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City of Otsego 2017 CAFR (PDF Version) Comprehensive Annual Financial Report For the Year Ended December 31, 2017 This page has been left blank intentionally. City of Otsego, Minnesota Comprehensive Annual Financial Report For the Year Ended December 31, 2017 Adam Flaherty City Administrator Prepared by: Finance Department Member of the: Government Finance Officers’ Association of the United States and Canada This page has been left blank intentionally. CITY OF OTSEGO, MINNESOTA TABLE OF CONTENTS Page No. INTRODUCTORY SECTION Letter of Transmittal 1 Elected Officials and Administration 8 Organizational Chart 9 Certificate of Achievement 10 FINANCIAL SECTION Independent Auditor's Report 11 Management's Discussion and Analysis 14 Basic Financial Statements Government-Wide Financial Statements Statement of Net Position 28 Statement of Activities 29 Fund Financial Statements Governmental Funds Balance Sheet 30 Reconciliation of the Balance Sheet of the Governmental Funds to the Statement of Net Position 31 Statement of Revenues, Expenditures and Changes in Fund Balances32 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of the Governmental Funds to the Statement of Activities 33 Statement of Revenues, Expenditures and Changes in Fund Balances: Budget-to-Actual General Fund 34 Proprietary Funds Statement of Net Position 36 Statement of Revenues, Expenses and Changes in Net Position 37 Statement of Cash Flows 38 Fiduciary Funds Statement of Net Position 40 Notes to the Financial Statements 41 Required Supplementary Information Schedule of Employer's Proportionate Share of Net Pension Liability 67 Schedule of Employer's Contributions 68 Notes to Required Supplementary Information 69 Combining and Individual Fund Statements and Schedules Governmental Funds Nonmajor Governmental Funds Combining Balance Sheet 72 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 73 Nonmajor Special Revenue Funds Combining Balance Sheet 76 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 77 Schedule of Revenues, Expenditures and Changes in Fund Balances: Budget-to-Actual Street Lighting Fund 78 Revolving Loans Fund 79 Nonmajor Capital Projects Funds Combining Balance Sheet 82 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 86 Schedule of Revenues, Expenditures and Changes in Fund Balances: Budget-to-Actual General Fund 90 CITY OF OTSEGO, MINNESOTA TABLE OF CONTENTS Debt Service Fund by Account Combining Balance Sheet 96 Combining Schedule of Revenues, Expenditures and Changes in Fund Balances 98 Schedule of Revenues, Expenditures and Changes in Fund Balances: Budget-to-Actual Series 2012A 100 Series 2010D & 2011A 101 Series 2010B 102 Series 2007B 103 Series 2010A 104 Fiduciary Funds Combining Statement of Changes in Agency Fund Assets & Liabilities 106 STATISTICAL SECTION (UNAUDITED) Financial Trends Net Position by Component 108 Changes in Net Position 110 Governmental Activities Tax Revenue by Source 116 Fund Balances of Governmental Funds 118 Changes in Fund Balances of Governmental Funds 120 Revenue Capacity Estimated Actual Value, Taxable Market Value and Tax Capacity of Taxable Property 122 Tax Capacity of Real Estate & Personal Property 124 Property Tax Rates - Direct and Overlapping Governments 125 Principal Property Taxpayers 126 Property Tax Levies and Collections 127 Debt Capacity Ratios of Outstanding Debt by Type 128 Ratios of General Bonded Debt Outstanding 129 Computation of Direct and Overlapping Governmental Activities Debt 130 Legal Debt Margin Information 132 Pledged Revenue Coverage 134 Demographic and Economic Information Demographic and Economic Statistics 135 Principal Employment Sectors 136 Operating Information Full-Time City Government Positions by Function 137 Operating Indicators by Function 138 Capital Asset Statistics by Function 139 City of Otsego│13400 90th Street NE, Otsego, MN 55330│Tel. (763) 441-4414 Fax (763) 441-8823 May 21, 2018 Honorable Mayor and Members of the City Council City of Otsego Transmitted herewith is the Comprehensive Annual Financial Report of the City of Otsego for the fiscal year ended December 31, 2017. Responsibility for both the accuracy of the data and the completeness and fairness of the presentation, including all disclosures, rests with the management of the City following the policies and procedures specified by the City’s system of internal control. Because the cost of internal controls should not exceed anticipated benefits, the objective is to provide reasonable, rather than absolute, assurance that the financial statements are free of any material misstatements. To the best of our knowledge and belief, the enclosed data is accurate, in all material respects, and is reported in a manner designed to present fairly the financial position and results of operations of the various funds of the City. All disclosures deemed necessary to enable the reader to gain an understanding of the City’s financial activities have been included. Minnesota Statutes require that the financial statements of the City be audited annually by the State Auditor or a Certified Public Accountant selected by the City Council. These financial statements have been audited by BerganKDV (the Auditors). The Auditors expressed an unmodified opinion on the financial statements, and their opinion letter is included as the first component within the financial section of this report. The Auditors have also issued a number of other reports on compliance with Government Auditing Standards and Minnesota Legal Compliance. These reports have been issued under separate cover. Accounting principles generally accepted in the United States of America require that management provide a narrative introduction, overview and analysis to accompany the basic financial statements in the form of a Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The City’s MD&A can be found immediately following the report of the auditors. 1 City of Otsego│13400 90th Street NE, Otsego, MN 55330│Tel. (763) 441-4414 Fax (763) 441-8823 PROFILE OF THE CITY The first town site in Otsego was originally platted in 1857 in what was once known as the Big Woods, heavily laden with deciduous trees, and interspersed with rivers, ponds, and prairies. The first settlers to the area were of European descent settling the area in 1852. On April 5, 1858, Otsego Township was established. The area remained a township until 1990 when it was incorporated into the City of Otsego to more fully serve its residents and to manage growth. Otsego is located at the confluence of the Mississippi and Crow Rivers approximately thirty miles northwest of Minneapolis. The Mississippi River runs along the northern and eastern borders of the City and the Crow River runs along the southern border in the far eastern part of the City until it enters the Mississippi River. The City is located in the northeast corner of Wright County and covers an area of about 30.5 square miles. The State Demographer’s most recent population estimate was 16,019, compared with 6,389 from the 2000 US Census. Otsego is the fastest growing City in Wright County and outpaces growth in neighboring cities outside Wright County. The City operates under the “Optional Plan A” form of government as defined in Minnesota Statutes. Under this plan, the government of the City is directed by a City Council consisting of an elected mayor and four elected councilmembers at large. The City Council exercises legislative authority and determines all matters of policy. The City Council appoints personnel responsible for the proper administration of all affairs relating to the City. The mayor and councilmembers serve four year terms with two councilmembers elected to four year terms every two years. The mayor is also elected to a four year term. The City provides its residents and businesses a full range of municipal services consisting of the construction & maintenance of highways, streets, and other infrastructure, park facilities, recreational opportunities, and general administrative services. The City services also provide public utilities including water, sanitary sewer and storm water services accounted for in enterprise funds. Police protection has been provided for more than 25 years through an agreement with the Wright County Sheriff’s department which provides 40 hours of service each and every day. Fire suppression and emergency response services are provided through agreements with the neighboring cities of Albertville, Elk River and Rogers. Each agreement has geographical boundaries based upon response times, however; all three of the departments have great relationships and provide for mutual aid whenever the instance warrants. 2 City of Otsego│13400 90th Street NE, Otsego, MN 55330│Tel. (763) 441-4414 Fax (763) 441-8823 Financial planning and control for the City of Otsego are based on the annual Operating Budget and the multi-year Capital Improvement Plan. Under Minnesota Statutes, a preliminary property tax levy must be adopted by the City Council no later than September 30th of each year for the ensuing year’s collection. This establishes a maximum levy that may subsequently be lowered but may not be increased at time of final adoption. A ceiling on the increase of the annual property tax levy is established from time to time by the Minnesota Legislature. Such a limit was not in place for taxes payable 2017 and 2018. Effective establishment of this levy means that a preliminary operating budget must be prepared. The City Administrator, with the assistance of the Finance Director and management staff, prepares such a budget each year and presents it along with the preliminary levy for City Council review. The City Council is required to adopt a final tax levy and annual budget each December for the subsequent year, which begins on January 1. Departments may make transfers of appropriations within their department. However, transfers of budget appropriations between departments needs authorization of the City Administrator. The legal level of budgetary control is at the fund level, so any appropriation transfers between funds needs the approval of the City Council. In addition, a Capital Improvement Plan covering a ten year period is reviewed and revised during the annual budget process. This includes projects for which the City may issue debt and/or assess portions of the cost to adjacent or benefitting property owners. Because there are limited funds available each year and the City does not wish to issue excessive amounts of debt, these projects are reviewed and reprioritized each year. ECONOMIC CONDITION Otsego continues to experience strong residential and commercial growth due to its ideal location. The City is 30 miles from downtown Minneapolis, the center of the Twin Cities metropolitan area and has excellent transportation access with Interstate 94 and State Highway 101. The City maintains a Comprehensive Plan document for land use and development to manage and encourage growth. The residential growth can be expressed with the 210 new residential construction permits issued during 2017. The average number of new residential construction permits through the past five years is 203. The latest estimates from the State Demographer’s office show total households at 5,580 or a growth of 23 percent since 2008. The City is expecting for this trend in residential housing growth to continue into the future as well. There have been a number of builders continuing to develop properties and go through the final platting process. During 2017, there were more than 500 additional residential lots platted, with more than 100 for year-to-date 2018. 3 City of Otsego│13400 90th Street NE, Otsego, MN 55330│Tel. (763) 441-4414 Fax (763) 441-8823 The taxable market value of property within the City increased $166 million to a total of $1,514,316,600 for taxes payable 2018. According to Wright County, for taxes payable 2018, there was approximately $64 million of value added for new residential and commercial / industrial development. The remaining portion of the growth would be due to market driven factors. The increased taxable value translates into increased tax capacity and has allowed the City to maintain or slightly decrease the property tax rate in five consecutive years. The City’s tax rate for payable 2018 is 36.556. The City continued to see commercial development in 2017. Nystrom & Associates constructed an office building in the Waterfront East development. During 2017, the City also approved its first multi-family housing project. Guardian Angels, a senior services provider started construction of a 142 unit senior housing project. This project is still under construction but is expected to be open in the fall of 2018. This project will be the first senior housing option in the community and will bring more than 100 jobs to the Otsego community. In the fall of 2017, the City welcomed the opening of the third school within the City. Prairie View Elementary and Middle School will serve early childhood through 8th grade students from School District 728. The School District will begin an expansion project to this school, which is expected to begin in spring 2018. Notable activity for 2018 includes an 80-acre industrial park which would create new industrial building sites including the ability to have outdoor storage, which is a use in high demand in the area. The City received a grant from the Minnesota Department of Employment and Economic Development to help facilitate the construction of urban standard streets to access the proposed industrial development. LONG-TERM FINANCIAL PLANNING The City has adopted and annually updates a ten-year Capital Improvement Plan (CIP) to facilitate the growth and maintenance of public infrastructure, community facilities and capital equipment. Projects in the CIP demonstrate the importance of developing long range financial planning strategies to facilitate the growth and prosperity of the City. The process assists with both short and long range financial planning needs by:  Prioritizing capital projects and equipment acquisitions  Estimating resource needs and related cash flows  Identifying adequate and sustainable funding sources 4 City of Otsego│13400 90th Street NE, Otsego, MN 55330│Tel. (763) 441-4414 Fax (763) 441-8823 MAJOR INITIATIVES With all of the growth that has been experienced in Otsego, the major initiatives for the City are currently to build upon the infrastructure, services and amenities available in the community. The City is near commencement for the construction of 85th Street and Maciver Avenue. This infrastructure project would extend the existing 85th Street from Nashua Avenue on a westerly course for roughly 1.50 miles. The project also includes the extension of existing Maciver Avenue from 80th Street on a northerly course to intersect the 85th street extension mentioned above. This route is especially important to the community as it will connect existing infrastructure to the new Prairie View Elementary and Middle School location. Construction of this project is expected to begin in the summer of 2018 and be completed in the summer of 2019. The City Council and City staff participated in a strategic planning session in the spring of 2018. The sessions sought to develop a practical vision of what Otsego should be in three to five years, identify obstacles blocking the community from realizing that vision, and to define innovative substantial actions to address these obstacles. The outcome of the sessions included a two-year implementation plan and created a framework for an ongoing effort of what collectively (residents, businesses, staff, advisory commissions and City Council) needs to happen to move Otsego successfully into the future. RELEVANT FINANCIAL POLICIES The City Council has approved a fund balance policy that established the minimum fund balance requirements of the General Fund at forty-five percent of the subsequent year’s expenditures. The policy also includes the annual review of the fund balance reserves of all other funds and the criteria for the use of reserves. Reserve balances are reviewed annually as part of the budget/financial planning process and at the time the Capital Improvement Plan is approved by the City Council. Financial management staff of the City of Otsego have developed and implemented internal controls designed to protect the City’s assets from loss, abuse, theft or other misappropriation. These controls provide reasonable assurance of the safety of the City’s assets while recognizing that management estimates and judgements as to the cost of such controls are also important to deriving maximum benefit from these controls. Policies relating to investment of City funds, billing and collection of public utility charges, management of long term debt, purchasing, fund balances and general accounting procedures have been developed. In addition, goals and objectives have been established for internal and external financial reporting and for long-term financial planning strategies. 5 6 This page has been left blank intentionally. 7 CITY OF OTSEGO, MINNESOTA ELECTED OFFICIALS AND ADMINISTRATION ELECTED OFFICIALS Name Position Term Expires Jessica Stockamp Mayor December 31, 2020 Vern Heidner Council Member December 31, 2018 Tom Darkenwald Council Member December 31, 2018 Jason Warehime Council Member December 31, 2020 Corey Tanner Council Member December 31, 2020 ADMINISTRATION Name Position Tami Loff City Clerk Adam Flaherty City Administrator & Finance Director Kevin Lamson Public Works Supervisor Ross Demant Parks & Recreation Supervisor Kurt Neidermeier Public Utilities Supervisor Andrew MacArthur City Attorney Daniel Licht City Planner Ron Wagner City Engineer 8 Organizational Chart Otsego Residents City Council City Administrator Advisory Commissions Planning Parks and Recreation Public Safety Heritage Preservation Public Safety Police Fire Building Inspections Professional Services Planning Engineering Legal Administrative Services Finance Utility Billing Information Technology Customer Service City Clerk Elections Human Resources Payroll Public Works Streets Vehicle Fleet City Buildings Public Utilities Water Sanitary Sewer Storm Water Parks & Recreation Parks & Trails Recreation Prairie Center 9 10 BerganKDV, Ltd. bergankdv.com Independent Auditor's Report Honorable Mayor and Members of the City Council City of Otsego Otsego, Minnesota Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Otsego, Minnesota, as of and for the year ended December 31, 2017, and the related notes to financial statements, which collectively comprise the City's basic financial statements as listed in the Table of Contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatements, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the City's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 11 Opinions In our opinion, the financial statements referred to in the first paragraph present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Otsego, Minnesota, as of December 31, 2017, and the respective changes in financial position and, where applicable, cash flows thereof and the respective budgeting comparison for the General Fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis, which follows this report letter, and Required Supplementary Information as listed in the Table of Contents be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board (GASB), who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the Required Supplementary Information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The introductory section, combining and individual fund financial statements and schedules and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. 12 Other Matters (Continued) Other Information (Continued) The combining and individual fund financial statements and schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual fund financial statements and schedules are fairly stated, in all material respects, in relation to the basic financial statements as a whole. The supplementary information contains prior year comparative information taken from the City's 2016 financial statements. We also have previously audited, in accordance with auditing standards generally accepted in the United States of America, the City's basic financial statements for the year ended December 31, 2016, which are not presented with the accompanying financial statements. In our report dated May 24, 2017, we expressed unmodified opinions on the respective financial statements of governmental activities, business type activities, each major fund, and the aggregate remaining fund information. In our opinion, the 2016 supplementary information is fairly stated in all material respects in relation to the basic financial statements for the year ended December 31, 2016, taken as a whole. The introductory section and statistical section have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated May 21, 2018, on our consideration of the City of Otsego's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City of Otsego's internal control over financial reporting and compliance. St. Cloud, Minnesota May 21, 2018 13 CITY OF OTSEGO, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2017 As management of the City of Otsego, Minnesota, (the City), we offer readers of the City's Comprehensive Annual Financial Report (CAFR), this narrative overview and analysis of the financial activities of the City for the fiscal year ended December 31, 2017. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found on pages 1-6 of this CAFR. Financial Highlights • The assets of the City exceeded its liabilities at the close of the most recent fiscal year by $75,992,623 (net position). Of this amount, $29,017,754 (unrestricted net position) may be used to meet the City's ongoing obligations to citizens and creditors. • The City's total net position increased by $10,712,386 (16.41%) from the previous year. The net position of the governmental activities increased $5,666,367 (16.60%). The City received contributed infrastructure from housing and industrial developers in the amount of $1,280,932, which mostly consists of streets. The City also made an investment in public infrastructure totaling $1,412,517, consisting of streets, trail systems and park additions. The business-type activities increased $5,046,019 (16.21%), with the primary reason for the increase being fees received for new connections to the City's public utility system. • As of the close of the current fiscal year, the City’s governmental funds reported combined ending fund balances of $16,401,130, which is an increase of $3,461,358 (26.75%) from the previous year. This increase was primarily driven by the activity within the capital project funds. Of the total fund balance, $3,013,041 (18.37%) is unassigned, which is free from any internal or external constraints upon its use. • The General fund has a fund balance of $3,890,645 at the close of the current fiscal year. During 2017, the fund balance increased $244,443 (6.70%) from the previous year. The primary reason for the increase is that licenses and permits revenue exceeded budgeted expectations by $574,484. In accordance with the City's fund balance policy, a transfer of $1,074,567 was made to the Pavement Management fund. That policy indicates that any fund balance exceeding 45% of the subsequent years budget will be transferred, and set aside for future capital expenditures. There is $317,197 (8.15%) of fund balance that is nonspendable, which is a combination of prepaid items and land held for resale. The remaining fund balance is either assigned, $205,257 (5.28%) or is unassigned, $3,368,191 (86.57%). • The City’s total outstanding bonded debt decreased by $3,160,000 (9.26%) during the current fiscal year, to an ending amount of $30,975,000. The decrease was the result of scheduled debt service payments. Overview of the Financial Statements The discussion and analysis are intended to serve as an introduction to the City’s basic financial statements. The City's basic financial statements include three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This CAFR also contains other supplementary information in addition to the basic financial statements themselves. Government-Wide Financial Statements: The government-wide financial statements are designed to provide readers with a broad overview of the City's finances, in a manner similar to a private-sector business. The statement of net position presents information on all of the City’s assets, liabilities and deferred inflows/outflows of resources, with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the City's overall financial position is stable, improving or deteriorating. 14 CITY OF OTSEGO, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2017 The statement of activities presents information showing how the City’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of the related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g. uncollected taxes, special assessments and earned but unused personal time off). 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, culture & recreation, economic development, and interest on long-term debt. The business- type activities of the City include: water utility, sanitary sewer utility and storm water utility. The government-wide financial statements can be found on pages 28 through 29 of this CAFR. Fund Financial Statements: A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. 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 statements. By doing so, readers may better understand the long-term impact of the City's near-term financial decisions. Both the governmental funds balance sheet and governmental funds statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City maintains 20 individual governmental funds. Information is presented separately in the governmental funds balance sheet and in the governmental funds statement of revenues, expenditures, and changes in fund balances for the following: General fund, the Debt Service Fund, and the Park Development Fund, which are considered to be major funds. Data from the remaining governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these nonmajor governmental funds is provided in the form of combining statements or schedules, elsewhere in this CAFR. 15 CITY OF OTSEGO, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2017 The City adopts an annual appropriated budget for the General Fund, the Debt Service Fund, and the Street Lighting and Revolving Loan special revenue funds. A budgetary comparison statement has been provided in the basic financial statements for the General fund. The basic governmental fund financial statements can be found on pages 30 through 34 of this CAFR. Proprietary Funds: Proprietary funds provide similar information to the government-wide financial statements, but in more detail. The City maintains one type of proprietary fund. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses enterprise funds to account for its water, sanitary sewer and storm water utilities. All of the City's enterprise funds are considered to be major funds, and separate information is provided for each of them in the basic financial statements. The basic proprietary fund financial statements can be found on pages 36 through 38 of this CAFR. Fiduciary Funds: Fiduciary funds are used to account for resources held for the benefit of parties outside the City. 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 fiduciary fund financial statements can be found on page 40 of this CAFR. Notes to the Financial Statements: The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 41 through 65 of this CAFR. Other Information: In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information in relation to the City's net pension liability. The schedules can be found on pages 67 through 69 of this CAFR. The combining statements referred to earlier in connection with nonmajor governmental funds and agency funds are presented immediately following the required supplementary information. Combining statements can be found on pages 72 through 106 of this CAFR. 16 CITY OF OTSEGO, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2017 Government-wide Financial Analysis As noted earlier, net position may serve over time as a useful indicator of a government's financial position. In the case of the City, assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $75,992,623 at the close of the most recent fiscal year. The largest portion of the City's net position ($42,001,333 or 55.27%) reflects its investment in capital assets, which includes: land, infrastructure, buildings, and machinery & equipment, less any related debt used to acquire those assets that is still outstanding. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. Increase Increase 2017 2016 (Decrease) 2017 2016 (Decrease) Current Assets 19,638,154$ 16,718,830$ 2,919,324$ 16,178,940$ 15,641,034$ 537,906$ Capital Assets 28,875,268 27,614,559 1,260,709 44,839,688 42,338,114 2,501,574 Total Assets 48,513,422 44,333,389 4,180,033 61,018,628 57,979,148 3,039,480 Deferred Outflows of Resources 331,471 551,448 (219,977) 86,308 127,317 (41,009) Long-term Liabilities 7,371,260 8,748,903 (1,377,643) 22,499,723 24,724,575 (2,224,852) Other Liabilities 1,457,750 1,836,587 (378,837) 2,367,112 2,207,509 159,603 Total Liabilities 8,829,010 10,585,490 (1,756,480) 24,866,835 26,932,084 (2,065,249) Deferred Inflows of Resources 207,367 157,198 50,169 53,994 36,293 17,701 Net Investment in Capital Assets 21,496,582 19,103,702 2,392,880 20,504,751 15,889,294 4,615,457 Restricted 4,973,536 4,292,589 680,947 - - - Unrestricted 13,338,398 10,745,858 2,592,540 15,679,356 15,248,794 430,562 Total Net Position 39,808,516$ 34,142,149$ 5,666,367$ 36,184,107$ 31,138,088$ 5,046,019$ At the end of the current fiscal year, the City is able to report positive balances in all three categories of net position, both for the government as a whole, as well as for its separate governmental and business-type activities. A portion of the City’s net position (6.54%) represents resources that are subject to external restrictions on how they may be used. The unrestricted portion (38.18%) may be used to meet the City's ongoing obligations to citizens and creditors. The governmental activities had the largest fluctuations in current assets and long-term liabilities. During 2017, the City saw a significant increase in residential development activity, which generates revenues such as park dedication fees and collector street access fees which are currently in cash assets. These revenues will be used to offset future expenditures for park and street infrastructure. The City made scheduled principal payments in the amount of $1,125,000 and issued no new long-term debt, therefore decreasing the respective liability. The business-type activities had a large fluctuation in long-term liabilities and capital assets. During 2017, the City made scheduled principal payments in the amount of $2,035,000. The City received contributed infrastructure from housing and commercial developers totaling $2,014,293 for a combination of water, sanitary sewer and storm water utility assets. CITY OF OTSEGO - SUMMARY OF NET POSITION Governmental Activities Business-type Activities 17 CITY OF OTSEGO, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2017 Increase Increase 2017 2016 (Decrease) 2017 2016 (Decrease) Program Revenues Charges for Services 2,357,111$ 2,475,470$ (118,359)$ 3,368,113$ 3,011,546$ 356,567$ Operating Grants and Contributions 261,814 248,910 12,904 - - - Capital Grants and Contributions 3,957,672 4,437,611 (479,939) 5,591,332 4,766,947 824,385 General Revenues Property Taxes 5,572,250 4,963,787 608,463 25,000 25,000 - Franchise Taxes 135,652 131,229 4,423 - - - Grants and Contributions not Restricted to Specific Programs 231,683 255,951 (24,268) - - - Unrestricted Investment Earnings 124,052 82,385 41,667 154,321 129,442 24,879 Other General Revenues 38,373 31,160 7,213 - - - Total Revenues 12,678,607 12,626,503 52,104 9,138,766 7,932,935 1,205,831 Expenses General Government 1,085,554 1,376,793 (291,239) - - - Public Safety 1,906,843 1,846,459 60,384 - - - Public Works 2,618,584 3,389,909 (771,325) - - - Culture and Recreation 1,013,252 847,553 165,699 - - - Economic Development 365,768 302,296 63,472 - - - Interest on Long-term Debt 197,282 223,938 (26,656) - - - Water Utility - - - 1,377,537 1,276,338 101,199 Sanitary Sewer Utility - - - 2,477,995 2,480,519 (2,524) Storm Water Utility - - - 62,172 42,342 19,830 Total Expenses 7,187,283 7,986,948 (799,665) 3,917,704 3,799,199 118,505 Increase (Decrease) Before Transfers 5,491,324 4,639,555 851,769 5,221,062 4,133,736 1,087,326 Transfers 195,686 186,755 8,931 (195,686) (186,755) (8,931) Transfers - Capital Assets (20,643) (162,876) 142,233 20,643 162,876 (142,233) Change in Net Position 5,666,367 4,663,434 1,002,933 5,046,019 4,109,857 936,162 Net Position - January 1 34,142,149 29,478,715 4,663,434 31,138,088 27,028,231 4,109,857 Net Position - December 31 39,808,516$ 34,142,149$ 5,666,367$ 36,184,107$ 31,138,088$ 5,046,019$ CITY OF OTSEGO - CHANGES IN NET POSITION Governmental Activities Business-type Activities 18 CITY OF OTSEGO, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2017 Governmental Activities Governmental activities resulted in an increase of the City's net position by $5,666,367. Key elements of this change is as follows: • Revenues increased $52,104 (0.41%) from the previous year; however, these revenues exceeded expenses by $5,491,324. Typical of new development within the City, the expenses to support that new development, whether operating or capital will lag behind the initial revenue stream. Revenues such as park dedication fees and collector street access fees will be used to offset future capital investments within the City's parks, trails and street infrastructure system. • Expenses decreased $799,665 (10.01%) from the previous year. This decrease is the result of fewer capital project expenditures during 2017 compared to the prior year. The City's capital project expenditures can vary greatly in an given year depending on both the quantity and type of project being undertaken that year. Below are specific graphs which provide comparisons of the governmental activities revenues and expenses: Charges for Services 18.59% Operating Grants 2.07% Capital Grants 31.22% Property Taxes 43.94% Franchise Taxes 1.07% Unrestricted Grants & Contributions 1.83% Investment Earnings 0.98% Sales of Capital Assets 0.30% Revenues by Source - 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 4,000,000 General Government Public Safety Public Works Culture & Recreation Economic Development Interest on Long- Term Debt Function Expenses vs. Program Revenues Expense Program Revenue 19 CITY OF OTSEGO, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2017 Business-type Activities Business-type activities resulted in an increase of net position by $5,046,019. Key elements of this change are as follows: • Revenues increased $1,205,831 (15.20%) from the prior year, with this increase being the result of three significant factors, 1) fees collected on new connections to the public utility system; 2) the operating revenues from new customers on the public utility system; and 3) infrastructure contributions from housing and industrial developers. • Expenses increased $118,505 (3.12%) from the prior year. Typical of new development activity, the expenses will lag behind the revenue sources but will increase as customer growth drives operational expense and either maintenance or capacity drive capital equipment and infrastructure related expense. Below are specific graphs which provide comparisons of the business-type activities revenues and expenses: - 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 Water Utility Sanitary Sewer Utility Storm Water Utility Function Expenses vs. Program Revenues Expense Program Revenue Charges for Services 36.86% Capital Grants 61.18% Property Taxes 0.27% Investment Earnings 1.69% Revenues by Source 20 CITY OF OTSEGO, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2017 Financial Analysis of the Government's Funds Governmental Funds: The focus of the City's governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City's financing requirements. In particular, unassigned fund balance may serve as useful measure of a government's net resources available at the end of the fiscal year. At the end of the current fiscal year, the City's governmental funds reported combined ending fund balances of $16,401,130, which is an increase of $3,461,358 (26.75%) from the previous year. The unassigned fund balance, which is not subject to internal or external constraints upon its use, is $3,013,041 (18.37% of total). Major Funds The General fund is the primary operating fund of the City. At the end of the current fiscal year, total fund balance is $3,890,645, an increase of $244,443 (6.70%). The increase in fund balance was the result of the following factors: 1) licenses and permits exceeding the budgeted by $574,484; 2) charges for services exceeding the budget by $170,190; 3) the City receiving land assets contributed from developers of $202,200; and 4) total expenditures being less than budgeted by $308,238. The offset to the budget surplus was a transfer out of $1,074,567 in accordance with the City's fund balance policy. As a measure of the General fund's liquidity, it may be useful to compare both unassigned and total fund balance, to total fund expenditures. The unassigned fund balance, which is $3,368,191, represents 71.17% of the current year General fund expenditures. Total General fund balance represents 82.21% of those same expenditures. Both of these are improvements over the prior year. The Debt Service fund has a total fund balance of $1,914,887 at the end of the year, a decrease of $18,870 (0.98%) from the previous year. The City retired $1,125,000 of principal on the outstanding bonded debt during 2017. The Park Development fund has a total fund balance of $1,377,188 at the end of 2017. This was an increase of $878,088 (175.93%) over the prior year. The increase was the result of significant development activity during the year. When new development is created, the City will sometimes collect park dedication fees in lieu of land dedication. During 2017, this revenue source accounted to $1,165,374 and will be used for future park infrastructure. Proprietary Funds: The City's proprietary funds provide the same type of information presented as business-type activities found in the government-wide financial statements, but in more detail. The enterprise funds have a combined ending net position of $36,184,107, an increase of $5,046,019 (16.21%). There are two components to net position in the enterprise funds, unrestricted ($15,679,356 or 43.33%) and net investment in capital assets ($20,504,751 or 56.67%). As a measure of liquidity, the unrestricted net position amounts to 516.52% of the current year operating expenses. Other factors concerning the finances of these funds have already been addressed in the discussion of the City's business-type activities. 21 CITY OF OTSEGO, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2017 Below is a graph with comparative amounts for each fund balance component for fiscal years 2015, 2016 and 2017: The City's Unassigned fund balance represents 18.37% of total governmental fund balance. The City also has four other components of fund balance, including Nonspendable (1.94%), Restricted (20.06%), Committed (2.90%) and Assigned (56.73%). • Nonspendable fund balance represents the amount of assets the City has invested in prepaid items and land assets held for resale. This fund balance component can largely fluctuate with the timing of certain payments (e.g. insurance premiums) and the net realizable value of the land assets being held by the City for future resale. • The City's restricted fund balance is the result of external constraints placed upon it. The source of that constraint includes debt service and park development. The debt service component has decreased slightly over the past three years as the bonds payable balance has declined, while the park dedication component has increased due to revenues exceeding expenditures. • The committed fund balances are within the City's special revenue funds for Street Lighting and Revolving Loans. This fund balance component has stayed consistent over the past three years. • Assigned fund balances are primarily associated with the City's capital project funds. The fund balance in this component has been increasing each of the past three years, and is the result of the City accumulating resources for future capital improvement projects and capital equipment purchases. A more detailed breakdown of the fund balance components can be found in the basic financial statements and accompanying financial statement footnotes. - 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 7,000,000 8,000,000 9,000,000 10,000,000 Nonspendable Restricted Committed Assigned Unassigned Governmental Fund Balance Components 2015 2016 2017 22 CITY OF OTSEGO, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2017 General Fund Budgetary Highlights During the year, there were no amendments to the General fund budget. The budgeted revenues and expenditures resulted in no change in fund balance. Actual results for the fiscal year were an increase of $244,443 (6.70%). The key elements of this change are as follows: • Actual revenues exceeded the budget by $1,010,467 (20.68%). The largest revenue variance was provided by licenses and permits, which were over budget by $574,484. The City has routinely budgeted for building permits at a conservative number ever since the housing crash in the late 2000's. During 2017, there were 210 new residential construction permits issued. Other revenue variances included $202,200 for land assets contributed to the City; and $170,190 within charges for services. • Actual expenditures were less than budget by $308,238 (6.12%). The largest variance was within the general government function, and was primarily the result of combined staffing for the City Administrator & Finance Director positions. Other general government departments that were under budget include: city council, administration, information technology and legal. The public works function also had a large variance, and was under budget by $80,763. • Transfers in resulted in no variance from the budget. These transfers are from the Water and Sanitary Sewer utility funds, and are annual contributions to help manage the property tax levy. • Transfers out were not budgeted for during 2017. The actual transfer out of $1,074,567 is in accordance with the City's fund balance policy. That policy outlines that any General fund balance exceeding 45% of the subsequent year's expenditure budget will be transferred, and assigned for future capital items. The ending unassigned fund balance of the General fund ($3,368,191) represents 62.63% of the adopted 2018 budget. 23 CITY OF OTSEGO, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2017 Capital Asset and Debt Administration Capital Assets: The City's investment in capital assets for its governmental and business-type activities at the end of the current year, amounts to $73,714,956 (net of accumulated depreciation). This investment in capital assets includes: land, buildings, street and utility infrastructure, parks equipment, trails, machinery and equipment and construction in progress. The City's investment in capital assets increased $3,762,283 (5.38%) from the previous year. Major capital asset events during the current year included the following: • The City updated its machinery & equipment fleet with several new pieces of equipment. The majority of these acquisitions were replacements of existing assets, however; a few items were new assets. These assets include: 1) three light/medium duty trucks; 2) front-end loader; 3) compact utility tractor; and 4) asphalt roller. • The City received contributed infrastructure from housing and industrial developers. These assets include: streets, trail systems, and public utility infrastructure. These assets are paid for and installed by the developer, are inspected by the City Engineer to City standards, and are later accepted by the City, who is responsible for future maintenance and replacement. • A street renewal project was completed on 85th Street between CSAH 42 and Page Avenue. This stretch of roadway was one of the first collector street sections within the City and is the most heavily travelled section of City roadway. • Water Tower #1 received both interior and exterior rehabilitation. With increasing demand on the City's water utility system, the City needed to improve the interior structure to safely hold drinking water. The exterior of the tower received a new coat of paint that also displays the newer version of the City's logo. • Within the City's west public water system, an extension of watermain along Kadler Avenue made a connection between 70th Street and the existing well and pumphouse located near Riverwood National golf course. • A road extension project was initiated that will extend 85th Street from Nashua Avenue to the west for approximately 1.50 miles and will extend Maciver Avenue from 80th Street to the north for approximately 0.50 miles. This important road corridor has been in the planning stages for many years, and when completed will provide an important east-west travel route, and will provide easier access to the new Prairie View Elementary and Middle School. • A road improvement project was initiated on Kadler Avenue. The improvement project will improve the current gravel roadway to an urban style collector street capable of handling the volume and type of traffic associated with the proposed industrial park. Increase Increase 2017 2016 (Decrease) 2017 2016 (Decrease) Land 2,046,664$ 1,959,823$ 86,841$ 631,739$ 550,079$ 81,660$ Construction in Progress 560,302 2,267,436 (1,707,134) 1,153,177 2,522,568 (1,369,391) Buildings and Improvements 4,702,865 4,818,512 (115,647) - - - Land Improvements 3,208,993 2,710,260 498,733 - - - Machinery and Equipment 1,499,549 1,518,206 (18,657) 887,199 271,381 615,818 Infrastructure 16,856,895 14,340,322 2,516,573 42,167,573 38,994,086 3,173,487 28,875,268$ 27,614,559$ 1,260,709$ 44,839,688$ 42,338,114$ 2,501,574$ Additional information on the City’s capital assets can be found in Note 3 (B) on pages 52 through 53 of this CAFR. CITY OF OTSEGO - CAPITAL ASSETS (net of depreciation) Governmental Activities Business-type Activities 24 CITY OF OTSEGO, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2017 Long-Term Debt: At the end of the current year, the City had outstanding long-term bonded debt of $30,975,000. Increase Increase 2017 2016 (Decrease) 2017 2016 (Decrease) General Obligation Bonds 7,265,000$ 8,345,000$ (1,080,000)$ -$ -$ -$ Equipment Certificates 85,000 130,000 (45,000) - - - General Obligation Revenue Bonds - - - 23,625,000 25,660,000 (2,035,000) Unamortized Premiums 28,686 35,857 (7,171) 709,937 788,820 (78,883) Compensated Absences 79,474 71,167 8,307 14,043 11,506 2,537 Total 7,458,160$ 8,582,024$ (1,123,864)$ 24,348,980$ 26,460,326$ (2,111,346)$ Revenue streams for the repayment of the outstanding debt liabilities include: special assessments upon benefitting properties, fees from new connections to the water and sanitary sewer utility systems, and property tax levies. Should any of these sources of revenues prove inadequate, all outstanding bonds are backed by the full faith and credit of the City. The City did not issue any bonds during 2017, and made principal payments in the amount of $3,160,000, which reduced the total outstanding long-term debt by 9.26% from the previous year. The City’s bond rating is AA, with a stable outlook from Standard & Poor’s Ratings Services. State statutes limit the amount of general obligation debt a Minnesota city may issue to 3% of total Estimated Market Value. The current debt limitation for the City is $40,449,402, with $3,782,338 in debt outstanding that is applicable to the limit. Additional information on the City’s long-term debt can be found in Note 3 (E) on pages 56 through 58 of this CAFR. CITY OF OTSEGO - OUTSTANDING DEBT Governmental Activities Business-type Activities 25 CITY OF OTSEGO, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2017 Economic Factors and Next Year's Budget and Rates The following economic factors were identified by the City as potentially having an impact on the financial future of the City, and were considered in preparation of the 2018 operating budgets and capital improvement plans. • The Taxable Market Value of real estate and personal property within the City increased 12.31% for taxes payable 2018. This increase is driven by both new construction within the City as well as market driven valuation increases. • New construction in the residential sector continues within the City. During 2017, the City issued 210 building permits for new residential construction. The City also continues to see builders final platting new developments for future years construction. • The City had significant real estate activity within the Waterfront East development. During 2017, Nystrom & Associates completed construction and celebrated the grand opening of their new office building. Also in 2017, Guardian Angels Senior Services began construction of a 142 unit senior housing project. This will be the first senior housing option in the City and is expected to be ready for occupancy in the fall of 2018. • In the fall of 2017, the City welcomed the opening of the third school within the City. Prairie View Elementary and Middle School will provide public education opportunities from early childhood through 8th grade within School District 728. The School District, in the spring of 2018 has broken ground on an expansion project to this school, which is indicative of the population growth in the City. • The City is in the project design and specification stages of a road improvement project to Kadler Avenue. This project became a priority to the City in 2017 when approached with an industrial park development covering approximately 80 acres. This development will provide additional developable lots within industrial zoning districts which will increase both employment opportunities and the taxable market value in the City. The City has obtained $704 thousand in grant dollars from MN DEED to help finance this project. • The City continues to expand upon and make improvements to the Capital Improvement Plan (CIP). The adopted CIP for 2018 plans for capital purchasing ten years into the future. These long range planning efforts assure that the City is always looking into the future and that the City is adequately planning from a financial resources standpoint. Requests for Information This financial report is designed to provide a general overview of the City of Otsego's finances for all those with an interest in the government's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the: Finance Director, 13400 90th Street NE, Otsego, MN 55330. 26 This page has been left blank intentionally. 27 CITY OF OTSEGO, MINNESOTA STATEMENT OF NET POSITION DECEMBER 31, 2017 Governmental Business-Type Activities Activities Total ASSETS Cash and Investments 15,768,068$ 15,308,718$ 31,076,786$ Receivables Interest 95,675 - 95,675 Accounts 25,008 385,188 410,196 Taxes 83,556 - 83,556 Special Assessments 2,542,823 428,017 2,970,840 Due from Other Governments 804,502 16,846 821,348 Land Held for Resale 202,200 - 202,200 Prepaid Items 116,322 40,171 156,493 Capital Assets Nondepreciable 2,606,966 1,784,916 4,391,882 Depreciable, Net of Accumulated Depreciation 26,268,302 43,054,772 69,323,074 Total Assets 48,513,422 61,018,628 109,532,050 DEFERRED OUTFLOWS OF RESOURCES General Employees Retirement Plan Pension Resources 331,471 86,308 417,779 Total Deferred Outflows of Resources 331,471 86,308 417,779 LIABILITIES Accounts Payable 152,596 146,891 299,487 Due to Other Governments 25,195 722 25,917 Accrued Salaries Payable 47,760 12,965 60,725 Accrued Interest Payable 56,304 73,726 130,030 Compensated Absences Payable Due Within One Year 15,895 2,808 18,703 Due in More than One Year 63,579 11,235 74,814 Bonds Payable Due Within One Year 1,160,000 2,130,000 3,290,000 Due in More than One Year 6,218,686 22,204,937 28,423,623 General Employees Retirement Plan Net Pension Payable 1,088,995 283,551 1,372,546 Total Liabilities 8,829,010 24,866,835 33,695,845 DEFERRED INFLOWS OF RESOURCES General Employees Retirement Plan Pension Resources 207,367 53,994 261,361 Total Deferred Inflows of Resources 207,367 53,994 261,361 NET POSITION Net Investment in Capital Assets 21,496,582 20,504,751 42,001,333 Restricted Debt Service 3,596,348 - 3,596,348 Park Development 1,377,188 - 1,377,188 Unrestricted 13,338,398 15,679,356 29,017,754 Total Net Position 39,808,516$ 36,184,107$ 75,992,623$ The notes to the financial statements are an integral part of this statement. 28 CITY OF OTSEGO, MINNESOTA STATEMENT OF ACTIVITIES FOR THE YEAR ENDED DECEMBER 31, 2017 Program Revenues Net (Expense) Revenue and Changes in Net Position Operating Capital Charges For Grants and Grants and Governmental Business-Type FUNCTIONS/PROGRAMS Expenses Services Contributions Contributions Activities Activities Total Government Activities General Government 1,085,554$ 100,125$ -$ -$ (985,429)$ -$ (985,429)$ Public Safety 1,906,843 1,384,626 60,239 - (461,978) - (461,978) Public Works 2,618,584 805,248 196,495 2,590,098 973,257 - 973,257 Culture and Recreation 1,013,252 67,112 5,080 1,165,374 224,314 - 224,314 Economic Development 365,768 - - 202,200 (163,568) - (163,568) Interest on Long-Term Debt 197,282 - - - (197,282) - (197,282) Total Government Activities 7,187,283 2,357,111 261,814 3,957,672 (610,686) - (610,686) Business-Type Activities Water Utility 1,377,537 1,529,127 - 1,973,489 - 2,125,079 2,125,079 Sanitary Sewer Utility 2,477,995 1,744,067 - 3,091,395 - 2,357,467 2,357,467 Storm Water Utility 62,172 94,919 - 526,448 - 559,195 559,195 Total Business-Type Activities 3,917,704 3,368,113 - 5,591,332 - 5,041,741 5,041,741 Total 11,104,987$ 5,725,224$ 261,814$ 9,549,004$ (610,686) 5,041,741 4,431,055 General Revenues Property Taxes 5,572,250 25,000 5,597,250 Franchise Taxes 135,652 - 135,652 Grants and Contributions Not Restricted to Specific Programs 231,683 - 231,683 Unrestricted Investment Earnings 124,052 154,321 278,373 Gain on Disposal of Capital Assets 38,373 - 38,373 Transfers 195,686 (195,686) - Transfers - Capital Assets (20,643) 20,643 - Total General Revenues and Transfers 6,277,053 4,278 6,281,331 Change in Net Position 5,666,367 5,046,019 10,712,386 Net Position - January 1 34,142,149 31,138,088 65,280,237 Net Position - December 31 39,808,516$ 36,184,107$ 75,992,623$ The notes to the financial statements are an integral part of this statement. 29 CITY OF OTSEGO, MINNESOTA BALANCE SHEET GOVERNMENTAL FUNDS DECEMBER 31, 2017 Other Debt Park Nonmajor Total General Service Development Governmental Governmental ASSETS Cash and Investments 3,570,019$ 1,940,381$ 1,386,648$ 8,871,020$ 15,768,068$ Receivables Interest 95,675 - - - 95,675 Accounts 4,600 - - 20,408 25,008 Taxes Current 44,993 - - - 44,993 Delinquent 38,563 - - - 38,563 Special Assessments Current - - - 702 702 Deferred 6,054 1,733,452 - 792,224 2,531,730 Delinquent 518 4,313 - 5,560 10,391 Due from Other Governments 2,390 - - 802,112 804,502 Due from Other Funds 17,178 - - 716,586 733,764 Land Held for Resale 202,200 - - - 202,200 Prepaid Items 114,997 1,325 - - 116,322 Total Assets 4,097,187 3,679,471 1,386,648 11,208,612 20,371,918 LIABILITIES Accounts Payable 88,452 1,785 9,460 52,899 152,596 Accrued Salaries Payable 47,760 - - - 47,760 Due to Other Governments 25,195 - - - 25,195 Due to Other Funds - 25,034 - 708,730 733,764 Total Liabilities 161,407 26,819 9,460 761,629 959,315 DEFERRED INFLOWS OF RESOURCES Unavailable Revenue - Property Taxes 38,563 - - - 38,563 Unavailable Revenue - Special Assessments 6,572 1,737,765 - 797,784 2,542,121 Unavailable Revenue - Intergovernmental - - - 430,789 430,789 Total Deferred Inflows of Resources 45,135 1,737,765 - 1,228,573 3,011,473 FUND BALANCES Nonspendable 317,197 1,325 - - 318,522 Restricted - 1,913,562 1,377,188 - 3,290,750 Committed - - - 474,863 474,863 Assigned 205,257 - - 9,098,697 9,303,954 Unassigned (Deficits)3,368,191 - - (355,150) 3,013,041 Total Fund Balances 3,890,645 1,914,887 1,377,188 9,218,410 16,401,130 Total Liabilities, Deferred Inflows of Resources and Fund Balances 4,097,187$ 3,679,471$ 1,386,648$ 11,208,612$ 20,371,918$ The notes to the financial statements are an integral part of this statement. 30 CITY OF OTSEGO, MINNESOTA RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION DECEMBER 31, 2017 Fund Balances - Governmental Funds 16,401,130$ Amounts reported for the governmental activities within the statement of net position are different because: Capital assets used in governmental activities are not financial resources, and therefore, are not reported as assets in governmental funds. Cost of Capital Assets 40,849,850 Accumulated Depreciation (11,974,582) Long-term liabilities, including bonds payable, are not due and payable in the current period, and therefore, are not reported as liabilities in governmental funds. Bonds Payable (7,350,000) Unamortized Premium on Bonds Payable (28,686) Accrued Interest Payable (56,304) Compensated Absences Payable (79,474) GERF Pension Payable (1,088,995) Some receivables are not available soon enough to pay for the current period's expenditures, and therefore, are unavailable in governmental funds. Delinquent Property Taxes Receivable 38,563 Special Assessments Receivable 2,542,121 Due from Other Governments 430,789 Deferred resources from pensions reported in governmental activities are not financial resources and are not payable in the current period, therefore are not reported in governmental funds. GERF Pension Deferred Outflows of Resources 331,471 GERF Pension Deferred Inflows of Resources (207,367) Total Net Position - Governmental Activities 39,808,516$ The notes to the financial statements are an integral part of this statement. 31 CITY OF OTSEGO, MINNESOTA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED DECEMBER 31, 2017 Other Debt Park Nonmajor Total General Service Development Governmental Governmental REVENUES Property Taxes 3,756,375$ 655,000$ -$ 1,183,745$ 5,595,120$ Franchise Taxes 135,652 - - - 135,652 Licenses and Permits 1,363,384 - - - 1,363,384 Intergovernmental 74,080 - - 1,019,074 1,093,154 Charges for Services 275,740 - 1,165,374 688,400 2,129,514 Special Assessments 8,495 612,145 - 113,882 734,522 Fines and Forfeitures 21,092 - - - 21,092 Investment Earnings (net)31,343 - 13,102 79,607 124,052 Miscellaneous 229,829 - - 65,080 294,909 Total Revenues 5,895,990 1,267,145 1,178,476 3,149,788 11,491,399 EXPENDITURES Current General Government 1,072,195 - - - 1,072,195 Public Safety 1,886,661 - - - 1,886,661 Public Works 1,055,965 - - 10,384 1,066,349 Culture and Recreation 587,739 - - - 587,739 Economic Development 113,579 - - 82,137 195,716 Capital Outlay General Government 7,382 - - 19,596 26,978 Public Safety 8,806 - - - 8,806 Public Works - - - 1,530,825 1,530,825 Culture and Recreation - - 300,388 123,808 424,196 Economic Development - - - 170,052 170,052 Debt Service Principal - 1,125,000 - - 1,125,000 Interest - 206,748 - - 206,748 Fiscal Agent Fees - 3,267 - - 3,267 Total Expenditures 4,732,327 1,335,015 300,388 1,936,802 8,304,532 Excess (Deficiency) of Revenues Over (Under) Expenditures 1,163,663 (67,870) 878,088 1,212,986 3,186,867 OTHER FINANCING SOURCES (USES) Transfers In 155,042 49,000 - 1,074,567 1,278,609 Sales of Capital Assets 305 - - 78,500 78,805 Transfers Out (1,074,567) - - (8,356) (1,082,923) Total Other Financing Sources (Uses)(919,220) 49,000 - 1,144,711 274,491 Net Change in Fund Balance 244,443 (18,870) 878,088 2,357,697 3,461,358 Fund Balance - January 1 3,646,202 1,933,757 499,100 6,860,713 12,939,772 Fund Balance - December 31 3,890,645$ 1,914,887$ 1,377,188$ 9,218,410$ 16,401,130$ The notes to the financial statements are an integral part of this statement. 32 CITY OF OTSEGO, MINNESOTA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED DECEMBER 31, 2017 Total Net Change in Fund Balances - Governmental Funds 3,461,358$ Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives as depreciation. Capital Outlays 1,412,517 Depreciation Expense (1,371,665) Assets Contributed by Developers 1,280,932 Contributions of capital assets to the proprietary funds decrease net position in the statement of activities, but do not appear in the governmental funds because they are not financial resources.(20,643) 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 increase financial resources. Thus the change in net position differs from the change in fund balance by the cost of the capital assets sold.(40,432) The repayment of principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net position. Principal Repayments 1,125,000 Interest on long-term debt in the statement of activities differs from the amount reported in the governmental funds because interest is recognized as an expenditure in the funds when it is due, and thus requires the use of current financial resources. In the statement of activities; however, interest expense is recognized as the interest accrues, regardless of when it is due.12,733 Certain revenues are recognized as soon as they are earned. Under the modified accrual basis of accounting, certain revenues cannot be recognized until they are available to liquidate liabilities of the current period. Property Taxes (22,870) Special Assessments (540,016) Intergovernmental 430,789 In the statement of activities, personnel expenses are recognized as they are accrued, however these expenses do not consume current financial resources, and under the modified accrual basis of accounting, are not reported in the governmental funds until they are due. Compensated Absences (8,307) GERF Pension (53,029) Change in Net Position - Governmental Activities 5,666,367$ The notes to the financial statements are an integral part of this statement. 33 CITY OF OTSEGO, MINNESOTA GENERAL FUND - STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED DECEMBER 31, 2017 Variance with Final Budget - Budgeted Amounts Actual Over Original Final Amounts (Under) REVENUES Property Taxes 3,763,273$ 3,763,273$ 3,756,375$ (6,898)$ Franchise Taxes 132,000 132,000 135,652 3,652 Licenses and Permits 788,900 788,900 1,363,384 574,484 Intergovernmental 56,800 56,800 74,080 17,280 Charges for Services 105,550 105,550 275,740 170,190 Special Assessments - - 8,495 8,495 Fines and Forfeitures 6,000 6,000 21,092 15,092 Investment Earnings (net) 33,000 33,000 31,343 (1,657) Miscellaneous - - 229,829 229,829 Total Revenues 4,885,523 4,885,523 5,895,990 1,010,467 EXPENDITURES Current General Government 1,325,349 1,325,349 1,072,195 (253,154) Public Safety 1,867,138 1,867,138 1,886,661 19,523 Public Works 1,136,728 1,136,728 1,055,965 (80,763) Culture and Recreation 584,490 584,490 587,739 3,249 Economic Development 109,860 109,860 113,579 3,719 Capital Outlay General Government 9,000 9,000 7,382 (1,618) Public Safety 8,000 8,000 8,806 806 Total Expenditures 5,040,565 5,040,565 4,732,327 (308,238) Excess (Deficiency) of Revenues Over (Under) Expenditures (155,042) (155,042) 1,163,663 1,318,705 OTHER FINANCING SOURCES (USES) Transfers In 155,042 155,042 155,042 - Sales of Capital Assets - - 305 305 Transfers Out - - (1,074,567) (1,074,567) Total Other Financing Sources (Uses)155,042 155,042 (919,220) (1,074,262) Net Change in Fund Balance - - 244,443 244,443 Fund Balance - January 1 3,646,202 3,646,202 3,646,202 - Fund Balance - December 31 3,646,202$ 3,646,202$ 3,890,645$ 244,443$ The notes to the financial statements are an integral part of this statement. 34 This page has been left blank intentionally. 35 CITY OF OTSEGO, MINNESOTA STATEMENT OF NET POSITION PROPRIETARY FUNDS DECEMBER 31, 2017 Sanitary Storm Water Sewer Water Total Utility Utility Utility Enterprise ASSETS Current Assets Cash and Cash Equivalents 7,211,688$ 7,876,688$ 220,342$ 15,308,718$ Receivables Accounts 135,398 244,910 4,880 385,188 Special Assessments Current - - 142 142 Delinquent 6,894 - 109 7,003 Due from Other Governments - 16,846 - 16,846 Prepaid Items 9,563 30,608 - 40,171 Total Current Assets 7,363,543 8,169,052 225,473 15,758,068 Noncurrent Assets Special Assessments Deferred 144,826 230,280 45,766 420,872 Capital Assets Land 98,222 533,517 - 631,739 Machinery and Equipment 255,590 850,682 - 1,106,272 Infrastructure 19,939,924 35,109,781 1,826,897 56,876,602 Construction in Progress 1,151,283 1,894 - 1,153,177 Total Capital Assets 21,445,019 36,495,874 1,826,897 59,767,790 Less: Accumulated Depreciation (5,133,640) (9,619,127) (175,335) (14,928,102) Net Capital Assets 16,311,379 26,876,747 1,651,562 44,839,688 Total Noncurrent Assets 16,456,205 27,107,027 1,697,328 45,260,560 Total Assets 23,819,748 35,276,079 1,922,801 61,018,628 DEFERRED OUTFLOWS OF RESOURCES General Employees Retirement Plan Pension Resources 21,577 64,731 - 86,308 LIABILITIES Current Liabilities Accounts Payable 31,724 32,033 83,134 146,891 Due to Other Governments 722 - - 722 Accrued Salaries Payable 3,241 9,724 - 12,965 Accrued Interest Payable 26,541 47,185 - 73,726 Bonds Payable 766,800 1,363,200 - 2,130,000 Compensated Absences Payable 702 2,106 - 2,808 Total Current Liabilities 829,730 1,454,248 83,134 2,367,112 Noncurrent Liabilities Bonds Payable (net)7,993,777 14,211,160 - 22,204,937 Compensated Absences Payable 2,809 8,426 - 11,235 General Employees Retirement Plan Net Pension Payable 70,887 212,664 - 283,551 Total Noncurrent Liabilities 8,067,473 14,432,250 - 22,499,723 Total Liabilities 8,897,203 15,886,498 83,134 24,866,835 DEFERRED INFLOWS OF RESOURCES General Employees Retirement Plan Pension Resources 13,498 40,496 - 53,994 NET POSITION Net Investment in Capital Assets 7,550,802 11,302,387 1,651,562 20,504,751 Unrestricted 7,379,822 8,111,429 188,105 15,679,356 Total Net Position 14,930,624$ 19,413,816$ 1,839,667$ 36,184,107$ The notes to the financial statements are an integral part of this statement. 36 CITY OF OTSEGO, MINNESOTA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION PROPRIETARY FUNDS FOR THE YEAR ENDED DECEMBER 31, 2017 Sanitary Storm Water Sewer Water Total Utility Utility Utility Enterprise OPERATING REVENUES Charges for Services 1,459,868$ 1,737,618$ 61,540$ 3,259,026$ OPERATING EXPENSES Personal Services 104,860 314,583 15,313 434,756 Supplies 203,591 134,062 727 338,380 Insurance 9,836 31,836 - 41,672 Utilities 83,155 212,690 - 295,845 Services and Other Charges 152,230 307,661 10,998 470,889 Depreciation 506,191 912,688 35,134 1,454,013 Total Operating Expenses 1,059,863 1,913,520 62,172 3,035,555 Operating Income (Loss) 400,005 (175,902) (632) 223,471 NONOPERATING REVENUES (EXPENSES) Antenna Rental 67,215 - - 67,215 Property Taxes - - 25,000 25,000 Special Assessments - - 33,379 33,379 Investment Earnings (net) 77,866 74,377 2,078 154,321 Miscellaneous Revenue 2,044 6,449 - 8,493 Interest and Fiscal Agent Fees (317,674) (564,475) - (882,149) Total Nonoperating Revenues (Expenses) (170,549) (483,649) 60,457 (593,741) Income (Loss) Before Capital Contributions and Transfers 229,456 (659,551) 59,825 (370,270) Connection Fees 1,036,919 2,540,120 - 3,577,039 Transfers In - 14,536 - 14,536 Capital Contributions - Developer Assets 936,570 551,275 526,448 2,014,293 Capital Contributions - Governmental Funds - 20,643 - 20,643 Transfers Out (54,741) (155,481) - (210,222) Change in Net Position 2,148,204 2,311,542 586,273 5,046,019 Net Position - January 1 12,782,420 17,102,274 1,253,394 31,138,088 Net Position - December 31 14,930,624$ 19,413,816$ 1,839,667$ 36,184,107$ The notes to the financial statements are an integral part of this statement. 37 CITY OF OTSEGO, MINNESOTA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED DECEMBER 31, 2017 Sanitary Storm Water Sewer Water Total Utility Utility Utility Enterprise CASH FLOWS FROM OPERATING ACTIVITIES Receipts from Customers and Users 1,447,140$ 1,721,082$ 60,518$ 3,228,740$ Other Operating Receipts 74,697 6,449 33,998 115,144 Payments to Suppliers (448,013) (692,118) (11,828) (1,151,959) Payments to Employees (93,837) (281,509) (15,313) (390,659) Net Cash Flows Provided by Operating Activities 979,987 753,904 67,375 1,801,266 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers In - 14,536 - 14,536 Property Taxes - - 25,000 25,000 Principal Paid on Revenue Bonds (732,600) (1,302,400) - (2,035,000) Interest Paid on Revenue Bonds (348,514) (619,301) - (967,815) Transfers Out (54,741) (155,481) - (210,222) Net Cash Flows Provided (Used) by Noncapital Financing Activities (1,135,855) (2,062,646) 25,000 (3,173,501) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition and Construction of Capital Assets (1,665,460) (148,864) (33,204) (1,847,528) Connection Fees 1,075,408 2,596,702 - 3,672,110 Net Cash Flows Provided by Capital and Related Financing Activities (590,052) 2,447,838 (33,204) 1,824,582 CASH FLOWS FROM INVESTING ACTIVITIES Interest on Investments 77,866 74,377 2,078 154,321 Net Increase (Decrease) in Cash and Cash Equivalents (668,054) 1,213,473 61,249 606,668 Cash and Cash Equivalents - January 1 7,879,742 6,663,215 159,093 14,702,050 Cash and Cash Equivalents - December 31 7,211,688$ 7,876,688$ 220,342$ 15,308,718$ RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES Operating Income (Loss) 400,005$ (175,902)$ (632)$ 223,471$ Adjustments to Reconcile Operating Income (Loss) to Net Cash Flows Provided by Operating Activities: Depreciation 506,191 912,688 35,134 1,454,013 GERF Pension Activity 10,176 30,535 - 40,711 Other Income Related to Operations 69,259 6,449 33,379 109,087 (Increase) Decrease in Assets & Deferred Outflows of Resources: Accounts Receivable (12,728) (18,322) (1,022) (32,072) Special Assessments 5,438 - 619 6,057 Due from Other Governments - 1,786 - 1,786 Prepaid Items (448) (1,632) - (2,080) Increase (Decrease) in Liabilities & Deferred Inflows of Resources Accounts Payable 953 (4,237) (103) (3,387) Due to Other Governments 294 - - 294 Accrued Salaries Payable 212 637 - 849 Compensated Absences Payable 635 1,902 - 2,537 Net Cash Flows Provided by Operating Activities 979,987$ 753,904$ 67,375$ 1,801,266$ NONCASH FINANCING ACTIVITIES Amortization of Premium on Bonds Payable 28,398$ 50,485$ -$ 78,883$ Acquisition of Capital Assets on Account 16,681$ -$ 81,452$ 98,133$ Contribution of Capital Assets - Developer 936,570$ 551,275$ 526,448$ 2,014,293$ Contribution of Capital Assets - Governmental Funds -$ 20,643$ -$ 20,643$ The notes to the financial statements are an integral part of this statement. 38 This page has been left blank intentionally. 39 CITY OF OTSEGO, MINNESOTA STATEMENT OF FIDUCIARY NET POSITION AGENCY FUNDS DECEMBER 31, 2017 Agency Funds ASSETS Current Assets Cash and Cash Equivalents 1,437,507$ LIABILITIES Current Liabilities Accounts Payable 34,933 Escrow Deposits 1,402,574 Total Liabilities 1,437,507$ The notes to the financial statements are an integral part of this statement. 40 CITY OF OTSEGO, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. REPORTING ENTITY The City of Otsego, Minnesota (the City) was incorporated in 1990 after being an established township since 1858. The City operates under the "Optional Plan A" form of government, as defined in Minnesota statutes. The governing body of the City (City Council) consists of an elected Mayor, and four elected Council members, all of which are elected at-large and serve four year staggered terms. The City Council exercises legislative authority and determines all matters of policy. The financial statements of the City have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP), as applied to governmental units by the Governmental Accounting Standards Board (GASB). The City includes all funds, organizations, institutions, agencies, departments, boards, and offices that are not legally separate from the City. Component units are legally separate organizations for which the elected officials of the City are financially accountable and are included within the basic financial statements of the City because of the significance of their operational or financial relationships with the City. The City is considered financially accountable for a component unit if it appoints a voting majority of the organization's governing body and is able to impose its will on the organization by significantly influencing the programs, projects, activities, or level of services performed or provided by the organization, or there is a potential for the organization to provide specific financial benefits to, or impose specific financial burdens on, the City. Blended component units, although legally separate, are, in substance, part of the government’s operations. A blended component unit is reported as if it were a fund of the City throughout the year. It is included at both the government-wide and fund financial reporting levels. A description of the City’s blended component unit follows: The City of Otsego Economic Development Authority (EDA) – The EDA is a legal entity separate from the City. Although legally separate, the EDA is reported as if it were part of the primary government because the Board of Commissioners is made up of the Mayor and four Council members and the City has operational responsibility over the EDA. It is this criterion that results in the EDA being reported as a blended component unit within the primary government, although there is currently no financial activity for the EDA. Separate financial statements would not be prepared for the EDA, even if there was financial activity. B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all non-fiduciary activities of the City and its component units. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or business-type activity and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or business-type activity. Taxes and other items not included among program revenues are reported instead as general revenues . Separate financial statements are provided for governmental funds, proprietary funds and fiduciary funds. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. 41 CITY OF OTSEGO, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 The Agency funds are presented in the fiduciary fund financial statements, including the Statement of Fiduciary Net Position. Since by definition, these assets are being held for the benefit of a third party, and cannot be used to address activities or obligations of the City, these funds are not incorporated into the government-wide 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 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 and special assessments are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources 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 revenues to be available if they are collected within 60 days of the end of the current fiscal year. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, compensated absences, as well as expenditures related to claims and judgements, are recorded only when payment is due. Property taxes, special assessments, intergovernmental revenues, charges for services and interest associated with the current fiscal year are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal year. Only the portion of special assessments receivable due within the current fiscal year is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the City. The City reports the following major governmental funds: General Fund - This is the City's primary operating fund, and accounts for all of the general financial resources of the City, except those required to be accounted for in another fund. Most of the current day-to-day operations of the City are financed from this fund. Debt Service Fund - This fund is used to account for the collection of property taxes, special assessments and other resources which are used to repay the principal and interest on debt issued for various improvements in the City. Park Development Fund - This fund was established to accumulate funds that will be used to provide for the acquisition and construction of new park sites, buildings and facilities throughout our growing City. The City reports the following major enterprise funds: Water Utility Fund - This fund accounts for the operations of the public water utility system. The resources accumulated are primarily from system user charges and system connection fees. The accumulated funds are then used to pay for the operational costs of pumping and distributing water to the system customers. The fund also accumulates resources to finance certain capital improvements and to pay the debt service associated with the water utility. Sanitary Sewer Utility Fund - This fund accounts for the operations of the public sewer utility system. The resources accumulated are primarily from system user charges and system connection fees. The accumulated funds are then used to pay for the operational costs of collection and treatment of sewage from the system. The fund also accumulates resources to finance certain capital improvements and to pay the debt service associated with the sewer utility. Storm Water Utility Fund - This fund accounts for the operations of the storm water collection system. The resources accumulated are primarily from system user charges and property taxes. The accumulated funds are then used to pay for the operational costs of collection and treatment of surface water runoff that does not require treatment. 42 CITY OF OTSEGO, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 The City reports the following fiduciary funds: Agency Funds - These funds are custodial in nature and do not present results of operations or have a measurement focus. Agency funds are accounted for using the accrual basis of accounting. These funds are used to account for assets from residents, builders and developers that are deposited with the City as part of specific projects. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are transactions that would be treated as revenues, expenditures or expenses if they involved external organizations, such as buying goods and services or payments in lieu of taxes. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the enterprise funds 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 revenue and expenses. D. DEPOSITS AND INVESTMENTS The City's cash and cash equivalents are considered to be cash on hand, demand deposits and investments with a maturity of three months or less when from the date of acquisition. All of the deposits and investments allocated to the proprietary funds are considered to meet this criteria. Cash balances from all funds are pooled and invested, to the extent available, in certificates of deposit and other authorized investments. Earnings from such investments are allocated on the basis of applicable participation by each of the funds. Minnesota statute §118A.04 governs the investment of public funds and outlines the allowable investment types. The City's investment policy is more restrictive than statute, and authorizes the City to invest in the following: a] Securities which are direct obligations or are guaranteed or insured issues of the United States, its agencies, its instrumentalities, or organizations created by an act of Congress. b] Shares of investment companies registered under the Federal Securities Act of 1940, and received the highest credit rating and is rated in one of the two highest categories by at least one nationally recognized statistical rating agency. c] Obligations of any state or local government with taxing powers rated "A" for general obligations or with a rating of "AA" or better for revenue backed obligations, with the ratings being provided by a national bond rating service. d] Commercial paper issued by a United States corporation or their Canadian subsidiaries that is rated in the highest quality by at least two nationally recognized rating agencies. e] Time deposits that are fully insured by the Federal Deposit Insurance Corporation. Certain investments for the City are reported at fair value as disclosed in Note 3 (A). The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; and Level 3 inputs are significant unobservable inputs. In accordance with Governmental Accounting Standards Board (GASB) Statement No. 79, the Minnesota Municipal Investment Pool (4M) securities are valued at amortized cost, which approximates fair value. There are no restrictions or limitations on withdrawals from the 4M Liquid Asset Fund. 43 CITY OF OTSEGO, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 E. RECEIVABLES AND PAYABLES Accounts Receivable Receivables include amounts billed for services provided by the City before year-end. Receivables within the enterprise funds do include unbilled charges for services provided from the middle of December to the end of the year, as the City bills for those services mid-month. The City currently has not established an allowance for doubtful accounts for either trade or utility charge receivables. The City annually certifies unpaid trade and utility charge receivable to Wright County for collection in the following year, and is the primary factor in reporting the receivables at a gross amount, rather than net of allowance. Property Taxes The City Council annually adopts a property tax levy and certifies it to Wright County in December. The County allocates this levy across taxable properties in the City based on valuations assessed in the prior year. These taxes become an enforceable lien against the property on January 1st, and are recorded as receivables by the City as of that date. Tax statements are generated and mailed by the County to the respective taxpayers, with half of the total due on May 15th and the second half due on October 15th. The County is also the collecting agency, and remits the amounts collected to the City with primary settlements in June and December, and a minor settlement in January. Property taxes that are unpaid as of December 31st, are then classified as delinquent. Delinquent taxes receivable include the past six years of uncollected taxes and are fully offset by a deferred inflow of resources for those collections not received within 60 days of year-end in the governmental fund financial statements. Special Assessments Special assessments represent the financing for public improvements paid for by benefiting property owners. These assessments are recorded as receivables upon certification to the County. Special assessments have been offset by a deferred inflow of resources for those collections not received within 60 days after year end in the governmental fund financial statements. Interfund 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, 2017 are planned to be eliminated in 2018. Long-term interfund loans are classified as “advances to/from other funds.” Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as "internal balances". F. PREPAID ITEMS Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. Prepaid items are reported using the consumption method and recorded as expenditures/expenses at the time of consumption rather than when purchased. G. ASSETS HELD FOR RESALE Assets held for resale represent various parcels of land that are currently owned by the City with the intent to sell in the future to create economic development activity within the City. The assets are reported at their net realizable value in the General fund. During the year ended December 31, 2017, management has reviewed the reported values of the assets. 44 CITY OF OTSEGO, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 H. CAPITAL ASSETS Capital assets, which include property, plant, equipment, infrastructure assets (e.g., roads, bridges, sidewalks, and similar items), and intangible assets such as easements and computer software, are reported in the applicable governmental or business-type activities columns in the government-wide financial statements and the proprietary fund financial statements. Capital assets are defined by the City as assets with an initial, individual cost in excess of the amounts in the table below and with an estimated useful life in excess of three years. All land assets are recorded by the City with no assigned cost threshold. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at acquisition value at the date of donation. Infrastructure $ 100,000 Buildings and Building Improvements 50,000 Land Improvements 25,000 Machinery and Equipment 5,000 The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed . For the year ended December 31, 2017 no interest was capitalized in connection with construction in progress. Capital assets of the City, are depreciated using the straight line method over the following estimated useful lives: Infrastructure 25 - 40 years Buildings and Building Improvements 10 - 40 years Land Improvements 5 - 20 years Machinery and Equipment 3 - 15 years I. DEFERRED OUTFLOWS OF RESOURCES In addition to assets, the statement of financial position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The City presents deferred outflows of resources on the Statement of Net Position for deferred outflows of resources related to pensions for various estimate differences that will be amortized and recognized over future years. 45 CITY OF OTSEGO, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 J. COMPENSATED ABSENCES It is the City's policy to permit employees to accumulate earned but unused personal time-off (PTO) benefits. All PTO pay is accrued when incurred in the government-wide and proprietary fund financial statements. A liability for these amounts is reported in governmental fund financial statements only if they have matured, for example, as a result of an employee retirement or resignation. The General fund is typically used to liquidate the compensated absences payable for governmental activities. K. LONG TERM OBLIGATIONS In the government-wide financial statements and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net position. Bond premiums and discounts are amortized over the life of the bonds using the straight line method. Bonds payable are reported net of the applicable bond premium or discount. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. L. PENSIONS For purposes of measuring the net pension liability, deferred outflows of resources, deferred inflows of resources, and pension expense, information about the fiduciary net position of the Public Employees Retirement Association (PERA) and additions to or deductions from PERA's fiduciary net position have been determined on the same basis as they are reported by PERA except that PERA's fiscal year end is June 30. For this purpose, plan contributions are recognized as of employer payroll paid dates and benefit payments and refunds are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. M. POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS In August 2004, the Governmental Accounting Standards Board (GASB) issued Statement No. 45, Accounting and Financial Reporting by Employers for Post-Employment Benefits Other Than Pensions, effective for the City year-end 2009. Statement No. 45 requires accrual based measurement, recognition and disclosure of other postemployment benefits (OPEB) expense, such as retiree medical and dental costs, over the employees' years of service, along with the related liability, net of any plan assets. The City has no plans that would result in an OPEB liability and, therefore, the City anticipates it will not incur any future explicit or implicit OPEB costs for its employees, and therefore, no liability will be recorded. N. DEFERRED INFLOWS OF RESOURCES In addition to liabilities, statements of financial position or balance sheets will sometimes report a separate section for deferred inflows of resources. This separate financial statement element represents an acquisition of net position that applies to future periods and so will not be recognized as an inflow of resources (revenue) until that time. The City has two types of items which qualify for reporting in this category. One item, unavailable revenue, which arises only under a modified accrual basis of accounting, therefore, is reported only in the governmental funds Balance Sheet. The governmental funds report unavailable revenue from sources such as: property taxes, special assessments and intergovernmental not collected within 60 days of year-end. These amounts are deferred and recognized as an inflow of resources in the period the amounts become available. The second item presented by the City are deferred inflows of resources on the Statement of Net Position for deferred inflows of resources related to pensions for various estimate differences that will be amortized and recognized over future years. 46 CITY OF OTSEGO, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 O. FUND EQUITY Fund equity in the fund financial statements is classified as fund balance for governmental funds and net position for proprietary funds. Fund equity in the government-wide financial statements is classified as net position for both governmental and business-type activities. Fund Balance – In the fund financial statements, governmental funds report fund balance in classifications that disclose restraints for which amounts in those funds can be spent. These classifications are as follows: Nonspendable – consists of amounts that are not in spendable form or are required to be maintained intact. Restricted – consists of amounts related to externally imposed constraints established by creditors, grantors or contributors; or constraints imposed by state statutory provisions. Committed – consists of internally imposed constraints. These constraints are imposed by formal action (resolution) of the City Council, which is the highest level of decision making authority. Assigned – consists of internally imposed constraints. These constraints reflect the specific purpose for which it is the City’s intended use. These constraints are established by the City Council or, pursuant to council resolution, the City Administrator or the Finance Director. Unassigned – is the residual classification for the General fund and also reflects negative residual amounts in other funds. When committed, assigned, or unassigned resources are available for an allowable use, it is the City’s policy to use resources in the following order; 1) committed, 2) assigned, and 3) unassigned. The City has formally adopted a fund balance policy for the General Fund. The policy establishes a year-end target fund balance amount of 45% of the next year’s operating budget for cash flow needs. Net Position – Net position represents the difference between assets, deferred outflows of resources, liabilities and deferred inflows of resources. Net position can be displayed in the three following classifications: Net Investment in Capital Assets – consists of capital assets, net of accumulated depreciation, and further reduced by the outstanding balance of any long-term debt used to build or acquire the respective capital assets. Restricted – reported when there are limitations of use through external restrictions imposed by creditors, grantors, or laws and regulations of other governments. Unrestricted – all remaining net position is reported in this classification. When both restricted and unrestricted net position are available for an allowable use, it is the government’s policy to use restricted resources first, then unrestricted resources as they are needed. P. USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP), requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Actual results could differ from such estimates. 47 CITY OF OTSEGO, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 NOTE 2 STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY A. BUDGETARY INFORMATION An annual budget is adopted on a basis consistent with accounting principles generally accepted in the United States of America (GAAP) for the General fund, the Debt Service fund, and Street Lighting and Revolving Loan special revenue funds. All annual appropriations lapse at year-end. The City does not use encumbrance accounting. In June of each year, General fund departments submit requests for appropriations to the City Administrator so that a budget may be prepared. The requested budget appropriations are presented and reviewed with the City Council. The proposed General fund budget and preliminary property tax levy must be certified to Wright County prior to September 30. The City Council holds public hearings and a final budget is adopted in early December, with the final property tax levy required to be certified to Wright County prior to the end of December. The appropriated budget is prepared by fund and department. The City's department heads are authorized to make transfers of budgeted appropriations within a department. Any transfers of appropriations between a department needs authorization of the City Administrator. The legal level of budgetary control is at the fund level, so any appropriations transfers between funds needs needs the approval of the City Council. There were no transfers of budgeted appropriations or budget amendments during the year. B. DEFICIT FUND EQUITY Deficit fund equity exists at December 31, 2017 in the following funds: Nonmajor Governmental Funds: Special Revenue Funds Tax Increment District #1 17,178$ Capital Project Funds Municipal State-Aid for Construction 263,971 Odean Improvements 5,425 Kadler Avenue Improvements 68,576 The deficits are being funded through internal borrowing. The Tax Increment District No. 1 fund deficit will be repaid with future collections of tax increment, which is expected to begin generating in 2018. The Municipal State-Aid for Construction fund deficit will be repaid with State-Aid funding for the 85th Street reconstruction and 70th Street & CSAH 37 construction projects. The Odean Improvements fund deficit will be repaid with future collections of special assessments against the benefitting property owners. The Kadler Avenue Improvements fund deficit will be repaid with project funding sources which are expected to include: grant monies, special assessments and bond proceeds. 48 CITY OF OTSEGO, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 NOTE 3 DETAILED NOTES ON ALL FUNDS A. DEPOSITS AND INVESTMENTS In accordance with Minnesota Statutes, the City maintains deposits at only those depository banks authorized by the City Council. All such depositories are members of the Federal Reserve System. Minnesota Statutes require that all City deposits with financial institutions be protected by federal deposit insurance, corporate surety bonds or collateral. The market value of collateral pledged must equal 110% of the deposits not covered by insurance or bonds. Minnesota Statutes require that all securities pledged as collateral be placed in safekeeping in a restricted account at the Federal Reserve Bank, or in an account at a trust department of a commercial bank or other financial institution that is not owned or controlled by the financial institution furnishing the collateral. At year-end, the City's carrying amount of deposits was $1,003,849, and a bank balance of $1,326,456. Custodial credit risk for the City's deposits would arise in the event of a bank failure, where the City's deposits may not be returned to it. As of year-end, the City's bank balance was not exposed to custodial credit risk because it was insured and fully collateralized with securities held by the pledging financial institution's trust department or agent in the City's name. As of December 31, 2017 the City had the following investments: Fair Value < 1 1 - 3 3 - 5 > 5 Negotiable Certificates of Deposit 13,203,291$ 6,156,705$ 4,114,328$ 2,687,341$ 244,917$ U.S. Government Agency Securities 6,722,588 1,646,458 5,076,130 - - Municipal Bonds 7,846,704 889,691 6,957,013 - - External Investment Pool 2,907,117 2,907,117 - - - Brokered Money Market Accounts 830,144 830,144 - - - Total 31,509,844$ 12,430,115$ 16,147,471$ 2,687,341$ 244,917$ The external investment pool and brokered money market investments are valued at amortized cost. All of the remaining City investments have recurring fair value measurements using a matrix pricing model (level 2 inputs). Investment Maturities (In Years) Investment Type 49 CITY OF OTSEGO, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 As of December 31, 2017, the City's investments in U.S. Government Agency Securities and Municipal Bonds carried the following ratings as well as their respective concentration percentage when compared to the total investment portfolio. An indication of "NR" in the ratings below mean that the respective rating organization has not provided a rating on the respective investment. Moody's S & P Fair Portfolio Rating Rating Value Concentration % U.S. Government Agency Securities Federal Farm Credit Bank (FFCB) Aaa AA+ 3,055,798$ 9.70% Federal Home Loan Bank (FHLB) Aaa AA+ 988,899 3.14% Federal Home Loan Mortgage Corporation (FHLMC) Aaa AA+ 1,240,174 3.94% Federal National Mortgage Association (FNMA)Aaa AA+ 1,437,717 4.56% Total 6,722,588$ 21.33% None of the U.S. Government Agency Securities investments are individually over 5% of the total investment portfolio. Municipal Bonds City of Ennis, Texas NR AA-424,779 1.35% State of Connecticut A1 A+898,341 2.85% State of New Mexico Finance Authority Aa2 AA+567,241 1.80% State of Florida Board of Administrative Finance Aa3 AA 499,840 1.59% Metropolitan Council, Minnesota Aaa AAA 471,167 1.50% Katonah School District, New York Aa1 NR 111,800 0.35% Lake County School District, Illinois Aa2 AA+716,162 2.27% Lincoln Consolidated School District, Michigan NR AA-501,280 1.59% City of Portsmouth, Virginia Aa2 AA+497,270 1.58% Swift County, Minnesota NR AA-320,115 1.02% State of California Aa3 AA-488,350 1.55% Pinckney School District, Michigan NR AA-173,303 0.55% Milan School District, Michigan NR AA-502,470 1.59% City of Kaukauna, Wisconsin NR AA-206,994 0.66% Milwaukee County, Wisconsin Aa2 AA 490,365 1.56% State of Virginia Infrastructure Authority Aa2 A 464,912 1.48% City of Oklahoma City, Oklahoma Aaa AAA 512,315 1.63% Total 7,846,704$ 24.90% The following is a summary of total deposits and investments as of December 31, 2017: Deposits 1,003,849$ Investments 31,509,844 Petty Cash and Change Funds 600 Total 32,514,293$ The City's deposits and investments as of December 31, 2017 are presented in the basic financial statements as follows: Statement of Net Position 31,076,786$ Statement of Fiduciary Net Position 1,437,507 Total 32,514,293$ Investment Type 50 CITY OF OTSEGO, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 Interest Rate Risk – This is the risk that the market values of the securities in the City's investment portfolio would decrease due to changes in market interest rates. The City identifies interest rate risk within the second and fourth objectives of the City's investment policy, which are liquidity and return on investment. The City attempts to limit its exposure to interest rate risk by keeping the investment portfolio sufficiently liquid to meet cash flow requirements, while still attempting to obtain a reasonable return on investment. The City also addresses interest rate risk by attempting to create proportions in the maturities of the City's investment portfolio which places longer term investments higher on the yield curve than those shorter term investments. Credit Risk – This is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. Minnesota Statutes limits allowable investments to those that are in the top two ratings issued by nationally recognized statistical rating organizations. The City's investment policy also addresses credit risk by further limiting investments to the list provided within Note 1-D. Concentration of Credit Risk – This is the risk of loss attributed to the magnitude of the City's investment in any single issuer. The first objective of the City's investment policy is safety. To obtain this objective, diversification is to be considered in the type of investment, maturity and the issuer of the respective investments. Each of the City's certificates of deposit are purchased in amounts not exceeding federal deposit insurance. The tables above outline the concentrations of the City's other investment types, including U.S. Government Agency Securities and Municipal Bonds. Custodial Credit Risk – This is the risk that in the event of the failure of a counterparty to an investment, the City will not be able to recover the value of an investment or collateral securities that are in possession of an outside party. In accordance with the City's investment policy, all investment securities shall be held by a single safekeeping agent in the name of the City. 51 CITY OF OTSEGO, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 B. CAPITAL ASSETS Capital asset activity for the year ended December 31, 2017 was as follows: Beginning Ending Balance Increases Decreases Balance Governmental Activities: Capital Assets, not Being Depreciated: Land 1,959,823$ 86,841$ -$ 2,046,664$ Construction in Progress 2,267,436 627,939 (2,335,073) 560,302 Total Capital Assets, not Being Depreciated 4,227,259 714,780 (2,335,073) 2,606,966 Capital Assets, Being Depreciated: Buildings and Building Improvements 6,471,210 42,068 - 6,513,278 Land Improvements 4,885,041 725,138 - 5,610,179 Machinery and Equipment 3,316,590 308,895 (232,301) 3,393,184 Infrastructure 19,509,245 3,216,998 - 22,726,243 Total Capital Assets, Being Depreciated 34,182,086 4,293,099 (232,301) 38,242,884 Less Accumulated Depreciation for: Buildings and Building Improvements 1,652,698 157,715 - 1,810,413 Land Improvements 2,174,781 226,405 - 2,401,186 Machinery and Equipment 1,798,384 287,120 (191,869) 1,893,635 Infrastructure 5,168,923 700,425 - 5,869,348 Total Accumulated Depreciation 10,794,786 1,371,665 (191,869) 11,974,582 Total Capital Assets Being Depreciated - Net 23,387,300 2,921,434 (40,432) 26,268,302 Governmental Activities Capital Assets - Net 27,614,559$ 3,636,214$ (2,375,505)$ 28,875,268$ Depreciation expense was charged to the functions of the City as follows: Governmental Activities: General Government 20,138$ Public Safety 3,985 Public Works 1,017,096 Culture and Recreation 330,446 Total Depreciation Expense - Governmental Activities 1,371,665$ 52 CITY OF OTSEGO, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 Beginning Ending Balance Increases Decreases Balance Business-type Activities: Capital Assets, not Being Depreciated: Land 550,079$ 81,660$ -$ 631,739$ Construction in progress 2,522,568 1,630,111 (2,999,502) 1,153,177 Total Capital Assets, not Being Depreciated 3,072,647 1,711,771 (2,999,502) 1,784,916 Capital Assets, Being Depreciated: Machinery and Equipment 431,473 674,799 - 1,106,272 Infrastructure 52,308,083 4,568,519 - 56,876,602 Total Capital Assets, Being Depreciated 52,739,556 5,243,318 - 57,982,874 Less Accumulated Depreciation for: Machinery and Equipment 160,092 58,981 - 219,073 Infrastructure 13,313,997 1,395,032 - 14,709,029 Total Accumulated Depreciation 13,474,089 1,454,013 - 14,928,102 Total Capital Assets Being Depreciated - Net 39,265,467 3,789,305 - 43,054,772 Business-type Activities Capital Assets - Net 42,338,114$ 5,501,076$ (2,999,502)$ 44,839,688$ Depreciation expense was charged to the functions of the City as follows: Business-type Activities: Water Utility 506,191$ Sanitary Sewer Utility 912,688 Storm Water Utility 35,134 Total Depreciation Expense - Business-type Activities 1,454,013$ C. CONSTRUCTION COMMITMENTS At December 31, 2017 the City had construction project contracts in progress. The commitments related to remaining contract balances are summarized as follows: Contract Remaining Amount Commitment Lefebvre Creek Park 104,851$ 36,170$ Project 53 CITY OF OTSEGO, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 D. INTERFUND BALANCES AND TRANSFERS At December 31, 2017, the composition of balances for due to/from other funds of the City were as follows: Due from Due to Other Funds Other Funds Major Governmental Funds: General 17,178$ -$ Debt Service - 25,034 Nonmajor Governmental Funds: Special Revenue Funds Tax Increment District No. 1 - 17,178 Capital Project Funds MSA Construction - 626,753 Odean Improvements - 5,425 Capital Improvements 716,586 - Kadler Avenue Improvements - 59,374 Total 733,764$ 733,764$ Interfund due to/from balances are representative of lending/borrowing arrangements to cover deficit cash balances at the end of the fiscal year. Balances in both the Debt Service and Odean Improvements funds will be repaid with the future collection of special assessments on benefiting property owners. The balance in the Tax Increment District No. 1 fund will be repaid with future collections of tax increment, which is expected to begin in 2018. The balance in the Municipal State-Aid for Construction fund will be repaid with State-Aid funding for the 85th Street reconstruction and 70th Street & CSAH 37 construction projects. The balance in the Kadler Avenue Improvements fund will be repaid with project funding sources, which are expected to include: grant monies, special assessments and bond proceeds. Fund 54 CITY OF OTSEGO, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 Transfers between funds made during the year ended December 31, 2017 were as follows: Transfer In Transfer Out Major Governmental Funds: General 155,042$ 1,074,567$ Debt Service 49,000 - Nonmajor Governmental Funds: Pavement Management 1,074,567 - 80th Street Improvements - 8,356 Total Governmental Funds 1,278,609 1,082,923 Major Proprietary Funds: Water Utility - 54,741 Sanitary Sewer Utility 14,536 155,481 Total Proprietary Funds 14,536 210,222 Total All Funds 1,293,145$ 1,293,145$ Interfund transfers allow the City to allocate financial resources to the funds that receive benefit from services provided by another fund or to provide additional capital and infrastructure funding. In addition, interfund transfers are occasionally authorized to allow redistribution of resources between funds for the most efficient use of funds. In 2017, the following transfers were made between funds: • The General fund transferred $1,074,567 to the Pavement Management fund in accordance with the City's fund balance policy, where any balance exceeding the minimum fund balance is set aside for future capital items. • The Water and Sanitary Sewer funds transferred $38,761 and $116,281 respectively to the General fund as an annual contribution to help manage the property tax levy. • The Water and Sanitary Sewer funds transferred $9,800 and $39,200 to the Debt Service fund to contribute their portion of the debt service associated with the purchase of the Jet Vac truck. • The Water fund transferred $6,180 to the Sanitary Sewer fund to contribute towards outstanding debt service. • The 80th Street Improvements fund transferred $8,356 to the Sanitary Sewer fund to close out the completed project. Fund 55 CITY OF OTSEGO, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 E. LONG-TERM DEBT Governmental Activities The City issued general obligation bonds to provide funding for the acquisition and construction of major capital facilities and construction of infrastructure in the governmental activities. General obligation bonds have also been issued to refinance general obligation improvement bonds, which were originally intended to be fully repaid with collections of special assessments. All long-term indebtedness outstanding is backed by the full faith and credit of the City. Bonds in the governmental activities will be retired with future property tax levies and collections of special assessments. In the event that a deficiency exists because of unpaid or delinquent taxes or special assessments at the time a debt service payment is due, the City must provide resources to cover the deficiency until other resources are available. At the end of the current year, there are $3,679,471 of assets accumulated in the debt service funds for future debt service. Included within those accumulated assets, there are $4,313 of delinquent special assessments receivable, of which collection is uncertain. Final Interest Maturity Original Payable Rates Date Date Issue 12/31/17 General Obligation Bonds: Equipment Certificates, Series 2010A 2.00 - 3.25% 1/28/2010 7/15/2019 385,000$ 85,000$ Refunding Bonds, Series 2010B 2.00 - 3.00% 11/30/2010 12/1/2021 3,705,000 1,850,000 Refunding Bonds, Series 2010D 2.00 - 3.60% 11/30/2010 2/1/2028 1,220,000 1,060,000 Refunding Bonds, Series 2011A 2.00 - 3.20% 12/21/2011 2/1/2028 4,640,000 3,540,000 Refunding Bonds, Series 2012A 2.00% 3/14/2012 12/1/2021 1,400,000 815,000 Total - Bonded Indebtedness 11,350,000$ 7,350,000 Other Liabilities: Unamortized Bond Premium 28,686 Compensated Absences Payable 79,474 Total Governmental Activities 7,458,160$ Annual debt service requirements to maturity for governmental activities long-term indebtedness are as follows: Principal Interest Principal Interest 1,115,000$ 180,225$ 45,000$ 2,650$ 1,145,000 155,655 40,000 1,300 1,160,000 129,344 - - 1,180,000 100,925 - - 520,000 70,311 - - 1,800,000 183,388 - - 345,000 5,740 - - 7,265,000$ 825,588$ 85,000$ 3,950$ Year Ending December 31 2018 2019 2023 - 2027 Equipment Certificates Governmental Activities General Obligation Bonds 2020 2021 2022 2028 Total 56 CITY OF OTSEGO, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 Business-type Activities The City issued general obligation bonds to provide funding for the acquisition and construction of major capital facilities and construction of infrastructure in the business-type activities. All long-term indebtedness outstanding is backed by the full faith and credit of the City. Bonds in the business-type activities will be retired with the net revenues of the Water and Sanitary Sewer funds. (Net revenues are defined as the excess of gross revenues and earnings over the normal, reasonable and current costs of operating and maintenance). In the event that a deficiency exists because of inadequate net revenues at the time a debt service payment is due, the City must provide resources to cover the deficiency until other resources are available. At the end of the current year, the Water and Sanitary Sewer funds provided net revenues of $3,719,482, which accounts for a debt-service coverage ratio of 123.87%. Final Interest Maturity Original Payable Rates Date Date Issue 12/31/17 General Obligation Bonds: Revenue Bonds, Series 2009A 4.00 - 4.13% 12/1/2009 12/1/2027 6,360,000$ 6,360,000$ Revenue Bonds, Series 2010C 2.00 - 5.00% 11/30/2010 12/1/2026 21,300,000 17,265,000 Total - Bonded Indebtedness 27,660,000$ 23,625,000 Other Liabilities: Unamortized Bond Premium 709,937 Compensated Absences Payable 14,043 Total Business-type Activities 24,348,980$ Annual debt service requirements to maturity for business-type activities long-term indebtedness are as follows: Principal Interest 2,130,000$ 884,710$ 2,220,000 799,510 2,335,000 710,710 2,410,000 640,660 2,550,000 520,160 11,980,000 1,369,183 23,625,000$ 4,924,933$ 2023 - 2027 Total Business-type Activities 2019 2020 2021 2022 Year Ending General Obligation Bonds December 31 2018 57 CITY OF OTSEGO, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 Changes in Long-Term Liabilities Long-term liability activity for the year ended December 31, 2017 was as follows: Beginning Ending Due Within Balance Additions Reductions Balance One Year Governmental Activities: Bonds Payable: General Obligation Bonds 8,345,000$ -$ (1,080,000)$ 7,265,000$ 1,115,000$ Equipment Certificates 130,000 - (45,000) 85,000 45,000 Total Bonded Indebtedness 8,475,000 - (1,125,000) 7,350,000 1,160,000 Unamortized Bond Premium 35,857 - (7,171) 28,686 - Compensated Absences 71,167 106,246 (97,939) 79,474 15,895 Total - Governmental 8,582,024 106,246 (1,230,110) 7,458,160 1,175,895 Business-type Activities: Bonds Payable: General Obligation Bonds 25,660,000 - (2,035,000) 23,625,000 2,130,000 Unamortized Bond Premium 788,820 - (78,883) 709,937 - Compensated Absences 11,506 24,703 (22,166) 14,043 2,808 Total - Business-type 26,460,326 24,703 (2,136,049) 24,348,980 2,132,808 Grand Total Long-Term Liabilities 35,042,350$ 130,949$ (3,366,159)$ 31,807,140$ 3,308,703$ The General fund is typically used to liquidate the compensated absences payable for governmental activities. F. CONDUIT DEBT OBLIGATIONS Conduit debt obligations are certain limited-obligation revenue bonds or similar instruments issued for the express purpose of providing capital financing for a specific third party. The City has issued various revenue bonds to provide funding to private sector entities for projects deemed to be in the public interest. Although these bonds bear the name of the City, the City has no obligation for such debt. Accordingly, the bonds are not reported as liabilities in the financial statements of the City. As of December 31, 2017, the City's conduit debt consisted of the following: Guardian Angels Senior Services Revenue Bonds, Series 2017 29,320,000$ Guardian Angels Senior Services Revenue Refunding Bonds, Series 2017A 10,010,000 Revenue Refunding Bonds, Series 2017B 6,930,000 Revenue Refunding Bonds, Series 2017C 165,000 Kaleidoscope Charter School Revenue Bonds, Series 2014A 15,580,000 58 CITY OF OTSEGO, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 G. TAX ABATEMENTS The City has entered into certain agreements for economic development purposes to either attract new businesses or retain existing business operations within the City. The authority for the City to enter into such agreements comes from Minnesota Statute §469. The City further has an established Business Subsidy Policy that provides evaluation criteria for any business subsidy requests. As of December 31, 2017, the City has entered into two types of agreements. Property Tax Abatements For the year ended December 31, 2017, the City abated property taxes totaling $81,237. Details of each agreement and the abatement for the current year are as follows: • The City has entered into a tax abatement agreement with Duke Realty for land acquisition costs paid by the developer that ultimately allowed for the City to construct street infrastructure within the Gateway North industrial park. The agreement outlines that 30 percent of taxes payable in 2008-2017 will be abated by the City, to a maximum value of $160,000. The abatement amounted to $14,904 in the current year. • The City has entered into a tax abatement agreement with Duke Realty for land acquisition costs paid by the developer that ultimately allowed for the City to construct street infrastructure within the Gateway North industrial park. The agreement outlines that 50 percent of taxes payable in 2016-2022 will be abated by the City, to a maximum value of $340,000. The abatement amounted to $61,620 in the current year. • The City has entered into a tax abatement agreement with Family Speech & Therapy Services for costs to upgrade and provide rehabilitation of an existing commercial building within the City. The agreement outlines that 100 percent of taxes payable in 2014-2019 will be abated by the City, to a maximum value of $25,000. The abatement amounted to $4,713 in the current year. Tax Increment Financing For the year ended December 31, 2017, the Tax Increment Financing Districts within the City did not generate any increment and respectively the City did not make any payments to the developers. Details of the agreement are as follows: • Tax Increment Financing District No. 1 was established in 2015 for the purpose of promoting industrial development on a parcel owned by the City which had been obtained through the tax forfeiture process. The parcel would not have been developed but-for tax increment financing given the existing special assessments and the extraordinary amount of soil improvements. Under the agreement, up to $694,487 of costs incurred by the developer will be reimbursed through a tax increment revenue note, payable beginning in 2018 and concluding in 2027. Payments on the tax increment revenue note are only made to the extent of increment generated by the district. The improvements to the site have just recently been completed, and the City anticipates increment generation will begin with taxes payable 2018. • Tax Increment Financing District No. 2 was established in 2017 for the purpose of promoting industrial development on two parcels along Kadler Avenue. In order for the industrial development to be accessible to the type and volume of traffic associated with industrial users, the Kadler Avenue street infrastructure would have to be improved. The City intended to retain the increment generated from the industrial park to pay for a portion of the street improvement costs. Prior to the City awarding a construction contract for the project, the developer requested the project be delayed until the private development was ready to move forward. Due to this project delay, the tax increment financing district was decertified. • Tax Increment Financing District No. 3 was established in 2017 for the purpose of facilitating the development of a 142 unit senior housing facility, consisting of independent living, assisted living and memory care. The tax increment district is a housing district, and is intended for occupancy, in part, by persons or families of low and moderate income. In order to qualify as a housing district, the senior housing facility is required to provide at least 20% of the residential units to persons whose incomes do not exceed 50% of the County median income. By providing the affordable housing, the City believes that such a project was in the best interests of the City and its residents and agreed to reimburse the developer the lesser of $2,389,400 or the costs of the site improvements actually incurred. The reimbursements will be made through a tax increment revenue note, payable beginning in 2020 and concluding in 2047. Payments of the tax increment revenue note are only made to the extent of increment generated by the district. 59 CITY OF OTSEGO, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 H. FUND EQUITY Net position reported in the government-wide statement of net position at December 31, 2017 include the following: Governmental Activities Net Investment in Capital Assets: Cost of Capital Assets 40,849,850$ Less: Accumulated Depreciation (11,974,582) Less: Related Long-Term Debt Outstanding (7,378,686) Total Net Investment in Capital Assets 21,496,582 Restricted for Debt Service Fund Balance - Governmental Fund Financial Statements 1,914,887 Add: Unavailable Revenue - Special Assessments 1,737,765 Less: Accrued Interest Payable (56,304) Total Restricted for Debt Service 3,596,348 Restricted for Park Development 1,377,188 Unrestricted 13,338,398 Total Governmental Activities Net position 39,808,516$ Business-type Activities Net Investment in Capital Assets: Cost of Capital Assets 59,767,790$ Less: Accumulated Depreciation (14,928,102) Less: Related Long-Term Debt Outstanding (24,334,937) Total Net Investment in Capital Assets 20,504,751 Unrestricted 15,679,356 Total Business-type Activities Net Position 36,184,107$ Aggregated funds balances reported in the governmental funds balance sheet at December 31, 2017 include the following: Governmental Funds Nonspendable Restricted Committed Assigned General Fund Prepaid Items 114,997$ -$ -$ -$ Assets Held for Resale 202,200 - - - Insurance Deductibles - - - 185,066 Educational Programs - - - 20,191 Debt Service Prepaid Items 1,325 - - - Debt Service - 1,913,562 - - Park Development City Parks - 1,377,188 - - Nonmajor Governmental Funds Street Light Replacement - - 125,396 - Business Development Loans - - 349,467 - City Buildings & Infrastructure - - - 8,844,833 City Parks - - - 253,864 Total Fund Balances 318,522$ 3,290,750$ 474,863$ 9,303,954$ 60 CITY OF OTSEGO, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 NOTE 4 RISK MANAGEMENT The City is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions and natural disasters. Property and casualty insurance is provided through the League of Minnesota Cities Insurance Trust (LMCIT), a public entity risk pool currently operating as a common risk management and insurance program. The City pays an annual premium to the LMCIT for its insurance coverage. The LMCIT is self-sustaining through member premiums and reinsures through commercial companies for excess claims. The City is covered through the pool for any claims incurred but unreported, however, retains risk for the deductible portions of the insurance policies. The amount of those deductibles is considered immaterial to the financial statements. Workers’ compensation coverage is provided through a pooled self-insurance program through the LMCIT. The respective insurance policy is retrospectively rated. With this type of coverage, final premiums are determined after loss experience is known. The amount of premium adjustment, if any, is considered immaterial and not recorded until received or paid. This coverage is not subject to a deductible. There were no significant reductions in insurance from the previous year or settlements in excess of insurance coverage for any of the past three years. The City is subject to certain legal claims in the normal course of business. Management does not expect the resolution of these claims will have a material impact on the City’s financial condition or results of operations. 61 CITY OF OTSEGO, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 NOTE 5 PENSION PLAN Public Employee's Retirement Association A. PLAN DESCRIPTION The City participates in the following cost-sharing multiple-employer defined benefit pension plan administered by the Public Employees Retirement Association of Minnesota (PERA). PERA's defined benefit pension plans are established and administered in accordance with Minnesota Statutes, Chapters 353 and 356. PERA's defined benefit pension plans are tax qualified plans under Section 401(a) of the Internal Revenue Code. General Employees Retirement Plan All full-time and certain part-time employees of the City are covered by the General Employees Plan. General Employees Plan members belong to the Coordinated Plan. Coordinated Plan members are covered by Social Security. B. BENEFITS PROVIDED PERA provides retirement, disability, and death benefits. Benefit provisions are established by state statute and can only be modified by the state legislature. Benefit increases are provided to benefit recipients each January. Increases are related to the funding ratio of the plan. Members in plans that are at least 90 percent funded for two consecutive years are given 2.5 percent increases. Members in plans that have not exceeded 90 percent funded, or have fallen below 80 percent, are given 1 percent increases. The benefit provisions stated in the following paragraphs of this section are current provisions and apply to active plan participants. Vested, terminated employees who are entitled to benefits but are not receiving them yet are bound by the provisions in effect at the time they last terminated their public service. General Employees Plan Benefits Benefits are based on a member's highest average salary for any five successive years of allowable service, age, and years of credit at termination or service. Two methods are used to compute benefits for PERA's Coordinated Plan members. The retiring member receives the higher of a step-rate benefit accrual formula (Method 1) or level accrual formula (Method 2). Under Method 1, the annuity accrual rate for a Coordinated Plan member is 1.2 percent of average salary for each of the first ten years and 1.7 percent for each remaining year. Under Method 2, the annuity accrual rate is 1.7 percent for Coordinated Plan members for each year of service. For members hired prior to July 1, 1989, a full annuity is available when age plus years of service equal 90 and normal retirement age is 65. For members hired on or after July 1, 1989, normal retirement age is the age for unreduced Social Security benefits capped at 66. 62 CITY OF OTSEGO, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 C. CONTRIBUTIONS Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. Contribution rates can only be modified by the state legislature. General Employees Fund Contributions Coordinated Plan members were required to contribute 6.5 percent of their annual covered salary in calendar year 2017. The City was required to contribute 7.5 percent for Coordinated Plan members in calendar year 2017. The City's contributions to the General Employees Fund for years ended December 31, 2017, 2016 and 2015 were $98,542, $96,567, and $83,256. The City's contributions were equal to the required contributions as set by state statute. D. PENSION COSTS General Employees Fund Pension Costs At December 31, 2017, the City reported a liability of $1,372,546 for its proportionate share of the General Employees Fund's net pension liability. The City's net pension liability reflected a reduction due to the State of Minnesota's contribution of $6 million to the fund in 2017. The State of Minnesota is considered a non-employer contributing entity and the State's contribution meets the definition of a special funding situation. The State of Minnesota's proportionate share of the net pension liability associated with the City totaled $17,254. The net pension liability was measured as of June 30, 2017, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The City's proportion of the net pension liability was based on the City's contributions received by PERA during the measurement period for employer payroll paid dates from July 1, 2016 through June 30, 2017, relative to the total employer contributions received from all of PERA's participating employers. At June 30, 2017, the City's proportion share was 0.0215 percent which was an increase of 0.0017 percent from its proportion measured as of June 30, 2016. For the year ended December 31, 2017, the City recognized pension expense of $192,780 for its proportionate share of the General Employees Plan's pension expense. In addition, the City recognized an additional $498 as pension expense (and grant revenue) for its proportionate share of the State of Minnesota's contribution of $6 million to the General Employees Fund. At December 31, 2017, the City reported its proportionate share of the General Employees Plan's deferred outflows of resources and deferred inflows of resources, related to pensions from the following sources: Deferred Deferred Outflows of Inflows of Resources Resources Differences Between Expected and Actual Economic Experience 45,234$ 81,056$ Changes in Actuarial Assumptions 209,854 137,598 Differences Between Projected and Actual Investment Earnings - 10,999 Changes in Proportion 111,298 31,708 Contributions Paid Subsequent to the Measurement Date 51,393 - Totals 417,779$ 261,361$ Description 63 CITY OF OTSEGO, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 Deferred outflows totaling $51,393 related to pensions resulting from the City's contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended December 31, 2018. Other amounts reported as deferred outflows and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Year Pension Ended Expense December 31, Amount 2018 55,533$ 2019 104,225 2020 3,529 2021 (58,262) 2022 - Thereafter - Total 105,025$ E. ACTUARIAL ASSUMPTIONS The total pension liability in the June 30, 2017, actuarial valuation was determined using the entry age normal actuarial cost method and the following actuarial assumptions: Inflation 2.50% per year Active Member Payroll Growth 3.25% per year Investment Rate of Return 7.50% Salary increases were based on a service-related table. Mortality rates for active members, retirees, survivors and disabilitants were based on the RP-2014 tables for all plans, males or females, as appropriate, with slight adjustments to fit PERA's experience. Cost of living benefit increases for retirees in the General Employees Plan are assumed to be 1 percent through the year 2044 and then 2.50 percent thereafter. Actuarial assumptions used in the June 30, 2017, valuation were based on the results of actuarial experience studies. The most recent four-year experience study in the General Employees Plan was completed in 2015. The following changes in actuarial assumptions occurred in 2017: • The Combined Service Annuity (CSA) loads were changed from 0.80 percent for active members and 60 percent for both vested and non-vested deferred members. The revised CSA loads are now 0.00 percent for active member liability, 15 percent for vested deferred member liability, and 3.00 percent for non-vested deferred member liability. • The assumed post-retirement benefit increase rate was changed from 1.00 percent per year for all years to 1.00 percent per year through 2044, and 2.50% percent thereafter. 64 CITY OF OTSEGO, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 The State Board of Investment, which manages the investments of PERA, prepares an analysis of the reasonableness of the long-term expected rate of return on a regular basis using a building-block method in which best-estimate ranges of expected future rates of return are developed for each major asset class. These ranges are combined to produce an expected long-term rate of return by weighting the expected future rates of return by the target asset allocation percentages. The target allocation and best estimates of geometric real rates of return for each major asset class are summarized in the following table: Long-Term Target Expected Real Allocation Rate of Return Domestic Stocks 39.00%5.10% International Stocks 19.00%5.30% Bonds 20.00%0.75% Alternative Assets 20.00%5.90% Cash 2.00%0.00% Total 100.00% F. DISCOUNT RATE The discount rate used to measure the total pension liability in 2017 was 7.5 percent. The projection of cash flows used to determine the discount rate assumed that contributions from Plan members and employers will be made at rates set in Minnesota Statutes. Based on those assumptions, the fiduciary net position of the General Employees Fund was projected to be available to make all projected future benefit payments of current Plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. G. PENSION LIABILITY SENSITIVITY The following presents the City's proportionate share of the net pension liability for all plans it participates in, calculated using the discount rate disclosed in the preceding paragraph, as well as what the City's proportionate share of the net pension liability would be if it were calculated using a discount rate 1 percentage point lower or 1 percentage point higher than the current rate. 6.50% 7.50% 8.50% One Point Current One Point Decrease Rate Increase General Employees Fund 2,128,921$ 1,372,546$ 753,316$ H. PENSION PLAN FIDUCIARY NET POSITION Detailed information about each pension plan's fiduciary net position is available in a separately issued PERA financial report that includes financial statements and required supplementary information. That report may be obtained at www.mnpera.org. Asset Class City's Proportionate Share of the Net Pension Liability 65 This page has been left blank intentionally. 66 CITY OF OTSEGO, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION (LAST TEN YEARS*) SCHEDULE OF CITY'S PROPORTIONATE SHARE OF NET PENSION LIABILITY GENERAL EMPLOYEE'S RETIREMENT FUND City's Proportionate ($) Share of the Net Pension Liability City's State's and the State's Proportionate (%) City's City's Proportionate (S) Proportionate ($)Share of Net Plan Fiduciary Proportionate (%) Proportionate ($) Share of the Net Share of the Net Pension Liability Net Position Fiscal Share of Share of Pension Liability Pension Liability City's Compared With as a Percentage Year Net Pension Net Pension Associated With Associated With Covered Covered of the Total Ending Liability Liability the City the City Payroll Payroll Pension Liability June 30, 2017 0.0215% 1,372,546$ 17,254$ 1,389,800$ 1,384,680$ 99.12%75.89% June 30, 2016 0.0198% 1,607,662 20,935 1,628,597 1,136,013 141.52%68.91% June 30, 2015 0.0195% 1,010,592 - 1,010,592 1,124,606 89.86%78.19% This supplementary information is provided prospectively beginning with the Year Ended December 31, 2015. 67 CITY OF OTSEGO, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION (LAST TEN YEARS*) SCHEDULE OF CITY'S CONTRIBUTIONS GENERAL EMPLOYEE'S RETIREMENT FUND Contributions in Relation to Contributions Statutorily Statutorily Contribution City's as a Percentage Year Required Required (Excess) Covered of Covered Ending Contributions Contributions Deficiency Payroll Payroll December 31, 2017 98,542$ 98,542$ -$ 1,313,893$ 7.50% December 31, 2016 96,567 96,567 - 1,287,564 7.50% December 31, 2015 83,256 83,256 - 1,110,085 7.50% This supplementary information is provided prospectively beginning with the Year Ended December 31, 2015. 68 CITY OF OTSEGO, MINNESOTA NOTES TO REQUIRED SUPPLEMENTARY INFORMATION FOR THE YEAR ENDED DECEMBER 31, 2017 NOTE 1 GENERAL EMPLOYEES FUND A. CHANGES FOR 2017 Changes in Actuarial Assumptions • The Combined Service Annuity (CSA) loads were changed from 0.80 percent for active members and 60 percent for both vested and non-vested deferred members. The revised CSA loads are now 0.00 percent for active member liability, 15 percent for vested deferred member liability, and 3.00 percent for non-vested deferred member liability. • The assumed post-retirement benefit increase rate was changed from 1.00 percent per year for all years to 1.00 percent per year through 2044, and 2.50% percent thereafter. B. CHANGES FOR 2016 Changes in Actuarial Assumptions • The assumed post-retirement benefit increase was changed from 1.00% per year through 2035 and 2.50% per year thereafter to 1.00% per year for all future years. • The assumed investment return was changed from 7.90% to 7.50%. The single discount rate was changed from 7.90% to 7.50%. • Other assumptions were changed pursuant to the experience study dated June 30, 2015. The assumed future salary increases and payroll growth were decreased by 0.25% to 3.25%. Inflation was decreased 0.25% to 2.50%. C. CHANGES FOR 2015 Changes in Plan Provisions • On January 1, 2015, the Minneapolis Employees Retirement Fund was merged into the General Employees Fund, which increased the total pension liability by $1.10 billion, and increased the fiduciary plan net position by $892 million. Upon consolidation, state and employer contributions were revised. Changes in Actuarial Assumptions • The assumed post-retirement benefit increase rate was changed from 1.00% per year through 2030 and 2.50% per year thereafter to 1.00% per year through 2035 and 2.50% per year thereafter. 69 This page has been left blank intentionally. 70 This page has been left blank intentionally. 71 CITY OF OTSEGO, MINNESOTA COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS DECEMBER 31, 2017 Total Special Capital Nonmajor Revenue Project Governmental ASSETS Cash and Investments 468,056$ 8,402,964$ 8,871,020$ Receivables Accounts 6,807 13,601 20,408 Special Assessments Current - 702 702 Deferred - 792,224 792,224 Delinquent - 5,560 5,560 Due from Other Governments - 802,112 802,112 Due from Other Funds - 716,586 716,586 Total Assets 474,863 10,733,749 11,208,612 LIABILITIES Accounts Payable - 52,899 52,899 Due to Other Funds 17,178 691,552 708,730 Total Liabilities 17,178 744,451 761,629 DEFERRED INFLOWS OF RESOURCES Unavailable Revenue - Special Assessments - 797,784 797,784 Unavailable Revenue - Intergovernmental - 430,789 430,789 Total Deferred Inflows of Resources - 1,228,573 1,228,573 FUND BALANCES Committed Street Light Replacement 125,396 - 125,396 Business Development Loans 349,467 - 349,467 Assigned City Buildings & Infrastructure - 8,844,833 8,844,833 City Parks - 253,864 253,864 Unassigned (Deficits) (17,178) (337,972) (355,150) Total Fund Balances 457,685 8,760,725 9,218,410 Total Liabilities, Deferred Inflows of Resources and Fund Balances 474,863$ 10,733,749$ 11,208,612$ 72 CITY OF OTSEGO, MINNESOTA COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED DECEMBER 31, 2017 Total Special Capital Nonmajor Revenue Project Governmental REVENUES Property Taxes 81,385$ 1,102,360$ 1,183,745$ Intergovernmental - 1,019,074 1,019,074 Charges for Services 11,323 677,077 688,400 Special Assessments - 113,882 113,882 Investment Earnings (net) 3,947 75,660 79,607 Miscellaneous 50,000 15,080 65,080 Total Revenues 146,655 3,003,133 3,149,788 EXPENDITURES Current Public Works 10,384 - 10,384 Economic Development 82,137 - 82,137 Capital Outlay General Government - 19,596 19,596 Public Works - 1,530,825 1,530,825 Culture and Recreation - 123,808 123,808 Economic Development - 170,052 170,052 Total Expenditures 92,521 1,844,281 1,936,802 Excess of Revenues Over Expenditures 54,134 1,158,852 1,212,986 OTHER FINANCING SOURCES (USES) Transfers In - 1,074,567 1,074,567 Sales of Capital Assets - 78,500 78,500 Transfers Out - (8,356) (8,356) Total Other Financing Sources (Uses) - 1,144,711 1,144,711 Net Change in Fund Balance 54,134 2,303,563 2,357,697 Fund Balance - January 1 403,551 6,457,162 6,860,713 Fund Balance - December 31 457,685$ 8,760,725$ 9,218,410$ 73 This page has been left blank intentionally. 74 CITY OF OTSEGO, MINNESOTA NONMAJOR SPECIAL REVENUE FUNDS A special revenue fund is used to account for and report the proceeds of specific revenue sources that are restricted or committed to expenditure for specified purposes other than debt service or capital projects. Street Lighting This fund accounts for the electrical service, maintenance, repair and replacement of street lights within the City's above standard street-lighting district for commercially developed areas. The primary funding source of the fund is generated through charges for services imposed upon the benefitting properties in the district. Revolving Loans This fund was established to provide for economic development subsidies and loans to be provided to business entities in the City through the City's Economic Development Authority (EDA). Tax Increment District No. 1 - Great River Centre This fund was established to account for the collection of tax increment generated revenues for parcels within the District. The District encompasses two parcels in the Great River Centre commercial and industrial area. The increment generated is used for specific economic development incentives within the District. 75 CITY OF OTSEGO, MINNESOTA COMBINING BALANCE SHEET NONMAJOR SPECIAL REVENUE FUNDS DECEMBER 31, 2017 Total Nonmajor Street Revolving Tax Increment Special Lighting Loans District No. 1 Revenue ASSETS Cash and Investments 118,589$ 349,467$ -$ 468,056$ Receivables Accounts 6,807 - - 6,807 Total Assets 125,396 349,467 - 474,863 LIABILITIES Due to Other Funds - - 17,178 17,178 FUND BALANCES Committed Street Light Replacement 125,396 - - 125,396 Business Development Loans - 349,467 - 349,467 Unassigned - - (17,178) (17,178) Total Fund Balances (Deficits) 125,396 349,467 (17,178) 457,685 Total Liabilities and Fund Balances (Deficits)125,396$ 349,467$ -$ 474,863$ 76 CITY OF OTSEGO, MINNESOTA COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES (DEFICITS) NONMAJOR SPECIAL REVENUE FUNDS FOR THE YEAR ENDED DECEMBER 31, 2017 Total Nonmajor Street Revolving Tax Increment Special Lighting Loans District No. 1 Revenue REVENUES Property Taxes -$ 81,385$ -$ 81,385$ Charges for Services 11,323 - - 11,323 Investment Earnings (net) 1,118 2,829 - 3,947 Miscellaneous - 50,000 - 50,000 Total Revenues 12,441 134,214 - 146,655 EXPENDITURES Current Public Works 10,384 - - 10,384 Economic Development - 81,237 900 82,137 Total Expenditures 10,384 81,237 900 92,521 Net Change in Fund Balance 2,057 52,977 (900) 54,134 Fund Balance (Deficit) - January 1 123,339 296,490 (16,278) 403,551 Fund Balance (Deficit) - December 31 125,396$ 349,467$ (17,178)$ 457,685$ 77 CITY OF OTSEGO, MINNESOTA NONMAJOR SPECIAL REVENUE FUNDS STREET LIGHTING FUND - STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED DECEMBER 31, 2017 Variance with Final Budget - Budgeted Amounts Actual Over Original Final Amounts (Under) REVENUES Charges for Services 10,000$ 10,000$ 11,323$ 1,323$ Investment Earnings (net) - - 1,118 1,118 Total Revenues 10,000 10,000 12,441 2,441 EXPENDITURES Current Public Works Services and Other Charges 10,000 10,000 10,384 384 Net Change in Fund Balance - - 2,057 2,057 Fund Balance - January 1 123,339 123,339 123,339 - Fund Balance - December 31 123,339$ 123,339$ 125,396$ 2,057$ 78 CITY OF OTSEGO, MINNESOTA NONMAJOR SPECIAL REVENUE FUNDS REVOLVING LOANS FUND - STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED DECEMBER 31, 2017 Variance with Final Budget - Budgeted Amounts Actual Over Original Final Amounts (Under) REVENUES Property Taxes 81,385$ 81,385$ 81,385$ -$ Investment Earnings (net) - - 2,829 2,829 Miscellaneous - - 50,000 50,000 Total Revenues 81,385 81,385 134,214 52,829 EXPENDITURES Current Economic Development Services and Other Charges 81,385 81,385 81,237 (148) Net Change in Fund Balance - - 52,977 52,977 Fund Balance - January 1 296,490 296,490 296,490 - Fund Balance - December 31 296,490$ 296,490$ 349,467$ 52,977$ 79 CITY OF OTSEGO, MINNESOTA NONMAJOR CAPITAL PROJECTS FUNDS Capital projects funds are used to account for and report financial resources that are restricted, committed, or assigned to expenditure for capital outlays, including the acquisition or construction of capital facilities and other capital assets. Pavement Management This fund was established to provide funds and to account for the expenditure of such funds, for costs associated with the City's street maintenance and replacement plan adopted annually within the Capital Improvement Plan. Annual projects may include: fog & seal coating, crack filling, paint striping, patching and asphalt overlays. Trails Management This fund was established to provide funds and to account for the expenditure of such funds, for costs associated with the City's trail maintenance plan adopted annually within the Capital Improvement Plan. Annual projects will typically include: crack filling, patching and seal coating. Parks Capital Equipment This fund was established to accumulate funds for major maintenance and future replacement of equipment within the City's park system. Revolving Capital Equipment This fund was established to provide funds and to account for the expenditure of such funds, for costs associated with the replacement of capital equipment, most significantly the City's machinery and vehicle fleet. Community Facilities This fund was established to accumulate funds that will be used to provide for the costs associated with the improvements of existing City facilities and the acquisition and construction of additional City facilities. Collector Streets This fund was established to accumulate funds derived from ongoing residential and commercial development that will provide for the costs associated with the construction of future arterial collector street infrastructure. Fire Reserve This fund was established to accumulate funds that will be used to finance the costs associated with the future construction of a fire department building and the capital equipment that will be housed within. Municipal State-Aid for Construction This fund was established to account for the State allotment of construction aid. The source of the State funding is provided for through collection of gasoline taxes. The funds accumulated are used on transportation related construction projects. Watershed Districts This fund was established to provide funds and to account for the expenditure of such funds, for costs associated with the maintenance of major water drainage system ditches throughout the City. 80 CITY OF OTSEGO, MINNESOTA NONMAJOR CAPITAL PROJECTS FUNDS (CONTINUED) Odean Improvements This fund was established to track the expenditures incurred for major improvements made to Odean Avenue in 1998. The outstanding special assessments to the benefitting property owners provide the funding for the costs. Capital Improvements This fund was established to accumulate resources that may be used to internally finance future City projects. Slabtown Improvements This fund was established to track the expenditures incurred for infrastructure improvements to the Slabtown area. The outstanding special assessments to the benefitting property owners provide the funding for the costs. 80th Street Improvements This fund was established to track the expenditures incurred for infrastructure improvements currently ongoing on 80th Street, from Marlowe to MacIver. Independent School District 728 is constructing a school near this location and is the driver for the improvement to occur. The School District will be providing the funds necessary. Kadler Avenue Improvements This fund was established to track the expenditures incurred for infrastructure improvements being planned for Kadler Avenue. The improvements will provide for an urban style street capable of handling the volumes and type of traffic associated with an industrial park, of which has received preliminary development approvals. 81 CITY OF OTSEGO, MINNESOTA COMBINING BALANCE SHEET NONMAJOR CAPITAL PROJECT FUNDS DECEMBER 31, 2017 Parks Revolving Pavement Trails Capital Capital Management Management Equipment Equipment ASSETS Cash and Investments 1,905,894$ 7,590$ 250,263$ 624,018$ Receivables Accounts - - 3,601 - Special Assessments Current - - - - Deferred 174,478 - - - Delinquent 599 - - - Due from Other Governments - - - - Due from Other Funds - - - - Total Assets 2,080,971 7,590 253,864 624,018 LIABILITIES Accounts Payable 23,406 - - - Due to Other Funds - - - - Total Liabilities 23,406 - - - DEFERRED INFLOWS OF RESOURCES Unavailable Revenue - Special Assessments 175,077 - - - Unavailable Revenue - Intergovernmental - - - - Total Deferred Inflows of Resources 175,077 - - - FUND BALANCES Assigned City Buildings & Infrastructure 1,882,488 7,590 - 624,018 City Parks - - 253,864 - Unassigned - - - - Total Fund Balances (Deficits)1,882,488 7,590 253,864 624,018 Total Liabilities, Deferred Inflows of Resources and Fund Balances (Deficits)2,080,971$ 7,590$ 253,864$ 624,018$ 82 (CONTINUED) Community Collector Fire MSA Watershed Odean Capital Facilities Streets Reserve Construction Districts Improvements Improvements 451,434$ 1,321,403$ 2,235,834$ -$ 839,004$ -$ 750,880$ 10,000 - - - - - - - - 702 - - - - - 175,243 - - - 17,500 414,417 - 3,874 1,087 - - - - - - - 802,112 - - - - - - - - - 716,586 461,434 1,500,520 2,237,623 802,112 839,004 17,500 1,881,883 1,696 - - 8,541 - - 10,054 - - - 626,753 - 5,425 - 1,696 - - 635,294 - 5,425 10,054 - 179,117 1,087 - - 17,500 414,417 - - - 430,789 - - - - 179,117 1,087 430,789 - 17,500 414,417 459,738 1,321,403 2,236,536 - 839,004 - 1,457,412 - - - - - - - - - - (263,971) - (5,425) - 459,738 1,321,403 2,236,536 (263,971) 839,004 (5,425) 1,457,412 461,434$ 1,500,520$ 2,237,623$ 802,112$ 839,004$ 17,500$ 1,881,883$ 83 CITY OF OTSEGO, MINNESOTA COMBINING BALANCE SHEET (CONTINUED) NONMAJOR CAPITAL PROJECT FUNDS DECEMBER 31, 2017 Total Nonmajor Slabtown 80th Street Kadler Avenue Capital Improvements Improvements Improvements Projects ASSETS Cash and Investments 16,644$ -$ -$ 8,402,964$ Receivables Accounts - - - 13,601 Special Assessments Current - - - 702 Deferred 10,586 - - 792,224 Delinquent - - - 5,560 Due from Other Governments - - - 802,112 Due from Other Funds - - - 716,586 Total Assets 27,230 - - 10,733,749 LIABILITIES Accounts Payable - - 9,202 52,899 Due to Other Funds - - 59,374 691,552 Total Liabilities - - 68,576 744,451 DEFERRED INFLOWS OF RESOURCES Unavailable Revenue - Special Assessments 10,586 - - 797,784 Unavailable Revenue - Intergovernmental - - - 430,789 Total Deferred Inflows of Resources 10,586 - - 1,228,573 FUND BALANCES Assigned City Buildings & Infrastructure 16,644 - - 8,844,833 City Parks - - - 253,864 Unassigned - - (68,576) (337,972) Total Fund Balances (Deficits)16,644 - (68,576) 8,760,725 Total Liabilities, Deferred Inflows of Resources and Fund Balances (Deficits)27,230$ -$ -$ 10,733,749$ 84 This page has been left blank intentionally. 85 CITY OF OTSEGO, MINNESOTA COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES (DEFICITS) NONMAJOR CAPITAL PROJECT FUNDS FOR THE YEAR ENDED DECEMBER 31, 2017 Parks Revolving Pavement Trails Capital Capital Management Management Equipment Equipment REVENUES Property Taxes 475,960$ 26,000$ 55,000$ 235,200$ Intergovernmental 325,599 - - - Charges for Services - - - - Special Assessments 32,405 - - - Investment Earnings (net) 6,604 31 2,204 5,493 Miscellaneous - - 5,080 - Total Revenues 840,568 26,031 62,284 240,693 EXPENDITURES Capital Outlay General Government - - - - Public Works 501,983 - - 275,671 Culture and Recreation - 21,701 39,315 33,222 Economic Development - - - - Total Expenditures 501,983 21,701 39,315 308,893 Excess (Deficiency) of Revenues Over (Under) Expenditures 338,585 4,330 22,969 (68,200) OTHER FINANCING SOURCES (USES) Transfers In 1,074,567 - - - Sales of Capital Assets - - - 78,500 Transfers Out - - - - Total Other Financing Sources (Uses) 1,074,567 - - 78,500 Net Change in Fund Balance 1,413,152 4,330 22,969 10,300 Fund Balance (Deficit) - January 1 469,336 3,260 230,895 613,718 Fund Balance (Deficit) - December 31 1,882,488$ 7,590$ 253,864$ 624,018$ 86 (CONTINUED) Community Collector Fire MSA Watershed Odean Capital Facilities Streets Reserve Construction Districts Improvements Improvements -$ -$ 150,000$ -$ -$ -$ 160,200$ - - - 463,564 - - 26,157 - 457,670 - - 219,407 - - - 10,096 1,109 - - - 67,196 4,333 12,462 20,421 - 10,416 - 13,696 10,000 - - - - - - 14,333 480,228 171,530 463,564 229,823 - 267,249 - - - - - - 19,596 - - - 574,277 - - 21,232 29,570 - - - - - - - - - - - - 170,052 29,570 - - 574,277 - - 210,880 (15,237) 480,228 171,530 (110,713) 229,823 - 56,369 - - - - - - - - - - - - - - - - - - - - - - - - - - - - (15,237) 480,228 171,530 (110,713) 229,823 - 56,369 474,975 841,175 2,065,006 (153,258) 609,181 (5,425) 1,401,043 459,738$ 1,321,403$ 2,236,536$ (263,971)$ 839,004$ (5,425)$ 1,457,412$ 87 CITY OF OTSEGO, MINNESOTA COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND (CONTINUED) CHANGES IN FUND BALANCES (DEFICITS) NONMAJOR CAPITAL PROJECT FUNDS FOR THE YEAR ENDED DECEMBER 31, 2017 Total Nonmajor Slabtown 80th Street Kadler Avenue Capital Improvements Improvements Improvements Projects REVENUES Property Taxes -$ -$ -$ 1,102,360$ Intergovernmental - 203,754 - 1,019,074 Charges for Services - - - 677,077 Special Assessments 3,076 - - 113,882 Investment Earnings (net) - - - 75,660 Miscellaneous - - - 15,080 Total Revenues 3,076 203,754 - 3,003,133 EXPENDITURES Capital Outlay General Government - - - 19,596 Public Works - 89,086 68,576 1,530,825 Culture and Recreation - - - 123,808 Economic Development - - - 170,052 Total Expenditures - 89,086 68,576 1,844,281 Excess (Deficiency) of Revenues Over (Under) Expenditures 3,076 114,668 (68,576) 1,158,852 OTHER FINANCING SOURCES (USES) Transfers In - - - 1,074,567 Sales of Capital Assets - - - 78,500 Transfers Out - (8,356) - (8,356) Total Other Financing Sources (Uses) - (8,356) - 1,144,711 Net Change in Fund Balance 3,076 106,312 (68,576) 2,303,563 Fund Balance (Deficit) - January 1 13,568 (106,312) - 6,457,162 Fund Balance (Deficit) - December 31 16,644$ -$ (68,576)$ 8,760,725$ 88 This page has been left blank intentionally. 89 CITY OF OTSEGO, MINNESOTA GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES, AND Page 1 of 5 CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED DECEMBER 31, 2017 (With Comparative Actual Amounts for the Year Ended December 31, 2016) 2016 Variance with Final Budget - Budgeted Amounts Actual Over Actual Original Final Amounts (Under) Amounts REVENUES Property Taxes Current 3,728,273$ 3,728,273$ 3,725,853$ (2,420)$ 3,477,971$ Delinquent 30,000 30,000 29,344 (656) 16,346 Penalties and interest 5,000 5,000 1,178 (3,822) 347 Total Property Taxes 3,763,273 3,763,273 3,756,375 (6,898) 3,494,664 Franchise Taxes 132,000 132,000 135,652 3,652 131,229 Licenses and Permits Business Licenses 34,750 34,750 34,012 (738) 35,470 Rental Licenses 56,000 56,000 46,700 (9,300) 59,350 Other Licenses 100 100 1,693 1,593 1,780 Right of Way Permits 10,000 10,000 45,950 35,950 49,110 Building Permits 681,750 681,750 1,222,229 540,479 1,492,001 Other Permits 6,300 6,300 12,800 6,500 23,854 Total Licenses and Permits 788,900 788,900 1,363,384 574,484 1,661,565 Intergovernmental State Police Aid 55,000 55,000 59,130 4,130 57,260 Other Aid & Grants 1,800 1,800 12,079 10,279 12,307 Local Other Aid & Grants - - 2,871 2,871 - Total Intergovernmental 56,800 56,800 74,080 17,280 69,567 Charges for Services General Government 11,500 11,500 91,630 80,130 77,697 Public Works 37,500 37,500 116,998 79,498 149,681 Culture and Recreation 56,550 56,550 67,112 10,562 59,236 Total Charges for Services 105,550 105,550 275,740 170,190 286,614 Special Assessments - - 8,495 8,495 4,179 Fines and Forfeitures 6,000 6,000 21,092 15,092 16,223 Investment Earnings (net)33,000 33,000 31,343 (1,657) 21,233 Miscellaneous Refunds and Reimbursements - - 21,848 21,848 63,753 Contributions and Donations - - 206,956 206,956 25,250 Other - - 1,025 1,025 17,219 Total Miscellaneous - - 229,829 229,829 106,222 Total Revenues 4,885,523 4,885,523 5,895,990 1,010,467 5,791,496 2017 90 CITY OF OTSEGO, MINNESOTA GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES, AND Page 2 of 5 CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED DECEMBER 31, 2017 (With Comparative Actual Amounts for the Year Ended December 31, 2016) 2016 Variance with Final Budget - Budgeted Amounts Actual Over Actual Original Final Amounts (Under) Amounts EXPENDITURES General Government City Council Personal Services 36,734 36,734 34,800 (1,934) 32,637 Supplies 375 375 453 78 - Services and Other Charges 85,184 85,184 64,426 (20,758) 43,995 Total 122,293 122,293 99,679 (22,614) 76,632 City Administrator Personal Services 160,746 160,746 144,311 (16,435) - Services and Other Charges - - 1,208 1,208 - Total 160,746 160,746 145,519 (15,227) - Administration Personal Services 245,062 245,062 235,598 (9,464) 385,165 Supplies 11,000 11,000 6,791 (4,209) 10,412 Services and Other Charges 40,356 40,356 41,716 1,360 39,276 Total 296,418 296,418 284,105 (12,313) 434,853 Elections Personal Services - - 33 33 12,660 Supplies 1,924 1,924 1,207 (717) 4,970 Services and Other Charges - - 24 24 2,386 Total 1,924 1,924 1,264 (660) 20,016 Assessing Services and Other Charges 81,623 81,623 80,589 (1,034) 76,623 Finance Personal Services 257,867 257,867 127,829 (130,038) 247,226 Supplies 3,000 3,000 619 (2,381) 551 Services and Other Charges 57,533 57,533 53,803 (3,730) 58,950 Total 318,400 318,400 182,251 (136,149) 306,727 Information Technology Supplies 5,000 5,000 2,640 (2,360) 2,616 Services and Other Charges 83,500 83,500 64,128 (19,372) 79,525 Total 88,500 88,500 66,768 (21,732) 82,141 Legal Services and Other Charges 114,000 114,000 80,084 (33,916) 107,499 Prairie Center Supplies 10,300 10,300 10,360 60 9,806 Services and Other Charges 18,849 18,849 23,100 4,251 19,315 Total 29,149 29,149 33,460 4,311 29,121 2017 91 CITY OF OTSEGO, MINNESOTA GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES, AND Page 3 of 5 CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED DECEMBER 31, 2017 (With Comparative Actual Amounts for the Year Ended December 31, 2016) 2016 Variance with Final Budget - Budgeted Amounts Actual Over Actual Original Final Amounts (Under) Amounts EXPENDITURES (CONTINUED) General Government (Continued) City Hall & Public Works Garage Supplies 12,800 12,800 11,838 (962) 11,563 Services and Other Charges 96,856 96,856 84,033 (12,823) 86,631 Total 109,656 109,656 95,871 (13,785) 98,194 Old Town Hall Services and Other Charges 2,640 2,640 2,605 (35) 1,874 Total General Government 1,325,349 1,325,349 1,072,195 (253,154) 1,233,680 Public Safety Police Services Services and Other Charges 1,020,700 1,020,700 1,032,192 11,492 991,403 Public Safety Commission Personal Services 750 750 710 (40) 690 Supplies 600 600 56 (544) 39 Services and Other Charges 1,500 1,500 - (1,500) - Total 2,850 2,850 766 (2,084) 729 Fire Protection Supplies 500 500 174 (326) - Services and Other Charges 538,594 538,594 539,641 1,047 494,831 Total 539,094 539,094 539,815 721 494,831 Building Inspections Personal Services 96,303 96,303 94,741 (1,562) 97,291 Supplies 6,000 6,000 2,628 (3,372) 2,653 Services and Other Charges 184,871 184,871 200,369 15,498 208,559 Total 287,174 287,174 297,738 10,564 308,503 Emergency Management Supplies 1,000 1,000 - (1,000) - Services and Other Charges 1,920 1,920 486 (1,434) 418 Total 2,920 2,920 486 (2,434) 418 Animal Control Services and Other Charges 14,400 14,400 15,664 1,264 12,101 Total Public Safety 1,867,138 1,867,138 1,886,661 19,523 1,807,985 2017 92 CITY OF OTSEGO, MINNESOTA GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES, AND Page 4 of 5 CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED DECEMBER 31, 2017 (With Comparative Actual Amounts for the Year Ended December 31, 2016) 2016 Variance with Final Budget - Budgeted Amounts Actual Over Actual Original Final Amounts (Under) Amounts EXPENDITURES (CONTINUED) Public Works Streets Maintenance Personal Services 478,349 478,349 461,099 (17,250) 449,616 Supplies 171,421 171,421 147,697 (23,724) 136,407 Services and Other Charges 70,556 70,556 62,571 (7,985) 55,171 Total 720,326 720,326 671,367 (48,959) 641,194 Engineering Services and Other Charges 86,400 86,400 69,755 (16,645) 74,258 Street Lighting Services and Other Charges 117,000 117,000 122,227 5,227 121,163 Fleet Management Personal Services 83,660 83,660 84,726 1,066 81,141 Supplies 118,482 118,482 98,660 (19,822) 89,119 Services and Other Charges 10,860 10,860 9,230 (1,630) 3,745 Total 213,002 213,002 192,616 (20,386) 174,005 Total Public Works 1,136,728 1,136,728 1,055,965 (80,763) 1,010,620 Culture and Recreation Parks Maintenance Personal Services 207,919 207,919 210,972 3,053 182,699 Supplies 77,150 77,150 69,972 (7,178) 67,401 Services and Other Charges 105,742 105,742 109,401 3,659 100,849 Total 390,811 390,811 390,345 (466) 350,949 Recreation Personal Services 116,637 116,637 124,491 7,854 121,174 Supplies 16,050 16,050 12,246 (3,804) 10,856 Services and Other Charges 58,542 58,542 59,581 1,039 49,870 Total 191,229 191,229 196,318 5,089 181,900 Heritage Preservation Commission Personal Services 450 450 430 (20) 450 Supplies 500 500 170 (330) 498 Services and Other Charges 1,500 1,500 476 (1,024) 325 Total 2,450 2,450 1,076 (1,374) 1,273 Total Culture and Recreation 584,490 584,490 587,739 3,249 534,122 2017 93 CITY OF OTSEGO, MINNESOTA GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES, AND Page 5 of 5 CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED DECEMBER 31, 2017 (With Comparative Actual Amounts for the Year Ended December 31, 2016) 2016 Variance with Final Budget - Budgeted Amounts Actual Over Actual Original Final Amounts (Under) Amounts EXPENDITURES (CONTINUED) Economic Development Planning Commission Personal Services 2,500 2,500 1,760 (740) 2,170 Services and Other Charges 1,500 1,500 - (1,500) 270 Total 4,000 4,000 1,760 (2,240) 2,440 Planning Services and Other Charges 91,200 91,200 105,639 14,439 87,218 Economic Development Supplies - - 70 70 - Services and Other Charges 14,660 14,660 6,110 (8,550) 8,667 Total 14,660 14,660 6,180 (8,480) 8,667 Total Economic Development 109,860 109,860 113,579 3,719 98,325 Capital Outlay General Government 9,000 9,000 7,382 (1,618) 6,325 Public Safety 8,000 8,000 8,806 806 21,303 Total 17,000 17,000 16,188 (812) 27,628 Total Expenditures 5,040,565 5,040,565 4,732,327 (308,238) 4,712,360 Excess (Deficiency) of Revenues Over (Under) Expenditures (155,042) (155,042) 1,163,663 1,318,705 1,079,136 OTHER FINANCING SOURCES (USES) Transfers In 155,042 155,042 155,042 - 136,755 Sales of Capital Assets - - 305 305 - Transfers Out - - (1,074,567) (1,074,567) (460,212) Total Other Financing Sources (Uses)155,042 155,042 (919,220) (1,074,262) (323,457) Net Change in Fund Balance - - 244,443 244,443 755,679 Fund Balance - January 1 3,646,202 3,646,202 3,646,202 - 2,890,523 Fund Balance - December 31 3,646,202$ 3,646,202$ 3,890,645$ 244,443$ 3,646,202$ 2017 94 This page has been left blank intentionally. 95 CITY OF OTSEGO, MINNESOTA COMBINING BALANCE SHEET DEBT SERVICE FUND BY ACCOUNT DECEMBER 31, 2017 Series Series Series 2003A 2004 2012A ASSETS Cash and Investments -$ -$ 656,775$ Receivables Special Assessments Deferred - - 200,849 Delinquent - - - Prepaid Items - - - Total Assets - - 857,624 LIABILITIES Accounts Payable - - 357 Due to Other Funds - - - Total Liabilities - - 357 DEFERRED INFLOWS OF RESOURCES Unavailable Revenue - Special Assessments - - 200,849 FUND BALANCES Nonspendable - - - Restricted - - 656,418 Total Fund Balances (Deficits) - - 656,418 Total Liabilities, Deferred Inflows of Resources and Fund Balances (Deficits) -$ -$ 857,624$ 96 Series Total 2010D Series Series Series Debt & 2011A 2010B 2007B 2010A Service 1,108,207$ 175,399$ -$ -$ 1,940,381$ 1,491,234 - 41,369 - 1,733,452 4,313 - - - 4,313 - - - 1,325 1,325 2,603,754 175,399 41,369 1,325 3,679,471 714 357 - 357 1,785 - - 24,714 320 25,034 714 357 24,714 677 26,819 1,495,547 - 41,369 - 1,737,765 - - - 1,325 1,325 1,107,493 175,042 (24,714) (677) 1,913,562 1,107,493 175,042 (24,714) 648 1,914,887 2,603,754$ 175,399$ 41,369$ 1,325$ 3,679,471$ 97 CITY OF OTSEGO, MINNESOTA COMBINING SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES (DEFICITS) DEBT SERVICE FUND BY ACCOUNT FOR THE YEAR ENDED DECEMBER 31, 2017 Series Series Series 2003A 2004 2012A REVENUES Property Taxes -$ -$ -$ Special Assessments - - 384,480 Total Revenues - - 384,480 EXPENDITURES Debt Service Principal - - 190,000 Interest - - 20,100 Fiscal Agent Fees - - 852 Total Expenditures - - 210,952 Excess (Deficiency) of Revenues Over (Under) Expenditures - - 173,528 OTHER FINANCING SOURCES (USES) Transfers In - 149,233 - Transfers Out (2,007) - (149,233) Total Other Financing Sources (Uses) (2,007) 149,233 (149,233) Net Change in Fund Balance (2,007) 149,233 24,295 Fund Balance (Deficit) - January 1 2,007 (149,233) 632,123 Fund Balance (Deficit) - December 31 -$ -$ 656,418$ 98 Series Total 2010D Series Series Series Debt & 2011A 2010B 2007B 2010A Service 225,000$ 430,000$ -$ -$ 655,000$ 64,183 - 163,482 - 612,145 289,183 430,000 163,482 - 1,267,145 455,000 435,000 - 45,000 1,125,000 123,225 59,423 - 4,000 206,748 1,207 356 - 852 3,267 579,432 494,779 - 49,852 1,335,015 (290,249) (64,779) 163,482 (49,852) (67,870) 2,007 - - 49,000 200,240 - - - - (151,240) 2,007 - - 49,000 49,000 (288,242) (64,779) 163,482 (852) (18,870) 1,395,735 239,821 (188,196) 1,500 1,933,757 1,107,493$ 175,042$ (24,714)$ 648$ 1,914,887$ 99 CITY OF OTSEGO, MINNESOTA DEBT SERVICE FUND - SERIES 2012A SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED DECEMBER 31, 2017 Variance with Final Budget - Budgeted Amounts Actual Over Original Final Amounts (Under) REVENUES Special Assessments 152,608$ 152,608$ 384,480$ 231,872$ Total Revenues 152,608 152,608 384,480 231,872 EXPENDITURES Debt Service Principal 190,000 190,000 190,000 - Interest 20,100 20,100 20,100 - Fiscal Agent Fees 500 500 852 352 Total Expenditures 210,600 210,600 210,952 352 Excess (Deficiency) of Revenues Over (Under) Expenditures (57,992) (57,992) 173,528 231,520 OTHER FINANCING SOURCES (USES) Transfers Out - - (149,233) (149,233) Net Change in Fund Balance (57,992) (57,992) 24,295 82,287 Fund Balance - January 1 632,123 632,123 632,123 - Fund Balance - December 31 574,131$ 574,131$ 656,418$ 82,287$ 100 CITY OF OTSEGO, MINNESOTA DEBT SERVICE FUND - SERIES 2010D & 2011A SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED DECEMBER 31, 2017 Variance with Final Budget - Budgeted Amounts Actual Over Original Final Amounts (Under) REVENUES Property Taxes 225,000$ 225,000$ 225,000$ -$ Special Assessments 76,835 76,835 64,183 (12,652) Total Revenues 301,835 301,835 289,183 (12,652) EXPENDITURES Debt Service Principal 455,000 455,000 455,000 - Interest 123,226 123,226 123,225 (1) Fiscal Agent Fees 1,000 1,000 1,207 207 Total Expenditures 579,226 579,226 579,432 206 Excess (Deficiency) of Revenues Over (Under) Expenditures (277,391) (277,391) (290,249) (12,858) OTHER FINANCING SOURCES Transfers In - - 2,007 2,007 Net Change in Fund Balance (277,391) (277,391) (288,242) (10,851) Fund Balance - January 1 1,395,735 1,395,735 1,395,735 - Fund Balance - December 31 1,118,344$ 1,118,344$ 1,107,493$ (10,851)$ 101 CITY OF OTSEGO, MINNESOTA DEBT SERVICE FUND - SERIES 2010B SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED DECEMBER 31, 2017 Variance with Final Budget - Budgeted Amounts Actual Over Original Final Amounts (Under) REVENUES Property Taxes 430,000$ 430,000$ 430,000$ -$ EXPENDITURES Debt Service Principal 435,000 435,000 435,000 - Interest 59,423 59,423 59,423 - Fiscal Agent Fees 500 500 356 (144) Total Expenditures 494,923 494,923 494,779 (144) Net Change in Fund Balance (64,923) (64,923) (64,779) 144 Fund Balance - January 1 239,821 239,821 239,821 - Fund Balance - December 31 174,898$ 174,898$ 175,042$ 144$ 102 CITY OF OTSEGO, MINNESOTA DEBT SERVICE FUND - SERIES 2007B SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED DECEMBER 31, 2017 Variance with Final Budget - Budgeted Amounts Actual Over Original Final Amounts (Under) REVENUES Special Assessments 56,341$ 56,341$ 163,482$ 107,141$ Fund Balance (Deficit) - January 1 (188,196) (188,196) (188,196) - Fund Balance (Deficit) - December 31 (131,855)$ (131,855)$ (24,714)$ 107,141$ 103 CITY OF OTSEGO, MINNESOTA DEBT SERVICE FUND - SERIES 2010A SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED DECEMBER 31, 2017 Variance with Final Budget - Budgeted Amounts Actual Over Original Final Amounts (Under) EXPENDITURES Debt Service Principal 45,000$ 45,000$ 45,000$ -$ Interest 4,000 4,000 4,000 - Fiscal Agent Fees 500 500 852 352 Total Expenditures 49,500 49,500 49,852 352 Excess (Deficiency) of Revenues Over (Under) Expenditures (49,500) (49,500) (49,852) (352) OTHER FINANCING SOURCES Transfers In 49,000 49,000 49,000 - Net Change in Fund Balance (500) (500) (852) (352) Fund Balance - January 1 1,500 1,500 1,500 - Fund Balance - December 31 1,000$ 1,000$ 648$ (352)$ 104 This page has been left blank intentionally. 105 CITY OF OTSEGO, MINNESOTA STATEMENT OF CHANGES IN AGENCY FUND ASSETS AND LIABILITIES AGENCY FUNDS FOR THE YEAR ENDED DECEMBER 31, 2017 1/1/2017 Additions Deductions 12/31/2017 ASSETS Cash and Cash Equivalents 2,775,533$ 876,666$ (2,378,192)$ 1,274,007$ LIABILITIES Accounts Payable 16,851$ 34,933$ (16,851)$ 34,933$ Escrow Deposit 2,758,682 876,666 (2,396,274) 1,239,074 Total Liabilities 2,775,533$ 911,599$ (2,413,125)$ 1,274,007$ 1/1/2017 Additions Deductions 12/31/2017 ASSETS Cash and Cash Equivalents 132,261$ 359,000$ (327,761)$ 163,500$ LIABILITIES Escrow Deposit 132,261$ 359,000$ (327,761)$ 163,500$ 1/1/2017 Additions Deductions 12/31/2017 ASSETS Cash and Cash Equivalents 2,907,794$ 1,235,666$ (2,705,953)$ 1,437,507$ LIABILITIES Accounts Payable 16,851$ 34,933$ (16,851)$ 34,933$ Escrow Deposit 2,890,943 1,235,666 (2,724,035) 1,402,574 Total Liabilities 2,907,794$ 1,270,599$ (2,740,886)$ 1,437,507$ Development Escrows Fund (701) Builders Escrow (702) Totals 106 CITY OF OTSEGO, MINNESOTA STATISTICAL SECTION (UNAUDITED) This part of the City of Otsego's comprehensive annual financial report (CAFR) presents detailed information as a context for understanding what the financial statements, note disclosures, and required supplementary information say about the City's overall financial health.Page No. Financial Trends 108 These tables contain trend information to help the readers of the CAFR understand the City's financial performance by comparing the current year with a historical perspective. Revenue Capacity 122 These tables contain information to help the readers of the CAFR assess the City's most significant revenue source, which is property taxes. Debt Capacity 128 These tables present information to help the readers of the CAFR assess the affordability of the City's current levels of outstanding debt and the City's ability to issue debt in the future. Demographic and Economic Information 135 These tables offer demographic and economic indicators to help the readers of the CAFR to understand the environment in which the City's financial activities take place. Operating Information 137 These tables contain service and infrastructure data to assist the readers of the CAFR to understand how the City's financial report relates to the services the City provides. Sources: Unless otherwise noted, the information in these tables is derived from the CAFR for each respective year. 107 CITY OF OTSEGO, MINNESOTA STATISTICAL SECTION (UNAUDITED) NET POSITION BY COMPONENT Last Ten Fiscal Years (accrual basis of accounting) 2008 2009 2010 2011 Governmental Activities Net Investment in Capital Assets 10,402,950$ 12,113,710$ 12,600,418$ 13,039,318$ Restricted 8,576,073 8,604,122 7,506,642 6,547,412 Unrestricted 8,335,206 8,085,402 8,568,988 8,490,450 Total Governmental Activities Net Position 27,314,229$ 28,803,234$ 28,676,048$ 28,077,180$ Business-type activities Net Investment in Capital Assets 18,721,350$ 19,658,076$ 17,255,564$ 16,017,362$ Restricted 6,302,993 6,462,497 - - Unrestricted 313,037 1,519,450 9,661,840 8,220,490 Total Business-type Activities Net Position 25,337,380$ 27,640,023$ 26,917,404$ 24,237,852$ Primary Government Net Investment in Capital Assets 29,124,300$ 31,771,786$ 29,855,982$ 29,056,680$ Restricted 14,879,066 15,066,619 7,506,642 6,547,412 Unrestricted 8,648,243 9,604,852 18,230,828 16,710,940 Total Primary Government Net Position 52,651,609$ 56,443,257$ 55,593,452$ 52,315,032$ Sources: The data for this table has been extracted from the respective years CAFR document. 108 Table 1 2012 2013 2014 2015 2016 2017 13,673,424$ 14,709,024$ 15,515,291$ 15,303,426$ 19,103,702$ 21,496,582$ 6,570,533 5,882,912 5,430,795 4,547,327 4,292,589 4,973,536 7,850,150 7,313,054 9,601,854 9,627,962 10,745,858 13,338,398 28,094,107$ 27,904,990$ 30,547,940$ 29,478,715$ 34,142,149$ 39,808,516$ 14,795,965$ 13,694,517$ 12,619,305$ 11,553,869$ 15,889,294$ 20,504,751$ - - - - - - 9,054,217 10,546,291 13,487,231 15,474,362 15,248,794 15,679,356 23,850,182$ 24,240,808$ 26,106,536$ 27,028,231$ 31,138,088$ 36,184,107$ 28,469,389$ 28,403,541$ 28,134,596$ 26,857,295$ 34,992,996$ 42,001,333$ 6,570,533 5,882,912 5,430,795 4,547,327 4,292,589 4,973,536 16,904,367 17,859,345 23,089,085 25,102,324 25,994,652 29,017,754 51,944,289$ 52,145,798$ 56,654,476$ 56,506,946$ 65,280,237$ 75,992,623$ 109 CITY OF OTSEGO, MINNESOTA STATISTICAL SECTION (UNAUDITED) CHANGES IN NET POSITION - CONTINUED ON THE FOLLOWING PAGES Last Ten Fiscal Years (accrual basis of accounting) 2008 2009 2010 2011 GOVERNMENTAL ACTIVITIES Expenses General Government 892,100$ 916,692$ 910,830$ 956,651$ Public Safety 1,781,953 1,786,889 1,615,763 1,647,285 Public Works 1,660,742 2,043,980 2,029,922 2,114,975 Sanitation 10,095 - - - Culture and Recreation 570,456 374,019 401,563 569,431 Economic Development 7,268 58,293 17,096 12,353 Interest on Long-term Debt 721,924 611,384 919,907 661,447 Total Expenses 5,644,538 5,791,257 5,895,081 5,962,142 Program Revenues Charges for Services General Government 45,222 117,955 109,349 109,686 Public Safety 592,768 474,185 889,878 819,537 Public Works 7,939 58,430 24,082 111,873 Culture and Recreation 330 250 360 3,101 Operating Grants and Contributions 196,232 182,205 191,850 197,325 Capital Grants and Contributions 1,714,984 2,843,309 563,690 233,832 Total Program Revenues 2,557,475 3,676,334 1,779,209 1,475,354 Net (Expense) / Revenue (3,087,063) (2,114,923) (4,115,872) (4,486,788) General Revenues and Transfers Taxes Property 3,270,875 3,505,575 3,587,177 3,719,778 Franchise Taxes 82,420 87,807 97,228 100,176 Unrestricted Grants and Contributions 106,320 141,892 29,797 26,051 Investment Earnings (net) 430,239 293,497 227,484 290,962 Gain on Disposal of Capital Assets - - 37,000 16,500 Transfers (5,696) - 10,000 44,000 Transfers - Capital Assets (249,113) (424,843) - - Total General Revenues and Transfers 3,635,045 3,603,928 3,988,686 4,197,467 Change in Net Position 547,982$ 1,489,005$ (127,186)$ (289,321)$ 110 Table 2 Page 1 of 3 2012 2013 2014 2015 2016 2017 1,002,690$ 906,102$ 1,230,335$ 1,174,510$ 1,376,793$ 1,085,554$ 1,445,397 1,447,887 1,499,538 1,670,627 1,846,459 1,906,843 2,486,553 2,760,130 2,383,890 6,521,708 3,389,909 2,618,584 - - - - - - 575,592 573,581 792,525 792,936 847,553 1,013,252 103,884 75,303 45,024 145,771 302,296 365,768 631,129 543,821 347,503 231,242 223,938 197,282 6,245,245 6,306,824 6,298,815 10,536,794 7,986,948 7,187,283 54,674 36,735 119,757 36,235 81,876 100,125 588,894 784,038 1,159,073 1,191,134 1,677,788 1,384,626 50,906 106,913 724,009 247,260 656,570 805,248 8,840 28,600 43,606 52,075 59,236 67,112 203,645 220,790 233,606 244,497 248,910 261,814 620,574 485,533 1,619,209 3,154,662 4,437,611 3,957,672 1,527,533 1,662,609 3,899,260 4,925,863 7,161,991 6,576,597 (4,717,712) (4,644,215) (2,399,555) (5,610,931) (824,957) (610,686) 4,271,751 4,333,972 4,476,810 4,602,153 4,963,787 5,572,250 106,547 83,681 120,964 128,722 131,229 135,652 54,601 10,954 132,104 242,970 255,951 231,683 212,731 (17,852) 157,640 55,909 82,385 124,052 40,009 44,343 32,355 35,600 31,160 38,373 49,000 - 122,632 284,586 186,755 195,686 - - - - (162,876) (20,643) 4,734,639 4,455,098 5,042,505 5,349,940 5,488,391 6,277,053 16,927$ (189,117)$ 2,642,950$ (260,991)$ 4,663,434$ 5,666,367$ 111 CITY OF OTSEGO, MINNESOTA STATISTICAL SECTION (UNAUDITED) CHANGES IN NET POSITION - CONTINUED Last Ten Fiscal Years (accrual basis of accounting) 2008 2009 2010 2011 BUSINESS-TYPE ACTIVITIES Expenses Water Utility 962,806$ 968,217$ 1,314,133$ 1,530,108$ Sanitary Sewer Utility 2,101,478 2,395,561 2,307,213 2,778,657 Storm Water Utility - 41,196 68,903 61,024 Total Expenses 3,064,284 3,404,974 3,690,249 4,369,789 Program Revenues Charges for Services Water Utility 745,635 739,062 745,395 736,448 Sanitary Sewer Utility 786,885 873,480 989,847 1,067,088 Storm Water Utility - 33,861 72,081 98,873 Capital Grants and Contributions 605,104 3,465,839 990,041 333,151 Total Program Revenues 2,137,624 5,112,242 2,797,364 2,235,560 Net (Expense) / Revenue (926,660) 1,707,268 (892,885) (2,134,229) General Revenues and Transfers Property Taxes - - - - Investment Earnings (net)315,762 170,532 180,266 - Gain on Disposal of Capital Assets - - - - Transfers 5,696 - (10,000) (44,000) Transfers - Capital Assets 249,113 424,843 - - Total General Revenues and Transfers 570,571 595,375 170,266 191,166 Change in Net Position (356,089)$ 2,302,643$ (722,619)$ (1,943,063)$ 112 Table 2 Page 2 of 3 2012 2013 2014 2015 2016 2017 1,301,990$ 1,241,343$ 1,187,553$ 1,246,064$ 1,276,338$ 1,377,537$ 2,326,550 2,123,381 2,052,493 2,207,811 2,480,519 2,477,995 69,834 72,944 57,977 95,533 42,342 62,172 3,698,374 3,437,668 3,298,023 3,549,408 3,799,199 3,917,704 1,049,531 1,259,942 1,167,066 1,261,303 1,334,442 1,529,127 1,055,557 1,186,523 1,325,181 1,479,703 1,601,172 1,744,067 69,608 41,831 45,570 76,211 75,932 94,919 1,032,687 1,267,189 2,560,270 2,020,299 4,766,947 5,591,332 3,207,383 3,755,485 5,098,087 4,837,516 7,778,493 8,959,445 (490,991) 317,817 1,800,064 1,288,108 3,979,294 5,041,741 - 57,739 24,824 25,000 25,000 25,000 152,321 (34,717) 168,320 85,259 129,442 154,321 - 18,733 28,440 - - - (49,000) - (122,632) (284,586) (186,755) (195,686) - - - - 162,876 20,643 103,321 41,755 98,952 (174,327) 130,563 4,278 (387,670)$ 359,572$ 1,899,016$ 1,113,781$ 4,109,857$ 5,046,019$ 113 CITY OF OTSEGO, MINNESOTA STATISTICAL SECTION (UNAUDITED) CHANGES IN NET POSITION - CONTINUED Last Ten Fiscal Years (accrual basis of accounting) 2008 2009 2010 2011 TOTAL PRIMARY GOVERNMENT Expenses Governmental Activities 5,644,538$ 5,791,257$ 5,895,081$ 5,962,142$ Business-type Activities 3,064,284 3,404,974 3,690,249 4,369,789 Total Expenses 8,708,822 9,196,231 9,585,330 10,331,931 Program Revenues Governmental Activities 2,557,475 3,676,334 1,779,209 1,475,354 Business-type Activities 2,137,624 5,112,242 2,797,364 2,235,560 Total Program Revenues 4,695,099 8,788,576 4,576,573 3,710,914 Net (Expense) / Revenue (4,013,723) (407,655) (5,008,757) (6,621,017) General Revenues and Transfers Governmental Activities 3,635,045 3,603,928 3,988,686 4,197,467 Business-type Activities 570,571 595,375 170,266 191,166 Total General Revenues and Transfers 4,205,616 4,199,303 4,158,952 4,388,633 Change in Net Position 191,893$ 3,791,648$ (849,805)$ (2,232,384)$ Sources: The data for this table has been extracted from the respective years CAFR document. 114 Table 2 Page 3 of 3 2012 2013 2014 2015 2016 2017 6,245,245$ 6,306,824$ 6,298,815$ 10,536,794$ 7,986,948$ 7,187,283$ 3,698,374 3,437,668 3,298,023 3,549,408 3,799,199 3,917,704 9,943,619 9,744,492 9,596,838 14,086,202 11,786,147 11,104,987 1,527,533 1,662,609 3,899,260 4,925,863 7,161,991 6,576,597 3,207,383 3,755,485 5,098,087 4,837,516 7,778,493 8,959,445 4,734,916 5,418,094 8,997,347 9,763,379 14,940,484 15,536,042 (5,208,703) (4,326,398) (599,491) (4,322,823) 3,154,337 4,431,055 4,734,639 4,455,098 5,042,505 5,349,940 5,488,391 6,277,053 103,321 41,755 98,952 (174,327) 130,563 4,278 4,837,960 4,496,853 5,141,457 5,175,613 5,618,954 6,281,331 (370,743)$ 170,455$ 4,541,966$ 852,790$ 8,773,291$ 10,712,386$ 115 CITY OF OTSEGO, MINNESOTA STATISTICAL SECTION (UNAUDITED) GOVERNMENTAL ACTIVITIES TAX REVENUE BY SOURCE Table 3 Last Ten Fiscal Years (accrual basis of accounting) Property Franchise Taxes Taxes Total 2008 3,270,875 82,420 3,353,295$ 2009 3,505,575 87,807 3,593,382 2010 3,587,177 97,228 3,684,405 2011 3,719,778 100,176 3,819,954 2012 4,271,751 106,547 4,378,298 2013 4,333,972 83,681 4,417,653 2014 4,476,810 120,964 4,597,774 2015 4,602,153 128,722 4,730,875 2016 4,963,787 131,229 5,095,016 2017 5,572,250 135,652 5,707,902 Sources: The data for this table has been extracted from the respective years CAFR document. 116 This page has been left blank intentionally. 117 CITY OF OTSEGO, MINNESOTA STATISTICAL SECTION (UNAUDITED) FUND BALANCES - GOVERNMENTAL FUNDS Last Ten Fiscal Years (modified accrual basis of accounting) 2008 2009 2010 2011 General Fund Reserved 6,069$ -$ -$ -$ Unreserved 1,538,650 1,685,623 1,713,440 - Nonspendable - - - - Assigned - - - 81,168 Unassigned - - - 1,622,430 Total General Fund 1,544,719$ 1,685,623$ 1,713,440$ 1,703,598$ All Other Governmental Funds Reserved 8,120,203$ 8,343,014$ 1,197,967$ -$ Unreserved, Reported in: Special Revenue Funds 3,356,320 2,684,192 2,811,289 - Capital Project Funds 2,228,379 1,960,421 2,157,424 - Nonspendable - - - - Restricted - - - 5,985,647 Committed - - - 39,142 Assigned - - - 6,517,609 Unassigned - - - (700,854) Total All Other Governmental Funds 13,704,902$ 12,987,627$ 6,166,680$ 11,841,544$ Sources: The data for this table has been extracted from the respective years CAFR document. Note: During 2011, the City implemented GASB Statement No. 54, Fund Balance and Governmental Fund Type Definitions. 118 Table 4 2012 2013 2014 2015 2016 2017 -$ -$ -$ -$ -$ -$ - - - - - - 11,254 11,254 80,423 105,547 110,973 317,197 87,971 103,418 101,833 128,646 192,408 205,257 1,665,366 1,797,403 3,211,382 2,656,330 3,342,821 3,368,191 1,764,591$ 1,912,075$ 3,393,638$ 2,890,523$ 3,646,202$ 3,890,645$ -$ -$ -$ -$ -$ -$ - - - - - - - - - - - - 4,601 351 - 2,675 2,000 1,325 7,898,825 8,805,554 2,576,729 2,278,379 1,931,757 3,290,750 52,360 595,191 387,033 406,683 419,829 474,863 5,605,265 4,267,012 5,218,020 6,825,237 7,221,257 9,098,697 (341,194) (9,555) (10,584) (26,070) (281,273) (355,150) 13,219,857$ 13,658,553$ 8,171,198$ 9,486,904$ 9,293,570$ 12,510,485$ 119 CITY OF OTSEGO, MINNESOTA STATISTICAL SECTION (UNAUDITED) CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS Last Ten Fiscal Years (modified accrual basis of accounting) 2008 2009 2010 2011 Revenues Property Taxes 3,368,516$ 3,560,656$ 3,671,320$ 3,886,919$ Franchise Taxes - - - - Licenses and Permits 604,818 433,080 339,568 303,059 Intergovernmental 915,934 336,937 191,784 375,703 Charges for Services 533,967 561,860 126,453 200,256 Special Assessments 1,567,265 1,309,711 1,511,510 2,055,623 Fines and Forfeitures - - - 1,000 Investment Earnings (net) 727,395 447,109 227,484 290,962 Miscellaneous 119,515 152,416 33,153 25,302 Total Revenues 7,837,410 6,801,769 6,101,272 7,138,824 Expenditures General Government 834,755 872,067 802,632 887,847 Public Safety 1,744,043 1,759,415 1,604,062 1,586,504 Public Works 860,594 1,255,099 962,329 974,557 Sanitation 10,095 - - - Culture and Recreation 379,246 240,047 201,080 246,075 Economic Development 7,268 58,293 17,096 12,353 Capital Outlay 3,357,334 561,037 1,533,354 1,178,526 Debt Service Principal 2,380,000 2,780,000 1,345,000 745,000 Interest 1,731,089 1,872,249 989,718 489,184 Bond Issuance & Fiscal Agent Fee's - 233,028 125,275 86,285 Total Expenditures 11,304,424 9,631,235 7,580,546 6,206,331 Excess (Deficiency) of Revenues Over (Under) Expenditures (3,467,014) (2,829,466) (1,479,274) 932,493 Other Financing Sources (Uses) Transfers In 1,723,793 1,553,570 931,682 2,069,009 Issuance of Debt - 6,360,000 5,310,000 4,640,000 Premium on Issuance of Debt - - - 48,529 Sales of Capital Assets - - 56,000 - Refunded Bonds Redeemed - (4,195,000) (4,325,000) - Insurance Recovery - - - - Transfers Out (1,445,342) (1,465,475) (917,937) (2,025,009) Total Other Financing Sources (Uses)278,451 2,253,095 1,054,745 4,732,529 Net Change in Fund Balances (3,188,563)$ (576,371)$ (424,529)$ 5,665,022$ Debt Service as a Percentage of Noncapital Expenditures 41.80%50.98%36.16%22.68% Sources: The data for this table has been extracted from the respective years CAFR document. 120 Table 5 2012 2013 2014 2015 2016 2017 4,344,415$ 4,564,068$ 4,524,092$ 4,651,453$ 4,960,518$ 5,595,120$ - - 120,964 128,722 131,229 135,652 553,577 819,493 1,238,823 1,179,136 1,661,565 1,363,384 621,447 241,996 1,034,552 3,570,630 2,111,727 1,093,154 86,655 170,194 1,142,453 555,660 1,274,578 2,129,514 875,822 1,987,647 905,441 560,748 575,155 734,522 2,000 - 4,000 11,998 16,223 21,092 209,984 (17,852) 157,640 55,909 82,385 124,052 56,625 78,457 50,286 105,573 119,732 294,909 6,750,525 7,844,003 9,178,251 10,819,829 10,933,112 11,491,399 918,055 923,255 1,169,697 1,141,113 1,233,680 1,072,195 1,440,908 1,447,182 1,495,008 1,664,031 1,807,985 1,886,661 1,009,827 1,121,981 1,023,693 1,044,024 1,019,946 1,066,349 - - - - - - 277,605 313,023 464,840 466,205 534,122 587,739 103,884 75,303 45,024 145,771 196,534 195,716 1,707,346 1,984,531 1,688,847 4,477,153 4,349,555 2,160,857 810,000 840,000 6,965,000 1,130,000 1,210,000 1,125,000 554,245 574,715 454,566 256,148 233,498 206,748 42,900 - - 2,979 3,362 3,267 6,864,770 7,279,990 13,306,675 10,327,424 10,588,682 8,304,532 (114,245) 564,013 (4,128,424) 492,405 344,430 3,186,867 997,325 - 612,433 1,574,500 648,087 1,278,609 1,400,000 - - - - - 64,542 - - - - - 40,009 - - 35,600 31,160 78,805 - - - - - - - 22,167 - (948,325) - (489,801) (1,289,914) (461,332) (1,082,923) 1,553,551 22,167 122,632 320,186 217,915 274,491 1,439,306$ 586,180$ (4,005,792)$ 812,591$ 562,345$ 3,461,358$ 23.13% 23.32% 60.23% 14.22% 18.40% 19.32% 121 CITY OF OTSEGO, MINNESOTA STATISTICAL SECTION (UNAUDITED) ESTIMATED ACTUAL VALUE, TAXABLE MARKET VALUE AND TAX CAPACITY OF TAXABLE PROPERTY Last Ten Fiscal Years 2008 2009 2010 2011 Estimated Actual Value 1,333,105,057$ 1,359,891,000$ 1,297,319,800$ 1,122,091,900$ Taxable Market Value Real Estate 1,192,244,800$ 1,254,432,100$ 1,163,465,900$ 1,045,413,800$ Personal Property 11,325,900 12,488,100 13,099,300 14,203,900 Total Taxable Market Value 1,203,570,700$ 1,266,920,200$ 1,176,565,200$ 1,059,617,700$ Taxable Market Value as a Percentage of Estimated Actual Value 90.28%93.16%90.69%94.43% Tax Capacity Real Estate 12,698,297$ 13,545,272$ 12,750,856$ 11,376,627$ Personal Property 226,018 249,252 261,328 283,499 Net Tax Capacity for Direct Rate 12,924,315$ 13,794,524$ 13,012,184$ 11,660,126$ Net Tax Capacity as a Percentage of Estimated Actual Value 0.97%1.01%1.00%1.04% Property Tax Levies General Revenues 2,967,000$ 3,402,090$ 3,252,000$ 3,500,000$ Debt Service 458,000 318,600 566,000 466,000 Total Property Taxes Levied 3,425,000$ 3,720,690$ 3,818,000$ 3,966,000$ Tax Rates General Revenues 22.957 24.663 24.992 30.017 Debt Service 3.544 2.310 4.350 3.997 Total Direct Tax Rate 26.500 26.972 29.342 34.013 Sources: The data for this table has been provided by the Wright County Auditor / Treasurer's Office. 122 Table 6 2012 2013 2014 2015 2016 2017 1,070,068,000$ 989,365,300$ 1,051,543,200$ 1,177,857,500$ 1,340,579,000$ 1,473,986,500$ 913,874,900$ 839,428,800$ 908,532,000$ 1,039,579,100$ 1,195,720,700$ 1,327,925,100$ 14,003,900 14,305,700 14,513,300 14,952,700 16,476,000 20,388,300 927,878,800$ 853,734,500$ 923,045,300$ 1,054,531,800$ 1,212,196,700$ 1,348,313,400$ 86.71%86.29%87.78%89.53%90.42%91.47% 9,999,046$ 9,184,748$ 9,805,499$ 11,060,135$ 12,909,476$ 14,465,922$ 279,502 285,540 290,266 298,480 328,948 407,194 10,278,548$ 9,470,288$ 10,095,765$ 11,358,615$ 13,238,424$ 14,873,116$ 0.96%0.96%0.96%0.96%0.99%1.01% 3,836,000$ 3,952,910$ 4,024,715$ 4,070,000$ 4,380,206$ 4,974,745$ 425,000 425,000 475,285 610,000 640,000 655,000 4,261,000$ 4,377,910$ 4,500,000$ 4,680,000$ 5,020,206$ 5,629,745$ 37.320 41.740 39.865 35.832 33.087 33.448 4.135 4.488 4.708 5.370 4.834 4.404 41.455 46.228 44.573 41.202 37.921 37.852 123 CITY OF OTSEGO, MINNESOTA STATISTICAL SECTION (UNAUDITED) TAX CAPACITY OF REAL ESTATE & PERSONAL PROPERTY Table 7 Last Ten Fiscal Years Non Commercial Personal Homestead Homestead & Industrial Agricultural Property Other Total 2008 8,390,152$ 1,998,030$ 1,435,171$ 800,803$ 226,018$ 74,141$ 12,924,315$ 64.92% 15.46% 11.10% 6.20% 1.75% 0.57% 100.00% 2009 8,666,112 2,120,456 1,878,314 805,387 249,252 75,003 13,794,524 62.82% 15.37% 13.62% 5.84% 1.81% 0.54% 100.00% 2010 8,126,189 1,661,573 2,164,323 719,579 261,328 79,192 13,012,184 62.45% 12.77% 16.63% 5.53% 2.01% 0.61% 100.00% 2011 7,547,244 1,251,967 1,893,120 606,587 283,499 77,709 11,660,126 64.73% 10.74% 16.24% 5.20% 2.43% 0.67% 100.00% 2012 6,460,276 1,097,107 1,821,302 543,596 279,502 76,765 10,278,548 62.85% 10.67% 17.72% 5.29% 2.72% 0.75% 100.00% 2013 5,906,265 903,006 1,788,872 533,264 285,540 53,341 9,470,288 62.37% 9.54% 18.89% 5.63% 3.02% 0.56% 100.00% 2014 6,607,296 918,439 1,664,605 536,842 290,266 78,317 10,095,765 65.45% 9.10% 16.49% 5.32% 2.88% 0.78% 100.00% 2015 7,732,867 1,057,409 1,633,988 582,530 298,480 53,341 11,358,615 68.08% 9.31% 14.39% 5.13% 2.63% 0.47% 100.00% 2016 8,878,089 1,183,843 2,166,341 627,666 328,948 53,537 13,238,424 67.06% 8.94% 16.36% 4.74% 2.48% 0.40% 100.00% 2017 9,942,548 1,232,700 2,627,164 597,483 407,194 66,027 14,873,116 66.85% 8.29% 17.66% 4.02% 2.74% 0.44% 100.00% Sources: The data for this table has been provided by the Wright County Auditor / Treasurer's Office. Residential 124 CITY OF OTSEGO, MINNESOTA STATISTICAL SECTION (UNAUDITED) PROPERTY TAX RATES - DIRECT AND OVERLAPPING GOVERNMENTS Last Ten Fiscal Years Table 8 School School School School School School City District 728 District 882 District 885 County District 728 District 882 District 885 2008 26.500 32.344 25.254 46.192 31.648 90.492 83.402 104.340 2009 26.972 36.136 26.083 46.714 32.567 95.675 85.622 106.253 2010 29.342 39.967 24.948 52.062 35.819 105.128 90.109 117.223 2011 34.013 43.489 27.029 51.369 39.306 116.808 100.348 124.688 2012 41.455 45.548 28.262 52.646 43.452 130.455 113.169 137.553 2013 46.228 50.058 26.229 57.213 44.288 140.574 116.745 147.729 2014 44.573 51.286 28.269 51.570 43.450 139.309 116.292 139.593 2015 41.202 42.483 22.882 51.082 40.593 124.278 104.677 132.877 2016 37.921 39.266 20.857 49.102 39.970 117.157 98.748 126.993 2017 37.852 36.659 16.242 46.893 39.599 114.110 93.693 124.344 Sources: The data for this table has been provided by the Wright County Auditor / Treasurer's Office. Overlapping Rates Total Direct & Overlapping 125 CITY OF OTSEGO, MINNESOTA STATISTICAL SECTION (UNAUDITED) PRINCIPAL PROPERTY TAXPAYERS Table 9 Current Year and Nine Years Ago 2017 2008 Percentage of Percentage of Net Tax Total Tax Net Tax Total Tax Taxpayer Classification Capacity Rank Capacity Value Capacity Rank Capacity Value Duke Realty Industrial 1,131,708$ 1 7.61%101,152$ 6 0.78% Minnegasco, Inc Utility 247,374 2 1.66%115,620 3 0.89% Target Corporation Commercial 205,390 3 1.38% Wright-Hennepin Electric Co-Op Utility 104,097 4 0.70%78,434 8 0.61% Elk Inn Partners LP Commercial 99,250 5 0.67% Apex Business Center, LLC Industrial 73,924 6 0.50%74,578 10 0.58% WFCIII LLC Commercial 59,250 7 0.40% 21st Century Bank Commercial 49,602 8 0.33% WFCII LLC Commercial 45,734 9 0.31% Darkenwald's Riverbend Co. LLC Residential 40,734 10 0.27% Geneva Exchange Fund XXII LLC Commercial 172,930 1 1.34% Martin Farms Development, LLC Residential 126,007 2 0.97% OHW, LLC Residential 106,965 4 0.83% Land Funding I LLC Commercial 105,912 5 0.82% Appello Group LLC Commercial 91,374 7 0.71% Darrel Farr Development Corp. Commercial 77,444 9 0.60% Totals 2,057,063$ 13.83%1,050,416$ 8.13% Sources: The data for this table has been provided by the Wright County Auditor / Treasurer's Office. 126 CITY OF OTSEGO, MINNESOTA STATISTICAL SECTION (UNAUDITED) PROPERTY TAX LEVIES AND COLLECTIONS Table 10 Last Ten Fiscal Years Collected within the Certified Fiscal Year of the Levy Collections in Total Collections to Date Property Percentage Subsequent Percentage Tax Levy Amount of Levy Years Amount to Date 2008 3,425,000$ 3,241,928$ 94.65% 183,072$ 3,425,000$ 100.00% 2009 3,720,690 3,498,865 94.04% 221,825 3,720,690 100.00% 2010 3,818,000 3,610,870 94.57% 207,130 3,818,000 100.00% 2011 3,966,000 3,820,747 96.34% 145,253 3,966,000 100.00% 2012 4,261,000 4,111,857 96.50% 143,387 4,255,244 99.86% 2013 4,377,910 4,306,802 98.38%70,221 4,377,023 99.98% 2014 4,500,000 4,444,153 98.76%53,689 4,497,842 99.95% 2015 4,680,000 4,641,720 99.18%35,790 4,677,510 99.95% 2016 5,020,206 4,979,508 99.19%37,071 5,016,579 99.93% 2017 5,629,745 5,606,101 99.58%- 5,606,101 99.58% Sources: The data for this table has been provided by Wright County and from City financial maintenance documents. Note: The components of the Certified Property Tax Levy can be viewed in table 6 of the statistical section. 127 CITY OF OTSEGO, MINNESOTA STATISTICAL SECTION (UNAUDITED) RATIOS OF OUTSTANDING DEBT BY TYPE Table 11 Last Ten Fiscal Years Business-Type Governmental Activities Activities General General Percentage Obligation Equipment Lease Obligation Total of Personal Per Bonds Certificates Revenue Revenue Bonds Debt Income Capita 2008 12,655,000$ -$ 3,430,000$ 26,765,000 42,850,000$ 9.32% 3,217$ 2009 11,265,000 - 3,230,000 27,740,000 42,235,000 9.26% 3,114 2010 13,750,000 385,000 - 28,922,111 43,057,111 9.24% 3,173 2011 17,728,529 350,000 - 28,843,229 46,921,758 9.17% 3,396 2012 18,413,438 310,000 - 28,764,347 47,487,785 8.82% 3,384 2013 17,601,634 265,000 - 28,685,465 46,552,099 8.26% 3,220 2014 10,664,830 220,000 - 28,606,583 39,491,413 6.33% 2,638 2015 9,553,029 175,000 - 28,527,701 38,255,730 5.61% 2,473 2016 8,380,857 130,000 - 26,448,820 34,959,677 4.82% 2,182 2017 7,293,686 85,000 - 24,334,937 31,713,623 4.20% 1,903 Sources: The data for this table has been provided from City financial maintenance documents. Note: More detailed information for Population and Personal Income can be viewed in table 16 of the statistical section. 128 CITY OF OTSEGO, MINNESOTA STATISTICAL SECTION (UNAUDITED) RATIOS OF GENERAL BONDED DEBT OUTSTANDING Table 12 Last Ten Fiscal Years Total Percentage of General General Less: Amounts Net General Estimated Obligation Equipment Bonded Debt Restricted to Obligation Actual Value Per Bonds Certificates Outstanding Debt Service Debt of Property Capita 2008 12,655,000$ -$ 12,655,000$ 1,864,069$ 10,790,931$ 0.81% 810$ 2009 11,265,000 - 11,265,000 1,092,787 10,172,213 0.75% 750 2010 13,750,000 385,000 14,135,000 6,962,030 7,172,970 0.55% 529 2011 17,728,529 350,000 18,078,529 6,547,412 11,531,117 1.03%835 2012 18,413,438 310,000 18,723,438 6,570,533 12,152,905 1.14%866 2013 17,601,634 265,000 17,866,634 5,882,912 11,983,722 1.21%829 2014 10,664,830 220,000 10,884,830 5,430,795 5,454,035 0.52%364 2015 9,553,029 175,000 9,728,029 4,506,243 5,221,786 0.44%337 2016 8,380,857 130,000 8,510,857 4,292,589 4,218,268 0.31%263 2017 7,293,686 85,000 7,378,686 3,596,348 3,782,338 0.26%227 Sources: The data for this table has been provided from City financial maintenance documents. Note: More detailed information for Population can be viewed in table 16 of the statistical section. Note: More detailed information for Estimated Property Values can be viewed in table 6 of the statistical section. 129 CITY OF OTSEGO, MINNESOTA STATISTICAL SECTION (UNAUDITED) COMPUTATION OF DIRECT AND OVERLAPPING Table 13 GOVERNMENTAL ACTIVITIES DEBT DECEMBER 31, 2017 Estimated Estimated Share Debt Percentage of Overlapping Governmental Unit Outstanding Applicable Debt Overlapping Debt: School Districts: No. 728 - Elk River 229,745,000$ 19.53% 44,869,199$ No. 882 - Monticello 49,330,000 3.50% 1,726,550 No. 885 - St. Michael-Albertville 219,335,000 4.16% 9,124,336 Wright County 53,685,000 10.66% 5,722,821 Total Overlapping Debt 552,095,000$ 61,442,906 City of Otsego Direct Debt 7,378,686 Total Direct and Overlapping Debt 68,821,592$ Sources: The majority of the data for this table has been provided by Wright County Auditor / Treasurer's Office. Sources: The remaining data for this table was provided by School District No. 728. Note: More detailed information for the City's outstanding debt can be viewed in table 11 of the statistical section. Note: Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the City. The schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of the City. This process recognizes that, when considering the City's ability to issue and repay long-term debt, the entire debt burden borne by the residents and businesses should be taken into account. However, this does not imply that every taxpayer is a resident, and therefore responsible for repaying the debt, of each overlapping government. Note: The percentage of overlapping debt applicable is estimated using tax capacity values. Applicable percentages were estimated by determining the portion of each entity's tax capacity that is within the City's boundaries, and dividing it by the entity's total tax capacity. 130 This page has been left blank intentionally. 131 CITY OF OTSEGO, MINNESOTA STATISTICAL SECTION (UNAUDITED) LEGAL DEBT MARGIN INFORMATION Last Ten Fiscal Years 2008 2009 2010 2011 Taxable Market Value 1,203,570,700$ 1,266,920,200$ 1,176,565,200$ 1,059,617,700$ Debt Limit Percentage 3.00% 3.00% 3.00% 3.00% Debt Limit 36,107,121 38,007,606 35,296,956 31,788,531 Total Net Debt Applicable to Limit 10,790,931 10,172,213 7,172,970 11,531,117 Legal Debt Margin 25,316,190$ 27,835,393$ 28,123,986$ 20,257,414$ Total Net Debt Applicable to the Limit as a Percentage of Debt Limit 29.89% 26.76% 20.32% 36.27% Sources: The data for this table has been provided by Wright County and from City financial maintenance documents. 132 Table 14 2012 2013 2014 2015 2016 2017 927,878,800$ 853,734,500$ 923,045,300$ 1,054,531,800$ 1,212,196,700$ 1,348,313,400$ 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 27,836,364 25,612,035 27,691,359 31,635,954 36,365,901 40,449,402 12,152,905 11,983,722 5,454,035 5,221,786 4,218,268 3,782,338 15,683,459$ 13,628,313$ 22,237,324$ 26,414,168$ 32,147,633$ 36,667,064$ 43.66%46.79%19.70%16.51%11.60%9.35% 133 CITY OF OTSEGO, MINNESOTA STATISTICAL SECTION (UNAUDITED) PLEDGED-REVENUE COVERAGE Table 15 Last Ten Fiscal Years Water and Water and Sanitary Sewer Sanitary Sewer Less: Net Utility Connection Operating Available Debt Service Charges Charges Expenses Revenue Principal Interest Coverage 2008 1,819,479$ 501,798$ 1,015,506$ 1,305,771$ 1,155,000$ 1,083,466$ 58.33% 2009 1,783,074 498,326 1,039,988 1,241,412 1,190,000 1,264,930 50.57% 2010 1,915,508 990,041 1,109,346 1,796,203 - 1,214,508 147.90% 2011 2,038,433 333,151 1,228,236 1,143,348 - 1,343,403 85.11% 2012 2,256,616 1,032,687 1,148,605 2,140,698 - 1,006,961 212.59% 2013 2,429,661 1,233,224 1,136,790 2,526,095 - 1,007,100 250.83% 2014 2,687,572 2,435,460 1,016,382 4,106,650 - 1,007,585 407.57% 2015 2,641,566 2,020,299 2,524,073 2,137,792 - 1,007,762 212.13% 2016 2,857,174 3,662,097 2,831,346 3,687,925 2,000,000 1,007,725 122.62% 2017 3,197,486 3,577,039 2,973,383 3,801,142 2,035,000 967,815 126.59% Property Debt Service Taxes Principal Interest Coverage 2008 235,763$ 95,000$ 140,763$ 100.00% 2009 337,200 200,000 137,200 100.00% 2010 - - - n/a 2011 - - - n/a 2012 - - - n/a 2013 - - - n/a 2014 - - - n/a 2015 - - - n/a 2016 - - - n/a 2017 - - - n/a Sources: The data for this table has been provided from City financial maintenance documents. General Obligation Revenue Bonds Lease Revenue Bonds 134 CITY OF OTSEGO, MINNESOTA STATISTICAL SECTION (UNAUDITED) DEMOGRAPHIC AND ECONOMIC STATISTICS Table 16 Last Ten Fiscal Years School Enrollments Per Capita No. 885 No. of Personal Personal Unemployment Median No. 728 No. 882 St. Michael Population Households Income Income Rate Age Elk River Monticello Albertville 2008 13,319 4,553 459,612,052$ 34,508 6.1%12,544 4,036 4,873 2009 13,562 4,660 455,886,630 33,615 8.9%33.8 12,702 4,057 5,094 2010 13,571 4,736 465,770,291 34,321 8.0%32.2 12,932 4,073 5,326 2011 13,816 4,826 511,523,584 37,024 6.8%32.4 12,801 4,110 5,497 2012 14,034 4,894 538,231,968 38,352 5.8%33.4 12,753 4,137 5,645 2013 14,457 5,035 563,823,000 39,000 5.0%33.4 13,123 4,137 5,747 2014 14,968 5,218 623,821,336 41,677 4.2%33.8 13,076 4,193 5,904 2015 15,472 5,394 682,361,616 44,103 3.7%34.1 13,136 4,096 6,096 2016 16,019 5,580 724,779,655 45,245 4.3%33.2 13,219 4,094 6,286 2017 16,669 5,790 754,193,942 45,245 3.5%33.2 13,461 4,168 6,335 Sources: Population & Households - Minnesota State Demographer [2017 Estimated by City] Personal Income - Calculated by the City Per Capita Personal Income - US Department of Commerce; Bureau of Economic Analysis Unemployment Rate - Minnesota Department of Employment and Economic Development Median Age - US Department of Commerce, Bureau of the Census School Enrollment - Minnesota Department of Education Note: Median age was added in 2015. Information prior to 2009 was not available. This will be updated on a go-forward basis. Note: Some data was not yet available for 2017. In those instances, 2016 data was shown for the current year. 135 CITY OF OTSEGO, MINNESOTA STATISTICAL SECTION (UNAUDITED) PRINCIPAL EMPLOYMENT SECTORS Table 17 Current Year and Nine Years Ago Percentage of Percentage of Total City Total City Employment Industry Employees Rank Employment Employees Rank Employment Education & Health Services 1,451 1 42.89%105 5 8.44% Trade, Transportation & Utilities 718 2 21.22% 305 2 24.52% Leisure & Hospitality 350 3 10.35% 318 1 25.56% Construction 338 4 9.99% 161 3 12.94% Professional & Business Services 250 5 7.39% 138 4 11.09% Other Services 79 6 2.34% 60 7 4.82% Public Administration 38 7 1.12% 21 8 1.69% Financial Activities 91 6 7.32% Totals 3,224 95.30% 1,199 96.38% Sources: The data for this table has been provided from the Minnesota Department of Employment and Economic Development. Note: Due to data privacy within the State, data for principal employers of the City is not available. Given this limitation, the City determined it was appropriate to provide data regarding employment industry data. The City felt that this data would still provide the user information to understand the degree to which the City's economy is or is not dependent on a certain employment sector. 2017 2008 136 CITY OF OTSEGO, MINNESOTA STATISTICAL SECTION (UNAUDITED) FULL TIME CITY GOVERNMENT POSITIONS BY FUNCTION Table 18 Last Ten Fiscal Years 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 General Government Administration 4.0 3.0 3.0 3.0 3.0 3.0 3.0 4.0 3.5 3.6 Finance 3.7 3.8 3.9 3.9 3.9 3.7 3.9 3.0 3.0 3.0 Total General Government 7.7 6.8 6.9 6.9 6.9 6.7 6.9 7.0 6.5 6.6 Public Safety Police - - - - - - - - - - Fire - - - - - - - - - - Building Inspections 4.0 2.6 1.6 1.0 1.0 1.0 1.0 1.0 1.5 1.5 Total Public Safety 4.0 2.6 1.6 1.0 1.0 1.0 1.0 1.0 1.5 1.5 Public Works Street Maintenance 5.9 5.9 6.9 6.9 5.9 5.8 5.8 6.9 6.9 6.9 Mechanic - - - - 1.0 1.0 1.0 1.0 1.0 1.0 Total Public Works 5.9 5.9 6.9 6.9 6.9 6.8 6.8 7.9 7.9 7.9 Culture and Recreation Parks Maintenance 1.0 1.0 1.0 1.0 1.4 1.4 1.4 3.5 3.5 3.5 Recreation - - - - 0.6 1.1 1.1 1.4 1.4 1.4 Total Culture and Recreation 1.0 1.0 1.0 1.0 2.0 2.5 2.5 4.9 4.9 4.9 Public Utilities Water Utility - - - - - 2.0 2.0 1.3 1.3 1.3 Sanitary Sewer Utility - - - - - 2.0 2.0 3.7 3.7 3.7 Total Public Utilities - - - - - 4.0 4.0 5.0 5.0 5.0 Total 18.6 16.3 16.4 15.8 16.8 21.0 21.2 25.8 25.7 25.9 Sources: The data for this table has been provided from City financial maintenance documents. Note: Police and Fire services are contracted services with Wright County and neighboring Cities respectively, therefore no City employees. Note: Public Utilities staffing were contracted with a service provider through 2012. In 2013, the City hired a staff and assumed operations. 137 CI T Y O F O T S E G O , M I N N E S O T A ST A T I S T I C A L S E C T I O N ( U N A U D I T E D ) OP E R A T I N G I N D I C A T O R S B Y F U N C T I O N Table 19 La s t T e n F i s c a l Y e a r s Fu n c t i o n 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7 Ad m i n i s t r a t i o n Re n t a l L i c e n s e s I s s u e d 8 9 1 9 9 1 8 0 2 4 6 2 9 2 3 3 7 3 7 2 3 7 2 3 8 7 3 5 1 Co d e E n f o r c e m e n t C i t a t i o n s 1 1 6 0 8 9 2 0 1 6 3 1 4 1 3 0 Re g i s t e r e d V o t e r s 7, 1 6 8 7 , 3 2 9 9 , 3 2 4 Ac t u a l V o t e s T a l l i e d 6 , 6 8 8 4 , 7 3 7 7 , 1 2 6 4 , 6 9 3 7 , 3 6 2 Po l i c e To t a l C a l l s f o r S e r v i c e 4 , 2 1 7 3 , 9 0 5 4 , 1 1 1 4 , 2 3 4 3 , 8 5 6 4 , 0 6 0 3 , 5 7 5 3 , 6 1 9 4,310 Fi r e Ca l l s - A l b e r t v i l l e D e p a r t m e n t 82 7 6 9 3 1 2 9 Ca l l s - E l k R i v e r D e p a r t m e n t 74 7 3 8 0 9 2 Ca l l s - R o g e r s D e p a r t m e n t 18 1 5 1 2 Bu i l d i n g I n s p e c t i o n s Nu m b e r o f P e r m i t s - A l l T y p e s 2 , 4 8 0 8 3 9 6 1 7 5 7 0 6 4 5 6 9 9 6 9 2 8 9 3 9 6 8 7 2 2 Ne w H o m e s C o n s t r u c t e d 8 0 9 4 7 3 5 8 1 4 3 1 9 0 1 8 8 2 0 7 2 1 9 2 1 0 Pu b l i c W o r k s Mi l e s o f S t r e e t s C o n s t r u c t e d - 0. 2 5 - - 0. 4 5 1. 3 3 2. 3 0 1. 6 6 2.59 3.93 Mi l e s o f S t r e e t s R e c o n s t r u c t e d 0.35 1.80 Sn o w P l o w i n g E v e n t s 15 26 55 40 46 37 22 16 16 22 Cu l t u r e a n d R e c r e a t i o n Pa r k s A c r e s M a i n t a i n e d 15 8 . 7 15 8 . 7 16 1 . 5 16 7 . 8 16 7 . 8 18 4 . 3 18 4 . 3 18 4 . 3 190.3 160.0 Pr a i r i e F e s t i v a l A t t e n d a n c e 4, 9 0 0 5, 1 0 0 6, 2 0 0 5,000 4,000 Re c r e a t i o n P r o g r a m s O f f e r e d 17 60 10 6 132 100 127 Re c r e a t i o n P r o g r a m s P a r t i c i p a n t s 55 0 9, 8 7 5 14 , 9 5 8 12 , 6 6 2 12,662 17,341 Wa t e r U t i l i t y Co n n e c t i o n s 2, 1 3 1 2, 2 2 2 2, 3 2 1 2, 3 7 9 2, 5 1 7 2, 6 7 8 2, 8 2 9 3, 0 2 3 3,155 3,278 Ga l l o n s D e l i v e r e d 33 9 , 3 9 4 , 0 0 0 34 8 , 9 4 7 , 0 7 0 34 8 , 4 9 8 , 6 1 0 35 3 , 5 1 5 , 8 0 0 42 9 , 2 9 3 , 5 0 0 40 9 , 4 9 2 , 7 3 0 37 5 , 2 9 9 , 8 4 0 38 9 , 1 1 8 , 3 3 0 393,795,210 491,484,000 Sa n i t a r y S e w e r U t i l i t y Av e r a g e D a i l y G a l l o n s T r e a t e d 41 6 , 0 0 0 47 4 , 0 0 0 50 9 , 0 0 0 51 2 , 0 0 0 48 5 , 0 0 0 54 3 , 0 0 0 53 9 , 0 0 0 55 1 , 0 0 0 600,000 627,000 So u r c e s : T h e d a t a f o r t h i s t a b l e h a s b e e n p r o v i d e d b y e a c h r e s p e c t i v e C i t y d e p a r t m e n t . No t e : T h e C i t y m a d e s i g n i f i c a n t c h a n g e s t o t h e i n d i c a t o r s i n c l u d e d i n t h i s t a b l e f o r 2 0 1 5 . N o t a l l h i s t o r i c a l d a t a w a s a b l e t o b e c o m p i l e d , a n d t h i s t a b l e w i l l b e u p d a t e d o n a g o - f o r w a r d b a s i s . 13 8 CI T Y O F O T S E G O , M I N N E S O T A ST A T I S T I C A L S E C T I O N ( U N A U D I T E D ) CA P I T A L A S S E T S T A T I S T I C S B Y F U N C T I O N Table 20 La s t T e n F i s c a l Y e a r s Fu n c t i o n 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7 Pu b l i c W o r k s St r e e t M i l e s ( M S A ) 1 1 3 . 1 0 1 1 2 . 8 5 1 1 2 . 8 5 1 1 2 . 8 5 1 1 3 . 3 0 1 1 4 . 6 3 1 1 6 . 9 3 1 1 8 . 5 9 1 2 0 . 8 8 124.81 He a v y D u t y T r u c k s 7 7 7 8 8 8 8 8 8 8 Li g h t D u t y V e h i c l e s 9 1 0 1 0 1 0 1 1 1 5 1 5 1 5 1 5 17 Tr a c t o r s & G r a d i n g E q u i p m e n t 4 4 7 8 8 8 8 8 8 8 Cu l t u r e a n d R e c r e a t i o n Tr a i l M i l e s 1 7 . 9 0 1 9 . 6 8 1 9 . 6 8 1 9 . 6 8 1 9 . 6 8 1 9 . 6 8 1 9 . 6 8 1 9 . 9 6 2 1 . 1 3 25.11 Nu m b e r o f P a r k s 7 7 7 8 8 1 0 1 0 1 0 1 1 12 Pl a y g r o u n d s 6 6 6 7 7 7 7 7 8 9 Pa r k S h e l t e r s 7 7 7 9 9 9 9 9 1 0 10 Ba l l F i e l d s 4 4 4 5 5 5 5 5 6 6 So c c e r F i e l d s - - - - - - - 3 3 3 Ba s k e t b a l l C o u r t s 4 4 4 5 5 5 5 5 5 5 Te n n i s C o u r t s 6 6 6 7 7 7 7 7 8 8 Ou t d o o r I c e R i n k s - - - - - 1 1 1 2 2 Mo w i n g E q u i p m e n t 2 2 3 4 5 5 5 5 6 6 Wa t e r U t i l i t y Wa t e r T o w e r s 3 3 3 3 3 3 3 3 3 3 We l l s 8 8 8 8 8 8 8 8 8 8 Mi l e s o f W a t e r M a i n 63 63 74 77 79 Hy d r a n t s 71 7 72 2 794 846 871 Wa t e r V a l v e s 1, 5 5 5 1, 6 0 3 1, 6 5 9 1,841 1,881 Sa n i t a r y S e w e r U t i l i t y Tr e a t m e n t F a c i l i t i e s 2 2 2 2 2 2 2 2 2 2 Li f t S t a t i o n s 9 9 9 9 9 9 9 9 10 10 Mi l e s o f S a n i t a r y S e w e r L i n e s 69 - 73 . 6 75.8 79.5 Ma n h o l e s 1, 2 5 7 1, 2 5 7 1, 3 6 6 1,480 1,524 Mi l e s o f S a n i t a r y F o r c e m a i n 20 20 20 20 20 So u r c e s : T h e d a t a f o r t h i s t a b l e h a s b e e n p r o v i d e d b y e a c h r e s p e c t i v e C i t y d e p a r t m e n t . No t e : T h e C i t y m a d e s i g n i f i c a n t c h a n g e s t o t h e s t a t i s t i c s i n c l u d e d i n t h i s t a b l e f o r 2 0 1 5 . N o t a l l h i s t o r i c a l d a t a w a s a b l e t o b e c o m p i l e d , a n d t h i s t a b l e w i l l b e u p d a t e d o n a g o - f o r w a r d b a s i s . 13 9 This page has been left blank intentionally. 140