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ITEM 3.8 City of Otsego - 2016 CAFR (PDF Version)I� �r CITY F 0 C)t e MINNESOTA Comprehensive Annual Financial Report For the Year Ended December 31, 2016 0 CITY OF S+ 0 MINNESOTA. This page has been left blank intentionally. City of Otsego, Minnesota Comprehensive Annual Financial Report For the Year Ended December 31, 2016 Adam Flaherty Interim City Administrator Prepared by: Finance Department Member of the: Government Finance Officers' Association of the United States and Canada 0 CITY OF S+ 0 MINNESOTA. 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 36 Government -wide Financial Statements 37 Statement of Net Position 28 Statement of Activities 29 Fund Financial Statements 40 Governmental Funds 41 Balance Sheet 30 Reconciliation of the Balance Sheet of the Governmental Funds 77 to the Statement of Net Position 31 Statement of Revenues, Expenditures and Changes in Fund Balances 32 Reconciliation of the Statement of Revenues, Expenditures and Changes in 84 Fund Balances of the Governmental Funds to the Statement of Activities 33 Statement of Revenues, Expenditures and Changes in Fund Balances: Budget -to -Actual 88 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 72 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 Nonmajor Capital Projects Funds Combining Balance Sheet 80 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 84 Schedule of Revenues, Expenditures and Changes in Fund Balances: Budget -to -Actual General Fund 88 Debt Service Fund by Account Combining Balance Sheet 94 Combining Schedule of Revenues, Expenditures and Changes in Fund Balances 96 Fiduciary Funds Combining Statement of Changes in Agency Fund Assets & Liabilities 98 CITY OF OTSEGO, MINNESOTA TABLE OF CONTENTS STATISTICAL SECTION (UNAUDITED) Financial Trends Net Position by Component 100 Changes in Net Position 102 Governmental Activities Tax Revenue by Source 108 Fund Balances of Governmental Funds 110 Changes in Fund Balances of Governmental Funds 112 Revenue Capacity Estimated Actual Value, Taxable Market Value and Tax Capacity of Taxable Property 114 Tax Capacity of Real Estate & Personal Property 116 Property Tax Rates - Direct and Overlapping Governments 117 Principal Property Taxpayers 118 Property Tax Levies and Collections 119 Debt Capacity Ratios of Outstanding Debt by Type 120 Ratios of General Bonded Debt Outstanding 121 Computation of Direct and Overlapping Governmental Activities Debt 122 Legal Debt Margin Information 124 Pledged Revenue Coverage 126 Demographic and Economic Information Demographic and Economic Statistics 127 Principal Employment Sectors 128 Operating Information Full -Time City Government Positions by Function 129 Operating Indicators by Function 130 Capital Asset Statistics by Function 131 i CITY OF se o MINNESOTA May 24, 2017 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, 2016. 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. City of Otsego 113400 90th Street NE, Otsego, MN 55330 1 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 15,472, 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. City of Otsego 113400 90`h Street NE, Otsego, MN 55330 I Tel. (763) 441-4414 Fax (763) 441-8823 2 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 2016 and 2017. 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 219 new residential construction permits issued during 2016. The average number of new residential construction permits through the past five years is 189. The latest estimates from the State Demographer's office show total households at 5,394 or a growth of 27 percent since 2007. 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 2016, there were more than 250 additional residential lots platted, with more than 100 for year-to-date 2017. City of Otsego 113400 90th Street NE, Otsego, MN 55330 I Tel. (763) 441-4414 Fax (763) 441-8823 3 The taxable market value of property within the City increased $136 million to a total of $1,348,313,400 for taxes payable 2017. According to Wright County, for taxes payable 2017, there was approximately $72 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 three consecutive years. The City's tax rate for payable 2017 is 37.921. Commercial building construction was also strong in 2016, with the completion of three significant projects. B1uDot expanded their operations within the City by completing an 116,200 square foot expansion of warehouse space. Wagner Spraytech, a new Otsego business, completed a 270,144 square foot warehouse. These two projects signal the full build -out on Phase 1 of the Gateway North Industrial Park. The initial project developer has been in communication with surrounding land -owners to determine if a Phase 2 is possible in the future. The third significant commercial project in 2016 was for P&F Machining, who constructed a 54,000 square foot industrial manufacturing facility. This project started out as a tax -forfeited parcel with significant impediments to development. The City applied for and received an infrastructure grant from the Minnesota Department of Employment and Economic Development which covered 50 percent of the required infrastructure improvements. The City Council and the developer worked together on the creation of the City's first tax -increment financing district to help overcome some of the costs involved with adding soil to the site. Lastly, the developer obtained a job creation grant with the goal of creating 17 additional jobs. The completion of this project was definitely a team effort between the City and the developer. The City is already seeing continued commercial and industrial projects thus far in 2017. Nystrom & Associates is constructing an office building in the Waterfront East development, which is expected to open in June. Guardian Angels, a senior services provider has acquired two parcels in Waterfront East, and has a proposed facility for 143 senior housing units in progress. This project is still under discussion and has not yet been approved by the City Council. A developer who just recently purchased approximately 80 acres has brought forth a concept plan that would create new industrial sites including the ability to have outdoor storage, which is a high demand use in the area. This industrial park would be located along Kadler Avenue and would also incorporate street and utility infrastructure projects within the area. In the Fall of 2017, the City will be welcoming 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. City of Otsego 113400 90th Street NE, Otsego, MN 55330 1 Tel. (763) 441-4414 Fax (763) 441-8823 .91 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 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 currently in the planning and design stages 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. The school is expected to open in the Fall of 2017, with road construction scheduled to begin in the Spring of 2018. The City currently operates two sanitary sewer treatment facilities, which accounts for a significant capital investment. With the expected growth of Otsego into the future, it was determined that a master planning process should be conducted. One of the primary objectives of this master plan will be to determine whether the sites for the existing sanitary sewer treatment facilities would account for the future growth expected in Otsego. Upon completion of the study, expected in late summer of 2017, the results will provide a blue -print to follow for future capital investments within the public sanitary sewer system. 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. City of Otsego 113400 90"' Street NE, Otsego, MN 55330 I Tel. (763) 441-4414 Fax (763) 441-8823 5 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. City Council adoption of these policies, goals and objectives is pending. FINANCIAL REPORTING AWARD The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Otsego for its 2015 Comprehensive Annual Financial Report (CAFR). The City first applied for this award in 2012, and has received the award every year since. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized comprehensive annual financial report. The report must satisfy both accounting principles generally accepted in the United States and applicable federal, state and local legal requirements. A Certificate of Achievement is valid for a period of one year. It is expected that the 2016 report conforms to the Certificate of Achievement program requirements. It will be submitted to the GFOA to determine the City's eligibility for another Certificate. ACKNOWLEDGEMENTS The preparation of this report would not have been possible without the expertise and dedication of the City's staff. Further, the City Council's support to promote and sustain the highest standards of professionalism in the financial management of the City of Otsego are acknowledged and appreciated. Respectfully submitted, Adam Flaherty City Administrator & Finance Director City of Otsego 113400 90t1' Street NE, Otsego, MN 55330 1 Tel. (763) 441-4414 Fax (763) 441-8823 rol 0 CITY OF S+ 0 MINNESOTA. This page has been left blank intentionally. CITY OF OTSEGO, MINNESOTA ELECTED OFFICIALS AND ADMINISTRATION ELECTED OFFICIALS Name Jessica Stockamp Jason Warehime Doug Schroeder Vern Heidner Tom Darkenwald ADMINISTRATION Position Mayor Council Member Council Member Council Member Council Member Name Position Tami Loff City Clerk Adam Flaherty Finance Director / Interim City Administrator Kevin Lamson Public Works Supervisor Ross Demant Parks & Recreation Supervisor Kurt Neidermeir Public Utilities Supervisor Andrew MacArthur City Attorney Daniel Licht City Planner Ron Wagner City Engineer i Term Expires December 31, 2016 December 31, 2016 December 31, 2016 December 31, 2018 December 31, 2018 0 Advisory Commissions Planning Parks and Recreation Public Safety Heritage Preservation City Clerk Elections Human Resources Payroll Public Safety Police Fire Building Inspections Otsego Residents City Council City Administrator Public Utilities 0 0 Parks & Recreation M Public Works Water' Parks & Trails Sanitary Sewer Recreation Storm Water Prairie Center I!!Administrati!eSvices Finance Utility Billing Information Technology Customer Service Streets Vehicle Fleet City Buildings Professional Services Planning Engineering Lega I uJ Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to City of Otsego Minnesota For its Comprehensive Annual Financial Report for the Fiscal Year Ended December 31, 2015 Executive Director/CEO 10 C: berganKDV 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, 2016, 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 BerganKDV, Ltd. bergankdv.com (:berganKov 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, 2016, 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 C: berganKDV 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 relates 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 2015 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, 2015, which are not presented with the accompanying financial statements. In our report dated June 1, 2016, 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 2015 supplementary information is fairly stated in all material respects in relation to the basic financial statements for the year ended December 31, 2015, 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 24, 2017, 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 24, 2017 13 CITY OF OTSEGO, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2016 As management of the City of Otsego, Minnesota, (the City), we offer readers of the City's Comprehensive Annual Financial Report (CAER), this narrative overview and analysis of the financial activities of the City for the fiscal year ended December 31, 2016. 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 Hiuhlkhts • The assets of the City exceeded its liabilities at the close of the most recent fiscal year by $65,280,237 (net position). Of this amount, $25,994,652 (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 $8,773,291 (15.53%) from the previous year. The net position of the governmental activities increased $4,663,434 (15.82%). The City received contributed infrastructure from housing and industrial developers in the amount of $1,287,485, which mostly consists of streets. The City also made an investment in public infrastructure totaling $2,745,369, consisting of streets, trail systems and park additions. The business -type activities increased $4,109,857 (15.21%), 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 $12,939,772, which is an increase of $562,345 (4.54%) from the previous year. This increase was primarily driven by the activity within the General fund. Of the total fund balance, $3,061,548 (23.66%) is unassigned, which is free from any internal or external constraints upon its use. • The General fund has a fund balance of $3,646,202 at the close of the current fiscal year. During 2016, the fund balance increased $755,679 (26.14%) from the previous year. The primary reason for the increase is that licenses and permits revenue exceeded budgeted expectations by $1,020,000. In accordance with the City's fund balance policy, a transfer of $460,212 was made to the Capital Equipment Revolving 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 $110,973 (3.04%) of fund balance that is nonspendable given that it is in the form of prepaid items, and the outlay for those assets has already occurred. The remaining fund balance is either assigned, $192,408 (5.28%) or is unassigned, $3,342,821 (91.68%). • The City's total outstanding bonded debt decreased by $3,210,000 (8.60%) during the current fiscal year, to an ending amount of $34,135,000. 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, 2016 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 fixture 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, and the Debt Service 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, 2016 The City adopts an annual appropriated budget for the General Fund. 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 nomnajor governmental funds and agency funds are presented immediately following the required supplementary information. Combining statements can be found on pages 72 through 98 of this CAFR. 16 CITY OF OTSEGO, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2016 Government -wide Financial Analysis As noted earlier, net position may serve over time as a useful indictor of a government's financial position. In the case of the City, assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $65,280,237 at the close of the most recent fiscal year. The largest portion of the City's net position ($34,992,996 or 53.60%) reflects its investment in capital assets, which includes: land, infrastructure, buildings, and machinery & equipment, less any related debt used to acquire those assets that is still outstanding. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. CITY OF OTSEGO - SUMMARY OF NET POSITION 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 (6.58%) represents resources that are subject to external restrictions on how they may be used. The remaining portion (39.82%) may be used to meet the City's ongoing obligations to citizens and creditors. The governmental activities capital assets increased significantly from the prior year. The City received contributed infrastructure from housing and industrial developers in the amount of $1,287,485, which mostly consists of streets. The City also made significant investments in public infrastructure, including streets, trail systems and park additions. The business -type activities had a large fluctuation in long-term liabilities and capital assets. During 2016, the City made scheduled principal payments in the amount of $2,000,000. The City received contributed infrastructure from housing and commercial developers totalling $1,104,850 for a combination of water, sanitary sewer and storm water utility assets. The City also made significant capital investments within its public utility systems, most notably in sanitary sewer equipment and solids process handling infrastructure. 17 Governmental Activities Business -type Activities Increase Increase 2016 2015 (Decrease) 2016 2015 (Decrease) Current Assets $ 16,718,830 $ 15,918,007 $ 800,823 $ 15,641,034 $ 15,941,662 $ (300,628) Capital Assets 27,614,559 25,031,455 2,583,104 42,338,114 40,081,570 2,256,544 Total Assets 44,333,389 40,949,462 3,383,927 57,979,148 56,023,232 1,955,916 Deferred Outflows of Resources 551,448 110,776 440,672 127,317 26,328 100,989 Long-term Liabilities 8,748,903 9,398,214 (649,311) 24,724,575 26,727,932 (2,003,357) Other Liabilities 1,836,587 2,065,284 (228,697) 2,207,509 2,265,347 (57,838) Total Liabilities 10,585,490 11,463,498 (878,008) 26,932,084 28,993,279 (2,061,195) Deferred Inflows of Resources 157,198 118,025 39,173 36,293 28,050 8,243 Net Investment in Capital Assets 19,103,702 15,303,426 3,800,276 15,889,294 11,553,869 4,335,425 Restricted 4,292,589 4,547,327 (254,738) - - - Unrestricted 10,745,858 9,627,962 1,117,896 15,248,794 15,474,362 (225,568) Total Net Position $ 34,142,149 $ 29,478,715 $ 4,663,434 $ 31,138,088 $ 27,028,231 $ 4,109,857 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 (6.58%) represents resources that are subject to external restrictions on how they may be used. The remaining portion (39.82%) may be used to meet the City's ongoing obligations to citizens and creditors. The governmental activities capital assets increased significantly from the prior year. The City received contributed infrastructure from housing and industrial developers in the amount of $1,287,485, which mostly consists of streets. The City also made significant investments in public infrastructure, including streets, trail systems and park additions. The business -type activities had a large fluctuation in long-term liabilities and capital assets. During 2016, the City made scheduled principal payments in the amount of $2,000,000. The City received contributed infrastructure from housing and commercial developers totalling $1,104,850 for a combination of water, sanitary sewer and storm water utility assets. The City also made significant capital investments within its public utility systems, most notably in sanitary sewer equipment and solids process handling infrastructure. 17 CITY OF OTSEGO, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2016 CITY OF OTSEGO - CHANGES IN NET POSITION Governmental Activities Business -type Activities Increase Increase 2016 2015 (Decrease) 2016 2015 (Decrease) Program Revenues Charges for Services $ 2,475,470 $ 1,526,704 $ 948,766 $ 3,011,546 $ 2,817,217 $ 194,329 Operating Grants and Contributions 248,910 244,497 4,413 - - - Capital Grants and Contributions 4,437,611 3,154,662 1,282,949 4,766,947 2,020,299 2,746,648 General Revenues Property Taxes 4,963,787 4,602,153 361,634 25,000 25,000 - Franchise Taxes 131,229 128,722 2,507 - - - Grants and Contributions not Restricted to Specific Programs 255,951 242,970 12,981 - - - Unrestricted Investment Earnings 82,385 55,909 26,476 129,442 85,259 44,183 Other General Revenues 31,160 35,600 (4,440) - - - Total Revenues 12,626,503 9,991,217 2,635,286 7,932,935 4,947,775 2,985,160 Expenses General Government 1,376,793 1,174,510 202,283 - - - Public Safety 1,846,459 1,670,627 175,832 - - - Public Works 3,389,909 6,521,708 (3,131,799) - - - Culture and Recreation 847,553 792,936 54,617 - - - Economic Development 302,296 145,771 156,525 - - - Interest on Long-term Debt 223,938 231,242 (7,304) - - - Water Utility - - - 1,276,338 1,246,064 30,274 Sanitary Sewer Utility - - - 2,480,519 2,207,811 272,708 Storm Water Utility - - - 42,342 95,533 (53,191) Total Expenses 7,986,948 10,536,794 (2,549,846) 3,799,199 3,549,408 249,791 Increase (Decrease) Before Transfers 4,639,555 (545,577) 5,185,132 4,133,736 1,398,367 2,735,369 Transfers 186,755 284,586 (97,831) (186,755) (284,586) 97,831 Transfers - Capital Assets (162,876) - (162,876) 162,876 - 162,876 Change in Net Position 4,663,434 (260,991) 4,924,425 4,109,857 1,113,781 2,996,076 Net Position - January 1 29,478,715 29,739,706 (260,991) 27,028,231 25,914,450 1,113,781 Net Position -December 31 $ 34,142,149 $ 29,478,715 $ 4,663,434 $ 31,138,088 $ 27,028,231 $ 4,109,857 CITY OF OTSEGO, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2016 Governmental Activities Governmental activities resulted in an increase of the City's net position by $4,663,434. Key elements of this change is as follows: • Capital grants and contributions increased $1,282,949 (40.67%), which is the result of contributed infrastructure from housing and industrial developers. Other significant activity within capital grants and contributions include special assessments, local cost sharing for street projects, park dedication fees, an infrastructure grant from MN DEED and state -aid construction funding. • Expenses in the public works function decreased by $3,131,799 (48.02%). This decrease was the result of a significant street infrastructure project, 70th Street, which had expenditures of $3,280,346 during 2015. This project did carry-over into 2016, but the expenses in 2016 were significantly less. Below are specific graphs which provide comparisons of the governmental activities revenues and expenses: Function Expenses vs. Program Revenues 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 General Public Safety Public Works Culture & Economic Interest on Long - Government Recreation Development Term Debt ■ Expense ■ Program Revenue Revenues by Source Franchise Taxes 1.04% Unrestricted Grants & Contributions Property Taxes 2.03% 39.30% Investment Earnings 0.65% 19 Sales of Capital Assets 0.25% Operating Grants 1.97% CITY OF OTSEGO, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2016 Business -type Activities Business -type activities resulted in an increase of net position by $4,109,857. Key elements of this change are as follows: • Capital grants and contributions increased $2,746,648 (135.95%). This increase is the result of two significant factors, 1) fees collected on new connections to the public utility system; 2) infastructure contributions from housing and industrial developers. The fees collected on new system connections go towards paying the debt service issued during the construction of the respective utility systems. During 2016, the fees collected on new connections exceeded the debt service payments. • Overall, the operating activities of the business -type activities remained consistent with the prior year. Increases were noted in charges for services, which for the most part kept pace with the increased expenses incurred for the operation of said utilities. Below are specific graphs which provide comparisons of the business -type activities revenues and expenses: Function Expenses vs. Program Revenues 5,000,000 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 Water Utility Sanitary Sewer Utility Storm Water Utility ■ Expense ■ Program Revenue Revenues by Source ital Grants 60.09 Property Taxes 0.32% Charges for Services 37.96%Investment Earnings 1.63% 20 CITY OF OTSEGO, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2016 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 $12,939,772, which is an increase of $562,345 (4.54%) from the previous year. The unassigned fund balance, which is not subject to internal or external constraints upon its use, is $3,061,548 (23.66% 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 $3,646,202, an increase of $755,679 (26.14%). The increase in fund balance was the result of licenses and permits exceeding the budgeted expectations by $1,020,000. All other revenues and expenditures were very comparable to their budgeted amounts. The offset to the budget surplus was a transfer out of $460,212 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 $3,342,821, represents 70.94% of the current year General fund expenditures. Total General fund balance represents 77.38% of those same expenditures. Both of these are improvements over the prior year. The Debt Service fund has a total fund balance of $1,933,757 at the end of the year, a decrease of $306,213 (13.67%) from the previous year. The City retired $1,210,000 of principal on the outstanding bonded debt during 2016. 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 $31,138,088, an increase of $4,109,857 (15.21%). There are two components to net position in the enterprise funds, unrestricted ($15,248,794 or 48.97%) and net investment in capital assets ($15,889,294 or 51.03%). As a measure of liquidity, the unrestricted net position amounts to 530.63% 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, 2016 Below is a graph with comparative amounts for each fund balance component for fiscal years 2014, 2015 and 2016: Governmental Fund Balance Components 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 Nonspendable Restricted Committed Assigned Unassigned ■ 2014 ■ 2015 ■ 2016 The City's Unassigned fund balance represents 23.66% of total governmental fund balance. The City also has four other components of fund balance, including Nonspendable (0.87%), Restricted (14.93%), Committed (3.24%) and Assigned (57.29%). • Nonspendable fund balance represents the amount of assets the City has invested in prepaid items. The balance of this fund balance component largely fluctuates with the timing of certain payments (e.g. insurance premiums). • The City's restricted fund balance is the result of external constraints placed upon it. The source of that constraint includes debt service. This component has decreased slightly over the past three years as the bonds payable balance has declined. • 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. 22 CITY OF OTSEGO, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2016 General Fund Budeetary Hiehliehts 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 $755,679 (26.14%). The key elements of this change are as follows: • Actual revenues exceeded the budget by $1,047,989 (22.09%). The largest revenue variance was provided by licenses and permits, which were over budget by $1,020,000. The City has routinely budgeted for building permits at a conservative number ever since the housing crash in the late 2000's. During 2016, there were 219 new residential construction permits issued. Along with the residential activity, there were also a handful of significant commercial, industrial and institutional permits issued. All other revenues accounted for an amount in excess of the budget of $27,989. • Actual expenditures were less than budget by $40,312 (0.85%). This is the second consecutive year that the City has been within one percent of its adopted expenditure budget, with both years being under budget. General government functions were under budget by $21,088 and public works functions were under budget by $88,332. Public safety functions exceeded the budget by $62,485, entirely driven by the increased building inspection activity that was required for all the permits issued. • Transfers in resulted in no variance from the budget. These transfers are from the Water and Sanitary Sewer utility funds, and help to reduce personnel and administrative overhead costs. • Transfers out were budgeted at $127,590 which represented the amount of revenue budgeted for local -government aid received during the year. The City Council has made a policy decision to not rely upon local -government aid as an ongoing revenue source to support General fund operations, rather to set the money aside for capital needs. During 2016, the City Council made the decision to simplify the accounting, and apply the revenue directly to a capital projects fund. The actual transfer out, $460,212 is in accordance with the City's fund balance policy. That policy outlines that and General fund balance exceeding 45% of the subsequent year's expenditure budget will be transferred, and assigned for future capital items. This transfer is not budgeted. The ending unassigned fund balance of the General fund ($3,342,821) represents 66.32% of the adopted 2017 budget. 23 CITY OF OTSEGO, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2016 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 $69,952,673 (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 $4,839,648 (7.43%) 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) a heavy duty snow plow and dump -body truck; 2) three light/medium duty trucks; 3) zero -turn mower; 4) anti -icing application equipment; and 5) a machine that allows for efficient paint application to the City's athletic fields. 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. • Construction of Northwood Park largely was completed in 2016. This neighborhood park is located on the East side of Trunk Highway 101, and North of County Road 38. The park includes play structures, a shelter, athletic fields and community gardens. • Road improvements were made to 80th Street NE from Marlowe Avenue to Maciver Avenue. These improvements were installed to handle the future traffic at the Prairie View Elementary and Middle School, which will open in the Fall of 2017. • A road extension was completed to Quaday Avenue NE to allow for industrial development to take place. Development activity along this road started in 2016 with the construction of a new facility for P&F Machining, which opened in early 2017. • The City's trail system expanded along County Road 38 making an important connection from Queens Avenue NE. • The expansion of the bio -solids processing digester at the West Sanitary Sewer Treatment facility was largely completed. This new processing infrastructure will allow for more effective and efficient treatment of bio -solids materials. • An additional aerator was added to the liquids processing ditches at the East Sanitary Sewer Treatment facility. This equipment provides added capacity to handle the growing liquids processing requirements as well as providing for system redundancy. Land Construction in Progress Buildings and Improvements Land Improvements Machinery and Equipment Infrastructure CITY OF OTSEGO - CAPITAL ASSETS (net of depreciation) Governmental Activities Business -type Activities Increase Increase 2016 2015 (Decrease) 2016 2015 (Decrease) $ 1,959,823 $ 1,959,823 $ - 2,267,436 140,373 2,127,063 4,818,512 4,974,124 (155,612) 2,710,260 2,909,130 (198,870) 1,518,206 1,441,980 76,226 14,340,322 13,606,025 734,297 $ 27,614,559 $ 25,031,455 $ 2,583,104 $ 550,079 $ 550,079 $ - 2,522,568 78,389 2,444,179 271,381 255,844 15,537 38,994,086 39,197,258 (203,172) $ 42,338,114 $ 40,081,570 $ 2,256,544 Additional information on the City's capital assets can be found in Note 3 (B) on pages 52 through 53 of this CAFR. 24 CITY OF OTSEGO, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2016 Long -Term Debt: At the end of the current year, the City had outstanding long-term bonded debt of $34,135,000. CITY OF OTSEGO - OUTSTANDING DEBT 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 2016, and made principal payments in the amount of $3,210,000, which reduced the total outstanding long-term debt by 8.60% 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 $36,365,901, with $4,182,411 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 25 Governmental Activities Business -type Activities Increase Increase 2016 2015 (Decrease) 2016 2015 (Decrease) General Obligation Bonds $ 8,345,000 $ 9,510,000 $ (1,165,000) - Equipment Certificates 130,000 175,000 (45,000) - - - General Obligation Revenue Bonds - - - 25,660,000 27,660,000 (2,000,000) Unamortized Premiums 35,857 43,029 (7,172) 788,820 867,701 (78,881) Compensated Absences 71,167 79,566 (8,399) 11,506 7,714 3,792 Total $ 8,582,024 $ 9,807,595 $ (1,225,571) $ 26,460,326 $ 28,535,415 $ (2,075,089) 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 2016, and made principal payments in the amount of $3,210,000, which reduced the total outstanding long-term debt by 8.60% 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 $36,365,901, with $4,182,411 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 25 CITY OF OTSEGO, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2016 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 2017 operating budgets and capital improvement plans. • The Taxable Market Value of real estate and personal property within the City increased 11.22% for taxes payable 2017. 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 2016, the City issued 219 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, as all of the remaining parcels have been purchased. The City is already seeing the construction of Nystrom & Associates who are expanding upon their operations in the City. Guardian Angels has also proposed a 143 unit senior facility with individual living, assisted living and memory care. • Industrial development continued during 2016. Wagner Spraytech built a new 270,144 square foot facility to complete Phase 1 in the Gateway North industrial park. The City sold a portion of a parcel in Great River Centre that was acquired through tax forfeiture to P&F Machining, who constructed a 54,000 square foot facility. The City has also received a proposal for the development of another 80 acres of industrial park along Kadler Avenue on the western side of the City. • The construction of the third school within Otsego got underway during 2016. Prairie View Elementary and Middle School will be an early childhood through 8th grade facility, and is part of School District 728. As part of this construction, the City made improvements to existing infrastructure in the area. The City is now in the planning stages to extend 85th Street and Maciver Avenue to allow for additional travel routes to and from the new school. Construction is tenatively planned for 2018. • The City is undertaking a master planning process for the City' sanitary sewer facilities. The study will take into effect the ultimate buildout projections for the City and its public sanitary sewer system. The results will determine if any future land acquisitions are necessary as well as estimated phasing plans for capacity additions the existing facilities. The results should be available in late summer 2017. • The City continues to expand upon and make improvements to the Capital Improvement Plan (CIP). The adopted CIP for 2017 now 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 0 CITY OF S+ 0 MINNESOTA. This page has been left blank intentionally. 27 CITY OF OTSEGO, MINNESOTA STATEMENT OF NET POSITION DECEMBER 31, 2016 The notes to the financial statements are an integral part of this statement 28 Governmental Business -Type Activities Activities Total ASSETS Cash and Investments $ 12,626,105 $ 14,702,050 $ 27,328,155 Receivables Interest 83,219 - 83,219 Accounts 14,536 353,116 367,652 Taxes 82,994 - 82,994 Special Assessments 3,085,625 529,145 3,614,770 Due from Other Governments 713,378 18,632 732,010 Prepaid Items 112,973 38,091 151,064 Capital Assets Nondepreciable 4,227,259 3,072,647 7,299,906 Depreciable, Net of Accumulated Depreciation 23,387,300 39,265,467 62,652,767 Total Assets 44,333,389 57,979,148 102,312,537 DEFERRED OUTFLOWS OF RESOURCES General Employees Retirement Plan Pension Resources 551,448 127,317 678,765 Total Deferred Outflows of Resources 551,448 127,317 678,765 LIABILITIES Accounts Payable 573,673 77,155 650,828 Due to Other Governments 14,301 428 14,729 Accrued Salaries Payable 47,514 12,116 59,630 Accrued Interest Payable 61,866 80,509 142,375 Compensated Absences Payable Due Within One Year 14,233 2,301 16,534 Due in More than One Year 56,934 9,205 66,139 Bonds Payable Due Within One Year 1,125,000 2,035,000 3,160,000 Due in More than One Year 7,385,857 24,413,820 31,799,677 General Employees Retirement Plan Net Pension Payable 1,306,112 301,550 1,607,662 Total Liabilities 10,585,490 26,932,084 37,517,574 DEFERRED INFLOWS OF RESOURCES General Employees Retirement Plan Pension Resources 157,198 36,293 193,491 Total Deferred Inflows of Resources 157,198 36,293 193,491 NET POSITION Net Investment in Capital Assets 19,103,702 15,889,294 34,992,996 Restricted Debt Service 4,292,589 - 4,292,589 Unrestricted 10,745,858 15,248,794 25,994,652 Total Net Position $ 34,142,149 $ 31,138,088 $ 65,280,237 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. 2016 The notes to the financial statements are an integral part of this statement. 29 Program Revenues Net (Expense) Revenue and Changes in Net Position Operating Capital Charges For Grants and Grants and Governmental Business -Type [JNCTIONS/PROGRAMS Expenses Services Contributions Contributions Activities Activities Total Government Activities General Government $ 1,376,793 $ 81,876 $ - $ $ (1,294,917) $ $ (1,294,917) Public Safety 1,846,459 1,677,788 58,339 (110,332) (110,332) Public Works 3,389,909 656,570 186,893 3,956,536 1,410,090 1,410,090 Culture and Recreation 847,553 59,236 3,678 481,075 (303,564) (303,564) Economic Development 302,296 - - - (302,296) (302,296) Interest on Long -Term Debt 223,938 - - (223,938) (223,938) Total Government Activities 7,986,948 2,475,470 248,910 4,437,611 (824,957) (824,957) Business -Type Activities Water Utility 1,276,338 1,334,442 - 1,471,674 1,529,778 1,529,778 Sanitary Sewer Utility 2,480,519 1,601,172 2,966,133 2,086,786 2,086,786 Storm Water Utility 42,342 75,932 329,140 362,730 362,730 Total Business -Type Activities 3,799,199 3,011,546 4,766,947 3,979,294 3,979,294 Total $ 11,786,147 $ 5,487,016 $ 248,910 $ 9,204,558 (824,957) 3,979,294 3,154,337 General Revenues Property Taxes 4,963,787 25,000 4,988,787 Franchise Taxes 131,229 - 131,229 Grants and Contributions Not Restricted to Specific Programs 255,951 - 255,951 Unrestricted Investment Earnings 82,385 129,442 211,827 Gain on Disposal of Capital Assets 31,160 - 31,160 Transfers 186,755 (186,755) - Transfers - Capital Assets (162,876) 162,876 - Total General Revenues and Transfers 5,488,391 130,563 5,618,954 Change in Net Position 4,663,434 4,109,857 8,773,291 Net Position - January 1 29,478,715 27,028,231 56,506,946 Net Position - December 31 $ 34,142,149 $ 31,138,088 $ 65,280,237 The notes to the financial statements are an integral part of this statement. 29 CITY OF OTSEGO, MINNESOTA BALANCESHEET GOVERNMENTAL FUNDS DECEMBER 31, 2016 ASSETS Cash and Investments Receivables Interest Accounts Taxes Current Delinquent Special Assessments Current Deferred Delinquent Due from Other Governments Due from Other Funds Prepaid Items Total Assets LIABILITIES Accounts Payable Accrued Salaries Payable Due to Other Governments Due to Other Funds Total Liabilities DEFERRED INFLOWS OF RESOURCES Unavailable Revenue - Property Taxes Unavailable Revenue - Special Assessments Total Deferred Inflows of Resources FUND BALANCES Nonspendable Restricted Committed Assigned Unassigned (Deficits) Total Fund Balances Total Liabilities, Deferred Inflows of Resources and Fund Balances Other Debt Nonmajor Total General Service Governmental Governmental $ 3,541,467 $ 2,270,938 $ 6,813,700 $ 12,626,105 83,219 - - 83,219 7,628 - 6,908 14,536 21,561 - - 21,561 61,433 - - 61,433 676 1,526 1,286 3,488 8,250 2,414,120 650,493 3,072,863 362 6,578 2,334 9,274 7,971 - 705,407 713,378 16,278 - 676,564 692,842 110,973 2,000 - 112,973 3,859,818 4,695,162 8,856,692 17,411,672 81,756 1,877 490,040 573,673 47,514 - - 47,514 14,301 - - 14,301 - 338,830 354,012 692,842 143,571 340,707 844,052 1,328,330 61,433 - - 61,433 8,612 2,420,698 652,827 3,082,137 70,045 2,420,698 652,827 3,143,570 110,973 2,000 - 112,973 - 1,931,757 - 1,931,757 - - 419,829 419,829 192,408 - 7,221,257 7,413,665 3,342,821 - (281,273) 3,061,548 3,646,202 1,933,757 7,359,813 12,939,772 $ 3,859,818 $ 4,695,162 $ 8,856,692 $ 17,411,672 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, 2016 Fund Balances - Governmental Funds $ 12,939,772 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 38,409,345 Accumulated Depreciation (10,794,786) 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 (8,475,000) Unamortized Premium on Bonds Payable (35,857) Accrued Interest Payable (61,866) Compensated Absences Payable (71,167) GERF Pension Payable (1,306,112) 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 61,433 Special Assessments Receivable 3,082,137 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 551,448 GERF Pension Deferred Inflows of Resources (157,198) Total Net Position - Governmental Activities $ 34,142,149 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, 2016 OTHER FINANCING SOURCES (USES) Transfers In 136,755 51,120 Other 648,087 Sales of Capital Assets - Debt Nonmajor Total Transfers Out General Service Governmental Governmental REVENUES (323,457) 51,120 490,252 217,915 Property Taxes $ 3,494,664 $ 640,000 $ 825,854 $ 4,960,518 Franchise Taxes 131,229 - - 131,229 Licenses and Permits 1,661,565 - - 1,661,565 Intergovernmental 69,567 - 2,042,160 2,111,727 Charges for Services 286,614 - 987,964 1,274,578 Special Assessments 4,179 449,527 121,449 575,155 Fines and Forfeitures 16,223 - - 16,223 Investment Earnings (net) 21,233 - 61,152 82,385 Miscellaneous 106,222 - 13,510 119,732 Total Revenues 5,791,496 1,089,527 4,052,089 10,933,112 EXPENDITURES Current General Government 1,233,680 - - 1,233,680 Public Safety 1,807,985 - - 1,807,985 Public Works 1,010,620 - 9,326 1,019,946 Culture and Recreation 534,122 - - 534,122 Economic Development 98,325 - 98,209 196,534 Capital Outlay General Government 6,325 - 108,180 114,505 Public Safety 21,303 - - 21,303 Public Works - - 3,222,643 3,222,643 Culture and Recreation - - 885,342 885,342 Economic Development - - 105,762 105,762 Debt Service Principal - 1,210,000 - 1,210,000 Interest - 233,498 - 233,498 Fiscal Agent Fees - 3,362 - 3,362 Total Expenditures 4,712,360 1,446,860 41429,462 10,588,682 Excess (Deficiency) of Revenues Over (Under) Expenditures 1,079,136 (357,333) (377,373) 344,430 OTHER FINANCING SOURCES (USES) Transfers In 136,755 51,120 460,212 648,087 Sales of Capital Assets - - 31,160 31,160 Transfers Out (460,212) - (1,120) (461,332) Total Other Financing Sources (Uses) (323,457) 51,120 490,252 217,915 Net Change in Fund Balance 755,679 (306,213) 112,879 562,345 Fund Balance - January 1 2,890,523 2,239,970 7,246,934 12,377,427 Fund Balance - December 31 $ 3,646,202 $ 1,933,757 $ 7,359,813 $ 12,939,772 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, 2016 Total Net Change in Fund Balances - Governmental Funds $ 562,345 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 2,745,369 Depreciation Expense (1,281,601) Assets Contributed by Developers 1,287,485 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. (162,876) 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. (5,273) 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 1,210,000 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. 12,922 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 3,269 Special Assessments 371,477 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 8,398 GERF Pension (88,081) Change in Net Position - Governmental Activities $ 4,663,434 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, 2016 REVENUES Property Taxes Franchise Taxes Licenses and Permits Intergovernmental Charges for Services Special Assessments Fines and Forfeitures Investment Earnings (net) Miscellaneous Total Revenues EXPENDITURES Current General Government Public Safety Public Works Culture and Recreation Economic Development Capital Outlay General Government Public Safety Total Expenditures Excess (Deficiency) of Revenues Over (Under) Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balance Fund Balance - January 1 Fund Balance - December 31 Budgeted Amounts Original Final Actual Amounts Variance with Final Budget - Over (Under) $ 3,544,352 $ 3,544,352 $ 3,494,664 $ (49,688) 107,000 107,000 131,229 24,229 641,565 641,565 1,661,565 1,020,000 343,590 343,590 69,567 (274,023) 57,000 57,000 286,614 229,614 - - 4,179 4,179 - - 16,223 16,223 50,000 50,000 21,233 (28,767) - - 106,222 106,222 4,743,507 4,743,507 5,791,496 1,047,989 1,254,768 1,254,768 1,233,680 (21,088) 1,745,500 1,745,500 1,807,985 62,485 1,098,952 1,098,952 1,010,620 (88,332) 535,652 535,652 534,122 (1,530) 105,300 105,300 98,325 (6,975) 1,000 1,000 6,325 5,325 11,500 11,500 21,303 9,803 4,752,672 4,752,672 4,712,360 (40,312) (9,165) (9,165) 1,079,136 1,088,301 136,755 136,755 136,755 - (127,590) (127,590) (460,212) (332,622) 9,165 9,165 (323,457) (332,622) - - 755,679 755,679 2,890,523 2,890,523 2,890,523 - $ 2,890,523 $ 2,890,523 $ 3,646,202 $ 755,679 The notes to the financial statements are an integral part of this statement. 34 0 CITY OF S+ 0 MINNESOTA. This page has been left blank intentionally. 35 CITY OF OTSEGO, MINNESOTA STATEMENT OF NET POSITION PROPRIETARY FUNDS DECEMBER 31, 2016 ASSETS Current Assets Cash and Cash Equivalents Receivables Accounts Special Assessments Current Delinquent Due from Other Governments Prepaid Items Total Current Assets Noncurrent Assets Special Assessments Deferred Capital Assets Land Machinery and Equipment Infrastructure Construction in Progress Total Capital Assets Less: Accumulated Depreciation Net Capital Assets Total Noncurrent Assets Total Assets DEFERRED OUTFLOWS OF RESOURCES General Employees Retirement Plan Pension Resources LIABILITIES Current Liabilities Accounts Payable Due to Other Governments Accrued Salaries Payable Accrued Interest Payable Bonds Payable Compensated Absences Payable Total Current Liabilities Noncurrent Liabilities Bonds Payable (net) Compensated Absences Payable General Employees Retirement Plan Net Pension Payable Total Noncurrent Liabilities Total Liabilities DEFERRED INFLOWS OF RESOURCES General Employees Retirement Plan Pension Resources NET POSITION Net Investment in Capital Assets Unrestricted Total Net Position The notes to the financial statements are an integral part of this statement. 36 Sanitary Storm Water Sewer Water Total Utility Utility Utility Enterprise $ 7,879,742 $ 6,663,215 $ 159,093 $ 14,702,050 122,670 226,588 3,858 353,116 421 - 191 612 9,163 - 462 9,625 - 18,632 - 18,632 9,115 28,976 - 38,091 8,021,111 6,937,411 163,604 15,122,126 186,063 286,862 45,983 518,908 57,392 492,687 - 550,079 192,981 238,492 - 431,473 18,566,434 32,555,855 1,185,794 52,308,083 9,500 2,513,068 - 2,522,568 18,826,307 35,800,102 1,185,794 55,812,203 (4,627,448) (8,706,439) (140,202) (13,474,089) 14,198,859 27,093,663 1,045,592 42,338,114 14,384,922 27,380,525 1,091,575 42,857,022 22,406,033 34,317,936 1,255,179 57,979,148 31,830 95,487 - 127,317 14,090 61,280 1,785 77,155 428 - - 428 3,029 9,087 - 12,116 28,983 51,526 - 80,509 732,600 1,302,400 - 2,035,000 575 1,726 - 2,301 779,705 1,426,019 1,785 2,207,509 8,788,975 15,624,845 - 24,413,820 2,301 6,904 - 9,205 75,389 226,161 - 301,550 8,866,665 15,857,910 - 24,724,575 9,646,370 17,283,929 1,785 26,932,084 9,073 27,220 - 36,293 4,677,284 10,166,418 1,045,592 15,889,294 8,105,136 6,935,856 207,802 15,248,794 $ 12,782,420 $ 17,102,274 $ 1,253,394 $ 31,138,088 36 CITY OF OTSEGO, MINNESOTA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION PROPRIETARY FUNDS FOR THE YEAR ENDED DECEMBER 31, 2016 OPERATING REVENUES Charges for Services OPERATING EXPENSES Personal Services Supplies Insurance Utilities Services and Other Charges Depreciation Total Operating Expenses Operating Income (Loss) NONOPERATING REVENUES (EXPENSES) Antenna Rental Property Taxes Special Assessments Investment Earnings (net) Miscellaneous Revenue Interest and Fiscal Agent Fees Total Nonoperating Revenues (Expenses) Income (Loss) Before Capital Contributions and Transfers Connection Fees Capital Contributions - Developer Assets Capital Contributions - Governmental Funds Transfers Out Change in Net Position Net Position - January I Net Position - December 31 The notes to the financial statements are an integral part of this statement. 37 Sanitary Storm Water Sewer Water Total Utility Utility Utility Enterprise $ 1,266,379 $ 1,590,795 $ 46,811 $ 2,903,985 90,893 270,660 - 361,553 173,969 160,706 401 335,076 9,776 31,148 - 40,924 63,355 176,861 - 240,216 123,337 409,288 17,890 550,515 481,736 839,617 24,051 1,345,404 943,066 1,888,280 42,342 2,873,688 323,313 (297,485) 4,469 30,297 67,782 - 67,782 - 25,000 25,000 - - 29,121 29,121 61,744 66,785 913 129,442 281 10,377 - 10,658 (333,272) (592,239) - (925,511) (203,465) (515,077) 55,034 (663,508) 119,848 (812,562) 59,503 (633,211) 990,079 2,672,018 - 3,662,097 481,595 294,115 329,140 1,104,850 - 162,876 - 162,876 (43,439) (143,316) - (186,755) 1,548,083 2,173,131 388,643 4,109,857 11,234,337 14,929,143 864,751 27,028,231 $ 12,782,420 $ 17,102,274 $ 1,253,394 $ 31,138,088 37 CITY OF OTSEGO, MINNESOTA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED DECEMBER 31, 2016 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from Customers and Users Other Operating Receipts Payments to Suppliers Payments to Employees Net Cash Flows Provided by Operating Activities CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Sanitary Storm Water Sewer Water Total Utility Utility Utility Enterprise $ 1,256,898 $ 1,570,192 $ 46,727 $ 2,873,817 44,634 10,377 36,109 91,120 (379,876) (773,458) (20,806) (1,174,140) (85,301) (253,879) - (339,180) 836,355 553,232 62,030 1,451,617 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES (1,157,932) Property Taxes - (321,908) 25,000 25,000 Principal Paid on Revenue Bonds (720,000) (1,280,000) - (2,000,000) Interest Paid on Revenue Bonds (362,869) (644,856) - (1,007,725) Transfers Out (43,439) (143,316) - (186,755) Net Cash Flows Provided (Used) by Noncapital Financing Activities (1,126,308) (2,068,172) 25,000 (3,169,480) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition and Construction of Capital Assets (36,980) (2,387,134) - (2,424,114) Connection Fees 1,013,270 2,677,357 3,690,627 Net Cash Flows Provided by Capital and Related Financing Activities 976,290 290,223 - 1,266,513 CASH FLOWS FROM INVESTING ACTIVITIES 1,345,404 3,686 Interest on Investments 61,744 66,785 913 129,442 Net Increase (Decrease) in Cash and Cash Equivalents Cash and Cash Equivalents - January 1 Cash and Cash Equivalents - December 31 RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES Operating Income (Loss) Adjustments to Reconcile Operating Income (Loss) to Net Cash Flows Provided (Used) by Operating Activities: Depreciation GERF Pension Activity Other Income Related to Operations (Increase) Decrease in Assets & Deferred Outflows of Resources: Accounts Receivable Special Assessments Due from Other Governments Prepaid Items Increase (Decrease) in Liabilities & Deferred Inflows of Resources Accounts Payable Due to Other Governments Accrued Salaries Payable Compensated Absences Payable Net Cash Flows Provided (Used) by Operating Activitiess NONCASH FINANCING ACTIVITIES Amortization of Premium on Bonds Payable Acquisition of Capital Assets on Account Contribution of Capital Assets - Developer Contribution of Capital Assets - Governmental Funds The notes to the financial statements are an integral part of this statement. 748,081 (1,157,932) 87,943 (321,908) 7,131,661 7,821,147 71,150 15,023,958 $ 7,879,742 $ 6,663,215 $ 159,093 $ 14,702,050 $ 323,313 $ (297,485) $ 4,469 $ 30,297 481,736 839,617 24,051 1,345,404 3,686 11,058 - 14,744 68,063 10,377 29,121 107,561 (9,481) (14,944) (84) (24,509) (23,429) 6,988 (16,441) - (5,659) - (5,659) (553) (2,648) (3,201) (3,171) 10,694 (2,515) 5,008 (5,715) (3,501) (9,216) 959 2,878 - 3,837 947 2,845 - 3,792 $ 836,355 $ 553,232 $ 62,030 $ 1,451,617 $ 28,397 $ 50,484 $ $ 78,881 $ - $ 25,010 $ $ 25,010 $ 481,595 $ 294,115 $ 329,140 S 1,104,850 $ - $ 162,876 $ - $ 162,876 0 CITY OF S+ 0 MINNESOTA. This page has been left blank intentionally. 39 CITY OF OTSEGO, MINNESOTA STATEMENT OF FIDUCIARY NET POSITION AGENCYFUNDS DECEMBER 31, 2016 ASSETS Current Assets Cash and Cash Equivalents LIABILITIES Current Liabilities Accounts Payable Escrow Deposits Total Liabilities Agency Funds $ 2,907,794 16,851 2,890,943 $ 2,907,794 The notes to the financial statements are an integral part of this statement. M CITY OF OTSEGO, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 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, 2016 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. 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, 2016 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. 43 CITY OF OTSEGO, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 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 1 st, 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 31 st, 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, 2016 are planned to be eliminated in 2017. 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. CITY OF OTSEGO, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 G. 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, 2016 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 H. 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 has only one item that qualifies for reporting in the category, Deferred Pension Resources. This item is reported only in the statements of net position. This item results from four factors: 1) actuarial calculations for the difference between projected and actual investment earnings on plan investments; 2) changes in actuarial assumptions; 3) changes in proportion; and 4) GERF contributions paid subsequent to the measurement date. 45 CITY OF OTSEGO, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 I. 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. J. LONGTERM OBLIGATIONS In the govermnent-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. K. 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. L. 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. M. 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 and special assessments 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, deferred pension resources, is reported only in the statements of net position. This item results from two factors: 1) the net effect of actuarial calculations for the change in proportionate share of the GERF pension; and 2) actuarial calculations for the difference between expected and actual economic experience. .M CITY OF OTSEGO, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 N. 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. O. 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, 2016 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. 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 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, 2016 in the following funds: Nonmajor Governmental Funds: Capital Project Funds Municipal State -Aid for Construction $ 153,258 Odean Improvements 5,425 80th Street Improvements 106,312 Special Revenue Funds Tax Increment District #1 16,278 The deficits are being funded through internal borrowing. The Municipal State -Aid for Construction fund deficit will be repaid with State -Aid funding for the 70th Street &CSAH 37 construction project. The Odean Improvements fund deficit will be repaid with future collections of special assessments against the benefitting property owners. The 80th Street Improvement fund deficit will be repaid with reimbursements from Independent School District 728 as the project was initiated by their school construction. The Tax Increment District No. 1 fund deficit will be repaid with future collections of tax increment, which is expected to begin in 2018. UN CITY OF OTSEGO, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 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 $3,622,032, and a bank balance of $3,948,671. 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, 2016 the City had the following investments: Investment Type Fair Value < 1 Investment Maturities (In Years) 1 - 3 3 - 5 > 5 Negotiable Certificates of Deposit $13,977,930 $ 5,899,135 $ 6,611,139 $ 1,224,084 $ 243,572 U.S. Government Agency Securities 3,484,787 299,453 2,892,823 292,511 - Municipal Bonds 8,498,411 1,545,916 2,531,698 4,420,797 - Brokered Money Market Accounts 652,189 652,189 - - - Total $ 26,613,317 $ 8,396,693 $ 12,035,660 $ 5,937,392 $ 243,572 All of the City's investments have recurring fair value measurements using a matrix pricing model (level 2 inputs) CITY OF OTSEGO, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 As of December 31, 2016, 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. None of the U.S. Government Agency Securities investments are individually over 5% of the total investment portfolio. Municipal Bonds Moody's S & P Fair Portfolio Investment Type Rating Rating Value Concentration % U.S. Government Agency Securities Al n/a 100,019 0.38% Federal Farm Credit Bank (FFCB) Aaa AA+ $ 1,544,875 5.80% Federal Home Loan Bank (FHLB) Aaa AA+ 992,474 3.73% Federal National Mortgage Association (FNMA) Aaa AA+ 947,438 3.56% Total n/a A $ 3,484,787 13.09% None of the U.S. Government Agency Securities investments are individually over 5% of the total investment portfolio. Municipal Bonds Scott County, Minnesota Aal n/a $ 90,095 0.34% City of Glencoe, Minnesota Al n/a 100,019 0.38% City of North Mankato, Minnesota n/a AA 55,080 0.21% Linn County, Iowa Aaa n/a 200,796 0.75% State of California Aa3 AA- 1,484,620 5.58% City of Elbow Lake, Minnesota n/a A 100,716 0.38% City of Ennis, Texas n/a AA- 428,685 1.61% State of Connecticut Aa3 AA- 913,242 3.43% State of New Mexico Finance Authority Aa2 AA+ 584,082 2.19% State of Florida Board of Administrative Finance Aa3 AAA 504,045 1.89% Metropolitan Council, Minnesota Aaa AAA 474,696 1.78% Katonah School District, New York Aal n/a 114,038 0.43% Lake County School District, Illinois Aa2 AA+ 738,031 2.77% Lincoln Consolidated School District, Michigan n/a AA- 500,310 1.88% City of Portsmouth, Virginia Aa2 AA 503,270 1.89% Swift County, Minnesota n/a AA- 322,355 1.21% Pinckney School District, Michigan n/a AA- 174,755 0.66% Milan School District, Michigan n/a AA- 502,596 1.89% City of Kaukauna, Wisconsin n/a AA- 211,090 0.79% Milwaukee County, Wisconsin Aa2 AA 495,890 1.86% Total $ 8,498,411 31.93% The following is a summary of total deposits and investments as of December 31, 2016: Deposits Investments Petty Cash and Change Funds Total $ 3,622,032 26,613,317 600 $ 30,235,949 The City's deposits and investments as of December 31, 2016 are presented in the basic financial statements as follows: Statement of Net Position Statement of Fiduciary Net Position Total 50 $ 27,328,155 2,907,794 $ 30,235,949 CITY OF OTSEGO, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 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, 2016 B. CAPITAL ASSETS Capital asset activity for the year ended December 31, 2016 was as follows: Governmental Activities: Capital Assets, not Being Depreciated: Land Construction in Progress Total Capital Assets, not Being Depreciated Capital Assets, Being Depreciated: Buildings and Building Improvements Land Improvements Machinery and Equipment Infrastructure Total Capital Assets, Being Depreciated Less Accumulated Depreciation for: Buildings and Building Improvements Land Improvements Machinery and Equipment Infrastructure Total Accumulated Depreciation Total Capital Assets Being Depreciated - Net Governmental Activities Capital Assets - Net Beginning Ending Balance Increases Decreases Balance $ 1,959,823 $ - $ - $ 1,959,823 140,373 2,220,017 (92,954) 2,267,436 2,100,196 2,220,017 (92,954) 4,227,259 6,471,210 - - 6,471,210 4,885,041 - - 4,885,041 3,084,605 362,476 (130,491) 3,316,590 18,128,806 1,380,439 - 19,509,245 32,569,662 1,742,915 (130,491) 34,182,086 1,497,086 155,612 - 1,652,698 1,975,911 198,870 - 2,174,781 1,642,625 280,977 (125,218) 1,798,384 4,522,781 646,142 - 5,168,923 9,638,403 1,281,601 (125,218) 10,794,786 22,931,259 461,314 (5,273) 23,387,300 $ 25,031,455 $ 2,681,331 $ (98,227) $ 27,614,559 Depreciation expense was charged to the functions of the City as follows: Governmental Activities: General Government Public Safety Public Works Culture and Recreation Total Depreciation Expense - Governmental Activities 52 $ 20,138 3,985 968,002 289,476 $ 1,281,601 CITY OF OTSEGO, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 Beginning Ending Balance Increases Decreases Balance Business -type Activities: Capital Assets, not Being Depreciated: Land $ 550,079 $ - $ - $ 550,079 Construction in progress 78,389 2,444,179 - 2,522,568 Total Capital Assets, not Being Depreciated 628,468 2,444,179 - 3,072,647 Capital Assets, Being Depreciated: Machinery and Equipment 378,554 52,919 - 431,473 Infrastructure 51,203,233 1,104,850 - 52,308,083 Total Capital Assets, Being Depreciated 51,581,787 1,157,769 - 52,739,556 Less Accumulated Depreciation for: Machinery and Equipment 122,710 37,382 - 160,092 Infrastructure 12,005,975 1,308,022 - 13,313,997 Total Accumulated Depreciation 12,128,685 1,345,404 - 13,474,089 Total Capital Assets Being Depreciated - Net 39,453,102 (187,635) - 39,265,467 Business -type Activities Capital Assets - Net $ 40,081,570 $ 2,256,544 $ - $ 42,338,114 Depreciation expense was charged to the functions of the City as follows: Business -type Activities: Water Utility $ 481,736 Sanitary Sewer Utility 839,617 Storm Water Utility 24,051 Total Depreciation Expense - Business -type Activities $ 1,345,404 C. CONSTRUCTION COMMITMENTS At December 31, 2016 the City had construction project contracts in progress. The commitments related to remaining contract balances are summarized as follows: Project 80th Street Improvement Project Quaday Avenue Extension Project 53 Contract Remaining Amount Commitment $ 805,026 $ 97,329 505,136 40,266 CITY OF OTSEGO, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 D. INTERFUND BALANCES AND TRANSFERS At December 31, 2016, the composition of balances for due to/from other funds of the City were as follows: Fund Major Governmental Funds: General Debt Service Nonmajor Governmental Funds: Special Revenue Funds Tax Increment District No. 1 Capital Project Funds Odean Improvements Capital Improvements 80th Street Improvements Total Due from Due to Other Funds Other Funds $ 16,278 $ - - 338,830 - 16,278 - 5,425 676,564 - - 332,309 $ 692,842 $ 692,842 Interfund due to/from balances are representative of lendingiborrowing 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 80th Street Improvement fund will be repaid with reimbursements from Independent School District 728 as the project was initiated by the construction of Prairie View Elementary and Middle School located in the City. 54 CITY OF OTSEGO, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 Transfers between funds made during the year ended December 31, 2016 were as follows: Fund Major Governmental Funds: General Debt Service Nonmajor Governmental Funds: Revolving Capital Equipment Municipal Buildings Total Governmental Funds Major Proprietary Funds: Water Utility Sanitary Sewer Utility Total Proprietary Funds Total All Funds Transfer In Transfer Out 136,755 $ 460,212 51,120 - 460,212 - - 1,120 648,087 461,332 43,439 143,316 - 186,755 $ 648,087 $ 648,087 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 2016, the following transfers were made between funds: • The General fund transferred $460,212 to the Revolving Capital Equipment 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 $33,439 and $103,316 respectively to the General fund to reduce Personnel and Administrative Service costs. • The Water and Sanitary Sewer funds transferred $10,000 and $40,000 to the Debt Service fund to contribute their portion of the debt service associated with the purchase of the Jet Vac truck. • The Municipal Buildings fund transferred $1,120 to the Debt Service fund to close out the remaining fund balance. 55 CITY OF OTSEGO, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 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 $4,695,162 of assets accumulated in the debt service funds for future debt service. Included within those accumulated assets, there are $6,578 of delinquent special assessments receivable, of which collection is uncertain. Final Interest Maturity Original Payable Rates Date Date Issue 12/31/16 General Obligation Bonds: $ 1,080,000 $ 202,748 2018 1,115,000 180,225 Equipment Certificates, Series 2010A 2.00-3.25% 1/28/2010 7/15/2019 $ 385,000 $ 130,000 Refunding Bonds, Series 2010B 2.00-3.00% 11/30/2010 12/1/2021 3,705,000 2,285,000 Refunding Bonds, Series 2010D 2.00-3.60% 11/30/2010 2/1/2028 1,220,000 1,140,000 Refunding Bonds, Series 2011A 2.00-3.20% 12/21/2011 2/1/2028 4,640,000 3,915,000 Refunding Bonds, Series 2012A 2.00% 3/14/2012 12/1/2021 1,400,000 1,005,000 Total - Bonded Indebtedness $ 11,350,000 8,475,000 Other Liabilities: Unamortized Bond Premium 35,857 Compensated Absences Payable 71,167 Total Governmental Activities $ 8,582,024 Annual debt service requirements to maturity for governmental activities long-term indebtedness are as follows: Year Ending December 31 Governmental Activities General Obligation Bonds Principal Interest 2017 $ 1,080,000 $ 202,748 2018 1,115,000 180,225 2019 1,145,000 155,655 2020 1,160,000 129,344 2021 1,180,000 100,925 2022-2026 1,980,000 236,844 2027-2028 685,000 22,595 Total $ 8,345,000 $ 1,028,336 56 Equipment Certificates Principal Interest 45,000 $ 4,000 45,000 2,650 40,000 1,300 $ 130,000 $ 7,950 CITY OF OTSEGO, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 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 $3,687,925, which accounts for a debt -service coverage ratio of 122.62%. Total Business -type Activities $ 26,460,326 Annual debt service requirements to maturity for business -type activities long-term indebtedness are as follows: Year Ending December 31 Business -type Activities General Obligation Bonds Principal Interest 2017 $ 2,035,000 $ Final 2018 2,130,000 884,710 Interest Maturity Original Payable 2,335,000 Rates Date Date Issue 12/31/16 General Obligation Bonds: 12,130,000 1,790,343 2027 2,400,000 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 19,300,000 Total - Bonded Indebtedness $ 27,660,000 25,660,000 Other Liabilities: Unamortized Bond Premium 788,820 Compensated Absences Payable 11,506 Total Business -type Activities $ 26,460,326 Annual debt service requirements to maturity for business -type activities long-term indebtedness are as follows: Year Ending December 31 Business -type Activities General Obligation Bonds Principal Interest 2017 $ 2,035,000 $ 966,110 2018 2,130,000 884,710 2019 2,220,000 799,510 2020 2,335,000 710,710 2021 2,410,000 640,660 2022-2026 12,130,000 1,790,343 2027 2,400,000 99,000 Total $ 25,660,000 $ 5,891,043 57 CITY OF OTSEGO, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 Changes in Long -Term Liabilities Long-term liability activity for the year ended December 31, 2016 was as follows: Governmental Activities: Bonds Payable: General Obligation Bonds Equipment Certificates Total Bonded Indebtedness Unamortized Bond Premium Compensated Absences Total - Governmental Business -type Activities: Bonds Payable: General Obligation Bonds Unamortized Bond Premium Compensated Absences Total - Business -type Grand Total Long -Term Liabilities Beginning Balance Additions Reductions Ending Due Within Balance One Year $ 9,510,000 $ - $ (1,165,000) $ 8,345,000 $ 1,080,000 175,000 - (45,000) 130,000 45,000 9,685,000 - (1,210,000) 8,475,000 1,125,000 43,029 - (7,172) 35,857 - 79,566 100,965 (109,364) 71,167 14,233 9,807,595 100,965 (1,326,536) 8,582,024 1,139,233 27,660,000 - (2,000,000) 25,660,000 2,035,000 867,701 - (78,881) 788,820 - 7,714 21,292 (17,500) 11,506 2,301 28,535,415 21,292 (2,096,381) 26,460,326 2,037,301 $38,343,010 $ 122,257 $ (3,422,917) $ 35,042,350 $ 3,176,534 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, 2016, the City's conduit debt consisted of the following: Guardian Angels Senior Services - Engel Haus Assisted Living Revenue Bonds, Series 2013 Kaleidoscope Charter School Revenue Bonds, Series 2014A Revenue Bonds, Series 2014B 58 $ 10,000,000 15,615,000 230,000 CITY OF OTSEGO, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 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, 2016, the City has entered into two types of agreements. Property Tax Abatements For the year ended December 31, 2016, the City abated property taxes totaling $81,931. 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 industial 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 $14,931 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 industial 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 $62,278 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 $4,722 in the current year. Tax Increment Financing For the year ended December 31, 2016, the Tax Increment Financing District within the City did not generate any increment and respectively the City did not make any payments to the developer. 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. 59 CITY OF OTSEGO, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 H. FUND EQUITY Net position reported in the government -wide statement of net position at December 31, 2016 include the following: Governmental Activities 10,745,858 Net Investment in Capital Assets: $ 34,142,149 Cost of Capital Assets $ 38,409,345 Less: Accumulated Depreciation (10,794,786) Less: Related Long -Tenn Debt Outstanding (8,510,857) Total Net Investment in Capital Assets 19,103,702 Restricted for Debt Service Fund Balance - Governmental Fund Financial Statements 1,933,757 Add: Unavailable Revenue - Special Assessments 2,420,698 Less: Accrued Interest Payable (61,866) Total Restricted for Debt Service 4,292,589 Unrestricted 10,745,858 Total Governmental Activities Net position $ 34,142,149 Business -type Activities Net Investment in Capital Assets: Cost of Capital Assets $ 55,812,203 Less: Accumulated Depreciation (13,474,089) Less: Related Long -Term Debt Outstanding (26,448,820) Total Net Investment in Capital Assets 15,889,294 Unrestricted 15,248,794 Total Business -type Activities Net Position $ 31,138,088 Aggregated funds balances reported in the governmental funds balance sheet at December 31, 2016 include the following: Governmental Funds General Fund Prepaid Items Insurance Deductibles Educational Programs Debt Service Prepaid Items Debt Service Nonmajor Governmental Funds Street Light Replacement Business Development Loans City Buildings & Infrastructure City Parks Total Fund Balances Nonspendable Restricted Committed Assigned $ 110,973 $ - $ - $ - - - - 172,408 20,000 2,000 - - - - 1,931,757 - - 123,339 - - - 296,490 - - 6,491,262 - - - 729,995 $ 112,973 $ 1,931,757 $ 419,829 $ 7,413,665 CITY OF OTSEGO, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 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, 2016 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 either the Coordinated Plan or the Basic Plan. Coordinated Plan members are covered by Social Security and Basic Plan members are not. The Basic Plan was closed to new members in 1967. All new members must participate in the Coordinated Plan. 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 and Basic 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 Basic Plan member is 2.2 percent of average salary for each of the first ten years of service, and 2.7 percent for each remaining year. 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 2.7 percent of average salary for Basic Plan members and 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, 2016 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 Basic Plan members and Coordinated Plan members were required to contribute 9.1 percent and 6.5 percent, respectively, of their annual covered salary in calendar year 2016. The City was required to contribute 11.78 percent of pay for Basic Plan members and 7.5 percent for Coordinated Plan members in calendar year 2016. The City's contributions to the General Employees Fund for years ended December 31, 2016, 2015 and 2014 were $96,567, $83,256, and $74,357. 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, 2016, the City reported a liability of $1,607,662 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 2016. 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 $20,935. The net pension liability was measured as of June 30, 2016, 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, 2015 through June 30, 2016, relative to the total employer contributions received from all of PERA's participating employers. At June 30, 2016, the City's proportion share was 0.0198 percent which was an increase of 0.0003 percent from its proportion measured as of June 30, 2015. For the year ended December 31, 2016, the City recognized pension expense of $205,634 for its proportionate share of the General Employees Plan's pension expense. In addition, the City recognized an additional $6,242 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, 2016, the City reported its proportionate share of the General Employees Plan's deferred outflows of resources and deferred inflows of resources, and its contributions subsequent to the measurement date, related to pensions from the following sources: Description Differences Between Expected and Actual Economic Experience Changes in Actuarial Assumptions Differences Between Projected and Actual Investment Earnings Changes in Proportion Contributions Paid Subsequent to the Measurement Date Totals 63 Deferred Deferred Outflows of Inflows of Resources Resources $ - $ 130,076 314,782 - 304,038 - 11,661 63,415 48,284 - $ 678,765 $ 193,491 CITY OF OTSEGO, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 Deferred outflows totaling $48,284 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, 2017. 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 2017 $ 110,075 2018 110,077 2019 158,768 2020 58,070 2021 - Thereafter - Total $ 436,990 E. ACTUARIAL ASSUMPTIONS The total pension liability in the June 30, 2016, actuarial valuation was determined using the entry age normal actuarial cost method and the following actuarial assumptions: Inflation Active Member Payroll Growth Investment Rate of Return 2.50% per year 3.25% per year 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 the General Employees Plan male or females, as appropriate, with slight adjustments. Cost of living benefit increases for retirees are assumed to be I percent for all future years for the General Employees Plan. Actuarial assumptions used in the June 30, 2016, 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 2016: • The assumed post-retirement benefit increase rate was changed from 1 percent per year through 2035 and 2.5 percent per year thereafter to 1 percent per year for all future years. • The assumed investment return and single discount rates were changed from 7.9 percent to 7.5 percent. • Other assumptions were changed pursuant to the experience study dated June 30, 2015. The assumed future salary increases, payroll growth and inflation were decreased to 3.25 percent for payroll growth and 2.50 percent for inflation. •' CITY OF OTSEGO, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 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 expected future rates of return are developed for each major asset class. These ranges are combined to produce an expected long-term rate of return by weighting the expected future rates of return by the target asset allocation percentages. The target allocation and best estimates of geometric real rates of return for each major asset class are summarized in the following table: Asset Class Domestic Stocks International Stocks Bonds Alternative Assets Cash Total F. DISCOUNT RATE Long -Term Target Expected Real Allocation Rate of Return 45.00% 5.50% 15.00% 6.00% 18.00% 1.45% 20.00% 6.40% 2.00% 0.50% 100.00% The discount rate used to measure the total pension liability in 2016 was 7.5 percent, a reduction from the 7.9 percent used in 2015. 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% City's Proportionate Share One Point Current One Point of the Net Pension Liability Decrease Rate Increase General Employees Fund H. PENSION PLAN FIDUCIARY NET POSITION $ 2,283,356 $ 1,607,662 $ 1,051,073 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. 65 0 CITY OF S+ 0 MINNESOTA. 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 This supplementary information is provided prospectively beginning with the Year Ended December 31, 2015. 67 Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 68.91% 78.19% 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 Proportionate (%) Proportionate ($) Share of the Net Share of the Net Pension Liability Fiscal Share of Share of Pension Liability Pension Liability City's Compared With Year Net Pension Net Pension Associated With Associated With Covered Covered Ending Liability Liability the City the City Payroll Payroll June 30, 2016 0.0198% $ 1,607,662 $ 20,935 $ 1,628,597 $ 1,136,013 141.52% June 30, 2015 0.0195% 1,010,592 - 1,010,592 1,124,606 89.86% This supplementary information is provided prospectively beginning with the Year Ended December 31, 2015. 67 Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 68.91% 78.19% CITY OF OTSEGO, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION (LAST TEN YEARS*) SCHEDULE OF CITY'S CONTRIBUTIONS GENERAL EMPLOYEE'S RETIREMENT FUND Year Ending December 31, 2016 December 31, 2015 Statutorily Required Contributions Contributions in Relation to Statutorily Required Contributions 96,567 $ 96,567 83,256 83,256 Contributions Contribution City's as a Percentage (Excess) Covered of Covered Deficiency Payroll Payroll This supplementary information is provided prospectively beginning with the Year Ended December 31, 2015. •i 1,287,564 7.50% 1,110,085 7.50% CITY OF OTSEGO, MINNESOTA NOTES TO REQUIRED SUPPLEMENTARY INFORMATION FOR THE YEAR ENDED DECEMBER 31, 2016 NOTE 1 GENERAL EMPLOYEES FUND A. 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%. B. 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. 0 CITY OF S+ 0 MINNESOTA. This page has been left blank intentionally. 70 0 CITY OF S+ 0 MINNESOTA. This page has been left blank intentionally. 71 CITY OF OTSEGO, MINNESOTA COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS DECEMBER 31, 2016 ASSETS Cash and Investments Receivables Accounts Special Assessments Current Deferred Delinquent Due from Other Governments Due from Other Funds Total Assets LIABILITIES Accounts Payable Due to Other Funds Total Liabilities DEFERRED INFLOWS OF RESOURCES Unavailable Revenue - Special Assessments FUND BALANCES Committed Street Light Replacement Business Development Loans Assigned City Buildings & Infrastructure City Parks Unassigned (Deficits) Total Fund Balances Total Liabilities, Deferred Inflows of Resources and Fund Balances 72 Total Special Capital Nonmajor Revenue Project Governmental $ 412,921 $ 6,400,779 $ 6,813,700 6,908 - 6,908 - 1,286 1,286 - 650,493 650,493 - 2,334 2,334 - 705,407 705,407 - 676,564 676,564 419,829 8,436,863 8,856,692 - 490,040 490,040 16,278 337,734 354,012 16,278 827,774 844,052 - 652,827 652,827 123,339 - 123,339 296,490 - 296,490 6,491,262 6,491,262 729,995 729,995 (16,278) (264,995) (281,273) 403,551 6,956,262 7,359,813 $ 419,829 $ 8,436,863 $ 8,856,692 CITY OF OTSEGO, MINNESOTA COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED DECEMBER 31, 2016 REVENUES Property Taxes Intergovernmental Charges for Services Special Assessments Investment Earnings (net) Miscellaneous Total Revenues EXPENDITURES Current Public Works Economic Development Capital Outlay General Government Public Works Culture and Recreation Economic Development Total Expenditures Excess (Deficiency) of Revenues Over (Under) Expenditures OTHER FINANCING SOURCES (USES) Transfers In Sales of Capital Assets Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balance Fund Balance - January 1 Fund Balance - December 31 73 9,326 - 9,326 98,209 - 98,209 - 108,180 Total Special Capital Nonmajor Revenue Project Governmental $ 88,814 $ 737,040 $ 825,854 - 2,042,160 2,042,160 19,801 968,163 987,964 - 121,449 121,449 3,188 57,964 61,152 - 13,510 13,510 111,803 3,940,286 4,052,089 9,326 - 9,326 98,209 - 98,209 - 108,180 108,180 7,400 3,215,243 3,222,643 - 885,342 885,342 - 105,762 105,762 114,935 4,314,527 4,429,462 (3,132) (374,241) (377,373) - 460,212 460,212 - 31,160 31,160 - (1,120) (1,120) - 490,252 490,252 (3,132) 116,011 112,879 406,683 6,840,251 7,246,934 $ 403,551 $ 6,956,262 $ 7,359,813 0 CITY OF S+ 0 MINNESOTA. 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 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 commericial 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, 2016 ASSETS Cash and Investments Receivables Accounts Total Assets LIABILITIES Due to Other Funds FUND BALANCES Committed Street Light Replacement Business Development Loans Unassigned Total Fund Balances (Deficits) Total Liabilities and Fund Balances (Deficits; 76 Total Nonmajor Street Revolving Tax Increment Special Lighting Loans District No. 1 Revenue $ 116,431 $ 296,490 $ - $ 412,921 6,908 - - 6,908 123,339 296,490 - 419,829 - - 16,278 16,278 123,339 - - 123,339 - 296,490 - 296,490 - - (16,278) (16,278) 123,339 296,490 (16,278) 403,551 $ 123,339 $ 296,490 $ - $ 419,829 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, 2016 REVENUES Property Taxes Charges for Services Investment Earnings (net) Total Revenues EXPENDITURES Current Public Works Economic Development Capital Outlay Public Works Total Expenditures Net Change in Fund Balance Fund Balance - January 1 Fund Balance (Deficit) - December 31 Street Revolving Lighting Loans $ - $ 88,814 19,801 - 903 2,285 20,704 91,099 Total Nonmajor Tax Increment Special District No. 1 Revenue $ - $ 88,814 - 19,801 - 3,188 - 111,803 9,326 - - 9,326 - 81,931 16,278 98,209 7,400 - - 7,400 16,726 81,931 16,278 114,935 3,978 9,168 (16,278) (3,132) 119,361 287,322 - 406,683 $ 123,339 $ 296,490 $ (16,278) $ 403,551 77 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. Park Development 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. 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 Consturction 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. 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. Municipal Buildings This fund was established to accumulate funds that will be used to provide for the costs associated with the improvements of existing City buildings and the acquisition and construction of additional City buildings. 79 CITY OF OTSEGO, MINNESOTA COMBINING BALANCE SHEET NONMAJOR CAPITAL PROJECT FUNDS DECEMBER 31, 2016 KH Parks Revolving Pavement Trails Park Capital Capital Management Management Development Equipment Equipment ASSETS Cash and Investments $ 470,794 $ 3,260 $ 502,973 $ 230,895 $ 613,718 Receivables Special Assessments Current - - - - - Deferred 97,591 Delinquent 508 - - - - Due from Other Governments - Due from Other Funds - - - - Total Assets 568,893 3,260 502,973 230,895 613,718 LIABILITIES Accounts Payable 1,458 - 3,873 - - Due to Other Funds - - - - - Total Liabilities 1,458 3,873 - DEFERRED INFLOWS OF RESOURCES Unavailable Revenue - Special Assessments 98,099 - FUND BALANCES Assigned City Buildings & Infrastructure 469,336 3,260 - - 613,718 City Parks - - 499,100 230,895 - Unassigned - - - - - Total Fund Balances (Deficits) 469,336 3,260 499,100 230,895 613,718 Total Liabilities, Deferred Inflows of Resources and Fund Balances (Deficits) $ 568,893 $ 3,260 $ 502,973 $ 230,895 $ 613,718 KH Community Collector Fire MSA Watershed Odean Capital Facilities Streets Reserve Construction Districts Improvements Improvements $ 487,230 $ 841,175 $ 2,064,464 $ 73,809 $ 609,181 $ - $ 489,712 - - 542 - - 744 24,481 - 17,500 498,053 317 1,507 - - 2 - - 119,077 262,090 - - - - - - 676,564 487,230 865,973 2,066,513 192,886 609,181 17,500 1,927,165 12,255 - - 346,144 - - 28,067 - - 5,425 12,255 - 346,144 5,425 28,067 - 24,798 1,507 - 17,500 498,055 474,975 841,175 2,065,006 609,181 - 1,401,043 - (153,258) - (5,425) 474,975 841,175 2,065,006 (153,258) 609,181 (5,425) 1,401,043 $ 487,230 $ 865,973 $ 2,066,513 $ 192,886 $ 609,181 $ 17,500 $ 1,927,165 MA CITY OF OTSEGO, MINNESOTA COMBINING BALANCE SHEET (CONTINUED) NONMAJOR CAPITAL PROJECT FUNDS DECEMBER 31, 2016 RA Total Nonmajor Slabtown 80th Street Municipal Capital Improvements Improvements Buildings Projects ASSETS Cash and Investments $ 13,568 $ - $ $ 6,400,779 Receivables Special Assessments Current - 1,286 Deferred 12,868 650,493 Delinquent - 2,334 Due from Other Governments 324,240 705,407 Due from Other Funds - - 676,564 Total Assets 26,436 324,240 8,436,863 LIABILITIES Accounts Payable - 98,243 490,040 Due to Other Funds 332,309 337,734 Total Liabilities - 430,552 827,774 DEFERRED INFLOWS OF RESOURCES Unavailable Revenue - Special Assessments 12,868 - 652,827 FUND BALANCES Assigned City Buildings & Infrastructure 13,568 6,491,262 City Parks - 729,995 Unassigned - (106,312) (264,995) Total Fund Balances (Deficits) 13,568 (106,312) 6,956,262 Total Liabilities, Deferred Inflows of Resources and Fund Balances (Deficits) $ 26,436 $ 324,240 $ $ 8,436,863 RA 0 CITY OF S+ 0 MINNESOTA. This page has been left blank intentionally. 83 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, 2016 REVENUES Property Taxes Intergovernmental Charges for Services Special Assessments Investment Earnings (net) Miscellaneous Total Revenues EXPENDITURES Capital Outlay General Government Public Works Culture and Recreation Economic Development Total Expenditures Excess (Deficiency) of Revenues Over (Under) Expenditures OTHER FINANCING SOURCES (USES) Transfers In Sales of Capital Assets Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balance Fund Balance (Deficit) - January 1 Fund Balance (Deficit) - December 31 Parks Revolving Pavement Trails Park Capital Capital Management Management Development Equipment Equipment $ 339,200 $ 25,250 $ $ 54,590 $ 168,000 314,483 - - - - 481,075 29,393 - - - - 2,484 26 5,685 1,588 3,998 - - - 3,510 - 685,560 25,276 486,760 59,688 171,998 532,150 - - 332,546 - 25,255 817,273 19,424 532,150 25,255 817,273 - 351,970 153,410 21 (330,513) 59,688 (179,972) - - - 460,212 31,160 - - - - 491,372 153,410 21 (330,513) 59,688 311,400 315,926 3,239 829,613 171,207 302,318 $ 469,336 $ 3,260 $ 499,100 $ 230,895 $ 613,718 Community Collector Fire MSA Watershed Odean Capital Facilities Streets Reserve Construction Districts Improvements Improvements $ $ $ 150,000 $ - $ $ $ - - 561,586 262,090 - 277,456 - - 209,632 - 4,748 1,079 - 83,154 3,809 5,277 15,516 6,844 12,737 10,000 - - - - 13,809 287,481 166,595 561,586 216,476 357,981 - - - - - - 108,180 - - 755,928 - 584,522 23,390 - - - - - - - - - 105,762 23,390 - - 755,928 - - 798,464 (9,581) 287,481 166,595 (194,342) 216,476 (440,483) (9,581) 287,481 166,595 (194,342) 216,476 - (440,483) 484,556 553,694 1,898,411 41,084 392,705 (5,425) 1,841,526 $ 474,975 $ 841,175 $ 2,065,006 $ (153,258) $ 609,181 $ (5,425) $ 1,401,043 MA 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, 2016 (CONTINUED) ME Total Nonmajor Slabtown 80th Street Municipal Capital Improvements Improvements Buildings Projects REVENUES Property Taxes $ $ - $ $ 737,040 Intergovernmental 904,001 2,042,160 Charges for Services - 968,163 Special Assessments 3,075 121,449 Investment Earnings (net) - 57,964 Miscellaneous - - 13,510 Total Revenues 3,075 904,001 3,940,286 EXPENDITURES Capital Outlay General Government - 108,180 Public Works 989,668 20,429 3,215,243 Culture and Recreation - - 885,342 Economic Development - - 105,762 Total Expenditures - 989,668 20,429 4,314,527 Excess (Deficiency) of Revenues Over (Under) Expenditures 3,075 (85,667) (20,429) (374,241) OTHER FINANCING SOURCES (USES) Transfers In - 460,212 Sales of Capital Assets 31,160 Transfers Out (1,120) (1,120) Total Other Financing Sources (Uses) - (1,120) 490,252 Net Change in Fund Balance 3,075 (85,667) (21,549) 116,011 Fund Balance (Deficit) - January 1 10,493 (20,645) 21,549 6,840,251 Fund Balance (Deficit) - December 31 $ 13,568 $ (106,312) $ - $ 6,956,262 ME 0 CITY OF S+ 0 MINNESOTA. This page has been left blank intentionally. 87 CITY OF OTSEGO, MINNESOTA GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED DECEMBER 31, 2016 (With Comparative Actual Amounts for the Year Ended December 31, 2015) Page 1 of 5 2016 2015 Variance with Final Budget - Budgeted Amounts Actual Over Actual Original Final Amounts (Under) Amounts REVENUES Property Taxes Current $ 3,529,352 $ 3,529,352 $ 3,477,971 $ (51,381) $ 3,266,747 Delinquent - - 16,346 16,346 41,262 Penalties and interest 15,000 15,000 347 (14,653) 7,444 Total Property Taxes 3,544,352 3,544,352 3,494,664 (49,688) 3,315,453 Franchise Taxes 107,000 107,000 131,229 24,229 128,722 Licenses and Permits Business Licenses 39,050 39,050 35,470 (3,580) 48,520 Rental Licenses 30,000 30,000 59,350 29,350 29,850 Other Licenses 750 750 1,780 1,030 1,700 Right of Way Permits 2,500 2,500 49,110 46,610 37,600 Building Permits 564,215 564,215 1,492,001 927,786 1,049,161 Other Permits 5,050 5,050 23,854 18,804 12,305 Total Licenses and Permits 641,565 641,565 1,661,565 1,020,000 1,179,136 Intergovernmental State Local Government Aid 127,590 127,590 - (127,590) 123,947 MSA Maintenance 163,000 163,000 - (163,000) - Police Aid 53,000 53,000 57,260 4,260 55,676 Other Aid & Grants - - 12,307 12,307 13,240 Local Other Aid & Grants - - - - 2,500 Total Intergovernmental 343,590 343,590 69,567 (274,023) 195,363 Charges for Services General Government 9,500 9,500 77,697 68,197 32,695 Public Works 6,000 6,000 149,681 143,681 90,108 Culture and Recreation 41,500 41,500 59,236 17,736 52,075 Total Charges for Services 57,000 57,000 286,614 229,614 174,878 Special Assessments - - 4,179 4,179 3,540 Fines and Forfeitures - - 16,223 16,223 11,998 Investment Earnings (net) 50,000 50,000 21,233 (28,767) 15,015 Miscellaneous Refunds and Reimbursements - - 63,753 63,753 30,194 Contributions and Donations 25,250 25,250 6,259 Other 17,219 17,219 28,784 Total Miscellaneous - - 106,222 106,222 65,237 Total Revenues 4,743,507 4,743,507 5,791,496 1,047,989 5,089,342 CITY OF OTSEGO, MINNESOTA GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED DECEMBER 31, 2016 (With Comparative Actual Amounts for the Year Ended December 31, 2015) Page 2 of 5 ." 2016 2015 Variance with Final Budget - Budgeted Amounts Actual Over Actual Original Final Amounts (Under) Amounts EXPENDITURES General Government City Council Personal Services 36,918 36,918 32,637 (4,281) 31,333 Services and Other Charges 79,358 79,358 43,995 (35,363) 25,908 Total 116,276 116,276 76,632 (39,644) 57,241 Administration Personal Services 367,416 367,416 385,165 17,749 296,339 Supplies 14,313 14,313 10,412 (3,901) 15,246 Services and Other Charges 87,738 87,738 39,276 (48,462) 68,298 Total 469,467 469,467 434,853 (34,614) 379,883 Elections Personal Services 13,850 13,850 12,660 (1,190) - Supplies 13,600 13,600 4,970 (8,630) 1,003 Services and Other Charges 2,375 2,375 2,386 11 - Total 29,825 29,825 20,016 (9,809) 1,003 Assessing Services and Other Charges 76,941 76,941 76,623 (318) 70,537 Finance Personal Services 228,006 228,006 247,226 19,220 223,736 Supplies 5,200 5,200 551 (4,649) 2,248 Services and Other Charges 55,325 55,325 58,950 3,625 115,981 Total 288,531 288,531 306,727 18,196 341,965 Information Technology Supplies 5,000 5,000 2,616 (2,384) 3,707 Services and Other Charges 66,000 66,000 79,525 13,525 63,086 Total 71,000 71,000 82,141 11,141 66,793 Legal Services and Other Charges 86,000 86,000 107,499 21,499 123,239 ." CITY OF OTSEGO, MINNESOTA GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED DECEMBER 31, 2016 (With Comparative Actual Amounts for the Year Ended December 31, 2015) Page 3 of 5 2016 2015 Variance with Final Budget - Budgeted Amounts Actual Over Actual Original Final Amounts (Under) Amounts EXPENDITURES (CONTINUED) General Government (Continued) Prairie Center Personal Services 3,280 3,280 - (3,280) Supplies 15,500 15,500 9,806 (5,694) 4,267 Services and Other Charges 15,097 15,097 19,315 4,218 17,712 Total 33,877 33,877 29,121 (4,756) 21,979 City Hall & Public Works Garage Supplies 7,750 7,750 11,563 3,813 9,659 Services and Other Charges 74,601 74,601 86,631 12,030 68,119 Total 82,351 82,351 98,194 15,843 77,778 Old Town Hall Services and Other Charges 500 500 1,874 1,374 695 Total General Government 1,254,768 1,254,768 1,233,680 (21,088) 1,141,113 Public Safety Police Services Services and Other Charges 978,200 978,200 991,403 13,203 952,546 Public Safety Commission Personal Services 750 750 690 (60) - Supplies 600 600 39 (561) 137 Services and Other Charges 1,500 1,500 (1,500) - Total 2,850 2,850 729 (2,121) 137 Fire Protection Supplies - - - 86 Services and Other Charges 497,462 497,462 494,831 (2,631) 455,281 Total 497,462 497,462 494,831 (2,631) 455,367 Building Inspections Personal Services 88,493 88,493 97,291 8,798 70,885 Supplies 6,700 6,700 2,653 (4,047) 4,791 Services and Other Charges 151,395 151,395 208,559 57,164 168,445 Total 246,588 246,588 308,503 61,915 244,121 Emergency Management Supplies 1,500 1,500 - (1,500) - Services and Other Charges 5,400 5,400 418 (4,982) 400 Total 6,900 6,900 418 (6,482) 400 Animal Control Services and Other Charges 13,500 13,500 12,101 (1,399) 11,460 Total Public Safety 1,745,500 1,745,500 1,807,985 62,485 1,664,031 CITY OF OTSEGO, MINNESOTA GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED DECEMBER 31, 2016 (With Comparative Actual Amounts for the Year Ended December 31, 2015) Page 4 of 5 91 2016 2015 Variance with Final Budget - Budgeted Amounts Actual Over Actual Original Final Amounts (Under) Amounts EXPENDITURES (CONTINUED) Public Works Streets Maintenance Personal Services 450,441 450,441 449,616 (825) 410,964 Supplies 159,723 159,723 136,407 (23,316) 153,501 Services and Other Charges 79,517 79,517 55,171 (24,346) 65,640 Total 689,681 689,681 641,194 (48,487) 630,105 Engineering Services and Other Charges 85,000 85,000 74,258 (10,742) 122,074 Street Lighting Services and Other Charges 115,968 115,968 121,163 5,195 108,987 Fleet Management Personal Services 76,377 76,377 81,141 4,764 76,873 Supplies 119,826 119,826 89,119 (30,707) 86,012 Services and Other Charges 12,100 12,100 3,745 (8,355) 10,473 Total 208,303 208,303 174,005 (34,298) 173,358 Total Public Works 1,098,952 1,098,952 1,010,620 (88,332) 1,034,524 Culture and Recreation Parks Maintenance Personal Services 195,774 195,774 182,699 (13,075) 145,663 Supplies 76,600 76,600 67,401 (9,199) 56,063 Services and Other Charges 109,432 109,432 100,849 (8,583) 113,885 Total 381,806 381,806 350,949 (30,857) 315,611 Recreation Personal Services 96,396 96,396 121,174 24,778 92,688 Supplies 12,400 12,400 10,856 (1,544) 12,967 Services and Other Charges 42,600 42,600 49,870 7,270 43,338 Total 151,396 151,396 181,900 30,504 148,993 Heritage Preservation Commission Personal Services 450 450 450 - 420 Supplies 500 500 498 (2) 170 Services and Other Charges 1,500 1,500 325 (1,175) 1,011 Total 2,450 2,450 1,273 (1,177) 1,601 Total Culture and Recreation 535,652 535,652 534,122 (1,530) 466,205 91 CITY OF OTSEGO, MINNESOTA GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED DECEMBER 31, 2016 (With Comparative Actual Amounts for the Year Ended December 31, 2015) Page 5 of 5 92 2016 2015 Variance with Final Budget - Budgeted Amounts Actual Over Actual Original Final Amounts (Under) Amounts EXPENDITURES (CONTINUED) Economic Development Planning Commission Personal Services 1,500 1,500 2,170 670 1,500 Supplies - - - - 24 Services and Other Charges 1,500 1,500 270 (1,230) 200 Total 3,000 3,000 2,440 (560) 1,724 Planning Services and Other Charges 88,000 88,000 87,218 (782) 86,335 Economic Development Services and Other Charges 14,300 14,300 8,667 (5,633) 8,152 Total Economic Development 105,300 105,300 98,325 (6,975) 96,211 Capital Outlay General Government 1,000 1,000 6,325 5,325 9,017 Public Safety 11,500 11,500 21,303 9,803 2,478 Culture and Recreation - - - - 11,240 Total 12,500 12,500 27,628 15,128 22,735 Total Expenditures 4,752,672 4,752,672 4,712,360 (40,312) 4,424,819 Excess (Deficiency) of Revenues Over (Under) Expenditures (9,165) (9,165) 1,079,136 1,088,301 664,523 OTHER FINANCING SOURCES (USES) Transfers In 136,755 136,755 136,755 - 122,276 Transfers Out (127,590) (127,590) (460,212) (332,622) (1,289,914) Total Other Financing Sources (Uses) 9,165 9,165 (323,457) (332,622) (1,167,638) Net Change in Fund Balance - - 755,679 755,679 (503,115) Fund Balance - January 1 2,890,523 2,890,523 2,890,523 - 3,393,638 Fund Balance - December 31 $ 2,890,523 $ 2,890,523 $ 3,646,202 $ 755,679 $ 2,890,523 92 0 CITY OF S+ 0 MINNESOTA. This page has been left blank intentionally. 93 CITY OF OTSEGO, MINNESOTA COMBINING BALANCE SHEET DEBT SERVICE FUND BY ACCOUNT DECEMBER 31, 2016 ASSETS Cash and Investments Receivables Special Assessments Current Deferred Delinquent Prepaid Items Total Assets LIABILITIES Accounts Payable Due to Other Funds Total Liabilities DEFERRED INFLOWS OF RESOURCES Unavailable Revenue - Special Assessments FUND BALANCES Nonspendable Restricted Total Fund Balances (Deficits) Total Liabilities, Deferred Inflows of Resources and Fund Balances (Deficits) M, Series Series Series 2003A 2004 2012A $ 2,008 $ - $ 632,436 - 1,526 - 3,473 151,365 556,626 6,414 164 - 11,895 153,055 1,189,062 - 313 150,760 - - 150,760 313 9,888 151,528 556,626 2,007 (149,233) 632,123 2,007 (149,233) 632,123 $ 11,895 $ 153,055 $ 1,189,062 Series Total 2010D Series Series Series Debt & 2011A 2010B 2007B 2010A Service $ 1,396,360 $ 240,134 $ - $ - $ 2,270,938 - - - - 1,526 1,510,192 - 192,464 - 2,414,120 - - - - 6,578 - - - 2,000 2,000 2,906,552 240,134 192,464 2,000 4,695,162 625 313 313 313 1,877 - - 187,883 187 338,830 625 313 188,196 500 340,707 1,510,192 - 192,464 - 2,420,698 - - - 2,000 2,000 1,395,735 239,821 (188,196) (500) 1,931,757 1,395,735 239,821 (188,196) 1,500 1,933,757 $ 2,906,552 $ 240,134 $ 192,464 S 2,000 S 4,695,162 95 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, 2016 REVENUES Property Taxes Special Assessments Total Revenues EXPENDITURES Debt Service Principal Interest Fiscal Agent Fees Total Expenditures Excess (Deficiency) of Revenues Over (Under) Expenditures OTHER FINANCING SOURCES Transfers In Net Change in Fund Balance Fund Balance (Deficit) - January 1 Fund Balance (Deficit) - December 31 0 Series Series Series 2003A 2004 2012A 801 4,058 232,519 801 4,058 232,519 - - 195,000 24,000 - 808 - - 219,808 801 4,058 12,711 801 4,058 12,711 1,206 (153,291) 619,412 $ 2,007 $ (149,233) $ 632,123 Series 425,000 100,000 Total 2010D Series Series Series Debt & 2011A 2010B 2007B 2010A Service $ 225,000 $ 415,000 $ - $ - $ 640,000 120,657 - 91,492 - 449,527 345,657 415,000 91,492 - 1,089,527 445,000 425,000 100,000 45,000 1,210,000 132,225 67,923 4,000 5,350 233,498 1,120 313 313 808 3,362 578,345 493,236 104,313 51,158 1,446,860 (232,688) (78,236) (12,821) (51,158) (357,333) - 1,120 - 50,000 51,120 (232,688) (77,116) (12,821) (1,158) (306,213) 1,628,423 316,937 (175,375) 2,658 2,239,970 $ 1,395,735 $ 239,821 $ (188,196) $ 1,500 $ 1,933,757 97 CITY OF OTSEGO, MINNESOTA STATEMENT OF CHANGES IN AGENCY FUND ASSETS AND LIABILITIES AGENCY FUNDS FOR THE YEAR ENDED DECEMBER 31, 2016 Development Escrows Fund (701) 1/1/2016 Additions Deductions 12/31/2016 ASSETS Cash and Cash Equivalents $ 990,002 $ 2,602,159 $ (816,628) $ 2,775,533 LIABILITIES Accounts Payable $ 26,642 $ 16,851 $ (26,642) $ 16,851 Escrow Deposit 963,360 2,602,159 (806,837) 2,758,682 Total Liabilities $ 990,002 $ 2,619,010 $ (833,479) $ 2,775,533 Builders Escrow (702) 1/1/2016 Additions Deductions 12/31/2016 ASSETS Cash and Cash Equivalents $ 177,500 $ 298,761 $ (344,000) $ 132,261 LIABILITIES Accounts Payable $ 1,000 $ - $ (1,000) $ - Escrow Deposit 176,500 298,761 (343,000) 132,261 Total Liabilities $ 177,500 $ 298,761 $ (344,000) $ 132,261 Totals 1/1/2016 Additions Deductions 12/31/2016 ASSETS Cash and Cash Equivalents $ 1,167,502 $ 2,900,920 $ (1,160,628) $ 2,907,794 LIABILITIES Accounts Payable $ 27,642 $ 16,851 $ (27,642) $ 16,851 Escrow Deposit 1,139,860 2,900,920 (1,149,837) 2,890,943 Total Liabilities $ 1,167,502 $ 2,917,771 $ (1,177,479) $ 2,907,794 W• 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 100 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 114 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 120 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 127 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 129 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. CITY OF OTSEGO, MINNESOTA STATISTICAL SECTION (UNAUDITED) NET POSITION BY COMPONENT Last Ten Fiscal Years (accrual basis of accounting) Governmental Activities Net Investment in Capital Assets Restricted Unrestricted Total Governmental Activities Net Position Business -type activities Net Investment in Capital Assets Restricted Unrestricted Total Business -type Activities Net Position Primary Government Net Investment in Capital Assets Restricted Unrestricted Total Primary Government Net Position Sources: The data for this table has been extracted from the respective years CAFR document. IG 2007 2008 2009 2010 $ 9,199,610 $ 10,402,950 $ 12,113,710 $ 12,600,418 9,278,966 8,576,073 8,604,122 7,506,642 8,287,671 8,335,206 8,085,402 8,568,988 $ 26,766,247 $ 27,314,229 $ 28,803,234 $ 28,676,048 $ 16,344,652 $ 18,721,350 $ 19,658,076 $ 17,255,564 7,620,664 6,302,993 6,462,497 - 1,728,153 313,037 1,519,450 9,661,840 $ 25,693,469 $ 25,337,380 $ 27,640,023 $ 26,917,404 $ 25,544,262 $ 29,124,300 $ 31,771,786 $ 29,855,982 16,899,630 14,879,066 15,066,619 7,506,642 10,015,824 8,648,243 9,604,852 18,230,828 $ 52,459,716 $ 52,651,609 $ 56,443,257 $ 55,593,452 Sources: The data for this table has been extracted from the respective years CAFR document. IG Table 1 101 2011 2012 2013 2014 2015 2016 $ 13,039,318 $ 13,673,424 $ 14,709,024 $ 15,515,291 $ 15,303,426 $ 19,103,702 6,547,412 6,570,533 5,882,912 5,430,795 4,547,327 4,292,589 8,490,450 7,850,150 7,313,054 9,601,854 9,627,962 10,745,858 $ 28,077,180 $ 28,094,107 $ 27,904,990 $ 30,547,940 $ 29,478,715 $ 34,142,149 $ 16,017,362 $ 14,795,965 $ 13,694,517 $ 12,619,305 $ 11,553,869 $ 15,889,294 8,220,490 9,054,217 10,546,291 13,487,231 15,474,362 15,248,794 $ 24,237,852 $ 23,850,182 $ 24,240,808 $ 26,106,536 $ 27,028,231 $ 31,138,088 $ 29,056,680 $ 28,469,389 $ 28,403,541 $ 28,134,596 $ 26,857,295 $ 34,992,996 6,547,412 6,570,533 5,882,912 5,430,795 4,547,327 4,292,589 16,710,940 16,904,367 17,859,345 23,089,085 25,102,324 25,994,652 $ 52,315,032 $ 51,944,289 $ 52,145,798 $ 56,654,476 $ 56,506,946 $ 65,280,237 101 CITY OF OTSEGO, MINNESOTA STATISTICAL SECTION (UNAUDITED) CHANGES IN NET POSITION - CONTINUED ON THE FOLLOWING PAGES Last Ten Fiscal Years (accrual basis of accounting) GOVERNMENTAL ACTIVITIES Expenses General Government Public Safety Public Works Sanitation Culture and Recreation Economic Development Interest on Long-term Debt Total Expenses Program Revenues Charges for Services General Government Public Safety Public Works Culture and Recreation Operating Grants and Contributions Capital Grants and Contributions Total Program Revenues Net (Expense) / Revenue General Revenues and Transfers Taxes Property Franchise Taxes Unrestricted Grants and Contributions Investment Earnings (net) Gain on Disposal of Capital Assets Transfers Transfers - Capital Assets 2007 2008 2009 2010 $ 796,258 $ 892,100 $ 916,692 $ 910,830 1,651,417 1,781,953 1,786,889 1,615,763 1,198,973 1,660,742 2,043,980 2,029,922 8,186 10,095 - - 298,088 570,456 374,019 401,563 71,875 7,268 58,293 17,096 520,352 721,924 611,384 919,907 4,545,149 5,644,538 5,791,257 5,895,081 106,390 45,222 117,955 109,349 910,074 592,768 474,185 889,878 - 7,939 58,430 24,082 740 330 250 360 151,198 196,232 182,205 191,850 6,739,484 1,714,984 2,843,309 563,690 7,907,886 2,557,475 3,676,334 1,779,209 3,362,737 (3,087,063) (2,114,923) (4,115,872) 2,781,744 3,270,875 3,505,575 69,473 82,420 87,807 241,467 106,320 141,892 561,230 430,239 293,497 4,000 - - (61,921) (5,696) - (2,576,514) (249,113) (424,843) 3,587,177 97,228 29,797 227,484 37,000 10,000 Total General Revenues and Transfers 1,019,479 3,635,045 3,603,928 3,988,686 Change in Net Position $ 4,382,216 $ 547,982 $ 1,489,005 $ (127,186) 102 Table 2 Page 1 of 3 2011 2012 2013 2014 2015 2016 100,176 106,547 83,681 120,964 128,722 131,229 $ 956,651 $ 1,002,690 $ 906,102 $ 1,230,335 $ 1,174,510 $ 1,376,793 1,647,285 1,445,397 1,447,887 1,499,538 1,670,627 1,846,459 2,114,975 2,486,553 2,760,130 2,383,890 6,521,708 3,389,909 569,431 575,592 573,581 792,525 792,936 847,553 12,353 103,884 75,303 45,024 145,771 302,296 661,447 631,129 543,821 347,503 231,242 223,938 5,962,142 6,245,245 6,306,824 6,298,815 10,536,794 7,986,948 109,686 54,674 36,735 119,757 36,235 81,876 819,537 588,894 784,038 1,159,073 1,191,134 1,677,788 111,873 50,906 106,913 724,009 247,260 656,570 3,101 8,840 28,600 43,606 52,075 59,236 197,325 203,645 220,790 233,606 244,497 248,910 233,832 620,574 485,533 1,619,209 3,154,662 4,437,611 1,475,354 1,527,533 1,662,609 3,899,260 4,925,863 7,161,991 (4,486,788) (4,717,712) (4,644,215) (2,399,555) (5,610,931) (824,957) 3,719,778 4,271,751 4,333,972 4,476,810 4,602,153 4,963,787 100,176 106,547 83,681 120,964 128,722 131,229 26,051 54,601 10,954 132,104 242,970 255,951 290,962 212,731 (17,852) 157,640 55,909 82,385 16,500 40,009 44,343 32,355 35,600 31,160 44,000 49,000 - 122,632 284,586 186,755 - - - - - (162,876) 4,197,467 4,734,639 4,455,098 5,042,505 5,349,940 5,488,391 $ (289,321) $ 16,927 $ (189,117) $ 2,642,950 $ (260,991) $ 4,663,434 103 CITY OF OTSEGO, MINNESOTA STATISTICAL SECTION (UNAUDITED) CHANGES IN NET POSITION - CONTINUED Last Ten Fiscal Years (accrual basis of accounting) BUSINESS -TYPE ACTIVITIES Expenses Water Utility Sanitary Sewer Utility Storm Water Utility Total Expenses Program Revenues Charges for Services Water Utility Sanitary Sewer Utility Storm Water Utility Operating Grants and Contributions Capital Grants and Contributions Total Program Revenues Net (Expense) / Revenue General Revenues and Transfers Property Taxes Unrestricted Grants and Contributions Investment Earnings (net) Gain on Disposal of Capital Assets Transfers Transfers - Capital Assets 2007 2008 $ 878,915 $ 962,806 1,896,741 2,101,478 2009 2010 $ 968,217 $ 1,314,133 2,395,561 2,307,213 41,196 68,903 2,775,656 3,064,284 3,404,974 3,690,249 798,009 745,635 739,062 745,395 649,847 786,885 873,480 989,847 - - 33,861 72,081 604,355 - - - 950,478 605,104 3,465,839 990,041 3,002,689 2,137,624 5,112,242 2,797,364 227,033 (926,660) 1,707,268 (892,885) 562,421 315,762 170,532 61,921 5,696 - 2,576,514 249,113 424,843 180,266 (10,000) Total General Revenues and Transfers 3,200,856 570,571 595,375 170,266 Change in Net Position $ 3,427,889 $ (356,089) $ 2,302,643 $ (722,619) 104 2011 2012 2013 2014 2015 Table 2 Page 2 of 3 2016 $ 1,530,108 $ 1,301,990 $ 1,241,343 $ 1,187,553 $ 1,246,064 $ 1,276,338 2,778,657 2,326,550 2,123,381 2,052,493 2,207,811 2,480,519 61,024 69,834 72,944 57,977 95,533 42,342 4,369,789 3,698,374 3,437,668 3,298,023 3,549,408 3,799,199 736,448 1,049,531 1,259,942 1,167,066 1,261,303 1,334,442 1,067,088 1,055,557 1,186,523 1,325,181 1,479,703 1,601,172 98,873 69,608 41,831 45,570 76,211 75,932 333,151 1,032,687 1,267,189 2,560,270 2,020,299 4,766,947 2,235,560 3,207,383 3,755,485 5,098,087 4,837,516 7,778,493 (2,134,229) (490,991) 317,817 1,800,064 1,288,108 3,979,294 - - 57,739 24,824 25,000 25,000 235,166 - - - - - - 152,321 (34,717) 168,320 85,259 129,442 - - 18,733 28,440 - - (44,000) (49,000) - (122,632) (284,586) (186,755) - - - - - 162,876 191,166 103,321 41,755 98,952 (174,327) 130,563 $ (1,943,063) $ (387,670) $ 359,572 $ 1,899,016 $ 1,113,781 $ 4,109,857 105 CITY OF OTSEGO, MINNESOTA STATISTICAL SECTION (UNAUDITED) CHANGES IN NET POSITION - CONTINUED Last Ten Fiscal Years (accrual basis of accounting) TOTAL PRIMARY GOVERNMENT Expenses Governmental Activities Business -type Activities Total Expenses Program Revenues Governmental Activities Business -type Activities Total Program Revenues Net (Expense) / Revenue General Revenues and Transfers Governmental Activities Business -type Activities Total General Revenues and Transfers Change in Net Position 2007 2008 2009 2010 $ 4,545,149 $ 5,644,538 $ 5,791,257 $ 5,895,081 2,775,656 3,064,284 3,404,974 3,690,249 7,320,805 8,708,822 9,196,231 9,585,330 7,907,886 2,557,475 3,676,334 1,779,209 3,002,689 2,137,624 5,112,242 2,797,364 10,910,575 4,695,099 8,788,576 4,576,573 3,589,770 (4,013,723) (407,655) (5,008,757) 1,019,479 3,635,045 3,603,928 3,988,686 3,200,856 570,571 595,375 170,266 4,220,335 4,205,616 4,199,303 4,158,952 $ 7,810,105 $ 191,893 $ 3,791,648 $ (849,805) Sources: The data for this table has been extracted from the respective years CAFR document. 106 Table 2 Page 3 of 3 2011 2012 2013 2014 2015 2016 $ 5,962,142 $ 6,245,245 $ 6,306,824 $ 6,298,815 $ 10,536,794 $ 7,986,948 4,369,789 3,698,374 3,437,668 3,298,023 3,549,408 3,799,199 10,331,931 9,943,619 9,744,492 9,596,838 14,086,202 11,786,147 1,475,354 1,527,533 1,662,609 3,899,260 4,925,863 7,161,991 2,235,560 3,207,383 3,755,485 5,098,087 4,837,516 7,778,493 3,710,914 4,734,916 5,418,094 8,997,347 9,763,379 14,940,484 (6,621,017) (5,208,703) (4,326,398) (599,491) (4,322,823) 3,154,337 4,197,467 4,734,639 4,455,098 5,042,505 5,349,940 5,488,391 191,166 103,321 41,755 98,952 (174,327) 130,563 4,388,633 4,837,960 4,496,853 5,141,457 5,175,613 5,618,954 $ (2,232,384) $ (370,743) $ 170,455 $ 4,541,966 $ 852,790 $ 8,773,291 107 CITY OF OTSEGO, MINNESOTA STATISTICAL SECTION (UNAUDITED) GOVERNMENTAL ACTIVITIES TAX REVENUE BY SOURCE Last Ten Fiscal Years (accrual basis of accounting) Table 3 Sources: The data for this table has been extracted from the respective years CAFR document. Property Franchise Taxes Taxes Total 2007 $ 2,781,744 $ 69,473 $ 2,851,217 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 Sources: The data for this table has been extracted from the respective years CAFR document. 0 CITY OF S+ 0 MINNESOTA. This page has been left blank intentionally. 109 CITY OF OTSEGO, MINNESOTA STATISTICAL SECTION (UNAUDITED) FUND BALANCES - GOVERNMENTAL FUNDS Last Ten Fiscal Years (modified accrual basis of accounting) General Fund Reserved Unreserved Nonspendable Assigned Unassigned Total General Fund All Other Governmental Funds Reserved Unreserved, Reported in: Special Revenue Funds Capital Project Funds Nonspendable Restricted Committed Assigned Unassigned Total All Other Governmental Funds Sources: The data for this table has been extracted from the respective years CAFR document. Note: During 2011, the City implemented GASB Statement No. 54, Fund Balance and Governmental Fund Type Definitions. 110 2007 2008 2009 2010 $ 4,894 $ 6,069 $ - $ - 1,095,854 1,538,650 1,685,623 1,713,440 $ 1,100,748 $ 1,544,719 $ 1,685,623 $ 1,713,440 $ 9,492,741 $ 8,120,203 $ 8,343,014 $ 1,197,967 3,207,643 3,356,320 2,684,192 2,811,289 4,637,052 2,228,379 1,960,421 2,157,424 $ 17,337,436 $ 13,704,902 $ 12,987,627 $ 6,166,680 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. 110 Table 4 111 2011 2012 2013 2014 2015 2016 - 11,254 11,254 80,423 105,547 110,973 81,168 87,971 103,418 101,833 128,646 192,408 1,622,430 1,665,366 1,797,403 3,211,382 2,656,330 3,342,821 $ 1,703,598 $ 1,764,591 $ 1,912,075 $ 3,393,638 $ 2,890,523 $ 3,646,202 - 4,601 351 - 2,675 2,000 5,985,647 7,898,825 8,805,554 2,576,729 2,278,379 1,931,757 39,142 52,360 595,191 387,033 406,683 419,829 6,517,609 5,605,265 4,267,012 5,218,020 6,825,237 7,221,257 (700,854) (341,194) (9,555) (10,584) (26,070) (281,273) $ 11,841,544 $ 13,219,857 $ 13,658,553 $ 8,171,198 $ 9,486,904 $ 9,293,570 111 CITY OF OTSEGO, MINNESOTA STATISTICAL SECTION (UNAUDITED) CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS Last Ten Fiscal Years (modified accrual basis of accounting) Sources: The data for this table has been extracted from the respective years CAFR document. 112 2007 2008 2009 2010 Revenues Property Taxes $ 2,707,808 $ 3,368,516 $ 3,560,656 $ 3,671,320 Franchise Taxes - - - - Licenses and Permits 914,988 604,818 433,080 339,568 Intergovernmental 863,219 915,934 336,937 191,784 Charges for Services 1,939,484 533,967 561,860 126,453 Special Assessments 1,559,651 1,567,265 1,309,711 1,511,510 Fines and Forfeitures - - - - Investment Earnings (net) 1,091,564 727,395 447,109 227,484 Miscellaneous 1,148,659 119,515 152,416 33,153 Total Revenues 10,225,373 7,837,410 6,801,769 6,101,272 Expenditures General Government 735,144 834,755 872,067 802,632 Public Safety 1,610,773 1,744,043 1,759,415 1,604,062 Public Works 943,083 860,594 1,255,099 962,329 Sanitation 8,186 10,095 - - Culture and Recreation 167,305 379,246 240,047 201,080 Economic Development 11,875 7,268 58,293 17,096 Capital Outlay 7,450,938 3,357,334 561,037 1,533,354 Debt Service Principal 2,315,067 2,380,000 2,780,000 1,345,000 Interest 1,798,908 1,731,089 1,872,249 989,718 Bond Issuance & Fiscal Agent Fee's 77,683 - 233,028 125,275 Total Expenditures 15,118,962 11,304,424 9,631,235 7,580,546 Excess (Deficiency) of Revenues Over (Under) Expenditures (4,893,589) (3,467,014) (2,829,466) (1,479,274) Other Financing Sources (Uses) Transfers In 1,754,282 1,723,793 1,553,570 931,682 Issuance of Debt 4,275,000 - 6,360,000 5,310,000 Premium on Issuance of Debt - - - - Sales of Capital Assets 4,000 - - 56,000 Refunded Bonds Redeemed - - (4,195,000) (4,325,000) Insurance Recovery - - - - Transfers Out (1,754,282) (1,445,342) (1,465,475) (917,937) Total Other Financing Sources (Uses) 4,279,000 278,451 2,253,095 1,054,745 Net Change in Fund Balances $ (614,589) $ (3,188,563) $ (576,371) $ (424,529) Debt Service as a Percentage of Noncapital Expenditures 37.70% 41.80% 50.98% 36.16% Sources: The data for this table has been extracted from the respective years CAFR document. 112 Table 5 2011 2012 2013 2014 2015 2016 $ 3,886,919 $ 4,344,415 $ 4,564,068 $ 4,524,092 $ 4,651,453 $ 4,960,518 - - - 120,964 128,722 131,229 303,059 553,577 819,493 1,238,823 1,179,136 1,661,565 375,703 621,447 241,996 1,034,552 3,570,630 2,111,727 200,256 86,655 170,194 1,142,453 555,660 1,274,578 2,055,623 875,822 1,987,647 905,441 560,748 575,155 1,000 2,000 - 4,000 11,998 16,223 290,962 209,984 (17,852) 157,640 55,909 82,385 25,302 56,625 78,457 50,286 105,573 119,732 7,138,824 6,750,525 7,844,003 9,178,251 10,819,829 10,933,112 887,847 918,055 923,255 1,169,697 1,141,113 1,233,680 1,586,504 1,440,908 1,447,182 1,495,008 1,664,031 1,807,985 974,557 1,009,827 1,121,981 1,023,693 1,044,024 1,019,946 246,075 277,605 313,023 464,840 466,205 534,122 12,353 103,884 75,303 45,024 145,771 196,534 1,178,526 1,707,346 1,984,531 1,688,847 4,477,153 4,349,555 745,000 810,000 840,000 6,965,000 1,130,000 1,210,000 489,184 554,245 574,715 454,566 256,148 233,498 86,285 42,900 - - 2,979 3,362 6,206,331 6,864,770 7,279,990 13,306,675 10,327,424 10,588,682 932,493 (114,245) 564,013 (4,128,424) 492,405 344,430 2,069,009 997,325 - 612,433 1,574,500 648,087 4,640,000 1,400,000 - - - - 48,529 64,542 - - - - - 40,009 - - 35,600 31,160 - - 22,167 (2,025,009) (948,325) - (489,801) (1,289,914) (461,332) 4,732,529 1,553,551 22,167 122,632 320,186 217,915 $ 5,665,022 $ 1,439,306 $ 586,180 $ (4,005,792) $ 812,591 $ 562,345 22.68% 23.13% 23.32% 60.23% 14.22% 18.40% 113 CITY OF OTSEGO, MINNESOTA STATISTICAL SECTION (UNAUDITED) ESTIMATED ACTUAL VALUE, TAXABLE MARKET VALUE AND TAX CAPACITY OF TAXABLE PROPERTY Last Ten Fiscal Years Sources: The data for this table has been provided by the Wright County Auditor / Treasurer's Office. 114 2007 2008 2009 2010 Estimated Actual Value $ 1,209,694,535 $ 1,333,105,057 $ 1,359,891,000 $ 1,297,319,800 Taxable Market Value Real Estate $ 1,031,745,900 $ 1,192,244,800 $ 1,254,432,100 $ 1,163,465,900 Personal Property 9,990,000 11,325,900 12,488,100 13,099,300 Total Taxable Market Value $ 1,041,735,900 $ 1,203,570,700 $ 1,266,920,200 $ 1,176,565,200 Taxable Market Value as a Percentage of Estimated Actual Value 86.12% 90.28% 93.16% 90.69% Tax Capacity Real Estate $ 10,928,056 $ 12,698,297 $ 13,545,272 $ 12,750,856 Personal Property 199,369 226,018 249,252 261,328 Net Tax Capacity for Direct Rate $ 11,127,425 $ 12,924,315 $ 13,794,524 $ 13,012,184 Net Tax Capacity as a Percentage of Estimated Actual Value 0.92% 0.97% 1.01% 1.00% Property Tax Levies General Revenues $ 2,482,980 $ 2,967,000 $ 3,402,090 $ 3,252,000 Debt Service 485,020 458,000 318,600 566,000 Total Property Taxes Levied $ 2,968,000 $ 3,425,000 $ 3,720,690 $ 3,818,000 Tax Rates General Revenues 22.314 22.957 24.663 24.992 Debt Service 4.359 3.544 2.310 4.350 Total Direct Tax Rate 26.673 26.500 26.972 29.342 Sources: The data for this table has been provided by the Wright County Auditor / Treasurer's Office. 114 Table 6 2011 2012 2013 2014 2015 2016 $ 1,122,091,900 $ 1,070,068,000 $ 989,365,300 $ 1,051,543,200 $ 1,177,857,500 $ 1,340,579,000 $ 1,045,413,800 $ 913,874,900 $ 839,428,800 $ 908,532,000 $ 1,039,579,100 $ 1,195,720,700 14,203,900 14,003,900 14,305, 700 14,513,300 14,952,700 16,476,000 $ 1,059,617,700 $ 927,878,800 $ 853,734,500 $ 923,045,300 $ 1,054,531,800 $ 1,212,196,700 94.43% 86.71% 86.29% 87.78% 89.53% 90.42% $ 11,376,627 $ 9,999,046 $ 9,184,748 $ 9,805,499 $ 11,060,135 $ 12,909,476 283,499 279,502 285,540 290,266 298,480 328,948 $ 11,660,126 $ 10,278,548 $ 9,470,288 $ 10,095,765 $ 11,358,615 $ 13,238,424 1.04% 0.96% 0.96% 0.96% 0.96% 0.99% $ 3,500,000 $ 3,836,000 $ 3,952,910 $ 4,024,715 $ 4,070,000 $ 4,380,206 466,000 425,000 425,000 475,285 610,000 640,000 $ 3,966,000 $ 4,261,000 $ 4,377,910 $ 4,500,000 $ 4,680,000 $ 5,020,206 30.017 37.320 41.740 39.865 35.832 33.087 3.997 4.135 4.488 4.708 5.370 4.834 34.013 41.455 46.228 44.573 41.202 37.921 115 CITY OF OTSEGO, MINNESOTA STATISTICAL SECTION (UNAUDITED) TAX CAPACITY OF REAL ESTATE & PERSONAL PROPERTY Last Ten Fiscal Years 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Residential Sources: The data for this table has been provided by the Wright County Auditor / Treasurer's Office. 116 Table 7 Other Total 70,937 $ 11,127,425 0.64% 100.00% 74,141 Non Commercial 100.00% Personal Homestead Homestead & Industrial Agricultural Property $ 7,618,707 $ 1,361,479 $ 1,151,084 $ 725,849 $ 199,369 $ 68.47% 12.24% 10.34% 6.52% 1.79% 8,390,152 1,998,030 1,435,171 800,803 226,018 64.92% 15.46% 11.10% 6.20% 1.75% 8,666,112 2,120,456 1,878,314 805,387 249,252 62.82% 15.37% 13.62% 5.84% 1.81% 8,126,189 1,661,573 2,164,323 719,579 261,328 62.45% 12.77% 16.63% 5.53% 2.01% 7,547,244 1,251,967 1,893,120 606,587 283,499 64.73% 10.74% 16.24% 5.20% 2.43% 6,460,276 1,097,107 1,821,302 543,596 279,502 62.85% 10.67% 17.72% 5.29% 2.72% 5,906,265 903,006 1,788,872 533,264 285,540 62.37% 9.54% 18.89% 5.63% 3.02% 6,607,296 918,439 1,664,605 536,842 290,266 65.45% 9.10% 16.49% 5.32% 2.88% 7,732,867 1,057,409 1,633,988 582,530 298,480 68.08% 9.31% 14.39% 5.13% 2.63% 8,878,089 1,183,843 2,166,341 627,666 328,948 67.06% 8.94% 16.36% 4.74% 2.48% Sources: The data for this table has been provided by the Wright County Auditor / Treasurer's Office. 116 Table 7 Other Total 70,937 $ 11,127,425 0.64% 100.00% 74,141 12,924,315 0.57% 100.00% 75,003 13,794,524 0.54% 100.00% 79,192 13,012,184 0.61% 100.00% 77,709 11,660,126 0.67% 100.00% 76,765 10,278,548 0.75% 100.00% 53,341 9,470,288 0.56% 100.00% 78,317 10,095,765 0.78% 100.00% 53,341 11,358,615 0.47% 100.00% 53,537 13,238,424 0.40% 100.00% CITY OF OTSEGO, MINNESOTA STATISTICAL SECTION (UNAUDITED) PROPERTY TAX RATES - DIRECT AND OVERLAPPING GOVERNMENTS Last Ten Fiscal Years Table 8 Sources: The data for this table has been provided by the Wright County Auditor / Treasurer's Office. 117 Overlapping Rates Total Direct & Overlapping School School School School School School City District 728 District 882 District 885 County District 728 District 882 District 885 2007 26.673 33.208 23.146 45.259 30.714 90.595 80.533 102.646 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 Sources: The data for this table has been provided by the Wright County Auditor / Treasurer's Office. 117 CITY OF OTSEGO, MINNESOTA STATISTICAL SECTION (UNAUDITED) PRINCIPAL PROPERTY TAXPAYERS Current Year and Nine Years Ago 2016 2007 Table 9 Sources: The data for this table has been provided by the Wright County Auditor / Treasurer's Office. 118 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 $ 764,963 1 5.78% Target Corporation Commercial 207,250 2 1.57% Minnegasco, Inc. Utility 184,220 3 1.39% $ 114,362 3 1.03% Elk Inn Partners, LP Commercial 109,250 4 0.83% Wright -Hennepin Electric Co -Op Utility 91,295 5 0.69% 60,017 8 0.54% Apex Business Center, LLC Industrial 73,924 6 0.56% 74,578 4 0.67% 21st Century Bank Commercial 49,602 7 0.37% GCI Capital, Inc. Commercial 46,676 8 0.35% Minnwest Bank Central Commercial 45,250 9 0.34% Darkenwald's Riverbend Co. LLC Residential 40,734 10 0.31% Geneva Exchange Fund XXII LLC Commercial 172,930 1 1.55% Land Funding I LLC Commercial 148,418 2 1.33% Martin Farms Development, LLC Residential 90,658 5 0.81% Tier One, LLC Commercial 63,286 6 0.57% OHW, LLC Residential 85,789 7 0.77% 5 Heirs Marketplace West, LLC Commercial 57,250 9 0.51% E & G Development LLC Agricultural 63,360 10 0.57% Totals $ 1,613,164 12.19% $ 930,648 8.35% Sources: The data for this table has been provided by the Wright County Auditor / Treasurer's Office. 118 CITY OF OTSEGO, MINNESOTA STATISTICAL SECTION (UNAUDITED) PROPERTY TAX LEVIES AND COLLECTIONS Last Ten Fiscal Years Table 10 Total Collections to Date Amount Percentage to Date Collected within the 100.00% 3,425,000 Certified Fiscal Year of the Levy Collections in 3,818,000 Property 3,960,244 Percentage Subsequent 99.95% Tax Levy Amount of Levy Years 2007 $ 2,968,000 $ 2,750,126 92.66% $ 217,874 2008 3,425,000 3,241,928 94.65% 183,072 2009 3,720,690 3,498,865 94.04% 221,825 2010 3,818,000 3,610,870 94.57% 207,130 2011 3,966,000 3,820,747 96.34% 139,497 2012 4,261,000 4,111,857 96.50% 147,109 2013 4,377,910 4,306,802 98.38% 68,586 2014 4,500,000 4,444,153 98.76% 51,816 2015 4,680,000 4,641,720 99.18% 31,888 2016 5,020,206 4,979,508 99.19% - Table 10 Total Collections to Date Amount Percentage to Date $ 2,968,000 100.00% 3,425,000 100.00% 3,720,690 100.00% 3,818,000 100.00% 3,960,244 99.85% 4,258,966 99.95% 4,375,388 99.94% 4,495,969 99.91% 4,673,608 99.86% 4,979,508 99.19% 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. 119 CITY OF OTSEGO, MINNESOTA STATISTICAL SECTION (UNAUDITED) RATIOS OF OUTSTANDING DEBT BY TYPE Last Ten Fiscal Years Governmental Activities General Obligation Equipment Bonds Certificates 2007 $ 13,785,000 $ 2008 12,655,000 2009 11,265,000 2010 13,750,000 2011 17,728,529 2012 18,413,438 2013 17,601,634 2014 10,664,830 2015 9,553,029 2016 8,380,857 Business -Type Activities General Lease Obligation Total Revenue Revenue Bonds Debt - $ 3,525,000 $ 27,920,000 $ 45,230,000 - 3,430,000 26,765,000 42,850,000 - 3,230,000 27,740,000 42,235,000 385,000 - 28,922,111 43,057,111 350,000 - 28,843,229 46,921,758 310,000 - 28,764,347 47,487,785 265,000 - 28,685,465 46,552,099 220,000 - 28,606,583 39,491,413 175,000 - 28,527,701 38,255,730 130,000 - 26,448,820 34,959,677 Percentage of Personal Income 10.84% 9.32% 9.26% 9.24% 9.17% 8.82% 8.26% 6.33% 5.61% 4.89% 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. 120 Table 11 Per Capita $ 3,619 3,217 3,114 3,173 3,396 3,384 3,220 2,638 2,473 2,158 CITY OF OTSEGO, MINNESOTA STATISTICAL SECTION (UNAUDITED) RATIOS OF GENERAL BONDED DEBT OUTSTANDING Last Ten Fiscal Years General Obligation Equipment Bonds Certificates 2007 $ 13,785,000 $ 2008 12,655,000 2009 11,265,000 2010 13,750,000 2011 17,728,529 2012 18,413,438 2013 17,601,634 2014 10,664,830 2015 9,553,029 2016 8,380,857 385,00 350,00 310,00 265,00 220,00 175,00 130,00 Total Estimated General Less: Amounts Net General Bonded Debt Restricted to Obligation Outstanding Debt Service Debt - $ 13,785,000 $ 1,778,560 $ 12,006,440 - 12,655,000 1,864,069 10,790,931 - 11,265,000 1,092,787 10,172,213 0 14,135,000 6,962,030 7,172,970 0 18,078,529 6,547,412 11,531,117 0 18,723,438 6,570,533 12,152,905 0 17,866,634 5,882,912 11,983,722 0 10,884,830 5,430,795 5,454,035 0 9,728,029 4,506,243 5,221,786 0 8,510,857 4,292,589 4,218,268 Table 12 Percentage of Estimated Actual Value Per of Property Capita 0.99% $ 961 0.81% 810 0.75% 750 0.55% 529 1.03% 835 1.14% 866 1.21% 829 0.52% 364 0.44% 337 0.31% 260 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. 121 CITY OF OTSEGO, MINNESOTA STATISTICAL SECTION (UNAUDITED) COMPUTATION OF DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT DECEMBER 31, 2016 Governmental Unit Overlapping Debt: School Districts: No. 728 - Elk River No. 882 - Monticello No. 885 - St. Michael -Albertville Wright County Total Overlapping Debt City of Otsego Direct Debt Total Direct and Overlapping Debt Estimated Debt Percentage Outstanding Applicable $ 274,800,000 45,215,000 191,010,000 59,935,000 $ 570,960,000 Table 13 Estimated Share of Overlapping Debt 18.35% $ 50,425,800 3.44% 1,555,396 4.14% 7,907,814 10.14% 6,077,409 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. 65,966,419 8,510,857 $ 74,477,276 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. 122 0 CITY OF S+ 0 MINNESOTA. This page has been left blank intentionally. 123 CITY OF OTSEGO, MINNESOTA STATISTICAL SECTION (UNAUDITED) LEGAL DEBT MARGIN INFORMATION Last Ten Fiscal Years Taxable Market Value Debt Limit Percentage Debt Limit Total Net Debt Applicable to Limit Legal Debt Margin Total Net Debt Applicable to the Limit as a Percentage of Debt Limit 2007 $ 1,041,735,900 2.00% 2008 $ 1,203,570,700 3.00% 2009 $ 1,266,920,200 3.00% 2010 $ 1,176,565,200 3.00% 20,834,718 36,107,121 38,007,606 35,296,956 12,006,440 10,790,931 10,172,213 7,172,970 $ 8,828,278 $ 25,316,190 $ 27,835,393 $ 28,123,986 57.63% 29.89% 26.76% 20.32% Sources: The data for this table has been provided by Wright County and from City financial maintenance documents. 124 Table 14 2011 2012 2013 2014 2015 2016 $ 1,059,617,700 $ 927,878,800 $ 853,734,500 $ 923,045,300 $ 1,054,531,800 $ 1,212,196,700 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 31,788,531 27,836,364 25,612,035 27,691,359 31,635,954 36,365,901 11,531,117 12,152,905 11,983,722 5,454,035 5,221,786 4,218,268 $ 20,257,414 $ 15,683,459 $ 13,628,313 $ 22,237,324 $ 26,414,168 $ 32,147,633 36.27% 43.66% 46.79% 19.70% 16.51% 11.60% 125 CITY OF OTSEGO, MINNESOTA STATISTICAL SECTION (UNAUDITED) PLEDGED -REVENUE COVERAGE Last Ten Fiscal Years Table 15 Sources: The data for this table has been provided from City financial maintenance documents. 126 General Obligation Revenue Bonds Water and Water and Sanitary Sewer Sanitary Sewer Less: Net Utility Connection Operating Available Debt Service Charges Charges Expenses Revenue Principal Interest Coverage 2007 $ 1,861,821 $ 1,662,772 $ 910,831 $ 2,613,762 $ 1,020,000 $ 1,203,646 117.54% 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% Capital Leases Property Debt Service Taxes Principal Interest Coverage 2007 $ 61,924 $ 59,567 $ 2,357 100.00% 2008 - - - n/a 2009 n/a 2010 n/a 2011 n/a 2012 - - n/a 2013 - - - n/a 2014 - - - n/a 2015 - - - n/a 2016 - - - n/a Lease Revenue Bonds Property Debt Service Taxes Principal Interest Coverage 2007 $ 177,541 $ 70,000 $ 107,541 100.00% 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 Sources: The data for this table has been provided from City financial maintenance documents. 126 CITY OF OTSEGO, MINNESOTA STATISTICAL SECTION (UNAUDITED) DEMOGRAPHIC AND ECONOMIC STATISTICS Last Ten Fiscal Years 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Population No. of Households 12,499 4,262 13,319 4,553 13,562 4,660 13,571 4,736 13,816 4,826 14,034 4,894 14,457 5,035 14,968 5,218 15,472 5,394 16,198 5,613 Table 16 Sources: Population & Households - Minnesota State Demographer [2016 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 2016. In those instances, 2015 data was shown for the current year. 127 School Enrollments Per Capita No. 885 Personal Personal Unemployment Median No. 728 No. 882 St. Michael Income Income Rate Age Elk River Monticello Albertville $ 417,329,111 33,389 5.1% 12,438 4,012 4,688 459,612,052 34,508 6.1% 12,544 4,036 4,873 455,886,630 33,615 8.9% 33.8 12,702 4,057 5,094 465,770,291 34,321 8.0% 32.2 12,932 4,073 5,326 511,523,584 37,024 6.8% 32.4 12,801 4,110 5,497 538,231,968 38,352 5.8% 33.4 12,753 4,137 5,645 563,823,000 39,000 5.0% 33.4 13,123 4,137 5,747 623,821,336 41,677 4.2% 33.8 13,076 4,193 5,904 682,361,616 44,103 3.7% 34.1 13,136 4,096 6,096 714,385,910 44,103 3.8% 34.1 13,219 4,094 6,286 Sources: Population & Households - Minnesota State Demographer [2016 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 2016. In those instances, 2015 data was shown for the current year. 127 CITY OF OTSEGO, MINNESOTA STATISTICAL SECTION (UNAUDITED) PRINCIPAL EMPLOYMENT SECTORS Current Year and Nine Years Ago 2016 2007 Table 17 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. 128 Percentage of Percentage of Total City Total City Employment Industry Employees Rank Employment Employees Rank Employment Education & Health Services 1,574 1 44.31% - 0.00% Trade, Transportation & Utilities 675 2 19.00% 116 4 9.59% Leisure & Hospitality 488 3 13.74% 431 1 35.65% Construction 326 4 9.18% 127 3 10.50% Professional & Business Services 242 5 6.81% 157 2 12.99% Other Services 71 6 2.00% 56 6 4.63% Public Administration 42 7 1.18% 21 7 1.74% Financial Activities 33 8 0.93% 95 5 7.86% Totals 3,451 97.16% 1,003 82.96% 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. 128 CITY OF OTSEGO, MINNESOTA STATISTICAL SECTION (UNAUDITED) FULL TIME CITY GOVERNMENT POSITIONS BY FUNCTION Last Ten Fiscal Years Table 18 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. 129 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 General Government Administration 5.0 4.0 3.0 3.0 3.0 3.0 3.0 3.0 4.0 3.5 Finance 3.5 3.7 3.8 3.9 3.9 3.9 3.7 3.9 3.0 3.0 Total General Government 8.5 7.7 6.8 6.9 6.9 6.9 6.7 6.9 7.0 6.5 Public Safety Police - - - - - - - - - - Fire - - - - - - - - - - Building Inspections 5.5 4.0 2.6 1.6 1.0 1.0 1.0 1.0 1.0 1.5 Total Public Safety 5.5 4.0 2.6 1.6 1.0 1.0 1.0 1.0 1.0 1.5 Public Works Street Maintenance 4.5 5.9 5.9 6.9 6.9 5.9 5.8 5.8 6.9 6.9 Mechanic - - - - 1.0 1.0 1.0 1.0 1.0 Total Public Works 4.5 5.9 5.9 6.9 6.9 6.9 6.8 6.8 7.9 7.9 Culture and Recreation Parks Maintenance 1.0 1.0 1.0 1.0 1.0 1.4 1.4 1.4 3.5 3.5 Recreation - - 0.6 1.1 1.1 1.4 1.4 Total Culture and Recreation 1.0 1.0 1.0 1.0 1.0 2.0 2.5 2.5 4.9 4.9 Public Utilities Water Utility - - - - - - 2.0 2.0 1.3 1.3 Sanitary Sewer Utility - - - - 2.0 2.0 3.7 3.7 Total Public Utilities - - - - - - 4.0 4.0 5.0 5.0 Total 19.5 18.6 16.3 16.4 15.8 16.8 21.0 21.2 25.7 25.7 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. 129 CITY OF OTSEGO, MINNESOTA STATISTICAL SECTION (UNAUDITED) OPERATING INDICATORS BY FUNCTION Table 19 Last Ten Fiscal Years Function 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Administration Rental Licenses Issued 101 89 199 180 246 292 337 372 372 387 Code Enforcement Citations 11 60 89 20 16 31 41 Registered Voters 7,168 7,329 9,324 Actual Votes Tallied 6,688 4,737 7,126 4,693 7,362 Police Total Calls for Service 4,217 3,905 4,111 4,234 3,856 4,060 3,575 3,619 Fire Calls - Albertville Department 82 76 93 Calls - Elk River Department 74 73 80 Calls - Rogers Department 18 15 Building Inspections Number of Permits - All Types 740 2,480 839 617 570 645 699 692 893 968 New Homes Constructed 279 80 94 73 58 143 190 188 207 219 Public Works Miles of Streets Constructed 2.65 - 0.25 - - 0.45 1.33 2.30 1.66 2.59 Miles of Streets Reconstructed 0.35 Snow Plowing Events 15 26 55 40 46 37 22 16 16 Culture and Recreation Parks Acres Maintained 142.0 158.7 158.7 161.5 167.8 167.8 184.3 184.3 184.3 190.3 Prairie Festival Attendance 4,900 5,100 6,200 5,000 Recreation Programs Offered 17 60 106 132 100 Recreation Programs Participants 550 9,875 14,958 12,662 12,662 Water Utility Connections 2,029 2,131 2,222 2,321 2,379 2,517 2,678 2,829 3,023 3,155 Gallons Delivered 352,955,656 339,394,000 348,947,070 348,498,610 353,515,800 429,293,500 409,492,730 375,299,840 389,118,330 393,795,210 Sanitary Sewer Utility Average Daily Gallons Treated 405,000 416,000 474,000 509,000 512,000 485,000 543,000 539,000 551,000 600,000 Sources: The data for this table has been provided by each respective City department. Note: The City made significant changes to the indicators included in this table for 2015. Not all historical data was able to be compiled, and this table will be updated on a go -forward basis. 130 CITY OF OTSEGO, NUNNESOTA STATISTICAL SECTION (UNAUDITED) CAPITAL ASSET STATISTICS BY FUNCTION Last Ten Fiscal Years Function 2007 2008 2009 2010 2011 2012 2013 Public Works 8 8 8 19.68 19.96 21.13 10 Street Miles (MSA) 112.60 113.10 112.85 112.85 112.85 113.30 114.63 Heavy Duty Trucks 7 7 7 7 8 8 8 Light Duty Vehicles 9 9 10 10 10 11 15 Tractors & Grading Equipment 4 4 4 7 8 8 8 Culture and Recreation 74 77 722 794 846 1,603 1,659 Trail Miles 16.90 17.90 19.68 19.68 19.68 19.68 19.68 Number of Parks 6 7 7 7 8 8 10 Playgrounds 6 6 6 6 7 7 7 Park Shelters 7 7 7 7 9 9 9 Ball Fields 4 4 4 4 5 5 5 Soccer Fields - - - - - - - Basketball Courts 4 4 4 4 5 5 5 Tennis Courts 6 6 6 6 7 7 7 Outdoor Ice Rinks - - - - - - 1 Mowing Equipment 1 2 2 3 4 5 5 Water Utility Water Towers 2 3 3 3 3 3 3 Wells 7 8 8 8 8 8 8 Miles of Water Main 63 Hydrants 717 Water Valves 1,555 Sanitary Sewer Utility Treatment Facilities 2 2 2 2 2 2 2 Lift Stations 9 9 9 9 9 9 9 Miles of Sanitary Sewer Lines 68.5 Manholes 1,257 Miles of Sanitary Forcemain 20 Sources: The data for this table has been provided by each respective City department. Note: The City made significant changes to the statistics included in this table for 2015. Not all historical data was able to be compiled, and this table will be updated on a go -forward basis 131 2014 2015 Table 20 2016 116.93 118.59 120.88 8 8 8 15 15 15 8 8 8 19.68 19.96 21.13 10 10 11 7 7 8 9 9 10 5 5 6 3 3 5 5 5 7 7 8 1 1 2 5 5 6 3 3 3 8 8 8 63 74 77 722 794 846 1,603 1,659 1,841 2 2 2 9 9 10 73.6 75.8 1,257 1,366 1,480 20 20 20 0 CITY OF S+ 0 MINNESOTA. This page has been left blank intentionally. 132