CITY OF ST. CHARLES, MINNESOTA FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED DECEMBER 31, 2008 CITY OF ST. CHARLES, MINNESOTA FINANCIAL STATEMENTS For the Fiscal Year Ended December 31, 2008 TABLE OF CONTENTS REFERENCE PAGE INTRODUCTORY SECTION List of Elected and Appointed Officials i FINANCIAL SECTION Independent Auditor's Report 1 Management's Discussion and Analysis 2 Basic Financial Statements Government-wide Financial Statements Statement of Net Assets FORM A-1 13 Statement of Activities FORM A-2 14 Fund Financial Statements Balance Sheet - Governmental Funds FORM B-1 16 Statement of Revenues, Expenditures, and Changes in Fund Balances -Governmental Funds FORM B-2 18 Reconciliation of Net Assets in the Government-wide Financial Statements and Fund Balances in the Fund Basis Financial Statements FORM B-3 20 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities FORM B-4 21 Statement of Revenues, Expenditures, and Changes in Fund Balances -Budget and Actual -General Fund FORM B-5 22 Statement of Revenues, Expenditures, and Changes in Fund Balances -Budget and Actual -Economic Development Fund FORM B-6 27 Statement of Net Assets -Proprietary Funds FORM C-1 28 Statement of Revenues, Expenses, and Changes in Fund Net Assets - Proprietary Funds FORM C-2 30 Statement of Cash Flows -Proprietary Funds FORM C-3 32 Notes to the Financial Statements 36 Combining and Individual Nonmajor Fund Statements and Schedules Combining Balance Sheet - Nonmajor Governmental Funds FORM D-1 59 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Nonmajor Governmental Funds FORM D-2 61 Schedule of Revenues, Expenditures, and Changes in Fund Balances -Budget and Actual -Advertising Fund FORM D-3 63 Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - Celebration Fund FORM D-4 64 Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - Library Fund FORM D-5 65 Schedule of Revenues, Expenditures, and Changes in Fund Balances -Budget and Actual -Volunteer Fire Department Fund FORM D-6 66 Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - Ambulance Fund FORM D-7 67 Schedule of Revenues, Expenditures, and Changes in Fund Balances -Budget and Actual -Emergency Management Services Fund FORM D-8 68 CITY OF ST. CHARLES, MINNESOTA FINANCIAL STATEMENTS For the Fiscal Year Ended December 31, 2008 TABLE OF CONTENTS (CONTINUED) REFERENCE PAGE FINANCIAL SECTION (CONTINUED) Supplementary Information Electric Fund: Statement of Net Assets SCHEDULE 1 69 Statement of Revenues, Expenses, and Changes in Fund Net Assets - Budget and Actual SCHEDULE 2 70 Water Fund: Statement of Net Assets SCHEDULE 3 71 Statement of Revenues, Expenses, and Changes in Fund Net Assets - Budget and Actual SCHEDULE 4 72 Sewer Fund: Statement of Net Assets SCHEDULE 5 73 Statement of Revenues, Expenses, and Changes in Fund Net Assets - Budget and Actual SCHEDULE 6 74 Storm Water Fund: Statement of Net Assets SCHEDULE 7 75 Statement of Revenues, Expenses, and Changes in Fund Net Assets - Budget and Actual SCHEDULE 8 76 Waste Management Fund: Statement of Net Asses SCHEDULE 9 77 Statement of Revenues, Expenses, and Changes in Fund Net Assets - Budget and Actual SCHEDULE 10 78 Ambulance Fund: Statement of Net Asses SCHEDULE 11 79 Statement of Revenues, Expenses, and Changes in Fund Net Assets - Budget and Actual SCHEDULE 12 80 Summary of Cash and Investments - All Fund Types SCHEDULE 13 81 Bond Retirement Schedules -Governmental Funds SCHEDULE 14 82 Bond Retirement Schedules - Business-Type Funds SCHEDULE 15 84 Auditor's Report on Legal Compliance 85 CITY OF ST. CHARLES, MINNESOTA INTRODUCTORY SECTION FOR THE FISCAL YEAR ENDED DECEMBER 31, 2008 (This Page Left Blank Intentionally) CITY OF ST. CHARLES, MINNESOTA LIST OF ELECTED AND APPOINTED OFFICIALS FOR THE FISCAL YEAR ENDED DECEMBER 31, 2008 William J. Spitzer Mayor John Schaber Council/Mayor Pro-Tem Wayne Getz Council David Braun Council Dan Nicklay Council Nick Koverman Clerk Administrator Kristine Huinker Accountant Janell Dahl Deputy Clerk i (This Page is Left Blank Intentionally) CITY OF ST. CHARLES, MINNESOTA FINANCIAL SECTION FOR THE FISCAL YEAR ENDED DECEMBER 31, 2008 (This Page is Left Blank Intentionally) INDEPENDENT AUDITOR'S REPORT Honorable Mayor and Members of the City Council City of St. Charles, Minnesota 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 St. Charles, Minnesota as of and for the year ended December 31, 2008, which collectively comprise the City’s basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City's management. Our responsibility is to express opinions on these financial statements based on our audit. The prior year comparative information has been derived from the City’s 2007 financial statements and, in our report dated April 11, 2008, we expressed unqualified opinions on the respective financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of St. Charles, Minnesota as of December 31, 2008, and the respective changes in financial position and cash flows, where applicable, and the respective budgetary comparison for the General Fund and the Major Special Revenue Funds for the year then ended in conformity with accounting principles generally accepted in the United States of America. The Management’s Discussion and Analysis on pages 2 through 12 is not a required part of the basic financial statements but is supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquires of management regarding the methods of measurement and presentation of the supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of St. Charles, Minnesota’s basic financial statements. The introductory section, combining and individual nonmajor fund financial statements, and supplementary information are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. The introductory section and supplementary information have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them. Rochester, Minnesota April 17, 2009 (This Page is Left Blank Intentionally) CITY OF ST. CHARLES, MINNESOTA MANAGEMENT’S DISCUSSION AND ANALYSIS As management of the St. Charles, Minnesota, we offer readers of the City of St. Charles’ financial statements this narrative overview and analysis of the financial activities of the City of St. Charles for the fiscal year ended December 31, 2008. FINANCIAL HIGHLIGHTS • The assets of the City of St. Charles exceeded its liabilities at the close of the most recent fiscal year by $16,707,691 (net assets). Of this amount, $3,323,992 (unrestricted net assets) may be used to meet the City’s ongoing obligations to citizens and creditors in accordance with the City’s fund designations and fiscal policies. • The City’s total net assets increased by $503,353. • As of the close of the current fiscal year, the City of St. Charles’ governmental funds reported combined ending fund balances of $1,363,602. Approximately 81 percent of this total amount, or $1,097,732 is available for use within the City’s designations and policies. • At the end of the current fiscal year, unreserved fund balance for the general fund was $377,079 or 28 percent of total general fund expenditures. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis are intended to serve as an introduction to the City of St. Charles’ basic financial statements. The City of St. Charles’ basic financial statements comprise three components: 1. Government-wide financial statements, providing information for the City as a whole. 2. Fund financial statements, providing detailed information for the City’s significant funds. 3. Notes to the financial statements, providing additional information that is essential to understanding the government-wide and fund statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Additional explanation of these sections of the financial statements follows. Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the City of St. Charles’ finances, in a manner similar to a private- sector business. The statement of net assets presents information on all of the City of St. Charles’ assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City of St. Charles is improving or deteriorating. 2 CITY OF ST. CHARLES, MINNESOTA MANAGEMENT’S DISCUSSION AND ANALYSIS The statement of activities presents information showing how the City’s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of the related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g. uncollected taxes and earned, but not used, compensated absences). Both of the government-wide financial statements distinguish functions of the City of St. Charles 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 (businesstype activities). The governmental activities of the City of St. Charles include general government, public safety, public works, library, parks and recreation and economic development. The business-type activities of the City of St. Charles include the electric, water, sewer, storm water, waste management utilities and ambulance services. The government-wide financial statements can be found on pages 13-15 of this report. Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City of St. Charles, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance- related legal requirements. All of the funds of the City of St. Charles can be divided into two categories: governmental funds and proprietary funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government- wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financial requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City of St. Charles maintains twenty-three individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the general fund, the economic development special revenue fund and the capital improvements fund all of which are considered to be major funds. Data from the other twenty 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 elsewhere in this report. The City of St. Charles adopts an annual appropriated budget for its general fund and special revenue funds. Budgetary comparison statements have been provided for the general fund (pages 22-26) and the special revenue funds (page 27 and 63-68) to demonstrate compliance with the budget. The governmental fund financial statements can be found on pages 16-19 of this report. 3 CITY OF ST. CHARLES, MINNESOTA MANAGEMENT’S DISCUSSION AND ANALYSIS Proprietary funds. The City of St. Charles maintains one type of proprietary funds – enterprise funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City of St. Charles uses enterprise funds to account for its electric, water, sewer, storm water utilities, waste management and ambulance. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for the electric, water, sewer, storm water utilities, waste management and ambulance, all of which are considered to be major funds of the City of St. Charles. The proprietary fund financial statements can be found on pages 28-35 of this report. Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found beginning on page 36 of this report. Other information. The combining statements referred to earlier in connection with nonmajor governmental funds can be found on pages 59-62 of this report. IMPORTANT REMINDERS Infrastructure Assets. When the City of St. Charles implemented GASB Statement #34 for the year ended December 31, 2004, the City elected to record infrastructure assets prospectively, rather than retroactively for government activities. Historically, governmental capital assets, particularly infrastructure assets, have only been accounted for using the current financial resources (budgeted resources) method, and have not been expensed annually through depreciation or accounted for otherwise. Additionally, significant infrastructure assets have been constructed by developers and contributed to the City prior to 2004 but were not recorded. All 2004 and future acquisitions of infrastructure assets have and will be recorded under the new reporting model. 4 CITY OF ST. CHARLES, MINNESOTA MANAGEMENT’S DISCUSSION AND ANALYSIS GOVERNMENT-WIDE FINANCIAL ANALYSIS As noted earlier, net assets may serve over time as a useful indicator of a government’s financial position. In the case of the City of St. Charles, assets exceeded liabilities by $16,707,691 at the close of the most recent fiscal year. By far the largest portion of the City of St. Charles’ net assets (80 percent) reflects its investment in capital assets (e.g. land, buildings, infrastructure, vehicles, and equipment), less any related debt used to acquire those assets that are still outstanding. The City of St. Charles uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City of St. Charles’ 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 St. Charles, Minnesota's Net Assets Governmental Business-Type Totals Activities Activities 2008 2007 Current and other assets 1,575,699 $ 2,145,289 $ 3,720,988$ 3,683,999 $ Capital assets 7,573,101 12,460,240 20,033,341 20,025,332 Total assets 9,148,800 14,605,529 23,754,329 23,709,331 Long-term liabilities outstanding 2,074,433 4,445,308 6,519,741 7,086,172 Other liabilities 133,167 393,730 526,897 418,821 Total liabilities 2,207,600 4,839,038 7,046,638 7,504,993 Net assets: Invested in capital assets, net of related debt 5,458,472 7,925,227 13,383,699 12,794,105 Unrestricted 1,482,728 1,841,264 3,323,992 3,410,233 Total net assets 6,941,200 $ 9,766,491 $ 16,707,691$ $ 16,204,338 The balance of unrestricted net assets ($3,323,992) may be used to meet the government’s ongoing obligations to citizens and creditors. At the end of the current fiscal year, the City of St. Charles is able to report positive balances in all categories of net assets, both for the government as a whole, as well as for its business-type activities. Governmental activities. Governmental activities decreased the City of St. Charles’ net assets by $46,918. The most significant change in governmental net assets is due to the effect of accounting for net assets under full accrual accounting, current year infrastructure capital outlay, which was funded during the year, will be expensed over its useful life and capital assets constructed by developers and contributed to the City are recorded as increases in net assets. 5 CITY OF ST. CHARLES, MINNESOTA MANAGEMENT’S DISCUSSION AND ANALYSIS Business-type activities. Business-type activities increased the City of St. Charles’ net assets by $550,271. The City’s electric and sewer utilities and ambulance contributed the most significant portion of that increase, or $498,643. A condensed version of the Statement of Activities follows: City of St. Charles, Minnesota's Change in Net Assets Governmental Business-Type Totals Activities Activities 2008 2007 Revenue: Program revenues: Charges for services 217,333 $ 4,488,217 $ 4,705,550 $ $ 4,360,000 Operating grants and contributions 140,756 10,809 151,565 165,355 Capital grants and contributions 18,794 12,500 31,294 1,169,382 General revenues: Property taxes 658,451 658,451 570,343 TIF proceeds 180,757 180,757 144,493 Franchise fees 36,317 36,317 33,496 Grants and contributions not restricted to specific programs 934,336 934,336 775,011 Other 67,759 32,258 100,017 151,735 Total revenues 2,254,503 4,543,784 6,798,287 7,369,815 Expenses: General government 433,756 433,756 409,594 Public safety 560,524 560,524 647,293 Public works 409,992 409,992 422,866 Library 166,807 166,807 170,000 Parks and recreation 472,971 472,971 431,375 Economic development 27,973 27,973 41,794 Interest on long-term debt 86,224 86,224 102,359 Electric 2,927,791 2,927,791 2,546,939 Water 399,887 399,887 358,086 Sewer 483,797 483,797 423,957 Storm water drainage 10,403 10,403 4,689 Waste management 152,104 152,104 159,683 Ambulance 162,705 162,705 Total expenses 2,158,247 4,136,687 6,294,934 5,718,635 Increase in net assets before transfers 96,256 407,097 503,353 1,651,180 Transfers (143,174) 143,174 Increase in net assets (46,918) 550,271 503,353 1,651,180 Net assets, beginning of year 6,988,118 9,216,220 16,204,338 14,553,158 Net assets, end of year 6,941,200 $ 9,766,491 $ $ 16,707,691 $ 16,204,338 6 CITY OF ST. CHARLES, MINNESOTA MANAGEMENT’S DISCUSSION AND ANALYSIS Below are specific graphs that provide comparisons of the governmental activities direct program revenues with their expenditures. Any shortfalls in direct revenues are primarily supported by property tax levy or general state aid. Expenses and Program Revenues - Governmental Activities $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0 Program revenues Expenses Revenues by Source - Governmental Activities Other 3% Grants and contributions not restricted to specific programs 41% Charges for services 10% Property taxes 29% TIF proceeds 8% Franchise fees 2% Capital grants and contributions 1% Operating grants and contributions 6% 7 CITY OF ST. CHARLES, MINNESOTA MANAGEMENT’S DISCUSSION AND ANALYSIS The following graphs relate the various business-type activities’ program revenues with their expenditures. Since all of these activities require significant physical assets to operate, any excess revenues are held for planned capital expenditures to keep pace with growing demand for services. Expenses and Program Revenues - Business-Type Activities $0 $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 $3,500,000 Electric Water Sewer Storm Water Waste Ambulance Drainage Management Program revenues Expenses Revenues by Source - Business-Type Activities Other 1% Charges for services 99% 8 CITY OF ST. CHARLES, MINNESOTA MANAGEMENT’S DISCUSSION AND ANALYSIS FUND BASIS FINANCIAL ANALYSIS As noted earlier, the City of St. Charles uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds. The focus of the City of St. Charles’ governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City of St. Charles’ financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the City of St. Charles’ governmental funds reported combined ending fund balances of $1,363,602, a decrease of $232,531. Approximately 81 percent of this total amount, or $1,097,732, constitutes unreserved fund balance, which is available for spending at the government’s discretion. The remainder of this fund balance is reserved to indicate that it is not available for new spending because it has already been committed 1) to liquidate contracts and purchase orders of the prior period, 2) to repay interfund advances or other debt, or 3) to fund specific capital projects or programs as obligated by statute or other regulation. The general fund is the chief operating fund of the City of St. Charles. At the end of the current fiscal year, unreserved fund balance of the general fund was $377,079. As a measure of the general fund’s liquidity, it may be useful to compare unreserved fund balance and total fund balance to total fund expenditures. Unreserved fund balance represents 28 percent of total general fund expenditures. The general fund’s total fund balance decreased by $32,450 during the current fiscal year. This year’s decrease was primarily due to a $60,948 reduction in state Local Government Aid (LGA). In addition, expenditures to complete projects from the 2007 flood were finished in 2008. The economic development fund decreased its fund balance by $54,951 due to the issuance of loans to NRB Metals, Inc. and Cabin Coffee, Inc. A loan from the electric fund was issued in the amount of $31,788 in order to support the loan issuance to NRB Metals, Inc. The capital improvement fund increased its fund balance by $18,469 for the year, and ended the year with a balance of $200,855. This year’s increase was primarily due to a planned reserve increase for future projects, as well as a delay of 2008 projects. The ambulance fund was converted into an enterprise fund in 2008, due to its ability to be self-supporting. This transfer of governmental assets caused a $145,548 reduction in the governmental fund balance. The debt service funds have a total fund balance of $199,648 all of which is reserved for the payment of debt service on outstanding bonds and notes payable, including tax increment bonds. 9 CITY OF ST. CHARLES, MINNESOTA MANAGEMENT’S DISCUSSION AND ANALYSIS Proprietary funds. The City of St. Charles’ proprietary funds statements found on pages 28-35 provide the same type of information found in the government-wide financial statements, but in more detail. The unrestricted assets in the respective proprietary funds are Electric - $961,291, Water – $395,316, Sewer - $259,531, Storm Water - $21,888, Waste Management - $(9,285), Ambulance - $212,523. Rates increased in the Electric and Sewer proprietary funds during 2008 in order to maintain infrastructure and allow for future improvements. General Fund Budgetary Highlights The City approved the 2008 general fund budget anticipating an increase in general fund reserves of $45,403. The City amended its budget to recognize additional unplanned obligations during the year and offset this somewhat with additional revenue sources. Differences between the original budget and the final budget can be briefly summarized as follows: • Unexpected changes in costs of services and products that were necessary to continue operations in the same manner required an adjustment to the original budgeted figures. • Franchise fees paid to HBC were to be eliminated in 2008. However, due to renegotiation with HBC, franchise fees were paid until the end of 2008. • The Police Department hired an additional officer in order to provide the City with 24 hour police coverage. • Rising fuel costs demanded an increase in budgeted gas and oil accounts. Capital Asset and Debt Administration Capital assets. The City of St. Charles’ investment in capital assets for its governmental and business-type activities as of December 31, 2008, amounts to $20,033,341 (net of accumulated depreciation). This investment in capital assets includes land, buildings and system, improvements, machinery and equipment, park facilities, roads, and bridges. The total increase in the City of St. Charles’ reported investment in capital assets for the current fiscal year was $8,009. City of St. Charles, Minnesota's Capital Assets (net of depreciation) Governmental Business-Type Totals Activities Activities 2008 2007 Land $ 945,602 $ 142,189 $ 1,087,791 $ 892,589 Buildings and improvements 2,485,829 4,818,453 7,304,282 7,423,402 Machinery and equipment 632,791 7,499,598 8,132,389 8,227,277 Infrastructure 3,508,879 3,508,879 3,482,064 Total $ 7,573,101 $ 12,460,240 $ 20,033,341 $ 20,025,332 Additional information on the City of St. Charles’ capital assets can be found in Note 3E on pages 47-48 of this report. 10 CITY OF ST. CHARLES, MINNESOTA MANAGEMENT’S DISCUSSION AND ANALYSIS Long-term debt. At the end of the current fiscal year, the City of St. Charles had $6,649,642 in bonds and notes outstanding. All of this debt is backed by the full faith and credit of the City. City of St. Charles, Minnesota's Outstanding Debt General Obligation and Revenue Bonds and Notes Payable Governmental Business-Type Totals Activities Activities 2008 2007 General obligation bonds $ 1,714,000 $ $ 1,714,000 $ 1,848,000 General obligation tax increment bonds 345,000 345,000 385,000 General obligation revenue bonds 4,515,000 4,515,000 4,900,000 Notes payable 55,629 20,013 75,642 98,227 Total $ 2,114,629 $ 4,535,013 $ 6,649,642 $ 7,231,227 The City of St. Charles’ total bonds and notes payable decreased by $581,585 during the current fiscal year. A more detailed breakdown of these obligations can be found in Note 3G, beginning on page 51. The City of St. Charles maintains an AA bond rating on its general obligation bonds from both Moody’s Investors Service and Standard and Poors. Economic Factors and Next Year’s Budgets and Rates • The unemployment rate for the City of St. Charles ended at 7.7 percent in 2008, which is considerably higher when compared to 2007. However, this rate is lower than the states average of 8.3 percent and the national average rate of 8.5 percent. • As of 2009, St. Charles's population is 3,583 people. Since 2000, it has had a population growth of 7.1 percent. • Compared to the rest of the country, St. Charles's cost of living is 11.61 percent lower than the U.S. average. • The City of St. Charles relies on Local Government Aid (LGA) for 65 percent of its General Fund revenues. Due to recent budget cuts at the state level, the City has taken measures to adjust its 2009 budget to reflect the effects of this change. All of these factors were considered in preparing the City of St. Charles’ budget for the 2009 fiscal year. To deal with both cycles in the economy and to plan for future capital expansion, the City routinely puts aside resources. 11 CITY OF ST. CHARLES, MINNESOTA MANAGEMENT’S DISCUSSION AND ANALYSIS Requests for Information This financial report is designed to provide a general overview of the City of St. Charles’ finances for all those with an interest in the City’s finances. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the City Administrator, City Hall, St. Charles, MN 55976. 12 (This Page is Left Blank Intentionally) CITY OF ST. CHARLES, MINNESOTA FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED DECEMBER 31, 2008 (This Page is Left Blank Intentionally) FORM A-1 CITY OF ST. CHARLES, MINNESOTA STATEMENT OF NET ASSETS December 31, 2008 With Comparative Totals for December 31, 2007 Governmental Business-Type Totals Activities Activities 2008 2007 ASSETS Cash and investments $ 1,428,900 $ 1,186,336 $ 2,615,236 $ 2,532,470 Receivables (net of allowance for uncollectibles) 166,072 532,468 698,540 708,341 Internal balances (92,818) 92,818 Due from other governmental units 57,323 39 57,362 41,336 Inventory 323,393 323,393 374,420 Prepaid items 16,222 10,235 26,457 27,432 Capital assets: Nondepreciable 945,602 142,189 1,087,791 892,589 Depreciable, net 6,627,499 12,318,051 18,945,550 19,132,743 Total Assets 9,148,800 14,605,529 23,754,329 23,709,331 LIABILITIES Accounts payable 63,295 313,617 376,912 275,856 Deposits payable 17,050 17,050 17,772 Accrued interest payable 40,947 30,029 70,976 78,017 Unearned revenue 20,162 20,162 19,935 Compensated absences 28,925 12,872 41,797 27,241 Noncurrent liabilities: Due within one year 191,138 420,013 611,151 580,627 Due in more than one year 1,883,295 4,025,295 5,908,590 6,505,545 Total Liabilities 2,207,600 4,839,038 7,046,638 7,504,993 NET ASSETS Invested in capital assets, net of related debt 5,458,472 7,925,227 13,383,699 12,794,105 Unrestricted 1,482,728 1,841,264 3,323,992 3,410,233 Total Net Assets $ 6,941,200 $ 9,766,491 $ 16,707,691 $ 16,204,338 See Notes to the Financial Statements 13 CITY OF ST. CHARLES, MINNESOTA STATEMENT OF ACTIVITIES For the Fiscal Year Ended December 31, 2008 With Comparative Totals for the Year Ended December 31, 2007 Functions/Programs Governmental activities: General government Public safety Public works Library Parks and recreation Economic development Interest on long-term debt Operating Charges for Grants and Expenses Services Contributions 433,756 $ 18,484 $ 19,612 $ 560,524 66,316 73,872 409,992 1,755 166,807 3,557 47,272 472,971 122,885 27,973 4,336 86,224Program Revenues Capital Grants and Contributions $ 380 16,867 177 1,370 Total governmental activities 2,158,247 217,333 140,756 18,794 Business-Type activities: ElectricWater Sewer Storm water drainage Waste management Ambulance 2,927,791 399,887 483,797 10,403 152,104 162,705 3,114,833 442,733 564,476 46,737 156,409 163,029 10,80912,500 Total business-type activities 4,136,687 4,488,217 10,809 12,500 Total $ 6,294,934 $ 4,705,550 151,565 $ 31,294 $ General revenues: General property taxes Tax increments Franchise fees Grants and contributions not restricted to specific programs Interest earnings Miscellaneous Transfers Total general revenues and transfers Change in net assets Net assets - beginning Net assets - ending See Notes to the Financial Statements 14 FORM A-2 Net (Expense) Revenue and Changes in Net Assets Governmental Business-Type Totals Activities Activities 2008 2007 (395,660) $ (395,660) $ (230,732) $ (419,956) (419,956) (350,478) (391,370) (391,370) (185,143) (115,801) (115,801) (135,018) (348,716) (348,716) (262,587) (23,637) (23,637) (41,794) (86,224) (86,224) (102,359) (1,781,364) (1,781,364) (1,308,111) 199,542 $ 199,542 291,999 42,846 42,846 275,689 80,679 80,679 513,224 36,334 36,334 212,873 4,305 4,305 (9,572) 11,133 11,133 374,839 374,839 1,284,213 (1,781,364) 374,839 (1,406,525) (23,898) 658,451 658,451 570,343 180,757 180,757 144,493 36,317 36,317 33,496 934,336 934,336 775,011 41,336 32,258 73,594 122,598 26,423 26,423 29,137 (143,174) 143,174 1,734,446 175,432 1,909,878 1,675,078 (46,918) 550,271 503,353 1,651,180 6,988,118 9,216,220 16,204,338 14,553,158 6,941,200 $ 9,766,491 $ 16,707,691 $ $ 16,204,338 15 (This Page is Left Blank Intentionally) CITY OF ST. CHARLES, MINNESOTA FUND FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED DECEMBER 31, 2008 CITY OF ST. CHARLES, MINNESOTA BALANCE SHEET GOVERNMENTAL FUNDS December 31, 2008 With Comparative Totals for December 31, 2007 25 34 Capital 10 Economic Improvements General Development Fund ASSETS Cash and investments $ 364,336 54,865 $ 186,632 $ Accounts receivable 11,895 Loans and contracts receivable 123,746 Taxes receivable delinquent 2,406 98 4,386 Special assessments receivable: Deferred 7,994 527 Due from other funds 379 Due from other governmental units 22,351 83 2,893 Advances from other funds 50,000 Prepaid expense 12,952 TOTAL ASSETS $ 422,313 178,792 $ 244,438 $ LIABILITIES AND FUND BALANCE Liabilities: Accounts payable $ 21,882 $ 38,669 $ Due to other funds Advances to other funds 28,818 Deferred revenue 10,400 123,844 4,914 Total Liabilities 32,282 152,662 43,583 Fund Balance: Reserved for: Advances 50,000 Prepaid items 12,952 Debt service Unreserved, designated: 26,130 150,855 Unreserved, undesignated, reported in: General fund 377,079 Special revenue funds Capital project funds Total Fund Balance 390,031 26,130 200,855 TOTAL LIABILITIES AND FUND BALANCE $ 422,313 178,792 $ 244,438 $ See Notes to the Financial Statements 16 FORM B-1 Other Governmental Funds Total Governmental Funds 2008 2007 823,067 $ 5,376 9,644 $ 1,428,900 1,599,204 $ 17,271 66,708 123,746 75,820 16,534 15,477 5,240 31,996 3,270 8,521 5,619 57,323 50,000 16,222 43,415 35,575 41,336 50,000 18,217 878,593 $ $ 1,724,136 1,945,752 $ 2,744 $ 5,619 114,000 9,644 132,007 $ 63,295 58,294 $ 5,619 35,575 142,818 125,000 148,802 130,750 360,534 349,619 3,270 199,648 385,048 50,000 16,222 199,648 562,033 50,000 18,217 255,054 209,437 158,620 746,586 377,079 158,620 1,363,602 408,810 522,229 132,386 1,596,133 878,593 $ $ 1,724,136 1,945,752 $ CITY OF ST. CHARLES, MINNESOTA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS For the Fiscal Year Ended December 31, 2008 With Comparative Totals for the Year Ended December 31, 2007 25 34 Capital 10 Economic Improvements General Development Fund REVENUES Property taxes $ 140,112 $ 6,522 $ 228,991 Tax increments Special assessments 1,729 Licenses and permits 32,499 Fines and forfeits 18,251 Intergovernmental revenues 749,663 760 28,219 Charges for services 177,793 Interest income 11,295 2,026 4,484 Donations Loan repayment 37,214 Miscellaneous revenues 24,926 1,370 TOTAL REVENUES 1,156,268 46,522 263,064 EXPENDITURES Current General government 310,441 2,590 Public safety 362,846 Public works 277,984 Library Parks and recreation 395,797 Economic development 115,473 Capital Outlay 216,206 Debt Service TOTAL EXPENDITURES 1,347,068 115,473 218,796 Excess (deficiency) of revenues over (under) expenditures (190,800) (68,951) 44,268 OTHER FINANCING SOURCES (USES) Transfers in 188,850 14,000 Transfers out (30,500) (25,799) TOTAL OTHER FINANCING SOURCES (USES) 158,350 14,000 (25,799) Net change in fund balances (32,450) (54,951) 18,469 FUND BALANCES, beginning 422,481 81,081 182,386 FUND BALANCES, ending $ 390,031 $ 26,130 $ 200,855 18 FORM B-2 Other Governmental Funds Total Governmental Funds 2008 2007 281,769 $ 180,757 278,350 47,861 23,531 42,095 3,734 $ 657,394 564,871 $ 180,757 144,493 1,729 3,311 32,499 25,780 18,251 18,727 1,056,992 949,635 225,654 375,384 41,336 57,024 42,095 92,227 37,214 163,288 30,030 72,767 858,097 2,323,951 2,467,507 50,685 125,954 135,136 363,716 488,800 277,984 135,136 395,797 115,473 358,285 553,367 264,503 137,465 355,772 41,794 210,678 426,884 302,505 270,195 270,195 289,445 792,648 2,473,985 2,303,136 65,449 (150,034) 164,371 146,661 (375,709) (229,048) 349,511 (432,008) (82,497) 636,469 (495,118) 141,351 (163,599) 910,185 (232,531) 1,596,133 305,722 1,290,411 746,586 $ $ 1,363,602 1,596,133 $ FORM B-3 CITY OF ST. CHARLES, MINNESOTA RECONCILIATION OF NET ASSETS IN THE GOVERNMENT-WIDE FINANCIAL STATEMENTS AND FUND BALANCES IN THE FUND BASIS FINANCIAL STATEMENTS December 31, 2008 Amounts reported for governmental activities in the statement of net assets are different because: Total governmental fund balances (page 17) $ 1,363,602 Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. Governmental funds - capital assets Less: Accumulated depreciation $ 10,936,023 (3,362,922) 7,573,101 Other long-term assets are not available to pay for current-period expenditures and, therefore, are deferred in the funds. Delinquent property taxes and special assessments Deferred special assessments Contracts receivable $ 16,534 8,424 123,844 148,802 Long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported in the funds. Bonds and notes payable $ Compensated absences Accrued interest Unamortized bond issuance costs (2,114,629) (28,925) (40,947) 40,196 (2,144,305) Net assets of governmental activities (page 13) $ 6,941,200 See Notes to the Financial Statements 20 FORM B-4 CITY OF ST. CHARLES, MINNESOTA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES For the Fiscal Year Ended December 31, 2008 Amounts reported for governmental activities in the statement of activities are different because: Net change in fund balances - total governmental funds (page 19) $ (232,531) Governmental funds reported capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. Capital outlay - capital projects fund $ 426,884 Depreciation expense (407,115) 19,769 The net effect of various miscellaneous transactions involving capital assets (i.e., sales, trade-ins, and donations) is to decrease net assets. Transfer of capital assets to business type activities $ (93,578) Other 35,942 (57,636) Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. Deferred revenue, December 31, 2008 $ 148,802 Deferred revenue, December 31, 2007 (130,750) 18,052 Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. Change in compensated absences (11,444) Bond proceeds provide current financial resources to governmental funds, but issuing debt increases long-term liabilities in the statement of net assets. Repayment of bond principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net assets. Principal retirement on long-term debt $ 179,770 Transfer of long-term debt to business type activities 32,901 Change in accrued interest 4,201 216,872 Change in net assets of governmental activities (pages 15) $ (46,918) See Notes to the Financial Statements 21 FORM B-5 CITY OF ST. CHARLES, MINNESOTA GENERAL FUND Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual For the Fiscal Year Ended December 31, 2008 With Comparative Totals for the Year Ended December 31, 2007 Variance with REVENUES Original Final Budgeted Amounts 2008 Actual Amounts Final Budget Positive (Negative) 2007 Actual Amounts Property Tax Levy Property tax collected 130,982 $ 130,982 $ 140,112 $ 9,130 $ $ 131,285 Special Assessments 5,000 5,000 1,729 (3,271) 3,311 Licenses and Permits Business and nonbusiness licenses Building permits Total Licenses and Permits 11,200 15,000 26,200 11,200 15,000 26,200 11,129 21,370 32,499 (71) 6,370 6,299 5,622 20,158 25,780 Intergovernmental Revenues Local government aid Market value credit Police aid PERA aid Highway FEMA grant Total Intergovernmental Revenues 747,520 17,062 2,412 5,000 771,994 747,520 17,062 18,000 2,412 5,000 789,994 686,572 17,062 26,750 2,412 16,867 749,663 (60,948) 8,750 (5,000) 16,867 (40,331) 682,93917,679 19,4062,412 4,053 97,328 823,817 Charges For Services Street Swimming pool Park and recreation Cable franchise fees Senior center rental Natural gas franchise fees Other Total Charges For Services 500 87,700 42,500 25,000 5,000 16,500 1,000 178,200 500 87,700 42,500 25,000 5,000 16,500 1,000 178,200 1,755 81,620 37,883 36,317 3,382 16,836 177,793 1,255 (6,080) (4,617) 11,317 (1,618) 336 (1,000) (407) 8,570 90,257 38,76533,496 5,63512,682 7,730 197,135 Fines and Forfeits Court fines and other 14,000 20,000 18,251 (1,749) 18,727 Interest Income 8,000 8,000 11,295 3,295 25,848 Miscellaneous Revenues Other 2,450 2,450 24,926 22,476 29,407 TOTAL REVENUES 1,136,826 $ 1,160,826 $ 1,156,268 $ (4,558) $ $ 1,255,310 See Notes to the Financial Statements 22 FORM B-5 CITY OF ST. CHARLES, MINNESOTA GENERAL FUND Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual For the Fiscal Year Ended December 31, 2008 With Comparative Totals for the Year Ended December 31, 2007 Variance with 2008 Final Budget -2007 Budgeted Amounts Actual Positive Actual Original Final Amounts (Negative) Amounts EXPENDITURES General Government Mayor and Council Salaries $ 24,838 $ 24,838 $ 27,325 $ (2,487) $28,248 Transportation and training 2,000 2,000 1,737 263 1,834 Printing and publication 300 300 300 711 Other 500 500 122 378 410 Total Mayor and Council 27,638 27,638 29,184 (1,546) 31,203 Election and Voter Registration 4,000 4,000 3,537 463 2,091 General and Financial Administration Salaries 69,617 69,617 69,135 482 63,660 Employee benefits and retirement 15,250 15,250 14,523 727 12,360 Supplies and minor equipment 8,000 8,000 7,274 726 9,985 Communication 6,000 31,000 27,302 3,698 21,606 Transportation and training 4,000 4,000 4,000 2,501 Printing and publication 1,000 1,000 1,220 (220) 11,044 Insurance 5,500 5,500 4,920 580 4,073 Repairs and maintenance 7,000 7,000 7,191 (191) 9,973 Assessor 15,000 15,000 16,009 (1,009) 15,350 Accounting and audit 13,000 9,300 9,210 90 12,040 Legal 18,000 18,000 13,446 4,554 22,386 Planning and zoning 2,000 2,000 136 1,864 897 Building inspection 20,000 20,000 24,650 (4,650) 25,863 Health officer and other 15,500 15,500 12,802 2,698 9,279 Memberships 8,000 8,000 10,474 (2,474) 9,919 Other 16,662 19,462 22,671 (3,209) 27,023 Total General and Financial Administration 224,529 248,629 244,963 3,666 257,959 City Hall Salaries 9,000 6,500 4,686 1,814 9,658 Employee benefits and retirement 1,408 590 455 135 1,478 Supplies and minor equipment 2,000 2,000 1,819 181 1,926 Insurance 800 1,040 876 164 769 Utilities 10,000 15,000 16,103 (1,103) 11,644 Repairs and maintenance 6,250 6,250 8,818 (2,568) 6,075 Total City Hall 29,458 31,380 32,757 (1,377) 31,550 Total General Government $ 285,625 $ 311,647 $ 310,441 $ 1,206 $ 322,803 See Notes to the Financial Statements 23 FORM B-5 CITY OF ST. CHARLES, MINNESOTA GENERAL FUND Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual For the Fiscal Year Ended December 31, 2008 With Comparative Totals for the Year Ended December 31, 2007 Variance with 2008 Final Budget -2007 Budgeted Amounts Actual Favorable Actual Original Final Amounts (Unfavorable) Amounts EXPENDITURES (continued) Public Safety Police Department Salaries $ 204,905 $ 225,905 $ 230,586 $ (4,681) $ 220,551 Employee benefits and retirement 65,597 55,697 68,324 (12,627) 56,339 Supplies and minor equipment 17,650 21,650 21,553 97 21,475 Professional services 5,500 5,500 10,549 (5,049) 7,069 Communication 3,600 3,600 3,248 352 3,868 Transportation and training 3,000 3,800 4,257 (457) 2,531 Printing and publication 200 200 389 (189) 1,376 Insurance 7,000 5,900 5,704 196 6,892 Repairs and maintenance 6,550 10,050 13,218 (3,168) 8,161 Other 4,250 4,250 5,018 (768) 4,003 Total Police Department 318,252 336,552 362,846 (26,294) 332,265 Total Public Safety 318,252 336,552 362,846 (26,294) 332,265 Public Works Street Department Salaries 110,569 110,569 112,845 (2,276) 110,983 Employee benefits and retirement 32,546 31,546 37,376 (5,830) 34,143 Supplies and minor equipment 13,550 21,250 19,543 1,707 19,422 Professional services 2,500 2,500 2,603 (103) 2,073 Communication 800 800 1,401 (601) 1,214 Transportation and training 2,000 2,000 3,130 (1,130) 1,969 Printing and publication 100 100 34 66 62 Insurance 6,000 5,200 4,843 357 5,549 Utilities 4,200 8,000 5,594 2,406 5,039 Repairs and maintenance 67,140 69,140 64,413 4,727 83,364 FEMA project 25,688 (25,688) Other 650 650 514 136 685 Total Public Works $ 240,055 $ 251,755 $ 277,984 $ (26,229) $ 264,503 See Notes to the Financial Statements 24 FORM B-5 CITY OF ST. CHARLES, MINNESOTA GENERAL FUND Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual For the Fiscal Year Ended December 31, 2008 With Comparative Totals for the Year Ended December 31, 2007 Variance with 2008 Final Budget -2007 Budgeted Amounts Actual Positive Actual Original Final Amounts (Negative) Amounts EXPENDITURES (continued) Parks and Recreation Recreation Salaries $ 86,978 $ 86,978 $ 83,073 $ 3,905 $ 88,647 Employee benefits and retirement 16,604 16,604 15,764 840 15,193 Supplies and minor equipment 1,500 1,500 158 1,342 1,255 Communication 2,000 2,000 2,065 (65) 2,243 Transportation and training 2,100 2,100 1,967 133 2,258 Printing and publication 500 500 241 259 250 Insurance 3,000 3,000 2,595 405 2,836 Repairs and maintenance 700 700 536 164 966 Recreation programs 28,000 28,000 21,958 6,042 25,160 Other 2,475 2,475 2,396 79 1,739 FEMA project 10,092 (10,092) Capital outlay 150 150 150 Total Recreation 144,007 144,007 140,845 3,162 140,547 Swimming Pool Program Salaries 47,843 47,843 54,031 (6,188) 57,408 Employee benefits and retirement 6,060 5,660 6,375 (715) 6,698 Supplies and minor equipment 21,400 21,400 18,083 3,317 19,674 Communication 500 500 520 (20) 385 Transportation and training 2,500 2,500 2,231 269 2,599 Printing and publication 600 600 216 384 746 Insurance 10,000 9,620 8,838 782 9,649 Utilities 12,000 12,000 22,152 (10,152) 17,278 Repairs and maintenance 10,500 10,500 10,128 372 7,635 Other 4,500 4,500 4,063 437 3,544 Total Swimming Pool Program 115,903 115,123 126,637 (11,514) 125,616 Parks Salaries 26,107 26,107 30,065 (3,958) 24,920 Employee benefits and retirement 6,019 7,369 8,232 (863) 6,017 Supplies and minor equipment 4,650 4,650 6,521 (1,871) 5,194 Professional services 1,131 Communication 500 500 500 500 Transportation and training 400 400 290 110 385 Printing and publication 100 200 152 48 177 Insurance 3,000 3,200 2,819 381 2,911 Repairs and maintenance 25,975 26,975 29,043 (2,068) 25,362 FEMA project 14,388 (14,388) Other 1,900 1,900 1,597 303 2,295 Total Parks $ 68,651 $ 71,301 $ 93,607 $ (22,306) $ 68,892 See Notes to the Financial Statements 25 FORM B-5 CITY OF ST. CHARLES, MINNESOTA GENERAL FUND Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual For the Fiscal Year Ended December 31, 2008 With Comparative Totals for the Year Ended December 31, 2007 Variance with 2008 Final Budget -2007 Budgeted Amounts Actual Positive Actual Original Final Amounts (Negative) Amounts EXPENDITURES (continued) Forestry Insurance $ 80 $ 80 $ 69 $ 11 $ 78 Repairs and maintenance 5,000 5,000 24,800 (19,800) 7,550 Other 2,000 2,000 2,000 2,000 Total Forestry 7,080 7,080 26,869 (19,789) 9,628 Senior Citizens Center Insurance 550 820 800 20 512 Utilities 5,100 7,000 6,310 690 6,742 Repairs and maintenance 3,550 3,550 729 2,821 3,835 Total Senior Citizens Center 9,200 11,370 7,839 3,531 11,089 Total Parks and Recreation 344,841 348,881 395,797 (46,916) 355,772 TOTAL EXPENDITURES 1,188,773 1,248,835 1,347,068 (98,233) 1,275,343 Excess (deficiency) of revenues over (under) expenditures (51,947) (88,009) (190,800) (102,791) (20,033) OTHER FINANCING SOURCES (USES) Transfers in 127,850 127,850 188,850 61,000 151,763 Transfers out (30,500) (30,500) (30,500) (70,139) Total Other Financing Sources (Uses) 97,350 97,350 158,350 61,000 81,624 Net change in fund balances 45,403 9,341 (32,450) (41,791) 61,591 FUND BALANCES, beginning 422,481 422,481 422,481 360,890 FUND BALANCES, ending $ 467,884 $ 431,822 $ 390,031 $ (41,791) $ 422,481 See Notes to the Financial Statements 26 FORM B-6 CITY OF ST. CHARLES, MINNESOTA ECONOMIC DEVELOPMENT FUND Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual For the Fiscal Year Ended December 31, 2008 With Comparative Totals for the Year Ended December 31, 2007 Variance with 2008 Final Budget 2007 Actual Positive Budgeted Amounts Actual Original Final Amounts (Negative) Amounts REVENUES Property Tax Levy Property tax collected $ $ 6,522 $ 6,522$ 17$ Market Value Credit 760 760 Interest Income 2,300 2,300 2,026 (274) 8,013 Loan Repayment 23,300 23,300 37,214 13,914 163,288 TOTAL REVENUES 25,600 25,600 46,522 20,922 171,318 EXPENDITURES Economic Development Professional services 21,500 29,000 27,803 1,197 21,687 Office supplies 99 (99) 4,149 Capital outlay 15,716 Revolving loans 3,200 87,500 87,500 Other 71 (71) 242 TOTAL EXPENDITURES 24,700 116,500 115,473 1,027 41,794 Excess (deficiency) of revenues over (under) expenditures 900 (90,900) (68,951) 21,949 129,524 OTHER FINANCING SOURCES (USES) Transfers in 14,000 45,788 14,000 (31,788) 6,500 Net change in fund balances 14,900 (45,112) (54,951) (9,839) 136,024 FUND BALANCES, beginning 81,081 81,081 81,081 (54,943) FUND BALANCES, ending 95,981$ 35,969$ 26,130 $ (9,839)$ 81,081$ See Notes to the Financial Statements 27 CITY OF ST. CHARLES, MINNESOTA PROPRIETARY FUNDS Statement of Net Assets December 31, 2008 With Comparative Totals for December 31, 2007 Business-Type Activities - Enterprise Funds ASSETS 70 Electric 71 Water 72 Sewer Storm Water 73 Current Assets Cash and investments Accounts receivable, net Accrued utility revenue Special assessments-deferred Taxes receivable-delinquent Due from other governmental units Advances to other funds Inventory Prepaid expenses Total Current Assets 501,840 $ 256,102 93,766 50,282 307,495 7,571 1,217,056 297,027 $ 61,075 7,347 18,494 15,898 1,742 401,583 166,659 $ 49,380 17,683 80024,042 271258,835 22,090 $ 4,0662,65728,813 Noncurrent Assets Capital assets: Nondepreciable Depreciable Less: Accumulated depreciation Net Capital Assets 113,489 8,977,233 2,227,408 6,863,314 4,175,710 1,503,563 2,672,147 28,7003,114,484 626,453 2,516,731 349,91414,360335,554 Total Assets 8,080,370 3,073,730 2,775,566 364,367 LIABILITIES Current Liabilities Current maturities of bonds payable Accounts payable Deferred revenue Customer deposits Accrued interest payable Total Current Liabilities 170,000 287,215 17,05010,659 484,924 115,700 10,703 11,041 137,444 114,3005,245 8008,329128,674 6,9256,925 Noncurrent Liabilities Bonds payable, net of current maturities Less: Unamortized bond discount Total Noncurrent Liabilities 2,970,000 (59,159) 2,910,841 555,350 (15,477) 539,873 589,650(15,070) 574,580 Total Liabilities 3,395,765 677,317 703,254 6,925 NET ASSETS Invested in capital assets, net of related debt Unrestricted 3,723,314 961,291 2,001,097 395,316 1,812,781 259,531 335,554 21,888 Total Net Assets $ 4,684,605 $ 2,396,413 $ 2,072,312 $ 357,442 See Notes to the Financial Statements 28 FORM C-1 23 Waste Management 22 Ambulance 2008 Totals 2007 23,194 $ 23,194 175,526 $ 39,539 53 39 651 215,808 $ 1,186,336 410,162 121,453 800 53 39 92,818 323,393 10,235 2,145,289 958,826 $ 384,975 95,586 800 75,000 374,420 9,215 1,898,822 157,335 84,841 72,494 142,189 16,774,676 4,456,625 12,460,240 132,189 16,245,249 3,963,074 12,414,364 23,194 288,302 14,605,529 14,313,186 13,170 19,309 32,479 20,013 3,232 53 23,298 420,013 326,490 20,162 17,050 30,029 813,744 385,000 227,322 19,935 17,772 32,869 682,898 4,115,000 (89,706) 4,025,294 4,515,000 (100,932) 4,414,068 32,479 23,298 4,839,038 5,096,966 (9,285) 52,481 212,523 7,925,227 1,841,264 7,514,364 1,701,856 (9,285) $ 265,004 $ $ 9,766,491 $ 9,216,220 See Notes to the Financial Statements CITY OF ST. CHARLES, MINNESOTA PROPRIETARY FUNDS Statement of Revenues, Expenses and Changes in Fund Net Assets For the Fiscal Year Ended December 31, 2008 With Comparative Totals for the Year Ended December 31, 2007 Business-Type Activities - Enterprise Funds 70 71 72 73 Electric Water Sewer Storm Water Operating Revenues Consumer sales and rentals Discounts Total Operating Revenues 3,068,778 $ $ (598) 3,068,180 434,010 $ 434,010 536,449 536,449 46,737 $ 46,737 Operating Expenses Purchased utilities Salaries Employee benefits and retirement Gas and oil Generation fuel Supplies and minor equipment Professional services Communication Transportation and training Printing and publishing Insurance Utilities Repairs and maintenance Depreciation and amortization Bad debts (recoveries) FEMA project Other Total Operating Expenses 1,914,270 283,635 256,989 87,059 37,27473,748 22,645 9,152 8,47550,29611,256 27,970 5,333 46,711 14,796 6,251 7,980 4,291 1,90232,725 3,996 71418,892 4,278 554 1,751 56,904 2,96690,793 34,106 34,243237,165 103,775 60,171 1,533 1,128 38,511 1,017 8982,791,095 360,837 444,221 600 7,598 2,205 10,403 Operating Income 277,085 73,173 92,228 36,334 Nonoperating Revenues (Expenses) Interest income Availability charges FEMA grant Compost and recycling fees MISO income Miscellaneous income Interest and fiscal charges Total Nonoperating Revenues (Expenses) 12,882 9,062 4,737 (8,812) (15,862) 12,5007,83138,822 8,723 28,027(136,696) (30,238) (23,714) (64,661) (21,265) (6,812) 659659 INCOME BEFORE TRANSFERS AND CONTRIBUTIONS 212,424 51,908 85,416 36,993 Contributed capital Transfers in Transfers out 25,799 (90,000) (30,000) CHANGE IN NET ASSETS 122,424 21,908 111,215 36,993 NET ASSETS - BEGINNING OF YEAR 4,562,181 2,374,505 1,961,097 320,449 TOTAL NET ASSETS - END OF YEAR 4,684,605 $ 2,396,413 $ 2,072,312 $ 357,442 $ See Notes to the Financial Statements 30 FORM C-2 23 Waste Management 22 Ambulance 2008 Totals 2007 118,510 $ 118,510 163,029 $ 163,029 $ 4,367,513 $ (598) 4,366,915 3,838,901 (9,042) 3,829,859 151,654 450 152,104 67,290 11,183 20,608 10,003 1,992 8,877 1,153 9,772 21,084 5,375 2,787 160,124 2,349,559 448,612 116,728 8,475 50,296 65,167 78,361 16,165 46,312 24,877 61,621 168,914 429,793 6,908 3,333 43,663 3,918,784 2,004,374 350,290 103,207 6,565 104,015 37,488 73,400 15,797 12,252 1,929 24,061 48,239 48,341 400,690 790 43,762 3,275,200 (33,594) 2,905 448,131 554,659 772 37,899 38,671 4,146 10,809 (2,581) 12,374 32,258 (24,674) 12,500 37,899 7,831 86,381 (193,229) (41,034) 65,575 75,998 11,030 27,916 13,154 97,510 (218,154) 73,029 5,077 15,279 407,097 627,688 (12,350) 60,677 195,548 (6,500) 60,677 221,347 (138,850) 722,100 (141,350) (7,273) 265,004 550,271 1,208,438 (2,012) 9,216,220 8,007,782 (9,285) $ 265,004 $ $ 9,766,491 $ 9,216,220 See Notes to the Financial Statements CITY OF ST. CHARLES, MINNESOTA PROPRIETARY FUNDS Statement of Cash Flows For the Fiscal Year Ended December 31, 2008 With Comparative Totals for the Year Ended December 31, 2007 Business-Type Activities - Enterprise Funds Electric Water Sewer Storm Water Cash Flows From Operating Activities Cash received from customers Access and other fees received Cash paid to suppliers and employees $ 3,035,218 59,153 (2,391,530) $ 437,670 8,723 (251,769) $ 529,945 28,027(407,839) $45,632 1,066 Net Cash Provided By (Used In) Operating Activities 702,841 194,624 150,133 46,698 Cash Flows From Noncapital Financing Activities Transfer in Transfer out (90,000) (30,000) 25,799Net Cash Provided By (Used In) Noncapital Financing Activities (90,000) (30,000) 25,799 Cash Flows From Capital and Related Financing Activities Capital asset acquisitions Advances (to) from other funds Principal payments on long-term debt Interest payments on long-term debt Net Cash Provided By (Used In) Capital and Related Financing Activities (205,867) (27,282) (165,000) (137,108) (535,257) (51,712) 4,506 (125,400) (31,622) (204,228) (63,647) 4,958(94,600) (24,758) (178,047) (49,639) (49,639) Cash Flows From Investing Activities Investment income received 12,882 9,062 4,737 659 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 90,466 (30,542) 2,622 (2,282) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 411,374 327,569 164,037 24,372 CASH AND CASH EQUIVALENTS, END OF YEAR $ 501,840 $ 297,027 $ 166,659 $ 22,090 See Notes to the Financial Statements 32 Waste Totals Management Ambulance 2008 2007 $ 118,684 $ 150,056 $ 4,317,205 $ 3,859,509 37,899 10,770 144,572 146,999 (153,285) (137,661) (3,341,018) (2,958,380) 3,298 23,165 1,120,759 1,048,128 168,421 194,220 (12,350) (6,500) (138,850) (141,350) (12,350) 161,921 55,370 (141,350) (370,865) (260,294) (17,818) 170,000 (12,888) (397,888) (375,000) (2,581) (196,069) (220,668) (15,469) (982,640) (685,962) 772 5,909 34,021 78,507 (8,280) 175,526 227,510 299,323 31,474 958,826 659,503 $ 23,194 $ 175,526 $ 1,186,336 $ 958,826 See Notes to the Financial Statements RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Business-Type Activities - Enterprise Funds Electric Water Sewer Storm Water Operating Income (Loss) Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation and amortization MISO income Compost fees Recycling fees Miscellaneous nonoperating income Availability charges FEMA grant (Increase) Decrease In: Accounts receivable Due from other governmental units Inventory Prepaid items Increase (Decrease) In: Accounts and contracts payable Customer deposits $ 277,085 73,173 $ 92,228 $ 36,334 $ 237,165 103,775 60,171 7,5987,83138,822 8,723 28,027(8,812) (15,862) 12,500(32,240) 12,472 9,358 (1,105) 48,148 2,879(525) 146 10114,777 2,268 (23,799) 3,871(722) Net Cash Provided By (Used In) Operating Activities $ 702,841 $ 194,624 $ 150,133 $ 46,698 Noncash Capital and Related Financing Activities Utility capital assets acquired by Contributed by developers Noncash assets transferred in$ $ $ $ Debt transferred in See Notes to the Financial Statements 34 FORM C-3 Waste Management Ambulance 2008 Totals 2007 (33,594) $ 2,905 $ 448,131 $ 554,659 $ 11,039 26,860 21,084 10,809 429,793 7,831 11,039 26,860 86,381 (24,674) 12,500 400,690 13,154 10,991 16,925 97,510 75,998 8,419 (12,973) (39) 267 (24,488) (39) 51,027 (102) (42,038) (115,917) (352) (1,181) 174 1,112 97,048 (548) 32,399 (4,310) 3,298 $ 23,165 $ $ 1,120,759 $ 1,048,128 $ $ 93,578 32,901 $ 722,100 $ 93,578 32,901 See Notes to the Financial Statements 35 (This Page Left Blank Intentionally) CITY OF ST. CHARLES, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS CITY OF ST. CHARLES, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS 1. Summary of Significant Accounting Policies The accounting policies of the City of St. Charles, Minnesota, conform to generally accepted accounting principles applicable to governmental units. The following is a summary of the more significant accounting policies: A. Reporting Entity In accordance with Statement No. 14 of the Governmental Accounting Standards Board, The Financial Reporting Entity, the City's financial statements include the primary government and the component units of the City of St. Charles, defined as follows: Primary Government - Includes all funds, account groups, organizations, institutions, agencies, departments, or offices which are not legally separate from the City of St. Charles. Component Units - Component units are legally separate organizations for which the elected officials of the City of St. Charles are financially accountable or for which the nature or significance of their relationship with the City of St. Charles would cause the general purpose financial statements to be misleading or incomplete. Based on these criteria, there are no component units of the City of St. Charles. B. Government-wide and Fund Financial Statements The government-wide financial statements (i.e., the statement of net assets and the statement of activities) report information on all of the nonfiduciary activities of the City. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment is 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 segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds and proprietary funds. Major individual governmental funds and all enterprise funds are reported as separate columns in the fund financial statements. 36 CITY OF ST. CHARLES, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 1. Summary of Significant Accounting Policies (Continued) C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Property taxes, licenses and permits, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the City. The City reports the following major governmental funds: The general fund is the government’s primary operating fund. It accounts for all financial resources of the City, except those required to be accounted for in another fund. The economic development fund accounts for the City economic development activities. The capital improvement fund accounts for the financial resources to be used for city street and other public infrastructure improvements. The City reports the following major proprietary funds: The electric fund accounts for the operations of the City owned electric utility system. The water fund accounts for the operation of the City owned water utility system. 37 CITY OF ST. CHARLES, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 1. Summary of Significant Accounting Policies (Continued) C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (continued) The City reports the following major proprietary funds (continued): The sewer fund accounts for the operation of the City owned sewer utility system. The storm water fund accounts for the operation of the City owned storm water drainage system. The waste management fund accounts for the operation of the City owned waste management system. The ambulance fund accounts for the operation of the City ambulance activities. Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the government-wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Governments also have the option of following subsequent private-sector guidance for their business-type activities and enterprise funds, subject to this same limitation. The City has elected not to follow subsequent private-sector guidance. As a general rule the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are charges between the City’s enterprise funds and various other functions of the City. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the City’s 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 of capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. When both restricted and unrestricted resources are available for use, it is the City’s policy to use restricted resources first, then unrestricted resources as they are needed. 38 CITY OF ST. CHARLES, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 1. Summary of Significant Accounting Policies (Continued) D. Assets, Liabilities, and Net Assets or Equity Cash and Investments Except where otherwise required, the City maintains all deposits in accounts in the name of the City. The deposits are invested on a short-term basis with interest income allocated to each fund based upon their relative account balance. The balances shown in each fund represents an equity interest in the commingled pool of cash and investments which is under the management of the City. Investments consist primarily of nonparticipating certificates of deposit recorded at cost, which approximates market value. Interfund Balances Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either “due to/from other funds” (i.e., the current portion of interfund loans) or “advances to/from other funds” (i.e., the non-current portion of interfund loans). All other outstanding balances between funds are reported as “due 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.” Advances between funds, as reported in the fund financial statements, are offset by a fund balance reserve account in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources. Property Taxes Property tax levies are set by the City Council in October of each year and are certified to Winona County for collection in the following year. In Minnesota, counties act as collection agents for all property taxes. The County spreads all levies over taxable property. Such taxes become a lien on January 1, following, and are recorded as receivables by the City at that date. Revenues for property taxes are accrued and recognized in the year collectible, net of delinquencies. Real property taxes may be paid by taxpayers in two equal installments on May 15 and October 15. Personal property taxes may be paid on February 28 and June 30. The County provides tax settlements to cities and other taxing districts normally during the months of July and December. Taxes which remain unpaid at December 31 are classified as delinquent taxes receivable. The amount of delinquent taxes receivable are fully offset by deferred revenue in the governmental fund types because they are not known to be available to finance current expenditures. 39 CITY OF ST. CHARLES, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 1. Summary of Significant Accounting Policies (Continued) D. Assets, Liabilities, and Net Assets or Equity (continued) Special Assessments Assessments are levied at various times upon City Council resolution for property owner improvements made by the City. Assessment collections are deferred over periods ranging from three to fifteen years with interest charges of 6.0% to 12.0%. Revenue from these assessments is recognized as the annual installments become collectible. Annual installments not collected as of each December 31 are classified as delinquent assessments receivable. The amount of delinquent assessments receivable are fully offset by deferred revenue in the Governmental Fund Types because they are not known to be available to finance current expenditures. Tax Increment Districts Tax increment revenues received are recorded in the Debt Service Fund to the extent required to service bond principal and interest payments due plus 5 percent of such payments. Any remaining property tax revenues are recognized in the Capital Projects Funds for the tax increment district. Inventory The inventory, representing electric and water utility supplies in the Enterprise Fund, is valued at the lower of cost or market on a first-in, first-out basis. Capital Assets Capital assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items), are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the government as assets with an initial, individual cost of more than $3,000. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. 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, net of interest earned on the invested debt proceeds over the same period. 40 CITY OF ST. CHARLES, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 1. Summary of Significant Accounting Policies (Continued) D. Assets, Liabilities, and Net Assets or Equity (continued) Capital Assets (continued) Property, plant and equipment are capitalized when acquired, and depreciation is provided using the straight-line method applied over the following estimated useful lives of the assets. Useful Life in Years Buildings 10 - 40 Infrastructure 15 - 67 Other Improvements 5 - 40 Machinery and Equipment 2 - 20 GASB Statement No. 34 required the City to report and depreciate new infrastructure assets effective January 1, 2004. Infrastructure assets include roads, bridges, underground pipe (other than related to utilities), traffic signals, etc. These infrastructure assets are likely to be the largest asset class of the City. Neither their historical cost nor depreciation related to assets acquired prior to 2004 have been reported in the financial statements. Market Value Credit (MVC) Property taxes on homestead property (as defined by State Statutes) are partially reduced by MVC. This credit is paid to the City by the State in lieu of taxes levied against homestead property. The State remits this credit through installments each year. The revenue is recognized as intergovernmental revenue by the City when received. Compensated Absences Vacation, sick pay and compensatory overtime are accrued when earned in the government-wide financial statements and the proprietary fund types. In the Governmental Funds of the fund financial statements, vacation, sick pay and compensatory overtime are recorded as expenditures and accrued as current liability only if they have matured, for example, as a result of employee’s resignations and retirements. Long-term Obligations Long-term debt is recognized as a liability of a governmental fund when due, or when resources have been accumulated in the debt service fund for payment early in the following year. For other long-term obligations, only that portion expected to be financed from expendable available financial resources is reported as a fund liability of a governmental fund. The remaining portion of such obligations is reported in the general long-term debt account group. Long-term liabilities expected to be financed from enterprise fund operations are accounted for in those funds. 41 CITY OF ST. CHARLES, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 1. Summary of Significant Accounting Policies (Continued) D. Assets, Liabilities, and Net Assets or Equity (continued) Concentration of Credit Risk Financial instruments which expose the City to a concentration of credit risk consist primarily of cash investments and accounts and loans receivable. The City's accounts and loans receivable are concentrated geographically, as for the most part, amounts are due from individuals residing in and businesses located in the City of St. Charles. Fund Equity Reserves represent those portions of fund equity not appropriable for expenditure or legally segregated for a specific future use. Designated fund balances represent tentative plans for future use of financial resources E. Comparative Data Comparative data for the prior year has been presented in certain of the accompanying financial statements in order to provide an understanding of changes in the City’s financial position and operations. However, complete comparative data has not been presented since their inclusion would not provide meaningful comparisons. Certain amounts in the prior year totals column have been reclassified to conform with the current year presentation. 2. Stewardship, Compliance, and Accountability A. Budgetary Information Annual budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America. Annual appropriated budgets are legally adopted by Council resolution for the General and Special Revenue Funds. Formal budgetary integration is employed as a management control device during the year for the General Fund and Special Revenue Funds. Formal budgetary integration is not employed for the Debt Service Funds because effective budgetary control is alternately achieved through general obligation bond indenture provisions. Budgetary control for the Capital Project Funds is based on a project completion time cycle rather than an annual basis, therefore budgetary comparisons on an annual basis would not present meaningful information. 42 CITY OF ST. CHARLES, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 2. Stewardship, Compliance, and Accountability (Continued) A. Budgetary Information (Continued) The City follows these legal compliance procedures in establishing the budgetary data reflected in the financial statements: 1. The City Administrator submits a proposed operating budget to the City Council prior to the end of each year for the fiscal year commencing the following January 1. The operating budget includes proposed expenditures and means of financing them. 2. Public hearings are conducted to obtain taxpayer comments. 3. Prior to December 28, the budget is legally enacted through the passage of a budget resolution. 4. Any changes to the budget at the functional level must be by formal resolution of the City Council. All budget amounts presented in the accompanying supplementary information reflect the original budget and the final budget (which have been adjusted for legally authorized revisions of the annual budgets during the year). B. Firemen's Relief Association of St. Charles The activities of this association are not included in the City's financial statements. The association has been organized by its members to provide pension benefits to members in accordance with Minnesota statutes. Other than funding the association with tax levies and state aids according to state law, the City and the association are not financially interdependent. The association makes independent selections of their board of directors and management of the association is autonomous with the City. Operations and fiscal matters are not influenced by the City. 43 CITY OF ST. CHARLES, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 3. Detailed Notes on All Funds A. Summary of Cash and Investments As of December 31, 2008, the City’s cash and investments consisted of the following items, all of which are held in an internal investment pool: Cash on hand $ 882 Deposits 1,169,486 Certificates of deposit U.S. Treasury Securities Money Market Funds Total Cash on Hand and Deposits $ 1,035,886 406,723 2,259 2,615,236 Investments Authorized by Minnesota Statues The City is authorized by Minnesota Statues to invest idle funds as follows: a) Direct obligations or obligations guaranteed by the United States or its agencies. b) Shares of investment companies registered under the Federal Investment Company Act of 1940 and whose only investments are in securities described in (a) above. c) General obligations of the State of Minnesota or its municipalities. d) Bankers acceptances of United States banks eligible for purchase by the Federal Reserve System. e) Commercial paper issued by United States corporations or their Canadian subsidiaries, of the highest quality, and maturing in 270 days or less. f) Repurchase agreements with banks that are members of the Federal Reserve System with capitalization exceeding $10,000,000, a reporting dealer in to the Federal Reserve Bank of New York, or certain Minnesota securities broker-dealers. g) Money market funds with institutions that have portfolios consisting exclusively of United States Treasury obligations and Federal Agency issues. 44 CITY OF ST. CHARLES, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 3. Detailed Notes on All Funds (Continued) Collateralization of Cash Deposits The City’s deposits are entirely covered by federal depository insurance or by collateral held by the City’s custodial bank in the City’s name. Minnesota Statues require that all City deposits be insured, secured by surety bonds or be collateralized. Except for notes secured by first mortgages of future maturity, the market value of collateral pledged by the custodial bank must equal 110% of the deposits not covered by insurance or surety bonds. Authorized collateral includes certain state of local government obligations and legal investments. Minnesota Statues also require that securities pledged as collateral be held in safekeeping by the Treasurer, or in a financial institution other than the institution furnishing the collateral. Interest Rate Risk The City does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. Credit Risk The City has no investment policy that would limit its investment choices. The City’s investment ratings are from Standard & Poor Investors Service. Concentration of Credit Risk The City places no limit on the amount the City may invest in any one issuer. At December 31, 2008, there were no individual investments greater than 5 percent of the City’s total investments. 45 CITY OF ST. CHARLES, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 3. Detailed Notes on All Funds (Continued) B. Deferred Special Assessments Receivable Deferred assessments receivable represent levies made on the property of owners benefited by public improvement projects. Assessments are payable over various periods and interest is charged at rates coinciding with improvement bonds. A summary of the deferred special assessments excluding interest charges, as of December 31, 2008 is as follows: General Fund 1979 Public Improvement Project $ 1,446 2004 Public Improvement Project 2,922 2005 Public Improvement Project 3,626 Total General Fund 7,994 Capital Projects Funds Capital Improvements Fund 527 Enterprise Funds Sewer Fund 800 Total $ 9,321 C. Loans and Contracts Receivable The City has made several loans through its economic development program. These loans are payable over terms ranging from 3 to 15 years, with interest rates ranging from 3% to 6% over the term of the loan. These loans are recorded in the Special Revenue Fund at the Economic Development individual fund level, and are offset by a deferred revenue account until the repayments are made. D. Due From Other Governmental Units Amounts due from other governmental units at December 31, 2008 are as follows: Winona State of Fund County Townships Minnesota Total General 1,749 $ $ 20,602 $ 22,351 $ Special Revenue 1,875 24,715 26,590 Debt Service 1,748 1,748 Capital Project 6,634 6,634 Enterprise 39 39 $ 12,045 $ 24,715 $ 20,602 $ 57,362 46 CITY OF ST. CHARLES, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 3. Detailed Notes on All Funds (Continued) E. Capital Assets Capital asset activity for the year ended December 31, 2008 was as follows: Beginning Governmental Activities Balance Increases Decreases Transfers Out Ending Balance Capital assets, not being depreciated: Land 760,400 $ 185,202 $ $ $ 945,602 $ Total capital assets, not being depreciated 760,400 185,202 945,602 Capital assets, being depreciated: Buildings 4,201,587 52,755 105,142 4,149,200 Infrastructure 3,746,733 137,418 3,884,151 Machinery and equipment 1,921,812 87,451 52,193 1,957,070 Total capital assets, being depreciated 9,870,132 277,624 157,335 9,990,421 Less accumulated depreciation for: Buildings 1,578,712 124,613 39,954 1,663,371 Infrastructure 264,669 110,603 375,272 Machinery and equipment 1,176,183 171,899 23,803 1,324,279 Total accumulated depreciation 3,019,564 407,115 63,757 3,362,922 Total capital assets, being depreciated, net 6,850,568 (129,491) 93,578 6,627,499 Governmental activities capital assets, net 7,610,968 $ 55,711 $ $ 93,578 $ 7,573,101 $ Beginning Business-Type Activities Balance Increases Decreases Transfers In Ending Balance Capital assets, not being depreciated: Land 132,189 $ 10,000 $ $ $ 142,189 $ Total capital assets, not being depreciated 132,189 10,000 142,189 Capital assets, being depreciated: Buildings and improvements 5,351,446 67,989 105,142 5,524,577 Machinery and equipment 10,893,803 304,102 52,193 11,250,098 Total capital assets, being depreciated 16,245,249 372,091 157,335 16,774,675 Less accumulated depreciation for: Buildings and improvements 550,919 115,251 39,954 706,124 Machinery and equipment 3,412,155 314,542 23,803 3,750,500 Total accumulated depreciation 3,963,074 429,793 63,757 4,456,624 Total capital assets, being depreciated, net 12,282,175 (57,702) 93,578 12,318,051 Business-type activities capital assets, net 12,414,364 $ (47,702) $ $ 93,578 $ 12,460,240 $ 47 CITY OF ST. CHARLES, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 3. Detailed Notes on All Funds (Continued) E. Capital Assets (continued) Depreciation expense was charged to functions/programs as follows: Governmental Activities: General governmentPublic safety Public works Library Parks and recreation $ 58,596 71,724 162,505 31,671 82,619 Total depreciation expense - governmental activities $ 407,115 Business-Type Activities: Electric Water Sewer Storm water drainage Ambulance $ 237,166 103,774 60,171 7,598 21,084 Total depreciation expense - business-type activities $ 429,793 F. Interfund Balances and Transfers The amounts due to and from other funds as of December 31, 2008, at the individual fund level are summarized below: Due To Due From Funds Other Funds Other Funds General Fund $ $ 379 Special Revenue: Celebration 379 Capital Project: Tax Increment District #2 5,240 Tax Increment District #6 5,240 $ 5,619 $ 5,619 48 CITY OF ST. CHARLES, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 3. Detailed Notes on All Funds (Continued) F. Interfund Balances and Transfers (continued) The amounts advanced to and from other funds as of December 31, 2008, individual fund level are summarized below: Advances To Advances From Funds Other Funds Other Funds Special Revenue: Economic Development $ $ 28,818 Capital Projects: Capital Improvements 50,000 Tax Increment Districts 5 114,000 Enterprise Funds: Electric 50,282 Water 18,494 Sewer 24,042 Total Advances $ 142,818 $ 142,818 Transfers during the year ended December 31, 2008 were as follows: Transfers Transfers Funds In Out General Fund $ 188,850 $ 30,500 Special Revenue: Economic Development 14,000 Library 16,500 Volunteer Fire Department 63,500 12,716 Ambulance 145,548 Debt Service: Tax Increment Districts 53,945 Fire Truck Lease 12,716 13,500 Capital Project: Capital Improvements 25,799 Tax Increment District #1 8,910 Tax Increment District #2 35,625 Tax Increment District #3 4,955 Tax Increment District #4 4,455 Emergency Management Services 150,000 Enterprise: Electric 90,000 Water 30,000 Sewer 25,799 Waste Management 12,350 Ambulance 195,548 6,500 Total Transfers $ 570,858 $ 570,858 49 CITY OF ST. CHARLES, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 3. Detailed Notes on All Funds (Continued) F. Interfund Balances and Transfers (continued) Excess of expenditures over budgeted appropriations at the individual fund level during 2008 are as follows: General Fund $ 98,233 Special Revenue Funds Volunteer Fire Department 38,941 Emergency Management Services 2,088 All excess expenditures were the result of planned processes. General Fund excess was a result of flood expenditures which were reimbursed through an unbudgeted FEMA grant. At December 31, 2008 the following funds have deficit fund balances: Special Revenue Funds Celebration $ 316 Capital Project Funds Tax Increment District #5 113,425 Tax Increment District #6 5,240 Enterprise Funds Waste Management 9,285 The City intends to fund accumulated deficits through additional revenue sources. 50 CITY OF ST. CHARLES, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 3. Detailed Notes on All Funds (Continued) G. Long-term debt The following is a summary of changes in long-term debt obligations during the year ended December 31, 2008: Amounts Beginning Ending Due Within Balance Additions Reductions Balance One Year GOVERNMENTAL ACTIVITIES Bonds and Notes Payable: General Obligation Bonds: 1983 Water Improvement (5%) $ 158,000 $ $ 39,000 $ 119,000 $ 41,000 2005A Street Improvement (3.0 - 4.0%) 1,690,000 95,000 1,595,000 100,000 Tax Increment Bonds: 2004 Refunding Tax Increment (2.7 - 4.2%) 385,000 40,000 345,000 40,000 Less: Unamortized Issuance Costs (44,123) (3,927) (40,196) Notes payable: 2003 Fire Truck Loan (4.625%) 65,326 9,697 55,629 10,138 Long-term Liabilities 2,254,203 179,770 2,074,433 191,138 BUSINESS-TYPE ACTIVITIES Bonds and Notes Payable: General Obligation Revenue Bonds: 2002 Water Fund (1.4 - 3.45%) 289,150 45,150 244,000 47,300 2002 Sewer Fund (1.4 - 3.45%) 415,850 59,850 356,000 62,700 2004 Water Fund (1.5 - 4.0%) 507,300 65,550 441,750 68,400 2004 Sewer Fund (1.5 - 4.0%) 382,700 49,450 333,250 51,600 2004 Electric Revenue (2.0 - 4.6%) 3,305,000 165,000 3,140,000 170,000 Less: Unamortized Discount (100,932) (11,227) (89,705) Notes Payable: 2006 Ambulance Lease (9.5%) 32,901 12,888 20,013 20,013 Long-term Liabilities 4,831,969 386,661 4,445,308 420,013 Total $ 7,086,172 $ $ 566,431 $ 6,519,741 $ 611,151 51 CITY OF ST. CHARLES, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 3. Detailed Notes on All Funds (Continued) G. Long-term debt (continued) The annual requirements to amortize all long-term debt outstanding as of December 31, 2008, over the life of the debt, are summarized below: General Obligation Tax General Obligation Revenue General Obligation Bonds Increment Bonds Bonds Other Years Principal Interest Principal Interest Principal Interest Principal Interest Governmental Activities 2009 $ 141,000 $ 64,125 $ 40,000 $ 12,340 $ 10,138 $ 2,580 2010 143,000 58,825 40,000 11,060 10,614 2,104 2011 140,000 53,344 40,000 9,690 11,105 1,613 2012 110,000 47,963 40,000 8,230 11,618 1,099 2013 115,000 44,025 45,000 6,623 12,154 564 2014-2018 625,000 151,906 140,000 8,962 2019-2021 440,000 27,000 Totals $ 1,714,000 447,188 $ 345,000 $ $ 56,905 55,629 $ 7,960 $ Business-Type Activities 2009 400,000 $ 170,950 $ 20,013 $ 1,011 $ 2010 415,000 158,587 2011 425,000 145,012 2012 445,000 130,718 2013 460,000 114,960 2014-2018 1,020,000 340,348 2019-2023 1,350,000 190,525 Totals $ 4,515,000 $ 1,251,100 20,013 $ 1,011 $ The City is the administering authority for the following tax increment finance districts: Municipal Development District No. 1 - The district is the housing type, authorized under Minnesota law Chapter 472(A), established in 1983 to last until the year 2008. The Central Business District Redevelopment District (Municipal Development District No. 2) - The district is of the redevelopment type, authorized under Minnesota law, Chapter 472 (A), established in 1985 to last until the year 2010. Municipal Development District No. 3 - The district is of the housing type, authorized under Minnesota law Chapter 472(A), established in 1988 to last until the year 2013. Municipal Development District No. 4 -The district is of the redevelopment type, authorized under Minnesota law Chapter 472(A), established in 1994 to last until the year 2019. Municipal Development District No. 5 – The district is of the economic development type, authorized under Minnesota law Chapter 469, established in 2000 to last until the year 2011. 52 CITY OF ST. CHARLES, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 3. Detailed Notes on All Funds (Continued) G. Long-term debt (continued) Municipal Development District No. 6 – The district is of the redevelopment type, authorized under Minnesota law Chapter 472(A), established in 2005 to last until the year 2030. Municipal Municipal Municipal Municipal Municipal Municipal District #1 District #2 District #3 District #4 District #5 District #6 Original gross tax capacity, including modifications $ 121 $ 68,249 $ 94 $ 1,241 $ 700 $ 822 Current gross tax capacity 3,684 180,051 7,644 8,680 37,442 22,068 Captured gross tax capacity Retained by authority 3,563 111,802 7,550 7,439 36,742 21,246 Outstanding Bonds and Loans as of December 31, 2008 $ 345,000 H. Fund Balance The City has reserved portions of the fund equity in several funds. The reserved fund equity represents the portion not available for expenditure or legally segregated for specific future use. A summary of reserved and designated fund equity as of December 31, 2008 is as follows: Fund Reserved for Debt Service Balance Debt Service Funds $ 199,648 Reserved for Advances Capital Improvement Fund $ 50,000 Reserved for Prepaid items General Fund Special Revenue Funds $ $ 12,952 3,270 16,222 Designated for Future Capital Expenditures Special Revenue Funds Capital Project Funds $ $ 89,564 472,469 562,033 53 CITY OF ST. CHARLES, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 4. Other Information A. Defined Benefit Pension Plans - Statewide Plan Description All full-time and certain part-time employees of the City of St. Charles are covered by defined benefit plans administered by the Public Employees Retirement Association of Minnesota (PERA). PERA administers the Public Employees Retirement Fund (PERF) and the Public Employees Police and Fire Fund (PEPFF) which are cost-sharing, multiple-employer retirement plans. These plans are established and administered in accordance with Minnesota Statutes, Chapters 353 and 356. PERF members belong to either the Coordinated Plan or the Basic Plan. Coordinated Plan members are covered by Social Security and Basic Plan members are not. All new members must participate in the Coordinated Plan. All police officers, firefighters and peace officers who qualify for membership by statute are covered by the PEPFF. PERA provides retirement benefits as well as disability benefits to members, and benefits to survivors upon death of eligible members. Benefits are established by state statute, and vest after three years of credited service. The defined retirement benefits are based on a member's highest average salary for any five successive years of allowable service, age, and years of credit at termination of service. Two methods are used to compute benefits for PERF’s Coordinated and Basic Plan members. The retiring member receives the higher of step-rate benefit accrual formula (Method 1) or a level accrual formula (Method 2). Under Method 1, the annuity accrual rate for a Basic Plan member is 2.2 percent of average salary for each of the first 10 years of service and 2.7 percent for each remaining year. The annuity accrual rate for a Coordinated plan member is 1.2 percent of average salary for each of the first 10 years and 1.7 percent for each remaining year. Under method 2, the annuity accrual rate is 2.7 percent of average salary for Basic Plan members and 1.7 percent for Coordinated Plan members for each year of service. For PEPFF members, the annuity accrual rate is 3.0 percent for each year of service. For all PEPFF members and for PERF members hired prior to July 1, 1989 whose annuity is calculated using Method 1, a full annuity is available when age plus years of service equal 90. Normal retirement age is 55 for PEPFF and 65 for Basic and Coordinated members hired prior to July 1, 1989. Normal retirement age is the age for unreduced Social Security benefits capped at 66 for Coordinated members hired on or after July 1, 1989. A reduced retirement annuity is also available to eligible members seeking early retirement. 54 CITY OF ST. CHARLES, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 4. Other Information (Continued) A. Defined Benefit Pension Plans – Statewide (continued) Plan Description (continued) There are different types of annuities available to members upon retirement. A single-life annuity is a lifetime annuity that ceases upon the death of the retiree--no survivor annuity is payable. There are also various types of joint and survivor annuity options available which will reduce the monthly normal annuity amount, because the annuity is payable over joint lives. Members may also leave their contributions in the fund upon termination of public service, in order to qualify for a deferred annuity at retirement age. Refunds of contributions are available at any time to members who leave public service, but before retirement benefits begin. The benefit provisions stated in the previous paragraphs of this section are current provisions and apply to active plan participants. Vested, terminated employees who are entitled to benefits but are not receiving them yet are bound by the provisions in effect at the time they last terminated their public service. PERA issues a publicly available financial report that includes financial statements and required supplementary information for PERF and PEPFF. That report may be obtained on the Internet at www.mnpera.org, by writing to PERA, 60 Empire Drive #200, St. Paul, Minnesota, 55103-2088 or by calling (651) 296-7460 or 1-800-652-9026. Funding Policy Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. These statutes are established and amended by the state legislature. The City makes annual contributions to the pension plans equal to the amount required by state statutes. PERF Basic Plan members and Coordinated Plan members are required to contribute 9.10% and 6.0%, respectively, of their annual covered salary in 2008. Contribution rates in the Coordinated Plan will increase in 2008 to 6.0%. PEPFF members are required to contribute 8.6% of their annual covered salary in 2008. That rate will increase to 9.4% in 2008. The City of St. Charles is required to contribute the following percentages of annual covered payroll: 11.78% Basic Plan PERF, 6.5% for Coordinated Plan PERF members, 12.9% for PEPFF members. Employer contribution rates for the Coordinated Plan and PEPFF will increase to 6.75% and 14.1% respectively, effective January 1, 2009. The City’s contributions to Public Employees Retirement Fund for the years ending December 31, 2008, 2007, and 2006 were $48,544, $40,728, and $39,733, respectively. The City’s contributions to the Public Employees Police and Fire Fund for the years ended December 31, 2008, 2007, and 2006, were $28,913, $21,849, and $17,328, respectively. The City’s contributions were equal to the contractually required contributions for each year as set by state statute. 55 CITY OF ST. CHARLES, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 4. Other Information (Continued) B. Defined Benefit Pension Plan – Volunteer Fire Relief Association Plan Description The City contributes to the City of St. Charles Fire Relief Association ("Association"), a single employer public employee retirement system that acts as a common investment and administrator for the City's firefighters. Volunteer firefighters of the City are members of the St. Charles Fire Department Relief Association. Association members are eligible to receive a lump sum pension benefit after reaching a minimum retirement age of 50 and at least 10 years of service. After 20 years of service, the lump sum benefit increases by $1,650 for each year of service over 20. These benefit provisions are consistent with enabling state statutes. Volunteers of the fire department are not required to contribute to the relief association. If a member leaves the department before 10 years of service, they are not eligible for any pension benefit. The City levies property taxes at the direction of and for the benefit of the fire relief association and passes through state aids allocated to the plan, all in accordance with enabling state statutes. Related Party Investments During 2008 and as of December 31, 2008 the Association held no securities issued by the City or other related parties. Funding Status and Progress Financial requirements of the relief association are determined using the State of Minnesota Schedules I-IIIII for lump sum pension plans used for computation of State Fire Aids. The computations are not based upon actuarial computations and no attempts have been made to provide such analysis. The estimated pension benefit obligation as of December 31, 2007 (latest information available) is shown below: Total plan assets $ 623,046 Total accrued liability 561,317 Assets in Excess of Accrued Liability $ 61,729 56 CITY OF ST. CHARLES, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 4. Other Information (Continued) B. Defined Benefit Pension Plan – Volunteer Fire Relief Association Contributions Required and Contributions Made Financial requirements of the relief association are determined on a computation based on member years of service. The City's minimum obligation is the financial requirement for the year less Association investment earnings and State aids. The funding strategy should provide sufficient resources to pay relief association benefits on a timely basis. Total contributions made by the City to the Association in 2008 amounted to $27,386. The contributed amount was determined as described above and was based on the Association's requirements as of December 31, 2008. The computation of the pension contribution requirements for 2008 was based on the same assumptions, benefit provision, lump sum funding method, and other significant factors used to determine pension contributions requirements in previous years. Ten-Year Historical Trend Information Ten-year historical trend information related to the pension plan is unavailable. C. Deferred Compensation Plan The City offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The plan, available to all city employees, permits them to defer a portion of their current salary until future years. The deferred compensation is not available to employees until termination, retirement, death, or unforeseeable emergency. D. Risk Management The City is exposed to various risks of loss related to torts: theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The City carries insurance for liability, property, and automotive insurance through the League of Minnesota Cities Insurance Trust (LMCIT). The City provides employee health insurance through a private insurance carrier. Settled claims resulting from these risks have not exceeded the insurance coverage in any of the past three years. There were no reductions in insurance coverage in 2008. 57 CITY OF ST. CHARLES, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 4. Other Information (Continued) D. Risk Management (continued) The City participates in a group workers' compensation plan of the LMCIT, which is a public entity risk pool currently operating as a common risk management and insurance program for member Minnesota Cities. All cities participating in the plan are jointly and severally liable for all claims and expenses of the plan. The LMCIT workers' compensation plan is self-sustaining based on the premiums charged, so that total contributions plus compounded earnings on those contributions will be sufficient to satisfy claims, liabilities and other expenses of the plan. The LMCIT plan participates in the Workers' Compensation Reinsurance Association with coverage of $1,000,000 per claim for plan year 2008. The amount of any liability in excess of plan assets may be assessed to participating Cities in a method and amount determined by the LMCIT. 5. Prounouncements Issued Not Yet Implemented The Governmental Accounting Standards Board (GASB) has issued pronouncements that have effective dates that may impact financial presentations. Management has not currently determined what, if any, impact implementation of the following statement may have on the financial statements of the City. GASB Statement #45, Accounting and Financial Reporting by Employers for Postemployment Benefits other Than Pensions will be effective for the City beginning with its year ending December 31, 2009. This statement established accounting standards for the measurement, recognition, and display of other Postemployment Benefits. In financial statements prepared on accrual basis of accounting, employers should recognize and disclose an amount equal to the annual cost of other postemployment benefits. The annual cost includes the normal cost for the year and a component for amortization of the total unfunded actuarial accrued liabilities of the plan over a period not to exceed 30 years. 58 CITY OF ST. CHARLES, MINNESOTA COMBINING AND INDIVIDUAL NONMAJOR FUNDS STATEMENTS AND SCHEDULES FOR THE FISCAL YEAR ENDED DECEMBER 31, 2008 ASSETS Cash and investments Accounts receivable Prepaid expense Taxes receivable - delinquent Due from other funds Due from other governmental units 21 Volunteer 20 24 26 Fire 22 Advertising Celebration Library Department Ambulance 5,946 $ $ $ 5,341 $ 122,323 $ 1,626 219 737 2,314 356 86 1,129 547 283 84 891 25,249 COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS December 31, 2008 CITY OF ST. CHARLES, MINNESOTA Special Revenue With Comparative Totals for December 31, 2007 27 Emergency Management Services 42,301 $ 52 38 Flood Relief 21,133 $ Total $ 197,044 1,626 3,270 2,170 26,507 59Tax Increment Districts $ 56 G.O. Water Improvement 69,807 $ 221 Debt Service 52 Fire Truck $ 13,465 TOTAL ASSETS 6,804 $ 170 $ $ 8,098 $ 152,059 $ 42,353 $ 21,133 $ $ 230,617 $ 70,028 $ $ 13,465 LIABILITIES AND FUND BALANCE Liabilities Accounts payable Deferred revenue Due to other funds Advances from other funds Total Liabilities Fund Balance Reserved Unreserved Designated Undesignated Total Fund Balance TOTAL LIABILITIES AND FUND BALANCE 602 $ 21$ $ 1,367 356 86 1,129 379 958 486 2,496 219 737 5,627 (316) 4,865 5,846 (316) 5,602 6,804 $ 170 $ $ 8,098 754 $ 547 1,301 2,314 148,444 150,758 $ 152,059 $ $ $ 52 52 42,301 42,301 42,353 $ $ 21,133 21,133 21,133 $ 2,744 $ 2,170 3795,293 3,270 63,434158,620 225,324 $ 230,617 $ $ $ 221221 69,807 69,807 70,028 $ $ 13,46513,465 $ 13,465 59 FORM D-1 Debt Service Capital Project 4250 4849 44 47 41 57 Tax Tax Tax Tax Tax Tax Flood 53 2005A Increment Increment Increment Increment Increment Increment 40 Hazard Total Nonmajor Ambulance Street Districts #1 Districts #2 Districts #3 Districts #4 Districts #5 District #6 Parkland Mitigation Governmental Lease Bond Total Fund Fund Fund Fund Fund Fund Dedication Grant Total Funds $ $ 114,628 $ 197,900 $ 5 $ 361,787 $ $ 11,742 $ 575 $ $ 54,014 $ $ 428,123 $ 823,067 3,750 3,750 5,376 3,270 2,237 2,458 5,016 5,016 9,644 5,240 5,240 5,240 1,748 1,748 3,741 3,741 31,996 $ $ 118,613 $ 202,106 $ 5 $ 375,784 $ $ 11,742 $ 575 $ $ 57,764 $ $ 445,870 $ 878,593 $ $ $ $ $ $ $$ $ $ $ $ $2,744 2,237 2,458 5,016 5,016 9,644 5,240 5,240 5,619 114,000 114,000 114,000 2,237 2,458 5,016 114,000 5,240 124,256 132,007 116,376 199,648 202,918 5 370,768 11,742 (113,425) (5,240) 57,764 321,614 385,048 158,620 116,376 199,648 5 370,768 11,742 (113,425) (5,240) 57,764 321,614 746,586 $ $ 118,613 $ 202,106 $ 5 $ 375,784 $ $ 11,742 $ 575 $ $ 57,764 $ $ 445,870 $ 878,593 60 CITY OF ST. CHARLES, MINNESOTA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS For the Fiscal Year Ended December 31, 2008 With Comparative Totals for the Year Ended December 31, 2007 Special Revenue Debt Service REVENUES 20 Advertising 24 Celebration 26 Library 21 Volunteer Fire 22 Department Ambulance 27 Emergency Management Services 38 Flood Relief Total 59Tax Increment Districts 56 G.O. Water Improvement 52 Fire Truck Property tax levy Property tax collected Tax increments Intergovernmental Charges for services Interest income Donations Miscellaneous 22,256 $ 6,697 $ 70,016 $ 41,579 $ 2,762 814 42,616 29,295 47,861 175 5 79 2,401 6,210 13,402 4,656 17,827 3,734 $ 3,019 $ 380 3,295 $ 590 $ 143,567 75,867 47,861 6,545 42,095 3,734 $ 6 526 $ 2,588 $ 563 TOTAL REVENUES 31,403 20,918 121,101 138,963 6,694 590 319,669 6 3,114 563 EXPENDITURES Current: General government Public safety Library Debt service Principal retirement Interest and fiscal charges Capital outlay 32,533 18,152 135,136 120,366 5,588 50,685 125,954 135,136 40,000 13,951 39,000 7,900 9,6953,021 TOTAL EXPENDITURES 32,533 18,152 135,136 120,366 5,588 311,775 53,951 46,900 12,716 Excess (deficiency) of revenues over (under) expenditures (1,130) 2,766 (14,035) 18,597 1,106 590 7,894 (53,945) (43,786) (12,153) OTHER FINANCING SOURCES (USES) Transfer in Transfer out 16,500 63,500 (12,716) (145,548) (150,000) 80,000 (308,264) 53,945 12,716 (13,500) TOTAL OTHER FINANCING SOURCES (USES) 16,500 50,784 (145,548) (150,000) (228,264) 53,945 (784) Net change in fund balances (1,130) 2,766 2,465 69,381 (145,548) (148,894) 590 (220,370) (43,786) (12,937) FUND BALANCES, beginning 6,976 (3,082) 3,137 81,377 145,548 191,195 20,543 445,694 113,593 26,402 FUND BALANCES, ending $ 5,846 (316) $ 5,602 $ $ 150,758 $ 42,301 $ $ 21,133 $ 225,324 $ 69,807 $ $ 13,465 61 FORM D-2 Debt Service Capital Project 4250 48 494447 41 57 Tax Tax Tax Tax Tax Tax Flood 53 2005A Increment Increment Increment Increment Increment Increment 40 Hazard Total Nonmajor Ambulance Street Districts #1 Districts #2 Districts #3 Districts #4 Districts #5 District #6 Parkland Mitigation Governmental Lease Bond Total Fund Fund Fund Fund Fund Fund Dedication Grant Total Funds $ $137,676 $138,202 $ $ $ $ $ $ $ $ $ $ 281,769 3,989 105,469 8,958 7,060 35,092 20,189 180,757 180,757 17,043 17,043 5,683 179,757 185,440 278,350 47,861 3,226 6,383 70 8,692 2 292 8 1,539 10,603 23,531 42,095 3,734 157,945 161,628 4,059 119,844 8,960 7,352 35,100 20,189 1,539 179,757 376,800 858,097 50,685 125,954 135,136 95,000 183,695 183,695 61,628 86,500 86,500 70 260 70 70 60 20,451 9,940 179,757 210,678 210,678 156,628 270,195 70 260 70 70 60 20,451 9,940 179,757 210,678 792,648 1,317 (108,567) 3,989 119,584 8,890 7,282 35,040 (262) (8,401) 166,122 65,449 66,661 146,661 (13,500) (8,910) (35,625) (4,955) (4,455) (53,945) (375,709) 53,161 (8,910) (35,625) (4,955) (4,455) (53,945) (229,048) 1,317 (55,406) (4,921) 83,959 3,935 2,827 35,040 (262) (8,401) 112,177 (163,599) 115,059 255,054 4,926 286,809 (3,935) 8,915 (148,465) (4,978) 66,165 209,437 910,185 $ $ 116,376 $ 199,648 $ 5 $ 370,768 $ $ 11,742 $ (113,425) $ (5,240) $ 57,764 $ $ 321,614 $ 746,586 62 FORM D-3 CITY OF ST. CHARLES, MINNESOTA ADVERTISING FUND Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual For the Fiscal Year Ended December 31, 2008 With Comparative Totals for the Year Ended December 31, 2007 Variance with 2008 Final Budget -2007 Budgeted Amounts Actual Positive Actual Original Final Amounts (Negative) Amounts REVENUES Property Tax Levy Property tax collected $ 22,688 $ 22,688 $ 22,256 $ (432) $ 14,557 Market value credit 2,762 2,762 2,762 1,997 Interest Income 175 175 151 Donations 6,000 6,000 6,210 210 5,684 TOTAL REVENUES 31,450 31,450 31,403 (47) 22,389 EXPENDITURES General Government Fireworks 6,000 6,000 5,913 87 6,000 City promotion 4,675 7,775 7,874 (99) 6,167 Board reimbursement annual events 416 (416) Professional services 425 425 310 115 425 Advertising 24,150 24,150 18,020 6,130 200 TOTAL EXPENDITURES 35,250 38,350 32,533 5,817 12,792 Net change in fund balances (3,800) (6,900) (1,130) 5,770 9,597 FUND BALANCES, beginning 6,976 6,976 6,976 (2,621) FUND BALANCES, ending $ 3,176 $ 76 $ 5,846 $ 5,770 $ 6,976 63 FORM D-4 CITY OF ST. CHARLES, MINNESOTA CELEBRATION FUND Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual For the Fiscal Year Ended December 31, 2008 With Comparative Totals for the Year Ended December 31, 2007 Variance with 2008 Final Budget -2007 Budgeted Amounts Actual Positive Actual Original Final Amounts (Negative) Amounts REVENUES Property tax levy Property tax collected $ 6,686 $ 6,686 $ 6,697 $ 11 $ 15,037 Market value credit 814 814 814 1,855 Donations 12,500 12,500 13,402 902 9,886 Interest income 55 TOTAL REVENUES 20,000 20,000 20,918 918 26,778 EXPENDITURES General Government Advertising 2,000 2,000 2,506 (506) 2,574 Dance 5,000 5,000 5,769 (769) 4,928 T-shirts 1,500 1,500 1,196 304 1,393 Rentals 2,000 2,000 1,093 907 1,621 Pageants 4,500 4,500 3,032 1,468 2,450 Other 4,600 4,100 4,556 (456) 6,604 TOTAL EXPENDITURES 19,600 19,100 18,152 948 19,570 Net change in fund balances 400 900 2,766 1,866 7,208 FUND BALANCES, beginning (3,082) (3,082) (3,082) (10,290) FUND BALANCES, ending $ (2,682) $ (2,182) $ (316) $ 1,866 $ (3,082) 64 FORM D-5 CITY OF ST. CHARLES, MINNESOTA LIBRARY FUND Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual For the Fiscal Year Ended December 31, 2008 With Comparative Totals for the Year Ended December 31, 2007 Variance with 2008 Final Budget 2007 Budgeted Amounts Actual Positive Actual Original Final Amounts (Negative) Amounts REVENUES Property Tax Levy Property tax collected $ 71,370 $ 71,370 $ 70,016 $ (1,354) $ 47,538 Intergovernmental Revenues Market value credit 8,689 8,689 8,689 6,230 Library aid 29,912 26,887 33,927 7,040 29,083 Intergovernmental Revenues 38,601 35,576 42,616 7,040 35,313 Donations 1,000 2,400 4,656 2,256 3,120 Miscellaneous Fines 1,000 1,000 2,577 1,577 2,284 Book sales 40 40 113 Copy machines 500 500 940 440 855 Interest income 79 79 2,637 Other 1,500 1,500 177 (1,323) 3,695 Total Miscellaneous Revenues 3,000 3,000 3,813 813 9,584 TOTAL REVENUES 113,971 112,346 121,101 8,755 95,555 EXPENDITURES Library Salaries 65,181 65,181 65,605 (424) 69,611 Employee benefits and retirement 17,540 17,540 19,731 (2,191) 19,423 Supplies and minor equipment 3,400 3,400 3,427 (27) 4,521 Professional services 7,600 7,300 7,995 (695) 7,189 Communications 1,200 1,200 1,622 (422) 1,228 Transportation and training 2,000 2,000 1,237 763 1,075 Printing and publication 800 800 576 224 450 Insurance 2,000 2,000 2,022 (22) 2,143 Utilities 8,500 13,000 11,436 1,564 9,653 Repairs and maintenance 3,000 3,000 1,637 1,363 4,063 Other 500 500 311 189 191 Capital outlay 18,750 19,250 19,537 (287) 17,918 TOTAL EXPENDITURES 130,471 135,171 135,136 35 137,465 Excess (deficiency) of revenues over (under) expenditures (16,500) (22,825) (14,035) 8,790 (41,910) OTHER FINANCING SOURCES Transfers in 16,500 16,500 16,500 16,500 Net change in fund balances (6,325) 2,465 8,790 (25,410) FUND BALANCES, beginning 3,137 3,137 3,137 28,547 FUND BALANCES, ending $ 3,137 $ (3,188) $ 5,602 $ 8,790 $ 3,137 65 FORM D-6 CITY OF ST. CHARLES, MINNESOTA VOLUNTEER FIRE DEPARTMENT FUND Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual For the Fiscal Year Ended December 31, 2008 With Comparative Totals for the Year Ended December 31, 2007 Variance with 2008 Final Budget -2007 Budgeted Amounts Actual Positive Actual Original Final Amounts (Negative) Amounts REVENUES Property Tax Levy Property tax collected $ 48,500 $ 48,500 $ 41,579 $ (6,921) $ Intergovernmental Revenues Fire aid 24,031 24,031 24,754 Market value credit 5,264 5,264 FEMA grant 2,287 DNR grant 4,930 Charges for Services Other local governments 34,000 34,000 35,028 1,028 24,687 Fire calls 4,000 4,000 12,833 8,833 9,229 Interest income 5,000 5,000 2,401 (2,599) 5,524 Donations 3,000 3,000 17,827 14,827 23,419 TOTAL REVENUES 94,500 94,500 138,963 44,463 94,833 EXPENDITURES Public Safety Salaries 18,000 18,000 28,178 (10,178) 21,383 Employee benefits and retirement 4,700 4,700 5,543 (843) 4,878 Supplies and minor equipment 12,500 13,000 11,827 1,173 13,153 Professional services 2,750 2,425 2,646 (221) 1,925 Communication 4,000 4,000 3,835 165 6,294 Transportation and training 5,000 5,000 4,816 184 5,901 Insurance 8,000 6,100 5,964 136 7,437 Utilities 5,400 6,900 5,176 1,724 4,538 Capital outlay 5,000 5,000 16,572 (11,572) 6,324 Repairs and maintenance 6,100 6,100 5,411 689 8,870 Fire relief payment 7,000 7,000 27,386 (20,386) 7,700 Other 3,200 3,200 3,012 188 1,707 TOTAL EXPENDITURES 81,650 81,425 120,366 (38,941) 90,110 Excess (deficiency) of revenues over (under) expenditures 12,850 13,075 18,597 5,522 4,723 OTHER FINANCING SOURCES (USES) Transfers in 63,500 63,500 22,385 Transfers out (12,716) (12,716) (12,716) (62,716) TOTAL OTHER FINANCING SOURCES (USES) (12,716) (12,716) 50,784 63,500 (40,331) Net change in fund balances 134 359 69,381 69,022 (35,608) FUND BALANCES, beginning 81,377 81,377 81,377 116,985 FUND BALANCES, ending $ 81,511 $ 81,736 $ 150,758 $ 69,022 $ 81,377 66 FORM D-7 CITY OF ST. CHARLES, MINNESOTA AMBULANCE FUND and Changes in Fund Balance - Budget and Actual Schedule of Revenues, Expenditures For the Fiscal Year Ended December 31, 2008 With Comparative Totals for the Year Ended December 31, 2007 Variance with REVENUES Original Final Budgeted Amounts 2008 Actual Amounts Final Budget Positive (Negative) 2007 Actual Amounts Property Tax Levy Property tax collected Intergovernmental Revenues FEMA grant Charges for Services Ambulance fees Interest Income Donations Miscellaneous $ $ $ $ $ 16 242 144,333 3,953 2,708 2,282 TOTAL REVENUES 153,534 EXPENDITURES Public Safety Salaries Employee benefits and retirement Supplies and minor equipment Professional services Communication Transportation and training Insurance Capital outlay Repairs and maintenance Bad debts Other 37,711 7,811 15,466 9,627 1,596 9,087 1,688 17,054 1,530 2,942 1,384 TOTAL EXPENDITURES 105,896 Excess (deficiency) of revenues over (under) expenditures 47,638 OTHER FINANCING SOURCES (USES) Transfers out (145,548) (145,548) (145,548) (68,970) Net change in fund balances (145,548) (145,548) (145,548) (21,332) FUND BALANCES, beginning 145,548 145,548 145,548 166,880 FUND BALANCES, ending $ $ $ $ $ 145,548 67 FORM D-8 CITY OF ST. CHARLES, MINNESOTA EMERGENCY MANAGEMENT SERVICES Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual For the Fiscal Year Ended December 31, 2008 With Comparative Totals for the Year Ended December 31, 2007 Variance with 2008 Final Budget -2007 Budgeted Amounts Actual Positive Actual Original Final Amounts (Negative) Amounts REVENUES Property Tax Levy Property tax collected $ 3,120 $ 3,120 $ 3,019 $ (101) $ Market value credit 380 380 380 213 Interest Income 500 500 3,295 2,795 1,256 Donations 13,500 TOTAL REVENUES 4,000 4,000 6,694 2,694 14,969 EXPENDITURES Public Safety Salaries 1,800 1,800 1,800 300 Transportation and training 1,200 1,200 89 1,111 Professional services 5,000 (5,000) Other 500 500 499 1 42 TOTAL EXPENDITURES 3,500 3,500 5,588 (2,088) 342 Excess (deficiency) of revenues over (under) expenditures 500 500 1,106 606 14,627 OTHER FINANCING SOURCES (USES) Transfers in 150,000 Transfers out (150,000) (150,000) TOTAL OTHER FINANCING SOURCES (USES) (150,000) (150,000) 150,000 Net change in fund balances 500 500 (148,894) (149,394) 164,627 FUND BALANCES, beginning 191,195 191,195 191,195 26,568 FUND BALANCES, ending $ 191,695 $ 191,695 $ 42,301 $ (149,394) $ 191,195 68 (This Page is Left Blank Intentionally) CITY OF ST. CHARLES, MINNESOTA SUPPLEMENTARY INFORMATION FOR THE FISCAL YEAR ENDED DECEMBER 31, 2008 SCHEDULE 1 December 31, 2008 and 2007 PROPRIETARY FUNDS CITY OF ST. CHARLES, MINNESOTA Statement of Net Assets ELECTRIC FUND ASSETS Current Assets Cash and cash equivalents Accounts receivable, net Accrued utility revenue Advances to other funds Inventory Prepaid expenses Total Current Assets $ 2008 501,840 256,102 93,766 50,282 307,495 7,571 1,217,056 $ 2007 411,374 249,77467,85423,000 355,6437,0461,114,691 Capital Assets Nondepreciable Depreciable Less: Accumulated depreciation 113,489 8,977,233 2,227,408 103,489 8,777,1161,990,243 Capital Assets, Net 6,863,314 6,890,362 Total Assets 8,080,370 8,005,053 LIABILITIES Current Liabilities Current maturities of bonds payable Accounts payable Customer deposits Accrued interest payable Total Current Liabilities 170,000 287,215 17,050 10,659 484,924 165,000172,43817,77211,071366,281 Noncurrent Liabilities Bonds payable, net of current maturities Less: Unamortized bond discount Total Noncurrent Liabilities 2,970,000 (59,159) 2,910,841 3,140,000(63,409) 3,076,591 Total Liabilities 3,395,765 3,442,872 NET ASSETS Invested in capital assets, net of related debt Unrestricted 3,723,314 961,291 3,585,362 976,819 Total Net Assets $ 4,684,605 $ 4,562,181 69 SCHEDULE 2 CITY OF ST. CHARLES, MINNESOTA PROPRIETARY FUNDS ELECTRIC FUND Statement of Revenues, Expenses and Changes in Fund Net Assets - Budget and Actual For the Fiscal Year Ended December 31, 2008 With Comparative Totals for the Year Ended December 31, 2007 Operating Revenue Consumer sales Discounts Total Operating Revenues Original Final $ 2,868,524 $ 2,868,524 2,868,524 2,868,524 Budgeted Amounts 2008 Actual Amounts $ 3,068,778 (598) 3,068,180 Variance with Final Budget Positive (Negative) 200,254 $ (598) 199,656 $ 2007 Actual Amounts 2,744,445 (9,042) 2,735,403 Operating Expenses Purchased utilities Salaries Employee benefits and retirement Gas and oil Generation fuel Supplies and minor equipment Professional services Communication Transportation and training Printing and publishing Insurance Utilities Repairs and maintenance Depreciation and amortization Bad debts Other Total Operating Expenses 1,752,724 255,505 75,537 9,000 60,000 10,620 56,000 6,000 26,500 1,100 21,583 3,500 277,610 38,850 2,594,529 1,752,724 255,505 75,537 9,000 60,000 10,620 56,000 6,000 26,500 1,100 21,583 3,500 277,610 38,850 2,594,529 1,914,270 256,989 73,748 8,475 50,296 11,256 46,711 7,980 32,725 18,892 1,751 90,793 237,165 1,533 38,511 2,791,095 (161,546) (1,484) 1,789 525 9,704 (636) 9,289 (1,980) (6,225) 1,100 2,691 1,749 186,817 (237,165) (1,533) 339 (196,566) 1,584,776230,00373,5156,565104,01510,37637,7479,1596,6121,76318,9941,54421,855236,21679037,5812,381,511 Operating Income 273,995 273,995 277,085 3,090 353,892 Nonoperating Revenues (Expenses) Interest income FEMA grant MISO income Miscellaneous income Interest and fiscal charges Total Nonoperating Revenues (Expenses) 30,000 30,000 (298,808) (238,808) 30,000 30,000 (298,808) (238,808) 12,882 12,500 7,831 38,822 (136,696) (64,661) (17,118) 12,500 7,831 8,822 162,112 174,147 50,6608,41913,15439,262(165,428) (53,933) INCOME BEFORE TRANSFERS AND CONTRIBUTED CAPITAL 35,187 35,187 212,424 177,237 299,959Contributed capital Transfers out (90,000) (90,000) (90,000) 42,700 (110,000) CHANGE IN NET ASSETS (54,813) (54,813) 122,424 177,237 232,659 TOTAL NET ASSETS BEGINNING OF YEAR 4,562,181 4,562,181 4,562,181 4,329,522 TOTAL NET ASSETS END OF YEAR $ 4,507,368 $ 4,507,368 $ 4,684,605 177,237 $ $ 4,562,181 70 SCHEDULE 3 PROPRIETARY FUNDS CITY OF ST. CHARLES, MINNESOTA December 31, 2008 and 2007 Statement of Net Assets WATER FUND ASSETS Current Assets 2008 2007 Cash and cash equivalents Accounts receivable, net Accrued utility revenue Advances to other funds Inventory Prepaid expenses Total Current Assets 297,027 $ 61,075 7,347 18,494 15,898 1,742 401,583 $ 327,569 69,914 10,980 23,000 18,777 1,888452,128 Property and Equipment Property and equipment Less: Accumulated depreciation Property, Plant and Equipment, Net 4,175,710 1,503,563 2,672,147 4,120,538 1,399,7882,720,750 Total Assets 3,073,730 3,172,878 LIABILITIES Current Liabilities Current maturities of bonds payable Accounts payable Accrued interest payable Total Current Liabilities 115,700 10,703 11,041 137,444 125,400 8,435 12,425146,260 Noncurrent Liabilities Bonds payable, net of current maturities Less: Unamortized bond discount Total Noncurrent Liabilities 555,350 (15,477) 539,873 671,050 (18,937) 652,113 Total Liabilities 677,317 798,373 NET ASSETS Invested in capital assets, net of related debt Unrestricted Total Net Assets 2,001,097 395,316 2,396,413 $ $ 1,924,300 450,2052,374,505 71 SCHEDULE 4 CITY OF ST. CHARLES, MINNESOTA PROPRIETARY FUNDS WATER FUND Statement of Revenues, Expenses and Changes in Fund Net Assets - Budget and Actual For the Fiscal Year Ended December 31, 2008 With Comparative Totals for the Year Ended December 31, 2007 Variance with 2008 Final Budget -2007 Budgeted Amounts Actual Positive Actual Original Final Amounts (Negative) Amounts Operating Revenue Consumer sales $ 432,670 $ 432,670 $ 434,010 $ 1,340 $ 436,807 Operating Expenses Salaries 87,649 87,649 87,059 590 83,362 Employee benefits and retirement 19,848 19,848 22,645 (2,797) 20,520 Supplies and minor equipment 22,200 22,200 27,970 (5,770) 22,314 Professional services 17,500 17,500 14,796 2,704 18,274 Communication 5,000 5,000 4,291 709 4,923 Transportation and training 4,000 4,000 3,996 4 3,312 Insurance 4,900 4,900 4,278 622 4,706 Utilities 35,000 35,000 56,904 (21,904) 43,771 Repairs and maintenance 71,450 71,450 34,106 37,344 19,794 Depreciation and amortization 103,775 (103,775) 102,230 Other 3,050 3,050 1,017 2,033 4,084 Total Operating Expenses 270,597 270,597 360,837 (90,240) 327,290 Operating Income 162,073 162,073 73,173 (88,900) 109,517 Nonoperating Revenues (Expenses) Interest income 2,200 2,200 9,062 6,862 9,507 Water availability charges (8,812) (8,812) 25,162 FEMA grant 2,611 Miscellaneous income 21,500 21,500 8,723 (12,777) 21,395 Interest and fiscal charges (153,559) (153,559) (30,238) 123,321 (30,796) Total Nonoperating Revenues (Expenses) (129,859) (129,859) (21,265) 108,594 27,879 INCOME BEFORE TRANSFERS AND 32,214 32,214 51,908 19,694 137,396 CONTRIBUTED CAPITAL Contributed capital 147,800 Transfers out (30,000) (30,000) (30,000) (30,000) CHANGE IN NET ASSETS 2,214 2,214 21,908 19,694 255,196 TOTAL NET ASSETS -BEGINNING OF YEAR 2,374,505 2,374,505 2,374,505 2,119,309 TOTAL NET ASSETS -END OF YEAR $ 2,376,719 $ 2,376,719 $ 2,396,413 $ 19,694 $ 2,374,505 72 SCHEDULE 5 CITY OF ST. CHARLES, MINNESOTA PROPRIETARY FUNDS SEWER FUND Statement of Net Assets December 31, 2008 and 2007 ASSETS 2008 2007 Current Assets Cash and cash equivalents Accounts receivable Accrued utility revenue Special assessments-deferred Advances to other funds Prepaid expenses Total Current Assets 166,659 $ 49,380 17,683 800 24,042 271 258,835 $164,037 61,14715,27480029,000281 270,539 Property and Equipment Nondepreciable Depreciable Less: Accumulated depreciation Property, Plant and Equipment, Net 28,700 3,114,484 626,453 2,516,731 28,7003,047,320566,2812,509,739 Total Assets 2,775,566 2,780,278 LIABILITIES Current Liabilities Current maturities of bonds payable Accounts payable Deferred revenue Accrued interest payable Total Current Liabilities 114,300 5,245 800 8,329 128,674 94,60029,0448009,373133,817 Noncurrent Liabilities Bonds payable, net of current maturities Less: Unamortized bond discount Total Noncurrent Liabilities 589,650 (15,070) 574,580 703,950(18,586) 685,364 Total Liabilities 703,254 819,181 NET ASSETS Invested in capital assets, net of related debt Unrestricted Total Net Assets 1,812,781 259,531 2,072,312 $ $ 1,711,189249,9081,961,097 73 SCHEDULE 6 CITY OF ST. CHARLES, MINNESOTA PROPRIETARY FUNDS SEWER FUND Statement of Revenues, Expenses and Changes in Fund Net Assets - Budget and Actual For the Fiscal Year Ended December 31, 2008 With Comparative Totals for the Year Ended December 31, 2007 Variance with 2008 Final Budget -2007 Budgeted Amounts Actual Positive Actual Original Final Amounts (Negative) Amounts Operating Revenue Consumer sales $ 589,532 $ 589,532 $ 536,449 $ (53,083) $ 492,192 Operating Expenses Purchased utilities 288,152 288,152 283,635 4,517 259,915 Salaries 37,785 37,785 37,274 511 36,925 Employee benefits and retirement 9,254 9,254 9,152 102 9,172 Supplies and minor equipment 7,400 7,400 5,333 2,067 4,798 Professional services 16,400 16,400 6,251 10,149 17,279 Communication 2,400 2,400 1,902 498 1,715 Transportation and training 4,000 4,000 714 3,286 2,328 Printing and publishing 750 750 750 166 Insurance 500 500 554 (54) 361 Utilities 2,000 2,000 2,966 (966) 2,924 Repairs and maintenance 69,000 69,000 34,243 34,757 6,692 Depreciation and amortization 60,171 (60,171) 57,696 FEMA project 1,128 (1,128) Other 950 950 898 52 2,056 Total Operating Expenses 438,591 438,591 444,221 (5,630) 402,027 Operating Income 150,941 150,941 92,228 (58,713) 90,165 Nonoperating Revenues (Expenses) Interest income 5,000 5,000 4,737 (263) 4,848 Sewer availability charges 8,210 8,210 (15,862) (24,072) 50,836 Miscellaneous income 40,000 40,000 28,027 (11,973) 36,853 Interest and fiscal charges (115,844) (115,844) (23,714) 92,130 (21,930) Total Nonoperating Revenues (Expenses) (62,634) (62,634) (6,812) 55,822 70,607 INCOME BEFORE CONTRIBUTED 88,307 88,307 85,416 (2,891) 160,772 CAPITAL Contributed capital 357,300 Transfers in 25,799 25,799 CHANGE IN NET ASSETS 88,307 88,307 111,215 22,908 518,072 NET ASSETS - BEGINNING OF YEAR 1,961,097 1,961,097 1,961,097 1,443,025 TOTAL NET ASSETS END OF YEAR $ 2,049,404 $ 2,049,404 $ 2,072,312 $ 22,908 $ 1,961,097 74 SCHEDULE 7 CITY OF ST. CHARLES, MINNESOTA STORM WATER FUND December 31, 2008 and 2007 PROPRIETARY FUNDS Statement of Net Assets ASSETS Current Assets Cash and cash equivalents Accounts receivable Accrued utility revenue Total Current Assets $ 2008 22,090 4,066 2,657 28,813 $ 2007 24,372 4,1401,478 29,990 Property and Equipment Property and equipment Less: Accumulated depreciation Property, Plant and Equipment, Net 349,914 14,360 335,554 300,2756,762293,513 Total Assets 364,367 323,503 LIABILITIES Current Liabilities Accounts payable 6,925 3,054 NET ASSETS Invested in capital assets, net of related debt Unrestricted 335,554 21,888 293,513 26,936 Total Net Assets $ 357,442 $ 320,449 75 SCHEDULE 8 CITY OF ST. CHARLES, MINNESOTA PROPRIETARY FUNDS STORM WATER FUND Statement of Revenues, Expenses and Changes in Fund Net Assets - Budget and Actual For the Fiscal Year Ended December 31, 2008 With Comparative Totals for the Year Ended December 31, 2007 Variance with 2008 Final Budget 2007 ActualBudgeted Amounts Positive Actual Original Final Amounts (Negative) Amounts Operating Revenue Storm water fees 57,648 $ 57,648 $ 46,737 $ (10,911) $ 43,262 $ Operating Expenses Professional services 2,100 2,100 600 (1,500) 100 Depreciation 7,598 7,598 4,548 FEMA project 2,205 2,205 Other 41 Total Operating Expenses 2,100 2,100 10,403 8,303 4,689 Operating Income 55,548 55,548 36,334 (19,214) 38,573 Nonoperating Revenues (Expenses) Interest income 155 155 659 504 144 INCOME BEFORE CONTRIBUTED 55,703 55,703 36,993 (18,710) 38,717 CAPITAL Contributed capital 174,300 CHANGE IN NET ASSETS 55,703 55,703 36,993 (18,710) 213,017 TOTAL NET ASSETS BEGINNING OF YEAR 320,449 320,449 320,449 107,432 TOTAL NET ASSETS END OF YEAR 376,152 $ 376,152 $ 357,442 $ (18,710) $ 320,449 $ 76 December 31, 2008 and 2007 PROPRIETARY FUNDS CITY OF ST. CHARLES, MINNESOTA WASTE MANAGEMENT FUND Statement of Net Assets SCHEDULE 9 ASSETS Current Assets Cash and cash equivalents $ 2008 23,194 2007 31,474$ LIABILITIES Current Liabilities Accounts payable Deferred revenue 13,170 19,309 14,351 19,135 Total Liabilities 32,479 33,486 NET ASSETS Unrestricted $ (9,285) $ (2,012) 77 SCHEDULE 10 CITY OF ST. CHARLES, MINNESOTA WASTE MANAGEMENT FUND Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual For the Fiscal Year Ended December 31, 2008 With Comparative Totals for the Year Ended December 31, 2007 Variance with 2008 Final Budget -2007 Budgeted Amounts Actual Positive Actual Original Final Amounts (Negative) Amounts Operating Revenue Charges for Services $ 130,000 $ 118,600 $ 118,510 $ (90) $ 122,195 Operating Expenses Waste Removal Garbage removal 130,000 142,000 146,895 (4,895) 148,061 City cleanup 8,000 4,800 4,759 41 8,221 Compost site expense 2,500 2,500 2,500 3,401 Other 450 450 Total Operating Expenses 140,500 149,750 152,104 (2,354) 159,683 Operating Income (10,500) (31,150) (33,594) (2,444) (37,488) Nonoperating Revenue Interest income 500 500 772 272 416 Compost fees 13,000 13,000 11,039 (1,961) 10,991 Recycling fees 26,900 26,860 (40) 16,925 Total Nonoperating Revenue 13,500 40,400 38,671 (1,729) 28,332 Income Before Transfers 3,000 9,250 5,077 (4,173) (9,156) Transfers out (1,350) (1,350) (12,350) (11,000) (1,350) CHANGE IN NET ASSETS 1,650 7,900 (7,273) (15,173) (10,506) TOTAL NET ASSETS - BEGINNING OF YEAR (2,012) (2,012) (2,012) 8,494 TOTAL NET ASSETS - END OF YEAR $ (362) $ 5,888 $ (9,285) $ (15,173) $ (2,012) 78 SCHEDULE 11 CITY OF ST. CHARLES, MINNESOTA PROPRIETARY FUNDS AMBULANCE FUND Statement of Net Assets December 31, 2008 Totals ASSETS Current Assets Cash and cash equivalents 175,526 $ Accounts receivable 39,539 Taxes receivable - delinquent 53 Prepaid expense 651 Due from other governmental units 39 Total Current Assets 215,808 Capital Assets Depreciable 157,335 Less: Accumulated depreciation 84,841 Capital Assets, Net 72,494 Total Assets 288,302 LIABILITIES Current Liabilities Current maturities of notes payable 20,013 Accounts payable 3,232 Deferred revenue 53 Total Current Liabilities 23,298 NET ASSETS Invested in capital assets, net of related debt 52,481 Unrestricted 212,523 Total Net Assets 265,004 $ 79 SCHEDULE 12 CITY OF ST. CHARLES, MINNESOTA AMBULANCE FUND Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual For the Fiscal Year Ended December 31, 2008 Variance with 2008 Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Property Tax Levy Property tax collected $ $ $ 39 $ 39 Charges for Services Ambulance service contracts 1,800 1,800 600 (1,200) Ambulance fees 147,000 147,000 162,429 15,429 Interest Income 2,000 2,000 4,146 2,146 Donations 870 870 Miscellaneous 9,900 9,900 TOTAL REVENUES 150,800 150,800 177,984 27,184 EXPENDITURES Public Safety Salaries 43,990 43,990 67,290 (23,300) Employee benefits and retirement 7,765 7,425 11,183 (3,758) Supplies and minor equipment 15,700 18,200 20,608 (2,408) Professional services 9,550 9,550 10,003 (453) Communication 1,200 1,200 1,992 (792) Transportation and training 10,000 10,000 8,877 1,123 Insurance 1,800 1,050 1,153 (103) Repairs and maintenance 16,500 16,500 9,772 6,728 Depreciation 21,084 (21,084) Bad debts 5,375 (5,375) Other 3,500 3,500 2,787 713 TOTAL EXPENDITURES 110,005 111,415 160,124 (48,709) Excess (deficiency) of revenues over (under) expenditures 40,795 39,385 17,860 (21,525) OTHER FINANCING SOURCES (USES) Interest expense (2,581) (2,581) Contributed capital 60,677 60,677 Transfers in 145,548 145,548 195,548 50,000 Transfers out (21,970) (21,970) (6,500) 15,470 TOTAL OTHER FINANCING SOURCES (USES) 123,578 123,578 247,144 123,566 Net change in fund balances 164,373 162,963 265,004 102,041 FUND BALANCES, beginning FUND BALANCES, ending $ 164,373 $ 162,963 $ 265,004 $ 102,041 80 CITY OF ST. CHARLES, MINNESOTA Summary of Cash and Investments December 31, 2008 All Fund Types SCHEDULE 13 CASH ON HAND Change funds $ 882 CASH IN BANK Eastwood State Bank St. Charles, Minnesota: General checking (.05%) and savings (1.50%) Merchants National Bank St. Charles, Minnesota: MISO Account 1,119,698 49,788 INVESTMENTS Eastwood State Bank St. Charles, Minnesota: Rate Amount Certificates of Deposit Merchants National Bank2.50% $ 311,925 Certificates of Deposit Salomon Smith Barney Certificates of Deposit U.S. Government Security Money Market Fund 3.20% 3.50-5.05% 3.00-4.50% 1.82% 106,230 617,731406,7232,259 TOTAL INVESTMENTS 1,444,868 TOTAL CASH AND INVESTMENTS, December 31, 2008 $ 2,615,236 81 SCHEDULE 14 CITY OF ST. CHARLES, MINNESOTA GOVERNMENTAL FUNDS Bond Retirement Schedules December 31, 2008 $687,000 General Obligation Bonds of 1983 Year Principal Interest Total 2009 2010 2011 41,000 $ 43,000 35,000 $ 5,950 3,900 1,750 $ 46,950 46,900 36,750 Totals 119,000 $ $ 11,600 $ 130,600 $1,785,000 G.O. Street Reconstruction/ Tax Abatement Bonds of 2005 Year Principal Interest Total 2009 100,000 $ 58,175 $ 158,175 $ 2010 100,000 54,925 154,925 2011 105,000 51,594 156,594 2012 110,000 47,963 157,963 2013 115,000 44,025 159,025 Thereafter 1,065,000 178,906 1,243,906 Totals $ 1,595,000 $ 435,588 $ 2,030,588 $465,000 General Obligation Refunding Tax Increment Bonds of 2004 Year Principal Interest Total 2009 40,000 $ 12,340 $ 52,340 $ 2010 40,000 11,060 51,060 2011 40,000 9,690 49,690 2012 40,000 8,230 48,230 2013 45,000 6,623 51,623 Thereafter 140,000 8,962 148,962 Totals 345,000 $ 56,905 $ 401,905 $ 82 SCHEDULE 14 CITY OF ST. CHARLES, MINNESOTA GOVERNMENTAL FUNDS Bond Retirement Schedules (Continued) December 31, 2008 $100,000 Fire Truck Loan Year Principal Interest Total 2009 2010 2011 2012 2013 10,138 $ 10,614 11,105 11,618 12,154 $ 2,580 2,104 1,613 1,099 564 $ 12,718 12,718 12,718 12,717 12,718 Totals 55,629 $ $ 7,960 $ 63,589 83 SCHEDULE 15 CITY OF ST. CHARLES, MINNESOTA BUSINESS-TYPE FUNDS Bond Retirement Schedules December 31, 2008 $1,060,000 General Obligation Utility Revenue Bonds of 2002 Year Principal Interest Total 2009 2010 2011 2012 2013 110,000$ 115,000 120,000 125,000 130,000 17,846$ 14,384 10,622 6,579 2,242 $ 127,846 129,384 130,622 131,579 132,242 Totals 600,000$ 51,673$ $ 651,673 $1,205,000 General Obligation Utility Revenue Bonds of 2004 Year Principal Interest Total 2009 2010 2011 2012 2013 Thereafter 120,000$ 125,000 125,000 130,000 135,000 140,000 25,196$ 21,395 17,270 12,870 8,098 2,800 $ 145,196 146,395 142,270 142,870 143,098 142,800 Totals 775,000$ 87,629$ $ 862,629 $3,790,000 General Obligation Utility Revenue Bonds of 2004 Year Principal Interest Total 2009 2010 2011 2012 2013 Thereafter 170,000$ 175,000 180,000 190,000 195,000 2,230,000 127,908$ 122,808 117,120 111,270 104,620 528,073 $ 297,908 297,808 297,120 301,270 299,620 2,758,073 Totals $ 3,140,000 $ 1,111,799 $ 4,251,799 84 (This Page Left Blank Intentionally) AUDITOR'S REPORT ON LEGAL COMPLIANCE Honorable Mayor and Members of the City Council City of St. Charles, Minnesota We have audited the general purpose financial statements of the City of St. Charles, Minnesota as of and for the year ended December 31, 2008 and have issued our report thereon dated April 17, 2009. We conducted our audit in accordance with U.S. generally accepted auditing standards and the provisions of the Minnesota Legal Compliance Audit Guide for Local Governments, promulgated by the Legal Compliance Task Force pursuant to Minn. Stat. 6.65. Accordingly, the audit included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. The Minnesota Legal Compliance Audit Guide for Local Governments covers seven main categories of compliance to be tested: contracting and bidding, deposits and investments, conflicts of interest, public indebtedness, claims and disbursements, miscellaneous provisions, and Tax Increment Financing. Our study included all of the listed categories. The results of our tests indicate that for the items tested, the City of St. Charles complied with the material terms and conditions of applicable legal provisions. This report is intended solely for the use of the City Council, management, and the Office of the State Auditor of Minnesota and is not intended to be and should not be used by anyone other than these specified parties. Rochester, Minnesota April 17, 2009