HomeMy WebLinkAbout9B - 2007 Annual Financial Report and Management Letter
MEETING DATE:
AGENDA #:
PREPARED BY:
AGENDA ITEM:
DISCUSSION:
MAY 19,2008
98
Ralph Teschner, Finance Director
CONSIDER APPROVAL OF 2007 ANNUAL FINANCIAL REPORT AND
MANAGEMENT LETTER
Introduction
Included with this agenda report is a copy of the 2007 Financial Report along
with the management letter prepared by the certified public accountant firm of
Abdo, Eick and Meyers as required by Minnesota Statute. The audit was
conducted in accordance with generally accepted auditing standards and
represents an independent opinion of the financial results and status of the
City of Prior Lake during the year of 2007.
Current Circumstances
The audit report represents the financial reporting model that reflects GASB
Statement No. 34 as required by the Governmental Accounting Standards
Board (GASB). This format represents a consolidation of the city's financial
reporting activity into two groups; governmental activities and business-type
activities that includes a statement of net assets. A statement of net assets is
included that identifies capital fixed assets, Le. land, buildings and
improvements. As stated in the financial report, the city's overall net asset
financial position is $124,612,071 and represents an increase of $887,229
from 2006's year-end position. The majority of the increase is from contributed
capital by developers as a result of public utility projects completed during the
year, additional park land, fixed asset purchases Le., equipment and vehicles
and increased cash reserves.
Contained within the financial report is a legal compliance audit which was
performed to ensure compliance with Minnesota Statutes in the six areas of;
contracting and bidding, deposits and investments, conflicts of interest, public
indebtedness, claims and disbursements and miscellaneous provisions. Also
attached is a Management Letter prepared by the auditors that provides
highlights of the report as well as any applicable recommendations.
According to the auditor's tests, the City has complied with the applicable legal
provisions as they apply to the six main categories stated above. Also noted
within their report on internal control is the fact that no matters involving
internal control structure and operation were observed to contain material
weaknesses as defined by GAS (Government Auditing Standards).
The auditors have identified that limited segregation of duties exist within the
structural operation of the Finance Department. Ideally from a checks and
balance perspective we could segregate responsibilities if additional personnel
were available. Our response is that the solution is not economically feasible
and is a common occurrence in cities of our size. A second notation relates to
the actual preparation of the financial statements. Because we do a
comprehensive review and reconcile the auditor prepared statements to our
www.cityofpriorlake.com
Phone 952.447.9800 / Fax 952.447.4245
ALTERNATIVES:
RECOMMENDED
MOTION:
financial software Staff does not consider this situation as a significant risk.
Again, as stated by the auditors, "This is not unusual for us to do with an
organization of your size".
The Management Letter is intended to bring to the City Council's attention
deficiencies or conditions recommended for improvement within the design or
administration of the City's financial operations. A graphic summary of the
City's results of operations within the General Fund depicting revenues and
expenditures is included. Also, the auditors discuss the importance of
maintaining an adequate fund balance for cash flow purposes and to establish
overall long term financial strength.
GASB requires that a "Management's Discussion and Analysis" known as an
MD&A be assimilated to provide supplementary information to facilitate a
greater understanding of the audit report by the general reader. Within this
year's MD&A is a section attributed to the financial management policies of the
City. A key element within the City's 2030 Vision and Strategic Plan is the
ability to demonstrate strong financial management. Establishing "Financial
Performance Gold Standards" provides the City a measure of its financial
health. Seven (7) objectives have been identified to serve as a fiscal
accountability report card. All are discussed and graphically profiled within the
MD&A section of the 2007 annual financial report.
The audit has been prepared in accordance with generally accepted
accounting principals. The primary results of the General Fund as indicated
within the 2007 audit are:
1.) Actual revenues of $11,748,959 (including transfers in), compared to
budgeted revenues of $11,685,807 or 101 % of projection.
2.) Operating expenditures were $12,004,693 compared to budgeted
expenditures of $11,685,807, or 103% of budget.
3.) Gross expenditures exceeded revenues by an amount of $255,734 and
a net of $105.734.00 after including the $150,000 Severance
Compensation Fund contribution authorized by RS 07-102.
The 2007 year-end General Fund balance (which is maintained for cash flow
and emergency purposes) decreased to $5,020,666 that represents a reserve
of 40% of the 2008 General Fund Budget or above the Council recognized
minimum 30% threshold, but less than the city auditor's recommendation of
50%. Also, it falls within the acceptable level of 35-50% as defined by the State
Auditor's Office.
The following alternatives are available to the City Council:
1. Accept the 2007 Annual Financial Report and Management Letter as
submitted.
2. Delay action according to a specific Council reason.
Alternative 1. Staff recommends acceptance of the management letter and the
financial report for the fiscal year ended December 31, 2007 as submitted. A
City Financial Reporting Form, which is basically a condensed excerpt of the
official document, is required to be submitted to the Office of the State Auditor
by June 30, 2008 along with this report.
Please feel free to contact Staff prior to the meeting if you have any questions
or would like to review the report (distributed with last week's Update) on a
more comprehensive basis. Steve McDonald of the firm Abdo, Eick and
Meyers will make a brief presentation regarding the report and management
letter and respond to any questions the Council may have.
1. Management Letter
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CITY OF PRIOR LAKE
PRIOR LAKE, MINNESOTA
ANNUAL FINANCIAL REPORT
YEAR ENDED
DECEMBER 31,2007
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CITY OF PRlOR LAKE, MINNESOTA
TABLE OF CONTENTS
DECEMBER 31, 2007
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1. INTRODUCTORY SECTION
Elected and Appointed Officials
I II. FINANCIAL SECTION
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Independent Auditor's Report
Management's Discussion and Analysis
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Basic Financial Statements
Government-wide Financial Statements
Statement of Net Assets
Statement of Activities
Fund Financial Statements
Governmental Funds
Balance Sheet
Reconciliation of the Balance Sheet to the Statement of Net Assets
Statement of Revenues, Expenditures and Changes in Fund Balances
Reconciliation ofthe Statement of Revenues, Expenditures and
Changes in Fund Balances to the Statement of Activities
General Fund
Statement of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual
Proprietary Funds
Statements of Net Assets
Statements of Revenues, Expenses and Changes in Fund Net Assets
Statements of Cash Flows
Notes to the Financial Statements
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Combining and Individual Fund Financial Statements and Schedules
Nonmajor Governmental Funds
Combining Balance Sheet
Combining Schedule of Revenues, Expenditures and Changes in Fund Balances
Nonmajor Special Revenue Funds
Combining Balance Sheet
Combining Schedule of Revenues, Expenditures and Changes in Fund Balances
Nonmajor Capital Projects Funds
Combining Balance Sheet
Combining Schedule of Revenues, Expenditures and Changes in Fund Balances
General Fund
Schedule of Revenue, Expenditures and Changes in Fund Balances - Budget and Actual
Debt Service Funds
Combining Balance Sheet
Combining Schedule of Revenues, Expenditures and Changes in Fund Balances (Deficits)
Water and Sewer Utilities Fund
Comparative Schedule of Revenues, Expenses and Changes in Fund Net Assets
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Page No.
2
I - XIV
3
4-5
6-7
8
9 - 10
11
12
13 - 14
15 - 16
17 - 20
21 - 48
49
50 - 51
52 - 53
54 - 55
56 - 57
58 - 59
60 - 67
68 - 71
72 - 75
76 - 77
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CITY OF PRlOR LAKE, MINNESOTA
TABLE OF CONTENTS - CONTINUED
DECEMBER 31,2007
Page No.
II1. FINANCIAL EXHIBITS
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Combined Schedule of Indebtedness
Bond Schedules
Debt Service Requirements
Tax Levies and Collections, Special Assessment Levies and Collections and Other Schedules
Key Financial Indicators
78 - 79
80 - 86
87 - 88
89 - 90
91
IV. OTHER REPORT
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Report on Minnesota Legal Compliance
92
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INTRODUCTORY SECTION
CITY OF PRIOR LAKE
PRIOR LAKE, MINNESOTA
YEAR ENDED
DECEMBER 31, 2007
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I Name
I Jack Haugen
Warren Erickson
Chad LeMair
I Ken Hedberg
Steve Millar
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I Frank Boyles
Ralph Teschner
Janie Gilb
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CITY OF PRlOR LAKE, MINNESOTA
ELECTED AND APPOINTED OFFICIALS
DECEMBER 31,2007
ELECTED
Title
Term Expires
Mayor
Council
Council
Council
Council
12/31/09
12/31/09
12/31/09
12/31/10
12/31/10
APPOINTED
City Manager
Finance Director
Accounting Supervisor
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FINANCIAL SECTION
CITY OF PRIOR LAKE
PRIOR LAKE, MINNESOTA
YEAR ENDED
DECEMBER 31,2007
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Certified Puhlic Accountants & Consultants
Grandview Square
5201 Eden Avenue
Suite 370
Edina, MN 55436
INDEPENDENT AUDITOR'S REPORT
Honorable Mayor and Council
City of Prior Lake
Prior Lake, Minnesota
We have audited the accompanying [mancial statements of the governmental activities, the business-type activities, each major
fund, and the aggregate remaining fund information of the City of Prior Lake, Minnesota (the City), as of and for the year ended
December 31,2007 , 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.
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 [mancial statements are
free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the [mancial statements. An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall [mancial 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 as of December 31, 2007, and the respective changes in financial position and cash flows and the respective budgetary
comparison schedule for the General fund, where applicable, thereof 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 I through XIV is not a required part ofthe [mancial 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 inquiries 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's basic financial statements. The introductory section, combining and individual nonmajor fund [mancial statements,
and statistical tables are presented for purposes of additional analysis and are not a required part of the basic [mancial
statements. The combining and individual fund [mancial statements and schedules 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 statistical tables have not been
subjected to the auditing procedures applied in the audit of the basic [mancial statements and, accordingly, we express no
opinion on them. 0J.nL, U ~ ~I LL P
May 5, 2008 ABDO, EICK & MEYERS, LLP
Minneapolis, Minnesota Certified Public Accountants
952.835.9090 . Fax 952.835.3261
www.aemcpas.com
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Management's Discussion and Analysis
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As management of the City of Prior Lake (the City), we offer readers of the City's financial statements this narrative overview
and analysis of the financial activities of the City for the fiscal year ended December 31, 2007.
Financial Highlights
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. The City's bond rating of Aa3 was reaffIrmed by Moody's Investor Service which places Prior Lake in the top ten
percentile of all Minnesota cities. Moody's recognizes Prior Lake for following prudent fiscal management practices and
credited the City for being progressive and anticipatory of its growth needs.
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. The assets of the City exceeded its liabilities at the close of the most recent fiscal year by $123,367,584 (net assets). Of
this amount, $29,979,584 (unrestricted net assets) may be used to meet the City's ongoing obligations to citizens and
creditors.
. The City's total net assets decreased by $357,258.
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. As ofthe close of the current fiscal year, the City's governmental funds reported combined ending fund balances of
$24,642,929, an increase of$6,853 in comparison with the prior year. Approximately 89 percent of this total amount or
$21,835,830 is available for spending at the City's discretion (unreserved fund balance).
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. At the end of the current fiscal year, unreserved fund balance for the general fund was $5,020,666, or 45 percent of
budgeted 2007 expenditures and transfers ($11,685,807)
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Overview of the Financial Statements
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This discussion and analysis are intended to serve as an introduction to the City's basic [mancial statements. The City's basic
financial statements comprise three components: 1) government-wide financial statements, 2) fund [mancial statements, and 3)
notes to the financial statements. This report also contains other supplemental information in addition to the basic financial
statements themselves.
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Government-wide Financial Statements
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The government-widefinancial statements are designed to provide readers with a broad overview of the City's finances, in a
manner similar to a private-sector business.
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The statement of net assets presents information on all of the City's assets and liabilities, with the difference between the two
reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the [mancial
position of the City is improving or deteriorating.
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The statement of activities presents information showing how the City's net assets changed during the most recent fiscal
year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of
the timing of related cash flows. Thus, revenues and expenditures are reported in this statement for some items that will only
result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave).
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Both of the government-wide financial statements distinguish functions ofthe City that are principally supported by taxes
and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a
significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the
City include general government, public safety, public works, culture and recreation, economic development and interest on
long-term debt. The business-type activities of the City include water and sewer utilities, storm water utility and transit
services.
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The government-wide financial statements can be found on pages 3 - 5 of this report.
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Management's Discussion and Analysis - Continued
May 5, 2008
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Fund Financial Statements
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Afund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific
activities or objectives. The City, like other state and local government, uses fund accounting to ensure and demonstrate
compliance with finance-related legal requirements. All of the funds of the City can be divided into two categories:
governmental funds and proprietary funds.
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Governmentalfunds. Governmentalfunds are used to account for essentially the same functions reported as governmental
activities in the government-wide fmancial statements. However, unlike the government-wide fmancial statements,
governmental fund fmancial 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 fmancing requirements.
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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 ofthe City's
near-term fmancing 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.
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The City maintains 24 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, Debt
Service, Construction, Trunk Reserve, Building, and Water Storage funds which are the major funds. Data from the other 15
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.
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The City adopts an annual appropriated budget for its General fund. A budgetary comparison statement has been provided
for the General fund to demonstrate compliance with this budget.
The basic governmental fund fmancial statements can be found on pages 6 - 12 of this report.
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Proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the
government-wide financial statements. The City uses enterprise funds to account for its water and sewer utilities, storm
water utility and transit services.
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Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail.
The basic proprietary fund financial statements can be found on pages 13 - 20 of this report.
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Notes to Financial Statements
The notes provide additional information that is essential to a full understanding of the data provided in the government-wide
and fund fmancial statements. The notes to the financial statements can be found on pages 21 - 48 of this report.
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Other Information
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The combining statements referred to earlier in connection with nonmajor governmental funds and internal service funds are
presented immediately following the notes to financial statements. Combining and individual fund fmancial statements and
schedules can be found on pages 49 - 91 of this report.
Government-wide Financial Analysis
As noted earlier, net assets may serve over time as a useful indicator of a government's financial position. In the case of the
City, assets exceeded liabilities by $124,612,071 at the close of the most recent fiscal year.
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The City's investment in capital assets (e.g., land, buildings, machinery and equipment), less any related debt used to acquire
those assets that are still outstanding total 72 percent of total net assets. The City uses these capital assets to provide services
to citizens; consequently, these assets are not available for future spending. Although the City's investment in its capital
assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from
other sources, since the capital assets themselves cannot be used to liquidate these liabilities.
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I Management's Discussion and Analysis - Continued
May 5, 2008
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Net Assets
I Governmental Activities Business-type Activities
Increase Increase
I 2007 2006 (Decrease) 2007 2006 (Decrease)
Assets
Cash and equivalents $26,763,909 $25,780,173 $ 983,736 $ 8,501,901 $ 6,966,763 $ 1,535,138
Receivables
I Delinquent taxes 236,829 112,186 124,643
Accounts 179,301 761,156 (581,855) 212,177 277,438 (65,261)
Loan 7,739 (7,739)
I Special assessments 2,302,824 2,789,679 (486,855) 5,456 9,308 (3,852)
Bond discount and
issuance costs, net 341,697 187,477 154,220
I Capital assets not
being depreciated 65,833,670 58,588,272 7,245,398 621,948 453,444 168,504
Capital assets net
I of accumulated depreciation 38,038,072 37,590,773 447,299 23,504,719 23,713,871 (209,152)
Total assets 133,696,302 125,817,455 7,878,847 32,846,201 31,420,824 1,425,377
I Liabilities
Accounts payable and
accrued expenses 1,799,048 1,671,717 127,331 287,471 111,441 176,030
I Due to other
governmental agencies 585 (585) 24,638 24,156 482
Deposits payable 577,750 247,750 330,000
Accrued interest 109,234 124,616 (15,382)
I Long-term liabilities
Due within one year
Compensated absences 205,875 221,544 (15,669) 41,371 33,577
I Bonds, capital leases and contracts 2,450,000 2,150,000 300,000
Due in more than one year Bonds,
capital leases and contracts 37,080,000 28,405,000 8,675,000
I Compensated absences 504,202 425,930 78,272 95,330 97,121 (1,791)
Total liabilities 42,726,109 33,247,142 9,478,967 448,810 266,295 182,515
I Net assets
Invested in capital assets,
net of related debt 64,683,439 28,033,272 36,650,167 24,126,667 24,167,315 (40,648)
I Restricted for
Debt service 4,577,941 5,443,352 (865,411)
Unrestricted 21,708,813 59,093,689 (37,384,876) 8,270,724 6,987,214 1,283,510
I Total net assets $90,970,193 $92,570,313 $ (1,600,120) $32,397,391 $31,154,529 $ 1,242,862
An additional portion of the City's net assets (4 percent) represents resources that are subject to external restrictions on how
I they may be used. The remaining balance of unrestricted net assets ($29,979,537) may be used to meet the City's ongoing
obligations to citizens and creditors.
At the end of the current fiscal year, the City is able to report positive balances in all three categories of net assets, both for
I the City as a whole, as well as for its separate governmental and business-type activities.
The increase in net assets in business-type activities was mainly from operating cash flow ofthe operations.
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I Management's Discussion and Analysis - Continued
May 5, 2008
I Governmental activities. The changes in net assets for the past two years are summarized below:
I Changes in Net Assets
Governmental Activities Business-type Activities
I Increase Increase
2007 2006 (Decrease) 2007 2006 (Decrease)
Revenues
I Program revenues
Charges for services $ 1,765,354 $ 2,639,546 $ (874,192) $ 5,072,937 $ 5, 155,003 $ (82,066)
Operating grants and
I contributions 985,660 967,973 17,687 738,204 745,233 (7,029)
Capital grants and
contributions 2,156,632 5,564,206 (3,407,574) 450,348 1,396,204 (945,856)
General revenues
I Taxes 9,239,450 8,3 18,4 I 8 921,032
Grants and contributions not
restricted to specific programs 1,222,299 75,616 1,146,683
I Unrestricted investment earnings 1,779,780 1,363,690 416,090 474,849 275,425 199,424
Miscellaneous 223,633 828,246 (604,613) 4,435 40 4,395
Special item - Property sale 427, I 5 I (427,151)
I Capital assets contributed
by developers 615,000 5,646,256 (5,031,256) 109,248 109,248
Capital assets contributed
I to enterprise funds (58,818) (351,657) 292,839 58,818 351,657 (292,839)
Transfers 709,025 247,646 461,379 (709,025) (247,646) (461,379)
Total revenues 18,638,015 25,727,091 (7,089,076) 6,199,814 7,675,916 (1,476,102)
I Expenses
General government 1,903,936 2,219,687 (315,751)
Public safety 5,463,583 3,679,083 1,784,500
I Public works 6,404,729 5,035,672 1,369,057
Culture and recreation 1,564,635 2,143,723 (579,088)
Economic development 272,225 285,096 (12,871)
I Interest on long-term debt 1,513,391 1,629,699 (116,308)
Water and sewer utilities 3,775,663 3,591,192 184,471
Storm water utility 267,708 282,143 (14,435)
I Transit services 692,071 493,102 198,969
Total expenses 17,122,499 14,992,960 2,129,539 4,735,442 4,366,437 369,005
I Change in net assets 1,515,516 10,734,131 (9,218,615) 1,464,372 3,309,479 (1,845,107)
Net assets, January 1 92,570,313 81,836,182 10,734,131 31,154,529 27,845,050 3,309,479
Prior period adjustment (3,115,636) (3,115,636) (221,510) (221,5 I 0)
I Net assets, December 31 $ 90,970,193 $ 92,570,313 $ (1,600,120) $ 32,397,391 $ 31,154,529 $ 1,242,862
. The largest change in the governmental activities was a reduction in the amount received from developers totaling
I over $5 million.
. As mentioned on the prior page the increase in business type activities was due to operating cash flow.
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Management's Discussion and Analysis - Continued
May 5, 2008
The graph below relates program revenues to program expenses exclusive of general revenues:
Expenses and Program Revenues - Governmental Activities
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$7,000,000
$6,000,000
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$5,000,000
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$4,000,000
$3,000,000
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$2,000,000
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$1,000,000
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$-
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I- Expenses - Program Revenues I
Revenues by Source - Governmental Activities
Unrestricted
investments earnings
10.2%
Charges for services
10.2%
Operating grants and
contributions
5.7%
Miscellaneous
1.3%
Grants and
contributions
unrestricted
7.0%
Capital grants and
contributions
12.4%
Other taxes
3.0%
Property taxes
50.2%
-v-
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Management's Discussion and Analysis - Continued
May 5, 2008
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For the most part, increases in expenses closely paralleled inflation and growth in the demand for services.
. Business-type activities. Business-type activities increased the City's net assets $1,242,862, accounting for all the
total growth in the City's net assets.
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$6,000,000
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$5,000,000
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$4,000,000
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$3,000,000
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$2,000,000
$1,000,000
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Expenses and Program Revenues - Business-type Activities
$-
Water and sewer utilities Storm water utility
Transit services
I_ Expenses - Program Revenues 1
Revenues by Source - Business-type Activities
Charges for services
75.26%
Other
7.11%
Capital grants and
contributions
6.68%
Operating grants and
contributions
10.95%
-VI-
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Management's Discussion and Analysis - Continued
May 5, 2008
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Financial Analysis ofthe Government's Funds
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As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal
requirements.
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Governmentalfunds. The focus of the City's governmental funds is to provide information on near-term inflows, outflows
and balances of spendable resources. Such information is useful in assessing the City's financing requirements. In particular,
unreservedfund balance may serve as a useful measure of a government's net resources available for spending at the end of
the fiscal year.
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Activity in the City's major funds is discussed below.
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Fund Balance December 31,
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Major funds
2007
2006
Increase
(Decrease)
General
$ 5,020,666
$ 5,276,400
$ (255,734)
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The decrease in the general fund was mainly due to the transfer out completed to fund project costs. The fund balance is still
strong relative to the following years budget (40%)
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Debt Service
2,437,706
2,619,915
(182,209)
The debt service fund balance decreased $182 thousand. This was anticipated since the City manages cash flow in all debt
service funds and ensures adequate resources exist to fund future obligations
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Construction
$
811,968
$
551,579
$
260,389
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This major projects in this fund during 2007 were costs related to the County Road 21 project and proceeds from the 2007
Street bonds.
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Trunk Reserve $ 1,322,544 $ 4,537,729 $ (3,215,185)
The most significant transaction in the Trunk Reserve was the transfer of $2.3 million to help finance the water treatment
project.
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Building $ 2,073,162
The Building fund incurred just over $1 million for the fIre station construction.
$ 3,180,247
$ (1,107,085)
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Water Storage $ 9,912,602 $ 2,088,470 $ 7,824,132
Debt totaling $8.5 million and transfers from the trunk reserve totaling $2.3 million were received in 2007 to fund the
construction of a water treatment facility.
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- VII-
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Management's Discussion and Analysis - Continued
May 5, 2008
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General Fund Budgetary Highlights
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Overall, the majority of the 2007 budgetary [mancial performance was very close to expectations on both the revenue and
expense side. The City's General Fund cash balance will have decreased by an estimated net amount of$308,000 (includes
$150,000 Severance Compensation Fund contribution authorized by RS 07-102) to a preliminary audited position of$5.02
million. This general fund cash balance amount represents a reserve of 40% based upon the current annual budget.
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The following two General Fund balance appropriations resulted in our total expenditures slightly exceeding revenues:
$250,000.00 - contribution to the Pike Lake Park acquisition.
$312,000.00 - 800 megahertz radio purchase.
Both appropriations were extraordinary demands.
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We anticipate that the regional building slowdown will continue another 24 months into at least the beginning of 20 1 O.
Because of this market uncertainty it is important that the City of Prior Lake exercise caution and continue to maintain its
financial strength through a healthy general fund balance.
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Capital Assets. The City's investment in capital assets for its governmental and business type activities as of
December 31,2007, amounts to $127,998,409 (net of accumulated depreciation). This investment in capital assets includes
land, buildings and system, improvements, machinery and equipment, park facilities, roads, highways and bridges.
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A variety of street construction projects in new residential developments contributed to the overall recent residential growth
which was reflected in Prior Lake's rank as the 38th fastest growing city in the United States as noted in Forbes for the years
spanning 2000 to 2006. Also last year, Scott County experienced the highest growth rate of all counties within the state of
Minnesota and was the 28th fastest growing county nationally from the year 2000 to 2007.
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Capital Assets, Net of Depreciation
Governmental Activities Business-type Activities
Increase Increase
2007 2006 (Decrease) 2007 2006 (Decrease)
Land $ 55,296,272 $ 51,144,423 $ 4,151,849 $ $ $
Construction work
in process 10,537,398 7,443,850 3,093,548 621,948 453,444 168,504
Land improvements 1,035,301 401,765 633,536 4,299,489 4,264,684 34,805
Machinery
and equipment 2,132,210 1,933,749 198,461 213,732 124,787 88,945
Vehicles 1,792,696 691,965 1,100,731 55,714 83,572 (27,858)
Infrastructure 33,077,865 34,563,293 (1,485,428) 18,935,784 19,240,828 (305,044)
Total $ 103,871,742 $ 96,179,045 $ 7,692,697 $ 24,126,667 $ 24,167,315 $ (40,648)
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Additional information on the City's capital assets can be found in Note 3C on pages 32 - 34 of this report.
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-VIII -
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Management's Discussion and Analysis - Continued
May 5, 2008
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Long-term debt. At the end of the current fiscal year, the City had total bonded debt outstanding of$38,305,000.
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Governmental Activities Outstanding Debt
General Obligation and Revenue Bonds
Governmental Activities Business-type Activities
Increase Increase
2007 2006 (Decrease) 2007 2006 Decrease
General obligation
improvement bonds 8,305,000 $ 8,295,000 $ 10,000 $ $ $
General obligation
tax increment bonds 355,000 370,000 (15,000)
General obligation bonds 10,300,000 10,790,000 (490,000)
Lease revenue bonds 9,770,000 9,900,000 (130,000)
General obligation/revenue bonds 9,575,000 1,200,000 8,375,000
Compensated absences 710,077 647,474 62,603 136,701 130,698 6,003
Total $ 39,015,077 $ 31,202,474 $ 7,812,603 $ 136,701 $ 130,698 $ 6,003
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. The City's total debt increased during the current fiscal year due to the issuance of general obligation bonds to
finance street reconstruction and to fmance the constructions of a water treatment plant.
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The City's assigned rating from Moody's is Aa3 for general obligation debt.
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The City's statutory debt limit is equal to two percent of estimated taxable market value of property located within the City.
The taxable market value totals $2,457,196,600, which calculates to a debt margin of$49,143,932. Debt fmanced partially or
entirely by special assessments is not applied against the City's debt limit, nor is debt fmanced by proprietary fund revenues.
Currently the City has $11,700,000 of general obligation debt outstanding leaving a debt margin of $37,443,932.
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Additional information on the City's long-term debt can be found in Note 3E on pages 35 - 42 of this report.
Economic Factors and Next Year's Budgets and Rates
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. Continued staged development ofland with the 3,000 acres recently annexed from Spring Lake Township will
provide the majority of the City's anticipated market value growth over the course of the next ten years.
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· Residential building activity is expected to continue its slowdown reflecting the metropolitan twin cities area
construction downturn.
· It's anticipated that 50-75 single family construction starts will occur in 2008.
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· Significant road improvement completions are scheduled for 2008 consisting of upgrading major CSAH 12 and
CSAH 82 to four lane highways.
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· Major building improvements scheduled for completion in 2008 include a second fIre station and a 7.5 MGD water
treatment plant and a 1.5 million gallon ground storage tanle
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-IX-
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Management's Discussion and Analysis - Continued
May 5,2008
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Financial management policies
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The City has set a goal to establish "Financial Performance Gold Standards" to measure the financial health of the City. Such
criteria supports several purposes:
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(a) to serve as best practice measures to strengthen the City's financial position and maximize the return ofthe taxpayer
dollar
(b) to communicate the fiscal performance and condition of the City to residents in a consistent manner
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(c) to facilitate the setting of policy and [mancial direction by the Council with resident input
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Objective 1: Aa2 Bond Rating
Achieve an Aa2 Bond Rating - Strong credit rating by Moody's Inc. provides low cost financing for the City's general obligation
bonds.
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Year Rating
2003 Al
2004 Al
2005 Aa3
2006 Aa3
2007 Aa3
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Objective 2: 45 Percent General Fund Reserve Balance
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Maintain a 45 Percent General Fund Reserve Balance - Office of the State Auditor (OSA) and City Auditor recommended reserve
to provide adequate cash flow, offset revenue shortfalls and insurance for unforeseen catastrophic events.
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$14,000,000
$12,000,000
$10,000,000
$8,000,000
$6,000,000
$4,000,000 .
48.0%
$2,000,000
$-
2003
$12,426,431
$11,685,807
$10,840,734
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.
57.0%
.
56.0%
t
47.0%
.
40.0%
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2004
2005
2006
2007
2008
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I~ Actual Fund Balance -Budget I
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Management's Discussion and Analysis - Continued
May 5, 2008
Objective 3: Lowest City Property Tax Rank in Scott County
Achieve the Lowest City Property Tax Rank in Scott County - Favorable tax rate provides stimulus for growth of residential and
commercial property tax base.
Cities 2003 2004 2005 2006 2007
Belle Plaine 65.496 61.700 58.142 54.983 56.929
Elko New Market 35.687 *
Jordan 60.597 54.176 55.530 50.786 47.287
New Prague 66.197 61.815 57.299 49.987 50.934
Prior Lake 38.614 34.347 32.469 31.305 28.435
Savage 46.527 51.404 46.385 46.489 50.155
Shakopee 33.939 32.433 31.115 30.974 31.939
* - Consolidated in 2007
Source: Scott County Department of Taxation
70.000
60.000
50.000
40.000
30.000
20.000
10.000
0.000
2003
Property tax rate - Scott County Cities
--+
, --+-
~._~~~~ nY'
,,!'I,~ "
", - ..
~Belle Plaine
......Elko New Market
....... Jordan
New Prague
Prior Lake
Savage
Shakopee
.l
2004
2005
2006
2007
-XI-
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Management's Discussion and Analysis - Continued
May 5, 2008
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Objective 4: 100 Percent Funded Fire Relief Association Pension
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Assure 100 percent Funded Fire Relief Association Pension - reduces reliance upon future property rate increases. The last year
of reported information is 2006.
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Fire Relief Funding Rate
125.00%
118.90%
120.00% 118.50%
..",,,,,.... 115.50% .
115.00%
110.00%
1 05.00% 0
.'",.,."."........
100.00%
95.00%
90.00%
2002 2003 2004 2005 2006
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Objective 5: 98 Percent General Fund Budget Outcome
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Limit expenditure level to a 98 percent General Fund Budget Outcome - ensures fiscal accountability at the highest level.
Actual Expenditures to Budget
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105%
103%
100.0%
101% -
99%
97%
95%
93%
91%
89%
2003 2004 2005
101.0%
.
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,.,;:-,:
..:"",:..
""""'.
98.0%
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II
2006
2007
-XII-
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Management's Discussion and Analysis - Continued
May 5, 2008
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Objective 6: 97 Percent Investment Position of All City Funds
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Manage a 97 percent Investment Position of All City Funds - Active investment realizes best possible return and fund
stewardship.
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Percent of cash invested
I
100%
99%
99%
98%
98%
97%
97%
96%
96% 6%
95%
95%
2003
...,.;",,+
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9W~
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,,,,,,,,,,.,,,.,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,"".,"""'.,
97%
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2004
2005
2006
2007
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Objective 7: 60/40 Percent Property Tax Ratio
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Target a 60/40 percent Property Tax Ratio - A proper balance between property tax and non-property tax revenues provides relief
to the citizen in the form of lower property taxes.
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Non-property revenue to total revenue
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41%
40%
40%
39%
38%
37%
36%
35%
34%
2003 2004
39%
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36%
36%
'+""""".
"''','''''''''''+-n___
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2005
2006
2007
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-XIII -
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Management's Discussion and Analysis - Continued
May 5, 2008
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Requests for Information
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This financial report is designed to provide a general overview ofthe City's finances for all those with an interest in the City's
finances. Questions concerning any ofthe information provided in this report or requests for additional financial information
should be addressed to the Finance Director, City of Prior Lake, 4646 Dakota Street, S.E., Prior Lake, Minnesota 55372-1714.
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-XIV-
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BASIC FINANCIAL STATEMENTS
CITY OF PRIOR LAKE
PRIOR LAKE, MINNESOTA
YEAR ENDED
DECEMBER 31, 2007
THIS PAGE IS LEFT BLANK
INTENTIONALL Y
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I CITY OF PRIOR LAKE, MINNESOTA
I STATEMENT OF NET ASSETS
DECEMBER 31,2007
I Governmental B usiness- type
Activities Activities Total
ASSETS
I Cash and cash equivalents $ 26,763,909 $ 8,501,901 $ 35,265,810
Receivables
Delinquent taxes 236,829 236,829
I Accounts 179,301 212,177 391,478
Special assessments 2,302,824 5,456 2,308,280
Unamortized bond discount and issuance costs, net 341,697 341,697
I Capital assets not being depreciated 65,833,670 621,948 66,455,618
Capital assets net of accumulated depreciation 38,038,072 23,504,719 61,542,791
I TOTAL ASSETS 133,696,302 32,846,201 166,542,503
LIABILITIES
I Accounts payable and accrued expenses 1,799,048 287,471 2,086,519
Due to other governmental agencies 24,638 24,638
Deposits payable 577,750 577,750
I Accrued interest payable 109,234 109,234
Long-term liabilities
Due within one year
I Compensated absences 205,875 41,371 247,246
Bonds, capital leases and contracts 2,450,000 2,450,000
Due in more than one year
I Compensated absences 504,202 95,330 599,532
Bonds, capital leases and contracts 37,080,000 37,080,000
I TOTAL LIABILITIES 42,726,109 448,810 43,174,919
NET ASSETS
I Invested in capital assets, net of related debt 64,683,439 24,126,667 88,810,106
Restricted for
Debt service 4,577,941 4,577,941
I Umestricted 21,708,813 8,270,724 29,979,537
I TOTAL NET ASSETS $ 90,970,193 $ 32,397,391 $ 123,367,584
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The notes to the fmancial statements are an integral part to this statement.
I -3-
Functions/Programs
Governmental activities
General government
Public safety
Police
Fire
Other
Public works
Culture and recreation
Library
Other
Economic development
Interest on long-term debt
Total governmental activities
Business-type activities
Water and sewer utilities
Storm water utility
Transit services
Total business-type activities
Total
CITY OF PRIOR LAKE, MINNESOTA
STATEMENT OF ACT1VITIES
YEAR ENDED DECEMBER 31, 2007
Expenses
$ 1,903,936
4,101,224
612,054
750,305
6,404,729
333,200
1,231,435
272,225
1,513,391
17,122,499
985,660
1,765,354
3,775,663 4,636,853
267,708 350,524
692,071 85,560 738,204
4,735,442 5,072,937 738,204
$ 21,857,941 $ 6,838,291 $ 1,723,864
General revenues
Taxes
Property taxes, levied for general purposes
Franchise taxes
Grants and contributions not restricted to specific programs
Unrestricted investment earnings
Miscellaneous
Capital assets contributed by developers
Capital assets contributed to enterprise funds
Transfers
Total general revenues, special items, and transfers
Change in net assets
Net assets, January 1
Prior period adjustment
Net assets, December 31
The notes to the financial statements are an integral part of this statement.
-4-
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2,156,632
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450,348
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450,348
$ 2,606,980
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Net (Expenses) Revenues and Changes in Net Assets
I Governmental Business-type
Activities Activities Total
I $ (1,203,024) $ $ (1,203,024)
I (3,321,329) (3,321,329)
(134,929) (134,929)
(295,927) (295,927)
I (4,580,439) (4,580,439)
(333,200) (333,200)
I (560,530) (560,530)
(272,084) (272,084)
(1,513,391) (1,513,391)
I (12,214,853) (12,214,853)
I 1,311,538 1,311,538
82,816 82,816
I 131,693 131,693
1,526,047 1,526,047
I (12,214,853) 1,526,047 (10,688,806)
I 8,716,647 8,716,647
522,803 522,803
I 1,222,299 1,222,299
1,779,780 474,849 2,254,629
223,633 4,435 228,068
I 615,000 109,248 724,248
(58,818) 58,818
709,025 (709,025)
I 13,730,369 (61,675) 13,668,694
1,515,516 1,464,372 2,979,888
I 92,570,313 31,154,529 123,724,842
I (3,115,636) (221,510) (3,337,146)
$ 90,970,193 $ 32,397,391 $ 123,367,584
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INTENTIONALL Y
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II
FUND FINANCIAL STATEMENTS
CITY OF PRIOR LAKE
PRIOR LAKE, MINNESOTA
YEAR ENDED
DECEMBER 31, 2007
CITY OF PRlOR LAKE, MINNESOTA I
BALANCE SHEET
GOVERNMENTAL FUNDS I
DECEMBER 31, 2007
Debt I
General Service Construction
ASSETS I
Cash and temporary investments $ 5,867,686 $ 2,421,683 $ 819,225
Receivables
Delinquent taxes 224,101 5,877 I
Accounts 179,301
Special assessments I
Delinquent 2,405 18,233
Deferred 800 1,398,714
Other (Green Acres) 842,668 I
TOTAL ASSETS $ 6,274,293 $ 4,687,175 $ 819,225
LIABILITIES AND FUND BALANCES I
LIABILITIES
Accounts payable $ 502,215 $ $ 7,257 I
Deposits payable 577,750
Deferred revenue 173,662 2,249,469
TOTAL LIABILITIES 1,253,627 2,249,469 7,257 I
FUND BALANCES I
Reserved for
Severance compensation
Debt service 2,437,706 I
Unreserved, reported in
General fund 5,020,666
Special revenue funds I
Capital projects funds 811,968
TOTAL FUND BALANCES 5,020,666 2,437,706 811,968 I
TOTAL LIABILITIES AND FUND BALANCES $ 6,274,293 $ 4,687,175 $ 819,225
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The notes to the fmancial statements are an integral part to this statement. I
-6-
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I Other Total
Trunk Water Governmental Governmental
I Reserve Building Storage Funds Funds
$ 1,354,703 $ 2,361,183 $ 10,600,635 $ 3,338,794 $ 26,763,909
I 6,851 236,829
179,301
I 20,638
36,642 1,436,156
I 3,362 846,030
$ 1,358,065 $ 2,361,183 $ 10,600,635 $ 3,382,287 $ 29,482,863
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I $ 32,158 $ 288,021 $ 688,033 $ 281,364 $ 1,799,048
577,750
3,363 36,642 2,463,136
I 35,521 288,021 688,033 318,006 4,839,934
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I 369,393 369,393
2,437,706
I 5,020,666
1,227,864 1,227,864
1,322,544 2,073,162 9,912,602 1,467,024 15,587,300
I 1,322,544 2,073,162 9,912,602 3,064,281 24,642,929
I $ 1,358,065 $ 2,361,183 $ 10,600,635 $ 3,382,287 $ 29,482,863
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INTENTIONALL Y
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CITY OF PRlOR LAKE, MINNESOTA
RECONCILIATION OF THE BALANCE SHEET
TO THE STATEMENT OF NET ASSETS
GOVERNMENTAL FUNDS
AS OF DECEMBER 31,2007
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Total fund balances - governmental funds
I Amounts reported for governmental activities in the statement
of net assets are different because:
$ 24,642,929
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Capital assets used in governmental activities are not fmancial
resources and therefore are not reported as assets in governmental funds.
Cost of capital assets
Less: accumulated depreciation
134,738,336
(30,866,594)
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Long-term liabilities, including bonds payable, are not due and payable in the
current period and therefore are not reported as liabilities in the funds.
Long-term liabilities at year-end consist of:
Severance payable
Bond principal payable
Less bond discount net of accumulated amortization
(710,077)
(39,530,000)
341,697
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Revenues in the statement of activities that do not provide current financial resources
are not reported as revenue in the fund fmancial statements.
Delinquent property taxes
Special assessments
172,860
2,290,276
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Governmental funds do not report a liability for accrued interest until due and payable.
(109,234)
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Total net assets - governmental activities
$ 90,970,193
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The notes to the fmancial statements are an integral part of this statement.
-8-
CITY OF PRIOR LAKE, MINNESOTA I
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS I
YEAR ENDED DECEMBER 31, 2007
I
Debt
General Service Construction I
REVENUES
Taxes $ 8,132,478 $ 791,329 $
Licenses and permits 517,662 I
Intergovernmental 1,240,355 257,724
Charges for services 1,016,212
Fines and forfeitures 190,650
Special assessments 543,172 I
Interest on investments 288,869 183,930 79,972
Miscellaneous 112,733 437,361
TOTAL REVENUES 11,498,959 1,518,431 775,057 I
EXPENDITURES
Current I
General government 2,192,485
Public safety 3,716,013
Public works 1,734,375 1,225,000 I
Culture and recreation 1,655,042
Economic development 109,632
Contingency 107,498 I
Capital outlay
General government 78,820
Public safety 448,546 I
Public works 1,914,668
Culture and recreation 258,844
Economic development I
Debt service
Principal 2,150,000
Interest and other 1,519,931 I
TOTAL EXPENDITURES 10,301,255 4,894,931 1,914,668
EXCESS (DEFICIENCY) OF REVENUES I
OVER (UNDER) EXPENDITURES 1,197,704 (3,376,500) (1,139,611)
OTHER FINANCING SOURCES (USES)
Transfers in 250,000 1,969,291 I
Bonds issued 1,225,000 1,400,000
Transfers out (1,703,438)
TOTAL OTHER FINANCING I
SOURCES (USES) (1,453,438) 3,194,291 1,400,000
NET CHANGE IN FUND BALANCES (255,734) (182,209) 260,389 I
FUND BALANCES, JANUARY 1 5,276,400 2,619,915 551,579
FUND BALANCES, DECEMBER 31 $ 5,020,666 $ 2,437,706 $ 811,968 I
The notes to the financial statements are an integral part ofthis statement.
-9- I
CITY OF PRIOR LAKE, MINNESOTA
RECONCILIATION OF THE STATEMENT OF
REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
TO THE STATEMENT OF ACTIVITIES
GOVERNMENTAL FUNDS
YEAR ENDED DECEMBER 31, 2007
Total net change in fund balances - governmental funds
Amounts reported for governmental activities in the statement
of activities are different because:
Capital outlays are reported in governmental funds as expenditures. However, in the statement of
activities, the cost ofthose assets is allocated over the estimated useful lives as depreciation expense.
Capital outlay
Depreciation expense
The issuance oflong-term debt provides current financial resources to governmental funds, while
the repayment of principal of long-term debt consumes the current financial resources of governmental
funds. Neither transaction, however, has any effect on net assets. Also, governmental funds report
the effect of issuance costs, premiums, discounts and similar items when debt is first issued,
whereas these amounts are deferred and amortized in the statement of activities.
Principal repayments
Debt issued or incurred, plus premium, less issuance costs and discount
Revenues in the statement of activities that do not provide current financial resources are not
repOlted as revenues in the funds.
Capital assets contributed by developers
Assets constructed in the governmental funds for the enterprise funds are eliminated in the
government-wide statements.
Interest on long-term debt in the statement of activities differs from the amount reported in the
governmental fund because interest is recognized as an expenditure in the funds when it is due,
and thus requires the use of current financial resources. In the statement of activities, however,
interest expense is recognized as the interest accrues, regardless of when it is due.
Governmental funds report debt issuance premiums and discounts as an other financing
sources or uses at the time of issuance. Premiums and discounts are reported as an
unamortized asset or liability in the government-wide financial statements.
Delinquent property taxes receivable will be collected this year but are not available soon
enough to pay for the current period's expenditures and therefore are deferred in the funds.
Certain revenues are recognized as soon as earned. Under the modified accrual
basis of accounting certain revenues cannot be recognized until they are available
to liquidate liabilities ofthe current period.
Special assessments
Loans
Some expenses reported in the statement of activities do not require the use of current
financial resources and, therefore, are not reported as expenditures in governmental funds.
Compensated absences
Change in net assets - governmental activities
The notes to the financial statements are an integral part of this statement.
-11-
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$
6,853
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12,710,047
(2,457,896)
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2,150,000
(10,961,938)
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615,000
(58,818)
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15,382
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(8,842)
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71,561
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(495,491)
(7,739)
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(62,603)
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$
1,515,516
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I CITY OF PRIOR LAKE, MINNESOTA
I STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES -
BUDGET AND ACTUAL
GENERAL FUND
YEAR ENDED DECEMBER 31, 2007
I Variance with
Budgeted Amounts Final Budget -
I Actual Positive
Original Final Amounts (Negative)
REVENUES
I Taxes
Property taxes $ 7,526,814 $ 7,526,814 $ 7,574,936 $ 48,122
Franchise taxes 345,530 345,530 557,542 212,012
I Licenses and permits 752,275 752,275 517,662 (234,613)
Intergovernmental 1,223,537 1,223,537 1,240,355 16,818
Charges for services 1,161,051 1,161,051 1,016,212 (144,839)
Fines and forfeitures 189,600 189,600 190,650 1,050
I Interest on investments 135,000 135,000 288,869 153,869
Miscellaneous 102,000 102,000 112,733 10,733
TOTAL REVENUES 11,435,807 11,435,807 11,498,959 63,152
I EXPENDITURES
Current
I General government 2,171,128 2,171,128 2,192,485 (21,357)
Public safety
Police 2,725,005 2,725,005 2,688,624 36,381
Fire and rescue 622,670 622,670 580,141 42,529
I Other 567,188 567,188 447,248 119,940
Public works 1,709,200 1,709,200 1,734,375 (25,175)
Culture and recreation 1,725,122 1,725,122 1,655,042 70,080
I Economic development 142,141 142,141 109,632 32,509
Contingency 250,000 250,000 107,498 142,502
Capital outlay
I General government 50,400 50,400 78,820 (28,420)
Public safety
Police 77,290 77,290 384,367 (307,077)
I Fire and rescue 45,979 45,979 46,745 (766)
Civil defense 20,000 20,000 17,434 2,566
Culture and recreation 7,000 7,000 258,844 (251,844)
I Economic development 25,000 25,000 25,000
TOTAL EXPENDITURES 10,138,123 10,138,123 10,301,255 (163,132)
EXCESS OF REVENUES OVER EXPENDITURES 1,297,684 1,297,684 1,197,704 (99,980)
I OTHER FINANCING SOURCES (USES)
Transfers in 250,000 250,000 250,000
I Transfers out (1,547,684) (1,547,684) (1,703,438) (155,754)
TOTAL OTHER FINANCING
SOURCES (USES) (1,297,684) (1,297,684) (1,453,438) (155,754)
I NET CHANGE IN FUND BALANCES (255,734) (255,734)
FUND BALANCES, JANUARY 1 5,276,400 5,276,400 5,276,400
I FUND BALANCES, DECEMBER 31 $ 5,276,400 $ 5,276,400 $ 5,020,666 $ (255,734)
The notes to the financial statements are an integral part to this statement.
I -12-
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I Business-type Activities - Enterprise Funds - Continued
Transit Services Totals
2007 2006 2007 2006
I $ $ $ 2,137,172 $ 2,415,356
2,425,089 2,276,421
I 350,524 339,323
446,148 435,318
78,792 75,921
I 85,560 49,957 85,560 49,957
85,560 49,957 5,523,285 5,592,296
I 46,268 47,503 1,089,668 1,016,684
6,744 1,489 210,236 167,810
I 773,478 843,290
639,059 444,110 772,505 547,696
5,738 5,488
I 206,642 165,748
1,070,194 1,047,609
52,581 15,751
I 526,110 520,013
692,071 493,102 4,707,152 4,330,089
I (606,511) (443,145) 816,133 1,262,207
I 738,204 584,439 738,204 745,233
(5,135) 474,849 275,425
(28,290) (36,348)
I 4,435 40
738,204 579,304 1,189,198 984,350
I 131,693 136,159 2,005,331 2,246,557
109,248 958,911
I 58,818 351,657
252,760
(709,025) (500,406)
I 131,693 136,159 1,464,372 3,309,479
1,182,928 1,046,769 31,154,529 27,845,050
I (221,510)
I $ 1,314,621 $ 1,182,928 $ 32,397,391 $ 31,154,529
I -16-
CITY OF PRIOR LAKE, MINNESOTA
STATEMENTS OF CASH FLOWS
PROPRIETARY FUNDS
YEARS ENDED DECEMBER 31,2007 AND 2006
Business-type Activities - Enterprise Funds
Water and Sewer Utilities Storm Water Utilities
2007 2006 2007 2006
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers $ 5,216,814 $ 5,026,538 $ 364,260 $ 324,231
Payments to suppliers (2,256,206) (2,084,061) (160,351) (201,381)
Payments to employees (950,083) (854,793) (88,941 ) (81,670)
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES 2,010,525 2,087,684 114,968 41,180
CASH FLOWS FROM
NONCAPITAL FINANCING ACTIVITIES
Intergovernmental 141,534 19,260
Transfers in 252,760
Transfers out (709,025) (500,406)
NET CASH PROVIDED (USED) BY
NON CAPITAL FINANCING ACTIVITIES (709,025) (106,112) 19,260
CASH FLOWS FROM CAPITAL
AND RELATED FINANCING ACTIVITIES
Purchase of property and equipment (567,196) (231,934)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest received on cash and investments 445,858 263,670 28,991 16,890
NET INCREASE (DECREASE)
IN CASH AND CASH EQUIVALENTS 1,180,162 2,013,308 143,959 77,330
CASH AND CASH EQUIVALENTS, JANUARY 1 5,451,682 3,438,374 291,681 214,351
CASH AND CASH EQUIVALENTS, DECEMBER 31 $ 6,631,844 $ 5,451,682 $ 435,640 $ 291,681
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The notes to the financial statements are an integral part of this statement.
-17-
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I Business-type Activities - Enterprise Funds - Continued
Transit Services Totals
I 2007 2006 2007 2006
$ 15,759 $ 121,175 $ 5,596,833 $ 5,471,944
I (498,305) (458,232) (2,914,862) (2,743,674)
(44,641) (42,344) (1,083,665) (978,807)
I (527,187) (379,401) 1,598,306 1,749,463
I 738,204 584,439 738,204 745,233
252,760
I (709,025) ( 500,406)
I 738,204 584,439 29,179 497,587
I (567,196) (231,934)
I (5,135) 474,849 275,425
I 211,017 199,903 1,535,138 2,290,541
1,223,400 1,023,497 6,966,763 4,676,222
I $ 1,434,417 $ 1,223,400 $ 8,501,901 $ 6,966,763
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I -18-
CITY OF PRIOR LAKE, MINNESOTA
STATEMENTS OF CASH FLOWS - CONTINUED
PROPRIETARY FUNDS
YEARS ENDED DECEMBER 31, 2007 AND 2006
Business-type Activities - Enterprise Funds
Water and Sewer Utilities Storm Water Utilities
2007 2006 2007 2006
RECONCILIATION OF OPERATING INCOME (LOSS)
TO NET CASH PROVIDED (USED)
BY OPERATING ACTIVITIES
Operating income (loss) $ 1,339,828 $ 1,648,172 $ 82,816 $ 57,180
Adjustments to reconcile operating income (loss)
to net cash provided (used) by operating activities:
Other income related to operations 4,435 40
Depreciation 526,110 520,013
(Increase) decrease in assets:
Accounts receivable 121,326 (169,947) 13,736 (15,092)
Due from other governments 101
Special assessments receivable 3,852 (6,672)
Increase (decrease) in liabilities:
Accounts payable 10,066 56,201 18,466 1,020
Due to other governments 482 5,130
Compensated absences payable 4,426 34,646 (50) (1,928)
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES $ 2,010,525 $ 2,087,684 $ 114,968 $ 41,180
SCHEDULE OF NONCASH ACTIVITIES FROM
CAPITAL AND RELATED FINANCING ACTIVITIES
Fixed assets contributed by developers $ 109,248 $ 958,911 $ $
Capital assets contributed from other funds $ 58,818 $ 351,657 $ $
Loss on disposal of capital assets $ 28,290 $ 36,348 $ $
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The notes to the financial statements are an integral part ofthis statement.
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-19-
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I Business-type Activities - Enterprise Funds - Continued
Transit Services Totals
2007 2006 2007 2006
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I $ (606,511 ) $ (443,145) $ 816,133 $ 1,262,207
I 4,435 40
526,110 520,013
(69,801) 65,261 (185,039)
I 71,218 71,319
3,852 (6,672)
I 147,498 (12,633) 176,030 44,588
482 5,130
1,627 5,159 6,003 37,877
I $
$ (527,187) $ (379,401) $ 1,598,306 1,749,463
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I $ $ $ 109,248 $ 958,911
$ $ $ 58,818 $ 351,657
$ $ $ 28,290 $ 36,348
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I -20-
CITY OF PRlOR LAKE, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31,2007
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Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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A. Reporting Entity
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The City of Prior Lake, Minnesota (the City), operates under "Optional Plan B" as defmed in the State of Minnesota
statutes. Under this plan, the government of the City is directed by a Council composed of an elected Mayor and
four elected Council members. The Council exercises legislative authority and determines all matters of policy.
The Council appoints personnel responsible for the proper administration of all affairs relating to the City. The City
has considered all potential units for which it is financially accountable, and other organizations for which the nature
and significance of their relationship with the City are such that exclusion would cause the City's financial
statements to be misleading or incomplete. The Governmental Accounting Standards Board (GASB) has set forth
criteria to be considered in determining fmancial accountability. These criteria include appointing a voting majority
of an organization's governing body, and (1) the ability of the primary government to impose its will on that
organization or (2) the potential for the organization to provide specific benefits to, or impose specific financial
burdens on the primary government. The City has the following component unit:
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Blended Component Unit
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The Prior Lake Economic Development Authority (EDA) was created pursuant to Minnesota statutes 469.090
through 469.108 to carry out economic and industrial development and redevelopment within the City in accordance
with policies established by the Council. The five-member Board of Directors consists of the full Council. The
EDA may not exercise any of the powers enumerated by the authorizing statutes without prior approval of the
Council. The EDA is reported as a blended special revenue fund. Separate financial statements are not issued for
this component unit.
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B. Government-wide and Fund Financial Statements
The government-wide financial statements (i.e., the statement of net assets and the statement of changes in net
assets) report information on all of the nonfiduciary activities of the City and its component units. 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.
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The statement of activities demonstrates the degree to which the direct expenses of a given function or segments are
offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or
segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit
from goods, services, or privileges provided by a given function or 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.
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Separate fmancial statements are provided for governmental funds and proprietary funds. Major individual
governmental funds and major individual enterprise funds are reported as separate columns in the fund fmancial
statements.
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CITY OF PRlOR LAKE, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2007
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 ofthe 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 ofthe current period. For this purpose, the City considers revenues to be
available ifthey 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, franchise taxes, licenses 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.
Revenue resulting from exchange transactions, in which each party gives and receives essentially equal value, is
recorded on the accrual basis when the exchange takes place. On a modified accrual basis, revenue is recorded in
the year in which the resources are measurable and become available.
Non-exchange transactions, in which the City receives value without directly giving equal value in return, include
property taxes, grants, entitlement and donations. On an accrual basis, revenue from property taxes is recognized in
the year for which the tax is levied. Revenue from grants, entitlements and donations is recognized in the year in
which all eligibility requirements have been satisfied. Eligibility requirements include timing requirements, which
specify the year when the resources are required to be used or the year when use is first permitted, matching
requirements, in which the City must provide local resources to be used for a specified purpose, and expenditure
requirements, in which the resources are provided to the City on a reimbursement basis. On a modified accrual
basis, revenue from non-exchange transactions must also be available before it can be recognized.
Deferred revenue arises when assets are recognized before revenue recognition criteria have been satisfied. Grants
and entitlements received before eligibility requirements are met are also recorded as deferred revenue. On the
modified accrual basis, receivables that will not be collected within the available period have also been reported as
deferred revenue in the fund financial statements.
The preparation of financial statements in conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results could differ from those estimates.
-22-
CITY OF PRlOR LAKE, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31,2007
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Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
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The City reports major governmental funds that are calculated based on these criteria:
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1) Total assets, liabilities, revenues, or expenditures/expenses of that individual governmental or enterprise
fund are at least 10 percent of the corresponding total (that is, total governmental or total enterprise funds),
and
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2) Total assets, liabilities, revenues, or expenditures/expenses of the individual governmental fund or
enterprise fund are at least 5 percent of the corresponding total for all governmental and enterprise funds
combined.
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The following major governmental funds meet the criteria described above:
The Generalfund is the City's primary operating fund. It accounts for all financial resources of the City,
except those required to be accounted for in another fund.
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The Debt Service fund accounts for the resources accumulated to provide repayment of the City's general
obligation debt.
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The Construction fund accounts for the resources accumulated and payments made for City projects.
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The Trunk Reserve fund accounts for the resources to complete capital project development.
The Buildingfund accounts for the resources to construct the new city hall, police and fIre station facilities.
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The Water Storage fund accounts for the resources to construct a new water treatment plant.
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The City reports the following major proprietary funds:
The Water and Sewer Utilities fund accounts for the activities of the water distribution system the City
maintains and for the activities of the City's sewage collection operations.
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The Storm Water Utility fund accounts for the costs associated with the City's storm water system, which are
financed by the storm water surcharge, and insure that user charges are sufficient to pay for those costs.
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The Transit Services fund accounts for the City's transit services.
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 GASB. 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.
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As a general rule the effect of interfund activity has been eliminated from government-wide fmancial statements.
Exceptions to this general rule are charges between the City's water and sewer function and various other functions
ofthe City. Elimination of these charges would distort the direct costs and program revenues reported for the
various functions concerned.
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Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or
privileges provided, 2) operating grants and contribution, 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.
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CITY OF PRlOR LAKE, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2007
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
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 enterprise funds are
charges to customers for sales and services. Operating expenses for enterprise funds include the cost of sales and
services, administrative expenses and depreciation on capital assets. All revenues and expenses not meeting this
defmition 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.
D. Assets, Liabilities and Net Assets or Equity
Deposits and Investments
The City's cash and cash equivalents are considered to be cash on hand, demand deposits, commercial paper,
government securities and short-term investments with original maturities of three months or less from the date of
acquisition.
Cash balances from all funds are pooled and invested, to the extent available, in authorized investments.
Investments are reported at fair value. Earnings from such investments are allocated on the basis of applicable
participation by each of the funds.
Minnesota statutes authorize the City to invest in obligations ofthe U.S. Treasury, commercial paper, corporate
bonds, repurchase agreements, the State Treasurer's Investment Pool and shares of investment companies registered
under the Federal Investment Company Act of 1940 whose only investments are obligations guaranteed by the
United States or its agencies.
The 4M Fund is a customized cash management and investment program for Minnesota public funds. Sponsored
and governed by the League of Minnesota Cities since 1987, the 4M Fund is a unique investment alternative
designed to address the daily and long term investment needs of Minnesota cities and other municipal entities.
Allowable under Minnesota statutes, the 4M Fund is comprised oftop quality, rated investments.
Investments for the City are reported at fair value. Earnings on investments are allocated to the individual funds
based upon the average of month-end cash and investment balances.
-24-
CITY OF PRlOR LAKE, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2007
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Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
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The City's investment policy contains the following restrictions:
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Investment Instruments
The City may invest in any type of security allowed by Minnesota Statutes as may be amended from time to time. I
The City has chosen to limit its allowable investments to those instruments listed below:
1. Bonds, notes, certificates of indebtedness, treasury bills or other securities now or hereafter issued by the
United States of America, its agencies and allowable instrumentalities;
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2. Interest bearing checking and savings accounts, or any other investments constituting direct obligations of
any bank;
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3. Certificates of deposit with federally insured institutions that are collateralized or insured in excess of the
$100,000 provided by the Federal Deposit Insurance Corporation coverage limit;
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4. Money market accounts that are invested in above referenced government securities.
5. Commercial paper meeting the following requirements
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a. The corporation must be organized in the United States.
b. The corporation's assets must exceed $500,000,000.
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c. The obligations at the time of purchase must be rated at the highest classifications by at least two of the
four standard rating services (Standard and Poor's, Duff and Phelp's, Moody's and Fitch Investors
Service).
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d. The obligations cannot have a maturity longer than 270 days.
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e. The total investment in anyone corporation cannot exceed 10 percent of that corporation's outstanding
obligations.
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f. The total investment in anyone corporation cannot be more than $2 million.
6. Investments may be made only in those savings banks or savings and loan associations the shares, or
investment certificates of which are insured by the Federal Deposit Insurance Corporation.
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7. Investment products that are considered as derivatives are specifically excluded from approved
investments.
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Diversification
It is the policy ofthe City to diversify its investment portfolio. Investments shall be diversified to eliminate the risk of I
loss resulting in over concentration in a specific maturity, issuer, or class of securities. Diversification strategies shall
be determined and revised periodically by the City Finance Director. The diversification shall be as follows:
a) Up to 100 percent of 1., but not less than 10 percent.
b) Up to 90 percent of2. and C.3.
c) Up to 20 percent of 4.
d) Up to 10 percent of 5.
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CITY OF PRlOR LAKE, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31,2007
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Duration
It is the policy of the City to require that all investment maturities shall not extend beyond ten (10) years in length.
Subject to market conditions and cash flow requirements, it is desirable for the city's investments to be laddered
over time in an effort to reduce interest rate market risk.
Accounts Receivable
Accounts receivable include amounts billed for services provided before year end. The City annually certifies
delinquent water and sewer accounts to the County for collection in the following year. Therefore, there has been no
allowance for doubtful accounts established.
Property Taxes
The Council annually adopts a tax levy and certifies it to the County in December for collection in the following
year. The County is responsible for collecting all property taxes for the City. These taxes attach an enforceable lien
on taxable property within the City on January 1 and are payable by the property owners in two installments. The
taxes are collected by the County Treasurer and tax settlements are made to the City during January, June and
December each year.
Taxes payable on homestead property, as defined by Minnesota statutes, were partially reduced by a market value
credit aid. The credit is paid to the City by the State of Minnesota (the State) in lieu of taxes levied against the
homestead property. The State remits this credit in two equal installments in October and December each year.
Delinquent taxes receivable include the past six years' uncollected taxes. Delinquent taxes have been offset by a
deferred revenue liability for delinquent taxes not received within 60 days after year end in the governmental fund
financial statements.
Special Assessments
Special assessments represent the fmancing for public improvements paid for by benefiting property owners. These
assessments are recorded as receivables upon certification to the County. Special assessments are recognized as
revenue when they are received in cash or within 60 days after year end. All governmental special assessments
receivable are offset by a deferred revenue liability in the governmental fund financial statements.
Interfund Receivables and Payables
Activity between funds that are representative of lendinglborrowing 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 inter fund 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."
-26-
CITY OF PRlOR LAKE, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31,2007
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Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
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Capital Assets
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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 [mancial statements. Capital assets are defined by the City as assets with an initial, individual cost
of more than $5,000 (amount not rounded) and an estimated useful life in excess of three years. Such assets are
recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are
recorded at estimated fair market value at the date of donation.
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In the case of initial capitalization of general infrastructure assets (i.e., those reported by governmental activities) the
City chose to include items dating back to June 30, 1980. The City was able to estimate the historical cost for the
initial reporting of these assets through backtracking (i.e., estimating the current replacement cost of the
infrastructure to be capitalized and using an appropriate price-level index to deflate the cost to the acquisition year
or estimated acquisition year). As the City constructs or acquires capital assets each period, including infrastructure
assets, they are capitalized and reported at historical cost. The reported value excludes normal maintenance and
repairs which are essentially amounts spent in relation to capital assets that do not increase the capacity or efficiency
of the item or extend its useful life beyond the original estimate. In the case of donations the City values these
capital assets at the estimated fair value of the item at the date of its donation.
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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.
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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.
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Property, plant and equipment ofthe City, are depreciated using the straight-line method over the following
estimated useful lives:
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Assets
Useful Lives
in Years
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Land improvements
Machinery and equipment
Vehicles
Infrastructure
20
5-30
5-10
10-65
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CITY OF PRlOR LAKE, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2007
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Compensated Absences
It is the City's policy to permit employees to accumulate earned but unused vacation and sick leave. Upon
separation, unused vacation and 50 percent of sick pay are paid to the employee if employed longer than five years.
Exempt employees who retire at age 55 or over have their sick leave paid into a Retirement Health Savings Plan
(HSA) according to the following schedule:
Years
Percentage
5
10
15
50 %
75
100
Vacation and sick leave are computed at year end. Accrued vacation and sick leave totaled $846,778 at year end.
Vacation and sick pay are accrued when incurred in proprietary funds and reported as long-term liabilities. The total
liability in the enterprise fund is $136,701. Vacation and sick pay of the governmental funds totaled $710,077 at
year end. The City has provided funding for these obligations with the severance compensation fund at a currently
computed level of 43 percent.
Long-term Obligations
In the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term
debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-
type activities or proprietary fund type statement of net assets. Beginning January 1,2003, bond premiums and
discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the straight-line
method in the government-wide and proprietary fmancial statements. Bond issuance costs are reported as deferred
charges and amortized over the term ofthe related debt.
In the fund financial statements, governmental fund types recognized bond premiums and discounts, as well as bond
issuance costs, during the current period. The face amount of debt issued is reported as other fmancing sources.
Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are
reported as other fmancing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are
reported as debt service expenditures.
Fund Equity
In the fund financial statements, governmental funds report reservations of fund balance for amounts that are not
available for appropriation or are legally restricted by outside parties for use for a specific purpose. Designations of
fund balance represent tentative management plans that are subject to change.
Net Assets
Net assets represent the difference between assets and liabilities. Net assets are displayed in three components:
a. Invested in capital assets, net of related debt - Consists of capital assets, net of accumulated depreciation
reduced by any outstanding debt attributable to acquire capital assets.
b. Restricted net assets - Consist of net assets restricted when there are limitations imposed on their use
through external restrictions imposed by creditors, grantors, laws or regulations of other governments.
c. Unrestricted net assets - All other net assets that do not meet the definition of "restricted" or "invested in
capital assets, net of related debt".
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CITY OF PRlOR LAKE, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31,2007
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Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
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Comparative Data/Rec1assifications
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Comparative total data for the prior year have been presented only for individual enterprise funds in the fund
financial statements in order to provide an understanding of the changes in the financial position and operations of
these funds. Also, certain amounts presented in the prior year data have been reclassified in order to be consistent
with the current year's presentation.
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Note 2: STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY
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A. Budgetary Information
Annual budgets are adopted on a basis consistent with accounting principles generally accepted in the United States
of America for the General fund. All annual appropriations lapse at fiscal year end. The City does not use
encumbrance accounting.
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In June of each year, all departments of the City submit requests for appropriations to the Finance Director so that a
budget may be prepared. Before September 15th, the proposed budget is presented to the Council for review. The
Council holds public hearings and a final budget is prepared and adopted in early December.
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The appropriated budget is prepared by fund, function and department. The City's department heads may make
transfers of appropriations within a department. Transfers of appropriations between departments require the
approval of the Council. The legal level of budgetary control is the department level. There were no budget
amendments during the year.
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Note 3: DETAILED NOTES ON ALL FUNDS
A. Deposits and Investments
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Custodial credit risk for deposits and investments is the risk that in the event of a bank failure, the City's deposits
and investments may not be returned or the City will not be able to recover collateral securities in the possession of
an outside party. In accordance with Minnesota statutes and as authorized by the Council, the City maintains
deposits at those depository banks which are members ofthe Federal Reserve System.
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Cash balances of the City's funds are combined (pooled) and invested to the extent available in various investments
authorized by Minnesota statutes. Each fund's portion of this pool (or pools) is displayed on the [mancial statements
as "cash and temporary investments". For purposes of identifying the risk of investing public funds, the balances
are categorized as follows:
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Deposits
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Minnesota statutes require that all City deposits be protected by insurance, surety bond or collateral. The market
value of collateral pledged must equal 110 percent of the deposits not covered by insurance or bonds (140 percent in
the case of mortgage notes pledged).
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Authorized collateral includes the legal investments described below, as well as certain first mortgage notes, and
certain other state or local government obligations. Minnesota statutes require that securities pledged as collateral
be held in safekeeping by the City or in a financial institution other than that furnishing the collateral.
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At year end, the City's carrying amount of deposits, net of outstanding checks, was $985,998 and the bank balance
was $1,177,527. The bank balance was covered by federal depository insurance totaling $100,000. The remaining
balance of$1,077,527 was collateralized with securities held by the pledging financial institution's trust department
or agent in the City's name.
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CITY OF PRlOR LAKE, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2007
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Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED
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Investments
At year end, the City's investment balances were as follows:
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Types ofInvestments
Pooled investments
4M Money Market
Mutual Fund
Credit
Quality/
Ratings (1)
Segmented
Time
Distribution (2)
Fair Value
and
Carrying
Amount
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PI
Less than 6 months
$ 4,024,410
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Non-pooled investments:
U.S. Government Securities
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AAA Less than 6 months 3,496,720
AAA 6 to 12 months 3,008,810
AAA 1 to 3 years 6,935,852
AAA More than 3 years 11,859,445
Total U.S. Government Securities 25,300,827
Municipal Bonds
AAA 6 to 12 months 288,321
AAA 1 to 3 years 263,955
AAA More than 3 years 491,244
Total municipal bonds 1,043,520
Commercial Paper PI Less than 6 months 3,911,055
Total non-pooled investments 30,255,402
Total investments $ 34,279,812
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1. Ratings are provided by various credit rating agencies where applicable to indicate associated credit risk.
2. Interest rate risk is disclosed using the segmented time distribution method.
N/ A Indicate not applicable or available.
At year end, the City's cash and investment balances were as follows:
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Carrying amount of deposits
Investments
$ 985,998
34,279,812
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Total
$ 35,265,810
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CITY OF PRlOR LAKE, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31,2007
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Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED
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B. Deferred Revenue
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Governmental funds report deferred revenue in connection with receivables for revenues that are not considered to
be available to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in
connection with resources that have been received, but not yet earned. At the end of the current fiscal year, the
various components of deferred revenue and unearned revenue reported in the governmental funds were as follows:
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Fund Unavailable
General
Delinquent property taxes $ 172,860
Special assessments 800
Debt Service
Special assessments 2,249,471
Trunk Reserve
Special assessments 3,363
Collector Street
Special assessments 36,642
Total $ 2,463,136
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CITY OF PRlOR LAKE, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2007
Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED
C. Capital Assets
Capital asset activity for the year ended December 31,2007 was as follows:
Beginning Ending
Balance Increases Decreases Balance
Governmental activities
Capital assets not being depreciated
Land $ 51,144,422 $ 4,151,850 $ $ 55,296,272
Construction in progress 7,443,850 6,209,184 (3,115,636) 10,537,398
Total capital assets not
being depreciated 58,588,272 10,361,034 (3,115,636) 65,833,670
Capital assets, being depreciated
Land improvements 1,187,310 702,000 1,889,310
Machinery and equipment 3,621,864 439,838 (123,877) 3,937,825
Vehic1es 3,068,389 1,470,239 (365,001) 4,173,627
Infrastructure 58,597,002 306,903 58,903,905
Total capital assets
being depreciated 66,474,565 2,918,980 (488,878) 68,904,667
Less accumulated depreciation for
Land improvements (785,545) (68,464) (854,009)
Machinery and equipment (1,688,113) (241,378) 123,876 (1,805,615)
Vehic1es (2,376,424) (355,724) 351,217 (2,380,931)
Infrastructure (24,033,710) (1,792,330) (25,826,040)
Total accumulated
depreciation (28,883,792) (2,457,896) 475,093 (30,866,595)
Total capital assets being
depreciated, net 37,590,773 461,084 (13,785) 38,038,072
Governmental activities
capital assets, net $ 96,179,045 $ 10,822,118 $ (3,129,421) $ 103,871,742
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CITY OF PRlOR LAKE, MINNESOTA I
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31,2007 I
Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED
Beginning Ending I
Balance Increases Decreases Balance
Business-type activities
Capital assets not being depreciated I
Construction in progress $ 453,444 $ 551,922 $ (383,418) $ 621,948
Total capital assets not I
being depreciated 453,444 551,922 (383,418) 621,948
Capital assets being depreciated I
Land improvements 5,253,374 169,768 (69,000) 5,354,142
Machinery and equipment 473,037 102,218 575,255
Vehicles 263,509 263,509
Infrastructure 24,523,366 73,262 24,596,628 I
Total capital assets
being depreciated 30,513,286 345,248 (69,000) 30,789,534 I
Less accumulated depreciation for
Land Improvements (988,690) (106,673) 40,710 (1,054,653) I
Machinery and equipment (348,250) (13,273) (361,523)
Vehic1es (179,937) (27,857) (207,794)
Infrastructure (5,282,538) (378,307) (5,660,845)
Total accumulated I
depreciation (6,799,415) (526,110) 40,710 (7,284,815)
Total capital assets being I
depreciated, net 23,713,871 (180,862) (28,290) 23,504,719
Business-type activities I
capital assets, net $ 24,167,315 $ 371,060 $ (411,708) $ 24,126,667
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CITY OF PRIOR LAKE, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2007
Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED
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Depreciation expense was charged to functions/programs ofthe City as follows:
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Governmental activities
General government
Public safety
Streets and highways
Culture and recreation
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Business-type activities
Water
Sewer
$ 415,987
216,351
1,464,692
360,866
$ 2,457,896
$ 229,053
297,057
$ 526,110
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Total depreciation expense - governmental activities
Total depreciation expense - business-type activities
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Construction Commitments
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The City has active construction projects as of December 31, 2007. The projects include street construction in areas
with newly developed housing and widening and construction of existing streets. At year end the City's
commitments with contractors are as follows:
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Spent Remaining
Project to date Commitment
Park projects $ 835,972 $ 176,145
Municipal Production Well No 8, 9 and 10 266,120 94,662
Street Reconstruction 68,869 131,618
Underground power and CSAH 21 Light 58,506 138,074
Water treatment proj ect 2,901,669 10,603,630
Lift station rehabilitation 186,230 52,404
Southbridge Crossing Station 57,096
Prior Lake Police Station and City Hall 12,191,817 1,398,975
Total $ 16,509,183 $ 12,652,604
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CITY OF PRlOR LAKE, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31,2007
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Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED
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Interfund transfers - A schedule of interfund transfers follows:
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D. Interfund Receivables, Payables and Transfers
Transfer in
Water Nonmajor
General Debt Service Storage Governmental
Fund Fund Fund Fund Funds Total
Transfer out
General $ $ 1,553,438 $ $ 150,000 $ 1,703,438
Trunk Reserve 2,316,500 2,316,500
Nonmajor governmental 36,828 36,828
Water/Sewer enterprise 250,000 379,025 80,000 709,025
Total transfers out $ 250,000 $ 1,969,291 $ 2,316,500 $ 230,000 $ 4,765,791
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. The General fund transferred $1,553,438 for its share of debt service costs and $150,000 to fund future
severance payments.
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. The Trunk Reserve fund transferred $2,316,500 to the Water Storage Fund for start up costs.
. The Nonmajor Governmental funds transferred $36,828 to the Debt Service funds for TIF payments. I
. The Water and Sewer fund made transfers for $250,000 for administrative costs to the General fund, $379,025
for current debt service and $80,000 for project costs. I
E. Long-term Debt
General Obligation Bonds I
The City issues general obligation bonds to provide funds for the acquisition and construction of major capital
facilities. General obligation bonds have been issued for general government activities. In addition, general I
obligation bonds have been issued to refund bond issues.
General obligation bonds are direct obligations and pledge the full faith and credit of the City. General obligation I
bonds currently outstanding are as follows:
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CITY OF PRlOR LAKE, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31,2007
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Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED
General Obligation Special Assessment Bonds
The following bonds were issued to fmance various improvements and will be repaid primarily from special
assessments levied on the properties benefiting from the improvements. Some issues, however, are partly financed
by ad valorem tax levies. All special assessment debt is backed by the full faith and credit of the City.
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Balance
Authorized Interest Issue Maturity at
Description and Issued Rate Date Date Year End
G.O. Improvement
Bonds of2000 $ 1,125,000 4.80 - 4.90 % 10/01/00 12/01/1 0 $ 375,000
G.O. Improvement
Bonds of 200 1 1,035,000 3.90 - 4.25 1 % 1/0 1 12/01/11 435,000
G.O. Improvement
Bonds of2002 1,050,000 3.00 - 3.55 1 % 1/02 12/01/12 550,000
G.O. Improvement
Bonds of2003 1,975,000 2.50 - 3.05 04/01/03 12/01/13 1,200,000
G.O. Improvement
Crossover Refunding
Bonds of 2004 1,385,000 2.10-2.35 04/01/04 12/01/09 400,000
G.O. Improvement
Bonds of 2004 2,700,000 2.70 - 3.90 06/01/04 12/01/14 1,925,000
G.O. Improvement
Bonds of2005 2,500,000 3.00 - 3.75 07/01/05 12/15/15 2,020,000
Total G.O. Special Assessment Bonds $ 6,905,000
The annual service requirements to maturity for General Obligation Special Assessment Bonds outstanding at
December 31, 2007 are as follows:
G.O. Special Assessment Bonds
Year Ending Governmental Activities
December 31, Principal Interest Total
2008 $ 1,325,000 $ 232,973 $ 1,557,973
2009 1,175,000 194,372 1,369,372
2010 1,050,000 156,373 1,206,373
2011 960,000 119,748 1,079,748
2012 875,000 86,322 961,322
2013-2015 1,520,000 95,345 1,615,345
Total $ 6,905,000 $ 885,133 $ 7,790,133
-36-
CITY OF PRlOR LAKE, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2007
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Balance
Authorized Interest Issue Maturity at
Description and Issued Rate Date Date Year End
G.O. Crossover Refunding
Bonds of 1999 $ 1,570,000 4.10 - 4.50 % 02/01/99 12/01/13 $ 925,000
G.O. Park Refunding
Bonds of 2005 6,260,000 4.00 - 5.00 % 09/01/05 12/01/17 5,725,000
G.O. Fire Hall
Bonds of2006 3,700,000 4.00 - 4.50 % 11/21/06 12/15/31 3,650,000
G.O. Street Reconstruction
Bonds of 2007 1,400,000 4.00 05/15/07 12/15/17 1,400,000
Total General Obligation Bonds $ 11.700,000
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Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED
General Obligation Bonds
The following bonds were used to fmance improvements and buildings. They will be repaid with ad valorem taxes.
The bonds are backed by the full faith and credit ofthe City.
The annual service requirements to maturity for General Obligation Bonds outstanding at December 31, 2007 are as
follows:
General Obligation Bonds
Year Ending Governmental Activities
December 31, Principal Interest Total
2008 $ 650,000 $ 520,560 $ 1,170,560
2009 720,000 494,375 1,214,375
2010 785,000 464,723 1,249,723
2011 830,000 431,737 1,261,737
2012 910,000 396,172 1,306,172
2013-2017 4,875,000 1,349,954 6,224,954
2018-2022 675,000 601,765 1,276,765
2023-2027 1,070,000 419,175 1,489,175
2028-2031 1,185,000 137,475 1,322,475
Total $ 11,700,000 $ 4,815,936 $ 16,515,936
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CITY OF PRlOR LAKE, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2007
Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED
General Obligation Revenue Bonds
The following bonds were used to finance maintenance building improvements. They will be repaid with ad
valorem taxes and revenue from the Utilities. The bonds are backed by the full faith and credit ofthe City.
Balance
Authorized Interest Issue Maturity at
Description and Issued Rate Date Date Year End
G.O. Refunding
Bonds of2005 $ 1,310,000 4.00 - 4.75 % 09/01/05 12/01/17 $ 1,075,000
G.O. Water Treatment Plant
Revenue Bonds
Series 2007 A 8,500,000 4.00 - 4.20 % 05/15/07 12/15/32 8,500,000
Total G.O. Revenue Bonds $ 9,575,000
The annual service requirements to maturity for General Obligation Revenue Bonds outstanding at
December 31,2007 are as follows:
G.O. Revenue Bonds
Year Ending Governmental Activities
December 31, Principal Interest Total
2008 $ 230,000 $ 393,414 $ 623,414
2009 245,000 384,214 629,214
2010 265,000 374,246 639,246
2011 290,000 363,282 653,282
2012 320,000 351,102 671,102
2013-2017 1,435,000 1,552,383 2,987,383
2018-2022 1,630,000 1,267,769 2,897,769
2023-2027 2,250,000 892,094 3,142,094
2028-2032 2,910,000 378,040 3,288,040
Total $ 9,575,000 $ 5,956,543 $ 15,531,543
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Balance
Authorized Interest Issue Maturity at
Description and Issued Rate Date Date Year End
Public Project Revenue
Bonds of2005 $ 10,000,000 3.50 - 4.65 % 05101/05 12/15/29 $ 9,770,000
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CITY OF PRlOR LAKE, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2007
Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED
Lease Revenue Bonds
The following bonds were used to fmance city hall and police station building improvements. They will be repaid
with ad valorem taxes and revenue from the Utilities. The bonds are backed by the full faith and credit of the City.
The annual service requirements to maturity for Lease Revenue Bonds outstanding at December 31, 2007 are as
follows:
Lease Revenue Bonds
Year Ending Governmental-type Activities
December 31, Principal Interest Total
2008 $ 145,000 $ 430,920 $ 575,920
2009 160,000 425,845 585,845
2010 185,000 420,085 605,085
2011 210,000 413,148 623,148
2012 230,000 404,748 634,748
2013-2017 1,530,000 1,863,588 3,393,588
2017-2022 2,315,000 1,475,763 3,790,763
2023-2027 3,305,000 875,438 4,180,438
2028-2029 1,690,000 119,273 1,809,273
Total $ 9,770,000 $ 6,428,805 $ 16,198,805
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CITY OF PRlOR LAKE, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2007
Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED
General Obligation Tax Increment Bonds
The following bonds were issued for downtown redevelopment projects. The additional tax increments resulting
from increased tax capacity of the redeveloped properties will be used to retire related debt.
Balance
Authorized Interest Issue Maturity at
Description and Issued Rate Date Date Year End
G.O. Tax Increment
Bonds of 2004 $ 400,000 3.00 - 4.80 % 06/01/04 12/01/24 $ 355,000
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The annual service requirements to maturity for General Obligation Tax Increment Bonds outstanding at
December 31, 2007 are as follows:
G.O. Tax Increment Bonds
Year Ending Governmental Activities
December 31, Principal Interest Total
2008 $ 15,000 $ 15,175 $ 30,175
2009 15,000 14,725 29,725
2010 15,000 14,275 29,275
2011 15,000 13,735 28,735
2012 15,000 13,195 28,195
2013-2017 95,000 56,043 151,043
2018-2022 125,000 32,100 157,100
2023-2024 60,000 4,320 64,320
Total $ 355,000 $ 163,568 $ 518,568
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CITY OF PRlOR LAKE, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2007
Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED
General Obligation Capital Improvement Plan Bonds
The following bonds were issued on behalf of the City of Prior Lake by Scott county for the City's share of the
County Road 82 improvement. Payments will come from annual appropriation levies.
Balance
Authorized Interest Issue Maturity at
Description and Issued Rate Date Date Year End
General Obligation
Capital Improvement
Plan Bonds $ 1,225,000 3.80 - 3.90 % 08/01/07 02/01/17 $ 1,225,000
The annual service requirements to maturity for General Obligation Capital Improvement Plan Bonds outstanding at
December 31, 2007 are as follows:
Year Ending
December 31,
G.O. Capital Improvement Bonds
Principal Interest Total
2008
2009
2010
2011
2012
2013-2017
$ 85,000
110,000
115,000
115,000
120,000
680,000
$ 1 ,225,000
$
45,155 $ 130,155
41,450 151,450
37,175 152,175
32,805 147,805
28,340 148,340
67,800 747,800
252,725 $ 1,477,725
$
Total
Compensated Absences
This liability represents vested benefits earned by employees through the end of the year, which will be paid at
termination of employment in future years.
Total compensated absences
$ 846,777
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CITY OF PRlOR LAKE, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2007
Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED
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Changes in Long-term Liabilities. During the year ended December 31, 2007, the following changes occurred in
long-term liabilities.
Beginning Ending Due Within
Balance Increases Decreases Balance One Year
Governmental activities
Bonds payable
General obligation
bonds $ 10,790,000 $ 1,400,000 $ (490,000) $ 11,700,000 $ 650,000
General obligation tax
increment bonds 370,000 (15,000) 355,000 15,000
General obligation
special assessment
bonds 8,295,000 (1,390,000) 6,905,000 1,325,000
General obligation
revenue bonds 1,200,000 8,500,000 (125,000) 9,575,000 230,000
General obligation
capital bonds 1,225,000 1,225,000 85,000
Revenue Bonds 9,900,000 (130,000) 9,770,000 145,000
Total bonds
payable 30,555,000 11,125,000 (2,150,000) 39,530,000 2,450,000
Compensated absences
payable 647,474 268,478 (205,875) 710,077 205,875
Governmental activity
long-term
liabilities $ 31,202,474 $ 11,393,478 $ (2,355,875) $ 40,240,077 $ 2,655,875
Business-type activities
Compensated absences
payable $ 130,698 $ 47,374 $ (41,371) $ 136,701 $ 41,371
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CITY OF PRlOR LAKE, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2007
Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED
F. Tax Increment Districts
The City is the administering authority for the following tax increment districts:
Authorizing law
Type of district
Tax Tax Tax Tax
Increment Increment Increment Increment
District District District District
No. 1-1 No. 1-3 No. 3-1 No. 4-1
M.S. 273 M.S. 273 M.S. 273 M.S. 273
Redevelopment Redevelopment Housing Economic
1985 2001 2001 2005
$ 1,185 $ 4,234 $ 625 $ 464
16,898 130,085 54,984 2,366
$ 15,713 $ 125,851 $ 54,359 $ 1,902
None None $ 400,000 None
(30,000)
$ 370,000
Tax Tax
Increment Increment
District District
No. 5-1 No. 6-1
M.S. 469.174 M.S. 469.174
Redevelopment Redevelopment
2006 2006
Year established
Tax capacity
Original
Current
Captured - retained
Bonds and notes issued
Amounts redeemed
Outstanding at December 31, 2006
Authorizing law
Type of district
Year established
Duration of district
Tax capacity
Original
Current
$
1,715 $ 1,384
1,715 1,384
$
400,000 None
(45,000)
355,000
Captured - retained
$
$
Bonds and notes issued
Amounts redeemed
Outstanding at December 31, 2006
$
The City's tax increment districts are subject to review by the State of Minnesota Office of the State Auditor (OSA).
Any disallowed claims or misuse of tax increments could become a liability of the applicable fund. Management
has indicated that they are not aware of any instances of noncompliance which would have a material effect on the
financial statements.
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CITY OF PRlOR LAKE, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2007
Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED
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G. Fund Equity
Certain reservations and designations have been made in the following funds:
Amount
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Fund financial statements
Fund balance - Reserved
Severance compensation
Debt Service
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Total reserved fund balance
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Fund balance - Unreserved - Designated
General
Nonmajor special revenue
Capital Park
EDC Revolving Loan
Revolving Loan
DAG
Cable Franchise
Economic Development Authority
Construction
Trunk Reserve
Building
Water Storage
Nonmajor capital projects
Nonmajor capital projects
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Total designated fund balance
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Purpose
Compensated absences
Debt service
$ 369,393
2,437,706
$ 2,807,099
Working capital
$ 5,020,666
Improvements
Development loans
Development loans
Improvements
Communications
Improvements
Improvements
Improvements
Capital outlay
Capital improvements
Capital outlay
Capital improvements
74,468
95,012
73,782
849,811
39,425
95,366
811,968
1,322,544
2,073,162
9,912,602
1,380,097
86,927
$ 21 ,835 ,830
Note 4: DEFINED BENEFIT PENSION PLANS - STATEWIDE
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A. Plan Description
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All full-time and certain part-time employees of the City 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.
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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, fire-fighters and peace officers who qualify for membership by statute are covered by the PEPFF.
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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
defmed 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.
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CITY OF PRlOR LAKE, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31,2007
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Note 4: DEFINED BENEFIT PENSION PLANS - STATEWIDE - CONTINUED
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Two methods are used to compute benefits for PERA'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 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 members 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.
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There are different types of annuities available to members upon retirement. A single-life annuity is a lifetime
annuity that ceases upon death of the retiree--no survivor annuity is payable. There are also various types of joint
and survivor annuity options available which will be payable over joint lives. Members may also leave their
contributions in the fund upon termination of public service, in order to qualify for a deferred annuity at retirement
age. Refunds of contributions are available at any time to members who leave public service, but before retirement
benefits begin.
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The benefit provisions stated in the previous paragraphs ofthis 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.
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PERA issues a publicly available [mancial 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.
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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 Minnesota statutes. PERF Basic Plan members and Coordinated Plan members were
required to contribute 9.10 percent and 5.75 percent, respectively, of their annual covered salary in 2007.
Contribution rates in the Coordinated Plan will increase in 2008 to 6.0 percent. PEPFF members were required to
contribute 7.8 percent of their annual covered salary in 2007. That rate will increase to 8.6 percent in 2008. The
City is required to contribute the following percentages of annual covered payroll: 11.78 percent for Basic Plan
PERF members, 6.25 percent for Coordinated Plan PERF members and 11.7 percent for PEPFF members.
Employer contribution rates for the Coordinated Plan and PEPFF will increase to 6.5 percent and 12.9 percent,
respectively, effective January 1,2008. The City's contributions to the PERF for the years ended
December 31,2007,2006, and 2005 were $201,251, $160,106, and $179,496, respectively. The City's contributions
to the PEPFF for the years ending December 31,2007,2006, and 2005 were $215,801, $212,856, and $133,602,
respectively. The City's contributions were equal to the contractually required contributions for each year as set by
Minnesota statute.
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B. Funding Policy
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CITY OF PRlORLAKE, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31,2007
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Note 5: OTHER INFORMATION
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A. Risk Management
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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 for which the City carries insurance. The City obtains
insurance through participation in the League of Minnesota Cities Insurance Trust (LMCIT), which is a risk sharing
pool with approximately 800 other governmental units. The City pays an annual premium to LMCIT for its
workers compensation and property and casualty, auto and liability insurance. The LMCIT is self sustaining
through member premiums and will reinsure for claims above a prescribed dollar amount for each insurance event.
Settled claims have not exceeded the City's coverage in any ofthe past three fiscal years.
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Liabilities are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably
estimated. Liabilities, if any, include an amount for claims that have been incurred but not reported (IBNRs). The
City's management is not aware of any incurred but not reported claims.
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B. Legal Debt Margin
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The City's statutory debt limit is equal to two percent of estimated taxable market value of property located within
the City. The taxable market value totals $2,457,196,600, which calculates to a debt margin of$49,143,932. Debt
financed partially or entirely by special assessments is not applied against the City's debt limit, nor is debt financed
by proprietary fund revenues. Currently the City has $11,700,000 of general obligation debt outstanding leaving a
debt margin of$37,443,932.
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Note 6: VOLUNTEER FIRE DEPARTMENT RELIEF ASSOCIATION - SINGLE EMPLOYER PERS
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A. Plan Description
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The Prior Lake Fire Department Firefighter's Relief and Pension Association (the Association) is the administrator
of a single-employer defined benefit Public Employee Retirement System (PERS) established to provide benefits
for members of the Prior Lake Fire Department (the Department) and is administered in accordance with
Minnesota statute, chapter 69.
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The Association maintains a separate Special fund to accumulate assets to fund the retirement benefits earned by
the Department's membership. Funding for the Association is derived primarily from an insurance premium tax in
accordance with the Volunteer Firefighter's Relief Association Financing Guidelines Act of 1971 (chapter 261 as
amended by chapter 509 of Minnesota statutes 1980).
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The Association issues a publicly available financial report that includes financial statements and required
supplementary information. The report may be obtained by writing to the Prior Lake Firemen's Relief Association,
16776 Fish Point Road Southeast, Prior Lake, Minnesota 55372.
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CITY OF PRlOR LAKE, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31,2007
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B. Funding Policy
Note 6: VOLUNTEER FIRE DEPARTMENT RELIEF ASSOCIATION - SINGLE EMPLOYER PERS - CONTINUED
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The fmancial requirements of the Special fund are determined in accordance with section 69.772 of the Minnesota
statutes, which requires the payment of pension benefits in a lump sum or optionally in annual installments. The I
benefits are payable after age 50, 20 years of service, and 10 years of Association membership or upon death. The
City's annual pension cost for the current year and related information for the plan is as follows:
Annual pension cost
Contributions made
City (Voluntary)
State aid
Actuarial valuation date
Actuarial cost method
Amortization method
Remaining amortization period
Normal cost
Prior service cost
Asset valuation method
Actuarial assumptions
Investment rate of return
Projected salary increases
Inflation rate
Cost of living adjustments
$
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162,759
20,000
162,759
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12/31/07
Entry age normal
Level dollar closed
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20 years
10 years
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Market
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5%
N/A
N/A
None
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Three Year Trend Information
Annual Percentage
Pension of APC
Cost (APC) Contributed
Required Supplementary Information
Assets in
Excess of
(Unfunded)
Accrued
Liability
Year
Ending
12/31/07
12/31/06
12/31/05
$
162,759
183,789
169,893
Actuarial
Valuation
Date
Actuarial
Value of
Assets
Actuarial
Accrued
Liability
12/31/07
12/31/06
12/31/05
12/31/04
*
*
$ 1,958,241
1,630,142
1,362,132
$ 1,652,010
1,411,697
1,145,542
*
Information not available at time of audit.
-47-
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Net Pension
Obligation
112.3 %
114.1
111.8
$
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Funded
Rate
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*
*
$ 306,231
218,445
216,590
118.5 %
115.5
118.9
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CITY OF PRlOR LAKE, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2007
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Note 7: JOINT VENTURE
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The City is a member of a j oint powers agreement, together with the cities of Shakopee, Belle Plaine, Jordan, Elko New
Market and Savage to provide for the joint exercise of prosecutorial powers. The cities of Shakopee, Belle Plaine,
Jordan, Savage, and Elko New Market, and the City each shall appoint one individual to serve on the Scott Joint
Prosecution Association Board (the Board). Each member city contributes funds to cover their city's proportionate share
of the costs of performing prosecution services. Contributions made by member cities for 2007 are as follows:
Contribution Percentage
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City of Savage $ 144,836 18.0 %
City of Shakopee 363,427 45.2
City of Prior Lake 152,861 19.0
City of Jordan 56,559 7.0
City of Belle Plaine 70,698 8.8
City ofElko New Market 16,433 2.0
$ 804,814 100.0 %
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The Board issues a publicly available financial report obtainable at the Savage City Hall, 6000 McColl Drive, Savage,
Minnesota 55378.
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Note 8: CONDUIT DEBT OBLIGATIONS
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Conduit debt obligations are certain limited-obligation revenue bonds or similar instruments issued for express purpose
of providing capital financing for a specific third party. The City has issued revenue bonds to provide funding to private-
sector entities for projects deemed to be in public interest. Although these bonds bear the name of the City, the City has
no obligation for such debt. Accordingly, the bonds are not reported as liabilities in the financial statements ofthe City.
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As of December 31,2007 the following issues were outstanding:
I
Name
Date ofIssue
Original
Amount
ofIssue
Balance
Outstanding
Shepherd's Path Senior Housing, Inc.
Shepherd's Path Senior Housing, Inc.
2006
2006
$ 10,000,000
21,445,000
$ 10,000,000
21,445,000
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Note 9: PRIOR PERIOD ADJUSTMENT
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During 2007, a prior period adjustment of$221,510 was made in the Water Fund, and $3,115,636 was made in the
governmental fund capital assets for the prior project costs capitalized twice.
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INTENTIONALL Y
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COMBINING AND INDIVIDUAL FUND
FINANCIAL STATEMENTS AND SCHEDULES
CITY OF PRIOR LAKE
PRIOR LAKE, MINNESOTA
YEAR ENDED
DECEMBER 31, 2007
THIS PAGE IS LEFT BLANK
INTENTIONALL Y
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CITY OF PRlOR LAKE, MINNESOTA
NONMAJOR GOVERNMENTAL FUNDS
COMBINING BALANCE SHEET
DECEMBER 31, 2007
Total
Special Capital Nonmajor
Revenue Proj ects Governmental
ASSETS
Cash and temporary investments $ 1,731,798 $ 1,606,996 $ 3,338,794
Receivables
Delinquent taxes 6,851 6,851
Special assessments
Deferred 36,642 36,642
TOTAL ASSETS $ 1,731,798 $ 1,650,489 $ 3,382,287
LIABILITIES AND FUND BALANCES
LIABILITIES
Accounts payable $ 134,541 $ 146,823 $ 281,364
Deferred revenue 36,642 36,642
TOTAL LIABILITIES 134,541 183,465 318,006
FUND BALANCES
Reserved for severance compensation 369,393 369,393
Umeserved
Designated for development loans 168,794 168,794
Designated for capital outlay 1,380,097 1,380,097
Designated for improvements 1,059,070 86,927 1,145,997
TOTAL FUND BALANCES 1,597,257 1,467,024 3,064,281
TOTAL LIABILITIES AND FUND BALANCES $ 1,731,798 $ 1,650,489 $ 3,382,287
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CITY OF PRlOR LAKE, MINNESOTA
NONMAJOR GOVERNMENTAL FUNDS
COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
YEAR ENDED DECEMBER 31,2007
Total
Special Capital Nonmajor
Revenue Projects Governmental
$ $ 513,331 $ 513,331
1,013,500 76,384 1,089,884
5,950 5,950
57,647 58,499 116,146
179,128 179,128
12,214 12,214
67,208 108,976 176,184
7,880 7,880
150,750 150,750
82,325 82,325
1,482,063 851,729 2,333,792
REVENUES
Taxes
Intergovernmental
Charges for services
Park support fees
Engineering fees
Dedication fees
Special assessments
Interest on investments
Miscellaneous
Loan repayments
Contributions and donations
Other
TOTAL REVENUES
EXPENDITURES
Current
Culture and recreation
Economic development
Capital outlay
Public safety
Public works
Culture and recreation
Parks
Trails and sidewalks
Lakefront park
The Pond park
Sand Point park
Thomas Ryan park
Pike Lake Park
Crystal Lake park
Woods at the Wilds park
Fairview Heights park
Jeffer's park
Howard Lake park
Shepards park
Economic development
294 294
17 ,240 17,240
1,292,997 1,292,997
259,387 1,730,822 1,990,209
28,603 49,379 77,982
106,617 106,617
6,270 6,270
4,290 4,290
31,839 31,839
644,410 644,410
1,260,000 1,260,000
39,258 39,258
38,978 38,978
224 224
71,484 71,484
66,857 66,857
33,616 33,616
161,854 161,854
2,609,367 3,235,052 5,844,419
TOTAL EXPENDITURES
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CITY OF PRlORLAKE, MINNESOTA
NONMAJOR GOVERNMENTAL FUNDS
COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - CONTINUED
YEAR ENDED DECEMBER 31, 2007
Total
Special Capital Nonmajor
Revenue Projects Governmental
$ (1,127,304) $ (2,383,323) $ (3,510,627)
DEFICIENCY OF REVENUES
UNDER EXPENDITURES
OTHER FINANCING SOURCES (USES)
Transfers in
Transfers out
150,000 80,000 230,000
(36,828) (36,828)
150,000 43,172 193,172
(977,304) (2,340,151 ) (3,317,455)
2,574,561 3,807,175 6,381,736
$ 1,597,257 $ 1,467,024 $ 3,064,281
TOTAL OTHER FINANCING SOURCES (USES)
NET CHANGE IN FUND BALANCES
FUND BALANCES, JANUARY 1
FUND BALANCES, DECEMBER 31
-51-
CITY OF PRlOR LAKE, MINNESOTA
NONMAJOR SPECIAL REVENUE FUNDS
COMBINING BALANCE SHEET
DECEMBER 31,2007
225 230 250
EDC
Capital Severance Revolving
Park Compensation Loan
ASSETS
Cash and temporary investments $ 183,105 $ 369,393 $ 95,012
LIABILITIES AND FUND BALANCES
LIABILITIES
Accounts payable $ 108,637 $ $
FUND BALANCES
Reserved for severance compensation 369,393
Unreserved
Designated for development loans 95,012
Designated for improvements 74,468
TOTAL FUND BALANCES 74,468 369,393 95,012
TOTAL LIABILITIES AND FUND BALANCES $ 183,105 $ 369,393 $ 95,012
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I 255 260 210 240
I Revolving Cable
Loan DAG Franchise EDA Total
I $ 73,782 $ 875,715 $ 39,425 $ 95,366 $ 1,731,798
I $ $ 25,904 $ $ $ 134,541
I 369,393
I 73,782 168,794
849,811 39,425 95,366 1,059,070
I 73,782 849,811 39,425 95,366 1,597,257
$ 73,782 $ 875,715 $ 39,425 $ 95,366 $ 1,731,798
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CITY OF PRIOR LAKE, MINNESOTA I
NONMAJOR SPECIAL REVENUE FUNDS
COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES I
YEAR ENDED DECEMBER 31,2007
225 230 250 I
EDC
Capital Severance Revolving
Park Compensation Loan I
REVENUES
Taxes
lntergovernmental $ 1,013,500 $ $ I
Charges for services
Park support fees 5,950
Engineering fees I
Dedication fees 179,128
Interest on investments 26,287 24,660 6,466
Miscellaneous
Loan repayments I
Contributions and donations 150,750
TOTAL REVENUES 1,375,615 24,660 6,466 I
EXPENDITURES
Current
Culture and recreation 17,240 I
Economic development
Capital outlay
Public works I
Culture and recreation
Parks 28,603
Trails and sidewalks 106,617 I
Lakefront park 6,270
The Pond park 4,290
Sand Point park 31,839 I
Thomas Ryan park 644,410
Pike Lake Park 1,260,000
Crystal Lake park 39,258 I
Woods at the Wilds park 38,978
Fairview Heights park 224
JefferIs park 71,484 I
Howard Lake park 66,857
Shepards park 33,616
TOTAL EXPENDITURES 2,332,446 17,240 I
EXCESS (DEFICIENCIES) OF REVENUES
OVER (UNDER) EXPENDITURES (956,831) 7,420 6,466 I
OTHER FINANCING USES
Transfers in 150,000 I
NET CHANGE IN FUND BALANCES (956,831) 157,420 6,466
FUND BALANCES, JANUARY 1 1,031,299 211,973 88,546 I
FUND BALANCES, DECEMBER 31 $ 74,468 $ 369,393 $ 95,012
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I 255 260 210 240
EDMN
Revolving Cable
I Loan DAG Franchise EDA Total
I $ $ $ $ $ 1,013,500
5,950
I 57,647 57,647
179,128
5,035 4,760 67,208
I 7,880 7,880
150,750
I 12,915 57,647 4,760 1,482,063
I 17,240
294 294
I 259,387 259,387
I 28,603
106,617
6,270
I 4,290
31,839
644,410
1,260,000
I 39,258
38,978
224
I 71,484
66,857
33,616
I 259,387 294 2,609,367
I 12,915 (201,740) 4,466 (1,127,304)
I 150,000
12,915 (201,740) 4,466 (977,304)
I 60,867 1,051,551 39,425 90,900 2,574,561
$ 73,782 $ 849,811 $ 39,425 $ 95,366 $ 1,597,257
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CITY OF PRlOR LAKE, MINNESOTA
NONMAJOR CAPITAL PROJECTS FUNDS
COMBINING BALANCE SHEET
DECEMBER 31, 2007
256 402 410
Downtown Tax Revolving
Redevelopment Increment Equipment
ASSETS
Cash and temporary investments $ 34,570 $ 86,927 $ 1,221,095
Receivables
Delinquent taxes 2,140
Special assessments
Deferred
TOTAL ASSETS $ 34,570 $ 86,927 $ 1,223,235
LIABILITIES AND FUND BALANCES
LIABILITIES
Accounts payable $ $ $
Deferred revenue
TOTAL LIABILITIES
FUND BALANCES
Unreserved
Designated for capital outlay 34,570 1 ,223,235
Designated for improvements 86,927
TOTAL FUND BALANCES 34,570 86,927 1,223,235
TOTAL LIABILITIES
AND FUND BALANCES $ 34,570 $ 86,927 $ 1 ,223,235
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I 503 413 414 415 417
Tax Tax Tax Tax
I Street Increment 1-3 Increment 3-1 Increment 4-1 Increment 6-1
Oversizing Lakefront Creekside On-site Shepards Path Total
I $ 200,833 $ 41,805 $ 20,695 $ 941 $ 130 $ 1,606,996
4,711 6,851
I 36,642 36,642
I $ 237,475 $ 46,516 $ 20,695 $ 941 $ 130 $ 1,650,489
I $ 146,823 $ $ $ $ $ 146,823
36,642 36,642
I 183,465 183,465
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54,010 46,516 20,695 941 130 1,380,097
I 86,927
54,010 46,516 20,695 941 130 1,467,024
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$ 237,475 $ 46,516 $ 20,695 $ 941 $ 130 $ 1,650,489
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CITY OF PRlOR LAKE, MINNESOTA I
NONMAJOR CAPITAL PROJECTS FUNDS
COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES I
YEAR ENDED DECEMBER 31,2007
256 402 410 I
Downtown Tax Revolving
Redevelopment Increment Equipment I
REVENUES
Taxes $ $ 19,256 $ 288,180
Intergovernmental I
State
Property tax credits
Other 10,000 I
County
Charges for services I
Other fees
Special assessments
Interest on investments 2,656 6,084 74,399
Miscellaneous I
Other 68,273
TOTAL REVENUES 2,656 25,340 440,852 I
EXPENDITURES I
Capital outlay
General government
Public safety 1,292,997 I
Public works 368,352
Culture and recreation 49,379
Economic development I
TOTAL EXPENDITURES 1,710,728
EXCESS OF REVENUES I
OVER EXPENDITURES 2,656 25,340 (1,269,876)
OTHER FINANCING SOURCES (USES) I
Transfers in 80,000
Transfers out I
TOTAL OTHER
FINANCING SOURCES (USES) 80,000 I
NET CHANGE IN FUND BALANCES 2,656 25,340 (1,189,876)
FUND BALANCES, JANUARY 1 31,914 61,587 2,413,111 I
FUND BALANCES, DECEMBER 31 $ 34,570 $ 86,927 $ 1,223,235 I
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CITY OF PRIOR LAKE, MINNESOTA I
GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - I
BUDGET AND ACTUAL
YEAR ENDED DECEMBER 31, 2007
(With comparative actual amounts for the year ended December 31,2006) I
2007 2006
Variance with I
Final Final Budget -
Budgeted Actual Positive Actual
Amounts Amounts (Negative) Amounts I'
REVENUES
Taxes
Property taxes $ 7,526,814 $ 7,574,936 $ 48,122 $ 6,697,422 I
Franchise fees 345,530 557,542 212,012 347,982
Total taxes 7,872,344 8,132,478 260,134 7,045,404 I
Licenses and permits
Business 57,875 59,959 2,084 69,090
Nonbusiness 694,400 457,703 (236,697) 763,520 I
Total licenses and permits 752,275 517,662 (234,613) 832,610
Intergovernmental I
State
Local govemment aid 11,905 11,905 11,905 I
Road and bridge aid 220,000 219,926 (74) 165,448
Firemen's aid 181,000 162,759 (18,241 ) 183,789
Police aid 143,130 177,620 34,490 151,123 I
Other state aids 1,850 1,850 3,497
County and local
County aid 23,600 21,014 (2,586) 19,287 I
Township fire and rescue aid 233,952 233,952 212,490
Liaison aid 49,950 51,329 1,379 47,519
Payment in lieu of taxes 360,000 360,000 360,000 ,I
Total intergovernmental 1,223,537 1,240,355 16,818 1,155,058
Charges for services I
Zoning fees 35,100 15,984 (19,116) 40,412
Plan check fees 372,563 220,353 (152,210) 399,052 I
Park fees 40,000 40,834 834 41,967
Project fees 365,685 365,685 324,614
Park program revenue 83,000 87,246 4,246 88,238 I
Park admission/rent 18,500 25,223 6,723 20,260
Facility rental 242,053 257,524 15,471 276,494
Reports 4,150 3,363 (787) 2,047 I
Total charges for services 1,161,051 1,016,212 (144,839) 1,193,084
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I CITY OF PRIOR LAKE, MINNESOTA
GENERAL FUND
I SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES -
BUDGET AND ACTUAL - CONTINUED
YEAR ENDED DECEMBER 31,2007
I (With comparative actual amounts for the year ended December 31, 2006)
2007 2006
I Variance with
Final Final Budget-
Budgeted Actual Positive Actual
I Amounts Amounts (Negative) Amounts
REVENUES-CONTINUED
Fines and forfeitures $ 189,600 $ 190,650 $ 1,050 $ 194,641
I Interest on investments 135,000 288,869 153,869 211,079
I Miscellaneous
Other 30,000 51,734 21,734 259,409
Contributions and donations 10,000 13,864 3,864 24,596
I Sale of property 12,000 9,941 (2,059) 427,151
Developers' agreements 50,000 37,194 (12,806) 436,127
I Total miscellaneous 102,000 112,733 10,733 1,147,283
TOTAL REVENUES 11,435,807 11,498,959 63,152 11,779,159
I EXPENDITURES
Current expenditures
I General government
Mayor and Council
Personal services 50,757 54,787 (4,030) 50,440
I Supplies 420 601 (181) 415
Other services and charges 10,750 9,437 1,313 9,263
I Total Mayor and Council 61,927 64,825 (2,898) 60,118
Ordinance
I Other services and charges 12,000 7,826 4,174 10,079
City manager
Personal services 267,068 261,818 5,250 240,891
I Supplies 4,610 5,625 (1,Q15) 5,390
Other services and charges 110,260 77,059 33,201 64,805
I Total city manager 381,938 344,502 37,436 311,086
Boards and commissions
I Personal services 12,837 10,066 2,771 9,796
Other services and charges 500 243 257
I Total board and commissions 13,337 10,309 3,028 9,796
I -61-
CITY OF PRIOR LAKE, MINNESOTA I
GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - I
BUDGETANDACTUAL-CONTINUED
YEAR ENDED DECEMBER 31, 2007
(With comparative actual amounts for the year ended December 31, 2006) I
2007 2006
Variance with I
Final Final Budget -
Budgeted Actual Positive Actual
Amounts Amounts (Negative) Amounts I
EXPENDITURES - CONTINUED
Current expenditures - Continued
General government - continued I
Election
Personal services $ 2,465 $ 2,401 $ 64 $ 12,428
Supplies 2,800 2,759 41 1,508 I
Other services and charges 300 141 159 649
Total election 5,565 5,301 264 14,585 I
Director of finance
Personal services 121,513 121,143 370 119,675
Supplies 2,320 3,217 (897) 2,266 I
Other services and charges 3,015 1,938 1,077 3,709
Total director of finance 126,848 126,298 550 125,650 I
Accounting
Personal services 140,585 139,967 618 135,238 I
Supplies 3,540 2,813 727 2,715
Other services and charges 24,115 22,579 1,536 20,711
Total accounting 168,240 165,359 2,881 158,664 I
Auditing I
Other services and charges 18,200 18,190 10 17,223
Assessing I
Other services and charges 102,200 102,886 (686) 92,705
Legal services I
Other services and charges 298,000 354,398 (56,398) 357,418
Personnel I
Personal services 43,929 44,641 (712) 42,344
Supplies 1,170 740 430 271
Other services and charges 30,700 30,143 557 55,961 I
275 98,576
Total personnel 75,799 75,524
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I CITY OF PRIOR LAKE, MINNESOTA
GENERAL FUND
I SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES -
BUDGET AND ACTUAL - CONTINUED
YEAR ENDED DECEMBER 31,2007
I (With comparative actual amounts for the year ended December 31, 2006)
2007 2006
I Variance with
Final Final Budget -
Budgeted Actual Positive Actual
I Amounts Amounts (Negative) Amounts
EXPENDITURES - CONTINUED
Current expenditures - Continued
I General government - continued
Communications
Personal services $ 75,304 $ 69,731 $ 5,573 $ 68,714
I Supplies 4,520 4,003 517 2,280
Other services and charges 52,150 35,727 16,423 32,334
I Total communications 131,974 109,461 22,513 103,328
Planning and zoning
I Personal services 313,643 339,565 (25,922) 294,292
Supplies 2,640 5,899 (3,259) 1,966
Other services and charges 34,430 18,838 15,592 10,695
I Total planning and zoning 350,713 364,302 (13,589) 306,953
I Data processing
Supplies 4,325 4,064 261 2,787
Other services and charges 100,325 68,797 31,528 100,878
I Total data processing 104,650 72,861 31,789 103,665
I Buildings and plant
Supplies 5,000 11,578 (6,578) 4,908
Other services and charges 314,737 358,865 (44,128) 226,993
I Total buildings and plant 319,737 370,443 (50,706) 231,901
Total general government 2,171,128 2,192,485 (21,357) 2,001,747
I Public safety
Police
I Personal services 2,442,283 2,402,154 40,129 2,322,412
Supplies 113,270 117,516 (4,246) 95,865
Other services and charges 169,452 168,954 498 107,146
I Total police 2,725,005 2,688,624 36,381 2,525,423
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CITY OF PRIOR LAKE, MINNESOTA I
GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - I
BUDGET AND ACTUAL - CONTINUED
YEAR ENDED DECEMBER 31, 2007
(With comparative actual amounts for the year ended December 31, 2006) I
2007 2006
Variance with I
Final Final Budget -
Budgeted Actual Positive Actual
Amounts Amounts (Negative) Amounts I
EXPENDITURES - CONTINUED
Current expenditures - Continued
Public safety - continued I
Fire and rescue
Personal services $ 213,987 $ 232,351 $ (18,364) $ 196,465
Supplies 67,810 61,262 6,548 46,279 I
Other services and charges 340,873 286,528 54,345 320,850
Total fire and rescue 622,670 580,141 42,529 563,594
Building inspections I
Personal services 503,270 394,178 109,092 466,410
Supplies 12,790 8,343 4,447 9,135 I
Other services and charges 10,600 7,105 3,495 9,135
Total building inspections 526,660 409,626 117,034 484,680 I
Civil defense
Other services and charges 7,300 4,394 2,906 2,499 I
Animal control
Other services and charges 33,228 33,228 33,228 I
Total public safety 3,914,863 3,716,013 198,850 3,609,424
Public works I
Engineering
Personal services 497,050 488,438 8,612 485,163 I
Supplies 1l,930 10,537 1,393 9,595
Other services and charges 33,450 32,491 959 23,887
Total engineering 542,430 531,466 10,964 518,645 I
Central garage I
Personal services 131,823 130,654 1,169 123,408
Supplies 16,520 17,286 (766) 18,201
Other services and charges 134,900 134,523 377 125,474 I
283,243 282,463 780
Total central garage 267,083
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~----
I CITY OF PRIOR LAKE, MINNESOTA
GENERAL FUND
I SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES -
BUDGET AND ACTUAL - CONTINUED
YEAR ENDED DECEMBER 31, 2007
I (With comparative actual amounts for the year ended December 31, 2006)
2007 2006
I Variance with
Final Final Budget -
Budgeted Actual Positive Actual
I Amounts Amounts (Negative) Amounts
EXPENDITURES - CONTINUED
Current expenditures - Continued
I Public works - continued
Streets
Personal services $ 276,897 $ 261,090 $ 15,807 $ 225,005
I Supplies 183,370 213,304 (29,934) 169,451
Other services and charges 423,260 446,052 (22,792) 340,775
I Total streets 883,527 920,446 (36,919) 735,231
Total public works 1,709,200 1,734,375 (25,175) 1,520,959
I Culture and recreation
Recreation
I Personal services 286,250 252,029 34,221 260,952
Supplies 62,050 64,385 (2,335) 61,081
Other services and charges 42,815 49,701 (6,886) 34,296
I Total recreation 391,115 366,115 25,000 356,329
Parks
I Personal services 856,062 860,818 (4,756) 848,171
Supplies 216,925 193,299 23,626 179,160
I Other services and charges 168,535 156,647 11,888 177,581
Total parks 1,241,522 1,210,764 30,758 1,204,912
I Libraries
Supplies 6,220 5,916 304 4,238
Other services and charges 86,265 72,247 14,018 74,481
I Total libraries 92,485 78,163 14,322 78,719
I Total culture and recreation 1,725,122 1,655,042 70,080 1,639,960
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I -65-
CITY OF PRIOR LAKE, MINNESOTA I
GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - I
BUDGET AND ACTUAL - CONTINUED
YEAR ENDED DECEMBER 31, 2007
(With comparative actual amounts for the year ended December 31, 2006) I
2007 2006
Variance with I
Final Final Budget -
Budgeted Actual Positive Actual
Amounts Amounts (Negative) Amounts I
EXPENDITURES - CONTINUED
Current expenditures - Continued
Economic development I
Personal services $ 87,595 $ 86,919 $ 676 $ 82,354
Supplies 1,420 567 853 415
Other services and charges 53,126 22,146 30,980 62,273 I
Total economic development 142,141 109,632 32,509 145,042
Contingency I
Contingency reserve 250,000 107,498 142,502 141,674
Total current expenditures 9,912,454 9,515,045 397,409 9,058,806 I
Capital outlay I
General government
City manager 2,500 1,386 1,114
Data processing 37,900 64,952 (27,052) 57,544
Buildings and plant 10,000 12,482 (2,482) 5,979 I
Public safety
Police 77,290 384,367 (307,077) 77 ,146
Fire and rescue 45,979 46,745 (766) 16,746 I
Civil defense 20,000 17,434 2,566 16,980
Public works
Central garage 1,970 I
Street 47,993
Culture and recreation
Library 5,000 255,037 (250,037) 6,403 I
Parks 2,000 3,807 (1,807)
Economic development 25,000 25,000
Total capital outlay 225,669 786,210 (560,541) 230,761 I
TOTAL EXPENDITURES 10,138,123 10,301,255 (163,132) 9,289,567 I
EXCESS OF REVENUES
OVER EXPENDITURES 1,297,684 1,197,704 (99,980) 2,489,592 I
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CITY OF PRIOR LAKE, MINNESOTA
GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES -
BUDGET AND ACTUAL - CONTINUED
YEAR ENDED DECEMBER 31, 2007
(With comparative actual amounts for the year ended December 31, 2006)
2007 2006
Variance with
Final Final Budget -
Budgeted Actual Positive Actual
Amounts Amounts (Negative) Amounts
OTHER FINANCING SOURCES (USES)
Transfers in $ 250,000 $ 250,000 $ $ 280,000
Transfers out (1,547,684) (1,703,438) (155,754) (1,790,562)
TOTAL OTHER FINANCING
SOURCES (USES) (1,297,684) (1,453,438) (155,754) (1,510,562)
NET CHANGE IN FUND BALANCES (255,734) (255,734) 979,030
FUND BALANCES, JANUARY 1 5,276,400 5,276,400 4,297,370
FUND BALANCES, DECEMBER 31 $ 5,276,400 $ 5,020,666 $ (255,734) $ 5,276,400
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CITY OF PRlOR LAKE, MINNESOTA
DEBT SERVICE FUNDS
COMBINING BALANCE SHEET
DECEMBER 31, 2007
Fire Hall
Bonds
Park
Referendum
City Hall
2005
Fire Station
#2
ASSETS
Cash and temporary investments (deficits)
Receivables
Delinquent taxes
Special assessments
Delinquent
Deferred
Other (Green Acres)
$
$
$
$
TOTAL ASSETS
$
$
$
$
LIABILITIES AND FUND BALANCES (DEFICITS)
LIABILITIES
Deferred revenue $ $ $ $
FUND BALANCES (DEFICITS)
Reserved for debt service
TOTAL LIABILITIES AND
FUND BALANCES (DEFICITS) $ $ $ $
-68-
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I 350 351 540 541 542 543
Water
I Water Revenue Treatment Candy Oak
PW Building Plant Pike Lake Duluth Cove Ridge
I $ $ $ $ 64,836 $ 141,235 $ 173,342
428 405 526
I 5,012 1,524
33,548 22,682 61,902
I 6,908
$ $ $ $ 103,824 $ 164,322 $ 244,202
I
I $ $ $ $ 38,560 $ 22,682 $ 70,333
I 65,264 141,640 173,869
I $ $ $ $ 103,824 $ 164,322 $ 244,202
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CITY OF PRIOR LAKE, MINNESOTA I
DEBT SERVICE FUNDS
COMBINING BALANCE SHEET - CONTINUED I
DECEMBER 31,2007
545 546 547 549 I
Tax
Frog Pixie 150th Mitchell Increment
Town Point Condons 2004 I
ASSETS
Cash and temporary investments (deficits) $ 188,685 $ 206,478 $ 162,571 $ 19,533
Receivables I
Delinquent taxes 434 434 781
Special assessments I
Delinquent 6,604
Deferred 42,586 71,512 303,776
Other (Green Acres) 113,052 I
TOTAL ASSETS $ 231,705 $ 278,424 $ 586,784 $ 19,533
LIABILITIES AND FUND BALANCES (DEFICITS) I
LIABILITIES
Deferred revenue $ 42,586 $ 71,512 $ 417,279 $ I
FUND BALANCES (DEFICITS)
Reserved for debt service 189,119 206,912 169,505 19,533 I
TOTAL LIABILITIES AND
FUND BALANCES (DEFICITS) $ 231,705 $ 278,424 $ 586,784 $ 19,533 I
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I 550 551 553 554
Street
I Breezy Fish Reconstruction
Point Point CSAH 82 2007 Total
I $ 443,009 1,022,269 $ $ (275) $ 2,421,683
1,365 1,504 5,877
I 3,645 1,448 18,233
455,664 407,044 1,398,714
I 722,708 842,668
$ 903,683 $ 2,154,973 $ $ (275) $ 4,687,175
I
I $ 456,765 $ 1,129,752 $ $ $ 2,249,469
I 446,918 1,025,221 (27 5) 2,437,706
I $ 903,683 $ 2,154,973 $ $ (275) $ 4,687,175
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OPERA TING REVENUES
Sewer charges
Water charges
Capital facility charges
Meter sales
CITY OF PRIOR LAKE, MINNESOTA
WATER AND SEWER UTILITIES FUND
COMP ARA TIVE SCHEDULE OF REVENUES, EXPENSES
AND CHANGES IN FUND NET ASSETS
YEARS ENDED DECEMBER 31, 2007 AND 2006
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2007 2006
$ 2,137,172 $ 2,415,356
2,425,089 2,276,421
446,148 435,318
78,792 75,921
5,087,201 5,203,016
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TOTAL OPERATING REVENUES
OPERA TING EXPENSES
Water utility
Personal services
Supplies
Repairs and maintenance
Other services and charges
Insurance
Utilities
Depreciation
Miscellaneous
Total water utility
Sewer utility
Personal services
Supplies
Repairs and maintenance
Other services and charges
Insurance
Utilities
Depreciation
Disposal charges
Miscellaneous
Total sewer utility
445,779 427,337
169,398 140,218
559,625 534,046
59,536 65,762
2,869 2,744
165,104 132,156
229,053 225,181
44,420 11,849
1,675,784 1,539,293
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508,730 462,102
29,158 22,752
97,402 129,606
23,400 18,412
2,869 2,744
41,538 33,592
297,057 294,832
1,070,194 1,047,609
1,241 3,902
2,071,589 2,015,551
3,747,373 3,554,844
1,339,828 1,648,172
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TOTAL OPERATING EXPENSES
OPERA TING INCOME
NONOPERATING REVENUES
Intergovernmental
Interest income
Loss on disposal of capital assets
Miscellaneous revenue
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141,534
445,858 263,670
(28,290) (36,348)
4,435 40
422,003 368,896
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TOTAL NONOPERATING REVENUES
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CITY OF PRIOR LAKE, MINNESOTA
WATER AND SEWER UTILITIES FUND
COMP ARA TIVE SCHEDULE OF REVENUES, EXPENSES
AND CHANGES IN FUND NET ASSETS - CONTINUED
YEARS ENDED DECEMBER 31, 2007 AND 2006
2007
2006
INCOME BEFORE TRANSFERS $ 1,761,831 $ 2,017,068
CONTRIBUTIONS FROM DEVELOPERS 109,248 958,911
CONTRIBUTIONS FROM OTHER FUNDS 58,818 351,657
TRANSFERS IN 252,760
TRANSFERS OUT (709,025) (500,406)
CHANGE IN FUND NET ASSETS 1,220,872 3,079,990
FUND NET ASSETS, JANUARY 1 29,670,019 26,590,029
PRIOR PERIOD ADmSTMENT (221,510)
FUND J\TET ASSETS, DECEMBER 31 $ 30,669,381 $ 29,670,019
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THIS PAGE IS LEFT BLANK
INTENTIONALL Y
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FINANCIAL EXHIBITS
CITY OF PRIOR LAKE
PRIOR LAKE, MINNESOTA
YEAR ENDED
DECEMBER 31,2007
CITY OF PRIOR LAKE, MINNESOTA
FINANCIAL EXHIBIT
COMBINED SCHEDULE OF INDEBTEDNESS
YEAR ENDED DECEMBER 31, 2007
Interest
Rate
Bonded indebtedness
G.O. special assessment bonds
G.O. Improvement Bonds of2000
G.O. Improvement Bonds of2001
G.O. Improvement Bonds of2002
G.O. Improvement Bonds of2003
G.O. Improvement Crossover Refunding Bonds of2004
G.O. Improvement Bonds of2004
G.O. Improvement Bonds of2005C
4.80 - 4.90 %
3.90 - 4.25
3.00 - 3.55
2.50 - 3.05
2.10-2.35
2.70 - 3.90
3.00 - 3.75
Total G.O. special assessment bonds
General obligation bonds
G.O. Crossover Refunding Fire Station Bonds of 1999
G.O. Park Refunding Bonds of2005
G.O. Fire Hall bonds of2006A
G.O. Street Reconstruction Bonds 2007B
4.15 - 4.50
4.00 - 5.00
4.00 - 4.50
4.00
Total general obligation bonds
General obligation revenue bonds
G.O. Public Works Building Refund Bonds of2005
G.O. Water Treatment Plant Revenue Bonds of2007A
4.00 - 4.75
4.00 - 4.20
Total general obligation revenue bonds
Revenue bonds
Public Project Revenue Bonds of2005B
3.50 - 4.65
Tax increment bonds
G.O. Tax Increment Bonds of2004
3.00 - 4.80
General obligation capital improvement plan bonds
G.O. Capital Plan bonds of2006A
3.80 - 3.90
Total bonded indebtedness
-78-
Issue
Date
10/01/00
10/01/01
10/01/02
04/01/03
04/01/04
06/01/04
07/01/05
02/01/99
09/01/05
11/21/06
05/15/07
09/01/05
05/15/07
05/01/05
06/01/04
08/01/07
Final
Maturity
Date
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12/01/10
12/01/11
12/01/12
12/01/13
12/01/09
12/01/14
12/15/15
12/01/13
12/01/17
12/31/31
12/15/17
12/01/17
12/15/32
12/15/29
12/01/24
02/01/17
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I Outstanding Issued Outstanding Due in 2008
I Authorized January 1 (Retired) December 31 Principal Interest
I $ 1,125,000 $ 490,000 $ (115,000) $ 375,000 $ 125,000 $ 18,188
1,035,000 535,000 (100,000) 435,000 100,000 17,788
1,050,000 650,000 (100,000) 550,000 100,000 18,325
I 1,975,000 1,400,000 (200,000) 1,200,000 200,000 37,200
1,385,000 760,000 (360,000) 400,000 275,000 8,713
2,700,000 2,200,000 (275,000) 1,925,000 275,000 64,900
I 2,500,000 2,260,000 (240,000) 2,020,000 250,000 67,860
11,770,000 8,295,000 (1,390,000) 6,905,000 1,325,000 232,973
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1,570,000 1,050,000 (125,000) 925,000 125,000 40,150
I 6,260,000 6,040,000 (315,000) 5,725,000 360,000 264,330
3,700,000 3,700,000 (50,000) 3,650,000 50,000 160,080
1,400,000 1,400,000 1,400,000 115,000 56,000
I 12,930,000 10,790,000 910,000 11,700,000 650,000 520,560
I 1,310,000 1,200,000 (125,000) 1,075,000 130,000 47,300
8,500,000 8,500,000 8,500,000 100,000 346,114
I 9,810,000 1,200,000 8,375,000 9,575,000 230,000 393,414
I 10,000,000 9,900,000 (130,000) 9,770,000 145,000 430,920
I 400,000 370,000 (15,000) 355,000 15,000
15,175
I 1,225,000
1,225,000 1,225,000 85,000 45,155
I $ 46,135,000 $ 30,555,000 $ 8,975,000 $ 39,530,000 $ 2,450,000 $ 1,638,196
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CITY OF PRIOR LAKE, MINNESOTA
FINANCIAL EXHIBIT
BOND SCHEDULES
DECEMBER 31,2007
Final
Issue Interest Maturity
Date Rate Date Principal
G.O. special assessment bonds
$1,125,000 G.O. Improvement Bonds of2000 1 % 1/00
4.80 % 12/01/08 $ 125,000
4.85 12/01/09 125,000
4.90 12/01/10 125,000
Total 375,000
$1,035,000 G.O. Improvement Bonds of2001 1 % 1/0 1
3.90 % 12/01/08 $ 100,000
4.00 12/01/09 100,000
4.15 12/01/10 100,000
4.50 12/01/11 135,000
Total 435,000
$1,050,000 G.O. Improvement Bonds of2002 10/01/02
3.00 % 12/1/08 $ 100,000
3.20 12/1/09 100,000
3.35 12/1/10 100,000
3.45 12/1/11 100,000
3.55 12/1/12 150,000
Total 550,000
$1,975,000 G.O. Improvement Bonds of2003 04/01/03
2.50 % 12/01/08 $ 200,000
2.90 12/01/09 200,000
3.10 12/01/10 200,000
3.25 12/01/11 200,000
3.35 12/01/12 200,000
3.50 12/01/13 200,000
Total 1,200,000
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CITY OF PRIOR LAKE, MINNESOTA
FINANCIAL EXHIBIT
BOND SCHEDULES-CONTINUED
DECEMBER 31,2007
Final
Issue Interest Maturity
Date Rate Date Principal
G.O. special assessment bonds - continued
$1,385,000 G.O. Improvement Crossover Refunding Bonds
of2004 04/01/04
2.10 % 12/01/08 $ 275,000
2.35 12/01/09 125,000
Total 400,000
$2,700,000 G.O. Improvement Bonds of2004 06/01/04
2.70 % 12/01/08 $ 275,000
3.00 12/01/09 275,000
3.20 12/01/10 275,000
3.45 12/01/11 275,000
3.65 12/01/12 275,000
3.70 12/01/13 275,000
3.90 12/01/14 275,000
Total 1,925,000
$2,500,000 G.O. Improvement Bonds of2005 07/01/05
3.00 % 12/01/08 $ 250,000
3.10 12/01/09 250,000
3.20 12/01/10 250,000
3.30 12/01/11 250,000
3.40 12/01/12 250,000
3.50 12/01/13 250,000
3.60 12/01/14 260,000
3.75 12/01/15 260,000
Total 2,020,000
Total G.O. special assessment bonds
$ 6,905,000
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CITY OF PRIOR LAKE, MINNESOTA
FINANCIAL EXHIBIT
BOND SCHEDULES-CONTINUED
DECEMBER 31,2007
Final
Issue Interest Maturity
Date Rate Date Principal
G.O. tax increment bonds
$400,000 Tax Increment Bonds of2004 06/01/04
3.00 % 12/01/08 $ 15,000
3.00 12/01/09 15,000
3.60 12/01/10 15,000
3.60 12/01/11 15,000
3.75 12/01/12 15,000
3.75 12/01/13 15,000
4.00 12/01/14 20,000
4.00 12/01/15 20,000
4.35 12/01/16 20,000
4.35 12/01/17 20,000
4.60 12/01/18 25,000
4.60 12/01/19 25,000
4.60 12/01/20 25,000
4.80 12/01/21 25,000
4.80 12/01/22 25,000
4.80 12/01/23 30,000
4.80 12/01/24 30,000
Total G.O. tax increment bonds $ 355,000
General obligation bonds
$1,570,000 G.O. Crossover Refunding Bonds of 1999 02/01/99
4.15 % 12/01/08 $ 125,000
4.25 12/01/09 135,000
4.30 12/01/10 150,000
4.35 12/01/11 150,000
4.40 12/01/12 175,000
4.50 12/01/13 190,000
Total 925,000
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I CITY OF PRIOR LAKE, MINNESOTA
FINANCIAL EXHIBIT
I BOND SCHEDULES-CONTINUED
DECEMBER 31, 2007
I Final
Issue Interest Maturity
Date Rate Date Principal
I General obligation bonds - continued
$6,260,000 G.O. Park Refunding Bonds of2005 03/01/98
4.00 % 12/01/08 $ 360,000
I 4.13 12/01/09 410,000
4.25 12/01/10 455,000
4.38 12/01/11 490,000
I 4.50 12/01/12 535,000
4.63 12/01/13 585,000
4.75 12/01/14 645,000
I 4.75 12/01/15 710,000
5.00 12/01/16 780,000
5.00 12/01/17 755,000
I Total 5,725,000
I $3,700,000 G.O. Fire Hall Bonds of2006A 06/01/04
4.00 % 12/01/08 $ 50,000
4.00 12/01/09 55,000
I 4.00 12/01/10 55,000
4.00 12/01/11 60,000
4.00 12/01/12 65,000
I 4.00 12/01/13 75,000
4.00 12/01/14 75,000
4.00 12/01/15 85,000
I 4.25 12/01/16 100,000
4.25 12/01/17 100,000
4.25 12/01/18 110,000
I 4.25 12/01/19 120,000
4.30 12/01/20 135,000
4.35 12/01/21 150,000
I 4.50 12/01/22 160,000
4.50 12/01/23 175,000
4.50 12/01/24 200,000
I 4.50 12/01/25 215,000
4.50 12/01/26 230,000
4.50 12/01/27 250,000
I 4.50 12/01/28 270,000
4.50 12/01/29 285,000
4.50 12/01130 305,000
I 4.50 12/01/31 325,000
Total
3,650,000
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CITY OF PRIOR LAKE, MINNESOTA I
FINANCIAL EXHIBIT
BOND SCHEDULES-CONTINUED I
DECEMBER 31, 2007
Final I
Issue Interest Maturity
Date Rate Date Principal
General obligation bonds - continued I
$1,400,000 G.O. Street Reconstruction Bonds 2007B 05/15/07
4.00 % 12/15/08 $ 115,000
4.00 12/15/09 120,000 I
4.00 12/15/10 125,000
4.00 12/15/11 130,000
4.00 12/15/12 135,000 I
4.00 12/15/13 140,000
4.00 12/15/14 150,000
4.00 12/15/15 155,000 I
4.00 12/15/16 160,000
4.00 12/15/17 170,000
Total 1,400,000 I
Total general obligation Bonds $ 11 ,700,000 I
Revenue Bonds
$10,000,000 Lease Revenue Bonds of2005B 05/01/05 I
3.50 % 12/15/08 $ 145,000
3.60 12/15/09 160,000
3.75 12/15/10 185,000 I
4.00 12/15/11 210,000
4.00 12/15/12 230,000
4.00 12/15/13 250,000 II
4.00 12/15/14 285,000
4.25 12/15/15 305,000
4.25 12/15/16 330,000 I
4.25 12/15/17 360,000
4.25 12/15/18 400,000
4.25 12/15/19 425,000 I
4.25 12/15/20 460,000
4.45 12/15/21 500,000
4.45 12/15/22 530,000 I
4.45 12/15/23 570,000
4.50 12/15/24 610,000
4.65 12/15/25 655,000 I
4.65 12/15/26 710,000
4.65 12/15/27 760,000
4.65 12/15/28 815,000 I
4.65 12/15/29 875,000
Total revenue bonds $ 9,770,000 I
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I CITY OF PRIOR LAKE, MINNESOTA
FINANCIAL EXHIBIT
I BOND SCHEDULES-CONTINUED
DECEMBER 31, 2007
I Final
Issue Interest Maturity
Date Rate Date Principal
I General Obligation Revenue Bonds
$1,310,000 G.O. Building Revenue Bonds of2005 09/07/05
4.00 % 12/01/08 $ 130,000
I 4.13 12/01/09 135,000
4.25 12/01/10 145,000
4.38 12/01/11 155,000
I 4.50 12/01/12 170,000
4.63 12/01/13 170,000
I 4.75 12/01/14 170,000
Total 1,075,000
I $8,500,000 G.O. Water Treatment Plant
Revenue Bonds of 2007 A 05/15/07
4.00 % 12/15/08 $ 100,000
I 4.00 12/15/09 110,000
4.00 12/15/1 0 120,000
4.00 12/15/11 135,000
I 4.00 12/15/12 150,000
4.00 12/15/13 175,000
4.00 12/15/14 200,000
I 4.00 12/15/15 220,000
4.00 12/15/16 240,000
4.00 12/15/17 260,000
I 4.00 12/15/18 280,000
4.00 12/15/19 300,000
4.00 12/15/20 325,000
I 4.00 12/15/21 350,000
4.00 12/15/22 375,000
4.00 12/15/23 400,000
I 4.00 12/15/24 425,000
4.00 12/15/25 450,000
4.10 12/15/26 475,000
4.13 12/15/27 500,000
I 4.13 12/15/28 525,000
4.13 12/15/29 550,000
4.20 12/15/30 580,000
I 4.20 12/15/31 610,000
4.20 12/15/32 645,000
I Total 8,500,000
Total general obligation revenue bonds $ 9,575,000
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CITY OF PRIOR LAKE, MINNESOTA
FINANCIAL EXHIBIT
BOND SCHEDULES-CONTINUED
DECEMBER 31, 2007
Final
Issue Interest Maturity
Date Rate Date Principal
08/01/07
3.80 % 12/15/08 $ 85,000
3.80 12/15/09 110,000
3.80 12/15/10 115,000
3.80 12/15/11 115,000
3.80 12/15/12 120,000
3.80 12/15/13 125,000
3.80 12/15/14 130,000
3.80 12/15/15 135,000
3.85 12/15/16 140,000
3.90 12/15/17 150,000
$ 1,225,000
General obligation capital improvement plan bonds
$1,225,000 G.O. Capital Improvement Plan Bonds
Total
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CITY OF PRIOR LAKE, MINNESOTA I
FINANCIAL EXHIBIT
DEBT SERVICE REQUIREMENTS I
DECEMBER 31, 2007
G.O. Special Assessment Bonds G.O. Bonds G.O. Revenue Bonds I
Year Principal Interest Principal Interest Principal Interest
2008 $ 1,325,000 $ 232,973 $ 650,000 $ 520,560 $ 230,000 $ 393,414
2009 1,175,000 194,373 720,000 494,375 245,000 384,214 I
2010 1,050,000 156,373 785,000 464,723 265,000 374,246
2011 960,000 119,747 830,000 431,737 290,000 363,282
2012 875,000 86,323 910,000 396,172 320,000 351,102 I
2013 725,000 55,760 990,000 356,398 345,000 337,452
2014 535,000 29,835 870,000 312,192 370,000 322,590
2015 260,000 9,750 950,000 272,554 220,000 306,514 I
2016 1,040,000 229,230 240,000 297,714
2017 1,025,000 179,580 260,000 288,114
2018 110,000 130,780 280,000 277,714 I
2019 120,000 126,105 300,000 266,514
2020 135,000 121,005 325,000 254,514
2021 150,000 115,200 350,000 241,514
2022 160,000 108,675 375,000 227,514 I
2023 175,000 101,475 400,000 212,514
2024 200,000 93,600 425,000 196,514
2025 215,000 84,600 450,000 179,514 I
2026 230,000 74,925 475,000 161,514
2027 250,000 64,575 500,000 142,039
2028 270,000 53,325 525,000 121,414 I
2029 285,000 41,175 550,000 99,758
2030 305,000 28,350 580,000 77,070
2031 325,000 14,625 610,000 52,710 I
2032 645,000 27,090
Total $ 6,905,000 $ 885,134 $ 11,700,000 $ 4,815,936 $ 9,575,000 $ 5,956,543 I
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I Revenue Bonds Tax Increment Bonds G.O. Capital Plan Bonds
Principal Interest Principal Interest Principal Interest
I $ 145,000 $ 430,920 $ 15,000 $ 15,175 $ 85,000 $ 45,155
160,000 425,845 15,000 14,725 110,000 41,450
185,000 420,085 15,000 14,275 115,000 37,175
II 210,000 413,148 15,000 13,735 115,000 32,805
230,000 404,748 15,000 13,195 120,000 28,340
250,000 395,548 15,000 12,633 125,000 23,685
285,000 385,548 20,000 12,070 130,000 18,840
I 305,000 374,148 20,000 11,270 135,000 13,805
330,000 361,185 20,000 10,470 140,000 8,545
360,000 347,160 20,000 9,600 150,000 2,925
I 400,000 331,860 25,000 8,730
425,000 314,860 25,000 7,580
460,000 296,798 25,000 6,430
I 500,000 277,248 25,000 5,280
530,000 254,998 25,000 4,080
570,000 231,413 30,000 2,880
I 610,000 205,763 30,000 1,440
655,000 177,398
710,000 146,940
I 760,000 113,925
815,000 78,585
875,000 40,688
II
il $ 9,770,000 $ 6,428,805 $ 355,000 $ 163,568 $ 1,225,000 $ 252,725
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CITY OF PRIOR LAKE, MINNESOTA I
FINANCIAL EXHIBIT
TAX LEVIES AND COLLECTIONS, I
SPECIAL ASSESSMENT LEVIES AND COLLECTIONS AND OTHER SCHEDULES
PRIOR TEN YEARS
TAX LEVIES AND COLLECTIONS I
Percentage I
Collection Percentage Collection of Total
Total of Current of Levy of Prior Total Collections
Year Levy Year Levy Collected Years'Levies Collections to Levy I
1998 $ 4,587,732 $ 4,506,000 98.22 $ 60,631 $ 4,566,631 99.54 %
1999 4,802,997 4,724,119 98.36 71,717 4,795,836 99.85
2000 4,866,728 4,789,471 98.41 59,551 4,849,022 99.64 I
2001 4,728,647 4,642,846 98.19 63,850 4,706,696 99.54
2002 5,520,913 5,454,555 98.80 131,862 5,586,417 101.19
2003 6,062,013 5,622,173 92.74 * 91,660 5,713,833 94.26 I
2004 6,588,000 6,149,977 93.35 * 73,164 6,223,141 94.46
2005 7,313,669 6,903,982 94.40 * 83,978 6,987,960 95.55
2006 8,086,236 7,733,423 95.64 * 76,133 7,809,556 96.58 I
2007 8,718,777 8,557,509 98.15 96,934 8,654,443 99.26
* Market value credit was withheld by the State of Minnesota. I
SPECIAL ASSESSMENT LEVIES AND COLLECTIONS
Percentage I
Collection Percentage Collection of Total II
Total of Current of Levy of Other Total Collections
Year Levy Year Levy* * Collected Years' Levies Collections to Levy
1996 $ 464,622 $ 348,536 75.01 % $ 14,971 $ 363,507 78.24 % I
1997 462,454 403,156 87.18 242,561 645,717 139.63
1998 363,408 312,260 85.93 42,128 354,388 97.52 I
1999 338,621 308,533 91.11 39,756 348,289 102.86 I
2000 288,866 278,169 96.30 30,780 308,949 106.95
2001 304,693 297,070 97.50 4,273 301,343 98.90
2002 296,832 289,718 97.60 55,291 345,009 116.23 I
2003 254,792 248,054 97.36 7,426 255,480 100.27
2004 471,563 434,451 92.13 4,783 439,234 93.14
2005 408,574 380,040 93.02 5,927 385,967 94.47 I
2006 476,717 446,508 93.66 49,397 495,905 104.03
2007 405,756 400,937 98.81 39,075 440,012 108.44
** Excludes prepaid assessment collections I
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CITY OF PRIOR LAKE, MINNESOTA
FINANCIAL EXHIBIT
TAX LEVIES AND COLLECTIONS,
SPECIAL ASSESSMENT LEVIES AND COLLECTIONS AND OTHER SCHEDULES - CONTINUED
PRIOR THREE YEARS
OTHER SCHEDULES
SCHEDULES OF MARKET VALUE, TAX LEVY, TAX CAPACITY VALUES AND TAX CAPACITY RATE
2005
2006
2007
Market value
$ 1,828,607,300
$ 2,132,768,700 $2,457,196,600
Tax levy
$
6,588,000
$
7,313,669 $ 8,718,777
Tax capacity
$ 20,051,257
$ 23,414,820 $ 27,092,716
Tax capacity rate
32.469%
31.305%
28.935%
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2005
2006
2007
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CITY OF PRIOR LAKE, MINNESOTA
FINANCIAL EXHIBIT
KEY FINANCIAL INDICATORS
PRIOR THREE YEARS
Current population
$
21,395
$
22,100
$
22,506
City revenues per capita (Governmental Funds)
$ 18,368,288 $ 21,522,699 $ 25,016,033
94 % * 96 % * 98 % *
$ 1,859 $ 986 $ 791
$ 1,407 $ 1,408 $ 1,317
159 % 142 % 153 %
Aa3 Aa3 Aa3
Net tax capacity valuation
Percent of property taxes collected
City expenditures per capita (Governmental Funds)
Ratio of bonded debt to tax capacity
Bond Rating
* Net of market value aid reduction by the State of Minnesota
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OTHER REPORT
CITY OF PRIOR LAKE
PRIOR LAKE, MINNESOTA
YEAR ENDED
DECEMBER 31,2007
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Certified Puhlic Accountants & Consultants
Grandview Square
5201 Eden Avenue
Suite 370
Edina, MN 55436
REPORT ON MINNESOTA LEGAL COMPLIANCE
Honorable Mayor and Council
City of Prior Lake, Minnesota
We have audited the accompanying financial statements ofthe governmental activities, the business-type activities, each major
fund and the aggregate remaining fund information of the City of Prior Lake, Minnesota (the City) as of and for the year ended
December 31, 2007, which collectively comprise the City's basic financial statements, and have issued our report thereon dated
May 5, 2008.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the
provisions of the Minnesota Legal Compliance Audit Guidefor Local Government, promulgated by the Minnesota Office of the
State Auditor pursuant to Minnesota statute, section 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 Government covers seven main categories of compliance to be tested:
contracting and bidding, deposits and investments, conflicts of interest, public indebtedness, claims and disbursements,
miscellaneous city 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 complied with the material terms and conditions of applicable
legal provisions.
This report is intended solely for the information and use of the Council, management and the Minnesota Office of the State
Auditor and is not intended to be and should not be used by anyone other than these specified parties.
,
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May 5, 2008
Minneapolis, Minnesota
ABDO, EICK & MEYERS, LLP
Certified Public Accountants
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CITY OF PRIOR LAKE
PRIOR LAKE, MINNESOTA
MANAGEMENT LETTER
YEAR ENDED
DECEMBER 31,2007
915
Certified Public Accountants & Consultants
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May 5, 2008
Certified Puhlic Accountants & Consultants
Grandview Square
5201 Eden Avenue
Suite 370
Edina, MN 55436
Honorable Mayor and Council
City of Prior Lake
Prior Lake, Minnesota
We have audited the [mancial statements of the govermnental activities, the business-type activities, each major fund, and the
aggregate remaining fund information of the City of Prior Lake, Minnesota (the City) for the year ended December 31, 2007
which collectively comprise the City's basic [mancial statements as listed in the table of contents and have issued our report
thereon dated May 5, 2008. Professional standards require that we provide you with the following information related to our
audit.
Our Responsibility Under Auditing Standards Generally Accepted in the United States of America
As stated in our engagement letter, our responsibility, as described by professional standards, is to express opinions about whether
the financial statements prepared by management with your oversight are fairly presented, in all material respects, in conformity
with accounting principles generally accepted in the United States of America. Our audit ofthe [mancial statements does not
relieve you or management of your responsibilities.
Our responsibility is to plan and perform the audit to obtain reasonable, but not absolute, assurance that the [mancial statements
are free of material misstatement. As part of our audit, we considered the internal control of the City. Such considerations were
solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control. We
are responsible for communicating significant matters related to the audit that are, in our professional judgment, relevant to your
responsibilities in overseeing the [mancial reporting process. However, we are not required to design procedures specifically to
identify such matters.
Significant Audit Findings
Our consideration of internal control was for the limited purpose described in the preceding paragraph and would not necessarily
identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. However, as discussed
below, we identified certain deficiencies in internal control that we consider to be significant deficiencies.
A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal
course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a
control deficiency, or combination of control deficiencies, that adversely affects the entity's ability to initiate, authorize, record,
process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a
remote likelihood that a misstatement of the entity's [mancial statements that is more than inconsequential will not be prevented or
detected by the entity's internal control. We consider the following deficiencies to be significant deficiencies in internal control.
952.835.9090 . Fax 952.835.3261
www.aemcpas.com
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City of Prior Lake
May 5, 2008
Page 2
Limited Segregation of Duties
Condition:
During our audit, we reviewed procedures over investments, cash disbursements,
cash receipts, and payroll and found the City to have limited segregation of duties
related to these procedures.
Criteria:
There are four general categories of duties: authorization, custody, record keeping
and reconciliation. In an ideal system, different employees perform each ofthese
four major functions. In other words, no one person has control of two or more of
these responsibilities.
Cause:
Investments: During the year the fInance director initiated the investment
transactions, maintained and posted activity to the finance system and reconciled the
investment accounts.
Cash disbursements: During the year, the accounting clerk had access to the check
stock, prepared the checks, entered transactions into the accounting system, had
access to the City's automated check signing machine and had bank reconciliation
responsibilities.
Cash receipts: During the year, the accounting clerk had responsibility over setting
up vendors, opening the mail, posting transactions to the general ledger, preparing
the deposit and reconciling the bank account.
Payroll: During the year, the accounting supervisor set up employee records, ran
payroll, approved payroll, posted transactions to the general ledger, prepared checks,
initiated direct deposit and prepared the quarterly tax returns.
Effect: The existence of this limited segregation of duties increases the risk of fraud and
error.
Recommendation: The current system is very efficient but we recommend that the City review processes
and consider modifying procedures to ensure a better separation is created.
Management Response: Management recognizes that it is not economically feasible to correct this fmding, is
aware ofthe deficiency and is relying on oversight by management and the Council
to monitor this deficiency.
www.aemcpas.com
952.835.9090 . Fax 952.835.3261
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City of Prior Lake
May 5, 2008
Page 3
2007-2
Preparation of Financial Statements
Condition: As in prior years, we were requested to draft the audited [mancial statements and
related footnote disclosures as part of our regular audit services. Recent auditing
standards require auditors to communicate this situation to the Council as an internal
control deficiency. Ultimately, it is management's responsibility to provide for the
preparation of your statements and footnotes, and the responsibility of the auditor to
determine the fairness of presentation of those statements. It is our responsibility to
inform you that this deficiency could result in a material misstatement to the [mancial
statements that could have been prevented or detected by your management.
Essentially, the auditors can not be part of your internal control process.
Criteria: Internal controls should be in place to provide reasonable assurance over [mancial
reporting.
Cause: From a practical standpoint we do both for you at the same time in connection with
our audit. This is not unusual for us to do with an organization of your size.
Effect: The effectiveness ofthe internal control system relies on enforcement by
management. The effect of deficiencies in internal controls can result in undetected
errors in [mancial reporting.
Recommendation: It is your responsibility to make the ultimate decision to accept this degree of risk
associated with this condition because of cost or other considerations. As in prior
years, we have instructed management to review a draft of the auditor prepared
[mancials in detail for their accuracy; we have answered any questions they might
have, and have encouraged research of any accounting guidance in connection with
the adequacy and appropriateness of classification of disclosure in your statements.
We are satisfied that the appropriate steps have been taken to provide you with the
completed [mancial statements. While the City is reviewing the [mancial statements
we recommend that a disclosure checklist be utilized to ensure all required
disclosures are presented and the City should agree its [mancial software to the
numbers reported in the [mancial statements.
Management Response: For now, the City's management accepts the degree of risk associated with this
condition and thoroughly reviews a draft of the [mancial statements.
A material weakness is a significant deficiency, or combination of significant deficiencies, that result in more than a remote
likelihood that a material misstatement of the [mancial statements will not be prevented or detected by the entity's internal control.
We believe there are no deficiencies that constitute a material weakness.
As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we performed
tests of compliance with certain provisions of Minnesota statutes. However, the objective of our tests was not to provide an
opinion on compliance with such provisions. We noted no instances of noncompliance with Minnesota statutes.
Planned Scope and Timing of the Audit
We performed the audit according to the planned scope and timing previously communicated to you.
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City of Prior Lake
May 5, 2008
Page 4
Qualitative Aspects of Accounting Practices
Management is responsible for the selection and use of appropriate accounting policies. In accordance with the terms of our
engagement letter, we will advise management about the appropriateness of accounting policies and their application. The
significant accounting policies used by the City are described in Note I to the fmancial statements. No new accounting policies
were adopted and the application of existing policies was not changed during the year. We noted no transaction entered into by the
governmental unit during the year for which there is a lack of authoritative guidance or consensus. There are no significant
transactions that have been recognized in the fmancial statements in a different period than when the transaction occurred.
Accounting estimates are an integral part of the fmancial statements prepared by management and are based on management's
knowledge and experience about past and current events and assumption about future events. Certain accounting estimates are
particularly sensitive because of their significance to the fmancial statements and because of the possibility that future events
affecting them may differ significantly from those expected. Depreciation on capital assets is an estimate based on the planned
useful lives of the City's capital assets.
The disclosures in the financial statements are neutral, consistent, and clear. Certain fmancial statement disclosures are particularly
sensitive because of their significance to fmancial statement users.
Difficulties Encountered in Performing the Audit
We encountered no significant difficulties in dealing with management in performing and completing our audit.
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City of Prior Lake
May 5, 2008
Page 5
Corrected and Uncorrected Misstatements
Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those
that are trivial, and communicate them to the appropriate level of management. Management has corrected all such misstatements.
In addition, none of the misstatements detected as a result of audit procedures and corrected by management were material, either
individually or in the aggregate, to the fmancial statements taken as a whole. We proposed one entry that would meet the
requirements discussed above. It is listed below:
Adjusting Journal Entries JE # 15 Debit Credit
TO RECORD ADDITIONAL ACCOUNTS PAYABLE
101-42100-114 Educational Reimbursement $ 5,835
101-43100-219 Oper Supp - Snow & Ice 7,129
101-43100-219 Oper Supp - Snow & Ice 9,589
10 1-43400-463 Repair Sup-Equip (P/W) 1,089
101-45100-401 Repair & Maintenance Service- Buildings 11,921
225-45025-501 Contract Vouchers 10,000
260-60051-502 Engineering 441
260-60053-502 Engineering 1,494
260-60063-502 Engineering 66
260-60071-502 Engineering 332
260-60088-502 Engineering 54
260-60093-502 Engineering 4,648
260-60100-502 Engineering 4,370
260-60112-502 Engineering 415
260-60120-502 Engineering 830
420-70205-501 Contract Vouchers 50,000
420-70305-501 Contract Vouchers 41,999
501-48355-505 Professional Services 55
602-49420-203 Office Supplies-Prnt Form 191
602-49420-314 Professional Services-Gen 297
10 I -20200 ACCOUNTS PAYABLE $ 14,053
101-20200 ACCOUNTS PAYABLE 21,510
225-20200 ACCOUNTS PAYABLE 10,000
260-20200 ACCOUNTS PAYABLE 12,650
420-20200 ACCOUNTS PAYABLE 91,999
501-20200 ACCOUNTS PAYABLE 55
602-20200 ACCOUNTS PAYABLE 488
Total $ 150,755 $ 150,755
Disagreements with Management
For purposes of this letter, professional standards defme a disagreement with management as a fmancial accounting, reporting, or
auditing matter, whether or not resolved to our satisfaction, that could be significant to the fmancial statements or the auditor's
report. Weare pleased to report that no such disagreements arose during the course of our audit.
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Management Representations
City of Prior Lake
May 5, 2008
Page 6
We have requested certain representations from management that are included in the management representation letter dated
May 5, 2008.
Management Consultations with Other Independent Accountants
In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to
obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the
governmental unit's [mancial statements or a determination of the type of auditor's opinion that may be expressed on those
statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all
the relevant facts. To our knowledge, there were no such consultations with other accountants.
Other Audit Findings or Issues
We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with
management each year prior to retention as the governmental unit's auditors. However, these discussions occurred in the normal
course of our professional relationship and our responses were not a condition to our retention.
Other Matters
The following are areas that came to our attention during the audit that we feel should be reviewed:
Financial Position and Results of Operations
Our principal observations and recommendations are summarized on the following pages. These recommendations resulted
from our observations made in connection with our audit of the City's [mancial statements for the year ended
December 31, 2007.
General Fund
The General fund is used to account for resources traditionally associated with government, which are not required legally or
by sound principal management to be accounted for in another fund. The General fund balance decreased $255,374 from
2007. The fund balance of $5,020,666 is 40 percent ofthe 2008 budgeted expenditures. We recommend the fund balance be
maintained at a level sufficient to fund operations until the major revenue sources are received in June. We feel a reserve of
approximately 50 percent of planned expenditures and transfers out is adequate to meet working capital and small emergency
needs.
4btf
Percent of
Planned
Expenditures
Extremely low
Low
Acceptable
Moderately high
High
Very high
Extremely high
Under 20%
2 I - 34
35 - 50
51 - 64
65 - 100
100 - 150
Above 150
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Months
Expenditures
on hand
Under 2.5
2.5 - 4
4-6
6-7
8 - 12
l2 - 18
Above 18
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City of Prior Lake
May 5, 2008
Page 7
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The State Auditor does group all General, special revenue funds ofthe government when making this calculation where our
calculation is based only on the General fund. The Office of the State Auditor (the OSA) has issued a Statement of Position
relating to fund balance stating "a local government should identify fund balance separately between reserved and unreserved
fund balance. The local government may assign and report some or all of the fund balance as designated and undesignated."
The OSA also recommends local governments adopt a formal policy on the level of unreserved fund balance that should be
maintained in the general and special revenue funds. This helps address citizen concerns as to the use of fund balance and tax
levels.
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The purposes and benefits of a fund balance are as follows:
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· Expenditures are incurred somewhat evenly throughout the year. However, property tax and state aid revenues are not
received until the second half ofthe year. An adequate fund balance will provide the cash flow required to fmance the
governmental fund expenditures.
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· The City is vulnerable to legislative actions at the State and Federal level. The State continually adjusts the local
government aid and property tax credit formulas. We also have seen the State mandate levy limits for cities over 2,500
in population. An adequate fund balance will provide a temporary buffer against those aid adjustments or levy limits.
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· Expenditures not anticipated at the time the annual budget was adopted may need immediate Council action. These
would include capital outlay, replacement, lawsuits and other items. An adequate fund balance will provide the
fmancing needed for such expenditures.
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· A strong fund balance will assist the City in obtaining, maintaining or improving its bond rating. The result will be
better interest rates in future bond sales.
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City of Prior Lake
May 5, 2008
Page 8
A table summarizing the General fund balance in relation to budget follows:
Percent
Unreserved General of Fund
Fund Balance Budget Fund Balance to
Year December 31 Year Budget Budget
2003 $ 4,088,907 2004 $ 8,751,570 48.0 %
2004 4,370,829 2005 9,716,031 57.0
2005 4,297,370 2006 10,840,734 56.0
2006 5,276,400 2007 11,685,807 47.0
2007 5,020,666 2008 12,426,431 40.0
Fund Balance as a Percent of Budget
$14,000,000
$12,000,000
$10,000,000
$8,000,000
$6,000,000
$4,000,000
$2,000,000
$-
$11,685,807 T12,426,431
$10840734 ..
--
$8,751,570 $9,716,031 - -
-
-
...
- - -
.... --._-- --
....
- .... .... ..... "'"
.... ---
48.0% 57.0% 56.0% 47.0% 40.0%
-~-- -
2003 2004 2005 2006
I~ Actual Fund Balance -Budget I
2007
2008
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City of Prior Lake
May 5, 2008
Page 9
The 2007 operations are summarized as follows:
Revenues
Expenditures
Variance with
Final Final Budget -
Budgeted Actual Positive
Amounts Amounts (Negative)
$ 11,435,807 $ 11,498,959 $ 63,152
10,138,123 10,301,255 (163,132)
1,297,684 1,197,704 (99,980)
Excess of revenues over expenditures
Other financing sources (uses)
Transfers in
Transfers out
250,000 250,000
(1,547,684) (1,703,438) (155,754)
(1,297,684) (1,453,438) (155,754)
(255,734) (255,734)
5,276,400 5,276,400
$ 5,276,400 $ 5,020,666 $ (255,734)
Total other fmancing sources (uses)
Net change in fund balances
Fund balances, January 1
Fund balances, December 3 1
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City of Prior Lake
May 5, 2008
Page 10
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A more detailed comparison of actual General fund revenues and transfers with the prior three years is as follows:
Percent
of
Source 2005 2006 2007 Total
Taxes $ 5,819,585 $ 7,045,404 $ 8,132,478 69.2 %
Licenses and permits 772,793 832,610 517,662 4.4
Intergovernmental 1,097,356 1,155,058 1,240,355 10.6
Charges for services 1,092,689 1,193,084 1,016,212 8.6
Fines and forfeitures 158,242 194,641 190,650 1.6
Interest on investments 42,569 211,079 288,869 2.5
Miscellaneous 673,195 1,147,283 112,733 1.0
Transfers in 250,000 280,000 250,000 2.1
Total revenues and transfers $ 9,906,429 $ 12,059,159 $ 11,748,959 100.0 %
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The past three years revenues and transfers are graphically presented as follows:
Revenues and Transfers
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$9,000,000
$8,000,000
$7,000,000
$6,000,000
$5,000,000
$4,000,000
$3,000,000
$2,000,000
$1,000,000 .
$-
2005
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2006
2007
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""-Taxes -Intergovernmental .....Charges for services
Other
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City of Prior Lake
May 5, 2008
Page 11
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A more detailed comparison of actual expenditures and transfers with the prior three years is as follows:
Percent
of
Program 2005 2006 2007 Total
Current
General government $ 1,781,100 $ 2,001,747 $ 2,192,485 18.3 %
Public safety 3,286,546 3,609,424 3,716,013 31.0
Public works 1,572,328 1,520,959 1,734,375 14.4
Culture and recreation 1,396,595 1,639,960 1,655,042 13.8
Economic development 107,555 145,042 109,632 0.9
Contingency 141,674 107,498 0.9
Total current 8,144,124 9,058,806 9,515,045 79.3
Capital outlay 262,116 230,761 786,210 6.5
Transfers out 1,573,648 1,790,562 1,703,438 14.2
Total expenditures and transfers $ 9,979,888 $ 11,080,129 $ 12,004,693 100.0 %
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The prior three years expenditures and transfers are graphically presented as follows:
Expenditures and Transfers
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$4,000,000
$3,500,000
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$3,000,000
$2,500,000
$1,500,000
.
\J,.(_^ _. ."
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~....
"~"
~
.
$2,000,000
~
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$1,000,000
$500,000
$-
2005
2006
2007
~General government -Public safety .........Culture and recreation'
Transfers out
Other
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City of Prior Lake
May 5, 2008
Page 12
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NOllmajor Special Revenue Funds
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Nonmajor special revenue funds are used to account for revenue that is to be used for a specific purpose. A summary of the
special revenue funds and fund balances is shown below:
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Fund Balances
December 31, Increase
Fund 2007 2006 (Decrease)
Capital Park $ 74,468 $ 1,031,299 $ (956,831 )
Severance Compensation 369,393 211,973 157,420
EDC Revolving Loan 95,012 88,546 6,466
Revolving Loan 73,782 60,867 12,915
DAG 849,811 1,051,551 (201,740)
Cable Franchise 39,425 39,425
EDA 95,366 90,900 4,466
Total $ 1,597,257 $ 2,574,561 $ (977,304)
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All funds have positive fund balances and provide reserves for future expenditures.
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City of Prior Lake
May 5, 2008
Page 13
Capital Projects Funds
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The following funds account for capital projects:
Fund Balances
December 31, Increase
2007 2006 (Decrease)
$ 811,968 $ 551,579 $ 260,389
1,322,544 4,537,729 (3,215,185)
2,073,162 3,180,247 (1,107,085)
9,912,602 2,088,470 7,824,132
14,120,276 10,358,025 3,762,251
Fund
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Major
Construction
Trunk Reserve
Building
Water Storage
Subtotal
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Nonmajor
Downtown Redevelopment
Tax Increment
Revolving Equipment
Street Oversizing
Tax Increment 1-3 Lakefront
Tax Increment 3- I Creekside
Tax Increment 4-1
Tax increment 6-1 Shephards Path
34,570 31,914 2,656
86,927 61,587 25,340
1,223,235 2,413,11 I (1,189,876)
54,010 1,259,540 (1,205,530)
46,516 27,969 18,547
20,695 12,864 7,831
941 190 751
130 130
1,467,024 3,807,175 (2,340,151 )
$ 15,587,300 $ 14,165,200 $ 1,422,100
Subtotal
Total
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City of Prior Lake
May 5, 2008
Page 14
Debt Service Funds
The Debt Service funds are used to account for the resources accumulated to repay bond principal and interest. The resources
generally consist of special assessments levied against benefiting properties, general property taxes or tax increments. All
bonds have adequate resources at year end to pay their obligations. The table below summarizes the obligations outstanding.
Total Total Bonds Maturity
Description Cash Assets Outstanding Date
Fire Hall Bonds $ $ $ 925,000 2013
G.O. Fire Hall Bonds 3,650,000 2031
Park G.O. (Refunded 2005) 5,725,000 2017
Building Revenue (Refunded 2005) 1,075,000 2014
City Hall 9,770,000 2029
G.O. Water Treatment Plant Revenue Bonds 8,500,000 2032
Pike Lake (Refunded 2004) 40,000 2007
Duluth (Refunded 2004) 64,836 103,824 150,000 2008
Candy Cove (Refunded 2004) 141,235 164,322 210,000 2009
Oak Ridge 173,342 244,202 375,000 2010
Frog Town 188,685 231,705 435,000 2011
Pixie Point 206,478 278,424 550,000 2012
150th Mitchell Commons 162,571 586,784 1,200,000 2013
Tax Increment 2004 19,533 19,533 355,000 2024
Breezy Point 443,009 903,683 1,925,000 2014
Fish Point 1,022,269 2,154,973 2,020,000 2015
CSAH 82 1,225,000 2017
G.O. Street Reconstruction Bonds (275) (275) 1,400,000 2017
$ 2,421,683 $ 4,687,175 $ 39,530,000
The Finance Director reviews the outstanding balance and evaluates the amount needed for levy each year. This is a good
practice and ensures the City will have sufficient resources to provide for future debt service.
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City of Prior Lake
May 5, 2008
Page 15
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Enterprise Funds
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Water and Sewer Utilities
The Water and Sewer Utilities fund are accounted for in a separate enterprise fund and a summary follows:
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The operations for the past three years are graphically presented below:
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The current cash balance has improved each of the last two years and is very good relative to operations. The current margins
are generating excellent cash flow and the cash balance will provide for future expansion and maintenance of the system.
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City of Prior Lake
May 5, 2008
Page 16
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Storm Water Utility
The operations for the past three years are graphically presented below:
2005 2006 2007
Percent of Percent of Percent of
Amount Total Amount Total Amount Total
Operating revenues $ 328,591 100.0 % $ 339,323 100.0 % $ 350,524 100.0 %
Operating expenses 124,500 37.9 282,143 83.1 267,708 76.4
Operating income 204,091 62.1 57,180 16.9 82,816 23.6
Nonoperating revenues 4,894 1.5 36,150 10.7 28,991 8.3
Income (loss) before
Contributions and transfers 208,985 63.6 93,330 27.6 111,807 31.9
Transfers out (162,272) (49.4)
Change in net assets $ 46,713 14.2 % $ 93,330 27.6 % $ 111 ,807 31.9 %
Cash and investments $ 214,351 $ 291,681 $ 435,640
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Storm Water Utility Summary
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$500,000
$450,000
$400,000
$350,000
$300,000
$250,000
$200,000
$150,000
$100,000
$50,000
$-
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2005
2006
2007
. Operating revenues
o Income (loss) before transfers
. Operating expenses
o Cash and investments
II Nonoperating revenues
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Although the cash balance appears adequate, the City should continue to evaluate operations annually to ensure rates are
sufficient.
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City of Prior Lake
May 5, 2008
Page 17
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Transit Services
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The operations for the past three years are graphically presented below:
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Most ofthe funding for transit services comes from governmental units and their revenue is reported in the nonoperating
revenue (expenses) category representing MVET (Motor Vehicle Excise Tax) state transit aid.
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Ratio Analysis
City of Prior Lake
May 5, 2008
Page 18
The following captures a few ratios from the City's financial statements that give some additional information for trend and peer
group analysis. The peer group average consists of the average of Abdo, Eick & Meyers' client base of approximately 90 cities.
The majority of these ratios facilitate the use of economic resources focus and accrual basis of accounting at the government-wide
level. A combination of liquidity (ability to pay its most immediate obligations), solvency (ability to pay its long-term
obligations), funding (comparison of financial amounts and economic indicators to measure changes in financial capacity over
time) and common-size (comparison of fmancial data with other cities regardless of size) ratios are shown below.
Ratio Calculation Source 2004 2005 2006
Debt to assets Total liabilities/total assets Government-wide 19% 22% 21%
30% 30% 33%
Debt per capita Bonded debt/population Government-wide $ 911 $ 1,367 $ 1,383
$ 1,670 $ 1,797 $ 1,995
Taxes per capita Tax revenues/population Government-wide $ 305 $ 340 $ 362
$ 355 $ 369 $ 407
Capital assets % left to Net capital assets/ Government-wide 72% 78% 77%
depreciate - Governmental gross capital assets 75% 74% 76%
Capital assets % left to Net capital assets/ Government-wide 68% 79% 78%
depreciate - Business-type gross capital assets 72% 72% 73%
Represents the City of Prior Lake
Peer Group ratio
Debt-to-Assets Leverage Ratio (Solvency Ratio)
2007
26%
N/A
77%
N/A
77%
N/A
The debt-to-assets leverage ratio is a comparison of a city's total liabilities to its total assets or the percentage of total assets that
are provided by creditors. It indicates the degree to which the City's assets are financed through borrowings and other long-term
obligations (i.e. a ratio of 50 percent would indicate half of the assets are fmancing with outstanding debt).
30% 30% 33%
------ --- -
.
. . -----
--.
. . 26%
. --
22%
21% -----..---.
19%
40%
35%
30%
25%
20%
15%
10%
2004
2005
2006
2007
I~City ratio -Peer group average I
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City of Prior Lake
May 5, 2008
Page 19
Bonded Debt per Capita (Funding Ratio)
This dollar amount is arrived at by dividing the total bonded debt by the population of the city and represents the amount of
bonded debt obligation for each citizen ofthe city at the end of the year. The higher the amount, the more resources are needed in
the future to retire these obligations through taxes, assessments or user fees.
$2,500
$1,797
$2,000 $1,670
. .
$1,500
$1,000 $1,367
$911
$500
$-
2004 2005
$1,995
.
$1,805
$1,383
2006
2007
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Taxes per Capita (Funding Ratio)
This dollar amount is arrived at by dividing the total tax revenues by the population of the city and represents the amount of taxes
for each citizen of the city for the year. The higher this amount is, the more reliant the city is on taxes to fund its operations.
$450
$430 $407
$410 $369 ~
$390 $355 ~ $398
$370 .
$350 .
$330 $362
$310 $340
$290 $305
$270
$250
2004 2005 2006 2007
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City of Prior Lake
May 5, 2008
Page 20
Capital Assets Percentage (Common-size Ratio)
This percentage represents the percent of governmental or business-type capital assets that are left to be depreciated. The lower
this percentage, the older the city's capital assets are and may need major repairs or replacements in the near future. A higher
percentage may indicate newer assets being constructed or purchased and may coincide with higher debt ratios or bonded debt per
capita.
Governmental Activities
90%
72% 78% 77% 77%
--a . . --- -
1----
--
75% 74% 76%
-- ----
--
U~_ -- -
80%
70%
60%
50%
40%
30%
2004
2005
2006
2007
I~City ratio -Peer group average I
Business-type Activities
90%
85% 79%
80% - 72% -==:
75%
~
70% - ~
65% 72%
68%
60% 1----
55%
50%
2004 2005
------
78%
77%
-. -
-
---
:
73%
--
--
-
2006
2007
I~City ratio -Peer group average I
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City of Prior Lake
May 5, 2008
Page 21
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Future Accounting Standard Changes
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The following Governmental Accounting Standards Board (GASB) Statements have been issued and may have an impact on
future City fmancial statements:
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GASB Statement No. 43 - Financial Reportingfor Post Employment Benefit Plans Other than Pension Plans
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This statement is effective one year prior to the effective date of Statement No. 45 for the employer or largest participating
employer in the benefit plan for multiple-employer plans. According to Statement No. 43, "The objective of this Statement
is to establish uniform standards offmancial reporting by State and local governmental entities for other post employment
benefit plans (OPEB plans). The term other post employment benefits (OPEB) refers to post employment benefits other
than pension benefits and includes (a) post employment healthcare benefits and (b) other types of post employment benefits
(for example, life insurance) if provided separately from a pension plan. The term plans, in this context, refers to trust or
other funds through which assets are accumulated to finance OPEB, and benefits are paid as they come due. This Statement
provides standards for measurement, recognition, and display of the assets, liabilities, and, where applicable, net assets and
changes in net assets of such funds and for related disclosures. The requirements of this Statement apply whether an OPEB
plan is reported as a trust or agency fund or a fiduciary component unit of a participating employer or plan sponsor, or the
plan is separately reported by a public employee retirement system (PERS) or other entity that administers the plan."
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GASB Statement No. 45 - Accounting and Financial Reporting by Employers for Post Employment Benefits Other Than
Pensions
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This statement is effective in three phases based on a government's total annual revenues in the frrst fiscal year ending after
June 15, 1999:
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· Governments that were phase 1 governments for the purpose of implementation of Statement No. 34 - those with
annual revenues of $1 00 million or more - are required to implement this Statement in financial statements for
periods beginning after December 15,2006.
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· Governments that were phase 2 governments for the purpose of implementation of Statement No. 34 - those with
total annual revenues of $1 0 million or more but less than $100 million - are required to implement this Statement in
fmancial statements for periods beginning after December 15,2007.
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· Governments that were phase 3 governments for the purpose of implementation of Statement No. 34 - those with
total annual revenues of less than $10 million - are required to implement this Statement in fmancial statements for
periods beginning after December 15,2008.
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Statement No. 45 gives the following summary, "In addition to pensions, many state and local governmental employers
provide other post employment benefits (OPEB) as part of the total compensation offered to attract and retain the services
of qualified employees. OPEB includes post employment healthcare, as well as other forms of post employment benefits
(for example, life insurance) when provided separately from a pension plan. This Statement establishes standards for the
measurement, recognition, and display ofOPEB expense/expenditures and related liabilities (assets), note disclosures, and,
if applicable, required supplementary information (RSI) in the fmancial reports of state and local governmental employers."
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City of Prior Lake
May 5, 2008
Page 22
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GASB Statement No. 47 - Accountingfor Termination Benefits
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In general, Statement No. 47 is effective for fmancial statements for periods beginning after June 15,2005. However, for
termination benefits that affect defmed benefit post employment benefits other than pensions, governments should
implement Statement 47 simultaneously with Statement No. 45, Accounting and Financial Reporting by Employersfor
Post Employment Benefits Other Than Pensions. The Statement provides accounting and reporting guidance for state and
local governments that offer benefits such as early retirement incentives or severance to employees that are involuntarily
terminated. The Statement requires that similar forms of termination benefits be accounted for in the same manner and is
intended to enhance both the consistency of reporting for termination benefits and the comparability offmancial statements.
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GASB Statement No. 49 - Accounting and Financial Reportingfor Pollution Remediation Obligations
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This statement was issued November 2007 and is effective for periods beginning after December 15,2007, but liabilities
should be measured at the beginning of that period so that beginning net assets can be restated.
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This standard is intended to ensure that certain cost and long-term obligations related to pollution clean up not specifically
addressed by current governmental accounting standards will be included in fmancial reports. The standards set forth the key
circumstances under which a government would be required to report a liability related to pollution remediation. A
government would have to determine whether one or more components of a pollution remediation liability are recognizable if
any of the following five obligating events or triggers occurs:
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· A government is compelled to take remediation action because pollution creates an imminent endangerment to the
public health or welfare or environment, leaving it little or no discretion to avoid remediation action.
· A government is in violation of a pollution prevention-related permit or license.
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· The government is named, or evidence indicates it will be named, by a regulator that has identified the government
as a responsible party or potentially responsible party for remediation, or as a government responsible for sharing
costs.
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· A government is named, or evidence indicates that it will be named, in a lawsuit to compel the government to
participate in remediation.
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· A government commences or legally obligates itself to commence clean up activities or monitoring or operation and
maintenance of the remediation effort.
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If any of the above bullets are met, the pollution remediation liabilities should be measured at their current value using the
expected cash flow technique, which measures the liability as a sum of probability-weighted amounts in a range of possible
estimated amounts. Expected recoveries from other responsible parties and from insurers reduce the amount ofremediation
expense. Statement No. 49 also specifies criteria for capitalization of some pollution remediation outlays.
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City of Prior Lake
May 5, 2008
Page 23
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GASB Statement No. 50 - Pension Disclosures
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This statement was issued May 2007 and is effective for periods beginning after June 15,2007, except for requirements
related to the use of the entry age actuarial cost method for the purpose of reporting a surrogate funded status and funding
progress of plans that use the aggregate actuarial cost method, which are effective for periods for which the fmancial
statements and RSI contain information resulting from actuarial valuations as of June 15,2007 or later.
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This statement more closely aligns the fmancial reporting requirements for pensions with those for OPEB and, in doing so,
enhances information disclosed in notes to fmancial statements or presented as required supplementary information (RSI) by
pension plans and by employers that provide pension benefits. The reporting changes required by this statement amend
applicable note disclosure and RSI requirements of Statement No. 25 , Financial Reporting for Defmed Benefit Pension Plans
and Note Disclosures for Defmed Contribution Plans, and No. 27 , Accounting for Pensions by State and Local Governmental
Employers, to conform with requirements of Statement No. 43 , Financial Reporting for Postemployment Benefit Plans Other
Than Pension Plans, and 45 , Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than
Pensions. This statement requires defmed benefit pension plans and sole and agent employers present the following
information related to note disclosures:
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· Notes to fmancial statements should disclose the funded status of the plan as of the most recent actuarial valuation
date. Defmed benefit pension plans also should disclose actuarial methods and significant assumptions used in the
most recent actuarial valuation in notes to fmancial statements instead of in notes to RSI.
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· If the aggregate actuarial cost method is used to determine the annual required contribution of the employer (ARC),
notes to fmancial statements should disclose the funded status of the plan, and a schedule of funding progress should
be presented as RSI, using the entry age actuarial cost method. Plans and employers also should disclose that the
purpose of doing so is to provide information that serves as a surrogate for the funded status and funding progress of
the plan.
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· Notes to fmancial statements should include a reference linking the funded status disclosure in the notes to financial
statements to the required schedule of funding progress in RSI.
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· If applicable, notes to fmancial statements should disclose legal or contractual maximum contribution rates. In
addition, if relevant, they should disclose that the maximum contribution rates have not been explicitly taken into
consideration in the projection of pension benefits for fmancial accounting measurement purposes.
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· If an actuarial assumption is different for successive years, notes to fmancial statements should disclose the initial
and ultimate rates.
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952.835.9090 . Fax 952.835.3261
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City of Prior Lake
May 5, 2008
Page 24
GASB Statement No. 51 - Accounting and Financial Reportingfor Intangible Assets
This statement was issued in June 2007 and is effective for periods beginning after June 15,2009.
The new standard characterizes an intangible asset as an asset that lacks physical substance, is nonfmancial in nature, and has
an initial useful life extending beyond a single reporting period. Examples of intangible assets include easements, computer
software, water rights, timber rights, patents, and trademarks.
This statement requires that intangible assets be classified as capital assets (except for those explicitly excluded from the
scope of the new standard, such as capital leases). Relevant authoritative guidance for capital assets should be applied to these
intangible assets. The statement provides additional guidance that specifically addresses the unique nature of intangible assets,
including:
· Requiring that an intangible asset be recognized in the statement of net assets only if it is considered identifiable
· Establishing a specified-conditions approach to recognizing intangible assets that are internally generated (for
example, patents and copyrights)
· Providing guidance on recognizing internally generated computer software
· Establishing specific guidance for the amortization of intangible assets.
* * * * *
This report is intended solely for the information and use of Council, management and the Minnesota Office of the State Auditor
and is not intended and should not be used by anyone other than those specified parties.
Our audit would not necessarily disclose all weaknesses in the system because it was based on selected tests of the accounting
records and related data. The comments and recommendations in the report are purely constructive in nature, and should be read
in this context.
If you have any questions or wish to discuss any of the items contained in this letter, please feel free to contact us at your
convenience. We wish to thank you for the continued opportunity to be of service and for the courtesy and cooperation extended
to us by your staff.
May 5, 2008
Minneapolis, Minnesota
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aM ~ ~~/LLf
ABDO, EICK & MEYERS, LLP
Certified Public Accountants
952.835.9090 . Fax 952.835.3261
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