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05.16.16 Council Packet
Meeting Location: Farmington Farmington City Hall Minnesota 430 Third Street Farmington,MN 55024 CITY COUNCIL REGULAR MEETING AGENDA MAY 16, 2016 7:00 P.M. Action Taken 1. CALL TO ORDER 7:00 P.M. 2. PLEDGE OFALLEGIANCE 3. ROLL CALL 4. APPROVEAGENDA 5. ANNOUNCEMENTS/COMMENDATIONS a) Dakota County Commissioner Mike Slavik Information Received b) Proclaim June 23, 2016, as Olympic Day Proclaimed c) 2016 Heritage Preservation Award 621 3rd Street 6. CITIZEN COMMENTS/RESPONSES TO COMMENTS(This time is reserved for citizen comments regarding non-agenda items.No official Council action can be taken on these items. Speakers are limited to five minutes to address the Council during"Citizen Comment"time.) - 7. CONSENT AGENDA a) Approve Council Minutes(5/2/2016 Regular) (5/9/2016 Work Session)— Administration Approved b) Approve Letter of Agreement for Facilities Use with ISD 192— Administration Approved c) Adopt Resolution Approving Gambling Premise Permit for Farmington Fire Fighters Relief Association—Administration R41-16 d) Adopt Resolution Approving State of Minnesota Joint Powers Agreement on Behalf of its City Attorney and Police Department—Police R42-16 e) Adopt Resolution in Support of Dakota County All Hazard Mitigation Plan Process—Police/Fire R43-16 1) Adopt Resolution Accepting Donation to Rambling River Center—Parks and Recreation R44-16 g) Adopt Resolution Accepting Donations from Farmington Youth Hockey - Association for Purchase of an AED and Lumber for New Hockey Boards— Parks and Recreation R45-16 h) Adopt Resolution Accepting Donation from Farmington Youth Hockey Association for New Sound System—Parks and Recreation R46-16 i) Approve Request to Waive Fees for 2016 Dew Days Celebration—Municipal Services Approved j) Approve Vermillion River Crossings Fifth Amendment to Development Approved Contract—Community Development k) Approve Seasonal Hiring—Human Resources Approved 1) Approve Bills -Finance Approved REGULAR AGENDA 8. PUBLIC HEARINGS 9. AWARD OF CONTRACT a) Approve Agreement Purchase and Installation of Sound System at Schmitz- Maid Arena—Parks and Recreation Approved_- 10. PETITIONS,REQUESTS AND COMMUNICATIONS a) 2015 Comprehensive Annual Financial Report—Finance Report Accepted b) Financial Review First Quarter 2016- Finance Information Received 11. UNFINISHED BUSINESS a) Highway 3 Project Funding Update-Engineering Approved. 12. NEW BUSINESS 13. COUNCIL ROUNDTABLE 14. ADJOURN oEFp►R�►'�► City of Farmington 430 Third Street Farmington, Minnesota 651.280.6800 -Fax 651.280.6899 ' '•„MOO*0 www.cifarmington.mn.us TO: Mayor, Councihnembers and City Administrator FROM: David McKnight, City Administrator SUBJECT: Dakota County Commissioner Mike Slavik DATE: May 16, 2016 INTRODUCTION Dakota County Commissioner Mike Slavik will be at your May 16, 2016 meeting to provide an update on activities occurring in the county. DISCUSSION Commissioner Slavik will be in attendance at your meeting to provide his semi-annual update of county activities. BUDGET IMPACT NA ACTION REQUESTED Hear the presentation from Commissioner Slavic and ask any questions you may have. aCity of Farmington 430 Third Street Farmington, Minnesota 6, 651.280.6800 -Fax 651.280.6899 ,, • ,,,, www.cifarnvngton.mn.us TO: Mayor,Councilmembers and City Administrator FROM: David McKnight, City Administrator SUBJECT: Proclaim June 23, 2016 as Olympic Day DATE: May 16, 2016 INTRODUCTION Farmington Community Education has requested that the City of Farmington proclaim June 23,2016 as Olympic Day. DISCUSSION Olympic Days mission is to promote fitness,well-being, culture and education,while promoting the Olympic values of excellence, friendship and respect. Community Education is planning an open house for the public to include refreshments, face painting,photo booth and fun, family activities at Twist and Tumble Gymnastics Center On Thursday, June 23,2016 from 6:00 p.m. to 8:00 p.m. BUDGET IMPACT NA ACTION REQUESTED Proclaim June 23, 2016 as Olympic Day in Farmington. ATTACHMENTS: Type Description © Backup Material Community Education Letter ® Backup Material Proclamation Community Education Farmington trZe AREA PUBLIC SCHOOLS Dear Mayor Larson, We are requesting that you review the attached proclamation celebrating Olympic Day 2016. Farmington Community Education,(with your help)would like to recognize and celebrate Olympic Day 2016. Olympic Day is held annually on June 23 and is celebrated by millions of people in more than 160 countries. Commemorating the birth of the modern Olympic Games in 1894,Olympic Days mission is to promote fitness,well-being, culture and education,while promoting the Olympic values of excellence,friendship and respect. The Olympic Day pillars-move, learn and discover-are promoted in every corner of the globe.Last June,more than 630,000 Americans celebrated Olympic Day while participating in 1,820 events in 1,297 cities. With celebrations in all 50 states and 11 locations abroad,2015 was a paramount success-making last year the most successful Olympic Day celebration in United States history. The city of Farmington and the Farmington School District are both community leaders that promote the same values as the Olympic Games. We are planning an open house available to the public to include refreshments,face-painting,photo booth and fun,family activities at the Twist-N-Tumble Gymnastic Center on Thursday,June 23,from 6-8 pm. Thank you for your consideration and please feel free to join us on June 23 at this celebration of the Olympics! Sincerely, z Katie Johnson Farmington Community Education (651)460-3211 kjohnson@farmington.k12.mn.us — OLYMPIC DAY 2016 Olympic Day Proclamation June 23, 2016 Whereas, for over 100 years,the Olympic movement has built a more peaceful and better world by educating young people through amateur athletics, by bringing together athletes from many countries in friendly competition, and by forging new relationships bound by friendship, solidarity, and fair play; Whereas, the United States Olympic Committee is dedicated to coordinating and developing amateur athletic activity in the United States to foster productive working relationships among sports-related organizations; Whereas, the City of Farmington promotes and supports amateur athletic activities involving Olympic and Paralympic sport; Whereas, the City of Farmington promotes and encourages physical fitness and public participation in amateur athletic activities; Whereas, the City of Farmington assists organizations and persons concerned with sports in the development of athletic programs for able-bodied and disabled athletes regardless of age, race, or gender; Whereas, June 23 is the anniversary of the founding of the modern Olympic movement, representing the date on which the Congress of Paris approved the proposal of Pierre de Coubertin to found the modern Olympics: Now,Therefore, I, Todd Larson, Mayor of the City of Farmington do hereby proclaim with much appreciation and admiration, June 23, 2016 as Olympic Day in the City of Farmington and urge all citizens to observe such anniversary with appropriate ceremonies and activities. In Witness Whereof, I have hereunto set my hand and caused the Great Seal of the City of Farmington to be affixed this 23rd day of June 2016. Mayor 01I►`1 OLYMPIC DAY 010 City of Farmington y430 Third Street Farmington,Minnesota 'ga 651.280.6800 -Fax 651.280.6899 0 '''4•„ ,n*`� www.cifarmington.mn.us TO: Mayor, Councilmembers and City Administrator FROM: Tony Wippler,Planning Manager SUBJECT: 2016 Heritage Preservation Award DATE: May 16, 2016 INTRODUCTION Annually, as part of the celebration of Heritage Preservation month(May),the city's Heritage Preservation Commission solicits nominations and selects an individual, family, company or organization that has made an outstanding contribution to the preservation,rehabilitation,restoration and use of Farmington's heritage resources and presents them with a certificate of appreciation at a city council meeting. DISCUSSION The 2016 Heritage Preservation Award recipients are Gregory&Julayne Miller. The Miller's are the owners of the home located at 621 3rd Street(please see attached picture). The Miller's house was built in 1910 and is a notable and well preserved example of the American Foursquare house type that was popular from the 1890s through the 1920s. The house possesses the following distinctive design characteristics of the vernacular foursquare cottage prototype: two story height, symmetrical massing,hip roof with overhanging eaves,wood lap wall cladding with corner boards, double- hung windows and a front porch extending across the entire facade. The house was designated a Farmington Heritage Landmark by the city council in 2011 due to its architectural significance. A member of the Heritage Preservation Commission will be in attendance at the city council meeting to present the certificate of appreciation to Mr. and Mrs. Miller. BUDGET IMPACT NA ACTION_REQUESTED Join with the Heritage Preservation Commission in presenting the 2016 Heritage Preservation Award to Gregory and Julayne Miller for their property located at 621 3rd Street. ATTACHMENTS: Type Description a Backup Material 621 3rd Street picture .r ,.- .%. 7; ; .. 4 $...-N,'„1. •' 1 ?, .... „A •,.... 4 ....:- . . .-44.Ai• . • .." 44. ' . ....• .. .-Ir 1, ; ...i., , • 4 - ,„vf.. ...;,04;::/ ... ot I n .. ,. .1. .4 ;,,, r• . . . , . . .', . 1,--.. , , .2.‘. .....0 s,„ . P.;... -.4f.,„-. ...r. . ,-, . 't . "•• ..1.''' V...; --:.'. ' - ''',. iirt:. 4. "'", '''..- . % ..r ,f-: "`I. Nr*."5.44. - lir.,,, f, •,'.7)..,7.4."-• ,;••&01,.■$..... 2:air!- 4 . I -`•-' •• •*--. •'', 4.' -.■AD 1 , ..., - .-11111;: 4' • . '' ' •7-4.7'. • ts1,‘".:•',:..". ....'' ;s k.• • ..'.A." 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"... : '.,*• -;,•,*, .t*,J '•f:.l't*. • i•:i;...!s i;;'....": ■••. . .7,* • 't.*,....N.t 4,1 4:••••-•:',"-.., -,..4•I's I-,”:-„,.'6„ ,-r:',,t.,= ,''- ,'• •• - • ''"r="-,4., :'....t*"=7+,7'': 'il,=■ -:,,, ,,' ,,7' r-,r=-,'"-"'7''";,7".` '= ''',`' ..:-d'et;Ur'.4.i^=.','" '74 '.•r.. *'`,",'•**•'.;*.;...., * . * ''; .itt• ;;;.* ,.t......"*4,•..al,`, ..,',;;t••;, ,, .4'. ,•,..*:1.•'• '* -.;• " ' * ' •7.`-, --..--:-.'*-. .....--•....fe...-::'- - !"-.^- . - - - . . .• . - - - . . . ••.. .--.-• •-,'• ..-•.' - - -;.•;`,..,..; -.. - .- ;- ' ".:7--1.--:',"' ..-'4....;`,1.-----.,': ' '---,, .. - • . • --,..• .-.',••-. .. '..... -'' '•`,-. ''''' • '-'' Z--- i ---- --' .. -,,.;-' •, ''.7,. .--. .',....,,i 7,,.-•.-: . -. - • , . - . . . _ . • , — ... _ ..- .. • ,..• • . . — e . • .. • . __ ,.. • -•. . . _. .1, - _ ".... • - -- . — - • • . ... . . • - •..r , • . - - •* _ .. ...„• . . , - • ., . �o 114194 City of Farmington 430 Third Street Farmington,Minnesota 651.280.6800 -Fax 651.280.6899 14r.4 x006 www.ci.farmington.mn.us TO: Mayor, Councilmembers and City Administrator FROM: Cynthia Muller,Executive Assistant SUBJECT: Approve City Council Minutes (5/2/2016 Regular)(5/9/2016 Work Session)- Administration DATE: May 16,2016 INTRODUCTION Attached are the city council minutes for May 2 and 9, 2016. DISCUSSION NA BUDGET IMPACT NA ACTION REQUESTED Approve the city council minutes for May 2 and 9, 2016. ATTACHMENTS: Type Description © Exhibit Council Minutes (5/2/2016 Regular) D Backup Material City Council Minutes (5/6/2016 Work Session) COUNCIL MINUTES REGULAR May 2, 2016 1. CALL TO ORDER The meeting was called to order by Mayor Larson at 7:00 p.m. 2. PLEDGE OFALLEGL4NCE Mayor Larson led the audience and Council in the Pledge of Allegiance. 3. ROLL CALL Members Present: Larson,Bartholomay, Bonar,Pitcher Members Absent: Donnelly Also Present: Joel Jamnik, City Attorney; David McKnight,City Administrator; Robin Hanson, Finance Director; Jim Larsen,Fire Chief;Adam Kienberger, Community Development Director; Randy Distad, Parks and Recreation Director;Kevin Schorzman, City Engineer; Brenda Wendlandt,Human Resources Director;Nicole Gorman, Recreation Supervisor; Cynthia Muller, Executive Assistant Audience: Lacelle Cordes, Jake Cordes, LeeAnn Herrera, Lois Lotze, Rob Carpentier, Linda Landwehr, Heidi Cunningham 4. APPROVE AGENDA City Administrator McKnight moved item 10a)Recreational Facilities Task Force Final Recommendation to follow the consent agenda. MOTION by Bartholomay, second by Bonar to approve the Agenda. APIF,MOTION CARRIED. 5. ANNOUNCEMENTS a) Minnesota Association of Senior Services Award Recognition for Recreation Supervisor Nicole Gorman Recreation Supervisor Nicole Gorman was presented with the Outstanding Senior Services Award from the MN Association of Senior Services(MASS) organization. She received this award for her many contributions to MASS and to the Rambling River Center. b) Recognize a Donation from the Farmington Rotary Club to the Farmington Fire Department The Farmington Rotary Club donated$4,120 to be used to purchase eight emergency alert pagers for the fire department. MOTION by Bartholomay, second by Bonar to adopt RESOLUTION R39-16 accepting the donation from Farmington Rotary Club. APIF,MOTION CARRIED. c) Proclaim May Historic Preservation Month Mayor Larson proclaimed May as Historic Preservation Month. Council Minutes(Regular) May 2,2016 Page 2 6. CITIZEN COMMENTS 7. CONSENT AGENDA MOTION by Bartholomay, second by Bonar to approve the Consent Agenda as follows: a) Approved Council Minutes (4/18/2016 Regular)(4/15/2016 Special)- Administration b) Adopted RESOLUTION R40-16 Accepting Donation to the Rambling River Center-Parks c) Approved Agreement to Construct Troy Hill Park Concrete Playground Border and Bench Pads-Parks d) Approved Bills-Finance APIF,MOTION CARRIED. 10. PETITIONS,REQUESTS AND COMMUNICATIONS a) Recreational Facilities Task Force Final Recommendation-Parks Parks and Recreation Director Distad presented the Recreational Facilities Task Force fmal recommendation as follows: Jim Bell Park and Preserve—general site improvements including signage and park lighting, landscaping,vehicular parking and circulation,connections to existing trails,picnic areas with small and large shelters,benches,picnic tables, etc.,playground structures, courts for basketball,tennis,pickleball. Also five fields for youth baseball/softball, soccer and lacrosse fields. An aquatic facility is included with a new pool with lazy river,zero depth shallow area,waterslides, lap swim/open swim area, geysers/fountains, deck space,bathhouse, security fencing, furniture, etc. Schmitz-Maki Arena—install a second sheet of outdoor ice including refrigeration system and additional parking lot. North Creek Park—Construct a multi-purpose building for shelter rental,warming house and year round park and rec program use. North Creek Greenway—install a new bridge and complete trail connections. These improvements would require a$10 million general obligation bond over a 20-year period and would mean an estimated$75 per year property tax increase on the average home. There would still be$2.4 million that would need to be covered in other ways such as from sports organizations or donations. Council had questions about the size and cost of the parking lot which is $950,000. The parking lot is oversized for 600 cars for tournaments and the cost also includes circulation from the parking lot out to 195th Street. It was sized according to code requirements because of all the facilities in that area. Council Minutes(Regular) May 2,2016 Page 3 Council asked about staffing costs for these new facilities. The$170,000 includes overall cost for the athletic fields. The pool will cost$440,000 to operate and there will be an estimated$17,000 net loss. This would be an improvement over the subsidy of$60,000 to $70,000 for the current pool. The$9.9 million would not include extra features, but would be functional. It puts five fields in the complex. Council commented this project would be phased with the first phase having real dollars and the second phase with$2.4 million being an open question. The task force did not discuss an ongoing maintenance fund for the facilities. After soft costs and contingencies there will be$8 million for construction, $2.4 million unpledged, $170,000 for staffing and daily maintenance and an unknown reserve for future maintenance. Regarding the second sheet of ice at Schmitz-Maki Arena,there is room next to the arena for a second sheet and parking. Staff will approach the school district about partnering with parking for a second sheet of ice. The cost of the outdoor ice sheet is$700,000. With no lights it is basically a weekend rink and Council wondered if we are utilizing the investment properly. Youth hockey made a strong commitment to help with funding of the rink. Council asked if we receive an affirmative vote on the referendum,what are the plans to repurpose the existing pool. Staff recommended keeping the bathhouse for restrooms for the park shelter and installing a basketball court in the parking lot. Council noted the aquatic facility has minimal amenities and not near what neighboring cities have. The task force determined needs for the size of Farmington. The proposed facility will still attract people to come because it has a different feel than a larger pool. The pool cost is $4.8 million. This year the current pool was subsidized for$70,000. In other communities costs in the first three to five years were covered by the fees. After that the city would need to subsidize the pool for$20,000. Staff can definitely keep the cost below the current subsidy. The five baseball/softball fields will cover our needs. Currently teams are using neighborhood ball parks which creates traffic problems. Those are really for neighborhoods to use,not for organized play. Council asked if there was room to expand this park in the future. There is room for expansion. It is a 15-year pool and water features can be added to re-energize the facility. The financial plan that Council has been reviewing is separate from this bond referendum. If Council decides to put this forward to a vote,we will have a facility that is useable,but not complete. Staff asked if Council wants to discuss completion before making a recommendation. This is a pay as you go project, so to expand organizations will have to come up with funds for specific items. Council Minutes(Regular) May 2,2016 Page 4 Ms. Lacelle Cordes,task force member, stated the task force looked at this like a once in a lifetime shot to get something. They needed$22 million to get everything. As far as the aquatic facility,they felt we should build a facility for Farmington and residents will stay here. The task force did discuss whether they were trying to cover too many areas, but agreed on this recommendation. Council will need to make a decision on a ballot question for the November 8, 2016, general election by August 1, 2016. The wording of the question will be approved by Council. Council decided to discuss changing the dollar amount at the May 9, 2016,Council work session. MOTION by Bonar, second by Bartholomay to accept the task force recreational facility report as presented. APIF,MOTION CARRIED. 8. PUBLIC HEARINGS a) Notice of Intent to Consider Issuance of Cable Franchise—Human Resources The city has received a request from Frontier Communications for a cable franchise. Representatives from Frontier Communications and Charter Communications,the city's current cable provider, each presented their offerings and an overview of their organizations. Mr.Bob Vose, Attorney representing the Apple Valley, Farmington,Rosemount Cable Commission,noted Charter has submitted two letters for legal counsel with legal argument. The legal arguments were not unexpected. Farmington is the first community in Minnesota that Frontier is approaching. Century Link is seeking and obtaining franchises all over Minnesota. Frontier's application is similar to Century Link's application submitted to other cities and was found to be sufficient. With Charter there are a number of legal issues,one of whether Charter holds an existing franchise. The cable commission was working on renewal of the Charter franchise for three years. The renewal extension expired at the end of 2015. Mr.Vose recommended Council direct staff to negotiate the legal issues and extend the period of written comment to 30 days. MOTION by Bonar, second by Pitcher to close the public hearing for tonight,but leave it open for public comment. APIF,MOTION CARRIED. MOTION by Bartholomay, second by Bonar to extend the public comment period for 30 days. APIF,MOTION CARRIED. 9. AWARD OF CONTRACT a) Approve Agreement Tamarack Park Basketball Court Improvement Project -Parks The basketball court at Tamarack Park is starting to deteriorate and is in need of repair and resurfacing. The low quote was submitted by Lee Sports LLC in the amount of$4,850. MOTION by Bartholomay, second by Pitcher to approve the agreement with Lee Sports Surfacing, LLC for the repair and resurfacing of the Tamarack Park basketball court. APIF,MOTION CARRIED. Council Minutes(Regular) May 2,2016 Page 5 b) 2016 Trail Crack Sealing-Engineering This year 17,000 linear feet of crack sealing will be done on trails. The low quote was received from All Things Asphalt in the amount of$6,460. MOTION by Bartholomay, second by Bonar to accept the quote of All Things Asphalt in the amount of$6,460 and authorize execution of a contract for the work. APIF, MOTION CARRIED. 11. UNFINISHED BUSINESS 12. NEW BUSINESS 13. COUNCIL ROUNDTABLE Councilmember Bartholomay: Wednesday's garbage curbside cleanup is this Saturday. Councilmember Pitcher: Reminded residents May is Poppy Month. City Engineer Schorzman: Road construction on CSAH50 starts this week. The TH3 project has not been awarded yet and staff will know more at the next meeting. Mayor Larson: Encouraged residents to buy a poppy and shop local. 14. ADJOURN MOTION by Bartholomay, second by Pitcher to adjourn at 8:43 p.m. APIF,MOTION CARRIED. Respectfully submitted, Cynthia Muller Executive Assistant Council Work Session Minutes May 9,2016 Mayor Larson called the work session to order at 6:30 p.m. Present: Larson,Bartholomay, Bonar,Donnelly, Pitcher Absent: None Also Present: David McKnight, City Administrator;Robin Hanson, Finance Director;Adam Kienberger, Community Development Director; Cynthia Muller,Executive Assistant MOTION by Bartholomay, second by Pitcher to approve the agenda. APIF,MOTION CARRIED. Trident Development TIF Analysis Update Trident Development is proposing to build a 70-unit senior living facility south of St.Michael's Church on Denmark Avenue. Trident has submitted an application for TIF. Ms. Stacie Kvilvang,Ehlers&Assoc, explained the process of TIF. We currently have two TIF districts. The redevelopment district was established in 1991 and becomes certified December 31, 2020. The CDA housing district was established in 1993 and becomes certified December 31,2020. Each project has a development contract that sets the amount of TIP. Most developments are done on a pay-as-you go basis. The city gives the developer a note that says you will pay at a certain interest rate which is the same as the financing. The developer pays the taxes,the city gets the payments. It is developer risk based. The Trident project requested a TIF note for 26 years for$2 million at 4% interest. Ehlers found this is not justified. What is justified is$1 million in TIF over 10 years. Today things have changed and now the recommendation is$1.47 million over 11 years and assumes a 2%inflation and would generate$117,000 less. What changed is the market value went up. Ms.Kvilvang explained the financial items Ehlers reviewed for this project. The terms are to create a TIF district for 26 years, 20%of the units will be affordable, the note will be for$1.47 million for 11 years. The developer has to construct a utility extension for$300,000. City fees amount to $111,000 in park dedication fees,utility hook up charges of$400,000, and will pay 100%of EDA costs. They have put down a$15,000 deposit. The city gets a new housing option with 20 new full time jobs,the church no longer owns the land so taxes on the land only are$1,100 which the city will receive in years one through 11. When the TIF note is paid off in today's tax rate the city would receive$73,000 in taxes. This item will be discussed at the May 10,2016, Planning Commission meeting for the land use. May 26, 2016,the EDA will adopt a resolution for the TIF plan and the development agreement. Council Work Session Minutes May 9,2016 Page 2 June 6, 2016,will be Council approval. Trident can then start construction in June. Council was in agreement with this plan. Part Time Building Inspector Position Discussion The city currently has two staff positions in inspections, a building official and a building inspector. Development is increasing with new homes and also home improvements and has caused a significant increase in workload. There is also an increase in commercial projects. Currently staff does not account for commercial development revenue. The building official only is certified to review commercial plans and inspections. Therefore, an additional part-time staff position is needed. Council asked if a cost analysis has been done to outsource the position. From past experience, staff has found it is two times more expensive to outsource versus having an internal position. This would be part-time so there would be no benefits. The cost would be $30,000-$40,000 for the rest of this year and staff would like to hire someone who is a certified building inspector. Commercial permit revenue would more than cover the position. When housing picks up, staff would like to convert this position to full time. For a part-time position,the hours would be capped at 29 hours per week. Council again brought up doing an analysis to contract out the work. Staff felt the difference with a contracted person versus in house is a city employee has more commitment toward the city and residents become familiar with this person. Engineering also moved away from a contracted position in the past few years. We have the Trident development and This Little Piggy projects and more projects annually with the potential start of Fairhill. Staff doesn't know about the market for a part-time building inspector,but would like to try. It is not just housing permits,but all permits are increasing. Some councilmembers felt hiring shows a commitment on the part of the city. Staff will post the position. Liquor Store Funds Liquor store funds have four pots. The city has more money in the community/organization transfer pot than we should have. It amounts to$227,437.07. The capital improvement pot has $267,437.08. Staff listed several uses for the funds. In addition to the list,Council suggested purchasing a new truck for building inspections. After a discussion about placing a wrap on the truck with"Paid for by liquor funds"it was decided to not have a wrap on the truck. The majority of Council agreed on the following items: Downtown redevelopment plan bike racks $5,000 Benches and signs $10,000 LED monument sign(by police station) $50,000 Patio/doors for banquet room at RRC $25,000 Pergola at RRC $5,000 Roving camera for parks/other areas $10,000 Arena sound system(partnership with FYHA) $8,000 Building Inspections vehicle TBD Council Work Session Minutes May 9,2016 Page 3 Liquor Store Update City Administrator McKnight and Council discussed various options for a location for the downtown liquor store. Recreational Facilities Plan Review Council discussed the recommendation received from the task force at the May 2,2016, City Council meeting. The second sheet of outdoor ice next to the arena is refrigerated ice without a roof and lights. FYHA has offered to make a donation towards the roof and lights. Councilmembers discussed wanting items to be complete and whether the recommendation was spread too thin over several facilities. They did not want to make major changes to the recommendation, but felt a minor change would be appropriate. It was determined to remove the proposed building at North Creek Park and use those funds towards a roof and lights for the outdoor ice. Funds would still be needed from FYHA, but then this project would be complete. Council then discussed the question to be placed on the November 8, 2016, general election ballot. As of now,the majority of Council agreed with having two questions on the ballot. One for a$10 million referendum including the change with North Creek Park funds going to the arena, and a second question for a$12.5 million referendum with the entire task force recommendation as presented. The wording of the question would be determined by the city attorney. Council will need to make a final decision on the ballot question by August 1,2016. MOTION by Bartholomay, second by Larson to adjourn at 8:25 p.m. APIF,MOTION CARRIED. Respectfully submitted, Cynthia Muller Executive Assistant o� AR, City of Farmington 6p 430 Third Street Farmington,Minnesota .. 651.280.6800 -Fax 651.280.6899 0 14''.,, , � wwvv.ci.farmington.mn.us TO: Mayor, Councilmembers and City Administrator FROM: David McKnight, City Administrator SUBJECT: Approve Letter of Agreement for Facilities Use with ISD 192-Administration DATE: May 16, 2016 INTRODUCTION ISD 192 approached the city about a cooperative agreement for the use of city and school district facilities by both entities. DISCUSSION The school district recently discussed with the city a joint agreement in regards to the use of city and school district facilities by each entity. The school district has proposed that in exchange for the school district using the city council chambers and other meeting rooms that the city would be able to use their tennis court facilities. Neither entity would charge for the use of facilities. In our continued efforts to work cooperatively with the school district, this type of agreement benefits everyone involved. BUDGET IMPACT NA ACTION REQUESTED Make a motion to approve the letter of agreement between ISD 192 and the City of Farmington for the use of facilities. ATTACHMENTS: Type Description Di Backup Material City/School Agreement LETTER OF AGREEMENT Farmington Area Public Schools ISD#192 and the City of Farmington agree to the following: Whereas the school district and city have sought opportunities to collaborate for the mutual benefit of the citizens and students in the community,the parties agree that the School District may use the city hall board room for school board meetings and may occasionally use meeting space in city hail without charge and the city will be able to use school district property for tennis Iessons without payment of facilities fees. The parties will follow established procedures regarding requests for use. If either party would like to use each other's facilities outside of what is described in this letter, both parties agree to work together to find a mutual solution. The parties agree that this letter of understanding will sunset on June 30,2017 unless renewed by mutual consent. Signed this t day of OH 2016. For the City of Farmington: 0vid McKnight, " A inistrator } • F 1 r: Farmin ton ISD# 192 _AA _ 0141 s. s e ouska,Director of Finance ,. 14.o� i'r► City of Farmington � 430 Third Street Farmington,Minnesota 651.280.6800 -Fax 651.280.6899 `4'.4aaor`6`� www.cifarmington.mn.us TO: Mayor, Councilmembers and City Administrator FROM: Cynthia Muller,Executive Assistant SUBJECT: Adopt Resolution Approving a Gambing Premise Permit for Farmington Fire Fighters Relief Association-Administration DATE: May 16,2016 INTRODUCTION The Farmington Fire Fighters Relief Association is requesting a gambling premises permit at 120 Elm Street. DISCUSSION Pursuant to state statute and pertinent city code, an organization must first obtain a resolution from the city, granting permission for gambling to occur at a specific location. The Farmington Fire Fighters Relief Association is requesting approval to conduct gambling activity at El Charro Mexican Restaurant, 120 Elm Street. The appropriate application has been received and the Relief Association is requesting the$50 investigation fee be waived. BUDGET IMPACT None. ACTION REQUESTED Consider the attached resolution approving a gambling premises permit for the Farmington Fire Fighters Relief Association at 120 Elm Street. ATTACHMENTS: Type Description D Resolution Resolution RESOLUTION NO. R41-16 APPROVING A NIINNESOTA LAWFUL GAMBLING PREMISE PERMIT APPLICATION FOR FARMINGTON FIRE FIGHTERS RELIEF ASSOCIATION Pursuant to due call and notice thereof,a regular meeting of the City Council of the city of Farmington,Minnesota,was held in the Council Chambers of said city on the 16th day of May 2016 at 7:00 p.m. Members Present: Larson,Bartholomay,Bonar,Donnelly,Pitcher Members Absent: None Member Bartholomay introduced and Member Bonar seconded the following: WHEREAS,pursuant to M.S. 349.166,the State of Minnesota Gambling Board may not issue or renew a Gambling Premise Permit unless the City Council adopts a resolution approving said permit; and, WHEREAS,the Farmington Fire Fighters Relief Association has submitted an application for a Gambling Premise Permit to be conducted at 120 Elm Street,for Council consideration,and WHEREAS,the Relief Association has requested the$50 investigation fee be waived. NOW,THEREFORE,BE IT RESOLVED by the Farmington City Council that the Gambling Premise Permit for the Farmington Fire Fighters Relief Association at 120 Elm Street,is hereby approved. This resolution adopted by recorded vote of the Farmington City Council in open session on the 16th day of May 2016. Mayor Attested to the /74-1-' day of May 2016. V 01)...Admini. strator SEAL �o��AR,y City of Farmington 0,4t. 430 Third Street Farmington, Minnesota o .` 651.280.6800 -Fax 651.280.6899 '4 m. www.cLfarmington.mn.us TO: Mayor, Councilmembers and City Administrator FROM: Police Chief Brian Lindquist SUBJECT: Resolution approving State of Minnesota JPA on behalf of its City Attorney and Police Department-Police DATE: May 16, 2016 INTRODUCTION The State of Minnesota, Bureau of Criminal Apprehension, is authorized under Minnesota State Statute to maintain and provide a criminal justice data communications network. In addition, the BCA maintains or has access to repositories of data that benefit criminal justice agencies. This data is utilized in support of our criminal justice duties. DISCUSSION In order for the BCA to share access to this data, it is necessary that the City of Farmington,the Farmington Police Department and its Prosecuting Authority enter into a Joint Powers agreement allowing that information to be shared. This WA was last approved in 2011 and renewal is required every five years. BUDGET IMPACT The City of Farmington currently pays the State $1,080.00 annually for connection services allowing us to access information necessary to fulfill our mission. This amount is budgeted annually and no change has been requested ACTION REQUESTED Adopt the resolution between the State,Minnesota BCA and the City of Farmington. ATTACHMENTS: Type Description D Cover Memo State of Minnesota JPA D Cover Memo Farmington PD Court Amendment D Cover Memo Farmington PD MAster JPA RESOLUTION NO.R42-16 RESOLUTION APPROVING STATE OF MINNESOTA JOINT POWERS AGREEMENTS WITH THE CITY OF FARMINGTON ON BEHALF OF ITS CITY ATTORNEY AND POLICE DEPARTMENT Pursuant to due call and notice thereof, a regular meeting of the City Council of the city of Farmington, Minnesota, was held in the council chambers of said city on the 16th day of May 2016, at 7:00 p.m. Members Present: Larson,Bartholomay, Bonar, Donnelly, Pitcher Members Absent: None Member Bartholomay introduced and Member Bonar seconded the following: WHEREAS,the city of Farmington on behalf of its Prosecuting Attorney and Police Department desires to enter into Joint Powers Agreements with the State of Minnesota, Department of Public Safety, Bureau of Criminal Apprehension to use systems and tools available over the State's criminal justice data communications network for which the city is eligible. The Joint Powers Agreements further provide the city with the ability to add,modify and delete connectivity, systems and tools over the five year life of the agreement and obligates the city to pay the costs for the network connection. NOW,THEREFORE,BE IT RESOLVED by the City Council of Farmington, Minnesota as follows: 1. That the State of Minnesota Joint Powers Agreements by and between the State of Minnesota acting through its Department of Public Safety, Bureau of Criminal Apprehension and the city of Farmington on behalf of its Prosecuting Attorney and Police Department, are hereby approved. Copies of the two Joint Powers Agreements are attached to this resolution and made a part of it. 2. That the Chief of Police, Brian A. Lindquist, or his or her successor, is designated the Authorized Representative for the Police Department. The Authorized Representative is also authorized to sign any subsequent amendment or agreement that may be required by the State of Minnesota to maintain the city's connection to the systems and tools offered by the State. To assist the Authorized Representative with the administration of the agreement,Administrative Sergeant is appointed as the Authorized Representative's designee. 3. That the City Attorney, Elliot Knetsch, or his or her successor, is designated the Authorized Representative for the Prosecuting Attorney. The Authorized Representative is also authorized to sign any subsequent amendment or agreement that may be required by the State of Minnesota to maintain the city's connection to the systems and tools offered by the State. To assist the Authorized Representative with the administration of the agreement,the City Administrator is appointed as the Authorized Representative's designee. 4. That Todd Larson,the Mayor for the city of Farmington, and David McKnight,the City Clerk, are authorized to sign the State of Minnesota Joint Powers Agreements. Passed and Adopted by the Council on this 16th day of May, 2016. CITY OF FARMINGTON By: odd Larson Its Mayor ATTEST: Li By: Davi 'ght Its City Clerk • COURT DATA SERVICES SUBSCRIBER AMENDMENT TO CJDN SUBSCRIBER AGREEMENT This Court Data Services Subscriber Amendment ("Subscriber Amendment") is entered into by the State of Minnesota, acting through its Department of Public Safety, Bureau of Criminal Apprehension, ("BCA")and the City of Farmington on behalf of its Police Department("Agency"), and by and for the benefit of the State of Minnesota acting through its State Court Administrator's Office ("Court") who shall be entitled to enforce any provisions hereof through any legal action against any party. Recitals This Subscriber Amendment modifies and supplements the Agreement between the BCA' and Agency, SWIFT Contract number 107080, of even or prior date, for Agency use of BCA systems and tools (referred to herein as "the CJDN Subscriber Agreement"). Certain BCA systems and tools that include access to and/or submission of Court Records may only be utilized by the Agency if the Agency completes this Subscriber Amendment. The Agency desires to use one or more BCA systems and tools to access and/or submit Court Records to assist the Agency in the efficient performance of its duties as required or authorized by law or court rule. Court desires to permit such access and/or submission. This Subscriber Amendment is intended to add Court as a party to the CJDN Subscriber Agreement and to create obligations by the Agency to the Court that can be enforced by the Court.It is also understood that,pursuant to the Master Joint Powers Agreement for Delivery of Court Data Services to CJDN Subscribers ("Master Authorization Agreement") between the Court and the BCA, the BCA is authorized to sign this Subscriber Amendment on behalf of Court. Upon execution the Subscriber Amendment will be incorporated into the CJDN - Subscriber Agreement by reference. The BCA, the Agency and the Court desire to amend the CJDN Subscriber Agreement as stated below. - The CJDN Subscriber Agreement is amended by the addition of the following provisions: 1. TERM; TERMINATION; ONGOING OBLIGATIONS. This Subscriber Amendment shall be effective on the date finally executed by all parties and shall remain in effect until expiration or termination of the CJDN Subscriber Agreement unless terminated earlier as provided in this Subscriber Amendment. Any party may terminate this Subscriber Amendment with or without cause by giving written notice to all other parties. The effective date of the termination shall be thirty days after the other party's receipt of the notice of termination, unless a later date is specified in the notice. The provisions of sections 5 through 9, 12.b., 12.c., and 15 through 24 shall survive any termination of this Subscriber Amendment as shall any other provisions which by their nature are intended or expected to survive such termination. Upon termination,the Subscriber shall perform the responsibilities set forth in paragraph 7(f)hereof. 2. Definitions. Unless otherwise specifically defined,each term used herein shall have the meaning assigned to such term in the CJDN Subscriber Agreement. 1 a. "Authorized Court Data Services" means Court Data Services that have been authorized for delivery to CJDN Subscribers via BCA systems and tools pursuant to an Authorization Amendment to the Joint Powers Agreement for Delivery of Court Data Services to CJDN Subscribers ("Master Authorization Agreement") between the Court and the BCA. b. "Court Data Services" means one or more of the services set forth on the Justice Agency Resource webpage of the Minnesota Judicial Branch website (for which the current address is www.courts.state.mn.us) or other location designated by the Court, as the same maybe amended from time to time by the Court. c. "Court Records" means all information in any form made available by the Court to Subscriber through the BCA for the purposes of carrying out this Subscriber Amendment,including: i. "Court Case Information"means any information in the Court Records that conveys information about a particular case or controversy, including without limitation Court Confidential Case Information, as defined herein. ii. "Court Confidential Case Information" means any information in the Court Records that is inaccessible to the public pursuant to the Rules of Public Access and that conveys information about a particular case or controversy. iii. "Court Confidential Security and Activation Information"means any information in the Court Records that is inaccessible to the public pursuant to the Rules of Public Access and that explains how to use or gain access to Court Data Services, including but not limited to login account names, passwords, TCP/IP addresses, Court Data Services user manuals, Court Data Services Programs, Court Data Services Databases, and other technical information. iv. "Court Confidential Information" means any information in the Court Records that is inaccessible to the public pursuant to the Rules of Public Access, including without limitation both i) Court Confidential Case Information; and ii) Court Confidential Security and Activation Information. d. "DCA" shall mean the district courts of the state of Minnesota and their respective staff. e. "Policies & Notices"means the policies and notices published by the Court in connection with each of its Court Data Services, on a website or other location designated by the Court, as the same may be amended from time to time by the Court. Policies & Notices for each Authorized Court Data Service identified in an approved request form under section 3, below, are hereby made part of this Subscriber Amendment by this reference and provide additional terms and conditions that govern Subscriber's use of Court Records accessed through such services, including but not limited to provisions on access and use limitations. 2 , f. "Rules of Public Access" means the Rules of Public Access to Records of the Judicial Branch promulgated by the Minnesota Supreme Court, as the same may be amended from time to time, including without limitation lists or tables published from time to time by the Court entitled Limits on Public Access to Case Records or Limits on Public Access to Administrative Records, all of which by this reference are made a part of this Subscriber Amendment. It is the obligation of Subscriber to check from time to time for updated rules, lists, and tables and be familiar with the contents thereof. It is contemplated that such rules,lists,and tables will be posted on the Minnesota Judicial Branch website,for which the current address is www.courts.state.mn.us. g. "Court" shall mean the State of Minnesota, State Court Administrator's Office. h. "Subscriber"shall mean the Agency. i. "Subscriber Records" means any information in any form made available by the Subscriber to the Court for the purposes of carrying out this Subscriber Amendment. • 3. REQUESTS FOR AUTHORIZED COURT DATA SERVICES. Following execution of this Subscriber Amendment by all parties, Subscriber may submit to the BCA one or more separate requests for Authorized Court Data Services. The BCA is authorized in the Master Authorization Agreement to process, credential and approve such requests on behalf of Court and all such requests approved by the BCA are adopted and incorporated herein by this reference the same as if set forth verbatim herein. a. Activation. Activation of the requested Authorized Court Data Service(s) shall occur promptly following approval. b. Rejection. Requests may be rejected for any reason, at the discretion of the BCA and/or the Court. c. Requests for Termination of One or More Authorized Court Data Services. The Subscriber may request the termination of an Authorized Court Data Services previously requested by submitting a notice to Court with a copy to the BCA. Promptly upon receipt of a request for termination of an Authorized Court Data Service,the BCA will deactivate the service requested. The termination of one or more Authorized Court Data Services does not terminate this Subscriber Amendment. Provisions for termination of this • Subscriber Amendment are set forth in section 1. Upon termination of Authorized Court Data Services, the Subscriber shall perform the responsibilities set forth in paragraph 7(f) hereof. 4. SCOPE OF ACCESS TO COURT RECORDS LIMITED. Subscriber's access to and/or submission of the Court Records shall be limited to Authorized Court Data Services identified in an approved request form under section 3, above, and other Court Records necessary for Subscriber to use Authorized Court Data Services.Authorized Court Data Services shall only be used according to the instructions provided in corresponding Policies &Notices or other,materials and only as necessary to assist Subscriber in the efficient performance of Subscriber's duties • 3 required or authorized by law or court rule in connection with any civil, criminal, administrative, or arbitral proceeding in any Federal, State, or local court or agency or before any self-regulatory body. Subscriber's access to the Court Records for personal or non-official use is prohibited. Subscriber will not use or attempt to use Authorized Court Data Services in any manner not set forth in this Subscriber Amendment, Policies &Notices, or other Authorized Court Data Services documentation, and upon any such unauthorized use or attempted use the Court may immediately terminate this Subscriber Amendment without prior notice to Subscriber. 5. GUARANTEES OF CONFIDENTIALITY. Subscriber agrees: a. To not disclose Court Confidential Information to any third party except where necessary to carry out the Subscriber's duties as required or authorized by law or court rule in connection with any civil, criminal, administrative, or arbitral proceeding in any Federal, State, or local court or agency or before any self-regulatory body. b. To take all appropriate action, whether by instruction, agreement, or otherwise, to insure the protection, confidentiality and security of Court Confidential Information and to satisfy Subscriber's obligations under this Subscriber Amendment. c. To limit the use of and access to Court Confidential Information to Subscriber's bona fide personnel whose use or access is necessary to effect the purposes of this Subscriber Amendment, and to advise each individual who is permitted use of and/or access to any Court Confidential Information of the restrictions upon disclosure and use contained in this Subscriber Amendment, requiring each individual who is permitted use of and/or access to Court Confidential Information to acknowledge in writing that the individual has read and understands such restrictions. Subscriber shall keep such acknowledgements on file for one year following termination of the Subscriber Amendment and/or CJDN Subscriber Agreement, whichever is longer, and shall provide the Court with access to, and copies of such acknowledgements upon request. For purposes of this Subscriber Amendment, Subscriber's bona fide personnel shall mean individuals who are employees of Subscriber or provide services to Subscriber either on a voluntary basis or as independent contractors with Subscriber. d. That, without limiting section 1 of this Subscriber Amendment, the obligations of Subscriber and its bona fide personnel with respect to the confidentiality and security of Court Confidential Information shall survive the termination of this Subscriber Amendment and the CJDN Subscriber Agreement and the termination of their relationship with Subscriber. e. That,notwithstanding any federal or state law applicable to the nondisclosure obligations of Subscriber and Subscriber's bona fide personnel under this Subscriber Amendment, such obligations of Subscriber and Subscriber's bona fide personnel are founded independently on the provisions of this Subscriber Amendment. 6. APPLICABILITY TO PREVIOUSLY DISCLOSED COURT RECORDS. Subscriber acknowledges and agrees that all Authorized Court Data Services and related Court Records disclosed to Subscriber prior to the effective date of this Subscriber Amendment shall be subject to the provisions of this Subscriber Amendment. 4 7. LICENSE AND PROTECTION OF PROPRIETARY RIGHTS. During the term of this Subscriber Amendment, subject to the terms and conditions hereof, the Court hereby grants to Subscriber a nonexclusive, nontransferable, limited license to use Court Data Services Programs and Court Data Services Databases to access or receive the Authorized Court Data Services identified in an approved request form under section 3, above, and related Court Records. Court reserves the right to make modifications to the Authorized Court Data Services, Court Data Services Programs, and Court Data Services Databases, and related materials without notice to Subscriber. These modifications shall be treated in all respects as their previous counterparts. a. Court Data Services Programs. Court is the copyright owner and licensor of the Court Data Services Programs. The combination of ideas, procedures, processes, systems, logic, coherence and methods of operation embodied within the Court Data Services Programs, and all information contained in documentation pertaining to the Court Data Services Programs, including but not limited to manuals, user documentation, and passwords, are trade secret information of Court and its licensors. b. Court Data Services Databases. Court is the copyright owner and licensor of the Court Data Services Databases and of all copyrightable aspects and components thereof. All specifications and information pertaining to the Court Data Services Databases and their structure, sequence and organization, including without limitation data schemas such as the Court XML Schema,are trade secret information of Court and its licensors. c. Marks. Subscriber shall neither have nor claim any right,title, or interest in or use of any trademark used in connection with Authorized Court Data Services, including but not limited to the marks"MNCIS"and"Odyssey." d. Restrictions on Duplication,Disclosure,and Use. Trade secret information of Court and its licensors will be treated by Subscriber in the same manner as Court Confidential Information. In addition, Subscriber will not copy any part of the Court Data Services Programs or Court Data Services Databases, or reverse engineer or otherwise attempt to discern the source code of the Court Data Services Programs or Court Data Services Databases, or use any trademark of Court or its licensors, in any way or for any purpose not specifically and expressly authorized by this Subscriber Amendment. As used herein, "trade secret information of Court and its licensors" means any information possessed by Court which derives independent economic value from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use. "Trade secret information of Court and its licensors" does not, however, include information which was known to Subscriber prior to Subscriber's receipt thereof either directly or indirectly, from Court or its licensors, information which is independently developed by Subscriber without reference to or use of information received from Court or its licensors, or information which would not qualify as a trade secret under Minnesota law. It will not be a violation of this section 7, sub-section d, for Subscriber to make up to one copy of training materials and configuration documentation, if any,for each individual authorized to access,use, or configure Authorized Court Data Services, solely for its own use in connection with this Subscriber Amendment. Subscriber will take all steps reasonably necessary to protect the copyright,trade secret, and . trademark rights of Court and its licensors and Subscriber will advise its bona fide personnel who are permitted access to any of the Court Data Services Programs and Court Data Services Databases, and trade secret information of Court and its licensors, of the restrictions upon duplication,disclosure and use contained in this Subscriber Amendment. 5 e. Proprietary Notices. Subscriber will not remove any copyright or proprietary notices included in and/or on the Court Data Services Programs or Court Data Services Databases, related documentation, or trade secret information of Court and its licensors, or any part thereof, made available by Court directly or through the BCA, if any, and Subscriber will include in and/or on any copy of the Court Data Services Programs or Court Data Services Databases, or trade secret information of Court and its licensors and any documents pertaining thereto, the same copyright and other proprietary notices as appear on the copies made available to Subscriber by Court directly or through the BCA, except that copyright notices shall be updated and other proprietary notices added as may be appropriate. f. Title; Return. The Court Data Services Programs and Court Data Services Databases, and related documentation, including but not limited to training and configuration material, if any, and logon account information and passwords, if any, made available by the Court to Subscriber directly or through the BCA and all copies, including partial copies, thereof are and remain the property of the respective licensor. Except as expressly provided in section 12.b., within ten days of the effective date of termination of this Subscriber Amendment or the CJDN Subscriber Agreement or within ten days of a request for termination of Authorized Court Data Service as described in section 4, Subscriber shall either: (i) uninstall and return any and all copies of the applicable Court Data Services Programs and Court Data Services Databases, and related documentation, including but not limited to training and configuration materials, if any, and logon account information, if any; or(2) destroy the same and certify in writing to the Court that the same have been destroyed. 8. INJUNCTIVE RELIEF. Subscriber acknowledges that the Court, Court's licensors, and DCA will be irreparably harmed if Subscriber's obligations under this Subscriber Amendment are not specifically enforced and that the Court, Court's licensors, and DCA would not have an adequate remedy at law in the event of an actual or threatened violation by Subscriber of its obligations. Therefore, Subscriber agrees that the Court, Court's licensors, and DCA shall be entitled to an injunction or any appropriate decree of specific performance for any actual or threatened violations or breaches by Subscriber or its bona fide personnel without the necessity of the Court, Court's licensors, or DCA showing actual damages or that monetary damages would not afford an adequate remedy. Unless Subscriber is an office, officer,agency, department, division,or bureau of the state of Minnesota, Subscriber shall be liable to the Court,Court's licensors, and DCA for reasonable attorneys fees incurred by the Court, Court's licensors, and DCA in obtaining any relief pursuant to this Subscriber Amendment. 9. LIABILITY. Subscriber and the Court agree that, except as otherwise expressly provided herein, each party will be responsible for its own acts and the results thereof to the extent authorized by law and shall not be responsible for the acts of any others and the results thereof. Liability shall be governed by applicable law. Without limiting the foregoing, liability of the Court and any Subscriber that is an office, officer, agency, department, division, or bureau of the state of Minnesota shall be governed by the provisions of the Minnesota Tort Claims Act, Minnesota Statutes, section 3.376, and other applicable law. Without limiting the foregoing, if Subscriber is a political subdivision of the state of Minnesota, liability of the Subscriber shall be governed by the provisions of Minn. Stat. Ch. 466 (Tort Liability, Political Subdivisions) or other applicable law. Subscriber and Court further acknowledge that the liability, if any, of the BCA is governed by a separate agreement between the Court and the BCA dated December 13,2010 with DPS-M-0958. 6 • 10. AVAILABILITY. Specific terms of availability shall be established by the Court and communicated to Subscriber by the Court and/or the BCA. The Court reserves the right to terminate this Subscriber Amendment immediately and/or temporarily suspend Subscriber's Authorized Court Data Services in the event the capacity of any host computer system or legislative appropriation of funds is determined solely by the Court to be insufficient to meet the computer needs of the courts served by the host computer system. 11. [reserved] 12. ADDITIONAL USER OBLIGATIONS. The obligations of the Subscriber set forth in this section are in addition to the other obligations of the Subscriber set forth elsewhere in this Subscriber Amendment. a. Judicial Policy Statement. Subscriber agrees to comply with all policies identified in Policies &Notices applicable to Court Records accessed by Subscriber using Authorized Court Data Services. Upon failure of the Subscriber to comply with such policies, the Court shall have the option of immediately suspending the Subscriber's Authorized Court Data Services on a temporary basis and/or immediately terminating this Subscriber Amendment. b. Access and Use; Log. Subscriber shall be responsible for all access to and use of Authorized Court Data Services and Court Records by Subscriber's bona fide personnel or by means of Subscriber's equipment or passwords, whether or not Subscriber has knowledge of or authorizes such access and use. Subscriber shall also maintain a log identifying all persons to whom Subscriber has disclosed its Court Confidential Security and Activation Information, such as user ID(s) and password(s), including the date of such disclosure. Subscriber shall maintain such logs for a minimum period of six years from the date of disclosure, and shall provide the Court with access to, and copies of, such logs upon request. The Court may conduct audits of Subscriber's logs and use of Authorized Court Data Services and Court Records from time to time. Upon Subscriber's failure to maintain such logs,to maintain accurate logs, or to promptly provide access by the Court to such logs, the Court may terminate this Subscriber Amendment without prior notice to Subscriber. c. Personnel. Subscriber agrees to investigate, at the request of the Court and/or the BCA, allegations of misconduct pertaining to Subscriber's bona fide personnel having access to or use of Authorized Court Data Services, Court Confidential Information, or trade secret information of the Court and its licensors where such persons are alleged to have violated the provisions of this Subscriber Amendment, Policies & Notices, Judicial Branch policies, or other security requirements or laws regulating access to the Court Records. d. Minnesota Data Practices Act Applicability. If Subscriber is a Minnesota Government entity that is subject to the Minnesota Government Data Practices Act, Minn. Stat. Ch. 13, Subscriber acknowledges and agrees that: (1)the Court is not subject to Minn. Stat. Ch. 13 (see section 13.90) but is subject to the Rules of Public Access and other rules promulgated by the Minnesota Supreme Court; (2) Minn. Stat. section 13.03, subdivision 4(e) requires that Subscriber comply with the Rules of Public Access and other rules promulgated by the Minnesota Supreme Court for access to Court Records provided via the 7 BCA systems and tools under this Subscriber Amendment; (3)the use of and access to Court Records may be restricted by rules promulgated by the Minnesota Supreme Court, applicable state statute or federal law; and(4)these applicable restrictions must be followed in the appropriate circumstances. 13. FEES; INVOICES. Unless the Subscriber is an office, officer, department, division, agency, or bureau of the state of Minnesota, Subscriber shall pay the fees, if any, set forth in applicable Policies & Notices, together with applicable sales, use or other taxes. Applicable monthly fees commence ten(10) days after notice of approval of the request pursuant to section 3 of this Subscriber Amendment or upon the initial Subscriber transaction as defined in the Policies & Notices, whichever occurs earlier. When fees apply, the Court shall invoice Subscriber on a monthly basis for charges incurred in the preceding month and applicable taxes,if any,and payment of all amounts shall be due upon receipt of invoice. If all amounts are not paid within 30 days of the date of the invoice, the Court may immediately cancel this Subscriber Amendment without notice to Subscriber and pursue all available legal remedies. Subscriber certifies that funds have been appropriated for the payment of charges under this Subscriber Amendment for the current fiscal year, if applicable. 14. MODIFICATION OF FEES. Court may modify the fees by amending the Policies &Notices as provided herein, and the modified fees shall be effective on the date specified in the Policies &Notices, which shall not be less than thirty days from the publication of the Policies & Notices. Subscriber shall have the option of accepting such changes or terminating this Subscriber Amendment as provided in section 1 hereof. 1g. WARRANTY DISCLAIMERS. a. WARRANTY EXCLUSIONS. EXCEPT AS SPECIFICALLY AND EXPRESSLY PROVIDED HEREIN, COURT, COURT'S LICENSORS, AND DCA MAKE NO REPRESENTATIONS OR WARRANTIES OF ANY KIND, INCLUDING BUT NOT LIMITED TO THE WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE OR MERCHANTABILITY, NOR ARE ANY WARRANTIES TO BE IMPLIED, WITH RESPECT TO THE INFORMATION, SERVICES OR COMPUTER PROGRAMS MADE AVAILABLE UNDER THIS AGREEMENT. b. ACCURACY AND COMPLETENESS OF INFORMATION. WITHOUT LIMITING THE GENERALITY OF THE PRECEDING PARAGRAPH, COURT, COURT'S LICENSORS, AND DCA MAKE NO WARRANTIES AS TO THE ACCURACY OR COMPLETENESS OF THE INFORMATION CONTAINED IN THE COURT RECORDS. 16. RELATIONSHIP OF THE PARTIES. Subscriber is an independent contractor and shall not be deemed for any purpose to be an employee, partner, agent or franchisee of the Court, Court's licensors, or DCA. Neither Subscriber nor the Court, Court's licensors, or DCA shall have the right nor the authority to assume, create or incur any liability or obligation of any kind, express or implied, against or in the name of or on behalf of the other. 17. NOTICE. Except as provided in section 2 regarding notices of or modifications to Authorized Court Data Services and Policies & Notices, any notice to Court or Subscriber 8 • • hereunder shall be deemed to have been received when personally delivered in writing or seventy- two (72) hours after it has been deposited in the United States mail, first class, proper postage prepaid, addressed to the party to whom it is intended at the address set forth on page one of this Agreement or at such other address of which notice has been given in accordance herewith. 18. NON-WAIVER. The failure by any party at any time to enforce any of the provisions of this Subscriber Amendment or any right or remedy available hereunder or at law or in equity, or to exercise any option herein provided, shall not constitute a waiver of such provision, remedy or option or in any way affect the validity of this Subscriber Amendment. The waiver of any default by either Party shall not be deemed a continuing waiver, but shall apply solely to the instance to which such waiver is directed. 19. FORCE MAJEURE. Neither Subscriber nor Court shall be responsible for failure or delay in the performance of their respective obligations hereunder caused by acts beyond their reasonable control. 20. SEVERABILITY. Every provision of this Subscriber Amendment shall be construed, to the extent possible, so as to be valid and enforceable. If any provision of this Subscriber Amendment so construed is held by a court of competent jurisdiction to be invalid, illegal or otherwise unenforceable, such provision shall be deemed severed from this Subscriber Amendment, and all other provisions shall remain in full force and effect. 21. ASSIGNMENT AND BINDING EFFECT. Except as otherwise expressly permitted herein, neither Subscriber nor Court may assign, delegate and/or otherwise transfer this Subscriber Amendment or any of its rights or obligations hereunder without the prior written • consent of the other. This Subscriber Amendment shall be binding upon and inure to the benefit of the Parties hereto and their respective successors and assigns, including any other legal entity into, by or with which Subscriber may be merged,acquired or consolidated. 22. GOVERNING LAW. This Subscriber Amendment shall in all respects be governed by and interpreted, construed and enforced in accordance with the laws of the United States and of the State of Minnesota. 23. VENUE AND JURISDICTION. Any action arising out of or relating to this Subscriber Amendment, its performance,enforcement or breach will be venued in a state or federal court situated within the State of Minnesota. Subscriber hereby irrevocably consents and submits itself to the personal jurisdiction of said courts for that purpose. 24. INTEGRATION. This Subscriber Amendment contains all negotiations and agreements between the parties. No other understanding regarding this Subscriber Amendment, whether written or oral, may be used to bind either party, provided that all terms and conditions of the CJDN Subscriber Agreement and all previous amendments remain in full force and effect except as supplemented or modified by this Subscriber Amendment. IN WITNESS WHEREOF, the Parties have, by their duly authorized officers, executed this Subscriber Amendment in duplicate, intending to be bound thereby. 9 1. SUBSCRIBER(AGENCY) 2. DEPARTMENT OF PUBLIC SAFETY, BUREAU OF CRIMINAL APPREHENSION Subscriber must attach written verification of authority to sign on behalf of and bind the entity, Name: such as an op" 'on o se esolution. (PRINTED) Name: Signed: (PRINTED) Signed: /0cid Lcz Title: (with delegated authority) Title: 1-!4'c(�o Date: (with delegd authority) Date: /7ej 14/,070/4 3. COMMISSIONER OF ADMINISTRATION delegated to Materials Management Division By: Name: A4 Vf /'je kn;e ti 1- Date: (PRINTED) Signe L.4e4 4. COURTS � ®® j Authority granted to Bureau of Criminal Apprehension Title: Ci /�/ ..�1c6h.,567 1 iet©i" (with delegated authority) Name: (PRINTED) Date: /9 /c. / ,,26)/4 Signed: Title: (with authorized authority) Date: 10 SWIFT Contract#107080 MN0190200 STATE OF MINNESOTA JOINT POWERS AGREEMENT AUTHORIZED AGENCY This agreement is between the State of Minnesota,acting through its Department of Public Safety,Bureau of Criminal Apprehension("BCA")and the City of Farmington on behalf of its Police Department("Agency"). Recitals Under Minn.Stat. §471.59,the BCA and the Agency are empowered to engage in those agreements that are necessary to exercise their powers.Under Minn.Stat. §299C.46 the BCA must provide a criminal justice data communications network to benefit authorized agencies in Minnesota.The Agency is authorized by law to utilize the criminal justice data communications network pursuant to the terms set out in this agreement. In addition,BCA either maintains repositories of data or has access to repositories of data that benefit authorized agencies in performing their duties. Agency wants to access these data in support of its official duties. The purpose of this Agreement is to create a method by which the Agency has access to those systems and tools for which it has eligibility,and to memorialize the requirements to obtain access and the limitations on the access. Agreement 1 Term of Agreement 1.1 Effective date: This Agreement is effective on the date the BCA obtains all required signatures under Minn. Stat. § 16C.05,subdivision 2. 1.2 Expiration date: This Agreement expires five years from the date it is effective. 2 Agreement between the Parties 2.1 General access.BCA agrees to provide Agency with access to the Minnesota Criminal Justice Data Communications Network(CJDN)and those systems and tools which the Agency is authorized by law to access via the CJDN for the purposes outlined in Minn.Stat. §299C.46. 2.2 Methods of access. The BCA offers three(3)methods of access to its systems and tools. The methods of access are: _ A.Direct access occurs when individual users at the Agency use Agency's equipment to access the BCA's systems and tools. This is generally accomplished by an individual user entering a query into one of BCA's systems or tools. B.Indirect access occurs when individual users at the Agency go to another Agency to obtain data and information from BCA's systems and tools. This method of access generally results in the Agency with indirect access obtaining the needed data and information in a physical format like a paper report. C.Computer-to-computer system interface occurs when Agency's computer exchanges data and information with BCA's computer systems and tools using an interface. Without limitation,interface types include:state message switch,web services,enterprise service bus and message queuing. For purposes of this Agreement,Agency employees or contractors may use any of these methods to use BCA's systems and tools as described in this Agreement. Agency will select a method of access and can change the methodology following the process in Clause 2.10. 2.3 Federal systems access.In addition,pursuant to 28 CFR§20.30-38 and Minn. Stat. §299C.58,BCA may provide Agency with access to the Federal Bureau of Investigation(FBI)National Crime Information Center. 1 • • SWIFT Contract#107080 MN0190200 2.4 Agency policies.Both the BCA and the FBI's Criminal Justice Information Systems(FBI-CJIS)have policies, regulations and laws on access,use,audit,dissemination,hit confirmation,logging,quality assurance,screening(pre- employment),security,timeliness,training,use of the system,and validation. Agency has created its own policies to ensure that Agency's employees and contractors comply with all applicable requirements. Agency ensures this compliance through appropriate enforcement.These BCA and FBI-CJIS policies and regulations,as amended and updated from time to time,are incorporated into this Agreement by reference. The policies are available at https://app.dps.mn.gov/cj dn. 2.5 Agency resources. To assist Agency in complying with the federal and state requirements on access to and use of the various systems and tools,information is available at https://sps.x.state.mn.us/sites/bcaservicecatalog/default.aspx. Additional information on appropriate use is found in the Minnesota Bureau of Criminal Apprehension Policy on Appropriate Use of Systems and Data available at https://dps.mn.gov/divisions/bca/bca- divisions/mnj is/DocumentsBCA-Policy-on-Appropriate-Use-of-Systems-and-Data.pdf. 2.6 Access granted. A.Agency is granted permission to use all current and future BCA systems and tools for which Agency is eligible. Eligibility is dependent on Agency(i)satisfying all applicable federal or state statutory requirements;(ii) complying with the terms of this Agreement;and(iii)acceptance by BCA of Agency's written request for use of a specific system or tool. B.To facilitate changes in systems and tools,Agency grants its Authorized Representative authority to make- written requests for those systems and tools provided by BCA that the Agency needs to meet its criminal justice obligations and for which Agency is eligible. 2.7 Future access.On written request by Agency,BCA also may provide Agency with access to those systems or tools which may become available after the signing of this Agreement,to the extent that the access is authorized by applicable state and federal law. Agency agrees to be bound by the terms and conditions contained in this Agreement that when utilizing new systems or tools provided under this Agreement. 2.8 Limitations on access.BCA agrees that it will comply with applicable state and federal laws when making information accessible.Agency agrees that it will comply with applicable state and federal laws when accessing, entering,using,disseminating,and storing data. Each party is responsible for its own compliance with the most current applicable state and federal laws. 2.9 Supersedes prior agreements. This Agreement supersedes any and all prior agreements between the BCA and the Agency regarding access to and use of systems and tools provided by BCA. 2.10 Requirement to update information. The parties agree that if there is a change to any of the information whether required by law or this Agreement,the party will send the new information to the other party in writing within 30 days of the change. This clause does not apply to changes in systems or tools provided under this Agreement. This requirement to give notice additionally applies to changes in the individual or organization serving a city as its prosecutor. Any change in performance of the prosecutorial function must be provided to the BCA in writing by giving notice to the Service Desk,BCA.ServiceDesk@state.mn.us. 2.11 Transaction record. The BCA creates and maintains a transaction record for each exchange of data utilizing its systems and tools. In order to meet FBI-CJIS requirements and to perform the audits described in Clause 7,there must be a method of identifying which individual users at the Agency conducted a particular transaction. If Agency uses either direct access as described in Clause 2.2A or indirect access as described in Clause 2.2B,BCA's transaction record meets FBI-CJIS requirements. When Agency's method of access is a computer to computer interface as described in Clause 2.2C,the Agency must 2 SWIFT Contract#107080 MN0190200 keep a transaction record sufficient to satisfy FBI-CJIS requirements and permit the audits described in Clause 7 to occur. If an Agency accesses data from the Driver and Vehicle Services Division in the Minnesota Department of Public Safety and keeps a copy of the data,Agency must have a transaction record of all subsequent access to the data that are kept by the Agency. The transaction record must include the individual user who requested access,and the date, time and content of the request. The transaction record must also include the date,time and content of the response along with the destination to which the data were sent. The transaction record must be maintained for a minimum of six(6)years from the date the transaction occurred and must be made available to the BCA within one(1)business day of the BCA's request. 2.12 Court information access. Certain BCA systems and tools that include access to and/or submission of Court Records may only be utilized by the Agency if the Agency completes the Court Data Services Subscriber Amendment,which upon execution will be incorporated into this Agreement by reference. These BCA systems and tools are identified in the written request made by Agency under Clause 2.6 above. The Court Data Services Subscriber Amendment provides important additional terms,including but not limited to privacy(see Clause 8.2, below),fees(see Clause 3 below),and transaction records or logs,that govern Agency's access to and/or submission of the Court Records delivered through the BCA systems and tools. 2.13 Vendor personnel screening.The BCA will conduct all vendor personnel screening on behalf of Agency as is required by the FBI CJIS Security Policy. The BCA will maintain records of the federal,fingerprint-based background check on each vendor employee as well as records of the completion of the security awareness training that may be relied on by the Agency. 3 Payment The Agency agrees to pay BCA for access to the criminal justice data communications network described in Minn. Stat.§299C.46 as specified in this Agreement.The bills are sent quarterly for the amount of Two Hundred Seventy Dollars($270.00)or a total annual cost of One Thousand Eighty Dollars($1,080.00). Agency will identify its contact person for billing purposes,and will provide updated information to BCA's Authorized Representative within ten business days when this information changes. If Agency chooses to execute the Court Data Services Subscriber Amendment referred to in Clause 2.12 in order to access and/or submit Court Records via BCA's systems,additional fees,if any,are addressed in that amendment. 4 Authorized Representatives The BCA's Authorized Representative is Dana Gotz,Department of Public Safety,Bureau of Criminal Apprehension, Minnesota Justice Information Services, 1430 Maryland Avenue,St.Paul,MN 55106,651-793-1007,or her successor. The Agency's Authorized Representative is Chief Brian Lindquist, 19500 Muncipal Drive,Farmington,MN 55024, (651)280-6700,or his/her successor. 5 Assignment,Amendments,Waiver,and Contract Complete 5.1 Assignment.Neither party may assign nor transfer any rights or obligations under this Agreement. 5.2 Amendments.Any amendment to this Agreement,except those described in Clauses 2.6 and 2.7 above must be in writing and will not be effective until it has been signed and approved by the same parties who signed and approved the original agreement,their successors in office,or another individual duly authorized. 5.3 Waiver.If either party fails to enforce any provision of this Agreement,that failure does not waive the provision or the right to enforce it. 5.4 Contract Complete.This Agreement contains all negotiations and agreements between the BCA and the Agency. No other understanding regarding this Agreement,whether written or oral,may be used to bind either party. 3 SWIFT Contract#107080 MN0190200 6 Liability Each party will be responsible for its own acts and behavior and the results thereof and shall not be responsible or liable for the other party's actions and consequences of those actions.The Minnesota Torts Claims Act,Minn. Stat. § 3.736 and other applicable laws govern the BCA's liability. The Minnesota Municipal Tort Claims Act,Minn.Stat. Ch.466,governs the Agency's liability. 7 Audits 7.1 Under Minn.Stat.§ 16C.05,subd.5,the Agency's books,records,documents,internal policies and accounting procedures and practices relevant to this Agreement are subject to examination by the BCA,the State Auditor or Legislative Auditor,as appropriate,for a minimum of six years from the end of this Agreement.Under Minn.Stat.§ 6.551,the State Auditor may examine the books,records,documents,and accounting procedures and practices of BCA.The examination shall be limited to the books,records,documents,and accounting procedures and practices that are relevant to this Agreement. 7.2 Under applicable state and federal law,the Agency's records are subject to examination by the BCA to ensure compliance with laws,regulations and policies about access,use,and dissemination of data. 7.3 If Agency accesses federal databases,the Agency's records are subject to examination by the FBI and Agency will cooperate with FBI examiners and make any requested data available for review and audit. 7.4 To facilitate the audits required by state and federal law,Agency is required to have an inventory of the equipment used to access the data covered by this Agreement and the physical location of each. 8 Government Data Practices 8.1 BCA and Agency. The Agency and BCA must comply with the Minnesota Government Data Practices Act, Minn.Stat.Ch. 13,as it applies to all data accessible under this Agreement,and as it applies to all data created, collected,received,stored,used,maintained,or disseminated by the Agency under this Agreement.The remedies of Minn.Stat.§§ 13.08 and 13.09 apply to the release of the data referred to in this clause by either the Agency or the BCA. 8.2 Court Records.If Agency chooses to execute the Court Data Services Subscriber Amendment referred to in Clause 2.12 in order to access and/or submit Court Records via BCA's systems,the following provisions regarding data practices also apply. The Court is not subject to Minn.Stat.Ch. 13(see section 13.90)but is subject to the Rules of Public Access to Records of the Judicial Branch promulgated by the Minnesota Supreme Court. All parties acknowledge and agree that Minn.Stat. § 13.93,subdivision 4(e)requires that the BCA and the Agency comply with the Rules of Public Access for those data received from Court under the Court Data Services Subscriber Amendment. All parties also acknowledge and agree that the use of,access to or submission of Court Records,as that term is defined in the Court Data Services Subscriber Amendment,maybe restricted by rules promulgated by the Minnesota Supreme Court,applicable state statute or federal law. All parties acknowledge and agree that these applicable restrictions must be followed in the appropriate circumstances. 9 Investigation of alleged violations;sanctions For purposes of this clause,"Individual User"means an employee or contractor of Agency. 9.1 Investigation.Agency and BCA agree to cooperate in the investigation and possible prosecution of suspected violations of federal and state law referenced in this Agreement.Agency and BCA agree to cooperate in the investigation of suspected violations of the policies and procedures referenced in this Agreement.When BCA becomes aware that a violation may have occurred,BCA will inform Agency of the suspected violation,subject to any restrictions in applicable law.When Agency becomes aware that a violation has occurred,Agency will inform BCA subject to any restrictions in applicable law. 9.2 Sanctions Involving Only BCA Systems and Tools. The following provisions apply to BCA systems and tools not covered by the Court Data Services Subscriber 4 • SWIFT Contract#107080 MN0190200 Amendment.None of these provisions alter the Agency's internal discipline processes,including those governed by a collective bargaining agreement. 9.2.1 For BCA systems and tools that are not covered by the Court Data Services Subscriber Amendment,Agency must determine if and when an involved Individual User's access to systems or tools is to be temporarily or permanently eliminated.The decision to suspend or terminate access may be made as soon as alleged violation is discovered,after notice of an alleged violation is received,or after an investigation has occurred. Agency must report the status of the Individual User's access to BCA without delay.BCA reserves the right to make a different determination concerning an Individual User's access to systems or tools than that made by Agency and BCA's determination controls. . 9.2.2 If BCA determines that Agency has jeopardized the integrity of the systems or tools covered in this Clause 9.2, BCA may temporarily stop providing some or all the systems or tools under this Agreement until the failure is remedied to the BCA's satisfaction.If Agency's failure is continuing or repeated,Clause 11.1 does not apply and BCA may terminate this Agreement immediately. 9.3 Sanctions Involving Only Court Data Services The following provisions apply to those systems and tools covered by the Court Data Services Subscriber Amendment,if it has been signed by Agency.As part of the agreement between the Court and the BCA for the delivery of the systems and tools that are covered by the Court Data Services Subscriber Amendment,BCA is required to suspend or terminate access to or use of the systems and tools either on its own initiative or when directed by the Court. The decision to suspend or terminate access may be made as soon as an alleged violation is discovered, after notice of an alleged violation is received,or after an investigation has occurred. The decision to suspend or terminate may also be made based on a request from the Authorized Representative of Agency. The agreement further provides that only the Court has the authority to reinstate access and use. 9.3.1 Agency understands that if it has signed the Court Data Services Subscriber Amendment and if Agency's Individual Users violate the provisions of that Amendment,access and use will be suspended by BCA or Court. Agency also understands that reinstatement is only at the direction of the Court. 9.3.2 Agency further agrees that if Agency believes that one or more of its Individual Users have violated the terms of• the Amendment,it will notify BCA and Court so that an investigation as described in Clause 9.1 may occur. 10 Venue Venue for all legal proceedings involving this Agreement,or its breach,must be in the appropriate state or federal court with competent jurisdiction in Ramsey County,Minnesota. • 11 Termination 11.1 Termination. The BCA or the Agency may terminate this Agreement at any time,with or without cause,upon 30 days'written notice to the other party's Authorized Representative. 11.2 Termination for Insufficient Funding.Either party may immediately terminate this Agreement if it does not obtain funding from the Minnesota Legislature,or other funding source;or if funding cannot be continued at a level sufficient to allow for the payment of the services covered here.Termination must be by written notice to the other party's authorized representative.The Agency is not obligated to pay for any services that are provided after notice and effective date of termination.However,the BCA will be entitled to payment,determined on a pro rata basis,for services satisfactorily performed to the extent that funds are available.Neither party will be assessed any penalty if the agreement is terminated because of the decision of the Minnesota Legislature,or other funding source,not to appropriate funds.Notice of the lack of funding must be provided within a reasonable time of the affected party receiving that notice. 12 Continuing obligations The following clauses survive the expiration or cancellation of this Agreement:6.Liability;7.Audits;8.Government Data Practices;9.Investigation of alleged violations;sanctions;and 10.Venue. 5 A SWIFT Contract#107080 MN0190200 The parties indicate their agreement and authority to execute this Agreement by signing below. 1. AGENCY 2. DEPARTMENT OF PUBLIC SAFETY,BUREAU OF CRIMINAL APPREHENSION ^7 Name: ?o c/," Lc /-5e:417 4%/ (PRINTED) Name: (PRINTED) Signed. f ,r Signed: Title: Al y p (with delegated authority) Title: (with delegated authority) Date: /l'len_cf /4, „�t /( •! Date: 3. COMMISSIONER OF ADMINISTRATION Name: (2a W i �C/f yj n/r delegated to Materials Management Division (PRINTED) V 66-: By: Signed: Date: Title: aft/ .,46Yizir�i i 5 A•"'/o.r (with delegated authority) Date: Me" /c, a®/6 6 4 qty City of Farmington 430 Third Street za Farmington,Minnesota o 651.280.6800 -Fax 651.280.6899 ''�.,, www.cifarmington.mn.us TO: Mayor, Councilmembers and City Administrator FROM: Brian Lindquist, Police Chief SUBJECT: Adopt Resolution in Support of the Dakota County All Hazard Mitigation Plan Process-Police/Fire DATE: May 16, 2016 INTRODUCTION In 2010 the City of Farmington partnered with Dakota County and several other cities within the county to prepare a plan that would make sure our communities would be eligible for Federal Emergency Management Agency (FEMA) funds to mitigate and recover from disaster. This multi-jurisdictional plan is called the Dakota County All-Hazards Mitigation Plan. It was approved in 2011; however, FEMA requires the plan be updated every five years.An updated plan is due in 2016. DISCUSSION The Police Department and Fire Department will work jointly with the Dakota County Emergency Preparedness Committee to evaluate hazards and provide plans to mitigate those dangers. This planning will take place over the course of the next six months. BUDGET IMPACT There is no budget impact to the City of Farmington ACTION REQUESTED Approve the resolution allowing the city to participate the all hazard mitigation planning process. ATTACHMENTS: Type Description D Cover Memo All Hazards itigation Resolution CITY OF FARMINGTON RESOLUTION NO. R43-16 RESOLUTION TO PARTICIPATE IN ALL HAZARD MITIGATION PLANNING PROCESS Pursuant to due call and notice thereof, a regular meeting of the City Council of the city of Farmington, Minnesota, was held in the Council Chambers of said city on the 16th day of May 2016 at 7:00 p.m. Members Present: Larson,Bartholomay, Bonar, Donnelly, Pitcher Members Absent: None Member Bartholomay introduced and Member Bonar seconded the following: WHEREAS,the County of Dakota coordinated preparation of an initial multi jurisdiction all- hazard mitigation planning process as established under the Disaster Mitigation Act of 2000; and WHEREAS,the city of Farmington participated in drafting the plan, and later reviewed and approved the plan; and WHEREAS, federal law requires the plan be updated every five years, and WHEREAS,the Act requires public involvement and local coordination among local units of government and businesses as part of the planning process; and WHEREAS, the plan must include descriptions of land uses and development trends,risk assessment including past hazards, hazards that threaten the county,maps of hazards, and estimates of structures at risk; and WHEREAS,the plan must include a mitigation strategy including goals and objectives and an action plan identifying specific mitigation projects and costs, in addition to ; and a maintenance or implementation process including plan updates, integration of the plan into other planning documents, and public education components; and WHEREAS, approval of the all hazard mitigation plan update will continue the county's eligibility to receive federal and state Hazard Mitigation Grant Program project grants; and WHEREAS,this resolution does not preclude the city of Farmington from preparing its own plans sometime in the future should they desire to do so. NOW THEREFORE BE IT RESOLVED,that the city of Farmington supports the county all hazard mitigation planning effort, agrees to participate with the county in preparing an update to the multi jurisdictional plan and recognizes that the plan will apply within the townships. Adopted on this 16th day of May 2016. Mayor Administrator o t► , City of Farmington 7 430 Third Street Farmington, Minnesota ec`o 651.280.6800 -Fax 651.280.6899 •„ www.ci.farmington.mn.us TO: Mayor, Councihnembers and City Administrator FROM: Randy Distad, Parks and Recreation Director SUBJECT: Adopt Resolution Accepting Donation to the Rambling River Center-Parks DATE: May 16,2016 INTRODUCTION A donation was recently made to the Rambling River Center by Happy Harry's Furniture. DISCUSSION A cash donation of$203.90 was made by Happy Harry's Furniture to the Rambling River Center. The donation was made through a program created in 2011, in which a customer of Happy Harry's Furniture is able to select a charity of their choice to receive a donation when merchandise is purchased from the store and then 10% from the sale to the customer is donated to the charity. The Rambling River Center is one of the charities that can be selected. With this most recent donation,Happy Harry's Furniture has donated a total of$7,612.43 to the Rambling River Center since the program's inception. This donation has been deposited into the Rambling River Center Capital Improvement Fund. Staff will communicate the city's appreciation on behalf of the Council to Happy Harry's Furniture, for their generous donation to the Rambling River Center. BUDGET IMPACT NA ACTION REQUESTED Adopt the attached resolution accepting the donation of$203.90 from Happy Harry's Furniture to the Rambling River Center. ATTACHMENTS: Type Description © Resolution Rambling River Center Donation RESOLUTION NO. R44-16 ACCEPT CASH DONATION TO THE RAMBLING RIVER CENTER FROM HAPPY HARRY'S FURNITURE Pursuant to due call and notice thereof, a regular meeting of the City Council of the city of Farmington, Minnesota,was held in the Council Chambers of said city on the 16th day of May, 2016 at 7:00 p.m. Members Present: Larson, Bartholomay, Bonar, Donnelly, Pitcher Members Absent: None Member Bartholomay introduced and Member Bonar seconded the following: WHEREAS, a$203.90 donation was made by Happy Harry's Furniture to the Rambling River Center; and, WHEREAS, it is required by State Statute that this donation be formally accepted; and, WHEREAS, it is in the best interest of the city to accept this donation. NOW,THEREFORE,BE IT RESOLVED the city of Farmington hereby accepts with gratitude the generous donation of$203.90 from Happy Harry's Furniture to the Rambling River Center. This resolution adopted by recorded vote of the Farmington City Council in open session on the 16th day of May, 2016. Mayor Attested to the 1) day of May, 2016. rty Administrator SEAL o�F�R City of Farmington per, 430 Third Street Farmington, Minnesota 11/4 , y. 651.280.6800 -Fax 651.280.6899 444;*;PROP wwwctfarmington.mn.us TO: Mayor, Councilmembers and City Administrator FROM: Randy Distad, Parks and Recreation Director SUBJECT: Adopt Resolution Accepting Donations from Farmington Youth Hockey Association for Purchase of an AED and Lumber for New Hockey Boards -Parks DATE: May 16, 2016 INTRODUCTION The Farmington Youth Hockey Association(FYHA)is making two cash donations to the city. One donation will be used to purchase an AED for the city's warming house. The second donation will be used to purchase lumber materials that will be used to replace the existing plastic hockey boards at North Creek Park. DISCUSSION FYHA is making a donation of$1,259.00 that is made on the condition it be used for the purchase of a new AED machine for the city's warming house in Rambling River Park,which is located just south of Levi Dodge Middle School. Currently there is not an AED dedicated entirely for use at the warming house, so this will be a welcome addition. A second donation of$3,517.46 is being made by FYHA, so the purchase of new lumber materials can be made to replace the existing plastic hockey boards with new wood hockey boards. The current plastic hockey boards are no longer being made and it has been difficult to find replacement boards. The city has received 10 years of use from the current plastic boards. This is an excellent opportunity for the city to work with FYHA to replace the hockey boards through this donation from FYHA. The replacement of the current plastic hockey boards with new wood hockey boards will benefit both the city and FYHA long term. Staff will communicate the city's appreciation on behalf of the city council to FYHA for these two generous donations. BUDGET IMPACT NA ACTION REQUESTED Approve the attached resolution accepting the donations of$1,259.00 and$3,517.46 from FYHA for the purchase of a new AED at the city's warming house located in Rambling River Park and purchase new lumber materials for the replacement of the plastic hockey boards with new wood hockey boards in North Creek Park. ATTACHMENTS: Type Description D Resolution FYHA Donations RESOLUTION NO.R45-16 ADOPT RESOLUTION ACCEPT DONATIONS FROM FARMINGTON YOUTH HOCKEY ASSOCIATION TO PURCHASE NEW AED MACHINE FOR CITY'S WARMING HOUSE AND NEW HOCKEY BOARDS FOR NORTH CREEK PARK Pursuant to due call and notice thereof, a regular meeting of the City Council of the city of Farmington, Minnesota,was held in the Council Chambers of said City on the 16th day of May,2016 at 7:00 p.m. Members Present: Larson, Bartholomay, Bonar, Donnelly,Pitcher Members Absent: None Member Bartholomay introduced and Member Bonar seconded the following: WHEREAS, Farmington Youth Hockey Association is making two separate cash donations of $1,259.00 and$3,517.46 to the city; and, WHEREAS, the cash donation of$1,259.00 is being made so the city can purchase a new AED machine for the warming house in Rambling River Park; and, WHEREAS, the cash donation of$3,517.46 will be used to purchase lumber materials for new hockey boards at North Creek Park; and, WHEREAS, it is required by State Statute and in the best interest of the city to accept these donations. NOW,THEREFORE,BE IT RESOLVED that the city of Farmington hereby accepts with gratitude the generous donations from the Farmington Youth Hockey Association in the amount of$1,259.00 to purchase a new AED machine for the warming house in Rambling River Park and in the amount of $3,517.46 for the purchase of lumber materials for new hockey boards at North Creek Park. This resolution adopted by recorded vote of the Farmington City Council in open session on the 16th day of May, 2016. Mayor Attested to this /• day of May, 2016. Ott; .1 -1 City Administrator SEAL Ali City of Farmington 430 Third Street o Farmington, Minnesota `ya 651.280.6800 -Fax 651.280.6899 444.•,, $ www ci.farmmgton.mn.us TO: Mayor, Councilmembers and City Administrator FROM: Randy Distad,Parks and Recreation Director SUBJECT: Adopt Resolution Accepting Donation from the Farmington Youth Hockey Association for a New Sound System-Parks DATE: May 16,2016 INTRODUCTION The Farmington Youth Hockey Association(FYHA)recently made a donation to the city to assist with purchasing a new sound system. DISCUSSION FYHA has made a donation of$7,500.00 that was made on the condition it be used for the purchase of a new sound system for the arena. This money has been deposited into the arena's Capital Improvement Fund, so it may be used for this purchase. Staff will communicate the city's appreciation on behalf of the city council to FYHA for this generous donation. BUDGET IMPACT NA ACTION REQUESTED Approve the attached resolution accepting the donation of$7,500.00 from FYHA for the purchase of a new sound system. ATTACHMENTS: Type Description 0 Resolution FYHA Donation RESOLUTION NO. R46-16 ADOPT RESOLUTION ACCEPT$7,500.00 DONATION FROM FARMINGTON YOUTH HOCKEY ASSOCIATION TO SCHMITZ-MAKI ARENA FOR NEW SOUND SYSTEM Pursuant to due call and notice thereof,a regular meeting of the City Council of the City of Farmington, Minnesota, was held in the Council Chambers of said city on the 16th day of May, 2016 at 7:00 p.m. Members Present: Larson, Bartholomay, Bonar, Donnelly,Pitcher Members Absent: None Member Bartholomay introduced and Member Bonar seconded the following: WHEREAS, a donation of$7,500.00 has been given by the Farmington Youth Hockey Association to Schmitz-Maki Arena; and, WHEREAS, the donation was given to help with the purchase of a new sound system for Schmitz-Maki Arena; and, WHEREAS, it is required by State Statute and in the best interest of the city to accept this donation. NOW,THEREFORE,BE IT RESOLVED that the city of Farmington hereby accepts with gratitude the generous donation of$7,500.00 from the Farmington Youth Hockey Association to Schmitz-Maki Arena for the purchase of a new sound system . This resolution adopted by recorded vote of the Farmington City Council in open session on the 16th day of May, 2016. Mayor Attested to this 04 day of May, 2016. City Administra r� SEAL 40%^ City of Farmington ca 430 Third Street • Farmington,Minnesota 651.280.6800 -Fax 651.280.6899 o ' •„ � www cifarmington.mn.us TO: Mayor, Counciltnembers and City Administrator FROM: Lena Larson,Municipal Services Coordinator SUBJECT: Approve Request to Waive Fees for 2016 Dew Days Celebration-Municipal Services DATE: May 16, 2016 INTRODUCTION Permits and fees would normally be required for events related to the 2016 Dew Days celebration. DISCUSSION The Dew Days Committee is requesting that the city council waive the fees for the permits and fees required for the Dew Days celebration. The city council has approved the waiver of these fees in past years. BUDGET IMPACT The following is a listing of events and services and the established fees for each; Tent Permit(MN State Fire Code,Section 105.6.43)2016 Fee @$40.00 Each Name of Event Location of Event Main tent for events Rambling River Center parking lot Exhibition Temporary Outdoor(Ord 3-17-4)2016 Fee @$15.00 Each Name of Event Location of Event Dew Days activities Rambling River Center parking lot Transient Merchant Permit(Ord 3-18-1)2016 Temporary Fee @$45.00 Each Name of Event Location of Event Art Fair&Business Expo Downtown City Facility 2016 Rental Fees Name of Event Location Fee Beer Garden Rambling River Center Garage $555.00 Garbage collection Fees 20 temporary 60-90 gallon carts collected 4 times $420.00 4 temporary 300 gallon carts collected 4 times $200.00 Total Amount of Fees Waived for 2016 Dew Days Celebration $1275.00 These fees for the Dew Days celebration were not budgeted as revenue in the city's 2016 budget. ACTION REQUESTED Approve the request to waive fees for the 2016 Dew Days celebration. In addition, authorize the city administrator to review and potentially waive other fees that may arise in the process of the festival preparation. a Fty City of Farmington � p 430 Third Street R'' Farmington,Minnesota o ' 651.280.6800 -Fax 651.280.6899 .4,8004 www.ci.farmington.mn.us TO: Mayor, Councilmembers and City Administrator FROM: Adam Kienberger, Community Development Director SUBJECT: Vermillion River Crossings Fifth Amendment to Development Contract-Community Development DATE: May 16, 2016 INTRODUCTION In an effort to facilitate the development of the Vermillion River Crossings development, staff recommends approving the Fifth Amendment to Development Contract between the City of Farmington and Farmington Land, LLC. DISCUSSION As a priority of both the city council and the Economic Development Authority (EDA), staff has been actively working with representatives of the Vermillion River Crossings parcels to outline a process that would facilitate development of these properties. The recommended development contract amendment allows for additional deferment and/or potential forgiveness of the outstanding special assessments for Outlots A and C through the execution of a business subsidy agreement. Any potential business subsidy agreement would require a public hearing and adhere to MN Statute 1161997. The property owners have agreed to this development contract amendment and have executed their portion of the agreement as attached. BUDGET IMPACT NA ACTION REQUESTED Approve the attached Fifth Amendment to Development Contract between the City of Farmington and Farmington Land,LLC. ATTACHMENTS: Type Description © Contract 5th Amendment to Development Contract FIFTH AMENDMENT TO DEVELOPMENT CONTRACT THIS FH4 TH AMENDMENT TO DEVELOPMENT CONTRACT(the"Amendment")dated this day of ,2016,by,between and among the CITY OF FARMINGTON,a Minnesota municipal corporation("City"),and FARMINGTON LAND,LLC,a Delaware limited f liability company("Developer"). RECITALS A. Developer is the fee owner of the property within the City of Farmington,Dakota County, Minnesota,legally described in Exhibit A(the"Property"). B. The City and Developer's predecessor in interest entered into that certain Development Contract dated August 1,2005,recorded October 26,2005 in the office of the Dakota County Recorder as Document No.2374405(the"Development Contract")related to the Property. C. The Developer assigned the Development Contract to the Lender for collateral purposes pursuant to that certain Assignment of Development Contract and Development Rights dated September 9,2005(the"Collateral Assignment"). D. The Development Contract was modified by the following: (i) First Amendment to Development Contract dated May 15,2006,recorded in the office of the Dakota County Recorder as Document No.2431735 (the"First Amendment"); (ii) Second Amendment to Development Contract Contract dated September 24,2007, recorded in the office of the Dakota County Recorder as Document No.2548303 (the"Second Amendment");and 184721v1 (iii) Third Amendment to Development Contract Contract dated December 15,2008, recorded in the office of the Dakota County Recorder as Document No.2632971 (the"Third Amendment");and (iv) Fourth Amendment to Development Contract dated May 4,2009,recorded in the office of the Dakota County Recorder as Document No.2682049(the"Fourth Amendment"); (collectively referred to herein as the"Amendments"). E. The Development Contract provided for special assessments to be levied against the Property for the Spruce Street construction costs; F. The Developer has requested that the special assessments for the Property be deferred until development of the Property and that the City consider a business subsidy agreement for future development of the Property; NOW, THEREFORE, the City and Developer, in consideration of the executed Development Contract,the Amendments,and the mutual promises and covenants contained herein,now mutually agree to amend the existing Development Contract by modifying the Development Contract as follows: 1. ASSESSMENTS. The assessment required for the construction of Spruce Street under paragraph 6 of the Development Contract and paragraph 2 of the First Amendment identified as Assessment #140368 shall be deferred for the Property until five (5) years after sale of the Property by Developer. Upon the termination of the deferment, the assessments shall be re-assessed over a 15 year period at 5.70% interest rate (consistent with paragraph 2 of the First Amendment) with the first year becoming payable in the 6th year following the sale. Developer and the City may enter into a mutually agreeable business subsidy agreement in connection with the development of the Property providing for forgiveness of the assessments. If the parties enter into a business subsidy agreement that provides for forgiveness of the assessments, the assessments shall terminate upon execution and recording of the business subsidy agreement. 2. TAX ABATEMENT. The City and Developer did not enter into a tax abatement agreement as provided under paragraphs 6 of the Development Contract and paragraph 3 of the First Amendment. The tax abatement provisions of the Development Contract and First Amendment shall be of no further force or effect. 3. ESTOPPEL. The City hereby acknowledges that, except for payment of the assessment required for the construction of Spruce Street described in the Contract and the Amendments, in the amounts allocable to the owner of the Property, the obligations of Developer set for in the Contract and Amendments have been satisfied as to the Property and Lot 1, Bock 1 of Vermillion River Crossings ("Lot 1"), and the City shall not look to the owner of the Property or Lot 1 for performance of any obligations of Developer pursuant to the Contract and Amendments. 4. Except as specifically provided herein, the Development Contract remain unchanged and in full force and effect.Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Development Contract. 184721v1 CITY OF FARMINGTON BY: Todd Larson,Mayor AND: David McKnight,City Administrator STATE OF MINNESOTA ) (ss. COUNTY OF DAKOTA ) The foregoing instrument was acknowledged before me this day of 2016, by Todd Larson and by David McKnight, respectively the Mayor and City Administrator of the City of Farmington, a Minnesota municipal corporation, on behalf of the corporation and pursuant to the authority granted by its City Council. NOTARY PUBLIC } 184721v1 DEVELOPER FARMINGTON LAND,LLC By:DF Services Its:Manager By:Dougherty Funding LLC Its: Sole Member By: -r'CI N / Title: 5. e STATE OF MINNESOTA ) (ss. COUNTY OF DAKOTA ) The f9ragoing instrument was acknowledged before me this B. day of riPY , 2016, by - ,het`./ the f1/Jif ffaa./4/ of Farmington Land, LLC, a Delawj a limited liability company, on beEIalf of the company. NOTA Y PUBLI -F 1(`a KAREN J RYAN NOTARY PUBLIC-MINNESOTA 1r MY COMMISSION EXPIRES 01/3112018 DRAFTED BY: CAMPBELL KNUTSON Professional Association Grand Oak Office Center I 860 Blue Gentian Road,Suite 290 Eagan,Minnesota 55121 Telephone:(651)452-5000 AMP 184721v1 1 EXHIBIT A Legal Description of Property Outlots A and C,Vermillion River Crossings,County of Dakota,State of Minnesota,according to the recorded plat thereof,except that portion of Outlot C replatted as part of Vermillion River Crossings Second Addition. 184721v1 O City of Farmington 430 Third Street Farmington,Minnesota �o 651.280.6800 -Fax 651.280.6899 .,,pR,,,� www.ci.farmington.mn.us TO: Mayor,Councilmembers and City Administrator FROM: Brenda Wendlandt,Human Resources Director SUBJECT: Approve Seasonal Hiring-Human Resouces DATE: May 16, 2016 INTRODUCTION The recruitment and selection process for the appointment of the attached list of summer seasonal staff has been completed. DISCUSSION After a thorough review by the Parks and Recreation Department and the Human Resources Office, offers of employment have been made to the individuals show on the attached spreadsheet, subject to ratification by city council. BUDGET IMPACT These positions are included in various departmental budgets. ACTION REQUESTED By motion approve the attached seasonal employment recommendations. ATTACHMENTS: Type Description © Backup Material Summer Seasonal Staff 2016 Spring/Summer Seasonal Staff 2015-16 Name Pay Rate Pos/Step RETURNING ARENA AND PARK MAINTENANCE STAFF Luke Johnson $ 10.07 Step 2-Arena Supervisor $ 10.16 Step 1-Park Maintenance Adam Roschen $ 10.07 Step 2-Arena Supervisor $ 10.16 Step 1-Park Maintenance Hunter Siegler $ 10.07 Step 2-Arena Supervisor $ 10.16 Step 1-Park Maintenance Tyler Wenck $ 10.07 Step 2-Arena Supervisor $ 10.16 Step 1-Park Maintenance Matt Thompson $ 10.16 Step 1-Park Maintenance Darrell Valek $ 10.44 Step 2-Park Maintenance Brandi Adelman $ 14.46 Step 2-Head Skating Instructor Brittnee Pawson $ 14.46 Step 2-Head Skating Instructor Michele Becker $ 14.46 Step 2-Head Skating Instructor Hannalove Langseth $ 10.72 Step 2-Skating Instructor Allison Peterson $ 10.72 Step 2-Skating Instructor Abigail Sliva $ 10.72 Step 2-Skating Instructor NEW ARENA STAFF Rina Kranz $ 10.43 Step 1-Skating Instructor RETURNING RECREATION STAFF Nicholas Hinnenkamp $ 9.00 Step 1-Recreation Assistant Kiley Foss $ 9.00 Step 1-Recreation Assistant Yazmin Navarro-Lopez $ 9.00 Step 1-Recreation Assistant NEW RECREATION STAFF Breanna Raske $ 9.00 Step 1-Recreation Assistant Sarah Swearingen $ 12.70 Step 1-Program Supervisor Bridget Lensing $ 9.00 Step 1-Recreation Assistant $ 13.76 Step 1-Assistant Tennis Coach Derek Cole $ 9.00 Step 1-Recreation Assistant $ 9.91 Step 1-Tennis Instructor o FttR,f City of armington Street Farmington,Minnesota o 651.280.6800 -Fax 651.280.6899 ' .,, o' www.ci.fatmington.mn.us TO: Mayor, Councilmembers and City Administrator FROM: Robin Hanson, Finance Director SUBJECT: Approve Bills-Finance DATE: May 16, 2016 INTRODUCTION Attached is the list of bills for April 23 through May 6, 2016. 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U rn id o co N o p, W VI a C o Q a '� 0 0 U o O = CO 7 Q Co 0 W c 7 .0a XQO g CO czi W J 7 co z Q rd m OI W 0) y alin Z co co W N OI N Z 7I o 0 a 0 m rn 0 I-� LL U fO Zi 0 4 W O t. ° 7 N •• U] H RiZ U U U a a ,KG 0 0 H Kt o Kt a co A a > V x J I A€ R a � Z 4 V.:.l � — Tii g O J is a v 2 `o W tt m p o 41 N v a) d v W v Co o Q in 3 v v O m s� mi g In `o V C a 03 J o a Lll o m m — m W W a F °o 'C a $ CO 0 II c3 c) Ce 0 N N e j d' d' ti O T }} °m E Z U Q 0 0 17i. fO g OJ 0 3 N 0 W U E O U m N CO T U a # W Co U 'n .0 S 'O° 10 m LO z° r n `" m 0 o 0 Q�F City of Farmington 430 Third Street Farmington,Minnesota 651.280.6800 -Fax 651.280.6899 .A `4°.. www ci.farmington.mn.us TO: Mayor, Councilmembers and City Administrator FROM: Randy Distad, Parks and Recreation Director SUBJECT: Approve Agreement Purchase and Installation of Sound System at Schmitz-Maki Arena DATE: May 16, 2016 INTRODUCTION The existing sound system at Schmitz-Maki Arena is old and no longer functions correctly. As a result, a request is being made of the city council to replace it with a new sound system. DISCUSSION The current sound system was installed in the 1990's. There are issues that have been occurring that has compromised the quality of the current sound system. It cuts out and no longer functions the way it should. This creates issues when games are being announced and music is being played. As a result of the current system malfunctioning proposals were solicited from four different vendors for a new sound system to be installed. Staff met at the arena with each of the contractors and outlined the scope of the project.Attached as Exhibit A, is the tabulation of the proposals received for the installation of a new sound system in the Arena. Each proposal submitted specified a different name brand of sound equipment. Staff is recommending the proposal from RAV Technologies be approved. While the proposal had an expiration date of 30 days from when it was submitted and has since expired, staff checked with the company and learned the company is still willing to honor the price that was proposed. Attached is an agreement form for the purchase and installation of the new sound system from RAV Technologies that the city council is being asked to approve. BUDGET IMPACT The cost of the new sound system being purchased and installed by RAV Technologies is proposed at $15,271.00. It is recommended the funds to cover the cost to purchase and install the new sound system will come from the following sources: • $7,500.00 from a donation made by Farmington Youth Hockey Association,which the city council was asked to accept in the consent agenda at tonight's meeting • $7,771.00 from a transfer of Liquor Store profits ACTION REQUESTED Staff is requesting the city council approve the attached agreement with RAV Technologies for the purchase and installation of a new sound system at the arena. ATTACHMENTS: Type Description D Exhibit Sound System Proposal Tabulation Form t Contract Agreement Form Exhibit A 2016 Schmitz-Maki Arena Sound System Proposal Tabulation Form Name of Contractor Quote Submitted RAV Technologies $15,271.00 Electronic Design Company $27,238.00 Sports Technology, Inc. $32,286.00 Farber Sound $33,166.00 . . • f AGREEMENT AGREEMENT made this /6.v4 day of ? , 2016, between the CITY OF FARMINGTON, a Minnesota municipal corporation ("City"), and RAV TECHNOLOGIES,a Minnesota corporation("Contractor"). IN CONSIDERATION OF THE MUTUAL UNDERTAKINGS HEREIN CONTAINED,THE PARTIES AGREE AS FOLLOWS: 1. CONTRACT DOCUMENTS. The following documents shall be referred to as the "Contract Documents", all of which shall be taken together as a whole as the contract between the parties as if they were set verbatim and in full herein: A. This Agreement B. Contractor Proposal dated February 26,2016,attached as Exhibit"A." In the event of conflict among the provisions of the Contract Documents,the order in which they are listed above shall control in resolving any such conflicts with Contract Document "A" having the first priority and Contract Document"B"having the last priority. 2. OBLIGATIONS OF THE CONTRACTOR The Contractor shall provide the goods,services,and perform the work in accordance with the Contract Documents. 3. OBLIGATIONS OF THE CITY. The City shall pay the Contractor in accordance with the bid. 4. SOFTWARE LICENSE. If the equipment provided by the Contractor pursuant to this Contract contains-software,including that which the manufacturer may have embedded into the hardware as an integral part of the equipment,the Contractor shall pay all software licensing fees. The Contractor shall also pay for all software updating fees for a period of one year following cutover. The Contractor shall have no obligation to pay for such fees thereafter. Nothing in the software license or licensing agreement shall obligate the City to pay any additional fees as a condition for continuing to use the software. 5. ASSIGNMENT. Neither party may assign, sublet, or transfer any interest or obligation in this Contract without the prior written consent of the other party,and then only upon such terms and conditions as both parties may agree to and set forth in writing. .6. TIME OF PERFORMANCE. The Contractor shall complete its obligations on or before August 31,2016. 7. PAYMENT. a. When the obligations of the Contractor have been fulfilled,inspected,and accepted, the City shall pay the Contractor$15,271.00.Such payment shall be made not later than thirty(30) days after completion,certification thereof,and invoicing by the Contractor. b. No final payment shall be made under this Contract until Contractor has satisfactorily established compliance with the provisions of Minn. Stat. Section 290.92. A certificate of the commissioner shall satisfy this requirement with respect to the Contractor or any subcontractor, S. EXTRA SERVICES. No claim will be honored for compensation for extra services or beyond the scope of this Agreement or the not-to-exceed price for the services identified in the proposal without written submittal by the Contractor,and approval of an amendment by the City, with specific estimates of type, tune, and maximum costs, prior to commencement of the work. 9. PROMPT PAYMENT TO SUBCONTRACTORS. Pursuant to Minnesota Statute 471.25, Subdivision 4a,the Contractor must pay any subcontractor within ten(10)days of the Contractor's receipt of payment from the City for undisputed services provided by the subcontractor. The Contractor must pay interest of one and one-half percent(1!2%)per month or any part of a month to subcontractor on any undisputed amount not paid on time to the subcontractor. The minimum monthly interest penalty payment for an unpaid balance of$100.00 or more is $10.00. For an unpaid balance of less than $100.00, the Contractor shall pay the actual penalty clue to the subcontractor. A subcontractor who prevails in a civil action to collect interest penalties from the Contractor shall be awarded its costs and disbursements, including attorney's fees,incurred in bringing the action. 10. WORKER'S COMPENSATION. If Contractor does public work,the Contractor shall obtain and maintain for the duration of this Contract, statutory Worker's Compensation Insurance and Employer's Liability Insurance as required under the laws of the State of Minnesota. 11. COMPREHENSIVE GENERAL LIABILITY. Contractor shall obtain the following minimum insurance coverage and maintain it at all times throughout the life of the Contract,with the City included as an additional name insured by endorsement; Bodily Injury: $2,000,000 each occurrence $2,000,000 aggregate,products and completed operations Property Damage: $2,000,000 each occurrence $2,000,000 aggregate Products and.Completed Operations Insurance shall be maintained for a minimum period of three (3)years after final payment and Contractor shall continue to provide evidence of such coverage to 2 • City on an annual basis during the aforementioned period;or if any reason Contractor's work ceases before final payment,for a minimum period of three(3)years from the date Contractor ceases work. Property Damage Liability Insurance shall include coverage for the following hazards: X (Explosion) C (Collapse) U (Underground) Contractual Liability(identifying the contract): Bodily Injury: $2,000,000 each occurrence Property Damage: $2,000,000 each occurrence $2,000,000 aggregate Personal Injury,with Employment Exclusion deleted: $2,000,000 aggregate Comprehensive.Automobile Liability(owned,non-owned,hired): Bodily Injury: $2,000,000 each occurrence $2,000,000 each accident Property Damage: $2,000,000 each occurrence 12. MINNESOTA GOVERNMENT DATA PRACTICES ACT. Contractor must comply with the Minnesota Government Data Practices Act, Minnesota Statutes Chapter 13,as it applies to (1) all data provided by the City pursuant to this Agreement, and (2) all data, created, collected, received, stored, used maintained, or disseminated by Contractor pursuant to this Agreement. Contractor is subject to all the provisions of the Minnesota Government Data Practices Act,including but not limited to the civil remedies of Minnesota Statutes Section 13.08;as if it were a government entity. In the event Contractor receives a request to release data, Contractor must immediately notify City. City will give Contractor instructions concerning the release of the data to the requesting party before the data is released. Contractor agrees to defend, indemnify, and hold City, its officials, officers, agents, employees, and volunteers harmless from any claims resulting from Contractor's officers', agents', city's, partners', employees', volunteers', assignees' or subcontractors' unlawful disclosure and/or use of protected data. The terms of this paragraph shall survive the cancellation or termination of this Agreement. 13. RECORDS, Contractor shall maintain complete and accurate records of expenses • involved in the performance of services. 14. WARRANTY. The Contractor guarantees that all new equipment warranties as specified within the bid shall be in full force and transferred to the City upon payment by the City. The Contractor shall be held responsible for any and all defects in workmanship, materials, and 3 equipment which may develop in any part of the contracted service,and upon proper notification by the City shall immediately replace, without cost to the City, any such faulty part or parts and damage done by reason of the same in accordance with the bid specifications. The Contractor further warrants to the City that all goods and services furnished under the Contract will be in conformance with Contract Documents and that the goods are of merchantable quality and are fit for the use for which they are sold. This warranty is in addition to any manufacturer's standard warranty y,and any warranty provided by law. 15. NONDISCRIMINATION. All Contractors and subcontractors employed shall comply with all applicable provisions of all federal, state and municipal laws which prohibit discrimination in employment to members of a protected class and all rules and regulations, promulgated and adopted pursuant thereto. The Contractor will include a similar provision in all subcontracts entered into for the performance of this contract. 16. INDEMNITY. The Contractor agrees to defend,hold harmless,and indemnify the City,its officers,agents4 and employees,for and against any and all claims, demands,actions,or causes of action, of whatever nature or character, arising from the Consultant's performance of work or services provided for herein.The Contractor shall take all reasonable precautions for the safety of all employees on the site and shall provide reasonable protection to prevent damage or loss to the property on the site or properties adjacent thereto and to work, materials and • equipment under the Contractor's control. 17. WAIVER. In the particular event that either party snail at any lime or times waive any breach of this Contract by the other, such waiver shall not constitute a waiver of any other or any succeeding breach of this Contract by either party,whether of the same or any other covenant, condition,or obligation. 18. GOVERNING LAW. The laws of the State of Minnesota govern the interpretation of this Contract. 19. SEVERABILITY. If any provision,term,or condition of this Contract is found to be or become unenforceable or invalid, it shall not effect the remaining provisions, terms, and conditions of this Contract, unless such invalid or unenforceable provision, term, or condition renders this Contract impossible to perform. Such remaining terms and conditions of the Contract shall continue in full force and effect and shall continue to operate as the parties'entire contract. 20. ENTIRE AGREEMENT. This Contract.represents the entire agreement of the parties and is a final,complete,and all inclusive statement of the terms thereof,and supersedes and terminates any prior agreement(s), understandings, or written or verbal representations litade between the parties with respect thereto. 21. TERMINATION. This Agreement may be terminated by the City for any reason or for convenience upon written notice to the Contractor. In the event of termination,the City shall be obligated to the Contractor for payment of amounts due and owing for materials provided or for services performed or furnished to the date and time of termination, 4 . • . . Dated: 0 ,2016. CITY OF FARMINGTON By: Todd Larson,Mayor B Y: 41 avid McKnigl ity inistrator 5 . Dated: CO ' r ,2016 CONTRACTOR: RAV TECHNOLOGIES By:Y Its: (Qadf& I ►MA_net"2✓ 6 0 EXHIBIT A BRAY technologies mono VISUAL 2475 Xenium Lane North, Plymouth, MN 55441 Tel:763-544-4400 Fax:763-544-5300 PRICE QUOTATION, Quoted To: Farmington Ice Arena Date 3/24/16 114 West Spruce Street - Farmington,MN 55024 Prepared By Don Owens Attn:Jeremy Pire Quantity Description Unit Price Extended Rink Audio Upgrade v.2 Arena 1 SP840A Octasound Central Speaker 2598.00 2598.00 2 SP540A Bleacher Speaker 1598.00 3196.00 2 0S2X12 Subwoofers-Subwoofer System 1450.00 2900.00 I Octasound RAMX2-Mic and Aux input for Mp3, 298.00 298.00 PC,IPOD(Timekeepers location) 1 Octasound PS-RAMX2 Power Supply 30.00 30.00 1 SML,V-S1-LD Surface Mount W/locking door. 160.00 160.00 1 RDL ST-DA3(Line Level Audio DA) 150.00 150.00 1 RDL PS-24AS Power Supply 30.00 30.00 Main Office _ 1 QSC GX3-(Main and Bleacher Speaker) 319.00 319.00 1 Dual Channel 500W amplifier-QSC GX5(Sub) 398.00 398.00 1 Rolls REQ215(15 Band Dual Channel EQ) 309.00 309.00 1 Octasound RAMX2-Mk and Aux input for Mp3, 298.00 298.00 PC,IPOD(Main Office) 1 Octasound PS-RAMX2 Power Supply 30.00 30.00 1 SMLV-SI-LD Surface Mount W/locking door. 160.00 160.00 1 Materials 495.00 495.00 1 Labor 3900.00 3900.00 Shipping TBD • TOTAL 15,271.00 This price quote is valid for a period of 30(thirty)days from the date listed above and does not include any federal,state,or local taxes and/or shipping charges that may apply. FORM QU-1 ..-....—^ml, AFFIN-2 OP 113:JH '`�4 .R1R CERTIFICATE OF LIABILITY INSURANCE DATE(M 2016 This CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER.THIS CERTIFICATE DOES NOT AFFIRMATIVELY OR NEGATIVELY AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POUCIES BELOW. THIS CERTIFICATE OF INSURANCE DOES NOT CONSTITUTE A CONTRACT BETWEEN THE ISSUING INSURER(S), AUTHORIZED REPRESENTATIVE OR PRODUCER,AND THE CERTIFICATE HOLDER. IMPORTANT: If the certificate holder is an ADDITIONAL INSURED,the policy(les)must be endorsed. If SUBROGATION IS WAIVED,subject to the terms and conditions of the policy,certain policies may require an endorsement A statement on this certificate does not confer rights to the certificate holder in lieu of such endorsement(s). PRODUCER AmeriStar Agency,Inc. HONE Matthew Schadow FAX 800 E.Wayzata Blvd.#250 INC.No.Eat):763-542-8377 (AC,No):763.5424977 Waynta,MN 55391 -M AIL.ADDRESS: Matthew Schadow INSURER(S)AFFORDING COVERAGE NAIL# — INSURER A:West Bend 15350 _ INSURED Affinitech,Inc. INSURER B:SFM DBA RAY Technologies of MN INSURER c 1264 Park Road Chanhassen,MN 55317 INSURER D: INSURER E: • INSURER F: COVERAGES CERTIFICATE NUMBER: REVISION NUMBER: THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED. NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY PERTAIN, THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS, EXCLUSIONS AND CONDITIONS OF SUCH POLICIES.LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS. INSR TYPE OF INSURANCE INSD WVD POLICY NUMBER (M POLICY IYWY) ( IYYYYY) LIMITS A X COMMERCIAL GENERAL LIABILITY EACH OCCURRENCE $ 1,000,000 CLAIMS-MADE X OCCUR X A090142 11/10/2015 11/1012016 a stasis Eir NTED nom) $ 200,000 MED EXP(Any one person) $ 5,000 PERSONAL IL ADV INJURY $ 1,000,000 GE N1 AGGREGATE UNIT APPUES PER: GENERAL AGGREGATE $ 2,000,000 POLICY X E : LOC PRODUCTS-COMP/OP AGG $ 2,000,000 OTHER: $ AUTOMOBILE LIABILITY CCOMBBII SINGLE UNIT $ 1,000,000 A X ANY AUTO A090142 11/10/2015 11/10/2016 BODILY INJURY(Per person) $ ALL OWNED SCHEDULED BODILY INJURY(Per accident) $ AUTOS X X NON.OWNED PROPERTY DAMAGE $ HIRED AUTOS AUTOS (Per accident) $ X UMBRELLA UAB X OCCUR EACH OCCURRENCE $ 4,000,000 A EXCESS UM CLAIMS-MADE A090142 11/10/2015 11/10/2016 AGGREGATE $ 4,000,000 DEO X I RETENTION$ 0 4,000,000 $ 4,000,000 WORKERS COMPENSATION X I SEATUTE I I ER- AND EMPLOYERS'LIABILITY B ANY PROPRIETOR/PARTNER/EXECUTIVE YIN 70876201 11110/2016 11/10/2016 E.L.EACH ACCIDENT $ 1,000,000 OFFICER/MEMBER EXCLUDED? n NIA (Mandatory In NH) E.L.DISEASE-EA EMPLOYEE $ 1,000,000 It yes,describe under DESCRIPTION OF OPERATIONS below E.L.DISEASE-POLICY LIMIT $ 1,000,000 DESCRIPTION OF OPERATIONS/LOCATIONS I VEHICLES(ACORD 101,Additional Remarks Schedule,may be attached If more space is required) City of Farmington is additional Insured CERTIFICATE HOLDER CANCELLATION FARFAM1 City of Farmington SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE EXPIRATION DATE THEREOF, NOTICE WILL BE DELIVERED IN 430 Third Street ACCORDANCE WITH THE POLICY PROVISIONS. Farmington,MN 55024 AUTHORIZED REPRESENTATIVE Q44,,,÷,/ 1 DR MI 114-"- ©1988-2014 ACORD CORPORATION. All rights reserved. ACORD 25(2014/01) The ACORD name and logo are registered marks of ACORD roE� iy� City of Farmington (1111k 430 Third Street Farmington,Minnesota 651.280.6800 -Fax 651.280.6899 —.Ammo` www.cifarmington.mn.us TO: Mayor, Councilmembers and City Administrator FROM: Robin Hanson, Finance Director SUBJECT: 2015 Comprehensive Annual Financial Report DATE: May 16, 2016 INTRODUCTION Each year the city's financial records are audited by an independent public accounting flim. The goal of an independent audit is to provide reasonable assurance that the city's financial statements are free of material misstatement. The audit involves examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements;assessing the accounting principles used and significant estimates made by management;and evaluating the overall financial statement presentation. Upon completion, the auditors render an audit opinion,review their management report with the city council, and the city publishes a Comprehensive Annual Financial Report(CAFR)to provide you, city staff, citizens, investors, and other interested parties with useful information concerning the city's operations and financial position. DISCUSSION Management assumes full responsibility for the completeness, accuracy and reliability of the information presented in the CAFR. To provide a reasonable basis for making these representations,management has established a comprehensive internal framework that is designed both to protect the government's assets from loss, theft or misuse and to provide sufficient, reliable information for the preparation of the city's financial statements in conformity with Generally Accepted Accounting Principles (GAAP). The cost of internal controls should not outweigh their benefits,therefore, the City of Farmington's comprehensive framework of internal control has been designed to provide reasonable,rather than absolute assurance, that the financial statements will be free from material misstatement. As management, we assert that to the best of our knowledge and belief,the financial report is complete and reliable in all material respects. The city's financial records have been audited by Malloy, Montague,Karnowski,Radosevich& Co., P.A. (MMKR). Based upon their audit,they concluded there was a reasonable basis for rendering an unqualified opinion that the City of Farmington's financial statements for the fiscal year ended December 31, 2015 are fairly presented in conformity with GAAP. An unqualified opinion is issued when the independent auditor believes that the company's financial statements are sound;that is,the statements are free from material misstatement. Representatives of the audit firm will be at the city council meeting to review this year's audit, provide a financial overview of the city's 2015 results, share their internal control findings and answer questions.A copy of this year's Management Report, Special Purpose Reports and the CAFR are attached. This past year,2015,was a very good year for the city and should be celebrated. • The assets and deferred outflows of resources of the City exceeded liabilities and deferred inflows of resources by$107,808,807(net position)at the close of the most recent fiscal year. Of this amount, $20,359,513(unrestricted net position)may be used to meet the government's ongoing obligations to citizens and creditors. • The City's total net position decreased by$1,255,284 in 2015, excluding the effect of a change in accounting principle discussed below. • The City recorded a change in accounting principle related to the implementation of new accounting standards for reporting employee participation in defined benefit pension plans. The change resulted in reductions to the beginning net position of the governmental activities ($4,456,420)and business-type activities ($491,161)on the city's government-wide financial statements. Please note the amounts included in the Management's Discussion and Analysis for 2014 have not been restated. • The city's total bonded debt increased by$150,838, or 0.5 percent, during the fiscal year due to a combination of the issuance of$3,050,000 of 2015A General Obligation Bonds and annual bond principal payments. • The city's governmental funds reported combined ending fund balances of$18,546,467 at December 31, 2015, an increase of$1,234,510 from the prior year.Approximately 68.8 percent of this total amount, $12,763,969, is available for use within the City's constraints and policies. • The city has one interfund loan which was for the purchase of a new fire truck by the General Fund with funds from the Water Fund. This loan will be fully repaid in 2016, one year early. • At the end of the current fiscal year,the unassigned fund balance for the General Fund was $4,734,537, or 40.1 percent,of 2016 General Fund budgeted expenditures and transfers out. • During 2015 the city's financial position continued to strengthen,the city's General Fund cash flow was positive each calendar month for the second year in a row and modest increases in property tax values continued indicating the economy is continuing to improve. • All of the city's work over the past few year to strengthen its financial management,position and policies was recognized in the fall of 2015 with Standard and Poor's raised the City's credit rating from"AA-" to "AA" The Government Finance Officers Association(GFOA)awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Farmington for its Comprehensive Annual Financial Report (CAFR)for the year ended December 31, 2014. This was the sixth year the city received this prestigious national award. In order to be awarded this Certificate of Achievement, the government needs to publish an easily readable and efficiently organized CAFR and has satisfied both GAAP and applicable legal requirements. The Certificate of Achievement is valid for a period of only one year and we believe the current CAFR continues to meet the Certificate of Achievement program requirements. We will be submitting the 2015 report to the GFOA to determine eligibility for another certificate. As part of the auditors review of the city's internal control processes and compliance testing they identified two matters to communicate with council. The first is a lack of segregation of duties in the accounts payable and payroll areas. This is considered a material weakness and was also shared with you last year. The lack of segregation of duties is not a reflection of the work of the staff involved. Rather, like other organizations with limited staff, it is a result of the inability to segregate certain duties due to the limited staff size. The second situation found that a payment made by electronic funds transfer(ETF)had not been included in the council check summary. The report parameters have been revised so that ETF payments are included in future reports. The auditors also noted that Minnesota Statutes require that each claim made for payment include a signed declaration that the claim is just and correct,and that no part of it has been paid. Historically,this has been easy to do,because this declaration was included above the endorsement line on the back side of city checks. With electronic forms of payment this is more challenging. Until the statutes have been updated to acknowledge the numerous forms of electronic payments the auditors have shared some suggestions on how to obtain this declaration. Staff will review these suggestions and decide how to proceed. As stated earlier,the responsibility for both the accuracy and completeness of the financial records rests with the city. This is not accomplished by one person. It takes everyone working together to make this possible. I would like to recognize and thank everyone involved. • The Finance Department has done an excellent job maintaining the city's financial records. Fach year it seems it gets more complicated. They should be very proud of their work. • A special thank you to the Human Resources staff for all of their assistance with the implementation of the pension accounting and disclosure requirements. This new requirement found us interrupting them often and asking for a lot of information from them this year. Next year will be better. • City staff members diligently code invoices, enter receipts, submit supporting documentation, answer our many questions and are very conscientious and conservative with their spending.All of these activities directly contribute to the accuracy and completeness of the city's financial records and improved financial strength. I very much appreciate their paying close attention to detail,patience in complying with our numerous accounting requirements and willingness to learn new accounting processes. • The auditors did an excellent job. They were organized, asked very good questions, quickly learned the city's processes and policies,were very thorough and respectful. Each staff person was technically very strong and they were instrumental in the implementation of the new pension accounting and disclosure requirements. • Finally, I would like to thank you,Mayor and members of the City Council,for your willingness to doing what you believe is best for the city in the long-run. That is difficult to do. You have worked hard to strengthen the city's financial position and have demonstrated your commitment to long-term comprehensive financial planning. BUDGET IMPACT N/A ACTION REQUESTED Ask any questions you may have the auditors or city staff and once you are comfortable with the information a motion should be made to accept the auditor's reports. ATTACHMENTS: Type Description © Backup Material 2015 MMKR Management Report ii Backup Material 2015 Special Purpose Reports 121 Backup Material 2015 City of Farmington CAFR Management Report for City of Farmington,Minnesota December 31,2015 THIS PAGE INTENTIONALLY LEFT BLANK PRINCIPALS Thomas M.Montague,CPA Thomas A.Kaowski,CPA Paul A.Radosevich.CPA William J.Lauer,CPA CERTIFIED PUBLIC James H.Eichten,CPA ACCOUNTANTS Aaron J.Nielsen,CPA Victoria L.Holinka,CPA To the City Council and Management City of Farmington,Minnesota We have prepared this management report in conjunction with our audit of the City of Farmington, Minnesota's (the City) financial statements for the year ended December 31, 2015. The purpose of this report is to provide comments resulting from our audit process and to communicate information relevant to city finances in Minnesota.We have organized this report into the following sections: • Audit Summary • Governmental Funds Overview • Enterprise Funds Overview • Government-Wide Financial Statements • Legislative Updates • Accounting and Auditing Updates We would be pleased to further discuss any of the information contained in this report or any other concerns that you would like us to address. We would also like to express our thanks for the courtesy and assistance extended to us during the course of our audit. The purpose of this report is solely to provide those charged with governance of the City, management, and those who have responsibility for oversight of the financial reporting process comments resulting from our audit process and information relevant to city finances in Minnesota.Accordingly,this report is not suitable for any other purpose. 4/6111, 1 keilvA4WAA, 44.444.44..^a.„ A., A 14 - Minneapolis,Minnesota May 10,2016 Malloy, Montague, Karnowski, Radosevich. & Co.. P.A. 5353 Wayzata Boulevard•Suite 410•Minneapolis.MN 55416•Telephone:952.545-0424•Tclefaa:952-545.0569•www.mmkr.com THIS PAGE INTENTIONALLY LEFT BLANK AUDIT SUMMARY The following is a summary of our audit work, key conclusions, and other information that we consider important or that is required to be communicated to the City Council, administration, or those charged with governance of the City. OUR RESPONSIBILITY UNDER AUDITING STANDARDS GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA AND GOVERNMENT AUDITING STANDARDS We have audited the financial statements of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City as of and for the year ended December 31,2015,and the related notes to the financial statements. Professional standards require that we provide you with information about our responsibilities under auditing standards generally accepted in the United States of America and Government Auditing Standards, as well as certain information related to the planned scope and timing of our audit. We have communicated such information to you verbally and in our audit engagement letter. Professional standards also require that we communicate the following information related to our audit. PLANNED SCOPE AND TIMING OF THE AUDIT We performed the audit according to the planned scope and timing previously discussed and coordinated in order to obtain sufficient audit evidence and complete an effective audit. AUDIT OPINION AND FINDINGS Based on our audit of the City's financial statements for the year ended December 31,2015: • We have issued an unmodified opinion on the City's basic financial statements. Our report included a paragraph emphasizing that the City implemented Governmental Accounting Standards Board (GASB) Statement No. 68,Accounting and Financial Reporting for Pensions— an amendment of GASB Statement No. 27, and GASB Statement No. 71,Pension Transition for Contributions Made Subsequent to the Measurement Date—an amendment of GASB Statement No. 68, during the year ended December 31,2015. Our opinion was not modified with respect to this matter. • We reported one matter involving the City's internal control over financial reporting that we consider to be a material weakness. Due to the limited size of the City's office staff,the City has limited segregation of duties in certain areas. • The results of our testing disclosed no instances of noncompliance that are required to be reported under Governmental Auditing Standards. • We reported one finding based on our testing of the City's compliance with Minnesota laws and regulations. One claim selected for testing was not reviewed and approved by the City Council prior to payment as required by Minnesota Statutes. The disbursement had been inadvertently omitted from the check listing submitted to the City Council for approval. -1- OTHER COMMENTS AND RECOMMENDATIONS-ELECTRONIC PAYMENT OF CLAIMS Minnesota Statutes require that each claim made for payment from a Minnesota city include a signed declaration that the claim is just and correct, and that no part of it has been paid. Cities have historically obtained this signed declaration by including it above the endorsement line on the back side of its checks. However, cities also have statutory authorization to make purchases using credit cards or pay claims through various forms of electronic fund transfers, which typically do not involve the issuance of a physical check. The statutes that authorized the use of these alternative purchasing methods specify that the transactions must comply with all applicable Minnesota Statutes, which include the requirement to obtain a signed declaration.There is no statutory guidance for how the claim declaration is to be obtained for these types of transactions.However,some recommended alternative procedures,while not complying with the letter of the law, have become common "best effort" practices to attempt to comply with this requirement,including: • Requiring employees making purchases with city credit cards to sign the required declaration on the credit card statement prior to payment in lieu of a signed declaration from each vendor. We understand this control will be built into the City's new accounts payable software. • Having vendors that will be paid through electronic fund transfers sign and submit an annual declaration that all claims they submit will be just,correct,and not previously paid. We recommend that the City examine its purchasing process,and consider adopting procedures to ensure that Minnesota statutory requirements for vendor claims are complied with when possible. SIGNIFICANT ACCOUNTING POLICIES Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the City are described in Note 1 of the notes to basic financial statements. The City implemented GASB Statement Nos.68 and 71 during the year ended December 31,2015.These statements provide new guidance on accounting and financial reporting for pensions accounted for in the financial statements of plan employers.Implementation of these standards resulted in an adjustment to the beginning equity reported in the City's government-wide and enterprise fund financial statements, as described in Note 1 of the notes to basic financial statements. The application of remaining policies was not changed during the year ended December 31,2015. We noted no transactions entered into by the City during the year for which there is a lack of authoritative guidance or consensus.All significant transactions have been recognized in the financial statements in the proper period. 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. Where applicable, management has corrected all such misstatements. In addition, none of the misstatements detected as a result of audit procedures and corrected by management, when applicable, were material, either individually or in the aggregate,to each opinion unit's financial statements taken as a whole. 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 City's financial 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. -2- ACCOUNTING ESTIMATES AND MANAGEMENT JUDGMENTS Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected.The most sensitive estimates affecting the financial statements were: • Depreciation — Management's estimates of depreciation expense are based on the estimated useful lives of the assets. • Compensated Absences—Management's estimate is based on current rates of pay, compensated absence balances,and the likelihood that sick leave will ultimately be paid at termination. • Other Post-Employment Benefit (OPEB) Liabilities — Actuarial estimates of the net OPEB obligation is based on eligible participants, estimated future health insurance premiums, and estimated retirement dates. • Pension Benefits — Actuarial estimates of net pension liabilities (assets) are calculated using actuarial calculations that include significant assumptions, including projected changes, investment returns,retirement ages,proportionate share,and employee turnover. We evaluated the key factors and assumptions used by management to develop these estimates in determining that they are reasonable in relation to the basic financial statements taken as a whole. The financial statement disclosures are neutral,consistent,and clear. DIFFICULTIES ENCOUNTERED IN PERFORMING THE AUDIT We encountered no significant difficulties in dealing with management in performing and completing our audit. DISAGREEMENTS WITH MANAGEMENT For purposes of this report, professional standards define a disagreement with management as a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. MANAGEMENT REPRESENTATIONS We have requested certain representations from management that are included in the management representation letter dated May 10,2016. 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 City's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. -3- OTHER MATTERS We applied certain limited procedures to Management's Discussion and Analysis and other pension and OPEB-related required supplementary information(RSI)that supplements the basic financial statements. Our procedures consisted of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We did not audit the RSI and do not express an opinion or provide any assurance on the RSI. We were engaged to report on the supplemental information accompanying the financial statements which is not RSI. With respect to this supplemental information, we made certain inquiries of management and evaluated the form,content,and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplemental information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves. We were not engaged to report on the introductory and statistical sections which accompany the financial statements but are not RSI. We did not audit or perform other procedures on this other information and we do not express an opinion or provide any assurance on it. -4- GOVERNMENTAL FUNDS OVERVIEW This section of the report provides you with an overview of the financial trends and activities of the City's governmental funds, which includes the General, special revenue, debt service, and capital project funds. These funds are used to account for the basic services the City provides to all of its citizens, which are financed primarily with property taxes. The governmental fund information in the City's financial statements focuses on budgetary compliance, and the sufficiency of each governmental fund's current assets to finance its current liabilities. PROPERTY TAXES Minnesota cities rely heavily on local property tax levies to support their governmental fund activities. For the 2014 fiscal year, local ad valorem property tax levies provided 39.0 percent of the total governmental fund revenues for cities over 2,500 in population, and 35.5 percent for cities under 2,500 in population. Property tax levies certified by Minnesota cities for 2015 increased about 4.0 percent over 2014, compared to an increase of 1.6 percent the prior year. A 1-year levy limit imposed on cities over 2,500 in population for the 2014 levy year was lifted for the 2015 levy year. The total market value of property in Minnesota cities increased about 8.5 percent for the 2015 levy year, following a modest increase of 1.1 percent for levy year 2014 and a four-year trend of declining market values for levy years 2010 through 2013. Market values showed increases across all property categories for 2015, with gains in the market values of residential homestead properties (10.0 percent) and non-homestead residential properties (9.7 percent) outpacing the market value gain of commercial/industrial properties (2.2 percent). Because the assessed valuation used for levying property taxes is based on values from the previous fiscal year(e.g., the market value for taxes payable in 2015 is based on estimated values as of January 1, 2014), market value improvement has lagged behind recent upturns in the housing market and the economy in general. The City's taxable market value increased 3.6 percent for taxes payable in 2014 and 12.5 percent for taxes payable in 2015. The following graph shows the City's changes in taxable market value over the past 10 years: Taxable Market Value $2,000,000,000 $1,800,000,000 $1,600,000,000 - $1,400,000,000 s • $1,200,000,000 — 1111— . • - $800,000,000 $600,000,000 $400,000,000 $200,000,000 — $– 2006 2007 20US 2000 2010 2011 2012 2013 201-1 2015 -5- Tax capacity is considered the actual base available for taxation. It is calculated by applying the state's property classification system to each property's market value. Each property classification, such as commercial or residential, has a different calculation and uses different rates. Consequently, a city's total tax capacity will change at a different rate than its total market value, as tax capacity is affected by the proportion of the City's tax base that is in each property classification from year-to-year, as well as legislative changes to tax rates. The City's tax capacity increased 3.0 percent for taxes payable in 2014 and 11.4 percent for taxes payable in 2015. The following graph shows the City's change in tax capacities over the past 10 years: Local Net Tax Capacity $20,000,000 - 'Wn - $18,000,000 - $16,000,000 ______r-m_______- $14,000,000 ME PPR Pr-I $12,000,000 $10,000,000 I= $8,000,000 = $6,000,000 - $4,000,000 $2,000,000 - 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 The improvement in property tax capacities contributed to decreases to the overall state-wide and metro area tax rates for 2015. The following table presents the average tax rates applied to city residents for each of the last two levy years,along with comparative state-wide and metro area rates. Rates expressed as a percentage of net tax capacity All Cities Seven-County City of State-Wide Metro Area Farmington 2014 2015 2014 2015 2014 2015 Average tax rate City 48.8 46.9 46.0 43.4 65.9 61.5 County 47.6 44.7 46.6 42.9 31.8 29.6 School 28.9 27.1 30.9 28.3 56.3 53.5 Special taxing 7.3 6.9 9.5 8.8 4.2 3.7 Total 1 32.6 125.6 133.0 123.4 158.2 148.3 The City's portion of the tax rate is higher than the average Minnesota city. The City has historically received more of its governmental fund revenue from property taxes than the average Minnesota city,due to the lower than average amount of aid it typically receives from the state. -6- GOVERNMENTAL FUND BALANCES The following table summarizes the changes in the fund balances of the City's governmental funds during the year ended December 31,2015,presented both by fund balance classification and by fund: Governmental Funds Change in Fund Balance Fund Balance as of December 31, Increase 2015 2014 (Decrease) Fund balances of governmental funds Total by classification Nonspendable $ 6,184 $ 33,529 $ (27,345) Restricted 5,776,314 5,673,161 103,153 Committed 8,025,185 — 8,025,185 Assigned 4,250 7,612,076 (7,607,826) Unassigned 4,734,534 3,993,191 741,343 Total—governmental funds $ 18,546,467 $ 17,311,957 $ 1,234,510 Total by fund General $ 4,744,818 $ 4,107,560 $ 637,258 Debt Service 5,482,325 5,034,389 447,936 State Aid Construction Capital Projects 1,731,020 1,936,898 (205,878) Storm Water Trunk Capital Projects 3,689,276 3,860,802 (171,526) Permanent Improving Revolving Capital Projects 135,560 115,082 20,478 Maintenance Capital Projects 968,730 836,420 132,310 Nonmajor 1,794,738 1,420,806 373,932 Total—governmental funds $ 18,546,467 $ 17,311,957 $ 1,234,510 In total, the fund balances of the City's governmental funds increased by $1,234,510 during the year ended December 31,2015. The significant shift between assigned and committed fund balances was due to the City revising its fund balance policy in 2015. Unassigned fund balance increased $741,343 due primarily to positive operating results in the General Fund. -7- GOVERNMENTAL FUNDS REVENUE AND EXPENDITURES The following table presents the per capita revenue of the City's governmental funds for the past three years,along with state-wide averages. We have included the most recent comparative state-wide averages available from the Office of the State Auditor to provide a benchmark for interpreting the City's data. The amounts received from the typical major sources of governmental fund revenue will naturally vary between cities based on factors such as the City's stage of development, location, size and density of its population, property values, services it provides, and other attributes. It will also differ from year-to-year due to the effect of inflation and changes in the City's operation. Also, certain data on these tables may be classified differently than how they appear on the City's financial statements in order to be more comparable to the state-wide information,particularly in separating capital expenditures from current expenditures. We have designed this section of our management report using per capita data in order to better identify unique or unusual trends and activities of the City. We intend for this type of comparative and trend information to complement, rather than duplicate, information in the Management's Discussion and Analysis. An inherent difficulty in presenting per capita information is the accuracy of the population count, which for most years is based on estimates. This table and the one on the following page exclude the activity of the Farmington Economic Development Authority,a component unit of the City. Governmental Funds Revenue per Capita With State-Wide Averages by Population Class State-Wide City of Farmington Year December 31,2014 2013 2014 2015 Population 2,500-10,000 10,000-20,000 20,000-100,000 22,154 22,386 22,622 Property taxes $ 427 $ 396 $ 427 $ 488 $ 493 $ 507 Tax increments 26 37 46 — — — Franchise and other taxes 32 42 37 12 12 12 Special assessments 59 51 64 43 37 29 Licenses and permits 28 27 41 30 23 16 Intergovernmental revenues 298 264 166 60 45 93 Charges for services 105 82 90 46 40 36 Other 66 72 65 7 17 17 Total revenue $ 1,041 $ 971 $ 936 $ 686 $ 667 $ 710 The City's governmental fund revenues for 2015 were $16,063,811, an increase of $1,154,643 (7.7 percent) from the prior year. On a per capita basis, the City received $710 in governmental fund revenue for 2015, an increase of $43 from the prior year. The majority of the increase was in intergovernmental revenue, which was $48 per capita higher than the prior year due to an increase of approximately$1.1 million in the amount of state aid received for street improvements. The City has historically received more of its governmental fund revenue from property taxes than the average Minnesota city, due to the lower than average amount of aid it typically receives from the state and the debt levies for the City's capital improvement bonds. -8- The expenditures of governmental funds will also vary from state-wide averages and from year-to-year, based on the City's circumstances.Expenditures are classified into three types as follows: • Current — These are typically the general operating type expenditures occurring on an annual basis,and are primarily funded by general sources such as taxes and intergovernmental revenues. • Capital Outlay and Construction—These expenditures do not occur on a consistent basis,more typically fluctuating significantly from year-to-year. Many of these expenditures are project-oriented, and are often funded by specific sources that have benefited from the expenditure,such as special assessment improvement projects. • Debt Service—Although the expenditures for debt service may be relatively consistent over the term of the respective debt,the funding source is the important factor. Some debt may be repaid through specific sources such as special assessments or redevelopment funding, while other debt may be repaid with general property taxes. The City's expenditures per capita of its governmental funds for the past three years, together with state-wide averages,are presented in the following table: Governmental Funds Expenditures per Capita With State-Wide Averages by Population Class State-Wide City of Farmington Year December 31,2014 2013 2014 2015 Population 2,500-10,000 10,000-20,000 20,000-100,000 22,154 22,386 22,622 Current General government $ 131 $ 104 $ 87 $ 76 $ 77 $ 86 Public safety 248 237 254 230 218 227 Streets and highways 121 119 114 79 91 87 Culture and recreation 86 101 92 69 65 68 All other 69 89 98 7 2 4 655 650 645 461 453 472 Capital outlay and construction 357 278 276 58 82 208 Debt service Principal 180 163 115 334 106 128 Interest and fiscal charges 54 40 34 62 49 46 234 203 149 396 155 174 Total expenditures $ 1,246 $ 1,131 $ 1,070 $ 915 $ 690 $ 854 Total expenditures in the City's governmental funds for 2015 were $19,314,898, an increase of $3,876,158 (25.1 percent) from the prior year. On a per capita basis,the City expended a total of$854 in 2015, an increase of$164 from the previous year. The majority of the increase was in capital outlay and construction expenditures, which were $126 per capita higher than last year, primarily due to funds expended for the Henderson Project and the joint county/city 195th Street Reconstruction Project. -9- GENERAL FUND The City's General Fund accounts for the financial activity of the basic services provided to the community. The primary services included within this fund are the administration of the municipal operation,police and fire protection,building inspection, streets and highway maintenance,and parks and recreation. The graph below illustrates the change in the General Fund financial position over the last five years. We have also included a line representing annual expenditures and transfers out to reflect the change in the size of the General Fund operation over the same period. General Fund Financial Position Year Ended December 31, $12,000,000 - $11,000,000 $10,000,000 $9,000,000 - $8,000,000 $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 III • $1,000,000 - $- 2011 2012 2013 2014 2015 Fund Balance I 'Cash Balance(Net of Borrowing)—Expenditures and Transfers Out The City's General Fund cash and investments, net of interfund borrowing at December 31, 2015 was $3,385,793, an increase of$451,173. Total fund balance at December 31, 2015 was $4,744,818, which was an increase of$637,258 from the prior year as compared to a breakeven budget. As the graph illustrates,the City has generally been able to maintain healthy cash and fund balance levels as the volume of financial activity has grown. This is an important factor because a government, like any organization, requires a certain amount of equity to operate. A healthy financial position allows the City to avoid volatility in tax rates; helps minimize the impact of state funding changes; allows for the adequate and consistent funding of services, repairs, and unexpected costs; and is a factor in determining the City's bond rating and resulting interest costs. Maintaining an adequate fund balance has become increasingly important given the fluctuations in state funding for cities in recent years. A trend that is typical to Minnesota local governments, especially the General Fund of cities, is the unusual cash flow experienced throughout the year. The City's General Fund cash disbursements are made fairly evenly during the year other than the impact of seasonal services such as snowplowing, street maintenance, and park activities. Cash receipts of the General Fund are quite a different story. Property taxes comprise about 80.7 percent of the fund's total annual revenue. Approximately half of these revenues are received by the City in July and the rest in December. Consequently, the City needs to have adequate cash reserves to finance its everyday operations between these payments. The City's unrestricted (assigned and unassigned) General Fund balance of$4,738,784 at the end of the 2015 fiscal year represented approximately 40.2 percent of budgeted expenditures and transfers out for 2016. This is within the City's policy that calls for maintaining an unrestricted fund balance of between 40-50 percent of the subsequent year's budgeted expenditures and transfers out. -10- The following chart reflects the City's General Fund revenue sources for 2015 compared to budget: General Fund Revenue Budget and Actual ■ Property Taxes ` MN Intergovernmental Fines and Forfeits II Charges for Services mii Licenses and Permits All Other ,8\ ,8s d J J',/ d2 X82 It' 18J &s "Pv 'Io. js ,d6 d6 �d'j ,8'j J� ,ACP ,d9 '�o°O°°o°o'°ogo °°OHO°o°°O�O°O�OOO°°'0 -'0°O.O°o°°o°o'°°o°°o •Actual •Budget General Fund revenue for 2015 was $10,509,233, which was $30,789 (0.3 percent) more than budget. Intergovernmental revenue exceeded budget by $144,273, as MSA street maintenance, fire pension aid, and police aid were all higher than projected. Charges for services exceeded budget by $48,605, mainly due to fire charges exceeding expectations. Revenue from licenses and permits were $112,331 less than budget, as building permits were lower than anticipated. Finally, revenue in the "all other" category was under budget by$53,013. The following graph presents the City's General Fund revenues by source for the last five years. The graph reflects the City's reliance on property taxes and other local sources of revenue: General Fund Revenue by Source Year Ended December 31, $9,000,000 - - $8,000,000 —p $7,000,000 ----,- $6,000,000 0 $5,000,000 $4,000,000 --' $3,000,000 $2,000,000 $1,000,000 • • • $– Property Intergovernmental Fines and Charges for Licenses All Other Taxes Forfeits Services and Permits ■2011 ■2012 ❑2013 ■2014 •2015 Total General Fund revenue for 2015 was $91,093 (0.9 percent)higher than last year.Property taxes were $311,864 higher than last year due to an increase in the general tax levy. License and permit revenues declined $143,839 from last year due to a decrease in building permits. Revenues in the "all other" category were $107,389 less than last year, mainly due to market value fluctuations in the City's investment portfolio,which were unusually high in the prior year. -11- The following graphs illustrate the components of General Fund spending for 2015 compared to budget: General Fund Expenditures Budget and Actual General Government Public Safety Public Works Parks and Recreation All Other `8\ ttso 8J 8I ,8, '8,) ] `:.,3 �Q 8V '8s 'Sss 0 °°a°°o soo°°o oo°Gb soo°°o�o°°o s°o°°o °°o°°o °o°°o moo°°o s°o°°o •Actual ■Budget General Fund expenditures for 2015 were $10,290,148, which was $606,469 (5.6 percent) under budget. Expenditures were under budget in every department due to conservative spending, with the largest savings in public works ($277,173) and parks and recreation ($112,202). Expenditures in the "all other" category were under budget by ($113,657), mainly due to a difference between how the City's $120,000 interfund loan principal repayment was budgeted (as an expenditure) and how it is reflected on the financial statements(impacts the balance sheet only). The following graph presents the City's General Fund expenditures by function for the last five years: General Fund Expenditures by Function Year Ended December 31, $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 —11" $1,000,000 General Public Safety Public Works Parks and All Other Government Recreation •2011 ■2012 ❑2013 ■2014 ■2015 Total General Fund expenditures for 2015 were $433,071 (4.4 percent) higher than the previous year. Expenditures rose in every category except public works,with the largest increases in general government ($229,477)and public safety($163,512). -12- ENTERPRISE FUNDS OVERVIEW The City maintains several enterprise funds to account for services the City provides that are financed primarily through fees charged to those utilizing the service. This section of the report provides you with an overview of the financial trends and activities of the City's enterprise funds,which includes the Liquor Operations,Sewer Operations,Solid Waste,Storm Water,Water,and Street Light Funds. ENTERPRISE FUNDS FINANCIAL POSITION The following table summarizes the changes in the financial position of the City's enterprise funds during the year ended December 31,2015,presented both by classification and by fund: Enterprise Funds Change in Financial Position Net Position as of December 31, Increase 2015 2014 (Decrease) Net position of enterprise funds Total by classification Net investment in capital assets $ 54,807,938 $ 55,685,476 $ (877,538) Restricted—future drinking water treatment plant 2,160,566 2,160,566 — Unrestricted 11,439,369 10,396,218 1,043,151 Total—enterprise funds $ 68,407,873 $ 68,242,260 $ 165,613 Total by fund Liquor Operations $ 956,725 $ 1,060,244 $ (103,519) Sewer Operations 21,446,130 21,652,653 (206,523) Solid Waste 1,347,092 1,314,332 32,760 Storm Water 14,907,068 14,104,609 802,459 Water 29,622,133 30,031,939 (409,806) Street Light 128,725 78,483 50,242 Total—enterprise funds $ 68,407,873 $ 68,242,260 $ 165,613 In total, the net position of the City's enterprise funds increased by $165,613 during the year ended December 31, 2015, which is the combination of a $656,774 increase from 2015 operations and a $491,161 decrease in beginning net position due to the change in accounting principle for GASB Statement No. 68, discussed elsewhere in this report. The change in accounting principle reduced the beginning net positions of the Liquor Operations and Solid Waste Funds by $276,278 and $214,883, respectively. The City's net investment in capital assets decreased $877,538 during the year due to depreciation,while unrestricted net position increased by$1,043,151. -13- LIQUOR OPERATIONS FUND The following graph presents five years of comparative operating results for the City's Liquor Operations Fund: Liquor Operations Fund Year Ended December 31, $5,000,000 $4,500,000 $4,000,000 - $3,500,000 $3,000,000 — $2,500,000 — $2,000,000 — : ::1,5000 0 00 —" $500,000 --141111111—■ , 911E1 44 � $- 2011 2012 2013 2014 2015 •Sales •Cost of Sales ❑Operating Expenses ■Operating Income(Loss) The City's Liquor Operations Fund ended 2015 with an unrestricted net position of$956,725. Beginning net position was reduced by $276,278 for the change in accounting principle, while current year operations resulted in an increase of$172,759. The Liquor Operations Fund had gross sales of$4,607,417 in 2015, a decrease of$31,777 (0.7 percent) from the previous year. Gross profit was $1,139,930,about 24.7 percent of sales. Operating expenses for 2015 were $885,110,an increase of$37,073 (4.4 percent) from the previous year, mainly in salaries and benefits due to the addition of a half-time administrative position at one of the stores. -14- SEWER OPERATIONS FUND The following graph presents five years of comparative operating results for the City's Sewer Operations Fund: Sewer Operations Fund Year Ended December 31, $2,000,000 r"." $1,750,000 $1500,000 . — $1,250,000 111111$1,000,000 $750,000 • $500,000 • ?. $250,000 _ $– $(250,000) 2011 2012 2013 2014 2015 =Operating Revenue Operating Expenses Income Before Depreciation —Operating Income(Loss) The Sewer Operations Fund ended 2015 with a total net position of$21,446,130, a decrease of$206,523 from the prior year. Of this, $18,548,842 represents the investment in sewer collection system capital assets,leaving an unrestricted net position of$2,897,288. Operating revenue before transfers in the Sewer Operations Fund was$1,957,902 for 2015,an increase of $114,156(6.2 percent)from the prior year due to higher usage and more customers on the system. Operating expenses for 2015 were $1,873,412, an increase of$162,569 (9.5 percent) from the previous year. The largest factor contributing to the change was an increase of approximately$168,000 in disposal fees paid to Metropolitan Council Environmental Services. -15- SOLID WASTE FUND The following graph presents five years of comparative operating results for the City's Solid Waste Fund: Solid Waste Fund Year Ended December 31, $2,000,000 $1,800,000 ■ $1,600,000 ■ $1,400,000 . ---- --- - $1,200,000 M $1,000,000 $800,000 ■$600,000 $400,000 . — $200,000 ■ $- 2011 2012 2013 2014 2015 o Operating Revenue mil Operating Expenses —Income Before Depreciation —Operating Income(Loss) The Solid Waste Fund ended 2015 with a total net position of$1,347,092. Beginning net position was reduced $214,883 for the change in accounting principle, while current year operations resulted in an increase of$247,643. Of the total ending net position, $131,041 represents the investment in solid waste operation capital assets,leaving an unrestricted net position of$1,216,051. Operating revenue in the Solid Waste Fund was$1,991,179 for 2015,an increase of$11,556(0.6 percent) from the prior year. Operating expenses for 2015 were $1,658,128, an increase of$57,694 (3.6 percent) from the previous year,mainly due to increases in salaries and purchased services. -16- STORM WATER FUND The following graph presents five years of comparative operating results for the City's Storm Water Fund: Storm Water Fund Year Ended December 31, $750,000 $600,000 INV _ - $450,000 =`° $300,000 — $150,000 $- $(150,000) $(300,000) 2011 2012 2013 2014 2015 Operating Revenue Operating Expenses —Operating Income(Loss) Income Before Depreciation The Storm Water Fund ended 2015 with a total net position of$14,907,068,an increase of$802,359 from the prior year. Of this, $13,947,368 represents the investment in storm water operation capital assets, leaving an unrestricted net position of$959,700. The increase in net position was primarily due to capital contributions of$945,938. Operating revenue in the Storm Water Fund was $670,353, an increase of$111,026 (19.9 percent) from the prior year,mainly due to a rate increase implemented for 2015. Operating expenses for 2015 were $731,444, an increase of$115,760 (18.8 percent) from the previous year.Most of the increase was in purchased service costs for pond dredging. -17- WATER FUND The following graph presents five years of comparative operating results for the City's Water Fund: Water Fund Year Ended December 31, $1,800,000 $1,600,000 - $1,400,000 $1,200,000 - -" $1,000,000 — $800,000 $600,000 — — $400,000 — $200,000 $(200,000) $(400,000) 2011 2012 2013 2014 2015 Operating Revenue i l Operating Expenses —Operating Income(Loss) Income Before Depreciation The Water Fund ended 2015 with a total net position of$29,622,133, a decrease of$409,806 from the prior year. Of this, $22,180,687 represents the investment in water distribution system capital assets, $2,160,566 is restricted for a future drinking water treatment plant, and unrestricted net position is $5,280,880. Operating revenue in the Water Fund for 2015 was $1,439,873, a decrease of$59,218 (4.0 percent) from the prior year due to a decrease in water consumption of about 5.4 percent. Water Fund operating expenses for 2015 were $1,339,420, a decrease of$70,541 (5.0 percent) from the previous year,mainly in depreciation. -18- STREET LIGHT FUND The following graph presents five years of comparative operating results for the City's Street Light Fund: Street Light Fund Year Ended December 31, $225,000 - $200,000 H $175,000 $150,000 — $125,000 $1 00,000 — $75,000 — $50,000 ■ $25,000 111 $(25,000) 2011 2012 2013 2014 2015 o Operating Revenue Operating Expenses Operating Income(Loss) Street Light Fund operating revenue was$222,159 for 2015,up$3,107(1.4 percent)from the prior year. Operating expenses were$173,212 for 2015, a decrease of$1,745 (1.0 percent)from the previous year. Unrestricted net position increased$50,242 in 2015,ending the year at$128,725. -19- GOVERNMENT-WIDE FINANCIAL STATEMENTS In addition to fund-based information,the current reporting model for governmental entities also requires the inclusion of two government-wide financial statements designed to present a clear picture of the City as a single, unified entity. These government-wide statements provide information on the total cost of delivering services,including capital assets and long-term liabilities. STATEMENT OF NET POSITION The Statement of Net Position essentially tells you what your city owns and owes at a given point in time, the last day of the fiscal year. Theoretically, net position represents the resources the City has leftover to use for providing services after its debts are settled.However,those resources are not always in spendable form, or there may be restrictions on how some of those resources can be used.Therefore,net position is divided into three components:net investment in capital assets,restricted,and unrestricted. The following table presents the components of the City's net position as of December 31, 2015 and 2014,for governmental activities and business-type activities: As of December 31, Increase 2015 2014 (Decrease) Net position Governmental activities Net investment in capital assets $ 21,417,203 $ 23,383,175 $ (1,965,972) Restricted 9,063,587 9,235,448 (171,861) Unrestricted 8,920,144 13,150,789 (4,230,645) Total governmental activities 39,400,934 45,769,412 (6,368,478) Business-type activities Net investment in capital assets 54,807,938 55,685,476 (877,538) Restricted 2,160,566 2,160,566 — Unrestricted 11,439,369 10,396,218 1,043,151 Total business-type activities 68,407,873 68,242,260 165,613 Total net position $ 107,808,807 $ 114,011,672 $ (6,202,865) The City's total net position at December 31, 2015 was $6,202,865 lower than the previous year-end. Beginning net position was reduced$4,947,581 for the change in accounting principle,while current year operations resulted in a decrease of $1,255,284. The City's net position decreased $1,912,058 from current year governmental activities and increased$656,774 from current year business-type activities. The decrease in governmental activities net position was mainly due to significant street maintenance costs incurred in 2015. -20- STATEMENT OF ACTIVITIES The Statement of Activities tracks the City's yearly revenues and expenses, as well as any other transactions that increase or reduce total net positions. These amounts represent the full cost of providing services. The Statement of Activities provides a more comprehensive measure than just the amount of cash that changed hands, as reflected in the fund-based financial statements. This statement includes the cost of supplies used,depreciation of long-lived capital assets,and other accrual-based expenses. The following table presents the change in the net position of the City for the years ended December 31, 2015 and 2014: 2015 2014 Program Expenses Revenues Net Change Net Change Net(expense)revenue Governmental activities General government $ 2,284,974 $ 456,308 $ (1,828,666) $ (1,383,291) Public safety 5,357,738 763,323 (4,594,415) (4,418,255) Public works 7,473,095 860,413 (6,612,682) (4,117,282) Parks and recreation 1,815,882 604,994 (1,210,888) (1,120,645) Economic development 90,000 — (90,000) 34,542 Interest on long-term debt 992,422 — (992,422) (1,020,096) Business-type activities Liquor 4,352,597 4,607,417 254,820 323,360 Sewer 1,875,225 1,957,902 82,677 131,600 Solid waste 1,658,128 2,013,179 355,051 400,189 Storm water 731,444 1,616,291 884,847 (56,357) Water 1,339,588 1,439,873 100,285 88,877 Street light 173,212 222,159 48,947 44,095 Total net(expense)revenue $ 28,144,305 $ 14,541,859 (13,602,446) (11,093,263) General revenues Property taxes 11,460,209 10,962,860 Franchise taxes 265,485 269,208 Unrestricted grants 278,974 246,597 Investment earnings 342,494 387,748 Total general revenues 12,347,162 11,866,413 Change in net position $ (1,255,284) $ 773,150 One of the goals of this statement is to provide a side-by-side comparison to illustrate the difference in the way the City's governmental and business-type operations are financed. The table clearly illustrates the dependence of the City's governmental operations on general revenues, such as property taxes and unrestricted grants. It also shows that, for the most part,the City's business-type activities are generating sufficient program revenues (service charges and program-specific grants) to cover expenses. This is critical given the current downward pressures on the general revenue sources. -21- LEGISLATIVE UPDATES Despite the 2015 legislative session beginning with a projected budget excess of$1.87 billion for the 2016-2017 biennium,the most favorable budget forecast in over a decade, little was accomplished during the regular legislative session due to partisan disagreement. The regular session adjourned without the Legislature bringing forth a number of significant funding bills, including the Omnibus Legacy Bill (funding for outdoor heritage, clean water, parks and trails, arts, and cultural heritage)and a bonding bill for capital projects. The Governor subsequently vetoed a number of other funding bills, including the Omnibus E-12 Education Bill due to the Legislature not addressing his demand for a universal preschool provision. Eventually, a one-day special session produced funding bills for E-12 education, jobs and energy,Legacy programs,environment and agriculture,and capital investment. The following is a summary of recent legislation affecting Minnesota cities in 2015 and into the future: Local Government Aid (LGA)—The Legislature completely overhauled the LGA formula for fiscal year 2014 and thereafter, creating a three-tiered formula that includes separate "need factor" calculations for cities with populations under 2,500, between 2,500 and 10,000, or over 10,000. The new formula simplified the LGA calculation, and reduced the volatility of the LGA distribution by limiting the amount it may decline in a given year. Beginning in 2015, any reduction to a city's calculated LGA distribution will be limited to the lesser of $10 per capita, or 5 percent of their previous year net tax levy.For cities that gain under the new formula,the increases will be distributed proportionate to their unmet need, as determined by the new "need factor" calculations. The state-wide LGA appropriation was $516.9 million for fiscal 2015, and is $519.4 million for fiscal 2016 and thereafter. Sales Tax Exemption—Cities (both home-rule and statutory) were exempted from paying sales tax on qualifying purchases,effective for purchases made on or after January 1,2014.Purchases of goods or services by an exempt local government for a publicly-provided liquor store,gas or electric utility, golf course, marina, campground, café, laundromat, solid waste hauling or recycling operation, or landfill will remain taxable. The 2014 Legislature extended the definition of tax exempt local government to include all special district; city, county, or township instrumentalities; economic development authorities; housing and redevelopment authorities;and all joint power boards or organizations.However,the effective date of this expanded exemption list was delayed until January 1,2017 by the 2015 Legislature. Omnibus Bonding Bill—The Legislature approved a scaled-down Omnibus Bonding Bill during the special session, authorizing approximately $370 million in capital improvements. Included in the funding approved was $172.5 million for transportation infrastructure, $23.5 million for flood hazard mitigation, $10 million for Public Financing Agency (PFA) grants to municipalities for wastewater infrastructure, and $1.5 million to the Metropolitan Council for inflow and infiltration improvement grants to metro area cities. Legacy Funding—The Legacy bill included $9.25 million annually to finance grants for city water infrastructure improvements through the PFA. It also included $17.25 million annually to fund "SCORE" block grants to counties for recycling and waste reduction (a portion of which is passed through to cities) and $1 million of annual funding for a new grant program to establish or improve recycling programs in non-metro area cities. Broadband Initiative — The Omnibus Jobs and Energy Bill passed in the special session included $10.6 million to finance the Border-to-Border Broadband Grant Program, a one-time appropriation available until June 30,2017. -22- Municipal State-Aid Streets — Included in the Omnibus Transportation Bill were annual funding allocations for municipal state-aid streets of$107.7 million for fiscal 2016 and $178.1 million for fiscal 2017,which represents an increase of approximately$41 million over the previous biennium. Small Cities Assistance Account—A one-time appropriation of$12.5 million was provided to create a new Small Cities Assistance Account to assist with construction and maintenance of roads located within eligible cities, defined as a statutory or home-rule charter city that does not receive municipal state aid street financing (generally those with a population under 5,000). The aid will be distributed to eligible cities biannually in each year funds are available based on the following formula: 5 percent equally to all eligible cities; 35 percent allocated proportionately on each city's share of lane miles to the total for all eligible cities; 35 percent allocated proportionately on each city's population to the total for all eligible cities;and 25 percent allocated proportionately on each city's state-aid adjustment factor to the total for all eligible cities. Workforce Housing Grant Program—The Omnibus Jobs and Energy Bill included annual funding of$2 million for fiscal 2016 and 2017 for a new Workforce Housing Grant Program. Eligible cities can use the grants to develop "market rate residential rental property" to serve employees of businesses located in the eligible project areas.The maximum grant award may not exceed 25 percent of the rental housing development project cost; and awards must be matched by a local unit of government,business,or nonprofit organization with$1 for each$2 of grant funding. Automated License Plate Reader (ALPR) Policy—Law enforcement agencies that utilize ALPRs are required to establish policies governing their use that are consistent with statutory guidelines.The Legislature placed limitations on the type of data that can be collected using ALPRs,and clarified the circumstances under which that data is considered public or private. A limitation of 60 days was established for the retention of data collected by ALPR not related to an active criminal investigation. Standards were established for the sharing of ALPR data between law enforcement agencies. Elections — The Elections Omnibus Bill made numerous changes to elections administration laws, including requirements for filing fees for statutory cities, ballot formatting and marking, absentee ballots,and election recounts. Energy Conservation Measures — The Uniform Municipal Contracting Law was amended to add water metering devices that increase efficiency to the definition of energy conservation measures, enabling municipalities to enter into guaranteed energy savings contracts for the use of water metering devices. Responsible Contractor Requirement — The "responsible contractor" law enacted by the 2014 Legislature became effective on January 1,2015.Contractors who bid on public contracts in excess of $50,000 are now required to certify that they are a "responsible bidder" in order to be awarded a contract as the lowest responsible bidder or best value alternative. The 2015 Legislature made several clarifications and modifications to the law, including: exempting design professionals and materials suppliers from the requirements;making motor carriers subject to the requirements and establishing a separate verification standard for them; excluding tax increment financing revenue from the value of a construction contract under the law; and allowing general contractors to submit bids without obtaining verification from all subcontractors that bid on the project(the successful prime contractor must submit a supplemental verification under oath prior to the execution of the contract). Appraisal Requirements for Eminent Domain—Effective July 1,2015,the appraisal requirements for the acquisition of property by eminent domain are changed to require the acquiring entity to obtain at least one appraisal for the property proposed to be acquired only if the acquisition value is greater than$25,000. For acquisitions less than$25,000,the acquiring entity may obtain a minimum damage acquisition report in lieu of an appraisal. -23- Firefighter Employment Provisions and Volunteer Benefits—The Omnibus Public Safety Finance and Policy Bill made a number of changes related to firefighters, including: allowing relief association dues as a voluntarily payroll deduction, allowing volunteer firefighters to be paid less frequently than every 31 days,requiring the licensure of all full-time firefighters by the State Board of Firefighter Training and Education,and expanding"continued employer health insurance benefits"to include dependents of volunteer firefighters killed in the line of duty. Police and Firefighter Retirement Supplemental State Aid —The volunteer firefighter portion of the Police and Firefighter Retirement Supplemental State Aid Program was made permanent. The minimum obligation of municipalities to an associated relief association special fund is now reduced by the amount of both fire state aid and police and firefighter retirement supplemental state aid.Police and firefighter retirement supplemental state aid is also added to the calculation of the exception to municipal ratification requirement for lump-sum plans. Pensions — A number of changes to the pension plans administered by the Public Employees Retirement Association(PERA)were adopted,effective June 30,2015,including: • The future interest rate actuarial assumption for the PERA General Plan and PERA Police and Fire Plan are changed from 8.5 percent to 8.0 percent for actuarial valuations prepared after June 30,2015. • The refund repayment interest rate and prior service credit purchase payment determination rate for the PERA General Plan and PERA Police and Fire Plan are also changed from 8.5 percent to 8.0 percent. • The CPI-based post-retirement adjustment mechanism for the PERA Police and Fire Plan is replaced with a flat 2.5 percent increase when the plan reaches a 90 percent funding level. • The contribution stabilizer mechanisms applicable to the PERA General Plan are revised, broadening the factors the plan's Board of Trustees may consider before recommending an increase in the plan contribution rates. • Definitions of salary,termination of service, allowable service, retirement, and volunteer firefighter were revised for all applicable PERA plans. • Changes in eligibility, service pension levels, ancillary benefits, and service time calculations were made to the PERA Statewide Volunteer Firefighter Plan, lump sum retirement division. A change was also made to create a "monthly benefit retirement division" within this plan to facilitate the transfer of individual volunteer firefighter association monthly benefit plans to the statewide plan. • A number of administrative language changes were made to complete the merger of the Minneapolis Employees Retirement Fund into the PERA General Plan, which was effective January 1,2015. -24- ACCOUNTING AND AUDITING UPDATES GASB STATEMENT NO.72,FAIR VALUE MEASURE AND APPLICATION The primary objective of this statement is to address accounting and financial reporting issues related to fair value measurements.Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This statement provides guidance for determining a fair value measurement for financial reporting purposes. It also provides guidance for applying fair value to certain investments and disclosures related to all fair value measurements. This statement generally requires investments to be measured at fair value.An investment is defined as a security or other asset that (a) a government holds primarily for the purpose of income or profit and (b)has a present service capacity based solely on its ability to generate cash or to be sold to generate cash. This statement is effective for financial statements for fiscal years beginning after June 15,2015. Earlier application is encouraged. GASB STATEMENT NO.73,ACCOUNTING AND FINANCIAL REPORTING FOR PENSIONS AND RELATED ASSETS THAT ARE NOT WITHIN THE SCOPE OF GASB STATEMENT 68,AND AMENDMENTS TO CERTAIN PROVISIONS OF GASB STATEMENTS 67AND 68 The objective of this statement is to improve the usefulness of information about pensions included in financial statements of state and local governments for making decisions and assessing accountability. This statement also clarifies the application of certain provisions of GASB Statement Nos. 67 and 68 regarding 10-year schedules of required supplementary information (RSI) and other recognition issues pertaining to employers and nonemployer contributing entities. These changes will improve financial reporting by establishing a single framework for the presentation of information about pensions, enhancing comparability for similar information reported by employers and nonemployer contributing entities. The requirements of this statement that address accounting and financial reporting by employers and governmental nonemployer contributing entities for pensions not within the scope of GASB Statement No. 68 are effective for financial statements for fiscal years beginning after June 15, 2016, and the requirements of this statement that address financial reporting for assets accumulated for purposes of providing those pensions are effective for fiscal years beginning after June 15,2015.The requirements of this statement for pension plans that are within the scope of GASB Statement No. 67 or for pensions that are within the scope of GASB Statement No. 68 are effective for fiscal years beginning after June 15, 2015.Earlier application is encouraged. GASB STATEMENT NO.74,FINANCIAL REPORTING FOR POSTEMPLOYMENTBENEFITPLANS OTHER THAN PENSION PLANS The objective of this statement is to improve the usefulness of information about post-employment benefits other than pensions (other post-employment benefits [OPEB]). This statement replaces GASB Statement Nos.43 and 57. It also includes requirements for defined contribution OPEB plans that replace the requirements for those OPEB plans in GASB Statement Nos.25,43,and 50.GASB Statement No.75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, establishes new accounting and financial reporting requirements for governments whose employees are provided with OPEB, as well as for certain nonemployer governments that have a legal obligation to provide financial support for OPEB provided to the employees of other entities. -25- This statement will improve fmancial reporting primarily through enhanced note disclosures and schedules of RSI that will be presented by OPEB plans administered through trusts meeting the specified criteria.The new information will enhance the decision-usefulness of the financial reports of those OPEB plans, their value for assessing accountability, and their transparency by providing information about measures of net OPEB liabilities and explanations of how and why those liabilities changed from year-to-year. The net OPEB liability information, including ratios, will offer an up-to-date indication of the extent to which the total OPEB liability is covered by the fiduciary net position of the OPEB plan. The comparability of the reported information for similar types of OPEB plans will be improved by the changes related to the attribution method used to determine the total OPEB liability. The contribution schedule will provide measures to evaluate decisions related to the assessment of contribution rates in comparison with actuarially determined rates, if such rates are determined. In addition, new information about rates of return on OPEB plan investments will inform financial report users about the effects of market conditions on the OPEB plan's assets over time and provide information for users to assess the relative success of the OPEB plan's investment strategy and the relative contribution that investment earnings provide to the OPEB plan's ability to pay benefits to plan members when they come due. This statement is effective for financial statements for fiscal years beginning after June 15,2016. Earlier application is encouraged. GASB STATEMENT NO.75,ACCOUNTING AND FINANCIAL REPORTING FOR POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS The primary objective of this statement is to improve accounting and financial reporting by state and local governments for post-employment benefits other than pensions (OPEB). It also improves information provided by state and local governmental employers about financial support for OPEB that is provided by other entities. This statement replaces the requirements of GASB Statement Nos. 45 and 57. GASB Statement No.74 establishes new accounting and financial reporting requirements for OPEB plans. This statement establishes standards for recognizing and measuring liabilities, deferred outflows of resources, deferred inflows of resources, and expense/expenditures. For defined benefit OPEB, this statement identifies the methods and assumptions that are required to be used to project benefit payments, discount projected benefit payments to their actuarial present value, and attribute that present value to periods of employee service.Note disclosure and RSI requirements about defined benefit OPEB also are addressed.This statement is effective for fiscal years beginning after June 15,2017.Earlier application is encouraged. Similar to changes implemented for pensions, this statement requires the liability of employers and nonemployer contributing entities to employees for defined benefit OPEB (net OPEB liability) to be measured as the portion of the present value of projected benefit payments to be provided to current active and inactive employees that is attributed to those employees' past periods of service (total OPEB liability),less the amount of the OPEB plan's fiduciary net position. GASB STATEMENT NO.77,TAX ABATEMENT DISCLOSURES This statement requires disclosure of tax abatement information about(1) a reporting government's own tax abatement agreements, and (2) those that are entered into by other governments and that reduce the reporting government's tax revenues. Tax abatements are widely used by state and local governments, particularly to encourage economic development. For financial reporting purposes,this statement defines a tax abatement as resulting from an agreement between a government and an individual or entity in which the government promises to forgo tax revenues and the individual or entity promises to subsequently take a specific action that contributes to economic development or otherwise benefits the government or its citizens. -26- The requirements of this statement improve financial reporting by giving users of financial statements essential information that is not consistently or comprehensively reported to the public at present. Disclosure of information about the nature and magnitude of tax abatements will make these transactions more transparent to financial statement users. As a result, users will be better equipped to understand (1)how tax abatements affect a government's future ability to raise resources and meet its financial obligations, and(2)the impact those abatements have on a government's financial position and economic condition. The requirements of this statement are effective for financial statements for periods beginning after December 15,2015.Earlier application is encouraged. GASB STATEMENT No.78,PENSIONS PROVIDED THROUGH CERTAIN MULTIPLE-EMPLOYER DEFINED BENEFIT PENSION PLANS The objective of this statement is to address a practice issue regarding the scope and applicability of GASB Statement No. 68,Accounting and Financial Reporting for Pensions—an amendment of GASB Statement No. 27. This issue is associated with pensions provided through certain multiple-employer defined benefit pension plans and to state or local governmental employers whose employees are provided with such pensions.Prior to the issuance of this statement,the requirements of GASB Statement No.68 applied to the financial statements of all state and local governmental employers whose employees are provided with pensions through pension plans that are administered through trusts that meet the criteria in paragraph 4 of GASB Statement No.68. This statement amends the scope and applicability of GASB Statement No. 68 to exclude pensions provided to employees of state or local governmental employers through a cost-sharing, multiple-employer defined benefit pension plan that(1)is not a state or local governmental pension plan, (2) is used to provide defined benefit pensions both to employees of state or local governmental employers and to employees of employers that are not state or local governmental employers,and(3)has no predominant state or local governmental employer(either individually or collectively with other state or local governmental employers that provide pensions through the pension plan). This statement establishes requirements for recognition and measurement of pension expense, expenditures, and liabilities; note disclosures; and RSI for pensions that have the characteristics described above. The requirements of this statement are effective for reporting periods beginning after December 15, 2015. Early application is encouraged. GASB STATEMENT NO.79,CERTAIN EXTERNAL INVESTMENT POOLS AND POOL PARTICIPANTS This statement establishes criteria for an external investment pool to qualify for making the election to measure all of its investments at amortized cost for financial reporting purposes. An external investment pool qualifies for that reporting if it meets all of the applicable criteria established in this statement. The specific criteria address(1)how the external investment pool transacts with participants;(2)requirements for portfolio maturity, quality, diversification, and liquidity; and (3) calculation and requirements of a shadow price. Significant noncompliance prevents the external investment pool from measuring all of its investments at amortized cost for financial reporting purposes. If an external investment pool meets the criteria in this statement and measures all of its investments at amortized cost,the pool's participants also should measure their investments in that external investment pool at amortized cost for financial reporting purposes. If an external investment pool does not meet the criteria in this statement, the pool's participants should measure their investments in that pool at fair value. This statement establishes additional note disclosure requirements for qualifying external investment pools that measure all of their investments at amortized cost for financial reporting purposes and for governments that participate in those pools.Those disclosures for both the qualifying external investment pools and their participants include information about any limitations or restrictions on participant withdrawals. The requirements of this statement are effective for reporting periods beginning after June 15,2015,except for certain provisions on portfolio quality,custodial credit risk,and shadow pricing. Those provisions are effective for reporting periods beginning after December 15, 2015. Earlier application is encouraged. -27- GASB STATEMENT NO.80,BLENDING REQUIREMENTS FOR CERTAIN COMPONENT UNITS AN AMENDMENT OF GASB STATEMENT NO.14 The objective of this statement is to clarify the financial statement presentation requirements for certain component units. This statement amends the blending requirements for the financial statement presentation of component units of all state and local governments. The additional criterion requires blending of a component unit incorporated as a not-for-profit corporation in which the primary government is the sole corporate member. The additional criterion does not apply to component units included in the financial reporting entity pursuant to the provisions of GASB Statement No. 39, Determining Whether Certain Organizations Are Component Units—an amendment of GASB Statement No. 14. The requirements of this statement are effective for reporting periods beginning after June 15, 2016.Earlier application is encouraged. CHANGES TO REQUIREMENTS FOR FEDERAL GRANTS In December 2013, the U.S. Office of Management and Budget(OMB) Circular released final guidance on administrative requirements, cost principles, and audit requirements for federal awards. The final guidance, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards ("Uniform Guidance"), supersedes and streamlines eight existing OMB Circulars into one document that includes OMB Circulars A-21, A-87, A-89, A-102, A-110, A-122, A-133, and the guidance in OMB Circular A-50 on Single Audit Act follow-up. The Uniform Guidance, which is located in Title 2 of the Code of Federal Regulations (CFR), consolidates previous guidance into a streamlined format that aims to improve both its clarity and accessibility, lessen administrative burdens for federal award recipients, and reduce the risk of waste, fraud,and abuse. The Following is a Summary of Significant Changes for Grant Recipients: • Changes time and effort documentation requirements by providing possibilities for alternative methods of accounting for salaries and wages based on achievement of performance outcomes. • Non-federal entities must have a financial management system that includes,but is not limited to: a comparison of expenditures with budget amounts for each federal award, written procedures to implement the requirements of,cash management, and written procedures for determining the allowability of costs in accordance with Subpart E–Cost Principles. • Governments must comply with the new general procurement standards which include, but are not limited to: written standards covering conflicts of interest of employees engaged in the selection, award, and administration of contracts and documented procurement procedures that include an analysis of lease versus purchase alternatives when appropriate. • Governments will now be required to follow the five procurement methods which include, at times, more restrictive compliance requirements than Minnesota Statutes. For example: small purchases (over $3,000 prior to October 1, 2015 and over $3,500 after October 1, 2015) will require quotes. • There are new requirements for governments with subrecipients (or those making subawards), which include, but are not limited to: a required written risk assessment of each subrecipient, which may require you to provide training and on-site reviews of their program operations. • For governments with subrecipients or those that operate as a fiscal host of a federal grant award and thus provide subawards, payments must be made in advance to the subrecipients, unless certain requirements are not met,then the reimbursement method can be used. -28- Among Other Matters Specifically Applicable to Auditors, Changes to the Uniform Guidance Include: • Raising both the threshold that triggers a Single Audit and the threshold for Type A/B program determination to$750,000. • Changing the high-risk program criteria for Type A programs. • Reducing the number of high-risk Type B programs that must be tested as major programs. • Revising the Type B small program floor. • Reducing the percentage of coverage requirement to 40 percent for normal auditees and 20 percent for low-risk auditees. • Revising the criteria for low-risk auditee status. • Increasing the threshold for reporting findings to$25,000 in questioned costs and requiring more detailed information to be reported. Effective Dates: Year beginning January 1,2015— • All administrative requirements and cost principles will apply to new awards made after December 26,2014. • Governmental entities are required to comply with the Uniform Guidance once the new regulations are in effect at the Federal government level(December 26,2014). • Any funding drawdowns made after January 1,2015 must comply with the Uniform Guidance. • Must document whether the entity is in compliance with the old or new procurement standards listed in Subpart D, Sections 200.317-200.326. The federal government has provided a two-year grace period for implementing the new procurement standards. Year beginning January 1,2016— • All administrative requirements and cost principles will apply to new awards made after December 26,2014. • Subpart F—Audit Requirements are applicable. Year beginning January 1,2017— • Must have implemented the new procurement standards of the Uniform Guidance, if the government initially elected the two-year grace beginning January 1,2015. • At this point,all of the new Uniform Guidance at Title 2 CFR 200 is applicable. Recommended Action Items: We recommend that award recipients familiarize themselves with the new requirements contained in the Uniform Guidance and develop a plan to become compliant with the new regulations. Consider the following— • Attend training on the new uniform administrative requirements. • Identify needed policy and procedure changes,especially in the areas of: o Financial management o Payment o Procurement o Compensation o Travel costs • Identify internal controls that might need to be established or modified. • Determine who within your organization is responsible for each action item. • Determine the timing of each action item. • Determine when you will implement the new procurement standards and document in writing. -29- THIS PAGE INTENTIONALLY LEFT BLANK CITY OF FARMINGTON DAKOTA COUNTY,MINNESOTA Special Purpose Audit Reports Year Ended December 31,2015 THIS PAGE INTENTIONALLY LEFT BLANK CITY OF FARMINGTON DAKOTA COUNTY,MINNESOTA Special Purpose Audit Reports Year Ended December 31,2015 Table of Contents Page Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards 1-2 Independent Auditor's Report on Minnesota Legal Compliance 3 Schedule of Findings and Responses 4-5 THIS PAGE INTENTIONALLY LEFT BLANK PRINCIPALS Thomas M.Montague,CPA Thomas A.Karnoayski,CPA Paul A.Radosevich,CPA William J.Lauer,CPA I /CERTIFIED PUBLIC James H.Eichten,CPA ACCOUNTANTS Aaron J.Nielsen,CPA Victoria L Holinka,CPA INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the City Council and Management City of Farmington,Minnesota We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities,the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Farmington, Minnesota(the City) as of and for the year ended December 31, 2015, and the related notes to the financial statements, which collectively comprise the City's basic financial statements,and have issued our report thereon dated May 10,2016. INTERNAL CONTROL OVER FINANCIAL REPORTING In planning and performing our audit of the financial statements,we considered the City's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we do not express an opinion on the effectiveness of the City's internal control. A deficiency in internal control 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 and correct, misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the City's fmancial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and,therefore,material weaknesses or significant deficiencies may exist that were not identified. We did identify a deficiency in internal control, described in the accompanying Schedule of Findings and Responses as item 2015-001, that we consider to be a material weakness. (continued) -1- Malloy. Montague, Karnowski, Radoseviclt. & Co., P.A. 5353 Wayzata Boulevard•Suite 410•Minneapolis.MN 55416•Telephone:952-545-0424•Telefax:952-545.0569•www.mmkr.com COMPLIANCE AND OTHER MATTERS As part of obtaining reasonable assurance about whether the City's financial statements are free from material misstatement,we performed tests of its compliance with certain provisions of laws, regulations, contracts,and grant agreements,noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. CITY'S RESPONSE TO FINDING The City's response to the finding identified in our audit is described in the accompanying Schedule of Findings and Responses. The City's response was not subjected to the auditing procedures applied in the audit of the financial statements and,accordingly,we express no opinion on it. PURPOSE OF THIS REPORT The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control and compliance. Accordingly, this report is not suitable for any other purpose. /11 , kAlutAo 4-t •At . ee., P. 4 . Minneapolis,Minnesota May 10,2016 -2- PRINCIPALS Thomas M.Montague.CPA Thomas A.Karnowski,CPA Paul A.Radosevich,CPA \Villiam J.Lauer,CPA CERTIFIED PUBLIC James H.Eichten,CPA ACCOUNTANTS Aaron J.Nielsen.CPA Victoria L Holinka,CPA INDEPENDENT AUDITOR'S REPORT ON MINNESOTA LEGAL COMPLIANCE To the City Council and Management City of Farmington,Minnesota We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities,the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Farmington, Minnesota(the City) as of and for the year ended December 31, 2015, and the related notes to the financial statements, which collectively comprise the City's basic financial statements,and have issued our report thereon dated May 10,2016. MINNESOTA LEGAL COMPLIANCE The Minnesota Legal Compliance Audit Guide for Cities, promulgated by the Office of the State Auditor pursuant to Minnesota Statute § 6.65, contains seven categories of compliance to be tested: contracting and bidding, deposits and investments, conflicts of interest, public indebtedness, claims and disbursements, miscellaneous provisions, and tax increment financing. Our audit considered all of the listed categories. In connection with our audit,nothing came to our attention that caused us to believe that the City failed to comply with the provisions of the Minnesota Legal Compliance Audit Guide for Cities, except as described in the Schedule of Findings and Responses as item 2015-002. However, our audit was not directed primarily toward obtaining knowledge of such noncompliance. Accordingly, had we performed additional procedures, other matters may have come to our attention regarding the City's noncompliance with the above referenced provisions. CITY'S RESPONSE TO FINDING The City's response to the finding identified in our audit is described in the accompanying Schedule of Findings and Responses. The City's response was not subjected to the auditing procedures applied in the audit of the financial statements and,accordingly,we express no opinion on it. PURPOSE OF THIS REPORT The purpose of this report is solely to describe the scope of our testing of compliance and the results of that testing, and not to provide an opinion on compliance.Accordingly,this report is not suitable for any other purpose. ► ,114x, K , e..., A A . Minneapolis,Minnesota May 10,2016 -3- Malloy. Montague. Karnowski. Radosevich. & Co.. P.A. 5353 Wayzata Boulevard•Suite 410•Minneapolis,MN 55416•Telephone:952-545.0424•Tclefax:952.595.0569•www.mmkr.com THIS PAGE INTENTIONALLY LEFT BLANK CITY OF FARMINGTON Schedule of Findings and Responses Year Ended December 31,2015 A. MATERIAL WEAKNESS IN INTERNAL CONTROL OVER FINANCIAL REPORTING 2015-001 INADEQUATE SEGREGATION OF DUTIES Criteria—Internal control over financial reporting. Condition — The City of Farmington, Minnesota (the City) has inadequate segregation of duties in a number of areas, including, but not limited to, controls over cash disbursements and payroll. Context—This is a current year and prior year finding. Cause—The inadequate segregation of duties is primarily caused by the limited size of the City's Finance Department staff. Effect—One important element of internal accounting controls is an adequate segregation of duties such that no one individual has responsibility to execute a transaction, have physical access to the related assets, and have responsibility or authority to record the transaction. A lack of segregation of duties subjects the City to a higher risk that errors or fraud could occur and not be detected in a timely manner in the normal course of business. Recommendation — We recommend that the City continue to review its accounting procedures and internal controls to segregate accounting functions wherever it is considered practical and cost-beneficial. Management Response—There is no disagreement with the audit fmding.The City reviews and makes improvements to its internal control structure on an ongoing basis to maximize the segregation of duties in all areas within the limits of the staff available. However, the City does not consider it cost-beneficial at this time to increase the size of its Finance Department staff in order to further segregate accounting functions. B. FINDINGS—MINNESOTA LEGAL COMPLIANCE AUDIT 2015-002 CITY COUNCIL APPROVAL OF CLAIMS Criteria—Minnesota Statute§412.271,Subd. 1. Condition — Minnesota Statutes require all claims to be audited and approved by the City Council prior to payment. One claim selected for testing was not included in the check summary provided to the City Council for approval. Context—This is a current year fmding. Cause—This was an oversight by city staff, as the check summary report that should have included this claim was incomplete. Effect—This claim was paid without being previously audited and approved for payment by the City Council. -4- CITY OF FARMINGTON Schedule of Findings and Responses(continued) Year Ended December 31,2015 B. FINDINGS—MINNESOTA LEGAL COMPLIANCE AUDIT(CONTINUED) 2015-002 CITY COUNCIL APPROVAL OF CLAIMS(CONTINUED) Recommendation — We recommend that the City review its procedures to ensure that all future claims are properly audited and approved by the City Council prior to payment. Management Response — There is no disagreement with the audit finding. The City is working with its fmancial software provider to implement report parameters that ensure that in the future,all claims are included in the check summaries provided to the City Council for approval. -5- Comprehensive Annual Financial Report 64 ..rte, 0 .,,. Y x{. r 1 Photo: "Favorite Place" by Bill Cuevas City Of Farmington, Minnesota Year Ended December 31, 2015 David McKnight - City Administrator Prepared by: Finance Department CITY OF FARMINGTON DAKOTA COUNTY,MINNESOTA Comprehensive Annual Financial Report for the Year Ended December 31,2015 David McKnight City Administrator Report Prepared by Finance Department Member of Government Finance Officers Association of the United States and Canada THIS PAGE INTENTIONALLY LEFT BLANK CITY OF FARMINGTON Table of Contents Page INTRODUCTORY SECTION Letter of Transmittal i—vi GFOA Certificate of Achievement vii Organizational Chart viii Elected Officials and Executive Staff ix FINANCIAL SECTION INDEPENDENT AUDITOR'S REPORT 1-3 MANAGEMENT'S DISCUSSION AND ANALYSIS 4-15 BASIC FINANCIAL STATEMENTS Government-Wide Financial Statements Statement of Net Position 16 Statement of Activities 17-18 Fund Financial Statements Governmental Funds Balance Sheet 19-20 Reconciliation of the Balance Sheet to the Statement of Net Position 21 Statement of Revenues,Expenditures,and Changes in Fund Balances 22-23 Reconciliation of the Statement of Revenues,Expenditures,and Changes in Fund Balances to the Statement of Activities 24 Statement of Revenues,Expenditures,and Changes in Fund Balances— Budget and Actual—General Fund 25 Proprietary Funds Statement of Net Position 26-27 Statement of Revenues,Expenses,and Changes in Fund Net Position 28-29 Statement of Cash Flows 30-31 Fiduciary Fund Statement of Net Position 32 Notes to Basic Financial Statements 33-62 REQUIRED SUPPLEMENTARY INFORMATION PERA—Public Employees General Employees Retirement Fund Schedule of City's and Non-Employer Proportionate Share of Net Pension Liability 63 Schedule of Employer Contributions 63 PERA—Public Employees Police and Fire Fund Schedule of City's and Non-Employer Proportionate Share of Net Pension Liability 64 Schedule of Employer Contributions 64 Defined Benefit Pension Plan—Farmington Fire Fighters' Relief Association Schedule of Changes in the Farmington Fire Fighters' Relief Association's Net Pension Liability(Asset)and Related Ratios 65 Schedule of Employer Contributions 65 City of Farmington Other Post-Employment Benefits Plan Schedule of Funding Progress 66 CITY OF FARMINGTON Table of Contents(continued) Page SUPPLEMENTAL INFORMATION Combining and Individual Fund Statements and Schedules Nonmajor Governmental Funds 67 Combining Balance Sheet 68 Combining Statement of Revenues,Expenditures,and Changes in Fund Balances 69 Nonmajor Special Revenue Funds 70 Combining Balance Sheet 71 Combining Statement of Revenues,Expenditures,and Changes in Fund Balances 72 Nonmajor Capital Projects Funds 73 Combining Balance Sheet 74-75 Combining Statement of Revenues,Expenditures,and Changes in Fund Balances 76-77 Debt Service Fund 78 Combining Balance Sheet by Account 79-80 Combining Schedule of Revenues,Expenditures,and Changes in Fund Balances by Account 81-82 Budgetary Comparison Schedules 83 Debt Service Fund 84 State Aid Construction Capital Projects Fund 85 Storm Water Trunk Capital Projects Fund 86 Permanent Improvement Revolving Capital Projects Fund 87 Maintenance Capital Projects Fund 88 Nonmajor Special Revenue Funds Police Donations and Forfeitures 89 Park Improvement 90 Arena 91 Nonmajor Capital Projects Funds Sanitary Sewer Trunk 92 Cable Communications 93 Fire 94 Private 95 Recreation 96 General Capital Equipment 97 Internal Service Funds 98 Combining Statement of Net Position 99 Combining Statement of Revenues,Expenses,and Changes in Fund Net Position 100 Combining Statement of Cash Flows 101 Fiduciary Fund 102 Agency Fund Statement of Changes in Assets and Liabilities 103 Discretely Presented Component Unit—EDA 104 Combining Balance Sheet 105 Combining Statement of Revenues,Expenditures,and Changes in Fund Balances 106 CITY OF FARMINGTON Table of Contents(continued) Page STATISTICAL SECTION(UNAUDITED) Net Position by Component 107-108 Changes in Net Position 109-112 Fund Balances of Governmental Funds 113-114 Changes in Fund Balances of Governmental Funds 115-116 Tax Capacity Value and Estimated Actual Value of Taxable Property 117-118 Property Tax Rates 119 Principal Property Taxpayers 120 Property Tax Levies and Collections 121 Ratios of Outstanding Debt by Type 122-123 Ratios of General Bonded Debt Outstanding 124-125 Direct and Overlapping Governmental Activities Debt 126 Legal Debt Margin Information 127-128 Pledged Revenue Coverage 129 Demographic and Economic Statistics 130 Principal Employers 131 Full-Time Equivalent City Government Employees by Function 132-133 Operating Indicators by Function 134-135 Capital Asset Statistics by Function/Program 136-137 THIS PAGE INTENTIONALLY LEFT BLANK INTRODUCTORY SECTION City of Farmington 430 Third Street Farmington,Minnesota 651.280.6800•Fax 651.280.6899 " �� www.ci.farmington.mn.us May 10,2016 Honorable Mayor,Members of the City Council,and Citizens of the City of Farmington,Minnesota The Comprehensive Annual Financial Report (CAFR) of the City of Farmington, Minnesota (the City) for the fiscal year ended December 31, 2015 is hereby submitted. This report was prepared by the Finance Department and responsibility for both the accuracy of the presented data and the completeness and fairness of the presentation, including all disclosures, supporting schedules, and statistical tables, rests with the City. To provide a reasonable basis for making these representations, management of the City has established a comprehensive internal control framework that is designed to protect the City's assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of these financial statements in conformity with accounting principles generally accepted in the United States of America. Because the cost of internal controls should not outweigh their benefits, the City's internal controls have been designed to provide reasonable, rather than absolute, assurance that the financial statements will be free from material misstatements. As management, we assert that to the best of our knowledge and belief, this CAFR is complete and reliable in all material respects, that it is presented in a manner designed to fairly set forth the financial position and results of operations of the City as measured by the financial activity of its various funds, and that all disclosures necessary to enable the reader to gain the maximum understanding of the City's financial affairs have been included. The organization,form, and contents of this report were prepared in accordance with the standards prescribed by the Governmental Accounting Standards Board, the Government Finance Officers Association (GFOA) of the United States and Canada, the American Institute of Certified Public Accountants, Minnesota Office of the State Auditor,and city policies. The City's financial statements have been audited by Malloy, Montague, Karnowski, Radosevich &Co., P.A., a professional firm of certified public accountants. The goal of the independent audit was to provide reasonable assurance that the financial statements of the City for the year ended December 31, 2015, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded, based upon the audit, that there was a reasonable basis for rendering an unqualified opinion that the City's financial statements, for the year ended December 31, 2015, are fairly presented in conformity with accounting principles generally accepted in the United States of America. The Independent Auditor's Report is presented as the first component of the financial section of this report. This transmittal letter is designed to complement the Management's Discussion and Analysis (MD&A) and should be read in conjunction with it. The MD&A can be found immediately following the report of the independent auditors. -i- Profile of the Government The City is a suburban community located 30 miles south and east of downtown Minneapolis in Dakota County and was established in 1872 as a railroad center for the surrounding farming community. The City has seen a 10 percent growth in population over the past 10 years due to an influx of new housing developments. The 2010 Census established the City population at 21,086. Additionally, the City's boundary has grown easterly, adding 1,407 acres of annexation and growing from 12.5 square miles in 2000 to its current size of 14.82 square miles. The growth that the City has experienced is due to a number of factors,such as relatively affordable home ownership as compared to homes north and west of the City, the opportunity to locate further from the inner core, and the opportunity to live in a community with a "home-town"feel because of its discernable traditional downtown. The City operates under the Mayor-Council form of organization. The governing City Council, consisting of the Mayor and four other councilmembers, is elected at large and on a non-partisan basis. Terms of office are staggered four-year terms, with elections held in each even-numbered year. The City Council is responsible for, among other things, passing ordinances, adopting the budget, appointing members to the various committees and commissions, and hiring the City Administrator, heads of various departments, and city employees. The City Administrator is responsible for carrying out the policies and ordinances of the City Council, for overseeing the day-to-day operations of the city government, and the heads of various departments and city employees. The City provides its residents and businesses a full range of municipal services, including police and fire protection, ambulance services, construction and maintenance of highways, streets, and other infrastructure, as well as recreational and cultural activities. The City operates the following enterprise funds: municipal liquor operations, sewer, solid waste, storm water, water, and street lights. The City also contributes to the senior center operations, outdoor municipal pool, ice arena, limited community recreation services,and several other important community-based events and projects. Economic Condition The information presented in the financial statements is perhaps best understood when it is considered from the broader perspective of the specific environment within which the City operates. Local Economy Major industries located within the City's boundaries include Independent School District No. 192, Farmington Area Public Schools (the District); Federal Aviation Administration; an electric utility cooperative; a transportation company; an assisted living facility; an independent living senior facility; manufacturers of dairy products and flag and light poles; and a trucking company. The District and the Federal Aviation Administration provide a significant economic presence, providing employment to approximately 900 and 400 people, respectively. During 2015, several local businesses undertook major remodels, interior expansions, and external renovations.The county library completed a comprehensive remodeling of their facility and several new businesses opened their doors.The City continues to partner with Dakota County to offer the Open to Business initiative,which provides financial and business advice to small and future business owners. New residential construction was steady in the City. There were 53 new single family residential permits issued in 2015 with a total valuation of $15,397,703. The number of foreclosures in the City continued to decline. There were 44 foreclosures in the City in 2015, which is down from 123 in 2012. -ii- Long-Term Planning In April 2013,the City Council adopted a set of strategies for 2013-2017,which include: • ensure the long-term financial health of the City, • position the City for future economic development, • review the use and efficiency of city facilities, • maintain the long-term viability of the city liquor operations,and • continue communication with residents and partnerships with other local governments. Under each strategy, the City has adopted a specific set of goals. These priorities and goals were approved by the City Council in June 2014. The City Council meets each year to review changes that have taken place in the City and identify a set of priorities and specific goals for each priority for the City to further its progress toward meeting the long-term strategies identified for 2013-2017. Additional information about these strategies and goals can be found on the City's website, www.ci.farmington.mn.us. During 2013, the City Council reviewed a 30-year capital improvement plan for the City's streets and equipment needs. Later that year, the City Council adopted a 2014-2018 Street Reconstruction Plan. The first project, the Akin Park Estates East and West Street Reconstruction Project, was completed during the summer of 2014. During 2015,the Henderson and 195th Street Projects were completed.The next city road project is scheduled for 2019. The 2015 budget included local government aid (LGA)dollars for the second time in nearly 10 years,the City Council designated that these funds be used to begin to address deferred equipment and new software application needs. If the City continues to receive LGA monies, the City Council intends to utilize a portion of these funds for the next several years to address fire equipment needs. In addition, the budget provided funding for the City to transition to its first full-time fire chief; he joined the City in April 2015. In the fall of 2015, the City adopted a long-term financial plan for the City's Sewer Fund. This plan projects revenues, operating expenditures, and infrastructure needs for the next 30 years.This analysis was used to set the City's 2015 sewer rates and will be periodically updated. The City has recently completed a Downtown Redevelopment Plan. The recommendations included in this plan will be considered as the City develops the budget for 2017 and future years. Finally, the City's outdoor pool is over 30 years old, and will at some point need a major capital investment. During 2016, the City Council authorized a Recreational Facilities Task Force to prioritize projects, including a possible replacement swimming pool, to potentially be included in a $10,000,000 bond referendum.The City Council recently received the recommendations of the group and now needs to decide if it is going to include a referendum question on the ballot in November 2016. Relevant Financial Policies Operating Budgets The annual budget serves as the foundation for the City's financial planning control.All departments of the City submit budget requests for the following year to the City Administrator in the spring/summer of each year. These requests serve as a starting point for the development of a proposed budget. These requests are then presented to the City Council for review in the summer. The City Council adopts a preliminary tax levy by September 30. The City Council is required to hold hearings and obtain input on the proposed budget and to adopt a final budget and property tax levy no later than December 28 of the close of the fiscal year. -iii- The budget of the City is prepared by fund (e.g., General Fund), function, (e.g., public safety), and department (i.e., police department). Departments may request transfers of appropriations within line items in the department; however, City Council approval is required when making transfers between funds. Budget to actual comparisons are provided in this report for the General Fund, special revenue funds, most capital project funds (excludes Fire, Recreation, and General Capital Equipment Capital Projects Funds), and debt service funds (in total). The General Fund budget to actual comparison is on page 25. The remaining budget to actual comparisons are presented starting on page 83. Revenue Policies The City conservatively projects its annual revenues after a thorough analytical process which involves annually reexamining existing and potential revenues sources. Cash Management Policy and Practice The City's investment policy was reviewed and updated in 2013. The primary goal of the City's investment policy is to ensure the safety of the principal invested. Idle cash during the year was invested according to the City's investment policy. The City continued to experience investing in a low interest rate environment, but saw its overall investment portfolio increase as well as an increase in overall market values as of the end of 2015. As a result, the City's 2015 investment earnings were comparable to 2014. Staff is monitoring interest rates and is continuing the diligent practice of reviewing the City's cash flow needs, determining the length of investment and the interest rate available to determine how best to invest available funds, including potentially retiring some debt early. The continued low interest rates available for investments will continue to affect the interest earnings of the City, has been factored into the City's 2016 budget, and will be considered as the 2017 budget is developed. Debt Management Policy and Practice The City Council reviewed and adopted an updated debt management policy in 2013.The purpose of the policy is to establish parameters and provide guidance governing the issuance, management, continuing evaluation of, and reporting on all debt obligations of the City.The City issued one new set of bonds in 2015 to pay for a portion of the joint county/city 195th Street Reconstruction Project.The remainder of this project will be funded with an internal loan which will be repaid from municipal state aid construction reimbursement funds.Staff continues to review its outstanding debt issues and advise the City Council as to which bonds it would make financial or program sense to refund and/or restructure. Fund Balance Policy and Practice During 2015,for the second year in a row in many years,the City's General Fund cash flow was positive each calendar month during the year. No interfund borrowing was required. Further evidence of the General Fund's improved financial strength can be seen in the General Fund's unassigned fund balance, which has increased from 20.8 percent of subsequent years' budgeted expenditures and transfers out as of December 31, 2011 to 40.1 percent as of December 31, 2015. This increase has been accomplished through sound budgeting, long-term financial planning, lower fuel prices, mild winters,and conservative spending by staff. In April 2015,the City adopted an updated fund balance policy,effective as of December 31,2014.This policy acknowledges the progress the City has made in strengthening its General Fund balance and challenged the City to continue to improve by increasing the minimum General Fund balance. The updated policy states the City will strive to maintain the fund balance in the General Fund between 40-50 percent of the subsequent year's budgeted expenditures and transfers out in order to provide enough funding to carry city operations to the next semiannual receipt of tax proceeds (in June/July). The City Council and staff have worked diligently to strengthen the City's financial position and as of December 31, 2015, have reached the minimum recommended fund balance level set forth in this policy. -iv- Major Initiatives The City continues to place a high priority on planning for community needs as growth and expansion issues impact city operations. The availability of land, infrastructure, and services continue to drive the community development focus of the City. A community that helps grow value has a positive impact on the net worth of all its property owners.As an organization,the City has worked diligently to build a variety of services,facilities,infrastructure, and secure a financial foundation for its residents and stakeholders. During 2015, the City completed the Henderson Addition and joint county/city 195th Street Reconstruction Projects. Maintaining high quality services plays a key role in favorable appreciation of the community's property values. The City's substantial investments in its infrastructure have helped extend the life of some existing roadways and improve the quality and safety of other roads in the City. Investments in homes and businesses represent the most important assets in an American citizen's personal portfolio; therefore, the continued enhancement of that value is extremely important. While the City's market value had declined in the past few years, in 2015 and continuing on into 2016,the City is seeing its residential house values rebound. The City needs to continue its forward progress by building and renewing its community.The community and organizational strength, both financial and operational, allows the City to create even greater opportunities.The City Council placed the goal of assisting and encouraging economic development as a high priority;during 2014,the City hired a Community Development Director.The City Council has further strengthened the organization by hiring its first full-time Fire Chief in April 2015. The City continues to collaborate with Dakota County, Dakota County Regional Chamber,the Farmington Business Association, the District, nearby communities, and neighboring townships to provide its citizens with various services. Also,work was begun in 2015 and recently completed in 2016 on a Downtown Redevelopment Plan.The recommendations included in this plan will be considered as the City develops the budget for 2017 and future years. For 2015 and 2016, the City Council adopted budgets which continue to fund seal coating, building maintenance, and trail maintenance needs as well as addressing deferred fire equipment needs, the City's 2014-2018 Street Reconstruction Plan, and, as previously mentioned, provide for the hiring of the City's first full-time Fire Chief. The Community Development Department has proactively worked with the Planning Commission in 2014/2015 to amend city code to make it easier for new businesses to locate in the City. Ordinance amendments included changes for data centers,food processing facilities,breweries,and distilleries. Finally, after several years of concentrated efforts, the City celebrated the achievement of one of its long-term financial goals when it received a rating upgrade from "AA-" to "AA" from Standard and Poor's. Awards The GFOA awarded a Certificate of Achievement for Excellence in Financial Reporting to the City for its CAFR for the year ended December 31, 2014. This is the sixth year the City has received this prestigious award. In order to be awarded a Certificate of Achievement, a city must publish an easily readable and efficiently organized CAFR. This report must satisfy both accounting principles generally accepted in the United States of America and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe our current CAFR continues to meet the Certificate of Achievement Program's requirements and are submitting it to the GFOA to determine its eligibility for another certificate. -v- Acknowledgments The preparation of this report would not have been possible without the talented and dedicated services of the entire staff of the Finance Department and other key city personnel. We would like to express our appreciation to all city staff for their attention to detail and budget management throughout the year. Credit also must be given to the Mayor and the City Council for their support and the steps they have taken to continue to strengthen the City's finances and longer-term financial planning. Respectively Submitted, cile.....: David McKnight, inistrator Robi Hanson, finance Director -vi- Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to City of Farmington Minnesota For its Comprehensive Annual Financial Report for the Fiscal Year Ended December 31, 2014 "02074.? Executive Director/CEO -vii- CITY OF FARMINGTON, MINNESOTA Organizational Chart December 31, 2015 Citizens City Council City Administrator Administration Finance Human Resources Police Fire Liquor Operations Information Technology Community Development Engineering Parks and Recreation Municipal Services I � Building Inspections Planning and Solid Waste Division Zoning Division -Vlll- CITY OF FARMINGTON Elected Officials and Executive Staff December 31,2015 ELECTED OFFICIALS Term Expires Todd Larson Mayor December 31,2016 Jason Bartholomay Councilmember December 31,2018 Doug Bonar Councilmember December 31,2016 Terry Donnelly Councilmember December 31,2016 Tim Pitcher Councilmember December 31,2018 EXECUTIVE STAFF David McKnight City Administrator Kevin Schorzman Engineer Robin Hanson Finance Director Jim Larsen Fire Chief Brenda Wendlandt Human Resources Director Todd Reiten Municipal Services Director Randy Distad Parks and Recreation Director Brian Lindquist Police Chief -ix- THIS PAGE INTENTIONALLY LEFT BLANK FINANCIAL SECTION PRINCIPALS Thomas M.Montague,CPA Thomas A.Kaowski,CPA Paul A.Radoscvich,CPA William J.Lauer,CPA I -M I R CERTIFIED PUBLIC James H.Eichcen,CPA ACCOUNTANTS Aaron J.Nielsen,CPA Victoria L.Holinka,CPA INDEPENDENT AUDITOR'S REPORT To the City Council and Management City of Farmington,Minnesota REPORT ON THE FINANCIAL STATEMENTS We have audited the accompanying financial statements of the governmental activities,the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Farmington, Minnesota (the City) as of and for the year ended December 31, 2015, and the related notes to the financial statements, which collectively comprise the City's basic financial statements as listed in the table of contents. MANAGEMENT'S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. AUDITOR'S RESPONSIBILITY Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to fmancial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fmancial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements,whether due to fraud or error. In making those risk assessments,the auditor considers internal control relevant to the City's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management,as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. - (continued) -1- Malloy, Montague, Karnowski, Radosevich, & Co., P.A. 5353 Wayzata Boulevard•Suite 410•Minneapolis.MN 55416•Telephone:952-545.0424•Telefax:952.545•0569•Mvm.mmkr.com OPINIONS In our opinion, the financial statements referred to on the previous page present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City as of December 31,2015,and the respective changes in financial position and,where applicable, cash flows thereof, and the budgetary comparison for the General Fund for the year then ended, in accordance with accounting principles generally accepted in the United States of America. EMPHASIS OF MATTER As described in Note 1 of the notes to basic financial statements,the City has implemented Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions—an amendment of GASB Statement No. 27, and GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date—an amendment of GASB Statement No. 68, during the year ended December 31,2015.Our opinion is not modified with respect to this matter. OTHER MATTERS Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis and the required supplementary information (RSI), as listed in the table of contents, be presented to supplement the basic financial statements. Such information,although not a part of the basic financial statements, is required by the GASB, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the RSI in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The introductory section, supplemental information, and statistical section, as listed in the table of contents, are presented for purposes of additional analysis and are not required parts of the basic financial statements. The supplemental information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic fmancial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplemental information is fairly stated,in all material respects,in relation to the basic financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. (continued) -2- OTHER REPORTING REQUIRED BY GOVERNMENT AUDITING STANDARDS In accordance with Government Auditing Standards, we have also issued our report dated May 10,2016 on our consideration of the City's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements, and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing,and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control over financial reporting and compliance. 14/6111 iLI ., K ; /4444e.A4.4„c4, e., A A . Minneapolis,Minnesota May 10,2016 -3- THIS PAGE INTENTIONALLY LEFT BLANK CITY OF FARMINGTON Management's Discussion and Analysis Year Ended December 31,2015 As management of the City of Farmington, Minnesota(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, 2015. The discussion and analysis is intended to be considered in conjunction with the additional information that we have furnished in our letter of transmittal,located earlier in this report, and the City's financial statements contained within this report. FINANCIAL HIGHLIGHTS • The assets and deferred outflows of resources of the City exceeded liabilities and deferred inflows of resources by $107,808,807 (net position) at the close of the most recent fiscal year. Of this amount, $20,359,513 (unrestricted net position) may be used to meet the government's ongoing obligations to citizens and creditors. • The City's total net position decreased by$1,255,284 in 2015,excluding the effect of a change in accounting principle discussed below. • The City recorded a change in accounting principle related to the implementation of new accounting standards for reporting employee participation in defined benefit pension plans. The change resulted in reductions to the beginning net position of the governmental activities ($4,456,420) and business-type activities ($491,161) on the City's government-wide fmancial statements. Please note the amounts included in the Management's Discussion and Analysis for 2014 have not been restated. • The City's total bonded debt increased by$150,838,or 0.5 percent,during the fiscal year due to a combination of the issuance of$3,050,000 of 2015A General Obligation Bonds and annual bond principal payments. • The City's governmental funds reported combined ending fund balances of $18,546,467 at December 31, 2015, an increase of$1,234,510 from the prior year. Approximately 68.8 percent of this total amount,$12,763,969,is available for use within the City's constraints and policies. • The City has one interfund loan which was for the purchase of a new fire truck by the General Fund with funds from the Water Fund.This loan will be fully repaid in 2016,one year early. • At the end of the current fiscal year, the unassigned fund balance for the General Fund was $4,734,534,or 40.1 percent,of 2016 General Fund budgeted expenditures and transfers out. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the City's basic financial statements.The City's basic financial statements are comprised of three components: 1)government-wide financial statements,2)fund financial statements,and 3)notes to the financial statements.This report also contains other supplementary information in addition to the basic financial statements themselves. Government-Wide Financial Statements —The government-wide financial statements are designed to provide readers with a broad overview of the City's finances, in a manner similar to a private sector business. -4- These financial statements include not only the City itself(known as the primary government), but also the Farmington Economic Development Authority (EDA). The EDA has been presented as a discretely presented component unit on the City's financial statements in accordance with accounting principles generally accepted in the United States of America. The Statement of Net Position presents information on all of the City's assets, liabilities, and deferred inflows/outflows, as applicable, with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The Statement of Activities presents information showing how the City's net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs,regardless of the timing of related cash flows. Thus,revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g.,uncollected taxes and earned,but unused personal leave time). Both of the government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues(governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City include general government, public safety, public works,parks and recreation, and economic development. The business-type activities of the City include liquor operations,and sewer,solid waste,storm water,water,and street light utility operations. Fund Financial Statements—A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives.The City,like other state and local governments,uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into three categories: governmental funds, proprietary funds,and fiduciary funds. Governmental Funds — Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on the 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 financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government's near-term fmancing decisions. Both the governmental funds Balance Sheet and Statement of Revenues, Expenditures, and Changes in Fund Balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City maintains several individual governmental funds. Information is presented separately in the governmental funds Balance Sheet and Statement of Revenues, Expenditures, and Changes in Fund Balances for the City's six individual major governmental funds.They are as follows: • General Fund • Debt Service Fund • State Aid Construction Capital Projects Fund • Storm Water Trunk Capital Projects Fund • Permanent Improvement Revolving Capital Projects Fund • Maintenance Capital Projects Fund -5- Data from the other governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these nonmajor governmental funds is provided in the form of combining statements elsewhere in this report. The City adopts annual appropriated budgets for its General Fund, special revenue funds, Debt Service Fund (combined), and capital projects funds. Budgetary comparison statements or schedules have been provided for these funds to demonstrate compliance with their respective budgets. Proprietary Funds—The City maintains six enterprise funds and four internal service funds as a part of its proprietary fund type. Enterprise funds are used to report the same functions presented as business-type activities in the governmental-wide financial statements. The City uses enterprise funds to account for its liquor operations, and its sewer, solid waste, storm water, water, and street light utility operations. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for the enterprise funds,all of which are considered to be major funds of the City. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City's various functions. The City uses internal service funds to account for its employee benefits, property and liability insurance, maintaining its fleet of vehicles, and information technology needs. All internal service funds are combined into a single, aggregated presentation in the proprietary fund financial statements, labeled Governmental Activities — Internal Service Funds. Because all of these services predominately benefit governmental, rather than business-type functions, they have been included within governmental activities in the government-wide financial statements. Individual fund data for the internal service funds is provided in the form of combining statements elsewhere in this report. Fiduciary Funds — Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the City's own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. Notes to Basic Financial Statements — The notes to basic financial statements provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. Other Information—In addition to the basic financial statements and accompanying notes,the fmancial section also presents required supplementary information, and the combining and individual fund statements and schedules (presented as supplementary information)referred to earlier in connection with nonmajor governmental funds and internal service funds, which are presented immediately following the basic fmancial statements. Further, a statistical section has been included as part of the comprehensive annual fmancial report (CAFR)to facilitate additional analysis,and is the third and final section of the report. -6- GOVERNMENT-WIDE FINANCIAL ANALYSIS An analysis of the City's financial position begins with a review of the Statement of Net Position and the Statement of Activities.These two statements report the City's net position and changes in net position.It should be noted that the financial position can also be affected by non-financial factors, including economic conditions,population growth,and new regulations. As noted earlier,net position may serve over time as a useful indicator of the City's financial position.As presented in the following condensed version of the Statement of Net Position, the City's assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by$107,808,807 at December 31,2015. City of Farmington's Net Position Governmental Activities Business-Type Activities Total 2015 2014 2015 2014 2015 2014 Current and other assets $ 25,813,806 $ 25,254,532 $ 14,605,450 $ 13,084,078 $ 40,419,256 $ 38,338,610 Capital assets 52,781,709 54,496,035 54,807,938 55,685,476 107,589,647 110,181,511 Total assets $ 78,595,515 $ 79,750,567 $ 69,413,388 $ 68,769,554 $ 148,008,903 $ 148,520,121 Deferred outflows of resources $ 1,387,254 $ — $ 70,620 $ — $ 1,457,874 $ — Current liabilities $ 6,295,828 $ 4,956,696 $ 400,576 $ 440,138 $ 6,696,404 $ 5,396,834 Long-term liabilities 33,349,311 29,024,459 616,255 87,156 33,965,566 29,111,615 Total liabilities $ 39,645,139 $ 33,981,155 $ 1,016,831 $ 527,294 $ 40,661,970, $ 34,508,449 Deferred inflows of resources $ 936,696 $ — $ 59,304 $ — $ 996,000 $ — Net position Net investment in capital assets $ 21,417,203 $ 23,383,175 $ 54,807,938 $ 55,685,476 $ 76,225,141 $ 79,068,651 Restricted 9,063,587 9,235,448 2,160,566 2,160,566 11,224,153 11,396,014 Unrestricted 8,920,144 13,150,789 11,439,369 10,396,218 20,359,513 23,547,007 Total net position $ 39,400,934 $ 45,769,412, $ 68,407,873, $ 68,242,260 $ 107,808,807 $ 114,011,672 The largest portion of the City's net position,$76,225,141,or 71 percent,reflects its investment in capital assets(e.g.,land,buildings,machinery and equipment); less any outstanding related debt used to acquire those 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. Restricted net position of$11,224,153 comprises 10 percent of net position at the close of the fiscal year ending December 31,2015.These assets are subject to external restrictions on how they may be used. The balance of unrestricted net position, $20,359,513, or approximately 19 percent, may be used to meet the City's ongoing obligations to citizens and creditors. Certain balances within unrestricted net position may have internally imposed commitments or limitations,which may further limit the purpose for which such net position may be used. -7- CHANGES IN NET POSITION The following table provides a condensed version of the Statement of Activities for the year ended December 31, 2015 with comparative totals for the year ended December 31, 2014. The City's net position decreased by$1,255,284,or 1.2 percent,during the current fiscal year. City of Farmington's Change in Net Position Governmental Activities Business-Type Activities Total 2015 2014 2015 2014 2015 2014 Revenues Charges for services $ 1,363,826 $ 1,645,450 $ 10,888,883 $ 10,740,033 $ 12,252,709 $ 12,385,483 Operating grants and contributions 649,541 677,999 22,000 21,000 671,541 698,999 Capital grants and contributions 671,671 477,833 945,938 - 1,617,609 477,833 Property taxes 11,460,209 10,962,860 - - 11,460,209 10,962,860 Other taxes 265,485 269,208 - - 265,485 269,208 Unrestricted grants 278,974 257,386 - - 278,974 257,386 Investment earnings 189,540 130,739 152,954 246,220 342,494 376,959 Total revenues 14,879,246 14,421,475 12,009,775 11,007,253 26,889,021 25,428,728 Expenses General government 2,284,974 1,940,630 - - 2,284,974 1,940,630 Public safety 5,357,738 5,192,091 - - 5,357,738 5,192,091 Public works 7,473,095 4,893,341 - - 7,473,095 4,893,341 Parks and recreation 1,815,882 1,730,734 - - 1,815,882 1,730,734 Economic development 90,000 49,417 - - 90,000 49,417 Interest on long-term debt 992,422 1,020,096 - - 992,422 1,020,096 Liquor - - 4,352,597 4,315,834 4,352,597 4,315,834 Sewer - - 1,875,225 1,712,146 1,875,225 1,712,146 Solid waste - - 1,658,128 1,600,434 1,658,128 1,600,434 Storm water - - 731,444 615,684 731,444 615,684 Water - - 1,339,588 1,410,214 1,339,588 1,410,214 Streetlights 173,212 174,957 173.212 174.957 Total expenses 18,014,111 14,826,309 10,130,194 9,829,269 28,144,305 24,655,578 Change in net position before transfers (3,134,865) (404,834) 1,879,581 1,177,984 (1,255,284) 773,150 Transfers 1,222,807 1,414,119 (1,222,807) (1,414,119) - - Change in net position (1,912,058) 1,009,285 656,774 (236,135) (1,255,284) 773,150 Net position-beginning 45,769,412 44,760,127 68,242,260 68,478,395 114,011,672 113,238,522 Change in accounting principle (4,456,420) - (491,161) - (4,947,581) - Net position-beginning,as restated 41,312,992 44,760,127 67,751,099 68,478,395 109,064,091 113,238,522 Net position-ending $ 39,400,934 $ 45,769,412 $ 68,407,873 $ 68,242,260 $ 107,808,807 $ 114,011,672 Governmental Activities-Governmental activities decreased the City's net position before transfers by $3,134,865,primarily due to costs incurred related to the county's 195th Street Reconstruction Project. Business-Type Activities-Business-type activities increased the City's net position before transfers by $1,879,581, due to a combination of capital contributed to the Storm Water Fund and profitable operations in all but the Storm Water Fund, where a rate increase went into effect January 1, 2015 to begin to address this deficit. -8- GOVERNMENTAL ACTIVITIES Revenues—The following chart illustrates the City's revenues by source for its governmental activities: Revenues by Source—Governmental Activities Capital Grants and Unrestricted Grants Contributions 2% Other 5% 1% Operating Grants and Contributions Charges for 4% Services 9% Other Taxes 2% ., • Property Taxes 77% Expenses—The following chart illustrates the City's governmental expenses and corresponding program revenues,excluding transfers,for its governmental activities: Expenses and Program Revenues—Governmental Activities $7,500,000 - $7,000,000 - $6,500,000 - $6,000,000 - $5,500,000 - ___ $5,000,000 - $4,500,000 - $4,000,000 - $3,500,000 - $3,000,000 - $2,500,000 - $2,000,000 - $1,500,000 - $1,000,000 - _111_ IlL_ $500,000 - $ General Parks and Economic Interest on Government Public Safety Public Works Recreation Development Long-Term Debt sProgram Revenues $456,308 $763,323 $860,413 $604,994 $— $- aExpenses $2,284,974 $5,357,738 $7,473,095 $1,815,882 $90,000 $992,422 -9- BUSINESS-TYPE ACTIVITIES Revenues—The following chart illustrates the City's revenues by source for its business-type activities: Revenues by Source—Business-Type Activities Capital Grants and Contributions Operating Grants g% Other and 1% Contributions <1% _ - \r Charges for Services 91% Expenses—Below is a graph showing the City's program revenues and expenses, excluding transfers, for its business-type activities: Expenses and Program Revenues—Business-Type Activities $5,000,000 - $4,500,000 - $4,000,000 - $3,500,000 - $3,000,000 - $2,500,000 - $2,000,000 - $1,500,000 - $1,000,000 - $500,000 $- Liquor Fund Sewer Solid Waste Storm Water Water Fund Street Light Operations ■Prop amRevenues $4,607,417 $1,957,902 $2,013,179 $1,616,291 $1,439,873 $222,159 a Expenses $4,352,597 $1,875,225 $1,658,128 $731,444 $1,339,588 $173,212 -10- FINANCIAL ANALYSIS OF THE CITY'S FUNDS As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance- related legal requirements. Governmental Funds — The focus of the City's governmental funds is to provide information on near-term inflows, outflows, and balances of currently available resources. Such information is useful in assessing the City's financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the City's governmental funds reported combined ending fund balances of$18,546,467, a 7.1 percent increase of$1,234,510 from 2014. Increased fire aid, state road maintenance funds, police aid, and charges for services (primarily for fire) helped offset lower new construction permit revenues,which were a result of limited lot availability for new construction,and the planned spending of a portion of the City's fund balance to cover the transition costs to a new full-time Fire Chief.Meanwhile,the City's General Fund benefited from lower fuel costs due to lower fuel prices, lower utility and snow removal costs due to a mild winter, and conservative spending by staff. The Debt Service Fund's fund balance increased due to the premium received in conjunction with the issuance of the 2015A bonds, increased transfers in as part of the City's long-term debt management plan, and property tax, special assessment, and investment earnings that were more than needed to pay the corresponding principal and interest due on the bonds. Committed, assigned, and unassigned fund balances, which are available for spending at the government's discretion,had a balance of$12,763,969 at year-end. The remainder of the fund balance is either nonspendable ($6,184), or restricted to indicate that it is not available for new spending because it has already been obligated 1) to pay debt service ($5,482,325), 2) to pay for capital improvements and future cable communication expenditures ($180,443), 3) for park improvements ($101,346), and 4) the remainder is from donations and other restricted funds($12,200). Financial highlights for the City's major governmental funds are as follows: General Fund—The General Fund is the chief operating fund of the City. At the end of 2015, the unassigned fund balance of the General Fund was $4,734,534. As a measure of the General Fund's liquidity, it may be useful to compare fund balance to total fund expenditures. The 2015 unassigned fund balance represents 40.1 percent of total 2016 General Fund budgeted expenditures and transfers out,up from 34.8 percent for the December 31,2014 unassigned fund balance as a percentage of the 2015 General Fund budgeted expenditures and transfers out. The reasons for the increase are due to lower than budgeted human resource costs (benefits and worker's compensation premiums), fuel (lower fuel prices), snow removal and utility costs (mild winter), and conservative spending by the various departments. As a result, the General Fund realized an overall increase in fund balance and the City saw the overall percentage of unassigned fund balance as a percentage of General Fund expenditures and transfers out increase. The General Fund's unassigned fund balance has increased from 20.8 percent as of December 31, 2011 to 40.1 percent as of December 31, 2015. The City Council has increased their commitment to not only sound, comprehensive budgets, but also long-term financial planning. In addition, the City has benefited from an improving economy and a couple of mild winters (lower utility and snow removal costs). Together these efforts have resulted in the strengthening of the General Fund's balance. The City Council also recently revised the City's fund balance policy and stated it would strive to maintain the fund balance in the General Fund between 40-50 percent of the subsequent year's budgeted expenditures and transfers out in order to provide enough funding to carry city operations to the next semiannual receipt of tax proceeds (in June/July). As of December 31, 2015, the City's General Fund balance meets the minimum fund balance guideline. -11- Debt Service Fund—During the year,the City repaid $2.9 million in principal. The fund balance in the Debt Service Fund increased $447,936, primarily due to the premium received in conjunction with the issuance of the 2015A bonds, increased transfers in as part of the City's long-term debt management plan,and property tax,special assessment,and investment earnings that were more than needed to pay the corresponding principal and interest due on most bonds. State Aid Construction Capital Projects Fund — The first priority for this fund's balance is to provide for future debt service payments, as needed, for certain bonds in the Debt Service Fund. During 2015,the amount needed to be transferred to the related bond funds in the Debt Service Fund exceeded the property tax levy, special assessments, and intergovernmental revenues, resulting in a net decrease of$205,878 in this fund's balance. Storm Water Trunk Capital Projects Fund —The decrease of$171,526 in fund balance is due to planned transfers to the related bond fund in the Debt Service Fund exceeding special assessment revenue and storm water trunk costs related to a street maintenance project completed in 2015. Permanent Improvement Revolving Capital Projects Fund —There were no new projects in this fund during 2015.There was a modest increase in the fund balance of$20,478 as special assessments received exceeded expenditures. Maintenance Capital Projects Fund —There was a modest increase of$132,310 as the combined state aid construction revenues and net bond proceeds were more than the street project costs incurred in 2015. Financial highlights for the significant changes in the City's nonmajor governmental funds are as follows: Sanitary Sewer Trunk Capital Projects Fund—The increase in fund balance of$41,913 is a result of the charges for services revenue exceeding the public works expenditures needed in 2015. Cable Communications Capital Projects Fund — During 2015, franchise tax revenues exceeded operational costs,resulting in a net increase in fund balance of$114,865. Fire Capital Projects Fund — In 2013, the City adopted a long-term capital equipment plan for its fire department.The increase in fund balance of$103,552 is a combination of planned transfers in for equipment replacement and donations from the Farmington Fire Fighters' Relief Association exceeding the current year's equipment expenditures. Proprietary Funds — The City's proprietary funds provide the same type of information found in the government-wide financial statements,but in more detail.Financial highlights for the significant changes in the City's proprietary funds are as follows: Liquor Operations Fund — The net position of the Liquor Operations Fund at the end of 2015 totaled $956,725, an increase of$172,759, excluding the change in accounting principle discussed earlier. Both stores were profitable, but did experience increased sales pressure, both price and quantity, from neighboring liquor stores responding to new competition introduced into the southern Twin Cities metropolitan area in 2014 and traffic disruption from a major local street reconstruction project which was completed in 2015. The cash position for both stores has continued to strengthen, increasing from a combined total of$775,059 at December 31,2014 to$900,732 as of December 31, 2015. Sewer Operations Fund—The decrease in net position of$206,523 is primarily due to charges for services not being sufficient to cover depreciation expense. The City began to address the structural pricing deficit by implementing a rate increase which went into effect January 1,2016 and is designed to provide sufficient funds over time, along with other planned future rate increases to cover both operations and depreciation. This fund continues to maintain a significant unrestricted net position of $2,897,288. -12- Solid Waste Fund — The Solid Waste Fund recorded an increase in net position of $247,643, excluding the change in accounting principle discussed earlier. While recording an increase in net position,this fund is experiencing increased costs related to its annual curbside clean-up program and increased disposal fees and quantities being disposed. Changes are being made in 2016 to the annual curbside clean-up program to reduce costs. Storm Water Fund — The increase in net position of $802,459 is primarily due to capital contributions of$945,938.This fund continues to maintain an unrestricted net position of$959,700. Water Fund—The 2015 decrease in net position of$409,806 is primarily due to charges for services not being sufficient to cover depreciation expense. In conjunction with a long-term financial analysis of this fund performed in 2014, which does take into consideration the long-term need to cover depreciation expense, a fee increase went into effect in January 2015. Over time,this increase, along with other planned fee increases, are designed to cover depreciation. This fund continues to maintain a significant unrestricted net position of$5,280,880. Street Light Fund—The Street Light Fund was established in 2010.By making this a utility fund,all properties, including tax-exempt properties, within the City pay for street lighting. After its fourth year of operation,this fund has achieved a modest positive net position of$128,725. GENERAL FUND BUDGETARY HIGHLIGHTS The City's original and final budgets are the same,as no budget amendments were made during the year. Actual revenues were $30,789 more than budgeted. Revenue variances from final budget to actual include: • Licenses and permits revenue was $112,331 less than budgeted, primarily due to lower than anticipated new construction residential building permit activity. This is due to the limited availability of lots for new construction; the 2016 permit revenues have been further reduced in recognition of the reduced inventory of lots available for new construction. • Intergovernmental revenue came in over budget by $144,273 due to higher than anticipated state aid for roads,police aid,and fire aid. • Charges for services were $48,605 higher than budgeted as a result of increased reimbursement from one of the neighboring townships for fire protection services. • Investment earnings revenues were more than budgeted primarily due to an overall increase in the funds available for investment in the General Fund and the increase in market value of the City's General Fund investments. Expenditures were $606,469 less than the budgeted amount. The City benefitted from lower human resource costs for benefits, lower fuel costs due to lower fuel prices, and lower utility and snow removal costs associated with the milder winter. Almost all areas of expenditures were under budget due to conservative spending and use of city resources by all staff. -13- CAPITAL ASSETS AND LONG-TERM DEBT Capital Assets—The City's investment in capital assets for its governmental and business-type activities as of December 31,2015 was$107,589,647 (net of accumulated depreciation). This investment in capital assets includes land, buildings, improvements other than buildings, park facilities, machinery and equipment, vehicles, roads, bridges, infrastructure, intangibles, water mains, water reservoirs, sewer mains, lift stations, and storm water mains. As a result, the City's investment in capital assets for the current fiscal year decreased by 2.4 percent due to depreciation. City of Farmington's Capital Assets Governmental Activities Business-Type Activities Total 2015 2014 2015 2014 2015 2014 Land and easement $ 1,749,824 $ 1,749,824 $ 414,576 $ 414,576 $ 2,164,400 $ 2,164,400 Construction in progress - - - 83,274 - 83,274 Buildings 16,168,676 16,581,076 229,214 379,056 16,397,890 16,960,132 Improvements other than buildings 480,119 584,280 - - 480,119 584,280 Machinery and equipment 1,289,643 1,571,715 292,878 335,467 1,582,521 1,907,182 Infrastructure 33,093,447 34,009,140 - - 33,093,447 34,009,140 Collection and distribution system - - 53,871,270 54,473,103 53,871,270 54,473,103 Total(net of depreciation) $ 52,781,709 $ 54,496,035, $ 54,807,938 $ 55,685,476 $ 107,589,647 $ 110,181,511 Additional information on the City's capital assets can be found in Note 4 of the notes to basic financial statements. Long-Term Debt—At the end of the current fiscal year, the City had total bonded debt outstanding of $31,086,534. All city debt is general obligation debt, which is backed by the full faith and credit of the government.Furthermore,the City has long-term liabilities of$277,972 for unamortized bond premiums, $849,518 for compensated absences, $6,012,482 for net pension liabilities, and $787,735 for other post-employment benefits. City of Farmington's Outstanding Debt Governmental Activities Business-Tune Activities Total 2015 2014 2015 2014 2015 2014 General obligation improvement bonds $ 18,375,000 $ 17,125,000 $ — $ — $ 18,375,000 $ 17,125,000 Capital improvement bonds 8,860,000 9,380,000 — — 8,860,000 9,380,000 Public Project Revenue Bond 2,395,000 2,700,000 — — 2,395,000 2,700,000 Revenue bonds 796,534 945,696 — — 796,534 945,696 Certificates of indebtedness 660,000 785,000 — — 660,000 785,000 Total bonds outstanding $31,086,534 $30,935,696 $ — $ — $31,086,534 $30,935,696 Bond principal repayments during 2015 totaled $2,899,162. The City's credit rating from Standard & Poor's was raised from"AA-"to"AA"in September 2015. Minnesota Statutes limit the amount of general obligation debt a Minnesota city may issue to 3 percent of total estimated market value. The current debt limitation for the City is $44,279,096, which is significantly more than the City's outstanding general obligation debt. Additional information on the City's long-term debt may be found in Note 6 of the notes to basic financial statements. -14- ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES The City increased its net operating levy in 2016 by$449,046. The final city net operating levy for 2016 is $9,613,254 and is 4.90 percent higher than the comparable 2015 levy. Of the total budgeted revenues, including transfers in, for 2016, 74 percent are from property taxes, including $2.1 million in fiscal disparities revenue. The remaining General Fund budgeted revenues were adjusted to better reflect projected building activity and intergovernmental related revenues. Proposed 2016 General Fund expenditures, including transfers out, are estimated at $11,798,225, an increase of 2.75 percent compared to the 2015 budget. The 2016 budget continues the funding for the City's seal coating, trail maintenance, and building maintenance; focuses local government aid spending on one-time expenditures;and continues to address deferred fire equipment needs. The City continues to implement its 2014-2018 Street Reconstruction Plan, with the completion in 2015 of the Henderson Project and the joint county/city 195th Street Reconstruction Project. The City issued the 2015A bonds to fund a portion of the reconstruction project;the remainder of the project costs will be paid for with an internal loan which will be repaid from municipal state aid construction funds.To reduce the impact on the 2016 debt levy, the City is utilizing a portion of its municipal state aid maintenance funds to pay for a portion of the debt service related to bonds previously issued for state aid eligible projects. As a result, even though total bonded debt increased by $150,838, the City's 2016 debt levy decreased from$3,059,728 to$2,970,848. For 2016,user charges have been increased in the Sewer Fund. For 2016, one of the City's biggest challenges is the reduction in the number of lots available for new residential homes. While there are indicators the local economy continues to improve, the reduced inventory of available residential lots is impacting the amount of new residential construction that is occurring in 2016. Meanwhile, an application has been submitted and a developer is pursuing construction of a 70-unit assisted living facility. REQUESTS FOR INFORMATION This CAFR is designed to provide a general overview of the City's finances for all those with an interest in the government's finances. Questions concerning any of the information provided in this CAFR or requests for additional financial information should be directed to the City's Finance Director at the City of Farmington, 430 Third Street, Farmington, Minnesota 55024; by calling (651) 280-6800; or emailing the request to rhanson @ci.farmington.mn.us. -15- BASIC FINANCIAL STATEMENTS THIS PAGE INTENTIONALLY LEFT BLANK CITY OF FARMINGTON Statement of Net Position as of December 31,2015 Primary Government Component Unit Economic Governmental Business-Type Development Activities Activities Total Authority Assets Cash and investments $ 19,130,532 $ 9,982,791 $ 29,113,323 $ 375,964 Receivables Accounts 295,871 1,376,160 1,672,031 - Interest 46,543 31,796 78,339 988 Property taxes 1,578,796 - 1,578,796 - Special assessments 4,204,181 360,911 4,565,092 - Due from other governments 32,672 2,775 35,447 6,750 Internal balances (231,775) 231,775 - - Inventory - 447,193 447,193 - Prepaid items 95,285 11,483 106,768 890 Restricted assets-temporarily restricted Cash for future drinking water treatment plant - 2,160,566 2,160,566 - Net pension asset-fire relief 661,701 - 661,701 - Capital assets Not depreciated 1,749,824 414,576 2,164,400 - Depreciated,net of accumulated depreciation 51,031,885 54,393,362 105,425,247 - Total capital assets,net of accumulated depreciation 52,781,709 54,807,938 107,589,647 - Total assets 78,595,515 69,413,388 148,008,903 384,592 Deferred outflows of resources Pension plan deferments-PERA 1,054,529 70,620 1,125,149 - Pension plan deferments-fire relief 332,725 - 332,725 - Total deferred outflows of resources 1,387,254 70,620 1,457,874 - Total assets and deferred outflows of resources $ 79,982,769 $ 69,484,008 $ 149,466,777 $ 384,592 Liabilities Accounts and contracts payable $ 246,778 $ 236,358 $ 483,136 $ 1,726 Accrued salaries and employee benefits payable 303,466 - 303,466 - Accrued interest payable 399,712 - 399,712 - Deposits payable 356,386 34,106 390,492 - Due to other governments 460 70,463 70,923 - Long-term liabilities Due within one year 4,989,026 59,649 5,048,675 - Due in more than one year 33,349,311 616,255 33,965,566 - Total long-term liabilities 38,338,337 675,904 39,014,241 - Total liabilities 39,645,139 1,016,831 40,661,970 1,726 Deferred inflows of resources Pension plan deferments-PERA 798,781 59,304 858,085 - Pension plan deferments-fire relief 137,915 - 137,915 Total deferred inflows of resources 936,696 59,304 996,000 - Net position Net investment in capital assets 21,417,203 54,807,938 76,225,141 - Restricted for Debt service 7,897,681 - 7,897,681 - Capital projects 180,443 - 180,443 - Police programs 27,060 - 27,060 - Park improvements 101,892 - 101,892 - Fire relief pensions 856,511 - 856,511 - Tax increment - - 58,487 Water Fund-future drinking water treatment plant - 2,160,566 2,160,566 - Unrestricted 8,920,144 11,439,369 20,359,513 324,379 Total net position 39,400,934 68,407,873 107,808,807 382,866 Total liabilities,deferred inflows of resources,and net position $ 79,982,769 $ 69,484,008 $ 149,466,777 $ 384,592 See notes to basic financial statements -16- CITY OF FARMINGTON Statement of Activities Year Ended December 31,2015 Program Revenues Operating Capital Charges for Grants and Grants and Functions/Programs Expenses Services Contributions Contributions Primary government Governmental activities General government $ 2,284,974 $ 399,053 $ 57,255 $ — Public safety 5,357,738 351,038 372,285 40,000 Public works 7,473,095 9,624 220,001 630,788 Parks and recreation 1,815,882 604,111 — 883 Economic development 90,000 — — — Interest and fiscal charges 992,422 — — — Total governmental activities 18,014,111 1,363,826 649,541 671,671 Business-type activities Liquor operations 4,352,597 4,607,417 — — Sewer operations 1,875,225 1,957,902 — — Solid waste 1,658,128 1,991,179 22,000 — Storm water 731,444 670,353 — 945,938 Water 1,339,588 1,439,873 — — Street light 173,212 222,159 — — Total business-type activities 10,130,194 10,888,883 22,000 945,938 Total primary government $ 28,144,305 $ 12,252,709 $ 671,541 $ 1,617,609 Component unit Economic development authority $ 419,188 $ — $ 137,837 $ — General revenues Property taxes Franchise taxes Grants and contributions not restricted to specific programs Investment earnings Transfers Total general revenues and transfers Change in net position Net position—beginning,as previously reported Change in accounting principle Net position—beginning,as restated Net position—ending See notes to basic financial statements -17- Net(Expense)Revenue and Changes in Net Position Primary Government Component Unit Economic Governmental Business-Type Development Activities Activities Total Authority $ (1,828,666) $ — $ (1,828,666) $ — (4,594,415) — (4,594,415) — (6,612,682) — (6,612,682) — (1,210,888) — (1,210,888) — (90,000) — (90,000) — (992,422) — (992,422) — (15,329,073) — (15,329,073) — — 254,820 254,820 — — 82,677 82,677 — — 355,051 355,051 — — 884,847 884,847 — — 100,285 100,285 — — 48,947 48,947 — — 1,726,627 1,726,627 — (15,329,073) 1,726,627 (13,602,446) — — — — (281,351) 11,460,209 — 11,460,209 112,298 265,485 — 265,485 — 278,974 — 278,974 — 189,540 152,954 342,494 5,286 1,222,807 (1,222,807) — — 13,417,015 (1,069,853) 12,347,162 117,584 (1,912,058) 656,774 (1,255,284) (163,767) 45,769,412 68,242,260 114,011,672 546,633 (4,456,420) (491,161) (4,947,581) — 41,312,992 67,751,099 109,064,091 546,633 $ 39,400,934 $ 68,407,873 $ 107,808,807 $ 382,866 -18- CITY OF FARMINGTON Balance Sheet Governmental Funds as of December 31,2015 Capital Projects— Debt Service State Aid General Fund Construction Assets Cash and investuients $ 3,617,568 $ 5,466,318 $ 1,726,170 Receivables Accounts 163,428 — — Interest 9,688 14,048 4,850 Property taxes Unremitted 1,390,456 — — Delinquent 188,340 — — Special assessments Delinquent — 5,927 1,242 Noncurrent — 2,805,727 273,079 Due from other governments 12,439 20,233 — Prepaid items 6,034 — — Total assets $ 5,387,953 $ 8,312,253 $ 2,005,341 Liabilities Accounts and contracts payable $ 177,107 $ — $ — Deposits payable 45,824 — — Due to other governments 89 — — Due to other funds 120,000 — — Advances from other funds 111,775 — — Total liabilities 454,795 — — Deferred inflows of resources Unavailable revenue—accounts receivable — 18,274 — Unavailable revenue—property taxes 188,340 — — Unavailable revenue—special assessments — 2,811,654 274,321 Total deferred inflows of resources 188,340 2,829,928 274,321 Fund balances Nonspendable 6,034 — — Restricted — 5,482,325 — Committed — — 1,731,020 Assigned 4,250 — — Unassigned 4,734,534 — — Total fund balances 4,744,818 5,482,325 1,731,020 Total liabilities,deferred inflows of resources,and fund balances $ 5,387,953 $ 8,312,253 $ 2,005,341 See notes to basic fmancial statements -19- Capital Capital Projects- Projects- Permanent Capital Storm Water Improvement Projects- Trunk Revolving Maintenance Nonmajor Total $ 3,679,469 $ 135,205 $ 966,331 $ 2,016,820 $ 17,607,881 - - - 128,444 291,872 9,807 355 2,399 5,396 46,543 - - - - 1,390,456 - - - - 188,340 590 637 - 170 8,566 15,294 1,099,013 - 2,502 4,195,615 - - - - 32,672 - - - 150 6,184 $ 3,705,160 $ 1,235,210 $ 968,730 $ 2,153,482 $ 23,768,129 $ - $ - $ - $ 46,221 $ 223,328 - - - 309,480 355,304 - - - 371 460 - - - - 120,000 - - - - 111,775 - - - 356,072 810,867 - - - - 18,274 - - - - 188,340 15,884 1,099,650 - 2,672 4,204,181 15,884 1,099,650 - 2,672 4,410,795 - - - 150 6,184 - - - 293,989 5,776,314 3,689,276 135,560 968,730 1,500,599 8,025,185 - - - - 4,250 - - - - 4,734,534 3,689,276 135,560 968,730 1,794,738 18,546,467 $ 3,705,160 $ 1,235,210 $ 968,730 $ 2,153,482 $ 23,768,129 -20- THIS PAGE INTENTIONALLY LEFT BLANK CITY OF FARMINGTON Reconciliation of the Balance Sheet to the Statement of Net Position Governmental Funds as of December 31,2015 Total fund balances—governmental funds $ 18,546,467 Amounts reported for governmental activities in the Statement of Net Position are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in governmental funds. Cost of capital assets 88,423,716 Less accumulated depreciation (35,642,007) Net pension assets are only recorded in the government-wide financial statements as they are not current financial resources to governmental funds. 661,701 Long-term liabilities are not payable with current financial resources and,therefore,are not reported in governmental funds. Bonds and certificates of indebtedness (31,086,534) Unamortized bond premiums (277,972) Compensated absences (752,753) Net pension liability (5,495,888) Net OPEB obligation (707,954) Interest on long-term debt is included in the change in net position as it accrues,regardless of when payment is due.However,it is included in the change in fund balances when due. (399,712) Internal service funds are used by management to charge certain costs to individual funds.The assets and liabilities of the internal service funds are included in governmental activities in the Statement of Net Position. 1,270,517 Due to availability,certain revenues are not recognized under the governmental fund statements until received; however, under full accrual in the government-wide Statement of Activities, revenues are recorded when earned regardless of when received. Accounts receivable 18,274 Delinquent property taxes 188,340 Delinquent and deferred special assessments 4,204,181 Governmental funds do not report certain long-term amounts related to pensions that are included in net position. Deferred outflows—pension plan deferments 1,387,254 Deferred inflows—pension plan deferments (936,696) Total net position—governmental activities $ 39,400,934 See notes to basic financial statements -21- CITY OF FARMINGTON Statement of Revenues,Expenditures,and Changes in Fund Balances Governmental Funds Year Ended December 31,2015 Capital Projects— Debt Service State Aid General Fund Construction Revenues Property taxes $ 8,485,373 $ 2,800,613 $ 177,000 Franchise taxes 100,000 — — Special assessments — 541,209 27,136 Licenses and permits 370,889 — — Intergovernmental 905,130 — — Charges for services 507,555 — — Fines and forfeits 52,299 — — Investment earnings 32,972 38,226 21,206 Other 55,015 — — Total revenues 10,509,233 3,380,048 225,342 Expenditures Current General government 1,946,663 — — Public safety 5,075,885 — — Public works 1,971,065 — — Parks and recreation 1,188,042 — — Economic development 90,000 — — Capital outlay General government — — — Public safety 5,720 — — Public works — — 220 Parks and recreation 6,430 — — Debt service Principal — 2,899,162 — Interest and fiscal charges 6,343 1,035,437 — Total expenditures 10,290,148 3,934,599 220 Excess(deficiency)of revenues over expenditures 219,085 (554,551) 225,122 Other financing sources(uses) Sale of capital assets — — — Transfers in 1,134,180 946,140 — Transfers out (716,007) (3,128,294) (431,000) Bonds issued — 3,050,000 — Premiums on bonds issued — 134,641 — Total other financing sources(uses) 418,173 1,002,487 (431,000) Net change in fund balances 637,258 447,936 (205,878) Fund balances Beginning of year 4,107,560 5,034,389 1,936,898 End of year $ 4,744,818 $ 5,482,325 $ 1,731,020 See notes to basic financial statements _22_ Capital Capital Projects- Projects- Permanent Capital Storm Water Improvement Projects- Trunk Revolving Maintenance Nonmajor Total $ - $ - $ - $ - $ 11,462,986 - - - 165,485 265,485 49,665 19,423 - 23,754 661,187 - - - - 370,889 - - 1,192,379 - 2,097,509 - - - 312,890 820,445 - - - - 52,299 43,408 1,420 14,357 21,229 172,818 - - 105,178 160,193 93,073 20,843 1,206,736 628,536 16,063,811 - - - 1,105 1,947,768 - - - 55,191 5,131,076 - - 14 1,971,079 - - - 350,410 1,538,452 - - - - 90,000 - - - 57,609 57,609 - - - 172,830 178,550 3,748 365 4,388,173 390 4,392,896 - - 14,735 45,361 66,526 - - - - 2,899,162 - - - - 1,041,780 3,748 365 4,402,908 682,910 19,314,898 89,325 20,478 (3,196,172) (54,374) (3,251,087) • - - - 157,599 157,599 - - 3,576,512 280,707 5,937,539 (260,851) - (248,030) (10,000) (4,794,182) - - - - 3,050,000 - - - - 134,641 (260,851) - 3,328,482 428,306 4,485,597 (171,526) 20,478 132,310 373,932 1,234,510 3,860,802 115,082 836,420 1,420,806 17,311,957 $ 3,689,276 $ 135,560 $ 968,730 $ 1,794,738 $ 18,546,467 -23- THIS PAGE INTENTIONALLY LEFT BLANK CITY OF FARMINGTON Reconciliation of the Statement of Revenues,Expenditures,and Changes in Fund Balances to the Statement of Activities Governmental Funds Year Ended December 31,2015 Total net change in fund balances—governmental funds $ 1,234,510 Amounts reported for governmental activities in the Statement of Activities are different because: Governmental funds report capital outlays as expenditures.However,in the Statement of Activities,the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. Capital outlay 547,173 Depreciation expense (2,092,452) A gain or loss on the disposal of capital assets,including the difference between the carrying value and any related sale proceeds,is included in the change in net position.However,only the sale proceeds are included in the change in fund balances. (169,047) Net pension assets are included in net position,but are excluded from fund balances because they do not represent financial resources. 177,356 The issuance of long-term debt provides current financial resources to governmental funds,while the repayment of long-term debt consumes the current financial resources of governmental funds.Neither transaction,however,has any effect on net position.Other long-term adjustments are also made between the governmental funds and the Statement of Activities for debt premiums,compensated absences,pension liabilities,and OPEB obligations. Bonds issued (3,050,000) Principal payments for bonds and certificate of indebtedness 2,899,162 Amortization of debt premiums (100,143) Compensated absences (33,038) Net pension liability (115,484) Net OPEB obligation (81,480) Interest on long-term debt in the Statement of Activities differs from the amount reported in the governmental funds because interest is recognized as an expenditure in the funds when it is due, and thus requires the use of current financial resources.In the Statement of Activities,however,interest expense is recognized as the interest accrues, regardless of when it is due. 14,860 Internal service funds are used by management to charge certain costs to individual funds.The net revenue of certain activities of internal service funds is reported with governmental activities in the government-wide financial statements. 70,278 Certain revenues included in net position as soon as they are earned are not included in the change in fund balances until available to liquidate liabilities of the current period. Accounts receivable (38,021) Delinquent property taxes (2,777) Delinquent and deferred special assessments (1,183,874) Governmental funds do not report additions or deletions to certain long-term amounts related to pensions that are included in the change in net position. Deferred outflows—pension plan deferments 819,154 Deferred inflows—pension plan deferments (808,235) Change in net position—governmental activities $ (1,912,058) See notes to basic financial statements -24- THIS PAGE INTENTIONALLY LEFT BLANK CITY OF FARMINGTON Statement of Revenues,Expenditures,and Changes in Fund Balances Budget and Actual General Fund Year Ended December 31,2015 Original and Over(Under) Final Budget Actual Final Budget Revenues Property taxes 8,462,417 $ 8,485,373 $ 22,956 Franchise taxes 100,000 100,000 - Licenses and permits 483,220 370,889 (112,331) Intergovernmental 760,857 905,130 144,273 Charges for services 458,950 507,555 48,605 Fines and forfeits 72,000 52,299 (19,701) Investment earnings 20,000 32,972 12,972 Other 121,000 55,015 (65,985) Total revenues 10,478,444 10,509,233 30,789 Expenditures Current General government 1,973,996 1,946,663 (27,333) Public safety 5,144,709 5,075,885 (68,824) Public works 2,248,238 1,971,065 (277,173) Parks and recreation 1,306,674 1,188,042 (118,632) Economic development 90,000 90,000 - Capital outlay Public safety 13,000 5,720 (7,280) Parks and recreation - 6,430 6,430 Debt service Principle retirement 113,657 - (113,657) Interest and fiscal charges 6,343 6,343 - Total expenditures 10,896,617 10,290,148 (606,469) Excess(deficiency)of revenues over expenditures (418,173) 219,085 637,258 Other financing sources(uses) Transfers in 1,124,180 1,134,180 10,000 Transfers out (706,007) (716,007) (10,000) Total other fmancing sources(uses) 418,173 418,173 - Net change in fund balances $ - 637,258 $ 637,258 Fund balances Beginning of year 4,107,560 End of year $ 4,744,818 See notes to basic financial statements -25- CITY OF FARMINGTON Statement of Net Position Proprietary Funds as of December 31,2015 Business-Type Activities-Enterprise Funds Liquor Sewer Solid Storm Operations Operations Waste Water Assets Current assets Cash and investments $ 900,732 $ 2,102,840 $ 1,176,637 $ 820,588 Cash restricted for drinking water treatment plant - - - - Receivables Accounts 54,521 449,534 433,416 144,795 Interest 2,359 5,527 3,091 2,105 Delinquent special assessments - 35,641 - - Due from other funds - - - - Due from other governments - 2,775 - - Inventory 447,193 - - - Prepaid items 11,133 - - 350 Total current assets 1,415,938 2,596,317 1,613,144 967,838 Noncurrent assets Special assessments - 315,594 - - Advances to other fund - - - - Capital assets Land - 85,000 - 1,192 Buildings - - - - Improvements other than buildings 121,012 - - - Machinery and equipment 242,513 726,038 1,287,119 55,581 Distribution system - - - - Collection system - 28,273,060 - 20,093,314 Less accumulated depreciation (363,525) (10,535,256) (1,156,078) (6,202,719) Total capital assets(net of accumulated depreciation) - 18,548,842 131,041 13,947,368 Total noncurrent assets - 18,864,436 131,041 13,947,368 Total assets 1,415,938 21,460,753 1,744,185 14,915,206 Deferred outflows of resources Pension plan deferments-PERA 39,724 - 30,896 - Total assets and deferred outflows of resources $ 1,455,662 $ 21,460,753, $ 1,775,081 $ 14,915,206 Liabilities Current liabilities Accounts and contracts payable $ 45,660 $ 7,168 $ 84,027 $ 8,138 Accrued salaries and employee benefits payable - - - - Deposits payable - - - - Due to other governments 42,143 7,455 19,888 - Compensated absences payable-current 34,935 - 24,714 - Total current liabilities 122,738 14,623 128,629 8,138 Noncurrent liabilities Compensated absences payable 11,643 - 8,237 Net pension liability-PERA 290,584 - 226,010 - Net OPEB obligation 40,613 - 39,168 - Total noncurrent liabilities 342,840 - 273,415 - Total liabilities 465,578 14,623 402,044 8,138 Deferred inflows of resources Pension plan deferments-PERA 33,359 - 25,945 - Net position Investment in capital assets - 18,548,842 131,041 13,947,368 Restricted for drinking water treatment plant - - - - Unrestricted 956,725 2,897,288 1,216,051 959,700 Total net position 956,725 21,446,130 1,347,092 14,907,068 Total liabilities,deferred inflows of resources,and net position $ 1,455,662 $ 21,460,753 $ 1,775,081 $ 14,915,206 See notes to basic financial statements -26- Governmental Street Activities- Water Light Total Internal Service $ 4,861,238 $ 120,756 $ 9,982,791 $ 1,522,651 2,160,566 - 2,160,566 - 259,286 34,608 1,376,160 - 18,397 317 31,796 3,999 515 - 36,156 - 120,000 - 120,000 - - 2,775 - - 447,193 - - - 11,483 89,101 7,420,002 155,681 14,168,920 1,615,751 9,161 - 324,755 - 111,775 - 111,775 - 328,384 - 414,576 - 3,243,203 - 3,243,203 - - - 121,012 - 292,723 - 2,603,974 79,453 32,511,466 - 32,511,466 - - - 48,366,374 - (14,195,089) - (32,452,667) (79,453) 22,180,687 - 54,807,938 - 22,301,623 - 55,244,468 - 29,721,625 155,681 69,413,388 1,615,751 - - 70,620 - $ 29,721,625 $ 155,681 $ 69,484,008 $ 1,615,751 $ 64,409 $ 26,956 $ 236,358 $ 23,450 - - - 303,466 34,106 - 34,106 1,082 977 - 70,463 - - - 59,649 17,236 99,492 26,956 400,576 345,234 - - 19,880 - - - 516,594 - - - 79,781 - - - 616,255 - 99,492 26,956 1,016,831 345,234 - - 59,304 - 22,180,687 - 54,807,938 - 2,160,566 - 2,160,566 - 5,280,880 128,725 11,439,369 1,270,517 29,622,133 128,725 68,407,873 1,270,517 $ 29,721,625 $ 155,681 $ 69,484,008 $ 1,615,751 _27_ CITY OF FARMINGTON Statement of Revenues,Expenses,and Changes in Fund Net Position Proprietary Funds Year Ended December 31,2015 Business-Type Activities-Enterprise Funds Liquor Sewer Solid Storm Operations Operations Waste Water Operating revenue Sales $ 4,605,113 $ - $ - $ - Charges for services - 1,954,920 1,986,644 668,618 Insurance reimbursement - - - - Miscellaneous 2,304 2,982 4,535 1,735 Total operating revenue 4,607,417 1,957,902 1,991,179 670,353 Cost of goods sold 3,467,487 - - - Gross profit 1,139,930 1,957,902 1,991,179 670,353 Operating expenses Personal services 436,108 2,885 370,358 724 Professional services 411,709 1,254,622 1,131,905 309,864 Materials and supplies 31,362 21,031 103,420 20,249 Insurance - - - - Depreciation 5,931 594,874 52,445 400,607 Total operating expenses 885,110 1,873,412 1,658,128 731,444 Operating income(loss) 254,820 84,490 333,051 (61,091) Nonoperating revenues(expenses) Intergovernmental - - 22,000 - Investment earnings 9,443 21,964 11,819 6,895 Interest expense - (1,813) - - Total nonoperating revenue(expenses) 9,443 20,151 33,819 6,895 Income(loss)before transfers and contributions 264,263 104,641 366,870 (54,196) Capital contributions - - - 945,938 Transfers in - - - 248,030 Transfers out (91,504) (311,164) (119,227) (337,313) Change in net position 172,759 (206,523) 247,643 802,459 Net position Beginning of year,as previously reported 1,060,244 21,652,653 1,314,332 14,104,609 Change in accounting principal (276,278) - (214,883) - Beginning of year,as restated 783,966 21,652,653 1,099,449 14,104,609 End of year $ 956,725 $ 21,446,130 $ 1,347,092 $ 14,907,068 See notes to basic financial statements -28- Governmental Street Activities- Water Light Total Internal Service $ - $ - $ 4,605,113 $ - 1,229,972 221,881 6,062,035 2,583,106 - - - 330,355 209,901 278 221,735 372 1,439,873 222,159 10,888,883 2,913,833 - - 3,467,487 - 1,439,873 222,159 7,421,396 2,913,833 6,343 - 816,418 2,283,415 313,952 173,212 3,595,264 219,310 194,634 - 370,696 164,266 - - - 283,525 824,491 - 1,878,348 - 1,339,420 173,212 6,660,726 2,950,516 , 100,453 48,947 760,670 (36,683) - - 22,000 10,789 101,538 1,295 152,954 16,722 (168) - (1,981) - 101,370 1,295 172,973 27,511 201,823 50,242 933,643 (9,172) - - 945,938 - - - 248,030 84,450 (611,629) - (1,470,837) (5,000) (409,806) 50,242 656,774 70,278 30,031,939 78,483 68,242,260 1,200,239 - - (491,161) - 30,031,939 78,483 67,751,099 1,200,239 $ 29,622,133 $ 128,725 $ 68,407,873 $ 1,270,517 -29- CITY OF FARMINGTON Statement of Cash Flows Proprietary Funds Year Ended December 31,2015 Business-Type Activities-Enterprise Funds Liquor Sewer Solid Storm Operations Operations Waste Water Cash flows from operating activities Cash received from customers $ 4,602,596 $ 1,901,122 $ 2,002,022 $ 652,897 Cash receipts from other funds and reimbursements - - - - Cash payments to suppliers (3,976,605) (1,271,907) (1,242,473) (336,421) Cash payments to employees for services (415,898) (2,885) (352,432) (724) Cash payments for interfund services used - - - - Net cash flows from operating activities 210,093 626,330 407,117 315,752 Cash flows from noncapital financing activities Intergovernmental revenue - - 22,000 - Transfers in - - - 248,030 Transfers out (91,504) (311,164) (119,227) (337,313) Net cash flows from noncapital financing activities (91,504) (311,164) (97,227) (89,283) Cash flows from capital and related financing activities Acquisition and construction of capital assets - (30,158) - - Advances(to)from other funds - - - - Interest paid - (1,813) - - Net cash flows from capital and related financing activities - (31,971) - - Cash flows from investing activities Interest received on investments 7,084 19,563 9,141 6,456 Net increase(decrease)in cash and cash equivalents 125,673 302,758 319,031 232,925 Cash and investments Beginning of year 775,059 1,800,082 857,606 587,663 End of year $ 900,732 $ 2,102,840 $ 1,176,637 $ 820,588 Reconciliation of operating income(loss)to net cash flows from operating activities Operating income(loss) $ 254,820 $ 84,490 $ 333,051 $ (61,091) Adjustments to reconcile operating income(loss)to net cash flows from operating activities Depreciation 5,931 594,874 52,445 400,607 Change in assets,deferred outflows of resources,liabilities, and deferred inflows of resources Accounts receivable (4,821) (44,367) 10,843 (17,456) Special assessments - (10,255) - - Due from other governments - (2,158) - - Inventory (21,198) - - - Prepaid items (10,693) - - (350) Deferred outflows of resources-pension plan deferments (27,669) - (21,520) - Accounts and contracts payable (35,680) (3,709) (6,303) (5,958) Accrued salaries and employee benefits - - - - Deposits payable - - - - Due to other governments 1,524 7,455 (845) - Compensated absences 7,441 - 7,911 - Net pension liability 2,251 - 1,751 - Net OPEB obligation 4,828 - 3,839 - Deferred inflows of resources-pension plan deferments 33,359 - 25,945 - Net cash flows from operating activities $ 210,093 $ 626,330 $ 407,117 $ 315,752 Schedule of noncash capital and related financing activities Contributions of capital assets $ - $ - $ - $ 945,938 See notes to basic financial statements -30- Governmental Street Activities- Water Light Total Internal Service $ 1,436,767 $ 225,449 $ 10,820,853 $ - - - - 2,921,391 (484,424) (175,131) (7,486,961) - (6,343) - (778,282) (2,193,521) - - - (674,317) 946,000 50,318 2,555,610 53,553 - - 22,000 10,789 - - 248,030 84,450 (611,629) - (1,470,837) (5,000) (611,629) - (1,200,807) 90,239 (24,714) - (54,872) - 113,657 - 113,657 - (168) - (1,981) - 88,775 - 56,804 - 120,631 978 163,853 12,723 543,777 51,296 1,575,460 156,515 6,478,027 69,460 10,567,897 1,366,136 $ 7,021,804 $ 120,756 $ 12,143,357 $ 1,522,651 $ 100,453 $ 48,947 $ 760,670 $ (36,683) 824,491 - 1,878,348 - 2,140 3,290 (50,371) 7,558 23,672 - 13,417 - 885 - (1,273) - - - (21,198) - - - (11,043) (24,991) - - (49,189) - 23,879 (1,919) (29,690) (4,515) - - - 108,954 (29,803) - (29,803) 775 283 - 8,417 - - 15,352 2,455 - 4,002 - - - 8,667 - - 59,304 - $ 946,000 $ 50,318 $ 2,555,610 $ 53,553 $ - $ - $ 945,938 $ - -31- CITY OF FARMINGTON Statement of Net Position Fiduciary Fund as of December 31,2015 Agency Fund Assets Cash and investments $ 317,120 Liabilities Deposits payable $ 317,120 See notes to basic financial statements -32- CITY OF FARMINGTON Notes to Basic Financial Statements December 31,2015 NOTE 1 —SIGNIFICANT ACCOUNTING POLICIES A. Organization The City of Farmington, Minnesota (City) was incorporated in 1872 and operates under the state of Minnesota Statutory Plan A form of government. The City Council is the governing body and is composed of an elected mayor and four councilmembers who exercise legislative authority and determine all matters of policy. The City provides the following services: public safety, roads, water and sanitary sewer, storm water management, solid waste and recycling disposal, public improvements, planning and zoning,recreation,and general administration. The accounting policies of the City conform to accounting principles generally accepted in the United States of America as applicable to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. B. Reporting Entity As required by accounting principles generally accepted in the United States of America,these fmancial statements include the City (the primary government) and its component unit. Component units are legally separate entities for which the primary government is financially accountable, or for which the exclusion of the component unit would render the financial statements of the primary government misleading. The criteria used to determine if the primary government is financially accountable for a component unit includes whether or not the primary government appoints the voting majority of the potential component unit's board, is able to impose its will on the potential component unit, is in a relationship of financial benefit or burden with the potential component unit,or is fiscally depended upon by the potential component unit. As a result of applying these criteria, certain organizations have been included or disclosed in this report as follows: 1. Discretely Presented Component Unit — The Farmington Economic Development Authority (EDA) is the City's official decision-making body regarding economic development. It promotes the retention and expansion of existing businesses while attracting new businesses to the community in order to promote a diversified tax base,job opportunities,and convenient shopping for residents.The EDA is a legally separate entity from the City;however,the City is financially accountable for the EDA. The EDA's governing board is comprised of two City Council members and three members appointed by the City Council, and the City has ability to impose its will on the EDA. The EDA does not issue separate financial statements. Information on the EDA's governmental funds is presented as supplemental information elsewhere in this report. C. Government-Wide Financial Statement Presentation The government-wide financial statements (Statement of Net Position and Statement of Activities) display information about the reporting government as a whole, except for fiduciary activities. These statements include all of the financial activities of the City. Governmental activities, which are normally supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which significantly rely upon sales,fees,and charges for support. -33- NOTE 1—SIGNIFICANT ACCOUNTING POLICIES(CONTINUED) The government-wide Statement of Activities demonstrates the extent to which the direct expense of a given function(general government, public safety,public works,parks and recreation, and economic and community development) or business-type activity (liquor operations, utility services) is offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or business-type activity. Interest on debt is considered an indirect expense and is reported separately in the Statement of Activities.Depreciation expense is included in the direct expenses of each function.Program revenues include: 1)charges to customers or applicants who purchase,use,or directly benefit from goods, services, or privileges provided by a given function or business-type activity and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or business-type activity. Taxes and other items not included among program revenues are reported instead as general revenues. Internally directed revenues are reported as general revenues rather than program revenues. The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting.Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes and special assessments are recognized as revenues in the fiscal year for which they are certified for levy. Grants and similar items are recognized when all eligibility requirements imposed by the provider have been met. As a general rule,the effect of interfund activity has been eliminated from the government-wide financial statements. However, charges between the City's enterprise funds and other functions are not eliminated, as that would distort the direct costs and program revenues reported in those functions. D. Fund Financial Statement Presentation Separate fund financial statements are provided for governmental,proprietary,and fiduciary funds.Major individual governmental and enterprise funds are reported as separate columns in the fund fmancial statements. Aggregated information for the remaining nonmajor governmental funds is reported in a single column in the fund financial statements. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this basis of accounting transactions are recorded in the following manner: 1. Revenue Recognition — Revenue is recognized when it becomes measurable and available. "Measurable" means the amount of the transaction can be determined and "available" means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. For this purpose,the City considers revenues to be available if they are collected within 60 days after year-end. 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. Grants and similar items are recognized when all eligibility requirements imposed by the provider have been met.Proceeds of long-term debt are reported as other financing sources. Major revenues susceptible to accrual include property taxes, special assessments, intergovernmental revenue, charges for services, and interest earned on investments. Major revenue that is not susceptible to accrual includes licenses and permits, fees, and miscellaneous revenue. Such revenues are recorded only when received because they are not measurable until collected. 2. Recording of Expenditures —Expenditures are generally recorded when a liability is incurred, except for principal and interest on long-term debt and other long-term liabilities which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as capital outlay expenditures in the governmental funds. -34- NOTE 1—SIGNIFICANT ACCOUNTING POLICIES(CONTINUED) Proprietary fund financial statements are reported using the economic resources measurement focus and accrual basis of accounting, similar to the government-wide financial statements. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the City's enterprise funds and internal service funds are charges to customers for sales and services. The operating expenses for the enterprise funds and internal service funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses that do not meet this definition are reported as nonoperating revenues and expenses. Aggregated information for the internal service funds is reported in a single column in the proprietary fund financial statements. Because the principal user of the internal services is the City's governmental activities, the financial statements of the internal service funds are consolidated into the governmental column when presented in the government-wide financial statements. The cost of these services is reported in the appropriate functional activity. Agency funds have no measurement focus,but utilize the accrual basis of accounting for reporting assets and liabilities. Description of Funds The City reports the following major governmental funds: General Fund—This fund is the City's primary operating fund.It accounts for all financial resources of the general government,except those required to be accounted for in another fund. Debt Service Fund—This fund accounts for the financial resources accumulated and payments made for principal and interest on long-term bond-financed debt of the City. State Aid Construction Capital Projects Fund—This fund,also referred to as the Road and Bridge Fund, accounts for street construction and road/street rehabilitation or reconstruction projects related to municipal state aids. Storm Water Trunk Capital Projects Fund—This fund accounts for construction and improvement storm water trunk infrastructure projects constructed within the City. Permanent Improvement Revolving Capital Projects Fund — This fund accounts for street construction projects financed with multiple funding sources. Maintenance Capital Projects Fund — This fund accounts for operations and activities related to maintenance of City roads,trails,and buildings. The City reports the following major enterprise funds: Liquor Operations Fund — The Liquor Operations Fund accounts for the retail operations of the City's two off-sale municipal liquor stores. Sewer Operations Fund — The Sewer Operations Fund accounts for the operations of the City's wastewater collection and treatment systems. Solid Waste Fund — The Solid Waste Fund accounts for the revenue and expenses related to the operation of the City's garbage collection and recycling programs. -35- NOTE 1—SIGNIFICANT ACCOUNTING POLICIES(CONTINUED) Storm Water Fund — The Storm Water Fund accounts for revenues and expenses related to the maintenance and cleaning of the City's existing storm water collection and holding pond system. Water Fund —The Water Fund accounts for the operations of the City's water distribution system including wells,reservoirs,and trunk infrastructure system. Street Light Fund—The Street Light Fund accounts for the financial activities related to city-owned street lights. Additionally,the City reports the following fund types: Internal Service Funds — Internal service funds account for the financing of goods and services provided to other departments or agencies of the City on a cost reimbursement basis. The City's internal service funds account for employee expenses, insurance, fleet services, and technology services. Agency Fund—The Agency Fund is used to record the receipt and remittance of monies held by the City as an agent primarily for land developers and builders that will be refunded to the respective depositors when the conditions are satisfied in accordance with the respective agreements. E. Budgets and Budgetary Accounting Budgets are prepared annually on a modified accrual basis and legally adopted by the City Council for the General Fund, special revenue funds, Debt Service Fund (in total), and capital projects funds. Budgeted expenditure appropriations lapse at year-end. The City follows these procedures in establishing the budgetary data reflected in the financial statements: 1. The City Administrator submits a proposed operating budget for the fiscal year commencing the following January 1 to the City Council. The operating budget includes proposed expenditures and the means of financing them. 2. The City Council reviews the proposed budget and makes appropriate changes. 3. Public hearings are conducted to obtain taxpayer comments. 4. The budget is legally enacted through passage of a resolution on a departmental basis and can be expended by each department based upon detailed budget estimates for individual expenditure accounts. 5. Formal budgetary integration is employed as a management control device during the year for the governmental and enterprise funds. 6. The legal level of budgetary control is at the fund level. Expenditures may not legally exceed budgeted appropriations at the total fund level. Monitoring of budgets is maintained at the expenditure category level (i.e., personnel services, supplies, other services and charges, etc.) within each department. Management can exceed appropriations at the department level without City Council approval.The City Council must approve any amounts over budget at the fund level by resolution or through the disbursement process. 7. The City Council may authorize transfers of budgeted amounts between funds. -36- NOTE 1—SIGNIFICANT ACCOUNTING POLICIES(CONTINUED) For the year ended December 31, 2015, expenditures exceeded budget for the following funds. Expenditures in excess of budget were approved by the City Council either through the disbursement process or separate City Council action. Budgeted Actual Expenditures Expenditures Major funds State Aid Construction Capital Projects $ — $ 220 Permanent Improvement Revolving Capital Projects — 365 Nonmajor special revenue funds Police Donations and Forfeitures 6,500 7,299 Arena 316,204 319,553 Nonmajor capital projects funds Sanitary Sewer Trunk — 14 Fire Capital Projects 62,500 127,243 Recreation Capital Projects 7,500 21,615 F. Cash and Investments Cash and investments include balances from all funds that are combined and invested to the extent available in various securities as authorized by state law. Earnings from the pooled investments are allocated to the respective funds according to the approved budget interest allocation. Investments are stated at fair value, based upon quoted market prices as of the balance sheet date. Investment income is accrued at the balance sheet date. Certain resources set aside for future use,such as the construction of a drinking water treatment plant,are classified as restricted assets on the Statement of Net Position, because their use is limited by outside agreements. For purposes of the Statement of Cash Flows, the City considers all highly liquid instruments with an original maturity from the time of purchase by the City of three months or less to be cash equivalents.The proprietary funds' portion in the government-wide cash and investment management pool is considered cash equivalent. It is the City's policy to invest in a manner that seeks to ensure preservation of capital in the overall portfolio. Safety of principal is the foremost objective, but liquidity and yield are also important considerations. The objective will be to mitigate credit risk by purchasing only highly rated securities with adequate collateral and interest rate risk by matching maturities to cash flow needs and holding securities to maturity. G. Receivables Utility and miscellaneous accounts receivable are reported at gross. Since the City is generally able to certify delinquent amounts to the county for collection as special assessments, no allowance for uncollectible accounts has been provided on current receivables. Significant receivable balances not expected to be collected within one year include$18,274 due from other governments in the Debt Service Fund,which is offset by a deferred inflow of resources. H. Interfund Receivables and Payables In the fund financial statements, activity between funds that is representative of lending or borrowing arrangements is reported as either"due to/from other funds"(current portion)or"advances to/from other funds." 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." -37- NOTE 1—SIGNIFICANT ACCOUNTING POLICIES(CONTINUED) I. Property Taxes Property tax levies are set by the City Council in December of each year, and certified to Dakota County for collection in the following year.In Minnesota,counties act as collection agents for all property taxes, spreading the levies over all taxable property. Such taxes become a lien on January 1 and are recorded as receivables by the City on that date. Tax levies on real property are payable in two equal installments on May 15 and October 15. Personal property taxes are due in full on May 15. The county provides tax settlements to cities and other taxing districts three times a year: in July,December,and January. Property taxes are recognized as revenue in the year levied in the government-wide financial statements and proprietary fund financial statements. In the governmental fund financial statements, taxes are recognized as revenue when received in cash or within 60 days after year-end. Taxes which remain unpaid on December 31 are classified as delinquent taxes receivable, and are offset by a deferred inflow of resources in the governmental fund financial statements. J. Special Assessments Special assessments represent the financing for public improvements paid for by benefiting property owners. Special assessments are recorded as receivables upon certification to the county. Special assessments are recognized as revenue in the year levied in the government-wide financial statements and proprietary fund financial statements. In the governmental fund financial statements, special assessments are recognized as revenue when received in cash or within 60 days after year-end. Governmental fund special assessments receivable which remain unpaid on December 31 are offset by a deferred inflow of resources in the governmental fund fmancial statements. K. Inventories Inventories of the proprietary funds, primarily the liquor operations, are stated at cost, which approximates market,using the average cost method. L. Prepaid Items Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. Prepaid items are reported using the consumption method and recorded as expenditures/expenses at the time of consumption. M. Capital Assets Capital assets, which include property, buildings, improvements, equipment, and infrastructure assets (roads,bridges,sidewalks,and similar items),and intangible assets,such as easements,are reported in the applicable governmental or business-type activities columns in the government-wide fmancial statements. Such assets are capitalized at historical cost, or estimated historical cost for assets where actual historical cost is not available. Donated assets are recorded as capital assets at their estimated fair market value on the date of donation. The City defines capital assets as those with an initial, individual cost of$5,000 or more with an estimated useful life in excess of three years. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized. Capital assets are recorded in the government-wide and proprietary fund financial statements,but are not reported in the governmental fund fmancial statements. 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. -38- NOTE 1—SIGNIFICANT ACCOUNTING POLICIES(CONTINUED) Land, easements, and construction in progress are not depreciated. The other classes of capital assets are depreciated using the straight-line method over the following estimated useful lives: - Buildings 20-50 years Improvements other than buildings 20-50 years Machinery and equipment 5-20 years Infrastructure 30 years Collection/distribution systems 50 years N. Deferred Outflows/Inflows of Resources In addition to assets, a statement of financial position may report a separate financial statement element called deferred outflows of resources, representing consumptions of net position that apply to future periods which are not recognized as an outflow of resources (expense/expenditure) until then. The City has one item that qualifies for reporting in this category, deferred outflows of resources related to pensions, reported in the government-wide and enterprise funds Statement of Net Position. This deferred outflow results from differences between expected and actual experience, changes of assumptions, and projected and actual earnings on pension plan investments,and from contributions to the plan subsequent to the measurement date and before the end of the reporting period. These amounts are deferred and amortized as required under pension standards. In addition to liabilities, statements of financial position or balance sheets may report a separate financial statement element called deferred inflows of resources, representing acquisitions of net position that applies to future periods which are not recognized as an inflow of resources(revenue)until that time.The City has two types of items which qualify for reporting in this category. The first item, unavailable revenue, arises only under the modified accrual basis of accounting and, therefore, is reported only in the governmental funds Balance Sheet. The governmental funds report unavailable revenue from three sources: property taxes, special assessments, and other accounts receivable not collected within 60 days of year-end. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. The second item, deferred inflows of resources related to pensions, is reported in the government-wide and enterprise funds Statement of Net Position. This deferred inflow results from differences between expected and actual experience, changes of assumptions, and projected and actual earnings on pension plan investments.These amounts are deferred and amortized as required under pension standards. O. Long-Term Obligations In the government-wide and proprietary fund financial statements, long-term debt and other long-term obligations are reported as liabilities. Bond premiums and discounts, if material, are deferred and amortized over the life of the bonds using the straight-line method. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs,during the current period.The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. -39- NOTE 1—SIGNIFICANT ACCOUNTING POLICIES(CONTINUED) P. Compensated Absences It is the City's policy to permit employees to accumulate earned,but unused leave benefits as either paid time off(PTO), or vacation and sick leave. Under the City's personnel policies and collective bargaining contracts, city employees are granted leave benefits in varying amounts based on length of service. No liability is recorded for non-vesting accumulating rights to receive sick leave benefits.As benefits accrue to employees,the accumulated PTO,vacation,and vested sick leave is reported as expense and liability in the government-wide and proprietary fund financial statements. Accrued PTO, vacation, and any portion of sick leave payable to employees upon termination are reported as expenditures in the governmental fund that will pay them when they become due and payable. Q. Pensions For purposes of measuring the net pension liability/asset, deferred outflows/inflows of resources, and pension expense, information about the fiduciary net position of the applicable pension and additions to/deductions from the pension plan's fiduciary net position have been determined on the same basis as they are reported by the plan except that the Public Employees Retirement Association (PERA) pension plan's fiscal year-end is June 30. For this purpose, plan contributions are recognized as of employer payroll paid dates and benefit payments and refunds are recognized when due and payable in accordance with the benefit terms.Investments are reported at fair value. R. Risk Management The City is exposed to various risks of loss related to torts: theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The City continues to carry commercial insurance for risks of loss, including workers' compensation, property and general liability, and employee health and accident insurance. The City retains risk for the deductible portions of the insurance policies. The amount of these deductibles is considered immaterial to the financial statements. Property and Casualty Insurance— Property and casualty insurance is provided through the League of Minnesota Cities Insurance Trust(LMCIT), a public entity risk pool currently operating as a common risk management and insurance program for Minnesota cities: general liability, excess liability, property, automobile,marine,crime,federal laws,employee dishonesty,boiler,petro fund,and open meeting law. The City pays an annual premium to the LMCIT for its insurance coverage. The LMCIT is self-sustaining through member premiums and will reinsure through commercial companies for excess claims.The LMCIT allows the pool to make additional assessments to make the pool self-sustaining. Current state statutes (Minnesota Statutes Subd. 466.04) provide limits of liability for the City. These limits are that the combination of defense expense and indemnification expense shall not exceed$500,000 in the case of one claimant or$1,500,000 for any number of claims arising out of a single occurrence.The City retains risk for the deductible portion of its insurance policies and any potential judicial ruling in excess of the statutory maximum. The City has never had a claim in excess of the statutory maximum. There were no significant reductions in insurance from the previous year or settlements in excess of insurance coverage for any of the past three fiscal years. Workers' Compensation Insurance— Workers' compensation coverage is provided through a pooled self-insurance program through the LMCIT. The City pays an annual premium to LMCIT. The City is subject to supplemental assessments as deemed necessary by the LMCIT. The LMCIT reinsures through Workers' Compensation Reinsurance Association as required by law. The City's premiums are determined after loss experience is known. The amount of premium adjustment, if any, is considered immaterial,and is not recorded until received or paid. -40- NOTE 1—SIGNIFICANT ACCOUNTING POLICIES(CONTINUED) S. Net Position and Flow Assumptions In the government-wide and proprietary fund financial statements, net position represents the difference between assets, deferred outflows of resources, liabilities, and deferred inflows of resources.Net position is displayed in three components: • Net Investment in Capital Assets—Consists of capital assets, net of accumulated depreciation, reduced by any outstanding debt attributable to acquire capital assets. • Restricted Net Position—Consists of net position restricted when there are limitations imposed on their use through external restrictions imposed by creditors,grantors, or laws or regulations of other governments. • Unrestricted Net Position—All other elements of net position that do not meet the definition of "restricted"or"net investment in capital assets." The City applies restricted resources first when an expense is incurred for which both restricted and unrestricted resources are available. T. Fund Balance Classifications and Flow Assumptions In the fund financial statements, governmental funds report fund balance in classifications that disclose constraints for which amounts in those funds can be spent.These classifications are as follows: • Nonspendable — Consists of amounts that are not in spendable form, such as prepaid items, inventory,and other long-term assets. • Restricted — Consists of amounts related to externally imposed constraints established by creditors,grantors,or contributors;or constraints imposed by state statutory provisions. • Committed—Consists of internally imposed constraints that are established by resolution of the City Council. Those committed amounts cannot be used for any other purpose unless the City Council removes or changes the specified use by taking the same type of action it employed to previously commit those amounts. • Assigned — Consists of internally imposed constraints for amounts intended to be used by the City for specific purposes but do not meet the criteria to be classified as restricted or committed. These constraints are established by the City Council and/or management. The City Council has adopted a fund balance policy which delegates the authority to assign amounts for specific purposes to the City Administrator and/or Finance Director. • Unassigned — The residual classification for the General Fund, which also reflects negative residual amounts in other funds. When both restricted and unrestricted resources are available for use, the City first uses restricted resources,then unrestricted resources as needed. When committed, assigned, or unassigned resources are available for use,the City uses resources in the following order: 1)committed,2)assigned,and 3)unassigned. -41- NOTE 1—SIGNIFICANT ACCOUNTING POLICIES(CONTINUED) U. Use of Estimates 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 the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenditures/expenses during the reporting period.Actual results could differ from those estimates. V. Change in Accounting Principle During the year ended December 31, 2015, the City implemented GASB Statement No. 68,Accounting and Financial Reporting for Pensions—an amendment of GASB Statement No. 27, and GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date—an amendment of GASB Statement No. 68. These statements included major changes in how governmental employers account for pension benefit expenses and liabilities. Under this new standard, the City is required to report its participation in two state-wide multi-employer cost-sharing defined benefit pension plans administered by the PERA and a single-employer defined benefit pension plan administered by the Farmington Fire Fighters' Relief Association(the Association).In financial statements prepared using the economic resources measurement focus and accrual basis of accounting (government-wide and proprietary funds),an employer is required to report its share of any net pension asset or liability,deferred outflows of resources, deferred inflows of resources, and pension expense related to such pension plans. This standard required retroactive implementation, which resulted in the restatement of net position as of December 31,2014.The details of the restatement are as follows: Government-Wide Financial Statements Proprietary Governmental Business-Type Fund Financial Activities Activities Statements Change in accounting principle PERA defined benefit pension plans Net pension liability $ (5,380,404) $ (512,592) $ (512,592) Deferred outflows related to pensions 289,639 21,431 21,431 Total—PERA (5,090,765) (491,161) (491,161) Association defined benefit pension plan Net pension asset 484,345 — — Deferred outflows related to pensions 278,461 — — Deferred inflows related to pensions (128,461) — — Total—Association 634,345 — — Total $ (4,456,420) $ (491,161) $ (491,161) -42- NOTE 2—DEPOSITS AND INVESTMENTS A. Components of Cash and Investments Cash and investments at year-end consist of the following: Deposits $ 8,101,097 Investments 23,865,876 Total $ 31,966,973 Cash and investments are included on the basic financial statements as follows: Primary government Statement of Net Position Cash and investments $ 29,113,323 Restricted assets—temporarily restricted Cash for future drinking water treatment plant 2,160,566 Fiduciary fund Cash and investments 317,120 Component unit Statement of Net Position Cash and investments 375,964 $ 31,966,973 B. Deposits In accordance with applicable Minnesota Statutes, the City maintains deposits at depository banks authorized by the City Council,including checking and savings accounts. The following is considered the most significant risk associated with deposits: Custodial Credit Risk—In the case of deposits,this is the risk that in the event of a bank failure,the City's deposits may be lost. Minnesota Statutes require that all deposits be protected by federal deposit insurance,corporate surety bond, or collateral. The market value of collateral pledged must equal 110 percent of the deposits not covered by federal deposit insurance or corporate surety bonds. Authorized collateral includes treasury bills,notes, and bonds; issues of U.S.government agencies;general obligations rated"A"or better; revenue obligations rated "AA" or better; irrevocable standard letters of credit issued by the Federal Home Loan Bank; and certificates of deposit. Minnesota Statutes require that securities pledged as collateral be held in safekeeping in a restricted account at the Federal Reserve Bank or in an account at a trust department of a commercial bank or other financial institution that is not owned or controlled by the financial institution furnishing the collateral. The City has no additional deposit policies addressing custodial credit risk. At year-end, the carrying amount of the City's deposits was $8,101,097, while the balance on the bank records was $8,406,476. At December 31, 2015, all deposits were fully covered by federal depository insurance,surety bonds,or by collateral held by the City's agent in the City's name. -43- NOTE 2—DEPOSITS AND INVESTMENTS(CONTINUED) C. Investments The City has the following investments at year-end: Credit Risk Interest Risk—Maturity Duration in Years Investment Type Rating Agency Less Than 1 1 to 5 5 to10 Total U.S.agency securities AA S&P $ — $ 1,300,391 $ 496,830 $ 1,797,221 Municipal bonds AAA S&P 75,122 994,515 — 1,069,637 Municipal bonds AA S&P 431,508 425,660 — 857,168 Municipal bonds AA Moody's — 1,282,938 — 1,282,938 Municipal bonds MIG-1 Moody's 524,337 — — 524,337 Negotiable certificates of deposit Not rated 7,823,780 8,718,986 1,791,809 18,334,575 Total investments $ 8,854,747 $ 12,722,490 $ 2,288,639 $ 23,865,876 Investments are subject to various risks,the following of which are considered the most significant: Custodial Credit Risk — For investments, this is the risk that in the event of a failure of the counterparty to an investment transaction (typically a broker-dealer) the City would not be able to recover the value of its investments or collateral securities that are in the possession of an outside party.The City's investment policies do not further address this risk. Credit Risk—This is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. Minnesota Statutes limit the City's investments to direct obligations or obligations guaranteed by the United States or its agencies; shares of investment companies registered under the Federal Investment Company Act of 1940 that receive the highest credit rating,are rated in one of the two highest rating categories by a statistical rating agency, and all of the investments have a fmal maturity of 13 months or less;general obligations rated"A"or better;revenue obligations rated"AA" or better;general obligations of the Minnesota Housing Finance Agency rated"A"or better;bankers' acceptances of United States banks eligible for purchase by the Federal Reserve System; commercial paper issued by United States corporations or their Canadian subsidiaries,rated of the highest quality category by at least two nationally recognized rating agencies, and maturing in 270 days or less; Guaranteed Investment Contracts guaranteed by a United States commercial bank,domestic branch of a foreign bank, or a United States insurance company, and with a credit quality in one of the top two highest categories;repurchase or reverse purchase agreements and securities lending agreements with financial institutions qualified as a "depository" by the government entity, with banks that are members of the Federal Reserve System with capitalization exceeding $10,000,000; that are a primary reporting dealer in U.S.government securities to the Federal Reserve Bank of New York; or certain Minnesota securities broker-dealers. The City's investment policies do not further address credit risk. Concentration Risk— This is the risk associated with investing a significant portion of the City's investments (considered 5 percent or more) in the securities of a single issuer, excluding U.S.guaranteed investments (such as treasuries), investment pools, and mutual funds. The City's investment policy places no limit on the amount the City may invest in any one issuer. However, it discusses the need to diversify investments to minimize risk. At year-end, the City's investment portfolio is not subject to concentration risk. -44- NOTE 2-DEPOSITS AND INVESTMENTS(CONTINUED) Interest Rate Risk-This is the risk of potential variability in the fair value of fixed rate investments resulting from changes in interest rates (the longer the period for which an interest rate is fixed, the greater the risk). The City's investment policy states the investment portfolio should be structured to meet cash requirements for ongoing operations.The policy limits investment maturities as a means of managing exposure to fair value losses arising from increasing interest rates,stating that no more than 30 percent of total investments should extend beyond 5 years and none should extend beyond 15 years. NOTE 3-INTERFUND BALANCES AND TRANSFERS A. Interfund Balances The interfund receivable/payable(current portion)and advances(long-term portion)represent the internal financing used to purchase a new fire truck in 2013,which is being repaid over five years, according to a City Council-approved resolution.Balances at year-end were as follows: Due From Due To Advances To Advances From Funds Other Funds Other Funds Other Funds Other Funds General Fund $ - $ 120,000 $ - $ 111,775 Water Fund,Proprietary 120,000 - 111,775 - Total $ 120,000 $ 120,000 $ 111,775 $ 111,775 B. Interfund Transfers The following transfers were made during the year in accordance with budget appropriations or as approved by City Council resolution to fund administrative overhead costs, debt service payments, eliminate fund balance deficits,or close funds: Transfers In Governmental Funds Proprietary Funds General Debt Service Storm Water Internal Transfers Out Fund Fund Maintenance Nonmajor Enterprise Service Total Governmental funds General $ - $ - $ 395,000 $ 240,707 $ - $ 80,300 $ 716,007 Debt Service - - 3,128,294 - - - 3,128,294 State Aid Construction - 431,000 - - - - 431,000 Storm Water Trunk - 207,633 53,218 - - - 260,851 Maintenance - - - - 248,030 - 248,030 Nonmajor 10,000 - - - - - 10,000 Proprietary funds Enterprise Liquor Operations 51,504 - - 40,000 - - 91,504 Sewer Operations 276,276 31,138 - - - 3,750 311,164 Solid Waste 72,120 46,707 - - - 400 119,227 Storm Water 321,744 15,569 - - - - 337,313 Water 397,536 214,093 - - - - 611,629 Internal service 5,000 - - - - - 5,000 Total $ 1,134,180 $ 946,140 $ 3,576,512 $ 280,707 $ 248,030 $ 84,450 $ 6,270,019 -45- NOTE 4—CAPITAL ASSETS Capital asset activity for the year ended December 31,2015 was as follows: A. Changes in Capital Assets Used in Governmental Activities Beginning Completed Ending Balance Additions Deletions Construction Balance Capital assets,not depreciated Land $ 1,441,957 $ — $ — $ — $ 1,441,957 Easements 307,867 — — — 307,867 Total capital assets,not depreciated 1,749,824 — — — 1,749,824 Capital assets,depreciated Buildings 21,383,065 30,700 — — 21,413,765 Improvements other than buildings 1,996,811 — (24,495) — 1,972,316 Machinery and equipment 5,828,892 146,457 (410,271) — 5,565,078 Infrastructure 57,509,416 370,016 (77,246) — 57,802,186 Total capital assets,depreciated 86,718,184 547,173 (512,012) — 86,753,345 Less accumulated depreciation on Buildings 4,801,989 443,100 — — 5,245,089 Improvements other than buildings 1,412,531 104,161 (24,495) — 1,492,197 Machinery and equipment 4,257,177 259,482 (241,224) — 4,275,435 Infrastructure 23,500,276 1,285,709 (77,246) — 24,708,739 Total accumulated depreciation 33,971,973 2,092,452 (342,965) — 35,721,460 Total capital assets,depreciated 52,746,211 (1,545,279) (169,047) — 51,031,885 Net capital assets $ 54,496,035 $ (1,545,279) $ (169,047) $ — $ 52,781,709 B. Changes in Capital Assets Used in Business-Type Activities Beginning Completed Ending Balance Additions Deletions Construction Balance Capital assets,not depreciated Land $ 414,576 $ — $ — $ — $ 414,576 Construction in progress 83,274 — — (83,274) — Total capital assets,not depreciated 497,850 — — (83,274) 414,576 Capital assets,depreciated Buildings 3,243,203 — — — 3,243,203 Improvements other than buildings 121,012 — — — 121,012 Machinery and equipment 2,654,265 54,872 (105,163) — 2,603,974 Collection/distribution systems 79,851,349 945,938 (2,721) 83,274 80,877,840 Total capital assets,depreciated 85,869,829 1,000,810 (107,884) 83,274 86,846,029 Less accumulated depreciation on Buildings 2,864,147 149,842 — — 3,013,989 Improvements other than buildings 121,012 — — — 121,012 Machinery and equipment 2,318,798 97,461 (105,163) — 2,311,096 Collection/distribution systems 25,378,246 1,631,045 (2,721) — 27,006,570 Total accumulated depreciation 30,682,203 1,878,348 (107,884) — 32,452,667 Total capital assets,depreciated 55,187,626 (877,538) — 83,274 54,393,362 Net capital assets $ 55,685,476 $ (877,538) $ — $ — $ 54,807,938 -46- NOTE 4—CAPITAL ASSETS(CONTINUED) C. Depreciation Expense by Function Depreciation expense was charged to the following functions: Governmental activities General government $ 211,653 Public safety 263,012 Public works 1,409,757 Parks and recreation 208,030 Total depreciation expense—governmental activities $ 2,092,452 Business-type activities Liquor operations $ 5,931 Sewer operations 594,874 Solid waste 52,445 Storm water 400,607 Water 824,491 Total depreciation expense—business-type activities $ 1,878,348 NOTE 5—OPERATING LEASES The City has two retail liquor stores known colloquially as Downtown and Pilot Knob. The Downtown store consists of 6,250 square feet of space in the City Center.In 2012,the City extended an existing lease for a five-year term at an initial monthly rent of$7,031 plus a proportionate share of common area operating expenses. The rent increases $.50 per square foot each year during the remaining term of the lease. The City has the option to renew for two additional five-year terms at rates to be negotiated. In addition,the City has the option to terminate the lease on or after August 1,2015 should the City choose to no longer be in the municipal liquor business. In 2015,the City paid$91,927 in rent for the Downtown store and$39,360 for common area operating expenses. The Pilot Knob location occupies a 4,758 square foot store in the Farmington Gateway Center. In March 2016, the City renewed an existing lease for a three-year term at a monthly cost of$6,344 plus a proportionate share of common area operating expenses. The City has the option to renew for an additional three-year term at set lease rates. The City paid $76,128 in rent for the Pilot Knob store and $41,395 for common area operating expenses during 2015. The following is a schedule by year of future minimum payments required under the leases, including the lease extension approved in March 2016 for the Pilot Knob location: Year Ending December 31, Amount 2016 $ 164,836 2017 132,638 2018 76,128 2019 69,784 $ 443,386 -47- NOTE 6—LONG-TERM DEBT A. Components of Long-Term Debt Final Original Interest Issue Maturity Balance- Issue Rate Date Date End of Year Governmental activities General obligation improvement bonds G.O.Improvement Bonds 2008A $ 1,355,000 3.20-4.10% 07/08/2008 02/01/2024 $ 910,000 G.O.Improvement Bonds 2008B $ 8,545,000 3.00-3.90% 07/08/2008 02/01/2023 5,105,000 G.O.Improvement Bonds 2010C $ 2,455,000 2.00-3.75% 06/10/2010 02/01/2027 1,940,000 G.O.Improvement Refunding Bonds 2011A $ 2,385,000 2.00-2.50% 08/25/2011 02/01/2019 1,275,000 G.O.Improvement Refunding Bonds 2013A $ 5,365,000 2.00% 01/15/2013 02/01/2022 4,700,000 G.O.Street Reconstruction Bonds 2013B $ 1,495,000 0.45-1.95% 10/09/2013 02/01/2020 1,395,000 G.O.Street Reconstruction Bonds 2015A $ 3,050,000 2.00-3.00% 10/15/2015 02/01/2030 3,050,000 Total general obligation improvement bonds 18,375,000 Capital improvement bonds G.O.Capital Improvement Bonds 2005C $ 2,280,000 3.50-4.40% 07/01/2005 02/01/2026 1,490,000 G.O.Capital Improvement Bonds 2007A $ 9,990,000 4.0011.20% 06/28/2007 02/01/2028 7,370,000 Total capital improvement bonds 8,860,000 Public project revenue bond G.O.Capital Improvement Bonds 2010A $ 3,850,000 2.00-4.00% 01/13/2010 02/01/2022 2,395,000 Revenue bonds G.O.Wastewater Treatment Bonds 1995 $ 1,053,000 4.63% 04/04/1995 08/20/2016 56,534 G.O.Utility Revenue Refunding Bonds 2010B $ 1,200,000 2.00-3.25% 01/13/2010 02/01/2022 740,000 Total revenue bonds 796,534 Certificates of indebtedness G.O.Equipment Certificate 2010D $ 1,145,000 1.00-3.10% 06/10/2010 02/01/2020 660,000 Total governmental activities bonds 31,086,534 Unamortized premium 277,972 Compensated absences 769,989 Net pension liability-PERA 5,495,888 Net OPEB obligation 707,954 Total governmental activities $ 38,338,337 Business-type activities Compensated absences $ 79,529 Net pension liability-PERA 516,594 Net OPEB obligation 79,781 Total business-type activities $ 675,904 -48- NOTE 6-LONG-TERM DEBT(CONTINUED) B. Changes in Long-Term Debt Beginning Ending Due Within Balance Additions Deletions Balance One Year Governmental activities G.O.improvement bonds $ 17,125,000 $ 3,050,000 $ 1,800,000 $ 18,375,000 $ 1,895,000 Capital improvement bonds 9,380,000 - 520,000 8,860,000 1,925,000 Public project revenue bond 2,700,000 - 305,000 2,395,000 310,000 Revenue bonds 945,696 - 149,162 796,534 156,534 Certificates of indebtedness 785,000 - 125,000 660,000 125,000 Unamortized bond premium 177,829 134,641 34,498 277,972 - Compensated absences 734,496 485,466 449,973 769,989 577,492 Net pension liability-PERA(1) - 6,270,067 774,179 5,495,888 - Net OPEB obligation 626,474 94,752 13,272 707,954 - Total governmental activities 32,474,495 10,034,926 4,171,084 38,338,337 4,989,026 Business-type activities Compensated absences 64,177 45,616 30,264 79,529 59,649 Net pension liability-PERA(1) - 574,186 57,592 516,594 - Net OPEB obligation 71,114 10,079 1,412 79,781 - Total business-type activities 135,291 629,881 89,268 675,904 59,649 Total government-wide $ 32,609,786 $ 10,664,807 $ 4,260,352 $ 39,014,241 $ 5,048,675 (1)Additions to the net pension liability-PERA includes the change in accounting principle described in Note 1. C. Minimum Debt Payments Minimum annual payments required to retire bonds are as follows: Year Ending G.O.Improvement Capital Improvement Public Project Revenue December 31, Principal Interest Principal Interest Principal Interest 2016 $ 1,895,000 $ 476,827 $ 1,925,000 $ 325,248 $ 310,000 $ 79,825 2017 2,110,000 443,414 455,000 276,537 320,000 70,375 2018 2,285,000 385,906 475,000 257,938 330,000 60,213 2019 2,575,000 322,341 495,000 238,538 340,000 49,325 2020 2,240,000 257,840 515,000 218,209 350,000 36,800 2021-2025 5,790,000 545,982 2,925,000 747,990 745,000 30,100 2026-2030 1,480,000 77,350 2,070,000 132,930 - - Total $ 18,375,000 $ 2,509,660 $ 8,860,000 $ 2,197,390 $ 2,395,000 $ 326,638 Year Ending Revenue Certificates of Indebtedness Total December 31, Principal Interest Principal Interest Principal Interest 2016 $ 156,534 $ 22,134 $ 125,000 $ 16,621 $ 4,411,534 $ 920,655 2017 95,000 18,378 130,000 13,558 3,110,000 822,262 2018 100,000 15,731 130,000 10,145 3,320,000 729,933 2019 105,000 12,691 135,000 6,365 3,650,000 629,260 2020 110,000 9,262 140,000 2,170 3,355,000 524,281 2021-2025 230,000 7,475 - - 9,690,000 1,331,547 2026-2030 - - - - 3,550,000 210,280 Total $ 796,534 $ 85,671 $ 660,000 $ 48,859 $ 31,086,534 $ 5,168,218 -49- NOTE 6—LONG-TERM DEBT(CONTINUED) D. Descriptions of Long-Term Debt • General Obligation Bonds—The City issues general obligation bonds to provide funds for the acquisition and construction of major capital improvements or to refinance (refund) previous bond issues.The reporting entity's long-term debt is segregated between the amounts to be repaid from governmental activities and amounts to be repaid from business-type activities (if any). General obligation bonds are direct obligations and pledge the full faith and credit of the City. The City has elected to retire the 2017 through 2026 maturities of its General Obligation Capital Emprovement bonds, Series 2005C on their February 1, 2016 call date using available internal resources.Redeeming these bonds in advance of their stated maturities will reduce future interest payments by$346,843. The City is subject to statutory limitation by the state of Minnesota for bonded indebtedness payable principally from property taxes. As of December 31, 2015, the City had not utilized $27,782,562 of its net legal debt margin. • Net OPEB Obligation — This liability represents the City's other post-employment benefits obligation(OPEB)as further described later in these notes.The General,Liquor,and Solid Waste Funds will be used to liquidate this liability. • Net Pension Liability—PERA—This liability represents the City's pension benefit obligations as further described later in these notes.The General,Liquor,and Solid Waste Funds will be used to liquidate this liability. • Compensated Absences—This liability represents vested benefits earned by employees through the end of the year,which will be paid or used in future periods. The General, Liquor, and Solid Waste Funds will be used to liquidate this liability. E. Ultimate Responsibility for Debt All general obligation bonds are backed by the full faith and credit of the City. F. Conduit Debt Obligations Conduit debt obligations are certain limited obligation revenue bonds or similar debt instruments issued for the express purpose of providing capital financing for a specific third party. The City has issued various revenue bonds to provide funding to private sector entities for projects deemed to be in the public interest. Although these bonds bear the name of the City, the City has no obligation for such debt. Accordingly, the bonds are not reported as liabilities in the financial statements of the City. As of December 31, 2015, there was one series of industrial revenue bonds outstanding with an approximate aggregate principal amount payable of$215,000. -50- NOTE 7—DEFINED BENEFIT PENSION PLANS—STATE-WIDE A. Plan Description The City participates in the following cost-sharing, multiple-employer defined benefit pension plans administered by the PERA. The PERA's defined benefit pension plans are established and administered in accordance with Minnesota Statutes,Chapters 353 and 356.The PERA's defined benefit pension plans are tax qualified plans under Section 401(a)of the Internal Revenue Code. 1. General Employees Retirement Fund(GERF) All full-time and certain part-time employees of the City are covered by the General Employees Retirement Fund (GERF). GERF members belong to either the Coordinated Plan or the Basic Plan. Coordinated Plan members are covered by Social Security and Basic Plan members are not. The Basic Plan was closed to new members in 1967. All new members must participate in the Coordinated Plan. 2. Public Employees Police and Fire Fund(PEPFF) The PEPFF,originally established for police officers and firefighters not covered by a local relief association, now covers all police officers and firefighters hired since 1980. Effective July 1, 1999,the PEPFF also covers police officers and firefighters belonging to local relief associations that elected to merge with and transfer assets and administration to the PERA. B. Benefits Provided The PERA provides retirement, disability, and death benefits. Benefit provisions are established by state statute and can only be modified by the State Legislature. Benefit increases are provided to benefit recipients each January.Increases are related to the funding ratio of the plan. Members in plans that are at least 90 percent funded for two consecutive years are given 2.5 percent increases. Members in plans that have not exceeded 90 percent funded, or have fallen below 80 percent,are given 1 percent increases. The benefit provisions stated in the following paragraphs of this section are current provisions and apply to active plan participants.Vested,terminated employees who are entitled to benefits but are not receiving them yet are bound by the provisions in effect at the time they last terminated their public service. 1. GERF Benefits Benefits are based on a member's highest average salary for any five successive years of allowable service, age, and years of credit at termination of service. Two methods are used to compute benefits for the PERA's Coordinated and Basic Plan members. The retiring member receives the higher of a step-rate benefit accrual formula (Method 1) or a level accrual formula (Method 2). Under Method 1,the annuity accrual rate for a Basic Plan member is 2.2 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 members hired prior to July 1, 1989, a full annuity is available when age plus years of service equal 90 and normal retirement age is 65. For members hired on or after July 1, 1989, normal retirement age is the age for unreduced Social Security benefits capped at 66. -51- NOTE 7—DEFINED BENEFIT PENSION PLANS—STATE-WIDE(CONTINUED) 2. PEPFF Benefits Benefits for PEPFF members first hired after June 30, 2010, but before July 1, 2014, vest on a prorated basis from 50 percent after five years up to 100 percent after 10 years of credited service. Benefits for PEPFF members first hired after June 30, 2014 vest on a prorated basis from 50 percent after 10 years up to 100 percent after 20 years of credited service.The annuity accrual rate is 3 percent of average salary for each year of service. For PEPFF members who were first hired prior to July 1, 1989,a full annuity is available when age plus years of service equal at least 90. C. Contributions Minnesota Statutes, Chapter 353 sets the rates for employer and employee contributions. Contribution rates can only be modified by the State Legislature. 1. GERF Contributions Coordinated Plan members were required to contribute 6.50 percent of their annual covered salary in calendar year 2015. The City was required to contribute 7.50 percent for Coordinated Plan members in calendar year 2015. The City's contributions to the GERF for the year ended December 31, 2015 were $271,726. The City's contributions were equal to the required contributions as set by state statute. 2. PEPFF Contributions Plan members were required to contribute 10.8 percent of their annual covered salary in calendar year 2015. The City was required to contribute 16.20 percent of pay for PEPFF members in calendar year 2015. The City's regular contributions to the PEPFF for the year ended December 31, 2015 were $374,503. The City's contributions were equal to the required contributions as set by state statute. D. Pension Costs 1. GERF Pension Costs At December 31, 2015, the City reported a liability of$3,228,709 for its proportionate share of the GERF's net pension liability. The net pension liability was measured as of June 30,2015,and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date.The City's proportion of the net pension liability was based on the City's contributions received by the PERA during the measurement period for employer payroll paid dates from July 1, 2014 through June 30, 2015, relative to the total employer contributions received from all of the PERA's participating employers. At June 30, 2015, the City's proportionate share was 0.0623 percent, which was a decrease of 0.0059 percent from its proportion measured as of June 30,2014. For the year ended December 31,2015, the City recognized pension expense of$359,955 for its proportionate share of the GERF's pension expense. -52- NOTE 7—DEFINED BENEFIT PENSION PLANS—STATE-WIDE(CONTINUED) At December 31,2015,the City reported its proportionate share of the GERF's deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Deferred Outflows Inflows of Resources of Resources Differences between expected and actual economic experience $ — $ 162,782 Differences between projected and actual investment earnings 305,647 — Changes in proportion — 207,864 Contributions paid to the PERA subsequent to the measurement date 135,727 — Total $ 441,374 $ 370,646 Deferred outflows of resources reported $135,727 related to pensions resulting from city contributions subsequent to the measurement date that will be recognized as a reduction of the net pension liability in the year ending December 31, 2016. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows: Pension Year Ended Expense December 31, Amount 2016 $ (47,137) 2017 $ (47,137) 2018 $ (47,137) 2019 $ 76,412 2. PEPFF Pension Costs At December 31, 2015, the City reported a liability of$2,783,773 for its proportionate share of the PEPFF's net pension liability. The net pension liability was measured as of June 30, 2015, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The City's proportion of the net pension liability was based on the City's contributions received by the PERA during the measurement period for employer payroll paid dates from July 1, 2014 through June 30, 2015, relative to the total employer contributions received from all of the PERA's participating employers. At June 30, 2015, the City's proportion was 0.245 percent, which was a decrease of 0.004 percent from its proportion measured as of June 30,2014. For the year ended December 31,2015,the City recognized pension expense of$471,816 for its proportionate share of the PEPFF's pension expense. The City also recognized $22,050 for the year ended December 31,2015, as revenue for its proportionate share of the state of Minnesota's on-behalf contributions to the PEPFF.Legislation passed in 2013 required the state of Minnesota to begin contributing$9 million to the PEPFF each year,starting in fiscal year 2014. -53- NOTE 7—DEFINED BENEFIT PENSION PLANS—STATE-WIDE(CONTINUED) At December 31,2015,the City reported its proportionate share of the PEPFF's deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Deferred Outflows Inflows of Resources of Resources Differences between expected and actual economic experience $ — $ 451,437 Differences between projected and actual investment earnings 485,027 — Changes in proportion — 36,002 Contributions paid to the PERA subsequent to the measurement date 198,748 — Total $ 683,775 $ 487,439 Deferred outflows of resources reported $198,748 related to pensions resulting from city contributions subsequent to the measurement date that will be recognized as a reduction of the net pension liability in the year ending December 31, 2016. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows: Pension Year Ended Expense December 31, Amount 2016 $ 23,769 2017 $ 23,769 2018 $ 23,769 2019 $ 23,769 2020 $ (97,488) E. Actuarial Assumptions The total pension liability in the June 30, 2015 actuarial valuation was determined using the following actuarial assumptions: Inflation 2.75%per year Active member payroll growth 3.50%per year Investment rate of return 7.90% Salary increases were based on a service-related table. Mortality rates for active members, retirees, survivors,and disabilitants were based on RP-2000 tables for males or females,as appropriate,with slight adjustments. Cost of living benefit increases for retirees are assumed to be: 1 percent effective every January 1st until 2034,then 2.5 percent for the GERF and the PEPFF. Actuarial assumptions used in the June 30, 2015 valuation were based on the results of actuarial experience studies. The experience study in the GERF was for the period July 1, 2004 through June 30, 2008, with an update of economic assumptions in 2014. The experience study for the PEPFF was for the period July 1,2004 through June 30,2009. There were no changes in actuarial assumptions in 2015. -54- NOTE 7—DEFINED BENEFIT PENSION PLANS—STATE-WIDE(CONTINUED) The long-term expected rate of return on pension plan investments is 7.9 percent. The State Board of Investment, which manages the investments of the PERA, prepares an analysis of the reasonableness of the long-term expected rate of return on a regular basis using a building-block method in which best-estimate ranges of expected future rates of return are developed for each major asset class. These ranges are combined to produce an expected long-term rate of return by weighting the expected future rates of return by the target asset allocation percentages. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Target Long-Term Expected Asset Class Allocation Real Rate of Return Domestic stocks 45% 5.50% International stocks 15% 6.00% Bonds 18% 1.45% Alternative assets 20% 6.40% Cash 2% 0.50% F. Discount Rate The discount rate used to measure the total pension liability was 7.9 percent.The projection of cash flows used to determine the discount rate assumed that employee and employer contributions will be made at the rate specified in statute. Based on that assumption, each pension plan's fiduciary net position was projected to be available to make all projected future benefit payments of current active and inactive employees. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. G. Pension Liability Sensitivity The following presents the City's proportionate share of the net pension liability for all plans it participates in,calculated using the discount rate disclosed in the preceding paragraph,as well as what the City's proportionate share of the net pension liability would be if it were calculated using a discount rate 1 percentage point lower or 1 percentage point higher than the current discount rate: 1%Decrease in 1%Increase in Discount Rate Discount Rate Discount Rate (6.9%) (7.9%) (8.9%) The City's proportionate share of the GERF net pension liability $ 5,076,679 $ 3,228,709 $ 1,702,571 The City's proportionate share of the PEPFF net pension liability $ 5,425,603 $ 2,783,773 $ 601,161 H. Pension Plan Fiduciary Net Position Detailed information about each pension plan's fiduciary net position is available in a separately-issued PERA financial report that includes financial statements and required supplementary information. That report may be obtained on the PERA website at www.mnpera.org. -55- NOTE 8—DEFINED BENEFIT PENSION PLAN—FIRE RELIEF ASSOCIATION A. Plan Description Volunteer firefighters of the City of Farmington Fire Department (the Department) are members of the Association, which administers a single-employer defined benefit pension plan established to provide benefits for its members. The plan is established and administered in accordance with Minnesota Statute, Chapter 69. The Association is governed by a Board of nine trustees; six voting trustees elected by the members of the Association, and the City's Mayor, City Administrator, and Fire Chief as ex-officio members. As of December 31, 2014, the plan covered 43 active firefighters and 5 vested terminated firefighters whose pension benefits are deferred. The Association maintains a separate Special Fund to accumulate assets to fund the retirement benefits earned by the Department's membership. B. Benefits Provided A firefighter who completes at least 20 years as an active member of the Department is entitled, after age 50,to a full service pension upon retirement. The bylaws of the Association also provide for an early vested service pension for a retiring member who has completed fewer than 20 years of service. The reduced pension, available to members with 10 years of service, shall be equal to 60 percent of the pension as described by the bylaws. This percentage increases 4 percent per year so that at 20 years of service, the full amount prescribed is paid. Members who retire with less than 20 years of service and have reached the age of 50 and have completed at least 10 years of active membership are entitled to a reduced service pension not to exceed the amount calculated by multiplying the member's service pension for the completed years of service times the applicable non-forfeitable percentage of pension. C. Contributions Minnesota Statutes, Chapters 424 and 424A authorize pension benefits for volunteer fire relief associations. The plan is funded by fire state aid, investment earnings, and, if necessary, employer contributions as specified in Minnesota Statutes and voluntary city contributions (if applicable). The firefighters have no obligation to contribute to the plan.Nonemployer pension contributions include state aid from the state of Minnesota and municipal contributions from the City. On-behalf of state aid payments from the state of Minnesota are received initially by the City and subsequently remitted to the Association. These on-behalf of state aid payments in addition to the City's municipal contribution payments to the Association plan are recognized as revenues and expenditures in the City's General Fund during the period received. The state of Minnesota contributed $128,461 in fire state aid to the plan on behalf of the Department for the year ended December 31,2014,which was recorded as revenue.Required employer contributions are calculated annually based on statutory provisions.The City's statutorily-required contributions to the plan for the year ended December 31, 2015 were $0; however, the City made a voluntary contribution of $150,000 to the plan. D. Pension Costs At December 31,2015,the City reported a net pension liability(asset)of($661,701)for the plan. The net pension liability (asset) was measured as of December 31, 2014. The total pension liability used to calculate the net pension liability(asset) in accordance with GASB Statement No. 68 was determined by applying an actuarial formula to specific census data certified by the Department as of December 31, 2014. -56- NOTE 8—DEFINED BENEFIT PENSION PLAN—FIRE RELIEF ASSOCIATION (CONTINUED) • The following table presents the changes in net pension liability(asset)during the year: Total Pension Plan Fiduciary Net Pension Liability Net Position Liability(Asset) (a) (b) (a-b) Beginning balance—January 1,2015 $ 1,638,527 $ 2,122,872 $ (484,345) Changes for the year Service cost 69,285 — 69,285 Interest on pension liability(asset) 110,249 — 110,249 Contributions(employer) — 150,000 (150,000) Contributions(state) — 133,461 (133,461) Net investment income — 84,277 (84,277) Benefit payments (265,643) (265,643) — Administrative costs — (10,848) 10,848 Total net changes (86,109) 91,247 (177,356) Ending balance—December 31,2015 $ 1,552,418 $ 2,214,119 $ (661,701) For the year ended December 31, 2015, the City recognized pension revenue of$128,461 and pension expense of$56,295. At December 31,2015,the City reported deferred inflows of resources and deferred outflows of resources, its contributions subsequent to the measurement date,related to pension from the following sources: Deferred Deferred Outflows Inflows of Resources of Resources Net difference between projected and actual earnings on plan investments $ 44,810 $ — City contributions subsequent to the measurement date 150,000 — State aid to the City subsequent to the measurement date 137,915 137,915 Total $ 332,725 $ 137,915 Deferred outflows of resources totaling$287,915 related to pensions resulting from the City's contributions to the plan subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ending December 31, 2016. Deferred inflows of resources totaling $137,15 related to state aid received subsequent to the measurement date will be recognized for its impact on the net pension liability in the year ending December 31,2016. Other amounts reported as deferred outflows and inflows of resources related to the plan will be recognized in pension expense as follows: Pension Year Ended Expense December 31, Amount 2016 $ 11,202 2017 $ 11,202 2018 $ 11,202 2019 $ 11,204 -57- NOTE 8—DEFINED BENEFIT PENSION PLAN—FIRE RELIEF ASSOCIATION (CONTINUED) E. Actuarial Assumptions The total pension liability at December 31,2014 was determined using the entry age normal actuarial cost method and the following actuarial assumptions: Retirement eligibility at 100 percent service pension at age 50 with 20 years of service,early vested retirement at age 50 with 10 years of service vested at 60 percent and increased by 4 percent for each additional year of service up to 20 and eligibility for deferred service pension payable at age 50 with 20 years of service Inflation rate 2.75%per year Investment rate of return 7.00% 20-year municipal bond yield 3.50% There were no changes in actuarial assumptions in 2014. The 7 percent long-term expected rate of return on pension plan investments was determined using a building-block method in which best estimates for expected future real rates of return(expected returns, net of inflation) were developed for each asset class using the plan's target investment allocation along with long-term return expectations by asset class. Inflation expectations were applied to derive the nominal rate of return for the portfolio.The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Long-Term Long-Term Target Expected Real Expected Nominal Asset Class Allocation Rate of Return Rate of Return Domestic equity 74.71 % 5.00 % 7.75 % Fixed income 14.75 1.75 % 4.50 % Real estate and alternatives 3.28 4.00 % 6.75 % Cash and equivalents 7.26 0.25 % 3.00 % Total 100.00 % 4.25 % 7.00 % F. Discount Rate The discount rate used to measure the total pension liability was 7.0 percent.The projection of cash flows used to determine the discount rate assumed that contributions to the plan will be made as specified in the state statute. Based on that assumption and considering the funding ratio of the plan, the fiduciary net position was projected to be available to make all projected future benefit payments of current active and inactive members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. -58- NOTE 8—DEFINED BENEFIT PENSION PLAN—FIRE RELIEF ASSOCIATION (CONTINUED) G. Pension Liability(Asset)Sensitivity The following presents the City's net pension liability (asset) for the plan, calculated using the discount rate disclosed in the preceding paragraph,as well as what the City's net pension liability(asset)would be if it were calculated using a discount rate 1 percent lower or 1 percent higher than the current discount rate: 1 Percent 1 Percent Decrease(6.00%) Current(7.00%) Increase(8.00%) Net pension liability(asset) $ (602,130) $ (661,701) $ (718,650) H. Pension Plan Fiduciary Net Position 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 Farmington Fire Fighters' Relief Association,403 Third Street,Farmington,Minnesota,55024 or by calling(651)280-6880. NOTE 9—OTHER POST-EMPLOYMENT BENEFITS(OPEB)PLAN A. Plan Description The City provides post-employment benefits to certain eligible employees through the City's Other Post-Employment Benefits (OPEB) Plan, a single-employer defined benefit plan administered by the City. All post-employment benefits are based on contractual agreements with employee groups. These contractual agreements do not include any specific contribution or funding requirements. The plan does not issue a publicly available financial report.These benefits are summarized as follows: Post-Employment Insurance Benefits—All retirees of the City have the option under state law to continue their medical insurance coverage through the City from the time of retirement until the employee reaches the age of eligibility for Medicare.For members of all employee groups,the retiree must pay the full premium to continue coverage for medical and dental insurance. The City is legally required to include any retirees for whom it provides health insurance coverage in the same insurance pool as its active employees, whether the premiums are paid by the City or the retiree.Consequently,participating retirees are considered to receive a secondary benefit known as an "implicit rate subsidy." This benefit relates to the assumption that the retiree is receiving a more favorable premium rate than they would otherwise be able to obtain if purchasing insurance on their own, due to being included in the same pool with the City's younger and statistically healthier active employees. B. Funding Policy The required contribution is based on projected pay-as-you-go financing requirements, with additional amounts to pre-fund benefits as determined annually by the City. -59- NOTE 9—OTHER POST-EMPLOYMENT BENEFITS(OPEB)PLAN(CONTINUED) C. Annual OPEB Cost and Net OPEB Obligation The City's annual OPEB cost(expense) is calculated based on the ARC of the City.The City has elected to calculate the ARC and related information using the alternative measurement method permitted by GASB Statement No. 45 for employers in plans with fewer than 100 total plan members. The ARC represents a level funding that, if paid on an ongoing basis, is projected to cover normal costs each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed 30 years. The annual OPEB cost is accrued in the accrual based statements. The liability is funded through payments from the City's General Fund and enterprise funds. The following table shows the components of the City's annual OPEB cost for the year, the amount actually contributed to the plan,and the changes in the City's net OPEB obligation to the plan: ARC $ 99,776 Interest on net OPEB obligation 31,391 Adjustment to ARC (26,336) Annual OPEB cost(expense) 104,831 Contributions made (14,684) Increase in net OPEB obligation 90,147 Net OPEB obligation—beginning of year 697,588 Net OPEB obligation—end of year $ 787,735 The City's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for the past three years are as follows: Fiscal Percentage of Year Ended Annual Employer Annual OPEB Net OPEB December 31, OPEB Cost Contribution Cost Contributed Obligation 2013 $ 6,034 $ 10,480 173.68% $ 607,039 2014 $ 100,652 $ 10,103 10.04% $ 697,588 2015 $ 104,831 $ 14,684 14.01% $ 787,735 D. Funded Status and Funding Progress As of January 1,2014,the most recent actuarial valuation date,the actuarial accrued liability for benefits and unfunded actuarial accrued liability (UAAL) were both $822,299, as the plan was unfunded. The covered payroll(annual payroll of active employees covered by the plan)was$5,332,090 and the ratio of the UAAL to the covered payroll was 15 percent. Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability occurrence of events far into the future.Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the ARC of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The Schedule of Funding Progress following the notes to basic financial statements presents multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. -60- NOTE 9-OTHER POST-EMPLOYMENT BENEFITS(OPEB)PLAN(CONTINUED) E. Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members)and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets,consistent with the long-term perspective of the calculations. In the January 1, 2014 actuarial valuation, the projected unit credit actuarial cost method was used. The actuarial assumptions included a 4.5 percent discount rate and an annual healthcare cost trend rate of 9 percent initially reduced incrementally to an ultimate rate of 5 percent after 12 years. Both rates included a 3 percent inflation assumption.The UAAL is being amortized at an increasing 3.75 percent per year of projected payroll on an open basis. The remaining amortization period at January 1, 2014 was 30 years. NOTE 10-FUND BALANCES A. Classifications At December 31,2015,the City had the following governmental fund balances: Debt Permanent Service State Aid Storm Water Improvement General Fund Fund Construction Trunk Revolving Maintenance Nonmajor Total Nonspendable Prepaid items $ 6,034 $ - $ - $ - $ - $ - $ 150 $ 6,184 Restricted Debt service - 5,482,325 - - - - - 5,482,325 Police programs - - - - - - 12,200 12,200 Park improvements - - - - - - 101,346 101,346 PEG fees - - - - - - 146,864 146,864 Recreational capital projects - - - - - - 33,579 33,579 Total restricted - 5,482,325 - - - - 293,989 5,776,314 Committed Street construction - - 1,731,020 - - - - 1,731,020 Stone water trunk - - - 3,689,276 - - - 3,689,276 Improvement projects - - - - 135,560 - 69,774 205,334 Park improvements - - - - - - 133,071 133,071 Ice arena - - - - - - 76,743 76,743 Sanitary sewer trunk - - - - - - 381,865 381,865 Cable communications - - - - - - 500,386 500,386 Fire capital programs - - - - - - 244,495 244,495 Pavement management - - - - - 968,730 - 968,730 Capital equipment - - - - - - 94,265 94,265 Total committed - - 1,731,020 3,689,276 135,560 968,730 1,500,599 8,025,185 Assigned Improvement projects 4,250 - - - - - - 4,250 Unassigned 4,734,534 - - - - - - 4,734,534 Total $ 4,744,818 $ 5,482,325 $ 1,731,020 $ 3,689,276 $ 135,560 $ 968,730 $ 1,794,738 $ 18,546,467 -61- NOTE 10—FUND BALANCES(CONTINUED) B. Minimum Fund Balance Policy The City's policy is to maintain an unassigned fund balance in the General Fund in the range of 40-50 percent of the subsequent year's budgeted expenditures and transfers out. At December 31, 2015, the unassigned fund balance of the General Fund was 40.1 percent of the subsequent year's budgeted expenditures and transfers out. NOTE 11—COMMITMENTS AND CONTINGENCIES A. Federal and State Funding Amounts recorded or receivable from federal and state agencies are subject to agency audit and adjustment. Any disallowed claims, including amounts already collected,may constitute a liability of the applicable funds. The amount, if any, of claims which may be disallowed by the grantor agencies cannot be determined at this time,although the City expects such amounts,if any,to be immaterial. B. Legal Claims The City has the usual and customary type of miscellaneous legal claims pending at year-end. Although the outcome of these lawsuits is not presently determinable,the City's management believes that the City will not incur any material monetary loss resulting from these claims. No loss has been recorded on the City's financial statements relating to these claims. C. Tax Increment Districts The City's tax increment districts are subject to review by the Minnesota Office of the State Auditor.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 fmancial statements. -62- REOUIRED SUPPLEMENTARY INFORMATION CITY OF FARMINGTON Schedule of City's and Non-Employer Proportionate Share of Net Pension Liability PERA—Public Employees General Employees Retirement Fund City's Proportionate Share of the Net Plan Fiduciary City's Pension Net Position as PERA Fiscal City's Proportionate Liability as a a Percentage of City Fiscal Year-End Date Proportion of Share of the Net Percentage of the Total Year-End (Measurement the Net Pension Pension City's Covered Covered Payroll Pension Date Date) Liability Liability(a) Payroll(b) (a/b) Liability 12/31/2015 6/30/2015 0.0623% $ 3,228,709 $ 3,660,794 88.20% 78.20% Schedule of Employer Contributions PERA—Public Employees General Employees Retirement Fund Contributions in Relation to the PERA Fiscal Statutorily Statutorily Contributions as City Fiscal Year-End Date Required Required Contribution a Percentage of Year-End (Measurement Contributions Contributions Deficiency Covered Payroll Covered Payroll Date Date) (a) (b) (Excess)(a-b) (d) (b/d) 12/31/2015 6/30/2015 $ 271,726 $ 271,726 $ — $ 3,623,009 7.50% Note: The City implemented GASB Statement No. 68 in fiscal 2015 (using a June 30, 2015 measurement date). This information is not available for previous fiscal years. -63- CITY OF FARMINGTON Schedule of City's and Non-Employer Proportionate Share of Net Pension Liability PERA—Public Employees Police and Fire Fund City's Proportionate Share of the Net Plan Fiduciary City's Pension Net Position as PERA Fiscal City's Proportionate Liability as a a Percentage of City Fiscal Year-End Date Proportion of Share of the Net Percentage of the Total Year-End (Measurement the Net Pension Pension City's Covered Covered Payroll Pension Date Date) Liability Liability(a) Payroll(b) (a/b) Liability 12/31/2015 6/30/2015 0.2450% $ 2,783,773 $ 2,242,616 124.13% 86.60% Schedule of Employer Contributions PERA—Public Employees Police and Fire Fund Contributions in Relation to the PERA Fiscal Statutorily Statutorily Contributions as Year-End Date Required Required Contribution a Percentage of City Fiscal (Measurement Contributions Contributions Deficiency Covered Payroll Covered Payroll Year-End Date) (a) (b) (Excess)(a-b) (d) (b/d) 12/31/2015 6/30/2015 $ 374,503 $ 374,503 $ — $ 2,311,741 16.20% Note: The City implemented GASB Statement No. 68 in fiscal 2015 (using a June 30, 2015 measurement date). This information is not available for previous fiscal years. -64- CITY OF FARMINGTON Schedule of Changes in the Farmington Fire Fighters' Relief Association's Net Pension Liability(Asset)and Related Ratios City fiscal year-end date December 31,2015 Farmington Fire Fighters'Relief Association year-end date(measurement date) December 31,2014 Total pension liability Service cost $ 69,285 Interest 110,249 Benefit payments (265,643) Net change in total pension liability (86,109) Total pension liability—beginning of year 1,638,527 Total pension liability—end of year $ 1,552,418 Plan fiduciary net position Contributions(state and local) $ 283,461 Net investment income 84,277 Benefit payments (265,643) Administrative costs (10,848) Net change in plan fiduciary net position 91,247 Plan fiduciary net position—beginning of year 2,122,872 Plan fiduciary net position—end of year $ 2,214,119 Net pension liability(asset)—ending $ (661,701) Plan fiduciary net position as a percentage of the total pension liability 142.62% Schedule of Employer Contributions Farmington Fire Fighters'Relief Association Contributions in Relation to the Statutorily Statutorily Contribution Voluntary City Fiscal Required Required Deficiency City Year-End Date Contributions(a) Contributions(b) (Excess)(a-b) Contribution 12/31/2015 $ — $ — $ — $ 150,000 Note: The City implemented GASB Statement No.68 in fiscal 2015 (using a December 31,2014 measurement date). This information is not available for previous fiscal years. -65- CITY OF FARMINGTON Other Post-Employment Benefits Plan Schedule of Funding Progress Unfunded Unfunded Actuarial Actuarial Actuarial Actuarial Liability as a Valuation Date Accrued Value of Accrued Funded Covered Percentage of January 1, Liability Plan Assets Liability Ratio Payroll Payroll 2012 $ 787,156 $ — $ 787,156 — % $ 5,533,262 14.2% 2013 $ 886,732 $ — $ 886,732 — % $ 5,740,759 15.1% 2014 $ 822,299 $ — $ 822,299 — % $ 5,332,090 15.4% -66- THIS PAGE INTENTIONALLY LEFT BLANK SUPPLEMENTAL INFORMATION THIS PAGE INTENTIONALLY LEFT BLANK NONMAJOR GOVERNMENTAL FUNDS The statements that follow are to provide further detail and support additional analysis for the City's nonmajor special revenue and capital projects funds. -67- CITY OF FARMINGTON Nonmajor Governmental Funds Combining Balance Sheet as of December 31,2015 Special Capital Revenue Projects Total Assets Cash and investments $ 283,773 $ 1,733,047 $ 2,016,820 Receivables Accounts 55,383 73,061 128,444 Interest 743 4,653 5,396 Special assessments Delinquent — 170 170 Noncurrent 546 1,956 2,502 Prepaid items 150 — 150 Total assets $ 340,595 $ 1,812,887 $ 2,153,482 Liabilities Accounts and contracts payable $ 9,881 $ 36,340 $ 46,221 Deposits payable 6,287 303,193 309,480 Due to other governments 371 — 371 Total liabilities 16,539 339,533 356,072 Deferred inflows of resources Unavailable revenue—special assessments 546 2,126 2,672 Fund balances Nonspendable 150 — 150 Restricted 113,546 180,443 293,989 Committed 209,814 1,290,785 1,500,599 Total fund balances 323,510 1,471,228 1,794,738 Total liabilities,deferred inflows of resources,and fund balances $ 340,595 $ 1,812,887 $ 2,153,482 -68- CITY OF FARMINGTON Nonmajor Governmental Funds Combining Statement of Revenues,Expenditures,and Changes in Fund Balances Year Ended December 31,2015 Special Capital Revenue Projects Total Revenue Franchise taxes $ - $ 165,485 $ 165,485 Special assessments 14,166 9,588 23,754 Charges for services 315,416 (2,526) 312,890 Investment earnings 3,358 17,871 21,229 Other Donations 5,050 65,442 70,492 Rentals 6,300 - 6,300 Miscellaneous 27,582 804 28,386 Total revenues 371,872 256,664 628,536 Expenditures Current General government - 1,105 1,105 Public safety 7,299 47,892 55,191 Public works - 14 14 Parks and recreation 329,584 20,826 350,410 Capital outlay General government - 57,609 57,609 Public safety - 172,830 172,830 Public works - 390 390 Parks and recreation 44,572 789 45,361 Total expenditures 381,455 301,455 682,910 Excess(deficiency)of revenues over expenditures (9,583) (44,791) (54,374) Other financing sources(uses) Sale of capital assets 8,746 148,853 157,599 Transfers in 40,000 240,707 280,707 Transfers out (10,000) - (10,000) Total other financing sources(uses) 38,746 389,560 428,306 Net change in fund balances 29,163 344,769 373,932 Fund balances Beginning of year 294,347 1,126,459 1,420,806 End of year $ 323,510 $ 1,471,228 $ 1,794,738 -69- THIS PAGE INTENTIONALLY LEFT BLANK NONMAJOR SPECIAL REVENUE FUNDS Nonmajor special revenue funds are used to account for the proceeds of certain specific revenue sources that are restricted or committed to expenditures for specified purposes. Nonmajor special revenue funds presently established are as follows: Police Donations and Forfeitures — Used to account for the operations and activities related to donations and the forfeiture of confiscated property and allows for the expenditure of those revenues for expenses related to the public safety of the City. Park Improvement—Used to account for the operations and activities related to the collection of park dedication fees and other revenues earmarked for construction and improvement of the City's park and trail system. Arena(Ice)—Used to account for the operation of the City's ice arena;one sheet of indoor ice for use by hockey and figure skating groups,both school and youth organizations supported. -70- CITY OF FARMINGTON Nonmajor Special Revenue Funds Combining Balance Sheet as of December 31,2015 Police Donations Park and Forfeitures Improvement Arena Total Assets Cash and investments $ 12,641 $ 233,804 $ 37,328 $ 283,773 Receivables Accounts - - 55,383 55,383 Interest 33 613 97 743 Special assessments Noncurrent - 546 - 546 Prepaid items - - 150 150 Total assets $ 12,674 $ 234,963 $ 92,958 $ 340,595 Liabilities Accounts and contracts payable $ 474 $ - $ 9,407 $ 9,881 Deposits payable - - 6,287 6,287 Due to other governments - - 371 371 Total liabilities 474 - 16,065 16,539 Deferred inflows of resources Unavailable revenue-special assessments - 546 - 546 Fund balances Nonspendable - - 150 150 Restricted for police programs 12,200 - - 12,200 Restricted for park improvements - 101,346 - 101,346 Committed for park improvements - 133,071 - 133,071 Committed for ice arena capital - - 76,743 76,743 Total fund balances 12,200 234,417 76,893 323,510 Total liabilities,deferred inflows of resources,and fund balances $ 12,674 $ 234,963 $ 92,958 $ 340,595 -71- CITY OF FARMINGTON Nonmajor Special Revenue Funds Combining Statement of Revenues,Expenditures, and Changes in Fund Balances Year Ended December 31,2015 Police Donations Park and Forfeitures Improvement Arena Total Revenues Special assessments $ - $ 14,166 $ - $ 14,166 Charges for services - - 315,416 315,416 Investment earnings 119 2,684 555 3,358 Other Donations 50 - 5,000 5,050 Rentals - 6,300 - 6,300 Miscellaneous 2,294 23,587 1,701 27,582 Total revenues 2,463 46,737 322,672 371,872 Expenditures Current Public safety 7,299 - - 7,299 Parks and recreation - 10,031 319,553 329,584 Capital outlay Parks and recreation - 44,572 - 44,572 Total expenditures 7,299 54,603 319,553 381,455 Excess(deficiency)of revenues over expenditures (4,836) (7,866) 3,119 (9,583) Other financing sources(uses) Sale of capital assets 8,746 - - 8,746 Transfers in - 40,000 - 40,000 Transfers out - (10,000) - (10,000) Total other financing sources(uses) 8,746 30,000 - 38,746 Net change in fund balances 3,910 22,134 3,119 29,163 Fund balances Beginning of year 8,290 212,283 73,774 294,347 End of year $ 12,200 $ 234,417 $ 76,893 $ 323,510 -72- THIS PAGE INTENTIONALLY LEFT BLANK NONMAJOR CAPITAL PROJECTS FUNDS Nonmajor capital projects funds are maintained to account for financial resources that are restricted, committed, or assigned to expenditures for capital outlays. Projects are financed through the issuance of debt,special assessments,tax levies,dedicated fees,and intergovernmental aids or grants. Nonmajor capital projects funds presently established are as follows: Sanitary Sewer Trunk—Used to account for the operations and activities dedicated to the construction and improvement of sanitary sewer trunk facilities in the City. Cable Communications—Used to account for the operations and activities related to the provision of cable communications for public access. Fire—Used to account for the operations and activities related to fire capital projects and donations to the fire department. Private—Used to account for the operations and activities related to engineering and administrative fees related to new development in the City. Recreation—Used to account for the operations and activities related to capital improvements to the City-owned recreation facilities, such as, the senior center, ice arena and swimming pool, and donations to these activities. General Capital Equipment—This fund is used to account for the operations and activities related to the City's general capital equipment. -73- CITY OF FARMINGTON Nonmajor Capital Projects Funds Combining Balance Sheet as of December 31,2015 Sanitary Fire Sewer Cable Capital Trunk Communications Projects Assets Cash and investments $ 380,864 $ 587,792 $ 274,427 Receivables Accounts — 68,889 3,600 Interest 1,001 1,545 721 Special assessments Delinquent 20 — — Noncurrent 1,450 — — Total assets $ 383,335 $ 658,226 $ 278,748 Liabilities Accounts and contracts payable $ — $ 432 $ 31,827 Deposits payable — 10,544 2,426 Total liabilities — 10,976 34,253 Deferred inflows of resources Unavailable revenue—special assessments 1,470 — — Fund balances Restricted for PEG fees — 146,864 — Restricted for recreational capital projects — — — Committed for sanitary sewer trunk 381,865 — — Committed for cable communications — 500,386 — Committed for fire capital programs — — 244,495 Committed for improvement projects — — — Committed for capital equipment — — — Total fund balances 381,865 647,250 244,495 Total liabilities,deferred inflows of resources,and fund balances $ 383,335 $ 658,226 $ 278,748 -74- Private Recreation General Capital Capital Capital Projects Projects Equipment Total $ 319,687 $ 76,259 $ 94,018 $ 1,733,047 572 - - 73,061 939 200 247 4,653 150 - - 170 506 - - 1,956 $ 321,854 $ 76,459 $ 94,265 $ 1,812,887 $ - $ 4,081 $ - $ 36,340 290,223 - - 303,193 290,223 4,081 - 339,533 656 - - 2,126 - - - 146,864 - 33,579 - 33,579 - - - 381,865 - - - 500,386 - - - 244,495 30,975 38,799 - 69,774 - - 94,265 94,265 30,975 72,378 94,265 1,471,228 $ 321,854 $ 76,459 $ 94,265 $ 1,812,887 -75- CITY OF FARMINGTON Nonmajor Capital Projects Funds Combining Statement of Revenues,Expenditures, and Changes in Fund Balances Year Ended December 31,2015 Sanitary Fire Sewer Cable Capital Trunk Communications Projects Revenues Franchise taxes $ — $ 165,485 $ — Special assessments 9,115 — — Charges for services 28,620 — — Investment earnings 4,192 6,185 2,005 Other Donations — — 40,000 Miscellaneous — 804 — Total revenues 41,927 172,474 42,005 Expenditures Current General government — — — Public safety — — 47,667 Public works 14 — — Parks and recreation — — — Capital outlay General government — 57,609 — Public safety — — 79,576 Public works — — — Parks and recreation — — — Total expenditures 14 57,609 127,243 Excess(deficiency)of revenues over expenditures 41,913 114,865 (85,238) Other financing sources(uses) Sale of capital assets — — 133,790 Transfers in — — 55,000 Total other financing sources(uses) — — 188,790 Net change in fund balances 41,913 114,865 103,552 Fund balances Beginning of year 339,952 532,385 140,943 End of year $ 381,865 $ 647,250 $ 244,495 -76- Private Recreation General Capital Capital Capital Projects Projects Equipment Total $ - $ - $ - $ 165,485 473 - - 9,588 (31,146) - - (2,526) 4,049 726 714 17,871 - 25,442 - 65,442 - - - 804 (26,624) 26,168 714 256,664 1,105 - - 1,105 - - 225 47,892 - - - 14 - 20,826 - 20,826 - - - 57,609 - - 93,254 172,830 390 - - 390 - 789 - 789 1,495 21,615 93,479 301,455 (28,119) 4,553 (92,765) (44,791) - - 15,063 148,853 - 20,000 165,707 240,707 - 20,000 180,770 389,560 (28,119) 24,553 88,005 344,769 59,094 47,825 6,260 1,126,459 $ 30,975 $ 72,378 $ 94,265 $ 1,471,228 -77- THIS PAGE INTENTIONALLY LEFT BLANK MAJOR DEBT SERVICE FUND The Debt Service Fund is used to account for the accumulation of resources for the payment of principal and interest on long-term debt obligations other than those issued for and serviced by an enterprise fund. 1995 General Obligation Wastewater Treatment Bonds — The bonds were issued to help finance a wastewater treatment facility. 2005C General Obligation Capital Improvement Bonds — The bonds were issued to finance Fire Station 2. 2007A General Obligation Capital Improvement Bonds—The bonds were issued to finance City Hall and the City Garage. 2008A&B General Obligation Improvement Bonds — The 2008A bonds were issued for the Elm Street Project and the 2008B bonds were issued for the 195th Street Extension Project. 2010A General Obligation Improvement Refunding Bond — The bonds were issued for the refmancing of the Police Station. 2010B General Obligation Utility Revenue Refunding Bonds — The bonds were issued for the refinancing of the Maintenance Facility Bonds. 2010C General Obligation Street Construction Bonds—The bonds were issued for the Walnut Street Reconstruction Project. 2010D General Obligation Equipment Certificate Bonds—The equipment certificates were issued in conjunction with the Ice Arena Rehabilitation Project. 2011A General Obligation Improvement Refunding Bonds — The bonds were issued for the Main Street Project. 2013A General Obligation Improvement Refunding Bonds — The bonds were issued to refund the 2005B and 2006A bonds,which were originally issued for the Ash Street,Hill Dee,and Spruce Street Projects. 2013B General Obligation Street Reconstruction Bonds — The bonds were issued to fund the Akin Park Estates East and West Street Reconstruction Project. 2015A General Obligation Street Reconstruction Bonds —The bonds were issued to fund the 195th Avenue Street Reconstruction Project. -78- CITY OF FARMINGTON Debt Service Fund Combining Balance Sheet by Account as of December 31,2015 1995 G.O. 2005C G.O. 2007A G.O. 2010A G.O. 2010B G.O. Wastewater Capital Capital 2008A&B G.O. Improvement Utility Revenue Treatment Improvement Improvement Improvement Refunding Refunding Bonds Bonds Bonds Bonds Bonds Bonds Assets Cash and investments $ 59,288 $ 143,061 $ 536,096 $ 2,867,026 $ 23,543 $ 140,333 Receivables Interest 157 376 1,408 7,532 62 369 Special assessments Delinquent — — — 1,692 — — Noncurrent — — 4,140 1,937,236 — — Due from other governments — — — 347 — — Total assets $ 59,445 $ 143,437 $ 541,644 $ 4,813,833 $ 23,605 $ 140,702 Deferred inflows of resources Unavailable revenue—accounts receivable $ — $ — $ — $ — $ — $ — Unavailable revenue—special assessments — — 4,140 1,938,928 — — Total deferred inflows of resources — — 4,140 1,938,928 — — Fund balances Restricted for debt service 59,445 143,437 537,504 2,874,905 23,605 140,702 Total deferred inflows of resources and fund balances $ 59,445 $ 143,437 $ 541,644 $ 4,813,833 $ 23,605 $ 140,702 -79- 2010C G.O. 2010D G.O. 2011A G.O. 2013A G.O. 2013B G.O. 2015A G.O. Street Equipment Improvement Improvement Street Street Construction Certificate Refunding Refunding Construction Construction Bonds Bonds Bonds Bonds Bonds Bonds Total $ 167,404 $ 26,679 $ 361,610 $ 888,638 $ 185,783 $ 66,857 $ 5,466,318 125 70 950 2,335 489 175 14,048 2,694 - - 1,541 - - 5,927 211,590 - 147,696 505,065 - - 2,805,727 - - 1,612 18,274 - - 20,233 $ 381,813 $ 26,749 $ 511,868 $ 1,415,853 $ 186,272 $ 67,032 $ 8,312,253 $ - $ - $ - $ 18,274 $ - $ - $ 18,274 214,284 - 147,696 506,606 - - 2,811,654 214,284 - 147,696 524,880 - - 2,829,928 167,529 26,749 364,172 890,973 186,272 67,032 5,482,325 $ 381,813 $ 26,749 $ 511,868 $ 1,415,853 $ 186,272 $ 67,032 $ 8,312,253 -80- CITY OF FARMINGTON Debt Service Fund Combining Schedule of Revenues,Expenditures, and Changes in Fund Balances by Account Year Ended December 31,2015 1995 G.O. 2005C G.O. 2007A G.O. 2010A G.O. 2010B G.O. Wastewater Capital Capital 2008A&B G.O. Improvement Utility Revenue Treatment Improvement Improvement Improvement Refunding Refunding Bonds Bonds Bonds Bonds Bonds Bonds Revenues Property taxes $ 58,050 $ 167,000 $ 887,413 $ 75,000 $ 396,000 $ - Special assessments - - 4,720 341,199 - - Investment earnings(charges) 477 700 1,033 28,999 (2,119) 1,120 Total revenues 58,527 167,700 893,166 445,198 393,881 1,120 Expenditures Debt service Principal retirement 54,162 100,000 420,000 605,000 305,000 95,000 Interest and fiscal fees 4,505 64,529 312,237 239,289 89,701 24,816 Total expenditures 58,667 164,529 732,237 844,289 394,701 119,816 Excess(deficiency)of revenues over expenditures (140) 3,171 160,929 (399,091) (820) (118,696) Other financing sources(uses) Transfers in - - - 390,588 - 124,552 Transfers out - - - - - - Bonds issued - - - - - - Premiums on bonds issued - - - - - - Total other financing sources(uses) - - - 390,588 - 124,552 Net change in fund balances (140) 3,171 160,929 (8,503) (820) 5,856 Fund balances Beginning of year 59,585 140,266 376,575 2,883,408 24,425 134,846 End of year $ 59,445 $ 143,437 $ 537,504 $ 2,874,905 $ 23,605 $ 140,702 -81- 2010C G.O. 2010D G.O. 2011A G.O. 2013A G.O. 2013B G.O. 2015A G.O. Street Equipment Improvement Improvement Street Street Construction Certificate Refunding Refunding Construction Construction Bonds Bonds _ Bonds Bonds Bonds Bonds Total $ 150,000 $ 137,815 $ 312,000 $ 359,835 $ 190,000 $ 67,500 $ 2,800,613 45,883 - 34,518 114,889 - - 541,209 (715) (552) 1,969 6,049 937 328 38,226 195,168 137,263 348,487 480,773 190,937 67,828 3,380,048 135,000 125,000 295,000 665,000 100,000 - 2,899,162 67,075 19,979 31,866 102,487 21,810 57,143 1,035,437 202,075 144,979 326,866 767,487 121,810 57,143 3,934,599 (6,907) (7,716) 21,621 (286,714) 69,127 10,685 (554,551) 150,000 - - 281,000 - - 946,140 - - - - - (3,128,294) (3,128,294) - - - - 3,050,000 3,050,000 - - - - - 134,641 134,641 150,000 - - 281,000 - 56,347 1,002,487 143,093 (7,716) 21,621 (5,714) 69,127 67,032 447,936 24,436 34,465 342,551 896,687 117,145 - 5,034,389 $ 167,529 $ 26,749 $ 364,172 $ 890,973 $ 186,272 $ 67,032 $ 5,482,325 -82- THIS PAGE INTENTIONALLY LEFT BLANK BUDGETARY COMPARISON SCHEDULES Debt Service Fund State Aid Construction Capital Projects Fund Storm Water Trunk Capital Projects Fund Permanent Improvement Revolving Capital Projects Fund Maintenance Capital Projects Fund Nonmajor Special Revenue Funds Police Donations and Forfeitures Park Improvement Arena(Ice) Nonmajor Capital Projects Funds Sanitary Sewer Trunk Cable Communications Fire Private Recreation General Capital Equipment -83- CITY OF FARMINGTON Debt Service Fund Budgetary Comparison Schedule Year Ended December 31,2015 Original and Over(Under) Final Budget Actual Final Budget Revenues Property taxes $ 2,762,728 $ 2,800,613 $ 37,885 Special assessments 489,607 541,209 51,602 Investment earnings — 38,226 38,226 Total revenues 3,252,335 3,380,048 127,713 Expenditures Debt service Principal retirement 2,969,162 2,899,162 (70,000) Interest and fiscal fees 995,641 1,035,437 39,796 Total expenditures 3,964,803 3,934,599 (30,204) Excess(deficiency)of revenues over expenditures (712,468) (554,551) 157,917 Other financing sources(uses) Transfers in 826,140 946,140 120,000 Transfers out (4,260,000) (3,128,294) 1,131,706 Bonds issued 4,290,000 3,050,000 (1,240,000) Premiums on bonds issued — 134,641 134,641 Total other financing sources(uses) 856,140 1,002,487 146,347 Net change in fund balances $ 143,672 447,936 $ 304,264 Fund balances Beginning of year 5,034,389 End of year $ 5,482,325 -84- CITY OF FARMINGTON State Aid Construction Capital Projects Fund Budgetary Comparison Schedule Year Ended December 31,2015 Original and Over(Under) Final Budget Actual Final Budget Revenues Property taxes $ 177,000 $ 177,000 $ — Special assessments 25,565 27,136 1,571 Investment earnings 27,570 21,206 (6,364) Total revenues 230,135 225,342 (4,793) Expenditures Capital outlay Public works — 220 220 Excess(deficiency)of revenues over expenditures 230,135 225,122 (5,013) Other financing sources(uses) Transfers out (311,000) (431,000) (120,000) Net change in fund balances $ (80,865) (205,878) $ (125,013) Fund balances Beginning of year 1,936,898 End of year $ 1,731,020 -85- CITY OF FARMINGTON Storm Water Trunk Capital Projects Fund Budgetary Comparison Schedule Year Ended December 31,2015 Original and Over(Under) Final Budget Actual Final Budget Revenues Special assessments $ — $ 49,665 $ 49,665 Investment earnings 28,770 43,408 14,638 Other 7,500 — (7,500) Total revenues 36,270 93,073 56,803 Expenditures Capital outlay Public works 350,000 3,748 (346,252) Excess(deficiency)of revenues over expenditures (313,730) 89,325 403,055 Other financing sources(uses) Transfers out (207,633) (260,851) (53,218) Net change in fund balances $ (521,363) (171,526) $ 349,837 Fund balances Beginning of year 3,860,802 End of year $ 3,689,276 -86- CITY OF FARMINGTON Permanent Improvement Revolving Capital Projects Fund Budgetary Comparison Schedule Year Ended December 31,2015 Original and Over(Under) Final Budget Actual Final Budget Revenues Special assessments $ 16,478 $ 19,423 $ 2,945 Investment earnings 560 1,420 860 Total revenues 17,038 20,843 3,805 Expenditures Capital outlay Public works — 365 365 Net change in fund balances $ 17,038 20,478 $ 3,440 Fund balances Beginning of year 115,082 End of year $ 135,560 -87- CITY OF FARMINGTON Maintenance Capital Projects Fund Budgetary Comparison Schedule Year Ended December 31,2015 Original and Over(Under) Final Budget Actual Final Budget Revenues Intergovernmental $ — $ 1,192,379 $ 1,192,379 Investment earnings 4,180 14,357 10,177 Total revenues 4,180 1,206,736 1,202,556 Expenditures Capital outlay Public works 5,020,000 4,388,173 (631,827) Parks and recreation — 14,735 14,735 Total expenditures 5,020,000 4,402,908 (617,092) Excess(deficiency)of revenues over expenditures (5,015,820) (3,196,172) 1,819,648 Other financing sources(uses) Transfers in 4,655,000 3,576,512 (1,078,488) Transfers out — (248,030) (248,030) Total other fmancing sources(uses) 4,655,000 3,328,482 (1,326,518) Net change in fund balances $ (360,820) 132,310 $ 493,130 Fund balances Beginning of year 836,420 End of year $ 968,730 -88- CITY OF FARMINGTON Police Donations and Forfeitures Special Revenue Fund Budgetary Comparison Schedule Year Ended December 31,2015 Original and Over(Under) Final Budget Actual Final Budget Revenues Investment earnings $ 60 $ 119 $ 59 Other Donations — 50 50 Miscellaneous — 2,294 2,294 Total revenues 60 2,463 2,403 Expenditures Current Public safety 6,500 7,299 799 Excess(deficiency)of revenues over expenditures (6,440) (4,836) 1,604 Other financing sources(uses) Sale of capital assets 5,000 8,746 3,746 Net change in fund balances $ (1,440) 3,910 $ 5,350 Fund balances Beginning of year 8,290 End of year $ 12,200 -89- CITY OF FARMINGTON Park Improvement Special Revenue Fund Budgetary Comparison Schedule Year Ended December 31,2015 Original and Over(Under) Final Budget Actual Final Budget Revenues Special assessments $ 13,123 $ 14,166 $ 1,043 Investment earnings 1,770 2,684 914 Other Rentals 6,300 6,300 — Miscellaneous — 23,587 23,587 Total revenues 21,193 46,737 25,544 Expenditures Current Parks and recreation — 10,031 10,031 Capital outlay Parks and recreation 70,000 44,572 (25,428) Total expenditures 70,000 54,603 (15,397) Excess(deficiency)of revenues over expenditures (48,807) (7,866) 40,941 Other financing sources(uses) Transfers in 40,000 40,000 — Transfers out — (10,000) (10,000) Total other financing sources(uses) 40,000 30,000 (10,000) Net change in fund balances $ (8,807) 22,134 $ 30,941 Fund balances Beginning of year 212,283 End of year $ 234,417 -90- CITY OF FARMINGTON Arena Special Revenue Fund Budgetary Comparison Schedule Year Ended December 31,2015 Original and Over(Under) Final Budget Actual Final Budget Revenues Charges for services $ 300,600 $ 315,416 $ 14,816 Investment earnings 260 555 295 Other Donations 5,000 5,000 — Miscellaneous 1,000 1,701 701 Total revenues 306,860 322,672 15,812 Expenditures Current Parks and recreation 316,204 319,553 3,349 Net change in fund balances $ (9,344) 3,119 $ 12,463 Fund balances Beginning of year 73,774 End of year $ 76,893 -91- CITY OF FARMINGTON Sanitary Sewer Trunk Capital Projects Fund Budgetary Comparison Schedule Year Ended December 31,2015 Original and Over(Under) Final Budget Actual Final Budget Revenues Special assessments $ 7,500 $ 9,115 $ 1,615 Charges for services 25,000 28,620 3,620 Investment earnings 2,290 4,192 1,902 Total revenues 34,790 41,927 7,137 Expenditures Current Public works — 14 14 Net change in fund balances $ 34,790 41,913 $ 7,123 Fund balances Beginning of year 339,952 End of year $ 381,865 -92- CITY OF FARMINGTON Cable Communications Capital Projects Fund Budgetary Comparison Schedule Year Ended December 31,2015 Original and Over(Under) Final Budget Actual Final Budget Revenues Franchise taxes $ 170,000 $ 165,485 $ (4,515) Investment earnings 3,210 6,185 2,975 Other Miscellaneous — 804 804 Total revenues 173,210 172,474 (736) Expenditures Capital outlay General government 71,000 57,609 (13,391) Net change in fund balances $ 102,210 114,865 $ 12,655 Fund balances Beginning of year 532,385 End of year $ 647,250 -93- CITY OF FARMINGTON Fire Capital Projects Fund Budgetary Comparison Schedule Year Ended December 31,2015 Original and Over(Under) Final Budget Actual Final Budget Revenues Investment earnings $ 90 $ 2,005 $ 1,915 Other Donations 15,000 40,000 25,000 Total revenues 15,090 42,005 26,915 Expenditures Current Public safety 2,500 47,667 45,167 Capital outlay Public safety 60,000 79,576 19,576 Total expenditures 62,500 127,243 64,743 Excess(deficiency)of revenues over expenditures (47,410) (85,238) (37,828) Other financing sources(uses) Sale of capital assets — 133,790 133,790 Transfers in 55,000 55,000 — Total other financing sources(uses) 55,000 188,790 133,790 Net change in fund balances $ 7,590 103,552 $ 95,962 Fund balances Beginning of year 140,943 End of year $ 244,495 -94- CITY OF FARMINGTON Private Capital Projects Fund Budgetary Comparison Schedule Year Ended December 31,2015 Original and Over(Under) Final Budget Actual Final Budget Revenues Special assessments $ — $ 473 $ 473 Charges for services 20,000 (31,146) (51,146) Investment earnings 1,990 4,049 2,059 Total revenues 21,990 (26,624) (48,614) Expenditures Current General government — 1,105 1,105 Capital outlay Public works 20,000 390 (19,610) Total expenditures 20,000 1,495 (18,505) Net change in fund balances $ 1,990 (28,119) $ (30,109) Fund balances Beginning of year 59,094 End of year $ 30,975 -95- CITY OF FARMINGTON Recreation Capital Projects Fund Budgetary Comparison Schedule Year Ended December 31,2015 Original and Over(Under) Final Budget Actual Final Budget Revenues Investment earnings $ 140 $ 726 $ 586 Other Donations 5,000 25,442 20,442 Total revenues 5,140 26,168 21,028 Expenditures Current Parks and recreation 7,500 20,826 13,326 Capital outlay Parks and recreation — 789 789 Total expenditures 7,500 21,615 14,115 Excess(deficiency)of revenues over expenditures (2,360) 4,553 6,913 Other financing sources(uses) Transfers in 20,000 20,000 — Net change in fund balances $ 17,640 24,553 $ 6,913 Fund balances Beginning of year 47,825 End of year $ 72,378 -96- CITY OF FARMINGTON General Capital Equipment Capital Projects Fund Budgetary Comparison Schedule Year Ended December 31,2015 Original and Over(Under) Final Budget Actual Final Budget Revenues Investment earnings $ — $ 714 $ 714 Expenditures Current Public safety — 225 225 Capital outlay Public safety 165,707 93,254 (72,453) Total expenditures 165,707 93,479 (72,228) Excess(deficiency)of revenues over expenditures (165,707) (92,765) 72,942 Other fmancing sources(uses) Sales of capital assets — 15,063 15,063 Transfers in 165,707 165,707 — Total other financing sources(uses) 165,707 180,770 15,063 Net change in fund balances $ — 88,005 $ 88,005 Fund balances Beginning of year 6,260 End of year $ 94,265 -97- THIS PAGE INTENTIONALLY LEFT BLANK INTERNAL SERVICE FUNDS Employee Expense—Used to account for the costs of employer-paid benefits, including pension, social security,health,life and dental insurance,and worker's compensation insurance. Property and Liability Insurance—Used to account for the costs of property and liability insurance for the City. Fleet—Used to account for the costs of vehicle maintenance services provided to divisions by staff at the city garage facility. Information Technology — Used to account for the costs of computer hardware, software, and Internet services provided to all city departments. -98- CITY OF FARMINGTON Internal Service Funds Combining Statement of Net Position as of December 31,2015 Property and Employee Liability Information Expense Insurance Fleet Technology Total Assets Current assets Cash and investments $ 849,400 $ 294,350 $ 131,874 $ 247,027 $ 1,522,651 Interest receivable 2,231 773 346 649 3,999 Prepaid items 73,752 - - 15,349 89,101 Total current assets 925,383 295,123 132,220 263,025 1,615,751 Noncurrent assets Capital assets Machinery and equipment - - 79,453 - 79,453 Less accumulated depreciation - - (79,453) - (79,453) Total capital assets - - - - - Total assets $ 925,383 $ 295,123 $ 132,220 $ 263,025 $ 1,615,751 Current liabilities Accounts and contracts payable $ - $ - $ 8,251 $ 15,199 $ 23,450 Accrued salaries and employee benefits payable 303,466 - - - 303,466 Deposits payable 1,082 - - - 1,082 Compensated absences payable - - 17,520 (284) 17,236 Total current liabilities 304,548 - 25,771 14,915 345,234 Net position Unrestricted 620,835 295,123 106,449 248,110 1,270,517 Total liabilities and net position $ 925,383 $ 295,123 $ 132,220 $ 263,025 $ 1,615,751 -99- CITY OF FARNIINGTON Internal Service Funds Combining Statement of Revenues,Expenses, and Changes in Fund Net Position Year Ended December 31,2015 Property and Employee Liability Information Expense Insurance Fleet Technology Total Operating revenues Charges for services $ 1,962,609 $ - $ 251,351 $ 369,146 $ 2,583,106 Insurance reimbursement - 330,355 - - 330,355 Miscellaneous - - 372 - 372 Total operating revenues 1,962,609 330,355 251,723 369,146 2,913,833 Operating expenses Personal services 2,027,029 - 171,371 85,015 2,283,415 Professional services 4,266 14 25,609 189,421 219,310 Materials and supplies - - 53,213 111,053 164,266 Insurance - 283,525 - - 283,525 Total operating expenses 2,031,295 283,539 250,193 385,489 2,950,516 Operating income(loss) (68,686) 46,816 1,530 (16,343) (36,683) Nonoperating revenue Intergovernmental 10,789 - - - 10,789 Investment earnings 9,779 2,832 1,460 2,651 16,722 Total nonoperating revenue 20,568 2,832 1,460 2,651 27,511 Income(loss)before transfers (48,118) 49,648 2,990 (13,692) (9,172) Transfers in - 14,150 - 70,300 84,450 Transfers out - - - (5,000) (5,000) Change in net position (48,118) 63,798 2,990 51,608 70,278 Net position Beginning of year 668,953 231,325 103,459 196,502 1,200,239 End of year $ 620,835 $ 295,123 $ 106,449 $ 248,110 $ 1,270,517 -100- CITY OF FARMINGTON Internal Service Funds Combining Statement of Cash Flows Year Ended December 31,2015 Property and Employee Liability Information Expense Insurance Fleet - Technology Total Cash flows from operating activities Cash receipts from other funds and reimbursements $ 1,962,609 $ 337,913 $ 251,723 $ 369,146 $ 2,921,391 Cash payments to employees for services (1,939,218) - (168,569) (85,734) (2,193,521) Cash payments for interfund services used - (287,603) (82,442) (304,272) (674,317) Net cash flows from operating activities 23,391 50,310 712 (20,860) 53,553 Cash flows from noncapital related financing activities Intergovernmental 10,789 - - - 10,789 Transfers in - 14,150 - 70,300 84,450 Transfers out - - - (5,000) (5,000) Net cash flows from noncapital related financing activities 10,789 14,150 - 65,300 90,239 Cash flows from investing activities Interest received on investments 7,548 2,059 1,114 2,002 12,723 Net increase(decrease)in cash and cash equivalents 41,728 66,519 1,826 46,442 156,515 Cash and cash equivalents Beginning of year 807,672 227,831 130,048 200,585 1,366,136 End of year $ 849,400 $ 294,350 $ 131,874 $ 247,027 $ 1,522,651 Reconciliation of operating income(loss)to net cash flows from operating activities Operating income(loss) $ (68,686) $ 46,816 $ 1,530 $ (16,343) $ (36,683) Adjustments to reconcile operating income(loss)to net cash flows from operating activities Change in assets and liabilities Accounts receivable - 7,558 - - 7,558 Prepaid items (12,762) - - (12,229) (24,991) Accounts and contracts payable (5,262) (4,064) (3,620) 8,431 (4,515) Accrued salaries and employee benefits 109,326 - (372) - 108,954 Deposits payable 775 - - - 775 Compensated absences payable - - 3,174 (719) 2,455 Total adjustments 92,077 3,494 (818) (4,517) 90,236 Net cash flows from operating activities $ 23,391 $ 50,310 $ 712 $ (20,860) $ 53,553 -101- FIDUCIARY FUND Agency Fund — Used to account for receipt and remittance of monies held by the City as an agent primarily for land developers and builders that will be refunded to the respective depositors when the conditions are satisfied in accordance with the respective agreements. -102- CITY OF FARMINGTON Agency Fund Statement of Changes in Assets and Liabilities for the Year Ended December 31,2015 Balance Balance January 1, December 31, 2015 Additions Deductions 2015 Assets Cash and investments $ 349,120 $ 527,018 $ 559,018 $ 317,120 Liabilities Deposits payable $ 349,120 $ 527,018 $ 559,018 $ 317,120 -103- DISCRETELY PRESENTED COMPONENT UNIT—EDA The following statements present the fund based financial information for the Farmington Economic Development Authority (EDA). The EDA utilizes one General Fund and two special revenue funds to administer the resources for the economic development authority within the City. -104- CITY OF FARMINGTON Economic Development Authority (Discretely Presented Component Unit) Combining Balance Sheet as of December 31,2015 Economic Special Revenue Development City Center Authority Tax General Increment Total Assets Cash and investments $ 317,024 $ 58,940 $ 375,964 Receivables Interest 833 155 988 Due from other governments 6,750 — 6,750 Prepaid items 890 — 890 Total assets $ 325,497 $ 59,095 $ 384,592 Liabilities Accounts and contracts payable $ 1,118 $ 608 $ 1,726 Fund balances Nonspendable 890 — 890 Restricted for tax increment — 58,487 58,487 Assigned for economic development 323,489 — 323,489 Total fund balances 324,379 58,487 382,866 Total liabilities and fund balances $ 325,497 $ 59,095 $ 384,592 -105- CITY OF FARMINGTON Economic Development Authority (Discretely Presented Component Unit) Combining Statement of Revenues,Expenditures,and Changes in Fund Balances Year Ended December 31,2015 Economic Special Revenue Development City Center Authority Tax General Increment Total Revenues Taxes $ 1,494 $ 110,804 $ 112,298 Intergovernmental 137,837 — 137,837 Investment earnings 3,365 1,921 5,286 Total revenues 142,696 112,725 255,421 Expenditures Current Economic development 69,683 349,505 419,188 Net change in fund balances 73,013 (236,780) (163,767) Fund balances Beginning of year 251,366 295,267 546,633 End of year $ 324,379 $ 58,487 $ 382,866 -106- THIS PAGE INTENTIONALLY LEFT BLANK STATISTICAL SECTION (UNAUDITED) STATISTICAL SECTION (UNAUDITED) This part of the City's comprehensive annual financial report (CAFR) presents detailed information as a context for understanding this year's financial statements, note disclosures, and supplementary information.This information has not been audited by the independent auditor. The contents of the statistical section include: Financial Trends—These tables contain trend information that may assist the reader in assessing the City's current financial performance by placing it in historical perspective. Revenue Capacity—These schedules contain information to assist the reader in assessing the City's most significant local revenue source—property taxes. Debt Capacity — These tables present information that may assist the reader in analyzing the affordability of the City's current levels of outstanding debt and the City's ability to issue additional debt in the future. Demographic and Economic Information — These tables offer economic and demographic indicators that are commonly used for fmancial analysis and that can assist the reader in understanding the City's present and ongoing financial status. Operating Information—These tables contain service and infrastructure indicators that can assist the reader in understanding how the information in the City's financial report relates to the services the City provides and the activities it performs. Source — Unless otherwise noted, the information in these tables is derived from the CAFR for the relevant year. THIS PAGE INTENTIONALLY LEFT BLANK STATISTICAL SECTION (UNAUDITED) This part of the City of Farmington,Minnesota's(the City)comprehensive annual financial report(CAFR)presents detailed information as a context for understanding what the information in the financial statements,note disclosures, and required supplementary information says about the City's overall financial health. Page Contents: Financial Trends These schedules contain trend information to help the reader understand how the City's financial performance and well-being have changed over time. 107 Revenue Capacity These schedules contain information to help the reader assess the City's most significant local revenue source,property taxes. 117 Debt Capacity These schedules present information to help the reader assess the affordability of the City's current levels of outstanding debt and the City's ability to issue additional debt in the future. 122 Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader understand the environment within which the City's financial activities take place. 130 Operating Indicators These schedules contain service and infrastructure data to help the reader understand how the information in the City's financial report relates to the services the City provides,and the activities it performs. 132 Sources: Unless otherwise noted,the information in these schedules is derived from the CAFR for the relevant year. CITY OF FARMINGTON Net Position by Component Last Ten Fiscal Years (accrual basis of accounting) Fiscal Year 2006 2007 2008 2009 Governmental activities Net investment in capital assets $ 24,059,576 $ 34,026,294 $ 27,179,331 $ 33,485,859 Restricted 491,830 5,621,371 5,239,803 4,036,063 Unrestricted 14,738,527 8,664,996 14,298,196 9,568,551 Total governmental activities net position $ 39,289,933 $ 48,312,661 $ 46,717,330 $ 47,090,473 Business-type activities Net investment in capital assets $ 58,772,575 $ 58,050,157 $ 61,492,839 $ 59,999,027 Restricted 2,049,445 2,035,244 2,094,245 2,094,245 Unrestricted 8,655,523 7,438,368 7,357,600 5,622,790 Total business-type activities net position $ 69,477,543 $ 67,523,769 $ 70,944,684 $ 67,716,062 Primary government Net investment in capital assets $ 82,832,151 $ 92,076,451 $ 88,672,170 $ 93,484,886 Restricted 2,541,275 7,656,615 7,334,048 6,130,308 Unrestricted 23,394,050 16,103,364 21,655,796 15,191,341 Total primary government net position $ 108,767,476 $ 115,836,430 $ 117,662,014 $ 114,806,535 Note: The City implemented GASB Statement No. 68 in fiscal 2015, recording a change in accounting principle that decreased unrestricted net position.Prior year balances were not restated. -107- 2010 2011 2012 2013 2014 2015 $ 22,287,712 $ 20,484,140 $ 21,263,670 $ 23,462,934 $ 23,383,175 $ 21,417,203 3,757,948 1,661,973 11,034,909 11,669,054 9,235,448 9,063,587 11,197,982 14,963,297 11,131,928 9,628,139 13,150,789 8,920,144 $ 37,243,642 $ 37,109,410 $ 43,430,507 $ 44,760,127 $ 45,769,412 $ 39,400,934 $ 60,219,892 $ 60,462,689 $ 58,728,008 $ 57,427,060 $ 55,685,476 $ 54,807,938 2,108,045 2,140,345 2,159,566 2,159,566 2,160,566 2,160,566 6,067,114 6,819,607 7,845,545 8,891,769 10,396,218 11,439,369 $ 68,395,051 $ 69,422,641 $ 68,733,119 $ 68,478,395 $ 68,242,260 $ 68,407,873 $ 82,507,604 $ 80,946,829 $ 79,991,678 $ 80,889,994 $ 79,068,651 $ 76,225,141 5,865,993 3,802,318 13,194,475 13,828,620 11,396,014 11,224,153 17,265,096 21,782,904 18,977,473 18,519,908 23,547,007 20,359,513 $ 105,638,693 $ 106,532,051 $ 112,163,626 $ 113,238,522 $ 114,011,672 $ 107,808,807 -108- CITY OF FARMINGTON Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) Fiscal Year 2006 2007 2008 2009 Expenses Governmental activities General government $ 2,247,160 $ 2,137,956 $ 2,476,747 $ 2,603,290 Public safety 1,894,841 4,267,469 4,415,667 4,568,041 Public works 6,076,693 4,410,908 8,676,538 5,891,010 Park and recreation 2,013,105 2,018,845 2,188,941 1,814,966 Economic development — — — 149,749 Intergovernmental donations — — — — Interest and fiscal charges 1,026,436 1,281,558 1,615,144 1,625,021 Total governmental activities expenses $ 13,258,235 $ 14,116,736 $ 19,373,037 $ 16,652,077 Business-type activities Liquor operations $ 4,039,247 $ 4,167,586 $ 4,385,187 $ 4,335,267 Sewer operations 1,722,708 1,938,784 1,786,170 1,887,357 Solid waste 1,683,859 1,803,932 1,830,082 1,799,151 Storm water 631,755 1,083,760 807,791 714,058 Water 1,564,104 1,606,115 2,588,880 1,859,342 Street light — — — — Total business-type activities 9,641,673 10,600,177 11,398,110 10,595,175 Total primary government expenses $22,899,908 $24,716,913 $ 30,771,147 $27,247,252 Program revenues Governmental activities Charges for services General government $ 1,012,197 $ 1,556,119 $ 641,069 $ 504,802 Public safety 369,808 451,233 481,589 430,107 Public works 2,147,413 1,436,915 300,437 1,031,006 Park and recreation 585,691 614,693 689,487 508,655 Economic development — — — 25,789 Operating grants and contributions 2,837,112 7,418,326 10,695,352 1,214,756 Capital grants and contributions 2,514,025 862,732 944,140 1,140,980 Total governmental activities program revenues $ 9,466,246 $ 12,340,018 $ 13,752,074 $ 4,856,095 -109- 2010 2011 2012 2013 2014 2015 $ 2,410,637 $ 1,897,429 $ 1,865,415 $ 1,778,549 $ 1,940,630 $ 2,284,974 4,844,128 5,162,361 4,989,522 5,156,950 5,192,091 5,357,738 3,261,582 2,800,221 3,063,908 3,849,742 4,893,341 7,473,095 1,864,728 1,666,466 1,719,254 1,775,967 1,730,734 1,815,882 83,572 114,639 44,114 50,000 49,417 90,000 8,526,239 313,198 - - - - 1,718,077 1,431,468 1,302,605 1,290,439 1,020,096 992,422 $22,708,963 $ 13,385,782 $ 12,984,818 $ 13,901,647 $ 14,826,309 $ 18,014,111 $ 4,267,536 $ 4,091,541 $ 4,116,030 $ 4,206,058 $ 4,315,834 $ 4,352,597 1,811,992 1,879,752 1,891,872 1,627,927 1,712,146 1,875,225 1,773,240 1,789,114 1,727,384 1,658,547 1,600,434 1,658,128 702,089 745,967 734,516 513,582 615,684 731,444 1,732,559 1,772,096 1,705,167 1,427,298 1,410,214 1,339,588 175,050 180,200 176,513 184,834 174,957 173,212 10,462,466 10,458,670 10,351,482 9,618,246 9,829,269 10,130,194 $ 33,171,429 $ 23,844,452 $ 23,336,300 $23,519,893 $24,655,578 $ 28,144,305 $ 503,258 $ 470,572 $ 436,113 $ 684,528 $ 534,008 $ 399,053 427,593 461,659 423,721 482,759 409,460 351,038 355,506 306,860 225,497 115,092 94,416 9,624 537,773 520,522 581,341 596,165 607,566 604,111 13,374 6,333 - - - - 551,257 507,180 533,939 713,378 677,999 649,541 2,449,930 2,388,656 4,976,219 645,233 477,833 671,671 $ 4,838,691 $ 4,661,782 $ 7,176,830 $ 3,237,155 $ 2,801,282 $ 2,685,038 (continued) -110- CITY OF FARMINGTON Changes in Net Position(continued) Last Ten Fiscal Years (accrual basis of accounting) Fiscal Year 2006 2007 2008 2009 Program revenues(continued) Business-type activities Charges for services Liquor operations $ 3,992,181 $ 4,267,756 $ 4,436,714 $ 4,335,565 Sewer operations 1,323,564 1,680,885 1,553,707 1,376,043 Solid waste 1,661,226 1,665,752 1,775,170 1,767,750 Storm water 433,035 349,445 445,815 460,346 Water 1,427,926 1,312,212 1,490,169 1,509,100 Street light — — — — Operating grants and contributions 368,006 119,604 103,010 104,206 Capital grants and contributions 3,973,033 — 41,047 53,354 Total business-type activities program revenues 13,178,971 9,395,654 9,845,632 9,606,364 Total primary government program revenues $ 22,645,217 $21,735,672 $ 23,597,706 $ 14,462,459 Net(expense)revenue Governmental activities $ (3,791,989) $ (1,776,718) $ (5,620,963) $(11,795,982) Business-type activities 3,537,298 (1,204,523) (1,552,478) (988,811) Total primary government net expense $ (254,691) $ (2,981,241) $ (7,173,441) $(12,784,793) General revenues and other changes in net position Governmental activities Property taxes $ 8,093,748 $ 8,040,734 $ 8,743,569 $ 8,963,578 Tax increments — — — 185,726 Franchise taxes — — — 219,722 Unrestricted grants and contributions — 337,753 173,383 47,830 Unrestricted investment earnings(charges) 433,129 750,689 513,072 311,546 Gain on sale of assets — — — 4,626 Transfers 537,894 1,120,865 (4,713,510) 2,436,097 Total governmental activities $ 9,064,771 $ 10,250,041 $ 4,716,514 $ 12,169,125 Business-type activities Unrestricted investment earnings(charges) $ 274,685 $ 371,614 $ 204,480 $ 196,286 Gain on disposal of assets — — 55,403 — Transfers (537,894) (1,120,865) 4,713,510 (2,436,097) Total business-type activities (263,209) (749,251) 4,973,393 (2,239,811) Total primary government $ 8,801,562 $ 9,500,790 $ 9,689,907 $ 9,929,314 Change in net position Governmental activities $ 5,272,782 $ 8,473,323 $ (904,449) $ 373,143 Business-type activities 3,274,089 (1,953,774) 3,420,915 (3,228,622) Total primary government $ 8,546,871 $ 6,519,549 $ 2,516,466 $ (2,855,479) -111- 2010 2011 2012 2013 2014 2015 $ 4,285,471 $ 4,199,344 $ 4,397,572 $ 4,521,454 $ 4,639,194 $ 4,607,417 1,581,526 1,600,303 1,787,957 1,816,763 1,843,746 1,957,902 1,850,073 1,872,771 1,869,426 1,952,177 1,979,623 1,991,179 464,043 467,729 475,060 565,166 559,327 670,353 1,439,906 1,417,708 1,595,116 1,558,400 1,499,091 1,439,873 140,773 178,464 215,029 216,719 219,052 222,159 72,631 29,000 20,010 19,300 21,000 22,000 100,162 49,473 100,525 108,642 - 945,938 9,934,585 9,814,792 10,460,695 10,758,621 10,761,033 11,856,821 $ 14,773,276 $ 14,476,574 $ 17,637,525 $ 13,995,776 $ 13,562,315 $ 14,541,859 $(17,870,272) $ (8,724,000) $ (5,807,988) $(10,664,492) $(12,025,027) $(15,329,073) (527,881) (643,878) 109,213 1,140,375 931,764 1,726,627 $(18,398,153) $ (9,367,878) $ (5,698,775) $ (9,524,117) $(11,093,263) $(13,602,446) $ 9,189,015 $ 9,607,893 $ 10,742,860 $ 10,748,581 $ 10,962,860 $ 11,460,209 155,094 150,339 154,214 - - - 228,932 237,449 243,635 259,671 269,208 265,485 927 1,500 1,816 24,845 257,386 278,974 181,943 119,632 77,276 (32,408) 130,739 189,540 25,412 75,306 - 18,268 - - (1,107,882) (1,602,351) 909,284 1,410,114 1,414,119 1,222,807 $ 8,673,441 $ 8,589,768 $ 12,129,085 $ 12,429,071 $ 13,034,312 $ 13,417,015 $ 98,988 $ 69,117 $ 110,549 $ (40,071) $ 246,220 $ 152,954 - - - 55,086 - - 1,107,882 1,602,351 (909,284) (1,410,114) (1,414,119) (1,222,807) 1,206,870 1,671,468 (798,735) (1,395,099) (1,167,899) (1,069,853) $ 9,880,311 $ 10,261,236 $ 11,330,350 $ 11,033,972 $ 11,866,413 $ 12,347,162 $ (9,196,831) $ (134,232) $ 6,321,097 $ 1,764,579 $ 1,009,285 $ (1,912,058) 678,989 1,027,590 (689,522) (254,724) (236,135) 656,774 $ (8,517,842) $ 893,358 $ 5,631,575 $ 1,509,855 $ 773,150 $ (1,255,284) -112- CITY OF FARMINGTON Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) Fiscal Year 2006 2007 2008 2009 General Fund Reserved $ — $ — $ 29,198 $ 31,996 Unreserved 1,518,153 2,139,686 2,008,315 2,125,884 Nonspendable — — — — Restricted — — — — Committed — — — — Assigned — — — — Unassigned — — — — Total General Fund $ 1,518,153 $ 2,139,686 $ 2,037,513 $ 2,157,880 All other governmental funds Reserved $ 2,320,397 $ 2,303,108 $ 1,962,741 $ 435,000 Unreserved,designated,reported in Capital projects funds 4,825,951 11,164,672 9,185,158 — Unreserved,undesignated,reported in Special revenue funds 670,597 823,821 343,559 52,771 Capital projects funds (1,474,992) (2,312,185) (518,992) 3,415,978 Debt service funds — (12,236) (148,755) 1,155,954 Nonspendable — — — — Restricted — — — — Committed — — — — Assigned — — — — Unassigned — — — — Total all other governmental funds $ 6,341,953 $ 11,967,180 $ 10,823,711 $ 5,059,703 Total all funds $ 7,860,106 $ 14,106,866 $ 12,861,224 $ 7,217,583 Note 1: The City implemented GASB Statement No.54 in fiscal 2011.Prior year information has not been restated. Note 2: The City modified its fund balance policy in 2015,resulting in an increase in committed fund balances. -113- 2010 2011 2012 2013 2014 2015 $ 30,314 $ - $ - $ - $ - $ - 2,188,528 - - - - - - 43,102 612,518 13,388 33,369 6,034 - - - - 81,000 4,250 - 2,093,006 2,067,246 3,079,013 3,993,191 4,734,534 $ 2,218,842 $ 2,136,108 $ 2,679,764 $ 3,092,401 $ 4,107,560 $ 4,744,818 $ 381,500 $ - $ - $ - $ - $ - (159,042) - - - - - 6,244,182 - - - - - 738,371 - - - - - - 307,074 146 - 160 150 - 2,312,309 2,950,166 6,881,858 5,673,161 5,776,314 - - - - - 8,025,185 - 6,726,928 9,134,820 7,865,678 7,531,076 - - (576,114) - - - - $ 7,205,011 $ 8,770,197 $ 12,085,132 $ 14,747,536 $ 13,204,397 $ 13,801,649 $ 9,423,853 $ 10,906,305 $ 14,764,896 $ 17,839,937 $ 17,311,957 $ 18,546,467 -114- CITY OF FARMINGTON Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) Fiscal Year 2006 2007 2008 2009 Revenues General property taxes $ 8,039,988 $ 7,974,235 $ 8,565,878 $ 8,944,965 Franchise fees 191,051 196,454 215,689 219,722 Special assessments 1,053,646 1,157,022 893,897 778,101 Licenses and permits 784,250 1,217,163 360,068 376,183 Intergovernmental 2,837,150 7,756,079 10,868,735 1,915,315 Charges for services 1,476,806 1,545,478 723,875 1,585,069 Fines and forfeits 86,635 75,411 75,522 67,155 Investment earnings 433,129 750,689 513,072 311,546 Other 522,682 892,832 717,206 503,493 Total revenues 15,425,337 21,565,363 22,933,942 14,701,549 Expenditures Current General government 1,812,423 1,822,699 1,925,414 2,061,106 Public safety 3,187,253 3,802,591 4,050,691 4,234,175 Public works 1,391,838 1,507,555 1,581,410 3,407,642 Park and recreation 2,052,856 2,058,213 1,812,370 1,525,303 Economic development 514,870 336,351 114,997 102,769 Capital outlay 11,384,435 13,715,576 21,511,910 7,287,689 Debt service Principal 1,975,875 2,202,183 1,854,314 2,796,155 Interest and fiscal charges 925,435 1,045,361 1,424,339 1,681,127 Total expenditures 23,244,985 26,490,529 34,275,445 23,095,966 Excess(deficiency)of revenues over expenditures (7,819,648) (4,925,166) (11,341,503) (8,394,417) Other financing sources(uses) Bonds issued 5,438,471 9,919,439 9,818,996 — Payment of refunded debt — — — — Sale of capital assets — 131,622 20,222 4,626 Transfers in 3,284,777 2,588,096 1,156,057 5,830,778 Transfers out (2,746,883) (1,467,231) (899,414) (3,084,628) Total other financing sources(uses) 5,976,365 11,171,926 10,095,861 2,750,776 Net change in fund balances $ (1,843,283) $ 6,246,760 $ (1,245,642) $ (5,643,641) Debt service as a percentage of noncapital expenditures 24.5% 25.4% 25.7% 28.3% 1 -115- 2010 2011 2012 2013 2014 2015 $ 9,392,326 $ 9,690,053 $ 11,112,325 $ 10,808,636 $ 11,031,219 $ 11,462,986 228,932 237,449 243,635 259,671 269,208 265,485 1,450,515 720,862 3,296,216 913,313 821,331 661,187 454,769 456,791 423,153 664,673 514,728 370,889 2,657,788 2,217,217 556,496 1,329,395 1,011,221 2,097,509 1,141,182 1,096,174 1,015,835 865,736 890,281 820,445 64,779 78,710 73,210 81,919 65,482 52,299 176,191 20,444 158,657 46,707 130,739 172,818 375,201 272,234 222,083 233,808 174,959 160,193 15,941,683 14,789,934 17,101,610 15,203,858 14,909,168 16,063,811 2,064,477 1,828,147 1,830,470 1,686,263 1,717,994 1,947,768 4,589,650 4,705,581 4,702,399 4,850,400 4,871,745 5,131,076 1,379,325 1,382,306 1,402,838 2,081,956 2,038,161 1,971,079 1,591,378 1,399,541 1,427,257 1,530,238 1,448,951 1,53 8,452 84,572 112,612 91,165 50,000 49,417 90,000 4,046,022 316,134 555,293 1,290,875 1,839,726 4,695,581 2,238,084 5,090,101 2,912,213 7,394,424 2,376,739 2,899,162 1,507,873 1,527,970 1,336,414 1,379,551 1,096,007 1,041,780 17,501,381 16,362,392 14,258,049 20,263,707 15,438,740 19,314,898 (1,559,698) (1,572,458) 2,843,561 (5,059,849) (529,572) (3,251,087) 8,710,984 2,418,979 - 7,088,037 - 3,184,641 (5,948,057) - - - (1,435,000) - 25,412 139,454 105,746 26,154 22,473 157,599 3,359,406 2,455,874 3,997,318 7,492,556 2,330,331 5,937,539 (2,381,778) (1,959,397) (3,088,034) (6,082,442) (916,212) (4,794,182) 3,765,967 3,054,910 1,015,030 8,524,305 1,592 4,485,597 $ 2,206,269 $ 1,482,452 $ 3,858,591 $ 3,464,456 $ (527,980) $ 1,234,510 27.8% 41.2% 31.0% 46.2% 24.8% 21.0% -116- CITY OF FARMINGTON Tax Capacity Value and Estimated Actual Value of Taxable Property Last Ten Fiscal Years Commercial/Industrial, Public Utility, Less Captured Payable Residential Railroads,and Agricultural Tax Increment Year Property Personal Property Apartments Property Tax Capacity 2006 $ 13,603,653 $ 1,597,805 $ 307,836 $ 161,240 $ (1,454,782) 2007 15,288,158 1,978,027 307,472 153,964 (495,460) 2008 16,248,923 2,335,426 307,317 186,181 (272,852) 2009 16,198,494 2,718,255 293,783 251,152 (276,434) 2010 14,657,576 2,849,385 289,447 272,170 (227,913) 2011 13,340,049 2,765,411 267,263 224,369 (143,056) 2012 11,604,460 2,683,032 269,378 207,859 (137,147) 2013 10,805,838 2,666,688 270,394 220,247 (130,805) 2014 11,207,086 2,669,813 272,246 234,772 (119,175) 2015 12,802,297 2,688,017 271,615 266,387 (113,361) Note: The tax capacity (assessed taxable value) of the property is calculated by applying a statutory formula to the estimated market value of the property. Source: Dakota County -117- Estimated Tax Capacity Less Contributions Total Direct Actual Value as a to Fiscal Fiscal Disparities Total Tax Tax Capacity Taxable Percentage of Disparities Pool Distribution Capacity Value Rate Value Actual Value $ (216,076) $ 794,764 $ 14,794,440 42.770 % $ 1,488,314,400 0.99 % (231,416) 931,980 17,932,725 41.882 1,670,767,400 1.07 (293,226) 929,718 19,441,487 43.821 1,785,560,700 1.09 (366,353) 1,224,665 20,043,562 44.186 1,804,253,700 1.11 (462,792) 1,304,003 18,681,876 49.274 1,661,903,500 1.12 (554,552) 1,537,976 17,437,460 55.730 1,522,502,000 1.15 (611,325) 2,016,261 16,032,518 63.093 1,344,600,257 1.19 (642,069) 2,195,874 15,386,167 66.821 1,266,601,230 1.21 (1,011,274) 3,371,993 16,625,461 65.876 1,311,752,463 1.27 (1,002,736) 3,397,197 18,309,416 61.455 1,475,969,866 1.24 -118- CITY OF FARMINGTON Property Tax Rates Direct and Overlapping Governments Last Ten Fiscal Years City Direct Rates Overlapping Rates(1) Total Direct and Fiscal Debt Total Dakota Other Special Overlapping Tax Year Operating Service City County ISD No. 192 Districts Rate 2006 34.088 8.682 42.770 26.308 43.692 3.780 116.550 2007 31.286 10.596 41.882 25.119 44.177 3.771 114.949 2008 33.348 10.473 43.821 25.177 45.819 3.749 118.566 2009 32.212 11.974 44.186 25.821 49.238 3.693 122.938 2010 37.103 12.171 49.274 27.261 53.439 3.821 133.795 2011 38.788 16.942 55.730 29.149 52.157 3.429 140.465 2012 43.954 19.139 63.093 31.417 55.292 4.187 153.989 2013 45.597 21.224 66.821 33.411 57.208 4.426 161.866 2014 47.308 18.568 65.876 31.820 56.300 4.150 158.146 2015 44.964 16.491 61.455 29.625 53.460 3.741 148.281 (1) Overlapping rates are those of local and county governments that apply to property owners within the City.Not all overlapping rates apply to all of the City's property owners. Source: Dakota County -119- CITY OF FARMINGTON Principal Property Taxpayers Current Fiscal Year and Nine Years Prior 2015 2006 Percentage Percentage of Total of Total Net Tax City Tax Net Tax City Tax Capacity Capacity Capacity Capacity Taxpayer Value Rank Value Value Rank Value Northern Natural Gas $ 458,348 1 2.86 % $ 251,438 1 1.60 % Xcel Energy(Northern States Power) 188,162 2 1.17 — — — Dakota Electric Association 129,580 3 0.81 120,087 2 0.77 Dakota Storage,LLC 81,608 4 0.51 78,028 4 0.50 Minnesota Energy Resources 69,838 5 0.44 — — — RLR Investments,LLC 68,204 6 0.43 — — — St.Francis Health Systems 67,269 7 0.42 102,917 3 0.66 POR-MKR Real Estate,LLC 65,370 8 0.41 — — — Farmington City Center,LLC 63,618 9 0.40 65,126 5 0.42 Schwiness,LLC 63,322 10 0.40 60,417 7 0.39 Valmont Industries — — 63,394 6 0.40 Commonbond Communities — — 57,558 8 0.37 Farmington Family Housing — — 25,498 9 0.16 Utilicorp United,Inc. — — 21,750 10 0.14 Total $ 1,255,319 7.83 % $ 846,213 5.40 % Source: Dakota County -120- THIS PAGE INTENTIONALLY LEFT BLANK CITY OF FARMINGTON Property Tax Levies and Collections Last Ten Fiscal Years Collected Within the Fiscal Year of Levy(2) Total Collections to Date Total Tax Percentage Delinquent Percentage Fiscal Levy for of Tax of Year Fiscal Year(1) Amount Levy Collections(2) Amount Levy 2006 $ 6,668,204 $ 6,563,837 98.43 % $ 59,440 $ 6,623,277 99.33 % 2007 7,926,780 7,727,933 97.49 195,586 7,923,519 99.96 2008 8,869,919 8,435,469 95.10 427,588 8,863,057 99.92 2009 9,313,415 8,637,012 92.74 666,963 9,303,975 99.90 2010 9,586,323 8,826,496 92.07 751,449 9,577,945 99.91 2011 9,869,985 9,334,157 94.57 526,053 9,860,210 99.90 2012 10,582,243 10,377,369 98.06 187,993 10,565,362 99.84 2013 10,734,608 10,581,301 98.57 137,426 10,718,727 99.85 2014 10,981,055 10,889,973 99.17 57,318 10,947,291 99.69 2015 11,402,145 11,307,924 99.17 — 11,307,924 99.17 (1) Includes fiscal disparity revenues. (2) Includes fiscal disparity revenues and is net of county/state adjustments. Source: Dakota County -121- CITY OF FARMINGTON Ratios of Outstanding Debt by Type Last Ten Fiscal Years Governmental Activities Special Certificates General Assessment Tax of Fiscal Year Obligation Bonds(1) Bonds Increment Bonds Indebtedness 2006 $ 10,314,908 $ 14,600,000 $ 520,000 $ 1,650,000 2007 19,287,725 13,895,000 475,000 1,215,000 2008 18,788,411 22,935,000 425,000 770,000 2009 17,757,256 21,685,000 370,000 310,000 2010 16,629,173 22,645,000 320,000 1,305,000 2011 15,774,072 21,010,000 265,000 1,145,000 2012 14,891,859 19,160,000 205,000 1,025,000 2013 15,467,435 18,235,000 140,000 905,000 2014 14,520,696 15,630,000 — 785,000 2015 16,496,534 13,930,000 — 660,000 Note 1: Details regarding the City's outstanding debt can be found in the notes to basic financial statements. Note 2: Outstanding debt as a percentage of total personal income is not presented,as total personal income information for the City is not available. (1) Includes all general obligations of the City,including Capital Improvement Plan Bonds,Revenue and Lease Revenue Bonds. -122- Business-Type Activities Net Total Premiums Revenue Primary Per (Discounts) Bonds Government Population Capita $ — $ 1,475,000 $ 28,559,908 20,502 1,393 — 1,280,000 36,152,725 21,072 1,716 — 1,080,000 43,998,411 21,343 2,061 — 875,000 40,997,256 21,654 1,893 — 665,000 41,564,173 21,086 1,971 — 450,000 38,644,072 21,558 1,793 — 230,000 35,511,859 21,806 1,629 203,702 — 34,951,137 22,154 1,578 177,829 — 31,113,525 22,446 1,386 277,972 — 31,364,506 22,622 1,386 -123- CITY OF FARMINGTON Ratios of General Bonded Debt Outstanding Last Ten Fiscal Years Less Amounts General Restricted for Market Percentage of Fiscal Obligation Repaying Value of Market Value of Year Bonds(1) Principal(2) Total Property Property 2006 $ 10,314,908 $ — $ 10,314,908 $ 1,488,314,400 0.69 % 2007 19,287,725 — 19,287,725 1,670,767,400 1.15 2008 18,788,411 — 18,788,411 1,785,560,700 1.05 2009 17,757,256 — 17,757,256 1,804,253,700 0.98 2010 16,629,173 — 16,629,173 1,661,903,500 1.00 2011 15,774,072 — 15,774,072 1,522,502,000 1.04 2012 14,891,859 — 14,891,859 1,344,600,257 1.11 2013 15,467,435 606,820 14,860,615 1,266,601,230 1.17 2014 14,520,696 852,842 13,667,854 1,311,752,463 1.04 2015 16,496,534 1,157,993 15,338,541 1,475,969,866 1.04 Note: Details regarding the City's outstanding debt can be found in the notes to basic financial statements. (1) Includes all general obligations of the City,including Capital Improvement Plan Bonds,Revenue and Lease Revenue Bonds. (2) Amounts restricted for repaying principal for years prior to 2013 are not readily available. (3) Personal income is not available. Source: Dakota County website and Dakota County Assessor's Office -124- Assessed Percentage of Percentage Value of Assessed Value of Personal Per Property of Property Population Income(3) Capita $ 13,732,616 75.11 % 20,502 — % 503 16,701,068 115.49 21,072 — 915 18,135,711 103.60 21,343 — 880 18,314,489 96.96 21,654 — 820 16,808,764 98.93 21,086 — 789 16,454,036 95.87 21,558 — 732 14,764,729 100.86 21,806 — 683 13,963,167 106.43 22,154 — 671 14,383,917 95.02 22,446 — 609 16,028,316 95.70 22,622 — 678 -125- THIS PAGE INTENTIONALLY LEFT BLANK CITY OF FARMINGTON Direct and Overlapping Governmental Activities Debt December 31,2015 Estimated Estimated Share of Net Debt Percentage Overlapping Governmental Unit Outstanding Applicable(1) Debt Overlapping debt Dakota County $ 23,420,000 3.863 % $ 904,748 ISD No. 192 Farmington 217,498,112 58.132 126,436,846 ISD No. 196 Rosemount—Apple Valley—Eagan 81,775,000 0.004 3,128 Metropolitan Council(2) 206,020,000 0.412 848,287 Total overlapping debt 528,713,112 128,193,009 Direct debt City of Farmington direct debt 31,364,506 100.000 31,364,506 Total direct and overlapping debt $ 560,077,618 $ 159,557,515 (1) The percentage of overlapping debt applicable is estimated using tax capacity. Applicable percentages were estimated by determining the portion of the governmental unit's tax capacity that is within the City's boundaries and dividing it by the governmental unit's total tax capacity. (2) The above debt includes all outstanding general obligation debt of the Metropolitan Council supported by taxes. The Metropolitan Council also has general obligation sewer revenue,wastewater revenue,and radio revenue bonds and lease obligations outstanding, all of which are supported entirely by revenues and are not included in the Overlapping Debt or Debt Ratios sections above. Note: Overlapping governments are those that coincide,at least in part,with the geographic boundaries of the City.This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of the City.This process recognizes that,when considering the City's ability to issue and repay long-term debt,the entire debt burden borne by the residents and businesses should be taken into account. However,this does not imply that every taxpayer is a resident and,therefore,responsible for repaying the debt of each overlapping government. Source: Dakota County Property Taxation Office and related Comprehensive Annual Financial Reports -126- CITY OF FARMINGTON Legal Debt Margin Information Last Ten Fiscal Years Fiscal Year 2006 2007 2008 2009 Debt limit $ 29,766,288 $ 33,415,348 $ 35,711,214 $ 36,087,407 Total net debt applicable to limit 9,513,423 17,448,186 17,963,411 16,327,256 Legal debt margin $ 20,252,865 $ 15,967,162 $ 17,747,803 $ 19,760,151 Total net debt applicable to the limit as a percentage of debt limit 31.96% 52.22% 50.30% 45.24% Note:The debt limit was raised from 2 percent to 3 percent of taxable market value,effective June 30,2008. -127- 2010 2011 2012 2013 2014 2015 $ 33,238,070 $ 45,675,060 $ 40,338,008 $ 37,998,037 $ 39,352,574 $ 44,279,096 17,934,173 16,919,072 15,916,859 15,442,435 14,520,696 16,496,534 $ 15,303,897 $ 28,755,988 $ 24,421,149 $ 22,555,602 $ 24,831,878 $ 27,782,562 53.96% 37.04% 39.46% 40.64% 36.90% 37.26% Legal Debt Margin Calculation for Fiscal Year 2015 Market value $ 1,475,969,866 Debt limit(3%of market value) 44,279,096 Debt applicable to limit 16,496,534 Legal debt margin 27,782,562 -128- CITY OF FARMINGTON Pledged Revenue Coverage Last Ten Fiscal Years Less Direct Net Revenue Fiscal Gross Operating Available for Debt Service Requirements Year Revenue(a) Expenses(b) Debt Service Principal Interest Total Coverage 2006 $ 1,469,340 $ (1,115,498) $ 353,842 $ 190,000 $ 40,381 $ 230,381 153.59 % 2007 1,795,043 (1,308,518) 486,525 195,000 37,911 232,911 208.89 2008 1,588,810 (1,154,444) 434,366 200,000 33,831 233,831 185.76 2009 1,376,043 (1,190,315) 185,728 205,000 30,791 235,791 78.77 2010 1,581,526 (1,191,274) 390,252 210,000 25,923 235,923 165.41 2011 1,600,303 (1,243,796) 356,507 215,000 21,760 236,760 150.58 2012 1,787,957 (1,286,270) 501,687 230,000 7,360 237,360 211.36 2013 No longer applicable—debt repaid in full in 2013 2014 No longer applicable—debt repaid in full in 2013 2015 No longer applicable—debt repaid in full in 2013 (a) Includes gross revenues of the Sewer Operations Funds. (b) Exclusive of depreciation. Note: Details regarding the City's outstanding debt can be found in the notes to basic financial statements. -129- CITY OF FARMINGTON Demographic and Economic Statistics Last Ten Fiscal Years Total Fiscal School Unemployment Personal Per Capita Year Population(1) Households Enrollment(3) Rate(2) Income Income 2006 20,502 6,949 6,021 3.5 (4) (4) 2007 21,072 7,143 6,207 4.1 (4) (4) 2008 21,343 7,453 6,472 6.1 (4) (4) 2009 21,654 7,824 6,320 7.3 (4) (4) 2010 21,086 7,412 6,499 6.5 (4) (4) 2011 21,558 7,464 6,555 5.2 (4) (4) 2012 21,806 7,532 6,560 6.1 (4) (4) 2013 22,154 7,806 6,877 4.7 (4) (4) 2014 22,446 7,906 7,075 3.1 (4) (4) 2015 22,622 7,959 7,019 3.3 (4) (4) (1) Farmington Building Inspections Department—2015 (2) Minnesota Department of Employment and Economic Development—Dakota County 2015 Annual Rate (3) Farmington School District—October 2015 (4) Personal income is not available -130- THIS PAGE INTENTIONALLY LEFT BLANK CITY OF FARMINGTON Principal Employers Current Fiscal Year and Nine Years Prior 2015 2006 Percentage of Total Percentage Employees Employment Employees of Total Taxpayer (1) Rank (2) (1) Rank Employment ISD No. 192,Farmington Public Schools 900 1 19.8 % 540 1 11.5 % Federal Aviation Administration 400 2 8.8 450 2 9.6 Dakota Electric 200 3 4.4 220 3 4.7 Marshall Lines,Inc. 182 4 4.0 60 8 1.3 Trinity Care Center&Trinity Terrace 140 5 3.1 — — — Kemps Dairy 131 6 2.9 139 4 3.0 Valmont Industries(Lexington Standard) 130 7 2.9 130 5 2.8 R&L Carriers 110 8 2.4 — — — City of Farmington 91 9 2.0 88 6 1.9 JIT Powder Coating 65 10 1.4 55 9 1.2 Controlled Air — — — 67 7 1.4 Peerless Plastics — — — 45 10 1.0 Total 2,349 51.8 % 1,794 38.4 % (1) Per City of Farmington records. (2) Minnesota Department of Employment and Economic Development,Q3 Total Employment of 4,536. -131- CITY OF FARMINGTON Full-Time Equivalent City Government Employees by Function Last Ten Fiscal Years Fiscal Year 2006 2007 2008 2009 2010 General government Administration 5.50 6.00 6.00 6.00 6.00 Finance 3.50 3.50 3.50 3.50 3.50 Human resources/information technology 3.00 3.00 3.00 3.00 3.00 Community development 5.00 4.00 4.00 4.00 4.00 Total general government 17.00 16.50 16.50 16.50 16.50 Public safety Police administration 5.00 5.00 6.00 6.00 6.00 Police patrol 18.00 18.00 18.00 16.00 16.00 Investigations 4.00 4.00 4.00 7.00 7.00 Fire 1.00 1.00 1.00 1.00 1.00 Total public safety 28.00 28.00 29.00 30.00 30.00 Public works Building inspections 4.00 4.00 3.00 3.00 3.00 Engineering 1.95 2.30 2.10 2.10 2.10 Streets 4.10 4.10 4.00 4.68 4.68 Snowplowing 0.40 0.40 0.43 0.45 0.45 Natural resources 0.75 0.80 0.75 1.12 1.12 Total public works 11.20 11.60 10.28 11.35 11.35 Parks and recreation Park maintenance 4.50 4.50 5.00 5.44 5.44 Building maintenance 1.00 1.30 1.00 - - Recreation programming 3.00 3.00 3.00 1.50 2.00 Total parks and recreation 8.50 8.80 9.00 6.94 7.44 Senior center 1.50 1.50 1.50 1.50 1.00 Swimming pool 2.00 2.20 0.50 0.40 0.40 Arena 2.00 1.50 1.50 1.86 1.86 Liquor operations 4.00 6.00 6.00 5.00 5.00 Sewer 2.90 2.90 2.81 2.41 2.41 Solid waste 7.40 7.40 6.39 6.38 6.38 Storm water utility 2.50 2.50 2.53 2.53 2.53 Water 3.00 3.10 2.99 3.64 3.64 Fleet 2.00 2.00 2.00 2.00 2.00 Total employees 92.00 94.00 91.00 90.51 90.51 Note: In addition to the above, the City has a volunteer Fire Department of 50 people and hires seasonal staff for its summer parks and recreation operations. Source: Various City Departments -132- 2011 2012 2013 2014 2015 5.00 5.25 3.50 3.50 3.00 2.75 2.50 4.00 4.00 4.50 2.80 1.80 3.00 3.00 3.00 3.00 1.00 2.00 2.50 2.50 13.55 10.55 12.50 13.00 13.00 6.15 6.15 5.15 5.15 5.15 16.00 16.50 18.00 17.00 17.00 7.00 6.50 5.00 5.00 5.00 1.25 1.40 1.40 1.40 1.50 30.40 30.55 29.55 28.55 28.65 3.00 2.93 2.50 2.50 2.50 2.42 2.34 5.10 4.60 4.50 4.68 4.68 10.00 10.00 9.00 0.45 0.45 - - - 1.02 1.02 1.00 1.00 1.00 11.57 11.42 18.60 18.10 17.00 4.44 4.44 3.50 3.50 3.50 - - 1.00 1.00 1.00 2.00 2.00 2.00 2.00 2.00 6.44 6.44 6.50 6.50 6.50 1.10 1.10 1.50 1.50 1.00 0.40 0.40 0.40 0.40 0.40 2.11 2.11 2.35 2.35 2.35 7.25 7.25 7.25 7.50 8.00 2.60 2.59 - - - 6.38 6.38 5.00 5.00 5.00 2.93 2.93 - - - 3.83 3.83 - - - 2.00 1.00 2.00 2.00 2.00 90.56 86.55 85.65 84.90 83.90 -133- CITY OF FARMINGTON Operating Indicators by Function Last Ten Years Fiscal Year Function/Program 2006 2007 2008 2009 General government Elections 1 N/A 1 N/A Registered voters 11,462 N/A 13,070 N/A Number of votes cast 6,853 N/A 10,309 N/A Voter participation(registered) 59.8% N/A 78.9% N/A Public safety Police Arrests 643 666 563 440 All citations and warnings 1,519 1,552 1,618 1,498 Calls for service 13,388 13,775 12,976 13,025 Fire Medical 478 398 370 251 Fire 181 226 230 324 Inspections Building permits 752 2,430 628 576 Value of building permits(in millions) $ 49 $ 130 $ 18 $ 20 Parks and recreation Parks Park reservations 71 77 106 77 Pool Pool open swim admissions 14,392 12,627 13,833 11,163 Pool swim lesson registrations 548 542 528 371 Pool season passes sold 118 126 75 69 Pool punch cards sold 172 198 230 202 Swim bus riders 991 1,069 997 1,059 Rambling River Center Memberships 489 523 531 440 Program participation 15,936 N/A 13,279 18,104 Number of volunteers 497 184 200 215 Total volunteer hours 2,706 2,174 2,400 6,315 Ice arena Ice skating lessons total participants 268 198 195 213 Arena rental hours 1,258 1,237 1,263 1,191 Outdoor rinks total number of skaters 3,406 3,995 4,740 6,542 Other Recreation program/event participants 9,117 9,662 8,427 6,568 Youth scholarships provided 67 69 44 31 N/A-Not Available * Beginning in 2012 this figure includes warnings. Source: Various City of Farmington Departments -134- 2010 2011 2012 2013 2014 2015 1 N/A 1 N/A 1 N/A 11,820 N/A 13,358 N/A 12,541 N/A 7,002 N/A 11,185 N/A 6,419 N/A 59.2% N/A 84.0% N/A 51.0% N/A 399 527 435 403 266 153 1,848 2,253 4,359* 4,517* 3,383 2,494 12,710 13,807 15,094 13,138 13,035 12,085 257 274 290 323 386 359 272 227 254 235 241 361 907 747 818 679 711 619 $ 22 $ 25 $ 17 $ 35 $ 24 $ 15 76 67 69 65 66 66 13,009 11,869 13,069 11,566 8,032 7,652 405 410 407 308 267 256 71 63 89 78 N/A N/A 163 142 130 154 193 176 729 620 641 786 408 536 430 430 428 435 406 381 11,738 15,817 16,198 16,875 15,285 13,885 107 108 152 94 130 107 4,276 4,601 3,741 4,780 4,348 5,944 263 195 200 215 230 216 1,171 1,271 1,197 1,147 1,197 1,315 9,797 6,499 5,259 7,819 7,481 7,851 6,258 6,126 6,607 6,971 6,425 5,976 45 20 22 25 7 4 -135- CITY OF FARMINGTON Capital Assets Statistics by Function/Program Last Ten Years Fiscal Year Function/Program 2006 2007 2008 2009 Public safety Police Stations 1 1 1 1 Patrol squads 16 16 20 18 Fire Stations 2 2 2 2 Fire trucks 6 7 7 7 Public works Vehicles 19 21 21 21 Streets(miles) 79 82 89 89 Parks and recreation Senior center—building 1 1 1 1 Swimming pool 1 1 1 1 Ice arena—building 1 1 1 1 Parks 21 21 21 21 Liquor operations Store—building — — — — Solid waste Compactor trucks 5 6 6 6 Sanitary sewer Collection system(miles) 80 83 84 84 Storm sewer Storm sewer(miles) 70 70 71 70 Water 104 108 108 108 Water main(miles) 7 7 7 7 Wells 2 2 2 2 Water reservoirs Source: City of Farmington financial records -136- 2010 2011 2012 2013 2014 2015 1 1 1 1 1 1 18 18 17 17 16 16 2 2 2 2 2 2 7 7 7 7 6 6 21 21 20 21 21 24 89 89 89 89 89 89 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 21 21 21 21 23 23 6 6 6 5 5 5 84 84 84 84 84 84 71 71 71 71 71 73 109 109 109 109 109 109 7 7 7 7 7 7 2 2 2 2 2 2 -137- THIS PAGE INTENTIONALLY LEFT BLANK 04J► City of Frmington Street 4. 46. Farmington, Minnesota o 651.280.6800 -Fax 651.280.6899 .,,4400.< www.ci.farmington.mn.us TO: Mayor,Councilmembers and City Administrator FROM: Robin Hanson SUBJECT: Financial Review- 1st Quarter 2016 DATE: May 16, 2016 INTRODUCTION Attached you will find the draft financial results for the 1st quarter of 2016. DISCUSSION General Fund First quarter revenues total approximately$343,000 or 3%of total budgeted revenues. The low amount reflects the face that property taxes,which represent 82% of budgeted revenues, are paid in two installments, during the second and fourth quarters. Other items of note are detailed below: • Permits -Residential new construction building permits for the first quarter of 2016 are less than the first quarter of 2015 (12 permits compared to 18).Yet, actual building permit revenue is comparable to the prior year's first quarter amounts. The offset relates to a permit issued for a commercial rehab project;the city generally does not budget for commercial permit revenues. • Charge for Service-First quarter 2016 revenues are higher than 2015. In 2016 the SRO revenues were recorded in the first quarter. In 2015 the amounts were recorded in the second quarter. • Investment Interest-Investment income for first quarter 2016 is higher than 2015. The General Fund is benefitting from higher average cash balances and investment income available for distribution. • Miscellaneous Revenues -The 2016 amounts include a$4,000 Rotary donation to the police department for a new trailer. Expenditures for the first quarter total$2,363,572 or 22%of budget and are comparable to 2015 amounts. All departments (police is reviewed on a combined basis--administration,patrol and investigations) expenditures are below 25%or one-fourth of the year's annual expenditures. Other Funds • Rambling River Center-In total the first quarter revenues for 2016 are similar to 2015. Upon closer review you can see recreation fees,membership fees and advertising are all higher than this time year. Rental income appears to be lower,but there is still one more rental invoice for the first quarter to be recorded which will result in these revenues being similar to last year's first quarter. the first quarter 2016 expenditures are less than last year as the part-time administrative support that is being provided to the Rambling River Center is being charged to that staff person's home business unit(also in General Fund),not RRC. • Swimming Pool-Closed for the season. • EDA-The 2016 expenditures are less than 2015. The first quarter of 2015 included a$19,000 CDBG reimbursement for Dakota County Lumber. Similar did not occur during the first quarter of 2016. • Park Improvement-The first quarter revenues are similar to last year. The majority of the budgeted expenditures will occur later this year. • Ice Arena-No one particular reason for increased revenues. Daily receipts, advertising,timing of FYHA donation, and increased rental revenue from FYHA all contributed. The 2016 operating costs are less than 2015. Last year included costs for the new point-of-sale system, as well as some other mechanical repairs. Liquor Operations As shown in the chart below, first quarter 2016 liquor sales are the highest they have been in the first quarter for the past five years for both stores: 2012 2013 2014 2015 2016 Downtown $393,655 $418,836 $443,852 $443,734 $453,331 Pilot Knob 510,904 493,272 512.543 500,487 517,981 $904,559 $912,108 $956,395 $944,221 $971,312 Both stores met their gross profit as a percentage of sales targets of 25%. The combined profit as a percent of sales was 4.4%which is below the 6.5%benchmark. This is typical for the first part of the year which is generally the slowest time for sales. Both liquor stores are off to a solid start. Enterprise Funds • Sewer-A new sewer rate went into effect as of January 1,2016. The primary reason for the increase in expenses is the budgeted increase in MCES (Metropolitan Council Environmental Services)fees. • Solid Waste-The first quarter 2016 revenue is high because the last two weeks of December's 2015 revenue was not included on the December bills. An adjustment was made on the March 2016 to correct for this error. The net increase in expenses of$9K for the first quarter of 2016 compared to 2015 is a combination of reduced HR fees (due to vacancy)of$14K and increased tipping fees and tonnage being disposed$23K. • .Storm Water-The 2016 are approximately$200,000 less than for the same time period in 2015. Last year the first quarter included 195th street planning and pond dredging costs. The city did not have these expenses in 2016. • Water-Revenues are similar. The primary reason for the decrease in 2016 expenses,relative to 2015, reflects the timing of when chemicals were purchased. The first quarter of 2015 included$26K,while the 1st quarter of 2016 it was $0. BUDGET IMPACT N/A ACTION REQUESTED Ask and questions you may have and receive the report. ATTACHMENTS: Type Description D Exhibit General Fund- 1st Quarter 2016 D Exhibit General Fund Fund Balance Chart-2016 Qtr 1 D Exhibit Other Funds - 1st Quarter 2016 D Exhibit Liquor Funds - 1st Quarter 2016 D Exhibit Utility Funds - 1st Quarter 2016 General Fund March 2016 YTD Operating Report March YTD March YTD March YTD March YTD March YTD Company Actual Actual Budget Actual Budget YTD Act as% 2016 Budget Comments 2015 2018 2016 Variance 2018 of Bud 2016 Revenues Property Taxes 0 0 8,747,170 (8,747,170) 0%;Taxes not recd until June. Licenses 15,435 18,010 41,355 (23,345) 44% Permits 66,740 66,849 326,348 (259,499) 20% Residents!building permits are lower than last year (2016-12 permits and 2015-18 permits),yet building permit revenue is comparable to the prior year due to a commercial rehab permit issued during the first quarter. Intergovernmental Revenue 110,801 125,553 803,134 (677,581) 16% Charge for Service 62,088 92,429 491,700 (399,271) 19%'Majority of difference between March 2016 YTD and March 2015 YTD is the 1st quarter SRO revenue from ISD 192 was recorded In the 1st qtr in 2016 and in the 2nd Or in 2015. Fines 10,475 12,033 65,000 (52,967) 1 March fine revenue not yet recorded Investment interest 7,188 8,730 18,462 (9,732) 47% Gent Fd is benefiting from higher ave cash balances and Inv income available for distribution. Miscellaneous 14,524 19,505 56,685 (37,180) 34% Includes$4,000 Rotary donation to the police department Franchise Fees 0 0 100,000 (100,000) 0% Subtotal Revenues 287,251 343,109 10,849,854 (10,306,745) 3% Expenditures Legislative 19,362 14,835 86,906 (72,071) 17%12015 included$2,500 pymt for strategic plan,March 2016 legal bill not yet recorded Historical Preservation 1,825 0 3,855 (3,855) 0% HPC contract changed;Inv not yet rec'd for 2016 1 Administration 92,616 78,204 376,379 (298,175) 21% Majority of decrease from 2015 relates to staff time previously charged to Admin that Is now charged to Finance -__ Elections to be held later this year Elections 9 25 57,548 (57,523) 0%' _ - - --- - ---- -- Communications 23,213 24,610 102,105 (77,495) 24% City Hall 40,020 42,309 195,321 (153,012) 22% Finance and Risk Mgmt 148,158 156,518 681,973 (525,455) 23% Increase primarily relates to Increased UB staffing relative to last year. Community Development 0 0 0 0 Human Resource 66,794 65,519 279,035 (213,516) 23 Police Administration 189,974 181,831 840,955 (659,124) 22% On a combined basis police adman,patrol&invest 45% 9 ti Management 53 In 25 Patrol Services 139,408 627,479 679,432 (466,649) =23%On a combined basis police adman,patrol&Invest 45% 639,408 627,479 2,679,435 (2,051,956) 23 ---- -- - - Investigations aflons ( ) ° On a combined basis police adman,patrol&Invest 45% ------ ------- --- --- -- - -Emer en Mana ement 54 4,900 (4,846) 1% - -------------- ------ Fire 152,425 210,639 1,140,007 (929,368) 18% HR: ----- (929,368) 18/o'Increased caste primarily in HR:full-time fire thief, increased training and combining of rescue(see below)with fire in 2016. Rescue 12,335 0 0 0 Combined with fire in 2016. Engineering 140,033 113,742 531,112 (417,370) 21%1 Civil engineer position vacant one month and reallocation of one person's time from engineering to planning Planning 123,630 87,740 347,774 (260,034) 25% 2015 included separation agree pymt 2016 includes reallocation of one person's time from engineering to planning. Building Inspection 60,290 62,472 256,724 (194,252) 24% Natural Resources 29,194 27,618 125,576 (97,958) 22% Streets 229,719 217,152 1,018,604 (801,452) 21% 2016 costs are less than 2015,primarily due to reduced staffing In 2016. Snow Removal 77,935 31,490 226,895 (195,405) 14% March sand and salt bill not yet rec'd.Continue to benefit from mild weather. Park Maintenance 115,866 117,707 608,700 (490,993) 19% Rambling River Center 39,343 31,380 149,166 (117,786) 21% Reduced staffing and program expense in 2016 compared to 2015. Park&Rec Adman 65,481 62,535 262,158 (199,623) 24%, Recreation Programs 4,907 9,343 113,407 (104,064) 8%1 Swimming Pool- 7,935 4,065 135232 (131,167) 3%2015 Included new point-of-sale software/equipment Interest Pald 0 482 0 482 Subtotal Expenditures 2,434,478 2,383,672 10,888,239 (8,622,867) 22% Revenues(Over)Under Expenditures (2,147,227) (2,020,463) (238,386) (1,784,078) 856% Other Financing 1 Transfers In 281,045 288,740 1,148,371 (859,631) 25% ----- - - - - ------ Transfers Out .--- -- ---o-I --- --- -- _-------- (201,502) (229,152) (906,607) 677,455 25% Subtotal Other Financing 79,643 69,588 241,784 (182,176) 25% 1 Net Change in Fund Balance (2,067,884)' (1,980,875) 6,379 (1,988,264) -36,464% 5/6/2016 10:38:35 AM Page 1 of 1 L a� L C U w O. N ".' _ Q ,,,„1011L• CD 0 N w > O o Eli 2 c a) • s u�E t � � , N x in m _ (2) o ' OC �) N =0 CU I • - O 0)m Q o .E • >, L _ . m f ID N 14—o u_ • c � I �a E 71-1 c U 0 CD 1 1 • i N1 i . °" Ii• • NI ,, ' I a) LL N CO I 1 L_ I O O O O 0 O 0 0 0 0 0 O O O 0 O O 0 O 0 O 0 0 0 0 0 O 0 ' O 0 O O O O O O O O O O Co O O EA O O O O O O 6 6 6 66 O O O O O O O O O O O O O O O O O O O O O Lf) O Lf) O Lf) O LU O Ls) O LC) O L() Lo O C9 CO LO- Ln d '� CO- CO- N N d4 } K} 69 Ef} Ef3 EA Ef3 69 69- 69 69 fa Eft EA aaueiea pun j u! a6ueq RRC,Pool,EDA,Park Improvement,Arena March 2016 YTD Operating Report March YTD March YTD March YTD Actual March YTD Company Actual Actual Budget Budget YTD Act as% Comment 2015 2016 2016 Variance of Bud 2016 2016 Rambling River Center Rec Fees-Sr Ctr 5,605 6,789 18,000 (11,211) 38% Similar to 2015 (Excludes CDBG) Membership Fees 7,072 7,983 12,000 (4,017) 67% Similar to 2015 (Excludes CDBG) Advertising 2,053 2,193 2,200 (7) 100% Similar to 2015 Rental Income-RRC 6,992 4,644 20,000 (15,356) 23% Details for one of the larger rental customers are still being confirmed.As a result,the invoice and corresponding revenue have not yet been recorded. Subtotal Rambling River 21,722 21,609 52,200 (30,591) 41% Center Revenues Rambling River Center 39,343 31,380 149,166 (117,786) 21% PT Admin Support staff time is being charged to Expenses their home business unit,not RRC. RRC Net Revenues/Ex (17,621) (9,771) (96,966) 87,195 10% Less subsidy needed in 1st qtr of 2016 than penditures in 2015.Howver,PT Admin Support hours are being charged to Planning,rather than RRC. Both are funded by Gen'l Fund. Swimming Pool Pool Admissions 0 210 37,000 (36,790) 1% Closed for the season. Swimming Lesson Fees 0 0 13,000 (13,000) 0% Concessions 0 0 11,000 (11,000) 0% Rental Income-Pool 204 153 2,000 (1,847) 8% Subtotal Swimming Pool 204 363 63,000 (62,637) 1% Revenues Pool Expenditures 7,935 4,065 135,232 (131,167) 3% Subtotal Pool (7,731) (3,702) (72,232) 68,530 5% Revenues Over (Under)Expenditures EDA EDA Revenues 624 700 1,572 (872) 45% EDA Expenses 27,344 9,357 42,430 (33,073) 22% March includes pymt of Open to Business fee. EDA Net (26,720) (8,657) (40,858) 32,201 21% Revenues/Expenditures Transfers In 22,500 10,000 40,000 (30,000) 25% Subtotal Other Financing 22,500 10,000 40,000 (30,000) 25% Net Change in EDA Fund (4,220) 1,343 (858) 2,201 -157% Balance Park Improvement Park Improvement 5,980 4,791 9,008 (4,217) 53% Revenues Park Improvement 19 0 60,000 (60,000) 0% Park expenditures occur later this year. Expenditures Park Improvement Net 5,961 4,790 (50,992) 55,782 -9% Change in Fund Balance Ice Arena Ice Arena Revenues 110,427 125,013 321,300 (196,287) 39% No one particular reason for increased revenues.Daily receipts,advertising,timing of FYHA donation,and increased rental revenue from FYHA all contributed. Ice Arena Expenditures 102,602 96,899 317,418 (220,519) 31% 2016 opearting costs are less than 2015.Last year included costs for the new point-of-sale system,as well as some other mechanical repairs. Ice Arena-Rev Over 7,825 28,114 3,882 24,232 724% (Under)Expenditures Ice Arena-Transfers In 0 0 0 0 Ice Arena-Transfers Out 0 0 0 Ice Arena Net Transfers 0 0 0 0 Ice Arena Net Change 7,825 28,114 3,882 24,232 724% in Fund Balance 5/6/2016 2:48:01 PM Page 1 of 1 v 9- Y O O LL a) c a) F- la y 0) • r 0 C d CO O 6 d O NN C ..= :CI N o CO - O O o CO d C CO a) Q:� ~ O. a)E L L L O N Cr y 0 Y o ✓ cc 0.3r C r `a) c CO O y O 3• y C.) , a) c O c c c o CD- _• c ,O a) -O-, N ca la L Y N a) Y .c 6 i Y N'i w Y fn O a) O -Cr: X In l- E E Uu) a) ?' w N CD O CO CO LD r N- O CO LO LD N- O CO O O O O 0 U N N N N V N N N N o N N N N N N s- M L CO F 0 0 col_ N a- 2 L.) Q O O O"'- O O O co V O CD CO V O fR M Ca\ ) O f` LO 00 LO O CO O O O I-R N M O O D N N O CO T Sr) O O LID D. 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J n N u w w N t & u N E I m = d o ^ ^ = `m V M N G N N y « N « b — ^, N ^ m" N ° m' ° 3 m c v m c w w y c o w E u€ wu ° ,n = _d =, d z d w g l I O 'II L` a O O rn p ti p_ j « 2 N 1 y C R z c O c O O _ N O c O & a d C ` d y O H 0 t & u @ c N v u i " f - w N N y q ' ... =. A t g m e c Oil 1,- > n u U m d q U > o d q q ` > 3 z K e Q r O 2- y 2 V d > c t m w m z a o m w z E ,¢, w d m c ) z icl' Llet 1w co g 3 m m Q m O I-- O_ Co O N N Wit, City of Farmington p 430 Third Street Farmington, Minnesota 0 651.280.6800 -Fax 651.280.6899 444• PO" WWW.ci.farmington.mn.us TO: Mayor, Counci members and City Administrator FROM: Kevin Schorzman SUBJECT: Highway 3 Project Funding Update DATE: May 16, 2016 INTRODUCTION As part of the project on Trunk Highway 3 (TH-3)this summer, MnDOT will be replacing the traffic signals at TH-3 and Ash Street and TH-3 and Elm Street. They will also be constructing a trail on the west side of TH-3 from 194th Street to the roundabout on TH-3. Both the signal replacement and trail work require monetary contributions by the city. On January 4, 2016, the city council approved the traffic signal agreement, and on April 4,2016, the city council approved the trail agreement. DISCUSSION MnDOT received bids for the project on April 22,2016, and awarded the project on May 3, 2016. The low bidder on the project was Hardrives, Inc.with a bid of$4,520,874.97. This compares to the engineer's estimate of$4,383,257.59. Based on the bids received, and per our agreements with MnDOT,we are anticipating the following city contributions toward the project costs: Traffic Signal: $79,478.32 Trail: $94,982.15 These costs are higher than anticipated in the original agreements (which were based on the engineer's estimate). The bid for the traffic signal is approximately$53,500 higher than the engineer's estimate. However, other agencies are experiencing similarly higher costs on their signal replacement projects. The bid for the trail construction is approximately$62,000 higher than the engineer's estimate. There are three work items that were higher than the engineer's estimate that make up the bulk of the higher cost: earthwork, storm sewer work, and erosion control and seeding. It should be noted that staff is currently in discussions with MnDOT to potentially reduce the additional city contribution as much as possible. However, funding the projects at a level higher than anticipated in January and April will still be necessary. The proposed funding, assuming no relief from MnDOT,is described in the budget impact section of this memo. BUDGET IMPACT As discussed previously, funding for the traffic signal will be paid by the street light fund as anticipated when the fund was created. Adequate funding exists for the entire city portion of the traffic signal replacement cost. Also as previously discussed,the trail funding will come from a combination of contributions from the liquor stores and funding remaining after the completion of the Henderson's Addition project. It was originally anticipated that the liquor stores would contribute$40,000 toward the trail project with the remainder coming from the remaining Henderson's funds. Staff is proposing increasing the liquor stores' contribution to $45,674. Doing this provides adequate funding for the trail extension when combined with the funds remaining following the Henderson's Addition project. Any relief provided by MnDOT will be distributed appropriately based on the above-mentioned funding scenario. ACTION REQUESTED Approve the revised funding for the TH-3 project.