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HomeMy WebLinkAbout05.21.18 Council Packet Meeting Location: Farmington Farmington City Hall Minnesota 430 Third Street Farmington,MN 55024 CITY COUNCIL REGULAR MEETING AGENDA MAY 21, 2018 7:00 P.M. Action Taken 1. CALL TO ORDER 7:00 P.M. 2. PLEDGE OF ALLEGIANCE 3. ROLL CALL 4. APPROVE AGENDA S. ANNOUNCEMENTS/COMMENDATIONS a) Police Officer Steve Kuyper Retirement Acknowledged b) Oath of Office for Fire Officers Adam Fischer and Matthew Price Acknowledged c) 2017 Fire Department Annual Report Information Received 6. CITIZEN COMMENTS/RESPONSES TO COMMENTS(This time is reserved for citizen comments regarding non-agenda items. No official action can be taken on these items. Speakers are limited to five minutes to address the city council during citizen comment time.) a) Response to Nancy Nelson Information Received 7. CONSENT AGENDA a) Approve Minutes of the May 7, 2018 City Council Meeting—Administration Approved b) Approve Minutes of the May 7, 2018 City Council Work Session— Administration Approved c) Approve Minutes of the May 14, 2018 City Council Work Session— Administration Approved d) Approve Temporary On-Sale Liquor License for Farmington Liquors— Community Development Approved e) Approve 2018 Trail Crack Sealing Agreement—Public Works Approved f) Approve Seasonal Hiring—Human Resources Approved g) Acknowledge Retirement Police—Human Resources Acknowledged h) Approve Bills - Finance Approved REGULAR AGENDA 8. PUBLIC HEARINGS a) Vacate Drainage and Utility Easements—Express Auto Transport, Inc. R19-18 9. AWARD OF CONTRACT 10. PETITIONS, REQUESTS AND COMMUNICATIONS a) 2017 Management and Comprehensive Annual Financial Report Information Received 11. UNFINISHED BUSINESS 12. NEW BUSINESS a) 2017 Public Works Annual Report Information Received 13. CITY COUNCIL ROUNDTABLE 14. ADJOURN �4�{AR,�i City of Farmington U 430 Third Street Farmington, Minnesota 651.280.6800 - Fax 651.280.6899 k,..„6„. .� y,. ' www.ci.farmington.mn.us TO: Mayor, Councilmembers and City Administrator FROM: Brian Lindquist, Police Chief SUBJECT: Police Officer Steve Kuyper Retirement DATE: May 21, 2018 INTRODUCTION Officer Steve Kuyper will be retiring from the City of Farmington on May 29, 2018. DISCUSSION After 23 years of faithful and dedicated service to the citizens of Farmington, Officer Kuyper will be retiring May 29th. Officer Kuyper has been a patrol officer, Investigator and a school resource officer. He also enjoys a civilian role with the planning commission. BUDGET IMPACT N/A ACTION REQUESTED Accept Officer Kuyper's retirement effective May 29, 2018 and thank him for his service to the community. v`tikRi►/4 City of Farmington i 430 Third Street ;'' ________ Farmington, Minnesota 651.280.6800 -Fax 651.280.6899 4►1 ,,.,:..,.: www.ci.farmington.mn.us TO: Mayor, Councilmembers and City Administrator FROM: Justin R. Elvestad, Fire Chief SUBJECT: Oath of Office for Fire Officers Adam Fischer and Matthew Price DATE: May 21, 2018 INTRODUCTION The Fire Department has had two promotions since March, two Fire Officers will be pinned with their badges and take the oath of office. DISCUSSION Adam Fischer was promoted to Assistant Chief in March of 2018,Assistant Chief Fischer has been with the Fire Department since March of 2003. Matthew Price was promoted to Captain in April of 2018. Captain Price has been with the Fire Department since August of 2013. City Administrator McKnight will administer the oath of office and their badges will be pinned by an individual of their choice. BUDGET IMPACT None ACTION REQUESTED The oath of office will administered and the badges for the new officers will be pinned. �o�Att�►i� City of Farmington 430 Third Street Farmington, Minnesota 651.280.6800 - Fax 651.280.6899 www.ci.farmington.mn.us TO: Mayor, Councilmembers and City Administrator FROM: Justin R. Elvestad, Fire Chief SUBJECT: 2017 Fire Department Annual Report DATE: May 21, 2018 INTRODUCTION The Farmington Fire Department is a full service, all hazards department providing fire and rescue services to the city of Farmington and the townships of Castle Rock, Eureka and Empire. The department works effectively with other city departments and mutual aid partners to provide life saving services throughout our approximately 75 square mile service area. DISCUSSION Staff will present the department's 2017 annual report and discuss its activities of the past year at the meeting. BUDGET IMPACT None ACTION REQUESTED No action is requested. This is informational only. o0A0i4„ City of Farmington 430 Third Street Farmington, Minnesota ' 651.280.6800 - Fax 651.280.6899 .,�„ ,• ';; ` www.ci.farmington.mn.us TO: Mayor, Councilmembers and City Administrator FROM: David McKnight, City Administrator SUBJECT: Response to Nancy Nelson DATE: May 21, 2018 INTRODUCTION Attached for your review is the response to Nancy Peterson who shared her thoughts with you on the Vitals program at the May 7, 2018 city council meeting. DISCUSSION NA BUDGET IMPACT NA ACTION REQUESTED NA ATTACHMENTS: Type Description CI Backup Material Nancy Peterson Response Letter o�FaRMiy, City of Farmington � � 430 Third Street Farmington, Minnesota 651.280.6800.Fax 651.280.6899 '•A pito-` www.cilarmington.mn.us May 16,2018 Nancy Peterson 18863 Embers Avenue Farmington, MN 55024 Dear Nancy: Thank you for sharing your thoughts on the Vitals program with the Farmington City Council at their meeting on May 7,2018. The city council discussed this issue at their work session this week and funding for this program will be included in the draft 2019 budget. The 2019 budget will be discussed throughout the summer and fall months with final approval taking place in December 2018. Not everything included in the initial draft budget is included in the final budget, but I wanted you to know that the funding for this program for next year will be included in the draft budget. If you have any questions, please feel free to contact me at 651-280-6801. Thank you for your time on this important matter. Brest wishes, l ....."7 .."/". ( David McKnight City Administrator Cc: City Council Packet 4004/, City of Farmington 7144fet%A.44 430 Third Street Farmington, Minnesota 651.280.6800 - Fax 651.280.6899 \ 1". ' www.ci.farmington.mn.us TO: Mayor, Councilmembers and City Administrator FROM: David McKnight, City Administrator SUBJECT: Approve Minutes of the May 7, 2018 City Council Meeting-Administration DATE: May 21, 2018 INTRODUCTION Attached for your review are the minutes of the May 7, 2018 city council meeting. DISCUSSION NA BUDGET IMPACT NA ACTION REQUESTED Approve the minutes of the May 7, 2018 city council meeting. ATTACHMENTS: Type Description D Backup Material May 7, 2018 City Council Minutes mmimw CITY OF FARMINGTON CITY COUNCIL MINUTES REGULAR MEETING MAY 7, 2018 1. Call to Order Mayor Larson called the meeting to order at 7:00 p.m. 2. Pledge of Allegiance Mayor Larson led those in attendance in the pledge of allegiance. 3. Roll Call Present-Larson, Bartholomay, Bernhjelm and Craig Absent-Donnelly Staff Present-Public Works Director Gehler, Community Development Director Kienberger and Human Resources Director Wendlandt. 4. Agenda Motion by Craig, second by Bartholomay,to approve the agenda as amended. APIF, motion carried. 5. Announcements/Commendations a) American Legion Auxiliary Poppy Day Members of the Farmington American Legion Auxiliary shared information on Poppy Day which will take place on May 25, 2018. b) Farmington Liquor Stores Update Liquor Operations Manager Blair Peterson provided the city council with an update on liquor store activities. Peterson shared information on 2017 sales increases, 2018 sales to date, donation drives held to date, wine club events, sponsorships and more. City councilmembers thanked Peterson for the work that is being done at the liquor stores. 6. Citizen Comments May 7, 2018 Minutes - 1- a) Nancy Nelson, 18863 Embers Avenue shared information on the Vitals program recently offered to cities in Dakota County. This program is designed to empower individuals with special needs and improves communication, safety and interactions with police and emergency responders. Ms. Nelson was disappointed that Farmington has not implemented this program and encouraged the city council to make it available in the city. 7. Consent Agenda Motion by Bartholomay, second by Craig, to approve the consent agenda: a) Approve Minutes of the April 16, 2018 City Council Meeting-Administration b) Approve Dakota Communications Center Management Control Agreement- Administration c) Approve Out of State Training-Administration d) Approve Temporary Storage Agreement-Administration e) Adopt Resolution R18-2018 Approving Plans and Specifications and Authorize Advertisement of Bids for Construction of City Hall USDA Lease Space-Parks f) Approve Electrical Work in Evergreen Knoll Park-Parks g) Declare Surplus Property-Fire h) Acknowledge Retirement Fire Department-Human Resources i) Acknowledge Retirement Fire Department-Human Resources j) Approve Seasonal Hiring-Human Resources k) Approve Bills-Finance* APIF, motion carried. *A bill to Veridian Weapon Technologies in the amount of$12,995 was removed from the list of bills. 8. Public Hearings a) On Sale Liquor License Amendment for El Charro Mexican Restaurant LLP Administrative Assistant Muller presented an on sale liquor license amendment for El Charro Mexican Restaurant located at 120 Elm Street. The owner is adding two partners to the business and going from an LLC to an LLP. The change in ownership requires a name change to the on sale liquor license and a public hearing. The application has been reviewed and approved by the police department. Mayor Larson opened the public hearing. No one in attendance wished to speak on the subject. Motion by Bartholomay, second by Bernhjelm, to closed the public hearing. APIF, motion carried. May 7, 2018 Minutes -2- Motion by Bernhjelm, second by Craig, to approve an on sale liquor license change in ownership and name change to El Charro Mexican Restaurant LLP, located at 120 Elm Street. APIF, motion carried. 9. Award of Contract None 10. Petitions, Requests and Communications a) 2017 Human Resources Annual Report Human Resources Director Wendlandt presented the 2017 Human Resources Annual Report to the city council. The department is made up of human resources, payroll, information technology, communications and cable communications. Wendlandt shared information on the work completed by the department in 2017 including recruitments, employment legal obligations including pay equity, workers compensation, regional safety group formed, IT projects, increased efforts in communications, web domain changes, continued negotiations on cable franchise agreements and more. City councilmembers thanked Wendlandt for the work performed in the department in 2017. 11. Unfinished Business None 12. New Business None 13. City Council Roundtable Craig-Thanked the American Legion Auxiliary representatives for sharing information on their program. Bartholomay-Thanked Ms. Nelson for sharing information on the Vitals program. Kienberger-Last week was national small business week and he thanked all of the small businesses owners in the city. Larson-Shared information on the Farmers Market, thanked the high school for allowing him to present to civics classes again this year, congratulated the high school military enlistees for May 7, 2018 Minutes -3- 2018, reminded residents of two Memorial Day events coming up and encouraged residents to shop local. Adjourn Motion by Bartholomay, second by Bernhjelm,to adjourn the meeting at 7:39 p.m. APIF, motion carried. Respectfully Submitted ilwiliffoK.afIct David McKnight, City Administrator • May 7, 2018 Minutes -4- Q� At1i City of Farmington 430 Third Street Farmington, Minnesota 651.280.6800 -Fax 651.280.6899 'II.'A.aw0` , www.ci.farmington.mn.us TO: Mayor, Councilmembers and City Administrator FROM: David McKnight, City Administrator SUBJECT: Approve Minutes of the May 7, 2018 City Council Work Session-Administration DATE: May 21, 2018 INTRODUCTION Attached for your review are the minutes from the May 7, 2018 city council work session. DISCUSSION NA BUDGET IMPACT NA ACTION REQUESTED Approve the minutes of the May 7, 2018 city council work session. ATTACHMENTS: Type Description ® Backup Material May 7, 2018 Work Session Minutes CITY OF FARMINGTON CITY COUNCIL MINUTES WORK SESSION MAY 7, 2018 Acting Mayor Bernhjelm called the work session to order at 6:00 p.m. Roll Call Present-Bartholomay, Bernhjelm and Craig Absent-Larson and Donnelly Also Present-Public Works Director Gehler, Human Resources Director Wendlandt, Community Development Director Kienberger and Communications Specialist Siebenaler. Agenda The city council approved the agenda by consensus. City Logo Project Human Resources Director Wendlandt and Communications Specialist Siebenaler presented options for a new city logo. Siebenaler presented logos, explained where the inspiration came from and the pros and cons of each option. The city council was asked to review and provide feedback on the options. Each of the councilmembers liked different elements of the options but were not thrilled with any of them. The city council felt the silo was outdated and not progressive. They were also concerned about the bridge as there have been some negative connotations of this symbol. The city council wants to get away from anything circular, would like something squared up and linear that portrays where the city wants to go. The would also like the name to be the primary focus. City staff was asked to come back with options that stick with the focus on the river and name, stay away from circular options and stay away from just using the letter F. The city council discussed getting quotes from professional graphic design companies. Staff commented that the intent was for staff and the city council to come up with the concept and May 7, 2018 Work Session Minutes - 1- then get quotes from graphic designers to take the concept and create a professional logo to keep costs down. Wendlandt clarified the city council direction of staff bringing back option five, removing most components but the river and the city name and if that does not work, staff would solicit ideas from others. Staff was also asked to get input from the absent city councilmembers as well. Adjourn Motion by Bartholomay, second by Craig, to adjourn the meeting at 6:26 p.m. APIF, motion carried. Respectfully Submitted Ywse€IwG1`4ht David McKnight, City Administrator May 7, 2018 Work Session Minutes -2- o�FMit , City of Farmington 430 Third Street Farmington, Minnesota 651.280.6800 - Fax 651.280.6899 1.• POOP- www.ci.farmington.mn.us TO: Mayor, Councilmembers and City Administrator FROM: David McKnight, City Administrator SUBJECT: Approve Minutes of the May 14, 2018 City Council Work Session-Administration DATE: May 21, 2018 INTRODUCTION Attached for your review are the minutes of the May 14, 2018 city council work session. DISCUSSION NA BUDGET IMPACT NA ACTION REQUESTED Approve the minutes of the May 14, 2018 city council work session. ATTACHMENTS: Type Description D Backup Material May 14, 2018 Work Session Minutes CITY OF FARMINGTON CITY COUNCIL MINUTES WORK SESSION MAY 14, 2018 Mayor Larson called the work session to order at 6:00 p.m. Roll Call Present-Larson, Bartholomay, Bernhjelm, Craig and Donnelly Absent-None Also Present-Administrator McKnight, Community Development Director Kienberger and Public Works Director Gehler. Agenda Motion by Bartholomay, second by Donnelly,to approve the agenda. APIF, motion carried. Community Solar Subscription Community Development Director Kienberger presented an update on community solar subscriptions. The city previously looked at the solar issue in 2015 and decided against participating in the Met Council led program at that time. The city has been approach by Nokomas Partners with a new approach to this topic that includes fixed savings. Kienberger reviewed potential benefits and risks to the 25-year program and clarified that this is for the city facilities in the Xcel Energy territory within Farmington. Councilmember Bernhjelm asked if there are opt out options. Kienberger stated there are some in the draft contract and they will be reviewed with the city council in detail if a contract is brought back for consideration. Administrator McKnight asked if becoming more energy efficient penalizes the city in terms of future savings. Public Works Director Gehler stated that it does not penalize the city. Councilmember Donnelly asked if the variance of power usage each month locks us in. Kienberger stated that it does not because the program looks at the city power use over a 12- month period when determining our potential amount of power to purchase from the solar garden and the potential savings. Gehler clarified the process and that it is easier to understand if you separate the past 12 months of energy use that helps determine how much of a solar garden we purchase and the amount of savings that are applied to future monthly city electric bills. May 14, 2018 Work Session Minutes - 1 - The consensus of the city council was to have city staff continue to work on this issue and have the city attorney review the draft contract before it is brought back to the city council. Councilmember Craig reminded staff to review the opt out options. Dakota County Cost Share Policy Update Public Works Director Gehler updated the city council on work that has been occurring on the Dakota County Cost Share Policies in terms of street construction projects. Gehler shared that this work has been occurring over the past year with input from public works directors, city administrators and others. Gehler reviewed the draft proposal and how it impacts different road classifications within the county. Councilmember Donnelly asked if this new approach would have had a different cap on the 195th Street project if it was in place a few years ago. Gehler stated it would have. Councilmember Craig asked what the capped percentage of projects was based on. Gehler stated that those are defined within county policy, what type of work receives what percentage of pay. Mayor Larson asked how much the county has taken in under the CTIB program because it seems there is now more money to spend since that was dissolved. Administrator McKnight stated that would be a good question for Commissioner Slavik to answer when he visits with the city council in June. After additional discussion, the city council wanted the message sent to the county that they appreciated the participation in county projects but that it would be appropriate for the county to have more participation and that some consideration be given for the smaller tax bases in some of the Dakota County cities. Councilmember Craig asked how often these policies are reviewed. Gehler stated that they are reviewed as needed. Alley Improvement Policy Discussion Public Works Director Gehler presented information on two potential alley paving projects. One is related to a new daycare being opened in Farmington and one is related to a building sale and potential new renters. There may be times when the city may participate in some of this work. After discussion, the city council consensus was that if these projects, or potential future projects, were going to be done they should be paid for by the property owners. There was May 14, 2018 Work Session Minutes -2 - some discussion about possible city participation in these projects in they were economic development related. The city council wanted to be as consistent as possible. Gehler brought up the issue of private streets and their impact on the city. There are about 5.5 miles or private streets in the city. City staff will do some additional research on this issue and bring it back for more in-depth city council discussion. Pavement Management Program Public Works Director Gehler presented information on pavement management efforts in Farmington. A video on pavement management efforts in the metro area was presented. Gehler reviewed information on the efforts performed in Farmington on pavement management including crack sealing, seal coating and street reconstruction. Gehler reminded the city council that a pavement condition index system should be in place by the end of 2019 that will place a score on the condition of each street to help determine future street maintenance and reconstruction schedules. Gehler reviewed how maintenance projects like seal coating, crack sealing, overlays and reconstruction extend the life of a road and lower overall costs compared to doing nothing. Gehler reviewed that we currently perform 11.4 miles of crack sealing and seal coating, 0.42 miles of reconstruction and 0 miles of mill and overlay each year. The annual benchmarks we should be meeting are 6.8 miles of crack sealing and seal coating, 1.7 miles of reconstruction and 3.4 miles of mill and overlay each year. The city council was in support of these projects and asked city staff to continue to try and work them into future budgets and capital improvement programs. City Administrator Update 2019 Budget Discussion Administrator McKnight shared with the city council that the 2019/2020 budget process has started at the staff level and the city council will start to discuss the budget in June. McKnight wanted to provide the city council with an opportunity to provide input on the budget and levy before they have information in front of them. Some direction was provided that a conservative approach would be taken with the budget. Other Updates Administrator McKnight presented updates on the following items: May 14, 2018 Work Session Minutes -3- 1. Discussed the Vitals program that a resident raised with the city council at the May 7, 2018 city council meeting. This issue will be considered as a part of the 2019 budget process. 2. Discussed with the city council a bill that was pulled from the May 7, 2018 list of bills. City Council Roundtable Councilmember Craig brought up the issue of Express Auto who plan to develop in the Farmington Business Park. Concerns have been expressed that this is a salvage or junk yard and neighbors to the south are concerned. Staff reviewed the business and clarified that it is an auto transfer of damaged vehicles. The city will require that a fence be installed to help with the existing trees as a part of the screening process. Councilmember Bernhjelm inquired about cancelling the July 2, 2018 city council meeting. The city council agreed to cancel this meeting. Adjourn Motion by Craig, second by Bartholomay, to adjourn the meeting at 8:10 p.m. APIF, motion carried. Respectfully Submitted 431"1466 74i*Kr David McKnight, City Administrator May 14, 2018 Work Session Minutes -4- YQFAR � City of Farmington cZ 430 Third Street Farmington, Minnesota 651.280.6800 - Fax 651.280.6899 •A til .,. www.c i.farmington.mn.us TO: Mayor, Councilmembers and City Administrator FROM: Cynthia Muller,Administrative Assistant SUBJECT: Approve Temporary On-Sale Liquor License for Farmington Liquors-Community Development DATE: May 21, 2018 INTRODUCTION Farmington Liquors is requesting a temporary on-sale liquor license for a wine tasting event to be held June 13, 2018 as a part of Dew Days. DISCUSSION This event will be held at the Flavors of Farmington tent in the Rambling River Center parking lot, 325 Oak Street. Per state statute, a temporary liquor license must first be approved by the city and then forwarded to the state for approval. BUDGET IMPACT The State of Minnesota waives all fees for temporary liquor licenses for non-profit organizations. Therefore, the city has not established a fee for this license. ACTION REQUESTED Approve the attached application for a temporary on-sale liquor license for Farmington Liquors, for a wine tasting to be held at the Flavors of Farmington tent in the Rambling River Center parking lot, on June 13, 2018. ATTACHMENTS: Type Description D Exhibit Temporary On-Sale Liquor License Application Minnesota Department of Public Safety Alcohol and Gambling Enforcement DivisionAl 945 Minnesota Street,Suite 222,St. Paul,MN 55101 AM n,INNE,utn DEI•.=litroff Of F ,LAG MI 651-201-7500 Fax 651-297-5259 TTY 651-282-6555 Alcohol&Gambling Enforcement APPLICATION AND PERMIT FOR A 1 DAY TO 4 DAY TEMPORARY ON-SALE LIQUOR LICENSE Name of organization Date organized Tax exempt number Address City State Zip Code CkCO'ill 16,4)r Minnesota556 '-Lt Name of person making application� Business phone Home phone li Date(s)of event Type of organization []Club ❑ Charitable ❑ Religious a Other non-profit Organization officer's name City State Zip Code \C�l\r, \-60-11(n1�C)r Minnesota Organization officer's name City J State Zip Code Minnesota Organization officer's name City State Zip Code 1 Minnesota Organization officer's name City State Zip Code Minnesota Location where permit will be used. If an outdoor area,describe, ✓If the applicant will contract for intoxicating liquor service give the name and address of the liquor license providing the service. If the applicant will carry liquor liability insurance please provide the carrier's name and amount of coverage. APPROVAL APPLICATION MUST BE APPROVED BY CITY OR COUNTY BEFORE SUBMITTING TO ALCOHOL AND GAMBLING ENFORCEMENT City or County approving the license Date Approved Fee Amount Permit Date Date Fee Paid City or County E-mail Address City or County Phone Number Signature City Clerk or County Official Approved Director Alcohol and Gambling Enforcement CLERKS NOTICE;Submit this form to Alcohol and Gambling Enforcement Division 30 days prior to event. ONE SUBMISSION PER EMAIL,APPLICATION ONLY. PLEASE PROVIDE A VALID E-MAIL ADDRESS FOR THE CITY/COUNTY AS ALL TEMPORARY PERMIT APPROVALS WILL BE SENT BACK VIA EMAIL. E-MAIL THE APPLICATION SIGNED BY CITY/COUNTY TO AGE,TEMPORARYAPPLICATION@STATE.MN.US Q�FAR 4 City of Farmington az" * p 430 Third Street Farmington, Minnesota 651.280.6800 -Fax 651.280.6899 •A PRO0v. www.ci.farmington.mn.us TO: Mayor, Councilmembers and City Administrator FROM: Matt Decur,Assistant City Engineer SUBJECT: Approve 2018 Trail Crack Sealing Agreement-Public Works DATE: May 21, 2018 INTRODUCTION The Trail Maintenance Capital Improvement Plan(CIP) approved by the City Council in 2014 includes fog sealing and crack sealing approximately five miles of trails shown in the attached map. Fog sealing is completed as part of the South Metro Cities Joint Powers Agreement for Street Maintenance Services (South Metro JPA) approved earlier this year. Trail crack sealing is not included in the South Metro JPA and is therefore bid as a separate contract. DISCUSSION The city solicited quotes from six contractors based on the anticipated 14,000 lineal feet of trail crack sealing and received the following three quotes: 2018 Farmington Trail Crack Sealing Quote Results Contractor Unit Price LF Total Bid Gopher State Seal Coat Inc. $0.390 $5,460.00 MN Asphalt Maintenance $0.395 $5,530.00 Astech Corp $0.650 $9,100.00 Based on quotes received, staff is recommending that the city accept the low quote of$5,460.00 from Gopher State Seal Coat, Inc. and award the contract for trail crack sealing to them. BUDGET IMPACT The cost of trail crack sealing is included in the 2018 trail maintenance budget. ACTION REQUESTED Accept the quote from and authorize execution of a contract with Gopher State Seal Coat, Inc. in the amount of$5,460.00 for the 2018 Trail Crack Sealing work. ATTACHMENTS: Type Description ID Backup Material 2018 Trail Maintenance Map .(‘,4..,''*;,. "'Pt' 1 _-A i . ,f 'it.o . - :: a :. __:, , , : , ..%. , MIn enance _... A FlpsR ji f _ pp,, I A 1 i -141it _. .. \3a IIs e 2018 Farmington Trail Maintenance 2018 Trails Major Cross Streets r_, Dakota County GI', Specifications and Requirements 2018 Trail Maintenance Gener. 11 construc on methods and materials shall be in accordance with current MnDOT specifications I.A d in accord ce with manufacturer recommendations. lithe project shall be completed no later than September 21,2018 uestions rel;tedto the project should be directed to: ity of Farm`•gton ttn: Shawn;..nyder 30 Third Str et armington, 55033 hone: (651)280-6844 -mail:. ssn t er ' tannin.. ommn.tov Projec The sc e of this pro ect involves crack sealing the trail sections shown on the attached maps for the City of Farmington. Crack ealing All w tic shall be in conformance with MnDOT specification 3723 for hot pour joint and crack sealer, MnDot Special Provi.ions S-141 Bituminous Pavement Treatment Clean &Seal for Joint and Crack Sealer and the manufacture 's application requirements. All pa 'ement crack. 1/16 inch wide or larger located on the trails shown on the attached maps shall be blown ean with co I'pressed air,and filled with hot rubber crack filler. The completed surface of the crack sealant hall be cove d with single-ply tissue material meeting the manufacturer's specifications to prevent trackin or transfer o the sealant. Paym p t for the app ication of crack sealer will be based on the unit price bid per linear feet of in-place accepte material. P.yment is full compensation for all materials,labor and equipment necessary to apply the crac sealer. 0 FORM OF AGREEMENT BE WEEN CITY OF FARMINGTONAND Gopher State Sealcoat FOR NON-BID CONSTRUCTION CONTRACT HIS AGREE ENT made this 21 day of May ,2018 ,by and between the CITY OF FARM GTON,a M.. esota municipal corporation("Owner"or"City")and Gopher State Sealcoat ,a Busine.s corporatio, ("Contractor"). Owner and Contractor,in consideration of the mutual covenants set forth herein,agree as folios: I I • CONT' •CT DOCUMENTS. The following documents shall be referred to as the"Contract Documents",all of which'shall be taken to gether as a whole as the contract between the parties as if they were set verbatim and in full herein: A. This Agreement. B. Specifications and Requirements-Trail Maintenance C. MnDOT Standard Specifications for Construction D. Contractor's Quote. In the ev nt of a conflict ..ong the provisions of the Contract Documents,the order in which they are listed above shall control in resolvin any such confli is with Contract Document"A"having the first priority and Contract Document"E"having the last priority. ,1 I OBLI I ATIONS OF THE CONTRACTOR. The Contractor shall provide the goods,services,and perform the work}n accordance :th the Contract Documents. 1▪ CONT' • CT PRICE. Owner shall pay Contractor for completion of the Work, in accordance with the Contract$ 5 460.00 inclusive of taxes,if any. PAY NT PROCEDURES. A. Contractor shall submit Application for Payment upon completion of the work. Application for Payment will be processed by the City Engineer. B. Payments to Subcontractors. (I) Prompt Payment to Subcontractors. Pursuant to Minn.Stat.§471.25,Subd.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 1 %2 percent per month or any part of a month to the 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 due to the subcontractor. (2) Form IC-134(attached)required from general contractor. Minn.Stat.§290.92 requires that the City of Farmington obtain a Withholding Affidavit for Contractors,Form 1C-134,before making final payments to Contractors. This form needs to be submitted by the Contractor to the Minnesota Department of Revenue for approval. The form is used to receive certification from the state that the vendor has complied with the requirement to withhold and remit state withholding taxes for employee salaries paid. C. Final Payment. Due to the small scope and short duration of this project,only one payment will be made upon completion of the project as recommended by the City Engineer. • COMP ETION DATE. The Work must be completed by September 21,2018 CONT CTOR'S REPRESENTATIONS. • A. Contractor has examined and carefully studied the Contract Documents and other related data identified in the Contract Documents. B. Contractor has visited the Site and become familiar with and is satisfied as to the general,local,and Site conditions that may affect cost,progress,and performance of the Work. C. Contractor is familiar with and is satisfied as to all federal,state,and local laws and regulations that may affect cost,progress,and performance of the Work. D. Contractor has carefully studied all: (1)reports of explorations and tests of subsurface conditions at or contiguous to the Site and all drawings of physical conditions in or relating to existing surface or subsurface structures at or contiguous to the Site(except Underground Facilities)which have been identified in the General Conditions and(2)reports and drawings of a Hazardous Environmental Condition,if any,at the Site. E. Contractor has obtained and carefully studied(or assumes responsibility for doing so)all additional or supplementary examinations, investigations, explorations,tests,studies,and data concerning conditions (surface,subsurface,and Underground Facilities)at or contiguous to the Site which may affect cost, progress,or performance of the Work or which relate to any aspect of the means,methods, techniques, sequences,and procedures of construction to be employed by Contractor,including any specific means, methods,techniques,sequences,and procedures of construction expressly required by the Bidding Documents,and safety precautions and programs incident thereto. F. Contractor does not consider that any further examinations,investigations,explorations,tests,studies, or data are necessary for the performance of the Work at the Contract Price,within the Contract Times, and in accordance with the other terms and conditions of the Contract Documents. G. Contractor is aware of the general nature of work to be performed by Owner and others at the Site that relates to the Work as indicated in the Contract Documents. H. Contractor has correlated the information known to Contractor,information and observations obtained from visits to the Site,reports and drawings identified in the Contract Documents,and all additional examinations,investigations,explorations,tests,studies,and data with the Contract Documents. I. The Contract Documents are generally sufficient to indicate and convey understanding of all terms and conditions for performance and furnishing of the Work. J. Subcontracts: (1) Unless otherwise specified in the Contract Documents,the Contractor shall,upon receipt of the executed Contract Documents,submit in writing to the Owner the names of the Subcontractors proposed for the work. Subcontractors may not be changed except at the request or with the consent of the Owner. (2) The Contractor is responsible to the Owner for the acts and omissions of the Contractor's subcontractors,and of their direct and indirect employees,to the same extent as the Contractor is responsible for the acts and omissions of the Contractor's employees. (3) The Contract Documents shall not be construed as creating any contractual relation between the Owner and any subcontractor. (4) The Contractor shall bind every subcontractor by the terms of the Contract Documents. , WO' i R'S COMPENSATION. The Contractor shall obtain and maintain for the duration of this Contract, statutory Worker's Com s sation Insurance and Employer's Liability Insurance as required under the laws of the State of Minneso . COM"i' HENSIVE GENERAL LIABILITY. Contractor shall obtain the following minimum insurance coverage nd maintain it t all times throughout the life of the Contract,with the City included as an additional name insured on the gene :1 liability insur• ce on a primary and noncontributory basis. The Contractor shall furnish the City a certificate of insuranc:.satisfactory to e City evidencing the required coverage: Bodily njury: $2,000,000 each occurrence $2,000,000 aggregate products and completed operations 1 1,17 1 Properly Damage: $2,000,000 each occurrence $2,000,000 aggregate Contractual Liability(id tifying the contract): Bodily njury: $2,000,000 each occurrence Proper) Damage: $2,000,000 each occurrence $2,000,000 aggregate Comprehensive Automo ile Liability(owned,non-owned,hired): Bodily njury: $2,000,000 each occurrence $2,000,000 each accident Proper Damage: $2,000,000 each occurrence WAR. ANTY. The Contractor guarantees that all new equipment warranties as specified within the quote shall be in full force and trans rred to the City upon payment by the City. The Contractor shall be held responsible for any and all defects i I workmanship, aterials,and equipment which may develop in any part of the contracted service,and upon proper notificat n by the City s i.11 immediately replace,without cost to the City,any such faulty part or parts and damage done by reason o the same in ace yrdance with the bid specifications. 0. INDE :LAITY. The Contractor agrees to indemnify and hold the City harmless from any claim made by third parties a result of the 'rvices performed by it. In addition,the Contractor shall reimburse the City for any cost of reasonable attorney'•fees it may inc' as a result of any such claims. ]. PERF 4 RMANCE AND PAYMENT BONDS. Performance and payment bonds are not required for the doing of any p lic work if the •ontract price is$75,000 or less.On projects of more than$75,000 for the doing of public work a paymentand and perfor nce bond each in the amount of the contract price must be furnished to the City prior to commenli ment of work. The form of the bonds must satisfy statutory requirements for such bonds. 2. MSC,LLANEOUS. A. Terms used in this Agreement have the meanings stated in the General Conditions. B. Owner and Contractor each binds itself,its partners,successors,assigns and legal representatives to the other party hereto,its partners,successors,assigns and legal representatives in respect to all covenants, agreements,and obligations contained in the Contract Documents. C. Any provision or part of the Contract Documents held to be void or unenforceable under any law or regulation shall be deemed stricken,and all remaining provisions shall continue to be valid and binding upon Owner and Contractor,who agree that the Contract Documents shall be reformed to replace such stricken provision or part thereof with a valid and enforceable provision that comes as close as possible to expressing the intention of the stricken provisions. D. Data Practices/Records. (1) All data created,collected,received,maintained or disseminated for any purpose in the course of this Contract is governed by the Minnesota Government Data Practices Act,Minn.Stat.Ch. 13,any other applicable state statute,or any state rules adopted to implement the act,as well as federal regulations on data privacy. (2) All books,records,documents and accounting procedures and practices to the Contractor and its subcontractors,if any,relative to this Contract are subject to examination by the City. E. 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. 0 F. Patented devices,materials and processes. If the Contract requires,or the Contractor desires,the use of any design, device,material or process covered by letters,patent or copyright,trademark or trade name, the Contractor shall provide for such use by suitable legal agreement with the patentee or owner and a copy of said agreement shall be filed with the Owner. If no such agreement is made or filed as noted, the Contractor shall indemnify and hold harmless the Owner from any and all claims for infringement by reason of the use of any such patented designed,device,material or process,or any trademark or trade name or copyright in connection with the Project agreed to be performed under the Contract,and shall indemnify and defend the Owner for any costs, liability, expenses and attorney's fees that result from any such infringement. G. 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. H. Waiver. In the particular event that either party shall at any time 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. I. Governing Law/Venue. The laws of the State of Minnesota govern the interpretation of this Contract. In the event of litigation,the exclusive venue shall be in the District Court of the State of Minnesota for Dakota County. J. 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. K. 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 made between the parties with respect thereto. L. Permits and Licenses;Rights-of-Way and Easements. The Contractor shall give all notices necessary and incidental to the construction and completion of the Project. The City will obtain all necessary rights-of-way and easements. The Contractor shall not be entitled to any additional compensation for any construction delay resulting from the City's not timely obtaining rights-of-way or easements. M. If the work is delayed or the sequencing of work is altered because of the action or inaction of the Owner,the Contractor shall be allowed a time extension to complete the work but shall not be entitled to any other compensation. OWNE• CONTRACTOR: CITY O FARMINGT t N 40711V SIN re Ca I , 111- Ld/li" Mayor Its:ItiTeX re Caerit-4,7 AND —Its City (! ' 7 -a. ) �o�FAR��,,) City of Farmington : P 430 Third Street oic Farmington, Minnesota 651.280.6800 - Fax 651.280.6899 ►.,,,�„�.a� 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 21, 2018 INTRODUCTION The recruitment and selection process for the appointment of the attached list of 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 a pre- employment drug test and 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 Seasonal Staffing 2018 Spring/Summer Seasonal Staff 2017-18 Name Pay Rate Pos/Step RETURNING RECREATION STAFF Kiley Foss $ 13.11 Step 1 - Rec Program Supervisor Darrel Valek $ 10.76 Step 2 - Park Maintenance Dillon Pariseau $ 13.72 Step 3 - Rec Program Supervisor Autumn Brule $ 9.65 Step 1 - Rec Program Assistant Megan Mc Millen $ 9.65 Step 1 - Rec Program Assistant Marvin Frank $ 10.47 Step 1 - Building Maintenance $ 10.47 Step 1- Park Maintenance Tyler Wenck $ 11.02 Step 3 - Building Maintenance $ 10.76 Step 2 - Park Maintenance $ 13.11 Step 1 -Arena Supervisor Lucy McConnel $ 9.65 Step - Rec Program Assistant Kylie Berquist $ 9.65 Step 1 - Rec Program Assistant Jacob Mader $ 10.47 Step 1 - Park Maintenance $ 10.47 Step 1 - Building Maintenance o4FAR, i , City of Farmington 430 Third Street Cif on Farmington, Minnesota 651.280.6800 - Fax 651.280.6899 , .A www.ci.farmington.mn.us TO: Mayor, Councilmembers and City Administrator FROM: Brenda Wendlandt, Human Resources Director SUBJECT: Acknowledge Retirement Police-Human Resources DATE: May 21, 2018 INTRODUCTION The city has received notice that Mr. Steve Kuyper will retire from his position as police officer effective May 29, 2018. DISCUSSION The Human Resources Office has received notification that Mr. Steve Kuyper will retire from his position as police officer effective May 29, 2018. Mr. Kuyper began employment with the city on June 1, 1995 and has been valued member of the city organization. The city appreciates his commitment to the organization and wishes him well in her future endeavors. BUDGET IMPACT NA ACTION REQUESTED Acknowledge the retirement of Mr. Steve Kuyper effective on May 29, 2018. 44ARH4► City of Farmington 430 Third Street Farmington, Minnesota 11/4_ 651.280.6800 - Fax 651.280.6899 ' ► 4NOW' www.ci.farmington.mn.us TO: Mayor, Councilmembers and City Administrator FROM: Teah Malecha, Finance Director SUBJECT: Approve Bills-Finance DATE: May 21, 2018 INTRODUCTION Attached is the May 03 - May 16, 2018 city council check register and recently processed automatic payments for your consideration. 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N N N C 2 N N N N a) V d' 4 4 co x 4 v M N ❑ Ln Ln Ln N a 0 Ln Ln L`n Y a co m o 0) o Z M co co o M M 0 La in M M to O co M Pel O w Z t r• m a 0 c N- o N O N a) a) N M co 0 E`-.1 C) f6 r a C 0 0 U a) N 47 C 0 0 U u) N ❑ C 3 O U U Q U) O) a 0 .0 .0 M2 co Z0 C' O E• ( SND Q Y 0 c z 0 D a Q o 0 x x CD w U U a aa a o 0 .. W U A J al c o _o Z � U O tQ # co N Q T co m d O c U O CD d co Q O t0 a � o O a a � c a � x o W rn m a) m 0- -C L U d _ N C Q • E Z (.0 a U` 'o Q m Q U C R Q a U N Y O) Oa 2 ZN rn U o 0AR44► City of Farmington U = 430 Third Street Farmington, Minnesota 651.280.6800 -Fax 651.280.6899 ' .,, • www.ci.farmington.mn.us TO: Mayor, Councilmembers and City Administrator FROM: Tony Wippler, Planning Manager SUBJECT: Vacate Drainage and Utility Easements-Express Auto Transport, Inc. DATE: May 21, 2018 INTRODUCTION The city has received a request from Express Auto Transport, Inc. to vacate existing drainage and utility easements within the FARMINGTON BUSINESS PARK plat. DISCUSSION Background Information Express Auto Transport, Inc., a nationwide auto transport carrier, is the contract purchaser of Lots 1-2, Block 1 and Lots 1, 2 and 3, Block 2 Farmington Business Park. Sterling State Bank is the current owner of the lots. As shown on the attached site plan, Express Auto Transport, Inc. is proposing to construct a 27,337 square foot building consisting of a 2,022 square feet of office space and 25,315 square feet of truck terminal. The building will be located on Lots 1 and 2, Block 1 of the FARMINGTON BUSINESS PARK. Express Auto Transport is proposing to utilize the three lots south of Canton Circle (Lots 1, 2 and 3, Block 2 FARMINGTON BUSINESS PARK) as a temporary storage area for insurance recovery units, that is anything involved in a loss that is covered by an insurance provider. These units are towed in, inventoried and then sold as complete units. There will never be any parts removed or on site mechanical work allowed. It will be a revolving inventory that will be stored on site. The storage area will be entirely fenced with an 8 foot high fence. The fence will either have to be an opaque wooden fence or chain link with slats and/or mesh that consists of earth tone colors of tan, brown or green hues to provide the required screening effect. The Planning Commission reviewed the site plan at its regular meeting on April 12, 2018 and approved the site plan with six contingencies. Those contingencies are: 1. A sign permit application shall be required for any signage to be placed on site. 2. The applicant shall obtain all necessary building permits that may be required for the establishment of the proposed use. 3. A lot combination must be submitted to and granted by Dakota County for Lots 1 and 2, Block 1 FARMINGTON BUSINESS PARK. 4. The vacation of the drainage and utility easements along the shared property lines of Lots 1 and 2, Block 1 FARMINGTON BUSINESS PARK. 5. The site plan being modified to show the building setback from 220th Street W at a minimum of 50 feet from the planned right of way line. 6. Contingent upon engineering comments and additional discussion on parking area materials. The proposed use, truck terminal, did not require a conditional use or public hearing at the Planning Commission due to a truck terminal being a permitted use within the B-3, Heavy Business, zoning district. A truck terminal is defined in city code as "any structure or land devoted principally to the receipt, transfer, short term storage, and dispatching of good transported by truck." Current Request As shown on the attached site plan, the proposed building will cross property lines therefore necessitating the need to vacate the drainage and utility easements that are currently dedicated on either side of the joint property line between Lots 1 and 2, Block 1 FARMINGTON BUSINESS PARK as well as combining these two lots through Dakota County. The easements to be vacated are described in the attached Exhibit "A" and depicted in the attached Exhibit "B". BUDGET IMPACT NA ACTION REQUESTED After the public hearing is conducted, a motion should be made to adopt the attached resolution vacating the drainage and utility easements described in the attached Exhibit"A" and depicted in the attached Exhibit "B", contingent upon: 1. The City Clerk filing a certified copy of the resolution with the County Auditor and County Recorder of Dakota County. 2. The execution of a lot combination for Lots 1 and 2, Block 1, FARMINGTON BUSINESS PARK. ATTACHMENTS: Type Description D Resolution Vacation Resolution D Backup Material Exhibit A- Vacation Description ❑ Backup Material Exhibit B - Vacation Depiction ❑ Backup Material Site Plan and Building Elevations RESOLUTION NO. R19-18 A RESOLUTION VACATING CERTAIN EASEMENTS 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 21St day of May, 2018 at 7:00 P.M. Members Present: Larson, Bartholomay, Bernhj elm, Craig Members Absent: Donnelly Member Bernhj elm And Member Bartholomay Introduced and seconded the following: WHEREAS, certain drainage and utility easements need to be vacated from the FARMINGTON BUSINESS PARK plat due to the proposed construction of a commercial building that would cross the joint property line of Lots 1 and 2, Block 1 of said plat, and WHEREAS,the city of Farmington has received a request from Express Auto Transport, Inc. to vacate the drainage and utility easements described on the attached Exhibit "A" and depicted in Exhibit"B"; and WHEREAS, it appears that it is in the public interest to vacate the drainage and utility easements described on the attached Exhibit"A" and depicted in Exhibit "B"; and WHEREAS, pursuant to Minn. Stat. §412.851, the Farmington City Council has conducted a hearing preceded by published and posted notice to consider the easement vacations requested by Express Auto Transport, Inc. NOW, THEREFORE,BE IT RESOLVED by the City Council of Farmington: 1. The drainage and utility easements described in Exhibit "A" and depicted in Exhibit "B" are hereby vacated. Drafted by: City of Farmington 430 Third Street Farmington,MN 55024 2. The City Clerk is directed to file a certified copy of this resolution with the County Auditor and County Recorder in and for Dakota County, Minnesota. 3. The Execution of a lot combination for Lots 1 and 2, Block 1, FARMINGTON BUSINESS PARK. This resolution adopted by recorded vote of the Farmington City Council in open session on the 21st day of May, 2018. Mayor Attested to the r day of May, 2018. V /Z4City Administ or SEAL Drafted by: City of Farmington 430 Third Street Farmington,MN 55024 be. A DRAINAGE AND UTILITY EASMENT VACATION DESCRIPTION That part of the drainage and utility easements dedicated in the plat of FARMINGTON BUSINESS PARK, according to the recorded plat thereof, Dakota County, Minnesota, described as follows: The South 10 feet of Lot 1, Block 1 and the North 10 feet of Lot 2, Block 1, said FARMINGTON BUSINESS PARK which lie east of the West 35 feet and west of the East 35 feet thereof. tx• 5 IllMOVING MNG NUMBER DAMNING NUMBER GRAWIN zw..r�rc ruwraa•rm.r+r;�v=su - eYmmcnxa ;:—..„...17.--. ,cmc,.., I y RI Ip I__.�_...._.1 is m,x " i71tig o ;1i o l f- c3 5 .V3 _1 19 s7J� .4! i e 1 Ip y, C ryr:.rrm.nW c w un mus tx Si.two II / M.8411.00 N %� fA'Aia r�'1 Ob'dlti I . �[IfI� o I iNr i\ �� �1 0 `TW e /� a i Nolo o . r le •� §yt x4N;a *g $ •c L —Srt rr,},,,,`aw kijl.00 n 3 sawsarose. amass xI _3�!Loom i MM. g _ AI.n,i4ov ww w 3 pI,LLm 5 IG • ss aq 11_ eons _B ° (o•i4L I Yr sv -IC I.�' i loop F� rttuK asn Ni°r, s=NAee =! 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O5 I 3: :3 d I o I ®'0 • I • •... ....._..........._.......... ._...__: .: ._..._.__....._._....__.... _. .. ...._...............__. ......... .. ............._......_........... ... ... c � ',,. o 044i City of Farmington U01 v 430 Third Street ZC Farmington, Minnesota 651.280.6800 - Fax 651.280.6899 PROlOw www.ci.farmington.mn.us TO: Mayor, Councilmembers and City Administrator FROM: Teah Malecha, Finance Director SUBJECT: 2017 Management and Comprehensive Annual Financial Report DATE: May 21, 2018 INTRODUCTION Each year the city's financial records are audited by an independent public accounting firm. 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 CAF R. 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 unmodified opinion that the City of Farmington's financial statements for the fiscal year ended December 31, 2017 are fairly presented in conformity with GAAP. An unmodified 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 2017 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, 2017, 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$109,570,443 (net position) at the close of the most recent fiscal year. Of this amount, $20,085,444 (unrestricted net position) may be used to meet the government's ongoing obligations to citizens and creditors. • The city's total net position increased by $2,268,565 in 2017, of this amount an increase of$3,090,504 was attributable to governmental activities, and a decrease of$821,939 was attributable to business-type activities. • The city's total bonded debt decreased by$16,385,000, or 45.1 percent, during the fiscal year due to a combination of of scheduled annual bond principle payments and the early retirement of several debt issues that were either refunded or called early using available city resources. • The city's governmental funds reported combined ending fund balances of$16,145,571 at December 31, 2017, a decrease of$11,037,808 from the prior year. Approximately 74.6 percent of this total amount, $12,039,205, is available for use within the City's constraints and policies. • At the end of the current fiscal year, the unassigned fund balance for the General Fund was $5,666,183, or 44.9 percent, of 2018 General Fund budgeted expenditures and transfers out. 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, 2016. This was the eighth 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 2017 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 one matter to communicate with the city council. The first is a lack of segregation of duties in the payroll area. 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. 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 fmancial records. Increased customer service has resulted in new processes to learn and educate others about. There is additional information to account for and reconcile. It has become more complicated. It requires a high degree of accuracy. They should be very proud of their work. • A special thank you to the Human Resources staff for all of their assistance with payroll and the related benefits. Each year the questions and data requested expand. They have done an excellent job. • City staff members diligently code and/or review invoices for payment, 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. They deserve a big thank you for paying close attention to detail, patience with complying with our numerous accounting requirements, some of which seem very tedious to those outside of Finance and Accounting, and their willingness to learn new ways to process information. • The auditors did an excellent job. They were organized and asked good questions. Each year their depth of understanding of the city and its processes and policies has increased. They were very thorough and respectful. Each staff person was technically strong and they were instrumental in the ongoing reporting for pension accounting and disclosure requirements. • I would like to thank you, Mayor, members of the City Council, and the City Administrator for your willingness to do what you believe is best for the city long-term. It is not easy as it is a constant balancing act. 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 of the auditors or city staff. Once you are comfortable with the information provided a motion should be made to accept the auditor's reports. ATTACHMENTS: Type Description D Backup Material 2017 Farmington Management Report D Backup Material 2017 Farmington Special Purpose Report © Backup Material 2017 Farmington Comprehensive Annual Financial Report(CAFR) Management Report for City of Farmington, Minnesota December 31, 2017 THIS PAGE INTENTIONALLY LEFT BLANK PRINCIPALS Thomas A.Karnowski,CPA Paul A.Radosevich,CPA William J.Lauer,CPA - Jamcs H.Eichten,CPA CERTIFIEDitIL.M1PUBLIC Aaron J.Nielsen,CPA ACCOUNTANTS Victoria L.Holinka,CPA/CMA 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, 2017. 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. / -la` / KiltAxow.4.14; P. A . Minneapolis, Minnesota May 14, 2018 Malloy, Montague, Karnowski, Radosevich & Co., P.A. 5353 Wayzata Boulevard • Suite 410 • Minneapolis, MN 55416 • Phone: 952-545-0424 • Fax: 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 Go VERNMENT 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, 2017, 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 31,2017: • We have issued an unmodified opinion on the City's basic financial statements. • 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 no findings based on our testing of the City's compliance with Minnesota laws and regulations. -1- 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. No new accounting policies were adopted and the application of existing policies was not changed during the year ended December 31, 2017; however, the City implemented the following governmental accounting standards during the fiscal year: • Governmental Accounting Standards Board (GASB) Statement No. 79, Certain External Investment Pools and Pool Participants, which enhanced disclosures regarding investments. • GASB Statement No. 82,Pension Issues, an amendment of GASB Statements No. 67, No. 68, and No. 73, which addressed certain issues related to pension reporting and disclosures. 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. 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: • Net Other Post-Employment Benefit (OPEB) and Pension Liabilities—The City has recorded liabilities and activity for other post-employment benefits (OPEB) and pension benefits. These obligations are calculated using actuarial methodologies described in GASB Statement Nos. 45 and 68. These actuarial calculations include significant assumptions, including projected changes, healthcare insurance costs, investment returns, retirement ages, proportionate share, and employee turnover. • 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. 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. -2- 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, a disagreement with management is 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 14, 2018. 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. 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. OTHER MATTERS We applied certain limited procedures to the management's discussion and analysis and the 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. Such information has 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 it. -3- 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 2016 fiscal year, local ad valorem property tax levies provided 39.8 percent of the total governmental fund revenues for cities over 2,500 in population, and 36.4 percent for cities under 2,500 in population. The total market value of property in Minnesota cities increased about 5.6 percent for the 2017 levy year, which followed an increase of 5.7 percent for levy year 2016. The market values used for levying property taxes are based on the previous fiscal year (e.g., market values for taxes levied in 2017 were based on assessed values as of January 1, 2016), so the trend of change in these market values lags somewhat behind the housing market and economy in general. The City's taxable market value increased 8.5 percent for taxes payable in 2016 and 5.2 percent for taxes payable in 2017. 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 11111.1 ■ $1,400,000,000 -- — $1,200,000,000 Pr ■ $1,000,000,000 ■ $800,00000 . ■ $600,000,000 $400,000,000 $200,000,000 ., mum ■ 2008 2009 2010 2011 2012 201; 2014 2015 2016 2017 -4- 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 its 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 7.9 percent for taxes payable in 2016 and 5.0 percent for taxes payable in 2017. The following graph shows the City's change in tax capacities over the past 10 years: Local Net Tax Capacity $20,000,000 $18,000,000 $16,000,000 - $14,000,000 - ® 1101 -- $12,000,000 - - - -- $10,000,000 - - --- $8,000,000 - - $6,000,000 - - -- - $4,000,000 -- - -- $2,000,000 -1111-i 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 The following table presents the average tax rates applied to city residents for each of the last three levy years, along with comparative state-wide and metro area average rates from the two most recent years for which the information is available: Rates Expressed as a Percentage of Net Tax Capacity All Cities Seven-County City of State-Wide Metro Area Farmington 2015 2016 2015 2016 2015 2016 2017 Average tax rate City 46.9 46.5 43.4 43.0 61.5 59.2 58.8 County 44.7 44.1 42.9 42.3 29.6 28.6 28.0 School 27.1 27.5 28.3 28.6 53.5 57.6 54.2 Special taxing 6.9 6.9 8.8 8.7 3.7 3.8 3.7 Total 125.6 125.0 123.4 122.6 148.3 149.2 144.7 Note: State-wide and metro area average tax rates are not available for 2017. 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. -5- 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, 2017, presented both by fund balance classification and by fund: Governmental Funds Change in Fund Balance Fund Balance as of December 31, Increase 2017 2016 (Decrease) Fund balances of governmental funds Total by classification Nonspendable $ 34,529 $ 33,872 $ 657 Restricted 4,071,837 16,959,150 (12,887,313) Committed 6,373,022 5,158,828 1,214,194 Unassigned 5,666,183 5,031,529 634,654 Total—governmental funds $ 16,145,571 $ 27,183,379 $ (11,037,808) Total by fund General $ 5,700,712 $ 5,065,291 $ 635,421 Debt Service 3,731,347 16,663,140 (12,931,793) State Aid Construction Capital Projects 283,919 396,538 (112,619) Storm Water Trunk Capital Projects 2,856,025 2,603,763 252,262 Permanent Improvement Revolving Capital Projects 165,526 151,184 14,342 Maintenance Capital Projects 903,238 136,382 766,856 Nonmajor 2,504,804 2,167,081 337,723 Total—governmental funds $ 16,145,571 $ 27,183,379 $ (11,037,808) In total, the fund balances of the City's governmental funds decreased by $11,037,808 during the year ended December 31,2017. The decrease in restricted fund balances of$12,887,313 relates primarily to the refunding or early call of several outstanding debt issues. The City retired $10.0 million of debt principal using refunding bond proceeds in addition to $6.4 million in debt principal paid from available resources. Committed fund balance increased $1,214,194, with the majority of the increase in resources committed for future capital improvements in the Storm Water Trunk and Maintenance Capital Projects Funds. Unassigned fund balance increased $634,654 due primarily to positive operating results in the General Fund. -6- 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 a 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 its operation. Also, certain data in these tables may be classified differently than how they appear in 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 31,2016 2015 2016 2017 Population 10,000-20,000 20,000-100,000 22,451 22,343 22,343 Property taxes $ 432 $ 455 $ 511 $ 530 $ 545 Tax increments 26 42 — — — Franchise and other taxes 43 45 12 12 12 Special assessments 44 59 29 24 24 Licenses and permits 33 42 17 29 19 Intergovernmental revenues 275 152 93 73 73 Charges for services 92 103 37 48 42 Other 57 54 17 24 19 Total revenue $ 1,002 $ 952 $ 716 $ 740 $ 734 The City's governmental fund revenues for 2017 were $16,393,012, a decrease of$182,120 (1.1 percent), or $6 per capita, from the prior year. Revenue from property taxes was $15 per capita higher than the prior year due to a 3.5 percent increase in the City's adopted levy. Licenses and permits were $10 per capita lower than last year, mainly as a result of a decrease in building permits. Charges for services declined $6 per capita from last year, mainly due to lower revenues from storm water and sanitary sewer trunk fees. 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. -7- 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 31,2016 2015 2016 2017 Population 10,000-20,000 20,000-100,000 22,451 22,343 22,343 Current General government $ 114 $ 97 $ 87 $ 89 $ 92 Public safety 250 273 229 237 248 Streets and highways 123 95 88 90 107 Culture and recreation 109 95 69 68 71 All other 77 91 4 2 2 673 651 477 486 520 Capital outlay and construction 370 301 209 123 26 Debt service Principal 163 115 129 197 286 Interest and fiscal charges 38 34 46 49 37 201 149 175 246 323 Total expenditures $ 1,244 $ 1,101 $ 861 $ 855 $ 869 Total expenditures in the City's governmental funds for 2017 were $19,396,070, an increase of$275,738 (1.4 percent), or$14 per capita, from the previous year. Current governmental expenditures for 2017 were $34 per capita higher than last year, mainly in the areas of public safety ($11 per capita) and streets and highways ($17 per capita). Capital outlay and construction expenditures were $97 per capita lower than last year, primarily due to a reduction in street improvement project activity. This was partially offset by a $77 per capita increase in debt service, due to the City electing to refund or exercise early call provisions on several debt issues,financed in part with available internal resources. -8- 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, $13,000,000 $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 $1,000,000 2013 2014 2015 2016 2017 Fund Balance $3,092,401 $4,107,560 $4,744,818 $5,065,291 $5,700,712 I I Cash(Net) $1,604,238 $2,934,620 $3,385,793 $3,875,421 $4,493,060 Exp&Trans Out $10,945,255 $10,497,656 $11,006,155 $12,228,226 $11,767,128 TheCi City's General Fund cash and investments, net of interfund borrowingat December 31, 2017 was $617,639 higher than at the previous year-end. Total fund balance at December 31, 2017 of$5,700,712 represented an increase of$635,421 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 81.3 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 unassigned General Fund balance of$5,666,183 at the end of the 2017 fiscal year represented approximately 44.9 percent of budgeted expenditures and transfers out for 2018. This is within the City's policy that calls for maintaining an unassigned fund balance of between 40.0-50.0 percent of the subsequent year's budgeted expenditures and transfers out. -9- The following graph reflects the City's General Fund revenue sources for 2017 compared to budget: General Fund Revenue Budget and Actual Property Taxes Intergovernmental MI Fines and Forfeits Charges for Services Licenses and Permits • All Other I Ooo o�s00 0� s� a°o-s��O°o s°o Ooo sib o� soo-O°o % � soo % s� O0 00 -'00 ,00 -00 �00 �00 -00 �00 .00 -0,. -0,. -0, -00 -00 �00 �o, 00 '00 O 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 ■ Actual ■Budget General Fund revenue for 2017 was $11,250,549, which was $197,409 (1.8 percent) more than budget. Property tax revenues were $46,373 over budget, mainly due to the City not budgeting for collections of prior year delinquent taxes. Intergovernmental revenue exceeded budget by $79,494, as fire pension and training aid, police aid, and miscellaneous state grants were higher than projected. Charges for services exceeded budget by $36,962, mainly due to fire charges exceeding expectations. Revenue from licenses and permits were $17,390 more than budget, as plumbing and heating permits were higher than anticipated. Finally, revenue in the all other category was $12,088 more than budget. 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, $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 $1,000,000 Property Fines and Charges for Licenses All Other Taxes Intergovernmental Forfeits Services and Permits ■2013 $8,269,785 $570,603 $81,919 $575,992 $664,673 $102,797 ■2014 $8,173,509 $849,876 $65,482 $519,169 $514,728 $295,376 02015 $8,485,373 $905,130 $52,299 $507,555 $370,889 $187,987 ■2016 $8,973,628 $937,424 $41,750 _ $577,905 $650,311 $217,498 ■2017 $9,142,126 $926,926 $45,102 $518,912 $415,005 $202,478 Total General Fund revenue for 2017 was $147,967 (1.3 percent) lower than last year. Property taxes were $168,498 higher than last year, due to the increased tax levy. Licenses and permits revenues decreased $235,306 from last year, due to a decrease in building permits. Charges for services decreased $58,993, mainly as a result of decreased fire charges. -10- The following graph illustrates the components of General Fund spending for 2017 compared to budget: General Fund Expenditures Budget and Actual 111 General Government Public Safety Public Works Parks and Recreation Economic Development +8r I Jc.) 'C) '..,' �' `817 J57 ` 'is 485. �6 °° ° ' 0 °° s°° °°° 00 °°° SO 00 °° '00 O°° S°° O°° °° '00 '00 '0 '0 'O° 'O° "00 '00 'O° 'O° 'O° ° ° 0 0 0 0 0 0 0 0 0 • Actual •Budget General Fund expenditures for 2017 were $10,812,336, which was $478,812 (4.2 percent) under budget. Expenditures were under budget due to milder weather, lower fuel prices, and conservative spending, with the largest savings in general government($198,189)and public works($173,601). 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 $1,000,000 General Parks and Economic Government Public Safety Public Works Recreation Development ■2013 $1,672,639 $5,511,231 $2,079,996 $1,204,319 $10,718 •2014 $1,717,186 $4,918,093 $2,038,136 $1,135,079 $48,583 0201 $1,946,663 $5,081,605 $1,977,495 $1,188,042 $96,343 ■2016 $1,996,410 $5,303,440 $1,941,856 $1,208,035 $41,178 ■2017 $1,984,002 $5,461,319 $2,094,946 $1,232,069 $40,000 Total General Fund expenditures for 2017 were $321,417 (3.1 percent)higher than the previous year. The largest increase was in public safety expenditures and public works expenditures, which were $157,879 and $153,090 higher than last year. -11- 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 31,2017, presented both by classification and by fund: Enterprise Funds Change in Financial Position Net Position as of December 31, Increase 2017 2016 (Decrease) Net position of enterprise funds Total by classification Net investment in capital assets $ 51,464,649 $ 53,225,787 $ (1,761,138) Restricted—future drinking water treatment plant 2,238,206 2,231,966 6,240 Unrestricted 13,508,485 12,575,526 932,959 Total—enterprise funds $ 67,211,340 $ 68,033,279 $ (821,939) Total by fund Liquor Operations $ 1,151,713 $ 1,057,545 $ 94,168 Sewer Operations 20,703,287 21,148,014 (444,727) Solid Waste 1,484,225 1,545,800 (61,575) Storm Water 14,332,928 14,684,236 (351,308) Water 29,443,667 29,531,419 (87,752) Street Light 95,520 66,265 29,255 Total—enterprise funds $ 67,211,340 $ 68,033,279 $ (821,939) In total, the net position of the City's enterprise funds decreased by $821,939 during the year ended December 31, 2017. The City's net investment in capital assets decreased$1,761,138 during the year, due to depreciation. Unrestricted net position increased by $932,959, as most of the City's enterprise operations had positive operating results prior to transfers out. The enterprise funds transferred a total of $1,939,974 to the governmental and internal service funds during the year to support the General Fund, help pay for capital improvements, and for debt service. -12- 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 i 1 0 ' $2,000,000 0 , $1,500,000 --A $1,000,000 i _ $500,000 $— I I ._'_._s _JUL_ 2013 2014 2015 2016 2017 ■Sales $4,521,454 $4,639,194 $4,607,417 $4,742,313 $4,967,468 ■Cost of Sales $3,378,256 $3,467,797 $3,467,487 $3,537,858 $3,707,363 0 Oper Exp $827,802 $848,037 $885,110 $911,074 $927,125 111 Oper Income $315,396 $323,360 $254,820 $293,381 $332,980 The City's Liquor Operations Fund ended 2017 with an unrestricted net position of $1,151,713, an increase of$94,168 from the prior year. The Liquor Operations Fund had gross sales of$4,967,468 in 2017, an increase of$225,155 (4.8 percent) from the previous year. Gross profit was $1,260,105, about 25.4 percent of sales, which is consistent with the prior year. Operating expenses for 2017 increased $16,051 (1.8 percent) from the previous year, mainly due to an increase in professional services. -13- 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, $2,250,000 $2,000,000 $1,750,000 — $1,500,000 — $1,250,000 — $1,000,000 — EE a $(250,000) — 2013 2014 2015 2016 2017 i lOper Rev $1,816,763 $1,843,746 $1,957,902 $2,043,859 $2,068,388 NOM OperExp $1,625,220 $1,710,843 $1,873,412 $2,049,273 $2,107,816 -Inc Before Depr $777,271 $723,105 $679,364 $591,786 $556,961 -Oper Inc(Loss) $191,543 $132,903 $84,490 $(5,414) $(39,428) The Sewer Operations Fund ended 2017 with a total net position of$20,703,287, a decrease of$444,727 from the prior year due to charges for services not being sufficient to cover depreciation expense. Of this, $17,371,645 represents the investment in sewer collection system capital assets, leaving an unrestricted net position of$3,331,642. Operating revenue in the Sewer Operations Fund increased $24,529 (1.2 percent) from the prior year, due to an increase in rates and more customers on the system. Operating expenses for 2017 were $58,543 (2.9 percent) higher than the previous year. The largest factor contributing to the change was an increase of approximately$56,000 in disposal fees paid to Metropolitan Council Environmental Services. -14- 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, $2,200,000 $2,000,000 $1,800,000 - $1,600,000 $1,400,000 $1,200,000 $1,000,000 ., $800,000 $600,000 $400,000 $200,000 $- 2013 2014 2015 2016 2017 1OperRev $1,952,177 $1,979,623 $1,991,179 $2,041,561 $2,061,324 OperExp $1,658,547 $1,600,434 $1,658,128 $1,775,162 $1,864,175 Inc Before Depr $347,133 $431,634 $385,496 $346,778 $305,022 Oper Inc(Loss) $293,630 $379,189 $333,051 $266,399 $197,149 The Solid Waste Fund ended 2017 with a total net position of$1,484,225, a decrease of$61,575 from the prior year. Of this, $219,928 represents the investment in solid waste operation capital assets, leaving an unrestricted net position of$1,264,297. Operating revenue in the Solid Waste Fund increased $19,763 (1.0 percent) from the prior year, due to increases in both tonnage collected and the number of customers. Operating expenses for 2017 were $89,013 (5.0 percent) higher than the previous year, mainly due to an increase in tipping fees charged to the City for solid waste disposal. -15- 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 $450,000 — $300,000 — ftt $150,000 — $(150,000) 2013 2014 2015 2016 2017 JOper Rev $565,166 $559,327 $670,353 $643,479 $647,767 MI=OperExp $513,582 $615,684 $731,444 $534,988 $551,793 -Oper Inc(Loss) $51,584 $(56,357) $(61,091) $108,491 $95,974 •Inc Before Depr $435,826 $330,919 $339,516 $520,482 $508,053 The Storm Water Fund ended 2017 with a total net position of$14,332,928, a decrease of$351,308 from the prior year due to charges for services not being sufficient to cover depreciation expense. Of this, $13,229,318 represents the investment in storm water operation capital assets, leaving an unrestricted net position of$1,103,610. Operating revenue in the Storm Water Fund increased$4,288 (0.7 percent)from the prior year. Operating expenses for 2017 were $16,805 (3.1 percent) higher than the previous year, mainly due to an increase in professional services. -16- 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 11 — $600,000 — I — $400,000 — i $200,000 — 2013 2014 2015 2016 2017 Oper Rev $1,558,400 $1,499,091 $1,439,873 $1,631,643 $1,681,079 I 1Oper Exp $1,426,947 $1,409,961 $1,339,420 $1,359,111 $1,313,735 Inc Before Depr $1,010,039 $968,433 $924,944 $1,042,252 $1,134,553 Oper Inc(Loss) $131,453 $89,130 $100,453 $272,532 $367,344 The Water Fund ended 2017 with a total net position of$29,443,667, a decrease of$87,752 from the prior year due to charges for services not being sufficient to cover depreciation expense. Of this, $20,643,758 represents the investment in water distribution system capital assets, $2,238,206 is restricted for a future drinking water treatment plant, and unrestricted net position is $6,561,703. Operating revenue in the Water Fund for 2017 increased $49,436 (3.0 percent)from the prior year, due to an increase in water rates, partially offset by a decrease in consumption. Water Fund operating expenses for 2017 were $45,376 (3.3 percent) lower than the previous year, mainly due to a decrease in professional services. -17- 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, $300,000 $250,000 $200,000 — $150,000 — $100,000 — $50,000 — $— $(50,000) $(100,000) 2013 2014 2015 2016 2017 D Oper Rev $216,719 $219,052 $222,159 $224,781 $225,570 1 Oper Exp $184,834 $174,957 $173,212 $288,924 $197,150 �Oper Inc(Loss) $31,885 $44,095 $48,947 $(64,143) $28,420 Street Light Fund operating revenue for 2017 increased$789 (0.4 percent)from the prior year. Operating expenses were $91,774 (31.8 percent) lower than the previous year, due to the cost of the City converting to LED lights, as well as the TH-3 Traffic Signal Change Project in the previous year. Unrestricted net position increased$29,255 in 2017, ending the year at$95,520. -18- 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 financial 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, 2017 and 2016, for governmental activities and business-type activities: As of December 31, Increase 2017 2016 (Decrease) Net position Governmental activities Net investment in capital assets $ 28,820,307 $ 23,684,773 $ 5,135,534 Restricted 6,961,837 10,441,391 (3,479,554) Unrestricted 6,576,959 5,142,435 1,434,524 Total governmental activities 42,359,103 39,268,599 3,090,504 Business-type activities Net investment in capital assets 51,464,649 53,225,787 (1,761,138) Restricted 2,238,206 2,231,966 6,240 Unrestricted 13,508,485 12,575,526 932,959 Total business-type activities 67,211,340 68,033,279 (821,939) Total net position $ 109,570,443 $ 107,301,878 $ 2,268,565 The City's total net position at December 31, 2017 was $2,268,565 higher than the previous year-end. The City's net position increased $3,090,504 from current year governmental activities and decreased $821,939 from current year business-type activities. The governmental activities net investment in capital assets increased $5.1 million and the restricted portion of governmental net position decreased $3.5 million in 2017, mainly due to the early repayment of several outstanding debt issues used to acquire the City's related capital assets. The $1.4 million increase in governmental activities unrestricted net position was primarily related to increases in the unassigned fund balance of the General Fund and fund balances committed for various capital purposes. The business-type activities net investment in capital assets decreased $1.8 million in 2017, mainly due to depreciation. The unrestricted portion of the business-type activities net position increased $932,959, due to the operating results of the City's enterprise operations as previously discussed. -19- 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, 2017 and 2016: 2017 2016 Program Expenses Revenues Net Change Net Change Net(expense)revenue Governmental activities General government $ 2,178,067 $ 467,783 $ (1,710,284) $ (1,544,367) Public safety 6,472,115 883,898 (5,588,217) (6,055,818) Public works 3,888,778 1,081,734 (2,807,044) (4,311,896) Parks and recreation 1,782,783 619,262 (1,163,521) (1,199,878) Economic development 40,000 15,000 (25,000) (40,000) Interest on long-term debt 549,075 — (549,075) (1,032,748) Business-type activities Liquor 4,634,488 4,967,468 332,980 293,381 Sewer 2,105,901 2,068,388 (37,513) (7,293) Solid waste 1,864,175 2,085,324 221,149 311,399 Storm water 571,572 647,767 76,195 108,491 Water 1,313,482 1,681,079 367,597 272,428 Street light 197,150 225,570 28,420 (64,143) Total net(expense)revenue $ 25,597,586 $ 14,743,273 (10,854,313) (13,270,444) General revenues Property taxes 12,181,830 11,806,302 Franchise taxes 266,728 275,691 Unrestricted grants 289,854 287,252 Investment earnings 330,058 394,270 Gain on disposal of capital assets 54,408 — Total general revenues 13,122,878 12,763,515 Change in net position $ 2,268,565 $ (506,929) 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. The difference in the year-to-year net change in the public safety function was mainly due to a smaller increase in the City's proportionate share of the state-wide Public Employees Retirement Association pension plans. The difference in the year-to-year net change in the public works function resulted primarily from a significant uncapitalized street maintenance expense in 2016 attributable to the county's reconstruction of 195th Street. -20- LEGISLATIVE UPDATES The 2017 legislative session began with a full agenda, which included adopting a fiscal year 2018-2019 biennial state budget. The February 2017, state budget forecast projected that the state General Fund would end the 2016-2017 biennium with a surplus of$743 million, eliminating the need for budget cuts or transfers to balance the fund. However, the Legislature was expected to address several significant spending areas for which successful funding appropriations had not been passed in recent legislative sessions. The 2017 regular legislative session ended with four omnibus budget bills being vetoed, potentially leaving a number of these same areas without appropriations. After a three-day special session, the Governor and Legislature were able to agree on budget and appropriation bills addressing most of the state budgetary needs for the upcoming biennium, albeit not without several line item vetoes invoked by the Governor, including striking the appropriations for operating the House and Senate from the bills. The following is a summary of recent legislation affecting Minnesota cities: Omnibus Bonding Bill —The omnibus bonding bill authorizes financing for approximately $1.1 billion in capital improvements. Included in the approved funding was $255 million for transportation infrastructure, $83 million for economic development, $116 million for Public Financing Agency water infrastructure loans and grants to municipalities, and $4 million for Metropolitan Council inflow and infiltration improvement grants to metro area cities. Omnibus Transportation Bill—The omnibus transportation bill appropriates $2.95 billion in fiscal 2018 and $2.87 billion in fiscal 2019, for a wide variety of transportation related projects. Included in the appropriations are approximately $191 million and $198 million for municipal state aid street fund purposes in fiscal 2018 and fiscal 2019,respectively. Property Tax Relief — The omnibus tax bill contained a number of property tax relief measures, including: • Elimination of the implicit price deflator annual increase for the state general property tax levy, effectively freezing it at the payable 2018 level for many property classes; • Exempting the first $100,000 of each commercial-industrial parcel's tax capacity from the state general property tax levy; • Expanding eligibility for homestead or agricultural property classification exemptions for certain types of resort and conservation property for general property taxes; and • Increasing the minimum value for a storage shed, deck, or similar structure on a leased mobile home to be considered taxable from $1,000 to $10,000. Local Government Aid — The annual appropriation for Local Government Aid (LGA) for cities was increased $15.0 million to $534.4 million for aid payable in 2018 and thereafter, and the LGA payment schedule was accelerated for fiscal 2019 only. Several corrections were also made to the city LGA formula calculation, and a sparsity adjustment was incorporated for certain medium and small cities beginning in 2018. Minnesota Investment Fund — The omnibus jobs and economic growth bill appropriates $12.5 million for each year of the biennium for the Minnesota Investment Fund, which is available for municipalities to provide loans to assist with the expansion of local businesses. Electronic Funds Transfers —Effective August 1, 2017, home rule charter cities of the second, third, or fourth class are added to the list of local government entities allowed to pay certain claims using electronic funds transfers. To be eligible, local governments must enact specified policy controls governing the initiation, authorization, and documentation of electronic funds transfers. Claims Declaration — The requirement to obtain a specific form of written claim declaration was also repealed based on the understanding that by making the claim, the party making the claim is declaring that the claim is just and correct and has not been paid previously. -21- City E-mail Address Required to Receive State Aid — Effective for state aids payable in 2018 and thereafter, cities will be required to register an official e-mail address with the Commissioner of the state Department of Revenue in order to receive state aid payments. Workforce Housing Tax Increment Financing—The omnibus tax bill created a new authorized use of tax increment financing (TIF), for workforce housing in cities located outside of the statutorily defined metropolitan area that meet certain criteria. Tax Increment Financing Interfund Loans —Interfund loan provisions for TIF were amended to make it easier for cities and development authorities to make and document interfund loans. Loans may now be made or documented up to 60 days after the actual transfer or expenditure occurs. Interfund loan resolutions may now be passed prior to the final approval of the related TIF plan. Loan terms may be amended after the loan has been made if the TIF district has not been decertified. Public Debt — The Legislature passed several amendments to statutes governing public debt that took effect on July 1, 2017, including: • Allowing both home rule charter and statutory cities to issue 20-year capital notes for projects to eliminate R-22 Freon-based refrigerant; • Increasing the maximum dollar limit on Housing and Redevelopment Authority general obligation bond issues from $3 million to $5 million; and • Modifying the requirements for street reconstruction bonds to be approved by a two-thirds majority of the governing body rather than requiring unanimous approval. Local Housing Trust Funds — The omnibus jobs and economic growth appropriations bill established authority for cities to create a local housing trust fund by ordinance, or to participate in a joint powers agreement to establish a regional housing trust fund.The funds,which may be financed from sources such as local government appropriations or housing and redevelopment authority levies,may be used for grants or loans for development, rehabilitation, financing of housing to match federal or state or private funds for housing, down payment assistance,rental assistance, or homebuyer counseling. Long-Term Equity Investment Authority — Effective July 1, 2017, cities with a population of more than 100,000 or those that had their most recently issued general obligation bonds rated in the highest category, are authorized to invest in an expanded list of authorized investments that includes certain equity-based investments. The amount invested in equity-based investments cannot exceed 15 percent of the sum of a city's assigned cash, cash equivalents, deposits, and investments. Before investing in the expanded list of authorized investments, the governing body of the municipality must adopt a resolution acknowledging the risks assumed. Border-to-Border Broadband Grants—The Legislature appropriated $20 million in fiscal 2018 for the Border-to-Border Broadband Grant Program. The grants, available through the Office of Broadband Development in the Department of Employment and Economic Development, provide funding to help communities meet state goals for the development of state-wide, high-speed broadband access, focusing on areas currently considered to be underserved or with a high concentration of low-income households. Elections — An omnibus elections law was passed making several modifications to election administration, including: requiring special elections conducted by local governments be held on one of five uniform election dates, clarifying the timeline for municipalities to change from odd to even-year election cycles or vise-versa, allowing municipalities to canvass the results of a primary election on the second or third day after the primary, and appropriating $7 million for grants to replace aging election equipment or purchase electronic poll books. -22- Workers' Compensation and PERA Retirement Benefits — A statutory change was adopted based on the results of recent court rulings that Public Employees Retirement Association (PERA) retirement benefits should not be offset against workers' compensation permanent total disability benefits. Under the new law, claimants would receive all past and future permanent and total disability benefits without a PERA retirement offset. Notice of Proposed Ordinances —A new statute was created requiring cities to provide a 10-day notice prior to a scheduled final vote on most new proposed ordinances or amendments to ordinances, and specifying the various acceptable means of providing the required notification. State Building Code Applicability — Construction, additions, and alterations to places of public accommodation; defined as publicly or privately-owned facilities designed for occupancy by 200 or more people as a sports or entertainment arena, stadium, theater, community or convention hall, special event center, indoor amusement facility or water park, or indoor swimming pool; must comply with the state building code. Sunday Liquor Sales—Minnesota Statutes were amended to allow for the sale of intoxicating liquor on Sundays between the hours of 11:00 a.m. and 6:00 p.m. by off-sale licensees, effective July 1, 2017. REAL ID Act — Minnesota Statutes were amended to make the state compliant with federal REAL ID Act requirements,which will change identity verification and security related to state-issued identification cards and driver's licenses. -23- THIS PAGE INTENTIONALLY LEFT BLANK ACCOUNTING AND AUDITING UPDATES GASB STATEMENT No. 75, ACCOUNTING AND FINANCIAL REPORTING FOR POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS 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 other post-employment benefits(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. This statement replaces the requirements of GASB Statement Nos. 45 and 57. This statement establishes standards for recognizing and measuring liabilities, deferred outflows of resources, deferred inflows of resources, and expense/expenditures. Similar to changes implemented for pensions, this statement requires the liability of employer 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. Note disclosure and RSI requirements about defined benefit OPEB also are addressed. The requirements for this statement are effective for fiscal years beginning after June 15, 2017. Earlier application is encouraged. GASB STATEMENT NO.83,CERTAIN ASSET RETIREMENT OBLIGATIONS This statement addresses accounting and financial reporting for certain asset retirement obligations (ARO),which are legally enforceable liabilities associated with the retirement of a tangible capital asset. This statement establishes criteria for determining the timing and pattern of recognition of a liability and a corresponding deferred outflow of resources for ARO. A government that has legal obligations to perform future asset retirement activities related to its tangible capital assets should recognize a liability when it is both incurred and reasonably estimable. The measurement of an ARO is required to be based on the best estimate of the current value of outlays expected to be incurred, and a deferred outflow of resources associated with an ARO is required to be measured at the amount of the corresponding liability upon initial measurement. This statement requires the current value of a government's AROs to be adjusted for the effects of general inflation or deflation at least annually, and a government to evaluate all relevant factors at least annually to determine whether the effects of one or more of the factors are expected to significantly change the estimated asset retirement outlays. A government should remeasure an ARO only when the result of the evaluation indicates there is a significant change in the estimated outlays. Deferred outflows of resources should be reduced and recognized as outflows of resources in a systematic and rational manner over the estimated useful life of the tangible capital asset. If a government owns a minority interest in a jointly owned tangible asset where a nongovernmental entity is the majority owner or has operational responsibility for the jointly owned asset,the government's minority share of an ARO should be reported using the measurement produced by the nongovernmental majority owner or the nongovernmental minority owner that has operational responsibility, without adjustment to conform to the liability measurement and recognition requirements of this statement. -24- The statement also requires disclosures of any funding or financial assurance requirements a government has related to the performance of asset retirement activities, along with any assets restricted for the payment of the government's AROs. This statement also requires disclosure of information about the nature of a government's AROs,the methods and assumptions used for the estimates of the liabilities, and the estimated remaining useful life of the associated tangible capital assets. If an ARO (or portions thereof) has been incurred by a government but is not yet recognized because it is not reasonably estimable, the government is required to disclose that fact and the reasons therefor. This statement requires similar disclosures for a government's minority shares of AROs. The requirements of this statement are effective for reporting periods beginning after June 15, 2018. Earlier application is encouraged. GASB STATEMENT NO.84,FIDUCIARY ACTIVITIES This statement establishes criteria for identifying fiduciary activities of all state and local governments. The focus of the criteria generally is on(1)whether a government is controlling the assets of the fiduciary activity and (2) the beneficiaries with whom a fiduciary relationship exists. Separate criteria are included to identify fiduciary component units and post-employment benefit arrangements that are fiduciary activities. An activity meeting the criteria should be reported in a fiduciary fund in the basic financial statements, which should present a statement of fiduciary net position and a statement of changes in fiduciary net position. This statement describes four fiduciary funds that should be reported, if applicable: (1) pension (and other employee benefit) trust funds, (2) investment trust funds, (3) private-purpose trust funds, and (4)custodial funds. Custodial funds generally should report fiduciary activities that are not held in a trust or equivalent arrangement that meets specific criteria. A fiduciary component unit, when reported in the fiduciary fund financial statements of a primary government, should combine its information with its component units that are fiduciary component units and aggregate that combined information with the primary government's fiduciary funds. This statement also provides for recognition of a liability to the beneficiaries in a fiduciary fund when an event has occurred that compels the government to disburse fiduciary resources, defined as when a demand for the resources has been made or when no further action, approval, or condition is required to be taken or met by the beneficiary to release the assets. The requirements of this statement are effective for reporting periods beginning after December 15, 2018. Earlier application is encouraged. GASB STATEMENT NO.85,OMNIBUS 2017 The objective of this statement is to address issues that have been identified during implementation and application of certain GASB statements. The statement addresses a variety of topics, including issues related to blending component units, goodwill, fair value measurement and application, and post-employment benefits (pensions and OPEB). The statement is meant to enhance consistency in the application of recent accounting and financial reporting standards. The requirements of this statement are effective for reporting periods beginning after June 15,2017. -25- GASB STATEMENT NO.86,CERTAIN DEBT EXTINGUISHMENT ISSUES Current GASB guidance requires that debt be considered defeased in substance when the debtor irrevocably places cash or other monetary assets acquired with refunding debt proceeds in a trust to be used solely for satisfying scheduled payments of both principal and interest of the defeased debt. This new standard establishes essentially the same requirements for when a government places cash and other monetary assets acquired with only existing resources in an irrevocable trust to extinguish the debt. The primary objective of this statement is to improve consistency in accounting and financial reporting for in-substance defeasance of debt by providing guidance for transactions in which cash and other monetary assets acquired with only existing resources—resources other than the proceeds of refunding debt—are placed in an irrevocable trust for the sole purpose of extinguishing debt. This statement also improves accounting and financial reporting for prepaid insurance on debt that is extinguished and notes to financial statements for debt that is defeased in substance. The requirements of this statement are effective for reporting periods beginning after June 15, 2017. GASB STATEMENT No.87,LEASES A lease is a contract that transfers control of the right to use another entity's nonfinancial asset as specified in the contract for a period of time in an exchange or exchange-like transaction. Examples of nonfinancial assets include buildings, land, vehicles, and equipment. Any contract that meets this definition should be accounted for under the leases guidance, unless specifically excluded in this statement. Governments enter into leases for many types of assets. Under the previous guidance, leases were classified as either capital or operating depending on whether the lease met any of four tests. In many cases, the previous guidance resulted in reporting lease transactions differently than similar nonlease financing transactions. The goal of this statement is to better meet the information needs of users by improving accounting and financial reporting for leases by governments. It establishes a single model for lease accounting based on the principle that leases are financings of the right to use an underlying asset. This statement increases the usefulness of financial statements by requiring recognition of certain lease assets and liabilities for leases that previously were classified as operating leases and recognized as inflows of resources or outflows of resources based on the payment provisions of the contract. Under this statement, a lessee is required to recognize a lease liability and an intangible right-to-use lease asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources, thereby enhancing the relevance and consistency of information about governments' leasing activities. To reduce the cost of implementation, this statement includes an exception for short-term leases, defined as a lease that, at the commencement of the lease term, has a maximum possible term under the lease contract of 12 months (or less), including any options to extend, regardless of their probability of being exercised. Lessees and lessors should recognize short-term lease payments as outflows of resources or inflows of resources, respectively, based on the payment provisions of the lease contract. The requirements of this statement are effective for reporting periods beginning after December 15, 2019. -26- THIS PAGE INTENTIONALLY LEFT BLANK CITY OF FARMINGTON DAKOTA COUNTY, MINNESOTA Special Purpose Audit Reports Year Ended December 31, 2017 THIS PAGE INTENTIONALLY LEFT BLANK CITY OF FARMINGTON DAKOTA COUNTY,MINNESOTA Special Purpose Audit Reports Year Ended December 31, 2017 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 THIS PAGE INTENTIONALLY LEFT BLANK PRINCIPALS Thomas A.Karnowski,CPA \LIPaul A.Radosevich,CPA William J.Lauer,CPA James H.Eichten,CPA CERTIFIED PUBLIC Aaron J.Nielsen,CPA ACCOUNTANTS Victoria L.Holinka,CPA/CMA 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, 2017, 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 14, 2018. 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 a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the City's financial 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 one deficiency in internal control, described in the accompanying Schedule of Findings and Responses as item 2017-001, that we consider to be a material weakness. (continued) -1- Malloy, Montague, Karnowski, Radosevich & Co., P.A. 5353 Wayzata Boulevard • Suite 410 • Minneapolis, MN 55416 • Phone: 952-545-0424 • Fax: 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. Wail, 1ossoli , KiAdoto MJJ4, a., eo., A A Minneapolis, Minnesota May 14, 2018 -2- PRINCIPALS Thomas A.Karnowski,CPA Paul A.Radosevich,CPA William J.Lauer,CPA James H.Eichten,CPA CERTIFIED PUBLIC Aaron J.Nielsen,CPA ACCOUNTANTS Victoria L.Holinka,CPA/CMA 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, 2017, 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 14,2018. MINNESOTA LEGAL COMPLIANCE The Minnesota Legal Compliance Audit Guide for Cities, promulgated by the State Auditor pursuant to Minnesota Statutes § 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. 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. 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. 1414147 1110744 1404/ K -, 44,. .a.. eo., P. a . Minneapolis, Minnesota May 14, 2018 -3- Malloy, Montague, Karnowski, Radosevich & Co., P.A. 5353 Wayzata Boulevard • Suite 410 • Minneapolis, MN 55416 • Phone: 952-545-0424 • Fax: 952-545-0569 • www.mmkr.com CITY OF FARMINGTON Schedule of Findings and Responses Year Ended December 31,2017 MATERIAL WEAKNESS IN INTERNAL CONTROL OVER FINANCIAL REPORTING 2017-001 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 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 finding. 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. -4- Comprehensive Annual Financial Report 1,,,74-...,_ , ,...v.7,,.., ,,,,i- , rl, ,„. . JVO*10,"1.£7:, , i'L''',,,,;, " 1, t . bt$V ''.."14° a it t ',',;,;,4„ tot, '+ i _, ,, ' ' t,1 "� k t7 is+';It, .14"-- i � \ w. il:41,.:,,,: ., � tk\'► i 3�a1.�� rel �1� ra 7.:'.24-'-i_____-.74-________-- � �.`.lt t - � 4 t�}Ott1� i�, ,i� ;Y y .l � . ylk , ,,,,,, _ —+a .: , , _________ _ _ _ _ ____ . 4 j ' a 1 . j Ael:, ,i , r .. tk , --------!-----____x_ ,,t:- ----.-7-: =*4 : -- 4 Photo by Colby Meyer City Of Farmington, Minnesota Year Ended December 31, 2017 David McKnight - City Administrator Prepared by: Finance Department CITY OF FARMINGTON DAKOTA COUNTY,MINNESOTA Comprehensive Annual Financial Report for the Year Ended December 31, 2017 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 33-64 REQUIRED SUPPLEMENTARY INFORMATION PERA—General Employees Retirement Fund Schedule of City's and Nonemployer Proportionate Share of Net Pension Liability 65 Schedule of City Contributions 65 PERA—Public Employees Police and Fire Fund Schedule of City's Proportionate Share of Net Pension Liability 66 Schedule of City Contributions 66 Farmington Fire Fighters' Relief Association Schedule of Changes in the Relief Association's Net Pension Liability(Asset) and Related Ratios 67 Schedule of City Contributions 68 City of Farmington Other Post-Employment Benefits Plan Schedule of Funding Progress 69 Notes to Required Supplementary Information 70-72 CITY OF FARMINGTON Table of Contents (continued) Page SUPPLEMENTAL INFORMATION Combining and Individual Fund Statements and Schedules Nonmaj or Governmental Funds 73 Combining Balance Sheet 74 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 75 Nonmajor Special Revenue Funds 76 Combining Balance Sheet 77 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 78 Nonmajor Capital Projects Funds 79 Combining Balance Sheet 80-81 Combining Statement of Revenues,Expenditures, and Changes in Fund Balances 82-83 Debt Service Fund 84 Combining Balance Sheet by Account 85-86 Combining Schedule of Revenues, Expenditures, and Changes in Fund Balances by Account 87-88 Budgetary Comparison Schedules 89 Debt Service Fund 90 State Aid Construction Capital Projects Fund 91 Storm Water Trunk Capital Projects Fund 92 Permanent Improvement Revolving Capital Projects Fund 93 Maintenance Capital Projects Fund 94 Nonmaj or Special Revenue Funds Police Donations and Forfeitures 95 Park Improvement 96 Arena 97 Nonmajor Capital Projects Funds Sanitary Sewer Trunk 98 Cable Communications 99 Fire 100 Private 101 Recreation 102 General Capital Equipment 103 Internal Service Funds 104 Combining Statement of Net Position 105 Combining Statement of Revenues,Expenses, and Changes in Fund Net Position 106 Combining Statement of Cash Flows 107 Fiduciary Fund 108 Agency Fund Statement of Changes in Assets and Liabilities 109 Discretely Presented Component Unit—EDA 110 Combining Balance Sheet 111 Combining Statement of Revenues,Expenditures, and Changes in Fund Balances 112 CITY OF FARMINGTON Table of Contents(continued) Page STATISTICAL SECTION(UNAUDITED) STATISTICAL TABLES 113 Net Position by Component 114-115 Changes in Net Position 116-119 Fund Balances of Governmental Funds 120-121 Changes in Fund Balances of Governmental Funds 122-123 Tax Capacity Value and Estimated Actual Value of Taxable Property 124-125 Property Tax Rates 126 Principal Property Taxpayers 127 Property Tax Levies and Collections 128 Ratios of Outstanding Debt by Type 129-130 Ratios of General Bonded Debt Outstanding 131-132 Direct and Overlapping Governmental Activities Debt 133 Legal Debt Margin Information 134-135 Pledged Revenue Coverage 136 Demographic and Economic Statistics 137 Principal Employers 138 Full-Time Equivalent City Government Employees by Function 139-140 Operating Indicators by Function 141-142 Capital Asset Statistics by Function/Program 143-144 THIS PAGE INTENTIONALLY LEFT BLANK INTRODUCTORY SECTION TAB W :, City of Farmington 7&\0011r 4v 430 Third Street Farmington,MN 651-280-6800 I Fax 651-280-6899 194-a no ' FarmingtonM N.gov May 14, 2018 To the 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, 2017 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 the 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's 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 31,2017, 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 unmodified opinion that the City's financial statements, for the year ended December 31, 2017, 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 6 percent growth in population over the past 10 years, due to an influx of new housing. The 2010 Census established the City's 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 Farmington, 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 nonpartisan 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's 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 the Independent School District (ISD) No. 192, Federal Aviation Administration, an electric utility cooperative, an assisted living facility, an independent living senior facility, a transportation company, a trucking company, and manufacturers of dairy products. ISD No. 192 and the Federal Aviation Administration provide a significant economic presence providing employment to approximately 900 and 800 people, respectively. During 2017, a new senior assisted living building completed construction, the Farmington Mall underwent major renovations, and several new businesses were started during the year. 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. In 2017,the City issued new construction permits for 42 new single-family units, one new duplex from an existing property demolition, two new multi-family, and one new commercial. The new single-family permits resulted in a total new residential building valuation of$8,145,929. The duplex building valuation was$274,100 and the multi-family building valuation was$347,700. The commercial building was a structure fire rebuild valued at $277,420. The number of foreclosures in the City continued to decline. There were 17 foreclosures in the city in 2017, this is down from 36 in 2016. -ii- Long-Term Planning The City Council meets each year to review changes that have taken place in the City and identify a set of priorities for the next 1-2 years. In June 2016, the City Council established four priorities for 2016-2017, which include: • Financial—Continue to take steps to make the City a city of fiscal excellence. • Development—Support the expansion of residential, commercial, and industrial properties. • Partnerships—Forge opportunities with existing and new partners. • Service Delivery—Endeavor to provide core government services at high quality levels. These priorities are intentionally broad, high level goals that the City Council believes will make the City an even stronger community. During the year,the city administrator formally updates the City Council on staff's progress. From a financial perspective, during 2017, the City refinanced a portion of its debt to achieve interest savings and reduce the term of its bond repayments, finished the year with positive financial results that served to continue to strengthen the fund balance in the General Fund,and donated over $100,000 of liquor store profits to projects benefitting the community. Meanwhile, staff continues to work with the City Council to review and update the City's 2030 financial management plan. During 2017,staff continued to review and revise various capital improvement plans(CIP), including CIP's for streets, trails, and equipment. Planning is underway for the design, build, and purchase of the City's next new fire engine in 2019.The next large-scale road project is scheduled for 2019. Updating the City's 2040 Comprehensive Plan was the focus of 2017 continuing into 2018.Additional information about these strategies and goals may be found on the City's website, www.FarmingtonMN.gov. 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. The budget of the City is prepared by fund (e.g., General Fund), function (e.g., public safety), and department (e.g., 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, capital project 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 89. -iii- Revenue Policies The City conservatively projects its annual revenues after a thorough analytical process, which involves annually reexamining existing and potential revenue 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 during 2017. As a result, the City's 2017 investment earnings were higher than 2016. Staff monitors interest rates and continues the diligent practice of reviewing the City's cash flow needs to determine how best to invest available funds, including potentially retiring some debt early. While short-term interest rates remained low in 2017, they were somewhat higher than 2016. In addition, the City's average investment balances were higher than the previous year and the average maturity was longer, resulting in higher investment earnings than the previous year. Continued low short-term interest rates and higher average investment balances were factored into the City's 2018 budget. The recent increase in short-term rates will be considered as the 2019 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. During the year, the City refunded four series of bonds to realize future interest savings. The City also internally refinanced one smaller bond issue.Staff continues to review its outstanding debt issues and advise the City Council which bonds, if any, it would make financial or program sense to refund and/or restructure. Fund Balance Policy and Practice The City's financial strength has improved significantly over the past five years. During 2017,for the fourth year in a row, 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 increased from 28 percent of the subsequent years' budgeted expenditures,and transfers out as of December 31,2013 to 45 percent as of December 31, 2017. 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 and 50 percent of the subsequent years' 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, reached and have since maintained 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 the community's 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. 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.The City is seeing its average residential home values continue to increase. The City needs to continue to progress forward 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. City ordinances continue to be reviewed and updated to provide for new business opportunities. A new 70-unit senior assisted living development was completed in 2017.The City Council approved the preliminary and final plats for a new 63 single-family lot development.The City continued implementation of the Downtown Redevelopment Plan, including a Downtown Facade Improvement Grant Program, and master plan development of a downtown community plaza. The City Council further strengthened the organization by hiring its first full-time fire chief in April 2015. Since then, the fire department has implemented large-scale capital improvement plans for vehicles and equipment, crafted strategic planning and mission development,and maintains 46 volunteer firefighters. Farmington Municipal Liquor Operations have made tremendous improvements over the past six years. With new management in 2012, an emphasis was placed on improving store operations, expectations, and profits. Store profits benefit the community and over the past five years, the stores have produced an average of just over$250,000 per year in profits. Notably,the liquor stores have been able to provide over$1.1 million since 2005 to city departments and community organizations. The City continues to collaborate with Dakota County, Dakota County Regional Chamber,the Farmington Business Association, ISD No. 192, nearby communities, and neighboring townships to provide its citizens with various services. 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, 2016.This is the eighth 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, (1604.: iir(gooti" David McKnight, City Administrator --(9•0 1 i i 1 f t det til t' Teah Malecha, Finance Director -vi- (13 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, 2016 a4,4,41,i, te Executive Director/CEO -vii- CITY OF FARMINGTON, MINNESOTA Organizational Chart December 31, 2017 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 CITY OF FARMINGTON Elected Officials and Executive Staff December 31, 2017 ELECTED OFFICIALS Term Expires Todd Larson Mayor December 31, 2020 Jason Bartholomay Councilmember December 31,2018 Katie Bernhjelm Councilmember December 31,2018 Robyn Craig Councilmember December 31, 2020 Terry Donnelly Councilmember December 31, 2020 EXECUTIVE STAFF David McKnight City Administrator Adam Kienberger Community Development Director Katy Gehler Engineer Vacant Finance Director Vacant 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 TAB PRINCIPALS Thomas A.Karnowski,CPA Paul A.Radosevich,CPA William J.Lauer,CPA James H.Eichten,CPA CERTIFIED PUBLIC Aaron J.Nielsen,CPA ACCOUNTANTS Victoria L.Holinka,CPA/CMA 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, 2017, 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 financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the City's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. (continued) -1- Malloy, Montague, Karnowski, Radosevich & Co., P.A. 5353 Wayzata Boulevard • Suite 410 • Minneapolis, MN 55416 • Phone: 952-545-0424 • Fax: 952-545-0569 • www.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, 2017, 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. 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 Government Accounting Standards Board, 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 financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the 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 14, 2018 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 solely 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 the effectiveness of the City's 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. WealAW1 111014Ari K ; / , c eo., P. 4 . Minneapolis, Minnesota May 14, 2018 -3- THIS PAGE INTENTIONALLY LEFT BLANK CITY OF FARMINGTON Management's Discussion and Analysis Year Ended December 31, 2017 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, 2017. 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 $109,570,443 (net position) at the close of the most recent fiscal year. Of this amount, $20,085,444 (unrestricted net position) may be used to meet the government's ongoing obligations to citizens and creditors. • The City's total net position increased by $2,268,565 in 2017, including an increase of $3,090,504 attributable to governmental activities, and a decrease of $821,939 attributable to business-type activities. • The City's outstanding bonded debt decreased by $16,385,000, or 45.1 percent, during the fiscal year due to a combination of scheduled annual bond principal payments and the early retirement of several debt issues that were either refunded or called early using available City resources. • The City's governmental funds reported combined ending fund balances of $16,145,571 at December 31, 2017, a decrease of$11,037,808 from the prior year. Approximately 74.6 percent of this total amount, $12,039,205, is available for use within the City's constraints and policies. • At the end of the current fiscal year, the unassigned fund balance for the General Fund was $5,666,183, or 44.9 percent, of 2018 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 financing 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 nonmaj or 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 financial 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 financial statements. Furthermore, a statistical section has been included as part of the Comprehensive Annual Financial 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 nonfinancial 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 $109,570,443 at December 31, 2017. City of Farmington's Net Position Governmental Activities Business-Type Activities Total 2017 2016 2017 2016 2017 2016 Current and other assets $ 23,576,767 $ 36,411,195 $ 16,875,572 $ 16,090,233 $ 40,452,339 $ 52,501,428 Capital assets 49,408,406 51,098,418 51,464,649 53,225,787 100,873,055 104,324,205 Total assets $ 72,985,173 $ 87,509,613 $ 68,340,221 $ 69,316,020 $ 141,325,394 $ 156,825,633 Deferred outflows of resources $ 5,954,677 $ 9,293,019 $ 158,917 $ 317,468 $ 6,113,594 $ 9,610,487 Current liabilities $ 7,202,593 $ 20,255,477 $ 430,501 $ 625,465 $ 7,633,094 $ 20,880,942 Long-term liabilities 22,878,191 35,391,748 729,628 865,054 23,607,819 36,256,802 Total liabilities $ 30,080,784 $ 55,647,225 $ 1,160,129 $ 1,490,519 $ 31,240,913 $ 57,137,744 Deferred inflows of resources $ 6,499,963 $ 1,886,808 $ 127,669 $ 109,690 $ 6,627,632 $ 1,996,498 Net position Net investment in capital assets $ 28,820,307 $ 23,684,773 $ 51,464,649 $ 53,225,787 $ 80,284,956 $ 76,910,560 Restricted 6,961,837 10,441,391 2,238,206 2,231,966 9,200,043 12,673,357 Unrestricted 6,576,959 5,142,435 13,508,485 12,575,526 20,085,444 17,717,961 Total net position $ 42,359,103 $ 39,268,599 $ 67,211,340 $ 68,033,279 $ 109,570,443 $ 107,301,878 The largest portion of the City's net position, $80,284,956, or 73 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$9,200,043 comprises 9 percent of net position at the close of the fiscal year ended December 31, 2017. These assets are subject to external restrictions on how they may be used. The balance of unrestricted net position, $20,085,444, or approximately 18 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, 2017 with comparative totals for the year ended December 31, 2016. The City's net position increased by$2,268,565, or 2.1 percent, during the current fiscal year. City of Farmington's Change in Net Position Governmental Activities Business-Type Activities Total 2017 2016 2017 2016 2017 2016 Revenues Charges for services $ 1,535,134 $ 1,975,741 $ 11,651,596 $ 11,327,636 $ 13,186,730 $ 13,303,377 Operating grants and contributions 684,376 744,730 24,000 23,000 708,376 767,730 Capital grants and contributions 848,167 818,545 - - 848,167 818,545 Property taxes 12,181,830 11,806,302 - - 12,181,830 11,806,302 Other taxes 266,728 275,691 - - 266,728 275,691 Unrestricted grants 289,854 287,252 - - 289,854 287,252 Investmentearnings 200,851 255,021 129,207 139,249 330,058 394,270 Gain on disposal of capital assets 54,408 - - - 54,408 - Total revenues 16,061,348 16,163,282 11,804,803 11,489,885 27,866,151 27,653,167 Expenses General government 2,178,067 2,268,779 - - 2,178,067 2,268,779 Public safety 6,472,115 6,979,608 - - 6,472,115 6,979,608 Public works 3,888,778 5,497,796 - - 3,888,778 5,497,796 Parks and recreation 1,782,783 1,904,792 - - 1,782,783 1,904,792 Economic development 40,000 40,000 - - 40,000 40,000 Interest on long-term debt 549,075 1,032,748 - - 549,075 1,032,748 Liquor - - 4,634,488 4,448,932 4,634,488 4,448,932 Sewer - - 2,105,901 2,051,152 2,105,901 2,051,152 Solid waste - - 1,864,175 1,753,162 1,864,175 1,753,162 Storm water - 571,572 534,988 571,572 534,988 Water - - 1,313,482 1,359,215 1,313,482 1,359,215 Street light - - 197,150 288,924 197,150 288,924 Total expenses 14,910,818 17,723,723 10,686,768 10,436,373 25,597,586 28,160,096 Change in net position before transfers 1,150,530 (1,560,441) 1,118,035 1,053,512 2,268,565 (506,929) Transfers 1,939,974 1,428,106 (1,939,974) (1,428,106) -Change in net position 3,090,504 (132,335) (821,939) (374,594) 2,268,565 (506,929) Netposition-beginning 39,268,599 39,400,934 68,033,279 68,407,873 107,301,878 107,808,807 Netposition-ending $ 42,359,103 $ 39,268,599 $ 67,211,340 $ 68,033,279 $ 109,570,443 $ 107,301,878 Governmental Activities-Governmental activities increased the City's net position before transfers by $1,150,530, primarily due to the completion of the 195th Street Reconstruction Project and reduction of interest on long-term debt. Business-Type Activities-Business-type activities increased the City's net position before transfers by $1,118,035, due to profitable operations in all but the Sewer Fund. -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 Unrestricted and Grants Other Operating Contributions 2% /o 2 Grants and 5% ° ° Charges for Contribution Services 4% 9% r. Other Taxes 2% Property Taxes • 76% 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 $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 $2,000,0001 1 $1,500,000 $1,000,000 $500,000 $— General Parks and Economic Interest on Government Public Safety Public Works Recreation Development Long-Term Debt ■Program Revenues $467,783 $883,898 $1,081,734 $619,262 $15,000 5— •Expenses $2,178,067 $6,472,115 $3,888,778 $1,782,783 $40,000 $549,075 -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 Operating Grants and Other Contributions / lqo Y '_Charges for Services 99°0 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 ■Program Revenues $4,967,468 $2,068,388 $2,085,324 $647,767 $1,681,079 $225,570 ■Expenses $4,634,488 $2,105,901 $1,864,175 $571,572 $1,313,482 $197,150 -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 $16,145,571, a 40.6 percent decrease of $11,037,808 from 2016. Much of the decrease is attributable to the use of $9,990,000 in general obligation refunding bonds issued in 2016 to call the outstanding principal of prior bond issuances on February 1, 2017. Meanwhile, the City's General Fund benefited from lower utility and snow removal costs along with several position vacancies throughout the year, and conservative spending by staff The Debt Service Fund's fund balance decreased due to the bond refunding noted and increased transfers in as part of the City's long-term debt management plan. Committed and unassigned fund balances, which are available for spending at the government's discretion, had a combined balance of $12,039,205 at year-end. The remainder of the fund balance is either nonspendable($34,529), or restricted to indicate that it is not available for new spending because it has already been obligated 1) to pay debt service ($3,731,347), 2) to pay for capital improvements and future cable communication expenditures ($182,414), 3) for park improvements ($140,616), and 4) the remainder is from donations and other restricted funds($17,460). 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 2017, the unassigned fund balance of the General Fund was $5,666,183. As a measure of the General Fund's liquidity, it may be useful to compare the fund balance to total fund expenditures. The 2017 unassigned fund balance represents 44.9 percent of total 2018 General Fund budgeted expenditures and transfers out, up from 41.2 percent for the December 31, 2016 unassigned fund balance as a percentage of the 2017 General Fund budgeted expenditures and transfers out. The reasons for the increase are due to higher than budgeted fire aid, a grant for part of the cost of the 2040 Comprehensive Plan, lower than budgeted 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 ratio of the General Fund's unassigned fund balance to the subsequent years' budgeted expenditures and transfers out has increased from 20.8 percent as of December 31, 2011 to 44.9 percent as of December 31, 2017. The City Council has increased its commitment to not only sound, comprehensive budgets, but also long-term financial planning. In addition, the City has benefitted 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, 2017, the City's General Fund balance meets the minimum fund balance guideline. -11- Debt Service Fund—During the year, the City refunded $9.99 million in refunding bonds and repaid $6.4 million in principal. The fund balance in the Debt Service Fund decreased $12.9 million, primarily due to the refunding or early call of several outstanding debt issues as part of the City's long-term debt management plan. State Aid Construction Capital Projects Fund—The first priority for this fund's fund balance is to provide for future debt service payments, as needed, for certain bonds in the Debt Service Fund. During 2017,the amount transferred to the related bond funds in the Debt Service Fund was less, due to two bond funds being transferred out in 2016, resulting in no property tax levy in 2017. The overall effect is a net decrease of$112,619 in this fund's balance. Storm Water Trunk Capital Projects Fund — The increase of$252,262 in fund balance is due to the City investing available fund balance to optionally repay the remaining 195th Street interfund loan. To reduce future interest costs, avoid incurring costs of issuance, and provide the City with more repayment flexibility, the City also utilized funds from the Storm Water Trunk Capital Projects Fund to set up loans to redeem three bond issues in the subsequent year. The interfund advances will be repaid with interest through a combination of future tax levies, project prepayments, and state aid construction reimbursements. Permanent Improvement Revolving Capital Projects Fund — There were no new projects in this fund during 2017. There was a modest increase in the fund balance of$14,342 as special assessments received and investment income exceeded expenditures. Maintenance Capital Projects Fund — There was an increase of $766,856 as there were no new street project costs incurred in 2017. An interfund advance was provided in 2016 by the Storm Water Trunk Capital Projects Fund to pay for a portion of the joint county/city 195th Street reconstruction project. This advance was repaid with state aid construction reimbursement dollars in 2017. Financial highlights for the significant changes in the City's nonmajor governmental funds are as follows: Cable Communications Capital Projects Fund — During 2017, franchise tax revenues exceeded operational costs,resulting in a net increase in fund balance of$86,664. 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$176,543 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. General Capital Equipment Capital Projects Fund—The decrease in fund balance of$38,809 is a result of expenditures to address police vehicle and equipment needs, as well as general city vehicle replacements, exceeding planned transfers into this fund. -12- 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 — Each year the City reviews the financial performance of its liquor operations. After setting aside a certain amount of funds for operations and administrative transfers, the remaining funds on hand are allocated to community investment and future capital improvements. During 2017, the City's liquor stores' community investment fund dollars were used to purchase the following: a building maintenance vehicle, wayfaring signage, park benches, and complete trail maintenance. The net position of the Liquor Operations Fund at the end of 2017 totaled $1,151,713, an increase of $94,168, which is net of the $108,114 in funds contributed to community projects noted above. The cash position for both stores has continued to strengthen, increasing from a combined total of$1,006,456 at December 31,2016 to $1,123,054 as of December 31,2017. Sewer Operations Fund —The decrease in net position of$444,727 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$3,331,642. Solid Waste Fund — The Solid Waste Fund recorded a decrease in net position of$61,575. While recording a decrease in net position, this fund is experiencing increased costs related to increased disposal fees and quantities being disposed. In addition, part of the decrease is attributed to the budgeted transfers made in 2017. There was a fee increase that went into effect January 2013 to offset some of the expenses incurred. Storm Water Fund—The decrease in net position of$351,308 is primarily due to budgeted transfers made in 2017. This fund continues to maintain an unrestricted net position of$1,103,610. Water Fund—The decrease in net position of$87,752 is primarily due to budgeted transfers made in 2017. 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 2017. Over time,this increase, along with other planned fee increases, is designed to cover depreciation. This fund continues to maintain a significant unrestricted net position of $6,561,703. 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. During 2017, a portion of the accumulated fund balance paid for the second phase of a project to convert some of the City's streetlights to LED. After its eighth year of operation,this fund has achieved a modest positive net position of$95,520. -13- 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 $197,409 more than budgeted. Revenue variances from final budget to actual include: • Intergovernmental revenue came in over budget by $79,494, due to higher than anticipated state aid for fire aid and a grant for a portion of the 2040 Comprehensive Plan. • Charges for services were $36,962 higher than budgeted as a result of fire charges billed to a neighboring township exceeding budget. • 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 $478,812 less than the budgeted amount. The City benefited from lower human resource costs partially attributable to salaries and benefits 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. 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, 2017 was $100,873,055 (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. The City's investment in capital assets for the current fiscal year decreased by 3.3 percent,mainly due to depreciation. City of Farmington's Capital Assets Governmental Activities Business-Type Activities Total 2017 2016 2017 2016 2017 2016 Land and easement $ 1,749,824 $ 1,749,824 $ 414,576 $ 414,576 $ 2,164,400 $ 2,164,400 Buildings 15,395,422 15,728,401 45,491 137,227 15,440,913 15,865,628 Improvements other than buildings 367,373 396,932 — — 367,373 396,932 Machinery and equipment 1,386,511 1,423,668 315,609 448,514 1,702,120 1,872,182 Infrastructure 30,509,276 31,799,593 — — 30,509,276 31,799,593 Collection and distribution system — 50,688,973 52,225,470 50,688,973 52,225,470 Total(net of depreciation) $ 49,408,406 $ 51,098,418 $ 51,464,649 $ 53,225,787 $ 100,873,055 $ 104,324,205 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 $19,910,000. 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$645,061 for unamortized bond premiums, $1,009,502 for compensated absences, $7,010,990 for net pension liabilities, and $969,394 for other post-employment benefits. -14- City of Farmington's Outstanding Debt Governmental Activities Business-Type Activities Total 2017 2016 2017 2016 2017 2016 General obligation improvement bonds $ 11,430,000 $ 19,930,000 $ — $ — $ 11,430,000 $ 19,930,000 Capital improvement bonds 6,170,000 13,105,000 — — 6,170,000 13,105,000 Public Project Revenue Bond 1,765,000 2,085,000 — 1,765,000 2,085,000 Revenue bonds 545,000 640,000 — — 545,000 640,000 Certificates of indebtedness — 535,000 — — — 535,000 Total bonds outstanding $ 19,910,000 $ 36,295,000 $ — $ — $ 19,910,000 $ 36,295,000 The City refunded several outstanding bond issues totaling $9,990,000 using the proceeds of refunding bonds issued in 2016. Bond principal repayments during 2017 totaled $6,395,000. 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 $50,558,628, 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. ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES The City increased its General Fund net operating levy in 2018 by $321,893. The final city total net tax levy for 2018 is $10,494,185 and is 4.98 percent higher than the comparable 2017 levy. Of the total General Fund budgeted revenues, including transfers in for 2018, 74.96 percent are from property taxes, including $2.2 million in fiscal disparities revenue. The remaining General Fund budgeted revenues were adjusted to better reflect projected building activity and intergovernmental-related revenues. Proposed 2018 General Fund expenditures, including transfers out, are estimated at $12,631,013, an increase of 3.5 percent compared to the 2017 budget. The 2018 budget maintains funding for core services—police and fire protection, street maintenance and snow removal, parks and recreation, and administration; and continues long-term funding for the City's seal coating, trail maintenance, building maintenance, and police and fire equipment. Longer term, the City's financial plan provides for the next large-scale street improvement project in 2019. For 2018, the City is focusing on updating the 2040 Comprehensive Plan. This plan aims to refocus the future for development within the community and offers a vision that will guide the next stage of planning and development investment. There are several new subdivisions anticipated for new home construction in late 2018 or early 2019. Meanwhile, a new 70-unit senior assisted living facility with memory care opened late summer 2017. In 2017, user charges were increased in the Water Fund. 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 tmalecha@FarmingtonMN.gov. -15- BASIC FINANCIAL STATEMENTS THIS PAGE INTENTIONALLY LEFT BLANK CITY OF FARMINGTON Statement of Net Position as of December 31,2017 Primary Government Component Unit Economic Governmental Business-Type Development Activities Activities Total Authority Assets Cash and investments $ 17,528,398 $ 12,388,353 $ 29,916,751 $ 332,150 Receivables Accounts 460,936 1,399,238 1,860,174 - Interest 44,642 37,232 81,874 846 Property taxes 1,348,292 - 1,348,292 - Special assessments 3,367,949 316,656 3,684,605 - Due from other governments 6,059 - 6,059 - Inventory - 495,597 495,597 - Prepaid items 42,135 290 42,425 595 Restricted assets-temporarily restricted Cash for future drinking water treatment plant - 2,238,206 2,238,206 Net pension asset-fire relief 778,356 - 778,356 - Capital assets Not depreciated 1,749,824 414,576 2,164,400 - Depreciated,net of accumulated depreciation 47,658,582 51,050,073 98,708,655 - Total capital assets,net of accumulated depreciation 49,408,406 51,464,649 100,873,055 - Total assets 72,985,173 68,340,221 141,325,394 333,591 Deferred outflows of resources Pension plan deferments-PERA 5,479,004 158,917 5,637,921 - Pension plan deferments-fire relief 475,673 - 475,673 - Total deferred outflows of resources 5,954,677 158,917 6,113,594 - Total assets and deferred outflows of resources $ 78,939,850 $ 68,499,138 $ 147,438,988 $ 333,591 Liabilities Accounts and contracts payable $ 383,969 $ 249,089 $ 633,058 $ 21,887 Accrued salaries and employee benefits payable 336,155 - 336,155 - Accrued interest payable 201,017 - 201,017 - Deposits payable 409,589 35,496 445,085 - Due to other governments 403 80,248 80,651 - Long-term liabilities Due within one year 5,871,460 65,668 5,937,128 - Due in more than one year 22,878,191 729,628 23,607,819 - Total long-term liabilities 28,749,651 795,296 29,544,947 - Total liabilities 30,080,784 1,160,129 31,240,913 21,887 Deferred inflows of resources Pension plan deferments-PERA 6,329,863 127,669 6,457,532 - Pension plan deferments-fire relief 170,100 - 170,100 - Total deferred inflows of resources 6,499,963 127,669 6,627,632 - Net position Net investment in capital assets 28,820,307 51,464,649 80,284,956 - Restricted for Debt service 5,537,418 - 5,537,418 - Capital projects 182,414 - 182,414 - Police programs 17,460 - 17,460 - Park improvements 140,616 - 140,616 - Firereliefpensions 1,083,929 - 1,083,929 - Water Fund-future drinking water treatment plant - 2,238,206 2,238,206 - Unrestricted 6,576,959 13,508,485 20,085,444 311,704 Total net position 42,359,103 67,211,340 109,570,443 311,704 Total liabilities,deferred inflows of resources,and net position $ 78,939,850 $ 68,499,138 $ 147,438,988 $ 333,591 See notes to basic financial statements -16- CITY OF FARMINGTON Statement of Activities Year Ended December 31,2017 Program Revenues Operating Capital Charges for Grants and Grants and Functions/Programs Expenses Services Contributions Contributions Primary government Governmental activities General government $ 2,178,067 $ 434,411 $ 33,372 $ — Public safety 6,472,115 405,648 422,205 56,045 Public works 3,888,778 76,049 213,577 792,108 Parks and recreation 1,782,783 619,026 222 14 Economic development 40,000 — 15,000 — Interest and fiscal charges 549,075 — — — Total governmental activities 14,910,818 1,535,134 684,376 848,167 Business-type activities Liquor operations 4,634,488 4,967,468 — — Sewer operations 2,105,901 2,068,388 — — Solid waste 1,864,175 2,061,324 24,000 — Storm water 571,572 647,767 — — Water 1,313,482 1,681,079 — — Street light 197,150 225,570 — — Total business-type activities 10,686,768 11,651,596 24,000 — Total primary government $ 25,597,586 $ 13,186,730 $ 708,376 $ 848,167 Component unit Economic development authority $ 82,902 $ — $ 52,057 $ — General revenues Property taxes Franchise taxes Grants and contributions not restricted to specific programs Investment earnings Gain on disposal of capital assets Transfers Total general revenues and transfers Change in net position Net position—beginning Net position—ending See notes to basic fmancial statements -17- Net(Expense)Revenue and Changes in Net Position Primary Government Component Unit Economic Governmental Business-Type Development Activities Activities Total Authority $ (1,710,284) $ — $ (1,710,284) $ — (5,588,217) — (5,588,217) — (2,807,044) — (2,807,044) — (1,163,521) — (1,163,521) — (25,000) — (25,000) - (549,075) — (549,075) — (11,843,141) — (11,843,141) — 332,980 332,980 — (37,513) (37,513) — 221,149 221,149 - - 76,195 76,195 - - 367,597 367,597 — 28,420 28,420 — 988,828 988,828 — (11,843,141) 988,828 (10,854,313) — — — — (30,845) 12,181,830 — 12,181,830 — 266,728 — 266,728 — 289,854 — 289,854 — 200,851 129,207 330,058 3,158 54,408 — 54,408 — 1,939,974 (1,939,974) — — 14,933,645 (1,810,767) 13,122,878 3,158 3,090,504 (821,939) 2,268,565 (27,687) 39,268,599 68,033,279 107,301,878 339,391 $ 42,359,103 $ 67,211,340 $ 109,570,443 $ 311,704 -18- CITY OF FARMINGTON Balance Sheet Governmental Funds as of December 31,2017 Capital Projects— Debt Service State Aid General Fund Construction Assets Cash and investments $ 4,493,060 $ 5,916,803 $ 283,203 Receivables Accounts 209,359 — — Interest 11,548 15,014 715 Property taxes Unremitted 1,215,476 — — Delinquent 132,816 — — Special assessments Delinquent — 2,579 1,771 Noncurrent 4,300 2,004,509 245,688 Due from other funds — — — Advances to other funds — — — Due from other governments 6,008 — — Prepaid items 34,529 — — Total assets $ 6,107,096 $ 7,938,905 $ 531,377 Liabilities Accounts and contracts payable $ 214,979 $ — $ — Deposits payable 54,224 — — Due to other governments 65 — — Due to other funds — 491,477 — Advances from other funds — 1,708,993 Total liabilities 269,268 2,200,470 — Deferred inflows of resources Unavailable revenue—property taxes 132,816 — — Unavailable revenue—special assessments 4,300 2,007,088 247,458 Total deferred inflows of resources 137,116 2,007,088 247,458 Fund balances Nonspendable 34,529 — — Restricted — 3,731,347 — Committed — — 283,919 Unassigned 5,666,183 — — Total fund balances 5,700,712 3,731,347 283,919 Total liabilities,deferred inflows of resources,and fund balances $ 6,107,096 $ 7,938,905 $ 531,377 See notes to basic financial statements -19- Capital Capital Projects- Projects- Permanent Capital Storm Water Improvement Projects- Trunk Revolving Maintenance Nonmajor Total $ 319,785 $ 165,107 $ 1,360,631 $ 2,686,357 $ 15,224,946 180,924 390,283 803 420 3,462 6,846 38,808 - - - - 1,215,476 - 132,816 - 565 - - 4,915 - 1,107,424 - 1,113 3,363,034 826,444 - - - 826,444 1,708,993 - - - 1,708,993 - 6,008 - - - - 34,529 $ 2,856,025 $ 1,273,516 $ 1,364,093 $ 2,875,240 $ 22,946,252 $ - $ - $ 125,888 $ 15,189 $ 356,056 - - - 353,796 408,020 - - - 338 403 - 334,967 - 826,444 - - - - 1,708,993 - - 460,855 369,323 3,299,916 - - 132,816 1,107,990 - 1,113 3,367,949 1,107,990 - 1,113 3,500,765 - - - - 34,529 - - - 340,490 4,071,837 2,856,025 165,526 903,238 2,164,314 6,373,022 - - - 5,666,183 2,856,025 165,526 903,238 2,504,804 16,145,571 $ 2,856,025 $ 1,273,516 $ 1,364,093 $ 2,875,240 $ 22,946,252 -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 31,2017 Total fund balances—governmental funds $ 16,145,571 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 88,506,261 Less accumulated depreciation (39,130,893) Net pension assets are only recorded in the government-wide financial statements as they are not current financial resources to governmental funds. 778,356 Long-term liabilities are not payable with current financial resources and, therefore, are not reported in governmental funds. Bonds and certificates of indebtedness (19,910,000) Unamortized bond premiums (645,061) Compensated absences (895,745) Net pension liability (6,401,196) Net OPEB obligation (871,448) 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. (201,017) 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. 2,028,796 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. Delinquent property taxes 132,816 Delinquent and deferred special assessments 3,367,949 Governmental funds do not report certain long-term amounts related to pensions that are included in net position. Deferred outflows—pension plan deferments 5,954,677 Deferred inflows—pension plan deferments (6,499,963) Total net position—governmental activities $ 42,359,103 See notes to basic financial statements -21- CITY OF FARMINGTON Statement of Revenues,Expenditures,and Changes in Fund Balances Governmental Funds Year Ended December 31,2017 Capital Projects— Debt Service State Aid General Fund Construction Revenues Property taxes $ 9,142,126 $ 2,871,904 $ Franchise taxes 120,000 — — Special assessments — 505,505 9,659 Licenses and permits 415,005 — — Intergovernmental 926,926 115,000 — Charges for services 518,912 — — Fines and forfeits 45,102 — — Investment earnings 27,560 19,244 2,833 Other 54,918 — — Total revenues 11,250,549 3,511,653 12,492 Expenditures Current General government 1,984,002 — — Public safety 5,440,973 — — Public works 2,078,554 — 111 Parks and recreation 1,226,401 — — Economic development 40,000 — — Capital outlay General government — — — Public safety 20,346 — — Public works 16,392 — — Parks and recreation 5,668 — — Debt service Principal — 6,395,000 — Interest and fiscal charges — 755,448 — Total expenditures 10,812,336 7,150,448 111 Excess(deficiency)of revenues over expenditures 438,213 (3,638,795) 12,381 Other financing sources(uses) Sale of capital assets — — — Transfers in 1,152,000 697,002 — Transfers out (954,792) — (125,000) Payment on refunded debt — (9,990,000) — Total other financing sources(uses) 197,208 (9,292,998) (125,000) Net change in fund balances 635,421 (12,931,793) (112,619) Fund balances Beginning of year 5,065,291 16,663,140 396,538 End of year $ 5,700,712 $ 3,731,347 $ 283,919 See notes to basic financial statements -22- Capital Capital Projects- Projects- Permanent Capital Storm Water Improvement Projects- Trunk Revolving Maintenance Nonmajor Total $ 166,000 $ - $ 6,759 $ - $ 12,186,789 - - - 146,728 266,728 2,702 13,302 - 1,576 532,744 - - 415,005 590,244 - 1,632,170 21,883 - 1,213 387,776 929,784 - 45,102 90,650 1,402 19,002 22,711 183,402 250 146,120 201,288 281,235 14,704 617,468 704,911 16,393,012 - - - 67,141 2,051,143 - - - 96,964 5,537,937 2 362 302,664 2 2,381,695 22,298 336,957 1,585,656 - - 40,000 6,680 6,680 - 287,560 307,906 - - 92,700 - 109,092 - - 30,768 126,381 162,817 - 6,395,000 28,971 - 33,725 - 818,144 28,973 362 482,155 921,685 19,396,070 252,262 14,342 135,313 (216,774) (3,003,058) - - - 54,408 54,408 - - 631,543 500,857 2,981,402 - (768) (1,080,560) - - (9,990,000) - - 631,543 554,497 (8,034,750) 252,262 14,342 766,856 337,723 (11,037,808) 2,603,763 151,184 136,382 2,167,081 27,183,379 $ 2,856,025 $ 165,526 $ 903,238 $ 2,504,804 $ 16,145,571 -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 31,2017 Total net change in fund balances—governmental funds $ (11,037,808) 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 377,302 Depreciation expense (2,100,352) Net pension assets are included in net position, but are excluded from fund balances because they do not represent financial resources. 154,797 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. Principal payments for bonds and certificate of indebtedness 16,385,000 Debt premiums 93,584 Compensated absences (38,641) Net pension liability 7,327,100 Net OPEB obligation (75,683) 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. 175,485 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. 217,042 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. Delinquent property taxes (9,259) Delinquent and deferred special assessments (426,566) 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 (3,338,342) Deferred inflows—pension plan deferments (4,613,155) Change in net position—governmental activities $ 3,090,504 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 31,2017 Original and Variance With Final Budget Actual Final Budget Revenues Property taxes $ 9,095,753 $ 9,142,126 $ 46,373 Franchise taxes 120,000 120,000 - Licenses and permits 397,615 415,005 17,390 Intergovernmental 847,432 926,926 79,494 Charges for services 481,950 518,912 36,962 Fines and forfeits 40,000 45,102 5,102 Investment earnings 23,005 27,560 4,555 Other 47,385 54,918 7,533 Total revenues 11,053,140 11,250,549 197,409 Expenditures Current General government 2,182,191 1,984,002 (198,189) Public safety 5,465,638 5,440,973 (24,665) Public works 2,268,547 2,078,554 (189,993) Parks and recreation 1,324,772 1,226,401 (98,371) Economic development 40,000 40,000 - Capital outlay Public safety 10,000 20,346 10,346 Public works - 16,392 16,392 Parks and recreation - 5,668 5,668 Total expenditures 11,291,148 10,812,336 (478,812) Excess(deficiency)of revenues over expenditures (238,008) 438,213 676,221 Other financing sources(uses) Transfers in 1,150,350 1,152,000 1,650 Transfers out (912,342) (954,792) (42,450) Total other financing sources(uses) 238,008 197,208 (40,800) Net change in fund balances $ - 635,421 $ 635,421 Fund balances Beginning of year 5,065,291 End of year $ 5,700,712 See notes to basic fmancial statements -25- CITY OF FARMINGTON Statement of Net Position Proprietary Funds as of December 31,2017 Business-Type Activities-Enterprise Funds Liquor Sewer Solid Storm Operations Operations Waste Water Assets Current assets Cash and investments $ 1,123,054 $ 2,602,817 $ 1,265,288 $ 969,383 Cash restricted for drinking water treatment plant - - - - Receivables Accounts 78,869 428,374 448,054 147,228 Interest 2,851 6,628 3,221 2,469 Delinquent special assessments - 22,277 - - Due from other governments - - - Inventory 495,597 - - Prepaid items 290 - - - Total current assets 1,700,661 3,060,096 1,716,563 1,119,080 Noncurrent assets Special assessments - 293,943 - - Capital assets Land - 85,000 - 1,192 Buildings - - - - Improvements other than buildings 121,012 - - - Machinery and equipment 242,513 720,696 1,383,689 30,264 Distribution system - - - Collection system - 28,273,060 - 20,182,371 Less accumulated depreciation (363,525) (11,707,111) (1,163,761) (6,984,509) Total capital assets(net of accumulated depreciation) - 17,371,645 219,928 13,229,318 Total noncurrent assets - 17,665,588 219,928 13,229,318 Total assets 1,700,661 20,725,684 1,936,491 14,348,398 Deferred outflows of resources Pension plan deferments-PERA 89,391 - 69,526 - Total assets and deferred outflows of resources $ 1,790,052 $ 20,725,684 $ 2,006,017 $ 14,348,398 Liabilities Current liabilities Accounts and contracts payable $ 86,861 $ 12,457 $ 81,013 $ 15,470 Accrued salaries and employee benefits payable - - - - Deposits payable - - - - Due to other governments 47,411 9,940 21,881 - Compensated absences payable-current 28,766 - 36,902 - Total current liabilities 163,038 22,397 139,796 15,470 Noncurrent liabilities Compensated absences payable 9,588 - 12,300 Net pension liability-PERA 343,009 - 266,785 Net OPEB obligation 50,890 - 47,056 - Total noncurrent liabilities 403,487 - 326,141 - Total liabilities 566,525 22,397 465,937 15,470 Deferred inflows of resources Pension plan deferments-PERA 71,814 - 55,855 - Net position Investment in capital assets - 17,371,645 219,928 13,229,318 Restricted for drinking water treatment plant - - - - Unrestricted 1,151,713 3,331,642 1,264,297 1,103,610 Total net position 1,151,713 20,703,287 1,484,225 14,332,928 Total liabilities,deferred inflows of resources,and net position $ 1,790,052 $ 20,725,684 $ 2,006,017 $ 14,348,398 See notes to basic financial statements -26- Governmental Street Activities- Water Light Total Internal Service $ 6,344,434 $ 83,377 $ 12,388,353 $ 2,303,452 2,238,206 - 2,238,206 - 262,559 34,154 1,399,238 70,653 21,851 212 37,232 5,834 - 22,277 - - 51 495,597 - 290 7,606 8,867,050 117,743 16,581,193 2,387,596 436 - 294,379 - 328,384 - 414,576 3,243,203 - 3,243,203 - 121,012 - 317,003 - 2,694,165 116,173 32,511,466 - 32,511,466 - 48,455,431 - (15,756,298) - (35,975,204) (83,135) 20,643,758 - 51,464,649 33,038 20,644,194 - 51,759,028 33,038 29,511,244 117,743 68,340,221 2,420,634 158,917 - $ 29,511,244 $ 117,743 $ 68,499,138 $ 2,420,634 $ 31,065 $ 22,223 $ 249,089 $ 27,913 336,155 35,496 - 35,496 1,569 1,016 80,248 - 65,668 26,201 67,577 22,223 430,501 391,838 21,888 - - - 609,794 - 97,946 - - 729,628 - 67,577 22,223 1,160,129 391,838 127,669 - 20,643,758 - 51,464,649 33,038 2,238,206 - 2,238,206 - 6,561,703 95,520 13,508,485 1,995,758 29,443,667 95,520 67,211,340 2,028,796 $ 29,511,244 $ 117,743 $ 68,499,138 $ 2,420,634 -27- CITY OF FARMINGTON Statement of Revenues,Expenses,and Changes in Fund Net Position Proprietary Funds Year Ended December 31,2017 Business-Type Activities-Enterprise Funds Liquor Sewer Solid Storm Operations Operations Waste Water Operating revenue Sales $ 4,965,490 $ - $ - $ - Charges for services - 2,066,726 2,058,063 647,767 Insurance reimbursement - - Miscellaneous 1,978 1,662 3,261 - Total operating revenue 4,967,468 2,068,388 2,061,324 647,767 Cost of goods sold 3,707,363 - - - Gross profit 1,260,105 2,068,388 2,061,324 647,767 Operating expenses Personal services 474,417 3,734 405,141 230 Professional services 443,484 1,489,343 1,246,891 123,667 Materials and supplies 9,224 18,350 104,270 15,817 Insurance - - - - Depreciation - 596,389 107,873 412,079 Total operating expenses 927,125 2,107,816 1,864,175 551,793 Operating income(loss) 332,980 (39,428) 197,149 95,974 Nonoperating revenues(expenses) Intergovernmental - - 24,000 - Investment earnings 9,780 22,162 11,640 10,272 Gain(loss)on sale of capital assets - 3,918 - (19,779) Interest and fiscal charges - (2,003) Total nonoperating revenues(expenses) 9,780 24,077 35,640 (9,507) Income(loss)before transfers 342,760 (15,351) 232,789 86,467 Transfers in 63,849 - Transfers out (248,592) (429,376) (358,213) (437,775) Change in net position 94,168 (444,727) (61,575) (351,308) Net position Beginning of year 1,057,545 21,148,014 1,545,800 14,684,236 End of year $ 1,151,713 $ 20,703,287 $ 1,484,225 $ 14,332,928 See notes to basic financial statements -28- Governmental Street Activities- Water Light Total Internal Service $ - $ - $ 4,965,490 $ - 1,461,274 225,250 6,459,080 2,885,357 - - - 276,939 219,805 320 227,026 - 1,681,079 225,570 11,651,596 3,162,296 - 3,707,363 - 1,681,079 225,570 7,944,233 3,162,296 14,023 - 897,545 2,331,919 367,469 187,277 3,858,131 254,814 165,034 9,873 322,568 140,409 - - 281,800 767,209 - 1,883,550 3,682 1,313,735 197,150 6,961,794 3,012,624 367,344 28,420 982,439 149,672 - - 24,000 10,789 74,518 835 129,207 17,449 258 - (15,603) - (5) - (2,008) - 74,771 835 135,596 28,238 442,115 29,255 1,118,035 177,910 63,849 39,132 (529,867) - (2,003,823) - (87,752) 29,255 (821,939) 217,042 29,531,419 66,265 68,033,279 1,811,754 $ 29,443,667 $ 95,520 $ 67,211,340 $ 2,028,796 -29- CITY OF FARMINGTON Statement of Cash Flows Proprietary Funds Year Ended December 31,2017 Business-Type Activities-Enterprise Funds Liquor Sewer Solid Storm Operations Operations Waste Water Cash flows from operating activities Cash received from customers $ 4,959,223 $ 2,116,219 $ 2,097,500 $ 645,569 Cash receipts from other funds and reimbursements - •- - - Cash payments to suppliers (4,157,449) (1,401,364) (1,466,018) (126,537) Cash payments to employees for services (445,718) (3,734) (380,942) (230) Cash payments for interfund services used - - - - Net cash flows from operating activities 356,056 711,121 250,540 518,802 Cash flows from noncapital financing activities Intergovernmental revenue - - 24,000 - Transfers in - - 63,849 - Transfers out (248,592) (429,376) (358,213) (437,775) Net cash flows from noncapital financing activities (248,592) (429,376) (270,364) (437,775) Cash flows from capital and related financing activities Acquisition and construction of capital assets - (16,392) - (125,799) Proceeds from the disposal of capital assets - 3,918 - Interest and fiscal charges paid - (2,003) - - Net cash flows from capital and related financing activities - (14,477) - (125,799) Cash flows from investing activities Interest received on investments 9,134 20,592 11,206 9,997 Net increase in cash and cash equivalents 116,598 287,860 (8,618) (34,775) Cash and investments Beginning of year 1,006,456 2,314,957 1,273,906 1,004,158 End of year $ 1,123,054 $ 2,602,817 $ 1,265,288 $ 969,383 Reconciliation of operating income(loss)to net cash flows from operating activities Operating income(loss) $ 332,980 $ (39,428) $ 197,149 $ 95,974 Adjustments to reconcile operating income(loss)to net cash flows from operating activities Depreciation - 596,389 107,873 412,079 Change in assets,deferred outflows of resources,liabilities, and deferred inflows of resources Accounts receivable (8,245) 13,848 36,176 (2,198) Special assessments - 33,983 - - Due from other governments - - - - Inventory (25,704) - - - Prepaid items 21,081 111,518 - 160 Deferred outflows of resources-pension plan deferments 89,185 - 69,366 - Accounts and contracts payable 4,914 (14,119) (114,143) 12,787 Accrued salaries and employee benefits - - - - Deposits payable - (1,010) - - Due to other governments 2,331 9,940 (714) - Compensated absences 7,835 - 7,891 - Net pension liability (83,022) - (64,572) - Net OPEB obligation 4,588 - 3,648 - Deferred inflows of resources-pension plan deferments 10,113 - 7,866 - Net cash flows from operating activities $ 356,056 $ 711,121 $ 250,540 $ 518,802 Schedule of noncash capital and related financing activities Net book value of disposed capital assets $ - $ - $ - $ 19,779 See notes to basic financial statements -30- Governmental Street Activities- Water Light Total Internal Service $ 1,666,602 $ 222,000 $ 11,707,113 $ - - - - 3,134,563 (556,486) (279,911) (7,987,765) - (14,023) - (844,647) (2,294,836) (698,173) 1,096,093 (57,911) 2,874,701 141,554 24,000 10,789 - - 63,849 39,132 (529,867) - (2,003,823) - (529,867) - (1,915,974) 49,921 (142,191) (36,720) 258 - 4,176 - (5) - (2,008) - 253 - (140,023) (36,720) 69,992 930 121,851 15,502 636,471 (56,981) 940,555 170,257 7,946,169 140,358 13,686,004 2,133,195 $ 8,582,640 $ 83,377 $ 14,626,559 $ 2,303,452 $ 367,344 $ 28,420 $ 982,439 $ 149,672 767,209 - 1,883,550 3,682 (15,858) (3,570) 20,153 (27,789) 1,381 - 35,364 - - - - 56 - - (25,704) - 132,759 9,110 - - 158,551 - (27,679) (82,761) (221,001) (20,730) - - - 19,835 3,496 - 2,486 586 200 - 11,757 - 15,726 7,132 - - (147,594) - 8,236 - - - 17,979 - $ 1,096,093 $ (57,911) $ 2,874,701 $ 141,554 $ - $ - $ 19,779 $ - -31- CITY OF FARMINGTON Statement of Net Position Fiduciary Fund as of December 31,2017 Agency Fund Assets Cash and investments $ 216,275 Liabilities Deposits payable $ 216,275 See notes to basic fmancial statements -32- CITY OF FARMINGTON Notes to Basic Financial Statements December 31, 2017 NOTE 1—SIGNIFICANT ACCOUNTING POLICIES A. Organization The City of Farmington, Minnesota (the 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 financial 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, one organization has been included in this report as follows: 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, two Independent School District No. 192 School Board members, and three residents 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 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 financial statements. Aggregated information for the remaining nonmajor funds is reported in a single column in the respective 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 the construction and improvement of storm water trunk infrastructure 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 benefits 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), capital projects funds, and enterprise 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 budgets and makes the appropriate changes. 3. Public hearings are conducted to obtain taxpayer comments. 4. The budgets are 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. -3 6- NOTE 1—SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) For the year ended December 31, 2017, 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 $ — $ 111 Storm Water Trunk Capital Projects $ — $ 28,973 Permanent Improvement Revolving Capital Projects $ — $ 362 Nonmajor special revenue funds Police Donations and Forfeitures $ 6,500 $ 12,696 Arena $ 313,952 $ 326,121 Nonmajor capital projects funds Sanitary Sewer Trunk $ — $ 2 Fire Capital Projects $ — $ 34,205 General Capital Equipment $ 157,546 $ 337,623 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 based on month-end outstanding balances for each fund. 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. Interest on these investments is allocated to the respective fund. 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 or with adequate collateral and interest rate risk by matching maturities to cash flow needs and holding securities to maturity. The City reports all investments at fair value. The City categorizes its fair value measurements within the fair value hierarchy established by accounting principles generally accepted in the United States of America. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; and Level 3 inputs are significant unobservable inputs. Debt securities classified in Level 2 of the fair value hierarchy are valued using a matrix pricing technique. Matrix pricing is used to value securities based on the securities' relationship to benchmark quoted prices. See Note 2 for the City's recurring fair value measurements as of the current year-end. -37- NOTE 1—SIGNIFICANT ACCOUNTING POLICIES(CONTINUED) 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. 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." 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 four times a year: in June,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 financial 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. -38- NOTE 1 —SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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 financial 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 acquisition 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 five 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 financial 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. 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 and liabilities, statements of financial position or balance sheets may report separate financial statement elements called deferred outflows or inflows of resources. These separate financial statement elements represent a consumption or acquisition of net position that applies to a future period and so will not be recognized as an outflow of resources (expense/expenditure) or an inflow of financial resources(revenue)until then. Deferred outflows and inflows of resources related to pensions are reported in the government-wide and enterprise funds Statement of Net Position. These deferred outflows and inflows result from differences between expected and actual experience, changes in proportion, changes of assumptions, differences between 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. Unavailable revenue arises only under a modified accrual basis of accounting and, therefore, is only reported in the governmental funds Balance Sheet. The governmental funds report unavailable revenue from two sources: property taxes and special assessments. These amounts are deferred and recognized as inflows of resources in the period that the amounts become available. -39- NOTE 1—SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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. 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 nonvesting 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, deferred outflows/inflows of resources, and pension expense, information about the fiduciary net position of the Public Employees Retirement Association (PERA) and additions to/deductions from the PERA's fiduciary net position have been determined on the same basis as they are reported by the PERA, except that the PERA's fiscal year-end is June 30. For this purpose, plan contributions are recognized as of employer payroll paid dates and benefit payments, and refunds are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. The PERA has a special funding situation created by a direct aid contribution made by the state of Minnesota. The direct aid is a result of the merger of the Minneapolis Employees Retirement Fund into the PERA on January 1, 2015. 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. -40- NOTE 1—SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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 the LMCIT. The City is subject to supplemental assessments as deemed necessary by the LMCIT. The LMCIT reinsures through the 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. 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. -41- NOTE 1 —SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) • 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. 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 amounts reported in the financial statements during the reporting period. Actual results could differ from those estimates. NOTE 2—DEPOSITS AND INVESTMENTS A. Components of Cash and Investments Cash and investments at year-end consist of the following: Deposits $ 4,819,092 Investments 27,884,290 Total $ 32,703,382 Cash and investments are included on the basic financial statements as follows: Primary government Statement of Net Position Cash and investments $ 29,916,751 Restricted assets—temporarily restricted Cash for future drinking water treatment plant 2,238,206 Fiduciary fund Cash and investments 216,275 Component unit Statement of Net Position Cash and investments 332,150 Total $ 32,703,382 -42- NOTE 2—DEPOSITS AND INVESTMENTS (CONTINUED) 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 $4,819,092, while the balance on the bank records was $4,894,291. At December 31, 2017, 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. C. Investments The City has the following investments at year-end: Fair Value Credit Risk Measurements Interest Risk—Maturity Duration in Years Investment Type Rating Agency Using Less Than 1 1 to 5 5 to 10 Total U.S.agency securities AA S&P Level 2 $ — $ 399,420 $ — $ 399,420 Municipal bonds AAA S&P Level 2 849,386 247,903 — 1,097,289 Municipal bonds AA S&P Level 2 310,000 273,022 — 583,022 Municipal bonds AA Moody's Level 2 323,482 249,570 — 573,052 Negotiable certificates of deposit Not rated Level 2 8,304,428 10,684,151 599,928 19,588,507 $ 9,787,296 $ 11,854,066 $ 599,928 22,241,290 Investment pools/mutual funds Western Asset Institutional Government Reserves AAAm S&P Level 2 5,643,000 Total investments $ 27,884,290 -43- NOTE 2—DEPOSITS AND INVESTMENTS (CONTINUED) 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 final 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 5.0 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. 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. The City's year-end investment portfolio maturities comply with this policy. -44- NOTE 3-INTERFUND BALANCES AND TRANSFERS A. Interfund Balances The City had the following interfund balances at year-end: Receivable Fund - Payable Fund Purpose Amount Due from/to other funds Governmental Governmental Storm Water Trunk Debt Service Debt financing(1) $ 132,661 Storm Water Trunk Debt Service Debt financing(2) 358,816 Storm Water Trunk Maintenance Construction financing(3) 334,967 Total due from/to other funds $ 826,444 Advances to/from other funds Governmental Governmental Storm Water Trunk Debt Service Debt financing(1) $ 252,809 Storm Water Trunk Debt Service Debt financing(2) 1,156,184 Storm Water Trunk Debt Service Debt financing(4) 300,000 Total advances to/from other funds $ 1,708,993 (1)Advance of$509,854 to finance G.O.2010D Bonds.Annual payments through 06/30/2020. 1.8 percent interest. (2)Advance of$1,515,000 to finance G.O.2010A Bonds.Annual payments through 12/30/2021. 1.755 percent interest. (3)Advance of$1,234,891 to finance street construction.Annual payments through 06/30/2030.2.1 percent interest. (4)Advance of$300,000 to finance G.O.2010C Bonds.Principal due 12/31/2022.2.3 percent interest. 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, fund debt service payments, or close funds: Transfers In Proprietary Governmental Funds Funds Debt Solid Waste Internal Transfers Out General Service Maintenance Nonmajor Enterprise Service Total Governmental funds General $ - $ 2,450 $ 488,175 $ 431,145 $ - $ 33,022 $ 954,792 State Aid Construction - 125,000 - - - - 125,000 Nonmajor - - 768 - - - 768 Proprietary funds Enterprise Liquor Operations 56,280 - 142,600 49,712 - - 248,592 Sewer Operations 268,503 142,388 - - 16,485 2,000 429,376 Solid Waste 130,881 213,582 - 10,000 - 3,750 358,213 Storm Water 339,084 71,194 - 10,000 17,137 360 437,775 Water 357,252 142,388 - - 30,227 - 529,867 Total $ 1,152,000 $ 697,002 $ 631,543 $ 500,857 $ 63,849 $ 39,132 $ 3,084,383 Intrafund transfers of$14,484,692 between the various accounts of the Debt Service Fund are eliminated in the basic financial statements. -45- NOTE 4—CAPITAL ASSETS Capital asset activity for the year ended December 31,2017 was as follows: A. Changes in Capital Assets Used in Governmental Activities Beginning Ending Balance Additions Deletions 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 21,413,765 103,150 (26,485) 21,490,430 Improvements other than buildings 1,650,256 40,000 — 1,690,256 Machinery and equipment 5,764,199 270,872 (145,333) 5,889,738 Infrastructure 57,802,186 — — 57,802,186 Total capital assets,depreciated 86,630,406 414,022 (171,818) 86,872,610 Less accumulated depreciation on Buildings 5,685,364 436,129 (26,485) 6,095,008 Improvements other than buildings 1,253,324 69,559 — 1,322,883 Machinery and equipment 4,340,531 308,029 (145,333) 4,503,227 Infrastructure 26,002,593 1,290,317 — 27,292,910 Total accumulated depreciation 37,281,812 2,104,034 (171,818) 39,214,028 Total capital assets,depreciated 49,348,594 (1,690,012) — 47,658,582 Net capital assets $ 51,098,418 $ (1,690,012) $ — $ 49,408,406 B. Changes in Capital Assets Used in Business-Type Activities Beginning Ending Balance Additions Deletions Balance Capital assets,not depreciated Land $ 414,576 $ — $ — $ 414,576 Capital assets,depreciated Buildings 3,243,203 — — 3,243,203 Improvements other than buildings 121,012 — — 121,012 Machinery and equipment 2,785,486 16,392 (107,713) 2,694,165 Collection/distribution systems 80,877,840 125,799 (36,742) 80,966,897 Total capital assets, depreciated 87,027,541 142,191 (144,455) 87,025,277 Less accumulated depreciation on Buildings 3,105,976 91,736 — 3,197,712 Improvements other than buildings 121,012 — — 121,012 Machinery and equipment 2,336,972 149,297 (107,713) 2,378,556 Collection/distribution systems 28,652,370 1,642,517 (16,963) 30,277,924 Total accumulated depreciation 34,216,330 1,883,550 (124,676) 35,975,204 Total capital assets,depreciated 52,811,211 (1,741,359) (19,779) 51,050,073 Net capital assets $ 53,225,787 $ (1,741,359) $ (19,779) $ 51,464,649 -46- NOTE 4—CAPITAL ASSETS (CONTINUED) C. Depreciation Expense by Function Depreciation expense was charged to the following functions: Governmental activities General government $ 219,510 Public safety 297,755 Public works 1,419,681 Parks and recreation 167,088 Total depreciation expense—governmental activities $ 2,104,034 Business-type activities Sewer operations $ 596,389 Solid waste 107,873 Storm water 412,079 Water 767,209 Total depreciation expense—business-type activities $ 1,883,550 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 2017,the City approved a two-year lease extension at a monthly rent of$8,594 plus a proportionate share of common area operating expenses. The City has the option to extend the lease one additional year at rates to be negotiated. In 2017, the City paid $99,479 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 2017. The following is a schedule by year of future minimum payments required under the leases: Year Ending December 31, Amount 2018 $ 179,253 2019 129,940 $ 309,193 -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 Refunding Bonds 2011A $ 2,385,000 2.00-2.50% 08/25/2011 02/01/2018 $ 660,000 G.O.Improvement Refunding Bonds 2013A $ 5,365,000 2.00% 01/15/2013 02/01/2022 3,345,000 G.O.Street Reconstruction Bonds 2013B $ 1,495,000 0.45-1.95% 10/09/2013 02/01/2020 1,125,000 G.O.Street Reconstruction Bonds 2015A $ 3,050,000 2.00-3.00% 10/15/2015 02/01/2030 2,850,000 G.O.Improvement Refunding Bonds 2016A $ 3,450,000 2.00% 12/01/2016 02/01/2023 3,450,000 Total general obligation improvement bonds 11,430,000 Capital improvement bonds G.O.Capital Improvement Refunding Bonds 2016B $ 4,540,000 2.00-3.00% 12/01/2016 02/01/2028 4,540,000 G.O.Capital Improvement Refunding Bonds 2016C $ 1,630,000 2.00% 12/01/2016 02/01/2020 1,630,000 Total capital improvement bonds 6,170,000 Public project revenue bond G.O.Capital Improvement Bonds 2010A $ 3,850,000 2.00-4.00% 01/13/2010 02/01/2018 1,765,000 Revenue bonds G.O.Utility Revenue Refunding Bonds 2010B $ 1,200,000 2.00-3.25% 01/13/2010 02/01/2018 545,000 Total governmental activities bonds 19,910,000 Unamortized premium 645,061 Compensated absences 921,946 Net pension liability—PERA 6,401,196 Net OPEB obligation 871,448 Total governmental activities $28,749,651 Business-type activities Compensated absences $ 87,556 Net pension liability—PERA 609,794 Net OPEB obligation 97,946 Total business-type activities $ 795,296 -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 $ 19,930,000 $ - $ 8,500,000 $ 11,430,000 $ 2,315,000 Capital improvement bonds 13,105,000 - 6,935,000 6,170,000 555,000 Public project revenue bond 2,085,000 - 320,000 1,765,000 1,765,000 Revenue bonds 640,000 - 95,000 545,000 545,000 Certificates of indebtedness 535,000 - 535,000 - - Unamortized bond premium 738,645 - 93,584 645,061 - Compensated absences 876,173 514,959 469,186 921,946 691,460 Net pension liability-PERA 13,728,296 1,399,923 8,727,023 6,401,196 - Net OPEB obligation 795,765 95,323 19,640 871,448 - Total governmental activities 52,433,879 2,010,205 25,694,433 28,749,651 5,871,460 Business-type activities Compensated absences 71,830 48,692 32,966 87,556 65,668 Net pension liability-PERA 757,388 109,559 257,153 609,794 Net OPEB obligation 89,710 10,418 2,182 97,946 - Total business-type activities 918,928 168,669 292,301 795,296 65,668 Total government-wide $ 53,352,807 $ 2,178,874 $ 25,986,734 $ 29,544,947 $ 5,937,128 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 2018 $ 2,315,000 $ 222,946 $ 555,000 $ 150,900 $ 1,765,000 $ 32,788 2019 1,905,000 179,260 530,000 140,050 - - 2020 2,220,000 136,973 545,000 129,300 - - 2021 1,470,000 98,050 505,000 116,275 - - 2022 1,275,000 68,450 525,000 100,825 - - 2023-2027 1,645,000 155,275 2,885,000 256,375 - - 2028-2030 600,000 19,338 625,000 6,250 - - Total $ 11,430,000 $ 880,292 $ 6,170,000 $ 899,975 $ 1,765,000 $ 32,788 Year Ending Revenue Total December 31, Principal Interest Principal Interest 2018 $ 545,000 $ 8,566 $ 5,180,000 $ 415,200 2019 - - 2,435,000 319,310 2020 - - 2,765,000 26 ,273 2021 - - 1,975,000 214,325 2022 - - 1,800,000 169,275 2023-2027 - - 4,530,000 411,650 2028-2030 - - 1,225,000 25,588 Total $ 545,000 $ 8,566 $ 19,910,000 $ 1,821,621 -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. In December 2016, the City issued $3,450,000 of General Obligation Refunding Bonds, Series 2016A. The proceeds of this issue were used to redeem, on their February 1, 2017 call date, the 2018 through 2027 maturities of the City's 2008A, 2008B, and 2010C Improvement Bonds, which reduced the City's total future debt service payments by $835,567 and resulted in present value savings of$636,732. In December 2016, the City issued $4,540,000 of General Obligation Capital Improvement Plan Refunding Bonds, Series 2016B and $1,630,000 of Taxable General Obligation Capital Improvement Plan Refunding Bonds, Series 2016C. The proceeds of these issues were used to redeem, on their February 1, 2017 call date, the 2018 through 2028 maturities of the City's 2007A Capital Improvement Plan Bonds, which reduced the City's total future debt service payments by$1,037,938 and resulted in present value savings of$968,869. The City has elected to redeem the 2019 through 2022 maturities of its General Obligation Capital Improvement Bonds, Series 2010A and its General Obligation Utility Revenue Refunding Bonds, Series 2010B on their February 1, 2018 call date using available internal resources. Redeeming these bonds in advance of their stated maturities will reduce future interest payments by$143,650 and$36,594,respectively. The City has elected to redeem the 2019 maturity of its General Obligation Refunding Bonds, Series 2011A on their February 1, 2018 call date using available internal resources. Redeeming these bonds in advance of their stated maturities will reduce future interest payments by $8,375. The City is subject to statutory limitation by the state of Minnesota for bonded indebtedness payable principally from property taxes. As of December 31, 2017, the City had not utilized $38,103,628 of its net legal debt margin. • Net OPEB Obligation—This liability represents the City's OPEB obligation as further described later in these notes. The General, Liquor Operations, 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 Operations, 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 Operations, 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. -50- NOTE 7 DEFINED BENEFIT PENSION PLANS Employees of the City participate in three defined benefit pension plans. Two of the plans are state-wide, cost-sharing, multiple-employer defined benefit pension plans administered by the PERA of Minnesota: the General Employees Retirement Fund (GERF) and the Public Employees Police and Fire Fund (PEPFF). The third is a single-employer defined benefit pension plan administered through the Farmington Fire Fighters' Relief Association (the Association). The details of the City's participation in each of these plans are presented later in these notes. The following table summarizes the impact of these plans on the City's government-wide financial statements: Farmington State-Wide PERA Pension Plans Fire Fighters' Relief Total GERF PEPFF Total Association All Plans Net pension asset $ — $ — $ — $ 778,356 $ 778,356 Deferred outflows of resources $ 993,231 $ 4,644,690 $ 5,637,921 $ 475,673 $ 6,113,594 Net pension liability $ 3,811,209 $ 3,199,781 $ 7,010,990 $ — $ 7,010,990 Deferred inflows of resources $ 797,931 $ 5,659,601 $ 6,457,532 $ 170,100 $ 6,627,632 Pension expense $ 472,781 $ 792,993 $ 1,265,774 $ 254,831 $ 1,520,605 NOTE 8—DEFINED BENEFIT PENSION PLANS—STATE-WIDE A. Plan Descriptions The City participates in the following cost-sharing, multiple-employer defined benefit pension plans administered by the PERA of Minnesota. 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 GERF. The 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 statutes 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 90.0 percent funded for two consecutive years are given 2.5 percent increases. Members in plans that have not exceeded 90.0 percent funded, or have fallen below 80.0 percent, are given 1.0 percent increases. -51- NOTE 8—DEFINED BENEFIT PENSION PLANS—STATE-WIDE (CONTINUED) 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 age 66. 2. PEPFF Benefits Benefits for the 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 the 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 the 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 Basic Plan members and Coordinated Plan members were required to contribute 9.10 percent and 6.50 percent, respectively, of their annual covered salary in calendar year 2017. The City was required to contribute 11.78 percent of pay for Basic Plan members and 7.50 percent for Coordinated Plan members in calendar year 2017. The City's contributions to the GERF for the year ended December 31, 2017 were $290,225. The City's contributions were equal to the required contributions as set by state statutes. 2. PEPFF Contributions Plan members were required to contribute 10.80 percent of their annual covered salary in calendar year 2017. The City was required to contribute 16.20 percent of pay for members in calendar year 2017. The City's contributions to the PEPFF for the year ended December 31, 2017 were $395,621. The City's contributions were equal to the required contributions as set by state statutes. -52- NOTE 8—DEFINED BENEFIT PENSION PLANS—STATE-WIDE (CONTINUED) D. Pension Costs 1. GERF Pension Costs At December 31, 2017, the City reported a liability of$3,811,209 for its proportionate share of the GERF's net pension liability. The net pension liability was measured as of June 30, 2017, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The City's proportion of the net pension liability was based on the City's contributions received by the PERA during the measurement period for employer payroll paid dates from July 1, 2016 through June 30, 2017, relative to the total employer contributions received from all of the PERA's participating employers. The City's proportionate share was 0.0597 percent at the end of the measurement period and 0.0583 percent for the beginning of the period. The City's net pension liability reflected a reduction due to the state of Minnesota's contribution of$6 million to the fund. The state of Minnesota is considered a nonemployer contributing entity and the state's contribution meets the definition of a special funding situation. The amount recognized by the City as its proportionate share of the net pension liability, the direct aid, and total portion of the net pension liability that was associated with the City were as follows: City's proportionate share of net pension liability $ 3,811,209 State's proportionate share of the net pension liability associated with the City $ 47,942 For the year ended December 31, 2017, the City recognized pension expense of$471,396 for its proportionate share of the GERF's pension expense. In addition, the City recognized an additional $1,385 as pension expense (and grant revenue) for its proportionate share of the state of Minnesota's contribution of$6 million to the GERF. At December 31, 2017, 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 $ 125,606 $ 242,919 Changes in actuarial assumptions 617,905 382,074 Differences between projected and actual investment earnings 18,675 — Changes in proportion 85,255 172,938 Contributions paid to the PERA subsequent to the measurement date 145,790 — Total $ 993,231 $ 797,931 -53- NOTE 8—DEFINED BENEFIT PENSION PLANS—STATE-WIDE (CONTINUED) Deferred outflows of resources reported $145,790 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, 2018. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows: Pension Year Ending Expense December 31, Amount 2018 $ 67,800 2019 $ 191,349 2020 $ (47,861) 2021 $ (161,778) 2. PEPFF Pension Costs At December 31, 2017, the City reported a liability of$3,199,781 for its proportionate share of the PEPFF's net pension liability. The net pension liability was measured as of June 30, 2017 and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The City's proportion of the net pension liability was based on the City's contributions received by the PERA during the measurement period for employer payroll paid dates from July 1, 2016 through June 30, 2017, relative to the total employer contributions received from all of the PERA's participating employers. The City's proportionate share was 0.2370 percent at the end of the measurement period and 0.2430 percent for the beginning of the period. For the year ended December 31, 2017, the City recognized pension expense of$771,663 for its proportionate share of the PEPFF's pension expense. The City also recognized $21,330 for the year ended December 31, 2017 as revenue and an offsetting reduction of net pension liability 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. At December 31, 2017,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 $ 73,652 $ 879,293 Changes in actuarial assumptions 4,293,565 4,542,899 Differences between projected and actual investment earnings 72,743 — Changes in proportion — 237,409 Contributions paid to the PERA subsequent to the measurement date 204,730 — Total $ 4,644,690 $ 5,659,601 -54- NOTE 8—DEFINED BENEFIT PENSION PLANS—STATE-WIDE (CONTINUED) Deferred outflows of resources reported $204,730 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, 2018. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows: Pension Year Ending Expense December 31, Amount 2018 $ 35,306 2019 $ 35,306 2020 $ (85,950) 2021 $ (270,319) 2022 $ (933,984) E. Actuarial Assumptions The total pension liability in the June 30, 2017 actuarial valuation was determined using the following actuarial assumptions: Inflation 2.50%per year Active member payroll growth 3.25%per year Investment rate of return 7.50% Salary increases were based on a service-related table. Mortality rates for active members, retirees, survivors, and disabilitants were based on RP-2014 tables for all plans for males or females, as appropriate, with slight adjustments to fit the PERA's experience. Cost of living benefit increases for retirees are assumed to be 1.0 percent per year for the GERF through 2044, and the PEPFF through 2064, and then 2.5 percent thereafter for both plans. Actuarial assumptions used in the June 30, 2017 valuation were based on the results of actuarial experience studies. The most recent four-year experience study in the GERF was completed in 2015. The most recent five-year experience study for the PEPFF was completed in 2016. The following changes in actuarial assumptions occurred in 2017: 1. GERF • The Combined Service Annuity (CSA) loads were changed from 0.8 percent for active members and 60.0 percent for vested and nonvested deferred members. The revised CSA loads are now zero percent for active member liability, 15.0 percent for vested deferred member liability, and 3.0 percent for nonvested deferred member liability. • The assumed post-retirement benefit increase rate was changed from 1.0 percent per year for all years,to 1.0 percent per year through 2044, and 2.5 percent per year thereafter. -55- NOTE 8—DEFINED BENEFIT PENSION PLANS—STATE-WIDE (CONTINUED) 2. PEPFF • Assumed salary increases were changed as recommended in the June 30, 2016 experience study. The net effect is proposed rates that average 0.34 percent lower than the previous rates. • Assumed rates of retirement were changed,resulting in fewer retirements. • The CSA load was 30 percent for vested and nonvested deferred members. The CSA has been changed to 33 percent for vested members and 2 percent for nonvested members. • The base mortality table for healthy annuitants was changed from the RP-2000 Fully Generational Table to the RP-2014 Fully Generational Table (with a base year of 2006), with male rates adjusted by a factor of 0.96. The mortality improvement scale was changed from Scale AA to Scale MP-2016. The base mortality table for disabled annuitants was changed from the RP-2000 Disabled Mortality Table to the mortality tables assumed for healthy retirees. • Assumed termination rates were decreased to 3 percent for the first three years of service. Rates beyond the select period of three years were adjusted, resulting in more expected terminations overall. • Assumed percentage of married female members was decreased from 65 percent to 60 percent. • Assumed age difference was changed from separate assumptions for male members (wives assumed to be three years younger) and female members (husbands assumed to be four years older)to the assumption that males are two years older than females. • The assumed percentage of female members electing joint and survivor annuities was increased. • The assumed post-retirement benefit increase rate was changed from 1.00 percent for all years,to 1.00 percent per year through 2064, and 2.50 percent thereafter. • The single discount rate changed from 5.60 percent to 7.50 percent. The State Board of Investment, which manages the investments of the PERA, prepares an analysis of the reasonableness on a regular basis of the long-term expected rate of return using a building-block method in which best-estimate ranges of expected future rates of return are developed for each major asset class. These ranges are combined to produce an expected long-term rate of return by weighting the expected future rates of return by the target asset allocation percentages. The target allocation and best-estimates of geometric real rates of return for each major asset class are summarized in the following table: Target Long-Term Expected Asset Class Allocation Real Rate of Return Domestic stocks 39 % 5.10 % International stocks 19 5.30 % Bonds 20 0.75 % Alternative assets 20 5.90 % Cash 2 — % Total 100 % -56- NOTE 8—DEFINED BENEFIT PENSION PLANS—STATE-WIDE (CONTINUED) F. Discount Rate The discount rate used to measure the total pension liability in 2017 was 7.50 percent. The projection of cash flows used to determine the discount rate assumed that contributions from plan members and employers will be made at rates set in Minnesota Statutes. Based on these assumptions, the fiduciary net positions of the GERF and the PEPFF were projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. G. Pension Liability Sensitivity The following table 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 6.50% 7.50% 8.50% The City's proportionate share of the GERF net pension liability $ 5,911,468 $ 3,811,209 $ 2,091,765 The City's proportionate share of the PEPFF net pension liability $ 6,026,123 $ 3,199,781 $ 866,481 H. Pension Plan Fiduciary Net Position Detailed information about the GERF's fiduciary net position is available in a separately issued PERA financial report. That report may be obtained on the PERA website at www.mnpera.org; by writing to the PERA at 60 Empire Drive, Suite 200, St. Paul, Minnesota 55103; or by calling (651) 296-7460 or (800) 652-9026. NOTE 9—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 Statutes, 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, 2016, the plan covered 42 active firefighters and 9 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. -57- NOTE 9—DEFINED BENEFIT PENSION PLAN—FIRE RELIEF ASSOCIATION (CONTINUED) 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 nonforfeitable 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 $142,488 in fire state aid to the plan on behalf of the Department for the year ended December 31, 2017, 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, 2017 were $0; however, the City made a voluntary contribution of $150,000 to the plan. D. Pension Costs At December 31, 2017,the City reported a net pension liability(asset) of($778,356) for the plan. The net pension liability (asset) was measured as of December 31, 2016. 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, 2016. -58- NOTE 9—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 1,2017 $ 1,237,039 $ 1,860,598 $ (623,559) Changes for the year Service cost 86,788 — 86,788 Interest 82,702 — 82,702 Differences between expected and actual experience (14,504) — (14,504) Changes of assumptions (15,678) — (15,678) Changes of benefit terms 143,662 — 143,662 Contributions(state and local) — 291,510 (291,510) Net investment income — 163,457 (163,457) Benefit payments (1,194) (1,194) — Administrative costs — (17,200) 17,200 Total net changes 281,776 436,573 (154,797) Ending balance—December 31,2017 $ 1,518,815 $ 2,297,171 $ (778,356) For the year ended December 31, 2017, the City recognized pension revenue of $141,510 and pension expense of$254,831. At December 31, 2017, 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 Difference between expected and actual liability $ — $ 13,269 Change of assumptions 95,392 14,343 Net difference between projected and actual earnings on plan investments 87,793 — City contributions subsequent to the measurement date 150,000 — State aid to the City subsequent to the measurement date 142,488 142,488 Total $ 475,673 $ 170,100 -59- NOTE 9—DEFINED BENEFIT PENSION PLAN—FIRE RELIEF ASSOCIATION (CONTINUED) Deferred outflows of resources totaling$292,488 related to pensions resulting from city 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, 2018. Deferred inflows of resources totaling $142,488 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, 2018. Other amounts reported as deferred outflows and inflows of resources related to the plan will be recognized in pension expense as follows: Pension Year Ending Expense December 31, Amount 2018 $ 44,047 2019 $ 44,049 2020 $ 32,846 2021 $ (653) 2022 $ 8,124 Thereafter $ 27,160 E. Actuarial Assumptions The total pension liability at December 31, 2016 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 6.50% 20-year municipal bond yield 3.78% For the December 31, 2016 valuation, the plan benefit per year of service increased from $4,575 to $5,500, and the actuarial assumptions for the investment return and single discount rate were both changed from 6.25 percent to 6.50 percent. The 6.50 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 52.48 % 5.58 % 8.33 % International equity 13.76 5.71 % 8.46 % Fixed income 17.21 2.27 % 5.02 % Real estate and alternatives 0.86 4.44 % 7.19 % Cash and equivalents 15.69 0.84 % 3.59 % Total 100.00 % 6.50 % -60- NOTE 9—DEFINED BENEFIT PENSION PLAN—FIRE RELIEF ASSOCIATION (CONTINUED) F. Discount Rate The discount rate used to measure the total pension liability was 6.50 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 statutes. 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. 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%Decrease Current 1%Increase (5.50%) (6.50%) (7.50%) Net pension liability(asset) $ (704,785) $ (778,356) $ (848,193) 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,430 Third Street,Farmington, Minnesota 55024, or by calling(651)280-6953. NOTE 10—OTHER POST-EMPLOYMENT BENEFITS (OPEB)PLAN A. Plan Description The City provides post-employment benefits to certain eligible employees through the City's 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. -61- NOTE 10—OTHER POST-EMPLOYMENT BENEFITS(OPEB)PLAN(CONTINUED) B. Funding Policy The required contribution is based on projected pay-as-you-go financing requirements, with additional amounts to prefund benefits as determined annually by the City. C. Annual OPEB Cost and Net OPEB Obligation The City's annual OPEB cost(expense) is calculated based on the annual required contributions(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 $ 100,462 Interest on net OPEB obligation 39,846 Adjustment to ARC (34,567) Annual OPEB cost(expense) 105,741 Contributions made (21,822) Increase in net OPEB obligation 83,919 Net OPEB obligation—beginning of year 885,475 Net OPEB obligation—end of year $ 969,394 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 2015 5 104,831 $ 14,684 14.01% $ 787,735 2016 $ 101,252 $ 3,512 3.47% $ 885,475 2017 $ 105,741 $ 21,822 20.64% $ 969,394 D. Funded Status and Funding Progress As of January 1, 2016, the most recent actuarial valuation date, the actuarial accrued liability for benefits and unfunded actuarial accrued liability (UAAL) were both $976,126, as the plan was unfunded. The covered payroll (annual payroll of active employees covered by the plan)was $5,487,000 and the ratio of the UAAL to the covered payroll was 17.8 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. -62- NOTE 10-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, 2016 actuarial valuation, the projected unit credit actuarial cost method was used. The actuarial assumptions included a 4.50 percent discount rate and an annual healthcare cost trend rate of 9.00 percent initially reduced incrementally to an ultimate rate of 5.00 percent after 12 years. Both rates included a 2.75 percent inflation assumption. The UAAL is being amortized at an increasing 3.50 percent per year of projected payroll on an open basis. The remaining amortization period at January 1, 2016 was 30 years. NOTE 11-FUND BALANCES A. Classifications At December 31,2017,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 $ 34,529 $ - $ - $ - $ - $ - $ - $ 34,529 Restricted Debt service - 3,731,347 - - - - - 3,731,347 Police programs - - - - - - 140,616 140,616 Park improvements - - - - - 17,460 17,460 PEG fees - - - - 146,658 146,658 Recreational capital projects - - - - - - 35,756 35,756 Total restricted - 3,731,347 - - - - 340,490 4,071,837 Committed Street construction - - 283,919 - - - - 283,919 Storm water trunk - - - 2,856,025 - - - 2,856,025 Improvement projects - - - 165,526 - 99,829 265,355 Park improvements - - - - - - 117,334 117,334 Ice arena - - - - - 109,193 109,193 Sanitary sewer trunk - - - - - 437,138 437,138 Cable communications - - - - - 688,640 688,640 Fire capital programs - - - - - 533,228 533,228 Pavement management - - - - - 903,238 - 903,238 Capital equipment - - - - - - 178,952 178,952 Total committed - - 283,919 2,856,025 165,526 903,238 2,164,314 6,373,022 Unassigned 5,666,183 - - - - - - 5,666,183 Total $ 5,700,712 $ 3,731,347 $ 283,919 $ 2,856,025 $ 165,526 $ 903,238 $ 2,504,804 $16,145,571 B. Minimum Fund Balance Policy The City's policy is to maintain an unassigned fund balance in the General Fund in the range of 40.0-50.0 percent of the subsequent year's budgeted expenditures and transfers out. At December 31, 2017, the unassigned fund balance of the General Fund was 44.9 percent of the subsequent year's budgeted expenditures and transfers out. -63- NOTE 12—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 it's not aware of any instances of noncompliance, which would have a material effect on the financial statements. NOTE 13—TAX INCREMENT PAY-AS-YOU-GO FINANCING REVENUE NOTES On November 2, 2017, the Farmington Economic Development Authority (EDA) entered into a private development agreement regarding the Trident Housing tax increment property. Reimbursements to the developer (Legacy Partners of Farmington, LLC) for the Downtown Redevelopment Project were contemplated in the development agreement. The vehicle used for this reimbursement is called a tax increment revenue note. This note provides for the payment of principal, equal to the developer's costs, plus interest at 3 percent. Payments on the loan will be made at the lesser of the note payment or 90 percent of the actual net tax increment received during specific years as stated in the agreement. Payments are first applied to accrued interest and then to principal balances. The note is cancelled at the end of the agreement term, whether or not it has been repaid. Any additional tax increments received in the years following the term are retained by the EDA. The outstanding principal balance as of December 31, 2017 for this agreement was $1,470,000. This amount is not included in long-term debt because of the nature of this note in that repayment is required only if sufficient tax increments are received. The EDA's position is that these are obligations to assign future and uncertain revenue sources and these obligations are not actual debt in substance. -64- REQUIRED SUPPLEMENTARY INFORMATION CITY OF FARMINGTON PERA—General Employees Retirement Fund Schedule of City's and Nonemployer Proportionate Share of Net Pension Liability Year Ended December 31,2017 Proportionate Share of the City's Net Pension Proportionate Liability and City's Share of the the City's Proportionate Plan Fiduciary State of Share of the Share of the Net Position City's City's Minnesota's State of Net Pension as a PERA Fiscal Proportion Proportionate Proportionate Minnesota's Liability as a Percentage Year-End Date of the Net Share of the Share of the Share of the City's Percentage of of the Total City Fiscal (Measurement Pension Net Pension Net Pension Net Pension Covered Covered Pension Year-End Date Date) Liability Liability Liability Liability Payroll Payroll Liability 12/31/2015 06/30/2015 0.0623% $ 3,228,709 $ — $ 3,228,709 $ 3,660,794 88.20% 78.20% 12/31/2016 06/30/2016 0.0583% $ 4,733,671 $ 61,864 $ 4,795,535 $ 3,618,268 130.83% 68.90% 12/31/2017 06/30/2017 0.0597% $ 3,811,209 $ 47,942 $ 3,859,151 $ 3,847,797 99.05% 75.90% PERA—General Employees Retirement Fund Schedule of City Contributions Year Ended December 31,2017 Contributions Contributions in Relation to as a Statutorily the Statutorily Contribution Percentage City Fiscal Required Required Deficiency Covered of Covered Year-End Date Contributions Contributions (Excess) Payroll Payroll 12/31/2015 $ 271,726 $ 271,726 $ — $ 3,623,009 7.50% 12/31/2016 $ 279,774 $ 279,774 $ — $ 3,730,581 7.50% 12/31/2017 $ 290,225 $ 290,225 $ — $ 3,872,895 7.49% Note: The City implemented GASB Statement No.68 in fiscal 2015(using a June 30,2015 measurement date).This schedule is intended to present 10-year trend information.Additional years will be added as they become available. -65- CITY OF FARMINGTON PERA—Public Employees Police and Fire Fund Schedule of City's Proportionate Share of Net Pension Liability Year Ended December 31,2017 City's Proportionate Plan Fiduciary Share of the Net Position City's City's Net Pension as a PERA Fiscal Proportion Proportionate Liability as a Percentage Year-End Date of the Net Share of the City's Percentage of of the Total City Fiscal (Measurement Pension Net Pension Covered Covered Pension Year-End Date Date) Liability Liability Payroll Payroll Liability 12/31/2015 06/30/2015 0.2450% $ 2,783,773 $ 2,242,616 124.13% 86.60% 12/31/2016 06/30/2016 0.2430% $ 9,752,013 $ 2,344,593 415.94% 63.90% 12/31/2017 06/30/2017 0.2370% $ 3,199,781 $ 2,431,157 131.62% 85.40% PERA—Public Employees Police and Fire Fund Schedule of City Contributions Year Ended December 31,2017 Contributions Contributions in Relation to as a Statutorily the Statutorily Contribution Percentage City Fiscal Required Required Deficiency Covered of Covered Year-End Date Contributions Contributions (Excess) Payroll Payroll 12/31/2015 $ 374,503 $ 374,503 $ — $ 2,311,741 16.20% 12/31/2016 $ 384,033 $ 384,033 $ — $ 2,370,262 16.20% 12/31/2017 $ 395,621 $ 395,621 $ — $ 2,442,894 16.19% Note: The City implemented GASB Statement No. 68 in fiscal 2015 (using a June 30, 2015 measurement date). This schedule is intended to present 10-year trend information.Additional years will be added as they become available. -66- CITY OF FARMINGTON Farmington Fire Fighters' Relief Association Schedule of Changes in the Relief Association's Net Pension Liability(Asset)and Related Ratios City fiscal year-end dated December 31, 2015 2016 2017 Farmington Fire Fighters' Relief Association year-end dated(measurement date)December 31, 2014 2015 2016 Total pension liability Service cost $ 69,285 $ 71,190 $ 86,788 Interest 110,249 92,788 82,702 Differences between expected and actual experience — — (14,504) Changes of assumptions — 116,780 (15,678) Changes of benefits terms — — 143,662 Benefit payments (265,643) (596,137) (1,194) Net change in total pension liability (86,109) (315,379) 281,776 Total pension liability—beginning of year 1,638,527 1,552,418 1,237,039 Total pension liability—end of year $ 1,552,418 $ 1,237,039 $ 1,518,815 Plan fiduciary net position Contributions(state and local) $ 283,461 $ 291,915 $ 291,510 Net investment income 84,277 (33,543) 163,457 Benefit payments (265,643) (596,137) (1,194) Administrative costs (10,848) (15,756) (17,200) Net change in plan fiduciary net position 91,247 (353,521) 436,573 Plan fiduciary net position—beginning of year 2,122,872 2,214,119 1,860,598 Plan fiduciary net position—end of year $ 2,214,119 $ 1,860,598 $ 2,297,171 Net pension liability(asset)—ending $ (661,701) $ (623,559) $ (778,356) Plan fiduciary net position as a percentage of the total pension liability 142.62% 150.41% 151.25% 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. -67- CITY OF FARMINGTON Farmington Fire Fighters' Relief Association Schedule of City Contributions 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 12/31/2016 $ — $ — $ — $ 150,000 12/31/2017 $ — $ — $ — $ 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. -68- 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 2013 $ 886,732 $ — $ 886,732 — % $ 5,740,759 15.1 % 2014 $ 822,299 $ — $ 822,299 — % $ 5,332,090 15.4 % 2016 $ 976,126 $ — $ 976,126 — % $ 5,487,000 17.8 % -69- CITY OF FARMINGTON Notes to Required Supplementary Information December 31, 2017 PERA—GENERAL EMPLOYEES RETIREMENT FUND 2017 CHANGES IN ACTUARIAL ASSUMPTIONS: • The Combined Service Annuity (CSA) loads were changed from 0.8 percent for active members and 60 percent for vested and nonvested deferred members. The revised CSA loads are now zero percent for active member liability, 15.0 percent for vested deferred member liability, and 3.0 percent for nonvested deferred member liability. • The assumed post-retirement benefit increase rate was changed from 1.0 percent per year for all years, to 1.0 percent per year through 2044, and 2.5 percent per year thereafter. 2016 CHANGES IN ACTUARIAL ASSUMPTIONS: • The assumed post-retirement benefit increase rate was changed from 1.0 percent per year through 2035, and 2.5 percent per year thereafter,to 1.0 percent per year for all years. • The assumed investment return was changed from 7.9 percent to 7.5 percent. The single discount rate was changed from 7.9 percent to 7.5 percent. • Other assumptions were changed pursuant to the experience study dated June 30, 2015. The assumed future salary increases,payroll growth,and inflation were decreased by 0.25 percent to 3.25 percent for payroll growth, and 2.50 percent for inflation. 2015 CHANGES IN PLAN PROVISIONS: • On January 1, 2015, the Minneapolis Employees Retirement Fund was merged into the General Employees Retirement Fund, which increased the total pension liability by $1.1 billion and increased the fiduciary plan net position by $892 million. Upon consolidation, state and employer contributions were revised. 2015 CHANGES IN ACTUARIAL ASSUMPTIONS: • The assumed post-retirement benefit increase rate was changed from 1.0 percent per year through 2030, and 2.5 percent per year thereafter, to 1.0 percent per year through 2035, and 2.5 percent per year thereafter. -70- CITY OF FARMINGTON Notes to Required Supplementary Information (continued) December 31, 2017 PERA—PUBLIC EMPLOYEES POLICE AND FIRE FUND 2017 CHANGES IN ACTUARIAL ASSUMPTIONS: • Assumed salary increases were changed as recommended in the June 30, 2016 experience study. The net effect is proposed rates that average 0.34 percent lower than the previous rates. • Assumed rates of retirement were changed,resulting in fewer retirements. • The CSA load was 30 percent for vested and nonvested deferred members.The CSA has been changed to 33 percent for vested members and 2 percent for nonvested members. • The base mortality table for healthy annuitants was changed from the RP-2000 Fully Generational Table to the RP-2014 Fully Generational Table(with a base year of 2006),with male rates adjusted by a factor of 0.96. The mortality improvement scale was changed from Scale AA to Scale MP-2016.The base mortality table for disabled annuitants was changed from the RP-2000 Disabled Mortality Table to the mortality tables assumed for healthy retirees. • Assumed termination rates were decreased to 3.0 percent for the first three years of service. Rates beyond the select period of three years were adjusted, resulting in more expected terminations overall. • Assumed percentage of married female members was decreased from 65 percent to 60 percent. • Assumed age difference was changed from separate assumptions for male members(wives assumed to be three years younger) and female members (husbands assumed to be four years older) to the assumption that males are two years older than females. • The assumed percentage of female members electing joint and survivor annuities was increased. • The assumed post-retirement benefit increase rate was changed from 1.00 percent for all years, to 1.00 percent per year through 2064, and 2.50 percent thereafter. • The single discount rate changed from 5.60 percent to 7.50 percent. 2016 CHANGES IN ACTUARIAL ASSUMPTIONS: • The assumed post-retirement benefit increase rate was changed from 1.0 percent per year through 2037, and 2.5 percent thereafter,to 1.0 percent per year for all future years. • The assumed investment return was changed from 7.9 percent to 7.5 percent. The single discount rate changed from 7.9 percent to 5.6 percent. • The assumed future salary increases, payroll growth, and inflation were decreased by 0.25 percent to 3.25 percent for payroll growth, and 2.50 percent for inflation. -71- CITY OF FARMINGTON Notes to Required Supplementary Information(continued) December 31, 2017 PERA—PUBLIC EMPLOYEES POLICE AND FIRE FUND (CONTINUED) 2015 CHANGES IN PLAN PROVISIONS: • The post-retirement benefit increase to be paid after attainment of the 90 percent funding threshold was changed from inflation up to 2.5 percent,to a fixed rate of 2.5 percent. 2015 CHANGES IN ACTUARIAL ASSUMPTIONS: • The assumed post-retirement benefit increase rate was changed from 1.0 percent per year through 2030, and 2.5 percent per year thereafter, to 1.0 percent per year through 2037, and 2.5 percent per year thereafter. FARMINGTON FIRE FIGHTERS'RELIEF ASSOCIATION 2017 CHANGES IN PLAN PROVISIONS: • The plan benefit level increased from $4,575 to $5,500 per year of service. 2017 CHANGES IN ACTUARIAL ASSUMPTIONS: • The actuarial assumptions for investment rate of return and the single discount rate both changed from 6.25 percent to 6.50 percent. 2016 CHANGES IN ACTUARIAL ASSUMPTIONS: • The actuarial assumptions for the single discount rate changed from 7.00 percent to 6.25 percent. • The retirement rates were updated to graduated rates from 50 percent at the later of age 50 or 20 years of service up to 100 percent at the earlier of age 65 or 30 years of service. -72- 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. -73- CITY OF FARMINGTON Nonmajor Governmental Funds Combining Balance Sheet as of December 31,2017 Special Capital Revenue Projects Total Assets Cash and investments $ 311,870 $ 2,374,487 $ 2,686,357 Receivables Accounts 85,832 95,092 180,924 Interest 794 6,052 6,846 Special assessments Noncurrent — 1,113 1,113 Total assets $ 398,496 $ 2,476,744 $ 2,875,240 Liabilities Accounts and contracts payable $ 11,146 $ 4,043 $ 15,189 Deposits payable 2,409 351,387 353,796 Due to other governments 338 — 338 Total liabilities 13,893 355,430 369,323 Deferred inflows of resources Unavailable revenue—special assessments — 1,113 1,113 Fund balances Restricted 158,076 182,414 340,490 Committed 226,527 1,937,787 2,164,314 Total fund balances 384,603 2,120,201 2,504,804 Total liabilities,deferred inflows of resources,and fund balances $ 398,496 $ 2,476,744 $ 2,875,240 -74- CITY OF FARMINGTON Nonmaj or Governmental Funds Combining Statement of Revenues,Expenditures, and Changes in Fund Balances Year Ended December 31,2017 Special Capital Revenue Projects Total Revenue Franchise taxes $ - $ 146,728 $ 146,728 Special assessments 287 1,289 1,576 Charges for services 345,398 42,378 387,776 Investment earnings 3,341 19,370 22,711 Other Donations 16,226 79,551 95,777 Rentals 10,081 - 10,081 Miscellaneous 40,126 136 40,262 Total revenues 415,459 289,452 704,911 Expenditures Current General government - 67,141 67,141 Public safety 12,696 84,268 96,964 Public works - 2 2 Parks and recreation 329,893 7,064 336,957 Capital outlay General government - 6,680 6,680 Public safety - 287,560 287,560 Parks and recreation 126,381 - 126,381 Total expenditures 468,970 452,715 921,685 Excess(deficiency)of revenues over expenditures (53,511) (163,263) (216,774) Other financing sources(uses) Sale of capital assets 4,594 49,814 54,408 Transfers in 49,712 451,145 500,857 Transfers out (768) - (768) Total other financing sources(uses) 53,538 500,959 554,497 Net change in fund balances 27 337,696 337,723 Fund balances Beginning of year 384,576 1,782,505 2,167,081 End of year $ 384,603 $ 2,120,201 $ 2,504,804 -75- 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. -76- CITY OF FARMINGTON Nonmaj or Special Revenue Funds Combining Balance Sheet as of December 31,2017 Police Donations Park and Forfeitures Improvement Arena Total Assets Cash and investments $ 17,547 $ 257,295 $ 37,028 $ 311,870 Receivables Accounts - - 85,832 85,832 Interest 45 655 94 794 Total assets $ 17,592 $ 257,950 $ 122,954 $ 398,496 Liabilities Accounts and contracts payable $ 132 $ - $ 11,014 $ 11,146 Deposits payable - - 2,409 2,409 Due to other governments 338 338 Total liabilities 132 - 13,761 13,893 Fund balances Restricted for police programs 17,460 - - 17,460 Restricted for park improvements - 140,616 - 140,616 Committed for park improvements - 117,334 - 117,334 Committed for ice arena capital - - 109,193 109,193 Total fund balances 17,460 257,950 109,193 384,603 Total liabilities and fund balances $ 17,592 $ 257,950 $ 122,954 $ 398,496 -77- CITY OF FARMINGTON Nonmajor Special Revenue Funds Combining Statement of Revenues,Expenditures, and Changes in Fund Balances Year Ended December 31,2017 Police Donations Park and Forfeitures Improvement Arena Total Revenues Special assessments $ - $ 287 $ - $ 287 Charges for services 345,398 345,398 Investment earnings 150 2,561 630 3,341 Other Donations 11,076 150 5,000 16,226 Rentals - 7,088 2,993 10,081 Miscellaneous - 38,856 1,270 40,126 Total revenues 11,226 48,942 355,291 415,459 Expenditures Current Public safety 12,696 - - 12,696 Parks and recreation - 4,704 325,189 329,893 Capital outlay Parks and recreation - 125,449 932 126,381 Total expenditures 12,696 130,153 326,121 468,970 Excess(deficiency)of revenues over expenditures (1,470) (81,211) 29,170 (53,511) Other financing sources(uses) Sale of capital assets 4,594 - - 4,594 Transfers in - 49,712 - 49,712 Transfers out - (768) - (768) Total other financing sources(uses) 4,594 48,944 - 53,538 Net change in fund balances 3,124 (32,267) 29,170 27 Fund balances Beginning of year 14,336 290,217 80,023 384,576 End of year $ 17,460 $ 257,950 $ 109,193 $ 384,603 -78- 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 — Used to account for the operations and activities related to the City's general capital equipment. -79- CITY OF FARMINGTON Nonmajor Capital Projects Funds Combining Balance Sheet as of December 31,2017 Sanitary Sewer Cable Trunk Communications Fire Assets Cash and investments $ 436,028 $ 776,667 $ 508,159 Receivables Accounts — 67,197 25,000 Interest 1,110 1,978 1,294 Special assessments Noncurrent — — — Total assets $ 437,138 $ 845,842 $ 534,453 Liabilities Accounts and contracts payable $ — $ — $ 1,225 Deposits payable — 10,544 Total liabilities — 10,544 1,225 Deferred inflows of resources Unavailable revenue—special assessments — — — Fund balances Restricted for public, educational,and governmental fees — 146,658 — Restricted for recreational capital projects — — — Committed for sanitary sewer trunk 437,138 — — Committed for cable communications — 688,640 — Committed for fire capital programs — — 533,228 Committed for improvement projects — — — Committed for capital equipment — — — Totalfundbalances 437,138 835,298 533,228 Total liabilities, deferred inflows of resources, and fund balances $ 437,138 $ 845,842 $ 534,453 -80- General Capital Private Recreation Equipment Total $ 378,357 $ 98,552 $ 176,724 $ 2,374,487 2,895 95,092 969 251 450 6,052 1,113 - - 1,113 $ 380,439 $ 98,803 $ 180,069 $ 2,476,744 $ - $ 1,701 $ 1,117 $ 4,043 340,733 110 - 351,387 340,733 1,811 1,117 355,430 1,113 - - 1,113 - - - 146,658 - 35,756 - 35,756 - - - 437,138 - - - 688,640 - - - 533,228 38,593 61,236 - 99,829 - - 178,952 178,952 38,593 96,992 178,952 2,120,201 $ 380,439 $ 98,803 $ 180,069 $ 2,476,744 -81- CITY OF FARMINGTON Nonmajor Capital Projects Funds Combining Statement of Revenues,Expenditures, and Changes in Fund Balances Year Ended December 31,2017 Sanitary Sewer Cable Trunk Communications Fire Revenues Franchise taxes $ — $ 146,728 $ — Special assessments 696 — — Charges for services 35,578 — — Investment earnings 3,770 6,552 4,208 Other Donations — — 56,045 Miscellaneous — — — Total revenues 40,044 153,280 60,253 Expenditures Current General government — 59,936 — Public safety — — 16,216 Public works 2 — — Parks and recreation — — — Capital outlay General government — 6,680 — Public safety — — 17,989 Total expenditures 2 66,616 34,205 Excess(deficiency)of revenues over expenditures 40,042 86,664 26,048 Other financing sources Sale of capital assets — — 495 Transfers in — — 150,000 Total other financing sources — — 150,495 Net change in fund balances 40,042 86,664 176,543 Fund balances Beginning of year 397,096 748,634 356,685 End of year $ 437,138 $ 835,298 $ 533,228 -82- General Capital Private Recreation Equipment Total $ - $ - $ - $ 146,728 593 - - 1,289 6,800 42,378 2,958 353 1,529 19,370 23,471 35 79,551 30 - 106 136 10,381 23,824 1,670 289,452 7,205 - - 67,141 68,052 84,268 - - 2 7,064 - 7,064 - - - 6,680 - - 269,571 287,560 7,205 7,064 337,623 452,715 3,176 16,760 (335,953) (163,263) - 33,320 15,999 49,814 20,000 281,145 451,145 53,320 297,144 500,959 3,176 70,080 (38,809) 337,696 35,417 26,912 217,761 1,782,505 $ 38,593 $ 96,992 $ 178,952 $ 2,120,201 -83- THIS PAGE INTENTIONALLY LEFT BLANK 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. 2007A General Obligation Capital Improvement Bonds—The bonds were issued to finance City Hall and the City Garage. The final payment on these bonds was made in 2017. 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. The final payment on these bonds was made in 2017. 2010A General Obligation Improvement Refunding Bond — The bonds were issued for the refinancing of the Police Station. The final payment on these bonds will be made in 2018. 2010B General Obligation Utility Revenue Refunding Bonds — The bonds were issued for the refinancing of the Maintenance Facility Bonds. The final payment on these bonds will be made in 2018. 2010C General Obligation Street Construction Bonds — The bonds were issued for the Walnut Street Reconstruction Project. The final payment on these bonds was made in 2017. 2010D General Obligation Equipment Certificate Bonds — The equipment certificates were issued in conjunction with the Ice Arena Rehabilitation Project. The final payment on these bonds was made in 2017. 2011A General Obligation Improvement Refunding Bonds — The bonds were issued for the Main Street Project. The final payment on these bonds will be made in 2018. 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 Construction Bonds—The bonds were issued to fund the Akin Park Estates East and West Street Reconstruction Project. 2015A General Obligation Street Construction Bonds — The bonds were issued to fund the 195th Avenue Street Reconstruction Project. 2016A General Obligation Improvement Refunding Bonds — The bonds were issued to refund the 2008A&B and 2010C bonds, which were originally issued for the Elm Street, 195th Street Extension, and Walnut Street Reconstruction Projects. 2016B General Obligation Capital Improvement Refunding Bonds—The bonds were issued to refund the 2007A bonds,which were originally issued to finance City Hall and the City Garage. 2016C General Obligation Capital Improvement Refunding Bonds—The bonds were issued to refund the 2007A bonds,which were originally issued to finance City Hall and the City Garage. -84- CITY OF FARMINGTON Debt Service Fund Combining Balance Sheet by Account as of December 31,2017 2007A G.O. 2010A G.O. 2010B G.O. 2010C G.O. 2010D G.O. Capital 2008A&B G.O. Improvement Utility Revenue Street Equipment Improvement Improvement Refunding Refunding Construction Certificate Bonds Bonds Bonds Bonds Bonds Bonds Assets Cash and investments $ — $ — $ 1,791,380 $ 599,244 $ — $ 486 Receivables Interest — — 4,569 1,528 — 1 Special assessments Delinquent — — — — — — Noncurrent — — — — — — Total assets $ — $ — $ 1,795,949 $ 600,772 $ — $ 487 Liabilities Due to other funds $ — $ — $ 358,816 $ — $ — $ 132,661 Advances from other funds — — 1,156,184 — — 252,809 Total liabilities — — 1,515,000 — — 385,470 Deferred inflows of resources Unavailable revenue—special assessments — — — — — — Fund balances(deficits) Restricted for debt service — — 280,949 600,772 — (384,983) Total liabilities,deferred inflows of resources,and fund balances $ — $ — $ 1,795,949 $ 600,772 $ — $ 487 -85- 2016B G.O. 2016C G.O. 2011A G.O. 2013A G.O. 2013B G.O. 2015A G.O. 2016A G.O. Capital Capital Improvement Improvement Street Street Improvement Improvement Improvement Refunding Refunding Construction Construction Refunding Refunding Refunding Bonds Bonds Bonds Bonds Bonds Bonds Bonds Total $ 684,726 $ 894,108 $ 277,115 $ 308,909 $ 664,425 $ 82,686 $ 613,724 $ 5,916,803 1,745 2,276 706 786 1,663 188 1,552 15,014 3 1,597 - - 979 - ' - 2,579 99,818 297,419 - - 1,607,272 - - 2,004,509 $ 786,292 $ 1,195,400 $ 277,821 $ 309,695 $ 2,274,339 $ 82,874 $ 615,276 $ 7,938,905 $ - $ - $ - $ - $ - $ - $ - $ 491,477 - - - - 300,000 - - 1,708,993 - - - 300,000 - - 2,200,470 99,821 299,016 - - 1,608,251 - - 2,007,088 686,471 896,384 277,821 309,695 366,088 82,874 615,276 3,731,347 $ 786,292 $ 1,195,400 $ 277,821 $ 309,695 $ 2,274,339 $ 82,874 $ 615,276 $ 7,938,905 -86- L. CITY OF FARMINGTON Debt Service Fund Combining Schedule of Revenues,Expenditures, and Changes in Fund Balances by Account Year Ended December 31,2017 2007A G.O. 2010A G.O. 2010B G.O. 2010C G.O. 2010D G.O. Capital 2008A&B G.O. Improvement Utility Revenue Street Equipment Improvement Improvement Refunding Refunding Construction Certificate Bonds Bonds Bonds Bonds Bonds Bonds Revenues Property taxes $ — $ — $ 457,403 $ — $ — $ 133,000 Special assessments — — — — — Intergovernmental — — — — — Investment earnings(charges) — — (2,984) 169 — 352 Total revenues — — 454,419 169 — 133,352 Expenditures Debt service Principal retirement — — 320,000 95,000 — 535,000 Interest and fiscal fees — — 71,206 19,209 — 18,604 Total expenditures — — 391,206 114,209 — 553,604 Excess(deficiency)of revenues over expenditures — — 63,213 (114,040) — (420,252) Other financing sources(uses) Transfers in — — — 569,552 — 2,450 Transfers out (7,067,137) (5,496,782) — — (1,560,080) — Payment on refunded debt — — — Total other financing sources(uses) (7,067,137) (5,496,782) — 569,552 (1,560,080) 2,450 Net change in fund balances (7,067,137) (5,496,782) 63,213 455,512 (1,560,080) (417,802) Fund balances(deficits) Beginning of year 7,067,137 5,496,782 217,736 145,260 1,560,080 32,819 End of year $ — $ — $ 280,949 $ 600,772 $ — $ (384,983) -87- • 2016B G.O. 2016C G.O. 2011A G.O. 2013A G.O. 2013B G.O. 2015A G.O. 2016A G.O. Capital Capital Improvement Improvement Street Street Improvement Improvement Improvement Refunding Refunding Construction Construction Refunding Refunding Refunding Bonds Bonds Bonds Bonds Bonds Bonds Bonds Total $ 316,000 $ 449,000 $ 267,000 $ 293,500 $ 171,000 $ 158,070 $ 626,931 $ 2,871,904 26,241 137,132 - - 342,132 - - 505,505 - 15,000 - - 100,000 - - 115,000 474 3,451 695 991 10,664 3,357 2,075 19,244 342,715 604,583 267,695 294,491 623,796 161,427 629,006 3,511,653 315,000 685,000 110,000 200,000 3,680,000 341,250 113,750 6,395,000 19,784 80,613 24,935 80,231 192,986 190,062 57,818 755,448 334,784 765,613 134,935 280,231 3,872,986 531,312 171,568 7,150,448 7,931 (161,030) 132,760 14,260 (3,249,190) (369,885) 457,438 (3,638,795) 320,000 125,000 - - 7,083,436 5,312,629 1,768,627 15,181,694 - - - - (346,574) (14,119) - (14,484,692) - - - (3,510,000) (4,860,000) (1,620,000) (9,990,000) 320,000 125,000 - - 3,226,862 438,510 148,627 (9,292,998) 327,931 (36,030) 132,760 14,260 (22,328) 68,625 606,065 (12,931,793) 358,540 932,414 145,061 295,435 388,416 14,249 9,211 16,663,140 $ 686,471 $ 896,384 $ 277,821 $ 309,695 $ 366,088 $ 82,874 $ 615,276 $ 3,731,347 -88- 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 -89- CITY OF FARMINGTON Debt Service Fund Budgetary Comparison Schedule Year Ended December 31,2017 Original and Variance With Final Budget Actual Final Budget Revenues Property taxes $ 2,871,904 $ 2,871,904 $ — Special assessments 436,440 505,505 69,065 Intergovernmental — 115,000 115,000 Investment earnings 4,159 19,244 15,085 Total revenues 3,312,503 3,511,653 199,150 Expenditures Debt service Principal retirement 6,521,459 6,395,000 (126,459) Interest and fiscal fees 767,661 755,448 (12,213) Total expenditures 7,289,120 7,150,448 (138,672) Excess(deficiency)of revenues over expenditures (3,976,617) (3,638,795) 337,822 Other financing sources(uses) Transfers in 12,607,167 15,181,694 2,574,527 Transfers out (10,424,850) (14,484,692) (4,059,842) Payment on refunded debt (9,990,000) (9,990,000) — Total other financing sources(uses) (7,807,683) (9,292,998) (1,485,315) Net change in fund balances $ (11,784,300) (12,931,793) $ (1,147,493) Fund balances Beginning of year 16,663,140 End of year $ 3,731,347 -90- CITY OF FARMINGTON State Aid Construction Capital Projects Fund Budgetary Comparison Schedule Year Ended December 31,2017 Original and Variance With Final Budget Actual Final Budget Revenues Special assessments $ 9,465 $ 9,659 $ 194 Investment earnings — 2,833 2,833 Total revenues 9,465 12,492 3,027 Expenditures Current Public works — 111 111 Excess of revenues over expenditures 9,465 12,381 2,916 Other fmancing(uses) Transfers out (1,277,615) (125,000) 1,152,615 Net change in fund balances $ (1,268,150) (112,619) $ 1,155,531 Fund balances Beginning of year 396,538 End of year $ 283,919 -91- CITY OF FARMINGTON Storm Water Trunk Capital Projects Fund Budgetary Comparison Schedule Year Ended December 31,2017 Original and Variance With Final Budget Actual Final Budget Revenues Property taxes $ 166,000 $ 166,000 $ — Special assessments — 2,702 2,702 Charges for service — 21,883 21,883 Investment earnings 31,173 90,650 59,477 Total revenues 197,173 281,235 84,062 Expenditures Current Public works — 2 2 Debt service Interest and fiscal charges — 28,971 28,971 Total expenditures — 28,973 28,973 Excess of revenues over expenditures 197,173 252,262 55,089 Other financing sources(uses) Transfers in 584,850 — (584,850) Transfers out (815,000) — 815,000 Total other financing sources(uses) (230,150) — 230,150 Net change in fund balances $ (32,977) 252,262 $ 285,239 Fund balances Beginning of year 2,603,763 End of year $ 2,856,025 -92- CITY OF FARMINGTON Permanent Improvement Revolving Capital Projects Fund Budgetary Comparison Schedule Year Ended December 31,2017 Original and Variance With Final Budget Actual Final Budget Revenues Special assessments $ — $ 13,302 $ 13,302 Investment earnings 1,002 1,402 400 Total revenues 1,002 14,704 13,702 Expenditures Current Public works — 362 362 Net change in fund balances $ 1,002 14,342 $ 13,340 Fund balances Beginning of year 151,184 End of year $ 165,526 -93- CITY OF FARMINGTON Maintenance Capital Projects Fund Budgetary Comparison Schedule Year Ended December 31,2017 Original and Variance With Final Budget Actual Final Budget Revenues Property taxes $ - $ 6,759 $ 6,759 Intergovernmental 550,000 590,244 40,244 Charges for service - 1,213 1,213 Investment earnings 10,782 19,002 8,220 Other - 250 250 Total revenues 560,782 617,468 56,686 Expenditures Current Public works 697,929 302,664 (395,265) Parks and recreation 24,250 22,298 (1,952) Capital outlay Public works - 92,700 92,700 Parks and recreation - 30,768 30,768 Debt service Interest and fiscal charges - 33,725 33,725 Total expenditures 722,179 482,155 (240,024) Excess(deficiency)of revenues over expenditures (161,397) 135,313 296,710 Other financing sources(uses) Transfers in 448,175 631,543 183,368 Transfers out (550,000) - 550,000 Total other financing sources(uses) (101,825) 631,543 733,368 Net change in fund balances $ (263,222) 766,856 $ 1,030,078 Fund balances Beginning of year 136,382 End of year $ 903,238 -94- CITY OF FARMINGTON Police Donations and Forfeitures Special Revenue Fund Budgetary Comparison Schedule Year Ended December 31,2017 Original and Variance With Final Budget Actual Final Budget Revenues Investment earnings $ 82 $ 150 $ 68 Other Donations — 11,076 11,076 Total revenues 82 11,226 11,144 Expenditures Current Public safety 6,500 12,696 6,196 Excess(deficiency)of revenues over expenditures (6,418) (1,470) 4,948 Other financing sources Sale of capital assets 5,000 4,594 (406) Net change in fund balances $ (1,418) 3,124 $ 4,542 Fund balances Beginning of year 14,336 End of year $ 17,460 • -95- CITY OF FARMINGTON Park Improvement Special Revenue Fund Budgetary Comparison Schedule Year Ended December 31,2017 Original and Variance With Final Budget Actual Final Budget Revenues Special assessments $ — $ 287 $ 287 Investment earnings 1,912 2,561 649 Other Donations — 150 150 Rentals 7,088 7,088 — Miscellaneous — 38,856 38,856 Total revenues 9,000 48,942 39,942 Expenditures Current Parks and recreation — 4,704 4,704 Capital outlay Parks and recreation 150,000 125,449 (24,551) Total expenditures 150,000 130,153 (19,847) Excess(deficiency)of revenues over expenditures (141,000) (81,211) 59,789 Other financing sources(uses) Transfers in 40,000 49,712 9,712 Transfers out — (768) (768) Total other financing sources(uses) 40,000 48,944 8,944 Net change in fund balances $ (101,000) (32,267) $ 68,733 Fund balances Beginning of year 290,217 End of year $ 257,950 -96- CITY OF FARMINGTON Arena Special Revenue Fund Budgetary Comparison Schedule Year Ended December 31,2017 Original and Variance With Final Budget Actual Final Budget Revenues Charges for services $ 325,400 $ 345,398 $ 19,998 Investment earnings 386 630 244 Other Donations 5,000 5,000 — Rentals 2,000 2,993 993 Miscellaneous 1,000 1,270 270 Total revenues 333,786 355,291 21,505 Expenditures Current Parks and recreation 313,952 325,189 11,237 Capital outlay Parks and recreation — 932 932 Total expenditures 313,952 326,121 12,169 Net change in fund balances $ 19,834 29,170 $ 9,336 Fund balances Beginning of year 80,023 End of year $ 109,193 -97- CITY OF FARMINGTON Sanitary Sewer Trunk Capital Projects Fund Budgetary Comparison Schedule Year Ended December 31,2017 Original and Variance With Final Budget Actual Final Budget Revenues Special assessments $ — $ 696 $ 696 Charges for services — 35,578 35,578 Investment earnings 2,981 3,770 789 Total revenues 2,981 40,044 37,063 Expenditures Current Public works — 2 2 Net change in fund balances $ 2,981 40,042 $ 37,061 Fund balances Beginning of year 397,096 End of year $ 437,138 -98- CITY OF FARMINGTON Cable Communications Capital Projects Fund Budgetary Comparison Schedule Year Ended December 31,2017 Original and Variance With Final Budget Actual Final Budget Revenues Franchise taxes $ 170,000 $ 146,728 $ (23,272) Investment earnings 4,347 6,552 2,205 Total revenues 174,347 153,280 (21,067) Expenditures Current General government 81,000 59,936 (21,064) Capital outlay General government — 6,680 6,680 Total expenditures 81,000 66,616 (14,384) Net change in fund balances $ 93,347 86,664 $ (6,683) Fund balances Beginning of year 748,634 End of year $ 835,298 -99- CITY OF FARMINGTON Fire Capital Projects Fund Budgetary Comparison Schedule Year Ended December 31,2017 Original and Variance With Final Budget Actual Final Budget Revenues Investment earnings $ 1,293 $ 4,208 $ 2,915 Other Donations — 56,045 56,045 Total revenues 1,293 60,253 58,960 Expenditures Current Public safety — 16,216 16,216 Capital outlay Public safety — 17,989 17,989 Total expenditures — 34,205 34,205 Excess of revenues over expenditures 1,293 26,048 24,755 Other financing sources Sale of capital assets — 495 495 Transfers in 150,000 150,000 — Total other financing sources 150,000 150,495 495 Net change in fund balances $ 151,293 176,543 $ 25,250 Fund balances Beginning of year 356,685 End of year $ 533,228 -100- CITY OF FARMINGTON Private Capital Projects Fund Budgetary Comparison Schedule Year Ended December 31,2017 Original and Variance With Final Budget Actual Final Budget Revenues Special assessments $ — $ 593 $ 593 Charges for services 20,000 6,800 (13,200) Investment earnings 2,892 2,958 66 Other Miscellaneous — 30 30 Total revenues 22,892 10,381 (12,511) Expenditures Current General government 20,000 7,205 (12,795) Net change in fund balances $ 2,892 3,176 $ 284 Fund balances Beginning of year 35,417 End of year $ 38,593 -101- CITY OF FARMINGTON Recreation Capital Projects Fund Budgetary Comparison Schedule Year Ended December 31,2017 Original and Variance With Final Budget Actual Final Budget Revenues Investment earnings $ 512 $ 353 $ (159) Other Donations 16,500 23,471 6,971 Total revenues 17,012 23,824 6,812 Expenditures Current Parks and recreation 8,250 7,064 (1,186) Capital outlay Parks and recreation 6,000 — (6,000) Total expenditures 14,250 7,064 (7,186) Excess of revenues over expenditures 2,762 16,760 13,998 Other financing sources Sale of capital assets — 33,320 33,320 Transfers in 20,000 20,000 — Total other financing sources 20,000 53,320 33,320 Net change in fund balances $ 22,762 70,080 $ 47,318 Fund balances Beginning of year 26,912 End of year $ 96,992 -102- CITY OF FARMINGTON General Capital Equipment Capital Projects Fund Budgetary Comparison Schedule Year Ended December 31,2017 Original and Variance With Final Budget Actual Final Budget Revenues Investment earnings $ 441 $ 1,529 $ 1,088 Other Donations — 106 106 Miscellaneous — 35 35 Total revenues 441 1,670 1,229 Expenditures Current Public safety 97,546 68,052 (29,494) Capital outlay Public safety 60,000 269,571 209,571 Total expenditures 157,546 337,623 180,077 Excess(deficiency)of revenues over expenditures (157,105) (335,953) (178,848) Other financing sources Sale of capital assets — 15,999 15,999 Transfers in 261,145 281,145 20,000 Total other financing sources 261,145 297,144 35,999 Net change in fund balances $ 104,040 (38,809) $ (142,849) Fund balances Beginning of year 217,761 End of year $ 178,952 -103- 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 workers' 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. -104- CITY OF FARMINGTON Internal Service Funds Combining Statement of Net Position as of December 31,2017 Property Employee and Liability Information Expense Insurance Fleet Technology Total Assets Current assets Cash and investments $ 1,365,245 $ 391,753 $ 156,712 $ 389,742 $ 2,303,452 Receivables Accounts 69,496 - 1,157 - 70,653 Interest 3,445 997 399 993 5,834 Due from other governments 51 - - - 51 Prepaid items - - - 7,606 7,606 Total current assets 1,438,237 392,750 158,268 398,341 2,387,596 Noncurrent assets Capital assets Machinery and equipment - - 116,173 - 116,173 Less accumulated depreciation - - (83,135) - (83,135) Total capital assets - - 33,038 - 33,038 Total assets $ 1,438,237 $ 392,750 $ 191,306 $ 398,341 $ 2,420,634 Current liabilities Accounts and contracts payable $ 5,571 $ 4,617 $ - $ 17,725 $ 27,913 Accrued salaries and employee benefits payable 336,155 - - - 336,155 Deposits payable 1,569 - - - 1,569 Compensated absences payable - - 23,639 2,562 26,201 Total current liabilities 343,295 4,617 23,639 20,287 391,838 Net position Investment in capital assets - - 33,038 - 33,038 Unrestricted 1,094,942 388,133 134,629 378,054 1,995,758 Total net position 1,094,942 388,133 167,667 378,054 2,028,796 Total liabilities and net position $ 1,438,237 $ 392,750 $ 191,306 $ 398,341 $ 2,420,634 -105- CITY OF FARMINGTON Internal Service Funds Combining Statement of Revenues,Expenses, and Changes in Fund Net Position Year Ended December 31,2017 Property Employee and Liability Information Expense Insurance Fleet Technology Total Operating revenues Charges for services $ 2,058,501 $ - $ 283,936 $ 542,920 $ 2,885,357 Insurance reimbursement - 276,939 - - 276,939 Total operating revenues 2,058,501 276,939 283,936 542,920 3,162,296 Operating expenses Personal services 2,016,352 - 168,210 147,357 2,331,919 Professional services - 10,967 26,798 217,049 254,814 Materials and supplies - - 53,268 87,141 140,409 Insurance - 281,800 - - 281,800 Depreciation - - 3,682 - 3,682 Total operating expenses 2,016,352 292,767 251,958 451,547 3,012,624 Operating income(loss) 42,149 (15,828) 31,978 91,373 149,672 Nonoperating revenue Intergovernmental 10,789 - - - 10,789 Investment earnings 10,048 3,107 1,425 2,869 17,449 Total nonoperating revenue 20,837 3,107 1,425 2,869 28,238 Income(loss)before transfers 62,986 (12,721) 33,403 94,242 177,910 Transfers in 13,022 26,110 - - 39,132 Change in net position 76,008 13,389 33,403 94,242 217,042 Net position Beginning of year 1,018,934 374,744 134,264 283,812 1,811,754 End of year $ 1,094,942 $ 388,133 $ 167,667 $ 378,054 $ 2,028,796 -106- CITY OF FARMINGTON Internal Service Funds Combining Statement of Cash Flows Year Ended December 31,2017 Property Employee and Liability Information Expense Insurance Fleet Technology Total Cash flows from operating activities Cash receipts from other funds and reimbursements $ 2,031,925 $ 276,939 $ 282,779 $ 542,920 $ 3,134,563 Cash payments to employees for services (1,986,401) - (163,382) (145,053) (2,294,836) Cash payments for interfund services used - (289,595) (95,937) (312,641) (698,173) Net cash flows from operating activities 45,524 (12,656) 23,460 85,226 141,554 Cash flows from noncapital related financing activities Intergovernmental 10,789 - - - 10,789 Transfers in 13,022 26,110 - - 39,132 Net cash flows from noncapital related financing activities 23,811 26,110 - - 49,921 Cash flows from capital and related financing activities Acquisition and construction of capital assets - - (36,720) - (36,720) Cash flows from investing activities Interest received on investments 8,642 2,930 1,394 2,536 15,502 Net increase(decrease)in cash and cash equivalents 77,977 16,384 (11,866) 87,762 170,257 Cash and cash equivalents Beginning of year 1,287,268 375,369 168,578 301,980 2,133,195 End of year $ 1,365,245 $ 391,753 $ 156,712 $ 389,742 $ 2,303,452 Reconciliation of operating income(loss)to net cash flows from operating activities Operating income(loss) $ 42,149 $ (15,828) $ 31,978 $ 91,373 $ 149,672 Adjustments to reconcile operating income(loss) to net cash flows from operating activities Depreciation - - 3,682 - 3,682 Change in assets and liabilities Accounts receivable (26,632) - (1,157) - (27,789) Due from other governments 56 - - - 56 Prepaid items 3,189 - - 5,921 9,110 Accounts and contracts payable 6,341 3,172 (15,871) (14,372) (20,730) Accrued salaries and employee benefits 19,835 - - - 19,835 Deposits payable 586 - - - 586 Compensated absences payable - - 4,828 2,304 7,132 Total adjustments 3,375 3,172 (8,518) (6,147) (8,118) Net cash flows from operating activities $ 45,524 $ (12,656) $ 23,460 $ 85,226 $ 141,554 -107- 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. -108- CITY OF FARMINGTON Agency Fund Statement of Changes in Assets and Liabilities Year Ended December 31,2017 Balance Balance January 1, December 31, 2017 Additions Deductions 2017 Assets Cash and investments $ 198,084 $ 216,523 $ 198,332 $ 216,275 Liabilities Accounts and contracts payable $ 12,000 $ — $ 12,000 $ — Deposits payable 186,084 216,523 186,332 216,275 Total liabilities $ 198,084 $ 216,523 $ 198,332 $ 216,275 -109- 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 one special revenue fund to administer the resources for the economic development authority within the City. -110- CITY OF FARMINGTON Economic Development Authority (Discretely Presented Component Unit) Combining Balance Sheet as of December 31,2017 Economic Development Trident Housing Authority Tax Increment General Special Revenue Total Assets Cash and investments $ 332,150 $ — $ 332,150 Receivables Interest 846 — 846 Prepaid items 595 — 595 Total assets $ 333,591 $ — $ 333,591 Liabilities Accounts and contracts payable $ 21,887 $ — $ 21,887 Fund balances Nonspendable for prepaid items 595 — 595 Assigned for economic development 311,109 — 311,109 Total fund balances 311,704 — 311,704 Total liabilities and fund balances $ 333,591 $ — $ 333,591 -111- CITY OF FARMINGTON Economic Development Authority (Discretely Presented Component Unit) Combining Statement of Revenues,Expenditures,and Changes in Fund Balances Year Ended December 31,2017 Economic Development Trident Housing Authority Tax Increment General Special Revenue Total Revenues Intergovernmental $ 50,225 $ 1,832 $ 52,057 Investment earnings 3,158 — 3,158 Total revenues 53,383 1,832 55,215 Expenditures Current Economic development 81,897 1,005 82,902 Net change in fund balances (28,514) 827 (27,687) Fund balances(deficits) Beginning of year 340,218 (827) 339,391 End of year $ 311,704 $ — $ 311,704 -112- THIS PAGE INTENTIONALLY LEFT BLANK STATISTICAL SECTION (UNAUDITED) TAB STATISTICAL TABLES (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 financial 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. -113- CITY OF FARMINGTON Net Position by Component Last Ten Fiscal Years (accrual basis of accounting) Fiscal Year 2008 2009 2010 2011 Governmental activities Net investment in capital assets $ 27,179,331 $ 33,485,859 $ 22,287,712 $ 20,484,140 Restricted 5,239,803 4,036,063 3,757,948 1,661,973 Unrestricted 14,298,196 9,568,551 11,197,982 14,963,297 Total governmental activities net position $ 46,717,330 $ 47,090,473 $ 37,243,642 $ 37,109,410 Business-type activities Net investment in capital assets $ 61,492,839 $ 59,999,027 $ 60,219,892 $ 60,462,689 Restricted 2,094,245 2,094,245 2,108,045 2,140,345 Unrestricted 7,357,600 5,622,790 6,067,114 6,819,607 Total business-type activities net position $ 70,944,684 $ 67,716,062 $ 68,395,051 $ 69,422,641 Primary government Net investment in capital assets $ 88,672,170 $ 93,484,886 $ 82,507,604 $ 80,946,829 Restricted 7,334,048 6,130,308 5,865,993 3,802,318 Unrestricted 21,655,796 15,191,341 17,265,096 21,782,904 Total primary government net position $117,662,014 $114,806,535 $105,638,693 $106,532,051 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. -114- 2012 2013 2014 2015 2016 2017 $ 21,263,670 $ 23,462,934 $ 23,383,175 $ 21,417,203 $ 23,684,773 $ 28,820,307 11,034,909 11,669,054 9,235,448 9,063,587 10,441,391 6,961,837 11,131,928 9,628,139 13,150,789 8,920,144 5,142,435 6,576,959 $ 43,430,507 $ 44,760,127 $ 45,769,412 $ 39,400,934 $ 39,268,599 $ 42,359,103 $ 58,728,008 $ 57,427,060 $ 55,685,476 $ 54,807,938 $ 53,225,787 $ 51,464,649 2,159,566 2,159,566 2,160,566 2,160,566 2,231,966 2,238,206 7,845,545 8,891,769 10,396,218 11,439,369 12,575,526 13,508,485 $ 68,733,119 $ 68,478,395 $ 68,242,260 $ 68,407,873 $ 68,033,279 $ 67,211,340 $ 79,991,678 $ 80,889,994 $ 79,068,651 $ 76,225,141 $ 76,910,560 $ 80,284,956 13,194,475 13,828,620 11,396,014 11,224,153 12,673,357 9,200,043 18,977,473 18,519,908 23,547,007 20,359,513 17,717,961 20,085,444 $112,163,626 $113,238,522 $114,011,672 $107,808,807 $107,301,878 $109,570,443 -115- CITY OF FARMINGTON Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) Fiscal Year 2008 2009 2010 2011 Expenses Governmental activities General government $ 2,476,747 $ 2,603,290 $ 2,410,637 $ 1,897,429 Public safety 4,415,667 4,568,041 4,844,128 5,162,361 Public works 8,676,538 5,891,010 3,261,582 2,800,221 Park and recreation 2,188,941 1,814,966 1,864,728 1,666,466 Economic development - 149,749 83,572 114,639 Intergovernmental donations - - 8,526,239 313,198 Interest and fiscal charges 1,615,144 1,625,021 1,718,077 1,431,468 Total governmental activities expenses $ 19,373,037 $ 16,652,077 $ 22,708,963 $ 13,385,782 Business-type activities Liquor operations $ 4,385,187 $ 4,335,267 $ 4,267,536 $ 4,091,541 Sewer operations 1,786,170 1,887,357 1,811,992 1,879,752 Solid waste 1,830,082 1,799,151 1,773,240 1,789,114 Storm water 807,791 714,058 702,089 745,967 Water 2,588,880 1,859,342 1,732,559 1,772,096 Street light - - 175,050 180,200 Total business-type activities 11,398,110 10,595,175 10,462,466 10,458,670 Total primary government expenses $ 30,771,147 $ 27,247,252 $ 33,171,429 $ 23,844,452 Program revenues Governmental activities Charges for services General government $ 641,069 $ 504,802 $ 503,258 $ 470,572 Public safety 481,589 430,107 427,593 461,659 Public works 300,437 1,031,006 355,506 306,860 Park and recreation 689,487 508,655 537,773 520,522 Economic development - 25,789 13,374 6,333 Operating grants and contributions 10,695,352 1,214,756 551,257 507,180 Capital grants and contributions 944,140 1,140,980 2,449,930 2,388,656 Total governmental activities program revenues $ 13,752,074 $ 4,856,095 $ 4,838,691 $ 4,661,782 -116- 2012 2013 2014 2015 2016 2017 $ 1,865,415 $ 1,778,549 $ 1,940,630 $ 2,284,974 $ 2,268,779 $ 2,178,067 4,989,522 5,156,950 5,192,091 5,357,738 6,979,608 6,472,115 3,063,908 3,849,742 4,893,341 7,473,095 5,497,796 3,888,778 1,719,254 1,775,967 1,730,734 1,815,882 1,904,792 1,782,783 44,114 50,000 49,417 90,000 40,000 40,000 1,302,605 1,290,439 1,020,096 992,422 1,032,748 549,075 $ 12,984,818 $ 13,901,647 $ 14,826,309 $ 18,014,111 $ 17,723,723 $ 14,910,818 $ 4,116,030 $ 4,206,058 $ 4,315,834 $ 4,352,597 $ 4,448,932 $ 4,634,488 1,891,872 1,627,927 1,712,146 1,875,225 2,051,152 2,105,901 1,727,384 1,658,547 1,600,434 1,658,128 1,753,162 1,864,175 734,516 513,582 615,684 731,444 534,988 571,572 1,705,167 1,427,298 1,410,214 1,339,588 1,359,215 1,313,482 176,513 184,834 174,957 173,212 288,924 197,150 10,351,482 9,618,246 9,829,269 10,130,194 10,436,373 10,686,768 $ 23,336,300 $ 23,519,893 $ 24,655,578 $ 28,144,305 $ 28,160,096 $ 25,597,586 $ 436,113 $ 684,528 $ 534,008 $ 399,053 $ 668,849 $ 434,411 423,721 482,759 409,460 351,038 459,240 405,648 225,497 115,092 94,416 9,624 195,716 76,049 1 581,341 596,165 607,566 604,111 651,936 619,026 533,939 713,378 677,999 649,541 744,730 684,376 4,976,219 645,233 477,833 671,671 818,545 848,167 $ 7,176,830 $ 3,237,155 $ 2,801,282 $ 2,685,038 $ 3,539,016 $ 3,067,677 -117- (continued) CITY OF FARMINGTON Changes in Net Position(continued) Last Ten Fiscal Years (accrual basis of accounting) Fiscal Year 2008 2009 2010 2011 Program revenues(continued) Business-type activities Charges for services Liquor operations $ 4,436,714 $ 4,335,565 $ 4,285,471 $ 4,199,344 Sewer operations 1,553,707 1,376,043 1,581,526 1,600,303 Solid waste 1,775,170 1,767,750 1,850,073 1,872,771 Storm water 445,815 460,346 464,043 467,729 Water 1,490,169 1,509,100 1,439,906 1,417,708 Street light - - 140,773 178,464 Operating grants and contributions 103,010 104,206 72,631 29,000 Capital grants and contributions 41,047 53,354 100,162 49,473 Total business-type activities program revenues 9,845,632 9,606,364 9,934,585 9,814,792 Total primary government program revenues $ 23,597,706 $ 14,462,459 $ 14,773,276 $ 14,476,574 Net(expense)revenue Governmental activities $ (5,620,963) $(11,795,982) $(17,870,272) $ (8,724,000) Business-type activities (1,552,478) (988,811) (527,881) (643,878) Total primary government net expense $ (7,173,441) $(12,784,793) $(18,398,153) $ (9,367,878) General revenues and other changes in net position Governmental activities Property taxes $ 8,743,569 $ 8,963,578 $ 9,189,015 $ 9,607,893 Tax increments - 185,726 155,094 150,339 Franchise taxes - 219,722 228,932 237,449 Unrestricted grants and contributions 173,383 47,830 927 1,500 Unrestricted investment earnings(charges) 513,072 311,546 181,943 119,632 Gain on sale of assets - 4,626 25,412 75,306 Transfers (4,713,510) 2,436,097 (1,107,882) (1,602,351) Total governmental activities $ 4,716,514 $ 12,169,125 $ 8,673,441 $ 8,589,768 Business-type activities Unrestricted investment earnings(charges) $ 204,480 $ 196,286 $ 98,988 $ 69,117 Gain on disposal of assets 55,403 - - - Transfers 4,713,510 (2,436,097) 1,107,882 1,602,351 Total business-type activities 4,973,393 (2,239,811) 1,206,870 1,671,468 Total primary government $ 9,689,907 $ 9,929,314 $ 9,880,311 $ 10,261,236 Change in net position Governmental activities $ (904,449) $ 373,143 $ (9,196,831) $ (134,232) Business-type activities 3,420,915 (3,228,622) 678,989 1,027,590 Total primary government $ 2,516,466 $ (2,855,479) $ (8,517,842) $ 893,358 -118- 2012 2013 2014 2015 2016 2017 $ 4,397,572 $ 4,521,454 $ 4,639,194 $ 4,607,417 $ 4,742,313 $ 4,967,468 1,787,957 1,816,763 1,843,746 1,957,902 2,043,859 2,068,388 1,869,426 1,952,177 1,979,623 1,991,179 2,041,561 2,061,324 475,060 565,166 559,327 670,353 643,479 647,767 1,595,116 1,558,400 1,499,091 1,439,873 1,631,643 1,681,079 215,029 216,719 219,052 222,159 224,781 225,570 20,010 19,300 21,000 22,000 23,000 24,000 100,525 108,642 - 945,938 - - 10,460,695 10,758,621 10,761,033 11,856,821 11,350,636 11,675,596 $ 17,637,525 $ 13,995,776 $ 13,562,315 $ 14,541,859 $ 14,889,652 $ 14,743,273 $ (5,807,988) $(10,664,492) $(12,025,027) $(15,329,073) $(14,184,707) $(11,843,141) 109,213 1,140,375 931,764 1,726,627 914,263 988,828 $ (5,698,775) $ (9,524,117) $(11,093,263) $(13,602,446) $(13,270,444) $(10,854,313) $ 10,742,860 $ 10,748,581 $ 10,962,860 $ 11,460,209 $ 11,806,302 $ 12,181,830 154,214 - - - - - 243,635 259,671 269,208 265,485 275,691 266,728 1,816 24,845 257,386 278,974 287,252 289,854 77,276 (32,408) 130,739 189,540 255,021 200,851 18,268 - - - 54,408 909,284 1,410,114 1,414,119 1,222,807 1,428,106 1,939,974 $ 12,129,085 $ 12,429,071 $ 13,034,312 $ 13,417,015 $ 14,052,372 $ 14,933,645 $ 110,549 $ (40,071) $ 246,220 $ 152,954 $ 139,249 $ 129,207 55,086 - - - - (909,284) (1,410,114) (1,414,119) (1,222,807) (1,428,106) (1,939,974) (798,735) (1,395,099) (1,167,899) (1,069,853) (1,288,857) (1,810,767) $ 11,330,350 $ 11,033,972 $ 11,866,413 $ 12,347,162 $ 12,763,515 $ 13,122,878 $ 6,321,097 $ 1,764,579 $ 1,009,285 $ (1,912,058) $ (132,335) $ 3,090,504 (689,522) (254,724) (236,135) 656,774 (374,594) (821,939) $ 5,631,575 $ 1,509,855 $ 773,150 $ (1,255,284) $ (506,929) $ 2,268,565 -119- CITY OF FARMINGTON Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) Fiscal Year 2008 2009 2010 2011 General Fund Reserved $ 29,198 $ 31,996 $ 30,314 $ — Unreserved 2,008,315 2,125,884 2,188,528 — Nonspendable — — — 43,102 Assigned — — — — Unassigned — — — 2,093,006 Total General Fund $ 2,037,513 $ 2,157,880 $ 2,218,842 $ 2,136,108 All other governmental funds Reserved $ 1,962,741 $ 435,000 $ 381,500 $ — Unreserved,designated,reported in Capital projects funds 9,185,158 — — — Unreserved,undesignated,reported in Special revenue funds 343,559 52,771 (159,042) — Capital projects funds (518,992) 3,415,978 6,244,182 Debt service funds (148,755) 1,155,954 738,371 — Nonspendable — — — 307,074 Restricted — 2,312,309 Committed — — — — Assigned — 6,726,928 Unassigned — (576,114) Total all other governmental funds $ 10,823,711 $ 5,059,703 $ 7,205,011 $ 8,770,197 Total all funds $ 12,861,224 $ 7,217,583 $ 9,423,853 $ 10,906,305 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. -120- 2012 2013 2014 2015 2016 2017 $ - $ - $ - $ - $ - $ 612,518 13,388 33,369 6,034 33,762 34,529 81,000 4,250 - - 2,067,246 3,079,013 3,993,191 4,734,534 5,031,529 5,666,183 $ 2,679,764 $ 3,092,401 $ 4,107,560 $ 4,744,818 $ 5,065,291 $ 5,700,712 $ - $ - $ - $ - $ - $ - 146 - 160 150 110 - 2,950,166 6,881,858 5,673,161 5,776,314 16,959,150 4,071,837 - - 8,025,185 5,158,828 6,373,022 9,134,820 7,865,678 7,531,076 - - - $ 12,085,132 $ 14,747,536 $ 13,204,397 $ 13,801,649 $ 22,118,088 $ 10,444,859 $ 14,764,896 $ 17,839,937 $ 17,311,957 $ 18,546,467 $ 27,183,379 $ 16,145,571 -121- CITY OF FARMINGTON Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) Fiscal Year 2008 2009 2010 2011 Revenues General property taxes $ 8,565,878 $ 8,944,965 $ 9,392,326 $ 9,690,053 Franchise fees 215,689 219,722 228,932 237,449 Special assessments 893,897 778,101 1,450,515 720,862 Licenses and permits 360,068 376,183 454,769 456,791 Intergovernmental 10,868,735 1,915,315 2,657,788 2,217,217 Charges for services 723,875 1,585,069 1,141,182 1,096,174 Fines and forfeits 75,522 67,155 64,779 78,710 Investment earnings 513,072 311,546 176,191 20,444 Other 717,206 503,493 375,201 272,234 Total revenues 22,933,942 14,701,549 15,941,683 14,789,934 Expenditures Current I General government 1,925,414 2,061,106 2,064,477 1,828,147 Public safety 4,050,691 4,234,175 4,589,650 4,705,581 Public works 1,581,410 3,407,642 1,379,325 1,382,306 Park and recreation 1,812,370 1,525,303 1,591,378 1,399,541 Economic development 114,997 102,769 84,572 112,612 Capital outlay 21,511,910 7,287,689 4,046,022 316,134 Debt service Principal 1,854,314 2,796,155 2,238,084 5,090,101 Interest and fiscal charges 1,424,339 1,681,127 1,507,873 1,527,970 Total expenditures 34,275,445 23,095,966 17,501,381 16,362,392 Excess(deficiency)of revenues over expenditures (11,341,503) (8,394,417) (1,559,698) (1,572,458) Other financing sources(uses) Bonds issued 9,818,996 - 8,710,984 2,418,979 Payment of refunded debt - - (5,948,057) - Sale of capital assets 20,222 4,626 25,412 139,454 Transfers in 1,156,057 5,830,778 3,359,406 2,455,874 Transfers out (899,414) (3,084,628) (2,381,778) (1,959,397) Total other financing sources(uses) 10,095,861 2,750,776 3,765,967 3,054,910 Net change in fund balances $ (1,245,642) $ (5,643,641) $ 2,206,269 $ 1,482,452 Debt service as a percentage of noncapital expenditures 25.7% 28.3% 27.8% 41.2% -122- 2012 2013 2014 2015 2016 2017 $ 11,112,325 $ 10,808,636 $ 11,031,219 $ 11,462,986 $ 11,852,567 $ 12,186,789 243,635 259,671 269,208 265,485 275,691 266,728 3,296,216 913,313 821,331 661,187 545,777 532,744 423,153 664,673 514,728 370,889 650,311 415,005 556,496 1,329,395 1,011,221 2,097,509 1,633,388 1,632,170 1,015,835 865,736 890,281 820,445 1,077,860 929,784 73,210 81,919 65,482 52,299 41,750 45,102 158,657 46,707 130,739 172,818 237,224 183,402 222,083 233,808 174,959 160,193 260,564 201,288 17,101,610 15,203,858 14,909,168 16,063,811 16,575,132 16,393,012 1,830,470 1,686,263 1,717,994 1,947,768 1,996,410 2,051,143 4,702,399 4,850,400 4,871,745 5,131,076 5,301,211 5,537,937 1,402,838 2,081,956 2,038,161 1,971,079 2,006,606 2,381,695 1,427,257 1,530,238 1,448,951 1,53 8,452 1,513,411 1,585,656 91,165 50,000 49,417 90,000 40,000 40,000 555,293 1,290,875 1,839,726 4,695,581 2,755,780 586,495 2,912,213 7,394,424 2,376,739 2,899,162 4,411,534 6,395,000 1,336,414 1,379,551 1,096,007 1,041,780 1,095,380 818,144 14,258,049 20,263,707 15,438,740 19,314,898 19,120,332 19,396,070 2,843,561 (5,059,849) (529,572) (3,251,087) (2,545,200) (3,003,058) 7,088,037 - 3,184,641 10,120,095 - - - (1,435,000) - - (9,990,000) 105,746 26,154 22,473 157,599 13,043 54,408 3,997,318 7,492,556 2,330,331 5,937,539 5,590,211 2,981,402 (3,088,034) (6,082,442) (916,212) (4,794,182) (4,541,237) (1,080,560) 1,015,030 8,524,305 1,592 4,485,597 11,182,112 (8,034,750) $ 3,858,591 $ 3,464,456 $ (527,980) $ 1,234,510 $ 8,636,912 $ (11,037,808) 31.0% 46.2% 24.8% 21.0% 29.5% 37.9% -123- CITY OF FARMINGTON Tax Capacity Value and Estimated Actual Value of Taxable Property Last Ten Fiscal Years Commercial/ Industrial, Less Public Utility, Captured Payable Residential Railroads, and Agricultural Tax Increment Year Property Personal Property Apartments Property Tax Capacity 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) 2016 14,005,748 2,739,868 280,096 272,897 (117,585) 2017 14,798,507 2,805,453 295,234 272,086 (118,368) 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 -124- Less Estimated Tax Capacity 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 $ (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 (953,101) 3,424,887 19,652,810 59.239 1,601,441,554 1.23 (1,039,820) 3,607,141 20,620,233 58.760 1,685,287,604 1.22 -125- CITY OF FARMINGTON Property Tax Rates(1) Direct and Overlapping Governments Last Ten Fiscal Years City Direct Rates Overlapping Rates(2) Total Direct Fiscal Debt Total Dakota Other Special Overlapping Year Operating Service City County ISD No. 192 Districts ' Rate 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 2016 44.220 15.019 59.239 28.562 57.570 3.802 149.173 2017 44.050 14.710 58.760 27.996 54.256 3.692 144.704 (1) Information reflects total tax rates levied by each entity. Tax rates are expressed in terms of"net tax capacity." A property's tax capacity is determined by multiplying its taxable market value by a state determined class rate. Class rates vary by property type and changed periodically based on state legislation. (2) 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 -126- CITY OF FARMINGTON Principal Property Taxpayers Current Fiscal Year and Nine Years Prior 2017 2008 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 $ 565,720 1 3.11 % $ 306,224 1 1.61 % Xcel Energy(Northern States Power) 194,526 2 1.07 — — — Dakota Electric Association 140,562 3 0.77 — — — Dakota Storage,LLC 81,226 4 0.45 83,488 7 0.44 Minnesota Energy Resources 80,408 5 0.44 — Valmont Industries 73,472 6 0.40 72,250 8 0.38 St.Francis Health Systems 68,162 7 0.38 84,640 6 0.44 POR-MKR Real Estate,LLC 65,582 8 0.36 — RLR Investments,LLC 65,140 9 0.36 — — — AMOS Financial,LLC 63,342 10 0.35 — — — Giles Properties — — — 129,771 2 0.68 Farmington City Center,LLC — 98,726 3 0.52 Land,LLC — — — 98,240 4 0.51 Mattatmy Partnership — — — 88,064 5 0.46 Schwiness,LLC — — — 71,388 9 0.37 Individual Property Owner — — — 68,322 10 0.36 Total $ 1,398,140 7.69 % $ 1,101,113 5.41 % Source:Dakota County -127- 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 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 92.07 758,988 9,585,484 99.99 2011 9,869,985 9,334,157 94.57 531,493 9,865,650 99.96 2012 10,582,243 10,377,369 98.06 200,913 10,578,282 99.96 2013 10,734,608 10,581,301 98.57 145,578 10,726,879 99.93 2014 10,981,055 10,889,973 99.17 75,577 10,965,550 99.86 2015 11,402,145 11,307,924 99.17 75,879 11,383,803 99.84 2016 11,718,018 11,656,384 99.47 39,484 11,695,868 99.81 2017 12,133,656 12,073,701 99.51 — 12,073,701 99.51 • (1) Includes fiscal disparity revenues. (2) Includes fiscal disparity revenues and is net of county/state adjustments. Source Dakota County -128- 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 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 2016 20,115,000 15,645,000 — 535,000 2017 12,455,000 7,455,000 — — Note 1:Details regarding the City's outstanding debt can be found in the notes to basic financial statements. Note 2: See Demographic and Economic Statistics schedule for population and personal income information. N/A—Not Available -129- Business-Type Activities Net Total Premiums Revenue Primary Percentage of (Discounts) Bonds Government Per Capita Personal Income $ — $ 1,080,000 $ 43,998,411 $ 2,061 4.5 % — 875,000 40,997,256 1,893 4.4 665,000 41,564,173 1,971 4.4 — 450,000 38,644,072 1,793 3.8 — 230,000 35,511,859 1,629 3.3 203,702 — 34,951,137 1,578 3.2 177,829 — 31,113,525 1,386 2.7 277,972 — 31,364,506 1,386 2.6 738,645 — 37,033,645 1,650 N/A 645,061 — 20,555,061 920 N/A -130- 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 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 2016 20,115,000 7,894,089 12,220,911 1,604,441,551 0.76 2017 12,455,000 2,167,387 10,287,613 1,685,287,604 0.61 (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) See Demographic and Economic Statistics schedule for population and personal income information. Note: Details regarding the City's outstanding debt can be found in the notes to basic financial statements. N/A—Not Available Source: Dakota County website and Dakota County Assessor's Office -131- Percentage of Total City Total City Percentage Tax Capacity Tax Capacity of Personal Per Value Value Population(3) Income(3) Capita $ 18,135,711 103.60 % 21,343 1.85 % $ 880 18,314,489 96.96 21,654 1.94 820 16,808,764 98.93 21,086 1.80 789 16,454,036 95.87 21,558 1.61 732 14,764,729 100.86 21,806 1.38 683 13,963,167 106.43 22,154 1.27 671 14,383,917 95.02 22,446 1.24 609 16,028,316 95.70 22,622 1.32 678 17,298,609 70.65 22,451 N/A 544 18,171,280 56.61 22,343 N/A 460 -132- THIS PAGE INTENTIONALLY LEFT BLANK CITY OF FARMINGTON Direct and Overlapping Governmental Activities Debt December 31,2017 Estimated Estimated Share of Net Debt Percentage Overlapping Governmental Unit Outstanding Applicable(1) Debt Overlapping debt Dakota County(2) $ — — % $ — ISD No. 192 Farmington 197,225,000 0.588 1,159,290 ISD No. 196 Rosemount—Apple Valley—Eagan 11,885,000 0.000 4 Metropolitan Council(3) 188,620,614 0.041 76,545 Total overlapping debt 397,730,614 1,235,840 Direct debt City of Farmington direct debt 20,555,061 100.000 20,555,061 Total direct and overlapping debt $ 418,285,675 $ 21,790,901 (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) Dakota County did not have any outstanding general obligation debt supported by taxes at year-end. (3) 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 -133- CITY OF FARMINGTON Legal Debt Margin Information Last Ten Fiscal Years Fiscal Year 2008 2009 2010 2011 Debt limit $ 35,711,214 $ 36,087,407 $ 33,238,070 $ 45,675,060 Total net debt applicable to limit 17,963,411 16,327,256 17,934,173 16,919,072 Legal debt margin $ 17,747,803 $ 19,760,151 $ 15,303,897 $ 28,755,988 Total net debt applicable to limit as a percentage of debt limit 50.30% 45.24% 53.96% 37.04% -134- 2012 2013 2014 2015 2016 2017 $ 40,338,008 $ 37,998,037 $ 39,352,574 $ 44,279,096 $ 48,043,247 $ 50,558,628 15,916,859 15,442,435 14,520,696 16,496,534 20,115,000 12,455,000 $ 24,421,149 $ 22,555,602 $ 24,831,878 $ 27,782,562 $ 27,928,247 $ 38,103,628 39.46% 40.64% 36.90% 37.26% 41.87% 24.63% Legal Debt Margin Calculation for Fiscal Year 2017 Market value $ 1,685,287,604 Debt limit(3%of market value) 50,558,628 Debt applicable to limit 12,455,000 Legal debt margin $ 38,103,628 -135- 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 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 2016 No longer applicable—debt repaid in full in 2013 2017 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. -136- CITY OF FARMINGTON Demographic and Economic Statistics Last Ten Fiscal Years Total Fiscal School Unemployment Personal Per Capita Year Population(1) Households(1) Enrollment(3) Rate(2) Income(5) Income(4) 2008 21,343 7,453 6,472 6.1 % $ 982,823,807 $ 46,049 2009 21,654 7,824 6,320 7.3 942,013,962 43,503 2010 21,086 7,412 6,499 6.5 934,426,090 44,315 2011 21,558 7,464 6,555 5.2 1,022,905,542 47,449 2012 21,806 7,532 6,560 6.1 1,068,254,134 48,989 2013 22,154 7,806 6,877 4.7 1,097,930,086 49,559 2014 22,446 7,906 7,075 3.1 1,159,941,942 51,677 2015 22,622 7,959 7,019 3.3 1,215,027,620 53,710 2016 22,451 7,657 7,074 3.4 N/A N/A 2017 22,343 7,691 7,126 2.7 N/A N/A (1) Numbers for 2008-2015 are from the Farmington Building Inspections Department. The 2016-2017 numbers are from the Metropolitan Council, which uses a more scientific and in-depth approach to estimating these values. They also have a one-year lag in reporting. (2) Minnesota Department of Employment and Economic Development-Dakota County 2015 Annual Rate. (3) Farmington School District-October enrollment count. (4) U.S.Bureau of Economic Analysis-Per capital personal income for Dakota County residents. (5) Per capita personal income for Dakota County residents multiplied by the estimated city population. N/A-Not Available -137- THIS PAGE INTENTIONALLY LEFT BLANK CITY OF FARMINGTON Principal Employers Current Fiscal Year and Nine Years Prior 2017 2008 Percentage of Total Percentage Employees Employment Employees of Total Taxpayer (1) Rank (2) (1) Rank Employment ISD No. 192,Farmington Public Schools 899 1 19.1 % 825 1 16.9 % Federal Aviation Administration 800 2 17.0 472 2 9.6 Dakota Electric 200 3 4.3 216 3 4.4 Trinity Care Center&Trinity Terrace 160 4 3.4 125 8 2.6 Marshall Lines,Inc. 150 5 3.2 200 4 4.1 River Valley Home Care 148 6 3.2 130 7 2.7 City of Farmington 147 7 3.1 144 5 2.9 R&L Carriers 133 8 2.8 — — — Kemps Dairy 133 8 2.8 125 8 2.6 Valmont Industries(Lexington Standard) 110 10 2.3 131 6 2.7 Bachman's Nursery — — — 80 10 1.6 Total 2,880 61.3 % 2,448 50.0 % (1) Per City of Farmington records. (2) Metropolitan Council Employment by Community as of 2015 (latest available),4,696 total employment. -138- CITY OF FARMINGTON Full-Time Equivalent City Government Employees by Function Last Ten Fiscal Years Fiscal Year 2008 2009 2010 2011 2012 General government Administration 6.00 6.00 6.00 5.00 5.25 Finance 3.50 3.50 3.50 2.75 2.50 Human resources/information technology 3.00 3.00 3.00 2.80 1.80 Community development 4.00 4.00 4.00 3.00 1.00 Total general government 16.50 16.50 16.50 8.55 10.55 Public safety Police administration 6.00 6.00 6.00 6.15 6.15 Police patrol 18.00 16.00 16.00 16.00 16.50 Investigations 4.00 7.00 7.00 7.00 6.50 Fire 1.00 1.00 1.00 1.25 1.40 Total public safety 29.00 30.00 30.00 30.40 30.55 Public works Building inspections 3.00 3.00 3.00 3.00 2.93 Engineering 2.10 2.10 2.10 2.42 2.34 Streets 4.00 4.68 4.68 4.68 4.68 Snowplowing 0.43 0.45 0.45 0.45 0.45 Natural resources 0.75 1.12 1.12 1.02 1.02 Total public works 10.28 11.35 11.35 11.57 11.42 Parks and recreation Park maintenance 5.00 5.44 5.44 4.44 4.44 Building maintenance 1.00 - - Recreation programming 3.00 1.50 2.00 2.00 2.00 Total parks and recreation 9.00 6.94 7.44 6.44 6.44 Senior center 1.50 1.50 1.00 1.10 1.10 Swimming pool 0.50 0.40 0.40 0.40 0.40 Arena 1.50 1.86 1.86 2.11 2.11 Liquor operations 6.00 5.00 5.00 7.25 7.25 Sewer 2.81 2.41 2.41 2.60 2.59 Solid waste 6.39 6.38 6.38 6.38 6.38 Storm water utility 2.53 2.53 2.53 2.93 2.93 Water 2.99 3.64 3.64 3.83 3.83 Fleet 2.00 2.00 2.00 2.00 1.00 Total employees 91.00 90.51 90.51 85.56 86.55 Note: In addition to the above, the City has a volunteer fire depailment of 50 people and hires seasonal staff for its summer parks and recreation operations. Source: Various city departments -139- 2013 2014 2015 2016 2017 3.50 3.50 3.00 2.00 1.00 4.00 4.00 4.50 5.50 5.50 3.00 3.00 3.00 3.00 4.00 2.00 2.50 2.50 3.00 3.00 12.50 13.00 13.00 13.50 13.50 5.15 5.15 5.15 5.15 5.15 18.00 17.00 17.00 17.00 17.00 5.00 5.00 5.00 5.00 5.00 1.40 1.40 1.50 1.50 1.50 29.55 28.55 28.65 28.65 28.65 2.50 2.50 2.50 3.20 3.50 5.10 4.60 4.50 4.50 5.50 10.00 10.00 9.00 9.50 9.50 1.00 1.00 1.00 1.00 - 18.60 18.10 17.00 18.20 18.50 3.50 3.50 3.50 3.50 3.60 1.00 1.00 1.00 1.00 1.00 2.00 2.00 2.00 2.00 2.00 6.50 6.50 6.50 6.50 6.60 1.50 1.50 1.00 1.40 1.40 0.40 0.40 0.40 0.40 0.40 2.35 2.35 2.35 2.35 2.35 7.25 7.50 8.00 8.00 8.00 5.00 5.00 5.00 5.50 5.50 2.00 2.00 2.00 2.00 2.00 85.65 84.90 83.90 86.50 86.90 -140- CITY OF FARMINGTON Operating Indicators by Function Last Ten Years Fiscal Year Function/Program 2008 2009 2010 2011 General government Elections 1 N/A 1 N/A Registered voters 13,070 N/A 11,820 N/A Number of votes cast 10,309 N/A 7,002 N/A Voter participation(registered) 78.9% N/A 59.2% N/A Public safety Police Arrests 563 440 399 527 All citations and warnings* 1,618 1,498 1,848 2,253 Calls for service 12,976 13,025 12,710 13,807 Fire Medical calls 370 251 257 274 Fire calls 230 324 272 227 Inspections Building permits 628 576 907 747 Value of building permits(in millions) $ 18 $ 20 $ 22 $ 25 Parks and recreation Parks Park reservations 106 77 76 67 Pool Pool open swim admissions 13,833 11,163 13,009 11,869 Pool swim lesson registrations 528 371 405 410 Pool season passes sold 75 69 71 63 Pool punch cards sold 230 202 163 142 Swim bus riders 997 1,059 729 620 Rambling River Center Memberships 531 440 430 430 Program participation 13,279 18,104 11,738 15,817 Number of volunteers 200 215 107 108 Total volunteer hours 2,400 6,315 4,276 4,601 Ice arena Ice skating lessons total participants 195 213 263 195 Arena rental hours 1,263 1,191 1,171 1,271 Outdoor rinks total number of skaters 4,740 6,542 9,797 6,499 Other Recreation program/event participants 8,427 6,568 6,258 6,126 Youth scholarships provided 44 31 45 20 *Beginning in 2012,this figure includes warnings. N/A-Not Available Source:Various city departments -141- 2012 2013 2014 2015 2016 2017 1 N/A 1 N/A 1 N/A 13,358 N/A 12,541 N/A 13,788 N/A 11,185 N/A 6,419 N/A 11,545 N/A 84.0% N/A 51.0% N/A 84.0% N/A 435 403 266 153 351 281 4,359 4,517 3,383 2,494 2,070 2,021 15,094 13,138 13,035 12,085 11,943 11,221 290 323 386 359 356 452 254 235 241 361 345 407 818 679 711 619 1,184 1,036 $ 17 $ 35 $ 24 $ 15 $ 38 $ 19 69 65 66 66 81 71 13,069 11,566 8,032 7,652 7,372 6,302 407 308 267 256 309 136 89 78 N/A N/A NA N/A 130 154 193 176 125 139 641 786 408 536 507 496 428 435 406 381 404 467 16,198 16,875 15,285 13,885 13,042 15,203 152 94 130 107 82 80 3,741 4,780 4,348 5,944 8,573 4,298 200 215 230 216 329 284 1,197 1,147 1,197 1,315 1,285 1,490 5,259 7,819 7,481 7,851 5,187 7,276 6,607 6,971 6,425 5,976 8,344 8,171 22 25 7 4 6 8 -142- CITY OF FARMINGTON Capital Assets Statistics by Function/Program Last Ten Years Fiscal Year Function/Program 2008 2009 2010 2011 Public safety Police Stations 1 1 1 1 Patrol squads 20 18 18 18 Fire Stations 2 2 2 2 Fire trucks 7 7 7 7 Public works Vehicles 21 21 21 21 Streets(miles) 89 89 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 6 6 6 6 Sanitary sewer Collection system(miles) 84 84 84 84 Storm sewer Storm sewer(miles) 71 70 71 71 Water Water main(miles) 108 108 109 109 Wells 7 7 7 7 Water reservoirs 2 2 2 2 Source: City's financial records -143- 2012 2013 2014 2015 2016 2017 1 1 1 1 1 1 17 17 16 16 15 15 2 2 2 2 2 2 7 7 6 6 8 8 20 21 21 24 29 29 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 23 23 23 23 6 5 5 5 5 5 84 84 84 84 84 90 71 71 71 73 73 78 109 109 109 109 109 113 7 7 7 7 7 7 2 2 2 2 2 2 -144- THIS PAGE INTENTIONALLY LEFT BLANK itikRifi , City of Farmington 430 Third Street Farmington, Minnesota 651.280.6800 - Fax 651.280.6899 nor" www.ci.farmington.mn.us TO: Mayor, Councilmembers and City Administrator FROM: Katy Gehler, Public Works Director SUBJECT: 2017 Public Works Annual Report DATE: May 21, 2018 INTRODUCTION May 20th marks the start of Public Works Week across the nation. We would like to take time to highlight the accomplishments of the department for 2017 and note some of the more substantial initiatives planned for 2018 and 2019. DISCUSSION Public Works is a very diverse department encompassing several divisions to provide basic road and utility services to the city. The eight divisions are; streets, water, sewer, storm water, solid waste, engineering, natural resources, and fleet. Staff will make a presentation on a variety of topics at the meeting and answer any questions you may have. BUDGET IMPACT N/A ACTION REQUESTED No action is required. This is informational only.