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HomeMy WebLinkAbout05.20.19 Council Packet Meeting Location: Farmington Farmington City Hall Minnesota 430 Third Street Farmington,MN 55024 CITY COUNCIL REGULAR MEETING AGENDA May 20, 2019 7:00 P.M. Action Taken 1. CALL TO ORDER 7:00 P.M. 2. PLEDGE OFALLEGIANCE 3. ROLL CALL 4. APPROVE AGENDA S. ANNOUNCEMENTS/COMMENDATIONS a) Recognition of the Farmington High School Robotics Team Recognized b) Farmington Liquors Community Contributions Milestone Recognized c) City of Farmington Bond Rating Upgrade to AA+ Recognized 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) Josh Wilson Information Received 7. CONSENT AGENDA a) Approve Minutes of the May 6, 2019, City Council Meeting— Administration Approved b) Approve Minutes of the May 6, 2019, City Council Work Session— Administration Approved c) Approve Minutes of the May 13, 2019, City Council Work Session- Administration Approved d) Approve 2020 ALF Budget—Administration Approved e) Accept Resignation Water Board—Administration Accepted f) Approve a Temporary On-Sale Liquor License for Farmington Liquors— Community Development Approved g) Approve Ordinance Amendment Regarding Number of Allowed Dogs— Community Development Ord 019-746 h) Approve ADA Transition Plan for Public Rights-of-Way—Public Works Approved i) Approve Seasonal Hiring—Human Resources Approved j) Approve 2020 Election Judge Compensation—Human Resources Approved k) Acknowledge Financial Review for the Month Ending March 31, 2019 - Finance Acknowledged 1) Approve Bills - Finance Approved REGULAR AGENDA 8. PUBLIC HEARINGS a) Approve Therapeutic Massage License for Laura Helvig Approved 9. AWARD OF CONTRACT 10. PETITIONS,REQUESTS AND COMMUNICATIONS a) 2018 Management and Comprehensive Annual Financial Report Accepted 11. UNFINISHED BUSINESS 12. NEW BUSINESS a) 2018 Public Works Annual Report Postponed 6/3/19 13. CITY COUNCIL ROUNDTABLE 14. ADJOURN 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: Recognition of the Farmington High School Robotics Team DATE: May 20, 2019 INTRODUCTION The Farmington High School Robotics Team has been featured in the news the past few months due to their academic success and their humanitarian efforts in building a wheelchair for a child in need. The team was recently honored for their efforts by the First Lady in the White House Rose Garden. The city council has asked the team to come to the city council meeting to say thank you for their success. DISCUSSION NA BUDGET IMPACT NA ACTION REQUESTED Thank the Farmington Robotics Team for their success and their positive impact on the Farmington community. , ikRRi►4t, City of Farmington / 430 Third Street Farmington, Minnesota fel 651.280.6800 -Fax 651.280.6899 '."• PROwww.ci.farmington.mn.us TO: Mayor, Councilmembers and City Administrator FROM: David McKnight, City Administrator SUBJECT: Farmington Liquors Community Contributions Milestone DATE: May 20, 2019 INTRODUCTION During the month of March 2019 the city's liquor operations achieved a milestone that is worth noting and celebrating. DISCUSSION The city's liquor operations annually use the profits of the two stores to reinvest back into the organization and community. A number of years ago we started track the donations and I am proud to say that in early March 2019 we passed the$1,000,000 in donations back into the Farmington community since 2005. A large portion of these donations go into our parks and recreation program,while dollars also go into various other departments and causes in Farmington. During the meeting I will highlight some of the donations we have made during the past decade. BUDGET IMPACT The profits of the Farmington Liquors operation are used to offset budget requests and help alleviate the need for taxpayer dollars to support city operations. ACTION REQUESTED Receive the information that is presented and ask any questions you may have. Please take the time to thank Liquor Operations Manager Blair Peterson and his staff for their work that enabled us the invest these dollars back into our organization and community. 44111,/,&. City of Farmington 430 Third Street Farmington, Minnesota 651.280.6800 -Fax 651.280.6899 '•,.4,,, www.ci.farmington.mn.us TO: Mayor, Councilmembers and City Administrator FROM: Teah Malecha, Finance Director SUBJECT: City of Farmington Bond Rating Upgrade to AA+ DATE: May 20, 2019 INTRODUCTION Standard & Poor's Global Ratings rates the city's credit risk. In early April, in conjunction with the planned issuance of the General Obligation Series 2019A bonds for the Westview Area street reconstruction and water tower refurbishment, Standard and Poor's reviewed the city's economy, management, and financial measures. They concluded their review by upgrading the city's credit rating from AA to AA+. The rating upgrade recognizes the collective work over the past several years of the city council and staff. It is a very important milestone for the city. Congratulations to all! DISCUSSION The city was rated by Moody's Investor Services until 2010 when we transitioned to using Standard and Poor's Global(S&P). At that time, S&P rated the city AA-.An upgrade to AA was received in 2015. The rating upgrade is a culmination of numerous years of hard work by city council and staff to improve the city's financial performance, strengthen management's oversight, update and improve on the city's financial policies and practices, and to improve the city's debt position. The rating outlook is stable for the next two years.A higher rating is possible in the future if the economy and the city's debt profile were to improve. A lower rating is possible if the budgetary performance becomes of concern and the budgetary flexibility deteriorates. The adoption and revisions of the city's long- term financial management plan are an important part of the city's management oversight. A copy of Standard and Poor's ratings analysis is attached for your review. BUDGET IMPACT The increased rating may result in lower future borrowing costs for the city. ACTION REQUESTED No action is required. Staff asks that you join us in recognizing and sharing this accomplishment. It is the result of dedicated work by the city council and staff. ATTACHMENTS: Type Description In Backup Material S&P Global Ratings Report S&P Global Ratings RatingsDirect® Summary: Farmington, Minnesota; General Obligation Primary Credit Analyst: Cora Bruemmer,Chicago+ 1 (312)233 7099;cora.bruemmer@spglobal.com Secondary Contact: Caroline E West,Chicago(1) 312-233-7047;caroline.west@spglobal.com Table Of Contents Rationale Outlook Related Research WWW.STANDARDANDPOORS.COM/RATINGSDIRECT APRIL 4, 2019 1 Summary: Farmington, Minnesota; General Obligation Credit Profile US$1.83 mil GO bnds ser 2019A due 02/01/2029 Long Term Rating AA+/Stable New Farmington GO imp rfdg bnds ser 2011A dtd:08/25/2011 due 02/01/2012-2019 Long Term Rating AA+/Stable Upgraded Rationale S&P Global Ratings raised its long-term rating to'AA+'from'AA'on Farmington,Minn.'s series general obligation (GO)debt.At the same time,we assigned our'AA+'rating on the city's series 2019A GO bonds.The outlook is stable. The upgrade reflects the city's growing economic base,very strong financial management,and lower debt burden.The city adopted a detailed financial management plan in 2017 with the goals of lowering its debt burden,cash-financing future projects,and managing the growth in its tax levy.The plan provides detailed forecasting for both operations and capital improvements,which is necessary as the city grows.Management has also focused on retiring debt early for costs savings by using internal financing,with minimal effects on the city's liquidity.As a result,our view of the city's economy,financial management,and debt burden has improved. The bonds are secured by the city's GO,full faith and credit pledge,which benefits from an unlimited ad valorem tax. The series 2019A bonds are also payable from net revenue of the city's water utility,but we rate to the GO pledge. Several of the city's bonds have additional revenue pledged,but we rate them all to the GO pledge. The series 2019A bonds will finance a street reconstruction project and refurbishment of the city's water tower. The rating reflects our assessment of the following factors,including Farmington's: • Strong economy,with access to a broad and diverse metropolitan statistical area(MSA); • Very strong management,with strong financial policies and practices under our Financial Management Assessment (FMA)methodology; • Strong budgetary performance,with operating surpluses in the general fund and at the total governmental fund level in fiscal 2017; • Very strong budgetary flexibility,with an available fund balance in fiscal 2017 of 58%of operating expenditures; • Very strong liquidity,with total government available cash at 1.6x total governmental fund expenditures and 7.6x governmental debt service,and access to external liquidity we consider strong; • Adequate debt and contingent liability position,with debt service carrying charges at 20.7%of expenditures and net direct debt that is 59.5%of total governmental fund revenue,as well as rapid amortization,with 96.3%of debt scheduled to be retired in 10 years;and WWW.STANDARDANDPOORS.COM/RATINGSDIRECT APRIL 4,2019 2 Summary:Farmington, Minnesota; General Obligation • Strong institutional framework score. Strong economy We consider Farmington's economy strong.The city,with an estimated population of 24,082 over roughly 14.8 miles, is in Dakota County,roughly 25 miles south of the Twin Cities. It is in the Minneapolis-St.Paul-Bloomington MSA, which we consider to be broad and diverse.The city has a projected per capita effective buying income of 115%of the national level and per capita market value of$85,524. Overall,market value grew by 6.1%over the past year to$2.1 billion in 2018.The county unemployment rate was 3.0%in 2017. Farmington is primarily residential(82%of tax capacity)with smaller commercial/industrial(10%)component.Since the recession,it has seen steady valuation growth resulting from both the appreciation of properties as well as new residential development.The city has ample room for additional growth,and management reports that it expects two new residential plats to be approved this spring,which would bring 300 more single-family homes. Officials expect taxable and market values to continue to increase at similar rates over the next few years.Based on the recent trend and upcoming developments in the city,we view this growth as likely. Very strong management We view the city's management as very strong,with strong financial policies and practices under our FMA methodology,indicating financial practices are strong,well embedded,and likely sustainable. Our view of the city's management has improved following the adoption and implementation of a long-term financial plan in 2017.The plan goes out to 2030,but has detailed schedules that project forward the next five years.The five-year forecast schedules are updated by management throughout the year,but are reviewed by the council annually. Some other management highlights include: • Use of at least three years of historical information in the formulation of the upcoming years revenue and expenditure assumptions with the help of outside sources and a line-by-line approach to budgeting; • Monthly reporting of budget-to-actual performance to the council,with the ability to make amendments to the budget as needed; • A five-year capital improvement plan that addresses capital needs,along with sources and uses of funds that is updated annually; • An investment management policy with monthly reporting of investments and holdings to the city manager and annual reports to council; • A debt management policy containing provisions limiting the city from issuing variable-rate debt and will not use derivative-based debt;and • A fund balance policy to maintain 40%to 50%of operating expenditures for cash-flow needs,which the city meets. Strong budgetary performance Farmington's budgetary performance is strong,in our opinion.The city had surplus operating results in the general fund of 5.4%of expenditures and 13.9%across all governmental funds in fiscal 2017.General fund operating results of the city have been stable over the last three years,with results of 4.3%in 2016 and 6.2%in 2015. WWW.STANDARDANDPOORS.COM/RATINGSDIRECT APRIL 4, 2019 3 Summary:Farmington,Minnesota; General Obligation We have adjusted revenue and expenditures to account for recurring transfers into and out of the general fund as well as total governmental funds.We also removed one-time transfers and expenditures related to the early retirement of debt. Over the last three fiscal years,the city has achieved strong general fund results,with surpluses ranging between 4% and 6%of expenditures. Management attributes the strong results to its conservative budgeting of revenue,for items such as building permits,as well as expenditures.Across total governmental funds,the city has had some use of reserves related to capital projects. The fiscal 2018 audit is not yet available,but management reports the year closed with roughly a$600,000 general fund surplus,but the city will transfer the surplus to capital projects funds or reclassify the fund balance for future projects to remain at its policy level of 40%of expenditures in reserve.Across total governmental funds,there was a reduction in fund balance related to three bond issues that were optionally redeemed(2010A, 2010B,and 2011A),but management is not expecting any other significant use of reserves. The 2019 budget is balanced for the general fund and across total governmental funds.Year-to-date,the city reports that revenue and expenditures are tracking to budget.Based on the city's historical performance and budgeting practices,we believe it will likely maintain a strong budgetary performance as it has consistently been able to outperform the budget. Very strong budgetary flexibility Farmington's budgetary flexibility is very strong,in our view,with an available fund balance in fiscal 2017 of 58%of operating expenditures,or$6.8 million.We expect the available fund balance to remain above 30%of expenditures for the current and next fiscal years,which we view as a positive credit factor.The available fund balance includes$5.7 million(48.2%of expenditures)in the general fund and$1.1 million(9.5%)that is outside the general fund but legally available for operations. Additional liquidity is provided by the cash and cash equivalents in the liquor fund which can be used for general operations with no repayment provisions.Based on fiscal 2018 projections and the 2019 budget,we believe the city's available fund balance as a percentage of expenditures will remain very strong. Very strong liquidity In our opinion,Farmington's liquidity is very strong,with total government available cash at 1.6x total governmental fund expenditures and 7.6x governmental debt service in 2017. In our view,the city has strong access to external liquidity if necessary. We believe that the city has strong access to external liquidity,having issued GO debt,which demonstrates access to capital markets.The city's governmental cash may decline slightly in 2018 as it used$3.2 million of cash on hand in its Storm Water Trunk Fund to optionally redeem its 2010A-B and 2011A GO debt for cost savings.The Storm Water Trunk Fund will be repaid with the annual tax levy on a schedule that runs through 2024.We do not expect this use of cash to materially affect the city's overall liquidity,which we expect to remain very strong.Additionally,the city does not have any potential contingent liabilities that could have an adverse effect on its cash position,and we do not view its investment practices as aggressive as the majority are in U.S.agencies and securities,highly rated municipal bonds, WWW.STANDARDANDPOORS.COM/RATINGSDIRECT APRIL 4,2019 4 Summary:Farmington,Minnesota; General Obligation CDs,and mutual funds. Adequate debt and contingent liability profile In our view,Farmington's debt and contingent liability profile is adequate.Total governmental fund debt service is 20.7%of total governmental fund expenditures,and net direct debt is 59.5%of total governmental fund revenue. Approximately 96.3%of the direct debt is scheduled to be repaid within 10 years,which,is in our view,a positive credit factor. We have adjusted the city's debt service costs in 2017 to remove debt payments associated with the early redemption of debt.The city does not have any plans to issue additional debt in the next two years. In 2020,it expects to finance a water tower project that will cost roughly$2.2 million with cash on hand in its enterprise funds.In 2022,it will likely have another street reconstruction project for which it may issue debt. Farmington's combined required pension and actual other postemployment benefit(OPEB)contributions totaled 3.7% of total governmental fund expenditures in 2017.The city made its full annual required pension contribution in 2017.It participates in two cost-sharing multiple-employer pension plans,including the General Employees Retirement Fund (GERF)and the Public Employees Police and Fire Fund(PEPFF),which are administered by the Public Employees Retirement Association of Minnesota(PERA).Required pension contributions to these plans are determined by state statute. Statutory contributions rates have generally not kept pace with actuarially determined contribution(ADC) rates,indicating potential for future payment acceleration.In June 2018,the state passed pension legislation that will marginally increase contributions(for PEPFF only),reduce the investment rate of return to 7.5%(from 8%),and reduce some employee benefits(primarily cost-of-living adjustments).While we view these as positive changes for future plan funding levels,the lack of an actuarial funding policy remains a weakness in these plans. For more information about the reforms included in the 2018 omnibus retirement bill and the potential for future cost increases see our article"Minnesota's New Pension Bill Is A Positive Step Toward Sustainable Funding,"published on June 7, 2018,on RatingsDirect. The GERF and PEPFF were 79.5%and 88.8%funded,respectively,in fiscal 2018.The city's proportionate share of the net pension liability for these plans totaled$7 million in fiscal 2017,the most recent year in which data are available. We consider historical plan funding levels somewhat weak,and we believe that the history of pension contributions below ADC increases the risk of payment acceleration.Additionally,in our view,the plan's investment portfolio is exposed to significant market risk,with only 22%of its investments allocated to fixed income and cash,which increases the risk for volatility in plan funding levels.Despite these weaknesses,we believe the city has sufficient taxing and operational flexibility to manage future increases in pension contributions. However,in the future,if pension contributions absorb a larger share of the city's budget,our view of its debt and contingent liability profile could weaken. The city also participates in the Farmington Fire Relief Association,a single-employer pension plan.In fiscal 2017,the plan was over 100%funded with a net pension asset of$778,000.It funds OPEBs on a pay-as-you-go basis.As of Jan. 1, 2016,the most recent actuarial valuation,its unfunded actuarial accrued liability was$976,000. WWW.STANDARDANDPOORS.COM/RATINGSDIRECT APRIL 4,2019 5 Summary:Farmington,Minnesota; General Obligation Strong institutional framework The institutional framework score for Minnesota cities with a population greater than 2,500 is strong. Outlook The stable outlook reflects our view that Farmington will maintain its very strong reserves supported by strong financial performance and management,so we do not expect to revise the ratings within the two-year outlook period. Upside scenario A higher rating is possible if the city's economic metrics were to improve to levels commensurate with those of its higher rated peers. Downside scenario A lower rating is possible if the city's budgetary performance were to weaken,causing a significant deterioration in its reserves. Related Research • S&P Public Finance Local GO Criteria:How We Adjust Data For Analytic Consistency,Sept. 12,2013 • Incorporating GASB 67 And 68:Evaluating Pension/OPEB Obligations Under Standard&Poor's U.S.Local Government GO Criteria,Sept. 2,2015 Ratings Detail(As Of April 4, 2019) Farmington GO Long Term Rating AA+/Stable Upgraded Unenhanced Rating NR(SPUR) Farmington GO imp rfdg bnds ser 2013A dtd 01/15/2013 due 02/01/2015-2022 Long Term Rating AA+/Stable Upgraded Farmington GO street reconstruction bnds ser 2015A dtd 10/15/2015 due 02/01/2030 Long Term Rating AA+/Stable Upgraded Certain terms used in this report,particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria,and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.standardandpoors.com for further information. Complete ratings information is available to subscribers of RatingsDirect at www.capitaliq.com.All ratings affected by this rating action can be found on S&P Global Ratings'public website at www.standardandpoors.com.Use the Ratings search box located in the left column. WWW.STANDARDANDPOORS.COM/RATINGSDIRECT APRIL 4,2019 6 Copyright©2019 by Standard&Poor's Financial Services LLC.All rights reserved. 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WWW.STANDARDANDPOORS.COM/RATINGSDIRECT APRIL 4,2019 7 1046, City of Farmington � 430 Third Street Farmington, Minnesota 651.280.6800 - Fax 651.280.6899 141'.a wwwci.farmington.mn.us TO: Mayor, Councilmembers and City Administrator FROM: David McKnight, City Administrator SUBJECT: Josh Wilson DATE: May 20, 2019 INTRODUCTION Josh Wilson has requested some time on the city council agenda as a part of the Highway 3 Corridor Study. He has incorporated this study into one of his class assignments and would like to share his thoughts on the issue. His presentation will exceed to traditional five minutes allowed to residents on an issue. DISCUSSION NA BUDGET IMPACT NA ACTION REQUESTED Hear the presentation made by Mr. Wilson on the Highway 3 Corridor Study. ATTACHMENTS: Type Description D Backup .Material. Josh Wilson Info Wilson 1 Public Discourse • Professor Anderson 16 April 2019 Josh Wilson • Farmington Community Concerns of Minnesota Highway 3 Thesis: The Farmington,MN corridor of Minnesota Highway 3 has hazardous conditions and poses danger for both residents and travelers through the community;with a focus on safety,a . multi-point plan will improve conditions for both drivers and pedestrians that use the Farmington portion of Minnesota Highway 3 as a transportation corridor. I. Minnesota Highway 3 has a history of danger. A. Minnesota Highway 3 is a significant problem in the Farmington community. 1. Multiple connected accidents,high speed limits,and the merge from a 4 to 2 lane highway is a problem for pedestrians and vehicles that travel through the Farmington community(Larson,Personal Interview). a) On February 9,2019,the Farmington Independent reported that a pedestrian was struck by a car while crossing Minnesota Highway 3 in Farmington,MN(Hildreth). b) In May 2016, a motorcyclist,going over the speed limit, collided with an SUV at the intersection of 200th Street and Highway 3 ("Motorcycle crash highlights dangers of Highway 3 near Farmington"). 2. Highway 3 is a minor arterial roadway that carries around 12,700 vehicles per day through Farmington(Wippler,Personal Interview). a) With this amount of traffic going through the community on this roadway,the chances of incidents happening are heightened (Wippler,Personal Interview). 3. Originally,the modern Farmington High School was planned to be built off of Highway 3 until residents shared concerns about the safety of students biking,walking,or driving on the road(S.Wilson,Personal Interview). Wilson 2 4. In the past,Highway 3 was used specifically for commercial purposes and now has business and housing development.This has caused traffic to increase(A. Wilson,Personal Interview). a) Lisa Lippold,resident of Farmington for over 25 years,informs that the city has evolved from a small town of 4,000 people to over 20,000 residents which has caused traffic increase due to population. (Lippold,Personal Interview) 5. After the 2016 road work of signal lights and merging lanes onto Highway 3,there have been numerous accidents, especially at the intersections of County Road 66 and 209th Street(Christensen,Personal Interview). B. Members of the Farmington,MN community have expressed safety concerns and the problem has frustrated city officials due to the avoidance from the State of Minnesota. 1. Minnesota Highway 3 is a state highway which prevents Farmington's ability for change(Kienberger,Personal Interview). a) However,its conditions affect the surrounding community and residents of Farmington(Kienberger,Personal Interview). 2. The issue on Highway 3 is believed to have started after the Farmington 2010 census report due to the large increase in population(Lippold, Personal Interview). a) In 2000,the population of Farmington was estimated to be 12,365 and in 2010,the population was estimated to be 21,086 (Metropolitan Council of Minnesota). b) The rise of population has created Minnesota Highway 3 into a commuter road to Saint Paul,MN for the residents and travelers of Farmington(Kienberger,Personal Interview). 3. The mayor of Farmington,MN,Todd Larson,believes that after the 2016 improvements of signal lights on Highway 3, danger on the highway has increased(Larson,Personal Interview). Wilson 3 4. In 2019, city officials met with Minnesota State Representative Angie Craig's office to express concern of Highway 3 in Farmington(Larson, Personal Interview). a) The state doesn't view the problem as urgent because they have not seen the affects of the 2016 construction improvements(Larson, Personal Interview). 5. The problem on Highway 3 exists,with inattentive driving,in the nearby • community of Rosemount,MN at certain intersections and turns(Tilack, • Personal Interview). a) On September 23,2014,there was a head on collision,caused by • speeding and inattentive driving,with two vehicles at the intersection of Minnesota Highway 3 and Connemara(Hansen). 6. The City of Farmington has developed in partnership with WSB Consultants,however, it will not address the safety concerns of the citizens (Rutherford,Personal Interview), • a) WSB Consultants is a design,consulting,and engineer company that was hired to develop a plan for the Minnesota Highway 3 Farmington Corridor(Maass,Personal Interview). • b) WSB Consultant's main goal,in the plan,is to bring in more business and economic growth with drivers of the commuter Highway 3 road,with safety in mind(Maass,Personal Interview). c) The plan that was created included a reconstruction and construction of buildings along the highway to encourage drivers to stop in Farmington on their commute (Maass,Personal Interview). II. This dangerous road harms the residents of Farmington,both adults and children,and those who travel through the city. A. High speed limits affect the safety of pedestrians and drivers. 1. The speed limit switches back and forth from 45 to 55 on Highway 3 which causes drivers to go over the limit because of their uncertainty with the road laws(S. Wilson,Personal Interview). Wilson 4 a) Fatalities on Minnesota roads increased in 2018 to 6%, of the 380 • deaths, 100 were due to speeding(Beer). 2. The two lane road with high speeds is dangerous, especially during rush hour because vehicles will be too close and often"compete" (C. Gruver, Personal Interview). • 3. Along the road,again,with traffic moving at altering speed limits,a driver • is at risk when leaving establishments or turning onto the highway because the intersections are not clearly marked(S. Wilson,Personal Interview). B. The narrow road is harmful to traveling vehicles. 1. Drivers on this road decide to illegally cross over the side lane marker and pass another car on the narrow shoulder(S. Wilson,Personal Interview). 2. Cars pass others on on the shoulder even though there isn't a shoulder pass lane(Lippold,Personal Interview). C. The road has multiple hidden intersections and turns which are inconveniences for drivers and pedestrians. 1. A majority of the intersections on the highway are either uncontrolled or semi-controlled intersections(Larson,Personal Interview). 2. In an acreage behind the Farmington Ace Hardware,there is a path on private property that drivers will illegally take to access Minnesota Highway 3 (Simmons,Personal Interview). a) Drivers will take this path because there are no other roads that connect to Highway 3 (Simmons,Personal Interview). 3. There is danger with visibility when turning left south-bound on Highway 3 from 213th Street(City of Farmington and WSB Consultants). 4. There are houses and businesses along the highway that drivers abruptly turn onto which causes other cars to stop (C. Gruver,Personal Interview). 5. From the Ace Hardware store,the turn south onto the highway is difficult because of a line of traffic(City of Farmington and WSB Consultants). 6. Often,multiple cars are stopped, on the highway,and in a line to turn onto a single road(G. Gruver,Personal Interview). Wilson 5 D. Pedestrians,especially children are unable to walk safely on or across this road. 1. As mother of young children, and resident near the highway,Hannah will • not allow her kids to travel near Highway 3 because of the fast-moving traffic and inattentive driving(Simmons,Personal Interview). 2. As a regular runner and biker,Heidi informs that it is dangerous to cross the highway to get to her gym,Anytime Fitness (Christensen,Personal Interview). 3. Route options are limited along this road,most people run on the shoulder with the hope that on-coming traffic or drivers will pay attention(Tilack, Personal Interview). • 4. Pedestrians do not have a safe way to access business'on the east side of Highway 3 in multiple places(0. Gruver,Personal Interview). III. The safety issue of Minnesota Highway 3 is caused by the existing road conditions as well as the decisions made by pedestrians and drivers. A. Some drivers decide to go over the speed limit and drive inattentively. 1. The speed limits are too high which causes people to drive inattentively, without paying attention to the surroundings,specifically pedestrians and other vehicles(Larson,Personal Interview). 2. After the death of a Farmington resident,locales expressed their concerns and believe that Highway 3 is a commuter road with heavy traffic in both directions and altering high speeds(Hildreth). 3. With the speed limit changing frequently,most cars do not follow it which causes confusion and danger(D. Gruver,Personal Interview). 4. Along with the road not being well maintained,cars drive too fast, especially around local businesses(0. Gruver,Personal Interview). 5. Inattentive and inexperienced drivers have a difficult time navigating the road(S. Wilson,Personal Interview). 6. Commonly,drivers speed to get ahead of another and abruptly break to turn into various establishments which causes confusion to others(City of Farmington and WSB Consultants). Wilson 6 B. Commonly,pedestrians will cross the highway illegally,not on a crosswalk, or without paying attention. 1. Highway 3 has no pedestrian crosswalks, sidewalks, or bike trails and lanes(A. Wilson,Personal Interview). 2. With a Dairy Queen and Carbone's across the street from each other,kids dart across the street to and from these establishments(A.Wilson, Personal Interview). 3. There are no sidewalks leading to Carbone's or the strip mall which forces people to walk on the side of the road with cars driving at a speed limit of 45 mph right next to them(Christensen,Personal Interview). 4. There is not a safe way to cross the highway as the speed limit is high so people will run across the road between traffic (City of Farmington and WSB Consultants). C. The road conditions cause trouble for drivers during hazardous weather conditions. 1. With poor lighting on the highway and icy roads,the dangers of the road are not visible as well as the ice(A. Wilson,Personal Interview). 2. During moderate rain,from southbound on Highway 3 to Elm Street,there is flooding which causes traffic problems and other dangers(City of Farmington and WSB Consultants). 3. During snowfall on Highway 3,drivers are often conflicted with how narrow and congested the road is in these conditions (City of Farmington and WSB Consultants). D. The road merges which impacts the flow of traffic for travelers and residents. 1. The road is a 4-lane divided road from MN 50 at the southern border to just north of Elm street where it necks down to a single lane undivided road which tends to add the potential for conflicts or accidents at this particular intersection(Wippler,Personal Interview). 2. Highway 3 changes from two lanes to one lane which causes road rage and confusion(City of Farmington and WSB Consultants). Wilson 7 3. The road is narrow and does not have enough lanes to cooperate with the daily traffic(G. Gruver,Personal Interview). 4. The merge of lanes on the highway causes people to not yield to the traffic with the right-of-way,race each other to get ahead,and collide with semi- trucks (City of Farmington and WSB Consultants). a) While driving to work, Olivia experienced cars driving too close to her,especially at the 213th St.merge into a single lane highway (0. Gruver, Personal Interview). 5. Highway 3 is a one-lane road North and South,drivers decided to be overly aggressive and pass other slower drivers but crossing over center line to pass even though it is marked as a not passing zone(S.Wilson, Personal Interview). 6. When heading northbound in the east-most lane the merge down to a single lane is unexpected,especially with turn lanes (City of Farmington and WSB Consultants). IV. The presented plan will address the Highway 3 problem of hazardous driving conditions that affect the safety of pedestrians. A. A multi-step process that will begin with an increase of law enforcement,radar speed limit signs,increased lighting,and eventually a trail system east and west of the highway. 1. The plan will include four steps that will proceed in a specific order so that each can be analyzed. • a) The first step will be increased law enforcement on the highway; this is something that has been absent from the road and will help draw attention to vehicles that are not following the road or driving laws. b) The second step will be a placement of radar speed limit signs which will make drivers aware and attentive to the surroundings as well as speed limits of the highway. c) The third step will be a placement of light posts on both sides of the Highway 3 Corridor to improve visibility for drivers. 1 Wilson 8 d) The fourth step is a creation of a pedestrian trail system on the east and west sides of the highway. 2. The plan will initially be implemented by the City of Farmington for the increase of law enforcement patrol officers. 3. After an analyzation of the impacts of increased patrol officers,the City of Farmington will work with the Minnesota Department of Transportation to establish around 4 radar speed limit signs and around 10 light posts along the Farmington Highway 3 Corridor. a) The radar signs will be placed where the speed limit is unclear and on both directions or sides of the highway. b) The light posts will be placed according to where light is-absent. 4. Then,both the City of Farmington and the Minnesota Department of Transportation will work collectively on a 1.5 mile trail system that will extend from 205th St. to Minnesota Highway 50. 5. The cost of this plan will be determined by the amount of law enforcement,radar speed signs,light posts,and the length as well as labor costs of the pedestrian trail. a) Law enforcement on the highway will depend on the amount of patrol officers and vehicles being used as well as how often the road will be patrolled. • • (1) The median salary and cost of hiring a patrol officer is • $61,050(U.S.News). b) According to the Farmington Community Development Director, Adam Kienberger,a radar speed sign is estimated to cost $4000-5000 each,for the physical sign and the labor to place next to the road,visible for patrons to see while driving(Kienberger, Personal Interview). (1) The total cost for four radar speed signs is around$16,000. c) The light posts are estimated to cost$5000 each and with 10 placed on the highway, a total of$50,000(S.Wilson,Personal Interview). Wilson 9 d) The Farmington Parks and Recreation Director informs that the trail will cost around$75,000 for each mile(Distad,Personal Interview). (1) The total cost of the 1.5 mile trail on both sides of the road • will cost around$225,000 which will include the labor and materials(Distad,Personal Interview). e) The total cost for this plan will be an estimated$302,050 which includes each step. B. A similar plan has been developed in Duluth,MN in regards to pedestrian and bike trail accommodations. 1. The pedestrian trail was created along Minnesota Highway 23 and provided accessibility to the downtown area of Duluth(Minnesota Department of Transportation). 2. The pedestrian trail aided the traffic on Minnesota Highway 23 with the division from the road(Minnesota Department of Transportation). 3. Pedestrians and citizens of the city of Duluth,MN were provided with safe accommodations on the trail(Minnesota Department of Transportation). C. The disadvantage for the City of Farmington's inability to reconstruct the Highway 3 Corridor will be outweighed by advantages. 1. The cost to implement the incremental four-step plan significantly outweighs the wait time for the state to reconstruct highway 3 in totality. a) The plan will be implemented within the next five years rather than the 15-20 years suggested by the State of Minnesota. b) The increased law enforcement,lighting,and signage will improve driver awareness on the highway corridor. c) The trails will provide safety for drivers because pedestrians will be directed off of the highway. 2. The indirect improvements to pedestrian and driver use of the highway corridor will minimize the disadvantage. Wilson 10 a) Drivers will be more attentive to speed limits because of the • increased law enforcement and radar signs when traveling along the highway which will allow pedestrians to cross safely from the trails at existing intersections and crosswalks. (1) Safety signage will minimize confusion and uncertainty for a driver's decisions on the highway while a pedestrian is on an existing crosswalk. b) Pedestrians and drivers will have increased confidence using their designated mode of transportation. D. The multi-step plan has additional benefits. 1. The pedestrian trail will be a significant component and compliment to the current plan that the City of Farmington has developed. a) The pedestrian trail addresses and provides safety for drivers and pedestrians using the Minnesota Highway 3 Corridor. b) With the pedestrian trail,there will be a new connection point to businesses which will allow people to visit in other ways than a vehicle. c) The trail will increase economic activity and attention for bikers that currently or will commute on Minnesota Highway 3. 2. Heavy traffic and confusion will be reduced on Highway 3 because of the increased lighting and pedestrian trail. • • a) Drivers of Highway 3 will be able to view the road clearly and visibly during hazardous weather conditions and at night. b) The pedestrian trail will provide bikers,runners,and walkers of Farmington,MN with an alternative route without the need to enter or cross Highway 3. 3. Law enforcement and radar speed limit signs will create a higher risk for a driver that chooses to speed. a) With patrol officers on the highway,the amount of speeding tickets will increase with the current conditions of the road. Wilson 11 b) The radar speed limit signs will warn drivers of the risks of speeding by blinking when a driver is over the speed limit. 4. The bike and pedestrian trail will accelerate the Farmington 2040 Comprehensive Plan. a) The plan shows numerous trail enhancements for Farmington including the Highway 3 Corridor(City of Farmington). • Wilson 12 Works Cited Beer,Rob. "Minnesota Traffic Deaths Increase 6%in 2018."Farmington Independent,Forum Communications Company,3 Jan. 2019,www.farmingtonindependent.com/news/ accidents/4551213-minnesota-traffic-deaths-increase-6-2018. Christensen,Heidi. Personal interview. 4 March 2019. City of Farmington and WSB Consultants. "Farmington Highway 3 Corridor Plan."Social Pinpoint, Social Pinpoint,Nov.2018,wsb.mysocialpinpoint.com/farmington-highway-3- corridor-plan?_ga-2.22572219.129720824.1551463 863-2139151017.1551463 863#/. City of Farmington. "2040 Comprehensive Plan."City of Farmington, West Corporation,2019, http://www.ci.farmington.mn.us/government/departments/planning_and zoning/ 2040 comprehensive_plan Distisri,Randy. Personal interview. 15 April 2019. Gruver, Cindy. Personal interview. 6 March 2019. Gruver,David.Personal interview. 6 March 2019. Gruver, Grant. Personal interview. 6 March 2019. Gruver, Olivia. Personal interview. 6 March 2019. Hansen,Nathan. "One hurt seriously in Highway 3 crash."Rosemount Town Pages, Forum Communications Company,23 Sep. 2014, https:www.rosemounttownpages.com/news/accidents/3540016-one-hurt-seriously- highway-3-crash. Hildreth,Kara. "Pedestrian Struck,Killed Crossing Highway 3 in Farmington."Farmington Independent,Forum Communications Company, 12 Feb. 2019, Wilson 13 www.far mingtonindependent.com/news/accidents/4569590-pedestrian-struck-killed- crossing-highway-3-Farmington. Kienberger,Adam.Personal interview. 8 March 2019. Larson,Todd.Personal interview. 8 March 2019. LaVigne, Trevor. Personal interview. 4 March 2019. • Lippold,Lisa. Personal interview. 5 March 2019. • • Maass,Eric. Personal interview. 8 April 2019. Metropolitan Council of Minnesota. "Community Profile for Farmington."Metropolitan Council,Metropolitan Council,2017, stats.metc.state.mn.us/profile/detail.aspx? c=02394747. • Minnesota Department of Transportation. "Hwy 23 pavement rehabilitation."Minnesota • Department of Transportation, State of Minnesota,2017,http://wwwdot.state.mn.us/dl/ projects/Hwy23grand/index.html "Motorcycle Crash Highlights Dangers of Highway 3 near Farmington."Fox 9 News,KMSP, May 2016,wwwfox9.com/trafc/motorcycle-crash-highlights-dangers-of-highway-3-in- farmington. Rutherford, Gary.Personal interview. 6 March 2019. • Simmons,Hannah. Personal interview. 8 April 2019. Tilack,Kevin. Personal interview. 6 March 2019. U.S.News. "Patrol Officer Overview." U.S. News, World Report,https://money.usnews.com/ careers/best-jobs/patrol-officer Wilson,Andrea. Personal interview. 4 March 2019. Wilson 14 Wilson, Steve. Personal interview.4 March 2019. Wippler,Tony. Personal interview.26 March 2019. Contact List Adam Kienberger 651-280-6820 Farmington Community Development Director Andrea Wilson Resident of Farmington Cindy Gruver Resident of Farmington David Gruver • Resident of Farmington Eric Maass emaass@wsbeng.com Farmington Highway 3 Corridor Project Manager Gary Rutherford grutherford@farmingtommn.gov Acting Farmington Police Chief Grant Gruver Resident of Farmington Hannah Simmons Member of the Farmington Economic Development Authority Heidi Christensen Resident of Farmington Wilson 15 Kevin Tilack Resident of Farmington Lisa Lippold llippold@farmington.k12.mn.us Resident of Farmington • Olivia Gruver 11110.1111111111111.11116Resident of Farmington Randy Distad . RDistad@fanningtonmn.gov Farmington Parks and Recreation Director Steve Wilson .111.111.111111111111. Former Farmington City Council Member Tony Wippler twippler@farmingtommn.gov Farmington Planning Manager Todd Larson 651-262-7652 Mayor of Farmington,MN • Trevor LaVigne • Resident of Farmington /41-104 j 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: Approve Minutes of the May 6, 2019 City Council Meeting-Administration DATE: May 20, 2019 INTRODUCTION Attached for your review are the minutes from the May 6, 2019 city council meeting. DISCUSSION NA BUDGET IMPACT NA ACTION REQUESTED Approve the minutes of the May 6, 2019 city council meeting. ATTACHMENTS: Type Description D Backup Material May 6, 2019 Minutes CITY OF FARMINGTON CITY COUNCIL MINUTES REGULAR MEETING MAY 6, 2019 1. Call to Order Mayor Larson called the meeting to order at 6:00 p.m. at Fire Station#2. 2. Pledge of Allegiance Mayor Larson led those in attendance in the Pledge of Allegiance. 3. Roll Call Present-Larson, Bernhjelm, Craig, Donnelly and Hoyt Absent-None Staff Present-Administrator McKnight, Fire Chief Elvestad,Assistant Fire Chief Albee,Assistant Fire Chief Fischer, Assistant Fire Chief Schmitz and Fire Captain Price. 4. Agenda Motion by Bernhjelm, second by Donnelly,to approve the agenda as presented. APIF, motion carried. 5. Announcements/Commendations None 6. Citizen Comments a) Tom Berres-19832 Devry Path-Shared with the city council the sounds that he hears during the day from his house. These are sounds that come from a lake, not a pond. 7. Consent Agenda Motion by Bernhjelm, second by Hoyt,to approve the consent agenda: a) Approve Minutes of the April 15, 2019 City Council Meeting-Administration b) Approve Agreement Farmington Preserve Park Basketball Court Surface Improvement Project-Parks c) Approve Farm Lease-Parks d) Approve Easement Agreement with Dakota Electric Association-Public Works May 6,2019 Minutes -1- e) Approve Request to Waive Fees for 2019 Dew Days Celebration-Public Works f) Approve a Professional Services Contract Related to the 2019 Projects-Public Works g) Approve Community Solar Garden Subscription Contract Amendment-Community Development h) Approve Seasonal Hiring-Human Resources i) Approve Position Description and Rating for Deputy Fire Chief-Human Resources j) Approve Hiring Recommendation Engineering-Human Resources k) Approve Bills-Finance APIF, motion carried. 8. Public Hearings None 9. Award of Contract None 10. Petitions, Requests and Communications None 11. Unfinished Business None 12. New Business None 13. City Council Roundtable None Adjourn Motion by Hoyt, second by Bernhjelm,to adjourn the meeting at 6:03 p.m. APIF, motion carried. Respectfully Submitted 2344401 A ivoK.,40,ht May 6,2019 Minutes -2- David McKnight, City Administrator May 6,2019 Minutes -3- /$ i, , City of Farmington ii 430 Third Street oa 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: Approve Minutes of the May 6, 2019 City Council Work Session-Administration DATE: May 20, 2019 INTRODUCTION Attached for your review are the minutes of the May 6, 2019 city council work session. DISCUSSION NA BUDGET IMPACT NA ACTION REQUESTED Approve the minutes of the May 6, 2019 city council work session. ATTACHMENTS: Type Description o Backup Material May 6. 2019 Work Session Minutes CITY OF FARMINGTON CITY COUNCIL MINUTES WORK SESSION MAY 6, 2019 Mayor Larson called the work session to order at 6:05 p.m. Roll Call Present-Larson, Donnelly, Bernhjelm Craig and Hoyt Absent-None Also Present-Administrator McKnight, Fire Chief Elvestad,Assistant Fire Chief Albee,Assistant Fire Chief Schmitz, Assistant Fire Chief Fischer and Fire Captain Price Agenda Motion by Craig, second by Bernhjelm,to approve the agenda. APIF, motion carried. Future Fire Engine Replacements Fire Chief Elvestad and Assistant Chief Fischer reviewed the next two engines scheduled for replacement as a part of the fire department capital improvement plan. These vehicles include Engine 2 which is a 1993 Luverne and Engine 1 which is a 2001 Pierce. Elvestad is proposing to replace Engine 2 in 2021 with a Ladder Truck and replace Engine 1 in 2026 with an engine. The estimated cost at this point are $1,100,000 for a Ladder Truck in 2021 and $1,063,350 for an engine in 2026. Mayor Larson asked why the department would need a ladder truck. Elvestad shared the reasoning for the request including how it is safer than sending people into a building and the safer approach of fighting the fire from above. In addition, with today's home construction material fires burn much faster than in the past. Fisher shared that the Lakeville ladder truck has been in Farmington 30 times in the past five years. In addition,the city has received ladder support from other communities as well. Councilmember Bernhjelm asked if we could partner with another city purchasing an engine at the same time to save money. Fire staff shared information on the HGAS program the city is a part of that purchases trucks through a cooperative program. Staff will look into the duel city question as well. May 6,2019 Work Session Minutes -1- Councilmember Donnelly asked how many engines are needed at each station. Elvestad explained the approach and reasoning behind having two engines at each station. After additional discussion, the consensus of the city council was to support the purchase of a ladder truck in 2021 or when economically feasible and the purchase of another engine in 2026. Fire Response Issues and Future Options Fire Chief Elvestad shared that national trends in the volunteer and paid on-call fire service have changed over the past decade. Firefighters are harder to recruit and retain. Many firefighters also work outside of the city during daytime hours and daytime response has been an issue. Fire staff reviewed the advantages and disadvantages of duty crews,fire brigades and full time staff approach to fire department staffing. A video of a house fire was shown to provide an example of the speed at which homes burn compared to response times to fires. Elvestad explained how the department is going to do a trial run of duty crews during three community events this year. Councilmember Bernhjelm stated that charging these costs back to events in the future should be considered. Councilmember Craig asked how many firefighters serve on a duty crew shift in other cities. Elvestad stated it is typically two or three. Councilmember Hoyt shared thoughts on the approach including the risks of the approach in terms of where they are staffed versus where calls from. The city council appreciated the information on this topic. They were supportive of the test fun for duty crews. Fire Stations Study Fire Chief Elvestad asked the city council to perform a study on the current and future uses and placement of fire stations. Staff has worked with BKV Group to provide a proposal for a full scale study of operational assessments of the current stations, fire station location analysis to be based off response times and staffing trends, space programming to identify the current and future space needs, concept May 6,2019 Work Session Minutes -2- planning with future fire station locations and current station upgrades, cost estimates to begin budgeting for future needs, implementation schedule and financial planning. The full cost of the study is $14,000 and a not to exceed reimbursable allows of$500. Councilmember Craig asked how you determine a possible location for a third fire station. Elvestad stated at this point they use the 2040 Comp Plan and growth projections. Councilmember Bernhjelm was concerned about performing a study and then having no financial resources to follow through on the recommendations. Other councilmembers agreed with this as well. Councilmember Hoyt preferred to use these potential dollars for duty crew work, work on developing a financial plan for this issue, use fire staff's knowledge for now and perform the study when appropriate. The consensus of the city council was to complete the duty crew test this year, include the fire station issue in the financial plan and perform the station location study when appropriate. The city council thanked the fire officers for their time and thoughts. City Administrator Update Administrator McKnight updated the city council on: ✓ July 1/July 8 city council meeting schedule, the July 1st meeting will be cancelled ✓ Reminded the city council of the joint city council/school board meeting scheduled for July 15th ✓ Shared that the 2020 budget development process has started at the department head level ✓ Reminded the city council that they will receive an update on the Bike/Ped Plan on Monday, May 20, 2019 at 6:00 p.m. ✓ Asked the city council if they had any interest in purchasing or renting the property at 202 Oak Street. The city council did not have any interest at this time. Adjourn Motion by Hoyt, second by Bernhjelm,to adjourn the meeting at 7:33 p.m. APIF, motion carried. May 6,2019 Work Session Minutes -3- Respectfully Submitted David McKnight, City Administrator May 6,2019 Work Session Minutes -4- 44446, City of43oFarmington 116/4LY‘'6. 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: Approve Minutes of the May 13, 2019 City Council Work Session-Administration DATE: May 20, 2019 INTRODUCTION Attached for your review are the minutes of the May 13, 2019 city council work session. DISCUSSION NA BUDGET IMPACT NA ACTION REQUESTED Approve the minutes of the May 13, 2019 city council work session. ATTACHMENTS: Type Description D Backup Material May 13, 2019 Work Session Minutes CITY OF FARMINGTON CITY COUNCIL MINUTES WORK SESSION MAY 13, 2019 Mayor Larson called the work session to order at 6:00 p.m. Roll Call Present-Larson, Donnelly, Bernhjelm Craig and Hoyt Absent-None Also Present-Administrator McKnight, Public Works Director Gehler, Community Development Director Kienberger, Police Chief Rutherford, Planning Manager Wippler, Parks and Recreation Director Distad and Attorney Kendall. Agenda Motion by Bernhjelm, second by Hoyt,to approve the agenda. APIF, motion carried. Mystic Meadows Outlots Public Works Director Gehler reviewed the encroachment issue in the Mystic Meadows neighborhood that the city council has been discussing the past few months. At the February and March work sessions the city council discussed and gave direction to city staff to acquire the outlots in this development through purchase. A neighborhood meeting was held on April 23, 2019 to gather resident input on how to address the residents use of the outlots with the city's stormwater management obligations. The city received 76 comments from 50 property owners along with a petition signed by 173 residents representing 56 properties. The common theme from the resident comments included: 1. Retain recreational use of the lake 2. Need to control willows 3. Need to replace walking path 4. Allow adjacent property owners to have access from their property 5. Allow property owners to maintain the buffer areas 6. Allow adjacent property owners to have docks/floating platforms 7. Deed the property to adjacent land owners 8. Maintain or grandfather in existing improvements 9. Public access/city fishing platform May 13, 2019 Work Session Minutes -1- 10. Keep the pond/lake natural. Remove unnatural landscape (beaches, docks, etc.) 11. City does not have a good track record of maintaining natural areas Several of the themes are supported through existing city codes, policies or standard operating procedures. Councilmember Donnelly asked if the 11 issues were ranked or the most common. Gehler stated they are the most common. Maintain Recreational Uses Based on community input, residents are utilizing the pond and buffer for a variety of recreational uses including swimming, boating, fishing and winter skating. None of these recreational activities are restricted. Staff is not recommending any changes to these types of recreational uses. It should be noted that given the primary function storm water ponds provide, water quality testing is not completed to ensure it is safe for recreational use. Maintain Access to the Pond from Individual Properties The city has historically allowed property owners adjacent to a pond to access the pond through a mowed strip up to 10 feet in width. Staff is not recommending any changes to this operational procedure. Maintenance of Trails The preliminary trail replacement plan funding provides for replacement of 1,800 feet of trail in 2020. There is approximately 1,300 feet of trail along the pond recommended for replacement at an estimated cost of$65,000. Ahead of the trail work, willow control should be completed. Maintenance of Pond Buffers Pond buffer maintenance is looked at two separate ways. Maintenance of the areas easily accessible through public property and the other areas that cannot be accessed without going on private property. Councilmember Craig asked if there are methods to treat the willows that are not toxic. Gehler stated there are sprays made to be used around water. Gehler reviewed the staff proposal to replace buffer signs around the pond. Mayor Larson asked if a survey would be required. Gehler stated we would first look to find property pins. May 13, 2019 Work Session Minutes -2- Gehler reviewed the four levels of encroachments that exist in the city and around this specific pond. Councilmember Bernhjelm clarified that decisions made tonight apply to all city properties and we need to be consistent and enforce the city code. She thought the encroachments should be removed and the city should work with the residents on buffer maintenance issues. Asked what about the next property owner who builds on city property. Councilmember Donnelly is not completely sold that taking a black and white approach was the right approach. He felt the city has some responsibility for this situation even if we did not own the land. Councilmember Hoyt agreed with the not hurting property owners approach but worried about other city properties. The city has some culpability in this situation. Mayor Larson stated that this issue is not one person's fault, we cannot go back and change the past and was trying to use common sense on this issue. Councilmember Craig was concerned about those neighbors who have followed the rules and not built in the buffer. She could only support this with some type of sunset clause. The city council held a lengthy discussion on a variety of issues related to this topic including public fishing piers, docs/swimming platforms, beaches, encroachment agreements, water quality, the impact of this decision on all public properties that abut private property, setting precedence, storage of items on buffers, city liabilities and immunities, being consistent in the enforcement of our codes, beaches, level one and two encroachments,grandfathering of current encroachments,the ability to enforce decisions made on this issue, sun setting as a part of encroachment agreements and more. Many residents shared their thoughts and asked questions of the city council throughout the work session. Community Development Director Kienberger asked the city council to keep enforceability in mind on these decisions. Most of the items being discussed are not included in the city code. City councilmembers had different opinions on all issues but a consensus of a majority of the city councilmembers on this issue included: 1. Recreational activity is allowed on the pond, no motors of any kind are allowed. 2. A 10 foot mowed path to allow access to the water is allowed. 3. Willow control will occur in 2019, path repair will be planned for in 2020. May 13, 2019 Work Session Minutes -3- 4. A guidance document for community education on buffers will be developed. 5. Buffer signage will be replaced in the Mystic Meadows development. 6. A communication plan on the appropriate work that can be done in the buffers will be created. 7. No storage is allowed in the buffers. 8. Docs/swimming platforms are allowed and an encroachment agreement will be developed by the city attorney for those with docs. Docs must be removed each fall. 9. A ten-foot beach will be allowed,those beaches that are currently larger than 10 feet should be reduced to ten feet. 10.The city and the neighbors will work together on willow removal. 11. Level one and two encroachments will be dealt with individually. An encroachment agreement will be developed by the city attorney. The city council direction was to have the encroachments removed upon sale of the property or the end of the lift cycle of the encroachment, whichever occurs first. 12. No new encroachments are allowed in any city buffer. Councilmember Bernhjelm did not support the approach taken by a majority of members due to concerns about consistent enforcement throughout the community,treating this property different than other city owned property and the future impact on the city. Flagstaff Snow Fence Review This issue will be brought back to a future city council work session. County Road 50 Utility Assessments Public Works Director Gehler reviewed with the city council two projects to extend water and sewer along County Road 50 from Akin Road to Pilot Knob Road in the late 1980's. The cost of the improvements were assessed to benefitting properties. Areas within the first phase of the industrial park and Northern Natural Gas were assessed along with the agriculture properties south of County Road 50. Given the green acres of the southern properties, the assessments were deferred until development while continuing to accrue interest at a rate over 8%. There is one parcel from the original assessment roll that is continuing to accrue interest on a deferred basis. This parcel is 80 acres located west of the Vermillion River Crossings development and was assessed a total of$192,000 for both projects. Given the time that has passed and the continued accrual of interest,the current amount of the assessment is$682,000 that will be due upon sale or development of the parcel. This amount has raised concerns when put in context with other fees that are charged with development. For this 80-acre parcel, area charges for sewer and water that will be paid at the time of platting would be on the order of$500,000. May 13, 2019 Work Session Minutes -4- Councilmembers debated the merits of removing the assessment now or in the future when we are approached by a potential buyer. All city councilmembers supported making the future development of the property as easy as possible and hoped for it to occur as soon as possible. A majority of the city council supported moving forward with the process to remove the assessments now. City Administrator Update None. Adjourn Motion by Bernhjelm, second by Craig,to adjourn the meeting at 9:19 p.m. APIF, motion carried. Respectfully Submitted David McKnight, City Administrator May 13, 2019 Work Session Minutes -5- y��A �''�► City of Farmington �_ 430 Third Street Farmington, Minnesota 651.280.6800 -Fax 651.280.6899 '' .,MOO" www.ci.farmington.mn.us TO: Mayor, Councilmembers and City Administrator FROM: David McKnight, City Administrator SUBJECT: Approve 2020 ALF Budget-Administration DATE: May 20, 2019 INTRODUCTION The joint powers agreement of the Apple Valley-Lakeville-Farmington Ambulance(ALF) states that on or before July 1 of each year, the annual operating budget for the following calendar year as recommended by the Board shall be submitted to each member City Council for approval or disapproval. DISCUSSION The 2020 draft ALF is included for your review. The draft budget was approved by the ALF Executive Committee and Board of Directors at their meetings in April and May of this year. The budget is very similar to the 2018 and 2019 budgets. A fund balance is intentionally left in the budget each year to deal with any issues that would arise with the ambulance license held by the three cities. BUDGET IMPACT The ALF budget does not impact the city budget. ACTION REQUESTED Ask any questions you may have on the proposed budget. Once the city council is comfortable, a motion should be made to approve the 2020 ALF budget. ATTACHMENTS: Type Description D Cover Memo Draft 2020 ALF Budget S7AMEDICApril 25,2019 Item No. Proposed 2020 Budget Proposed Action Consideration of the proposed 2020 Budget. Overview The Joint Powers Agreement states "On or before July 1 of each year, the annual operating budget for the following calendar year as recommended by the Board shall be submitted to each member City Council for approval or disapproval" The statute of limitations on the collection of outstanding debts has been reached and therefore all collection activity has been suspended indefinitely. All accounts at the collection agency had been closed for a couple years and those accounts have now been removed from the State of Minnesota's Revenue Recapture program. Going forward the only revenues anticipated are from the three townships and investment returns. If approved, the Budget will be forwarded to each respective City Council for their consideration of approval. 2018 2019 2019 2020 Actual Adopted Estimate Proposed Additions Townships $ 1,500 $ 1,500 $ 1,500 $ 1,500 Interest on investments 1,367 2,400 2,400 2,400 Total additions 2,867 3,900 3,900 3,900 Deductions Expenses Other 180 800 800 800 Total deductions 180 800 800 800 Net changes in cash before distributions 2,687 3,100 3,100 3,100 Distribution of cash Apple Valley - - - - Lakeville - - - - Farmi ngton - - - - Total distribution of cash - - - - Net changes in cash position 2,687 3,100 3,100 3,100 Cash balance,January 1 185,320 186,715 188,007 191,107 Cash balance, December 31 $ 188,007 $ 189,815 $ 191,107 $ 194,207 ,ti ► ,t, City of Farmington (tivlUt 430 Third Street Farmington, Minnesota 651.280.6800 -Fax 651.280.6899 .4 PRW►fi www.ci.farmington.mn.us TO: Mayor, Councilmembers and City Administrator FROM: Cynthia Muller,Administrative Assistant SUBJECT: Accept Resignation Water Board-Administration DATE: May 20, 2019 INTRODUCTION A member of the Water Board has resigned. DISCUSSION Mr. Stephen Gassert has submitted his resignation from his position on the Water Board effective May 15, 2019. His term on the board runs through January 31, 2020. A copy of his resignation is attached. BUDGET IMPACT N/A ACTION REQUESTED Accept the resignation of Stephen Gassert from the Water Board effective May 15, 2019. ATTACHMENTS: Type Description D Exhibit Resignation Cindy Muller From: Katy Gehler Sent: Wednesday, May 15, 2019 8:17 AM To: Cindy Muller Cc: David McKnight Subject: FW:Waterboard Resignation Katy, I have taken a new job that will require me to move out of the Farmington area. I will be resigning from the water board effective 5/15 as I will be unable to make this months meeting. Thank You, Stephen Gassert 1 ,,Q�� Ri „ City of Farmington rY p 430 Third Street Farmington, Minnesota 651.280.6800 -Fax 651.280.6899 ' ,#,,mss' www.ci.farmington.mn.us TO: Mayor, Councilmembers and City Administrator FROM: Cynthia Muller,Administrative Assistant SUBJECT: Approve a Temporary On-Sale Liquor License for Farmington Liquors-Community Development DATE: May 20, 2019 INTRODUCTION Farmington Liquors is requesting a temporary on-sale liquor license for a wine tasting event to be held June 12, 2019. 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 12, 2019. ATTACHMENTS: Type Description ❑ Exhibit Application Minnesota Department of Public Safety � Alcohol and Gambling Enforcement Division i 445 Minnesota Street,Suite 222,St.Paul,MN 55101 651-201-7500 Fax 651-297-5259 TTY 651-282-6555 , Mf:vs. <ti:.�. or.tnittt,t rr�t u„r,.�iti;,:,nrc:l APPLICATION AND PERMIT FOR A'I DAY Aloohal&�Oambling Enforcement TO 4 DAY TEMPORARY ON-SALE LIQUOR LICENSE Name of organization Date organized Tax exempt number Farmington Liquors 41-6005151 Address City State Zip Code 109 Elm Street Farmington Minnesota 55024 Name of person making application Business phone Home phone Cindy McMillen-cmcmillen@FarmingtonMN.gov 651-280-6885 Date(s)of event Type of organization June 12, 2019 ❑Club ❑Charitable 0 Religious ❑Other non-profit Organization officer's name City State Zip Code Blair Peterson Farmington Minnesota 55024 Organization officer's name City State Zi Code Minnesota Organization officer's name City State Zt Code Minnesota j Organization officer's name City State Zip Code Minnesota ! j Location where permit will be used. If an outdoor area,describe, ,345 ©Qk s-/". ec+ 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 CRY 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 Email 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 'a �► City of Farmington W a 430 Third Street imi Farmington, Minnesota 651.280.6800 -Fax 651.280.6899 Ill"'4 POwww.ci.farmington.mn.us TO: Mayor, Councilmembers and City Administrator FROM: Tony Wippler, Planning Manager SUBJECT: Approve Ordinance Amendment Regarding Number of Allowed Dogs-Community Development DATE: May 20, 2019 INTRODUCTION Attached, for city council consideration is an ordinance amendment to Title 6, Chapters 2 and 3 as they relate to dogs and kennels, respectively. DISCUSSION The attached ordinance amendment revises Section 6-2-14 to increase the number of allowed dogs from two to three. The proposed ordinance amendment also amends Section 6-3-1 changing the definitions for both Commercial Kennels and Residential Hobby Kennels to an establishment where four or more dogs are being kept. Current definitions state establishments where three or more dogs are being kept. The proposed changes reflect similar language as our neighboring communities. Current city code allows for a maximum of two dogs (up to four if certain circumstances exist). The keeping of three or more dogs under this current code require a kennel license be approved. Commercial Kennels and Residential Hobby Kennels are conditionally allowed only in certain zoning districts (B-1, B-3, IP and I-1 for Commercial Kennels; and A-1 for Residential Hobby Kennels). Planning Commission Review and Public Hearing The Planning Commission reviewed the proposed ordinance, in draft form, at its regular meeting on April 9, 2019 and directed staff to prepare the ordinance for a public hearing. The Commission held the public hearing on May 14, 2019 and took public testimony on the proposed amendment. The Planning Commission recommended approval of the ordinance amendment with a vote of 3-0. BUDGET IMPACT NA ACTION REQUESTED Adopt the attached ordinance amendment to Title 6, Chapters 2 and 3 as they relate to dogs and kennels, respectively. ATTACHMENTS: Type Description D Ordinance Dog Ordinance CITY OF FARMINGTON DAKOTA COUNTY,MINNESOTA ORDINANCE NO. 019-746 AN ORDINANCE AMENDING TITLE 6 CHAPTERS 2 AND 3 AS THEY RELATE TO DOGS AND KENNELS RESPECTIVELY THE CITY COUNCIL OF THE CITY OF FARMINGTON ORDAINS: SECTION 1.Title 6, Chapter 2 of the Farmington City Code, is hereby amended by adding the underlined language and removing the striketlifeugh language as follows: 6-2-1 : LICENSE REQUIRED: (A)No person shall own,keep or harbor any dog over the age of four(4)months within the city unless a license has first been secured. Licenses shall be issued by the clerk for such fees as shall be set forth by the city council from time to time. It shall be the duty of each person owning,keeping or harboring a dog to pay a license fee imposed by this section to the clerk on or before January 1 of each year, or upon acquiring ownership or possession of any unlicensed dog, or upon establishing residence in the city to forthwith pay such license fee'. (B)At any time when a license is purchased as a result of enforcement action, an enforcement penalty fee shall be imposed, as established by the city council, in addition to the regular licensing fee. (Ord. 015- 698, 6-15-2015) 6-2-2 : RECEIPTS FOR LICENSES: Upon payment of the license fee,the clerk shall execute a receipt in duplicate,the original of which shall be delivered to the person who pays the fee and the duplicate retained in the records of the city. The receipt shall describe the dog as to breed and age. (Ord. 015-698, 6-15-2015) 6-2-3 : TAGS: The clerk shall also procure a sufficient number of suitable metallic tags,the shape and/or color of which shall be different for each license year.The clerk,or designated representative, shall deliver one appropriate tag for each dog to the owner when the license fee is paid. The owner shall cause said tag to be affixed by a permanent metal fastener to the collar of the dog so licensed in such a manner so that the tag may easily be seen by police officers of the city. The owner shall see to it that the tag is constantly worn by such dog. (Ord. 015-698, 6-15-2015) 6-2-4 : DOG POUND: The council shall from time to time designate a place as city dog pound where suitable arrangements are made for keeping and maintaining any dogs which may be seized or taken into custody by any officer of the city pursuant to this chapter. (Ord. 015-698, 6-15-2015) 6-2-5: IMPOUNDING OF UNLICENSED DOGS: If the dog is licensed,officers will attempt to contact the owner and return the dog. If the dog is unlicensed, officers will transport the dog to Castle Rock Kennels. The dog will remain there until the owner is contacted or for five(5)days,whichever is shorter. The city is responsible for housing fees on those dogs. Identified pet owners are responsible for fees on boarding their pets when they are located. (Ord. 015-698,6-15-2015) 6-2-6: REDEMPTION OF IMPOUNDED DOGS: If the dog is unlicensed and no owner is located within five(5)days,Castle Rock Kennels will look for alternative placement or adoption. (Ord. 015-698,6-15-2015) 6-2-7: DISPOSAL OF UNREDEEMED DOGS: Any dog which is not claimed as provided in section 6-2-6 of this chapter within five(5)days after impounding may be sold by the dogcatcher according to the agreement and the fees so received retained by the city. (Ord. 015-698,6-15-2015) 6-2-8: DANGEROUS DOGS: (A)Definitions: DANGEROUS DOG: 1.Any dog that has: (a)Without provocation, inflicted substantial bodily harm on a human being on public or private property; (b)Killed a domestic animal without provocation while off the owner's property; or (c)Been found to be potentially dangerous,and after the owner has notice that the dog is potentially dangerous,the dog aggressively bites,attacks,or endangers the safety of humans or domestic animals. 2.A dog shall not be declared a"dangerous dog" if the threat,injury, or damage was sustained by a person: (a)Who was committing, at the time, a wilful trespass or other tort upon the premises occupied by the owner of the dog; (b)Who was provoking,tormenting,abusing, or assaulting the dog or who can be shown to have repeatedly, in the past,provoked,tormented,abused,or assaulted the dog; or (c)Who was committing or attempting to commit a crime. POTENTIALLY DANGEROUS DOG:Any dog that: 1. When unprovoked, inflicts bites on a human or domestic animal on public or private property; 2. When unprovoked, chases or approaches a person, including a person on a bicycle,upon the streets, sidewalks, or any public or private property, other than the dog owner's property, in an apparent attitude of attack; or 3. Has a known propensity,tendency, or disposition to attack unprovoked, causing injury or otherwise threatening the safety of humans or domestic animals. (B)Registration Required:All dangerous dogs must be registered with the city. The city shall issue a certificate of registration to the owner of a dangerous dog if the owner presents sufficient evidence that: 1.A proper enclosure exists for the dangerous dog as required under this section and a posting on the premises with a clearly visible warning sign as required under this section, including a warning symbol to inform children that there is a dangerous dog on the property; and 2.A surety bond issued by a surety company authorized to conduct business in this state in a form acceptable to the city in the sum of at least fifty thousand dollars($50,000.00),payable to any person injured by the dangerous dog,or a policy of liability insurance issued by an insurance company authorized to conduct business in this state in the amount of at least fifty thousand dollars ($50,000.00),insuring the owner for any personal injuries inflicted by the dangerous dog. Such insurance policy shall provide that no cancellation of the policy will be made unless ten(10)days' written notice is first given to the city clerk. At the time of registration,the city shall provide to the owner of the dangerous dog for posting on the owner's property a copy of a warning symbol to inform children that there is a dangerous dog on the property. (C)Fees: 1. Registration: The city shall charge an annual registration fee,in addition to any regular dog licensing fees,which amount shall be set by resolution of the city council from time to time. 2. Warning Symbols: The city shall charge a fee for warning symbols provided to owners of dangerous dogs for posting on their property,which amount shall be set by resolution of the city council from time to time. (D)Requirements: Owners of dangerous dogs within the city shall comply with the following: 1. Tag:A dangerous dog must have a standardized,easily identifiable tag identifying the dog as dangerous and containing the uniform dangerous dog symbol required by the city affixed to the dog's collar at all times. 2. Confinement: All dangerous dogs shall be securely confined indoors or in a securely enclosed and locked pen or kennel, except when leashed and muzzled as required under this section. Such pen, kennel, or structure must have secure sides and a secure top attached to the sides.All structures used to confine dangerous dogs must be locked with a key or combination lock when such animals are within the structure. Such structure must have a secure bottom or floor attached to the sides of the pen or the sides of the pen must be embedded in the ground no less than two feet(2').All structures erected to house dangerous dogs must comply with all zoning and building regulations of the city.All such structures must be adequately lighted and ventilated and kept in a clean and sanitary condition. 3. Leash And Muzzle:No person shall permit a dangerous dog to go outside its kennel or pen unless such dog is securely leashed with a leash no longer than four feet(4')in length.No person shall permit a dangerous dog to be kept on a chain,rope or other type of leash outside its kennel or pen unless a person is in physical control of the leash. Such dogs may not be leashed to inanimate objects such as trees,posts,buildings, and the like. In addition,all dangerous dogs on a leash outside the animal's kennel or pen must be muzzled by a muzzling device sufficient to prevent such dog from biting persons or other animals. 4. Confinement Indoors:No dangerous dog may be kept on a porch,patio or in any part of a house or structure that would allow the dog to exit such building on its own volition. In addition,no such dog may be kept in a house or structure when the windows are open or when screen windows or screen doors are the only obstacle preventing the dog from exiting the structure. (E)Law Enforcement Exemption: The provisions of this section do not apply to dangerous dogs used by law enforcement officials for police work. (F)Confiscation: 1. Seizure: The city shall immediately seize any dangerous dog if: (a)After fourteen(14)days after the owner has notice that the dog is dangerous,the dog is not validly registered under this section; (b)After fourteen(14)days after the owner has notice that the dog is dangerous,the owner does not secure the proper liability insurance or surety coverage as required under this section; (c)The dog is not maintained in the proper enclosure;or (d)The dog is outside the proper enclosure and not under physical restraint of a responsible person as required under this section. 2. Reclaimed: An owner may reclaim a dangerous dog seized under this section by paying impounding and boarding fees and presenting proof to the city that the requirements of this section have been met. The city may dispose of a dog that is not reclaimed within seven(7)days and the owner is liable to the city for costs incurred in confining and disposing of the dog. 3. Subsequent Offenses: The city shall seize any dog where a person has been convicted of a misdemeanor for violating Minnesota Statutes Annotated 347.51 or 347.52,and the person is charged with a subsequent violation relating to the same dog. If the person is convicted of the crime for which the dog was seized,the city will destroy the dog in accordance with the order of the court and the owner shall pay the cost of confining and destroying the animal. If the person is not convicted of the crime for which the dog was seized,the dog may be reclaimed pursuant to subsection(F)2 of this section or disposed of within seven(7)days if unclaimed. (Ord. 015-698,6- 15-2015) 6-2-9: BARKING DOGS: It shall be unlawful for any person to own, harbor,keep or have in his/her possession or on his/her premises any dog,which by loud and frequent barking,howling, or yelping shall cause noise, disturbance or annoyance to persons residing in the vicinity thereof (Ord. 015-698,6-15-2015) 6-2-10: TRESPASSING BY DOGS: It shall be unlawful for any person who owns,harbors,or keeps a dog, or the parents or guardians of any such person under twenty one(21)years of age,to allow such dog to stray or trespass upon the premises of any other person to the latter's damage or annoyance. (Ord. 015-698,6-15-2015) 6-2-11: RUNNING AT LARGE PROHIBITED: It shall be unlawful for any person owning, possessing or harboring any dog,or the parents or guardians of any such person under twenty one(21)years of age,to allow such dog to run at large within the urban districts of the City, or within the rural districts of the City if said dog can be classified a public nuisance as set forth in section 6-2-12 of this chapter.All dogs within the urban districts,not confined within an enclosure shall be kept on a leash securely fastened or held so as to prevent the dog from running at large. A dog within the urban districts shall be deemed to be running at large if the same is off the premises of the person who owns,harbors or keeps said dog and not under the control of such person or some other person designated by him/her, either by leash, cord or chain. (A)The rural district shall include all platted and unplatted land presently within the limits of the City,or hereinafter annexed thereto,which are not developed for commercial, industrial or urban residential purposes. Land in rural districts must be open,rural in character and maintained generally in farm crops,pasture land,seeded or diverted acreage. (B)The urban district shall include all other lands within the limits of the City,or such lands hereinafter annexed,which are not within the rural districts. (Ord. 015-698, 6-15-2015) 6-2-12: DOGS AS PUBLIC NUISANCES: It shall be unlawful for the owner or custodian of any dog within the corporate limits of the City of Farmington,whether permanently or temporarily therein,to permit such dog from committing any act which constitutes a nuisance. It shall be considered a nuisance for any dog to habitually or frequently bark or howl,to run at large,to trespass,to perform lewd acts or annoy any person, or to defile or destroy any property,public or private.Unrestrained dogs,or those dogs considered a nuisance, may be taken by the dogcatcher, any law enforcement officer of the City and by other persons designated by the City to assist in the enforcement of this chapter and be impounded. Such officers shall have the right to enter upon premises,whether public or private,for the purpose of impounding an animal which constitutes a nuisance. (Ord. 015-698,6-15-2015) 6-2-13: QUARANTINE: Whenever any person owning,possessing or harboring any dog within the corporate limits of the City shall learn that such dog has bitten any human being, such person shall immediately impound said dog in a place of confinement where it cannot escape or have access to any human being or other animal and shall also immediately notify the Chief of Police. Whenever the Chief of Police shall learn that any human being has been bitten by any dog within said City,he/she shall ascertain the identity of such dog and the person owning,possessing or harboring it and shall immediately direct such person to forthwith impound such dog as herein required. Any dog so impounded shall be kept continuously so confined for a period of fourteen(14)days from the day the dog bit a human being. Upon learning that a dog has bitten a human being,the Chief of Police shall immediately notify the Health Officer and inform him/her of the place where the dog is impounded. It shall be the duty of the Health Officer to inspect the said dog from time to time during its period of fourteen(14)days' confinement and to determine whether such dog is infected with rabies. For this purpose he/she shall have access to the premises where such dog is kept at all reasonable hours and may take possession of the dog and confine it in the City dog pound or other suitable place at the expense of the owner. The owner or person in possession or harboring such dog shall immediately notify the Health Officer of any evidence of sickness or disease in the dog during the period of confinement and shall promptly deliver its carcass to the Health Officer in case of its death during said period. (Ord. 015-698,6-15-2015) 6-2-14: LIMITATION OF DOGS ON PREMISES: (A)Limits: It shall be unlawful for the owner of any parcel of land within the corporate limits of the City of Farmington to own,keep or harbor, or allow to be owned,kept or harbored on said parcel more than two(2r)three(3)dogs, unless a license and conditional use permit for a commercial kennel or residential hobby kennel has been secured. For purposes of this section"owner" shall be any person, firm, partnership, corporation, shown to be such on the record of the Dakota County auditor or Dakota County Treasurer.For purposes of this section, "parcel of land" shall mean that portion of land intended as a unit of ownership to which the Dakota County auditor or Dakota County Treasurer has assigned a parcel number. (B)Exception: The owner of a parcel of land in the City of Farmington shall be allowed to own and keep up to a maximum of four(4)dogs on a temporary basis under the following conditions: 1.All dogs shall have been owned prior to residency in the City. 2.All dogs kept under provision of this section shall be unsexed as documented by a veterinarian's certificate. 3. All dogs kept under provisions of this section shall be sheltered within the primary residence on the parcel of land. 4. Dogs shall be allowed outdoors only on the owner's property and secured within a fenced perimeter. 5.All owners keeping dogs under provisions of this section shall come into compliance with subsection(A)of this section through attrition. (C)Fees: The owner of a dog licensed under the provisions of subsection(B)of this section shall be required to pay an annual fee for each dog over that number authorized in subsection(A)of this section. The Farmington City Council shall,by resolution, establish the amount of the fee required. (Ord. 018-736,3-19-2018) 6-2-15: DOG SHELTERS: It shall be unlawful for any person to erect or maintain on the premises which he/she occupies any type of shelter or other place of confinement in which animals are kept closer than ten feet(10')of the adjoining property line.(Ord. 015-698, 6-15-2015) 6-2-16: RABIES VACCINATION: No person shall own,keep or harbor any dog over the age of four(4)months within the City unless the dog has been vaccinated for rabies.At the time a license is issued,the owner of the dog shall provide proof that the dog being licensed has been vaccinated against rabies within the previous thirty six(36) months. (Ord. 015-698,6-15-2015) SECTION 2. Title 6,Chapter 3 of the Farmington City Code, is hereby amended by adding the underlined language and removing the str4kcthrough language as follows: 6-3-1: DEFINITIONS: For the purposes of this chapter,the following terms shall have the meanings herein ascribed to them: KENNEL,COMMERCIAL:Any place where three(3)four(4)or more dogs(male or female)over six (6)months of age, or more than ten(10)cats(male or female)over six(6)months of age, or more than ten(10)ferrets(male or female)over six(6)months of age, or any combination thereof,not including offspring under seven(7)months of age, are commercially kept,boarded,trained or offered for sale except when located in a pet shop or animal clinic.A kennel may include secured outdoor runs and/or play areas. KENNEL,RESIDENTIAL HOBBY: Any building, structure, enclosure or premises located on a residentially used property where tree-(3)four(4) or more dogs(male or female)over six(6)months of age are kept or maintained. (Ord. 018-736, 3-19-2018) 6-3-2: LICENSE REQUIRED: (A)Requirements:Any person desiring to operate and maintain a commercial kennel or residential hobby kennel within the City shall be required to obtain the required license therefor from the Clerk of the City. The license application shall state the name and address of the kennel owner,the type of kennel, the location of the kennel,and the number of animals proposed to be kept. The license to operate a commercial or residential hobby kennel shall be for one year and expire on December 31 of each year. The fee for said license shall be as set by the Council from time to time. In addition to the license required herein,the applicant for a commercial kennel license and residential hobby kennel must also secure a conditional use permit when locating in the A-1 (residential hobby kennels only),B-1, B-3, I-I,or IP Zoning Districts. Each kennel license shall be posted conspicuously on the premises where said kennel is located. Every kennel shall be kept at all times in a clean and sanitary condition and the animals shall be reasonably restrained from annoying the neighborhood or the general public. The Council,or its authorized representative, shall have the right of entry for inspection of said premises at all reasonable hours. (B) Standards: Commercial kennels are subject to the following standards: 1.An enclosed exercise area shall be provided to accommodate the periodic exercising of dogs boarded at the facility.Any outdoor exercise area must be fenced to a minimum height of four feet (4'). In cases where the fencing is not one hundred percent(100%)opaque a three foot(3') vegetative buffer must also be provided along said fence.Any outdoor exercise area must be maintained in a clean and sanitary condition at all times.All solid waste must be removed a minimum of once per day and the solid waste shall not be allowed to enter a stormwater facility or storm sewer.No dogs shall remain unattended in an outdoor exercise area. 2. In a multi-tenant building,the kennel facility must have a ventilation system that prohibits the transmission of odors or organisms between tenant bays. The ventilation system must be capable of completely exchanging internal air at a rate of 1.00 cfm/square foot of floor space per area dedicated for the keeping of animals exclusive of offices pursuant to chapter 1346 of the Minnesota State Building Code,as may be amended. These requirements can be met by the submission of an air exchange analysis,acceptable to the City from a Minnesota licensed contractor or engineer confirming with said standards,otherwise,the facility ventilation system must be completely separate and independent of other tenant space within the building. Facility air temperature must be maintained between sixty degrees Fahrenheit(60°F)and eighty degrees Fahrenheit(80°F). 3. If located within a multi-tenant building, soundproofing shall be installed on all common walls between the commercial kennel bay and adjacent bays within the building. 4. Wall finish materials below forty eight inches(48")in height shall be impervious,washable materials such as sealed masonry, ceramic tile,glass board,or marlite.Floor finish shall be sealed concrete or other approved impervious surface.Liquid tight curbing, at least six inches(6")high, shall be installed along shared walls for sanitary confinement and water wash down cleaning. 5.A sufficiently sized room/cage separate from the facility areas shall be provided to adequately separate sick or injured animals from healthy animals. 6.Animal wastes shall be immediately cleaned up with solid wastes being enclosed in a container of sufficient construction to eliminate odors and organisms. (Ord.018-736,3-19-2018) 6-3-3: RECORDS KEPT: Each licensee hereunder shall keep a record of each and every animal harbored in said kennel,stating the name, sex and breed of each such animal,the date of acquisition and the disposition of said animal and any further information as the Council may from time to time determine necessary. (Ord. 018-736,3-19- 2018) SECTION 3. Effective Date. This ordinance shall be effective upon its passage and publication according to law. ADOPTED this 20th day of May 2019,by the City Council of the City of Farmington. CITY OF FARMINGTON By: Todd L. on,Mayor ATTEST: By: avid McKni t, dministrator SEAL Approved as to form the 0day of "! 2019. By: City Atto Summary published in the Dakota County Tribune the c9 7 day of ,2019. CITY OF FARMINGTON DAKOTA COUNTY, MINNESOTA SUMMARY ORDINANCE NO. 019-746 AN ORDINANCE AMENDING TITLE 6, CHAPTERS 2 AND 3, OF THE CITY CODE AS THEY RELATE TO DOGS AND KENNELS RESPECTIVELY NOTICE IS HEREBY GIVEN that, on May 20, 2019, Ordinance No. 019-746 was adopted by the City Council of the City of Farmington, Minnesota. NOTICE IS FURTHER GIVEN that, because of the lengthy nature of the ordinance,the following summary of the ordinance has been prepared for publication. Ordinance No. 019-746 amends Title 6, Chapters 2 and 3 of the city code amending the number of dogs allowed from two to three on residential properties and from three to four dogs for commercial and residential hobby kennels. A printed copy of the ordinance, in its entirety, is available for inspection by any person during the city's regular office hours and is posted on the city's website. APPROVED for publication by the City Council of the City of Farmington, Minnesota,this 20th day of May, 2019. CITY OF FARMINGTON Todd Larson, Mayor ATTEST: By: WCie/Z/ avid McKnitgAy Administrator Approved as to form the {— day of72019. B:' City Atto Published in the Dakota County Tribune the ,4 day of 2019. 4FAri, , City of Farmington t 430 Third Street Farmington, Minnesota 651.280.6800 -Fax 651.280.6899 ' .,, www.ci.farmington.mn.us TO: Mayor, Councilmembers and City Administrator FROM: Matt Decur,Assistant City Engineer SUBJECT: Approve ADA Transition Plan for Public Rights-of-Way-Public Works DATE: May 20, 2019 INTRODUCTION The U.S. Department of Justice Americans with Disabilities Act(ADA) requires public agencies to conduct a self-evaluation of facilities within public rights—of-way and to develop a Transition Plan. The Transition Plan must detail how the agency will ensure that all its facilities are accessible to all individuals. DISCUSSION City staff inventoried pedestrian curb ramps on city sidewalks and trails. Data collected was evaluated and facilities were categorized into three tiers. Tier 1 facilities are substantially compliant with ADA requirements and do not require improvements. Tier 2 facilities will be improved when adjacent streets are improved as part of a scheduled Capital Improvement Plan(CIP)project. Tier 3 facilities will be improved as soon as possible—they will either be added to the CIP or be addressed with the city's annual maintenance program. 34% of the City's facilities rated in Tier 1, considered being in good condition. 66% of pedestrian ramps fell into Tier 2, considered to be in fair condition. Less than 1% of facilities rated in poor condition and fell into Tier 3. The city's goal is to have 80%of its pedestrian facilities rated in Tier I within the next 20 years. An open house was held on April 30, 2019, to take comments on the draft Transition Plan. No comments were received. BUDGET IMPACT Construction costs will be included in the CIP or maintenance budget when facilities are scheduled for improvement. ACTION REQUESTED Approve the City of Farmington ADA Transition Plan for Public Right-of-Way. ATTACHMENTS: Type Description D Backup Material ADA Transition Plan CITY OF FARMINCTON 6-44=-0.---"-"---...... ...400000,0"1"1""ftba- Cityof F ADA Transition P an or Public• •i is-a.,,:,,,,,„, -1''''''"'' '''14-4' --,,,:f. 1. .-,,',', ,...'.i.;,.;-,,*.. ,, „ ... If , . k '''!ii•Ort'•1:'' ' 7---',Irro,t,J.,',.,,,Igk,r "j f� ? • ", ....-4,, ,,{l , pM. i�y� Sk j • 1iiii011j�.. . G .. }i k. . �c.v es v� May2019 _ , ______ 430 Third Street I Farmington, Minnesota I 651-280-6800 I FarmingtonMN.gov Table of Contents Introduction 3 Transition Plan Need and Purpose 3 ADA and its Relationship to Other Laws 3 Agency Requirements 4 Self-Evaluation 5 Overview 5 Summary 5 Policies and Practices 6 Previous Practices 6 Policy 6 Improvement Schedule 6 Priority Areas 6 External Agency Coordination 6 Schedule 7 ADA Coordinator 7 Implementation Schedule 7 Methodology 7 Public Outreach 8 Grievance Procedure 8 Monitor the Progress 8 Appendices 9 A. Self-Evaluation Results 9 B. Agency ADA Design Standards and Procedures 9 C. Contact Information 9 D. Grievance Procedure 9 E. Complaint Form 9 F. ADA Public Notice 9 1 �--"•-"-••CITY OF FARMINGTON G. Public Outreach 9 Appendix A—Self-Evaluation Results 10 Appendix B—Agency ADA Design Standards and Procedures 11 Design Procedures 11 Intersection Corners 11 Sidewalks/Trails 11 Traffic Control Signals 11 Bus Stops and Other Transit Facilities 12 Other policies, practices and programs 12 Design Standards 12 Appendix C—Contact Information 13 ADA Title II Coordinator 13 Public Right of Ways ADA Implementation Coordinator 13 Appendix D—Grievance Procedure 14 City of Farmington 14 Grievance Procedure under the Americans with Disabilities Act 14 City of Farmington Grievance Procedure 15 Appendix E—Complaint Form 18 Appendix F—ADA Public Notice 21 Public Notice 21 Appendix G—Public Outreach 22 2 CITY of FARMINGTON Introduction Transition Plan Need and Purpose The Americans with Disabilities Act (ADA), enacted on July 26, 1990, is a civil rights law prohibiting discrimination against individuals on the basis of disability. ADA consists of five titles outlining protections in the following areas: 1. Employment 2. State and local government services 3. Public accommodations 4. Telecommunications 5. Miscellaneous Provisions Title II of ADA pertains to the programs, activities and services public entities provide. As a provider of public transportation services and programs,the City of Farmington must comply with this section of the Act as it specifically applies to public service agencies. Title II of ADA provides that, "...no qualified individual with a disability shall, by reason of such disability, be excluded from participation in or be denied the benefits of the services, programs, or activities of a public entity, or be subjected to discrimination by any such entity." (42 USC.Sec. 12132; 28 CFR. Sec.35.130) As required by Title II of ADA, 28 CFR. Part 35 Sec. 35.105 and Sec.35.150,the City of Farmington has conducted a self-evaluation of its facilities within public rights of way and has developed this Transition Plan detailing how the organization will ensure that all of those facilities are accessible to all individuals. ADA and its Relationship to Other Laws Title II of ADA is companion legislation to two previous federal statutes and regulations:the Architectural Barriers Acts of 1968 and Section 504 of the Rehabilitation Act of 1973. The Architectural Barriers Act of 1968 is a Federal law that requires facilities designed, built, altered or leased with Federal funds to be accessible.The Architectural Barriers Act marks one of the first efforts to ensure access to the built environment. Section 504 of the Rehabilitation Act of 1973 is a Federal law that protects qualified individuals from discrimination based on their disability.The nondiscrimination requirements of the law apply to employers and organizations that receive financial assistance from any Federal department or agency. Title II of ADA extended this coverage to all state and local government entities, regardless of whether they receive federal funding or not. 3 CITY OF FARMINGTON Agency Requirements Under Title 11,the City of Farmington must meet these general requirements: • Must operate their programs so that, when viewed in their entirety,the programs are accessible to and useable by individuals with disabilities (28 C.F.R. Sec. 35.150). • May not refuse to allow a person with a disability to participate in a service, program or activity simply because the person has a disability (28 C.F.R.Sec. 35.130(a). • Must make reasonable modifications in policies, practices and procedures that deny equal access to individuals with disabilities unless a fundamental alteration in the program would result(28 C.F.R.Sec. 35.130(b) (7). • May not provide services or benefits to individuals with disabilities through programs that are separate or different unless the separate or different measures are necessary to • ensure that benefits and services are equally effective (28 C.F.R. Sec. 35.130(b)(iv) & (d). • Must take appropriate steps to ensure that communications with applicants, participants and members of the public with disabilities are as effective as communications with others(29 C.F.R. Sec. 35.160(a). • Must designate at least one responsible employee to coordinate ADA compliance [28 CFR Sec. 35.107(a)].This person is often referred to as the "ADA Coordinator."The public entity must provide the ADA coordinator's name, office address, and telephone number to all interested individuals [28 CFR Sec.35.107(a)]. • • Must provide notice of ADA requirements. All public entities, regardless of size, must provide information about the rights and protections of Title Il to applicants, participants, beneficiaries, employees, and other interested persons [28 CFR Sec. 35,106]. The notice must include the identification of the employee serving as the ADA coordinator and must provide this information on an ongoing basis [28 CFR Sec. • 104.8(a)]. • Must establish a grievance procedure. Public entities must adopt and publish grievance procedures providing for prompt and equitable resolution of complaints [28 CFR Sec. 35.107(b)].This requirement provides for a timely resolution of all problems or conflicts related to ADA compliance before they escalate to litigation and/or the federal complaint process. This document has been created to specifically cover accessibility within the public rights of way and does not include information on City programs, practices, or building facilities not related to public rights of way. 4 CITY OF FARMINGTON Self-Evaluation Overview The City of Farmington is required, under Title II of the Americans with Disabilities Act (ADA) and 28CFR35.105,to perform a self-evaluation of its current transportation infrastructure policies, practices, and programs.This self-evaluation will identify what policies and practices impact accessibility and examine how the City implements these policies.The goal of the self- evaluation is to verify that, in implementing the City's policies and practices,the department is providing accessibility and not adversely affecting the full participation of individuals with disabilities. The self-evaluation also examines the condition of the City's Pedestrian Circulation Route/Pedestrian Access Route) (PCR/PAR) and identifies potential need for PCR/PAR infrastructure improvements.This will include the sidewalks, curb ramps, bicycle/pedestrian trails,traffic control signals and transit facilities that are located within the City rights of way. Any barriers to accessibility identified in the self-evaluation and the remedy to the identified barrier are set out in this transition plan. Summary In 2018,the City of Farmington conducted an inventory of pedestrian facilities within its public right of way consisting of the evaluation of pedestrian ramps at intersections and mid-block crossings including trail and sidewalk facilities. Pedestrian ramps were assessed and categorized into three condition rating tiers: Tier 1(GREEN): largely or fully compliant Tier 2 (YELLOW): substantially compliant Tier 3(RED): largely not compliant Detailed maps showing categorized pedestrian curb ramps are included in Appendix A and will be updated periodically. 5 CITY OF FARMINGTON Policies and Practices Previous Practices Since the adoption of the ADA,the City of Farmington has striven to provide accessible pedestrian features as part of the City's capital improvement projects. As additional information was made available as to the methods of providing accessible pedestrian features, the City updated their procedures to accommodate these methods. Policy The City of Farmington's goal is to continue to provide accessible pedestrian design features as part of the City's capital improvement projects. The City has established ADA design standards and procedures as listed in Appendix B. These standards and procedures will be kept up to date with nationwide and local best management practices. The City will consider and respond to all accessibility improvement requests. Requests for accessibility improvements can be submitted to the ADA Coordinator. Contact information for ADA Coordinator is located in Appendix C. All accessibility improvements that have been deemed reasonable will be scheduled consistent with transportation priorities. The City will coordinate with external agencies to ensure that all new or altered pedestrian facilities within the City's jurisdiction are ADA compliant to the maximum extent feasible. Maintenance of pedestrian facilities within the public right of way will continue to follow the policies set forth by the City.The City will maintain and update the facility database and maps to reflect improvements and to measure progress. Improvement Schedule Priority Areas The City of Farmington has established an assessment system to prioritize ADA improvements based on condition ratings and to identify specific locations as priority areas. Additional priority will be given to any location where an improvement project or alteration was constructed after January 26, 1991, and accessibility features were omitted. External Agency Coordination Many other agencies are responsible for pedestrian facilities within the jurisdiction of the City of Farmington. The City will coordinate with those agencies to track and assist in the facilitation of the elimination of accessibility barriers along their routes. 6 CITY OF FARMINGTON Schedule The City of Farmington has set the following schedule and goals for improving the accessibility of its pedestrian facilities within the City's jurisdiction: Pedestrian ramps in Tier 1 (GREEN) are largely compliant and do not require improvements at this time. Pedestrian ramps in Tier 2 (YELLOW) are considered serviceable and substantially compliant. Improvement of these facilities will be incorporated into Capital Improvement Program projects on adjacent streets whenever feasible. The City will use the CIP and pavement management program to coordinate improvements to Tier 2 pedestrian ramps. Pedestrian ramps in Tier 3 (RED) are identified as a hazard or compliance issue and need to be addressed. Improvements will be incorporated into a project in the current Capital Improvement Plan or added to the next annual sidewalk maintenance project. The City of Farmington has set a goal to have 80%of pedestrian facilities fully ADA compliant in 20 years. Remaining facilities will be Tier 2 (YELLOW)facilities that have not been improved as part of an adjacent CIP project. ADA Coordinator In accordance with 28 CFR 35.107(a),the City of Farmington has identified an ADA Title II Coordinator to oversee the City's policies and procedures. Contact information for this individual is located in Appendix C. Implementation Schedule Methodology The City of Farmington will utilize two methods for upgrading pedestrian facilities to the current ADA standards. The first and most comprehensive of the two methods are the scheduled street and utility improvement projects. All pedestrian facilities impacted by these projects will be upgraded to current ADA accessibility standards. The second method is the stand alone sidewalk and ADA accessibility improvement project. These projects will be incorporated into the Capital Improvement Program (CIP) on a case by case basis as determined by City of Farmington staff. 7 CITY OF FARMINGTON Public Outreach The City of Farmington recognizes that public participation is an important component in the development of this document. Public outreach for the creation of this document consisted of the following activities: • Public Open House—April 30, 2019 • Transition Plan Approved by City Council- This document was also available for public comment. A summary of comments received and detailed information regarding the public outreach activities are located in Appendix G. Grievance Procedure Under the Americans with Disabilities Act, each agency is required to publish its responsibilities in regards to the ADA. A draft of this public notice is provided in Appendix D. If users of City of Farmington facilities and services believe the City has not provided reasonable accommodation, they have the right to file a grievance. In accordance with 28 CFR 35.107(b),the City has developed a grievance procedure for the purpose of the prompt and equitable resolution of citizens' complaints, concerns,comments, and other grievances. This grievance procedure is outlined in Appendix D. Monitor the Progress This document will continue to be updated as conditions within the City evolve. The ADA Transition Plan for Public Rights of Way and accessibility information will be on the City's website (www.farmingtonmn.gov). Improvements to accessible facilities will be updated in the Capital Improvement Plan and other regular updates to the City Council. 8 CITY OF FARMINGTON Appendices A. Self-Evaluation Results B. Agency ADA Design Standards and Procedures in Public Rights of Way C. Contact Information D. Grievance Procedure E. Complaint Form F. ADA Public Notice G. Public Outreach 9 c►TYOF FARMINGTON Appendix A - Self-Evaluation Results This initial self-evaluation of pedestrian facilities yielded the following results: • Tier 1(GREEN)—250(34%) • Tier 2(YELLOW)—346(66%) • Tier 3 (RED)—3 (0.004%) Pedestrian Ramp Tier Ratings E3 Tier 1 Tier 2 ■Tier 3 The following maps detailing how pedestrian ramps are categorized can also be found at www.farmingtonmn.gov. 10 CITY OF FARMINGTON ...filen X.111 DUNCAN CT "" w W EVENTIDE WAY O It' r to /° 5 •I irse 4./nu-`uln�ll= m t" 111r itECHOTER�0•;".`14,1a. G • I 11rVUJ.I oil?. EMERALD ry° O/ `r m• ♦ r I' I• 41111141.. 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Lei .1'->•rs-a-T�-3-GS`-2�u'�-L �`-C =' '�••�• ! ,=1.1111,!„l l ! .;l.l:.l. ;.:1,! 1.! 1,l w t 1 • w H$vw 4- 'slaummul Xi nd .. 1: Appendix B - Agency ADA Design Standards and Procedures in the Public Rights of Way Design Procedures Intersection Corners The City of Farmington will attempt to construct or upgrade pedestrian ramps and intersections to achieve compliance within all capital improvement projects. There may be limitations which make it technically infeasible for an intersection corner to achieve full accessibility within the scope of any project.Those limitations will be noted and those intersection corners will remain on the transition plan. As future projects or opportunities arise,those intersection corners shall continue to be incorporated into future work. Regardless on if full compliance can be achieved or not, each intersection corner shall be made as compliant as possible in accordance with the judgment of City staff. Sidewalks/Trails The City will attempt to achieve compliance with the construction or upgrade of trails and sidewalks within all capital improvement projects. There may be limitations which make it technically infeasible for segments of sidewalks or trails to achieve full accessibility within the scope of any project.Those limitations will be noted and those segments will remain on the transition plan. As future projects or opportunities arise,those segments shall continue to be incorporated into future work. Regardless on if full compliance can be achieved or not, every sidewalk or trail shall be made as compliant as possible in accordance with the judgment of City staff. Traffic Control Signals All traffic control signals in the City of Farmington are currently owned and operated by MnDOT or Dakota County. The City will work with these agencies and attempt to construct and upgrade traffic control signals to achieve compliance within all capital improvement projects. There may be limitations which make it technically infeasible for individual traffic control signal locations to achieve full accessibility within the scope of any project.Those limitations will be noted and those locations will remain on the transition plan. As future projects or opportunities arise,those locations shall continue to be incorporated into future work. Regardless on if full compliance can be achieved or not, each traffic signal control location shall be made as compliant as possible in accordance with the judgment of City staff. 11 CITY OF FARMINGTON Bus Stops and Other Transit Facilities There are currently no other transit facilities present within the limits of the City of Farmington. The City of Farmington will work with transit providers to ensure that future facilities meet all appropriate accessibility standards. Other policies,practices and programs Policies, practices and programs not identified in this document will follow the applicable ADA standards. Design Standards The City of Farmington generally follows the guidelines identified in PROWAG, as adopted by the Minnesota Department of Transportation (MnDOT), when practical and feasible. 12 CITY OF FARMINGTON Appendix C - Contact Information Public Rights-of-Way ADA Implementation Coordinator Name: Katy Gehler or current Public Works Director Address: 430 Third Street Farmington, MN 55024 Phone: 651-280-6840 Fax: 651-280-6839 E-mail: kgehler@farmingtommn.gov 13 crry OF----- FARMINGTON Appendix D - Grievance Procedure City of Farmington Grievance Procedure under the Americans with Disabilities Act This Grievance Procedure is established to meet the requirements of the Americans with Disabilities Act of 1990 ("ADA"). It may be used by anyone who wishes to file a complaint alleging discrimination on the basis of disability in the provision of services, activities, programs, or benefits by the City of Farmington. The City of Farmington's Personnel Policy governs employment-related complaints of disability discrimination. The complaint should be in writing and contain information about the alleged discrimination such as name, address, phone number of complainant and location, date, and description of the problem.Alternative means of filing complaints, such as personal interviews or a tape recording of the complaint will be made available for persons with disabilities upon request. The complaint should be submitted by the grievant and/or his/her designee as soon as possible but no later than 60 calendar days after the alleged violation the ADA Coordinator listed in Appendix C. Within 30 calendar days after receipt of the complaint,the City of Farmington ADA Coordinator or their designee will meet with the complainant to discuss the complaint and the possible resolutions. Within 30 calendar days of the meeting,the City of Farmington ADA Coordinator or their designee will respond in writing, and where appropriate, in a format accessible to the complainant, such as large print, Braille, or audio tape. The response will explain the position of the City and offer options for substantive resolution of the complaint. If the response by City of Farmington ADA Coordinator or their designee does not satisfactorily resolve the issue,the complainant and/or his/her designee may appeal the decision within 30 calendar days after receipt of the response to the City of Farmington Administrator or their designee. Within 30 calendar days after receipt of the appeal, City of Farmington Administrator or their designee will meet with the complainant to discuss the complaint and possible resolutions. Within 30 calendar days after the meeting,the City of Farmington Administrator or their designee will respond in writing, and, where appropriate, in a format accessible to the complainant, with a final resolution of the complaint. All written complaints received by City of Farmington ADA Coordinator or their designee, appeals to City of Farmington Administrator or their designee,and responses from these two offices will be retained by the City of Farmington for at least three years. 14 CRY OF FARMINGTON City of Farmington Grievance Procedure Those wishing to file a formal written grievance with the City of Farmington may do so by one of the following methods: Internet Visit the City of Farmington website (www.farmingtonmn.gov) and click the "ADA" link to the ADA Grievance Form. A copy of The ADA Grievance Form is included in Appendix E. Telephone Contact the pertinent City staff person listed in the Contact Information section of Appendix C to submit an oral grievance.The staff person will complete and submit the ADA Grievance Form on behalf of the person filing the grievance. Paper Submittal Contact the pertinent City staff person listed in the Contact Information section of Appendix C to request a paper copy of the county's grievance form, complete the form, and submit it to the ADA Coordinator.The ADA Grievance Form will ask for the following information: • The name, address,telephone number, and email address for the person filing the grievance • The name, address,telephone number, and email address for the person alleging an ADA violation (if different than the person filing the grievance) • A description and location of the alleged violation and the nature of a remedy sought, if known by the complainant. • If the complainant has filed the same complaint or grievance with the United States Department of Justice (DOJ), another federal or state civil rights agency, a court,or others,the name of the agency or court where the complainant filed it and the filing date. The City will acknowledge receipt of the grievance to the complainant within 15 working days of its submittal. City will also provide to the complainant within 15 working days of its submittal; 1) a response or resolution to the grievance or; 2) information on when the complainant can expect a response or resolution to the grievance. If the grievance filed does not concern a City of Farmington facility,the City will work with the complainant to contact the agency that has jurisdiction. 15 CITY OF FARMINGTON Within 60 calendar days of receipt, a City of Farmington staff person will conduct an investigation necessary to determine the validity of the alleged violation.As a part of the investigation,the staff person would conduct an engineering study to help determine the City's response. The staff person will take advantage of department resources and use engineering judgment, data collected, and any information submitted by the resident to develop a conclusion.A staff person will be available to meet with the complainant to discuss the matter as a part of the investigation and resolution of the matter. The City will document each resolution of a filed grievance and retain such documentation in the department's ADA Grievance File in accordance with state and federal law. The City will consider all specific grievances within its particular context or setting. Furthermore,the City will consider many varying circumstances including: 1)the nature of the access to services, programs, or facilities at issue; 2)the specific nature of the disability;3)the essential eligibility requirements for participation;4)the health and safety of others: and 5)the degree to which an accommodation would constitute a fundamental alteration to the program, service, or facility, or cause an undue hardship to the City of Farmington. Accordingly, the resolution by the City of Farmington of any one grievance does not constitute a precedent upon which the county is bound or upon which other complaining parties may rely. File Maintenance The City shall maintain ADA grievance files in accordance with state and federal laws. Complaints of Title II violations may also be filed with the DOJ within 180 days of the date of discrimination. In certain situations,cases may be referred to a mediation program sponsored by the Department of Justice (DOJ).The DOJ may bring a lawsuit where it has investigated a matter and has been unable to resolve violations. For more information, contact: U.S. Department of Justice Civil Rights Division 950 Pennsylvania Avenue, N.W. Disability Rights Section- NYAV Washington, D.C. 20530 www.ada.gov (800) 514-0301 (voice—toll free) (800) 514-0383 (TTY) 16 CITY OF FARMINGTON Title II may also be enforced through private lawsuits in Federal court. It is not necessary to file a complaint with the DOJ or any other Federal agency, or to receive a "right-to-sue" letter, before going to court. 17 crry of FARMINGTON Appendix E - Complaint Form 18 CITY OF FARMINGTON City of Farmington Title II of the American with Disabilities Act Section 504 of the Rehabilitation Act of 1973 Discrimination Complaint Form Instructions: Please fill out this form completely, in black ink or type. Sign and return to the ADA Coordinator at the address in Appendix C. Attach additional sheets if necessary. Complainant: Address: City, State, and Zip Code: Telephone (Home): Telephone (Business): Person Discriminated Against: (if other than the complainant) Address: City, State, and Zip Code: Telephone (Home): Telephone (Business): Government,or organization,or institution which you believe has discriminated: Name: Address: County: City: State and Zip Code: Telephone Number: When did the discrimination occur? Date: 19 CITY OF� FARMINGTON Describe the acts of discrimination providing the name(s)where possible of the individuals who discriminated (attach additional pages if necessary): Have efforts been made to resolve this complaint through the internal grievance procedure of the government, organization, or institution? Yes No If yes: what is the status of the grievance? Has the complaint been filed with another bureau of the Department of Justice or any other Federal,State, or local civil rights agency or court? Yes No If yes: Agency or Court: Contact Person: Address: City,State, and Zip Code: Telephone Number: Date Filed: Do you intend to file with another agency or court? Yes No Agency or Court: Address: City,State and Zip Code: Telephone Number: Additional space for answers: Signature: Date: 20 CITY OF FARMINGTON 1 Appendix F - ADA Public Notice As part of the ADA requirements the City/County has posted the following notice outlining its ADA requirements: Public Notice In accordance with the requirements of title II of the Americans with Disabilities Act of 1990, the City of Farmington will not discriminate against qualified individuals with disabilities on the basis of disability in City's services, programs, or activities. Employment:The City does not discriminate on the basis of disability in its hiring or employment practices and complies with all regulations promulgated by the U.S. Equal Employment Opportunity Commission under title I of the Americans with Disabilities Act (ADA). Effective Communication:The City will generally, upon request, provide appropriate aids and services leading to effective communication for qualified persons with disabilities so they can participate equally in the City's programs,services, and activities, including qualified sign language interpreters, documents in Braille, and other ways of making information and communications accessible to people who have speech, hearing, or vision impairments. Modifications to Policies and Procedures:The City will make all reasonable modifications to policies and programs to ensure that people with disabilities have an equal opportunity to enjoy all City programs, services, and activities. For example, individuals with service animals are welcomed in City offices, even where pets are generally prohibited. Anyone who requires an auxiliary aid or service for effective communication, or a modification of policies or procedures to participate in a City program, service, or activity, should contact the office of the City Administrator as soon as possible but no later than 48 hours before the scheduled event. The ADA does not require the City to take any action that would fundamentally alter the nature of its programs or services, or impose an undue financial or administrative burden. The City will not place a surcharge on a particular individual with a disability or any group of individuals with disabilities to cover the cost of providing auxiliary aids/services or reasonable modifications of policy,such as retrieving items from locations that are open to the public but are not accessible to persons who use wheelchairs. 21 CITY OF FARMINGTON Appendix G - Public Outreach The draft City of Farmington ADA Transition Plan for Public Rights of Way was introduced to City Council on April 8, 2019 at a Council Work Session. The draft Plan was then opened for public comment and posted to the City's website. An Open House was scheduled for April 30, 2019. A flyer for the Open House is attached to this Appendix. The flyer was posted at City Hall and emailed to 312 subscribers to the City's email notification system. The flyer and Open House schedule were also added to the City's online calendar of meetings and events. The Open House was held on April 30, 2019 from 6:00 p.m.to 7:00 p.m. No stakeholders attended the meeting. No comments were received from the public on the draft City of Farmington ADA Transition Plan for Public Rights of Way. The Public Rights of Way ADA Implementation Coordinator will continue to take comments from the public on the Plan. 22 CITY OF FARMINGTON , p 'at City of Farmington 430 Third Street Farmington, Minnesota 651.280.6800 -Fax 651.280.6899 •40www.ci.farmington.mn.us TO: Mayor, Councilmembers and City Administrator FROM: Jennifer Gabbard, Human Resources Director SUBJECT: Approve Seasonal Hiring-Human Resources DATE: May 20, 2019 INTRODUCTION The recruitment and selection process for the appointment of the attached list of summer seasonal staff has been completed. DISCUSSION After a thorough review by the Parks and Recreation Department and the Human Resources Department, offers of employment have been made to the individuals shown on the attached spreadsheet, subject to a pre-employment drug test, a background check and ratification by the city council. BUDGET IMPACT These positions are included in the departmental budgets. ACTION REQUESTED By motion approve the attached seasonal employment recommendations. ATTACHMENTS: Type Description D Backup Material 2019 Summer Seasonal Hiring Last Name First Name Position 2019 Pay Rate Date Effective Betting Rebecca Program Supervisor $14.11 5/20/2019 Burditt Jay Program Supervisor $13.77 5/20/2019 Koch Spencer Park Maintenance $10.70 5/20/2019 Larkin Ross Recreation Assistant $9.86 5/20/2019 Matzdorf Claire Recreation Assistant $10.14 5/20/2019 Schultz Kayla Recreation Assistant $9.86 5/20/2019 Palodichuk Anna Recreation Assistant $10.59 5/20/2019 Palodichuk Emily Recreation Assistant $9.86 5/24/2019 Springer Maddison . 'Y ' ► City of Farmington 430 Third Street Farmington, Minnesota 651.280.6800 - Fax 651.280.6899 ' ,.A . www.ci.farmington.mn.us TO: Mayor, Councilmembers and City Administrator FROM: Jennifer Gabbard, Human Resources Director SUBJECT: Approve 2020 Election Judge Compensation-Human Resources DATE: May 20, 2019 INTRODUCTION Every so often, the city council reviews the compensation of election judges. Staff is recommending the review of the hourly rate for election judges for the 2020 general election. DISCUSSION For the 2020 election, staff is recommending that the individuals appointed to serve in the city of Farmington as election judges their hourly rate will be$12.50 for election judges and $14.00 for head judges. This is an increase for election judges, from$9.65 for election judges and $10.50 for head election judges. The change in wages will help our recruitment process for these difficult to fill positions and make our compensation similar to our surrounding communities. BUDGET IMPACT Election costs will be included in the 2020 budget, including wages that are paid to election judges. ACTION REQUESTED By motion approve the above election judge compensation recommendations. /1,701041,,A, City of Farmington /Lk. CP 430 Third Street Farmington, Minnesota 651.280.6800 -Fax 651.280.6899 .4440' www.ci.farmington.mn.us TO: Mayor, Councilmembers and City Administrator FROM: Teah Malecha, Finance Director SUBJECT: Acknowledge Financial Review for the Month Ending March 31, 2019-Finance DATE: May 20, 2019 INTRODUCTION Staff reviews the financial performance of the General Fund and several other funds with the city council quarterly review. The financial statements are included in your packet and incorporate more detailed analytical comments. The following provides a more in depth review of the General Fund and highlights notable areas for the other funds included in this review. DISCUSSION General Fund The General Fund is the city's primary operating account. The financial summary for the first three months is the first attachment. The following will provide explanations for the various revenue items and highlight the more significant expenditure variations. The items reviewed are in the order they appear on the attached General Fund financial statement. Revenues For 2019,budgeted General Fund revenues total$11,455,983. During the first quarter of the year the city recorded General Fund revenues totaling$307,555 or three percent of total budgeted revenues. The majority of the revenue is received starting in the second quarter. Property taxes represent the majority of total General Fund revenues (including transfers in from other funds). Property taxes are generally payable in two installments, May and October, and collected by the county. The city receives its share from the county in June and December. While there are many reasons the city needs a fund balance(which is similar to an individual's personal net worth), needing to pay its bills between the receipt of tax payments from the county is the most significant reason. Over the past few years the city has strengthened its fund balance and is now able to pay all of its General Fund bills between the receipt of tax payments, essentially paychecks, from the county without borrowing from other funds That is a significant accomplishment and an important step in becoming a city of fiscal excellence. The other types of revenues in the General Fund consist of licenses,permits, intergovernmental revenue, charge for services, fines, investment income, franchise fees, rental income, etc. Permit revenue includes building, plumbing, heating, electric, etc. permits. The revenue for the first quarter of 2019 is the lower for this time period last year. The larger amount in 2018 was due to the permit issued for Trinity Care Center. The city has issued 16 more building permits than in 2018. Plumbing, heating, and electric permits are up four from 2018. Intergovernmental revenue includes local government aid (LGA), municipal state aid (MS A)maintenance, police and fire aid, etc. The city received the first half of the MSA maintenance funds for 2019. The second half will be received in July. LGA is paid in two installments, June and December. Police and fire aid has not been received. The city needs a strong fund balance as many of these items are paid later in the year. Charge for services includes:fire, recreation, school resource officer(SRO), etc., charges. Castle Rock and Eureka townships are billed quarterly for fire protection. Empire, the largest of the three townships, is billed annually, after year-end,per contract. Non-contract(i.e. illegal and/or hazardous)fires charges are billed as they occur. Recreation programs are primarily offered in the summer. The school is billed for their share of the school resource officers human resource costs on a quarterly basis. Fine revenue is received the following month. It is currently trending higher than in 2018. Investment interest consists of investment earnings and the city's annual mark-to-market to recognize the change in the market value of its investment portfolio. It has been trending higher than in 2018. Miscellaneous revenues include rental income related to the Rambling River Center(RRC-senior center)and city hall as well as donations. Franchise fee revenue in the General Fund represents the transfer of a portion of the city's franchise fee revenue to the General Fund to help pay for city operations. The remainder of the franchise fees are used to pay for the city's cable operations. The first payment is typically received in the second quarter. Expenditures Finance tracks expenditures by department. The following notes explain significant or unusual variations from last year or actual versus budgeted amounts which vary a bit from the expected 25 percent(3 of 12 months)through the end of March in the same order as they appear on the attached General Fund financial report. City hall has an increase over 2018 due to the hiring of custodial staff and purchase of cleaning equipment. The audit invoices have been paid earlier this year than in 2018 resulting in higher expenditures in finance and risk management. The part-time salaries for fire are trending higher than the first quarter of 2018. Natural resources is much lower in 2018 due to the position being vacant for a portion of the year. The city experienced more snowfall in the first quarter of 2019, than in 2018. As a result the 2019 snow removal expenditures are higher this year than last. Overall, General Fund expenditures, excluding transfers, are at 23 percent of budget for the first quarter of the year. EDA, Park Improvement, and Arena The EDA(Economic Development Authority), Park Improvement Fund, and Ice Arena activities have historically been of interest to council. They are also included for your review. EDA The EDA revenues were higher in 2018 as it included the receipt of funds related to a CDBG grant for a building roof completed. Expenditures are higher in 2019 due to the addition of the Dakota Broadband (DBB) initiative. Park Improvement Fund The Park Improvement fund received a farm lease payment in first quarter. The Bike Pedestrian Plan expenditures are included along with the grant funding revenue for the plan. Arena Revenues are slightly higher than in 2018 due to higher rental income. Expenditures are trending higher at 29 percent for the first quarter of the year. Liquor Operations The city has two financial benchmarks for its liquor operations. The first is a 25 percent gross profit margin. For the first quarter of the year both stores exceeded the gross profit margin target. The second standard is a 6 percent profit as a percent of sales. This is evaluated on a combined basis. For the first quarter, the stores reached 5.4 percent. The 2019 results are ahead last year's pace, which was 4.8 percent through the first quarter. The percentage is generally the lowest the first half of the year. The liquor stores are on track to meet that benchmark once again this year. After each calendar year, staff reviews the financial results for the two liquor stores combined, determines the amount of funds needed to cover day-to-day operations and administrative transfers to the General Fund. The remaining funds are divided evenly and transferred into the Community Investment and Capital Improvements accounts. This is referred to as the four pots philosophy. Each year staff utilizes actual financial results to fund these four pots. Staff periodically makes recommendations to council on how to best invest available dollars in the Community Investment pot to benefit the community. Meanwhile, the capital improvement dollars are available for future liquor store capital building needs (e.g. remodeling, updating, relocation,possible building, etc.). Enterprise Funds The city operates five utility funds: sewer operations, solid waste, storm water, water, and street lighting. Sewer Operations For the first quarter of 2019 revenues trended higher than 2018. There was an increase in MCES (Metropolitan Council Environmental Services)fees. These are the fees charged to the city to treat its sewer water. The fees reflect an increase in the cost to treat the volumes processed. The expenditures also include the box for one of the new plows. The chassis was paid for in 2018. Solid Waste For the first quarter of 2019 solid waste expenses exceeded revenues. Expenditures included the new compactor and hook lift. The chassis were paid for in 2018. Storm Water Revenues exceeded expenditures during the first quarter of 2019. The expenditures for 2018 were drastically higher due to the purchase of the street sweeper. For all of the city's utility funds, the billing cycle(revenue)lags the recording of expenses. For example, the city bills every three months. The January billing includes November and December of the previous year, as well as January of the current year. So, two-thirds of that billing cycle is attributable to the prior year and is recorded as such in the financial statements. This means that at the end of this year, the financial statements will remain open so that we can capture the revenues related to the current year, which will not be billed out until January and February of the following year. Additional comments,which may be of interest to you, including those for the water and street light funds are contained in the comment section of the attached financial statements. BUDGET IMPACT The budget impacts have been noted above as appropriate. ACTION REQUESTED Review and acknowledge the financial reports for month ended March 31, 2019. ATTACHMENTS: Type Description D Backup Material General Fund -YTD Ended March 31, 2019 General Fund Chart-YTD Ended March 31, D Backup Material 2019 Bac.lcup Material Special Revenue Funds -YTD Ended March D 31, 2019 o Backup Material Liquor Stores -YTD Ended March 31, 2019 o Backup Material Utility Funds -YTD Ended March 31, 2019 General Fund March 2019 YTD Operating Report March YTD Quarter 1 March YTD March YTD Actual March YTD Company Actual Actual Actual Budget 2019 Budget Variance YTD Act as% Comments 2018 2019 2019 2019 of Bud 2019 Revenues Property Taxes 0 0 0 9,808,308 (9,808 308) 0% Taxes are received semi-annually. 1st half wit be received in June. Licenses 18,010 23,267 23,267 50,350 (27,083) 46% Includes liquor,beer&wine,club arcade,massage,gambling,animal,etc.2019 higher due to '.. 3 liquor licenses being paid in full upfront. Permits 93,397 42,924 42,924 346,060 (303,136) 12% Includes building,plumbing and heating,electric,etc.permits.Permit revenues are lower than '.. '..2018 at this time due to Trinity Care permit issued in early 2018. Intergovernmental Revenue 122,891. 116,447 116,447 892,265 (775,818) 13% Includes Local Government Aid(LGA),Municipal State Aid(MSA)Maintenance,Police and Fire Aid,etc.Recd 1st half of MSA for road maintenance(2nd half will be in July).LGA is paid in two installments,June and December.Police and Fire Aid not received until the fall. Charge for Service 82,798, 74,033 74,033 438,880', (364,847) 17% Includes fire,recreation,school resource officer,etc.charges.Castle Rock and Eureka are billed quarterly for fire charges/contract.Empire,largest amount,billed annually,after '.. '.. year-end/contract.Non-contract(i.e.illegal,hazardous)fire charges are billed as they occurred.Recreation programs are primarily held in the summer.School resource officer is '..billed quarterly. Fines 12,303 13,397 13,397 42,000 (28,603) 32% Fine revenue received a month late,e.g.January received in February. Investment Interest 15,475', 24,649', 24,649 21,900. 2,749 113% Intestment eamings attributable to General Fund's proportionate share of investment '.. '..balances. Miscellaneous 12,655. 12,838 12,838'.. 43,775 (30,937) 29% Includes Sr Center,City Hall rental income,and donations. '.. Franchise Fees 0 0 0 120,000 (120,000)', 0% A portion of the city's franchise fee is used to pay for the city's General Fund operations.The remainder is used to pay for the city's cable operation.Generally,the first payment is not received until the 2nd quarter. '.. Subtotal Revenues 357,529', 307,555', 307,555', 11,763,538 (11,455,983)', 3% '.. Expenditures _........ Legislative 13,564 14,365 14,365 96,447 (82,082) 15%. Administration 60,952 61,888 61,888 295,214' (233,326). 21% Elections 791 0 0 35,867 (35,867), 0% Costs for 2019 will be maintenance costs only. Communications 34,549 27,499 27,499 99,650. (72,151) 28%. City Hall 44,139 65,436 65,436 354,144. (288,708)'. 18% Higher costs in 2019 for custodial staff and donning equipment. Finance and Risk Mgmt 158,440 174,952 174,952 739,736 (564,784) 24% Higher costs in 2019 due to audit invoices paid earlier in the year than 2018. Human Resource 73,048 80,614 80,614 336,447'. (255,833) 24% Additional salary costs due to employee retirement and increased IT costs in 2019. Police Administration 215,174'. 248,948 248,948 873,339 (624,391) 29% On a combined basis Police Admin,Patrol,and Investigations are 24.3%. Patrol Services 692,618 638,828 638,828'. 2,738,524 (2,099,696) 23% On a combined basis Police Admin,Patrol,and Investigations are 24.3%. Investigations 146,661'. 201,989 201,989'. 856,544 (654,555) 24% On a combined basis Police Admin,Patrol,and Investigations are 24.3%. Emergency Management 54 46 46 11,650 (11,604). 0% Fire 180,485 211,428 211,428'. 1,267,885 (1,056,457) 17% Increased salaries from 2018. _.. '.. Engineering 137,766. 144,067 144,067 624,587 (480,520) 23% Planning 94,935 94,306 94,306. 521,0621 (426,756) 18% Building Inspection 101,895'. 98980' 98,980 387,828 (288,848) 26% Natural Resources 6,308 25,345 25,345- 122,583 (97,238) 21% Position vacant the 1st qtr of 2018. '.. Streets 231,909 242,471 242,471 1,146,492 (904,021)', 21% Snow Removal 108,521 177,536 177,536 227,064 (49,528) 78% Sand,salt,vehicle parts,and staff time were higher than a year ago. Park Maintenance 137,348'. 148,819'. 148,819! 671,357 (522,538) 22% Rambling River Center 40,164 41,2521 41,252'. 182,287 (141,035) 23% Park&Rec Admin 61,843'. 63,507 63,507 271,145 (207,638) 23% Rec supervisor hired part way through 2017 resulting in lower expenses for 2017. Recreation Programs 5,429 10,615 10,615 106,804 (96 189) 10% Majority of programming is in the summer Interest Paid _... 0 0 0 0, 0 Bad Debt Expense 0 0 0 0 Subtotal Expenditures 2,546,591'. 2,772,892 2,772,892 11,966,656'. (9,193,764) 23%1, Revenues(Over)Under Expenditure (2,189,062) (2,465,337) (2,465,337) (203,118) (2,262,219) 1,214% Other Financing Transfers In 299,094 311,064'. 311,064 1,244,256 (933192)', 25% Transfers Out (249,936) (500,285) (500,285)', (1,041,138) 540,853 48% Subtotal Other Financing 49,158 (189,221)', (189,221) 203,118 (392,339)', -93% Net Change in Fund Balance (2,139,904) (2,654,558) (2,654,558) 0 (2,654,558) III i 1 T 1 [ [ 1 f 'l''),',,''-1,1'''''''' ° oW II • • • il!Illpill O Z O !>o, -6--I i © ■ _ V w 0 w D ■ • • 3 Oc .- _ 1 1 Ti�� a) E E:1 LL LL O � >' RS ■ • ♦ ^zxarr4 "ms V 0 L • • • c. • • • W IIII 111111111111111.117.1: ♦ • mak '"" z .. 't g .3";N7. .r":✓�. . "; 03 1 11 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 000000000000000 0 0 0 0 0 0 0, c8 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 c ° LC) CLQLO o LU o L() o LO o in o in f- r Co CO LC) LC) 7i_- - c`) M N c £1 69 to to to to Ef3 Eft Ef3 Ef} E/} Ef} EF3 Ef} ooueiee pun j u! o6uou3 EDA, Park Improvement,Arena March 2019 YTD Operating Report March YTD Quarter 1 March YTD March YTD March YTD YTD Company Actual Actual Actual Budget 2019 Actual Budget Act as%of Bud Comment 2018 2019 2019 Variance 2019 2019 EDA EDA Revenues 22,941 1,674 1,674 2,300 (626) 73% Higher revenues in 2018 due to pass-through CDA grant. EDA Expenses 11,213 20,272 20,272 51,427 (31,156) 39% Increased expenses due to Dakota Broadband. EDA Net 11,728 (18,597) (18,597) (49,127) 30,530 38% Revenues/Expenditures Transfers In 0 12,500 12,500 50,000 (37,500) 25% Transfers Out (713) (713) (713) (2,850) 2,138 25% Transfer to Trident TIF district for Dakota County TIF maintenance fees Subtotal Other Financing (713) 11,787 11,787 47,150 (35,363) 25% Net Change in EDA Fund 11,015 (6,810) (6,810) (1,977) (4,833) 344% Balance Park Improvement Park Improvement 1,474 13,898 13,898 27,800 (13,902) 50% Bike-Ped Path Plan grant and farm lease payment Revenues received in 2019. Park Improvement 0 14,232 14,232 307,500 (293,268) 5% Bike-Ped Path Plan. Expenditures Park Improvement Net 1,474 (334) (334) (279,700) 279,366 0% Change in Fund Balance Ice Arena Ice Arena Revenues 115,401 126,794 126,794 356,100 (229,306) 36% Ice Arena Expenditures 100,281 102,697 102,697 352,744 (250,047) 29% Ice Arena-Rev Over 15,120 24,097 24,097 3,356 20,741 718% (Under)Expenditures Ice Arena-Transfers In 0 0 0 0 0 Ice Arena-Transfers Out 5,000 0 0 0 0 No arena capital transfer in 2019. Ice Arena Net Transfers (5,000) 0 0 0 0 Ice Arena Net Change in 10,120 24,097 24,097 3,356 20,741 718% Fund Balance L 4 03 ) _ ( 0) >y_ — Cr) Co CO t T >. N '.2U) _ C _c .c L N L N co L d NY . c a Y 3 o O E dal E m E rn N Y (6 >0) to E U U) U co L U U7 (a C ▪•. L C C Q) LO .0 _c U N Q Q)U) id N CO o O O o N I- L � N N L) U) 3 d N () a N N e. 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C C C C C _ C C N O C C C C C C U U U C 0 U CO D U C U U C U Lc U U U 4-) a x a, A v 'a a>, x a>i 0 cot £ a>, x a, et y d Z 2 W Q x >> R �, a). a>i )9- .:', d 2 W F- Z '� rtW 2 F- F Z `per ceW R F- Z (p d' W Q' F- Z e d' W 2 U) u) to UJ /fttAR , , City of Farmington Ca 430 Third Street Farmington, Minnesota 41 651.280.6800 -Fax 651.280.6899 •A .'° www.ci.farmington.mn.us TO: Mayor, Councilmembers and City Administrator FROM: Teah Malecha, Finance Director SUBJECT: Approve Bills-Finance DATE: May 20, 2019 INTRODUCTION Attached is the May 1 -May 15, 2019 city council check register and recently processed automatic payments for your consideration. DISCUSSION NA BUDGET IMPACT NA ACTION REQUESTED Approve the attached payments. ATTACHMENTS: Type Description D Backup Material Check Register 5/1/19-5/15/19 0 ). 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N a) Z j LU W W LU W W CO Z an a c� C9 0 C7 C7 C7 0 U U 0 v ar cd to m < < < < Hiii 0 <A a c J W Z C0 Cal 0 0• C re 0U' Z D a) w p p - > (p H CC U 0 U 0 0 0 Z W U c aU U 0 U 0 U 0 U U U U U o x W W W W W W W W W W X W E LU J J J J J J J J J J J N m W LU LU LU W LU LU LU W W d' W W N N co co O CA O co O O) O) O 0 co m Q 0: a' Et d' 0= R' W' �' Et d' O d U M 2 2 2 2 2 2 2 m II o N N Co u) o o) oco co co o V N 0 N L o N 7 n 'V, n D) Cl) 192.• C n M C] C) a0 u V (O C] N n n o O a) N Or r M O m E CA -5 o CC 0 E o J m N c �p 0 1 b N T Y a )` 0 o in U) hi 0 U N W t (� N ,, rcpR ►►1 , City of Farmington 430 Third Street Farmington, Minnesota 651.280.6800 -Fax 651.280.6899 `—.A POO' www.ci.farmington.mn.us TO: Mayor, Councilmembers and City Administrator FROM: Cynthia Muller,Administrative Assistant SUBJECT: Therapeutic Massage License for Laura Helvig DATE: May 20, 2019 INTRODUCTION Pursuant to City Ordinance 3-15-8, a public hearing must be held to issue a therapeutic massage license. DISCUSSION Ms. Laura Helvig has applied for a license to practice therapeutic massage at Main Street Day Spa located at 326 Third Street. The required fees have been received and the application has been reviewed by the Farmington Police Department. BUDGET IMPACT The fees collected are included in the revenue estimates of the 2019 budget. ACTION REQUESTED Conduct the public hearing and accept any comments that are made. Once the city council is comfortable, a motion should be made to approve a therapeutic massage license for Laura Helvig at Main Street Day Spa, 326 Third Street. A0 1A6,, , City of Farmington 0 ( 430 Third Street Farmington, Minnesota 651.280.6800 -Fax 651.280.6899 .A www.ci.farmington.mn.us TO: Mayor, Councilmembers and City Administrator FROM: Teah Malecha, Finance Director SUBJECT: 2018 Management and Comprehensive Annual Financial Report DATE: May 20, 2019 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 the city council, staff, citizens, investors, and other interested parties with useful information concerning the city's operations and financial position. DISCUSSION Management assumes full responsibility for the completeness, accuracy, and reliability of the information presented in the CAFR. To provide a reasonable basis for making these representations, management has established a comprehensive internal framework that is designed both to protect the government's assets from loss, theft or misuse, and to provide sufficient, reliable information for the preparation of the city's financial statements in conformity with Generally Accepted Accounting Principles (GAAP). The cost of internal controls should not outweigh their benefits, therefore, the city of Farmington's comprehensive framework of internal control has been designed to provide reasonable,rather than absolute assurance, that the financial statements will be free from material misstatement. As management, we assert that to the best of our knowledge and belief, the financial report is complete and reliable in all material respects. The city's financial records have been audited by Malloy, Montague, Karnowski, Radosevich& Co., P.A. (MMKR). Based upon their audit, they concluded there was a reasonable basis for rendering an unmodified opinion that the City of Farmington's financial statements for the fiscal year ended December 31, 2018 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 film will be at the city council meeting to review this year's audit, provide a financial overview of the city's 2018 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, 2018, 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$113,362,930(net position) at the close of the most recent fiscal year. Of this amount, $22,591,907 (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 $3,792,487 in 2018, of this amount an increase of$3,345,555 was attributable to governmental activities, and an increase of$446,932 was attributable to business-type activities. • The city's total bonded debt decreased by$5,180,000, or 26.0 percent, during the fiscal year due to a combination of scheduled annual bond principle payments and the early retirement of several debt issues that were called early using available city resources. • The city's governmental funds reported combined ending fund balances of$15,318,659 at December 31, 2018, a decrease of$826,912 from the prior year. Approximately 86.1 percent of this total amount, $13,192,928, 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 $5,365,969, or 41.3 percent, of 2019 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, 2017. This was the ninth 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 2018 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. There 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 financial 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. • 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. Thank you to staff 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 great 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. • 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 ID Backup Material 2018 Farmington Comprehensive Annual Financial Report(CAFR) D Backup Material 2018 Farmington.Management Report D Backup Material 2018 Farmington Special Purpose Report Comprehensive Annual Financial Report x ,a or Photo by Joe Burge City of Farmington, Minnesota Year Ended December 31 , 2018 David McKnight - City Administrator Prepared by: Finance Department CITY OF FARMINGTON DAKOTA COUNTY,MINNESOTA Comprehensive Annual Financial Report for the Year Ended December 31, 2018 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 Fiduciary 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 Other Post-Employment Benefits Plan Schedule of Changes in the City's Total OPEB Liability and Related Ratios 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 Nonmaj or Special Revenue Funds 76 Combining Balance Sheet 77 Combining Statement of Revenues,Expenditures,and Changes in Fund Balances 78 Nonmaj or 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 Nonmaj or 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 CITY OF 430 Third St., Farmington,MN 55024 FARM I N GTO N 651-280-6800 '�-- FarmingtonMN.gov nunnn May 13, 2019 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, 2018 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 31,2018,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, 2018, 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 4 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, with a current population estimate of 22,421. 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 14.8 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, 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, a building materials and installation company,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 500 people, respectively. During 2018,a number of new businesses opened or expanded, renovations to the Farmington Mall were completed, and construction commenced on a new building in downtown Farmington and one in the Business Park.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 slightly down in the City. In 2018, the City issued new construction permits for 34 new single-family units, two new multi-family, and two new commercial. The new single-family permits resulted in a total new residential building valuation of$7,229,300.The multi-family building valuation was$377,100 and the two commercial buildings had a valuation of $2,367,152. The number of foreclosures in the City remained relatively flat.There were 21 foreclosures in the city in 2018, up slightly from 17 in 2017. -11- 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 February 2018, the City Council established four priorities for 2018, which include: • Development—Encourage the expansion of residential, commercial, and industrial properties. • Partnerships—Forge opportunities with existing and new partners. • Financial—Continue to take steps to make the City a city of fiscal excellence. • 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 2018,the City 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 benefiting the community.Meanwhile,staff continues to work with the City Council to review and update the City's 2030 financial management plan. During 2018,staff continued to review and revise various capital improvement plans(CIP), including CIP's for streets, trails, and equipment. The City's new fire engine has been ordered and will be delivered in early 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 was able to invest in some higher yields at the end of 2018 and saw its overall investment portfolio increase during 2018.As a result,the City's 2018 investment earnings were higher than 2017. 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. Short-term interest rates increased in 2018 over 2017. The City's average investment balances were slightly higher than the previous year resulting in higher investment earnings than the previous year. Interest rates declined slightly at the end of the fourth quarter in 2018. Changes in interest rates will be considered as the 2020 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 used internal resources, including an interfund loan, to call three outstanding series of bonds early to realize future interest savings. 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 2018, for the fifth 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 41 percent as of December 31, 2018. This increase has been accomplished through sound budgeting, long-term financial planning, lower fuel prices,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. City ordinances continue to be reviewed and updated to provide for new business opportunities.The City Council approved the preliminary plat for a new 135 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.Work also began on a small area study for the redevelopment of the Highway 3 corridor. 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 50 volunteer firefighters. Farmington Municipal Liquor Operations have made tremendous improvements over the past seven 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 six years,the stores have produced an average of over$300,000 per year in profits. Notably, the liquor stores have been able to provide over$1 million since 2005 to city departments and community organizations. The City continues to collaborate with Dakota County, Dakota County Community Development Agency, Dakota County Regional Chamber of Commerce,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, 2017. This is the ninth 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, (0.1go.: David McKnight, City Administrator I, ' . Teah Malecha, Finance Director -vi- GD 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, 2017 akit*Ak. Executive Director/CEO -vii- CITY OF FARMINGTON, MINNESOTA Organizational Chart December 31, 2018 Citizens City Council City Administrator Administration Finance Human Resources Police Fire Liquor Operations Information Technology I I Community Development Engineering Parks and Recreation Municipal Services I I Building Inspections Planning and Solid Waste Division Zoning Division -Vlll- CITY OF FARMINGTON Elected Officials and Executive Staff December 31, 2018 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 Teah Malecha Finance Director Justin Elvestad Fire Chief Brenda Wendlandt Human Resources Director Todd Reiten Municipal Services Director Randy Distad Parks and Recreation Director Gary Rutherford Interim 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 Jaclyn M.Huegel,CPA INDEPENDENT AUDITOR'S REPORT To the City Council and Management City of Farmington,Minnesota REPORT ON THE FINANCIAL STATEMENTS We have audited the accompanying financial statements of the governmental activities,the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Farmington, Minnesota (the City) as of and for the year ended December 31, 2018, 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 Sc 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, 2018, 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 13, 2019 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. 14/61417/ lifOad1.04,44; 1 14d.at aA..moi... " . 4.0.t P. A Minneapolis,Minnesota May 13,2019 -3- THIS PAGE INTENTIONALLY LEFT BLANK CITY OF FARMINGTON Management's Discussion and Analysis Year Ended December 31,2018 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, 2018. 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 $113,362,930 (net position) at the close of the most recent fiscal year. Of this amount, $22,591,907 (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 $3,792,487 in 2018, including an increase of $3,345,555 attributable to governmental activities, and an increase of $446,932 attributable to business-type activities. • The City's outstanding bonded debt decreased by $5,180,000, or 26.0 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 called early using available city resources. • The City's governmental funds reported combined ending fund balances of $15,318,659 at December 31, 2018, a decrease of$826,912 from the prior year. Approximately 86.1 percent of this total amount, $13,192,928, 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 $5,365,969, or 41.3 percent, of 2019 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 $113,362,930 at December 31,2018. City of Farmington's Net Position Governmental Activities Business-Type Activities Total 2018 2017 2018 2017 2018 2017 Current and other assets $ 23,120,625 $ 23,576,767 $ 18,275,116 $ 16,875,572 $ 41,395,741 $ 40,452,339 Capital assets,net 48,183,984 49,408,406 50,747,479 51,464,649 98,931,463 100,873,055 Total assets $ 71,304,609 $ 72,985,173 $ 69,022,595 $ 68,340,221 $140,327,204 $141,325,394 Deferred outflows of resources $ 4,525,492 $ 5,954,677 $ 112,331 $ 158,917 $ 4,637,823 $ 6,113,594 Current liabilities $ 1,473,994 $ 7,202,593 $ 579,717 $ 430,501 $ 2,053,711 $ 7,633,094 Long-term liabilities 22,519,969 22,878,191 758,004 729,628 23,277,973 23,607,819 Total liabilities $ 23,993,963 $ 30,080,784 $ 1,337,721 $ 1,160,129 $ 25,331,684 $ 31,240,913 Deferred inflows of resources $ 6,131,480 $ 6,499,963 $ 138,933 $ 127,669 $ 6,270,413 $ 6,627,632 Net position Net investment in capital assets $ 32,909,853 $ 28,820,307 $ 50,747,479 $ 51,464,649 $ 83,657,332 $ 80,284,956 Restricted 4,797,191 6,961,837 2,316,500 2,238,206 7,113,691 9,200,043 Unrestricted 7,997,614 6,576,959 14,594,293 13,508,485 22,591,907 20,085,444 Total net position $ 45,704,658 $ 42,359,103 $ 67,658,272 $ 67,211,340 $113,362,930 $109,570,443 The largest portion of the City's net position, $83,657,332, or 74 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$7,113,691 comprised 6 percent of net position at the close of the fiscal year ended December 31,2018. These assets are subject to external restrictions on how they may be used. The balance of unrestricted net position, $22,591,907, or approximately 20 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, 2018 with comparative totals for the year ended December 31, 2017. The City's net position increased by$3,792,487,or 3.5 percent,during the current fiscal year. City of Farmington's Change in Net Position Governmental Activities Business-Type Activities Total 2018 2017 2018 2017 2018 2017 Revenues Charges for services $ 1,859,036 $ 1,535,134 $ 12,190,215 $ 11,651,596 $ 14,049,251 $ 13,186,730 Operating grants and contributions 702,853 684,376 30,263 24,000 733,116 708,376 Capital grants and contributions 942,627 848,167 - - 942,627 848,167 Property taxes 12,659,480 12,181,830 - - 12,659,480 12,181,830 Other taxes 266,324 266,728 - - 266,324 266,728 Unrestricted grants 316,100 289,854 - - 316,100 289,854 Investment earnings 239,714 200,851 200,144 129,207 439,858 330,058 Gain on disposal of capital assets 531 54,408 - - 531 54,408 Total revenues 16,986,665 16,061,348 12,420,622 11,804,803 29,407,287 27,866,151 Expenses General government 2,511,818 2,178,067 - - 2,511,818 2,178,067 Public safety 5,728,925 6,472,115 - - 5,728,925 6,472,115 Public works 4,358,465 3,888,778 - - 4,358,465 3,888,778 Parks and recreation 1,772,351 1,782,783 - - 1,772,351 1,782,783 Economic development 30,000 40,000 - - 30,000 40,000 Interest on long-term debt 350,431 549,075 - - 350,431 549,075 Liquor - - 4,890,304 4,634,488 4,890,304 4,634,488 Sewer - - 1,931,276 2,105,901 1,931,276 2,105,901 Solid waste - - 2,092,844 1,864,175 2,092,844 1,864,175 Storm water - - 521,465 571,572 521,465 571,572 Water - - 1,246,667 1,313,482 1,246,667 1,313,482 Street light - - 180,254 197,150 180,254 197,150 Total expenses 14,751,990 14,910,818 10,862,810 10,686,768 25,614,800 25,597,586 Change in net position before transfers 2,234,675 1,150,530 1,557,812 1,118,035 3,792,487 2,268,565 Transfers 1,110,880 1,939,974 (1,110,880) (1,939,974) - - Change in net position 3,345,555 3,090,504 446,932 (821,939) 3,792,487 2,268,565 Netposition-beginning 42,359,103 39,268,599 67,211,340 68,033,279 109,570,443 107,301,878 Netposition-ending $ 45,704,658 $ 42,359,103 $ 67,658,272 $ 67,211,340 $113,362,930 $109,570,443 Governmental Activities-Governmental activities increased the City's net position before transfers by $2,234,675,primarily due to the City's continued efforts to reduce outstanding long-term debt. Business-Type Activities-Business-type activities increased the City's net position before transfers by $1,557,812, as program revenues exceeded expenses for all activities. -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% 1% Grants and 6% Charges for Services --"7"-- Contribution 11% 4% Other Taxes ', 2% Property Taxes 74% 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 $6,000,000 $5,500,000 $5,000,000 $4,500,000 $4,000,000 $3,500,000 $3,000,000 ill J 0111 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 Ell$ Interest on General Parks and Economic Government Public Safety Public Works Long-Tenn Recreation Development Debt •Program Revenues $505,879 $872,743 $1,403,632 $722,262 $- $- ■Expenses $2,511,818 $5,728,925 $4,358,465 $1,772,351 $30,000 $350,431 -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 2% <1% Charges for Services 98% 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 $5,500,000 $4,500,000 $3,500,000 $2,500,000 $1,500,000 $500,00011111 111..0111.11 $(500,000) Liquor Fund Sewer Solid Waste Storm Water Water Fund Street Light Operations •Program Revenues $5,256,645 $2,045,728 $2,101,935 $737,115 $1,852,381 $226,674 •Expenses $4,890,304 $1,931,276 $2,092,844 $521,465 $1,246,667 $180,254 -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 $15,318,659, a 5.1 percent decrease of $826,912 from 2017. The decrease is mainly attributable to the use of$2,215,000 of available resources to exercise early call provisions and retire the outstanding principal of three prior bond issuances on February 1, 2018. Meanwhile, fund balances in the City's capital projects funds (major and nonmajor) increased by a combined total of$1,081,752, as the various revenue sources and transfers into these funds exceeded current year capital outlay. Committed and unassigned fund balances, which are available for spending at the government's discretion, had a combined balance of $13,192,928 at year-end. The remainder of the fund balance is either nonspendable ($116,102), or restricted to indicate that it is not available for new spending because it has already been obligated 1) to pay debt service ($1,624,162), 2)to pay for capital improvements and future cable communication expenditures ($168,148), 3) for park improvements ($201,907), and 4) the remainder is from donations and other restricted funds($15,412). 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 2018, the unassigned fund balance of the General Fund was $5,365,969. As a measure of the General Fund's liquidity, it may be useful to compare the fund balance to total fund expenditures. The 2018 unassigned fund balance represents 41.3 percent of total 2019 General Fund budgeted expenditures and transfers out, down from 44.9 percent for the December 31, 2017 unassigned fund balance as a percentage of the 2018 General Fund budgeted expenditures and transfers out. Total fund balances increased by $21,359 in the General Fund during the 2018 fiscal year. The reason for the decrease in unassigned fund balance is mainly due to the commitment of$240,000 of General Fund balance at December 31, 2018 for reduction of the City's 2019 debt levy. 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 41.3 percent as of December 31, 2018. 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 tight budgetary control of expenditures, which has resulted in the strengthening of the General Fund's balance over that period. 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, 2018, the City's General Fund balance meets the minimum fund balance guideline. -11- Debt Service Fund — During the year, the City repaid $5,180,000 in bond principal, including $2,215,000 called prior to maturity. The fund balance in the Debt Service Fund decreased$2,107,185, primarily due to the early call of three outstanding debt issues as part of the City's long-term debt management plan. State Aid Construction Capital Projects Fund — As the City currently has no significant improvement projects in process on eligible state aid streets, the first priority for this fund's fund balance currently is to provide for debt service payments, as needed, for certain bonds in the Debt Service Fund. During 2018, the amount transferred to the related bond account in the Debt Service Fund was $180,000. The overall effect is a net decrease of$167,651 in this fund's balance. Storm Water Trunk Capital Projects Fund— The increase of$315,800 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 interfund loans from the Storm Water Trunk Capital Projects Fund to redeem several outstanding bond issues in recent years. The interfund advances will be repaid with interest through future tax levies. Permanent Improvement Revolving Capital Projects Fund— There were no new projects in this fund during 2018. There was a modest increase in the fund balance of $2,463 from special assessments and investment income received. Maintenance Capital Projects Fund — The increase of$593,285 in fund balance was due to state aid, along with various other revenue sources and transfers in, exceeding current year capital outlay expenditures. Total fund balances in the City's nonmajor governmental funds increased $515,017 in fiscal 2018, to a year-end total of $3,019,821. Financial highlights for some of the significant changes in the City's nonmajor governmental funds are as follows: Park improvement Special Revenue Fund — During 2018, increases in park dedication and development fees resulted in a fund balance increase of$205,612 to a year-end balance of$463,562. Fire Capital Projects Fund — In 2013, the City adopted a long-term capital equipment plan for its fire department. The decrease in fund balance of$395,516 is due to a$534,018 down payment made on a new 2019 Pierce Impel Pumper Truck, offset by a combination of planned transfers in for equipment replacement and donations from the Farmington Fire Fighters' Relief Association. General Capital Equipment Capital Projects Fund—The increase in fund balance of$720,611 is mainly a result of a $600,000 transfer in from the General Fund to support future expenditures to address police vehicle and equipment needs, as well as general city vehicle replacements. -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 2018,the City's liquor stores' community investment fund dollars were used to purchase park vehicles and entrance sign lighting, and to support the plaza design as part of the Downtown Redevelopment Project. The net position of the Liquor Operations Fund at the end of 2018 totaled $1,338,985, an increase of$187,272, which is net of the $137,569 in funds contributed to community projects noted above. The cash position for both stores has continued to strengthen, increasing from a combined total of$1,123,054 at December 31,2017 to$1,415,691 as of December 31,2018. Sewer Operations Fund—The decrease in net position of$148,891 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$3,690,094. Solid Waste Fund — The Solid Waste Fund net position decreased by $47,115. This fund is experiencing increased costs related to increased disposal fees and quantities being disposed. In addition, part of the decrease is attributable to the budgeted transfers made in 2018. There was a fee increase that went into effect January 2013 to offset some of the expenses incurred. Storm Water Fund — The increase in net position of $86,540 is primarily due to the capital contribution from the Storm Water Trunk Capital Projects Fund of $229,175, offset by budgeted transfers made in 2018.This fund continues to maintain an unrestricted net position of$1,189,716. Water Fund—The increase in net position of$321,263 is primarily due to development fees paid in the current year for the Regetta Fields development project and a reduction in budgeted transfers made in 2018. 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$7,176,247. Street Light Fund—The Street Light Fund was established in 2010.By making this a utility fund, all properties, including tax-exempt properties, within the City pay for street lighting. After its ninth year of operation,this fund has achieved a modest positive net position of$143,383. -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 $191,966 more than budgeted. Revenue variances from final budget to actual include: • Licenses and permits revenues came in over budget by $38,939, due to an increase in permit valuations from 2017 to 2018 that was not anticipated in the budget. • Intergovernmental revenue was $78,614 over budget, mainly due to higher than anticipated state fire aid. • Charges for services were $39,637 higher than budgeted as a result of fire charges billed to a neighboring township exceeding budget. • Fines and forfeits revenues were $25,182 more than budgeted, due to an increase in court fines revenue received in the current year that was not anticipated in the budget. Expenditures were $450,073 less than the budgeted amount. The City benefited from lower salaries and benefits costs partially attributable to vacant positions and natural attrition, as well as lower than anticipated replacement parts and equipment costs. 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, 2018 was $98,931,463 (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 1.9 percent,mainly due to depreciation. City of Farmington's Capital Assets Governmental Activities Business-Type Activities Total 2018 2017 2018 2017 2018 2017 Land and easement $ 1,749,824 $ 1,749,824 $ 414,576 $ 414,576 $ 2,164,400 $ 2,164,400 Buildings 14,970,309 15,395,422 — 45,491 14,970,309 15,440,913 Improvements other than buildings 325,845 367,373 — — 325,845 367,373 Machinery and equipment 1,918,313 1,386,511 907,864 315,609 2,826,177 1,702,120 Infrastructure 29,219,693 30,509,276 — — 29,219,693 30,509,276 Collection/distribution systems — — 49,272,779 50,688,973 49,272,779 50,688,973 Construction in progress — — 152,260 152,260 — Total(net of depreciation) $ 48,183,984 $ 49,408,406 $ 50,747,479 $ 51,464,649 $ 98,931,463 $100,873,055 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 $14,730,000. 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$551,475 for unamortized bond premiums, $1,065,224 for compensated absences, $5,818,950 for net pension liabilities, and $1,112,324 for other post-employment benefits. -14- City of Farmington's Outstanding Debt Governmental Activities Business-Type Activities Total 2018 2017 2018 2017 2018 2017 General obligation improvement bonds $ 9,115,000 $ 11,430,000 $ — $ — $ 9,115,000 $ 11,430,000 Capital improvement bonds 5,615,000 6,170,000 — — 5,615,000 6,170,000 Public Project Revenue Bond — 1,765,000 — — — 1,765,000 Revenue bonds — 545,000 — — — 545,000 Total bonds outstanding $ 14,730,000 $ 19,910,000 $ — $ — $ 14,730,000 $ 19,910,000 The City elected to redeem the 2019 maturity of one outstanding debt issue, and the 2019 through 2022 maturities of two other debt issues in advance of their stated maturities using available internal resources totaling$2,215,000. Bond principal repayments during 2018 totaled$5,180,000,including the$2,215,000 called prior to maturity. 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 $54,324,795, 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 2019 by $302,493. The final city total net tax levy for 2019 is $10,795,765 and is 2.87 percent higher than the comparable 2018 levy. Of the total General Fund budgeted revenues, including transfers in for 2019, 75.4 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 2019 General Fund expenditures, including transfers out, are estimated at $13,007,794, an increase of 3.0 percent compared to the 2018 budget. The 2019 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. The City's financial plan provides for the next large-scale street improvement project in 2019. For 2019,the City is continuing to focus on updating the 2040 Comprehensive Plan, which is in the final draft phase. 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 early 2019. 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 31,2018 Primary Government Component Unit Economic Governmental Business-Type Development Activities Activities Total Authority Assets Cash and investments $ 17,175,240 $ 13,712,862 $ 30,888,102 $ 323,800 Receivables Accounts 326,129 1,364,834 1,690,963 - Interest 40,387 37,635 78,022 636 Property taxes 1,237,583 - 1,237,583 - Special assessments 3,151,776 304,202 3,455,978 - Due from other governments 13,707 - 13,707 - Loan 111,057 - 111,057 - Inventory - 536,029 536,029 - Prepaid items 20,882 3,054 23,936 595 Restricted assets-temporarily restricted Cash for future drinking water treatment plant - 2,316,500 2,316,500 - Net pension asset-fire relief 1,043,864 - 1,043,864 - Capital assets Not depreciated 1,749,824 566,836 2,316,660 - Depreciated,net of accumulated depreciation 46,434,160 50,180,643 96,614,803 - Total capital assets,net of accumulated depreciation 48,183,984 50,747,479 98,931,463 - Total assets 71,304,609 69,022,595 140,327,204 325,031 Deferred outflows of resources Pension plan deferments-PERA 4,081,695 105,235 4,186,930 - Pension plan deferments-fire relief 385,246 - 385,246 - OPEB plan deferments 58,551 7,096 65,647 - Total deferred outflows of resources 4,525,492 112,331 4,637,823 - Total assets and deferred outflows of resources $ 75,830,101 $ 69,134,926 $ 144,965,027 $ 325,031 Liabilities Accounts and contracts payable $ 369,623 $ 471,920 $ 841,543 $ 20,898 Accrued salaries and employee benefits payable 386,310 - 386,310 - Accrued interest payable 141,973 - 141,973 - Deposits payable 575,230 32,000 607,230 - Due to other govemments 858 75,797 76,655 - Long-term liabilities Due within one year 3,154,550 79,371 3,233,921 - Due in more than one year 19,365,419 678,633 20,044,052 - Total long-term liabilities 22,519,969 758,004 23,277,973 - Total liabilities 23,993,963 1,337,721 25,331,684 20,898 Deferred inflows of resources Pension plan deferments-PERA 5,846,102 138,933 5,985,035 - Pension plan deferments-fire relief 285,378 - 285,378 - Total deferred inflows of resources 6,131,480 138,933 6,270,413 - Net position Net investment in capital assets 32,909,853 50,747,479 83,657,332 - Restricted for Debt service 3,267,992 - 3,267,992 - Capital projects 168,148 - 168,148 - Police programs 15,412 - 15,412 - Park improvements 201,907 - 201,907 - Fire relief pensions 1,143,732 - 1,143,732 - Water Fund-future drinking water treatment plant - 2,316,500 2,316,500 - Unrestricted 7,997,614 14,594,293 22,591,907 304,133 Total net position 45,704,658 67,658,272 113,362,930 304,133 Total liabilities,deferred inflows of resources,and net position $ 75,830,101 $ 69,134,926 $ 144,965,027 $ 325,031 See notes to basic financial statements -16- CITY OF FARMINGTON Statement of Activities Year Ended December 31,2018 Program Revenues Operating Capital Charges for Grants and Grants and Functions/Programs Expenses Services Contributions Contributions Primary government Governmental activities General government $ 2,511,818 $ 467,417 $ 38,462 $ — Public safety 5,728,925 408,434 412,284 52,025 Public works 4,358,465 273,695 239,352 890,585 Parks and recreation 1,772,351 709,490 12,755 17 Economic development 30,000 — — — Interest and fiscal charges 350,431 — — — Total governmental activities 14,751,990 1,859,036 702,853 942,627 Business-type activities Liquor operations 4,890,304 5,256,645 — — Sewer operations 1,931,276 2,045,728 - — Solid waste 2,092,844 2,071,672 30,263 — Storm water 521,465 737,115 — — Water 1,246,667 1,852,381 — — Street light 180,254 226,674 — — Total business-type activities 10,862,810 12,190,215 30,263 — Total primary government $ 25,614,800 $ 14,049,251 $ 733,116 $ 942,627 Component unit Economic development authority $ 105,881 $ — $ 54,659 $ — General revenues Property taxes Franchise taxes Grants and contributions not restricted to specific programs Investment earnings Gain on disposal of capital assets Transfers—capital assets Transfers—internal activities Total general revenues and transfers Change in net position Net position—beginning Net position—ending See notes to basic financial statements -17- Net(Expense)Revenue and Changes in Net Position Primary Government Component Unit Economic Governmental Business-Type Development Activities Activities Total Authority $ (2,005,939) $ — $ (2,005,939) $ — (4,856,182) — (4,856,182) — (2,954,833) — (2,954,833) — (1,050,089) — (1,050,089) — (30,000) — (30,000) — (350,431) — (350,431) — (11,247,474) — (11,247,474) — 366,341 366,341 — 114,452 114,452 - - 9,091 9,091 - - 215,650 215,650 - - 605,714 605,714 - - 46,420 46,420 - - 1,357,668 1,357,668 — (11,247,474) 1,357,668 (9,889,806) — - — — (51,222) 12,659,480 — 12,659,480 39,463 266,324 — 266,324 — 316,100 — 316,100 — 239,714 200,144 439,858 4,188 531 — 531 — (229,175) 229,175 — — 1,340,055 (1,340,055) — — 14,593,029 (910,736) 13,682,293 43,651 3,345,555 446,932 3,792,487 (7,571) 42,359,103 67,211,340 109,570,443 311,704 $ 45,704,658 $ 67,658,272 $ 113,362,930 $ 304,133 -18- CITY OF FARMINGTON Balance Sheet Governmental Funds as of December 31,2018 Capital Projects— Debt Service State Aid General Fund Construction Assets Cash and investments $ 4,555,548 $ 3,328,736 $ 115,996 Receivables Accounts 197,707 — — Interest 11,882 8,151 272 Property taxes Unremitted 1,111,008 — — Delinquent 126,575 — — Special assessments Delinquent — 135,914 — Noncurrent 2,155 1,649,889 239,071 Due from other funds — — — Advances to other funds — — — Due from other governments 9,934 — — Loan 111,057 — — Prepaid items 5,045 — — Total assets $ 6,130,911 $ 5,122,690 $ 355,339 Liabilities Accounts and contracts payable $ 227,003 $ — $ — Deposits payable 52,950 — — Due to other governments 157 — — Due to other funds — 717,721 — Advances from other funds — 995,004 — Total liabilities 280,110 1,712,725 — Deferred inflows of resources Unavailable revenue—property taxes 126,575 — — Unavailable revenue—special assessments 2,155 1,785,803 239,071 Total deferred inflows of resources 128,730 1,785,803 239,071 Fund balances Nonspendable 116,102 — — Restricted — 1,624,162 — Committed 240,000 — 116,268 Unassigned 5,365,969 — — Total fund balances 5,722,071 1,624,162 116,268 Total liabilities,deferred inflows of resources,and fund balances $ 6,130,911 $ 5,122,690 $ 355,339 See notes to basic financial statements -19- Capital Capital Projects- Projects- Permanent Capital Storm Water Improvement Projects- Trunk Revolving Maintenance Nonmajor Total $ 1,467,356 $ 167,596 $ 1,530,220 $ 3,456,763 $ 14,622,215 128,233 325,940 3,203 393 3,944 6,554 34,399 - - - 1,111,008 - - - - 126,575 344 - 128 136,386 - 1,123,903 - 372 3,015,390 717,721 - - - 717,721 995,004 - - - 995,004 - - - 3,773 13,707 - - - - 111,057 - - - 5,045 $ 3,183,284 $ 1,292,236 $ 1,534,164 $ 3,595,823 $ 21,214,447 $ 11,459 $ - $ 37,641 $ 52,637 $ 328,740 - - - 522,237 575,187 - - - 628 785 - 717,721 - - - - 995,004 11,459 - 37,641 575,502 2,617,437 - - 126,575 1,124,247 - 500 3,151,776 - 1,124,247 - 500 3,278,351 - - - - 116,102 - - - 385,467 2,009,629 3,171,825 167,989 1,496,523 2,634,354 7,826,959 - - - - 5,365,969 3,171,825 167,989 1,496,523 3,019,821 15,318,659 $ 3,183,284 $ 1,292,236 $ 1,534,164 $ 3,595,823 $ 21,214,447 -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 31,2018 Total fund balances—governmental funds $ 15,318,659 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 88,726,104 Less accumulated depreciation (40,567,814) Net pension assets are only recorded in the government-wide financial statements as they are not current financial resources to governmental funds. 1,043,864 Long-term liabilities are not payable with current financial resources and,therefore, are not reported in governmental funds. Bonds (14,730,000) Unamortized bond premiums (551,475) Compensated absences (936,741) Net pension liability (5,280,168) Total OPEB liability (998,927) 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. (141,973) 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. 2,150,766 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 126,575 Delinquent and deferred special assessments 3,151,776 Governmental funds do not report certain long-term amounts related to pensions that are included in net position. Deferred outflows—pension plan deferments 4,466,941 Deferred outflows—OPEB plan deferments 58,551 Deferred inflows—pension plan deferments (6,131,480) Total net position—governmental activities $ 45,704,658 See notes to basic financial statements -21- CITY OF FARMINGTON Statement of Revenues,Expenditures,and Changes in Fund Balances Governmental Funds Year Ended December 31,2018 Capital Projects— Debt Service State Aid General Fund Construction Revenues Property taxes $ 9,450,249 $ 3,047,373 $ — Franchise taxes 120,000 — — Special assessments 4,300 298,910 9,660 Licenses and permits 449,350 — — Intergovernmental 965,250 — — Charges for services 479,637 — — Fines and forfeits 60,182 — — Investment earnings 49,053 19,769 2,713 Other 48,582 — — Total revenues 11,626,603 3,366,052 12,373 Expenditures Current General government 2,246,116 — — Public safety 5,328,765 — — Public works 2,275,034 — 24 Parks and recreation 1,193,213 — — Economic development 30,000 — — Capital outlay General government 2,111 — — Public safety 77,629 — — Public works 3,808 — — Parks and recreation 24,520 — — Debt service Principal — 5,180,000 — Interest and fiscal charges — 473,237 — Total expenditures 11,181,196 5,653,237 24 Excess(deficiency)of revenues over expenditures 445,407 (2,287,185) 12,349 Other financing sources(uses) Sale of capital assets — — — Transfers in 1,196,376 180,000 — Transfers out (1,620,424) — (180,000) Total other financing sources(uses) (424,048) 180,000 (180,000) Net change in fund balances 21,359 (2,107,185) (167,651) Fund balances Beginning of year 5,700,712 3,731,347 283,919 End of year $ 5,722,071 $ 1,624,162 $ 116,268 See notes to basic financial statements -22- Capital Capital Projects- Projects- Permanent Capital Storm Water Improvement Projects- Trunk Revolving Maintenance Nonmajor Total $ 166,000 $ - $ 2,099 $ - $ 12,665,721 146,324 266,324 23 271 - 1,430 314,594 - - - 449,350 105,650 - 688,686 8,633 1,768,219 168,278 - 12,085 434,360 1,094,360 - - 60,182 80,136 2,192 20,810 35,295 209,968 - - 256,432 305,014 520,087 2,463 723,680 882,474 17,133,732 - - - 64,908 2,311,024 - - - 20,123 5,348,888 543 - 414,670 - 2,690,271 - - 7,550 395,161 1,595,924 - - - - 30,000 - 29,260 31,371 - - - 896,652 974,281 229,175 - 111,769 163,990 508,742 - - - 58,277 82,797 - 5,180,000 25,662 - 4,162 - 503,061 255,380 - 538,151 1,628,371 19,256,359 264,707 2,463 185,529 (745,897) (2,122,627) - - - 11,000 11,000 51,093 - 517,608 1,269,914 3,214,991 - - (109,852) (20,000) (1,930,276) 51,093 - 407,756 1,260,914 1,295,715 315,800 2,463 593,285 515,017 (826,912) 2,856,025 165,526 903,238 2,504,804 16,145,571 $ 3,171,825, $ 167,989 $ 1,496,523 $ 3,019,821 $ 15,318,659 -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 31,2018 Total net change in fund balances—governmental funds $ (826,912) 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 1,123,773 Depreciation expense (2,101,207) Transfers of capital assets to business-type activities (229,175) A gain or loss on the disposal of capital assets, including the difference between the carrying value and any related sale proceeds,is included in the change in net position. However,only the sale proceeds are included in the change in fund balance. Net book value of capital assets disposed (10,469) Net pension assets are included in net position, but are excluded from fund balances because they do not represent financial resources. 265,508 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 5,180,000 Debt premiums 93,586 Compensated absences (40,996) Net pension liability 1,121,028 Total OPEB liability (127,479) 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. 59,044 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. 121,970 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 (6,241) Delinquent and deferred special assessments (216,173) 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 (1,487,736) Deferred outflows—OPEB plan deferments 58,551 Deferred inflows—pension plan deferments 368,483 Change in net position—governmental activities $ 3,345,555 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 31,2018 Original and Variance With Final Budget Actual Final Budget Revenues Property taxes $ 9,467,815 $ 9,450,249 $ (17,566) Franchise taxes 120,000 120,000 - Special assessments - 4,300 4,300 Licenses and permits 410,411 449,350 38,939 Intergovernmental 886,636 965,250 78,614 Charges for services 440,000 479,637 39,637 Fines and forfeits 35,000 60,182 25,182 Investment earnings 31,000 49,053 18,053 Other 43,775 48,582 4,807 Total revenues 11,434,637 11,626,603 191,966 Expenditures Current General government 2,322,387 2,246,116 (76,271) Public safety 5,624,685 5,328,765 (295,920) Public works 2,386,501 2,275,034 (111,467) Parks and recreation 1,277,496 1,193,213 (84,283) Economic development - 30,000 30,000 Capital outlay General government - 2,111 2,111 Public safety 15,000 77,629 62,629 Public works - 3,808 3,808 Parks and recreation 5,200 24,520 19,320 Total expenditures 11,631,269 11,181,196 (450,073) Excess(deficiency)of revenues over expenditures (196,632) 445,407 642,039 Other financing sources(uses) Transfers in 1,196,376 1,196,376 - Transfers out (999,744) (1,620,424) (620,680) Total other financing sources(uses) 196,632 (424,048) (620,680) Net change in fund balances $ - 21,359 $ 21,359 Fund balances Beginning of year 5,700,712 End of year $ 5,722,071 See notes to basic financial statements -25- CITY OF FARMINGTON Statement of Net Position Proprietary Funds as of December 31,2018 Business-Type Activities-Enterprise Funds Liquor Sewer Solid Storm Operations Operations Waste Water Assets Current assets Cash and investments $ 1,415,691 $ 2,975,577 $ 1,077,394 $ 1,033,653 Cash restricted for drinking water treatment plant - - - - Receivables Accounts 48,402 419,485 452,830 163,448 Interest 3,357 6,980 2,526 2,425 Delinquent special assessments - 26,360 - - Inventory 536,029 - - - Prepaid items 3,054 - - - Total current assets 2,006,533 3,428,402 1,532,750 1,199,526 Noncurrent assets Special assessments - 277,842 - - Capital assets Land - 85,000 - 1,192 Buildings - - - - Improvements other than buildings 121,012 - - - Machinery and equipment 242,513 810,103 1,568,895 226,277 Distribution system - - - - Collection system - 28,273,060 - 20,411,546 Construction in progress - - - - Less accumulated depreciation (363,525) (12,303,861) (1,187,653) (7,409,263) Total capital assets(net of accumulated depreciation) - 16,864,302 381,242 13,229,752 Total noncurrent assets - 17,142,144 381,242 13,229,752 Total assets 2,006,533 20,570,546 1,913,992 14,429,278 Deferred outflows of resources Pension plan deferments-PERA 59,195 - 46,040 - OPEB plan deferments 3,945 - 3,151 - Total deferred outflows of resources 63,140 - 49,191 - Total assets and deferred outflows of resources $ 2,069,673 $ 20,570,546 $ 1,963,183 $ 14,429,278 Liabilities Current liabilities Accounts and contracts payable $ 191,470 $ 13,665 $ 96,031 $ 9,810 Accrued salaries and employee benefits payable - - - - Deposits payable - - - - Due to other governments 49,765 2,485 22,558 - Compensated absences payable-current 36,570 - 42,801 - Total current liabilities 277,805 16,150 161,390 9,810 Noncurrent liabilities Compensated absences payable 12,188 - 14,266 Net pension liability-PERA 303,065 - 235,717 - Total OPEB liability 59,480 - 53,917 - Total noncurrent liabilities 374,733 - 303,900 - Total liabilities 652,538 16,150 465,290 9,810 Deferred inflows of resources Pension plan deferments-PERA 78,150 - 60,783 - Net position Investment in capital assets - 16,864,302 381,242 13,229,752 Restricted for drinking water treatment plant - - - - Unrestricted 1,338,985 3,690,094 1,055,868 1,189,716 Total net position 1,338,985 20,554,396 1,437,110 14,419,468 Total liabilities,deferred inflows of resources,and net position $ 2,069,673 $ 20,570,546 $ 1,963,183 $ 14,429,278 See notes to basic financial statements -26- Governmental Street Activities- Water Light Total Internal Service $ 7,071,811 $ 138,736 $ 13,712,862 $ 2,553,025 2,316,500 - 2,316,500 - 248,482 32,187 1,364,834 189 22,021 326 37,635 5,988 26,360 - 536,029 - - 3,054 15,837 9,658,814 171,249 17,997,274 2,575,039 277,842 - 328,384 - 414,576 - 3,243,203 - 3,243,203 - - 121,012 - 499,828 - 3,347,616 116,173 32,511,466 - 32,511,466 - 48,684,606 - 152,260 - 152,260 - (16,462,958) - (37,727,260) (90,479) 20,272,183 - 50,747,479 25,694 20,272,183 - 51,025,321 25,694 29,930,997 171,249 69,022,595 2,600,733 - - 105,235 - 7,096 - 112,331 - $ 29,930,997 $ 171,249 $ 69,134,926 $ 2,600,733 $ 133,078 $ 27,866 $ 471,920 $ 40,883 - - 386,310 32,000 - 32,000 43 989 - 75,797 73 - 79,371 22,658 166,067 27,866 659,088 449,967 - - 26,454 - - - 538,782 - 113,397 - 678,633 - 166,067 27,866 1,337,721 449,967 138,933 - 20,272,183 - 50,747,479 25,694 2,316,500 - 2,316,500 - 7,176,247 143,383 14,594,293 2,125,072 29,764,930 143,383 67,658,272 2,150,766 $ 29,930,997 $ 171,249 $ 69,134,926 $ 2,600,733 -27- CITY OF FARMINGTON Statement of Revenues,Expenses,and Changes in Fund Net Position Proprietary Funds Year Ended December 31,2018 Business-Type Activities-Enterprise Funds Liquor Sewer Solid Storm Operations Operations Waste Water Operating revenue Sales $ 5,252,866 $ - $ - $ - Charges for services - 2,044,331 2,067,169 737,115 Insurance reimbursement - - - - Miscellaneous 3,779 1,397 4,503 - Total operating revenue 5,256,645 2,045,728 2,071,672 737,115 Cost of goods sold 3,923,968 - - - Gross profit 1,332,677 2,045,728 2,071,672 737,115 Operating expenses Personal services 495,787 2,006 420,411 3,180 Professional services 452,076 1,318,876 1,475,666 93,047 Materials and supplies 18,473 13,207 123,832 12,484 Insurance - - - - Depreciation - 596,750 81,435 424,754 Total operating expenses 966,336 1,930,839 2,101,344 533,465 Operating income(loss) 366,341 114,889 (29,672) 203,650 Nonoperating revenues(expenses) Intergovernmental - - 30,263 - Investment earnings 15,308 35,151 16,814 12,654 Gain on sale of capital assets - 1,500 8,500 12,000 Interest and fiscal charges - (1,937) - - Total nonoperating revenues(expenses) 15,308 34,714 55,577 24,654 Income before transfers and capital contributions 381,649 149,603 25,905 228,304 Transfers and capital contributions Capital contributions-from other funds - - - 229,175 Transfers in 66,846 - Transfers out (194,377) (298,494) (139,866) (370,939) Total transfers and capital contributions (194,377) (298,494) (73,020) (141,764) Change in net position 187,272 (148,891) (47,115) 86,540 Net position Beginning of year 1,151,713 20,703,287 1,484,225 14,332,928 End of year $ 1,338,985 $ 20,554,396 $ 1,437,110 $ 14,419,468 See notes to basic financial statements -28- Governmental Street Activities- Water Light Total Internal Service $ - $ - $ 5,252,866 $ - 1,613,716 226,250 6,688,581 2,923,970 - - 256,153 238,665 424 248,768 - 1,852,381 226,674 12,190,215 3,180,123 - 3,923,968 - 1,852,381 226,674 8,266,247 3,180,123 8,361 - 929,745 2,458,634 373,533 180,254 3,893,452 286,395 134,828 - 302,824 164,542 - - - 237,113 730,940 - 1,833,879 7,344 1,247,662 180,254 6,959,900 3,154,028 604,719 46,420 1,306,347 26,095 - - 30,263 10,789 118,774 1,443 200,144 29,746 1,000 - 23,000 - (5) - (1,942) - 119,769 1,443 251,465 40,535 724,488 47,863 1,557,812 66,630 - - 229,175 - 66,846 55,340 (403,225) - (1,406,901) - (403,225) - (1,110,880) 55,340 321,263 47,863 446,932 121,970 29,443,667 95,520 67,211,340 2,028,796 $ 29,764,930 $ 143,383 $ 67,658,272 $ 2,150,766 -29- CITY OF FARMINGTON Statement of Cash Flows Proprietary Funds Year Ended December 31,2018 Business-Type Activities-Enterprise Funds Liquor Sewer Solid Storm Operations Operations Waste Water Cash flows from operating activities Cash received from customers $ 5,287,112 $ 2,066,635 $ 2,066,896 $ 720,895 Cash receipts from other funds and reimbursements - - - - Cash payments to suppliers (4,330,750) (1,338,330) (1,583,803) (111,191) Cash payments to employees for services (484,150) (2,006) (411,490) (3,180) Cash payments for interfund services used - - - - Net cash flows from operating activities 472,212 726,299 71,603 606,524 Cash flows from noncapital financing activities Intergovernmental revenue - - 30,263 - Transfers in - - 66,846 - Transfers out (194,377) (298,494) (139,866) (370,939) Net cash flows from noncapital financing activities (194,377) (298,494) (42,757) (370,939) Cash flows from capital and related financing activities Acquisition and construction of capital assets - (89,407) (242,749) (196,013) Proceeds from the disposal of capital assets - 1,500 8,500 12,000 Interest and fiscal charges paid - (1,937) - - Net cash flows from capital and related financing activities - (89,844) (234,249) (184,013) Cash flows from investing activities Interest received on investments 14,802 34,799 17,509 12,698 Net increase in cash and cash equivalents 292,637 372,760 (187,894) 64,270 Cash and investments Beginning of year 1,123,054 2,602,817 1,265,288 969,383 End of year $ 1,415,691 $ 2,975,577 $ 1,077,394 $ 1,033,653 Reconciliation of operating income(loss)to net cash flows from operating activities Operating income(loss) $ 366,341 $ 114,889 $ (29,672) $ 203,650 Adjustments to reconcile operating income(loss)to net cash flows from operating activities Depreciation - 596,750 81,435 424,754 Change in assets,deferred outflows of resources,liabilities, and deferred inflows of resources Accounts receivable 30,467 8,889 (4,776) (16,220) Special assessments - 12,018 - - Due from other governments - - - - Inventory (40,432) - - - Prepaid items (2,764) - - - Deferred outflows of resources-pension plan deferments 30,196 - 23,486 - Deferred outflows of resources-OPEB plan deferments (3,945) - (3,151) - Accounts and contracts payable 104,609 1,208 15,018 (5,660) Accrued salaries and employee benefits - - - - Deposits payable - - - - Due to other governments 2,354 (7,455) 677 - Compensated absences 10,404 - 7,865 Net pension liability (39,944) - (31,068) - Total OPEB liability 8,590 - 6,861 - Deferred inflows of resources-pension plan deferments 6,336 - 4,928 - Net cash flows from operating activities $ 472,212 $ 726,299 $ 71,603 $ 606,524 Schedule of noncash capital and related financing activities Capital assets contributed from other funds $ - $ - $ - $ 229,175 See notes to basic financial statements -30- Governmental Street Activities- Water Light Total Internal Service $ 1,866,894 $ 228,641 $ 12,237,073 $ - 3,250,638 (409,871) (174,611) (7,948,556) - (8,361) - (909,187) (2,413,627) (683,159) 1,448,662 54,030 3,379,330 153,852 30,263 10,789 66,846 55,340 (403,225) - (1,406,901) - (403,225) - (1,309,792) 66,129 (359,365) - (887,534) - 1,000 - 23,000 - (5) - (1,942) - (358,370) - (866,476) - 118,604 1,329 199,741 29,592 805,671 55,359 1,402,803 249,573 8,582,640 83,377 14,626,559 2,303,452 $ 9,388,311 $ 138,736 $ 16,029,362 $ 2,553,025 $ 604,719 $ 46,420 $ 1,306,347 $ 26,095 730,940 - 1,833,879 7,344 14,077 1,967 34,404 70,464 436 - 12,454 - 51 (40,432) - (2,764) (8,231) 53,682 - (7,096) - 102,013 5,643 222,831 12,970 50,155 (3,496) - (3,496) (1,526) (27) - (4,451) 73 18,269 (3,543) (71,012) - 15,451 - 11,264 - $ 1,448,662 $ 54,030 $ 3,379,330 $ 153,852 $ - $ - $ 229,175 $ - -31- CITY OF FARMINGTON Statement of Fiduciary Net Position Fiduciary Fund as of December 31,2018 Agency Fund Assets Cash and investments $ 324,275 Liabilities Deposits payable $ 324,275 See notes to basic financial statements -32- CITY OF FARMINGTON Notes to Basic Financial Statements December 31,2018 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 (e.g. personnel services, supplies, other services and charges, etc.) within each department. Management can exceed appropriations at the department level without City Council approval. The City Council must approve any amounts over budget at the fund level by resolution or through the disbursement process. 7. The City Council may authorize transfers of budgeted amounts between funds. -36- NOTE 1—SIGNIFICANT ACCOUNTING POLICIES(CONTINUED) For the year ended December 31, 2018, 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 Debt Service $ 5,235,429 $ 5,653,237 State Aid Construction Capital Projects $ — $ 24 Storm Water Trunk Capital Projects $ — $ 255,380 Nonmajor special revenue funds Police Donations and Forfeitures $ 6,500 $ 9,930 Arena $ 319,421 $ 364,759 Nonmajor capital projects funds Sanitary Sewer Trunk $ — $ 163,990 Fire Capital Projects $ — $ 600,773 Recreation Capital Projects $ 11,600 $ 23,314 General Capital Equipment $ 207,600 $ 306,072 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 pension and other postemployment benefits(OPEB) plans 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 plan investments, and from contributions to the plans subsequent to the measurement date and before the end of the reporting period.These amounts are deferred and amortized as required under applicable pension or OPEB 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. 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. -39- NOTE 1—SIGNIFICANT ACCOUNTING POLICIES(CONTINUED) 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. 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. -40- NOTE 1—SIGNIFICANT ACCOUNTING POLICIES(CONTINUED) 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. • 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. -41- NOTE 1—SIGNIFICANT ACCOUNTING POLICIES(CONTINUED) • 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. V. Change in Accounting Principle During the 2018 fiscal year, the City implemented GASB Statement No. 75,Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. This statement establishes new standards for employer recognition and measurement of liabilities, deferred outflows/inflows of resources, and expense for OPEB.This standard requires retroactive implementation.However,the cumulative net effect of this change in accounting principle was not material to these financial statements, and was therefore included in current year activity. NOTE 2—DEPOSITS AND INVESTMENTS A. Components of Cash and Investments Cash and investments at year-end consist of the following: Deposits $ 3,785,510 Investments 30,063,125 Petty cash 4,042 Total $ 33,852,677 Cash and investments are included on the basic financial statements as follows: Primary government Statement of Net Position Cash and investments $ 30,888,102 Restricted assets—temporarily restricted Cash for future drinking water treatment plant 2,316,500 Statement of Fiduciary Net Position Cash and investments 324,275 Component unit Statement of Net Position Cash and investments 323,800 Total $ 33,852,677 -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 $3,785,510, while the balance on the bank records was $3,807,123. At December 31, 2018, all deposits were fully covered by federal deposit 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 $ — $ 395,904 $ — $ 395,904 Municipal bonds AAA S&P Level 2 125,338 456,476 — 581,814 Municipal bonds AA Moody's Level 2 249,840 393,564 — 643,404 Municipal bonds AA S&P Level 2 144,616 252,785 — 397,401 Negotiable certificates of deposit Not rated Level 2 8,280,874 13,300,025 333,077 21,913,976 $ 8,800,668 $ 14,798,754 $ 333,077 23,932,499 Investment pools/mutual funds Westem Asset Institutional Government Reserves AAA S&P Level 2 6,130,626 Total investments $ 30,063,125 -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) $ 236,518 Storm Water Trunk Debt Service Debt financing(2) 481,203 Total due from/to other funds $ 717,721 Advances to/from other funds Governmental Governmental Storm Water Trunk Debt Service Debt financing(1) $ 16,291 Storm Water Trunk Debt Service Debt financing(2) 678,713 Storm Water Trunk Debt Service Debt financing(3) 300,000 Total advances to/from other funds $ 995,004 (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$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 Storm Water Solid Waste Internal Transfers Out General Service Trunk Maintenance Nonmajor Enterprise Service Total Governmental funds General $ - $ - $ - $ 493,969 $1,077,225 $ - $49,230 $1,620,424 State Aid Construction - 180,000 - - - - - 180,000 Maintenance - - 51,093 - 58,759 - - 109,852 Nonmajor - - - - 20,000 - - 20,000 Proprietary funds Enterprise Liquor Operations 56,808 - - 23,639 113,930 - - 194,377 Sewer Operations 279,252 - - - - 17,242 2,000 298,494 Solid Waste 136,116 - - - - - 3,750 139,866 Storm Water 352,656 - - - - 17,923 360 370,939 Water 371,544 - - - - 31,681 - 403,225 Total $1,196,376 $180,000 $ 51,093 $ 517,608 $1 269,914 $ 66,846 $55,340 $3,337,177 -45- NOTE 4—CAPITAL ASSETS Capital asset activity for the year ended December 31,2018 was as follows: A. Changes in Capital Assets Used in Governmental Activities Transfers and Beginning Completed Ending Balance Additions Deletions Construction Balance Capital assets,not depreciated Land $ 1,441,957 $ — $ — $ — $ 1,441,957 Easements 307,867 — — — 307,867 Construction in progress — 229,175 — (229,175) — Total capital assets,not depreciated 1,749,824 229,175 — (229,175) 1,749,824 Capital assets,depreciated Buildings 21,490,430 17,300 (237,063) — 21,270,667 Improvements other than buildings 1,690,256 14,927 (50,271) — 1,654,912 Machinery and equipment 5,889,738 862,371 (387,421) — 6,364,688 Infrastructure 57,802,186 — — — 57,802,186 Total capital assets,depreciated 86,872,610 894,598 (674,755) — 87,092,453 Less accumulated depreciation on Buildings 6,095,008 435,395 (230,045) — 6,300,358 Improvements other than buildings 1,322,883 56,455 (50,271) — 1,329,067 Machinery and equipment 4,503,227 327,118 (383,970) — 4,446,375 Infrastructure 27,292,910 1,289,583 — — 28,582,493 Total accumulated depreciation 39,214,028 2,108,551 (664,286) — 40,658,293 Total capital assets,depreciated 47,658,582 (1,213,953) (10,469) — 46,434,160 Net capital assets $ 49,408,406 $ (984,778) $ (10,469) $ (229,175) $ 48,183,984 B. Changes in Capital Assets Used in Business-Type Activities Transfers and Beginning Completed Ending Balance Additions Deletions Construction Balance Capital assets,not depreciated Land $ 414,576 $ — $ — $ — $ 414,576 Construction in progress — 152,260 — — 152,260 Total capital assets,not depreciated 414,576 152,260 — — 566,836 Capital assets,depreciated Buildings 3,243,203 — — — 3,243,203 Improvements other than buildings 121,012 — — — 121,012 Machinery and equipment 2,694,165 735,274 (81,823) — 3,347,616 Collection/distribution systems 80,966,897 — — 229,175 81,196,072 Total capital assets,depreciated 87,025,277 735,274 (81,823) 229,175 87,907,903 Less accumulated depreciation on Buildings 3,197,712 45,491 — — 3,243,203 Improvements other than buildings 121,012 — — — 121,012 Machinery and equipment 2,378,556 143,019 (81,823) — 2,439,752 Collection/distribution systems 30,277,924 1,645,369 — — 31,923,293 Total accumulated depreciation 35,975,204 1,833,879 (81,823) — 37,727,260 Total capital assets,depreciated 51,050,073 (1,098,605) — 229,175 50,180,643 Net capital assets $ 51,464,649 $ (946,345) $ — $ 229,175 $ 50,747,479 -46- NOTE 4—CAPITAL ASSETS(CONTINUED) C. Depreciation Expense by Function Depreciation expense was charged to the following functions: Governmental activities General government $ 215,101 Public safety 294,582 Public works 1,442,954 Parks and recreation 155,914 Total depreciation expense—governmental activities $ 2,108,551 Business-type activities Sewer operations $ 596,750 Solid waste 81,435 Storm water 424,754 Water 730,940 Total depreciation expense—business-type activities $ 1,833,879 NOTE 5—OPERATING LEASES PAYABLE 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 2018,the City paid $103,125 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 2018. The following is a schedule by year of future minimum payments required under the leases: Year Ending December 31, Amount 2019 $ 129,940 -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 2013A $ 5,365,000 2.00% 01/15/2013 02/01/2022 $ 2,650,000 G.O.Street Reconstruction Bonds 2013B $ 1,495,000 0.45-1.95% 10/09/2013 02/01/2020 890,000 G.O.Street Reconstruction Bonds 2015A $ 3,050,000 2.00-3.00% 10/15/2015 02/01/2030 2,650,000 G.O.Improvement Refunding Bonds 2016A $ 3,450,000 2.00% 12/01/2016 02/01/2023 2,925,000 Total general obligation improvement bonds 9,115,000 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 1,075,000 Total capital improvement bonds 5,615,000 Total governmental activities bonds 14,730,000 Unamortized premiums 551,475 Compensated absences 959,399 Net pension liability-PERA 5,280,168 Total OPEB liability 998,927 Total governmental activities $22,519,969 Business-type activities Compensated absences $ 105,825 Net pension liability-PERA 538,782 Total OPEB liability 113,397 Total business-type activities $ 758,004 B. Changes in Long-Term Debt Beginning Ending Due Within Balance Additions Deletions Balance One Year Governmental activities G.O.improvement bonds $ 11,430,000 $ - $ 2,315,000 $ 9,115,000 $ 1,905,000 Capital improvement bonds 6,170,000 - 555,000 5,615,000 530,000 Public project revenue bond 1,765,000 - 1,765,000 - - Revenue bonds 545,000 - 545,000 - - Unamortized bond premiums 645,061 - 93,586 551,475 - Compensated absences 921,946 611,537 574,084 959,399 719,550 Net pension liability-PERA 6,401,196 699,048 1,820,076 5,280,168 - Total OPEB liability 871,448 139,613 12,134 998,927 - Total governmental activities 28,749,651 1,450,198 7,679,880 22,519,969 3,154,550 Business-type activities Compensated absences 87,556 64,160 45,891 105,825 79,371 Net pension liability-PERA 609,794 59,710 130,722 538,782 - Total OPEB liability 97,946 16,922 1,471 113,397 - Total business-type activities 795,296 140,792 178,084 758,004 79,371 Total government-wide $ 29,544,947 $ 1,590,990 $ 7,857,964 $ 23,277,973 $ 3,233,921 -48- NOTE 6-LONG-TERM DEBT(CONTINUED) C. Minimum Debt Payments Minimum annual payments required to retire bonds are as follows: Year Ending G.O.Improvement Capital Improvement Total December 31, Principal Interest Principal Interest Principal Interest 2019 $ 1,905,000 $ 179,260 $ 530,000 $ 140,050 $ 2,435,000 $ 319,310 2020 2,220,000 136,973 545,000 129,300 2,765,000 266,273 2021 1,470,000 98,050 505,000 116,275 1,975,000 214,325 2022 1,275,000 68,450 525,000 100,825 1,800,000 169,275 2023 670,000 46,775 545,000 84,775 1,215,000 131,550 2024-2028 1,235,000 121,100 2,965,000 177,850 4,200,000 298,950 2029-2030 340,000 6,738 - - 340,000 6,738 Total $ 9,115,000 $ 657,346 $ 5,615,000 $ 749,075 $14,730,000 $ 1,406,421 D. Descriptions of Long-Term Debt • General Obligation Bonds -The City issues general obligation bonds to provide funds for the acquisition and construction of major capital improvements or to refinance (refund) previous bond issues. The reporting entity's long-term debt is segregated between the amounts to be repaid from governmental activities and amounts to be repaid from business-type activities (if any). General obligation bonds are direct obligations and pledge the full faith and credit of the City. The City 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 reduced future interest payments by $143,650 and$36,594,respectively. The City 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 reduced 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, 2018, the City had not utilized $45,169,795 of its net legal debt margin. • Other Long-Term Liabilities-The City provides its employees with various benefits, including compensated absences,pension benefits, and OPEB as further described elsewhere in these notes. The General,Liquor Operations,and Solid Waste Funds will be used to liquidate these liabilities. E. Ultimate Responsibility for Debt All general obligation bonds are backed by the full faith and credit of the City. -49- 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 $ — $ — $ — $ 1,043,864 $ 1,043,864 Deferred outflows of resources $ 657,723 $ 3,529,207 $ 4,186,930 $ 385,246 $ 4,572,176 Net pension liability $ 3,367,387 $ 2,451,563 $ 5,818,950 $ — $ 5,818,950 Deferred inflows of resources $ 868,329 $ 5,116,706 $ 5,985,035 $ 285,378 $ 6,270,413 Pension expense $ 304,809 $ 262,317 $ 567,126 $ 232,685 $ 799,811 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 the Coordinated Plan. Coordinated Plan members are covered by Social Security. 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. -50- NOTE 8—DEFINED BENEFIT PENSION PLANS—STATE-WIDE(CONTINUED) 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. 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 Plan members. Members hired prior to July 1, 1989, receive the higher of Method 1 or Method 2 formulas. Only Method 2 is used for members hired after June 30, 1989. Under Method 1, the accrual rate for Coordinated Plan members is 1.2 percent of average salary for each of the first 10 years of service, and 1.7 percent of average salary for each additional year. Under Method 2, the accrual rate for Coordinated Plan members is 1.7 percent of average salary for all years 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. Benefit increases are provided to benefit recipients each January. Increases are related to the funding ratio of the plan. If the GERF is at least 90.0 percent funded for two consecutive years, benefit recipients are given a 2.5 percent increase. If the plan has not exceeded 90.0 percent funded, or has fallen below 80.0 percent, benefit recipients are given a one percent increase. A benefit recipient who has been receiving a benefit for at least 12 full months as of June 30 will receive a full increase. Members receiving benefits for at least one month, but less than 12 full months as of June 30,will receive a pro rata increase. 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. A full, unreduced pension is earned when members are age 55 and vested, or for members who were first hired prior to July 1, 1989,when age plus years of service equal at least 90. Benefit increases are provided to benefit recipients each January. PEPFF benefit recipients receive a future annual 1.0 percent increase.An annual adjustment will equal 2.5 percent any time the plan exceeds a 90.0 percent funded ratio for two consecutive years. If the adjustment is increased to 2.5 percent and the funded ratio falls below 80.0 percent for one year,or 85.0 percent for two consecutive years, the post-retirement benefit increase will be lowered to 1.0 percent. A benefit recipient who has been receiving a benefit for at least 12 full months as of June 30, will receive a full increase. Members receiving benefits for at least one month, but less than 12 full months as of June 30, will receive a pro rata increase. For retirements after May 31, 2014, the first increase will be delayed two years. -51- NOTE 8—DEFINED BENEFIT PENSION PLANS—STATE-WIDE(CONTINUED) C. Contributions Minnesota Statutes, Chapter 353 sets the rates for employer and employee contributions. Contribution rates can only be modified by the State Legislature. 1. GERF Contributions Coordinated Plan members were required to contribute 6.50 percent of their annual covered salary in fiscal year 2018. The City was required to contribute 7.50 percent for Coordinated Plan members. The City's contributions to the GERF for the year ended December 31, 2018 were $312,863. 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 fiscal year 2018. The City was required to contribute 16.20 percent of pay for members. The City's contributions to the PEPFF for the year ended December 31, 2018 were $396,439. The City's contributions were equal to the required contributions as set by state statutes. D. Pension Costs 1. GERF Pension Costs At December 31, 2018, the City reported a liability of$3,367,387 for its proportionate share of the GERF's net pension liability. The net pension liability was measured as of June 30,2018, 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, 2017 through June 30, 2018, relative to the total employer contributions received from all of the PERA's participating employers. The City's proportionate share was 0.0607 percent at the end of the measurement period and 0.0597 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 $16 million to the fund in 2018. 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 the net pension liability $ 3,367,387 State's proportionate share of the net pension liability associated with the City $ 110,472 For the year ended December 31, 2018, the City recognized pension expense of$279,047 for its proportionate share of the GERF's pension expense. In addition, the City recognized an additional $25,762 as pension expense (and grant revenue) for its proportionate share of the state of Minnesota's contribution of$16 million to the GERF. -52- NOTE 8—DEFINED BENEFIT PENSION PLANS—STATE-WIDE(CONTINUED) At December 31, 2018, 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 $ 87,726 $ 94,329 Changes in actuarial assumptions 308,952 374,095 Differences between projected and actual investment earnings — 348,080 Changes in proportion 104,717 51,825 Contributions paid to the PERA subsequent to the measurement date 156,328 — Total $ 657,723 $ 868,329 Deferred outflows of resources reported $156,328 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, 2019. 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 2019 $ 98,562 2020 $ (140,648) 2021 $ (254,565) 2022 $ (70,283) 2. PEPFF Pension Costs At December 31, 2018, the City reported a liability of$2,451,563 for its proportionate share of the PEPFF's net pension liability. The net pension liability was measured as of June 30, 2018, 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, 2017 through June 30, 2018, relative to the total employer contributions received from all of the PERA's participating employers. The City's proportionate share was 0.2300 percent at the end of the measurement period and 0.2370 percent for the beginning of the period. For the year ended December 31, 2018, the City recognized pension expense of$241,617 for its proportionate share of the PEPFF's pension expense. The City also recognized $20,700 for the year ended December 31, 2018 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. -53- NOTE 8—DEFINED BENEFIT PENSION PLANS—STATE-WIDE(CONTINUED) At December 31,2018,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 $ 100,550 $ 636,900 Changes in actuarial assumptions 3,220,175 3,716,363 Differences between projected and actual investment earnings — 498,396 Changes in proportion — 265,047 Contributions paid to the PERA subsequent to the measurement date 208,482 — Total $ 3,529,207 $ 5,116,706 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, 2019. 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 2019 $ (93,993) 2020 $ (215,250) 2021 $ (399,619) 2022 $ (1,063,280) 2023 $ (23,839) E. Actuarial Assumptions The total pension liability in the June 30, 2018 actuarial valuation was determined using an individual entry-age normal actuarial cost method and 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 for all plans were based on RP-2014 tables for males and females, as appropriate, with slight adjustments to fit the PERA's experience. Cost of living benefit increases after retirement for retirees are assumed to be 1.25 percent per year for the GERF,and 1.00 percent per year for the PEPFF. Actuarial assumptions used in the June 30, 2018 valuation were based on the results of actuarial experience studies. The most recent six-year experience study in the GERF was completed in 2015. The most recent four-year experience study for PEPFF was completed in 2016. Economic assumptions were updated in 2017 based on a review of inflation and investment return assumptions. -54- NOTE 8—DEFINED BENEFIT PENSION PLANS—STATE-WIDE(CONTINUED) The following changes in actuarial assumptions occurred in 2018: 1. GERF • The mortality projection scale was changed from MP-2015 to MP-2017. • The assumed post-retirement benefit increase was changed from 1.00 percent per year through 2044,and 2.50 percent per year thereafter,to 1.25 percent per year. 2. PEPFF • The mortality projection scale was changed from MP-2016 to MP-2017. • As set by state statutes, the assumed post-retirement benefit increase was changed from 1.0 percent per year through 2064, and 2.5 percent per year thereafter, to 1.0 percent for all years with no trigger. 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 36 % 5.10 % International stocks 17 5.30 % Bonds 20 0.75 % Alternative assets 25 5.90 % Cash 2 — % Total 100 % F. Discount Rate The discount rate used to measure the total pension liability in 2018 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. -55- NOTE 8—DEFINED BENEFIT PENSION PLANS—STATE-WIDE(CONTINUED) 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 $ 5,472,435 $ 3,367,387 $ 1,629,730 The City's proportionate share of the PEPFF net pension liability $ 5,256,305 $ 2,451,563 $ 132,158 H. Pension Plan Fiduciary Net Position Detailed information about each pension plan's fiduciary net position is available in a separately issued PERA financial report that includes financial statements and required supplementary information. That report may be obtained on the PERA website at www.mnpera.org; 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. 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. -56- NOTE 9—DEFINED BENEFIT PENSION PLAN—FIRE RELIEF ASSOCIATION (CONTINUED) 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 $150,548 in fire state aid to the plan on behalf of the Department for the year ended December 31, 2018, 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, 2018 were $0; however, the City made a voluntary contribution of $150,000 to the plan. D. Pension Costs At December 31, 2018, the City reported a net pension liability (asset) of($1,043,864) for the plan. The net pension liability (asset) was measured as of December 31, 2017. 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. 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 1,2018 $ 1,518,815 $ 2,297,171 $ (778,356) Changes for the year Service cost 93,501 — 93,501 Interest 95,308 — 95,308 Changes of benefit terms 171,894 — 171,894 Contributions(state and local) — 301,508 (301,508) Net investment income — 342,985 (342,985) Benefit payments (292,064) (292,064) — Administrative costs — (18,282) 18,282 Total net changes 68,639 334,147 (265,508) Ending balance—December 31,2018 $ 1,587,454 $ 2,631,318 $ (1,043,864) For the year ended December 31, 2018, the City recognized pension revenue of$144,488 and pension expense of$232,865. -57- NOTE 9—DEFINED BENEFIT PENSION PLAN—FIRE RELIEF ASSOCIATION (CONTINUED) At December 31, 2018, 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 $ — $ 12,034 Change of assumptions 84,698 13,008 Net difference between projected and actual earnings on plan investments — 109,788 City contributions subsequent to the measurement date 150,000 — State aid to the City subsequent to the measurement date 150,548 150,548 Total $ 385,246 $ 285,378 Deferred outflows of resources totaling$300,548 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, 2019. Deferred inflows of resources totaling $150,458 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, 2019. 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 2019 $ 3,634 2020 $ (7,569) 2021 $ (41,068) 2022 $ (32,289) 2023 $ 8,124 Thereafter $ 19,036 E. Actuarial Assumptions The total pension liability at December 31,2017 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 3.31% For the December 31, 2017 valuation, the plan benefit per year of service increased from $5,500 to $6,500. The actuarial assumptions for the investment return and single discount rate remained unchanged at 6.50 percent. -58- NOTE 9—DEFINED BENEFIT PENSION PLAN—FIRE RELIEF ASSOCIATION (CONTINUED) 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 56.68 % 5.39 % 8.14 % International equity 15.75 5.20 % 7.95 % Fixed income 18.09 1.98 % 4.73 % Real estate and alternatives 0.98 4.25 % 7.00 % Cash and equivalents 8.50 0.79 % 3.54 % Total 100.00 % 6.50 % 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 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) $ (956,914) $ (1,043,864) $ (1,126,704) 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. -59- NOTE 10—OTHER POST-EMPLOYMENT BENEFITS(OPEB)PLAN A. Plan Description The City provides post-employment insurance benefits to certain eligible employees through its OPEB Plan, a single-employer defined benefit plan administered by the City. All post-employment benefits are based on contractual agreements with employee groups. Eligibility for these benefits is based on years of service and/or minimum age requirements. These contractual agreements do not include any specific contribution or funding requirements. The plan does not issue a publicly available financial report. No plan assets are accumulated in a trust that meets the criteria in paragraph 4 of GASB Statement No. 75. B. Benefits Provided All retirees of the City upon retirement have the option under state law to continue their medical insurance coverage through the City. For members of certain employee groups, the City pays for all or part of the eligible retiree's premiums for medical and/or dental insurance from the time of retirement until the employee reaches the age of eligibility for Medicare. Benefits paid by the City differ by bargaining unit and date of hire, with some contracts specifying a certain dollar amount per month, and some covering premium costs as defined within each collective bargaining agreement. Retirees not eligible for these city-paid premium benefits must pay the full city premium rate for their coverage. 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 until the retiree reaches Medicare eligibility, 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. For police officers or firefighters disabled in the line-of-duty, Minnesota Statutes require the City to continue payment of the employer's contribution toward health coverage for the police officer or firefighter and their spouse,if the spouse was covered at the time of disability, until age 65. C. Contributions The required contribution is based on projected pay-as-you-go financing requirements, with additional amounts to prefund benefits as determined periodically by the City. The City's current year required pay-as-you-go contributions to finance the benefits described in the previous section totaled$40,361. D. Membership Membership in the plan consisted of the following as of the latest actuarial valuation: Retirees and beneficiaries receiving benefits 6 Active plan members 64 Total members 70 E. Total OPEB Liability of the City The City's total OPEB liability of$1,112,324 as of year-end was measured as of January 1, 2018, and was determined by an actuarial valuation as of that date. -60- NOTE 10—OTHER POST-EMPLOYMENT BENEFITS(OPEB)PLAN(CONTINUED) F. Actuarial Assumptions The total OPEB liability was determined by an actuarial valuation as of January 1, 2018, using the following actuarial assumptions, applied to all periods included in the measurement, unless otherwise specified: Discount rate 3.44% 20-year municipal bond yield 3.44% Inflation rate 2.75% Salary increases 3.50% Healthcare trend rate 10.00%grading to 5.00%over 10 years The actuarial assumptions used in the latest valuation were based on those used to value pension liabilities for Minnesota city employees. The state pension plans base their assumptions on periodic experience studies. Economic assumptions are based on input from a variety of published sources of historical and projected future financial data. Each assumption was reviewed for reasonableness with the source information as well as for consistency with the other economic assumptions. Since the plan is not funded by an irrevocable trust, the discount rate is equal to the 20-year municipal bond yield rate of 3.44 percent, which was set by considering published rate information for 20-year high quality, tax-exempt, general obligation municipal bonds as of the measurement date. The City discount rate used in the prior measurement date was 4.50 percent. Mortality rates were based on the RP-2014 Mortality Table, adjusted for white collar and mortality improvements using projection scale MP-2015 from a base year of 2014 (using projection scale MP-2016 from a base year of 2006 for police and fire personnel). Future retirees electing coverage is assumed to be 65 percent. Married future retirees electing spouse coverage is assumed to be 40 percent(60 percent for police and fire personnel). G. Changes in the Total OPEB Liability Total OPEB Liability Beginning balance—January 1,2018 $ 969,394 Changes for the year Service cost 113,275 Interest 40,190 Benefit payments—employer financed (38,891) Changes of assumptions 28,356 Total net changes 142,930 Ending balance—December 31,2018 $ 1,112,324 -61- NOTE 10—OTHER POST-EMPLOYMENT BENEFITS(OPEB)PLAN(CONTINUED) H. Total OPEB Liability Sensitivity to Discount and Healthcare Cost Trend Rate Changes The following presents the total OPEB liability of the City, as well as what the City's total OPEB liability would be if it were calculated using a discount rate that is 1 percentage point lower or 1 percentage point higher than the current discount rate: 1%Decrease in Discount 1%Increase in Discount Rate Rate Discount Rate OPEB discount rate 2.44% 3.44% 4.44% Total OPEB liability $ 1,030,600 $ 1,112,324 $ 1,198,871 The following presents the net OPEB liability of the City, as well as what the City's total OPEB liability would be if it were calculated using healthcare cost trend rates that are 1 percentage point lower or 1 percentage point higher than the current healthcare cost trend rates: 1%Decrease in Healthcare Trend 1%Increase in Healthcare Trend Rate Rate Healthcare Trend Rate OPEB healthcare trend rate 9.00%decreasing to 10.00%decreasing to 11.00%decreasing to 4.00%over 10 years 5.00%over 10 years 6.00%over 10 years Total OPEB liability $ 1,262,349 $ 1,112,324 $ 985,499 I. OPEB Expense and Related Deferred Outflows of Resources and Deferred Inflows of Resources For the current year, the City recognized OPEB expense of$121,191. As of year-end, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources: Deferred Outflows Deferred Inflows of Resources of Resources Changes of assumptions $ 25,286 $ — Contributions subsequent to the measurement date 40,361 — $ 65,647 $ — Deferred outflows of resources reported $40,361 related to OPEB 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, 2019. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows: OPEB Year Ending Expense December 31, Amount 2019 $ 3,070 2020 $ 3,070 2021 $ 3,070 2022 $ 3,070 2023 $ 3,070 Thereafter $ 9,936 -62- NOTE 11-FUND BALANCES A. Classifications At December 31,2018,the City had the following governmental fund balances: Service State Aid Storm Water Improvement General Fund Fund Construction Trunk Revolving Maintenance Nonmajor Total Nonspendable Prepaid items $ 5,045 $ - $ - $ - $ - $ - $ - $ 5,045 Loan 111,057 - - - - - - 111,057 Total nonspendable 116,102 - - - - - - 116,102 Restricted Debt service - 1,624,162 - - - - - 1,624,162 Police programs - - - - - - 15,412 15,412 Park improvements - - - - - - 201,907 201,907 PEG fees - - - - - - 142,567 142,567 Recreational capital projects - - - - - - 25,581 25,581 Total restricted - 1,624,162 - - - - 385,467 2,009,629 Committed Lower debt levy 240,000 - - - - - - 240,000 Street construction - - 116,268 - - - - 116,268 Storm water trunk - - - 3,171,825 - - - 3,171,825 Improvement projects - - - - 167,989 - 133,255 301,244 Park improvements - - - - - - 261,655 261,655 Ice arena capital - - - - - - 82,791 82,791 Sanitary sewer trunk - - - - - - 363,495 363,495 Cable communications - - - - - - 755,883 755,883 Fire capital programs - - - - - - 137,712 137,712 Pavement management - - - - - 1,496,523 - 1,496,523 Capital equipment - - - - - - 899,563 899,563 Total committed 240,000 - 116,268 3,171,825 167,989 1,496,523 2,634,354 7,826,959 Unassigned 5,365,969 - - - - - - 5,365,969 Total $ 5,722,071 $ 1,624,162 $ 116,268 $ 3,171,825 $ 167,989 $ 1,496,523 $ 3,019,821 $15,318,659 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, 2018, the unassigned fund balance of the General Fund was 41.3 percent of the subsequent year's budgeted expenditures and transfers out. NOTE 12-OPERATING LEASE RECEIVABLE In 2018, the City entered into an agreement to lease space in City Hall to the U.S. Department of Agriculture (USDA) for a 20-year term, commencing October 1, 2018. The USDA may cancel the lease any time after the end of the first year of the lease term,with 120-days prior written notice. The USDA is required to make monthly rental payments for the space rental and operating costs that total $16,394 annually for years 1-10 of the agreement, and $19,575 annually for years 11-20 of the agreement. The City received rental payments totaling$4,098 under this agreement during 2018. As part of this agreement, the City made improvements to the space in accordance with USDA specifications with a total cost of$113,500. The USDA will reimburse the City for the full cost of these improvements through noncancelable monthly payments totaling$13,152 annually over a 10-year period, with 3.0 percent interest. The outstanding principle due on this agreement at December 31, 2018 of $111,037 is reported as a loan receivable in the City's General Fund. -63- NOTE 13—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. D. Construction Commitments The City is committed to various construction contracts for the improvement of City property. At December 31, 2018,the City's remaining commitment under these contracts is approximately$292,750. NOTE 14—TAX INCREMENT PAY-AS-YOU-GO FINANCING REVENUE NOTES On November 2, 2017, the 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, 2018 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. NOTE 15—SUBSEQUENT EVENT In May 2019, the City approved the sale of$1,645,000 of General Obligation Bonds, Series 2019A. The bonds bear interest rates ranging from 4.0 to 5.0 percent, and have a final maturity of February 1, 2029. -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 31,2018 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% 12/31/2018 06/30/2018 0.0607% $ 3,367,387 $ 110,472 $ 3,477,859 $ 4,034,230 83.47% 79.50% PERA—General Employees Retirement Fund Schedule of City Contributions Year Ended December 31,2018 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% 12/31/2018 $ 312,863 $ 312,863 $ — $ 4,171,664 7.50% 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 31,2018 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% 12/31/2018 06/30/2018 0.2300% $ 2,451,563 $ 2,424,781 101.10% 88.80% PERA—Public Employees Police and Fire Fund Schedule of City Contributions Year Ended December 31,2018 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% 12/31/2018 $ 396,439 $ 396,439 $ — $ 2,447,155 16.20% 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 2018 Farmington Fire Fighters'Relief Association year-end dated(measurement date)December 31, 2014 2015 2016 2017 Total pension liability Service cost $ 69,285 $ 71,190 $ 86,788 $ 93,501 Interest 110,249 92,788 82,702 95,308 Differences between expected and actual experience — — (14,504) — Changes of assumptions — 116,780 (15,678) — Changes of benefits terms — — 143,662 171,894 Benefit payments (265,643) (596,137) (1,194) (292,064) Net change in total pension liability (86,109) (315,379) 281,776 68,639 Total pension liability—beginning of year 1,638,527 1,552,418 1,237,039 1,518,815 Total pension liability—end of year $ 1,552,418 $ 1,237,039 $ 1,518,815 $ 1,587,454 Plan fiduciary net position Contributions(state and local) $ 283,461 $ 291,915 $ 291,510 $ 301,508 Net investment income 84,277 (33,543) 163,457 342,985 Benefit payments (265,643) (596,137) (1,194) (292,064) Administrative costs (10,848) (15,756) (17,200) (18,282) Net change in plan fiduciary net position 91,247 (353,521) 436,573 334,147 Plan fiduciary net position—beginning of year 2,122,872 2,214,119 1,860,598 2,297,171 Plan fiduciary net position—end of year $ 2,214,119 $ 1,860,598 $ 2,297,171 $ 2,631,318 Net pension liability(asset)—ending $ (661,701) $ (623,559) $ (778,356) $ (1,043,864) Plan fiduciary net position as a percentage of the total pension liability 142.62% 150.41% 151.25% 165.76% 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 12/31/2018 $ — $ — $ — $ 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 Changes in the City's Total OPEB Liability and Related Ratios 2018 Total OPEB liability Service cost $ 113,275 Interest 40,190 Changes of assumptions 28,356 Benefit payments (38,891) Net change in total OPEB liability 142,930 Total OPEB liability—beginning of year 969,394 Total OPEB liability—end of year $ 1,112,324 Covered payroll $ 5,800,000 Total OPEB liability as a percentage of covered payroll 19.18% Note: The City implemented GASB Statement No. 75 in fiscal 2018. This schedule is intended to present 10-year trend information.Additional years will be added as they become available. -69- CITY OF FARMINGTON Notes to Required Supplementary Information December 31,2018 PERA—GENERAL EMPLOYEES RETIREMENT FUND 2018 CHANGES IN ACTUARIAL ASSUMPTIONS: • The mortality projection scale was changed from MP-2015 to MP-2017. • The assumed benefit increase was changed from 1.00 percent per year through 2044, and 2.50 percent per year thereafter,to 1.25 percent per year. 2017 CHANGES IN PLAN PROVISIONS: • The state's special funding contribution increased from$6 million to$16 million. 2017 CHANGES IN ACTUARIAL ASSUMPTIONS: • The Combined Service Annuity(CSA)loads were changed from 0.80 percent for active members and 60.00 percent for vested and nonvested deferred members.The revised CSA loads are now zero percent for active member liability, 15.00 percent for vested deferred member liability, and 3.00 percent for nonvested deferred member liability. • The assumed post-retirement benefit increase rate was changed from 1.00 percent per year for all years, to 1.00 percent per year through 2044,and 2.50 percent per year thereafter. 2016 CHANGES IN ACTUARIAL ASSUMPTIONS: • The assumed post-retirement benefit increase rate was changed from 1.00 percent per year through 2035, and 2.50 percent per year thereafter,to 1.00 percent per year for all years. • The assumed investment return was changed from 7.90 percent to 7.50 percent. The single discount rate was changed from 7.90 percent to 7.50 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 1.00 percent per year through 2030,and 2.50 percent per year thereafter,to 1.00 percent per year through 2035,and 2.50 percent per year thereafter. -70- CITY OF FARMINGTON Notes to Required Supplementary Information(continued) December 31,2018 PERA—PUBLIC EMPLOYEES POLICE AND FIRE FUND 2018 CHANGES IN ACTUARIAL ASSUMPTIONS: • The mortality projection scale was changed from MP-2016 to MP-2017. • As set by state statutes, the assumed post-retirement benefit increase was changed from 1.00 percent per year through 2064,and 2.50 percent per year thereafter,to 1.00 percent for all years with no trigger. 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 30.00 percent for vested and nonvested deferred members. The CSA has been changed to 33.00 percent for vested members,and 2.00 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 3.00 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 65.00 percent to 60.00 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 1.00 percent per year through 2037, and 2.50 percent thereafter,to 1.00 percent per year for all future years. • The assumed investment return was changed from 7.90 percent to 7.50 percent. The single discount rate changed from 7.90 percent to 5.60 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 31,2018 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 90.00 percent funding threshold was changed from inflation up to 2.50 percent,to a fixed rate of 2.50 percent. 2015 CHANGES IN ACTUARIAL ASSUMPTIONS: • The assumed post-retirement benefit increase rate was changed from 1.00 percent per year through 2030, and 2.50 percent per year thereafter,to 1.00 percent per year through 2037,and 2.50 percent per year thereafter. FARMINGTON FIRE FIGHTERS' RELIEF ASSOCIATION 2018 CHANGES IN PLAN PROVISIONS: • The plan benefit level increased from$5,500 to $6,500 per year of service. 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 50.00 percent at the later of age 50 or 20 years of service,up to 100.00 percent at the earlier of age 65 or 30 years of service. OTHER POST-EMPLOYMENT BENEFITS PLAN 2018 CHANGES IN ACTUARIAL ASSUMPTIONS: • The actuarial assumptions for the single discount rate changed from 4.50 percent to 3.44 percent. -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 31,2018 Special Capital Revenue Projects Total Assets Cash and investments $ 528,356 $ 2,928,407 $ 3,456,763 Receivables Accounts 57,574 70,659 128,233 Interest 1,228 5,326 6,554 Special assessments Delinquent — 128 128 Noncurrent — 372 372 Due from other governments 3,773 — 3,773 Total assets $ 590,931 $ 3,004,892 $ 3,595,823 Liabilities Accounts and contracts payable $ 22,158 $ 30,479 $ 52,637 Deposits payable 6,380 515,857 522,237 Due to other governments 628 — 628 Total liabilities 29,166 546,336 575,502 Deferred inflows of resources Unavailable revenue—special assessments — 500 500 Fund balances Restricted 217,319 168,148 385,467 Committed 344,446 2,289,908 2,634,354 Total fund balances 561,765 2,458,056 3,019,821 Total liabilities,deferred inflows of resources,and fund balances $ 590,931 $ 3,004,892 $ 3,595,823 -74- CITY OF FARMINGTON Nonmajor Governmental Funds Combining Statement of Revenues,Expenditures,and Changes in Fund Balances Year Ended December 31,2018 Special Capital Revenue Projects Total Revenue Franchise taxes $ - $ 146,324 $ 146,324 Special assessments 17 1,413 1,430 Intergovernmental 8,633 - 8,633 Charges for services 349,128 85,232 434,360 Investment earnings 6,150 29,145 35,295 Other Donations 9,720 71,081 80,801 Rentals 9,484 - 9,484 Miscellaneous 166,147 - 166,147 Total revenues 549,279 333,195 882,474 Expenditures Current General government - 64,908 64,908 Public safety 9,930 10,193 20,123 Parks and recreation 382,493 12,668 395,161 Capital outlay General government - 29,260 29,260 Public safety - 896,652 896,652 Public works - 163,990 163,990 Parks and recreation 47,631 10,646 58,277 Total expenditures 440,054 1,188,317 1,628,371 Excess(deficiency)of revenues over expenditures 109,225 (855,122) (745,897) Other financing sources(uses) Sale of capital assets 2,937 8,063 11,000 Transfers in 85,000 1,184,914 1,269,914 Transfers out (20,000) - (20,000) Total other financing sources(uses) 67,937 1,192,977 1,260,914 Net change in fund balances 177,162 337,855 515,017 Fund balances Beginning of year 384,603 2,120,201 2,504,804 End of year $ 561,765 $ 2,458,056 $ 3,019,821 -75- THIS PAGE INTENTIONALLY LEFT BLANK NONMAJOR SPECIAL REVENUE FUNDS Nonmaj or 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 Nonmajor Special Revenue Funds Combining Balance Sheet as of December 31,2018 Police Donations Park and Forfeitures Improvement Arena Total Assets Cash and investments $ 16,369 $ 467,339 $ 44,648 $ 528,356 Receivables Accounts - - 57,574 57,574 Interest 52 1,083 93 1,228 Due from other governments - 3,773 - 3,773 Total assets $ 16,421 $ 472,195 $ 102,315 $ 590,931 Liabilities Accounts and contracts payable $ 1,009 $ 8,633 $ 12,516 $ 22,158 Deposits payable - - 6,380 6,380 Due to other governments 628 628 Total liabilities 1,009 8,633 19,524 29,166 Fund balances Restricted for police programs 15,412 - - 15,412 Restricted for park improvements - 201,907 - 201,907 Committed for park improvements - 261,655 - 261,655 Committed for ice arena capital - - 82,791 82,791 Total fund balances 15,412 463,562 82,791 561,765 Total liabilities and fund balances $ 16,421 $ 472,195 $ 102,315 $ 590,931 -77- CITY OF FARMINGTON Nonmajor Special Revenue Funds Combining Statement of Revenues,Expenditures, and Changes in Fund Balances Year Ended December 31,2018 Police Donations Park and Forfeitures Improvement Arena Total Revenues Special assessments $ - $ 17 $ - $ 17 Intergovernmental - 8,633 - 8,633 Charges for services - - 349,128 349,128 Investment earnings 215 5,206 729 6,150 Other Donations 4,720 - 5,000 9,720 Rentals - 7,088 2,396 9,484 Miscellaneous 10 165,033 1,104 166,147 Total revenues 4,945 185,977 358,357 549,279 Expenditures Current Public safety 9,930 - - 9,930 Parks and recreation - 18,428 364,065 382,493 Capital outlay Parks and recreation - 46,937 694 47,631 Total expenditures 9,930 65,365 364,759 440,054 Excess(deficiency)of revenues over expenditures (4,985) 120,612 (6,402) 109,225 Other financing sources(uses) Sale of capital assets 2,937 - - 2,937 Transfers in - 85,000 - 85,000 Transfers out - - (20,000) (20,000) Total other financing sources(uses) 2,937 85,000 (20,000) 67,937 Net change in fund balances (2,048) 205,612 (26,402) 177,162 Fund balances Beginning of year 17,460 257,950 109,193 384,603 End of year $ 15,412 $ 463,562 $ 82,791 $ 561,765 -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 31,2018 Sanitary Sewer Cable Trunk Communications Fire Assets Cash and investments $ 362,644 $ 846,127 $ 151,229 Receivables Accounts — 70,659 — Interest 851 1,985 355 Special assessments Delinquent — — — Noncurrent — — — Total assets $ 363,495 $ 918,771 $ 151,584 Liabilities Accounts and contracts payable $ — $ 9,777 $ 13,872 Deposits payable — 10,544 — Total liabilities — 20,321 13,872 Deferred inflows of resources Unavailable revenue—special assessments — — — Fund balances Restricted for public,educational,and governmental fees — 142,567 — Restricted for recreational capital projects — — — Committed for sanitary sewer trunk 363,495 — — Committed for cable communications — 755,883 — Committed for fire capital programs — — 137,712 Committed for improvement projects — — — Committed for capital equipment — — — Total fund balances 363,495 898,450 137,712 Total liabilities,deferred inflows of resources,and fund balances $ 363,495 $ 918,771 $ 151,584 -80- General Capital Private Recreation Equipment Total $ 549,985 $ 114,105 $ 904,317 $ 2,928,407 - 70,659 1,291 268 576 5,326 128 - - 128 372 - - 372 $ 551,776 $ 114,373 $ 904,893 $ 3,004,892 $ - $ 1,500 $ 5,330 $ 30,479 505,138 175 - 515,857 505,138 1,675 5,330 546,336 500 - - 500 - - - 142,567 25,581 - 25,581 - - - 363,495 - - 755,883 - - - 137,712 46,138 87,117 - 133,255 899,563 899,563 46,138 112,698 899,563 2,458,056 $ 551,776 $ 114,373 $ 904,893 $ 3,004,892 -81- CITY OF FARMINGTON Nonmajor Capital Projects Funds Combining Statement of Revenues,Expenditures, and Changes in Fund Balances Year Ended December 31,2018 Sanitary Sewer Cable Trunk Communications Fire Revenues Franchise taxes $ — $ 146,324 $ — Special assessments 7 — — Charges for services 85,232 — — Investment earnings 5,108 10,659 2,550 Other Donations — — 52,025 Total revenues 90,347 156,983 54,575 Expenditures Current General government — 64,571 — Public safety — — 10,193 Parks and recreation — — — Capital outlay General government — 29,260 — Public safety — — 590,580 Public works 163,990 — — Parks and recreation — — — Total expenditures 163,990 93,831 600,773 Excess(deficiency)of revenues over expenditures (73,643) 63,152 (546,198) Other financing sources Sale of capital assets — — 682 Transfers in — — 150,000 Total other financing sources 150,682 Net change in fund balances (73,643) 63,152 (395,516) Fund balances Beginning of year 437,138 835,298 533,228 End of year $ 363,495 $ 898,450 $ 137,712 -82- General Capital Private Recreation Equipment Total $ - $ - $ - $ 146,324 1,406 - - 1,413 - - 85,232 6,476 1,351 3,001 29,145 - 17,669 1,387 71,081 7,882 19,020 4,388 333,195 337 - - 64,908 - - - 10,193 12,668 - 12,668 - - - 29,260 - - 306,072 896,652 - - - 163,990 - 10,646 - 10,646 337 23,314 306,072 1,188,317 7,545 (4,294) (301,684) (855,122) - - 7,381 8,063 - 20,000 1,014,914 1,184,914 - 20,000 1,022,295 1,192,977 7,545 15,706 720,611 337,855 38,593 96,992 178,952 2,120,201 $ 46,138 $ 112,698 $ 899,563 $ 2,458,056 -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. 2010A General Obligation Improvement Refunding Bonds — The bonds were issued for the refinancing of the Police Station. The final payment on these bonds was 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 was made in 2018. 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 was 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 31,2018 2010A G.O. 2010B G.O. 2010D G.O. 2011A G.O. Improvement Utility Revenue Equipment Improvement Refunding Refunding Certificate Refunding Bonds Bonds Bonds Bonds Assets Cash and investments $ — $ 44,493 $ 123 $ 38,558 Receivables Interest 343 104 — 90 Special assessments Delinquent — — — — Noncurrent — — — 79,506 Total assets $ 343 $ 44,597 $ 123 $ 118,154 Liabilities Due to other funds $ 481,203 $ — $ 236,518 $ — Advances from other funds 678,713 — 16,291 Total liabilities 1,159,916 — 252,809 — Deferred inflows of resources Unavailable revenue—special assessments — — — 79,506 Fund balances(deficits) Restricted for debt service (1,159,573) 44,597 (252,686) 38,648 Total liabilities,deferred inflows of resources,and fund balances $ 343 $ 44,597 $ 123 $ 118,154 -85- 2016B G.O. 2016C G.O. 2013A G.O. 2013B G.O. 2015A G.O. 2016A G.O. Capital Capital Improvement Street Street Improvement Improvement Improvement Refunding Construction Construction Refunding Refunding Refunding Bonds Bonds Bonds Bonds Bonds Bonds Total $ 853,024 $ 545,093 $ 329,005 $ 851,768 $ 82,280 $ 584,392 $ 3,328,736 2,001 1,279 772 1,998 193 1,371 8,151 1,023 - - 134,891 - - 135,914 222,964 - - 1,347,419 - - 1,649,889 $ 1,079,012 $ 546,372 $ 329,777 $ 2,336,076 $ 82,473 $ 585,763 $ 5,122,690 $ - $ - $ - $ - $ - $ - $ 717,721 - - - 300,000 - - 995,004 - - - 300,000 - - 1,712,725 223,987 - - 1,482,310 - - 1,785,803 855,025 546,372 329,777 553,766 82,473 585,763 1,624,162 $ 1,079,012 $ 546,372 $ 329,777 $ 2,336,076 $ 82,473 $ 585,763 $ 5,122,690 -86- CITY OF FARMINGTON Debt Service Fund Combining Schedule of Revenues,Expenditures, and Changes in Fund Balances by Account Year Ended December 31,2018 2010A G.O. 2010B G.O. 2010D G.O. 2011A G.O. Improvement Utility Revenue Equipment Improvement Refunding Refunding Certificate Refunding Bonds Bonds Bonds Bonds Revenues Property taxes $ 383,873 $ — $ 139,000 $ — Special assessments — — — 21,472 Investment earnings 2,267 1,208 5 1,028 Total revenues 386,140 1,208 139,005 22,500 Expenditures Debt service Principal 1,765,000 545,000 — 660,000 Interest and fiscal charges 61,662 12,383 6,708 10,323 Total expenditures 1,826,662 557,383 6,708 670,323 Excess(deficiency)of revenues over expenditures (1,440,522) (556,175) 132,297 (647,823) Other financing sources Transfers in — — — — Net change in fund balances (1,440,522) (556,175) 132,297 (647,823) Fund balances(deficits) Beginning of year 280,949 600,772 (384,983) 686,471 End of year $ (1,159,573) $ 44,597 $ (252,686) $ 38,648 -87- 2016B G.O. 2016C G.O. 2013A G.O. 2013B G.O. 2015A G.O. 2016A G.O. Capital Capital Improvement Street Street Improvement Improvement Improvement Refunding Construction Construction Refunding Refunding Refunding Bonds Bonds Bonds Bonds Bonds Bonds Total $ 444,000 $ 521,000 $ 293,500 $ 591,000 $ 124,000 $ 551,000 $ 3,047,373 87,423 - - 190,015 298,910 5,014 1,815 1,649 4,162 266 2,355 19,769 536,437 522,815 295,149 785,177 124,266 553,355 3,366,052 695,000 235,000 200,000 525,000 - 555,000 5,180,000 62,796 19,264 75,067 72,499 124,667 27,868 473,237 757,796 254,264 275,067 597,499 124,667 582,868 5,653,237 (221,359) 268,551 20,082 187,678 (401) (29,513) (2,287,185) 180,000 - - - - - 180,000 (41,359) 268,551 20,082 187,678 (401) (29,513) (2,107,185) 896,384 277,821 309,695 366,088 82,874 615,276 3,731,347 $ 855,025 $ 546,372 $ 329,777 $ 553,766 $ 82,473 $ 585,763 $ 1,624,162 -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 RevolvingCapital Projects Fund Maintenance Capital Projects Fund Nonmaj or Special Revenue Funds Police Donations and Forfeitures Park Improvement Arena(Ice) Nonmaj or 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 31,2018 Original and Variance With Final Budget Actual Final Budget Revenues Property taxes $ 3,047,373 $ 3,047,373 $ — Special assessments 418,235 298,910 (119,325) Investment earnings 8,400 19,769 11,369 Total revenues 3,474,008 3,366,052 (107,956) Expenditures Debt service Principal 4,758,815 5,180,000 421,185 Interest and fiscal charges 476,614 473,237 (3,377) Total expenditures 5,235,429 5,653,237 417,808 Excess(deficiency)of revenues over expenditures (1,761,421) (2,287,185) (525,764) Other financing sources(uses) Transfers in 330,000 180,000 (150,000) Transfers out (529,773) — 529,773 Total other financing sources(uses) (199,773) 180,000 379,773 Net change in fund balances $ (1,961,194) (2,107,185) $ (145,991) Fund balances Beginning of year 3,731,347 End of year $ 1,624,162 -90- CITY OF FARMINGTON State Aid Construction Capital Projects Fund Budgetary Comparison Schedule Year Ended December 31,2018 Original and Variance With Final Budget Actual Final Budget Revenues Special assessments $ 7,279 $ 9,660 $ 2,381 Investment earnings 1,900 2,713 813 Total revenues 9,179 12,373 3,194 Expenditures Current Public works — 24 24 Excess of revenues over expenditures 9,179 12,349 3,170 Other financing(uses) Transfers out (180,000) (180,000) — Net change in fund balances $ (170,821) (167,651) $ 3,170 Fund balances Beginning of year 283,919 End of year $ 116,268 -91- CITY OF FARMINGTON Storm Water Trunk Capital Projects Fund Budgetary Comparison Schedule Year Ended December 31,2018 Original and Variance With Final Budget Actual Final Budget Revenues Property taxes $ 166,000 $ 166,000 $ — Special assessments — 23 23 Intergovernmental — 105,650 105,650 Charges for service — 168,278 168,278 Investment earnings 9,004 80,136 71,132 Total revenues 175,004 520,087 345,083 Expenditures Current Public works — 543 543 Capital outlay Public works — 229,175 229,175 Debt service Interest and fiscal charges — 25,662 25,662 Total expenditures — 255,380 255,380 Excess of revenues over expenditures 175,004 264,707 89,703 Other financing sources Transfers in 869,773 51,093 (818,680) Net change in fund balances $ 1,044,777 315,800 $ (728,977) Fund balances Beginning of year 2,856,025 End of year $ 3,171,825 -92- CITY OF FARMINGTON Permanent Improvement Revolving Capital Projects Fund Budgetary Comparison Schedule Year Ended December 31,2018 Original and Variance With Final Budget Actual Final Budget Revenues Special assessments $ — $ 271 $ 271 Investment earnings 1,300 2,192 892 Total revenues 1,300 2,463 1,163 Net change in fund balances $ 1,300 2,463 $ 1,163 Fund balances Beginning of year 165,526 End of year $ 167,989 -93- CITY OF FARMINGTON Maintenance Capital Projects Fund Budgetary Comparison Schedule Year Ended December 31,2018 Original and Variance With Final Budget Actual Final Budget Revenues Property taxes $ - $ 2,099 $ 2,099 Intergovernmental 340,000 688,686 348,686 Charges for service - 12,085 12,085 Investment earnings 15,600 20,810 5,210 Total revenues 355,600 723,680 368,080 Expenditures Current Public works 901,969 414,670 (487,299) Parks and recreation 22,750 7,550 (15,200) Capital outlay Public works - 111,769 111,769 Debt service Interest and fiscal charges - 4,162 4,162 Total expenditures 924,719 538,151 (386,568) Excess(deficiency)of revenues over expenditures (569,119) 185,529 754,648 Other financing sources(uses) Transfers in 493,969 517,608 23,639 Transfers out (340,000) (109,852) 230,148 Total other financing sources(uses) 153,969 407,756 253,787 Net change in fund balances $ (415,150) 593,285 $ 1,008,435 Fund balances Beginning of year 903,238 End of year $ 1,496,523 -94- CITY OF FARMINGTON Police Donations and Forfeitures Special Revenue Fund Budgetary Comparison Schedule Year Ended December 31,2018 Original and Variance With Final Budget Actual Final Budget Revenues Investment earnings $ 100 $ 215 $ 115 Other Donations — 4,720 4,720 Miscellaneous — 10 10 Total revenues 100 4,945 4,845 Expenditures Current Public safety 6,500 9,930 3,430 Excess(deficiency)of revenues over expenditures (6,400) (4,985) 1,415 Other financing sources Sale of capital assets 5,000 2,937 (2,063) Net change in fund balances $ (1,400) (2,048) $ (648) Fund balances Beginning of year 17,460 End of year $ 15,412 -95- CITY OF FARMINGTON Park Improvement Special Revenue Fund Budgetary Comparison Schedule Year Ended December 31,2018 Original and Variance With Final Budget Actual Final Budget Revenues Special assessments $ — $ 17 $ 17 Intergovernmental — 8,633 8,633 Investment earnings 2,399 5,206 2,807 Other Rentals 7,088 7,088 — Miscellaneous 1,000 165,033 164,033 Total revenues 10,487 185,977 175,490 Expenditures Current Parks and recreation 9,500 18,428 8,928 Capital outlay Parks and recreation 65,000 46,937 (18,063) Total expenditures 74,500 65,365 (9,135) Excess(deficiency)of revenues over expenditures (64,013) 120,612 184,625 Other financing sources Transfers in 85,000 85,000 — Net change in fund balances $ 20,987 205,612 $ 184,625 Fund balances Beginning of year 257,950 End of year $ 463,562 -96- CITY OF FARMINGTON Arena Special Revenue Fund Budgetary Comparison Schedule Year Ended December 31,2018 Original and Variance With Final Budget Actual Final Budget Revenues Charges for services $ 333,900 $ 349,128 $ 15,228 Investment earnings 600 729 129 Other Donations 5,000 5,000 — Rentals 2,500 2,396 (104) Miscellaneous 1,000 1,104 104 Total revenues 343,000 358,357 15,357 Expenditures Current Parks and recreation 319,421 364,065 44,644 Capital outlay Parks and recreation — 694 694 Total expenditures 319,421 364,759 45,338 Excess(deficiency)of revenues over expenditures 23,579 (6,402) (29,981) Other financing(uses) Transfers out (20,000) (20,000) — Net change in fund balances $ 3,579 (26,402) $ (29,981) Fund balances Beginning of year 109,193 End of year $ 82,791 -97- CITY OF FARMINGTON Sanitary Sewer Trunk Capital Projects Fund Budgetary Comparison Schedule Year Ended December 31,2018 Original and Variance With Final Budget Actual Final Budget Revenues Special assessments $ — $ 7 $ 7 Charges for services — 85,232 85,232 Investment earnings 3,700 5,108 1,408 Total revenues 3,700 90,347 86,647 Expenditures Capital outlay Public works — 163,990 163,990 Total expenditures — 163,990 163,990 Net change in fund balances $ 3,700 (73,643) $ (77,343) Fund balances Beginning of year 437,138 End of year $ 363,495 -98- CITY OF FARMINGTON Cable Communications Capital Projects Fund Budgetary Comparison Schedule Year Ended December 31,2018 Original and Variance With Final Budget Actual Final Budget Revenues Franchise taxes $ 170,000 $ 146,324 $ (23,676) Investment earnings 6,000 10,659 4,659 Total revenues 176,000 156,983 (19,017) Expenditures Current General government 131,000 64,571 (66,429) Capital outlay General government 9,000 29,260 20,260 Total expenditures 140,000 93,831 (46,169) Net change in fund balances $ 36,000 63,152 $ 27,152 Fund balances Beginning of year 835,298 End of year $ 898,450 -99- CITY OF FARMINGTON Fire Capital Projects Fund Budgetary Comparison Schedule Year Ended December 31,2018 Original and Variance With Final Budget Actual Final Budget Revenues Investment earnings $ 2,500 $ 2,550 $ 50 Other Donations — 52,025 52,025 Total revenues 2,500 54,575 52,075 Expenditures Current Public safety — 10,193 10,193 Capital outlay Public safety — 590,580 590,580 Total expenditures — 600,773 600,773 Excess(deficiency)of revenues over expenditures 2,500 (546,198) (548,698) Other financing sources Sale of capital assets — 682 682 Transfers in 150,000 150,000 — Total other financing sources 150,000 150,682 682 Net change in fund balances $ 152,500 (395,516) $ (548,016) Fund balances Beginning of year 533,228 End of year $ 137,712 -100- CITY OF FARMINGTON Private Capital Projects Fund Budgetary Comparison Schedule Year Ended December 31,2018 Original and Variance With Final Budget Actual Final Budget Revenues Special assessments $ — $ 1,406 $ 1,406 Charges for services 20,000 — (20,000) Investment earnings 3,000 6,476 3,476 Total revenues 23,000 7,882 (15,118) Expenditures Current General government 20,000 337 (19,663) Net change in fund balances $ 3,000 7,545 $ 4,545 Fund balances Beginning of year 38,593 End of year $ 46,138 -101- CITY OF FARMINGTON Recreation Capital Projects Fund Budgetary Comparison Schedule Year Ended December 31,2018 Original and Variance With Final Budget Actual Final Budget Revenues Investment earnings $ 400 $ 1,351 $ 951 Other Donations 21,500 17,669 (3,831) Total revenues 21,900 19,020 (2,880) Expenditures Current Parks and recreation 8,100 12,668 4,568 Capital outlay Parks and recreation 3,500 10,646 7,146 Total expenditures 11,600 23,314 11,714 Excess(deficiency)of revenues over expenditures 10,300 (4,294) (14,594) Other financing sources Transfers in 20,000 20,000 — Net change in fund balances $ 30,300 15,706 $ (14,594) Fund balances Beginning of year 96,992 End of year $ 112,698 -102- CITY OF FARMINGTON General Capital Equipment Capital Projects Fund Budgetary Comparison Schedule Year Ended December 31,2018 Original and Variance With Final Budget Actual Final Budget Revenues Investment earnings $ 1,500 $ 3,001 $ 1,501 Other Donations 8,000 — (8,000) Miscellaneous — 1,387 1,387 Total revenues 9,500 4,388 (5,112) Expenditures Current Public safety 97,600 — (97,600) Capital outlay Public safety 110,000 306,072 196,072 Total expenditures 207,600 306,072 98,472 Excess(deficiency)of revenues over expenditures (198,100) (301,684) (103,584) Other financing sources Sale of capital assets — 7,381 7,381 Transfers in 296,545 1,014,914 718,369 Total other financing sources 296,545 1,022,295 725,750 Net change in fund balances $ 98,445 720,611 $ 622,166 Fund balances Beginning of year 178,952 End of year $ 899,563 -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 31,2018 Property Employee and Liability Information Expense Insurance Fleet Technology Total Assets Current assets Cash and investments $ 1,457,829 $ 443,746 $ 179,811 $ 471,639 $ 2,553,025 Receivables Accounts - - 90 99 189 Interest 3,419 1,041 422 1,106 5,988 Prepaid items - - - 15,837 15,837 Total current assets 1,461,248 444,787 180,323 488,681 2,575,039 Noncurrent assets Capital assets Machinery and equipment - - 116,173 - 116,173 Less accumulated depreciation - - (90,479) - (90,479) Total capital assets - - 25,694 - 25,694 Total assets $ 1,461,248 $ 444,787 $ 206,017 $ 488,681 $ 2,600,733 Current liabilities Accounts and contracts payable $ 5,492 $ 16,400 $ 6,909 $ 12,082 $ 40,883 Accrued salaries and employee benefits payable 386,310 - - - 386,310 Deposits payable 43 - - - 43 Due to other governments - - 73 - 73 Compensated absences payable - - 17,030 5,628 22,658 Total current liabilities 391,845 16,400 24,012 17,710 449,967 Net position Investment in capital assets - - 25,694 - 25,694 Unrestricted 1,069,403 428,387 156,311 470,971 2,125,072 Total net position 1,069,403 428,387 182,005 470,971 2,150,766 Total liabilities and net position $ 1,461,248 $ 444,787 $ 206,017 $ 488,681 $ 2,600,733 -105- CITY OF FARMINGTON Internal Service Funds Combining Statement of Revenues,Expenses, and Changes in Fund Net Position Year Ended December 31,2018 Property Employee and Liability Information Expense Insurance Fleet Technology Total Operating revenues Charges for services $ 2,088,562 $ - $ 290,680 $ 544,728 $ 2,923,970 Insurance reimbursement - 256,153 - - 256,153 Total operating revenues 2,088,562 256,153 290,680 544,728 3,180,123 Operating expenses Personal services 2,108,205 - 168,181 182,248 2,458,634 Professional services 46,375 9 33,721 206,290 286,395 Materials and supplies 69,283 95,259 164,542 Insurance - 237,113 - - 237,113 Depreciation 7,344 - 7,344 Total operating expenses 2,154,580 237,122 278,529 483,797 3,154,028 Operating income(loss) (66,018) 19,031 12,151 60,931 26,095 Nonoperating revenue Intergovernmental 10,789 - - - 10,789 Investment earnings 16,668 5,113 2,187 5,778 29,746 Total nonoperating revenue 27,457 5,113 2,187 5,778 40,535 Income(loss)before transfers (38,561) 24,144 14,338 66,709 66,630 Transfers in 13,022 16,110 - 26,208 55,340 Change in net position (25,539) 40,254 14,338 92,917 121,970 Net position Beginning of year 1,094,942 388,133 167,667 378,054 2,028,796 End of year $ 1,069,403 $ 428,387 $ 182,005 $ 470,971 $ 2,150,766 -106- CITY OF FARMINGTON Internal Service Funds Combining Statement of Cash Flows Year Ended December 31,2018 Property Employee and Liability Information Expense Insurance Fleet Technology Total Cash flows from operating activities Cash receipts from other funds and reimbursements $ 2,158,109 $ 256,153 $ 291,747 $ 544,629 $ 3,250,638 Cash payments to employees for services (2,059,655) - (174,790) (179,182) (2,413,627) Cash payments for interfund services used (46,375) (225,339) (96,022) (315,423) (683,159) Net cash flows from operating activities 52,079 30,814 20,935 50,024 153,852 Cash flows from noncapital related financing activities Intergovernmental 10,789 - - - 10,789 Transfers in 13,022 16,110 - 26,208 55,340 Net cash flows from noncapital related financing activities 23,811 16,110 - 26+208 66,129 Cash flows from investing activities Interest received on investments 16,694 5,069 2,164 5,665 29,592 Net increase in cash and cash equivalents 92,584 51,993 23,099 81,897 249,573 Cash and cash equivalents Beginning of year 1,365,245 .391,753 156,712 389,742 2,303,452 End of year $ 1,457,829 $ 443,746 $ 179,811 $ 471,639 $ 2,553,025 Reconciliation of operating income(loss)to net cash flows from operating activities Operating income(loss) $ (66,018) $ 19,031 $ 12,151 $ 60,931 $ 26,095 Adjustments to reconcile operating income(loss) to net cash flows from operating activities Depreciation - - 7,344 - 7,344 Change in assets and liabilities Accounts receivable 69,496 - 1,067 (99) 70,464 Due from other governments 51 - - - 51 Prepaid items - - - (8,231) (8,231) Accounts and contracts payable (79) 11,783 6,909 (5,643) 12,970 Accrued salaries and employee benefits 50,155 - - - 50,155 Deposits payable (1,526) - - - (1,526) Due to other governments - - 73 - 73 Compensated absences payable - - (6,609) 3,066 (3,543) Total adjustments 118,097 11,783 8,784 (10,907) 127,757 Net cash flows from operating activities $ 52,079 $ 30,814 $ 20,935 $ 50,024 $ 153,852 -107- FIDUCIARY FUND Agency Fund — Used to account for 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. -108- CITY OF FARMINGTON Agency Fund Statement of Changes in Assets and Liabilities Year Ended December 31,2018 Balance Balance January 1, December 31, 2018 Additions Deductions 2018 Assets Cash and investments $ 216,275 $ 392,470 $ 284,470 $ 324,275 Liabilities Deposits payable $ 216,275 $ 392,470 $ 284,470 $ 324,275 -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 31,2018 Economic Development Trident Housing Authority Tax Increment General Special Revenue Total Assets Cash and investments $ 301,271 $ 22,529 $ 323,800 Receivables Interest 636 — 636 Prepaid items 595 — 595 Total assets $ 302,502 $ 22,529 $ 325,031 Liabilities Accounts and contracts payable $ 3,140 $ 17,758 $ 20,898 Fund balances Nonspendable for prepaid items 595 — 595 Assigned for economic development 298,767 4,771 303,538 Total fund balances 299,362 4,771 304,133 Total liabilities and fund balances $ 302,502 $ 22,529 $ 325,031 -111- CITY OF FARMINGTON Economic Development Authority (Discretely Presented Component Unit) Combining Statement of Revenues,Expenditures,and Changes in Fund Balances Year Ended December 31,2018 Economic Development Trident Housing Authority Tax Increment General Special Revenue Total Revenues Property taxes $ — $ 39,463 $ 39,463 Intergovernmental 51,809 2,850 54,659 Investment earnings 4,188 — 4,188 Total revenues 55,997 42,313 98,310 Expenditures Current Economic development 68,339 37,542 105,881 Net change in fund balances (12,342) 4,771 (7,571) Fund balances Beginning of year 311,704 — 311,704 End of year $ 299,362 $ 4,771 $ 304,133 -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 tables 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 2009 2010 2011 2012 Governmental activities Net investment in capital assets $ 33,485,859 $ 22,287,712 $ 20,484,140 $ 21,263,670 Restricted 4,036,063 3,757,948 1,661,973 11,034,909 Unrestricted 9,568,5 51 11,197,982 14,963,297 11,131,928 Total governmental activities net position $ 47,090,473 $ 37,243,642 $ 37,109,410 $ 43,430,507 Business-type activities Net investment in capital assets $ 59,999,027 $ 60,219,892 $ 60,462,689 $ 58,728,008 Restricted 2,094,245 2,108,045 2,140,345 2,159,566 Unrestricted 5,622,790 6,067,114 6,819,607 7,845,545 Total business-type activities net position $ 67,716,062 $ 68,395,051 $ 69,422,641 $ 68,733,119 Primary government Net investment in capital assets $ 93,484,886 $ 82,507,604 $ 80,946,829 $ 79,991,678 Restricted 6,130,308 5,865,993 3,802,318 13,194,475 Unrestricted 15,191,341 17,265,096 21,782,904 18,977,473 Total primary government net position $114,806,535 $105,638,693 $106,532,051 $112,163,626 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- 2013 2014 2015 2016 2017 2018 $ 23,462,934 $ 23,383,175 $ 21,417,203 $ 23,684,773 $ 28,820,307 $ 32,909,853 11,669,054 9,235,448 9,063,587 10,441,391 6,961,837 4,797,191 9,628,139 13,150,789 8,920,144 5,142,435 6,576,959 7,997,614 $ 44,760,127 $ 45,769,412 $ 39,400,934 $ 39,268,599 $ 42,359,103 $ 45,704,658 $ 57,427,060 $ 55,685,476 $ 54,807,938 $ 53,225,787 $ 51,464,649 $ 50,747,479 2,159,566 2,160,566 2,160,566 2,231,966 2,238,206 2,316,500 8,891,769 10,396,218 11,439,369 12,575,526 13,508,485 14,594,293 $ 68,478,395 $ 68,242,260 $ 68,407,873 $ 68,033,279 $ 67,211,340 $ 67,658,272 $ 80,889,994 $ 79,068,651 $ 76,225,141 $ 76,910,560 $ 80,284,956 $ 83,657,332 13,828,620 11,396,014 11,224,153 12,673,357 9,200,043 7,113,691 18,519,908 23,547,007 20,359,513 17,717,961 20,085,444 22,591,907 $113,238,522 $114,011,672 $107,808,807 $107,301,878 $109,570,443 $113,362,930 -115- CITY OF FARMINGTON Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) Fiscal Year 2009 2010 2011 2012 Expenses Governmental activities General government $ 2,603,290 $ 2,410,637 $ 1,897,429 $ 1,865,415 Public safety 4,568,041 4,844,128 5,162,361 4,989,522 Public works 5,891,010 3,261,582 2,800,221 3,063,908 Park and recreation 1,814,966 1,864,728 1,666,466 1,719,254 Economic development 149,749 83,572 114,639 44,114 Intergovernmental donations - 8,526,239 313,198 - Interest and fiscal charges 1,625,021 1,718,077 1,431,468 1,302,605 Total governmental activities expenses $ 16,652,077 $ 22,708,963 $ 13,385,782 $ 12,984,818 Business-type activities Liquor operations $ 4,335,267 $ 4,267,536 $ 4,091,541 $ 4,116,030 Sewer operations 1,887,357 1,811,992 1,879,752 1,891,872 Solid waste 1,799,151 1,773,240 1,789,114 1,727,384 Storm water 714,058 702,089 745,967 734,516 Water 1,859,342 1,732,559 1,772,096 1,705,167 Street light - 175,050 180,200 176,513 Total business-type activities 10,595,175 10,462,466 10,458,670 10,351,482 Total primary government expenses $ 27,247,252 $ 33,171,429 $ 23,844,452 $ 23,336,300 Program revenues Governmental activities Charges for services General government $ 504,802 $ 503,258 $ 470,572 $ 436,113 Public safety 430,107 427,593 461,659 423,721 Public works 1,031,006 355,506 306,860 225,497 Park and recreation 508,655 537,773 520,522 581,341 Economic development 25,789 13,374 6,333 - Operating grants and contributions 1,214,756 551,257 507,180 533,939 Capital grants and contributions 1,140,980 2,449,930 2,388,656 4,976,219 Total governmental activities program revenues $ 4,856,095 $ 4,838,691 $ 4,661,782 $ 7,176,830 -116- 2013 2014 2015 2016 2017 2018 $ 1,778,549 $ 1,940,630 $ 2,284,974 $ 2,268,779 $ 2,178,067 $ 2,511,818 5,156,950 5,192,091 5,357,738 6,979,608 6,472,115 5,728,925 3,849,742 4,893,341 7,473,095 5,497,796 3,888,778 4,358,465 1,775,967 1,730,734 1,815,882 1,904,792 1,782,783 1,772,351 50,000 49,417 90,000 40,000 40,000 30,000 1,290,439 1,020,096 992,422 1,032,748 549,075 350,431 $ 13,901,647 $ 14,826,309 $ 18,014,111 $ 17,723,723 $ 14,910,818 $ 14,751,990 $ 4,206,058 $ 4,315,834 $ 4,352,597 $ 4,448,932 $ 4,634,488 $ 4,890,304 1,627,927 1,712,146 1,875,225 2,051,152 2,105,901 1,931,276 1,658,547 1,600,434 1,658,128 1,753,162 1,864,175 2,092,844 513,582 615,684 731,444 534,988 571,572 521,465 1,427,298 1,410,214 1,339,588 1,359,215 1,313,482 1,246,667 184,834 174,957 173,212 288,924 197,150 180,254 9,618,246 9,829,269 10,130,194 10,436,373 10,686,768 10,862,810 $ 23,519,893 $ 24,655,578 $ 28,144,305 $ 28,160,096 $ 25,597,586 $ 25,614,800 $ 684,528 $ 534,008 $ 399,053 $ 668,849 $ 434,411 $ 467,417 482,759 409,460 351,038 459,240 405,648 408,434 115,092 94,416 9,624 195,716 76,049 273,695 596,165 607,566 604,111 651,936 619,026 709,490 713,378 677,999 649,541 744,730 684,376 702,853 645,233 477,833 671,671 818,545 848,167 942,627 $ 3,237,155 $ 2,801,282 $ 2,685,038 $ 3,539,016 $ 3,067,677 $ 3,504,516 (continued) -117- CITY OF FARMINGTON Changes in Net Position Last Ten Fiscal Years(continued) (accrual basis of accounting) Fiscal Year 2009 2010 2011 2012 Program revenues(continued) Business-type activities Charges for services Liquor operations $ 4,335,565 $ 4,285,471 $ 4,199,344 $ 4,397,572 Sewer operations 1,376,043 1,581,526 1,600,303 1,787,957 Solid waste 1,767,750 1,850,073 1,872,771 1,869,426 Storm water 460,346 464,043 467,729 475,060 Water 1,509,100 1,439,906 1,417,708 1,595,116 Street light - 140,773 178,464 215,029 Operating grants and contributions 104,206 72,631 29,000 20,010 Capital grants and contributions 53,354 100,162 49,473 100,525 Total business-type activities program revenues 9,606,364 9,934,585 9,814,792 10,460,695 Total primary government program revenues $ 14,462,459 $ 14,773,276 $ 14,476,574 $ 17,637,525 Net(expense)revenue Governmental activities $(11,795,982) $(17,870,272) $ (8,724,000) $ (5,807,988) Business-type activities (988,811) (527,881) (643,878) 109,213 Total primary government net expense $(12,784,793) $(18,398,153) $ (9,367,878) $ (5,698,775) General revenues and other changes in net position Governmental activities Property taxes $ 8,963,578 $ 9,189,015 $ 9,607,893 $ 10,742,860 Tax increments 185,726 155,094 150,339 154,214 Franchise taxes 219,722 228,932 237,449 243,635 Unrestricted grants and contributions 47,830 927 1,500 1,816 Unrestricted investment earnings(charges) 311,546 181,943 119,632 77,276 Gain on sale of capital assets 4,626 25,412 75,306 - Transfers 2,436,097 (1,107,882) (1,602,351) 909,284 Total governmental activities $ 12,169,125 $ 8,673,441 $ 8,589,768 $ 12,129,085 Business-type activities Unrestricted investment earnings(charges) $ 196,286 $ 98,988 $ 69,117 $ 110,549 Gain on disposal of capital assets - - - - Transfers (2,436,097) 1,107,882 1,602,351 (909,284) Total business-type activities (2,239,811) 1,206,870 1,671,468 (798,735) Total primary government $ 9,929,314 $ 9,880,311 $ 10,261,236 $ 11,330,350 Change in net position Governmental activities $ 373,143 $ (9,196,831) $ (134,232) $ 6,321,097 Business-type activities (3,228,622) 678,989 1,027,590 (689,522) Total primary government $ (2,855,479) $ (8,517,842) $ 893,358 $ 5,631,575 -118- 2013 2014 2015 2016 2017 2018 $ 4,521,454 $ 4,639,194 $ 4,607,417 $ 4,742,313 $ 4,967,468 $ 5,256,645 1,816,763 1,843,746 1,957,902 2,043,859 2,068,388 2,045,728 1,952,177 1,979,623 1,991,179 2,041,561 2,061,324 2,071,672 565,166 559,327 670,353 643,479 647,767 737,115 1,558,400 1,499,091 1,439,873 1,631,643 1,681,079 1,852,381 216,719 219,052 222,159 224,781 225,570 226,674 19,300 21,000 22,000 23,000 24,000 30,263 108,642 - 945,938 - - - 10,758,621 10,761,033 11,856,821 11,350,636 11,675,596 12,220,478 $ 13,995,776 $ 13,562,315 $ 14,541,859 $ 14,889,652 $ 14,743,273 $ 12,220,478 $(10,664,492) $(12,025,027) $(15,329,073) $(14,184,707) $(11,843,141) $(11,247,474) 1,140,375 931,764 1,726,627 914,263 988,828 1,357,668 $ (9,524,117) $(11,093,263) $(13,602,446) $(13,270,444) $(10,854,313) $ (9,889,806) $ 10,748,581 $ 10,962,860 $ 11,460,209 $ 11,806,302 $ 12,181,830 $ 12,659,480 259,671 269,208 265,485 275,691 266,728 266,324 24,845 257,386 278,974 287,252 289,854 316,100 (32,408) 130,739 189,540 255,021 200,851 239,714 18,268 - - - 54,408 531 1,410,114 1,414,119 1,222,807 1,428,106 1,939,974 1,110,880 $ 12,429,071 $ 13,034,312 $ 13,417,015 $ 14,052,372 $ 14,933,645 $ 14,593,029 $ (40,071) $ 246,220 $ 152,954 $ 139,249 $ 129,207 $ 200,144 55,086 - - - - - (1,410,114) (1,414,119) (1,222,807) (1,428,106) (1,939,974) (1,110,880) (1,395,099) (1,167,899) (1,069,853) (1,288,857) (1,810,767) (910,736) $ 11,033,972 $ 11,866,413 $ 12,347,162 $ 12,763,515 $ 13,122,878 $ 13,682,293 $ 1,764,579 $ 1,009,285 $ (1,912,058) $ (132,335) $ 3,090,504 $ 3,345,555 (254,724) (236,135) 656,774 (374,594) (821,939) 446,932 $ 1,509,855 $ 773,150 $ (1,255,284) $ (506,929) $ 2,268,565 $ 3,792,487 -119- CITY OF FARMINGTON Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) Fiscal Year 2009 2010 2011 2012 General Fund Reserved $ 31,996 $ 30,314 $ — $ — Unreserved 2,125,884 2,188,528 — — Nonspendable — — 43,102 612,518 Committed — — — — Assigned — — — — Unassigned — — 2,093,006 2,067,246 Total General Fund $ 2,157,880 $ 2,218,842 $ 2,136,108 $ 2,679,764 All other governmental funds Reserved $ 435,000 $ 381,500 $ — $ — Unreserved,undesignated,reported in Special revenue funds 52,771 (159,042) — — Capital projects funds 3,415,978 6,244,182 — — Debt service funds 1,155,954 738,371 — — Nonspendable — — 307,074 146 Restricted — — 2,312,309 2,950,166 Committed — — — — Assigned — — 6,726,928 9,134,820 Unassigned — — (576,114) — Total all other governmental funds $ 5,059,703 $ 7,205,011 $ 8,770,197 $ 12,085,132 Total all funds $ 7,217,583 $ 9,423,853 $ 10,906,305 $ 14,764,896 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- 2013 2014 2015 2016 2017 2018 $ - $ - $ - $ - $ - $ - 13,388 33,369 6,034 33,762 34,529 5,045 - - - 240,000 - 81,000 4,250 - - - 3,079,013 3,993,191 4,734,534 5,031,529 5,666,183 5,477,026 $ 3,092,401 $ 4,107,560 $ 4,744,818 $ 5,065,291 $ 5,700,712 $ 5,722,071 $ - $ - $ - $ - $ - $ 160 150 110 - - 6,881,858 5,673,161 5,776,314 16,959,150 4,071,837 2,009,629 - - 8,025,185 5,158,828 6,373,022 7,586,959 7,865,678 7,531,076 - - - - $ 14,747,536 $ 13,204,397 $ 13,801,649 $ 22,118,088 $ 10,444,859 $ 9,596,588 $ 17,839,937 $ 17,311,957 $ 18,546,467 $ 27,183,379 $ 16,145,571 $ 15,318,659 -121- CITY OF FARMINGTON Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) Fiscal Year 2009 2010 2011 2012 Revenues General property taxes $ 8,944,965 $ 9,392,326 $ 9,690,053 $ 11,112,325 Franchise fees 219,722 228,932 237,449 243,635 Special assessments 778,101 1,450,515 720,862 3,296,216 Licenses and permits 376,183 454,769 456,791 423,153 Intergovernmental 1,915,315 2,657,788 2,217,217 556,496 Charges for services 1,585,069 1,141,182 1,096,174 1,015,835 Fines and forfeits 67,155 64,779 78,710 73,210 Investment earnings 311,546 176,191 20,444 158,657 Other 503,493 375,201 272,234 222,083 Total revenues 14,701,549 15,941,683 14,789,934 17,101,610 Expenditures Current General government 2,061,106 2,064,477 1,828,147 1,830,470 Public safety 4,234,175 4,589,650 4,705,581 4,702,399 Public works 3,407,642 1,379,325 1,382,306 1,402,838 Park and recreation 1,525,303 1,591,378 1,399,541 1,427,257 Economic development 102,769 84,572 112,612 91,165 Capital outlay 7,287,689 4,046,022 316,134 555,293 Debt service Principal 2,796,155 2,238,084 5,090,101 2,912,213 Interest and fiscal charges 1,681,127 1,507,873 1,527,970 1,336,414 Total expenditures 23,095,966 17,501,381 16,362,392 14,258,049 Excess(deficiency)of revenues over expenditures (8,394,417) (1,559,698) (1,572,458) 2,843,561 Other financing sources(uses) Bonds issued - 8,710,984 2,418,979 - Payment of refunded debt - (5,948,057) - - Sale of capital assets 4,626 25,412 139,454 105,746 Transfers in 5,830,778 3,359,406 2,455,874 3,997,318 Transfers out (3,084,628) (2,381,778) (1,959,397) (3,088,034) Total other financing sources(uses) 2,750,776 3,765,967 3,054,910 1,015,030 Net change in fund balances $ (5,643,641) $ 2,206,269 $ 1,482,452 $ 3,858,591 Debt service as a percentage of noncapital expenditures 28.3% 27.8% 41.2% 31.0% -122- 2013 2014 2015 2016 2017 2018 $ 10,808,636 $ 11,031,219 $ 11,462,986 $ 11,852,567 $ 12,186,789 $ 12,665,721 259,671 269,208 265,485 275,691 266,728 266,324 913,313 821,331 661,187 545,777 532,744 314,594 664,673 514,728 370,889 650,311 415,005 449,350 1,329,395 1,011,221 2,097,509 1,633,3 88 1,632,170 1,768,219 865,736 890,281 820,445 1,077,860 929,784 1,094,360 81,919 65,482 52,299 41,750 45,102 60,182 46,707 130,739 172,818 237,224 183,402 209,968 233,808 174,959 160,193 260,564 201,288 305,014 15,203,858 14,909,168 16,063,811 16,575,132 16,393,012 17,133,732 1,686,263 1,717,994 1,947,768 1,996,410 2,051,143 2,311,024 4,850,400 4,871,745 5,131,076 5,301,211 5,537,937 5,348,888 2,081,956 2,038,161 1,971,079 2,006,606 2,381,695 2,690,271 1,530,238 1,448,951 1,538,452 1,513,411 1,585,656 1,595,924 50,000 49,417 90,000 40,000 40,000 30,000 1,290,875 1,839,726 4,695,581 2,755,780 586,495 1,597,191 7,394,424 2,376,739 2,899,162 4,411,534 6,395,000 5,180,000 1,379,551 1,096,007 1,041,780 1,095,380 818,144 503,061 20,263,707 15,438,740 19,314,898 19,120,332 19,396,070 19,256,359 (5,059,849) (529,572) (3,251,087) (2,545,200) (3,003,058) (2,122,627) 7,088,037 - 3,184,641 10,120,095 - - - (1,435,000) - - (9,990,000) - 26,154 22,473 157,599 13,043 54,408 11,000 7,492,556 2,330,331 5,937,539 5,590,211 2,981,402 3,214,991 (6,082,442) (916,212) (4,794,182) (4,541,237) (1,080,560) (1,930,276) 8,524,305 1,592 4,485,597 11,182,112 (8,034,750) 1,295,715 $ 3,464,456 $ (527,980) $ 1,234,510 $ 8,636,912 $ (11,037,808) $ (826,912) 46.2% 24.8% 21.0% 29.5% 37.9% 31.3% -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 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) 2018 15,932,445 2,884,545 382,700 257,966 (37,168) 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 $ (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 (1,061,204) 3,721,925 22,081,209 57.161 1,810,826,485 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 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 2018 42.451 14.710 57.161 26.573 52.813 3.203 139.750 (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 change 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 2018 2009 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 $ 556,640 1 2.86 % $ 306,224 1 1.57 % Xcel Energy(Northern States Power) 206,412 2 1.06 — — — Dakota Electric Association 145,068 3 0.75 — — — Minnesota Energy Resources 91,594 4 0.47 — — — Dakota Storage,LLC 82,680 5 0.42 83,488 7 0.43 Valmont Industries 73,874 6 0.38 72,250 8 0.37 St.Francis Health Systems 69,616 7 0.36 84,640 6 0.43 RLR Investments,LLC 67,032 8 0.34 — — — POR-MKR Real Estate,LLC 66,938 9 0.34 — — — AMOS Financial,LLC 65,368 10 0.34 — — — Giles Properties — — — 129,771 2 0.67 Farmington City Center,LLC — — — 98,726 3 0.51 Land,LLC — — — 98,240 4 0.50 Mattamy Partnership — — — 88,064 5 0.45 Schwiness,LLC — — — 71,388 9 0.37 Individual property owner — — — 68,322 10 0.35 Total $ 1,425,222 7.32 % $ 1,101,113 5.31 % 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 2009 $ 8,869,919 $ 8,435,469 95.10 % $ 427,588 $ 8,863,057 99.92 % 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 98.57 151,752 10,733,053 99.99 2014 10,981,055 10,889,973 99.17 86,278 10,976,251 99.96 2015 11,402,145 11,307,924 99.17 87,173 11,395,097 99.94 2016 11,718,018 11,656,384 99.47 51,036 11,707,420 99.91 2017 12,133,656 12,073,701 99.51 41,765 12,115,466 99.85 2018 12,681,188 12,601,932 99.38 — 12,601,932 99.38 (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 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 — — 2018 9,155,000 5,575,000 — — 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 $ — $ 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 551,475 — 15,281,475 682 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 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 2018 9,155,000 1,588,980 7,566,020 1,810,826,485 0.42 (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 $ 18,314,489 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 19,457,656 38.88 22,421 N/A 337 -132- THIS PAGE INTENTIONALLY LEFT BLANK CITY OF FARMINGTON Direct and Overlapping Governmental Activities Debt December 31,2018 Estimated Estimated Share of Net Debt Percentage Overlapping Governmental Unit Outstanding Applicable(1) Debt Overlapping debt Dakota County(2) $ — — % $ — ISD No. 192 Farmington 185,175,000 0.595 1,102,621 ISD No. 196 Rosemount—Apple Valley—Eagan 134,115,000 0.000 51 Metropolitan Council(3) 189,310,976 0.040 76,574 Total overlapping debt 508,600,976 1,179,246 Direct debt City of Farmington direct debt 15,281,475 100.000 15,281,475 Total direct and overlapping debt $ 523,882,451 $ 16,460,721 (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 2009 2010 2011 2012 Debt limit $ 36,087,407 $ 33,238,070 $ 45,675,060 $ 40,338,008 Total net debt applicable to limit 16,327,256 17,934,173 16,919,072 15,916,859 Legal debt margin $ 19,760,151 $ 15,303,897 $ 28,755,988 $ 24,421,149 Total net debt applicable to limit as a percentage of debt limit 45.24% 53.96% 37.04% 39.46% -134- 2013 2014 2015 2016 2017 2018 $ 37,998,037 $ 39,352,574 $ 44,279,096 $ 48,043,247 $ 50,558,628 $ 54,324,795 15,442,435 14,520,696 16,496,534 20,115,000 12,455,000 9,155,000 $ 22,555,602 $ 24,831,878 $ 27,782,562 $ 27,928,247 $ 38,103,628 $ 45,169,795 40.64% 36.90% 37.26% 41.87% 24.63% 16.85% Legal Debt Margin Calculations for Fiscal Year 2018 Market value $ 1,810,826,485 Debt limit(3%of market value) 54,324,795 Debt applicable to limit 9,155,000 Legal debt margin $ 45,169,795 -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 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 2018 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) 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 2018 22,421 7,779 7,138 2.7 N/A N/A (1) Numbers for 2008-2015 are from the Farmington Building Inspections Department.The 2016-2018 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 2018 2009 Percentage of Total Percentage Employees Employment Employees of Total Taxpayer (1) Rank (2) (1) Rank Employment ISD No. 192,Farmington Public Schools 925 1 18.6 % 800 1 18.0 % Federal Aviation Administration 498 2 10.0 650 2 14.6 Installed Building Solutions 230 3 4.6 — — — Dakota Electric Association 200 4 4.0 208 4 4.7 Trinity Care Center&Trinity Terrace 181 5 3.6 125 8 2.8 Marshall Lines,Inc. 175 6 3.5 215 3 4.8 Valmont Industries 154 7 3.1 118 9 2.7 City of Farmington 149 8 3.0 101 10 2.3 R&L Carriers 140 9 2.8 — — — Kemps Dairy 138 10 2.8 134 7 3.0 River Valley Home Care — — — 196 5 4.4 Bachman's Nursery — — — 150 6 3.4 Total 2,790 56.1 % 2,697 60.8 % (1) Per City of Farmington records. (2) Metropolitan Council Employment by Community as of 2017(latest available),4,971 total employment. -138- CITY OF FARMINGTON Full-Time Equivalent City Government Employees by Function Last Ten Fiscal Years Fiscal Year 2009 2010 2011 2012 General government Administration 6.00 6.00 5.00 5.25 Finance 3.50 3.50 2.75 2.50 Human resources/information technology/communications 3.00 3.00 2.80 1.80 Community development 4.00 4.00 3.00 1.00 Total general government 16.50 16.50 13.55 10.55 Public safety Police administration 6.00 6.00 6.15 6.15 Police patrol 16.00 16.00 16.00 16.50 Investigations 7.00 7.00 7.00 6.50 Fire 1.00 1.00 1.25 1.40 Total public safety 30.00 30.00 30.40 30.55 Public works Building inspections 3.00 3.00 3.00 2.93 Engineering 2.10 2.10 2.42 2.34 Streets 4.68 4.68 4.68 4.68 Snowplowing 0.45 0.45 0.45 0.45 Natural resources 1.12 1.12 1.02 1.02 Total public works 11.35 11.35 11.57 11.42 Parks and recreation Park maintenance 5.44 5.44 4.44 4.44 Building maintenance - - - - Recreation programming 1.50 2.00 2.00 2.00 Total parks and recreation 6.94 7.44 6.44 6.44 Senior center 1.50 1.00 1.10 1.10 Swimming pool 0.40 0.40 0.40 0.40 Arena 1.86 1.86 2.11 2.11 Liquor operations 5.00 5.00 7.25 7.25 Sewer 2.41 2.41 2.60 2.59 Solid waste 6.38 6.38 6.38 6.38 Storm water utility 2.53 2.53 2.93 2.93 Water 3.64 3.64 3.83 3.83 Fleet 2.00 2.00 2.00 1.00 Total employees 90.51 90.51 90.56 86.55 Note: In addition to the above,the City has a volunteer fire department of 50 people and hires seasonal staff for its summer parks and recreation operations. Source: Various city departments -139- 2013 2014 2015 2016 2017 2018 3.50 3.50 3.00 2.00 1.00 1.00 4.00 4.00 4.50 5.50 5.50 5.50 3.00 3.00 3.00 3.00 4.00 5.00 2.00 2.50 2.50 3.00 3.00 4.00 12.50 13.00 13.00 13.50 13.50 15.50 5.15 5.15 5.15 5.15 5.15 5.00 18.00 17.00 17.00 17.00 17.00 15.00 5.00 5.00 5.00 5.00 5.00 6.00 1.40 1.40 1.50 1.50 1.50 1.00 29.55 28.55 28.65 28.65 28.65 27.00 2.50 2.50 2.50 3.20 3.50 3.50 5.10 4.60 4.50 4.50 5.50 4.50 10.00 10.00 9.00 9.50 9.50 9.00 1.00 1.00 1.00 1.00 - 1.00 18.60 18.10 17.00 18.20 18.50 18.00 3.50 3.50 3.50 3.50 3.60 4.00 1.00 1.00 1.00 1.00 1.00 1.00 2.00 2.00 2.00 2.00 2.00 2.00 6.50 6.50 6.50 6.50 6.60 7.00 1.50 1.50 1.00 1.40 1.40 1.00 0.40 0.40 0.40 0.40 0.40 - 2.35 2.35 2.35 2.35 2.35 2.00 7.25 7.50 8.00 8.00 8.00 9.50 5.00 5.00 5.00 5.50 5.50 5.50 2.00 2.00 2.00 2.00 2.00 2.00 85.65 84.90 83.90 86.50 86.90 87.50 -140- CITY OF FARMINGTON Operating Indicators by Function Last Ten Years Fiscal Year Function/Program 2009 2010 2011 2012 General government Elections N/A 1 N/A 1 Registered voters N/A 11,820 N/A 13,358 Number of votes cast N/A 7,002 N/A 11,185 Voter participation(registered) N/A 59.2% N/A 84.0% Public safety Police Arrests 440 399 527 435 All citations and warnings* 1,498 1,848 2,253 4,359 Calls for service 13,025 12,710 13,807 15,094 Fire Medical calls 251 257 274 290 Fire calls 324 272 227 254 Inspections Building permits 576 907 747 818 Value of building permits(in millions) $ 20 $ 22 $ 25 $ 17 Parks and recreation Parks Park reservations 77 76 67 69 Pool(Closed after 2017) Pool open swim admissions 11,163 13,009 11,869 13,069 Pool swim lesson registrations 371 405 410 407 Pool season passes sold 69 71 63 89 Pool punch cards sold 202 163 142 130 Swim bus riders 1,059 729 620 641 Rambling River Center Memberships 440 430 430 428 Program participation 18,104 11,738 15,817 16,198 Number of volunteers 215 107 108 152 Total volunteer hours 6,315 4,276 4,601 3,741 Ice arena Ice skating lessons total participants 213 263 195 200 Arena rental hours 1,191 1,171 1,271 1,197 Outdoor rinks total number of skaters 6,542 9,797 6,499 5,259 Other Recreation program/event participants 6,568 6,258 6,126 6,607 Youth scholarships provided 31 45 20 22 *Beginning in 2012,this figure includes warnings. N/A-Not Available Source:Various city departments -141- 2013 2014 2015 2016 2017 2018 N/A 1 N/A 1 N/A 1 N/A 12,541 N/A 13,788 N/A 13,403 N/A 6,419 N/A 11,545 N/A 9,632 N/A 51.0% N/A 84.0% N/A 72.0% 403 266 153 351 281 284 4,517 3,383 2,494 2,070 2,021 2,484 13,138 13,035 12,085 11,943 11,221 13,033 323 386 359 356 452 411 235 241 361 345 407 340 679 711 619 1,184 1,036 1,059 $ 35 $ 24 $ 15 $ 38 $ 19 $ 26 65 66 66 81 71 64 11,566 8,032 7,652 7,372 6,302 - 308 267 256 309 136 - 78 N/A N/A NA N/A - 154 193 176 125 139 - 786 408 536 507 496 - 435 406 381 404 467 497 16,875 15,285 13,885 13,042 15,203 16,015 94 130 107 82 80 69 4,780 4,348 5,944 8,573 4,298 3,426 215 230 216 329 284 296 1,147 1,197 1,315 1,285 1,490 1,380 7,819 7,481 7,851 5,187 7,276 5,451 6,971 6,425 5,976 8,344 8,171 7,034 25 7 4 6 8 1 -142- CITY OF FARMINGTON Capital Assets Statistics by Function/Program Last Ten Years Fiscal Year Function/Program 2009 2010 2011 2012 Public safety Police Stations 1 1 1 1 Patrol squads 18 18 18 17 Fire Stations 2 2 2 2 Fire trucks 7 7 7 7 Public works Vehicles 21 21 21 20 Streets(miles) 89 89 89 89 Parks and recreation Senior center—building 1 1 1 1 Swimming pool(Closed after 2017) 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) 70 71 71 71 Water Water main(miles) 108 109 109 109 Wells 7 7 7 7 Water reservoirs 2 2 2 2 Source:City's financial records -143- 2013 2014 2015 2016 2017 2018 1 1 1 1 1 1 17 16 16 15 15 16 2 2 2 2 2 2 7 6 6 8 8 8 21 21 24 29 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 21 23 23 23 23 24 5 5 5 5 5 5 84 84 84 84 90 90 71 71 73 73 78 78 109 109 109 109 113 113 7 7 7 7 7 7 2 2 2 2 2 2 -144- THIS PAGE INTENTIONALLY LEFT BLANK Management Report for City of Farmington,Minnesota December 31,2018 THIS PAGE INTENTIONALLY LEFT BLANK PRINCIPALS Thomas A.Karnowski,CPA Paul A.Radosevich,CPA William J.Lauer,CPA James H.Eichten,CPA CERTIFIED taiMi(R PUBLIC Aaron J.Nielsen,CPA ACCOUNTANTS Victoria L.Holinka,CPA/CMA Jaclyn M.Huegel,CPA To the City Council and Management City of Farmington,Minnesota We have prepared this management report in conjunction with our audit of the City of Farmington, Minnesota's (the City) financial statements for the year ended December 31, 2018. 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. 111034,114A1/ K ; /2.0et,., P. A . Minneapolis,Minnesota May 13,2019 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 GOVERNMENT AUDITING STANDARDS We have audited the financial statements of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City as of and for the year ended December 31, 2018. 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 31,2018: • 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, 2018; however, the City implemented the following governmental accounting standards during the fiscal year: • Governmental Accounting Standards Board(GASB)Statement No. 75,Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, which established new accounting and financial reporting requirements for governments whose employees are provided with other post-employment benefits(OPEB). • GASB Statement No. 85, Omnibus 2017, which addresses issues that have been identified during implementation and application of certain GASB statements. 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 clearly trivial, and communicate them to the appropriate level of management. There were no misstatements detected as a result of audit procedures that 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: • Pensions and OPEB Liabilities — The City has recorded liabilities and activity for pension benefits and OPEB. These obligations are calculated using actuarial methodologies described in GASB Statement Nos. 68 and 75. 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 13,2019. 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 (MD&A) 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 supplementary 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 supplementary 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- THIS PAGE INTENTIONALLY LEFT BLANK 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 2017 fiscal year, local ad valorem property tax levies provided 41.1 percent of the total governmental fund revenues for cities over 2,500 in population, and 37.4 percent for cities under 2,500 in population. Total property taxes levied by all Minnesota cities for taxes payable in 2018 increased 6.2 percent from the prior year, and total certified levies payable in 2019 are projected to increase by 5.6 percent. The total market value of property in Minnesota cities increased about 5.6 percent for the 2017 levy year (state-wide market value information for the 2018 levy year was not available at the time this report was issued). The market values used for levying property taxes are based on the previous fiscal year (e.g., market values for taxes levied in 2018 were based on assessed values as of January 1, 2017), 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 5.2 percent for taxes payable in 2017 and 7.4 percent for taxes payable in 2018. The following graph shows the City's changes in taxable market value over the past 10 years: Taxable Market Value $2,000,000,000 $1,800,000,000 $1,600,000,000 — $1,400,000,000 — - -- $1,200,000,000 — — $1,000,000,000 $800,000,000 $600,000,000 $400,000,000 MI $200,000,000 �- ,- I 7..._ 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 -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 5.0 percent and 7.1 percent for taxes payable in 2017 and 2018,respectively. 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 . En - --- $16,000,000 $14,000,000 — — $12,000,000 . — - — -- $10,000,000 — - -----. --- — $8,000,000 $6,000,000 . r. — $4,000,000 $2,000,000 --- • $- 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 The following table presents the average tax rates applied to city residents for each of the last three levy years: Rates Expressed as a Percentage of Net Tax Capacity City of Farmington 2016 2017 2018 Average tax rate City 59.2 58.8 57.2 County 28.6 28.0 26.6 School 57.6 54.2 52.8 Special taxing 3.8 3.7 3.2 Total 149.2 144.7 139.8 Despite the City historically having a higher dependence on property taxes than the average Minnesota city, both the City portion of the tax rate and the overall tax rate on Farmington residents have been steadily declining in recent years, due to the increasing taxable market value of property within the City. -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 31,2018,presented both by fund balance classification and by fund: Governmental Funds Change in Fund Balance Fund Balance as of December 31, Increase 2018 2017 (Decrease) Fund balances of governmental funds Total by classification Nonspendable $ 116,102 $ 34,529 $ 81,573 Restricted 2,009,629 4,071,837 (2,062,208) Committed 7,826,959 6,373,022 1,453,937 Unassigned 5,365,969 5,666,183 (300,214) Total—governmental funds $ 15,318,659 $ 16,145,571 $ (826,912) Total by fund General $ 5,722,071 $ 5,700,712 $ 21,359 Debt Service 1,624,162 3,731,347 (2,107,185) State Aid Construction Capital Projects 116,268 283,919 (167,651) Storm Water Trunk Capital Projects 3,171,825 2,856,025 315,800 Permanent Improvement Revolving Capital Projects 167,989 165,526 2,463 Maintenance Capital Projects 1,496,523 903,238 593,285 Nonmajor 3,019,821 2,504,804 515,017 Total—governmental funds $ 15,318,659 $ 16,145,571 $ (826,912) In total,the fund balances of the City's governmental funds decreased by $826,912 during the year ended December 31,2018. The decrease in restricted fund balances of $2,062,208 relates primarily to the early call of three outstanding debt issues (total principal called $2,215,000) during 2018, which reduced future debt service interest by$188,619. Committed fund balance increased $1,453,937, with the majority of the increase in resources committed for future capital improvements in the Storm Water Trunk, Maintenance, and several nonmajor capital projects funds. Unassigned fund balance decreased $300,214, despite the positive overall operating result in the General Fund. The decrease in unassigned fund balance was primarily due to the commitment of$240,000 of the year-end fund balance in the General Fund to reduce the City's 2019 debt service levy. -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 MD&A. An inherent difficulty in presenting per capita information is the accuracy of the population count, which for most years is based on estimates. Governmental Funds Revenue per Capita With State-Wide Averages by Population Class State-Wide City of Farmington Year December 31,2017 2016 2017 2018 Population 10,000-20,000 20,000-100,000 22,343 22,421 22,421 Property taxes $ 451 $ 475 $ 530 $ 544 $ 565 Tax increments 27 38 — Franchise and other taxes 43 48 12 12 12 Special assessments 48 59 24 24 14 Licenses and permits 34 49 29 19 20 Intergovernmental revenues 276 147 73 73 79 Charges for services 103 103 48 41 49 Other 53 48 24 19 26 Total revenue $ 1,035 $ 967 $ 740 $ 732 $ 765 The City's governmental fund revenues for 2018 were $17,133,732, an increase of $740,720 (4.5 percent), or $33 per capita, from the prior year. Revenue from property taxes was $21 per capita higher than the prior year, due to a 4.5 percent increase in the City's adopted levy. Charges for services increased$8 per capita from last year,mainly due to higher revenues from storm water and sanitary sewer trunk fees. Special assessment revenue was $10 per capita lower than last year, mainly attributable to an increase in delinquencies. 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 31,2017 2016 2017 2018 Population 10,000-20,000 20,000-100,000 22,343 22,421 22,421 Current General government $ 120 $ 101 $ 89 $ 91 $ 103 Public safety 259 287 237 247 239 Streets and highways 127 101 90 106 120 Culture and recreation 112 99 68 71 71 All other 64 77 2 2 1 682 665 486 517 534 Capital outlay and construction 319 263 123 26 71 Debt service Principal 147 121 197 285 231 Interest and fiscal charges 35 32 49 36 22 182 153 246 321 253 Total expenditures $ 1,183 $ 1,081 $ 855 $ 864 $ 858 Total expenditures in the City's governmental funds for 2018 were $19,256,359, a decrease of$139,711 (0.7 percent), or$6 per capita, from the previous year. Current governmental expenditures for 2018 were $17 per capita higher than last year, mainly in expenditures for streets and highways ($14 per capita). Capital outlay expenditures were$45 per capita higher than last year,primarily due to a down payment on a new fire truck and an increase in other vehicle purchases. These increases were offset by a $68 per capita decrease in debt service, due to the City refunding or exercising early call provisions on a number of outstanding debt issues in recent years. -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 Ti Al—Al 1 $3,000,000 $2,000,000 $1,000,000 2014 2015 2016 2017 2018 NEN Fund Balance $4,107,560 $4,744,818 $5,065,291 $5,700,712 $5,722,071 O Cash(Net) $2,934,620 $3,385,793 $3,875,421 $4,493,060 $4,555,548 Exp&Trans Out $10,497,656 $11,006,155 $12,228,226 $11,767,128 $12,801,620 The City's General Fund cash and investments, net of interfund borrowing at December 31, 2018 was $62,488 higher than at the previous year-end. Total fund balance at December 31, 2018 of$5,722,071 represented an increase of$21,359 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. 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$5,365,969 at the end of the 2018 fiscal year represented approximately 41.3 percent of budgeted expenditures and transfers out for 2019. 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 2018 compared to budget: General Fund Revenue Budget and Actual Property Taxes Air. Ari Intergovernmental Wil Fines and Forfeits 7 Charges for Services _----ij Licenses and Permits _____Ii All Other p , csv.3 4' 01 5r it, 86 8j kr 8 49 ur1 O o-000 -0 .0 o�oOO o�OOO o�OOO o�OOO o-0 00 o-000 o .0 �00 OOoo ■Budget • Actual General Fund revenue for 2018 was $11,626,603, which was $191,966 (1.7 percent) more than budget. Intergovernmental revenue exceeded budget by $78,614, as fire pension and training aid, police aid, and miscellaneous state grants were higher than projected. Charges for services exceeded budget by $39,637, mainly due to fire charges exceeding expectations. Revenue from licenses and permits was $38,939 more than budget,as building, plumbing,and heating permits were higher than anticipated. Revenue from court fines also exceeded budget by$25,182. 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 --.- s- NB _111111 . . _ Property Fines and Charges for Licenses Taxes Intergovernmental All Other Forfeits Services and Permits •2014 $8,173,509 $849,876 $65,482 $519,169 $514,728 $295,376 •2015 $8,485,373 $905,130 $52,299 $507,555 $370,889 $187,987 02016 $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 •2018 $9,450,249 $965,250 $60,182 $479,637 $449,350 $221,935 Total General Fund revenue for 2018 was $376,054 (3.3 percent) higher than last year. Property taxes were $308,123 higher than last year, due to the increased tax levy. Intergovernmental revenues increased $38,324 from last year, mainly in local government state aid. Licenses and permits were $34,345 higher than last year,due to an increase in building permits. -10- The following graph illustrates the components of General Fund spending for 2018 compared to budget: General Fund Expenditures Budget and Actual General Government Public Safety1111116 411,. Public Works Parks and Recreation Economic Development 000 °% s°° °o r°° °% ro °% s� °o r°° "O°o °O 'O° 'Op 'OO 'O° 'Op 'O° 'Op '00 X00 "00 '00 O O O O O O ° O O O O ■Budget • Actual General Fund expenditures for 2018 were $11,181,196, which was $450,073 (3.9 percent) under budget. Expenditures were under budget in almost every category, with the largest savings in public safety ($233,291)and public works($107,659). 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 _rte $4,000,000 $3,000,000 $2,000,000 $1,000,000 General � Parks and Economic Government Public Safety Public Works Recreation Development ■2014 $1,717,186 $4,918,093 $2,038,136 $1,135,079 $48,583 ■2015 $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 ■2018 $2,248,227 $5,406,394 $2,278,842 $1,217,733 $30,000 Total General Fund expenditures for 2018 were$368,860 (3.4 percent) higher than the previous year. The largest increase was in general government expenditures, which was $264,225 higher than last year, due in part to a tax increment redistribution payment. Public works expenditures were $183,896 higher than last year,mainly due to personnel additions and increased snow removal costs. -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 31,2018,presented both by classification and by fund: Enterprise Funds Change in Financial Position Net Position as of December 31, Increase 2018 2017 (Decrease) Net position of enterprise funds Total by classification Net investment in capital assets $ 50,747,479 $ 51,464,649 $ (717,170) Restricted—future drinking water treatment plant 2,316,500 2,238,206 78,294 Unrestricted 14,594,293 13,508,485 1,085,808 Total—enterprise funds $ 67,658,272 $ 67,211,340 $ 446,932 Total by fund Liquor Operations $ 1,338,985 $ 1,151,713 $ 187,272 Sewer Operations 20,554,396 20,703,287 (148,891) Solid Waste 1,437,110 1,484,225 (47,115) Storm Water 14,419,468 14,332,928 86,540 Water 29,764,930 29,443,667 321,263 Street Light 143,383 95,520 47,863 Total—enterprise funds $ 67,658,272 $ 67,211,340 $ 446,932 In total, the net position of the City's enterprise funds increased by $446,932 during the year ended December 31, 2018. The City's net investment in capital assets decreased $717,170 during the year, due to depreciation. Unrestricted net position increased by $1,085,808, as all of the City's enterprise operations had positive operating results for the year prior to transfers out. The enterprise funds transferred a total of$1,340,055 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, $5,500,000 $5,000,000 $4,500,000 Nii $4,000,000 — $3,500,000 — $3,000,000 — $2,500,000 $2,000,000 — $1,500,000 — $1,000,000 — $500,000 — 2014 2015 2016 2017 2018 •Sales $4,639,194 $4,607,417 $4,742,313 $4,967,468 $5,256,645 ■Cost of Sales $3,467,797 $3,467,487 $3,537,858 $3,707,363 $3,923,968 0Oper Exp $848,037 $885,110 $911,074 $927,125 $966,336 ■Oper Income $323,360 $254,820 $293,381 $332,980 $366,341 The City's Liquor Operations Fund ended 2018 with an unrestricted net position of $1,338,985, an increase of$187,272 from the prior year. The Liquor Operations Fund had gross sales of$5,256,645 in 2018, an increase of$289,177 (5.8 percent) from the previous year. Gross profit was$1,332,677,about 25.4 percent of sales,which is consistent with the prior year. Operating expenses for 2018 increased $39,211 (4.2 percent) from the previous year, mainly in salaries and benefits. -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 — $750,000 — $500,000 — WI 1111111.1.— $250,000 — $(250,000) 2014 2015 2016 2017 2018 OOperRev $1,843,746 $1,957,902 $2,043,859 $2,068,388 $2,045,728 Oper Exp $1,710,843 $1,873,412 $2,049,273 $2,107,816 $1,930,839 -Inc Before Depr $723,105 $679,364 $591,786 $556,961 $711,639 -Oper Inc(Loss) $132,903 $84,490 $(5,414) $(39,428) $114,889 The Sewer Operations Fund ended 2018 with a total net position of$20,554,396, a decrease of$148,891 from the prior year. Of this, $16,864,302 represents the investment in sewer collection system capital assets, leaving an unrestricted net position of$3,690,094. Operating revenue in the Sewer Operations Fund decreased$22,660(1.1 percent)from the prior year. Operating expenses for 2018 were $176,977 (8.4 percent) lower than the previous year. The largest factor contributing to the change was an increase of approximately $189,000 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 .11 — $(200,000) 2014 2015 2016 2017 2018 oOperRev $1,979,623 $1,991,179 $2,041,561 $2,061,324 $2,071,672 OperExp $1,600,434 $1,658,128 $1,775,162 $1,864,175 $2,101,344 Inc Before Depr $431,634 $385,496 $346,778 $305,022 $51,763 Oper Inc(Loss) $379,189 $333,051 $266,399 $197,149 $(29,672) The Solid Waste Fund ended 2018 with a total net position of$1,437,110, a decrease of$47,115 from the prior year. Of this, $381,242 represents the investment in solid waste operation capital assets, leaving an unrestricted net position of$1,055,868. Operating revenue in the Solid Waste Fund increased$10,348(0.5 percent)from the prior year. Operating expenses for 2018 were $237,169 (12.7 percent) higher than the previous year, mainly due to an increase of over$208,000 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, $800,000 $700,000 $600,000 $500,000 — $400,000 — $300,000 — $200,000 — $100,000 — $(100,000) 2014 2015 2016 2017 2018 I I Oper Rev $559,327 $670,353 $643,479 $647,767 $737,115 MEI Oper Exp $615,684 $731,444 $534,988 $551,793 $533,465 -Oper Inc(Loss) $(56,357) $(61,091) $108,491 $95,974 $203,650 -Inc Before Depr $330,919 $339,516 $520,482 $508,053 $628,404 The Storm Water Fund ended 2018 with a total net position of$14,419,468, an increase of$86,540 from the prior year. Of this, $13,229,752 represents the investment in storm water operation capital assets, leaving an unrestricted net position of$1,189,716. Operating revenue in the Storm Water Fund increased $89,348 (13.8 percent) from the prior year, due to an increase in storm water rates. Operating expenses for 2018 were $18,328 (3.3 percent) lower than the previous year, mainly due to a decrease 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, $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 — 2014 2015 2016 2017 2018 oOperRev $1,499,091 $1,439,873 $1,631,643 $1,681,079 $1,852,381 MIN OperExp $1,409,961 $1,339,420 $1,359,111 $1,313,735 $1,247,662 -Inc Before Depr $968,433 $924,944 $1,042,252 $1,134,553 $1,335,659 -Oper Inc(Loss) $89,130 $100,453 $272,532 $367,344 $604,719 The Water Fund ended 2018 with a total net position of$29,764,930, an increase of$321,263 from the prior year. Of this, $20,272,183 represents the investment in water distribution system capital assets, $2,316,500 is restricted for a future drinking water treatment plant, and unrestricted net position is $7,176,247. Operating revenue in the Water Fund for 2018 increased $171,302 (10.2 percent) from the prior year, mainly due to water quality management fees and trunk charges from new development. Water Fund operating expenses for 2018 were $66,073 (5.0 percent)lower than the previous year, mainly due to decreases in supplies and depreciation. -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 — 3 $100,000 $50,000 — $(50,000) $(100,000) 2014 2015 2016 2017 2018 I I Oper Rev $219,052 $222,159 $224,781 $225,570 $226,674 NMI Oper Exp $174,957 $173,212 $288,924 $197,150 $180,254 Oper Inc(Loss) $44,095 $48,947 $(64,143) $28,420 $46,420 Street Light Fund operating revenue for 2018 increased$1,104(0.5 percent)from the prior year. Operating expenses were $16,896 (8.6 percent) lower than the previous year, due to expenses for supplies and professional services having been unusually high the last two years, due to the City switching over to LED lights and replacing some traffic lights. Unrestricted net position increased$47,863 in 2018,ending the year at$143,383. -18- THIS PAGE INTENTIONALLY LEFT BLANK 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 the 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, 2018 and 2017,for governmental activities and business-type activities: As of December 31, Increase 2018 2017 (Decrease) Net position Governmental activities Net investment in capital assets $ 32,909,853 $ 28,820,307 $ 4,089,546 Restricted 4,797,191 6,961,837 (2,164,646) Unrestricted 7,997,614 6,576,959 1,420,655 Total governmental activities 45,704,658 42,359,103 3,345,555 Business-type activities Net investment in capital assets 50,747,479 51,464,649 (717,170) Restricted 2,316,500 2,238,206 78,294 Unrestricted 14,594,293 13,508,485 1,085,808 Total business-type activities 67,658,272 67,211,340 446,932 Total net position $ 113,362,930 $ 109,570,443 $ 3,792,487 The City's total net position at December 31, 2018 was $3,792,487 higher than the previous year-end. The City's net position increased $3,345,555 from current year governmental activities and $446,932 from current year business-type activities. The governmental activities net investment in capital assets increased $4,089,546 and the restricted portion of governmental net position decreased $2,164,646 in 2018, mainly due to the early repayment of several outstanding debt issues used to acquire the City's related capital assets. The $1,420,655 increase in governmental activities unrestricted net position was primarily related to increases in fund balances committed for various capital purposes. The business-type activities net investment in capital assets decreased $717,170 in 2018, mainly due to depreciation. The unrestricted portion of the business-type activities net position increased $1,085,808, due to the positive 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 position. 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, 2018 and 2017: 2018 2017 Program Expenses Revenues Net Change Net Change Net(expense)revenue Governmental activities General government $ 2,511,818 $ 505,879 $ (2,005,939) $ (1,710,284) Public safety 5,728,925 872,743 (4,856,182) (5,588,217) Public works 4,358,465 1,403,632 (2,954,833) (2,807,044) Parks and recreation 1,772,351 722,262 (1,050,089) (1,163,521) Economic development 30,000 — (30,000) (25,000) Interest on long-term debt 350,431 — (350,431) (549,075) Business-type activities Liquor 4,890,304 5,256,645 366,341 332,980 Sewer 1,931,276 2,045,728 114,452 (37,513) Solid waste 2,092,844 2,101,935 9,091 221,149 Storm water 521,465 737,115 215,650 76,195 Water 1,246,667 1,852,381 605,714 367,597 Street light 180,254 226,674 46,420 28,420 Total net(expense)revenue $ 25,614,800 $ 15,724,994 (9,889,806) (10,854,313) General revenues Property taxes 12,659,480 12,181,830 Franchise taxes 266,324 266,728 Unrestricted grants 316,100 289,854 Investment earnings 439,858 330,058 Gain on disposal of capital assets 531 54,408 Total general revenues 13,682,293 13,122,878 Change in net position $ 3,792,487 $ 2,268,565 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 the impact of changes in the City's proportionate share of state-wide Public Employees Retirement Association pension plans. -20- LEGISLATIVE UPDATES The 2018 legislative session, falling in the second half of the state's fiscal biennium, was a short session in which only two major finance-related bills were passed, omnibus bonding bills related to bonding, and pensions. The following is a brief summary of specific legislative changes from the 2018 session or previous legislative sessions potentially impacting Minnesota cities. Omnibus Bonding Bill—The omnibus bonding bill authorized financing for over $1.5 billion in capital improvements. Included in the approved funding was $542 million for various transportation infrastructure, $99 million for local city-related economic development projects, and appropriations for a number of different utility(water,sewer,wastewater,etc.)infrastructure improvement programs. Wastewater Investment Protection—Effective retroactively back to August 1, 2017, when a city builds a new wastewater treatment facility or upgrades one to meet current standards that exceed its previous performance, the investment in that facility would be considered adequate for a period of 16 years before a city could be required to upgrade the facility again to meet updated state wastewater facility standards. Competitive Bidding Threshold—Effective for contracts awarded on or after August 1, 2018,the dollar threshold at which Minnesota Statutes require the use of a sealed bidding process was raised from $100,000 to $175,000. This extends the dollar range for which contracts may be awarded using direct negotiation (obtaining two quotations) to contracts between $25,000 and $175,000. By reference, this change also increased the dollar threshold at which public contractors' performance and payment bonds are required for contracts over$175,000. Water Tank Maintenance Contracts —Effective for contracts awarded on or after September 1, 2018, multi-year service contracts for water tank maintenance work that were previously allowed to be awarded through direct negotiation, are required to be awarded through a sealed bid or best value bid procurement process when the total cost of the contract for the services and supplies is expected to exceed the competitive bid threshold of$175,000. Minnesota Licensing and Registration System (MNLARS) — The Legislature established the MNLARS steering committee, and a one-time appropriation of $9.65 million was approved for fiscal year 2018 to fund costs related to the continued development, improvement,operation,and deployment of the MNLARS. However, a bill to provide an additional proposed appropriation of$9 million to partially compensate deputy registrars throughout the state for financial losses related to the flawed rollout of the MNLARS was vetoed by the Governor. Pension Benefit Reforms —The 2018 pension bill included a number of reforms to the various defined benefit pension plans across the state, including the plans administered by the Public Employees Retirement Association(PERA). • Reforms impacting the PERA General Employees Retirement Fund(GERF)plan included: o Post-retirement cost of living adjustments (COLAs) will be equal to 50.0 percent of the annual increase for Social Security, but not less than 0.5 percent, and not more than 1.5 percent. o For early retirees that retire on or after January 1, 2024, COLAs are deferred until the retiree reaches the normal retirement age. o Phases in actuarial reduction factors over five year on early retirement benefits payable beginning July 1,2019. o The rate of interest paid on refunds of employee contributions to former public employees was reduced from an annual rate of 4.0 percent to 3.0 percent. -21- • Reforms impacting the PERA Public Employees Police and Fire Fund(PEPFF)plan included: o Post-retirement COLAs were permanently set at 1.00 percent. o Employer contribution rates increase from the current 16.20 percent of covered salaries to 16.95 percent beginning January 1,2019,and 17.70 percent beginning January 1,2020. o Employee contribution rates increase from the current 10.80 percent of covered salaries to 11.30 percent beginning January 1,2019,and 11.80 percent beginning January 1,2020. o To reduce the need for additional contribution increases, the state will contribute an additional $4.5 million to the plan annually for fiscal years 2019 and 2020, increasing to $9.0 million annually thereafter through fiscal 2048,or until the plan is fully funded. o The rate of interest paid on refunds of employee contributions to former public employees was reduced from an annual rate of 4.00 percent to 3.00 percent. • Reforms impacting the volunteer firefighter relief associations plan included: o Added a requirement that the fire chief annually certify each firefighter's service credit to the relief association and the related municipality effective January 1,2019. -22- ACCOUNTING AND AUDITING UPDATES 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. 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. -23- 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.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 the 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. -24- GASB STATEMENT NO. 88, CERTAIN DISCLOSURES RELATED TO DEBT, INCLUDING DIRECT BORROWINGS AND DIRECT PLACEMENTS The primary objective of this statement is to improve the information that is disclosed in notes to government financial statements related to debt,including direct borrowings and direct placements. It also clarifies which liabilities governments should include when disclosing information related to debt. The requirements of this statement will improve financial reporting by providing users of financial statements with essential information that currently is not consistently provided. In addition, information about resources to liquidate debt and the risks associated with changes in terms associated with debt will be disclosed. As a result, users will have better information to understand the effects of debt on a government's future resource flows. This statement defines debt for purposes of disclosure in notes to financial statements as a liability that arises from a contractual obligation to pay cash(or other assets that may be used in lieu of cash)in one or more payments to settle an amount that is fixed at the date the contractual obligation is established. The statement requires that additional essential information related to debt be disclosed in notes to financial statements, including unused lines of credit; assets pledged as collateral for the debt; and terms specified in debt agreements related to significant events of default with finance-related consequences, significant termination events with finance-related consequences, and significant subjective acceleration clauses. It also requires that existing and additional information be provided for direct borrowings and direct placements of debt separately from other debt. The requirements of this statement are effective for reporting periods beginning after June 15,2018. GASB STATEMENT NO. 89, ACCOUNTING FOR INTEREST COST INCURRED BEFORE THE END OF A CONSTRUCTION PERIOD The objectives of this statement are to enhance the relevance and comparability of information about capital assets and the cost of borrowing for a reporting period and to simplify accounting for interest cost incurred before the end of a construction period. This statement requires that interest cost incurred before the end of a construction period be recognized as an expense in the period in which the cost is incurred for financial statements prepared using the economic resources measurement focus.As a result, interest cost incurred before the end of a construction period will no longer be included in the historical cost of a capital asset reported in a business-type activity or enterprise fund. This statement also reiterates that in financial statements prepared using the current financial resources measurement focus, interest cost incurred before the end of a construction period should continue to be recognized as an expenditure on a basis consistent with governmental fund accounting principles. The requirements of this statement are effective for reporting periods beginning after December 15,2019. Earlier application is encouraged.The requirements of this statement should be applied prospectively. -25- GASB STATEMENT NO. 90, MAJORITY EQUITY INTEREST—AN AMENDMENT OF GASB STATEMENTS No.14 AND No. 61 The primary objectives of this statement are to improve the consistency and comparability of reporting a government's majority equity interest in a legally separate organization and to improve the relevance of financial statement information for certain component units. It specifies that a majority equity interest in a legally separate organization should be reported as an investment if a government's holding of the equity interest meets the definition of an investment. It further specifies that such investments should generally be measured using the equity method, unless it is held by a special-purpose government engaged only in fiduciary activities, a fiduciary fund, or an endowment (including permanent and term endowments) or permanent fund, in which case the majority equity interest should be measured at fair value. All other holdings of a majority equity interest in a legally separate organization that do not meet the definition of an investment result in the government being financially accountable for the legally separate organization and, therefore, the government should report that organization as a component unit, and should report an asset related to the majority equity interest using the equity method. This statement also requires that a component unit in which a government has a 100 percent equity interest account for its assets, deferred outflows of resources, liabilities, and deferred inflows of resources at acquisition value at the date the government acquired a 100 percent equity interest in the component unit. Transactions presented in flows statements of the component unit in that circumstance should include only transactions that occurred subsequent to the acquisition. The requirements of this statement are effective for reporting periods beginning after December 15,2018. Earlier application is encouraged. The requirements should be applied retroactively, except for the provisions related to reporting a majority equity interest in a component unit and reporting a component unit if the government acquires a 100 percent equity interest,which should be applied prospectively. UNIFORM GUIDANCE,MICRO-PURCHASE THRESHOLD Under the Uniform Guidance for federal programs,a micro-purchase is one for goods or services that,due to its relatively low value, does not require the government to abide by many of its ordinary competitive procedures, including small business set-asides. Because the contract is theoretically such a low amount, the contracting officer can pick virtually whatever company and product he or she wants to satisfy the procurement, so long as the price is reasonable. The standard micro-purchase threshold has been amended to increase the threshold to $10,000, effective June 20, 2018. Entities are not required to increase the micro-purchase and simplified acquisition thresholds but, if they wish to do so, they must update their procurement policies and procedures to reflect the change in thresholds. They cannot retroactively make these changes effective prior to June 20,2018. -26- CITY OF FARMINGTON DAKOTA COUNTY,MINNESOTA Special Purpose Audit Reports Year Ended December 31,2018 THIS PAGE INTENTIONALLY LEFT BLANK CITY OF FARMINGTON DAKOTA COUNTY,MINNESOTA Special Purpose Audit Reports Year Ended December 31,2018 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 I\A RPaul A.Radosevich,CPA William J.Lauer,CPA James H.Eichten,CPA CERTIFIED PUBLIC Aaron J.Nielsen,CPA ACCOUNTANTS Victoria L.Holinka,CPA/CMA Jaclyn M.Huegel,CPA INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the City Council and Management City of Farmington,Minnesota We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Farmington, Minnesota (the City) as of and for the year ended December 31, 2018, 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 13,2019. 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 2018-001, 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. /4/61147 /16 , Kt �& cea. P. A . Minneapolis,Minnesota May 13,2019 -2- PRINCIPALS Thomas A.Karnowski,CPA Paul A.Radosevich,CPA William J.Lauer,CPA James H.Eichten,CPA M R CERTIFIED PUBLIC Aaron J.Nielsen,CPA ACCOUNTANTS Victoria L.Holinka,CPA/CMA Jaclyn M.Huegel,CPA INDEPENDENT AUDITOR'S REPORT ON MINNESOTA LEGAL COMPLIANCE To the City Council and Management City of Farmington,Minnesota We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Farmington, Minnesota (the City) as of and for the year ended December 31, 2018, 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 13,2019. 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. 'X11%1, 014704, K ; 441.401441-‘44.1-C4. C ms., P. a - Minneapolis,Minnesota May 13,2019 -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 31,2018 MATERIAL WEAKNESS IN INTERNAL CONTROL OVER FINANCIAL REPORTING 2018-001 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- CAW City of Farmington t p 430 Third Street Farmington, Minnesota 651.280.6800 -Fax 651.280.6899 . ,,,� www ci.farmington.mn.us TO: Mayor, Councilmembers and City Administrator FROM: Katy Gehler, Public Works Director SUBJECT: 2018 Public Works Annual Report DATE: May 20, 2019 INTRODUCTION May 19th marks the start of Public Works Week across the nation. We would like to take time to highlight the accomplishments of the department for 2018 and note some of the more substantial initiatives planned for 2019 and 2020. 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.