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2018 Annual Financial ReportFor the Fis c al Y e a r E n d e d D e c e m b e r 3 1, 2 0 1 8. CITY OF CH A N H A S S E N, MI N N E S O T A Comprehen si v e A n n u al FINANCIAL REPORT 2018 COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY OF CHANHASSEN, MINNESOTA FOR THE YEAR ENDED DECEMBER 31, 2018 Finance Department Greg Sticha, Finance Director Member of Government Finance Officers Association of United States and Canada - This page intentionally left blank - CITY OF CHANHASSEN, MINNESOTA TABLE OF CONTENTS Page Reference No. I. INTRODUCTORY SECTION Letter of Transmittal 3 Certificate of Achievement 7 Organization Chart 8 Organization 9 II. FINANCIAL SECTION Independent Auditor's Report 13 Management's Discussion and Analysis 17 Basic Financial Statements: Government-Wide Financial Statements: Statement of Net Position Statement 1 33 Statement of Activities Statement 2 34 Fund Financial Statements: Balance Sheet - Governmental Funds Statement 3 36 Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds Statement 4 37 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities Statement 5 38 Statement of Net Position - Proprietary Funds Statement 6 39 Statement of Revenues, Expenses and Changes in Fund Net Position - Proprietary Funds Statement 7 40 Statement of Cash Flows - Proprietary Funds Statement 8 41 Statement of Net Position - Fiduciary Funds Statement 9 42 Notes to Financial Statements 43 Required Supplementary Information: Budgetary Comparison Schedule - General Fund Statement 10 88 Schedule of Changes in the City's Total OPEB Liability and Related Ratios Statement 11 94 Schedule of Proportionate Share of Net Pension Liability - General Employees Retirement Fund Statement 12 95 Schedule of Pension Contributions - General Employees Retirement Fund Statement 13 96 Schedule of Proportionate Share of Net Pension Liability - Public Employees Police and Fire Fund Statement 14 97 Schedule of Pension Contributions - Public Employees Police and Fire Fund Statement 15 98 Schedule of Changes in the Net Pension Liability and Related Ratios - Chanhassen Fire Department Relief Association Statement 16 99 Schedule of Contributions - Chanhassen Fire Department Relief Association Statement 17 100 Notes to RSI 101 CITY OF CHANHASSEN, MINNESOTA TABLE OF CONTENTS Page Reference No. Combining and Individual Nonmajor Fund Financial Statements and Schedules: Combining Balance Sheet - Nonmajor Governmental Funds Statement 18 110 Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Governmental Funds Statement 19 111 Subcombining Balance Sheet - Nonmajor Special Revenue Funds Statement 20 114 Subcombining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Special Revenue Funds Statement 21 115 Subcombining Balance Sheet - Nonmajor Debt Service Funds Statement 22 118 Subcombining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Debt Service Funds Statement 23 119 Subcombining Balance Sheet - Nonmajor Capital Project Funds Statement 24 122 Subcombining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Capital Project Funds Statement 25 124 Special Revenue Funds: Schedules of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual: Contribution Fund Statement 26 127 Cemetery Fund Statement 27 128 CATV Statement 28 129 Combining Statement of Net Position - Agency Funds Statement 29 132 Combining Statement of Changes in Assets and Liabilities - Agency Funds Statement 30 133 III. STATISTICAL SECTION (UNAUDITED) Financial Trends: Net Position by Component Table 1 138 Changes in Net Position Table 2 140 Fund Balances - Governmental Funds Table 3 144 Changes in Fund Balances - Governmental Funds Table 4 146 Revenue Capacity: Tax Capacity Value and Estimated Market Value of Taxable Property Table 5 148 Direct and Overlapping Property Tax Capacity Rates Table 6 150 Principal Property Taxpayers Table 7 151 Property Tax Levies and Collections Table 8 153 Debt Capacity: Ratios of Outstanding Debt by Type Table 9 154 Ratios of General Bonded Debt Outstanding Table 10 156 Direct and Overlapping Governmental Activities Debt Table 11 157 Legal Debt Margin Information Table 12 158 Pledged Revenue Coverage Table 13 159 CITY OF CHANHASSEN, MINNESOTA TABLE OF CONTENTS Page Reference No. Demographic and Economic: Demographic and Economic Statistics Table 14 160 Principal Employers Table 15 161 Operating Information: Full-Time Equivalent City Government Employees by Function/Program Table 16 162 Operating Indicators by Function/Program Table 17 164 Capital Asset Statistics by Function/Program Table 18 166 Combined Schedule of Indebtedness Exhibit 1 170 Debt Service Payments to Maturity: General Obligation Bonds - Governmental Activities Exhibit 2 172 General Obligation Revenue Bonds Exhibit 3 173 Schedule of Deferred Tax Levies Exhibit 4 174 IV. OTHER INFORMATION (UNAUDITED) - This page intentionally left blank - I. INTRODUCTORY SECTION 1 - This page intentionally left blank - 2 3 4 5 - This page intentionally left blank - 6 7 City of Chanhassen, Minnesota Organization Chart Citizens Administration Mayor - Council Environmental Commission Planning Commission Senior Commission Park & RecreationPark & Recreation Commission Economic Development Authority Finance Law Enforcement & Fire Administration Public Works Community Development Parks and Recreation 8 CITY OF CHANHASSEN, MINNESOTA ORGANIZATION December 31, 2018 Term Expires Mayor: Elise Ryan 12/31/2022 Council Members: Bethany Tjornhom 12/31/2020 Jerry McDonald 12/31/2020 Julia Coleman 12/31/2022 Dan Campion 12/31/2022 City Manager: Todd Gerhardt Appointed Finance Director: Greg Sticha Appointed Community Development Director: Kathryn Aanenson Appointed Public Works Director/City Engineer: Paul Oehme Appointed Parks and Recreation Director: Todd Hoffman Appointed 9 - This page intentionally left blank - 10 II. FINANCIAL SECTION 11 - This page intentionally left blank - 12 55 5th Street East, Suite 1400, St. Paul, MN, 55101 www.redpathcpas.com INDEPENDENT AUDITOR'S REPORT To the Honorable Mayor and Members of the City Council City of Chanhassen, Minnesota Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the City of Chanhassen, Minnesota, as of and for the year ended December 31, 2018, and the related notes to the financial statements, which collectively comprise the City of Chanhassen, Minnesota’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 entity’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 entity’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. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the City of Chanhassen, Minnesota, as of December 31, 2018, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As described in Note 11 to the financial statements, City of Chanhassen, Minnesota adopted new accounting guidance, GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions for the year ended December 31, 2018. Our opinion is not modified with respect to this matter. Report on Summarized Comparative Information We have previously audited the City of Chanhassen, Minnesota’s 2017 financial statements, and we expressed an unmodified audit opinion on the respective financial statements of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information in our report dated June 22, 2018. In our opinion, the summarized comparative information presented herein as of and for the year ended December 31, 2017 is consistent, in all material respects, with the audited financial statements from which it has been derived. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, the budgetary comparison information, and the schedules of OPEB and pension information, 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 Governmental 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 required supplementary information 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 of Chanhassen, Minnesota’s basic financial statements. The introductory section, combining and individual nonmajor fund financial statements and schedules, statistical section and other information, are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements and schedules are the responsibility of management and were derived from and relate 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 combining and individual nonmajor fund financial statements and schedules are fairly stated in all material respects in relation to the basic financial statements as a whole. The introductory section, statistical section and other information 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. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated June 24, 2019, on our consideration of the City of Chanhassen, Minnesota’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and 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 of Chanhassen, Minnesota’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 of Chanhassen, Minnesota’s internal control over financial reporting and compliance. REDPATH AND COMPANY, LTD. St. Paul, Minnesota June 24, 2019 - This page intentionally left blank - 16 MANAGEMENT’S DISCUSSION AND ANALYSIS As management of the City of Chanhassen, 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. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found in the introductory section of this report. Financial Highlights The assets of the City exceeded its liabilities at the close of the most recent fiscal year by $150,921,660 (net position). Of this amount, $21,123,940 (unrestricted net position) may be used to meet the City’s ongoing obligations to citizens and creditors in accordance with the City's fund designations and fiscal policies. The City’s total net position increased by $29,013. As of the close of the current fiscal year, governmental funds reported combined ending fund balances of $14,773,090. Of this amount, $2,618,680 is restricted by external constraints established by creditors, grantors, contributors, or by state statutory provisions. At the end of the current fiscal year, the General Fund had a fund balance of $5,754,693. Of that amount, $87,067 was in a nonspendable form and the remaining $5,667,626 was unassigned. Total debt decreased by $3,708,315 during the current fiscal year, from $36,007,121 to $32,298,806. Please refer to the Capital Asset and Debt Administration portion of this analysis for an explanation of the decrease. Overview of the Financial Statements The management’s discussion and analysis is intended to serve as an introduction to the City’s basic financial statements, which 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. 17 Management’s Discussion and Analysis The statement of net position presents information on all of the City’s assets, deferred outflows of resources, liabilities, and deferred inflows of resources, 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 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 vacation leave). 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 community development. The business-type activities include water, sewer, and surface water management. The government-wide financial statements can be found on Statements 1 and 2 of this report. Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds 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 near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financial requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the City's near-term financial decisions. Both the governmental fund balance sheet and governmental fund statement of revenues, expenditures and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. 18 Management’s Discussion and Analysis The City maintains four individual major governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures and changes in fund balances for the following major funds:  General Fund  Public Works Facility Bonds – note there is no balance sheet presented for this fund given it was closed at 12/31/18.  Revolving Assessment Fund  TH101 Improvements – Pioneer to Flying Cloud Data from the other governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these nonmajor governmental funds is provided in the form of combining statements elsewhere in this report. The City adopts an annual appropriated budget for the General Fund and for the Contribution, Cemetery and CATV special revenue funds. Budgetary comparison statements have been provided for those funds to demonstrate compliance with this budget. The basic governmental fund financial statements can be found on Statements 3 through 5 of this report. Proprietary funds. The City maintains three enterprise 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 government-wide financial statements. 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 following funds:  Water  Sewer  Surface Water Management The basic proprietary fund financial statements can be found on Statements 6 through 8 of this report. Fiduciary funds. Fiduciary funds are used to account for resources held for 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. The basic fiduciary fund financial statement can be found on Statement 9 of this report. 19 Management’s Discussion and Analysis Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found following Statement 9 of this report. Other information. The combining statements referred to earlier in connection with nonmajor governmental funds are presented immediately following the required supplementary information. Combining and individual fund financial statements and schedules can be found on Statements 18 through 30 of this report. Government-Wide Financial Analysis As noted earlier, net position may serve over time as a useful indicator of a government's financial position. Assets plus deferred outflows of resources exceeded liabilities plus deferred inflows of resources by $150,921,660 at the close of the most recent fiscal year. The largest portion of the City’s net position ($127,248,740, or 84%) reflects its net investment in capital assets (e.g. land, buildings, machinery, and equipment) less any related debt used to acquire those assets that is still outstanding. 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. City of Chanhassen, Minnesota's Net Position 2018 2017 2018 2017 2018 2017 Assets: Current and other assets $21,860,984 $25,717,270 $17,403,788 $19,036,069 $39,264,772 $44,753,339 Capital assets 77,954,500 78,118,880 78,926,004 74,879,632 156,880,504 152,998,512 Total assets 99,815,484 103,836,150 96,329,792 93,915,701 196,145,276 197,751,851 Total deferred outflows of resources 1,169,090 1,546,919 139,478 215,456 1,308,568 1,762,375 Liabilities: Long-term liabilities outstanding 12,036,639 18,235,875 26,649,966 24,453,599 38,686,605 42,689,474 Other liabilities 5,253,996 2,220,129 1,079,166 2,156,104 6,333,162 4,376,233 Total liabilities 17,290,635 20,456,004 27,729,132 26,609,703 45,019,767 47,065,707 Total deferred inflows of resources 1,309,944 1,372,839 202,473 183,033 1,512,417 1,555,872 Net position: Net investment in capital assets 71,053,355 70,255,784 56,195,385 57,212,106 127,248,740 127,467,890 Restricted 2,548,980 3,270,087 - - 2,548,980 3,270,087 Unrestricted 8,781,660 10,028,355 12,342,280 10,126,315 21,123,940 20,154,670 Total net position $82,383,995 $83,554,226 $68,537,665 $67,338,421 $150,921,660 $150,892,647 Governmental Activities Business-Type Activities Totals 20 Management’s Discussion and Analysis $2,548,980 of the City’s net position represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net position ($21,123,940) may be used to meet ongoing obligations to citizens and creditors. At the end of the current fiscal year, the City is able to report positive balances in all three categories of net position, both for the City as a whole, as well as for its separate governmental and business-type activities. Governmental Activities Total net position of the governmental activities decreased $1,170,231, or 1%. The most significant components of change in net position are as follows:  Net investment in capital assets increased $797,571 due to a reduction in bonds payable from making scheduled bond payments.  Restricted net position decreased $721,107. This decrease occurred due to park & recreation capital outlay, which shifted net position out of this category into net investments in capital assets.  Unrestricted net position decreased $1,246,695. In 2017, there was $989,954 in unrestricted net position for prepayment of a fire vehicle that was not delivered until 2018, which shifted net position out of this category into net investment in capital assets. Business-Type Activities The total net position of the City’s business-type activities increased by $1,199,244, or 2%, primarily because contributions of capital assets and operating revenues were greater than depreciation expense and transfers out for construction projects. Unrestricted net position increased $2,215,965, primarily due to larger water and sewer connection fees collected as compared to the previous year. 21 Management’s Discussion and Analysis City of Chanhassen, Minnesota's Changes in Net Position 2018 2017 2018 2017 2018 2017 Revenues: Program revenues: Charges for services $3,587,590 $3,027,020 $6,920,429 $6,396,118 $10,508,019 $9,423,138 Operating grants and contributions 948,912 902,871 44,604 45,109 993,516 947,980 Capital grants and contributions 1,669,995 2,425,333 3,965,466 1,678,595 5,635,461 4,103,928 General revenues: General property taxes 10,877,849 10,826,116 - - 10,877,849 10,826,116 Grants and contributions not restricted to specific programs 19,755 19,753 - - 19,755 19,753 Unrestricted investment earnings 258,456 164,393 263,802 171,044 522,258 335,437 Gain on sale of capital assets 45,244 38,254 10,568 - 55,812 38,254 Total revenues 17,407,801 17,403,740 11,204,869 8,290,866 28,612,670 25,694,606 Expenses: General government 3,291,465 3,230,517 - - 3,291,465 3,230,517 Public safety 3,819,890 3,969,540 - - 3,819,890 3,969,540 Public works 7,225,531 8,161,048 - - 7,225,531 8,161,048 Parks and recreation 3,158,725 3,227,236 - - 3,158,725 3,227,236 Community development 589,570 918,962 - - 589,570 918,962 Interest and fees on long-term debt 173,323 408,273 - - 173,323 408,273 Water - - 4,567,874 3,866,810 4,567,874 3,866,810 Sewer - - 4,122,804 3,746,880 4,122,804 3,746,880 Surface water management - - 1,634,475 1,538,468 1,634,475 1,538,468 Total expenses 18,258,504 19,915,576 10,325,153 9,152,158 28,583,657 29,067,734 Increase (decrease) in net position before transfers (850,703) (2,511,836) 879,716 (861,292) 29,013 (3,373,128) Transfers (319,528) (204,422) 319,528 204,422 - - Change in net position (1,170,231) (2,716,258) 1,199,244 (656,870) 29,013 (3,373,128) Net position - beginning 83,554,226 86,270,484 67,338,421 67,995,291 150,892,647 154,265,775 Net position - ending $82,383,995 $83,554,226 $68,537,665 $67,338,421 $150,921,660 $150,892,647 Governmental Activities Business-Type Activities Totals 22 Management’s Discussion and Analysis Governmental Activities Revenues Revenues for the governmental activities increased by $4,061, or less than 1%. There was nothing significant that contributed to this increase. Expenses Expenses for the governmental activities decreased by $1,657,072, or 8%. This decrease was due to non-capitalized construction costs being less in 2018 as compared to 2017. Below are specific graphs which provide comparisons of the governmental activities revenues and expenses: 23 Management’s Discussion and Analysis Business-Type Activities Revenues Revenues for the business-type activities increased by $2,914,003, or 35%. More specifically, capital grants and contributions increased $2,286,871 from the previous year. The increase was primarily due to higher water and sewer connection revenue as compared to the previous year. Expenses Expenses for business-type activities increased by $1,172,995, or 13%. This increase was partially due to debt issued for the second water treatment plant, resulting in additional interest and fiscal charges related to that debt. There was also increased fees for Metropolitan Council wastewater treatment. 24 Management’s Discussion and Analysis Below are specific graphs showing the business-type activities revenue and expense comparisons: 25 Management’s Discussion and Analysis Financial Analysis of the Government's Funds Governmental funds. The focus of the City’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City’s financing requirements. In particular, unrestricted fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. At the end of the current fiscal year, the City’s governmental funds reported combined ending fund balances of $14,773,090. Approximately 18% of this total amount ($2,618,680) constitutes fund balance restricted by external constraints established by creditors, grantors, contributors, or by state statutory provisions. $96,393 of fund balance is not in a spendable form, $6,414,882 has been assigned, and $5,643,135 is unassigned. The General Fund balance increased by $366,573 in 2018. The increase was due to an increase in building permit revenue as compared to budget. The 2008A G.O. Public Works Facility bonds fund balance decreased by $559,367 in 2018. The decrease was due to the crossover date on these bonds taking place in 2018. The fund was closed at the end of 2018. The Revolving Assessment Fund balance decreased by $386,715. The decrease was due to expenses for construction projects. The TH101 Improvements – Pioneer to Flying Cloud Fund balance increased by $25,092. The increase was due to immaterial miscellaneous revenues collected related to the project. The nonmajor special revenue funds increased by $79,737. The increase was due to larger than anticipated collections of cable TV franchise fee revenue. The nonmajor debt service funds decreased by $5,134,222. The decrease was due to a transfer out to payoff 2008A refunding bonds. The nonmajor capital project funds decreased by $903,056. The decrease was due to the use of reserve funds to pay for the purchase of a fire apparatus vehicle. Proprietary funds. The City’s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. The unrestricted net position in the respective proprietary funds is $5,888,292 (Water), $5,439,748 (Sewer) and $1,014,240 (Surface Water Management). Net position in the Water Fund increased by $1,214,610. The increase is due to water connection charges larger than the prior year. 26 Management’s Discussion and Analysis Net position in the Sewer Fund increased by $28,028. The increase was due to sewer connection charges larger than the prior year, but was primarily offset by increased wastewater disposal charges higher than the prior year. Net position in the Surface Water Management Fund decreased by $43,394. There were no significant items that contributed to this change in fund balance. 27 Management’s Discussion and Analysis Budgetary Highlights General Fund There were no budget amendments to the General Fund in 2018. Budgetary Variances – Revenues The positive General Fund revenue variance of $639,112 was primarily due to building permit revenue exceeding budget. Budgetary Variances – Expenses Expenses for the General Fund had a positive variance of $221,241. The variance was primarily due to a number of vacant positions in 2018, as well as a refund in the policing services contract. Capital Asset and Debt Administration Capital assets. The City’s investment in capital assets for its governmental and business-type activities as of December 31, 2018 amounts to $156,880,504 (net of accumulated depreciation). This investment in capital assets includes land, easements, buildings, infrastructure, machinery, and equipment. City of Chanhassen, Minnesota’s Capital Assets (Net of Depreciation) Beginning Ending Primary Government Balance Increase Decrease Balance Governmental activities: Capital assets not being depreciated: Land $19,802,718 $ - $ - $19,802,718 Construction in progress 1,849,280 239,781 (1,800,147) 288,914 Permanent easements 1,566,462 - - 1,566,462 Total capital assets not being depreciated 23,218,460 239,781 (1,800,147) 21,658,094 Capital assets being depreciated: Buildings and structures 23,310,383 100,777 - 23,411,160 Machinery and equipment 8,738,531 1,344,094 (775,352) 9,307,273 Other improvements 8,627,516 515,292 - 9,142,808 Infrastructure 118,363,891 3,454,290 (245,723) 121,572,458 Temporary easements - 777,930 - 777,930 Total capital assets being depreciated 159,040,321 6,192,383 (1,021,075) 164,211,629 Less accumulated depreciation for: Buildings and structures 8,402,061 570,593 - 8,972,654 Machinery and equipment 6,298,130 456,716 (700,055) 6,054,791 Other improvements 3,856,411 362,819 - 4,219,230 Infrastructure 85,583,299 3,330,972 (245,723) 88,668,548 Total accumulated depreciation 104,139,901 4,721,100 (945,778) 107,915,223 Governmental activities capital assets - net $78,118,880 $1,711,064 ($1,875,444) $77,954,500 28 Management’s Discussion and Analysis Beginning Ending Primary Government Balance Increase Decrease Balance Business-type activities: Capital assets not being depreciated: Land $2,094,435 $10,000 $ - $2,104,435 Construction in progress 12,889,386 68,186 (12,700,357) 257,215 Permanent easements 1,880,805 151,767 (153,771) 1,878,801 Total capital assets not being depreciated 16,864,626 229,953 (12,854,128) 4,240,451 Capital assets being depreciated: Buildings and structures 12,445,429 15,533,985 - 27,979,414 Machinery and equipment 1,832,228 61,280 (69,326) 1,824,182 Other improvements 113,724,848 4,578,449 (41,368) 118,261,929 Total capital assets being depreciated 128,002,505 20,173,714 (110,694) 148,065,525 Less accumulated depreciation for: Buildings and structures 2,489,831 248,917 - 2,738,748 Machinery and equipment 981,022 118,867 (25,892) 1,073,997 Other improvements 66,516,646 3,091,948 (41,367) 69,567,227 Total accumulated depreciation 69,987,499 3,459,732 (67,259) 73,379,972 Business-type activities capital assets - net 74,879,632 16,943,935 (12,897,563) 78,926,004 Total capital assets - net $152,998,512 $18,654,999 ($14,773,007) $156,880,504 Additional information on the City’s capital assets can be found in Note 5. Governmental Activities Capital Assets. There was a decrease in capital assets due to the reduction in depreciable assets (current year depreciation expense exceeded current year additions). Business-Type Activities Capital Assets. There was an increase in capital assets due to the construction of a new water treatment plant. Long-term debt. At the end of the current fiscal year, the City had total bonds payable outstanding of $32,298,806, a decrease of $3,708,315 from 2017. The decrease was due to 2008A refunding bonds being paid off in 2018. The balance of the bonds payable outstanding is comprised of $6,435,000 in general obligation bonds, $24,785,000 of revenue bonds which financed capital investments for the water, sewer, and surface water management operations, and unamortized bond premiums of $1,078,806. Additional long-term debt in the amount of $880,730 for compensated absences was also outstanding at the end of 2018. 29 Management’s Discussion and Analysis City of Chanhassen, Minnesota’s Outstanding Debt 2018 2017 2018 2017 2018 2017 General obligation bonds $6,435,000 $12,420,000 $ - $ - $6,435,000 $12,420,000 Revenue bonds - - 24,785,000 22,565,000 24,785,000 22,565,000 Bond premium 191,818 207,803 886,988 814,318 1,078,806 1,022,121 Compensated absences 676,840 705,202 203,890 194,041 880,730 899,243 Total $7,303,658 $13,333,005 $25,875,878 $23,573,359 $33,179,536 $36,906,364 TotalsBusiness-Type ActivitiesGovernmental Activities As the financial statements will indicate, the City maintained strong financial reserves and continues its practice of utilizing multiple long term financial planning documents. The City’s bond rating was reaffirmed in February 2018 by Standard & Poor’s. The City of Chanhassen is one of approximately 25 communities in the State of Minnesota to have an AAA bond rating from either Standard & Poor’s or Moody’s. State statutes limit the amount of general obligation debt a Minnesota city may issue to 3% of the total estimated market value. The current debt limitation for the City is $123,377,313. Of the City's outstanding debt, $6,435,000 is applicable to the statutory limitation. Additional information on the City’s long-term debt can be found in Note 6. Requests for Information. This financial report is designed to provide a general overview of the City of Chanhassen, Minnesota’s finances for all those with an interest in the government’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Director of Finance, 7700 Market Boulevard, P.O. Box 147, Chanhassen, Minnesota 55317. 30 BASIC FINANCIAL STATEMENTS 31 - This page intentionally left blank - 32 CITY OF CHANHASSEN, MINNESOTA STATEMENT OF NET POSITION Statement 1 December 31, 2018 With Comparative Totals For December 31, 2017 Governmental Business-Type Activities Activities 2018 2017 Assets: Cash and investments $18,189,001 $14,689,332 $32,878,333 $28,260,901 Cash with escrow agent - - - 5,331,655 Restricted cash - 1,700,044 1,700,044 5,686,976 Accrued interest receivable 80,703 76,484 157,187 116,101 Due from other governmental units 468,027 6,980 475,007 82,783 Accounts receivable - net 138,556 1,588,126 1,726,682 1,479,948 Property taxes receivable 188,063 - 188,063 249,327 Prepaid items 96,393 47,090 143,483 1,092,507 Inventories - at cost - 62,873 62,873 79,527 Internal balances 829,452 (829,452) - - Special assessments receivable 1,870,789 62,311 1,933,100 2,373,614 Capital assets (net of accumulated depreciation): Nondepreciable 21,658,094 4,240,451 25,898,545 40,083,086 Depreciable 56,296,406 74,685,553 130,981,959 112,915,426 Total assets 99,815,484 96,329,792 196,145,276 197,751,851 Deferred outflows of resources related to pensions 1,169,090 139,478 1,308,568 1,762,375 Liabilities: Accounts payable 729,939 162,148 892,087 772,415 Due to other governmental units 60,076 103,246 163,322 129,122 Salaries payable 219,688 50,350 270,038 240,647 Contracts payable 432,897 414,320 847,217 2,114,672 Accrued interest payable 69,700 348,277 417,977 446,178 Unearned revenue 3,741,696 825 3,742,521 673,199 Compensated absences payable: Due within one year 106,262 32,010 138,272 92,791 Due in more than one year 570,578 171,880 742,458 806,452 Other post employment benefits payable: Due in more than one year 199,068 - 199,068 47,656 Bonds payable: Due within one year 720,000 1,850,000 2,570,000 7,360,000 Due in more than one year 5,906,818 23,821,988 29,728,806 28,647,121 Net pension liability: Due in more than one year 4,533,913 774,088 5,308,001 5,735,454 Total liabilities 17,290,635 27,729,132 45,019,767 47,065,707 Deferred inflows of resources related to pensions 1,309,944 202,473 1,512,417 1,555,872 Net position: Net investment in capital assets 71,053,355 56,195,385 127,248,740 127,467,890 Restricted for: Debt service 1,189,447 - 1,189,447 1,400,411 Park improvements 1,224,509 - 1,224,509 1,716,043 Other purposes 135,024 - 135,024 153,633 Unrestricted 8,781,660 12,342,280 21,123,940 20,154,670 Total net position $82,383,995 $68,537,665 $150,921,660 $150,892,647 Totals The accompanying notes are an integral part of these financial statements. 33 CITY OF CHANHASSEN, MINNESOTA STATEMENT OF ACTIVITIES For The Year Ended December 31, 2018 With Comparative Totals For The Year Ended December 31, 2017 Program Revenues Charges For Functions/Programs Expenses Services Primary government: Governmental activities: General government $3,291,465 $559,077 Public safety 3,819,890 1,752,643 Public works 7,225,531 144,963 Parks and recreation 3,158,725 1,098,679 Community development 589,570 32,228 Interest and fees on long-term debt 173,323 - Total governmental activities 18,258,504 3,587,590 Business-type activities: Water 4,567,874 3,121,292 Sewer 4,122,804 3,034,207 Surface water management 1,634,475 764,930 Total business-type activities 10,325,153 6,920,429 Total primary government $28,583,657 $10,508,019 The accompanying notes are an integral part of these financial statements. 34 Statement 2 Operating Capital Grants and Grants and Governmental Business-Type Contributions Contributions Activities Activities 2018 2017 $33,991 $ - ($2,698,397) $ - ($2,698,397) ($2,735,922) 454,728 - (1,612,519) - (1,612,519) (2,244,270) 434,806 1,669,995 (4,975,767) - (4,975,767) (4,981,270) 25,387 - (2,034,659) - (2,034,659) (2,307,237) - - (557,342) - (557,342) (883,380) - - (173,323) - (173,323) (408,273) 948,912 1,669,995 (12,052,007) 0 (12,052,007) (13,560,352) - 2,549,058 - 1,102,476 1,102,476 (55,701) - 975,880 - (112,717) (112,717) (490,721) 44,604 440,528 - (384,413) (384,413) (485,914) 44,604 3,965,466 0 605,346 605,346 (1,032,336) $993,516 $5,635,461 (12,052,007)605,346 (11,446,661) (14,592,688) General revenues: General property taxes 10,877,849 - 10,877,849 10,826,116 Grants and contributions not restricted to specific programs 19,755 - 19,755 19,753 Unrestricted investment earnings 258,456 263,802 522,258 335,437 Gain on sale of capital assets 45,244 10,568 55,812 38,254 Transfers (319,528)319,528 - - Total general revenues and transfers 10,881,776 593,898 11,475,674 11,219,560 Change in net position (1,170,231) 1,199,244 29,013 (3,373,128) Net position - January 1 83,554,226 67,338,421 150,892,647 154,265,775 Net position - December 31 $82,383,995 $68,537,665 $150,921,660 $150,892,647 Program Revenues Net (Expense) Revenue and Changes in Net Position Totals The accompanying notes are an integral part of these financial statements. 35 CITY OF CHANHASSEN, MINNESOTA BALANCE SHEET Statement 3 GOVERNMENTAL FUNDS December 31, 2018 With Comparative Totals For December 31, 2017 605 TH101 Improvments - Other 601 Revolving Pioneer to Governmental General Fund Assessment Fund Flying Cloud Funds Assets:2018 2017 Cash and investments $5,803,175 $1,589,190 $3,808,306 $6,988,330 $18,189,001 $15,438,795 Cash with escrow agent - - - - - 5,331,655 Accrued interest receivable 27,047 10,960 6,589 36,107 80,703 59,075 Due from other governmental units 159,964 270,275 - 37,788 468,027 79,911 Accounts receivable - net 41,039 - - 97,517 138,556 239,632 Property taxes receivable 173,817 2,553 - 11,693 188,063 249,327 Prepaid items 87,067 - - 9,326 96,393 1,071,755 Interfund loan receivable - 225,517 - 700,000 925,517 1,097,299 Special assessments receivable - 1,355,169 - 515,620 1,870,789 2,304,327 Total assets $6,292,109 $3,453,664 $3,814,895 $8,396,381 $21,957,049 $25,871,776 Liabilities, Deferred Inflows of Resources, and Fund Balances Liabilities: Accounts payable $141,471 $42,810 $95,418 $450,240 $729,939 $552,149 Due to other governmental units 23,451 31,333 - 5,292 60,076 22,611 Salaries payable 211,990 - - 7,698 219,688 195,990 Contracts payable - 201,418 - 231,479 432,897 601,219 Interfund loan payable - - - 96,065 96,065 154,506 Unearned revenue 54,370 20,861 3,666,465 - 3,741,696 672,474 Total liabilities 431,282 296,422 3,761,883 790,774 5,280,361 2,198,949 Deferred inflows of resources: Unavailable revenue 106,134 1,353,417 - 444,047 1,903,598 2,387,779 Fund balances: Nonspendable 87,067 - - 9,326 96,393 1,071,755 Restricted - - - 2,618,680 2,618,680 8,458,576 Assigned - 1,803,825 53,012 4,558,045 6,414,882 6,602,135 Unassigned 5,667,626 - - (24,491) 5,643,135 5,152,582 Total fund balances 5,754,693 1,803,825 53,012 7,161,560 14,773,090 21,285,048 Total liabilities, deferred inflows of resources, and fund balances $6,292,109 $3,453,664 $3,814,895 $8,396,381 $21,957,049 $25,871,776 Fund balance reported above $14,773,090 $21,285,048 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 the funds.77,954,500 78,118,880 Other long-term assets are not available to pay for current period expenditures and, therefore, are reported as unavailabe revenue in the funds.1,903,598 2,387,779 Long-term liabilities, including pension related deferred outflows and inflows, are not due and payable in the current period and, therefore, are not reported in the funds (see Note 1U).(12,247,193) (18,237,481) Net position of governmental activities $82,383,995 $83,554,226 Total Governmental Funds The accompanying notes are an integral part of these financial statements. 36 CITY OF CHANHASSEN, MINNESOTA STATEMENT OF REVENUES, EXPENDITURES AND Statement 4 CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS For The Year Ended December 31, 2018 With Comparative Totals For The Year Ended December 31, 2017 605 TH101 367 2008A G.O. Improvments - Other Public Works 601 Revolving Pioneer to Governmental General Fund Facility Bonds Assessment Fund Flying Cloud Funds Revenues:2018 2017 General property taxes $8,647,307 $ - $384,838 $ - $1,824,697 $10,856,842 $10,820,682 Licenses and permits 1,704,497 - - - 584,555 2,289,052 1,641,140 Intergovernmental 436,547 - 320,525 900,403 361,740 2,019,215 2,149,875 Special assessments - - 462,425 - 137,631 600,056 842,523 Charges for services 577,215 - - - 243,530 820,745 838,498 Fines and forfeits 95,351 - - - - 95,351 128,394 Investment earnings 73,165 - 52,617 17,823 114,851 258,456 164,393 Contributions and donations 25,387 - - - 44,952 70,339 73,734 Refunds and reimbursements 60,427 - - - 96,493 156,920 174,853 Other 208,922 - - 14,400 2,200 225,522 264,114 Total revenues 11,828,818 0 1,220,405 932,626 3,410,649 17,392,498 17,098,206 Expenditures: Current: General government 2,127,385 5,585 - - 702,138 2,835,108 2,871,267 Public safety 3,496,307 - - - 97,570 3,593,877 3,602,897 Public works 2,539,676 - 439,603 129,604 738,899 3,847,782 4,617,523 Parks and recreation 2,271,284 - - - 54,988 2,326,272 2,395,554 Community development 547,707 - - - 62,661 610,368 577,877 Capital outlay: General government - - - - 22,133 22,133 30,838 Public safety - - - - 1,169,952 1,169,952 2,950 Public works - - 1,520,660 777,930 16,478 2,315,068 2,595,012 Parks and recreation - - - - 1,316,908 1,316,908 376,992 Decertification of TIF district - - - - - - 362,123 Debt service: Principal - 5,615,000 - - 370,000 5,985,000 670,000 Interest and paying agent fees - 121,634 - - 173,660 295,294 433,925 Total expenditures 10,982,359 5,742,219 1,960,263 907,534 4,725,387 24,317,762 18,536,958 Revenues over (under) expenditures 846,459 (5,742,219)(739,858) 25,092 (1,314,738) (6,925,264) (1,438,752) Other financing sources (uses): Sale of capital assets - - - - 58,458 58,458 19,286 Transfers in - 5,290,000 353,143 - 1,081,021 6,724,164 1,924,157 Transfers out (479,886) (107,148) - - (5,782,282) (6,369,316) (748,522) Total other financing sources (uses) (479,886) 5,182,852 353,143 0 (4,642,803) 413,306 1,194,921 Net change in fund balance 366,573 (559,367)(386,715) 25,092 (5,957,541) (6,511,958) (243,831) Fund balance - January 1 5,388,120 559,367 2,190,540 27,920 13,119,101 21,285,048 21,528,879 Fund balance - December 31 $5,754,693 $0 $1,803,825 $53,012 $7,161,560 $14,773,090 $21,285,048 Total Governmental Funds The accompanying notes are an integral part of these financial statements. 37 CITY OF CHANHASSEN, MINNESOTA RECONCILIATION OF THE STATEMENT OF REVENUES,Statement 5 EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES For The Year Ended December 31, 2018 With Comparative Totals For The Year Ended December 31, 2017 2018 2017 Amounts reported for governmental activities in the statement of activities (Statement 2) are different because: Net changes in fund balances - total governmental funds (Statement 4)($6,511,958) ($243,831) 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 4,824,061 3,005,792 Depreciation expense (4,721,100) (4,750,613) The net effect of various miscellaneous transactions involving capital assets (i.e. sales, trade-ins and donations) is to increase (decrease) net position. Developer contributed infrastructure 420,249 42,548 Transfer of capital assets to Enterprise Funds (674,376) (1,380,057) Gain (loss) on disposal of capital assets (13,214)18,968 Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. Change in delinquent property taxes 21,007 5,434 Change in deferred and delinquent special assessments (505,188)235,826 Change in other unavailable revenue - (19,979) The issuance of long-term debt provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net position. Also, governmental funds report the effects of bond premiums when the debt is first issued, whereas amounts are deferred and amortized over the life of the debt in the statement of activities. Repayment of principal 5,985,000 670,000 Amortization of bond premiums 15,985 15,985 Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. Expenses reported in the statement of activities include the effects of the changes in these expense accruals as follows: Change in compensated absences payable 28,362 58,361 Change in other post employment benefits payable (151,412)(13,606) Change in accrued interest payable 105,986 9,667 Governmental funds report pension contributions as expenditures, however, pension expense is reported in the statement of activities. This is the amount by which pension expense exceeds pension contributions.6,367 (370,753) Change in net position of governmental activities (Statement 2)($1,170,231) ($2,716,258) The accompanying notes are an integral part of these financial statements. 38 CITY OF CHANHASSEN, MINNESOTA STATEMENT OF NET POSITION Statement 6 PROPRIETARY FUNDS December 31, 2018 With Comparative Totals For December 31, 2017 Water Sewer Surface Water Management 2018 2017 Assets: Current assets: Cash and cash equivalents $7,873,858 $5,686,989 $1,128,485 $14,689,332 $12,822,106 Restricted cash 1,700,044 - - 1,700,044 5,686,976 Accrued interest receivable 38,042 30,887 7,555 76,484 57,026 Due from other governmental units 1,136 355 5,489 6,980 2,872 Accounts receivable - net 731,442 665,180 191,504 1,588,126 1,240,316 Interfund loan receivable 96,065 - - 96,065 154,506 Prepaid items 18,283 15,602 13,205 47,090 20,752 Water meter inventory 62,873 - - 62,873 79,527 Special assessments receivable 47,799 2,224 - 50,023 57,592 Connection charges receivable 11,482 806 - 12,288 11,695 Total current assets 10,581,024 6,402,043 1,346,238 18,329,305 20,133,368 Noncurrent assets: Capital assets: Nondepreciable 2,201,486 782,194 1,256,771 4,240,451 16,864,626 Depreciable 81,230,399 36,510,262 30,324,864 148,065,525 128,002,505 Total capital assets 83,431,885 37,292,456 31,581,635 152,305,976 144,867,131 Less: Allowance for depreciation (31,849,856) (24,723,525) (16,806,591) (73,379,972) (69,987,499) Net capital assets 51,582,029 12,568,931 14,775,044 78,926,004 74,879,632 Total assets 62,163,053 18,970,974 16,121,282 97,255,309 95,013,000 Deferred outflows of resources related to pensions 59,787 48,999 30,692 139,478 215,456 Liabilities: Current liabilities: Accounts payable 124,838 21,187 16,123 162,148 220,266 Due to other governmental units 20,244 36,698 46,304 103,246 106,511 Salaries payable 23,755 15,664 10,931 50,350 44,657 Contracts payable 180,485 195,603 38,232 414,320 1,513,453 Accrued interest payable 346,550 1,727 - 348,277 270,492 Unearned revenue - - 825 825 725 Interfund loan payable - due within one year 192,867 - - 192,867 192,517 Compensated absences payable - due within one year 14,197 11,750 6,063 32,010 20,022 Bonds payable - due within one year 1,787,500 62,500 - 1,850,000 1,375,000 Total current liabilities 2,690,436 345,129 118,478 3,154,043 3,743,643 Noncurrent liabilities: Interfund loan payable 732,650 - - 732,650 904,782 Compensated absences payable 76,231 63,091 32,558 171,880 174,019 Bonds payable 23,561,988 260,000 - 23,821,988 22,004,318 Net pension liability 331,812 271,943 170,333 774,088 880,240 Total noncurrent liabilities 24,702,681 595,034 202,891 25,500,606 23,963,359 Total liabilities 27,393,117 940,163 321,369 28,654,649 27,707,002 Deferred inflows of resources related to pensions 86,790 71,130 44,553 202,473 183,033 Net position: Net investment in capital assets 28,854,641 12,568,932 14,771,812 56,195,385 57,212,106 Unrestricted 5,888,292 5,439,748 1,014,240 12,342,280 10,126,315 Total net position $34,742,933 $18,008,680 $15,786,052 $68,537,665 $67,338,421 Totals The accompanying notes are an integral part of these financial statements. 39 CITY OF CHANHASSEN, MINNESOTA STATEMENT OF REVENUES, EXPENSES AND Statement 7 CHANGES IN FUND NET POSITION PROPRIETARY FUNDS For The Year Ended December 31, 2018 With Comparative Totals For The Year Ended December 31, 2017 Water Sewer Surface Water Management 2018 2017 Operating revenues: Charges for services $2,994,530 $2,950,883 $748,618 $6,694,031 $6,218,387 Penalties and other 114,276 82,639 16,151 213,066 172,192 Intergovernmental - - 44,604 44,604 45,109 Total operating revenues 3,108,806 3,033,522 809,373 6,951,701 6,435,688 Operating expenses: Personal services 812,519 492,693 335,178 1,640,390 1,518,299 Materials and supplies 385,900 36,976 39,435 462,311 356,414 Contractual services: MCES - 1,830,942 - 1,830,942 1,564,754 Other 695,072 604,538 334,461 1,634,071 1,303,541 Repairs and maintenance 263,528 123,268 614 387,410 513,650 Depreciation 1,607,497 978,700 873,535 3,459,732 3,586,719 Total operating expenses 3,764,516 4,067,117 1,583,223 9,414,856 8,843,377 Operating income (loss) (655,710) (1,033,595) (773,850) (2,463,155) (2,407,689) Nonoperating revenues (expenses): Investment earnings 159,813 83,552 20,437 263,802 171,044 Refunds and reimbursements 12,486 685 161 13,332 5,539 Interest and fiscal charges (752,091) (4,435) - (756,526) (308,781) Loss on disposal of capital assets (45,983) (45,968) (51,252) (143,203) - Total nonoperating revenues (expenses) (625,775) 33,834 (30,654) (622,595) (132,198) Income before contributions and transfers (1,281,485) (999,761) (804,504) (3,085,750) (2,539,887) Transfers in 7,223 37,000 79,912 124,135 21,063 Transfers out (221,003) (21,742) (236,238) (478,983) (1,196,698) Capital contributions: Contributions of capital assets 310,743 269,507 744,592 1,324,842 1,961,562 Special assessments 11,623 268 - 11,891 2,582 Connection charges 2,387,509 742,756 172,844 3,303,109 1,094,508 Total contributions and transfers 2,496,095 1,027,789 761,110 4,284,994 1,883,017 Change in net position 1,214,610 28,028 (43,394) 1,199,244 (656,870) Net position - January 1 33,528,323 17,980,652 15,829,446 67,338,421 67,995,291 Net position - December 31 $34,742,933 $18,008,680 $15,786,052 $68,537,665 $67,338,421 Capital Transfers - Reconciliation of capital contributions and transfers:Contributions Net Amounts reported above $4,639,842 ($354,848) Amounts reported for business-type activities in the statement of activities are different because: Transfer in of capital assets from governmental activities (674,376) 674,376 Amounts reported on the statement of activities $3,965,466 $319,528 Totals The accompanying notes are an integral part of these financial statements. 40 CITY OF CHANHASSEN, MINNESOTA STATEMENT OF CASH FLOWS Statement 8 PROPRIETARY FUNDS For The Year Ended December 31, 2018 With Comparative Totals For The Year Ended December 31, 2017 Water Sewer Surface Water Management 2018 2017 Cash flows from operating activities: Receipts from customers and users $2,891,429 $2,922,107 $786,347 $6,599,883 $6,336,110 Payment to suppliers (1,256,211) (2,595,355) (400,313) (4,251,879) (3,822,785) Payment to employees (812,055) (492,669) (330,858) (1,635,582) (1,463,076) Miscellaneous revenue 12,486 685 161 13,332 50,648 Net cash flows provided by (used in) operating activities 835,649 (165,232) 55,337 725,754 1,100,897 Cash flows from noncapital financing activities: Transfers in 7,223 37,000 79,912 124,135 21,063 Interfund loan receivable - collections 58,441 - - 58,441 110,266 Interfund loan payable - (payments)(192,517) - - (192,517) (192,176) Net cash flows provided by (used in) noncapital financing activities (126,853) 37,000 79,912 (9,941) (60,847) Cash flows from capital and related financing activities: Acquisition of capital assets (7,448,138) 112,682 (222,064) (7,557,520) (8,743,369) Connection charges 2,385,573 744,099 172,844 3,302,516 1,112,206 Special assessment collections 18,981 479 - 19,460 21,353 Transfers out (221,003) (21,742) (236,238) (478,983) (1,196,698) Proceeds from issuance of bonds 3,734,159 - - 3,734,159 10,462,491 Principal paid on bonds (1,312,500) (62,500) - (1,375,000) (955,000) Interest and fiscal charges (719,799) (4,696) - (724,495) (608,548) Net cash flows provided by (used in) capital and related financing activities (3,562,727) 768,322 (285,458) (3,079,863) 92,435 Cash flows from investing activities: Investment earnings 149,459 75,316 19,569 244,344 160,914 Net increase (decrease) in cash and cash equivalents (2,704,472) 715,406 (130,640) (2,119,706) 1,293,399 Cash and cash equivalents - January 1 12,278,374 4,971,583 1,259,125 18,509,082 17,215,683 Cash and cash equivalents - December 31 $9,573,902 $5,686,989 $1,128,485 $16,389,376 $18,509,082 Reconciliation of operating income (loss) to net cash provided (used) by operating activities: Operating income (loss) ($655,710) ($1,033,595) ($773,850) ($2,463,155) ($2,452,798) Adjustments to reconcile operating income (loss) to net cash flows from operating activities: Miscellaneous revenue (expense)12,486 685 161 13,332 50,648 Depreciation 1,607,497 978,700 873,535 3,459,732 3,586,719 Changes in assets and liabilities, deferred outflows and inflows: Decrease (increase) in receivables (217,377) (111,415) (23,126) (351,918) (54,344) Decrease (increase) in prepaid items (8,441) (8,682) (9,215) (26,338) (18,561) Decrease (increase) in inventory 16,654 - - 16,654 (28,414) Decrease (increase) in deferred outflows of resources 32,568 26,692 16,718 75,978 253,919 Increase (decrease) in payables 85,141 12,846 (9,806) 88,181 (19,402) Increase (decrease) in net pension liability (45,502) (37,292) (23,358) (106,152) (251,232) Increase (decrease) in deferred inflows of resources 8,333 6,829 4,278 19,440 34,362 Total adjustments 1,491,359 868,363 829,187 3,188,909 3,553,695 Net cash flows provided by (used in) operating activities $835,649 ($165,232) $55,337 $725,754 $1,100,897 Noncash investing, capital and financing activities: Capital assets in the amount of $310,743 and $709,699 were contributed to the Water Fund in 2018 and 2017, respectively. Capital assets in the amount of $269,507 and $361,286 were contributed to the Sewer Fund in 2018 and 2017, respectively. Capital assets in the amount of $744,592 and $890,577 were contributed to the Surface Water Fund in 2018 and 2017, respectively. Totals The accompanying notes are an integral part of these financial statements. 41 CITY OF CHANHASSEN, MINNESOTA STATEMENT OF NET POSITION Statement 9 FIDUCIARY FUNDS December 31, 2018 With Comparative Totals For December 31, 2017 2018 2017 Assets: Cash and investments $2,161,036 $2,603,979 Liabilities: Accounts payable $27,975 $ - Escrow deposits payable 2,133,061 2,603,979 Total liabilities $2,161,036 $2,603,979 Agency Funds The accompanying notes are an integral part of these financial statements. 42 CITY OF CHANHASSEN, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The City of Chanhassen, Minnesota (the City) was incorporated in 1967 and operates under the State of Minnesota Statutory Plan B form of government. The governing body consists of a five member City council elected by voters of the City. The financial statements of the City have been prepared in conformity with accounting principles generally accepted in the United States of America as applied to governmental units by the Governmental Accounting Standards Board (GASB). The following is a summary of the significant accounting policies. A. FINANCIAL REPORTING ENTITY In accordance with GASB pronouncements and accounting principles generally accepted in the United States of America, the financial statements of the reporting entity should include those of the City (the primary government) and its component units. The component unit discussed below is included in the City’s reporting entity because of the significance of its operational or financial relationships with the City. COMPONENT UNITS The City has one component unit, the Economic Development Authority (EDA). The financial statements of the EDA are included as a blended component unit because its governing body is substantively the same as the City Council, the City is in a relationship of financial burden with the EDA, and because management of the City have operational responsibilities for the EDA. Separate financial statements for the EDA are not prepared. JOINTLY GOVERNED ORGANIZATIONS Southwest Area Transit Commission. The City, in conjunction with the Cities of Eden Prairie and Chaska, has agreed to establish the Southwest Area Transit Commission (the Commission). The purpose of the Commission is to provide alternative methods of public transit service to the three cities. The Commission’s board is composed of two commissioners from each of the cities. Western Area Fire Training Association (WAFTA). The City is a member of a joint powers group along with ten other communities. WAFTA operates a fire training facility in western Carver County. JOINT POWERS AGREEMENT The Chanhassen Recreation Center is owned by Independent School District No. 112 and operates under a joint powers agreement between the City and the School District. The ninety-nine year agreement expires in 2093. According to the terms of the agreement, the City reimburses the School District 24% of the cost to operate and maintain the facility. B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the nonfiduciary activities of the primary government and its component units. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. 43 CITY OF CHANHASSEN, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 The statement of activities demonstrates the degree to which the direct expenses of a given function or business-type activity, are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or business-type activity. 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. Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. C. MEASUREMENT FOCUS, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT PRESENTATION The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. The City’s only fiduciary funds are agency funds. Agency funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers all revenues, except reimbursement grants, to be available if they are collected within 60 days of the end of the current fiscal period. Reimbursement grants are considered available if they are collected within one year of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Property taxes, special assessments, intergovernmental revenues, charges for services and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the City. The City reports the following major governmental funds: General 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. 2008A G.O. Public Works Facility Bonds (367) accounts for the accumulation of resources for payment of the 2008A General Obligation CIP Bonds (Public Works Building) and other related indebtedness and interest for this issuance. 44 CITY OF CHANHASSEN, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 Revolving Assessment Fund (601) accounts for the City’s annual street re-construction program. The individual property owner pays a portion of the cost of the annual project with assessments and the City funds its portion with the reserves created in this fund and an annual tax levy. TH101 Improvements – Pioneer to Flying Cloud (605) accounts for the funding sources and costs of the Trunk Highway 101 improvement project, which includes widening of the highway between Pioneer Trail and Flying Cloud Drive, sanitary sewer and water extension, storm sewer improvements, pedestrian/bicycle trails, and a pedestrian bridge. The City reports the following major proprietary funds: The Water Fund accounts for the water service charges which are used to finance the water system operating expenses. The Sewer Fund accounts for the sewer service charges which are used to finance the sanitary sewer system operating expenses. The Surface Water Management Fund accounts for the surface water charges which are used to finance the surface water system operating expenses. Additionally, the City reports the following fund type: Agency funds account for the assets of various escrow deposits and the Moon Valley Restoration Funds held by the City in a trustee capacity or as an agent. As a general rule the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are transactions that would be treated as revenues, expenditures or expenses if they involved external organizations, such as buying goods and services or payments in lieu of taxes, are similarly treated when they involve other funds of the City. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. Proprietary Funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the water, sewer, and surface water management enterprise funds are charges to customers for sales and services. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. 45 CITY OF CHANHASSEN, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 D. BUDGETS Budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America. Annual appropriated budgets are adopted for the General Fund and for the Contribution, Cemetery, and CATV Special Revenue Funds. Budgeted amounts are reported as originally adopted, or as amended by the City Council. There were no budget amendments during 2018. Budgeted expenditure appropriations lapse at year end. Encumbrance accounting, under which purchase orders, contracts, and other commitments for the expenditure of monies are recorded in order to reserve that portion of the appropriation, is not employed by the City because it is at present not considered necessary to assure effective budgetary control or to facilitate effective cash management. E. LEGAL COMPLIANCE - BUDGETS The City follows these procedures in establishing the budgetary data reflected in the financial statements: 1. The City Manager submits to the City Council a proposed operating budget for the fiscal year commencing the following January 1. The operating budget includes proposed expenditures and the means of financing them. 2. Public hearings are conducted to obtain taxpayer comments. 3. The budget is legally enacted through passage of a resolution. 4. Management may authorize transfer of budgeted amounts between departments within any fund. All budget amendments between funds must be approved by the City Council. The legal level of budgetary control is at the fund level. Budgetary monitoring, by departments or divisions and by category, is required by City policy. 5. Formal budgetary integration is employed as a management control device during the year for the General Fund and for the Contribution, Cemetery and CATV Special Revenue Funds. Formal budgetary integration is not employed for Debt Service Funds because effective budgetary control is alternatively achieved through general obligation bond indenture provisions. Budgetary control for Capital Projects Funds is accomplished through the use of project controls. During 2018, the Contribution Special Revenue Fund has expenditures of $56,134, which exceeded budgeted expenditures of $46,000 by $10,134. F. CASH AND INVESTMENTS Cash and investment balances from all funds are pooled and invested to the extent available in authorized investments. Investments are stated at fair value. Investment income is accrued at the balance sheet date and allocated to individual funds on the basis of the fund's equity in the cash and investment pool. For purposes of the statement of cash flows, the Proprietary Funds consider all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. All of the cash and 46 CITY OF CHANHASSEN, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 investments allocated to the Proprietary Fund types have original maturities of 90 days or less. Therefore, the entire balance in such fund types is considered cash equivalents. G. RECEIVABLES Property taxes and special assessment receivables have been reported net of estimated uncollectible accounts (See Note 1 H and I). Because utility bills are considered liens on property, no estimated uncollectible amounts are established. Uncollectible amounts are not material for other receivables and have not been reported. H. PROPERTY TAX REVENUE RECOGNITION The City Council annually adopts a tax levy and certifies it to the County in December (levy/assessment date) of each year for collection in the following year. The County is responsible for billing and collecting all property taxes for itself, the City, the local School District and other taxing authorities. Such taxes become a lien on January 1 and are recorded as receivables by the City at that date. Real property taxes are payable (by property owners) on May 15 and October 15 of each calendar year. Personal property taxes are payable by taxpayers on February 28 and June 30 of each year. These taxes are collected by the County and remitted to the City on or before July 15 and December 15 of the same year. Delinquent collections for November and December are received the following January. The City has no ability to enforce payment of property taxes by property owners. The County possesses this authority. GOVERNMENT-WIDE FINANCIAL STATEMENTS The City recognizes property tax revenue in the period for which taxes were levied. Uncollectible property taxes are not material and have not been reported. GOVERNMENT FUND FINANCIAL STATEMENTS The City recognizes property tax revenue when it becomes both measurable and available to finance expenditures of the current period. In practice, current and delinquent taxes and State credits received by the City in July, December and January are recognized as revenue for the current year. Taxes collected by the County by December 31 (remitted to the City the following January) and taxes and credits not received at year end are classified as delinquent and due from County taxes receivable. The portion of delinquent taxes not collected by the City in January are fully offset by deferred inflows of resources because they are not available to finance current expenditures. The City's property tax revenue includes payments from the Metropolitan Revenue Distribution (Fiscal Disparities Formula) per State Statute 473F. This statute provides a means of spreading a portion of the taxable valuation of commercial/industrial real property to various taxing authorities within the defined metropolitan area. The valuation "shared" is a portion of commercial/industrial property valuation growth since 1971. I. SPECIAL ASSESSMENT REVENUE RECOGNITION Special assessments are levied against benefited properties for the cost or a portion of the cost of special assessment improvement projects in accordance with State Statutes. These assessments are collectible by the City over a term of years usually consistent with the term of the related bond issue. Collection of annual installments (including interest) is handled by the County Auditor in the same manner as property 47 CITY OF CHANHASSEN, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 taxes. Property owners are allowed to (and often do) prepay future installments without interest or prepayment penalties. Once a special assessment roll is adopted, the amount attributed to each parcel is a lien upon that property until full payment is made or the amount is determined to be excessive by the City Council or court action. If special assessments are allowed to go delinquent, the property is subject to tax forfeit sale and the first proceeds of that sale (after costs, penalties and expenses of sale) are remitted to the City in payment of delinquent special assessments. Generally, the City will collect the full amount of its special assessments not adjusted by City Council or court action. Pursuant to State Statutes, a property shall be subject to a tax forfeit sale after three years unless it is homesteaded, agricultural or seasonal recreational land in which event the property is subject to such sale after five years. GOVERNMENT-WIDE FINANCIAL STATEMENTS The City recognizes special assessment revenue in the period that the assessment roll was adopted by the City Council. Uncollectible special assessments are not material and have not been reported. GOVERNMENT FUND FINANCIAL STATEMENTS Revenue from special assessments is recognized by the City when it becomes measurable and available to finance expenditures of the current fiscal period. In practice, current and delinquent special assessments received by the City are recognized as revenue for the current year. Special assessments are collected by the County and remitted by December 31 (remitted to the City the following January) and are also recognized as revenue for the current year. All remaining delinquent, deferred and special deferred assessments receivable in governmental funds are completely offset by deferred inflows of resources. J. INVENTORIES GOVERNMENTAL FUNDS The original cost of materials and supplies are recorded as expenditures at the time of purchase. These funds do not maintain material amounts of inventories. PROPRIETARY FUNDS Inventories of the Proprietary Funds are stated at cost, which approximates market, using the first-in, first- out (FIFO) method. K. PREPAID ITEMS Certain prepayments 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. L. CAPITAL ASSETS Capital assets, which include property, plant, equipment, infrastructure assets (e.g., roads, trails, sidewalks, and similar items), and intangible assets such as easements and computer software, are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. 48 CITY OF CHANHASSEN, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 Capital assets are defined by the City as assets with an initial, individual cost of more than $10,000 and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at acquisition value at the date of donation. In the case of the initial capitalization of general infrastructure assets, the City chose to include all such items regardless of their acquisition date amount. These assets are reported at historical or estimated historical cost, using the 1987 base highway construction price trend, when historical costs were unavailable. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. In accordance with GASB 89, which the City early implemented for the year ended December 31, 2018, interest incurred during the construction phase of capital assets of business-type activities is recognized as an expense in the period in which the cost is incurred. Capital assets of the City are depreciated/amortized using the straight line method over the following estimated useful lives: Buildings and structures 20 – 50 years Machinery and equipment (including software) 3 – 30 years Drainage systems 30 years Water and sewer lines 30 years Streets 25 – 50 years Trails 15 years Sidewalks 25 years Other improvements 7 – 40 years Temporary easements 2 years M. COMPENSATED ABSENCES The City compensates all employees upon termination for unused vacation and unused sick time up to a maximum based upon length of service. The City compensates nonexempt employees for unused comp time. All vacation pay and comp time is accrued when incurred in the government-wide and proprietary fund financial statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee resignations and retirements. In accordance with the provisions of GASB Statement No. 16, Accounting for Compensated Absences, no liability is recorded for nonvesting accumulating rights to receive sick pay benefits. However, a liability is recognized for that portion of accumulating sick leave benefits that is vested as severance pay. N. LONG-TERM OBLIGATIONS In the government-wide financial statements and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net position. Bond premiums and discounts, if material, are amortized over the life of the related debt. 49 CITY OF CHANHASSEN, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 In the fund financial statements, governmental fund types recognize bond premiums and discounts 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. O. DEFERRED OUTFLOWS/INFLOWS OF RESOURCES In addition to assets, the statement of financial position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element represents a consumption of net position that applies to future periods and so will not be recognized as an outflow of resources (expense/expenditure) until then. The government has one item that qualifies for reporting in the category. It is the pension related deferred outflows of resources reported in the government-wide Statement of Net Position and the proprietary funds Statement of Net Position. In addition to liabilities, the statement of financial position reports a separate section for deferred inflows of resources. This separate financial statement element represents an acquisition of net position that applies to future periods, and therefore, will not be recognized as an inflow of resources (revenue) until that time. The government has pension related deferred inflows of resources reported in the government- wide Statement of Net Pension and the proprietary funds Statements of Net Position. The government also has an item, which arises only under a modified accrual basis of accounting, that qualifies for reporting in this category. Accordingly, the item, unavailable revenue, is reported only in the governmental fund balance sheet. The governmental funds report unavailable revenues from the following sources: property taxes, special assessments and other revenue not collected within 60 days from year-end. P. FUND BALANCE CLASSIFICATIONS 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. 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. These constraints are established by Resolution of City Council, and committed amounts cannot be used for any other purpose unless the City Council removes or changes the specified use by resolution. Assigned - consists of internally imposed constraints for the specific purpose of the City’s intended use. Pursuant to the City’s Fund Balance Policy, the City Manager or Finance Director are authorized to assign fund balance that reflects the City’s intended use of those funds. Unassigned - is the residual classification for the General Fund and also reflects negative residual amounts in other funds. When both restricted and unrestricted resources are available for use, it is the City’s policy to first use restricted resources, and then use unrestricted resources as they are needed. 50 CITY OF CHANHASSEN, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 When committed, assigned or unassigned resources are available for use, it is the City’s policy to use resources in the following order: 1) committed 2) assigned and 3) unassigned. The exception to this is the Park Acquisition and Development Fund (410), where it is the City’s policy to use resources in the following order: 1) assigned, 2) committed, and 3) restricted. Q. INTERFUND TRANSACTIONS During the course of operations, numerous transactions occur between individual funds for goods provided or services rendered. Interfund services provided and used are accounted for as revenues, expenditures or expenses. Transactions that constitute reimbursements to a fund for expenditures/expenses initially made from it that are properly applicable to another fund, are recorded as expenditures/expenses in the reimbursing fund and as reductions of expenditures/expenses in the fund that is reimbursed. The City provides temporary advances to funds that have insufficient cash balances by means of an advance from another fund. Short-term interfund loans are classified as “due to/from other funds.” Long- term interfund loans are classified as “interfund loan receivable/payable.” Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as “internal balances.” All other interfund transactions are reported as transfers. R. USE OF ESTIMATES The preparation of financial statements in accordance with generally accepted accounting principles (GAAP) requires management to make estimates that affect amounts reported in the financial statements during the reporting period. Actual results could differ from such estimates. S. COMPARATIVE TOTALS The basic financial statements, required supplementary information, and combining and individual fund financial statements and schedules include certain prior-year summarized comparative information in total but not at the level of detail required for a presentation in conformity with generally accepted accounting principles. Accordingly, such information should be read in conjunction with the government’s financial statements for the year ended December 31, 2017, from which the summarized information was derived. T. PENSION PLANS COST SHARING MULTIPLE – EMPLOYER PLANS 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 PERA’s fiduciary net position have been determined on the same basis as they are reported by PERA except 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. 51 CITY OF CHANHASSEN, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 SINGLE EMPLOYER PLAN Pensions. For purposes of measuring the net pension liability (asset), deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Chanhassen Fire Department Relief Association (Relief) and additions to/deductions from the Relief’s fiduciary net position have been determined on the same basis as they were reported by the Relief. For this purpose, benefit payments are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. U. RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS The governmental fund balance sheet includes a reconciliation between fund balances – total governmental funds and net position – governmental activities as reported in the government-wide statement of net position. One element of that reconciliation explains that “long-term liabilities, including pension related deferred outflows and inflows, are not due and payable in the current period and, therefore, are not reported in the funds.” The details of this ($12,247,193) difference are as follows: Bonds payable ($6,435,000) Unamortized bond premium (191,818) Accrued interest payable (69,700) Compensated absences payable (676,840) Other post employment benefits payable (199,068) Net pension liability (4,533,913) Deferred outflows of resources related to pensions 1,169,090 Deferred inflows of resources related to pensions (1,309,944) Net adjustment to decrease fund balances - total governmental funds to arrive at net position - governmental activities ($12,247,193) Note 2 DEPOSITS AND INVESTMENTS A. DEPOSITS In accordance with Minnesota Statutes, the City maintains deposits at those depository banks authorized by the City Council, all of which are members of the Federal Reserve System. Custodial Credit Risk – Custodial credit risk is the risk that in the event of a bank failure, the City’s deposits may not be returned to it. Minnesota Statutes require that insurance, surety bonds or collateral protect all City deposits. The market value of collateral pledged must equal 110% of deposits not covered by insurance or bonds. The City has no additional deposit policies addressing custodial credit risk. As of December 31, 2018, the bank balance of the City’s deposits was insured by the FDIC or covered by pledged collateral held in the City’s name. Minnesota Statutes require that securities pledged as collateral be held in safekeeping by the City Treasurer or in a financial institution other than that furnishing the collateral. Authorized collateral includes the following: 52 CITY OF CHANHASSEN, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 a) United States government treasury bills, treasury notes, treasury bonds; b) Issues of United States government agencies and instrumentalities as quoted by a recognized industry quotation service available to the government entity; c) General obligation securities of any state or local government with taxing powers which is rated “A” or better by a national bond rating service, or revenue obligation securities of any state or local government with taxing powers which is rated “AA” or better by a national bond rating service; d) General obligation securities of a local government with taxing powers may be pledged as collateral against funds deposited by that same local government entity; e) Irrevocable standby letters of credit issued by Federal Home Loan Banks to a municipality accompanied by written evidence that the bank’s public debt is rated “AA” or better by Moody’s Investors Service, Inc. or Standard & Poor’s Corporation; and f) Time deposits that are fully insured by any federal agency. At December 31, 2018, the carrying amount of the City’s deposits with financial institutions was $1,742,550. B. INVESTMENTS Minnesota Statutes authorize the City to invest in the following: a) Direct obligations or obligations guaranteed by the United States or its agencies, its instrumentalities, or organizations created by an act of congress, excluding mortgage-backed securities defined as high risk. b) Shares of investment companies registered under the Federal Investment Company Act of 1940 and whose only investments are in securities described in (a) above, general obligation tax-exempt securities, or repurchase or reverse repurchase agreements. c) State and local securities as follows: 1) any security which is a general obligation of any state or local government with taxing powers which is rated “A” or better by a national bond rating service; 2) any security which is a revenue obligation of any state or local government with taxing powers which is rated “AA” or better by a national bond rating service; and 3) a general obligation of the Minnesota Housing Finance Agency which is a moral obligation of the State of Minnesota and is rated “A” or better by a national bond rating agency. d) Bankers’ acceptance of United States banks. e) Commercial paper issued by United States corporations or their Canadian subsidiaries, of the highest quality, and maturing in 270 days or less. f) Repurchase or reverse repurchase agreements with banks that are members of the Federal Reserve System with capitalization exceeding $10,000,000; a primary reporting dealer in U.S. government securities to the Federal Reserve Bank of New York; certain Minnesota securities broker-dealers; or, a bank qualified as a depositor. 53 CITY OF CHANHASSEN, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 g) General obligation temporary bonds of the same governmental entity issued under section 429.091, subdivision 7; 469.178, subdivision 5; or 475.61, subdivision 6. As of December 31, 2018, the City had the following investments and maturities: Fair Less Investment Type Rating Value Than 1 1-5 6-10 Money Market NR $6,090,605 $6,090,605 $ - $ - Brokered Certificates of Deposit NR 4,419,133 2,955,914 1,463,219 - Municipal Bonds (1)8,602,951 2,757,763 4,827,074 1,018,114 Federal National Mortgage Assn. Notes Aaa 2,636,580 2,146,561 490,019 - Federal Home Loan Mortgage Corp. Notes Aaa 3,512,699 1,044,319 2,468,380 - Federal Home Loan Bank Notes Aaa 3,581,654 - 2,755,748 825,906 Federal Farm Credit Bank Aaa 2,462,453 - 1,403,166 1,059,287 US Treasury Notes Aaa 1,699,150 1,699,150 - - Resolution Funding Corp. Strip Bonds NR 1,364,099 624,800 739,299 - Private Export Funding Corp. Bonds Aaa 626,874 - 626,874 - Total $34,996,198 $17,319,112 $14,773,779 $2,903,307 (1) $1,922,680 are rated Aaa, $2,964,129 are rated Aa1,Total investments $34,996,198 $1,728,130 are rated Aa2, and $636,318 are rated AAA,Deposits 1,742,550 and $1,351,694 are rated AA.Petty cash 665 Total cash and investments $36,739,413 NR - Not Rated Classifications above are by maturity date. Some investments listed above have call dates that occur in less than one year. Investment Maturities (in Years) The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. The hierarchy has three levels. Level 1 investments are valued using inputs that are based on quoted prices in active markets for identical assets. Level 2 investments are valued using inputs that are based on quoted prices for similar assets or inputs that are observable, either directly or indirectly. Level 3 investments are valued using inputs that are unobservable. 54 CITY OF CHANHASSEN, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 The City has the following recurring fair value measurements as of December 31, 2018: Investment Type 12/31/2018 Level 1 Level 2 Level 3 Investments at fair value: Brokered Certificates of Deposit $4,419,133 $ - $4,419,133 $ - Municipal Bonds 8,602,951 - 8,602,951 - Federal National Mortgage Assn. Notes 2,636,580 - 2,636,580 - Federal Home Loan Mortgage Corp. Notes 3,512,699 - 3,512,699 - Federal Home Loan Bank Notes 3,581,654 - 3,581,654 - Federal Farm Credit Bank 2,462,453 - 2,462,453 - US Treasury Notes 1,699,150 - 1,699,150 - Resolution Funding Corp. Strip Bonds 1,364,099 - 1,364,099 - Private Export Funding Corp. Bonds 626,874 - 626,874 - Total/subtotal 28,905,593 $0 $28,905,593 $0 Investments not categorized: Money Market 6,090,605 Total $34,996,198 Fair Value Measurement Using Cash and investments are presented in the financial statements as follows: Cash and investments: Governmental and business-type (Statement 1) $32,878,333 Fiduciary (Statement 9) 2,161,036 Restricted cash (Statement 1) 1,700,044 Total $36,739,413 C. INVESTMENT RISKS Custodial credit risk – investments – For investments in securities, custodial credit risk is the risk that in the event of failure of the counterparty to a transaction, the City will not be able to recover the value of its investment securities that are in the possession of an outside party. Investments in investment pools and money markets are not evidenced by securities that exist in physical or book entry form, and therefore are not subject to custodial credit risk disclosures. The City’s investment policy requires the City’s security broker/dealers to provide its audited financial statements, proof of NASD certification, proof of state registration, and certification of having read, understood and agreed to comply with the City’s investment policy. Investments in securities are held by the City’s broker-dealer of which $500,000 per broker is insured through SIPC. Each broker-dealer has provided additional protection by providing additional insurance. This insurance is subject to aggregate limits applied to all of the broker-dealer’s accounts. Interest rate risk – Interest rate risk is the risk that changes in interest rates of debt investments could adversely affect the fair value of an investment. The City’s investment policy requires the City to diversify its investment portfolio to eliminate the risk of loss resulting from over concentration of assets in a specific maturity. The policy also states the City’s investment portfolio will remain sufficiently liquid to enable the City to meet all operating requirements which might be reasonable, i.e., not investing in maturities longer than seven years. 55 CITY OF CHANHASSEN, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 Credit risk – Credit risk is the risk that an issuer or other counterparty to an investment will be unable to fulfill its obligation to the holder of the investment. State law limits investments to commercial paper to those rated in the highest quality category by at least two nationally recognized rating agencies; in any security of the State of Minnesota or any of its municipalities which is rated “A” or better by a national bond rating service for general obligation and rated “AA” or better for a revenue obligation; a general obligation of the Minnesota Housing Finance Agency to those rated “A” or better by a national bond rating agency; mutual funds or money market funds whose investments are restricted to securities described in MS 118A.04. The City’s investment policy does not place further restrictions on investment options. Concentration of credit risk – Concentration of credit risk is the risk of loss that may be attributed to the magnitude of a government’s investment in a single issuer. The City’s investment policy states investments shall be diversified by limiting investments to avoid over concentration in securities from a specific issuer or business sector (excluding U.S. Treasury securities). Investments in a single issuer exceeding 5% of the City’s overall investment portfolio are in various holdings as follows: Federal National Mortgage Association Notes 8% Federal Home Loan Mortgage Corporation Notes 10% Federal Home Loan Bank Notes 10% Federal Farm Credit Bank 7% Note 3 RECEIVABLES Significant receivable balances not expected to be collected within one year of December 31, 2018 are as follows: Interfund Delinquent Special Loan Property Assessments Receivable Taxes Receivable Total Major Funds: General $ - $42,827 $ - $42,827 Revolving Assessment Fund 32,650 - 1,071,738 1,104,388 Water - - 39,606 39,606 Sewer - - 833 833 Nonmajor Funds 700,000 - 322,079 1,022,079 $732,650 $42,827 $1,434,256 $2,209,733 56 CITY OF CHANHASSEN, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 Note 4 UNAVAILABLE REVENUE Governmental funds report deferred inflows of resources in connection with receivables of revenues that are not considered to be available to liquidate liabilities of the current period. At December 31, 2018, the various components of unavailable revenue were as follows: Revolving General Assessment Nonmajor Fund Fund Funds Total Delinquent property taxes receivable $106,134 $ - $ - $106,134 Special assessments not yet due - 1,353,417 444,046 1,797,463 Total unavailable revenue $106,134 $1,353,417 $444,046 $1,903,597 Major Funds 57 CITY OF CHANHASSEN, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 Note 5 CAPITAL ASSETS Capital asset activity for the year ended December 31, 2018 was as follows: Beginning Ending Primary Government Balance Increase Decrease Balance Governmental activities: Capital assets not being depreciated: Land $19,802,718 $ - $ - $19,802,718 Construction in progress 1,849,280 239,781 (1,800,147) 288,914 Permanent easements 1,566,462 - - 1,566,462 Total capital assets not being depreciated 23,218,460 239,781 (1,800,147) 21,658,094 Capital assets being depreciated: Buildings and structures 23,310,383 100,777 - 23,411,160 Machinery and equipment 8,738,531 1,344,094 (775,352) 9,307,273 Other improvements 8,627,516 515,292 - 9,142,808 Infrastructure 118,363,891 3,454,290 (245,723) 121,572,458 Temporary easements - 777,930 - 777,930 Total capital assets being depreciated 159,040,321 6,192,383 (1,021,075) 164,211,629 Less accumulated depreciation for: Buildings and structures 8,402,061 570,593 - 8,972,654 Machinery and equipment 6,298,130 456,716 (700,055) 6,054,791 Other improvements 3,856,411 362,819 - 4,219,230 Infrastructure 85,583,299 3,330,972 (245,723) 88,668,548 Total accumulated depreciation 104,139,901 4,721,100 (945,778) 107,915,223 Governmental activities capital assets - net $78,118,880 $1,711,064 ($1,875,444) $77,954,500 Beginning Ending Primary Government Balance Increase Decrease Balance Business-type activities: Capital assets not being depreciated: Land $2,094,435 $10,000 $ - $2,104,435 Construction in progress 12,889,386 68,186 (12,700,357) 257,215 Permanent easements 1,880,805 151,767 (153,771) 1,878,801 Total capital assets not being depreciated 16,864,626 229,953 (12,854,128) 4,240,451 Capital assets being depreciated: Buildings and structures 12,445,429 15,533,985 - 27,979,414 Machinery and equipment 1,832,228 61,280 (69,326) 1,824,182 Other improvements 113,724,848 4,578,449 (41,368) 118,261,929 Total capital assets being depreciated 128,002,505 20,173,714 (110,694) 148,065,525 Less accumulated depreciation for: Buildings and structures 2,489,831 248,917 - 2,738,748 Machinery and equipment 981,022 118,867 (25,892) 1,073,997 Other improvements 66,516,646 3,091,948 (41,367) 69,567,227 Total accumulated depreciation 69,987,499 3,459,732 (67,259) 73,379,972 Business-type activities capital assets - net 74,879,632 16,943,935 (12,897,563) 78,926,004 Total capital assets - net $152,998,512 $18,654,999 ($14,773,007) $156,880,504 58 CITY OF CHANHASSEN, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 Depreciation expense was charged to functions/programs of the City as follows: Governmental activities: General government $309,265 Public safety 133,609 Public works 3,390,823 Parks and recreation 887,403 Total depreciation expense - governmental activities $4,721,100 Business-type activities: Water $1,607,497 Sewer 978,700 Surface water management 873,535 Total depreciation expense - business-type activities $3,459,732 Note 6 CITY INDEBTEDNESS The City issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. The City’s long-term debt is segregated between the amounts to be repaid from governmental activities and amounts to be repaid from business-type activities. GOVERNMENTAL ACTIVITIES As of December 31, 2018, the governmental activities long-term debt of the City consisted of the following: Final Authorized Issue Maturity Interest And Outstanding Date Date Rate Issued 12/31/18 General Long-Term Debt: General Obligation Bonds: G.O. Capital Improvement Plan Bonds, Series 2008A 11/18/08 2/1/2018 4.00% - 4.60% $7,550,000 $ - G.O. Library Refunding Bonds, Series 2010A 1/27/10 2/1/2022 2.00% - 3.10% 3,660,000 1,630,000 G.O. Bonds, Series 2016A 3/3/2016 2/1/2030 2.00% - 3.00% 4,805,000 4,805,000 Bond premium 239,773 191,818 Total general obligation bonds 16,254,773 6,626,818 Compensated absences payable N/A 676,840 Total City indebtedness - governmental activities $16,254,773 $7,303,658 59 CITY OF CHANHASSEN, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 BUSINESS-TYPE ACTIVITIES As of December 31, 2018, the business-type activities long-term debt of the City consisted of the following: Final Authorized Issue Maturity Interest And Outstanding Date Date Rate Issued 12/31/18 G.O. Revenue Bonds: Water Revenue Bonds, Series 2011A 10/6/2011 2/1/2022 0.30% - 2.15% $5,920,000 $2,400,000 Water Revenue Bonds, Series 2011B 10/6/2011 2/1/2025 2.00% - 3.00% 3,720,000 3,630,000 Water and Sewer Revenue Bonds, Series 2012A 11/15/2012 2/1/2023 1.00% - 1.55% 1,245,000 645,000 Water Revenue Bonds, Series 2016A 3/3/2016 2/1/2026 2.00% - 3.00% 1,565,000 1,285,000 Water Revenue Bonds, Series 2016B 12/29/2016 2/1/2042 3.50% - 4.00% 3,630,000 3,630,000 Water Revenue Bonds, Series 2017A 2/1/2017 2/1/2038 2.00% - 4.00% 10,000,000 9,600,000 Water Revenue Bonds, Series 2018A 3/15/2018 2/1/2030 3.00% - 4.00% 3,595,000 3,595,000 Bond premium 1,078,498 886,988 Total G.O. revenue bonds 30,753,498 25,671,988 Compensated absences payable N/A 203,890 Total City indebtedness - business-type activities $30,753,498 $25,875,878 GOVERNMENTAL ACTIVITIES Annual debt service requirements to maturity for the governmental activities long-term debt are as follows: Year Ending December 31, Principal Interest 2019 $720,000 $156,480 2020 745,000 134,505 2021 770,000 111,780 2022 800,000 88,015 2023 385,000 70,025 2024 395,000 58,325 2025 410,000 48,300 2026 420,000 40,000 2027 430,000 31,500 2028 440,000 22,800 2029 455,000 13,850 2030 465,000 4,650 Total $6,435,000 $780,230 General Obligation Bonds It is not practicable to determine the specific year for payment of long-term accrued compensated absences. 60 CITY OF CHANHASSEN, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 BUSINESS-TYPE ACTIVITIES Annual debt service requirements to maturity for the business-type long-term debt are as follows: Year Ending G.O. Revenue Bonds December 31, Principal Interest 2019 $1,850,000 $759,798 2020 1,870,000 677,567 2021 1,930,000 632,209 2022 1,510,000 587,722 2023 1,280,000 547,659 2024 1,175,000 510,213 2025 1,210,000 473,663 2026 655,000 445,738 2027 915,000 422,213 2028 945,000 394,313 2029 975,000 365,513 2030 1,005,000 335,813 2031 670,000 310,688 2032 690,000 290,288 2033 715,000 269,213 2034 735,000 247,463 2035 755,000 225,113 2036 780,000 202,088 2037 800,000 176,388 2038 830,000 147,863 2039 825,000 118,900 2040 855,000 88,431 2041 885,000 54,700 2042 925,000 18,500 Total $24,785,000 $8,302,056 It is not practicable to determine the specific year for payment of long-term accrued compensated absences. 61 CITY OF CHANHASSEN, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 CHANGE IN LONG-TERM LIABILITIES Long-term liability activity for the year ended December 31, 2018 was as follows: Beginning Ending Due Within Balance Additions Deletions Balance One Year Governmental activities: General obligation bonds $12,420,000 $ - ($5,985,000)$6,435,000 $720,000 Bond premium 207,803 - (15,985) 191,818 - Compensated absences 705,202 589,282 (617,644) 676,840 106,262 Total governmental activity long-term liabilities $13,333,005 $589,282 ($6,618,629) $7,303,658 $826,262 Business-type activities: G.O. revenue bonds $22,565,000 $3,595,000 ($1,375,000) $24,785,000 $1,850,000 Bond premium 814,318 139,159 (66,489) 886,988 - Compensated absences 194,041 150,545 (140,696) 203,890 32,010 Total business-type activity long-term liabilities $23,573,359 $3,884,704 ($1,582,185) $25,875,878 $1,882,010 For the governmental activities, compensated absences are generally liquidated by the General and Special Revenue Funds. All long-term bonded indebtedness outstanding at December 31, 2018 is backed by the full faith and credit of the City. General Obligation Revenue Bonds are serviced by the Sewer and Water Enterprise Funds and are carried as debt of those funds. Other bonds are supported by various Debt Service Funds. NONEXCHANGE FINANCIAL GUARANTEE OF DEBT On August 1, 2014 the Carver County Community Development Agency, a legally separate entity from the City, issued $2,110,000 of Housing Development Refunding Bonds, Series 2014 and $2,370,000 of Taxable Housing Development and Refunding Bonds, Series 2014T. The proceeds were used to refund a portion of prior bonds and to fund certain capital improvements of the Centennial Hill Apartments, which are located within the City. In accordance with Minnesota Statutes, Section 469.034, Subd. 2, the City has pledged its full faith and credit and taxing powers to the payment of debt service on the Series 2014 and Series 2014T bonds. In the event that the Carver County Community Development Agency is unable to pay the debt service on the bonds due to insufficient housing revenues and cash reserves, the City is obligated to pay the debt service. The City’s guarantee extends until the bonds have fully matured, which is scheduled to occur in 2034. The total amount of outstanding guaranteed debt, including interest, at December 31, 2018 is $5,030,891. The City’s management does not expect the City will be required to make any debt service payments towards these bonds. Accordingly, the bonds are not reflected in the financial statements of the City. 62 CITY OF CHANHASSEN, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 CROSSOVER REFUNDING Series 2016A Bonds On March 3, 2016, the City issued $6,370,000 in General Obligation Bonds, Series 2016A with an average interest rate of 2.35%. Bonds in the amount of $1,565,000 were issued to provide funding for water system improvements. The remaining $4,805,000 of bonds, along with $475,000 of cash on hand, were used to advance refund $5,290,000 of outstanding 2008A Series Bonds with an average interest rate of 4.42%. The net proceeds were used to purchase U.S. government securities in the amount of $5,448,832. Those securities were deposited in an irrevocable trust with an escrow agent to provide for the interest on the refunding bonds through the crossover date of February 1, 2018 and called principal on the refunded bonds (2019 through 2030 maturities) on February 1, 2018. The City advance refunded the 2019 through 2030 maturities of the 2008A Series Bonds to reduce its total debt service payments during the years 2017 through 2030 by $928,572 and to obtain an economic gain (difference between the present value of the debt service payments on the old and new debt) of $757,654. The City is responsible for the debt service of the refunding bonds, which began on August 1, 2018. The debt service of the refunding bonds due prior to August 1, 2018 was payable from the escrow account. REVENUE PLEDGED Future revenue pledged for the payment of long-term debt is as follows: Percent of Debt service Remaining Principal Pledged Use of Total as a % of Term of Principal and Interest Revenue Bond Issue Proceeds Type Debt Service net revenues Pledge and Interest Paid Received 2008A CIP bonds Public Works Facility construction Property taxes 100%n/a 2009 - 2029 $ - $5,736,634 $ - 2010A Library Refunding bonds Library construction Property taxes 100%n/a 2012 - 2021 $1,731,255 $424,880 $461,297 - refunded the 2002A Library bonds 2011A Water Revenue bonds Water infrastructure improvements Water usage charges 100% 23.4% 2012 - 2021 $2,481,539 $728,813 $3,108,806 - refunded the 2005B bonds 2011B Water Revenue bonds Water infrastructure improvements Water usage charges 100%4.3% 2012 - 2024 $4,023,800 $134,500 $3,108,806 - refunded the 2005B bonds 2012A Water & Sewer Revenue Purchase of meter reading equipment Water and sewer 100%2.2% 2013 - 2022 $667,793 $133,915 $6,142,328 bonds usage charges 2016A Water Revenue bonds Water infrastructure improvements Water usage charges 100%5.7% 2016 - 2025 $1,420,200 $177,200 $3,108,806 2016B Water Revenue bonds West Water Treatment Plant Water usage charges 100%4.4% 2017 - 2041 $6,672,841 $138,238 $3,108,806 2017A Water Revenue bonds West Water Treatment Plant Water usage charges 100% 22.5% 2018 - 2038 $13,491,150 $699,900 $3,108,806 2018A Water Revenue bonds West Water Treatment Plant Water usage charges 100%n/a 2019 - 2030 $4,329,732 $ - $3,108,806 Current YearRevenue Pledged 63 CITY OF CHANHASSEN, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 Note 7 DEFERRED AD VALOREM TAX LEVIES - BONDED DEBT General obligation bond issues sold by the City are financed by ad valorem tax levies. Special assessment bond issues sold by the City are partially financed by ad valorem tax levies in addition to special assessments levied against the benefiting properties. When a bond issue to be financed partially or completely by ad valorem tax levies is sold, specific annual amounts of such tax levies are stated in the bond resolution and the County Auditor is notified and instructed to levy these taxes over the appropriate years. The future tax levies are subject to cancellation when and if the City has provided alternative sources of financing. The City Council is required to levy any additional taxes found necessary for full payment of principal and interest. These future scheduled tax levies are not shown as assets in the accompanying financial statements at December 31, 2018. Future scheduled tax levies for all bonds outstanding at December 31, 2018 totaled $6,732,171. Note 8 DEFINED BENEFIT PENSION PLANS A. PLAN DESCRIPTION The City participates in the following cost-sharing multiple-employer defined benefit pension plans administered by the Public Employees Retirement Association of Minnesota (PERA). PERA’s defined benefit pension plans are established and administered in accordance with Minnesota Statutes, Chapters 353 and 356. 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 (with the exception of employees covered by PEPFF) and certain part-time employees of the City are covered by the General Employees Retirement Fund (GERF). GERF members belong to either the Coordinated Plan or the Basic Plan. Coordinated Plan members are covered by Social Security and Basic Plan members are not. The Basic Plan was closed to new members in 1967. All new members must participate in the Coordinated Plan. 2. Public Employees Police and Fire Fund (PEPFF) The PEPFF, originally established for police officers and firefighters not covered by a local relief association, now covers all police officers and firefighters hired since 1980. Effective July 1, 1999, the PEPFF also covers police officers and firefighters belonging to a local relief association that elected to merge with and transfer assets and administration to PERA. B. BENEFITS PROVIDED PERA provides retirement, disability, and death benefits. Benefit provisions are established by state statute 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. 64 CITY OF CHANHASSEN, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 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 PERA's Coordinated and Basic 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 a Basic Plan member is 2.2% of average salary for each of the first ten years of service and 2.7% for each additional year. The accrual rate for a Coordinated Plan member is 1.2% of average salary for each of the first ten years and 1.7% for each additional year. Under Method 2, the accrual rate is 2.7% of average salary for Basic Plan members and 1.7% for Coordinated Plan members for all years of service. The accrual for Minneapolis Employees Retirement Fund (MERF) is 2% for each of the first 10 years of service and 2.5% for each additional year. For members hired prior to July 1, 1989, a full annuity is available when age plus years of service equal 90 and normal retirement age is 65. For members hired on or after July 1, 1989, normal retirement age is the age for unreduced Social Security benefits capped at 66. Beginning January 1, 2019, benefit recipients will receive a future annual increase equal to 50 percent of the Social Security Cost of Living Adjustment, not less than 1.0 percent and not more than 1.5 percent. For retirements on or after January 1, 2024, the first benefit increase is delayed until the retiree reaches Normal Retirement Age (not applicable to Rule of 90 retirees, disability benefit recipients, or survivors). 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% after five years up to 100% after ten years of credited service. Benefits for PEPFF members first hired after June 30, 2014, vest on a prorated basis from 50% after ten years up to 100% after twenty years of credited service. The annuity accrual rate is 3% of average salary for each year of service. For PEPFF members who were first hired prior to July 1, 1989, a full annuity is available when age plus years of service equal at least 90. Beginning in 2019, the COLA will be fixed at 1 percent. Under funding measurements from 2017, the 2.5 percent COLA trigger was never expected to occur and was subsequently removed from law. Post retirement increases are given each year except for annuitants who have been receiving a benefit for only 31 to 41 months. These annuitants will receive a prorated amount of the increase on a sliding scale. C. CONTRIBUTIONS Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. Contribution rates can only be modified by the state legislature. 1. GERF Contributions Basic Plan members and Coordinated Plan members were required to contribute 9.1% and 6.50%, respectively, of their annual covered salary in fiscal year 2018. The City was required to contribute 11.78% of pay for Basic Plan members and 7.50% for Coordinated Plan members. The City’s contributions to the GERF for the year ended December 31, 2018, were $383,686. The City’s contributions were equal to the required contributions as set by state statute. 65 CITY OF CHANHASSEN, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 2. PEPFF Contributions Legislation increased both employee and employer contribution rates in the Police and Fire Plan. Employee rates increased from 10.80 percent of pay to 11.30 percent and employer rates increase from 16.20 percent to 16.95 percent on January 1, 2019. On January 1, 2020 employee rates increase to 11.80 percent and employer rates increase to 17.70 percent. The City’s contributions to the Police and Fire Fund for the year ended December 31, 2018 were $33,511. The City’s contributions were equal to the required contributions as set by state statute. D. PENSION COSTS 1. GERF Pension Costs At December 31, 2018, the City reported a liability of $4,216,168 for its proportionate share of the GERF’s net pension liability. 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 non-employer contributing entity and the state’s contribution meets the definition of a special funding situation. The State of Minnesota’s proportionate share of the net pension liability associated with the City totaled $138,310. 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 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 PERA’s participating employers. At June 30, 2018 the City’s proportion was .0760% which was a increase of .0009% from its proportion measured as of June 30, 2017. Post-retirement benefit increases were changed from 1.0% per year with a provision to increase to 2.5% upon attainment of 90% funding ratio to 50% of the Social Security Cost of Living Adjustment, not less than 1.0% and not more than 1.5%, beginning January 1, 2019. If changes expected to have a significant effect on the measurement of the net pension liability had occurred between the measurement date and the reporting date, the entity would include a brief description of the nature of those changes. For the year ended December 31, 2018, the City recognized pension expense of $357,477 for its proportionate share of the GERF’s pension expense. In addition, the City recognized an additional $32,254 as pension expense (and grant revenue) for its proportionate share of the State of Minnesota’s contribution of $16 million to the General Employees Fund. 66 CITY OF CHANHASSEN, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 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 Outflows Deferred Inflows of Resources of Resources Differences between expected and actual economic experience $111,595 $123,694 Changes in actuarial assumptions 405,136 473,731 Difference between projected and actual investment earnings - 428,289 Changes in proportion 53,309 77,082 Contributions paid to PERA subsequent to the measurement date 189,645 - Total $759,685 $1,102,796 $189,645 reported as deferred outflows of resources related to pensions resulting from City contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended December 31, 2019. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows: Year Ended Pension December 31,Expense 2019 $105,563 2020 (225,983) 2021 (324,338) 2022 (87,998) 2023 - Thereafter - 2. PEPFF Pension Costs At December 31, 2018, the City reported a liability of $205,718 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 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 PERA’s participating employers. At June 30, 2018, the City’s proportion was .0193% which was an increase of .0003% from its proportion measured as of June 30, 2017. The City also recognized $1,737 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. Beginning in January 1, 2019, the COLA will be fixed at 1 percent. Under funding measurements from 2017, the 2.5 percent COLA trigger was never expected to occur and was subsequently removed from law. 67 CITY OF CHANHASSEN, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 For the year ended December 31, 2018, the City recognized pension expense of $34,814 for its proportionate share of the PEPFF’s pension expense. 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 Outflows Deferred Inflows of Resources of Resources Differences between expected and actual economic experience $8,291 $50,759 Changes in actuarial assumptions 256,752 302,844 Difference between projected and actual investment earnings - 42,709 Changes in proportion 34,364 11,306 Contributions paid to PERA subsequent to the measurement date 17,019 - Total $316,426 $407,618 $17,019 reported as deferred outflows of resources related to pensions resulting from City contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended December 31, 2019. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows: Year Ended Pension December 31,Expense 2019 $6,600 2020 (3,101) 2021 (31,001) 2022 (80,029) 2023 (680) Thereafter - The net pension liability is liquidated by the General Fund and enterprise funds. E. ACTUARIAL ASSUMPTIONS The total pension liability in the June 30, 2018, actuarial valuation was determined using the following actuarial assumptions: GERF PEPFF Inflation 2.50% per year 2.50% per year Salary Growth 3.25% per year after 26 years of service 3.25% per year after 25 years of service Investment Rate of Return 7.50%7.50% The total pension liability for each of the defined benefit cost-sharing plans was determined by an actuarial valuation as of June 30, 2018, using the entry age normal actuarial cost method. Inflation is assumed to be 68 CITY OF CHANHASSEN, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 2.50 percent for the GERF and PEPFF. Salary growth assumptions in the GERF decrease in annual increments from 11.25 percent after one year of service, to 3.25 percent after 26 years of service. In the PEPFF, salary growth assumptions decrease from 12.25 percent after one year of service to 3.25 percent after 25 years of service. Mortality rates for all plans are based on RP-2014 mortality tables. The tables are adjusted slightly to fit PERA's experience. Actuarial assumptions for the General Employees Plan are reviewed every four to six years. The most recent six-year experience study for the General Employees Plan was completed in 2015. The most recent four-year experience study for the Police and Fire Plan was completed in 2016. Economic assumptions were updated in 2014 based on a review of inflation and investment return assumptions. The following changes in actuarial assumptions occurred in 2018: General Employees Fund  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. Police and Fire Fund  The mortality projection scale was changed from MP-2016 to MP-2017. The long-term expected rate of return on pension plan investments is 7.5%. The State Board of Investment, which manages the investments of 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% 0.00% Total 100% F. DISCOUNT RATE The discount rate used to measure the total pension liability in 2018 was 7.50%. 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 position of the General Employees Fund and the Police and Fire Fund was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of 69 CITY OF CHANHASSEN, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. G. PENSION LIABILITY SENSITIVITY The following presents the City’s proportionate share of the net pension liability for all plans it participates in, calculated using the discount rate disclosed in the preceding paragraph, as well as what the City’s proportionate share of the net pension liability would be if it were calculated using a discount rate 1 percentage point lower or 1 percentage point higher than the current discount rate: 1% Decrease in 1% Increase in Discount Rate (6.5%) Discount Rate (7.5%) Discount Rate (8.5%) City's proportionate share of the GERF net pension liability $6,857,813 $4,216,168 $2,040,519 City's proportionate share of the PEPFF net pension liability $441,073 $205,718 $11,090 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 Internet at www.mnpera.org. I. PENSION EXPENSE Pension expense recognized by the City for the fiscal year ended December 31, 2018 is as follows: GERF $357,477 PEPFF 34,814 Fire Relief (note 9)281,240 Total $673,531 Note 9 SINGLE EMPLOYER PENSION PLAN A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES For purposes of measuring the net pension liability, deferred outflows and inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Chanhassen Fire Department Relief Association (the Relief Association) and additions to/deductions from the Relief Association’s fiduciary net position have been determined on the same basis as they were reported by the Relief Association. For this purpose, benefit payments are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. 70 CITY OF CHANHASSEN, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 B. PLAN DESCRIPTION All members of the Chanhassen Fire Department are covered by a defined benefit pension plan administered by the Relief Association. The Plan is a single employer retirement plan and is established and administered in accordance with Minnesota Statute, Chapter 69. C. BENEFITS PROVIDED Twenty Year Service Pension Prior to April 1997, each member who is at least 50 years of age, has retired from the Fire Department, has served at least twenty years of active service with such department before retirement, and has been a member of the Relief Association in good standing at least ten years prior to such retirement shall be entitled to receive either a monthly lifetime service pension or a defined benefit lump sum pension. After April 1997, each member shall be entitled to receive a defined benefit lump sum pension. Monthly service pensions shall be $410 per month. Defined benefit service pension per year of service shall be $6,800. The maximum service pension shall not exceed the maximum service pension amount permitted under the flexible service pension maximums pursuant to Minnesota Section 424A.02, Subdivision 3. Members who choose the lump sum receive no additional interest accrual. 71 CITY OF CHANHASSEN, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 Ten Year Service But Less Than Twenty Year Service Each member who is at least 50 years of age; who has retired from the Fire Department; who has served at least five years of active service with such department before retirement but has not served at least 20 years of active service; and, who has been a member of the Relief Association in good standing at least ten years prior to such retirement, shall be entitled to either a pro-rated monthly service pension or a pro-rated lump sum service pension based on the percentages in the following table: For Duty of: more than but less than 5 years 6 years 40% 6744 7848 8952 91056 10 11 60 11 12 64 12 13 68 13 14 72 14 15 76 15 16 80 16 17 84 17 18 88 18 19 92 19 20 96 20 100 The payment amount will be calculated by using the amount payable per year of service in effect at the time of such early retirement, multiplied by the number of accumulated years of service, multiplied by the appropriate percentage as defined above. During the time a member is on early-vested pension, he or she will not be eligible for disability benefits. Survivors Benefit Prior to April 1997, if any active vested or deferred member dies leaving an eligible surviving spouse, they shall receive a monthly pension for a guaranteed fifteen year period. After April 1997, an eligible surviving spouse shall receive a lump sum payment calculated in accordance with the by-laws. If there is no surviving spouse, then the deceased member’s designated beneficiary or their estate would receive the payment. A surviving spouse of a member receiving a monthly pension shall receive 50% of the member’s monthly benefit, based on the date of death. Permanent Disability Any member of the Relief Association contracting sickness or injury, incapacitating the member from attending to their business, from causes outside or within their line of duty, and a physician’s report shows 72 CITY OF CHANHASSEN, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 that that member is unable to perform their duties, they are entitled to their full accrued lump sum benefit, payable immediately. Temporary Disability Any member of the Relief Association who becomes temporarily incapacitated from attending to their business due to illness of injury, sustained in the performance of such business, and is unable to work for a period of one week or longer, shall be paid a benefit of $5 per day for a period of no longer than 120 days in any one fiscal year, providing the member is under the care of a physician or doctor during this period. Death Benefit Upon the death of any active or deferred member, the beneficiaries of the deceased member shall be paid a death benefit in an amount equivalent to the accrued service pension. D. EMPLOYEES COVERED BY BENEFIT TERMS At December 31, 2018, the following employees were covered by the benefit terms: Retirees and beneficiaries currently receiving benefits 7 Retired members entitled to benefits but have not received them 25 Active members: Fully vested (20 years or more)4 Partially vested (5 years to 19 years)17 Non-vested (less than 5 years)22 Total 75 E. CONTRIBUTIONS Minnesota Statutes Chapter 424A.092 specifies minimum support rates required on an annual basis. The minimum support rates from the municipality and from State Aid are determined as the amount required to meet the normal cost plus amortizing any existing prior service costs over a ten-year period. The significant actuarial assumptions used to compute the municipal support are not the same as those used to compute the accrued pension liability. The Relief Association is comprised of volunteers; therefore, there are no payroll expenditures (i.e., there are no covered payroll percentage calculations). Contributions totaling $236,444 ($181,695 from the State of Minnesota and $54,749 from the City) were made to the Relief Association in accordance with state statute requirements for the year ended December 31, 2018. 73 CITY OF CHANHASSEN, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 F. ACTUARIAL METHOD AND SIGNIFICANT ASSUMPTIONS The total pension liability was determined by an actuarial valuation as of December 31, 2018 using the following actuarial assumptions, applied to all periods in the measurement: Valuation date 12/31/2018 Measurement date (assets and funded status)12/31/2018 Actuarial cost method Entry Age Normal Amortization method Level dollar Closed 20-year period Asset valuation method Market Value Actuarial assumptions: Investment rate of return 5% Projected salary increases N/A Includes inflation at 3% Cost-of-living adjustments N/A Age of service retirement The later of the age 50 and 20 years of service Post-retirement benefit increases None Mortality assumptions were determined using the RP-2014 Blue Collar Mortality with fully generational improvements from 2006 based on assumptions from the Social Security Administration’s 2018 trustees report. The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimates of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These real rates of return are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. For each major asset class that is included in the pension plan’s target asset allocation as of December 31, 2018, these best estimates are summarized in the following table: Target Long-Term Expected Asset Class Allocation Real Rate of Return Stock and mutual funds 60% 5.2% Fixed income 30% 0.6% Other 5% 0.6% Cash 5% 0.0% 100% G. DISCOUNT RATES The discount rate used to measure the total pension liability was 5%. The liability discount rate was developed using the alternative method described in paragraph 43 of GASB 67, which states that “if the evaluations required by paragraph 41 can be made with sufficient reliability without a separate projection of cash flows into and out of the pension plan, alternative methods may be applied in making the evaluations.” The determination of the discount rate assumed that the plan’s current underfunded status, 74 CITY OF CHANHASSEN, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 combined with Minnesota statutory funding requirements, provide sufficient reliability that projected plan assets will be adequate to pay future retiree benefits. Therefore, the plan’s long-term expected return on plan investments was applied to all periods of projected benefit payments to determine the total pension liability. H. CHANGES IN THE NET PENSION LIABILITY Total Pension Plan Fiduciary Net Pension Liability Net Position Liability (a) (b) (a) - (b) Balance at December 31, 2017 $2,931,196 $2,246,599 $684,597 Changes for the year: Service cost 143,922 - 143,922 Interest 149,836 - 149,836 Changes in benefit terms - - - Differences between expected and actual experience - - - Changes of assumptions (1,074) - (1,074) Contributions - employer - 54,749 (54,749) On behalf contributions - State of MN - 184,695 (184,695) Contributions - employee - - - Net investment income - (130,928) 130,928 Benefit payments, including refunds of employee contributions (216,595) (216,595) - Administrative expense - (17,350) 17,350 Other changes - - - Net changes 76,089 (125,429) 201,518 Balance at December 31, 2018 $3,007,285 $2,121,170 $886,115 Increase (Decrease) I. PENSION LIABILITY SENSITIVITY The following presents the net pension liability of the Relief Association, calculated using the discount rate of 5.0%, as well as what the net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (4.0%) or 1-percentage-point higher (6.0%) than the current rate: Current 1% Decrease Discount Rate 1% Increase (4.0%) (5.0%) (6.0%) Net pension liability $1,040,404 $886,115 $745,369 75 CITY OF CHANHASSEN, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 J. PENSION PLAN FIDUCIARY NET POSITION Detailed information about the pension plan’s fiduciary net position is available in the separately issued Relief Association financial report. That report may be obtained by writing to Chanhassen Fire Department Relief Association, P.O. Box 147, Chanhassen, Minnesota, 55317. K. PENSION EXPENSE AND DEFERRED OUTFLOWS OF RESOURCES AND DEFERRED INFLOWS OF RESOURCES RLEATED TO PENSIONS For the year ended December 31, 2018, the City recognized pension expense of $281,240, including $184,695 and $54,749 as pension expense (and grant revenue) for the State of Minnesota’s on-behalf contribution to the plan and the City’s on-behalf contribution to the plan, respectively. At December 31, 2018, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows Deferred Inflows of Resources of Resources Differences between expected and actual economic experience $3,087 $1,064 Changes in actuarial assumptions 138,982 939 Difference between projected and actual investment earnings 90,388 - Total $232,457 $2,003 Amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows: Year Ended Pension December 31,Expense 2019 $84,098 2020 42,522 2021 55,070 2022 48,764 2023 - Thereafter - Note 10 DEFINED CONTRIBUTION PLAN Four Council members of the City of Chanhassen are covered by the Public Employees Defined Contribution Plan (PEDCP), a multiple-employer deferred compensation plan administered by PERA. The PEDCP is a tax qualified plan under Section 401(a) of the Internal Revenue Code and all contributions by or on behalf of employees are tax deferred until time of withdrawal. Plan benefits depend solely on amounts contributed to the plan plus investment earnings, less administrative expenses. Minnesota Statutes, Chapter 353D.03, specifies plan provisions, including the 76 CITY OF CHANHASSEN, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 employee and employer contribution rates for those qualified personnel who elect to participate. An eligible elected official who decides to participate contributes 5% of salary which is matched by the elected official's employer. For ambulance service personnel, employer contributions are determined by the employer, and for salaried employees must be a fixed percentage of salary. Employer contributions for volunteer personnel may be a unit value for each call or period of alert duty. Employees who are paid for their services may elect to make member contributions in an amount not to exceed the employer share. Employer and employee contributions are combined and used to purchase shares in one or more of the seven accounts of the Minnesota Supplemental Investment Fund. For administering the plan, PERA receives 2% of employer contributions and twenty-five hundredths of 1% (.0025) of the assets in each member's account annually. Total contributions made by the City during fiscal year 2018 were: Required Employee Employer (Pension Expense) Employee Employer Rate $1,705 $1,705 5%5%5% Percentage of Covered PayrollContribution Amount Note 11 OTHER POST-EMPLOYMENT BENEFITS (OPEB) For the year ended December 31, 2018, the City implemented GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. GASB Statement No. 75 established new accounting and financial reporting requirement for government whose employees are provided OPEB. Net postion has not been restated as a result of the change in accounting principle because its effects on the financial statements were not material. A. PLAN DESCRIPTION In addition to providing the pension benefits described in Note 8 and 9, the City provides post-employment health care benefits (as defined in paragraph B) for retired employees through a single-employer defined benefit plan. The City’s OPEB plan is administered by the City. The authority to provide these benefits is established in Minnesota Statutes Sections 471.61 Subd. 2a, and 299A.465. The benefits, benefit levels, employee contributions and employer contributions are governed by the City and can be amended by the City through its personnel manual and collective bargaining agreements with employee groups. The Plan is not accounted for as a trust fund, as an irrevocable trust has not been established to account for the plan. The Plan does not issue a separate report. B. BENEFITS PROVIDED Retirees The City is required by State Statute to allow retirees to continue participation in the City’s group health insurance plan if the individual terminates service with the City through service retirement or disability retirement. Employees who satisfy the rule of 80 or attain age 55 and have completed 10 years of service at termination can immediately commence medical benefits. Retirees may obtain dependent coverage while the participating retiree is under age 65. Covered spouses may continue coverage after the retiree’s death. The surviving spouse of an active employee may continue coverage in the group health insurance plan after the employee’s death. 77 CITY OF CHANHASSEN, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 All health care coverage is provided through the City’s group health insurance plans. The retiree is required to pay 100% of their premium cost for the City-sponsored group health insurance plan in which they participate. The premium is a blended rate determined on the entire active and retiree population. Since the projected claims costs for retirees exceed the blended premium paid by retirees, the retirees are receiving an implicit rate subsidy (benefit). The coverage levels are the same as those afforded to active employees. Upon a retiree reaching age 65, Medicare becomes the primary insurer and the City’s plan becomes secondary. C. PARTICIPANTS As of the January 1, 2018 actuarial valuation, participants consisted of: Active employees receiving benefits 72 Inactive employees currently receiving or entitled to receive benefits 1 Total 73 D. TOTAL OPEB LIABILITY AND CHANGES IN TOTAL OPEB LIABILITY The City’s total OPEB liability of $199,068 was measured as of December 31, 2018, and was determined by an actuarial valuation as of January 1, 2018. Changes in the total OPEB liability during 2018 were: Balance - beginning of year $194,919 Changes for the year: Service cost 14,388 Interest 7,032 Changes of benefit terms - Differences between expected and actual experience - Changes in assumptions (7,402) Benefit payments (9,869) Net changes 4,149 Balance - end of year $199,068 78 CITY OF CHANHASSEN, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 E. ACTUARIAL ASSUMPTIONS AND OTHER INPUTS The total OPEB liability in the January 1, 2018 actuarial valuation was determined using the following actuarial assumptions and other inputs, applied to all periods included in the measurement, unless otherwise specified: Inflation 2.50% Salary increases Based on the most recent disclosed assumptions for the pension plan in which the employee participates. Discount rate 4.11% Investment rate of return 4.11% Healthcare cost trend rates 7.5% for 2018 gradually decreasing to an ultimate rate of 4.0% in 2026 and beyond. Retirees' share of benefit-related costs 100% Since the plan is funded on a pay-as-you-go basis, both the discount rate and the investment rate of return was based on the 20 year AA rated municipal bond rate as of December 31, 2018, obtained from the Bond Buyer G.O. 20 year Bond Muncipal Bond Index. Mortality rates were based on the RPH total Dataset Mortality Table fully generational using scale MR- 2017. 20% of employees are assumed to elect spousal coverage at retirement. Husbands are assumed to be three years older than wives. Actual spousal coverage and age is used for retirees. F. SENSITIVITY OF THE TOTAL OPEB LIABILITY TO CHANGES IN THE DISCOUNT RATE 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% lower (3.11%) or 1% higher (5.11%) than the current discount rate: 1% Decrease Discount Rate 1% Increase (3.11%) (4.11%) (5.11%) Total OPEB liability $210,182 $199,068 $188,393 79 CITY OF CHANHASSEN, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 G. SENSITIVITY OF THE TOTAL OPEB LIABILITY TO CHANGES IN THE HEALTHCARE COST TREND RATES 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 healthcare cost trend rates that are 1% lower (6.41% decreasing to 3.4%) or 1% higher (8.41% decreasing to 5.4%) than the current healthcare cost trend rates: Healthcare Cost 1% Decrease Trend Rates 1% Increase (6.50% decreasing to 3.0%)(7.5% decreasing to 4.0%)(8.50% decreasing to 5.0%) Total OPEB liability $182,417 $199,068 $217,907 H. OPEB EXPENSE For the year ended December 31, 2018, the City recognized $20,598 of OPEB expense. I. ACTUARIAL METHODS AND ASSUMPTIONS Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality and the health care cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions (ARC) of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to financial statements, presents multi-year trend information that shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effect of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. In the January 1, 2018 actuarial valuation, the projected unit credit actuarial pay cost method was used. The actuarial assumptions included a 4.0% investment rate of return (net of administrative expenses) and an annual health care cost trend rate of 8.0% for 2018, decreasing by 0.5% annually to an ultimate rate of 4.0%. These rates include a 3% inflation rate. The actuarial value of assets was $0. The plan’s unfunded actuarial accrued liability is being amortized using the level percentage of projected payroll method over 30 years on an open basis. The remaining amortization period at December 31, 2018 was 30 years. 80 CITY OF CHANHASSEN, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 Note 12 INTERFUND LOANS AND TRANSFERS Amounts reported as interfund loan receivable/payable at December 31, 2018 are as follows: Interfund Interfund Loan Receivable Loan Payable Major Funds: Revolving Assessment Fund $225,517 $ - Water Fund 96,065 925,517 Nonmajor Funds 700,000 96,065 Total $1,021,582 $1,021,582 During 2010, the City adopted resolution 2010-16A authorizing an interfund loan for advance of certain costs in connection with the Transit Station Public Improvement Project. The Transit Station Assessment Fund borrowed $729,253 from the Water Fund. Repayments, including interest, will be made as funds become available. There were $58,441 of repayments in 2018 and $96,065 is expected to be repaid in 2019. During 2015, the City adopted resolution 2015-15 authorizing an interfund loan to finance construction of Well #15. The Water Fund borrowed $700,000 from the Revolving Assessment Fund and $700,000 from the Capital Equipment Replacement Fund. The loan is being repaid at an interest rate of 2.5% over eight years. Payments during years 2016-2019 are being made to the Revolving Assessment Fund and payments during years 2020-2023 will be made to the Capital Replacement Fund. There were $192,517 of repayments in 2018 and $192,867 is expected to be repaid in 2019. Interfund transfers made during 2018 are summarized as follows: Transfers In Transfers Out Major Funds: General Fund $ - $479,886 2008A G.O Public Works Facility Bonds 5,290,000 107,148 Revolving Assessment Fund 353,143 - Water Fund 7,223 221,003 Sewer Fund 37,000 21,742 Surface Water Management Fund 79,912 236,238 Nonmajor Funds 1,081,021 5,782,282 Total $6,848,299 $6,848,299 $566,206 of interfund transfers were made to finance capital expenditures, primarily in the Revolving Assessment Fund. A $5,290,000 transfer was made to the G.O. Public Works Facility Bonds fund to pay off the refunding bonds at the crossover date. A transfer of $399,886 was made to establish a new nonmajor capital project fund. A $107,148 was made to a nonmajor debt service fund to close the 2008A G.O. Public Works Facility Bonds fund.. A $485,059 transfer was made to close a nonmajor capital project fund. These transfers are considered routine and consistent with previous practices. 81 CITY OF CHANHASSEN, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 Note 13 CONDUIT DEBT From time to time, the City has issued conduit debt to provide financial assistance to private-sector entities for the acquisition and construction of facilities deemed to be in the public interest. The bonds are secured by the property financed and are payable solely from payments received on the underlying mortgage loans. Upon repayment of the bonds, ownership of the acquired facilities transfers to the private-sector entity served by the bond issuance. Neither the City, the State, nor any political subdivision thereof is obligated in any manner for the repayment of the bonds. Accordingly, the bonds are not reported as liabilities in the accompanying financial statements. As of December 31, 2018, the outstanding conduit debt is as follows: Bonds Original 12/31/18 Maturity Project Name Issued Principal Principal Date St. Hubert Catholic Community, Series 2007 10/07 $5,942,140 $2,426,050 2027 Presbyterian Homes, Series 2014B 06/14 9,300,000 7,651,736 2034 Note 14 DEFICIT FUND BALANCES The City has a deficit fund balance of $24,491 in the Transit Station Assessment Capital Project Fund at December 31, 2018. The deficit will be eliminated through special assessment collections. Note 15 COMMITMENTS AND CONTINGENCIES A. 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. 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. B. LITIGATION The City is in the process of acquiring land for the Lyman Boulevard Phase 2 Project. During 2018, the City and Carver County agreed on an amount for condemnation of two properties. The property owners declined the offer and are suing the City and County for damages. The total amount of damages sought by the property owners is $5,028,510. The total estimated damages per the County appraiser was $432,500. The total amounts awarded by the County Commissioners was $760,500. The property owners appealed that award to a Jury Trial that is scheduled to take place in 2019. The degree of probability of an unfavorable outcome, above and beyond the settlement amount awarded by the County Commissioners, in the Jury Trials is unknown. The City is unable to make a reasonable estimate of the amount of loss, above and beyond the settlement amount awarded by the County Commissioners. C. WESTERN AREA FIRE TRAINING ACADEMY A potential claim may be asserted against the City arising out of its membership in the Western Area Fire Training Academy (WAFTA). WAFTA is a joint powers entity consisting of 11 member cities that was 82 CITY OF CHANHASSEN, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 formed in 1974 to purchase property to be used and operated as a fire training facility. In the late 1980’s, WAFTA became aware that the site was contaminated. Since that time, WAFTA has been working with the Minnesota Pollution Control Agency (MPCA) and other responsible parties to address the contamination issues on the site. At this time, the City’s share of the potential cost to remediate the site cannot be determined, nor has a claim been asserted against WAFTA or the City. Based on recent studies of the site, it is Management’s belief that the amount of any potential claim is not material to the financial statements. D. FEDERAL AND STATE FUNDS The City receives financial assistance from federal and state governmental agencies in the form of grants. The disbursement of funds received under these programs generally requires compliance with the terms and conditions specified in the grant agreements and is subject to audit by the grantor agencies. Any disallowed claims resulting from such audits could become a liability of the applicable fund. However, in the opinion of management, any such disallowed claims will not have a material effect on any of the financial statements of the individual fund types included herein or on the overall financial position of the City at December 31, 2018. E. TAX ABATEMENTS – PAY-AS-YOU-GO TAX INCREMENT The City occasionally provides tax abatements pursuant to Minnesota Statutes 469.174 to 469.1794 (Tax Increment Financing) through a pay-as-you-go note program. Tax increment financing (TIF) can be used to encourage private development, redevelopment, renovation and renewal, growth in low-to-moderate- income housing, and economic development within the City. TIF captures the increase in tax capacity and property taxes from development or redevelopment to provide funding for the related project. As of December 31, 2018, there were no outstanding pay-as-you-go notes. F. COMMITTED CONTRACTS At December 31, 2018, the City had commitments of $192,829 for uncompleted construction contracts. In addition, the City entered into construction contracts during 2019 totaling $4,416,872. 83 CITY OF CHANHASSEN, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 Note 16 FUND BALANCE A. CLASSIFICATIONS Definitions of fund balance classifications are included in Note 1P. At December 31, 2018, a summary of the governmental fund balance classifications are as follows: TH101 Revolving Improvements - Other General Assessment Pioneer to Governmental Fund Fund Flying Cloud Funds Total Nonspendable: Prepaid items $87,067 $ - $ - $9,326 $96,393 Restricted for: Debt service - - - 1,259,147 1,259,147 Park improvements - - - 1,224,509 1,224,509 CATV - public education - - - 104,220 104,220 Public safety - fire - - - 30,804 30,804 Total restricted 0 0 0 2,618,680 2,618,680 Assigned for: Capital improvements - 1,803,825 53,012 2,805,959 4,662,796 Cable communications - - - 462,910 462,910 Cemetery operations - - - 49,043 49,043 Debt service reserve - - - 1,240,133 1,240,133 Total assigned 0 1,803,825 53,012 4,558,045 6,414,882 Unassigned 5,667,626 - - (24,491) 5,643,135 Total $5,754,693 $1,803,825 $53,012 $7,161,560 $14,773,090 B. MINIMUM UNASSIGNED FUND BALANCE POLICY The City Council has formally adopted a policy regarding the minimum unassigned fund balance for the General Fund. The most significant revenue source of the General Fund is property taxes. This revenue source is received in two installments during the year – June and December. As such, it is the City’s goal to begin each fiscal year with sufficient working capital to fund operations between each semi-annual receipt of property taxes. The City’s fund balance policy states the year end General Fund balance shall be sufficient to cover 50% of the property taxes budgeted to be received during the following year. At December 31, 2018, the fund balance of the General Fund exceeded this level. 84 CITY OF CHANHASSEN, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 Note 17 LEASE REVENUE The City receives revenue from agreements for the lease of space above its water towers and on City property to communication companies. The space is used for antennas and other equipment necessary to provide radio communications. For accounting purposes, the leases are considered operating leases. Lease revenue for the year ended December 31, 2018 totaled $192,792. Terms of each lease outstanding at year end are as follows: Lessee Terms Current Term Sprint $25,082 per year with 3% annual increases 8/1/06 - 7/31/21 Sprint $23,486 per year with 3% annual increases 12/1/05 - 11/30/20 Verizon $2,342 per month 5/1/17 - 4/30/22 Nextel West Corp. $22,926 per year with 3% annual increases 12/1/14 - 11/30/19 T-Mobile $2,153 per month with 3% annual increases 11/1/05 - 10/31/20 T-Mobile $22,258 per year with 3% annual increases 1/1/14 - 12/31/19 StoneBridge/Nextera 5% of gross revenues associated with equipment used on property 4/1/06 - 12/31/19 Cingular/AT&T $2,029 per month with 3% annual increases 8/1/12 - 7/31/22 Note 18 RECENTLY ISSUED ACCOUNTING STANDARDS The Governmental Accounting Standards Boards (GASB) recently approved the following statements which were not implemented for these financial statements: Statement No. 83 Certain Asset Retirement Obligations. The provisions of this Statement are effective for reporting periods beginning after June 15, 2018. Statement No. 84 Fiduciary Activities. The provisions of this Statement are effective for reporting periods beginning after December 15, 2018. Statement No. 87 Leases. The provisions of this Statement are effective for reporting periods beginning after December 15, 2019. Statement No. 88 Certain Disclosures Related to Debt, including Direct Borrowings and Direct Placements. The provisions of this Statement are effective for reporting periods beginning after June 15, 2018. Statement No. 90 Majority Equity Interests. The provisions of this Statement are effective for reporting periods beginning after December 15, 2018. Statement No. 91 Conduit Debt Obligations. The provisions of this Statement are effective for reporting periods beginning after December 15, 2020. The effect these standards may have on future financial statements is not determinable at this time, but it is expected that Statement No. 87 may have a material impact. 85 - This page intentionally left blank - 86 REQUIRED SUPPLEMENTARY INFORMATION 87 CITY OF CHANHASSEN, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION Statement 10 BUDGETARY COMPARISON SCHEDULE - GENERAL FUND Page 1 of 6 For The Year Ended December 31, 2018 With Comparative Actual Amounts For The Year Ended December 31, 2017 2017 Actual Variance with Actual Original Final Amounts Final Budget Amounts Revenues: General property taxes $8,709,333 $8,709,333 $8,647,307 ($62,026) $8,407,559 Excess tax increment received - - - - 86,633 Total general property taxes 8,709,333 8,709,333 8,647,307 (62,026) 8,494,192 Licenses and permits: Licenses - general government 4,300 4,300 1,250 (3,050) 3,150 Licenses - public safety 93,500 93,500 77,229 (16,271) 92,268 Permits - public safety 895,500 895,500 1,559,119 663,619 1,055,127 Permits - public works 33,000 33,000 56,869 23,869 58,941 Permits - community development 6,500 6,500 10,030 3,530 5,565 Total licenses and permits 1,032,800 1,032,800 1,704,497 671,697 1,215,051 Intergovernmental: State aid - police - public safety 162,000 162,000 163,282 1,282 155,816 State aid - fire - public safety 180,000 180,000 195,261 15,261 184,650 PERA - public safety 20,000 20,000 19,467 (533) 19,467 Other 47,000 47,000 58,537 11,537 55,985 Total intergovernmental 409,000 409,000 436,547 27,547 415,918 Charges for services: General government 76,500 76,500 76,481 (19) 76,367 Public safety 5,000 5,000 3,334 (1,666) 4,771 Public works 63,300 63,300 18,278 (45,022) 62,359 Parks and recreation 453,200 453,200 456,924 3,724 465,051 Community development 29,700 29,700 22,198 (7,502) 30,017 Total charges for services 627,700 627,700 577,215 (50,485) 638,565 Fines and forfeits: Public safety 116,000 116,000 95,351 (20,649) 128,394 Investment earnings 30,000 30,000 73,165 43,165 36,120 Contributions and donations: Parks and recreation 25,267 25,267 25,387 120 28,609 Total contributions and donations 25,267 25,267 25,387 120 28,609 Refunds and reimbursements: General government 16,600 16,600 5,749 (10,851) 10,268 Public safety 11,300 11,300 8,257 (3,043) 8,050 Public works 35,300 35,300 44,221 8,921 54,043 Parks and recreation 500 500 2,200 1,700 250 Total refunds and reimbursements 63,700 63,700 60,427 (3,273) 72,611 Other: General government 184,800 184,800 199,569 14,769 201,643 Public safety 5,000 5,000 9,353 4,353 5,127 Total other 189,800 189,800 208,922 19,122 206,770 Total revenues 11,203,600 11,203,600 11,828,818 625,218 11,236,230 2018 Budgeted Amounts 88 CITY OF CHANHASSEN, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION Statement 10 BUDGETARY COMPARISON SCHEDULE - GENERAL FUND Page 2 of 6 For The Year Ended December 31, 2018 With Comparative Actual Amounts For The Year Ended December 31, 2017 2017 Actual Variance with Actual Original Final Amounts Final Budget Amounts Expenditures: General government: Legislative: Current: Personal services $44,900 $44,900 $44,404 $496 $44,894 Contractual services 81,600 81,600 83,282 (1,682) 77,723 Total legislative 126,500 126,500 127,686 (1,186) 122,617 Administrative office: Current: Personal services 478,500 478,500 478,591 (91) 473,518 Contractual services 56,600 56,600 48,743 7,857 49,354 Total administrative office 535,100 535,100 527,334 7,766 522,872 Finance: Current: Personal services 308,900 308,900 305,800 3,100 300,279 Materials and supplies 200 200 64 136 - Contractual services 49,600 49,600 42,971 6,629 38,822 Total finance 358,700 358,700 348,835 9,865 339,101 Election: Current: Personal services 24,600 24,600 27,088 (2,488) - Materials and supplies 4,000 4,000 1,353 2,647 - Contractual services 14,000 14,000 10,388 3,612 - Total election 42,600 42,600 38,829 3,771 0 Legal: Current: Contractual services 190,500 190,500 191,253 (753) 198,417 Property assessment: Current: Contractual services 150,000 150,000 152,430 (2,430) 146,422 M.I.S.: Current: Personal services 157,900 157,900 158,880 (980) 149,389 Materials and supplies 30,000 30,000 25,093 4,907 29,061 Contractual services 46,900 46,900 45,837 1,063 45,163 Total M.I.S. 234,800 234,800 229,810 4,990 223,613 2018 Budgeted Amounts 89 CITY OF CHANHASSEN, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION Statement 10 BUDGETARY COMPARISON SCHEDULE - GENERAL FUND Page 3 of 6 For The Year Ended December 31, 2018 With Comparative Actual Amounts For The Year Ended December 31, 2017 2017 Actual Variance with Actual Original Final Amounts Final Budget Amounts Expenditures: (continued) General government: (continued) City hall: Current: Personal services $91,200 $91,200 $91,086 $114 $84,870 Materials and supplies 41,600 41,600 41,646 (46) 37,610 Contractual services 281,000 281,000 272,972 8,028 267,786 Total City hall 413,800 413,800 405,704 8,096 390,266 Library: Current: Materials and supplies 2,500 2,500 50 2,450 2,333 Contractual services 109,100 109,100 105,454 3,646 106,832 Total library 111,600 111,600 105,504 6,096 109,165 Total general government 2,163,600 2,163,600 2,127,385 36,215 2,052,473 Public safety: Police: Current: Personal services 73,900 73,900 - 73,900 7,462 Materials and supplies 2,500 2,500 342 2,158 313 Contractual services 1,885,000 1,885,000 1,780,304 104,696 1,796,460 Total police 1,961,400 1,961,400 1,780,646 180,754 1,804,235 Fire department: Current: Personal services 719,100 719,100 829,461 (110,361) 725,762 Materials and supplies 45,100 45,100 39,197 5,903 34,621 Contractual services 155,400 155,400 140,122 15,278 134,702 Total fire department 919,600 919,600 1,008,780 (89,180) 895,085 Code enforcement: Current: Personal services 698,500 698,500 638,261 60,239 727,619 Materials and supplies 6,600 6,600 3,227 3,373 2,533 Contractual services 13,000 13,000 9,519 3,481 6,632 Total code enforcement 718,100 718,100 651,007 67,093 736,784 Community Service: Current: Personal services 58,700 58,700 51,401 7,299 42,301 Materials and supplies 1,700 1,700 471 1,229 993 Contractual services 6,000 6,000 4,002 1,998 5,371 Total animal control 66,400 66,400 55,874 10,526 48,665 Total public safety 3,665,500 3,665,500 3,496,307 169,193 3,484,769 2018 Budgeted Amounts 90 CITY OF CHANHASSEN, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION Statement 10 BUDGETARY COMPARISON SCHEDULE - GENERAL FUND Page 4 of 6 For The Year Ended December 31, 2018 With Comparative Actual Amounts For The Year Ended December 31, 2017 2017 Actual Variance with Actual Expenditures: (continued) Original Final Amounts Final Budget Amounts Public works: Engineering: Current: Personal services $652,500 $652,500 $577,406 $75,094 $638,145 Materials and supplies 1,300 1,300 815 485 31 Contractual services 27,500 27,500 31,573 (4,073) 20,532 Total engineering 681,300 681,300 609,794 71,506 658,708 Street maintenance: Current: Personal services 853,400 853,400 853,116 284 781,788 Materials and supplies 112,600 112,600 104,544 8,056 102,711 Contractual services 30,900 30,900 46,316 (15,416) 46,597 Total street maintenance 996,900 996,900 1,003,976 (7,076) 931,096 Street lighting: Current: Materials and supplies 2,000 2,000 5,233 (3,233) 4,679 Contractual services 354,500 354,500 370,086 (15,586) 354,518 Total street lighting 356,500 356,500 375,319 (18,819) 359,197 Fleet department: Current: Personal services 311,400 311,400 318,572 (7,172) 295,499 Materials and supplies 177,400 177,400 148,553 28,847 149,653 Contractual services 63,300 63,300 83,462 (20,162) 73,656 Total fleet department 552,100 552,100 550,587 1,513 518,808 Total public works 2,586,800 2,586,800 2,539,676 47,124 2,467,809 Parks and recreation: Parks and recreation commission: Current: Materials and supplies 100 100 25 75 - Contractual services 1,100 1,100 - 1,100 175 Total parks and recreation commission 1,200 1,200 25 1,175 175 Parks and recreation administration: Current: Personal services 239,500 239,500 229,809 9,691 226,421 Materials and supplies 200 200 324 (124) 16 Contractual services 5,900 5,900 5,743 157 6,714 Total parks and recreation administration 245,600 245,600 235,876 9,724 233,151 Recreation center: Current: Personal services 229,400 229,400 216,320 13,080 205,080 Materials and supplies 23,000 23,000 17,128 5,872 15,505 Contractual services 93,800 93,800 93,678 122 91,836 Total recreation center 346,200 346,200 327,126 19,074 312,421 2018 Budgeted Amounts 91 CITY OF CHANHASSEN, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION Statement 10 BUDGETARY COMPARISON SCHEDULE - GENERAL FUND Page 5 of 6 For The Year Ended December 31, 2018 With Comparative Actual Amounts For The Year Ended December 31, 2017 2017 Actual Variance with Actual Original Final Amounts Final Budget Amounts Expenditures: (continued) Parks and recreation: (continued) Senior citizen center: Current: Personal services $80,100 $80,100 $98,133 ($18,033) $78,268 Materials and supplies 4,300 4,300 3,804 496 4,472 Contractual services 29,700 29,700 28,275 1,425 35,200 Total senior citizen center 114,100 114,100 130,212 (16,112) 117,940 Recreation programs: Current: Personal services 214,900 214,900 218,115 (3,215) 203,941 Materials and supplies 21,100 21,100 23,610 (2,510) 26,115 Contractual services 116,100 116,100 120,673 (4,573) 123,322 Total recreation programs 352,100 352,100 362,398 (10,298) 353,378 Self-supporting programs: Current: Personal services 36,300 36,300 34,647 1,653 34,758 Materials and supplies 4,500 4,500 4,422 78 4,284 Contractual services 15,000 15,000 11,927 3,073 11,575 Total self-supporting programs 55,800 55,800 50,996 4,804 50,617 Lake Ann Park operations: Current: Personal services 12,200 12,200 10,350 1,850 9,289 Materials and supplies 9,200 9,200 8,343 857 10,677 Contractual services 49,100 49,100 45,413 3,687 47,608 Total Lake Ann Park operations 70,500 70,500 64,106 6,394 67,574 Park maintenance: Current: Personal services 848,400 848,400 875,603 (27,203) 837,263 Materials and supplies 80,800 80,800 85,684 (4,884) 86,356 Contractual services 101,100 101,100 107,607 (6,507) 118,072 Total park maintenance 1,030,300 1,030,300 1,068,894 (38,594) 1,041,691 Recreation sports: Current: Personal services 29,300 29,300 25,164 4,136 27,312 Materials and supplies 7,900 7,900 6,487 1,413 7,946 Contractual services 300 300 - 300 - Total recreation sports 37,500 37,500 31,651 5,849 35,258 Total parks and recreation 2,253,300 2,253,300 2,271,284 (17,984) 2,212,205 2018 Budgeted Amounts 92 CITY OF CHANHASSEN, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION Statement 10 BUDGETARY COMPARISON SCHEDULE - GENERAL FUND Page 6 of 6 For The Year Ended December 31, 2018 With Comparative Actual Amounts For The Year Ended December 31, 2017 2017 Actual Variance with Actual Original Final Amounts Final Budget Amounts Expenditures: (continued) Community development: Planning commission: Current: Materials and supplies $200 $200 $ - $200 $ - Contractual services 1,500 1,500 828 672 1,339 Total planning commission 1,700 1,700 828 872 1,339 Planning administration: Current: Personal services 482,700 482,700 489,020 (6,320) 453,703 Materials and supplies 400 400 350 50 503 Contractual services 11,300 11,300 12,633 (1,333) 42,023 Total planning administration 494,400 494,400 502,003 (7,603) 496,229 Senior facility commission: Current: Personal services 28,600 28,600 28,824 (224) 27,735 Contractual services 9,700 9,700 16,052 (6,352) 15,519 Total senior facility commission 38,300 38,300 44,876 (6,576) 43,254 Total community development 534,400 534,400 547,707 (13,307) 540,822 Total expenditures 11,203,600 11,203,600 10,982,359 221,241 10,758,078 Revenues over expenditures 0 0 846,459 846,459 478,152 Other financing sources (uses): Transfers out - - (479,886) (479,886) (404,478) Total other financing sources (uses) 0 0 (479,886) (479,886) (404,478) Net change in fund balance $0 $0 366,573 $366,573 73,674 Fund balance - January 1 5,388,120 5,312,712 Fund balance - December 31 $5,754,693 $5,386,386 Budgeted Amounts 2018 93 CITY OF CHANHASSEN, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION Statement 11 SCHEDULE OF CHANGES IN THE CITY'S TOTAL OPEB LIABILITY AND RELATED RATIOS Last Ten Fiscal Years 2018 Total OPEB liability: Service cost $14,388 Interest 7,032 Changes of benefit terms - Differences between expected and actual experience - Changes in assumptions (7,402) Benefit payments (9,869) Net change in total OPEB liability 4,149 Total OPEB liability - beginning 194,919 Total OPEB liability - ending $199,068 Covered-employee payroll $5,151,178 Total OPEB liability as a percentage of covered-employee payroll 3.9% The schedule is provided prospectively beginning with the City's fiscal year ended December 31, 2018 and is intended to show a ten year trend. Additional years will be added as they become available. 94 CITY OF CHANHASSEN, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION Statement 12 SCHEDULE OF PROPORTIONATE SHARE OF NET PENSION LIABILITY - GENERAL EMPLOYEES RETIREMENT FUND Last Ten Fiscal Years City's Plan State's Proportionate Fiduciary Proportionate Share of the Net Net City's City's Share Pension Liability City's Position Proportionate Proportionate (Amount) and the State's Proportionate as a Share Share of the Net Proportionate Share of the Net Percentage (Percentage) (Amount) Pension Share of the Net Pension Liability of the Measurement Fiscal Year of the of the Net Liability Pension Liability as a Percentage Total Date Ending Net Pension Pension Associated Associated with Covered of its Covered Pension June 30 December 31 Liability Liability (a) with City (b) City (a+b) Payroll (c) Payroll ((a+b)/c) Liability 2015 2015 0.0791% $4,099,373 $0 $4,099,373 $4,651,703 88.1% 78.2% 2016 2016 0.0759% 6,162,704 80,496 6,243,200 4,708,444 132.6% 68.9% 2017 2017 0.0751% 4,794,334 60,265 4,854,599 4,836,519 100.4% 75.9% 2018 2018 0.0760% 4,216,168 138,310 4,354,478 5,115,814 85.1% 79.5% The schedule is provided prospectively beginning with the City's fiscal year ended December 31, 2015 and is intended to show a ten year trend. Additional years will be reported as they become available. 95 CITY OF CHANHASSEN, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION Statement 13 SCHEDULE OF PENSION CONTRIBUTIONS - GENERAL EMPLOYEES RETIREMENT FUND Last Ten Fiscal Years Statutorily Contributions in Contribution Contributions as a Required Relation to the Deficiency Covered Percentage of Fiscal Year Contribution Statutorily Required (Excess) Payroll Covered-Employee Ending (a) Contribution (b)(a-b)(c)Payroll (b/c) December 31, 2015 $346,881 $346,881 $0 $4,625,080 7.5% December 31, 2016 358,611 358,611 - 4,781,489 7.5% December 31, 2017 371,824 371,824 - 4,957,652 7.5% December 31, 2018 383,686 383,686 - 5,115,814 7.5% The schedule is provided prospectively beginning with the City's fiscal year ended December 31, 2015 and is intended to show a ten year trend. Additional years will be reported as they become available. 96 CITY OF CHANHASSEN, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION Statement 14 SCHEDULE OF PROPORTIONATE SHARE OF NET PENSION LIABILITY - PUBLIC EMPLOYEES POLICE AND FIRE FUND Last Ten Fiscal Years Proportionate Share Proportionate Proportionate of the Net Pension Plan Fiduciary Share Share (Amount) Liability as a Net Position as (Percentage) of of the Net Percentage of its a Percentage Measurement Fiscal Year the Net Pension Pension Covered Covered of the Total Date Ending Liability Liability (a) Payroll (b) Payroll (a/b) Pension Liability June 30, 2015 December 31, 2015 0.0200%$227,247 $180,370 126.0%86.6% June 30, 2016 December 31, 2016 0.0190%762,503 186,408 409.1%63.9% June 30, 2017 December 31, 2017 0.0190%256,523 194,526 131.9%85.4% June 30, 2018 December 31, 2018 0.0193%205,718 206,857 99.4%88.8% The schedule is provided prospectively beginning with the City's fiscal year ended December 31, 2015 and is intended to show a ten year trend. Additional years will be reported as they become available. 97 CITY OF CHANHASSEN, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION Statement 15 SCHEDULE OF PENSION CONTRIBUTIONS - PUBLIC EMPLOYEES POLICE AND FIRE FUND Last Ten Fiscal Years Statutorily Contributions in Contribution Contributions as a Required Relation to the Deficiency Covered Percentage of Fiscal Year Contribution Statutorily Required (Excess) Payroll Covered Ending (a) Contribution (b)(a-b)(c)Payroll (b/c) December 31, 2015 $29,647 $29,647 $0 $183,006 16.2% December 31, 2016 30,790 30,790 - 190,064 16.2% December 31, 2017 32,612 32,612 - 201,307 16.2% December 31, 2018 33,511 33,511 - 206,857 16.2% The schedule is provided prospectively beginning with the City's fiscal year ended December 31, 2015 and is intended to show a ten year trend. Additional years will be reported as they become available. 98 CITY OF CHANHASSEN, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION Statement 16 SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY AND RELATED RATIOS - CHANHASSEN FIRE DEPARTMENT RELIEF ASSOCIATION LAST TEN FISCAL YEARS Fiscal year ending and measurement date December 31, 2018 December 31, 2017 December 31, 2016 December 31, 2015 Total pension liability: Service cost $143,922 $88,924 $88,924 $86,369 Interest 149,836 127,729 128,235 118,909 Changes of benefit terms - 212,120 - 279,202 Differences between expected and actual experience - 5,145 - (5,328) Changes of assumptions (1,074) 231,636 (203) - Benefit payments, including refunds of employee contributions (216,595) (370,143)(113,883)(470,743) Net change in total pension liability 76,089 295,411 103,073 8,409 Total pension liability - beginning 2,931,196 2,635,785 2,532,712 2,524,303 Total pension liability - ending (a)$3,007,285 $2,931,196 $2,635,785 $2,532,712 Plan fiduciary net position: Contributions - employer $54,749 $ - $ - $37,571 Contributions - State of Minnesota 184,695 181,554 177,831 177,784 Contributions - employee - - - - Net investment income (130,928) 306,593 158,581 (105,958) Benefit payments, including refunds of employee contributions (216,595) (340,243)(113,883)(470,743) Administrative expense (17,350) (14,875)(16,972)(7,225) Other changes - - 500 - Net change in plan fiduciary net position (125,429)133,029 206,057 (368,571) Plan fiduciary net position - beginning 2,246,599 2,113,570 1,907,513 2,276,084 Plan fiduciary net position - ending (b)$2,121,170 $2,246,599 $2,113,570 $1,907,513 Net pension liability - ending (a) - (b)$886,115 $684,597 $522,215 $625,199 Plan fiduciary net position as a percentage of the total pension liability 70.5%76.6%80.2%75.3% Covered payroll*NA NA NA NA Net pension liability as a percentage of covered payroll*Not applicable Not applicable Not applicable Not applicable *The Chanhassen Fire Department Relief Association is comprised of volunteers, therefore there are no payroll expenditures. GASB 68 was implemented in 2015. Information prior to 2015 is not available. 99 CITY OF CHANHASSEN, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION Statement 17 SCHEDULE OF CONTRIBUTIONS - CHANHASSEN FIRE DEPARTMENT RELIEF ASSOCIATION Last Ten Fiscal Years Actuarially Contribution Contributions Determined Deficiency as a Percentage Fiscal Year Contribution Employer State of MN (Excess) Covered of Covered Ending (a) Contributions (b) Contributions (c) (a-b-c) Payroll Payroll December 31, 2015 $142,501 $37,571 $174,784 ($69,854) ** December 31, 2016 171,760 - 176,831 (5,071) ** December 31, 2017 171,760 - 176,554 (4,794) ** December 31, 2018 236,444 54,749 181,695 - *The Chanhassen Fire Department Relief Association is comprised of volunteers, therefore, there are no payroll expenditures. (i.e., there are no covered payroll amounts or percentage calculations.) GASB 68 was implemented in 2015. Information prior to 2015 is not available. Contributions in Relation to the Actuarially Determined Contribution 100 CITY OF CHANHASSEN, MINNESOTA NOTES TO RSI December 31, 2018 A. LEGAL COMPLIANCE – BUDGETS The General Fund budget is legally adopted on a basis consistent with accounting principles generally accepted in the United States of America. The legal level of budgetary control is at the expenditure category level. B. PENSION INFORMATION 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 1.0 percent per year through 2044 and 2.50 percent per year thereafter to 1.25 percent per year. 2017 Changes in Actuarial Assumptions:  The Combined Service Annuity (CSA) loads were changed from 0.8% for active members and 60% for vested and non-vested deferred members. The revised CSA loads are now 0.0% for active member liability, 15.0% for vested deferred member liability and 3.0% for non-vested deferred member liability.  The assumed post-retirement benefit increase rate was changed from 1.0% per year for all years to 1.0% per year through 2044 and 2.5% per year thereafter. 2016 Changes in Actuarial Assumptions:  The assumed post-retirement benefit increase rate was changed from 1.0% per year through 2035 and 2.5% per year thereafter to 1.0% per year for all future years.  The assumed investment return was changed from 7.9% to 7.5%. The single discount rate was changed from 7.9% to 7.5%.  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% to 3.25% for payroll growth and 2.50% for inflation. PERA – Public Employees Police and Fire Fund 2018 Changes in Actuarial Assumptions:  The mortality projection scale was changed from MP-2016 to MP-2017. 2017 Changes in Actuarial Assumptions:  The single discount rate was changed from 5.6% to 7.5%.  Assumed salary increases were changed as recommended in the June 30, 2016 experience study. The net effect is proposed rates that average 0.34% lower than the previous rates.  Assumed rates of retirement were changed, resulting in fewer retirements. 101 CITY OF CHANHASSEN, MINNESOTA NOTES TO RSI December 31, 2018  The Combined Service Annuity (CSA) load was 30% for vested and non-vested deferred members. The CSA has been changed to 33% for vested members and 2% for non-vested members.  The base mortality table for healthy annuitants was changed from the RP-2000 fully generational table to the RP-2014 fully generational table (with a base year of 2006), with male rates adjusted by a factor of 0.96. The mortality improvement scale was changed from Scale AA to Scale MP-2016. The base mortality table for disabled annuitants was changed from the RP-2000 disabled mortality table to the mortality tables assumed for healthy retirees.  Assumed termination rates were decreased to 3.0% 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% to 60%.  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% for all years to 1.00% per year through 2064 and 2.50% thereafter. 2016 Changes in Actuarial Assumptions:  The assumed post-retirement benefit increase rate was changed from 1.0% per year through 2037 and 2.5% per year thereafter to 1.0% per year for all future years.  The assumed investment return was changed from 7.9% to 7.5%. The single discount rate changed from 7.9% to 5.6%.  The assumed future salary increases, payroll growth, and inflation were decreased by 0.25% to 3.25% for payroll growth and 2.50% for inflation. Single Employer – Fire Relief Association Valuation date – actuarially determined contribution rates are calculated as of January 1 every other year, which is the same date as the beginning of the fiscal year beginning in which contributions are reported. 2018 Changes in Actuarial Assumptions:  Mortality assumptions were determined using the RP-2014 Blue Collar Mortality with fully generational improvements from 2006 based on assumptions from the Social Security Administration’s 2018 trustees report.  The mortality improvement scale used to measure liability has been changed from an improvement scale based on assumptions developed from the 2017 Social Security Trustees Report to an improvement scaled based on assumptions developed from the 2018 Social Security trustees Report. The base table (RP-2014 Blue Collar) and year in which improvements began (2006) remained unchanged. This results in a decrease in liability and service cost. 102 CITY OF CHANHASSEN, MINNESOTA NOTES TO RSI December 31, 2018 2017 Changes in Actuarial Assumptions:  The mortality improvement scale has been changed from an improvement scale based on assumptions developed from the 2016 Social Security Trustees Report to an improvement scale based on assumptions developed from the 2017 Social Security Trustees Report.  Disability rates have changed from 0.03% at age 20, grading to 0.33% at age 50 to Class 1 1985 Disability Rates.  The lump sum benefit accrual amount has been projected to increase by 9.27% every three years (3% compounded each year). 2016 Changes in Actuarial Assumptions:  As of December 31, 2016, the mortality assumption was changed to the RP-2014 Blue Collar Mortality with fully generational improvements from 2006 based on assumptions from the Social Security Administration’s 2016 trustees report. Details can be obtained from the financial reports of the Fire Relief Association. C. OPEB INFORMATION No assets are accumulated in a trust that meets the criteria in paragraph 4 of GASB Statement No. 75 to pay related benefits. 103 - This page intentionally left blank - 104 COMBINING AND INDIVIDUAL NONMAJOR FUND FINANCIAL STATEMENTS AND SCHEDULES 105 - This page intentionally left blank - 106 NONMAJOR GOVERNMENTAL FUNDS 107 - This page intentionally left blank - 108 SPECIAL REVENUE FUNDS The Special Revenue Funds are used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specified purposes. DEBT SERVICE FUNDS The Debt Service Funds are used to account for the accumulation of resources for, and payment of, interest, principal and related costs on general long-term debt. CAPITAL PROJECT FUNDS The Capital Project Funds account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by Proprietary Funds). 109 CITY OF CHANHASSEN, MINNESOTA COMBINING BALANCE SHEET Statement 18 NONMAJOR GOVERNMENTAL FUNDS December 31, 2018 With Comparative Totals For December 31, 2017 Special Debt Capital Revenue Service Project 2018 2017 Assets: Cash and investments $595,422 $2,860,503 $3,532,405 $6,988,330 $7,607,096 Cash with escrow agent - - - - 5,331,655 Accrued interest receivable 3,262 13,259 19,586 36,107 30,688 Due from other governmental units - - 37,788 37,788 38,018 Accounts receivable - net 55,991 - 41,526 97,517 131,710 Property taxes receivable - 5,769 5,924 11,693 12,193 Prepaid items 951 - 8,375 9,326 990,723 Interfund loan receivable - - 700,000 700,000 700,000 Special assessments receivable - 320,151 195,469 515,620 561,240 Total assets $655,626 $3,199,682 $4,541,073 $8,396,381 $15,403,323 Liabilities, Deferred Inflows of Resources, and Fund Balance Liabilities: Accounts payable $ - $380,250 $69,990 $450,240 $205,665 Due to other governmental units - - 5,292 5,292 - Salaries payable 7,698 - - 7,698 6,573 Contracts payable - - 231,479 231,479 202,082 Interfund loan payable - - 96,065 96,065 154,506 Unearned revenue - - - - 566,868 Total liabilities 7,698 380,250 402,826 790,774 1,135,694 Deferred inflows of resources: Unavailable revenue - 320,152 123,895 444,047 561,241 Fund balance: Nonspendable 951 - 8,375 9,326 990,723 Restricted 135,024 1,259,147 1,224,509 2,618,680 8,458,576 Assigned 511,953 1,240,133 2,805,959 4,558,045 4,411,595 Unassigned - - (24,491) (24,491) (154,506) Total fund balance 647,928 2,499,280 4,014,352 7,161,560 13,706,388 Total liabilities, deferred inflows of resources, and fund balance $655,626 $3,199,682 $4,541,073 $8,396,381 $15,403,323 Total Nonmajor Governmental Funds 110 CITY OF CHANHASSEN, MINNESOTA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND Statement 19 CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS For The Year Ended December 31, 2018 With Comparative Totals For The Year Ended December 31, 2017 Special Debt Capital Revenue Service Project 2018 2017 Revenues: General property taxes $ - $931,697 $893,000 $1,824,697 $1,941,652 Licenses and permits - - 584,555 584,555 426,089 Intergovernmental - - 361,740 361,740 683,292 Special assessments - 393 137,238 137,631 139,410 Charges for services 243,530 - - 243,530 199,933 Investment earnings 8,825 53,046 52,980 114,851 88,086 Contributions and donations 44,952 - - 44,952 45,125 Refunds and reimbursements - - 96,493 96,493 14,648 Other - - 2,200 2,200 57,344 Total revenues 297,307 985,136 2,128,206 3,410,649 3,595,579 Expenditures: Current: General government 153,495 392,846 155,797 702,138 818,794 Public safety 56,134 - 41,436 97,570 118,128 Public works - - 738,899 738,899 470,056 Parks and recreation - - 54,988 54,988 183,349 Community development - - 62,661 62,661 37,055 Capital outlay: General government 7,941 - 14,192 22,133 30,838 Public safety - - 1,169,952 1,169,952 2,950 Public works - - 16,478 16,478 27,202 Parks and recreation - - 1,316,908 1,316,908 376,992 Decertification of TIF district - - - - 362,123 Debt service: Principal - 370,000 - 370,000 670,000 Interest and paying agent fees - 173,660 - 173,660 433,925 Total expenditures 217,570 936,506 3,571,311 4,725,387 3,531,412 Revenues over (under) expenditures 79,737 48,630 (1,443,105) (1,314,738)64,167 Other financing sources (uses): Sale of capital assets - - 58,458 58,458 19,286 Transfers in - 107,148 973,873 1,081,021 173,771 Transfers out - (5,290,000) (492,282) (5,782,282) (344,044) Total other financing sources (uses)0 (5,182,852) 540,049 (4,642,803) (150,987) Net change in fund balance 79,737 (5,134,222) (903,056) (5,957,541) (86,820) Fund balance - January 1 568,191 7,633,502 4,917,408 13,119,101 13,793,208 Fund balance - December 31 $647,928 $2,499,280 $4,014,352 $7,161,560 $13,706,388 Reconciliation of beginning fund balance to prior year ending fund balance: Prior year ending fund balance reported above $13,706,388 Reclassification of 2008A G.O. Public Works Facility Bonds, now presented as a major fund (559,367) Reclassification of TH 101 Improvements - Lyman to Pioneer fund balance, now presented as a major fund (27,920) Fund balance - January 1, 2018 as reported on this statement $13,119,101 Total Nonmajor Governmental Funds 111 - This page intentionally left blank - 112 NONMAJOR SPECIAL REVENUE FUNDS Special Revenue Funds are established to account for taxes and other revenues set aside for a particular purpose. Revenues are recognized in the accounting period in which they become available and measurable. Expenditures are recognized in the accounting period in which the related liability is incurred. Contribution Fund – This fund accounts for the proceeds that the City receives from charitable gambling. The City collects 10% of the net proceeds from a pull-tab operation in the City. By state statute, the fund may only be used for equipment and training for the City’s fire department. Cemetery Fund – The City owns and operates a municipal cemetery. In 2014, improvements were made to add approximately 300 additional plots. This fund accounts for all plot fees and maintenance going forward. Cemetery operations had previously been accounted for within the City’s General Fund. CATV Fund – Under the terms of the franchise agreement with Mediacom, the City is to receive 5% of the revenues derived from cable television sales within the City. These monies are dedicated solely to improving public broadcasting capabilities, studio improvements, and other capital expenditures improving the overall cable system. 113 CITY OF CHANHASSEN, MINNESOTA SUBCOMBINING BALANCE SHEET Statement 20 NONMAJOR SPECIAL REVENUE FUNDS December 31, 2018 With Comparative Totals For December 31, 2017 201 Contribution Fund 202 Cemetery Fund 210 CATV Fund 2018 2017 Assets: Cash and investments $28,180 $48,798 $518,444 $595,422 $519,079 Accrued interest receivable 190 245 2,827 3,262 2,269 Due from other governmental units - - - - 104 Accounts receivable - net 6,145 - 49,846 55,991 52,843 Prepaid items - - 951 951 769 Total assets $34,515 $49,043 $572,068 $655,626 $575,064 Liabilities and Fund Balance Liabilities: Accounts payable $ - $ - $ - $ - $300 Salaries payable 3,711 - 3,987 7,698 6,573 Total liabilities 3,711 0 3,987 7,698 6,873 Fund balance: Nonspendable - - 951 951 769 Restricted 30,804 - 104,220 135,024 153,633 Assigned - 49,043 462,910 511,953 413,789 Total fund balance 30,804 49,043 568,081 647,928 568,191 Total liabilities and fund balance $34,515 $49,043 $572,068 $655,626 $575,064 Total Nonmajor Special Revenue Funds 114 CITY OF CHANHASSEN, MINNESOTA SUBCOMBINING STATEMENT OF REVENUES, EXPENDITURES Statement 21 AND CHANGES IN FUND BALANCES NONMAJOR SPECIAL REVENUE FUNDS For The Year Ended December 31, 2018 With Comparative Totals For The Year Ended December 31, 2017 201 Contribution Fund 202 Cemetery Fund 210 CATV Fund 2018 2017 Revenues: Charges for services $ - $12,550 $230,980 $243,530 $191,952 Investment earnings 514 664 7,647 8,825 3,930 Contributions and donations 44,952 - - 44,952 41,952 Refunds and reimbursements - - - - 104 Total revenues 45,466 13,214 238,627 297,307 237,938 Expenditures: Current: General government - 1,397 152,098 153,495 140,323 Public safety 56,134 - - 56,134 51,031 Capital outlay: General government - - 7,941 7,941 - Public safety - - - - 2,950 Total expenditures 56,134 1,397 160,039 217,570 194,304 Revenues over (under) expenditures (10,668) 11,817 78,588 79,737 43,634 Other financing sources: Transfers in - - - - 831 Net change in fund balance (10,668) 11,817 78,588 79,737 44,465 Fund balance - January 1 41,472 37,226 489,493 568,191 523,726 Fund balance - December 31 $30,804 $49,043 $568,081 $647,928 $568,191 Total Nonmajor Special Revenue Funds 115 - This page intentionally left blank - 116 NONMAJOR DEBT SERVICE FUNDS Debt Service Funds are maintained on the modified accrual basis of accounting for revenues from taxes and other sources set aside for the payment of the debt obligations of the City. Principal and interest on the general long-term debt is recognized when due. Permanent Revolving Debt – This fund is used to account for excess resources from matured bond issues. General Obligation Bond Funds – These funds are used to account for the accumulation of resources for payment of general obligation bonds or other general indebtedness and the interest thereon. 117 CITY OF CHANHASSEN, MINNESOTA SUBCOMBINING BALANCE SHEET Statement 22 NONMAJOR DEBT SERVICE FUNDS December 31, 2018 With Comparative Totals For December 31, 2017 300 Permanent Revolving Debt 368 2009A G.O. Refunding Bonds 369 2010A G.O. Library Refunding Bonds 370 2016A G.O. Refunding Bonds 2018 2017 Assets: Cash and investments $823,487 $787,679 $731,896 $517,441 $2,860,503 $2,844,741 Cash with escrow agent - - - - - 5,331,655 Accrued interest receivable 4,725 4,493 2,585 1,456 13,259 9,907 Due from other governments - - - - - - Property taxes receivable - - 2,649 3,120 5,769 6,567 Special assessments receivable 9,029 311,122 - - 320,151 320,463 Total assets $837,241 $1,103,294 $737,130 $522,017 $3,199,682 $8,513,333 Liabilities, Deferred Inflows of Resources, and Fund Balance Liabilities: Accounts payable $ - $380,250 $ - $ - $380,250 $ - Deferred inflows of resources: Unavailable revenue 9,030 311,122 - - 320,152 320,464 Fund balance: Restricted - - 737,130 522,017 1,259,147 6,588,900 Assigned 828,211 411,922 - - 1,240,133 1,603,969 Total fund balance 828,211 411,922 737,130 522,017 2,499,280 8,192,869 Total liabilities, deferred inflows of resources, and fund balance $837,241 $1,103,294 $737,130 $522,017 $3,199,682 $8,513,333 Total Nonmajor Debt Service Funds 118 CITY OF CHANHASSEN, MINNESOTA SUBCOMBINING STATEMENT OF REVENUES, EXPENDITURES AND Statement 23 CHANGES IN FUND BALANCES NONMAJOR DEBT SERVICE FUNDS For The Year Ended December 31, 2018 With Comparative Totals For The Year Ended December 31, 2017 300 Permanent Revolving Debt 368 2009A G.O. Refunding Bonds 369 2010A G.O. Library Refunding Bonds 370 2016A G.O. Refunding Bonds 2018 2017 Revenues: General property taxes $ - $ - $461,297 $470,400 $931,697 $1,048,652 Special assessments 393 - - - 393 8,081 Charges for services - - - - - 7,981 Investment earnings 12,781 12,154 6,992 21,119 53,046 52,103 Total revenues 13,174 12,154 468,289 491,519 985,136 1,116,817 Expenditures: Current: General government 8,914 380,250 3,682 - 392,846 17,806 Debt service: Principal - - 370,000 - 370,000 670,000 Interest and paying agent fees - - 55,355 118,305 173,660 433,925 Total expenditures 8,914 380,250 429,037 118,305 936,506 1,121,731 Revenues over (under) expenditures 4,260 (368,096) 39,252 373,214 48,630 (4,914) Other financing sources (uses): Transfers in - - - 107,148 107,148 - Transfers out - - - (5,290,000) (5,290,000) - Total other financing sources (uses)0 0 0 (5,182,852) (5,182,852)0 Net change in fund balance 4,260 (368,096) 39,252 (4,809,638) (5,134,222) (4,914) Fund balance - January 1 823,951 780,018 697,878 5,331,655 7,633,502 8,197,783 Fund balance - December 31 $828,211 $411,922 $737,130 $522,017 $2,499,280 $8,192,869 Reconciliation of beginning fund balance to prior year ending fund balance: Prior year ending fund balance reported above $8,192,869 Reclassification of 2008A G.O. Public Works Facility Bonds, now presented as a major fund (559,367) Fund balance - January 1, 2018 as reported on this statement $7,633,502 Total Nonmajor Debt Service Funds 119 - This page intentionally left blank - 120 NONMAJOR CAPITAL PROJECT FUNDS Capital Project Funds are used to account for the construction and financing of large capital projects. Revenues and expenditures are recognized on the modified accrual basis. Revenues are recognized in the accounting period in which they become available and measurable. Expenditures are recognized in the accounting period in which they are incurred. Most capital projects are singular in purpose and their revenues/expenditures cannot be used for subsidizing any other operating fund. In each of these cases, bonds or other revenues received can only be used for these specific activities. The following Capital Project Funds differ in that several of the expenditure categories represent recurring types of costs, i.e., personal services, repair and maintenance of utilities, and/or recurring land improvements. 400 Capital Replacement Fund – Accounts for the City’s annual equipment purchases not related to the City’s enterprise funds. The fund currently does include a property tax levy to support the annual purchases. 401 Park Replacement Fund – Accounts for replacement or repair of major park equipment/infrastructure, including playgrounds, picnic shelters, hockey rinks, bridges, fences, walls, etc. The maintenance and replacement schedule is an ongoing endeavor that will be updated as new investments are made or aging structures are removed. 410 Park Acquisition and Development – Accounts for park dedication fees as required by the City ordinance. These funds are then utilized to finance park and trail improvements identified in the park and recreation section of the City’s comprehensive plan. 413 Transit Station Assessment Fund – Accounts for the interfund loan from the Water Fund to fund costs associated with the redevelopment of the Dinner Theater Transit Station in TIF #10, and for the repayment of the special assessment to repay those costs. 420 Street Pavement Management – Accounts for sealcoating costs on local streets. 422 Old Public Works Building – Accounts for the sale of the old public works building and the related contract for deed receivable. 480 Street Pavement Management – Accounts for tax increment financing for the downtown district, TIF #11 – Frontier Development #2. 603 Lyman Blvd Improvements – Accounts for the street and utility improvement of Lyman Blvd. 121 CITY OF CHANHASSEN, MINNESOTA SUBCOMBINING BALANCE SHEET NONMAJOR CAPITAL PROJECT FUNDS December 31, 2018 With Comparative Totals For December 31, 2017 400 Capital 401 Park Replacement Fund Replacement Fund Assets: Cash and investments $1,200,428 $398,734 Accrued interest receivable 4,652 355 Due from other governmental units 137 - Accounts receivable - net 24,526 - Property taxes receivable 5,307 - Prepaid items 8,375 - Interfund loan receivable 700,000 - Special assessments receivable - - Total assets $1,943,425 $399,089 Liabilities, Deferred Inflows of Resources, and Fund Balance Liabilities: Accounts payable $45,241 $903 Due to other governmental units 5,292 - Contracts payable - - Interfund loan payable - - Unearned revenue - - Total liabilities 50,533 903 Deferred inflows of resources: Unavailable revenue - - Fund balance: Nonspendable 8,375 - Restricted - - Assigned 1,884,517 398,186 Unassigned - - Total fund balance 1,892,892 398,186 Total liabilities, deferred inflows of resources, and fund balance $1,943,425 $399,089 122 Statement 24 410 Park 420 Street 603 Lyman Acquisition and 413 Transit Station Pavement Boulevard Total Nonmajor Development Assessment Fund Management Improvements 2018 2017 $1,441,711 $ - $337,506 $154,026 $3,532,405 $4,243,276 9,851 - 2,304 2,424 19,586 18,512 - - 12,421 25,230 37,788 37,914 17,000 - - - 41,526 78,867 - - 617 - 5,924 5,626 - - - - 8,375 989,954 - - - - 700,000 700,000 - 195,469 - - 195,469 240,777 $1,468,562 $195,469 $352,848 $181,680 $4,541,073 $6,314,926 $12,574 $ - $11,272 $ - $69,990 $205,365 - - - - 5,292 - 231,479 - - - 231,479 202,082 - 96,065 - - 96,065 154,506 - - - - - 566,868 244,053 96,065 11,272 0 402,826 1,128,821 - 123,895 - - 123,895 240,777 - - - - 8,375 989,954 1,224,509 - - - 1,224,509 1,716,043 - - 341,576 181,680 2,805,959 2,393,837 - (24,491) - - (24,491)(154,506) 1,224,509 (24,491)341,576 181,680 4,014,352 4,945,328 $1,468,562 $195,469 $352,848 $181,680 $4,541,073 $6,314,926 Capital Project Funds 123 CITY OF CHANHASSEN, MINNESOTA SUBCOMBINING STATEMENT OF REVENUES, EXPENDITURES AND Statement 25 CHANGES IN FUND BALANCES Page 1 of 2 NONMAJOR CAPITAL PROJECT FUNDS For The Year Ended December 31, 2018 With Comparative Totals For The Year Ended December 31, 2017 410 Park 413 Transit Station 420 Street 400 Capital 401 Park Acquisition and Assessment Pavement Replacement Fund Replacement Fund Development Fund Management Revenues: General property taxes $800,000 $ - $ - $ - $93,000 Licenses and permits - - 584,555 - - Intergovernmental - - - - 301,740 Special assessments - - - 137,238 - Investment earnings 12,583 961 26,647 - 6,232 Contributions and donations - - - - - Refunds and reimbursements 30,298 - 55,000 - 4,411 Other 2,200 - - - - Total revenues 845,081 961 666,202 137,238 405,383 Expenditures: Current: General government 155,797 - - - - Public safety 41,436 - - - - Public works 47,054 - - - 367,776 Parks and recreation 11,747 - 43,241 - - Community development - 2,661 - - - Capital outlay: General government 14,192 - - - - Public safety 167,132 - - - - Public works 12,016 - - - 4,462 Parks and recreation 202,413 - 1,114,495 - - Decertification of TIF district - - - - - Total expenditures 651,787 2,661 1,157,736 0 372,238 Revenues over (under) expenditures 193,294 (1,700) (491,534)137,238 33,145 Other financing sources (uses): Sale of capital assets 58,458 - - - - Transfers in 565,059 399,886 - - 8,928 Transfers out - - - (7,223) - Total other financing sources (uses)623,517 399,886 - (7,223)8,928 Net change in fund balance 816,811 398,186 (491,534)130,015 42,073 Fund balance - January 1 1,076,081 - 1,716,043 (154,506)299,503 Fund balance - December 31 $1,892,892 $398,186 $1,224,509 ($24,491) $341,576 124 CITY OF CHANHASSEN, MINNESOTA SUBCOMBINING STATEMENT OF REVENUES, EXPENDITURES AND Statement 25 CHANGES IN FUND BALANCES Page 2 of 2 NONMAJOR CAPITAL PROJECT FUNDS For The Year Ended December 31, 2018 With Comparative Totals For The Year Ended December 31, 2017 480 Frontier 603 Lyman 422 Old Public Development #2 Boulevard Works Building TIF#11 Improvements 2018 2017 Revenues: General property taxes $ - $ - $ - $893,000 $893,000 Licenses and permits - - - 584,555 426,089 Intergovernmental - 60,000 - 361,740 683,292 Special assessments - - - 137,238 131,329 Investment earnings - - 6,557 52,980 32,053 Contributions and donations - - - - 3,173 Refunds and reimbursements - - 6,784 96,493 14,544 Other - - - 2,200 57,344 Total revenues 0 60,000 13,341 2,128,206 2,240,824 Expenditures: Current: General government - - - 155,797 660,665 Public safety - - - 41,436 67,097 Public works - - 324,069 738,899 470,056 Parks and recreation - - - 54,988 183,349 Community development - 60,000 - 62,661 37,055 Capital outlay: General government - - - 14,192 30,838 Public safety 1,002,820 - - 1,169,952 - Public works - - - 16,478 27,202 Parks and recreation - - - 1,316,908 376,992 Decertification of TIF district - - - - 362,123 Total expenditures 1,002,820 60,000 324,069 3,571,311 2,215,377 Revenues over (under) expenditures (1,002,820)0 (310,728) (1,443,105)25,447 Other financing sources (uses): Sale of capital assets - - - 58,458 19,286 Transfers in - - - 973,873 172,940 Transfers out (485,059) - - (492,282) (344,044) Total other financing sources (uses)(485,059)0 0 540,049 (151,818) Net change in fund balance (1,487,879)0 (310,728) (903,056) (126,371) Fund balance - January 1 1,487,879 - 492,408 4,917,408 5,071,699 Fund balance - December 31 $0 $0 $181,680 $4,014,352 $4,945,328 Reconciliation of beginning fund balance to prior year ending fund balance: Prior year ending fund balance reported above $4,945,328 Reclassification of TH 101 Improvements - Lyman to Pioneer fund balance, now presented as a major fund (27,920) Fund balance - January 1, 2018 as reported on this statement $4,917,408 Total Nonmajor Capital Project Funds 125 - This page intentionally left blank - 126 CITY OF CHANHASSEN, MINNESOTA SPECIAL REVENUE FUND - CONTRIBUTION FUND Statement 26 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL For The Year Ended December 31, 2018 With Comparative Actual Amounts For The Year Ended December 31, 2017 2017 Actual Variance with Actual Original Final Amounts Final Budget Amounts Revenues: Investment earnings $ - $ - $514 $514 $325 Contributions and donations 38,000 38,000 44,952 6,952 41,603 Refunds and reimbursements - - - - 104 Total revenues 38,000 38,000 45,466 7,466 42,032 Expenditures: Current: Public safety: Contractual services 46,000 46,000 56,134 (10,134) 51,031 Capital outlay - - - - 2,950 Total expenditures 46,000 46,000 56,134 (10,134) 53,981 Revenues over (under) expenditures (8,000) (8,000) (10,668) (2,668) (11,949) Other financing sources (uses): Transfers in - - 0 831 831 Net change in fund balance ($8,000) ($8,000) (10,668) ($1,837) (11,118) Fund balance - January 1 41,472 52,590 Fund balance - December 31 $30,804 $41,472 2018 Budgeted Amounts 127 CITY OF CHANHASSEN, MINNESOTA SPECIAL REVENUE FUND - CEMETERY FUND Statement 27 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL For The Year Ended December 31, 2018 With Comparative Actual Amounts For The Year Ended December 31, 2017 2017 Actual Variance with Actual Original Final Amounts Final Budget Amounts Revenues: Charges for services $3,900 $3,900 $12,550 $8,650 $4,150 Investment earnings 100 100 664 564 279 Contributions and donations - - - - 349 Total revenues 4,000 4,000 13,214 9,214 4,778 Expenditures: Current: General government: Contractual services 3,500 3,500 1,397 2,103 1,963 Total expenditures 3,500 3,500 1,397 2,103 1,963 Revenues over (under) expenditures $500 $500 11,817 $11,317 2,815 Fund balance - January 1 37,226 34,411 Fund balance - December 31 $49,043 $37,226 2018 Budgeted Amounts 128 CITY OF CHANHASSEN, MINNESOTA SPECIAL REVENUE FUND - CATV Statement 28 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL For The Year Ended December 31, 2018 With Comparative Actual Amounts For The Year Ended December 31, 2017 2017 Actual Variance with Actual Original Final Amounts Final Budget Amounts Revenues: Franchise and PEG fees $195,000 $195,000 $230,980 $35,980 $187,802 Refunds and reimbursements - - - - - Investment earnings 2,000 2,000 7,647 5,647 3,326 Total revenues 197,000 197,000 238,627 41,627 191,128 Expenditures: Current: General government: Personal services 108,600 108,600 112,598 (3,998) 107,267 Materials and supplies 5,000 5,000 - 5,000 - Contractual services 32,300 32,300 39,500 (7,200) 31,093 Capital outlay 15,000 15,000 7,941 7,059 - Total expenditures 160,900 160,900 160,039 861 138,360 Revenues over expenditures $36,100 $36,100 78,588 $42,488 52,768 Fund balance - January 1 489,493 436,725 Fund balance - December 31 $568,081 $489,493 2018 Budgeted Amounts 129 - This page intentionally left blank - 130 FIDUCIARY FUNDS Fiduciary Funds have been established to account for cash or other assets held by the City as a trustee or agent for others. Revenues are recognized in the accounting period in which they become available and measurable. Expenditures are recognized in the accounting period in which the related liability is incurred. Fiduciary Funds are custodial in nature (assets equal liabilities) and do not involve measurement of the results of operations. Escrow Fund – This fund is used to account for various deposits required by the City. Moon Valley Restoration Fund – This is an escrow fund which will be used to finance restoration to a gravel pit when it ceases operation. 131 CITY OF CHANHASSEN, MINNESOTA COMBINING STATEMENT OF NET POSITION Statement 29 AGENCY FUNDS December 31, 2018 With Comparative Totals For December 31, 2017 815 Escrow Fund 913 Moon Valley Restoration Fund 2018 2017 Assets: Cash and investments $2,073,817 $87,219 $2,161,036 $2,603,979 Liabilities: Accounts payable $27,975 $ - $27,975 $ - Escrow deposits payable 2,045,842 87,219 2,133,061 2,603,979 Total liabilities $2,073,817 $87,219 $2,161,036 $2,603,979 Totals 132 CITY OF CHANHASSEN, MINNESOTA COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES Statement 30 AGENCY FUNDS For The Year Ended December 31, 2018 Balance Balance 01/01/18 Additions Deletions 12/31/18 Escrow Fund Assets: Cash and investments $2,516,891 $1,038,715 $1,481,789 $2,073,817 Liabilities: Accounts payable $ - $27,975 $ - $27,975 Escrow deposits payable 2,516,891 1,010,740 1,481,789 2,045,842 Total liabilities $2,516,891 $1,010,740 $1,481,789 $2,045,842 Moon Valley Restoration Fund Assets: Cash and investments $87,088 $131 $ - $87,219 Liabilities: Escrow deposits payable $87,088 $131 $ - $87,219 Totals - All Agency Funds Assets: Cash and investments $2,603,979 $1,038,846 $1,481,789 $2,161,036 Liabilities: Accounts payable $ - $27,975 $ - $27,975 Escrow deposits payable 2,603,979 1,010,871 1,481,789 2,133,061 Total liabilities $2,603,979 $1,038,846 $1,481,789 $2,161,036 133 - This page intentionally left blank - 134 III. STATISTICAL SECTION (UNAUDITED) 135 - This page intentionally left blank - 136 III. STATISTICAL SECTION (UNAUDITED) This part of the City of Chanhassen, Minnesota’s Comprehensive Annual Financial Report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the City of Chanhassen, Minnesota’s overall financial health. Contents Table Number Financial Trends These tables contain trend information to help the reader understand how the City’s financial performance and well-being have changed over time. Tables 1-4 Revenue Capacity These tables contain information to help the reader assess the City’s most significant local revenue source, the property tax. Tables 5-8 Debt Capacity These tables present information to help the reader assess the affordability of the City’s current levels of outstanding debt and the City’s ability to issue additional debt in the future. Tables 9-13 Demographic and Economic These tables offer demographic and economic indicators to help the reader understand the environment within which the City’s financial activities take place. Tables 14-15 Operating Information These tables contain service and infrastructure data to help the reader understand how the information in the City’s financial report relates to the services the City provides and the activities it performs. Tables 16-18 Sources: Unless otherwise noted, the information in these tables is derived from the comprehensive financial reports for the relevant year. 137 CITY OF CHANHASSEN, MINNESOTA NET POSITION BY COMPONENT Last Ten Fiscal Years (Accrual Basis of Accounting) 2009 2010 2011 2012 Governmental activities: Net investment in capital assets $72,106,198 $73,272,450 $70,866,708 $69,987,563 Restricted: Debt service 6,461,780 9,655,951 9,774,727 5,905,553 Park Improvements - 2,088,246 2,516,027 1,650,118 Tax increment purposes 840,857 693,309 812,096 1,022,785 Other purposes - 121,137 168,147 142,747 Unrestricted 14,421,042 8,348,968 8,823,980 14,544,111 Total governmental activities net position $93,829,877 $94,180,061 $92,961,685 $93,252,877 Business-type activities: Net investment in capital assets $55,496,919 $57,028,340 $55,430,138 $54,475,353 Unrestricted 12,129,049 10,259,836 9,484,947 10,631,342 Total business-type activities net position $67,625,968 $67,288,176 $64,915,085 $65,106,695 Primary government: Net investment in capital assets $127,603,117 $130,300,790 $126,296,846 $124,462,916 Restricted: Debt service 6,461,780 9,655,951 9,774,727 5,905,553 Park Improvements - 2,088,246 2,516,027 1,650,118 Tax increment purposes 840,857 693,309 812,096 1,022,785 Other purposes - 121,137 168,147 142,747 Unrestricted 26,550,091 18,608,804 18,308,927 25,175,453 Total primary government net position $161,455,845 $161,468,237 $157,876,770 $158,359,572 Note: GASB 65 was implemented in 2013. Unamortized bond issuance costs are no longer included within net position. Net position for years prior to 2013 was not restated. Note: GASB 68 was implemented in 2015. Net position was restated for 2014 to reflect the reporting of net pension liability and pension related deferred outflows of resources. Net position for years prior to 2014 was not restated. 138 Table 1 2013 2014 2015 2016 2017 2018 $71,260,946 $71,867,072 $71,225,523 $72,588,940 $70,255,784 $71,053,355 6,595,927 3,441,810 3,455,172 1,390,127 1,400,411 1,189,447 1,714,972 1,751,739 1,896,923 1,505,784 1,716,043 1,224,509 1,347,593 965,809 475,357 399,178 - - 165,838 176,089 154,810 164,751 153,633 135,024 13,724,705 13,877,772 9,510,105 10,221,704 10,028,355 8,781,660 $94,809,981 $92,080,291 $86,717,890 $86,270,484 $83,554,226 $82,383,995 $52,541,451 $54,111,608 $55,704,478 $57,478,975 $57,212,106 $56,195,385 11,391,338 10,467,201 10,032,731 10,516,316 10,126,315 12,342,280 $63,932,789 $64,578,809 $65,737,209 $67,995,291 $67,338,421 $68,537,665 $123,802,397 $125,978,680 $126,930,001 $130,067,915 $127,467,890 $127,248,740 6,595,927 3,441,810 3,455,172 1,390,127 1,400,411 1,189,447 1,714,972 1,751,739 1,896,923 1,505,784 1,716,043 1,224,509 1,347,593 965,809 475,357 399,178 - - 165,838 176,089 154,810 164,751 153,633 135,024 25,116,043 24,344,973 19,542,836 20,738,020 20,154,670 21,123,940 $158,742,770 $156,659,100 $152,455,099 $154,265,775 $150,892,647 $150,921,660 139 CITY OF CHANHASSEN, MINNESOTA CHANGES IN NET POSITION Last Ten Fiscal Years (Accrual Basis of Accounting) 2009 2010 2011 2012 Expenses Governmental activities: General government $2,597,147 $2,898,608 $2,565,486 $2,690,853 Public safety 3,158,465 3,227,396 3,061,122 3,176,441 Public works 9,123,165 6,308,023 8,607,534 7,743,147 Parks and recreation 3,663,124 3,046,718 2,921,593 3,114,340 Community development 628,339 879,048 799,379 646,262 Interest on long-term debt 1,031,567 880,384 838,421 725,881 Total governmental activities expenses 20,201,807 17,240,177 18,793,535 18,096,924 Business-type activities: Water 3,311,129 3,443,583 3,581,955 3,646,787 Sewer 3,276,042 3,252,510 3,317,329 3,235,324 Surface water management 1,093,165 1,202,556 1,173,115 1,347,345 Total business-type activities expenses 7,680,336 7,898,649 8,072,399 8,229,456 Total primary government expenses $27,882,143 $25,138,826 $26,865,934 $26,326,380 Program revenues Governmental activities: Charges for services: Licenses and permits $1,085,754 $1,331,374 $1,381,326 $1,595,358 Charges for services 1,064,173 1,189,560 1,047,726 1,394,356 Fines and forfeits 122,496 123,609 126,571 119,997 Operating grants and contributions 363,540 414,654 692,428 404,663 Capital grants and contributions 1,265,287 4,175,655 1,646,573 2,953,496 Total governmental activities program revenues 3,901,250 7,234,852 4,894,624 6,467,870 Business-type activities: Charges for services: Water 2,689,170 2,424,634 2,611,327 3,146,886 Sewer 2,378,111 2,365,358 2,297,677 2,434,370 Surface water management 512,761 538,688 534,473 590,323 Operating grants and contributions 5,332 2,984 12,589 121,925 Capital grants and contributions 1,684,982 1,593,289 1,086,655 1,861,689 Total business-type activities program revenues 7,270,356 6,924,953 6,542,721 8,155,193 Total primary government program revenues $11,171,606 $14,159,805 $11,437,345 $14,623,063 140 Table 2 Page 1 of 2 2013 2014 2015 2016 2017 2018 $2,630,405 $3,099,004 $2,775,663 $2,887,111 $3,230,517 $3,291,465 3,313,694 3,416,088 3,826,376 3,973,031 3,969,540 3,819,890 14,224,453 9,604,525 11,153,322 7,591,530 8,161,048 7,225,531 2,919,183 3,062,592 2,952,985 3,278,139 3,227,236 3,158,725 523,651 1,043,848 527,268 689,448 918,962 589,570 588,352 465,935 409,676 493,746 408,273 173,323 24,199,738 20,691,992 21,645,290 18,913,005 19,915,576 18,258,504 4,702,686 3,347,965 3,290,265 4,422,789 3,866,810 4,567,874 3,548,200 3,171,696 3,297,128 3,254,619 3,746,880 4,122,804 1,334,173 1,491,763 1,328,144 1,388,979 1,538,468 1,634,475 9,585,059 8,011,424 7,915,537 9,066,387 9,152,158 10,325,153 $33,784,797 $28,703,416 $29,560,827 $27,979,392 $29,067,734 $28,583,657 $2,113,770 $1,691,634 $1,565,900 $1,653,858 $1,641,140 $2,289,052 1,396,068 1,149,372 1,153,779 1,209,882 1,257,486 1,203,187 99,984 100,516 117,189 114,367 128,394 95,351 472,298 532,337 823,943 735,840 902,871 948,912 10,718,999 3,296,748 5,812,825 3,705,857 2,425,333 1,669,995 14,801,119 6,770,607 9,473,636 7,419,804 6,355,224 6,206,497 2,829,226 2,573,027 2,611,895 2,717,285 2,921,936 3,121,292 2,358,854 2,472,536 2,525,731 2,619,882 2,764,674 3,034,207 615,896 639,087 668,971 684,199 709,508 764,930 63,112 210,857 45,130 72,007 45,109 44,604 2,852,437 2,633,793 3,140,823 5,199,139 1,678,595 3,965,466 8,719,525 8,529,300 8,992,550 11,292,512 8,119,822 10,930,499 $23,520,644 $15,299,907 $18,466,186 $18,712,316 $14,475,046 $17,136,996 141 CITY OF CHANHASSEN, MINNESOTA CHANGES IN NET POSITION Last Ten Fiscal Years (Accrual Basis of Accounting) 2009 2010 2011 2012 Net (expense) revenue: Governmental activities ($16,300,557) ($10,005,325) ($13,898,911) ($11,629,054) Business-type activities (409,980) (973,696) (1,529,678)(74,263) Total primary government net (expense) revenue (16,710,537) (10,979,021) (15,428,589) (11,703,317) General revenues and other changes in net position Governmental activities: Property taxes 9,921,598 10,014,684 9,849,882 10,064,176 Tax increment collections 473,674 539,523 566,045 533,011 Grants and contributions not restricted to specific programs 27,612 45,767 28,304 20,071 Unrestricted investment earnings 357,953 222,719 505,541 173,523 Gain on sale of capital assets 4,524 20,727 44,000 56,610 Special item - sale of public works building - - - 1,246,275 Transfers 774,746 (487,911) 1,061,763 (173,420) Total governmental activities 11,560,107 10,355,509 12,055,535 11,920,246 Business-type activities: Unrestricted investment earnings 141,070 114,349 211,707 92,453 Miscellaneous 10,549 33,644 6,643 - Gain on sale of capital assets - - - - Transfers (774,746)487,911 (1,061,763)173,420 Total business-type activities (623,127)635,904 (843,413)265,873 Total primary government $10,936,980 $10,991,413 $11,212,122 $12,186,119 Change in net assets: Governmental activities ($4,740,450) $350,184 ($1,843,376) $291,192 Business-type activities (1,033,107) (337,792) (2,373,091)191,610 Total primary government ($5,773,557)$12,392 ($4,216,467) $482,802 142 Table 2 Page 2 of 2 2013 2014 2015 2016 2017 2018 ($9,398,619) ($13,921,385) ($12,171,654) ($11,493,201) ($13,560,352) ($12,052,007) (865,534)517,876 1,077,013 2,226,125 (1,032,336)605,346 (10,264,153) (13,403,509) (11,094,641) (9,267,076) (14,592,688) (11,446,661) 10,059,324 10,482,273 10,536,216 10,643,917 10,826,116 10,877,849 545,906 307,940 200,338 111,761 - - 19,941 19,736 21,679 19,754 19,753 19,755 (14,764)183,602 176,731 156,202 164,393 258,456 37,720 191,755 66,248 41,129 38,254 45,244 - - - - - - 307,596 6,389 (612,078)73,032 (204,422) (319,528) 10,955,723 11,191,695 10,389,134 11,045,795 10,844,094 10,881,776 (776)134,533 132,406 79,765 171,044 263,802 - - - - - - - - 57,510 25,224 - 10,568 (307,596)(6,389)612,078 (73,032)204,422 319,528 (308,372)128,144 801,994 31,957 375,466 593,898 $10,647,351 $11,319,839 $11,191,128 $11,077,752 $11,219,560 $11,475,674 $1,557,104 ($2,729,690) ($1,782,520) ($447,406) ($2,716,258) ($1,170,231) (1,173,906)646,020 1,879,007 2,258,082 (656,870) 1,199,244 $383,198 ($2,083,670)$96,487 $1,810,676 ($3,373,128)$29,013 143 CITY OF CHANHASSEN, MINNESOTA FUND BALANCES - GOVERNMENTAL FUNDS Last Ten Fiscal Years (Modified Accrual Basis of Accounting) 2009 2010 2011 2012 General Fund: Reserved $46,750 $55,826 $ - $ - Unreserved: Designated 3,690,000 3,754,000 - - Undesignated 1,137,109 1,459,792 - - Nonspendable - - 17,280 57,137 Unassigned - - 5,278,118 5,434,641 Total general fund $4,873,859 $5,269,618 $5,295,398 $5,491,778 All other governmental funds: Reserved $2,950,284 $5,642,029 $ - $ - Unreserved: Designated Special revenue funds 668,992 2,082,929 - - Capital project funds 11,418,006 7,487,198 - - Undesignated Debt service funds 342,877 356,724 - - Capital project funds (2,001,149) (786,209) - - Nonspendable - - 12,662 1,373,146 Restricted - - 10,426,585 6,359,422 Assigned - - 6,561,411 6,731,400 Unassigned - - (730,120) (646,856) Total all other governmental funds $13,379,010 $14,782,671 $16,270,538 $13,817,112 The City implemented GASB Statement No. 54 for the fiscal year ended December 31, 2011. Information for years prior to 2011 is presented in accordance with fund balance classifications in effect at that time. 144 Table 3 2013 2014 2015 2016 2017 2018 $ - $ - $ - $ - $ - $ - - - - - - - - - - - - - 16,741 58,333 72,114 25,832 81,032 87,067 5,274,584 5,550,732 5,258,232 5,286,880 5,307,088 5,667,626 $5,291,325 $5,609,065 $5,330,346 $5,312,712 $5,388,120 $5,754,693 $ - $ - $ - $ - $ - $ - - - - - - - - - - - - - - - - - - - - - - - - - 1,327,068 1,289,575 1,253,705 - 990,723 9,326 9,181,230 5,724,419 5,824,354 8,673,981 8,458,576 2,618,680 6,366,292 5,951,507 5,586,353 7,806,958 6,602,135 6,414,882 (559,515)(475,352)(372,509)(264,772)(154,506)(24,491) $16,315,075 $12,490,149 $12,291,903 $16,216,167 $15,896,928 $9,018,397 145 CITY OF CHANHASSEN, MINNESOTA CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS Last Ten Fiscal Years 2009 2010 2011 2012 Revenues: General property taxes $9,834,389 $10,141,168 $9,760,052 $10,143,011 Tax increment collections 473,674 539,523 566,045 533,011 Licenses and permits 1,085,754 1,331,374 1,381,326 1,595,358 Intergovernmental 397,438 401,550 1,425,525 2,151,785 Special assessments 540,151 790,426 1,242,040 1,667,881 Charges for services 950,760 923,550 795,616 880,920 Fines and forfeits 122,496 123,609 126,571 119,997 Investment income 357,953 222,719 505,541 173,523 Contributions and donations 47,206 58,016 50,685 36,893 Refunds and reimbursements 61,707 132,616 117,441 253,030 Other 170,688 213,272 846,523 264,038 Total revenues 14,042,216 14,877,823 16,817,365 17,819,447 Expenditures: Current: General government 2,070,698 2,525,326 2,162,479 2,326,490 Public safety 2,979,044 3,077,038 2,896,644 3,013,980 Public works 5,710,804 2,739,704 4,779,067 3,726,158 Parks and recreation 2,487,985 1,901,564 1,906,489 2,154,714 Community development 527,919 698,818 502,916 621,295 Capital outlay: General government 143,663 473,753 129,535 75,226 Public safety 55,152 65,667 52,645 39,314 Public works 8,179,324 3,995,444 2,122,641 3,502,371 Parks and recreation 235,292 490,737 309,524 1,310,366 Debt service: Principal 2,553,002 2,370,000 1,025,000 5,100,000 Interest and paying agent fees 920,529 888,843 853,152 814,621 Bond issuance costs 73,182 46,505 - - Developer assistance 90,354 176,643 298,216 21,108 Total expenditures 26,026,948 19,450,042 17,038,308 22,705,643 Revenues over (under) expenditures (11,984,732) (4,572,219)(220,943) (4,886,196) Other financing sources (uses): Bonds issued 6,020,000 5,200,000 - - Loans issued - - - - Bond premium (discount)226,991 35,964 - - Remption of refunding bonds (8,387,123) - - - Transfers in 1,324,015 1,105,000 1,734,590 1,203,031 Transfers out - - - (48,881) Sale of capital assets 16,274 30,675 - - Special item - sale of public works building - - - 1,475,000 Total other financing sources (uses)(799,843) 6,371,639 1,734,590 2,629,150 Net change in fund balance ($12,784,575) $1,799,420 $1,513,647 ($2,257,046) Debt service as a percentage of noncapital expenditures 20.5%23.2%13.3%33.3% Debt service as percentage of total expenditures 13.6%17.0%11.0%26.0% 146 Table 4 2013 2014 2015 2016 2017 2018 $10,176,483 $10,489,350 $10,529,994 $10,640,315 $10,820,682 $10,856,842 545,906 307,940 200,338 111,761 - - 2,113,770 1,691,634 1,565,900 1,653,858 1,641,140 2,289,052 7,971,339 2,553,062 4,897,139 974,917 2,149,875 2,019,215 3,193,078 854,966 1,664,424 820,026 842,523 600,056 907,414 798,578 799,543 846,540 838,498 820,745 99,984 100,516 117,189 114,367 128,394 95,351 (14,764)183,602 176,731 156,202 164,393 258,456 33,159 66,918 78,175 60,802 73,734 70,339 235,363 77,871 85,955 150,093 174,853 156,920 259,703 265,119 267,622 276,067 264,114 225,522 25,521,435 17,389,556 20,383,010 15,804,948 17,098,206 17,392,498 2,274,640 2,350,437 2,391,195 2,479,271 2,871,267 2,835,108 3,179,446 3,258,363 3,431,541 3,713,146 3,602,897 3,593,877 10,628,140 5,352,221 7,537,376 3,961,016 4,617,523 3,847,782 2,002,604 2,164,703 2,068,532 2,256,314 2,395,554 2,326,272 522,538 1,034,047 515,382 659,276 940,000 610,368 87,707 34,080 - 62,713 30,838 22,133 74,144 23,980 122,143 314,004 2,950 1,169,952 2,482,728 2,894,237 2,566,867 459,142 2,595,012 2,315,068 627,214 485,107 476,323 1,153,763 376,992 1,316,908 1,590,000 4,190,000 1,810,000 1,795,000 670,000 5,985,000 599,487 518,722 439,470 483,533 433,925 295,294 - - - - - - - - - - - - 24,068,648 22,305,897 21,358,829 17,337,178 18,536,958 24,317,762 1,452,787 (4,916,341)(975,819) (1,532,230) (1,438,752) (6,925,264) - - - 4,805,000 - - - - - - - - - - - 239,773 - - - - - - - - 888,711 1,783,719 2,158,844 1,347,883 1,924,157 6,724,164 (43,988)(676,095) (1,701,005) (1,044,114)(748,522) (6,369,316) - 301,531 41,015 90,318 19,286 58,458 - - - - - - 844,723 1,409,155 498,854 5,438,860 1,194,921 413,306 $2,297,510 ($3,507,186) ($476,965) $3,906,630 ($243,831) ($6,511,958) 10.5%25.0%12.4%14.8%7.1%32.2% 9.1%21.1%10.5%13.1%6.0%25.8% 147 CITY OF CHANHASSEN, MINNESOTA TAX CAPACITY VALUE AND ESTIMATED MARKET VALUE OF TAXABLE PROPERTY Last Ten Fiscal Years Fiscal Year Commercial/Total Ended Residential Industrial All Tax December 31, Property Agricultural Property Other Capacity 2009 $30,741,292 $190,844 $9,665,269 $471,749 $41,069,154 2010 30,301,115 170,857 10,229,329 477,663 41,178,964 2011 28,951,885 131,751 9,778,491 511,185 39,373,312 2012 27,198,238 137,012 9,149,904 520,743 37,005,897 2013 26,970,557 105,160 8,927,095 541,612 36,544,424 2014 28,725,937 132,728 8,984,174 613,105 38,455,944 2015 32,778,287 153,500 9,205,053 620,620 42,757,460 2016 33,790,483 222,144 9,508,063 669,890 44,190,580 2017 34,470,607 278,224 9,910,242 764,420 45,423,493 2018 36,545,419 296,153 10,317,456 869,646 48,028,674 Sources: Carver County Taxpayer Services and Hennepin County 148 Table 5 Captured Tax Capacity on Fiscal Adjusted City Estimated Tax Capacity Tax Increment Disparity Tax Capacity Direct Tax Market as a Percent District Contribution Value Rate Value of EMV ($473,702) ($1,627,749) $38,967,703 22.99300 $3,501,886,800 1.11% (532,007) (1,861,362) 38,785,595 25.18300 3,491,841,800 1.11% (509,863) (1,998,912) 36,864,537 26.60256 3,350,141,800 1.10% (469,759) (2,038,437) 34,497,701 28.53211 3,153,275,000 1.09% (435,999) (1,804,630) 34,303,795 28.42838 3,118,066,700 1.10% (252,884) (1,971,928) 36,231,132 27.23862 3,294,605,000 1.10% (267,337) (1,896,611) 40,593,512 24.63317 3,686,777,200 1.10% (103,638) (2,119,400) 41,967,542 24.25249 3,802,904,100 1.10% - (2,055,461) 43,368,032 23.85464 3,899,829,200 1.11% - (2,009,509) 46,019,165 22.66614 4,112,577,100 1.12% 149 CITY OF CHANHASSEN, MINNESOTA DIRECT AND OVERLAPPING PROPERTY TAX CAPACITY RATES Table 6 Last Ten Fiscal Years Fiscal Operational Debt City School Carver Year and Capital Service Total District #112 County Other Total Tax capacity rates (per $100 of adjusted tax capacity value) 2009 18.864 4.129 22.993 35.505 38.033 5.458 101.989 2010 20.722 4.461 25.183 35.840 39.509 5.639 106.171 2011 21.915 4.688 26.603 40.236 41.752 6.021 114.610 2012 23.701 4.831 28.532 44.382 43.562 6.681 123.158 2013 23.635 4.793 28.428 45.319 46.115 6.603 126.467 2014 22.708 4.531 27.239 44.917 45.211 6.873 124.239 2015 21.532 3.101 24.633 39.120 40.488 6.270 110.512 2016 21.314 2.938 24.252 39.245 38.880 6.417 108.795 2017 21.536 2.317 23.853 37.005 38.851 6.565 106.274 2018 20.731 1.935 22.666 33.837 37.436 6.537 100.476 Source: Carver County Taxpayer Services (1)The City Direct Rate is the Urban Based Rate, not including market value levies. City Direct Rate(1)Overlapping Rates 150 CITY OF CHANHASSEN, MINNESOTA PRINCIPAL PROPERTY TAXPAYERS Table 7 Current Year and Nine Years Ago Percentage Percentage Taxable of Total City Taxable of Total City Capacity Capacity Capacity Capacity Taxpayer Value Rank Value Value Rank Value Northern States Power Co $441,898 1 0.9% $208,498 7 0.5% Istar Minnesota LLC 441,354 2 0.9% 343,066 3 0.9% SGO MN West Village LLC 425,358 3 0.9% - - LTF Real Estate Company Inc 336,010 4 0.7% - - Rosemount Inc 301,832 5 0.6% 396,692 1 1.0% Prince R Nelson 263,889 6 0.6% 208,305 8 0.5% PHM/Chanhassen Inc.227,821 7 0.5% - - Lake Susan Apartment Homes 225,535 8 0.5% - - LTF Real Estate MP II LLC 222,352 9 0.5% 217,712 5 0.6% Centerpoint Energy Minnegasco 220,696 10 0.5% - - IRET Properties - - 354,498 2 0.9% LTF Real Estate VRDN I LLC - - 234,528 4 0.6% DRF Chanhassen Medical Bldg - - 213,250 6 0.5% Target Corporation T-0862 - - 204,062 9 0.5% Park Avenue Lofts LLC - - 196,318 10 0.5% Total $3,106,745 6.7% $2,576,929 6.6% Total All Property $46,566,282 $39,015,238 Source: Carver County Taxpayer Services 2018 2009 151 - This page intentionally left blank - 152 CITY OF CHANHASSEN, MINNESOTA PROPERTY TAX LEVIES AND COLLECTIONS Table 8 Last Ten Fiscal Years Fiscal Taxes Collections Year Levied in Ended For The Percentage Subsequent Percentage December 31, Fiscal Year Amount of Levy Years Amount of Levy 2009 $10,074,565 $9,668,713 96.0%$158,572 $9,827,285 97.5% 2010 10,213,190 9,918,528 97.1%(18,327) 9,900,201 96.9% 2011 10,267,390 9,739,125 94.9%186,123 9,925,248 96.7% 2012 10,153,690 10,005,877 98.5%51,796 10,057,674 99.1% 2013 10,195,890 10,105,393 99.1%20,236 10,125,629 99.3% 2014 10,334,140 10,269,518 99.4%28,614 10,298,132 99.7% 2015 10,484,021 10,446,765 99.6%24,842 10,471,606 99.9% 2016 10,629,621 10,564,815 99.4%21,532 10,586,347 99.6% 2017 10,795,121 10,718,876 99.3%4,339 10,723,216 99.3% 2018 10,913,868 10,834,344 99.3% - 10,834,344 99.3% Source: City Finance Department Fiscal Year of the Levy Collected Within The Total Collections to Date 153 CITY OF CHANHASSEN, MINNESOTA RATIOS OF OUTSTANDING DEBT BY TYPE Last Ten Fiscal Years General General Fiscal Obligation Revenue Tax Increment Improvement Year Bonds Bonds Bonds Bonds 2009 $13,045,000 $335,000 $960,000 $6,625,000 2010 16,860,000 230,000 900,000 5,805,000 2011 16,195,000 120,000 840,000 5,615,000 2012 11,475,000 - 775,000 5,420,000 2013 10,155,000 - 705,000 5,220,000 2014 9,550,000 - 635,000 1,705,000 2015 8,925,000 - - 1,155,000 2016 13,313,788 - - - 2017 12,627,803 - - - 2018 6,626,818 - - - Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements. (1)Information pertaining to Chanhassen Personal Income is not available, information for Carver County was included instead. (a) Information not available Governmental Activities 154 Table 9 Business-Type Bonded Debt Activities Per Total Carver County Other G.O. Revenue Debt Personal Debt Bonds Total Debt Per Capita Income(1) - $11,695,000 $32,660,000 $1,322 0.7% - 10,955,000 34,750,000 1,514 0.7% - 20,077,339 42,847,339 1,849 0.8% - 20,578,313 38,248,313 1,629 0.7% - 16,324,287 32,404,287 1,353 0.6% - 10,045,261 21,935,261 899 0.4% - 9,256,235 19,336,235 784 0.3% - 13,926,719 27,240,507 1,092 0.4% - 23,379,318 36,007,121 1,425 0.5% - 25,671,988 32,298,806 1,238 (a) 155 CITY OF CHANHASSEN, MINNESOTA RATIOS OF GENERAL BONDED DEBT OUTSTANDING Table 10 Last Ten Fiscal Years Net General General G.O. Tax G.O. G.O. Total General Less Amounts Net General Percentage Obligation Fiscal Obligation Increment Improvement Revenue Obligation Restricted for Obligation of Tax Bonded Debt Year Bonds Bonds Bonds Bonds Bonded Debt Debt Service Bonded Debt Capacity Per Capita 2009 $13,045,000 $960,000 $6,625,000 $11,695,000 $32,325,000 $6,461,780 $25,863,220 66.29% $1,047 2010 16,860,000 900,000 5,805,000 10,955,000 34,520,000 9,217,254 25,302,746 64.55%1,102 2011 16,195,000 840,000 5,615,000 20,077,339 42,727,339 16,998,401 25,728,938 68.61%1,110 2012 11,475,000 775,000 5,420,000 20,578,313 38,248,313 13,020,206 25,228,107 71.80%1,074 2013 10,155,000 705,000 5,220,000 16,324,287 32,404,287 10,266,366 22,137,921 63.62%924 2014 9,550,000 635,000 1,705,000 10,045,261 21,935,261 3,441,810 18,493,451 50.09%758 2015 8,925,000 - 1,155,000 9,256,235 19,336,235 3,455,171 15,881,063 38.60%644 2016 13,313,788 - - 13,926,719 27,240,507 6,418,913 20,821,594 48.72%834 2017 12,627,803 - - 23,379,318 36,007,121 6,413,214 29,593,907 67.23%1,171 2018 6,626,818 - - 25,671,988 32,298,806 1,189,446 31,109,360 66.81%1,192 Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements. 156 CITY OF CHANHASSEN, MINNESOTA DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT Table 11 December 31, 2018 Estimated Estimated Share of Debt Percentage Overlapping Governmental Unit Outstanding Applicable*Debt Direct debt: City of Chanhassen(1)$6,626,818 100.00% $6,626,818 Overlapping debt: Eastern Carver County School District 159,015,000 37.20% 59,153,580 Eden Prairie Independent School District 51,264,311 0.87% 446,000 Carver County 15,990,000 31.58% 5,049,642 Hennepin County 1,056,890,798 0.05% 528,445 Hennepin Suburban Park District 43,575,708 0.08%34,861 Hennepin Regional Railroad Authority 24,600,380 0.08%19,680 Metropolitan Council 75,902,689 0.03%22,771 Subtotal - overlapping debt 1,427,238,886 65,254,979 Total direct and overlapping debt $1,433,865,704 $71,881,797 (1)Excludes debt related to the City's business-type activities. 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. *For debt repaid with property taxes, the percentage of overlapping debt applicable is estimated using taxable assessed property values. Applicable percentages were estimated by determining the portion of another governmental unit's taxable assessed value that is within the City's boundaries and dividing it by each unit's total taxable assessed value. 157 CITY OF CHANHASSEN, MINNESOTA LEGAL DEBT MARGIN INFORMATION Table 12 Last Ten Fiscal Years Legal Debt Margin Calculation for Fiscal Year 2018 Market value $4,112,577,100 Applicable percentage 3% Debt limit 123,377,313 Debt applicable to limit: Total bonded debt 32,298,806 Less: Special assessment bonds - Tax increment bonds - Enterprise Fund debt (25,671,988) Less: Cash and investments in G.O. Bond Debt Service Fund (1,249,336) 5,377,482 Legal debt margin $117,999,832 Legal Debt Margin Calculation for Fiscal Years 2009 Through 2018 Net Debt Net Debt Legal Amount of Debt Applicable Fiscal Debt Applicable to Debt Applicable to to Limit Year Population Limit Limit Margin Debt Limit Per Capita 2009 24,699 $105,056,604 $11,175,086 $93,881,518 10.64%$452 2010 22,952 104,755,254 15,831,831 88,923,423 15.11%690 2011 23,179 100,504,254 14,755,258 85,748,996 14.68%637 2012 23,484 94,598,250 10,117,347 84,480,903 10.70%431 2013 23,954 93,542,001 8,705,958 84,836,043 9.31%363 2014 24,388 98,838,150 8,030,953 90,807,197 8.13%329 2015 24,655 110,603,316 7,346,583 103,256,733 6.64%298 2016 24,951 114,087,123 6,721,445 107,365,678 5.89%269 2017 25,273 116,994,876 6,048,333 110,946,543 5.17%239 2018 26,088 123,377,313 5,377,482 117,999,832 4.36%206 158 CITY OF CHANHASSEN, MINNESOTA PLEDGED REVENUE COVERAGE Table 13 Last Ten Fiscal Years Special Fiscal Assessment Year Collections Principal Interest Coverage 2009 $74,575 $1,220,000 $142,963 0.055 2010 313,131 820,000 223,667 0.300 2011 456,912 190,000 171,300 1.265 2012 625,288 195,000 165,525 1.734 2013 2,174,645 200,000 159,600 6.047 2014 119,060 3,515,000 103,875 0.033 2015 751,995 550,000 42,900 1.268 2016 6,298 1,155,000 26,175 0.005 2017 - - - - 2018 - - - - Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements. Improvement bonds with a designated revenue source of special assessments were paid off in 2016. Improvement Bonds Debt Service 159 CITY OF CHANHASSEN, MINNESOTA DEMOGRAPHIC AND ECONOMIC STATISTICS Table 14 Last Ten Fiscal Years Chanhassen Carver County Carver County Carver County Fiscal Chanhassen Unemployment Unemployment Personal Income Per Capita Year Population(1)Rate(2)Rate(2)(thousands)(3)Personal Income(3) 2009 24,699 5.8%7.2%$4,460,096 $49,424 2010 22,952 6.1%6.8%4,691,577 51,331 2011 23,179 4.8%5.5%5,108,292 55,044 2012 23,484 4.5%4.8%5,499,669 58,595 2013 23,954 4.1%4.3%5,610,153 58,677 2014 24,388 3.4%3.6%6,038,631 62,035 2015 24,655 2.9%3.2%6,359,013 64,496 2016 24,951 2.9%3.3%6,577,482 65,560 2017 25,273 2.8%2.9%6,911,379 67,680 2018 26,088 2.4%2.5%(a)(a) Sources:(1)Federal Census Data and Chanhassen Planning Department (2)State of Minnesota, Department of Employment and Economic Development (3)U.S. Department of Commerce, Bureau of Economic Analysis (a) Information not available Note: Information pertaining to Chanhassen Personal Income and Per Capita Personal Income is not available, information for Carver County was included instead. 160 CITY OF CHANHASSEN, MINNESOTA PRINCIPAL EMPLOYERS Table 15 Current Year and Nine Years Ago Percentage Percentage of Total City of Total City Employer Employees Rank Employment(1)Employees Rank Employment(1) Lifetime Fitness 1,464 1 23.5% 1,061 2 17.9% Instant Web Companies 1,157 2 18.5% 847 3 14.3% Rosemount Inc 1,067 3 17.1% 1,600 1 26.9% The Bernard Group 646 4 10.4% - Eastern Carver County Schools 465 5 7.5% 350 7 5.9% RR Donnelley 382 6 6.1% 360 6 6.1% General Mills 350 7 5.6% 475 5 8.0% Minnesota Landscape Arboretum 266 8 4.3% 230 9 3.9% Chanhassen Dinner Theatres 261 9 4.2% 300 8 5.0% Control Products 181 10 2.9% - Super Value Headquarters - 528 4 8.9% Byerly's - 190 10 3.2% Total 6,239 5,941 Source: Survey by City Administration and Finance Departments (1)The statistic for total City employment is not available, therefore the percentage represents the percentage of the top ten listed. 2018 2009 161 CITY OF CHANHASSEN, MINNESOTA FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION/PROGRAM Last Ten Fiscal Years Function/Program 2009 2010 2011 General government 13 13 13 Public safety 3 3 3 Public works 26 26 26 Parks & recreation 11 11 11 Community development 16 15 15 Total 69 68 68 Source: City Finance Department Full-Time Equivalent Employees as of December 31, 162 Table 16 2012 2013 2014 2015 2016 2017 2018 13 13 13 13 13 13 13 3333222 26 26 26 26 27 29 29 11 11 11 11 12 13 13 14 14 14 14 16 16 16 67 67 67 67 70 73 73 Full-Time Equivalent Employees as of December 31, 163 CITY OF CHANHASSEN, MINNESOTA OPERATING INDICATORS BY FUNCTION/PROGRAM Last Ten Fiscal Years Function/Program 2009 2010 2011 Building: Total permits issued 2,608 2,910 3,397 Total estimated value $67,811,817 $65,046,933 $82,991,029 Election: Registered voters 16,544 15,326 15,326 Fire: Average number of employees 45 45 45 General government: Area of city - square miles 23.78 23.78 23.78 Average number of permanent full-time employees (excluding fire department)69 68 68 Police: Average number of employees 15 15 15 Number of crimes - MNCJRS(1)702 647 757 Number of crimes - NIBRS(1) - - - Water: Number of customers 7,427 7,620 7,655 Daily average consumption - gallons 3,642,410 2,698,559 2,257,542 Plant capacity - gallons 8,550,000 8,550,000 8,550,000 Source: Various City Departments (1)Crime statistics in Minnesota had been reported for the last forty years utilizing Minnesota's Criminal Justice Reporting System (MNCJRS). The Federal Bureau of Investigations has mandated that all states become National Incident Based Reporting System (NIBRS) compliant by 2019. The Carver County Sheriff's Office transitioned to NIBRS June 1, 2016. Fiscal Year 164 Table 17 2012 2013 2014 2015 2016 2017 2018 3,285 3,201 3,076 3,266 2,891 2,981 3,085 $83,531,808 $89,370,069 $80,591,941 $82,145,483 $73,881,121 $82,430,550 $136,016,287 16,916 16,916 16,344 16,344 17,769 17,769 17,480 45 45 45 45 45 45 45 23.78 23.78 23.79 23.79 23.79 23.79 23.79 67 67 67 67 70 73 73 15 15 15 15 15 15 15 777 748 838 870 313 - - - - - - 472 737 698 7,741 7,953 8,075 8,195 8,254 8,312 8,407 2,570,349 2,876,383 2,542,413 2,495,868 2,565,905 2,624,486 2,888,586 8,550,000 8,550,000 8,550,000 8,550,000 8,550,000 8,550,000 17,100,000 Fiscal Year 165 CITY OF CHANHASSEN, MINNESOTA CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM Last Ten Fiscal Years Function/Program 2009 2010 2011 Fire: Number of stations 2 2 2 Parks and recreation: Acres of parks 383 396 396 Acres of open space 434 434 489 Number of shelter buildings 4 4 4 Number of picnic shelters 5 5 5 Number of playgrounds 26 26 26 Number of swimming beaches 6 5 5 Number of tennis courts 17 17 17 Number of outdoor pickleball courts - - - Police: Number of stations 1 1 1 Public works: Miles of streets 110.9 111.9 112.0 Miles of sidewalks 31.1 31.9 31.9 Miles of trails 53.6 53.6 56.1 Sewer: Miles of storm sewers 69.5 71.0 74.5 Miles of sanitary sewers 123.0 123.6 123.7 Number of lift stations 31 31 31 Water: Miles of watermains 135.1 136.8 137.8 Number of wells 12 12 12 Source: Various City Departments Fiscal Year 166 Table 18 2012 2013 2014 2015 2016 2017 2018 2222222 401 401 405 405 405 466 466 503 503 503 503 503 528 528 4444444 5 6 7 13 15 18 21 26 27 27 27 27 27 27 5555555 15 15 15 15 15 16 16 236661010 1111111 112.6 113.5 113.7 113.9 116.5 116.5 117.0 31.9 31.9 32.0 32.0 34.0 34.0 34.0 56.4 58.6 59.2 59.9 62.4 62.4 65.0 75.3 76.5 77.0 78.8 84.3 84.5 86.8 123.9 124.3 124.5 125.3 128.2 128.2 128.6 31 31 31 31 31 31 31 138.0 139.1 139.3 140.6 145.5 145.5 148.8 12 12 12 12 13 13 13 Fiscal Year 167 - This page intentionally left blank - 168 IV. OTHER INFORMATION (UNAUDITED) 169 CITY OF CHANHASSEN, MINNESOTA COMBINED SCHEDULE OF INDEBTEDNESS December 31, 2018 Final Interest Issue Maturity Bonded indebtedness: Rates Date Date General obligation bonds: G.O. Capital Improvement Plan Bonds, Series 2008A 4.00%-4.60% 11/18/08 02/01/30 G.O. Library Refunding Bonds, Series 2010A 2.00%-3.10% 01/27/10 02/01/22 G.O. Bonds, Series 2016A 2.00%-3.00% 03/03/16 02/01/30 Total general obligation bonds Enterprise Fund debt: G.O. Water Revenue Bonds, Series 2011A 0.30%-2.15% 10/06/11 02/01/22 G.O. Water Revenue Refunding Bonds, Series 2011B 2.00%-3.00% 10/06/11 02/01/25 G.O. Water and Sewer Revenue Bonds, Series 2012A 1.00%-1.55% 11/15/12 02/01/23 G.O. Water Revenue Bonds, Series 2016A 2.00%-3.00% 03/03/16 02/01/26 G.O. Water Revenue Bonds, Series 2016B 3.50%-4.00% 12/29/16 02/01/42 G.O. Water Revenue Bonds, Series 2017A 2.00%-4.00% 02/01/17 02/01/38 G.O. Water Revenue Bonds, Series 2018A 3.00%-4.00% 03/15/18 02/01/30 Total Enterprise Fund debt Total City bonded indebtedness 170 Exhibit 1 Payable Payable Principal Original January 1, December 31, Due in Issue Payments 2018 Issued Payments 2018 2019 $7,550,000 $1,935,000 $5,615,000 $ - $5,615,000 $ - $ - 3,660,000 1,660,000 2,000,000 - 370,000 1,630,000 390,000 4,805,000 - 4,805,000 - - 4,805,000 330,000 16,015,000 3,595,000 12,420,000 0 5,985,000 6,435,000 720,000 5,920,000 2,840,000 3,080,000 - 680,000 2,400,000 695,000 3,720,000 60,000 3,660,000 - 30,000 3,630,000 470,000 1,245,000 475,000 770,000 - 125,000 645,000 125,000 1,565,000 140,000 1,425,000 - 140,000 1,285,000 145,000 3,630,000 - 3,630,000 - - 3,630,000 - 10,000,000 - 10,000,000 400,000 9,600,000 150,000 - - - 3,595,000 - 3,595,000 265,000 26,080,000 3,515,000 22,565,000 3,595,000 1,375,000 24,785,000 1,850,000 $42,095,000 $7,110,000 $34,985,000 $3,595,000 $7,360,000 $31,220,000 $2,570,000 Prior Years 2018 171 CITY OF CHANHASSEN, MINNESOTA DEBT SERVICE PAYMENTS TO MATURITY Exhibit 2 GENERAL OBLIGATION BONDS - GOVERNMENTAL ACTIVITIES December 31, 2018 G.O. Library Refunding G.O. Bonds,Bonds, Series 2010A Series 2016A Total Bonds payable $1,630,000 $4,805,000 $6,435,000 Future interest payable 101,255 678,975 780,230 $1,731,255 $5,483,975 $7,215,230 Payments to maturity: 2019 $433,480 $443,000 $876,480 2020 431,630 447,875 879,505 2021 429,480 452,300 881,780 2022 436,665 451,350 888,015 2023 - 455,025 455,025 2024 - 453,325 453,325 2025 - 458,300 458,300 2026 - 460,000 460,000 2027 - 461,500 461,500 2028 - 462,800 462,800 2029 - 468,850 468,850 2030 - 469,650 469,650 $1,731,255 $5,483,975 $7,215,230 172 CITY OF CHANHASSEN, MINNESOTA DEBT SERVICE PAYMENTS TO MATURITY Exhibit 3 GENERAL OBLIGATION REVENUE BONDS December 31, 2018 G.O. Water G.O. Water G.O. Water & G.O. Water G.O. Water G.O. Water G.O. Water Revenue Revenue Sewer Revenue Revenue Revenue Revenue Revenue Bonds, Series Bonds, Series Bonds, Series Bonds, Series Bonds, Series Bonds, Series Bonds, Series 2011A 2011B 2012A 2016A 2016B 2017A 2018A Total Bonds payable $2,400,000 $3,630,000 $645,000 $1,285,000 $3,630,000 $9,600,000 $3,595,000 $24,785,000 Future interest payable 81,540 393,800 22,793 135,200 3,042,841 3,891,150 734,732 8,302,056 $2,481,540 $4,023,800 $667,793 $1,420,200 $6,672,841 $13,491,150 $4,329,732 $33,087,056 Payments to maturity: 2019 $733,663 $569,500 $132,665 $177,925 $138,238 $444,400 $413,407 2,609,798 2020 731,758 567,600 131,321 178,500 138,238 441,400 358,750 2,547,567 2021 738,163 572,900 134,758 178,925 138,238 443,350 355,875 2,562,209 2022 277,956 572,675 133,003 179,200 138,238 440,250 356,400 2,097,722 2023 - 576,925 136,046 179,325 138,238 440,500 356,625 1,827,659 2024 - 580,575 - 174,375 138,238 434,100 357,925 1,685,213 2025 - 583,625 - 175,200 138,238 432,600 354,000 1,683,663 2026 - - - 176,750 138,238 430,900 354,850 1,100,738 2027 - - - - 138,238 843,575 355,400 1,337,213 2028 - - - - 138,238 845,425 355,650 1,339,313 2029 - - - - 138,238 846,675 355,600 1,340,513 2030 - - - - 138,238 847,325 355,250 1,340,813 2031 - - - - 138,238 842,450 980,688 2032 - - - - 138,238 842,050 980,288 2033 - - - - 138,238 845,975 984,213 2034 - - - - 138,238 844,225 982,463 2035 - - - - 138,238 841,875 980,113 2036 - - - - 138,238 843,850 982,088 2037 - - - - 138,238 838,150 976,388 2038 - - - - 275,788 702,075 977,863 2039 - - - - 943,900 - 943,900 2040 - - - - 943,431 - 943,431 2041 - - - - 939,700 - 939,700 2042 - - - - 943,500 - 943,500 $2,481,540 $4,023,800 $667,793 $1,420,200 $6,672,841 $13,491,150 $4,329,732 $33,087,056 173 CITY OF CHANHASSEN, MINNESOTA SCHEDULE OF DEFERRED TAX LEVIES Exhibit 4 December 31, 2018 Library G.O. Capital Total Years of Bonds Improvement Deferred Levy/ of 2002A/ Plan Bonds Tax Collection 2010A of 2008A Levies 2018/2019 $459,512 $475,702 $935,214 2019/2020 457,412 480,585 937,997 2020/2021 465,497 479,745 945,242 2021/2022 - 483,840 483,840 2022/2023 - 482,213 482,213 2023/2024 - 485,520 485,520 2024/2025 - 487,410 487,410 2025/2026 - 489,090 489,090 2026/2027 - 490,560 490,560 2027/2028 - 497,070 497,070 2028/2029 - 498,015 498,015 $1,382,421 $5,349,750 $6,732,171 174