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9.a) Northland Securities-General Obligation Equipment Certificates of Indebtedness ($570,000) PRELIMINARY OFFICIAL STATEMENT DATED JUNE ll,2013 NEW ISSUE BOOK ENTRY ONLY BANK QUALIFIED "NONRATED" With respect to the $570,000 General Obligation Eguipment Certificates of Indebtedness, Series 2013A, dated July 1, 2013 (the "Certificates"or the "/ssue) in the opinion of Eckberg, Lamniers, Briggs, Wolff& �'ierling, PLLP, Bond Counsel, based on present federal and Minnesota laws, regulations, rulings and decisions, at the time of their issuance and delivery to the original purchaser, interest on the Certificates is excluded from gross income for purposes of United States inconse tax and, to the same extent,frorra taxable net income of individuals, estates and trusts for purposes of State of Minnesota income tax(other than Minnesota franchise tcixes measured by income and imposed on corporations and financial institutions). Interest is not an item of taz preference for purposes of the alternative minimum taz imposed on individuals and corporations,- however, interest on the Certificates is taken into account in determining adjusted current earnings for purposes of computing the federal alternative minimum tax imposed on corporations. No opinion will be expressed by Bond Counse/regarding other state or federal tcix conseguences caused by the receipt or accrual of interest on the Certificates or arising with respect to ownership of the Certificates.See "Tax Exemption"herein for additional information. CITY OF SCANDIA, MINNESOTA $570,000 GENERAL OBLIGATION EQUIPMENT CERTIFICATES OF INDEBTEDNESS, SERIES 2013A Dated Date: July 1,2013 Interest Due: Each January 1 and July 1 Commencing January 1,2014 Amount Rate Maturi Yield Price Amount Rate Maturi Yield Price $55,000 % 07/O1/14 $55,000 % 07/O1/19 % 55,000 07/O 1/15 60,000 07/O 1/20 55,000 07/O 1/16 60,000 07/O 1/21 55,000 07/O 1/17 60,000 07/O 1/22 5 5,000 07/O 1/18 60,000 07/O 1/23 The General Obligation Equipment Certificates of Indebtedness, Series 2013A (the "Certificates" or"the "Issue") are being issued by the City of Scandia, Minnesota (the "City" or the "Issuer") pursuant to Minnesota Statutes, Chapters 475 and 412.301, as amended. Proceeds of the Certificates will be used to finance the purchase of a fire truck and a dump truck and pay costs associated with issuance of the Certificates. See Securiry/Sources and Uses of Funds herein for additional information. The Certificates are valid and binding general obligations of the City and are payable from ad volorem taxes. The full faith and credit of the City is pledged to their payment. In the event of any deficiency in the Debt Service Account established for this Issue,the City has validly obligated itself to levy additional ad valorem taxes upon all of the taxable property within the City,without limitation of amount. See Authoriry and Purpose herein for additional information. The Certificates maturing on July 1, 2020 and thereafter are subject to redemption, in whole or in part, on July 1, 2019, and on any date thereafter at a price of par plus accrued interest. Principal due with respect to the Certificates is payable annually on July 1, commencing July 1, 2014. Interest due with respect to the Certificates is payable semiannually on January 1 and July 1, commencing January 1, 2014. The Certificates will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York. Individual purchases will be made in book-entry form only, in the principal amount of$5,000 or any whole multiple thereof. Purchasers will not receive physical delivery of Certificates. See `Book-Entry System" in Description of the Certificates herein for additional information. The Paying Agent/Registrar will be Northland Trust Services Inc., Minneapolis, Minnesota. NORTHLAND SECURITIES TABLE OF CONTENTS Pa�e SUMMARYOF OFFERING.....................................................................................................................................2 PRINCIPALCITY OFFICIALS................................................................................................................................3 AUTHORITYAND PURPOSE.................................................................................................................................4 SECURITY/SOURCES AND USES OF FUNDS.....................................................................................................4 DESCRIPTIONOF THE CERTIFICATES...............................................................................................................5 LIMITEDCONTINUING DISCLOSURE................................................................................................................7 UNDERWRITING.....................................................................................................................................................7 FUTUREFINANCING..............................................................................................................................................8 CERTIFICATERATING ..........................................................................................................................................8 LITIGATION .............................................................................................................................................................8 CERTIF ICATION......................................................................................................................................................8 LEGALITY ................................................................................................................................................................8 TAXEXEMPTION....................................................................................................................................................8 GENERALINFORMATION ..................................................................................................................................10 MINNESOTA VALUATIONS; PROPERTY TAX CLASSIFICAT[ONS.............................................................16 ECONOMIC AND FINANCIAL INFORMATION................................................................................................20 SUMMARYOF DEBT AND DEBT STATISTICS................................................................................................23 APPENDIX A—LEGAL OPINION APPENDIX B —CONTINUING DISCLOSURE UNDERTAKING APPENDIX C—CITY'S FINANCIAL STATEMENT � I'HE CER'IIFICA"I�ES ARE OI�I=ERED,SUBJECT TO PRIOR SALE.WHEN_AS AND iF ACCI[P�I�IfD[�Y T13E UNDERWRITER(S)NAMGD ON THE FRONT COVk R Of T}i1S OPFICIAL STATEMENT AND SUBJECT TO AN OPINION AS IO VALIUIIY OF '�I�E CERTIFICA'1'G BY BOND COUNSF.I.. SllE3.lECT TO APPI_ICABLE SECURI'I IES LAWS AND PKI�VAILING MARK1:"I CONDITIONS. THI� UNDERVI%RITER(S) INTENDS BUT IS NO"I'O[3LIGATED.'1�0 APPECT SECONDARY MARKET TRADING FOR THG C�R"I�II�ICATE.CLOSING DATr IS E$TIMATI:D TO BE WITHIN 30 UAYS OF THE DA'1'F.OF ISSUE. NO PERSON HAS BEGN AUTHORIZED TO GIVI: ANY 1NFORMA'1'ION OR TO MAKL: ANY REPRESENTA"I�IONS OTHER THAN TI�OSE CONTAINGD W "THIS OFrICIAI. STATEMENT W CONNEC'TION W'I"I H 'I HE OFFERS MAUE HEREBY, ANU IF GNEN OR MADL:, SUCH INFORMA'I�ION OR RGPRGStiNTAT10NS MUS"I� NO"� BE Rr1.lIiD UPON AS 1IAVING E3EGN AU��HORIZ[iD BY "1'HE CI�I'Y OR THE UNDERVI%RI"I�f:R(S). N6IIHER THF: DELIVERY OF "I�HIS OFFICIAI. STA'IEMEN"1' NOR ANY SALL I1rR[iUNDGR SI�ALL UNDFR ANY CIRCUMS'IANCGS CREATIi ANY IMPI.ICATION TIIA"i I�HF,RF HAS l3GEN NO CHANGI' IN"I�HE AFEAIRS OP"IHL�CITY SINCI:��Ill DATE HEREOF. 1�I11S OFFICIAI,S'TA'I�EMI:N'T DOES NOT CONSTITUTE AN OI�FrR OR SOI.IC:1"I'A'f10N W ANY JURISDICTION 1N WHICII SUCH OFFER OK SOLICITATION 1S NO"f AU�'HORI7,GD, OR IN WIIICII 'I�III� PGRSON MAKING SUCH O��IiR OR SOLICI'I'ATION IS NOT QUAL1FIf:D"I�O DO SO,OR TO ANY P�RSON TO WI IOM 1'I'1S UNI.AWNUL TO MAKG SU('li OFFER OR SOI.ICI'I�A"I�ION.THE IM�ORMATION SE'l�FOR'I�II I IIiRL-IN HAS BI:EN 0[3TAWEll FROM�fHE C1TY AND O"fHf:R SOURC[:S WHICI�ARE BELIEV[�:D�I�O BE RELIABLI:.[3UT IT IS NOT GUAKAN"IEED AS T�O nCCURACY OR COMPLEIENFSS BY. AND IS NOT TO [3F CONS'IRUFD AS A RI:PRFSEN"I�A7�ION 13Y. "t'HE UNDERWRI'I�ER(S). SUMMARY OF OFFERING City of Scandia,Minnesota $570,000 General Obligation Equipment Certificates of Indebtedness,Series 2013A (Book-Entry Only) AMOUNT- $570,000 ISSUER- Ciry of Scandia,Minnesota(the"City"or the"Issuer") AWARD DATE- Tuesday,June 18,2013 LJNDERWRITER- Northland Securities Inc.,Minneapolis,Minnesota,(the"Underwriter"45 South 7th Street,Suite 2000,Minneapolis, Minnesota 55402,telephone:612-851-5900 or 800-851-2920) TYPE OF ISSUE- General Obligation Equipment Certificates of Indebtedness, Series 2013A (the"Certificates" or the "Issue"). See Authoriry and Purpose as well as Security/Sources and Uses of Funds herein for additional information. AUTHORITY,PURPOSE &SECURITY- The General Obligation Equipment Certificates of Indebtedness,Series 2013A (the"Certificates")aze being issued by the Ciry of Scandia, Minnesota (the "Ciry") pursuant to Minnesota Statutes, Chapters 475 and 412301, as amended.Proceeds of the Certificates will be used to finance the purchase of a fire truck and a dump truck and to pay costs associated with issuance of the Certificates. The Certificates are valid and binding general obligations of the City and are payable from ad volorem taxes. The full faith and credit of the Ciry is also pledged to their payment.In the event of any deficiency in the Debt Service Account established for this Issue,the City has validly obligated itself to levy additional ad valorem taxes upon all of the taxable property within the City,without limitation of amount.See Authoriry and Purpose as well as Securiry/Sources and Uses of Funds herein for additional information. DATE OF ISSUE- July 1,2013 INTEREST PA1D- Semiannually on each January 1 and July l, commencing January 1,2014,to registered owners of the Certificates appearing of record in the bond register as of the close of business on the fifteenth day(whether or not a business day)of the calendar month of such interest payment date(the"Record Date"). MATURITIES- 07/Ol/14 $55,000 07/Ol/17 $55,000 07/O1/20 $60,000 07/O1/22 $60,000 07/Ol/15 55,000 07/Ol/18 55,000 07/O1/21 60,000 07/Ol/23 60,000 07/O1/16 55,000 07/O1/19 55,000 REDEMPTION- The Certificates maturing on July 1, 2020 and thereafter are subject to redemption, in whole or in part,on July l, 2019,and on any date thereafter at a price of par plus accrued interest. See Description of the Certifrcates herein for information. BOOK-ENTRY- The Certificates will be issued as fully registered and,when issued,will be registered in the name of Cede&Co.,as nominee of The Depository Trust Company,New York,New York,to which principal and interest payments will be made. Individual purchases will be made in book-entry form only, in the principal amount of$5,000 or any whole multiple thereof.Purchasers will not receive physical delivery of the Certificates. PAYING AGENT/REGISTRAR- Northland Trust Services Inc., Minneapolis,Minnesota TAX DESIGNATIONS- NOT Private Activity Bonds—The Certificates are not"private activity bonds" as defined in Section 141 of the Internal Revenue Code of 1986,as amended(the Code). Bank Oualified TaY-Exempt Obli ations - The Ciry will designate the Certificates as "qualified tax-exempt obligations"for purposes of Section 265(b)(3)of the Code. LEGAL OPINION- Eckberg,Lammers,Briggs,Wolff&Vierling,P.L.L.P. BOND RATING- The City will not apply for an undedying bond rating from either Moody's Investors Service or Standard&Poor's Ratings Service. CLOSING- Estimated to be within 30 days of the date of issuance. PRIMARY CONTACTS- Kristina Handt,City Administrator,City of Scandia,Minnesota 651-433-2274 Monte Eastvold,Vice President,Northland Securities,Inc.,612-851-5904 —2— CITY OF SCANDIA,MINNESOTA PRINCIPAL CITY OFFICIALS Elected Officials Citv Council Name Position Term E�ires Randall Simonson Mayor O1/O1/l5 Chris Ness Council Member O1/01/l7 Sally Swanson Council Member O 1/O 1/15 Jim Schneider Council Member O1/O1/15 Dan Lee Council Member O 1/O 1/17 Primary Contacts Kristina Handt City Administrator Colleen Firkus City Treasurer Brenda Eklund Deputy City Clerk Nick Vivian(Eckberg, Lammers, Briggs, Wolff&Vierling, P.L.L.P) City Attorney Bond Counsel Eckberg, Lammers, Briggs, Wolff&Vierling, P.L.L.P. Stillwater, Minnesota Underwriter Northland Securities, Inc. Minneapolis, Minnesota -3- AUTHORITY AND PURPOSE The General Obligation Equipment Certificates of Indebtedness, Series 2013A (the "Certificates" or the "Issue") are being issued by the City of Scandia, Minnesota(the "City") pursuant to Minnesota Statutes, Chapters 475 and 412.301, as amended. Proceeds from issuance of the Certificates will be used to finance the purchase of a fire truck and a dump truck and to pay costs associated with issuance of the Certificates. SECURITY/SOURCES AND USES OF FUNDS Security The Certificates are valid and binding general obligations of the City and are payable from ad volorem taxes. The full faith and credit of the City is also pledged to their payment. In the event of any deficiency in the Debt Service Account established for this Issue,the City has validly obligated itself to levy additional ad valarem taxes upon all of the taxable property within the CiTy, without limitation of amount. Sources and Uses of Funds Following are the sources and uses of funds in connection with the issuance of the Certificates. Sources of Funds Par Amount of Certificates 570 000 Uses of Funds Deposit to Project Fund $ 544,454 Costs of Issuance/Underwriter's Discount 16,680 Capitalized Interest 8,846 Rounding Amount 20 Total Uses of Funds: � -4- DESCRIPTION OF THE CERTIFICATES Details of Certain Terms The Certificates will be dated, as originally issued, as of July 1, 2013, and will be issued as fully registered Certificates in the denominations of $5,000 or any integral multiple thereo£ Principal, including mandatory redemptions on the Certificates, if applicable, will be payable annually July l, commencing July 1, 2014. Interest on the Certificate will be payable semiannually on each January 1 and July 1, commencing January l, 2014. The Certificates when issued, will be registered in the name of Cede & Co. (the "Registered Holder"), as nominee of The Depository Trust Company, New York, New York ("DTC"), the initial custodian for the Certificates, to which principal and interest payments on the Certificates will be made so long as Cede & Co. is the Registered Holder of the Certificates. See `Book-Entry System" in Description of the Certificates herein for additional information. So long as the Book-Entry Only System is used, individual purchases of the Certificates will be made in book-entry form only, in the principal amount of$5,000 or any integral multiple thereof("Authorized Denominations"). Individual purchasers ("Beneficial Owners") of the Certificates will not receive physical delivery of bond certificates, and registration, exchange, transfer, tender and redemption of the Certificates with respect to Beneficial Owners shall be governed by the Book-Entry Only System. So long as the Book-Entry Only System is used, payments from Cede & Co., as the Record Holder, to the Beneficial Owners shall be governed by the Book-Entry Only System. If the Book-Entry Only System is discontinued, the principal of and premium, if any, on the Certificates will be payable upon presentation and surrender at the offices of the Paying Agent and Bond Registrar or a duly appointed successor. Interest on the Certificates will be paid by check or draft mailed by the Bond Registrar to the registered holders thereof as such appear on the registration books maintained by the Bond Registrar as of the close of business on the fifteenth day (whether or not a business day)of the calendar month of such interest payment date(the"Record Date"). Registration,Transfer and Exchange So long as the Book-Entry Only System is used, payments from Cede & Co., as the Record Holder, to the Beneficial Owners shall be governed by the Book-Entry Only System. If the Book-Entry Only System is discontinued, the Certificates may be transferred upon surrender of the Certificates at the principal office of the Bond Registrar, duly endorsed for transfer or accompanied by an assignment duly executed by the registered owner or his or her attorney duly authorized in writing. The Certificates, upon surrender thereof at the principal office of the Bond Registrar may also be exchanged for other Certificates of the same series, of any authorized denominations having the same form, terms, interest rates and maturities as the Certificates being exchanged. The Bond Registrar will require the payment by the Certificate holder requesting such exchange or transfer of any tax or governmental charge required to be paid with respect to such exchange or transfer. The Bond Registrar is not required to (i) issue, transfer or exchange any Certificate during a period beginning at the opening of business fifteen days before any selection of Certificates of a particular stated maturity for redemption in accordance with the provisions of the Certificate Indenture and ending on the day of the first mailing of the relevant notice of redemption or(ii)to transfer any Certificates or portion thereof selected for redemption. Optional Redemption The Certificates maturing on July 1, 2020 and thereafter are subject to redemption, in whole or in part, on July 1, 2019, and on any date thereafter at a price of par plus accrued interest. If redemption is in part, the selection of the amounts and maturities of the Certificates to be prepaid shall be at the discretion of the City. Notice of redemption shall be given by registered mail to the registered owner of the Certificates not less than 30 days prior to such redemption date. Book-Entry System The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for the Certificates(the"Certificates"). The Certificates will be issued as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized -s- representative of DTC. One fully-registered certificate will be issued for the Certificates, in the aggregate principal amount of such issue, and will be deposited with DTC. DTC, the world's largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.6 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries)that DTC's participants("Direct Participants")deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other arganizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has a Standard & Poor's rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtcc.org. Purchases of Certificates under the DTC system must be made by or through Direct Participants, which will receive a credit for the Certificates on DTC's records. The ownership interest of each actual purchaser of each Certificates (`Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Certificates are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Certificates, except in the event that use of the book- entry system for the Certificates is discontinued. To facilitate subsequent transfers, all Certificates deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Certificates with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Certificates; DTC's records reflect only the identity of the Direct Participants to whose accounts such Certificates are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices shall be sent to DTC. If less than all of the Certificates within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. -6- Neither DTC nor Cede & Ca (nor any other DTC nominee) will consent or vote with respect to Certificates unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Certificates are credited on the record date(identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend payments on the Certificates will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the City or Agent, on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with Certificates held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, Agent, or the City, subject to any statutory or regulatory reyuirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be reyuested by an authorized representative of DTC) is the responsibility of the City or Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to the Certificates at any time by giving reasonable notice to the City or Agent. Under such circumstances, in the event that a successor depository is not obtained,certificates for the Certificates are reyuired to be printed and delivered. The City may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, certificates for the Certificates will be printed and delivered to DTC. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that the City believes to be reliable, but the City of Scandia takes no responsibility for the accuracy thereof. LIMITED CONTINUING DISCLOSURE In order to assist the Underwriter(s) in complying with SEC Rule 15c2-12 (the "Rule"), pursuant to a resolution awarding the Issue and a Continuing Disclosure Certificate(the"Certificate")to be executed on behalf of the City on ar before Bond Closing,the City has and will covenant for the benefit of holders of the Certificates to annually provide certain financial and operating data,which information is customarily prepared by the City and is publicly available, to the Municipal Securities Rulemaking Board ("MSRB") in an electronic format prescribed by the MSRB, and to provide notices of the occurrence of certain events enumerated in the Rule to the MSRB. The specific nature of the Certificate, as well as the information to be contained in the annual report or the notices of material events is set forth in the Continuing Disclosure Certificate in substantially the form attached hereto as Appendix B. The City has never failed to comply in all material respects with any previous undertakings under the Rule to provide annual reports or notices of material events. A failure by the City to comply with the Certificate will not constitute an event of default on the Certificates (although holders will have an enforceable right to specific performance).Nevertheless, such a failure must be reported in accordance with the Rule and must be considered by any broker, dealer or municipal securities dealer before recommending the purchase or sale of the Certificates in the secondary market. Consequently, such a failure may adversely affect the transferability and liquidity of the Certificates and their market price. Please see Appendix B - Continuing Disclosure Certifrcate herein for additional information. UNDERWRITING The Certificates are being purchased from the City by Northland Securities Inc., Minneapolis, Minnesota (the "Underwriter"). The Underwriter will receive total compensation of$ in connection with the purchase of the Certificates assuming all Certificates are sold at the rates and yields set forth on the cover page of this Official -�- Statement, which compensation is % of the par value. The obligation to make such purchase is subject to certain terms and conditions,the approval of certain legal matters by counsel and certain other conditions. FUTURE FINANCING The City does not anticipate the need to finance any additional general obligation debt within the next three months. CERTIFICATE RATING The City will not apply for an underlying bond rating from either Moody's Investars Service or Standard & Poor's Ratings Service. LITIGATION As of May 14, 20l 3 the City is not aware of any threatened or pending litigation that questions the arganization or boundaries of the City ar the right of any of its officers to their respective offices or in any manner questioning their rights and power to execute and deliver the Certificates or otherwise yuestioning the validity of the Certificates. CERTIFICATION The City will furnish a statement to the effect that this Official Statement to the best of their knowledge and belief, as of the date of sale and the date of delivery, is true and correct in all material respects, and does not contain any untrue statements of a material fact or omit to state a material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. The City has always promptly met all payments of principal and interest on its indebtedness when due. LEGALITY Legal matters incident to the authorization and issuance of the Certificates are subject to the approving opinion of Eckberg, Lammers, Briggs, Wolff& Vierling, P.L.L.P. as to validity and tax exemption. A copy of such opinion will be available at the time of the delivery of the Certificates. See Appendix A — Proposed Form of Legal Opinion. Bond Counsel has not participated in the preparation of this Official Statement and is not passing upon its accuracy, completeness or sufficiency. Bond Counsel has not examined, nor attempted to examine, or verify, any of the financial or statistical statements or data contained in this Official Statement, and will express no opinion with respect thereto. TAX EXEMPTION General In the opinion of Bond Counsel, under federal and Minnesota laws, regulations, rulings and decisions in effect on the date of issuance of the Certificates, interest on the Certificates is excluded from gross income for federal income tax purposes and, to the same extent, from taxable net income of individuals, estates and trusts for Minnesota income tax purposes. Interest on the Certificates is included in taxable income of corporations and financial institutions for purposes of the Minnesota franchise tax. Certain provisions of the Internal Revenue Code of 1986, as amended (the "Code"), however, impose continuing requirements that must be met after the issuance of the Certificates in order for interest thereon to be and remain excludable from federal gross income and from Minnesota taxable net income. Noncompliance with such requirements by the City may cause the interest on the Certificate to be includable in goss income for purposes of federal income taxation and in taxable net income for purposes of Minnesota income taxation, retroactive to the date of issuance of the Certificates, irrespective in some cases of the date on which such noncompliance is ascertained. No provision has been made for redemption of or -g- for an increase in the interest rate on the Certificates in the event that interest on the Certificates becomes includable in federal gross income or Minnesota taxable income. Interest on the Certificates is not an item of tax preference includable in alternative minimum taxable income for purposes of the federal alternative minimum tax applicable to all taxpayers or the Minnesota alternative minimum tax applicable to individuals, estates and trusts, but is includable in adjusted current earnings in determining the federal alternative minimum taxable income of corporations for purposes of the federal alternative minimum tax. Interest on the Certificates may be includable in the income of a foreign corporation for purposes of the branch profits tax imposed by Section 884 of the Code and is includable in the net investment income of foreign insurance companies for purposes of Section 842(b) of the Code. In the case of an insurance company subject to the tax imposed by Section 831 of the Code, the amount which otherwise would be taken into account as losses incurred under Section 832(b)(5) of the Code must be reduced by an amount eyual to fifteen percent of the interest on the Certificates that is received or accrued during the taxable year. Section 86 of the Code requires recipients of certain Social Security and railroad retirement benefits to take into account, in determining the taxability of such benefits,receipts or accruals of interest on the Certificates. Passive Investment Income of S Corporations Passive investment income, including interest on the Certificates, may be subject to federal income taxation under Section 1375 of the Code for a Subchapter S corporation that has Subchapter C earnings and profits at the close of the taxable year if greater than twenty-five percent of the gross receipts of such Subchapter S corporation is passive investment income. Section 265 of the Code denies a deduction for interest on indebtedness incurred or continued to purchase or carry the Certificates or, in the case of a financial institution, that portion of the holder's interest expense allocated to interest on the Certificates, except with respect to certain financial institutions (within the meaning of Section 265(b)of the Code). Proposed Changes in Federal and State Tax Law From time to time, there are Presidential proposals, proposals of various federal committees, and legislative proposals in the Congress and in the states that, if enacted, could alter or amend the federal and state tax matters referred to herein ar adversely affect the marketability or market value of the Certificates ar otherwise prevent holders of the Certificates from realizing the full benefit of the tax exemption of interest on the Certificates. Further, such proposals may impact the marketability or market value of the Certificates simply by being proposed. No prediction is made whether such provisions will be enacted as proposed or concerning other future legislation affecting the tax treatment of interest on the Certificates. ln addition, regulatory actions are from time to time announced or proposed and litigation is threatened ar commenced which, if implemented or concluded in a particular manner, could adversely affect the market value, marketability or tax status of the Certificates. It cannot be predicted whether any such regulatory action will be implemented, how any particular litigation or judicial action will be resolved,or whether the Certificates would be impacted thereby. The above is not a comprehensive list of all federal tax consequences that may arise from the receipt of interest on the Certificates. The receipt of interest on the Certificates may otherwise affect the federal or State of Minnesota income tax liability of the recipient based on the particular taxes to which the recipient is subject and the particular tax status of other items or deductions. Bond Counsel expresses no opinion regarding any such conseyuences. All prospective purchasers of the Certificates are advised to consult their own tax advisors as to the tax consequences of, or tax considerations for, purchasing or holding the Certificates. Qualified Tax-Exempt Obligations The City will designate the Certificates as"qualified tax-exempt obligations" for purposes of Section 265(b)(3)of the Code relating to the ability of financial institutions to deduct from income for federal income tax purposes, interest expense that is allocable to carrying and acquiring tax-exempt obligations. "Qualified tax-exempt obligations" are treated as acquired by a financial institution before August 8, 1986. lnterest allocable to such obligations remains subject to the 20%disallowance under prior law. -9- CITY OF SCANDIA, MINNESOTA GENERAL INFORMATION Location/Access/Transportation The City is located in Washington County approximately 9 miles east of Forest Lake and 35 miles north of St. Paul. Access to the City is via State Highway 95 and 97 as well as County Roads 3. Area 24,960 Acres (39.0 Square Miles) Population 1990 Census 3,197 2010 Census 3,936 2000 Census 3,872 2013 Estimate� 3,967 Labor Force Data2 Comparative average labor force and unemployment rate figures for 2013 (through March) and year-end 2012 are listed below.Figures are not seasonally adjusted and numbers of people are estimated by place of residence. March 2013 2012 Civilian Unemployment Civilian Unemployment Labor Force Rate Labor Force Rate Washington County 134,067 537% 133,730 5.34% Minneapolis/St. Paul MSA 1,863,659 5.60 1,857,426 5.50 Minnesota 2,959,508 6.13 2,977,919 6.65 Income Data3 Comparative income levels are listed below for the City,the State of Minnesota and the United States. City of Scandia State of Minnesota United States Median Family Income $88,882 $73,046 $64,293 Per Capita Income 33,014 30,310 27,915 City Government The City of Scandia, formerly the Town of New Scandia, was organized as a City on January l, 2007. It is a Statutory City with an `Optional Plan A' form of government. It is governed by a mayor, elected at large for a two-year term and a four-member Council, with Council members elected to overlapping four-year terms. The Council exercises legislative authority and determines all matters of policy. The professional staff is appointed and consists of an administrator, consulting attorney,and an engineer. � Source:City of Scandia estimate. 2 Source:Minnesota Department of Employment and Economic Development. 3 Source:2007-2011 American Community Survey,U.S.Census Bureau(www.factfinder2.census.gov.com). —10— Municipat Enterprise Services The Waterworks svstem consists entirely of individual wells. The Sewer s, stY em consists of two systems. The "Uptown sewer system" serves the village area of Scandia including the Community Center. The total design flow is 4,086 gallons per day. The 2012 audited charges for services were $9,579. The "201" Community System serves properties around Big Marine Lake. The total design flow for the Bliss system is 19,800 gallons per day and the Anderson-Erickson system is 6,700 gallons per day. The 2012 audited charges for services were $70,696. Bargaining Units/I.abor Contracts There are no labor unions representing City employee groups. Employee Pension Programs The City employs 43 people, 5 full-time and 2 part-time, 24 firefighters, and 12 seasonal employees. The pension plan currently covers 31 of the City employees. The City participates in contributory pension plans through the Public Employees Retirement Association(PERA) under Minnesota Statutes, Chapters 353 and 356, which cover all full-time and certain part-time employees. PERA administers the General Employees Retirement Fund (GERF) and the Public Employees Police and Fire Fund (PEPFF), which are cost sharing, multiple-employer retirement plans. Benefits are established by State Statute and vest after three years of credited service. State Statute requires the City to fund current service pension cost as it accrues. Defined retirement benefits are based on a member's highest average salary for any five successive years of allowable service,age, and years of credit at termination of service. PERA issues a publicly available financial report that includes financial statements and required supplementary information for GERF (formerly "PERF") and PEPFF. That report may be obtained at ��_��_��.:mn���ra.or��, or by writing to PERA at 60 Empire Drive, #200, St. Paul, MN 55103-2088 or by calling (651) 296-7460 or 1-800-652-9026. The City makes annual contributions to the pension plans equal to the amount required by state statutes. GERF Basic Plan members and Coordinated Plan members were required to contribute 9.1% and 6.25%, respectively, of their annual covered salary in 2012. PEPFF members were required to contribute 9.6% of their annual covered salary in 2012. Effective January 1, 2013, State statute reyuires the City to contribute the following percentages of annual covered payroll: 11.78% for Basic Plan GERF members, 7.25% for Coordinated Plan GERF members, and 14.4%for PEPFF members(unchanged from 2012 contribution levels). Certificate Contributions to GERF and PEPFF have been as follows: Year Amount Year Amount 2012 $20,284 2007 $14,426 201 l 21,169 2006 13,000 2010 20,298 2005 10,000 2009 19,880 2004 12,000 2008 21,087 2003 9,000 -u- Volunteer firefighters of the Certificates are eligible for pension benefits through membership in the Voluntary Firefighter Retirement Plan administered by the Public Employees Retirement Association (PERA). The plan is an agent lump-sum defined benefit plan. Plan assets are managed by the Minnesota State Board of Investment and codified as Minnesota Statues Chapter 353G. State aids, investment earnings and City contributions fund the plan. The Plan provides for the payment of lump sum retirement benefits that are based on a specific dollar value paid for each year of credited service accumulated by a volunteer firefighter who terminates service and meets the minimum requirements for receipt of the benefits. The dollar value payable per year of service is determined by the sponsoring municipality ar entity at the time an election to participate in the Plan is made, selected from 20 possible benefit levels. An entity may elect to increase the benefit level after joining the Plan. A firefighter's service pension and survivor's retirement benefit accrues at the rate of$2,500 per year. The benefits are payable after age 50, a minimum of 5 years of "good-time" service credit in the Plan, and have served his or her employment relationship with the fire department for a minimum of 30 days. Other Postemployment Benefits(OPEB) The City has no plans that would result in an OPEB liability and, therefore, the City anticipates it will not incur any future explicit or implicit OPEB costs for its employees and,therefore, no liability will be recorded. Estimated Cash/Investment Balances as of Apri130,2013 (unaudited) Fund Name General Fund $ 1,062,O10 Debt Service Funds 410,781 Capital Projects Funds 409,362 Enterprise Funds 160,997 Total Estimated Cash/Investment Balances 2.043.150 (Remainder ofpage intentionally left blank) -12- Budget Summary 2012 2013 Adopted Adopted % Bud�et 2012 Actual Bud�et $ Chan�e ChanQe Revenues: General Property Taxes $2,056,163 $2,060,478 $2,181,774 $125,611 5.7% Intergovernmental Aid 14,959 51,199 135,597 120,638 88.9 Licenses and Permits 53,830 54,657 34,050 (19,780) (58.1) Fees/Fines and Charges 151,971 251,988 203,813 51,842 25.4 Other Revenues 325,837 72,O12 166,452 (159,385) 95.7 Total Revenues $2,602,760 $2,490,334 $2,721,686 $118,926 4.4% 2012 2013 Adopted Adopted % Bud�et 2012 Actual Bud�et Chan e ChanQe Ex_penditures: General Government $390,895 $389,764 $405,262 $14,367 3.8% Planning& Building 150,06] 295,217 68,796 (81,265) (329.1) Police 116,560 117,173 1 l 8,759 2,199 13 Fire 294,447 221,058 324,467 30,020 31.9 Parks and Comm. Cent. 99,146 82,326 106,511 7,365 22.7 Public Works 798,277 636,322 908,842 110,565 30.0 Debt Service 381,098 365,057 369,741 (11,357) (1.3) CapitalOutlay 197,514 174,293 433,000 235,486 59.7 Enterprise/Spec. Rev 170,945 Not included Not included N/A N/A Total Expenditures $2,598,943 $2,281,210 $2,735,378 $136,435 4.9% Excess of Revenues over (Under)Expenditures $ 3,817 $209,124 ($ 13,692) Residential Development There are approximately 1,507 housing units located within the City. There were five single-family homes and no multi-family homes constructed in 2012. Industrial Park(s) The City of Scandia has one privately-owned industrial park. CommerciaVIndustrial Development Building construction and commerciaUindustrial development completed within the past three years have been as follows: Product/ Description of Name Service Construction Security State Bank of Marine Banking New Commercial Building -13- Building Permits Building permits issued for the past nine years and a portion of the current year have been as follows: Commercial/ Industrial Residential Total Total Number Number Number Permit Year o Permits o Permits o Permits Valuation 2013 (Asof05/O1/13) 1 25 26 $ 759,281 2012 2 85 87 2,062,185 2011 5 ]08 113 2,833,009 2010 8 146 154 3,971,068 2009 1 184 185 3,145,364 2008 1 275 276 4,597,134 2007 2 128 130 4,357,597 2006 1 140 141 7,886,895 2005 1 179 180 16,049,295 2004 1 159 160 13,000,244 Banking/Financial Institutions Banking and financial services providers within the City include the following: Reported Bank Name Deposits/Assets Security State Bank of Marine $19,749,000� Education The City is served by two school districts. Independent School District No. 2144, Chisago Lakes which operates three elementary schools, grades Kindergarten through six; a middle school, grades six through eight; and a high school, grades nine through twelve. Combined enrollment at the three schools far the 2012/2013 school year is approximately 3,334. Independent School District No. 831, Forest Lakes which operates eight elementary schools, grades Kindergarten through six; one junior high school, grades seven through nine; a high school, grades ten through twelve, and an alternative learning center grades six through twelve. Combined enrollment at the eleven schools for the 2012/2013 school year is approximately 6,664. Post secondary education is available at the following schools: Distance School Tvpe Location From the Citv Metropolitan State University Public University St. Paul 25 Century College Private College White Bear Lake 25 University of Minnesota Public University Minneapolis 28 Bethel University Private University St. Paul 30 University of St. Thomas Private University St. Paul 38 � Source:Federal Deposit Insurance Corporation(FDIC)www2.fdic.gov.Reported deposits as of June 30,2012. -14- Major Empioyers� Following are the major employers within the City: Number of Emplover Name Product/Service Employees2 Scandia Elementary Education 50 City of Scandia City Government 43 P N Products Plastic Products 25 Security State Bank Banking 21 Am-Tec Designs Metal Fabrication 8 Commercial Asphalt Co. Asphalt 5 Concepts in Wood Wooden Furniture 5 Todd's Home Center Gas and Hardware 5 Peterson Excavating Excavating Service 3 Largest Taxpayers3 Following are the ten largest taxpayers within the City: Percent of 2012/2013 2012/2013 Total Tax Taxable Tcrx Capaciry Name Classi�cation Market Value Ca aci ($5.687.699)4 Tiller Corp Commercial $5,422,300 $ 73,313 1.29% Xcel Energy Public Utility 3,072,200 61,444 1.08 Big Marine Lake Development Commercial 4,748,900 58,115 1.02 Individual Agricultural 2,164,800 23,766 0.42 Individual Residential 1,991,100 23,639 0.42 Individual Residential 1,206,400 23,378 0.41 MN Energy Resources Corp Public Utility 1,173,800 22,726 0.40 Soo Line Railroad Co Railroad 836,800 16,736 0.29 Scandia Four Commercial 749,700 14,244 0.25 Northern Natural Gas Co. Public Utility 698,100 13.962 0.25 1 2 5.83% � Source:The City,FDIC website,and the 2013 Manufacturers Register. 2 Indudes fWl-time,part-time,and seasonal employees. 3 As repor[ed by Washington County. 4 Before taac increment adjustment. —15— MINNESOTA VALUATIONS; PROPERTY TAX CLASSIFICATIONS Market Value State Law defines the "market value" of real properiy as the usual selling price at the place where the property to which the term is applied shall be at the time of assessment; being the price which could be obtained at a private sale or an auction sale, if it is determined by the assessor that the price from the auction sale represents an arm's- length transaction. The assessor uses sales and market value income trends to estimate the value of property in an open market transaction. This value is also called"estimated market value". This value is set on January 2 of each year. Property taxes levied each year are based on the value of property on January 2 of the preceding year. According to Minnesota Statutes, Chapter 273, all real property subject to taxation is to be appraised at maximum intervals of five years. Taxable Market Value The"taxable market value" is the amount used for calculating property taxes. The taxable market value may differ from the estimated market value due to the application of special programs that exclude value from taxation. These programs currently include, but are not limited to, Homestead Market Value Exclusion and Green Acres. Market Value Exclusion In 2011, the State Legislature eliminated the Homestead Market Value Gedit. The Credit was an amount paid by the State to local taxing jurisdictions to reduce taxes paid by homesteaded property. The Credit has been replaced by a Homestead Market Value Exclusion. The Exclusion reduces the taxable market value (beginning with t�es payable 2012) of a jurisdiction by excluding a portion of the value of homesteaded property from taxation. For a homestead valued at $76,000 or less, the exclusion is 40 % of market value, yielding a maximum exclusion of $30,400 at $76,000 of market value. For a homestead valued between $76,000 and $413,800, the exclusion is $30,400 minus 9% of the valuation over $76,000. For a homestead valued at $413,800 or more, there is no valuation exclusion. Sales Ratio The Minnesota Department of Revenue conducts the Assessment Sales Ratio Study to compare real estate sales prices to local assessor valuations. The State uses the study results to ensure consistency in property assessments across the state. There are three different sales ratio studies that cover three distinct time periods. The 12-month study includes sales that occur from October 1 of a given year to September 30 of the following year and are compared to market values used for property taxation. The median ratio from the 12-month study is the sales ratio used to calculate indicated and economic market values. Economic and Indicated Market Value "Economic market value"and "indicated market value"reflect adjustments made to account far the effects of the sales ratio. The economic market value is determined by dividing the estimated market value of the jurisdiction by the sales ratio. Economic market value provides an estimation of the full value of property if it were valued at 100%of its value in the marketplace(prior to the application of legislatively mandated exclusions). The indicated market value is determined by dividing the taxable market value of the jurisdiction by the sales ratio. This value represents an estimation of the "full value" of property for taxation, after the deduction of legislative exclusions. Note: Economic market values are currently only available from the Minnesota Department of Revenue for cities and counties, so school districts will continue to use indicated market values until more current information becomes available. -16- Net Tax Capacity Property taxes are calculated on the basis of the "net tax capacity value". Net tax capacity is calculated by multiplying the taxable market value of a parcel by the statutory class rate for the use classification of the properiy. These class rates are subject to revisions by the State Legislature. The table following this section contains current and historical class rates for primary property classifications. Tax Cycle Minnesota local government ad valorem property taxes are extended and collected by the various counties within the state. The process begins in the fall of every year with the certification, to the county auditor, of all local taxing districts' property tax levies. Local tax rates are calculated by dividing each taxing district's levy by its net tax capacity. One percentage point of local tax rate represents $1 of tax per $100 net tax capacity. A list of taxes due is then prepared by the county auditor and turned over to the county treasurer on or before the first Monday in January. The county treasurer is responsible for collecting all property taxes within the county. Real estate and personal property tax statements (excluding manufactured homes) are to be mailed out no later than March 31, and manufactured home property tax statements no later than July 15. The due dates for payment of real and personal property taxes (excluding manufactured homes) are one-half on ar before May 15 (May 31 for resorts) and one- half on or before October 15 (November 15 for farm property). Personal property taxes for manufactured homes become due one-half on or before August 31 and one-half on or before November 15. Delinquent property taxes are penalized at various rates depending on the type of property and the length of delinquency. Tax Levies for General Obligation Bonds(Minnesota Statutes,Section 475.61) State Law requires the governing body of any municipality issuing general obligations, prior to delivery of the obligations, to levy by resolution a direct general ad valorem tax upon all taxable property in the municipality to be spread upon the tax rolls for each year of the term of the obligations. The tax levies for all years shall be specified and such that if collected in full will, together with estimated collections of special assessments and other revenues pledged for the payment of said obligations, produce at least five percent in excess of the amount needed to meet the principal and interest payments on the obligations when due. Such resolution shall irrevocably appropriate the taxes so levied and any special assessments or other revenues so pledged to the municipality's debt service fund or a special debt service fund or account created for the payment of one or more issues of obligations. The governing body may, at its discretion, at any time after the obligations have been authorized, adopt a resolution levying only a portion of such taxes, to be filed, assessed, extended, collected and remitted, and the amount therein levied shall be credited against the tax required to be levied prior to delivery of the obligations. The recording officer of the municipality shall file in the office of the county auditor of each county in which any part of the municipality is located a certified copy of the resolution, together with full information regarding the obligations for which the tax is levied. No further action by the municipality is required to authorize the extension, assessment and collection of the tax, but the municipality's liability on the obligations is not limited thereto and its governing body shall levy and cause to be extended, assessed and collected any additional taxes found necessary for full payment of the principal and interest. The auditor shall annually assess and extend upon the tax rolls the amount specified for such year in the resolution, unless the amount has been reduced as authorized below or, if the municipality is located in more than one county,the portion thereof that bears the same ratio to the whole amount as the tax capacity value of taxable property in that part of the municipality located in the county bears to the tax capacity value of all taxable property in the municipality. Tax levies so made and filed shall be irrevocable, except that if the governing body in any year makes an irrevocable appropriation to the debt service fund of moneys actually on hand or if there is on hand any excess amount in the debt service fund, the recording officer may certify to the county auditor the fact and amount -»- thereof and the auditor shall reduce by the amount so certified the amount otherwise to be included in the rolls next thereafter prepared. All such taxes shall be collected and remitted to the municipality by the county treasurer as other taxes are collected and remitted, and shall be used only for payment of the obligations on account of that levied or to repay advances from other funds used for such payments, except that any surplus remaining in the debt service fund when the obligations and interest thereon are paid may be appropriated to any other general purpose by the municipality. Levy Limits The State Legislature periodically enacts limitations on the ability of cities and counties to levy property taxes. Levy limits were reenacted in 2008 and applied to all counties and all cities with a population over 2,500 for taxes payable in 2009-201 l. Levies "to pay the costs of the principal and interest on bonded indebtedness" were designated special levies and could be levied in addition to the amount allowed by levy limitations. Although the Issuer is not currently subject to statutory levy limitations, future legislation may be enacted that affects the ability to levy property taxes. (Remainder of page intentionally left blank) -18- The following is a partial summary of these factors: Property Tax Classifications Class Rate Schedule 2008/ 2009/ 2010/ 2011/ 2012/ Class Tvpe ofPropertv 2009 2010 2011 2012 2013 1 a Residential Homestead: First$500,000 1.00% 1.00% 1.00% 1.00% 1.00% Over$500,000 l.25 1.25 1.25 1.25 1.25 1 c Commercial seasonal-residential recreational- under 250 days and includes homestead First$600,000 .50 .50 .50 .50 .50 $600,000-2,300,000 1.00 1.00 1.00 1.00 1.00 Over$2,300,OOOt 1.25 1.25 1.25 1.25 1.25 2a Aericultura]Homestead-House,Garage.One Acre: (HGA) First$500,000 1.00 1.00 1.00 1.00 1.00 Over$500,000 1.25 1.25 1.25 l 25 1.25 Remainder of Farm*- First$890,000 .50 Over$890,000 l.00 First$1,010,000 .50 Over$l,O 10,000 1.00 First$1,140,000 .50 Over$1,140,000 1.00 First$1,210,000 .50 Over$1,210,000 1.00 First$1,290,000 .50 Over$1,290,000 1.00 A�ricultural Homestead Land� 1.00 1.00 1.00 1.00 1.00 2a Non-Homestead Agricultural Productive Land" 1.00 1.00 1.00 1.00 1.00 2b Non-Homestead Rural Vacant Land2 1.00 1.00 1.00 1.00 1.00 3a Commercial/Industrial and Public Utilitvt First$150,000 1.50 1.50 1.50 1.50 1.50 Over$150,000 2.00 2.00 2.00 2.00 2.00 4a Apartment(4+units, incl.private for-profit hospitals) l.25 1.25 1.25 1.25 l.25 4b(4) Unimproved Residential 1.25 1.25 1.25 1.25 1.25 Residential Non-Homestead(Single Unit) 4bb(1) First$500,000 1.00 1.00 1.00 1.00 1.00 Over$500,000 1.25 1.25 1.25 1.25 1.25 4bb(2) A�Non-Homestead(Single unit,garage& 1 acre): First$500,000 l.00 1.00 1.00 1.00 1.00 Over$500,000 1.25 1.25 1.25 1.25 125 4c(1) Seasonal Residential Recreational/Commercialfi 1.00 1.00 1.00 1.00 1.00 (Resort): First$500,000 1.25 1.25 1.25 1.25 1.25 Over$500,000 4c(2) 4ualifvingg.olf courses 1.25 1.25 1.25 1.25 1.25 4c(12) Seasonal Residential Recreationalt Non-Commercial(Cabin)3: First$76,000* 1.00 1.00 $76,000-$500,000" 1.00 1.00 Over$500,000* 1.25 1.25 4d Qualifvine Low-Income Rental Housin� .75 .75 .75 .75 .75 t Subject to the state general property tau. " Exempt from referendum market value based t�es. � Homestead remainder&non-homestead;includes structures. 2 Homestead remainder&non-homestead;includes minor ancillary structures. 3 Note: For purposes of the state eg neral propertv tax onlv, non-commercial class 4c(1) seasonal residential recreational property has the following class rate structure:First$76,000 0.40%,$76,001-$500,000 1.00%and over$500,000 1.25%. -19- CITY OF SCANDIA, MINNESOTA ECONOMIC AND FINANCIAL INFORMATION� Valuations Estimated Net Ta� Market Yalue Capacity 2012/2013 2012/2013 Real Property $ 580,475,900 $ 5,588,574 Personal Property 5,142,300 99,125 10%of 200KV Powerlines - - - ( 1,612) Fiscal Disparities2 -- - (Contribution to Pool) -- - ( 127,505) Distribution from Pool -- - 273,939 Total Adjusted Valuation 585.618.200 5.832,521 Economic Market Value Economic market value (described in detail under "MINNESOTA VALUATIONS, PROPERTY TAX CLASSIFICATIONS" herein) has been calculated as shown below, and is also used in the "Summary of Debt and Debt Statistics." $ 591,654,100 Estimated Market Value of real property (as of January 2, 2012 for taxes payable in 2013) — 93.4°/a3 Minnesota Department of Revenue 2011 Sales Assessment Ratio _ $633,462,634 Economic Market Value of real property + 5,290,500 Estimated Market Value of personal property = 638.753.134 Economic Market Value of real and personal property used in "Summary of Debt and Debt Statistics" Sales Ratios4 Sales ratios over the past eight years have been as follows: Year Ratio Year Ratio 2011 93.4°/a 2007 88.7% 2010 103.8 2006 80.9 2009 104.1 2005 75.1 2008 96.3 2004 74.4 � Property valuations,taY rates,and tax levies and collections are provided by Washington County. 2 Fiscal Disparities Law The 1971 Legislature enacted a "fiscal disparities law" which allows all the Twin City Metropolitan Area Municipalities to share in commercial/industrial growth, regardless of where the growth occurred geographically. Forty percent (40%) of every metropolitan municipality's growth in commercial/industrial assessed valuation is pooled then redistributed to all municipalities on the basis of population and per capita valuation after the tax increment and fiscal disparity adjustments. 3 The 2011 Sales Ratio of 93.4%means the Estimated Market Value of all real property is 93.4%of the probable selling price of the property. 4 The 2012 Sales Ratio is not yet available.The Sales Ratios for 2004-2010 are based on the Taxable Mazket Value(rather than Estimated Market Value)of all real property in relation to the probable selling price of the property. —20— Valuation Trends(Real and Personal Property) In 2011, the State Legislature eliminated the Homestead Market Value Credit for homestead residential property and replaced it with "Homestead Market Value Exclusion" (see "MINNESOTA VALUATIONS; PROPERTY TAX CLASSIFICATIONS" herein). Beginning with taxes payable in 2012, this results in a reduction in the Taxable Market Value of residential homestead property and, consequently, also in the Indicated Market Value. Valuation trends over the past nine years have been as follows: Tax Tccx Levy Year/ Capacity Capacity Collection Economic Indicated Estimated Taxable Before Tax After Tax Year Market Value Market Value Market Yalue Market Yalue Increments� Increments2 2012/2013 $638,753,134 N/A $596,944,600 $555,474,800 $5,687,699 $5,832,521 2011/2012 626,636,840 N/A 585,618,200 540,565,900 5,544,604 5,764,433 20l 0/20l l N/A $543,460,983 N/A 564,112,500 5,777,932 6,062,485 2009/2010 N/A 605,837,176 N/A 630,676,500 6,465,388 6,743,832 2008/2009 N/A 640,265,005 N/A 616,575,200 6,329,655 6,569,188 2007/2008 N/A 724,485,795 N/A 642,618,900 6,609,372 6,802,932 2006/2007 N/A 749,533,993 N/A 606,373,000 6,218,565 6,365,920 2005/2006 N/A 710,447,537 N/A 533,546,100 5,437,461 5,575,029 2004/2005 N/A 622,318,O11 N/A 463,004,600 4,722,292 4,850,145 Breakdown of Valuations 2012/2013 Tax Capacity, Real and Personal Property(before tax increment and fiscal disparities adjustments): Residential Homestead $ 3,712,977 65.28% Agricultural 509,170 8.95 Commercial& Industrial 237,173 4.17 Public Utility 6,248 0.11 Railroad 16,736 0.29 Residential Non-Homestead 756,915 ]3.31 Seasonal Recreational-Residential 349,355 6.14 Personal Property 99.125 1.74 Totals: 5.687.699 100.00% � Also before fiscal disparity adjustments. Z Also after fiscal disparity adjustments. -21- Tax Capacity Rates Tax capacity rates for a City resident within ISD No. 831, Forest Lake, for the past five-assessable/collection years have been as follows: 2008/09 2009/10 2010/11 2011/12 2012/13 Tax Tax Tcrx Tax Tczr Levy Year/ Capacity Capacity Capacity Capacity Capacity Collection Year Rates Rates Rates Rates Rates Washington County 26.371% 27.775% 29.772% 31.939% 34.225% City of Scandia 28.521 28.446 33.557 35.785 37.294 ISD No. 831, Forest Lake 13.455 12.895 15.411 17331 22.018 Washington County HRA 1.016 1.071 1.143 1.224 1311 Metropolitan Council 0.788 0.818 0.832 0.937 1.043 Mosquito Abatement 0.472 0.477 0.494 0.536 0.583 Regional Rail Authority 0.075 0.193 0.196 0.211 0.226 Misc. Watershed Districts� 8.141 8.124 8.329 9.478 10.384 Totals: 78.839% 79.799% 89.734% 97.441% 107.084% Market Value Rates: 2008/2009 2009/2010 2010/2011 2011/2012 2012/2013 ISD No. 831 (Forest Lake) 0.13385% 0.13710% 0.15293% 0.15390% 0.17389% Tax Levies and Collections2 Levy Year/ 2008/ 2009/ 2010/ 2011/ Collection Year 2009 2010 2011 2012 Original Gross Tax Levy $ 1,860,882 $ 1,919,044 $2,014,142 $ 2,055,684 Property Tax Credits3 ( 63,316) ( 59,786) � 75.265� ( 9,746) Levy Adjustments ( 568) 3,330 475 851 Net Tax Levy $1,798,134 $ 1,862,588 $ 1,939,352 $ 2,046,789 Amount Collected during Collection Year $ 1,750,760 $ 1,823,122 $ 1,906,013 $ 2,014,693 Percent of Net Tax Levy Collected 97.37% 97.88% 98.28% 98.43% Amount Delinquent at end of Collection Year $ 47,374 $ 39,466 $ 33,339 $ 32,096 Delinquencies Collected as of 12/31/12 ( 34,983) ( 23,531) ( 24,310) ( 0) Delinquencies Abated or Cancelled as of l2/31/12 ( 6,266) ( 8,184) 1,271 ( 0) Total Delinquencies Outstanding as of 12/31/12 $ 6,125 $ 7,751 $ 10,300 $ 32,096 Percent ofNet Tax Levy Collected 99.66% 99.58% 99.47% 98.43% Note: 2012/2013 Net Tax Levy $2,]62,173 1 Three various watershed districts consisting of the following: Rice Creek Watershed District,Camelian-Marine Watershed District,and Comfort Lake- Forest Lake Watershed District. 2 2012/2013 property taxes are currently in the process of collection/reporting and updated figures aze not yet available from Washington County. 3 Property ta�c credits are aids provided by the State of Minnesota and paid directly to the City. -22- SUMMARY OF DEBT AND DEBT STATISTICS Statutory Debt Limitl Minnesota Statutes, Section 475.53 states that a city or county may not incur or be subject to a net debt in excess of three percent(3%) of its estimated market value. Net debt is, with limited exceptions, debt paid solely from ad valorem taxes. Computation of Legal Debt Margin as of June 2, 20l 3: 2012/2013 Estimated Market Value $ 596,944,600 Multiplied by 3% x .03 Statutory Debt Limit 17.908338 $685,000 G.O. Building Crossover Refunding Bonds, Series 2005A $315,000 $570,000 G.O. Equipment Certificates of Indebtedness, Series 2013A(This issue) 570,000 Less outstanding debt applicable to debt limit: $ 885,000 Legal debt margin 17.023.338 (Remainder of page intentionally left blank) � Effective June 2, 1997 and pursuant to Minnesota Statutes 465.71,any lease revenue or public project revenue bond issues/agreements of $1,000,000 or more are subject to the statutory debt limit. Lease revenue or public project revenue bond issues/agreements less than $1,000,000 are not subject to the statutory debt limit. —23— SCANDIA,MINNESOTA GENERAL OBLICATIONDEBT PAYABLE FROM TAXES (As ojJune 2,2013,Plus This Issue) This Issue Purpose: G.O. G.O. Building Equipment Crossover Re- Certificates of funding Bonds, Indebtedness, Series 2005A Series 20I3A Dated: OS/O1/OS 07/O1/13 Original Amount: $685,000 $570,000 Maturity: 1-Dec 1-Jul TOTAL TOTAL Interest Rates: 335-4.20% ------- PRINCIPAL: PRIN&INT: 2013 $100,000 $0 $100,000 $106,438 2013 2014 105,000 55,000 160,000 178,575 2014 2015 110,000 55,000 165,000 178,720 2015 2016 0 55,000 55,000 63,550 2016 2017 0 55,000 55,000 62,863 2017 2018 0 55,000 55,000 62,175 2018 2019 0 55,000 55,000 61,213 2019 2020 0 60,000 60,000 65,250 2020 2021 0 60,000 60,000 64,050 2021 2022 0 60,000 6Q000 62,850 2022 2023 0 60,000 60,000 61,500 2023 $315,000 $570,000 $885,000 $967,183 (U NOTE:93%OF GENERAL OBLIGAT/ON DEBT PAYABLE FROM TAXES WILL BE RETIRED WITHIN TEN YEARS. (I) These bond.c crossover reJunded 5665,000 oftlse SI,200,000 General Ob/igation Building Bonds of2000,daled Fe6ruary I,2000.Malurities 2009 through 2015,inclusive,will be caAed jor redemption on December 1,2008,at a price ojpar plus accrued interest. -24- SCANDIA,MINNESOTA GENERAL OBLIGATION DEBT PAYABLE FROM SPECIAL ASSESSMENTS (As of June 2,2013) Purpose: G.O. Improvement Bonds, Series 2007A Dated: OS/O1/07 Original Amount: $1,430,000 Maturity: ]-Dec TOTAL TOTAL Interest Rates: 3.65-410% PRINCIPAL: PR/N&INT.• 2013 $135,000 $135,000 $147,809 2013 2014 ]30,000 130,000 15Q388 2014 2015 125,000 125,000 140,188 20]5 2016 125,000 125,000 135,188 2016 2017 125,000 125,000 130,125 2017 $640,000 $640,000 $703,697 NOTE:100%OF GENERAL OBLIGATION DEBT PAYABLE FROM SPEC/AL ASSESSMENTS WILL BE RETIRED WITNIN TEN YEARS. —25— Indirect Debt* 2012/2013 2012/2013 Taz Outstanding Tax Capacity Percentage General Tarpayers' Capacity Value Applicable Obligation Share Issuer Value��� in Ci �>> in Ci Debt o Debt Washington County $ 244,593,651 $5,832,521 238% $145,345,000�2� $ 3,459,211 ISD No. 831, Forest Lake 44,049,942 4,987,642 1132 30,085,000�3� 3,405,622 ISD No. 834, Stillwater 77,090,993 2,042 .003 50,935,000�4� 1,349 ISD No. 2144, Chisago Lakes 18,]30,641 842,837 4.65 18,740,000�5� 871,410 Metropolitan Council 2,705,979,151 5,832,521 .22 618,674�6> 1,361 Metro Transit 2,371,125,078 5,832,521 .21 3]7,355,092��� 666,447 Total Indirect Debt: 8.405.400 (Remainder of page intentionally left blank) * Only those taxing jurisdictions with general obligation debt outstanding are included. Debt figures do not include non-general obligation debt,short-term general obligation debt,or general obligation tax/aid anticipation certificates of indebtedness. �>> Tax Capacity Value is after taY increment deduction and fiscal disparity contribution and distribution values. �2� Washington County has bond indebtedness of$188,369,349 as of May 2, 2013. Revenue bonds in the amount of$43,024,349 are excluded from the amount above since the bonds are payable from various revenue sources. �3� ISD No 831,Forest Lake has bond indebtedness of$30,085,000 as of May 2,2013. �4> ISD No. 834, Stillwater has bond indebtedness of $60,935,000 as of May 2, 2013. Lease revenue bonds in the amount of $]0,000,000 are excluded from the above since the bonds are annual appropriated limited obligations. �5�ISD No.2144,Chisago Lakes has bond indebtedness of$18,740,000 as of May 2,2013. �6� Deductions:(A)$1,078,268,995 Metropolitan Waste Control Commission Debt as of December 31,2012. Note 1: Debt Service on(A)above is 100%self supported from revenues of the Metro Sanitary Sewer System,although the bonds are full faith and credit bonds. Note 2: The only tax supported bond indebtedness is$10,975,000 as of December 31,2012, less non-escrowed funds for debt of $]0,356,326 as of December 31,2012. ��� Metro Transit has bond indebtedness of $380,605,000 as of December 31, 2012, less non-escrowed funds for debt service of $63,249,908 as of December 31, 2012. This debt is issued by the Metropolitan Council for all public transit operations in the transit district,of which Metro Transit is the largest public transit provider,and is payable from ad valorem taYes levied on all taxable property within the Metropolitan Transit District. —26— General Obligation Debt Bonds secured by special assessments $ 640,000 Bonds secured by taxes(includes a portion of this issue) 885.000 Subtotal General Obligation Direct Debt $ 1.525,000 Add taxpayers' share of indirect debt 8,405,400 Net Direct and Indirect Debt 9.930.400 Facts for Ratio Computations 2012/2013 Economic Market Value(real and personal property) $638,753,134 Population(2013 estimate) 3,967 Debt Ratios Direct Indirect Direct and Debt Debt Indirect Debt To Economic Market Value 0.24% 1.32% 1.56% Per Capita $384 $2,119 $2,503 -z�- APPENDIX A Proposed Form of Legal Opinion ECKBERG�a LAN'[M�RS i t1TTORN[YS AT LA�� 1809 Northwestern Avenue, Suite 110 Stiliwater, Minnesota 55082 (651)439-2878 Fax(651)439-2923 www.ec kberglammers.com $570,000 General Obligation Equipment Certificates of Indebtedness Series 2013A City of Scandia,Minnesota We have acted as bond counsel to the City of Scandia,Minnesota(the"Issuer")in connection with the issuance by the Issuer of its General Obligation Equipment Certificates of Indebtedness, Series 2013A (the "Certificates"), originally dated as of July 1,2013,and issued in the original aggregate principal amount of$570,000. In such capacity and for the purpose of rendering this opinion we have examined certified copies of certain proceedings, certifications and other documents, and applicable laws as we have deemed necessary. Regarding questions of fact material to this opinion, we have relied on certified proceedings and other certifications of public officials and other documents furnished to us without undertaking to verify the same by independent investigation. Under existing laws, regulations, rulings and decisions in effect on the date hereof,and based on the foregoing we are of the opinion that: 1. The Certificates have been duly autharized and executed,and are valid and binding general obligations of the Issuer,enforceable in accordance with their terms. 2. The principal of and interest on the Certificates are payable from ad valorem taxes levied by the Issuer, but if necessary for the payment thereof additional ad valorem ta�ces are required by law to be levied on all taxable property located in the Issuer,which taxes are not subject to any limitation as to rate or amount. 3. Interest on the Certificates is excludable from gross income of the recipient for federal income tax purposes and, to the same extent, from t�able net income of individuals, trusts, and estates for State of Minnesota income tax purposes, and is not a preference item for purposes of the computation of the federal alternative minimum t�,or the computation of the Minnesota alternative minimum tax imposed on individuals,trusts and estates. However, such interest is taken into account in determining adjusted current earnings for the purpose of computing the federal alternative minimum tax imposed on certain corporations and is subject to Minnesota franchise taxes on corporations (including financial institutions) measured by income. The opinions set forth in this paragraph are subject to the condition that the Issuer comply with all requirements of the Internal Revenue Code of 1986, as amended,that must be satisfied subsequent to the issuance of the Certificates in order that interest thereon be, or continue to be, excludable from gross income for federal income tax purposes and, to the same extent, from taxable net income for State of Minnesota income tax purposes. The Issuer has covenanted to comply with all such requirements. Failure to comply with certain of such reyuirements may cause interest on the Certificates to be included in gross income for federal income tax purposes and t�able net income for State of Minnesota income tax purposes retroactively to the date of issuance of the Certificates. We express no opinion regarding federal or state t�consequences arising with respect to the Certificates other than as expressly set forth herein. 4. The rights of the owners of the Certificates and the enforceability of the Certificates may be limited by bankruptcy, insolvency, reorganization, moratorium, and other similar laws affecting creditor's rights generally and by equitable principles,whether considered at law or in equity. We have not been asked and have not undertaken to review the accuracy, completeness or sufficiency of the Official Statement or other offering material relating to the Certificates, and accardingly we express no opinion with respect thereto. This opinion is given as of the date hereof and we assume no obligation to update, revise, or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur. Dated July 9,2013 at Stillwater,Minnesota. - APPENDIX B Form of Continuing Disclosure Certiticate $570,000 City of Scandia,Minnesota General Obligation Equipment Certificates of Indebtedness Series 2013A CONTINUING DISCLOSURE CERTIFICATE July 1,2013 This Continuing Disclosure Certificate(the"Disclosure Certificate")is executed and delivered by the City of Scandia, Minnesota (the "Issuer") in connection with the issuance of its General Obligation Equipment Certificates of Indebtedness, Series 2013A, in the original aggregate principal amount of $570,000 (the"Certificates"). The Certificates are being issued pursuant to a resolution adopted by the City Council of the Issuer on June l8, 2013 (the "Award Resolution"). The Certificates are being delivered to Northland Securities, Ina (the "Purchaser")on the date hereof. Pursuant to the Award Resolution,the Issuer has covenanted and agreed to provide continuing disclosure of certain financial information and operating data and timely notices of the occunence of certain events. Section 1. Definitions. ln addition to the defined terms set forth in the Award Resolution, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section,the following capitalized terms shall have the following meanings: "Annual Report" means any annual report that includes financial information and operating data which is customarily prepared by the Issuer and is publicly available, which shall mean at a minimum the Issuer's Audited Financial Statements,as further described in Section 3 of this Disclosure Certificate. "Audited Financial Statements" means the Issuer's annual financial statements, prepared in accardance with generally accepted accounting principles("GAAP")for governmental units,as prescribed by the Governmental Accounting Standards Board("GASB"). "Certificates" means the General Obligation Equipment Certificates of Indebtedness, Series 2013A, issued by the Issuer in the original aggregate principal amount of$570,000. "Disclosure Certificate"means this Continuing Disclosure Certificate, executed and delivered by the Issuer. "EMMA"means the Electronic Municipal Market Access system,operated by the MSRB. "Final Official Statement" means the Final Official Statement, dated , which constitutes the final official statement delivered in connection with the Certificates and is available from the MSRB. "Fiscal Year"means the fiscal year of the Issuer. "Holder"means the person in whose name a Certificate is registered or a beneficial owner of such a Certificate. "Issuer" means the City of Scandia, Minnesota, which is the obligated person with respect to the Certificates. "Material Event"means any of the events listed in Section 4(a)of this Disclosure Certificate. "MSRB"means the Municipal Securities Rulemaking Board,located at 1900 Duke Street, Suite 600, Alexandria,VA 22314. "Participating Underwriter" means any of the original underwriter(s) of the Certificates (including the Purchaser)reyuired to comply with the Rule in cormection with the offering of the Certificates. "Purchaser"means Northland Securities,Inc. "Repository"means EMMA,or any successor thereto designated by the SEC. "Rule"means SEC Rule 15c2-12(b)(5), promulgated by the SEC under the Securities Exchange Act of 1934,as the same may be amended from time to time, and including written interpretations thereof by the SEC. "SEC"means the Securities and Exchange Commission. Section 2. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Issuer for the benefit of the Holder(s) of the Certificates in arder to assist the Participating Underwriter(s) in complying with the Rule. This Disclosure Certificate, together with the Award Resolution, constitutes the written agreement or contract for the benefit of the Holder(s) of the Certificates that is required by the Rule. Section 3. Provision of Annual Report. The Issuer shall provide, as soon as available, but not later than 12 months after the end of the Fiscal Year commencing with the year that ends December 31,2013, the Repository with its Annual Report. The Annual Report may be incorporated by reference from other documents, including official statements of debt issues of the Issuer or related public entities, which have been submitted to the Repository or the SEC. If the document incorporated by reference is a final official statement, it must also be available from the MSRB. The Issuer shall clearly identify each such other document so incorparated by reference. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in this Section 3 of this Disclosure Certificate; ro� vided that the Audited Financial Statements of the Issuer may be submitted separately from the balance of the Annual Report. Section 4. Reportin�of Material Events. (a) This Section shall govern the giving of notice of the occurrence of any of the following events(the"Material Events")with respect to the Certificates: 1. Principal and interest payment delinquencies; 2. Non-payment related defaults, if material; 3. Unscheduled draws on debt service reserves reflecting financial difficulties; 4. Unscheduled draws on credit enhancements reflecting financial difficulties; 2 5. Substitution of credit or liquidity providers,or their failure to perform; 6. Adverse ta�c opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701 — TEB)or other material notices or determinations with respect to the t�status of the Certificates,or other material events affecting the tax status of the Certificates; 7. Modifications to the rights of the Holder(s),if material; 8. Bond calls, if material,and tender offers; 9. Defeasances; 10. Release, substitution or sale of property securing repayment of the Certificates, if material; 11. Rating changes; 12. Bankruptcy,insolvency,receivership or similar event of the Issuer; l 3. The consummation of a merger, consolidation,ar acyuisition involving the Issuer or the sale of all or substantially all of the assets of the Issuer, other than in the ardinary course of business,the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material;and ]4. Appointment of a successor or additional trustee or the change of name of a trustee, if material. (b) The Issuer shall file a notice of the occurrence of a Material Event with the Repository or the MSRB within ten(]0)business days of such occurrence. (c) Unless otherwise required by law and subject to technical and economic feasibility, the Issuer shall employ such methods of information transmission as shall be requested or recommended by the designated recipients of the Issuer's information. Section 5. EMMA. The SEC has designated EMMA as a nationally recognized municipal securities information repository and the exclusive portal for complying with the continuing disclosure requirements of the Rule. Until the EMMA system is amended or altered by the MSRB and the SEC, the Issuer shall make all filings required under this Disclosure Certificate solely with EMMA. Section 6. Termination of Reportin�li a� tion. The Issuer's obligations under the Award Resolution and this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all the Certificates. Section 7. A�ent. The Issuer may, from time to time, appoint or engage a dissemination agent to assist it in carrying out its obligations under the Award Resolution and this Disclosure Certificate,and may discharge any such agent,with or without appointing a successor dissemination agent. Section 8. Amendment; Waiver. Notwithstanding any other provision of the Award Resolution and this Disclosure Certificate, the Issuer may amend this Disclosure Certificate, and any 3 provision of this Disclosure Certificate may be waived, if such amendment or waiver is supported by an opinion of nationally recognized bond counsel to the effect that such amendment or waiver would not cause a violation of the Rule. The provisions of the Award Resolution requiring continuing disclosure pursuant to the Rule and this Disclosure Certificate,or any provision thereof or hereof, shall be null and void in the event that the Issuer delivers to the Repository an opinion of nationally recognized bond counsel to the effect that those portions of the Rule which impose the continuing disclosure requirements of the Award Resolution and this Disclosure Certificate are invalid, have been repealed retroactively, or otherwise do not apply to the Certificates. The provisions of the Award Resolution requiring continuing disclosure pursuant to the Rule and this Disclosure Certificate may be amended without the consent of the Holder(s) of the Certificates, but only upon the delivery by the Issuer to the Repository of the proposed amendment and an opinion of nationally recognized bond counsel to the effect that such amendment, and giving effect thereto, will not adversely affect the compliance by the Issuer with the Rule. Section 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the Issuer from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Material Event, in addition to that which is reyuired by this Disclosure Certificate. If the Issuer chooses to include any information in any Annual Report or notice of occurrence of a Material Event in addition to that which is specifically required by this Disclosure Certificate, the Issuer shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Material Event. Section 10. Default. In the event of a failure of the Issuer to comply with any provision of this Disclosure Certificate, any Holder of the Certificates may take such actions as may be necessary and appropriate, including seeking mandamus or specific performance by court order, to cause the Issuer to comply with its continuing disclosure obligations under the Award Resolution and this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an event of default with respect to the Certificates and the sole remedy under this Disclosure Certificate in the event of any failure of the Issuer to comply with this Disclosure Certificate shall be an action to compel performance. Section 11. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the Issuer, the Participating Underwriter(s), and the Holder(s) from time to time of the Certificates, and shall create no rights in any other person or entity. 4 IN WITNESS WHEREOF, we have executed this Disclosure Certificate in our official capacities effective as of the date and year first written above. CITY OF SCANDIA,MINNESOTA Mayor City Administrator (Signature page to the Continuing Disclosure Certificate for the Series 2013A Certificates) S-1 APPENDIX C City's Financial Report The following financial statements are excerpts from the annual financial report for the year ended December 31, 2012. The complete financial report for the year 2012 and the prior two years are available for inspection at the City Hall and the office of Northland Securities, Inc. The reader of this Official Statement should be aware that the complete financial report may have further data relating to the excerpts presented in the appendix which may provide additional explanation, interpretation or modification of the excerpts. �� ���� � wwM►.�en.oan �Ci�ftonLarsanAllen nuoeP�o�AuorroRs� �Poar Hor�vrabte�Aayor and Memkers of the City Council and Citizens City of 8candia, Minnesota Report on the Finanelal 8tstem�nts We have audited �e accompanying finsncial statements of the gcvemniental�ac�vities, the business- type activiti�es, each major fund, and the aggregate remaining fund infom�ation flf the City of Scandia, Minnesota (the C�y), as of and for the year ended December 31, 2012, and the related not�s M the financial statements� whtch collectively comprise the City's basic financial statsments as listed in tfie table of contents. Msnsgeme�rt's Reaponslblllty!br�e Fin�ncl�!Statemer�fs Management is responsible for the prepara�on and fair presentation of these flnancial statements in accordanve wkh axounting principles generally accepted in the United States of Hmerica;this indudes the design, implementartion, and maintenance of intemal control relevant M the preparation and fair presentation of financial statemeMs that are free from mate�iai misstatement, whether due to traud er emor. Auditors'Responsibllliy Ou� responsibtlity is to express opinions on these flnat�ciat stetemeMs based on our audit. We conduded our audit in accordance with auditinp standards generally accepted in the United States oi Americ� and the standards applicabie to flnancial aud'its contalned in C3ovemment Auditing�tandards, lssued by the Comptroiler General of the United States. Those standards r�quire that we plan and pertorm the audit to abtain reasonabl�assuranves about wh�ther the financial statern�r�ts ar�fr�from mater�al misstatement An audit invohres pertorrnin9 proc�dures to obt,ain sudit evidQnce about the arrroulnts�and�isdosur�s in the �nanciai s#atements. The procedures selected depend on the auditoB' juci�meM, induding the assessmer�t of the risks of rnateriai mtsstatement of tfie fiu�ancial statements. whether due to fraud or error. !n making those �isk asse�smeMs, the auc�tor co�siders intemai controi nelevant to the entity's Q�eparatwn and�air pcesentation of the financigl statemens ln order to design audit procedures that�r+� appropriate in the circumstances, Dut not for the purpose a#ex,pressing an opinion on the eifectiveness oi the Glty's ir�temai control. AccoMingy, we exptess no such opin{on. An audit siso indudes evalut,ating the appropria�eness of a000unting policies used and the reasonableness o�f significsnt accounting estimates ma►de by management, as well as evaluating the overatl presentstion of the �nancial sta�ernet�ts. We believe that the audit evidenoe we have obtained Is sufficient and appropriate to provide a basis fo� our audit opinions. � � M+�P.�a..w�e..n�Y�e...n.sW �NYlI�A11nT'111. Honorabie Mayor and Members of the City Cauncil and Citiiz�ns City of Scandia,MinnesoRa Opinions In our opinions, the financ[al statements refemed to above preser�t fajrly, in ail ma�rlal respects, the respective �nancia! posi�on of the govemmentat activities, the business-�►pe a�es, each major fund, �nd the aAgreBate remaininQ fund infc�mnation of the City� as of Oecember 31, 2012� and the rBspec�ive changas tn financial positi�on and, where applicable, cesh flows thereof for the year then ended in oonfonnity wfth accourrting prindples generaily aovepted in the Unl��d States of America. Othar MeMera Requlrisd Suppleme�tery�r�fametlon A�coun�ng princi�les generatly aooepted M the United Stafies af America requke that the management's discussion and analysis and budgetary comperison lnformation, as listed in the table of contents, be p�sented to supplemern the baslc financial statemeMs. Such informatjon, although �ot a part of the bastc financial statements, is r+equir�d by the Govemmentaf A000unting Standards Board, who cansiders it to be an essential part of finnanci�i repotting for pladng the basic financial statements in an approptiafie operational, economic, or historical cor�text. 1Ne have applied certain limited procedures to the required supplementary informa�on in accordance with auditin� standards generaliy acoepted In the United States of Americe, which consisted of inquiries of management about the methods of preparing the infomaa�on and c�mparing the infcnnation for consistency wfth managemenYs responses to our inquiries, the basic flnanaai statements, and other knowled8e we obiained during our audit of the basic fmancial statements. We do not e�cpress an opl�ion or provide gny assuranoe on the informatbn because the limited proceRiures do not provide us with sufficient evidenoe to expres�an opinion or provlde any assunance. Odher ini�rormatfon Our audit was oonduc�d for the purpose of forming opinions on ihe �inanaal stabements that ooliedively comprise the City'a basic Anancial statementa.The c:ombMing fund flnancial statements are �resented for purposes of addi�onal analysis and are not a required part af the basic fiqancial statements: Trie cambininfl flmd finanaai s�temeMs are the responslbUity of management and werQ dern►ed trom and reiate direcNy to the underiying accounting and o�her �s used �o prepare the flnancia) statements. Such infomnation has been subjeded to#��sudi�ng p�ooedures applied in the sudit of tF�e basic fina�cial statements and oenain additlonal procedures, inciuding comparing end reconciling such infomnation directfy to the underlying aocounting and other t�ecocds used to prepare the financial ste�emenffi Ar to the flnancisl slatements themselves, and other addrtionai pro�edures in acc�danoe wfth auditing standards generaly aocepted in the United States of America. M our opinion, the information is fai�►stated in all materi�l respects in refatlon bo f�e basic flnanc.ial st�bemeMs taken as e wh�e. Honorable Mayor and Members of the Cit�r Counc�l an�!Citi�,en� Cit�r of Scandia, Minnesota Other Repo�tin�Required by Government Auditlng Standards In accordance with Gov+emment Audib'r� Standards, we have aiso �ssued out report dated May 6, �013, on our consideration of the City's intemal coMrol o�er financial reportin� and on our tests af its ccmpliance Withh oertain provlsions of laws, �egula�ons, contracts, and �rant �►greemeMs and oth�r matters. The purpose of that repo�t is to describe the scope of our testing �t tntemal c�o�troi avar flnant:ia�a I reportin� �nd oompliance and the result of that testing� arad not to provlde an opinion on intemal control over finan�iai repor�ng ot on cotnptiance. That report 1s an �ntegrai part of an audit perfomned in accordance with Gov�emnrent Aud�ing Starxlards i� c�onsidering the City's lntemal c�onttol over fmanclal reporting and complianoe. . �G+1��-�� C1ifEonLar�onAllen LLP Minneapolis, Minnesota May 8, 2013 REQUiRED$UPPI.�BMENTAIRY IMF�?RMATICN CiTY OF 8CANbW,IiIINNESOTA MANAGEMENT'S DI8CU8810N A►ND ANALYSIS YEAR ENDED DECEMBER 31�2012 As management of the CNy, we otfer readers of the Clty's financial statemertts this narrathre overv�w and an�lysis of the flnancial aativities�f the City for the tiscal yesr�nded t�et�ember 31.,2012. Financisl Hi8hli8hts o The City's �et �tion of its govemrrientsl acthr�ies increased by $fi5,348 du�i�g tf�e y�ar to $10,314,874 at year-end. o The totai lund bal2�nce of the General Fund incxease� by.�75.877 dunng�t►e yesr to s1,329,6�3 a�year-end. o The net pos#tion of#he Cityy's business-type a�tiv�ties�209 Sev�er and Uptawn �rer EMerprise Funds)in�reased�y�113,137 during the year to�1,943,439. Overview of the FIrl�ncial StatemeMs This discussion and analysis is intended to setve as an introdu�tion to the City's basic financia! statemer�ts. The City's basic flnanc�al statements oompriss th�ee com�nents: 1)govemment-wlde financial statements, 2)fund financial statements, and 3) notes to the financial statements. This report also contains other sup�tementary information in addition to the basic�nanasl statements. 6ovemment-Wide Financlal Statements The gov�emment wi�e financial statsme�ts are deslgned to provide �sders with a brosd overview of the City's flnanc�s, in a mar�ner similar to a private-sector business. The sfetement of net pos�ion pneeents in�orma�on on all of the City's asset� and liabili�es. wRh the difference between the two reported aa net posldon. CArsr t�ne, increases or decreases in net position may serve es a useful indicatar of whether the financial positbn of the City ls improving oc deteriorating. The stsiement of acdvities presents information showing how the Ci#y's net pos�tiion changed during the most recent fiscal year. All cttanges in net pos�ition are reported ss soon�s the unde�lying event giving rise to the changs occurs,►�gatdless of the timins 4f r�eieted cash flowa.Thus, r�eve�ues and expenses are repc>rt�d in this�tat+ement fdr some items that will only result in cash flows in future fiscal pe�lods (a,g., uncollected tauces�r�c!eamed but unused vacation leave). Both of the goverr�trt�t-wide �inancia) statemer�ts distinguish functions of the City that are principally suppo�ted by taxes and inteergovemmental r�ever�ues (qov�emmsnta!sctivities)tr�am othisr tunc�ans t�at are intended to recover all or a siflniflcant porticn of their costs throu�h �tser fees artd cheryes (busln�as-type ac�ivities), The ,govemmental acctivi�es of the City inciude �ner�i govemment, pub�c safety, publ'�c works, parks and rec�ea�tion, and other.�The ony business-type aaivities of the Ciry ere the sewet operations. The gwemme�t-wide financia!s#ateme�ts can be found on pages'l416 of this t9eporL cm�oF sc�►�bu►,Mn�r�sarra AAANACsEMENT'S DISCUSSION AND ANAlYS18 YEAR ENDED DECEMBER 91,201 Z Fund Financial S4t8menb A f�nd is e grouping of related accounts that ts used to maintain c�ontrol over resoufce,s ihn�t have been segregeted for speciflc activities or objecpves. The City. tlke ottter stste and local gavemments, uses fund aocounting t� ensuce snd demonst� compliance with fina�ce-related legal requirernents.AA of the#unds of the City can be d�rided into two categorfes:govemm�ental funds and proprietary fund�, Govemmenta! Funds. C3ove►�mental funds are used � acoot[nt for essentially the sa�me iutt�iiqns reported as gavammentel activdl►es in the govemme�t wlde fir►�ncial statements, How�ver, unlike the government�wide finandal statements, govemmental fund flnancial sta�ements focu� on near-t�rrt� inflows and out�ows af spendable issoumes, as well as on balances of spendab/e resources available at the end of tMe �scal year. 5uch information may be useful in evaluaUng a govemment's n�ar#erm tinancing requirements. Because the #ocus of govemmen�i tunds is namovrer than th�t of the govemment�vide finandal staternents, it is useful to compare the infomnafion presented for govemmental funds with slmilar information pr+esented for govsmmentsl ectfvld�es tn the government-wide financial statements. By doing so, readers may better undetstand tf�e long-term impact by the govemment's near-term financing decisions. Both the govemmerrtal fund batanoe sheet and the govemmental fund statement of revenues, expend�ures and changes in fund balanoes provide a recanciliation to facilitate this comparison between govemmentel funds end gov�emmentaf acth�itles. 7he City malntains several individua) govemmer�tal funds. (nforrnation is p�esented separatey in the govemmenial fund balanc:e sheet a� in the govemmeMal �und statemeM of�venues, expenditures and changes in iund balences for the General Fund,2007 Improvement Bond Debt Service Fund, and the Equipment Replac�mern Capit�l Projec:t Fund. Data from ihe other govemmental funds ere vombined irtto a sing�, a�gr�egated presentatlor�. Individ�tai �und data for each af these nonmajor pavernntental #unds �s provided in the fbrm of combining stetements els�where in these financial statements.. The Gity adopts an annual sppropriabed budget for its Generei Fund. A budgetary comparison ststement has been provided for the C3eneral Fund to demonstrate compiiatxe with this budget. The�sic govemmental fund financial statement�can be found nn pages 97-��of tl�is r�port. PnopNet�ry Funtls, The /xoprietary funds are used to repati the same funCtions presented as busfness-type �ctivities in ihe govemmeM-wlde financial statiements. The City uses enterprlse funda�o acxount for its businsss-type�divities. Proprietary tunds provide the satne iype of iMorn�atbn as the govemment-wide finenciai statements, oNy in more detail. The propr9etary fund flnendsl ststements provide separet�e Mfomtation for th� 201 Sewer En#erpr�se and Uptown Sewer Fu►1ds,which are considered td be maja�funds ofthe City- ClTY OF SCANOIA�MINNE�dTA MAt+IACiEMENT'S Dt8CU3810N AND AfiiALY8f3 YEAR ENDED DECEMBER 37� 20'f 2 Fund Financhl StatemeM�(Cor�tinued) Propr�letary Funds(Contlnuecq The basic propnietary fund financisl statements can be found on peges�1-23 of this reparL NOtes to Flrfr�hCi�l Stat�mehts The notes provide addi�onal inform�tian that�S essentiai to a f�il understandtng of the data provided in the govemment wide and fund financ�l statements. The notes to financiai statements can be four� qn pa�es 25�3 of this report. Othe�informadon The combining statements referred to earlier in oonnection with nonmaJor govemmental f�nds ate presented immediately following the notes to fnandal statemer�ts. Combining and indhridual fund staternents and sche�uies can be found on pages 47-48 of this report. Government Wide Flnancial Analysls The City's financial statements are presented in accordance with the requirements of Gavernmental Aocounting Standards 8oard (GASB) Statement No. 34, 8ssic Financlal Stetements �r�d Management's Discussi�n end�It�elysi�-for State and Laael Govemments. Comparative informati� is included in these tab{es to highlight changes in flnandal position, shown in Exfiibits 1-2. The govemment-wide statements report the City's net position and how they have changed. Net position, the difference between the City's asset� and I�iiities, are one way to me�sure the �iiy's financiat position. Over time, incxeases or dec�ases in the Ctty's net posftbn can be nseci ss an indicator of the Cit�r's financ�l position. The Cify's financial position is the product of many�factors. For e�mpte,the�etemnination o#the City's lnvestment in capital assets, net of related debt invt�lves many �ssumptions and estimates, such as current and accumutated ,depreaation �mounts. A conssrvative versu� a liberal ap�oacfi �o depreciation estimates, as weN as capitelization policies,will produce a very signifi�t differ�nce�n the calculated amounts. For these reasons, it k impottant to view the net positlon balanc�e as � sfa�ting point#o e►raluate future yeers'results, r��her than to focus�n the curr�nt balance. t�TY OF BCANDIA�111tNNE80TA MANAG�MENT'S DISCUSSiON AND ANALY8IS YEAR ENDED DECEMBER 81, 2012 �XHIBIT 9:CITY OF SCANDIA'S NET P08ITIDN (3ovsnanenisl Activltles 9uBir�e�s-Type At�llvfll� Tdals 20 2 zo�t �6�i zo�i ' �o�s zatt Currmt artd OtlwrAs�elf � i 2,832,02t 3 1#5,792 = 2f9,08B f 2.--7 r0�� ; 2,�9 Gp&�111atds,Net 9,106,�4�4 �j401,t14 /,019,�0 �IO,OD� 10,12fi,314 10,?A�.118 , .`...... ��. ���.. .._�.. Totelllsseb 1t,�AD,?46 12,03��187 1,185,602 i.Q69,090 12,d75,�127 i��tiY2,�65 CnrreMLl�b�i�es T83,822 2I7.e69 22,249 28,�90 1ee.id6 278.869 l,org-Term UobiNUas t.230,053 , 1,b95,782 �� - 1�,f5� t.b35.78� 7aW WbUfli�s d.30�.d75 1.7E3.645 Z'1.2t3 28.7A8. 1.41T,118 i.!'i2.44! Mst Posilbn: Net InwisOnont In CsPtt��Awts 7.868,�07 7,d64,t54 i,016,6�0 MQ,DoO 8,909.377 l,724,iW �tssNicled tor Dabt Reqronbr►t 592,30� 598.�10 - - 392.307 68634t1 Re=Wetsd ior Rosd N1eInlKlence 123,55! !22.573 - - 123,659 �22 373 Uixrsbicted 1.708,425 1,8�.5�t9�55� 17d.5�9 194,902 i.63Z.97t 7.a98,25T Tdtal N�t Posidon �'S�a'1i3� �.'Fis.�z �3�'7�' �i'�;b�8;3d�' '�E6�" �l�4� �.. �..� ��.� �� �..� �� As noted earlier� net posidon may serve over �me as a usefu) indicator of a povemment's finandal position, in the case of the City, assets exceeded Uabiiides by $11,458,308 at the dose of the mosi recent fiscal year. The Iargest portion bf the CI�►'s net position (T69�) retlects its investment in capital assets (e.g., land, buildings, machinery and equipment), less any �elated debi used'to ac:quire those .assets that are sdil vutstanding. The Chy uses these capital assets t� provide services tc citfzens: consequently, these assets are r�ot available for future spendinQ. Although the Ctty's investment in its cap'dal assets is reported net of related debt, it sfiould be noted that the resources needed to repay this debt must be provided from otfter souroes, s�nce the capital assets themselves canno# be used to liquidate these liab�ities. The City's debt 'rs repaid primerily t�rough$pedai assessments, properiy tax ievies t�r debt of govemmentai activities and user charges provlde the �nancing fo� the tlebt of the b�sin�ss-type activities. An additional po�tion of the Cihr's t�et position (fi°�6j �presents nesources that a►e subject to extemal �restrictb�s cn how they may be used. The t+emalning balance of unrssM�ted nef po$ihion (51,838,Q2A) may be used to mesf the City's ongoing obligetions#o c�tize�s and c►ed�o(a. CRY DF SCANDIA,MINNE30TA MANAGEMENT'�DISCUSSION AND ANALY818 YFAR ENDED DECEMBER 31,Z012 EXHIBIT Z:CHANaES 1N HET POSITION c�ovemmenw A�tleo �A�id�s Tobls 2012 2ot1 �T-�oT� 2ot2 zoit .�� .`�..��_ R�NENU� ��41L�G110! Cpetpe�for 5etvicet � 342�43i � 367,179 5 a9�2T5 ; �e.Z01 i A3'1�709 � t2S,98Z Opara6n9 Gha1}s and COnlribUffo�u Z5,961 41�500 • - 2b,3l/ 44�350 CapNal Cirartls�nd ContrlbWons 7,129 25,799 5.151 - 12.200 25,y99 GlSiYLS'!1tlGSr� Prop�rlyTa�as� 2A73,189 1.921,04A - - 2,DT3.iQ3 t.821.044 Grants u�d Contr�uNau Not RoatricbdforaPsrdcul�rPu�pop 18,9�8 ➢,890 • - 1a.91B 0,�30 OMAr 10,�7! 16,973 72S 2.206 11,Bdf il,f7b ThblReverlues .903 2.8 4,7�., E��349 87�40E 2;38+{,-'fl52 2��4{2,�11�9 EXP�N$F.S Oetiersl t3ov6rtrment i36,�4 E8T,73t. - - 738,5BQ 607,731 PubliC Sefety 3e3,522 ,125,873 - - 389,323 +�Zb,673 PublfC Wake 680,724 E�18,889 • - 980,72� MS,aW Perks arM Recrosdon 65,SBT l39,21s - - 95,567 133.216 Inlwvstmd Fi�sl Chnp�s 85,573 86,384 - 85,5T3 d6,36i Sewer 14a,621 81,b29 t43,E21 91,029 Total Experaes 2,?a11;�4 2,� 143,821 D1,p2p �,8a5,387 2,25�.911 TRANISFERS (170,808) 3,N5 110,609 I3.W5) ^�^ - GHANdE IN MET PO�TTION 65,34D 71�,�0! 113,137 (27.268) 174,105 107,Z02 Nst Positiotl-Bepintlirg of Ye�ar iQ2�8,522 99 035,D54 '1,03b,302 '1.057,56e 1 t,Zi�,aZ4 11.,09Z,622 .�...��,�...�.�.. .,�.._...��.. .�.... ..�,..�� NETPOSiT10N•EkDOFYEAR i 1D31�,87Q i iD,248,i22 i 1,1�9.485 i 1,Q50.302 � 11,4ba.3tlY i 11,218.�2A �a�� ��i ��s �s a�r��s tiove�ment�l Activkies.Govemme�tai activlties increased the Clty's net pos�ior�by�65,348. 6uslness Type Activitles. Busi�es�type expenses�201 S�wer and Uptown Sbwer Enterprise Futu�) ihcreased the C'rty's net positivn by�1 a3,137. C1TY 4F 3CAN0lA, MINNESOTA , MANAGEMENT'S DISCUSSION AND ANALYSiS YEAR ENDED DECEMBER 81. 201Z The following is a gra�hic,al representatior�of the various sources of the Gity's govemmsntal re�rsnues {excludin8 transieersj of$�2,477,90�: Governmen'tal ActiviNes Re�venue by Saurce 2092 a�ees,Char�ee,and ��� ■OperaUnpGradaand N OMter Ranenal Revenua 14% nirbutior�s 0% 19i 0 Gapl�l Grar�ts�nd �ont�utlor� 096 a Gran�s and Corn�bulons Not Resfrictedio�a Pardcular Purpns4 ■PlopertyTaxea 19i �� The following Is a graphicai representation of the various sources of the Cjty's gavemmental expenses af$2,241�947 and program revenues of$374.944: Expens�s and Program Revehues-C3ovemmer�tal Ac#ivltles S1,Zoo,000 �Expe�bs, i1,Op0.000 ��ro���� saoo,noo ssoo.000 5400,Ob0 �200,000 � Genaral Governmant Pubiic Safety Pub�c 1Morks Parka end In�erest end Fis�sl ReRxestion Chargea CITY OF SCANDIA,MINNE30TA IMANAGEMENT'S DISCU3SION AND ANALY318 YEAR ENDED DECEMBER 31�2012 The folbwing is a graphical representation of the variaus source�of the City's business-type revenues of$86,149; Business Type Activtti�s Revenus by 3ource 2012 op+w f3ranla aConuibuN o.e% 8.0li cnaroesrorserv�oe. 93;2'j6 The following is a graphical representation of the various sources of the City's business-type expenses of$143,621 and program revenues of$85,426: 6cp�nses and Propiam R�wnu�s-8usinas-Typ�Aat�rriWs s140�00p ___ _ . _. _ . w„�* �,�. ,�, 5120�Q00 ,�: ;,= OExpenae8 � ��� ■Pragram Revenues 5700,OOD ��'�� ,� ; 580�000 '�.F ' 380,000 '��� � -'��. y��� S+{0,000 _-- �:;' � i20,0o0 ;.��_ �.�,h. � ,�; 201 Sewer Upiown Sewar CITY OF$CANDIA�MINNESOTA MANAGEMENT'S DISCUSSION AND ANALY8i8 YEAR ENDeD DECEMBER 31,2072 Financial Anatysis of the GovernmenCs Fu�ds As noted earl�r, the Gity uses fund acc�unting to ensu� and demonstra�e compltance witlt fmance- related legsl requirement�. GovenHrrentel funds. The focus of the �ity's�ovsmmentai lunds is ta provide Infanna�on on near: term Inflows� ou#flows and balances of spendable resources. Such information is tisef�l in assesainp �he C'tty's fl�ancing requtremeMs. In patticular, unassi�ned fi��d �b�►lanoe may ser�ve as e usefu) measure of a�ovemmenCs net resoun�s available#or spend'mg af the end of the fiscal year. As of the end of the current fisr.�l year,all af the City's govemmsnt�i fu�ds together reported combined ending fund balanoes of$2,247�42b, an increase of�69,943 in aomparlson with the prior year. Of tha $2,247,425 fund balance, 729�6 (�1,626,825) constitutes unresbided fund balanoe, whleh is available for spending at the City's discretion. The unrestricted fund balance is broken into two catego�ies, assJgned and unassfgned. UnassJgned tund balar�ce re�resents 52°�6 (�1,177,e7o� �na ass��sd�,nd balance rep�sents 204�6 ($448,955).The remainder of the fund t�alance consists of non,spendable and t�est�cted fimd balance. Nonspenda6le fund balance constitutes 1°�6 ($28,032) and r�sb�cted fi�nd batencae co�stitutes 269�6 (�592,568). The General Fund is the chief opera�ng fund of the C�y.St the e�d of the cutrent year, fund balanoe of the General Fund was$1,329,553, an increase of$75,877 over the prior fiscal year. Key fadors in this change in fund balance are as follaws: o Act�a) expenditures totaled $1,843,649 (excluding transfecs) for 2012 +compared to budgeted expenditures of$1,769,009,a net variancs of$74,640. o Actuai revenues totaled $1,994,957 for 2012 +oompared tc budgeted revenues of�1,836,680, a net favorable Variance c�f$158,277 (before trensfersj. Reyenue firom Zoning and Hearing Fees were �105,026 more than budgeted due to r�eirnbursamenta for the Zavorai M1r�e EIS. intergovemmentel Revenue was �25,902 more than budgeted due to unanticipated State MarketValue Credit payments and Fire State Aid. Donations and Other Revenue were s25,239 more than budgeted due ta a large insurance dividend {312,8p0), Insuranoe Prem�um Refuttds ($2,313), Impound Fees(�910),and Donations. Becauee property tajc r�evenues are rtot received un�l the mlddie of the budget year, it is important ihst t�e City carry�und balances sufticient to�over antiapated expenses#or the flrst half of�he budget ysar. If not, the City woutd be foroed to bo�row (and pay i�terest on� the fu�ds nec�essary to meet besic expertses such as payroll. The $1,11i,810 0# un�ssig�ed fund balarlce ip the �eneral Fund is adequate for cash flow parposes. �ITY OF SCANDL4,MINNE80�'A MANAGEWIENT'S DISCUSSfON AND ANALY8t8 YEAR ENDED DECEMBER 31,2012 t3eneral Fund Budgatary Highlights Detati of the General Fund Qriginal budget, flnat budget and actual revenues and expenditures can be found bsginning an page 44 of this report.The net change in the General Fund Balance was�75�877. The City Councii approved the fopowing budget smendment�ducir�g the�►e�r. o Increesed Other Professional Servlc�s by �7�300 to pay for a City Admbtistretor sea�h and hiring contract with Springsted, Inc. o Incressed Donations by $1,OD0 in AdmMi�tratinn $ Finance end reduce Council Conference and Seminars by �1�000 to make a dona�on �the Washir�gtan County Historicai Sq�teiy for its Heritage CeMer. o Increased Fire revenue Donations by SZ,OQO and increase Fire expense Smail To�ls and Minor Equipment to eccept a Lions Club donation for the purahase of a winch and hailer for the Fi�e Department. o Reduce Contractual Road Maintenance, RegUlar Wages and Heslth Insurence line items in the Public Worlcs budget to meet equipme�t needs, which resulted in a net decrease in the budget ot$176. o Reduced severai lines ibems In the Fire Department Ewdget to cover the purchase of two tabiet computers for a6,657 needed for interdepartmental emergency communications and en increase in Tumout Gear and Uniforms required for new�reflghters. Actual expenditures were less than budgets in several departments. Spending in the Public Safety Department was $20,898 less than budgeted (lar�efy due ta under-spendM� in Fire). Spending in Public Wo�ks was $66,804 less than bud�eted (largely due to under-spending for personnel, enginescing and graveUsalt budgets. Spending in General Govemment Departments wes �172�158 higher than budgeted (lar+gey due to the Zevoral Mine EIS expenses). Spending in PaHts and Recreation was 58,026 less than budgeted due to changes made in fadlitiss and grounsls �inter►ance. Pr.o�uietary Fu»da. The City's propr�tary tunds pravide the same type of inforrna�on tound in �he �ovemmet�t wide financial statements,but in more detaii. Unrestricted net position of the 201 Sewer operations at the end of the year amounted b 5167,A04. Unrestricted net position of the Uptown Sewer operallons at the end of the year amounted to(�44,355). Capit�l Ass�t snd Debt Adminittratlon Capital Assets. The Ciry's investrrtient in capital assets for its govemmental and b�siness type activiNea es of December 31, 20i3, amounts to $10,1Z5,314 (net of accumulated dsprecietlon). This investment in capital assets inctudes Iand, construdion M prooess, buildings, equipment and vehicles, othe� improrrments, tlte sewer system, and iMrastructure. This represents a decnease in 'the City of Scandis's lnvestment in capital aseets{r�oi accumu'lated�epr�edation)of 1.1�b. CITY OF 3CANbIA,MINNESOTA MANAGEMENT'3 DISCUSSfON AND ANALY818 YEAR ENDED DECEMBER 31,2012 CITY OF SCANDIA'S CAPITAL A9SETS (Net of Depreciation) oo+rttnMenbl eu�h�e.s-ryps Aetbi ies Ad �Us To �_�� ��� �� L,ar1d ; 487.735 i ;e7.735 : - _ - i 4Qi,T95 ; 4d7.735 Cor�tnxdiontnf'tboef� - 111,M2 - • - 1f1,�3Z BuMdlnps �,Z3�,87Q 2,�5'1,870 - • Z,23�.8'l0 Z,2�2,6t0 EquipnemandVet�itlet /,b�11.9S3 1,3Tf.717 - - 1.6AtA63 1.971,717 MTfsskualuro 8,273,789 9,35o,�it2 - • 9�78.T�o 9,�S�y12 plh�r Impio�em�rlis 982.847 18Z.&/7 = - 162,047 1aZ,617 geyvet Systenn - - t,S00,000 t,S60.000 1,600.000 1,50G,000 tlphw�rn Sewar - - 2M13,827 - ?A9,�2T - Less:Accwrw{alsd pepnotatlon 4,693,950 (4,324.717) 23,93 d80.000 1T,Z87 4,OM,717 Tofal S 9,� 5 9;4D1,1�t8 S A 6,8 S 840. i 1 ,1 5.31�4 10,9A1,146 a�:...r� �a�r� v� a�� Long-Term Debt At the end of the currsrn tiscal year, the City had total bonded debt outstanding of $1,235,000.All debt is backed by the full faith and cr�edit of the City. CITY OF$GANDIA'S OUTSTANDINQ DEBT �Qeneral ObHgation� Garamme+tW AdMUss Bu�MreeMT D�Acllvllf�s Ta1tM 209Z 011 � �72 � 20t1 2012 ZDit LOi�10-TERM��.IOATIONS konp Term DaDk 8enaral ObNpewtbn Note� f 1,Z8b,000 i 1�5�10,000 �' - i - S 1,235.000 S 13+10.000 UnemoAlZad BOnd d�counl (t�.Od�) (23a�a) - (10.063) (23.80d). Co�npsma�ed�oe� /6,018 19,G80 - - 1S,01a 19,Oa0 TolN ��,'�� .��� �� � ,�i9�°l� ��e �� �� �� �� /�dditioRal informatbn on lonq-berm debt Is pressnted ir� Note 4 af this report Economic Fact�ra and Next Year'�Budga3s snd Rates o The City Cou�cil has approved a baianced budget t�nr the General Fund for 2013. $tafF will con�nually monfbr the budget and recommend any revisibns that are deemed necessary to the City Council. o Du�ing the cuRent economlc downturn the City will ooMinue �o experlence slow or no growth, and the revenues �fr�m permits and interest income will continue to be below historic levels� Staff wAI oantinue ta monitbr the changes in this area to prepare#or 2014 budget tilsa�sions. which wip begin in June M 2013� Requeats for Infom�atlon This 8ner�aal report is designed to provide a general overvtew of the City's finances far ail ttwse with an interest in the City's flnanc�. Questions conceming any of the inT�rmation provided tn this repott w requests for additional finandal information should be addressed to the City of Scandia, 14727 209th 5t. N., Scandia, Minn�ota 650i3(tetephone 651-433-2274), BA31G FIMANCIAL��'�TEMENT6 CITY OF SCANDW�MINNE80TA �"I'A'.fE1MENT OF NE'f'POSI'TION DECEMBER�1, Z01� Govemmet►tsl Busina�s-Typ� Aafiv�ies Adiv�ies To�sis A88ET'8 Cesh end irnrastms�tts �S 2,27#,415 � 164�528 f 3r438,9��1 Rec�ivebtes: 7a�ces ar►d Otlter 722�9�2 19��39 134,85� Speclel Assess�nsr�ts 129,783 8,812 137,696 In�ernai Balances 39,588 {39,588) - Unamortized lssuanoe Costs 10,591 - 10,591 Prepaid Items 22,392 - 22,382 Invantory 5,640 - 5,640 Capitsl Aasets,Nondapredabte 487,735 - �487,73� Capital Assets,Net of Accumulated Depreclatian 8,�1i,6$9 1 �19,�90 9,8�7,579 Tatal Asseta 91,7a9,745 1,�65,682 12,875;427 UA8ILITIE$ Aocourrts and Canttects Psyable 128,307 22,243 1b0,54{ Aocrued PayroN,Taxes and Bene�ts 27,843 - 2'7,643 Interest Peyable 5,408 - 5,408 Uneamad Revern�e 2,570 - 2,57D NoncurroM Liabilkies: Due Wdhin One Year 317,355 - �31'7,355 Due in More Zhan flne Year 913,598 - 973,598 Total UablNties 1,394,875 Z2,249 1�417,118 NET P4817'ION Met Irneshnent in Cep�al Asse�s 7,889,�87 9,019�89Q 8,9D�,977 Restrided for Debt Retirement 592;907 - 592.807 Restricted ior Rosd Maintenance 123,65i - 123,850 XJrirestfictsd �,709,425 �23.549 1,632,9T4 Totel Net Position � iD,814,8�7� � '1;�r43,438 ffi 1 A1458 909 see a�pany�r�y Notas ro saslc FMascisf 3Yate�»ewts. CITY OF SCANDIA, MINNESOTIA. STATEMENT OF ACTIVtTiES YEAR ENDED DEGEMBER 31�20'!Z P m Revertuea pers g ran Charges fqr G�ant$and arui FUNCTIONBlPROGRAMS Expenses Serv1Ge Cont�ibutic�ns CoMtibaUons l3ovemment Aotivftlea: �eneral Govemme� s 736;560 i 260,647 5 - � - Public Satety 383,522 33,581 25,301 - Pubiic Worics 960,724 1,244 - 7,125 Parks and Recreation 95,{87 39,769 - - Interest and Fisc.�l CMarges 65,573 7,223 - - Total Govammerrtai Activiti� 2,249,9A6 ��3a2,4�34 2 �381 '7,129 Businass-Type Activitl�s: Sewer 12A,149 70,696 - 3,i51 Uptown Sewer 17 478 __9�5�8 - - Totsl BUsi�less-Type ACHvtties �4 6 1 80,275 - 5�751 Total Primary Govemment s 2.385,667 s 422,709 S 26,38� s 12,280 GENERAL REVEAIUES Taxes: P�perty Taxes,Levied fw General Purposes Grents a�Contributiona not Restrided tor a Pa�tkx�is�Purpose Investmsnt EarN�gs Tota(Generei Revenues Translecs CHANGE IN NET PO$fT10N Net Poaition-8�inr�ing ot Y�ar M�T POSITION-END tS�YEAR Ses ac�compan,yinQ Note�ro 8asic fFnandai S�ern�nta; N+et(Expe�e)Revenue and Changes M Net Positlon �Govemmer►tal Business-Type ActiviHes puctivWes Total s (475,913) S - s (475,813) �524,6�0) - (324,590) {952.�51) - (962,359) (55,798) - (55,798) (58,354) - 58,350 (1,867,002) - {1,867,002 - (50,296) (5Q,296) 7 899 p,889) - � 8,195) (58,195j (1,867,002) (58�196� �1,925,197) 2,073,1B3 - 2,OT3,163 18,9'!$ - 'l8,918 10.ST8 723 19,601 � ;2.102,859 72 2.103,682 {1T0.6Q9) 17�,809 - 85,348 198,137 'l78r485 �0,24s:622 1.030,302 11,279.82a S 9 0,314,870 3 1�143,439 ; i 1,458,30g CtTY OF SCANDIA,MMINES�1'A BALANCE 6HEET GOVERNMENTJ�L FUNDS DECE�ABER 31�?Al2 �007 In�rova�neM Equipmb�t NonmaJor General Bond Replaaement Ciovemmat�Ea� Fund D�bt Service Fund _ Funds T, ohk _ ASSETS Caah and I�VeWr�aMs S 1.398,13i s 21D.998 � 222.9�3 i 4l4,a9S f 2.2Yd,+18 Ta�ap Reoeivabb 92.782 15 - a 82,b15 Sp�tisl Aswasmsitb Reoeiv�bls - 128,783 . � 128,783 Other RecNvables 3C,097 • - 30,097 ProP�d Items 22,39� _ . . ?2,38Z Inventory 5,840 - - - 8.640 Advsnce b ONta�Funds 39,589 39,588 Totol/lareb S 1 547 3�589�f f��2i393�� ��� i 6�3,790. LtA8M.1T1ES AND FUHd BAUNCE� Uab111tles: A�ecouMs and Contra�ts Paysb�e ; 128.301 3 • i - # - � 128.301 Acduad PaYroll,Taxes and 8�oftte 27,643 - - - 27.84� Del�srrsd itovenue 87.5b6 126.798 e �,361 7a�a1 LLbRNbs 217.�99 128,7�� - Fund BsYnoss: NonapendaDls: Prepaki(bms 22.392 - - - 22.352 Imrentory 5,640 - . • 5.840 Adva�oe to OTher Furds - - - 9�,5s6 39,508 Etesdicbed ior. Osbt Setvfoe - �40,998 - 22�.921 488.817 Rcad Mshribnanoe 123.551 - - - l23.6Si Assfan�d tot: Inhas�rue�un(mpirwsma�Project� - - • 177�56d 177:588 lloqualtbp and Daviebptnent of Ps�1cs . • 9�406 9.A� Equlpmeht R�epfacosmeM - - ?32:�93 - 222.393 Unassip�rod t:177�70 .,._�. .._,_. 'f� Tctsl Fttnd Bdanoe� 1� 20 , �2Z.398 454.IS3. 2:Z� .+tZ6 totsl LifbNllbs pnd Wnd Batanees S 1.�� a� i� y3� i� _�� S�e aocompanylr�Atotea M BesiC Fhtancle!Sta�en�►ts. CITY OF SCANOU►, MINNE80TA RECONCIUATION OF THE GOVERNMENTI�L FUNDS BALANCE 81iEET TO THE STATEMENT OF NET PO$1TIdN G�OVERNMENTAC ACTIVITIES DECEM6ER 81,201Z TOTAL FUNq BALANCES FOR GOVERI+IM�lTAL fUN08 3 2.Z4T�425 7'otel net pcskior►reported for go�rerrnneMal activNies irt Ihe�err�r�t of rt�po�tion is c�erent becau$e: Capttal ass�ls uaQd in gOnremm�Mal activities are twt finandal rosour�s and��here�ote,are not repated in the iunds. Capita!Assets • s 13.798,77� Lsss:Accum�ted DeprecialioA _ (4,893,350) 8�'lt�5,A24 Some rBceivables,indudiog special sas�asments,are nepatted aa deferred revenue:�n the fiund�inancia!statements but are re�ognized as revenue wlien eamed in�e govar�ment vWde s�atements. Tt�eae deferred revenues consist of: 5pecial Assessments on Tax Roil 59,008 Other�peaal Assessmetns 126,i85 187;781' Bcnd and equipmeMce�Wicate issuence oosts are roportad as expenc�itur�s in tf�e govemmentai futtds arid are shown as�ts net of accumulated amor�za�on on the stabement of n�poaitlon. 10,581 Some�abiiities arae t�ot due and paysble,M the cx►rt�nt ps�i�i and, therefore,are not reported in the funds.These liabiti�es consist of: Long-Tam�Obligations (1,230.953). Accrt�d Interast on Long-Term Debt (5,408) , (1,2�:381) TOTAL NET POSITION OF G�yERNMENTAL A�Ym�B � 10.314,87A See accotr�anyP►+y l�lotes bo Be�ic Finar�eJ Stateme�ts. CITY OF�CANDIA�MINNE80TA STATEMENT OF REVENUES,EXPENDITURES,AND CNANOE8!N FUI+�10 �ALANC� (iOVERNMENTAI.FUNDS YEAR E�1DE0 DECEMBER�i�201� zoo� Imao�►ema�+t Equlpn�nt Nonn�lOr Tdal Genb�► Bot�d R�aM �o�arr+rrisnopt tiwenin+enW Fund peb�.Senrice Fuad �� �_ REVEDIUE.S Taxas � 14609,�tl1 � 1�18.902 � - � Sa2,9f6 s 2,080,47a 5pedol Assaamanb - 32,213 - _ 3�2,245 1�6eraov�arrunental i3evanua 51,199 - - - 51.199 Lioernes ar�d Pamdts '34,Sb7 - - - 54.857 ChalQes ior SetVices 234,1T0 - - - 234,170 Flnes and Farfelb 1'��618 • - - t7.818 Ml�oellanoou�Rewnue 35 617 81� ��1 11�9 �1 82�8 89 767 toml Ftpvenuas �, 4� �1d0,061 �.1�7' 3�s,z� 2,� EIIPENOITilRE� �urceM: Oerbrql Govemmern r08,966 - - - 708,986 Pubrtc Saliet�r 338�231 - - 33a,231 PuWic Worka 638,322 - - - 638,9Z2 Pafka a11d Re�xredOn C+eatter 82,3Z6 - • - 82,329 FifaetlandOqle� 1AOD - - - 7,D00 'Dabt Servloe: PrindDal P�Y►nents - 135,000 - 170.000 905,000 lnter�st PaYntonts - 3D,850 - 29.� 60�037 CapNal Outlay: Oeneral ti0wem►nerll 1,8�6 - - - t,9�1$ Pubnc Sateqr a,9ao - �93��vA - 'to2,l94 Publtc iNorlts 63;479 - - - 83,A7D Parks and Recrlatlon Cerrier Z,A00 . - 3 57I S 9T4 robu��ndn��s �,p�,ws �ss.eso �� , '� � 2,� EXCEs8 SDEFICIEA1Cln OP REYd1UE� OVER(UHDER)EXPENOtNRE� 15l.30S 14,211 �9Z,S01j 111,4?.'� 184;140 OTHE�FINAN�IN6 SOURCES�tJSEs) 1lrmitor In 4,569 - 80,000 - 3+I,B69 7rat�sfer Out' t8Q000) - - �118,796 19B Todt Other Financinp 8au�ss Zll�es) (T5.431) _� �-�a,� i�a,� ri�e, a 1 �E'�CNAriQE1N FUND 1111LANCEB ib.877 14,211 (1Z,�1� (T,34i] 09,9�3 Fund Baimcss-Bapinnkip of Yaar 1,253,576 Z2S,�e5 Z36,1B4 K61,827 Z,77T.� FUND BALJINCEB •EFID OF1rEM :�� S� s' �2.393 _S� _3 2�5� Se�accar►parlyfnq NWe�l0 8asic�ah�elS�re►»b�tx �{TY OF SCANDIA, MINNE�OTA F�CONCIUA'1`ION O�'THE GOVERNMENTAL FUNDS STATEMEN'!'OF RE1/ENUES� EXPENDITURES� AND CHANGES 1N fUND BALANCE TO THE STATEMENT OF ACTIVITIES GOVERNAAEMTAL A�T'IVITIE3 YEAR ENDED DECEMBER$1,2012 NET�HANGE IN�UNO BALANCEB-TOTAL G�118RNMENTAL FUNDB 3 89,843 ArriouMs repotlad iot pdvemfientai e�tl�tles in the atatement c� aCtiviC� aro ditferent becauas: Cap�ai outlsys sro rep�r�as expend�ures in 9�►ernn►eAta1 tunds, However.,in are s��e�t o�aa�►r�es,the CQsi of c�fita!8s8et6 is aUQcBted Aver ihelr estimsted useful livea aa deprecietion expense,ll►ia is the amount by which depreciafion exceeded cap�tal oudays in ths cun+snt pe�iod. CapRa1 Outlaya Repbned in�avefnment�al Fund St�tem�nts $ 158;984 Deproc(atlon Expenee , i387,89A) (23�,390) Recsivables not cumeMly svailable aro raporbd as de�erred rovenue in the tund 'flnenaal statemer�ts.but are►�eoognited as�evenue when aamed in!he govemmeM-wide sta�ar�ts. (9Z,431) The govemmental tunds repot#bornd proQeeds as finanoing sourceo,While repaymeM of bond principat is reperted as an expenditure.In the statemerrt of net pos�ion.howavar,lasuing detit Increaaes tong-term liabtlitles and does not aHeat the statement of acth�itks and repayment af prinapal reduoes the liabil'dy. Also, govemm�til iunds repart#�e eflect of iasuance costs,promiums aru!disc�uunts when da�t is 6rst issued,whereas ttlese smounts are detemed and amorttze4 in !he ststemer�t of adivities. Ir�terost ia recogninad as an expendRuro m 1he govsmmanlal tunds when ik is due• In th�sfatement of adivitl�e,however, intenest expenee i�r�cbgnized as itsc,crues,regardless bf when'it is due.The net eflect of thase dif�erences in the treatmeni of genetal oblipatfon debt ar�rsla�ed ttems ia as follorvs: Rapeyrtrtu�ant ot Bond Pritx�pal 9�i5.000 Chan,Qe in Acxx�t�d 1nteresR�snee 7,+405 AmaRitBti�n oi EqUipment Ce1�ls Is�uance Coeb (930) Amortization ot Bond istuancb Cr�sts �1.746) qmortizatwn of Bond Di9cour�t {4,245) �,�8+1 In the statement af ac'INi11es,r�mpensated ebaences are measured by ihe amwunts eamsd tlurir�the yesr. I�t the qoeemmental fimda,however, expanditures br these kema sre meaaur+ed by fhe amaunt of finsacial nesoucoes used(penerelly,the emDunta actuaHy paM).D►tfing the y�r,the 6alahae of compensated�tbsences pays�ble de0raesed. �F��D74 A total af S85,d73 oi fnfrgstructure(ost oi�?9,061 oI ecaumula�ed deprec�iadan) waa tranafer�ed irom the�oremmentei acthrities capitai assets to the Uptown Sewe�Entetprise Fuad,aa this enterprise fund yvas esteblished as of Js�uary 1,. 2Q02. �56:412) �CH/►NGE IN NET P081TION OF f30VERNMENTAt/►C'flVl?IES s 85,�48 ,See�c�companY�np Notas b I9asro�lnanofel�teteme�e. CITY OF SCANDIA,MINNESOTA STATEIIAENT OF NET PC�SiTION PROPRIETARY FUNDS DECENIBER 31,20'12 201 Sewet Uptorem Enterprise Sew�r 'Total ASSETS Fuhd Fw1d 'Z0�2 Curr�nt Asset�: Cash and lrn►estments � 184,529 � - i 76�4,579 Special Assessments Receiv�b{e f�,912 • �8,912 Other AcCounts Re�eivabie 9�574 2.365 11,D39 Oue trom�tlter Funds , 636 - , 6�6 Tatal Currerit pssets 183,669 2,385 188,018 Noncu►nnt Assels: Cepit�lal Assets: Collection System� 1,500,000 243,82T t,743,627 Less:Axumulsted Deprsciat�on (690,OOD) t93,937) ! (723,937) Totsl Cepitel Assets 810,000 209,880 1,019,890 Tata1 Assats 993,681 212,255 1;205,808 UABILITtE8 Current Liablliti�s: Accotmts Peyable 15,747 6,496 Z2,2+43 Due kq Othe�Fu�ds 838 B36 fiotal Curtent Uabilitiss 15,�4T 7',732 22,879 Advenc�from Other Funds 39,588 3D.588 " . Total Ltabilit�es 15,747 d8,720 82.467 NET P081TION invested in Capita)Assets 810,fl00 209,890 1.D19,890 Unroatricted 167.904 (44.355� 123.549 Total Ndt Pos�fOn - 97J,904 165,535 �,143,439 Tdtal Uabilities and Net PosRfon .� 9�i,85� � 2�2,255 � 1.2W3,906 5ee scc�naQeoving Notes eQ Basic Finanae!St�tements �OF SCANDIA,MINNESOTA STATE�IAEMTS OF'REVENUES,E�PENSEB,AND CHANGE81�1 NET POSITldN' PROPRIETARY FUNL3S YEAR ENDED DECEMBER 31, 201� ZO! Sewec Upt�wtl Enter�rise Sewer Total Fut�tl :Fund 2012 OPERATING RENENUES Ch�r�for Service $ 70,888 S 9,879 � 8p,27S QPERATING EXPENSES pepreciaqon 30,d40 �4,876 94,878 Utilities 1,837 377 2,014 Maintenanoe�nd Other 94,506 12,225 1�:731 , Total Operating Expenses 7�6,143 97,4T8 948,621. GpERA'f1N0 L.O$S (55,�47} (7,899) (B3.99Bj NONOPERATINQ REVENUE IMerest Revenue '7�9 - T23 Special Assessments 5,i51 �. 3;151 Total N000penating Revenue 5,8T4 5,874 L08S BHFORE?RAN9FERS (4�,573) (7,89�) (57,472) TftANSFERS Tranafer In - 176,178 175,178 Tcanster Out (2�828) t1.744) {4,569) Total7ransiera (2.825) 't73,434 170,609 CHANGE iN N6T POSIT'ION (52,398) 186.535 113,137 Net Pvmitbrl-Be$irt+�iR�of Ye�r '1,030.3t12. �,090,902, NET PC$ITION-END OF YEAR 3 977.9d4 S 185.535 �f i.�43.439 ,See acoomp�yrnv Nales ro Bask Ff►+a�ial Stat�ments. CITY OF SCANDIA,MiNNESOTA STATEME`�iT OF CASH FLOWB PROPRIETARY FUNDS YFAR ENDED DECEMBER 31�2092 207 Sewer Uptown Sewer En�SrPrise En�erprise Fund Fund Totsl CA8H FLOWS FROI�A OPERATING ACTfIRi1Es Cee��Reaehrod trorn Cus�omer�B � 71�570 � 7,214 � 78,79+1 Cash PBid to Suppi'i�ers for Cioods And SsNioas (tt19.192f (B,108) f118.298) Nat Cash Provided(Ueed)by Uperetinp Ac�iVifies (37,822) 1,108 (36,514) CA8H FLOWS FROM NONCAP(TAL flNANCING AC7IVITIE8 Transfer�ut (2�825} (1�744) (4.689) Oue tc/Due from to Cover Negativa Csah t636) 63B - Net Cesh Used by Nonc�pitalJ�divfties (3,461) (1,1D8) (4,588) CA3H FLOWS I�ROM CAPIT/1L I1ND RELATEO FINANCtNO ACTtVtfIES Purchasea of Capitat Hasats - (158,354) (158;354j Trensier In trom Capilai Improvemen!Fund - 118,�66 118,7E� Advanoe'from Capitai Improvement�und - 35,568 39,588 Net Caah Used tor Capital artd Related Financing Adhriti� - - - CA$H FLOWS FROM tNVESTIN6 AC7'�VI71E8 InEer+est On InvesMeMe 72$ 723 NET DECREA8E IN CA8H AND GASH�aW1//1l��1T� (40,360) - (4G,360) Caah end Caeh Equivabnb•Bepinninp of Yaar 20�,888 2M.889 CJ18H AMD CABH ECUNALENTs-END OF YEAR S 16�1.529 � 3 16�.529 RECONCiLlAYION OF OPERATIN�3 l.O�s'f'O NE7 CASH PROYIDED{USEDj BY OPERATING ACTMTIl8 oper�v��.os� s (�.aa�� 3 �.e�s) � '(83.�s) A�usfinenb to Reoonclb Opersfi�l�ss 4o Net Cash Provyded(Used)by O�etating AcWiNesr Uepnecla�on F�cpenea 30,000 4,��8 s4.87B SpeCial Asse�arr�ents 6,151 - 5,9�i Chsnpss tn Asset and UabNity Aoc�unt�: Increase in SpeciatJ4ssessrt�ehts�Rsdefvabk �1�991) • (1,�1} Decroase in Ottter A000unb R�viwbk (2�286) (2,365) (��f51) Decreass in Prepayme�t - - - Ina�9sse in Due trom CouMy - - - Inc�ease(beaease)in Aocounffi Payabb (93,0491 6.�t'86 `_t6,5531 Nat Cash Ptovidad(Uaed)by Opetsti�p Adivities S C37,B22) i '1 108 t t36.614y NONCASH CAPR/1L FlNANCINO ACTiVIT1�8 Capital Assets of;56,41 Z(net al aooumWsted deprecistbh)wete lranaferr�ed finrn GovenlmenlaMc�iv�ies CapitsM Asseta b the 201 Uptown Sew�r Fund See aocanpany'mg JyoBea iv 88sic Financfa/SlBt�rnents. CITY OF SGANDIA,MINNEBDTA BTAT�MENT OF N�'f P+D�ITION FlDUCIARY FiJND DDCEMBER 91�20�Z A�aencv Ftmd ASSETS Curront Assst�: Ceah and thvestmenta S 172.947 L11►BIL�7IES Cummt Liabliides: Go�ltraCtOr Oeposit� S 172:347 Sas s�c:orripen�Notss to Basia f+Irancia!Stetem�ts♦ C1TY OF SCANDIA� MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 3'!,�0'I� NCTE 1 SUMMARY OF SIGNIFICANT ACCOUNTiNG POLICIES The Ciry of Scandia (City� is a public corporation formed under Minnesota Statl�te 4'ix. As such,the City is under statutory city regulations and appiicabte statutory guidetines. The b�sic flnanciai atatements of the City have .been prepared in conformity �wi1h U.S. generaly accepted ac;oounting pr�nciptes as applied to govemmentei untts by the Guvemmental Accounting Standar�ds Boar� (GASB). The following is a summ�ry of 'the sign�icent accounting po�icies: A. FINANCUIL REPORTlNG ENTtTY As requi�ed by U.S. generally accepted accounting princtples, the flna�crel st�lemeMs of the repotti�g entity Include all funds, depa�tments, agencies, boards, cammissior�s, and other organizatidns over which C'�ty officials exercis+e oversight respolnsibility. Component units are legally separate ent�ies for which the City (primary govemn�ent)Is tinancially aacountable, or far which the exclusion of the r,omponent unit would render th� finan�ial statements of the Primary Govemmerrt misleading. The crite�ia used fo determine if the Primary Govemment is flnancialy accour�table for a cornponent unit include whether br nat the Prirr�sry Govemment appoints the voting majority of the poten�al camponent unit's poverni�g body, is able to impos� �s will on the potiential component unit, is in a relatic3nship of financial benefii or burden with #i�e poten�al component unit, or is fis�slly depended upon by the poter�tial component unit. Based cn these c�iteria, there are na or�anizations consldered ta be component units of the City. C1TY OF�CANDIA,MINNESOTJmI NOTES T�BASIC FINANCIAL STATEIA�N'�S DECEM9ER 31,2012 N�TE 1 SUMINARY OF SIGNIFICANT ACCOUNTING POLICIES(CONTINt1ED) B. BAS1C FINANCIAL STATEMENTS 1. (3ovemment Vlnd�Statements The govemment wide financial statements(I.e.,the staten�nt of net position and the staterr�nt of activities) display infonnatiQ+� abQut the primary govemment. 7hsse statements include #he flna�cial activi�es of the overall Ciqr govemment, except for fiduciary activities. Gavemrt�tal adivities, which nornrelly are supported by troc�ss �nd intergovernmentat reu�enues, are neportad separetely from bu�iness-type activities,which tely Go a�ignficant extent on fees and charges to extsmal parties for suppert, As a general rule, the et�ect of interfund activity fias been �Iitninated trom the govemment wide fi.nancia) stetements. Except�ns to this general rule are charges betwe+�n the C�r's enterprfse fund �and various other fiunc�ons af govemment. Eliminations of these charges would disbort the diract oosts and program revenues rspot�ed fe�the various tunctbns c�oncemed. In the �ovemment wide staterr�snt of r�t posi�o�, bo#h the govemmen�l an� business-type activi�es columns: (a)are presented on a consolida�ed basis by column; an� �b)are repotted on � full accsuel, economic resourc:e basis, v�ich rrscognizes all tong-tert�n assets a�d neceivabies as well as long•�erm debt and obligallons. The CKy's n�t position is repo�Ge� in thnee parts: (1)net investmeM in cepital assets: (2)restricbed pet position;ar�d(9)ur�restricted net�sihon, The statement of activities demonstraies the degree to whi�h the direc#expehses of each iunct�on �of the City's gnvemmental a�es and different business-type activities are offset Dy progrem revenues. Direct expen�s are those �at are cleariy identiflable with a speclfic func�on or ac�vi�ty. Prognm re�r�nues include: ('I)fees, #ines, and cl�rges paid kry the reapients af goods, ssrvic:es, ar privileges provided by a given function or activity; and (�)�ran#s and cQntributior�s that s�e restrlct�d to meeting the oper�nal or caQltal r�equinemer�ts of a particutar function or eci�i�y. Revenues that are not classified as program revenues, induding all taxes, are presented as general revenues. 2. Fund Finanael S#atements Tfie fiund financi�i statements provide iniormation about tt�e Gity's funds, inciuding its fiduciary f�a�d. S�parate stateme»ts for s�d� fund t�tegory (goveminenta�, proprietary, and fiduciary� are preser�ted. The emphasis of govemmenta) a�d proprietary fiund financiai statements � on major individusl govemmental and enterprise funds, with each dispisyed as separate oolumns in the fund �nancial statements. Ali reinaining govemmental funds are aggr+e�ated and r+eport�d a� nonmajor�unds. CITY OF SCAMDIA�MINNE80TA NOTES TO BAStC FINANCIAL STATEMENTS DECEMBER 31,?A1Z NOTE 1 SUMMAF�Y OF SIGNIFICANT ACCOUNTING POLICIES�CONTINUEDj B. BASiC FINANCIAL 8TATEMENTS(CONTiNUED� 2. Fund Financia) Statements(Corrtinued) Propri�tary tund opereting revenues, such as c:harges for senr'�ces, resuft irom exchahge fransactions asso�a�ed wftt► t�e principal activity of the fund. Exchanpe transactions are those in which each pai#y rec.eives and gives up essentialiy equal values. Nonoperating revenues� such es subsidies and investment eemings, result from nonexchange transaCtions or incidental activides. The Cit�r reports the toliowlr�g majar govemmental funds: Generel Fund The Generaf Fund ts the Ct1y's primary operating fund. It �nts �or all finanaal resouroes of the generai govemment, except those required to tie accaunted for in another tund. 2007 Debt�ervic�Fund The 2007 Deb#Servfce Fund aa�ounts for debt service payrnents used to financ:e the Cihr's various irr�rovement projects. Eauinment Red�aement F�d The Equipment Replacement Capital Project Fund acaoun�ts for resourc�s to be used to purchase motar vehides and heavy machinery. The City reports the foUowing tnajor proprietery�unds: Sewer Fund The Sewer Fund a�u�ts fo� customer s�wer setV�ce char�es that are used ba finance sewe�opera�ng expen�es. Unt�wn Sewer Fund The U�town Sewer Fund aocou�ts ior customer serVic� �itarges that are used ta finance uptown sewer opereting expenses. Ada�;onau�►,the City reports the follwving fidudary tut�d; Naencv Fund. To acoou�fior assets held as an agent fior ir�dividuals, prit+ate organizations, other govemtnental upits, and/or ather funds. The City's agency fund accounts for passr through coM�ctor's deposits�lati�g ko prospedive developmenis. C1TY OF SCANDIA,�IIINNESdTA NOTES TO BA81C FINANCIAL STATEIAENTB OECEMBER 81�30`12 NOTE'i 3U�i1MARX Of�ICiNIFICANT ACCOUNTlNG POi,.1�1E8(CONTlNUED� C. MEASUREMENT F04US AND BASt8 OF ACCOUNTiN�i The govemment-wide and pr+oprfetary fur�ci financial statements are reported using the economic resources measurement focus and the soaval basis of aocour�ting. The Agency fund� which is i�tuded as � Ffduaary Fund, does not have a measurement focus. Revenues are recar+ded when eamed, and expenses are recorded when a liability is incuFned, regardiess of the tlming of nelated cash flows. Property taxes:are recognized as revenues in ttle �rear for which they are leuted. GraMs and similar items are r�eoognizQd as r�nu� as soon �s a!I etigibility requirements impo�ed by the prnvkler have been me� Govemmental fcmd financial statements ara reported usir�g ttte current flnanGal res�urces measuremerrt focus and the modified aa�al basis of accounting. Reveriues �re recognized as soon as they are both n�asurab�and availabis. The Gity considers a�ll revenues to be availabie if ihey are coqeded within 80 days aRer the end of the curreM period. Property and other taxes� licenses, and irrter�est are all considered to be susceptible �o acaval. Expend�ures are recorded when the related furad liabilihr is incurred, exoept for principal and interest on general lon8-tem� debt, compensated absences, and daims and judgmeMs, whit�� are recognized as expenditures to the extent that they have meitured. Ptoceeds of general b�g-term debt and ecquisidons under t�p�tal leeses are repo�ted as other finandng souroes. When both restric�ed and unrestricted re�ourc�s ere ava�able f�r use� it is the Clt�r's p�t�cy to use restricted �+esaurces first,then unrestrided resouroes ss they are needad. Amounts r�poried as program revenues indude: (1�Cha�ges to cus�omers o�applioa�ffi for poods, serv'�ces� or priv�leges provided, (2j operatin� grarr►t�s and oontributicros, and (3)capitai grants and oanttibutlons, ir►dudins speda�i assessmetrts. Proprietary funds distlnguish operatjn� revenues and expenses from nonoperating itgms. Ctperating rQvenues and expenses ger�rally r�ult from pt+oviding selvk�es and produdng and tletiverMg goods in connection with a proprietary iund's principal ongoing operations. The principa) opera�ng rovenue af the City'a enterprlse fund Is charge�ta customers for sales and s�rvices. Operating expensea for ente�prise funOs i�dude the cost of sales and services, administretive expenses, and depreciation on capital assets. All rev�nues and expenses not meeting this definition are reported as nonoperatlng revenues and e�cpenses. CITY OF SCANDIA�A�IIrNNE$OTA NC1TE3 TO BASIC FlNANCIAI.STATEMENTS DECEMBER S!,ZO'!Z NOTE � �UMMARY OF SIGNIFJC�NT ACCOUNTING PtlLI�tES{CONTINUED) D. BUDGETS 8udgeis ere adopted cn � bes� vonsister�t with U.S. general�r ac�e�ted as�un#ng principles. Annual approprlated 6udgets are adopted for the Generai Fund. 8udg�d expenditure approprya�ons lapse at year-end. E, GASH AND INVESTMENTS Gash and investmeM balanc�es from ail funda are pooled and invested tq the extent avaiiable !n investment� autho�ized by Minnesata Statutes. Eamings fran invesfinents are �llocated to individual funds on the bas�s of tfie iund's equity in the cash end investment pool. The Cit�r provides temporary advan�es to funds#hat have insu�ici'snt cash baianoes by means of an advance from another fund shown as interfund reoetvsbles in the advancing fund in the govemmental tun�financial statements, and an intertund peyaibte in the tund with the deficit, until adequate resourc8s are reveived. Ttrese interFund payabies are eliminated#or statement oi net positi�n ptesentation. investments are stated �t fair value as of the balance slaset date. Intere�t ealnings are aocrued at t�e balanoe sheet date. For purposes of the statement of cash flaws the ProQrietary Fund considers aA high�y liquid investments Wlth a maturity of three months w less when purchased to be cash equiv�lents.All ot the cash and investmeMs allocated ta the proprietary fi,�d types have originai maturities of 90 days or less.Tt�erefore,the entire balance in such#und types is considered cash eqUivalents. F. PROPERTY TAX CREDM'S Property taxes on homestead property (as defit�ed by s#ate statutes) are parUally r+educed by property tax credits.These credits sre paid to the City by the State in lieu of taxes levied ag�i�lst homestead propetly. 'fhe State remits these credits throt�gh instatiments each year.These credits are recognized as revenue by the City at the#ime of collection. CITY OF SCANDIA,liAINNE80YA NOTES TO BASIC FINANCiAL STATEMENTS D�CEMBER 37�201 Z NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTINt3 POLICIES(CONTINUED) �3. PROPERTY TAX REVENUE RECOGNITiON The City Council e�Anually adopts a t�c levy and'certifles a to ltte County i� December (levy/assessment date} of eaoh yesr for coilectlon in the falowing yeer. The County is responsible for biAin� and callecting all property taxes for itselfA tfi+e Gity. t�e locai Schaol District and other ta�ung authorities. Su�h taxes become a ii�n an January 1 and are recor�ded as rec�ivables by the City at #hat date. �eal properly #a�s are payab� (by property owners) on May 95 and Oct�ber 15 of each caiendar year. Personel property taxes are payabie by t�tpayers on Febniary Z8 and June 30 of each year, These taxes ace coilected by 1he County and remitted to the City on or befare Ju1y 15 and December 15 of the same year. Delinquent oollections for Alovember and Deceimber are receivetl the following January. The Clty has no ab�it�r to enforoe payment ot properly taxes bY property ow�ers.The Ccunty possesses this a��thority. Within the governmental fund financial statements, the Cit�r recognizes property tax t+evenue when �beoomes#�oth measurable and available to finance expendku�s of the curre�t period. In practice, cument and delinquent taxes and State c.nedlts receh►ed by the City in July, December and the following January are recognized as revenue for the current year. Taxes and credits not�eceived at the year-ernl�re classifled�s delinquent and due from County taxes reoeivabie. The porti�n of delinquent taxes not coilected by the City in January is fuliy offset by deferned revenue because it fs not a►relfable to finance cument expend�ures, Deferned revenue In govemmental activities is s+usceptible to 1u11 accrual on the govemment-wide statements. The City's property tax reve�ue includes payments from tt�e Metropol�n Revenue Dist�ibution (Fiscal Dispa�i�es Farmula) per MlnResote Stetute 473F. This statute provides a means of spr�eading a portion ot the taucablr valua�on of commenci�ICndustiial real prop8rty to verious faxing author(ties within the deflned �tropolitan area. The valuaqon "shared" is.a p�rtion of commercialtndustnal property valuation gtrowth since 1971. Property ta�tes paid to tha Cit�r through this-formula for 2012 totaled $125,828'. Receipt af property taxes from this "fiscai disp�rilies pool"does not increase or decre+ase total tax re�v�enue. CiTY OF SCANDIA, AAINNE80TA NOTE$TO BASIC FINANCIAL STATEMENTS DECEMBER 31.201 Z NOTE 1 $UIUIMARY OF St�NIFICANT ACCOUNTIN6 POLICIES(CONTiNUEDy H. 3PECIAL ASSESSMENT REVENIJE RECOt3NITiON Speaai assessments ar+e levied against beneflted properties for the c�t or a portion of the oost vf�pe�al assessment improvement projects in accordanoe with state statu�s. These assessme�ts are collectible �y ihe City oVer a iemt df years �sually consistent with ttre term of the reiated bond issus. Colledion cf annual installments (includfng interest) is handled by !he County Auditor in the :s�me manoer as property tanes. Property owners are allowed to (and often do) prepay fu#ure installnle�tts without Ir�terest or prepayment penaltie�. Within the fund financi�i statements, the revenue f�om speci�l assessments is recogniz�d by the Ci�y when it beconles measurable and available �o finance �xpenditu�es of the current �scai period. !n practice, current and d�iinquent speciai essessmet�ts teceived by the Ci1y are necognized as revenue for the cuRent year. Special assessments are cailected by the County and rerr►itted b� December 31 (remitted to the City the fi4lbwing January) and are also recognized as revenue for the cument yesr. All remaining delinqueM and deisrred�special assessments receivable in governmental tunding are completely offset by defiened revenues. Deferred ravenue in govemmental activities is susceptibie to full accrua) on the govemment-�wide statemeots. Once a special assessment roll is adopted, the amount attribwted to eacfi par�el is a 11en upon that property until full payment is msde qr the amount is determined to be exce�sive by the Clty Council or oourt actfon. tf special assessments are alivwed io go delinquent, the property Is subject to tax forfeit sale and the first prooeeds of that sale {after costs, penalties and expenses of sal�� are remitted to the City in �►aymsnt of delinquent s�ecial assessments. Genera0y., the City wi4 coDect the full amount of its �speciai assessments not adjusted by the City Counci)or court aclion. Pursuant to statg statutes, � property shaq be subject to a tax iorfeit sale aRer throe years unless it is homesteaded, agricultural Qr seasflnai rec�eational land in which evsnt the property is subject to such sale ait�t five years. I. CAPITAL ASSET8 Capital assets, which in�luds property, plant, equipment, and infrast�ucture assets te.g. roads� �idewalks, street lights, and similar items) are reported in the applicable gavemmental or business-type activities oolumns in the govemment�nride #inanaal statements. Capitaf assets exceedit�g the City's capibalization �hreahold af $5.000 are record$d at liistorical cost or estimated t�is�orieal cost if purchased or constructeci. The cost of nonnal mair�tenance and repairs that do not add �o the value of the a�et or materialy extend asset lives are not �apitalized. Major outiays for capital assets and impwvenients ere capitalized as projects are t;onsttuded. Irlfiastrudu� has been capitalized as of 1980 and thereatter. C1TY OF 3CANDIA,IIAINNESOTA NOTE9 TO BASlC FINANCIAL STATEMENfi$ DECEMBER 31�?A72 NOTE 1 SUMMARY OI�SIGNIFICAMT ACCOUNTINQ POLICIES(C�JNTI�1UEp� i. CAPITAL ASSET8(GONTINUED) Deprea�tion on exhaustibie assets is reoorded as an aUoce�e� expense in the statiement t�f activi�es w�t aocumulated depr,edaiion refl+acbed in the sta�ett�nt of net posi�on. Capitai assets are depreccieted usin� the straighWine mgthod vver tfieK estimsted usei�! lives. Slnce surplus assets are �old br an immaterial amount whan declan�d as no longer needed far CiEy purposes, no saNage value is t�ken into. cansideretion fvr depreciation purposes. Usefui lives vary from 3 t� 30 yesrs for buildings, equ[pment, vefiicles, fumituroe and fuctunes, and other improvements, and �5 to 50 years for InfrasVucture. Capital assets not bein� depreciated include land and construction in progress, J. Ct�MPENSATED ABSENCES It is the City's policy to permit employees to accumuiate samed but unused leave benefits. All leave pay js accrued o� a per pay period basis and cecorded in the govemment-wide finandal statements. The current portion is calculated based on histo�ical trends. K. LONG TERM QBLKiATIONS In the entittyy-�wide financial statements, long-term debt and other long-tenn obligations are reported as liab��ies in the appiicabie govemrtiental activiqes. Bond pr�ums and �iscounts are defemed and amortized ove�the life of the bonds using the stra�pht-line method. Band issue costs, if material, are reported as deferred charges and amortized over'the term of th�rela�ed debt using ihe straight-line method. In the flovemnnen�l fund financial statements, bond premiums �nd discounts, as wei� �s bond issue costs are r�cognized during the current period. The fa+ce atnount of th� debt issue is reported as another finsncin� source. Premiums Bce�vec� on deb� issuances are reported as other financing sources while discounts are reparfied as other financing us�, Issue c�sts are reported as deM service expenditur�s. CiTY OF 8CANDIA,MINNESOTA NGTES TO BASIC FINANCIAL STATEMEMTS DECEMBER 31,2D7 2 �IOTE'! SUMAAARY OF SIGN1PfCANT ACCOUNTIN6 POi.1�lE3(CONTINUED� L. NET POSITION Net position represents tE�e difference tistween assets and �abilities U the gov�mrr�t wide flnanciai stateinenls and are classifi�ed into thre�components: a) Net investment in�ap'�al assets—This component c;onsists of capital sssets net of accumulated depneciation and reduced by the amount af outstanding balance of bonds or other borrowings that are attributabte to the acquisiqo�, construction or improven�nt of those assets. b) Restrided net pasition—Net position witfi constraints placed on the use eith�by 1)extemal groups such as creditors, grantors. or laws or �egulationa of other governments; ar 2) law through constitutional provislons or snabiing iegislatlon are reflect�ed in this component. c) UnrestNded net �osition — Ap nther assets t�►at do not meet the de�nition of "�estrtcted"o�'net investnient In capital asse�." M. FUND BALANCE ln the fund finanaai statements, govemm�ntal funds report fund balsnoes in dassificatlons that dis�bse constralnts for which amounts in those funds can be spent. These classiflcaY�orts are as followe; Nonspendable — pcdions of fund batanoe related �a prepaids, Irn►entories, lon�-term receivables,and corpus on any permanent fiund. Restrictsd — funds are co�strained itom outside parties �statute, grantors, bon� agreements,etc). Committed—fund oonstwaints are eatablished and rnvdified by e resolu�o►►approved by the CRy Coundl. Assigned—cons�t$of lntemally imposed consfiraints approved by the City Cour�il. Unassigned — is the residual classification for the �eneral Fuhd and also reflects negaWe residual amounts in other funds. When an expenditur�is inc,urred for purposes for which bvth reshicted and unreshided fund balance is avaHabb, it is t�e City's poiicy to use resir�ded flrst, then vnnestricted fund balance.. Whe� an expenditure is incumed for pucposes for which committed, as�igned, and unassi�ned a.mount� are available, it is the Ciiy's policy to ase comnnitted �Rrst, then assigned,and finaly unassipned amounts: The City formaAy adopted a fund balance policy for the General Fund. Tfie policy establishes a year-�nd target fund balance range of 3596-509�of the annual operating budget. CiTY t)F SCANDIA,I�AINNE80TA NOTES TO BASlC FiNANCiAL.STATEMENTS pECEMBER 31,20'!2 NOTE'! SUMAMARY 4F SKiNiflCANT ACC�UNTiNQ pOl.1ClE$(GONTlNUEO� N. INTERFUND TRAMSACTIONB Jnterfund servic�s provlded and used ar�e acoounted for as revenues, expenditure� or expenses, Triansactlotts that constituts reimbursements to a fund for expend�ures/expenses initially made from it that are prnpery applicable to another �und, are►�econ�ed as expen�tures/expenses in the neimbursing fund and as reduc�otts of expenditures or expenses in t�►e fund that is r+eimbursed. Ail other interfund transac�ons are repo�ed as�ransfiers. All intetfund transadions are elimineted except for activity between government�l activmes and business-type activi�es for pre�entation in the entity-�wide statemer�s of net pos�ion arid st�tements ot act�vitles. NOTf 2 DEP�SIT8 AND INVESTMENTS A. DEPOSlTS The City maintains a cash and i�vestment pool that is available for use by sll funds. Each fund type's portion of this pool is dlsptayed on the statemern ofi net position and the balance sheet as "Cash and Invesbnents." In accobance w�h Minnesota Statutes the City maintains deposits at flnsndai institutions whi�h are authorized by the City Council. Custodle!Credit Risk—Custodiai credit risk#or deposits 1s�he risk that In the event of� bank #ailure, the City's deposits may nct be returned to it. The Ciiy does not have s deposit policy ior c�Eodial credit risk and follows Minnesota 5tatutes for deposits. Minnestita S#a�utes require that all deposits be protected by insura»oe, surety bond, or collateral. The market value of c;ollateral pi�dged must equal 1109�6 of the deposiis noi covered by insurance or corporate surety bands. Authorized coUateral include: U.S. govemment treasury �Ils, notes, or bonds; issues af a U.S. gavemmeAt agency; general obligations �f a state o� local govemment rated "A" or bet#er, reven�e obtigat�ons of a sta�e or (ocel governmeM rat�d °AA' or �etter, irnevocable standby letters of credit issued by a Federat Home Loar� Bank; and pme �eposits insured by a tederal agency. Minnesota Statutes �equire securi�+as pledged as oollateral be hetd in s�fekeeptn� in s testricted account at the Federai Reserve Bank or in an account at � trust department of a r.ommerci�l bank o� o�her financiai institution not owned or oontrollad by the deposit�ry.. The carrying value and bat�k balance of the�ity's depashs tn ban�ks at �ecember 3�, 20121s �2,811,291 and 52,825,179, respectivei�r, and were entirey covered by federai depository insuranCe or by surety bonds and collateral ln accordanoe wtth Minnesota Statutes. CCTY�F 3CANDIA�MtNNESOTA NOTES TO 8A8iC FINANCIAL STATElIAENTS DECEMBER�1.Z012 NOTE S CAPlTAL A8SETS Capitai as�et activ�ty!or the year ended Dec�mber 31, 2012 Was as follows: e.o�� �P esw,o. Adenton� c�eoo.u� �n�s e.ww� Go+r.nn�nplllctlNtl.s: - ' �fpial Mte�s#lot 8eln�D��Nds Lantl i 4b7,796 !i - s - : - f iii,TSli COII6tfliWOn M pr�Dy►qt 111.86Y =, _ �� ti i 7.l52). Totai Capilal Alsdf NDl BeU1p De�ld�ld E6�,6s7 - - {111,852y ; ,7'36 Cepltal Iwa46 6Mnp Dsptad�led: eurer� z:�z.�o - - - z.�.eyo E�Wlpinmi �d3.�?2 1�8,950 • 1�1,Y6T 424,232 Whk�ll 1,OOO,ZOS 11,�20 • 1.D17,721 Inh���uetw. 4.55?,?�12 - - I�6.�7� 0.278�7� blher ImprDwmenb 16T,847 . �_, 182.bf7 ro►aicapn.i�s.,e.�wprra.�ea oa,i�e,2�s �se,se4 • ie,r�a »,a�t.o�e Aoamu4Md Deprecf�Mon For Bulldh�ps f�t2,5l4) (4l�2i81� . . (7ED,a45� Equ�pmsm (2ss,sasl t56�Y2� • • (Z62�493) uaMclre ts7's.e7e) =�9.527I - - t�.�+s1 In�rs 1z�,er►1 f�e,ae4) - s�,oe� {�,e��,aco� ah.r�m�rova+n�r►�. na,o�s� ie.aw) - ,^ ta�.eo� Tow��.ied osa.a.ron .���n c�e�.sw� so,oe� t4,a�a,�o� Totsl Cspqa�Aast�,Betnp Depr�d�r4.Nst e.eo ,a5� (2a�.a�o1 56.4so e;e�7.ea�. oor.mmsaw,Acuwae:cs�cs��s.et+.Hat s arn�.ue a tza�.a,o� a - s �ae.�,� a 9.00s,�z4 �� �� �� �� �� 6.o�minti Endkw BsMno� �_ DNporals . Tt�nlfsr� . BM�o� �ttl1111�17�10�A011YItlq: Cipibl AffN�B�inO�sPl�led: SawerFle�! i 1,500.000 i - : - i - S 1,500,000 llplOwn Bwwr - 16l�36�/ lS,47J ?���l2T ToMt W➢IW As.�b Bskq O�txad�Md 1�600,000 't a - �0 .� ,� L�s�:Aaa�mualW G�x.aation �eo.a00I Cdn.s7d1 - (x�.oe�) (7�'as�� aNc.pM.��nw-s.w.run�ay a e�o.o�o �� i2� s - s se,��2 s�.o�4.s�o .r-�r is..� ar.�r■ Deprecia�on wa�charged to Ctty fiu�c�on�as fotlows: Geners�oo�►emmern s 15,�so Public Sataty 45,291 PubUC Vlbtks ',►24.402 Padcs ar�d Rec�ea�on 1Z,Z�i1 ��� Tota!Depreoia�on-Govemmer�tal 11dNVities S �a7.694 CI'fY OF SCANDW,MINNESOTA NOTES 70 6ASIC FiNANCIAL 3TATEMENTB DECEMBER 39� 2012 NOTE 4 �ITY iNDEBTEDNESB City lndebtedness at:Decefiber 37,2fl421s composed of the fioNdwtng: � Issu� Maluri�r tnfe�st Orqinsl Bal�nae i'l�le Dsb Rabe Is�ue 12J31M2 Oowrn�nMt�L AetivMMss iian�tal Oblf�tlon D�b� Z005 BWldfip Ctostover Bond� 6/112006 12/1/2D15 9.36�4:Zl6 i 885,OOD i 915,ODD 20071tnprov�smerABondt W11200T 1?J1IT017 9.66=4.1% 1.d30.000 BAO,D00 201D E��ipment CetdMate 7115r2010 2/11ZOi8 Z.22-3.6696 20�.DD0 1BO,OOD 2011 Eq�ApmeM CetUibab OISQIZ011 12M/ZOlB Z.76%-3.96�6 160,OOD - 120.DD0 Tota1 Lor�p-fimm oebt 2,465.00A 1.Z36.00c1 Ununortize8 Bond Dlscuunt (Jt3.OBD� (7�.093) Compenssped qb� NfA 15 016 ToW Z 1 10 � b 7 , T�e following is a schedule of chanQes in City indebtedness far the year ended December 39,2012: arKounts Bdanoe Bebnoe pue VV�hin !l1H2 I�ued Retlrod 1?131/12 One Year Lono-TMn b� GoyMnn�nt�rf ActivltNs: General Obllpetkm NWe� i 1.640.000 i - � (906.000) � 1.235,b00 3 306,000 Utq�nw�ed Nond Di�unt C��? - �,� t19.083) _ Compan�afed Absenoss 19,OB0 22�'lt (26,1�. 15.016 t2,363 Totai Long-Tenn Debi 5�536�7� 5 22 071 S'� i�9� Sl7.366 All long-te�rn bonded Indebtedness autstandir►g at December 31,209� is backed by the h�lr faifh and credit of the City,including special assessment bond issues. For the govemmental activitie,s� cflmpensated absences are gener�ally!'�uidated by the Geaerai Fund. During.2006, the Cit�issued �85,000 of Genecal Obligation 8uftding �rossover Refunding Bonds. Series 20t15A for the purpos� of refunding the 51,200�OOQ General Obliga#�on Buildin9 Bonds of 20Q0.The crossclver refunding ticxumed on Deoembe�1,2008, CITYOFSCANDW, MiNNES�TA �IOTES TO BAS1C FiNANCIAi.STATE.�AEN'1'$ DECEMBER�1�Z01� NOTE 4 CITY INDEBTEONESS(CONTINUEO) Minimum annu�l principal and interest payments required to retire I�ng-�erm debt, not including campe�sated ab.sences payable er�e as i�llows; Year End`u�a aecember 31. Principal lntet'e�t Total 20i 3 , , , 2414 305,OD0 35,943 3+40,9�l3 xQ15 �05,OD.0 2d,198 329,188 2098 195,d00 12,083 207,083 2017 125 b00 5,125 130,125 Total , . 3��',� , . Desc�iotbn and Restrfcflons of Lon�-Term Debt General Obligation Bonds — Tfie bonds were issusd for improvements or proJects which benefited th�City as a whole and are,therefar�e, �p�id from ad valorem levies. The liabil'dy for compensated absenc:es represents vested benefits eamed by govemment�i lund er�ployees through the end ofthe y�r wh�ch wili be paid or used in iuture periods. NOTE S pEFI1�ED BENEFIT PEh1810N PLAMB—STAT�WIDE A. PLAN DESGRIPTION All fuN-�me and oertain part time em�loyees-of the City are c�ovet+ed by dafined benefit pension pisns administered by the Public Employees RetiremaM Association of Minnesota (PERA). PERA administers the General Ert�pioyees Retirer�errt Fund (GERF), which 1s a cost-sharing, muRipte-employer retirement pl�n. This plan is established and administer+�d in acoocdance with Minnesots Sta�t�tes, �hapter 353 and 358, GERF rtnembers belong to either the Goardinated Plan or the Basic Plan. GooMihated Plan msmbers are covered by Social Security and Basic Plan members�re nat Aii new members must patticipate in the Coordlnated Pl�n. PERA provides retirement beneflts as v+r�ll as disaDility benefits to members� and benefits to survivo�s upon death of eligible membens. Benefits are established by state statute, and vest after three years �f Credited sen►ice. The defin�l retlr+ement be�sfits are based on a member's highegt everage selary tar any fivs suc�essive years of allowable servir�e, age, and years of credit at termin�a�an of servlce. CITY OF SCANDIA� A�INNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 3i.2012 NOTE 5 DEFINED BENEFIT PENSION PLANS—STATEVYIDE(CONTINUED) A. pLAN DESCRIPTION(COAITINUED) TMro methods �re used to compute benefits tor PERA's Coordinated and 8aeic Plan members. The retiring member receives the higher of a step-rate benefft �caual tonrlula (Method 1) or a level ac�ual fiormula (Method 2). Under Method 1, the:annuity accntal rate fo�a Basic Plan member is 2.29�6 of average salary for each of the first 10 years of service and �.74/o for each remaining year The annuity axruai rate for a Coordinated Pian member is 1.296 of average salary for each of the �rst 10 years and 1.7% for each remaining year. Under Method 2, the annuity ac�crual rate is 2.796 0# average salary for Basic Ptan members and 1.796 for Coordinated Plan mem6ers fp� each year of servic�e. For GERF membera hired prior to Juy 1, 1989 whose annuity is cabulated uaing Method 1, a full annu{ty is available when age pius years ofi service equal 90. Normal retirement gge is B5 fot Basic and Coordinated members hired prior to July 1, 1989. Normal �earemern age is the age for unreduced Social Secur�ty benefits capped at 66 for Coordinated members hired Dn or after July 1, 9989. A ceduced r�etirement annuity is also available to eligible members ssekirig earty re�rement. There ar�e dffferent types of annulties availa6le to members upon retiremerrt. A-single- life annuiry is a IifeUme annuity that cea�es upen the death of the retiree, no sunrivor annuity is payable. There are ako various iypes of Joint and survivor annuity options available which wfll be payable over joint lives. Members may also leave their coMributions in the fwtd upon termina�on of pubilc service in order to qualNy for a defeRed annuity at re�rement age. Refunds of contributions are available at any�me ta members who leave pubC�c service, but before reti�ement benefits 6egin. The benefit provistons stated in the previous �aragraphs of this section are cunent provisions and apply to actWe plan partictpants. V�sted,te►minated err�ployees who are entitled to beneftts but ane nat receiving them yet are boUnd by the provlsions in effed at the time they lasf terminated their public service. PERA issues a publicly availabie finan�ial report that includes flnancial stat�ments and required supplementary inf�m�ation for GERF. That report may be obtained on the intemet at www.mnpera.org, by writing to PERA at 80 fmpire Drive �200, SL Paul, Minnesota+ 55103-2088 or by calling t651)296-7460 or 1-800-652-902�. CITY OF SCANDIA, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 201Z AiOTI?6 DEFINED BENEFIT PENSION PLAN8—SYATEWlDE(CONTINUED) 6. FUNDIN6 POLICY Minnesota 5tatutes, Chapter 353 sets the rates for empioyer end employee oQnuibutans.These statutes are established and amended by the�S legislature.The City makes annual cont�ibutions to the pension plans equsl �o the amount roquired by state st�tutes. GERF Basic Plan memhers an� Coordtnated Plan members were requined to contribute 9.196 and 6.259�6 respedively, of their annual covered safary in 2012. The City is required to contribute the follvwing percentages af annual covered payrvll: 11.78°�, ior 8asic Plan members and 7.2b96 for Coordinated Plan merr�bers. The City's contributio�s to the Gsneral Empioyees Re�rement Fund for the years ended December 31� 2012, 2011, and 2010 were 520,284, �21,189, and $20,298, nespectivety. The City's contribuaons wene equal to the coql�actually �quired contributions for each year as set by state s#etute. NOTE� DEFINED CONTRIBUTfON PENSION PLAN The council members of the City are covered by the PuDlfc Empbyees Defined Contribution Plan (PEDCP), a multipfe-emplpyer defened compensebon�lan administer�ed by the Public Employees Retirement AssoGation af Minne�ota (P�RA). The PEOCP is a tax qualified plan under Section 401(a) of the Intemal Revanue Code and all conM'bufions by or vn behalf of employees are tax de�erred until time of withdrawal. Plan benefits depend solely on amounts contrtbuted to the plan plus i�vesiment eamings� less administrative expenses. Minnesota Statutes, Chapter 353D.43, speaifies plan provisions, including the etnployee and emplvyer Conttibution rattes for thosg qualifled personnel who eteci io participate. An eligible elected ofhcial who decides to pariicipate c:antributes 5�6 of salary which is matched by the elected o�icla�Ps emplayer. Employer and Empioyse contributions are com�ined and used to purchase sh�res in oqe or mor� of ihe .seven accounts of 1he Minnesota Supplemental Investment Fund. For adminis�erin� the plan, PERA t9aceives 296 of amployer oontrlbuttons and tweMy-five hundredths o4 ens percent of the assets in e�ch member's account annually. Total employer and employee oontribudons made by the C�y during fiscal year 2012 w�re �824. CITY OF SCANDUI,MINNESOTA NOTES TO BASIC FINANCUL STATEMENTS DEGEMBER S1�Z01� NOTE 7 STIITE'iMD�YOWNTEER FlREFI6HTER RETIREMENT PLAN A. PLAN DESCRIPTION 8�ayinaing January 1, 2011, #he City joined the Vvluntary Stat�wide Volunteer Fireflghfier Retir�ement Plen (the Plan� adriiiniste�+ed by the Pubtic Employ�es RetiremeM Association (PERA). The ptaq is an agent tump-sun� defined benefit plan. Plan sssets are managed by the Minnssota State Boa�d of Investment. The Pisn is voluntary and open to fire departmenis as a replacement of the�r e�ciafing vclunteer �refighter retirement plan. It is also open to muniapalities currenNy without a vQlunteer firefighter retirement plen.The Plan is aodtfled�s Minnssota Statutes Chapter 353G. The lump �um benefitts payable from the Plan ace iu�ded by e�usting flre state a� allacated ta a municipality, addi�onal municipai contributlons, as applicable, and eamings on the investmerrt of these funds. Each participating entiiy will have a�eparate Entlty Acoount in whi�h the assets necessary to fimd tfie beneflts wiN be maintained. PERA perfonns annual caiculations for each Entity Ac:oount to essess H�e level pf funding needed to maintain a� sufficient to pay the beneflts being eamed by the participating er�tity's volunteer fireft�hhers. The calculffiions wlll resembis the prooedure alr+eady defined in law for use by atl existing volunteer flne relief associatiorts. Required coMributions fvr the coming year will be based on servlce credn data provided to PERA in March of each year by each participating entliy's flre chief. The� are no provisions that ailow votuntary contributions ir�to the Plan at�is fime�either from members or from municipel�iies. B. RETIREMENT BENEFITS `The Pian provides for the payment of lump sum retirem+ent beneflts that are based cn a specific doilar value paid for each yesr of cnedited seNice a�cu�nulated by a volunteer firefigfiter who terminates $ervbe snd meets the minimum requiroments for receipt of the t�neftts. The dollar value payable per year of servfce is determined by the sppnsoring mun�cipatity or er�tity at the tinne an election � pa�pate Irt the Plsn is made, selected from 2Q possibte benefd levels. An entity may eiect ba idctease th�s benefid I�avel after joining the Pla�. The beneflt level epproved by the City is$2,�d0 per year of seivioe. TD be eligible for a benefit,a fire�ghter must: • be at least 50 years old; • be veste�, which means heving acquired e minimum af S yeers ofi"gQod time" service credk in the Plan;and, • have severed his or her empfoyment relationship with the flre department tor a minimum of 3�days. C1TY OF SCANDIA,M1NNE8�TA NOTES Tfl BASIC FINANCIAL STATEM�NTS DECEIIABER 31,�073 NOTE 7 STATEYViDE VOLUNTEER FIREFI�3MTER RETiREMENT PLJ1N (CONTINUED� 8. RETIRfMENT BENEFITS(CONTINUED) A tull r�sth�ement benefit is payable b a tirefiphter w�h 20 yea�rs of servioe. Firiaf�ghtens retiring with fewer than 20 but at least 5 yesrs of setvice gre eligible for a perc:entage ot a full beneflt. Fom�er rnembers of the #Ne department who were vested at'the�me they ieft the departmer�t are also en�ded to benefits when they attain age 50. Totai emptc�yer co�tribu�ions made during fisc;al yeat�012 Yvere as follows: Ciy Contritwtiana � 21,968 St�te Ald 18.258 Ta�l s 40 244 P�r to 2011, the �ireflghter pension benefits were heid and managed by the Scandia Fire Reliei Associa�on. Upon joining the Plan,the pension trust fund of the Scandia Fire Retief Assodation ceased to exist as s pension fund and tt►e legal tiae to the assets were contributed the Plan in the amount of�577,244. NOTE S COMMITMENTS AND CONTINGENC�ES Law Enforoement Services — The City has entered intio an sgreement with Washington County to recshre law enforcement services 1or 2011 and 2012. '�fle agreement calis for the City to pay Washingto� Cbunty based on the ach�a) casts associaled with providing services under the agreement. Related expenditures ior flscal year 201 Z were s116,863. �re Deoartment Services Aareement—Eifectiv$January 1�`2012,the City has extended it$ agreement with May Township to pfovide flre serv'ices to the Towr�ship. '�'i�e contr�ct is for three years ent�nding th�ouph Deoember 3'!, 2014. lf t�e t.ontr'act is nat renewed or extended by December 31, 2014, the c�ntrad wiil continu� on s prordted mahth-#o-month basis. Re�ated revenues for the fiscal yeare 2012 and 2011 vYere �33.551 and S32,v74, respec�ively.The Townahip will pey the CRy�34,558 br 2013. CITY OF 8CANDW,MINNESOTA N4TES TO B�ASIC FINANCtAL STATEINENTB DECEMBER 31,Z012 NOTE 8 INTERFUND lndividua)fund ira�lsfers for�scal year 2012 are as foHt�nrg: 7ransfer Trensier !n Out Govemmental Activny: Generel Capitel Ass�ts 3 - S 58,412 Generat Fund 4,569 50,000 �quipment Replacament 80,OQ4 - Non-Major Funds: Capitai lrnprove�rte� - ��18,766 6usin�ss-TYpe A�divitY: Sewer - 2,825 Uptown Sewer 97`5.iT8 1,744 � ZS9,747 259,747 During 20�2, the C!ty made routine transfers from the Generat F�nd to the Equipment Repiacement Fund and reimbursed the General Fund for woric done on behalf of the 241 Sewer and Uptown Sewer Funds. �56,412 of uptown sewer infrast�udure �net of acxumulated dept�ecia�on) was transterned from Govemmerrtal Activ�iss Capital Assets to the new Uptown Sewer enterp�ise fund effective January 1,��12. Addi�anally, ths cx�st of the Uptown Sewer Improvement ProJect was tunded by the C�pital Imprc�rement F�nd through an operating transfer od �118,768 and an �rn��?urld lo�n that r�pr�esented 25�0 of the total oost of'the project. T)�e �cost af this (oan '�s to �e recovered through an increased Uptown Sewer usage rate aver the na�t 10 years, and will be repaid to the Capitai lmprovement fund over this period through ar�nusl paymerrts of�2,639. �ntefiirfd Irderiund Rscelvable PaYable Gove�rflttental Ac�vrity: Capitalllr�Provement S 86r588 S - Business-Type�lt�ivity: Uptovm Sewar - 39 588 � � . CITY OF SCANDIi1, NUNNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31� 201 Z NO'iE 10 R18K MANA{3EIIAENT The City is exposed b various risks of bss relsted to torts; theR of� damege �o snd destrudlon of assets;errors and omissio�s; injuries to employees;and natutal disesters. The City has entered into a joint powers agreement with the League of Minnesota Cities Insurence Trust (LMCt'n to protect the Ciry in the event of a bsa. The LMCIT is a pubUc entit�r risk pooi currentl� operating a�a common risk management ahd insuratnc�progrem for Minnesota cities. The agreement for fiorrnation of#he LMCIT provides tfia# tl�e pool will be seif-susta(ning through member premiums and will refnsure through c�mmercial oompanies for claims in excess of reserved arnounts #or each insured event. The pool c�n make additional assessmenb to make the pc�ol self-sustai�ling. The City has determined that it is not possible to estimmate the amount ofi such additional assessmenta, if any; however� they are not expected to be material to these financi�l statements. There have been no significant reductions in insurance coverege during 2012 and setNements have not exceeded Maurance coverape Tor any ot the past thtee�sca1 years. The CRy has entered into a joint powers agreement with the SouthwesUWest CeMral Services Cooperative (SC) to provide group employee benefits for their employees and to obtain other financial and risk management sarvices. The SC is a pubfic entdy whtch operates the heaith insuranoe pooi through which the City purchases employee heaRh fnsurance. The joint powers apreement provides that the SC will establish, procure, and a�iminister group employee benefits, including selecti�g prov(ders, in exchange fo� e service fee de'bermined by the C�ty's oontr�ct. The agreement is renewed annuaNy end�e City may witfidraw ftom the agre�ment at amr time during the year upon 90 days Written r�otice to the board and all provlders af the program.