comprehensive annual financial report

BLAINE, MINNESOTA

COMPREHENSIVE ANNUAL

FINANCIAL REPORT

FOR THE YEAR ENDED DECEMBER 31, 2005

ISSUED BY THE DEPARTMENT OF FINANCE

CA

FR 05

CITY OF BLAINE, MINNESOTA

Comprehensive Annual Financial Report

for the year ended December 31, 2005

Finance Department

Joseph Huss

Finance Director

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TABLE OF CONTENTS DECEMBER 31, 2005

Page

i

INTRODUCTORY SECTION Letter of Transmittal 1 GFOA Certificate of Achievement for Excellence in Financial Reporting 4 Organizational Chart 5 Principal Officials 6 FINANCIAL SECTION Independent Auditors’ Report 7 Management’s Discussion and Analysis 9 Basic Financial Statements:

Government-wide Financial Statements: Statement of Net Assets 20 Statement of Activities 21

Fund Financial Statements: Balance Sheet – Governmental Funds 22 Statement of Revenues, Expenditures, and Changes in Fund Balances – Governmental Funds 24 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances

of Governmental Funds to the Statement of Activities

26

Statement of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – General Fund

28

Statement of Net Assets – Proprietary Funds 30 Statement of Revenues, Expenses, and Changes in Fund Net Assets – Proprietary Funds 32 Statement of Cash Flows – Proprietary Funds 34 Statement of Fiduciary Net Assets – Fiduciary Fund 36

Notes to the Financial Statements 37 Combining and Individual Fund Statements:

Combining Balance Sheet – Nonmajor Governmental Funds 69 Combining Balance Sheet – Nonmajor Special Revenues Funds 70 Combining Balance Sheets – Nonmajor Capital Project Funds 72

Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Nonmajor Governmental Funds

75

Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Nonmajor Special Revenue Funds

76

Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Nonmajor Capital Project Funds

78

Combining Statement of Net Assets – Internal Service Funds 82 Combining Statement of Revenues, Expenses, and Changes in Fund Net Assets – Internal

Service Funds

83

Combining Statement of Cash Flows – Internal Service Funds 84 Statement of Changes in Assets and Liabilities – Blaine Area Development Company Agency

Fund

86


TABLE OF CONTENTS DECEMBER 31, 2005

Page

ii

STATISTICAL SECTION Table 1 – General Fund Expenditures by Function – Last Ten Fiscal Years 87 Table 2 – General Fund Revenues by Source – Last Ten Fiscal Years 88 Table 3 – Property Tax Levies and Collections – Last Ten Fiscal Years 89 Table 4 – Assessed Value, Taxable Assessed Value, and Estimated Market Value of Taxable

Property – Last Ten Fiscal Years

90

Table 5 – Property Tax Rates – Direct and Overlapping Governments – Last Ten Fiscal Years 91 Table 6 – Special Assessment Collections – Last Ten Fiscal Years 92 Table 7 – Ratio of Net General Bonded Debt to Assessed Value and Net Bonded Debt per

Capita – Last Ten Fiscal Years

93

Table 8 – Computation of Legal Debt Margin 94 Table 9 – Computation of Direct and Overlapping Debt 95 Table 10 – Ratio of Annual Debt Service Expenditures for General Bonded Debt to Total

General Fund Expenditures – Last Ten Fiscal Years

96

Table 11 – Revenue Bond Coverage – Public Utilities Fund – Last Ten Fiscal Years 97 Table 12 – Demographic Statistics 98 Table 13 – Property Value and Construction – Last Ten Fiscal Years 99 Table 14 – Principal Taxpayers 100 Table 15 – Service Efforts and Accomplishments 101 Table 16 – Miscellaneous Statistics 104

4


CERTIFICATE OF ACHIEVEMENT FOR EXCELLENCE IN FINANCIAL REPORTING

5


ORGANIZATIONAL CHART

ELECTORATE

City Council

Planning CommissionPark Board

City Attorney(Contractual)

City Manager

Administration

City ClerkHuman ResourcesCommunications

Finance and IS

FinanceInformation Services

Safety Services

AdministrationPolice Patrol

Police InvestigationsPolice RecordsFire Department

Community ServiceCommunity Standards

Public Services

AdministrationPublic WorksEngineering

GISRecreation

CommunityDevelopment

PlanningEconomic Development

Building Inspections

6


PRINCIPAL OFFICIALS Legislative Term Expires MAYOR Thomas Ryan December 31, 2008 COUNCILMEMBERS Wes Hovland December 31, 2006 Dick Swanson December 31, 2008 Dave Clark December 31, 2006 Mike Bourke December 31, 2008 Katherine Kolb December 31, 2006 Russ Herbst December 31, 2008 Administrative Date of hire CITY MANAGER Ronald R. Wood August 29, 2002 FINANCE DIRECTOR Joseph J. Huss July 17, 2003 SAFETY SERVICES MANAGER/POLICE CHIEF David M. Johnson June 24, 1996 PUBLIC SERVICES MANAGER Robert E. Therres May 21, 2001 COMMUNITY DEVELOPMENT DIRECTOR Bryan K. Schafer June 2, 1986

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Stamp

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Stamp

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Management’s Discussion and Analysis As management of the City of Blaine (the City), we offer readers of the City’s financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended December 31, 2005. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found on pages 1-3 of this report. Financial Highlights • The assets of the City exceeded its liabilities at the close of the most recent fiscal year by $266,851,372 (net

assets). Of this amount, $55,821,035 (unreserved net assets) may be used to meet the government’s ongoing obligations to citizens and creditors.

• The government’s total net assets increased by $68,124,715. Of this amount, $44,609,887 is due to the retro-active reporting of infrastructure capital assets acquired from 1980 to 2002 per GASB Statement No. 34, and $17,285,142 is attributable to capital assets contributed to the city by developers in 2005.

• As of the close of the fiscal year, the City’s governmental funds reported combined ending fund balances of $51,447,393, an increase of $714,070 in comparison with the prior year. Approximately 83 percent of this total amount, $42,830,298, is available for spending at the government’s discretion (unreserved fund balance).

• At the end of the current fiscal year, unreserved fund balance for the general fund was $9,044,086, or 49 percent of the total general fund expenditures.

• The City’s total bonded debt increased by $4,565,000 (16 percent) during the current year. The key factor in this increase was the issuance of bonds totaling $8,050,000.

Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the City’s basic financial statements. The City’s basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the City’s finances, in a manner similar to a private-sector business. The statement of net assets presents information on all of the City’s assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The statement of activities presents information showing how the city’s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave). Both the government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City include general government, public safety, pubic works, sanitation, recreation, and community development. The business-type activities of the City include water and sanitary sewer utilities and senior housing. The government-wide financial statements include not only the City itself, but also the Blaine Economic Development Authority (EDA), a legally separate entity that functions for all practical purposes as a department of the City, and therefore has been included as an integral part of the primary government. The government-wide financial statements can be found on pages 20-21 of this report. Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds.

10

Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on the near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental fund balance sheet and governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City maintains fourteen individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the general fund, economic development authority fund, debt service fund, general capital projects fund, city improvement project fund, and EDA capital projects fund all of which are considered major funds. Data from the eight other governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these nonmajor governmental funds is provided in the form of combining statements elsewhere in this report. The City adopts an annual appropriated budget for its general fund. A budgetary comparison statement has been provided for the general fund to demonstrate compliance with this budget. The basic governmental fund financial statements can be found on pages 22-29 of this report. Proprietary funds. The City maintains two different types of proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses enterprise funds to account for its public utilities and senior housing operations. Internal service funds are an accounting device to accumulate and allocate costs internally among the City’s various functions. The City uses internal service funds to account for its self-insurance program and for compensated absences. Because both of these services predominantly benefit governmental rather than business-type functions, they have been included within governmental activities in the government-wide financial statements. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for the public utilities and senior housing operations, both of which are considered to be major funds of the City. Conversely, both internal service funds are combined into a single, aggregated presentation in the proprietary fund financial statements. Individual fund data for the internal service funds is provided in the form of combining statements elsewhere in this report. The basic proprietary fund financial statements can be found on pages 30-35 of this report. Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statement because the resources of those funds are not available to support the City’s own programs. The basic fiduciary fund financial statements can be found on page 36 of this report. Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 37-65 of this report. Other information. The combining statements referred to earlier in connection with nonmajor governmental funds and internal service funds are presented immediately following the basic financial statements. Combining and individual fund statements and schedules can be found on pages 69-86 of this report.

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Government-wide Financial Analysis As noted earlier, net assets may serve over time as a useful indicator of a government’s financial position. In the case of the City, assets exceeded liabilities by $266,851,372 at the close of the most recent fiscal year. The largest portion of the City’s net assets (75 percent) reflects its investment in capital assets (e.g., land, buildings, machinery and equipment, infrastructure), less any related debt used to acquire those assets that is still outstanding. The City uses these capital assets to provide services to citizens; consequently, these assets are not for future spending. Although the City’s investment in capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities.

City of Blaine’s Net Assets

Governmental Activities Business-type Activities Total2005 2004 2005 2004 2005 2004

Current and other assets 64,076,911$ 61,630,647$ 23,263,405$ 27,526,157$ 87,340,316$ 89,156,804$ Capital assets 131,813,862 61,820,335 89,965,315 81,759,763 221,779,177 143,580,098

Total assets 195,890,773 123,450,982 113,228,720 109,285,920 309,119,493 232,736,902 Long-term liabilities outstanding 34,589,966 30,025,700 - - 34,589,966 30,025,700 Other liabilities 6,323,645 2,882,065 1,354,510 1,102,480 7,678,155 3,984,545

Total liabilities 40,913,611 32,907,765 1,354,510 1,102,480 42,268,121 34,010,245 Net assets:

Invested in capital assets, net of related debt 116,027,087 47,922,189 89,965,316 81,759,763 200,311,103 129,681,952 Restricted 10,719,234 10,415,770 - - 10,719,234 10,415,770 Unrestricted 28,230,841 32,205,258 21,908,894 26,423,677 55,821,035 58,628,935

Total net assets 154,977,162$ 90,543,217$ 111,874,210$ 108,183,440$ 266,851,372$ 198,726,657$

An additional portion of the City’s net assets (3 percent) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets ($55,821,035) may be used to meet the government’s ongoing obligations to citizens and creditors. At the end of the current fiscal year, the City is able to report positive balances in all three categories of net assets, both for the government as a whole, as well as for its separate governmental and business-type activities. The decrease in restricted net assets reported in connection with the City’s governmental activities was due to a decrease in funds restricted for debt service in 2005. The City’s net assets increased by $68,124,715 during 2005. Of this amount, $44,609,887 was due to a restatement of capital assets, per GASB Statement No. 34, to include infrastructure assets acquired by the City in the years 1980 through 2002. The remaining increase in net assets of $23,514,828, was due to current year activities and approximately 73% of this increase represents capital assets constructed by developers and donated to the city for maintaining. The remainder is due to a gain on the sale of property owned by the Economic Development Authority, new special assessments certified to the County, and increases in development-related charges for services. Governmental activities. Governmental activities increased the City’s net assets by $64,433,945, thereby accounting for 95 percent of the total growth in net assets of the City. Key elements of this increase are as follows:

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City’s Changes in Net Assets


Revenues:Program revenues:

Charges for services 9,080,812$ 11,399,178$ 9,911,802$ 10,195,706$ 18,992,614$ 21,594,884$ Operating grants and contributions 708,732 613,325 - - 708,732 613,325 Capital grants and contributions 18,351,997 11,576,664 4,841,712 6,272,426 23,193,709 17,849,090

General revenues:Property taxes 13,631,483 12,346,823 - - 13,631,483 12,346,823 Other taxes 2,725,237 2,492,370 - - 2,725,237 2,492,370 Grants and contributions not restricted to specific programs 1,197,475 1,258,192 - - 1,197,475 1,258,192 Other 1,292,610 1,630,149 462,108 323,670 1,754,718 1,953,819

Total revenues 46,988,344 41,316,701 15,215,622 16,791,802 62,203,966 58,108,503

Expenses:General government 4,126,919 4,011,878 - - 4,126,919 4,011,878 Public safety 5,965,260 7,497,763 - - 5,965,260 7,497,763 Public works 8,827,754 5,327,720 - - 8,827,754 5,327,720 Sanitation 1,998,737 1,916,655 - - 1,998,737 1,916,655 Recreation 1,421,484 975,024 - - 1,421,484 975,024 Community development 4,163,275 2,143,457 - - 4,163,275 2,143,457 Interest on long-term debt 1,021,810 962,761 - - 1,021,810 962,761 Water - - 5,977,548 2,456,739 5,977,548 2,456,739 Sewer - - 4,050,789 3,755,427 4,050,789 3,755,427 Senior housing - - 1,135,564 1,050,535 1,135,564 1,050,535

Total expenses 27,525,239 22,835,258 11,163,901 7,262,701 38,689,140 30,097,959

Increase in net assets before transfers 19,463,105 18,481,443 4,051,721 9,529,101 23,514,827 28,010,544 Transfers 360,953 187,777 (360,953) (187,777) - - Increase in net assets 19,824,058 18,669,220 3,690,768 9,341,324 23,514,827 28,010,544 Net assets - 01/01/05 90,543,217 71,873,997 108,183,440 98,842,116 198,726,657 170,716,113 Restatement of Net Assets* 44,609,887 - - - 44,609,887 - Net assets - 12/31/05 154,977,162$ 90,543,217$ 111,874,208$ 108,183,440$ 266,851,371$ 198,726,657$

*Restated in accordance with GASB Statement No. 34. See Notes 4.C. and 4.G.

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Expenses and Program Revenues – Governmental Activities

$0

$5

$10

$15

$20

$25

Generalgovernment

Public safety Public works Sanitation Recreation Communitydevelopment

Interest onlong-term debt

Mill

ions

ExpensesProgram revenues

Revenues by Source – Governmental Activities

Operating grants and

contributions1%

Capital grants and

contributions39%

Grants and other

contributions not restricted

to specific programs

3%

Charges for services

19%

Other taxes1%

Property taxes/tax

increments34%

Other3%

Business-type activities. Business-type activities increased the City’s net assets by $3,690,768 accounting for 5 percent of the total growth in the government’s net assets. Key elements of this increase arise from operating activities in the water and sewer utilities as well as contributions of water and sewer service lines from developers.

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Expenses and Program Revenues – Business-type Activities

$0

$1

$2

$3

$4

$5

$6

$7

$8

Water Sewer Senior housing

Mill

ions

ExpensesProgram revenues

Revenues by Source – Business-type Activities

Unrestricted investment earnings

3%

Charges for services

65%Capital grants and

contributions32%

Financial Analysis of the Government’s Funds As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds. The focus of the City’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City’s financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the City’s governmental funds reported combined ending fund balances of $51,477,393, an increase of $714,070 in comparison with the prior year. Approximately 83 percent of this total amount, or $42,830,298, constitutes unreserved fund balance, which is available for spending at the government’s discretion. The remainder of the fund balance is reserved to indicate that it is not available for new spending because it has already been committed 1) to liquidate contracts and purchase orders of the prior year ($4,874,534), 2) to pay debt service ($2,798,624), or 3) to make loans, notes, and leases available to third parties for development and redevelopment ($943,937).

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The general fund is the chief operating fund of the City. At the end of the current fiscal year, unreserved fund balance of the general fund was $9,044,086, while total fund balance reached $9,325,714. As a measure of the general fund’s liquidity, it may be useful to compare total fund balance to total fund expenditures. Total fund balance represents 51 percent of the total general fund expenditures at the current fiscal year end. The fund balance of the City’s general fund decreased by $474,900 during the current fiscal year. The key factors in this decrease was the transfer of $1,474,502 to the Capital Equipment Fund for the purchase of replacement equipment. The economic development authority fund balance decreased by $1,934,983 during the current year due to transfers out to fund capital projects related to economic development. The debt service fund balance decreased by $350,702 due to the completion of payments on several issues and the transfer of excess funds to the general capital projects fund. The general capital projects fund balance increased by $1,039,507 due to the completion of city improvement projects and bond issues, and the transfer of funds remaining in those projects to this fund. The city improvement projects fund balance increased by $3,894,649 due to the issuance of bonds for the construction of a fire station, a major, multi-year construction project, and the EDA capital projects fund balance decreased by $2,504,146 due mainly to the development of three parcels to be sold and used for future economic development. Proprietary funds. The City’s proprietary funds provide the same type of information found in the government-wide statements, but in more detail. Unrestricted net assets of the public utilities fund at the end of the year amounted to $20,592,106 and those for the senior housing fund amounted to $1,371,359. The growth in net assets for the public utilities fund was $3,848,865 and the decrease in net assets for the senior housing fund was $154,088. General Fund Budgetary Highlights There were no significant variances between final budgeted revenues and actual amounts. For expenditures, actual expenditures were less than budgeted for all activities except in the unallocated area, where the over-expenditure was mostly due to the required funding of compensated absences. This shortfall was made up with funds on hand from savings in other departments. For these other departments, the key factor in this variance was the transitional savings resulting from filling new or vacant positions. Actual expenditures and other financing uses exceeded actual revenues and other financing sources by $474,900 for the year. Capital Asset and Debt Administration Capital assets. The City’s investment in capital assets for its governmental and business-type activities as of December 31, 2005, amounts to $221,779,179 per the Statement of Net Assets (net of accumulated depreciation). This investment in capital assets includes land, buildings and structures, machinery and equipment, water distribution and sewage collection systems, infrastructure and construction in progress. Major capital assets events during the current fiscal year included the following: • Infrastructure capital assets (right-of-way, streets, bridges and storm sewers) totaling $44,609,887 were

capitalized per GASB Statement No. 34. These assets were contributed by developers during the years 1980 through 2002, and prior to 2003, along with all other capital assets owned by the City, were not required to be reported in the basic financial statements.

• Contributions totaling nearly $17,300,000 were received from developers in the form of streets, storm sewers, sanitary sewers, water mains, bridges, right-of-way, and outlots to be left as open space.

• Open space in the amount of $315,000 was purchased throughout the City. • Improvements to parks and trails during the year totaled approximately $900,000. • Equipment and vehicles in excess of $835,000 was purchased during the year. • Land in the amount of $2,107,000 was purchased for re-development purposes. • The Automated Water Meter Reading program, which retrofitted over 16,000 existing water meters, was

completed at a cost of nearly $3,500,000 with $141,201 eligible for capitalization, and $3,359,000 expensed for water meters and related supplies.

• The City’s first water treatment plant was completed at a cost of $5,100,000 and a second treatment plant was started with completion expected in 2006.

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City of Blaine’s Capital Assets (net of depreciation)

Additional information on the City’s capital assets can be found in Note 4.C. on pages 52-54 of this report. Long-term debt. At the end of the current fiscal year, the City had total bonded debt outstanding of $32,985,000. Of this amount, $9,710,000 was for general obligation improvement debt which has financed special assessment construction as part the continuing development within the city. An additional $9,100,000 was general obligation tax increment financing debt that financed the city’s economic development and redevelopment program. The remaining $14,175,000 is general obligation debt issued for the construction of a new fire station, purchase of capital equipment, and to acquire open space within the city.

The City’s total debt increased by $4,565,000 (16%) during the current fiscal year. The key factor in this was the issuance of $8,050,000 in general obligation capital improvement bonds for the construction of a new fire station within the City. The City’s bond rating was upgraded to Aa3 by Moody’s Investor Service on all of it’s general obligation debt in September 2003. State statutes limit the amount of general obligation debt a Minnesota city may issue to 2 percent of the total estimated market value of property within the city. The current debt limit for the City is $81,078,418. Of the City’s $32,985,000 in outstanding debt at the current fiscal year end, $14,175,00 is subject to the restrictions placed by state statute. Additional information on the City’s long-term debt can be found in Note 4.E. on pages 56-58 of this report. Economic Factors and Next Year’s Budget and Rates • The City’s unemployment rate ended the year at 3.8 percent, which compares favorably with the state

unemployment rate of 4.0 percent, and the national unemployment rate of 5.1 percent. • City building permits maintained activity levels in both quantity and value in 2005. A total of 2,742 permits with a

total valuation of $194,576,933 were issued in 2005. These factors were considered in preparing the City’s budget for the 2006 fiscal year.


Land 58,955,380$ 25,357,745$ 1,024,976$ 1,024,976$ 59,980,356$ 26,382,721$ Buildings and structures 18,301,988 17,740,963 8,101,417 8,385,907 26,403,405 26,126,870 Machinery and equipment 4,465,260 4,492,307 657,053 586,736 5,122,313 5,079,043 Distribution and collection system - - 73,437,597 70,405,033 73,437,597 70,405,033 Infrastructure 43,961,707 13,009,270 - - 43,961,707 13,009,270 Construction in progress 6,129,530 1,220,050 6,744,273 1,357,111 12,873,803 2,577,161

Total 131,813,865$ 61,820,335$ 89,965,316$ 81,759,763$ 221,779,181$ 143,580,098$


General obligation bonds 14,175,000$ 7,435,000$ - $ - $ 14,175,000$ 7,435,000$ General obligation improvement bonds 9,710,000 10,450,000 - - 9,710,000 10,450,000 General obligation tax increment increment financing bonds 9,100,000 10,535,000 - - 9,100,000 10,535,000

Total 32,985,000$ 28,420,000$ - $ - $ 32,985,000$ 28,420,000$

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During the current fiscal year, unreserved fund balance in the general fund decreased by $426,092. This decrease came about chiefly through a transfer of $1,474,502 to the Capital Equipment Fund, and was used to fund the purchase of equipment in 2005. The transfer also allowed the General Fund’s unrestricted fund balance level to stay within the City’s policy of maintaining at least a 30 percent cash flow reserve plus an amount equal to one month’s expenditures as contingency in the general fund. Water usage rates in the public utilities fund were last increased in 2003 for the 2004 fiscal year and will remain at that level in 2006. The amounts were based on a study completed in 2003 encompassing significant long-term improvements and additions to the water distribution and treatment systems that currently exist in the city. Two of those projects were started in late 2004 and will continue through 2006. Requests for Information This financial report is designed to provide a general overview of the City’s finances for all those with an interest in the government’s finances. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the Finance Director, City of Blaine, 10801 Town Square Drive, Blaine, Minnesota 55449-8101.

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19


BASIC

FINANCIAL

STATEMENTS


STATEMENT OF NET ASSETSDECEMBER 31, 2005

Governmental Business-TypeActivities Activities Total

ASSETSCash, cash equivalents, and pooled investments 56,548,904$ 21,821,319$ 78,370,222$ Delinquent taxes receivable 338,343 - 338,343 Tax increments receivable 23,032 - 23,032 Accounts receivable 413,367 1,166,708 1,580,074 Special assessments receivable 4,392,604 312,537 4,705,141 Intergovernmental receivable 785,102 7,332 792,434 Internal balances 54,570 (54,570) (0.43) Prepaid items and other assets 43,953 10,079 54,032 Assets held for resale 1,000 - 1,000 Loans receivable 821,777 - 821,777 Note receivable 74,024 - 74,024 Lease receivable 48,136 - 48,136 Deferred charges 532,099 - 532,099 Capital assets, net of depreciation:

Land 58,955,380 1,024,976 59,980,356 Buildings and structures 18,301,987 8,101,417 26,403,404 Machinery and equipment 4,465,259 657,053 5,122,312 Distribution and collection system - 73,437,596 73,437,596 Infrastructure 43,961,706 - 43,961,706 Construction in progress 6,129,530 6,744,273 12,873,803

TOTAL ASSETS 195,890,773 113,228,720 309,119,493

LIABILITIESLiabilities:

Accounts payable 2,265,531 322,347 2,587,878 Accrued liabilities 335,709 22,486 358,195 Deposits payable 2,002,520 103,949 2,106,469 Contracts payable 1,114,286 867,425 1,981,711 Intergovernmental payable 20,664 38,303 58,967 Bond interest payable 440,666 - 440,666 Unearned revenue 144,269 - 144,269 Noncurrent liabilities:

Due in one year 3,265,675 - 3,265,675 Due in more than one year 31,324,291 - 31,324,291

TOTAL LIABILITIES 40,913,611 1,354,510 42,268,121

NET ASSETSInvestment in capital assets, net of related debt 116,027,087 89,965,316 200,311,103 Restricted for:

Debt service 5,723,839 - 5,723,839 Tax increment 4,669,159 - 4,669,159 Public safety programs 168,835 - 168,835 Cable TV 18,043 - 18,043 Charitable gambling 139,358 - 139,358

Unrestricted 28,230,841 21,908,894 55,821,035

TOTAL NET ASSETS 154,977,162$ 111,874,210$ 266,851,372$

The notes to the financial statements are an integral part of this statement.

20


STATEMENT OF ACTIVITIESFOR THE YEAR ENDED DECEMBER 31, 2005

Net Revenues (Expenses) andProgram Revenues Changes in Net Assets

Operating Capital Charges for Grants and Grants and Governmental Business-type

Expenses Services Contributions Contributions Activities Activities Total

Functions/ProgramsGovernmental activities:

General government 4,126,919$ 522,956$ - $ 11,664$ (3,592,299)$ - $ (3,592,299)$ Public safety 7,983,630 513,333 513,784 10,927 (6,945,586) - (6,945,586) Public works 6,809,384 1,253,276 10,000 18,292,406 12,746,298 - 12,746,298 Sanitation 1,998,737 2,273,127 89,188 - 363,578 - 363,578 Recreation 1,421,484 1,920,768 - 37,000 536,284 - 536,284 Community development 4,163,275 2,597,350 95,760 - (1,470,165) - (1,470,165) Interest on long-term debt 1,021,810 - - - (1,021,810) - (1,021,810)

Total governmentalactivities 27,525,239 9,080,810 708,732 18,351,997 616,300 - 616,300

Business-type activities:Water 5,977,547 4,525,733 - 2,231,400 - 779,586 779,586 Sewer 4,050,789 4,081,868 - 2,610,312 - 2,641,391 2,641,391 Senior Housing 1,135,564 1,304,200 - - - 168,637 168,637

Total business-typeactivities 11,163,900 9,911,802 - 4,841,712 - 3,589,614 3,589,614

Total government 38,689,140 18,992,612 708,732 23,193,709 616,300 3,589,614 4,205,914

General revenues:Property taxes 13,631,483 - 13,631,483 Tax increments 2,307,928 - 2,307,928 Franchise taxes 319,025 - 319,025 Lodging taxes 22,725 - 22,725 Gambling taxes 75,559 - 75,559 Grants and contributions not restricted to specific programs 1,197,475 - 1,197,475 Unrestricted investment earnings 1,219,875 462,108 1,681,983 Gain on sale of capital assets 72,735 - 72,735

Transfers 360,953 (360,953) 0

Total general revenues and transfers 19,207,758 101,155 19,308,913

Change in net assets 19,824,058 3,690,769 23,514,827

Net assets - beginning 90,543,217 108,183,440 198,726,657

Prior Period Adjustment 44,609,887 - 44,609,887

Net assets - ending 154,977,162$ 111,874,209$ 266,851,371$


21


BALANCE SHEETGOVERNMENTAL FUNDSDECEMBER 31, 2005 Economic

DevelopmentGeneral Authority Debt Service

ASSETSCash and pooled investments 10,509,736$ 6,897,953$ 2,778,118$ Delinquent taxes receivable 301,066 252 37,019 Tax increments receivable - - - Accounts receivable 22,062 - - Special assessments receivable - 10,501 3,328,862 Intergovernmental receivable 140,181 42 21,240 Interfund receivable - 2,990,925 - Deferred charges - - - Prepaid items and other assets 5,454 - - Assets held for resale - - - Loans receivable - 808,582 - Note receivable - 74,024 - Lease receivable - - -

TOTAL ASSETS 10,978,499 10,782,279 6,165,239

LIABILITIES AND FUND BALANCESLiabilities:

Accounts payable 376,987 10,045 734 Accrued liabilities 335,709 - - Deposits payable 484,930 - - Contracts payable - 470,681 - Intergovernmental payable 9,824 - - Interfund payable - - - Deferred revenue 445,335 10,753 3,365,881

Total liabilities 1,652,785 491,479 3,366,615

Fund balances:Reserved for prepaid items and other assets 5,454 - - Reserved for committed contracts 276,174 - - Reserved for debt service - - 2,798,624 Reserved for loans receivable - 808,582 - Reserved for note receivable - 74,024 - Reserved for lease receivable - - - Unreserved, reported in:

Designated:General Fund 9,044,086 - - Special Revenue Funds - 9,408,194 - Capital Projects Funds - - -

Undesignated:Capital Projects Funds (Deficit) - - -

Total fund balances 9,325,714 10,290,800 2,798,624

TOTAL LIABILITIES AND FUND BALANCES 10,978,499$ 10,782,279$ 6,165,239$

Amounts reported for governmental activities in the statement of net assets are different because:Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds.Other long-term assets are not available to pay for current-period expenditures and, therefore, are deferred in the funds.Internal service funds are used by management to charge the costs of insurance and compensated absences to individual funds. The

assets and liabilities of the internal service funds are included in governmental activities in the statement of net assets.Long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported in the funds.


22

TotalGeneral Capital City Improvement EDA Capital Other Nonmajor Governmental

Projects Projects Projects Governmental Funds Funds

9,461,656$ 15,017,802$ - $ 10,064,877$ 54,730,142$ 6 - - - 338,343

- - - 23,032 23,032 5,041 31,488 - 354,776 413,367

245,763 807,233 - 245 4,392,604 563 479,876 - 143,200 785,102

- - - - 2,990,925 - 395,143 - - 395,143 - - - - 5,454 - - - 1,000 1,000 - - - 13,195 821,777 - - - - 74,024 - - - 48,136 48,136

9,713,029 16,731,542 - 10,648,461 65,019,049

256,753 959,025 76,519 524,550 2,204,613 - - - - 335,709

20,899 1,486,691 - 10,000 2,002,520 - 560,592 38,119 44,894 1,114,286 - - - 10,840 20,664 - - 2,990,925 - 2,990,925

245,770 811,924 - 23,276 4,902,939

523,422 3,818,232 3,105,563 613,560 13,571,656

- - - - 5,454 - 4,560,002 - 32,904 4,869,080 - - - - 2,798,624 - - - 13,195 821,777 - - - - 74,024 - - - 48,136 48,136

- -

- - - - 9,044,086 - - - 714,342 10,122,536

9,189,607 8,353,308 - 9,096,141 26,639,056

- - (3,105,563) - (3,105,563)

9,189,607 12,913,310 (3,105,563) 10,034,901 51,447,393

9,713,029$ 16,731,542$ - $ 10,648,461$

131,813,8634,758,670

210,360(33,253,124)

Net assets of governmental activities 154,977,162$

23


GOVERNMENTAL FUNDSFOR THE YEAR ENDED DECEMBER 31, 2005

EconomicDevelopment

General Authority Debt ServiceREVENUESProperty taxes 12,132,732$ 210$ 1,466,828$ Tax increments - - - Franchise taxes - - - Lodging taxes - 22,725 - Gambling taxes - - - Special assessments - - 521,130 Licenses and permits 2,069,320 - - Intergovernmental 1,648,285 95,760 186,463 Charges for services 3,431,923 26,400 - Fines and forfeits 257,620 - - Interest earnings 173,261 265,394 63,407 Miscellaneous 21,627 2 598

Total revenues 19,734,768 410,491 2,238,426

EXPENDITURESCurrent:

General government 2,968,942 - - Public safety 7,293,022 - - Public works 5,338,042 - - Sanitation - - - Recreation 799,742 - - Community development 1,446,538 1,441,300 - Unallocated expenditures 304,745 - -

Capital outlay:General government - - - Public safety 7,491 - - Public works - - - Recreation 2,176 - - Community development - 404,172 -

Debt service - - 4,500,235

Total expenditures 18,160,698 1,845,472 4,500,235

Excess (deficiency) of revenues over expenditures 1,574,070 (1,434,981) (2,261,809) OTHER FINANCING SOURCES (USES)Transfers in 29,507 - 1,878,639 Transfers out (2,078,477) (500,000) - Sale of capital assets - - - Improvement bond issued - - 32,468 Discount on improvement bond issued - - -

Total other financing sources (uses) (2,048,970) (500,000) 1,911,107

Net change in fund balances (474,900) (1,934,981) (350,702)

FUND BALANCES (DEFICIT) AT BEGINNING OF YEAR 9,800,614 12,225,781 3,149,326

FUND BALANCES (DEFICIT) AT END OF YEAR 9,325,714$ 10,290,800$ 2,798,624$


STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES

24

TotalGeneral Capital City Improvement EDA Capital Other Nonmajor Governmental

Projects Projects Projects Governmental Funds Funds

(13)$ - $ - $ - $ 13,599,757$ - - - 2,301,416 2,301,416 - - - 319,025 319,025 - - - - 22,725 - - - 75,559 75,559

351,635 378,251 - 283 1,251,299 - - - - 2,069,320 - 1,551,162 - 339,443 3,821,113 - 1,430 - 2,284,328 5,744,081 - - - 30,302 287,922

219,109 293,349 1,324 204,031 1,219,875 44,085 95,624 - 575,498 737,434

614,816 2,319,816 1,324 6,129,885 31,449,526

- - - 382,283 3,351,225 - - - 13,835 7,306,857 - 12,676 - - 5,350,718 - - - 2,224,137 2,224,137 - - - - 799,742 - - - 52,699 2,940,537 - - - - 304,745

- 84,641 - - - 84,641

449,503 2,018,370 - 19,527 2,494,891 486,240 5,147,375 - - 5,633,615

3,016 - - 635,652 640,844 37,303 - 3,005,470 398,161 3,845,106

- - - - 4,500,235

1,060,703 7,178,421 3,005,470 3,726,294 39,477,293

(445,887) (4,858,605) (3,004,146) 2,403,591 (8,027,767)

1,474,502 807,309 500,000 25,348 4,715,305 - (18,079) - (1,760,173) (4,356,729)

10,892 - - 375,879 386,771 - 8,017,532 - - 8,050,000 - (53,508) - - (53,508)

1,485,394 8,753,254 500,000 (1,358,946) 8,741,839

1,039,507 3,894,649 (2,504,146) 1,044,645 714,072

8,150,100 9,018,661 (601,417) 8,990,256 50,733,321

9,189,607$ 12,913,310$ (3,105,563)$ 10,034,901$ 51,447,393$

25


OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIESFOR THE YEAR ENDED DECEMBER 31, 2005

Amounts reported for governmental activities in the statement of activities (page 21) are different because:

Net change in fund balances - total governmental funds (page 25) 714,072$

Governmental funds report capital outlay as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the current period. 8,411,953

The net effect of various miscellaneous transactions involving capital assets (i.e., sales, trade-ins, and donations) is to increase net assets. 16,971,688

Revenues in the statement of activities that do not provide current financial resources are reported as deferred revenues in the funds. This is the change in deferred revenue from the previous year. (1,619,076)

The issuance of long-term debt (e.g., bonds, leases) provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. Also, governmental funds report the effect of issuance costs, premiums, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. This amount is the net effect of these differences in the treatment of long-term debt and related items. (4,449,668)

Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. (68,402)

Internal service funds are used by management to charge the costs of insurance and compensated absences to individual funds. The assets and liabilities of the internal service funds are included in governmental activities in the statement of net assets. (136,509)

Change in net assets of governmental activities (page 21) 19,824,058$


RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES

26

27



GENERAL FUNDFOR THE YEAR ENDED DECEMBER 31, 2005

Budgeted AmountsVariance with

Original Final Actual Amounts Final Budget REVENUESProperty taxes 12,284,763$ 12,284,763$ 12,132,732$ (152,031)$ Licenses and permits 2,221,375 2,221,375 2,069,320 (152,055) Intergovernmental 1,648,930 1,648,930 1,648,285 (645) Charges for services 3,385,655 3,385,655 3,431,923 46,268 Fines and forfeits 257,550 257,550 257,620 70 Interest earnings 177,500 177,500 173,261 (4,239) Miscellaneous 4,500 4,500 21,627 17,127

Total revenues 19,980,273 19,980,273 19,734,768 (245,505)

EXPENDITURESCURRENT:

GENERAL GOVERNMENT:Council 89,565 89,565 88,085 1,480 Commissions and committees 12,900 12,900 13,199 (299) City manager 381,430 384,410 299,471 84,939 City clerk 195,129 194,784 183,181 11,603 Human resources 332,550 340,114 304,957 35,157 Finance 1,083,812 1,100,868 960,282 140,586 Legal 435,000 435,000 401,500 33,500 Information services 600,955 614,945 556,792 58,153 Communications 234,350 215,003 161,475 53,528

Total general government 3,365,691 3,387,589 2,968,942 418,647

PUBLIC SAFETY:Safety services administration 511,015 546,568 583,338 (36,770) Police patrol 3,678,500 3,849,325 3,602,122 247,203 Police investigation 718,780 765,060 728,914 36,146 Police records 439,035 444,120 376,705 67,415 Crime prevention 173,625 177,635 167,665 9,970 Fire department 920,270 920,270 920,270 - Community service 284,415 261,930 259,760 2,170 Community standards 638,075 661,527 654,248 7,279

Total public safety 7,363,715 7,626,435 7,293,022 333,413

PUBLIC WORKS:Public services management 133,305 139,520 136,058 3,462 Public works 3,883,065 3,954,120 3,965,181 (11,061) Engineering 1,170,870 1,194,175 1,140,763 53,412 GIS 99,600 102,370 96,040 6,330

Total public works 5,286,840 5,390,185 5,338,042 52,143

RECREATION:Recreation 809,980 827,830 799,742 28,088

Total recreation 809,980 827,830 799,742 28,088

The notes to the financial statements are an integral part of this statement. continued

STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL

28


GENERAL FUNDFOR THE YEAR ENDED DECEMBER 31, 2005

Budgeted AmountsVariance with

Original Final Actual Amounts Final Budget

STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL

EXPENDITURESCURRENT (continued):

COMMUNITY DEVELOPMENT:Planning 408,585 422,095 427,309 (5,214) Economic development 123,195 127,885 118,672 9,213 Building inspections 916,775 952,075 900,557 51,518

Total community development 1,448,555 1,502,055 1,446,538 55,517

UNALLOCATED EXPENDITURES:Unallocated expenditures 696,165 236,852 304,745 (67,893)

CAPITAL OUTLAY:Public safety - - 7,491 (7,491) Recreation - - 2,176 (2,176)

Total capital outlay - - 9,667 (9,667)

DEBT SERVICE:Interest and fiscal charges 20,000 20,000 - 20,000

Total debt service 20,000 20,000 - 20,000

Total expenditures 18,990,946 18,990,946 18,160,698 830,248

Excess (deficiency) of revenues over expenditures 989,327 989,327 1,574,070 584,743

OTHER FINANCING SOURCES (USES)Transfers in - - 29,507 29,507 Transfers out (651,500) (2,151,002) (2,078,477) 72,525

Total other financing sources (uses) (651,500) (2,151,002) (2,048,970) 102,032

Net change in fund balance 337,827 (1,161,675) (474,900) 686,775

9,800,614 9,800,614 9,800,614 -

10,138,441$ 8,638,939$ 9,325,714$ 686,775$

FUND BALANCE AT BEGINNING OF YEAR

FUND BALANCE AT END OF YEAR

29


STATEMENT OF NET ASSETSPROPRIETARY FUNDSDECEMBER 31, 2005

Business-type Activities--Enterprise FundsPublic Public Senior Senior Governmental

Utilities Utilities Housing Housing Total Activities-InternalCurrent Year Prior Year Current Year Prior Year Current Year Service Funds

ASSETSCurrent assets:

Cash and cash equivalents 20,371,345$ 24,724,562$ 1,449,974$ 1,341,826$ 21,821,319$ 1,818,762$ Accounts receivable 1,165,304 1,287,961 1,404 685 1,166,708 - Special assessments receivable 312,537 212,550 - - 312,537 - Intergovernmental receivable 7,332 2,332 - - 7,332 - Other assets - 2,089 10,079 4,715 10,079 38,499

Total current assets 21,856,518 26,229,494 1,461,457 1,347,226 23,317,975 1,857,261

Noncurrent assets:Capital assets:

Land 88,480 88,480 936,496 936,496 1,024,976 - Buildings and structures 1,812,258 1,812,258 9,757,136 9,757,136 11,569,394 - Machinery and equipment 2,507,880 2,380,109 63,826 97,832 2,571,706 - Distribution and collection system 95,065,898 90,227,016 - - 95,065,898 - Construction in progress 6,744,273 1,357,111 - - 6,744,273 - Less: accumulated depreciation (25,208,404) (23,318,011) (1,802,528) (1,578,664) (27,010,932) -

Total capital assets - net 81,010,385 72,546,963 8,954,930 9,212,800 89,965,315 - TOTAL ASSETS 102,866,903 98,776,457 10,416,387 10,560,026 113,283,290 1,857,261

LIABILITIESCurrent liabilities:

Accounts payable 313,583 529,593 8,764 1,135 322,347 60,917 Accrued liabilities 22,486 18,179 - - 22,486 - Deposits payable 22,615 7,500 81,334 76,697 103,949 - Compensated absences - - - - - 80,000 Claims and judgments payable - - - - - 55,675 Contracts payable 867,425 430,744 - 1,817 867,425 - Intergovernmental payable 38,303 36,815 - - 38,303 -

Total current liabilities 1,264,412 1,022,831 90,098 79,649 1,354,510 196,592

continued

30


STATEMENT OF NET ASSETSPROPRIETARY FUNDSDECEMBER 31, 2005



Noncurrent liabilities:Compensated absences - - - - - 1,252,385 Claims and judgments payable - - - - - 252,494

Total noncurrent liabilities - - - - - 1,504,879

TOTAL LIABILITIES 1,264,412 1,022,831 90,098 79,649 1,354,510 1,701,471

NET ASSETSNet assets, invested in capital assets 81,010,385 72,546,963 8,954,930 9,212,800 89,965,315 - Unrestricted 20,592,106 25,206,663 1,371,359 1,267,577 21,963,465 155,790

TOTAL NET ASSETS 101,602,491$ 97,753,626$ 10,326,289$ 10,480,377$ 111,928,780 155,790$

Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds (54,570)

Net assets business-type activities 111,874,210$


31


PROPRIETARY FUNDSFOR THE YEAR ENDED DECEMBER 31, 2005



OPERATING REVENUESWater sales 3,370,873$ 3,419,948$ - $ - $ 3,370,873$ - $ Sewer charges 3,979,183 3,841,150 - - 3,979,183 - Rental charges - - 1,284,441 1,239,577 1,284,441 - Employee benefit charges - - - - - 147,193 Insurance reimbursements - - - - - 288,122 Penalties 110,725 141,511 - - 110,725 - Permits 21,127 20,484 - - 21,127 - Retained fees 26,236 16,890 - - 26,236 - Water connection charges 1,088,970 1,510,476 - - 1,088,970 - Other 7,321 2,866 17,382 1,367 24,703 -

Total operating revenues 8,604,435 8,953,325 1,301,823 1,240,944 9,906,258 435,315

OPERATING EXPENSESMetropolitan Waste Control Commission charges 2,023,864 1,868,241 - - 2,023,864 - Administrative charges 802,200 802,200 26,400 26,400 828,600 - Salaries and benefits 802,412 734,392 - - 802,412 171,714 Contractual services 3,719,529 247,900 589,889 525,806 4,309,418 437,013 Supplies 262,827 248,989 - - 262,827 - Water meters 170,499 195,986 - - 170,499 - Utilities 280,355 272,262 116,333 105,512 396,688 - Taxes and assessments - - 145,072 149,546 145,072 - Depreciation 1,962,642 1,807,908 255,492 243,271 2,218,134 -

Total operating expenses 10,024,328 6,177,878 1,133,186 1,050,535 11,157,514 608,727

Operating income (loss) (1,419,893) 2,775,447 168,637 190,409 (1,251,256) (173,412)

continued

STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS

32


PROPRIETARY FUNDSFOR THE YEAR ENDED DECEMBER 31, 2005



STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS

NONOPERATING REVENUES (EXPENSES)Special assessments 3,166 1,437 - - 3,166 - Interest earnings 435,656 302,507 26,452 21,163 462,108 32,895 Gain (loss) on disposal of capital assets - - (2,377) - (2,377) -

Total nonoperating revenues (expenses) 438,822 303,944 24,075 21,163 462,897 32,895

Income (loss) before contributions and transfers (981,071) 3,079,391 192,712 211,572 (788,359) (140,517)

Capital contributions 4,841,712 6,388,788 - 10,000 4,841,712 - Transfers out (11,776) - (346,800) (337,264) (358,576) -

Change in net assets 3,848,865 9,468,179 (154,088) (115,692) 3,694,777 (140,517)

NET ASSETS AT BEGINNING OF YEAR 97,753,626 88,285,447 10,480,377 10,596,069 108,234,003 296,307

NET ASSETS AT END OF YEAR 101,602,491$ 97,753,626$ 10,326,289$ 10,480,377$ 111,928,780$ 155,790$

Adjustment to reflect consolidation of internal service fund activities related to enterprise funds (4,007)

Change in net assets of business-type activities 3,690,770$


33


STATEMENT OF CASH FLOWSPROPRIETARY FUNDSFOR THE YEAR ENDED DECEMBER 31, 2005

Business-type Activities--Enterprise FundsGovernmental

Public Public Senior Senior Activities-Utilities Utilities Housing Housing Total Internal Service

Current Year Prior Year Current Year Prior Year Current Year Funds

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from customers 8,723,579$ 8,831,855$ 1,301,104$ 1,240,452$ 10,024,683$ 440,937$ Deposits 15,115 2,400 4,637 2,863 19,752 - Cash paid to suppliers for goods and services (4,210,450) (584,309) (850,846) (778,933) (5,061,296) (420,008) Cash paid to employees for services (798,105) (727,148) - - (798,105) (77,658) Other transmission and distribution (2,023,864) (1,868,241) - - (2,023,864) - Administrative charges (802,200) (802,200) (26,400) (26,400) (828,600) -

Net cash provided by (used in) operating activities 904,075 4,852,357 428,495 437,982 1,332,570 (56,729) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES:

Transfers out (11,776) - (346,799) (337,264) (358,575) - Special assessments (96,821) (77,411) - - (96,821) -

Net cash provided by (used in)noncapital financing activities (108,597) (77,411) (346,799) (337,264) (455,396) -

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES:

Capital contributions - - - 10,000 - - Acquisition and construction of capital assets (5,584,351) (1,788,001) - (601,895) (5,584,351) -

Net cash provided by (used in) capital andrelated financing activities (5,584,351) (1,788,001) - (591,895) (5,584,351) -

CASH FLOWS FROM INVESTING ACTIVITIES:Investment earnings 435,656 302,507 26,452 21,163 462,108 32,895

Net increase (decrease) in cash and cash equivalents (4,353,217) 3,289,452 108,148 (470,014) (4,245,069) (23,834)

continued

34


STATEMENT OF CASH FLOWSPROPRIETARY FUNDSFOR THE YEAR ENDED DECEMBER 31, 2005

Business-type Activities--Enterprise FundsGovernmental

Public Public Senior Senior Activities-Utilities Utilities Housing Housing Total Internal Service

Current Year Prior Year Current Year Prior Year Current Year Funds

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 24,724,562 21,435,110 1,341,826 1,811,840 26,066,388 1,842,596

CASH AND CASH EQUIVALENTS AT END OF YEAR 20,371,345$ 24,724,562$ 1,449,974$ 1,341,826$ 21,821,319$ 1,818,762$ RECONCILIATION OF OPERATING INCOME (LOSS) TO NETCASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

Operating income (loss) (1,419,893)$ 2,775,447$ 168,637$ 190,409$ (1,251,256)$ (173,412)$

ADJUSTMENTS TO RECONCILE OPERATING INCOME (LOSS)TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

Depreciation 1,962,642 1,807,908 255,492 243,271 2,218,134 - Change in assets and liabilities:

(Increase) decrease in accounts receivable 122,657 (120,167) (719) (492) 121,938 5,623 (Increase) decrease in intergovernmental receivable (5,000) (1,923) - - (5,000) - (Increase) decrease in other assets 2,089 (579) (5,364) (1,021) (3,275) (5,252) Increase (decrease) in accounts payable (216,010) 128,137 7,629 1,135 (208,381) 60,917 Increase (decrease) in accrued liabilities 4,307 7,244 - - 4,307 - Increase (decrease) in deposits payable 15,115 2,400 4,637 2,863 19,752 - Increase (decrease) in contracts payable 436,681 253,270 (1,817) 1,817 434,864 - Increase (decrease) in compensated absences - - - - - 94,055 Increase (decrease) in claims and judgments payable - - - - - (38,660) Increase (decrease) in intergovernmental payable 1,487 620 - - 1,487 - Increase (decrease) in deferred revenue - - - - - -

Total adjustments 2,323,968 2,076,910 259,858 247,573 2,583,826 116,683

Net cash provided by (used in) operating activities 904,075$ 4,852,357$ 428,495$ 437,982$ 1,332,570$ (56,729)$

NONCASH INVESTING CAPITAL AND FINANCING ACTIVITIES

Capital contributions from developers 4,841,712$ 6,262,426$ - $ - $ 4,841,712$ - $ Capital contributions from government - 126,361 - - - - Loss on disposal of capital assets - - (2,377) - (2,377) -


35


FIDUCIARY FUNDDECEMBER 31, 2005

AgencyFund

ASSETSCash and pooled investments 158,569$

LIABILITIESDue to Blaine Area Development Company 158,569

NET ASSETS

Unreserved - $


STATEMENT OF FIDUCIARY NET ASSETS

36


NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2005

37

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The City of Blaine (the City) was incorporated on November 3, 1964, with the adoption of a home rule charter. The City operates under a council-manager form of government and provides the following services: public safety (police, fire, emergency preparedness, and animal control), highways and streets, sanitation, parks and recreation, public improvements, planning and inspections, economic development, sanitary sewer and water, senior housing, and general administrative services.

The financial statements of the City have been prepared in conformity with generally accepted accounting principles, as applied to governmental units by the Governmental Accounting Standards Board (GASB). The City's significant accounting policies are described below.

A. Reporting Entity

The City includes all funds, organizations, institutions, agencies, departments, and offices that are not legally separate from such. Component units are legally separate organizations for which the elected officials of the City are financially accountable and are included within the basic financial statements of the City because of the significance of their operational or financial relationships with the City.

The City is considered financially accountable for a component unit if it appoints a voting majority of the organization's governing body and is able to impose its will on the organization by significantly influencing the programs, projects, activities, or level of services performed or provided by the organization, or there is a potential for the organization to provide specific financial benefits to, or impose specific financial burdens, on the City.

As a result of applying the component unit definition criteria above, certain organizations are presented in this report as follows:

Blended Component Units

Blended component units are reported as if they are part of the City. The only financial data requiring inclusion relates to the City of Blaine Economic Development Authority (EDA) and such data is included in this report. The governing board is the City Council, which reviews and approves tax levies and major economic development improvement activities. City general obligation tax increment financing bonds are issued to finance Economic Development Authority activities. Although the Economic Development Authority is legally separate from the City, the governing board is the City Council and its sole purpose is to carry out certain economic development projects, which provide direct benefits to the citizens of the City. The EDA is reported in the Economic Development Authority Special Revenue Fund, the Debt Service Fund, the Tax Increment Financing Projects Fund, the Economic Development Projects Fund, and the Senior Housing Fund.

B. Government-Wide and Fund Financial Statements

Government-Wide Financial Statements

The statement of net assets and statement of activities display information about the reporting government as a whole. They include all funds of the reporting entity except for fiduciary funds. The statements distinguish between governmental and business-type activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange revenues. Business-type activities are financed in whole or in part by fees charged to external parties for goods or services.

The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. The City allocates indirect expenses to functions in the statement of activities. Program revenues include 1) charges to customers or applicants who purchase, use or directly benefit from goods, services, or privileges provided by a given function or segment, and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported as general revenues.



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B. Government-Wide and Fund Financial Statements (Continued)

Fund Financial Statements

The accounts of the City are organized on the basis of funds, each of which is considered to be a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts, which comprise its assets, liabilities, net assets/fund equity, revenues, and expenditures or expenses, as appropriate.

Separate financial statements are provided for governmental funds and proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements.

Funds are organized as major funds or nonmajor funds within the governmental and proprietary statements. An emphasis is placed on major funds within the governmental and proprietary categories. A fund is considered major if it is the primary operating fund of the City or meets the following criteria:

1) Total assets, liabilities, revenues, or expenditures/expenses of that individual governmental or enterprise fund

are at least 10 percent of the corresponding total for all funds of that category or type, and

2) The same element of the individual governmental fund or enterprise fund that met the 10 percent test is at least 5 percent of the corresponding total for all governmental and enterprise funds combined.

3) In addition, any other governmental or proprietary fund that the City believes is particularly important to

financial statement users may be reported as a major fund.

The City reports the following major governmental funds:

General Fund – accounts for the City’s primary operating activities. It is used to account for all financial resources except those required to be accounted for in another fund.

Economic Development Authority Special Revenue Fund – accounts for the administration of economic development related activities in the City.

Debt Service Fund – accounts for resources accumulated and payments made for principal and interest on long-term debt.

General Capital Projects Fund – accounts for general capital improvements, not related to infrastructure, economic development, or tax increment.

City Improvement Projects Capital Projects Fund – accounts for the construction of streets, water mains, sanitary sewers, storm sewers, and other improvements that benefit property owners. EDA Capital Projects Fund – accounts for EDA financed acquisitions of land for future development or redevelopment and infrastructure needs related to redevelopment.

The City reports the following major enterprise funds:

Public Utilities – accounts for the operations and maintenance of the City’s water distribution and sewer collection systems.

Senior Housing Fund – accounts for the operations and maintenance of the City-owned senior housing buildings, Blaine Courts and Cloverleaf Courts.



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B. Government-Wide and Fund Financial Statements (Continued)

Fund Financial Statements (Continued)

The City reports the following nonmajor governmental funds:

Special Revenue Funds – used to account for the proceeds of specific revenue sources (other than major capital projects) that are legally restricted to expenditures for specified purposes:

Cable Television Charitable Gambling Police Grants Refuse Forfeited Property

Capital Projects Funds – used to account for financial resources to be used for the acquisition or construction of equipment and/or major capital facilities:

Park Development Projects Street Improvement Projects Tax Increment Financing Projects

In addition, the City reports the following fund types:

Internal service funds are used to account for the financing of goods or services provided by one department or agency to other departments or agencies of the City on a cost-reimbursement basis:

Compensated Absences Fund Insurance Fund

Agency - The Blaine Area Development Company Agency fund accounts for the activities of the Blaine Area Development Company, for which the city provides accounting services.

C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation

Government-Wide Financial Statements

The government-wide statement of net assets and statement of activities are reported using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when the liability is incurred or economic asset used. Revenues, expenses, gains, losses, assets, and liabilities resulting from exchange and exchange-like transactions are recognized when the exchange takes place. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider are met. Special assessments are recorded as revenue when earned. Unbilled receivables are recorded as revenues when services are provided.

Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the government-wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Governments also have the option of following subsequent private-sector guidance for their business-type activities and enterprise funds, subject to this same limitation. The City has elected not to follow subsequent private-sector guidance.

As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are charges between the City’s public utility functions and various other functions of the government. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned.



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C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued)


Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recorded when they are both measurable and available. Available means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. The City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures are recorded when the related fund liability is incurred; exceptions to the general rule include principal and interest on general long-term debt which is recognized when due. Property tax and tax increment revenue is recognized in compliance with GASB Interpretation No. 5, Property Tax Revenue Recognition in Governmental Funds, issued in November 1998. Property tax revenue is recorded when it becomes available. Available means when due or delinquent and receivable within the current period and collectible within the current period, or expected to be collected soon enough thereafter to be used to pay liabilities of the current period. Soon enough thereafter shall not exceed 60 days.

Revenue from special assessments is recognized by the City when it becomes measurable and available to finance expenditures of the current period. In practice, current and delinquent special assessments collectible during the current period are recognized as revenue in the current period.

Intergovernmental aids and grants are recognized as revenues in the period the City is entitled to the resources, and the amounts are available. Amounts owed to the City which are not available are recorded as receivables and deferred revenues. Amounts received prior to the entitlement period are also recorded as deferred revenues.

Franchise taxes, licenses and permits, charges for services, and miscellaneous revenues are recorded as revenues when received in cash because they are generally not measurable until actually received.

Lodging taxes, gambling taxes, fines and forfeits, and investment earnings are recorded as earned since they are measurable and available.

The City reports deferred revenues on its governmental funds balance sheet. For governmental fund financial statements, deferred revenues arise when a potential revenue does not meet both the "measurable" and "available" criteria for recognition in the current period. Deferred revenues also arise when resources are received before the City has a legal claim to them, as when grant monies are received prior to the incurrence of qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met, or when the City has a legal claim to the resources, the liability for deferred revenue is removed from the balance sheet and revenue is recognized. Proprietary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as described previously in this note. Agency funds follow the accrual basis of accounting and do not have a measurement focus.

The proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the Public Utilities and Senior Housing Funds are charges to customers for sales and services. Operating expenses for proprietary funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures/expenses during the reporting period. Actual results could differ from those estimates.



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D. Assets, Liabilities, and Net Assets or Equity

1. Deposits and Investments

Cash and cash equivalents are identified only for the purpose of the statement of cash flows reporting by the proprietary funds. The proprietary funds consider all highly liquid investments (including restricted assets) with a maturity of three months or less from the date of purchase to be cash equivalents

The City is authorized by Minnesota Statutes Chapter 118A to invest in the following:

a) Bonds, notes, bills, mortgages, and other securities, which are direct obligations or are guaranteed or

insured issues of the United States, its agencies, its instrumentalities, or organizations created by Congress.

b) State and local securities that consist of the following:

any security which is a general obligation of any state or local government with taxing powers which is rated “A” or better by a national bond rating agency; any security which is a revenue obligation of any state or local government with taxing powers which is rated “AA” or better by a national bond rating agency; or a general obligation of the Minnesota Housing Finance Agency which is a moral obligation of the State of Minnesota and is rated “A” or better by a national bond rating agency.

c) Commercial paper issued by United States corporations or their Canadian subsidiaries that is rated in the

highest quality category by at least two nationally recognized rating agencies and matures in 270 days or less.

d) Time deposits that are fully insured by the Federal Deposit Insurance Corporation.

e) Banker’s acceptances of United States banks.

Investments are stated at fair value, which is the amount at which an investment could be exchanged in a current transaction between willing parties. Fair values are based on quoted market prices. No investments are reported at amortized cost. Adjustments necessary to record investments at fair value are recorded in the operating statement as increases or decreases in interest earnings. Investment income on commingled investments of municipal accounting funds is allocated based on average monthly balances. The difference between the bank balance and carrying value is due to outstanding checks and/or deposits in transit. Note 4 contains details of the City’s investment policy.

2. Receivables and Payables

Activity between funds that is representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either “interfund payables/receivables” (i.e. the current portion of the interfund loan) or “advances to/advances from other funds” (i.e. the non-current portion of interfund loans).

All other outstanding balances between funds are reported as “due to/from other funds.” Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as “internal balances.”

All utility and property tax receivables are shown at a gross amount, since both taxes and utility receivables are assessable to the property taxes and are collectible upon sale of the assessed property. The City expects to make full collection of its other receivables, so no allowance is considered necessary.

Property taxes are submitted to the County Auditor by December 28 of each year, to be levied on January 1 on property values assessed as of the same date. The tax levy notice is mailed in March with the first half due on May 15 and the second half due on October 15.

Unpaid taxes at December 31 become liens on the respective property and are classified in the financial statements as delinquent taxes receivable.



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D. Assets, Liabilities, and Net Assets or Equity (Continued)

3. Inventories and Prepaid Items

All inventories are valued at cost using the first in/first out (FIFO) method using the purchases method of accounting. Inventory balances of governmental funds are adjusted annually. Inventory balances at year-end were not material and therefore, not reported on the financial statements.

Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both the government-wide and fund financial statements.

4. Capital Assets

Government-Wide Statements

In the government-wide financial statements, fixed assets are accounted for as capital assets. Capital assets are defined by the City as assets with an initial, individual cost of more than $5,000 and an estimated useful life of at least 2 years. All capital assets are valued at historical cost, or estimated historical costs if actual amounts are unavailable. Donated capital assets are recorded at their estimated fair value at the date of donation. Infrastructure assets constructed by developers and donated to the City are recorded at historical cost (if provided by the developer) or the estimated cost to construct the assets would the City have constructed them.

Prior to January 2003, infrastructure assets of governmental funds were not capitalized. Upon implementing GASB 34, governmental units are required to account for all capital assets, including infrastructure, in the government-wide statements prospectively from the date of implementation. Retroactive reporting of all major general infrastructure assets is encouraged but not required until January 1, 2007, when GASB 34 requires the City to retroactively report all major general infrastructure assets acquired since January 1, 1980. For the year ended December 31, 2005, the City has included infrastructure assets of governmental funds acquired from 1980 through 2002.

Property, plant, and equipment of the Public Utilities and Senior Housing Enterprise Funds are stated at historical cost or estimated market value on the date donated, less accumulated depreciation. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of assets constructed.

Depreciation of all exhaustible capital assets is recorded as an allocated expense in the statement of activities, with accumulated depreciation reflected in the statement of net assets. Depreciation is provided over the assets’ estimated useful lives using the straight-line method of depreciation. The range of estimated useful lives by type of asset is as follows:

Buildings and Structures 10 - 40 yearsMachinery and Equipment 2 - 20 yearsWater distribution and sanitary sewer collection systems 10 - 100 yearsInfrastructure assets 50 years


In the fund financial statements, capital assets used in governmental fund operations are accounted for as capital outlay expenditures of the governmental fund upon acquisition. Capital assets used in proprietary fund operations are accounted for the same way as in the government-wide statements.

5. Other assets

In governmental funds, debt issuance costs are recognized as expenditures in the current period. For the government-wide and the proprietary fund type financial statements, debt issuance costs are deferred and amortized over the term of the debt issue.



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6. Compensated absences

Accrued liabilities for unused vacation and vested sick leave are reflected in the Compensated Absences Internal Service Fund.

Per City policy, employees are allowed to accumulate sick leave benefits and unused vacation days and to redeem the same upon retirement. Up to 120 days of sick leave benefits and 25 days of vacation can be accumulated. The amount of the benefit is determined by multiplying the employee's hourly pay rate by 100% of the vacation hours plus 33 1/3% of the unused sick hours for employees terminating after five years, 40% after ten years, or 50% after fifteen years of service. Payments for compensated absences will be made at rates in effect at the time of payment. The compensated absences liability at December 31, 2005, is determined on the basis of current salary rate and includes salary related obligations of the City.

7. Long-term liabilities

In the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term debt and other long-term liabilities are reported as liabilities in the applicable governmental activities, business-type activities, and proprietary fund type statement of net assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the straight-line method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt.

In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures.

8. Fund equity

Government-Wide Statements

Equity is classified as net assets and displayed in three components:

a. Invested in capital assets, net of related debt – Consists of capital assets including restricted capital

assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, mortgages, notes, or other borrowings that are attributable to the acquisition, construction, or improvement of those assets.

b. Restricted net assets – Consists of net assets with constraints placed on their use either by 1) external

groups such as creditors, grantors, contributors, or laws or regulations of other governments or, 2) law through constitutional provisions or enabling legislation.

c. Unrestricted net assets – All other net assets that do not meet the definition of “restricted” or “invested in

capital assets, net of related debt.” When both restricted and unrestricted resources are available for use, it is the City’s policy to use restricted resources first, and then unrestricted resources as they are needed.

The net asset section includes an adjustment for capital assets owned by the business-type activities, but financed by debt of the governmental activities. The amount is a reduction of “invested in capital assets, net of related debt,” and an increase in “unrestricted” net assets, shown only in the total column.



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8. Fund equity (Continued)


Governmental fund equity is classified as fund balance. Fund balance is further classified as reserved and unreserved. Unreserved fund balance includes funds set aside by management for specific uses, which are labeled “designated”. The balance of unreserved fund balance is labeled “undesignated”, which indicates it is available for appropriation. Proprietary fund equity is classified the same as in the government-wide statements.

2. RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS

A. Explanation of certain difference between the governmental fund balance sheet and the government-wide

statement of net assets

The governmental fund balance sheet includes a reconciliation between fund balance – total governmental funds and net assets – governmental activities as reported in the government-wide statement of net assets. Elements of that reconciliation are detailed as follows:

B. Explanation of certain differences between the governmental fund statement of revenues, expenditures and

changes in fund balances and the government-wide statement of activities

The governmental fund statement of revenues, expenditures, and changes in fund balances includes a reconciliation between net changes in fund balances – total governmental funds and changes in net assets of governmental activities as reported in the government-wide statement of activities. One element of that reconciliation explains that “governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense”. The details of this difference are as follows:

Capital assets transferred from business-type activities 2,377$ Depreciation expense (2,777,683) Reported capital outlay expenditures 12,699,097 Less: Expenditures reported as capital outlay, but not capitalized (1,511,838) Net Capital outlay 11,187,259

Net adjustment to increase net changes in fund balances - total governmental fundsto arrive at changes in net assets of governmental funds 8,411,953$

Capital assets (net of depreciation) 131,813,863$ Addition of deferred revenues 4,758,670 Internal service funds 210,360 Gross Bonds payable (32,985,000)

Less: Deferred charge for issuance costs (to be amortized over life of debt) 136,315 Less: Issuance Premium (to be amortized as interest expense) 36,227

Accrued interest payable (440,666) Net Bonds payable (33,253,124)

Net adjustment to reduce fund balance-total governmental fundsto arrive at net assets-governmental activites 103,529,769$



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2. RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS

B. Explanation of certain differences between the governmental fund statement of revenues, expenditures and changes in fund balances and the government-wide statement of activities (Continued)

Another element of that reconciliation states that “The net effect of various miscellaneous transactions involving capital assets (i.e., sales, trade-ins, and donations) is to increase net assets.” The details of this $16,971,688 difference are as follows:

In the statement of activities, only the gain on the sale of capital assets is reported.However, in the governmental funds, the proceeds from the sale increase financial resources. Thus, the change in net assets differs from the change in fund balance by the cost of the capital assets sold. (313,454)$

Donations of capital assets increase net assets in the statement of activities, but do not appear in the governmental funds because they are not financial resources 17,285,142

Net adjustment to increase changes in fund balances - total governmental funds to arrive at changes in net assets of governmental activities. 16,971,688$

Another element of that reconciliation states that “the issuance of long-term debt (e.g., bonds, leases) provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. Also, governmental funds report the effect of issuance costs, premiums, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities.” The details of this difference are as follows:

Debt issued or incurred:

Issuance of general obligation improvement bonds (8,050,000)Less: discount 56,128Less: issuance costs 59,204

Principal repayments:General obligation debt 3,485,000

Net adjustment to increase net changes in fund balances - total governmental fundsto arrive at changes in net assets of governmental activities (4,449,668)$

Another element of that reconciliation states that “Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds.” The details of this difference are as follows:

Compensated absences 4,007$ Claims and judgments (140,516) Accrued interest (68,400)

Net adjustment to decrease net change in fund balance - total governmental fundsto arrive at changes in net assets of governmental activities (204,909)$



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3. STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY

A. Budgetary Information

Annual budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America for the general fund. Budgets are not legally required to be prepared, or adopted, for special revenue, debt service, or capital project funds, but are informally prepared in accordance with sound financial management policies. All annual appropriations lapse at fiscal year-end.

During the month of June, all departments and divisions of the City submit requests for appropriations to the City’s manager so that a budget may be prepared. Before September 15, the proposed budget is presented to the City Council for review and approval. By September 15, the proposed budget and tax levy must be submitted to the county auditor. The Council holds public hearings and a final budget and tax levy must be prepared, adopted, and submitted to the county auditor, no later than December 28.

The appropriated budget is prepared by fund, department, division, and activity. The Manager may make transfers within activities; transfers between activities, divisions, or departments must be approved by the City Council. The legal level of budgetary control (i.e., the level at which expenditures may not legally exceed appropriations) is at the fund level. The Council adjusted several budgetary appropriations for the general fund in 2005, which increased the total appropriations for the year by $25,000. The increased appropriations were approved by Council pursuant to City Charter Section 7.08 which states,

“After the budget resolution has been adopted, the council shall have no power to increase the expenditure amounts fixed in the budget resolution on a total fund basis by the insertion of new items or otherwise beyond the estimated revenues, unless the actual receipts exceed the estimates and then, not beyond the actual receipts or by specific appropriations of reserves. The city council shall approve any transfer among programs in the Annual Budget. The council may, by resolution, approved by a vote of five (5) members, reduce the sums appropriated for any purpose by the budget resolution; or may expend sums for any lawful purpose as long as the total appropriations for a fund is not exceeded, unless otherwise amended.”

The increased appropriations in 2005 were funded by council-approved use of reserves.

B. Deficit fund equity

The General Capital Projects, Tax Increment Financing Projects, Economic Development Projects, and City Improvement Projects Capital Projects Funds have individual project accounts for the various general, tax increment, economic development, and special assessment improvements. Each account may have a temporary deficit due to the timing of the project and receipt of bond proceeds and other financing sources. The aggregate total of these accounts does not produce a fund deficit for the General Capital Projects, Tax Increment Financing Projects or City Improvement Projects at December 31, 2005.

The Economic Development Projects Fund had an unreserved, undesignated fund balance deficit of $3,105,563 at December 31, 2005. This was primarily due to the purchase of land, which will be resold in the future, and expenditures for the development of Town Square Park. There are unreserved, designated funds available in the Economic Development Authority special revenue fund to cover this deficit.



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4. DETAILED NOTES ON ALL FUNDS

A. Deposits and Investments

The City’s cash and investments at December 31, 2005 were comprised of the following:

Carrying Bank AssociatedValue Balance Risks *

Federal agency securities 63,504,882 63,171,196 1, 2, 3, 4Commercial paper 6,743,801 6,743,801 1, 2, 3, 4Deposits 97,630$ 636,075$ 1Money market funds 8,179,778 8,148,728 1Petty cash and change funds 2,700 - N/A Total Cash and Investments 78,528,791$ 78,699,800$

Reconciliation to financial statements Per statement of net assets 78,370,222$ Per statement of fiduciary net assets 158,569

Total Cash and Investments 78,528,791$

* See descriptions of Associated Risks listed below. Deposits in each local and area bank are insured by the FDIC in the amount of $100,000

The City maintains collateral agreements with its banks. At December 31, 2005, the banks had pledged various government securities in the amount of $2,272,563 to secure the City’s deposits.

The City’s investments may be subject to the following types of risk:

1. Custodial Credit Risk

Deposits – Custodial credit risk for deposits is the risk that in the event of a financial institution failure, the City’s deposits may not be recovered. Minnesota Statutes require that all City deposits be protected by insurance, surety bond, or collateral. The market value of collateral pledged must equal 110% of the deposits not covered by insurance or bonds (140% in the case of mortgage notes pledged).

Authorized collateral includes the legal investments described below, as well as certain first mortgage notes, and certain other state or local government obligations. Minnesota Statutes require that securities pledged as collateral be held in safekeeping by the City Treasurer or in a financial institution other than that furnishing the collateral.

Investments – For investments, custodial credit risk is the risk that, in the event of the failure of the counterparty, the City will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The City’s investment policy requires that all investments, deposits and repurchase agreements be structured so that they are either:

• Insured or registered and held by the City or its agent in the City’s name, or

• Uninsured, unregistered and held by the counterparty’s trust department or agent in the City’s name.

At December 31, 2005, the City’s entire investment portfolio is in safekeeping in a custodial trust account at one institution.



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A. Deposits and Investments (Continued)

2. Credit Risk

The City’s investment policy restricts investment instruments to those authorized by Minnesota Statutes 118A.04. In accordance with this Statute, commercial paper must be rated in the highest quality category by at least two nationally recognized rating agencies. At December 31, 2005, the City owned commercial paper with issuers rated A1+ by Standard and Poor’s and P1 by Moody’s or P1 by Moody’s and F1 by Fitch rating agencies. These are the highest ratings given by the three nationally recognized rating agencies. The federal agency securities are rated Aaa by Moody’s and AAA by Standard and Poor’s rating agencies.

3. Concentration of Credit Risk

The City’s investment policy requires diversification of investments to eliminate the risk of loss resulting from over-concentration of assets in a specific maturity, a specific issuer or a specific class of securities. At December 31, 2005, investments in any one issuer that represent 5% or more of the City’s total investments are as follows:

% ofIssuer Investment Type PortfolioFederal Home Loan Bank Federal agency security 40%Federal Home Loan Mortgage Corporation Federal agency security 14%Federal National Mortgage Association Federal agency security 24%First American Funds Money market 10%

4. Interest Rate Risk

Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. In accordance with its investment policy, the City manages its exposure to interest rate risk by purchasing a combination of shorter term and longer term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations.

Information about the sensitivity of the fair values of the City’s investments to market interest rate fluctuations is provided by the following table that shows the distribution of the City’s investments by maturity:

6 Months 7 to 12 13 to 24 More ThanInvestment Type Fair Value Or Less Months Months 24 Months

Federal agency securities 63,504,882$ 15,235,857$ 18,456,595$ 18,292,130$ 11,520,301$ Commercial paper 6,743,801 6,743,801 Money market 8,179,778 8,179,776

Total 78,428,461$ 30,159,434$ 18,456,595$ 18,292,130$ 11,520,301$

Remaining Maturity

For the purposes of this disclosure, it is assumed that investments will be held until maturity.



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B. Receivables

Receivables as of year-end for the City’s individual major funds, nonmajor funds, and internal services funds are as follows:

Economic General City EDA Nonmajor InternalDevelopment Debt Capital Improvement Capital Public Senior and Other Service

General Authority Service Projects Projects Projects Utilities Housing Funds Funds TotalReceivables: Accounts 22,062$ - $ - $ 5,041$ 31,488$ - $ 1,165,304$ 1,404$ 354,776$ - $ 1,580,075$ Delinquent taxes 301,066 252 37,019 6 - - - - - - 338,343 Tax increments - - - - - - - 23,032 - 23,032 Special assessments - 10,501 3,328,862 245,763 807,233 312,537 - 245 - 4,705,141 Intergovernmental 140,181 42 21,240 563 479,876 7,332 - 143,200 - 792,434 Loans receivable - 808,582 - - - - - 13,195 - 821,777 Notes receivable - 74,024 - - - - - - - 74,024 Lease receivable - - - - - - - 48,136 - 48,136

Total receivables 463,309$ 893,401$ 3,387,121$ 251,373$ 1,318,597$ - $ 1,485,173$ 1,404$ 582,584$ - $ 8,382,962$

Amounts not expected to becollected within one year 150,533$ 766,940$ 2,855,516$ 159,758$ 732,280$ -$ 271,640$ - $ 108,570$ - $ 5,045,237$



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B. Receivables (Continued)

Governmental funds report deferred revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection with resources that have been received, but not yet earned. At the end of the current fiscal year, the various components of deferred revenue and unearned revenue reported in the governmental funds were as follows:

Unavailable Unearned Totals

Delinquent taxes receivable:General Fund 301,066$ - $ 301,066$ Economic Development Authority Fund 252 - 252 Debt Service Fund 37,019 - 37,019 General Capital Projects Fund 6 6

Delinquent tax increments receivable - nonmajor funds 23,032 - 23,032 Delinquent special assessments:

Debt Service Fund 15,428 - 15,428 General Capital Projects Fund 65,816 65,816 City Improvement Projects Fund 3,062 - 3,062

Special assessments not yet due: Economic Development Authority Fund 10,500 10,500

Debt Service Fund 3,313,434 - 3,313,434 General Capital Projects Fund 179,947 179,947 City Improvement Projects Fund 804,171 - 804,171 Nonmajor funds 245 - 245

MSA receivables for money not yet received 4,691 - 4,691 Payments for services and licenses not yet provided - General Fund - 144,269 144,269

Total deferred/unearned revenue for governmental funds 4,758,670$ 144,269$ 4,902,939$



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B. Receivables (Continued)

Loans receivable

The Economic Development Authority authorized a loan to Woodco Pre-Finishing in lieu of a business loan through the BADC. The loan has a term of 20 years with payments of principal and interest due monthly. This loan is recorded in the Economic Development Authority Fund.

The Economic Development Authority authorized a loan to Exhaust Pro under the Fire Code Loan Program that was established in 1992. The loan is payable over seven years with principal and interest due monthly. This loan is reported in the nonmajor governmental funds.

Under the terms of the Home Improvement Loan Program, established in 1998, the Economic Development Authority, through a third party administrator, issues home improvement loans to homeowners within the City that qualify. These loans vary in length and amount, with the maximums being $25,000 over 20 years. At December 31, 2005, the receivable balance for these loans was $702,428. Additionally, the Economic Development Authority approved a no-interest loan with James Smith for the properties at 11300 and 11360 Highway 65 for $16,000. The total principal amount is due upon sale of the property. All of these loans are reported in the Economic Development Authority Fund.

Note receivable

The Economic Development Authority accepted a note for the purchase of a parcel of land located on the southwest corner of Cloverleaf Parkway and Highway 65 from D & M Management. The terms of the note call for equal payments to be made at closing and on the first nine anniversaries of closing, with the remaining amount due as a lump sum on the tenth anniversary of closing. The receivable for this note is recorded in the Economic Development Authority Fund.

Lease receivable

The Economic Development Authority has leased a parcel of land to the Tournament Players Club of the Twin Cities, LLC (the TPC), for use in the construction and operation of a portion of a private membership eighteen-hole golf course. The TPC will make annual lease payments until the expiration of the lease on June 14, 2048. At that time, the TPC has the option to purchase the leased property for the purchase price stated in the lease agreement. This lease is reported in the nonmajor governmental funds.

The principal amounts remaining to be collected are as follows:

Lease Receivable

Year Due TPC2006 4,041 2007 3,711 2008 3,407 2009 3,128 2010 - 2014 12,196 2015 - 2019 7,959 2020 - 2024 5,194 2025 - 2029 3,390 2030 - 2034 2,212 2035 - 2039 1,444 2040 - 2044 942 2045 - 2048 512

Total 48,136

Amounts due under the loans, note, and lease agreements have been recorded as receivables and as a reservation of fund balance in the funds indicated at December 31, 2005.



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C. Capital Assets

Capital asset activity for the year ended December 31, 2005, was as follows:

Beginning Restatement for Restated EndingBalance Infrastructure (1) Beginning Balance Increases Decreases Balance

Governmental activities:Capital assets not being depreciated:

Land 25,357,745$ 18,468,573$ 43,826,318$ 15,413,509$ (284,447)$ 58,955,380$ Construction in progress 1,220,050 - 1,220,050 7,996,746 (3,087,266) 6,129,530

Total capital assets not being depreciated 26,577,795 18,468,573 45,046,368 23,410,255 (3,371,713) 65,084,910

Capital assets being depreciated:Buildings and structures 21,191,589 - 21,191,589 1,231,484 - 22,423,073 Machinery and equipment 11,599,264 - 11,599,264 1,142,344 (203,399) 12,538,209 Infrastructure 13,169,816 32,534,283 45,704,099 5,804,111 - 51,508,210

Total capital assets being depreciated 45,960,669 32,534,283 78,494,952 8,177,939 (203,399) 86,469,492

Less accumulated depreciation for:Buildings and structures (3,450,626) - (3,450,626) (670,460) - (4,121,086) Machinery and equipment (7,106,957) - (7,106,957) (1,140,385) 174,392 (8,072,950) Infrastructure (160,546) (6,392,969) (6,553,515) (992,988) - (7,546,503)

Total accumulated depreciation (10,718,129) (6,392,969) (17,111,098) (2,803,833) 174,392 (19,740,539)

Total capital assets being depreciated, net 35,242,540 26,141,314 61,383,854 5,374,106 (29,007) 66,728,953

Governmental activities capital assets, net 61,820,335$ 44,609,887$ 106,430,222$ 28,784,361$ (3,400,720)$ 131,813,863$

(1) Restated for infrastructure additions in accordance with GASB Statement No 34, and includes infrastructure assets constructed in the years 1980 through 2002.



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C. Capital Assets (Continued)

Beginning Restatement for Restated EndingBalance Infrastructure (1) Beginning Balance Increases Decreases Balance

Business-type activities:Capital assets not being depreciated:

Land 1,024,976$ - $ 1,024,976$ - $ - $ 1,024,976$ Construction in progress 1,357,111 - 1,357,111 6,288,276 (901,114) 6,744,273

Total capital assets not being depreciated 2,382,087 - 2,382,087 6,288,276 (901,114) 7,769,249

Capital assets being depreciated:Buildings 11,569,394 - 11,569,394 - - 11,569,394 Machinery and equipment 2,477,941 - 2,477,941 197,190 (103,425) 2,571,706 Collection and distribution 90,227,016 - 90,227,016 4,841,712 (2,830) 95,065,898

Total capital assets being depreciated 104,274,351 - 104,274,351 5,038,902 (106,255) 109,206,998

Less accumulated depreciation for:Buildings (3,183,487) - (3,183,487) (284,490) - (3,467,977) Machinery and equipment (1,891,205) - (1,891,205) (124,496) 101,048 (1,914,653) Collection and distribution (19,821,983) - (19,821,983) (1,809,148) 2,830 (21,628,301)

Total accumulated depreciation (24,896,675) - (24,896,675) (2,218,134) 103,878 (27,010,931)

Total capital assets being depreciated, net 79,377,676 - 79,377,676 2,820,768 (2,377) 82,196,067

Business-type activities capital assets, net 81,759,763$ - $ 81,759,763$ 9,109,044$ (903,491)$ 89,965,316$

(1) Infrastructure assets owned by business-type activities have always been included in the fund and government-wide financial statements.



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C. Capital Assets (Continued)

Depreciation expense was charged to functions of the City as follows:

Governmental Activities:General government 468,598$ Public safety 543,998 Public works including depreciation of infrastructure 1,430,795 Recreation 309,181 Community development 25,110

Total depreciation expense - governmental activities* 2,777,682$

Business-type Activities:Water 942,205$ Sewer 1,020,437 Senior Housing 255,492

Total depreciation expense - business-type activities 2,218,134$

*Depreciation expense is $26,149 less than reported in the capital asset activity above. This difference is the accumulated depreciation on an asset that was transferred from an enterprise fund to the general fund.

D. Interfund receivables, payables, and transfers

The composition of interfund balances as of December 31, 2005, is as follows:

Interfund payables/receivables:

Receivable Fund Payable Fund

Economic Development Authority EDA Capital Projects 2,990,925$ Less: Fund eliminations (2,990,925) Add: Internal service balance 54,570

Total-government-wide statement 54,570$

Interfund payables and receivables are representative of lending/borrowing arrangements to cover deficit cash balances at the end of the fiscal year. The balances will be paid when the individual projects are complete. For the statement of Net Assets, interfund balances which are owed within the governmental activities or business-type activities are netted and eliminated.



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D. Interfund receivables, payables, and transfers (Continued)

Interfund transfers: Transfers in:

General City EDA NonmajorDebt Capital Improvement Capital Governmental

Transfers out: General Service Projects Projects Projects Funds Total

General 25,000$ - $ 1,474,502$ 578,975$ - $ - $ 2,078,477$ Economic Development Authority - - - - 500,000 - 500,000 Debt Service - - - - - - - General Capital Projects - - - - - - - City Improvement Projects 4,507 - - - - 13,572 18,079 Nonmajor Governmental Funds - 1,531,839 - 228,334 - - 1,760,173 Public Utilities - - - - - 11,776 11,776 Senior Housing - 346,800 - - - - 346,800

29,507$ 1,878,639$ 1,474,502$ 807,309$ 500,000$ 25,348$

Subtotal - Fund Statements 4,715,305

Less: Government-wide eliminations (4,356,728) Plus: Transfer of asset from business-type activities to governmental activities 2,377

Total Transfers - Government-Wide Statement of Activities 360,954$

Transfers are used to 1) move revenues from the fund with collection authorization to the debt service fund as debt service principal and interest payments become due, 2) to provide revenues to satisfy a deficit in a project fund after the project has been completed, 3) to distribute excess revenues from a fund in which the project has been completed or the debt has been paid, 4) move general fund revenues to finance various programs that the government must account for in other funds in accordance with budgetary authorizations, including amounts provided as subsidies or matching funds for various grant programs.



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E. Long-term obligations

Long-term obligations activity for the year ended December 31, 2005, was as follows: Amounts

Beginning Ending Due WithinGovernmental Activities Balance Increases Decreases Balance One YearGeneral Obligation Bonds Payable:

Fire Improvement 2,195,000$ 8,050,000$ 275,000$ 9,970,000$ 285,000$ Open Space 3,235,000 - 200,000 3,035,000 205,000 Equipment Certificates 2,005,000 - 835,000 1,170,000 635,000 Special Assessment Debt with Government Commitment 10,450,000 740,000 9,710,000 560,000 Tax Increment Financing 10,535,000 - 1,435,000 9,100,000 1,445,000 Add (Subtract) Deferred Amounts for:

(Discounts)/Premiums 20,541 56,768 (36,227) -

Total bonds payable 28,440,541$ 8,050,000$ 3,541,768$ 32,948,773$ 3,130,000$

Other Liabilities:Compensated absences 1,238,330 171,714 77,659 1,332,384 80,000 Claims and judgments payable 346,829 293,872 332,532 308,169 55,675

Total other liabilities 1,585,159 465,586 410,191 1,640,553 135,675

Total Governmental ActivitiesLong-Term Liabilities 30,025,700$ 8,515,586$ 3,951,959$ 34,589,326$ 3,265,675$

General Obligation Debt

The City issues general obligation bonds to provide for the acquisition of capital assets, the acquisition of open space within the City, the construction of infrastructure, and economic development and redevelopment. General obligation bonds have been issued for governmental activities. The original amount of general obligation bonds issued in prior years with amounts outstanding at year-end was $48,630,000.

At December 31, 2005, the City had the following general obligation bonds outstanding:

Interest Original BalanceRates Indebtedness 12-31-2005

Governmental Activites:General obligation 2.00% - 4.50% 15,280,000$ 12,255,000$ General obligation refunding 4.45% - 4.90% 2,960,000 1,920,000 General obligation special assessment debt with government commitment 3.00% - 5.15% 15,250,000 9,710,000 General obligation tax increment financing 3.90% - 6.75% 9,800,000 6,540,000 General obligation tax increment financing refunding 1.20% - 5.50% 5,340,000 2,560,000

Governmental Activities 48,630,000$ 32,985,000$



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E. Long-term obligations (Continued)

General Obligation Debt (Continued)

Governmental ActivitiesSpecial Assessment Debt General Obligation

General Obligation Debt with Government Commitment Tax Increment Financing DebtYears Principal Interest Principal Interest Principal Interest

2006 1,125,000 438,512 560,000 348,874 1,445,000 380,908 2007 1,005,000 501,518 890,000 320,990 1,220,000 322,395 2008 1,095,000 464,680 885,000 289,191 815,000 275,650 2009 850,000 424,323 885,000 256,391 850,000 237,101 2010 890,000 388,154 880,000 223,448 610,000 204,016 2011 - 2015 3,405,000 1,480,389 3,345,000 708,576 2,250,000 665,676 2016 - 2020 2,695,000 858,604 2,265,000 206,101 1,910,000 237,634 2021 - 2025 2,535,000 377,100 - - - - 2026 575,000 11,500 - - - -

Total 14,175,000$ 4,944,779$ 9,710,000$ 2,353,571$ 9,100,000$ 2,323,380$

On December 1, 2005, the City issued the General Obligation Capital Improvement Bonds of 2005 Series A of $8,050,000 with an average interest rate of 4.03%. The net proceeds of $7,990,313 shall provide funds to finance the acquisition, construction and furnishings of buildings and equipment for municipal fire protection. All general obligation bonds payable are backed by the full faith and credit of the City. Bonds in the governmental activities will be retired by future property tax levies, tax increments, or special assessments accumulated by the debt service fund. In the event that a deficiency exists because of unpaid or delinquent tax increments or special assessments at the time a debt service payment is due, the City must provide resources to cover the deficiency until other resources are received. Delinquent tax increments in the governmental funds at December 31, 2005, were $23,032; delinquent special assessments in the governmental funds at December 31, 2005 were $84,307, which is included in the special assessments receivable balance of $4,392,604.

Compensated absences, unpaid vacation and sick leave, for both governmental and proprietary fund types, are accounted for in the Compensated Absences Internal Service Fund. Claims and judgments payable and accrued insurance claim deductibles, for governmental and proprietary fund types, are accounted for in the Self-Insurance Internal Service Fund.



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E. Long-term obligations (Continued)

General Obligation Debt (Continued)

In accordance with the provisions of the Municipal Industrial Development Act, the City authorized the issuance of Industrial Development Revenue Bonds/Notes whose purpose is to finance private development as approved by the State. Under terms of the issues authorized and the requirements of the Municipal Industrial Development Act, the City has no obligation for the payment of the principal and interest other than its share in the Industrial Development Projects. Accordingly, these liabilities have been excluded from these financial statements. A summary of this type of conduit debt is as follows:

Original Payable

Issue December 31

Industrial Development Revenue/Revenue Refunding Bonds 10,665,000$ 9,555,000$ Public Project Revenue Refunding Bonds 7,385,000 3,785,000 Revenue Notes 6,252,743 5,409,769

Total outstanding December 31 24,302,743$ 18,749,769$

The Public Project Revenue Refunding Bonds were issued by the Blaine Economic Development Authority.

F. Net Assets/Fund Balances

Net assets reported in the government-wide statement of net assets at December 31, 2005, include the following:

Governmental Activities

Invested in capital assets, net of related debt:Land 58,955,380$ Construction in progress 6,129,530 Other capital assets, net of accumulated depreciation 66,728,952 Less: related long-term debt outstanding, net of unspent bond proceeds (15,786,775)

Total invested in Capital Assets 116,027,087

Restricted:Debt service 5,723,839 Tax increment 4,669,159 Public safety programs 168,835 Cable TV 18,043 Charitable gambling 139,358

Total Restricted 10,719,234

Unrestricted 28,230,841

Total Governmental Activities Net Assets 154,977,162$



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F. Net Assets/Fund Balances (Continued)

Business-Type Activities

Invested in capital assets, net of related debtLand 1,024,976$ Construction in progress 6,744,273 Other capital assets, net of accumulated depreciation 82,196,067 Less: related long-term debt outstanding -

Total invested in Capital Assets 89,965,316

Unrestricted 21,908,894

Total Business-Type Activities Net Assets 111,874,210$

Governmental fund balances reported on the fund financial statements at December 31, 2005, include the following:

ReservedMajor Funds

General FundPrepaids and other assets 5,454$ Committed contracts 276,174

Total 281,628$

Economic Development Authority Special Revenue FundLoans receivable 808,582$ Notes receivable 74,024

Total 882,606$

General Debt Service FundDebt service 2,798,624$

City Improvement Projects Capital Projects FundCommitted contracts 4,560,002$

Nonmajor FundsPark Development Projects Capital Project Fund

Committed contracts 32,904$

Tax Increment Financing Projects Capital Project FundLoans receivable 13,195$ Lease receivable 48,136

Total 61,331$



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F. Net Assets/Fund Balances (Continued)

Unreserved, designatedMajor Funds

General FundWorking capital 9,044,086$

Economic Development Authority Special Revenue FundEconomic development 9,408,194

General Capital Projects Capital Project FundCapital improvements 9,189,607

City Improvement Projects Capital Project FundCapital improvements 8,353,308

Total 35,995,195$

Nonmajor FundsSpecial Revenue Funds

Public safety programs 168,835$ Cable Television 18,043 Charitable Gambling 139,358 Sanitation 518,289

Total 844,525$

Capital Project FundsPark Development Projects 2,417,363$ Street Improvement 2,098,071 Tax Increment Financing Projects 4,580,707

Total 9,096,141$

Unreserved, undesignated (deficit)Nonmajor Funds

Capital Project FundsEconomic Development Projects (3,105,563)$

Designation of Net AssetsInternal Service Fund

Designated for future catastrophe losses 155,790$



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G. Restatement of Net Assets

In 2005, in accordance with GASB Statement No. 34, the City included infrastructure (streets, bridges, right-of-way, and storm sewer) constructed or acquired from 1980 to 2002 in its capital asset records:

Net AssetsGovernmental

Activities

Net Assets - January 1, as previously reported 90,543,217$ Add:

Land 18,468,573 Infrastructure-Streets, balance 1/1/05 19,959,185 Accumulated depreciation infrastructure streets, balance 1/1/05 (3,945,328) Infrastructure-Storm Sewer, balance 1/1/05 12,575,098 Accumulated depreciation storm sewer, balance 1/1/05 (2,447,641)

44,609,887

Net Assets - January 1, as restated 135,153,104$ 5. OTHER INFORMATION

A. Risk Management

The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. In order to protect against these risks of loss, the City purchases commercial insurance through the League of Minnesota Cities Insurance Trust, a public entity risk pool. This pool currently operates as a common risk management and insurance pool for municipal entities. The City pays an annual premium to the League for its insurance coverage (the League of Minnesota Cities Insurance Trust is self-sustaining through commercial companies for excess claims). The City, covered through the pool for any claims incurred but unreported, however, retains risk for the deductible portion of its insurance policies.

During the year ended December 31, 2005, there were no significant reductions in coverage compared to the prior year. Settled claims from these risks have not exceeded commercial insurance coverage for the past three years.

The Self-Insurance Internal Service Fund was established to account for and finance the City’s uninsured risks of loss. This fund provides coverage up to $25,000 ($100,000 aggregate) for each general liability and property damage claim. The City is a member of the League of Minnesota Cities Insurance Trust (LMCIT) for claims in excess of coverage provided by the Self-Insurance Internal Service Fund and for all other risks of loss, including workers’ compensation. The City's premium payments to the LMCIT include an estimate for incurred but not reported claims.

Insurance reimbursements to the Self-Insurance Internal Service Fund are charged back to the affected governmental and proprietary funds, in the form of an insurance charge, to fund future premiums to the LMCIT, estimated prior and current year claims, and a reserve for catastrophe losses. That reserve was $155,790 at December 31, 2005, and is reported as a designation of the Self-Insurance Internal Service Fund net assets.

The claims and judgments liability reported in the fund at December 31, 2005, is based on the requirements of GASB Statement No. 10, Accounting and Financial Reporting for Risk Financing and Related Insurance Issues, which requires a liability for claims be reported if it is probable that a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. The liability for incurred, reported claims, $55,675, is classified as a current liability and the amount estimated for incurred but not reported claims, $252,494, is classified as a noncurrent liability within the Self-Insurance Internal Service Fund.



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5. OTHER INFORMATION

A. Risk Management (Continued) A summary of the claims and judgments liability amounts at December 31, 2005, and 2004, is as follows:

2005 2004

Beginning balance 346,829$ 359,792$

Incurred claims 293,872 193,203

Payment on claims (141,081) (104,607)

Reserve adjustments (191,451) (101,559)

Ending balance 308,169$ 346,829$

B. Employee Retirement System

1. Defined benefit pension plan

a. Plan Description

All full-time and certain part-time employees of the City are covered by defined benefit pension plans administered by the Public Employees Retirement Association of Minnesota (PERA). PERA administers the Public Employees Retirement Fund (PERF) and the Public Employees Police and Fire Fund (PEPFF) which are cost-sharing, multiple-employer retirement plans. These plans are established and administered in accordance with Minnesota Statutes Chapters 353 and 356.

PERF members belong to either the Coordinated Plan or the Basic Plan. Coordinated Plan members are covered by Social Security and Basic Plan members are not. All new members must participate in the Coordinated Plan. All police officers, fire fighters, and peace officers who qualify for membership by statute are covered by the PEPFF.

PERA provides retirement benefits as well as disability benefits to members, and benefits to survivors upon death of eligible members. Benefits are established by state statute and vest after three years of credited service. The 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 PERF and PEPFF. That report may be obtained by writing to PERA, 60 Empire Drive Suite 200, St. Paul, Minnesota 55103-2088 or by calling (651) 296-7460 or 1-800-652-9026.



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B. Employee Retirement System (Continued)

1. Defined benefit pension plan (Continued)

b. Funding Policy

Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. These statutes are established and amended by the state legislature. The City makes annual contributions to the pension plans equal to the amount required by state statutes. PERF Basic Plan members and Coordinated Plan members are required to contribute 9.10% and 5.10%, respectively, of their annual covered salary. PEPFF members are required to contribute 6.20% of their annual covered salary. The City of Blaine is required to contribute the following percentages of annual covered payroll: 11.78% for Basic Plan PERF members, 5.53% for Coordinated Plan PERF members, and 9.30% for PEPFF members. The City’s contributions for the years ended December 2005, 2004, and 2003 were as follows, equal to the contractually required contributions for each year as set by state statute:

2005 2004 2003

PERFContributions by Employee 324,255$ 294,173$ 284,305$ Contributions by Employer 351,594 318,975 308,275

PEPFFContributions by Employee 237,300 225,970 217,046 Contributions by Employer 355,950 338,955 325,568

Totals 1,269,098$ 1,178,073$ 1,135,194$

C. Commitments and Contingencies

The City, in connection with the normal conduct of its affairs, is involved in various claims, judgments, and litigation. City management estimates that the potential claims against the City not covered by insurance resulting from such litigation would not materially affect the financial position of the City.

The City has active construction projects as of December 31, 2005. The projects include improvements to the City’s public works facility, construction projects in the City’s various parks, street construction projects, construction of a new fire station, and construction of two water treatment facilities. The remaining amount on each of these contracts shows as a reservation of fund balance in the governmental funds in the amount of $4,869,080.

The City issued bonds in excess of $5 million in the years 1995, 1997, 1999, 2001, 2004 and 2005 and therefore is required to rebate excess income relating to these issues to the federal government as required under the Tax Reform Act of 1986. The extent of the City’s liability for arbitrage rebates on the remaining issues is not determinable at this time. It is the opinion of city management that the arbitrage rebates on the remaining issues would not be material.



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D. Joint Ventures

A joint venture is a legal entity or other organization that results from a contractual arrangement and that is owned, operated, or governed by two or more participants as a separate and specific activity subject to joint control, in which participants retain an ongoing financial interest or an ongoing financial responsibility.

The City is a member of the North Metro Telecommunications Commission (the Commission), which includes eight surrounding communities, that oversees the franchise agreement with Comcast, the local cable company. Legally separate, the City does not appoint a voting majority of the Board, and the Commission is fiscally independent of the City. During 2005, the City contributed $254,556 to the Commission, which is included as expenditures in the Cable Television Special Revenue Fund.

The City has joined with the Cities of Mounds View and Spring Lake Park to cooperate in providing fire protection services to their residents. Fire protection services are furnished by the Spring Lake Park-Blaine-Mounds View Fire Department, a private nonprofit Internal Revenue Code (IRC) Section 501(c)(3) organization. The municipalities agreed upon several significant provisions pursuant to their agreement dated December 11, 1990:

1) The City issued $4,450,000 General Obligation Fire Improvement Bonds on May 1, 1991, to defray the cost of

new fire stations and equipment. Each city's share of the debt is calculated to be a percentage from year to year based on a formula described in the agreement. The Cities of Mounds View and Spring Lake Park agree to reimburse the City of Blaine for their share of the debt service upon request. The amount of the bond outstanding at December 31, 2005, is $0.

The City issued $2,960,000 General Obligation Fire Improvement Refunding Bonds on October 1, 1997, to refund the 1991 issue. Each city’s share of the debt will be calculated in the same manner as the 1991 issue. The amount of the bond outstanding at December 31, 2005, is $1,920,000. In January 2005, the three cities executed a supplement to their joint powers agreement. The supplement authorized the City to issue $8,050,000 General Obligation Capital Improvement Bonds to finance the construction of a new fire station that will serve to consolidate the operations of two smaller stations that will be closed. The supplement obligates each of the cities to annually pay a portion of debt service on the bonds in an amount equal to each city's share of the debt as calculated on the formula described in the agreement. Mounds View and Spring Lake Park have pledged their full faith and credit and taxing powers to pay the applicable formula percentage of debt service on the bonds. The bonds were issued on December 1, 2005.

2) Operating and maintenance costs are to be shared by the cities as determined by the formula each year. The City contributed $920,270 for its share during 2005, which is included as expenditures in the General Fund.

3) Property will be in the City of Blaine's name. Property and equipment with an original cost of $6,289,451 was

accounted for at December 31, 2005.

The current debt service and operating and maintenance costs share per the agreement for the Cities of Blaine, Mounds View, and Spring Lake Park is 73.58%, 15.84%, and 10.58%, respectively.



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D. Joint Ventures (continued) The City of Blaine provides accounting services to the Blaine Area Development Company (BADC). The BADC is a private, nonprofit IRC Section 501(c)(4) organization. The BADC is a separate legal entity which receives government grants designed for financing of small businesses in the Cities of Blaine and Spring Lake Park. The City does not appoint a voting majority of the Board and the BADC is not fiscally dependent on the City. The cash balance of $158,569 associated with the BADC is reported in an agency fund.

Complete financial statements for the joint ventures and jointly governed organizations may be obtained as follows:

1) North Metro Telecommunications Commission

12520 Polk Street Blaine, Minnesota 55434

2) Spring Lake Park-Blaine-Mounds View Fire Department

1710 Highway 10 Spring Lake Park, Minnesota 55432

3) Blaine Area Development Company

10801 Town Square Drive Blaine, Minnesota 55449

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NONMAJOR GOVERNMENTAL FUNDS

SPECIAL REVENUE FUNDS

Special Revenue Funds account for revenues derived from specific taxes or other earmarked revenue sources. They are usually required by statute or local ordinance and/or resolution to finance particular functions, activities, or governments.

Cable Television Fund – This fund was established to account for transactions associated with cable television in the City. Revenue includes franchise fees from Comcast Cable. Expenditures include the operation of the North Metro Telecommunications Commission and other costs relating to the cable television activity.

Charitable Gambling Fund – This fund was created pursuant to Minnesota Statute §349.12 for the collection of a 10% fee on net profits from lawful gambling within city boundaries. Disbursements by the City are for lawful purposes as defined by state statute.

Police Grants Fund – This fund was established to account for transactions related to police grants received from the federal and state governments. Disbursements are regulated by the grant agreement with the grant agency.

Refuse Fund – This fund accounts for the refuse and recycling collections contract and the fees collected by the City.

Forfeited Property – This fund accounts for forfeited property unlawfully used or acquired in a criminal activity and diverted to law enforcement.

CAPITAL PROJECT FUNDS

Capital Projects Funds are established to account for the resources expended to acquire assets of a permanent nature other than those financed by other governmental and proprietary funds.

Park Development Projects Fund – This fund is used to account for contributions from developers and federal and state grants for park development.

Street Improvement Fund – This fund is used to account for the street pavement maintenance program. Financing includes certain Municipal State Aid monies and operating transfers from various sources.

Tax Increment Financing Projects Fund – This fund accounts for the bond proceeds of the general obligation tax increment financing bonds and tax increments for economic development and redevelopment improvements.

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COMBINING BALANCE SHEETNONMAJOR GOVERNMENTAL FUNDSDECEMBER 31, 2005

Nonmajor Nonmajor Special Capital

Revenue Project Total

ASSETSCash and pooled investments 628,078$ 9,436,799$ 10,064,877$ Tax increments receivable - 23,032 23,032 Accounts receivable 354,776 - 354,776 Special assessments receivable - 245 245 Intergovernmental receivable 41,350 101,850 143,200 Assets held for resale 1,000 - 1,000 Loans receivable - 13,195 13,195 Lease receivable - 48,136 48,136

TOTAL ASSETS 1,025,204 9,623,257 10,648,461


Accounts payable 169,839 354,711 524,550 Deposits payable - 10,000 10,000 Contracts payable - 44,894 44,894 Intergovernmental payable 10,840 - 10,840 Deferred revenue - 23,276 23,276

Total liabilities 180,679 432,881 613,560

Fund balances:Reserved for committed contracts - 32,904 32,904 Reserved for loans receivable - 13,195 13,195 Reserved for lease receivable - 48,136 48,136 Unreserved, designated:

Public safety programs 38,652 - 38,652 Cable television 18,043 - 18,043 Charitable gambling 139,358 - 139,358 Sanitation 518,289 - 518,289 Capital improvements - 9,096,141 9,096,141

Total fund balances 844,525 9,190,376 10,034,901

TOTAL LIABILITIES AND FUND BALANCES 1,025,204$ 9,623,257$ 10,648,461$

69


COMBINING BALANCE SHEETNONMAJOR SPECIAL REVENUE FUNDSDECEMBER 31, 2005

Cable CharitableTelevision Gambling

ASSETSCash and pooled investments 18,043$ 120,125$ Accounts receivable - 19,233 Intergovernmental receivable - -

TOTAL ASSETS 18,043 139,358


Accounts payable - - Intergovernmental payable - -

Total liabilities - -

Fund balances:Unreserved, designated:

Public safety programs - - Cable television 18,043 - Charitable gambling - 139,358 Sanitation - -

Total fund balances 18,043 139,358

TOTAL LIABILITIES AND FUND BALANCES 18,043$ 139,358$

70

Police Forfeited Grants Refuse Property Total

41,132$ 318,595$ 130,183$ 628,078$ - 335,543 - 354,776 - 41,350 - 41,350

41,132 695,488 131,183 1,025,204

2,480 166,359 1,000 169,839 - 10,840 - 10,840

2,480 177,199 1,000 180,679

38,652 - - 38,652 - - - 18,043 - - - 139,358 - 518,289 - 518,289

38,652 518,289 130,183 844,525

41,132$ 695,488$ 131,183$ 1,025,204$

71


COMBINING BALANCE SHEETNONMAJOR CAPITAL PROJECTS FUNDSDECEMBER 31, 2005

ParkDevelopment Street

Projects Improvement

ASSETSCash and pooled investments 2,496,026$ 2,098,071$ Tax increments receivable - - Special assessments receivable - - Intergovernmental receivable - - Loans receivable - - Lease receivable - -

TOTAL ASSETS 2,496,026 2,098,071


Accounts payable 4,710 - Deposits payable - - Contracts payable 44,894 - Deferred revenue - -

Total liabilities 49,604 -

Fund balances:Reserved for committed contracts 29,059 - Reserved for loans receivable - - Reserved for lease receivable - - Unreserved:

Designated for capital improvements 2,417,363 2,098,071

Total fund balances (Deficit) 2,446,422 2,098,071

TOTAL LIABILITIES AND FUND BALANCES 2,496,026$ 2,098,071$

72

Tax Increment Financing Projects Total

4,842,702$ 9,436,799$ 23,032 23,032

245 245 101,850 101,850 13,195 13,195 48,136 48,136

5,029,160 9,623,257

350,001 354,711 10,000 10,000

- 44,894 23,276 23,276

383,277 432,881

3,845 32,904 13,195 13,195 48,136 48,136

4,580,707 9,096,141

4,645,883 9,190,376

5,029,160$ 9,623,257$

73

74



NONMAJOR GOVERNMENTAL FUNDSFOR THE YEAR ENDED DECEMBER 31, 2005

Nonmajor Nonmajor Special Capital

Revenue Project Total

REVENUESTax increments - $ 2,301,416$ 2,301,416$ Franchise taxes 319,025 - 319,025 Gambling taxes 75,559 - 75,559 Special assessments - 283 283 Intergovernmental 91,221 248,222 339,443 Charges for services 2,273,128 11,200 2,284,328 Fines and forfeits 30,302 - 30,302 Interest earnings 12,293 191,738 204,031 Miscellaneous - 575,498 575,498

Total revenues 2,801,528 3,328,357 6,129,885


General government 382,283 - 382,283 Public safety 13,835 - 13,835 Sanitation 2,224,137 - 2,224,137 Community development - 52,699 52,699

Capital outlay:Public safety 19,527 - 19,527 Recreation - 635,652 635,652 Community development - 398,161 398,161

Total expenditures 2,639,782 1,086,512 3,726,294

Excess (deficiency) of revenues overexpenditures 161,746 2,241,845 2,403,591

OTHER FINANCING SOURCES (USES)Transfers in - 25,348 25,348 Transfers out - (1,760,173) (1,760,173) Sale of capital assets - 375,879 375,879

Total other financing sources (uses) - (1,358,946) (1,358,946)

Net change in fund balances 161,746 882,899 1,044,645

FUND BALANCES AT BEGINNING OF YEAR 682,779 8,307,477 8,990,256

FUND BALANCES AT END OF YEAR 844,525$ 9,190,376$ 10,034,901$

COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES

75


NONMAJOR SPECIAL REVENUE FUNDSFOR THE YEAR ENDED DECEMBER 31, 2005

Cable CharitableTelevision Gambling

REVENUESFranchise taxes 319,025$ - $ Gambling taxes - 75,559 Intergovernmental - - Charges for services - - Fines and forfeits - - Interest earnings 664 2,116

Total revenues 319,689 77,675


General government 308,283 74,000 Public safety - - Sanitation - -

Capital outlay:Public safety - -

Total expenditures 308,283 74,000

Excess (deficiency) of revenues over expenditures 11,406 3,675

Net change in fund balances 11,406 3,675

FUND BALANCES (DEFICIT) AT BEGINNING OF YEAR 6,637 135,683

FUND BALANCES AT END OF YEAR 18,043$ 139,358$


76

Police Forfeited Grants Refuse Property Total

- $ - $ - $ 319,025$ - - - 75,559

2,033 89,188 - 91,221 - 2,273,128 - 2,273,128 - - 30,302 30,302 830 6,152 2,531 12,293

2,863 2,368,468 32,833 2,801,528

- - - 382,283 3,667 - 10,168 13,835 - 2,224,137 - 2,224,137

- - 19,527 19,527

3,667 2,224,137 29,695 2,639,782

(804) 144,331 3,138 161,746

(804) 144,331 3,138 161,746

39,456 373,958 127,045 682,779

38,652$ 518,289$ 130,183$ 844,525$

77


NONMAJOR CAPITAL PROJECTS FUNDSFOR THE YEAR ENDED DECEMBER 31, 2005

ParkDevelopment Street

Projects ImprovementREVENUESTax increments - $ - $ Special assessments - - Intergovernmental 37,000 128,398 Charges for services 11,200 - Interest earnings 48,355 44,306 Miscellaneous 575,498 -

Total revenues 672,053 172,704

EXPENDITURES Current:

Community development - - Capital outlay:

Recreation 635,652 - Community development - -

Total expenditures 635,652 -

Excess (deficiency) of revenues over expenditures 36,401 172,704

OTHER FINANCING SOURCES (USES) Transfers in 11,776 13,572 Transfers out - (228,334) Sale of capital assets - -

Total other financing sources (uses) 11,776 (214,762)

Net change in fund balances 48,177 (42,058)

FUND BALANCES (DEFICIT) AT BEGINNING OF YEAR 2,398,245 2,140,129

FUND BALANCES (DEFICIT) AT END OF YEAR 2,446,422$ 2,098,071$


78

Tax Increment Financing Projects Total

2,301,416$ 2,301,416$ 283 283

82,824 248,222 - 11,200

99,077 191,738 - 575,498

2,483,600 3,328,357

52,699 52,699

- 635,652 398,161 398,161

450,860 1,086,512

2,032,740 2,241,845

- 25,348

(1,531,839) (1,760,173) 375,879 375,879

(1,155,960) (1,358,946)

876,780 882,899

3,769,103 8,307,477

4,645,883$ 9,190,376$

79

80


81


INTERNAL SERVICE FUNDS

Internal service funds are used to account for the financing of goods and services provided by one department or activity to other departments or activities of the government on a cost reimbursement basis.

Compensated Absences Fund – The City maintains this fund for the accrued liabilities related to vacation leave and vested sick leave of the various funds.

Self-Insurance Fund – The City established this fund to account for insurance premiums and to provide for larger deductibles on its property and liability insurance coverages. Savings from the insurance premiums are charged to operating funds to finance future insurance deductibles on various claims.


COMBINING STATEMENT OF NET ASSETSINTERNAL SERVICE FUNDSDECEMBER 31, 2005

Compensated Self-Absences Insurance Total

ASSETSCurrent assets:

Cash and cash equivalents 1,332,385$ 486,377$ 1,818,762$ Accounts receivable - - - Other assets - 38,499 38,499

Total current assets 1,332,385 524,876 1,857,261

LIABILITIESCurrent liabilities:

Accounts payable - 60,917 60,917 Compensated absences 80,000 - 80,000 Claims and judgments payable - 55,675 55,675

Total current liabilities 80,000 116,592 196,592

Noncurrent liabilities:Compensated absences 1,252,385 - 1,252,385 Claims and judgments payable - 252,494 252,494

Total noncurrent liabilities 1,252,385 252,494 1,504,879

Total liabilities 1,332,385 369,086 1,701,471

NET ASSETSUnrestricted - 155,790 155,790

Total net assets - $ 155,790$ 155,790$

82


INTERNAL SERVICE FUNDSFOR THE YEAR ENDED DECEMBER 31, 2005


OPERATING REVENUES Employee benefit charges 147,193$ - $ 147,193$ Insurance reimbursements - 288,122 288,122

Total operating revenues 147,193 288,122 435,315

OPERATING EXPENSESSalaries and benefits 171,714 - 171,714 Contractual services - 437,013 437,013

Total operating expenses 171,714 437,013 608,727

Operating income (loss) (24,521) (148,891) (173,412)

NONOPERATING REVENUES (EXPENSES)Interest earnings 24,521 8,374 32,895

Total nonoperating revenues (expenses) 24,521 8,374 32,895

Change in net assets - (140,517) (140,517)

NET ASSETS AT BEGINNING OF YEAR - 296,307 296,307

NET ASSETS AT END OF YEAR - $ 155,790$ 155,790$

COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS

83


COMBINING STATEMENT OF CASH FLOWSINTERNAL SERVICE FUNDSFOR THE YEAR ENDED DECEMBER 31, 2005


INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

CASH FLOWS FROM OPERATING ACTIVITIES:

Cash received from customers 147,192$ 293,745$ 440,937$ Cash paid to suppliers for goods and services - (420,008) (420,008) Cash paid to employees for services (77,658) - (77,658)

Net cash provided by (used in) operating activities 69,534 (126,263) (56,729)

CASH FLOWS FROM INVESTING ACTIVITIES:

Investment earnings 24,521 8,374 32,895

Net increase (decrease) in cash and cash equivalents 94,055 (117,889) (23,834)

CASH AND CASH EQUIVALENTS ATBEGINNING OF YEAR 1,238,330 604,266 1,842,596

CASH AND CASH EQUIVALENTS AT

END OF YEAR 1,332,385$ 486,377$ 1,818,762$

RECONCILIATION OF OPERATING INCOME(LOSS) TO NET CASH PROVIDED BY (USED IN)OPERATING ACTIVITIES

Operating income (loss) (24,521)$ (148,891)$ (173,412)$

ADJUSTMENTS TO RECONCILE OPERATINGINCOME (LOSS) TO NET CASH PROVIDED BY(USED IN) OPERATING ACTIVITIES

Changes in assets and liabilities:(Increase) decrease in accounts receivable - 5,623 5,623 (Increase) decrease in other assets - (5,252) (5,252) Increase (decrease) in accounts payable - 60,917 60,917 Increase (decrease) in compensated absences 94,055 - 94,055 Increase (decrease) in claims and judgments payable - (38,660) (38,660)

Total adjustments 94,055 22,628 116,683

Net cash provided by (used in) operating activities 69,534$ (126,263)$ (56,729)$

84

85


AGENCY FUND

Blaine Area Development Company Fund – This fund accounts for the investments retained by the City for the Blaine Area Development Company. The company is a non-profit organization operating under Section 501(c) of the Internal Revenue Code. It receives government grants designated for financing of small businesses in the Cities of Blaine and Spring Lake Park.


Balance BalanceJanuary 1, December 31,

2005 Additions Deletions 2005

ASSETS

Cash and pooled investments 220,479$ 284,688$ 346,598$ 158,569$

LIABILITIES Due to Blaine Area Development Company 220,479$ 284,688$ 346,598$ 158,569$

STATEMENT OF CHANGES IN ASSETS AND LIABILITIESBLAINE AREA DEVELOPMENT COMPANY AGENCY FUNDFOR THE YEAR ENDED DECEMBER 31, 2005

86

CITY OF BLAINE, MINNESOTA Table 1

GENERAL FUND EXPENDITURES BY FUNCTIONLAST TEN FISCAL YEARS

General Public Public Community Capital DebtYear government safety works Recreation development Unallocated outlay service Total

1996 2,096,569 3,271,105 2,663,825 380,773 781,480 875,845 463,462 - 10,533,059

1997 2,066,823 3,752,162 2,830,745 410,285 918,597 435,403 544,768 - 10,958,783

1998 2,367,521 3,989,312 3,042,926 448,138 1,015,337 447,068 943,676 13,628 12,267,606

1999 2,590,251 4,238,171 2,872,445 458,305 1,160,211 505,542 950,537 782,506 13,557,968

2000 2,821,282 4,451,691 2,997,046 511,555 1,438,855 264,813 1,223,945 974,175 14,683,362

2001 2,714,458 5,363,026 3,817,640 570,196 958,133 347,374 1,184,883 60,854 15,016,564

2002 2,754,108 5,847,882 4,163,477 665,496 1,207,106 335,859 1,479,934 45,234 16,499,096

2003 2,748,434 6,174,152 4,190,906 648,391 1,242,805 491,043 1,053,580 22,684 16,571,995

2004 2,977,464 6,703,045 4,629,913 716,058 1,296,757 345,240 773,667 - 17,442,144

2005 2,968,942 7,293,022 5,338,042 799,742 1,446,538 304,745 9,667 - 18,160,698

$0

$2

$4

$6

$8

$10

$12

$14

$16

$18

$20

Mill

ions

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

General Fund Expenditures by Function - Last Ten Fiscal Years

General Government Public Safety Public Works

Recreation Community Development Unallocated, Capital and Debt

Unaudited 87


GENERAL FUND REVENUES BY SOURCELAST TEN FISCAL YEARS

Licenses Charges FinesProperty Utility and Intergov- for and Miscel-

Year taxes Meter Fee permits ernmental services forfeits Interest laneous Total

1996 4,361,601 - 716,273 3,179,366 1,761,145 240,143 163,874 4,528 10,426,930

1997 4,704,846 - 813,870 3,460,745 2,076,718 240,521 145,564 15,566 11,457,830

1998 5,004,330 137,169 1,083,936 3,545,198 1,965,779 237,096 277,930 4,083 12,255,521

1999 6,181,141 414,645 1,584,999 3,551,158 2,488,345 275,210 (38,559) 20,160 14,477,099

2000 6,843,047 172,429 1,498,670 3,551,739 2,489,619 264,580 459,138 12,103 15,291,325

2001 7,693,504 - 1,879,013 3,670,331 2,658,522 248,850 348,445 13,149 16,511,814

2002 9,360,295 - 1,880,071 2,745,887 2,649,879 247,055 196,997 1,393 17,081,577

2003 9,994,102 - 2,066,967 1,621,983 3,438,174 303,316 97,761 22,875 17,545,178

2004 10,930,653 - 2,402,449 1,649,596 3,666,639 262,138 113,425 24,551 19,049,451

2005 12,132,732 - 2,069,320 1,648,285 3,431,923 257,620 173,261 21,627 19,734,768

$0

$2

$4

$6

$8

$10

$12

$14

$16

$18

$20

Mill

ions

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

General Fund Revenues by Source - Last Ten Fiscal Years

Ad Valorem Taxes Utility Meter Fee Licenses and Permits

Intergovernmental Charges for Services Fines and Forfeits, Interest, Miscellaneous

Unaudited 88


PROPERTY TAX LEVIES AND COLLECTIONSLAST TEN FISCAL YEARS

Percent of Percent of Percent Delinquent total tax Outstanding delinquent

Year of Total Current tax of tax levy tax Total tax collections delinquent taxes tocollection tax levy collections collected collections collections to tax levy taxes tax levy

1996 4,611,950 4,551,402 98.7% 58,806 4,610,208 100.0% 127,474 2.8%

1997 5,003,105 4,924,875 98.4% 50,203 4,975,078 99.4% 187,370 3.7%

1998 5,390,802 5,301,577 98.3% 74,323 5,375,900 99.7% 218,623 4.1%

1999 6,614,398 6,441,315 97.4% 122,717 6,564,032 99.2% 290,126 4.4%

2000 7,129,780 7,039,479 98.7% 194,748 7,234,227 101.5% 205,080 2.9%

2001 8,485,929 8,304,831 97.9% 20,827 8,325,658 98.1% 311,036 3.7%

2002 9,720,421 9,661,238 99.4% 69,202 9,730,440 100.1% 280,369 2.9%

2003 11,259,054 10,921,979 97.0% 110,693 11,032,672 98.0% 359,704 3.2%

2004 12,150,711 12,109,118 99.7% 159,431 12,268,549 101.0% 306,616 2.5%

2005 13,619,801 13,487,228 99.0% 103,430 13,590,659 99.8% 338,343 2.5%

$0

$2

$4

$6

$8

$10

$12

$14

Mill

ions

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Property Tax Collections - Last Ten Fiscal Years

Current Tax Collections Delinquent Tax Collections

Unaudited 89


Totalpercentage

Tax Assessed value assessed of Net taxablecollection Real Personal Estimated estimated assessed

year property property Total market value market value value*

1996 24,983,967 981,638 25,965,605 1,308,088,400 2.0% 24,895,581

1997 26,636,202 1,060,361 27,696,563 1,386,115,300 2.0% 27,470,353

1998 26,292,059 999,127 27,291,186 1,524,527,600 1.8% 27,361,098

1999 27,387,532 613,148 28,000,680 1,872,398,569 1.5% 28,101,569

2000 30,154,536 1,085,856 31,240,392 2,114,107,123 1.5% 31,340,030

2001 35,405,635 1,038,549 36,444,184 2,190,276,200 1.7% 36,625,815

2002 28,727,305 718,693 29,445,998 2,516,493,200 1.2% 29,028,909

2003 33,337,175 762,419 34,099,594 3,030,371,500 1.1% 33,279,912

2004 38,833,016 796,615 39,629,631 3,551,499,400 1.1% 39,022,553

2005 45,989,334 1,127,767 47,117,101 4,053,920,900 1.2% 46,002,230

* Total assessed value and tax capacity after fiscal disparities and captured tax increments. Fiscal disparities law was enacted in 1971by Minnesota State Legislature to equalize the industrial and commercial tax bases of various communities in the metropolitan area.

Source of data: Anoka County Assessor Office and Ramsey County Department of Taxation

ASSESSED VALUE, TAXABLE ASSESSED VALUE, AND ESTIMATED MARKET VALUE OF TAXABLE PROPERTY

LAST TEN FISCAL YEARS

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

$50

Mill

ions

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Assessed Value and Net Taxable Assessed Value - Last Ten Fiscal Years

Assessed Value Net Taxable Assessed Value

Unaudited 90


Tax Collection School DistrictYear City County #11 #12 #16 Miscellaneous Total

1996 18.223 31.036 64.387 - - 6.261 119.907 18.223 31.036 - 63.103 - 6.723 119.085 18.223 31.036 - - 67.583 6.275 123.117

1997 17.828 30.091 55.588 - - 6.146 109.653 17.828 30.091 - 66.000 - 6.480 120.399 17.828 30.091 - - 61.268 6.443 115.630

1998 18.863 30.618 51.824 - - 7.434 108.739 18.863 30.618 - 58.662 - 7.628 115.771 18.863 30.618 - - 59.004 8.053 116.538

1999 23.301 32.265 54.856 - - 8.019 118.441 23.301 32.265 - 64.802 - 8.777 129.145 23.301 32.265 - - 61.111 8.777 125.454

2000 21.762 30.861 51.792 - - 8.337 112.752 21.762 30.861 - 58.491 - 8.753 119.867 21.762 30.861 - - 51.701 7.988 112.312

2001 22.788 28.859 52.281 - - 7.972 111.900 22.788 28.859 - 69.888 - 8.912 130.447 22.788 28.859 - - 39.772 8.912 100.331

2002 37.227 37.976 29.082 - - 6.724 111.009 37.227 37.976 - 37.828 - 7.439 120.470 37.227 37.976 - - 26.055 7.439 108.697

2003 35.479 37.714 26.941 - - 7.517 107.651 35.479 37.714 - 37.467 - 8.317 118.977 35.479 37.714 - - 22.152 8.317 103.662

2004 33.353 35.221 21.050 - - 7.190 96.814 33.353 35.221 - 36.649 - 8.010 113.233 33.353 35.221 - - 21.504 8.010 98.088

2005 31.334 33.080 21.492 - - 7.436 93.342 31.334 33.080 - 37.486 - 8.319 110.219 31.334 33.080 - - 16.118 8.319 88.851

Source of data: Anoka County Assessor Office

PROPERTY TAX RATES - DIRECT AND OVERLAPPING GOVERNMENTS


80.000

90.000

100.000

110.000

120.000

130.000

140.000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Property Tax Rates - Direct and Overlapping Governments - Last Ten Fiscal Years

Total Property Tax - School District #11 Total Property Tax - School District #12 Total Property Tax - School District #16

Unaudited 91


SPECIAL ASSESSMENT COLLECTIONSLAST TEN FISCAL YEARS

Special Special Ratio of Total outstandingassessments assessments collection to special

Year due collected* amount due assessments

1996 1,264,009 1,313,110 103.9% 7,077,288

1997 1,127,587 1,103,184 97.8% 8,186,791

1998 1,255,262 1,348,437 107.4% 6,154,082

1999 997,786 1,089,207 109.2% 5,518,365

2000 936,870 1,076,691 114.9% 4,588,506

2001 788,487 759,683 96.3% 4,903,616

2002 1,313,003 1,342,590 102.3% 3,565,169

2003 623,986 620,540 99.4% 3,416,425

2004 564,053 588,304 104.3% 5,324,524

2005 493,054 473,780 96.1% 4,705,141

* Includes collection of current and delinquent special assessments from the County in the Debt Service and Capital Projects Funds, but does not include prepayments or city billed collections.

85%

90%

95%

100%

105%

110%

115%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Special Assessment Collections - Last Ten Fiscal Years

Unaudited 92


Debt payablefrom tax Ratio of net

increments Cash and bonded debt Net bondedAssessed Gross and non-tax investments Net bonded to assessed debt

Year Population @ value bonded debt revenues on hand debt value per capita

1996 43,670 25,965,605 28,230,000 24,180,000 503,455 3,546,545 13.66% 81.21

1997 44,700 27,696,563 34,080,000 27,220,000 3,470,514 * 3,389,486 12.24% 75.83

1998 46,470 27,291,186 32,560,000 25,125,000 3,530,828 * 3,904,172 14.31% 84.01

1999 48,052 31,240,392 36,380,000 28,990,000 3,602,146 * 3,787,854 12.12% 78.83

2000 44,942 31,240,392 33,450,000 26,155,000 3,612,135 * 3,682,865 11.79% 81.95

2001 46,622 36,444,184 34,125,000 25,365,000 518,374 8,241,626 22.61% 176.78

2002 48,302 29,445,998 29,255,000 20,935,000 660,780 7,659,220 26.01% 158.57

2003 51,236 34,099,594 25,430,000 16,745,000 1,077,426 7,607,574 22.31% 148.48

2004 53,520 39,629,631 28,420,000 20,985,000 1,200,354 6,234,646 15.73% 116.49

2005 56,208 47,117,101 32,985,000 18,810,000 1,340,782 12,834,218 27.24% 228.33

@ 2000 population from census data. All other populations based on estimates from City Planning Department. * Includes escrow funds from GO Fire Improvement Refunding Bonds, Series 1997C

RATIO OF NET GENERAL BONDED DEBT TO ASSESSED VALUE AND NET BONDED DEBT PER CAPITA


0%

5%

10%

15%

20%

25%

30%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Ratio of Net General Bonded Debt to Assessed Value - Last Ten Fiscal Years

$0

$40

$80

$120

$160

$200

$240

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Net Bonded Debt Per Capita - Last Ten Fiscal Years

Unaudited 93


Amount

Estimated market value 4,053,920,900$

Debt limit - 2.00% of estimated market value 81,078,418

AMOUNT OF DEBT APPLICABLE TO DEBT LIMIT

Total bonded debt 32,985,000Less: General obligation improvement bonds 9,710,000 General obligation tax increment financing bonds 9,100,000

Total debt applicable to debt limit 14,175,000

LEGAL DEBT MARGIN 66,903,418$

COMPUTATION OF LEGAL DEBT MARGIN

DECEMBER 31, 2005

Unaudited 94


Percentage City'sG.O. debt Applicable to Share of

Jurisdiction outstanding (1) the City (2) Debt

Direct:

City of Blaine 32,985,000$ 100.00% 32,985,000$

Overlapping:

Anoka County 80,620,000 17.30% 13,947,260

Ramsey County 173,295,000 0.10% 173,295

Ramsey County Library 9,045,000 0.20% 18,090

Independent School District #11-Anoka-Hennepin 177,417,115 12.80% 22,709,391

Independent School District #12-Centennial 84,945,000 17.40% 14,780,430

Independent School District #16-Spring Lake Park 21,875,000 64.50% 14,109,375

Independent School District #621-Mounds View 132,813,495 0.50% 664,067

Independent School District #916-Northeast Metro Intermediate) 1,390,000 4.50% 62,550

Metropolitan Council 35,750,000 1.70% 607,750

Metropolitan Transit District 179,020,000 2.00% 3,580,400

Total Overlapping 896,170,610 70,652,608

Grand Total 929,155,610$ 103,637,608$

(1) The G.O. debt outstanding includes debt which is secured by the authority to levy taxes on real estate.(2) Determined by the portion of the long-term debt which is secured by taxable real estate located within the City of Blaine.Source of data: Information obtained from taxing districts by financial consultant.

COMPUTATION OF DIRECT AND OVERLAPPING DEBT

DECEMBER 31, 2005

Direct and Overlapping Debt - December 31, 2005

City31.83%

Miscellaneous4.04%

School District50.49%

County13.64%

Unaudited 95


Ratio of debt Total service to total Total general fund general fund

Year Principal Interest debt service expenditures expenditures

1996 210,000 291,441 501,441 10,533,059 4.76%

1997 150,000 307,529 457,529 10,958,783 4.17%

1998 165,000 377,921 542,921 12,267,606 4.43%

1999 915,000 415,849 1,330,849 13,557,968 9.82%

2000 1,055,000 413,466 1,468,466 14,683,362 10.00%

2001 350,000 * 291,478 641,478 15,016,564 4.27%

2002 440,000 304,217 744,217 16,499,096 4.51%

2003 910,000 320,299 1,230,299 16,571,995 7.42%

2004 1,250,000 314,271 1,564,271 17,442,144 8.97%

2005 1,310,000 273,728 1,583,728 18,160,698 8.72%

* - excludes $3,180,000 GO Fire Improvement Bonds refunded in 2001.Total debt service excludes general obligation debt paid from special assessments, tax increments, and Enterprise Fund sources.

RATIO OF ANNUAL DEBT SERVICE EXPENDITURES FOR GENERAL BONDED DEBT TO

TOTAL GENERAL FUND EXPENDITURES - LAST TEN FISCAL YEARS

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Ratio of Annual Debt Service Expenditures for General Bonded Debt to Total General Fund Expenditures - Last Ten Fiscal Years

Unaudited 96


REVENUE BOND COVERAGE - PUBLIC UTILITIES FUNDLAST TEN FISCAL YEARS

Net revenuesGross Operating available for Debt service requirements

Year revenues expenses# debt service Principal Interest Total Coverage

1996 5,450,966 3,000,693 2,450,273 235,000 85,472 320,472 7.65

1997 5,644,952 3,103,707 2,541,245 345,000 82,093 427,093 5.95

1998 6,318,815 3,233,618 3,085,197 365,000 65,002 430,002 7.17

1999 6,073,697 3,202,067 2,871,630 385,000 46,419 431,419 6.66

2000 7,121,514 3,384,449 3,737,065 405,000 26,300 431,300 8.66

2001 7,505,457 * 3,591,444 3,914,013 115,000 13,378 128,378 30.49

2002 7,324,680 * 3,806,357 3,518,323 120,000 8,265 128,265 27.43

2003 7,776,780 * 4,365,822 3,410,958 125,000 2,813 127,813 26.69

2004 9,257,269 * 4,369,970 4,887,299 - - - -

2005 9,043,257 * 8,061,686 981,571 - - - -

# Operating expenses exclusive of depreciation. * - Revenues exclusive of capital contributions

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

$4.0

$4.5

$5.0

Mill

ions

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Revenue Bond Coverage - Public Utilities Fund - Last Ten Fiscal Years

Net revenues available for debt service Principal and Interest Payments

Unaudited 97


DEMOGRAPHIC STATISTICS

POPULATION:

Year Population*

1950 1,6941960 7,5701970 20,6401980 28,5581990 38,9752000 44,9422005 56,208

* The 1950, 1960, 1970, 1980, 1990, and 2000 figures are U.S. Census figures. The 2005 figure is provided by the City's Planning Department.

HOUSING:

2005Housing

breakdown Units

Single family 13,774 **Multiple family 4,975 ***Manufactured housing 2,558

Total 21,307

** Includes duplexes. *** Includes quads and six-unit townhouses.

Comparative percentage changes in housing unitsType 1980 1990 2000 2005

Single family 71.1% 65.3% 66.4% 64.7%Multiple family 6.3% 16.4% 19.8% 23.3%Manufactured housing 22.6% 18.3% 13.8% 12.0%

HOUSEHOLD SIZE:

Household Year people/unit Source of estimate

1970 3.79 U.S. Census1980 3.34 U.S. Census1990 2.92 U.S. Census2000 2.82 U.S. Census2005 2.80 City of Blaine Planning Department

0

20

40

60

Thou

sand

s

1950 1960 1970 1980 1990 2000 2005

Population Growth

0%

20%

40%

60%

80%

100%

1980 1990 2000 2005

Comparative Changes in Housing Units

Single family Multiple family Mobile home

0.00

2.00

4.00

1970 1980 1990 2000 2005

Household Size

2005 Housing Unit Breakdown

Single family64.65%

Multiple family23.35%

Mobile home12.00%

Unaudited 98


Construction Estimated New Housing unitYear market value Total permits Total valuation housing units permit valuation

1996 1,308,088,400 1,410 68,201,656 290 31,519,919

1997 1,386,115,300 1,655 78,151,923 311 33,523,646

1998 1,524,527,600 2,274 85,361,195 583 64,084,766

1999 1,872,398,569 2,608 119,232,423 863 95,310,537

2000 2,114,107,123 2,565 109,327,953 564 76,765,799

2001 2,190,276,200 2,612 156,923,877 664 94,622,754

2002 2,516,493,200 2,809 152,657,052 819 112,464,395

2003 3,030,371,500 2,956 160,709,580 816 115,044,234

2004 3,551,499,400 2,742 194,576,933 986 153,012,438

2005 4,053,920,900 2,456 173,540,545 639 108,930,074

Source of data: Anoka County Assessor Office and City Inspections Department.

PROPERTY VALUE AND CONSTRUCTION


$0

$40

$80

$120

$160

$200

Mill

ions

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Property Value and Construction - Last Ten Fiscal Years

Total Valuation New Housing Permit Valuation

Unaudited 99


PRINCIPAL TAXPAYERS

Taxes payable Percentage of 2004 net total net

Taxpayer Type of business tax capacity tax capacity

Glimcher Northtown Venture LLC Shopping Center 1,118,152$ 3.80%

Village of Blaine Grocery Store and Shopping Center 534,418 1.81%

Connexus Energy Utility 330,044 1.12%

Raymen Associates of Blaine Apartment Complex 311,502 1.06%

North Court RE Holdings, Inc. Shopping Center 278,072 0.94%

Target Corporation Retail 265,890 0.90%

Walmart Retail 258,640 0.88%

Individual Commercial/Industrial 248,324 0.84%

Engelsma Ltd. Partnership Commercial/Industrial 245,288 0.83%

Home Depot USA Retail 235,152 0.80%

Total 3,825,482$ 12.98%

Source of data: Anoka County Assessor Office.

0%

1%

1%

2%

2%

3%

3%

4%

4%

5%

5%

Shopping Centers Commercial/Industrial Grocery Stores Multi-family Complexes Utility Retail

Principal Taxpayers Percentage of Total Tax Capacity

Unaudited 100

CITY OF BLAINE, MINNESOTA Table 15Continued

SERVICE EFFORTS AND ACCOMPLISHMENTSMINNESOTA CITIES VS. CITY OF BLAINE PER CAPITA COMPARISONS MINNESOTA OFFICE OF STATE AUDITOR 2001-2004

2001 2002 2003 2004 2001 2002 2003 2004

GOVERNMENTAL FUNDS

REVENUES:

Taxes:Property taxes 233$ 252$ 265$ 285$ 184$ 206$ 224$ 219$ Tax increments 83 58 64 64 41 25 39 38 Franchise taxes 20 19 21 22 5 5 5 5 Sales and other taxes 31 30 30 32 2 2 2 2

Total taxes 367 359 380 403 232 238 270 264

Intergovernmental:Federal 32 34 42 43 5 1 5 5 State 233 261 216 197 115 105 34 33 County 7 7 7 5 2 2 2 2 Other 10 10 11 20 9 11 5 5

Total intergovernmental 282 312 276 265 131 119 46 45

Special assessments 60 64 70 71 36 40 36 35 Licenses and permits 35 36 38 42 41 41 41 41 Charges for services 85 92 94 98 122 112 130 128 Fines and forfeits 10 10 10 11 6 6 7 7 Interest 54 39 22 22 68 32 17 17 Miscellaneous 61 62 54 60 15 17 9 9

Total revenues 954$ 974$ 944$ 972$ 651$ 605$ 556$ 546$

continuedUnaudited 101



2001 2002 2003 2004 2001 2002 2003 2004

GOVERNMENTAL FUNDS (continued)

EXPENDITURES:

Current:Public Safety: Police 138$ 144$ 150$ 157$ 85$ 90$ 90$ 88$ Fire 53 56 56 59 14 14 14 14 Other protection 21 23 20 26 31 33 37 36

Total public safety 212 223 226 242 130 137 141 138

General government 94 96 105 94 73 126 66 65 Streets and highways 81 79 82 85 41 42 39 38 Sanitation 4 4 4 5 45 50 51 50 Health 9 10 9 6 - - - - Culture and recreation 88 97 91 95 36 46 38 37 Airports 2 2 2 2 - - - - Transit 4 4 4 4 - - - - HRA and economic development 54 74 79 77 28 20 30 29 Unallocated 14 14 14 12 21 27 23 22

Total current expenditures 562 603 616 622 374 448 388 379

Capital outlay 375 317 315 320 484 130 125 123 Debt service 198 213 202 207 100 104 89 87

Total expenditures 1,135$ 1,133$ 1,133$ 1,149$ 958$ 682$ 602$ 589$

continuedUnaudited 102



2001 2002 2003 2004 2001 2002 2003 2004

ENTERPRISE FUNDS

Water enterprise:Operating revenues 100$ 99$ 108$ 122$ 55$ 52$ 73$ 98$ Nonoperating revenues 15 14 11 17 7 4 3 3

Total revenues 115 113 119 139 62 56 76 101

Operating expenses 88 88 93 110 43 47 50 48 Nonoperating expenses 6 6 6 8 1 1 - -

Total expenses 94 94 99 118 44 48 50 48

Sewer enterprise:Operating revenues 97 98 97 106 91 89 76 77 Nonoperating revenues 12 12 8 13 11 7 4 3

Total revenues 109 110 105 119 102 96 80 80

Operating expenses 80 85 87 96 66 65 71 73 Nonoperating expenses 5 5 5 6 - 1 - -

Total expenses 85 90 92 102 66 66 71 73

BONDED INDEBTEDNESS

General obligation 149$ 165$ 210$ 227$ 141$ 130$ 118$ 106$ G.O. tax increment 276 256 248 236 342 277 239 207 G.O. special assessments 351 370 379 412 204 157 - 205 G.O. revenue 482 455 472 504 5 3 - -

Total general obligation 1,258 1,246 1,309 1,379 692 567 357 518

Revenue tax increment 59 58 52 56 - - - - Revenue 230 264 268 262 - - - - Other 7 6 8 9 - - - -

Total bonded indebtedness 1,554 1,575 1,638 1,707 692 566 356 356

Refunding indebtedness 367 331 356 350 203 148 76 76

Other long-term debt 193$ 216$ 228$ 210$ 49$ 43$ 56$ 56$

Unaudited 103


MISCELLANEOUS STATISTICSDECEMBER 31, 2005

Date of incorporation 1964Form of government Council-ManagerFiscal year begins January 1Area 34.5 square miles

MUNICIPAL SERVICES AND FACILITIES Number of full-time employees 163Miles of streets 270.36Miles of sanitary sewer 208.92Building permits issued 2,300Police protection: Number of police officers 52Fire protection: Number of volunteers 70 Number of stations 5Water service: Number of residential dwellings with water service 14,928 Average daily residential consumption (gallons) 3,978,167Parks and recreation facilities: Number of parks 61 Total area (acres) 655.90

Unaudited 104

comprehensive annual financial report

Documents

statement of changes

general fund revenues

city of blaine

actual general fund

fund balance budget

individual fund statements

fiscal years90 table

fiscal years93 table