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• GAAP require that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management's Discussion and Analysis (MD&A). This letter of transmittal is designed to complement MD&A and should be read in conjunction with. it. The City of Falcon Heights' MD&A can be found immediately following the report of the independent auditors. PR®F1[~,E ®F 'I'gdE G~IVERNMENT' The City of Falcon Heights, incorporated in 1949, is located near the center of the Minneapolis and St. Paul metropolitan area, in the eastern part of the state. This area is considered to be the major population and economic growth area in the state, and one of the top economic growth areas in the country. The City of Falcon Heights currently occupies a land area of 2.28 square miles and serves a population of 5,600. The City of Falcon Heights is empowered to levy a property tax on both real and personal properties located within its boundaries. While it also is empowered by state statute to extend its corporate limits by annexation, Falcon Heights is a completely developed community and is bordered on all sides by other incorporated communities. The City of Falcon Heights has operated under the council/city administrator form of government since 1974. Policy-making and legislative authority are vested in a city council consisting of the mayor and four council members. The council is responsible, among other things, for passing ordinances, adopting the budget, appointing committees, and hiring the city administrator. The city administrator is responsible for carrying out the policies and ordinances of the council, for overseeing the day-to-day operations of the city government, and for appointing the heads of the • various departments. The council is elected on anon-partisan basis. Council members serve four-year staggered terms, with two council members elected every two years. The mayor is elected:to serve afour-year term. The mayor and all four council members are elected at Iarge. The City of Falcon Heights provides a full range of services, including police and fire protection; the construction and maintenance of highways, streets, and other infrastructZU-e; water and sewer services; and recreational activities and cultural events. The annual budget serves as the foundation for the City of Falcon Heights' financial planning and control. All departments of the City of Falcon Heights are required to submit requests for appropriation to the city administrator during or before the second week in June each year. The city administrator uses these requests as the starting point for developing a proposed budget. ]:n August of each year the city staff submits to the cit3~ council a proposed operating budget for the fiscal year commencing the following January 1. The council is required to hold public hearings on the proposed budget and to adopt a final budget by no later than December ~ 1, the close of the City of Falcon Heights' fiscal year. The appropriated budget is prepared by fund, function (e.g., public safe T police). Trausfers of appropriations within or between departments regt~ur)e the speoial~approval of the city council. Budget-to-actual comparisons are provided in this report for the general fund and each special revenue fund. For the general fund, this comparison is presented on page 33 as part of the basic financial statements. The City had one major special revenue fund in 2003. This major special revenue fund was the Community Development Special Revenue Fund whose budget-to-actual statement is shown on page 39. The non-major special revenue funds' budget- . to-actual schedules are presented on pages 72-76.