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CITY OF FALCON HEIGHTS, NIINNESOTA • MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2003 Proprietary Funds -The City of Falcon Heights' proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. Unrestricted net assets of the sanitary sewer fund at the end of the year amounted to $ 1,519,259, and those for the storm drainage fund amounted to $ 647,516. The total growth in net assets for the sanitary sewer fund was $ 104,320; however, the storm drainage fund experienced a decrease of $ 34,871. The total net asset increase combining all proprietary funds was $ 69,449. Other factors concerning the finances of these two funds have akeady been addressed in the discussion of the City of Falcon Heights' business-type activities. GENERAL FUND BUDGETARY HIGHLIGHTS A reclassification was made in the general fund budget to reflect expenditures made in the fund rather than being transferred to another fund to be spent. During the year, the revenues exceeded budgetary estimates and the actual expenditures were less than the budgetary estimates. CAPITAL ASSET AND DEBT ADMINISTRATION Capital assets -The City of Falcon Heights' investment in capital assets for its governmental • and business-type activities as of December 31, 2003, amounts to $ 6,985,090 (net of accumulated depreciation). This investment in capital assets includes land, buildings and system, improvements other than buildings, machinery and equipment and infrastructure. More detail is available on page 24. The City has elected to use the "Modified Approach" as defined by Governmental Accounting Standards Board (GASB) Statement No. 34 for infrastructure reporting of its streets and alleys. The software program MicroPAVER, which is developed and supported by the US Army Corps of Engineers as a tool of pavement management, will be used to inventory and rate the quality of the pavement on all sections of streets and alleys within the City. MicroPAVER surveys the pavement segments of the City and assigns a Pavement Condition Index (PCI) rating to each. The following scale set up by the City determines a schedule of maintenance, rehabilitation and reconstruction for pavement segments: 100 to 80 ~ Excellent, 79 to 50 ~ Good, 49 to 30 -~ Fair, and 29 to 0 -~ Failed. The goal of the City is to maintain an overall PCI rating above 70. The weighted average of the City's PCI for 2001 was 88, which denotes that the City's streets are in "excellent" condition. This PCI rating demonstrates the City's aggressive pavement rehabilitation and reconstruction efforts. The next rating will be completed in 2004. No major capital asset events occurred during 2003. We did, however, resurface and replace curb and gutter on one of the local streets. This street was one block in length. • 23