Comprehensive Annual Financial Report 12/31/2002

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The Town Center /Civic Center Project Funds were established to account for costs associated with the creation of the "Village ", including: infrastructure, civic buildings and development of the property for commercial use. The Lake /Apollo Drive Improvement Fund was established to account for the costs of upgrading Lake Drive and Apollo Drive east of Lake Drive for the Market Place development. The Twilight Acres /W. Shadow Pond Improvement Fund was established to account for the costs of installing sewer infrastructure in the Twilight Acres area and to install utility and street improvements on West Shadow Ponds Drive. Tax Increment Funds were established to account for projects financed with tax increments. Enterprise Funds Enterprise Funds account for operations that are financed and operated in a manner similar to private business enterprises. The City maintains two enterprise funds. The Water Fund accounts for the operations of the municipal water system. The following table illustrates the operations: 2002 2001 $ Change % Change Operating Revenues $777,978 $865,943 (S87,965) (10.16 %) Operating Expenses 610,751 508,649 102 102 20.07% (Excluding Depreciation) Operating Income (Loss) $167,227 $357,294 (S190,067) (53.20 %) New water rates were implemented in April 2001, and were not changed in 2002. Rates were reconfigured into a tiered structured to provide an incentive to conserve water. The rates were also set to capture system depreciation for future system replacement. Precipitation in 2002 was much higher than the annual average. As a result, less water was consumed for irrigation purposes, resulting in lower water revenues. Continuation of a program to implement a telephone meter reading system resulted in increases in personnel, supply and contractual costs over the previous year. The Sewer Fund accounts for the operations of the municipal sanitary sewer system. The following table illustrates the operations: Operating Revenues Operating Expenses (Excluding Deprecation) Operating Income (Loss) 2002 2001 $ Change % Change $1,112,809 $1,011,983 $100,826 9.96% 645.066 575.379 69.687 12.11% $467,743 $436,604 $$ 31,139 7.13% Sewer rates were increased slightly in 2002, with system depreciation built into the rate for future system replacement. Additional users also contributed to increased revenues for the year. Personnel, contractual service costs, and Metropolitan Council Environmental Services charges for sewage treatment were the primary reasons for the increase in expenses from the previous year. 8 r amino