Blue Earth County, Minnesota

Effectively and Efficiently Delivering Essential Services

County Road 12 Project

The project features 1.8 miles of new roadway and roundabouts at MN Highway 83 and Hoffman Road. This project is being funded by local option transportation sales tax dollars. The tax helps to address the growing need for transportation funding.

Comprehensive Annual Financial Report For the Year Ended December 31, 2018 Comprehensive Annual Financial Report Of Blue Earth County Minnesota

For the Year Ended December 31, 2018

Prepared by the Finance Department Issued June 2019

Blue Earth County 204 South Fifth Street Mankato, MN 56002 JAMESTOWN LIME CAMBRIA MADISON LAKE MANKATO NORTH MANKATO

EAGLE LAKE SKYLINE JUDSON BUTTERNUT MANKATO VALLEY SOUTH BEND LE RAY

LAKE PEMBERTON CRYSTAL

LINCOLN GARDEN CITY RAPIDAN DECORIA MC PHERSON

ST. CLAIR GOOD THUNDER VERNON CENTER

VERNON CERESCO CENTER LYRA BEAUFORD MEDO

DANVILLE

AMBOY MAPLETON

MINNESOTA PLEASANT SHELBY STERLING MAPLETON LAKE MOUND

ESTABLISHED: 1853 FORM OF GOVERNMENT: Board of Commissioners – Administrator AREA: 764 Square Miles COUNTY SEAT: Mankato POPULATION: 64,013 (2010 Census) NUMBER OF TOWNSHIPS: 23 NUMBER OF CITIES: 13

BLUE EARTH COUNTY TABLE OF CONTENTS

Reference Page

INTRODUCTORY SECTION Letter of Transmittal 1 GFOA Certificate of Achievement 8 Organizational Chart 9 List of Principal Officials 10

FINANCIAL SECTION Independent Auditor's Report 11 Management's Discussion and Analysis (Required Supplementary Information) 15

BASIC FINANCIAL STATEMENTS: Government-wide Financial Statements: Statement of Net Position Exhibit 1 25 Statement of Activities Exhibit 2 26 Fund Financial Statements: Balance Sheet-Governmental Funds Exhibit 3 27 Statement of Revenues, Expenditures, and Changes in Fund Balances-Governmental Funds Exhibit 4 28 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities Exhibit 5 29 Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual: General Fund Exhibit 6 30 Public Works Special Revenue Fund Exhibit 7 32 Human Services Special Revenue Fund Exhibit 8 33 County Ditch Special Revenue Fund Exhibit 9 34 Statement of Net Position-Enterprise Proprietary Funds Exhibit 10 36 Statement of Revenues, Expenses, and Changes in Fund Net Position-Enterprise Proprietary Funds Exhibit 11 37 Statement of Cash Flows-Enterprise Proprietary Funds Exhibit 12 38 Statement of Fiduciary Assets and Liabilities-Fiduciary Funds Exhibit 13 40 Notes to the Financial Statements 41

REQUIRED SUPPLEMENTARY INFORMATION: Schedule of Changes in Total OPEB Liability and Related Ratios 74 Schedule of Proportionate Share of Net Pension Liability 75 Schedule of Contributions 76 Notes to the Required Supplementary Information 77

SUPPLEMENTARY INFORMATION: Combining Schedule of Changes in Assets and Liabilities- All Agency Funds Schedule 1 79 Capital Assets Used in the Operation of Governmental Funds: Comparative Schedule by Source Schedule 2 80 Schedule by Function Schedule 3 81 Schedule of Changes by Function Schedule 4 82 Schedule of Intergovernmental Revenue Schedule 5 83 BLUE EARTH COUNTY TABLE OF CONTENTS

Reference Page

FINANCIAL SECTION (Continued) SUPPLEMENTARY INFORMATION (Continued): Schedule of Expenditures of Federal Awards Schedule 6 84 Notes to the Schedule of Expenditures of Federal Awards 86 Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Building and Capital Purchases Fund Schedule 7 87

STATISTICAL SECTION Government-Wide Information: Net Position Table 1 89 Changes in Net Position Table 2 90 Fund Information: Fund Balances of Governmental Funds Table 3 92 Changes in Fund Balances of Governmental Funds Table 4 93 Net Tax Capacity and Estimated Actual Value of Taxable Property Table 5 94 Tax Rates as a Percentage of Net Tax Capacity Table 6 95 Principal Property Taxpayers Table 7 96 Property Tax Levies and Collection Table 8 97 Ratios of Outstanding Debt by Type Table 9 98 Ratios of General Bonded Debt Outstanding Table 10 99 Computation of Direct, Overlapping, and Underlying Bonded Debt-General Obligation Bonds Table 11 100 Legal Debt Margin Information Table 12 101 Demographic and Economic Statistics Table 13 102 Principal Employers Table 14 103 Full Time Equivalent County Government Employees by Function Table 15 104 Operating Indicators by Function Table 16 105 Capital Assets Statistics by Function Table 17 106 INTRODUCTORY SECTION - 1 - but not absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes that: (1) the cost of a control should not exceed the benefits likely to be derived; and (2) the valuation of costs and benefits requires estimates and judgment by management.

Generally accepted accounting principles (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. Blue Earth County’s MD&A can be found immediately following the report of the independent auditors.

Profile of the Government

Blue Earth County was organized in 1853 as a county in the State of Minnesota. It has an area of 764 square miles (488,960 acres) including 23 townships and 13 full and fractional incorporated municipalities. The 2018 population is estimated at 67,892. The County seat, Mankato, is located on the Minnesota River.

Blue Earth County operates under an elected five-member County Board, each member representing a district of the County. The County Board is responsible, among other things, for passing ordinances, adopting the budget, and the hiring of the County’s administrator. The County’s administrator is responsible for carrying out the policies and ordinances of the County Board, for overseeing the day-to-day operations of the government, and for appointing the heads of the various divisions and departments. The County Board is elected on a non-partisan basis. County Board members serve four-year staggered terms.

The County provides a full range of services including public safety and law enforcement; tax assessment and collection; vital statistics and public records; health and human services; highways, parks, public works and planning; environmental management; and recreation and cultural services. The County operates primarily out of five buildings; the Historic Courthouse, Government Center, Justice Center, Public Works Shop, and the Library.

Blue Earth County has one blended component unit, the Blue Earth County Economic Development Authority. It is included in the County’s reporting entity because of the significance of its operational or financial relationship with the County. The EDA’s governing body is substantially the same as the governing body of Blue Earth County and there is a financial benefit or burden relationship between the County and the EDA.

Blue Earth County’s Strategic Plan and financial policies guide the budget process by identifying priorities to be used to help provide a focus for allocating future resources and where appropriate, reallocating existing resources. Blue Earth County’s strategies focus on the following areas:

1) Building the Community – Protecting the Health, Safety and Well-Being of Individuals and Families. 2) Environmental Stewardship – Promoting and Modeling Sustainable Use of Natural Resources. 3) Leadership – Commissioners and Employees Demonstrating Leadership Behavior through Innovation, Communication and Collaboration. 4) Management of Resources and Measurement of Results – Utilizing Best Practices to Effectively and Efficiently Provide Valuable Services and Achieve Expected Results. 5) Run the Business – Investing in Technology and Business Processes to Foster Productivity, Responsiveness and Accessibility to the Community. 6) Develop Employees – Attract, Train, Recognize and Retain Key Talent.

An annual budget is approved by the County Commissioners for all governmental funds. The legal level of budgetary control is at the fund level. In the General, Special Revenue, and Capital Projects Funds, the total Fund appropriation cannot be exceeded without approval by the County Commissioners. Monthly reports are required for these funds which compare budgeted amounts to actual expenditures. The approval of the budget does not mean that funds will or must be spent. Needs are assessed throughout the year and expenditures are approved within the framework of existing budgets and fund availability.

The County maintains a budget for the Enterprise Fund for administrative purposes. This is not a legally mandated budget. Therefore, budgetary comparisons have been omitted from this report.

- 2 - Local Economy

Healthcare, education, the retail/hospitality industry, and agriculture are major players in the local economy and continue to contribute to its stability and diversity. Blue Earth County partners with Regional Economic Development Alliance and Greater Mankato Growth, with the objective of retaining and growing the primary economic base of the Greater Mankato Regional Marketplace through business retention, new enterprise, emerging business development and new business development.

According to the Bureau of Economic Analysis, in 2017 the Mankato-North Mankato Metropolitan Statistical Area (MSA) had a population of 100,939, ranked 353rd in the United States. Per Capita Personal Income (PCPI) was $44,767, ranked 168th in the United States. The 2007-2017 compound annual growth rate of PCPI was 2.7 percent. In 2018, the average unemployment rate (not seasonally adjusted) was 2.5%, still lower in comparison with the state’s average rate of 2.9% and the nation’s average rate of 3.9%. The MSA saw growth in manufacturing jobs in 2018, with increases of 5% year-over-year. For five consecutive years, the area has been listed in the top 40 on Forbes Best Small Places for Business and Careers.

Construction across Mankato continued strong in 2018. Multi-year construction projects happening in downtown continue to progress. A $19 million, seven-story building at the corner of Main and Second streets will include a ground floor restaurant with sidewalk seating, retail shops, office space, a top-floor events center with an outdoor veranda, and a four-level parking ramp. The historic Landmark Center building is planned to be expanded and converted to a boutique hotel which will include a restaurant and banquet center. Next to the library, another tower is going up that will house Prairie Care, which will offer mental health services for adolescents. The City of Mankato has two census tracts designated as Federal Opportunity Zones.

The local trend for developers is strong multifamily housing construction and steady single-family construction. Developers are continuing to build apartments, senior-living units and single-family homes near the new Prairie Winds School on the east side of town. In addition, commercial development is taking place in the area behind Kohl’s. On the northern side of the city near Wickersham, a new subdivision will include apartments and townhomes. Ecumen Pathstone Living is slated to start construction on a four-story complex that will house 24 memory care units and 56 independent living apartments next to Sibley Park.

The sale of existing commercial properties in the area remains fairly strong although several big-box store buildings remain vacant. Federated Insurance purchased the former Verizon call center building for use as a processing center. A large self-storage center is planned for Mankato’s east side that will feature three stories with up to 700 climate-controlled storage units of various sizes. Rihm Kenworth plans to open a 28,000-sqare-foot facility that will include truck sales, leasing, rental, repairs and truck parts sales. A new branch of Pioneer Bank is planned for a high traffic area at the intersection of Victory Drive and Adams Street. The largest industrial project happening is the 87,000-square-foot addition to Johnson Outdoors.

The $24 million Blue Earth County Service Center expansion and parking ramp replacement is expected to be completed in 2020.

Mankato continues to grow as a regional hub for healthcare. The Open Door Health Center in Mankato, which serves those with no insurance or who are underinsured, pursues a “one-stop shop” model of integrated care to treat the patient’s overall health. Open Door also offers family practice medical and comprehensive dental care on two mobile clinics that service the region. Founded in 1916, Mankato Clinic now has 12 sites in five communities in the Mankato region. Mayo Clinic Health System Mankato continues their expansion and renovation plans as part of an ongoing effort to create a major regional health campus in Mankato. The completion of a $65 million hospital surgical suite expansion and a new gastrointestinal endoscopy center followed a $5 million expansion and renovation of the orthopedic and sports clinic.

Blue Earth County is home to several institutions of higher learning including the Minnesota State University- Mankato, Bethany Lutheran College, and Rasmussen Business College. The Mankato campus of MSU was the most substantial economic driver of the 37 state colleges and universities in Minnesota in the prior year with total economic impact of more than $781 million and responsible for more than 6,200 jobs directly or indirectly. The influx of students has contributed to an increased need for rental housing as well as construction of retail businesses within walking distance of campuses. In 2018 Rasmussen College moved to a new Mankato campus that includes large, high-tech classrooms, new computer labs and simulation equipment, updated health sciences and nursing labs as well as expanded student learning and faculty spaces.

- 3 - Visit Mankato continues to develop the visitor economy in greater Mankato by promoting greater Mankato as a premier destination for conventions, tournaments and tourism. Mankato’s Performing Arts Center offers a quality space for concerts, theater shows and other events. The Performing Arts Center hall can be cleared to provide the big area of floor space that conventions are looking for, and it can be used as a stand-alone facility for conventions or trade shows or in conjunction with the space in the rest of the civic center complex for larger events. The 4,000 seat Vetter Stone Amphitheater in Riverfront Park and the Mankato marathon also draw many visitors, generating substantial economic impact. In 2018, an estimated 111 conventions and sporting events were held generating $19.5 million in estimated economic impact.

The retail/hospitality sector in Mankato continues to be an immense draw for people across southern Minnesota and northern Iowa. The River Hills Malls estimates 8.5 million visitors a year. Larger retail construction projects include a 4,700-square-foot Casey’s gas station on the north side of the city and a 7,700-square-foot Kwik Trip on the east side.

Blue Earth County also ranks among the top production areas in Minnesota for corn, soybeans, and hogs, and is a significant producer of beef, milk, and canning crops. A large number of industries are directly related to agriculture, including soybean processing, ethanol production, feed mills, equipment manufacturing, and seed companies.

Long-term Financial Planning

Blue Earth County’s Strategic Plan is a written plan of action that aligns resources to address the most critical issues facing the County. The County’s financial plan is a mechanism to ensure that the County is financially able to meet these immediate and long-term service objectives. The following countywide goals provide direction for overall County government, as well as divisional operating plans:

1. Enhance public trust and promote a positive attitude toward County governance by involving informed citizens in results-oriented public policy formulation. 2. Capitalize on social, economic, and governmental change by building sustainable partnerships with public, private and non-profit organizations. 3. Identify and seek long-term solutions to evolving public policy and contemporary governance issues. 4. Review and prioritize programs and services and create strategies for long-term funding and cost efficiencies.

The long-range plans and policies of the County are reflected in the two-year operating budget and six-year capital investment plan. By using its resources wisely, the County ensures adequate funding for the services, public facilities, and infrastructure necessary to meet the community’s present and future needs. By setting forth operating principles which employ balanced and fair revenue policies, maintain appropriate financial capacity for present and future needs, and promote opportunities for partnering with citizens and other public entities, we minimize the cost of government and reduce financial risk.

Relevant Financial Policies

Blue Earth County has adopted financial management policies in order to allow for the planning of adequate funding of services desired by the public, to manage County finances wisely, and to carefully account for public funds. The financial management policies include: fund balance policies, debt management policies, investment policies, credit card policies, capital asset policies, budget and significant accounting policies. The County’s policy on cash flow states that at the end of each fiscal year, the County will maintain spendable fund balance in the General Fund in a range equal to 35%-50% of the subsequent year’s budgeted General Fund operating expenditures. In addition to cash flow needs this accommodates emergency contingency concerns. The percentage of unassigned General Fund balance at December 31, 2018, in relation to the 2019 expenditure budget is 55%. Since property tax payments are received by the County in installments in May and November, the County needs adequate cash reserves in order to avoid short-term borrowing to finance operations.

The primary objectives, in priority order, of the County’s Investment Policy are safety, liquidity and yield. Cash temporarily idle during the year is invested in interest bearing checking and savings accounts, money market accounts, certificates of deposit, obligations of the U.S. Treasury and government agencies to maximize interest earnings on all funds. The County only invests in instruments that are authorized under Minnesota Statutes Chapter 118A. Investment income will be allocated to the general fund pursuant to Minnesota Statute 385.07. The average investment income return for 2018 on investments was 2.0%.

- 4 -

Major Initiatives Overview Blue Earth County is comprised of rural communities and agricultural areas, recreational lakes and river corridors, and the expanding regional center of Mankato, its County seat. Industries such as education, health care, retail, manufacturing, and agriculture all contribute to the continued growth of the County. This puts additional pressure on Blue Earth County programs and services to handle changes in population, growth, and demographics - all factors that affect the future financial positioning of the organization.

Across all departments there is increased demand for services, caseloads (human services, probation and office of the county attorney), public safety calls, jail space, licensing, records, and infrastructure such as roads and bridges. To address this service demand, additional staffing either has or will be added across departments. Looking ahead, staffing will be needed especially in the departments of County Attorney, Community Corrections, Taxpayer Services, Sheriff’s Office, and Human Services.

The County has identified several major initiatives that fall within the organization’s overall mission to effectively and efficiently deliver essential services to its citizens while taking into consideration current and future needs of its multi-faceted and varying communities.

Budget Stability Primary sources of funding for Blue Earth County programs and services, most of which are mandated by State and Federal agencies, is often unpredictable and volatile from budget to budget depending on the outcome of legislative sessions. Blue Earth County continues to advocate, educate, and work with State and Federal legislators to build greater consistency in budgeting predictability from year to year. The County also works diligently each year to manage and set forth a balanced budget that helps keep the burden off property taxes. In addition to budget stability, fiscal responsibility remains a core value and ongoing initiative to all Blue Earth County Departments as they manage their individual budgets in putting together the overall County budget.

Priority Areas Key priority areas include public safety (including probation, prosecution, jail staffing and dispatch), core human services (including mental health and child protective services), transportation improvements, and technology. Additionally, organizational values encompass agility, effectiveness, efficiency, empathy, equal access, ethical behavior, respect, transparency, and accountability across departments.

Public Safety Public Safety is a core priority for Blue Earth County, which consists of department areas within the criminal justice system that include Probation, County Attorney (prosecution), and the Sheriff’s Office (including the jail).

Areas of the criminal justice system (along with the State Court system) are seeing higher volumes of clients coming through the system. Jail population levels have significantly risen with the average daily population increasing from 81 (in 2009 when the facility opened) to 111 today.

Departments within the criminal justice system, along with Human Services, are working together to find ways to address the new trends and continual rise in jail population for the County. A groundbreaking jail diversion program known as the “Yellow Line Project” has shown promise in terms of inmate outcomes and cost savings. This joint- effort program between Human Services, Sheriff’s Office, Community Corrections, Office of the County Attorney and community partners is intended to frontload services ahead of the ‘yellow line,’ the space between the pre- booking area and the intake area of the jail. The goal is for law enforcement and individuals to be able to consider alternatives for those who have mental health or chemical health problems. This project has garnered interest from other counties in Minnesota and around the nation.

The County Attorney’s Office was awarded a grant to help establish a Children’s Advocacy Center in Mankato. These centers offer a safe place for children, teens, and vulnerable adults who may have experienced sexual abuse, physical abuse, sexual exploitation, or witnessed a violent crime. They are person-centered facilities where a team of law enforcement, child protection, prosecution, mental health, medical, and victim advocacy professionals work together to investigate allegations of abuse, help victims heal from abuse, and hold offenders accountable. Coordinated efforts have continued towards the formation of a Children’s Advocacy Center which will be spun off to a private non-profit organization.

- 5 - Human Services The Blue Earth County Human Services Department comprises roughly 1/3 of the overall Blue Earth County budget and is the largest department within the organization based on staffing, programs, and services provided to citizens. Human Services continues to see increased caseloads across divisions within the service areas. The department has been heavily impacted by the Affordable Care Act/MnSure systems that follow Federal and State program guidelines. There have been a great deal of technology issues and a lack of resources provided to support the data systems used in the department. Human Services hopes for a viable solution that resolves the technology and system challenges that have placed a great deal of strain on the department.

Another key element with Human Services includes working with Federal and State agencies to move towards more administration simplification in the realm of financial assistance and to streamline eligibility requirements across multiple programs to help the department better assist clients and allow staff to save time, resources, and create greater efficiencies. Additionally, Human Services is often watching and waiting when it comes to legislative actions and what those decisions mean to key line items in the budget.

Continued cost shifts from the State for mandated services have also placed additional burdens on the department’s budget.

Transportation Infrastructure Roads, bridges, and parks are an integral part of the quality of life and vitality for Blue Earth County. The County is responsible for the maintenance of more than 730 miles of roads within its boundaries. It is also known for having the most miles of river in the State, which equates to more than 200 bridges throughout its cities and rural areas. Large highway infrastructure expenditures and undertakings are comprised of road improvement projects, bridge replacements, road maintenance, and trail upkeep and park investments.

Multiple significant road project investments are slated over the next few years. A multi-year project on County Road 1 is being completed in numerous stages; County Road 90 to Mankato (to be completed in 2019), and County Road 9 to County Road 90. These updates will bring much needed improvements to the connection from the centrally located Good Thunder region to Mankato.

Construction projects for 2019 include County Road 10 from Good Thunder to the Blue Earth River, CSAH 14 from TH 30 to CSAH 4, a roundabout at the intersection of CSAH 17 and Haefner Drive and a number of small bridge replacements and routine maintenance projects.

Technology Technology is an integral part of how Blue Earth County operates and provides services to its citizens and the public. Every department utilizes technology in some capacity with new systems and tools constantly emerging to foster greater efficiencies for both internal processes and external customers.

Blue Earth County has continued to invest in its Information Technology (IT) Department to support systems and the ever-growing needs for technology use among departments. Malware protection is a key element in the IT Department and investments in the latest automatic response technology continue to safeguard County computers.

Main continued IT investments include implementation of Office 365 across the organization. Technology is a crucial piece to how the County does business and throughout the departments there are several projects recently completed or on the docket. One main undertaking for IT will be coordinating new technology needs for the expansion underway of the Blue Earth County Government Center. Efforts will include networking and wiring for conference rooms, work stations, wireless technology, and security cameras to name a few.

The Blue Earth County website continues to be a main tool in sharing information with the public and for allowing citizens to conduct County business online at their convenience. The County’s goal is to offer as much information and as many resources to the public as possible.

Broadband availability to all residents and businesses of Blue Earth County is an emerging effort for the IT Department. Working with the Blandin Foundation, the IT Department will be conducting a needs assessment and pursuing potential funding resources to assist with expanding broadband’s reach in the county.

Capital Projects Blue Earth County owns and operates five main County buildings with a handful of other satellite facilities such as the Household Hazardous Waste Facility, Ponderosa Landfill, and Highway Department truck shops in outlying communities.

- 6 -

A major capital initiative includes the remodel and expansion of the Blue Earth County Government Center along with the addition of a new parking ramp. Added space needs for staff within the Historic Courthouse and Government Center was identified in a large, comprehensive study that was conducted over the last few years. An expansion to the Blue Earth County Government Center will provide needed space, but also allow for departments to better organize staff, which will help serve the public more efficiently as well as foster more collaboration throughout County departments. The Government Center will serve as a one-stop public service center for many county services once the building project is complete.

The County remains proactive in operating its facilities in the most efficient manner to save taxpayer dollars and resources. Facility performance is monitored by staff and tracked by benchmarking programs. The Blue Earth County Justice Center operates as a silver LEED-certified building and both the Historic Courthouse and Government Center are designated as being in the top 25 percent of energy efficient buildings through the Energy Star program.

Awards and Acknowledgements

The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to Blue Earth County for its comprehensive annual financial report for the fiscal year ended December 31, 2017. In order to be awarded a Certificate of Achievement, a government unit must publish an easily readable and efficiently organized comprehensive annual financial report, whose contents conform to program standards. Such reports must satisfy both generally accepted accounting principles and applicable legal requirements.

A Certificate of Achievement is valid for a period of one year only. Blue Earth County has received a Certificate of Achievement for the last thirty-one consecutive years (fiscal years 1987-2017). We believe our current report continues to meet the Certificate of Achievement program requirements and we are submitting it to the GFOA to determine its eligibility for another certificate.

The preparation of this report on a timely basis could not have been accomplished without the efficient and dedicated services of the entire staff of the Finance Department. We would also like to thank the members of the County Board of Commissioners for their interest and support in planning and conducting the financial operations of the County in a responsible and progressive manner. The County’s excellent financial status is a tribute to that involvement.

Respectfully submitted,

Lisa Malinski

Lisa Malinski Finance Director

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State Oversight Includes MnDot, DHS, MPCA, DNR, State Auditor, DOR, DOC, Secretary of State

Blue Earth County Constituency

County Board Attorney • Recieves information and feedback Sheriff from citizen committees

County Administrator

Human Public Community Environmental Taxpayer Veteran’s Info Physical Library Extension Finance Services Works Corrections Services Services Services Technology Plant Director Director Director Director Director Director Director Director Director Director Director

- 9 - BLUE EARTH COUNTY LIST OF PRINCIPAL OFFICIALS

TERM OFFICE NAME EXPIRES

COMMISSIONERS

1st District Colleen Landkamer Jan. 2023 2nd District Vance Stuehrenberg Jan. 2023 3rd District Mark Piepho Jan. 2021 4th District Will Purvis Jan. 2021 5th District Kip Bruender Jan. 2021

COUNTY OFFICERS Elected Attorney Pat McDermott Jan. 2019 Sheriff Brad Peterson Jan. 2019

Appointed County Administrator Robert Meyer Indefinite Human Services Director Phil Claussen Indefinite Public Works Director Ryan Thilges April 2020 Community Corrections Director Josh Milow Indefinite Taxpayer Services Director Mike Stalberger Indefinite Environmental Services Director Mike Stalberger Indefinite Extension Director Kia Harries Indefinite Finance Director Lisa Malinski Indefinite Veteran’s Services Director Michael McLaughlin Indefinite Information Technology Director Karri Harvey Indefinite Physical Plant Director Tim Edwards Indefinite Library Director Kelly McBride Indefinite Human Resources Director Laura Elvebak Indefinite County Assessor Mark Manderfeld Dec. 2020

- 10 - FINANCIAL SECTION

STATE OF MINNESOTA OFFICE OF THE STATE AUDITOR

SUITE 500 (651) 296-2551 (Voice) 525 PARK STREET (651) 296-4755 (Fax) JULIE BLAHA SAINT PAUL, MN 55103-2139 [email protected] (E-mail) STATE AUDITOR 1-800-627-3529 (Relay Service)

INDEPENDENT AUDITOR’S REPORT

Board of County Commissioners Blue Earth County Mankato, Minnesota

Report on the Financial Statements

We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of Blue Earth County, Minnesota, as of and for the year ended December 31, 2018, and the related notes to the financial statements, which collectively comprise the County’s basic financial statements, as listed in the table of contents.

Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the Blue Earth County Economic Development Authority, a blended component unit, which is both a major fund and 26 percent, 21 percent, and 24 percent, respectively, of the assets, net position, and revenues of the business-type activities. Those statements were audited by other auditors whose report thereon has been furnished to us, and our opinion, insofar as it relates to the amounts included for the Economic Development Authority Enterprise Fund, is based solely on the report of the other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An Equal Opportunity Employer

- 11 - An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the County’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the County’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Opinions In our opinion, based on our audit and the report of the other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of Blue Earth County as of December 31, 2018, and the respective changes in financial position and, where applicable, cash flows thereof and the respective budgetary comparisons of the General Fund, Public Works Special Revenue Fund, Human Services Special Revenue Fund, and County Ditch Special Revenue Fund for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Emphasis of Matter – Change in Accounting Principle As discussed in Note 1E. to the financial statements, in 2018, the County adopted new accounting guidance by implementing the provisions of Governmental Accounting Standards Board (GASB) Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, which represents a change in accounting principles. Our opinion is not modified with respect to this matter.

Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis and Required Supplementary Information as listed in the table of contents be presented to supplement the basic financial statements. Such information, although not part of the basic financial statements, is required by the GASB, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

- 12 - Supplementary Information Our audit for the year ended December 31, 2018, was conducted for the purpose of forming opinions on the financial statements that collectively comprise Blue Earth County’s basic financial statements. The Supplementary Information as listed in the table of contents for the year ended December 31, 2018, is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The Supplementary Information has been subjected to the auditing procedures applied in the audit of the basic financial statements for the year ended December 31, 2018, and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Supplementary Information is fairly stated, in all material respects, in relation to the basic financial statements as a whole for the year ended December 31, 2018.

We also previously audited, in accordance with auditing standards generally accepted in the United States of America, the basic financial statements of Blue Earth County as of and for the year ended December 31, 2017 (not presented herein), and have issued our report thereon dated May 16, 2018, which contained unmodified opinions on the respective financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information. The Comparative Schedule by Source of Capital Assets Used in the Operation of Governmental Funds and the Schedule of Changes by Function of Capital Assets Used in the Operation of Governmental Funds for the year ended December 31, 2017, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the 2017 financial statements. The Comparative Schedule by Source of Capital Assets Used in the Operation of Governmental Funds and the Schedule of Changes by Function of Capital Assets Used in the Operation of Governmental Funds have been subjected to the auditing procedures applied in the audit of the 2017 basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare those financial statements or to those financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Comparative Schedule by Source of Capital Assets Used in the Operation of Governmental Funds and the Schedule of Changes by Function of Capital Assets Used in the Operation of Governmental Funds are fairly stated, in all material respects, in relation to the basic financial statements as a whole for the year ended December 31, 2017.

Other Information The Introductory and Statistical Sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements for the year ended December 31, 2018, and, accordingly, we do not express an opinion or provide any assurance on them.

- 13 - Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated June 6, 2019, on our consideration of Blue Earth County’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of Blue Earth County’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Blue Earth County’s internal control over financial reporting and compliance. It does not include the Blue Earth County Economic Development Authority, which was audited by other auditors.

JULIE BLAHA GREG HIERLINGER, CPA STATE AUDITOR DEPUTY STATE AUDITOR

June 6, 2019

- 14 - BLUE EARTH COUNTY MINNESOTA Management’s Discussion and Analysis (Unaudited) December 31, 2018

The Financial Management of Blue Earth County offers readers of Blue Earth County’s financial statement this narrative overview and analysis of the financial activities of Blue Earth County for the fiscal year ended December 31, 2018. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal and the notes to the financial statements.

Financial Highlights  The assets and deferred outflows of resources of Blue Earth County exceeded its liabilities and deferred inflows of resources at the close of the most recent fiscal year by $398.7 million (net position). Of this amount, $75.0 million (unrestricted net position) may be used to meet the government’s ongoing obligations to citizens and creditors.  The government’s total net position increased by $27.2 million (7.3%) in comparison with the prior year after restatement. The reason for this change is stated in the Government-wide Financial Analysis.  As of December 31, 2018, the County governmental funds reported combined ending fund balances of $111.5 million, an increase of $6.7 million from 2017. Nonspendable and restricted fund balances were $17.6 million of total fund balance or 16%. These fund balances are not available for appropriation because of constraints placed on the use of these funds. The remaining fund balances of $93.9 million or 84.2% are unrestricted and classified as either committed, assigned or unassigned.  At the end of the current fiscal year, the General Fund reported a total fund balance of $31.8 million, an increase of $3.6 million or 12.9% from the previous year.  Blue Earth County’s total bonded debt increased $8.1 million during the year. The County issued $10 million in General Obligation Capital Improvement Plan bonds and made payments of $1.9 million during the year.

Overview of the Financial Statements This discussion and analysis are intended to serve as an introduction to Blue Earth County’s basic financial statements. Blue Earth County’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 Blue Earth County’s finances, in a manner similar to a private-sector business.

The Statement of Net Position presents information on all of Blue Earth County’s assets, deferred outflows of resources, liabilities and deferred inflows of resources, with the difference between the four reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of Blue Earth County is improving or deteriorating.

The Statement of Activities presents information showing how the government’s net position changed during the most recent fiscal year. All changes in net position 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 result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave).

Both of the government-wide financial statements distinguish functions of Blue Earth County 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 cost through user fees and charges (business-type activities). The governmental activities of Blue Earth County include general government, public safety, health and welfare, highways and streets, culture and recreation, environmental services, conservation of natural resources, and economic development. The business-type activities of Blue Earth County include the Ponderosa Landfill and the Economic Development Authority.

The government-wide financial statements include not only Blue Earth County itself (known as the primary government), but also a legally separate Economic Development Authority, EDA. The EDA, although legally separate, functions for all practical purposes as a department of Blue Earth County, and therefore has been included as an integral part of the primary government.

The government-wide financial statements can be found on pages 25-26 of this report.

- 15 - BLUE EARTH COUNTY MINNESOTA Management’s Discussion and Analysis (Unaudited) December 31, 2018

Fund Financial Statements. A fund is a grouping of related accounts used to maintain control over resources that have been segregated for specific activities or objectives. Blue Earth County uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of Blue Earth County can be divided into three broad categories: governmental funds, proprietary funds, and fiduciary funds.

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 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 the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.

Within the governmental funds Blue Earth County maintains three fund types: General, Special Revenue, and Capital Projects. 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, Public Works Fund, Human Services Fund, County Ditch Fund, and Building and Capital Purchases Fund, all of which are considered to be major.

Blue Earth County adopts an annual appropriated budget for its five major governmental funds. Budgetary comparison statements have been provided as part of the basic financial statements for the general fund and special revenue funds and as part of the supplementary information for the building and capital purchases fund to demonstrate compliance with their budgets. The basic governmental fund financial statements can be found on pages 27-34 of this report.

Proprietary Funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. Blue Earth County uses enterprise funds to account for the Ponderosa Landfill (Landfill) and the Blue Earth County Economic Development Authority (EDA), its blended component unit.

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 Ponderosa Landfill fund (a major fund) and the EDA, reported as a major fund. The basic proprietary fund financial statements can be found on pages 36-39 of this report.

Fiduciary Funds. Fiduciary funds (Agency Funds) are used to account for assets held by Blue Earth County as an agent for individuals, private organizations, other governments or other funds. Agency funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. In addition, the agency funds are not reflected in the government-wide financial statements because those resources are not available to support Blue Earth County’s programs. The basic fiduciary fund financial statements can be found on page 40 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 41-73 of this report.

Other Information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning Blue Earth County’s pensions and other postemployment benefits to its employees. Required Supplementary information can be found on pages 74-78. Other information including schedules on various financial aspects of the County can be found in the Supplementary Information section of this report found on pages 79-87.

- 16 - BLUE EARTH COUNTY MINNESOTA Management’s Discussion and Analysis (Unaudited) December 31, 2018

Government-wide Financial Analysis As noted earlier, net position may serve over time as a useful indicator of a government’s financial position. In the case of Blue Earth County, assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $398.7 million at the close of 2018. This is an increase of $27.2 million or 7.3% over the prior fiscal year after restatement. At January 1, 2018, Net Position was restated for a change in account principle GASB Statement No. 75 “Accounting and Financial Reporting for Postemployment Benefits Other Than Pension” (Note 1E.).

Net investment in capital assets of $301 million (e.g., land and permanent easements, land improvements, buildings and building improvements, leasehold improvements, personal property, intangibles, infrastructure, and construction in progress, less any related debt used to acquire assets that is still outstanding) represents the largest portion of net position (75.5%). Blue Earth County uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although Blue Earth County’s investment in its 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. Capital assets increased $22.2 million in 2018. The majority of this change can be attributed to a $14.6 million increase in infrastructure, $8.7 million increase in construction in progress, $1.2 million increase in land and permanent easements, offset by decrease in buildings and building improvements of $1.2 million.

Restricted net position (resources that are subject to external restrictions on how they may be used) accounts for 5.7% and $22.7 million of Blue Earth County’s net position in 2018 compared to 5.1% in the prior year. Restricted net position increased by $3.5 million from the prior year.

The remaining balance of unrestricted net position, $75.0 million accounts for 18.8% of total net position and may be used to meet the government’s ongoing obligations to citizens and creditors.

At the end of the current fiscal year, Blue Earth County is able to report positive balances in all three categories of net position, both for the government as a whole, as well as for its separate governmental activities. The same situation held true for the prior fiscal year.

Additional details are outlined in the table, Blue Earth County Changes in Net Position, and the discussion that follows.

Blue Earth County's Net Position

Governmental Business-type Activities Activities Total 2018 2017 restated 2018 2017 2018 2017 restated

Current and other assets $ 139,672,632 $ 128,393,175 $ 10,298,906 $ 8,629,073 $ 149,971,538 $ 137,022,248 Capital assets 314,396,158 291,567,902 9,667,328 10,291,223 324,063,486 301,859,125 Total assets 454,068,790 419,961,077 19,966,234 18,920,296 474,035,024 438,881,373 Deferred Outflow s of Resources 8,468,401 12,330,159 - - 8,468,401 12,330,159 Long-term liabilities outstanding 59,218,615 56,668,264 6,049,056 5,707,174 65,267,671 62,375,438 Other liabilities 6,039,731 5,770,633 300,915 409,950 6,340,646 6,180,583 Total liabilities 65,258,346 62,438,897 6,349,971 6,117,124 71,608,317 68,556,021 Deferred Inflow s of Resources 12,212,564 11,141,742 - - 12,212,564 11,141,742 Net position: Net investment in capital assets 293,441,157 280,349,370 7,557,556 8,055,687 300,998,713 288,405,057 Restricted 22,670,193 19,163,634 - - 22,670,193 19,163,634 Unrestricted 68,954,931 59,197,593 6,058,707 4,747,485 75,013,638 63,945,078 Total net position, as restated $ 385,066,281 $ 358,710,597 $ 13,616,263 $ 12,803,172 $ 398,682,544 $ 371,513,769

- 17 - BLUE EARTH COUNTY MINNESOTA Management’s Discussion and Analysis (Unaudited) December 31, 2018

Governmental Activities. Governmental activities increased Blue Earth County’s net position by $26.4 million, thereby accounting for 97% of the total growth in the net position of Blue Earth County. Total revenues for governmental activities increased $11.9 million (12.9%) in 2018.

Changes in general revenues were attributable to the following: • Property taxes collected increased $2.7 million (8.5%) from the prior year. The County levied a 7.99% increase for taxes payable 2018. • Transportation sales tax increased $0.3 million from the prior year. This was implemented in 2016 and is a 1/2 percent countywide local option transportation sales and use tax to address growing transportation needs throughout the County. • Investment income increased $1.3 million (120.1%) due to an increase in fair market of investments and an overall more favorable investing environment. • Grants and contributions not restricted to specific programs increased $0.3 million and other gifts and contributions and miscellaneous sources increased by $0.3 million.

Blue Earth County Changes In Net Position

Governmental Business-type Activities Activities Total 2018 2017 2018 2017 2018 2017 Revenues: Program Revenues: Charges for Services $ 14,191,637 $ 15,932,305 $ 3,453,791 $ 3,486,877 $ 17,645,428 $ 19,419,182 Operating grants and contributions 39,170,248 30,232,937 599,143 539,908 39,769,391 30,772,845 Capital grants and contributions 2,895,158 3,089,810 14,801 41,875 2,909,959 3,131,685 General revenues: Property taxes 34,824,826 32,104,467 - - 34,824,826 32,104,467 Mortgage registry and deed tax 72,409 70,148 - - 72,409 70,148 Transportation sales tax 6,259,239 5,934,167 - - 6,259,239 5,934,167 Gifts and contributions 36,575 88,668 - - 36,575 88,668 Investment Income 2,346,146 1,065,872 3,932 3,275 2,350,078 1,069,147 Grants and contributions not restricted to specific programs 3,453,895 3,169,311 64,812 65,634 3,518,707 3,234,945 Miscellaneous 1,231,164 855,667 239,112 98,439 1,470,276 954,106 Total Revenues 104,481,297 92,543,352 4,375,591 4,236,008 108,856,888 96,779,360 Expenses: General government 16,567,070 14,454,413 - - 16,567,070 14,454,413 Public safety 13,496,280 15,165,119 - - 13,496,280 15,165,119 Health and w elfare 24,087,966 28,555,006 - - 24,087,966 28,555,006 Highw ays and streets 13,268,236 10,352,360 - - 13,268,236 10,352,360 Culture and recreation 2,104,339 2,154,028 - - 2,104,339 2,154,028 Environmental services 2,396,919 2,477,033 - - 2,396,919 2,477,033 Conservation of natural resources 4,384,102 4,666,403 - - 4,384,102 4,666,403 Economic development 253,366 165,827 - - 253,366 165,827 Unallocated interest on long-term debt 508,646 656,236 - - 508,646 656,236 Landfill - - 2,392,723 3,145,246 2,392,723 3,145,246 EDA - - 1,095,467 1,123,800 1,095,467 1,123,800 Total Expenses 77,066,924 78,646,425 3,488,190 4,269,046 80,555,114 82,915,471 Change in Net Position before Special Item 27,414,373 13,896,927 887,401 (33,038) 28,301,774 13,863,889 and Transfers Special item (Note 1D. 16) (1,110,318) - - - (1,110,318) - Transfers 51,629 136,856 (74,310) (136,856) (22,681) - Change in Net Position 26,355,684 14,033,783 813,091 (169,894) 27,168,775 13,863,889 Net Position - January 1 358,710,597 347,592,086 12,803,172 12,973,066 371,513,769 360,565,152 Net Position - December 31, as restated $ 385,066,281 $ 358,710,597 $ 13,616,263 $ 12,803,172 $ 398,682,544 $ 371,513,769

- 18 - BLUE EARTH COUNTY MINNESOTA Management’s Discussion and Analysis (Unaudited) December 31, 2018

Program revenues increased $7 million from the prior year. Changes in program revenues resulted from the following: • General government operating grants and contributions increased by $.2 million due to funding for the Child Advocacy Center and capital grants. • Health and welfare charges for services increased $1.1 million and operating grants and contributions decreased $4.1 million mainly due to the assignment of the Adult Mental Health Initiative service contract to the South Central Community Based Initiative. • Highways and streets operating grants and contributions increased $12.5 million mainly due to CSAH 1 turn- back funds, and capital grants and contributions decreased $.3 million from the prior year due to fluctuations in road projects and the funding of those projects. • Public Safety charges for services decreased by $.1 million. Operating grants and contributions increased by $.2 million mainly due to increases in funding for Community Corrections Act subsidy and peace officer training. • Conservation of natural resources charges for services decreased $2.7 million primarily from an decrease in special assessments from ditch projects.

Expenses and Program Revenues - Governmental Activities

Interest on long-term debt Economic development Conservation of natural resources Environmental services Culture and recreation Highways and streets Health and welfare Public safety General government

Millions - 5 10 15 20 25 30

Program Revenue Expenses

Revenue by Source - Governmental Activities Gifts and contributionsCharges, for services, 0.0% 13.6% Transportaion Sales Investment income, Tax, 6.0% 2.2%

Property taxes, 33.3%

Operating grants and contributions, 37.5%

Grants and Other, 1.2% contributions not restricted, 3.3% Mortgage registry and Capital grants and deed tax, 0.1% contributions, 2.8%

- 19 - BLUE EARTH COUNTY MINNESOTA Management’s Discussion and Analysis (Unaudited) December 31, 2018

Business-type Activities. In 2018 business-type activities account for 3% of Blue Earth County’s overall net position. Business-type activities increased Blue Earth County’s net position by $.8 million.

The Landfill fund’s net position increased by $.9 million or 8.8%. In 2018, the Landfill fund showed an operating income of $.8 million. Blue Earth County has contracted with Ponderosa Management Company to operate the landfill through a series of multi-year contracts since the County purchased the landfill in 1996. The Landfill fund’s revenues consist primarily of charges for services (95.2%) which decreased 1.3% from the prior year. Expenses in the Landfill decreased $.8 million from the prior year. Contract services decreased by $.3 million due to a reevaluated management contract from the prior year. Landfill closure and postclosure expense decreased $.2 million, depreciation decreased by $.2 million, and other services and charges decreased by $.05 million.

The EDA component unit showed an overall decrease in net position of $.05 million or 1.7%. The EDA’s revenues are largely intergovernmental revenues from HUD grants and rental charges. The EDA’s revenues were insufficient to cover expenses during the year. The EDA draws down funding from HUD, for the Capital Fund Program based upon allowable program expenses. The EDA saw increases in program revenue of $.05 million, and a slight decrease in expenses of $.03 million. The financial outlook of the EDA remains stable. There are no restrictions, limitations, or commitments that significantly affect the availability of fund resources for future use.

Expenses and Program Revenue - Business-Type Activities

3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 - Landfill EDA

Expenses Program Revenue

Revenue by Source- Business-Type Activities Capital Grants and contributions 0.3% Other 5.5%

Charges for Services Operating Grants and 78.9% contributions 13.7% Grants and contributions not restricted to specific Investment Income programs 0.1% 1.5%

- 20 - BLUE EARTH COUNTY MINNESOTA Management’s Discussion and Analysis (Unaudited) December 31, 2018

Financial Analysis of the Government’s Funds As noted earlier, Blue Earth County uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements.

Governmental Funds. The focus of Blue Earth County governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing Blue Earth County’s financing requirements. In particular, unassigned 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 December 31, 2018, the County’s total fund balance in the governmental funds reported was $111.5 million an increase of $6.7 million (6.4%) from 2017. Of this total amount, $93.9 million or 84% constitutes spendable fund balance, categorized as either committed, assigned or unassigned. Committed fund balance is approved by the County Board by resolution for contractual agreements that will be satisfied with existing fund balance resources, fund balance in the health insurance program, Emergency Management per MN Statute 12.26 with the amount determined by the County Administrator, advances to Public Works and county ditches, and building and capital requests according to the County’s Capital Improvement Plan. The remainder of fund balance is restricted or nonspendable to indicate that it is not available for appropriation because of constraints placed on the use of these funds. Information on restricted funds can be found on page 61 in the notes to the financial statements of this report.

The General Fund is the chief operating fund of Blue Earth County. At the end of the current fiscal year, spendable fund balance of the General Fund was $19.3 million, compared to $15.9 million in 2017. As a measure of the General Fund’s liquidity, it may be useful to compare both unassigned fund balance and total fund balance to total fund expenditures. The unassigned fund balance of the General Fund was equal to 60.4% of expenditures, while total fund balance represented 116% of expenditures.

In 2018, the fund balance of Blue Earth County’s General Fund increased by $3.6 million or 12.9%. General Fund revenues exceeded expenditures by $4.1 million before transfers and other financing sources. Revenue increased by $4 million overall. Increases were seen in property taxes of $2.2 million, investment income of $1.2 million, intergovernmental revenue of $.6 million and miscellaneous revenue of $.1 million, offset by a decrease in charges for service of $.1 million. Increases in intergovernmental revenue were seen in Program Aid $.3 million, Public Safety Resources $.2 million and Water and Soil Resources $.1 million. Expenditures in the fund decreased $8.9 million or 24.5% during the year. Debt service costs decreased $11.4 million from the prior year. The Public Project Lease Revenue bonds of 2007 were defeased in 2017. General Government expenditures increased $1.8 million. Administrative services changes included increased health insurance costs and property and casualty insurance expenditures. The License Center saw increased costs due to election year expenses and the addition of a part-time license center specialist position. Building and Maintenance saw an increase due to special assessments for angled parking along Fifth Street. The County Attor- ney’s office added a new assistant county attorney position and continue to pass through funding to the Child Advocacy Center. In addition, Public Safety expenditures increased $.6 million.

The Public Works Fund had an increase in fund balance after increase (decrease) for inventories of $4.4 million or 66.9%. Revenues increased $8.8 million or 38.1% mainly due to increases in intergovernmental revenue of $8.2 million, transportation sales tax of $.3 million, and miscellaneous revenues of $.4 million offset by decreases in gifts and contributions of $.1 million. Expenditures increased $7.3 million or 35% overall. The majority of this change $6.8 million was due to timing of road projects, but other notable changes include a $.4 million increase in work on the Rapidan Dam as well as $.2 million in additional capital spending. Transfers in include funds for deferred equipment, abatement proceeds, and park funding.

The fund balance of the Human Services Fund increased $.5 million during the current fiscal year, an increase of 3.8%. Revenues decreased $2.5 million or 7.5%. Intergovernmental revenues decreased $3.6 million. In 2018 the County assigned its interest in the state contract to provide services under the Adult Mental Health Initiative to the South Cen- tral Community Based Initiative special item (Note 1D. 16). Other changes included increases in Property taxes of $.3 million and charges for services of $.9 million, offset by decreases in miscellaneous revenue of $.1 million. Expendi- tures decreased $3.8 million or 11.7% mainly due to the change in the Adult Mental Health Initiative offset by the addition of six new staff.

- 21 - BLUE EARTH COUNTY MINNESOTA Management’s Discussion and Analysis (Unaudited) December 31, 2018

The County Ditch Fund has a total fund balance of $(.1) million at the end of 2018, a decrease of $2.7 million. Reve- nues increased by $.3 million or 12.9%. Special assessments increased $.4 million due to various projects. The decrease of expenditures was only $.08 million in 2018. Project costs decreased by $.4 million while debt service costs increased $.3 million.

The Building and Capital Purchases Fund had a total fund balance of $56.2 million at the end of the current fiscal year, an increase of $.9 million. Revenue increased $.1 million mainly due to an increase in intergovernmental revenue. In 2018 the County was awarded $.1 million for a voting equipment grant on behalf of the Secretary of State. The grant was used with matching county dollars to purchase tabulation, assistive voting and electronic roster equipment. Ex- penditures for capital outlay increased $9.3 million. In 2018 the county issued $8.9 million General Obligation Capital Improvement Bonds to fund various capital projects countywide. A major capital initiative includes the remodel and expansion of the Blue Earth County Government Center along with the addition of a new parking ramp.

Proprietary Funds. Blue Earth County proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail.

Net investment in capital assets amounts to $7.6 million of total net position of $13.6 million or 55.5%. This category of net position decreased $.5 million or 6.2% mainly due to the completion of cell construction at the landfill. Other factors concerning the finances of these two funds have already been addressed in the discussion of Blue Earth County’s business-type activities.

General Fund Budgetary Highlights Differences between the original budget and the final amended budget in the General Fund can be summarized as follows: • Increases in Intergovernmental Revenue and expenditures relating to the Child Advocacy Center for County Attor- ney. • Decreases in contracts and special assessment payments of $.5 million in General Government. • Increases in other financing sources and environmental services expenditures of $.1 million for the Agricultural Best Management Practices Loan Program. • Increase in Interest and fiscal charges due to issuance of General Obligation Capital Improvement Bonds. • Increase in Economic Development expenditures due to the Blue Earth County Childcare Forgivable Loan Program which is intended to serve as funds to expand or improve the availability of childcare in small cities and townships across Blue Earth County.

Differences between the final amended budget and actual amounts can be summarized as follows: • Property taxes had a positive variance of $.2 million with the final budget. • Intergovernmental revenue had a positive variance of $.1 million. • Charges for services had a $.1 million positive variance due to the Environmental Services Paintcare program to recycle leftover, unwanted paint. • Investment Income had a $1.5 million positive variance. • Miscellaneous revenue had a $.1 million positive variance due to various reasons including commission revenue for the jail and sale of land. • Administrative Services expenditures had a positive variance of $.2 million mainly due to self insured health expenditures resulting in lower than expected costs. • Public Safety expenditures had a positive variance of $.1 million mainly due to temporary salary and benefit savings due to unfilled positions. • Transfers out had a negative variance of $.2 million. The capital fund received an increased transfer of interest income due to issuance of capital improvement bonds. The Ponderosa dedicated long-term trust fund for closure and post-closure expense received an increased transfer based on the annual report submitted to the Minnesota Pollu- tion Control Agency meeting the requirements of solid waste management rules.

Capital Asset and Debt Administration Capital Assets. Blue Earth County’s investment in capital assets for its governmental and business-type activities as of December 31, 2018, amounts to $324.1 million (net of accumulated depreciation/amortization). This investment in capital assets includes land and permanent easements, land improvements, buildings and building improvements, leasehold improvements, personal property, intangibles, infrastructure, and construction in progress. The total increase in Blue Earth County’s investment in capital assets for the current fiscal year was $22.2 million or 7.4%.

- 22 - BLUE EARTH COUNTY MINNESOTA Management’s Discussion and Analysis (Unaudited) December 31, 2018

Major capital asset events during the current fiscal year included the following: • Net increase in construction in progress for governmental activities of $8.7 million. Outstanding construction in progress includes $5.9 million for new parking ramp and $3.9 Government Center building addition. • Net increase in infrastructure for governmental activities of $14.6 million, includes additions of $8.7 million for CASH 12 and $3.4 million for CSAH 14. • Net increase in land and permanent easements for governmental activities of $1.2 million is mainly due to the ac- quirement of right of way for CSAH 1, 12, 14, 41, and 52 as well as County roads 109, 111, and 144. • Net decrease in building and building improvements for governmental activities of $.7 million, includes $.5 million in additions for security systems at the Justice Center, offset by $.1 million in decreases and depreciation of $1.1 million. • Capital assets for business-type activities decreased $.6 million. The landfill saw increases of $.1 million in construction in progress, land improvements and personal property. The EDA saw a decrease in construction in progress and an increase in leasehold improvements of $.1 million. These increases were offset by depreciation of $.8 million.

Additional information on Blue Earth County’s capital assets can be found in note 6 on pages 54-55 of this report.

Blue Earth County Capital Assets (Net)

Governmental Business-type activities activities Total 2018 2017 2018 2017 2018 2017 Land and permanent easements 46,206,568 45,055,433 873,214 873,214 $ 47,079,782 $ 45,928,647 Construction in progress 20,272,614 11,543,251 28,578 96,080 20,301,192 11,639,331 Land improvements 1,589,620 1,763,638 1,319,638 1,602,507 2,909,258 3,366,145 Building and building improvements 37,622,424 38,645,938 5,739,229 5,906,189 43,361,653 44,552,127 Leasehold improvements - - 803,910 799,987 803,910 799,987 Personal property 4,674,524 5,010,674 902,759 1,013,246 5,577,283 6,023,920 Intangibles 319,688 443,874 - - 319,688 443,874 Infrastructure 203,710,720 189,105,094 - - 203,710,720 189,105,094 Total $ 314,396,158 $ 291,567,902 $ 9,667,328 $ 10,291,223 $ 324,063,486 $ 301,859,125

Long-term Debt. At the end of the current fiscal year, Blue Earth County had total bonded debt outstanding of $29 million. In 2018 the county issued $8.9 million of General Obligation Capital Improvement Plan Bonds to fund various capital improvement projects countywide. The overall change in bonded debt from the start of the year is $8.1 million.

Current and future County tax levies are used to finance general obligation bonds and are paid from the General Fund. Special assessment bonded debt will be repaid from special assessments levied on benefited property from the County Ditch Special Revenue Fund.

Blue Earth County received a “AA+” General Obligation rating from S & P in 2018. State statutes limit the amount of general obligation debt a county can incur to no more than 3% of the market value of taxable property in the County. The current debt limitation for Blue Earth County is $255.3 million which is significantly in excess of Blue Earth County’s outstanding general obligation debt.

Blue Earth County has several loans outstanding with the Minnesota Pollution Control Agency for funding Clean Water Projects which will be repaid from special assessments. The County also has a Minnesota Cleanup Revolving Loan with the Minnesota Department of Employment and Economic Development for the abatement of asbestos at the Nich- ols building. Blue Earth County has an agreement with Vine Faith in Action who purchased the building from the Coun- ty for repayment of the DEED loan. The County entered into a loan agreement with the Minnesota Department of Agri- culture in 2014 for environmental impact projects which will be repaid from special assessments. Loans payable decreased 2% from the prior year. The EDA outstanding loan balance of $2.1 million for financing the Breckenridge Townhomes project is unchanged from the prior year.

Additional information on Blue Earth County’s long-term debt can be found in note 9 on pages 57-60 of this report.

- 23 - BLUE EARTH COUNTY MINNESOTA Management’s Discussion and Analysis (Unaudited) December 31, 2018

Blue Earth County Long-term Bonded Debt

Governmental Activities 2018 2017 General obligation bonds 17,095,000 9,015,000 Plus unamortized premium 1,790,121 765,376 Total General obligation bonds 18,885,121 9,780,376 Special assessment debt w ith governmental commitment 9,769,000 10,707,000 Plus unamortized premium 372,328 402,785 Total Special assessment bonds 10,141,328 11,109,785

Total $ 29,026,449 $ 20,890,161

Economic Factors and Next Year’s Budgets and Rates • The average unemployment rate for Blue Earth County for 2018 was 2.5%, which is a decrease from a rate of 3.0% from the prior year. This is lower in comparison with the state’s average rate of 2.9% and the nation’s average rate of 3.9%.

• The United States GDP Growth Rate advanced 2.9%. The most since 2015, and above 2.2% in 2017. Unemploy- ment is forecast to continue at the natural rate. The Federal Reserve foresees no interest rate hikes in 2019.

• The EDA property vacancy rate is 3.7%. This is a increase from 2.1% last year. This is considered to be very low.

• Blue Earth County property tax per capita ranked the 15th lowest out of 87 counties.

• A significant portion of the County’s budget is used to provide programs and services mandated by the State or Federal governments. State and federal funding continues to be unpredictability for these mandated services due to the outcome of legislative sessions. Blue Earth County continues to advocate, educate and work with State and Federal legislators to build greater consistency in budgeting predictability from year to year. • Priority areas in the budget are : Building the Community – Protecting the Health, Safety and Well-Being of Individuals and Families. Environmental Stewardship – Promoting and Modeling Sustainable Use of Natural Resources. Leadership – Commissioners and Employees Demonstrating Leadership Behavior through Innovation, Commu- nication and Collaboration. Management of Resources and Measurement of Results – Utilizing Best Practices to Effectively and Efficiently Provide Valuable Services and Achieve Expected Results. Run the Business – Investing in Technology and Business Processes to Foster Productivity, Responsiveness and Accessibility to the Community. Develop Employees – Attract, Train, Recognize and Retain Key Talent. All of these factors were considered in preparing Blue Earth County’s budget for the 2018 fiscal year.

On December 19, 2017 the Blue Earth County Board of Commissioners approved the 2018 budget. The property tax levy of $34,751,280 is 7.99% more than 2017. Most of this increase is due to increase in employee and benefit costs.

A Budget and Economic Forecast released February 2019, by the Minnesota Department of Management and Budget shows a reduced surplus for the FY 2020/2021 biennium of $1.05 billion for the Minnesota’s budget. The forecast reflects reduced revenues coming from individual income tax. Governor Tim Walz says the State of our State is strong in his first State of State address.

Requests for Information This financial report is designed to provide a general overview of the Blue Earth County’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 financial information should be addressed to the Finance Department, P.O. Box 8608, Mankato, MN 56002-8608 or contact us via email at [email protected] or visit our web site at www.blueearthcountymn.gov.

- 24 - BASIC FINANCIAL SECTION BLUE EARTH COUNTY Exhibit 1 STATEMENT OF NET POSITION DECEMBER 31, 2018

Primary Government Governmental Business-Type Activities Activities Total Assets Cash and Investments $ 111,162,577 $ 6,676,824 $ 117,839,401 Taxes Receivable-Delinquent 666,810 - 666,810 Special Assessments Receivable -Delinquent 52,184 - 52,184 Accounts Receivable 359,472 374,056 733,528 Accrued Interest Receivable 283,673 - 283,673 Notes Receivable -Current 71,401 - 71,401 Due from Other Governments 12,791,997 27,205 12,819,202 Prepaid Items 417,150 22,498 439,648 Inventories 912,657 - 912,657 Restricted Assets Cash Security Deposits - 22,678 22,678 Cash Family Self Sufficiency Deposits - 12,809 12,809 Cash Other - 172,758 172,758 Cash held by Fiscal Agent 38,472 38,472 Cash Long-Term Dedicated Funds - 2,901,606 2,901,606 Special Assessments Receivable -Noncurrent 12,813,942 - 12,813,942 Notes Receivable -Noncurrent 140,769 50,000 190,769 Capital Assets not being depreciated: Land and Permanent Easements 46,206,568 873,214 47,079,782 Construction in Progress 20,272,614 28,578 20,301,192 Capital Assets (net of accumulated depreciation/amortization): Land Improvements 1,589,620 1,319,638 2,909,258 Buildings and Building Improvements 37,622,424 5,739,229 43,361,653 Leasehold Improvements - 803,910 803,910 Personal Property 4,674,524 902,759 5,577,283 Intangibles 319,688 - 319,688 Infrastructure 203,710,720 - 203,710,720 Total Assets 454,068,790 19,966,234 474,035,024 Deferred Outflows of Resources Deferred Other Postemployment Benefits Liability 309,388 - 309,388 Deferred Pension Outflows 8,159,013 - 8,159,013 Total Deferred Outflows of Resources 8,468,401 - 8,468,401 Liabilities Accounts Payable 1,598,458 61,936 1,660,394 Salaries Payable 1,064,373 3,790 1,068,163 Contracts Payable 2,445,151 - 2,445,151 Accrued Interest Payable 293,615 - 293,615 Due to Other Governments 594,592 23,898 618,490 Unearned Revenue 43,542 3,046 46,588 Security Deposits Payable - 22,678 22,678 Family Self Sufficiency Deposits Payable - 12,809 12,809 Other Current Liabilities - 172,758 172,758 Accrued Closure Payable - 3,939,344 3,939,344 General Obligation Bonds Payable (due within one year) 2,118,583 - 2,118,583 General Obligation Special Assess. Bonds Payable (due within one year) 979,457 - 979,457 Loan Payable (due within one year) 161,429 - 161,429 Compensated Absences (due within one year) 1,359,258 - 1,359,258 Compensated Absences (due in more than one year) 1,811,391 - 1,811,391 Loan Payable (due in more than one year) 877,251 2,109,712 2,986,963 General Obligation Bonds Payable (due in more than one year) 16,766,538 - 16,766,538 G. O. Special Assess. Bonds Payable (due in more than one year) 9,161,871 - 9,161,871 Other Postemployment Benefits Liability 4,175,647 - 4,175,647 Net Pension Liability 21,807,190 - 21,807,190 Total Liabilities 65,258,346 6,349,971 71,608,317 Deferred Inflows of Resources Deferred Property Tax Inflow 121,871 - 121,871 Deferred Inflow on Refunding 125,820 - 125,820 Deferred Pension Inflows 11,964,873 - 11,964,873 Total Deferred Inflows of Resources 12,212,564 - 12,212,564 Net Position Net Investment in Capital Assets 293,441,157 7,557,556 300,998,713 Restricted for: General Government 846,275 - 846,275 Public Safety 383,111 - 383,111 Environmental Services 7,587,337 - 7,587,337 Conservation of Natural Resources 3,668,231 - 3,668,231 Economic Development 775,064 - 775,064 Culture and Recreation 393,481 - 393,481 Solid Waste 596,355 - 596,355 Road Projects 6,764,049 - 6,764,049 Debt Service 1,216,552 - 1,216,552 Unspent Grant Revenues 439,738 - 439,738 Unrestricted 68,954,931 6,058,707 75,013,638 Total Net Position $ 385,066,281 $ 13,616,263 $ 398,682,544 The notes to the financial statements are an integral part of this statement.

- 25 - BLUE EARTH COUNTY Exhibit 2 STATEMENT OF ACTIVITIES FOR THE YEAR ENDED DECEMBER 31, 2018

Net (Expense) Revenue and Changes Program Revenues in Net Position Functions/Programs Operating Capital Grants Primary Government Primary government: Charges for Grants and and Governmental Business-type Governmental activities: Expenses Services Contributions Contributions Activities Activities Total General Government $ 16,567,070 $ 1,757,647 $ 450,593 $ 100,333 $ (14,258,497) $ - $ (14,258,497) Public Safety 13,496,280 802,263 2,182,684 204,352 (10,306,981) - (10,306,981) Health and Welfare 24,087,966 6,838,672 13,397,323 - (3,851,971) - (3,851,971) Highways and Streets 13,268,236 226,665 22,453,809 2,590,473 12,002,711 - 12,002,711 Culture and Recreation 2,104,339 222,983 38,586 - (1,842,770) - (1,842,770) Environmental Services 2,396,919 1,415,803 615,253 - (365,863) - (365,863) Conservation of Natural Resources 4,384,102 2,927,604 32,000 - (1,424,498) - (1,424,498) Economic Development 253,366 - - - (253,366) - (253,366) Unallocated Interest on Long-Term Debt 508,646 - - - (508,646) - (508,646) Total governmental activities 77,066,924 14,191,637 39,170,248 2,895,158 (20,809,881) - (20,809,881)

Business-type activities: Landfill 2,392,723 3,169,581 - - - 776,858 776,858 EDA 1,095,467 284,210 599,143 14,801 - (197,313) (197,313) Total business-type activities 3,488,190 3,453,791 599,143 14,801 - 579,545 579,545

Total primary government $ 80,555,114 $ 17,645,428 $ 39,769,391 $ 2,909,959 (20,809,881) 579,545 (20,230,336)

General revenues: Property Taxes 34,824,826 - 34,824,826 Mortgage Registry and Deed Tax 72,409 - 72,409 Transportation Sales Tax 6,259,239 - 6,259,239 Gifts and Contributions 36,575 - 36,575 Investment Income 2,346,146 3,932 2,350,078 Grants and contributions not restricted to specific programs 3,453,895 64,812 3,518,707 Miscellaneous 1,231,164 239,112 1,470,276 Special item, (Note 1D. 16) (1,110,318) - (1,110,318) Transfers 51,629 (74,310) (22,681) Total general revenues, special item, and transfers 47,165,565 233,546 47,399,111 Change in net position 26,355,684 813,091 27,168,775 Net Position - January 1, as previously reported 361,625,869 12,803,172 374,429,041 Restatement, (Note 1E.) (2,915,272) - (2,915,272) Net Position - January 1, as restated $ 358,710,597 $ 12,803,172 $ 371,513,769 Net Position - December 31 $ 385,066,281 $ 13,616,263 $ 398,682,544

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

- 26 - BLUE EARTH COUNTY Exhibit 3 BALANCE SHEET GOVERNMENTAL FUNDS DECEMBER 31, 2018

Building and Total Public Human County Capital Governmental General Works Services Ditch Purchases Funds Assets Cash and Investments $ 31,080,591 $ 11,495,813 $ 11,368,327 $ 2,797,133 $ 54,420,713 $ 111,162,577 Taxes Receivable-Delinquent 350,869 98,390 160,737 - 56,814 666,810 Special Assessments Receivable-Delinquent - - - 52,184 - 52,184 Accounts Receivable 160,505 13,097 185,857 - 13 359,472 Accrued Interest Receivable 283,673 - - - - 283,673 Due from Other Funds 15,920 10,752 - - - 26,672 Due from Other Governments 290,704 9,808,038 2,644,310 29,308 19,637 12,791,997 Advances to Other Funds 1,352,259 - - - 2,976,155 4,328,414 Prepaids 417,150 - - - - 417,150 Inventories - 912,657 - - - 912,657 Special Assessments Receivable-Noncurrent 638,183 - - 12,175,759 - 12,813,942 Notes Receivable 199,265 - - - 12,905 212,170 Total Assets $ 34,789,119 $ 22,338,747 $ 14,359,231 $ 15,054,384 $ 57,486,237 $ 144,027,718

Liabilities Accounts Payable $ 812,657 $ 132,489 $ 420,110 $ 87,490 $ 145,712 $ 1,598,458 Salaries Payable 594,798 114,547 355,028 - - 1,064,373 Contracts Payable - 926,462 - 478,414 1,040,275 2,445,151 Due to Other Funds 10,516 64 16,092 - - 26,672 Due to Other Governments 252,937 9,730 322,174 9,751 - 594,592 Unearned Revenue 43,542 - - - - 43,542 Advances from Other Funds - 1,973,072 - 2,355,342 - 4,328,414 Total Liabilities 1,714,450 3,156,364 1,113,404 2,930,997 1,185,987 10,101,202

Deferred Inflows of Resources Unavailable Revenue 539,515 86,895 386,385 - 43,678 1,056,473 Unavailable Revenue-Special Assessments 638,183 - - 12,227,943 - 12,866,126 Unavailable Revenue-Intergovernmental - 8,179,339 233,834 - 7,072 8,420,245 Deferred Property Tax Inflow 66,529 16,256 29,421 - 9,665 121,871 Total Deferred Inflows of Resources 1,244,227 8,282,490 649,640 12,227,943 60,415 22,464,715

Fund Balance Nonspendable 1,493,028 912,657 - - - 2,405,685 Restricted 11,000,672 524,946 - 2,462,634 1,212,241 15,200,493 Committed 2,758,859 6,228,693 - - 55,027,594 64,015,146 Assigned - 3,233,597 12,596,187 - - 15,829,784 Unassigned 16,577,883 - - (2,567,190) - 14,010,693 Total Fund Balance 31,830,442 10,899,893 12,596,187 (104,556) 56,239,835 111,461,801 Total Liabilities, Deferred Inflows of Resources and Fund Balance $ 34,789,119 $ 22,338,747 $ 14,359,231 $ 15,054,384 $ 57,486,237

Amounts reported to governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. 314,396,158 Deferred Outflows resulting from County's contributions paid to OPEB and PERA subsequent to the measurement date and certain pension changes being amortized in the Statement of Net Position are not reported in the funds. 8,468,401 Long-term liabilities, including bond payables and net pension liability, are not due and payable in the current period and therefore are not reported in the funds. (59,512,230) Deferred Inflows from gain on refunding and resulting from certain pension changes being amortized in the Statement of Net Position are not reported in the funds. (12,090,693) Other long-term assets are not available to pay for current-period expenditures and, therefore, are unavailable in the funds. 22,342,844 Net position of governmental activities $ 385,066,281

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

- 27 - BLUE EARTH COUNTY Exhibit 4 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED DECEMBER 31, 2018

Building and Total Public Human County Capital Governmental General Works Services Ditch Purchases Funds Revenues Property Taxes $ 19,166,368 $ 4,565,694 $ 8,258,472 $ - $ 2,714,569 $ 34,705,103 Mortgage Registry and Deed Tax 72,409 - - - - 72,409 Special Assessments 191,489 1,072 - 2,282,497 - 2,475,058 Licenses and Permits 342,615 - - - - 342,615 Transportaion Sales Tax - 6,247,557 - - - 6,247,557 Intergovernmental 5,117,476 20,275,360 15,003,038 32,000 333,124 40,760,998 Charges for Services 2,892,601 410,627 7,019,310 - 221,907 10,544,445 Fines and Forfeitures 355,294 - 200 - - 355,494 Investment Income 2,267,103 - - - - 2,267,103 Miscellaneous 1,146,974 465,861 111,976 8,400 57,069 1,790,280 Gifts and Contributions 31,492 - - - 115 31,607 Total Revenues 31,583,821 31,966,171 30,392,996 2,322,897 3,326,784 99,592,669

Expenditures Current General Government 11,570,838 - - - - 11,570,838 Public Safety 10,204,090 - 3,143,099 - - 13,347,189 Health and Welfare - - 25,553,761 - - 25,553,761 Highways and Streets - 26,220,453 - - - 26,220,453 Culture and Recreation 1,346,710 578,378 - - - 1,925,088 Environmental Services 2,432,655 - - - - 2,432,655 Conservation of Natural Resources 252,983 - - 3,764,251 - 4,017,234 Economic Development 253,366 - - - - 253,366 Intergovernmental - 415,201 - - - 415,201 Debt Service Principal Retirement 937,703 - - 938,000 28,656 1,904,359 Interest and Fiscal Charges 440,448 - - 358,313 - 798,761 Capital Outlay - 1,220,629 74,271 - 12,325,776 13,620,676 Total Expenditures 27,438,793 28,434,661 28,771,131 5,060,564 12,354,432 102,059,581

Excess of Revenues Over (Under) Expenditures 4,145,028 3,531,510 1,621,865 (2,737,667) (9,027,648) (2,466,912) Other Financing Sources (Uses) Transfers In 340,398 776,324 1,946 47,969 89,850 1,256,487 Transfers Out (990,777) (32,976) (48,261) - (132,844) (1,204,858) Loans 135,523 - - - - 135,523 Bonds Issued - - - - 8,890,000 8,890,000 Premium on Bonds - - - - 1,109,787 1,109,787 Total Other Financing Sources (Uses) (514,856) 743,348 (46,315) 47,969 9,956,793 10,186,939

Special Item Transfer of Operations (Note 1D. 16) - - (1,110,318) - - (1,110,318)

Net Change in Fund Balance 3,630,172 4,274,858 465,232 (2,689,698) 929,145 6,609,709

Fund Balance - January 1 28,200,270 6,528,946 12,130,955 2,585,142 55,310,690 104,756,003

Increase (Decrease) in Inventories - 96,089 - - - 96,089

Fund Balance - December 31 $ 31,830,442 $ 10,899,893 $ 12,596,187 $ (104,556) $ 56,239,835 $ 111,461,801

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

- 28 - BLUE EARTH COUNTY Exhibit 5 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED DECEMBER 31, 2018

Amounts reported for governmental activities in the statement of activities are different because:

Net change in fund balances - total governmental funds $ 6,609,709

Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of capital assets is allocated over their estimated useful lives and reported as depreciation expense.

Capital outlays reported as expenditures $ 30,965,728 Net book value of capital assets disposed of (336,266) Depreciation expense (7,801,206) The amounts by which capital outlays exceeded depreciation in the current period. 22,828,256

The issuance of long term debt (e.g., bonds, loans) provides current financial resources to governmental funds, while issuing debt increases long-term liabilities in the statement of net position. Repayment of principal of long-term debt is an expenditure in the governmental funds; however, the repayment reduces long-term liabilities in the statement of net position.

Issuance of debt less premiums reported as current financial resources (10,004,083) Repayment of debt principal reported as expenditures 1,904,359 The amount by which proceeds exceeded repayments. (8,099,724)

Some expenses in the statement of activities are not recognized in the governmental funds.

Change in other postemployment benefits liability (12,021) Change in deferred other postemployment benefits liability 309,388 Change in interest payable (202,388) Change in inventory charged to expense 96,089 Change in compensated absences payable (486,222) Change in net pension liability 6,063,344 Change in deferred pension outflows (4,171,146) Change in deferred pension inflows (1,667,167) The amount by which expense payable exceeded expenditures (70,123)

Revenues in the statement of activities that do not provide current financial resources are not reported as revenue in the funds.

Change in unavailable revenue for taxes and special assessments 575,714 Change in unavailable revenue for grants and allotments 4,511,852 The amount by which governmental funds unavailable revenue increased. 5,087,566

Changes in net position of governmental activities $ 26,355,684

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

- 29 - BLUE EARTH COUNTY Exhibit 6 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL GENERAL FUND FOR THE YEAR ENDED DECEMBER 31, 2018

Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) Revenues Property Taxes $ 18,987,450 $ 18,987,450 $ 19,166,368 $ 178,918 Mortgage Registry and Deed Tax 64,000 64,000 72,409 8,409 Special Assessments 106,452 106,452 191,489 85,037 Licenses and Permits 311,300 311,300 342,615 31,315 Intergovernmental 4,832,979 5,021,659 5,117,476 95,817 Charges for Services 2,796,904 2,796,904 2,892,601 95,697 Fines and Forfeitures 360,750 360,750 355,294 (5,456) Investment Income 810,000 810,000 2,267,103 1,457,103 Miscellaneous 1,010,830 1,010,830 1,146,974 136,144 Gifts and Contributions 27,500 27,500 31,492 3,992 Total Revenues 29,308,165 29,496,845 31,583,821 2,086,976

Expenditures General Government Commissioners 391,415 391,415 402,577 (11,162) Courts 144,500 144,500 170,206 (25,706) License Center 816,800 816,800 871,678 (54,878) Administrative Services 3,088,534 2,653,534 2,449,447 204,087 Attorney 2,640,527 2,829,207 2,780,497 48,710 Taxpayer Services 2,547,661 2,547,661 2,478,276 69,385 Building and Maintenance 2,179,305 2,089,305 2,098,624 (9,319) Veterans Service Officer 274,313 274,313 272,846 1,467 Other 27,000 27,000 46,687 (19,687) Total General Government 12,110,055 11,773,735 11,570,838 202,897 Public Safety Sheriff 6,226,114 6,261,114 6,311,243 (50,129) Medical Examiner 100,000 100,000 123,028 (23,028) Jail 3,744,561 3,744,561 3,640,159 104,402 Emergency Services 141,209 141,209 129,660 11,549 Total Public Safety 10,211,884 10,246,884 10,204,090 42,794 Culture and Recreation Historical Society 111,224 111,224 111,224 - Library 1,167,735 1,167,735 1,132,729 35,006 Other 94,547 94,547 102,757 (8,210) Total Culture and Recreation 1,373,506 1,373,506 1,346,710 26,796 Environmental Services Environmental Services 2,413,852 2,549,375 2,432,655 116,720

- 30 - BLUE EARTH COUNTY Exhibit 6 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE (Continued) BUDGET AND ACTUAL GENERAL FUND FOR THE YEAR ENDED DECEMBER 31, 2018

Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) Conservation of Natural Resources Cooperative Extension 210,528 210,528 198,729 11,799 Agricultural Society 39,254 39,254 54,254 (15,000) Total Conservation of Natural Resources 249,782 249,782 252,983 (3,201) Economic Development Economic Development and Assistance 170,390 247,190 253,366 (6,176) Debt Service Principal Retirement 955,103 955,103 937,703 17,400 Interest and Fiscal Charges 366,632 434,598 440,448 (5,850) Total Debt Service 1,321,735 1,389,701 1,378,151 11,550 Total Expenditures 27,851,204 27,830,173 27,438,793 391,380 Excess of Revenues Over (Under) Expenditures 1,456,961 1,666,672 4,145,028 2,478,356

Other Financing Sources (Uses) Transfers In 305,145 305,145 340,398 35,253 Transfers Out (821,028) (821,028) (990,777) (169,749) Loans - 135,523 135,523 - Total Other Financing Sources (Uses) (515,883) (380,360) (514,856) (134,496)

Net Change in Fund Balance 941,078 1,286,312 3,630,172 2,343,860 Fund Balance - January 1 28,200,270 28,200,270 28,200,270 -

Fund Balance - December 31 $ 29,141,348 $ 29,486,582 $ 31,830,442 $ 2,343,860

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

- 31 - BLUE EARTH COUNTY Exhibit 7 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL PUBLIC WORKS SPECIAL REVENUE FUND FOR THE YEAR ENDED DECEMBER 31, 2018

Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) Revenues Property Taxes $ 4,594,124 $ 4,594,124 $ 4,565,694 $ (28,430) Special Assessments - - 1,072 1,072 Transportation Sales Tax 6,000,000 6,000,000 6,247,557 247,557 Intergovernmental 23,148,207 20,648,207 20,275,360 (372,847) Charges for Services 507,000 507,000 410,627 (96,373) Miscellaneous 23,304 23,304 465,861 442,557 Gifts and Contributions - - - - Total Revenues 34,272,635 31,772,635 31,966,171 193,536

Expenditures Current Highways and Streets Administration 279,339 279,339 396,588 (117,249) Maintenance 6,024,475 6,024,475 5,907,178 117,297 Construction 22,288,850 19,788,850 19,231,420 557,430 Other 2,234,589 2,234,589 685,267 1,549,322 Total Highways and Streets 30,827,253 28,327,253 26,220,453 2,106,800 Culture and Recreation Parks 549,421 549,421 578,378 (28,957) Intergovernmental Highways and Streets 368,821 368,821 415,201 (46,380) Capital Outlay 1,074,500 1,074,500 1,220,629 (146,129) Total Expenditures 32,819,995 30,319,995 28,434,661 1,885,334 Excess of Revenues Over (Under) Expenditures 1,452,640 1,452,640 3,531,510 2,078,870

Other Financing Sources (Uses) Transfers In 990,078 728,078 776,324 48,246 Transfers Out (2,000,000) - (32,976) (32,976) Total Other Financing Sources (Uses) (1,009,922) 728,078 743,348 15,270

Net Change in Fund Balance 442,718 2,180,718 4,274,858 2,094,140 Fund Balance - January 1 6,528,946 6,528,946 6,528,946 - Increase (Decrease) in Inventories - - 96,089 96,089 Fund Balance - December 31 $ 6,971,664 $ 8,709,664 $ 10,899,893 $ 2,190,229

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

- 32 - BLUE EARTH COUNTY Exhibit 8 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL HUMAN SERVICES SPECIAL REVENUE FUND FOR THE YEAR ENDED DECEMBER 31, 2018

Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) Revenues Property Taxes $ 8,314,786 $ 8,314,786 $ 8,258,472 $ (56,314) Intergovernmental 18,893,459 14,593,377 15,003,038 409,661 Charges for Services 5,664,323 5,664,323 7,019,310 1,354,987 Fines and Forfeitures 500 500 200 (300) Miscellaneous 117,150 97,150 111,976 14,826 Total Revenues 32,990,218 28,670,136 30,392,996 1,722,860

Expenditures Public Safety Corrections 3,086,619 3,086,619 3,143,099 (56,480) Health and Welfare Income Maintenance 6,393,445 6,393,445 6,376,512 16,933 Social Services 11,349,437 11,879,437 11,872,193 7,244 Mental Health 9,822,386 4,982,304 4,742,829 239,475 Community Health 2,639,284 2,639,284 2,562,227 77,057 Total Health and Welfare 30,204,552 25,894,470 25,553,761 340,709

Capital Outlay 95,500 95,500 74,271 21,229 Total Expenditures 33,386,671 29,076,589 28,771,131 305,458 Excess of Revenues Over (Under) Expenditures (396,453) (406,453) 1,621,865 2,028,318

Other Financing Sources (Uses) Transfers In 10,600 2,000 1,946 (54) Transfers Out (39,895) (50,000) (48,261) 1,739 Total Other Financing Sources (Uses) (29,295) (48,000) (46,315) 1,685

Special Item Transfer of Operations (Note 1D. 16) - (1,113,295) (1,110,318) 2,977

Net Change in Fund Balance (425,748) (1,567,748) 465,232 2,032,980 Fund Balance - January 1 12,130,955 12,130,955 12,130,955 - Fund Balance - December 31 $ 11,705,207 $ 10,563,207 $ 12,596,187 $ 2,032,980

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

- 33 - BLUE EARTH COUNTY Exhibit 9 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL COUNTY DITCH SPECIAL REVENUE FUND FOR THE YEAR ENDED DECEMBER 31, 2018

Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) Revenues Special Assessments $ 1,990,000 $ 1,990,000 $ 2,282,497 $ 292,497 Intergovernmental - - 32,000 32,000 Miscellaneous - - 8,400 8,400 Total Revenues 1,990,000 1,990,000 2,322,897 332,897

Expenditures Current Conservation of Natural Resources 1,242,000 3,800,000 3,764,251 35,749 Debt Service Principal Retirement 938,000 938,000 938,000 - Interest and Fiscal Charges 323,211 323,211 358,313 (35,102) Total Debt Service 1,261,211 1,261,211 1,296,313 (35,102) Total Expenditures 2,503,211 5,061,211 5,060,564 647 Excess of Revenues Over (Under) Expenditures (513,211) (3,071,211) (2,737,667) 333,544

Other Financing Sources (Uses) Transfers In 513,211 63,211 47,969 (15,242)

Net Change in Fund Balance - (3,008,000) (2,689,698) 318,302 Fund Balance - January 1 2,585,142 2,585,142 2,585,142 - Fund Balance - December 31 $ 2,585,142 $ (422,858) $ (104,556) $ 318,302

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

- 34 -

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- 35 - BLUE EARTH COUNTY Exhibit 10 STATEMENT OF NET POSITION ENTERPRISE PROPRIETARY FUNDS DECEMBER 31, 2018

LANDFILL EDA TOTALS Assets Current Assets Cash and Investments $ 5,501,984 $ 1,174,840 $ 6,676,824 Accounts Receivable 350,818 23,238 374,056 Due from Other Governments 1,742 25,463 27,205 Prepaid Items - 22,498 22,498 Restricted Cash and Investments: Cash Security Deposits - 22,678 22,678 Cash Family Self Sufficiency Deposits - 12,809 12,809 Cash Other - 172,758 172,758 Cash held by Fiscal Agent - 38,472 38,472 Total Current Assets 5,854,544 1,492,756 7,347,300

Noncurrent Assets Restricted Cash and Investments: Cash Long-Term Dedicated Funds 2,901,606 - 2,901,606 Notes Receivable - 50,000 50,000 Capital Assets (Net of Depreciation) 5,947,919 3,719,409 9,667,328 Total Noncurrent Assets 8,849,525 3,769,409 12,618,934

Total Assets 14,704,069 5,262,165 19,966,234

Liabilities Current Liabilities Accounts Payable 52,775 9,161 61,936 Salaries Payable - 3,790 3,790 Due to Other Governments 11,552 12,346 23,898 Unearned Revenue - 3,046 3,046 Security Deposits Payable - 22,678 22,678 Family Self Sufficiency Deposits Payable - 12,809 12,809 Other Current Liabilities - 172,758 172,758 Total Current Liabilities 64,327 236,588 300,915

Noncurrent Liabilities Accrued Closure Payable 3,939,344 - 3,939,344 Loans Payable (due in more than one year) - 2,109,712 2,109,712 Total Noncurrent Liabilities 3,939,344 2,109,712 6,049,056

Total Liabilities 4,003,671 2,346,300 6,349,971

Net Position Net Investment in Capital Assets 5,947,859 1,609,697 7,557,556 Unrestricted 4,752,539 1,306,168 6,058,707 Total Net Position $ 10,700,398 $ 2,915,865 $ 13,616,263

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

- 36 - BLUE EARTH COUNTY Exhibit 11 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION ENTERPRISE PROPRIETARY FUNDS FOR THE YEAR ENDED DECEMBER 31, 2018

LANDFILL EDA TOTALS Operating Revenues Charges for Services $ 3,169,581 $ 284,210 $ 3,453,791 Miscellaneous 25,006 - 25,006 Total Operating Revenue 3,194,587 284,210 3,478,797

Operating Expenses Contracted Services 791,191 - 791,191 Housing Assistance Payments - 353,070 353,070 Administrative Services 161,004 42,835 203,839 Employee Salaries - 189,101 189,101 Other Services and Charges 499,338 207,066 706,404 Utilities 28,270 98,838 127,108 Depreciation 564,070 204,557 768,627 Landfill Closure and Postclosure Expense 341,882 - 341,882 Total Operating Expenses 2,385,755 1,095,467 3,481,222

Operating Income (Loss) 808,832 (811,257) (2,425)

Nonoperating Revenues (Expenses) Miscellaneous 135,362 78,744 214,106 Intergovernmental - 663,955 663,955 Gain (Loss) on Sale of Capital Assets (6,968) - (6,968) Investment Income - 3,932 3,932 Net Nonoperating Revenues (Expenses) 128,394 746,631 875,025

Income (Loss) Before Capital Contributions and Transfers 937,226 (64,626) 872,600 Capital Contributions - 14,801 14,801 Transfers In 190,602 - 190,602 Transfers Out (264,912) - (264,912) Change in Net Position 862,916 (49,825) 813,091

Net Position - January 1 9,837,482 2,965,690 12,803,172 Net Position - December 31 $ 10,700,398 $ 2,915,865 $ 13,616,263

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

- 37 - BLUE EARTH COUNTY Exhibit 12 STATEMENT OF CASH FLOWS ENTERPRISE PROPRIETARY FUNDS FOR THE YEAR ENDED DECEMBER 31, 2018

LANDFILL EDA TOTALS Cash Flows from Operating Activities Cash Received from Customers $ 3,226,256 $ 279,462 $ 3,505,718 Cash Paid to Suppliers (1,441,294) (732,098) (2,173,392) Cash Paid to Employees - (189,713) (189,713) Other Operating Income 25,006 - 25,006 Net Cash Provided by Operating Activities 1,809,968 (642,349) 1,167,619 Cash Flows from (used in) Noncapital Financing Activities Insurance Proceeds - 8,640 8,640 Tenant Fraud Recovery - 6,816 6,816 Intergovernmental - 646,068 646,068 Energy Rebate - 63,288 63,288 Transfers In 190,602 - 190,602 Transfers Out (264,912) - (264,912) Net Cash Provided by Noncapital Financing Activities (74,310) 724,812 650,502 Cash Flows from (used in) Capital and Related Financing Activities Other Federal Revenue - 16,732 16,732 Purchase of Capital Assets (260,723) (9,820) (270,543) Net Cash from (used in) Capital and Related Financing Activities (260,723) 6,912 (253,811) Cash Flows from (used in) Investing Activities Investment Income - 3,932 3,932 Net Cash from (used in) Investing Activities - 3,932 3,932 Net Increase (Decrease) in Cash and Cash Equivalents 1,474,935 93,307 1,568,242 Cash and Cash Equivalents - January 1 6,928,655 1,328,250 8,256,905 Cash and Cash Equivalents - December 31 $ 8,403,590 $ 1,421,557 $ 9,825,147

- 38 - BLUE EARTH COUNTY Exhibit 12 STATEMENT OF CASH FLOWS (Continued) ENTERPRISE PROPRIETARY FUNDS FOR THE YEAR ENDED DECEMBER 31, 2018

LANDFILL EDA TOTALS Reconciliation of Operating Income (Loss) to Net Cash Provided by Operating Activities Operating Income (Loss) $ 808,832 $ (811,257) $ (2,425) Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided by Operating Activities Miscellaneous Income 135,362 - 135,362 Depreciation 564,070 204,557 768,627 Landfill Closure and Postclosure Expense 341,882 - 341,882 (Increase) Decrease in Accounts Receivable (79,136) (6,035) (85,171) (Increase) Decrease in Due from Other Governments 449 449 (Increase) Decrease in Prepaids - (913) (913) (Decrease) Increase in Accounts Payable 41,483 (14,652) 26,831 (Decrease) Increase in Salaries Payable - (612) (612) (Decrease) Increase in Tenant Security Deposits - 34 34 (Decrease) Increase in Due to Other Governments (2,974) (12,758) (15,732) (Decrease) Increase in Unearned Revenue - 1,253 1,253 (Decrease) Increase in Family Self Sufficiency Deposits - (2,125) (2,125) (Decrease) Increase in Other Current Liabilities - 159 159 Net Cash Provided by Operating Activities $ 1,809,968 $ (642,349) $ 1,167,619

Reconciliation of Cash and Cash Equivalents to the Statement of Net Position Cash and Investments 5,501,984 1,174,840 6,676,824 Cash - Tenant Security Deposits - 22,678 22,678 Cash - Family Self Sufficiency Deposits - 12,809 12,809 Cash - Other - 172,758 172,758 Cash - Long-Term Dedicated Funds 2,901,606 - 2,901,606 Cash held by Fiscal Agent - 38,472 38,472 Cash and Cash Equivalents at end of year $ 8,403,590 $ 1,421,557 $ 9,825,147

Noncash Investing, Capital, and Financing Activities Capital Assets purchased using Contracts/Accounts Payable $ - $ 7,576 $ 7,576

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

- 39 - BLUE EARTH COUNTY Exhibit 13 STATEMENT OF FIDUCIARY ASSETS AND LIABILITIES FIDUCIARY FUNDS DECEMBER 31, 2018

Agency Funds

Assets Cash and Investments $ 2,790,731 Due from Other Governments 16,726 Total Assets $ 2,807,457

Liabilities Accounts Payable $ 117,155 Due to Other Governments 2,690,302 Total Liabilities $ 2,807,457

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

- 40 -

GUIDE TO NOTES

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES …..…………………………………42

2. RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS…..49

3. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY…………………………………….50

4. CASH, DEPOSITS AND INVESTMENTS…………………………………………………………50

5. RECEIVABLES …………………..…………………………………..………….…………………..53

6. CAPITAL ASSETS……………………………………………..…………………………………….54

7. INTERFUND RECEIVABLES, PAYABLES, ADVANCES, TRANSFERS AND INTERNAL BALANCES…………………………………………………………………………….……………..55

8. LANDFILL CLOSURE AND POSTCLOSURE CARE COSTS …………………………………56

9. LONG-TERM DEBT …………………………….…………………………………………………..57

10. FUND BALANCE ……………………………………………………………………………………61

11. PENSION PLANS AND OTHER POSTEMPLOYMENT BENEFITS……………..……………62

12. RISK MANAGEMENT…………………………………………………………..…………………..71

13. TAX ABATEMENTS ………………………………………………………………………………..72

14. SUMMARY OF SIGNIFICANT CONTINGENCIES AND OTHER ITEMS ………..…………..72

- 41 - BLUE EARTH COUNTY NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2018

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The financial statements of Blue Earth County have been prepared in conformity with generally accepted accounting principles (GAAP). The following is a summary of the significant accounting policies.

A. Reporting Entity

Blue Earth County, Minnesota, (the County) was established in August 1853, and is an organized county having the powers, duties and privileges granted by Minnesota State Statutes. The County is governed by a five-member board of commissioners elected from districts within the County. The Board is organized with a chair and vice-chair elected at the annual meeting in January of each year. As required by generally accepted accounting principles, these financial statements present the County and its component unit, an entity for which the County is financially accountable. The blended component unit, although legally a separate entity, is in substance, part of the County’s operations.

Blended component unit. The Blue Earth County Economic Development Authority (the EDA) is a component unit of Blue Earth County, Minnesota, and was created to carry out redevelopment of blighted areas and to establish safe and sanitary dwelling accommodations for low-income persons, the elderly, disabled, and handicapped persons. The EDA is governed by a five member Board of Commissioners and consists of the following Public Housing Projects: Public and Indian Housing (Low Rent) Scattered Sites and Breckenridge Townhomes - Section 8 Housing Choice Voucher - and Public Housing Capital Fund Program.

The EDA is included in the Blue Earth County reporting entity as the EDA Enterprise Fund with a December 31 year-end. The EDA’s governing body is substantively the same as the governing body of Blue Earth County and there is a financial benefit or burden relationship between the County and the EDA. The county is legally obligated to provide resources for debt service payments. The Enterprise Fund financial statements of the Economic Development Authority are available at the following address: Blue Earth County Economic Development Authority, 204 South Fifth Street, Mankato, MN 56001.

B. Basic Financial Statements

Government-Wide Statements. The government-wide financial statements (i.e., the statement of net position and the statement of activities) display information on all of the nonfiduciary activities of the primary government and its component unit. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. For the most part, the effect of interfund activity has been removed from these statements. Exceptions to this general rule are transactions that would be treated as revenues, expenditures or expenses if they involved external organizations, such as buying goods and services or payments in lieu of taxes. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned.

In the government-wide statement of net position, both the governmental and business-type activities columns: (a) are presented on a consolidated basis by column; and (b) are reported on a full accrual, economic resource basis, which recognizes all long-term assets and receivables as well as long-term debt and obligations. The County’s net position is reported in three parts: (1) net investment in capital assets; (2) restricted net position; and (3) unrestricted net position. The County first utilizes restricted resources to finance qualifying activities.

The statement of activities demonstrates the degree to which the direct expenses of a given function or business-type activity are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or activity. Program revenues include 1) fees, fines, and charges paid by the recipients of goods, services, or privileges provided by a given function or activity; and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or activity. Taxes and other items not included among program revenues are reported instead as general revenues. Direct expenses of interfund services provided and used are not eliminated from the various functional categories.

- 42 - BLUE EARTH COUNTY NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2018

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

B. Basic Financial Statements (Continued)

Fund Financial Statements. The fund financial statements provide information about the County’s funds, including its fiduciary funds and blended component unit. Separate statements for each fund category--governmental, proprietary, and fiduciary--are presented. The emphasis of governmental and proprietary fund financial statements is on major individual governmental and enterprise funds, with each displayed as separate columns in the fund financial statements. All remaining governmental and enterprise funds are aggregated and reported as nonmajor funds.

Proprietary funds distinguish operating revenues and expenses from nonoperating items. Proprietary fund operating revenues, such as charges for services, result from exchange transactions associated with the principal activity of the fund. Exchange transactions are those in which each party receives and gives up essentially equal values. Nonoperating revenues, such as subsidies and investment earnings, result from nonexchange transactions or incidental activities. Operating expenses for enterprise 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 County reports the following major governmental funds:

General Fund is the County’s primary operating fund. It accounts for all financial resources of the general government, except those accounted for in another fund.

Public Works Special Revenue Fund is used to account for and report the proceeds of specific revenue sources restricted from federal and state government, committed property tax revenues, as well as assigned fees for services and other miscellaneous revenue all used for the construction and maintenance of roads, bridges, and parks.

Human Services Special Revenue Fund is used to account for and report the proceeds of specific revenue sources restricted from federal, state, and other oversight agencies, committed property tax revenues, as well as assigned fees for services and other miscellaneous revenue all used for social services, income maintenance, community health, mental health and community corrections.

County Ditch Special Revenue Fund is used to account for and report the proceeds of specific revenue sources restricted from bond proceeds, federal or state grants, as well as restricted special assessments revenue levied against benefitted property to finance the cost of constructing and maintaining an agricultural drainage ditch system.

Building and Capital Purchases Fund is a capital project fund used to account for and report financial resources that are restricted, committed or assigned to expenditures for capital outlay.

The County reports the following major enterprise funds:

Ponderosa Landfill Fund is used to account for the operation, maintenance, and development of the County solid waste landfill.

EDA is a blended component unit of the County, and accounts for financial resources used for redevelopment of blighted areas and establishing safe and sanitary dwelling accommodations for low-income persons, the elderly, disabled, and handicapped persons.

Additionally, the County reports the following fiduciary fund type:

Agency Funds are custodial in nature and do not present results of operations or have a measurement focus. These funds account for assets held by the county as an agent or trustee for individuals, private organizations, other governments, or other funds in a trust capacity. These include Drug Task Force, Tax and Penalties, Adult Mental Health Initiative and Agency-Other.

- 43 - BLUE EARTH COUNTY NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2018

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

C. Measurement Focus and Basis of Accounting

The government-wide and proprietary fund financial statements are reported using the economic resources measurement focus and the full accrual basis of accounting. The fiduciary fund financial statements are reported using the accrual basis of accounting. Revenues are recorded when earned, and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year in which they are levied. Shared revenues are generally recognized in the period the appropriation goes into effect. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met.

Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Blue Earth County considers all revenues to be available if they are collected within 60 days after the end of the current period. Property and other taxes, shared revenues, licenses, and interest are all considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long- term debt, compensated absences, and claims and judgments, which are recognized as expenditures to the extent that they have matured. Proceeds of general long-term debt and acquisitions under capital leases are reported as other financing sources.

When both restricted and unrestricted resources are available for use, it is the County’s policy to use restricted resources first, then unrestricted resources as they are needed.

D. Assets, Liabilities, Deferred Outflows/Inflows of Resources, and Net Position or Equity

1. Cash and Investments

Cash, deposits and investments are stated at fair value. A market approach is used to value all investments other than external investment pools, which are measured at the net asset value. Pursuant to Minnesota Statute Section 385.07, investment earnings on cash and pooled investments are credited to the General Fund.

Blue Earth County invests in an external investment pool, the Minnesota Association of Governments Investing for Counties Fund (MAGIC), which is created under a joint powers agreement pursuant to Minnesota Statute Section 471.59. The investment in the pool is measured at the net asset value per share, provided by the pool. This pool is available for use by all funds of the County and each fund type’s portion of this pool is displayed on the Statement of Net Position within “Cash and Investments.”

Cash and cash equivalents are identified only for the purpose of the statement of cash flows reporting by the proprietary funds. Pooled investments, which have the characteristics of demand deposits, are considered to be cash and cash equivalents on the statement of cash flows.

The EDA’s cash and cash equivalents are considered to be cash on hand, demand deposits and short- term investments with original maturities of three months or less from date of acquisition. Restricted assets are considered to be cash and cash equivalents.

2. Receivables and Payables

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

- 44 - BLUE EARTH COUNTY NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2018

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

D. Assets, Liabilities, Deferred Outflows/Inflows of Resources, and Net Position or Equity (Continued)

2. Receivables and Payables (Continued)

Advances between funds, as reported in the fund financial statements, are offset by a nonspendable fund balance in the General Fund to indicate that it is not in spendable form and advances in the Capital Projects Fund are committed.

3. Property Taxes and Special Assessments

Property taxes are levied in December and attach as an enforceable lien on property as of January 1 of the following year. The tax levy is divided into two billings: first half is due May 15th and second half is due either October 15th or November 15th. Property tax collections and remittances to other governmental units and County Governmental funds are accounted for in an Agency fund. The County is required by statute to distribute the collections to the various governmental units on a schedule prescribed in Minnesota Statutes Chapter 276. No allowance for uncollectible taxes or special assessments have been provided because such amounts are not expected to be material. Taxes, which remain unpaid by property owners at December 31, are considered delinquent. Special assessments receivable consist of delinquent special assessments and noncurrent special assessments.

4. Inventories and Prepaid Items

Inventory is valued at cost using the weighted average method. Inventory in the Public Works Special Revenue Fund consists of expendable supplies held for consumption. The cost is recorded as an expenditure at the time when individual inventory items are purchased. Reported inventories are equally offset by a nonspendable fund balance to indicate that it is not in spendable form.

Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. The cost of prepaid items is recorded as expenditures/expenses when consumed rather than when purchased.

5. Restricted Assets

Certain funds of the County are classified as restricted assets on the statement of net position because the restriction is either imposed by law through constitutional provisions or enabling legislation or imposed externally by creditors, grantors, contributors, or laws or regulations of other governments. Therefore, their use is limited by applicable laws and regulations.

6. Capital Assets

Capital assets include land and permanent easements, leasehold improvements, land improvements, buildings and building improvements, personal property, intangibles, and infrastructure assets. Infrastructures assets have been capitalized retroactively to 1980 upon adoption of GASB Statement No. 34. These are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are recorded at historical cost or, if donated, at acquisition price at the date of acquisition. In some instances, capital asset historical costs were not available; therefore, the costs of these assets at the dates of acquisitions have been estimated. Capital asset improvement costs are capitalized if the cost exceeds the capitalization thresholds, and either extends the useful life, increases the capacity, or improves the efficiency of an asset. Otherwise the costs will be recorded as a repair/maintenance expense.

- 45 - BLUE EARTH COUNTY NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2018

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

D. Assets, Liabilities, Deferred Outflows/Inflows of Resources, and Net Position or Equity (Continued)

6. Capital Assets (Continued)

Capital assets have initial useful lives extending beyond a single period and dollar amount for capitalization per asset category as follows: all land is capitalized regardless of cost; leasehold improvements, personal property and intangibles when the cost of individual items exceed $5,000; exhaustible land improvements, buildings, and building improvements when the cost exceed $25,000, infrastructure assets when the cost of projects exceed $100,000.

For the EDA major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed.

Depreciation/Amortization on the capital assets of the primary government, as well as the component unit, is computed using the straight-line method over the following estimated useful lives:

Assets Years Assets Years Land improvements (exhaustible) 3-20 Personal Property 5-30 Building and building improvements 10-125 Intangibles 5-20 Leasehold Improvements 15 Infrastructure 10-75

7. Pension

For purposes of measuring the net pension liability, deferred outflows/inflows of resources, and pension expense, information about the fiduciary net position of the Public Employees Retirement Association (PERA) and additions to/deductions from PERA’s fiduciary net position have been determined on the same basis as they are reported by PERA except that PERA’s fiscal year end is June 30. For this purpose, plan contributions are recognized as of employer payroll paid dates and benefit payments and refunds are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.

8. Compensated Absences

Under the County’s personnel policies and union contracts, County employees earn vacation leave at a rate of between 10.5 and 27.5 days per year based on the length of service. There is no requirement that vacation leave is taken, but a maximum of hours ranging from 300 to 320 may be carried over at the end of the calendar year based on the employee’s respective union affiliation. At termination, employees are paid for any accumulated vacation leave. Employees earn sick leave at a rate of 12 days per year. Accumulated sick leave at December 31, 2018, is $4,577,750 of which $465,115 is vested and payable upon termination. The liability for accumulated vacation and vested sick leave is reported in the governmental activities column of the government-wide statement of net position. The unvested accumulated sick leave of $4,112,635 has not been recorded as a liability in the financial statements because these amounts are not paid when employees separate from service. The current portion is based on the five year vacation and compensation time report.

9. Unearned Revenue

Unearned revenue arises when assets are recognized before revenue recognition criteria have been satisfied. Grants and entitlements received before eligibility requirements are met are also recorded as unearned revenue. Business-type funds report unearned revenue representing prepaid rents that have been received in advance by the EDA. These unearned revenues will be recognized by the EDA as expenditures have been incurred.

- 46 - BLUE EARTH COUNTY NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2018

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

D. Assets, Liabilities, Deferred Outflows/Inflows of Resources, and Net Position or Equity (Continued)

10. Deferred Outflows of Resources

The Deferred Outflows of Resources is a separate section which represents a consumption of net position that relate to a future period. The county will not recognize the related outflow until a future event occurs. These are descripted later in the notes under Pension Plans and other Postemployment Benefits.

11. Long-term Obligations

In the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net position. Bond premiums and discounts 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 expensed during the current period.

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.

12. Deferred Inflows of Resources

The Deferred Inflows of Resources is a separate section which represents an acquisition of net position that relate to a future period. The Governmental funds report unavailable revenue in connection with receivables that will not be collected within the available period as deferred inflows of resources. The government-wide statements report amounts related to prepaid taxes received at the end of the year for future years and the difference between the net carrying amount and the reacquisition price of currently refunded bonds resulted in a deferred inflow of resources that will be recognized as a component of interest expense over the remaining life of the new debt. In addition, the decreases in the net pension liability are descripted later in the notes under Pension Plans.

13. Classification of Net Position/Fund Balances

Net position in the government-wide and proprietary fund financial statements are classified in the following categories:

Net investment in capital assets – the amount of net position representing capital assets net of accumulated depreciation and reduced by outstanding debt attributed to the acquisition, construction, or improvement of the assets.

Restricted net position – the amount of net position for which external restrictions have been imposed by creditors, grantors, contributors, or laws or regulations of other governments and restrictions imposed by law through constitutional provisions or enabling legislation.

Unrestricted net position – the amount of net position that does not meet the definition of restricted or net investment in capital assets.

- 47 - BLUE EARTH COUNTY NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2018

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

D. Assets, Liabilities, Deferred Outflows/Inflows of Resources, and Net Position or Equity (Continued)

13. Classification of Net Position/Fund Balances (Continued)

Fund balance is the difference between assets and liabilities and deferred inflows in governmental funds. The classifications are based primarily on the extent to which the County is bound to observe constraints imposed upon the use of the resources in the governmental funds. The classifications are as follows:

Non-spendable Fund Balance – the non-spendable fund balance includes amounts that cannot be spent because they are not in spendable form, or legally or contractually required to be maintained intact. The “not in spendable form” criterion includes items that are not expected to be converted to cash.

Spendable Fund Balance – the spendable fund balance includes amounts that are available for appropriation based on the constraints that control how specific amounts can be spent. The following categories define the revenue source and the level of force of the constraint on spending.

Restricted – reflects constraints placed on the use of resources because of legal restrictions stipulated by outside parties (such as grantors, contributors, or creditors) outstanding at the end of the year. It also includes fund balance with legal restrictions placed on its use in accordance with state statutes.

Committed – reflects constraints that the County has imposed upon itself by a formal action (resolution) of the County Board. Those committed amounts cannot be used for any other purpose unless the Board removes or changes the specified use by taking the same type of action (resolution) it employed to previously commit these amounts.

Assigned – reflects funds intended to be used by the County for specific purposes that do not meet the criteria to be classified as restricted or committed. The County Board has by resolution authorized the County Administrator and Finance Director to assign fund balance. The County Board may also assign fund balance as it does when appropriating fund balance to cover a gap between estimated revenue and appropriations in the subsequent year’s appropriated budget. Unlike commitments, assignments generally only exist temporarily. In other words, an additional action does not normally have to be taken for the removal of an assignment.

At the end of each fiscal year, it is the County’s policy to maintain a Spendable-Assigned portion of the fund balance for cash flow in a range equal to 35-50% of the subsequent year’s budgeted expenditures for Special Revenue Funds, except in the County Ditch Fund.

Unassigned – includes the residual portion of the General Fund and includes all spendable fund balance amounts not contained in the other classifications. In other governmental funds, the unassigned classification is used only to report a deficit balance resulting from overspending for specific purposes for which amounts had been restricted or committed.

At the end of each fiscal year, it is the County’s policy to maintain a Spendable-Unassigned portion of the fund balance for cash flow in a range equal to 35-50% of the subsequent year’s budgeted General Fund operating expenditures. In addition to cash flow needs this accommodates emergency contingency concerns.

It is the County’s policy to use restricted amounts first, when both restricted and unrestricted amounts are available for incurred expenditures. Additionally, the County would first use committed, then assigned, and lastly unassigned amounts of unrestricted fund balance when expenditures are incurred.

- 48 - BLUE EARTH COUNTY NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2018

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

D. Assets, Liabilities, Deferred Outflows/Inflows of Resources, and Net Position or Equity (Continued)

14. Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, deferred outflows of resources, liabilities, and deferred inflows of resources; disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

15. Comparative Data

The comparative schedule of capital assets by source was presented in order to provide an understanding of changes in capital assets by function.

16. Special Item

Blue Earth County transferred certain human services adult mental health operations to the South Central Community Based Initiative (SCCBI) Joint Powers Board (JPB), effective January 1, 2018. Blue Earth County transferred $1,110,318 cash to the SCCBI.

E. Change in Accounting Principles

At January 1, 2018, Net Position was restated for a change in accounting principle in the Statement of Activities of $2,915,272 for Governmental Activities. GASB Statement No. 75 “Accounting and Financial Reporting for Postemployment Benefits Other Than Pension,” changes the amount employers report as OPEB expense.

2. RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS

Explanation of certain differences between the governmental fund balance sheet and the government-wide statement of net position

The governmental fund balance sheet includes reconciliation between fund balance – total governmental funds and net position – governmental activities as reported in the government-wide statement of net position. One element of that reconciliation explains that “long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported in the funds.”

The details of this $59,512,230 difference are as follows: Bonds payable $26,864,000 Plus: Issuance premium (to be amortized over life of debt) 2,162,449 Accrued interest payable 293,615 Loans payable 1,038,680 Compensated absences 3,170,649 Other Postemployment Benefits Liability 4,175,647 Net Pension Liability 21,807,190 Net adjustment to reduce fund balance – total governmental funds to arrive at net position – governmental activities $59,512,230

- 49 - BLUE EARTH COUNTY NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2018

3. STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY

A. Budgetary information

The County Board adopts estimated revenue and expenditure budgets for all General, Special Revenue and Capital Projects Funds. All budgets are adopted on a basis consistent with generally accepted accounting principles. Encumbered and unencumbered appropriations lapse at the close of the fiscal year to the extent that they have not been expended. The following year’s budget is adjusted for encumbered amounts at year-end if they are expended. Expenditures may not legally exceed budgeted appropriations at the fund level.

The County Board or the County Administrator can amend budgets during the year. The County Administrator is authorized to transfer budgeted amounts within a fund. All other transfers and additional appropriations require County Board approval. The legal level of budgetary control (i.e., the level at which expenditures may not legally exceed appropriations) is the fund level. The Board made several supplemental budgetary appropriations throughout the year.

B. County Ditch Special Revenue Fund

Individual ditch records are maintained on a modified accrual basis. Twenty-five of the drainage systems have deficit fund balances at December 31, 2018, totaling $2,567,190. These deficits will be eliminated with future special assessment levies against benefited properties.

C. Deficit Fund Balance

The Ditch Fund has a deficit fund balance of $104,556 at December 31, 2018, which will be eliminated with future special assessments.

4. CASH, DEPOSITS AND INVESTMENTS

Minnesota Statute Section 118A.02 authorizes the County to designate depositories for public funds and make investments. Minnesota Statutes Section 118A.03 requires that all bank deposits be protected by insurance, surety bond, or collateral. The market value of collateral pledged shall be at least ten percent more than the amount on deposit at the close of the financial institution’s banking day, not covered by insurance or bonds.

Authorized collateral includes treasury bills, notes and bonds; issues of U.S. government agencies; general obligations rated “A” or better, revenue obligations rated “AA” or better; irrevocable standby letters of credit issued by the Federal Home Loan Bank; and certificates of deposit. Minnesota Statutes require that securities pledged as collateral be held in safekeeping in a restricted account at the Federal Reserve Bank or in an account at a trust department of a commercial bank or other financial institution that is not owned or controlled by the financial institution furnishing the collateral.

Custodial Credit Risk. Custodial credit risk for deposits is the risk that in the event of a financial institution failure, the County’s deposits may not be returned. The County’s policy states all deposits should be fully collateralized. As of December 31, 2018, the County’s deposits were not exposed to custodial credit risk.

Fair Value of Investment. The County measures and records its investments using fair value measurement guidelines established by generally accepted accounting principles. These guidelines recognize a three- tiered fair value hierarchy, as follows:

• Level 1: Quoted prices for identical investments in active markets; • Level 2: Observable inputs other than quoted market prices; and, • Level 3: Unobservable inputs.

- 50 - BLUE EARTH COUNTY NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2018

4. CASH, DEPOSITS AND INVESTMENTS (Continued)

At December 31, 2018, the County had the following recurring fair value measurements.

Fair Value Measurements Using Quoted Prices Significant In Active Other Significant Markets for Observable Unobservable December 31, Identical Assets Inputs Inputs 2018 (Level 1) (Level 2) (Level 3) Investments by fair value level Debt securities U.S. Treasury securities $ 2,041,226 $ 2,041,226 $ - $ - U.S. Agencies 39,277,790 - 39,277,790 - Municipal/Public Bonds 3,643,312 - 3,643,312 - Negotiable certificates of deposit 9,596,983 - 9,596,983 -

Total debt securities $ 54,559,311 $ 2,041,226 $ 52,518,085 $ -

Total Investments by Fair Value Level $ 54,559,311 $ 2,041,226 $ 52,518,085 $ -

Investments measured at the net asset value (NAV) MAGIC Portfolio $ 14,620,578 Money Market Mutual Funds 42,770,469

Total investments measured at the NAV $ 57,391,047

Total Investments $ 111,950,358

Debt securities classified in Level 1 are valued using a market approach quoted in active markets for those securities. Debt securities classified in Level 2 are valued using the following approaches: • U.S. Agencies, Municipal/Public bonds: a market approach using quoted prices for similar securities in active markets; • Negotiable Certificates of Deposit: a market approach using quoted prices for similar securities in markets that are not active;

MAGIC is a local government investment pool which is quoted at a net asset value (NAV). The County invests in this pool for the purpose of the joint investment of the County’s money with those of other counties to enhance the investment earnings accruing to each member.

MAGIC Portfolio is valued using amortized cost. Shares of the MAGIC Portfolio are available to be redeemed upon proper notice without restrictions under normal operating conditions. There are no limits to the number of redemptions that can be made as long as the County has a sufficient number of shares to meet their redemption request. The Fund’s Board of Trustees can suspend the right of withdrawal or postpone the date of payment if the Trustees determine that there is an emergency that makes the sale of a Portfolio’s securities or determination of its net asset value not reasonably practical.

Money Market Mutual Funds are priced at calculated net asset value (NAV). A money market mutual fund may include several different underlying short-term obligations, including government sponsored enterprises, U.S. treasuries and municipal securities. The $1 NAV price is derived from the value of these obligations, accrued income, anticipated cash flow (maturities), management fees and other fund expenses. The fair value of the investment is the fair value per share of the underlying portfolio. The County may redeem these funds at any time and for any use the County has designated.

Interest Rate Risk. Interest rate risk is the risk that changes in the market interest rate will adversely affect the fair value of an investment. The County’s investment policy is to invest in both shorter and longer-term investments to limit exposure to interest rate risk. Diversification strategies shall be determined and revised periodically by the investment officer.

- 51 - BLUE EARTH COUNTY NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2018

4. CASH, DEPOSITS AND INVESTMENTS (Continued)

The following table represents the potential interest rate risk related to the county’s investments using the segmented time distribution method and assuming an investment will be called on the next scheduled call date. At December 31, 2018, the County had the following investment maturities:

Investment Type Fair Value Less Than 30-90 90 Days- 1-5 More Than 30 Days Days 1 Year Years 5 Years U. S. Treasuries $ 2,041,226 $ - $ - $ - $ 196,226 $ 1,845,000 Quasi Agencies 39,277,790 3,962,320 7,058,207 19,792,428 8,464,835 - Municipal Bonds 3,643,312 - 998,997 - 2,644,315 - Mutual Funds 42,770,469 42,770,469 - - - - Negotiable CD’s 9,596,983 246,074 - 2,706,037 6,644,872 - Investment Pool 14,620,578 14,620,578 - - - - Total investments $111,950,358 $61,599,441 $ 8,057,204 $22,498,465 $17,950,248 $1,845,000

Credit Risk. Generally, credit risk is the risk that an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. It is the County’s policy to invest only in securities that meet the ratings requirements set by state statute.

Minnesota Statute Section 118A.04 and 118A.05 generally authorize the following types of investments as available to the County: (1) Securities which are direct obligations or are guaranteed or insured issues of the United States, its agencies, its instrumentalities, or organizations created by an act of Congress, except mortgage backed securities defined as “high risk” by Minnesota Statute Section 118A.04, subdivision 6; (2) Mutual funds through shares of registered investment companies provided the mutual fund receives certain ratings depending on its investments; (3) General obligations of the State of Minnesota and its municipalities; and in certain state agency and local obligations of Minnesota and other states provided such obligations have certain specified bond ratings by a national bond rating service; (4) Banker’s acceptances of United States banks; (5) Commercial paper issued by United States corporations or their Canadian subsidiaries that is of the highest quality category by two nationally recognized rating agencies and matures in 270 days or less; (6) With certain restrictions, in repurchase agreements, securities lending agreements, joint powers investment trusts, and guaranteed investment contracts; and (7) Time deposits that are fully insured by the Federal Deposit Insurance Corporation.

The County’s exposure to credit risk as of December 31, 2018, is as follows:

Moody’s Rating Fair Value Aaa $74,866,883 Aa2 1,870,660 Aa1 643,754 Not rated 20,695,956 S & P’s Rating AA+ 1,978,280 A 256,616

Total $100,312,149

Custodial Credit Risk. The custodial credit risk for investment is the risk that, in the event of the failure of the counterparty to a transaction, a government will not be able to recover the value of investment or collateral securities that are in the possession of an outside party. The County’s policy on custodial credit risk states the securities will be held by an independent third-party custodian selected by the County as evidenced by safekeeping receipts in Blue Earth County’s name. As of December 31, 2018, the County’s investments were not exposed to custodial credit risk.

- 52 - BLUE EARTH COUNTY NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2018

4. CASH, DEPOSITS AND INVESTMENTS (Continued)

Concentration of Credit Risk. The concentration of credit risk is the risk of loss that may be caused by the county’s investment in a single issuer. It is the county’s policy that U.S. Treasury securities, U.S. Agency Securities, and obligations backed by U.S. Treasury and/or U.S. Agency securities, may be held without limit. Investments in any one issuer that represent 5% or more of the County’s investments are as follows: FFCB-$7,997,440, FNMA-$10,174,245, FAMC-$6,075,378, FHLB-$7,970,460, FHLMC-$7,060,267.

Cash held by Fiscal Agent are excess cash flow funds held by the Minnesota Housing Finance Agency. These funds will be held in a residual receipts account until the related bonds are forgiven in 2025. The current balance as of December 31, 2018 is $38,472.

Reconciliation of Blue Earth County’s total cash and investments to the basic financial statement follows: Government-wide statement of net position Governmental Activities Cash and Investments $ 111,162,577 Business-Type Activities Cash and Investments 6,676,824 Restricted Assets: Cash Security Deposits 22,678 Cash Family Self Sufficiency Deposits 12,809 Cash-Other 172,758 Cash held by Fiscal Agent 38,472 Cash-Long-Term Dedicated Funds 2,901,606 Statement of Fiduciary Assets & Liabilities Cash and Investments 2,790,731 Total Cash and Investments $ 123,778,455

5. RECEIVABLES

Receivables as of December 31, 2018, year-end for the County’s governmental activities and business- type activities are as follows:

Governmental activities: Total Receivables Due within one year Taxes Receivable-Delinquent $ 666,810 $ 666,810 Special Assessments Receivable-Delinquent 52,184 52,184 Accounts Receivable 359,472 359,472 Accrued Interest Receivable 283,673 283,673 Due from Other Governments 12,791,997 12,791,997 Special Assessments Receivable-Noncurrent 12,813,942 1,990,161 Notes Receivable 212,170 71,401 Total Governmental activities $27,180,248 $16,215,698

Business-type activities Total Receivables Due within one year Accounts Receivable $ 374,056 $ 374,056 Due from Other Governments 27,205 27,205 Notes Receivable 50,000 - Total Business-type activities $ 451,261 $ 401,261

There is currently no allowance for uncollectible receivables. The collection rate for taxes exceeds 98% and it has been determined that the other receivables will be collected.

- 53 - BLUE EARTH COUNTY NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2018

6. CAPITAL ASSETS

Capital asset activity for the year ended December 31, 2018 was as follows:

Governmental activities: Beginning Ending Capital assets, not being depreciated: Balance Increases Decreases Balance Land and Permanent Easements $ 45,055,433 $ 1,164,454 $ (13,319) $46,206,568 Construction in progress 11,543,251 25,946,297 (17,216,934) 20,272,614 Total capital assets, not being depreciated 56,598,684 27,110,751 (17,230,253) 66,479,182

Capital assets, being depreciated/amortized: Land Improvements 3,721,312 182,432 (1,069,267) 2,834,477 Buildings and Building Improvements 51,045,264 125,114 (82,069) 51,088,309 Personal Property 14,667,480 809,077 (399,851) 15,076,706 Intangibles 4,198,749 228,987 (19,336) 4,408,400 Infrastructure 250,538,658 1 9 , 739 , 620 (151,052) 270,127,226 Total capital assets being depreciated/amortized 324,171,463 21,085,230 (1,721,575) 343,535,118

Less accumulated depreciation/amortization: Land Improvements (1,957,674) (149,424) 862,241 (1,244,857) Buildings and Building Improvements (12,399,326) (1,095,251) 28,692 (13,465,885) Personal Property (9,656,806) (1,131,397) 386,021 (10,402,182) Intangibles (3,754,875) (348,540) 14,703 (4,088,712) Infrastructure (61,433,564) (5,076,594) 93,652 (66,416,506) Total accumulated depreciation/amortization (89,202,245) (7,801,206) 1,385,309 (95,618,142) Total capital assets, being depreciated/amortized, net 234,969,218 13,284,024 (336,266) 247,916,976 Governmental activities capital assets, net $291,567,902 $ 40,394,775 $(17,566,519) $314,396,158

Business-type activities: Beginning Ending Capital assets, not being depreciated: Balance Increases Decreases Balance Land $ 873,214 $ - $ - $ 873,214 Construction in progress 96,080 28,578 (96,080) 28,578 Total capital assets, not being depreciated 969,294 28,578 (96,080) 901,792

Capital assets, being depreciated: Land Improvements 5,072,343 40,901 (2,000) 5,111,244 Buildings and Building Improvements 9,481,223 - - 9,481,223 Leasehold Improvements 3,343,960 103,305 - 3,447,265 Personal Property 2,048,471 76,995 (8,361) 2,117,105 Total capital assets being depreciated 19,945,997 221,201 (10,361) 20,156,837

Less accumulated depreciation: Land Improvements (3,469,836) (321,770) - (3,791,606) Buildings and Building Improvements (3,575,034) (166,960) - (3,741,994) Leasehold Improvements (2,543,973) (99,382) - (2,643,355) Personal Property (1,035,225) (180,515) 1,394 (1,214,346) Total accumulated depreciation (10,624,068) (768,627) 1,394 (11,391,301) Total capital assets, being depreciated, net 9,321,929 (547,426) (8,967) 8,765,536 Business-type activities capital assets, net $ 10,291,223 $ (518,848) $ (105,047) $ 9,667,328

- 54 - BLUE EARTH COUNTY NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2018

6. CAPITAL ASSETS (Continued)

Depreciation/amortization expense was charged to functions/programs as follows: Governmental activities: General Government $ 1,544,702 Public Safety 376,916 Highways and Streets, including depreciation of general infrastructure assets 5,476,543 Health and Welfare 169,038 Environmental Services 45,548 Culture and Recreation 186,663 Conservation of Natural Resources 1,796 Total depreciation/amortization expense--governmental activities $ 7,801,206 Business-type activities: Landfill $ 564,070 EDA 204,557 Total depreciation expense--business-type activities $ 768,627

Contract Commitments

Blue Earth County has active projects as of December 31, 2018. Projects include ditch, highway projects and equipment and information technology projects. At year-end, commitments with contractors are as follows: Project Contract Amount Remaining Commitment Ditch Projects $ 3,509,608 $ 948,330

Highway Projects & Equip. 11,653,791 6,228,693

Building Projects 18,949,536 9,589,951

Technology Update Projects 522,962 349,811

Total $ 34,635,897 $17,116,785

The ditch projects are being financed by special assessments. The highway equipment is financed with County taxes, intergovernmental revenue and transportation sales tax. The other projects are financed by tax levy.

7. INTERFUND RECEIVABLES, PAYABLES, ADVANCES, TRANSFERS AND INTERNAL BALANCES

Interfund balances within governmental funds are eliminated on the government-wide statements. Interfund receivables, payables, and advances reported on the fund financial statements at December 31, 2018 are: Interfund Interfund Interfund Interfund Advances Advances Major Governmental Funds Receivables Payables Receivables Payables General Fund $ 15,920 $ 10,516 $ 1,352,259 $ - Public Works 10,752 64 - 1,973,072 Human Services - 16,092 - - Building & Capital Purchases - - 2,976,155 - County Ditch - - - 2,355,342 Total Governmental Funds $ 26,672 $ 26,672 $ 4,328,414 $ 4,328,414

In the Public Works Fund, interfund receivables were due to fuel allocation and snow removal. The General Fund interfund receivables were mostly postage allocation, detox, fraud investigator and attorney fees paid by Human Services. These interfund receivables and payables are expected to be repaid within one year of December 31, 2018.

- 55 - BLUE EARTH COUNTY NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2018

7. INTERFUND RECEIVABLES, PAYABLES, ADVANCES, TRANSFERS AND INTERNAL BALANCES (Continued)

The advances from the General Fund to the County Ditch Fund were to cover individual negative ditch balances. County Ditch Fund advances from the Building & Capital Purchases Fund were for County internally funded ditch projects. The advances from the Building & Capital Purchases Fund to the Public Works Fund were to cover road projects. These advances are not expected to be eliminated within one year of December 31, 2018.

Interfund transfers: Transfer In: Major Fiduciary Major Governmental Funds Business Fund Type-Fund General Public Human County Building & Landfill Transfer out: Fund Works Services Ditch Capital Enterprise Agency Total General Fund $ 21,560 $ 616,170 $ 1,946 $ 47,969 $ 89,850 $ 190,602 $ 22,680 $ 990,777 Public Works - 32,976 - - - - - 32,976 Human Services 48,260 ------48,260 Building & Capital Purchases 5,666 127,178 - - - - - 132,844 Landfill Enterprise 264,912 ------264,912 Total transfers in $ 340,398 $ 776,324 $ 1,946 $ 47,969 $ 89,850 $ 190,602 $ 22,680 $ 1,469,769

Interfund transfers allow the County to allocate financial resources to the funds that receive benefit from services provided by another fund. All of the County’s interfund transfers fall under that category. Interfund transfers in to the General Fund from the Landfill Enterprise Fund are for County oversite of the landfill. Public Works Fund transfers in from the General Fund are primarily made up of abatements to cover infrastructure costs. Building & Capital Purchases Fund transfers to the Public Works Fund are to cover large capital purchases

8. LANDFILL CLOSURE AND POSTCLOSURE CARE COSTS

State and Federal laws and regulations require the County to place a final cover on the Ponderosa Landfill site when it stops accepting waste and to perform certain maintenance and monitoring functions at the site for 30 years after closure. Although closure and postclosure care costs will be paid only near or after the date that the landfill stops accepting waste, the County reports a portion of these closure and postclosure care costs as an operating expense in each period based on landfill capacity used as of each balance sheet date. The $3,939,344 reported as landfill closure and postclosure care liability as of December 31, 2018, represents the cumulative amount reported to date based on the use of 79 percent of the estimated capacity of the landfill. The County will recognize the remaining estimated cost of closure and postclosure care of $1,032,413 as the remaining estimated capacity is filled. These amounts are based on what it would cost to perform all closure and postclosure care in 2018. Actual cost may be higher due to inflation, changes in technology, or changes in regulations. The County expects to close the landfill in the year 2034 based on the 2018 engineer’s report. Existing capacity will be utilized for industrial waste as opposed to municipal waste and the volume of landfill capacity used on an annual basis will decrease significantly as a result.

The County is required by state and federal laws and regulations to make annual contributions to a trust to finance closure and postclosure care. The County is in compliance with these requirements, and, at December 31, 2018, had a balance of $2,901,606. These are reported as restricted assets on the balance sheet.

- 56 - BLUE EARTH COUNTY NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2018

9. LONG-TERM DEBT

A. Bonds

Governmental Activities

The County issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. General obligation bonds are direct obligations and pledge the full faith and credit of the County. Bonds payable at December 31, 2018, are comprised of the following individual issues:

General Obligation Bonds The following issue is to be repaid from tax levies from the General Fund:

$9,015,000 Capital Improvement Plan Refunding Bonds of 2017A, which mature serially on December 1, in amounts of $885,000 to $1,150,000 through December 1, 2026, with 2.00% to 5.00% interest payments due June 1 and December 1. $8,205,000

$8,890,000 Capital Improvement Plan Bonds of 2018A, which mature serially on December 1, in amounts of $990,000 to $1,480,000 through December 1, 2025, with 5.00% interest payments due June 1 and December 1. $8,890,000

Total General Obligation Bonds $17,095,000 Plus: Unamortized Premium 1,790,121 Total General Obligation Bonds, net: $18,885,121

Special Assessment Bonds The following bonds are to be repaid from ditch special assessments levied on benefited property. The County’s obligation is to make payment upon default of the property owners. Payments will be made from the County Ditch Special Revenue Fund.

$1,000,000 Drainage Bonds of 2006A, which mature serially on December 1, in amounts of $55,000 to $60,000 through December 1, 2020, with 3.85% interest payments due June 1 and December 1. $ 115,000

$295,000 Drainage Bonds of 2009A, which mature serially on December 1, in amounts of $34,000 through December 1, 2019, with 4.00% interest payments due June 1 and December 1. 34,000

$760,000 Drainage Bonds of 2011A, which mature serially on December 1, in amounts of $50,000 to $60,000 through December 1, 2026, with 2.0% to 2.75% interest payments due June 1 and December 1. 430,000

$790,000 Drainage Bonds of 2013A, which mature serially on December 1, in amounts of $80,000 to $85,000 through December 1, 2022, with 1.35% to 1.65% interest payments due June 1 and December 1. 325,000

$1,990,000 Drainage Bonds of 2013B, which mature serially on December 1, in amounts of $195,000 to $220,000 through December 1, 2023, with 2.00% to 2.50% interest payments due June 1 and December 1. 1,030,000

$1,930,000 Drainage Bonds of 2015A, which mature serially on December 1, in amounts of $120,000 to $150,000 through December 1, 2030, with 2.00% to 3.00% interest payments due June 1 and December 1. 1,585,000

$3,115,000 Drainage Bonds of 2016A, which mature serially on December 1, in amounts of $190,000 to $235,000 through December 1, 2031, with 2.00% interest payments due June 1 and December 1. 2,760,000

- 57 - BLUE EARTH COUNTY NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2018

9. LONG-TERM DEBT (Continued)

A. Bonds (Continued)

Governmental Activities (Continued)

$3,715,000 Drainage Bonds of 2017B, which mature serially on December 1, in amounts of $205,000 to $300,000 through December 1, 2032, with 3.00% to 5.00% interest payments due June 1 and December 1. 3,490,000

Total Special Assessment Bonds $9,769,000 Plus: Unamortized premium 372,328 Total Special Assessment Bonds, net $10,141,328

Conservation of Natural Resources on the Statement of Activities includes $361,276 of direct interest with the remaining interest shown as “unallocated interest on long-term debt.”

The following is the annual requirements to retire bonded debts outstanding at December 31, 2018. Governmental Activities G.O. Bonds G.O. Special Assessment Bonds Year Ended December 31 Principal Interest Total Principal Interest Total 2019 1,875,000 855,503 2,730,503 949,000 253,360 1,202,360 2020 2,090,000 640,750 2,730,750 940,000 226,452 1,166,452 2021 2,180,000 545,500 2,725,500 905,000 198,862 1,103,862 2022 2,285,000 446,100 2,731,100 935,000 177,318 1,112,318 2023 2,395,000 331,850 2,726,850 875,000 155,100 1,030,100 2024-2028 6,270,000 354,600 6,624,600 3,285,000 494,713 3,779,713 2029-2032 - - - 1,880,000 108,800 1,988,800 Total 17,095,000 3,174,303 20,269,303 $9,769,000 $1,614,605 $11,383,605

B. Loans Payable

Governmental Activities

The following loans except the Minnesota Department of Employment and Economic Development (DEED) will be repaid from special assessments levied on benefited property and payments are made from the General Fund. The DEED loan will be repaid from the Note Receivable from VINE and payments are made from the Building and Capital Purchases Fund.

$33,905 Minnesota Pollution Control Agency Loan Agreement for funding a Clear Water Partnership Project on the Blue Earth River Watershed (Lily & Center Creeks). The loan payable was for $60,000 plus accrued interest, of which $33,905 has been received by the County. Payments are due semi-annually on June 15 and December 15, over ten years at 2%, beginning December 2009. $ 1,860

$101,472 Minnesota Pollution Control Agency Loan Agreement for funding a Clear Water Partnership Project on the Lower Maple River Watershed. The loan payable was for $100,000 plus accrued interest, of which $101,472 has been received by the County. Payments are due semi-annually on June 15 and December 15, over ten years at 2%, beginning June 2010. 11,080

- 58 - BLUE EARTH COUNTY NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2018

9. LONG-TERM DEBT (Continued)

B. Loans Payable (Continued)

Governmental Activities (Continued)

$143,523 Minnesota Pollution Control Agency Loan Agreement for implementation of conservation practices and effectiveness monitoring in the Middle Minnesota Watershed. The loan payable was for $162,500 plus accrued interest, of which $143,523 has been received by the County. Payments are due semi-annually on June 15 and December 15, over ten years at 2%, beginning June 2011. 31,034

$551,870 Minnesota Pollution Control Agency Loan Agreement for funding a Clear Water Partnership Project on the Greater Blue Earth Watershed. The loan payable was for $575,000 plus accrued interest, of which $551,870 has been received by the County. Payments are due semi-annually on June 15 and December 15, over ten years at 2%, beginning December 2014. 317,063

$125,199 Minnesota Pollution Control Agency Loan Agreement for implementation of conservation practices and effectiveness monitoring in the Middle Minnesota Watershed. The loan payable was for $420,000 plus accrued interest, of which $125,199 has been received by the County. Payments are due semi-annually on June 15 and December 15, over ten years at 2%, beginning December 2014. 71,930

$195,000 Minnesota Department of Employment and Economic Development Minnesota Cleanup Revolving Loan Agreement for abatement of the pollutant asbestos. The loan payable was for $195,000. Payments are due semi-annually on February 15 and August 15, over eight years at 1%, beginning August 2012. 12,904

$669,961 Minnesota Department of Agriculture AgBMP Loan Program for projects that mitigate pollution and other adverse environmental impacts. The loan payable was for $669,961. Payments are due semi-annually on April 1 and October 1, over ten years at zero-interest for each project, beginning April 2016, but there was a repayment made in 2015. 592,809

Total Loans Payable $1,038,680

The following is a summary of the annual requirements to retire loans payable at December 31, 2018. Governmental Activities Year Ended December 31 Loans Payable Principal Interest Total 2019 161,429 8,237 169,666 2020 145,482 6,321 151,803 2021 133,034 4,699 137,733 2022 136,338 3,285 139,623 2023 139,740 1,843 141,583 2024-2028 313,845 371 314,216 2029 8,812 - 8,812 Total $1,038,680 $24,756 $1,063,436

- 59 - BLUE EARTH COUNTY NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2018

9. LONG-TERM DEBT (Continued)

B. Loans Payable (Continued)

Business-Type Activities

The following loans were issued by the EDA to finance the Breckenridge Townhomes project.

$1,956,712 Minnesota Housing Finance Agency Loan Agreement for financing capital projects. The loan payable with no accrued interest is due September 23, 2025. This is $1,956,712 a forgivable loan if the required tax credit thresholds are maintained.

$153,000 Greater Minnesota Housing Fund Loan Agreement for financing capital projects. The loan payable with no accrued interest is due September 23, 2040. 153,000 Total Loans Payable $2,109,712

The following is a summary of the annual requirements to retire loans payable at December 31, 2018. Business-Type Activities Year Ended December 31 Loans Payable Principal Interest Total 2025 $1,956,712 $ - $1,956,712 2040 153,000 - 153,000 Total $2,109,712 $ - $2,109,712

C. Changes in Long-term Liabilities

Long-term liability activity for the year ended December 31, 2018, was as follows:

Beginning Ending Due Within Governmental activities: Balance Additions Reductions Balance One Year Bonds Payable: General obligation bonds $9,015,000 $8,890,000 $(810,000) $17,095,000 $1,875,000 Plus unamortized premium 765,376 1,109,787 (85,042) 1,790,121 243,583 General obligation bonds net 9,780,376 9,999,787 (895,042) 18,885,121 2,118,583 Special assessment bonds 10,707,000 - (938,000 ) 9,769,000 949,000 Plus unamortized premium 402,785 - (30,457) 372,328 30,457 Special assessment bonds net 11,109,785 - (968,457) 10,141,328 979,457 Total bonds payable 20,890,161 9,999,787 (1,863,499) 29,026,449 3,098,040 Loans Payable 1,059,516 135,523 (156,359) 1,038,680 161,429 Compensated absences 2,684,427 2,500,624 (2,014,402) 3,170,649 1,359,258 Total Governmental activity Long-term liabilities $24,634,104 $12,635,934 $(4,034,260) $ 33,235,778 $ 4,618,727 Business-type activities: Estimated liability for landfill closure/post-closure $3,597,462 $341,882 $ - $3,939,344 $ - Loans Payable 2,109,712 - - 2,109,712 - Total Business-type activities $5,707,174 $341,882 $ - $6,049,056 $ -

For the Governmental activities, compensated absences, other postemployment benefit obligations, and pension liabilities are generally liquidated by the general fund, public works fund, and human services fund.

- 60 - BLUE EARTH COUNTY NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2018

10. FUND BALANCE

A. CLASSIFICATIONS

At December 31, 2018, a summary of the governmental fund balance classifications are as follows:

Building and Total General Public Human County Capital Governmental Fund Works Services Ditch Purchases Funds Nonspendable: Inventory $ - $ 912,657 $ - $ - $ - $ 912,657 Long-term Notes 140,769 - - - - 140,769 Advances 1,352,259 - - - - 1,352,259 Total Nonspendable 1,493,028 912,657 - - - 2,405,685

Restricted: Debt Service 1,216,552 - - - - 1,216,552 Recycling Fee 7,313,168 - - - - 7,313,168 Solid Waste 596,355 - - - - 596,355 Small Cities Programs 775,064 - - - - 775,064 Ditches - - - 2,462,634 - 2,462,634 Notes - - - - 12,904 12,904 E-911 - - - - 439,738 439,738 Conceal & Carry 378,111 - - - - 378,111 Sheriff Contingent 5,000 - - - - 5,000 Library 368,481 - - - - 368,481 Professional Development 73,772 - - - - 73,772 Riparian Protection 274,169 - - - - 274,169 Road Projects - 499,946 499,946 Park Dedication Donations - 25,000 - - - 25,000 Election Technology - - - - 195,959 195,959 Recorder Equipment - - - - 336,718 336,718 Recorder Technology - - - - 196,584 196,584 Veterans Van - - - - 30,338 30,338 Total Restricted 11,000,672 524,946 - 2,462,634 1,212,241 15,200,493

Committed: Contractual Agreements - 6, 228,693 - - 9,939,762 16,168,455 Health Insurance 2,758,859 - - - - 2,758,859 Emergency Management - - - - 1,600,000 1,600,000 Advances - - - - 1,003,083 1,003,083 Capital Improvement Plan - - - - 42,484,749 42,484,749 Total Committed 2,758,859 6,228,693 - - 55,027,594 64,015,146

Assigned: Public Works - 3,233,597 - - - 3,233,597 Human Services - - 12,596,187 - - 12,596,187 Total Assigned - 3,233,597 12,596,187 - - 15,829,784

Unassigned: 16,577,883 - - (2,567,190) - 14,010,693

Total $ 31,830,442 $10,899,893 $12,596,187 $ (104,556) $56,239,835 $111,461,801

- 61 - BLUE EARTH COUNTY NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2018

11. PENSION PLANS AND OTHER POSTEMPLOYMENT BENEFITS

A. DEFINED BENEFIT PENSION PLANS

Plan Description All full-time and certain part-time employees of Blue Earth County participate in the following cost-sharing multiple-employer defined benefit pension plans administered by the Public Employees Retirement Association of Minnesota (PERA). PERA’s defined benefit pension plans are established and administered in accordance with Minnesota Statutes, Chapters 353 and 356. PERA’s defined benefit pension plans are tax qualified plans under Section 401 (a) of the Internal Revenue Code.

1. General Employees Retirement Plan (General Employee Plan; accounted for in the General Employees Fund). All full-time and certain part-time employees of the County are covered by the General Employees Plan. General Employees Plan members belong to the Coordinated Plan. Coordinated Plan members are covered by Social Security. All new members must participate in the Coordinated Plan, for which benefits vest after five years of credited service.

2. Public Employees Police and Fire Plan (Police and Fire Plan; accounted for in the Police and Fire Fund). The Police and Fire Plan, originally established for police officers and firefighters not covered by a local relief association, now covers all police officers and firefighters hired since 1980. Effective July 1, 1999, the Police and Fire Plan also covers police officers and firefighters belonging to local relief associations that elected to merge with and transfer assets and administration to PERA.

3. Local Government Correctional Plan (Correctional Plan; accounted for in the Correctional Fund). The Correctional Plan was established for correctional officers serving in county and regional corrections facilities. Eligible participants must be responsible for the security, custody, and control of the facilities and its inmates.

Benefits Provided PERA provides retirement, disability and death benefits. Benefit provisions are established by state statute and can only be modified by the state legislature. Vested terminated employees who are entitled to benefits, but are not receiving them yet, are bound by the provisions in effect at the time they last terminated their public service.

1. General Employees Plan Benefits General Employees Plan 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. Two methods are used to compute benefits for PERA's Coordinated Plan members. Members hired prior to July 1, 1989, receive the higher of Method 1 or Method 2 formulas. Only Method 2 is used for members hired after June 30, 1989. Under Method 1, the annuity accrual rate for a Coordinated Plan member is 1.2% of average salary for each of the first ten years of service and 1.7% for each remaining year. Under Method 2, the annuity accrual rate is 1.7% for Coordinated Plan members for each year of service. The accrual rates for former MERF members is 2.0% for each of the first ten years of service and 2.5% for each additional year. For members hired prior to July 1, 1989, a full annuity is available when age plus years of service equal 90 and normal retirement age is 65. For members hired on or after July 1, 1989, normal retirement age is the age for unreduced Social Security benefits capped at 66.

Benefit increases are provided to benefit recipients each January. Increases are related to the fund ratio of the plan. If the General Employees Plan is at least 90% funded for two consecutive years, benefit recipients are given a 2.5% increase. If the plan has not exceeded 90% funded, or have fallen below 80%, benefit recipients are given a 1.0% increase. A benefit recipient who has been receiving a benefit for at least 12 full months as of June 30, will receive a full increase. Members receiving benefits for at least one month but less than 12 full months as of June 30, will receive a pro rata increase.

- 62 - BLUE EARTH COUNTY NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2018

11. PENSION PLANS AND OTHER POSTEMPLOYMENT BENEFITS (Continued)

A. DEFINED BENEFIT PENSION PLANS (Continued)

Benefits Provided (Continued) 2. Police and Fire Plan Benefits Benefits for the Police and Fire Plan members first hired after June 30, 2010, but before July 1, 2014, vest on a prorated basis from 50% after five years up to 100% after ten years of credited service. Benefits for Police and Fire Plan members first hired after June 30, 2014, vest on a prorated basis from 50% after ten years up to 100% after twenty years of credited service. The annuity accrual rate is 3% of average salary for each year of service. For Police and Fire Plan members who were first hired prior to July 1, 1989, a full annuity is available when age plus years of service equal at least 90.

Benefit increases are provided to benefit recipients each January. Police and Fire Plan benefit recipients receive a future annual 1.0% increase. An annual adjustment will equal 2.5% any time the plan exceeds a 90% funded ratio for two consecutive years. If the adjustment is increased to 2.5% and the funded ratio falls below 80% for one year or 85% for two consecutive years, the post-retirement benefit increase will be lowered to 1.0%. A benefit recipient who has been receiving a benefit for at least 12 full months as of June 30, will receive a full increase. Members receiving benefits for at least one month but less than 12 full months as of June 30, will receive a pro rata increase. For retirements after May 31, 2014, the first increase will be delayed two years.

3. Correctional Plan Benefits Benefits for Correctional Plan members first hired after June 30, 2010, vest on a prorated basis from 50% after five years up to 100% after ten years of credited service. The annuity accrual rate is 1.9% of average salary for each year of service in that plan. For Correctional Plan members who were first hired prior to July 1, 1989, a full annuity is available when age plus years of service equal at least 90.

Benefit increases are provided to benefit recipients each January. Increases are related to the funding ratio of the plan. If the Correctional Plan is at least 90% funded for two consecutive years, benefit recipients are given a 2.5% increase. If the plan has not exceeded 90% funded, or have fallen below 80%, benefit recipients are given a 1.0% increase. A benefit recipient who has been receiving a benefit for at least 12 full months as of June 30, will receive a full increase. Members receiving benefits for at least one month but less than 12 full months as of June 30, will receive a pro rata increase.

Contributions Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. Contribution rates can only be modified by the state legislature.

1. General Employees Fund Contributions Coordinated Plan members were required to contribute 6.5% of their annual covered salary in year 2018; the County was required to contribute 7.5% for Coordinated Plan members. The County’s contributions to the General Employees Fund for the year ended December 31, 2018, were $1,767,549. The County’s contributions were equal to the required contributions as set by state statute.

2. Police and Fire Fund Contributions Plan members were required to contribute 10.8% of their annual covered salary and the County was required to contribute 16.2% of pay for members in fiscal year 2018. The County’s contributions to the Police and Fire Fund for the year ended December 31, 2018, were $429,812. The County’s contributions were equal to the required contributions as set by state statute.

3. Correctional Fund Contributions Plan members were required to contribute 5.83% of their annual covered salary and the County was required to contribute 8.75% of pay for plan members in fiscal year 2018. The County’s contributions to the Correctional Fund for the year ended December 31, 2018, were $165,940. The County’s contributions were equal to the required contributions as set by state statute.

- 63 - BLUE EARTH COUNTY NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2018

11. PENSION PLANS AND OTHER POSTEMPLOYMENT BENEFITS (Continued)

A. DEFINED BENEFIT PENSION PLANS (Continued)

Pension Costs 1. General Employees Fund Pension Costs At December 31, 2018, the County reported a liability of $19,033,781 for its proportionate share of the General Employees Fund’s net pension liability. The County’s net pension liability reflected a reduction due to the State of Minnesota’s contribution of $16 million to the fund in 2018. The State of Minnesota is considered a non-employer contributing entity and the state’s contribution meets the definition of a special funding situation. The State of Minnesota’s proportionate share of the net pension liability associated with the County totaled $624,423. The net pension liability was measured as of June 30, 2018, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The County’s proportion of the net pension liability was based on the County’s contributions received by PERA during the measurement period for employer payroll paid dates from July 1, 2017, through June 30, 2018, relative to the total employer contributions received from all of PERA’s participating employers. At June 30, 2018, the County’s proportion share was .3431% which was an increase of .0004% from its proportion measured as of June 30, 2017.

For the year ended December 31, 2018, the County recognized pension expense of $2,000,160 for its proportionate share of the General Employees Fund’s pension expense. In addition, the County recognized an additional $145,614 as pension expense (and grant revenue), which results in a reduction of the net pension liability, for its proportionate share of the State of Minnesota’s contribution of $16 million to the General Employees Fund.

At December 31, 2018, the County reported its proportionate share of the General Employees Plan’s deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows Deferred Inflows of Resources of Resources Differences between expected and actual economic experience $ 503,231 $ 556,104 Difference between projected and actual investment earnings - 1,959,030 Changes in actuarial assumptions 1,821,386 2,136,942 Changes in proportion 247,183 40,597 Contributions paid to PERA subsequent to the measurement date 889,773 - Total $3,461,573 $4,692,673

A total of $889,773 reported as deferred outflows of resources related to pensions resulting from County contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended December 31, 2019. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows:

Year ended December 31: Pension Expense Amount 2019 $853,318 2020 ($1,039,962) 2021 ($1,536,962) 2022 ($397,267)

- 64 - BLUE EARTH COUNTY NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2018

11. PENSION PLANS AND OTHER POSTEMPLOYMENT BENEFITS (Continued)

A. DEFINED BENEFIT PENSION PLANS (Continued)

Pension Costs (Continued) 2. Police and Fire Fund Pension Costs At December 31, 2018, the County reported a liability of $2,619,975 for its proportionate share of the Police and Fire Fund’s net pension liability. The net pension liability was measured as of June 30, 2018, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The County’s proportion of the net pension liability was based on the County’s contributions received by PERA during the measurement period for employer payroll paid dates from July 1, 2017, through June 30, 2018, relative to the total employer contributions received from all of PERA’s participating employers. At June 30, 2018, the County’s proportion was .2458% which was an increase of .0088% from its proportion measured as of June 30, 2017. The County also recognized $22,122 for the year ended December 31, 2018, as revenue and an offsetting reduction of net pension liability for its proportionate share of the State of Minnesota’s on-behalf contributions to the Police and Fire Fund. Legislation passed in 2013 required the State of Minnesota to begin contributing $9 million to the Police and Fire Fund each year, starting in fiscal year 2014.

For the year ended December 31, 2018, the County recognized pension expense of $344,521 for its proportionate share of the Police and Fire Plan’s pension expense.

At December 31, 2018, the County reported its proportionate share of the Police and Fire Plan’s deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows Deferred Inflows of Resources of Resources Differences between expected and actual economic experience $ 103,412 $ 631,477 Difference between projected and actual investment earnings - 527,841 Changes in actuarial assumptions 3,259,929 3,722,000 Changes in proportion 225,907 240,790 Contributions paid to PERA subsequent to the measurement date 225,411 - Total $3,814,659 $5,122,108

A total of $225,411 reported as deferred outflows of resources related to pensions resulting from County contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended December 31, 2019. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows:

Year ended December 31: Pension Expense Amount 2019 ($14,062) 2020 ($127,896) 2021 ($346,470) 2022 ($1,055,594) 2023 $11,162

- 65 - BLUE EARTH COUNTY NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2018

11. PENSION PLANS AND OTHER POSTEMPLOYMENT BENEFITS (Continued)

A. DEFINED BENEFIT PENSION PLANS (Continued)

Pension Costs (Continued) 3. Correctional Plan Pension Costs At December 31, 2018, the County reported a liability of $153,434 for its proportionate share of the Correctional Plan’s net pension liability. The net pension liability was measured as of June 30, 2018, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The County’s proportion of the net pension liability was based on the County’s contributions received by PERA during the measurement period for employer payroll paid dates from July 1, 2017, through June 30, 2018, relative to the total employer contributions received from all of PERA’s participating employers. At June 30, 2018, the County’s proportion was .9329% which was a decrease of .0471% from its proportion measured as of June 30, 2017.

For the year ended December 31, 2018, the County recognized pension expense of ($184,287) for its proportionate share of the Correctional Plan’s pension expense.

At December 31, 2018, the County reported its proportionate share of the Correctional Plan’s deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows Deferred Inflows of Resources of Resources Differences between expected and actual economic experience $ 8,089 $ 17,229 Difference between projected and actual investment earnings - 169,484 Changes in actuarial assumptions 791,346 1,789,640 Changes in proportion 773 173,739 Contributions paid to PERA subsequent to the measurement date 82,573 - Total $882,781 $2,150,092

A total of $82,573 reported as deferred outflows of resources related to pensions resulting from County contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended December 31, 2019. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows:

Year ended December 31: Pension Expense Amount 2019 $68,556 2020 ($756,753) 2021 ($629,565) 2022 ($32,122)

4. Total Pension Expense-The total pension expense for all plans recognized by the County for the year ended December 31, 2018 was $2,160,394.

Actuarial Assumptions The total pension liability in the June 30, 2018 actuarial valuation was determined using the following actuarial assumptions:

Inflation 2.50% per year Salary Growth 3.25% per year Investment Rate of Return 7.50%

- 66 - BLUE EARTH COUNTY NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2018

11. PENSION PLANS AND OTHER POSTEMPLOYMENT BENEFITS (Continued)

A. DEFINED BENEFIT PENSION PLANS (Continued)

Actuarial Assumptions (Continued)

Salary increases were based on a service-related table. Mortality rates for active members, retirees, survivors, and disabilitants for all plans were based on PR 2014 tables for males or females, as appropriate, with slight adjustments to fit PERA’s experience. Cost of living benefit increases after retirement for retirees are assumed to be 1.25% per year for the General Employees Plan, 1.00% per year for the Police and Fire Plan, and 2.00% per year for the Correctional Plan.

Actuarial assumptions used in the June 30, 2018 valuation were based on the results of actuarial experience studies. The most recent six-year experience study in the General Employees Plan was completed in 2015. The most recent four-year experience study for Police and Fire Plan was completed in 2016. The five-year experience study for the Correction Plan, prepared by a former actuary, was completed in 2012. The mortality assumption for the Correctional Plan is based on the Police and Fire Plan experience study completed in 2016. Economic assumptions were updated in 2017 based on a review of inflation and investment return assumption.

The following changes in actuarial assumptions occurred in 2018:

General Employees Retirement Plan • The morality projection scale was changed from MP-2015 to MP-2017. • The assumed post-retirement benefit increase was changed from 1.00% per year through 2044 and 2.50% per year thereafter to 1.25% per year. Public Employees Police and Fire Plan • The morality projection scale was changed from MP-2016 to MP-2017. • As set by statute, the assumed post-retirement benefit increase was changed from 1.0% per year through 2064 and 2.5% per year, thereafter, to 1.0% for all years, with no trigger. Local Government Correctional Plan • The Single Discount Rate was changed from 5.96% per annum to 7.50% per annum. • The morality projection scale was changed from MP-2016 to MP-2017. • The assumed post-retirement benefit increase was changed from 2.50% per year to 2.00% per year.

The State Board of Investment, which manages the investments of PERA, prepares an analysis of the reasonableness on a regular basis of the long-term expected rate of return using a building-block method in which best-estimate ranges of expected future rates of return are developed for each major asset class. These ranges are combined to produce an expected long-term rate of return by weighting the expected future rates of return by the target asset allocation percentages. The target allocation and best estimates of geometric real rates of return for each major asset class are summarized in the following table:

Long-Term Expected Real Asset Class Target Allocation Rate of Return Domestic Stocks 36% 5.10% International Stocks 17% 5.30% Bonds (Fixed Income) 20% 0.75% Alternative Assets (Private Markets) 25% 5.90% Cash 2% 0.00%

- 67 - BLUE EARTH COUNTY NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2018

11. PENSION PLANS AND OTHER POSTEMPLOYMENT BENEFITS (Continued)

A. DEFINED BENEFIT PENSION PLANS (Continued)

Discount Rate The discount rate used to measure the total pension liability in 2018 was 7.5%. The projection of cash flows used to determine the discount rate assumed contributions from plan members and employers will be made at the rate set in Minnesota Statute. Based on that assumption, the fiduciary net position of the General Employees Fund, the Police and Fire Fund and Correctional Fund were projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability.

Pension Liability Sensitivity The following presents the County’s proportionate share of the net pension liability for all plans it participates in, calculated using the discount rate disclosed in the preceding paragraph, as well as what the County’s proportionate share of the net pension liability would be if it were calculated using a discount rate 1.0 percentage point lower or 1.0 percentage point higher than the current discount rate:

Proportionate Share of the General Employees Public Employees Police Local Government Retirement Plan and Fire Plan Correctional Plan Discount Net Pension Discount Net Pension Discount Net Pension Rate Liability Rate Liability Rate Liability 1% Decrease 6.5% $30,932,331 6.5% $5,617,390 6.5% $1,313,131 Current 7.5% $19,033,781 7.5% $2,619,975 7.5% $153,434 1% Increase 8.5% $9,211,868 8.5% $141,237 8.5% ($774,288)

Pension Plan Fiduciary Net Position Detailed information about each pension plan’s fiduciary net position is available in a separately-issued PERA financial report that includes financial statements and required supplementary information. That report may be obtained on the internet at www.mnpera.org; by writing to PERA at 60 Empire Drive, Suite 200, St. Paul, Minnesota 55103-2088; or by calling 651-296-7460 or 1-800-652-9026.

B. DEFINED CONTRIBUTION PLAN

Five board members of the County are covered by the Defined Contribution Plan, a multiple-employer deferred compensation plan administered by PERA. The Defined Contribution Plan is a tax qualified plan under Section 401(a) of the Internal Revenue Code and all contributions by or on behalf of employees are tax deferred until time of withdrawal.

Plan benefits depend solely on amounts contributed to the plan plus investment earnings, less administrative expenses. Minnesota Statutes, Chapter 353D.03, specifies plan provisions, including the employee and employer contribution rates for those qualified personnel who elect to participate. An eligible elected official who decides to participate contributes 5.00% of salary which is matched by the employer. Employees who are paid for their services may elect to make member contributions in an amount not to exceed the employer share. Employer and employee contributions are combined and used to purchase shares in one or more of the seven accounts of the Minnesota Supplemental Investment Fund. For administering the plan, PERA receives 2.00% of employer contributions and 0.25% of the assets in each member's account annually.

Total contributions by dollar amount and percentage of covered payroll made by the County and employees during the year ended December 31, 2018 were $9,294 and $9,294, respectively. The percentage of covered payroll by the County and employee were 5.00 percent for both. Required contribution rates were 5.00 percent.

- 68 - BLUE EARTH COUNTY NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2018

11. PENSION PLANS AND OTHER POSTEMPLOYMENT BENEFITS (Continued)

B. DEFINED CONTRIBUTION PLAN (Continued)

PERA issues a publicly available financial report that includes financial statements and required supplementary information for the Public Employees Defined Contribution Plan. That report may be obtained on the internet at www.mnpera.org; by writing to PERA at 60 Empire Drive, Suite 200, Saint Paul, Minnesota 55103-2088, or by calling 651-296-7460 or 1-800-652-9026.

C. OTHER POSTEMPLOYMENT BENEFITS

Plan Description and Funding Policy Blue Earth County administers Other Postemployment Benefits Plan (OPEB), a single-employer defined benefits health care plan to eligible retirees and their dependents.

Elected County officials, department heads, supervisors, and employees not subject to a collective bargaining agreement are entitled to paid County health insurance upon their retirement if they were hired and eligible before July 1, 1991, and if the individual has reached age 55 and been employed by Blue Earth County 15 years. One year of paid County health insurance will be provided for every 4 years of service to the County by elected officials and department heads. One year of paid County health insurance will be provided for every 7 years of service to the County by supervisors and employees not subject to a collective bargaining unit. The County had nine employees who were eligible for this benefit in 2018. The cost for this program totaled $138,817 in 2018.

The County also provides health insurance benefits for eligible retired employees and their spouses under a single-employer self-insured plan. The County provides benefits for retirees as required by Minnesota Statute 471.61 subdivision 2b. Retirees are required to pay 100% of the total premium cost. Since the premium is determined on the entire active and retiree population, the retirees are receiving implicit rate subsidy. As of January 1, 2018, there were approximately 15 retirees receiving health benefits from the County’s health plan. There were also 425 Active plan participants. The implicit rate subsidy amount was determined by an actuarial study to be $170,571 for 2018.

The county offered an early retirement incentive for County employees in 2018. The early retirement was voluntary and included continued health insurance on an employee’s existing plan at 100% for 36 months after the effective date of retirement or until eligible for other health insurance benefits for employee with 15 years or more of service with Blue Earth County. The County had 22 employees participate in the health insurance benefit for 2018. The health care cost of this program totaled $50,034 in 2018, and an estimated cost of $747,260 for 2019 to 2021. The continued health insurance benefit is included in the calculation of the OPEB actuarial information since they were active employees, but the report did not include early retirement incentive since the valuation date was January 1, 2018 but will be reflected in the disclosure results as of December 10, 2019.

OPEB benefits have historically been funded on a pay-as-you-go basis usually paying retiree benefits out of the general fund. Under GASB 75, plan sponsors may set up a trust and pre-fund the benefits. There is no requirement to pre-fund benefits under GASB 75. No assets have been accumulated in a trust that meets the criteria in paragraph 4 of GASB 75. The OPEB plan does not issue a separate, audited GAAP- basis benefits plan financial report.

Total OPEB Liability The County’s total OPEB liability of $4,175,647 was measured as of January 1, 2018 and was determined by an actuarial valuation as of that date.

The total OPEB liability for the year-end December 31, 2018, actuarial valuation was determined using the following actuarial assumptions and other inputs, applied to all periods included in the measurement, unless otherwise specified:

Inflation 2.50% Salary increases 3.00%, Health care cost trend 6.50%, as of January 1, 2018 grading to 5.00% over 6 years

- 69 - BLUE EARTH COUNTY NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2018

11. PENSION PLANS AND OTHER POSTEMPLOYMENT BENEFITS (Continued)

C. OTHER POSTEMPLOYMENT BENEFITS (Continued)

Total OPEB Liability (Continued) The current year discount rate is 3.3%, which is a change from the prior year rate of 3.50%. For the current valuation, the discount rate is based on a tax-exempt, high quality estimated yield of 20-Year AA-rated municipal bond index.

Changes in the Total OPEB Liability

Total OPEB Liability

Balance at December 31, 2017 restated $ 4,163,626 Changes for the year: Service Cost 180,424 Interest 138,334 Benefit payments (306,737)

Net Change 12,021

Balance at December 31, 2018 $ 4,175,647

OPEB Liability Sensitivity The following presents the total OPEB liability of the County, calculated using the discount rate previously disclosed, as well as what the County’s total OPEB liability would be if it were calculated using a discount rate that is 1.0 percentage point lower or percentage point higher than the current discount rate:

Discount Total OPEB Rate Liability 1% Decrease 2.30% $4,436,274 Current 3.30% $4,175,647 1% Increase 4.30% $3,931,224

The following presents the total OPEB liability of the County, calculated using the health care cost trend previously disclosed, as well as what the County’s total OPEB liability would be if it were calculated using health care cost trend rates that are 1.0 percentage point lower or 1.0 percentage point higher than the current health care cost trend rate:

Health Care Total OPEB Trend Rate Liability 1% Decrease 2.30% $3,859,565 Current 3.30% $4,175,647 1% Increase 4.30% $4,540,715

OPEB Expense and Deferred Outflows of Resources For the year ended December 31, 2018, the County recognized OPEB expense of $318,758. The County reported deferred outflows of resources related to OPEB resulting from contributions made subsequent to the measurement date of $309,388 which will be recognized as a reduction of the OPEB liability for the year ended December 31, 2019.

- 70 - BLUE EARTH COUNTY NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2018

11. PENSION PLANS AND OTHER POSTEMPLOYMENT BENEFITS (Continued)

C. OTHER POSTEMPLOYMENT BENEFITS (Continued)

Changes in Actuarial Assumptions The following changes in actuarial assumptions occurred in 2018: • The discount rate used changed from 3.50% to 3.30%. • Mortality tables were updated from the RP-2014 White Collar Mortality Tables with MP-2015 Generational Improvement Scale (with Blue Collar adjustment for Police and Fire Personnel) to the RP- 2014 White Collar Mortality Tables with MP-2017 Generational Improvement Scale (with Blue Collar adjustment for Police and Fire Personnel). • The retirement and withdrawal tables for all employers were updated. • Future retirees with post-age 65 GASB 75 subsidies are assumed to receive Count paid premiums equal to the Platinum blue Medicare Supplement rates. • Health care trend rates were changed to better anticipate short term and long-term medical increases.

12. RISK MANAGEMENT

The County is exposed to various risks of loss related to torts; theft of, damage to, or destruction of assets; errors or omissions; injuries to employees; or natural disasters. The County has entered into a joint powers agreement with other Minnesota Counties to form the Minnesota Counties Intergovernmental Trust (MCIT). In 1983 and 1986, the County joined the MCIT Workers’ Compensation and Property and Casualty Divisions, respectively. For all other risk, the County has purchased commercial insurance. There were no significant reductions in insurance from the prior year. The amount of settlements did not exceed insurance coverage for each of the past three fiscal years.

As of January 1, 1989, the Workers’ Compensation Division was self-sustaining based on the premiums charged, so that total contributions plus compounded earnings on these contributions will equal the amount needed to satisfy claims liabilities and other expenses. MCIT participates in the Workers’ Compensation Reinsurance Association with coverage at $500,000 per claim for plan year 2018, and $500,000 per claim for plan year 2019. Should MCIT Workers’ Compensation Division liabilities exceed assets, MCIT may assess the County in a method and amount to be determined.

The Property and Casualty Division is self-sustaining and the County pays an annual premium to cover current and future losses. The MCIT carries reinsurance for its property lines to protect against catastrophic losses. Should the MCIT Property and Casualty Division liabilities exceed assets for 2007 or years beyond, MCIT may assess the County in a method and amount to be determined by MCIT. Premiums are paid by the General Fund and are reimbursed from other funds for their share.

In July 1982, the County began to self-insure for employee health insurance coverage. The County has retained risk up to $125,000 stop-loss per person per year (120 percent aggregate) for the health plan. At December 31, 2018, the amount of these liabilities was $450,000 and is accounted for in the General Fund.

This liability is the County's best estimate based on available information. Following are the changes in the claims liability for the past two years.

2018 2017 Liability at January 1 $ 500,000 $ 270,000 Current year claims and changes in estimates 8,094,839 7,226,005 Payments and adjustments (8,144,839) (6,996,005) Liability at December 31 $ 450,000 $ 500,000

- 71 - BLUE EARTH COUNTY NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2018

13. TAX ABATEMENTS

The County has agreed to tax abatements, under MN Statutes 469.1812 to 469.1815 in conjunction with Cities within the County. The County had three Economic Development Tax Abatements to promote development of commercial opportunities and increase the tax base. The Abatement will equal the property tax calculated to the extent actually received by the County as its share of property taxes. The County has not made any commitments as part of the agreements other than to reduce taxes. The County will transfer to the Cities the abatement to fund or reimburse the cost related to the abatement. The amount of taxes abated for the year ended December 31, 2018, regardless of dollar amount, is shown below:

Tax Abatement Program County Taxes Abated Economic Development Tax Abatements A tax abatement to redevelop a downtown hotel $45,733 A tax abatement to develop a grocery store 7,922 A tax abatement for a bus service facility 3,454

Tax Abatements – Pay-As-You-Go Tax Increment

The County is subject to tax abatements granted by Cities within the County, under MN Statutes 469.174 to 469.179 through a pay-as-you-go Tax Increment Financing (TIF). TIF’s within the County are used for redevelopment, housing or economic development. TIF captures the increase in tax capacity and property taxes of all taxing jurisdictions from development or redevelopment to provide funding for the related project. The County had eleven pay-as-you-go TIFs in 2018, the County’s portion of the taxes abated was approximately 42%. The amount of taxes abated for the TIF and the County’s share for the year ended December 31, 2018, is shown below:

Number Taxes County Taxes Tax Abatement Program of TIF Abated Abated Tax Increment Financing City of: Eagle Lake 2 $112,300 $ 53,591 Madison Lake 2 57,308 21,886 Mankato 7 390,275 161,348 Total 11 $559,883 $236,825

14. SUMMARY OF SIGNIFICANT CONTINGENCIES AND OTHER ITEMS

Claims and Litigation

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

Jointly Governed Organizations

The County, in conjunction with other local governments, appoints at least one member to the Boards of the following organizations.

Greater Blue Earth River Basin Alliance. The County made payments of $7,252 for membership dues in 2018 and $7,252 in 2017 to the Board.

Law Enforcement Shooting Range. The County made no payments in 2018 and 2017.

Mankato/North Mankato Area Planning Organization. The County made no payments in 2018 and 2017.

Minnesota Counties Intergovernmental Trust. The County made payments of $623,110 in 2018 and $542,140 in 2017 and received dividends of $173,122 in 2018 and $160,070 in 2017.

- 72 - BLUE EARTH COUNTY NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2018

14. SUMMARY OF SIGNIFICANT CONTINGENCIES AND OTHER ITEMS (Continued)

Jointly Governed Organizations (Continued)

Minnesota River Valley Drug Task Force. The County made payments of $39,784 in 2018 and $39,784 in 2017.

Minnesota River Valley Tactical Response Team. The County made payments of $176 in 2018 and $125 in 2017.

Region One-Southeast Minnesota Homeland Security Emergency Management. The County made payments of $1,000 in 2018 and $1,000 in 2017.

Rural Minnesota Energy Board. The County made payments of $2,500 for membership dues in 2018 and $1,000 in 2017.

Sentence to Serve. The County received payments of $21,279 in 2018 and $15,056 in 2017.

South Central Community Based Initiative. The County made transfers of 22,680 in 2018 and no payments 2017.

South Central Emergency Medical Services. The County made payments of $5,500 in 2018 and $5,000 in 2017.

South Central Minnesota Computer Consortium. The County made payments of $46,682 in 2018 and $45,875 in 2017.

South Central Minnesota Regional Emergency Communications Joint Powers Board. The County made payments of $5,665 in 2018 and $7,015 in 2017.

South Central Regional IMM Trak Joint Powers Board. The County made payments of $17,101 in 2018 and $14,436 in 2017.

South Central Transit Joint Powers Board. The County made payments of $44,178 in 2018 and $34,493 in 2017.

South Central Workforce Council. The County made no payments in 2018 or 2017 to the Board.

South East Minnesota Recyclers’ Exchange. The County made payments of $1,700 for membership dues in 2018 and $1,700 in 2017 to the Board.

- 73 - BLUE EARTH COUNTY REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CHANGES IN TOTAL OPEB LIABILITY AND RELATED RATIOS (Last Ten Years*)

2018 Total OPEB Liability Service Cost $ 180,424 Interest 138,334 Benefit Payments (306,737) Net Change in Total OPEB Liaibility 12,021 Total OPEB Liability - Beginning 4,163,626 Total OPEB Liability - Ending $ 4,175,647

Covered Payroll 26,434,283

Total OPEB Liability as a Percentage of Covered Payroll 16%

* This schedule is provided prospectively beginning with the fiscal year ended December 31, 2018.

The notes to the required supplementary information are an integral part of this schedule. - 74 - BLUE EARTH COUNTY REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF PROPORTIONATE SHARE OF NET PENSION LIABILITY (Last Ten Years*)

PERA General Employees Retirement Plan

Employer's Plan State's Proportionate Fiduciary Employer's Proportionate Employer's and Share of the Net Net Position Employer’s Proportionate Share of the Net State's Pension Liability as a Proportion Share (Amount) of Pension Liability Proportionate (Asset) as a Percentage (Percentage) of the Net Pension Associated with Share of the Net Percentage of its of the Total Fiscal Year the Net Pension Liability (Asset) the County Pension Liability Covered Payroll Covered Payroll Pension Ending Liability (Asset) (a) (b) (a+b) (c) (a/c) Liability 6/30/2018 0.3431% $19,033,781 $624,423 $19,658,204 $23,063,314 82.53% 75.5% 6/30/2017 0.3427% $21,877,742 $275,096 $22,152,838 $22,077,686 99.09% 75.9% 6/30/2016 0.3437% $27,906,735 $364,484 $28,271,219 $21,327,683 130.85% 68.9% 6/30/2015 0.3261% $16,900,194 N/A $16,900,194 $19,183,832 88.10% 78.2%

PERA Police and Fire Plan

Employer's Proportionate Employer's Share of the Net Employer’s Proportionate Pension Liability Plan Fiduciary Proportion Share (Amount) of (Asset) as a Net Position as a (Percentage) of the Net Pension Percentage of its Percentage of Fiscal Year the Net Pension Liability (Asset) Covered Payroll Covered Payroll the Total Ending Liability (Asset) (a) (b) (a/b) Pension Liability 6/30/2018 0.246% $2,619,975 $2,590,696 101.13% 88.8% 6/30/2017 0.237% $3,199,782 $2,429,159 131.72% 85.4% 6/30/2016 0.246% $9,872,408 $2,373,252 415.99% 63.9% 6/30/2015 0.230% $2,613,338 $2,112,851 123.69% 86.6%

PERA Local Government Correctional Plan

Employer's Proportionate Employer's Share of the Net Employer’s Proportionate Pension Liability Plan Fiduciary Proportion Share (Amount) of (Asset) as a Net Position as a (Percentage) of the Net Pension Percentage of its Percentage of Fiscal Year the Net Pension Liability (Asset) Covered Payroll Covered Payroll the Total Ending Liability (Asset) (a) (b) (a/b) Pension Liability 6/30/2018 0.93% $153,434 $1,905,223 8.05% 97.6% 6/30/2017 0.98% $2,793,010 $1,957,094 142.71% 67.9% 6/30/2016 1.02% $3,726,203 $1,914,559 194.62% 58.2% 6/30/2015 1.00% $154,600 $1,798,141 8.60% 96.9%

* This schedule is provided prospectively beginning with the fiscal year ended December 31, 2015.

The notes to the required supplementary information are an integral part of this schedule. - 75 - BLUE EARTH COUNTY REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CONTRIBUTIONS (Last Ten Years*)

PERA General Employees Retirement Plan

Statutorily Contributions in Relation Contribution Contributions as a Required to the Statutorily Required Deficiency Covered Percentage of Fiscal Year Contribution Contribution (Excess) Payroll Covered Payroll Ending (a) (b) (a-b) (c) (b/c) 12/31/2018 $1,767,549 $1,767,549 $0 $23,567,313 7.50% 12/31/2017 $1,690,962 $1,690,962 $0 $22,546,173 7.50% 12/31/2016 $1,606,937 $1,606,937 $0 $21,425,839 7.50% 12/31/2015 $1,491,501 $1,491,501 $0 $19,886,659 7.50%

PERA Police and Fire Plan

Statutorily Contributions in Relation Contribution Contributions as a Required to the Statutorily Required Deficiency Covered Percentage of Fiscal Year Contribution Contribution (Excess) Payroll Covered Payroll Ending (a) (b) (a-b) (c) (b/c) 12/31/2018 $429,812 $429,812 $0 $2,653,158 16.20% 12/31/2017 $404,637 $404,637 $0 $2,497,756 16.20% 12/31/2016 $392,063 $392,063 $0 $2,420,136 16.20% 12/31/2015 $350,305 $350,305 $0 $2,162,372 16.20%

PERA Local Government Correctional Plan

Statutorily Contributions in Relation Contribution Contributions as a Required to the Statutorily Required Deficiency Covered Percentage of Fiscal Year Contribution Contribution (Excess) Payroll Covered Payroll Ending (a) (b) (a-b) (c) (b/c) 12/31/2018 $165,940 $165,940 $0 $1,896,451 8.75% 12/31/2017 $166,988 $166,988 $0 $1,908,441 8.75% 12/31/2016 $168,652 $168,652 $0 $1,927,453 8.75% 12/31/2015 $160,273 $160,273 $0 $1,833,572 8.74%

* This schedule is presented prospectively beginning with the fiscal year ended December 31, 2015.

The notes to the required supplementary information are an integral part of this schedule. - 76 - BLUE EARTH COUNTY NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION FOR THE YEAR ENDED DECEMBER 31, 2018

Other Postemployment Benefits Funded Status

In 2018, the County implemented Governmental Accounting Standards Board (GASB) Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pension. See Note 11.C in the notes to the financial statements for additional information regarding the County’s other postemployment benefits.

Employer Contributions to Other Postemployment Benefits

Assets have not been accumulated in a trust that meets the criteria in paragraph four of GASB Statement 75 to pay related benefits. The following changes in actuarial assumptions occurred in 2018: • The discount rate used changed from 3.50% to 3.30%. • Mortality tables were updated from the RP-2014 White Collar Mortality Tables with MP-2015 Generational Improvement Scale (with Blue Collar adjustment for Police and Fire Personnel) to the RP-2014 White Collar Mortality Tables with MP-2017 Generational Improvement Scale (with Blue Collar adjustment for Police and Fire Personnel). • The retirement and withdrawal tables for all employers were updated. • Future retirees with post-age 65 GASB 75 subsidies are assumed to receive Count paid premiums equal to the Platinum blue Medicare Supplement rates. • Health care trend rates were changed to better anticipate short term and long-term medical increases.

Defined Benefit Pension Plans Changes in Significant Plan Provisions, Actuarial Methods and Assumptions

The following changes were reflected in the valuation performed on behalf of the Public Employees Retirement Association for the year ended June 30, 2018:

General Employees Retirement Plan Changes in Actuarial Assumptions: 2018 Changes • The morality projection scale was changed from MP-2015 to MP-2017. • The assumed benefit increase was changed from 1.00% per year through 2044 and 2.50% per year thereafter to 1.25% per year. 2017 Changes • The Combined Service Annuity loads were changed from 0.8% for active members and 60.0% for vested and non-vested deferred members. The revised CSA loads are now 0.0% for active member liability, 15.0% for vested deferred member liability and 3.0% for non-vested deferred member liability. • The assumed post-retirement benefit increase rate was changed from 1.0% per year for all years to 1.0% per year through 2044 and 2.5% per year thereafter. 2016 Changes • The assumed post-retirement benefit increase rate was changed from 1.0% per year through 2035 and 2.5% per year thereafter to 1.0% per year for all years. • The assumed investment return was changed from 7.9% to 7.5%. The single discount rate was changed from 7.9% to 7.5%. • Other assumptions were changed pursuant to the experience study dated June 30, 2015. The assumed payroll growth and inflation were decreased by 0.25% to 3.25% for payroll growth and 2.50% for inflation.

Public Employees Police and Fire Plan Changes in Actuarial Assumptions: 2018 Changes • The morality projection scale was changed from MP-2016 to MP-2017.

- 77 - BLUE EARTH COUNTY NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION FOR THE YEAR ENDED DECEMBER 31, 2018 Defined Benefit Pension Plans Changes in Significant Plan Provisions, Actuarial Methods and Assumptions (Continued)

Public Employees Police and Fire Plan (Continued) Changes in Actuarial Assumptions: (Continued) 2017 Changes • Assumed salary increases were changed as recommended in the June 30, 2016 experience study. The net effect is proposed rates that average 0.34% lower than previous rates. • Assumed rates of retirement were changed, resulting in fewer retirements. • The Combined Service Annuity load was 30% for vested and non-vested deferred members. The CSA has been changed to 33% for vested members and 2% for non-vested members. • The base mortality table for healthy annuitants was changed from the RP-2000 fully generational table to the RP-2014 fully generational table (with a base year of 2006), with male rates adjusted by a factor of 0.96. The mortality improvement scale was changed from Scale AA to Scale MP- 2016. The base mortality table for disabled annuitants was changed from the RP-2000 disabled mortality table to the mortality table assumed for healthy retirees. • Assumed termination rates were decreased to 3% for the first three years of service. Rates beyond the select period of three years were adjusted, resulting in more expected terminations overall. • Assumed percentage for married female members was decreased from 65% to 60%. • Assumed age difference was changed from separate assumptions for male members (wives assumed to be three years younger) and female members (husbands assumed to be four years older) to the assumption that males are two years older than females. • The assumed percentage of female members electing Joint and Survivor annuities was increased. • The assumed post-retirement benefit increase rate was changed from 1.0% for all years to 1.0% per year through 2064 and 2.5% thereafter. 2016 Changes • The assumed post-retirement benefit increase rate was changed from 1.0% per year through 2037 and 2.5 % thereafter to 1.0% per year for all future years. • The assumed investment return was changed from 7.9% to 7.5%. The single discount rate changed from 7.9% to 5.6%. • The assumed payroll growth and inflation were decreased by 0.25% to 3.25% for payroll growth and 2.50% for inflation.

Local Government Correctional Plan Changes in Actuarial Assumptions: 2018 Changes • The Single Discount Rate was changed from 5.96% per annum to 7.50% per annum. • The morality projection scale was changed from MP-2016 to MP-2017. • The assumed post-retirement benefit increase was changed from 2.50% per year to 2.00% per year. 2017 Changes • The base mortality table for health annuitants was changed from the RP-2000 fully generational table to the RP-2014 fully generational table (with a base year of 2006), with male rates adjusted by a factor of 0.96. The mortality improvement scale was changed from Scale AA to Scale MP- 2016 and is applied to health and disabled members. The base mortality table for disabled annuitants was changed from the RP-2000 disabled mortality table to the RP-2014 disabled annuitant mortality table (with future mortality improvement according to MP-2016). • The Combined Service Annuity load was 30% for vested and non-vested, deferred members. The CSA has been changed to 35% for vested members and 1% for non-vested members. • The Single Discount Rate was changed from 5.31% per annum to 5.96% per annum. 2016 Changes • The assumed investment return was changed from 7.9% to 7.5%. The single discount rate changed from 7.9% to 5.31%. • The assumed payroll growth and inflation were decreased by 0.25% to 3.25% for payroll growth and 2.50% for inflation.

- 78 - SUPPLEMENTARY SECTION Schedule 1 BLUE EARTH COUNTY COMBINING SCHEDULE OF CHANGES IN ASSETS AND LIABILITIES ALL AGENCY FUNDS

FOR THE YEAR ENDED DECEMBER 31, 2018

Balance Balance January 1 Additions Deductions December 31 ADULT MENTAL HEALTH INITIATIVE Assets Cash and Investments $ - $ 6,517,194 $ 5,445,701 $ 1,071,493

Liabilities Due to Other Governments $ - $ 6,517,194 $ 5,445,701 $ 1,071,493

DRUG TASK FORCE Assets Cash and Investments $ 413,038 $ 674,811 $ 704,586 $ 383,263

Liabilities Due to Other Governments $ 413,038 $ 674,811 $ 704,586 $ 383,263

TAXES AND PENALTIES Assets Cash and Investments $ 2,164,325 $ 109,433,208 $ 110,689,827 $ 907,706

Liabilities Unapportioned Taxes and Assessments $ - $ 37,949,784 $ 37,949,784 $ - Due to Other Governments 2,164,325 71,483,424 72,740,043 907,706

Total Liabilities $ 2,164,325 $ 109,433,208 $ 110,689,827 $ 907,706

AGENCY - OTHER Assets Cash and Investments $ 326,039 $ 26,647,917 $ 26,545,687 $ 428,269 Due from Other Governments - 16,726 - 16,726

Total Assets $ 326,039 $ 26,664,643 $ 26,545,687 $ 444,995

Liabilities Accounts Payable $ 124,131 $ 239,959 $ 246,935 $ 117,155 Due to Other Governments 201,908 26,424,684 26,298,752 327,840

Total Liabilities $ 326,039 $ 26,664,643 $ 26,545,687 $ 444,995

TOTAL ALL AGENCY FUNDS Assets Cash and Investments $ 2,903,402 $ 143,273,130 $ 143,385,801 $ 2,790,731 Due from Other Governments - 16,726 - 16,726

Total Assets $ 2,903,402 $ 143,289,856 $ 143,385,801 $ 2,807,457

Liabilities Unapportioned Taxes and Assessments $ - $ 37,949,784 $ 37,949,784 $ - Accounts Payable 124,131 239,959 246,935 117,155 Due to Other Governments 2,779,271 105,100,113 105,189,082 2,690,302

Total Liabilities $ 2,903,402 $ 143,289,856 $ 143,385,801 $ 2,807,457

- 79 - BLUE EARTH COUNTY Schedule 2 CAPITAL ASSETS USED IN THE OPERATION OF GOVERNMENTAL FUNDS COMPARATIVE SCHEDULE BY SOURCE DECEMBER 31, 2018

Governmental funds capital assets: 2018 2017

Land and Permanent Easements $ 46,206,568 $ 45,055,433 Land Improvements 2,834,477 3,721,312 Building & Building Improvements 51,088,309 51,045,264 Personal Property 15,076,706 14,667,480 Intangibles 4,408,400 4,198,749 Infrastructures 270,127,226 250,538,658 Construction in Progress 20,272,614 11,543,251

Total governmental funds capital assets $ 410,014,300 $ 380,770,147

Investments in governmental funds capital assets by source:

General Fund $ 677,390 $ 628,617 Special Revenue Funds 332,399,997 312,469,330 Capital Projects Fund 76,936,913 67,672,200

Total governmental funds capital assets $ 410,014,300 $ 380,770,147

- 80 - BLUE EARTH COUNTY Schedule 3 CAPITAL ASSETS USED IN THE OPERATION OF GOVERNMENTAL FUNDS SCHEDULE BY FUNCTION DECEMBER 31, 2018

Land and Construction Permanent Land Bldg & Bldg Personal in Easements Improvements Improvements Property Intangibles Infrastructures Progress Total

General Government $ 379,218 $ 442,224 $ 4,877,571 $ 2,167,793 $ 2,712,503 $ 540,110 $ 11,398,450 $ 22,517,869

Public Safety 1,897,979 800,518 38,380,776 3,781,201 190,348 1,762,772 - 46,813,594

Highway and Streets 42,174,464 417,699 1,642,421 8,133,018 65,308 264,148,805 8,588,514 325,170,229

Health and Welfare 260,000 - 3,277,164 204,818 1,276,895 - 164,252 5,183,129

Economic Development 274,430 ------274,430

Culture and Recreation 1,167,777 1,174,036 2,503,129 427,250 7,699 3,675,539 121,398 9,076,828

Environmental Services 52,700 - 407,248 351,446 155,647 - - 967,041

Conservation of Natural Resources - - - 11,180 - - - 11,180

Total Governmental Fund Capital Assets $ 46,206,568 $ 2,834,477 $ 51,088,309 $ 15,076,706 $ 4,408,400 $ 270,127,226 $ 20,272,614 $ 410,014,300

- 81 - BLUE EARTH COUNTY Schedule 4 CAPITAL ASSETS USED IN THE OPERATION OF GOVERNMENTAL FUNDS SCHEDULE OF CHANGES BY FUNCTION FOR THE YEAR ENDED DECEMBER 31, 2018

Capital Assets Capital Assets Dec. 31, 2017 Transfers Additions Deletions Dec. 31, 2018

General Government $ 13,316,631 $ - $ 10,412,398 $ (1,211,160) $ 22,517,869

Public Safety 46,719,828 - 268,261 (174,495) 46,813,594

Highway and Streets 305,560,348 - 36,700,598 (17,090,717) 325,170,229

Health and Welfare 4,984,327 - 363,361 (164,559) 5,183,129

Economic Development 287,249 - - (12,819) 274,430

Culture and Recreation 8,954,845 - 408,271 (286,288) 9,076,828

Environmental Services 935,128 - 31,913 - 967,041

Conservation of Natural Resources 11,791 - 11,180 (11,791) 11,180

GRAND TOTAL $ 380,770,147 $ - $ 48,195,982 $ (18,951,829) $ 410,014,300

- 82 - BLUE EARTH COUNTY Schedule 5 SCHEDULE OF INTERGOVERNMENTAL REVENUE YEAR ENDED DECEMBER 31, 2018

Building and Total Public Human County Capital Governmental General Works Services Ditch Purchases Funds Appropriations and Shared Revenue E-911 $ - $ - $ - $ - $ 150,775 $ 150,775 MV Homestead Credit 194,612 47,714 86,356 - 28,370 357,052 Highway Users Tax - 17,659,364 - - - 17,659,364 County Program Aid 2,955,885 - - - - 2,955,885 PERA Rate Reimbursement 76,706 - - - - 76,706 Out of Home Placement Aid - - 3,904 - - 3,904 Police Aid 274,778 - - - - 274,778 Aquatic Invasive Species 118,650 - - - - 118,650 SCORE 190,081 - - - 190,081 Disparity Reduction Aid 35,021 8,586 15,540 - 5,105 64,252 Riparian Protection Aid 156,878 - - - - 156,878 Total Appropriations and Shared Revenue 4,002,611 17,715,664 105,800 - 184,250 22,008,325

Reimbursement for Services-State Minnesota Department of Human Services - - 2,175,623 - - 2,175,623 Total Reimbursement for Services-State - - 2,175,623 - - 2,175,623

Grants: State Minnesota Department, Agency or Board Human Services - - 4,825,059 - - 4,825,059 Health - - 404,517 - - 404,517 Corrections - - 1,219,783 - - 1,219,783 Public Safety 363,410 5,421 - - 4,163 372,994 Secretary of State - - - - 100,333 100,333 Water and Soil Resources 84,488 - - 32,000 - 116,488 Pollution Control 65,156 - - - - 65,156 Peace Officers 32,538 - - - - 32,538 Natural Resources 55,553 1,286,863 - - - 1,342,416 Veteran's Affairs 12,500 - - - - 12,500 Trial Courts - - 85,291 - - 85,291 Transportation - 322,989 - - - 322,989 Total State Grants 613,645 1,615,273 6,534,650 32,000 104,496 8,900,064

Federal U.S. Department of Agriculture 101,437 - 900,806 - - 1,002,243 Education - - 2,000 - 2,000 Health & Human Services 164,028 - 5,184,746 - - 5,348,774 Homeland Security 58,245 291,837 - - 42,342 392,424 Housing & Urban Development - - 99,413 - - 99,413 Justice 7,087 - - - 2,036 9,123 Transportation 170,423 652,586 - - - 823,009 Total Federal Grants 501,220 944,423 6,186,965 - 44,378 7,676,986

Total Grants 1,114,865 2,559,696 12,721,615 32,000 148,874 16,577,050

Total Intergovernmental Revenue $ 5,117,476 $ 20,275,360 $ 15,003,038 $ 32,000 $ 333,124 $ 40,760,998

This schedule does not include the intergovernmental revenue detail for Blue Earth County Economic Development Authority Enterprise Fund.

- 83 - BLUE EARTH COUNTY Schedule 6 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED DECEMBER 31, 2018

Federal Grantor Federal Pass-Through Passed Pass-Through Agency CFDA Grant Through to Grant Program Title Number Numbers Expenditures Subrecipients

U.S. Department of Agriculture Passed Through Minnesota Department of Health WIC Special Supplemental Nutrition Program for Women, Infants, and Children 10.557 12-700-00059 $ 270,431 $ -

Passed Through Minnesota Department of Human Services SNAP Cluster State Administrative Matching Grants for the Supplemental Nutrition Assistance Program 10.561 182MN101S2514 $ 543,768 $ - State Administrative Matching Grants for the Supplemental Nutrition Assistance Program 10.561 182MN127Q7503 60,975 - State Administrative Matching Grants for the Supplemental Nutrition Assistance Program 10.561 182MN101S2520 2,391 - Total CFDA #10.561 $ 607,134 $ -

Passed Through Minnesota Department of Agriculture WIC Farmers' Market Nutrition Program (FMNP) 10.572 12-700-00059 $ 600 $ -

Total U.S. Department of Agriculture $ 878,165 $ -

U.S. Department of Housing and Urban Development Passed Through Hearth Connections Continuum of Care Program 14.267 Not provided $ 99,413 $ -

U.S. Department of Justice Direct State Criminal Alien Assistance Program 16.606 N/A $ 7,087 $ -

Bulletproof Vest Partnership Program 16.607 N/A $ 7,072 $ -

Total U.S. Department of Justice $ 14,159 $ -

U.S. Department of Transportation Passed Through Minnesota Department of Transportation Highway Planning and Construction Cluster Highway Planning and Construction 20.205 00007 $ 440,286 $ -

Passed Through Minnesota Department of Public Safety Highway Safety Cluster State and Community Highway Safety 20.600 A-ENFRC18-2018-BLUEEASO-062 $ 18,589 $ 15,027 State and Community Highway Safety 20.600 A-ENFRC19-2019-BLUEEACO-014 341 - Total CFDA #20.600 $ 18,930 $ 15,027

National Priority Safety Programs 20.616 A-ENFRC18-2018-BLUEEASO-062 $ 53,162 $ 45,167 National Priority Safety Programs 20.616 A-OFFICR19-2019-BLUEEACO-022 6,690 - Total CFDA #20.616 $ 59,852 $ 45,167 (Total expenditures for Highway Safety Cluster $78,782)

Minimum Penalties for Repeat Offenders for Driving While Intoxicated 20.608 A-ENFRC18-2018-BLUEEASO-062 $ 43,973 $ 32,141 Minimum Penalties for Repeat Offenders for Driving While Intoxicated 20.608 A-ENFRC19-2019-BLUEEACO-014 34,085 29,758 Minimum Penalties for Repeat Offenders for Driving While Intoxicated 20.608 A-OFFICR19-2019-BLUEEACO-022 13,583 - Total CFDA #20.608 $ 91,641 $ 61,899

Total U.S. Department of Transportation $ 610,709 $ 122,093

U.S. Department of Education Passed Through Minnesota Department of Education Special Education Cluster (IDEA) Special Education Grants to States 84.027 Not provided $ 2,000 $ -

Total U.S. Department of Education $ 2,000 $ -

The notes to the Schedule of Expenditures of Federal Awards are an integral part of this schedule.

- 84 - BLUE EARTH COUNTY Schedule 6 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS (Continued) FOR THE YEAR ENDED DECEMBER 31, 2018

Federal Grantor Federal Pass-Through Passed Pass-Through Agency CFDA Grant Through to Grant Program Title Number Numbers Expenditures Subrecipients

U.S. Department of Health and Human Services Passed Through Minnesota Department of Health Public Health Emergency Preparedness 93.069 12-700-00059 $ 35,437 $ - Disabilities Prevention 93.184 12-700-00059 $ 55,531 $ - Universal Newborn Hearing Screening 93.251 12-700-00059 $ 300 $ - Early Hearing Detection and Intervention Information System (EHDI-IS) Surveillance Program 93.314 12-700-00059 $ 525 $ - PPHF Capacity Building Assistance to Strengthen Public Health Immunization Infrastructure and Performance financed in part by Prevention and Public Health Funds 93.539 12-700-00059 $ 31,000 $ -

TANF Cluster Temporary Assistance for Needy Families 93.558 12-700-00059 $ 71,337 $ - (Total Temporary Assistance for Needy Families 93.558 $661,718) Medicaid Cluster Medical Assistance Program 93.778 1805MN5ADM $ 9,325 $ - (Total Medical Assistance Program 93.778 $2,405,675) Maternal and Child Health Services Block Grant to the States 93.994 12-700-00059 $ 59,767 $ -

Passed Through Minnesota Department of Human Services Promoting Safe and Stable Families 93.556 G-1701MNFPSS $ 17,502 $ - TANF Cluster Temporary Assistance for Needy Families 93.558 1801MNTANF $ 590,381 $ - (Total Temporary Assistance for Needy Families 93.558 $661,718) Child Support Enforcement 93.563 1804MNCSES $ 235,175 $ - Child Support Enforcement 93.563 1804MNCEST 861,055 Total CFDA #93.563 $ 1,096,230 $ -

Community-Based Child Abuse Prevention Grants 93.590 G-1702MNFRPG $ 29,766 $ - CCDFCluster Child Care Mandatory and Matching Funds of The Child Care and Development Fund 93.596 G1801MNCCDF $ 38,559 $ - Stephanie Tubbs Jones Child Welfare Services Program 93.645 G-1701MNCWSS $ 15,926 $ - Foster Care - Title IV-E 93.658 1801MNFOST $ 361,477 $ - Social Services Block Grant 93.667 G-1801MNSOSR $ 366,903 $ - John H. Chafee Foster Care Program for Successful Transition to Adulthood 93.674 G-1801MNCILP $ 8,574 $ - Children's Health Insurance Program 93.767 1805MN5R21 $ 602 $ - Medicaid Cluster Medical Assistance Program 93.778 1805MN5ADM $ 2,365,204 $ - Medical Assistance Program 93.778 1805MN5MAP 31,146 - (Total Medical Assistance Program 93.778 $2,405,675) $ 2,396,350 $ -

Total U.S. Department of Health and Human Services $ 5,185,492 $ -

U.S. Department of Homeland Security Passed Through Minnesota Department of Natural Resources Boating Safety Financial Assistance 97.012 140525 $ 42,342 $ - Boating Safety Financial Assistance 97.012 139800 4,500 - Total CFDA #97.012 $ 46,842 $ -

Passed Through Minnesota Department of Public Safety Disaster Grants - Public Assistance (Presidentially Declared Disasters) 97.036 DR4290/P0720 $ 7,406 $ -

Hazard Mitigation Grant 97.039 A-HMGP-DR4290-BLUEEACO-002 $ 284,431 $ -

Emergency Management Performance Grants 97.042 A-EMPG-2018-BLUEEACO-007 $ 37,971 $ -

Homeland Security Grant Program 97.067 A-DECN-SHSP-2017-SCECB-007 $ 15,774 $ -

Total U.S. Department of Homeland Security $ 392,424 $ -

Total Federal Awards $ 7,182,362 $ 122,093

Totals by Cluster Total expenditures for SNAP Cluster $ 607,134 Total expenditures for Highway Planning and Construction Cluster 440,286 Total expenditures for Highway Safety Cluster 78,782 Total expenditures for Special Education Cluster (IDEA) 2,000 Total expenditures for TANF Cluster 661,718 Total expenditures for CCDF Cluster 38,559 Total expenditures for Medicaid Cluster 2,405,675

The notes to the Schedule of Expenditures of Federal Awards are an integral part of this schedule.

- 85 - BLUE EARTH COUNTY NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED DECEMBER 31, 2018

1. Reporting Entity

The Schedule of Expenditures of Federal Awards presents the activities of federal award programs expended by Blue Earth County. The County’s reporting entity is defined in Note 1 to the financial statements. The schedule does not include $613,944 in federal awards expended by the Blue Earth County Economic Development Authority (EDA) component unit, which was audited by other auditors.

2. Basis of Presentation

The accompanying Schedule of Expenditures of Federal Awards includes the federal grant activity of Blue Earth County under programs of the federal government for the year ended December 31, 2018. The information in this schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the schedule presents only a selected portion of the operations of Blue Earth County, it is not intended to and does not present the financial position, changes in net position, or cash flows of Blue Earth County.

3. Summary of Significant Accounting Policies

Expenditures reported on the schedule are reported on the modified accrual basis of accounting. Such expenditures are recognized following the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Blue Earth County has not elected to use the 10 percent de minimis indirect cost rate allowed under the Uniform Guidance.

4. Reconciliation to Schedule of Intergovernmental Revenues

Federal grant revenue per Schedule of Intergovernmental Revenues $ 7,676,986 Grants received more than 60 days after year-end unavailable in 2018 Bulletproof Vest Partnership Program 7,072 Highway Planning and Construction 8,541 Promoting Safe and Stable Families 4,336 Temporary Assistance for Needy Families 135,545 Community-Based Child Abuse Prevention Grants 10,190 Stephanie Tubbs Jones Child Welfare Services Program 4,050 John H. Chafee Foster Care Program for Successful Transition to Adulthood 3,311

Unavailable in 2017, recognized as revenue in 2018 State Administrative Matching Grants for the Supplemental Nutrition Assistance Program (124,078) Bulletproof Vest Partnership Program (2,036) Highway Planning and Construction (220,841) Promoting Safe and Stable Families (1,375) Temporary Assistance for Needy Families (174,563) Child Support Enforcement (144,776)

Expenditures Per Schedule of Expenditures of Federal Awards $ 7,182,362

- 86 - BLUE EARTH COUNTY Schedule 7 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL BUILDING AND CAPITAL PURCHASES FUND FOR THE YEAR ENDED DECEMBER 31, 2018

Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) Revenues Property Taxes $ 2,731,532 $ 2,731,532 $ 2,714,569 $ (16,963) Intergovernmental 183,133 283,466 333,124 49,658 Charges for Services 215,000 215,000 221,907 6,907 Miscellaneous 23,400 23,400 57,069 33,669 Gifts and Contributions - - 115 115

Total Revenues 3,153,065 3,253,398 3,326,784 73,386

Expenditures Debt Service Principal Retirement 28,371 28,371 28,656 (285)

Capital Outlay 15,439,688 15,475,021 12,325,776 3,149,245

Total Expenditures 15,468,059 15,503,392 12,354,432 3,148,960

Excess of Revenues Over (Under) Expenditures (12,314,994) (12,249,994) (9,027,648) 3,222,346

Other Financing Sources (Uses) Transfers In 2,052,100 52,100 89,850 37,750 Transfers Out (883,211) (621,211) (132,844) 488,367 Bonds Issued - 8,890,000 8,890,000 - Premium on Bonds - 1,109,787 1,109,787 -

Total Other Financing Sources (Uses) 1,168,889 9,430,676 9,956,793 526,117

Net Change in Fund Balance (11,146,105) (2,819,318) 929,145 3,748,463 Fund Balance - January 1 55,310,690 55,310,690 55,310,690 - Fund Balance - December 31 $ 44,164,585 $ 52,491,372 $ 56,239,835 $ 3,748,463

- 87 -

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- 88 - STATISTICAL SECTION

This part of the Blue Earth County's comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the government's overall financial health.

Contents Page

Financial Trends 89 These schedules contain trend information to help the reader understand how the government's financial performance and well-being have changed over time.

Revenue Capacity 94 These schedules contain information to help the reader assess the government's most significant local revenue source, the property tax.

Debt Capacity 98 These schedules present information to help the reader assess the afforda- bility of the government's current levels of outstanding debt and the government's ability to issue additional debt in the future.

Demographic and Economic Information 102 These schedules offer demographic and economic indicators to help the reader understand the environment within which the government's financial activities take place.

Operating Information 104 These schedules contain service and infrastructure data to help the reader understand how the information in the government's financial report relates to the services the government provides and the activities it performs.

Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year.

BLUE EARTH COUNTY TABLE 1 NET POSITION (UNAUDITED) LAST TEN FISCAL YEARS (Accrual Basis of Accounting)

Fiscal Year 2009 2010 2011 2012 Restated 2013 2014 Restated 2015 2016 Restated 2017 Restated 2018 Governmental activities Net investment in capital assets $ 207,678,084 $ 208,528,183 $ 222,531,295 $ 230,705,224 $ 240,841,484 $ 249,876,561 $ 255,219,616 $ 271,174,577 $ 280,349,370 $ 293,441,157 Restricted 17,659,233 20,094,991 18,131,861 18,718,632 24,518,450 16,682,195 16,975,829 16,584,548 19,163,634 22,670,193 Unrestricted 57,869,681 66,903,181 71,740,830 72,980,556 77,704,776 64,210,026 62,896,075 59,832,961 59,197,593 68,954,931 Total governmental activities net position $ 283,206,998 $ 295,526,355 $ 312,403,986 $ 322,404,412 $ 343,064,710 $ 330,768,782 $ 335,091,520 $ 347,592,086 $ 358,710,597 $ 385,066,281

Business-type activities Net investment in capital assets $ 4,271,135 $ 5,746,190 $ 4,924,254 $ 4,227,284 $ 4,711,058 $ 4,846,381 $ 6,443,554 $ 7,291,678 $ 8,055,687 $ 7,557,556 Restricted 46,515 23,269 54,325 37,381 19,375 415,819 453,944 19,011 - - Unrestricted 2,026,909 2,458,810 3,288,871 4,444,220 5,353,953 5,571,755 6,860,824 5,662,377 4,747,485 6,058,707 Total business-type activities net position $ 6,344,559 $ 8,228,269 $ 8,267,450 $ 8,708,885 $ 10,084,386 $ 10,833,955 $ 13,758,322 $ 12,973,066 $ 12,803,172 $ 13,616,263

Primary government Net investment in capital assets $ 211,949,219 $ 214,274,373 $ 227,455,549 $ 234,932,508 $ 245,552,542 $ 254,722,942 $ 261,663,170 $ 278,466,255 $ 288,405,057 $ 300,998,713 Restricted 17,705,748 20,118,260 18,186,186 18,756,013 24,537,825 17,098,014 17,429,773 16,603,559 19,163,634 22,670,193 Unrestricted 59,896,590 69,361,991 75,029,701 77,424,776 83,058,729 69,781,781 69,756,899 65,495,338 63,945,078 75,013,638 Total primary government net position $ 289,551,557 $ 303,754,624 $ 320,671,436 $ 331,113,297 $ 353,149,096 $ 341,602,737 $ 348,849,842 $ 360,565,152 $ 371,513,769 $ 398,682,544

- 89 - BLUE EARTH COUNTY TABLE 2 CHANGES IN NET POSITION (UNAUDITED) LAST TEN FISCAL YEARS (Accrual Basis of Accounting)

Fiscal Year Expenses 2009 2010 2011 2012 Restated 2013 2014 (1) 2015 2016 Restated 2017 Restated 2018 Governmental activities: General government $ 11,819,680 $ 11,742,009 $ 12,538,401 $ 14,187,963 $ 11,901,342 $ 14,557,228 $ 14,762,563 $ 14,610,346 $ 14,454,413 $ 16,567,070 Public safety 9,744,939 10,399,012 9,820,153 12,334,008 11,797,553 11,536,569 12,140,324 15,293,129 15,165,119 13,496,280 Health and welfare 23,930,513 23,943,348 23,576,171 23,748,019 24,246,462 26,019,806 25,977,229 28,511,453 28,555,006 24,087,966 Highways and streets 9,345,220 10,907,810 11,352,021 10,713,067 10,537,112 12,658,712 12,414,069 11,673,540 10,352,360 13,268,236 Culture and recreation 1,906,181 1,778,554 1,750,351 1,891,351 1,853,669 2,078,999 1,899,258 2,459,605 2,154,028 2,104,339 Environmental services 1,408,391 1,607,666 1,762,086 1,796,154 1,975,216 1,896,038 2,017,610 2,260,110 2,477,033 2,396,919 Conservation of natural resources 721,530 1,079,313 1,380,074 1,456,747 2,140,506 2,380,581 1,521,689 5,756,398 4,666,403 4,384,102 Economic development 190,967 409,535 656,913 272,814 144,658 165,388 189,532 382,397 165,827 253,366 Unallocated interest on long-term debt 833,535 839,919 834,852 1,097,853 712,247 677,760 647,559 587,492 656,236 508,646 Total governmental activities expenses 59,900,956 62,707,166 63,671,022 67,497,976 65,308,765 71,971,081 71,569,833 81,534,470 78,646,425 77,066,924 Business-type activities: Landfill 1,583,932 1,743,366 2,163,983 1,887,287 966,788 2,116,855 1,872,369 3,386,306 3,145,246 2,392,723 EDA 988,758 909,912 1,161,767 999,271 1,161,167 1,070,563 1,084,273 1,054,486 1,123,800 1,095,467 Total business-type activities expenses 2,572,690 2,653,278 3,325,750 2,886,558 2,127,955 3,187,418 2,956,642 4,440,792 4,269,046 3,488,190 Total primary government expenses $ 62,473,646 $ 65,360,444 $ 66,996,772 $ 70,384,534 $ 67,436,720 $ 75,158,499 $ 74,526,475 $ 85,975,262 $ 82,915,471 $ 80,555,114

Program Revenues Governmental activities: Charges for services: General government $ 1,843,823 $ 1,698,127 $ 1,734,147 $ 1,723,065 $ 1,169,849 $ 1,098,578 $ 1,190,198 $ 1,776,092 $ 1,794,486 $ 1,757,647 Health and welfare 4,298,248 5,433,942 5,570,753 5,654,266 5,625,496 5,699,234 5,186,599 5,774,849 5,758,106 6,838,672 Environmental services 1,124,758 1,121,390 1,127,075 1,101,703 1,113,177 1,110,257 1,151,788 1,300,140 1,388,622 1,415,803 Other activities 1,589,681 2,251,948 2,429,287 2,892,099 4,059,643 2,755,197 4,163,290 5,634,590 6,991,091 4,179,515 Operating grants and contributions 24,464,630 24,376,590 25,812,424 24,018,596 41,416,993 29,399,738 28,710,560 39,144,992 30,232,937 39,170,248 Capital grants and contributions 2,692,018 6,610,470 7,140,762 8,032,385 634,623 1,337,228 2,585,562 1,094,503 3,089,810 2,895,158 Total governmental activities program revenues 36,013,158 41,492,467 43,814,448 43,422,114 54,019,781 41,400,232 42,987,997 54,725,166 49,255,052 56,257,043 Business-type activities: Charges for services Landfill 1,778,166 2,111,419 2,161,681 2,365,411 2,520,003 2,909,618 3,072,162 2,661,057 3,210,720 3,169,581 EDA 161,413 171,237 183,534 181,751 218,656 220,949 248,656 256,503 276,157 284,210 Operating grants and contributions 519,477 545,155 758,967 504,401 517,114 574,573 599,390 620,975 539,908 599,143 Capital grants and contributions 281,181 1,164,318 16,194 177,334 106,881 112,377 120,523 138,170 41,875 14,801 Total business-type activities program revenues 2,740,237 3,992,129 3,120,376 3,228,897 3,362,654 3,817,517 4,040,731 3,676,705 4,068,660 4,067,735 Total primary government program revenues $ 38,753,395 $ 45,484,596 $ 46,934,824 $ 46,651,011 $ 57,382,435 $ 45,217,749 $ 47,028,728 $ 58,401,871 $ 53,323,712 $ 60,324,778

Net (expense)/revenue Governmental activities $ (23,887,798) $ (21,214,699) $ (19,856,574) $ (24,075,862) $ (11,288,984) $ (30,570,849) $ (28,581,836) $ (26,809,304) $ (29,391,373) $ (20,809,881) Business-type activities 167,547 1,338,851 (205,374) 342,339 1,234,699 630,099 1,084,089 (764,087) (200,386) 579,545 Total primary government net expense $ (23,720,251) $ (19,875,848) $ (20,061,948) $ (23,733,523) $ (10,054,285) $ (29,940,750) $ (27,497,747) $ (27,573,391) $ (29,591,759) $ (20,230,336)

- 90 - BLUE EARTH COUNTY TABLE 2 CHANGES IN NET POSITION (UNAUDITED) LAST TEN FISCAL YEARS (Accrual Basis of Accounting)

Fiscal Year 2009 2010 2011 2012 Restated 2013 2014 (1) 2015 2016 Restated 2017 Restated 2018

General Revenues and Other Changes in Net Position Governmental activities: Property taxes $ 26,226,080 $ 25,976,339 $ 27,020,802 $ 28,295,201 $ 29,373,926 $ 28,967,176 $ 29,775,281 $ 30,195,093 $ 32,104,467 $ 34,824,826 Mortgage Registry and Deed Tax 53,830 47,562 47,697 58,090 66,865 54,528 76,842 77,432 70,148 72,409 Transportation Sales Tax ------4,485,909 5,934,167 6,259,239 Gifts and Contributions 177,254 139,465 119,850 235,141 166,327 168,883 166,698 45,368 88,668 36,575 Investment income (815,783) 1,956,336 3,957,072 1,353,494 (1,549,275) 2,596,070 844,258 548,237 1,065,872 2,346,146 Unrestricted grants and contributions 4,500,983 3,673,393 3,761,114 2,769,528 2,492,050 3,021,177 2,961,322 2,944,461 3,169,311 3,453,895 Miscellaneous 2,287,578 2,164,886 1,899,698 1,320,785 1,272,449 1,296,728 781,019 797,542 855,667 1,231,164 Special Item ------(1,110,318) Transfers 9,335 (423,925) (72,028) 44,049 126,940 87,516 (1,700,846) 215,828 136,856 51,629 Total governmental activities 32,439,277 33,534,056 36,734,205 34,076,288 31,949,282 36,192,078 32,904,574 39,309,870 43,425,156 47,165,565 Business-type activities: Investment income 50,917 69,325 52,136 20,210 3,891 23,566 15,493 30,902 3,275 3,932 Unrestricted grants and contributions 45,786 21,072 21,838 34,874 28,434 39,674 40,715 59,403 65,634 64,812 Miscellaneous 12,490 30,537 98,553 88,061 235,417 143,746 83,224 104,354 98,439 239,112 Transfers (9,335) 423,925 72,028 (44,049) (126,940) (87,516) 1,700,846 (215,828) (136,856) (74,310) Total business-type activities 99,858 544,859 244,555 99,096 140,802 119,470 1,840,278 (21,169) 30,492 233,546 Total primary government $ 32,539,135 $ 34,078,915 $ 36,978,760 $ 34,175,384 $ 32,090,084 $ 36,311,548 $ 34,744,852 $ 39,288,701 $ 43,455,648 $ 47,399,111

Change in Net Position Governmental activities $ 8,551,479 $ 12,319,357 $ 16,877,631 $ 10,000,426 $ 20,660,298 $ 5,621,229 $ 4,322,738 $ 12,500,566 $ 14,033,783 $ 26,355,684 Business-type activities 267,405 1,883,710 39,181 441,435 1,375,501 749,569 2,924,367 (785,256) (169,894) 813,091 Total Change in Net Position $ 8,818,884 $ 14,203,067 $ 16,916,812 $ 10,441,861 $ 22,035,799 $ 6,370,798 $ 7,247,105 $ 11,715,310 $ 13,863,889 $ 27,168,775

(1) Sufficient information was not available to restate the statement of activities for the change in pension accounting and financial reporting standards implemented with GASB Statements No. 68 and 71.

- 91 - BLUE EARTH COUNTY TABLE 3 FUND BALANCES OF GOVERNMENTAL FUNDS (UNAUDITED) LAST TEN FISCAL YEARS (Modified Accrual Basis of Accounting)

Fiscal Year 2009 2010 2011 (1) 2012 2013 2014 2015 Restated 2016 Restated 2017 2018 General Fund Reserved $ 15,807,146 $ 17,416,369 $ - $ - $ - $ - $ - $ - $ - $ - Unreserved 2,665,781 5,381,158 ------Nonspendable - - 1,502,749 1,132,832 930,133 879,941 759,655 441,413 1,394,967 1,493,028 Restricted - - 15,891,507 16,547,465 15,602,199 14,405,591 12,560,243 12,635,796 10,934,963 11,000,672 Committed - - 1,984,794 2,569,737 2,694,767 1,294,451 802,927 1,784,944 2,663,546 2,758,859 Assigned - - 91,600 466,468 1,351,969 - 116,546 - - - Unassigned - - 10,039,506 10,333,791 7,762,243 10,943,435 11,811,502 12,671,134 13,206,794 16,577,883 Total general fund $ 18,472,927 $ 22,797,527 $ 29,510,156 $ 31,050,293 $ 28,341,311 $ 27,523,418 $ 26,050,873 $ 27,533,287 $ 28,200,270 $ 31,830,442

All Other Governmental Funds Reserved $ 5,332,800 $ 3,284,472 $ - $ - $ - $ - $ - $ - $ - $ - Unreserved 49,479,378 56,722,124 ------Nonspendable - - 698,953 860,738 759,597 889,179 826,322 1,025,786 816,568 912,657 Restricted - - 2,531,512 2,050,581 8,582,025 2,909,348 4,984,402 4,503,304 5,870,517 4,199,821 Committed - - 24,986,823 42,236,778 43,249,434 39,763,154 46,073,871 55,362,251 59,886,902 61,256,287 Assigned - - 34,922,885 20,826,518 22,379,238 29,756,388 21,367,957 13,075,300 12,130,955 15,829,784 Unassigned - - (5,900,760) (6,852,038) (671,986) (1,255,250) (1,150,162) (1,206,522) (2,149,209) (2,567,190) Total all other governmental funds $ 54,812,178 $ 60,006,596 $ 57,239,413 $ 59,122,577 $ 74,298,308 $ 72,062,819 $ 72,102,390 $ 72,760,119 $ 76,555,733 $ 79,631,359

(1) The County implemented GASB 54 in fiscal year 2011, resulting in significant reclassification of the components of fund balance. Years prior to 2011 have not been restated.

- 92 - BLUE EARTH COUNTY TABLE 4 CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS (UNAUDITED) LAST TEN FISCAL YEARS (Modified Accrual Basis of Accounting)

Fiscal Year 2009 2010 2011 2012 2013 2014 2015 Restated 2016 Restated 2017 2018 Revenues Property taxes $ 25,899,958 $ 26,063,314 $ 27,271,347 $ 28,468,840 $ 29,211,865 $ 28,918,484 $ 29,997,120 $ 30,160,599 $ 32,197,874 $ 34,705,103 Mortgage registry and deed tax 53,830 47,562 47,697 58,090 66,865 54,528 76,842 77,432 70,148 72,409 Special assessments 596,969 440,973 619,771 595,444 1,278,376 1,452,369 1,525,264 1,663,217 2,020,533 2,475,058 Licenses and permits 235,216 230,545 239,784 259,920 266,628 283,546 307,712 326,355 320,724 342,615 Transportaion sales tax ------4,465,076 5,927,848 6,247,557 Intergovernmental 33,680,712 32,708,055 35,814,731 36,924,257 45,296,176 34,846,406 32,923,151 44,070,419 35,575,341 40,760,998 Charges for services 7,854,317 9,017,988 9,374,891 9,552,427 8,957,282 8,642,342 8,146,646 9,359,786 9,755,335 10,544,445 Fines and forfeitures 129,344 102,639 106,783 84,689 123,301 105,597 114,978 395,210 399,248 355,494 Investment income (724,961) 1,888,368 4,001,805 1,353,160 (1,553,497) 2,644,852 845,914 532,243 1,084,865 2,267,103 Miscellaneous 3,182,430 3,094,860 2,389,278 1,850,794 1,919,247 1,765,671 1,270,316 1,265,258 1,413,959 1,790,280 Gifts and contributions 177,254 139,465 119,850 235,141 166,327 149,583 148,198 39,368 92,668 31,607 Total revenues 71,085,069 73,733,769 79,985,937 79,382,762 85,732,570 78,863,378 75,356,141 92,354,963 88,858,543 99,592,669

Expenditures General government 6,798,179 7,578,098 6,999,768 6,910,940 7,699,115 10,076,173 9,338,110 8,968,394 9,779,497 11,570,838 Public safety 9,430,784 10,154,400 9,570,872 11,744,925 11,155,862 10,906,393 11,223,564 12,173,343 12,535,711 13,347,189 Health and welfare 24,357,099 25,532,991 25,066,727 25,065,805 25,597,536 27,333,453 27,169,122 29,014,033 29,616,592 25,553,761 Highways and streets 16,802,606 14,475,177 23,534,448 21,096,017 19,497,093 20,693,902 16,811,425 25,933,072 19,179,992 26,220,453 Culture and recreation 1,898,472 1,737,136 1,751,469 1,602,155 1,676,676 1,981,410 1,832,542 1,957,712 1,877,593 1,925,088 Environmental services 1,497,992 1,711,705 1,795,504 1,858,936 1,990,594 1,936,938 2,040,848 2,191,472 2,460,608 2,432,655 Conservation of natural resources 652,918 1,013,323 1,304,446 1,377,626 1,977,195 2,254,239 1,346,477 5,511,293 4,355,844 4,017,234 Economic development 190,967 409,535 656,913 272,814 144,658 165,388 189,532 382,397 165,827 253,366 Intergovernmental - - - - - 327,278 344,072 356,349 354,956 415,201 Debt service Principal 1,881,140 770,184 1,886,833 1,938,043 2,044,793 2,303,087 1,349,150 1,459,861 12,838,887 1,904,359 Interest and fiscal charges 915,925 909,871 975,297 869,422 907,693 852,300 843,023 856,154 977,744 798,761 Capital Outlay 9,924,494 3,685,977 3,424,088 3,778,765 3,596,948 3,389,052 4,677,483 5,191,264 4,102,134 13,620,676 Total expenditures 74,350,576 67,978,397 76,966,365 76,515,448 76,288,163 82,219,613 77,165,348 93,995,344 98,245,385 102,059,581

Excess of revenues over (under) expenditures (3,265,507) 5,755,372 3,019,572 2,867,314 9,444,407 (3,356,235) (1,809,207) (1,640,381) (9,386,842) (2,466,912)

Other financing sources (uses) Transfers in 2,932,478 2,275,877 2,362,494 1,206,193 1,095,699 904,375 2,341,684 1,607,432 10,948,023 1,256,487 Transfers out (2,923,143) (2,699,802) (2,434,522) (1,162,144) (968,759) (816,859) (4,042,530) (1,391,604) (10,811,167) (1,204,858) Bonds issued 295,000 4,000,000 760,000 - 2,780,000 - 1,930,000 3,115,000 12,730,000 8,890,000 Loans 70,000 105,275 264,875 350,153 170,783 85,755 165,757 145,355 187,270 135,523 Premium on bonds - 93,961 1,428 - 45,760 - 44,179 104,877 1,004,531 1,109,787 Total other financing sources (uses) 374,335 3,775,311 954,275 394,202 3,123,483 173,271 439,090 3,581,060 14,058,657 10,186,939

Special Item ------(1,110,318)

Net change in fund balance $ (2,891,172) $ 9,530,683 $ 3,973,847 $ 3,261,516 $ 12,567,890 $ (3,182,964) $ (1,370,117) $ 1,940,679 $ 4,671,815 $ 6,609,709

Debt service as a percentage of noncapital expenditures 4.9% 2.9% 4.8% 4.7% 4.9% 4.7% 3.4% 3.3% 16.9% 3.8%

- 93 - BLUE EARTH COUNTY TABLE 5 NET TAX CAPACITY AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY (UNAUDITED) LAST TEN FISCAL YEARS

Ratio of Net Net Tax Capacity Tax Capacity Real Property Total Total to Total Payable Residential Agricultural Commercial Personal Net Tax Direct Estimated Estimated Year Property Property Property (1) Property Capacity Tax Rate Actual Value Actual Value 2019 $39,239,051 $23,255,582 $23,672,075 $2,118,551 $88,285,259 41.582 % $8,509,546,800 1.0 %

2018 $36,808,283 $24,623,265 $23,364,915 $2,104,026 $86,900,489 39.924 % $8,446,377,800 1.0 %

2017 $33,421,690 $24,263,709 $22,585,464 $2,021,690 $82,292,553 39.034 % $8,096,092,400 1.0 %

2016 $31,661,152 $25,306,516 $21,306,312 $1,731,637 $80,005,617 38.073 % $7,992,955,200 1.0 %

2015 $29,797,263 $29,987,451 $19,031,884 $1,590,647 $80,407,245 37.166 % $8,173,631,800 1.0 %

2014 $28,069,848 $26,152,441 $19,389,519 $1,507,672 $75,119,480 38.748 % $7,520,912,500 1.0 %

2013 $27,186,272 $18,654,467 $18,932,766 $1,462,384 $66,235,889 43.994 % $6,581,229,100 1.0 %

2012 $27,542,426 $16,012,062 $18,803,775 $1,404,559 $63,762,822 43.902 % $6,302,009,500 1.0 %

2011 $30,527,236 $15,038,076 $19,120,052 $1,394,698 $66,080,062 42.386 % $6,183,183,900 1.1 %

2010 $31,129,590 $15,472,879 $19,741,954 $1,211,879 $67,556,302 40.678 % $7,038,014,800 1.0 %

(1) Includes Jobz Net Tax Capacity (Jobz ended for Payable Year 2016) Source: Blue Earth County Finance Department

- 94 - BLUE EARTH COUNTY TABLE 6 TAX RATES AS A PERCENTAGE OF NET TAX CAPACITY (UNAUDITED) LAST TEN FISCAL YEARS

Collection Year: 2010 (1) 2011 (1) 2012 (1) 2013 2014 2015 2016 2017 2018 2019

City of Mankato

Blue Earth County Operational 36.667 % 38.285 % 39.656 % 40.075 % 36.856 % 35.397 % 36.292 % 37.539 % 38.502 % 38.340 % Debt 4.011 % 4.101 % 4.249 % 3.919 % 1.892 % 1.769 % 1.781 % 1.495 % 1.422 % 3.242 % Blue Earth County Total 40.678 % 42.386 % 43.905 % 43.994 % 38.748 % 37.166 % 38.073 % 39.034 % 39.924 % 41.582 %

City of Mankato 38.053 % 39.787 % 43.994 % 44.842 % 43.554 % 44.065 % 43.624 % 43.727 % 43.823 % 43.956 %

I.S.D. #77 19.577 % 19.085 % 20.959 % 18.895 % 24.052 % 22.573 % 24.097 % 22.400 % 22.231 % 22.424 %

Region 9 0.187 % 0.192 % 0.197 % 0.194 % 0.169 % 0.156 % 0.162 % 0.167 % 0.167 % 0.177 %

Total 98.495 % 101.450 % 109.055 % 107.925 % 106.523 % 103.960 % 105.956 % 105.328 % 106.145 % 108.139 %

Additional Tax Rates:

Cities of: Amboy 75.109 % 79.907 % 112.600 % 119.012 % 129.750 % 141.892 % 154.120 % 140.185 % 150.387 % 144.719 % Eagle Lake 35.831 % 37.749 % 44.660 % 45.947 % 45.219 % 43.437 % 38.487 % 38.439 % 32.545 % 33.400 % Good Thunder 95.872 % 99.455 % 129.680 % 134.495 % 140.542 % 144.362 % 149.406 % 143.236 % 147.430 % 155.264 % Lake Crystal 65.716 % 72.428 % 82.555 % 93.292 % 92.221 % 88.663 % 87.664 % 81.119 % 70.362 % 69.193 % Madison Lake 49.153 % 51.584 % 59.010 % 60.188 % 49.641 % 52.339 % 52.139 % 55.017 % 53.759 % 57.295 % Mapleton 67.028 % 69.480 % 91.678 % 94.450 % 105.127 % 101.395 % 109.612 % 104.708 % 98.450 % 93.041 % Pemberton 101.150 % 120.225 % 156.567 % 161.695 % 170.385 % 171.308 % 162.006 % 159.509 % 153.356 % 161.259 % St. Clair 69.030 % 67.875 % 88.867 % 93.689 % 92.228 % 91.785 % 90.8789 % 87.779 % 81.073 % 81.487 % Skyline 20.298 % 20.828 % 23.904 % 26.176 % 25.976 % 25.934 % 24.423 % 23.659 % 22.492 % 19.868 % Vernon Center 83.456 % 89.845 % 111.277 % 118.775 % 130.373 % 141.892 % 152.138 % 144.547 % 141.080 % 138.968 %

School Districts:

I.S.D. #75 34.710 % 36.871 % 35.130 % 30.323 % 21.642 % 19.360 % 24.577 % 22.896 % 21.998 % 22.927 % I.S.D. #2071 20.963 % 23.202 % 24.675 % 23.546 % 19.587 % 21.442 % 24.259 % 22.761 % 22.116 % 22.829 % I.S.D. #2135 11.247 % 10.974 % 10.615 % 9.540 % 8.275 % 7.782 % 10.332 % 11.178 % 7.038 % 6.328 %

The Tax Capacity Rate is determined by dividing a taxing district's property tax levy amount by the taxing district's total tax capacity. The Tax Capacity Rate will be expressed as a percentage of tax capacity.

(1) Doesn't include levy for Regional Library which is applicable to selected areas only. Source: Blue Earth County Finance Department

- 95 - BLUE EARTH COUNTY TABLE 7 PRINCIPAL PROPERTY TAXPAYERS (UNAUDITED) DECEMBER 31, 2018

2018 2009 2018/2019 Percentage of 2009/2010 Percentage of Net Tax Total Net Tax Net Tax Total Net Tax Taxpayer Type of Business Capacity (1) Rank Capacity Capacity (1) Rank Capacity Northern States Power Co. Utility $ 1,825,220 1 2.1% $ 1,080,307 2 1.6% River Hills Mall Partners (previously General Growth Properties Inc) Shopping Mall 1,116,640 2 1.3% 1,094,120 1 1.6% Wal-Mart Stores Retail 608,085 3 0.7% Minnesota Gas Company Utility 409,824 4 0.5% Mankato Clinic Ltd Health Care 366,128 5 0.4% Highland Hills Apartments Real Estate 363,796 6 0.4% 230,701 10 0.3% Poet Biorefining Lake Crystal LLC (perviously Northstar Ethanol) Gas Utility 333,258 7 0.4% IRC Mankato Heights (previously Inland Real Estate Corp.) Real Estate 317,246 8 0.4% 326,902 3 0.5% Archer-Daniels Midland Grain Milling 282,672 9 0.3% 293,784 7 0.4% Kearney Properties LTD Real Estate 276,162 10 0.3% Alliance Pipeline Gas Utility 303,334 4 0.4% Immanual - St. Joseph's Hospital Health Care 299,828 5 0.4% Midwest Wireless Holdings LLC Telecommunication 294,218 6 0.4% Monks Road Associates Real Estate 245,850 8 0.4% Harvest States Cooperative Grain Milling 241,011 9 0.4% Totals $ 5,899,031 6.8% $ 4,410,055 6.4%

Total County Net Tax Capacity (2)(3) $ 88,285,259 100% $ 67,556,302 100%

(1) Source: Blue Earth County Taxpayer Services Department (2) Source: Blue Earth County Finance Department (3) Includes Jobz Net Tax Capacity (Jobz ended for Payable Year 2016)

- 96 - BLUE EARTH COUNTY TABLE 8 PROPERTY TAX LEVIES AND COLLECTION (UNAUDITED) LAST TEN FISCAL YEARS

Collection within the Percent of Taxes Levied Fiscal Year of the Levy Collections Total Collections to Date Outstanding Delinquent Fiscal for the Percent Additions/ in Subsequent Percent Delinquent Taxes to Year Fiscal Year (1) Amount of Levy (Abatements) Years Amount of Levy Taxes Tax Levy

2018 $34,327,801 $33,940,151 98.87 % ($423) $0 $33,940,151 98.87 % $387,227 1.13 %

2017 $31,766,501 $31,397,701 98.84 % ($111,499) $157,002 $31,554,703 99.33 % $100,299 0.32 %

2016 $29,984,556 $29,650,494 98.89 % ($160,877) $123,770 $29,774,264 99.30 % $49,415 0.16 %

2015 $29,385,318 $29,177,402 99.29 % ($53,670) $132,062 $29,309,464 99.74 % $22,184 0.08 %

2014 $28,788,365 $28,472,153 98.90 % ($82,139) $221,786 $28,693,939 99.67 % $12,287 0.04 %

2013 $28,787,257 $28,525,390 99.09 % ($20,976) $231,969 $28,757,359 99.90 % $8,922 0.03 %

2012 $28,051,541 $27,693,948 98.73 % ($86,929) $262,596 $27,956,544 99.66 % $8,068 0.03 %

2011 $26,476,124 $26,087,213 98.53 % ($123,385) $262,127 $26,349,340 99.52 % $3,399 0.01 %

2010 $26,051,207 $25,355,238 97.33 % ($69,939) $622,433 $25,977,671 99.72 % $3,597 0.01 %

2009 $25,627,198 $24,951,218 97.36 % ($36,159) $636,574 $25,587,792 99.85 % $3,247 0.01 %

(1) Education Homestead Credit not included in levy. Source: Blue Earth County Finance Department

- 97 - BLUE EARTH COUNTY TABLE 9 RATIOS OF OUTSTANDING DEBT BY TYPE (UNAUDITED) LAST TEN FISCAL YEARS

Business- Type Governmental Activities Activities General Special Lease Percentage Fiscal Obligation Bonds Assessment Revenue Total Primary of Personal Per Capita Year and Notes Bonds Bonds Loans Loans Government Income (1) (1) 2018 18,885,121 10,141,328 - 1,038,680 2,109,712 32,174,841 (2) 474 2017 9,780,376 11,109,785 - 1,059,516 2,109,712 24,059,389 0.8% 358 2016 - 7,861,143 12,150,702 1,025,133 2,109,712 23,146,690 0.8% 345 2015 - 5,159,787 12,984,856 1,008,639 2,109,712 21,262,994 0.7% 317 2014 - 3,614,184 13,784,010 983,032 2,109,712 20,490,938 0.8% 309 2013 1,053,491 4,037,760 14,553,164 996,364 2,109,712 22,750,491 0.9% 346 2012 2,091,981 1,446,000 15,292,318 896,374 2,109,712 21,836,385 0.9% 335 2011 3,105,471 1,642,000 16,001,472 603,264 2,109,712 23,461,919 1.0% 364 2010 4,093,961 1,097,000 16,680,626 380,222 114,444 22,366,253 1.1% 349 2009 464,948 1,335,000 16,694,780 348,889 - 18,843,617 1.0% 312

Note: Details regarding the county's outstanding debt can be found in the notes to the financial statements.

(1) See Table 13 Demographic and Economic Statistics for personal income and population data. (2) This information is not yet available.

- 98 - BLUE EARTH COUNTY TABLE 10 RATIOS OF GENERAL BONDED DEBT OUTSTANDING (UNAUDITED) LAST TEN FISCAL YEARS

Gross Less: Net Net Bonded Net Fiscal Net Tax Bonded Debt Service Bonded Debt to Net Bonded Debt Year Population (1) Capacity (2) (3) Debt (2) (4) Funds (2) Debt Tax Capacity per Capita 2018 67,892 $86,900,489 $18,885,121 $1,216,552 $17,668,569 20.33 % $260

2017 67,220 $82,292,553 $9,780,376 $1,235,264 $8,545,112 10.38 % $127

2016 67,087 $80,005,617 $12,150,702 $1,454,367 $10,696,335 13.37 % $159

2015 67,064 $80,407,245 $12,984,856 $1,476,720 $11,508,136 14.31 % $172

2014 66,400 $75,119,480 $13,784,010 $1,480,990 $12,303,020 16.38 % $185

2013 65,740 $66,235,889 $15,606,655 $2,554,721 $13,051,934 19.71 % $199

2012 65,091 $63,762,822 $17,384,299 $2,615,772 $14,768,527 23.16 % $227

2011 64,383 $66,080,062 $18,810,000 $2,609,827 $16,200,173 24.52 % $252

2010 64,013 $67,556,302 $20,440,000 $4,470,725 $15,969,275 23.64 % $249

2009 60,393 $64,836,799 $16,895,000 $3,205,928 $13,689,072 21.11 % $227

(1) Source: State Demographer's Office, US Census Bureau. (2) Source: Blue Earth County Finance Department (3) Includes Jobz Net Tax Capacity (Jobz ended for 2016) (4) Amount does not include special assessment bonds.

- 99 - BLUE EARTH COUNTY TABLE 11 COMPUTATION OF DIRECT, OVERLAPPING, AND UNDERLYING BONDED DEBT (UNAUDITED) GENERAL OBLIGATION BONDS DECEMBER 31, 2018

Tax Capacity G.O. Debt G.O. Debt (1) Within Applicable Governmental Unit Total Net County (2) to County

Direct: Blue Earth County $ 30,065,129 $ 18,885,121 100.0 % $ 18,885,121

Overlapping: City of Mankato 98,246,769 6,277,494 99.9 % 6,271,217 School Districts: 77 Mankato 104,060,000 99,020,000 78.3 % 77,532,660 75 St. Clair 2,840,000 2,840,000 99.9 % 2,837,160

Total Overlapping Debt 205,146,769 108,137,494 86,641,037

Underlying 2071 Lake Crystal 26,591,783 26,591,783 100.0 % 26,591,783 City of Eagle Lake 3,446,802 175,000 100.0 % 175,000 City of Good Thunder 62,000 - 100.0 % - City of Lake Crystal 5,421,000 1,400,000 100.0 % 1,400,000 City of Madison Lake 10,203,347 - 100.0 % - City of Mapleton 5,874,000 - 100.0 % - City of Pemberton 664,352 664,352 100.0 % 664,352 City of St. Clair 1,536,861 - 100.0 % - City of Skyline 238,756 - 100.0 % - City of Vernon Center 1,335,000 - 100.0 % - Garden City Township 36,000 - 100.0 % - Jamestown Township 116,410 - 100.0 % - LeRay Township 214,204 214,204 100.0 % 214,204 Mankato Township 142,000 - 100.0 % - McPherson Township 38,547 38,547 100.0 % 38,547 Rapidan Township 315,000 - 100.0 % - South Bend Township 246,000 - 100.0 % -

Total Underlying Debt 56,482,062 29,083,886 29,083,886

Total Direct, Overlapping and Underlying Debt $ 291,693,960 $ 156,106,501 $ 134,610,044

(1) Total G.O. debt includes all long term debt of the jurisdiction. Net G.O. debt is determined by deducting debt which is intended to be primarily financed by means other than a real estate tax levy. (2) Determined by the ratio of Net Tax Capacity located within Blue Earth County to total Net Tax Capacity.

Source: Blue Earth County Finance Department

- 100 - BLUE EARTH COUNTY TABLE 12 LEGAL DEBT MARGIN INFORMATION (UNAUDITED) LAST TEN FISCAL YEARS

Fiscal Year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Debt limit $ 211,140,444 $ 210,153,051 $ 189,060,285 $ 197,436,873 $ 225,627,375 $ 245,208,954 $ 239,788,656 $ 242,882,772 $ 253,391,334 $ 255,286,404

Total net debt applicable to limit $ 14,194,119 $ 16,485,700 $ 15,073,700 $ 13,345,111 $ 11,628,519 $ 12,303,020 $ 11,508,136 $ 10,696,335 $ 8,545,112 $ 17,668,569

Legal debt margin $ 196,946,325 $ 193,667,351 $ 173,986,585 $ 184,091,762 $ 213,998,856 $ 232,905,934 $ 228,280,520 $ 232,186,437 $ 244,846,222 $ 237,617,835

Total net debt applicable to the limit as a percentage of debt limit 6.72% 7.84% 7.97% 6.76% 5.15% 5.02% 4.80% 4.40% 3.37% 6.92%

Legal Debt Margin Calculation for Fiscal Year 2018

Market value: $8,509,546,800

Debt limit (3% of market value) $255,286,404 Debt applicable to limit: General obligation bonds and notes 18,885,121 Less: Amount set aside for repayment of general obligation debt (1,216,552) Total net debt applicable to limit 17,668,569 Legal debt margin $237,617,835

Source: Blue Earth County Finance Department

- 101 - BLUE EARTH COUNTY TABLE 13 DEMOGRAPHIC AND ECONOMIC STATISTICS (UNAUDITED) LAST TEN FISCAL YEARS

Per Gross Number School Fiscal Population Personal Capita Median Unemployment Retail of Retail Enrollment Labor Year (2) Income Income (3) Age (2) Rate (4) Sales (5) Businesses (5) I.S.D. #77 (6) Force (4)

2018 67,892 (1) (1) 30.6 2.5 % (1) (1) 8,464 41,345

2017 67,220 $2,917,818,540 $43,407 30.5 3.0 % $1,410,542,389 554 8,357 39,772

2016 67,087 $2,795,045,681 $41,663 30.1 3.2 % $1,331,698,184 573 8,047 39,116

2015 67,064 $2,895,018,752 $43,168 29.8 3.0 % $1,328,087,224 567 7,713 39,042

2014 66,400 $2,706,198,400 $40,756 29.8 3.4 % $1,313,585,400 564 7,595 38,693

2013 65,740 $2,575,167,280 $39,172 29.8 4.3 % $1,417,862,918 558 7,765 38,158

2012 65,091 $2,559,313,029 $39,319 29.8 4.8 % $1,250,376,828 573 7,524 39,234

2011 64,383 $2,369,809,464 $36,808 29.8 5.3 % $1,212,661,778 569 7,284 38,695

2010 64,013 $2,002,838,744 $31,288 29.8 6.2 % $1,100,420,016 580 7,549 38,215

2009 60,393 $1,961,625,033 $32,481 29.9 6.7 % $1,044,447,925 608 7,363 37,907

(1) This information is not yet available. (2) Source: State Demographer's Office, US Census Bureau. (3) Source: US Department of Commerce, Bureau of Economic Analysis. (4) Source: Minnesota Department of Employment and Economic Development. (5) Source: Minnesota Department of Revenue. (6) Source: Minnesota Department of Education.

- 102 - BLUE EARTH COUNTY TABLE 14 PRINCIPAL EMPLOYERS (UNAUDITED) CURRENT YEAR AND NINE YEARS AGO

2018 2009 Percentage of Percentage of Employee Total County Employee Total County Taxpayer Type of Business Count Rank Employment Count Rank Employment General medical and surgical Immanual-St Joseph's-Mayo Health System 2,300 1 5.56% 1,828 1 4.82% hospital Minnesota State University at Mankato University 1,816 2 4.39% 1,600 2 4.22%

ISD #77 (Mankato) Education 1,450 3 3.51% 1,160 4 3.06%

Mankato Clinic Offices of Physicians 750 4 1.81% 683 6 1.80%

Hy-Vee Foods Stores Retail Grocer 710 5 1.72% 710 5 1.87%

Blue Earth County Government 479 6 1.16% 425 8 1.12% Vocational rehabilitation Mankato Rehabilitation Center Inc 441 7 1.07% 1,407 3 3.71% services Monarch Healthcare Management Nursing care facilities 436 8 1.05% 400 10 1.06% (previously The Thro Company) City of Mankato Government 382 9 0.92%

Wal-Mart Distribution center 350 10 0.85%

Wal-Mart Retail General 470 7 1.24% Wireless telecommunications Verizon Wireless 422 9 1.11% carrier

Totals 9,114 22.04% 9,105 24.01%

Source: Blue Earth County Finance Department

- 103 - BLUE EARTH COUNTY TABLE 15 FULL TIME EQUIVALENT COUNTY GOVERNMENT EMPLOYEES BY FUNCTION (UNAUDITED) LAST TEN FISCAL YEARS

Fiscal Year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Function General government 93.13 85.88 84.88 84.00 86.80 88.30 93.25 100.04 101.00 84.80

Public safety Sheriff licensed 26.50 26.50 26.50 26.50 26.50 26.50 29.00 30.00 32.00 28.00 Sheriff non-licensed 64.52 56.52 56.52 60.20 60.39 63.03 61.27 61.63 61.61 56.75 Corrections 26.50 24.50 24.50 24.75 24.75 25.00 27.00 27.00 28.00 26.00

Health and welfare 119.49 124.90 122.90 120.00 124.00 128.00 142.00 152.75 153.00 152.75

Highways and streets 46.50 43.50 42.50 43.50 43.50 43.50 43.50 45.00 45.00 43.00

Culture and recreation Library 17.22 16.72 16.72 14.35 14.28 14.28 14.75 14.88 14.88 13.75 Parks 5.40 5.40 5.40 5.40 5.40 5.40 5.40 5.40 5.40 5.50

Environmental services 17.60 16.60 16.60 15.50 15.50 15.50 15.50 16.50 16.50 14.50

Conservation of natural resources 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00

Total 417.86 401.52 397.52 395.20 402.12 410.51 432.67 454.20 458.39 426.05

Note: Human Service employees transferred from Agency Fund to HS Fund in 2010 - per State Auditor Early Retirees/vacant positions deducted from original 2010, 2011 and 2018 budgeted figures South Central Community Based Initiative (SCCBI) employees transferred from Human Services Fund to Agency Fund in 2018

Source: Blue Earth County Finance Department

- 104 - BLUE EARTH COUNTY TABLE 16 OPERATING INDICATORS BY FUNCTION (UNAUDITED) LAST TEN FISCAL YEARS

Fiscal Year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Function General government Physical property assessments 8,850 10,061 5,461 6,999 6,133 6,600 8,471 7,682 7,571 7,652 Documents recorded/processed 12,820 11,388 10,650 12,615 12,186 9,507 10,975 10,940 10,739 9,472 Veterans transported for medical care 630 661 570 564 595 545 523 392 271 344 Felony complaints issued 499 512 541 470 718 631 813 719 770 723 Public safety Jail bed days 29,390 31,533 31,265 31,808 37,755 40,077 38,125 39,930 40,290 40,595 Traffic stops 2,769 2,665 2,726 2,388 3,059 3,609 2,588 3,508 3,388 3,920 Arrests 2,470 2,153 1,966 2,056 2,552 2,453 2,529 2,337 1,897 1,680 Offenders on probation 1,980 1,766 1,658 1,584 1,265 1,263 1,508 1,825 2,083 2,088 Drug court open cases succeeding on probation 44 79 61 51 41 52 50 55 45 47

Health and welfare Child protection investigations 220 200 200 176 142 196 244 281 316 383 Out-of-home placements 173 170 90 84 79 82 129 105 139 101 Dollars of child support collected (millions) $ 6.60 $ 6.50 $ 6.87 $ 6.93 $ 7.47 $ 7.48 $ 7.72 $ 7.56 $ 7.29 $ 7.19 People who received cash and/or medical assistance 4,605 4,789 5,095 5,227 5,490 7,480 7,842 8,239 9,095 8,788 Highways and streets Miles of road reconstructed, paved and/or sealcoated 60.00 45.00 35.00 51.50 60.40 45.00 71.00 77.00 66.26 61.50 Number of bridges rebuilt 3 2 3 1 4 3 2 1 0 4 Culture and recreation Camping nights in county parks 7,000 6,962 7,140 7,869 7,637 7,497 7,482 7,361 7,217 7,159 Youth completing summer reading program 2,316 3,300 3,048 3,200 2,800 2,540 2,728 2,768 2,700 2,674 Environmental services Tons of materials recycled 67,000 68,000 69,800 70,200 63,202 65,145 50,000 54,000 46,400 55,321 Percent of materials recycled 69.2% 67.3% 71.4% 56.1% 62.5% (1) (1) 50.3% 55.2% (2) Tons of hazardous waste collected 45,000 53,000 44,000 46,000 47,000 51,000 61,000 63,000 61,000 80,575 Feedlot inspections 119 110 118 108 106 106 145 116 105 81 Building permits 122 130 142 162 163 170 150 137 150 162

Conservation of natural resources Ditch inspections 35 52 58 65 60 82 82 213 360 370 Youth enrollment in extension programs 4,228 4,350 4,550 4,823 4,502 4,668 4,542 4,681 4,579 (2)

(1) This information is not available do to report changes. (2) This information is not yet available. Source: Various County Departments

- 105 - BLUE EARTH COUNTY TABLE 17 CAPITAL ASSETS STATISTICS BY FUNCTION (UNAUDITED) LAST TEN FISCAL YEARS

Fiscal Year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Function General government Buildings 4 4 4 4 6 6 6 6 4 4 Vehicles 3 4 4 3 3 3 3 3 3 3 Public safety Buildings 3 3 1 1 1 1 1 1 1 1 Patrol units 26 26 25 26 30 30 35 36 36 36 Vehicles 9 9 5 5 5 5 5 5 5 5 Health and welfare Buildings 2 2 2 1 1 1 1 1 1 1 Vehicles 2 2 2 2 2 2 2 2 2 2 Highways and streets Buildings 12 12 12 12 12 12 12 12 12 12 Miles 733 733 733 733 733 735 737 744 746 748 Miles of bike path 23.6 23.6 23.6 23.6 20.5 20.5 20.5 20.5 35 35 Bridges 136 143 144 146 148 150 152 154 153 154 Heavy equipment 40 40 38 38 38 52 55 59 55 57 Culture and recreation Acres of wetland and conservation lands 926 926 926 926 926 926 926 926 926 926 County parks 15 15 15 15 15 15 15 16 16 16 Playground structures at parks 7 7 7 7 7 7 7 7 7 7 Parks buildings 18 18 18 18 20 20 20 20 20 21 Library buildings 1 1 1 1 1 1 1 1 1 1 Environmental services Buildings 4 4 4 4 4 4 4 4 4 4 Vehicles 6 6 6 6 6 6 6 6 6 6 Hazardous waste centers 1 1 1 1 1 1 1 1 1 1

Conservation of natural resources (1)

(1) No capital asset indicators are available for the conservation of natural resources function. Source: Various County Departments

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