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This section of the report provides you with an overview of the fmancial trends and activities of the City's <br />governmental funds, which includes the General Fund, special revenue, debt service, and capital project <br />funds. These funds are used to account for the basic services the City provides to all of its citizens, which <br />are financed primarily with property taxes. The governmental fund information in the City's financial <br />statements focuses on budgetary compliance, and the sufficiency of each governmental fund's current <br />assets to finance its current liabilities. <br />PROPERTY TAXES <br />Minnesota cities rely heavily on local property tax levies to support their governmental fund activities. In <br />recent years this dependence has been heightened, as economic conditions have resulted in reductions to <br />other revenue sources such as state aids and fees generated from property development or redevelopment. <br />Despite these conditions, property taxes levied by Minnesota cities increased a record low 0.9 percent <br />state -wide for 2012, and 2.27 percent for 2013. Almost one -third of Minnesota cities kept their 2013 levy <br />at the same level as the previous year, while another 13 percent reduced their levies for 2013. <br />Economic conditions have also had a profound effect on the tax base of Minnesota cities with state -wide <br />taxable market values declining each of the last four levy years, including average decreases of <br />8.8 percent and 4.5 percent for taxes payable in 2012 and 2013, respectively. There is optimism that this <br />trend is reversing, as the market value decline for the 2013 levy year was the smallest of the past four <br />years. However, since the assessed valuation used for levying property taxes is based on values from the <br />previous fiscal year (e.g. the market value for taxes payable in 2013 is based on estimated values as of <br />January 1, 2012), taxable market value improvement has lagged behind recent upturns in the housing <br />market and the economy in general. <br />The City's taxable market value decreased 3.7 percent for taxes payable in 2012 and 6.9 percent for taxes <br />payable in 2013. The following graph shows the City's changes in taxable market value over the past <br />10 years: <br />$2,500,000,000 <br />$2,000,000,000 <br />$1,500,000,000 <br />$1,000,000,000 — <br />$500,000,000 — <br />$— <br />GOVERNMENTAL FUNDS OVERVIEW <br />Taxable Market Value <br />2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 <br />