HomeMy WebLinkAbout9A 2015 Annual Financial Report and Management Letter4646 Dakota Street SE
Prior Lake, MN 55372
CITY COUNCIL AGENDA REPORT
MEETING DATE: MAY 23, 2016
AGENDA #:
PREPARED BY:
9A
DON URAM, FINANCE DIRECTOR
CATHY ERICKSON, ACCOUNTING MANAGER
PRESENTED BY: JIM EICHTEN, MMKR & CO, P.A.
AGENDA ITEM: CONSIDER APPROVAL OF A RESOLUTION APPROVING THE 2015
ANNUAL FINANCIAL REPORT AND MANAGEMENT LETTER
DISCUSSION: Introduction
The 2015 annual audit was conducted in accordance with generally
accepted auditing standards and represents an independent opinion of the
financial activities during the year and position of the City of Prior Lake as of
12/31/2015. The purpose of the audit is to express an opinion about
whether the financial statements prepared are fairly presented, in all
material respects, and in conformity with accounting principles generally
accepted in the United States of America.
History
All cities with a population of more than 2,500 are required by state statute
to complete an audit each year. The firm of Malloy, Montague, Karnowski,
Radosevich & Co, P.A. (MMKR) has been retained by the City for this
purpose.
Current Circumstances
Copies of the reports are included in the packet that was distributed to
Council members on May 18. Copies of the 2015 Annual Financial Report
and Management Letter will also be available for the Council and public
prior to the workshop on May 23.
The Annual Financial Report represents the financial reporting model that
reflects GASB Statement No. 34 as required by the Governmental
Accounting Standards Board (GASB). This format consolidates the City’s
financial reporting activity into two groups (governmental activities and
business-type activities) and includes a statement of net assets. A
statement of net assets identifies capital assets (i.e. land, buildings and
improvements) and long-term liabilities. As stated in the Financial Report,
the City’s overall net asset financial position (governmental and business-
type activities combined) is $164,076,748 and represents an increase of
$4,494,148 from December 31, 2014. This number includes a change in
accounting principal (GASB 68) for reporting the City’s participation in the
PERA pension plan and the inclusion of the Fire Department Relief
Association’s net pension assets as part of the City’s entity-wide financial
statements in the amount of $5,117,943. While the net pension liability will
be reported on the financial statements, there is no expectation that the City
pay off the liability within several budget cycles. For that reason, the City will
not need to budget more for pension expenses under these new
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requirements. The City’s PERA contribution rates will also not increase as a
result of this accounting change. Those will continue asset in MN Statutes
based on traditional actuarial funding valuations.
Conclusion
The Management Letter is intended to bring to the City Council’s attention
any deficiencies or conditions recommended for improvement within the
design or administration of the City’s financial operations and to follow-up on
prior year findings and recommendations.
Based on their audit of the City’s financial statements for the year ended
December 31, 2015:
MMKR issued an unmodified opinion on the City’s financial
statements;
MMKR reported no deficiencies in the City’s internal control over
financial reporting that they considered to be material weaknesses;
The results of MMKR’s testing disclosed no instances of
noncompliance required to be reported under Government Auditing
Standards;
MMKR reported one finding based on testing of the City’s
compliance with Minnesota laws and regulations.
The City held two CD’s each through separate investment
broker’s at December 31, 2015, leaving $484,995 of the City’s
deposits uninsured and uncollateralized. This was an
oversight by staff and once identified was rectified immediately.
Staff reviews collateral coverage regularly and will assure that
adequate diversification of CD’s is obtained in the future.
The Management Letter also includes summaries and graphs for
operational activity for the General Fund and proprietary funds, comparative
information for property taxes and governmental fund revenues and
expenditures, and accounting and auditing updates.
GASB requires that a Management’s Discussion and Analysis (known as an
MD&A) be assimilated in the Annual Financial Report to provide
supplementary information to facilitate a greater understanding of the audit
report by the general reader. As in previous years, the MD&A includes a
section attributed to the financial management policies of the City. A key
element within the City’s Vision and Strategic Plan is the ability to
demonstrate strong financial management and effective use of community
resources. In addition, the Comprehensive Financial Management Policy
(CFMP) includes a section on Financial Planning and Reporting for the
purpose of providing “accurate, current and meaningful information about
the City’s operations to guide decision making and enhance and protect the
City’s financial position.” The Council recently updated this section of the
CFMP to include five (5) objectives/metrics to be included in the Annual
Financial Report. They include:
1) Bond Rating – Maintain or improve current Aa2 bond rating;
2) General Fund Reserve Balance - Maintain a General Fund
unrestricted fund balance (which includes Committed, Assigned and
Unassigned classifications) within a range of 40 – 50% of projected
expenditures for the subsequent year;
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3) Property Taxes – Maintain or improve property tax rank when
compared to a broader list of metro area cities;
4) Property Taxes / Household – Maintain a level of property taxes on a
per household basis which takes into account the cost of inflation
and community growth.
5) General Fund Expenditures / Household – Maintain a level of
General Fund operational expenditures on a per household basis
which takes into account the cost of inflation and community growth.
All five objectives/metrics are discussed and graphically presented within
the MD&A section of the 2015 Annual Financial Report.
The primary results for the General Fund as indicated within the 2015
Annual Financial Report are:
1) Actual revenues were $12,691,919 (including transfers and sale of
assets) compared to budgeted revenues of $12,647,274 or 100% of
budget.
2) Actual expenditures were $12,343,815 (including transfers out)
compared to amended budgeted expenditures of $12,880,629 or
96% of budget.
3) Gross expenditures exceeded revenues by an amount of $348,104.
The 2015 year-end General Fund balance (which is maintained for cash
flow, emergency purposes, etc.) increased to $6,124,751 which represents
a reserve of 47.3% of the 2016 General Fund budgeted expenditures. Of
that total, $6,041,095 or 46.7% is unrestricted. This level of reserve is
within the targeted range of 40-50% as identified in the City’s
Comprehensive Financial Management Policy.
Please feel free to contact Staff prior to the meeting if you have any
questions or would like to review the Report on a more comprehensive
basis.
Jim Eichten of the firm MMKR & Co, P.A. will make a brief presentation
regarding the Report and Management Letter and respond to any questions
the Council may have. Mr. Eichten will also be making a presentation
during the Council Workshop on May 23.
Additional Reporting Required
A City Financial Reporting Form, which is basically a condensed excerpt of
the official document, is required to be submitted to the Office of the State
Auditor by June 30, 2016 along with this report.
ALTERNATIVES: The following alternatives are available to the City Council:
1. Motion and second to adopt the attached resolution accepting the
2015 Annual Financial Report and Management Letter as submitted.
2. Delay action according to a specific Council reason.
RECOMMENDED
MOTION:
Alternative 1.
4646 Dakota Street SE
Prior Lake, MN 55372
RESOLUTION 16-XXX
A RESOLUTION ACCEPTING THE 2015 ANNUAL FINANCIAL REPORT AND
MANAGEMENT LETTER
Motion By: Second By:
WHEREAS, Minnesota Statutes requires that the city’s financial records be annually audited;
and,
WHEREAS, the annual audit is conducted in conformance with generally accepted accounting
principles; and
WHEREAS, the purpose of the audit is to express an opinion about whether the financial
statements prepared by the city are fairly presented in all material respects in
conformity with accounting principles generally accepted in the United States of
America; and,
WHEREAS, the firm of Malloy, Montague, Karnowski, Radosevich and Co. P.A. (MMKR) have
been retained by the city council for this purpose; and,
WHEREAS, MMKR has submitted the 2015 Annual Financial Report and Management Letter;
and,
WHEREAS, MMKR has issued an unmodified opinion with respect to the city’s 2015 financial
statements; and,
WHEREAS, the city staff and city council have carefully examined the submitted statements and
reports and their contents at a work session and regular city council meeting.
NOW THEREFORE, BE IT HEREBY RESOLVED BY THE CITY COUNCIL OF PRIOR LAKE,
MINNESOTA as follows:
1. The recitals set forth above are incorporated herein.
2. The city council hereby accepts the 2015 Annual Financial Report and Management Letter.
3. The staff is hereby directed to submit the reports to the Office of the State Auditor.
PASSED AND ADOPTED THIS 23rd DAY OF MAY 2016.
VOTE Hedberg Keeney McGuire Morton Thompson
Aye ☐ ☐ ☐ ☐ ☐
Nay ☐ ☐ ☐ ☐ ☐
Abstain ☐ ☐ ☐ ☐ ☐
Absent ☐ ☐ ☐ ☐ ☐
______________________________
Frank Boyles, City Manager
CITY OF PRIOR LAKE
SCOTT COUNTY, MINNESOTA
Financial Statements
and Supplemental Information
Year Ended
December 31, 2015
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Page
INTRODUCTORY SECTION
ELECTED AND APPOINTED OFFICIALS 1
FINANCIAL SECTION
INDEPENDENT AUDITOR’S REPORT 2–4
MANAGEMENT’S DISCUSSION AND ANALYSIS 5–18
BASIC FINANCIAL STATEMENTS
Government-Wide Financial Statements
Statement of Net Position 19
Statement of Activities 20–21
Fund Financial Statements
Governmental Funds
Balance Sheet 22–23
Reconciliation of the Balance Sheet to the Statement of Net Position 24
Statement of Revenues, Expenditures, and Changes in Fund Balances 25–26
Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund
Balances to the Statement of Activities 27
Statement of Revenues, Expenditures, and Changes in Fund Balances –
General Fund – Budget and Actual 28
Proprietary Funds
Statements of Net Position 29–30
Statements of Revenues, Expenses, and Changes in Net Position 31–32
Statements of Cash Flows 33–36
Notes to Basic Financial Statements 37–68
REQUIRED SUPPLEMENTARY INFORMATION
Public Employees General Employees Retirement Fund
Schedule of City’s and Non-Employer Proportionate Share of the Net Pension Liability 69
Schedule of Employer Contributions 69
Public Employees Police and Fire Fund
Schedule of City’s and Non-Employer Proportionate Share of the Net Pension Liability 70
Schedule of Employer Contributions 70
Prior Lake Fire Relief Association
Schedule of Changes in the Prior Lake Fire Relief Association’s Net Pension Asset
and Related Ratios 71
Schedule of Employer Contributions 71
Other Post-Employment Benefits Plan
Schedule of Funding Progress 72
CITY OF PRIOR LAKE
SCOTT COUNTY, MINNESOTA
Table of Contents
Page
SUPPLEMENTAL INFORMATION
Combining and Individual Fund Statements and Schedules
Nonmajor Governmental Funds
Combining Balance Sheet 73
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 74
Nonmajor Special Revenue Funds
Combining Balance Sheet 75–76
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 77–78
Nonmajor Capital Projects Funds
Combining Balance Sheet 79–82
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 83–86
General Fund
Schedule of Revenues, Expenditures, and Changes in Fund Balances –
Budget and Actual 87–93
Debt Service Funds
Balance Sheet by Account 94–98
Schedule of Revenues, Expenditures, and Changes in Fund Balances 99–103
OTHER INFORMATION SECTION
Summary Financial Report
Revenues and Expenditures for General Operations 104
Combined Schedule of Indebtedness 105–106
Bond Schedules 107–111
Debt Service Requirements 112–113
Tax Levies and Collections, Special Assessment Levies and Collections 114
Schedules of Market Value, Tax Levy, Tax Capacity Values, Tax Capacity Rate,
and Market Value Rate 115
Key Financial Indicators 116
OTHER REQUIRED REPORTS
Independent Auditor’s Report on Internal Control Over Financial Reporting and
on Compliance and Other Matters Based on an Audit of Financial Statements
Performed in Accordance With Government Auditing Standards 117–118
Independent Auditor’s Report on Minnesota Legal Compliance 119
Schedule of Findings 120
CITY OF PRIOR LAKE
SCOTT COUNTY, MINNESOTA
Table of Contents (continued)
INTRODUCTORY SECTION
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Term Expires
Ken Hedberg Mayor 12/31/2016
Richard Keeney Councilmember 12/31/2016
Michael McGuire Councilmember 12/31/2018
Monique Morton Councilmember 12/31/2016
Annette Thompson Councilmember 12/31/2018
Frank Boyles City Manager
Donald Uram Finance Director
Cathy Erickson Accounting Manager
ELECTED
APPOINTED
CITY OF PRIOR LAKE
SCOTT COUNTY, MINNESOTA
Elected and Appointed Officials
As of December 31, 2015
FINANCIAL SECTION
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INDEPENDENT AUDITOR’S REPORT
To the City Council and Management
City of Prior Lake, 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 the City of Prior Lake,
Minnesota (the City) as of and for the year ended December 31, 2015, and the related notes to the
financial statements, which collectively comprise the City’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 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 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 City’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 City’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.
(continued)
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OPINIONS
In our opinion, the financial statements referred to on the previous page 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 the City as of December 31, 2015, and the
respective changes in financial position and, where applicable, cash flows thereof, and the budgetary
comparison for the General Fund for the year then ended, in accordance with accounting principles
generally accepted in the United States of America.
EMPHASIS OF MATTER
As described in Note 1 of the notes to basic financial statements, the City has implemented Governmental
Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for
Pensions—an amendment of GASB Statement No. 27, and GASB Statement No. 71, Pension Transition
for Contributions Made Subsequent to the Measurement Date—an amendment of GASB Statement No. 68,
during the year ended December 31, 2015. 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 the required supplementary information (RSI), as listed in the table of
contents, be presented to supplement the basic financial statements. Such information, although not a 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 RSI 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.
Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively
comprise the City’s basic financial statements. The introductory section, combining and individual fund
financial statements and schedules, and other information section, as listed in the table of contents, are
presented for purposes of additional analysis and are not required parts of the basic financial statements.
The combining and individual fund statements and schedules are the responsibility of management and
were derived from and relate directly to the underlying accounting and other records used to prepare the
basic financial statements. Such information has been subjected to the auditing procedures applied in the
audit of the basic financial statements 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 information is fairly stated, in all material respects, in relation to the basic financial statements as a
whole.
The introductory and other information sections have not been subjected to the auditing procedures
applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or
provide any assurance on them.
(continued)
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Prior Year Comparative Information
We have previously audited the City’s 2014 financial statements, and we expressed unmodified audit
opinions on the respective financial statements of the governmental activities, the business-type activities,
each major fund, and the aggregate remaining fund information in our report dated May 15, 2015. In our
opinion, the partial comparative information presented herein as of and for the year ended December 31,
2014 is consistent, in all material respects, with the audited financial statements from which it has been
derived.
OTHER REPORTING REQUIRED BY GOVERNMENT AUDITING STANDARDS
In accordance with Government Auditing Standards, we have also issued our report dated May 18, 2016
on our consideration of the City’s internal control over financial reporting and on our tests of its
compliance with certain provisions of laws, regulations, contracts, grant agreements, and other matters.
The purpose of that report is 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 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 the City’s internal control over financial
reporting and compliance.
Minneapolis, Minnesota
May 18, 2016
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CITY OF PRIOR LAKE
Management’s Discussion and Analysis
Fiscal Year Ended December 31, 2015
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As the management of the City of Prior Lake, Minnesota (the City), we offer readers of the City’s
financial statements this narrative overview and analysis of the financial activities of the City for the
fiscal year ended December 31, 2015.
FINANCIAL HIGHLIGHTS
The assets and deferred outflows of resources of the City exceeded its liabilities and deferred
inflows of resources at the close of the most recent fiscal year by $164,076,748 (net position). Of
this amount, $15,346,945 (unrestricted net position) may be used to meet the government’s
ongoing obligations to citizens and creditors.
The City recorded a change in accounting principle in the current year for reporting the City’s
participation in the Public Employees Retirement Association (PERA) pension plan and inclusion
of the Prior Lake Fire Relief Association’s net pension asset on the City’s government-wide
financial statements. This change reduced beginning net position in the government-wide
financial statements by $5,117,943; of this amount, $4,181,955, or 81.7 percent, was attributable
to governmental activities and $935,988, or 18.3 percent, was attributable to business-type
activities. While the net pension liability will be reported on the City’s financial statements, there
is no expectation that the City pay off the liability within several budget cycles. Because of that,
the City will not need to budget more for pension expenses under these new requirements. It is
also important to note that the City’s pension contributions will not increase as a result of this
accounting change. Contribution rates will continue to be set in Minnesota Statutes based on
traditional actuarial funding valuations.
The City’s total net position increased by $9,612,091 exclusive of the change in accounting
principle explained above.
As of the close of the current fiscal year, the City’s governmental funds reported combined
ending fund balances of $25,625,224, an increase of $5,856,590 in comparison with the prior
year.
At the end of the current fiscal year, the unassigned fund balance for the General Fund was
$6,041,095, or 46.7 percent, of budgeted 2016 expenditures and transfers out ($12,945,738). The
total fund balance of $6,124,751 reflects an increase of $348,104. This is $581,459 more than the
budgeted decrease which was primarily due to increased revenues from a League of Minnesota
Cities Insurance Trust (LMCIT) workers’ compensation retroactive premium adjustment and
property/casualty dividend. Also, the City had lower than budgeted expenditures due to several
open positions during the year and less capital outlay than was originally planned for in the Parks
Department.
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OVERVIEW OF THE FINANCIAL STATEMENTS
This discussion and analysis is intended to serve as an introduction to the City’s basic financial
statements. The City’s basic financial statements include three components: 1) government-wide financial
statements, 2) fund financial statements, and 3) notes to basic financial statements. This report also
contains supplemental 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 the City’s finances, in a manner similar to a private sector
business.
The Statement of Net Position presents information on all of the City’s assets, deferred outflows of
resources, liabilities, and deferred inflows of resources, with the difference between them reported as net
position. Over time, increases or decreases in net position may serve as a useful indicator of whether the
financial position of the City is improving or deteriorating.
The Statement of Activities presents information showing how the City’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 only 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 the City 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 costs through user fees and charges (business-type
activities). The governmental activities of the City include general government, public safety, public
works, culture and recreation, and economic development. The business-type activities of the City include
water, sewer, and water quality operations. In 2014, the City transferred the responsibility for operating a
transit operation to the Minnesota Valley Transit Authority. The Transit Fund was closed in 2015.
The government-wide financial statements can be found in the financial section following this report.
Fund Financial Statements – A fund is a grouping of related accounts that is used to maintain control
over resources that have been segregated for specific activities or objectives. The City, like other state and
local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal
requirements. All of the funds of the City can be divided into two categories: governmental funds and
proprietary 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 City’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 City’s near-term financing decisions. Both
the governmental funds Balance Sheet and the governmental funds Statement of Revenues, Expenditures,
and Changes in Fund Balances provide a reconciliation to facilitate this comparison between
governmental funds and governmental activities.
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The City maintains numerous individual governmental funds. Information is presented separately in the
governmental funds Balance Sheet and in the governmental funds Statement of Revenues, Expenditures,
and Changes in Fund Balances for the General Fund, DAG Special Revenue Fund, Debt Service Fund,
and Construction Fund, all of which are considered major funds. Data from the other governmental funds
are combined into a single, aggregated presentation. Individual fund data for each of these nonmajor
governmental funds are provided in the form of combining statements elsewhere in this report.
The City adopts an annual appropriated budget for its General Fund. A budgetary comparison statement
has been provided for this fund to demonstrate compliance with this budget.
The basic governmental fund financial statements can be found in the financial section of this report
immediately following the government-wide financial statements.
Proprietary Funds – The City maintains two types of proprietary funds. Enterprise funds are used to
report the same functions presented as business-type activities in the government-wide financial
statements. The City uses enterprise funds to account for its water, sewer, water quality, and transit
operations. The Transit Fund was closed in 2015.
Proprietary funds provide the same type of information as shown in the government-wide financial
statements, only in more detail.
Internal service funds are an accounting device used to accumulate and allocate costs internally among
the City’s various functions. The City uses internal service funds to account for severance compensation.
Because these internal service fund activities predominantly benefit governmental rather than
business-type functions, they have been included within governmental activities in the government-wide
financial statements.
The Internal Service Fund is presented separately in the proprietary fund financial statements.
The basic proprietary fund financial statements can be found in the financial section of this report
immediately following the governmental fund statements.
Notes to Basic Financial Statements – The notes to basic financial statements 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 basic financial statements can be found following the proprietary fund
statements within the financial section of this report.
Supplemental Information – The combining and individual fund statements and schedules referred to
earlier in connection with nonmajor governmental funds are presented immediately following the required
supplementary information.
GOVERNMENT-WIDE FINANCIAL ANALYSIS
As noted earlier, net position may serve over time as a useful indicator of a City’s financial position. In
the case of the City, assets and deferred outflows of resources exceeded liabilities and deferred inflows of
resources by $164,076,748 at the close of the most recent fiscal year.
The City’s investment in capital asset (e.g., land, buildings, and machinery and equipment), less any
related debt used to acquire those assets that is still outstanding, totaled 86.5 percent of total net position.
The City uses these capital assets to provide services to citizens; consequently, these assets are not
available for future spending. Although the City’s investment in its capital assets is reported net of related
debt, it should be noted that the resources needed to repay this debt must be provided from other sources,
since the capital assets themselves cannot be used to liquidate these liabilities.
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The following table provides the City’s Summary of Net Position:
2015 2014 2015 2014 2015 2014
Assets
Current and other assets 34,420,681$ 25,821,559$ 5,185,565$ 7,783,391$ 39,606,246$ 33,604,950$
Capital assets 134,217,973 121,076,263 47,805,809 46,627,184 182,023,782 167,703,447
Total assets 168,638,654$ 146,897,822$ 52,991,374$ 54,410,575$ 221,630,028$ 201,308,397$
Deferred outflows of resources
Pension plan deferments 1,271,046$ –$ 137,788$ –$ 1,408,834$ –$
Liabilities
Long-term liabilities 52,654,689$ 37,672,990$ 1,119,251$ 109,172$ 53,773,940$ 37,782,162$
Other liabilities 3,840,708 2,684,991 222,595 1,258,644 4,063,303 3,943,635
Total liabilities 56,495,397$ 40,357,981$ 1,341,846$ 1,367,816$ 57,837,243$ 41,725,797$
Deferred inflows of resources
Pension plan deferments 1,024,683$ –$ 100,188$ –$ 1,124,871$ –$
Net position
Net investment in
capital assets 94,087,717$ 87,153,664$ 47,805,809$ 46,627,184$ 141,893,526$ 133,780,848$
Restricted 6,836,277 5,195,822 – – 6,836,277 5,195,822
Unrestricted 11,465,626 14,190,355 3,881,319 6,415,575 15,346,945 20,605,930
Total net position 112,389,620$ 106,539,841$ 51,687,128$ 53,042,759$ 164,076,748$ 159,582,600$
Activities Activities Total
Governmental Business-Type
Summary of Net Position
as of December 31, 2015 and 2014
Table 1
An additional portion of the City’s net position ($6,836,277, or 4.2 percent) represents resources that are
subject to external restrictions on how they may be used. The remaining balance of unrestricted net
position, $15,346,945, may be used to meet the government’s ongoing obligations to citizens and
creditors.
At the end of the current fiscal year, the City 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 and
business-type activities. The same situation held true for the prior fiscal year.
Total net position increased $4,494,148 during the current year. A significant factor contributing to the
change in net position was the adoption of Governmental Accounting Standards Board (GASB) Statement
No. 68, which required the City to recognize its long-term obligation for pension benefits as a liability for
the first time. This change in accounting principle decreased beginning net position by $5,117,943.
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2015 2014 2015 2014 2015 2014
Revenues
Program revenues
Charges for services 1,908,653$ 1,912,949$ 6,688,221$ 6,479,535$ 8,596,874$ 8,392,484$
Operating grants and
contributions 1,505,332 1,354,372 42,402 883,079 1,547,734 2,237,451
Capital grants and
contributions 9,448,983 5,917,572 851,824 576,240 10,300,807 6,493,812
General revenues
Property taxes and tax
increments 10,847,377 9,923,506 – – 10,847,377 9,923,506
Franchise taxes 604,997 594,800 – – 604,997 594,800
Grants and contributions
not restricted to specific
programs 13,250 26,557 – – 13,250 26,557
Interest income 398,549 782,965 127,457 355,290 526,006 1,138,255
Miscellaneous 308,307 204,641 10,021 5,782 318,328 210,423
Total revenues 25,035,448 20,717,362 7,719,925 8,299,926 32,755,373 29,017,288
Expenses
General government 3,266,222 3,557,910 – – 3,266,222 3,557,910
Public safety 5,426,539 5,230,546 – – 5,426,539 5,230,546
Public works 4,775,320 4,227,440 – – 4,775,320 4,227,440
Culture and recreation 2,271,719 2,229,987 – – 2,271,719 2,229,987
Economic development 590,532 535,955 – – 590,532 535,955
Interest on long-term debt 1,410,844 1,185,474 – – 1,410,844 1,185,474
Water – – 2,347,154 2,297,197 2,347,154 2,297,197
Sewer – – 2,468,932 2,447,618 2,468,932 2,447,618
Water quality – – 560,820 638,570 560,820 638,570
Transit – – – 1,099,899 – 1,099,899
Total expenses 17,741,176 16,967,312 5,376,906 6,483,284 23,118,082 23,450,596
Increase in net position
before transfers and
special items 7,294,272 3,750,050 2,343,019 1,816,642 9,637,291 5,566,692
Special items
Transfer of operations – – (25,200) (1,371,480) (25,200) (1,371,480)
Transfers 2,737,462 612,622 (2,737,462) (612,622) – –
Changes in net position 10,031,734 4,362,672 (419,643) (167,460) 9,612,091 4,195,212
Net position – beginning,
as previously reported 106,539,841 102,177,169 53,042,759 53,210,219 159,582,600 155,387,388
Change in accounting principle (4,181,955) – (935,988) – (5,117,943) –
Net position – beginning, restated 102,357,886 102,177,169 52,106,771 53,210,219 154,464,657 155,387,388
Net position – ending 112,389,620$ 106,539,841$ 51,687,128$ 53,042,759$ 164,076,748$ 159,582,600$
Activities Activities Total
Table 2
Changes in Net Position
for the Years Ended December 31, 2015 and 2014
Governmental Business-Type
Governmental Activities – Governmental activities increased the City’s net position by $10,031,734.
This is offset by a change in accounting principle of $4,181,955 for a total net change of $5,849,779. Key
elements of this increase are seen in the table above. The increase is due primarily to the receipt of
prepaid special assessments for the 2015 street reconstruction projects, the receipt of $1 million in
Municipal State Aid for the reconstruction of TH 13/150th Street, and developer land/infrastructure
contributions. In addition, just over $2.8 million was transferred in to fund utility infrastructure
improvements in various road reconstruction projects, including Credit River Road, Welcome Avenue,
and the Highland/Marsh area improvements.
-10-
The business-type activities decreased the City’s net position in total by $1,355,631. Of that, $419,643 is
due mostly to the transfers made for utility infrastructure improvements mentioned on the previous page.
Interest income was lower due to a more stable investment market while still maintaining positive market
value adjustments on the City’s investment portfolio.
Net position was also reduced due to a change in accounting principle of $935,988.
Below are specific graphs that provide comparisons of the governmental activities program revenues and
expenses:
Governmental Activities – Revenue by Program
-11-
Business-Type Activities – Below are graphs showing the business-type activities program revenues and
expense comparisons.
Business-Type Activities – Revenue by Source
-12-
FINANCIAL ANALYSIS OF THE GOVERNMENT’S FUNDS
As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with
finance-related legal requirements.
Governmental Funds – The focus of the City’s governmental funds is to provide information on
near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing
the City’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 the end of the current fiscal year, the City’s governmental funds reported combined ending fund
balances of $25,625,224, an increase of $5,856,590 in comparison with the prior year.
The General Fund is the chief operating fund of the City. At the end of the recent fiscal year, unassigned
fund balance of the General Fund was $6,041,095, while total fund balance reached $6,124,751. As a
measure of the General Fund’s liquidity, it may be useful to compare the unassigned fund balance to total
fund expenditures. Unassigned fund balance represents about 46.7 percent of total 2016 General Fund
budgeted expenditures and transfers out ($12,945,738).
Total fund balance for the City’s General Fund increased by $348,104 during 2015. This is $581,459
more than the budgeted decrease which was due to increased revenues from a LMCIT workers’
compensation retroactive premium adjustment and property/causality dividend. Also, the City had lower
than budgeted expenditures due to several open positions during the year and less capital outlay than was
originally planned for in the Parks Department. Approximately $200,000 of project expenditures will be
carried over to 2016.
The DAG Special Revenue Fund balance increased $62,368. Charges for services increased $47,525 and
exceeded capital outlay in 2015, which caused the increase in fund balance.
The Debt Service Fund balance increased by $6,016,064. This is largely due to the issuance of the
refunding portion of the 2015A General Obligation Improvement Bonds. The City manages cash flow in
all debt service funds and ensures adequate resources exist to fund future obligations.
The Construction Fund balance increased by $2,888,325. This increase is mainly due to the issuance of
the new money portion of the 2015A General Obligation Improvement Bonds. Offsetting this increase
was a significant increase in capital outlay related to various projects underway during the year.
Proprietary Funds – The City’s proprietary funds provide the same information for the business-type
activities found in the government-wide financial statements, but in more detail.
GENERAL FUND BUDGETARY HIGHLIGHTS
Actual revenues were $37,515 over budget in 2015 due primarily to an insurance dividend that was not
expected in the budget. The number of building permits came in 11 percent below budget. This resulted in
a reduction in revenues associated with building permit fees causing licenses and permits to be $55,281
lower than budget.
Actual expenditures were $537,214 less than budget in 2015. The largest variances from budget were in
general government and public works being under budget by $132,705 and $134,289, respectively. This
is primarily due to certain staff positions not being filled and park and street improvements not being
completed as budgeted.
-13-
CAPITAL ASSETS AND LONG-TERM DEBT
Capital Assets – The City’s investment in capital assets for its governmental and business-type activities
as of December 31, 2015 amounts to $182,023,782 (net of accumulated depreciation). This investment in
capital assets includes items such as land, buildings and improvements, machinery and equipment, park
facilities, roads, highways, and bridges.
2015 2014 2015 2014 2015 2014
Land 32,221,249$ 32,075,809$ –$ –$ 32,221,249$ 32,075,809$
Easements 36,823,303 33,661,179 75,300 75,300 36,898,603 33,736,479
Construction in progress 15,229,989 6,882,779 327,534 47,281 15,557,523 6,930,060
Land improvements 772,769 780,320 61,516 65,903 834,285 846,223
Machinery and equipment 2,718,747 2,602,981 402,831 438,262 3,121,578 3,041,243
Vehicles 1,331,252 981,972 31,470 15,740 1,362,722 997,712
Infrastructure 45,120,664 44,091,223 46,907,158 45,984,698 92,027,822 90,075,921
Total 134,217,973$ 121,076,263$ 47,805,809$ 46,627,184$ 182,023,782$ 167,703,447$
Table 3
Capital Assets
(Net of Depreciation)
Total
Business-Type
Activities
Governmental
Activities
Additional information on the City’s capital assets can be found in Note 3 of the notes to basic financial
statements.
-14-
Long-Term Debt – At the end of the current fiscal year, the City had total bonded debt outstanding of
$43,020,000. This amount comprises debt backed by the full faith and credit of the City. The City’s total
debt increased during the current fiscal year due to the issuance of the 2015A and 2015B General
Obligation Improvement Bonds. Additionally, the City implemented GASB Statement No. 68,
Accounting and Financial Reporting for Pensions—an amendment of GASB Statement No. 27. This
GASB Statement requires an employer to recognize a liability for its share of the pension liability
provided through the pension plan. This net pension liability for the City is $6,453,193. (See Note 1.Y.
Change in Accounting Principle for further information.)
2015 2014 2015 2014 2015 2014
G.O. bonds 13,775,000$ 15,290,000$ –$ –$ 13,775,000$ 15,290,000$
G.O. special assessment bonds 16,370,000 10,595,000 – – 16,370,000 10,595,000
G.O. tax increment bonds 225,000 245,000 – – 225,000 245,000
G.O. revenue bonds 12,650,000 7,510,000 – – 12,650,000 7,510,000
Premium (discount) on bonds payable 495,558 292,599 – – 495,558 292,599
Energy loan payable 2,574,450 2,667,924 – – 2,574,450 2,667,924
Compensated absences payable 881,375 929,153 113,169 109,172 994,544 1,038,325
Net OPEB obligation 236,195 143,314 – – 236,195 143,314
Net pension liability – GERF and PEPFF 5,447,111 – 1,006,082 – 6,453,193 –
Total 52,654,689$ 37,672,990$ 1,119,251$ 109,172$ 53,773,940$ 37,782,162$
Table 4
Long-Term Liabilities
Total
Governmental Business-Type
Activities Activities
The City’s statutory debt limit is equal to 3 percent of estimated taxable market value of property located
within the City. The taxable market value totals $2,620,934,100, which calculates to a debt margin of
$78,628,023. Debt financed partially or entirely by special assessments, tax increments, and other revenue
sources is not applied against the City’s debt limit, nor is debt financed by proprietary fund revenues.
Currently, the City has $13,775,000 of general obligation debt outstanding, leaving a debt margin of
$64,853,023.
Additional information on the City’s long-term debt can be found in Note 5 of the notes to basic financial
statements.
ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES
The City adopted a general operating budget of $12,945,738, expenditures and other financing
uses, for fiscal 2016, an increase of $381,793, or 3.0 percent, from the 2015 original budget.
Continued staged development of land with the 2,000 acres annexed in 2004 from Spring Lake
Township will provide the majority of the City’s anticipated market value growth over the course
of the next 10–15 years.
-15-
Financial Management Policies
The City has set a goal to establish “Financial Performance Standards” to measure the financial health of
the City. These standards serve multiple purposes:
a) To serve as best practice measures to strengthen the City’s financial position and maximize the
return of the taxpayer dollar.
b) To communicate the fiscal performance and condition of the City to residents in a consistent
manner.
c) To facilitate the setting of policy and financial direction by the City Council with resident input.
Objective 1: Aa2 Bond Rating
Maintain or improve current Aa2 Bond Rating – Strong credit rating by Moody’s Investors Service
(Moody’s), provides low cost financing for the City’s general obligation bonds. In April 2010, Moody’s
recalibrated the City’s bond rating to the global rating scale and, therefore, changed the City’s bond rating
from Aa3 to an Aa2. The Aa2 bond rating was reaffirmed with the 2015 bond issuances:
2011 Aa2
2012 Aa2
2013 Aa2
2014 Aa2
2015 Aa2
Objective 2: General Fund Reserve Balance
Maintain a 40 to 50 Percent General Fund Reserve Balance – The Office of the State Auditor
recommended a reserve balance to provide adequate cash flow, offset revenue shortfalls, and insurance
for unforeseen catastrophic events. The City Council adopted a revision to the Comprehensive Financial
Management Policy which established a fund balance policy regarding the minimum unrestricted fund
balance for the General Fund. The policy established that the City will strive to maintain an unrestricted
General Fund balance (which includes committed, assigned, and unassigned classifications) within a
range from 40 to 50 percent of the projected expenditures for the subsequent year.
$12,729,968
$12,192,316
$12,985,255
$12,563,945
$12,945,738
61%
57%
50%
46%47%
$11,000,000
$11,250,000
$11,500,000
$11,750,000
$12,000,000
$12,250,000
$12,500,000
$12,750,000
$13,000,000
$13,250,000
2011 2012 2013 2014 2015
Subsequent Year’s Budget Actual Fund Balance
-16-
Objective 3: Property Taxes
Maintain or Improve Property Tax Rank when compared to a broader list of metro area cities. The
favorable tax rate provides stimulus for growth of residential and commercial property tax base. This data
reflects the tax capacity rate, which is based on the levies approved by the City Council to fund general
services, such as police, fire, street maintenance, parks, recreation, finance, and general administration as
well as the Economic Development Authority. The tables do not reflect the market value rate, which is a
tax based on market referenda approved by the City’s voters to finance the construction of two fire
stations and improvements to the City’s parks and library.
Metro
10,000–24,999
Seven-County
Metro Area
City of
Prior Lake
2011 37.73 40.03 30.71
2012 43.27 43.45 29.74
2013 46.05 46.14 31.89
2014 48.80 46.00 30.69
2015 46.90 43.40 31.96
Average City Tax Capacity Rate
2011 –
2012 –
2013 0.62
2014 0.55
2015 0.55
EDA Tax Capacity Rate
Average Prior Lake
Source: League of Minnesota
Cities and Scott County
-17-
Objective 4: Property Taxes/Household
Maintain a level of property taxes on a per household basis which takes into account the cost of inflation
and community growth. The goal is to have a tax levy per household that is at or below the rate of
inflation over time. This chart reflects community growth and the cost of inflation using the
Minneapolis-St. Paul consumer price index (CPI).
$975
$1,000
$1,025
$1,050
$1,075
$1,100
$1,125
$1,150
$1,175
$1,200
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Property Tax Levy Per Household
Property Tax Levy/HH Expected Property Tax Levy/HH
-18-
Objective 5: General Fund Expenditures/Household
Maintain a level of General Fund operational expenditures on a per household basis which takes into
account the cost of inflation and community growth. The goal is to maintain General Fund operating
expenditures per household at or below the rate of inflation over time. This chart reflects community
growth and the cost of inflation using the Minneapolis-St. Paul CPI.
$1,100
$1,150
$1,200
$1,250
$1,300
$1,350
$1,400
$1,450
$1,500
$1,550
$1,600
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
General Fund Total Operating
Expenditures Per Household
Expected Operating Expenditures/HH Operating Expenditures/HH
REQUESTS FOR INFORMATION
These financial statements are designed to provide a general overview of the City’s finances for all those
with an interest in the City’s finances. Questions concerning any of the information provided in this report
or requests for additional financial information should be addressed to the office of the City’s Finance
Director at the City of Prior Lake, 4646 Dakota Street Southeast, Prior Lake, MN 55372-1714.
BASIC FINANCIAL STATEMENTS
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Governmental Business-Type
Activities Activities Total
Assets
Cash and investments 22,871,311$ 4,930,223$ 27,801,534$
Receivables
Delinquent taxes 139,676 – 139,676
Accounts 349,713 190,510 540,223
Special assessments 3,576,521 39,054 3,615,575
Due from other governmental agencies 443,356 25,778 469,134
Prepaid items 9,150 – 9,150
Restricted assets – temporarily restricted
Cash and investments held in escrow 6,103,066 – 6,103,066
Net pension asset 927,888 – 927,888
Capital assets not being depreciated 84,274,541 402,834 84,677,375
Capital assets net of accumulated depreciation 49,943,432 47,402,975 97,346,407
Total assets 168,638,654 52,991,374 221,630,028
Deferred outflows of resources
Pension plan deferments – GERF and PEPFF 1,042,046 137,788 1,179,834
Pension plan deferments – fire relief 229,000 – 229,000
Total deferred outflows of resources 1,271,046 137,788 1,408,834
Total assets and deferred
outflows of resources 169,909,700$ 53,129,162$ 223,038,862$
Liabilities
Accounts and contracts payable 1,517,937$ 109,471$ 1,627,408$
Accrued salaries and employee benefits payable 315,241 47,298 362,539
Due to other governmental agencies 1,014,698 62,826 1,077,524
Deposits payable 888,433 3,000 891,433
Accrued interest payable 66,354 – 66,354
Unearned revenue 38,045 – 38,045
Long-term liabilities
Due within one year 4,112,299 42,513 4,154,812
Due in more than one year 48,542,390 1,076,738 49,619,128
Total liabilities 56,495,397 1,341,846 57,837,243
Deferred inflows of resources
Pension plan deferments – GERF and PEPFF 776,105 100,188 876,293
Pension plan deferments – fire relief 248,578 – 248,578
Total deferred inflows of resources 1,024,683 100,188 1,124,871
Net position
Net investment in capital assets 94,087,717 47,805,809 141,893,526
Restricted for debt service 5,222,765 – 5,222,765
Restricted for other purposes 1,613,512 – 1,613,512
Unrestricted 11,465,626 3,881,319 15,346,945
Total net position 112,389,620 51,687,128 164,076,748
Total liabilities, deferred inflows
of resources, and net position 169,909,700$ 53,129,162$ 223,038,862$
See notes to basic financial statements
CITY OF PRIOR LAKE
Statement of Net Position
as of December 31, 2015
-19-
Program Revenues
Operating Capital
Charges for Grants and Grants and
Functions/Programs Expenses Services Contributions Contributions
Governmental activities
General government 3,266,222$ 712,236$ 78,801$ –$
Public safety 5,426,539 748,740 1,172,572 101,097
Public works 4,775,320 – 236,794 9,246,021
Culture and recreation 2,271,719 211,183 – 101,865
Economic development 590,532 236,494 17,165 –
Interest on long-term debt 1,410,844 – – –
Total governmental activities 17,741,176 1,908,653 1,505,332 9,448,983
Business-type activities
Water 2,347,154 3,390,052 – 579,873
Sewer 2,468,932 2,432,925 – 271,951
Water quality 560,820 865,244 42,402 –
Total business-type activities 5,376,906 6,688,221 42,402 851,824
Total 23,118,082$ 8,596,874$ 1,547,734$ 10,300,807$
General revenues
Taxes
Property taxes, levied for general purposes
Property taxes, levied for debt service
Franchise taxes
Tax increments
Grants and contributions not restricted to specific programs
Interest income
Miscellaneous
Transfers
Special item – transfer of operations
Total general revenues, transfers, and special items
Change in net position
Net position – beginning, as previously reported
Change in accounting principle
Net position – beginning, restated
Net position – ending
See notes to basic financial statements
CITY OF PRIOR LAKE
Statement of Activities
Year Ended December 31, 2015
-20-
Governmental Business-Type
Activities Activities Total
(2,475,185)$ –$ (2,475,185)$
(3,404,130) – (3,404,130)
4,707,495 – 4,707,495
(1,958,671) – (1,958,671)
(336,873) – (336,873)
(1,410,844) – (1,410,844)
(4,878,208) – (4,878,208)
– 1,622,771 1,622,771
– 235,944 235,944
– 346,826 346,826
– 2,205,541 2,205,541
(4,878,208) 2,205,541 (2,672,667)
8,499,322 – 8,499,322
1,876,204 – 1,876,204
604,997 – 604,997
471,851 – 471,851
13,250 – 13,250
398,549 127,457 526,006
308,307 10,021 318,328
2,737,462 (2,737,462) –
– (25,200) (25,200)
14,909,942 (2,625,184) 12,284,758
10,031,734 (419,643) 9,612,091
106,539,841 53,042,759 159,582,600
(4,181,955) (935,988) (5,117,943)
102,357,886 52,106,771 154,464,657
112,389,620$ 51,687,128$ 164,076,748$
Changes in Net Position
Net (Expense) Revenues and
-21-
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FUND FINANCIAL STATEMENTS
DAG Debt
General Special Revenue Service
Assets
Cash and investments 6,902,926$ 1,208,665$ 2,224,123$
Cash held in escrow – – 5,309,198
Receivables
Delinquent taxes 136,778 – –
Accounts 188,784 – 76,527
Special assessments
Delinquent 504 – 12,480
Deferred 40,517 – 2,779,018
Other (Green Acres) – – 718,253
Due from other governmental agencies 133,011 – 22,420
Due from other funds 68,926 – –
Prepaids 9,150 – –
Total assets 7,480,596$ 1,208,665$ 11,142,019$
Liabilities, Deferred Inflows of Resources,
and Fund Balances
Liabilities
Accounts and contracts payable 246,111$ 41,533$ 3,505$
Accrued salaries and employee benefits payable 311,106 – –
Due to other governmental agencies 207,721 – –
Due to other funds – – 68,926
Deposits payable 440,075 423,358 –
Unearned revenue 4,295 – –
Total liabilities 1,209,308 464,891 72,431
Deferred inflows of resources
Unavailable revenue from delinquent taxes 136,778 – –
Unavailable revenue from special assessments 9,759 – 3,509,752
Total deferred inflows of resources 146,537 – 3,509,752
Fund balances
Nonspendable 9,150 – –
Restricted 74,506 – 7,561,906
Assigned – 743,774 –
Unassigned, reported in
General Fund 6,041,095 – –
Debt service funds – – (2,070)
Total fund balances 6,124,751 743,774 7,559,836
Total liabilities, deferred inflows
of resources, and fund balances 7,480,596$ 1,208,665$ 11,142,019$
See notes to basic financial statements
CITY OF PRIOR LAKE
Balance Sheet
Governmental Funds
as of December 31, 2015
-22-
Nonmajor Total
Governmental Governmental
Construction Funds Funds
5,106,006$ 7,023,973$ 22,465,693$
– 793,868 6,103,066
– 2,898 139,676
5,864 75,877 347,052
– – 12,984
– 24,346 2,843,881
– 1,403 719,656
280,742 7,183 443,356
– – 68,926
– – 9,150
5,392,612$ 7,929,548$ 33,153,440$
351,404$ 875,384$ 1,517,937$
– 4,135 315,241
806,438 539 1,014,698
– – 68,926
– 25,000 888,433
– 33,750 38,045
1,157,842 938,808 3,843,280
– 2,898 139,676
– 25,749 3,545,260
– 28,647 3,684,936
– – 9,150
661,868 1,170,949 9,469,229
3,572,902 5,791,144 10,107,820
– – 6,041,095
– – (2,070)
4,234,770 6,962,093 25,625,224
5,392,612$ 7,929,548$ 33,153,440$
-23-
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25,625,224$
Capital assets are included in net position, but are excluded from fund balances because they do not
represent financial resources.
Cost of capital assets 187,610,876
Less accumulated depreciation (53,392,903)
Long-term liabilities are included in net position but are excluded from fund balances until due and
payable.
Bond principal payable (43,020,000)
Energy loan payable (2,574,450)
Net OPEB obligation (236,195)
Net pension liability – GERF and PEPFF (5,447,111)
Debt issuance premiums and discounts are excluded from net position until amortized, but are
included in fund balances upon issuance as other financing sources and uses.(495,558)
Accrued interest payable on long-term debt is included in net position, but is excluded from fund
balances until due and payable.(66,354)
Internal service funds are used by management to charge certain costs to individual funds. The
assets and liabilities of the internal service funds are included in governmental activities in the
Statement of Net Position.
Internal service fund net position included in governmental activities (473,096)
The recognition of certain revenues and expenses/expenditures differ between the full accrual
governmental activities financial statements and the modified accrual governmental fund financial
statements.
Delinquent property taxes 139,676
Special assessments 3,545,260
Net pension asset 927,888
Deferred outflows – GERF and PEPFF pension plans 1,042,046
Deferred outflows – fire relief pension plan 229,000
Deferred inflows – GERF and PEPFF pension plans (776,105)
Deferred inflows – fire relief pension plan (248,578)
Total net position – governmental activities 112,389,620$
See notes to basic financial statements
Amounts reported for governmental activities in the Statement of Net Position are different because:
as of December 31, 2015
CITY OF PRIOR LAKE
Reconciliation of the Balance Sheet to the
Statement of Net Position
Governmental Funds
Total fund balances – governmental funds
-24-
DAG Debt
General Special Revenue Service
Revenues
Taxes 8,087,428$ –$ 1,876,204$
Franchise taxes 604,997 – –
Special assessments 366 – 1,137,818
Licenses and permits 587,464 – –
Intergovernmental 1,573,865 – –
Charges for services 1,048,564 229,056 –
Fines and forfeits 1,390 – –
Interest on investments 114,970 – 36,987
Miscellaneous 310,225 – 67,119
Total revenues 12,329,269 229,056 3,118,128
Expenditures
Current
General government 2,568,472 – –
Public safety 4,821,150 – –
Public works 2,078,309 – –
Culture and recreation 1,600,071 – –
Economic development 6,213 – –
Capital outlay 233,355 166,688 –
Debt service
Principal – – 3,203,474
Interest and other – – 1,366,442
Total expenditures 11,307,570 166,688 4,569,916
Excess (deficiency) of revenues over expenditures 1,021,699 62,368 (1,451,788)
Other financing sources (uses)
Debt issued – – 169,906
Refunding debt issued – – 5,360,000
Premium on debt issued – – 143,647
Transfers in 355,520 – 1,794,299
Transfers out (1,036,245) – –
Sale of assets 7,130 – –
Total other financing sources (uses) (673,595) – 7,467,852
Net change in fund balances 348,104 62,368 6,016,064
Fund balances
Beginning of year 5,776,647 681,406 1,543,772
End of year 6,124,751$ 743,774$ 7,559,836$
See notes to basic financial statements
CITY OF PRIOR LAKE
Statement of Revenues, Expenditures, and Changes in Fund Balances
Governmental Funds
Year Ended December 31, 2015
-25-
Nonmajor Total
Governmental Governmental
Construction Funds Funds
–$ 880,615$ 10,844,247$
– – 604,997
– 2,883 1,141,067
– – 587,464
1,291,061 17,165 2,882,091
– 1,215,903 2,493,523
– – 1,390
74,615 150,052 376,624
– 102,652 479,996
1,365,676 2,369,270 19,411,399
– 70,716 2,639,188
– – 4,821,150
– – 2,078,309
– 84,098 1,684,169
– 158,570 164,783
9,918,880 3,886,841 14,205,764
– – 3,203,474
118,242 – 1,484,684
10,037,122 4,200,225 30,281,521
(8,671,446) (1,830,955) (10,870,122)
6,960,094 – 7,130,000
– – 5,360,000
134,961 – 278,608
4,599,792 191,000 6,940,611
(135,076) (1,824,556) (2,995,877)
– 6,240 13,370
11,559,771 (1,627,316) 16,726,712
2,888,325 (3,458,271) 5,856,590
1,346,445 10,420,364 19,768,634
4,234,770$ 6,962,093$ 25,625,224$
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THIS PAGE INTENTIONALLY LEFT BLANK
5,856,590$
Capital outlays are recorded in net position and the cost is allocated over their estimated useful lives as depreciation
expense. However, fund balances are reduced for the full cost of capital outlays at the time of purchase.
Capital outlay 13,232,911
Capital contributions 4,579,712
Depreciation expense (3,469,810)
A gain or loss on the disposal of capital assets, including the difference between the carrying value and any related sale
proceeds, is included in the change in net position. However, only the sale proceeds are included in the change in fund
balance.(32,297)
Capital assets constructed in the governmental funds then transferred to the enterprise funds are shown in the
government-wide financial statements but not in the governmental funds statements.(1,168,806)
The amount of debt issued is reported in the governmental funds as a source of financing. Debt obligations are not
revenues in the Statement of Activities, but rather constitute long-term liabilities. Repayment of long-term debt does
not affect the change in net position. However, it reduces fund balances.
Principal repayments 3,203,474
Debt issued (12,490,000)
Net OPEB obligations (92,881)
Net pension liability – GERF and PEPFF (135,516)
Interest on long-termdebt is included in the change in net position as it accrues, regardless of when the payment is due.
However, it is included in the change in fund balances when due.(1,809)
Debt issuance premiums and discounts are included in the change in net position as they are amortized over the life of
the debt. However, they are included in the change in fund balances upon issuance as other financing sources and uses.(202,959)
Internal service funds are used by management to charge certain costs to individual funds. The net revenue of certain
activities of the internal service funds is reported with governmental activities in the government-wide financial
statements.
Internal service fund activity included in governmental activities (81,826)
The recognition of certain revenues and expenses/expendituresdiffer between the full accrual governmental activities
financial statements and the modified accrual governmental fund financial statements.
Delinquent property taxes 4,109
Special assessments 786,231
Net pension asset 107,966
Deferred outflows – GERF and PEPFF pension plans 752,328
Deferred outflows – fire relief pension plan 209,000
Deferred inflows – GERF and PEPFF pension plans (776,105)
Deferred inflows – fire relief pension plan (248,578)
10,031,734$ Change in net position – governmental activities
See notes to basic financial statements
CITY OF PRIOR LAKE
Year Ended December 31, 2015
Governmental Funds
to the Statement of Activities
Amounts reported for governmental activities in the Statement of Activities are different because:
Total net change in fund balances – governmental funds
Revenues, Expenditures, and Changes in Fund Balances
Reconciliation of the Statement of
Certain expenses are included in the change in net position, but do not require the use of current funds, and are not
included in the change in fund balances.
-27-
THIS PAGE INTENTIONALLY LEFT BLANK
Actual Variance With
Original Final Amounts Final Budget
Revenues
Taxes
Property taxes 8,107,223$ 8,107,223$ 8,087,428$ (19,795)$
Franchise taxes 595,000 595,000 604,997 9,997
Special assessments 35,000 35,000 366 (34,634)
Licenses and permits 642,745 642,745 587,464 (55,281)
Intergovernmental 1,483,842 1,567,171 1,573,865 6,694
Charges for services 1,049,615 1,049,615 1,048,564 (1,051)
Fines and forfeits – – 1,390 1,390
Interest on investments 120,000 120,000 114,970 (5,030)
Miscellaneous 175,000 175,000 310,225 135,225
Total revenues 12,208,425 12,291,754 12,329,269 37,515
Expenditures
Current
General government 2,701,177 2,701,177 2,568,472 (132,705)
Public safety
Police 3,364,784 3,364,784 3,351,784 (13,000)
Fire and rescue 842,855 883,855 880,918 (2,937)
Other 612,725 612,725 588,448 (24,277)
Public works 2,096,259 2,212,598 2,078,309 (134,289)
Culture and recreation 1,665,866 1,679,516 1,600,071 (79,445)
Economic development – 8,500 6,213 (2,287)
Capital outlay
General government 31,663 74,558 87,869 13,311
Public safety
Fire and rescue 41,000 – – –
Culture and recreation 171,771 307,071 145,486 (161,585)
Total expenditures 11,528,100 11,844,784 11,307,570 (537,214)
Excess of revenues over expenditures 680,325 446,970 1,021,699 574,729
Other financing sources (uses)
Transfers in 355,520 355,520 355,520 –
Transfers out (1,035,845) (1,035,845) (1,036,245) (400)
Sale of assets – – 7,130 7,130
Total other financing sources (uses) (680,325) (680,325) (673,595) 6,730
Net change in fund balances –$ (233,355)$ 348,104 581,459$
Fund balances, January 1 5,776,647
Fund balances, December 31 6,124,751$
See notes to basic financial statements
CITY OF PRIOR LAKE
Budgeted Amounts
Year Ended December 31, 2015
General Fund
Statement of Revenues, Expenditures, and Changes in Fund Balances
Budget and Actual
-28-
2015 2014 2015 2014
Current assets
Cash and investments 2,658,290$ 3,370,513$ 1,574,261$ 2,542,663$
Receivables
Accounts 80,598 62,660 88,770 69,696
Special assessments
Delinquent 34,504 24,557 – –
Deferred 4,550 – – –
Due from other governmental agencies 4,132 761 143 187
Total current assets 2,782,074 3,458,491 1,663,174 2,612,546
Noncurrent assets
Capital assets not being depreciated 306,440 75,300 – –
Depreciable capital assets 36,229,785 35,133,223 24,678,067 24,007,042
Accumulated depreciation (7,958,390) (7,322,526) (6,576,762) (6,169,688)
Total noncurrent assets 28,577,835 27,885,997 18,101,305 17,837,354
Total assets 31,359,909 31,344,488 19,764,479 20,449,900
Deferred outflows of resources
Pension plan deferments – GERF 61,239 – 51,033 –
Total assets and deferred outflows of resources 31,421,148$ 31,344,488$ 19,815,512$ 20,449,900$
Current liabilities
Accounts and contracts payable 78,474$ 35,986$ 23,644$ 38,579$
Accrued salaries and employee benefits payable 19,235 19,820 20,192 18,393
Due to other governmental agencies 25,722 30,090 2,800 4,855
Deposits payable 3,000 3,500 – –
Current portion of compensated absences payable 21,976 25,886 15,280 25,860
Total current liabilities 148,407 115,282 61,916 87,687
Noncurrent liabilities
Compensated absences payable 50,633 37,206 16,500 13,401
Net pension liability 447,148 – 372,623 –
Total noncurrent liabbilities 497,781 37,206 389,123 13,401
Total liabilities 646,188 152,488 451,039 101,088
Deferred inflows of resources
Pension plan deferments – GERF 44,528 – 37,107 –
Net position (deficit)
Net investment in capital assets 28,577,835 27,885,997 18,101,305 17,837,354
Unrestricted 2,152,597 3,306,003 1,226,061 2,511,458
Total net position 30,730,432 31,192,000 19,327,366 20,348,812
Total liabilities, deferred inflows of
resources, and net position 31,421,148$ 31,344,488$ 19,815,512$ 20,449,900$
See notes to basic financial statements
CITY OF PRIOR LAKE
Statements of Net Position
Proprietary Funds
as of December 31, 2015 and 2014
Business-Type Activities – Enterprise Funds
Water Sewer
-29-
Governmental
Activities –
Internal Service
2015 2014 2015 2014 2015 2014 Fund
697,672$ 542,333$ –$ 897,036$ 4,930,223$ 7,352,545$ 405,618$
21,142 17,479 – 7,771 190,510 157,606 2,661
– – – – 34,504 24,557 –
– – – – 4,550 – –
21,503 93,892 – 153,843 25,778 248,683 –
740,317 653,704 – 1,058,650 5,185,565 7,783,391 408,279
96,394 47,281 – – 402,834 122,581 –
1,330,931 1,065,240 – – 62,238,783 60,205,505 –
(300,656) (208,688) – – (14,835,808) (13,700,902) –
1,126,669 903,833 – – 47,805,809 46,627,184 –
1,866,986 1,557,537 – 1,058,650 52,991,374 54,410,575 408,279
25,516 – – – 137,788 – –
1,892,502$ 1,557,537$ –$ 1,058,650$ 53,129,162$ 54,410,575$ 408,279$
7,353$ 22,537$ –$ 60,364$ 109,471$ 157,466$ –$
7,871 7,844 – – 47,298 46,057 –
34,304 18,390 – 998,286 62,826 1,051,621 –
– – – – 3,000 3,500 –
5,257 6,819 – – 42,513 58,565 319,934
54,785 55,590 – 1,058,650 265,108 1,317,209 319,934
3,523 – – – 70,656 50,607 561,441
186,311 – – – 1,006,082 – –
189,834 – – – 1,076,738 50,607 561,441
244,619 55,590 – 1,058,650 1,341,846 1,367,816 881,375
18,553 – – – 100,188 – –
1,126,669 903,833 – – 47,805,809 46,627,184 –
502,661 598,114 – – 3,881,319 6,415,575 (473,096)
1,629,330 1,501,947 – – 51,687,128 53,042,759 (473,096)
1,892,502$ 1,557,537$ –$ 1,058,650$ 53,129,162$ 54,410,575$ 408,279$
Water Quality Transit Totals
-30-
2015 2014 2015 2014
Operating revenues
Sewer charges –$ –$ 2,179,696$ 2,121,424$
Water charges 3,032,176 2,700,496 – –
Storm water charges – – – –
Capital facility charges 253,220 247,990 253,229 247,999
Meter sales 104,656 103,196 – –
Transit charges – – – –
Charges for services – – – –
Total operating revenues 3,390,052 3,051,682 2,432,925 2,369,423
Operating expenses
Personal services 688,995 648,782 605,937 642,637
Supplies 310,183 297,773 87,152 80,541
Repairs and maintenance 116,695 209,720 19,841 31,404
Other services and charges 145,132 119,700 82,554 59,162
Insurance 1,973 1,903 1,973 1,903
Utilities 424,444 381,216 35,746 36,380
Disposal charges – – 1,228,533 1,215,970
Miscellaneous 2,601 2,426 121 1,350
Depreciation 657,131 635,677 407,075 378,271
Total operating expenses 2,347,154 2,297,197 2,468,932 2,447,618
Operating income (loss) 1,042,898 754,485 (36,007) (78,195)
Nonoperating revenues (expenses)
Intergovernmental 4,550 574 – –
Interest income 58,274 149,359 34,017 108,826
Miscellaneous 10,021 5,782 – –
Total nonoperating revenues (expenses) 72,845 155,715 34,017 108,826
Income (loss) before contributions, transfers, and special items 1,115,743 910,200 (1,990) 30,631
Capital contributions from other funds 542,506 520,013 399,075 694,391
Capital contributions to other funds – – – –
Capital contributions from developers 575,323 319,163 271,951 256,503
Transfers out (2,279,145) (1,306,350) (1,343,820) (502,086)
Special item – transfer of operations – – – –
Change in net position (45,573) 443,026 (674,784) 479,439
Net position – beginning, as previously stated 31,192,000 30,748,974 20,348,812 19,869,373
Change in accounting principle (415,995) – (346,662) –
Net position – beginning, restated 30,776,005 30,748,974 20,002,150 19,869,373
Net position, December 31 30,730,432$ 31,192,000$ 19,327,366$ 20,348,812$
See notes to basic financial statements
Business-Type Activities – Enterprise Funds
CITY OF PRIOR LAKE
Statements of Revenues, Expenses, and Changes in Net Position
Proprietary Funds
Years Ended December 31, 2015 and 2014
Water Sewer
-31-
Governmental
Activities –
Internal Service
2015 2014 2015 2014 2015 2014 Fund
–$ –$ –$ –$ 2,179,696$ 2,121,424$ –$
– – – – 3,032,176 2,700,496 –
865,244 843,292 – – 865,244 843,292 –
– – – – 506,449 495,989 –
– – – – 104,656 103,196 –
– – – 215,138 – 215,138 –
– – – – – – 24,931
865,244 843,292 – 215,138 6,688,221 6,479,535 24,931
284,200 273,338 – 48,165 1,579,132 1,612,922 117,720
21,617 11,611 – 675 418,952 390,600 –
47,888 64,177 – 2,865 184,424 308,166 –
112,987 228,092 – 1,048,194 340,673 1,455,148 –
– – – – 3,946 3,806 –
– – – – 460,190 417,596 –
– – – – 1,228,533 1,215,970 –
2,160 396 – – 4,882 4,172 –
91,968 60,956 – – 1,156,174 1,074,904 –
560,820 638,570 – 1,099,899 5,376,906 6,483,284 117,720
304,424 204,722 – (884,761) 1,311,315 (3,749) (92,789)
42,402 162,041 – 721,038 46,952 883,653 –
9,966 21,102 25,200 76,003 127,457 355,290 10,963
– – – – 10,021 5,782 –
52,368 183,143 25,200 797,041 184,430 1,244,725 10,963
356,792 387,865 25,200 (87,720) 1,495,745 1,240,976 (81,826)
265,691 224,410 – – 1,207,272 1,438,814 –
– – – (162,000) – (162,000) –
– – – – 847,274 575,666 –
(321,769) (81,000) – – (3,944,734) (1,889,436) –
– – (25,200) (1,371,480) (25,200) (1,371,480) –
300,714 531,275 – (1,621,200) (419,643) (167,460) (81,826)
1,501,947 970,672 – 1,621,200 53,042,759 53,210,219 (391,270)
(173,331) – – – (935,988) – –
1,328,616 970,672 – 1,621,200 52,106,771 53,210,219 (391,270)
1,629,330$ 1,501,947$ –$ –$ 51,687,128$ 53,042,759$ (473,096)$
Water Quality Transit Totals
-32-
2015 2014 2015 2014
Cash flows from operating activities
Cash received from customers 3,353,746$ 3,033,117$ 2,413,895$ 2,363,958$
Cash payments to suppliers (962,908) (1,023,906) (1,472,910) (1,405,781)
Cash payments to employees (665,621) (638,750) (599,584) (646,129)
Net cash flows from operating
activities 1,725,217 1,370,461 341,401 312,048
Cash flows from noncapital financing activities
Special item – transfer of operations – – – –
Intergovernmental 4,550 574 – –
Transfers in (out) (2,279,145) (1,306,350) (1,343,820) (502,086)
Net cash flows from noncapital
financing activities (2,274,595) (1,305,776) (1,343,820) (502,086)
Cash flows from capital and related financing
activities
Miscellaneous 10,021 5,782 – –
Purchase of capital assets (231,140) – – –
Net cash flows from capital
financing activities (221,119) 5,782 – –
Cash flows from investing activities
Interest received on cash and investments 58,274 149,359 34,017 108,826
Net increase (decrease) in cash and cash
equivalents (712,223) 219,826 (968,402) (81,212)
Cash and cash equivalents, January 1 3,370,513 3,150,687 2,542,663 2,623,875
Cash and cash equivalents, December 31 2,658,290$ 3,370,513$ 1,574,261$ 2,542,663$
See notes to basic financial statements
Water Sewer
Business-Type Activities – Enterprise Funds
CITY OF PRIOR LAKE
Statements of Cash Flows
Proprietary Funds
Years Ended December 31, 2015 and 2014
-33-
Governmental
Activities –
Internal Service
2015 2014 2015 2014 2015 2014 Fund
933,970$ 754,362$ 161,614$ 201,944$ 6,863,225$ 6,353,381$ 24,945$
(183,922) (281,064) (1,058,650) (1,052,690) (3,678,390) (3,763,441) –
(276,195) (273,217) – (48,165) (1,541,400) (1,606,261) (165,498)
473,853 200,081 (897,036) (898,911) 1,643,435 983,679 (140,553)
– – (25,200) (384,708) (25,200) (384,708) –
42,402 162,041 – 721,038 46,952 883,653 –
(321,769) (81,000) – – (3,944,734) (1,889,436) –
(279,367) 81,041 (25,200) 336,330 (3,922,982) (1,390,491) –
– – – – 10,021 5,782 –
(49,113) (47,280) – (162,000) (280,253) (209,280) –
(49,113) (47,280) – (162,000) (270,232) (203,498) –
9,966 21,102 25,200 76,003 127,457 355,290 10,963
155,339 254,944 (897,036) (648,578) (2,422,322) (255,020) (129,590)
542,333 287,389 897,036 1,545,614 7,352,545 7,607,565 535,208
697,672$ 542,333$ –$ 897,036$ 4,930,223$ 7,352,545$ 405,618$
Transit TotalsWater Quality
(continued)
-34-
2015 2014 2015 2014
Reconciliation of operating income (loss) to net
cash flows from operating activities
Operating income (loss) 1,042,898$ 754,485$ (36,007)$ (78,195)$
Adjustments to reconcile operating income (loss)
to net cash flows from operating activities
Depreciation 657,131 635,677 407,075 378,271
(Increase) decrease in assets
and deferred outflows of resources
Accounts receivable (17,938) (6,681) (19,074) (5,472)
Special assessments receivable (14,497) (19,328) – –
Due from other governments (3,371) 7,444 44 7
Deferred outflows of resources (42,621) – (35,518) –
Increase (decrease) in liabilities
and deferred inflows of resources
Accounts and contracts payable 42,488 (35,187) (14,935) 19,736
Accrued salaries and employee benefits payable (585) 3,558 1,799 808
Due to other governmental agencies (4,368) 21,019 (2,055) 1,193
Deposits payable (500) 3,000 – –
Compensated absences payable 9,517 6,474 (7,481) (4,300)
Net pension liability 12,535 – 10,446 –
Deferred inflows of resources 44,528 – 37,107 –
Net cash flows from operating
activities 1,725,217$ 1,370,461$ 341,401$ 312,048$
Schedule of noncash activities from capital and
related financing activities
Capital assets contributed from other funds 542,506$ 520,013$ 399,075$ 694,391$
Capital assets contributed to other funds –$ –$ –$ –$
Capital assets contributed by developers 575,323$ 319,163$ 271,951$ 256,503$
Special item due to other governmental agency –$ –$ –$ –$
See notes to basic financial statements
Business-Type Activities – Enterprise Funds
Water
CITY OF PRIOR LAKE
Sewer
Statements of Cash Flows (continued)
Proprietary Funds
Years Ended December 31, 2015 and 2014
-35-
Governmental
Activities –
Internal Service
2015 2014 2015 2014 2015 2014 Fund
304,424$ 204,722$ –$ (884,761)$ 1,311,315$ (3,749)$ (92,789)$
91,968 60,956 – – 1,156,174 1,074,904 –
(3,663) (2,639) 7,771 (1,322) (32,904) (16,114) 14
– – – – (14,497) (19,328) –
72,389 (86,291) 153,843 (11,872) 222,905 (90,712) –
(17,759) – – – (95,898) – –
(15,184) 17,903 (60,364) (956) (47,995) 1,496 –
27 (1,123) – – 1,241 3,243 –
15,914 5,309 (998,286) – (988,795) 27,521 –
– – – – (500) 3,000 –
1,961 1,244 – – 3,997 3,418 (47,778)
5,223 – – – 28,204 – –
18,553 – – – 100,188 – –
473,853$ 200,081$ (897,036)$ (898,911)$ 1,643,435$ 983,679$ (140,553)$
265,691$ 224,410$ –$ –$ 1,207,272$ 1,438,814$ –$
–$ –$ –$ (162,000)$ –$ (162,000)$ –$
–$ –$ –$ –$ 847,274$ 575,666$ –$
–$ –$ –$ 986,772$ –$ 986,772$ –$
Transit TotalsWater Quality
-36-
THIS PAGE INTENTIONALLY LEFT BLANK
CITY OF PRIOR LAKE
Notes to Basic Financial Statements
December 31, 2015
-37-
NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES
A. Organization
The City of Prior Lake, Minnesota (the City) operates under “Optional Plan B” as defined in Minnesota
Statutes. Under this plan, the government of the City is directed by a City Council composed of an elected
Mayor and four elected councilmembers. The City Council exercises legislative authority and determines
all matters of policy. The City Council appoints personnel responsible for the proper administration of all
affairs relating to the City. The City has considered all potential units for which it is financially
accountable, and other organizations for which the nature and significance of their relationship with the
City are such that exclusion would cause the City’s financial statements to be misleading or incomplete.
The accounting policies of the City conform to accounting principles generally accepted in the United
States of America as applicable to governmental units.
B. Reporting Entity
As required by accounting principles generally accepted in the United States of America, these financial
statements include the City (the primary government) and its component units. Component units are
legally separate entities for which the primary government is financially accountable, or for which the
exclusion of the component unit would render the financial statements of the primary government
misleading. The criteria used to determine if the primary government is financially accountable for a
component unit includes whether or not the primary government appoints the voting majority of the
potential component unit’s board, is able to impose its will on the potential component unit, is in a
relationship of financial benefit or burden with the potential component unit, or is fiscally depended upon
by the potential component unit.
As a result of applying these criteria, certain organizations have been included or disclosed in this report
as follows:
Blended Component Unit – The Prior Lake Economic and Development Authority (EDA) was
created pursuant to Minnesota Statutes § 469.090 through § 469.108 to carryout economic and
industrial development and redevelopment within the City in accordance with policies established by
the City Council. The five-member Board of Directors consists of two councilmembers and three
members appointed from the community. The EDA is reported as a blended component unit within
the EDA Special Revenue Fund. Separate financial statements are not issued for this component unit.
The EDA may not exercise any of the powers enumerated by the authorizing statutes without prior
approval of the City Council.
C. Government-Wide Financial Statements
The government-wide financial statements (Statement of Net Position and Statement of Activities)
display information about the reporting government as a whole. These statements include all of the
financial activities of the City. Governmental activities, which are normally supported by taxes and
intergovernmental revenues, are reported separately from business-type activities, which significantly rely
upon sales, fees, and charges for support.
-38-
NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Statement of Activities demonstrates the degree to which the direct expenses of a given function or
segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a
specific function or segment. Program revenues include: 1) charges to customers or applicants who
purchase, use, or directly benefit from goods, services, or privileges provided by a given function or
segment, 2) operating grants and contributions, and 3) capital grants and contributions, including special
assessments that are restricted to meeting the operational or capital requirements of a particular function
or segment. Taxes and other internally directed revenues are reported as general revenues.
The government-wide financial statements are reported using the economic resources measurement focus
and 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 and special
assessments are recognized as revenues in the fiscal year for which they are certified for levy. Grants and
similar items are recognized when all eligibility requirements imposed by the provider have been met.
As a general rule, the effect of interfund activity has been eliminated from the government-wide financial
statements. However, charges between the City’s enterprise funds and other functions are not eliminated,
as that would distort the direct costs and program revenues reported in those functions. The City applies
restricted resources first when an expense is incurred for which both restricted and unrestricted resources
are available. Depreciation expense is included in the direct expenses of each function. Interest on
long-term debt is considered an indirect expense and is reported separately on the Statement of Activities.
D. Fund Financial Statement Presentation
Separate fund financial statements are provided for governmental and proprietary funds. Major individual
governmental and enterprise funds are reported as separate columns in the fund financial statements.
Aggregated information for the remaining nonmajor governmental funds is reported in a single column in
the fund financial statements.
Governmental fund financial statements are reported using the current financial resources measurement
focus and the modified accrual basis of accounting. Under this basis of accounting transactions are
recorded in the following manner:
1. Revenue Recognition – Revenue is recognized when it becomes measurable and available.
“Measurable” means the amount of the transaction can be determined and “available” means
collectible within the current period or soon enough thereafter to be used to pay liabilities of the
current period. For this purpose, the City considers revenues to be available if they are collected
within 60 days after year-end. Only the portion of special assessments receivable due within the
current fiscal period is considered to be susceptible to accrual as revenue of the current period.
Grants and similar items are recognized when all eligibility requirements imposed by the provider
have been met.
Major revenue that is susceptible to accrual includes property taxes, franchise taxes, special
assessments, intergovernmental revenue, charges for services, and interest earned on investments.
Major revenue that is not susceptible to accrual includes licenses and permits, fees, and
miscellaneous revenue. Such revenue is recorded only when received because it is not measurable
until collected.
2. Recording of Expenditures – Expenditures are generally recorded when a liability is incurred,
except for principal and interest on long-term debt and compensated absences, which are
recognized as expenditures to the extent they have matured. Capital asset acquisitions are
reported as capital outlay expenditures in the governmental funds. Proceeds of long-term debt and
acquisitions under capital leases are reported as other financing sources.
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NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Proprietary fund financial statements are reported using the economic resources measurement focus and
the accrual basis of accounting, similar to the government-wide financial statements. Proprietary funds
distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses
generally result from providing services and producing and delivering goods in connection with a
proprietary fund’s principal ongoing operations. The principal operating revenues of the City’s enterprise
funds and internal service funds are charges to customers for sales and services. The operating expenses
for the enterprise funds and internal service funds include the cost of sales and services, administrative
expenses, and depreciation on capital assets. All revenues and expenses that do not meet this definition
are reported as nonoperating revenues and expenses.
Aggregated information for the internal service funds is reported in a single column in the proprietary
fund financial statements. Because the principal user of the internal services is the City’s governmental
activities, the financial statements of the internal service funds are consolidated into the governmental
column when presented in the government-wide financial statements. The cost of these services is
reported in the appropriate functional activity.
Description of Funds
The City reports the following major governmental funds:
General Fund – This is the general operating fund of the City. It is used to account for all financial
resources except those required to be accounted for in another fund.
DAG Special Revenue Fund – This fund accounts for costs the City incurs in connection with a
subdivision. The fees are paid to the City by the developer when the development contract and final
plat are approved by the City Council. These revenues are used to pay for legal expenses incurred in
connection with review and approval of the plat and inspection services on developer-installed
utilities, including sewer, water, and street installation for newly-approved subdivisions within the
City.
Debt Service Fund – This fund accounts for the resources accumulated to provide repayment of the
City’s general obligation debt.
Construction Capital Project Fund – This fund accounts for the resources accumulated and
payments made for city projects.
The City reports the following major proprietary funds:
Water Fund – This fund is used to account for the operation, maintenance, and improvement of the
City’s water system.
Sewer Fund – This fund is used to account for the operation, maintenance, and improvement of the
City’s sewer collection operations.
Water Quality Fund – This fund accounts for the costs associated with the City’s storm water
system.
Transit Fund – This fund is used to account for the City’s transit services, which are funded mainly
by the Metropolitan Council. In 2014, the City transferred the responsibility for operating a transit
operation to the Minnesota Valley Transit Authority (MVTA). The Transit Fund was closed in 2015.
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NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The City also reports the following fund types:
Internal Service Fund – This fund is used to account for the City’s severance benefits offered by the
City to its employees. The Internal Service Fund operates in a manner similar to the enterprise funds;
however, it provides services primarily to other departments within the City.
E. Cash and Investments
1. Deposits and Investments
The City’s cash and cash equivalents are considered to be cash on hand, demand deposits,
government securities, and short-term investments with original maturities of three months or less
from the date of acquisition.
Cash balances from all funds are combined and invested to the extent available in short-term
investments. Earnings from the pooled investments are allocated to the individual funds based on
the average monthly cash and investment balances of the respective funds.
The Minnesota Municipal Money Market Fund (4M Fund) is a customized cash management and
investment program for Minnesota public funds. Sponsored and governed by the League of
Minnesota Cities since 1987, the 4M Fund is a unique investment alternative designed to address
the daily and long-term investment needs of Minnesota cities and other municipal entities.
Allowable under Minnesota Statutes, the 4M Fund is comprised of top quality-related
investments.
Investments are generally stated at fair value, except for investments in 2a7-like external
investment pools, which are stated at amortized cost. Short-term, highly liquid debt instruments
(including bankers’ acceptance and U.S. treasury and agency obligations) purchased with a
remaining maturity of one year or less are also reported at amortized cost. Investment income is
accrued at the Balance Sheet date.
Cash held in escrow includes balances held in escrow accounts for future capital projects from
energy loan proceeds and proceeds from refunding bonds held to pay off refunded bonds.
Earnings on these accounts are allocated directly to those funds.
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NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2. Investment Policy
The City’s investment policy contains the following restrictions:
a) Allowable Investments
The City may invest in any type of security allowed by Minnesota Statutes and may be
amended from time to time. The City has chosen to limit its allowable investments to those
instruments listed below:
1) Bonds, notes, certificates of indebtedness, treasury bills, or other securities now or
hereafter issued by the United States of America, its agencies and allowable
instrumentalities;
2) Interest-bearing checking and savings accounts, or any other investments constituting
direct obligations of any bank;
3) Certificates of deposit at state and federally-chartered institutions that are limited to
the amount of coverage provided by the Federal Deposit Insurance Corporation
(FDIC);
4) Money market accounts that are invested in the above referenced government
securities.
5) State and local securities which have at the time of investment one of the three
highest credit ratings by a nationally recognized rating agency.
6) Investments may be made only in those savings banks or savings and loan
associations the shares, or investment certificates, of which are insured by the FDIC.
7) Investment products that are considered as derivatives are specifically excluded from
approved investments.
b) Diversification
It is the policy of the City to diversify its investment portfolio. Investments shall be
diversified to eliminate the risk of loss resulting in over concentration in a specific maturity,
issuers, or class of securities. Diversification strategies shall be determined and revised
periodically by the City’s Finance Director. The diversification shall be as follows:
1) Up to 100 percent of 1., but not less than 10 percent
2) Up to 90 percent of 2. and 3.
3) Up to 20 percent of 4.
4) Up to 20 percent of 5.
c) Duration
It is the policy of the City to require that all investment maturities shall not extend beyond
10 years with no more than 20 percent maturing beyond 5 years. Subject to market conditions
and cash flow requirements, it is desirable for the City’s investments to be laddered over time
in an effort to reduce interest rate market risk.
F. Receivables
Accounts receivable include amounts billed for services provided before year-end. The City annually
certifies delinquent water and sewer accounts to the county for collection in the following year.
Therefore, there has been no allowance for doubtful accounts established.
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NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
G. Property Taxes
Property tax levies are set by the City Council in December of each year, and are certified to Scott County
for collection in the following year. In Minnesota, counties act as collection agents for all property taxes.
The county spreads all levies over taxable property. Such taxes become a lien on January 1 and are
recorded as receivables by the City on that date. Real property taxes may be paid by taxpayers in two
equal installments on May 15 and October 15. Personal property taxes are due in full on May 15. The
county provides tax settlements to cities and other taxing districts three times a year; in July, December,
and January. Taxes which remain unpaid on December 31 are classified as delinquent taxes receivable.
H. Special Assessments
Special assessments represent the financing for public improvements paid for by benefiting property
owners. These assessments are recorded as delinquent (levied but unremitted) or deferred (certified but
not yet levied) special assessments receivable. Deferred contingent special assessments represent
assessments on undeveloped property that will not be levied and collected until the properties are
subdivided or developed.
I. Prepaid Items
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. Prepaid items are reported using
the consumption method and recorded as expenditures at the time of consumption.
J. Interfund Receivables and Payables
In the fund financial statements, activity between funds that is representative of lending or borrowing
arrangements is reported as either “due to/from other funds” (current portion) or “advances to/from other
funds.” 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.”
K. Capital Assets
Capital assets, which include property, buildings, improvements, equipment, infrastructure assets (roads,
bridges, sidewalks, and similar items), and intangible assets such as easements, are reported in the
applicable governmental or business-type activities columns in the government-wide financial statements.
Such assets are capitalized at historical cost, or estimated historical cost for assets where actual historical
cost is not available. Donated assets are recorded as capital assets at their estimated fair market value on
the date of donation. The City defines capital assets as those with an initial, individual cost of $5,000 or
more with an estimated useful life in excess of one year. The cost of normal maintenance and repairs that
do not add to the value of the asset or materially extend asset lives are not capitalized.
In the case of initial capitalization of general infrastructure assets (i.e., those reported by governmental
activities) the City chose to include items dating back to June 30, 1980. The City was able to estimate the
historical cost for the initial reporting of these assets through back-trending (i.e., estimating the current
replacement cost of the infrastructure to be capitalized and using an appropriate price-level index to
deflate the cost to the acquisition year or estimated acquisition year).
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NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Capital assets are recorded in the government-wide and proprietary fund financial statements, but are not
reported in the governmental fund financial statements. Interest incurred during the construction phase of
capital assets for business-type activities is included as part of the capitalized value of the assets
constructed. Property, plant, and equipment of the City are depreciated using the straight-line method
over the following estimated useful lives:
Useful Lives
Assets in Years
Land improvements 5–20
Machinery and equipment 5–30
Vehicles 8–25
Infrastructure 10–65
Land, easements, and construction in progress are not depreciated.
L. Long-Term Liabilities
In the government-wide and proprietary fund financial statements, long-term debt and other long-term
obligations are reported as liabilities. Bond premiums and discounts are deferred and amortized over the
life of the bonds using the straight-line method.
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.
M. Compensated Absences
It is the City’s policy to permit employees to accumulate earned but unused vacation and sick leave. Upon
separation, unused vacation and 50 percent of sick pay are paid to the employee if employed longer than
five years. The majority of separation benefits are paid into a retirement health savings plan.
The City has provided funding for these obligations in the Severance Compensation Internal Service
Fund.
N. Other Post-Employment Benefits (OPEB)
Under Minnesota Statute § 471.61, Subd. 2b, public employers must allow retirees and their dependants
to continue coverage indefinitely in an employer-sponsored healthcare plan, under the following
conditions: 1) retirees must be receiving (or be eligible to receive) an annuity from a Minnesota public
pension plan; 2) coverage must continue in a group plan until age 65, and retirees must pay no more than
the group premium; and 3) retirees may obtain dependant coverage immediately before retirement. All
premiums are funded on a pay-as-you-go basis. The liability was actuarially determined, in accordance
with Governmental Accounting Standards Board (GASB) Statement No. 45, at January 1, 2014.
O. Pension Plans
For purposes of measuring the net pension liability, deferred outflows/inflows of resources, and pension
expense, information about the fiduciary net positions of the Public Employees Retirement Association
(PERA) and the Prior Lake Fire Relief Association (the Association) and additions to/deductions from the
PERA’s and the Association’s fiduciary net positions have been determined on the same basis as they are
reported by the PERA and the Association except that the 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.
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NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
P. Deferred Outflows/Inflows of Resources
In addition to assets, the Statement of Financial Position will sometimes report a separate section for
deferred outflows of resources. This separate financial statement element, deferred outflows of resources,
represents a consumption of net position that applies to a future period(s) and so will not be recognized as
an outflow of resources (expense/expenditure) until then. The City only has one item that qualifies for
reporting in this category. It is the deferred outflows of resources related to pensions reported in the
government-wide and enterprise funds Statement of Net Position. This deferred outflow results from
differences between expected and actual experience, changes of assumptions, difference between
projected and actual earnings on pension plan investments, and from contributions to the plan subsequent
to the measurement date and before the end of the reporting period. These amounts are deferred and
amortized as required under pension standards.
In addition to liabilities, the Statement of Financial Position will sometimes report a separate section for
deferred inflows of resources. This separate financial statement element, deferred inflows of resources,
represents an acquisition of net position that applies to a future period(s) and so will not be recognized as
an inflow of resources (revenue) until that time. The City has two types of items which qualify for
reporting in this category.
The first item, unavailable revenue, arises only under a modified accrual basis of accounting and,
therefore, is only reported in the governmental funds Balance Sheet. The governmental funds report
unavailable revenue from three sources: property taxes, special assessments, and land held for resale.
These amounts are deferred and recognized as an inflow of resources in the period that the amounts
become available.
The second item, deferred inflows of resources related to pensions, is reported in the government-wide
and enterprise funds Statement of Net Position. This deferred inflow results from differences between
expected and actual experience, changes of assumptions, and differences between projected and actual
earnings on pension plan investments. These amounts are deferred and amortized as required under
pension standards.
Q. Net Position
In the government-wide and proprietary fund financial statements, net position represents the difference
between assets, deferred outflows of resources, liabilities, and deferred inflows of resources. Net position
is displayed in three components:
Net Investment in Capital Assets – Consists of capital assets, net of accumulated depreciation,
reduced by any outstanding debt attributable to acquire capital assets.
Restricted Net Position – Consists of net position restricted when there are limitations imposed
on their use through external restrictions imposed by creditors, grantors, or laws or regulations of
other governments.
Unrestricted Net Position – All other elements of net position that do not meet the definition of
“restricted” or “net investment in capital assets.”
R. Fund Balance Classifications
In the fund financial statements, governmental funds report fund balance in classifications that disclose
constraints for which amounts in those funds can be spent. These classifications are as follows:
Nonspendable – Consists of amounts that are not in spendable form, such as prepaid items,
inventory, and other long-term assets.
Restricted – Consists of amounts related to externally imposed constraints established by
creditors, grantors, or contributors; or constraints imposed by state statutory provisions.
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NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Committed – Consists of internally imposed constraints that are established by resolution of the
City Council. Those committed amounts cannot be used for any other purpose unless the City
Council removes or changes the specified use by taking the same type of action it employed to
previously commit those amounts.
Assigned – Consists of internally imposed constraints. These constraints consist of amounts
intended to be used by the City for specific purposes but do not meet the criteria to be classified
as restricted or committed. In governmental funds, assigned amounts represent intended uses
established by the governing body itself or by an official to which the governing body delegates
the authority. Pursuant to City Council resolution, the Finance Director is authorized to establish
assignments of fund balance.
Unassigned – The residual classification for the General Fund which also reflects negative
residual amounts in other funds.
When both restricted and unrestricted resources are available for use, it is the City’s policy to first use
restricted resources, then use unrestricted resources as they are needed. When committed, assigned, or
unassigned resources are available for use, it is the City’s policy to use resources in the following order:
1) committed, 2) assigned, and 3) unassigned.
S. Comparative Data
The basic financial statements include certain prior year partial comparative information in total, but not
at the level of detail required for a presentation in conformity with accounting principles generally
accepted in the United States of America. Accordingly, such information should be read in conjunction
with the City’s financial statements for the year ended December 31, 2014, from which the summarized
information was derived. Also, certain amounts presented in the prior year data have been reclassified in
order to be consistent with the current year’s presentation.
T. Budgets and Budgetary Accounting
Annual budgets are adopted on a basis consistent with accounting principles generally accepted in the
United States of America for the General Fund. The City does not prepare a budget for the DAG Special
Revenue Fund. All annual appropriations lapse at year-end. The City does not use encumbrance
accounting.
In June of each year, all departments of the City submit requests for appropriations to the Finance
Director so that a budget may be prepared. In September, the proposed budget is presented to the City
Council for review. The City Council holds public hearings and a final budget is prepared and adopted in
early December.
The appropriated budget is prepared by fund, function, and department. The City’s department heads may
make transfers of appropriations within a department. Transfers of appropriations between departments
require the approval of the City Manager. The legal level of budgetary control is the fund level.
U. Statement of Cash Flows
For purposes of the Statement of Cash Flows, the City considers all highly liquid debt instruments with an
original maturity from the time of purchase by the City of three months or less to be cash equivalents. The
proprietary funds’ portion in the government-wide cash and investment management pool is considered to
be cash equivalent.
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NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
V. Risk Management
The City is exposed to various risks of loss related to torts: theft of, damage to, and destruction of assets;
errors and omissions; and natural disasters. The City participates in the League of Minnesota Cities
Insurance Trust (LMCIT), a public entity risk pool for its general property and casualty, workers’
compensation, and other miscellaneous insurance coverages. LMCIT operates as a common risk
management and insurance program for a large number of cities in Minnesota. The City pays an annual
premium to the LMCIT for insurance coverage. The LMCIT agreement provides that the trust will be
self-sustaining through member premiums and will reinsure through commercial companies for claims in
excess of certain limits. Settled claims did not exceed insurance coverage in the past three fiscal years.
There were no significant reductions in insurance coverage in 2015.
W. Restricted Assets
Restricted assets are cash, investments, and interest accrued thereon; the use of which is limited by
external requirements, such as a bond indenture or trust agreements.
X. 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 and liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenue and expenditures/expenses during the
reporting period. Actual results could differ from those estimates.
Y. Change in Accounting Principle
During the year ended December 31, 2015, the City implemented GASB Statement No. 68, Accounting
and Financial Reporting for Pensions—an amendment of GASB Statement No. 27, and GASB Statement
No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date—an
amendment of GASB Statement No. 68. These statements included major changes in how employers
account for pension benefit expenses and liabilities. In financial statements prepared using the economic
resources measurement focus and the accrual basis of accounting (government-wide and proprietary
funds), an employer is required to recognize a liability for its share of the net pension liability provided
through the pension plan. An employer is required to recognize pension expense and report deferred
outflows of resources and deferred inflows of resources for its share related to pensions. This standard
required retroactive implementation, which resulted in the restatement of net position as of December 31,
2014. The details of the restatement are as follows:
Governmental Business-Type Water
Activities Activities Water Sewer Quality
Net position – December 31, 2014
(as reported) 106,539,841$ 53,042,759$ 31,192,000$ 20,348,812$ 1,501,947$
Net pension asset 819,922 – – – –
Deferred outflow – fire relief 20,000
Deferred outflow related to pensions 289,718 41,890 18,618 15,515 7,757
Net pension liability (5,311,595) (977,878) (434,613) (362,177) (181,088)
Net position – December 31, 2014
(as restated) 102,357,886$ 52,106,771$ 30,776,005$ 20,002,150$ 1,328,616$
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NOTE 2 – CASH AND INVESTMENTS
A. Components of Cash and Investments
Cash and investments at year-end consist of the following:
Deposits 4,260,834$
Investments 29,643,016
Cash on hand 750
Total 33,904,600$
Cash and investments are presented in the financial statements as follows:
Cash and investments – Statement of Net Position 27,801,534$
Restricted assets – temporarily restricted –
cash and investments held in escrow 6,103,066
Total 33,904,600$
B. Deposits
In accordance with applicable Minnesota Statutes, the City maintains deposits at depository banks
authorized by the City Council, including checking accounts and certificates of deposit.
The following is considered the most significant risk associated with deposits:
Custodial Credit Risk – In the case of deposits, this is the risk that in the event of a bank failure, the
City’s deposits may be lost.
Minnesota Statutes require that all deposits be protected by federal deposit insurance, corporate surety
bond, or collateral. The market value of collateral pledged must equal 110 percent of the deposits not
covered by federal deposit insurance or corporate surety 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 standard 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. The City has no additional deposit
policies addressing custodial credit risk.
At year-end, the carrying amount of the City’s deposits was $4,260,834 while the balance on the bank
records was $4,822,461. At December 31, 2015, all deposits were fully covered by federal depository
insurance or collateral held by the City’s agent in the City’s name with the exception of two instances
in which certificates of deposit at the same bank exceeded federal depository insurance coverage by
$484,995 in total.
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NOTE 2 – CASH AND INVESTMENTS (CONTINUED)
C. Investments
The City has the following investments at year-end:
Investment Type Rating Agency Less Than 1 1 to 5 Over 5 Total
U.S. treasury securities AAA Moody’s –$ 9,989$ –$ 9,989$
U.S. government securities AA+ S&P – 10,713,927 3,112,112 13,826,039
Local government securities AAA S&P – 253,842 – 253,842
Local government securities AA+ S&P – 2,615,895 – 2,615,895
Negotiable certificates of deposit N/R N/A 2,858,845 5,647,629 1,451,069 9,957,543
2,858,845$ 19,241,282$ 4,563,181$ 26,663,308
Investment pools/mutual funds
Minnesota Municipal Money Market Fund N/R N/A 2,174,317
Fidelity Treasury Portfolio – Class I AAA S&P 768,868
Wells Fargo Advantage Government Money
Market AAA S&P 4,000
Northland Federated Treasury Cash Series AAA S&P 32,523
Total investment pools/mutual funds 2,979,708
Total investments 29,643,016$
N/A – Not Applicable
N/R – Not Rated
Credit Risk
Interest Risk –
Segmented Time Distribution in Years
The 4M Fund is regulated by Minnesota Statutes and the Board of Directors of the League of Minnesota
Cities and is an external investment pool not registered with the Securities and Exchange Commission
(SEC) that follows the same regulatory rules of the SEC under rule 2a7. The City’s investment in the
4M Fund is measured at the net asset value per share provided by the pool, which is based on an
amortized cost method that approximates fair value.
Investments are subject to various risks, the following of which are considered the most significant:
Custodial Credit Risk – For investments, this is the risk that in the event of a failure of the
counterparty to an investment transaction (typically a broker-dealer) the City would not be able to
recover the value of its investments or collateral securities that are in the possession of an outside
party. The City does not have a formal investment policy addressing this risk, but typically limits its
exposure by purchasing insured or registered investments, or by the control of who holds the
securities.
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NOTE 2 – CASH AND INVESTMENTS (CONTINUED)
Credit Risk – This is the risk that an issuer or other counterparty to an investment will not fulfill its
obligations. Minnesota Statutes limit the City’s investments to direct obligations or obligations
guaranteed by the United States or its agencies; shares of investment companies registered under the
Federal Investment Company Act of 1940 that receive the highest credit rating, are rated in one of the
two highest rating categories by a statistical rating agency, and all of the investments have a final
maturity of 13 months or less; general obligations rated “A” or better; revenue obligations rated “AA”
or better; general obligations of the Minnesota Housing Finance Agency rated “A” or better; bankers’
acceptances of United States banks eligible for purchase by the Federal Reserve System; commercial
paper issued by United States corporations or their Canadian subsidiaries, rated of the highest quality
category by at least two nationally recognized rating agencies, and maturing in 270 days or less;
Guaranteed Investment Contracts guaranteed by a United States commercial bank, domestic branch of
a foreign bank, or a United States insurance company, and with a credit quality in one of the top two
highest categories; repurchase or reverse purchase agreements and securities lending agreements with
financial institutions qualified as a “depository” by the government entity, with banks that are
members of the Federal Reserve System with capitalization exceeding $10,000,000; that are a
primary reporting dealer in U.S. government securities to the Federal Reserve Bank of New York; or
certain Minnesota securities broker-dealers. The City’s investment policy as described in Note 1
addresses credit risk.
Concentration Risk – This is the risk associated with investing a significant portion of the City’s
investment (considered 5 percent or more) in the securities of a single issuer, excluding U.S.
guaranteed investments (such as treasuries), investment pools, and mutual funds. At December 31,
2015, the City had 11.7 and 33.3 percent of its portfolio invested with Federal Home Loan Mortgage
Corporation and Federal Home Loan Bank, respectively. The City’s investment policy as described in
Note 1 addresses concentration risk.
Interest Rate Risk – This is the risk of potential variability in the fair value of fixed rate investments
resulting from changes in interest rates (the longer the period for which an interest rate is fixed, the
greater the risk). The City has an investment policy as described in Note 1 which addresses interest
rate risk.
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NOTE 3 – CAPITAL ASSETS
Capital asset activity for the year ended December 31, 2015 was as follows:
A. Changes in Capital Assets Used in Governmental Activities
Transfers,
Contributions,
Beginning and Completed
of Year Additions Deletions Construction End of Year
Capital assets, not depreciated
Land 32,075,809$ 145,440$ –$ –$ 32,221,249$
Easements 33,661,179 3,153,574 – 8,550 36,823,303
Construction in progress 6,882,779 11,864,496 – (3,517,286) 15,229,989
Total capital assets, not depreciated 72,619,767 15,163,510 – (3,508,736) 84,274,541
Capital assets, depreciated
Land improvements 2,154,994 – – 75,324 2,230,318
Machinery and equipment 5,624,163 148,871 (98,923) 351,039 6,025,150
Vehicles 5,232,345 668,392 (433,227) – 5,467,510
Infrastructure 85,867,940 1,831,850 – 1,913,567 89,613,357
Total capital assets, depreciated 98,879,442 2,649,113 (532,150) 2,339,930 103,336,335
Less accumulated depreciation on
Land improvements (1,374,674) (82,875) – – (1,457,549)
Machinery and equipment (3,021,182) (362,789) 77,568 – (3,306,403)
Vehicles (4,250,373) (308,170) 422,285 – (4,136,258)
Infrastructure (41,776,717) (2,715,976) – – (44,492,693)
Total accumulated depreciation (50,422,946) (3,469,810) 499,853 – (53,392,903)
Net capital assets, depreciated 48,456,496 (820,697) (32,297) 2,339,930 49,943,432
Total capital assets, net 121,076,263$ 14,342,813$ (32,297)$ (1,168,806)$ 134,217,973$
B. Changes in Capital Assets Used in Business-Type Activities
Transfers,
Contributions,
Beginning and Completed
of Year Additions Deletions Construction End of Year
Capital assets, not depreciated
Easements 75,300$ –$ –$ –$ 75,300$
Construction in progress 47,281 280,253 – – 327,534
Total capital assets, not depreciated 122,581 280,253 – – 402,834
Capital assets, depreciated
Land improvements 87,739 – – – 87,739
Machinery and equipment 997,968 13,950 – – 1,011,918
Vehicles 302,245 24,516 (21,268) – 305,493
Infrastructure 58,817,553 847,274 – 1,168,806 60,833,633
Total capital assets, depreciated 60,205,505 885,740 (21,268) 1,168,806 62,238,783
Less accumulated depreciation on
Land improvements (21,836) (4,387) – – (26,223)
Machinery and equipment (559,706) (49,381) – – (609,087)
Vehicles (286,505) (8,786) 21,268 – (274,023)
Infrastructure (12,832,855) (1,093,620) – – (13,926,475)
Total accumulated depreciation (13,700,902) (1,156,174) 21,268 – (14,835,808)
Net capital assets, depreciated 46,504,603 (270,434) – 1,168,806 47,402,975
Total capital assets, net 46,627,184$ 9,819$ –$ 1,168,806$ 47,805,809$
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NOTE 3 – CAPITAL ASSETS (CONTINUED)
C. Depreciation Expense by Function
Depreciation expense for the year ended December 31, 2015 was charged to the following functions:
Governmental activities
General government 472,390$
Public safety 212,225
Public works 2,342,883
Culture and recreation 442,312
Total depreciation expense – governmental activities 3,469,810$
Business-type activities
Water 657,131$
Sewer 407,075
Water quality 91,968
Total depreciation expense – business-type activities 1,156,174$
NOTE 4 – INTERFUND BALANCES AND TRANSFERS
A. Interfund Balances
Interfund borrowing is done for cash flow purposes. The composition of interfund balances as of
December 31, 2015 is as follows:
Receivable Fund Payable Fund Amount
General Fund Debt Service Fund 68,926$
B. Interfund Transfers
A schedule of interfund transfers is as follows:
Transfers Out General Debt Service Construction Nonmajor Total
Governmental funds
General –$ 1,036,245$ –$ –$ 1,036,245$
Construction – 135,076 – – 135,076
Nonmajor – 107,260 1,717,296 – 1,824,556
Proprietary funds
Water 177,760 515,718 1,485,667 100,000 2,279,145
Sewer 177,760 – 1,096,060 70,000 1,343,820
Water Quality – – 300,769 21,000 321,769
355,520$ 1,794,299$ 4,599,792$ 191,000$ 6,940,611$
Transfer In
Governmental
Transfers are used to move revenues from the funds in which they are collected to the funds where they
are to be spent in accordance with statutory, budgetary, or contractual requirements.
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NOTE 5 – LONG-TERM DEBT
A. Components of Long-Term Debt
Final Balance –
Original Issue Interest Rate Issue Date Maturity Date End of Year
Governmental activities
General obligation bonds
Park Refunding Bonds of 2005 6,260,000$ 3.75–5.00% 09/01/2005 12/01/2017 1,535,000$
Street Reconstruction Bonds of 2007 1,400,000$ 4.00% 05/15/2007 12/15/2017 330,000
Capital Improvement Plan Bonds 1,225,000$ 3.80–3.90% 08/01/2007 02/01/2017 290,000
Fire Hall Refunding Bonds 2011B 3,500,000$ 2.00–3.40% 12/14/2011 12/15/2031 3,380,000
Capital Improvement Refunding Bonds 2012A 9,825,000$ 2.00–2.70% 03/13/2012 12/15/2029 8,240,000
Total general obligation bonds 13,775,000
General obligation special assessment bonds
Improvement Bonds of 2009A 1,700,000$ 1.10–3.50% 05/15/2009 12/15/2019 700,000
Improvement Bonds of 2010A 1,235,000$ 0.80–3.20% 05/26/2010 12/15/2020 635,000
Improvement Bonds of 2011A 2,130,000$ 1.80–2.50% 08/31/2011 12/15/2021 1,315,000
Improvement Bonds of 2011B 2,280,000$ 2.00–2.35% 12/14/2011 12/15/2022 1,640,000
Improvement Bonds of 2013A 3,240,000$ 2.00–2.65% 08/15/2013 12/15/2023 2,590,000
Improvement Bonds of 2014A 2,665,000$ 2.00–2.50% 09/25/2014 12/15/2024 2,360,000
Improvement Bonds of 2015A 4,640,000$ 2.00–3.00% 05/14/2015 12/15/2030 4,640,000
Improvement Bonds of 2015B 2,490,000$ 1.00–2.25% 05/14/2015 12/15/2022 2,490,000
Total general obligation special
assessment bonds 16,370,000
Tax increment bonds
Tax Increment Refunding Bonds of 2011A 290,000$ 1.80–3.00% 08/31/2011 12/15/2024 225,000
General obligation revenue bonds
Water Treatment Plant Revenue
Bonds of 2007A 8,500,000$ 4.00–4.20% 05/15/2007 12/15/2032 7,290,000
General Obligation Improvement
Bonds of 2015A 5,360,000$ 1.00–3.00% 05/14/2015 12/15/2031 5,360,000
Total general obligation revenue bonds 12,650,000
Premium (discount) on bonds payable 495,558
Energy loan payable 2,667,924$ 2.12% 12/08/2014 06/19/2025 2,574,450
Compensated absences payable 994,544
Net OPEB obligation 236,195
Net pension liability – GERF and PEPFF 6,453,193
Total long-term debt 53,773,940$
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NOTE 5 – LONG-TERM DEBT (CONTINUED)
B. Changes in Long-Term Debt
Balance – Change in
Beginning Accounting Balance – Due Within
of Year Principle* Additions Deletions End of Year One Year
Governmental activities
Bonds payable
G.O. bonds 15,290,000$ –$ –$ 1,515,000$ 13,775,000$ 1,625,000$
G.O. special assessment bonds 10,595,000 – 7,130,000 1,355,000 16,370,000 1,660,000
G.O. tax increment bonds 245,000 – – 20,000 225,000 20,000
G.O. revenue bonds 7,510,000 – 5,360,000 220,000 12,650,000 240,000
Premium (discount) on bonds payable 292,599 – 278,608 75,649 495,558 –
Total bonds payable, net of premium (discount) 33,932,599 – 12,768,608 3,185,649 43,515,558 3,545,000
Energy loan payable 2,667,924 – – 93,474 2,574,450 247,365
Compensated absences payable 929,153 – 118,812 166,590 881,375 319,934
Net OPEB obligation 143,314 – 110,580 17,699 236,195 –
Net pension liability – GERF and PEPFF – 5,311,595 1,699,300 1,563,784 5,447,111 –
Governmental activities long-term liabilities 37,672,990$ 5,311,595$ 14,697,300$ 5,027,196$ 52,654,689$ 4,112,299$
Business-type activities
Compensated absences payable 109,172$ –$ 13,506$ 9,509$ 113,169$ 42,513$
Net pension liability – GERF – 977,878 246,257 218,053 1,006,082 –
Business-type activities long-term liabilities 109,172$ 977,878$ 259,763$ 227,562$ 1,119,251$ 42,513$
*Adjustment is part of the change in accounting principle described earlier in these notes.
C. Minimum Debt Payments
Minimum annual principal and interest payments required to retire long-term debt are as follows:
Year Ending
December 31, Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest
2016 1,625,000$ 375,270$ 1,660,000$ 366,000$ 20,000$ 5,520$ 240,000$ 431,839$ 247,365$ 53,249$
2017 1,645,000 313,350 1,610,000 333,655 20,000 5,160 5,420,000 422,239 252,634 47,980
2018 610,000 254,475 2,065,000 301,498 25,000 4,800 355,000 199,325 258,016 42,598
2019 635,000 242,275 1,655,000 260,223 25,000 4,300 375,000 187,375 263,512 37,102
2020 675,000 229,575 1,350,000 224,158 25,000 3,763 400,000 174,625 269,126 31,488
2021–2025 3,955,000 922,115 5,145,000 705,860 110,000 8,425 2,365,000 664,525 1,283,797 68,964
2026–2030 4,315,000 387,210 2,885,000 249,999 – – 2,855,000 351,100 – –
2031–2032 315,000 10,710 – – – – 640,000 19,200 – –
13,775,000$ 2,734,980$ 16,370,000$ 2,441,393$ 225,000$ 31,968$ 12,650,000$ 2,450,228$ 2,574,450$ 281,381$
Energy Loan Payable
Governmental Activities
General Obligation G.O. Special Assessment Tax Increment Bonds G.O. Revenue Bonds
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NOTE 5 – LONG-TERM DEBT (CONTINUED)
D. Descriptions and Restrictions of Long-Term Debt
General Obligation Bonds – The City issues general obligation bonds to provide funds for the
acquisition and construction of major capital facilities. They will be repaid with ad valorem taxes.
General obligation bonds have been issued for general government activities. In addition, general
obligation bonds have been issued to refund bond issues. General obligation bonds are direct obligations
and pledge the full faith and credit of the City. The capital improvement plan bonds were issued on behalf
of the City by Scott County for the City’s share of the County Road 82 improvement.
General Obligation Special Assessment Bonds – Special assessment bonds were issued to finance
various improvements and will be repaid primarily from special assessments levied on the properties
benefiting from the improvements. Some issues, however, are partly financed by ad valorem tax levies.
All special assessment debt is backed by full faith and credit of the City.
General Obligation Tax Increment Bonds – These bonds were issued for downtown redevelopment
projects. The additional tax increments resulting from increased tax capacity of the redeveloped properties
will be used to retire related debt.
General Obligation Revenue Bonds – These bonds were used to finance maintenance and building
improvements. They will be repaid with ad valorem taxes and revenue from the utilities. The bonds are
backed by the full faith and credit of the City.
Compensated Absences – This liability represents vested benefits earned by employees through the end
of the year, which will be paid at termination of employment in future years. The Internal Service Fund
and enterprise funds will be used to liquidate this liability.
Net OPEB Obligation – Long-term liabilities for OPEB will be paid by the General Fund and enterprise
funds.
Net Pension Liability – The details of this liability are disclosed elsewhere in these notes. Such benefits
are financed by the General Fund and enterprise funds.
Refunding Bonds – In 2015, the City issued $10,000,000 of General Obligation Bonds, Series 2015A. A
portion of the bond issue is a crossover refunding of the 2007A Water Treatment Plant Revenue Bonds.
The proceeds of the new bonds were deposited in an escrow account on May 14, 2015, the closing date.
The escrow investments bear interest rates that will provide sufficient funds to refund the old bonds when
called on December 15, 2017. The escrow account also provided debt service payments on the new bonds
until the crossover date. The old bonds are considered defeased on the crossover date and, therefore, will
be removed as a liability on that date. As a result of the crossover refunding issue, the City will save
$752,549 in debt service payments and achieve an economic gain (the present value of the difference
between the old and the new debt service) of $536,817.
Energy Loan Payable – In 2014, the City entered into an energy loan payable for the purpose of
furnishing certain equipment and work designed to reduce energy consumption and operational costs in
the City. In this energy loan payable agreement, the provider guarantees a minimum level of energy and
operational savings in the City. Payments on the loan will be made semiannually in the amount of
$150,307 commencing December 19, 2015 and each June and December 19 thereafter until final payment
is made on June 19, 2025.
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NOTE 5 – LONG TERM DEBT (CONTINUED)
E. Conduit Debt Obligations
Conduit debt obligations are certain limited-obligation revenue bonds or similar instruments issued for the
express purpose of providing capital financing for a specific third party. The City has issued revenue
bonds to provide funding to private sector entities for projects deemed to be in the public interest.
Although these bonds bear the name of the City, the City has no obligation for such debt. Accordingly,
the bonds are not reported as liabilities in the financial statements of the City. The aggregate amount of all
conduit debt outstanding at December 31, 2015 is $27,785,000.
F. Revenue Pledged
Future revenue pledged for the payment of long-term debt is as follows:
Percent of Remaining Principal Pledged
Use of Total Term of Principal and Interest Revenue
Bond Issue Proceeds Type Debt Service Pledge and Interest Paid Received
Tax Increment Refunding Bonds of 2011A Street and site improvements Tax increment financing 100% 2011–2024 256,968$ 25,880$ 89,291$
Water Treatment Plant Revenue Bonds of 2007A Water Treatment Facility Utility charges 100% 2007–2032 8,081,028$ 526,514$ 3,390,052$
General Obligation Bonds of 2015A Partial refunding Utility charges 100% 2015–2031 7,019,200$ 83,456$ 3,390,052$
Revenue Pledged Current Year
G. Legal Debt Margin
The City’s statutory debt limit is equal to 3 percent of estimated taxable market value of property located
within the City. The taxable market value totals $2,620,934,100, which calculates to a debt margin of
$78,628,023. Debt financed partially or entirely by special assessments is not applied against the City’s
debt limit, nor is debt financed by proprietary fund revenues. Currently, the City has $13,775,000 of
general obligation debt outstanding, leaving a debt margin of $64,853,023.
H. Tax Increment Districts
The City’s tax increment districts are subject to review by the Office of the State Auditor. Any disallowed
claims or misuse of tax increments could become a liability of the applicable fund. Management has
indicated that they are not aware of any instances of noncompliance which would have a material effect
on the financial statements.
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NOTE 6 – FUND BALANCES
A. Classifications
At December 31, 2015, a summary of the City’s governmental fund balance classifications are as follows:
DAG Special Debt Construction Nonmajor
General Fund Revenue Fund Service Fund Fund Funds Total
Nonspendable
Prepaid items 9,150$ –$ –$ –$ –$ 9,150$
Restricted
Future debt service – – 7,561,906 – 320,527 7,882,433
Capital improvements – – – 661,868 – 661,868
Economic development – – – – 215,594 215,594
Tax increment – – – – 491,339 491,339
Forfeiture sales 74,506 – – – 143,489 217,995
Total restricted 74,506 – 7,561,906 661,868 1,170,949 9,469,229
Assigned
Capital improvements – – – 3,572,902 5,540,515 9,113,417
Development – 743,774 – – 183,944 927,718
Communications – – – – 66,685 66,685
Total assigned – 743,774 – 3,572,902 5,791,144 10,107,820
Unassigned 6,041,095 – (2,070) – – 6,039,025
Total 6,124,751$ 743,774$ 7,559,836$ 4,234,770$ 6,962,093$ 25,625,224$
C. Minimum Unrestricted Fund Balance Policy
The City Council has formally adopted a fund balance policy regarding the minimum unrestricted fund
balance for the General Fund. The policy establishes that the City will strive to maintain an unrestricted
General Fund balance (which includes committed, assigned, and unassigned classifications) between 40
and 50 percent of the subsequent year’s General Fund budgeted expenditures. At December 31, 2015, the
unrestricted fund balance of the General Fund was 46.7 percent of the subsequent year’s budgeted
expenditures and transfers out.
The City Council may consider the judicious use of reserve balances in the following situations:
to fund an expenditure of long-term benefit or legacy to the community
to fund a one-time (nonrecurring) expenditure or grant matching opportunity
to fund a one-time unplanned revenue shortfall
to fund an unplanned expenditure due to an emergency or disaster
to moderate property taxes
to retire existing debt
to fund policy shifts by other governmental entities having a negative impact on the City
to provide catch-up funding for long-term obligations not previously recognized
In no case will the unrestricted balance be allowed to fall below 40 percent.
In the event that the year-end unrestricted balance is projected to be less than the target level due to the
use of unrestricted balances for purposes identified above, a plan must be presented to the City Council at
the time the unrestricted funds are appropriated that will reestablish the target level within 24 to
36 months.
If restoration of the unrestricted balance cannot be accomplished within such period without severe
hardship to the City, then the City Council will establish a different time period.
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NOTE 7 – DEFINED BENEFIT PENSION PLANS – STATE-WIDE
A. Plan Description
The City participates in the following cost-sharing, multiple-employer defined benefit pension plans
administered by the PERA. The PERA’s defined benefit pension plans are established and administered
in accordance with Minnesota Statutes, Chapters 353 and 356. The PERA’s defined benefit pension plans
are tax qualified plans under Section 401 (a) of the Internal Revenue Code.
1. General Employees Retirement Fund (GERF)
All full-time and certain part-time employees of the City are covered by the General Employees
Retirement Fund (GERF). GERF members belong to either the Coordinated Plan or the Basic
Plan. Coordinated Plan members are covered by Social Security and Basic Plan members are not.
The Basic Plan was closed to new members in 1967. All new members must participate in the
Coordinated Plan.
2. Public Employees Police and Fire Fund (PEPFF)
The Public Employees Police and Fire Fund (PEPFF), 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 PEPFF also covers police officers and
firefighters belonging to local relief associations that elected to merge with and transfer assets and
administration to the PERA.
B. Benefits Provided
The PERA provides retirement, disability, and death benefits. Benefit provisions are established by state
statute and can only be modified by the State Legislature.
Benefit increases are provided to benefit recipients each January. Increases are related to the funding ratio
of the plan. Members in plans that are at least 90 percent funded for two consecutive years are given
2.5 percent increases. Members in plans that have not exceeded 90 percent funded, or have fallen below
80 percent, are given 1 percent increases.
The benefit provisions stated in the following paragraphs of this section are current provisions and apply
to active plan participants. 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. GERF Benefits
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 the PERA’s Coordinated and Basic Plan members. The retiring member
receives the higher of a step-rate benefit accrual formula (Method 1) or a level accrual formula
(Method 2). Under Method 1, the annuity accrual rate for a Basic Plan member is 2.2 percent of
average salary for each of the first 10 years of service and 2.7 percent for each remaining year.
The annuity accrual rate for a Coordinated Plan member is 1.2 percent of average salary for each
of the first 10 years and 1.7 percent for each remaining year. Under Method 2, the annuity accrual
rate is 2.7 percent of average salary for Basic Plan members and 1.7 percent for Coordinated Plan
members for each year of service. 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.
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NOTE 7 – DEFINED BENEFIT PENSION PLANS – STATE-WIDE (CONTINUED)
2. PEPFF Benefits
Benefits for PEPFF members first hired after June 30, 2010, but before July 1, 2014, vest on a
prorated basis from 50 percent after five years up to 100 percent after 10 years of credited service.
Benefits for PEPFF members first hired after June 30, 2014 vest on a prorated basis from
50 percent after 10 years up to 100 percent after 20 years of credited service. The annuity accrual
rate is 3 percent of average salary for each year of service. For PEPFF 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.
C. Contributions
Minnesota Statutes, Chapter 353 sets the rates for employer and employee contributions. Contribution
rates can only be modified by the State Legislature.
1. GERF Contributions
Coordinated Plan members were required to contribute 6.50 percent of their annual covered
salary in calendar year 2015. The City was required to contribute 7.50 percent for Coordinated
Plan members in calendar year 2015. The City’s contributions to the GERF for the year ended
December 31, 2015 were $314,233. The City’s contributions were equal to the required
contributions as set by state statute.
2. PEPFF Contributions
Plan members were required to contribute 10.80 percent of their annual covered salary in
calendar year 2015. The City was required to contribute 16.20 percent of pay for PEPFF members
in calendar year 2015. The City’s regular contributions to the PEPFF for the year ended
December 31, 2015 were $363,525. The City’s contributions were equal to the required
contributions as set by state statute.
D. Pension Costs
1. GERF Pension Costs
At December 31, 2015, the City reported a liability of $3,726,231 for its proportionate share of
the GERF’s net pension liability. The net pension liability was measured as of June 30, 2015, and
the total pension liability used to calculate the net pension liability was determined by an actuarial
valuation as of that date. The City’s proportion of the net pension liability was based on the City’s
contributions received by the PERA during the measurement period for employer payroll paid
dates from July 1, 2014 through June 30, 2015, relative to the total employer contributions
received from all of the PERA’s participating employers. At June 30, 2015, the City’s
proportionate share was 0.0719 percent, which was a decrease of 0.0052 percent from its
proportion measured as of June 30, 2014.
For the year ended December 31, 2015, the City recognized pension expense of $120,349 for its
proportionate share of the GERF’s pension expense.
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NOTE 7 – DEFINED BENEFIT PENSION PLANS – STATE-WIDE (CONTINUED)
At December 31, 2015, the City reported its proportionate share of the GERF’s deferred outflows
of resources and deferred inflows of resources related to pensions from the following sources:
Deferred Deferred
Outflows Inflows
of Resources of Resources
Differences between expected and actual economic experience –$ 187,865$
Differences between projected and actual investment earnings 352,745 –
Changes in proportion – 183,202
Contributions paid to the PERA subsequent to the measurement
date 157,581 –
Total 510,326$ 371,067$
Deferred outflows of resources reported $157,581 related to pensions resulting from city
contributions subsequent to the measurement date that will be recognized as a reduction of the net
pension liability in the year ending December 31, 2016. Other amounts reported as deferred
outflows and inflows of resources related to pensions will be recognized in pension expense as
follows:
Pension
Year Ended Expense
December 31, Amount
2016 (35,504)$
2017 (35,504)$
2018 (35,504)$
2019 88,190$
2. PEPFF Pension Costs
At December 31, 2015, the City reported a liability of $2,726,962 for its proportionate share of
the PEPFF’s net pension liability. The net pension liability was measured as of June 30, 2015,
and the total pension liability used to calculate the net pension liability was determined by an
actuarial valuation as of that date. The City’s proportion of the net pension liability was based on
the City’s contributions received by the PERA during the measurement period for employer
payroll paid dates from July 1, 2014 through June 30, 2015, relative to the total employer
contributions received from all of the PERA’s participating employers. At June 30, 2015, the
City’s proportion was 0.240 percent, which was a decrease of 0.007 percent from its proportion
measured as of June 30, 2014.
For the year ended December 31, 2015, the City recognized pension expense of $93,038 for its
proportionate share of the PEPFF’s pension expense. The City also recognized $21,600 for the
year ended December 31, 2015, as revenue for its proportionate share of the state of Minnesota’s
on-behalf contributions to the PEPFF. Legislation passed in 2013 required the state of Minnesota
to begin contributing $9 million to the PEPFF each year, starting in fiscal year 2014.
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NOTE 7 – DEFINED BENEFIT PENSION PLANS – STATE-WIDE (CONTINUED)
At December 31, 2015, the City reported its proportionate share of the PEPFF’s deferred outflows
of resources and deferred inflows of resources related to pensions from the following sources:
Deferred Deferred
Outflows Inflows
of Resources of Resources
Differences between expected and actual economic experience –$ 442,224$
Differences between projected and actual investment earnings 475,128 –
Changes in proportion – 63,002
Contributions paid to the PERA subsequent to the measurement
date 194,380 –
Total 669,508$ 505,226$
Deferred outflows of resources reported $194,380 related to pensions resulting from the city
contributions subsequent to the measurement date that will be recognized as a reduction of the net
pension liability in the year ending December 31, 2016. Other amounts reported as deferred
outflows and inflows of resources related to pensions will be recognized in pension expense as
follows:
Pension
Year Ended Expense
December 31, Amount
2016 17,737$
2017 17,737$
2018 17,737$
2019 17,737$
2020 (101,046)$
E. Actuarial Assumptions
The total pension liability in the June 30, 2015 actuarial valuation was determined using the following
actuarial assumptions:
Inflation 2.75% per year
Active member payroll growth 3.50% per year
Investment rate of return 7.90%
Salary increases were based on a service-related table. Mortality rates for active members, retirees,
survivors, and disabilitants were based on RP-2000 tables for males or females, as appropriate, with slight
adjustments. Cost of living benefit increases for retirees are assumed to be: 1 percent effective every
January 1st until 2034, then 2.5 percent for the GERF and the PEPFF.
Actuarial assumptions used in the June 30, 2015 valuation were based on the results of actuarial
experience studies. The experience study in the GERF was for the period July 1, 2004 through June 30,
2008, with an update of economic assumptions in 2014. The experience study for the PEPFF was for the
period July 1, 2004 through June 30, 2009.
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NOTE 7 – DEFINED BENEFIT PENSION PLANS – STATE-WIDE (CONTINUED)
There were no changes in actuarial assumptions in 2015.
The long-term expected rate of return on pension plan investments is 7.9 percent. The State Board of
Investment, which manages the investments of the PERA, prepares an analysis of the reasonableness of
the long-term expected rate of return on a regular basis 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
arithmetic real rates of return for each major asset class are summarized in the following table:
Asset Class
Target
Allocation
Long-Term Expected
Real Rate of Return
Domestic stocks 45% 5.50%
International stocks 15% 6.00%
Bonds 18% 1.45%
Alternative assets 20% 6.40%
Cash 2% 0.50%
F. Discount Rate
The discount rate used to measure the total pension liability was 7.9 percent. The projection of cash flows
used to determine the discount rate assumed that employee and employer contributions will be made at
the rate specified in the statute. Based on that assumption, each pension plan’s fiduciary net position was
projected to be available to make all projected future benefit payments of current active and inactive
employees. 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.
G. Pension Liability Sensitivity
The following presents the City’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
City’s proportionate share of the net pension liability would be if it were calculated using a discount rate
1 percentage point lower or 1 percentage point higher than the current discount rate:
1% Decrease in 1% Increase in
Discount Rate Discount Rate Discount Rate
(6.9%) (7.9%) (8.9%)
The City’s proportionate share of the
GERF net pension liability 5,858,960$ 3,726,231$ 1,964,925$
The City’s proportionate share of the
PEPFF net pension liability 5,314,877$ 2,726,962$ 588,893$
H. 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 PERA website at www.mnpera.org.
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NOTE 8 – DEFINED BENEFIT PENSION PLANS – FIRE RELIEF ASSOCIATION
A. Plan Description
All members of the Prior Lake Fire Department (the Department) are covered by a defined benefit plan
administered by the Association. As of December 31, 2014, the plan covered 37 active firefighters and
10 vested terminated firefighters whose pension benefits are deferred. The plan was established
November 1, 1957, and the Association operates under the provisions of Minnesota Laws 1965,
Chapter 446, as amended and Minnesota Statutes, Chapters 69 and 424A. It is governed by a Board of
Trustees (the Board) made up of six members elected by the members of the Association for three-year
terms, and the Mayor, City Manager, and Fire Chief, who serve as ex-officio voting members of the
Board of Trustees.
The Association maintains a separate Special Fund to accumulate assets to fund the retirement benefits
earned by the Department’s membership. Funding for the Association is derived from an insurance
premium tax in accordance with the Volunteer Firefighter’s Relief Association Financing Guidelines Act
of 1971 (Chapter 261 as amended by Chapter 509 of Minnesota Statutes 1980). Funds are also derived
from investment income.
B. Benefits Provided
Retirement Benefits
According to the bylaws of the Association and pursuant to Minnesota Statutes, Chapter 424A.02,
Subdivisions 2 and 4, the Association pays to each member who has served as an active firefighter in the
Department for a period of 20 years or more to his/her resignation, and who has reached the age of
50 years or more, $6,800 per year of service for lump sum. A member who has served in the Department
for at least 20 years, but has not reached the age of 50 may retire and be placed on the deferred pension
roll until he/she reaches the age of 50. Members who retire with less than 20 years of service and have
reached the age of 50 and have completed at least 10 years of active membership are entitled to a reduced
service pension.
Disability Benefits
If a member of the Association becomes totally or permanently disabled, the Association shall pay to such
members the sum of $6,800 lump sum plan for each year that they have served as an active member of the
Department.
Death Benefit
Upon the death of any member of the Association who is in good standing at the time of their death, the
Association shall pay to the surviving spouse, if any, and if there is no surviving spouse, to surviving
child or children, if any, and if no child or children survive, to the estate of such deceased member under
10 years of service, the sum of $6,800 for each year that they served as an active member of the
Department.
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NOTE 8 – DEFINED BENEFIT PENSION PLANS – FIRE RELIEF ASSOCIATION
(CONTINUED)
C. Contributions
Minnesota Statutes, Chapters 424 and 424A, authorize pension benefits for volunteer fire relief
associations. The plan is funded by fire state aid, investment earnings, and, if necessary, employer
contributions as specified in Minnesota Statutes and voluntary city contributions (if applicable). The state
of Minnesota contributed $195,194 in fire state aid to the plan on behalf of the Department for the year
ended December 31, 2014, which was recorded as a revenue. Required employer contributions are
calculated annually based on statutory provisions. The City’s statutorily-required contributions to the plan
for the year ended December 31, 2014 were $195,194. The City’s contributions were equal to the required
contributions as set by state statute. The City made a $20,000 voluntary contribution to the plan in the
year ended December 31, 2014. Furthermore, firefighters have no obligation to contribute to the plan.
D. Pension Costs
At December 31, 2015, the City reported a net pension liability (asset) of $927,888 for the plan. The net
pension liability (asset) was measured as of December 31, 2014. The total pension liability (asset) used to
calculate the net pension liability (asset) in accordance with GASB Statement No. 68 was determined by
an actuary applying an actuarial formula to specific census data certified by the Department as of
December 31, 2014.
The following table presents the changes in net pension liability (asset):
Total Pension Plan Fiduciary Net Pension
Liability Net Position Liability (Asset)
(a) (b) (a-b)
Beginning balance – January 1, 2014 2,481,307$ 3,301,229$ (819,922)$
Changes for the year
Service cost 106,719 – 106,719
Interest on pension liability (asset) 148,718 – 148,718
Projected investment earnings – 204,330 (204,330)
Contributions (employer) – 20,000 (20,000)
Contributions (state) – 195,194 (195,194)
Asset (gain) loss – (49,474) 49,474
Administrative costs – (6,647) 6,647
Total net changes 255,437 363,403 (107,966)
Ending balance – December 31, 2014 2,736,744$ 3,664,632$ (927,888)$
For the year ended December 31, 2014, the City recognized pension revenue of $195,194 and pension
expense of $146,807.
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NOTE 8 – DEFINED BENEFIT PENSION PLANS – FIRE RELIEF ASSOCIATION
(CONTINUED)
At December 31, 2015, the City reported deferred inflows of resources and deferred outflows of
resources, its contributions subsequent to the measurement date, related to pension from the following
sources:
Deferred Deferred
Outflows Inflows
of Resources of Resources
Net difference between projected and actual earnings on
plan investments –$ 39,578$
State aid to the City subsequent to the measurement date – 209,000
Contributions from the City subsequent to the measurement date 229,000 –
Total 229,000$ 248,578$
Deferred outflows of resources totaling $229,000 related to pensions resulting from the city contributions
to the plan subsequent to the measurement date will be recognized as a reduction of the net pension
liability in the year ended December 31, 2016. Deferred inflows of resources totaling $209,000 related to
state aid received subsequent to the measurement date will be recognized for its impact on the net pension
liability in the year ended December 31, 2016. Other amounts reported as deferred outflows and inflows
of resources related to the plan will be recognized in pension expense as follows:
Pension
Year Ended Expense
December 31, Amount
2016 (9,895)$
2017 (9,895)$
2018 (9,895)$
2019 (9,893)$
E. Actuarial Assumptions
The total pension liability at December 31, 2014 was determined using the entry age normal actuarial cost
method and the following actuarial assumptions:
Retirement eligibility at 100 percent service pension at age 50 with 20 years of service, early
vested retirement at age 50 with 10 years of service vested at 60 percent and increased by
4 percent for each additional year of service up to 20 and eligibility for deferred service
pension payable at age 50 with 20 years of service
Salary increases 2.50%
Cost of living increases 5.90%
Investment rate of return 6.00%
20-year municipal bond yield 3.50%
The 6 percent long-term expected rate of return on pension plan investments was determined using a
building-block method in which best estimates for expected future real rates of return (expected returns,
net of inflation) were developed for each asset class using the plan’s target investment allocation along
with long-term return expectations by asset class. Inflation expectations were applied to derive the
nominal rate of return for the portfolio.
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NOTE 8 – DEFINED BENEFIT PENSION PLANS – FIRE RELIEF ASSOCIATION
(CONTINUED)
The target allocation and best estimates of arithmetic real rates of return for each major asset class are
summarized in the following table:
Asset Class
Cash 14.00 % 2.00 %
Fixed income 26.00 5.00
Equities 58.00 7.50
Other 2.00 6.00
Total 100.00 %
Long-Term
Target Expected Real
Allocation Rate of Return
F. Discount Rate
The discount rate used to measure the total pension liability was 6.0 percent. The projection of cash flows
used to determine the discount rate assumed that contributions to the plan will be made as specified in the
statute. Based on that assumption and considering the funding ratio of the plan, the fiduciary net position
was projected to be available to make all projected future benefit payments of current active and inactive
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.
G. Pension Liability (Asset) Sensitivity
The following presents the City’s net pension liability (asset) for the plan, calculated using the discount
rate disclosed in the preceding paragraph, as well as what the City’s net pension liability (asset) would be
if it were calculated using a discount rate 1 percent lower or 1 percent higher than the current discount
rate:
1 Percent 1 Percent
Decrease (5.00%) Current (6.00%) Increase (7.00%)
Defined benefit plan (826,450)$ (927,888)$ (1,024,219)$
H. Pension Plan Fiduciary Net Position
The Association issues a publicly available financial report. This report may be obtained by writing to the
Prior Lake Fire Relief Association, 5316 Hampton Street, Prior Lake, MN 55372.
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NOTE 9 – OTHER POST-EMPLOYMENT BENEFITS PLAN
A. Plan Description
The City provides post-employment benefits to certain eligible employees through the City’s Other
Post-Employment Benefits Plan, a single-employer defined benefit plan administered by the City. All
post-employment benefits are based on contractual agreements with employee groups. As of January 1,
2014, the plan had 84 active participants and 2 retired participants. Eligibility for these benefits is based
on years of service and/or minimum age requirements. These contractual agreements do not include any
specific contribution or funding requirements. The plan does not issue a publicly available financial
report. These benefits are summarized as follows:
Post-Employment Insurance Benefits – All retirees of the City have the option under state law to
continue their medical insurance coverage through the City from the time of retirement until the
employee reaches the age of eligibility for Medicare. For two employees, the City pays for all of the
eligible retiree’s premiums for medical insurance from the time of retirement until the employee
reaches the age of eligibility for Medicare. Retirees not eligible for these city-paid premium benefits
must pay the full city premium rate for their coverage.
The City is legally required to include any retirees for whom it provides health insurance coverage in
the same insurance pool as its active employees, whether the premiums are paid by the City or the
retiree. Consequently, participating retirees are considered to receive a secondary benefit known as an
“implicit rate subsidy.” This benefit relates to the assumption that the retiree is receiving a more
favorable premium rate than they would otherwise be able to obtain if purchasing insurance on their
own, due to being included in the same pool with the City’s younger and statistically healthier active
employees.
B. Funding Policy
The required contribution is based on projected pay-as-you-go financing requirements, with additional
amounts to pre-fund benefits as determined annually by the City. There is no invested plan assets
accumulated for payment of future benefits.
C. Annual OPEB Cost and Net OPEB Obligation
The City’s annual OPEB cost (expense) is calculated based on annual required contributions (ARC) of the
City, an amount determined on an actuarially determined basis in accordance with the parameters of
GASB Statement No. 45. The ARC represents a level funding that, if paid on an ongoing basis, is
projected to cover normal costs each year and amortize any unfunded actuarial liabilities (or funding
excess) over a period not to exceed 30 years. The following table shows the components of the City’s
annual OPEB cost for the year, the amount actually contributed to the plan, and the changes in the City’s
net OPEB obligation to the plan:
ARC 113,021$
Interest on net OPEB obligation 5,733
Adjustment to ARC (8,174)
Annual OPEB cost 110,580
Contributions made (17,699)
Increase in net OPEB obligation 92,881
Net OPEB obligation – beginning of year 143,314
Net OPEB obligation – end of year 236,195$
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NOTE 9 – OTHER POST-EMPLOYMENT BENEFITS PLAN (CONTINUED)
The City’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net
OPEB obligation for the year are as follows:
Percentage of
Year Ended Annual Employer Annual OPEB Net OPEB
December 31, OPEB Cost Contribution Cost Contributed Obligation
2015 110,580$ 17,699$ 16.0%236,195$
2014 158,749$ 15,435$ 9.7%143,314$
D. Funded Status and Funding Progress
As of January 1, 2014, the most recent actuarial valuation date, the plan was zero percent funded. The
actuarial accrued liability for benefits was $753,525, and the actuarial value of assets was $0, resulting in
an unfunded actuarial accrued liability (UAAL) of $753,525. The covered payroll (annual payroll of
active employees covered by the plan) was $5,840,769, and the ratio of the UAAL to the covered payroll
was 12.9 percent.
Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and
assumptions about the probability occurrence of events far into the future. Examples include assumptions
about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the
funded status of the plan and the ARC of the employer are subject to continual revision as actual results
are compared with past expectations and new estimates are made about the future. The Schedule of
Funding Progress following the notes to basic financial statements presents multi-year trend information
about whether the actuarial value of plan assets is increasing or decreasing over time relative to the
actuarial accrued liabilities for benefits.
E. Actuarial Methods and Assumptions
Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as
understood by the employer and the plan members) and include the types of benefits provided at the time
of each valuation and the historical pattern of sharing of benefit costs between the employer and plan
members to that point. The actuarial methods and assumptions used include techniques that are designed
to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of
assets, consistent with the long-term perspective of the calculations.
In the January 1, 2014 actuarial valuation, the entry age normal level dollar method was used. The
actuarial assumptions included: a 4.0 percent investment rate of return (net of administrative expenses)
based on the City’s own investments; a 2.5 percent rate of projected salary increases; a general inflation
rate of 2.5 percent; and an annual healthcare cost trend rate of 7.5 percent initially, reduced by decrements
to an ultimate rate of 5.0 percent after six years. The UAAL is being amortized on a level dollar basis
over a closed period. The remaining amortization base periods at January 1, 2014 is 30 years.
NOTE 10 – STEWARDSHIP AND ACCOUNTABILITY
Deficit Net Position
As of December 31, 2015, the Internal Service Fund had a deficit net position of $473,096. This deficit
will be eliminated by future charges for services. The Park Referendum, Fire Station Number 2, and
GESP Lease Nonmajor Debt Service Accounts had deficit fund balances of $175, $88, and $1,807,
respectively.
-68-
NOTE 11 – COMMITMENTS AND CONTINGENCIES
A. Federal and State Funding
Amounts received or receivable from federal and state agencies are subject to agency audit and
adjustment. Any disallowed claims, including amounts already collected, may constitute a liability of the
applicable funds. The amount, if any, of funds that may be disallowed by the agencies cannot be
determined at this time although the City expects such amounts, if any, to be immaterial.
B. Legal Claims
The City has the usual and customary type of miscellaneous legal claims pending at year-end. Although
the outcome of these lawsuits is not presently determinable, the City’s management believes that the City
will not incur any material monetary loss resulting from these claims. No loss has been recorded on the
City’s financial statements relating to these claims.
C. Construction Contracts
During fiscal 2015, the City awarded contracts for various construction and remodeling projects. The
City’s commitment for uncompleted work on these contracts at December 31, 2015 is $3,612,111.
NOTE 12 – SPECIAL ITEM – TRANSFER OF OPERATIONS
During the year ended December 31, 2014, the City transferred the responsibility for operating a transit
operation to the Minnesota Valley Transit Authority (MVTA). As part of transferring this responsibility,
the City is required by Minnesota Statutes to transfer the remaining assets, liabilities, and net position to
the MVTA as well. During fiscal 2015, the City earned interest revenue on cash and investments held in
the Transit Fund for a portion of the year. The transfer of this revenue to the MVTA is reported as a
special item in the Statement of Activities and the Statement of Revenues, Expenses, and Changes in Net
Position in fiscal 2015. The Transit Fund was closed in 2015.
NOTE 13 – SUBSEQUENT EVENT
In May 2016, the City Council approved the issuance and sale of $3,505,000 General Obligation Bonds,
Series 2016A with an interest rate of 2 percent and a final maturity date of December 15, 2026. A portion
of the 2016A Bonds were issued to advance refund the General Obligation Water Revenue Bonds of
2007A.
REQUIRED SUPPLEMENTARY INFORMATION
City’s
Proportionate Plan Fiduciary
Share of the Net Position
City’s City’s Net Pension as a
PERA Fiscal Proportion Proportionate Liability as a Percentage
Year-End Date of the Net Share of the City’s Percentage of of the Total
City Fiscal (Measurement Pension Net Pension Covered Covered Pension
Year-End Date Date) Liability Liability (a) Payroll (b)Payroll (a/b) Liability
12/31/2015 6/30/2015 0.0719% 3,726,231$ 4,189,768$ 88.94% 78.20%
Contributions
in Relation to Contributions
PERA Fiscal Statutorily the Statutorily as a
Year-End Date Required Required Contribution Percentage
City Fiscal (Measurement Contributions Contributions Deficiency Covered of Covered
Year-End Date Date) (a) (b) (Excess) (a-b) Payroll (d)Payroll (b/d)
12/31/2015 6/30/2015 314,233$ 314,233$ –$ 4,189,768$ 7.50%
Note: The City implemented GASB Statement No. 68 in fiscal 2015 (using a June 30, 2015 measurement date).
This information is not available for previous fiscal years.
Schedule of Employer Contributions
Public Employees General Employees Retirement Fund
Year Ended December 31, 2015
CITY OF PRIOR LAKE
Schedule of City’s and Non-Employer Proportionate Share of Net Pension Liability
Public Employees General Employees Retirement Fund
Year Ended December 31, 2015
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City’s
Proportionate Plan Fiduciary
Share of the Net Position
City’s City’s Net Pension as a
PERA Fiscal Proportion Proportionate Liability as a Percentage
Year-End Date of the Net Share of the City’s Percentage of of the Total
City Fiscal (Measurement Pension Net Pension Covered Covered Pension
Year-End Date Date) Liability Liability (a) Payroll (b)Payroll (a/b) Liability
12/31/2015 6/30/2015 0.2400% 2,726,962$ 2,244,215$ 121.51% 86.60%
Contributions
in Relation to Contributions
PERA Fiscal Statutorily the Statutorily as a
Year-End Date Required Required Contribution Percentage
City Fiscal (Measurement Contributions Contributions Deficiency Covered of Covered
Year-End Date Date) (a) (b) (Excess) (a-b) Payroll (d)Payroll (b/d)
12/31/2015 6/30/2015 363,525$ 363,525$ –$ 2,244,215$ 16.20%
Note: The City implemented GASB Statement No. 68 in fiscal 2015 (using a June 30, 2015 measurement date).
This information is not available for previous fiscal years.
Schedule of Employer Contributions
Public Employees Police and Fire Fund
Year Ended December 31, 2015
CITY OF PRIOR LAKE
Schedule of City’s and Non-Employer Proportionate Share of Net Pension Liability
Public Employees Police and Fire Fund
Year Ended December 31, 2015
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December 31,
2014
Total pension liability
Service cost 106,719$
Interest 148,718
Net change in total pension liability 255,437
Total pension liability – beginning 2,481,307
Total pension liability – ending 2,736,744$
Plan fiduciary net position
Contributions (state and local) 215,194$
Net investment income 154,856
Administrative costs (6,647)
Net change in plan fiduciary net position 363,403
Total pension liability – beginning 3,301,229
Total pension liability – ending 3,664,632$
Net pension liability (asset) – ending (927,888)$
Plan fiduciary net position as a percentage
of the total pension liability 133.90%
Contributions in
Relation to the
City Fiscal Statutorily Statutorily Contribution Voluntary
Year-End Required Required Deficiency City
Date Contributions (a) Contributions (b) (Excess) (a-b) Contribution
12/31/15 209,000$ 209,000$ –$ 20,000$
*This schedule is provided prospectively beginning with the fiscal year ended December 31, 2015.
Schedule of Employer Contributions
Prior Lake Fire Relief Association
Required Supplementary Information (Last Ten Years*)
Year Ended December 31, 2015
CITY OF PRIOR LAKE
Schedule of Changes in the Prior Lake Fire Relief
Association’s Net Pension Asset and Related Ratios
Required Supplementary Information (Last Ten Years*)
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Actuarial Unfunded
Fiscal Year Valuation Actuarial Actuarial Actuarial
Ended Date – Accrued Value Accrued Covered
December 31, January 1, Liability of Plan Assets Liability Payroll
2014 2014 753,525$ –$ 753,525$ – % 5,840,769$ 12.9 %
CITY OF PRIOR LAKE
Ratio
Funded
Payroll
Percentage of
Liability as a
Unfunded
Other Post-Employment Benefits Plan
Schedule of Funding Progress
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SUPPLEMENTAL INFORMATION
Special
Revenue Capital Projects Total
Assets
Cash and investments 1,078,850$ 5,945,123$ 7,023,973$
Cash held in escrow 25,000 768,868 793,868
Receivables
Delinquent taxes 1,931 967 2,898
Accounts 47,264 28,613 75,877
Special assessments
Deferred – 24,346 24,346
Other (Green Acres) – 1,403 1,403
Due from other governmental agencies 5,922 1,261 7,183
Total assets 1,158,967$ 6,770,581$ 7,929,548$
Liabilities
Accounts and contracts payable 210,529$ 664,855$ 875,384$
Accrued salaries and employee benefits payable 4,135 – 4,135
Due to other governmental agencies 539 – 539
Deposits payable 25,000 – 25,000
Unearned revenue 33,750 – 33,750
Total liabilities 273,953 664,855 938,808
Deferred inflows of resources
Unavailable revenue from delinquent taxes 1,931 967 2,898
Unavailable revenue from special assessments – 25,749 25,749
Total deferred inflows of resources 1,931 26,716 28,647
Fund balances
Restricted 215,594 955,355 1,170,949
Assigned 667,489 5,123,655 5,791,144
Total fund balances 883,083 6,079,010 6,962,093
Total liabilities, deferred inflows
of resources, and fund balances 1,158,967$ 6,770,581$ 7,929,548$
CITY OF PRIOR LAKE
Nonmajor Governmental Funds
Combining Balance Sheet
as of December 31, 2015
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Special
Revenue Capital Projects Total
Revenue
Taxes 158,731$ 721,884$ 880,615$
Special assessments – 2,883 2,883
Intergovernmental 17,165 – 17,165
Charges for services 136,281 1,079,622 1,215,903
Interest on investments 21,392 128,660 150,052
Miscellaneous
Contributions and donations 1,555 – 1,555
Other – 101,097 101,097
Total revenue 335,124 2,034,146 2,369,270
Expenditures
Current
General government – 70,716 70,716
Culture and recreation 84,098 – 84,098
Economic development 158,570 – 158,570
Capital outlay 235,177 3,651,664 3,886,841
Total expenditures 477,845 3,722,380 4,200,225
Excess (deficiency) of revenues over expenditures (142,721) (1,688,234) (1,830,955)
Other financing sources (uses)
Transfers in – 191,000 191,000
Transfers out (62,356) (1,762,200) (1,824,556)
Sale of assets – 6,240 6,240
Total other financing sources (uses) (62,356) (1,564,960) (1,627,316)
Net change in fund balances (205,077) (3,253,194) (3,458,271)
Fund balances
Beginning of year 1,088,160 9,332,204 10,420,364
End of year 883,083$ 6,079,010$ 6,962,093$
Year Ended December 31, 2015
CITY OF PRIOR LAKE
Nonmajor Governmental Funds
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances
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Capital ED Revolving Revolving
Park Loan Loan
Assets
Cash and investments 652,976$ 120,832$ 93,833$
Cash held in escrow – – –
Receivables
Delinquent taxes – – –
Accounts 1,493 523 406
Due from other governmental agencies – – –
Total assets 654,469$ 121,355$ 94,239$
Liabilities
Accounts and contracts payable 203,859$ –$ –$
Accrued salaries and employee benefits payable – – –
Due to other governmental agencies – – –
Deposits payable – – –
Unearned revenue 33,750 – –
Total liabilities 237,609 – –
Deferred inflows of resources
Unavailable revenue from delinquent taxes – – –
Fund balances
Restricted for economic development – 121,355 94,239
Assigned for capital improvements 416,860 – –
Assigned for development – – –
Assigned for communications – – –
Total fund balances 416,860 121,355 94,239
Total liabilities, deferred inflows
of resources, and fund balances 654,469$ 121,355$ 94,239$
as of December 31, 2015
CITY OF PRIOR LAKE
Nonmajor Special Revenue Funds
Combining Balance Sheet
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Cable
Franchise EDA Total
71,225$ 139,984$ 1,078,850$
25,000 – 25,000
– 1,931 1,931
– 44,842 47,264
– 5,922 5,922
96,225$ 192,679$ 1,158,967$
4,540$ 2,130$ 210,529$
– 4,135 4,135
– 539 539
25,000 – 25,000
– – 33,750
29,540 6,804 273,953
– 1,931 1,931
– – 215,594
– – 416,860
– 183,944 183,944
66,685 – 66,685
66,685 183,944 883,083
96,225$ 192,679$ 1,158,967$
-76-
Capital ED Revolving Revolving
Park Loan Loan
Revenues
Taxes –$ –$ –$
Intergovernmental – – –
Charges for services 123,710 – –
Interest on investments 14,104 2,417 1,877
Miscellaneous
Contributions and donations 1,555 – –
Total revenues 139,369 2,417 1,877
Expenditures
Current
Culture and recreation 84,098 – –
Economic development – – –
Capital outlay 229,647 – –
Total expenditures 313,745 – –
Excess (deficiency) of revenues
over expenditures (174,376) 2,417 1,877
Other financing uses
Transfers out (62,356) – –
Net change in fund balances (236,732) 2,417 1,877
Fund balances
Beginning of year 653,592 118,938 92,362
End of year 416,860$ 121,355$ 94,239$
Year Ended December 31, 2015
CITY OF PRIOR LAKE
Nonmajor Special Revenue Funds
Combining Statement of Revenues, Expenditures,
and Changes in Fund Balances
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Cable
Franchise EDA Total
–$ 158,731$ 158,731$
– 17,165 17,165
5,133 7,438 136,281
– 2,994 21,392
– – 1,555
5,133 186,328 335,124
– – 84,098
– 158,570 158,570
4,540 990 235,177
4,540 159,560 477,845
593 26,768 (142,721)
– – (62,356)
593 26,768 (205,077)
66,092 157,176 1,088,160
66,685$ 183,944$ 883,083$
-78-
Tax Revolving Trunk
Increment Equipment Reserve
Assets
Cash and investments 77,243$ 859,133$ 1,581,894$
Cash held in escrow – – –
Receivables
Delinquent taxes – – –
Accounts 943 6,049 9,607
Special assessments
Deferred – – 12,460
Other (Green Acres) – – 1,403
Due from other governmental agencies – 1,261 –
Total assets 78,186$ 866,443$ 1,605,364$
Liabilities
Accounts and contracts payable –$ 8,503$ –$
Deferred inflows of resources
Unavailable revenue from delinquent taxes – – –
Unavailable revenue from special assessments – – 13,863
Total deferred inflows of resources – – 13,863
Fund balances
Restricted for tax increment 78,186 – –
Restricted for forfeiture sales – 143,489 –
Restricted for future capital improvements – – –
Assigned for capital improvements – 714,451 1,591,501
Total fund balances 78,186 857,940 1,591,501
Total liabilities, deferred inflows
of resources, and fund balances 78,186$ 866,443$ 1,605,364$
CITY OF PRIOR LAKE
Nonmajor Capital Projects Funds
Combining Balance Sheet
as of December 31, 2015
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Tax Tax
Street Water Increment 1-3 Increment 3-1
Oversizing Storage Lakefront Creekside
680,029$ 1,148,660$ 130,404$ 117,036$
– – – –
– – 967 –
3,256 2,624 490 315
4,886 7,000 – –
– – – –
– – – –
688,171$ 1,158,284$ 131,861$ 117,351$
–$ –$ 68,372$ –$
– – 967 –
4,886 7,000 – –
4,886 7,000 967 –
– – 62,522 117,351
– – – –
– – – –
683,285 1,151,284 – –
683,285 1,151,284 62,522 117,351
688,171$ 1,158,284$ 131,861$ 117,351$
(continued)
-80-
Tax Tax Tax
Increment 5-1 Increment 6-1 Increment 1-4
Premiere Shepard’s Path River Vet
Assets
Cash and investments 11,459$ 357,181$ 3,829$
Cash held in escrow – – –
Receivables
Delinquent taxes – – –
Accounts 18 639 (8)
Special assessments
Deferred – – –
Other (Green Acres) – – –
Due from other governmental agencies – – –
Total assets 11,477$ 357,820$ 3,821$
Liabilities
Accounts and contracts payable 5,726$ 130,514$ 3,598$
Deferred inflows of resources
Unavailable revenue from delinquent taxes – – –
Unavailable revenue from special assessments – – –
Total deferred inflows of resources – – –
Fund balances
Restricted for tax increment 5,751 227,306 223
Restricted for forfeiture sales – – –
Restricted for future capital improvements – – –
Assigned for capital improvements – – –
Total fund balances 5,751 227,306 223
Total liabilities, deferred inflows
of resources, and fund balances 11,477$ 357,820$ 3,821$
as of December 31, 2015
CITY OF PRIOR LAKE
Nonmajor Capital Projects Funds
Combining Balance Sheet (continued)
-81-
Revolving
Park Facility
Equipment Management Total
387,904$ 590,351$ 5,945,123$
– 768,868 768,868
– – 967
1,504 3,176 28,613
– – 24,346
– – 1,403
– – 1,261
389,408$ 1,362,395$ 6,770,581$
–$ 448,142$ 664,855$
– – 967
– – 25,749
– – 26,716
– – 491,339
– – 143,489
– 320,527 320,527
389,408 593,726 5,123,655
389,408 914,253 6,079,010
389,408$ 1,362,395$ 6,770,581$
-82-
Tax Revolving Trunk
Increment Equipment Reserve
Revenues
Taxes –$ 250,033$ –$
Special assessments – – –
Charges for services 8,000 – 713,406
Interest (losses) on investments 1,528 21,391 41,806
Miscellaneous
Other – 101,097 –
Total revenues 9,528 372,521 755,212
Expenditures
Current
General government 294 70,422 –
Capital outlay 5,136 875,336 –
Total expenditures 5,430 945,758 –
Excess (deficiency) of revenues
over expenditures 4,098 (573,237) 755,212
Other financing sources (uses)
Transfers in – 141,000 –
Transfers out – – (1,352,864)
Sale of assets – 6,240 –
Total other financing sources (uses) – 147,240 (1,352,864)
Net change in fund balances 4,098 (425,997) (597,652)
Fund balances (deficit)
Beginning of year 74,088 1,283,937 2,189,153
End of year 78,186$ 857,940$ 1,591,501$
CITY OF PRIOR LAKE
Nonmajor Capital Projects Funds
Combining Statement of Revenues, Expenditures,
and Changes in Fund Balances
Year Ended December 31, 2015
-83-
Tax Tax
Street Water Increment 1-3 Increment 3-1
Oversizing Storage Lakefront Creekside
–$ –$ 89,291$ 71,808$
2,883 – – –
180,216 178,000 – –
14,780 20,284 1,989 1,481
– – – –
197,879 198,284 91,280 73,289
– – – –
– – 101,292 32,831
– – 101,292 32,831
197,879 198,284 (10,012) 40,458
– – – –
(302,075) – (25,880) –
– – – –
(302,075) – (25,880) –
(104,196) 198,284 (35,892) 40,458
787,481 953,000 98,414 76,893
683,285$ 1,151,284$ 62,522$ 117,351$
(continued)
-84-
Tax Tax Tax
Increment 5-1 Increment 6-1 Increment 1-4
Premiere Shepard’s Path River Vet
Revenues
Taxes 12,724$ 290,032$ 7,996$
Special assessments – – –
Charges for services – – –
Interest (losses) on investments 89 3,755 (11)
Miscellaneous
Other – – –
Total revenues 12,813 293,787 7,985
Expenditures
Current
General government – – –
Capital outlay 11,970 261,547 7,714
Total expenditures 11,970 261,547 7,714
Excess (deficiency) of revenues
over expenditures 843 32,240 271
Other financing sources (uses)
Transfers in – – –
Transfers out – – –
Sale of assets – – –
Total other financing sources (uses) – – –
Net change in fund balances 843 32,240 271
Fund balances (deficit)
Beginning of year 4,908 195,066 (48)
End of year 5,751$ 227,306$ 223$
Year Ended December 31, 2015
CITY OF PRIOR LAKE
Nonmajor Capital Projects Funds
Combining Statement of Revenues, Expenditures,
and Changes in Fund Balances (continued)
-85-
Revolving
Park Facility
Equipment Management Total
–$ –$ 721,884$
– – 2,883
– – 1,079,622
7,896 13,672 128,660
– – 101,097
7,896 13,672 2,034,146
– – 70,716
– 2,355,838 3,651,664
– 2,355,838 3,722,380
7,896 (2,342,166) (1,688,234)
– 50,000 191,000
– (81,381) (1,762,200)
– – 6,240
– (31,381) (1,564,960)
7,896 (2,373,547) (3,253,194)
381,512 3,287,800 9,332,204
389,408$ 914,253$ 6,079,010$
-86-
THIS PAGE INTENTIONALLY LEFT BLANK
2014
Actual Variance With Actual
Original Final Amounts Final Budget Amounts
Revenues
Taxes
Property taxes 8,107,223$ 8,107,223$ 8,087,428$ (19,795)$ 7,364,122$
Franchise taxes 595,000 595,000 604,997 9,997 594,800
Total taxes 8,702,223 8,702,223 8,692,425 (9,798) 7,958,922
Special assessments 35,000 35,000 366 (34,634) 10,798
Licenses and permits
Business 72,920 72,920 77,870 4,950 79,620
Nonbusiness 569,825 569,825 509,594 (60,231) 503,532
Total licenses and permits 642,745 642,745 587,464 (55,281) 583,152
Intergovernmental
Federal grants 3,500 7,882 19,806 11,924 125,971
State
Road and bridge aid 288,000 288,000 316,827 28,827 288,204
Fire relief aid 209,000 209,000 213,941 4,941 202,136
Police aid 182,800 182,800 209,926 27,126 184,160
Other state aids 52,680 59,480 18,559 (40,921) 49,579
County and local
Township fire and rescue aid 282,002 282,002 279,094 (2,908) 325,976
Liaison aid 45,860 45,860 23,565 (22,295) 45,860
Payment in lieu of taxes 420,000 420,000 420,000 – 400,000
Other local aids – 72,147 72,147 – 3,853
Total intergovernmental 1,483,842 1,567,171 1,573,865 6,694 1,625,739
Charges for services
Zoning fees 7,810 7,810 26,626 18,816 16,634
Plan check fees 291,420 291,420 233,752 (57,668) 229,070
Park fees 54,250 54,250 65,127 10,877 52,425
Project fees 300,000 300,000 273,943 (26,057) 263,929
Park program revenue 63,000 63,000 67,210 4,210 76,459
Tower leases 202,065 202,065 243,499 41,434 210,994
PEG access fees 34,000 34,000 32,952 (1,048) 33,100
Park admission/rent 23,250 23,250 29,852 6,602 21,424
Facility rental 71,520 71,520 72,757 1,237 141,260
Reports 2,300 2,300 2,846 546 2,102
Total charges for services 1,049,615 1,049,615 1,048,564 (1,051) 1,047,397
(continued)
CITY OF PRIOR LAKE
General Fund
Schedule of Revenues, Expenditures, and
Changes in Fund Balances – Budget and Actual
Year Ended December 31, 2015
(With Comparative Actual Amounts for the Year Ended December 31, 2014)
2015
Budgeted Amounts
-87-
2014
Variance With
Original Final Actual Final Budget Actual
Revenues (continued)
Fines and forfeits – – 1,390 1,390 127,225
Interest on investments 120,000 120,000 114,970 (5,030) 230,464
Miscellaneous
Other 94,000 94,000 238,492 144,492 171,833
Contributions and donations 11,000 11,000 11,866 866 27,761
Developers’ agreements 70,000 70,000 59,867 (10,133) 90,474
Total miscellaneous 175,000 175,000 310,225 135,225 290,068
Total revenues 12,208,425 12,291,754 12,329,269 37,515 11,873,765
Expenditures
Current expenditures
General government
Mayor and Council
Personal services 49,370 49,370 53,503 4,133 46,347
Supplies 300 300 42 (258) 205
Other services and charges 5,720 5,720 4,987 (733) 5,459
Total Mayor and Council 55,390 55,390 58,532 3,142 52,011
Ordinance
Other services and charges 7,500 7,500 6,952 (548) 8,497
Administration
Personal services 335,330 335,330 318,613 (16,717) 324,576
Supplies 2,250 2,250 5,688 3,438 3,750
Other services and charges 47,179 47,179 51,241 4,062 47,934
Total administration 384,759 384,759 375,542 (9,217) 376,260
Boards and commissions
Personal services 9,689 9,689 9,258 (431) 9,043
Other services and charges 650 650 879 229 346
Total boards and commissions 10,339 10,339 10,137 (202) 9,389
Election
Personal services – – – – 11,621
Supplies – – – – 2,141
Other services and charges 75,000 75,000 84,750 9,750 1,398
Total election 75,000 75,000 84,750 9,750 15,160
(continued)
Schedule of Revenues, Expenditures, and
Budgeted Amounts
General Fund
Changes in Fund Balances – Budget and Actual (continued)
CITY OF PRIOR LAKE
Year Ended December 31, 2015
(With Comparative Actual Amounts for the Year Ended December 31, 2014)
2015
-88-
2014
Variance With
Original Final Actual Final Budget Actual
Expenditures (continued)
Current expenditures (continued)
General government (continued)
Finance
Personal services 418,654 418,654 396,539 (22,115) 406,089
Supplies 2,225 2,225 2,297 72 2,122
Other services and charges 13,805 13,805 12,418 (1,387) 18,389
Total finance 434,684 434,684 411,254 (23,430) 426,600
Auditing
Other services and charges 29,950 29,950 30,748 798 25,115
Assessing
Other services and charges 152,250 152,250 152,155 (95) 134,621
Legal services
Other services and charges 215,000 215,000 233,507 18,507 384,657
Personnel
Personal services 132,433 132,433 55,315 (77,118) 129,616
Supplies 250 250 323 73 246
Other services and charges 27,538 27,538 33,297 5,759 22,467
Total personnel 160,221 160,221 88,935 (71,286) 152,329
Communications
Personal services 104,251 104,251 72,801 (31,450) 98,482
Supplies 750 750 92 (658) 450
Other services and charges 17,300 17,300 15,550 (1,750) 23,560
Total communications 122,301 122,301 88,443 (33,858) 122,492
Community development
Personal services 277,393 277,393 286,768 9,375 243,058
Supplies 2,150 2,150 2,556 406 942
Other services and charges 28,450 28,450 5,340 (23,110) 21,663
Total community development 307,993 307,993 294,664 (13,329) 265,663
(continued)
General Fund
2015
Year Ended December 31, 2015
CITY OF PRIOR LAKE
Changes in Fund Balances – Budget and Actual (continued)
(With Comparative Actual Amounts for the Year Ended December 31, 2014)
Schedule of Revenues, Expenditures, and
Budgeted Amounts
-89-
2014
Variance With
Original Final Actual Final Budget Actual
Expenditures (continued)
Current expenditures (continued)
General government (continued)
Technology
Personal services 131,171 131,171 131,814 643 101,266
Supplies 1,040 1,040 578 (462) 5,949
Other services and charges 108,622 108,622 107,494 (1,128) 254,040
Total technology 240,833 240,833 239,886 (947) 361,255
Buildings and plant
Personal services 71,409 71,409 74,214 2,805 50,889
Supplies 5,614 5,614 5,779 165 8,926
Other services and charges 427,934 427,934 412,974 (14,960) 422,935
Total buildings and plant 504,957 504,957 492,967 (11,990) 482,750
Total general government 2,701,177 2,701,177 2,568,472 (132,705) 2,816,799
Public safety
Police
Personal services 3,083,623 3,083,623 3,090,015 6,392 3,096,561
Supplies 117,047 117,047 115,158 (1,889) 119,121
Other services and charges 164,114 164,114 146,611 (17,503) 169,095
Total police 3,364,784 3,364,784 3,351,784 (13,000) 3,384,777
Fire and rescue
Personal services 383,428 383,428 399,781 16,353 352,874
Supplies 92,177 92,177 62,952 (29,225) 74,507
Other services and charges 367,250 408,250 418,185 9,935 397,076
Total fire and rescue 842,855 883,855 880,918 (2,937) 824,457
Building inspections
Personal services 558,114 558,114 538,616 (19,498) 519,796
Supplies 13,014 13,014 8,648 (4,366) 5,859
Other services and charges 6,315 6,315 6,407 92 8,188
Total building inspections 577,443 577,443 553,671 (23,772) 533,843
Emergency management
Other services and charges 10,025 10,025 9,577 (448) 4,745
Animal control
Other services and charges 25,257 25,257 25,200 (57) 25,200
Total public safety 4,820,364 4,861,364 4,821,150 (40,214) 4,773,022
(continued)
Year Ended December 31, 2015
(With Comparative Actual Amounts for the Year Ended December 31, 2014)
2015
Budgeted Amounts
CITY OF PRIOR LAKE
General Fund
Schedule of Revenues, Expenditures, and
Changes in Fund Balances – Budget and Actual (continued)
-90-
2014
Variance With
Original Final Actual Final Budget Actual
Expenditures (continued)
Current expenditures (continued)
Public works
Engineering
Personal services 337,087 337,087 343,925 6,838 310,802
Supplies 11,580 11,580 9,087 (2,493) 7,705
Other services and charges 31,480 31,480 8,653 (22,827) 19,192
Total engineering 380,147 380,147 361,665 (18,482) 337,699
Central garage
Personal services 178,223 178,223 178,660 437 171,059
Supplies 168,545 168,545 123,596 (44,949) 179,214
Other services and charges 23,023 23,023 30,196 7,173 46,601
Total central garage 369,791 369,791 332,452 (37,339) 396,874
Streets
Personal services 352,581 354,146 331,049 (23,097) 331,389
Supplies 253,600 257,374 231,351 (26,023) 260,549
Other services and charges 740,140 851,140 821,792 (29,348) 547,911
Total streets 1,346,321 1,462,660 1,384,192 (78,468) 1,139,849
Total public works 2,096,259 2,212,598 2,078,309 (134,289) 1,874,422
Culture and recreation
Recreation
Personal services 272,487 273,879 268,297 (5,582) 300,603
Supplies 60,888 66,695 60,447 (6,248) 80,143
Other services and charges 26,002 26,002 17,670 (8,332) 25,312
Total recreation 359,377 366,576 346,414 (20,162) 406,058
Parks
Personal services 821,636 858,094 847,810 (10,284) 847,275
Supplies 186,110 206,703 184,303 (22,400) 181,165
Other services and charges 152,159 181,383 160,107 (21,276) 178,615
Total parks 1,159,905 1,246,180 1,192,220 (53,960) 1,207,055
Libraries
Supplies 3,743 3,743 3,597 (146) 3,882
Other services and charges 63,017 63,017 57,840 (5,177) 67,995
Total libraries 66,760 66,760 61,437 (5,323) 71,877
(continued)
2015
CITY OF PRIOR LAKE
General Fund
Schedule of Revenues, Expenditures, and
Changes in Fund Balances – Budget and Actual (continued)
(With Comparative Actual Amounts for the Year Ended December 31, 2014)
Budgeted Amounts
Year Ended December 31, 2015
-91-
2014
Variance With
Original Final Actual Final Budget Actual
Expenditures (continued)
Current expenditures (continued)
Culture and recreation
Natural resources
Personal services 35,850 – – – 35,036
Supplies 24,750 – – – 5,845
Other services and charges 19,224 – – – 25,134
Total natural resources 79,824 – – – 66,015
Total culture and recreation 1,665,866 1,679,516 1,600,071 (79,445) 1,751,005
Economic development
Other services and charges – 8,500 6,213 (2,287) –
Total current expenditures 11,283,666 11,463,155 11,074,215 (388,940) 11,215,248
Capital outlay
General government
Technology 23,163 66,058 81,353 15,295 258,955
Buildings and plant 8,500 8,500 6,516 (1,984) 12,462
Public safety
Police – – – – 1,000
Fire and rescue 41,000 – – – 7,506
Culture and recreation
Parks 171,771 307,071 145,486 (161,585) 216,138
Economic development
Contingency
FEMA costs – – – – 92,174
Economic development – – – – 115,000
Total capital outlay 244,434 381,629 233,355 (148,274) 703,235
Total expenditures 11,528,100 11,844,784 11,307,570 (537,214) 11,918,483
Excess (deficiency) of
revenues over expenditures 680,325 446,970 1,021,699 574,729 (44,718)
(continued)
Budgeted Amounts
Schedule of Revenues, Expenditures, and
Changes in Fund Balances – Budget and Actual (continued)
Year Ended December 31, 2015
2015
(With Comparative Actual Amounts for the Year Ended December 31, 2014)
General Fund
CITY OF PRIOR LAKE
-92-
2014
Variance With
Original Final Actual Final Budget Actual
Other financing sources (uses)
Transfers in 355,520 355,520 355,520 – 481,762
Transfers out (1,035,845) (1,035,845) (1,036,245) (400) (1,091,655)
Sale of assets – – 7,130 7,130 –
Total other financing
sources (uses) (680,325) (680,325) (673,595) 6,730 (609,893)
Net change in fund balances –$ (233,355)$ 348,104 581,459$ (654,611)
Fund balances
Beginning of year 5,776,647 6,431,258
End of year 6,124,751$ 5,776,647$
Budgeted Amounts
General Fund
Schedule of Revenues, Expenditures, and
Changes in Fund Balances – Budget and Actual (continued)
Year Ended December 31, 2015
(With Comparative Actual Amounts for the Year Ended December 31, 2014)
2015
CITY OF PRIOR LAKE
-93-
Water
Park City Hall Fire Treatment
Referendum 2005 Station #2 Plant
Assets
Cash and investments –$ 9,340$ –$ –$
Cash held in escrow – – – 5,309,198
Receivables
Accounts – 117 – –
Special assessments
Delinquent – – – –
Deferred – – – –
Other (Green Acres) – – – –
Due from other governmental agencies – 2,959 – –
Total assets –$ 12,416$ –$ 5,309,198$
Liabilities
Accounts and contracts payable 175$ 1,175$ 88$ 175$
Due to other funds – – – –
Total liabilities 175 1,175 88 175
Deferred inflows of resources
Unavailable revenue from
special assessments – – – –
Fund balances (deficit)
Restricted for debt service – 11,241 – 5,309,023
Unassigned (deficit in restricted balance) (175) – (88) –
Total fund balances (deficit) (175) 11,241 (88) 5,309,023
Total liabilities, deferred inflows
of resources, and fund balances –$ 12,416$ –$ 5,309,198$
CITY OF PRIOR LAKE
Debt Service Funds
Balance Sheet by Account
as of December 31, 2015
-94-
Tax
Increment Breezy Fish
2004 Point Point CSAH 82
27,022$ 31,025$ –$ 30,737$
– – – –
115 676 – 117
– – – –
– – 30,111 –
– – 692,597 –
– – – 751
27,137$ 31,701$ 722,708$ 31,605$
89$ –$ –$ –$
– – – –
89 – – –
– – 722,708 –
27,048 31,701 – 31,605
– – – –
27,048 31,701 – 31,605
27,137$ 31,701$ 722,708$ 31,605$
(continued)
-95-
Street Brooksville Brooksville CR 12 and
Reconstruction Hills Hills II/Maple 2010
2007 2008 Glen 2nd Reconstruction
Assets
Cash and investments 31,328$ 66,784$ 59,233$ 55,865$
Cash held in escrow – – – –
Receivables
Accounts 157 1,009 896 538
Special assessments
Delinquent – 1,125 – –
Deferred – 105,770 94,232 47,511
Other (Green Acres) – – – –
Due from other governmental agencies 900 457 703 549
Total assets 32,385$ 175,145$ 155,064$ 104,463$
Liabilities
Accounts and contracts payable 175$ –$ 176$ 176$
Due to other funds – – – –
Total liabilities 175 – 176 176
Deferred inflows of resources
Unavailable revenue from
special assessments – 106,895 94,232 47,511
Fund balances (deficit)
Restricted for debt service 32,210 68,250 60,656 56,776
Unassigned (deficit in restricted balance) – – – –
Total fund balances (deficit) 32,210 68,250 60,656 56,776
Total liabilities, deferred inflows
of resources, and fund balances 32,385$ 175,145$ 155,064$ 104,463$
Balance Sheet by Account (continued)
Debt Service Funds
CITY OF PRIOR LAKE
as of December 31, 2015
-96-
CSAH 44,
Boudin Boudin Welcome, Crest,
Phase I Phase II CR 12, Sunset Maplewood
285,582$ 208,640$ 535,743$ 210,822$
– – – –
1,317 875 3,503 (23)
– – 10,912 443
234,439 230,057 663,920 82,076
– – 25,656 –
842 1,057 12,989 1,213
522,180$ 440,629$ 1,252,723$ 294,531$
88$ 88$ 174$ 87$
– – – –
88 88 174 87
234,439 230,057 700,489 82,520
287,653 210,484 552,060 211,924
– – – –
287,653 210,484 552,060 211,924
522,180$ 440,629$ 1,252,723$ 294,531$
(continued)
-97-
THIS PAGE INTENTIONALLY LEFT BLANK
Street TH 13,
Reconstruction 150th Street
GESP Lease 2015 Reconstruction Total
Assets
Cash and investments –$ 213,066$ 458,936$ 2,224,123$
Cash held in escrow – – – 5,309,198
Receivables
Accounts 67,119 – 111 76,527
Special assessments
Delinquent – – – 12,480
Deferred – 1,290,902 – 2,779,018
Other (Green Acres) – – – 718,253
Due from other governmental agencies – – – 22,420
Total assets 67,119$ 1,503,968$ 459,047$ 11,142,019$
Liabilities
Accounts and contracts payable –$ 670$ 169$ 3,505$
Due to other funds 68,926 – – 68,926
Total liabilities 68,926 670 169 72,431
Deferred inflows of resources
Unavailable revenue from
special assessments –$ 1,290,901$ –$ 3,509,752$
Fund balances (deficit)
Restricted for debt service – 212,397 458,878 7,561,906
Unassigned (deficit in restricted balance) (1,807) – – (2,070)
Total fund balances (deficit) (1,807) 212,397 458,878 7,559,836
Total liabilities, deferred inflows
of resources, and fund balances 67,119$ 1,503,968$ 459,047$ 11,142,019$
CITY OF PRIOR LAKE
Debt Service Funds
Balance Sheet by Account (continued)
as of December 31, 2015
-98-
Water
Park City Hall Fire Treatment
Referendum 2005 Station #2 Plant
Revenues
Taxes –$ 586,910$ –$ –$
Special assessments – – – –
Interest (losses) on investments – 1,581 – (7,736)
Miscellaneous – – – –
Total revenues – 588,491 – (7,736)
Expenditures
Debt service
Principal 710,000 395,000 120,000 220,000
Interest and other 111,400 194,478 95,106 482,607
Total expenditures 821,400 589,478 215,106 702,607
Excess (deficiency) of revenues
over expenditures (821,400) (987) (215,106) (710,343)
Other financing sources (uses)
Debt issued – – – –
Refunding debt issued – – – 5,360,000
Premium on debt issued – – – 143,647
Transfers in 821,225 – 215,018 515,719
Total other financing sources (uses) 821,225 – 215,018 6,019,366
Net change in fund balances (175) (987) (88) 5,309,023
Fund balances (deficit)
Beginning of year – 12,228 – –
End of year (175)$ 11,241$ (88)$ 5,309,023$
Year Ended December 31, 2015
and Changes in Fund Balances
CITY OF PRIOR LAKE
Debt Service Funds
Schedule of Revenues, Expenditures,
-99-
Tax
Increment Breezy Fish
2004 Point Point CSAH 82
–$ –$ –$ 148,875$
– 441 – –
514 494 – (52)
– – – –
514 935 – 148,823
20,000 – – 135,000
5,968 – – 13,805
25,968 – – 148,805
(25,454) 935 – 18
– – – –
– – – –
– – – –
25,880 – – –
25,880 – – –
426 935 – 18
26,622 30,766 – 31,587
27,048$ 31,701$ –$ 31,605$
(continued)
-100-
Street Brooksville Brooksville CR 12 and
Reconstruction Hills Hills II/Maple 2010
2007 2008 Glen 2nd Reconstruction
Revenues
Taxes 178,459$ 90,661$ 139,332$ 108,793$
Special assessments – 52,045 37,418 16,515
Interest on investments 1,092 1,566 2,335 1,885
Miscellaneous – – – –
Total revenues 179,551 144,272 179,085 127,193
Expenditures
Debt service
Principal 155,000 120,000 175,000 120,000
Interest and other 19,574 12,375 27,125 21,812
Total expenditures 174,574 132,375 202,125 141,812
Excess (deficiency) of revenues
over expenditures 4,977 11,897 (23,040) (14,619)
Other financing sources (uses)
Debt issued – – – –
Refunding debt issued – – – –
Premium on debt issued – – – –
Transfers in – – – –
Total other financing sources (uses) – – – –
Net change in fund balances 4,977 11,897 (23,040) (14,619)
Fund balances (deficit)
Beginning of year 27,233 56,353 83,696 71,395
End of year 32,210$ 68,250$ 60,656$ 56,776$
and Changes in Fund Balances (continued)
Year Ended December 31, 2015
CITY OF PRIOR LAKE
Debt Service Funds
Schedule of Revenues, Expenditures,
-101-
CSAH 44,
Boudin Boudin Welcome, Crest,
Phase I Phase II CR 12, Sunset Maplewood
167,007$ 200,408$ 15,269$ 240,490$
48,407 58,076 319,652 13,151
7,037 5,008 14,184 1,648
– – – –
222,451 263,492 349,105 255,289
210,000 220,000 325,000 185,000
31,533 38,756 99,557 57,338
241,533 258,756 424,557 242,338
(19,082) 4,736 (75,452) 12,951
– – – –
– – – –
– – – –
– – – 135,076
– – – 135,076
(19,082) 4,736 (75,452) 148,027
306,735 205,748 627,512 63,897
287,653$ 210,484$ 552,060$ 211,924$
(continued)
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Street TH 13,
Reconstruction 150th Street
GESP Lease 2015 Reconstruction Total
Revenues
Taxes –$ –$ –$ 1,876,204$
Special assessments – 154,243 437,870 1,137,818
Interest on investments – 5,093 2,338 36,987
Miscellaneous 67,119 – – 67,119
Total revenues 67,119 159,336 440,208 3,118,128
Expenditures
Debt service
Principal 93,474 – – 3,203,474
Interest and other 56,833 72,738 25,437 1,366,442
Total expenditures 150,307 72,738 25,437 4,569,916
Excess (deficiency) of revenues
over expenditures (83,188) 86,598 414,771 (1,451,788)
Other financing sources (uses)
Debt issued – 125,799 44,107 169,906
Refunding debt issued – – – 5,360,000
Premium on debt issued – – – 143,647
Transfers in 81,381 – – 1,794,299
Total other financing sources (uses) 81,381 125,799 44,107 7,467,852
Net change in fund balances (1,807) 212,397 458,878 6,016,064
Fund balances (deficit)
Beginning of year – – – 1,543,772
End of year (1,807)$ 212,397$ 458,878$ 7,559,836$
CITY OF PRIOR LAKE
Debt Service Funds
Schedule of Revenues, Expenditures,
and Changes in Fund Balances (continued)
Year Ended December 31, 2015
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OTHER INFORMATION SECTION
THIS PAGE INTENTIONALLY LEFT BLANK
Percent
Increase
2015 2014 (Decrease)
Revenues
Taxes 10,844,247$ 9,924,277$ 9.3%
Franchise taxes 604,997 594,800 1.7%
Special assessments 1,141,067 616,960 84.9%
Licenses and permits 587,464 580,112 1.3%
Intergovernmental 2,882,091 2,038,495 41.4%
Charges for services 2,493,523 2,771,929 (10.0%)
Fines and forfeits 1,390 127,225 (98.9%)
Interest (losses) on investments 376,624 730,981 (48.5%)
Miscellaneous 479,996 350,339 37.0%
Total revenues 19,411,399$ 17,735,118$ 9.5%
Per capita 775$ 712$ 8.8%
Expenditures
Current
General government 2,639,188$ 2,813,759$ (6.2%)
Public safety 4,821,150 4,732,024 1.9%
Public works 2,078,309 1,874,422 10.9%
Culture and recreation 1,684,169 1,768,519 (4.8%)
Economic development 164,783 115,437 42.7%
Capital outlay 14,205,764 6,338,290 124.1%
Debt service
Principal 3,203,474 3,185,000 0.6%
Interest and other charges 1,484,684 1,256,059 18.2%
Total disbursements 30,281,521$ 22,083,510$ 37.1%
Per capita 1,209$ 886$ 36.5%
Total long-term indebtedness 43,020,000$ 33,640,000$ 27.9%
Per capita 1,717$ 1,350$ 27.2%
General Fund balance – December 31 6,124,751$ 5,776,647$ 6.0%
Per capita 245$ 232$ 5.6%
The purpose of this report is to provide a summary of financial information concerning the City to interested citizens. The
complete financial statements may be examined at City Hall, 4646 Dakota Street Southeast, Prior Lake, Minnesota
55372-1714. Questions about this report should be directed to the Finance Director at (952) 447-9841.
Governmental Funds
Years Ended December 31, 2015 and 2014
Total
CITY OF PRIOR LAKE
Summary Financial Report
Revenues and Expenditures for General Operations
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Final
Issue Maturity
Date Date
Bonded indebtedness
G.O. special assessment bonds
G.O. Improvement Bonds of 2009A 1.10–3.50 % 05/15/2009 12/15/2019
G.O. Improvement Bonds of 2010A 0.80–3.20 05/26/2010 12/15/2020
G.O. Improvement Bonds of 2011A 1.80–2.50 08/31/2011 12/15/2021
G.O. Improvement Bonds of 2011B 2.00–2.35 12/14/2011 12/15/2022
G.O. Improvement Bonds of 2013A 2.00–2.65 08/15/2013 12/15/2023
G.O. Improvement Bonds of 2014A 2.00–2.50 09/15/2014 12/15/2024
G.O. Improvement Refunding Bonds of 2014A 2.00 09/15/2014 12/15/2018
G.O. Improvement Bonds of 2015A 2.00–3.00 05/14/2015 12/15/2030
G.O. Improvement Bonds of 2015B 1.00–2.25 05/14/2015 12/15/2022
Total G.O. special assessment bonds
Tax increment bonds
G.O. Tax Increment Refunding Bonds of 2011A 1.80–3.00 08/31/2011 12/15/2024
General obligation bonds
G.O. Park Refunding Bonds of 2005 3.75–5.00 09/01/2005 12/01/2017
G.O. Street Reconstruction Bonds of 2007B 4.00 05/15/2007 12/15/2017
G.O. Improvement Bonds of 2011B 2.00–3.40 12/14/2011 12/15/2031
G.O. Capital Improvement Refunding Bonds of 2012A 2.00–2.70 03/13/2012 12/15/2029
Total general obligation bonds
General obligation revenue bonds
G.O. Water Treatment Plant Revenue Bonds of 2007A 4.00–4.20 05/15/2007 12/15/2032
G.O. Improvement Refunding Bonds of 2015A 1.00–3.00 05/14/2015 12/15/2031
Total general obligation revenue bonds
General obligation capital improvement plan bonds
G.O. Capital Plan Bonds of 2006A 3.80–3.90 08/01/2007 02/01/2017
Total bonded indebtedness
Rate
CITY OF PRIOR LAKE
Combined Schedule of Indebtedness
for the Year Ended December 31, 2015
Interest
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Outstanding Issued Outstanding
Authorized January 1 (Retired) December 31 Principal Interest
1,700,000$ 875,000$ (175,000)$ 700,000$ 175,000$ 22,750$
1,235,000 755,000 (120,000) 635,000 125,000 18,503
2,130,000 1,525,000 (210,000) 1,315,000 215,000 27,665
2,280,000 1,860,000 (220,000) 1,640,000 225,000 34,268
3,240,000 2,915,000 (325,000) 2,590,000 325,000 56,780
2,170,000 2,170,000 (185,000) 1,985,000 190,000 42,100
495,000 495,000 (120,000) 375,000 125,000 7,500
4,640,000 – 4,640,000 4,640,000 – 115,824
2,490,000 – 2,490,000 2,490,000 280,000 40,610
20,380,000 10,595,000 5,775,000 16,370,000 1,660,000 366,000
290,000 245,000 (20,000) 225,000 20,000 5,520
6,260,000 2,245,000 (710,000) 1,535,000 780,000 76,750
1,400,000 485,000 (155,000) 330,000 160,000 13,200
3,500,000 3,500,000 (120,000) 3,380,000 135,000 92,618
9,825,000 8,635,000 (395,000) 8,240,000 410,000 184,157
20,985,000 14,865,000 (1,380,000) 13,485,000 1,485,000 366,725
8,500,000 7,510,000 (220,000) 7,290,000 240,000 297,714
5,360,000 – 5,360,000 5,360,000 – 134,125
13,860,000 7,510,000 5,140,000 12,650,000 240,000 431,839
1,225,000 425,000 (135,000) 290,000 140,000 8,545
56,740,000$ 33,640,000$ 9,380,000$ 43,020,000$ 3,545,000$ 1,178,629$
Due in 2016
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Final
Issue Maturity
Date Date Principal
General obligation
special assessment bonds
$1,700,000 General Obligation
Improvement Bonds, Series 2009A 05/15/2009 3.00 % 12/15/2016 175,000$
3.00 12/15/2017 175,000
3.50 12/15/2018 175,000
3.50 12/15/2019 175,000
Total 700,000
$1,235,000 General Obligation
Improvement Bonds, Series 2010A 05/26/2010 2.50 % 12/15/2016 125,000
2.75 12/15/2017 125,000
3.00 12/15/2018 125,000
3.10 12/15/2019 130,000
3.20 12/15/2020 130,000
Total 635,000
$2,130,000 General Obligation
Improvement Bonds, Series 2011A 08/31/2011 1.80 % 12/15/2016 215,000
1.80 12/15/2017 215,000
2.00 12/15/2018 220,000
2.15 12/15/2019 220,000
2.35 12/15/2020 220,000
2.50 12/15/2021 225,000
Total 1,315,000
$2,280,000 General Obligation
Improvement Bonds, Series 2011B 12/14/2011 1.80 % 12/15/2016 225,000
1.80 12/15/2017 225,000
2.00 12/15/2018 230,000
2.15 12/15/2019 230,000
2.35 12/15/2020 240,000
2.50 12/15/2021 245,000
3.00 12/15/2022 245,000
Total 1,640,000
(continued)
CITY OF PRIOR LAKE
Bond Schedules
December 31, 2015
Rate
Interest
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Final
Issue Maturity
Date Date Principal
General obligation
special assessment bonds (continued)
$3,240,000 General Obligation
Improvement Bonds, Series 2013A 08/15/2013 2.00 % 12/15/2016 325,000
2.00 12/15/2017 325,000
2.00 12/15/2018 325,000
2.00 12/15/2019 325,000
2.10 12/15/2020 325,000
2.30 12/15/2021 325,000
2.50 12/15/2022 320,000
2.65 12/15/2023 320,000
Total 2,590,000
$2,170,000 General Obligation
Improvement Bonds, Series 2014A 09/25/2014 2.00 % 12/15/2016 190,000
2.00 12/15/2017 190,000
2.00 12/15/2018 215,000
2.00 12/15/2019 220,000
2.00 12/15/2020 225,000
2.00 12/15/2021 230,000
2.00 12/15/2022 235,000
2.50 12/15/2023 235,000
2.50 12/15/2024 245,000
Total 1,985,000
$495,000 General Obligation Improvement
Refunding Bonds, Series 2014A 09/25/2014 2.00 % 12/15/2016 125,000
2.00 12/15/2017 125,000
2.00 12/15/2018 125,000
Total 375,000
$4,640,000 General Obligation
Improvement Bonds, Series 2015A 05/14/2015 2.00 % 12/15/2023 405,000
2.00 12/15/2024 575,000
2.00 12/15/2025 775,000
2.50 12/15/2026 610,000
2.50 12/15/2027 555,000
3.00 12/15/2028 550,000
3.00 12/15/2029 600,000
3.00 12/15/2030 570,000
Total 4,640,000
(continued)
CITY OF PRIOR LAKE
Bond Schedules (continued)
December 31, 2015
Interest
Rate
-108-
Final
Issue Maturity
Date Date Principal
General obligation
special assessment bonds (continued)
$2,490,000 General Obligation
Improvement Bonds, Series 2015B 05/14/2015 1.00 % 12/15/2016 280,000
1.00 12/15/2017 230,000
1.40 12/15/2018 650,000
1.60 12/15/2019 355,000
1.90 12/15/2020 210,000
2.10 12/15/2021 315,000
2.25 12/15/2022 450,000
2,490,000
Total general obligation special assessment bonds 16,370,000$
General obligation
tax increment bonds
$290,000 Tax Increment Refunding
Bonds, Series 2011A 08/31/2011 1.80 % 12/15/2016 20,000$
1.80 12/15/2017 20,000
2.00 12/15/2018 25,000
2.15 12/15/2019 25,000
2.35 12/15/2020 25,000
2.50 12/15/2021 25,000
3.00 12/15/2022 25,000
3.00 12/15/2023 30,000
3.00 12/15/2024 30,000
Total general obligation tax increment bonds 225,000$
General obligation bonds
$6,260,000 General Obligation Park
Refunding Bonds of 2005 09/01/2005 5.000 % 12/01/2016 780,000$
5.000 12/01/2017 755,000
Total 1,535,000
$1,400,000 General Obligation
Street Reconstruction Bonds of 2007B 05/15/2007 4.00 % 12/15/2016 160,000
4.00 12/15/2017 170,000
Total 330,000
(continued)
Bond Schedules (continued)
December 31, 2015
Interest
Rate
CITY OF PRIOR LAKE
-109-
Final
Issue Maturity
Date Date Principal
General obligation bonds (continued)
$3,500,000 General Obligation Improvement
Bonds, Series 2011B 12/14/2011 2.00 % 12/15/2016 135,000
2.00 12/15/2017 135,000
2.00 12/15/2018 140,000
2.00 12/15/2019 150,000
2.05 12/15/2020 160,000
2.20 12/15/2021 175,000
2.35 12/15/2022 180,000
2.50 12/15/2023 195,000
2.65 12/15/2024 215,000
2.75 12/15/2025 230,000
2.85 12/15/2026 240,000
3.00 12/15/2027 255,000
3.20 12/15/2028 270,000
3.20 12/15/2029 285,000
3.40 12/15/2030 300,000
3.40 12/15/2031 315,000
Total 3,380,000
$9,825,000 General Obligation Capital
Improvement Refunding Bonds of 2012A 03/13/2012 2.00 % 12/15/2016 410,000
2.00 12/15/2017 435,000
2.00 12/15/2018 470,000
2.00 12/15/2019 485,000
2.00 12/15/2020 515,000
2.00 12/15/2021 545,000
2.00 12/15/2022 565,000
2.00 12/15/2023 590,000
2.15 12/15/2024 615,000
2.30 12/15/2025 645,000
2.40 12/15/2026 685,000
2.50 12/15/2027 720,000
2.60 12/15/2028 760,000
2.70 12/15/2029 800,000
Total 8,240,000
Total general obligation bonds 13,485,000$
(continued)
December 31, 2015
Interest
Rate
CITY OF PRIOR LAKE
Bond Schedules (continued)
-110-
Final
Issue Maturity
Date Date Principal
General obligation revenue bonds
$8,500,000 General Obligation Water
Treatment Plant Revenue Bonds of 2007A 05/15/2007 4.00 % 12/15/2016 240,000$
4.00 12/15/2017 5,420,000
4.00 12/15/2018 280,000
4.00 12/15/2019 300,000
4.00 12/15/2020 325,000
4.00 12/15/2021 350,000
4.00 12/15/2022 375,000
Total 7,290,000
$5,360,000 General Obligation Improvement
Refunding Bonds, Series 2015A 05/14/2015 1.00 % 12/15/2018 75,000
1.00 12/15/2019 75,000
1.50 12/15/2020 75,000
1.50 12/15/2021 75,000
1.50 12/15/2022 75,000
2.00 12/15/2023 480,000
2.00 12/15/2024 495,000
2.00 12/15/2025 515,000
2.50 12/15/2026 530,000
2.50 12/15/2027 550,000
3.00 12/15/2028 570,000
3.00 12/15/2029 590,000
3.00 12/15/2030 615,000
3.00 12/15/2031 640,000
Total 5,360,000
Total general obligation revenue bonds 12,650,000$
General obligation capital improvement
plan bonds
$1,225,000 General Obligation Capital
Improvement Plan Bonds 08/01/2007 3.85 % 02/01/2016 140,000$
3.90 02/01/2017 150,000
Total general obligation capital improvement plan bonds 290,000$
Interest
Rate
CITY OF PRIOR LAKE
Bond Schedules (continued)
December 31, 2015
-111-
Year Principal Interest Principal Interest Principal Interest
2016 1,485,000$ 366,725$ 1,660,000$ 366,000$ 20,000$ 5,520$
2017 1,495,000 310,425 1,610,000 333,655 20,000 5,160
2018 610,000 254,475 2,065,000 301,498 25,000 4,800
2019 635,000 242,275 1,655,000 260,223 25,000 4,300
2020 675,000 229,576 1,350,000 224,158 25,000 3,763
2021 720,000 215,996 1,340,000 194,593 25,000 3,175
2022 745,000 201,244 1,250,000 164,888 25,000 2,550
2023 785,000 185,713 960,000 136,305 30,000 1,800
2024 830,000 169,041 820,000 113,850 30,000 900
2025 875,000 150,120 775,000 96,225 – –
2026 925,000 128,960 610,000 80,725 – –
2027 975,000 105,680 555,000 65,475 – –
2028 1,030,000 80,030 550,000 51,600 – –
2029 1,085,000 51,630 600,000 35,100 – –
2030 300,000 20,910 570,000 17,098 – –
2031 315,000 10,710 – – – –
Total 13,485,000$ 2,723,510$ 16,370,000$ 2,441,393$ 225,000$ 31,968$
CITY OF PRIOR LAKE
Debt Service Requirements
December 31, 2015
General Obligation Bonds Special Assessment Bonds
General Obligation
Tax Increment Bonds
General Obligation
-112-
Principal Interest Principal Interest
240,000$ 431,839$ 140,000$ 8,545$
5,420,000 422,239 150,000 2,925
355,000 199,325 – –
375,000 187,375 – –
400,000 174,625 – –
425,000 160,500 – –
450,000 145,375 – –
480,000 129,250 – –
495,000 119,650 – –
515,000 109,750 – –
530,000 99,450 – –
550,000 86,200 – –
570,000 72,450 – –
590,000 55,350 – –
615,000 37,650 – –
640,000 19,200 – –
12,650,000$ 2,450,228$ 290,000$ 11,470$
Revenue Bonds Plan Bonds
General ObligationGeneral Obligation
-113-
Collections
Total of Prior Total
Year Levy Years’ Levy Collections
2006 8,086,236$ 7,733,423$ 95.64 * 76,133$ 7,809,556$ 96.58 %
2007 8,718,777 8,557,509 98.15 * 96,934 8,654,443 99.26
2008 9,365,437 9,027,680 96.39 * 1,520,587 9,148,267 97.68
2009 9,881,555 9,330,012 94.42 * 157,906 9,487,918 96.02
2010 10,079,186 9,764,852 96.88 * 235,004 9,999,856 99.21
2011 10,114,124 9,742,074 96.32 * 148,029 9,890,103 97.79
2012 9,414,124 9,367,641 99.51 132,726 9,500,367 100.92
2013 9,414,124 9,307,276 98.87 79,901 9,387,177 99.71
2014 9,448,918 9,361,417 99.07 86,180 9,447,597 99.99
2015 10,394,086 10,323,081 99.32 48,336 10,371,417 99.78
*Market value credit was withheld by the state of Minnesota
Collections
Total of Prior Total
Year Levy Years’ Levy Collections
2006 476,717$ 446,508$ 93.66 49,397$ 495,905$ 104.03 %
2007 405,756 400,937 98.81 39,075 440,012 108.44
2008 336,687 330,203 98.07 9,243 339,446 100.82
2009 366,972 362,795 98.86 3,461 366,256 99.80
2010 441,066 435,017 98.63 3,522 438,539 99.43
2011 347,795 341,728 98.26 5,802 347,530 99.92
2012 385,017 380,144 98.73 4,240 384,384 99.84
2013 393,347 388,480 98.76 4,943 393,423 100.02
2014 526,584 460,800 87.51 4,946 465,746 88.45
2015 374,285 365,481 97.65 11,655 377,136 100.76
**Excludes prepaid assessment collections
Collection
of Current
Year Levy**
Percentage
Percentage
Percentage
Collected
Percentage
Collectionsof Levy
of Total
of Total
to Levy
CITY OF PRIOR LAKE
Tax Levies and Collections, and
Special Assessment Levies and Collections
Special Assessment Levies and Collections
Prior Ten Years
Tax Levies and Collections
Collection
of Current
Year Levy
of Levy
Collected to Levy
Collections
-114-
2013
Taxable market value 2,372,776,200$ 2,445,568,700$ 2,620,934,100$
Tax levy 9,414,124$ 9,448,918$ 10,394,086$
Tax capacity, net of fiscal disparities,
and tax increment 24,018,600$ 24,793,703$ 26,636,432$
Tax capacity rate 31.887% 30.736% 31.988%
Market value rate 0.040% 0.040% 0.039%
EDA tax capacity rate 0.625% 0.551% 0.557%
Prior Three Years
2015
CITY OF PRIOR LAKE
Schedules of Market Value, Tax Levy, Tax Capacity Values,
Tax Capacity Rate, and Market Value Rate
2014
-115-
2013 2014 2015
Current population 24,223 24,911 25,049
Tax capacity, net of fiscal disparities,
and tax increment 24,018,600$ 24,793,703$ 26,636,432$
Percent of current property taxes collected 98.87% 99.07% 99.32%
City revenues per capita (governmental funds) 788$ 712$ 775$
City expenditures per capita (governmental funds) 1,032$ 886$ 1,209$
Ratio of bonded debt to tax capacity 148.55% 128.05% 153.07%
Bond rating Aa2 Aa2 Aa2
CITY OF PRIOR LAKE
Key Financial Indicators
Prior Three Years
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OTHER REQUIRED REPORTS
THIS PAGE INTENTIONALLY LEFT BLANK
-117-
INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER
FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS
BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN
ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
To the City Council and Management
City of Prior Lake, Minnesota
We have audited, 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, the financial statements of the governmental
activities, the business-type activities, each major fund, and the aggregate remaining fund information of
the City of Prior Lake, Minnesota (the City) as of and for the year ended December 31, 2015, and the
related notes to the financial statements, which collectively comprise the City’s basic financial statements,
and have issued our report thereon dated May 18, 2016.
INTERNAL CONTROL OVER FINANCIAL REPORTING
In planning and performing our audit of the financial statements, we considered the City’s internal control
over financial reporting (internal control) to determine the audit procedures that are appropriate in the
circumstances for the purpose of expressing our opinions on the financial statements, but not for the
purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we do
not express an opinion on the effectiveness of the City’s internal control.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, to prevent, or
detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or combination
of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement
of the City’s financial statements will not be prevented, or detected and corrected, on a timely basis. A
significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less
severe than a material weakness, yet important enough to merit attention by those charged with
governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this
section and was not designed to identify all deficiencies in internal control that might be material
weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any
deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses
may exist that have not been identified.
(continued)
-118-
COMPLIANCE AND OTHER MATTERS
As part of obtaining reasonable assurance about whether the City’s financial statements are free from
material misstatement, we performed tests of its compliance with certain provisions of laws, regulations,
contracts, and grant agreements, noncompliance with which could have a direct and material effect on the
determination of financial statement amounts. However, providing an opinion on compliance with those
provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The
results of our tests disclosed no instances of noncompliance or other matters that are required to be
reported under Government Auditing Standards.
PURPOSE OF THIS REPORT
The purpose of this report is solely to describe the scope of our testing of internal control and compliance
and the results of that testing, and not to provide an opinion on the effectiveness of the City’s internal
control or on compliance. This report is an integral part of an audit performed in accordance with
Government Auditing Standards in considering the City’s internal control and compliance. Accordingly,
this report is not suitable for any other purpose.
Minneapolis, Minnesota
May 18, 2016
-119-
INDEPENDENT AUDITOR’S REPORT
ON MINNESOTA LEGAL COMPLIANCE
To the City Council and Management
City of Prior Lake, Minnesota
We have audited, 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, the financial statements of the governmental
activities, the business-type activities, each major fund, and the aggregate remaining fund information of
the City of Prior Lake, Minnesota (the City) as of and for the year ended December 31, 2015, and the
related notes to the financial statements, which collectively comprise the City’s basic financial statements,
and have issued our report thereon dated May 18, 2016.
MINNESOTA LEGAL COMPLIANCE
The Minnesota Legal Compliance Audit Guide for Cities, promulgated by the Office of the State Auditor
pursuant to Minnesota Statute § 6.65, contains seven categories of compliance to be tested: contracting
and bidding, deposits and investments, conflicts of interest, public indebtedness, claims and
disbursements, miscellaneous provisions, and tax increment financing. Our audit considered all of the
listed categories.
In connection with our audit, nothing came to our attention that caused us to believe that the City failed to
comply with the provisions of the Minnesota Legal Compliance Audit Guide for Cities, except as
described in the Schedule of Findings as item 2015-001. However, our audit was not directed primarily
toward obtaining knowledge of such noncompliance. Accordingly, had we performed additional
procedures, other matters may have come to our attention regarding the City’s noncompliance with the
above referenced provisions.
CITY’S RESPONSE TO FINDING
The City’s response to the legal compliance finding identified in our audit has been included in the
Schedule of Findings. The City’s response was not subject to the auditing procedures applied in our audit
of the financial statements and, accordingly, we express no opinion on it.
PURPOSE OF THIS REPORT
The purpose of this report is solely to describe the scope of our testing of compliance and the results of
that testing, and not to provide an opinion on compliance. Accordingly, this report is not suitable for any
other purpose.
Minneapolis, Minnesota
May 18, 2016
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CITY OF PRIOR LAKE
Schedule of Findings
December 31, 2015
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FINDINGS – MINNESOTA LEGAL COMPLIANCE AUDIT
2015-001 COLLATERAL FOR UNINSURED DEPOSITS
Condition and Criteria – Minnesota Statute § 118A.03 requires that if a city’s deposits
exceed federal insurance coverage, excess deposits must be covered by corporate surety
bonds or collateral that has a market value of at least 110 percent of such excess. This
requirement was not met for two banks for which City of Prior Lake, Minnesota (the City)
held two certificates of deposit each through separate investment brokers at December 31,
2015, leaving $484,995 of the City’s deposits uninsured and uncollateralized.
Cause – This was an oversight by city personnel.
Effect – City deposits not covered by federal depository insurance or pledged collateral were
subject to custodial credit risk, the risk they may be lost if the depository bank fails.
Recommendation – We recommend that the City review its investment portfolio of
certificates of deposit to assure that in the future there are no certificates of deposit held
through various investment brokers with the same bank. This will ensure the City will remain
covered by federal depository insurance coverage for collateral purposes.
Management Response – There is no disagreement with the audit finding. This was an
oversight by the City that was recognized by city staff and rectified in January and March
2016. The City’s staff reviews collateral coverage regularly and will assure that adequate
diversification of certificates of deposit is obtained in the future.
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Management Report
for
City of Prior Lake, Minnesota
December 31, 2015
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To the City Council and Management
City of Prior Lake, Minnesota
We have prepared this management report in conjunction with our audit of the City of Prior Lake,
Minnesota’s (the City) financial statements for the year ended December 31, 2015. The purpose of this
report is to provide comments resulting from our audit process and to communicate information relevant
to city finances in Minnesota. We have organized this report into the following sections:
Audit Summary
Governmental Funds Overview
Enterprise Funds Overview
Government-Wide Financial Statements
Legislative Updates
Accounting and Auditing Updates
We would be pleased to further discuss any of the information contained in this report or any other
concerns that you would like us to address. We would also like to express our thanks for the courtesy and
assistance extended to us during the course of our audit.
The purpose of this report is solely to provide those charged with governance of the City, management,
and those who have responsibility for oversight of the financial reporting process comments resulting
from our audit process and information relevant to city finances in Minnesota. Accordingly, this report is
not suitable for any other purpose.
Minneapolis, Minnesota
May 18, 2016
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-1-
AUDIT SUMMARY
The following is a summary of our audit work, key conclusions, and other information that we consider
important or that is required to be communicated to the City Council, administration, or those charged
with governance of the City.
OUR RESPONSIBILITY UNDER AUDITING STANDARDS GENERALLY ACCEPTED IN THE UNITED
STATES OF AMERICA AND GOVERNMENT AUDITING STANDARDS
We have audited the financial statements of the governmental activities, the business-type activities, each
major fund, and the aggregate remaining fund information of the City as of and for the year ended
December 31, 2015, and the related notes to the financial statements. Professional standards require that
we provide you with information about our responsibilities under auditing standards generally accepted in
the United States of America and Government Auditing Standards, as well as certain information related
to the planned scope and timing of our audit. We have communicated such information to you verbally
and in our audit engagement letter. Professional standards also require that we communicate the following
information related to our audit.
PLANNED SCOPE AND TIMING OF THE AUDIT
We performed the audit according to the planned scope and timing previously discussed and coordinated
in order to obtain sufficient audit evidence and complete an effective audit.
AUDIT OPINION AND FINDINGS
Based on our audit of the City’s financial statements for the year ended December 31, 2015:
We have issued an unmodified opinion on the City’s basic financial statements. Our report
included a paragraph emphasizing that the City implemented Governmental Accounting
Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions—
an amendment of GASB Statement No. 27, and GASB Statement No. 71, Pension Transition for
Contributions Made Subsequent to the Measurement Date—an amendment of GASB Statement
No. 68, during the year ended December 31, 2015. Our opinion was not modified with respect to
this matter.
We reported no deficiencies in the City’s internal control over financial reporting that we
considered to be material weaknesses.
The results of our testing disclosed no instances of noncompliance required to be reported under
Government Auditing Standards.
We reported one finding based on our testing of the City’s compliance with Minnesota laws and
regulations:
1) The City had certificates of deposit in excess of federal depository insurance at two
depositories as of December 31, 2015, and the excess deposits were not adequately
covered by pledged collateral with a market value of 110 percent of the excess, as
required by state statutes. As a result, $484,995 of the City’s deposits were exposed to
custodial credit risk at year-end. This oversight was corrected in early 2016.
-2-
SIGNIFICANT ACCOUNTING POLICIES
Management is responsible for the selection and use of appropriate accounting policies. The significant
accounting policies used by the City are described in Note 1 of the notes to basic financial statements.
The City implemented GASB Statement Nos. 68 and 71 during the year ended December 31, 2015. These
statements provide new guidance on accounting and financial reporting for pensions accounted for in the
financial statements of plan employers. Implementation of these standards resulted in an adjustment to the
beginning equity reported in the City’s government-wide and enterprise fund financial statements, as
described in Note 1 of the notes to basic financial statements. The application of remaining policies was
not changed during the year ended December 31, 2015.
We noted no transactions entered into by the City during the year for which there is a lack of authoritative
guidance or consensus. All significant transactions have been recognized in the financial statements in the
proper period.
ACCOUNTING ESTIMATES AND MANAGEMENT JUDGMENTS
Accounting estimates are an integral part of the financial statements prepared by management and are
based on management’s knowledge and experience about past and current events and assumptions about
future events. Certain accounting estimates are particularly sensitive because of their significance to the
financial statements and because of the possibility that future events affecting them may differ
significantly from those expected. The most sensitive estimates affecting the financial statements were:
Depreciation – Management’s estimates of depreciation expense are based on the estimated
useful lives of the assets.
Compensated Absences – Estimates for compensated absences payable are based on current sick
and vacation leave balances.
Net Other Post-Employment Benefit (OPEB) and Net Pension Liabilities – The City has
recorded liabilities and activity for other post-employment benefits (OPEB) and pension benefits.
These obligations are calculated using actuarial methodologies described in GASB Statements
Nos. 45 and 68. These actuarial calculations include significant assumptions, including projected
changes, healthcare insurance costs, investment returns, retirement ages, proportionate share, and
employee turnover.
We evaluated the key factors and assumptions used by management to develop these estimates in
determining that they are reasonable in relation to the basic financial statements taken as a whole.
The financial statement disclosures are neutral, consistent, and clear.
CORRECTED AND UNCORRECTED MISSTATEMENTS
Professional standards require us to accumulate all known and likely misstatements identified during the
audit, other than those that are trivial, and communicate them to the appropriate level of management.
Where applicable, management has corrected all such misstatements. In addition, none of the
misstatements detected as a result of audit procedures and corrected by management, when applicable,
were material, either individually or in the aggregate, to each opinion unit’s financial statements taken as
a whole.
DIFFICULTIES ENCOUNTERED IN PERFORMING THE AUDIT
We encountered no significant difficulties in dealing with management in performing and completing our
audit.
-3-
DISAGREEMENTS WITH MANAGEMENT
For purposes of this report, professional standards define a disagreement with management as a financial
accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be
significant to the financial statements or the auditor’s report. We are pleased to report that no such
disagreements arose during the course of our audit.
MANAGEMENT REPRESENTATIONS
We have requested certain representations from management that are included in the management
representation letter dated May 18, 2016.
MANAGEMENT CONSULTATIONS WITH OTHER INDEPENDENT ACCOUNTANTS
In some cases, management may decide to consult with other accountants about auditing and accounting
matters, similar to obtaining a “second opinion” on certain situations. If a consultation involves
application of an accounting principle to the City’s financial statements or a determination of the type of
auditor’s opinion that may be expressed on those statements, our professional standards require the
consulting accountant to check with us to determine that the consultant has all the relevant facts. To our
knowledge, there were no such consultations with other accountants.
OTHER AUDIT FINDINGS OR ISSUES
We generally discuss a variety of matters, including the application of accounting principles and auditing
standards, with management each year prior to retention as the City’s auditors. However, these
discussions occurred in the normal course of our professional relationship and our responses were not a
condition to our retention.
OTHER MATTERS
We applied certain limited procedures to Management’s Discussion and Analysis and the pension and
OPEB-related required supplementary information (RSI) that supplements the basic financial statements.
Our procedures consisted of inquiries of management regarding 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 did not audit the RSI and do not express an opinion or provide any assurance on the RSI.
We were engaged to report on the supplemental information accompanying the financial statements
which is not RSI. With respect to this supplementary information, we made certain inquiries of
management and evaluated the form, content, and methods of preparing the information to determine that
the information complies with accounting principles generally accepted in the United States of America,
the method of preparing it has not changed from the prior period, and the information is appropriate and
complete in relation to our audit of the financial statements. We compared and reconciled the
supplementary information to the underlying accounting records used to prepare the financial statements
or to the financial statements themselves.
We were not engaged to report on the introductory and other information sections which accompany the
financial statements but are not RSI. We did not audit or perform other procedures on this other
information and we do not express an opinion or provide any assurance on it.
-4-
GOVERNMENTAL FUNDS OVERVIEW
This section of the report provides you with an overview of the financial trends and activities of the City’s
governmental funds, which include the General, special revenue, debt service, and capital project funds.
These funds are used to account for the basic services the City provides to all of its citizens, which are
financed primarily with property taxes. The governmental fund information in the City’s financial
statements focuses on budgetary compliance, and the sufficiency of each governmental fund’s current
assets to finance its current liabilities.
PROPERTY TAXES
Minnesota cities rely heavily on local property tax levies to support their governmental fund activities.
For the 2014 fiscal year, local ad valorem property tax levies provided 39.0 percent of the total
governmental fund revenues for cities over 2,500 in population, and 35.5 percent for cities under 2,500 in
population. Property tax levies certified by Minnesota cities for 2015 increased about 4.0 percent over
2014, compared to an increase of 1.6 percent the prior year. A one-year levy limit imposed on cities over
2,500 in population for the 2014 levy year was lifted for the 2015 levy year.
The total market value of property in Minnesota cities increased about 8.5 percent for the 2015 levy year,
following a modest increase of 1.1 percent for levy year 2014 and a four-year trend of declining market
values for levy years 2010 through 2013. Market values showed increases across all property categories
for 2015, with gains in the market values of residential homestead properties (10.0 percent) and
non-homestead residential properties (9.7 percent) outpacing the market value gain of
commercial/industrial properties (2.2 percent). Because the assessed valuation used for levying property
taxes is based on values from the previous fiscal year (e.g., the market value for taxes payable in 2015 is
based on estimated values as of January 1, 2014), market value improvement has lagged behind recent
upturns in the housing market and the economy in general.
The City’s taxable market value increased 3.2 percent for taxes payable in 2014 and 7.0 percent for taxes
payable in 2015. The following graph shows the City’s changes in taxable market value over the past
10 years:
$–
$500,000,000
$1,000,000,000
$1,500,000,000
$2,000,000,000
$2,500,000,000
$3,000,000,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Taxable Market Value
-5-
Tax capacity is considered the actual base available for taxation. It is calculated by applying the state’s
property classification system to each property’s market value. Each property classification, such as
commercial or residential, has a different calculation and uses different rates. Consequently, a city’s total
tax capacity will change at a different rate than its total market value, as tax capacity is affected by the
proportion of the City’s tax base that is in each property classification from year-to-year, as well as
legislative changes to tax rates. The City’s tax capacity increased 2.9 percent and 7.2 percent for taxes
payable in 2014 and 2015, respectively.
The following graph shows the City’s change in tax capacities over the past 10 years:
$–
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Local Net Tax Capacity
The improvement in property tax capacities contributed to decreases to the overall state-wide and metro
area tax rates for 2015. The following table presents the average tax rates applied to city residents for
each of the last two levy years, along with comparative state-wide and metro area rates.
Rates expressed as a percentage of net tax capacity
2014 2015 2014 2015 2014 2015
Average tax rate
City 48.8 46.9 46.0 43.4 30.7 32.0
County 47.6 44.7 46.6 42.9 39.7 36.6
School 28.9 27.1 30.9 28.3 36.2 32.7
Special taxing 7.3 6.9 9.5 8.8 7.4 7.3
Total 132.6 125.6 133.0 123.4 114.0 108.6
Prior LakeMetro Area
Seven-CountyAll Cities
State-Wide
City of
The City’s portion of the total tax rate is below both the state-wide and metro area averages, as presented
in the table above. The school rate within the City exceeds the state-wide and the metro area averages.
The average tax rate in total is below these averages.
-6-
GOVERNMENTAL FUND BALANCES
The following table summarizes the changes in the fund balances of the City’s governmental funds during
the year ended December 31, 2015, presented both by fund balance classification and by fund:
Increase
2015 2014
(Decrease)
Fund balances of governmental funds
Total by classification
Nonspendable 9,150$ 710$ 8,440$
Restricted 9,469,229 5,188,054 4,281,175
Assigned 10,107,820 8,803,981 1,303,839
Unassigned 6,039,025 5,775,889 263,136
Total – governmental funds 25,625,224$ 19,768,634$ 5,856,590$
Total by fund
General 6,124,751$ 5,776,647$ 348,104$
DAG Special Revenue 743,774 681,406 62,368
Debt Service 7,559,836 1,543,772 6,016,064
Construction 4,234,770 1,346,445 2,888,325
Special revenue nonmajor funds 883,083 1,088,160 (205,077)
Capital projects nonmajor funds 6,079,010 9,332,204 (3,253,194)
Total – governmental funds 25,625,224$ 19,768,634$ 5,856,590$
Governmental Funds Change in Fund Balance
Fund Balance
as of December 31,
In total, the fund balances of the City’s governmental funds increased by $5,856,590 during the year
ended December 31, 2015. Debt Service Fund balance increased due to the issuance of the refunding
portion of the 2015A General Obligation Improvement Bonds that will refund the 2007A General
Obligation Water Treatment Plan Revenue Bonds. Construction Fund balance increased due to the
issuance of the new money portion of the 2015A General Obligation Improvements Bonds and the
2015B General Obligation Improvement Bonds. Capital Projects Fund balances decreased due to the
significant amount of capital outlay expended during 2015.
-7-
GOVERNMENTAL FUNDS REVENUE AND EXPENDITURES
The following table presents the per capita revenue of the City’s governmental funds for the past three
years, along with state-wide averages.
We have included the most recent comparative state-wide averages available from the Office of the State
Auditor to provide a benchmark for interpreting the City’s data. The amounts received from the typical
major sources of governmental fund revenue will naturally vary between cities based on factors such as
the City’s stage of development, location, size and density of its population, property values, services it
provides, and other attributes. It will also differ from year-to-year due to the effect of inflation and
changes in the City’s operation. Also, certain data on these tables may be classified differently than how
they appear on the City’s financial statements in order to be more comparable to the state-wide
information, particularly in separating capital expenditures from current expenditures.
We have designed this section of our management report using per capita data in order to better identify
unique or unusual trends and activities of your city. We intend for this type of comparative and trend
information to complement, rather than duplicate, information in the Management’s Discussion and
Analysis. An inherent difficulty in presenting per capita information is the accuracy of the population
count, which for most years is based on estimates.
Year 2013 2014 2015
Population 2,500–10,000 10,000–20,000 20,000–100,000 24,223 24,911 25,049
Property taxes 427$ 396$ 427$ 388$ 379$ 414$
Tax increments 26 37 46 20 19 19
Franchise and other taxes 32 42 37 24 24 24
Special assessments 59 51 64 47 25 46
Licenses and permits 28 27 41 32 23 23
Intergovernmental revenues 298 264 166 166 82 115
Charges for services 105 82 90 110 111 100
Other 66 72 65 1 49 34
Total revenue 1,041$ 971$ 936$ 788$ 712$ 775$
December 31, 2014
City of Prior LakeState-Wide
Governmental Funds Revenue per Capita
With State-Wide Averages by Population Class
In total, the City’s governmental fund revenues for 2015 were $19,411,399, an increase of $1,676,281
(9.5 percent) from the prior year. On a per capita basis, the City received $775 in governmental fund
revenue for 2015, an increase of $63 from the prior year. In general, the City has generated less
governmental fund revenue per capita than the state-wide averages. Most of this relates to lower than
average revenues in many of the development categories, including tax increment and special
assessments.
-8-
The expenditures of governmental funds will also vary from state-wide averages and from year-to-year,
based on the City’s circumstances. Expenditures are classified into three types as follows:
Current – These are typically the general operating type expenditures occurring on an annual
basis, and are primarily funded by general sources such as taxes and intergovernmental revenues.
Capital Outlay and Construction – These expenditures do not occur on a consistent basis, more
typically fluctuating significantly from year-to-year. Many of these expenditures are
project-oriented, and are often funded by specific sources that have benefited from the
expenditure, such as special assessment improvement projects.
Debt Service – Although the expenditures for debt service may be relatively consistent over the
term of the respective debt, the funding source is the important factor. Some debt may be repaid
through specific sources such as special assessments or redevelopment funding, while other debt
may be repaid with general property taxes.
The City’s expenditures per capita of its governmental funds for the past three years, together with
state-wide averages, are presented in the following table:
Year 2013 2014 2015
Population 2,500–10,000 10,000–20,000 20,000–100,000 24,223 24,911 25,049
Current
131$ 104$ 87$ 111$ 113$ 105$
248 237 254 191 190 193
121 119 114 79 75 83
86 101 92 69 71 67
69 89 98 8 5 7
655 650 645 458 454 455
Capital outlay
and construction 357 278 276 359 254 567
Debt service
180 163 115 161 128 128
54 40 34 54 50 59
234 203 149 215 178 187
Total expenditures 1,246$ 1,131$ 1,070$ 1,032$ 886$ 1,209$
General government
Governmental Funds Expenditures per Capita
With State-Wide Averages by Population Class
December 31, 2014
City of Prior LakeState-Wide
Interest and fiscal charges
Public safety
Streets and highways
Culture and recreation
All other
Principal
Total expenditures in the City’s governmental funds for 2015 were $30,281,521, an increase of
$8,198,011 (37.1 percent) from the prior year. On a per capita basis, the City expended a total of $1,209
in 2015. Capital outlay expenditures increased $313 per capita from the prior year due to significant street
construction and equipment replacement expenditures in 2015. Debt service expenditures for 2015 were
$9 per capita higher than the prior year, mainly due to the payment of interest on new bonds in 2015.
-9-
GENERAL FUND
The City’s General Fund accounts for the financial activity of the basic services provided to the
community. The primary services included within this fund are the administration of the municipal
operation, police and fire protection, building inspection, streets and highway maintenance, and culture
and recreation. The graph below illustrates the change in the General Fund financial position over the last
five years. We have also included a line representing annual expenditures and operating transfers out to
reflect the change in the size of the General Fund operation over the same period.
$–
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
2011 2012 2013 2014 2015
General Fund Financial Position
Year Ended December 31,
Fund Balance
Cash and Investments Balance
Expenditures and Transfers Out
The City’s General Fund cash and investments balance at December 31, 2015 was $6,902,926, an
increase of $280,528. Total fund balance at December 31, 2015 was $6,124,751, which is an increase of
$348,104 from the prior year.
As the graph illustrates, the City has generally been able to maintain healthy cash and fund balance levels
as the volume of financial activity has grown. This is an important factor because a government, like any
organization, requires a certain amount of equity to operate. A healthy financial position allows the City
to avoid volatility in tax rates; helps minimize the impact of state funding changes; allows for the
adequate and consistent funding of services, repairs, and unexpected costs; and is a factor in determining
the City’s bond rating and resulting interest costs. Maintaining an adequate fund balance has become
increasingly important given the fluctuations in state funding for cities in recent years.
The City has formally adopted a fund balance policy regarding the minimum unrestricted fund balance for
the General Fund. The policy establishes that the City will strive to maintain an unrestricted General Fund
balance (which includes committed, assigned, and unassigned classifications) between 40 and 50 percent
of the subsequent year’s General Fund budgeted expenditures and transfers out. At December 31, 2015,
the unrestricted fund balance of the General Fund was 46.7 percent of the subsequent year’s budgeted
expenditures and transfers out.
-10-
The following chart reflects the City’s General Fund revenue sources for 2015 compared to budget:
All Other
Fines and Forfeits
Charges for Services
Intergovernmental
Licenses and Permits
Taxes
General Fund Revenue
Budget and Actual
Actual Budget
General Fund revenue for 2015 was $12,329,269, which was $37,515 (0.3 percent) more than budget.
The following graph presents the City’s General Fund revenue by source for the last five years. The graph
reflects the City’s increased reliance on property tax revenue in recent years.
$–
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
$8,000,000
$9,000,000
$10,000,000
Taxes Licenses
and
Permits
Intergovernmental Charges
for
Services
Fines
and
Forfeits
All Other
General Fund Revenue by Source
Year Ended December 31,
2011 2012 2013 2014 2015
Total General Fund revenue for 2015 was $455,504 (3.8 percent) higher than last year. Tax revenue
increased by $733,503, or 9.2 percent, related to the increased tax levy. Fines and forfeitures were
$125,835 lower than last year due to the City no longer recognizing these as revenue because the City acts
as a pass-through entity. All other revenue was lower than last year as well by $105,769, or 19.9 percent,
mainly due to lower investment earnings on the City’s portfolio compared to the prior year.
-11-
The following graphs illustrate the components of General Fund spending for 2015 compared to budget:
All Other
Culture and Recreation
Public Works
Public Safety
General Government
General Fund Expenditures
Budget and Actual
Actual Budget
Total General Fund expenditures for 2015 were $11,307,570, which was $537,214 (4.5 percent) under
budget. General government expenditures were $132,705 under budget due to the City not having filled
all the staff positions during the year. Public works expenditures were $134,289 under budget, due mostly
to anticipated projects that did not occur in 2015. All other expenditures were $150,561 under budget,
mainly in capital outlay as some projects didn’t occur.
The following graph presents the City’s General Fund expenditures by function for the last five years:
$–
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
$4,000,000
$4,500,000
$5,000,000
General
Government
Public Safety Public Works Culture and
Recreation
All Other
General Fund Expenditures by Function
Year Ended December 31,
2011 2012 2013 2014 2015
Total General Fund expenditures for 2015 were $610,913 (5.1 percent) lower than the previous year.
General government and all other expenditures decreased by $248,327 and $463,667, respectively. Open
staffing positions and the reduced need for consultants contributed to the decrease in general government.
All other decreases were mainly related to significant capital outlay for technology, parks, and economic
development in the prior year.
-12-
ENTERPRISE FUNDS OVERVIEW
The City maintains a number of enterprise funds to account for services the City provides that are
financed primarily through fees charged to those utilizing the service. This section of the report provides
you with an overview of the financial trends and activities of the City’s enterprise funds, which includes
the Water, Sewer, Water Quality, and Transit Funds. The Transit Fund was closed in 2015.
ENTERPRISE FUNDS FINANCIAL POSITION
The following table summarizes the changes in the financial position of the City’s enterprise funds during
the year ended December 31, 2015, presented by both classification and by fund:
Increase
2015 2014 (Decrease)
Net position of enterprise funds
Total by classification
Net investment in capital assets 47,805,809$ 46,627,184$ 1,178,625$
Unrestricted 3,881,319 6,415,575 (2,534,256)
Total – enterprise funds 51,687,128$ 53,042,759$ (1,355,631)$
Total by fund
Water 30,730,432$ 31,192,000$ (461,568)$
Sewer 19,327,366 20,348,812 (1,021,446)
Water Quality 1,629,330 1,501,947 127,383
Total – enterprise funds 51,687,128$ 53,042,759$ (1,355,631)$
Enterprise Funds Change in Financial Position
Net Position
as of December 31,
INTERNAL SERVICE FUND
During the year ended December 31, 2011, the City established a Compensated Absences Internal Service
Fund to finance the compensated absence obligations of the governmental funds of the City. At
December 31, 2015, this fund had assets totaling $408,279, while liabilities totaled $881,375, leaving a
deficit net position balance of ($473,096). We recommend that the City continue to include the financing
of these obligations as part of its long range financial plans.
-13-
WATER ENTERPRISE FUND
The following graph presents five years of comparative operating results for the City’s Water Fund:
$–
$250,000
$500,000
$750,000
$1,000,000
$1,250,000
$1,500,000
$1,750,000
$2,000,000
$2,250,000
$2,500,000
$2,750,000
$3,000,000
$3,250,000
$3,500,000
2011 2012 2013 2014 2015
Water Enterprise Fund
Year Ended December 31,
Operating Revenue Operating Expenses
Operating Income (Loss)Income Before Depreciation
The Water Fund ended 2015 with net position of $30,730,432, a decrease of $461,568 from the prior year,
which includes an adjustment to beginning net position of $415,995 from the change in accounting
principle, as mentioned earlier in this report. Of this, $28,577,835 represents the investment in capital
assets, leaving $2,152,597 in unrestricted net position. The Water Fund had transfers out totaling
$2,279,145 in fiscal 2015 to support other funds, pay debt service, and provide for construction projects.
Operating revenue in the Water Fund was $3,390,052, an increase of 11.1 percent from the prior year.
This increase was due to a combination of increased rates and water usage in fiscal 2015 compared to
2014 water usage, which had decreased due to major flooding in the area during the spring of 2014.
Water Fund operating expenses for 2015 were $2,347,154, an increase of $49,957 (2.2 percent) from the
previous year. The largest factor contributing to the change was an increase in utilities of $43,228.
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SEWER ENTERPRISE FUND
The following graph presents five years of comparative operating results for the City’s Sewer Fund:
$(250,000)
$–
$250,000
$500,000
$750,000
$1,000,000
$1,250,000
$1,500,000
$1,750,000
$2,000,000
$2,250,000
$2,500,000
$2,750,000
2011 2012 2013 2014 2015
Sewer Enterprise Fund
Year Ended December 31,
Operating Revenue Operating Expenses
Operating Income (Loss)Income Before Depreciation
The Sewer Fund ended 2015 with net position of $19,327,366, a decrease of $1,021,446 from the prior
year, which includes an adjustment to beginning net position of $346,662 from the change in accounting
principle, as mentioned earlier in this report. Of this, $18,101,305 represents the City’s investment in
capital assets, leaving $1,226,061 in unrestricted net position. The Sewer Fund had transfers out totaling
$1,343,820 in fiscal 2015 to support other funds, pay debt service, and provide for construction projects.
Operating revenue in the Sewer Fund was $2,432,925, an increase of $63,502, or 2.7 percent, from the
prior year, mainly related to increased rates. Sewer Fund operating expenses for 2015 were $2,468,932,
an increase of $21,314, or 0.9 percent.
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WATER QUALITY ENTERPRISE FUND
The following graph presents five years of comparative operating results for the City’s Water Quality
Fund:
$(100,000)
$–
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000
$900,000
2011 2012 2013 2014 2015
Water Quality Enterprise Fund
Year Ended December 31,
Operating Revenue Operating Expenses
Operating Income (Loss)Income Before Depreciation
The Water Quality Fund ended 2015 with net position of $1,629,330, an increase of $127,383 from the
prior year, which includes a change in accounting principle, as previously mentioned, that adjusted
beginning net position down by $173,331. Of this, $1,126,669 represents the investment in capital assets,
leaving $502,661 in unrestricted net position.
Operating revenue in the Water Quality Fund was $865,244, an increase of $21,952, or 2.6 percent, from
the prior year due to an increase in the rates in fiscal 2015. Water Quality Fund operating expenses for
2015 were $560,820, a decrease of $77,750, or 12.2 percent, from the previous year, due mostly to
decreased other services and charges.
State and federal grant income and interest income, which are not included in the table above, totaled
$42,402 and $9,966, respectively, in fiscal 2015. After including this revenue, the Water Quality Fund
reflected income before contributions and transfers of $356,792.
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TRANSIT FUND
During the year ended December 31, 2014, the City transferred the responsibility for operating a transit
operation to the Minnesota Valley Transit Authority (MVTA). As part of transferring this responsibility,
the City is required by Minnesota Statutes to transfer the remaining assets, liabilities, and net position to
the MVTA as well. During fiscal 2015, the City earned interest revenue on cash and investments held in
the Transit Fund for a portion of the year. The transfer of this revenue to the MVTA is reported as a
special item in the Statement of Activities and the Statement of Revenues, Expenses, and Changes in Net
Position in fiscal 2015.
The special item – transfer of operations reported in the City’s financial report totaled $25,200. The
Transit Fund was closed in 2015.
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GOVERNMENT-WIDE FINANCIAL STATEMENTS
In addition to fund-based information, the current reporting model for governmental entities also requires
the inclusion of two government-wide financial statements designed to present a clear picture of the City
as a single, unified entity. These government-wide statements provide information on the total cost of
delivering services, including capital assets and long-term liabilities.
STATEMENT OF NET POSITION
The Statement of Net Position essentially tells you what your city owns and owes at a given point in time,
the last day of the fiscal year. Theoretically, net position represents the resources the City has to use for
providing services after its debts are settled. However, those resources are not always in spendable form,
or there may be restrictions on how some of those resources can be used. Therefore, net position is
divided into three components: net investment capital assets, restricted, and unrestricted.
The following table presents the components of the City’s net position as of December 31, 2015 and 2014
for governmental activities and business-type activities:
Increase
2015 2014
(Decrease)
Net position
Governmental activities
Net investment in capital assets 94,087,717$ 87,398,664$ 6,689,053$
Restricted 6,836,277 4,950,822 1,885,455
Unrestricted 11,465,626 14,190,355 (2,724,729)
Total governmental activities 112,389,620 106,539,841 5,849,779
Business-type activities
Net investment in capital assets 47,805,809 46,627,184 1,178,625
Unrestricted 3,881,319 6,415,575 (2,534,256)
Total business-type activities 51,687,128 53,042,759 (1,355,631)
Total net position 164,076,748$ 159,582,600$ 4,494,148$
As of December 31,
The City’s total net position at December 31, 2015 was $4,494,148 higher than the total net position
reported at the previous year-end. The increase in the net investment in capital assets balance was mostly
due to capital outlay activity during fiscal 2015.
The City recorded a change in accounting principle for reporting its participation in the Public Employees
Retirement Association and Prior Lake Fire Relief Association pension plans that reduced beginning
unrestricted net position in governmental activities by $4,181,955 and business-type activities by
$935,988, for a total reduction of $5,117,943.
At the end of the current fiscal year, the City is able to present positive balances in all three categories of
net position, both for the government as a whole, as well as for its separate governmental and
business-type activities. The same situation held true for the prior year.
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STATEMENT OF ACTIVITIES
The Statement of Activities tracks the City’s yearly revenues and expenses, as well as any other
transactions that increase or reduce total net positions. These amounts represent the full cost of providing
services. The Statement of Activities provides a more comprehensive measure than just the amount of
cash that changed hands, as reflected in the fund-based financial statements. This statement includes the
cost of supplies used, depreciation of long-lived capital assets, and other accrual-based expenses.
The following table presents the change in the net position of the City for the years ended December 31,
2015 and 2014:
2014
Program
Expenses Revenues Net Change Net Change
Governmental activities
General government 3,266,222$ 791,037$ (2,475,185)$ (2,816,941)$
Public safety 5,426,539 2,022,409 (3,404,130) (3,021,205)
Public works 4,775,320 9,482,815 4,707,495 1,387,465
Culture and recreation 2,271,719 313,048 (1,958,671) (1,785,789)
Economic development 590,532 253,659 (336,873) (360,475)
Interest on long-term debt 1,410,844 – (1,410,844) (1,185,474)
Business-type activities
Water 2,347,154 3,969,925 1,622,771 1,074,222
Sewer 2,468,932 2,704,876 235,944 178,308
Water quality 560,820 907,646 346,826 366,763
Transit – – – (163,723)
23,118,082$ 20,445,415$ (2,672,667) (6,326,849)
General revenues
Taxes 11,452,374 10,518,306
Unrestricted grants and contributions 13,250 52,555
Investment earnings 526,006 1,112,257
Other revenues 318,328 210,423
Special item – transfer of operations (25,200) (1,371,480)
12,284,758 10,522,061
9,612,091$ 4,195,212$
Total net (expense) revenue
Total general revenues
Change in net position
Net (expense) revenue
2015
One of the goals of this statement is to provide a side-by-side comparison to illustrate the difference in the
way the City’s governmental and business-type operations are financed. The table clearly illustrates the
dependence of the City’s governmental operations on general revenues, such as property taxes and
unrestricted grants. It also shows that, for the most part, the City’s business-type activities are generating
sufficient program revenues (service charges and program-specific grants) to cover expenses. This is
critical given the current downward pressures on the general revenue sources.
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LEGISLATIVE UPDATES
Despite the 2015 legislative session beginning with a projected budget excess of $1.87 billion for the
2016–2017 biennium, the most favorable budget forecast in over a decade, little was accomplished during
the regular legislative session due to partisan disagreement. The regular session adjourned without the
Legislature bringing forth a number of significant funding bills, including the Omnibus Legacy Bill
(funding for outdoor heritage, clean water, parks and trails, arts, and cultural heritage) and a bonding bill
for capital projects. The Governor subsequently vetoed a number of other funding bills, including the
Omnibus E–12 Education Bill due to the Legislature not addressing his demand for a universal preschool
provision. Eventually, a one-day special session produced funding bills for E–12 education, jobs and
energy, Legacy programs, environment and agriculture, and capital investment.
The following is a summary of recent legislation affecting Minnesota cities in 2015 and into the future:
Local Government Aid (LGA) – The Legislature completely overhauled the LGA formula for fiscal
year 2014 and thereafter, creating a three-tiered formula that includes separate “need factor”
calculations for cities with populations under 2,500, between 2,500 and 10,000, or over 10,000. The
new formula simplified the LGA calculation, and reduced the volatility of the LGA distribution by
limiting the amount it may decline in a given year. Beginning in 2015, any reduction to a city’s
calculated LGA distribution will be limited to the lesser of $10 per capita, or 5 percent of their
previous year net tax levy. For cities that gain under the new formula, the increases will be distributed
proportionate to their unmet need, as determined by the new “need factor” calculations. The
state-wide LGA appropriation was $516.9 million for fiscal 2015, and is $519.4 million for fiscal
2016 and thereafter.
Sales Tax Exemption – Cities (both home-rule and statutory) were exempted from paying sales tax
on qualifying purchases, effective for purchases made on or after January 1, 2014. Purchases of goods
or services by an exempt local government for a publicly-provided liquor store, gas or electric utility,
golf course, marina, campground, café, laundromat, solid waste hauling or recycling operation, or
landfill will remain taxable.
The 2014 Legislature extended the definition of tax exempt local government to include all special
district; city, county, or township instrumentalities; economic development authorities; housing and
redevelopment authorities; and all joint power boards or organizations. However, the effective date of
this expanded exemption list was delayed until January 1, 2017 by the 2015 Legislature.
Omnibus Bonding Bill – The Legislature approved a scaled-down Omnibus Bonding Bill during the
special session, authorizing approximately $370 million in capital improvements. Included in the
funding approved was $172.5 million for transportation infrastructure, $23.5 million for flood hazard
mitigation, $10 million for Public Financing Agency (PFA) grants to municipalities for wastewater
infrastructure, and $1.5 million to the Metropolitan Council for inflow and infiltration improvement
grants to metro area cities.
Legacy Funding – The Legacy bill included $9.25 million annually to finance grants for city water
infrastructure improvements through the PFA. It also included $17.25 million annually to fund
“SCORE” block grants to counties for recycling and waste reduction (a portion of which is passed
through to cities) and $1 million of annual funding for a new grant program to establish or improve
recycling programs in non-metro area cities.
Broadband Initiative – The Omnibus Jobs and Energy Bill passed in the special session included
$10.6 million to finance the Border-to-Border Broadband Grant Program, a one-time appropriation
available until June 30, 2017.
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Municipal State-Aid Streets – Included in the Omnibus Transportation Bill were annual funding
allocations for municipal state-aid streets of $107.7 million for fiscal 2016 and $178.1 million for
fiscal 2017, which represents an increase of approximately $41 million over the previous biennium.
Small Cities Assistance Account – A one-time appropriation of $12.5 million was provided to create
a new Small Cities Assistance Account to assist with construction and maintenance of roads located
within eligible cities, defined as a statutory or home-rule charter city that does not receive municipal
state aid street financing (generally those with a population under 5,000). The aid will be distributed
to eligible cities biannually in each year funds are available based on the following formula: 5 percent
equally to all eligible cities; 35 percent allocated proportionately on each city’s share of lane miles to
the total for all eligible cities; 35 percent allocated proportionately on each city’s population to the
total for all eligible cities; and 25 percent allocated proportionately on each city’s state-aid adjustment
factor to the total for all eligible cities.
Workforce Housing Grant Program – The Omnibus Jobs and Energy Bill included annual funding
of $2 million for fiscal 2016 and 2017 for a new Workforce Housing Grant Program. Eligible cities
can use the grants to develop “market rate residential rental property” to serve employees of
businesses located in the eligible project areas. The maximum grant award may not exceed 25 percent
of the rental housing development project cost; and awards must be matched by a local unit of
government, business, or nonprofit organization with $1 for each $2 of grant funding.
Automated License Plate Reader (ALPR) Policy – Law enforcement agencies that utilize ALPRs
are required to establish policies governing their use that are consistent with statutory guidelines. The
Legislature placed limitations on the type of data that can be collected using ALPRs, and clarified the
circumstances under which that data is considered public or private. A limitation of 60 days was
established for the retention of data collected by ALPR not related to an active criminal investigation.
Standards were established for the sharing of ALPR data between law enforcement agencies.
Elections – The Elections Omnibus Bill made numerous changes to elections administration laws,
including requirements for filing fees for statutory cities, ballot formatting and marking, absentee
ballots, and election recounts.
Energy Conservation Measures – The Uniform Municipal Contracting Law was amended to add
water metering devices that increase efficiency to the definition of energy conservation measures,
enabling municipalities to enter into guaranteed energy savings contracts for the use of water
metering devices.
Responsible Contractor Requirement – The “responsible contractor” law enacted by the 2014
Legislature became effective on January 1, 2015. Contractors who bid on public contracts in excess of
$50,000 are now required to certify that they are a “responsible bidder” in order to be awarded a
contract as the lowest responsible bidder or best value alternative. The 2015 Legislature made several
clarifications and modifications to the law, including: exempting design professionals and materials
suppliers from the requirements; making motor carriers subject to the requirements and establishing a
separate verification standard for them; excluding tax increment financing revenue from the value of
a construction contract under the law; and allowing general contractors to submit bids without
obtaining verification from all subcontractors that bid on the project (the successful prime contractor
must submit a supplemental verification under oath prior to the execution of the contract).
Appraisal Requirements for Eminent Domain – Effective July 1, 2015, the appraisal requirements
for the acquisition of property by eminent domain are changed to require the acquiring entity to
obtain at least one appraisal for the property proposed to be acquired only if the acquisition value is
greater than $25,000. For acquisitions less than $25,000, the acquiring entity may obtain a minimum
damage acquisition report in lieu of an appraisal.
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Firefighter Employment Provisions and Volunteer Benefits – The Omnibus Public Safety Finance
and Policy Bill made a number of changes related to firefighters, including: allowing relief
association dues as a voluntarily payroll deduction, allowing volunteer firefighters to be paid less
frequently than every 31 days, requiring the licensure of all full-time firefighters by the State Board of
Firefighter Training and Education, and expanding “continued employer health insurance benefits” to
include dependents of volunteer firefighters killed in the line of duty.
Police and Firefighter Retirement Supplemental State Aid – The volunteer firefighter portion of
the Police and Firefighter Retirement Supplemental State Aid Program was made permanent. The
minimum obligation of municipalities to an associated relief association special fund is now reduced
by the amount of both fire state aid and police and firefighter retirement supplemental state aid. Police
and firefighter retirement supplemental state aid is also added to the calculation of the exception to
municipal ratification requirement for lump-sum plans.
Pensions – A number of changes to the pension plans administered by the Public Employees
Retirement Association (PERA) were adopted, effective June 30, 2015, including:
The future interest rate actuarial assumption for the PERA General Plan and PERA
Police and Fire Plan are changed from 8.5 percent to 8.0 percent for actuarial valuations
prepared after June 30, 2015.
The refund repayment interest rate and prior service credit purchase payment
determination rate for the PERA General Plan and PERA Police and Fire Plan are also
changed from 8.5 percent to 8.0 percent.
The CPI-based post-retirement adjustment mechanism for the PERA Police and Fire Plan
is replaced with a flat 2.5 percent increase when the plan reaches a 90 percent funding
level.
The contribution stabilizer mechanisms applicable to the PERA General Plan are revised,
broadening the factors the plan’s Board of Trustees may consider before recommending
an increase in the plan contribution rates.
Definitions of salary, termination of service, allowable service, retirement, and volunteer
firefighter were revised for all applicable PERA plans.
Changes in eligibility, service pension levels, ancillary benefits, and service time
calculations were made to the PERA Statewide Volunteer Firefighter Plan, lump sum
retirement division. A change was also made to create a “monthly benefit retirement
division” within this plan to facilitate the transfer of individual volunteer firefighter
association monthly benefit plans to the statewide plan.
A number of administrative language changes were made to complete the merger of the
Minneapolis Employees Retirement Fund into the PERA General Plan, which was
effective January 1, 2015.
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ACCOUNTING AND AUDITING UPDATES
GASB STATEMENT NO. 72, FAIR VALUE MEASURE AND APPLICATION
The primary objective of this statement is to address accounting and financial reporting issues related to
fair value measurements. Fair value is the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date. This statement
provides guidance for determining a fair value measurement for financial reporting purposes. It also
provides guidance for applying fair value to certain investments and disclosures related to all fair value
measurements.
This statement generally requires investments to be measured at fair value. An investment is defined as a
security or other asset that (a) a government holds primarily for the purpose of income or profit and
(b) has a present service capacity based solely on its ability to generate cash or to be sold to generate cash.
This statement is effective for financial statements for fiscal years beginning after June 15, 2015. Earlier
application is encouraged.
GASB STATEMENT NO. 73, ACCOUNTING AND FINANCIAL REPORTING FOR PENSIONS AND RELATED
ASSETS THAT ARE NOT WITHIN THE SCOPE OF GASB STATEMENT 68, AND AMENDMENTS TO
CERTAIN PROVISIONS OF GASB STATEMENTS 67 AND 68
The objective of this statement is to improve the usefulness of information about pensions included in
financial statements of state and local governments for making decisions and assessing accountability.
This statement also clarifies the application of certain provisions of GASB Statement Nos. 67 and 68
regarding 10-year schedules of required supplementary information (RSI) and other recognition issues
pertaining to employers and nonemployer contributing entities. These changes will improve financial
reporting by establishing a single framework for the presentation of information about pensions,
enhancing comparability for similar information reported by employers and nonemployer contributing
entities.
The requirements of this statement that address accounting and financial reporting by employers and
governmental nonemployer contributing entities for pensions not within the scope of GASB Statement
No. 68 are effective for financial statements for fiscal years beginning after June 15, 2016, and the
requirements of this statement that address financial reporting for assets accumulated for purposes of
providing those pensions are effective for fiscal years beginning after June 15, 2015. The requirements of
this statement for pension plans that are within the scope of GASB Statement No. 67 or for pensions that
are within the scope of GASB Statement No. 68 are effective for fiscal years beginning after June 15,
2015. Earlier application is encouraged.
GASB STATEMENT NO. 74, FINANCIAL REPORTING FOR POSTEMPLOYMENT BENEFIT PLANS OTHER
THAN PENSION PLANS
The objective of this statement is to improve the usefulness of information about post-employment
benefits other than pensions (other post-employment benefits [OPEB]). This statement replaces GASB
Statement Nos. 43 and 57. It also includes requirements for defined contribution OPEB plans that replace
the requirements for those OPEB plans in GASB Statement Nos. 25, 43, and 50. GASB Statement No. 75,
Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, establishes new
accounting and financial reporting requirements for governments whose employees are provided with
OPEB, as well as for certain nonemployer governments that have a legal obligation to provide financial
support for OPEB provided to the employees of other entities.
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This statement will improve financial reporting primarily through enhanced note disclosures and
schedules of RSI that will be presented by OPEB plans administered through trusts meeting the specified
criteria. The new information will enhance the decision-usefulness of the financial reports of those OPEB
plans, their value for assessing accountability, and their transparency by providing information about
measures of net OPEB liabilities and explanations of how and why those liabilities changed from
year-to-year. The net OPEB liability information, including ratios, will offer an up-to-date indication of
the extent to which the total OPEB liability is covered by the fiduciary net position of the OPEB plan.
The comparability of the reported information for similar types of OPEB plans will be improved by the
changes related to the attribution method used to determine the total OPEB liability. The contribution
schedule will provide measures to evaluate decisions related to the assessment of contribution rates in
comparison with actuarially determined rates, if such rates are determined. In addition, new information
about rates of return on OPEB plan investments will inform financial report users about the effects of
market conditions on the OPEB plan’s assets over time and provide information for users to assess the
relative success of the OPEB plan’s investment strategy and the relative contribution that investment
earnings provide to the OPEB plan’s ability to pay benefits to plan members when they come due.
This statement is effective for financial statements for fiscal years beginning after June 15, 2016. Earlier
application is encouraged.
GASB STATEMENT NO. 75, ACCOUNTING AND FINANCIAL REPORTING FOR POSTEMPLOYMENT
BENEFITS OTHER THAN PENSIONS
The primary objective of this statement is to improve accounting and financial reporting by state and local
governments for post-employment benefits other than pensions (OPEB). It also improves information
provided by state and local governmental employers about financial support for OPEB that is provided by
other entities. This statement replaces the requirements of GASB Statement Nos. 45 and 57. GASB
Statement No. 74 establishes new accounting and financial reporting requirements for OPEB plans.
This statement establishes standards for recognizing and measuring liabilities, deferred outflows of
resources, deferred inflows of resources, and expense/expenditures. For defined benefit OPEB, this
statement identifies the methods and assumptions that are required to be used to project benefit payments,
discount projected benefit payments to their actuarial present value, and attribute that present value to
periods of employee service. Note disclosure and RSI requirements about defined benefit OPEB also are
addressed. This statement is effective for fiscal years beginning after June 15, 2017. Earlier application is
encouraged.
Similar to changes implemented for pensions, this statement requires the liability of employers and
nonemployer contributing entities to employees for defined benefit OPEB (net OPEB liability) to be
measured as the portion of the present value of projected benefit payments to be provided to current
active and inactive employees that is attributed to those employees’ past periods of service (total OPEB
liability), less the amount of the OPEB plan’s fiduciary net position.
GASB STATEMENT NO. 77, TAX ABATEMENT DISCLOSURES
This statement requires disclosure of tax abatement information about (1) a reporting government’s own
tax abatement agreements, and (2) those that are entered into by other governments and that reduce the
reporting government’s tax revenues. Tax abatements are widely used by state and local governments,
particularly to encourage economic development. For financial reporting purposes, this statement defines
a tax abatement as resulting from an agreement between a government and an individual or entity in
which the government promises to forgo tax revenues and the individual or entity promises to
subsequently take a specific action that contributes to economic development or otherwise benefits the
government or its citizens.
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The requirements of this statement improve financial reporting by giving users of financial statements
essential information that is not consistently or comprehensively reported to the public at present.
Disclosure of information about the nature and magnitude of tax abatements will make these transactions
more transparent to financial statement users. As a result, users will be better equipped to understand
(1) how tax abatements affect a government’s future ability to raise resources and meet its financial
obligations, and (2) the impact those abatements have on a government’s financial position and economic
condition. The requirements of this statement are effective for financial statements for periods beginning
after December 15, 2015. Earlier application is encouraged.
GASB STATEMENT NO. 78, PENSIONS PROVIDED THROUGH CERTAIN MULTIPLE-EMPLOYER DEFINED
BENEFIT PENSION PLANS
The objective of this statement is to address a practice issue regarding the scope and applicability of
GASB Statement No. 68, Accounting and Financial Reporting for Pensions—an amendment of GASB
Statement No. 27. This issue is associated with pensions provided through certain multiple-employer
defined benefit pension plans and to state or local governmental employers whose employees are
provided with such pensions. Prior to the issuance of this statement, the requirements of GASB Statement
No. 68 applied to the financial statements of all state and local governmental employers whose employees
are provided with pensions through pension plans that are administered through trusts that meet the
criteria in paragraph 4 of GASB Statement No. 68.
This statement amends the scope and applicability of GASB Statement No. 68 to exclude pensions
provided to employees of state or local governmental employers through a cost-sharing,
multiple-employer defined benefit pension plan that (1) is not a state or local governmental pension plan,
(2) is used to provide defined benefit pensions both to employees of state or local governmental
employers and to employees of employers that are not state or local governmental employers, and (3) has
no predominant state or local governmental employer (either individually or collectively with other state
or local governmental employers that provide pensions through the pension plan). This statement
establishes requirements for recognition and measurement of pension expense, expenditures, and
liabilities; note disclosures; and RSI for pensions that have the characteristics described above. The
requirements of this statement are effective for reporting periods beginning after December 15, 2015.
Early application is encouraged.
GASB STATEMENT NO. 79, CERTAIN EXTERNAL INVESTMENT POOLS AND POOL PARTICIPANTS
This statement establishes criteria for an external investment pool to qualify for making the election to
measure all of its investments at amortized cost for financial reporting purposes. An external investment
pool qualifies for that reporting if it meets all of the applicable criteria established in this statement. The
specific criteria address (1) how the external investment pool transacts with participants; (2) requirements
for portfolio maturity, quality, diversification, and liquidity; and (3) calculation and requirements of a
shadow price. Significant noncompliance prevents the external investment pool from measuring all of its
investments at amortized cost for financial reporting purposes. If an external investment pool meets the
criteria in this statement and measures all of its investments at amortized cost, the pool’s participants also
should measure their investments in that external investment pool at amortized cost for financial reporting
purposes. If an external investment pool does not meet the criteria in this statement, the pool’s
participants should measure their investments in that pool at fair value.
This statement establishes additional note disclosure requirements for qualifying external investment
pools that measure all of their investments at amortized cost for financial reporting purposes and for
governments that participate in those pools. Those disclosures for both the qualifying external investment
pools and their participants include information about any limitations or restrictions on participant
withdrawals. The requirements of this statement are effective for reporting periods beginning after
June 15, 2015, except for certain provisions on portfolio quality, custodial credit risk, and shadow pricing.
Those provisions are effective for reporting periods beginning after December 15, 2015. Earlier
application is encouraged.
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GASB STATEMENT NO. 80, BLENDING REQUIREMENTS FOR CERTAIN COMPONENT UNITS—AN
AMENDMENT OF GASB STATEMENT NO. 14
The objective of this statement is to clarify the financial statement presentation requirements for certain
component units. This statement amends the blending requirements for the financial statement
presentation of component units of all state and local governments. The additional criterion requires
blending of a component unit incorporated as a not-for-profit corporation in which the primary
government is the sole corporate member. The additional criterion does not apply to component units
included in the financial reporting entity pursuant to the provisions of GASB Statement No. 39,
Determining Whether Certain Organizations Are Component Units—an amendment of GASB Statement
No. 14. The requirements of this statement are effective for reporting periods beginning after June 15,
2016. Earlier application is encouraged.
CHANGES TO REQUIREMENTS FOR FEDERAL GRANTS
In December 2013, the U.S. Office of Management and Budget (OMB) Circular released final guidance
on administrative requirements, cost principles, and audit requirements for federal awards. The final
guidance, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal
Awards (“Uniform Guidance”), supersedes and streamlines eight existing OMB Circulars into one
document that includes OMB Circulars A-21, A-87, A-89, A-102, A-110, A-122, A-133, and the
guidance in OMB Circular A-50 on Single Audit Act follow-up.
The Uniform Guidance, which is located in Title 2 of the Code of Federal Regulations (CFR),
consolidates previous guidance into a streamlined format that aims to improve both its clarity and
accessibility, lessen administrative burdens for federal award recipients, and reduce the risk of waste,
fraud, and abuse.
The Following is a Summary of Significant Changes for Grant Recipients:
Changes time and effort documentation requirements by providing possibilities for alternative
methods of accounting for salaries and wages based on achievement of performance outcomes.
Non-federal entities must have a financial management system that includes, but is not limited to:
a comparison of expenditures with budget amounts for each federal award, written procedures to
implement the requirements of cash management, and written procedures for determining the
allowability of costs in accordance with Subpart E – Cost Principles.
Governments must comply with the new general procurement standards which include, but are
not limited to: written standards covering conflicts of interest of employees engaged in the
selection, award, and administration of contracts and documented procurement procedures that
include an analysis of lease versus purchase alternatives when appropriate.
Governments will now be required to follow the five procurement methods which include, at
times, more restrictive compliance requirements than Minnesota Statutes. For example: small
purchases (over $3,000 prior to October 1, 2015 and over $3,500 after October 1, 2015) will
require quotes.
There are new requirements for governments with subrecipients (or those making subawards),
which include, but are not limited to: a required written risk assessment of each subrecipient,
which may require you to provide training and on-site reviews of their program operations.
For governments with subrecipients or those that operate as a fiscal host of a federal grant award
and thus provide subawards, payments must be made in advance to the subrecipients, unless
certain requirements are not met, then the reimbursement method can be used.
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Among Other Matters Specifically Applicable to Auditors, Changes to the Uniform Guidance Include:
Raising both the threshold that triggers a Single Audit and the threshold for Type A/B program
determination to $750,000.
Changing the high-risk program criteria for Type A programs.
Reducing the number of high-risk Type B programs that must be tested as major programs.
Revising the Type B small program floor.
Reducing the percentage of coverage requirement to 40 percent for normal auditees and
20 percent for low-risk auditees.
Revising the criteria for low-risk auditee status.
Increasing the threshold for reporting findings to $25,000 in questioned costs and requiring more
detailed information to be reported.
Effective Dates:
Year beginning January 1, 2015 –
All administrative requirements and cost principles will apply to new awards made after
December 26, 2014.
Governmental entities are required to comply with the Uniform Guidance once the new
regulations are in effect at the Federal government level (December 26, 2014).
Any funding drawdowns made after January 1, 2015 must comply with the Uniform Guidance.
Must document whether the entity is in compliance with the old or new procurement standards
listed in Subpart D, Sections 200.317–200.326. The federal government has provided a two-year
grace period for implementing the new procurement standards.
Year beginning January 1, 2016 –
All administrative requirements and cost principles will apply to new awards made after
December 26, 2014.
Subpart F – Audit Requirements are applicable.
Year beginning January 1, 2017 –
Must have implemented the new procurement standards of the Uniform Guidance, if the
government initially elected the two-year grace beginning January 1, 2015.
At this point, all of the new Uniform Guidance at Title 2 CFR 200 is applicable.
Recommended Action Items:
We recommend that award recipients familiarize themselves with the new requirements contained in the
Uniform Guidance and develop a plan to become compliant with the new regulations.
Consider the following –
Attend training on the new uniform administrative requirements.
Identify needed policy and procedure changes, especially in the areas of:
o Financial management
o Payment
o Procurement
o Compensation
o Travel costs
Identify internal controls that might need to be established or modified.
Determine who within your organization is responsible for each action item.
Determine the timing of each action item.
Determine when you will implement the new procurement standards and document in writing.