HomeMy WebLinkAbout9A 2017 Annual Financial Report and Management Letter Report
4646 Dakota Street SE
Prior Lake, MN 55372
CITY COUNCIL AGENDA REPORT
MEETING DATE: MAY 21, 2018
AGENDA #: 9A
PREPARED BY: CATHY ERICKSON, FINANCE DIRECTOR
JASON ETTER, ACCOUNTING MANAGER
PRESENTED BY: JIM EICHTEN, MMKR & CO, P.A.
AGENDA ITEM: CONSIDER APPROVAL OF A RESOLUTION APPROVING THE 2017
ANNUAL FINANCIAL REPORT AND MANAGEMENT LETTER
DISCUSSION: Introduction
The 2017 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
12/31/2017. 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 May 21 meeting packet that is
distributed to Council members. Copies of the 2017 Annual Financial
Report and Management Letter will also be available for the Council and
public prior to the Council meeting on May 21.
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 $184,594,667 and represents an increase of
$14,247,283 from December 31, 2016.
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.
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Based on their audit of the City’s financial statements for the year ended
December 31, 2017:
• 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 no findings based on testing of the City’s
compliance with Minnesota laws and regulations.
• MMKR performed procedures to follow-up on the findings and
recommendations that resulted from our prior your audit (2016).
They reported that the following prior year finding was corrected in
the current year (2017).
➢ The City had cash in excess of federal depository insurance with one
investment broker as of December 31, 2016, which was not
adequately covered by pledged collateral with a market value of 110
percent of the excess, as required by state statutes. As a result,
$408,416 of the City’s deposits were exposed to custodial credit risk
at year-end. This was an oversight by former staff and, once
identified, was rectified immediately by current staff. Current staff
has requested that the broker sweep funds into the money market
account daily.
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.” This section of the CFMP includes five (5)
objectives/metrics to be included in the Annual Financial Report. They
include:
o Bond Rating – Maintain or improve current Aa2 bond rating;
o General Fund Reserve Balance - Maintain a General Fund
unrestricted fund balance (which includes Committed,
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Assigned and Unassigned classifications) within a range of
40 – 50% of projected expenditures for the subsequent year;
o Property Taxes – Maintain or improve property tax rank when
compared to a broader list of metro area cities;
o 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.
o 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 2017 Annual Financial Report.
The primary results for the General Fund as indicated within the 2017
Annual Financial Report are:
1) Actual revenues were $13,364,941 (including transfers and sale of
assets) compared to amended budgeted revenues of $12,270,878 or
105% of budget.
2) Actual expenditures were $13,208,933 (including transfers out)
compared to amended budgeted expenditures of $13,497,674 or
98% of budget.
3) Gross revenue exceeded expenditures/transfers by $156,008.
At the end of the current fiscal year, the unrestricted fund balance for the
General Fund (which includes committed, assigned and unassigned
classifications) was $6,840,928 or 53.6 percent of budgeted 2018
expenditures and transfers out of $12,767,768. The fund balance is
maintained for cash flow, emergency purposes, etc. This level of reserve is
higher than the targeted range of 40-50% as identified in the City’s
Comprehensive Financial Management Policy.
Of the total fund balance of $6,840,928, $218,546 is assigned for the 2018
budget for fire gear, Cartegraph and Laserfiche software, and a transfer to
the Permanent Improvement Revolving Capital Project Fund for the 2018
street overlay project. The unassigned amount of $6,622,382 represents a
reserve of 51.8 percent of the 2018 budgeted expenditures and transfers
out of $12,767,768.
The total fund balance of $6,840,928 reflects an increase of $156,008 from
the prior year. The increase in fund balance from the prior year is primarily
due to increased revenues from building permits and fees related to the
Lakeridge and Pike Lake March apartment buildings and developer
agreement revenue for the Summit Preserve, Trillium Cove and Haven’s
Ridge developments. The City had lower than budgeted expenditures due
to employee turnover and delays in filling open positions, and less repair &
maintenance, street maintenance, and fuel expenditures than planned.
The total fund balance of $6,840,928 reflects an increase of $932,804 from
the amended budget. The amended budget reflected the use of fund
balance of $776,796 for projects carried over from 2016, and transfers to
the severance compensation, construction fund, and Permanent
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Improvement Revolving capital project fund for the 2017 street overlay
project.
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.
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, 2018 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
2017 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 17-___
A RESOLUTION ACCEPTING THE 2017 ANNUAL FINANCIAL REPORT AND
MANAGEMENT LETTER
Motion By: Second By:
WHEREAS, Minnesota Statutues 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 2017 Annual Financial Report and Management Letter;
and,
WHEREAS, MMKR has issued an unmodified opinion with respect to the City’s 2017 financial
statements; and,
WHEREAS, The City staff and City Council have carefully examined the submitted statements
and reports and their contents at a 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 2017 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 by the Prior Lake City Council this 21st day of May, 2018
VOTE Briggs McGuire Thompson Braid Burkart
Aye ☐ ☐ ☐ ☐ ☐
Nay ☐ ☐ ☐ ☐ ☐
Abstain ☐ ☐ ☐ ☐ ☐
Absent ☐ ☐ ☐ ☐ ☐
______________________________
Frank Boyles, City Manager
CITY OF PRIOR LAKE
SCOTT COUNTY, MINNESOTA
Financial Statements
and Supplemental Information
Year Ended
December 31, 2017
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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 5–19
BASIC FINANCIAL STATEMENTS
Government-Wide Financial Statements
Statement of Net Position 20
Statement of Activities 21–22
Fund Financial Statements
Governmental Funds
Balance Sheet 23–24
Reconciliation of the Balance Sheet to the Statement of Net Position 25
Statement of Revenues, Expenditures, and Changes in Fund Balances 26–27
Reconciliation of the Statement of Revenues, Expenditures, and Changes
in Fund Balances to the Statement of Activities 28
Statement of Revenues, Expenditures, and Changes in Fund Balances –
General Fund – Budget and Actual 29
Proprietary Funds
Statements of Net Position 30–31
Statements of Revenues, Expenses, and Changes in Net Position 32–33
Statements of Cash Flows 34–37
Notes to Basic Financial Statements 38–72
REQUIRED SUPPLEMENTARY INFORMATION
PERA – General Employees Retirement Fund
Schedule of City’s and Nonemployer Proportionate Share
of Net Pension Liability 73
Schedule of City Contributions 73
PERA – Public Employees Police and Fire Fund
Schedule of City’s Proportionate Share of Net Pension Liability 74
Schedule of City Contributions 74
Prior Lake Fire Relief Association
Schedule of Changes in the Relief Association’s Net Pension Asset
and Related Ratios 75
Schedule of City Contributions 76
City of Prior Lake Other Post-Employment Benefits Plan
Schedule of Funding Progress 77
Notes to Required Supplementary Information 78–80
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 81
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 82
Nonmajor Special Revenue Funds
Combining Balance Sheet 83–84
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 85–86
Nonmajor Capital Projects Funds
Combining Balance Sheet 87–90
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 91–94
General Fund
Schedule of Revenues, Expenditures, and Changes in Fund Balances –
Budget and Actual 95–100
Debt Service Funds
Balance Sheet by Account 101–106
Schedule of Revenues, Expenditures, and Changes in Fund Balances 107–112
Internal Service Funds
Combining Statement of Net Position 113
Combining Statement of Revenues, Expenses, and Changes in Net Position 114
Combining Statement of Cash Flows 115
OTHER INFORMATION SECTION
Summary Financial Report
Revenues and Expenditures for General Operations 116
Combined Schedule of Indebtedness 117–118
Bond Schedules 119–124
Debt Service Requirements 125–126
Tax Levies and Collections, and Special Assessment Levies and Collections 127
Schedules of Market Value, Tax Levy, Tax Capacity Values, Tax Capacity Rate,
and Market Value Rate 128
Key Financial Indicators 129
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 130–131
Independent Auditor’s Report on Minnesota Legal Compliance 132
CITY OF PRIOR LAKE
SCOTT COUNTY, MINNESOTA
Table of Contents (continued)
INTRODUCTORY SECTION
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Term Expires
Kirt Briggs Mayor 12/31/2020
Zach Braid Councilmember 12/31/2020
Kevin Burkart Councilmember 12/31/2020
Michael McGuire Councilmember 12/31/2018
Annette Thompson Councilmember 12/31/2018
Frank Boyles City Manager
Cathy Erickson Finance Director
Jason Etter Accounting Manager
ELECTED
APPOINTED
CITY OF PRIOR LAKE
SCOTT COUNTY, MINNESOTA
Elected and Appointed Officials
As of December 31, 2017
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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, 2017, 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 an d 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, 2017, 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.
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 Governmental Accounting Standards Board, 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 procedur es 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
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 2016 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 June 1, 2017. In our
opinion, the partial comparative information presented herein as of and for the year ended December 31,
2016 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 11, 2018
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 solely to describe the scope of our testing of internal control over financial
reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness
of the City’s internal control over financial reporting or on compliance . That report is an integral part of
an audit performed in accordance with Government Auditing Standards in considering the City’s internal
control over financial reporting and compliance.
Minneapolis, Minnesota
May 11, 2018
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CITY OF PRIOR LAKE
Management’s Discussion and Analysis
Fiscal Year Ended December 31, 2017
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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, 2017.
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 $184,594,667 (net position). Of
this amount, $15,097,854 (unrestricted net position) may be used to meet the government’s
ongoing obligations to citizens and creditors.
• The City’s total net position increased by $14,247,283.
• As of the close of the current fiscal year, the City’s governmental funds reported combined
ending fund balances of $22,151,190, a decrease of $4,713,436 in comparison with the prior year.
• At the end of the current fiscal year, the unrestricted fund balance (which includes committed,
assigned, and unassigned classifications) for the General Fund was $6,840,928, or 53.6 percent,
of budgeted 2018 expenditures and transfers out of $12,767,768. The total fund balance reflects
an increase of $156,008 from the prior year and an increase of $932,804 from the amended
budget. The amended budget reflected the use of fund balance of $776,796 for projects carried
over from 2016, and funding for transfers to the Severance Compensation Fund, Construction
Fund, and Permanent Improvement Revolving Capital Project Fund for the 2017 Street Overlay
Project. The increase in fund balance is primarily due to increased revenues from building
permits and fees.
• Of the total fund balance of $6,840,928, $218,546 is assigned for the 2018 budget for projects
carried over from 2017 (fire gear and Cartegraph software), Laserfiche software, and a transfer to
the Permanent Improvement Revolving Capital Project Fund for the 2018 Street Overlay Project.
The unassigned amount of $6,622,382 is 51.8 percent of budgeted 2018 expenditures and
transfers out of $12,767,768.
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.
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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.
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.
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, 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, and water quality operations.
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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
and insurance benefits. 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 funds are 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.
Other Information – In addition to the basic financial statements and accompanying notes, the financial
section also presents required supplementary information, and t he combining and individual fund
statements and schedules (presented as supplemental information) referred to earlier in connection with
nonmajor governmental funds and internal service funds, which are presented immediately following the
basic financial statements.
Further, another information section has been included as part of the financial statements to facilitate
additional analysis.
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 $184,594,667 at the close of the most recent fiscal year.
The City’s investment in capital assets (e.g., land, buildings, and machinery and equipment), less any
related debt used to acquire those assets that is still outstanding, totaled 87.8 percent of total net position.
The City uses these capital assets to provide services to citizens ; consequently, these assets are not
available for future spending. Although the City’s investment in its capital assets is reported net of related
debt, it should be noted that the resources needed to repay this debt must be provided from other sources,
since the capital assets themselves cannot be used to liquidate these liabilities.
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The following table provides the City’s Summary of Net Position:
2017 2016 2017 2016 2017 2016
Assets
Current and other assets 31,974,846$ 34,656,763$ 5,371,063$ 5,679,447$ 37,345,909$ 40,336,210$
Capital assets 144,791,036 137,876,393 56,639,547 51,075,358 201,430,583 188,951,751
Total assets 176,765,882$ 172,533,156$ 62,010,610$ 56,754,805$ 238,776,492$ 229,287,961$
Deferred outflows of resources
Pension plan deferments 5,566,192$ 8,862,104$ 291,709$ 632,391$ 5,857,901$ 9,494,495$
Liabilities
Long-term liabilities 47,235,563$ 60,724,315$ 1,334,641$ 1,649,156$ 48,570,204$ 62,373,471$
Other liabilities 4,458,330 3,474,169 217,313 166,592 4,675,643 3,640,761
Total liabilities 51,693,893$ 64,198,484$ 1,551,954$ 1,815,748$ 53,245,847$ 66,014,232$
Deferred inflows of resources
Pension plan deferments 6,560,944$ 2,234,103$ 232,935$ 186,737$ 6,793,879$ 2,420,840$
Net position
Net investment in
capital assets 105,369,831$ 99,587,768$ 56,639,547$ 51,075,358$ 162,009,378$ 150,663,126$
Restricted 7,534,235 6,282,406 – – 7,534,235 6,282,406
Unrestricted 11,173,171 9,092,499 3,877,883 4,309,353 15,051,054 13,401,852
Total net position 124,077,237$ 114,962,673$ 60,517,430$ 55,384,711$ 184,594,667$ 170,347,384$
Summary of Net Position
as of December 31, 2017 and 2016
Table 1
Activities Activities Total
Governmental Business-Type
An additional portion of the City’s net position ($7,534,235, or 4.1 percent) represents resources that are
subject to external restrictions on how they may be used. The remaining balance of unrestricted net
position, $15,051,054, may be used to meet the government’s ongoing obligations to citizens and
creditors.
The significant reduction in deferred outflows of resources and long-term liabilities and increase in
deferred inflows of resources relates to improvements in portfolio earnings in the Public Employees
Retirement Association (PERA) pension plan in calendar year 2017 as compared to calendar year 2016.
The Governmental Accounting Standards Board (GASB) Statement No. 68 requires the City to recognize
its proportionate share of pension benefit obligations.
At the end of the current fiscal year, the City is able to report positive balances in all three categories of
net position, both for the government as a whole, as well as for its separate governmental and
business-type activities. The same situation held true for the prior fiscal year.
-9-
2017 2016 2017 2016 2017 2016
Revenues
Program revenues
Charges for services 2,734,766$ 2,001,048$ 7,810,480$ 7,335,805$ 10,545,246$ 9,336,853$
Operating grants and
contributions 1,569,507 1,505,694 9,111 9,232 1,578,618 1,514,926
Capital grants and
contributions 13,065,751 6,088,779 300,778 1,608,264 13,366,529 7,697,043
General revenues
Property taxes and tax
increments 12,022,044 11,582,548 – – 12,022,044 11,582,548
Franchise taxes 620,469 659,782 – – 620,469 659,782
Grants and contributions
not restricted to specific
programs 212 19,864 – – 212 19,864
Interest income 197,350 394,422 41,680 65,941 239,030 460,363
Gain on sale of capital assets 3,440 6,163 – – 3,440 6,163
Miscellaneous 250,627 153,648 10,434 9,825 261,061 163,473
Total revenues 30,464,166 22,411,948 8,172,483 9,029,067 38,636,649 31,441,015
Expenses
General government 3,361,467 3,176,442 – – 3,361,467 3,176,442
Public safety 5,914,382 7,583,658 – – 5,914,382 7,583,658
Public works 5,008,168 4,672,078 – – 5,008,168 4,672,078
Culture and recreation 2,274,752 2,105,696 – – 2,274,752 2,105,696
Economic development 557,896 610,584 – – 557,896 610,584
Interest on long-term debt 1,246,553 1,294,104 – – 1,246,553 1,294,104
Water – – 2,621,448 2,493,541 2,621,448 2,493,541
Sewer – – 2,771,143 2,635,304 2,771,143 2,635,304
Water quality – – 633,557 598,972 633,557 598,972
Total expenses 18,363,218 19,442,562 6,026,148 5,727,817 24,389,366 25,170,379
Increase in net position
before transfers 12,100,948 2,969,386 2,146,335 3,301,250 14,247,283 6,270,636
Transfers (2,986,384) (396,333) 2,986,384 396,333 – –
Changes in net position 9,114,564 2,573,053 5,132,719 3,697,583 14,247,283 6,270,636
Net position – beginning 114,962,673 112,389,620 55,384,711 51,687,128 170,347,384 164,076,748
Net position – ending 124,077,237$ 114,962,673$ 60,517,430$ 55,384,711$ 184,594,667$ 170,347,384$
Activities Activities Total
Table 2
Changes in Net Position
for the Years Ended December 31, 2017 and 2016
Governmental Business-Type
Governmental Activities – Governmental activities increased the City’s net position by $9,114,564. Key
elements of this increase are seen in the table above. The increase is due primarily to the recognition of
developer land/infrastructure contributions related to the Pike Lake Marsh, Summit Preserve, Haven
Ridge, and Trillium Cove projects.
The City’s proportionate share of the PERA pension benefit expense decreased $1,086,587, primarily due
to improvements in the portfolio earnings of the pension plan from the prior year. This reduced
expenditures across all functions, with the most significant PERA pension expense reduction of $915,610
in public safety.
The business-type activities increased the City’s net position in total by $5,132,719, mostly due to a net
increase in transfers/capital contributions of $2,590,051 from the governmental funds.
-10-
Below are specific graphs that provide comparisons of the governmental activities program revenues and
expenses.
Public works revenue will vary based on development and transportation projects. In 2017, the City
received about $6.6 million in easement donations from developers and about $3.1 million in
development program trunk/connection fees. Revenue also included about $1.4 million in street project
special assessments.
$–
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
General
Government
Public Safety Public Works Culture and
Recreation
Economic
Development
Interest on
Long-Term
Debt
Expenses Program Revenues
Governmental Activities – Revenue by Program
-11-
Business-Type Activities – Below are graphs showing the business-type activities program revenues and
expense comparisons.
Revenues are collected to fund operations, capital improvements, debt service, and the utility work
completed as part of the street projects identified in the Five-Year Capital Improvement Program.
$–
$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
$3,750,000
$4,000,000
Water Sewer Water Quality
Expenses Program Revenues
Business-Type Activities – Revenue by Source
Charges for
Services
96%
Operating Grants
and Contributions
< 1%
Capital Grants and
Contributions
4%Other
< 1%
-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 $22,151,190, a decrease of $4,713,436 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, total fund
balance reached $6,840,928. As a measure of the General Fund’s liquidity, it may be useful to compare
the total fund balance to total fund expenditures. Total fund balance represents about 53.6 percent of total
2018 General Fund budgeted expenditures and transfers out $12,767,768. Of the total fund balance of
$6,840,928, $218,546 is assigned for the 2018 budget for projects carried over from 2017 (fire gear and
Cartegraph software), Laserfiche software, and a transfer to the Permanent Improvement Revolving
Capital Project Fund. This leaves an unassigned fund balance of the General Fund of $6,622,382, or
51.8 percent, of total 2018 General Fund budgeted expenditures and transfers out of $12,767,768.
The total fund balance reflects an increase of $156,008 from the prior year and an increase of $932,804
from the amended budget. The amended budget reflected the use of fund balance of $776,796 for projects
carried over from 2016, and funding for transfers to the Severance Compensation Fund, Construction
Fund, and Permanent Improvement Revolving Capital Project Fund for the 2017 Street Overlay Project.
The increase in fund balance is primarily due to increased revenues from building permits and fees.
The Debt Service Fund balance decreased by $6,748,450. This is largely due to the refunding payment
during the current year for the City’s G.O. Water Treatment Revenue Plant Bonds, Series 2007A. The
City manages cash flow in all debt service funds and ensures adequate resources exist to fund future
obligations.
The Construction Fund balance decreased by $1,002,314. This decrease is mainly due to increased capital
outlay. There were many new road projects during the current year, such as the Cates Street area
improvement, Balsam Street area improvement, Franklin Trail, and Sycamore Trail.
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.
-13-
GENERAL FUND BUDGETARY HIGHLIGHTS
The City amends its budget at various points during the year. The General Fund budget was amended in
2017 to increase the spending of the fund balance by $726,796, mainly for transfers to other funds.
Actual revenues were $640,423 over budget in 2017, due primarily to an increase in building permits and
plan check fees related to two apartment buildings: Lakeridge and Pike Lake Marsh. There was also an
increase in revenues related to an increase in developer agreements for Summit Preserve, Trillium Cove ,
and Haven’s Ridge that were not budgeted.
Actual expenditures were $289,337 less than budget in 2017.
Many factors impacted expenditures. In 2017, personnel costs were about $158,000 less than budget.
Employee turnover and delays in filling open positions has allowed for savings in those areas. The largest
variance from budget was in public works being under budget by $110,432. This is primarily due to
actual supply expenditures, including fuel and repairs and maintenance coming in lower than expected.
-14-
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, 2017 amounts to $201,430,583 (net of accumulated depreciation). This investment in
capital assets includes items such as land, buildings and improvements, machinery and equipment, park
facilities, roads, highways, and bridges.
2017 2016 2017 2016 2017 2016
Land 32,221,249$ 32,221,249$ –$ –$ 32,221,249$ 32,221,249$
Easements 43,854,364 37,271,304 75,300 75,300 43,929,664 37,346,604
Construction in progress 12,870,246 12,622,172 127,154 – 12,997,400 12,622,172
Land improvements 1,148,189 1,234,187 52,742 57,129 1,200,931 1,291,316
Machinery and equipment 2,719,274 2,712,684 684,323 360,085 3,403,597 3,072,769
Vehicles 1,692,829 1,708,560 10,651 21,151 1,703,480 1,729,711
Infrastructure 50,284,885 50,106,237 55,689,377 50,561,693 105,974,262 100,667,930
Total 144,791,036$ 137,876,393$ 56,639,547$ 51,075,358$ 201,430,583$ 188,951,751$
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.
Long-Term Debt – At the end of the current fiscal year, the City had total bonded debt outstanding of
$36,960,000. This amount comprises debt backed by the full faith and credit of the City. The City’s total
long-term liabilities decreased during the current fiscal year, due to a decrease in net pension liability as
well as the refunding of the City’s G.O. Water Treatment Revenue Plant Bonds, Series 2007A.
2017 2016 2017 2016 2017 2016
G.O. bonds 13,410,000$ 14,980,000$ –$ –$ 13,410,000$ 14,980,000$
G.O. special assessment bonds 16,365,000 13,745,000 – – 16,365,000 13,745,000
G.O. tax increment bonds 185,000 205,000 – – 185,000 205,000
G.O. revenue bonds 7,000,000 14,050,000 – – 7,000,000 14,050,000
Premium (discount) on bonds payable 596,753 572,534 – – 596,753 572,534
Energy loan payable 2,074,452 2,327,085 – – 2,074,452 2,327,085
Compensated absences payable 794,988 872,720 141,868 134,300 936,856 1,007,020
Net OPEB obligation 398,179 324,900 – – 398,179 324,900
Net pension liability – GERF and PEPFF 6,411,191 13,647,076 1,192,773 1,514,856 7,603,964 15,161,932
Total 47,235,563$ 60,724,315$ 1,334,641$ 1,649,156$ 48,570,204$ 62,373,471$
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 $3,030,449,778, which calculates to a debt limit of
$90,913,493. 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 $13,410,000 of general obligation debt outstanding, leaving a debt limit of
$77,503,493.
Additional information on the City’s long-term debt can be found in Note 5 of the notes to basic financial
statements.
-15-
ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES
• The City adopted a general operating budget of $12,767,768, for expenditures and other financing
uses for fiscal 2018, a decrease of $303,110, or 2.3 percent, from the 2017 original budget.
• Growth is robust in Prior Lake with 334 and 318 residential permits issued in 2016 and 2017,
respectively. From 2005 to 2016, the City has ranked in the top 25 in the Twin Cities Metro Area
in total number of residential units and ranked in the top 20 in the Twin Cities Metro Area in total
single-family residential units. Source: Metropolitan Council, Community Profile, Building
Permits, Residential, Twin Cities Region (7-county metro area).
• Over the past two years, the City issued permits for six multi-family residential buildings, with a
total of 440 units (218 units in 2017).
• New commercial and industrial permit valuation was $13,828,500 in 2017, a 145 percent increase
over 2016. Total commercial and industrial permit valuation (new and addition/alteration) has
increased by an average of 70.3 percent year over year since 2011.
• Continued staged development of land with the 2,000 acres annexed in 2004 from Spring Lake
Township will provide most of the City’s anticipated market value growth over the course of the
next 10–15 years.
• The addition of a water treatment plant to serve the City’s development is imminent. The City
faced the prospect of a $15 million expenditure to build its own facility or spend $8.7 million to
build the facility in collaboration with the Shakopee Mdewakanton Sioux Community (SMSC).
In 2017, the City entered into a Water Purchase and Facility Expansion Agreement with the
SMSC. The SMSC is constructing a new water treatment plant. The plant can supply additional
water to the City and will have future expansion available to meet the City’s long-term needs.
This approach provides the City with the flexibility to evaluate the pace and timing of
development in the Orderly Annexation Area before a substantial investment is needed to
construct the expansion of the water treatment plant. The initial improvements, combined with
the long-term water purchase agreement, could provide the City with enough water capacity for
the next 15 to 20 years, depending on the rate of development.
Under the agreement, the initial maximum investment is $3,500,000, which will be funded from
Trunk Reserve and Water Storage Funds. The remainder will become due when the second half
of the water treatment plant improvements are installed to make the facility expansion
operational. The City has incorporated these anticipated costs in its Capital Improvement Plan
and the water development trunk fees as part of its 2040 Comprehensive Plan update.
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.
-16-
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. The City also
received an initial bond rating of AA+ from S&P in 2015. The AA+ bond rating was reaffirmed with the
2016 and 2017 bond issuance:
Moody’s S&P
2013 Aa2
2014 Aa2
2015 Aa2 AA+
2016 AA+
2017 AA+
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.
$12,985,255
$12,563,945
$12,945,738 $13,070,878 $12,767,768
50%
46%47%
51%54%
$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
2013 2014 2015 2016 2017
Subsequent Year’s Budget Actual Fund Balance
-17-
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. The City made the final payment on the 2005 parks and
library referendum debt in 2017.
Metro
10,000–24,999
Seven-County
Metro Area
City of
Prior Lake
2013 46.05 46.14 31.89
2014 48.80 46.00 30.69
2015 46.90 43.40 31.96
2016 46.96 42.95 31.95
2017 N/A N/A 32.69
Average City Tax Capacity Rate
2013 0.62
2014 0.55
2015 0.55
2016 –
2017 –
EDA Tax Capacity Rate
Average Prior Lake
Source: League of Minnesota
Cities and Scott County
N/A – Not available
-18-
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).
$1,025
$1,050
$1,075
$1,100
$1,125
$1,150
$1,175
$1,200
$1,225
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Property Tax Levy Per Household
Property Tax Levy/HH Expected Property Tax Levy/HH
-19-
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.
$1,150
$1,200
$1,250
$1,300
$1,350
$1,400
$1,450
$1,500
$1,550
$1,600
$1,650
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
General Fund Total Operating
Expenditures Per Household
Expected Operating Expenditures/HH Operating Expenditures/HH
REQUESTS FOR INFORMATION
These financial statements are designed to provide a general overview of the City’s finances for all those
with an interest in the City’s finances. Questions concerning any of the information provided in this report
or requests for additional financial information should be addressed to the office of the City’s Finance
Director at the City of Prior Lake, 4646 Dakota Street Southeast, Prior Lake, Minnesota 55372-1714.
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BASIC FINANCIAL STATEMENTS
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Governmental Business-Type
Activities Activities Total
Assets
Cash and investments 26,376,751$ 5,028,626$ 31,405,377$
Receivables
Delinquent taxes 104,941 – 104,941
Accounts 475,786 276,977 752,763
Special assessments 3,971,672 64,105 4,035,777
Due from other governmental agencies 230,874 1,355 232,229
Restricted assets – temporarily restricted
Cash and investments held in escrow 25,000 – 25,000
Net pension asset 789,822 – 789,822
Capital assets not being depreciated 88,945,859 202,454 89,148,313
Capital assets net of accumulated depreciation 55,845,177 56,437,093 112,282,270
Total assets 176,765,882 62,010,610 238,776,492
Deferred outflows of resources
Pension plan deferments – GERF and PEPFF 5,331,010 291,709 5,622,719
Pension plan deferments – fire relief 235,182 – 235,182
Total deferred outflows of resources 5,566,192 291,709 5,857,901
Total assets and deferred
outflows of resources 182,332,074$ 62,302,319$ 244,634,393$
Liabilities
Accounts and contracts payable 1,266,496$ 152,122$ 1,418,618$
Accrued salaries and employee benefits payable 339,059 43,762 382,821
Due to other governmental agencies 1,639,859 18,429 1,658,288
Deposits payable 1,096,687 3,000 1,099,687
Accrued interest payable 77,829 – 77,829
Unearned revenue 38,400 – 38,400
Long-term liabilities
Due within one year 4,268,293 56,278 4,324,571
Due in more than one year 42,967,270 1,278,363 44,245,633
Total liabilities 51,693,893 1,551,954 53,245,847
Deferred inflows of resources
Pension plan deferments – GERF and PEPFF 6,134,598 232,935 6,367,533
Pension plan deferments – fire relief 426,346 – 426,346
Total deferred inflows of resources 6,560,944 232,935 6,793,879
Net position
Net investment in capital assets 105,369,831 56,639,547 162,009,378
Restricted for debt service 6,162,188 – 6,162,188
Restricted for other purposes 1,372,047 – 1,372,047
Unrestricted 11,173,171 3,877,883 15,051,054
Total net position 124,077,237 60,517,430 184,594,667
Total liabilities, deferred inflows of resources
and net position 182,332,074$ 62,302,319$ 244,634,393$
CITY OF PRIOR LAKE
Statement of Net Position
as of December 31, 2017
See notes to basic financial statements -20-
Program Revenues
Operating Capital
Charges for Grants and Grants and
Functions/Programs Expenses Services Contributions Contributions
Governmental activities
General government 3,361,467$ 763,068$ 385$ –$
Public safety 5,914,382 1,161,427 1,568,577 55,972
Public works 5,008,168 492,233 241 12,405,971
Culture and recreation 2,274,752 299,845 272 603,808
Economic development 557,896 18,193 32 –
Interest on long-term debt 1,246,553 – – –
Total governmental activities 18,363,218 2,734,766 1,569,507 13,065,751
Business-type activities
Water 2,621,448 3,793,719 3,463 147,827
Sewer 2,771,143 3,090,773 161 133,351
Water quality 633,557 925,988 5,487 19,600
Total business-type activities 6,026,148 7,810,480 9,111 300,778
Total 24,389,366$ 10,545,246$ 1,578,618$ 13,366,529$
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
Gain on sale of capital assets
Miscellaneous
Transfers
Total general revenues and transfers
Change in net position
Net position – beginning
Net position – ending
CITY OF PRIOR LAKE
Statement of Activities
Year Ended December 31, 2017
See notes to basic financial statements -21-
Governmental Business-Type
Activities Activities Total
(2,598,014)$ –$ (2,598,014)$
(3,128,406) – (3,128,406)
7,890,277 – 7,890,277
(1,370,827) – (1,370,827)
(539,671) – (539,671)
(1,246,553) – (1,246,553)
(993,194) – (993,194)
– 1,323,561 1,323,561
– 453,142 453,142
– 317,518 317,518
– 2,094,221 2,094,221
(993,194) 2,094,221 1,101,027
8,873,508 – 8,873,508
2,637,725 – 2,637,725
620,469 – 620,469
510,811 – 510,811
212 – 212
197,350 41,680 239,030
3,440 – 3,440
250,627 10,434 261,061
(2,986,384) 2,986,384 –
10,107,758 3,038,498 13,146,256
9,114,564 5,132,719 14,247,283
114,962,673 55,384,711 170,347,384
124,077,237$ 60,517,430$ 184,594,667$
Changes in Net Position
Net (Expense) Revenues and
-22-
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FUND FINANCIAL STATEMENTS
Debt
General Service Construction
Assets
Cash and investments 8,306,418$ 2,636,749$ 4,009,880$
Cash held in escrow – – –
Receivables
Delinquent taxes 104,673 – –
Accounts 154,295 11,016 7,839
Special assessments
Delinquent 504 27,922 –
Deferred 30,367 3,094,842 134,500
Other (Green Acres)– 477,006 –
Due from other governmental agencies 108,680 14,934 103,447
Due from other funds 236 – –
Total assets 8,705,173$ 6,262,469$ 4,255,666$
Liabilities, Deferred Inflows of Resources,
and Fund Balances
Liabilities
Accounts and contracts payable 183,629$ 3,378$ 649,709$
Accrued salaries and employee benefits payable 335,102 – –
Due to other governmental agencies 509,774 – 1,129,555
Due to other funds – – –
Deposits payable 716,658 – 17,353
Unearned revenue 4,650 – –
Total liabilities 1,749,813 3,378 1,796,617
Deferred inflows of resources
Unavailable revenue from delinquent taxes 104,673 – –
Unavailable revenue from special assessments 9,759 3,599,767 134,500
Total deferred inflows of resources 114,432 3,599,767 134,500
Fund balances
Restricted – 2,659,811 –
Assigned 218,546 – 2,324,549
Unassigned, reported in
General Fund 6,622,382 – –
Debt Service and Capital Projects Funds – (487) –
Total fund balances 6,840,928 2,659,324 2,324,549
Total liabilities, deferred inflows
of resources, and fund balances 8,705,173$ 6,262,469$ 4,255,666$
CITY OF PRIOR LAKE
Balance Sheet
Governmental Funds
as of December 31, 2017
See notes to basic financial statements -23-
Nonmajor Total
Governmental Governmental
Funds Funds
10,946,540$ 25,899,587$
25,000 25,000
268 104,941
181,965 355,115
– 28,426
206,531 3,466,240
– 477,006
3,813 230,874
– 236
11,364,117$ 30,587,425$
429,780$ 1,266,496$
3,957 339,059
530 1,639,859
236 236
362,676 1,096,687
33,750 38,400
830,929 4,380,737
268 104,941
206,531 3,950,557
206,799 4,055,498
1,036,455 3,696,266
9,290,170 11,833,265
– 6,622,382
(236) (723)
10,326,389 22,151,190
11,364,117$ 30,587,425$
-24-
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22,151,190$
Capital assets are included in net position,but are excluded from fund balances because they do not
represent financial resources.
Cost of capital assets 205,206,424
Less accumulated depreciation (60,415,388)
Long-term liabilities are included in net position but are excluded from fund balances until due and
payable.
Bond principal payable (36,960,000)
Energy loan payable (2,074,452)
Net OPEB obligation (398,179)
Net pension liability – GERF and PEPFF (6,411,191)
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.(596,753)
Accrued interest payable on long-term debt is included in net position,but is excluded from fund
balances until due and payable.(77,829)
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 (197,153)
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 104,941
Special assessments 3,950,557
Net pension asset 789,822
Deferred outflows – GERF and PEPFF pension plans 5,331,010
Deferred outflows – fire relief pension plan 235,182
Deferred inflows – GERF and PEPFF pension plans (6,134,598)
Deferred inflows – fire relief pension plan (426,346)
Total net position – governmental activities 124,077,237$
Amounts reported for governmental activities in the Statement of Net Position are different because:
as of December 31, 2017
CITY OF PRIOR LAKE
Reconciliation of the Balance Sheet to the
Statement of Net Position
Governmental Funds
Total fund balances – governmental funds
See notes to basic financial statements -25-
Debt
General Service Construction
Revenues
Taxes 8,158,561$ 2,637,725$ –$
Franchise taxes 620,469 – –
Special assessments (10,660) 1,213,966 127,000
Licenses and permits 820,433 – –
Intergovernmental 1,657,988 – 28,339
Charges for services 1,346,676 – –
Fines and forfeits 2,250 – –
Interest on investments 11,150 87,999 39,855
Miscellaneous 324,434 (7,440) 123,200
Total revenues 12,931,301 3,932,250 318,394
Expenditures
Current
General government 2,741,278 – –
Public safety 5,239,456 – –
Public works 1,798,918 – –
Culture and recreation 1,677,597 – –
Economic development – – –
Capital outlay 115,563 – 8,600,814
Debt service
Principal – 3,987,633 –
Interest and other – 1,201,083 76,332
Total expenditures 11,572,812 5,188,716 8,677,146
Excess (deficiency) of revenues
over expenditures 1,358,489 (1,256,466) (8,358,752)
Other financing sources (uses)
Debt issued – – 3,780,000
Premium on debt issued – – 83,711
Payments on refunded bonds – (6,790,000) –
Transfers in 430,000 1,731,545 3,644,260
Transfers out (1,636,121) (433,529) (151,533)
Sale of assets 3,640 – –
Total other financing sources (uses)(1,202,481) (5,491,984) 7,356,438
Net change in fund balances 156,008 (6,748,450) (1,002,314)
Fund balances
Beginning of year 6,684,920 9,407,774 3,326,863
End of year 6,840,928$ 2,659,324$ 2,324,549$
CITY OF PRIOR LAKE
Statement of Revenues, Expenditures, and Changes in Fund Balances
Governmental Funds
Year Ended December 31, 2017
See notes to basic financial statements -26-
Nonmajor Total
Governmental Governmental
Funds Funds
1,240,116$ 12,036,402$
– 620,469
166,885 1,497,191
– 820,433
– 1,686,327
3,919,103 5,265,779
– 2,250
54,836 193,840
150,999 591,193
5,531,939 22,713,884
41 2,741,319
108,873 5,348,329
– 1,798,918
– 1,677,597
98,499 98,499
3,035,910 11,752,287
– 3,987,633
14,641 1,292,056
3,257,964 28,696,638
2,273,975 (5,982,754)
725,000 4,505,000
19,514 103,225
– (6,790,000)
602,980 6,408,785
(740,149) (2,961,332)
– 3,640
607,345 1,269,318
2,881,320 (4,713,436)
7,445,069 26,864,626
10,326,389$ 22,151,190$
-27-
THIS PAGE INTENTIONALLY LEFT BLANK
(4,713,436)$
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 10,780,042
Capital contributions 6,571,403
Depreciation expense (3,902,965)
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.(6,533,837)
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 10,777,633
Debt issued (4,505,000)
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.
Net OPEB obligations (73,279)
Net pension liability – GERF and PEPFF 7,235,885
Interest on long-term debt 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.(28,636)
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.(24,219)
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 286,801
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 (13,532)
Special assessments 697,653
Net pension asset 182,804
Deferred outflows – GERF and PEPFF pension plans (3,296,203)
Deferred outflows – fire relief pension plan 291
Deferred inflows – GERF and PEPFF pension plans (4,461,707)
Deferred inflows – fire relief pension plan 134,866
9,114,564$ Change in net position – governmental activities
CITY OF PRIOR LAKE
Year Ended December 31, 2017
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
See notes to basic financial statements -28-
THIS PAGE INTENTIONALLY LEFT BLANK
Actual Variance With
Original Final Amounts Final Budget
Revenues
Taxes
Property taxes 8,210,812$ 8,210,812$ 8,158,561$ (52,251)$
Franchise taxes 603,000 603,000 620,469 17,469
Special assessments 2,500 2,500 (10,660) (13,160)
Licenses and permits 583,220 583,220 820,433 237,213
Intergovernmental 1,542,735 1,542,735 1,657,988 115,253
Charges for services 1,173,311 1,173,311 1,346,676 173,365
Fines and forfeits – – 2,250 2,250
Interest on investments 85,750 85,750 11,150 (74,600)
Miscellaneous 89,550 89,550 324,434 234,884
Total revenues 12,290,878 12,290,878 12,931,301 640,423
Expenditures
Current
General government 2,739,610 2,781,130 2,741,278 (39,852)
Public safety
Police 3,730,730 3,744,730 3,748,068 3,338
Fire and rescue 905,149 905,149 845,670 (59,479)
Other 676,575 676,575 645,718 (30,857)
Public works 2,183,580 1,909,350 1,798,918 (110,432)
Culture and recreation 1,733,824 1,733,824 1,677,597 (56,227)
Capital outlay
General government 83,391 111,391 105,607 (5,784)
Culture and recreation – – 9,956 9,956
Total expenditures 12,052,859 11,862,149 11,572,812 (289,337)
Excess of revenues over expenditures 238,019 428,729 1,358,489 929,760
Other financing sources (uses)
Bond proceeds 300,000 – – –
Transfers in 430,000 430,000 430,000 –
Transfers out (1,018,019) (1,635,525) (1,636,121) (596)
Sale of assets – – 3,640 3,640
Total other financing sources (uses)(288,019) (1,205,525) (1,202,481) 3,044
Net change in fund balances (50,000)$ (776,796)$ 156,008 932,804$
Fund balances, January 1 6,684,920
Fund balances, December 31 6,840,928$
CITY OF PRIOR LAKE
Budgeted Amounts
Year Ended December 31, 2017
General Fund
Statement of Revenues, Expenditures, and Changes in Fund Balances
Budget and Actual
See notes to basic financial statements -29-
2017 2016 2017 2016
Current assets
Cash and investments 2,824,752$ 2,794,170$ 1,215,627$ 1,657,304$
Receivables
Accounts 105,677 77,385 123,556 104,010
Special assessments
Delinquent 30,205 22,088 30,205 22,088
Deferred 3,695 3,278 – –
Due from other governmental agencies 213 1,269 140 163
Total current assets 2,964,542 2,898,190 1,369,528 1,783,565
Noncurrent assets
Capital assets not being depreciated 152,661 75,300 – –
Depreciable capital assets 41,800,216 39,141,571 29,953,317 26,423,279
Accumulated depreciation (9,386,318) (8,648,686) (7,247,588) (7,000,787)
Total noncurrent assets 32,566,559 30,568,185 22,705,729 19,422,492
Total assets 35,531,101 33,466,375 24,075,257 21,206,057
Deferred outflows of resources
Pension plan deferments – GERF 129,649 281,063 108,040 234,219
Total assets and deferred outflows of resources 35,660,750$ 33,747,438$ 24,183,297$ 21,440,276$
Current liabilities
Accounts and contracts payable 56,340$ 53,254$ 14,542$ 14,158$
Accrued salaries and employee benefits payable 18,143 22,678 18,847 23,955
Due to other governmental agencies 14,095 24,860 2,520 6,200
Deposits payable 3,000 4,500 – –
Current portion of compensated absences payable 26,686 28,870 21,772 20,677
Total current liabilities 118,264 134,162 57,681 64,990
Noncurrent liabilities
Compensated absences payable 59,142 52,022 22,165 21,788
Net pension liability 530,122 673,270 441,768 561,058
Total noncurrent liabilities 589,264 725,292 463,933 582,846
Total liabilities 707,528 859,454 521,614 647,836
Deferred inflows of resources
Pension plan deferments – GERF 103,527 82,994 86,272 69,162
Net position (deficit)
Investment in capital assets 32,566,559 30,568,185 22,705,729 19,422,492
Unrestricted 2,283,136 2,236,805 869,682 1,300,786
Total net position 34,849,695 32,804,990 23,575,411 20,723,278
Total liabilities, deferred inflows of
resources, and net position 35,660,750$ 33,747,438$ 24,183,297$ 21,440,276$
CITY OF PRIOR LAKE
Statements of Net Position
Proprietary Funds
as of December 31, 2017 and 2016
Business-Type Activities – Enterprise Funds
Water Sewer
See notes to basic financial statements -30-
Governmental
Activities –
2017 2016 2017 2016 Internal Service
988,247$ 937,294$ 5,028,626$ 5,388,768$ 477,164$
47,744 59,733 276,977 241,128 120,671
– – 60,410 44,176 –
– – 3,695 3,278 –
1,002 665 1,355 2,097 –
1,036,993 997,692 5,371,063 5,679,447 597,835
49,793 – 202,454 75,300 –
1,834,982 1,491,829 73,588,515 67,056,679 –
(517,516) (407,148) (17,151,422) (16,056,621) –
1,367,259 1,084,681 56,639,547 51,075,358 –
2,404,252 2,082,373 62,010,610 56,754,805 597,835
54,020 117,109 291,709 632,391 –
2,458,272$ 2,199,482$ 62,302,319$ 57,387,196$ 597,835$
81,240$ 5,108$ 152,122$ 72,520$ –$
6,772 8,120 43,762 54,753 –
1,814 3,759 18,429 34,819 –
– – 3,000 4,500 –
7,820 8,597 56,278 58,144 315,277
97,646 25,584 273,591 224,736 315,277
4,283 2,346 85,590 76,156 479,711
220,883 280,528 1,192,773 1,514,856 –
225,166 282,874 1,278,363 1,591,012 479,711
322,812 308,458 1,551,954 1,815,748 794,988
43,136 34,581 232,935 186,737 –
1,367,259 1,084,681 56,639,547 51,075,358 –
725,065 771,762 3,877,883 4,309,353 (197,153)
2,092,324 1,856,443 60,517,430 55,384,711 (197,153)
2,458,272$ 2,199,482$ 62,302,319$ 57,387,196$ 597,835$
Water Quality Totals
-31-
2017 2016 2017 2016
Operating revenues
Sewer charges –$ –$ 2,830,617$ 2,484,584$
Water charges 3,454,135 3,329,247 – –
Storm water charges – – – –
Capital facility charges 260,147 256,984 260,156 256,994
Meter sales 79,437 87,868 – –
Charges for services – – – –
Total operating revenues 3,793,719 3,674,099 3,090,773 2,741,578
Operating expenses
Personal services 686,525 738,337 676,145 684,644
Supplies 330,573 308,377 46,065 48,644
Repairs and maintenance 185,561 115,261 22,936 65,099
Other services and charges 207,125 162,565 118,735 54,440
Insurance 1,841 1,841 1,841 1,841
Utilities 470,014 472,969 40,711 33,563
Disposal charges – – 1,390,443 1,323,005
Miscellaneous 2,177 3,895 4,609 43
Depreciation 737,632 690,296 469,658 424,025
Total operating expenses 2,621,448 2,493,541 2,771,143 2,635,304
Operating income (loss)1,172,271 1,180,558 319,630 106,274
Nonoperating revenues
Intergovernmental 5,841 16,948 161 59,465
Interest income 21,511 35,216 12,357 20,473
Miscellaneous 10,314 6,525 – 3,180
Total nonoperating revenues 37,666 58,689 12,518 83,118
Income before contributions and transfers 1,209,937 1,239,247 332,148 189,392
Capital contributions from other funds 2,590,740 1,774,662 3,619,544 1,046,156
Capital contributions from developers 145,449 778,674 133,351 699,056
Transfers in 250,000 24,871 – 92,312
Transfers out (2,151,421) (1,742,896) (1,232,910) (631,004)
Change in net position 2,044,705 2,074,558 2,852,133 1,395,912
Net position (deficit) – beginning 32,804,990 30,730,432 20,723,278 19,327,366
Net position (deficit) – ending 34,849,695$ 32,804,990$ 23,575,411$ 20,723,278$
Business-Type Activities – Enterprise Funds
CITY OF PRIOR LAKE
Statements of Revenues, Expenses, and Changes in Net Position
Proprietary Funds
Years Ended December 31, 2017 and 2016
Water Sewer
See notes to basic financial statements -32-
Governmental
Activities –
Internal Service
2017 2016 2017 2016 Fund
–$ –$ 2,830,617$ 2,484,584$ –$
– – 3,454,135 3,329,247 –
925,988 920,128 925,988 920,128 –
– – 520,303 513,978 –
– – 79,437 87,868 –
– – – – 26,293
925,988 920,128 7,810,480 7,335,805 26,293
290,871 293,907 1,653,541 1,716,888 46,015
27,613 27,076 404,251 384,097 –
85,347 51,036 293,844 231,396 –
118,694 35,088 444,554 252,093 –
– – 3,682 3,682 –
– – 510,725 506,532 –
– – 1,390,443 1,323,005 –
664 85,373 7,450 89,311 –
110,368 106,492 1,317,658 1,220,813 –
633,557 598,972 6,026,148 5,727,817 46,015
292,431 321,156 1,784,332 1,607,988 (19,722)
5,487 1,092 11,489 77,505 –
7,812 10,252 41,680 65,941 3,510
120 120 10,434 9,825 203,013
13,419 11,464 63,603 153,271 206,523
305,850 332,620 1,847,935 1,761,259 186,801
323,553 – 6,533,837 2,820,818 –
19,600 62,261 298,400 1,539,991 –
42,093 – 292,093 117,183 100,000
(455,215) (167,768) (3,839,546) (2,541,668) –
235,881 227,113 5,132,719 3,697,583 286,801
1,856,443 1,629,330 55,384,711 51,687,128 (483,954)
2,092,324$ 1,856,443$ 60,517,430$ 55,384,711$ (197,153)$
Water Quality Totals
-33-
2017 2016 2017 2016
Cash flows from operating activities
Cash received from customers 3,756,449$ 3,695,363$ 3,063,133$ 2,704,230$
Cash payments to suppliers (1,233,962) (1,090,990) (1,652,796) (1,532,721)
Cash payments to employees (628,333) (681,847) (631,622) (632,892)
Miscellaneous revenue 10,314 6,525 – 3,180
Net cash flows from operating
activities 1,904,468 1,929,051 778,715 541,797
Cash flows from noncapital financing activities
Intergovernmental 5,841 16,948 161 59,465
Transfers in (out)(1,901,421) (1,718,025) (1,232,910) (538,692)
Net cash flows from noncapital
financing activities (1,895,580) (1,701,077) (1,232,749) (479,227)
Cash flows from capital and related financing
activities
Purchase of capital assets 183 (127,310) – –
Cash flows from investing activities
Interest received on cash and investments 21,511 35,216 12,357 20,473
Net increase (decrease) in cash and cash
equivalents 30,582 135,880 (441,677) 83,043
Cash and cash equivalents, January 1 2,794,170 2,658,290 1,657,304 1,574,261
Cash and cash equivalents, December 31 2,824,752$ 2,794,170$ 1,215,627$ 1,657,304$
Water Sewer
Business-Type Activities – Enterprise Funds
CITY OF PRIOR LAKE
Statements of Cash Flows
Proprietary Funds
Years Ended December 31, 2017 and 2016
See notes to basic financial statements -34-
Governmental
Activities –
Internal Service
2017 2016 2017 2016 Fund
937,640$ 902,375$ 7,757,222$ 7,301,968$ 25,774$
(170,210) (231,363) (3,056,968) (2,855,074) –
(266,981) (272,843) (1,526,936) (1,587,582) (123,747)
120 120 10,434 9,825 85,377
500,569 398,289 3,183,752 2,869,137 (12,596)
5,487 1,092 11,489 77,505 –
(413,122) (167,768) (3,547,453) (2,424,485) 100,000
(407,635) (166,676) (3,535,964) (2,346,980) 100,000
(49,793) (2,243) (49,610) (129,553) –
7,812 10,252 41,680 65,941 3,510
50,953 239,622 (360,142) 458,545 90,914
937,294 697,672 5,388,768 4,930,223 386,250
988,247$ 937,294$ 5,028,626$ 5,388,768$ 477,164$
TotalsWater Quality
-35-(continued)
2017 2016 2017 2016
Reconciliation of operating income (loss) to net
cash flows from operating activities
Operating income (loss)1,172,271$ 1,180,558$ 319,630$ 106,274$
Adjustments to reconcile operating income (loss)
to net cash flows from operating activities
Depreciation 737,632 690,296 469,658 424,025
Miscellaneous revenue 10,314 6,525 – 3,180
(Increase) decrease in assets
and deferred outflows of resources
Accounts receivable (28,292) 3,213 (19,546) (15,240)
Special assessments receivable (8,534) 13,688 (8,117) (22,088)
Due from other governments 1,056 2,863 23 (20)
Deferred outflows of resources 151,414 (219,824) 126,179 (183,186)
Increase (decrease) in liabilities
and deferred inflows of resources
Accounts and contracts payable 3,086 (25,220) 384 (9,486)
Accrued salaries and employee benefits payable (4,535) 3,443 (5,108) 3,763
Due to other governmental agencies (10,765) (862) (3,680) 3,400
Deposits payable (1,500) 1,500 – –
Compensated absences payable 4,936 8,283 1,472 10,685
Net pension liability (143,148) 226,122 (119,290) 188,435
Deferred inflows of resources 20,533 38,466 17,110 32,055
Net cash flows from operating
activities 1,904,468$ 1,929,051$ 778,715$ 541,797$
Schedule of noncash activities from capital and
related financing activities
Capital assets contributed from other funds 2,590,740$ 1,774,662$ 3,619,544$ 1,046,156$
Capital assets contributed by developers 145,449$ 778,674$ 133,351$ 699,056$
Business-Type Activities – Enterprise Funds
Water
CITY OF PRIOR LAKE
Sewer
Statements of Cash Flows (continued)
Proprietary Funds
Years Ended December 31, 2017 and 2016
See notes to basic financial statements -36-
Governmental
Activities –
Internal Service
2017 2016 2017 2016 Fund
292,431$ 321,156$ 1,784,332$ 1,607,988$ (19,722)$
110,368 106,492 1,317,658 1,220,813 –
120 120 10,434 9,825 203,013
11,989 (38,591) (35,849) (50,618) (118,155)
– – (16,651) (8,400) –
(337) 20,838 742 23,681 –
63,089 (91,593) 340,682 (494,603) –
76,132 (2,245) 79,602 (36,951) –
(1,348) 249 (10,991) 7,455 –
(1,945) (30,545) (16,390) (28,007) –
– – (1,500) 1,500 –
1,160 2,163 7,568 21,131 (77,732)
(59,645) 94,217 (322,083) 508,774 –
8,555 16,028 46,198 86,549 –
500,569$ 398,289$ 3,183,752$ 2,869,137$ (12,596)$
323,553$ –$ 6,533,837$ 2,820,818$ –$
19,600$ 62,261$ 298,400$ 1,539,991$ –$
TotalsWater Quality
-37-
THIS PAGE INTENTIONALLY LEFT BLANK
CITY OF PRIOR LAKE
Notes to Basic Financial Statements
December 31, 2017
-38-
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 by the City Council. 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.
-39-
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 coll ected
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. Proceeds of long-term debt and acquisitions under capital leases are reported as
other financing sources.
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.
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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 ser vice 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.
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.
The City also reports the following fund type:
Internal Service Funds – Internal service funds account for the financing of goods and services
provided to other departments or agencies of the City on a cost reimbursement basis. The City utilizes
a Severance Compensation Internal Service Fund and an Insurance Internal Service Fund in managing
city operations.
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NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 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. Earnings on these accounts are allocated directly to those funds.
The City categorizes its fair value measurements within the fair value hierarchy established by
accounting principles generally accepted in the United States of America. The hierarchy is based
on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted
prices in active markets for identical assets; Level 2 inputs are significant other observable inputs;
and Level 3 inputs are significant unobservable inputs.
Debt securities classified in Level 2 of the fair value hierarc hy are valued using a matrix pricing
technique. Matrix pricing is used to value securities based on the securities’ relationship to
benchmark quoted prices.
See Note 2 for the City’s recurring fair value measurements as of year-end.
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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 2. a) 1), but not less than 10 percent
2) Up to 90 percent of 2. a) 2) and 2. a) 3)
3) Up to 20 percent of 2. a) 4)
4) Up to 20 percent of 2. a) 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. 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.”
J. 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 acquisition value on
the date of donation. The City defines capital assets as those with an initial, individual cost of $5,00 0 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.
K. 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.
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. Other Post-Employment Benefits (OPEB)
Under Minnesota Statutes § 471.61, Subd. 2b, public employers must allow retirees and their dependents
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 dependent 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, 2017.
N. Pension Plans
For purposes of measuring the net pension liability, deferred outflows/inflows of resources, and pension
expense, information about the fiduciary net position of the Public Employees Retirement Association
(PERA) and additions to/deductions from the PERA’s fiduciary net position have been determined on the
same basis as they are reported by the PERA 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)
The PERA has a special funding situation created by a direct aid contribution made by the state of
Minnesota. The direct aid is a result of the merger of the Minneapolis Employees Retirement Fund into
the PERA on January 1, 2015.
O. Deferred Outflows/Inflows of Resources
In addition to assets and liabilities, statements of financial position or balance sheets will sometimes
report a separate section for deferred outflows of resources. These separate financial statement elements
represent a consumption or acquisition of net position that applies to future periods and so will not be
recognized as an outflow of resources (expense/expenditure) or an inflow of financial resources until
then.
The City reports deferred outflows and inflows of resources related to pensions in the government-wide
and enterprise funds Statement of Net Position. These deferred outflows and inflows result from
differences between expected and actual experience, changes in proportion, 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.
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 two sources: property taxes and special assessments. These amounts are deferred and recognized as
an inflow of resources in the period that the amounts become available.
P. 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.”
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NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Q. 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.
• 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.
R. 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, 2016, 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.
S. 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. 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.
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NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
T. 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.
U. 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. The 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 2017.
V. 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.
W. 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
amounts reported in the financial statements during the reporting period. Actual results could differ from
those estimates.
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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 399,535$
Investments 31,030,092
Cash on hand 750
Total 31,430,377$
Cash and investments are presented in the financial statements as follows:
Statement of Net Position
Cash and investments 31,405,377$
Restricted assets – temporarily restricted –
cash and investments held in escrow 25,000
Total 31,430,377$
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 $399,535 while the balance on the bank
records was $494,058. At December 31, 2017, all deposits were fully covered by federal depository
insurance, surety bonds, or by collateral held by the City’s agent in the City’s name.
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NOTE 2 – CASH AND INVESTMENTS (CONTINUED)
C. Investments
The City has the following investments at year-end:
Fair Value
Investment Type Rating Agency Measurement Less Than 1 1 to 5 Over 5 Total
U.S. Agency securities AA S&P Level 2 –$ 6,569,142$ –$ 6,569,142$
Local government securities AAA S&P Level 2 – 675,493 – 675,493
Local government securities AAA Moody’s Level 2 – 265,762 – 265,762
Local government securities AA S&P Level 2 1,203,540 2,269,734 – 3,473,274
Local government securities AA Moody’s Level 2 – 362,146 – 362,146
Negotiable certificates of deposit N/R N/A Level 2 3,301,783 7,914,924 478,431 11,695,138
4,505,323$ 18,057,201$ 478,431$ 23,040,955
Investment pools/mutual funds
Minnesota Municipal Money Market Fund N/R N/A N/A 7,504,892
Fidelity Treasury Portfolio – Class I AAA S&P Level 1 304,713
Wells Fargo Advantage Government Money
Market AAA S&P Level 1 179,159
Northland Federated Treasury Cash Series AAA S&P Level 1 373
Total investment pools/mutual funds 7,989,137
Total investments 31,030,092$
N/A – Not Applicable
N/R – Not Rated
Credit Risk
Interest Risk –
Segmented Time Distribution in Years
The 4M Fund is an external investment pool regulated by Minnesota Statutes that is not registered with
the Securities and Exchange Commission (SEC), but follows the same regulatory rules of the SEC. The
fair value of the position in the pool is the same as the value of the pool shares. The City’s investment in
this fund is measured at amortized cost. The fund has no restrictions on withdrawals.
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 $10,000,000; that are a
primary reporting dealer in U.S. government securities to the Federal Reserve Bank of New York; or
certain Minnesota securities broker-dealers. The City’s investment policy as described in Note 1
addresses credit risk.
Concentration Risk – This is the risk associated with investing a significant portion of the City’s
investment (considered 5.0 percent or more) in the securities of a single issuer, excluding U.S.
guaranteed investments (such as treasuries), investment pools, and mutual funds. At December 31,
2017, the City had 11.9 and 6.1 percent of its portfolio invested with Federal Home Loan Mortgage
Corporation and Federal National Mortgage Association, respectively. The City’s investment policy
as described in Note 1, addresses concentration risk.
Interest Rate Risk – This is the risk of potential variability in the fair value of fixed rate investments
resulting from changes in interest rates (the longer the period for which an interest rate is fixed, the
greater the risk). The City has an investment policy as described in Note 1, which addresses interest
rate risk.
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NOTE 3 – CAPITAL ASSETS
Capital asset activity for the year ended December 31, 2017 was as follows:
A. Changes in Capital Assets Used in Governmental Activities
Transfers
Beginning and Completed
of Year Additions Deletions Construction End of Year
Capital assets, not depreciated
Land 32,221,249$ –$ –$ –$ 32,221,249$
Easements 37,271,304 6,583,060 – – 43,854,364
Construction in progress 12,622,172 9,017,105 – (8,769,031) 12,870,246
Total capital assets, not depreciated 82,114,725 15,600,165 – (8,769,031) 88,945,859
Capital assets, depreciated
Land improvements 2,774,127 – – – 2,774,127
Machinery and equipment 6,247,073 678,906 (49,016) (265,309) 6,611,654
Vehicles 5,959,141 319,151 (152,795) – 6,125,497
Infrastructure 97,495,561 753,223 – 2,500,503 100,749,287
Total capital assets, depreciated 112,475,902 1,751,280 (201,811) 2,235,194 116,260,565
Less accumulated depreciation on
Land improvements (1,539,940) (85,998) – – (1,625,938)
Machinery and equipment (3,534,389) (407,007) 49,016 – (3,892,380)
Vehicles (4,250,581) (334,882) 152,795 – (4,432,668)
Infrastructure (47,389,324) (3,075,078) – – (50,464,402)
Total accumulated depreciation (56,714,234) (3,902,965) 201,811 – (60,415,388)
Net capital assets, depreciated 55,761,668 (2,151,685) – 2,235,194 55,845,177
Total capital assets, net 137,876,393$ 13,448,480$ –$ (6,533,837)$ 144,791,036$
B. Changes in Capital Assets Used in Business-Type Activities
Transfers
Beginning and Completed
of Year Additions Deletions Construction End of Year
Capital assets, not depreciated
Easements 75,300$ –$ –$ –$ 75,300$
Construction in progress – 127,154 – – 127,154
Total capital assets, not depreciated 75,300 127,154 – – 202,454
Capital assets, depreciated
Land improvements 87,739 – – – 87,739
Machinery and equipment 1,017,781 – – 372,114 1,389,895
Vehicles 305,493 – (222,857) – 82,636
Infrastructure 65,645,666 220,856 – 6,161,723 72,028,245
Total capital assets, depreciated 67,056,679 220,856 (222,857) 6,533,837 73,588,515
Less accumulated depreciation on
Land improvements (30,610) (4,387) – – (34,997)
Machinery and equipment (657,696) (47,876) – – (705,572)
Vehicles (284,342) (10,500) 222,857 – (71,985)
Infrastructure (15,083,973) (1,254,895) – – (16,338,868)
Total accumulated depreciation (16,056,621) (1,317,658) 222,857 – (17,151,422)
Net capital assets, depreciated 51,000,058 (1,096,802) – 6,533,837 56,437,093
Total capital assets, net 51,075,358$ (969,648)$ –$ 6,533,837$ 56,639,547$
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NOTE 3 – CAPITAL ASSETS (CONTINUED)
C. Depreciation Expense by Function
Depreciation expense for the year ended December 31, 2017 was charged to the following functions:
Governmental activities
General government 511,921$
Public safety 163,694
Public works 2,756,093
Culture and recreation 471,257
Total depreciation expense – governmental activities 3,902,965$
Business-type activities
Water 737,632$
Sewer 469,658
Water quality 110,368
Total depreciation expense – business-type activities 1,317,658$
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, 2017 is as follows:
Receivable Fund Payable Fund Amount
General Fund Nonmajor governmental funds 236$
B. Interfund Transfers
A schedule of interfund transfers is as follows:
Internal Service
Transfers Out General Debt Service Construction Nonmajor Severance Water Water Quality Total
Governmental funds
General –$ 1,018,791$ 312,000$ 205,330$ 100,000$ –$ –$ 1,636,121$
Debt – – 433,529 – – – – 433,529
Construction – 5,000 104,440 – – – 42,093 151,533
Nonmajor – 162,897 327,252 – – 250,000 – 740,149
Proprietary funds
Water 185,000 544,857 1,215,214 206,350 – – – 2,151,421
Sewer 185,000 – 877,610 170,300 – – – 1,232,910
Water Quality 60,000 – 374,215 21,000 – – – 455,215
430,000$ 1,731,545$ 3,644,260$ 602,980$ 100,000$ 250,000$ 42,093$ 6,800,878$
Transfer In
Governmental Proprietary
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
Fire Hall Refunding Bonds 2011B 3,500,000$ 2.00–3.40%12/14/2011 12/15/2031 3,110,000$
Capital Improvement Refunding Bonds 2012A 9,825,000$ 2.00–2.70%03/13/2012 12/15/2029 7,395,000
Street Reconstruction Bonds of 2015B 2,330,000$ 1.00–2.25%05/14/2015 12/15/2022 1,860,000
Street Reconstruction Bonds of 2016A 760,000$ 2.00%05/01/2016 12/15/2026 675,000
Improvement Bonds 2017A 370,000$ 2.00–2.25%06/29/2017 12/15/2027 370,000
Total general obligation bonds 13,410,000
General obligation special assessment bonds
Improvement Bonds of 2009A 1,700,000$ 1.10–3.50%05/15/2009 12/15/2019 350,000
Improvement Bonds of 2010A 1,235,000$ 0.80–3.20%05/26/2010 12/15/2020 385,000
Improvement Bonds of 2011A 2,130,000$ 1.80–2.50%08/31/2011 12/15/2021 885,000
Improvement Bonds of 2011B 2,280,000$ 2.00–2.35%12/14/2011 12/15/2022 1,190,000
Improvement Bonds of 2013A 3,240,000$ 2.00–2.65%08/15/2013 12/15/2023 1,940,000
Improvement Bonds of 2014A 2,665,000$ 2.00–2.50%09/25/2014 12/15/2024 1,730,000
Improvement Bonds of 2015A 4,640,000$ 2.00–3.00%05/14/2015 12/15/2030 4,640,000
Improvement Bonds of 2015B 160,000$ 1.00–2.25%05/14/2015 12/15/2022 120,000
Improvement Bonds of 2016A 1,105,000$ 2.00%05/01/2016 12/15/2026 990,000
Improvement Bonds of 2017A 4,135,000$ 2.00–2.25%06/29/2017 12/15/2027 4,135,000
Total general obligation special
assessment bonds 16,365,000
Tax increment bonds
Tax Increment Refunding Bonds of 2011A 290,000$ 1.80–3.00%08/31/2011 12/15/2024 185,000
General obligation revenue bonds
General Obligation Improvement
Bonds of 2015A 5,360,000$ 1.00–3.00%05/14/2015 12/15/2031 5,360,000
General Obligation Improvement
Bonds of 2016A 1,640,000$ 2.00%05/01/2016 12/15/2022 1,640,000
Total general obligation revenue bonds 7,000,000
Premium (discount) on bonds payable 596,753
Energy loan payable 2,667,924$ 2.12%12/08/2014 06/19/2025 2,074,452
Compensated absences payable 794,988
Net OPEB obligation 398,179
Net pension liability – GERF and PEPFF 6,411,191
Total long-term debt 47,235,563$
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NOTE 5 – LONG-TERM DEBT (CONTINUED)
B. Changes in Long-Term Debt
Balance –
Beginning Balance –Due Within
of Year Additions Deletions End of Year One Year
Governmental activities
Bonds payable
G.O. bonds 14,980,000$ 370,000$ 1,940,000$ 13,410,000$ 1,375,000$
G.O. special assessment bonds 13,745,000 4,135,000 1,515,000 16,365,000 1,925,000
G.O. tax increment bonds 205,000 – 20,000 185,000 25,000
G.O. revenue bonds 14,050,000 – 7,050,000 7,000,000 370,000
Premium (discount) on bonds payable 572,534 103,225 79,006 596,753 –
Total bonds payable, net of premium (discount)43,552,534 4,608,225 10,604,006 37,556,753 3,695,000
Energy loan payable 2,327,085 – 252,633 2,074,452 258,016
Compensated absences payable 872,720 106,642 184,374 794,988 315,277
Net OPEB obligation 324,900 110,967 37,688 398,179 –
Net pension liability – GERF and PEPFF 13,647,076 1,319,948 8,555,833 6,411,191 –
Governmental activities long-term liabilities 60,724,315$ 6,145,782$ 19,634,534$ 47,235,563$ 4,268,293$
Business-type activities
Compensated absences payable 134,300$ 23,258$ 15,690$ 141,868$ 56,278$
Net pension liability – GERF 1,514,856 181,453 503,536 1,192,773 –
Business-type activities long-term liabilities 1,649,156$ 204,711$ 519,226$ 1,334,641$ 56,278$
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
2018 1,375,000$ 312,055$ 1,925,000$ 411,877$ 25,000$ 4,800$ 370,000$ 166,925$ 258,016$ 42,598$
2019 1,110,000 284,923 1,860,000 330,538 25,000 4,300 385,000 160,275 263,512 37,102
2020 1,010,000 264,046 1,710,000 289,053 25,000 3,763 400,000 153,325 269,126 31,488
2021 1,160,000 243,948 1,605,000 252,103 25,000 3,175 420,000 145,700 274,859 25,755
2022 1,320,000 220,108 1,385,000 217,388 25,000 2,550 440,000 137,675 280,714 19,900
2023–2027 5,465,000 751,415 6,160,000 645,468 60,000 2,700 2,570,000 544,300 728,225 23,309
2028–2032 1,970,000 163,280 1,720,000 103,800 – – 2,415,000 184,650 – –
13,410,000$ 2,239,775$ 16,365,000$ 2,250,227$ 185,000$ 21,288$ 7,000,000$ 1,492,850$ 2,074,452$ 180,152$
Energy Loan Payable
Governmental Activities
General Obligation G.O. Special Assessment G.O. Tax Increment Bonds G.O. Revenue Bonds
D. Other Long-Term Liabilities
The City offers a number of benefits to its employees, including severance benefits payable, compensated
absences payable, pensions, and OPEB. The details of these various benefit liabilities are discussed
elsewhere in these notes. Such benefits are financed primarily from the General and Enterprise Funds.
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NOTE 5 – LONG-TERM DEBT (CONTINUED)
City employees participate in two state-wide cost-sharing, multi-employer defined benefit pension plans
administered by the General Employees Retirement Fund (GERF) and the Public Employees Police and
Fire Fund (PEPFF) and one single-employer plan administered by the Prior Lake Fire Department Relief
Association (the Association). The following is a summary of the net pension liabilities, deferred
outflows and inflows of resources, and pension expense reported for these plans as of and for the year
ended December 31, 2017:
Net Deferred Deferred
Pension Outflows of Inflows of Pension
Pension Plans Liabilities Resources Resources Expense
GERF 4,417,682$ 1,080,405$ 862,722$ 570,103$
PEPFF 3,186,282 4,542,314 5,504,811 790,605
Fire relief association – 235,182 426,346 (82,071)
Total 7,603,964$ 5,857,901$ 6,793,879$ 1,278,637$
E. 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.
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.
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NOTE 5 – LONG-TERM DEBT (CONTINUED)
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.
In 2016, the City issued $3,505,000 of General Obligation Bonds, Series 2016A. A portion of the bond
issue is a crossover refunding of the 2007A Water Treatment Pla nt Revenue Bonds. The proceeds of the
new bonds were deposited in an escrow account on May 26, 2016, 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 $88,765
in debt service payments and achieve an economic gain (the present value of the difference between the
old and the new debt service) of $90,369.
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.
F. 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, 2017 is $4,901,025.
G. Revenue Pledged
Future revenue pledged for the payment of long-term debt is as follows:
Percent of Remaining Principal Pledged
Use of Total Term of Principal and Interest Revenue
Bond Issue Proceeds Type Debt Service Pledge and Interest Paid Received
Tax Increment Refunding Street and site Tax increment 100%2011–2024 206,288$ 25,160$ 101,296$
Bonds of 2011A improvements financing
General Obligation Partial refunding Utility charges 100%2015–2031 6,750,950$ 134,125$ 3,793,719$
Bonds of 2015A
General Obligation Partial refunding Utility charges 100%2016–2022 1,741,900$ 32,800$ 3,793,719$
Bonds of 2016A
Revenue Pledged Current Year
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NOTE 5 – LONG-TERM DEBT (CONTINUED)
H. 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 $3,030,449,778, which calculates to a debt limit of
$90,913,493. 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 reven ues.
Currently, the City has $13,410,000 of general obligation debt outstanding, leaving a debt margin of
$77,503,493.
NOTE 6 – FUND BALANCES
A. Classifications
At December 31, 2017, a summary of the City’s governmental fund balance classifications are as follows:
Debt Construction Nonmajor
General Fund Service Fund Fund Funds Total
Restricted
Future debt service –$ 2,659,811$ –$ –$ 2,659,811$
Economic development – – – 266,907 266,907
Tax increment – – – 586,248 586,248
Forfeiture sales – – – 183,300 183,300
Total restricted – 2,659,811 – 1,036,455 3,696,266
Assigned
Subsequent year’s budget 218,546 – – – 218,546
Capital improvements – – 2,324,549 8,991,017 11,315,566
Development – – – 207,238 207,238
Communications – – – 91,915 91,915
Total assigned 218,546 – 2,324,549 9,290,170 11,833,265
Unassigned 6,622,382 (487) – (236) 6,621,659
Total 6,840,928$ 2,659,324$ 2,324,549$ 10,326,389$ 22,151,190$
B. 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
40.0 and 50.0 percent of the subsequent year’s General Fund budgeted expenditures. At December 31,
2017, the unrestricted fund balance of the General Fund was 53.6 percent of the subsequent year’s
budgeted expenditures and transfers out.
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NOTE 6 – FUND BALANCES (CONTINUED)
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.
NOTE 7 – DEFINED BENEFIT PENSION PLANS – STATE-WIDE
A. Plan Description
The City participates in the following cost-sharing, multi-employer defined benefit pension plans
administered by the PERA of Minnesota. 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 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 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
statutes and can only be modified by the State Legislature.
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NOTE 7 – DEFINED BENEFIT PENSION PLANS – STATE-WIDE (CONTINUED)
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 90.0 percent funded for two consecutive years are given
2.5 percent increases. Members in plans that have not exceeded 90.0 percent funded, or have fallen below
80.0 percent, are given 1.0 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 avera ge 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 age 66.
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
Basic Plan members and Coordinated Plan members were required to contribute 9.10 percent and
6.50 percent, respectively, of their annual covered salary in calendar year 2017. The City was
required to contribute 11.78 percent of pay for Basic Plan members and 7.50 percent for
Coordinated Plan members in calendar year 2017. The City’s contributions to the GERF for the
year ended December 31, 2017 were $328,001. The City’s contributions were equal to the
required contributions as set by state statutes.
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NOTE 7 – DEFINED BENEFIT PENSION PLANS – STATE-WIDE (CONTINUED)
2. PEPFF Contributions
Plan members were required to contribute 10.8 percent of their annual covered salary in calendar
year 2017. The City was required to contribute 16.2 percent of pay for PEPFF members in
calendar year 2017. The City’s regular contributions to the PEPFF for the year ended
December 31, 2017 were $400,549. The City’s contributions were equal to the required
contributions as set by state statutes.
D. Pension Costs
1. GERF Pension Costs
At December 31, 2017, the City reported a liability of $4,417,682 for its proportionate share of
the GERF’s net pension liability. The net pension liability was measured as of June 30, 2017 , 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, 2016 through June 30, 2017, relative to the total employer contributions
received from all of the PERA’s participating employers. The City’s proportionate share was
0.0692 percent at the end of the measurement period and 0.0691 percent for the beginning of the
period.
The City’s net pension liability reflected a reduction due to the state of Minnesota’s contribution
of $6 million to the fund. The state of Minnesota is considered a nonemployer contributing entity
and the state’s contribution meets the definition of a special funding situation. The amount
recognized by the City as its proportionate share of the net pension liability, the direct aid, and
total portion of the net pension liability that was associated with the City were as follows:
City’s proportionate share of net pension liability 4,417,682$ State’s proportionate share of the net pension liability
associated with the City 55,547$
For the year ended December 31, 2017, the City recognized pension expense of $568,499 for its
proportionate share of the GERF’s pension expense. In addition, the City recognized an
additional $1,604 as pension expense (and grant revenue) for its proportionate share of the state
of Minnesota’s contribution of $6 million to the GERF.
At December 31, 2017, the City reported its proportionate share of the GERF’s deferred outflows
of resources and deferred inflows of resources related to pensions from the following sources:
Deferred Deferred
Outflows Inflows
of Resources of Resources
Differences between expected and actual economic experience 145,593$ 286,226$
Changes in actuarial assumptions 732,371 442,873
Differences between projected and actual investment earnings 34,275 –
Changes in proportion 6,090 133,623
Contributions paid to the PERA subsequent to the measurement
date 162,076 –
Total 1,080,405$ 862,722$
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NOTE 7 – DEFINED BENEFIT PENSION PLANS – STATE-WIDE (CONTINUED)
Deferred outflows of resources reported $162,076 related to pensions resulting from city
contributions subsequent to the measurement date that will be recognized as a reduction of the net
pension liability in the year ending December 31, 2018. Other amounts reported as deferred
outflows and inflows of resources related to pensions will be recognized in pension expense as
follows:
Pension
Year Ending Expense
December 31,Amount
2018 100,680$
2019 224,369$
2020 (81,922)$
2021 (187,520)$
2. PEPFF Pension Costs
At December 31, 2017, the City reported a liability of $3,186,282 for its proportionate share of
the PEPFF’s net pension liability. The net pension liability was measured as of June 30, 2017,
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, 2016 through June 30, 2017, relative to the total employer
contributions received from all of the PERA’s participating employers. The City’s proportionate
share was 0.236 percent at the end of the measurement period and 0.238 percent for the beginning
of the period.
For the year ended December 31, 2017, the City recognized pension expense of $769,365 for its
proportionate share of the PEPFF’s pension expense. The City also recognized $21,240 for the
year ended December 31, 2017, as pension revenue (and an offsetting reduction of net pension
liability) for its proportionate share of the state of Minnesota’s on-behalf contributions to the
PEPFF. In 2013, legislation passed and required the state of Minnesota to begin contributing
$9 million to the PEPFF each year, starting in fiscal year 2014.
At December 31, 2017, the City reported its proportionate share of the PEPFF’s deferred outflows
of resources and deferred inflows of resources related to pensions from the following sources:
Deferred Deferred
Outflows Inflows
of Resources of Resources
Differences between expected and actual economic experience 73,343$ 861,245$
Changes in actuarial assumptions 4,205,222 4,523,728
Differences between projected and actual investment earnings 54,679 –
Changes in proportion – 119,838
Contributions paid to the PERA subsequent to the measurement
date 209,070 –
Total 4,542,314$ 5,504,811$
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NOTE 7 – DEFINED BENEFIT PENSION PLANS – STATE-WIDE (CONTINUED)
Deferred outflows of resources reported $209,070 related to pensions resulting from city
contributions subsequent to the measurement date that will be recognized as a reduction of the net
pension liability in the year ending December 31, 2018. Other amounts reported as deferred
outflows and inflows of resources related to pensions will be recognized in pension expense as
follows:
Pension
Year Ending Expense
December 31,Amount
2018 36,115$
2019 36,115$
2020 (82,667)$
2021 (257,678)$
2022 (903,452)$
E. Actuarial Assumptions
The total pension liability in the June 30, 2017 actuarial valuation was determined using the following
actuarial assumptions:
Inflation 2.50% per year
Active member payroll growth 3.25% per year
Investment rate of return 7.50%
Salary increases were based on a service-related table. Mortality rates for active members, retirees,
survivors and disabilitants were based on RP-2014 tables for all plans for males or females, as
appropriate, with slight adjustments to fit the PERA’s experience. Cost of living benefit increases for
retirees are assumed to be 1.0 percent per year for the GERF through 2044, and the PEPFF through 2064,
and then 2.5 percent thereafter for both plans.
Actuarial assumptions used in the June 30, 2017 valuation were based on the results of actuarial
experience studies. The most recent four-year experience study in the GERF was completed in 2015. The
most recent five-year experience study for the PEPFF was completed in 2016.
The following changes in actuarial assumptions occurred in 2017:
1. GERF
• The Combined Service Annuity (CSA) loads were changed from 0.8 percent for active
members and 60.0 percent for vested and nonvested deferred members. The revised
CSA loads are now zero percent for active member liability, 15.0 percent for vested deferred
member liability, and 3.0 percent for nonvested deferred member liability.
• The assumed post-retirement benefit increase rate was changed from 1.0 percent per year for
all years, to 1.0 percent per year through 2044, and 2.5 percent per year thereafter.
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NOTE 7 – DEFINED BENEFIT PENSION PLANS – STATE-WIDE (CONTINUED)
2. PEPFF
• Assumed salary increases were changed as recommended in the June 30, 2016 experience
study. The net effect is proposed rates that average 0.34 percent lower than the previous rates.
• Assumed rates of retirement were changed, resulting in fewer retirements.
• The CSA load was 30 percent for vested and nonvested deferred members. The CSA has
been changed to 33 percent for vested members and 2 percent for nonvested members.
• The base mortality table for healthy annuitants was changed from the RP -2000 Fully
Generational Table to the RP-2014 Fully Generational Table (with a base year of 2006), with
male rates adjusted by a factor of 0.96. The mortality improvement scale was changed from
Scale AA to Scale MP-2016. The base mortality table for disabled annuitants was changed
from the RP-2000 Disabled Mortality Table to the mortality tables assumed for healthy
retirees.
• Assumed termination rates were decreased to 3.0 percent for the first three years of service.
Rates beyond the select period of three years were adjusted, resulting in more expected
terminations overall.
• Assumed percentage of married female members was decreased from 65 percent to
60 percent.
• Assumed age difference was changed from separate assumptions for male members (wives
assumed to be three years younger) and female members (husbands assumed to be four years
older) to the assumption that males are two years older than females.
• The assumed percentage of female members electing joint and survivor annuities was
increased.
• The assumed post-retirement benefit increase rate was changed from 1.00 percent for all
years, to 1.00 percent per year through 2064, and 2.50 percent thereafter.
• The single discount rate changed from 5.60 percent to 7.50 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
geometric real rates of return for each major asset class are summarized in the following table:
Asset Class
Domestic stocks 39 %5.10 %
International stocks 19 5.30 %
Bonds 20 0.75 %
Alternative assets 20 5.90 %
Cash 2 – %
Total 100 %
Target
Allocation
Long-Term
Expected
of Return
Real Rate
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NOTE 7 – DEFINED BENEFIT PENSION PLANS – STATE-WIDE (CONTINUED)
F. Discount Rate
The discount rate used to measure the total pension liability in 2017 was 7.50 percent. The projection of
cash flows used to determine the discount rate assumed that contributions from plan members and
employers will be made at rates set in Minnesota Statutes. Based on these assumptions, the fiduciary net
positions of the GERF and the PEPFF were projected to be available to make all projected future benefit
payments of current plan members. Therefore, the long-term expected rate of return on pension plan
investments was applied to all periods of projected benefit payments to determine the total pension
liability.
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
(6.5%)(7.5%)(8.5%)
The City’s proportionate share of the
GERF net pension liability 6,852,154$ 4,417,682$ 2,424,625$
The City’s proportionate share of the
PEPFF net pension liability 6,000,696$ 3,186,282$ 862,825$
H. Pension Plan Fiduciary Net Position
Detailed information about the GERF’s fiduciary net position is available in a separately issued PERA
financial report. That report may be obtained on the PERA website at www.mnpera.org; by writing to the
PERA at 60 Empire Drive, Suite 200, St. Paul, Minnesota 55103; or by calling (651) 296 -7460 or
(800) 652-9026.
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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 Prior Lake Fire Department Relief Association (the Association). As of December 31,
2016, the plan covered 46 active firefighters and 11 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 reache d the age of
50 years or more, $7,200 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, 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 $7,200 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 $7,200 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 ap plicable). The state
of Minnesota contributed $215,182 in fire state aid to the plan on behalf of the Department for the year
ended December 31, 2017, 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, 2017 were $215,182. The City’s contributions were equal to the required
contributions as set by state statutes. The City made a $20,000 voluntary contribution to the plan in the
year ended December 31, 2017. Furthermore, firefighters have no obligation to contribute to the plan.
D. Pension Costs
At December 31, 2017, the City reported a net pension liability (asset) of ($789,822) for the plan. The net
pension liability (asset) was measured as of December 31, 2016. The total pension liability used to
calculate the net pension liability (asset) in accordance with GASB Statement No. 68 was determined by
Hildi, Inc. applying an actuarial formula to specific census data certified by the Department as of
December 31, 2016.
The following table presents the changes in net pension liability (asset):
Total Pension Plan Fiduciary Net Pension
Liability Net Position Liability (Asset)
Beginning balance – January 1, 2017 3,109,785$ 3,716,803$ (607,018)$
Changes for the year
Service cost 110,441 – 110,441
Interest on pension liability (asset)192,181 – 192,181
Plan changes 34,110 – 34,110
Projected investment earnings – 228,778 (228,778)
Contributions (employer)– 20,000 (20,000)
Contributions (state)– 215,891 (215,891)
Asset (gain) loss 28,006 92,033 (64,027)
Benefit payments (34,403) (34,403) –
Administrative costs – (9,160) 9,160
Total net changes 330,335 513,139 (182,804)
Ending balance – December 31, 2017 3,440,120$ 4,229,942$ (789,822)$
For the year ended December 31, 2017, the City recognized pension expense of negative ($82,071).
A benefit level increase from $7,100 to $7,200 was reflected in the pension liability in the current year.
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NOTE 8 – DEFINED BENEFIT PENSION PLANS – FIRE RELIEF ASSOCIATION
(CONTINUED)
At December 31, 2017, the City reported deferred inflows of resources and deferred outflows of resources
related to the pension from the following sources:
Deferred Deferred
Outflows Inflows
of Resources of Resources
Net difference between projected and actual earnings on
plan investments –$ 211,164$
State aid to the City subsequent to the measurement date – 215,182
Contributions from the City subsequent to the measurement date 235,182 –
Total 235,182$ 426,346$
Deferred outflows of resources totaling $235,182 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 ending December 31, 2018. Deferred inflows of resources totaling $215,182 related to
state aid received subsequent to the measurement date will be recognized for its impact on the net pension
liability in the year ending December 31, 2018. Other amounts reported as deferred outflows and inflows
of resources related to the plan will be recognized in pension expense as follows:
Pension
Year Ending Expense
December 31,Amount
2018 (74,149)$
2019 (74,148)$
2020 (64,251)$
2021 14,904$
2022 (13,520)$
E. Actuarial Assumptions
The total pension liability at December 31, 2016 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
Investment rate of return 6.00%
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 13.00 %2.25 %
Fixed income 21.00 3.30 %
Equities 65.00 7.50 %
Other 1.00 6.00 %
Total 100.00 %
Weight
Portfolio
Return
Class
Expected
F. Discount Rate
The discount rate used to measure the total pension liability was 6 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
statutes. 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% Decrease Discount Rate 1% Increase
(5.00%)(6.00%)(7.00%)
Defined benefit plan (678,357)$ (789,822)$ (895,394)$
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, Minnesota 55372.
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NOTE 9 – OTHER POST-EMPLOYMENT BENEFITS (OPEB) PLAN
A. Plan Description
The City provides post-employment benefits to certain eligible employees through the City’s OPEB 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, 2017, the plan had 87 active
participants and 6 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 secondar y 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 prefund benefits as determined annually by the City. There are 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 116,959$
Interest on net OPEB obligation 11,372
Adjustment to ARC (17,364)
Annual OPEB cost 110,967
Contributions made (37,688)
Increase in net OPEB obligation 73,279
Net OPEB obligation – beginning of year 324,900
Net OPEB obligation – end of year 398,179$
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NOTE 9 – OTHER POST-EMPLOYMENT BENEFITS (OPEB) 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:
Year Ended Annual Employer Net OPEB
December 31,OPEB Cost Contribution Obligation
2017 110,967$ 37,688$ 34.0 %398,179$
2016 108,880$ 20,175$ 18.5 %324,900$
2015 110,580$ 17,699$ 16.0 %236,195$
Percentage of
Annual OPEB
Cost Contributed
D. Funded Status and Funding Progress
As of January 1, 2017, the most recent actuarial valuation date, the plan was zero percent funded. The
actuarial accrued liability for benefits was $926,948, and the actuarial value of assets was $0, resulting in
an unfunded actuarial accrued liability (UAAL) of $926,948. The covered payroll (annual payroll of
active employees covered by the plan) was $6,369,671, and the ratio of the UAAL to the covered payroll
was 14.6 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 an d 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, 2017 actuarial valuation, the entry age normal level dollar method was used. The
actuarial assumptions included: a 3.5 percent investment rate of return (net of administrative expenses)
based on the City’s own investments; a general inflation rate of 2.5 percent; and an annual healthcare cost
trend rate of 6.5 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, 2017 is 30 years.
NOTE 10 – STEWARDSHIP AND ACCOUNTABILITY
Deficit Net Position
As of December 31, 2017, the Severance Compensation Internal Service Fund had a deficit net position of
$476,887. This deficit will be eliminated by future charges for services. The Tax Increment 1-5 Gateway
Center Nonmajor Capital Project Fund had a deficit fund balance of $236.
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NOTE 11 – TAX ABATEMENT AGREEMENTS
The City, in order to spur economic development and redevelopment, has entered into private
development and redevelopment agreements to encourage a developer to construct, expand, or improve
new or existing properties and buildings or clean-up and redevelop blighted areas. The City currently has
six agreements that would be considered tax abatements under GASB Statement No. 77.
Outstanding
Amount Principal Date of
Abated During Balance Required
Name Purpose the Fiscal Year at Year-End Decertification
1-3 Lakefront
1-4 River Valley Vet
3-1 Creekside Estates 54-unit senior housing facility 69,552$ 147,575$ 12/31/2029
5-1 Premier Dance
1-5 Gateway Center
12/31/2035
7,857$ 35,264$ 12/31/2022
144,073$ 12/31/2034
12,447$ 12/31/2034
80-unit owner-occupied senior housing facility
and 12,000 square feet of retail space and
related improvements 12/31/2029683,901$ 75,972$
7,000 square foot addition to the existing
veterinary clinic facility
6-1 Shepherds Path
Acquisition, construction and equipping of a
170-unit multi-family senior housing
development
80.03 acres, including 442 senior housing units,
a YMCA facility, youth center, medical
office/clinic, bank, park area, trails, and
companion uses to the existing church 278,707$
159,449$
–$ 1,637,000$
10,000 square foot commercial facility to be
used as a dance studio
The City is authorized to create a tax increment financing plan under Minnesota Statutes,
Chapter 469.175. The criteria that must be met under the state statutes are that, in the opinion of the
municipality:
• The proposed development or redevelopment would not reasonably be expected to occur solely
through private investment within the reasonably foreseeable future;
• The increased market value of the site that could reasonably be expected to occur without the use
of tax increment financing would be less than the increase in the market value estimated to result
from the proposed development after subtracting the present value of the projected tax increments
for the maximum duration of the district permitted by the plan. The requirements of this item do
not apply if the district is a housing district;
• The tax increment financing plan conforms to the general plan for the development or
redevelopment of the municipality as a whole; and
• The tax increment financing plan will afford maximum opportunity, consistent with the sound
needs of the municipality as a whole, for the development or redevelopment of the project by
private enterprise.
The City has entered into private development agreements regarding certain tax increment properties. The
vehicle used for this reimbursement is called a tax increment revenue note.
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NOTE 11 – TAX ABATEMENT AGREEMENTS (CONTINUED)
These notes provide for the payment of principal, equal to the developer’s costs, plus interest at a set rate.
Payments on the loan will be made at the lesser of the note payment or the actual net tax increment
received (or a reduced percentage received in certain cases) during specific years as stat ed in the
agreement. Payments are first applied to accrued interest and then to the principal balance. The note is
canceled at the end of the agreement term, whether or not the note has been repaid. Any additional tax
increments received in years following the term are retained by the City.
The outstanding principal balances as of December 31, 2017 for these agreements are listed on the
previous page. These amounts are not included in long-term debt because the nature of these notes is that
repayment is required only if sufficient tax increments are received. The City’s position is that these are
obligations to assign future and uncertain revenue sources and, as such, is not actual debt in substance.
NOTE 12 – 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 2017, the City awarded contracts for various construction and remodeling projects. The
City’s commitment for uncompleted work on these contracts at December 31, 2017 is $2,136,549.
D. Tax Increment Districts
The City’s tax increment districts are subject to review by the Office of the State Auditor. Any disallowed
claims or misuse of tax increments could become a liability of the applicable fund. Management has
indicated that they are not aware of any instances of noncompliance, which would have a material effect
on the financial statements.
THIS PAGE INTENTIONALLY LEFT BLANK
REQUIRED SUPPLEMENTARY INFORMATION
Proportionate
Share of the
City’s Net Pension
Proportionate Liability and City’s
Share of the the City’s Proportionate Plan Fiduciary
State of Share of the Share of the Net Position
City’s City’s Minnesota’s State of Net Pension as a
PERA Fiscal Proportion Proportionate Proportionate Minnesota’s Liability as a Percentage
Year-End Date of the Net Share of the Share of the Share of the City’s Percentage of of the Total
(Measurement Pension Net Pension Net Pension Net Pension Covered Covered Pension
Date)Liability Liability Liability Liability Payroll Payroll Liability
06/30/2015 0.0719% 3,726,231$ –$ 3,726,231$ 4,189,768$ 88.94% 78.20%
06/30/2016 0.0691% 5,610,578$ 73,274$ 5,683,852$ 4,285,600$ 130.92% 68.90%
06/30/2017 0.0692% 4,417,682$ 55,547$ 4,473,229$ 4,457,941$ 99.10% 75.90%
Contributions Contributions
in Relation to as a
Statutorily the Statutorily Contribution Percentage
Required Required Deficiency Covered of Covered
Contributions Contributions (Excess)Payroll Payroll
314,233$ 314,233$ –$ 4,189,768$ 7.50%
332,258$ 332,258$ –$ 4,430,122$ 7.50%
328,001$ 328,001$ –$ 4,373,614$ 7.50%
Note:The City implemented GASB Statement No.68 in fiscal 2015 (using a June 30, 2015 measurement date). This schedule is intended to present 10-year
trend information. Additional years will be added as they become available.
City Fiscal
Year-End Date
12/31/2015
12/31/2017
CITY OF PRIOR LAKE
PERA – General Employees Retirement Fund
Schedule of City’s and Nonemployer Proportionate Share of Net Pension Liability
PERA – General Employees Retirement Fund
12/31/2016
Schedule of City Contributions
City Fiscal
Year-End Date
12/31/2015
12/31/2016
Year Ended December 31, 2017
12/31/2017
Year Ended December 31, 2017
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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
(Measurement Pension Net Pension Covered Covered Pension
Date)Liability Liability Payroll Payroll Liability
06/30/2015 0.2400% 2,726,962$ 2,244,215$ 121.51% 86.60%
06/30/2016 0.2380% 9,551,354$ 2,294,383$ 416.29% 63.90%
06/30/2017 0.2360% 3,186,282$ 2,425,426$ 131.37% 85.40%
Contributions Contributions
in Relation to as a
Statutorily the Statutorily Contribution Percentage
Required Required Deficiency Covered of Covered
Contributions Contributions (Excess)Payroll Payroll
363,525$ 363,525$ –$ 2,244,215$ 16.20%
377,586$ 377,586$ –$ 2,337,729$ 16.15%
400,549$ 400,549$ –$ 2,472,531$ 16.20%
Note:The City implemented GASB Statement No.68 in fiscal 2015 (using a June 30, 2015 measurement date).This schedule
is intended to present 10-year trend information. Additional years will be added as they become available.
12/31/2017
12/31/2017
CITY OF PRIOR LAKE
City Fiscal
Year-End Date
12/31/2015
12/31/2016
PERA – Public Employees Police and Fire Fund
Schedule of City’s Proportionate Share of Net Pension Liability
PERA – Public Employees Police and Fire Fund
Schedule of City Contributions
City Fiscal
Year-End Date
12/31/2015
12/31/2016
Year Ended December 31, 2017
Year Ended December 31, 2017
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City fiscal year-end dated December 31,2015 2016 2017
Measurement period December 31, 2014 December 31, 2015 December 31, 2016
Total pension liability
Service cost 106,719$ 109,387$ 110,441$
Interest 148,718 164,204 192,181
Asset (gain) loss – – 28,006
Benefit payments – – (34,403)
Plan changes – 99,450 34,110
Net change in total pension liability 255,437 373,041 330,335
Total pension liability – beginning 2,481,307 2,736,744 3,109,785
Total pension liability – ending 2,736,744$ 3,109,785$ 3,440,120$
Plan fiduciary net position
Contributions (state and local)215,194$ 228,087$ 235,891$
Net investment income 154,856 (169,276) 320,811
Benefit payments – – (34,403)
Administrative costs (6,647) (6,640) (9,160)
Net change in plan fiduciary net position 363,403 52,171 513,139
Total pension liability – beginning 3,301,229 3,664,632 3,716,803
Total pension liability – ending 3,664,632$ 3,716,803$ 4,229,942$
Net pension liability (asset) – ending (927,888)$ (607,018)$ (789,822)$
Plan fiduciary net position as a percentage
of the total pension liability 133.90%119.52%122.96%
Note 1:A benefit level increase from $7,100 to $7,200 was reflected in the pension liability for 2017.
Note 2:The City implemented GASB Statement No.68 in fiscal 2015 (using a December 31, 2014 measurement date).
This information is not available for previous years.
CITY OF PRIOR LAKE
Prior Lake Fire Relief Association
Schedule of Changes in the Relief Association’s
Net Pension Asset and Related Ratios
(Last Ten Years*)
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Contributions in
Relation to the
Statutorily Statutorily Contribution Voluntary
Required Required Deficiency City
Contributions Contributions (Excess)Contribution
12/31/2015 208,087$ 208,087$ –$ 20,000$
12/31/2016 215,891$ 215,891$ –$ 20,000$
12/31/2017 215,182$ 215,182$ –$ 20,000$
*The City implemented GASB Statement No.68 in fiscal 2015 (using a December 31, 2014 measurement date). This
information is not available for previous years.
City Fiscal
Year-End Date
CITY OF PRIOR LAKE
Prior Lake Fire Relief Association
Schedule of City Contributions
Year Ended December 31, 2017
(Last Ten Years*)
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Actuarial Actuarial Unfunded
Fiscal Year Valuation Actuarial Value Actuarial
Ended Date –Accrued of Accrued Covered
December 31,January 1,Liability Plan Assets Liability Payroll
2014 2014 753,525$ –$ 753,525$ – %5,840,769$ 12.9 %
2017 2017 926,948$ –$ 926,948$ – %6,369,671$ 14.6 %
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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CITY OF PRIOR LAKE
Notes to Required Supplementary Information
December 31, 2017
PERA – General Employees Retirement Fund
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2017 CHANGES
CHANGES IN ACTUARIAL ASSUMPTIONS:
• The Combined Service Annuity (CSA) loads were changed from 0.8 percent for active members and
60 percent for vested and nonvested deferred members. The revised CSA loads are now zero percent
for active member liability, 15.0 percent for vested deferred member liability, and 3.0 percent for
nonvested deferred member liability.
• The assumed post-retirement benefit increase rate was changed from 1.0 percent per year for all years
to 1.0 percent per year through 2044, and 2.5 percent per year thereafter.
2016 CHANGES
CHANGES IN ACTUARIAL ASSUMPTIONS:
• The assumed post-retirement benefit increase rate was changed from 1.0 percent per year through 2035,
and 2.5 percent per year thereafter, to 1.0 percent per year for all years.
• The assumed investment return was changed from 7.9 percent to 7.5 percent. The single discount rate
was changed from 7.9 percent to 7.5 percent.
• Other assumptions were changed pursuant to the experience study dated June 30, 2015. The assumed
future salary increases, payroll growth, and inflation were decreased by 0.25 percent to 3.25 percent for
payroll growth, and 2.50 percent for inflation.
2015 CHANGES
CHANGES IN PLAN PROVISIONS:
• On January 1, 2015, the Minneapolis Employees Retirement Fund was merged into the General
Employees Retirement Fund, which increased the total pension liability by $1.1 billion and increased
the fiduciary plan net position by $892 million. Upon consolidation, state and employer contributions
were revised.
CHANGES IN ACTUARIAL ASSUMPTIONS:
• The assumed post-retirement benefit increase rate was changed from 1.0 percent per year through 2030,
and 2.5 percent per year thereafter, to 1.0 percent per year through 2035, and 2.5 percent per year
thereafter.
CITY OF PRIOR LAKE
Notes to Required Supplementary Information (continued)
December 31, 2017
PERA – Public Employees Police and Fire Fund
-79-
2017 CHANGES
CHANGES IN ACTUARIAL ASSUMPTIONS:
• Assumed salary increases were changed as recommended in the June 30, 2016 experience study. The
net effect is proposed rates that average 0.34 percent lower than the previous rates.
• Assumed rates of retirement were changed, resulting in fewer retirements.
• The Combined Service Annuity (CSA) load was 30 percent for vested and nonvested deferred
members. The CSA has been changed to 33 percent for vested members and 2 percent for nonvested
members.
• The base mortality table for healthy annuitants was changed from the RP-2000 Fully Generational
Table to the RP-2014 Fully Generational Table (with a base year of 2006), with male rates adjusted by
a factor of 0.96. The mortality improvement scale was changed from Scale AA to Scale MP-2016. The
base mortality table for disabled annuitants was changed from the RP -2000 Disabled Mortality Table
to the mortality tables assumed for healthy retirees.
• Assumed termination rates were decreased to 3.0 percent for the first three years of service. Rates
beyond the select period of three years were adjusted, resulting in more expected terminations overall.
• Assumed percentage of married female members was decreased from 65 percent to 60 percent.
• Assumed age difference was changed from separate assumptions for male members (wives assumed to
be three years younger) and female members (husbands assumed to be four years older) to the
assumption that males are two years older than females.
• The assumed percentage of female members electing joint and survivor annuities was increased.
• The assumed post-retirement benefit increase rate was changed from 1.00 percent for all years to
1.00 percent per year through 2064, and 2.50 percent thereafter.
• The single discount rate changed from 5.60 percent to 7.50 percent.
CITY OF PRIOR LAKE
Notes to Required Supplementary Information (continued)
December 31, 2017
PERA – Public Employees Police and Fire Fund
-80-
2016 CHANGES
CHANGES IN ACTUARIAL ASSUMPTIONS:
• The assumed post-retirement benefit increase rate was changed from 1.0 percent per year through 2037,
and 2.5 percent thereafter, to 1.0 percent per year for all future years.
• The assumed investment return was changed from 7.9 percent to 7.5 percent. The single discount rate
changed from 7.9 percent to 5.6 percent.
• The assumed future salary increases, payroll growth, and inflation were decreased by 0.25 percent to
3.25 percent for payroll growth, and 2.50 percent for inflation.
2015 CHANGES
CHANGES IN PLAN PROVISIONS:
• The post-retirement benefit increase to be paid after attainment of the 90 percent funding threshold
was changed, from inflation up to 2.5 percent, to a fixed rate of 2.5 percent
CHANGES IN ACTUARIAL ASSUMPTIONS:
• The assumed post-retirement benefit increase rate was changed from 1.0 percent per year through 2030,
and 2.5 percent per year thereafter, to 1.0 percent per year through 2037, and 2.5 percent per year
thereafter.
THIS PAGE INTENTIONALLY LEFT BLANK
SUPPLEMENTAL INFORMATION
Special
Revenue Capital Projects Total
Assets
Cash and investments 3,232,431$ 7,714,109$ 10,946,540$
Cash held in escrow 25,000 – 25,000
Receivables
Delinquent taxes 268 – 268
Accounts 109,504 72,461 181,965
Special assessments
Deferred – 206,531 206,531
Due from other governmental agencies 630 3,183 3,813
Total assets 3,367,833$ 7,996,284$ 11,364,117$
Liabilities
Accounts and contracts payable 124,397$ 305,383$ 429,780$
Accrued salaries and employee benefits payable 3,957 – 3,957
Due to other governmental agencies 530 – 530
Due to other funds – 236 236
Deposits payable 362,676 – 362,676
Unearned revenue 33,750 – 33,750
Total liabilities 525,310 305,619 830,929
Deferred inflows of resources
Unavailable revenue from delinquent taxes 268 – 268
Unavailable revenue from special assessments – 206,531 206,531
Total deferred inflows of resources 268 206,531 206,799
Fund balances
Restricted 450,207 586,248 1,036,455
Assigned 2,392,048 6,898,122 9,290,170
Unassigned (deficit in restricted balance)– (236) (236)
Total fund balances 2,842,255 7,484,134 10,326,389
Total liabilities, deferred inflows
of resources, and fund balances 3,367,833$ 7,996,284$ 11,364,117$
CITY OF PRIOR LAKE
Nonmajor Governmental Funds
Combining Balance Sheet
as of December 31, 2017
-81-
Special
Revenue Capital Projects Total
Revenue
Taxes 139,358$ 1,100,758$ 1,240,116$
Special assessments – 166,885 166,885
Charges for services 1,133,022 2,786,081 3,919,103
Interest on investments 11,960 42,876 54,836
Miscellaneous
Contributions and donations 5,930 – 5,930
Other 55,972 89,097 145,069
Total revenue 1,346,242 4,185,697 5,531,939
Expenditures
Current
General government 41 – 41
Public safety 108,873 – 108,873
Economic development 98,499 – 98,499
Capital outlay 481,549 2,554,361 3,035,910
Debt service
Interest and other – 14,641 14,641
Total expenditures 688,962 2,569,002 3,257,964
Excess of revenues over expenditures 657,280 1,616,695 2,273,975
Other financing sources (uses)
Debt issued – 725,000 725,000
Premium on debt issued – 19,514 19,514
Transfers in – 602,980 602,980
Transfers out (21,052) (719,097) (740,149)
Total other financing sources (uses)(21,052) 628,397 607,345
Net change in fund balances 636,228 2,245,092 2,881,320
Fund balances
Beginning of year 2,206,027 5,239,042 7,445,069
End of year 2,842,255$ 7,484,134$ 10,326,389$
Year Ended December 31, 2017
CITY OF PRIOR LAKE
Nonmajor Governmental Funds
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances
-82-
Capital ED Revolving Revolving
Park Loan Loan
Assets
Cash and investments 1,312,547$ 123,448$ 649$
Cash held in escrow – – –
Receivables
Delinquent taxes – – –
Accounts 3,619 663 95,347
Due from other governmental agencies – – –
Total assets 1,316,166$ 124,111$ 95,996$
Liabilities
Accounts and contracts payable –$ –$ –$
Accrued salaries and employee benefits payable – – –
Due to other governmental agencies – – –
Deposits payable – – –
Unearned revenue 33,750 – –
Total liabilities 33,750 – –
Deferred inflows of resources
Unavailable revenue from delinquent taxes – – –
Fund balances
Restricted for economic development – 124,111 95,996
Restricted for forfeiture sales – – –
Assigned for capital improvements 1,282,416 – –
Assigned for development – – –
Assigned for communications – – –
Total fund balances 1,282,416 124,111 95,996
Total liabilities, deferred inflows
of resources, and fund balances 1,316,166$ 124,111$ 95,996$
as of December 31, 2017
CITY OF PRIOR LAKE
Nonmajor Special Revenue Funds
Combining Balance Sheet
-83-
Cable Police
Franchise EDA Forfeiture DAG Total
83,964$ 256,306$ 250,305$ 1,205,212$ 3,232,431$
25,000 – – – 25,000
– 268 – – 268
7,951 1,589 335 – 109,504
– 630 – – 630
116,915$ 258,793$ 250,640$ 1,205,212$ 3,367,833$
–$ –$ 67,340$ 57,057$ 124,397$
– 3,957 – – 3,957
– 530 – – 530
25,000 – – 337,676 362,676
– – – – 33,750
25,000 4,487 67,340 394,733 525,310
– 268 – – 268
– 46,800 – – 266,907
– – 183,300 – 183,300
– – – 810,479 2,092,895
– 207,238 – 207,238
91,915 – – – 91,915
91,915 254,038 183,300 810,479 2,842,255
116,915$ 258,793$ 250,640$ 1,205,212$ 3,367,833$
-84-
Capital ED Revolving Revolving
Park Loan Loan
Revenues
Taxes –$ –$ –$
Charges for services 627,808 – –
Interest on investments 7,090 925 335
Miscellaneous
Contributions and donations 5,930 – –
Other – – –
Total revenues 640,828 925 335
Expenditures
Current
General government – – –
Public safety – – –
Economic development – – –
Capital outlay 86,718 – –
Total expenditures 86,718 – –
Excess (deficiency) of revenues over expenditures 554,110 925 335
Other financing sources (uses)
Transfers out (21,052) – –
Net change in fund balances 533,058 925 335
Fund balances
Beginning of year 749,358 123,186 95,661
End of year 1,282,416$ 124,111$ 95,996$
Year Ended December 31, 2017
CITY OF PRIOR LAKE
Nonmajor Special Revenue Funds
Combining Statement of Revenues, Expenditures,
and Changes in Fund Balances
-85-
Cable Police
Franchise EDA Forfeiture DAG Total
–$ 139,358$ –$ –$ 139,358$
36,815 8,293 – 460,106 1,133,022
134 1,524 1,952 – 11,960
– – – – 5,930
– – 55,972 – 55,972
36,949 149,175 57,924 460,106 1,346,242
41 – – – 41
– – 108,873 – 108,873
– 98,499 – – 98,499
57,480 – – 337,351 481,549
57,521 98,499 108,873 337,351 688,962
(20,572) 50,676 (50,949) 122,755 657,280
– – – – (21,052)
(20,572) 50,676 (50,949) 122,755 636,228
112,487 203,362 234,249 687,724 2,206,027
91,915$ 254,038$ 183,300$ 810,479$ 2,842,255$
-86-
Tax Revolving Trunk
Increment Equipment Reserve
Assets
Cash and investments 72,757$ 412,779$ 2,260,085$
Receivables
Accounts 15,180 5,856 24,158
Special assessments
Deferred – – 11,041
Due from other governmental agencies – 1,769 –
Total assets 87,937$ 420,404$ 2,295,284$
Liabilities
Accounts and contracts payable –$ 1,680$ –$
Due to other funds – – –
Total liabilities – 1,680 –
Deferred inflows of resources
Unavailable revenue from special assessments – – 11,041
Fund balances
Restricted for tax increment 87,937 – –
Assigned for capital improvements – 418,724 2,284,243
Unassigned (deficit in restricted balance)– – –
Total fund balances 87,937 418,724 2,284,243
Total liabilities, deferred inflows
of resources, and fund balances 87,937$ 420,404$ 2,295,284$
CITY OF PRIOR LAKE
Nonmajor Capital Projects Funds
Combining Balance Sheet
as of December 31, 2017
-87-
Tax Tax
Street Water Increment 1-3 Increment 3-1
Oversizing Storage Lakefront Creekside
847,161$ 2,024,294$ 130,981$ 135,816$
4,227 13,939 734 456
– 6,654 – –
– – 407 –
851,388$ 2,044,887$ 132,122$ 136,272$
–$ –$ 38,043$ 34,776$
– – – –
– – 38,043 34,776
– 6,654 – –
– – 94,079 101,496
851,388 2,038,233 – –
– – – –
851,388 2,038,233 94,079 101,496
851,388$ 2,044,887$ 132,122$ 136,272$
(continued)
-88-
Tax Tax Tax
Increment 5-1 Increment 6-1 Increment 1-4
Premiere Shepard’s Path River Vet
Assets
Cash and investments 13,676$ 432,516$ 4,713$
Receivables
Accounts 40 1,298 (2)
Special assessments
Deferred – – –
Due from other governmental agencies – – –
Total assets 13,716$ 433,814$ 4,711$
Liabilities
Accounts and contracts payable 6,223$ 139,354$ 3,928$
Due to other funds – – –
Total liabilities 6,223 139,354 3,928
Deferred inflows of resources
Unavailable revenue from special assessments – – –
Fund balances
Restricted for tax increment 7,493 294,460 783
Assigned for capital improvements – – –
Unassigned (deficit in restricted balance)– – –
Total fund balances 7,493 294,460 783
Total liabilities, deferred inflows
of resources, and fund balances 13,716$ 433,814$ 4,711$
as of December 31, 2017
CITY OF PRIOR LAKE
Nonmajor Capital Projects Funds
Combining Balance Sheet (continued)
-89-
Tax Revolving Permanent
Increment 1-5 Park Facility Improvement
Gateway Ctr Equipment Management Revolving Total
–$ 565,220$ 555,814$ 258,297$ 7,714,109$
– 2,094 4,002 479 72,461
– – – 188,836 206,531
– 1,007 – – 3,183
–$ 568,321$ 559,816$ 447,612$ 7,996,284$
–$ 26,640$ 54,739$ –$ 305,383$
236 – – – 236
236 26,640 54,739 – 305,619
– – – 188,836 206,531
– – – – 586,248
– 541,681 505,077 258,776 6,898,122
(236) – – – (236)
(236) 541,681 505,077 258,776 7,484,134
–$ 568,321$ 559,816$ 447,612$ 7,996,284$
-90-
Tax Revolving Trunk
Increment Equipment Reserve
Revenues
Taxes –$ 375,905$ –$
Special assessments – – 4,438
Charges for services 9,900 – 1,939,760
Interest on investments 531 4,387 8,902
Miscellaneous – – –
Total revenues 10,431 380,292 1,953,100
Expenditures
Capital outlay 9,531 890,370 77,391
Debt service
Interest and other – – –
Total expenditures 9,531 890,370 77,391
Excess (deficiency) of revenues
over expenditures 900 (510,078) 1,875,709
Other financing sources (uses)
Debt issued – – –
Premium on debt issued – – –
Transfers in – 341,000 –
Transfers out – – (515,400)
Total other financing sources (uses)– 341,000 (515,400)
Net change in fund balances 900 (169,078) 1,360,309
Fund balances (deficit)
Beginning of year 87,037 587,802 923,934
End of year 87,937$ 418,724$ 2,284,243$
CITY OF PRIOR LAKE
Nonmajor Capital Projects Funds
Combining Statement of Revenues, Expenditures,
and Changes in Fund Balances
Year Ended December 31, 2017
-91-
Tax Tax
Street Water Increment 1-3 Increment 3-1
Oversizing Storage Lakefront Creekside
–$ –$ 101,296$ 77,280$
1,295 3,219 – –
372,621 463,800 – –
4,218 12,291 818 767
89,097 – – –
467,231 479,310 102,114 78,047
76,333 (2,075) 78,084 70,170
– – – –
76,333 (2,075) 78,084 70,170
390,898 481,385 24,030 7,877
– – – –
– – – –
– – – –
(94,663) – (25,205) –
(94,663) – (25,205) –
296,235 481,385 (1,175) 7,877
555,153 1,556,848 95,254 93,619
851,388$ 2,038,233$ 94,079$ 101,496$
(continued)
-92-
Tax Tax Tax
Increment 5-1 Increment 6-1 Increment 1-4
Premiere Shepard’s Path River Vet
Revenues
Taxes 13,830$ 309,675$ 8,730$
Special assessments – – –
Charges for services – – –
Interest on investments 63 2,277 10
Miscellaneous – – –
Total revenues 13,893 311,952 8,740
Expenditures
Capital outlay 13,065 279,325 8,475
Debt service
Interest and other – – –
Total expenditures 13,065 279,325 8,475
Excess (deficiency) of revenues
over expenditures 828 32,627 265
Other financing sources (uses)
Debt issued – – –
Premium on debt issued – – –
Transfers in – – –
Transfers out – – –
Total other financing sources (uses)– – –
Net change in fund balances 828 32,627 265
Fund balances (deficit)
Beginning of year 6,665 261,833 518
End of year 7,493$ 294,460$ 783$
Year Ended December 31, 2017
CITY OF PRIOR LAKE
Nonmajor Capital Projects Funds
Combining Statement of Revenues, Expenditures,
and Changes in Fund Balances (continued)
-93-
Tax Revolving Permanent
Increment 1-5 Park Facility Improvement
Gateway Ctr Equipment Management Revolving Total
–$ 214,042$ –$ –$ 1,100,758$
– – – 157,933 166,885
– – – – 2,786,081
– 3,035 5,146 431 42,876
– – – – 89,097
– 217,077 5,146 158,364 4,185,697
18 156,114 520,540 377,020 2,554,361
– – 7,472 7,169 14,641
18 156,114 528,012 384,189 2,569,002
(18) 60,963 (522,866) (225,825) 1,616,695
– – 370,000 355,000 725,000
– – 9,913 9,601 19,514
– 85,330 56,650 120,000 602,980
– – (83,829) – (719,097)
– 85,330 352,734 484,601 628,397
(18) 146,293 (170,132) 258,776 2,245,092
(218) 395,388 675,209 – 5,239,042
(236)$ 541,681$ 505,077$ 258,776$ 7,484,134$
-94-
2016
Variance With
Original Final Actual Final Budget Actual
Revenues
Taxes
Property taxes 8,210,812$ 8,210,812$ 8,158,561$ (52,251)$ 8,271,183$
Franchise taxes 603,000 603,000 620,469 17,469 615,028
Total taxes 8,813,812 8,813,812 8,779,030 (34,782) 8,886,211
Special assessments 2,500 2,500 (10,660) (13,160) 9,363
Licenses and permits
Business 81,190 81,190 84,540 3,350 87,365
Nonbusiness 502,030 502,030 735,893 233,863 664,459
Total licenses and permits 583,220 583,220 820,433 237,213 751,824
Intergovernmental
Federal grants 18,000 18,000 8,458 (9,542) 17,145
State
Road and bridge aid 316,827 316,827 335,077 18,250 325,213
Fire relief aid 213,000 213,000 228,617 15,617 223,801
Police aid 182,800 182,800 211,783 28,983 199,490
Other state aids 15,180 15,180 11,905 (3,275) 11,905
County and local
County aid – – – – 16,000
Township fire and rescue aid 311,068 311,068 298,076 (12,992) 311,068
Liaison aid 45,860 45,860 48,072 2,212 47,130
Payment in lieu of taxes 440,000 440,000 510,000 70,000 430,000
Other local aids – – 6,000 6,000 –
Total intergovernmental 1,542,735 1,542,735 1,657,988 115,253 1,581,752
Charges for services
Zoning fees 20,650 20,650 55,064 34,414 28,529
Plan check fees 243,474 243,474 342,541 99,067 310,435
Park fees 60,000 60,000 121,432 61,432 80,081
Project fees 343,000 343,000 332,406 (10,594) 212,839
Park program revenue 58,000 58,000 74,768 16,768 63,462
Tower leases 267,966 267,966 282,189 14,223 246,883
PEG access fees 32,000 32,000 – (32,000) 32,227
Park admission/rent 57,500 57,500 62,410 4,910 36,664
Facility rental 89,321 89,321 74,754 (14,567) 119,722
Reports 1,400 1,400 1,112 (288) 1,662
Total charges for services 1,173,311 1,173,311 1,346,676 173,365 1,132,504
CITY OF PRIOR LAKE
General Fund
Schedule of Revenues, Expenditures, and
Changes in Fund Balances – Budget and Actual
Year Ended December 31, 2017
(With Comparative Actual Amounts for the Year Ended December 31, 2016)
2017
Budgeted Amounts
-95-(continued)
2016
Variance With
Original Final Actual Final Budget Actual
Revenues (continued)
Fines and forfeits – – 2,250 2,250 4,743
Interest on investments
Interest earnings 85,750 85,750 91,836 6,086 87,195
Amortization – premium/discount – – (35,864) (35,864) –
Unrealized gain (loss)– – (44,822) (44,822) 9,841
Total interest on investments 85,750 85,750 11,150 (74,600) 97,036
Miscellaneous
Other 29,550 29,550 39,132 9,582 39,444
Contributions and donations – – 9,992 9,992 26,049
Developers’ agreements 60,000 60,000 275,310 215,310 76,261
Total miscellaneous 89,550 89,550 324,434 234,884 141,754
Total revenues 12,290,878 12,290,878 12,931,301 640,423 12,605,187
Expenditures
Current expenditures
General government
Mayor and City Council
Personal services 51,543 51,543 52,316 773 51,301
Supplies 300 300 201 (99) 171
Other services and charges 6,350 6,350 15,927 9,577 5,709
Total Mayor and City Council 58,193 58,193 68,444 10,251 57,181
Ordinance
Other services and charges 7,500 7,500 7,533 33 7,329
Administration
Personal services 349,087 349,087 350,057 970 349,935
Supplies 3,250 3,250 6,220 2,970 6,128
Other services and charges 56,891 67,391 80,489 13,098 60,427
Total administration 409,228 419,728 436,766 17,038 416,490
Boards and commissions
Personal services 9,689 9,689 10,550 861 9,903
Other services and charges 1,000 1,000 677 (323) 467
Total boards and commissions 10,689 10,689 11,227 538 10,370
Election
Personal services – – – – 14,070
Supplies – – – – 1,546
Other services and charges – – – – 1,366
Total election – – – – 16,982
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, 2017
(With Comparative Actual Amounts for the Year Ended December 31, 2016)
2017
-96-(continued)
2016
Variance With
Original Final Actual Final Budget Actual
Expenditures (continued)
Current expenditures (continued)
General government (continued)
Finance
Personal services 443,161 443,161 404,558 (38,603) 418,264
Supplies 1,425 1,425 1,068 (357) 2,200
Other services and charges 15,380 15,380 7,652 (7,728) 8,512
Total finance 459,966 459,966 413,278 (46,688) 428,976
Auditing
Other services and charges 28,150 28,150 31,240 3,090 31,733
Assessing
Other services and charges 187,250 187,250 187,378 128 169,608
Legal services
Other services and charges 200,000 200,000 217,039 17,039 147,402
Personnel
Personal services 130,332 130,332 131,379 1,047 127,300
Supplies 250 250 176 (74) 45
Other services and charges 33,023 61,043 61,698 655 24,662
Total personnel 163,605 191,625 193,253 1,628 152,007
Communications
Personal services 97,358 97,358 94,456 (2,902) 89,499
Supplies 750 750 81 (669) 42
Other services and charges 21,600 21,600 20,252 (1,348) 16,826
Total communications 119,708 119,708 114,789 (4,919) 106,367
Community development
Personal services 292,123 292,123 261,162 (30,961) 291,720
Supplies 2,500 2,500 2,837 587 2,342
Other services and charges 52,650 52,650 72,900 20,000 29,663
Total community development 347,273 347,273 336,899 (10,374) 323,725
General Fund
2017
Year Ended December 31, 2017
CITY OF PRIOR LAKE
Changes in Fund Balances – Budget and Actual (continued)
(With Comparative Actual Amounts for the Year Ended December 31, 2016)
Schedule of Revenues, Expenditures, and
Budgeted Amounts
-97-(continued)
2016
Variance With
Original Final Actual Final Budget Actual
Expenditures (continued)
Current expenditures (continued)
General government (continued)
Technology
Personal services 141,628 141,628 141,357 (271) 139,147
Supplies 23,405 26,405 18,395 (8,010) 1,051
Other services and charges 102,161 102,161 92,793 (9,368) 92,270
Total technology 267,194 270,194 252,545 (17,649) 232,468
Buildings and plant
Personal services 79,201 79,201 80,157 956 77,207
Supplies 7,000 7,000 6,203 (797) 6,478
Other services and charges 394,653 394,653 384,527 (10,126) 346,943
Total buildings and plant 480,854 480,854 470,887 (9,967) 430,628
Total general government 2,739,610 2,781,130 2,741,278 (39,852) 2,531,266
Public safety
Police
Personal services 3,388,625 3,388,625 3,426,617 37,992 3,226,226
Supplies 131,112 145,112 123,821 (21,291) 114,874
Other services and charges 210,993 210,993 197,630 (13,363) 179,259
Total police 3,730,730 3,744,730 3,748,068 3,338 3,520,359
Fire and rescue
Personal services 650,314 650,314 627,662 (22,652) 660,488
Supplies 96,213 96,213 68,947 (27,266) 71,840
Other services and charges 158,622 158,622 149,061 (9,561) 162,821
Total fire and rescue 905,149 905,149 845,670 (59,479) 895,149
Building inspections
Personal services 570,740 570,740 561,102 (9,638) 548,022
Supplies 9,950 9,950 4,932 (5,018) 10,116
Other services and charges 57,635 57,635 42,038 (15,597) 25,693
Total building inspections 638,325 638,325 608,072 (30,253) 583,831
Emergency management
Other services and charges 11,802 11,802 11,246 (556) 9,639
Animal control
Other services and charges 26,448 26,448 26,400 (48) 26,000
Total public safety 5,312,454 5,326,454 5,239,456 (86,998) 5,034,978
Year Ended December 31, 2017
(With Comparative Actual Amounts for the Year Ended December 31, 2016)
2017
Budgeted Amounts
CITY OF PRIOR LAKE
General Fund
Schedule of Revenues, Expenditures, and
Changes in Fund Balances – Budget and Actual (continued)
-98-(continued)
2016
Variance With
Original Final Actual Final Budget Actual
Expenditures (continued)
Current expenditures (continued)
Public works
Engineering
Personal services 345,949 345,949 344,375 (1,574) 311,937
Supplies 11,900 11,900 7,627 (4,273) 13,286
Other services and charges 27,423 27,423 27,992 569 15,420
Total engineering 385,272 385,272 379,994 (5,278) 340,643
Central garage
Personal services 195,443 195,443 189,990 (5,453) 183,998
Supplies 171,911 171,911 173,462 1,551 129,897
Other services and charges 37,200 37,200 52,874 15,674 47,393
Total central garage 404,554 404,554 416,326 11,772 361,288
Streets
Personal services 394,805 394,805 375,370 (19,435) 354,288
Supplies 245,453 245,453 191,147 (54,306) 212,713
Other services and charges 753,496 479,266 436,081 (43,185) 606,602
Total streets 1,393,754 1,119,524 1,002,598 (116,926) 1,173,603
Total public works 2,183,580 1,909,350 1,798,918 (110,432) 1,875,534
Culture and recreation
Recreation
Personal services 303,276 303,276 285,289 (17,987) 299,687
Supplies 60,649 60,649 86,992 26,343 69,424
Other services and charges 24,427 24,427 18,425 (6,002) 15,611
Total recreation 388,352 388,352 390,706 2,354 384,722
Parks
Personal services 884,035 884,035 832,942 (51,093) 855,018
Supplies 166,720 166,720 128,183 (38,537) 128,685
Other services and charges 241,954 241,954 266,346 24,392 184,110
Total parks 1,292,709 1,292,709 1,227,471 (65,238) 1,167,813
Libraries
Supplies 5,000 5,000 4,317 (683) 2,776
Other services and charges 47,763 47,763 55,103 7,340 38,515
Total libraries 52,763 52,763 59,420 6,657 41,291
2017
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, 2016)
Budgeted Amounts
Year Ended December 31, 2017
-99-(continued)
2016
Variance With
Original Final Actual Final Budget Actual
Expenditures (continued)
Current expenditures (continued)
Culture and recreation
Natural resources
Personal services – – – – 149
Total culture and recreation 1,733,824 1,733,824 1,677,597 (56,227) 1,593,975
Total current expenditures 11,969,468 11,750,758 11,457,249 (293,509) 11,035,753
Capital outlay
General government
Technology 78,391 103,391 96,409 (6,982) 74,320
Buildings and plant 5,000 8,000 9,198 1,198 5,553
Public safety
Police – – – – 176
Culture and recreation
Parks – – 9,956 9,956 142,759
Total capital outlay 83,391 111,391 115,563 4,172 222,808
Total expenditures 12,052,859 11,862,149 11,572,812 (289,337) 11,258,561
Excess of revenues
over expenditures 238,019 428,729 1,358,489 929,760 1,346,626
Other financing sources (uses)
Debt issued 300,000 – – – –
Transfers in 430,000 430,000 430,000 – 362,640
Transfers out (1,018,019) (1,635,525) (1,636,121) (596) (1,159,226)
Sale of assets – – 3,640 3,640 10,129
Total other financing
sources (uses)(288,019) (1,205,525) (1,202,481) 3,044 (786,457)
Net change in fund balances (50,000)$ (776,796)$ 156,008 932,804$ 560,169
Fund balances
Beginning of year 6,684,920 6,124,751
End of year 6,840,928$ 6,684,920$
Budgeted Amounts
Schedule of Revenues, Expenditures, and
Changes in Fund Balances – Budget and Actual (continued)
Year Ended December 31, 2017
2017
(With Comparative Actual Amounts for the Year Ended December 31, 2016)
General Fund
CITY OF PRIOR LAKE
-100-
Water
Park City Hall Fire Treatment
Referendum 2005 Station #2 Plant
Assets
Cash and investments 263$ 11,828$ 161$ 1,683$
Receivables
Accounts – 150 – –
Special assessments
Delinquent – – – –
Deferred – – – –
Other (Green Acres)– – – –
Due from other governmental agencies – 2,886 – –
Total assets 263$ 14,864$ 161$ 1,683$
Liabilities
Accounts and contracts payable 750$ 175$ 88$ –$
Deferred inflows of resources
Unavailable revenue from
special assessments – – – –
Fund balances (deficit)
Restricted for debt service – 14,689 73 1,683
Unassigned (deficit in restricted balance)(487) – – –
Total fund balances (deficit)(487) 14,689 73 1,683
Total liabilities, deferred inflows
of resources, and fund balances 263$ 14,864$ 161$ 1,683$
CITY OF PRIOR LAKE
Debt Service Funds
Balance Sheet by Account
as of December 31, 2017
-101-
Tax
Increment Breezy Fish
2004 Point Point CSAH 82
27,365$ –$ 2,499$ –$
145 – (80) –
– – – –
– – 30,112 –
– – 451,350 –
– – – –
27,510$ –$ 483,881$ –$
88$ –$ –$ –$
– – 481,461 –
27,422 – 2,420 –
– – – –
27,422 – 2,420 –
27,510$ –$ 483,881$ –$
(continued)
-102-
Street Brooksville Brooksville CR 12 and
Reconstruction Hills Hills II/Maple 2010
2007 2008 Glen 2nd Reconstruction
Assets
Cash and investments 20,858$ 41,425$ 27,783$ 68,852$
Receivables
Accounts 188 1,051 936 1,305
Special assessments
Delinquent – 375 789 –
Deferred – 53,007 36,929 23,439
Other (Green Acres)– – – –
Due from other governmental agencies 797 480 661 1,212
Total assets 21,843$ 96,338$ 67,098$ 94,808$
Liabilities
Accounts and contracts payable –$ 750$ 125$ 175$
Deferred inflows of resources
Unavailable revenue from
special assessments – 53,382 37,717 23,439
Fund balances (deficit)
Restricted for debt service 21,843 42,206 29,256 71,194
Unassigned (deficit in restricted balance)– – – –
Total fund balances (deficit)21,843 42,206 29,256 71,194
Total liabilities, deferred inflows
of resources, and fund balances 21,843$ 96,338$ 67,098$ 94,808$
Balance Sheet by Account (continued)
Debt Service Funds
CITY OF PRIOR LAKE
as of December 31, 2017
-103-
CSAH 44,
Boudin Boudin Welcome,Crest,
Phase I Phase II CR 12, Sunset Maplewood
203,875$ 205,390$ 621,266$ 292,892$
1,548 1,122 4,245 348
– 522 18,847 –
142,248 143,259 453,036 42,719
– – 25,656 –
681 947 777 1,147
348,352$ 351,240$ 1,123,827$ 337,106$
88$ 88$ 175$ 175$
142,248 143,781 497,539 42,719
206,016 207,371 626,113 294,212
– – – –
206,016 207,371 626,113 294,212
348,352$ 351,240$ 1,123,827$ 337,106$
(continued)
-104-
Street TH 13, 150th
Reconstruction Street 2015 Manitou Road
GESP Lease 2015 Reconstruction Improvement
Assets
Cash and investments 62,742$ 400,946$ 192,156$ 181,109$
Receivables
Accounts 58 – – –
Special assessments
Delinquent – 5,455 – 1,934
Deferred – 893,135 – 196,723
Other (Green Acres)– – – –
Due from other governmental agencies 1,343 2,435 671 396
Total assets 64,143$ 1,301,971$ 192,827$ 380,162$
Liabilities
Accounts and contracts payable –$ 175$ 175$ 59$
Deferred inflows of resources
Unavailable revenue from
special assessments – 898,589 – 198,657
Fund balances (deficit)
Restricted for debt service 64,143 403,207 192,652 181,446
Unassigned (deficit in restricted balance)– – – –
Total fund balances (deficit)64,143 403,207 192,652 181,446
Total liabilities, deferred inflows
of resources, and fund balances 64,143$ 1,301,971$ 192,827$ 380,162$
CITY OF PRIOR LAKE
Debt Service Funds
Balance Sheet by Account (continued)
as of December 31, 2017
-105-
Cates, Balsam,
Franklin Trail,
Sycamore Trail
Street and
Maintenance 2017
TH 13, 150th Center Roof Mill and
Street 2016 Equipment Improvements Overlay
Reconstruction 2016 2017 Improvements Total
2,278$ 3,653$ 266,892$ 833$ 2,636,749$
– – – – 11,016
– – – – 27,922
– – 1,080,235 – 3,094,842
– – – – 477,006
185 316 – – 14,934
2,463$ 3,969$ 1,347,127$ 833$ 6,262,469$
58$ 58$ 138$ 38$ 3,378$
– – 1,080,235 – 3,599,767
2,405 3,911 266,754 795 2,659,811
– – – – (487)
2,405 3,911 266,754 795 2,659,324
2,463$ 3,969$ 1,347,127$ 833$ 6,262,469$
-106-
Water
Park City Hall Fire Treatment
Referendum 2005 Station #2 Plant
Revenues
Taxes –$ 613,375$ –$ –$
Special assessments – – – –
Interest on investments – 707 – 61,126
Miscellaneous – – – –
Total revenues – 614,082 – 61,126
Expenditures
Debt service
Principal 755,000 434,999 135,000 260,000
Interest and other 38,500 177,379 90,267 455,788
Total expenditures 793,500 612,378 225,267 715,788
Excess (deficiency) of revenues
over expenditures (793,500) 1,704 (225,267) (654,662)
Other financing sources (uses)
Payments on refunded bonds – – – (6,790,000)
Transfers in 793,275 – 225,516 544,857
Transfers out – – – –
Total other financing sources (uses)793,275 – 225,516 (6,245,143)
Net change in fund balances (225) 1,704 249 (6,899,805)
Fund balances (deficit)
Beginning of year (262) 12,985 (176) 6,901,488
End of year (487)$ 14,689$ 73$ 1,683$
Year Ended December 31, 2017
and Changes in Fund Balances
CITY OF PRIOR LAKE
Debt Service Funds
Schedule of Revenues, Expenditures,
-107-
Tax
Increment Breezy Fish
2004 Point Point CSAH 82
–$ –$ –$ 75,986$
– – 381,065 –
195 203 1,021 28
– – – –
195 203 382,086 76,014
20,000 – – 150,000
5,293 – – 2,925
25,293 – – 152,925
(25,098) 203 382,086 (76,911)
– – – –
25,205 – – 53,863
– (32,283) (379,666) –
25,205 (32,283) (379,666) 53,863
107 (32,080) 2,420 (23,048)
27,315 32,080 – 23,048
27,422$ –$ 2,420$ –$
(continued)
-108-
Street Brooksville Brooksville CR 12 and
Reconstruction Hills Hills II/Maple 2010
2007 2008 Glen 2nd Reconstruction
Revenues
Taxes 169,317$ 85,191$ 140,565$ 181,716$
Special assessments – 30,058 29,136 13,273
Interest on investments 454 571 634 463
Miscellaneous – – – –
Total revenues 169,771 115,820 170,335 195,452
Expenditures
Debt service
Principal 170,000 125,000 175,000 125,000
Interest and other 7,550 5,750 17,624 16,048
Total expenditures 177,550 130,750 192,624 141,048
Excess (deficiency) of revenues
over expenditures (7,779) (14,930) (22,289) 54,404
Other financing sources (uses)
Payments on refunded bonds – – – –
Transfers in – – – –
Transfers out – – – (21,580)
Total other financing sources (uses)– – – (21,580)
Net change in fund balances (7,779) (14,930) (22,289) 32,824
Fund balances (deficit)
Beginning of year 29,622 57,136 51,545 38,370
End of year 21,843$ 42,206$ 29,256$ 71,194$
and Changes in Fund Balances (continued)
Year Ended December 31, 2017
CITY OF PRIOR LAKE
Debt Service Funds
Schedule of Revenues, Expenditures,
-109-
CSAH 44,
Boudin Boudin Welcome,Crest,
Phase I Phase II CR 12, Sunset Maplewood
142,695$ 201,264$ 165,057$ 243,859$
49,704 56,065 68,467 31,088
2,200 1,902 5,714 2,110
– – – –
194,599 259,231 239,238 277,057
215,000 225,000 325,000 190,000
24,334 30,087 50,456 38,477
239,334 255,087 375,456 228,477
(44,735) 4,144 (136,218) 48,580
– – – –
– – – 5,000
– – – –
– – – 5,000
(44,735) 4,144 (136,218) 53,580
250,751 203,227 762,331 240,632
206,016$ 207,371$ 626,113$ 294,212$
(continued)
-110-
Street TH 13, 150th
Reconstruction Street 2015 Manitou Road
GESP Lease 2015 Reconstruction Improvement
Revenues
Taxes 285,390$ –$ 142,695$ 84,126$
Special assessments – 152,984 68,780 76,297
Interest on investments (5) – – –
Miscellaneous (7,440) – – –
Total revenues 277,945 152,984 211,475 160,423
Expenditures
Debt service
Principal 252,634 – 230,000 115,000
Interest and other 47,980 116,494 38,481 22,159
Total expenditures 300,614 116,494 268,481 137,159
Excess (deficiency) of revenues
over expenditures (22,669) 36,490 (57,006) 23,264
Other financing sources (uses)
Payments on refunded bonds – – – –
Transfers in 83,829 – – –
Transfers out – – – –
Total other financing sources (uses)83,829 – – –
Net change in fund balances 61,160 36,490 (57,006) 23,264
Fund balances (deficit)
Beginning of year 2,983 366,717 249,658 158,182
End of year 64,143$ 403,207$ 192,652$ 181,446$
CITY OF PRIOR LAKE
Debt Service Funds
Schedule of Revenues, Expenditures,
and Changes in Fund Balances (continued)
Year Ended December 31, 2017
-111-
Cates, Balsam,
Franklin Trail,
Sycamore Trail
Street and
Maintenance 2017
TH 13, 150th Center Roof Mill and
Street 2016 Equipment Improvements Overlay
Reconstruction 2016 2017 Improvements Total
39,401$ 67,088$ –$ –$ 2,637,725$
– – 257,049 – 1,213,966
– – 9,843 833 87,999
– – – – (7,440)
39,401 67,088 266,892 833 3,932,250
30,000 55,000 – – 3,987,633
7,057 8,258 138 38 1,201,083
37,057 63,258 138 38 5,188,716
2,344 3,830 266,754 795 (1,256,466)
– – – – (6,790,000)
– – – – 1,731,545
– – – – (433,529)
– – – – (5,491,984)
2,344 3,830 266,754 795 (6,748,450)
61 81 – – 9,407,774
2,405$ 3,911$ 266,754$ 795$ 2,659,324$
-112-
Severance
Compensation Insurance Total
Assets
Cash and investments 315,100$ 162,064$ 477,164$
Receivables
Accounts 3,001 117,670 120,671
Total assets 318,101$ 279,734$ 597,835$
Current liabilities
Current portion of compensated absences payable 315,277$ –$ 315,277$
Noncurrent liabilities
Compensated absences payable 479,711 – 479,711
Total liabilities 794,988 – 794,988
Net position (deficit)
Unrestricted (476,887) 279,734 (197,153)
Total liabilities and net position 318,101$ 279,734$ 597,835$
CITY OF PRIOR LAKE
Internal Service Funds
Combining Statement of Net Position
as of December 31, 2017
-113-
Severance
Compensation Insurance Total
Operating revenues
Charges for services 26,293$ –$ 26,293$
Operating expenses
Personal services 37,597 8,418 46,015
Operating income (loss)(11,304) (8,418) (19,722)
Nonoperating revenues
Interest income 2,574 936 3,510
Miscellaneous – 203,013 203,013
Transfers in 100,000 – 100,000
Total nonoperating revenues 102,574 203,949 306,523
Change in net position 91,270 195,531 286,801
Net position
Beginning of year (568,157) 84,203 (483,954)
End of year (476,887)$ 279,734$ (197,153)$
CITY OF PRIOR LAKE
Internal Service Funds
Combining Statement of Revenues, Expenses, and Changes in Net Position
Year Ended December 31, 2017
-114-
Severance
Compensation Insurance Total
Cash flows from operating activities
Cash received from customers 25,774$ –$ 25,774$
Cash payments to employees (115,329) (8,418) (123,747)
Miscellaneous revenue – 85,377 85,377
Net cash flows from operating activities (89,555) 76,959 (12,596)
Cash flows from noncapital financing activities
Transfers in 100,000 – 100,000
Cash flows from investing activities
Interest received on cash and investments 2,574 936 3,510
Net increase in cash and cash equivalents 13,019 77,895 90,914
Cash and cash equivalents, January 1 302,081 84,169 386,250
Cash and cash equivalents, December 31 315,100$ 162,064$ 477,164$
Reconciliation of operating income (loss) to net
cash flows from operating activities
Operating income (loss)(11,304)$ (8,418)$ (19,722)$
Miscellaneous revenue – 203,013 203,013
Adjustments to reconcile operating income (loss)
to net cash flows from operating activities
(Increase) decrease in assets
Accounts receivable (519) (117,636) (118,155)
Increase (decrease) in liabilities
Compensated absences payable (77,732) – (77,732)
Net cash flows from operating activities (89,555)$ 76,959$ (12,596)$
CITY OF PRIOR LAKE
Internal Service Funds
Combining Statement of Cash Flows
Year Ended December 31, 2017
-115-
OTHER INFORMATION SECTION
THIS PAGE INTENTIONALLY LEFT BLANK
Percent
Increase
2017 2016 (Decrease)
Revenues
Taxes 12,036,402$ 11,604,544$ 3.7%
Franchise taxes 620,469 659,782 (6.0%)
Special assessments 1,497,191 857,070 74.7%
Licenses and permits 820,433 751,824 9.1%
Intergovernmental 1,686,327 1,656,379 1.8%
Charges for services 5,265,779 3,341,807 57.6%
Fines and forfeits 2,250 4,743 (52.6%)
Interest on investments 193,840 388,084 (50.1%)
Miscellaneous 591,193 208,715 183.3%
Total revenues 22,713,884$ 19,472,948$ 16.6%
Per capita 872$ 768$ 13.5%
Expenditures
Current
General government 2,741,319$ 2,536,514$ 8.1%
Public safety 5,348,329 5,076,152 5.4%
Public works 1,798,918 1,875,534 (4.1%)
Culture and recreation 1,677,597 1,606,831 4.4%
Economic development 98,499 150,177 (34.4%)
Capital outlay 11,752,287 7,901,298 48.7%
Debt service
Principal 3,987,633 3,792,365 5.1%
Interest and other charges 1,292,056 1,375,468 (6.1%)
Total disbursements 28,696,638$ 24,314,339$ 18.0%
Per capita 1,101$ 959$ 14.9%
Total long-term bonded indebtedness 36,960,000$ 42,980,000$ (14.0%)
Per capita 1,419$ 1,695$ (16.3%)
General Fund balance – December 31 6,840,928$ 6,684,920$ 2.3%
Per capita 263$ 264$ (0.4%)
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, 2017 and 2016
Total
CITY OF PRIOR LAKE
Summary Financial Report
Revenues and Expenditures for General Operations
-116-
Final
Issue Maturity
Date Date
Bonded indebtedness
General obligation 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 09/25/2014 12/15/2024
G.O. Improvement Refunding Bonds of 2014A 2.00 09/25/2014 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
G.O. Improvement Bonds of 2016A 2.00 05/01/2016 12/15/2026
G.O. Improvement Bonds of 2017A 2.00–2.25 06/29/2017 12/15/2027
Total general obligation special assessment bonds
General obligation 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
G.O. Street Reconstruction Bonds of 2015B 1.00–2.25 05/14/2015 12/15/2022
G.O. Street Reconstruction Bonds of 2016A 2.00 05/01/2016 12/15/2026
G.O. Improvement Bonds of 2017A 2.00–2.25 06/29/2017 12/15/2027
Total general obligation bonds
General obligation revenue bonds
G.O. Water Treatment Plant Revenue Bonds of 2007A 4.00–4.20 05/15/2007 12/15/2017
G.O. Improvement Refunding Bonds of 2015A 1.00–3.00 05/14/2015 12/15/2031
G.O. Improvement Refunding Bonds of 2016A 2.00 05/01/2016 12/15/2022
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, 2017
Interest
-117-
Outstanding Issued Outstanding
Authorized January 1 (Retired)December 31 Principal Interest
1,700,000$ 525,000$ (175,000)$ 350,000$ 175,000$ 12,250$
1,235,000 510,000 (125,000) 385,000 125,000 11,940
2,130,000 1,100,000 (215,000) 885,000 220,000 19,925
2,280,000 1,415,000 (225,000) 1,190,000 230,000 25,268
3,240,000 2,265,000 (325,000) 1,940,000 325,000 43,780
2,170,000 1,795,000 (190,000) 1,605,000 215,000 34,500
495,000 250,000 (125,000) 125,000 125,000 2,500
4,640,000 4,640,000 – 4,640,000 – 115,825
160,000 140,000 (20,000) 120,000 20,000 2,243
1,105,000 1,105,000 (115,000) 990,000 110,000 19,800
4,135,000 – 4,135,000 4,135,000 380,000 123,846
23,290,000 13,745,000 2,620,000 16,365,000 1,925,000 411,877
290,000 205,000 (20,000) 185,000 25,000 4,800
6,260,000 755,000 (755,000) – – –
1,400,000 170,000 (170,000) – – –
3,500,000 3,245,000 (135,000) 3,110,000 140,000 87,218
9,825,000 7,830,000 (435,000) 7,395,000 470,000 167,258
2,330,000 2,070,000 (210,000) 1,860,000 630,000 33,268
760,000 760,000 (85,000) 675,000 90,000 13,500
370,000 – 370,000 370,000 45,000 10,811
24,445,000 14,830,000 (1,420,000) 13,410,000 1,375,000 312,055
8,500,000 7,050,000 (7,050,000) – – –
5,360,000 5,360,000 – 5,360,000 75,000 134,125
1,640,000 1,640,000 – 1,640,000 295,000 32,800
15,500,000 14,050,000 (7,050,000) 7,000,000 370,000 166,925
1,225,000 150,000 (150,000) – – –
64,750,000$ 42,980,000$ (6,020,000)$ 36,960,000$ 3,695,000$ 895,657$
Due in 2018
-118-
Final
Issue Maturity
Date Date Principal
General obligation
special assessment bonds
$1,700,000 General Obligation
Improvement Bonds, Series 2009A 05/15/2009 3.00 %12/15/2018 175,000$
3.50 12/15/2019 175,000
Total 350,000
$1,235,000 General Obligation
Improvement Bonds, Series 2010A 05/26/2010 2.75 %12/15/2018 125,000
3.10 12/15/2019 130,000
3.20 12/15/2020 130,000
Total 385,000
$2,130,000 General Obligation
Improvement Bonds, Series 2011A 08/31/2011 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 885,000
$2,280,000 General Obligation
Improvement Bonds, Series 2011B 12/14/2011 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 1,190,000
$3,240,000 General Obligation
Improvement Bonds, Series 2013A 08/15/2013 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 1,940,000
(continued)
CITY OF PRIOR LAKE
Bond Schedules
December 31, 2017
Rate
Interest
-119-
Final
Issue Maturity
Date Date Principal
General obligation
special assessment bonds (continued)
$2,170,000 General Obligation
Improvement Bonds, Series 2014A 09/25/2014 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 1,605,000
$495,000 General Obligation Improvement
Refunding Bonds, Series 2014A 09/25/2014 2.00 %12/15/2018 125,000
Total 125,000
$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
$160,000 General Obligation
Improvement Bonds, Series 2015B 05/14/2015 1.40 %12/15/2018 20,000
1.60 12/15/2019 25,000
1.90 12/15/2020 25,000
2.10 12/15/2021 25,000
2.25 12/15/2022 25,000
Total 120,000
(continued)
CITY OF PRIOR LAKE
Bond Schedules (continued)
December 31, 2017
Interest
Rate
-120-
Final
Issue Maturity
Date Date Principal
General obligation
special assessment bonds (continued)
$1,105,000 General Obligation
Improvement Bonds, Series 2016A 05/01/2016 2.00 %12/15/2018 110,000
2.00 12/15/2019 110,000
2.00 12/15/2020 110,000
2.00 12/15/2021 110,000
2.00 12/15/2022 110,000
2.00 12/15/2023 110,000
2.00 12/15/2024 110,000
2.00 12/15/2025 110,000
2.00 12/15/2026 110,000
Total 990,000
$4,135,000 General Obligation
Improvement Bonds, Series 2017A 06/29/2017 2.00 %12/15/2018 380,000
2.00 12/15/2019 425,000
2.00 12/15/2020 435,000
2.00 12/15/2021 445,000
2.00 12/15/2022 450,000
2.00 12/15/2023 385,000
2.00 12/15/2024 390,000
2.00 12/15/2025 400,000
2.25 12/15/2026 410,000
2.25 12/15/2027 415,000
Total 4,135,000
Total general obligation special assessment bonds 16,365,000$
General obligation
tax increment bonds
$290,000 Tax Increment Refunding
Bonds, Series 2011A 08/31/2011 2.00 %12/15/2018 25,000$
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 185,000$
(continued)
Bond Schedules (continued)
December 31, 2017
Interest
Rate
CITY OF PRIOR LAKE
-121-
Final
Issue Maturity
Date Date Principal
General obligation bonds
$3,500,000 General Obligation Improvement
Bonds, Series 2011B 12/14/2011 2.00 %12/15/2018 140,000$
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 3,110,000
$9,825,000 General Obligation Capital
Improvement Refunding Bonds of 2012A 03/13/2012 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 7,395,000
$2,330,000 General Obligation
Street Reconstruction Bonds, Series 2015B 05/14/2015 1.40 %12/15/2018 630,000
1.60 12/15/2019 330,000
1.90 12/15/2020 185,000
2.10 12/15/2021 290,000
2.25 12/15/2022 425,000
Total 1,860,000
(continued)
December 31, 2017
Interest
Rate
CITY OF PRIOR LAKE
Bond Schedules (continued)
-122-
Final
Issue Maturity
Date Date Principal
General obligation bonds (continued)
$760,000 General Obligation
Street Reconstruction Bonds, Series 2016A 05/01/2016 2.00 %12/15/2018 90,000
2.00 12/15/2019 95,000
2.00 12/15/2020 95,000
2.00 12/15/2021 95,000
2.00 12/15/2022 95,000
2.00 12/15/2023 95,000
2.00 12/15/2024 35,000
2.00 12/15/2025 35,000
2.00 12/15/2026 40,000
Total 675,000
$370,000 General Obligation
Improvement Bonds of 2017A 06/29/2017 2.00 %12/15/2018 45,000
2.00 12/15/2019 50,000
2.00 12/15/2020 55,000
2.00 12/15/2021 55,000
2.00 12/15/2022 55,000
2.00 12/15/2023 55,000
2.00 12/15/2024 55,000
Total 370,000
Total general obligation bonds 13,410,000$
General obligation revenue bonds
$5,360,000 General Obligation Improvement
Refunding Bonds, Series 2015A 05/14/2015 1.00 %12/15/2018 75,000$
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
(continued)
CITY OF PRIOR LAKE
Bond Schedules (continued)
December 31, 2017
Interest
Rate
-123-
Final
Issue Maturity
Date Date Principal
General obligation revenue bonds (continued)
$1,640,000 General Obligation Improvement
Refunding Bonds, Series 2016A 05/01/2016 2.00 %12/15/2018 295,000
2.00 12/15/2019 310,000
2.00 12/15/2020 325,000
2.00 12/15/2021 345,000
2.00 12/15/2022 365,000
Total 1,640,000
Total general obligation revenue bonds 7,000,000$
Interest
Rate
CITY OF PRIOR LAKE
Bond Schedules (continued)
December 31, 2017
-124-
Year Principal Interest Principal Interest Principal Interest
2018 1,375,000$ 312,055$ 1,925,000$ 411,877$ 25,000$ 4,800$
2019 1,110,000 284,923 1,860,000 330,538 25,000 4,300
2020 1,010,000 264,046 1,710,000 289,053 25,000 3,763
2021 1,160,000 243,948 1,605,000 252,103 25,000 3,175
2022 1,320,000 220,108 1,385,000 217,388 25,000 2,550
2023 935,000 192,015 1,455,000 187,168 30,000 1,800
2024 920,000 172,340 1,320,000 154,812 30,000 900
2025 910,000 151,620 1,285,000 127,188 – –
2026 965,000 129,760 1,130,000 101,488 – –
2027 975,000 105,680 970,000 74,812 – –
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 17,100 – –
2031 315,000 10,710 – – – –
Total 13,410,000$ 2,239,775$ 16,365,000$ 2,250,227$ 185,000$ 21,288$
CITY OF PRIOR LAKE
Debt Service Requirements
December 31, 2017
General Obligation Bonds Special Assessment Bonds
General Obligation
Tax Increment Bonds
General Obligation
-125-
Principal Interest
370,000$ 166,925$
385,000 160,275
400,000 153,325
420,000 145,700
440,000 137,675
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
7,000,000$ 1,492,850$
Revenue Bonds
General Obligation
-126-
Collection Collections
Total of Current of Prior Total
Year Levy Year Levy Years’ Levy Collections
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
2016 11,078,361 11,034,353 99.60 68,478 11,102,831 100.22
2017 11,568,155 11,520,353 99.59 12,692 11,533,045 99.70
*Market value credit was withheld by the state of Minnesota
Collection Collections
Total of Current of Prior Total
Year Levy Year Levy**Years’ Levy Collections
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 347,795 345,533 99.35 6,113 351,646 101.11
2012 385,017 384,144 99.77 4,477 388,621 100.94
2013 393,347 391,132 99.44 5,606 396,738 100.86
2014 526,584 460,800 87.51 4,946 465,746 88.45
2015 354,412 365,481 103.12 11,655 377,136 106.41
2016 453,962 475,376 104.72 2,611 477,987 105.29
2017 504,420 474,936 94.15 7,331 482,267 95.61
**Excludes prepaid assessment collections
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
of Levy
Collected to Levy
Collections
-127-
2015 2016 2017
Taxable market value 2,620,934,100$ 2,842,299,000$ 3,030,449,778$
Tax levy 10,394,086$ 11,078,361$ 11,568,155$
Tax capacity, net of fiscal disparities,
and tax increment 26,636,432$ 28,850,704$ 29,819,702$
Tax capacity rate 30.988% 31.953% 32.685%
Market value rate 0.039% 0.038% 0.034%
EDA tax capacity rate 0.557% 0.496% 0.434%
Prior Three Years
CITY OF PRIOR LAKE
Schedules of Market Value, Tax Levy, Tax Capacity Values,
Tax Capacity Rate, and Market Value Rate
-128-
2015 2016 2017
Current population 25,049 25,356 26,053
Tax capacity, net of fiscal disparities,
and tax increment 26,636,432$ 28,850,704$ 29,819,702$
Percent of current property taxes collected 99.32% 99.60% 99.59%
City revenues per capita (governmental funds)775$ 768$ 872$
City expenditures per capita (governmental funds)1,209$ 959$ 1,101$
Ratio of bonded debt to tax capacity 153.07% 141.14% 162.77%
Bond rating Aa2 (Moody’s)AA+ (S&P)AA+ (S&P)
CITY OF PRIOR LAKE
Key Financial Indicators
Prior Three Years
-129-
OTHER REQUIRED REPORTS
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-130-
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, t he 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, 2017, 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 11, 2018.
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)
-131-
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 11, 2018
-132-
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, 2017, 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 11, 2018.
MINNESOTA LEGAL COMPLIANCE
The Minnesota Legal Compliance Audit Guide for Cities, promulgated by the State Auditor pursuant to
Minnesota Statutes § 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. 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.
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 11, 2018
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Management Report
for
City of Prior Lake, Minnesota
December 31, 2017
THIS PAGE INTENTIONALLY LEFT BLANK
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, 2017. 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, man agement,
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 11, 2018
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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, 2017, 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, 2017:
• We have issued an unmodified opinion on the City’s basic financial statements.
• 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 u nder
Government Auditing Standards.
• We reported no findings based on our testing of the City’s compliance with Minnesota laws and
regulations.
FOLLOW-UP ON PRIOR YEAR FINDINGS AND RECOMMENDATIONS
As a part of our audit of the City’s financial statements for the year ended December 31, 2017, we
performed procedures to follow-up on the findings and recommendations that resulted from our prior year
audit. We reported the following findings that were corrected by the City in the current year:
• The City had cash in excess of federal depository insurance with one investment broker as of
December 31, 2016, which was not adequately covered by pledged collateral with a market value
of 110 percent of the excess, as required by state statutes. This was corrected during the current
year.
-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.
No new accounting policies were adopted and the application of existing policies was not changed during
the year ended December 31, 2017; however, the City implemented the following governmental
accounting standards during the fiscal year:
• Governmental Accounting Standards Board (GASB) Statement No. 79, Certain External
Investment Pools and Pool Participants, which enhanced disclosures regarding investments.
• GASB Statement No. 82, Pension Issues, an amendment of GASB Statements No. 67, No. 68, and
No. 73, which addressed certain issues related to pension reporting and disclosures.
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 Statement
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.
DIFFICULTIES ENCOUNTERED IN PERFORMING THE AUDIT
We encountered no significant difficulties in dealing with management in performing and completing our
audit.
CORRECTED AND UNCORRECTED MISSTATEMENTS
Professional standards require us to accumulate all known and likely misstatements identified during the
audit, other than those that are clearly 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.
-3-
DISAGREEMENTS WITH MANAGEMENT
For purposes of this report, a disagreement with management is 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 11, 2018.
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 the 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. Such information has 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 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 includes 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 2016 fiscal year, local ad valorem property tax levies provided 39.8 percent of the total
governmental fund revenues for cities over 2,500 in population, and 36.4 percent for cities under 2,500 in
population.
The total market value of property in Minnesota cities increased about 5.6 percent for the 2017 levy year,
which followed an increase of 5.7 percent for levy year 2016. The market values used for levying
property taxes are based on the previous fiscal year (e.g., market values for taxes levied in 2017 were
based on assessed values as of January 1, 2016), so the trend of change in these market values lags
somewhat behind the housing market and economy in general.
The City’s taxable market value increased 8.4 percent for taxes payable in 2016 and increased 6.6 percent
for taxes payable in 2017. 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
$3,500,000,000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
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 its 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 8.3 percent and 3.4 percent for taxes payable in
2016 and 2017, 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
$35,000,000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Local Net Tax Capacity
The following table presents the average tax rates applied to city residents for each of the last three levy
years, along with comparative state-wide and metro area average rates from the two most recent years for
which the information is available:
2015 2016 2015 2016 2015 2016 2017
Average tax rate
City 46.9 46.5 43.4 43.0 32.0 32.0 32.7
County 44.7 44.1 42.9 42.3 36.6 36.2 35.9
School 27.1 27.5 28.3 28.6 32.7 32.9 30.6
Special taxing 6.9 6.9 8.8 8.7 7.3 7.2 7.8
Total 125.6 125.0 123.4 122.6 108.6 108.3 107.0
Rates Expressed as a Percentage of Net Tax Capacity
Metro Area
Seven-CountyAll Cities
State-Wide Prior Lake
City of
The City’s portion of the total tax rate is below both the state-wide and metro area averages, as presented
in the table above. The school rate within the City exceeds the state-wide and the metro area averages.
The average tax rate in total is below these averages.
-6-
GOVERNMENTAL FUND BALANCES
The following table summarizes the changes in the fund balances of the City’s governmental funds during
the year ended December 31, 2017, presented both by fund balance classification and by fund:
Increase
2017 2016 (Decrease)
Fund balances of governmental funds
Total by classification
Restricted 3,696,266$ 10,474,448$ (6,778,182)$
Assigned 11,833,265 9,755,914 2,077,351
Unassigned 6,621,659 6,634,264 (12,605)
Total – governmental funds 22,151,190$ 26,864,626$ (4,713,436)$
Total by fund
General 6,840,928$ 6,684,920$ 156,008$
Debt Service 2,659,324 9,407,774 (6,748,450)
Construction 2,324,549 3,326,863 (1,002,314)
Special revenue nonmajor funds 2,842,255 2,206,027 636,228
Capital projects nonmajor funds 7,484,134 5,239,042 2,245,092
Total – governmental funds 22,151,190$ 26,864,626$ (4,713,436)$
Governmental Funds Change in Fund Balance
Fund Balance
as of December 31,
In total, the fund balances of the City’s governmental funds decreased by $4,713,436 during the year
ended December 31, 2017. Debt Service Fund balance decreased due to the refunding of the 2007A bond
occurring during the current year. Construction Fund balance decreased due to further spending of capital
outlay on the previously issued bonds. Special revenue nonmajor fund balances increased due to the
significant amount of dedication revenue received for various new developments during 2017. Capital
projects nonmajor fund balances increased due to increased trunk fund revenues and increased
development activity in 2017.
-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 a 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 its 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 the 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 2015 2016 2017
Population 2,500–10,000 10,000–20,000 20,000–100,000 25,049 25,356 26,053
Property taxes 460$ 432$ 455$ 414$ 438$ 442$
Tax increments 26 26 42 19 20 20
Franchise and other taxes 35 43 45 24 26 24
Special assessments 59 44 59 46 34 57
Licenses and permits 35 33 42 23 30 31
Intergovernmental revenues 313 275 152 115 65 65
Charges for services 110 92 103 100 132 202
Other 91 57 54 34 24 30
Total revenue 1,129$ 1,002$ 952$ 775$ 769$ 871$
December 31, 2016
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 2017 were $22,713,884, an increase of $3,240,936
(16.6 percent) from the prior year. On a per capita basis, the City received $871 in governmental fund
revenue for 2017, an increase of $102 from the prior year. Charges for services increased $70 per capita,
mainly due to increases in development fees received. In general, the City has generated less
governmental fund revenue per capita than the state-wide averages. Most of this relates to lower than
average intergovernmental revenues, which is mostly local government aid.
-8-
The expenditures of governmental funds will also vary from state -wide averages and from year-to-year,
based on the City’s circumstances. Expenditures are classified into three types as follows:
• Current – These are typically the general operating type expenditures occurring on an annual
basis, and are primarily funded by general sources such as taxes and intergovernmental revenues.
• Capital Outlay and Construction – These expenditures do not occur on a consistent basis, more
typically fluctuating significantly from year-to-year. Many of these expenditures are
project-oriented, and are often funded by specific sources that have benefited from the
expenditure, such as special assessment improvement projects.
• Debt Service – Although the expenditures for debt service may be relatively consistent over the
term of the respective debt, the funding source is the important factor. Some debt may be repaid
through specific sources such as special assessments or redevelopment funding, while other debt
may be repaid with general property taxes.
The City’s expenditures per capita of its governmental funds for the past three years, together with
comparative state-wide averages, are presented in the following table:
Year 2015 2016 2017
Population 2,500–10,000 10,000–20,000 20,000–100,000 25,049 25,356 26,053
Current
145$ 114$ 97$ 105$ 100$ 105$
263 250 273 192 200 205
126 123 95 83 74 69
93 109 95 67 63 64
74 77 91 7 6 4
701 673 651 454 443 447
Capital outlay
and construction 381 370 301 567 312 451
Debt service
196 163 115 128 150 153
48 38 34 59 54 50
244 201 149 187 204 203
Total expenditures 1,326$ 1,244$ 1,101$ 1,208$ 959$ 1,101$
General government
Governmental Funds Expenditures per Capita
With State-Wide Averages by Population Class
December 31, 2016
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 2017 were $28,696,638, an increase of
$4,382,299 (18.0 percent) from the prior year. On a per capita basis, the City expended a total of $1,101
in 2017. Capital outlay expenditures increased $139 per capita from the prior year due to significant street
construction and equipment replacement expenditures in 2017.
-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.
2013 2014 2015 2016 2017
Fund Balance $6,431,258 $5,776,647 $6,124,751 $6,684,920 $6,840,928
Cash and Inv (Net of Borrowing)$7,635,527 $6,622,398 $6,902,926 $7,211,301 $8,306,654
Expend and Transfers Out $12,273,534 $13,007,098 $12,343,815 $12,417,787 $13,208,933
$–
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
General Fund Financial Position
Year Ended December 31,
The City’s General Fund cash and investments balance increased $1,095,353 during the current year.
Total fund balance increased $156,008 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 40.0 and
50.0 percent of the subsequent year’s General Fund budgeted expenditures. At December 31, 2017, the
unrestricted fund balance of the General Fund was 53.6 percent of the subsequent year’s budgeted
expenditures and transfers out.
-10-
The following chart reflects the City’s General Fund revenue sources for 2017 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 2017 was $12,931,301, which was $640,423 (5.2 percent) more than budget,
mainly due to the City having more developments than expected leading to more building permits.
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.
Taxes
Licenses
and
Permits Intergovernmental
Charges
for
Services
Fines
and
Forfeits
All Other
2013 $7,714,967 $766,834 $1,514,185 $1,165,190 $137,529 $92,025
2014 $7,958,467 $580,112 $1,626,194 $1,047,397 $127,225 $531,330
2015 $8,692,425 $587,464 $1,573,865 $1,048,564 $1,390 $425,561
2016 $8,886,211 $751,824 $1,581,752 $1,132,504 $4,743 $248,153
2017 $8,779,030 $820,433 $1,657,988 $1,346,676 $2,250 $324,924
$–
$1,500,000
$3,000,000
$4,500,000
$6,000,000
$7,500,000
$9,000,000
General Fund Revenue by Source
Year Ended December 31,
Total General Fund revenue for 2017 was $326,114 (2.6 percent) higher than last year. Tax revenue
decreased by $107,181, or 1.2 percent, due to a reduction in fiscal disparities and an increase in
delinquent taxes. Licenses and permits were $68,609 higher than last year, due to the City having more
developments leading to increased building permits during 2017. Charges for services increased by
$214,172, mainly from development fees. In 2017, the all other revenue category was higher than the
prior year by $76,771 (30.9 percent), mainly due to an increase in developer agreements for Summit
Preserve, Trillium Cove, and Haven’s Ridge.
-11-
The following graphs illustrate the components of General Fund spending for 2017 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 2017 were $11,572,812, which was $289,337 (2.4 percent) under
budget. Public works expenditures were $110,432 under budget, mainly due to supply costs, including
fuel and repairs and maintenance, coming in lower than projected.
The following graph presents the City’s General Fund expenditures by function for the last five years:
General
Government Public Safety Public Works Culture and
Recreation All Other
2013 $2,677,900 $4,630,971 $1,905,280 $1,660,103 $199,210
2014 $2,813,759 $4,732,024 $1,874,422 $1,751,005 $744,233
2015 $2,568,472 $4,821,150 $2,078,309 $1,600,071 $239,568
2016 $2,531,266 $5,034,978 $1,875,534 $1,593,975 $222,808
2017 $2,741,278 $5,239,456 $1,798,918 $1,677,597 $115,563
$–
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
General Fund Expenditures by Function
Year Ended December 31,
Total General Fund expenditures for 2017 were $314,251 (2.8 percent) greater than the previous year.
Public safety expenditures increased $204,478, due to a new officer added and an increase in overtime.
-12-
ENTERPRISE FUNDS OVERVIEW
The City maintains a number of enterprise funds to account for services the City provides that are
financed primarily through fees charged to those utilizing the service. This section of the report provides
you with an overview of the financial trends and activities of the City’s enterprise funds, which includes
the Water, Sewer, and Water Quality Funds.
ENTERPRISE FUNDS FINANCIAL POSITION
The following table summarizes the changes in the financial position of the City’s enterprise funds during
the year ended December 31, 2017, presented by both classification and by fund:
Increase
2017 2016 (Decrease)
Net position of enterprise funds
Total by classification
Investment in capital assets 56,639,547$ 51,075,358$ 5,564,189$
Unrestricted 3,877,883 4,309,353 (431,470)
Total – enterprise funds 60,517,430$ 55,384,711$ 5,132,719$
Total by fund
Water 34,849,695$ 32,804,990$ 2,044,705$
Sewer 23,575,411 20,723,278 2,852,133
Water Quality 2,092,324 1,856,443 235,881
Total – enterprise funds 60,517,430$ 55,384,711$ 5,132,719$
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, 2017, this fund had assets totaling $318,101, while liabilities totaled $794,988, leaving a
deficit net position balance of ($476,887). We recommend that the City continue to include the financing
of these obligations as part of its long range financial plans.
During the year ended December 31, 2016, the City established an Insurance Internal Service Fund to
account for risk management activities, including worker’s compensation, volunteer accident, and
property/casualty insurance. At December 31, 2017, this fund had assets totaling $279,734 and no
liabilities, leading to a net position balance of $279,734.
-13-
WATER ENTERPRISE FUND
The following graph presents five years of comparative operating results for the City’s Water Fund:
2013 2014 2015 2016 2017
Oper Revenue $3,246,774 $3,051,682 $3,390,052 $3,674,099 $3,793,719
Oper Expenses $2,188,545 $2,297,197 $2,347,154 $2,493,541 $2,621,448
Oper Income (Loss)$1,058,229 $754,485 $1,042,898 $1,180,558 $1,172,271
Inc Before Depr $1,989,540 $1,390,162 $1,700,029 $1,870,854 $1,909,903
$–
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
$4,000,000
Water Enterprise Fund
Year Ended December 31,
The Water Fund ended 2017 with net position of $34,849,695, an increase of $2,044,705 from the prior
year. Of this, $32,566,559 represents the investment in capital assets, leaving $2,283,136 in unrestricted
net position. The Water Fund had transfers out totaling $2,151,421 in 2017 to support other funds, pay
debt service, and provide for construction projects.
Operating revenue in the Water Fund increased $119,620 (3.3 percent) from the prior year. This increase
was due to a combination of increased rates and water usage in 2017.
Water Fund operating expenses for 2017 increased $127,907 (5.1 percent) from the previous year. The
largest factors contributing to the change were increases in repairs and maintenance of $70,300.
State and federal grants, interest, and miscellaneous income, which are not included in the table above,
totaled $5,841, $21,511, and $10,314, respectively, in 2017. After including this revenue, the Water Fund
reflected income before contributions and transfers of $1,209,937.
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SEWER ENTERPRISE FUND
The following graph presents five years of comparative operating results for the City’s Sewer Fund:
2013 2014 2015 2016 2017
Oper Revenue $2,453,432 $2,369,423 $2,432,925 $2,741,578 $3,090,773
Oper Expenses $2,345,167 $2,447,618 $2,468,932 $2,635,304 $2,771,143
Oper Income (Loss)$108,265 $(78,195)$(36,007)$106,274 $319,630
Inc Before Depr $477,077 $300,076 $371,068 $530,299 $789,288
$(250,000)
$250,000
$750,000
$1,250,000
$1,750,000
$2,250,000
$2,750,000
$3,250,000
Sewer Enterprise Fund
Year Ended December 31,
The Sewer Fund ended 2017 with net position of $23,575,411, an increase of $2,852,133 from the prior
year. Of this, $22,705,729 represents the City’s investment in capital assets, leaving $869,682 in
unrestricted net position. The Sewer Fund had transfers out totaling $1,232,910 in 2017 to support other
funds, pay debt service, and provide for construction projects.
Operating revenue in the Sewer Fund increased $349,195 (12.7 percent) from the prior year, mainly
related to increased rates and increased sewer treatments. Sewer Fund operating expenses for 2017
increased $135,839 (5.2 percent). The largest factors contributing to the change were increases in disposal
charges of $67,438 and other services and charges of $64,295.
State and federal grants and interest, which are not included in the table above, totaled $161 and $12,357,
respectively, in 2017. After including this revenue, the Sewer Fund reflected income before contributions
and transfers of $332,148.
-15-
WATER QUALITY ENTERPRISE FUND
The following graph presents five years of comparative operating results for the City’s Water Quality
Fund:
2013 2014 2015 2016 2017
Oper Revenue $702,529 $843,292 $865,244 $920,128 $925,988
Oper Expenses $532,508 $638,570 $560,820 $598,972 $633,557
Oper Income (Loss)$170,021 $204,722 $304,424 $321,156 $292,431
Inc Before Depr $222,912 $265,678 $396,392 $427,648 $402,799
$–
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000
$900,000
$1,000,000
Water Quality Enterprise Fund
Year Ended December 31,
The Water Quality Fund ended 2017 with net position of $2,092,324, an increase of $235,881 from the
prior year. Of this, $1,367,259 represents the investment in capital assets, leaving $725,065 in unrestricted
net position.
Operating revenue in the Water Quality Fund increased $5,860 (0.6 percent) from the prior year due to an
increase in the rates in 2017. Water Quality Fund operating expenses for 2017 increased $34,585
(5.8 percent) from the previous year, mainly due to the hiring of an interim public works director and the
update to the storm water management plan.
-16-
GOVERNMENT-WIDE FINANCIAL STATEMENTS
In addition to fund-based information, the current reporting model for governmental entities also requires
the inclusion of two government -wide financial statements designed to present a clear picture of the City
as a single, unified entity. These government-wide financial statements provide information on the total
cost of delivering services, including capital assets and long-term liabilities.
STATEMENT OF NET POSITION
The Statement of Net Position essentially tells you what the City owns and owes at a given point in time,
the last day of the fiscal year. Theoretically, net position represents the resources the City has leftover to
use for providing services after its debts are settled. However, those resources are not always in spendable
form, or there may be restrictions on how some of those resources can be used. Therefore, net position is
divided into three components: net investment in capital assets, restricted, and unrestricted.
The following table presents the components of the City’s net position as of December 31, 2017 and
2016, for governmental activities and business-type activities:
Increase
2017 2016 (Decrease)
Net position
Governmental activities
Net investment in capital assets 105,369,831$ 99,587,768$ 5,782,063$
Restricted 7,534,235 6,282,406 1,251,829
Unrestricted 11,173,171 9,092,499 2,080,672
Total governmental activities 124,077,237 114,962,673 9,114,564
Business-type activities
Net investment in capital assets 56,639,547 51,075,358 5,564,189
Unrestricted 3,877,883 4,309,353 (431,470)
Total business-type activities 60,517,430 55,384,711 5,132,719
Total net position 184,594,667$ 170,347,384$ 14,247,283$
As of December 31,
The City’s total net position at December 31, 2017 was $14,247,283 higher than the total net position
reported at the previous year-end. The increase in the net investment in capital assets balance was mostly
due to capital outlay and capital contribution activity during fiscal 2017.
At the end of the current fiscal year, the City is able to present positive balances in all three categories of
net position, both for the government as a whole, as well as for its separate governmental and
business-type activities. The same situation held true for the prior year.
-17-
STATEMENT OF ACTIVITIES
The Statement of Activities tracks the City’s yearly revenues and expenses, as well as any other
transactions that increase or reduce total net position. These amounts represent the full cost of providing
services. The Statement of Activities provides a more comprehensive measure than just the amoun t of
cash that changed hands, as reflected in the fund-based financial statements. This statement includes the
cost of supplies used, depreciation of long-lived capital assets, and other accrual-based expenses.
The following table presents the change in the net position of the City for the years ended December 31,
2017 and 2016:
2016
Program
Expenses Revenues Net Change Net Change
Governmental activities
General government 3,361,467$ 763,453$ (2,598,014)$ (2,555,644)$
Public safety 5,914,382 2,785,976 (3,128,406) (5,016,639)
Public works 5,008,168 12,898,445 7,890,277 591,657
Culture and recreation 2,274,752 903,925 (1,370,827) (985,632)
Economic development 557,896 18,225 (539,671) (586,679)
Interest on long-term debt 1,246,553 – (1,246,553) (1,294,104)
Business-type activities
Water 2,621,448 3,945,009 1,323,561 1,976,180
Sewer 2,771,143 3,224,285 453,142 864,795
Water quality 633,557 951,075 317,518 384,509
24,389,366$ 25,490,393$ 1,101,027 (6,621,557)
General revenues
Taxes 12,642,513 12,242,330
Unrestricted grants and contributions 212 19,864
Interest income 239,030 460,363
Gain on sale of capital assets 3,440 6,163
Miscellaneous 261,061 163,473
Total general revenues 13,146,256 12,892,193
14,247,283$ 6,270,636$
Total net (expense) revenue
Change in net position
Net (expense) revenue
2017
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 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.
THIS PAGE INTENTIONALLY LEFT BLANK
-18-
LEGISLATIVE UPDATES
The 2017 legislative session began with a full agenda, which included adopting a fiscal year 2018–2019
biennial state budget. The February 2017, state budget forecast projected that the state General Fund
would end the 2016–2017 biennium with a surplus of $743 million, eliminating the need for budget cuts
or transfers to balance the fund. However, the Legislature was expected to address several significant
spending areas for which successful funding appropriations had not been passed in recent legislative
sessions. The 2017 regular legislative session ended with four omnibus budget bills being vetoed,
potentially leaving a number of these same areas without appropriations. After a three-day special session,
the Governor and Legislature were able to agree on budget and appropriation bills addressing most of the
state budgetary needs for the upcoming biennium, albeit not without several line item vetoes invoked by
the Governor, including striking the appropriations for operating the House and Senate from the bills.
The following is a summary of recent legislation affecting Minnesota cities:
Omnibus Bonding Bill – The omnibus bonding bill authorizes financing for approximately $1.1 billion
in capital improvements. Included in the approved funding was $255 million for transportation
infrastructure, $83 million for economic development, $116 million for Public Financing Agency water
infrastructure loans and grants to municipalities, and $4 million for Metropolitan Council inflow and
infiltration improvement grants to metro area cities.
Omnibus Transportation Bill – The omnibus transportation bill appropriates $2.95 billion in fiscal 2018
and $2.87 billion in fiscal 2019, for a wide variety of transportation related projects. Included in the
appropriations are approximately $191 million and $198 million for municipal state aid street fund
purposes in fiscal 2018 and fiscal 2019, respectively.
Property Tax Relief – The omnibus tax bill contained a number of property tax relief measures,
including:
• Elimination of the implicit price deflator annual increase for the state general property tax
levy, effectively freezing it at the payable 2018 level for many property classes;
• Exempting the first $100,000 of each commercial-industrial parcel’s tax capacity from the
state general property tax levy;
• Expanding eligibility for homestead or agricultural property classification exemptions for
certain types of resort and conservation property for general property taxes; and
• Increasing the minimum value for a storage shed, deck, or similar structure on a leased
mobile home to be considered taxable from $1,000 to $10,000.
Local Government Aid – The annual appropriation for Local Government Aid (LGA) for cities was
increased $15.0 million to $534.4 million for aid payable in 2018 and thereafter, and the LGA payment
schedule was accelerated for fiscal 2019 only. Several corrections were also made to the city LGA
formula calculation, and a sparsity adjustment was incorporated for certain medium and small cities
beginning in 2018.
Minnesota Investment Fund – The omnibus jobs and economic growth bill appropriates $12.5 million
for each year of the biennium for the Minnesota Investment Fund, which is available for municipalities to
provide loans to assist with the expansion of local businesses.
Electronic Funds Transfers – Effective August 1, 2017, home rule charter cities of the second, third, or
fourth class are added to the list of local government entities allowed to pay certain claims using
electronic funds transfers. To be eligible, local governments must enact specified policy controls
governing the initiation, authorization, and documentation of electronic funds transfers.
Claims Declaration – The requirement to obtain a specific form of written claim declaration was also
repealed based on the understanding that by making the claim, the party making the claim is declaring
that the claim is just and correct and has not been paid previously.
-19-
City E-mail Address Required to Receive State Aid – Effective for state aids payable in 2018 and
thereafter, cities will be required to register an official e-mail address with the Commissioner of the state
Department of Revenue in order to receive state aid payments.
Workforce Housing Tax Increment Financing – The omnibus tax bill created a new authorized use of
tax increment financing (TIF), for workforce housing in cities located outside of the statutorily defined
metropolitan area that meet certain criteria.
Tax Increment Financing Interfund Loans – Interfund loan provisions for TIF were amended to make
it easier for cities and development authorities to make and document interfund loans. Loans may now be
made or documented up to 60 days after the actual transfer or expenditure occurs. Interfund loan
resolutions may now be passed prior to the final approval of the related TIF plan. Loan terms may be
amended after the loan has been made if the TIF district has not been decertified.
Public Debt – The Legislature passed several amendments to statutes governing public debt that took
effect on July 1, 2017, including:
• Allowing both home rule charter and statutory cities to issue 20-year capital notes for projects
to eliminate R-22 Freon-based refrigerant;
• Increasing the maximum dollar limit on Housing and Redevelopment Authority general
obligation bond issues from $3 million to $5 million; and
• Modifying the requirements for street reconstruction bonds to be approved by a two -thirds
majority of the governing body rather than requiring unanimous approval.
Local Housing Trust Funds – The omnibus jobs and economic growth appropriations bill established
authority for cities to create a local housing trust fund by ordinance, or to participate in a joint powers
agreement to establish a regional housing trust fund. The funds, which may be financed from sources such
as local government appropriations or housing and redevelopment authority levies, may be used for grants
or loans for development, rehabilitation, financing of housing to match federal or state or private funds for
housing, down payment assistance, rental assistance, or homebuyer counseling.
Long-Term Equity Investment Authority – Effective July 1, 2017, cities with a population of more
than 100,000 or those that had their most recently issued general obligation bonds rated in the highest
category, are authorized to invest in an expanded list of authorized investments that includes certain
equity-based investments. The amount invested in equity-based investments cannot exceed 15 percent of
the sum of a city’s assigned cash, cash equivalents, deposits, and investments. Before investing in the
expanded list of authorized investments, the governing body of the municipality must adopt a resolution
acknowledging the risks assumed.
Border-to-Border Broadband Grants – The Legislature appropriated $20 million in fiscal 2018 for the
Border-to-Border Broadband Grant Program. The grants, available through the Office of Broadband
Development in the Department of Employment and Economic Development, provide funding to help
communities meet state goals for the development of state-wide, high-speed broadband access, focusing
on areas currently considered to be underserved or with a high concentration of low-income households.
Elections – An omnibus elections law was passed making several modifications to election
administration, including: requiring special elections conducted by local governments be held on one of
five uniform election dates, clarifying the timeline for municipalities to change from odd to
even-year election cycles or vise-versa, allowing municipalities to canvass the results of a primary
election on the second or third day after the primary, and appropriating $7 million for grants to replace
aging election equipment or purchase electronic poll books.
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Workers’ Compensation and PERA Retirement Benefits – A statutory change was adopted based on
the results of recent court rulings that Public Employees Retirement Association (PERA) retirement
benefits should not be offset against workers’ compensation permanent total disability benefits. Under the
new law, claimants would receive all past and future permanent and total disability benefits without a
PERA retirement offset.
Notice of Proposed Ordinances – A new statute was created requiring cities to provide a 10-day notice
prior to a scheduled final vote on most new proposed ordinances or amendments to ordinances, and
specifying the various acceptable means of providing the required notification.
State Building Code Applicability – Construction, additions, and alterations to places of public
accommodation; defined as publicly or privately-owned facilities designed for occupancy by 200 or more
people as a sports or entertainment arena, stadium, theater, community or convention hall, special event
center, indoor amusement facility or water park, or indoor swimming pool; must comply with the state
building code.
Sunday Liquor Sales – Minnesota Statutes were amended to allow for the sale of intoxicating liquor on
Sundays between the hours of 11:00 a.m. and 6:00 p.m. by off-sale licensees, effective July 1, 2017.
REAL ID Act – Minnesota Statutes were amended to make the state compliant with federal REAL ID
Act requirements, which will change identity verification and security related to state-issued identification
cards and driver’s licenses.
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ACCOUNTING AND AUDITING UPDATES
GASB STATEMENT NO. 75, ACCOUNTING AND FINANCIAL REPORTING FOR POSTEMPLOYMENT
BENEFITS OTHER THAN PENSIONS
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 other post-employment benefits (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. This statement replaces the requirements of GASB Statement Nos. 45 and 57.
This statement establishes standards for recognizing and measuring liabilities, deferred outflows of
resources, deferred inflows of resources, and expense/expenditures. Similar to changes implemented for
pensions, this statement requires the liability of employer 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. Note disclosure and RSI requirements about defined benefit OPEB also are
addressed.
The requirements for this statement are effective for fiscal years beginning after June 15, 2017. Earlier
application is encouraged.
GASB STATEMENT NO. 83, CERTAIN ASSET RETIREMENT OBLIGATIONS
This statement addresses accounting and financial reporting for certain asset retirement obligations
(ARO), which are legally enforceable liabilities associated with the retirement of a tangible capital asset.
This statement establishes criteria for determining the timing and pattern of recognition of a liability and a
corresponding deferred outflow of resources for ARO. A government that has legal obligations to perform
future asset retirement activities related to its tangible capital assets should recognize a liability when it is
both incurred and reasonably estimable. The measurement of an ARO is required to be based on the best
estimate of the current value of outlays expected to be incurred, and a deferred outflow of resources
associated with an ARO is required to be measured at the amount of the corresponding liability upon
initial measurement.
This statement requires the current value of a government’s AROs to be adjusted for the effects of general
inflation or deflation at least annually, and a government to evaluate all relevant factors at least annually
to determine whether the effects of one or more of the factors are expected to significantly change the
estimated asset retirement outlays. A government should remeasure an ARO only when the result of the
evaluation indicates there is a significant change in the estimated outlays. Deferred outflows of resources
should be reduced and recognized as outflows of resources in a systematic and rational manner over the
estimated useful life of the tangible capital asset.
If a government owns a minority interest in a jointly owned tangible asset where a nongovernmental
entity is the majority owner or has operational responsibility for the jointly owned asset, the government’s
minority share of an ARO should be reported using the measurement produced by the nongovernmental
majority owner or the nongovernmental minority owner that has operational responsibility, without
adjustment to conform to the liability measurement and recognition requirements of this statement.
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The statement also requires disclosures of any funding or financial assurance requirements a government
has related to the performance of asset retirement activities, along with any assets restricted for the
payment of the government’s AROs. This statement also requires disclosure of information about the
nature of a government’s AROs, the methods and assumptions used for the estimates of the liabilities, and
the estimated remaining useful life of the associated tangible capital assets. If an ARO (or portions
thereof) has been incurred by a government but is not yet recognized because it is not r easonably
estimable, the government is required to disclose that fact and the reasons therefor. This statement
requires similar disclosures for a government’s minority shares of AROs.
The requirements of this statement are effective for reporting periods beginning after June 15, 2018.
Earlier application is encouraged.
GASB STATEMENT NO. 84, FIDUCIARY ACTIVITIES
This statement establishes criteria for identifying fiduciary activities of all state and local governments.
The focus of the criteria generally is on (1) whether a government is controlling the assets of the fiduciary
activity and (2) the beneficiaries with whom a fiduciary relationship exists. Separate criteria are included
to identify fiduciary component units and post-employment benefit arrangements that are fiduciary
activities.
An activity meeting the criteria should be reported in a fiduciary fund in the basic financial statements,
which should present a statement of fiduciary net position and a statement of changes in fiduciary net
position. This statement describes four fiduciary funds that should be reported, if applicable: (1) pension
(and other employee benefit) trust funds, (2) investment trust funds, (3) private -purpose trust funds, and
(4) custodial funds. Custodial funds generally should report fiduciary activities that are not held in a trust
or equivalent arrangement that meets specific criteria.
A fiduciary component unit, when reported in the fiduciary fund financial statements of a primary
government, should combine its information with its component units that are fiduciary component units
and aggregate that combined information with the primary government’s fiduciary funds.
This statement also provides for recognition of a liability to the beneficiaries in a fiduciary fund wh en an
event has occurred that compels the government to disburse fiduciary resources, defined as when a
demand for the resources has been made or when no further action, approval, or condition is required to
be taken or met by the beneficiary to release the assets.
The requirements of this statement are effective for reporting periods beginning after December 15, 2018.
Earlier application is encouraged.
GASB STATEMENT NO. 85, OMNIBUS 2017
The objective of this statement is to address issues that have bee n identified during implementation and
application of certain GASB statements. The statement addresses a variety of topics, including issues
related to blending component units, goodwill, fair value measurement and application, and
post-employment benefits (pensions and OPEB). The statement is meant to enhance consistency in the
application of recent accounting and financial reporting standards. The requirements of this statement are
effective for reporting periods beginning after June 15, 2017.
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GASB STATEMENT NO. 86, CERTAIN DEBT EXTINGUISHMENT ISSUES
Current GASB guidance requires that debt be considered defeased in substance when the debtor
irrevocably places cash or other monetary assets acquired with refunding debt proceeds in a trust to be
used solely for satisfying scheduled payments of both principal and interest of the defeased debt. This
new standard establishes essentially the same requirements for when a government places cash and other
monetary assets acquired with only existing resources in an irrevocable trust to extinguish the debt.
The primary objective of this statement is to improve consistency in accounting and financial reporting
for in-substance defeasance of debt by providing guidance for transactions in which cash and other
monetary assets acquired with only existing resources—resources other than the proceeds of refunding
debt—are placed in an irrevocable trust for the sole purpose of extinguishing debt. This statement also
improves accounting and financial reporting for prepaid insurance on debt that is extinguished and notes
to financial statements for debt that is defeased in substance. The requirements of this statement are
effective for reporting periods beginning after June 15, 2017.
GASB STATEMENT NO. 87, LEASES
A lease is a contract that transfers control of the right to use another entity’s nonfinancial asset as
specified in the contract for a period of time in an exchange or exchange -like transaction. Examples of
nonfinancial assets include buildings, land, vehicles, and equipment. Any contract that meets this
definition should be accounted for under the leases guidance, unless specifically excluded in this
statement.
Governments enter into leases for many types of assets. Under the previous guidance, leases were
classified as either capital or operating depending on whether the lease met any of four tests. In many
cases, the previous guidance resulted in reporting lease transactions differently than similar nonlease
financing transactions.
The goal of this statement is to better meet the information needs of users by improving accounting and
financial reporting for leases by governments. It establishes a single model for lease accounting based on
the principle that leases are financings of the right to use an underlying asset. This statement increases the
usefulness of financial statements by requiring recognition of certain lease assets and liabilities for leases
that previously were classified as operating leases and recognized as inflows of resources or outflows of
resources based on the payment provisions of the contract.
Under this statement, a lessee is required to recognize a lease liability and an intangible right -to-use lease
asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources, thereby
enhancing the relevance and consistency of information about governments’ leasing activities.
To reduce the cost of implementation, this statement includes an exception for short -term leases, defined
as a lease that, at the commencement of the lease term, has a maximum possible term under the lease
contract of 12 months (or less), including any options to extend, regardless of their probability of being
exercised. Lessees and lessors should recognize short-term lease payments as outflows of resources or
inflows of resources, respectively, based on the payment provisions of the lease contract. The
requirements of this statement are effective for reporting periods beginning after December 15, 2019.
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