HomeMy WebLinkAbout6(C) 2018 Annual Financial Report and Management Letter - Agenda Report - 2019.5.20
4646 Dakota Street SE
Prior Lake, MN 55372
CITY COUNCIL AGENDA REPORT
MEETING DATE: MAY 20, 2019
AGENDA #: 6C
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 2018
ANNUAL FINANCIAL REPORT AND MANAGEMENT LETTER
DISCUSSION: Introduction
The 2018 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
12/31/2018. 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 20 meeting packet that is
distributed to Council members. Copies of the 2018 Annual Financial
Report and Management Letter will also be available for the Council and
public prior to the Council meeting on May 20.
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 $196,790,047 and represents an increase of
$12,023,720 from December 31, 2017.
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.
2
Based on their audit of the City’s financial statements for the year ended
December 31, 2018:
• MMKR issued an unmodified opinion on the City’s financial
statements;
• MMKR reported no deficiencies in the City’s internal control over
financial reporting that they considered to be material weaknesses;
• The results of MMKR’s testing disclosed no instances of
noncompliance required to be reported under Government Auditing
Standards;
• MMKR reported one finding based on testing of the City’s
compliance with Minnesota laws and regulations.
o Minnesota Statutes § 423A.022, Subd. 2 states that annually,
the commissioner of revenue shall allocate police and
firefighter retirement supplemental state aid. For
municipalities that are allowed amounts for fire departments
participating in the voluntary state-wide lump sum volunteer
firefighter retirement plans, this balance is required to be paid
to the treasurer of each municipality for transmittal within 30
days of receipt to the treasurer of the applicable volunteer
firefighter relief association for deposit in its Special Fund.
For the 2018 allocation of this aid to the City, the City did not
pay the fire association prior to the 30-day period set by the
Minnesota Statutes. This was an oversight by City
personnel. The City was not in compliance with Minnesota
Statutes § 423A.022, Subd. 2.
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,
3
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 2018 Annual Financial Report.
The primary results for the General Fund as indicated within the 2018
Annual Financial Report are:
1) Actual revenues were $13,639,287 (including transfers and sale of
assets) compared to amended budgeted revenues of $12,748,778 or
107% of budget.
2) Actual expenditures were $13,115,121 (including transfers out)
compared to amended budgeted expenditures of $13,429,423 or
98% of budget.
3) Gross revenue exceeded expenditures/transfers by $524,166.
At the end of the current fiscal year, the unrestricted fund balance for the
General Fund (which includes committed, assigned and unassigned
classifications) was $6,931,767 or 51.1 percent of budgeted 2019
expenditures and transfers out of $13,554,319. 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 $7,213,402, $281,635 is assigned for the 2019
budget for City Manager severance, phone system replacement, and
fuel/salt supply replenishment due to significant 2018 snow events.
The total fund balance of $7,213,402 reflects an increase of $372,474 from
the prior year, including a prior period adjustment of $151,692.
During the year ended December 31, 2018, the City recorded a prior period
adjustment. The City properly applied the full portion of accrued wages to
the appropriate accounting period. The effect of this change reduced the
General Fund balance at December 31, 2017 balance by $151,692. If
recorded in the prior year, this adjustment would have increased accrued
salaries and salary expense/expenditures.
The increase in fund balance from the prior year is primarily due to
increased revenues from building permits and fees related to1) Additional
plan check fees due to 198 bldg. permits as compared to a budget of 135
permits -$136k, 2) an increase in city contracted services for Police and
Parks overtime as compared to budget totaling $110k, about $50k from
police overtime at the SMSC and $11k for Parks contracted overtime. 3)
4
additional tower lease revenue of $13k due to renewing leases negotiated at
a higher rate than originally budgeted, and 4) Zoning and Subdivision fees
are $19k higher than budget due to the additional plats and application fees
than planned due to the Summit Preserve, Trillium Cove and Haven Ridge
development phases.
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 $7,213,402 reflects an increase of $1,204,811
from the amended budget. The amended budget reflected the use of fund
balance of $680,645 for projects carried over from 2017.
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, 2019 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
2018 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 19-___
A RESOLUTION ACCEPTING THE 2018 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 2018 Annual Financial Report and Management Letter;
and,
WHEREAS, MMKR has issued an unmodified opinion with respect to the City’s 2018 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 2018 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 20st day of May, 2019
VOTE Briggs Thompson Burkart Braid Erickson
Aye ☐ ☐ ☐ ☐ ☐
Nay ☐ ☐ ☐ ☐ ☐
Abstain ☐ ☐ ☐ ☐ ☐
Absent ☐ ☐ ☐ ☐ ☐
______________________________
Michael Plante, City Manager
CITY OF PRIOR LAKE
SCOTT COUNTY, MINNESOTA
Financial Statements
and Supplemental Information
Year Ended
December 31, 2018
THIS PAGE INTENTIONALLY LEFT BLANK
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 38–74
REQUIRED SUPPLEMENTARY INFORMATION
PERA – General Employees Retirement Fund
Schedule of City’s and Nonemployer Proportionate Share
of Net Pension Liability 75
Schedule of City Contributions 75
PERA – Public Employees Police and Fire Fund
Schedule of City’s Proportionate Share of Net Pension Liability 76
Schedule of City Contributions 76
Prior Lake Fire Relief Association
Schedule of Changes in the Relief Association’s Net Pension Asset
and Related Ratios 77
Schedule of City Contributions 78
Other Post-Employment Benefits Plan
Schedule of Changes in the City’s Total OPEB Liability and Related Ratios 79
Notes to Required Supplementary Information 80–83
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 84
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 85
Nonmajor Special Revenue Funds
Combining Balance Sheet 86–87
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 88–89
Nonmajor Capital Projects Funds
Combining Balance Sheet 90–93
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 94–97
General Fund
Schedule of Revenues, Expenditures, and Changes in Fund Balances –
Budget and Actual 98–103
Debt Service Fund
Balance Sheet by Account 104–109
Schedule of Revenues, Expenditures, and Changes in Fund Balances by Account 110–115
Internal Service Funds
Combining Statement of Net Position 116
Combining Statement of Revenues, Expenses, and Changes in Net Position 117
Combining Statement of Cash Flows 118
OTHER INFORMATION SECTION
Summary Financial Report
Revenues and Expenditures for General Operations 119
Combined Schedule of Indebtedness 120–121
Bond Schedules 122–127
Debt Service Requirements 128–129
Tax Levies and Collections, and Special Assessment Levies and Collections 130
Schedules of Market Value, Tax Levy, Tax Capacity Values, Tax Capacity Rate,
and Market Value Rate 131
Key Financial Indicators 132
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 133–134
Independent Auditor’s Report on Minnesota Legal Compliance 135
Schedule of Findings and Responses 136
CITY OF PRIOR LAKE
SCOTT COUNTY, MINNESOTA
Table of Contents (continued)
INTRODUCTORY SECTION
THIS PAGE INTENTIONALLY LEFT BLANK
-1-
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, 2018
THIS PAGE INTENTIONALLY LEFT BLANK
FINANCIAL SECTION
THIS PAGE INTENTIONALLY LEFT BLANK
-2-
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, 2018, and the related notes to the
financial statements, which collectively comprise the City’s basic financial statements as listed in the
table of contents.
MANAGEMENT’S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with accounting principles generally accepted in the United States of America; this includes
the design, implementation, and maintenance of internal control relevant to the preparation and fair
presentation of financial statements that are free from material misstatement, whether due to fraud or
error.
AUDITOR’S RESPONSIBILITY
Our responsibility is to express opinions on these financial statements based on our audit. We conducted
our audit in accordance with auditing standards generally accepted in the United States of America and
the standards applicable to financial audits contained in Government Auditing Standards, issued by the
Comptroller General of the United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the City’s preparation
and fair presentation of the financial statements in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s
internal control. Accordingly, we express no such opinion. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of significant accounting estimates
made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinions.
(continued)
C E R T I F I E D
A C C O U N T A N T S
P UBLIC
PRINCIPALS
Thomas A. Karnowski, CPA
Paul A. Radosevich, CPA
William J. Lauer, CPA
James H. Eichten, CPA
Aaron J. Nielsen, CPA
Victoria L. Holinka, CPA/CMA
Jaclyn M. Huegel, CPA
Malloy, Montague, Karnowski, Radosevich & Co., P.A.
5353 Wayzata Boulevard • Suite 410 • Minneapolis, MN 55416 • Phone: 952-545-0424 • Fax: 952-545-0569 • www.mmkr.com
Standard Letterhead-r2.qxp_167639 Letterhead-RV1 9/7/18 6:34 PM Page 1
-3-
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, 2018, and the
respective changes in financial position, and, where applicable, cash flows thereof, and the budgetary
comparison for the General Fund for the year then ended in accordance with accounting principles
generally accepted in the United States of America.
EMPHASIS OF MATTER
As described in Note 1 of the notes to basic financial statements, the City has implemented Governmental
Accounting Standards Board (GASB) Statement No. 75, Accounting and Financial Reporting for
Postemployment Benefits Other Than Pensions, during the year ended December 31, 2018. Our opinion is
not modified with respect to this matter.
OTHER MATTERS
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management ’s
discussion and analysis and the required supplementary information (RSI), as listed in the table of
contents, be presented to supplement the basic financial statements. Such information, although not a part
of the basic financial statements, is required by the GASB, who considers it to be an essential part of
financial reporting for placing the basic financial statements in an appropriate operational, economic, or
historical context. We have applied certain limited procedures to the RSI in accordance with auditing
standards generally accepted in the United States of America, which consisted of inquiries of
management about the methods of preparing the information and comparing t he 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, the supplemental information,
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 supplemental information is the responsibility of management and was derived from and relates
directly to the underlying accounting and other records used to prepare the basic financial statements.
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 supplemental
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)
-4-
Prior Year Comparative Information
We have previously audited the City’s 2017 financial statements, and we expressed unmodified audit
opinions on the respective financial statements of the governmental activities, the business-type activities,
each major fund, and the aggregate remaining fund information in our report dated May 11, 2018. In our
opinion, the partial comparative information presented herein as of and for the year ended December 31,
2017 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 15, 2019,
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 15, 2019
THIS PAGE INTENTIONALLY LEFT BLANK
CITY OF PRIOR LAKE
Management’s Discussion and Analysis
Fiscal Year Ended December 31, 2018
-5-
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, 2018.
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 $196,790,047 (net position). Of
this amount, $18,671,075 (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 $12,023,720, which excludes two prior period
adjustments and a change in accounting principle that were reported in the current year.
• As of the close of the current fiscal year, the City’s governmental funds reported combined
ending fund balances of $24,994,452, an increase of $2,994,954 in comparison with the prior year
when excluding the prior period adjustment reported in the current year.
• At the end of the current fiscal year, the unrestricted fund balance (which includes the assigned
and unassigned classifications) for the General Fund was $7,213,402, or 53.2 percent, of
budgeted 2019 expenditures and transfers out of $13,554,319. The total fund balance reflects an
increase of $372,474 from the prior year, including a prior period adjustment of $151,692. The
amended budget expected a net decrease of $680,645. The difference in this change in fund
balance is primarily due to revenues exceeding budgeted amounts by $887,186, mostly in
building permits and fees. Expenditures were also under budgeted amounts by $314,302.
• Of the total General Fund balance of $7,213,402, $281,635 is assigned for the 2019 budget for
city manager severance, phone system replacement, and fuel/salt supply replenishment due to
significant 2018 snow events. The unassigned amount of $6,931,767 is 51.1 percent of budgeted
2019 expenditures and transfers out of $13,554,319.
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.
-6-
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.
-7-
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 the 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, an other 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 $196,790,047 at the close of the most recent fiscal year.
The City’s investment in capital assets (e.g., land, buildings, and machinery and equipment), less any
related debt used to acquire those assets that is still outstanding, totaled 86.2 percent of total net position.
The City uses these capital assets to provide services to citizens; consequently, these assets are not
available for future spending. Although the City’s investment in its capital assets is reported net of related
debt, it should be noted that the resources needed to repay this debt must be provided from other sources,
since the capital assets themselves cannot be used to liquidate these liabilities.
-8-
The following table provides the City’s Summary of Net Position:
2018 2017 2018 2017 2018 2017
Assets
Current and other assets 34,335,059$ 31,974,846$ 10,343,542$ 5,371,063$ 44,678,601$ 37,345,909$
Capital assets, net 149,257,662 144,791,036 64,672,620 56,639,547 213,930,282 201,430,583
Total assets 183,592,721$ 176,765,882$ 75,016,162$ 62,010,610$ 258,608,883$ 238,776,492$
Deferred outflows of resources 4,366,049$ 5,566,192$ 182,120$ 291,709$ 4,548,169$ 5,857,901$
Liabilities
Long-term liabilities 48,847,077$ 47,235,563$ 4,210,298$ 1,334,641$ 53,057,375$ 48,570,204$
Other liabilities 3,819,740 4,458,330 2,986,575 217,313 6,806,315 4,675,643
Total liabilities 52,666,817$ 51,693,893$ 7,196,873$ 1,551,954$ 59,863,690$ 53,245,847$
Deferred inflows of resources 6,200,450$ 6,560,944$ 302,865$ 232,935$ 6,503,315$ 6,793,879$
Net position
Net investment in
capital assets 107,929,953$ 105,369,831$ 61,697,384$ 56,639,547$ 169,627,337$ 162,009,378$
Restricted 8,491,635 7,534,235 – – 8,491,635 7,534,235
Unrestricted 12,669,915 11,173,171 6,001,160 3,877,883 18,671,075 15,051,054
Total net position 129,091,503$ 124,077,237$ 67,698,544$ 60,517,430$ 196,790,047$ 184,594,667$
Summary of Net Position
as of December 31, 2018 and 2017
Table 1
Activities Activities Total
Governmental Business-Type
An additional portion of the City’s net position ($8,491,635 or 4.3 percent) represents resources that are
subject to external restrictions on how they may be used. The remaining balance of unrestricted net
position, $18,671,075, may be used to meet the government’s ongoing obligations to citizens and
creditors.
The increase in long-term liabilities in the current year relate to the issuance of debt for capital projects in
the current year.
At the end of the current fiscal year, the City is able to report positive balances in all three categories of
net position, both for the government as a whole, as well as for its separate governmental and
business-type activities. The same situation held true for the prior fiscal year.
-9-
2018 2017 2018 2017 2018 2017
Revenues
Program revenues
Charges for services 2,698,360$ 2,734,766$ 8,225,463$ 7,810,480$ 10,923,823$ 10,545,246$
Operating grants and
contributions 2,164,590 1,569,507 15,372 9,111 2,179,962 1,578,618
Capital grants and
contributions 9,221,982 13,065,751 1,246,094 300,778 10,468,076 13,366,529
General revenues
Property taxes and tax
increments 12,812,307 12,022,044 – – 12,812,307 12,022,044
Franchise taxes 630,932 620,469 – – 630,932 620,469
Grants and contributions
not restricted to specific programs 12,845 212 – – 12,845 212
Investment income 318,751 197,350 90,678 41,680 409,429 239,030
Gain on sale of capital assets – 3,440 – – – 3,440
Miscellaneous 66,337 250,627 11,938 10,434 78,275 261,061
Total revenues 27,926,104 30,464,166 9,589,545 8,172,483 37,515,649 38,636,649
Expenses
General government 3,346,943 3,361,467 – – 3,346,943 3,361,467
Public safety 6,283,264 5,914,382 – – 6,283,264 5,914,382
Public works 5,393,240 5,008,168 – – 5,393,240 5,008,168
Culture and recreation 2,376,137 2,274,752 – – 2,376,137 2,274,752
Economic development 825,975 557,896 – – 825,975 557,896
Interest on long-term debt 1,010,342 1,246,553 – – 1,010,342 1,246,553
Water – – 2,721,328 2,621,448 2,721,328 2,621,448
Sewer – – 2,934,670 2,771,143 2,934,670 2,771,143
Water quality – – 600,030 633,557 600,030 633,557
Total expenses 19,235,901 18,363,218 6,256,028 6,026,148 25,491,929 24,389,366
Increase in net position
before transfers 8,690,203 12,100,948 3,333,517 2,146,335 12,023,720 14,247,283
Transfers (3,177,982) (2,986,384) 3,177,982 2,986,384 – –
Changes in net position 5,512,221 9,114,564 6,511,499 5,132,719 12,023,720 14,247,283
Net position
Beginning of year, as previously reported 124,077,237 114,962,673 60,517,430 55,384,711 184,594,667 170,347,384
Prior period adjustment (151,692) – 740,538 – 588,846 –
Change in accounting principle (346,263) – (70,923) – (417,186) –
Beginning of year, as restated 123,579,282 114,962,673 61,187,045 55,384,711 184,766,327 170,347,384
End of year 129,091,503$ 124,077,237$ 67,698,544$ 60,517,430$ 196,790,047$ 184,594,667$
Activities Activities Total
Table 2
Changes in Net Position
for the Years Ended December 31, 2018 and 2017
Governmental Business-Type
Governmental Activities – Governmental activities increased the City’s net position by $5,512,221
excluding the prior period adjustment and change in accounting principle . Key elements of this increase
are seen in the table above. The increase is due primarily to the recognition of developer
land/infrastructure contributions for the second additions of Haven Ridge, Trillium Cove, and Summit
Preserve, for $4.4 million.
The business-type activities increased the City’s net position in total by $6,511,499 excluding the prior
period adjustment and change in accounting principle, mostly due to a net increase in transfers/capital
contributions of $3,177,982 from the governmental funds. A prior period adjustment of $740,538
increased the net position, due to the City recognizing unbilled revenue in the current year, which was not
previously accrued.
-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 201 8, the City
received about $4.4 million in capital asset-related donations from developers and about $2.2 million in
development program trunk/connection fees. Revenue also included about $1.4 million in street project
special assessments.
$3,346,943
$6,283,264
$5,393,240
$2,376,137
$825,975 $1,010,342 $688,590
$3,656,611
$8,918,991
$802,267
$18,473
$–
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
$8,000,000
$9,000,000
$10,000,000
General
Government
Public Safety Public Works Culture and
Recreation
Economic
Development
Interest on
Long-Term Debt
Expenses Program Revenues
Governmental Activities – Revenue by Program
Charges for Services
10%Operating Grants and
Contributions
8%
Capital Grants and
Contributions
33%
Property Taxes 46%
Franchise Taxes
2%
Other
1%
-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.
$2,721,328
$2,934,670
$600,030
$4,535,067
$3,761,760
$1,190,102
$–
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
$4,000,000
$4,500,000
$5,000,000
Water Sewer Water Quality
Expenses Program Revenues
Business-Type Activities – Revenue by Source
-12-
FINANCIAL ANALYSIS OF THE GOVERNMENT’S FUNDS
As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with
finance-related legal requirements.
Governmental Funds – The focus of the City’s governmental funds is to provide information on
near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing
the City’s financing requirements. In particular, unassigned fund balance may serve as a useful measure
of a government’s net resources available for spending at the end of the fiscal year.
As of the end of the current fiscal year, the City’s governmental funds reported combined ending fund
balances of $24,994,452, an increase of $2,994,954 in comparison with the prior year when excluding the
prior period adjustment.
The General Fund is the chief operating fund of the City. At the end of the recent fiscal year, total fund
balance reached $7,213,402. 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 53.2 percent of total
2019 General Fund budgeted expenditures and transfers out of $13,554,319. Of the total fund balance,
$281,635 is assigned for the 2019 budget for city manager severance, phone system replacement, and
fuel/salt supply replenishment due to significant 2018 snow events . This leaves an unassigned fund
balance of the General Fund of $6,931,767, or 51.1 percent, of total 2019 General Fund budgeted
expenditures and transfers out of $13,554,319.
The total fund balance of the General Fund reflects an increase of $372,474 from the prior year , which
included a prior period adjustment of $151,692 and a positive variance of $1,204,811 from the amended
budget. The fund balance increase is primarily due to net revenues over expenditures of $897,494.
Revenues exceeded budgeted amounts by $887,186, mostly in building permits and fees. Expenditures
were also under budgeted amounts by $314,302.
Additional information on the $151,692 prior period adjustment can be found on Note 1 of the notes to
the basic financial statement.
The Debt Service Fund balance increased by $397,257. The City manages cash flow in all debt service
accounts and ensures adequate resources exist to fund future obligations.
The Construction Fund balance increased by $745,757. This is largely due to the issuance of
2018A general obligation bonds of $3,975,000, net transfers in of $1,525,069, and offsetting capital
outlay of $5,356,130 for street projects. Capital outlay for the 2018 street improvement project alone was
$3,742,377.
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
2018 to increase the spending of the fund balance by $661,655, mainly for transfers to other funds for
funding EDA initiatives, street mill and overlay projects, and one-time stormwater easement cost.
Actual revenues were $887,186 over budget in 2018, due primarily to an increase in building permits and
plan check fees.
Actual expenditures were $314,302 less than budget in 2018. Many factors impacted expenditures. The
largest variance from budget was in public works being under budget by $1 77,158. This is primarily due
to personal services coming in lower than expected by $121,486. The City used contracted services for a
combined public works director/city engineer position, which resulted in savings in the public works
personal services line.
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, 2018 amounts to $213,930,282 (net of accumulated depreciation). This investment in
capital assets includes items such as land, buildings and improvements, machinery and equipment, park
facilities, roads, highways, and bridges.
2018 2017 2018 2017 2018 2017
Land 32,221,249$ 32,221,249$ –$ –$ 32,221,249$ 32,221,249$
Utility access agreement – – 1,492,167 – 1,492,167 –
Easements 47,095,500 43,854,364 218,912 75,300 47,314,412 43,929,664
Construction in progress 10,682,758 12,870,246 1,283,621 127,154 11,966,379 12,997,400
Land improvements 1,079,690 1,148,189 48,355 52,742 1,128,045 1,200,931
Machinery and equipment 2,807,013 2,719,274 935,532 684,323 3,742,545 3,403,597
Vehicles 1,708,031 1,692,829 4,993 10,651 1,713,024 1,703,480
Infrastructure 53,663,421 50,284,885 60,689,040 55,689,377 114,352,461 105,974,262
Total 149,257,662$ 144,791,036$ 64,672,620$ 56,639,547$ 213,930,282$ 201,430,583$
Table 3
Capital Assets
(Net of Depreciation)
Total
Business-Type
Activities
Governmental
Activities
Additional information on the City’s capital assets can be found in Note 3 of the notes to basic financial
statements.
-14-
Long-Term Debt – At the end of the current fiscal year, the City had total bonded debt outstanding of
$41,535,000. This amount comprises debt backed by the full faith and credit of the City. The City’s total
long-term liabilities increased during the current fiscal year, due to the issuance of 2018A general
obligation improvement bonds.
2018 2017 2018 2017 2018 2017
G.O. bonds 13,200,000$ 13,410,000$ –$ –$ 13,200,000$ 13,410,000$
G.O. special assessment bonds 18,905,000 16,365,000 – – 18,905,000 16,365,000
G.O. tax increment bonds 160,000 185,000 – – 160,000 185,000
G.O. revenue bonds 6,630,000 7,000,000 2,640,000 – 9,270,000 7,000,000
Premium (discount) on bonds payable 1,199,452 596,753 335,236 – 1,534,688 596,753
Energy loan payable 1,816,436 2,074,452 – – 1,816,436 2,074,452
Compensated absences payable 838,524 794,988 167,619 141,868 1,006,143 936,856
Total OPEB liability 819,780 398,179 86,353 – 906,133 398,179
Net pension liability – GERF and PEPFF 5,277,885 6,411,191 981,090 1,192,773 6,258,975 7,603,964
Total 48,847,077$ 47,235,563$ 4,210,298$ 1,334,641$ 53,057,375$ 48,570,204$
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 $3,261,128,200, which calculates to a debt limit of
$97,833,846. 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 $13,200,000 of general obligation debt outstanding, leaving a debt limit of
$84,633,846.
Additional information on the City’s long-term debt can be found in Note 5 of the notes to basic financial
statements.
ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES
• The City adopted a general operating budget of $13,554,319, for expenditures and other financing
uses for fiscal 2019, an increase of $786,551, or 6.2 percent, from the 2018 original budget.
• Growth is robust in the City, with 318 and 198 residential permits issued in 2017 and 2018,
respectively (2017 included 218 units in multi-family residential buildings). From 2005 to 2017,
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).
• Since 2016, 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 $13,433,500 and $5,317,652 in 2017 and
2018, respectively (2017 included the construction of the Lake Ridge and Pike Lake Marsh
apartments and 170,000 square feet of new commercial space). The City saw a $6.8 million
increase in commercial additions in 2018 for school-related additions and alterations.
-15-
• Continued staged development of land within the Spring Lake Township orderly annexation area
will provide opportunity for 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, 2017, and 2018 bond issuance:
Moody’s S&P
2014 Aa2
2015 Aa2 AA+
2016 AA+
2017 AA+
2018 AA+
Objective 2: General Fund Reserve Balance
Maintain a 40 to 50 percent General Fund reserve balance – The Office of the State Auditor recommends
a reserve balance between 35 to 50 percent 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.
$12,563,945
$12,945,738
$13,070,878
$12,767,768
$13,554,319
46%
47%
51%54%53%
$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
$13,500,000
$13,750,000
2014 2015 2016 2017 2018
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.
Metro
10,000–24,999
Seven-County
Metro Area
City of
Prior Lake
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
2018 N/A N/A 33.04
Average City Tax Capacity Rate
2014 0.55
2015 0.55
2016 –
2017 –
2018 –
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
$1,250
$1,275
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
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
$1,700
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
General Fund Total Operating
Expenditures Per Household
Expected Operating Expenditures/HH Operating Expenditures/HH
REQUESTS FOR INFORMATION
These financial statements are designed to provide a general overview of the City’s finances for all those
with an interest in the City’s finances. Questions concerning any of the information provided in this report
or requests for additional financial information should be addressed to the office of the City’s Finance
Director at the City of Prior Lake, 4646 Dakota Street Southeast, Prior Lake, Minnesota 55372-1714.
THIS PAGE INTENTIONALLY LEFT BLANK
BASIC FINANCIAL STATEMENTS
THIS PAGE INTENTIONALLY LEFT BLANK
Governmental Business-Type
Activities Activities Total
Assets
Cash and investments 28,473,713$ 9,083,917$ 37,557,630$
Receivables
Delinquent taxes 112,141 – 112,141
Accounts 542,038 1,178,946 1,720,984
Special assessments 3,993,626 79,593 4,073,219
Due from other governmental agencies 166,566 1,086 167,652
Restricted assets – temporarily restricted
Cash and investments held in escrow 25,000 – 25,000
Net pension asset 1,021,975 – 1,021,975
Capital assets not being depreciated 89,999,507 2,994,700 92,994,207
Capital assets net of accumulated depreciation 59,258,155 61,677,920 120,936,075
Total assets 183,592,721 75,016,162 258,608,883
Deferred outflows of resources
Pension plan deferments – GERF and PEPFF 4,065,825 174,826 4,240,651
Pension plan deferments – fire relief 264,611 – 264,611
OPEB plan deferments 35,613 7,294 42,907
Total deferred outflows of resources 4,366,049 182,120 4,548,169
Total assets and deferred
outflows of resources 187,958,770$ 75,198,282$ 263,157,052$
Liabilities
Accounts and contracts payable 1,589,996$ 458,082$ 2,048,078$
Accrued salaries and employee benefits payable 544,891 82,127 627,018
Due to other governmental agencies 262,155 2,392,990 2,655,145
Deposits payable 1,246,025 4,500 1,250,525
Accrued interest payable 137,478 48,876 186,354
Unearned revenue 39,195 – 39,195
Long-term liabilities
Due within one year 4,589,871 279,343 4,869,214
Due in more than one year 44,257,206 3,930,955 48,188,161
Total liabilities 52,666,817 7,196,873 59,863,690
Deferred inflows of resources
Pension plan deferments – GERF and PEPFF 5,778,745 302,865 6,081,610
Pension plan deferments – fire relief 421,705 – 421,705
Total deferred inflows of resources 6,200,450 302,865 6,503,315
Net position
Net investment in capital assets 107,929,953 61,697,384 169,627,337
Restricted for debt service 6,355,680 – 6,355,680
Restricted for net pension asset 864,881 – 864,881
Restricted for other purposes 1,271,074 – 1,271,074
Unrestricted 12,669,915 6,001,160 18,671,075
Total net position 129,091,503 67,698,544 196,790,047
Total liabilities, deferred inflows of resources
and net position 187,958,770$ 75,198,282$ 263,157,052$
CITY OF PRIOR LAKE
Statement of Net Position
as of December 31, 2018
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 3,346,943$ 681,924$ 6,666$ –$
Public safety 6,283,264 1,459,387 2,133,783 63,441
Public works 5,393,240 242,709 4,167 8,672,115
Culture and recreation 2,376,137 296,422 19,419 486,426
Economic development 825,975 17,918 555 –
Interest on long-term debt 1,010,342 – – –
Total governmental activities 19,235,901 2,698,360 2,164,590 9,221,982
Business-type activities
Water 2,721,328 3,967,705 5,018 562,344
Sewer 2,934,670 3,270,520 3,963 487,277
Water quality 600,030 987,238 6,391 66,473
Total business-type activities 6,256,028 8,225,463 15,372 1,116,094
Total 25,491,929$ 10,923,823$ 2,179,962$ 10,338,076$
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
Investment income
Miscellaneous
Transfers
Total general revenues and transfers
Change in net position
Net position
Beginning of year, as previously reported
Prior period adjustments
Change in accounting principle
Beginning of year, as restated
Net position – end of year
CITY OF PRIOR LAKE
Statement of Activities
Year Ended December 31, 2018
See notes to basic financial statements -21-
Governmental Business-Type
Activities Activities Total
(2,658,353)$ –$ (2,658,353)$
(2,626,653) – (2,626,653)
3,525,751 – 3,525,751
(1,573,870) – (1,573,870)
(807,502) – (807,502)
(1,010,342) – (1,010,342)
(5,150,969) – (5,150,969)
– 1,813,739 1,813,739
– 827,090 827,090
– 460,072 460,072
– 3,100,901 3,100,901
(5,150,969) 3,100,901 (2,050,068)
8,922,197 – 8,922,197
3,139,951 – 3,139,951
630,932 – 630,932
750,159 – 750,159
12,845 – 12,845
318,751 90,678 409,429
66,337 11,938 78,275
(3,177,982) 3,177,982 –
10,663,190 3,280,598 13,943,788
5,512,221 6,381,499 11,893,720
124,077,237 60,517,430 184,594,667
(151,692) 740,538 588,846
(346,263) (70,923) (417,186)
123,579,282 61,187,045 184,766,327
129,091,503$ 67,568,544$ 196,660,047$
Changes in Net Position
Net (Expense) Revenues and
-22-
THIS PAGE INTENTIONALLY LEFT BLANK
FUND FINANCIAL STATEMENTS
Debt
General Service Construction
Assets
Cash and investments 8,938,262$ 3,023,943$ 3,761,417$
Cash held in escrow – – –
Receivables
Delinquent taxes 111,977 – –
Accounts 197,904 11,774 7,510
Special assessments
Delinquent 641 19,841 3,964
Deferred 34,685 2,983,732 72,630
Other (Green Acres)– 451,350 –
Due from other governmental agencies 109,512 22,744 28,064
Total assets 9,392,981$ 6,513,384$ 3,873,585$
Liabilities, Deferred Inflows of Resources,
and Fund Balances
Liabilities
Accounts and contracts payable 237,474$ 1,880$ 682,621$
Accrued salaries and employee benefits payable 537,908 – –
Due to other governmental agencies 234,493 – 26,711
Deposits payable 1,042,523 – 17,353
Unearned revenue 5,445 – –
Total liabilities 2,057,843 1,880 726,685
Deferred inflows of resources
Unavailable revenue from delinquent taxes 111,977 – –
Unavailable revenue from special assessments 9,759 3,454,923 76,594
Total deferred inflows of resources 121,736 3,454,923 76,594
Fund balances
Restricted – 3,056,581 –
Assigned 281,635 – 3,070,306
Unassigned 6,931,767 – –
Total fund balances 7,213,402 3,056,581 3,070,306
Total liabilities, deferred inflows
of resources, and fund balances 9,392,981$ 6,513,384$ 3,873,585$
CITY OF PRIOR LAKE
Balance Sheet
Governmental Funds
as of December 31, 2018
See notes to basic financial statements -23-
Nonmajor Total
Governmental Governmental
Funds Funds
12,197,288$ 27,920,910$
25,000 25,000
164 112,141
321,483 538,671
1,242 25,688
425,541 3,516,588
– 451,350
6,246 166,566
12,976,964$ 32,756,914$
668,021$ 1,589,996$
6,983 544,891
951 262,155
186,149 1,246,025
33,750 39,195
895,854 3,682,262
164 112,141
426,783 3,968,059
426,947 4,080,200
1,097,687 4,154,268
10,556,476 13,908,417
– 6,931,767
11,654,163 24,994,452
12,976,964$ 32,756,914$
-24-
THIS PAGE INTENTIONALLY LEFT BLANK
24,994,452$
Capital assets are included in net position,but are excluded from fund balances because they do
not represent financial resources.
Cost of capital assets 213,308,528
Less accumulated depreciation (64,050,866)
Long-term liabilities are included in net position but are excluded from fund balances until due
and payable.
Bond principal payable (38,895,000)
Energy loan payable (1,816,436)
Total OPEB liability (819,780)
Net pension liability – GERF and PEPFF (5,277,885)
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.(1,199,452)
Accrued interest payable on long-term debt is included in net position,but is excluded from fund
balances until due and payable.(137,478)
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.(282,354)
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 112,141
Special assessments 3,968,059
Net pension asset 1,021,975
Deferred outflows of resources – GERF and PEPFF pension plans 4,065,825
Deferred outflows of resources – fire relief pension plan 264,611
Deferred outflows of resources – OPEB 35,613
Deferred inflows of resources – GERF and PEPFF pension plans (5,778,745)
Deferred inflows of resources – fire relief pension plan (421,705)
Total net position – governmental activities 129,091,503$
Amounts reported for governmental activities in the Statement of Net Position are different because:
as of December 31, 2018
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 7,988,125$ 3,139,951$ –$
Franchise taxes 630,932 – –
Special assessments 4,691 997,285 64,277
Licenses and permits 994,613 – –
Intergovernmental 1,835,750 – 19,214
Charges for services 1,357,049 – –
Fines and forfeits 1,448 – –
Interest on investments 54,717 43,964 73,183
Miscellaneous 325,639 – –
Total revenues 13,192,964 4,181,200 156,674
Expenditures
Current
General government 2,755,367 – –
Public safety 5,746,524 – –
Public works 1,882,971 – –
Culture and recreation 1,850,587 – –
Economic development – – –
Capital outlay 60,021 – 5,356,130
Debt service
Principal – 3,953,016 –
Interest and other – 944,599 53,408
Total expenditures 12,295,470 4,897,615 5,409,538
Excess (deficiency) of revenues
over expenditures 897,494 (716,415) (5,252,864)
Other financing sources (uses)
Debt issued – – 3,975,000
Premium on debt issued – – 498,552
Transfers in 443,000 1,171,697 2,026,491
Transfers out (819,651) (58,025) (501,422)
Sale of capital assets 3,323 – –
Total other financing sources (uses)(373,328) 1,113,672 5,998,621
Net change in fund balances 524,166 397,257 745,757
Fund balances
Beginning of year, as previously reported 6,840,928 2,659,324 2,324,549
Prior period adjustment (151,692) – –
Beginning of year, as restated 6,689,236 2,659,324 2,324,549
End of year 7,213,402$ 3,056,581$ 3,070,306$
CITY OF PRIOR LAKE
Statement of Revenues, Expenditures, and Changes in Fund Balances
Governmental Funds
Year Ended December 31, 2018
See notes to basic financial statements -26-
Nonmajor Total
Governmental Governmental
Funds Funds
1,677,970$ 12,806,046$
– 630,932
273,832 1,340,085
– 994,613
10,000 1,864,964
3,043,960 4,401,009
– 1,448
140,456 312,320
87,011 412,650
5,233,229 22,764,067
4,607 2,759,974
66,807 5,813,331
– 1,882,971
56,965 1,907,552
149,852 149,852
3,641,654 9,057,805
– 3,953,016
22,237 1,020,244
3,942,122 26,544,745
1,291,107 (3,780,678)
1,655,000 5,630,000
173,698 672,250
885,767 4,526,955
(2,697,233) (4,076,331)
19,435 22,758
36,667 6,775,632
1,327,774 2,994,954
10,326,389 22,151,190
– (151,692)
10,326,389 21,999,498
11,654,163$ 24,994,452$
-27-
THIS PAGE INTENTIONALLY LEFT BLANK
2,994,954$
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 7,776,269
Capital contributions 4,407,602
Depreciation expense (4,052,295)
A gain or loss on the disposal of capital assets,including the difference between the carrying value and any related
sale proceeds,is included in the change in net position.However,only the sale proceeds are included in the change in
fund balance.(36,344)
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.(3,628,606)
The amount of debt issued is reported in the governmental funds as a source of financing.Debt obligations are not
revenues in the Statement of Activities,but rather constitute long-term liabilities.Repayment of long-term debt does
not affect the change in net position; however, it reduces fund balances.
Principal repayments 3,953,016
Debt issued (5,630,000)
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.
Total OPEB liability (44,056)
Net pension liability – GERF and PEPFF 1,133,306
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.(59,649)
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. (602,699)
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.(85,201)
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 7,200
Special assessments 17,502
Net pension asset 232,153
Deferred outflows of resources – GERF and PEPFF pension plans (1,265,185)
Deferred outflows of resources – fire relief pension plan 29,429
Deferred outflows of resources – OPEB 4,331
Deferred inflows of resources – GERF and PEPFF pension plans 355,853
Deferred inflows of resources – fire relief pension plan 4,641
5,512,221$ Change in net position – governmental activities
CITY OF PRIOR LAKE
Year Ended December 31, 2018
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 8,006,734$ 8,006,734$ 7,988,125$ (18,609)$
Franchise taxes 615,000 615,000 630,932 15,932
Special assessments 2,500 2,500 4,691 2,191
Licenses and permits 607,798 607,798 994,613 386,815
Intergovernmental 1,675,986 1,675,986 1,835,750 159,764
Charges for services 1,087,315 1,087,315 1,357,049 269,734
Fines and forfeits – – 1,448 1,448
Investment income 86,000 86,000 54,717 (31,283)
Miscellaneous 224,445 224,445 325,639 101,194
Total revenues 12,305,778 12,305,778 13,192,964 887,186
Expenditures
Current
General government 2,799,743 2,826,408 2,755,367 (71,041)
Public safety
Police 4,172,825 4,172,825 4,172,593 (232)
Fire and rescue 929,460 944,460 960,914 16,454
Other 631,204 631,204 613,017 (18,187)
Public works 2,063,803 2,060,129 1,882,971 (177,158)
Culture and recreation 1,898,731 1,902,405 1,850,587 (51,818)
Capital outlay
General government 44,450 72,341 60,021 (12,320)
Total expenditures 12,540,216 12,609,772 12,295,470 (314,302)
Excess (deficiency) of revenues
over expenditures (234,438) (303,994) 897,494 1,201,488
Other financing sources (uses)
Transfers in 443,000 443,000 443,000 –
Transfers out (227,552) (819,651) (819,651) –
Sale of assets – – 3,323 3,323
Total other financing sources (uses)215,448 (376,651) (373,328) 3,323
Net change in fund balances (18,990)$ (680,645)$ 524,166 1,204,811$
Fund balances
Beginning of year, as previously reported 6,840,928
Prior period adjustment (151,692)
Beginning of year, as restated 6,689,236
End of year 7,213,402$
CITY OF PRIOR LAKE
Budgeted Amounts
Year Ended December 31, 2018
General Fund
Statement of Revenues, Expenditures, and Changes in Fund Balances
Budget and Actual
See notes to basic financial statements -29-
2018 2017 2018 2017
Current assets
Cash and investments 6,471,431$ 2,824,752$ 1,816,230$ 1,215,627$
Receivables
Accounts 426,906 105,677 599,201 123,556
Special assessments
Delinquent 38,431 30,205 38,431 30,205
Deferred 2,731 3,695 – –
Due from other governmental agencies 914 213 172 140
Total current assets 6,940,413 2,964,542 2,454,034 1,369,528
Noncurrent assets
Capital assets not being depreciated 2,201,760 152,661 634,293 –
Depreciable capital assets 46,392,214 41,800,216 31,108,724 29,953,317
Accumulated depreciation (10,190,444) (9,386,318) (7,759,498) (7,247,588)
Total noncurrent assets 38,403,530 32,566,559 23,983,519 22,705,729
Total assets 45,343,943 35,531,101 26,437,553 24,075,257
Deferred outflows of resources
Pension plan deferments – GERF 77,701 129,649 64,750 108,040
OPEB plan deferments 3,003 – 3,003 –
Total deferred outflows of resources 80,704 129,649 67,753 108,040
Total assets and deferred outflows of resources 45,424,647$ 35,660,750$ 26,505,306$ 24,183,297$
Current liabilities
Accounts and contracts payable 250,311$ 56,340$ 172,745$ 14,542$
Accrued salaries and employee benefits payable 33,702 18,143 36,042 18,847
Due to other governmental agencies 2,240,059 14,095 7,520 2,520
Deposits payable 4,500 3,000 – –
Accrued interest payable 24,438 – 24,438 –
Current portion of compensated absences payable 32,917 26,686 26,573 21,772
Current portion of bonds payable 105,000 – 105,000 –
Total current liabilities 2,690,927 118,264 372,318 57,681
Noncurrent liabilities
Compensated absences payable 67,411 59,142 26,220 22,165
Bonds premium (discount)167,618 – 167,618 –
Bonds payable 1,215,000 – 1,215,000 –
Net pension liability 436,041 530,122 363,367 441,768
Total OPEB Liability 35,557 – 35,557 –
Total noncurrent liabilities 1,921,627 589,264 1,807,762 463,933
Total liabilities 4,612,554 707,528 2,180,080 521,614
Deferred inflows of resources
Pension plan deferments – GERF 134,607 103,527 112,172 86,272
Net position (deficit)
Net investment in capital assets 36,915,912 32,566,559 22,495,901 22,705,729
Unrestricted 3,761,574 2,283,136 1,717,153 869,682
Total net position 40,677,486 34,849,695 24,213,054 23,575,411
Total liabilities, deferred inflows of
resources, and net position 45,424,647$ 35,660,750$ 26,505,306$ 24,183,297$
CITY OF PRIOR LAKE
Statements of Net Position
Proprietary Funds
as of December 31, 2018
Business-Type Activities – Enterprise Funds
Water Sewer
(With Partial Comparative Information as of December 31, 2017)
See notes to basic financial statements -30-
Governmental
Activities –
Internal Service
2018 2017 2018 2017 Fund
796,256$ 988,247$ 9,083,917$ 5,028,626$ 552,803$
152,839 47,744 1,178,946 276,977 3,367
– – 76,862 60,410 –
– – 2,731 3,695 –
– 1,002 1,086 1,355 –
949,095 1,036,993 10,343,542 5,371,063 556,170
158,647 49,793 2,994,700 202,454 –
2,766,329 1,834,982 80,267,267 73,588,515 –
(639,405) (517,516) (18,589,347) (17,151,422) –
2,285,571 1,367,259 64,672,620 56,639,547 –
3,234,666 2,404,252 75,016,162 62,010,610 556,170
32,375 54,020 174,826 291,709 –
1,288 – 7,294 – –
33,663 54,020 182,120 291,709 –
3,268,329$ 2,458,272$ 75,198,282$ 62,302,319$ 556,170$
35,026$ 81,240$ 458,082$ 152,122$ –$
12,383 6,772 82,127 43,762 –
145,411 1,814 2,392,990 18,429 –
– – 4,500 3,000 –
– – 48,876 – –
9,853 7,820 69,343 56,278 396,359
– – 210,000 – –
202,673 97,646 3,265,918 273,591 396,359
4,645 4,283 98,276 85,590 442,165
– – 335,236 – –
– – 2,430,000 – –
181,682 220,883 981,090 1,192,773 –
15,239 – 86,353 – –
201,566 225,166 3,930,955 1,278,363 442,165
404,239 322,812 7,196,873 1,551,954 838,524
56,086 43,136 302,865 232,935 –
2,285,571 1,367,259 61,697,384 56,639,547 –
522,433 725,065 6,001,160 3,877,883 (282,354)
2,808,004 2,092,324 67,698,544 60,517,430 (282,354)
3,268,329$ 2,458,272$ 75,198,282$ 62,302,319$ 556,170$
Water Quality Totals
-31-
2018 2017 2018 2017
Operating revenues
Sewer charges –$ –$ 3,006,814$ 2,830,617$
Water charges 3,558,027 3,454,135 – –
Storm water charges – – – –
Capital facility charges 263,705 260,147 263,212 260,156
Meter sales 137,964 79,437 – –
Charges for services – – – –
Total operating revenues 3,959,696 3,793,719 3,270,026 3,090,773
Operating expenses
Personal services 693,116 686,525 661,568 676,145
Supplies 381,771 330,573 42,217 46,065
Repairs and maintenance 102,527 185,561 20,574 22,936
Other services and charges 186,595 207,125 156,352 118,735
Insurance 1,516 1,841 17,997 1,841
Utilities 506,412 470,014 40,802 40,711
Disposal charges – – 1,440,332 1,390,443
Miscellaneous 3,091 2,177 252 4,609
Depreciation 804,126 737,632 511,909 469,658
Total operating expenses 2,679,154 2,621,448 2,892,003 2,771,143
Operating income (loss)1,280,542 1,172,271 378,023 319,630
Nonoperating revenues (expenses)
Intergovernmental 3,833 3,463 2,778 161
Investment income 58,716 21,511 24,562 12,357
Gain on sale of capital assets 1,185 – 1,185 –
Interest expense (42,174)– (42,174)–
Miscellaneous 19,948 10,314 – –
Total nonoperating revenues 41,508 35,288 (13,649) 12,518
Income before contributions and transfers 1,322,050 1,207,559 364,374 332,148
Special assessments 54,401 2,378 – –
Capital grants – – – –
Capital contributions from other funds 2,691,005 2,590,740 576,051 3,619,544
Capital contributions from developers 507,943 145,449 487,277 133,351
Transfers in 2,608,475 250,000 17,434 –
Transfers out (1,622,445) (2,151,421) (1,117,033) (1,232,910)
Change in net position 5,561,429 2,044,705 328,103 2,852,133
Net position (deficit)
Beginning of year, as previously reported 34,849,695 32,804,990 23,575,411 20,723,278
Prior period adjustment 295,566 – 338,744 –
Change in accounting principle (29,204)– (29,204)–
Beginning of year, as restated 35,116,057 32,804,990 23,884,951 20,723,278
End of year 40,677,486$ 34,849,695$ 24,213,054$ 23,575,411$
Business-Type Activities – Enterprise Funds
CITY OF PRIOR LAKE
Statements of Revenues, Expenses, and Changes in Net Position
Proprietary Funds
Year Ended December 31, 2018
Water Sewer
(With Partial Comparative Information for the Year Ended December 31, 2017)
See notes to basic financial statements -32-
Governmental
Activities –
Internal Service
2018 2017 2018 2017 Fund
–$ –$ 3,006,814$ 2,830,617$ –$
– – 3,558,027 3,454,135 –
986,338 925,988 986,338 925,988 –
– – 526,917 520,303 –
– – 137,964 79,437 –
– – – – 28,245
986,338 925,988 8,216,060 7,810,480 28,245
275,481 290,871 1,630,165 1,653,541 119,877
22,999 27,613 446,987 404,251 –
44,877 85,347 167,978 293,844 –
133,920 118,694 476,867 444,554 –
– – 19,513 3,682 –
– – 547,214 510,725 –
– – 1,440,332 1,390,443 –
864 664 4,207 7,450 –
121,889 110,368 1,437,924 1,317,658 –
600,030 633,557 6,171,187 6,026,148 119,877
386,308 292,431 2,044,873 1,784,332 (91,632)
7,291 5,487 13,902 9,111 –
7,400 7,812 90,678 41,680 6,431
– – 2,370 – –
– – (84,348) – –
– 120 19,948 10,434 –
14,691 13,419 42,550 61,225 6,431
400,999 305,850 2,087,423 1,845,557 (85,201)
– – 54,401 2,378 –
130,000 – 130,000 – –
361,550 323,553 3,628,606 6,533,837 –
66,473 19,600 1,061,693 298,400 –
143,612 42,093 2,769,521 292,093 –
(480,667) (455,215) (3,220,145) (3,839,546) –
621,967 235,881 6,511,499 5,132,719 (85,201)
2,092,324 1,856,443 60,517,430 55,384,711 (197,153)
106,228 – 740,538 – –
(12,515)– (70,923) – –
2,186,037 1,856,443 61,187,045 55,384,711 (197,153)
2,808,004$ 2,092,324$ 67,698,544$ 60,517,430$ (282,354)$
Water Quality Totals
-33-
2018 2017 2018 2017
Cash flows from operating activities
Cash received from customers 3,941,882$ 3,756,449$ 3,132,049$ 3,063,133$
Cash payments to suppliers 1,238,023 (1,233,962) (1,555,323) (1,652,796)
Cash payments to employees (685,072) (628,333) (648,560) (631,622)
Miscellaneous revenue 19,948 10,314 – –
Net cash flows from operating
activities 4,514,781 1,904,468 928,166 778,715
Cash flows from noncapital financing activities
Intergovernmental revenue 3,833 3,463 2,778 161
Transfers in 2,608,475 250,000 17,434 –
Transfers (out)(1,622,445) (2,151,421) (1,117,033) (1,232,910)
Net cash flows from noncapital
financing activities 989,863 (1,897,958) (1,096,821) (1,232,749)
Cash flows from capital and related financing
activities
Special assessments 54,401 2,378 – –
Capital grants – – – –
Acquisition of capital assets (3,442,149) 183 (726,371) –
Proceeds from issuance of debt 1,487,618 – 1,487,618 –
Proceeds from sale of capital assets 1,185 – 1,185 –
Interest paid on long-term debt (17,736) – (17,736) –
Net cash flows from capital
and related financing activities (1,916,681) 2,561 744,696 –
Cash flows from investing activities
Interest received 58,716 21,511 24,562 12,357
Net increase (decrease) in cash and cash
equivalents 3,646,679 30,582 600,603 (441,677)
Cash and cash equivalents, January 1 2,824,752 2,794,170 1,215,627 1,657,304
Cash and cash equivalents, December 31 6,471,431$ 2,824,752$ 1,816,230$ 1,215,627$
Business-Type Activities – Enterprise Funds
CITY OF PRIOR LAKE
Statements of Cash Flows
Proprietary Funds
Year Ended December 31, 2018
(With Partial Comparative Information for the Year Ended December 31, 2017)
Water Sewer
See notes to basic financial statements -34-
Governmental
Activities –
Internal Service
2018 2017 2018 2017 Fund
992,394$ 937,640$ 8,066,325$ 7,757,222$ 28,225$
(105,277) (170,210) (422,577) (3,056,968) –
(274,567) (266,981) (1,608,199) (1,526,936) (76,341)
– 120 19,948 10,434 117,324
612,550 500,569 6,055,497 3,183,752 69,208
7,291 5,487 13,902 9,111 –
143,612 42,093 2,769,521 292,093 –
(480,667) (455,215) (3,220,145) (3,839,546) –
(329,764) (407,635) (436,722) (3,538,342) –
– – 54,401 2,378 –
130,000 – 130,000 – –
(612,177) (49,793) (4,780,697) (49,610) –
– – 2,975,236 – –
– – 2,370 – –
– – (35,472) – –
(482,177) (49,793) (1,654,162) (47,232) –
7,400 7,812 90,678 41,680 6,431
(191,991) 50,953 4,055,291 (360,142) 75,639
988,247 937,294 5,028,626 5,388,768 477,164
796,256$ 988,247$ 9,083,917$ 5,028,626$ 552,803$
TotalsWater Quality
-35-(continued)
2018 2017 2018 2017
Reconciliation of operating income (loss) to net
cash flows from operating activities
Operating income (loss)1,280,542$ 1,172,271$ 378,023$ 319,630$
Adjustments to reconcile operating income (loss)
to net cash flows from operating activities
Depreciation 804,126 737,632 511,909 469,658
Miscellaneous revenue 19,948 10,314 – –
(Increase) decrease in assets
and deferred outflows of resources
Accounts receivable (11,351) (28,292) (129,719) (19,546)
Special assessments receivable (7,262) (8,534) (8,226) (8,117)
Due from other governments (701) 1,056 (32) 23
Deferred outflows of resources – GERF 51,948 151,414 43,290 126,179
Deferred outflows of resources – OPEB (3,003) – (3,003) –
Increase (decrease) in liabilities
and deferred inflows of resources
Accounts and contracts payable 193,971 3,086 158,203 384
Accrued salaries and employee benefits payable 1,247 (4,535) 10,013 (5,108)
Due to other governmental agencies 2,225,964 (10,765) 5,000 (3,680)
Deposits payable 1,500 (1,500) – –
Compensated absences payable 14,500 4,936 8,856 1,472
Net pension liability (94,081) (143,148) (78,401) (119,290)
Total OPEB Liability 6,353 – 6,353 –
Deferred inflows of resources – GERF 31,080 20,533 25,900 17,110
Net cash flows from operating
activities 4,514,781$ 1,904,468$ 928,166$ 778,715$
Schedule of noncash activities from capital and
related financing activities
Capital assets contributed from other funds 2,691,005$ 2,590,740$ 576,051$ 3,619,544$
Capital assets contributed by developers 507,943$ 145,449$ 487,277$ 133,351$
Business-Type Activities – Enterprise Funds
Water
CITY OF PRIOR LAKE
Sewer
Statements of Cash Flows (continued)
Proprietary Funds
Year Ended December 31, 2018
(With Partial Comparative Information for the Year Ended December 31, 2017)
See notes to basic financial statements -36-
Governmental
Activities –
Internal Service
2018 2017 2018 2017 Fund
386,308$ 292,431$ 2,044,873$ 1,784,332$ (91,632)$
121,889 110,368 1,437,924 1,317,658 –
– 120 19,948 10,434 –
5,054 11,989 (136,016) (35,849) 117,304
– – (15,488) (16,651) –
1,002 (337) 269 742 –
21,645 63,089 116,883 340,682 –
(1,288) – (7,294) – –
(46,214) 76,132 305,960 79,602 –
1,689 (1,348) 12,949 (10,991) –
143,597 (1,945) 2,374,561 (16,390) –
– – 1,500 (1,500) –
2,395 1,160 25,751 7,568 43,536
(39,201) (59,645) (211,683) (322,083) –
2,724 – 15,430 – –
12,950 8,555 69,930 46,198 –
612,550$ 500,569$ 6,055,497$ 3,183,752$ 69,208$
361,550$ 323,553$ 3,628,606$ 6,533,837$ –$
66,473$ 19,600$ 1,061,693$ 298,400$ –$
TotalsWater Quality
-37-
THIS PAGE INTENTIONALLY LEFT BLANK
CITY OF PRIOR LAKE
Notes to Basic Financial Statements
December 31, 2018
-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 th e government-wide financial
statements. However, charges between the City’s enterprise funds and other functions are not eliminated,
as that would distort the direct costs and program revenues reported in those functions. The City applies
restricted resources first when an expense is incurred for which both restricted and unrestricted resources
are available. Depreciation expense is included in the direct expenses of each function. Interest on
long-term debt is considered an indirect expense and is reported separately on the Statement of Activities.
D. Fund Financial Statement Presentation
Separate fund financial statements are provided for governmental and proprietary funds. Major individual
governmental and enterprise funds are reported as separate columns in the fund financial statements.
Aggregated information for the remaining nonmajor governmental funds is reported in a single column in
the fund financial statements.
Governmental fund financial statements are reported using the current financial resources measurement
focus and the modified accrual basis of accounting. Under this basis of accounting transactions are
recorded in the following manner:
1. Revenue Recognition – Revenue is recognized when it becomes measurable and available.
“Measurable” means the amount of the transaction can be determined and “available” means
collectible within the current period or soon enough thereafter to be used to pay liabilities of the
current period. For this purpose, the City considers revenues to be available if they are collected
within 60 days after year-end. Only the portion of special assessments receivable due within the
current fiscal period is considered to be susceptible to accrual as revenue of the current period.
Grants and similar items are recognized when all eligibility requirements imposed by the provider
have been met. 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, compensated absences, and other long-term
liabilities, which are recognized as expenditures to the extent they have matured. Capital asset
acquisitions are reported as capital outlay expenditures in the governmental funds.
-40-
NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Proprietary fund financial statements are reported using the economic resources measurement focus and
the accrual basis of accounting, similar to the government -wide financial statements. Proprietary funds
distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses
generally result from providing services and producing and delivering goods in connection with a
proprietary fund’s principal ongoing operations. The principal operating revenues of the City’s enterprise
funds and internal service funds are charges to customers for sales and services . The operating expenses
for the enterprise funds and internal service funds include the cost of sales and services, administrative
expenses, and depreciation on capital assets. All revenues and expenses that do not meet this definition
are reported as nonoperating revenues and expenses.
Aggregated information for the internal service funds is reported in a single column in the proprietary
fund financial statements. Because the principal user of the internal services is the City’s governmental
activities, the financial statements of the internal service funds are consolidated into the governmental
column when presented in the government-wide financial statements. The cost of these services is
reported in the appropriate functional activity.
Description of Funds
The City reports the following major governmental funds:
General Fund – This is the general operating fund of the City. It is used to account for all financial
resources except those required to be accounted for in another fund.
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.
-41-
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.
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 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 may also be reported at amortized cost. Investment income is accrued at the
Balance Sheet date.
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 hierarchy 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.
-42-
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.
-43-
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), deferred (certified but not
yet levied), or other (Green Acres) 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 water access agreements and
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 $5,000 or more with an estimated useful life in excess of
one year. The cost of normal maintenance and repairs that do not add to the value of the asset or
materially extend asset lives are not capitalized.
In the case of initial capitalization of general infrastructure assets (i.e., those reported by governmental
activities) the City chose to include items dating back to June 30, 1980. The City was able to estimate the
historical cost for the initial reporting of these assets through back-trending (i.e., estimating the current
replacement cost of the infrastructure to be capitalized and using an appropriate price-level index to
deflate the cost to the acquisition year or estimated acquisition year).
-44-
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, water access agreements, 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
and the enterprise funds.
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.
-45-
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.
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 and deferred inflows 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 and OPEB 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 and OPEB 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.”
-46-
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 Cit y’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, 2017, 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.
-47-
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 the current year.
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.
X. Prior Period Adjustments and Change in Accounting Principle
During the year ended December 31, 2018, the City recorded two prior period adjustments. First, the City
properly applied the full portion of accrued wages to the appropriate accounting period. The effect of this
change reduced the General Fund balance and the governmental activities net position at December 31,
2017 by $151,692 and the business-type activities and enterprise funds by $25,416. If recorded in the
prior year, this adjustment would have increased accrued salaries and salary expense/expenditures.
Second, the City began recording unbilled utility receivables at year-end. The recorded unbilled utility
receivables increased the City’s business-type activities and enterprise funds net position by $765,954. If
recorded in the prior year, this adjustment would have increased accounts receivable and utility revenue.
-48-
NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
X. Prior Period Adjustments and Change in Accounting Principle (continued)
During the year ended December 31, 2018, the City implemented GASB Statement No. 75, Accounting
and Financial Reporting for Postemployment Benefits Other Than Pensions. This statement included
major changes in how plans and employers account for OPEB benefit obligations. This statement
established standards for recognizing and measuring liabilities, deferred outflows of resources, deferred
inflows of resources, and expense/expenditures. Certain amounts necessary to fully restate fiscal year
2017 financial information are not determinable; therefore, prior year comparative amounts have not been
restated. The implementation of the new GASB statement in the current year resulted in the restatement
of net position as of December 31, 2017.
The details of the prior period adjustment and change in accounting principle are as follows:
Proprietary Funds/
Governmental Business-type Governmental
Activities Activities Funds
Net position/fund balance – beginning, as previously reported 124,077,237$ 60,517,430$ 22,151,190$
Change in accounting principle
Other post-employment benefit obligations, previous reporting standards 398,179 – –
Total OPEB liability, current reporting standards (775,724) (77,328) –
Deferred outflows of resources, under current reporting standards 31,282 6,405 –
Total change in accounting principle (346,263) (70,923) –
Prior period adjustments
Adjustment to accrued wages (151,692) (25,416) (151,692)
Adjustment to utility receivable – 765,954 –
Total prior period adjustments (151,692) 740,538 (151,692)
Net position – beginning, as restated 123,579,282$ 61,187,045$ 21,999,498$
NOTE 2 – CASH AND INVESTMENTS
A. Components of Cash and Investments
Cash and investments at year-end consist of the following:
Deposits 1,105,412$
Investments 36,476,368
Cash on hand 850
Total 37,582,630$
Cash and investments are presented in the financial statements as follows:
Statement of Net Position
Cash and investments 37,557,630$
Restricted assets – temporarily restricted –
cash and investments held in escrow 25,000
Total 37,582,630$
-49-
NOTE 2 – CASH AND INVESTMENTS (CONTINUED)
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 $1,105,412, while the balance on the
bank records was $1,299,200. At December 31, 2018, all deposits were fully covered by federal
deposit insurance, surety bonds, or by collateral held by the City’s agent in the City’s name.
C. Investments
The City has the following investments at year-end:
Fair Value
Investment Type Rating Agency Measurement Less Than 1 1 to 5 Over 5 Total
U.S. agency securities AA S&P Level 2 –$ 6,541,179$ 490,610$ 7,031,789$
Local government securities AAA S&P Level 2 1,422,911 548,456 – 1,971,367
Local government securities AAA Moody’s Level 2 – 260,967 – 260,967
Local government securities AA S&P Level 2 468,703 2,045,727 – 2,514,430
Local government securities AA Moody’s Level 2 114,909 737,091 – 852,000
Local government securities A S&P Level 2 – 254,990 – 254,990
4M Fund - Term Series N/R N/A N/A 3,700,000 – – 3,700,000
Negotiable certificates of deposit N/R N/A Level 2 2,293,197 11,070,276 – 13,363,473
7,999,720$ 21,458,686$ 490,610$ 29,949,016
Investment pools/mutual funds
4M Fund N/R N/A N/A 5,776,377
Federated Trust AAA S&P Level 1 49,869
Western Asset Institutional
Government Reserve AAA S&P Level 1 701,106
Total investment pools/mutual funds 6,527,352
Total investments 36,476,368$
N/A – Not Applicable
N/R – Not Rated
Credit Risk
Interest Risk –
Segmented Time Distribution in Years
-50-
NOTE 2 – CASH AND INVESTMENTS (CONTINUED)
The City’s investments include investment pools managed by 4M, which is an external investment pool
regulated by Minnesota Statutes and is not registered with the Securities and Exchange Commission. The
City’s investments in this investment pool are measured at the net asset value per share provided by the
pools, which are based on amortized cost methods that approximate fair value. There are no restrictions or
limitations on withdrawals from 4M. 4M Term Series Portfolios are intended to be held until maturity; a
participant’s withdrawal prior to maturity will require seven-days’ notice of redemption and will likely
carry a penalty, which could be substantial in that it would be intended to allow the Term Series Portfolio
to recoup any associated penalties, charges, losses, or other costs associated with the early redemption of
the investments therein.
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.
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 $10,000,000; that are a
primary reporting dealer in U.S. government securities to the Federal Reserve Bank of New York; or
certain Minnesota securities broker-dealers. The City’s investment policy as described in Note 1
addresses credit risk.
Concentration Risk – This is the risk associated with investing a significant portion of the City’s
investment (considered 5.0 percent or more) in the securities of a single issuer, excluding U.S.
guaranteed investments (such as treasuries), investment pools, and mutual funds. At December 31,
2018, the City had 10.80 and 5.14 percent of its portfolio invested with Federal Home Loan Mortgage
Corporation and Federal National Mortgage Association, respectively. The City’s investment policy
as described in Note 1 addresses concentration risk.
Interest Rate Risk – This is the risk of potential variability in the fair value of fixed rate investments
resulting from changes in interest rates (the longer the period for which an interest rate is fixed, the
greater the risk). The City has an investment policy as described in Note 1, which addresses interest
rate risk.
-51-
NOTE 3 – CAPITAL ASSETS
Capital asset activity for the year ended December 31, 2018 was as follows:
A. Changes in Capital Assets Used in Governmental Activities
Transfers
Beginning and Completed
of Year Additions Deletions Construction End of Year
Capital assets, not depreciated
Land 32,221,249$ –$ –$ –$ 32,221,249$
Easements 43,854,364 3,241,136 – – 47,095,500
Construction in progress 12,870,246 5,129,036 – (7,316,524) 10,682,758
Total capital assets, not depreciated 88,945,859 8,370,172 – (7,316,524) 89,999,507
Capital assets, depreciated
Land improvements 2,774,127 – – – 2,774,127
Machinery and equipment 6,611,654 687,544 – (212,404) 7,086,794
Vehicles 6,125,497 405,836 (383,358) (10,464) 6,137,511
Infrastructure 100,749,287 2,720,319 (69,803) 3,910,786 107,310,589
Total capital assets, depreciated 116,260,565 3,813,699 (453,161) 3,687,918 123,309,021
Less accumulated depreciation on
Land improvements (1,625,938) (68,499) – – (1,694,437)
Machinery and equipment (3,892,380) (387,401) – – (4,279,781)
Vehicles (4,432,668) (343,826) 347,014 – (4,429,480)
Infrastructure (50,464,402) (3,252,569) 69,803 – (53,647,168)
Total accumulated depreciation (60,415,388) (4,052,295) 416,817 – (64,050,866)
Net capital assets, depreciated 55,845,177 (238,596) (36,344) 3,687,918 59,258,155
Total capital assets, net 144,791,036$ 8,131,576$ (36,344)$ (3,628,606)$ 149,257,662$
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$ 143,612$ –$ –$ 218,912$
Water access agreement – 1,492,167 – – 1,492,167
Construction in progress 127,154 1,156,467 – – 1,283,621
Total capital assets, not depreciated 202,454 2,792,246 – – 2,994,700
Capital assets, depreciated
Land improvements 87,739 – – – 87,739
Machinery and equipment 1,389,895 92,081 – 212,404 1,694,380
Vehicles 82,636 – – 10,464 93,100
Infrastructure 72,028,245 2,958,063 – 3,405,738 78,392,046
Total capital assets, depreciated 73,588,515 3,050,144 – 3,628,606 80,267,265
Less accumulated depreciation on
Land improvements (34,997) (4,387) – – (39,384)
Machinery and equipment (705,572) (53,276) – – (758,848)
Vehicles (71,985) (16,122) – – (88,107)
Infrastructure (16,338,868) (1,364,138) – – (17,703,006)
Total accumulated depreciation (17,151,422) (1,437,923) – – (18,589,345)
Net capital assets, depreciated 56,437,093 1,612,221 – 3,628,606 61,677,920
Total capital assets, net 56,639,547$ 4,404,467$ –$ 3,628,606$ 64,672,620$
-52-
NOTE 3 – CAPITAL ASSETS (CONTINUED)
C. Depreciation Expense by Function
Depreciation expense for the year ended December 31, 2018 was charged to the following functions:
Governmental activities
General government 534,671$
Public safety 133,723
Public works 2,937,862
Culture and recreation 446,039
Total depreciation expense – governmental activities 4,052,295$
Business-type activities
Water 804,126$
Sewer 511,909
Water quality 121,888
Total depreciation expense – business-type activities 1,437,923$
NOTE 4 – TRANSFERS
Interfund Transfers
A schedule of interfund transfers is as follows:
Transfers Out General Debt Service Construction Nonmajor Water Sewer Water Quality Total
Governmental funds
General –$ 228,040$ –$ 447,999$ –$ –$ 143,612$ 819,651$
Debt service – 58,025 – – – – – 58,025
Construction – 242,820 – 224,416 16,752 17,434 – 501,422
Nonmajor – 105,508 – 2 2,591,723 – – 2,697,233
Proprietary funds
Water 190,500 537,304 776,900 117,741 – – – 1,622,445
Sewer 190,500 – 845,924 80,609 – – – 1,117,033
Water Quality 62,000 – 403,667 15,000 – – – 480,667
443,000$ 1,171,697$ 2,026,491$ 885,767$ 2,608,475$ 17,434$ 143,612$ 7,296,476$
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.
-53-
NOTE 5 – LONG-TERM DEBT
A. Components of Long-Term Debt
Final Balance –
Original Issue Interest Rate Issue Date Maturity Date End of Year
General obligation bonds
Fire Hall Refunding Bonds 2011B 3,500,000$ 2.00–3.40%12/14/2011 12/15/2031 2,970,000$
Capital Improvement Refunding Bonds 2012A 9,825,000$ 2.00–2.70%03/13/2012 12/15/2029 6,925,000
Street Reconstruction Bonds of 2015B 2,330,000$ 1.00–2.25%05/14/2015 12/15/2022 1,230,000
Street Reconstruction Bonds of 2016A 760,000$ 2.00%05/01/2016 12/15/2026 585,000
Improvement Bonds 2017A 370,000$ 2.00–2.25%06/29/2017 12/15/2027 325,000
Improvement Bonds 2018A 1,165,000$ 4.00-5.00%08/15/2018 12/15/2028 1,165,000
Total general obligation bonds 13,200,000
General obligation special assessment bonds
Improvement Bonds of 2009A 1,700,000$ 1.10–3.50%05/15/2009 12/15/2019 175,000
Improvement Bonds of 2010A 1,235,000$ 0.80–3.20%05/26/2010 12/15/2020 260,000
Improvement Bonds of 2011A 2,130,000$ 1.80–2.50%08/31/2011 12/15/2021 665,000
Improvement Bonds of 2011B 2,280,000$ 2.00–2.35%12/14/2011 12/15/2022 960,000
Improvement Bonds of 2013A 3,240,000$ 2.00–2.65%08/15/2013 12/15/2023 1,615,000
Improvement Bonds of 2014A 2,665,000$ 2.00–2.50%09/25/2014 12/15/2024 1,390,000
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 100,000
Improvement Bonds of 2016A 1,105,000$ 2.00%05/01/2016 12/15/2026 880,000
Improvement Bonds of 2017A 4,135,000$ 2.00–2.25%06/29/2017 12/15/2027 3,755,000
Improvement Bonds of 2018A 4,465,000$ 4.00-5.00%08/15/2018 12/15/2028 4,465,000
Total general obligation special
assessment bonds 18,905,000
Tax increment bonds
Tax Increment Refunding Bonds of 2011A 290,000$ 1.80–3.00%08/31/2011 12/15/2024 160,000
General obligation revenue bonds
General Obligation Improvement
Bonds of 2015A 5,360,000$ 1.00–3.00%05/14/2015 12/15/2031 5,285,000
General Obligation Improvement
Bonds of 2016A 1,640,000$ 2.00%05/01/2016 12/15/2022 1,345,000
General Obligation Improvement
Bonds of 2018A 2,640,000$ 4.00–5.00%08/15/2018 12/15/2028 2,640,000
Total general obligation revenue bonds 9,270,000
Premium (discount) on bonds payable 1,534,688
Energy loan payable 2,667,924$ 2.12%12/08/2014 06/19/2025 1,816,436
Compensated absences payable 1,006,143
Total OPEB liability 906,133
Net pension liability – GERF and PEPFF 6,258,975
Total long-term debt 53,057,375$
-54-
NOTE 5 – LONG-TERM DEBT (CONTINUED)
B. Changes in Long-Term Debt
Balance –
Beginning
of Year Change in Beginning
as Previously Accounting Balance as Balance –Due Within
Reported Principle *Restated Additions Deletions End of Year One Year
Governmental activities
Bonds payable
G.O. bonds 13,410,000$ –$ 13,410,000$ 1,165,000$ 1,375,000$ 13,200,000$ 1,230,000$
G.O. special assessment bonds 16,365,000 – 16,365,000 4,465,000 1,925,000 18,905,000 2,290,000
G.O. tax increment bonds 185,000 – 185,000 – 25,000 160,000 25,000
G.O. revenue bonds 7,000,000 – 7,000,000 – 370,000 6,630,000 385,000
Premium (discount) on bonds payable 596,753 – 596,753 672,250 69,551 1,199,452 –
Total bonds payable, net of premium (discount)37,556,753 – 37,556,753 6,302,250 3,764,551 40,094,452 3,930,000
Energy loan payable 2,074,452 – 2,074,452 – 258,016 1,816,436 263,512
Compensated absences payable 794,988 – 794,988 208,386 164,850 838,524 396,359
Net OPEB obligationTotal OPEB liability 398,179 377,545 775,724 75,337 31,281 819,780 –
Net pension liability – GERF and PEPFF 6,411,191 – 6,411,191 795,640 1,928,946 5,277,885 –
Governmental activities long-term liabilities 47,235,563$ 377,545$ 47,613,108$ 7,381,613$ 6,147,644$ 48,847,077$ 4,589,871$
Bonds payable
G.O. revenue bonds –$ –$ –$ 2,640,000$ –$ 2,640,000$ 210,000$
Premium (discount) on bonds payable – – – 335,236 – 335,236 –
Total bonds payable, net of premium (discount)– – – 2,975,236 – 2,975,236 210,000
Compensated absences payable 141,868 – 141,868 25,751 – 167,619 69,343
Total OPEB liability – 77,328 77,328 15,432 6,407 86,353 –
Net pension liability – GERF 1,192,773 – 1,192,773 90,130 301,813 981,090 –
Business-type activities long-term liabilities 1,334,641$ 77,328$ 1,411,969$ 3,106,549$ 308,220$ 4,210,298$ 279,343$
Business-type activities
*Note: This is only a portion of the change in accounting principle described in Note 1.
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 Principal Interest
2018 1,230,000$ 353,057$ 2,290,000$ 591,738$ 25,000$ 4,300$ 385,000$ 160,275$ 263,512$ 37,102$ 210,000$ 156,400$
2019 1,140,000 310,343 2,200,000 467,753 25,000 3,763 400,000 153,325 269,126 31,488 240,000 108,900
2020 1,270,000 285,048 2,060,000 403,203 25,000 3,175 420,000 145,700 274,859 25,755 240,000 99,300
2021 1,430,000 256,808 1,860,000 358,288 25,000 2,550 440,000 137,675 280,714 19,900 250,000 89,700
2022 1,055,000 224,316 1,945,000 309,068 30,000 1,800 480,000 129,250 286,693 13,920 260,000 79,700
2023–2027 5,375,000 718,681 7,380,000 832,700 30,000 900 2,660,000 487,500 441,532 9,390 1,440,000 219,800
2028–2031 1,700,000 83,250 1,170,000 52,198 – – 1,845,000 112,200 – – – –
13,200,000$ 2,231,503$ 18,905,000$ 3,014,948$ 160,000$ 16,488$ 6,630,000$ 1,325,925$ 1,816,436$ 137,555$ 2,640,000$ 753,800$
G.O. Revenue Bonds
Business-Type Activities
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 Fund, enterprise funds,
and internal service funds.
-55-
NOTE 5 – LONG-TERM DEBT (CONTINUED)
City employees participate in two state-wide, cost-sharing, multiple-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, 2018:
Net Net Deferred Deferred
Pension Pension Outflows of Inflows of Pension
Pension Plans Asset Liabilities Resources Resources Expense
GERF –$ 3,633,671$ 647,502$ 1,121,718$ 280,133$
PEPFF – 2,625,304 3,593,149 4,959,892 319,259
Fire relief association 1,021,975 – 264,611 421,705 (246,223)
Total 1,021,975$ 6,258,975$ 4,505,262$ 6,503,315$ 353,169$
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 the 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.
Total OPEB Liability – Long-term liabilities for OPEB will be paid by the General Fund and enterprise
funds.
Net Pension Liability – The details of this liability are disclosed elsewhere in these notes. Such benefits
are financed by the General Fund and enterprise funds.
-56-
NOTE 5 – LONG-TERM DEBT (CONTINUED)
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, 2018 is $4,811,066.
G. Revenue Pledged
Future revenue pledged for the payment of long-term debt is as follows:
Percent of Remaining Principal Pledged
Use of Total Term of Principal and Interest Revenue
Bond Issue Proceeds Type Debt Service Pledge and Interest Paid Received
Tax Increment Refunding Street and site Tax increment
Bonds of 2011A improvements financing 100%2011–2024 176,488$ 29,800$ 140,281$
General Obligation
Bonds of 2015A Partial refunding Utility charges 100%2015–2031 6,541,825$ 209,125$ 4,014,097$
General Obligation
Bonds of 2016A Partial refunding Utility charges 100%2016–2022 1,414,100$ 327,800$ 4,014,097$
General Obligation Water and sewer
Bonds of 2018A improvements Utility charges 100%2018–2028 3,393,800$ –$ 7,284,123$
Revenue Pledged Current Year
-57-
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 $3,261,128,200, which calculates to a debt limit of
$97,833,846. 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 $13,200,000 of general obligation debt outstanding, leaving a debt margin of
$84,633,846.
NOTE 6 – FUND BALANCES
A. Classifications
At December 31, 2018, a summary of the City’s governmental fund balance classifications are as follows:
Debt Construction Nonmajor
General Fund Service Fund Fund Funds Total
Restricted
Future debt service –$ 3,056,581$ –$ –$ 3,056,581$
Economic development – – – 268,252 268,252
Tax increment – – – 647,528 647,528
Forfeiture sales – – – 181,907 181,907
Total restricted – 3,056,581 – 1,097,687 4,154,268
Assigned
Subsequent year’s budget 281,635 – – – 281,635
Capital improvements – – 3,070,306 9,981,501 13,051,807
Development – – – 511,296 511,296
Communications – – – 63,679 63,679
Total assigned 281,635 – 3,070,306 10,556,476 13,908,417
Unassigned 6,931,767 – – – 6,931,767
Total 7,213,402$ 3,056,581$ 3,070,306$ 11,654,163$ 24,994,452$
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,
2018, the unrestricted fund balance of the General Fund was 53.2 percent of the subsequent year’s
budgeted expenditures and transfers out.
-58-
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 Descriptions
The City participates in the following cost-sharing, multiple-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. The GERF
members belong to the Coordinated Plan. Coordinated Plan members are covered by Social
Security.
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.
-59-
NOTE 7 – DEFINED BENEFIT PENSION PLANS – STATE-WIDE (CONTINUED)
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. 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 Plan members. Members hired prior to July 1,
1989, receive the higher of Method 1 or Method 2 formulas. Only Method 2 is used for members
hired after June 30, 1989. Under Method 1, the accrual rate for Coordinated Plan members is
1.2 percent of average salary for each of the first 10 years of service, and 1.7 percent of average
salary for each additional year. Under Method 2, the accrual rate for Coordinated Plan members
is 1.7 percent of average salary for all years 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.
Benefit increases are provided to benefit recipients each January. Increases are related to the
funding ratio of the plan. If the GERF is at least 90.0 percent funded for two consecutive years,
benefit recipients are given a 2.5 percent increase. If the plan has not exceeded 90.0 percent
funded, or has fallen below 80.0 percent, benefit recipients are given a 1.0 percent increase. A
benefit recipient who has been receiving a benefit for at least 12 full months as of June 30 will
receive a full increase. Members receiving benefits for at least one month, but less than 12 full
months as of June 30, will receive a pro rata increase.
2. PEPFF Benefits
Benefits for the 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 the 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. A full, unreduced pension is
earned when members are age 55 and vested, or for members who were first hired prior to July 1,
1989, when age plus years of service equal at least 90.
Benefit increases are provided to benefit recipients each January. PEPFF benefit recipients
receive a future annual 1.0 percent increase. An annual adjustment will equal 2.5 percent any time
the plan exceeds a 90.0 percent funded ratio for two consecutive years. If the adjustment is
increased to 2.5 percent and the funded ratio falls below 80.0 percent for one year, or 85.0 percent
for two consecutive years, the post-retirement benefit increase will be lowered to 1.0 percent. A
benefit recipient who has been receiving a benefit for at least 12 full months as of June 30 , will
receive a full increase. Members receiving benefits for at least one month, but less than 12 full
months as of June 30, will receive a pro rata increase. For retirements after May 31, 2014, the
first increase will be delayed two years.
-60-
NOTE 7 – DEFINED BENEFIT PENSION PLANS – STATE-WIDE (CONTINUED)
C. Contributions
Minnesota Statutes, Chapter 353 sets the rates for employer and employee contributions. Contribution
rates can only be modified by the State Legislature.
1. GERF Contributions
Coordinated Plan members were required to contribute 6.50 percent of their annual covered
salary in fiscal year 2018. The City was required to contribute 7.50 percent for Coordinated Plan
members. The City’s contributions to the GERF for the year ended December 31, 2018 were
$344,234. The City’s contributions were equal to the required contributions as set by state
statutes.
2. PEPFF Contributions
Plan members were required to contribute 10.80 percent of their annual covered salary in fiscal
year 2018. The City was required to contribute 16.20 percent of pay for members. The City’s
contributions to the PEPFF for the year ended December 31, 2018 were $431,541. 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, 2018, the City reported a liability of $3,633,671 for its proportionate share of
the GERF’s net pension liability. The net pension liability was measured as of June 30, 2018, and
the total pension liability used to calculate the net pension liability was determined by an actuarial
valuation as of that date. The 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, 2017 through June 30, 2018, relative to the total employer contributions
received from all of the PERA’s participating employers. The City’s proportionate share was
0.0655 percent at the end of the measurement period and 0.0692 per cent for the beginning of the
period.
The City’s net pension liability reflected a reduction due to the state of Minnesota’s contribution
of $16 million to the fund in 2018. The state of Minnesota is considered a nonemployer
contributing entity and the state’s contribution meets the definition of a special funding situation.
The amounts recognized by the City as its proportionate share of the net pension liability, the
direct aid, and total portion of the net pension liability that was associated with the City were as
follows:
City’s proportionate share of the net pension liability 3,633,671$
State’s proportionate share of the net pension liability
associated with the City 119,282$
For the year ended December 31, 2018, the City recognized pension expense of $252,358 for its
proportionate share of the GERF’s pension expense. In addition, the City recognized an
additional $27,775 as pension expense (and grant revenue) for its proportio nate share of the state
of Minnesota’s contribution of $16 million to the GERF.
-61-
NOTE 7 – DEFINED BENEFIT PENSION PLANS – STATE-WIDE (CONTINUED)
At December 31, 2018, the City reported its proportionate share of the GERF’s deferred outflows
of resources and deferred inflows of resources related to pensions from the following sources:
Deferred Deferred
Outflows Inflows
of Resources of Resources
Differences between expected and actual economic experience 101,367$ 111,803$
Changes in actuarial assumptions 366,185 424,067
Differences between projected and actual investment earnings – 372,416
Changes in proportion 4,060 213,432
Contributions paid to the PERA subsequent to the measurement
date 175,890 –
Total 647,502$ 1,121,718$
Deferred outflows of resources reported $175,890 related to pensions resulting from city
contributions subsequent to the measurement date that will be recognized as a reduction of the net
pension liability in the year ending December 31, 2019. Other amounts reported as deferred
outflows and deferred inflows of resources related to pensions will be recognized in pension
expense as follows:
Pension
Year Ending Expense
December 31,Amount
2019 47,972$
2020 (258,319)$
2021 (363,920)$
2022 (75,839)$
2. PEPFF Pension Costs
At December 31, 2018, the City reported a liability of $2,625,304 for its proportionate share of
the PEPFF’s net pension liability. The net pension liability was measured as of June 30, 2018 and
the total pension liability used to calculate the net pension liability was determined by an actuarial
valuation as of that date. The 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, 2017 through June 30, 2018, relative to the total employer contributions
received from all of the PERA’s participating employers. The City’s proportionate share was
0.2463 percent at the end of the measurement period and 0.2360 percent for the beginning of the
period.
-62-
NOTE 7 – DEFINED BENEFIT PENSION PLANS – STATE-WIDE (CONTINUED)
For the year ended December 31, 2018, the City recognized pension expense of $297,092 for its
proportionate share of the PEPFF’s pension expense. The City also recognized $22,167 for the
year ended December 31, 2018 as revenue and an offsetting reduction of net pension liability for
its proportionate share of the state of Minnesota’s on-behalf contributions to the PEPFF.
Legislation passed in 2013 required the state of Minnesota to begin contributing $9 million to the
PEPFF each year, starting in fiscal year 2014.
At December 31, 2018, the City reported its proportionate share of the PEPFF’s deferred outflows
of resources and deferred inflows of resources related to pensions from the following sources:
Deferred Deferred
Outflows Inflows
of Resources of Resources
Differences between expected and actual economic experience 101,367$ 111,803$
Changes in actuarial assumptions 366,185 424,067
Differences between projected and actual investment earnings – 372,416
Changes in proportion 4,060 213,432
Contributions paid to the PERA subsequent to the measurement
date 175,890 –
Total 647,502$ 1,121,718$
Deferred outflows of resources reported $220,093 related to pensions resulting from city
contributions subsequent to the measurement date that will be recognized as a reduction of the net
pension liability in the year ending December 31, 2019. Other amounts reported as deferred
outflows and deferred inflows of resources related to pensions will be recognized in pension
expense as follows:
Pension
Year Ending Expense
December 31,Amount
2019 (62,303)$
2020 (181,085)$
2021 (356,097)$
2022 (1,001,873)$
2023 14,522$
-63-
NOTE 7 – DEFINED BENEFIT PENSION PLANS – STATE-WIDE (CONTINUED)
E. Actuarial Assumptions
The total pension liability in the June 30, 2018 actuarial valuation was determined using an individual
entry-age normal actuarial cost method and 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 for all plans were based on RP-2014 tables for males and females, as
appropriate, with slight adjustments to fit the PERA’s experience. Cost of living benefit increases after
retirement for retirees are assumed to be 1.25 percent per year for the GERF and 1.00 percent per year for
the PEPFF.
Actuarial assumptions used in the June 30, 2018 valuation were based on the results of actuarial
experience studies. The most recent six-year experience study in the GERF was completed in 2015. The
most recent four-year experience study for PEPFF was completed in 2016. Economic assumptions were
updated in 2017 based on a review of inflation and investment return assumptions.
The following changes in actuarial assumptions occurred in 2018:
1. GERF
• The mortality projection scale was changed from MP-2015 to MP-2017.
• The assumed post-retirement benefit increase was changed from 1.00 percent per year
through 2044, and 2.50 percent per year thereafter, to 1.25 percent per year.
2. PEPFF
• The mortality projection scale was changed from MP-2016 to MP-2017.
• As set by state statutes, the assumed post-retirement benefit increase was changed from
1.0 percent per year through 2064, and 2.5 percent per year thereafter, to 1.0 percent for all
years, with no trigger.
The State Board of Investment, which manages the investments of the PERA, prepares an analysis of the
reasonableness on a regular basis of the long-term expected rate of return using a building-block method
in which best-estimate ranges of expected future rates of return are developed for each major asset class.
These ranges are combined to produce an expected long-term rate of return by weighting the expected
future rates of return by the target asset allocation percentages. The target allocation and best -estimates of
geometric real rates of return for each major asset class are summarized in the following table:
Asset Class
Domestic stocks 36 % 5.10 %
International stocks 17 5.30 %
Bonds 20 0.75 %
Alternative assets 25 5.90 %
Cash 2 – %
Total 100 %
Allocation
Target
Real Rate of Return
Long-Term Expected
-64-
NOTE 7 – DEFINED BENEFIT PENSION PLANS – STATE-WIDE (CONTINUED)
F. Discount Rate
The discount rate used to measure the total pension liability in 2018 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 table 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 5,905,181$ 3,633,671$ 1,758,605$
The City’s proportionate share of the
PEPFF net pension liability 5,628,817$ 2,625,304$ 141,524$
H. Pension Plan Fiduciary Net Position
Detailed information about each pension plan’s fiduciary net position is available in a separately issued
PERA financial report that includes financial statements and required supplementary information. That
report may be obtained on the PERA website at www.mnpera.org; 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.
-65-
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,
2017, the plan covered 43 active firefighters and 8 vested terminated firefighters whose pension benefits
are deferred. The plan was established November 1, 1957, and the Association operates under the
provisions of Minnesota Laws 1965, Chapter 446, as amended and Minnesota Statutes, Chapters 69 and
424A. It is governed by a Board of Trustees (the Board) made up of six members elected by the members
of the Association for three-year terms, and the mayor, city manager, and fire chief, who serve as
ex officio voting members of the Board of Trustees.
The Association maintains a separate Special Fund to accumulate assets to fund the retirement benefits
earned by the Department’s membership. Funding for the Association is derived from an insurance
premium tax in accordance with the Volunteer Firefighter’s Relief Association Financing Guidelines Act
of 1971 (Chapter 261 as amended by Chapter 509 of Minnesota Statutes 1980). Funds are also derived
from investment income.
B. Benefits Provided
Retirement Benefits
According to the bylaws of the Association and pursuant to Minnesota Statutes, Chapter 424A.02,
Subdivisions 2 and 4, the Association pays to each member who has served as an active firefighter in the
Department for a period of 20 years or more to his/her resignation, and who has reached the age of
50 years or more, $8,000 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 lump sum of $8,000 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 $8,000 for each year that they served as an active member of the
Department.
-66-
NOTE 8 – DEFINED BENEFIT PENSION PLANS – FIRE RELIEF ASSOCIATION
(CONTINUED)
C. Contributions
Minnesota Statutes, Chapters 424 and 424A, authorize pension benefits for volunteer fire relief
associations. The plan is funded by fire state aid, investment earnings, and, if necessary, employer
contributions as specified in Minnesota Statutes and voluntary city contributions (if applicable). The state
of Minnesota contributed $225,610 in fire state aid to the plan on behalf of the Department for the year
ended December 31, 2018, which was recorded as a revenue. Required employer contributi ons are
calculated annually based on statutory provisions. The City’s statutorily-required contributions to the plan
for the year ended December 31, 2018 were $225,610. 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, 2018. Furthermore, firefighters have no obligation to contribute to the plan.
D. Pension Costs
At December 31, 2018, the City reported a net pension liability (asset) of ($1,021,975) for the plan. The
net pension liability (asset) was measured as of December 31, 2017. The total pension liability used to
calculate the net pension liability (asset) in accordance with GASB Statement No. 68 was determined by
Hildi, Inc. applying an actuarial formula to specific census data certified by the Department as of
December 31, 2017.
The following table presents the changes in net pension liability (asset):
Liability Net Position Liability (Asset)
Beginning balance – January 1, 2018 3,440,120$ 4,229,942$ (789,822)$
Changes for the year
Service cost 132,893 – 132,893
Interest on pension liability (asset)208,100 – 208,100
Plan changes 304,902 – 304,902
Projected investment earnings – 254,627 (254,627)
Contributions (employer)– 20,000 (20,000)
Contributions (state)– 217,182 (217,182)
Asset (gain) loss – 386,359 (386,359)
Benefit payments (209,373) (209,373) –
Administrative costs – (120) 120
Total net changes 436,522 668,675 (232,153)
Ending balance – December 31, 2018 3,876,642$ 4,898,617$ (1,021,975)$
For the year ended December 31, 2018, the City recognized pension expense of ($246,223).
-67-
NOTE 8 – DEFINED BENEFIT PENSION PLANS – FIRE RELIEF ASSOCIATION
(CONTINUED)
At December 31, 2018, the City reported deferred inflows of resources and deferred outflows of resources
related to the pension from the following sources:
Deferred Deferred
Outflows Inflows
of Resources of Resources
Net difference between projected and actual earnings on
plan investments –$ 196,095$
Difference between expected and actual economic experience 21,001 –
State aid to the City subsequent to the measurement date – 225,610
Contributions from the City subsequent to the measurement date 243,610 –
Total 264,611$ 421,705$
Deferred outflows of resources totaling $243,610 related to pensions resulting from 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, 2019. Deferred inflows of resources totaling $225,610 related to state
aid received subsequent to the measurement date will be recognized for its impact on the net pension
liability in the year ending December 31, 2019. Other amounts reported as deferred outflows and inflows
of resources related to the plan will be recognized in pension expense as follows:
Pension
Year Ending Expense
December 31,Amount
2019 (3,124)$
2020 (13,021)$
2021 (92,176)$
2022 (73,770)$
2023 3,501$
Thereafter 3,496$
E. Actuarial Assumptions
The total pension liability at December 31, 2018 was determined using the entry age normal actuarial cost
method and the following actuarial assumptions:
Retirement eligibility at 100 percent service pension at age 50 with 20 years of service, early
vested retirement at age 50 with 10 years of service vested at 60 percent and increased by
4 percent for each additional year of service up to 20 and eligibility for deferred service
pension payable at age 50 with 20 years of service
Salary increases 2.50%
Cost of living increases 5.00%
Investment rate of return 6.00%
20-year municipal bond yield 3.50%
-68-
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 %2.25 %
Fixed income 21 3.30 %
Equities 65 7.50 %
Other 1 6.00 %
Total 100 %6.00 %
Weight
Portfolio
Return
Class
Expected
F. Discount Rate
The discount rate used to measure the total pension liability was 6.0 percent. The projection of cash flows
used to determine the discount rate assumed that contributions to the plan will be made as specified in
state 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. Plan Changes
A benefit level increase from $7,200 to $8,000 occurred for calendar year 2018.
H. Pension Liability (Asset) Sensitivity
The following presents the City’s net pension liability (asset) for the plan, calculated using the discount
rate disclosed in the preceding paragraph, as well as what the City’s net pension liability (asset) would be
if it were calculated using a discount rate 1 percent lower or 1 percent higher than the current discount
rate:
1% Decrease 1% Increase
in Discount Rate Discount Rate in Discount Rate
(5.00%)(6.00%)(7.00%)
Defined benefit plan (918,078)$ (1,021,975)$ (1,120,433)$
I. 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.
-69-
NOTE 9 – OTHER POST-EMPLOYMENT BENEFITS (OPEB) PLAN
A. Plan Description
The City provides post-employment insurance benefits to certain eligible employees through its OPEB
Plan, a single-employer defined benefit plan administered by the City. All post-employment benefits are
based on contractual agreements with employee groups. 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. No
plan assets are accumulated in a trust that meets the criteria in paragraph 4 of GASB Statement No. 75.
B. Benefits Provided
All retirees of the City upon retirement have the option under state law to continue their medical
insurance coverage through the City. For members of certain employee groups, the City pays for all or
part of the eligible retiree’s premiums for medical and/or dental insurance from the time of retirement
until the employee reaches the age of eligibility for Medicare. Benefits paid by the City differ by
bargaining unit and date of hire, with some contracts specifying a certain dollar amount per month, and
some covering premium costs as defined within each collective bargaining agreement. 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 until the retiree reaches Medicare eligibility, whether the
premiums are paid by the City or the retiree. Consequently, participating retirees are considered to receive
a secondary benefit known as an “implicit rate subsidy.” This benefit relates to the assumption that the
retiree is receiving a more favorable premium rate than they would otherwise be able to obtain if
purchasing insurance on their own, due to being included in the same pool with the City’s younger and
statistically healthier active employees.
C. Contributions
The required contribution is based on projected pay-as-you-go financing requirements, with additional
amounts to prefund benefits as determined periodically by the City. The City’s current year required
pay-as-you-go contributions to finance the benefits described in the previous section totaled $42,907.
D. Membership
Membership in the plan consisted of the following as of the latest actuarial valuation:
Retirees and beneficiaries receiving benefits 6
Active plan members 87
Total members 93
E. Total OPEB Liability of the City
The City’s total OPEB liability of $906,133 as of year-end was measured as of January 1, 2018, and was
determined by an actuarial valuation as of that date.
-70-
NOTE 9 – OTHER POST-EMPLOYMENT BENEFITS (OPEB) PLAN (CONTINUED)
F. Actuarial Assumptions
The total OPEB liability was determined by an actuarial valuation as of January 1, 2018, using the
following actuarial assumptions, applied to all periods included in the measurement, unless otherwise
specified:
Discount rate 3.30%
20-year municipal bond yield 3.30%
Inflation rate 2.50%
Salary increases 3.00%
Healthcare cost trend rate 6.25% grading to 5.00% over 5 years
The actuarial assumptions used in the latest valuation were based on those used to value pension liabilities
for Minnesota city employees. The state pension plans base their assumptions on periodic experience
studies. Economic assumptions are based on input from a variety of published sources of historical and
projected future financial data. Each assumption was reviewed for reasonableness with the source
information as well as for consistency with the other economic assumptions.
Since the plan is not funded by an irrevocable trust, the discount rate is equal to the 20 -year municipal
bond yield rate of 3.30 percent, which was set by considering published rate information for 20-year high
quality, tax-exempt, general obligation municipal bonds as of the measurement date. The City discount
rate used in the prior measurement date was 3.50 percent.
Mortality rates were based on the RP-2014 White Collar Mortality Tables with MP-2016 Generational
Improvement Scale (with Blue Collar adjustment for Police and Fire Personnel). The mortality rates used
in the previous study were based on the RP-2014 adjusted to 2006 White Collar Mortality Tables with
MP-2016 Generational Improvement Scale (Blue Collar Tables for Police and Fire Personnel). Healthcare
cost trend rates were also changed from the previous study to better anticipate short -term and long-term
medical increases.
Future retirees electing coverage is assumed to be 50 percent when a pre -age 65 subsidy is not available.
Married future retirees electing spouse coverage is assumed to be 25 percent when a pre-age 65 subsidy is
not available.
G. Changes in the Net OPEB Liability
Total OPEB
Liability
Beginning balance – January 1, 2018 853,052$
Changes for the year
Service cost 61,214
Interest 29,555
Benefit payments – employer financed (37,688)
Total net changes 53,081
Ending balance – December 31, 2018 906,133$
-71-
NOTE 9 – OTHER POST-EMPLOYMENT BENEFITS (OPEB) PLAN (CONTINUED)
Assumption changes since the prior measurement date include the following:
• The healthcare trend rates were changed from 6.50 percent grading to 5.00 percent over 6 years,
to 6.25 percent grading to 5.00 percent over 5 years.
• The mortality table was updated from RP-2014 adjusted to 2006 White Collar Mortality Tables
with MP-2016 Generational Improvement Scale to RF-2014 White Collar with MP-2016
Generational Improvement Scale.
• The actuarial cost method was changed from entry age normal, level dollar to entry age, level
percent of pay.
• The discount rate was changed from 3.50 percent to 3.30 percent.
H. Total OPEB Liability Sensitivity to Discount and Healthcare Cost Trend Rate Changes
The following presents the total OPEB liability of the City, as well as what the City’s total OPEB liability
would be if it were calculated using a discount rate that is 1 percentage point lower or 1 percentage point
higher than the current discount rate:
OPEB discount rate 3.30%
Total OPEB liability $ 975,829 $ 841,221
2.30%4.30%
1% Decrease in 1% Increase in
Discount Rate Discount Rate
Discount
Rate
906,133$
The following presents the net OPEB liability of the City, as well as what the City’s total OPEB liability
would be if it were calculated using healthcare cost trend rates that are 1 percentage point lower or
1 percentage point higher than the current healthcare cost trend rates:
OPEB healthcare cost trend rate
Total OPEB liability $ 810,221 $ 1,018,211
4.00% over 5 years 6.00% over 5 years5.00% over 5 years
$ 906,133
1% Decrease in 1% Increase in
Trend Rate Trend Rate
5.25% decreasing to 7.25% decreasing to
Trend Rate
6.25% decreasing to
Healthcare Cost Healthcare Cost Healthcare Cost
I. OPEB Expense and Related Deferred Outflows of Resources and Deferred Inflows of Resources
For the current year ended, the City recognized OPEB expense of $90,768. As of year-end, the City
reported deferred outflows of resources and deferred inflows of resources related to OPEB from the
following sources:
Deferred Deferred
Outflows Inflows
of Resources of Resources
Contributions from the City subsequent
to the measurement date 42,907$ –$
-72-
NOTE 9 – OTHER POST-EMPLOYMENT BENEFITS (OPEB) PLAN (CONTINUED)
Deferred outflows of resources totaling $42,907 related to pensions resulting from 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, 2019.
NOTE 10 – STEWARDSHIP AND ACCOUNTABILITY
Deficit Net Position
As of December 31, 2018, the Severance Compensation Internal Service Fund had a deficit net position of
$565,136. This deficit will be eliminated by future charges for services.
NOTE 11 – TAX ABATEMENT AGREEMENTS
The City, in order to spur economic development and redevelopment, has entered into private
development and redevelopment agreements to encourage a developer to construct, expand, or improve
new or existing properties and buildings or clean-up and redevelop blighted areas. The City currently has
six agreements that would be considered tax abatements.
Outstanding
Amount Principal Date of
Abated During Balance Required
Name Purpose the Fiscal Year at Year-End Decertification
1-3 Lakefront
1-4 River Valley Vet
3-1 Creekside Estates 54-unit senior housing facility 82,183$ 81,002$ 12/31/2029
5-1 Premier Dance
1-5 Gateway Center
12/31/2035
8,334$ 27,169$ 12/31/2022
130,980$ 12/31/2034
13,093$ 12/31/2034
80-unit owner-occupied senior housing facility
and 12,000 square feet of retail space and
related improvements 12/31/2029642,524$ 105,211$
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 296,180$
146,679$
157,383$ 1,583,000$
10,000 square foot commercial facility to be
used as a dance studio
-73-
NOTE 11 – TAX ABATEMENT AGREEMENTS (CONTINUED)
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.
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 stated 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, 2018 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, are not actual debt in-substance.
-74-
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 2018, the City awarded contracts for various construction and remodeling projects. The
City’s commitment for uncompleted work on these contracts at December 31, 201 8 is approximately
$3,500,000.
D. Tax Increment Districts
The City’s tax increment districts are subject to review by the Office of the State Auditor. Any disallowed
claims or misuse of tax increments could become a liability of the applicable fund. Management has
indicated that they are not aware of any instances of noncompliance, which would have a material effect
on the financial statements.
THIS PAGE INTENTIONALLY LEFT BLANK
REQUIRED SUPPLEMENTARY INFORMATION
Proportionate
Share of the
City’s Net Pension
Proportionate Liability and City’s
Share of the the City’s Proportionate Plan Fiduciary
State of Share of the Share of the Net Position
City’s City’s Minnesota’s State of Net Pension as a
PERA Fiscal Proportion Proportionate Proportionate Minnesota’s Liability as a Percentage
Year-End Date of the Net Share of the Share of the Share of the City’s Percentage of of the Total
(Measurement Pension Net Pension Net Pension Net Pension Covered Covered Pension
Date)Liability Liability Liability Liability Payroll Payroll Liability
06/30/2015 0.0719% 3,726,231$ –$ 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%
06/30/2018 0.0655% 3,633,671$ 119,282$ 3,752,953$ 4,405,847$ 82.47% 79.50%
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%
344,234$ 344,234$ –$ 4,589,776$ 7.50%
Note:
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, 2018
12/31/2017
Year Ended December 31, 2018
12/31/2018
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
12/31/2018
-75-
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%
06/30/2018 0.2463% 2,625,304$ 2,595,948$ 101.13% 88.80%
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%
431,541$ 431,541$ –$ 2,666,989$ 16.18%
Note:
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, 2018
Year Ended December 31, 2018
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
12/31/2018
12/31/2018
-76-
City fiscal year-end dated December 31,2015 2016 2017 2018
Measurement period – December 31,2014 2015 2016 2017
Total pension liability
Service cost 106,719$ 109,387$ 110,441$ 132,893$
Interest 148,718 164,204 192,181 208,100
Asset (gain) loss – – 28,006 –
Benefit payments – – (34,403) (209,373)
Plan changes – 99,450 34,110 304,902
Net change in total pension liability 255,437 373,041 330,335 436,522
Total pension liability – beginning 2,481,307 2,736,744 3,109,785 3,440,120
Total pension liability – ending 2,736,744$ 3,109,785$ 3,440,120$ 3,876,642$
Plan fiduciary net position
Contributions (state and local)215,194$ 228,087$ 235,891$ 237,182$
Net investment income 154,856 (169,276) 320,811 640,986
Benefit payments – – (34,403) (209,373)
Administrative costs (6,647) (6,640) (9,160) (120)
Net change in plan fiduciary net position 363,403 52,171 513,139 668,675
Total pension liability – beginning 3,301,229 3,664,632 3,716,803 4,229,942
Total pension liability – ending 3,664,632$ 3,716,803$ 4,229,942$ 4,898,617$
Net pension liability (asset) – ending (927,888)$ (607,018)$ (789,822)$ (1,021,975)$
Plan fiduciary net position as a percentage
of the total pension liability 133.90%119.52%122.96%126.36%
Note 1:A benefit level increase from $6,800 to $7,100 was reflected in the pension liability for 2016.
Note 2:A benefit level increase from $7,100 to $7,200 was reflected in the pension liability for 2017.
Note 3:A benefit level increase from $7,200 to $8,000 was reflected in the pension liability for 2018.
Note 4:The City implemented GASB Statement No.68 in fiscal 2015 (using a December 31,2014 measurement date).This
information is not available for previous years.
CITY OF PRIOR LAKE
Prior Lake Fire Relief Association
Schedule of Changes in the Relief Association’s
Net Pension Asset and Related Ratios
(Last Ten Years)
-77-
Contributions in
Relation to the
Statutorily Statutorily Contribution Voluntary
Required Required Deficiency City
Contributions Contributions (Excess)Contribution
208,087$ 208,087$ –$ 20,000$
215,891$ 215,891$ –$ 20,000$
217,182$ 217,182$ –$ 20,000$
225,610$ 225,610$ –$ 20,000$
Note: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, 2018
(Last Ten Years)
12/31/2015
12/31/2016
12/31/2017
12/31/2018
-78-
2018
Total OPEB liability
Service cost 61,214$
Interest 29,555
Benefit payments (37,688)
Net change in total OPEB liability 53,081
Total OPEB liability – beginning of year 853,052
Total OPEB liability – end of year 906,133$
Covered payroll 6,560,761$
Total OPEB liability as a percentage of covered payroll 13.81%
Note:The City implemented GASB Statement No.75 in fiscal 2018.This schedule is intended to
present 10-year trend information. Additional years will be added as they become available.
CITY OF PRIOR LAKE
Other Post-Employment Benefits Plan
Schedule of Changes in the City’s Total
OPEB Liability and Related Ratios
Year Ended December 31, 2018
-79-
CITY OF PRIOR LAKE
Notes to Required Supplementary Information
December 31, 2018
-80-
PERA – GENERAL EMPLOYEES RETIREMENT FUND
2018 CHANGES IN ACTUARIAL ASSUMPTIONS:
The mortality projection scale was changed from MP-2015 to MP-2017.
The assumed benefit increase was changed from 1.00 percent per year through 2044, and 2.50 percent per
year thereafter, to 1.25 percent per year.
2017 CHANGES IN PLAN PROVISIONS:
The state’s special funding contribution increased from $6 million to $16 million.
2017 CHANGES IN ACTUARIAL ASSUMPTIONS:
The Combined Service Annuity (CSA) loads were changed from 0.80 percent for active members and
60.00 percent for vested and nonvested deferred members. The revised CSA loads are now zero percent for
active member liability, 15.00 percent for vested deferred member liability, and 3.00 percent for nonvested
deferred member liability.
The assumed post-retirement benefit increase rate was changed from 1.00 percent per year for all years, to
1.00 percent per year through 2044, and 2.50 percent per year thereafter.
2016 CHANGES IN ACTUARIAL ASSUMPTIONS:
The assumed post-retirement benefit increase rate was changed from 1.00 percent per year through 2035,
and 2.50 percent per year thereafter, to 1.00 percent per year for all years.
The assumed investment return was changed from 7.90 percent to 7.50 percent. The single discount rate
was changed from 7.90 percent to 7.50 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 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.
2015 CHANGES IN ACTUARIAL ASSUMPTIONS:
The assumed post-retirement benefit increase rate was changed from 1.00 percent per year through 2030,
and 2.50 percent per year thereafter, to 1.00 percent per year through 2035, and 2.50 percent per year
thereafter.
CITY OF PRIOR LAKE
Notes to Required Supplementary Information (continued)
December 31, 2018
-81-
PERA – PUBLIC EMPLOYEES POLICE AND FIRE FUND
2018 CHANGES IN ACTUARIAL ASSUMPTIONS:
The mortality projection scale was changed from MP-2016 to MP-2017.
As set by state statutes, the assumed post-retirement benefit increase was changed from 1.00 percent per
year through 2064, and 2.50 percent per year thereafter, to 1.00 percent for all years with no trigger.
2017 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 CSA load was 30.00 percent for vested and nonvested deferred members. The CSA has been changed
to 33.00 percent for vested members, and 2.00 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 3.00 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 65.00 percent to 60.00 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, 2018
-82-
PERA – PUBLIC EMPLOYEES POLICE AND FIRE FUND (CONTINUED)
2016 CHANGES IN ACTUARIAL ASSUMPTIONS:
The assumed post-retirement benefit increase rate was changed from 1.00 percent per year through 2037,
and 2.50 percent thereafter, to 1.00 percent per year for all future years.
The assumed investment return was changed from 7.90 percent to 7.50 percent. The single discount rate
changed from 7.90 percent to 5.60 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 IN PLAN PROVISIONS:
The post-retirement benefit increase to be paid after attainment of the 90.00 percent funding threshold was
changed from inflation up to 2.50 percent, to a fixed rate of 2.50 percent.
2015 CHANGES IN ACTUARIAL ASSUMPTIONS:
The assumed post-retirement benefit increase rate was changed from 1.00 percent per year through 2030,
and 2.50 percent per year thereafter, to 1.00 percent per year through 2037, and 2.50 percent per year
thereafter.
CITY OF PRIOR LAKE
Notes to Required Supplementary Information (continued)
December 31, 2018
-83-
OTHER POST-EMPLOYMENT BENEFITS PLAN
2018 CHANGES IN ACTUARIAL ASSUMPTIONS:
The healthcare trend rates were changed from 6.50 percent grading to 5.00 percent over 6 years, to
6.25 percent grading to 5.00 percent over 5 years.
The mortality table was updated from RP-2014 adjusted to 2006 White Collar Mortality Tables with
MP-2016 Generational Improvement Scale to RF-2014 White Collar with MP-2016 Generational
Improvement Scale.
The actuarial cost method was changed from entry age normal, level dollar to entry age, level percent of
pay.
The discount rate was changed from 3.50 percent to 3.30 percent.
SUPPLEMENTAL INFORMATION
Special
Revenue Capital Projects Total
Assets
Cash and investments 3,544,928$ 8,652,360$ 12,197,288$
Cash held in escrow 25,000 – 25,000
Receivables
Delinquent taxes 164 – 164
Accounts 155,525 165,958 321,483
Special assessments
Delinquent – 1,242 1,242
Deferred – 425,541 425,541
Due from other governmental agencies 841 5,405 6,246
Total assets 3,726,458$ 9,250,506$ 12,976,964$
Liabilities
Accounts and contracts payable 43,208$ 624,813$ 668,021$
Accrued salaries and employee benefits payable 6,983 – 6,983
Due to other governmental agencies 951 – 951
Deposits payable 186,149 – 186,149
Unearned revenue 33,750 – 33,750
Total liabilities 271,041 624,813 895,854
Deferred inflows of resources
Unavailable revenue from delinquent taxes 164 – 164
Unavailable revenue from special assessments – 426,783 426,783
Total deferred inflows of resources 164 426,783 426,947
Fund balances
Restricted 450,159 647,528 1,097,687
Assigned 3,005,094 7,551,382 10,556,476
Total fund balances 3,455,253 8,198,910 11,654,163
Total liabilities, deferred inflows
of resources, and fund balances 3,726,458$ 9,250,506$ 12,976,964$
CITY OF PRIOR LAKE
Nonmajor Governmental Funds
Combining Balance Sheet
as of December 31, 2018
-84-
Special
Revenue Capital Projects Total
Revenue
Taxes 139,511$ 1,538,459$ 1,677,970$
Special assessments – 273,832 273,832
Intergovernmental – 10,000 10,000
Charges for services 793,534 2,250,426 3,043,960
Investment income 30,463 109,993 140,456
Miscellaneous
Contributions and donations 6,375 – 6,375
Other 63,441 17,195 80,636
Total revenue 1,033,324 4,199,905 5,233,229
Expenditures
Current
General government 4,607 – 4,607
Public safety 66,807 – 66,807
Economic development 149,852 – 149,852
Culture and recreation 56,965 – 56,965
Capital outlay 442,095 3,199,559 3,641,654
Debt service
Interest and other – 22,237 22,237
Total expenditures 720,326 3,221,796 3,942,122
Excess of revenues over expenditures 312,998 978,109 1,291,107
Other financing sources (uses)
Debt issued – 1,655,000 1,655,000
Premium on debt issued – 173,698 173,698
Transfers in 300,000 585,767 885,767
Transfers out – (2,697,233) (2,697,233)
Sale of capital assets – 19,435 19,435
Total other financing sources (uses)300,000 (263,333) 36,667
Net change in fund balances 612,998 714,776 1,327,774
Fund balances
Beginning of year 2,842,255 7,484,134 10,326,389
End of year 3,455,253$ 8,198,910$ 11,654,163$
Year Ended December 31, 2018
CITY OF PRIOR LAKE
Nonmajor Governmental Funds
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances
-85-
Capital ED Revolving Revolving
Park Loan Loan
Assets
Cash and investments 1,781,117$ 124,781$ 651$
Cash held in escrow – – –
Receivables
Delinquent taxes – – –
Accounts 4,149 673 95,347
Due from other governmental agencies – – –
Total assets 1,785,266$ 125,454$ 95,998$
Liabilities
Accounts and contracts payable 973$ –$ –$
Accrued salaries and employee benefits payable – – –
Due to other governmental agencies – – –
Deposits payable – – –
Unearned revenue 33,750 – –
Total liabilities 34,723 – –
Deferred inflows of resources
Unavailable revenue from delinquent taxes – – –
Fund balances
Restricted for economic development – 125,454 95,998
Restricted for forfeiture sales – – –
Assigned for capital improvements 1,750,543 – –
Assigned for development – – –
Assigned for communications – – –
Total fund balances 1,750,543 125,454 95,998
Total liabilities, deferred inflows
of resources, and fund balances 1,785,266$ 125,454$ 95,998$
as of December 31, 2018
CITY OF PRIOR LAKE
Nonmajor Special Revenue Funds
Combining Balance Sheet
-86-
Cable Police
Franchise EDA Forfeiture DAG Total
55,993$ 529,867$ 181,542$ 870,977$ 3,544,928$
25,000 – – – 25,000
– 164 – – 164
7,686 47,305 365 – 155,525
– 841 – – 841
88,679$ 578,177$ 181,907$ 870,977$ 3,726,458$
–$ 11,983$ –$ 30,252$ 43,208$
– 6,983 – – 6,983
– 951 – – 951
25,000 – – 161,149 186,149
– – – – 33,750
25,000 19,917 – 191,401 271,041
– 164 – – 164
– 46,800 – – 268,252
– – 181,907 – 181,907
– – – 679,576 2,430,119
– 511,296 – – 511,296
63,679 – – – 63,679
63,679 558,096 181,907 679,576 3,455,253
88,679$ 578,177$ 181,907$ 870,977$ 3,726,458$
-87-
Capital ED Revolving Revolving
Park Loan Loan
Revenues
Taxes –$ –$ –$
Charges for services 506,726 – –
Investment income 19,944 1,343 2
Miscellaneous
Contributions and donations 6,375 – –
Other – – –
Total revenues 533,045 1,343 2
Expenditures
Current
General government – – –
Public safety – – –
Economic development – – –
Culture and recreation 56,965 – –
Capital outlay 7,953 – –
Total expenditures 64,918 – –
Excess (deficiency) of revenues over expenditures 468,127 1,343 2
Other financing sources
Transfers in – – –
Net change in fund balances 468,127 1,343 2
Fund balances
Beginning of year 1,282,416 124,111 95,996
End of year 1,750,543$ 125,454$ 95,998$
Year Ended December 31, 2018
CITY OF PRIOR LAKE
Nonmajor Special Revenue Funds
Combining Statement of Revenues, Expenditures,
and Changes in Fund Balances
-88-
Cable Police
Franchise EDA Forfeiture DAG Total
–$ 139,511$ –$ –$ 139,511$
36,081 8,018 – 242,709 793,534
820 6,381 1,973 – 30,463
– – – – 6,375
– – 63,441 – 63,441
36,901 153,910 65,414 242,709 1,033,324
4,607 – – – 4,607
– – 66,807 – 66,807
– 149,852 – – 149,852
– – – – 56,965
60,530 – – 373,612 442,095
65,137 149,852 66,807 373,612 720,326
(28,236) 4,058 (1,393) (130,903) 312,998
– 300,000 – – 300,000
(28,236) 304,058 (1,393) (130,903) 612,998
91,915 254,038 183,300 810,479 2,842,255
63,679$ 558,096$ 181,907$ 679,576$ 3,455,253$
-89-
Tax Revolving Trunk
Increment Equipment Reserve
Assets
Cash and investments 11,715$ 937,905$ 2,876,398$
Receivables
Accounts 77,672 6,022 40,898
Special assessments
Delinquent – – 451
Deferred – – 9,183
Due from other governmental agencies – 3,661 –
Total assets 89,387$ 947,588$ 2,926,930$
Liabilities
Accounts and contracts payable –$ –$ 22,485$
Deferred inflows of resources
Unavailable revenue from special assessments – – 9,634
Fund balances
Restricted for tax increment 89,387 – –
Assigned for capital improvements – 947,588 2,894,811
Total fund balances 89,387 947,588 2,894,811
Total liabilities, deferred inflows
of resources, and fund balances 89,387$ 947,588$ 2,926,930$
CITY OF PRIOR LAKE
Nonmajor Capital Projects Funds
Combining Balance Sheet
as of December 31, 2018
-90-
Tax Tax
Street Water Increment 1-3 Increment 3-1
Oversizing Storage Lakefront Creekside
1,103,485$ 914,133$ 144,958$ 152,008$
4,539 26,510 786 499
– 346 – –
– 5,414 – –
– – – –
1,108,024$ 946,403$ 145,744$ 152,507$
–$ –$ 47,592$ 41,093$
– 5,760 – –
– – 98,152 111,414
1,108,024 940,643 – –
1,108,024 940,643 98,152 111,414
1,108,024$ 946,403$ 145,744$ 152,507$
-91-(continued)
Tax Tax Tax
Increment 5-1 Increment 6-1 Increment 1-4
Premiere Shepard’s Path River Vet
Assets
Cash and investments 14,958$ 476,993$ 5,290$
Receivables
Accounts 47 1,455 2
Special assessments
Delinquent – – –
Deferred – – –
Due from other governmental agencies – – –
Total assets 15,005$ 478,448$ 5,292$
Liabilities
Accounts and contracts payable 6,547$ 148,091$ 4,167$
Deferred inflows of resources
Unavailable revenue from special assessments – – –
Fund balances
Restricted for tax increment 8,458 330,357 1,125
Assigned for capital improvements – – –
Total fund balances 8,458 330,357 1,125
Total liabilities, deferred inflows
of resources, and fund balances 15,005$ 478,448$ 5,292$
as of December 31, 2018
CITY OF PRIOR LAKE
Nonmajor Capital Projects Funds
Combining Balance Sheet (continued)
-92-
Tax Revolving Permanent
Increment 1-5 Park Facility Improvement
Gateway Ctr Equipment Management Revolving Total
87,284$ 739,091$ 686,983$ 501,159$ 8,652,360$
42 2,887 4,019 580 165,958
– – – 445 1,242
– – – 410,944 425,541
– 1,587 – 157 5,405
87,326$ 743,565$ 691,002$ 913,285$ 9,250,506$
78,691$ –$ 276,147$ –$ 624,813$
– – – 411,389 426,783
8,635 – – – 647,528
– 743,565 414,855 501,896 7,551,382
8,635 743,565 414,855 501,896 8,198,910
87,326$ 743,565$ 691,002$ 913,285$ 9,250,506$
-93-
Tax Revolving Trunk
Increment Equipment Reserve
Revenues
Taxes –$ 549,823$ –$
Special assessments – – 2,260
Intergovernmental – 10,000 –
Charges for services 9,900 – 1,612,994
Investment income 227 13,741 37,857
Miscellaneous – 7,195 –
Total revenues 10,127 580,759 1,653,111
Expenditures
Capital outlay 8,677 892,763 139,064
Debt service
Interest and other – 8,129 –
Total expenditures 8,677 900,892 139,064
Excess (deficiency) of revenues
over expenditures 1,450 (320,133) 1,514,047
Other financing sources (uses)
Debt issued – 605,000 –
Premium on debt issued – 69,562 –
Transfers in – 155,000 196,078
Transfers out – – (1,099,557)
Sale of capital assets – 19,435 –
Total other financing sources (uses)– 848,997 (903,479)
Net change in fund balances 1,450 528,864 610,568
Fund balances (deficit)
Beginning of year 87,937 418,724 2,284,243
End of year 89,387$ 947,588$ 2,894,811$
and Changes in Fund Balances
Year Ended December 31, 2018
CITY OF PRIOR LAKE
Nonmajor Capital Projects Funds
Combining Statement of Revenues, Expenditures,
-94-
Tax Tax
Street Water Increment 1-3 Increment 3-1
Oversizing Storage Lakefront Creekside
–$ –$ 140,281$ 91,314$
– 1,596 – –
– – – –
253,073 374,459 – –
12,080 18,522 1,457 1,407
– – – –
265,153 394,577 141,738 92,721
36,856 – 107,530 82,803
– – – –
36,856 – 107,530 82,803
228,297 394,577 34,208 9,918
– – – –
– – – –
28,339 – – –
– (1,492,167) (30,135) –
– – – –
28,339 (1,492,167) (30,135) –
256,636 (1,097,590) 4,073 9,918
851,388 2,038,233 94,079 101,496
1,108,024$ 940,643$ 98,152$ 111,414$
-95-(continued)
Tax Tax Tax
Increment 5-1 Increment 6-1 Increment 1-4
Premiere Shepard’s Path River Vet
Revenues
Taxes 14,548$ 329,089$ 9,260$
Special assessments – – –
Intergovernmental – – –
Charges for services – – –
Investment income 130 4,357 36
Miscellaneous – – –
Total revenues 14,678 333,446 9,296
Expenditures
Capital outlay 13,713 297,549 8,954
Debt service
Interest and other – – –
Total expenditures 13,713 297,549 8,954
Excess (deficiency) of revenues
over expenditures 965 35,897 342
Other financing sources (uses)
Debt issued – – –
Premium on debt issued – – –
Transfers in – – –
Transfers out – – –
Sale of capital assets – – –
Total other financing sources (uses)– – –
Net change in fund balances 965 35,897 342
Fund balances (deficit)
Beginning of year 7,493 294,460 783
End of year 8,458$ 330,357$ 1,125$
Year Ended December 31, 2018
CITY OF PRIOR LAKE
Nonmajor Capital Projects Funds
Combining Statement of Revenues, Expenditures,
and Changes in Fund Balances (continued)
-96-
Tax Revolving Permanent
Increment 1-5 Park Facility Improvement
Gateway Ctr Equipment Management Revolving Total
165,667$ 238,477$ –$ –$ 1,538,459$
– – – 269,976 273,832
– – – – 10,000
– – – – 2,250,426
607 7,541 6,045 5,986 109,993
– 10,000 – – 17,195
166,274 256,018 6,045 275,962 4,199,905
157,403 54,134 776,736 623,377 3,199,559
– – 7,524 6,584 22,237
157,403 54,134 784,260 629,961 3,221,796
8,871 201,884 (778,215) (353,999) 978,109
– – 560,000 490,000 1,655,000
– – 69,643 34,493 173,698
– – 58,350 148,000 585,767
– – – (75,374) (2,697,233)
– – – – 19,435
– – 687,993 597,119 (263,333)
8,871 201,884 (90,222) 243,120 714,776
(236) 541,681 505,077 258,776 7,484,134
8,635$ 743,565$ 414,855$ 501,896$ 8,198,910$
-97-
2017
Variance With
Original Final Actual Final Budget Actual
Revenues
Taxes
Property taxes 8,006,734$ 8,006,734$ 7,988,125$ (18,609)$ 8,158,561$
Franchise taxes 615,000 615,000 630,932 15,932 620,469
Total taxes 8,621,734 8,621,734 8,619,057 (2,677) 8,779,030
Special assessments 2,500 2,500 4,691 2,191 (10,660)
Licenses and permits
Business 82,340 82,340 85,535 3,195 84,540
Nonbusiness 525,458 525,458 909,078 383,620 735,893
Total licenses and permits 607,798 607,798 994,613 386,815 820,433
Intergovernmental
Federal grants 17,850 17,850 7,504 (10,346) 8,458
State
Road and bridge aid 325,213 325,213 376,210 50,997 335,077
Fire relief aid 222,000 222,000 238,189 16,189 228,617
Police aid 242,450 242,450 286,590 44,140 211,783
Other state aids 11,905 11,905 11,905 – 11,905
County and local
Township fire and rescue aid 297,775 297,775 296,559 (1,216) 298,076
Liaison aid 48,793 48,793 48,793 – 48,072
Payment in lieu of taxes 510,000 510,000 570,000 60,000 510,000
Other local aids – – – – 6,000
Total intergovernmental 1,675,986 1,675,986 1,835,750 159,764 1,657,988
Charges for services
Zoning fees 20,650 20,650 39,712 19,062 55,064
Plan check fees 255,028 255,028 390,830 135,802 342,541
Park fees 98,000 98,000 204,608 106,608 121,432
Project fees 236,000 236,000 235,030 (970) 332,406
Park program revenue 60,000 60,000 68,957 8,957 74,768
Tower leases 277,596 277,596 290,462 12,866 282,189
Park admission/rent 60,500 60,500 74,090 13,590 62,410
Facility rental 77,941 77,941 52,217 (25,724) 74,754
Reports 1,600 1,600 1,143 (457) 1,112
Total charges for services 1,087,315 1,087,315 1,357,049 269,734 1,346,676
(With Comparative Actual Amounts for the Year Ended December 31, 2017)
2018
Budgeted Amounts
CITY OF PRIOR LAKE
General Fund
Schedule of Revenues, Expenditures, and
Changes in Fund Balances – Budget and Actual
Year Ended December 31, 2018
-98-(continued)
2017
Variance With
Original Final Actual Final Budget Actual
Revenues (continued)
Fines and forfeits – – 1,448 1,448 2,250
Investment income
Interest earnings 86,000 86,000 133,312 47,312 91,836
Amortization – premium/discount – – (20,302) (20,302) (35,864)
Unrealized gain (loss)– – (58,293) (58,293) (44,822)
Total investment income 86,000 86,000 54,717 (31,283) 11,150
Miscellaneous
Other 29,445 29,445 39,285 9,840 39,132
Contributions and donations – – 25,380 25,380 9,992
Developers’ agreements 195,000 195,000 260,974 65,974 275,310
Total miscellaneous 224,445 224,445 325,639 101,194 324,434
Total revenues 12,305,778 12,305,778 13,192,964 887,186 12,931,301
Expenditures
Current expenditures
General government
Mayor and City Council
Personal services 51,546 51,546 55,690 4,144 52,316
Supplies 300 300 522 222 201
Other services and charges 6,350 6,350 6,961 611 15,927
Total Mayor and City Council 58,196 58,196 63,173 4,977 68,444
Ordinance
Other services and charges 7,500 7,500 7,091 (409) 7,533
Administration
Personal services 363,725 363,725 364,416 691 350,057
Supplies 6,000 6,000 6,482 482 6,220
Other services and charges 58,580 67,245 71,265 4,020 80,489
Total administration 428,305 436,970 442,163 5,193 436,766
Boards and commissions
Personal services 9,689 9,689 9,581 (108) 10,550
Other services and charges 1,000 1,000 231 (769) 677
Total boards and commissions 10,689 10,689 9,812 (877) 11,227
Year Ended December 31, 2018
(With Comparative Actual Amounts for the Year Ended December 31, 2017)
2018
Schedule of Revenues, Expenditures, and
Budgeted Amounts
General Fund
Changes in Fund Balances – Budget and Actual (continued)
CITY OF PRIOR LAKE
-99-(continued)
2017
Variance With
Original Final Actual Final Budget Actual
Expenditures (continued)
Current expenditures (continued)
General government (continued)
Election
Personal services 18,984 18,984 18,103 (881) –
Supplies 2,500 2,500 1,911 (589) –
Other services and charges 2,500 2,500 543 (1,957) –
Total election 23,984 23,984 20,557 (3,427) –
Finance
Personal services 446,092 446,092 430,368 (15,724) 404,558
Supplies 1,450 1,450 1,251 (199) 1,068
Other services and charges 16,510 16,510 15,247 (1,263) 7,652
Total finance 464,052 464,052 446,866 (17,186) 413,278
Auditing
Other services and charges 30,700 30,700 30,615 (85) 31,240
Assessing
Other services and charges 194,700 194,700 194,716 16 187,378
Legal services
Other services and charges 212,000 212,000 162,462 (49,538) 217,039
Personnel
Personal services 139,193 139,193 141,197 2,004 131,379
Supplies 250 250 – (250) 176
Other services and charges 45,000 63,000 53,159 (9,841) 61,698
Total personnel 184,443 202,443 194,356 (8,087) 193,253
Communications
Personal services 102,467 102,467 99,485 (2,982) 94,456
Supplies 750 750 43 (707) 81
Other services and charges 21,500 21,500 17,406 (4,094) 20,252
Total communications 124,717 124,717 116,934 (7,783) 114,789
Community development
Personal services 281,269 281,269 286,888 5,619 261,162
Supplies 2,500 2,500 940 (1,560) 2,837
Other services and charges 42,706 42,706 41,291 (1,415) 72,900
Total community development 326,475 326,475 329,119 2,644 336,899
Budgeted Amounts
2018
Year Ended December 31, 2018
CITY OF PRIOR LAKE
Changes in Fund Balances – Budget and Actual (continued)
(With Comparative Actual Amounts for the Year Ended December 31, 2017)
Schedule of Revenues, Expenditures, and
General Fund
-100-(continued)
2017
Variance With
Original Final Actual Final Budget Actual
Expenditures (continued)
Current expenditures (continued)
General government (continued)
Technology
Personal services 145,653 145,653 145,204 (449) 141,357
Supplies 45,506 45,506 41,586 (3,920) 18,395
Other services and charges 86,536 86,536 101,136 14,600 92,793
Total technology 277,695 277,695 287,926 10,231 252,545
Buildings and plant
Personal services 82,899 82,899 88,495 5,596 80,157
Supplies 7,210 7,210 7,484 274 6,203
Other services and charges 366,178 366,178 353,598 (12,580) 384,527
Total buildings and plant 456,287 456,287 449,577 (6,710) 470,887
Total general government 2,799,743 2,826,408 2,755,367 (71,041) 2,741,278
Public safety
Police
Personal services 3,764,811 3,764,811 3,818,418 53,607 3,426,617
Supplies 123,539 123,539 123,662 123 123,821
Other services and charges 284,475 284,475 230,513 (53,962) 197,630
Total police 4,172,825 4,172,825 4,172,593 (232) 3,748,068
Fire and rescue
Personal services 668,831 668,831 673,258 4,427 627,662
Supplies 89,910 104,910 111,391 6,481 68,947
Other services and charges 170,719 170,719 176,265 5,546 149,061
Total fire and rescue 929,460 944,460 960,914 16,454 845,670
Building inspections
Personal services 527,330 527,330 540,879 13,549 561,102
Supplies 9,000 9,000 7,745 (1,255) 4,932
Other services and charges 57,596 57,596 28,910 (28,686) 42,038
Total building inspections 593,926 593,926 577,534 (16,392) 608,072
Emergency management
Other services and charges 10,830 10,830 9,083 (1,747) 11,246
Animal control
Other services and charges 26,448 26,448 26,400 (48) 26,400
Total public safety 5,733,489 5,748,489 5,746,524 (1,965) 5,239,456
CITY OF PRIOR LAKE
General Fund
Schedule of Revenues, Expenditures, and
Changes in Fund Balances – Budget and Actual (continued)
Year Ended December 31, 2018
(With Comparative Actual Amounts for the Year Ended December 31, 2017)
2018
Budgeted Amounts
-101-(continued)
2017
Variance With
Original Final Actual Final Budget Actual
Expenditures (continued)
Current expenditures (continued)
Public works
Engineering
Personal services 397,737 379,367 281,211 (98,156) 344,375
Supplies 9,850 9,850 10,827 977 7,627
Other services and charges 59,152 73,846 59,086 (14,760) 27,992
Total engineering 466,739 463,063 351,124 (111,939) 379,994
Central garage
Personal services 206,705 206,705 205,565 (1,140) 189,990
Supplies 173,414 173,414 151,544 (21,870) 173,462
Other services and charges 41,560 41,560 44,458 2,898 52,874
Total central garage 421,679 421,679 401,567 (20,112) 416,326
Streets
Personal services 420,543 420,543 398,353 (22,190) 375,370
Supplies 245,080 245,080 253,454 8,374 191,147
Other services and charges 509,762 509,764 478,473 (31,291) 436,081
Total streets 1,175,385 1,175,387 1,130,280 (45,107) 1,002,598
Total public works 2,063,803 2,060,129 1,882,971 (177,158) 1,798,918
Culture and recreation
Recreation
Personal services 330,853 330,853 316,831 (14,022) 285,289
Supplies 66,849 66,849 92,716 25,867 86,992
Other services and charges 29,994 29,994 26,067 (3,927) 18,425
Total recreation 427,696 427,696 435,614 7,918 390,706
Parks
Personal services 952,823 952,823 1,002,580 49,757 832,942
Supplies 146,170 146,170 159,200 13,030 128,183
Other services and charges 308,944 312,618 204,412 (108,206) 266,346
Total parks 1,407,937 1,411,611 1,366,192 (45,419) 1,227,471
Libraries
Supplies 5,000 5,000 3,615 (1,385) 4,317
Other services and charges 58,098 58,098 45,166 (12,932) 55,103
Total libraries 63,098 63,098 48,781 (14,317) 59,420
Budgeted Amounts
Year Ended December 31, 2018
2018
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, 2017)
-102-(continued)
2017
Variance With
Original Final Actual Final Budget Actual
Expenditures (continued)
Total culture and recreation 1,898,731 1,902,405 1,850,587 (51,818) 1,677,597
Total current expenditures 12,495,766 12,537,431 12,235,449 (301,982) 11,457,249
Capital outlay
General government
Technology 39,450 67,341 56,283 (11,058) 96,409
Buildings and plant 5,000 5,000 3,738 (1,262) 9,198
Culture and recreation
Parks – – – – 9,956
Total capital outlay 44,450 72,341 60,021 (12,320) 115,563
Total expenditures 12,540,216 12,609,772 12,295,470 (314,302) 11,572,812
Excess (deficiency) of revenues
over expenditures (234,438) (303,994) 897,494 1,201,488 1,358,489
Other financing sources (uses)
Transfers in 443,000 443,000 443,000 – 430,000
Transfers out (227,552) (819,651) (819,651) – (1,636,121)
Sale of assets – – 3,323 3,323 3,640
Total other financing
sources (uses)215,448 (376,651) (373,328) 3,323 (1,202,481)
Net change in fund balances (18,990)$ (680,645)$ 524,166 1,204,811$ 156,008
Fund balances
Beginning of year, as previously reported 6,840,928 6,684,920
Prior period adjustment (151,692) –
Beginning of year, as restated 6,689,236 6,684,920
End of year 7,213,402$ 6,840,928$
General Fund
CITY OF PRIOR LAKE
Budgeted Amounts
Schedule of Revenues, Expenditures, and
Changes in Fund Balances – Budget and Actual (continued)
Year Ended December 31, 2018
2018
(With Comparative Actual Amounts for the Year Ended December 31, 2017)
-103-
Water
Park City Hall Fire Treatment
Referendum 2005 Station #2 Plant
Assets
Cash and investments –$ 11,483$ 146$ 2,062$
Receivables
Accounts – 227 – –
Special assessments
Delinquent – – – –
Deferred – – – –
Other (Green Acres)– – – –
Due from other governmental agencies – 4,239 – –
Total assets –$ 15,949$ 146$ 2,062$
Liabilities
Accounts and contracts payable –$ 176$ 88$ –$
Deferred inflows of resources
Unavailable revenue from
special assessments – – – –
Fund balances
Restricted for debt service – 15,773 58 2,062
Total liabilities, deferred inflows
of resources, and fund balances –$ 15,949$ 146$ 2,062$
CITY OF PRIOR LAKE
Debt Service Fund
Balance Sheet by Account
as of December 31, 2018
-104-
Tax Street Brooksville
Increment Fish Reconstruction Hills
2004 Point 2007 2008
27,844$ –$ –$ –$
147 – – –
– – – –
– 30,112 – –
– 451,350 – –
– – – –
27,991$ 481,462$ –$ –$
88$ –$ –$ –$
– 481,462 – –
27,903 – – –
27,991$ 481,462$ –$ –$
-105 (continued)
Brooksville CR 12 and
Hills II/Maple 2010 Boudin Boudin
Glen 2nd Reconstruction Phase I Phase II
Assets
Cash and investments 43,183$ 45,818$ 169,850$ 196,858$
Receivables
Accounts 1,153 2,379 1,588 1,173
Special assessments
Delinquent 357 – – 1,050
Deferred 17,191 39,187 97,837 104,495
Other (Green Acres)– – – –
Due from other governmental agencies 1,843 1,043 1,014 1,863
Total assets 63,727$ 88,427$ 270,289$ 305,439$
Liabilities
Accounts and contracts payable –$ 126$ 87$ 89$
Deferred inflows of resources
Unavailable revenue from
special assessments 17,547 39,187 97,837 105,545
Fund balances
Restricted for debt service 46,180 49,114 172,365 199,805
Total liabilities, deferred inflows
of resources, and fund balances 63,727$ 88,427$ 270,289$ 305,439$
as of December 31, 2018
Balance Sheet by Account (continued)
Debt Service Fund
CITY OF PRIOR LAKE
-106-
CSAH 44,Street
Welcome,Crest,Reconstruction
CR 12, Sunset Maplewood GESP Lease 2015
553,697$ 304,760$ 62,557$ 528,701$
4,226 412 67 (89)
5,037 – – 8,742
406,081 30,462 – 786,793
– – – –
1,161 1,624 2,000 18
970,202$ 337,258$ 64,624$ 1,324,165$
175$ 173$ –$ 175$
411,118 30,462 – 795,535
558,909 306,623 64,624 528,455
970,202$ 337,258$ 64,624$ 1,324,165$
-107 (continued)
TH 13, 150th TH 13, 150th
Street 2015 Manitou Road Street 2016 Equipment
Reconstruction Improvement Reconstruction 2016
Assets
Cash and investments 243,456$ 167,727$ 3,943$ 6,785$
Receivables
Accounts 74 (33) 6 9
Special assessments
Delinquent – 2,484 – –
Deferred – 167,694 – –
Other (Green Acres)– – – –
Due from other governmental agencies 3,909 697 287 433
Total assets 247,439$ 338,569$ 4,236$ 7,227$
Liabilities
Accounts and contracts payable 176$ 60$ 60$ 58$
Deferred inflows of resources
Unavailable revenue from
special assessments – 170,178 – –
Fund balances
Restricted for debt service 247,263 168,331 4,176 7,169
Total liabilities, deferred inflows
of resources, and fund balances 247,439$ 338,569$ 4,236$ 7,227$
CITY OF PRIOR LAKE
Debt Service Fund
Balance Sheet by Account (continued)
as of December 31, 2018
-108-
Cates, Balsam,
Franklin Trail,
Sycamore Trail,
Street and
Maintenance 2017 2018
Center Roof Mill and Franklin,
Improvements Overlay Huron,
2017 Improvements Woodside Total
379,024$ 1,917$ 274,132$ 3,023,943$
369 – 66 11,774
2,171 – – 19,841
867,757 – 436,123 2,983,732
– – – 451,350
2,606 7 – 22,744
1,251,927$ 1,924$ 710,321$ 6,513,384$
136$ 38$ 175$ 1,880$
869,929 – 436,123 3,454,923
381,862 1,886 274,023 3,056,581
1,251,927$ 1,924$ 710,321$ 6,513,384$
-109
Water
Park City Hall Fire Treatment
Referendum 2005 Station #2 Plant
Revenues
Taxes –$ 637,043$ –$ –$
Special assessments – – – –
Investment income – 1,969 – –
Total revenues – 639,012 – –
Expenditures
Debt service
Principal – 470,000 140,000 370,000
Interest and other – 167,928 87,568 166,925
Total expenditures – 637,928 227,568 536,925
Excess (deficiency) of revenues
over expenditures – 1,084 (227,568) (536,925)
Other financing sources (uses)
Transfers in 487 – 227,553 537,304
Transfers out – – – –
Total other financing sources (uses)487 – 227,553 537,304
Net change in fund balances 487 1,084 (15) 379
Fund balances (deficit)
Beginning of year (487) 14,689 73 1,683
End of year –$ 15,773$ 58$ 2,062$
Year Ended December 31, 2018
and Changes in Fund Balances by Account
CITY OF PRIOR LAKE
Debt Service Fund
Schedule of Revenues, Expenditures,
-110-
Tax Street Brooksville
Increment Fish Reconstruction Hills
2004 Point 2007 2008
–$ –$ –$ 85,013$
– – – 33,159
278 – 225 659
278 – 225 118,831
25,000 – – 125,000
4,932 – – 2,500
29,932 – – 127,500
(29,654) – 225 (8,669)
30,135 – – –
– (2,420) (22,068) (33,537)
30,135 (2,420) (22,068) (33,537)
481 (2,420) (21,843) (42,206)
27,422 2,420 21,843 42,206
27,903$ –$ –$ –$
-111-(continued)
Brooksville CR 12 and
Hills II/Maple 2010 Boudin Boudin
Glen 2nd Reconstruction Phase I Phase II
Revenues
Taxes 158,985$ 71,764$ 152,360$ 200,939$
Special assessments 22,544 9,222 51,597 43,998
Investment income 1,072 957 2,856 3,085
Total revenues 182,601 81,943 206,813 248,022
Expenditures
Debt service
Principal 175,000 125,000 220,000 230,000
Interest and other 12,745 12,560 20,464 25,588
Total expenditures 187,745 137,560 240,464 255,588
Excess (deficiency) of revenues
over expenditures (5,144) (55,617) (33,651) (7,566)
Other financing sources (uses)
Transfers in 22,068 33,537 – –
Transfers out – – – –
Total other financing sources (uses)22,068 33,537 – –
Net change in fund balances 16,924 (22,080) (33,651) (7,566)
Fund balances (deficit)
Beginning of year 29,256 71,194 206,016 207,371
End of year 46,180$ 49,114$ 172,365$ 199,805$
and Changes in Fund Balances by Account (continued)
Year Ended December 31, 2018
CITY OF PRIOR LAKE
Debt Service Fund
Schedule of Revenues, Expenditures,
-112-
CSAH 44,Street
Welcome,Crest,Reconstruction
CR 12, Sunset Maplewood GESP Lease 2015
174,442$ 243,998$ 300,305$ –$
117,922 13,971 – 10,449
6,968 4,117 790 5,226
299,332 262,086 301,095 15,675
325,000 215,000 258,016 –
43,955 34,675 42,598 117,495
368,955 249,675 300,614 117,495
(69,623) 12,411 481 (101,820)
2,419 – – 227,068
– – – –
2,419 – – 227,068
(67,204) 12,411 481 125,248
626,113 294,212 64,143 403,207
558,909$ 306,623$ 64,624$ 528,455$
-113-(continued)
Sycamore Trail,
TH 13, 150th TH 13, 150th
Street 2015 Manitou Road Street 2016 Equipment
Reconstruction Improvement Reconstruction 2016
Revenues
Taxes 587,361$ 78,388$ 43,058$ 65,140$
Special assessments 132,758 35,843 – –
Investment income 4,920 2,513 171 276
Total revenues 725,039 116,744 43,229 65,416
Expenditures
Debt service
Principal 650,000 110,000 35,000 55,000
Interest and other 36,180 19,859 6,458 7,158
Total expenditures 686,180 129,859 41,458 62,158
Excess (deficiency) of revenues
over expenditures 38,859 (13,115) 1,771 3,258
Other financing sources (uses)
Transfers in 15,752 – – –
Transfers out – – – –
Total other financing sources (uses)15,752 – – –
Net change in fund balances 54,611 (13,115) 1,771 3,258
Fund balances (deficit)
Beginning of year 192,652 181,446 2,405 3,911
End of year 247,263$ 168,331$ 4,176$ 7,169$
CITY OF PRIOR LAKE
Debt Service Fund
Schedule of Revenues, Expenditures,
and Changes in Fund Balances by Account (continued)
Year Ended December 31, 2018
-114-
Cates, Balsam,
Franklin Trail,
Sycamore Trail,
Street and
Maintenance 2017 2018
Center Roof Mill and Franklin,
Improvements Overlay Huron,
2017 Improvements Woodside Total
340,051$ 1,104$ –$ 3,139,951$
253,540 – 272,282 997,285
5,941 25 1,916 43,964
599,532 1,129 274,198 4,181,200
360,000 65,000 – 3,953,016
124,424 10,412 175 944,599
484,424 75,412 175 4,897,615
115,108 (74,283) 274,023 (716,415)
– 75,374 – 1,171,697
– – – (58,025)
– 75,374 – 1,113,672
115,108 1,091 274,023 397,257
266,754 795 – 2,659,324
381,862$ 1,886$ 274,023$ 3,056,581$
-115-
Severance
Compensation Insurance Total
Assets
Cash and investments 270,367$ 282,436$ 552,803$
Receivables
Accounts 3,021 346 3,367
Total assets 273,388$ 282,782$ 556,170$
Current liabilities
Current portion of compensated absences payable 396,359$ –$ 396,359$
Noncurrent liabilities
Compensated absences payable 442,165 – 442,165
Total liabilities 838,524 – 838,524
Net position (deficit)
Unrestricted (565,136) 282,782 (282,354)
Total liabilities and net position 273,388$ 282,782$ 556,170$
CITY OF PRIOR LAKE
Internal Service Funds
Combining Statement of Net Position
as of December 31, 2018
-116-
Severance
Compensation Insurance Total
Operating revenues
Charges for services 28,245$ –$ 28,245$
Operating expenses
Personal services 119,877 – 119,877
Operating income (loss)(91,632) – (91,632)
Nonoperating revenues
Investment income 3,383 3,048 6,431
Change in net position (88,249) 3,048 (85,201)
Net position (deficit)
Beginning of year (476,887) 279,734 (197,153)
End of year (565,136)$ 282,782$ (282,354)$
CITY OF PRIOR LAKE
Internal Service Funds
Combining Statement of Revenues, Expenses, and Changes in Net Position
Year Ended December 31, 2018
-117-
THIS PAGE INTENTIONALLY LEFT BLANK
Severance
Compensation Insurance Total
Cash flows from operating activities
Cash received from customers 28,225$ –$ 28,225$
Cash payments to employees (76,341) – (76,341)
Miscellaneous revenue – 117,324 117,324
Net cash flows from operating activities (48,116) 117,324 69,208
Cash flows from investing activities
Interest received on cash and investments 3,383 3,048 6,431
Net increase in cash and cash equivalents (44,733) 120,372 75,639
Cash and cash equivalents, January 1 315,100 162,064 477,164
Cash and cash equivalents, December 31 270,367$ 282,436$ 552,803$
Reconciliation of operating income (loss) to net
cash flows from operating activities
Operating income (loss)(91,632)$ –$ (91,632)$
Adjustments to reconcile operating income (loss)
to net cash flows from operating activities
(Increase) decrease in assets
Accounts receivable (20) 117,324 117,304
Increase (decrease) in liabilities
Compensated absences payable 43,536 – 43,536
Net cash flows from operating activities (48,116)$ 117,324$ 69,208$
CITY OF PRIOR LAKE
Internal Service Funds
Combining Statement of Cash Flows
Year Ended December 31, 2018
-118-
THIS PAGE INTENTIONALLY LEFT BLANK
OTHER INFORMATION SECTION
THIS PAGE INTENTIONALLY LEFT BLANK
Percent
Increase
2018 2017 (Decrease)
Revenues
Taxes 12,806,046$ 12,036,402$ 6.4%
Franchise taxes 630,932 620,469 1.7%
Special assessments 1,340,085 1,497,191 (10.5%)
Licenses and permits 994,613 820,433 21.2%
Intergovernmental 1,864,964 1,686,327 10.6%
Charges for services 4,401,009 5,265,779 (16.4%)
Fines and forfeits 1,448 2,250 (35.6%)
Interest on investments 312,320 193,840 61.1%
Miscellaneous 412,650 591,193 (30.2%)
Total revenues 22,764,067$ 22,713,884$ 0.2%
Per capita 869$ 872$ (0.4%)
Expenditures
Current
General government 2,759,974$ 2,741,319$ 0.7%
Public safety 5,813,331 5,348,329 8.7%
Public works 1,882,971 1,798,918 4.7%
Culture and recreation 1,907,552 1,677,597 13.7%
Economic development 149,852 98,499 52.1%
Capital outlay 9,057,805 11,752,287 (22.9%)
Debt service
Principal 3,953,016 3,987,633 (0.9%)
Interest and other charges 1,020,244 1,292,056 (21.0%)
Total disbursements 26,544,745$ 28,696,638$ (7.5%)
Per capita 1,013$ 1,101$ (8.0%)
Total long-term bonded indebtedness 38,895,000$ 36,960,000$ 5.2%
Per capita 1,484$ 1,419$ 4.6%
General Fund balance – December 31 7,213,402$ 6,840,928$ 5.4%
Per capita 275$ 263$ 4.8%
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.
Questions about this report should be directed to the Finance Director at (952) 447-9841.
Governmental Funds
Years Ended December 31, 2018 and 2017
Total
CITY OF PRIOR LAKE
Summary Financial Report
Revenues and Expenditures for General Operations
-119-
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
G.O. Improvement Bonds of 2018A 4.00–5.00 08/15/2018 12/15/2028
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. 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
G.O. Improvement Bonds of 2018A 4.00-5.00 08/15/2018 12/15/2028
Total general obligation bonds
General obligation revenue bonds
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
G.O. Improvement Bonds of 2018A 4.00–5.00 08/15/2018 12/15/2028
Total general obligation revenue bonds
Total bonded indebtedness
Rate
CITY OF PRIOR LAKE
Combined Schedule of Indebtedness
Year Ended December 31, 2018
Interest
-120-
Outstanding Issued Outstanding
Authorized January 1 (Retired)December 31 Principal Interest
1,700,000$ 350,000$ (175,000)$ 175,000$ 175,000$ 6,125$
1,235,000 385,000 (125,000) 260,000 130,000 8,190
2,130,000 885,000 (220,000) 665,000 220,000 15,525
2,280,000 1,190,000 (230,000) 960,000 230,000 20,668
3,240,000 1,940,000 (325,000) 1,615,000 325,000 37,280
2,170,000 1,605,000 (215,000) 1,390,000 220,000 30,200
495,000 125,000 (125,000) – – –
4,640,000 4,640,000 – 4,640,000 – 115,825
160,000 120,000 (20,000) 100,000 25,000 1,963
1,105,000 990,000 (110,000) 880,000 110,000 17,600
4,135,000 4,135,000 (380,000) 3,755,000 425,000 77,162
4,465,000 – 4,465,000 4,465,000 430,000 261,200
27,755,000 16,365,000 2,540,000 18,905,000 2,290,000 591,738
290,000 185,000 (25,000) 160,000 25,000 4,300
3,500,000 3,110,000 (140,000) 2,970,000 150,000 84,418
9,825,000 7,395,000 (470,000) 6,925,000 485,000 157,858
2,330,000 1,860,000 (630,000) 1,230,000 330,000 24,448
760,000 675,000 (90,000) 585,000 95,000 11,700
370,000 370,000 (45,000) 325,000 50,000 6,500
1,165,000 – 1,165,000 1,165,000 120,000 68,133
17,950,000 13,410,000 (210,000) 13,200,000 1,230,000 353,057
5,360,000 5,360,000 (75,000) 5,285,000 75,000 133,375
1,640,000 1,640,000 (295,000) 1,345,000 310,000 26,900
2,640,000 – 2,640,000 2,640,000 210,000 156,400
9,640,000 7,000,000 2,270,000 9,270,000 595,000 316,675
55,635,000$ 36,960,000$ 4,575,000$ 41,535,000$ 4,140,000$ 1,265,770$
Due in 2019
-121-
Final
Issue Maturity
Date Date Principal
General obligation
special assessment bonds
$1,700,000 General Obligation
Improvement Bonds, Series 2009A 05/15/2009 05/15/2009 %12/15/2019 175,000$
$1,235,000 General Obligation
Improvement Bonds, Series 2010A 05/26/2010 05/26/2010 %12/15/2019 130,000
12/15/2020 130,000
Total 260,000
$2,130,000 General Obligation
Improvement Bonds, Series 2011A 08/31/2011 2.15 %12/15/2019 220,000
2.35 12/15/2020 220,000
2.50 12/15/2021 225,000
Total 665,000
$2,280,000 General Obligation
Improvement Bonds, Series 2011B 12/14/2011 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 960,000
$3,240,000 General Obligation
Improvement Bonds, Series 2013A 08/15/2013 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 1,615,000
$2,170,000 General Obligation
Improvement Bonds, Series 2014A 09/25/2014 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 1,390,000
CITY OF PRIOR LAKE
Bond Schedules
December 31, 2018
Rate
Interest
-122-(continued)
Final
Issue Maturity
Date Date Principal
General obligation
special assessment bonds (continued)
$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 1.60 %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 100,000
$1,105,000 General Obligation
Improvement Bonds, Series 2016A 05/01/2016 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 880,000
$4,135,000 General Obligation
Improvement Bonds, Series 2017A 06/29/2017 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 3,755,000
CITY OF PRIOR LAKE
Bond Schedules (continued)
December 31, 2018
Interest
Rate
-123-(continued)
Final
Issue Maturity
Date Date Principal
General obligation
special assessment bonds (continued)
$4,465,000 General Obligation
Improvement Bonds, Series 2018A 08/15/2018 4.00 %12/15/2019 430,000
4.00 12/15/2020 490,000
4.00 12/15/2021 455,000
4.00 12/15/2022 475,000
4.00 12/15/2023 490,000
4.00 12/15/2024 395,000
5.00 12/15/2025 410,000
5.00 12/15/2026 420,000
5.00 12/15/2027 440,000
5.00 12/15/2028 460,000
Total 4,465,000
Total general obligation special assessment bonds 18,905,000$
General obligation
tax increment bonds
$290,000 Tax Increment Refunding
Bonds, Series 2011A 08/31/2011 2.15 %12/15/2019 25,000$
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 160,000$
General obligation bonds
$3,500,000 General Obligation Improvement
Bonds, Series 2011B 12/14/2011 2.00 %12/15/2019 150,000$
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 2,970,000
Bond Schedules (continued)
December 31, 2018
Interest
Rate
CITY OF PRIOR LAKE
-124-(continued)
Final
Issue Maturity
Date Date Principal
General obligation bonds (continued)
$9,825,000 General Obligation Capital
Improvement Refunding Bonds of 2012A 03/13/2012 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 6,925,000
$2,330,000 General Obligation
Street Reconstruction Bonds, Series 2015B 05/14/2015 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 1,230,000
$760,000 General Obligation
Street Reconstruction Bonds, Series 2016A 05/01/2016 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 585,000
December 31, 2018
Interest
Rate
CITY OF PRIOR LAKE
Bond Schedules (continued)
-125-(continued)
Final
Issue Maturity
Date Date Principal
General obligation bonds (continued)
$370,000 General Obligation
Improvement Bonds of 2017A 06/29/2017 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 325,000
$1,165,000 General Obligation
Improvement Bonds, Series 2018A 08/15/2018 4.00 %12/15/2019 120,000
4.00 12/15/2020 130,000
4.00 12/15/2021 110,000
4.00 12/15/2022 110,000
4.00 12/15/2023 120,000
4.00 12/15/2024 125,000
5.00 12/15/2025 125,000
5.00 12/15/2026 130,000
5.00 12/15/2027 130,000
5.00 12/15/2028 65,000
Total 1,165,000
Total general obligation bonds 13,200,000$
General obligation revenue bonds
$5,360,000 General Obligation Improvement
Refunding Bonds, Series 2015A 05/14/2015 1.00 %12/15/2019 75,000$
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 5,285,000
CITY OF PRIOR LAKE
Bond Schedules (continued)
December 31, 2018
Interest
Rate
-126-(continued)
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 %12/15/2019 310,000
2.00 12/15/2020 325,000
2.00 12/15/2021 345,000
2.00 12/15/2022 365,000
Total 1,345,000
$2,640,000 General Obligation Improvement
Bonds, Series 2018A 08/15/2018 4.00 %12/15/2019 210,000
4.00 12/15/2020 240,000
4.00 12/15/2021 240,000
4.00 12/15/2022 250,000
4.00 12/15/2023 260,000
4.00 12/15/2024 270,000
5.00 12/15/2025 270,000
5.00 12/15/2026 280,000
5.00 12/15/2027 300,000
5.00 12/15/2028 320,000
Total 2,640,000
Total general obligation revenue bonds 9,270,000$
Interest
Rate
CITY OF PRIOR LAKE
Bond Schedules (continued)
December 31, 2018
-127-
Year Principal Interest Principal Interest
2019 1,230,000$ 353,057$ 2,290,000$ 591,738$
2020 1,140,000 310,343 2,200,000 467,753
2021 1,270,000 285,048 2,060,000 403,203
2022 1,430,000 256,808 1,860,000 358,288
2023 1,055,000 224,316 1,945,000 309,068
2024 1,045,000 199,841 1,715,000 257,111
2025 1,035,000 174,120 1,695,000 213,688
2026 1,095,000 146,010 1,550,000 167,488
2027 1,105,000 115,430 1,410,000 119,813
2028 1,095,000 83,280 1,010,000 74,600
2029 1,085,000 51,630 600,000 35,099
2030 300,000 20,910 570,000 17,099
2031 315,000 10,710 – –
Total 13,200,000$ 2,231,503$ 18,905,000$ 3,014,948$
CITY OF PRIOR LAKE
Debt Service Requirements
December 31, 2018
General Obligation
General Obligation Bonds Special Assessment Bonds
-128-
Principal Interest Principal Interest
25,000$ 4,300$ 595,000$ 316,675$
25,000 3,763 640,000 262,225
25,000 3,175 660,000 245,000
25,000 2,550 690,000 227,375
30,000 1,800 740,000 208,950
30,000 900 765,000 188,950
– – 785,000 168,250
– – 810,000 144,450
– – 850,000 117,200
– – 890,000 88,450
– – 590,000 55,350
– – 615,000 37,650
– – 640,000 19,200
160,000$ 16,488$ 9,270,000$ 2,079,725$
Revenue Bonds
General ObligationGeneral Obligation
Tax Increment Bonds
-129-
THIS PAGE INTENTIONALLY LEFT BLANK
Collection Collections
Total of Current of Prior Total
Year Levy Year Levy Years’ Levy Collections
2009 9,881,555$ 9,881,555$ 94.42 %*157,906$ 9,487,918$ 96.02 %
2010 10,079,186 10,079,186 100.00 *235,004 9,999,856 99.21
2011 10,114,124 10,114,124 100.00 *148,029 10,262,153 101.46
2012 9,414,124 9,414,124 100.00 132,726 9,546,850 101.41
2013 9,414,124 9,414,124 100.00 79,901 9,494,025 100.85
2014 9,448,918 9,448,918 100.00 86,180 9,535,098 100.91
2015 10,394,086 10,394,086 100.00 48,336 10,442,422 100.47
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
2018 12,077,538 11,994,082 99.31 61,762 12,055,844 99.82
*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
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
2018 657,443 635,553 96.67 34,485 670,038 101.92
**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
-130-
2016 2017 2018
Taxable market value 2,842,299,000$ 3,030,449,778$ 3,261,128,200$
Tax levy 11,078,361$ 11,568,155$ 12,077,538$
Tax capacity, net of fiscal disparities,
and tax increment 28,850,704$ 29,819,702$ 33,172,374$
Tax capacity rate 31.953% 32.685% 33.040%
Market value rate 0.038% 0.034% 0.007%
EDA tax capacity rate 0.496% 0.434% 0.390%
CITY OF PRIOR LAKE
Schedules of Market Value, Tax Levy, Tax Capacity Values,
Tax Capacity Rate, and Market Value Rate
Prior Three Years
-131-
2016 2017 2018
Current population 25,356 26,053 26,207
Tax capacity, net of fiscal disparities,
and tax increment 28,850,704$ 29,819,702$ 33,172,374$
Percent of current property taxes collected 99.60% 99.59% 99.31%
City revenues per capita (governmental funds)768$ 872$ 869$
City expenditures per capita (governmental funds)959$ 1,101$ 1,013$
Ratio of bonded debt to tax capacity 141.14% 114.30% 108.36%
Bond rating AA+ (S&P)AA+ (S&P)AA+ (S&P)
CITY OF PRIOR LAKE
Key Financial Indicators
Prior Three Years
-132-
THIS PAGE INTENTIONALLY LEFT BLANK
OTHER REQUIRED REPORTS
THIS PAGE INTENTIONALLY LEFT BLANK
-133-
INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER
FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS
BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN
ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
To the City Council and Management
City of Prior Lake, Minnesota
We have audited, in accordance with auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Government Auditing Standards,
issued by the Comptroller General of the United States, the financial statements of the governmental
activities, the business-type activities, each major fund, and the aggregate remaining fund information of
the City of Prior Lake, Minnesota (the City) as of and for the year ended December 31, 2018, 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 15, 2019.
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 a 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)
C E R T I F I E D
A C C O U N T A N T S
P UBLIC
PRINCIPALS
Thomas A. Karnowski, CPA
Paul A. Radosevich, CPA
William J. Lauer, CPA
James H. Eichten, CPA
Aaron J. Nielsen, CPA
Victoria L. Holinka, CPA/CMA
Jaclyn M. Huegel, CPA
Malloy, Montague, Karnowski, Radosevich & Co., P.A.
5353 Wayzata Boulevard • Suite 410 • Minneapolis, MN 55416 • Phone: 952-545-0424 • Fax: 952-545-0569 • www.mmkr.com
Standard Letterhead-r2.qxp_167639 Letterhead-RV1 9/7/18 6:34 PM Page 1
-134-
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 test ing 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 15, 2019
-135-
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, 2018, 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 15, 2019.
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, except as
described in the Schedule of Findings and Responses as item 2018-001. However, our audit was not
directed primarily toward obtaining knowledge of such noncompliance. Accordingly, had we performed
additional procedures, other matters may have come to our attention regarding the City’s noncompliance
with the above referenced provisions.
CITY’S RESPONSE TO FINDING
The City’s response to the legal compliance finding identified in our audit has been included in the
Schedule of Findings and Responses. The City’s response was not subject to the auditing procedures
applied in our audit of the financial statements and, accordingly, we express no opinion on it.
PURPOSE OF THIS REPORT
The purpose of this report is solely to describe the scope of our testing of compliance and the results of
that testing, and not to provide an opinion on compliance. Accordingly, this report is not suitable for any
other purpose.
Minneapolis, Minnesota
May 15, 2019
C E R T I F I E D
A C C O U N T A N T S
P UBLIC
PRINCIPALS
Thomas A. Karnowski, CPA
Paul A. Radosevich, CPA
William J. Lauer, CPA
James H. Eichten, CPA
Aaron J. Nielsen, CPA
Victoria L. Holinka, CPA/CMA
Jaclyn M. Huegel, CPA
Malloy, Montague, Karnowski, Radosevich & Co., P.A.
5353 Wayzata Boulevard • Suite 410 • Minneapolis, MN 55416 • Phone: 952-545-0424 • Fax: 952-545-0569 • www.mmkr.com
Standard Letterhead-r2.qxp_167639 Letterhead-RV1 9/7/18 6:34 PM Page 1
THIS PAGE INTENTIONALLY LEFT BLANK
CITY OF PRIOR LAKE
Schedule of Findings and Responses
Year Ended December 31, 2018
-136-
FINDINGS – MINNESOTA LEGAL COMPLIANCE AUDIT
2018-001 UNTIMELY DISBURSEMENT TO VOLUNTEER FIRE RELIEF
Condition and Criteria – Minnesota Statutes § 423A.022, Subd. 2 states that annually, the
commissioner of revenue shall allocate police and firefighter retirement supplemental state
aid. Of the total amount appropriated as supplemental state aid, a percentage is paid to the
executive director of the Public Employees Retirement Association for deposit in the Public
Employees Police and Fire Retirement Fund. A percentage is then paid to municipalities that
qualify to receive fire state aid in that calendar year. For municipalities that are allocated
amounts for fire departments participating in the voluntary state-wide lump sum volunteer
firefighter retirement plans, this balance is required to be paid to the treasurer of each
municipality for transmittal within 30 days of receipt to the treasurer of the applicable
volunteer firefighter relief association for deposit in its Special Fund.
For the 2018 allocation of this aid to the City, the City did not pay the fire relief association
prior to the 30-day period set by the Minnesota Statutes.
Cause – This was an oversight by City personnel.
Effect – The City was not in compliance with Minnesota Statutes § 423A.022, Subd. 2.
Recommendation – We recommend that the City follow Minnesota Statutes § 423A.022,
Subd. 2 and disburse funds received from the state of Minnesota to the volunteer firefighter
relief association within the 30-day time period.
Management Response – There is no disagreement with the audit finding.
THIS PAGE INTENTIONALLY LEFT BLANK
Management Report
for
City of Prior Lake, Minnesota
December 31, 2018
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, 2018. We have organized
this report into the following sections:
•Audit Summary
•Governmental Funds Overview
•Enterprise Funds Overview
•Government-Wide Financial Statements
•Legislative Updates
•Accounting and Auditing Updates
We would be pleased to further discuss any of the information contained in this report or any other
concerns that you would like us to address. We would also like to express our thanks for the courtesy and
assistance extended to us during the course of our audit.
The purpose of this report is solely to provide those charged with governance of the City, management,
and those who have responsibility for oversight of the financial reporting process comments resulting
from our audit process and information relevant to city finances in Minnesota. Accordingly, this report is
not suitable for any other purpose.
Minneapolis, Minnesota
May 15, 2019
C E R T I F I E D
A C C O U N T A N T S
P UBLIC
PRINCIPALS
Thomas A. Karnowski, CPA
Paul A. Radosevich, CPA
William J. Lauer, CPA
James H. Eichten, CPA
Aaron J. Nielsen, CPA
Victoria L. Holinka, CPA/CMA
Jaclyn M. Huegel, CPA
Malloy, Montague, Karnowski, Radosevich & Co., P.A.
5353 Wayzata Boulevard • Suite 410 • Minneapolis, MN 55416 • Phone: 952-545-0424 • Fax: 952-545-0569 • www.mmkr.com
Standard Letterhead-r2.qxp_167639 Letterhead-RV1 9/7/18 6:34 PM Page 1
THIS PAGE INTENTIONALLY LEFT BLANK
-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, 2018. 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, 2018:
• We have issued an unmodified opinion on the City’s basic financial statements. Our report
included a paragraph emphasizing the City’s implementation of Governmental Accounting
Standards Board (GASB) Statement No. 75, Accounting and Financial Reporting for
Postemployment Benefits Other Than Pensions during the year ended December 31, 2018. Our
opinion was not modified with respect to this matter.
• We reported no deficiencies in the City’s internal control over financial reporting that we
considered to be material weaknesses.
• The results of our testing disclosed no instances of noncompliance required to be reported under
Government Auditing Standards.
• We reported one finding based on our testing of the City’s compliance with Minnesota laws and
regulations as follows:
Minnesota Statutes § 423A.022, Subd. 2 states that annually, the commissioner of revenue shall
allocate police and firefighter retirement supplemental state aid. Of the total amount appropriated
as supplemental state aid, a percentage is paid to the executive director of the Public Employees
Retirement Association (PERA) for deposit in the Public Employees Police and Fire Retirement
Fund. A percentage is then paid to municipalities that qualify to receive fire state aid in that
calendar year. For municipalities that are allocated amounts for fire departments participating in
the voluntary state-wide lump sum volunteer firefighter retirement plans, this balance is required
to be paid to the treasurer of each municipality for transmittal within 30 days of receipt to the
treasurer of the applicable volunteer firefighter relief association for deposit in its Special Fund.
For the 2018 allocation of this aid to the City, the City did not pay the fire relief association prior
to the 30-day period set by Minnesota Statutes.
-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, 2018; however, the City implemented the following governmental
accounting standards during the fiscal year:
• GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits
Other Than Pensions, which established new accounting and financial reporting requirements for
governments whose employees are provided with other post-employment benefits (OPEB).
• GASB Statement No. 85, Omnibus 2017, which addresses issues that have been identified during
implementation and application of certain GASB statements.
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.
• Total Other Post-Employment Benefits (OPEB) and Net Pension Liabilities – The City has
recorded liabilities and activity for pension benefits and OPEB. These obligations are calculated
using actuarial methodologies described in GASB Statement Nos. 68 and 75. 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. There were no misstatements detected as a result of audit procedures that 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 15, 2019.
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 (MD&A) 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 supplemental 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
supplemental 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.
THIS PAGE INTENTIONALLY LEFT BLANK
-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 t o 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 2017 fiscal year, local ad valorem property tax levies provided 41.1 percent of the total
governmental fund revenues for cities over 2,500 in population, and 37.4 percent for cities under 2,500 in
population. Total property taxes levied by all Minnesota cities for taxes payable in 2018 increased
6.2 percent from the prior year, and total certified levies payable in 2019 are projected to increase by
5.6 percent.
The total market value of property in Minnesota cities increased about 5.6 percent for the 2017 levy year
(state-wide market value information for the 2018 levy year was not available at the time this report was
issued). The market values used for levying property taxes are based on the previous fiscal year
(e.g., market values for taxes levied in 2018 were based on assessed values as of January 1, 2017), 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 6.6 percent for taxes payable in 2017 and 7.6 percent for taxes
payable in 2018. 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
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
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 3.4 percent and 11.2 percent for taxes payable in
2017 and 2018, 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
$35,000,000
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Local Net Tax Capacity
The following table presents the average tax rates applied to city residents for each of the last three levy
years:
2016 2017 2018
Average tax rate
City 32.0 32.7 33.0
County 36.2 35.9 35.1
School 32.9 30.6 33.0
Special taxing 7.2 7.8 8.7
Total 108.3 107.0 109.8
City of Prior Lake
Rates Expressed as a Percentage of Net Tax Capacity
The City’s portion of the tax rate has been increasing slightly over the past two years.
-6-
GOVERNMENTAL FUND BALANCES
The following table summarizes the changes in the fund balances of the City’s governmental funds during
the year ended December 31, 2018, presented both by fund balance classification and by major fund:
Increase
2018 2017 (Decrease)
Fund balances of governmental funds
Total by classification
Restricted 4,154,268$ 3,696,266$ 458,002$
Assigned 13,908,417 11,833,265 2,075,152
Unassigned 6,931,767 6,621,659 310,108
Total – governmental funds 24,994,452$ 22,151,190$ 2,843,262$
Total by fund
General 7,213,402$ 6,840,928$ 372,474$
Debt Service 3,056,581 2,659,324 397,257
Construction 3,070,306 2,324,549 745,757
Special revenue nonmajor funds 3,455,253 2,842,255 612,998
Capital projects nonmajor funds 8,198,910 7,484,134 714,776
Total – governmental funds 24,994,452$ 22,151,190$ 2,843,262$
Governmental Funds Change in Fund Balance
Fund Balance
as of December 31,
In total, the fund balances of the City’s governmental funds increased by $2,843,262 during the year
ended December 31, 2018, including a prior period adjustment lowering beginning fund balance by
$151,692. The increase in the assigned balance mostly relates to the increase in assigned balances for
capital projects.
-7-
GOVERNMENTAL FUNDS REVENUE AND EXPENDITURES
The following table presents the per capita revenue of the City’s governmental funds for the past
three years, along with state-wide averages.
We have included the most recent comparative state-wide averages available from the Office of the State
Auditor to provide a benchmark for interpreting the City’s data. The amounts received from the typical
major sources of governmental fund revenue will naturally vary between cities based on factors , such as a
city’s stage of development, location, size and density of its population, property values, services it
provides, and other attributes. It will also differ from year-to-year, due to the effect of inflation and
changes in its operation. Also, certain data in these tables may be classifie d differently than how they
appear in the City’s financial statements in order to be more comparable to the state-wide information,
particularly in separating capital expenditures from current expenditures.
We have designed this section of our management report using per capita data in order to better identify
unique or unusual trends and activities of the City. We intend for this type of comparative and trend
information to complement, rather than duplicate, information in the MD&A. An inherent difficult y in
presenting per capita information is the accuracy of the population count, which for most years is based
on estimates.
Year 2016 2017 2018
Population 2,500–10,000 10,000–20,000 20,000–100,000 25,356 26,053 26,207
Property taxes 474$ 451$ 475$ 438$ 442$ 460$
Tax increments 26 27 38 20 20 29
Franchise and other taxes 38 43 48 26 24 24
Special assessments 57 48 59 34 57 51
Licenses and permits 39 34 49 30 31 38
Intergovernmental revenues 322 276 147 65 65 71
Charges for services 108 103 103 132 202 168
Other 68 53 48 24 30 28
Total revenue 1,132$ 1,035$ 967$ 769$ 871$ 869$
December 31, 2017
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 2018 were $22,764,067, an increase of $50,183
(0.2 percent) from the prior year. On a per capita basis, the City received $869 in governmental fund
revenue for 2018, a decrease of $2 from the prior year. Charges for services decreased $34 per capita,
mainly due to increases in development fees received in 2017. In general, the City has generated less
governmental fund revenue per capita than the state-wide averages. Most of this relates to lower than
average intergovernmental revenues, which is mostly local government aid.
-8-
The expenditures of governmental funds will also vary from state -wide averages and from year-to-year,
based on the City’s circumstances. Expenditures are classified into three types as follows:
• Current – These are typically the general operating type expenditures occurring on an annual
basis, and are primarily funded by general sources, such as taxes and intergovernmental revenues.
• Capital Outlay and Construction – These expenditures do not occur on a consistent basis, more
typically fluctuating significantly from year-to-year. Many of these expenditures are
project-oriented, and are often funded by specific sources that have benefited from the
expenditure, such as special assessment improvement projects.
• Debt Service – Although the expenditures for debt service may be relatively consistent over the
term of the respective debt, the funding source is the important factor. Some debt may be repaid
through specific sources, such as special assessments or redevelopment funding, while other debt
may be repaid with general property taxes.
The City’s expenditures per capita of its governmental funds for the past three years, together with
comparative state-wide averages, are presented in the following table:
Year 2016 2017 2018
Population 2,500–10,000 10,000–20,000 20,000–100,000 25,356 26,053 26,207
Current
147$ 120$ 101$ 100$ 105$ 105$
270 259 287 200 205 222
128 127 101 74 69 72
96 112 99 63 64 73
76 64 77 6 4 6
717 682 665 443 447 478
Capital outlay
and construction 403 319 263 312 451 346
Debt service
228 147 121 150 153 151
44 35 32 54 50 39
272 182 153 204 203 190
Total expenditures 1,392$ 1,183$ 1,081$ 959$ 1,101$ 1,014$
Interest and fiscal charges
Public safety
Streets and highways
Culture and recreation
All other
Principal
General government
Governmental Funds Expenditures per Capita
With State-Wide Averages by Population Class
December 31, 2017
City of Prior LakeState-Wide
Total expenditures in the City’s governmental funds for 2018 were $26,544,745, a decrease of $2,151,893
(7.5 percent) from the prior year. On a per capita basis, the City expended a total of $1,014 in 2018.
Capital outlay expenditures decreased $105 per capita from the prior year, due to less construction related
expenditures in 2018.
-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.
2014 2015 2016 2017 2018
Fund Balance $5,776,647 $6,124,751 $6,684,920 $6,840,928 $7,213,402
Cash and Inv (Net of Borrowing)$6,622,398 $6,902,926 $7,211,301 $8,306,654 $8,938,262
Expenditures and Transfers Out $13,007,098 $12,343,815 $12,417,787 $13,208,933 $13,115,121
$–
$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 $631,608 during the current year. Total
fund balance increased $372,474 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, 2018, the
unrestricted fund balance of the General Fund was 53.2 percent of the subsequent year’s budgeted
expenditures and transfers out.
-10-
The following graph reflects the City’s General Fund revenue sources for 2018 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 2018 was $13,192,964, which was $887,186 (7.2 percent) more than budget,
mainly due to the City having more development than expected, leading to more building permits and
charges for services.
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
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
2018 $8,619,057 $994,613 $1,835,750 $1,357,049 $1,448 $385,047
$–
$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 2018 was $261,663 (2.0 percent) higher than last year. Tax revenue
decreased by $159,972, or 1.8 percent. Licenses and permits were $174,180 higher than last year, due to
the City having more development, leading to increased building permits during 2018. Intergovernmental
revenue increased by $177,762, due to an increase in a number of state aid categories in the current year.
-11-
The following graph illustrates the components of General Fund spending for 2018 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 2018 were $12,295,470, which was $314,302 (2.5 percent) under
budget. Public works expenditures were $177,158 under budget, mainly in personnel costs for
engineering.
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
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
2018 $2,755,367 $5,746,524 $1,882,971 $1,850,587 $60,021
$–
$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 2018 were $722,568 (6.2 percent) greater than the previous year.
Public safety expenditures increased $507,068, due to wages and benefits for additional police officers,
higher cost of living adjustments in the current year, higher overtime costs, higher fire department
personnel costs, and increased fire department gear and training costs.
-12-
ENTERPRISE FUNDS OVERVIEW
The City maintains a number of enterprise funds to account for services the City provides that are
financed primarily through fees charged to those utilizing the service. This section of the report provides
you with an overview of the financial trends and activities of the City’s enterprise funds, which includes
the Water, Sewer, and Water Quality Funds.
ENTERPRISE FUNDS FINANCIAL POSITION
The following table summarizes the changes in the financial position of the City’s enterprise funds during
the year ended December 31, 2018, presented by both classification and by fund:
Increase
2018 2017 (Decrease)
Net position of enterprise funds
Total by classification
Investment in capital assets 61,697,384$ 56,639,547$ 5,057,837$
Unrestricted 6,001,160 3,877,883 2,123,277
Total – enterprise funds 67,698,544$ 60,517,430$ 7,181,114$
Total by fund
Water 40,677,486$ 34,849,695$ 5,827,791$
Sewer 24,213,054 23,575,411 637,643
Water Quality 2,808,004 2,092,324 715,680
Total – enterprise funds 67,698,544$ 60,517,430$ 7,181,114$
Enterprise Funds Change in Financial Position
Net Position
as of December 31,
INTERNAL SERVICE FUND
The City has established a Compensated Absences Internal Service Fund to finance the compensated
absence obligations of the governmental funds of the City. At December 31, 2018, this fund had assets
totaling $273,388, while liabilities totaled $838,524, leaving a deficit net position balance of ($565,136).
We recommend that the City continue to include the financing of these obligations as part of its
long-range financial plans.
The City also has established an Insurance Internal Service Fund to account for risk management
activities, including workers’ compensation, volunteer accident, and property/casualty insurance. At
December 31, 2018, this fund had assets totaling $282,782 and no liabilities, leading to a net position
balance of $282,782.
-13-
WATER ENTERPRISE FUND
The following graph presents five years of comparative operating results for the City’s Water Fund:
2014 2015 2016 2017 2018
Oper Revenue $3,051,682 $3,390,052 $3,674,099 $3,796,097 $3,959,696
Oper Expenses $2,297,197 $2,347,154 $2,493,541 $2,621,448 $2,679,154
Oper Income (Loss)$754,485 $1,042,898 $1,180,558 $1,174,649 $1,280,542
Inc Before Depr $1,390,162 $1,700,029 $1,870,854 $1,912,281 $2,084,668
$–
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
$4,000,000
$4,500,000
Water Enterprise Fund
Year Ended December 31,
The Water Fund ended 2018 with net position of $40,677,486, an increase of $5,827,791 from the prior
year, including a prior period adjustment and a change in accounting principle. Of this, $36,915,912
represents the investment in capital assets, leaving $3,761,574 in unrestricted net position. The Water
Fund had transfers out totaling $1,622,445 in 2018 to support other funds, pay debt service, and provide
for construction projects.
Operating revenue in the Water Fund increased $163,599 (4.3 percent) from the prior year. This increase
was due to increased rates in 2018.
Water Fund operating expenses for 2018 increased $57,706 (2.2 percent) from the previous year.
State and federal grants, interest revenue and expenses, miscellaneous income, and gain on sale of capital
assets, which are not included in the graph above, totaled $41,508 in 2018. After including these revenues
and expenses, the Water Fund reflected income before contributions and transfers of $1,376,451.
-14-
SEWER ENTERPRISE FUND
The following graph presents five years of comparative operating results for the City’s Sewer Fund:
2014 2015 2016 2017 2018
Oper Revenue $2,369,423 $2,432,925 $2,741,578 $3,090,773 $3,270,026
Oper Expenses $2,447,618 $2,468,932 $2,635,304 $2,771,143 $2,892,003
Oper Income (Loss)$(78,195)$(36,007)$106,274 $319,630 $378,023
Inc Before Depr $300,076 $371,068 $530,299 $789,288 $889,932
$(250,000)
$–
$250,000
$500,000
$750,000
$1,000,000
$1,250,000
$1,500,000
$1,750,000
$2,000,000
$2,250,000
$2,500,000
$2,750,000
$3,000,000
$3,250,000
$3,500,000
Sewer Enterprise Fund
Year Ended December 31,
The Sewer Fund ended 2018 with net position of $24,213,054, an increase of $637,643 from the prior
year, including the prior period adjustment and change in accounting principle. Of this, $23,495,901
represents the City’s investment in capital assets, leaving $1,717,153 in unrestricted net position. The
Sewer Fund had transfers out totaling $1,117,033 in 2018 to support other funds, pay debt service, and
provide for construction projects.
Operating revenue in the Sewer Fund increased $179,253 (5.8 percent) from the prior year, mainly related
to increased rates in 2018. Sewer Fund operating expenses for 2018 increased $120,860 (4.4 percent)
from the previous year.
State and federal grants, interest revenue and expenses, and gain on sale of capital assets, which are not
included in the graph above, totaled ($13,649) in 2018. After including these revenues and expenses, the
Sewer Fund reflected income before contributions and transfers of $364,374.
-15-
WATER QUALITY ENTERPRISE FUND
The following graph presents five years of comparative operating results for the City’s Water Quality
Fund:
2014 2015 2016 2017 2018
Oper Revenue $843,292 $865,244 $920,128 $925,988 $986,338
Oper Expenses $638,570 $560,820 $598,972 $633,557 $600,030
Oper Income (Loss)$204,722 $304,424 $321,156 $292,431 $386,308
Inc Before Depr $265,678 $396,392 $427,648 $402,799 $508,197
$–
$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 2018 with net position of $2,808,004, an increase of $715,680 from the
prior year, which includes a prior period adjustment and a change in accounting principle. Of this,
$2,285,571 represents the investment in capital assets, leaving $522,433 in unrestricted net position.
Operating revenue in the Water Quality Fund increased $60,350 (6.5 percent) from the prior year, due to
an increase in the rates in 2018. Water Quality Fund operating expenses for 2018 decreased $33,527
(5.3 percent) from the previous year.
-16-
GOVERNMENT-WIDE FINANCIAL STATEMENTS
In addition to fund-based information, the current reporting model for governmental entities also requires
the inclusion of two government -wide financial statements designed to present a clear picture of the City
as a single, unified entity. These government-wide financial statements provide information on the total
cost of delivering services, including capital assets and long-term liabilities.
STATEMENT OF NET POSITION
The Statement of Net Position essentially tells you what the City owns and owes at a given point in time,
the last day of the fiscal year. Theoretically, net position represents the resources the City has leftover to
use for providing services after its debts are settled. However, those resources are not always in spendable
form, or there may be restrictions on how some of those resources can be used. Therefore, net position is
divided into three components: net investment in capital assets, restricted, and unrestricted.
The following table presents the components of the City’s net position as of December 31, 2018 and
2017, for governmental activities and business-type activities:
Increase
2018 2017 (Decrease)
Net position
Governmental activities
Net investment in capital assets 107,929,953$ 105,369,831$ 2,560,122$
Restricted 8,491,635 7,534,235 957,400
Unrestricted 12,669,915 11,173,171 1,496,744
Total governmental activities 129,091,503 124,077,237 5,014,266
Business-type activities
Net investment in capital assets 61,697,384 56,639,547 5,057,837
Unrestricted 6,001,160 3,877,883 2,123,277
Total business-type activities 67,698,544 60,517,430 7,181,114
Total net position 196,790,047$ 184,594,667$ 12,195,380$
As of December 31,
The City’s total net position at December 31, 2018 was $12,195,380 higher than the total net position
reported at the previous year-end, which includes changes for prior period adjustments and a change in
accounting principle. The increase in the net investment in capital assets balance was mostly due to
capital outlay and capital contribution activity during fiscal 2018.
At the end of the current fiscal year, the City is able to present positive balances in all three categories of
net position, both for the government as a whole, as well as for its separate governmental and
business-type activities. The same situation held true for the prior year.
-17-
STATEMENT OF ACTIVITIES
The Statement of Activities tracks the City’s yearly revenues and expenses, as well as any other
transactions that increase or reduce total net position. These amounts represent the full cost of providing
services. The Statement of Activities provides a more comprehensive measure than just the amoun t of
cash that changed hands, as reflected in the fund-based financial statements. This statement includes the
cost of supplies used, depreciation of long-lived capital assets, and other accrual-based expenses.
The following table presents the change in the net position of the City for the years ended December 31,
2018 and 2017:
2017
Program
Expenses Revenues Net Change Net Change
Governmental activities
General government 3,346,943$ 688,590$ (2,658,353)$ (2,598,014)$
Public safety 6,283,264 3,656,611 (2,626,653) (3,128,406)
Public works 5,393,240 8,918,991 3,525,751 7,890,277
Culture and recreation 2,376,137 802,267 (1,573,870) (1,370,827)
Economic development 825,975 18,473 (807,502) (539,671)
Interest on long-term debt 1,010,342 – (1,010,342) (1,246,553)
Business-type activities
Water 2,721,328 4,535,067 1,813,739 1,323,561
Sewer 2,934,670 3,761,760 827,090 453,142
Water quality 600,030 1,190,102 590,072 317,518
25,491,929$ 23,571,861$ (1,920,068) 1,101,027
General revenues
Taxes 13,443,239 12,642,513
Unrestricted grants and contributions 12,845 212
Investment income 409,429 239,030
Gain on sale of capital assets – 3,440
Miscellaneous 78,275 261,061
Total general revenues 13,943,788 13,146,256
12,023,720$ 14,247,283$
Total net (expense) revenue
Change in net position
Net (expense) revenue
2018
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.
-18-
LEGISLATIVE UPDATES
The 2018 legislative session, falling in the second half of the state’s fiscal biennium, was a short session
in which only two major finance-related bills were passed, omnibus bonding bills related to bonding, and
pensions. The following is a brief summary of specific legislative changes from the 2018 session or
previous legislative sessions potentially impacting Minnesota cities.
Omnibus Bonding Bill – The omnibus bonding bill authorized financing for over $1.5 billion in capital
improvements. Included in the approved funding was $542 million for various transportation
infrastructure, $99 million for local city-related economic development projects, and appropriations for a
number of different utility (water, sewer, wastewater, etc.) infrastructure improvement programs.
Wastewater Investment Protection – Effective retroactively back to August 1, 2017, when a city builds
a new wastewater treatment facility or upgrades one to meet current standards that exceed its previous
performance, the investment in that facility would be considered adequate for a period of 16 years before
a city could be required to upgrade the facility again to meet updated state wastewater facility standards.
Competitive Bidding Threshold – Effective for contracts awarded on or after August 1, 2018, the dollar
threshold at which Minnesota Statutes require the use of a sealed bidding process was raised from
$100,000 to $175,000. This extends the dollar range for which contracts may be awarded using direct
negotiation (obtaining two quotations) to contracts between $25,000 and $175,000. By reference, this
change also increased the dollar threshold at which public contractors’ performance and payment bonds
are required for contracts over $175,000.
Water Tank Maintenance Contracts – Effective for contracts awarded on or after September 1, 2018,
multi-year service contracts for water tank maintenance work that were previously allowed to be awarded
through direct negotiation, are required to be awarded through a sealed bid or best value bid procurement
process when the total cost of the contract for the services and supplies is expected to exceed the
competitive bid threshold of $175,000.
Minnesota Licensing and Registration System (MNLARS) – The Legislature established the
MNLARS steering committee, and a one-time appropriation of $9.65 million was approved for fiscal
year 2018 to fund costs related to the continued development, improvement, operation, and deployment of
the MNLARS. However, a bill to provide an additional proposed appropriation o f $9 million to partially
compensate deputy registrars throughout the state for financial losses related to the flawed rollout of the
MNLARS was vetoed by the Governor.
Pension Benefit Reforms – The 2018 pension bill included a number of reforms to the various defined
benefit pension plans across the state, including the plans administered by the Public Employees
Retirement Association (PERA).
• Reforms impacting the PERA General Employees Retirement Fund (GERF) plan included:
o Post-retirement cost of living adjustments (COLAs) will be equal to 50.0 percent of the
annual increase for Social Security, but not less than 0.5 percent , and not more than
1.5 percent.
o For early retirees that retire on or after January 1, 2024, COLAs are deferred until the retire e
reaches the normal retirement age.
o Phases in actuarial reduction factors over five year on early retirement benefits payable
beginning July 1, 2019.
o The rate of interest paid on refunds of employee contributions to former public employees
was reduced from an annual rate of 4.0 percent to 3.0 percent.
-19-
• Reforms impacting the PERA Public Employees Police and Fire Fund (PEPFF) plan included:
o Post-retirement COLAs were permanently set at 1.00 percent.
o Employer contribution rates increase from the current 16.20 percent of covered salaries to
16.95 percent beginning January 1, 2019, and 17.70 percent beginning January 1, 2020.
o Employee contribution rates increase from the current 10.80 percent of covered salaries to
11.30 percent beginning January 1, 2019, and 11.80 percent beginning January 1, 2020.
o To reduce the need for additional contribution increases, the state will contribute an
additional $4.5 million to the plan annually for fiscal years 2019 and 2020, increasing to
$9.0 million annually thereafter through fiscal 2048, or until the plan is fully funded.
o The rate of interest paid on refunds of employee contributions to former public employees
was reduced from an annual rate of 4.00 percent to 3.00 percent.
• Reforms impacting the volunteer firefighter relief associations plan included:
o Added a requirement that the fire chief annually certify each firefighter’s service credit to the
relief association and the related municipality effective January 1, 2019.
-20-
ACCOUNTING AND AUDITING UPDATES
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 non governmental
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.
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 reasonably
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.
-21-
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 when 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. 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 the 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.
-22-
GASB STATEMENT NO. 88, CERTAIN DISCLOSURES RELATED TO DEBT, INCLUDING DIRECT
BORROWINGS AND DIRECT PLACEMENTS
The primary objective of this statement is to improve the information that is disclosed in notes to
government financial statements related to debt, including direct borrowings and direct placements. It also
clarifies which liabilities governments should include when disclosing information related to debt.
The requirements of this statement will improve financial reporting by providing users of financial
statements with essential information that currently is not consistently provided. In addition, information
about resources to liquidate debt and the risks associated with changes in terms associated with debt will
be disclosed. As a result, users will have better information to understan d the effects of debt on a
government’s future resource flows.
This statement defines debt for purposes of disclosure in notes to financial statements as a liability that
arises from a contractual obligation to pay cash (or other assets that may be used i n lieu of cash) in one or
more payments to settle an amount that is fixed at the date the contractual obligation is established. The
statement requires that additional essential information related to debt be disclosed in notes to financial
statements, including unused lines of credit; assets pledged as collateral for the debt; and terms specified
in debt agreements related to significant events of default with finance -related consequences, significant
termination events with finance-related consequences, and significant subjective acceleration clauses. It
also requires that existing and additional information be provided for direct borrowings and direct
placements of debt separately from other debt. The requirements of this statement are effective for
reporting periods beginning after June 15, 2018.
GASB STATEMENT NO. 89, ACCOUNTING FOR INTEREST COST INCURRED BEFORE THE END OF A
CONSTRUCTION PERIOD
The objectives of this statement are to enhance the relevance and comparability of information about
capital assets and the cost of borrowing for a reporting period and to simplify accounting for interest cost
incurred before the end of a construction period.
This statement requires that interest cost incurred before the end of a construction period be r ecognized as
an expense in the period in which the cost is incurred for financial statements prepared using the
economic resources measurement focus. As a result, interest cost incurred before the end of a construction
period will no longer be included in the historical cost of a capital asset reported in a business-type
activity or enterprise fund. This statement also reiterates that in financial statements prepared using the
current financial resources measurement focus, interest cost incurred before the end of a construction
period should continue to be recognized as an expenditure on a basis consistent with governmental fund
accounting principles.
The requirements of this statement are effective for reporting periods beginning after December 15, 2019.
Earlier application is encouraged. The requirements of this statement should be applied prospectively.
-23-
GASB STATEMENT NO. 90, MAJORITY EQUITY INTEREST—AN AMENDMENT OF GASB STATEMENTS
NO. 14 AND NO. 61
The primary objectives of this statement are to improve the consistency and comparability of reporting a
government’s majority equity interest in a legally separate organization and to improve the relevance of
financial statement information for certain component units.
It specifies that a majority equity interest in a legally separate organization should be reported as an
investment if a government’s holding of the equity interest meets the definition of an investment. It
further specifies that such investments should generally be measured using the equity method, unless it is
held by a special-purpose government engaged only in fiduciary activities, a fiduciary fund, or an
endowment (including permanent and term endowments) or permanent fund, in which case the majority
equity interest should be measured at fair value.
All other holdings of a majority equity interest in a legally separate organization that do not meet the
definition of an investment result in the government being financially accountable for the legally separate
organization and, therefore, the government should report that organization as a component unit, and
should report an asset related to the majority equity interest using the equity method.
This statement also requires that a component unit in which a government has a 100 percent equity
interest account for its assets, deferred outflows of resources, liabilities, and deferred inflows of resources
at acquisition value at the date the government acquired a 100 percent equity interest in the component
unit. Transactions presented in flows statements of the component unit in that circumstance should
include only transactions that occurred subsequent to the acquisition.
The requirements of this statement are effective for reporting periods beginning after December 15, 2018.
Earlier application is encouraged. The requirements should be applied retroactively, except for the
provisions related to reporting a majority equity interest in a component unit and reporting a component
unit if the government acquires a 100 percent equity interest, which should be applied prospectively.
UNIFORM GUIDANCE, MICRO-PURCHASE THRESHOLD
Under the Uniform Guidance for federal programs, a micro-purchase is one for goods or services that, due
to its relatively low value, does not require the government to abide by many of its ordinary competitive
procedures, including small business set-asides. Because the contract is theoretically such a low amount,
the contracting officer can pick virtually whatever company and product he or she wants to satisfy the
procurement, so long as the price is reasonable. The standard micro-purchase threshold has been amended
to increase the threshold to $10,000, effective June 20, 2018. Entities are not required to increase the
micro-purchase and simplified acquisition thresholds but, if they wish to do so, they must update their
procurement policies and procedures to reflect the change in thresholds. They cannot retroactively make
these changes effective prior to June 20, 2018.