HomeMy WebLinkAbout06(A) - Audit Presentation by MMKRCITY OF PRIOR LAKE
SCOTT COUNTY, MINNESOTA
Financial Statements
and Supplemental Information
Year Ended
December 31, 2020
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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
Statement of Net Position 30–31
Statement of Revenues, Expenses, and Changes in Net Position 32–33
Statement of Cash Flows 34–37
Notes to Basic Financial Statements 38–76
REQUIRED SUPPLEMENTARY INFORMATION
PERA – General Employees Retirement Fund
Schedule of City’s and Nonemployer Proportionate Share
of Net Pension Liability 77
Schedule of City Contributions 77
PERA – Public Employees Police and Fire Fund
Schedule of City’s and Nonemployer Proportionate Share of Net Pension Liability 78
Schedule of City Contributions 78
Prior Lake Fire Relief Association
Schedule of Changes in the Relief Association’s Net Pension Asset
and Related Ratios 79
Schedule of City Contributions 80
Other Post-Employment Benefits Plan
Schedule of Changes in the City’s Total OPEB Liability
and Related Ratios 81
Notes to Required Supplementary Information 82–88
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 89
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 90
Nonmajor Special Revenue Funds
Combining Balance Sheet 91–92
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 93–94
Nonmajor Capital Projects Funds
Combining Balance Sheet 95–98
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 99–102
General Fund
Schedule of Revenues, Expenditures, and Changes in Fund Balances –
Budget and Actual 103–108
Debt Service Fund
Balance Sheet by Account 109–113
Schedule of Revenues, Expenditures, and Changes in Fund Balances by Account 114–118
Internal Service Funds
Combining Statement of Net Position 119
Combining Statement of Revenues, Expenses, and Changes in Net Position 120
Combining Statement of Cash Flows 121
OTHER INFORMATION SECTION
Summary Financial Report
Revenues and Expenditures for General Operations 122
Combined Schedule of Indebtedness 123–124
Bond Schedules 125–130
Debt Service Requirements 131–132
Tax Levies and Collections, and Special Assessment Levies and Collections 133
Schedules of Market Value, Tax Levy, Tax Capacity Values, Tax Capacity Rate,
and Market Value Rate 134
Key Financial Indicators 135
SINGLE AUDIT AND OTHER REQUIRED REPORTS
Schedule of Expenditures of Federal Awards 136
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 137–138
Independent Auditor’s Report on Compliance for
Each Major Federal Program and Report on Internal Control over Compliance
Required by the Uniform Guidance 139–140
Independent Auditor’s Report on Minnesota Legal Compliance 141
Schedule of Findings and Questioned Costs 142–143
CITY OF PRIOR LAKE
SCOTT COUNTY, MINNESOTA
Table of Contents (continued)
INTRODUCTORY SECTION
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Term Expires
Mayor 12/31/2024
Councilmember 12/31/2024
Councilmember 12/31/2024
Councilmember 12/31/2022
Kirt Briggs
Zach Braid
Kevin Burkart
Kimberly Churchill
Annette Thompson Councilmember 12/31/2022
Jason Wedel City Manager
Cathy Erickson Finance Director
Kelly Horn Assistant Finance Director
Jason Etter Senior Accountant
ELECTED
APPOINTED
CITY OF PRIOR LAKE
SCOTT COUNTY, MINNESOTA
Elected and Appointed Officials
As of December 31, 2020
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FINANCIAL SECTION
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INDEPENDENT AUDITOR’S REPORT
To the City Council and Management
City of Prior Lake, Minnesota
REPORT ON THE FINANCIAL STATEMENTS
We have audited the accompanying financial statements of the governmental activities, the business-type
activities, each major fund, and the aggregate remaining fund information of the City of Prior Lake,
Minnesota (the City) as of and for the year ended December 31, 2020, 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
Kalen T. Karnowski, 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
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OPINIONS
In our opinion, the financial statements referred to on the previous page present fairly, in all material
respects, the respective financial position of the governmental activities, the business-type activities, each
major fund, and the aggregate remaining fund information of the City as of December 31, 20 20, and the
respective changes in financial position and, where applicable, cash flows thereof, and the budgetary
comparison for the General Fund for the year then ended, in accordance with accounting principles
generally accepted in the United States of America.
OTHER MATTERS
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s
discussion and analysis and the required supplementary information (RSI), as listed in the table of contents,
be presented to supplement the basic financial statements. Such information, although not a part of the basic
financial statements, is required by the Governmental Accounting Standards Board, who considers it to be
an essential part of financial reporting for placing the basic financial statements in an appropriate
operational, economic, or historical context. We have applied certain limited procedures to the RSI in
accordance with auditing standards generally accepted in the United States of America, which consisted of
inquiries of management about the methods of preparing the information and comparing the information
for consistency with management’s responses to our inquiries, the basic financial statements, and other
knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or
provide any assurance on the information because the limited procedures do not provide us with sufficient
evidence to express an opinion or provide any assurance.
Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively
comprise the City’s basic financial statements. The introductory section, 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 Schedule of Expenditures of Federal
Awards is presented for purposes of additional analysis as required by Title 2 U.S. Code of Federal
Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for
Federal Awards, and is also not a required part of the basic financial statements.
The supplemental information and the Schedule of Expenditures of Federal Awards are the responsibility
of management and were derived from and relate directly to the underlying accounting and other records
used to prepare the basic financial statements. Such information has been subjected to the auditing
procedures applied in the audit of the basic financial statements and certain additional procedures, including
comparing and reconciling such information directly to the underlying accounting and other records used
to prepare the basic financial statements or to the basic financial statements themselves, and other additional
procedures in accordance with auditing standards generally accepted in the United States of America. In
our opinion, the combining and individual fund financial statements and the Schedule of Expenditures of
Federal Awards are fairly stated, in all material respects, in relation to the basic financial statements as a
whole.
The introductory and other information sections have not been subjected to the auditing procedures applied
in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any
assurance on them.
(continued)
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Prior Year Comparative Information
We have previously audited the City’s 2019 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 18, 2020. In our
opinion, the partial comparative information presented herein as of and for the year ended December 31,
2019 is consistent, in all material respects, with the audited fi nancial 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 17, 2021 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 17, 2021
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CITY OF PRIOR LAKE
Management’s Discussion and Analysis
Fiscal Year Ended December 31, 2020
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, 2020.
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 $219,772,469 (net position). Of
this amount, $21,728,736 (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 $12,550,177.
• As of the close of the current fiscal year, the City’s governmental funds reported combined
ending fund balances of $26,591,308, an increase of $3,629,050 in comparison with the prior
year.
• At the end of the current fiscal year, the total fund balance for the General Fund was $10,114,088,
or 67.1 percent, of budgeted 2021 expenditures and transfers out of $15,077,717. The total fund
balance reflects an increase of $2,210,913 from the prior year and an increase of $2,570,625 from
the amended budget. The original budget reflected use of fund balance for a transfer of funds to
the City’s Economic Development Authority (EDA) and a website upgrade, while an amendment
for a health insurance adjustment and project carryover from 2019 resulted in a budgeted use of
fund balance totaling $359,712. The increase in fund balance is primarily due to unbudgeted
intergovernmental revenues of $1,951,401 arising from federal coronavirus relief funds and total
expenditures and transfers out less than budget by $531,515, due to cost-saving measures put in
place to minimize the financial impact of the pandemic. The expenditure reduction measures were
primarily in general government, public works, and culture and recreation functions , as service
levels, programs, and employee personnel costs and training were reduced during the pandemic.
• Of the total fund balance of $10,114,088, $70,066 is nonspendable for prepaid items and
$260,704 is assigned for the 2021 budget, primarily for projects carried over from 2020 and
anticipated police aid revenue shortfall. The unassigned amount of $9,783,378 is 64.9 percent of
budgeted 2021 expenditures and transfers out of $15,077,717.
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.
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The Statement of Net Position presents information on all of the City’s assets, deferred outflows of
resources, liabilities, and deferred inflows of resources, with the difference between them reported as net
position. Over time, increases or decreases in net position may serve as a useful indicator of whether the
financial position of the City is improving or deteriorating. The Statement of Activities presents
information showing how the City’s net position changed during the most recent fiscal year. All changes
in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of
the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some
items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned, but
unused, vacation leave).
Both of the government-wide financial statements distinguish functions of the City that are principally
supported by taxes and intergovernmental revenues (governmental activities) from other functions that are
intended to recover all or a significant portion of their costs through user fees and charges (business-type
activities). The governmental activities of the City include general government, public safety, public
works, culture and recreation, and economic development. The business-type activities of the City include
water, sewer, and water quality operations.
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 Rev enues, 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.
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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.
Proprietary funds provide the same type of information as shown in the government-wide financial
statements, only in more detail. The proprietary fund financial statements provide separate information
for the enterprise funds, all of which are considered to be major funds of the City.
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. All internal service funds are combined into a single, aggregated presentation in
the proprietary fund financial statements, labeled Governmental Activities – Internal Service Funds.
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. Individual fund data for the internal service funds is provided in the form of
combining statements elsewhere in this report.
The basic proprietary fund financial statements can be found in the financial section of this report
immediately following the governmental fund statements.
Notes to Basic Financial Statements – The notes to basic financial statements provide additional
information that is essential to a full understanding of the data provided in the government-wide and fund
financial statements. The notes to basic financial statements can be found following the proprietary fund
statements within the financial section of this report.
Other Information – In addition to the basic financial statements and accompanying notes, the financial
section also presents required supplementary information, and t he combining and individual fund
statements and schedules (presented as supplemental information) referred to earlier in connection with
nonmajor governmental funds and internal service funds, which are presented immediately following the
basic financial statements.
Further, 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 $219,772,469 at the close of the most recent fiscal year.
The City’s investment in capital assets (e.g., land, buildings, and machinery and equipment), less any
related debt used to acquire those assets that is still outstanding, totaled 85.2 percent of total net position.
The City uses these capital assets to provide services to citizens; consequently, these assets are not
available for future spending. Although the City’s investment in its capital assets is reported net of related
debt, it should be noted that the resources needed to repay this debt must be provided from other sources,
since the capital assets themselves cannot be used to liquidate these liabilities.
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The following table provides the City’s Summary of Net Position:
2020 2019 2020 2019 2020 2019
Assets
Current and other assets 34,530,060$ 35,015,361$ 11,523,717$ 10,461,812$ 46,053,777$ 45,477,173$
Capital assets 153,595,893 152,157,816 71,516,241 71,130,568 225,112,134 223,288,384
Total assets 188,125,953$ 187,173,177$ 83,039,958$ 81,592,380$ 271,165,911$ 268,765,557$
Deferred outflows of resources
Pension and OPEB plan deferments 2,526,494$ 3,544,708$ 157,600$ 111,916$ 2,684,094$ 3,656,624$
Liabilities
Long-term liabilities 43,777,198$ 46,988,267$ 4,013,500$ 4,083,650$ 47,790,698$ 51,071,917$
Other liabilities 3,044,317 7,256,426 256,354 1,846,603 3,300,671 9,103,029
Total liabilities 46,821,515$ 54,244,693$ 4,269,854$ 5,930,253$ 51,091,369$ 60,174,946$
Deferred inflows of resources
Pension and OPEB plan deferments 2,900,602$ 4,787,351$ 85,565$ 237,592$ 2,986,167$ 5,024,943$
Net position
Net investment in capital assets 118,120,401$ 112,279,178$ 69,058,053$ 68,398,856$ 187,178,454$ 180,678,034$
Restricted 10,865,279 7,988,232 – – 10,865,279 7,988,232
Unrestricted 11,944,650 11,418,431 9,784,086 7,137,595 21,728,736 18,556,026
Total net position 140,930,330$ 131,685,841$ 78,842,139$ 75,536,451$ 219,772,469$ 207,222,292$
Governmental Activities Business-Type Activities Total
Summary of Net Position
as of December 31, 2020 and 2019
Table 1
An additional portion of the City’s net position ($10,865,279, or 4.9 percent) represents resources that are
subject to external restrictions on how they may be used. The remaining balance of unrestricted net
position, $21,728,736, may be used to meet the government’s ongoing obligations to citizens and
creditors.
The significant reduction in deferred outflows of resources, long-term liabilities, and deferred inflows of
resources relates to improvements in portfolio earnings in the Public Employees Retirement Association
(PERA) pension plans in 2020. The Governmental Accounting Standards Board Statement No. 68
requires the City to recognize its proportionate share of pension benefit obligations.
The decline in other liabilities relates to the City having significant outstanding construction contracts
payable in the prior year.
At the end of the current fiscal year, the City is able to report positive balances in all three categories of
net position, both for the government as a whole, as well as for its separate governmental and
business-type activities. The same situation held true for the prior fiscal year.
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2020 2019 2020 2019 2020 2019
Revenues
Program revenues
Charges for services 2,154,819$ 2,552,868$ 10,358,971$ 8,474,649$ 12,513,790$ 11,027,517$
Operating grants and
contributions 1,790,808 1,628,053 35,983 2,924 1,826,791 1,630,977
Capital grants and
contributions 6,237,207 8,605,951 1,812,139 616,975 8,049,346 9,222,926
General revenues
Property taxes and tax
increments 14,395,457 13,537,055 – – 14,395,457 13,537,055
Franchise taxes 670,917 639,783 – – 670,917 639,783
Grants and contributions
not restricted to specific
programs 1,951,940 12,867 – – 1,951,940 12,867
Investment income 790,517 1,094,987 298,677 290,301 1,089,194 1,385,288
Miscellaneous 149,353 113,489 35,230 31,435 184,583 144,924
Gain on sale of assets 38,913 – – – 38,913 –
Total revenues 28,179,931 28,185,053 12,541,000 9,416,284 40,720,931 37,601,337
Expenses
General government 3,831,010 3,582,241 – – 3,831,010 3,582,241
Public safety 7,025,367 6,490,001 – – 7,025,367 6,490,001
Public works 6,024,512 5,700,624 – – 6,024,512 5,700,624
Culture and recreation 2,127,013 2,462,914 – – 2,127,013 2,462,914
Economic development 964,213 936,034 – – 964,213 936,034
Interest on long-term debt 896,377 1,038,292 – – 896,377 1,038,292
Water – – 3,281,173 3,026,239 3,281,173 3,026,239
Sewer – – 3,397,772 3,321,093 3,397,772 3,321,093
Water quality – – 623,317 611,654 623,317 611,654
Total expenses 20,868,492 20,210,106 7,302,262 6,958,986 28,170,754 27,169,092
Increase in net position
before transfers 7,311,439 7,974,947 5,238,738 2,457,298 12,550,177 10,432,245
Transfers 1,933,050 (5,380,609) (1,933,050) 5,380,609 – –
Changes in net position 9,244,489 2,594,338 3,305,688 7,837,907 12,550,177 10,432,245
Net position
Beginning of year 131,685,841 129,091,503 75,536,451 67,698,544 207,222,292 196,790,047
End of year 140,930,330$ 131,685,841$ 78,842,139$ 75,536,451$ 219,772,469$ 207,222,292$
Governmental Activities Business-Type Activities Total
Table 2
Changes in Net Position
for the Years Ended December 31, 2020 and 2019
The significant increase in grants and contributions not restricted to specific programs relates to the
receipt of federal Coronavirus Relief Fund aid in the current year.
Governmental Activities – Governmental activities increased the City’s net position by $9,244,489. Key
elements of this increase are seen in the table above. The increase is primarily due to net transfers in from
the enterprise funds for operations and debt service and operating results of the governmental funds,
including unbudgeted federal revenues and an increase in property taxes.
The business-type activities increased the City’s net position in total by $3,305,688, mostly due to
increased charges for services from rate and usage increases and capital contributions from developers.
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Below are specific graphs that provide comparisons of the governmental activities program revenues and
expenses.
Program revenues as compared to program expenses are consistent with the prior year for all categories
except public works. Public works revenue will vary based on development and transportation projects. In
2020, the City received about $3.5 million in easement donations from developers and about $1.0 million
in development program trunk/connection fees. Revenue also included about $1.0 million in street project
special assessments.
$–
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
$8,000,000
General
Government
Public Safety Public Works Culture and
Recreation
Economic
Development
Interest on
Long-Term
Debt
Expenses Program Revenues
Governmental Activities – Revenue by Program
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Business-Type Activities – Below are graphs showing the business-type activities program revenues and
expense comparisons.
Revenues are collected to fund operations, capital improvements, debt service, and the utility work
completed as part of the street projects identified in the Five-Year Capital Improvement Program.
$–
$250,000
$500,000
$750,000
$1,000,000
$1,250,000
$1,500,000
$1,750,000
$2,000,000
$2,250,000
$2,500,000
$2,750,000
$3,000,000
$3,250,000
$3,500,000
$3,750,000
$4,000,000
$4,250,000
$4,500,000
$4,750,000
$5,000,000
$5,250,000
$5,500,000
$5,750,000
$6,000,000
Water Sewer Water Quality
Expenses Program Revenues
Business-Type Activities – Revenue by Source
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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 $26,591,308, an increase of $3,629,050 in comparison with the prior year.
The General Fund is the chief operating fund of the City. At the end of the recent fiscal year, total fund
balance reached $10,114,088. 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 67.1 percent of total
2021 General Fund budgeted expenditures and transfers out $15,077,717. Of the total fund balance of
$10,114,088, $70,006 is nonspendable for prepaids and $260,704 is assigned for subsequent year’s
budgeted expenditures. This leaves an unassigned fund balance of the General Fund of $9,783,378, or
64.9 percent, of total 2021 General Fund budgeted expenditures, and transfers out of $15,077,717.
The total fund balance reflects an increase of $2,210,913 from the prior year and an increase of
$2,570,625 from the amended budget. The amended budget reflected the use of fund balance of $359,712
for a transfer of funds to the City’s EDA, an upgrade of the City’s website, and project carryover from
2019.
The Debt Service Fund balance decreased by $169,276. 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 $232,539, due to timing differences between project
financing inflows and capital outlays.
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 original budget reflected use of fund balance of $201,250 for a transfer of funds to the City’s EDA
and a website upgrade.
The City amends its budget at various points during the year. The General Fund budget was amended in
2020 to increase the spending of the fund balance by $158,462 for a health insurance reserve adjustment,
and carryforward of 2019 projects/spending for capital outlay, parks, and police.
Actual revenues were $2,036,507 over budget in 2020, due primarily to unbudgeted federal coronavirus
relief funds.
Actual expenditures were $631,515 less than budget in 2020. Many factors impacted expenditures. The
largest variance from budget was in parks being under budget by $443,392, and recreation being under
budget by $135,285. This is primarily due to the City deciding to reduce service levels and not to hire
seasonal parks staff during the summer of 2020, as a financial precaution related to pandemic
uncertainties. Additionally, street maintenance and supplies expenditures were less than planned,
primarily due to a reduction in activities related to the pandemic.
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, 2020 amounts to $225,112,134 (net of accumulated depreciation). This investment in
capital assets includes items such as land, buildings and improvements, machinery and equipment, park
facilities, roads, highways, and bridges.
2020 2019 2020 2019 2020 2019
Land 33,088,883$ 33,269,751$ –$ –$ 33,088,883$ 33,269,751$
Utility access agreement – – 2,499,970 2,499,970 2,499,970 2,499,970
Easements 48,680,620 48,173,410 218,912 218,912 48,899,532 48,392,322
Construction in progress 4,738,038 3,820,430 81,203 3,070 4,819,241 3,823,500
Land improvements 996,343 1,067,742 39,581 43,968 1,035,924 1,111,710
Machinery and equipment 2,832,036 2,797,763 523,389 565,623 3,355,425 3,363,386
Vehicles 2,557,655 2,448,016 343,554 360,330 2,901,209 2,808,346
Infrastructure 60,702,318 60,580,704 67,809,632 67,438,695 128,511,950 128,019,399
Total 153,595,893$ 152,157,816$ 71,516,241$ 71,130,568$ 225,112,134$ 223,288,384$
Table 3
Capital Assets
(Net of Depreciation)
TotalBusiness-Type ActivitiesGovernmental 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,
including premiums of $36,809,881. This amount comprises debt backed by the full faith and credit of the
City. The City’s total long-term liabilities decreased during the current fiscal year, due to scheduled
payments on debt obligations and energy loans payable.
2020 2019 2020 2019 2020 2019
G.O. bonds 11,030,000$ 12,185,000$ –$ –$ 11,030,000$ 12,185,000$
G.O. special assessment bonds 16,115,000 18,465,000 – – 16,115,000 18,465,000
G.O. tax increment bonds 110,000 135,000 – – 110,000 135,000
G.O. revenue bonds 5,845,000 6,245,000 2,190,000 2,430,000 8,035,000 8,675,000
Premium (discount) on bonds payable 1,251,694 1,430,714 268,187 301,712 1,519,881 1,732,426
Energy loan payable 1,283,798 1,552,924 – – 1,283,798 1,552,924
Compensated absences payable 948,807 841,031 215,032 200,014 1,163,839 1,041,045
Net OPEB obligation 709,417 654,579 155,471 141,945 864,888 796,524
Net pension liability – GERF and PEPFF 6,483,482 5,479,019 1,184,810 1,009,979 7,668,292 6,488,998
Total 43,777,198$ 46,988,267$ 4,013,500$ 4,083,650$ 47,790,698$ 51,071,917$
Table 4
Long-Term Liabilities
TotalGovernmental Activities Business-Type 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 $3,713,161,300, which calculates to a debt limit of
$111,394,839. 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 $11,030,000 of general obligation debt outstanding, leaving a debt limit
of $100,364,839.
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 $15,077,717 for expenditures and other financing
uses for fiscal 2021, an increase of $420,969, or 2.9 percent, from the 2020 original budget.
• The City is continuing to monitor and assess the revenue impacts related to the ongoing
COVID-19 pandemic. To manage the impact of any projected revenue shortfall, planned
expenditure reductions would be made. Similar to 2020, these cost-saving measures could include
reductions in seasonal staffing, overtime, training, and reduced services for recreation, pavement
management, city parks mowing, and streetscaping. The City’s Comprehensive Financial
Management Policy 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 within a range of 40 to 50 percent of projec ted expenditures
for the subsequent year. In no case will the reserve be allowed to fall below 40 percent. The fund
balance policy is in place to provide adequate cash flow, offset revenue shortfalls, and insurance
for unforeseen catastrophic events, such as the COVID-19 pandemic.
-15-
• Growth is robust in the City, with 162 single-family residential permits issued in 2020 and a total
of 563 single-family residential permits issued between 2018 and 2020. From 2005 to 2019, the
City has consistently ranked in the top 25 in the Twin Cities metro area in total number of
residential units and ranked in the top 15 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. The City anticipates issuing permits for one additional 98-unit multi-family residential
building in 2021.
Total building permit valuation (new and addition/alteration) has remained consistent over the
past five years (2016–2020), with an average of $78.6 million each year.
Commercial building permit valuation (new and addition/alteration) has also remained consistent
with an average annual valuation of $14.2 million over the past four years (2017–2020).
• Continued staged development of land within the City and areas to be annexed under the orderly
annexation agreement with Spring Lake Township will provide most of the City’s anticipated
market value growth over the course of the next 10 to 15 years.
To meet the City’s water needs as it continues to grow, the City entered into a Water Purchase
and Facility Expansion Agreement with the Shakopee Mdewakanton Sioux Community. 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.
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 Standard & Poors (S&P) in 2015. The AA+ bond rating was
reaffirmed with the 2016, 2017, 2018, and 2019 bond issuance:
Moody's S&P
2015 Aa2 AA+
2016 AA+
2017 AA+
2018 AA+
2019 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 maint ain
an unrestricted General Fund balance (which includes committed, assigned, and unassigned
classifications) within a range from 40 to 50 percent of projected expenditures for the subsequent year.
$12,945,738 $13,070,878 $12,767,768
$13,554,319
$14,656,748
$15,077,717
47%
51%52%
53%
54%
67%
$11,500,000
$12,000,000
$12,500,000
$13,000,000
$13,500,000
$14,000,000
$14,500,000
$15,000,000
$15,500,000
2015 2016 2017 2018 2019 2020
Subsequent Year’s Budget Actual Fund Balance
The increase in the 2020 reserve percentage is primarily due to unbudgeted intergovernmental revenues of
$1,951,401 arising from federal coronavirus relief funds.
-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 dat a 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 EDA. 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.
Year
Seven-County
Metro Area
City of
Prior Lake
2016 42.95 31.95
2017 N/A 32.69
2018 42.19 33.04
2019 41.43 33.02
2020 40.87 32.96
Source: League of Minnesota Cities
Average City Tax Capacity Rate
-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 and growth over time. This chart reflects community growth and the cost of inflation using the
Minneapolis-St. Paul Consumer Price Index (CPI). The 2020 property tax levy included additional
funding for EDA for economic initiatives, including downtown redevelopment and areas where costs are
coming in higher than the inflation benchmark.
$1,000
$1,050
$1,100
$1,150
$1,200
$1,250
$1,300
$1,350
$1,400
2012 2013 2014 2015 2016 2017 2018 2019 2020
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
$1,750
2012 2013 2014 2015 2016 2017 2018 2019 2020
General Fund Total Operating
Expenditures Per Household
Expected Operating Expenditures/HH Operating Expenditures/HH
REQUESTS FOR INFORMATION
These financial statements are designed to provide a general overview of the City’s finances for all those
with an interest in the City’s finances. Questions concerning any of the information provided in this report
or requests for additional financial information should be addressed to the office of the City’s Finance
Director at the City of Prior Lake, 4646 Dakota Street Southeast, Prior Lake, Minnesota 55372-1714.
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BASIC FINANCIAL STATEMENTS
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Governmental Business-Type
Activities Activities Total
Assets
Cash and investments 29,074,935$ 10,179,826$ 39,254,761$
Receivables
Delinquent taxes 143,143 – 143,143
Accounts 382,277 1,250,306 1,632,583
Special assessments 3,043,786 80,274 3,124,060
Due from other governmental agencies 130,806 13,311 144,117
Restricted assets – temporarily restricted
Cash and investments held in escrow 39,777 – 39,777
Prepaid items 70,006 – 70,006
Assets held for resale 417,268 – 417,268
Net pension asset – fire relief 1,228,062 – 1,228,062
Capital assets not being depreciated 86,507,541 2,800,085 89,307,626
Capital assets net of accumulated depreciation 67,088,352 68,716,156 135,804,508
Total assets 188,125,953 83,039,958 271,165,911
Deferred outflows of resources
Pension plan deferments – GERF and PEPFF 2,175,791 151,125 2,326,916
Pension plan deferments – fire relief 321,157 – 321,157
OPEB plan deferments 29,546 6,475 36,021
Total deferred outflows of resources 2,526,494 157,600 2,684,094
Total assets and deferred outflows of resources 190,652,447$ 83,197,558$ 273,850,005$
Liabilities
Accounts and contracts payable 838,625$ 154,300$ 992,925$
Accrued salaries and employee benefits payable 300,812 56,280 357,092
Due to other governmental agencies 120,833 40,136 160,969
Deposits payable 1,101,248 1,500 1,102,748
Accrued interest payable 40,762 4,138 44,900
Unearned revenue 642,037 – 642,037
Long-term liabilities
Total OPEB liability – due in more than one year 709,417 155,471 864,888
Net pension liability – GERF and PEPFF – due in more than one year 6,483,482 1,184,810 7,668,292
Due within one year 4,635,850 344,059 4,979,909
Due in more than one year 31,948,449 2,329,160 34,277,609
Total liabilities 46,821,515 4,269,854 51,091,369
Deferred inflows of resources
Pension plan deferments – GERF and PEPFF 2,293,766 63,099 2,356,865
Pension plan deferments – fire relief 504,326 – 504,326
OPEB plan deferments 102,510 22,466 124,976
Total deferred inflows of resources 2,900,602 85,565 2,986,167
Net position
Net investment in capital assets 118,120,401 69,058,053 187,178,454
Restricted for debt service 5,333,333 – 5,333,333
Restricted for net pension asset 1,044,893 – 1,044,893
Restricted for capital improvements 2,268,074 – 2,268,074
Restricted for other purposes 2,218,979 – 2,218,979
Unrestricted 11,944,650 9,784,086 21,728,736
Total net position 140,930,330 78,842,139 219,772,469
Total liabilities, deferred inflows of resources, and net position 190,652,447$ 83,197,558$ 273,850,005$
CITY OF PRIOR LAKE
Statement of Net Position
as of December 31, 2020
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 3,831,010$ 441,040$ 36,779$ 16,000$
Public safety 7,025,367 1,381,810 1,744,065 28,117
Public works 6,024,512 68,701 824 6,015,365
Culture and recreation 2,127,013 248,451 9,021 177,725
Economic development 964,213 14,817 119 –
Interest on long-term debt 896,377 – – –
Total governmental activities 20,868,492 2,154,819 1,790,808 6,237,207
Business-type activities
Water 3,281,173 4,784,064 18,935 889,695
Sewer 3,397,772 4,399,718 12,645 889,806
Water quality 623,317 1,175,189 4,403 32,638
Total business-type activities 7,302,262 10,358,971 35,983 1,812,139
Total 28,170,754$ 12,513,790$ 1,826,791$ 8,049,346$
General revenues
Taxes
Property taxes, levied for general purposes
Property taxes, levied for debt service
Tax increments
Franchise taxes
Grants and contributions not restricted
to specific programs
Investment income
Miscellaneous
Gain on sale of assets
Transfers
Total general revenues and transfers
Change in net position
Net position
Beginning of year
End of year
CITY OF PRIOR LAKE
Statement of Activities
Year Ended December 31, 2020
See notes to basic financial statements -21-
Governmental Business-Type
Activities Activities Total
(3,337,191)$ –$ (3,337,191)$
(3,871,375) – (3,871,375)
60,378 – 60,378
(1,691,816) – (1,691,816)
(949,277) – (949,277)
(896,377) – (896,377)
(10,685,658) – (10,685,658)
– 2,411,521 2,411,521
– 1,904,397 1,904,397
– 588,913 588,913
– 4,904,831 4,904,831
(10,685,658) 4,904,831 (5,780,827)
10,279,490 – 10,279,490
3,316,380 – 3,316,380
799,587 – 799,587
670,917 – 670,917
1,951,940 – 1,951,940
790,517 298,677 1,089,194
149,353 35,230 184,583
38,913 – 38,913
1,933,050 (1,933,050) –
19,930,147 (1,599,143) 18,331,004
9,244,489 3,305,688 12,550,177
131,685,841 75,536,451 207,222,292
140,930,330$ 78,842,139$ 219,772,469$
Changes in Net Position
Net (Expense) Revenues and
-22-
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FUND FINANCIAL STATEMENTS
Debt
General Service Construction
Assets
Cash and investments 11,068,473$ 2,813,475$ 1,243,962$
Cash and investments held in escrow – – –
Prepaid items 70,006 – –
Receivables
Delinquent taxes 143,053 – –
Accounts 222,709 9,442 7,193
Special assessments
Delinquent 1,032 20,829 6,304
Deferred 22,523 2,092,724 56,490
Other (Green Acres)– 451,350 –
Due from other governmental agencies 111,466 14,044 –
Assets held for resale – – –
Total assets 11,639,262$ 5,401,864$ 1,313,949$
Liabilities
Accounts and contracts payable 148,134$ 2,769$ 172,575$
Accrued salaries and employee benefits payable 296,621 – –
Due to other governmental agencies 120,270 – –
Deposits payable 783,822 – –
Unearned revenue 23,515 – 584,772
Total liabilities 1,372,362 2,769 757,347
Deferred inflows of resources
Unavailable revenue from delinquent taxes 143,053 – –
Unavailable revenue from special assessments 9,759 2,564,904 62,794
Total deferred inflows of resources 152,812 2,564,904 62,794
Fund balances
Nonspendable 70,006 – –
Restricted – 2,834,191 –
Assigned 260,704 – 493,808
Unassigned 9,783,378 – –
Total fund balances 10,114,088 2,834,191 493,808
Total liabilities, deferred inflows
of resources, and fund balances 11,639,262$ 5,401,864$ 1,313,949$
CITY OF PRIOR LAKE
Balance Sheet
Governmental Funds
as of December 31, 2020
See notes to basic financial statements -23-
Nonmajor Total
Governmental Governmental
Funds Funds
13,418,059$ 28,543,969$
39,777 39,777
– 70,006
90 143,143
139,899 379,243
1,544 29,709
390,990 2,562,727
– 451,350
5,296 130,806
417,268 417,268
14,412,923$ 32,767,998$
515,147$ 838,625$
4,191 300,812
563 120,833
317,426 1,101,248
33,750 642,037
871,077 3,003,555
90 143,143
392,535 3,029,992
392,625 3,173,135
– 70,006
4,486,963 7,321,154
8,662,258 9,416,770
– 9,783,378
13,149,221 26,591,308
14,412,923$ 32,767,998$
-24-
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26,591,308$
Capital assets are included in net position,but are excluded from fund balances because they do
not represent financial resources.
Cost of capital assets 225,596,425
Less accumulated depreciation (72,000,532)
Net pension assets are included in net position,but are excluded from fund balances because they
do not represent financial resources.1,228,062
Long-term liabilities are included in net position,but are excluded from fund balances until due
and payable.
Bond principal payable (33,100,000)
Energy loan payable (1,283,797)
Total OPEB liability (709,417)
Net pension liability – GERF and PEPFF (6,483,482)
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.(1,251,694)
Accrued interest payable on long-term debt is included in net position,but is excluded from fund
balances until due and payable.(40,762)
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.(414,808)
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 143,143
Special assessments 3,029,992
Deferred outflows of resources – GERF and PEPFF pension plans 2,175,791
Deferred outflows of resources – fire relief pension plan 321,157
Deferred outflows of resources – OPEB 29,546
Deferred inflows of resources – GERF and PEPFF pension plans (2,293,766)
Deferred inflows of resources – fire relief pension plan (504,326)
Deferred inflows of resources – OPEB (102,510)
Total net position – governmental activities 140,930,330$
Amounts reported for governmental activities in the Statement of Net Position are different because:
as of December 31, 2020
CITY OF PRIOR LAKE
Reconciliation of the Balance Sheet to the
Statement of Net Position
Governmental Funds
Total fund balances – governmental funds
See notes to basic financial statements -25-
Debt
General Service Construction
Revenues
Taxes 8,923,782$ 3,316,380$ –$
Franchise taxes 670,917 – –
Special assessments 5,457 616,627 7,824
Licenses and permits 900,601 – –
Intergovernmental 4,092,040 – 747,941
Charges for services 1,081,405 – –
Fines and forfeits 1,652 – –
Investment income 186,820 117,528 73,155
Miscellaneous 159,331 – –
Total revenues 16,022,005 4,050,535 828,920
Expenditures
Current
General government 3,279,680 – –
Public safety 6,693,505 – –
Public works 1,999,412 – –
Culture and recreation 1,628,772 – –
Economic development – – –
Capital outlay 144,308 – 1,028,446
Debt service
Principal – 4,199,126 –
Interest and other – 1,125,331 –
Total expenditures 13,745,677 5,324,457 1,028,446
Excess (deficiency) of revenues
over expenditures 2,276,328 (1,273,922) (199,526)
Other financing sources (uses)
Contributions from governmental activities – – –
Transfers in 470,000 1,260,291 690,000
Transfers out (538,018) (155,645) (257,935)
Sale of capital assets 2,603 – –
Total other financing sources (uses)(65,415) 1,104,646 432,065
Net change in fund balances 2,210,913 (169,276) 232,539
Fund balances
Beginning of year 7,903,175 3,003,467 261,269
End of year 10,114,088$ 2,834,191$ 493,808$
CITY OF PRIOR LAKE
Statement of Revenues, Expenditures, and Changes in Fund Balances
Governmental Funds
Year Ended December 31, 2020
See notes to basic financial statements -26-
Nonmajor Total
Governmental Governmental
Funds Funds
2,126,031$ 14,366,193$
– 670,917
306,455 936,363
– 900,601
– 4,839,981
1,235,583 2,316,988
– 1,652
396,110 773,613
91,183 250,514
4,155,362 25,056,822
4,724 3,284,404
12,896 6,706,401
– 1,999,412
11,152 1,639,924
170,354 170,354
3,210,304 4,383,058
– 4,199,126
– 1,125,331
3,409,430 23,508,010
745,932 1,548,812
180,868 180,868
733,185 3,153,476
(368,828) (1,320,426)
63,717 66,320
608,942 2,080,238
1,354,874 3,629,050
11,794,347 22,962,258
13,149,221$ 26,591,308$
-27-
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3,629,050$
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 3,292,312
Capital contributions 3,236,717
Depreciation expense (4,870,870)
Capital contributions from governmental funds (180,868)
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.(39,214)
Net pension assets are only recorded in the government-wide financial statements,as they are not current financial
resources to governmental funds.588,288
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 4,199,126
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 (54,838)
Net pension liability – GERF and PEPFF (1,004,463)
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.49,934
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. 179,020
Internal service funds are used by management to charge certain costs to individual funds.The net revenue (expense)of
certain activities of the internal service funds is reported with governmental activities in the government-wide financial
statements.(39,244)
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 29,810
Special assessments (638,806)
Deferred outflows of resources – GERF and PEPFF pension plans (784,176)
Deferred outflows of resources – fire relief pension plan (240,226)
Deferred outflows of resources – OPEB 6,188
Deferred inflows of resources – GERF and PEPFF pension plans 2,088,627
Deferred inflows of resources – fire relief pension plan (216,747)
Deferred inflows of resources – OPEB 14,869
9,244,489$ Change in net position – governmental activities
CITY OF PRIOR LAKE
Year Ended December 31, 2020
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 8,953,156$ 8,953,156$ 8,923,782$ (29,374)$
Franchise taxes 630,000 630,000 670,917 40,917
Special assessments 5,000 5,000 5,457 457
Licenses and permits 830,464 830,464 900,601 70,137
Intergovernmental 2,126,362 2,126,362 4,092,040 1,965,678
Charges for services 1,178,050 1,178,050 1,081,405 (96,645)
Fines and forfeits – – 1,652 1,652
Investment income 102,700 102,700 186,820 84,120
Miscellaneous 159,766 159,766 159,331 (435)
Total revenues 13,985,498 13,985,498 16,022,005 2,036,507
Expenditures
Current
General government 3,283,425 3,256,464 3,279,680 23,216
Public safety
Police 4,848,910 4,855,232 5,011,955 156,723
Fire and rescue 1,038,440 1,038,440 995,854 (42,586)
Other 647,988 719,989 685,696 (34,293)
Public works 2,200,445 2,215,845 1,999,412 (216,433)
Culture and recreation 2,166,203 2,214,173 1,628,772 (585,401)
Capital outlay 68,319 77,049 144,308 67,259
Total expenditures 14,253,730 14,377,192 13,745,677 (631,515)
Excess (deficiency) of revenues
over expenditures (268,232) (391,694) 2,276,328 2,668,022
Other financing sources (uses)
Transfers in 470,000 470,000 470,000 –
Transfers out (403,018) (438,018) (538,018) (100,000)
Sale of assets – – 2,603 2,603
Total other financing sources (uses)66,982 31,982 (65,415) (97,397)
Net change in fund balances (201,250)$ (359,712)$ 2,210,913 2,570,625$
Fund balances
Beginning of year 7,903,175
End of year 10,114,088$
CITY OF PRIOR LAKE
Budgeted Amounts
Year Ended December 31, 2020
General Fund
Statement of Revenues, Expenditures, and Changes in Fund Balances
Budget and Actual
See notes to basic financial statements -29-
2020 2019 2020 2019
Current assets
Cash and investments 5,604,480$ 5,775,364$ 2,635,109$ 1,992,299$
Receivables
Accounts 399,384 398,848 680,551 606,549
Special assessments
Delinquent 39,318 49,624 39,318 49,624
Deferred 1,638 1,633 – –
Due from other governmental agencies 2,645 2,231 124 180
Total current assets 6,047,465 6,227,700 3,355,102 2,648,652
Noncurrent assets
Capital assets not being depreciated 2,602,388 2,575,270 12,118 –
Depreciable capital assets 52,086,842 51,188,338 35,179,400 34,182,869
Accumulated depreciation (12,024,118) (11,068,791) (8,937,816) (8,323,323)
Total noncurrent assets 42,665,112 42,694,817 26,253,702 25,859,546
Total assets 48,712,577 48,922,517 29,608,804 28,508,198
Deferred outflows of resources
Pension plan deferments – GERF 60,771 45,893 62,894 43,362
OPEB plan deferments 2,770 2,247 2,569 1,989
Total deferred outflows of resources 63,541 48,140 65,463 45,351
Total assets and deferred outflows of resources 48,776,118$ 48,970,657$ 29,674,267$ 28,553,549$
Current liabilities
Accounts and contracts payable 41,492$ 382,909$ 33,916$ 129,511$
Accrued salaries and employee benefits payable 22,533 46,270 25,143 42,453
Due to other governmental agencies 35,164 1,098,043 3,543 5,848
Deposits payable 1,500 4,500 – –
Accrued interest payable 2,069 2,269 2,069 2,269
Current portion of compensated absences payable 50,014 39,289 39,592 18,618
Current portion of bonds payable 120,000 120,000 120,000 120,000
Total current liabilities 272,772 1,693,280 224,263 318,699
Noncurrent liabilities
Compensated absences payable 78,845 77,991 26,962 46,211
Bonds premium (discount)134,094 150,856 134,094 150,856
Bonds payable 975,000 1,095,000 975,000 1,095,000
Net pension liability – GERF 476,440 433,789 493,085 409,860
Total OPEB Liability 66,510 62,971 61,684 55,755
Total noncurrent liabilities 1,730,889 1,820,607 1,690,825 1,757,682
Total liabilities 2,003,661 3,513,887 1,915,088 2,076,381
Deferred inflows of resources
Pension plan deferments – GERF 25,374 91,114 26,260 86,088
OPEB plan deferments 9,611 11,292 8,913 9,998
Total deferred inflows of resources 34,985 102,406 35,173 96,086
Net position
Net investment in capital assets 41,436,018 41,328,961 25,024,608 24,493,690
Unrestricted 5,301,454 4,025,403 2,699,398 1,887,392
Total net position 46,737,472 45,354,364 27,724,006 26,381,082
Total liabilities, deferred inflows of
resources, and net position 48,776,118$ 48,970,657$ 29,674,267$ 28,553,549$
CITY OF PRIOR LAKE
Statement of Net Position
Proprietary Funds
as of December 31, 2020
Business-Type Activities – Enterprise Funds
Water Sewer
(With Partial Comparative Information as of December 31, 2019)
See notes to basic financial statements -30-
Governmental
Activities –
Internal Service
2020 2019 2020 2019 Fund
1,940,237$ 1,404,780$ 10,179,826$ 9,172,443$ 530,966$
170,371 168,353 1,250,306 1,173,750 3,034
– – 78,636 99,248 –
– – 1,638 1,633 –
10,542 12,327 13,311 14,738 –
2,121,150 1,585,460 11,523,717 10,461,812 534,000
185,579 146,682 2,800,085 2,721,952 –
3,302,231 3,203,355 90,568,473 88,574,562 –
(890,383) (773,832) (21,852,317) (20,165,946) –
2,597,427 2,576,205 71,516,241 71,130,568 –
4,718,577 4,161,665 83,039,958 81,592,380 534,000
27,460 17,597 151,125 106,852 –
1,136 828 6,475 5,064 –
28,596 18,425 157,600 111,916 –
4,747,173$ 4,180,090$ 83,197,558$ 81,704,296$ 534,000$
78,892$ 114,352$ 154,300$ 626,772$ –$
8,604 15,768 56,280 104,491 –
1,429 2,411 40,136 1,106,302 –
– – 1,500 4,500 –
– – 4,138 4,538 –
14,453 8,483 104,059 66,390 360,991
– – 240,000 240,000 –
103,378 141,014 600,413 2,152,993 360,991
5,165 9,422 110,972 133,624 587,817
– – 268,188 301,712 –
– – 1,950,000 2,190,000 –
215,285 166,330 1,184,810 1,009,979 –
27,277 23,219 155,471 141,945 –
247,727 198,971 3,669,441 3,777,260 587,817
351,105 339,985 4,269,854 5,930,253 948,808
11,465 34,936 63,099 212,138 –
3,942 4,164 22,466 25,454 –
15,407 39,100 85,565 237,592 –
2,597,427 2,576,205 69,058,053 68,398,856 –
1,783,234 1,224,800 9,784,086 7,137,595 (414,808)
4,380,661 3,801,005 78,842,139 75,536,451 (414,808)
4,747,173$ 4,180,090$ 83,197,558$ 81,704,296$ 534,000$
Water Quality Totals
-31-
2020 2019 2020 2019
Operating revenues
Sewer charges –$ –$ 4,034,543$ 3,341,491$
Water charges 4,273,809 3,338,696 – –
Storm water charges – – – –
Capital facility charges 383,331 280,532 365,175 280,542
Meter sales 126,924 153,312 – –
Charges for services – 19,781 – –
Total operating revenues 4,784,064 3,792,321 4,399,718 3,622,033
Operating expenses
Personal services 761,721 805,403 801,367 813,914
Supplies 355,088 321,455 47,654 44,624
Repairs and maintenance 402,654 234,088 35,494 123,317
Other services and charges 153,624 166,945 117,411 111,946
Insurance 7,210 36,733 25,998 36,733
Utilities 596,704 530,893 59,732 42,736
Disposal charges – – 1,658,137 1,544,728
Miscellaneous 11,355 – – –
Depreciation 955,327 888,449 614,493 563,826
Total operating expenses 3,243,683 2,983,966 3,360,286 3,281,824
Operating income (loss)1,540,381 808,355 1,039,432 340,209
Nonoperating revenues (expenses)
Intergovernmental 18,935 1,583 12,645 954
Investment income 172,842 184,077 70,637 68,827
Gain (loss) on sale of capital assets – (3,000) – –
Interest expense (37,490)(39,273) (37,486) (39,269)
Miscellaneous 13,905 18,166 – 942
Total nonoperating revenues 168,192 161,553 45,796 31,454
Income (loss) before contributions and transfers 1,708,573 969,908 1,085,228 371,663
Special assessments 3,391 6,614 – –
Capital grants – – 2,601 (3,734)
Capital contributions from other funds – 2,537,191 – 1,709,980
Capital contributions from developers 886,304 285,509 887,205 310,986
Transfers in – 1,873,151 – 306,280
Transfers out (1,215,160) (995,495) (632,110) (527,147)
Change in net position 1,383,108 4,676,878 1,342,924 2,168,028
Net position
Beginning of year 45,354,364 40,677,486 26,381,082 24,213,054
End of year 46,737,472$ 45,354,364$ 27,724,006$ 26,381,082$
Business-Type Activities – Enterprise Funds
CITY OF PRIOR LAKE
Statement of Revenues, Expenses, and Changes in Net Position
Proprietary Funds
Year Ended December 31, 2020
Water Sewer
(With Partial Comparative Information for the Year Ended December 31, 2019)
See notes to basic financial statements -32-
Governmental
Activities –
Internal Service
2020 2019 2020 2019 Fund
–$ –$ 4,034,543$ 3,341,491$ –$
– – 4,273,809 3,338,696 –
1,175,189 1,060,295 1,175,189 1,060,295 –
– – 748,506 561,074 –
– – 126,924 153,312 –
– – – 19,781 32,368
1,175,189 1,060,295 10,358,971 8,474,649 32,368
343,057 304,445 1,906,145 1,923,762 212,562
28,408 18,441 431,150 384,520 –
74,117 115,319 512,265 472,724 –
61,184 39,022 332,219 317,913 –
– – 33,208 73,466 –
– – 656,436 573,629 –
– – 1,658,137 1,544,728 –
– – 11,355 – –
116,551 134,427 1,686,371 1,586,702 –
623,317 611,654 7,227,286 6,877,444 212,562
551,872 448,641 3,131,685 1,597,205 (180,194)
4,403 387 35,983 2,924 –
55,198 37,397 298,677 290,301 16,904
– – – (3,000) –
– – (74,976) (78,542) –
21,325 12,327 35,230 31,435 24,046
80,926 50,111 294,914 243,118 40,950
632,798 498,752 3,426,599 1,840,323 (139,244)
– – 3,391 6,614 –
– – 2,601 (3,734) –
– 335,892 – 4,583,063 –
32,638 17,600 1,806,147 614,095 –
– 267,517 – 2,446,948 100,000
(85,780) (126,760) (1,933,050) (1,649,402) –
579,656 993,001 3,305,688 7,837,907 (39,244)
3,801,005 2,808,004 75,536,451 67,698,544 (375,564)
4,380,661$ 3,801,005$ 78,842,139$ 75,536,451$ (414,808)$
Water Quality Totals
-33-
2020 2019 2020 2019
Cash flows from operating activities
Cash received from customers 4,790,415$ 3,808,967$ 4,336,078$ 3,603,484$
Cash payments to suppliers (2,930,931) (2,299,532) (2,042,326) (1,948,990)
Cash payments to employees (810,511) (750,358) (808,823) (722,460)
Miscellaneous/other revenue 13,905 18,166 – 942
Net cash flows from operating
activities 1,062,878 777,243 1,484,929 932,976
Cash flows from noncapital financing activities
Intergovernmental revenue 18,935 1,583 12,645 954
Transfers in – 1,873,151 – 306,280
Transfers (out)(1,215,160) (995,495) (632,110) (527,147)
Net cash flows from noncapital
financing activities (1,196,225) 879,239 (619,465) (219,913)
Cash flows from capital and related financing
activities
Special assessments 3,391 6,614 – –
Capital grants – – 2,601 (3,734)
Acquisition of capital assets (39,318) (2,360,036) (121,444) (418,887)
Payments on bonds payable (120,000) (105,000) (120,000) (105,000)
Interest paid on long-term debt (54,452) (78,204) (54,448) (78,200)
Net cash flows from capital
and related financing activities (210,379) (2,536,626) (293,291) (605,821)
Cash flows from investing activities
Interest received 172,842 184,077 70,637 68,827
Net increase (decrease) in cash and cash
equivalents (170,884) (696,067) 642,810 176,069
Cash and cash equivalents, January 1 5,775,364 6,471,431 1,992,299 1,816,230
Cash and cash equivalents, December 31 5,604,480$ 5,775,364$ 2,635,109$ 1,992,299$
Water Sewer
Business-Type Activities – Enterprise Funds
CITY OF PRIOR LAKE
Statement of Cash Flows
Proprietary Funds
Year Ended December 31, 2020
(With Partial Comparative Information for the Year Ended December 31, 2019)
See notes to basic financial statements -34-
Governmental
Activities –
Internal Service
2020 2019 2020 2019 Fund
1,174,956$ 1,032,454$ 10,301,449$ 8,444,905$ 32,492$
(200,151) (236,456) (5,173,408) (4,484,978) –
(329,359) (306,773) (1,948,693) (1,779,591) (104,785)
21,325 12,327 35,230 31,435 23,989
666,771 501,552 3,214,578 2,211,771 (48,304)
4,403 387 35,983 2,924 –
– 267,517 – 2,446,948 100,000
(85,780) (126,760) (1,933,050) (1,649,402) –
(81,377) 141,144 (1,897,067) 800,470 100,000
– – 3,391 6,614 –
– – 2,601 (3,734) –
(105,135) (71,569) (265,897) (2,850,492) –
– – (240,000) (210,000) –
– – (108,900) (156,404) –
(105,135) (71,569) (608,805) (3,214,016) –
55,198 37,397 298,677 290,301 16,904
535,457 608,524 1,007,383 88,526 68,600
1,404,780 796,256 9,172,443 9,083,917 462,366
1,940,237$ 1,404,780$ 10,179,826$ 9,172,443$ 530,966$
TotalsWater Quality
-35-(continued)
2020 2019 2020 2019
Reconciliation of operating income (loss) to net
cash flows from operating activities
Operating income (loss)1,540,381$ 808,355$ 1,039,432$ 340,209$
Adjustments to reconcile operating income (loss)
to net cash flows from operating activities
Depreciation 955,327 888,449 614,493 563,826
Miscellaneous / other revenue 13,905 18,166 – 942
(Increase) decrease in assets
and deferred outflows of resources
Accounts receivable (536) 28,058 (74,002) (7,348)
Special assessments receivable 10,301 (10,095) 10,306 (11,193)
Due from other governments (414) (1,317) 56 (8)
Deferred outflows of resources – GERF (14,878) 31,808 (19,532) 21,388
Deferred outflows of resources – OPEB (523) 756 (580) 1,014
Increase (decrease) in liabilities
and deferred inflows of resources
Accounts and contracts payable (341,417) 132,598 (95,595) (43,234)
Accrued salaries and employee benefits payable (23,737) 12,568 (17,310) 6,411
Due to other governmental agencies (1,062,879) (1,142,016) (2,305) (1,672)
Deposits payable (3,000) – – –
Compensated absences payable 11,579 16,952 1,725 12,036
Net pension liability – GERF 42,651 (2,252) 83,225 46,493
Total OPEB liability 3,539 27,414 5,929 20,198
Deferred inflows of resources – GERF (65,740) (43,493) (59,828) (26,084)
Deferred inflows of resources – OPEB (1,681) 11,292 (1,085) 9,998
Net cash flows from operating
activities 1,062,878$ 777,243$ 1,484,929$ 932,976$
Schedule of noncash activities from capital and
related financing activities
Capital assets contributed from other funds –$ 2,537,191$ –$ 1,709,980$
Capital assets contributed by developers 886,304$ 285,509$ 887,205$ 310,986$
Business-Type Activities – Enterprise Funds
Water
CITY OF PRIOR LAKE
Sewer
Statement of Cash Flows (continued)
Proprietary Funds
Year Ended December 31, 2020
(With Partial Comparative Information for the Year Ended December 31, 2019)
See notes to basic financial statements -36-
Governmental
Activities –
Internal Service
2020 2019 2020 2019 Fund
551,872$ 448,641$ 3,131,685$ 1,597,205$ (180,194)$
116,551 134,427 1,686,371 1,586,702 –
21,325 12,327 35,230 31,435 24,046
(2,018) (15,514) (76,556) 5,196 67
– – 20,607 (21,288) –
1,785 (12,327) 1,427 (13,652) –
(9,863) 14,778 (44,273) 67,974 –
(308) 460 (1,411) 2,230 –
(35,460) 79,326 (472,472) 168,690 –
(7,164) 3,385 (48,211) 22,364 –
(982) (143,000) (1,066,166) (1,286,688) –
– – (3,000) – –
1,713 3,407 15,017 32,395 107,777
48,955 (15,352) 174,831 28,889 –
4,058 7,980 13,526 55,592 –
(23,471) (21,150) (149,039) (90,727) –
(222) 4,164 (2,988) 25,454 –
666,771$ 501,552$ 3,214,578$ 2,211,771$ (48,304)$
–$ 335,892$ –$ 4,583,063$ –$
32,638$ 17,600$ 1,806,147$ 614,095$ –$
TotalsWater Quality
-37-
THIS PAGE INTENTIONALLY LEFT BLANK
CITY OF PRIOR LAKE
Notes to Basic Financial Statements
December 31, 2020
-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 t he exclusion
of the component unit would render the financial statements of the primary government misleading . The
criteria used to determine if the primary government is financially accountable for a component unit
includes whether or not the primary government appoints the voting majority of the potential component
unit’s board, is able to impose its will on the potential component unit, is in a relationship of financial
benefit or burden with the potential component unit, or is fiscally depended upon by the potential
component unit.
As a result of applying these criteria, certain organizations have been included or disclosed in this report as
follows:
Blended Component Unit – The Prior Lake Economic and Development Authority (EDA) was created
pursuant to Minnesota Statutes § 469.090 through § 469.108 to carryout economic and industrial
development and redevelopment within the City in accordance with policies established by the City
Council. The five-member Board of Directors consists of two councilmembers and three members
appointed from the community by the City Council. The EDA is reported as a blended component unit
within the EDA Special Revenue Fund. Separate financial statements are not issued for this component
unit. The EDA may not exercise any of the powers enumerated by the authorizing statutes without prior
approval of the City Council.
C. Government-Wide Financial Statements
The government-wide financial statements (Statement of Net Position and Statement of Activities) display
information about the reporting government as a whole. These statements include all of the financial
activities of the City. Governmental activities, which are normally supported by taxes and
intergovernmental revenues, are reported separately from business-type activities, which significantly rely
upon sales, fees, and charges for support.
-39-
NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Statement of Activities demonstrates the degree to which the direct expenses of a given function or
segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a
specific function or segment. Program revenues include: 1) charges to customers or applicants who
purchase, use, or directly benefit from goods, services, or privileges provided by a given function or
segment, 2) operating grants and contributions, and 3) capital grants and contributions, including special
assessments that are restricted to meeting the operational or capital requirements of a particular function or
segment. Taxes and other internally directed revenues are reported as general revenues.
The government-wide financial statements are reported using the economic resources measurement focus
and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when
a liability is incurred, regardless of the timing of related cash flows. Property taxes and special assessments
are recognized as revenues in the fiscal year for which they are certified for levy. Grants and similar items
are recognized when all eligibility requirements imposed by the provider have been met.
As a general rule, the effect of interfund activity has been eliminated from the government -wide financial
statements. However, charges between the City’s enterprise funds and other functions are not eliminated,
as that would distort the direct costs and program revenues reported in those functions. The City applies
restricted resources first when an expense is incurred for which both restricted and unrestricted resources
are available. Depreciation expense is included in the direct expenses of each function. Interest on long-term
debt is considered an indirect expense and is reported separately on the Statement of Activities.
D. Fund Financial Statement Presentation
Separate fund financial statements are provided for governmental and proprietary funds. Major individual
governmental and enterprise funds are reported as separate columns in the fund financial statements.
Aggregated information for the remaining nonmajor governmental funds is reported in a single column in
the fund financial statements.
Governmental fund financial statements are reported using the current financial resources measurement
focus and the modified accrual basis of accounting. Under this basis of accounting, transactions are recorded
in the following manner:
1. Revenue Recognition – Revenue is recognized when it becomes measurable and available.
“Measurable” means the amount of the transaction can be determined and “available” means
collectible within the current period or soon enough thereafter to be used to pay liabilities of the
current period. For this purpose, the City considers revenues to be available if they are coll ected
within 60 days after year-end. Only the portion of special assessments receivable due within the
current fiscal period is considered to be susceptible to accrual as revenue of the current period.
Grants and similar items are recognized when all eligibility requirements imposed by the provider
have been met. Proceeds of long-term debt and acquisitions under capital leases are reported as
other financing sources.
Major revenue that is susceptible to accrual includes property taxes, franchise taxes, special
assessments, intergovernmental revenue, charges for services, and interest earned on investments.
Major revenue that is not susceptible to accrual includes licenses and permits, fees, and
miscellaneous revenue. Such revenue is recorded only when received because it is not measurable
until collected.
2. Recording of Expenditures – Expenditures are generally recorded when a liability is incurred,
except for principal and interest on long-term debt, 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.
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NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
E. Cash and Investments
1. Deposits and Investments
The City’s cash and cash equivalents are considered to be cash on hand, demand deposits,
government securities, and short-term investments with original maturities of three months or less
from the date of acquisition.
Cash balances from all funds are combined and invested to the extent available in short -term
investments. Earnings from the pooled investments are allocated to the individual funds based on
the average monthly cash and investment balances of the respective funds.
The Minnesota Municipal Money Market (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.
Cash held in escrow includes balances held in escrow accounts for future capital projects from
energy loan proceeds and cash deposits in the police department. Earnings on these accounts are
allocated directly to those funds.
The City categorizes its fair value measurements within the fair value hierarchy established by
accounting principles generally accepted in the United States of America. The hierarchy is based
on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices
in active markets for identical assets; Level 2 inputs are significant other observable inputs; and
Level 3 inputs are significant unobservable inputs.
Debt securities classified in Level 2 of the fair value 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.
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NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2. Investment Policy
The City’s investment policy contains the following restrictions:
a) Allowable Investments
The City may invest in any type of security allowed by Minnesota Statutes and may be amended
from time to time. The City has chosen to limit its allowable investments to those instruments
listed below:
1) Bonds, notes, certificates of indebtedness, treasury bills, or other securities now or
hereafter issued by the United States of America, its agencies and allowable
instrumentalities.
2) Interest-bearing checking and savings accounts, or any other investments constituting
direct obligations of any bank.
3) Certificates of deposit at state and federally-chartered institutions that are limited to
the amount of coverage provided by the Federal Deposit Insurance Corporation
(FDIC).
4) Money market accounts that are invested in the above referenced government
securities.
5) State and local securities, which have at the time of investment one of the three highest
credit ratings by a nationally recognized rating agency.
6) Investments may be made only in those savings banks or savings and loan associations
the shares, or investment certificates, of which are insured by the FDIC.
7) Bankers’ acceptances issued by United States banks and commercial paper issued by
a United States corporation or its Canadian subsidiary that is rated in the highest quality
category by at least two nationally recognized rating agencies and mature in 270 days
or less .
8) 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 concent ration 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)
2) Up to 100 percent of 2. a) 2) and 2. a) 3)
3) Up to 25 percent of 2. a) 4)
4) Up to 25 percent of 2. a) 5)
5) Up to 10 percent of 2. a) 6 and 2. a) 7)
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.
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NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
G. Property Taxes
Property tax levies are set by the City Council in December of each year and are certified to Scott County
for collection in the following year. In Minnesota, counties act as collection agents for all property taxes.
The county spreads all levies over taxable property. Such taxes become a lien on January 1 and are recorded
as receivables by the City on that date. Real property taxes may be paid by taxpayers in two equal
installments on May 15 and October 15. Personal property taxes are due in full on May 15. The county
provides tax settlements to cities and other taxing districts three times a year; in July, December, and
January. Taxes which remain unpaid on December 31 are classified as delinquent taxes receivable.
H. Special Assessments
Special assessments represent the financing for public improvements paid for by benefiting property
owners. These assessments are recorded as delinquent (levied but unremitted) or deferred (certified but not
yet levied), 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. Prepaid Items
Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as
prepaid items in both government-wide and fund financial statements. Prepaid items are reported using the
consumption method and recorded as expenses/expenditures at the time of consumption.
J. Assets Held for Resale
Assets held for resale are reported as an asset in the government-wide and fund financial statements. These
assets are reported at the lower of cost or acquisition value.
K. 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.”
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NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
L. 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).
Capital assets are recorded in the government-wide and proprietary fund financial statements, but are not
reported in the governmental fund financial statements. 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, utility access agreements, easements, and construction in progress are not depreciated.
M. Compensated Absences
It is the City’s policy to permit employees to accumulate earned but unused vacation and sick leave. Upon
separation, unused vacation and 50 percent of sick pay are paid to the employee if employed longer than
five years. The majority of separation benefits are paid into a retirement health savings plan.
As benefits accrue to employees, vacation, and vested sick leave is reported as expense and liability in the
government-wide and proprietary fund financial statements. Accrued vacation, and the portion of sick leave
payable to employees upon termination are reported as expenditures in the governmental fund that will pay
them when they become due and payable.
The City has provided funding for these obligations in the Severance Compensation Internal Service Fund
and enterprise funds.
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NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
N. 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.
O. 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.
P. State-Wide 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. 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.
Q. 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 (revenue) 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.
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NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
R. 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.”
The City applies restricted resources first when an expense is incurred for which both restricted and
unrestricted resources are available.
S. Fund Balance Classifications
In the fund financial statements, governmental funds report fund balance in classifications that disclose
constraints for which amounts in those funds can be spent. These classifications are as follows:
• Nonspendable – Consists of amounts that are not in spendable form, such as prepaid items,
inventory, and other long-term assets.
• Restricted – Consists of amounts related to externally imposed constraints established by creditors,
grantors, or contributors; or constraints imposed by state statutory provisions.
• Committed – Consists of internally imposed constraints that are established by resolution of the
City Council. Those committed amounts cannot be used for any other purpose unless the City
Council removes or changes the specified use by taking the same type of action it employed to
previously commit those amounts.
• Assigned – Consists of internally imposed constraints. These constraints consist of amounts
intended to be used by the City for specific purposes but do not meet the criteria to be classified as
restricted or committed. In governmental funds, assigned amounts represent intended uses
established by the governing body itself or by an official to which the governing body delegates
the authority. Pursuant to City Council resolution, the finance director is authorized to establish
assignments of fund balance.
• Unassigned – The residual classification for the General Fund, which also reflects negative residual
amounts in other funds.
When both restricted and unrestricted resources are available for use, it is the City’s policy to first use
restricted resources, then use unrestricted resources as they are needed. When committed, assigned, or
unassigned resources are available for use, it is the City’s policy to use resources in the following
order: 1) committed, 2) assigned, and 3) unassigned.
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NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
T. 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, 2019, 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.
U. 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.
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.
V. 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.
W. 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.
X. 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.
Y. Use of Estimates
The preparation of financial statements, in conformity with accounting principles generally accepted in the
United States of America, requires management to make estimates and assumptions that affect amounts
reported in the financial statements during the reporting period. Actual results could differ from those
estimates.
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NOTE 2 – CASH AND INVESTMENTS
A. Components of Cash and Investments
Cash and investments at year-end consist of the following:
Deposits 297,110$
Investments 38,996,478
Cash on hand 950
Total 39,294,538$
Cash and investments are presented in the financial statements as follows:
Statement of Net Position
Cash and investments 39,254,761$
Restricted assets – temporarily restricted –
cash and investments held in escrow 39,777
Total 39,294,538$
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 $298,060, while the balance on the bank
records was $784,818. At December 31, 2020, all deposits were fully covered by federal deposit
insurance, surety bonds, or by collateral held by the City’s agent in the City’s name.
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NOTE 2 – CASH AND INVESTMENTS (CONTINUED)
C. Investments
The City has the following investments at year-end:
Fair Value
Investment Type Rating Agency Measurement Less Than 1 1 to 5 Total
U.S. agency securities AA S&P Level 2 200,340$ –$ 200,340$
Local government securities AAA S&P Level 2 – 1,426,816 1,426,816
Local government securities AAA Moody’s Level 2 260,489 488,915 749,404
Local government securities AA S&P Level 2 2,531,243 1,897,832 4,429,075
Local government securities AA Moody’s Level 2 379,664 3,986,783 4,366,447
Local government securities A S&P Level 2 301,276 265,498 566,774
Local government securities MIG1 Moody's Level 2 604,434 – 604,434
Negotiable certificates of deposit N/R N/A Level 2 2,684,574 10,031,517 12,716,091
6,962,020$ 18,097,361$ 25,059,381
Investment pools/mutual funds
4M Fund N/R N/A Amortized Cost 10,030,757
U.S. Treasuries Fund AAA S&P Level 1 1,222,058
Government Obligation Fund AAA S&P Level 1 1,094,325
U.S. Government Securities
Money Market Fund AAA S&P Level 1 1,589,957
Total investment pools/
mutual funds 13,937,097
Total investments 38,996,478$
N/A – Not Applicable
N/R – Not Rated
Credit Risk
Interest Risk –
Segmented Time Distribution in Years
The City’s investments include investment pools managed by the 4M Fund, 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 the 4M Fund. The 4M Fund 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.
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NOTE 2 – CASH AND INVESTMENTS (CONTINUED)
Credit Risk – This is the risk that an issuer or other counterparty to an investment will not fulfill its
obligations. Minnesota Statutes limit the City’s investments to direct obligations or obligations
guaranteed by the United States or its agencies; shares of investment companies registered under the
Federal Investment Company Act of 1940 that receive the highest credit rating, are rated in one of the
two highest rating categories by a statistical rating agency, and all of the investments have a final
maturity of 13 months or less; general obligations rated “A” or better; revenue obligations rated “AA”
or better; general obligations of the Minnesota Housing Finance Agency rated “A” or better; bankers’
acceptances of United States banks eligible for purchase by the Federal Reserve System; commercial
paper issued by United States corporations or their Canadian subsidiaries, rated of the highest quality
category by at least two nationally recognized rating agencies, and maturing in 270 days or less;
Guaranteed Investment Contracts guaranteed by a United States commercial bank, domestic branch of
a foreign bank, or a United States insurance company, and with a credit quality in one of the top two
highest categories; repurchase or reverse purchase agreements and securities lending agreements with
financial institutions qualified as a “depository” by the government entity, with banks that are members
of the Federal Reserve System with capitalization exceeding $10,000,000; that are a primary reporting
dealer in U.S. government securities to the Federal Reserve Bank of New York; or certain Minnesota
securities broker-dealers. The City’s investment policy as described in Note 1 addresses credit risk.
Concentration Risk – This is the risk associated with investing a significant portion of the City’s
investment (considered 5.0 percent or more) in the securities of a single issuer, excluding
U.S. guaranteed investments (such as treasuries), investment pools, and mutual funds. The City’s
investment policy as described in Note 1, addresses concentration risk.
Interest Rate Risk – This is the risk of potential variability in the fair value of fixed rate investments
resulting from changes in interest rates (the longer the period for which an interest rate is fixed, the
greater the risk). The City has an investment policy as described in Note 1, which addresses interest
rate risk.
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NOTE 3 – CAPITAL ASSETS
Capital asset activity for the year ended December 31, 2020 was as follows:
A. Changes in Capital Assets Used in Governmental Activities
Transfers
Beginning and Completed
of Year Additions Deletions Construction End of Year
Capital assets, not depreciated
Land 33,269,751$ –$ –$ (180,868)$ 33,088,883$
Easements 48,173,410 507,210 – – 48,680,620
Construction in progress 3,820,430 1,273,570 – (355,962) 4,738,038
Total capital assets, not depreciated 85,263,591 1,780,780 – (536,830) 86,507,541
Capital assets, depreciated
Land improvements 2,832,128 – – – 2,832,128
Machinery and equipment 7,360,762 403,053 (386,382) 48,800 7,426,233
Vehicles 6,964,941 629,847 (633,898) – 6,960,890
Infrastructure 117,847,122 3,715,349 – 307,162 121,869,633
Total capital assets, depreciated 135,004,953 4,748,249 (1,020,280) 355,962 139,088,884
Less accumulated depreciation on
Land improvements (1,764,386) (71,399) – – (1,835,785)
Machinery and equipment (4,562,999) (395,093) 363,895 – (4,594,197)
Vehicles (4,516,925) (503,481) 617,171 – (4,403,235)
Infrastructure (57,266,418) (3,900,897) – – (61,167,315)
Total accumulated depreciation (68,110,728) (4,870,870) 981,066 – (72,000,532)
Net capital assets, depreciated 66,894,225 (122,621) (39,214) 355,962 67,088,352
Total capital assets, net 152,157,816$ 1,658,159$ (39,214)$ (180,868)$ 153,595,893$
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
Utility access agreements 2,499,970$ –$ –$ –$ 2,499,970$
Easements 218,912 – – – 218,912
Construction in progress 3,070 116,731 – (38,598) 81,203
Total capital assets, not depreciated 2,721,952 116,731 – (38,598) 2,800,085
Capital assets, depreciated
Land improvements 87,739 – – – 87,739
Machinery and equipment 1,376,307 24,400 – – 1,400,707
Vehicles 465,213 – – – 465,213
Infrastructure 86,645,303 1,930,913 – 38,598 88,614,814
Total capital assets, depreciated 88,574,562 1,955,313 – 38,598 90,568,473
Less accumulated depreciation on
Land improvements (43,771) (4,388) – – (48,159)
Machinery and equipment (810,684) (66,634) – – (877,318)
Vehicles (104,883) (16,776) – – (121,659)
Infrastructure (19,206,608) (1,598,573) – – (20,805,181)
Total accumulated depreciation (20,165,946) (1,686,371) – – (21,852,317)
Net capital assets, depreciated 68,408,616 268,942 – 38,598 68,716,156
Total capital assets, net 71,130,568$ 385,673$ –$ –$ 71,516,241$
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NOTE 3 – CAPITAL ASSETS (CONTINUED)
C. Depreciation Expense by Function
Depreciation expense for the year ended December 31, 2020 was charged to the following functions:
Governmental activities
General government 523,762$
Public safety 300,901
Public works 3,605,422
Culture and recreation 440,785
Total depreciation expense – governmental activities 4,870,870$
Business-type activities
Water 955,327$
Sewer 614,493
Water quality 116,551
Total depreciation expense – business-type activities 1,686,371$
NOTE 4 – TRANSFERS
A schedule of interfund transfers is as follows:
Internal
Service
Funds
Transfers Out General Debt Service Construction Nonmajor Severance Total
Governmental funds
General –$ 241,768$ –$ 196,250$ 100,000$ 538,018$
Debt Service – 155,645 – – – 155,645
Construction – – – 257,935 – 257,935
Nonmajor – 308,828 60,000 – – 368,828
Proprietary funds
Water 202,110 554,050 292,000 167,000 – 1,215,160
Sewer 202,110 – 338,000 92,000 – 632,110
Water Quality 65,780 – – 20,000 – 85,780
470,000$ 1,260,291$ 690,000$ 733,185$ 100,000$ 3,253,476$
Transfer In
Governmental Funds
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
Governmental activities
General obligation bonds
Fire Hall Refunding Bonds 2011B 3,500,000$ 2.00–3.40%12/14/2011 12/15/2031 2,660,000$
Capital Improvement Refunding Bonds 2012A 9,825,000$ 2.00–2.70%03/13/2012 12/15/2029 5,925,000
Street Reconstruction Bonds of 2015B 2,330,000$ 1.00–2.25%05/14/2015 12/15/2022 715,000
Street Reconstruction Bonds of 2016A 760,000$ 2.00%05/01/2016 12/15/2026 395,000
Improvement Bonds 2017A 370,000$ 2.00–2.25%06/29/2017 12/15/2027 220,000
Improvement Bonds 2018A 1,165,000$ 4.00–5.00%08/15/2018 12/15/2028 915,000
Improvement Bonds 2019A 215,000$ 5.00%06/27/2019 12/15/2028 200,000
Total general obligation bonds 11,030,000
Improvement Bonds of 2011A 2,130,000$ 1.80–2.50%08/31/2011 12/15/2021 225,000
Improvement Bonds of 2011B 2,280,000$ 2.00–2.35%12/14/2011 12/15/2022 490,000
Improvement Bonds of 2013A 3,240,000$ 2.00–2.65%08/15/2013 12/15/2023 965,000
Improvement Bonds of 2014A 2,665,000$ 2.00–2.50%09/25/2014 12/15/2024 945,000
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 50,000
Improvement Bonds of 2016A 1,105,000$ 2.00%05/01/2016 12/15/2026 660,000
Improvement Bonds of 2017A 4,135,000$ 2.00–2.25%06/29/2017 12/15/2024 2,895,000
Improvement Bonds of 2018A 4,465,000$ 4.00–5.00%08/15/2018 12/15/2028 3,545,000
Improvement Bonds of 2019A 1,850,000$ 5.00%06/27/2019 12/15/2028 1,700,000
Total general obligation special
assessment bonds 16,115,000
Tax increment bonds
Tax Increment Refunding Bonds of 2011A 290,000$ 1.80–3.00%08/31/2011 12/15/2024 110,000
General obligation revenue bonds
General Obligation Improvement
Bonds of 2015A 5,360,000$ 1.00–3.00%05/14/2015 12/15/2031 5,135,000
General Obligation Improvement
Bonds of 2016A 1,640,000$ 2.00%05/01/2016 12/15/2022 710,000
Total general obligation revenue bonds 5,845,000
Premium (discount) on bonds payable 1,251,694
Energy loan payable 2,667,924$ 2.12%12/08/2014 06/19/2025 1,283,797
Compensated absences payable 948,808
Total governmental activity long-term liabilities 36,584,299
Business-type activities
General obligation revenue bonds
General Obligation Improvement
Bonds of 2018A 2,640,000$ 4.00–5.00%08/15/2018 12/15/2028 2,190,000
Premium (discount) on bonds payable 268,188
Compensated absences payable 215,031
Total business-type activity long-term liabilities 2,673,219
Total government-wide long-term liabilities 39,257,518$
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NOTE 5 – LONG-TERM DEBT (CONTINUED)
B. Changes in Long-Term Debt
Balance –
Beginning Balance –Due Within
of Year Additions Deletions End of Year One Year
Governmental activities
Bonds payable
G.O. bonds 12,185,000$ –$ 1,155,000$ 11,030,000$ 1,290,000$
G.O. special assessment bonds 18,465,000 – 2,350,000 16,115,000 2,265,000
G.O. tax increment bonds 135,000 – 25,000 110,000 25,000
G.O. revenue bonds 6,245,000 – 400,000 5,845,000 420,000
Premium (discount) on bonds payable 1,430,714 – 179,020 1,251,694 –
Total bonds payable, net of premium (discount)38,460,714 – 4,109,020 34,351,694 4,000,000
Energy loan payable 1,552,924 – 269,127 1,283,797 274,859
Compensated absences payable 841,031 178,212 70,435 948,808 360,991
Governmental activities long-term liabilities 40,854,669$ 178,212$ 4,448,582$ 36,584,299$ 4,635,850$
Business-type activities
Bonds payable
G.O. revenue bonds 2,430,000$ –$ 240,000$ 2,190,000$ 240,000$
Premium (discount) on bonds payable 301,711 – 33,523 268,188 –
Total bonds payable, net of premium (discount)2,731,711 – 273,523 2,458,188 240,000
Compensated absences payable 200,014 40,487 25,470 215,031 104,059
Business-type activities long-term liabilities 2,931,725$ 40,487$ 298,993$ 2,673,219$ 344,059$
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
2021 1,290,000$ 295,047$ 2,265,000$ 496,204$ 25,000$ 3,175$ 420,000$ 145,700$ 274,859$ 25,755$ 240,000$ 99,300$
2022 1,450,000 265,802 2,070,000 433,038 25,000 2,550 440,000 137,675 280,714 19,900 250,000 89,700
2023 1,080,000 232,316 2,165,000 373,318 30,000 1,800 480,000 129,250 286,693 13,920 260,000 79,700
2024 1,070,000 206,591 1,950,000 310,363 30,000 900 495,000 119,650 292,800 7,813 270,000 69,300
2025 1,060,000 179,620 1,845,000 255,188 – – 515,000 109,750 148,731 1,576 270,000 58,500
2026–2030 4,765,000 426,010 5,820,000 500,851 – – 2,855,000 351,100 – – 900,000 92,000
2031 315,000 10,710 – – – – 640,000 19,200 – – – –
11,030,000$ 1,616,096$ 16,115,000$ 2,368,962$ 110,000$ 8,425$ 5,845,000$ 1,012,325$ 1,283,797$ 68,964$ 2,190,000$ 488,500$
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 and
compensated absences payable. The details of these various benefit liabilities are discussed elsewhere in
these notes. Such benefits are financed primarily from the General, Enterprise Funds, and Internal Service
Funds.
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NOTE 5 – LONG-TERM DEBT (CONTINUED)
E. Descriptions and Restrictions of Long-Term Debt
General Obligation Bonds – The City issues general obligation bonds to provide funds for the acquisition
and construction of major capital facilities. They will be repaid with ad valorem taxes. General obligation
bonds have been issued for general government activities. In addition, general obligation bonds have been
issued to refund bond issues. General obligation bonds are direct obligations and pledge the full faith and
credit of the City. The capital improvement plan bonds were issued on behalf of the City by Scott County
for the City’s share of the County Road 82 improvement.
General Obligation Special Assessment Bonds – Special assessment bonds were issued to finance various
improvements and will be repaid primarily from special assessments levied on the properties benefiting
from the improvements. Some issues, however, are partly financed by ad valorem tax levies. All special
assessment debt is backed by full faith and credit of the City.
General Obligation Tax Increment Bonds – These bonds were issued for downtown redevelopment
projects. The additional tax increments resulting from increased tax capacity of the redeveloped properties
will be used to retire related debt.
General Obligation Revenue Bonds – These bonds were used to finance maintenance and building
improvements. They will be repaid with ad valorem taxes and revenue from the utilities. The bonds are
backed by the full faith and credit of the City.
Compensated Absences – This liability represents vested benefits earned by employees through the end
of the year, which will be paid at termination of employment in future years. The Internal Service Fund and
enterprise funds will be used to liquidate this liability.
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.
If the City fails to make loan payments specified in this agreement or otherwise defaults on the loan, the
lender may declare the loan fully due and payable, take possession of the equipment identified in this
agreement without terminating the agreement, exclude the City from possession of the equipment and
attempt to sell the equipment identified in the loan, or take legal actions to force the City to comply with
the terms of the loan.
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NOTE 5 – LONG-TERM DEBT (CONTINUED)
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, 2020 is $4,498,268.
G. Revenue Pledged
Future revenue pledged for the payment of long-term debt is as follows:
Percent of Remaining Principal Pledged
Use of Total Term of Principal and Interest Revenue
Bond Issue Proceeds Type Debt Service Pledge and Interest Paid Received
Tax Increment Refunding Street and site Tax increment 100%2011–2024 118,425$ 28,763$ 130,212$
Bonds of 2011A improvements financing
General Obligation Partial refunding Utility charges 100%2015–2031 6,125,825$ 207,625$ 4,784,064$
Bonds of 2015A
General Obligation Partial refunding Utility charges 100%2016–2022 731,500$ 345,700$ 4,784,064$
Bonds of 2016A
General Obligation Water and sewer Utility charges 100%2018–2028 2,678,500$ 348,900$ 9,183,782$
Bonds of 2018A improvements
Revenue Pledged Current Year
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 $3,713,161,300, which calculates to a debt limit of
$111,394,839. 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 $11,030,000 of general obligation debt outstanding, leaving a debt margin of
$100,364,839.
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NOTE 6 – FUND BALANCES
A. Classifications
At December 31, 2020, a summary of the City’s governmental fund balance classifications are as follows:
Debt Construction Nonmajor
General Fund Service Fund Fund Funds Total
Nonspendable
Prepaid items 70,006$ –$ –$ –$ 70,006$
Restricted
Future debt service – 2,834,191 – – 2,834,191
Economic development – – – 216,117 216,117
Communications – – – 97,986 97,986
Capital improvements – – – 2,268,074 2,268,074
Development – – – 877,359 877,359
Tax increment – – – 864,565 864,565
Forfeiture sales – – – 162,862 162,862
Total restricted – 2,834,191 – 4,486,963 7,321,154
Assigned
Subsequent year’s budget 260,704 – – – 260,704
Capital improvements – – 493,808 8,662,258 9,156,066
Total assigned 260,704 – 493,808 8,662,258 9,416,770
Unassigned 9,783,378 – – – 9,783,378
Total 10,114,088$ 2,834,191$ 493,808$ 13,149,221$ 26,591,308$
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,
2020, the unrestricted fund balance of the General Fund was 66.6 percent and the unassigned balance of
the General Fund was 64.9 percent of the subsequent year’s budgeted expenditures and transfers out.
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NOTE 6 – FUND BALANCES (CONTINUED)
The City Council may consider the judicious use of reserve balances in the following situations:
• to fund an expenditure of long-term benefit or legacy to the community
• to fund a one-time (nonrecurring) expenditure or grant matching opportunity
• to fund a one-time unplanned revenue shortfall
• to fund an unplanned expenditure, due to an emergency or disaster
• to moderate property taxes
• to retire existing debt
• to fund policy shifts by other governmental entities having a negative impact on the City
• to provide catch-up funding for long-term obligations not previously recognized
In no case will the unrestricted balance be allowed to fall below 40 percent.
In the event that the year-end unrestricted balance is projected to be less than the target level, due to the use
of unrestricted balances for purposes identified above, a plan must be presented to the City Council at the
time the unrestricted funds are appropriated that will reestablish the target level within 24 to 36 months.
If restoration of the unrestricted balance cannot be accomplished within such period without severe hardship
to the City, then the City Council will establish a different time period.
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NOTE 7 – DEFINED BENEFIT PENSION PLANS - STATE-WIDE
A. Plan Description
The City participates in the following cost-sharing, multiple-employer defined benefit pension plans
administered by the PERA 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.
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, 2020:
Net Deferred Deferred
Pension Outflows of Inflows of Pension
Pension Plans Liabilities Resources Resources Expense
GERF 4,280,758$ 546,022$ 227,978$ 218,441$
PEPFF 3,387,534 1,780,894 2,128,887 454,819
Total 7,668,292$ 2,326,916$ 2,356,865$ 673,260$
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 Public Employees Police and Fire Fund (PEPFF), originally established for police officers and
firefighters not covered by a local relief association, now covers all police officers and firefighters
hired since 1980. Effective July 1, 1999, the PEPFF also covers police officers and firefighters
belonging to local relief associations that elected to merge with and transfer assets and
administration to the PERA.
B. Benefits Provided
The PERA provides retirement, disability, and death benefits. Benefit provisions are established by state
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 la st
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 Securit y
benefits capped at age 66.
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NOTE 7 – DEFINED BENEFIT PENSION PLANS – STATE-WIDE (CONTINUED)
Annuities, disability benefits, and survivor benefits are increased effective every January 1.
Beginning January 1, 2019, the post-retirement increase will be equal to 50.0 percent of the cost of
living adjustment (COLA) announced by the Social Security Administration, with a minimum
increase of at least 1.0 percent and a maximum of 1.5 percent. Recipients that have been receiving
the annuity or benefit for at least a full year as of the June 30 before the effective date of the
increase, will receive the full increase. For recipients receiving the annuity or benefit for at least
one month, but less than a full year as of the June 30 before the effective date of the increase, will
receive a reduced prorated increase. For members retiring on January 1, 2024 or later, the increase
will be delayed until normal retirement age (age 65 if hired prior to July 1, 1989, or age 66 for
individuals hired on or after July 1, 1989). Members retiring under Rule of 90 are exempt from the
delay to normal retirement.
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 50.0 percent after five years, up to 100.0 percent after 10 years of credited
service. Benefits for the PEPFF members first hired after June 30, 2014 vest on a prorated basis
from 50.0 percent after 10 years, up to 100.0 percent after 20 years of credited service. The annuity
accrual rate is 3.0 percent of average salary for each year of service. For Police and Fire Plan
members who were first hired prior to July 1, 1989, a full annuity is available when age plus year
of service equal at least 90.
Benefit increases are provided to benefit recipients each January. Beginning in 2019, the
post-retirement increase will be fixed at 1.0 percent. Recipients that have been receiving the annuity
or benefit for at least 36 months as of the June 30 before the effective date of the increase, will
receive the full increase. For recipients receiving the annuity or benefit for at least 25 months, but
less than 36 months as of the June 30 before the effective date of the increase, will receive a reduced
prorated increase.
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 2020. 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, 2020, were $395,820. The
City’s contributions were equal to the required contributions as set by state statutes.
2. PEPFF Contributions
Police and fire member’s contribution rates increased from 11.30 percent of pay to 11.80 percent
and employer rates increased from 16.95 percent to 17.70 percent on January 1, 2020. The City’s
contributions to the PEPFF for the year ended December 31, 2020, were $555,781. The City’s
contributions were equal to the required contributions as set by state statutes.
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NOTE 7 – DEFINED BENEFIT PENSION PLANS – STATE-WIDE (CONTINUED)
D. Pension Costs
1. GERF Pension Costs
At December 31, 2020, the City reported a liability of $4,280,758 for its proportionate share of the
GERF’s net pension liability. The City’s net pension liability reflected a reduction, due to the state
of Minnesota’s contribution of $16.0 million. The state of Minnesota is considered a nonemployer
contributing entity and the state’s contribution meets the definition of a special funding situation.
The net pension liability was measured as of June 30, 2020, and the total pension liability used to
calculate the net pension liability was determined by an actuarial valuation as of that date. The
City’s proportion of the net pension liability was based on the City’s contributions received by the
PERA during the measurement period for employer payroll paid dates from July 1, 201 9 through
June 30, 2020, relative to the total employer contributions received from all of the PERA’s
participating employers. The City’s proportionate share was 0.0714 percent at the end of the
measurement period and 0.0679 percent for the beginning of the period.
The amount recognized by the City as its proportionate share of the net pension liability, the direct
aid, and total portion of the net pension liability that was associated with the City were as follows:
City’s proportionate share of net pension liability 4,280,758$
State’s proportionate share of the net pension liability
associated with the City 132,000$
For the year ended December 31, 2020, the City recognized pension expense of $206,953 for its
proportionate share of the GERF’s pension expense. In addition, the City recognized an additional
$11,488 as pension expense (and grant revenue) for its proportionate share of the state of
Minnesota’s contribution of $16.0 million to the GERF.
At December 31, 2020, the City reported its proportionate share of the GERF’s deferred outflows
of resources and deferred inflows of resources related to pensions from the following sources:
Deferred Deferred
Outflows Inflows
of Resources of Resources
Differences between expected and actual economic experience 37,064$ 16,196$
Changes in actuarial assumptions – 152,734
Differences between projected and actual investment earnings 92,643 –
Changes in proportion 211,699 59,048
Contributions paid to the PERA subsequent to the measurement
date 204,616 –
Total 546,022$ 227,978$
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NOTE 7 – DEFINED BENEFIT PENSION PLANS – STATE-WIDE (CONTINUED)
A total of $204,616 reported as deferred outflows of resources related to pensions resulting from
city contributions subsequent to the measurement date that will be recognized as a reduction of the
net pension liability in the year ending December 31, 2021. Other amounts reported as deferred
outflows and deferred inflows of resources related to pensions will be recognized in pension
expense as follows:
Pension
Year Ending Expense
December 31,Amount
2021 (203,764)$
2022 84,314$
2023 129,452$
2024 103,426$
2. PEPFF Pension Costs
At December 31, 2020, the City reported a liability of $3,387,534 for its proportionate share of the
PEPFF’s net pension liability. The net pension liability was measured as of June 30, 2020, 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, 2019 through June 30, 2020, relative to the total employer contributions received from
all of the PERA’s participating employers. The City’s proportionate share was 0.2570 percent at
the end of the measurement period and 0.2569 percent for the beginning of the period.
The state of Minnesota also contributed $13.5 million to the Police and Fire Fund in the plan fiscal
year ended June 30, 2020. The contribution consisted of $4.5 million in direct state aid that does
meet the definition of a special funding situation and $9.0 million in fire state aid that does not meet
the definition of a special funding situation. The $4.5 million direct state was paid on October 1,
2019. Thereafter, by October 1 of each year, the state will pay $9.0 million to the Police and Fire
Fund until full funding is reached or July 1, 2048, whichever is earlier. The $9.0 million in fire state
aid will continue until the fund is 90.0 percent funded, or until the State Patrol Plan (administered
by the Minnesota State Retirement System) is 90.0 percent funded, whichever occurs later.
As a result, the state of Minnesota is included as a nonemployer contributing entity in the Police
and Fire Retirement Plan Schedule of Employer Allocations and Schedule of Pension Amounts by
Employer, Current Reporting Period Only (pension allocation schedules) for the $4.5 million in
direct state aid. Police and Fire Plan employers need to recognize their proportionate share of the
state of Minnesota’s pension expense (and grant revenue) under GASB Statement No. 68 special
funding situation accounting and financial reporting requirements. For the year ended
December 31, 2020, the City recognized pension expense of $430,272 for its proportionate share
of the Police and Fire Plan’s pension expense. In addition, the City recognized an additional
$24,547 as pension expense (and grant revenue) for its proportionate share of the state of
Minnesota’s contribution of $4.5 million to the Police and Fire Fund.
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NOTE 7 – DEFINED BENEFIT PENSION PLANS – STATE-WIDE (CONTINUED)
The amount recognized by the City as its proportionate share of the net pension liability, the direct
aid, and total portion of the net pension liability that was associated with the City were as follows:
City’s proportionate share of net pension liability 3,387,534$
State’s proportionate share of the net pension liability
associated with the City 79,788$
The state of Minnesota is not included as a nonemployer contributing entity in the Police and Fire
Pension Plan pension allocation schedules for $9.0 million in fire state aid. The City also recognized
$23,130 for the year ended December 31, 2020, as revenue and an offsetting reduction of net
pension liability for its proportionate share of the state of Minnesota’s on behalf contributions to
the Police and Fire Fund.
At December 31, 2020, the City reported its proportionate share of the PEPFF’s deferred outflows
of resources and deferred inflows of resources related to pensions from the following sources:
Deferred Deferred
Outflows Inflows
of Resources of Resources
Differences between expected and actual economic experience 145,898$ 148,978$
Changes in actuarial assumptions 1,051,306 1,949,368
Differences between projected and actual investment earnings 135,190 –
Changes in proportion 145,743 30,541
Contributions paid to the PERA subsequent to the measurement date 302,757 –
Total 1,780,894$ 2,128,887$
A total of $302,757 reported as deferred outflows of resources related to pensions resulting from
city contributions subsequent to the measurement date that will be recognized as a reduction of the
net pension liability in the year ending December 31, 2021. Other amounts reported as deferred
outflows and deferred inflows of resources related to pensions will be recognized in pension
expense as follows:
Pension
Year Ending Expense
December 31,Amount
2021 (181,307)$
2022 (827,083)$
2023 189,311$
2024 165,767$
2025 2,562$
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NOTE 7 – DEFINED BENEFIT PENSION PLANS – STATE-WIDE (CONTINUED)
E. Actuarial Assumptions
The total pension liability in the June 30, 2020 actuarial valuation was determined using an individual
entry-age normal actuarial cost method and the following actuarial assumptions:
GERF PEPFF
Inflation 2.25% per year 2.50% per year
Active member payroll growth 3.00% per year 3.25% per year
Investment rate of return 7.50%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, 2020 valuation were based on the results of actuarial experience
studies. The most recent four-year experience study in the GERF was completed in 2019. The assumption
changes were adopted by the Board and become effective with the July 1, 2020 actuarial valuation. The
most recent four-year experience study for the PEPFF was completed in 2020. The recommended
assumptions for those plans were adopted by the Board and will be effective with the July 1, 2021 actuarial
valuations if approved by the State Legislature.
The following changes in actuarial assumptions and plan provisions occurred in 2020:
1. GERF
CHANGES IN ACTUARIAL ASSUMPTIONS
• The price inflation assumption was decreased from 2.50 percent to 2.25 percent.
• The payroll growth assumption was decreased from 3.25 percent to 3.00 percent.
• Assumed salary increase rates were changed as recommended in the June 30, 2019 experience
study. The net effect is assumed rates that average 0.25 percent less than previous rates.
• Assumed rates of retirement were changed as recommended in the J une 30, 2019 experience
study. The changes result in more unreduced (normal) retirements and slightly fewer Rule of 90
and early retirements.
• Assumed rates of termination were changed as recommended in the June 30, 2019 experience
study. The new rates are based on service and are generally lower than the previous rates for
years two through five, and slightly higher thereafter.
• Assumed rates of disability were changed as recommended in the June 30, 2019 experience
study. The change results in fewer predicted disability retirements for males and females.
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NOTE 7 – DEFINED BENEFIT PENSION PLANS – STATE-WIDE (CONTINUED)
• The base mortality table for healthy annuitants and employees was changed from the
RP-2014 Table to the Pub-2010 General Mortality Table, with adjustments. The base mortality
table for disabled annuitants was changed from the RP-2014 Disabled Annuitant Mortality
Table to the Pub-2010 General/Teacher Disabled Annuitant Mortality Table, with adjustments.
• The mortality improvement scale was changed from MP-2018 to MP-2019.
• The assumed spouse age difference was changed from two years older for females to one year
older.
• The assumed number of married male new retirees electing the 100.00 percent joint and
survivor option changed from 35.00 percent to 45.00 percent. The assumed number of married
female new retirees electing the 100.00 percent joint and survivor option changed from
15.00 percent to 30.00 percent. The corresponding number of married new retirees electing the
life annuity option was adjusted accordingly.
CHANGES IN PLAN PROVISIONS
• Augmentation for current privatized members was reduced to 2.00 percent for the period July 1,
2020 through December 31, 2023, and zero percent thereafter. Augmentation was eliminated
for privatizations occurring after June 30, 2020.
2. PEPFF
CHANGES IN ACTUARIAL ASSUMPTIONS
• The mortality projection scale was changed from MP-2018 to MP-2019.
The Minnesota State Board of Investment, which manages the investments of the PERA, prepares an
analysis of the reasonableness of the long-term expected rate of return on a regular basis using a
building-block method in which best-estimate ranges of expected future rates of return are developed for
each major asset class. These ranges are combined to produce an expected long-term rate of return by
weighting the expected future rates of return by the target asset allocation percentages. The target allocation
and best-estimates of geometric real rates of return for each major asset class are summarized in the
following table:
Asset Class
Domestic stocks 35.50 %5.10 %
International stocks 17.50 5.30 %
Bonds (fixed income)20.00 0.75 %
Alternative assets (private markets)25.00 5.90 %
Cash 2.00 – %
Total 100.00 %
Allocation
Target
Real Rate of Return
Long-Term Expected
-66-
NOTE 7 – DEFINED BENEFIT PENSION PLANS – STATE-WIDE (CONTINUED)
F. Discount Rate
The discount rate used to measure the total pension liability in 2020 was 7.50 percent. The projection of
cash flows used to determine the discount rate assumed that contributions from plan members and
employers will be made at rates set in Minnesota Statutes. Based on these assumptions, the fiduciary net
positions of the GERF and the PEPFF were projected to be available to make all projected future benefit
payments of current plan members. Therefore, the long-term expected rate of return on pension plan
investments was applied to all periods of projected benefit payments to determine the total pension liability.
G. Pension Liability Sensitivity
The following presents the City’s proportionate share of the net pension liability for all plans it participates
in, calculated using the discount rate disclosed in the preceding paragraph, as well as what the City’s
proportionate share of the net pension liability would be if it were calculated using a discount rate
1 percentage point lower or 1 percentage point higher than the current discount rate:
1% Decrease in 1% Increase in
Discount Rate Discount Rate Discount Rate
(6.50%)(7.50%)(8.50%)
City’s proportionate share of the
GERF net pension liability 6,860,568$ 4,280,758$ 2,152,619$
City’s proportionate share of the
PEPFF net pension liability 6,751,845$ 3,387,534$ 604,158$
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.
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NOTE 8 – DEFINED BENEFIT PENSION PLANS – FIRE RELIEF ASSOCIATION
A. Plan Description
All members of the Prior Lake Fire Department (the Department) are covered by a defined benefit plan
administered by the Prior Lake Fire Department Relief Association (the Association). As of December 31,
2019, the plan covered 41 active firefighters and 13 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, $8,500 per year of service. 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 $8,500 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 $8,500 for each year that they served as an active member of the Department.
-68-
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 $247,275 in fire state aid to the plan on behalf of the Department for the year ended
December 31, 2020, which was recorded as revenue. Required employer contributions are calculated
annually based on statutory provisions. The City’s statutorily-required contributions to the plan for the year
ended December 31, 2020 were $247,275. 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, 2020. Furthermore, firefighters have no obligation to contribute to the plan.
D. Pension Costs
At December 31, 2020, the City reported a net pension liability (asset) of $1,228,062 for the plan. The net
pension liability (asset) was measured as of December 31, 2019. The total pension liability used to calculate
the net pension liability (asset) in accordance with GASB Statement No. 68 was determined by applying
an actuarial formula to specific census data certified by the Department as of December 31, 2019.
For the year ended December 31, 2020, the City recognized pension expense of $364,966. The City also
recognized $233,651 as revenue for the state of Minnesota’s on-behalf contributions to the Department.
The following table presents the changes in net pension liability (asset) during the year:
Total Pension Plan Fiduciary Net Pension
Liability Net Position Liability (Asset)
Beginning balance – January 1, 2020 3,550,594$ 4,190,368$ (639,774)$
Changes for the year
Service cost 153,304 – 153,304
Interest on pension liability (asset)197,843 – 197,843
Projected investment earnings – 231,574 (231,574)
Contributions (employer)– 20,000 (20,000)
Contributions (state)– 233,651 (233,651)
Asset (gain) loss – 454,210 (454,210)
Benefit payments (213,500) (213,500) –
Total net changes 137,647 725,935 (588,288)
Ending balance – December 31, 2020 3,688,241$ 4,916,303$ (1,228,062)$
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NOTE 8 – DEFINED BENEFIT PENSION PLANS – FIRE RELIEF ASSOCIATION
(CONTINUED)
At December 31, 2020, 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 –$ 210,685$
Changes in actuarial assumptions 39,880 –
Difference between expected and actual economic experience 14,002 45,366
State aid to the City subsequent to the measurement date – 248,275
Contributions from the City subsequent to the measurement date 267,275 –
Total 321,157$ 504,326$
Deferred outflows of resources totaling $267,275 related to pensions resulting from the City’s 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, 2021. Deferred inflows of resources totaling $248,275 related to state aid
received subsequent to the measurement date will be recognized for its impact on the net pension liability
in the year ending December 31, 2021. Other amounts reported as deferred outflows and inflows of
resources related to the plan will be recognized in pension expense as follows:
Pension
Year Ending Expense
December 31,Amount
2021 (75,389)$
2022 (56,983)
2023 20,287
2024 (88,258)
2025 (915)
Thereafter (911)
E. Actuarial Assumptions
The total pension liability (asset) at December 31, 2020 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%
Investment rate of return 5.50%
20-year municipal bond yield 3.50%
The 5.50 percent long-term expected rate of return on pension plan investments was determined using a
building-block method in which best-estimates for expected future real rates of return (expected returns,
net of inflation) were developed for each asset class us ing the plan’s target investment allocation. along
with long-term return expectations by asset class. Inflation expectations were applied to derive the nominal
rate of return for the portfolio.
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NOTE 8 – DEFINED BENEFIT PENSION PLANS – FIRE RELIEF ASSOCIATION
(CONTINUED)
The target allocation and best-estimates of geometric real rates of return for each major asset class are
summarized in the following table:
Asset Class
Cash 11.00 %2.25 %
Fixed income 34.00 3.75 %
Equities 55.00 7.25 %
Other – 6.00 %
Total 100.00 %
Weight
Portfolio
Return
Class
Expected
F. Discount Rate
The discount rate used to measure the total pension liability was 5.5 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. 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 in 1% Increase in
Discount Rate Discount Rate Discount Rate
(4.50%)(5.50%)(6.50%)
Net pension liability (asset)(1,130,017)$ (1,228,062)$ (1,320,028)$
H. Pension Plan Fiduciary Net Position
The Association issues a publicly available financial report. This report may be obtained by writing to the
Prior Lake Fire Relief Association, 5316 Hampton Street, Prior Lake, Minnesota 55372.
I. Plan Changes
A benefit level increase from $8,000 to $8,500 occurred for fiscal year 2019.
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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 som e 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 $36,021.
Contributions for OPEB are paid by the General Fund and enterprise funds.
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 94
Total members 100
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NOTE 9 – OTHER POST-EMPLOYMENT BENEFITS (OPEB) PLAN (CONTINUED)
E. Total OPEB Liability of the City
The City’s total OPEB liability of $864,888 as of year-end was measured as of January 1, 2020, and was
determined by an actuarial valuation as of January 1, 2019.
F. Actuarial Methods and Assumptions
The total OPEB liability was determined by an actuarial valuation as of January 1, 2019, using the entry-age,
level percentage of pay actuarial method and the following actuarial assumptions, applied to all periods
included in the measurement, unless otherwise specified:
Discount rate 3.80%
20-year municipal bond yield 3.80%
Inflation rate 2.50%
Salary increases 3.00%
Healthcare trend rate 6.50%, grading to 5.00% over 6 years
The actuarial assumptions used in the latest valuation were based on those used to value pension liabilities
for Minnesota city employees. The state pension plans base their assumptions on periodic experience
studies. Economic assumptions are based on input from a variety of published sources of historical and
projected future financial data. Each assumption was reviewed for reasonableness with the source
information, as well as for consistency with the other economic assumptions.
Since the Plan is not funded by an irrevocable trust, the discount rate is equal to the 20-year municipal bond
yield rate of 3.80 percent, which was set by considering published rate information for 20-year high quality,
tax-exempt, general obligation municipal bonds as of the measurement date. The City discount rate used in
the prior measurement date was 3.80 percent.
Mortality rates were based on the RP-2014 White Collar Mortality Tables with MP-2018 Generational
Improvement Scale (with Blue Collar adjustment for Police and Fire Personnel).
Future retirees electing coverage is assumed to be 50 percent when a pre -age 65 subsidy is not available.
Married future retirees electing spouse coverage is assumed to be 25 percent when a pre-age 65 subsidy is
not available.
G. Changes in the Total OPEB Liability
Total OPEB
Liability
Beginning balance – January 1, 2020 796,524$
Changes for the year
Service cost 64,598
Interest 32,188
Benefit payments – employer-financed (28,422)
Total net changes 68,364
Ending balance – December 31, 2020 864,888$
-73-
NOTE 9 – OTHER POST-EMPLOYMENT BENEFITS (OPEB) PLAN CONTINUED)
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 liabi lity
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 3.80%
Total OPEB liability 932,304$ 802,080$
2.80%4.80%
1% Decrease in 1% Increase in
Discount Rate Discount RateDiscount Rate
864,888$
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 trend rate
Total OPEB liability
1% Decrease in 1% Increase in
5.50% decreasing to 7.50% decreasing to
Healthcare Trend Rate
6.50% decreasing to
Healthcare Trend Rate Healthcare Trend Rate
768,354$ 979,115$
4.00% over 6 years 6.00% over 6 years5.00% over 6 years
864,888$
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 $78,930. As of year-end, the City reported
deferred outflows of resources and deferred inflows of resources related to OPEB from the following
sources:
Deferred Deferred
Outflows Inflows
of Resources of Resources
Changes in actuarial assumptions –$ 95,934$
Difference between expected and actual economic experience – 29,042
Contributions from the City subsequent to the measurement date 36,021 –
36,021$ 124,976$
Deferred outflows of resources totaling $36,021 related to pensions resulting from city contributions to the
Plan subsequent to the measurement date will be recognized as a reduction of the net pension liability in
the year ending December 31, 2021. Other amounts reported as deferred outflows and inflows of resources
related to the plan will be recognized in pension expense as follows:
OPEB
Year Ending Expense
June 30,Amount
2021 (17,856)$
2022 (17,856)$
2023 (17,856)$
2024 (17,856)$
2025 (17,856)$
Thereafter (35,696)$
-74-
NOTE 10 – STEWARDSHIP AND ACCOUNTABILITY
Deficit Net Position
As of December 31, 2020, the Severance Compensation Internal Service Fund had a deficit net position of
$442,978. This deficit will be eliminated by future charges for services.
NOTE 11 – TAX ABATEMENT AGREEMENTS
The City, in order to spur economic development and redevelopment, has entered into private development
and redevelopment agreements to encourage a developer to construct, expand, or improve new or existing
properties and buildings or clean-up and redevelop blighted areas. The City currently has six agreements
that would be considered tax abatements.
Outstanding
Amount Principal Date of
Abated During Balance Required
Name Purpose the Fiscal Year at Year-End Decertification
1-3 Lakefront 80-unit owner-occupied senior housing facility
and 12,000 square feet of retail space and
related improvements 97,659$ 890,127$ 12/31/2029
1-4 River Valley Vet
9,434$ 8,124$ 12/31/2022
3-1 Creekside Estates 54-unit senior housing facility 44,321$ –$ 12/31/2029
5-1 Premier Dance
14,461$ 111,111$ 12/31/2034
6-1 Shepherds Path 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 319,480$ 2,877,238$ 12/31/2034
1-5 Gateway Center
182,119$ 1,366,437$ 12/31/2035
Acquisition,construction,and equipping of a
170-unit multi-family senior housing
development
10,000 square foot commercial facility to be
used as a dance studio
7,000 square foot addition to the existing
veterinary clinic facility
-75-
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 u se
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, 2020 for these agreements are listed on the previous
page. These amounts are not included in long-term debt because the nature of these notes is that repayment
is required only if sufficient tax increments are received. The City’s position is that these are obligations to
assign future and uncertain revenue sources and, as such, is not actual debt in-substance.
-76-
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 2020, the City awarded contracts for various construction and remodeling projects. The City’s
commitment for uncompleted work on these contracts at December 31, 2020 is $369,422.
D. Tax Increment Districts
The City’s tax increment districts are subject to review by the Office of the State Auditor. Any disallowed
claims or misuse of tax increments could become a liability of the applicable fund. Management has
indicated that they are not aware of any instances of noncompliance, which would have a material effect
on the financial statements.
E. COVID-19
The COVID-19 pandemic has caused economic and financial market volatility in the United States and
around the world, along with significant business and operational disruptions for many organizations. Due
to the unknown breadth and duration of this pandemic, any potential impact it may have on the City’s
future operations and financial condition cannot be determined at this time and has not been reflected in
these financial statements.
THIS PAGE INTENTIONALLY LEFT BLANK
REQUIRED SUPPLEMENTARY INFORMATION
Proportionate
Share of the
City’s Net Pension
Proportionate Liability and City’s
Share of the the City’s Proportionate Plan Fiduciary
State of Share of the Share of the Net Position
City’s City’s Minnesota’s State of Net Pension as a
PERA Fiscal Proportion Proportionate Proportionate Minnesota’s Liability as a Percentage
Year-End Date of the Net Share of the Share of the Share of the City’s Percentage of of the Total
(Measurement Pension Net Pension Net Pension Net Pension Covered Covered Pension
Date)Liability Liability Liability Liability Payroll Payroll Liability
06/30/2015 0.0719% 3,726,231$ –$ 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%
06/30/2019 0.0679% 3,754,038$ 116,662$ 3,870,700$ 4,803,433$ 78.15% 80.20%
06/30/2020 0.0714% 4,280,758$ 132,000$ 4,412,758$ 5,090,738$ 84.09% 79.10%
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%
374,803$ 374,803$ –$ 4,999,585$ 7.50%
395,820$ 395,820$ –$ 5,278,601$ 7.50%
Note:
12/31/2020
12/31/2020
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.
Year-End Date
12/31/2015
12/31/2017
12/31/2018
12/31/2019
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, 2020
12/31/2017
Year Ended December 31, 2020
12/31/2018
12/31/2019
City Fiscal
-77-
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 0.2400% 2,726,962$ –$ 2,726,962$ 2,244,215$ 121.51% 86.60%
06/30/2016 0.2380% 9,551,354$ –$ 9,551,354$ 2,294,383$ 416.29% 63.90%
06/30/2017 0.2360% 3,186,282$ –$ 3,186,282$ 2,425,426$ 131.37% 85.40%
06/30/2018 0.2463% 2,625,304$ –$ 2,625,304$ 2,595,948$ 101.13% 88.80%
06/30/2019 0.2569% 2,734,960$ –$ 2,734,960$ 2,713,440$ 100.79% 89.30%
06/30/2020 0.2570% 3,387,534$ 79,788$ 3,467,322$ 3,019,145$ 112.20% 87.20%
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%
498,625$ 498,625$ –$ 2,941,707$ 16.95%
555,781$ 555,781$ –$ 3,139,767$ 17.70%
Note:
Schedule of City Contributions
Year Ended December 31, 2020
PERA – Public Employees Police and Fire Fund
Schedule of City’s and Nonemployer Proportionate Share of Net Pension Liability
Year Ended December 31, 2020
PERA – Public Employees Police and Fire Fund
City Fiscal
Year-End
12/31/2015
12/31/2016
CITY OF PRIOR LAKE
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
12/31/2015
12/31/2016
12/31/2020
12/31/2017
12/31/2017
12/31/2018
12/31/2018
12/31/2019
12/31/2019
12/31/2020
-78-
City fiscal year-end dated December 31,2015 2016 2017 2018 2019 2020
Measurement period – December 31,2014 2015 2016 2017 2018 2019
Total pension liability
Service cost 106,719$ 109,387$ 110,441$ 132,893$ 151,350$ 153,304$
Interest 148,718 164,204 192,181 208,100 220,949 197,843
Asset (gain) loss – – 28,006 – (60,490) –
Benefit payments – – (34,403) (209,373) (691,031) (213,500)
Assumption changes – – – – 53,174 –
Plan changes – 99,450 34,110 304,902 – –
Net change in total pension liability 255,437 373,041 330,335 436,522 (326,048) 137,647
Total pension liability – beginning 2,481,307 2,736,744 3,109,785 3,440,120 3,876,642 3,550,594
Total pension liability – ending 2,736,744$ 3,109,785$ 3,440,120$ 3,876,642$ 3,550,594$ 3,688,241$
Plan fiduciary net position
Contributions (state and local)215,194$ 228,087$ 235,891$ 237,182$ 247,610$ 253,651$
Net investment income 154,856 (169,276) 320,811 640,986 (262,184) 685,784
Benefit payments – – (34,403) (209,373) (691,031) (213,500)
Administrative costs (6,647) (6,640) (9,160) (120) (2,644) –
Net change in plan fiduciary net position 363,403 52,171 513,139 668,675 (708,249) 725,935
Total plan fiduciary net position – beginning 3,301,229 3,664,632 3,716,803 4,229,942 4,898,617 4,190,368
Total plan fiduciary net position – ending 3,664,632$ 3,716,803$ 4,229,942$ 4,898,617$ 4,190,368$ 4,916,303$
Net pension liability (asset) – ending (927,888)$ (607,018)$ (789,822)$ (1,021,975)$ (639,774)$ (1,228,062)$
Plan fiduciary net position as a percentage
of the total pension liability 133.90%119.52%122.96%126.36%118.02%133.30%
Note:
(Last Six Years)
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 Liability (Asset) and Related Ratios
-79-
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$
234,651$ 234,651$ –$ 20,000$
247,275$ 247,275$ –$ 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, 2020
(Last Six Years)
12/31/2015
12/31/2016
12/31/2017
12/31/2018
12/31/2019
12/31/2020
-80-
2018 2019 2020
Total OPEB liability
Service cost 61,214$ 62,717$ 64,598$
Interest 29,555 31,270 32,188
Changes of assumptions – (37,343) –
Differences between expected and actual experiences – (123,346) –
Benefit payments (37,688) (42,907) (28,422)
Net change in total OPEB liability 53,081 (109,609) 68,364
Total OPEB liability – beginning of year 853,052 906,133 796,524
Total OPEB liability – end of year 906,133$ 796,524$ 864,888$
Covered payroll 6,560,761$ 7,134,065$ 7,348,087$
Total OPEB liability as a percentage of covered payroll 13.81% 11.17% 11.77%
Note:
Year Ended December 31, 2020
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
Fiscal Year-End
-81-
CITY OF PRIOR LAKE
Notes to Required Supplementary Information
December 31, 2020
-82-
PERA – GENERAL EMPLOYEES RETIREMENT FUND
2020 CHANGES IN ACTUARIAL ASSUMPTIONS
• The price inflation assumption was decreased from 2.50 percent to 2.25 percent.
• The payroll growth assumption was decreased from 3.25 percent to 3.00 percent.
• Assumed salary increase rates were changed as recommended in the June 30, 2019 experience
study. The net effect is assumed rates that average 0.25 percent less than previous rates.
• Assumed rates of retirement were changed as recommended in the June 30, 2019 experience
study. The changes result in more unreduced (normal) retirements and slightly fewer
Rule of 90 and early retirements.
• Assumed rates of termination were changed as recommended in the June 30, 2019 experience
study. The new rates are based on service and are generally lower than the previous rates for
years two through five, and slightly higher thereafter.
• Assumed rates of disability were changed as recommended in the June 30, 2019 experience
study. The change results in fewer predicted disability retirements for males and females.
• The base mortality table for healthy annuitants and employees was changed from the RP-2014
Table to the Pub-2010 General Mortality Table, with adjustments. The base mortality table for
disabled annuitants was changed from the RP-2014 Disabled Annuitant Mortality Table to the
Pub-2010 General/Teacher Disabled Annuitant Mortality Table, with adjustments.
• The mortality improvement scale was changed from MP-2018 to MP-2019.
• The assumed spouse age difference was changed from two years older for females to one year
older.
• The assumed number of married male new retirees electing the 100.00 percent joint and
survivor option changed from 35.00 percent to 45.00 percent. The assumed number of married
female new retirees electing the 100.00 percent joint and survivor option changed from
15.00 percent to 30.00 percent. The corresponding number of married new retirees electing the
life annuity option was adjusted accordingly.
2020 CHANGES IN PLAN PROVISIONS
• Augmentation for current privatized members was reduced to 2.00 percent for the period July 1,
2020 through December 31, 2023, and zero percent thereafter. Augmentation was eliminated
for privatizations occurring after June 30, 2020.
CITY OF PRIOR LAKE
Notes to Required Supplementary Information (continued)
December 31, 2020
-83-
PERA – GENERAL EMPLOYEES RETIREMENT FUND (CONTINUED)
2019 CHANGES IN ACTUARIAL ASSUMPTIONS
• The mortality projection scale was changed from MP-2017 to MP-2018.
2019 CHANGES IN PLAN PROVISIONS
• The employer supplemental contribution was changed prospectively, decreasing from
$31.0 million to $21.0 million per year. The state’s special funding contribution was changed
prospectively, requiring $16.0 million due per year through 2031.
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.
2018 CHANGES IN PLAN PROVISIONS
• The augmentation adjustment in early retirement factors is eliminated over a five-year period
starting July 1, 2019, resulting in actuarial equivalence after June 30, 2024.
• Interest credited on member contributions decreased from 4.00 percent to 3.00 percent,
beginning July 1, 2018.
• Deferred augmentation was changed to zero percent, effective January 1, 2019. Augmentation
that has already accrued for deferred members will still apply.
• Contribution stabilizer provisions were repealed.
• Post-retirement benefit increases were changed from 1.00 percent per year with a provision to
increase to 2.50 percent upon attainment of 90.00 percent funding ratio to 50.00 percent of the
Social Security Cost of Living Adjustment, not less than 1.00 percent and not more than
1.50 percent, beginning January 1, 2019.
• For retirements on or after January 1, 2024, the first benefit increase is delayed until the retiree
reaches normal retirement age; does not apply to Rule of 90 retirees, disability benefit
recipients, or survivors.
• Actuarial equivalent factors were updated to reflect revised mortality and interest assumptions.
CITY OF PRIOR LAKE
Notes to Required Supplementary Information (continued)
December 31, 2020
-84-
PERA – GENERAL EMPLOYEES RETIREMENT FUND (CONTINUED)
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.
2017 CHANGES IN PLAN PROVISIONS
• The state’s contribution for the Minneapolis Employees Retirement Fund equals $16.0 million
in 2017 and 2018, and $6.0 million thereafter.
• The Employer Supplemental Contribution for the Minneapolis Employees Retirement Fund
changed from $21.0 million to $31.0 million in calendar years 2019 to 2031. The state’s
contribution changed from $16.0 million to $6.0 million in calendar years 2019 to 2031.
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 changed from 7.90 percent to 7.50 percent.
• Other assumptions were changed pursuant to the experience study 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 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.
2015 CHANGES IN PLAN PROVISIONS
• On January 1, 2015, the Minneapolis Employees Retirement Fund was merged into the General
Employees Fund, which increased the total pension liability by $1.1 billion and increased the
fiduciary plan net position by $892.0 million. Upon consolidation, state and employer
contributions were revised; the state’s contribution of $6.0 million, which meets the special
funding situation definition, was due September 2015.
CITY OF PRIOR LAKE
Notes to Required Supplementary Information (continued)
December 31, 2020
-85-
PERA – PUBLIC EMPLOYEES POLICE AND FIRE FUND
2020 CHANGES IN ACTUARIAL ASSUMPTIONS
• The mortality projection scale was changed from MP-2018 to MP-2019.
2019 CHANGES IN ACTUARIAL ASSUMPTIONS
• The mortality projection scale was changed from MP-2017 to MP-2018.
2018 CHANGES IN ACTUARIAL ASSUMPTIONS
• The mortality projection scale was changed from MP-2016 to MP-2017.
2018 CHANGES IN PLAN PROVISIONS
• Post-retirement benefit increases were changed to 1.00 percent for all years, with no trigger.
• An end date of July 1, 2048 was added to the existing $9.0 million state contribution.
• New annual state aid will equal $4.5 million in fiscal years 2019 and 2020, and $9.0 million
thereafter, until the plan reaches 100.00 percent funding, or July 1, 2048, if earlier.
• Member contributions were changed from 10.80 percent to 11.30 percent of pay, effective
January 1, 2019, and 11.80 percent of pay, effective January 1, 2020.
• Employer contributions were changed from 16.20 percent to 16.95 percent of pay, effective
January 1, 2019, and 17.70 percent of pay, effective January 1, 2020.
• Interest credited on member contributions decreased from 4.00 percent to 3.00 percent,
beginning July 1, 2018.
• Deferred augmentation was changed to zero percent, effective January 1, 2019. Augmentation
that has already accrued for deferred members will still apply.
• Actuarial equivalent factors were updated to reflect revised mortality and interest assumptions.
CITY OF PRIOR LAKE
Notes to Required Supplementary Information (continued)
December 31, 2020
-86-
PERA – PUBLIC EMPLOYEES POLICE AND FIRE FUND (CONTINUED)
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 was changed from 5.60 percent per annum to 7.50 percent per annum.
CITY OF PRIOR LAKE
Notes to Required Supplementary Information (continued)
December 31, 2020
-87-
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 per year 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 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.
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.
CITY OF PRIOR LAKE
Notes to Required Supplementary Information (continued)
December 31, 2020
-88-
PRIOR LAKE FIRE RELIEF ASSOCIATION
• The discount rate was changed from 6.00 percent to 5.50 percent for 2019.
• A benefit level increase from $8,000 to $8,500 was reflected in the pension liability for 2019.
• A benefit level increase from $7,200 to $8,000 was reflected in the pension liability for 2018.
• A benefit level increase from $7,100 to $7,200 was reflected in the pension liability for 2017.
• A benefit level increase from $6,800 to $7,100 was reflected in the pension liability for 2016.
OTHER POST-EMPLOYMENT BENEFITS PLAN
2019 CHANGES IN ACTUARIAL ASSUMPTIONS
• The healthcare trend rates were changed from 6.25 percent, grading to 5.00 percent over
five years, to 6.50 percent, grading to 5.00 percent over six years.
• The mortality tables were updated to meet current actuarial standards.
• The discount rate was changed from 3.30 percent to 3.80 percent.
2018 CHANGES IN ACTUARIAL ASSUMPTIONS
• The healthcare trend rates were changed from 6.50 percent, grading to 5.00 percent over
six years, to 6.25 percent, grading to 5.00 percent over five years.
• The mortality table was updated from RP-2014 adjusted to 2006 White Collar Mortality Tables
with MP-2016 Generational Improvement Scale, to RF-2014 White Collar with MP-2016
Generational Improvement Scale.
• The actuarial cost method was changed from entry-age normal level dollar to entry-age level
percent of pay.
• The discount rate was changed from 3.50 percent to 3.30 percent.
THIS PAGE INTENTIONALLY LEFT BLANK
SUPPLEMENTAL INFORMATION
Special
Revenue Capital Projects Total
Assets
Cash and investments 3,354,245$ 10,063,814$ 13,418,059$
Cash held in escrow 39,777 – 39,777
Receivables
Delinquent taxes 90 – 90
Accounts 90,100 49,799 139,899
Special assessments
Delinquent – 1,544 1,544
Deferred – 390,990 390,990
Due from other governmental agencies 927 4,369 5,296
Assets held for resale 417,268 – 417,268
Total assets 3,902,407$ 10,510,516$ 14,412,923$
Liabilities
Accounts and contracts payable 40,489$ 474,658$ 515,147$
Accrued salaries and employee benefits payable 4,191 – 4,191
Due to other governmental agencies 563 – 563
Deposits payable 200,926 116,500 317,426
Unearned revenue 33,750 – 33,750
Total liabilities 279,919 591,158 871,077
Deferred inflows of resources
Unavailable revenue from delinquent taxes 90 – 90
Unavailable revenue from special assessments – 392,535 392,535
Total deferred inflows of resources 90 392,535 392,625
Fund balances
Restricted 3,622,398 864,565 4,486,963
Assigned – 8,662,258 8,662,258
Total fund balances 3,622,398 9,526,823 13,149,221
Total liabilities, deferred inflows
of resources, and fund balances 3,902,407$ 10,510,516$ 14,412,923$
CITY OF PRIOR LAKE
Nonmajor Governmental Funds
Combining Balance Sheet
as of December 31, 2020
-89-
Special
Revenue Capital Projects Total
Revenue
Taxes 273,460$ 1,852,571$ 2,126,031$
Special assessments – 306,455 306,455
Charges for services 282,414 953,169 1,235,583
Investment income 88,530 307,580 396,110
Miscellaneous
Contributions and donations 35,030 – 35,030
Other 28,117 28,036 56,153
Total revenue 707,551 3,447,811 4,155,362
Expenditures
Current
General government 4,724 – 4,724
Public safety 12,896 – 12,896
Culture and recreation 11,152 – 11,152
Economic development 170,125 229 170,354
Capital outlay 622,913 2,587,391 3,210,304
Total expenditures 821,810 2,587,620 3,409,430
Excess (deficiency) of revenues over expenditures (114,259) 860,191 745,932
Other financing sources (uses)
Contributions from governmental activities 180,868 – 180,868
Transfers in 161,250 571,935 733,185
Transfers out – (368,828) (368,828)
Sale of capital assets – 63,717 63,717
Total other financing sources (uses)342,118 266,824 608,942
Net change in fund balances 227,859 1,127,015 1,354,874
Fund balances
Beginning of year 3,394,539 8,399,808 11,794,347
End of year 3,622,398$ 9,526,823$ 13,149,221$
Year Ended December 31, 2020
CITY OF PRIOR LAKE
Nonmajor Governmental Funds
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances
-90-
Capital ED Revolving Revolving
Park Loan Loan
Assets
Cash and investments 1,678,603$ 134,528$ 664$
Cash held in escrow – – –
Receivables
Delinquent taxes – – –
Accounts 2,858 579 346
Due from other governmental agencies – – –
Assets held for resale – – –
Total assets 1,681,461$ 135,107$ 1,010$
Liabilities
Accounts and contracts payable 17,393$ –$ –$
Accrued salaries and employee benefits payable – – –
Due to other governmental agencies – – –
Deposits payable – – –
Unearned revenue 33,750 – –
Total liabilities 51,143 – –
Deferred inflows of resources
Unavailable revenue from delinquent taxes – – –
Fund balances
Restricted for economic development – 135,107 1,010
Restricted for forfeiture sales – – –
Restricted for capital improvements 1,630,318 – –
Restricted for development – – –
Restricted for communications – – –
Total fund balances 1,630,318 135,107 1,010
Total liabilities, deferred inflows
of resources, and fund balances 1,681,461$ 135,107$ 1,010$
as of December 31, 2020
CITY OF PRIOR LAKE
Nonmajor Special Revenue Funds
Combining Balance Sheet
-91-
Cable Police
Franchise EDA Forfeiture DAG Total
91,746$ 464,303$ 162,638$ 821,763$ 3,354,245$
25,000 – 14,777 – 39,777
– 90 – – 90
6,240 79,853 224 – 90,100
– 927 – – 927
– 417,268 – – 417,268
122,986$ 962,441$ 177,639$ 821,763$ 3,902,407$
–$ 238$ –$ 22,858$ 40,489$
– 4,191 – – 4,191
– 563 – – 563
25,000 – 14,777 161,149 200,926
– – – – 33,750
25,000 4,992 14,777 184,007 279,919
– 90 – – 90
– 80,000 – – 216,117
– – 162,862 – 162,862
– – – 637,756 2,268,074
– 877,359 – – 877,359
97,986 – – – 97,986
97,986 957,359 162,862 637,756 3,622,398
122,986$ 962,441$ 177,639$ 821,763$ 3,902,407$
-92-
Capital ED Revolving Revolving
Park Loan Loan
Revenues
Taxes –$ –$ –$
Charges for services 174,820 – –
Investment income 63,581 4,595 5
Miscellaneous
Contributions and donations 30,130 – –
Other – – –
Total revenues 268,531 4,595 5
Expenditures
Current
General government – – –
Public safety – – –
Culture and recreation 11,152 – –
Economic development – – –
Capital outlay 357,754 – –
Total expenditures 368,906 – –
Excess (deficiency) of revenues
over expenditures (100,375) 4,595 5
Other financing sources
Contributions from governmental activities – – –
Transfers in – – –
Total other financing sources – – –
Net change in fund balances (100,375) 4,595 5
Fund balances
Beginning of year 1,730,693 130,512 1,005
End of year 1,630,318$ 135,107$ 1,010$
Year Ended December 31, 2020
CITY OF PRIOR LAKE
Nonmajor Special Revenue Funds
Combining Statement of Revenues, Expenditures,
and Changes in Fund Balances
-93-
Cable Police
Franchise EDA Forfeiture DAG Total
–$ 273,460$ –$ –$ 273,460$
31,276 7,617 – 68,701 282,414
2,667 12,366 5,316 – 88,530
– 4,900 – – 35,030
– – 28,117 – 28,117
33,943 298,343 33,433 68,701 707,551
4,724 – – – 4,724
– – 12,896 – 12,896
– – – – 11,152
– 170,125 – – 170,125
6,399 87,533 31 171,196 622,913
11,123 257,658 12,927 171,196 821,810
22,820 40,685 20,506 (102,495) (114,259)
– 180,868 – – 180,868
– 161,250 – – 161,250
– 342,118 – – 342,118
22,820 382,803 20,506 (102,495) 227,859
75,166 574,556 142,356 740,251 3,394,539
97,986$ 957,359$ 162,862$ 637,756$ 3,622,398$
-94-
Tax Revolving Trunk
Increment Equipment Reserve
Assets
Cash and investments 20,294$ 799,452$ 4,012,844$
Receivables
Accounts 926 5,043 19,967
Special assessments
Delinquent – – 726
Deferred – – 6,245
Due from other governmental agencies – 2,347 –
Total assets 21,220$ 806,842$ 4,039,782$
Liabilities
Accounts and contracts payable –$ 169,838$ –$
Deposits payable – – –
Total liabilities – 169,838 –
Deferred inflows of resources
Unavailable revenue from special assessments – – 6,972
Fund balances
Restricted for tax increment 21,220 – –
Assigned for capital improvements – 637,004 4,032,810
Total fund balances 21,220 637,004 4,032,810
Total liabilities, deferred inflows
of resources, and fund balances 21,220$ 806,842$ 4,039,782$
CITY OF PRIOR LAKE
Nonmajor Capital Projects Funds
Combining Balance Sheet
as of December 31, 2020
-95-
Tax Tax
Street Water Increment 1-3 Increment 3-1
Oversizing Storage Lakefront Creekside
1,376,660$ 622,005$ 151,666$ 265,562$
3,645 13,775 657 295
– 559 – –
– 3,218 – –
– – – –
1,380,305$ 639,557$ 152,323$ 265,857$
–$ –$ 42,074$ –$
116,500 – – –
116,500 – 42,074 –
– 3,777 – –
– – 110,249 265,857
1,263,805 635,780 – –
1,263,805 635,780 110,249 265,857
1,380,305$ 639,557$ 152,323$ 265,857$
-96-(continued)
Tax Tax Tax
Increment 5-1 Increment 6-1 Increment 1-4
Premiere Shepard’s Path River Vet
Assets
Cash and investments 17,643$ 587,115$ 6,080$
Receivables
Accounts 22 848 (11)
Special assessments
Delinquent – – –
Deferred – – –
Due from other governmental agencies – – –
Total assets 17,665$ 587,963$ 6,069$
Liabilities
Accounts and contracts payable 7,230$ 159,740$ 4,717$
Deposits payable – – –
Total liabilities 7,230 159,740 4,717
Deferred inflows of resources
Unavailable revenue from special assessments – – –
Fund balances
Restricted for tax increment 10,435 428,223 1,352
Assigned for capital improvements – – –
Total fund balances 10,435 428,223 1,352
Total liabilities, deferred inflows
of resources, and fund balances 17,665$ 587,963$ 6,069$
as of December 31, 2020
CITY OF PRIOR LAKE
Nonmajor Capital Projects Funds
Combining Balance Sheet (continued)
-97-
Tax Revolving Permanent
Increment 1-5 Park Facility Improvement
Gateway Ctr Equipment Management Revolving Total
118,470$ 1,220,590$ 506,207$ 359,226$ 10,063,814$
(182) 1,303 3,643 (132) 49,799
– – – 259 1,544
– – – 381,527 390,990
– 1,197 111 714 4,369
118,288$ 1,223,090$ 509,961$ 741,594$ 10,510,516$
91,059$ –$ –$ –$ 474,658$
– – – – 116,500
91,059 – – – 591,158
– – – 381,786 392,535
27,229 – – – 864,565
– 1,223,090 509,961 359,808 8,662,258
27,229 1,223,090 509,961 359,808 9,526,823
118,288$ 1,223,090$ 509,961$ 741,594$ 10,510,516$
-98-
Tax Revolving Trunk
Increment Equipment Reserve
Revenues
Taxes –$ 624,897$ –$
Special assessments – – 1,844
Charges for services 7,200 – 604,347
Investment income 1,064 21,105 123,209
Miscellaneous – – –
Total revenues 8,264 646,002 729,400
Expenditures
Current
Economic development 229 – –
Capital outlay 73,340 1,115,758 492
Total expenditures 73,569 1,115,758 492
Excess (deficiency) of revenues
over expenditures (65,305) (469,756) 728,908
Other financing sources (uses)
Transfers in – 215,000 –
Transfers out – –(60,000)
Sale of capital assets – 63,717 –
Total other financing sources (uses)– 278,717 (60,000)
Net change in fund balances (65,305) (191,039) 668,908
Fund balances
Beginning of year 86,525 828,043 3,363,902
End of year 21,220$ 637,004$ 4,032,810$
CITY OF PRIOR LAKE
Nonmajor Capital Projects Funds
Combining Statement of Revenues, Expenditures,
and Changes in Fund Balances
Year Ended December 31, 2020
-99-
Tax Tax
Street Water Increment 1-3 Increment 3-1
Oversizing Storage Lakefront Creekside
–$ –$ 130,212$ 96,149$
– 1,317 – –
44,461 297,161 – –
44,972 16,365 3,754 6,249
– – – –
89,433 314,843 133,966 102,398
– – – –
– – 100,368 1,009
– – 100,368 1,009
89,433 314,843 33,598 101,389
– – – –
– – (28,895) –
– – – –
– – (28,895) –
89,433 314,843 4,703 101,389
1,174,372 320,937 105,546 164,468
1,263,805$ 635,780$ 110,249$ 265,857$
-100-(continued)
Tax Tax Tax
Increment 5-1 Increment 6-1 Increment 1-4
Premiere Shepard’s Path River Vet
Revenues
Taxes 16,068$ 354,978$ 10,483$
Special assessments – – –
Charges for services – – –
Investment income 372 14,676 61
Miscellaneous – – –
Total revenues 16,440 369,654 10,544
Expenditures
Current
Economic development – – –
Capital outlay 15,490 320,471 10,445
Total expenditures 15,490 320,471 10,445
Excess (deficiency) of revenues
over expenditures 950 49,183 99
Other financing sources (uses)
Transfers in – – –
Transfers out – – –
Sale of capital assets – – –
Total other financing sources (uses)– – –
Net change in fund balances 950 49,183 99
Fund balances
Beginning of year 9,485 379,040 1,253
End of year 10,435$ 428,223$ 1,352$
Year Ended December 31, 2020
CITY OF PRIOR LAKE
Nonmajor Capital Projects Funds
Combining Statement of Revenues, Expenditures,
and Changes in Fund Balances (continued)
-101-
Tax Revolving Permanent
Increment 1-5 Park Facility Improvement
Gateway Ctr Equipment Management Revolving Total
191,705$ 318,599$ 29,523$ 79,957$ 1,852,571$
– – – 303,294 306,455
– – – – 953,169
951 33,131 17,466 24,205 307,580
– 28,036 – – 28,036
192,656 379,766 46,989 407,456 3,447,811
– – – – 229
183,131 62,120 114,490 590,277 2,587,391
183,131 62,120 114,490 590,277 2,587,620
9,525 317,646 (67,501) (182,821) 860,191
– – 99,000 257,935 571,935
– – – (279,933) (368,828)
– – – – 63,717
– – 99,000 (21,998) 266,824
9,525 317,646 31,499 (204,819) 1,127,015
17,704 905,444 478,462 564,627 8,399,808
27,229$ 1,223,090$ 509,961$ 359,808$ 9,526,823$
-102-
2019
Variance With
Original Final Actual Final Budget Actual
Revenues
Taxes
Property taxes 8,953,156$ 8,953,156$ 8,923,782$ (29,374)$ 8,367,851$
Franchise taxes 630,000 630,000 670,917 40,917 639,783
Total taxes 9,583,156 9,583,156 9,594,699 11,543 9,007,634
Special assessments 5,000 5,000 5,457 457 140
Licenses and permits
Business 84,145 84,145 11,625 (72,520) 81,320
Nonbusiness 746,319 746,319 888,976 142,657 910,776
Total licenses and permits 830,464 830,464 900,601 70,137 992,096
Intergovernmental
Federal grants 10,000 10,000 1,957,795 1,947,795 1,821
State
Road and bridge aid 377,000 377,000 417,958 40,958 378,807
Fire relief aid 242,650 242,650 248,275 5,625 273,282
Police aid 251,990 251,990 296,262 44,272 291,594
Other state aids 25,905 25,905 34,315 8,410 11,905
County and local
Township fire and rescue aid 364,147 364,147 365,765 1,618 314,136
Liaison aid 54,670 54,670 54,670 – 52,680
Other local aids – – 17,000 17,000 1,000
Payment in lieu of taxes 800,000 800,000 700,000 (100,000) 600,000
Total intergovernmental 2,126,362 2,126,362 4,092,040 1,965,678 1,925,225
Charges for services
Zoning fees 30,000 30,000 36,370 6,370 32,104
Plan check fees 320,487 320,487 397,284 76,797 382,837
Park fees 181,850 181,850 128,565 (53,285) 202,125
Project fees 122,000 122,000 41,995 (80,005) 73,290
Park program revenue 62,000 62,000 36,348 (25,652) 75,084
Tower leases 317,582 317,582 305,566 (12,016) 312,116
Park admission/rent 107,200 107,200 96,534 (10,666) 76,419
Facility rental 35,831 35,831 36,374 543 37,536
Reports 1,100 1,100 2,369 1,269 1,602
Total charges for services 1,178,050 1,178,050 1,081,405 (96,645) 1,193,113
CITY OF PRIOR LAKE
General Fund
Schedule of Revenues, Expenditures, and
Changes in Fund Balances – Budget and Actual
Year Ended December 31, 2020
(With Comparative Actual Amounts for the Year Ended December 31, 2019)
2020
Budgeted Amounts
-103-(continued)
2019
Variance With
Original Final Actual Final Budget Actual
Revenues (continued)
Fines and forfeits – – 1,652 1,652 996
Investment income
Interest earnings 102,700 102,700 153,053 50,353 152,608
Amortization – premium/discount – – (66,083) (66,083) (8,690)
Unrealized gain (loss)– – 99,850 99,850 116,516
Total investment income 102,700 102,700 186,820 84,120 260,434
Miscellaneous
Other 29,766 29,766 82,535 52,769 56,864
Contributions and donations – – 14,734 14,734 18,403
Developers’ agreements 130,000 130,000 62,062 (67,938) 119,021
Total miscellaneous 159,766 159,766 159,331 (435) 194,288
Total revenues 13,985,498 13,985,498 16,022,005 2,036,507 13,573,926
Expenditures
Current expenditures
General government
Mayor and City Council
Personal services 66,857 66,857 61,277 (5,580) 63,060
Supplies 300 300 170 (130) 311
Other services and charges 8,350 8,350 4,240 (4,110) 6,773
Total Mayor and City Council 75,507 75,507 65,687 (9,820) 70,144
Ordinance
Other services and charges 7,500 7,500 5,440 (2,060) 4,025
Administration
Personal services 274,743 274,743 243,543 (31,200) 464,153
Supplies 6,500 6,500 7,176 676 6,983
Other services and charges 59,230 59,230 67,020 7,790 57,863
Total administration 340,473 340,473 317,739 (22,734) 528,999
Boards and commissions
Personal services 10,765 10,765 5,306 (5,459) 8,719
Other services and charges 1,000 1,000 201 (799) –
Total boards and commissions 11,765 11,765 5,507 (6,258) 8,719
Schedule of Revenues, Expenditures, and
Budgeted Amounts
General Fund
Changes in Fund Balances – Budget and Actual (continued)
CITY OF PRIOR LAKE
Year Ended December 31, 2020
(With Comparative Actual Amounts for the Year Ended December 31, 2019)
2020
-104-(continued)
2019
Variance With
Original Final Actual Final Budget Actual
Expenditures (continued)
Current expenditures (continued)
General government (continued)
City Clerk
Personal services 115,093 115,093 115,545 452 81,824
Supplies – – 76 76 179
Other services and charges 1,190 1,190 1,540 350 1,977
Total City Clerk 116,283 116,283 117,161 878 83,980
Election
Personal services 28,231 28,231 43,468 15,237 –
Supplies 3,000 3,000 8,991 5,991 –
Other services and charges 3,000 3,000 5,934 2,934 –
Total election 34,231 34,231 58,393 24,162 –
Finance
Personal services 502,507 502,507 481,376 (21,131) 465,968
Supplies 1,450 1,450 1,533 83 485
Other services and charges 16,615 19,655 16,989 (2,666) 14,122
Total finance 520,572 523,612 499,898 (23,714) 480,575
Auditing
Other services and charges 35,475 35,475 31,184 (4,291) 37,564
Assessing
Other services and charges 218,704 218,704 216,236 (2,468) 202,418
Legal services
Other services and charges 180,000 180,000 193,279 13,279 152,275
Personnel
Personal services 262,440 262,440 269,685 7,245 154,461
Supplies 250 250 46 (204) 69
Other services and charges 44,200 44,200 33,475 (10,725) 32,588
Total personnel 306,890 306,890 303,206 (3,684) 187,118
Communications
Personal services 113,981 113,981 111,308 (2,673) 106,378
Supplies 200 200 – (200) –
Other services and charges 66,150 66,150 38,736 (27,414) 20,183
Total communications 180,331 180,331 150,044 (30,287) 126,561
General Fund
2020
Year Ended December 31, 2020
CITY OF PRIOR LAKE
Changes in Fund Balances – Budget and Actual (continued)
(With Comparative Actual Amounts for the Year Ended December 31, 2019)
Schedule of Revenues, Expenditures, and
Budgeted Amounts
-105-(continued)
2019
Variance With
Original Final Actual Final Budget Actual
Expenditures (continued)
Current expenditures (continued)
General government (continued)
Community development
Personal services 315,151 315,151 304,334 (10,817) 299,211
Supplies 5,450 5,450 3,536 (1,914) 1,530
Other services and charges 59,320 59,320 142,284 82,964 27,449
Total community development 379,921 379,921 450,154 70,233 328,190
Technology
Personal services 211,666 138,152 141,468 3,316 150,439
Supplies 34,376 34,376 45,693 11,317 43,069
Other services and charges 130,633 224,147 197,960 (26,187) 134,730
Total technology 376,675 396,675 385,121 (11,554) 328,238
Buildings and plant
Personal services 98,827 48,826 61,740 12,914 95,013
Supplies 8,000 8,000 7,762 (238) 8,388
Other services and charges 392,271 392,271 411,129 18,858 357,849
Total buildings and plant 499,098 449,097 480,631 31,534 461,250
Total general government 3,283,425 3,256,464 3,279,680 23,216 3,000,056
Public safety
Police
Personal services 4,270,175 4,270,175 4,543,382 273,207 4,126,264
Supplies 177,757 184,079 181,722 (2,357) 145,362
Other services and charges 400,978 400,978 286,851 (114,127) 230,468
Total police 4,848,910 4,855,232 5,011,955 156,723 4,502,094
Fire and rescue
Personal services 744,129 744,129 759,660 15,531 691,220
Supplies 115,260 115,260 91,930 (23,330) 91,345
Other services and charges 179,051 179,051 144,264 (34,787) 154,190
Total fire and rescue 1,038,440 1,038,440 995,854 (42,586) 936,755
Building inspections
Personal services 549,272 621,273 614,709 (6,564) 562,078
Supplies 17,250 17,250 8,444 (8,806) 14,713
Other services and charges 37,791 37,791 23,013 (14,778) 17,675
Total building inspections 604,313 676,314 646,166 (30,148) 594,466
Emergency management
Other services and charges 14,875 14,875 10,335 (4,540) 9,947
Year Ended December 31, 2020
(With Comparative Actual Amounts for the Year Ended December 31, 2019)
2020
Budgeted Amounts
CITY OF PRIOR LAKE
General Fund
Schedule of Revenues, Expenditures, and
Changes in Fund Balances – Budget and Actual (continued)
-106-(continued)
2019
Variance With
Original Final Actual Final Budget Actual
Expenditures (continued)
Current expenditures (continued)
Public safety (continued)
Animal control
Other services and charges 28,800 28,800 29,195 395 28,200
Total public safety 6,535,338 6,613,661 6,693,505 79,844 6,071,462
Public works
Engineering
Personal services 341,628 341,628 316,764 (24,864) 303,932
Supplies 10,600 10,600 8,004 (2,596) 6,693
Other services and charges 26,862 26,862 31,353 4,491 37,671
Total engineering 379,090 379,090 356,121 (22,969) 348,296
Central garage
Personal services 244,744 244,744 232,956 (11,788) 225,463
Supplies 184,525 184,525 177,965 (6,560) 144,447
Other services and charges 53,800 53,800 59,315 5,515 42,934
Total central garage 483,069 483,069 470,236 (12,833) 412,844
Streets
Personal services 468,818 484,218 470,933 (13,285) 422,174
Supplies 333,601 333,601 208,033 (125,568) 332,140
Other services and charges 535,867 535,867 494,089 (41,778) 438,729
Total streets 1,338,286 1,353,686 1,173,055 (180,631) 1,193,043
Total public works 2,200,445 2,215,845 1,999,412 (216,433) 1,954,183
Culture and recreation
Recreation
Personal services 351,207 351,207 249,411 (101,796) 304,211
Supplies 87,052 87,052 57,188 (29,864) 103,307
Other services and charges 35,800 35,800 32,175 (3,625) 26,050
Total recreation 474,059 474,059 338,774 (135,285) 433,568
Parks
Personal services 1,107,555 1,118,055 863,292 (254,763) 990,650
Supplies 183,755 183,755 123,499 (60,256) 143,591
Other services and charges 331,761 369,231 240,858 (128,373) 259,408
Total parks 1,623,071 1,671,041 1,227,649 (443,392) 1,393,649
Budgeted Amounts
Year Ended December 31, 2020
(With Comparative Actual Amounts for the Year Ended December 31, 2019)
Changes in Fund Balances – Budget and Actual (continued)
Schedule of Revenues, Expenditures, and
General Fund
CITY OF PRIOR LAKE
2020
-107-(continued)
2019
Variance With
Original Final Actual Final Budget Actual
Expenditures (continued)
Current expenditures (continued)
Culture and recreation (continued)
Libraries
Supplies 5,000 5,000 2,839 (2,161) 10,449
Other services and charges 64,073 64,073 59,510 (4,563) 51,598
Total libraries 69,073 69,073 62,349 (6,724) 62,047
Total culture and recreation 2,166,203 2,214,173 1,628,772 (585,401) 1,889,264
Total current expenditures 14,185,411 14,300,143 13,601,369 (698,774) 12,914,965
Capital outlay
General government
Technology 61,819 70,549 85,525 14,976 74,206
Public safety
Police – – 46,544 46,544 3,588
Fire – – – – 7,595
Public works
Streets – – – – 7,485
Buildings and plant 6,500 6,500 12,239 5,739 7,722
Total capital outlay 68,319 77,049 144,308 67,259 100,596
Total expenditures 14,253,730 14,377,192 13,745,677 (631,515) 13,015,561
Excess (deficiency) of revenues
over expenditures (268,232) (391,694) 2,276,328 2,668,022 558,365
Other financing sources (uses)
Transfers in 470,000 470,000 470,000 – 456,300
Transfers out (403,018) (438,018) (538,018) (100,000) (334,769)
Sale of assets – – 2,603 2,603 9,877
Total other financing
sources (uses)66,982 31,982 (65,415) (97,397) 131,408
Net change in fund balances (201,250)$ (359,712)$ 2,210,913 2,570,625$ 689,773
Fund balances
Beginning of year 7,903,175 7,213,402
End of year 10,114,088$ 7,903,175$
Budgeted Amounts
Schedule of Revenues, Expenditures, and
Changes in Fund Balances – Budget and Actual (continued)
Year Ended December 31, 2020
2020
(With Comparative Actual Amounts for the Year Ended December 31, 2019)
General Fund
CITY OF PRIOR LAKE
-108-
Water Tax
City Hall Fire Treatment Increment
2005 Station #2 Plant 2004
Assets
Cash and investments 20,163$ 212$ 2,037$ 29,949$
Receivables
Accounts 143 – – 127
Special assessments
Delinquent – – – –
Deferred – – – –
Other (Green Acres)– – – –
Due from other governmental agencies 2,490 – – –
Total assets 22,796$ 212$ 2,037$ 30,076$
Liabilities
Accounts and contracts payable 251$ 126$ –$ 128$
Deferred inflows of resources
Unavailable revenue from
special assessments – – – –
Fund balances
Restricted for debt service 22,545 86 2,037 29,948
Total liabilities, deferred inflows
of resources, and fund balances 22,796$ 212$ 2,037$ 30,076$
CITY OF PRIOR LAKE
Debt Service Fund
Balance Sheet by Account
as of December 31, 2020
-109-
CR 12 and CSAH 44,
Fish 2010 Boudin Boudin Welcome,Crest,
Point Reconstruction Phase I Phase II CR 12, Sunset Maplewood
–$ –$ 90,819$ 140,339$ 373,924$ 199,967$
– – 1,475 1,041 3,945 252
– – – – 663 –
30,112 – 30,084 37,079 300,203 20,308
451,350 – – – – –
– – 628 679 638 601
481,462$ –$ 123,006$ 179,138$ 679,373$ 221,128$
–$ –$ 128$ 126$ 251$ 251$
481,462 – 30,084 37,079 300,866 20,308
– – 92,794 141,933 378,256 200,569
481,462$ –$ 123,006$ 179,138$ 679,373$ 221,128$
-110 (continued)
Street TH 13, 150th
Reconstruction Street 2015 Manitou Road
GESP Lease 2015 Reconstruction Improvement
Assets
Cash and investments 43,899$ 175,498$ 549,309$ 133,937$
Receivables
Accounts 2,373 893 (311) (142)
Special assessments
Delinquent – 11,459 – 3,621
Deferred 16,504 517,239 – 125,771
Other (Green Acres)– – – –
Due from other governmental agencies 1,642 – 842 1,062
Total assets 64,418$ 705,089$ 549,840$ 264,249$
Liabilities
Accounts and contracts payable –$ 251$ 251$ 84$
Deferred inflows of resources
Unavailable revenue from
special assessments 16,504 528,699 – 129,392
Fund balances
Restricted for debt service 47,914 176,139 549,589 134,773
Total liabilities, deferred inflows
of resources, and fund balances 64,418$ 705,089$ 549,840$ 264,249$
Balance Sheet by Account (continued)
Debt Service Fund
CITY OF PRIOR LAKE
as of December 31, 2020
-111-
Cates, Balsam,
Franklin Trail,
Sycamore Trail,
Maintenance 2017 2018
TH 13, 150th Center Roof Mill and Franklin,
Street 2016 Equipment Improvements Overlay Huron,2018
Reconstruction 2016 2017 Improvements Woodside Street Overlay
9,331$ 14,310$ 541,867$ 5,665$ 348,868$ 12,242$
(5) (9) 1 (3) (276) (8)
– – 4,172 – 914 –
– – 586,093 – 418,774 –
– – –– ––
157 254 1,613 5 2,569 23
9,483$ 14,555$ 1,133,746$ 5,667$ 770,849$ 12,257$
84$ 84$ 188$ 63$ 188$ 63$
– – 590,265 – 419,688 –
9,399 14,471 543,293 5,604 350,973 12,194
9,483$ 14,555$ 1,133,746$ 5,667$ 770,849$ 12,257$
-112 (continued)
THIS PAGE INTENTIONALLY LEFT BLANK
2019 2019
Street Street
Improvements Overlay Total
Assets
Cash and investments 121,139$ –$ 2,813,475$
Receivables
Accounts (54) – 9,442
Special assessments
Delinquent – – 20,829
Deferred 10,557 – 2,092,724
Other (Green Acres)– – 451,350
Due from other governmental agencies 841 – 14,044
Total assets 132,483$ –$ 5,401,864$
Liabilities
Accounts and contracts payable 252$ –$ 2,769$
Deferred inflows of resources
Unavailable revenue from
special assessments 10,557 – 2,564,904
Fund balances
Restricted for debt service 121,674 – 2,834,191
Total liabilities, deferred inflows
of resources, and fund balances 132,483$ –$ 5,401,864$
CITY OF PRIOR LAKE
Debt Service Fund
Balance Sheet by Account (continued)
as of December 31, 2020
-113-
Water Tax
City Hall Fire Treatment Increment
2005 Station #2 Plant 2004
Revenues
Taxes 663,030$ –$ –$ –$
Special assessments – – – –
Investment income 3,179 – – 988
Total revenues 666,209 – – 988
Expenditures
Debt service
Principal 515,000 160,000 400,000 25,000
Interest and other 148,902 81,740 153,325 3,934
Total expenditures 663,902 241,740 553,325 28,934
Excess (deficiency) of revenues
over expenditures 2,307 (241,740) (553,325) (27,946)
Other financing sources (uses)
Transfers in – 241,768 554,050 28,895
Transfers out – – – –
Total other financing sources (uses)– 241,768 554,050 28,895
Net change in fund balances 2,307 28 725 949
Fund balances
Beginning of year 20,238 58 1,312 28,999
End of year 22,545$ 86$ 2,037$ 29,948$
Year Ended December 31, 2020
and Changes in Fund Balances by Account
CITY OF PRIOR LAKE
Debt Service Fund
Schedule of Revenues, Expenditures,
-114-
CR 12 and CSAH 44,
Fish 2010 Boudin Boudin Welcome,Crest,
Point Reconstruction Phase I Phase II CR 12, Sunset Maplewood
–$ 124,241$ 167,295$ 180,826$ 169,755$ 159,915$
– 14,288 32,551 28,640 85,474 6,095
– 1,912 5,399 7,521 16,076 10,422
– 140,441 205,245 216,987 271,305 176,432
– 130,000 220,000 240,000 325,000 225,000
– 4,160 11,374 16,490 31,526 26,547
– 134,160 231,374 256,490 356,526 251,547
– 6,281 (26,129) (39,503) (85,221) (75,115)
– – – – – –
– (45,645) – – – –
– (45,645) – – – –
– (39,364) (26,129) (39,503) (85,221) (75,115)
– 39,364 118,923 181,436 463,477 275,684
–$ –$ 92,794$ 141,933$ 378,256$ 200,569$
-115-(continued)
Street TH 13, 150th
Reconstruction Street 2015 Manitou Road
GESP Lease 2015 Reconstruction Improvement
Revenues
Taxes 300,147$ –$ 124,241$ 76,267$
Special assessments – 26,682 117,777 26,715
Investment income 203 12,934 15,484 5,741
Total revenues 300,350 39,616 257,502 108,723
Expenditures
Debt service
Principal 269,126 – 210,000 110,000
Interest and other 31,488 117,571 21,476 15,483
Total expenditures 300,614 117,571 231,476 125,483
Excess (deficiency) of revenues
over expenditures (264) (77,955) 26,026 (16,760)
Other financing sources (uses)
Transfers in 45,645 – 110,000 –
Transfers out – (110,000) – –
Total other financing sources (uses)45,645 (110,000) 110,000 –
Net change in fund balances 45,381 (187,955) 136,026 (16,760)
Fund balances
Beginning of year 2,533 364,094 413,563 151,533
End of year 47,914$ 176,139$ 549,589$ 134,773$
and Changes in Fund Balances by Account (continued)
Year Ended December 31, 2020
CITY OF PRIOR LAKE
Debt Service Fund
Schedule of Revenues, Expenditures,
-116-
Cates, Balsam,
Franklin Trail,
Sycamore Trail,
Maintenance 2017 2018
TH 13, 150th Center Roof Mill and Franklin,
Street 2016 Equipment Improvements Overlay Huron,2018
Reconstruction 2016 2017 Improvements Woodside Street Overlay
41,824$ 67,656$ 325,980$ 1,230$ 683,942$ 6,151$
– – 160,830 – 115,781 –
414 658 20,131 156 11,821 234
42,238 68,314 506,941 1,386 811,544 6,385
35,000 60,000 420,000 70,000 525,000 95,000
5,084 4,884 69,952 4,462 208,988 16,262
40,084 64,884 489,952 74,462 733,988 111,262
2,154 3,430 16,989 (73,076) 77,556 (104,877)
– – – 74,400 – 111,200
– – – – – –
– – – 74,400 – 111,200
2,154 3,430 16,989 1,324 77,556 6,323
7,245 11,041 526,304 4,280 273,417 5,871
9,399$ 14,471$ 543,293$ 5,604$ 350,973$ 12,194$
-117-(continued)
THIS PAGE INTENTIONALLY LEFT BLANK
2019 2019
Street Street
Improvements Overlay Total
Revenues
Taxes 223,880$ –$ 3,316,380$
Special assessments 1,794 – 616,627
Investment income 4,255 – 117,528
Total revenues 229,929 – 4,050,535
Expenditures
Debt service
Principal 100,000 65,000 4,199,126
Interest and other 122,350 29,333 1,125,331
Total expenditures 222,350 94,333 5,324,457
Excess (deficiency) of revenues
over expenditures 7,579 (94,333) (1,273,922)
Other financing sources (uses)
Transfers in – 94,333 1,260,291
Transfers out – – (155,645)
Total other financing sources (uses)– 94,333 1,104,646
Net change in fund balances 7,579 – (169,276)
Fund balances
Beginning of year 114,095 – 3,003,467
End of year 121,674$ –$ 2,834,191$
CITY OF PRIOR LAKE
Debt Service Fund
Schedule of Revenues, Expenditures,
and Changes in Fund Balances by Account (continued)
Year Ended December 31, 2020
-118-
Severance
Compensation Insurance Total
Assets
Cash and investments 503,080$ 27,886$ 530,966$
Receivables
Accounts 2,750 284 3,034
Total assets 505,830$ 28,170$ 534,000$
Current liabilities
Current portion of compensated absences payable 360,991$ –$ 360,991$
Noncurrent liabilities
Compensated absences payable 587,817 – 587,817
Total liabilities 948,808 – 948,808
Net position
Unrestricted (442,978) 28,170 (414,808)
Total liabilities and net position 505,830$ 28,170$ 534,000$
CITY OF PRIOR LAKE
Internal Service Funds
Combining Statement of Net Position
as of December 31, 2020
-119-
Severance
Compensation Insurance Total
Operating revenues
Charges for services 32,368$ –$ 32,368$
Operating expenses
Personal services 107,562 105,000 212,562
Operating income (loss)(75,194) (105,000) (180,194)
Nonoperating revenues
Investment income 13,163 3,741 16,904
Other income – 24,046 24,046
Total nonoperating revenues 13,163 27,787 40,950
Income (loss) before transfers (62,031) (77,213) (139,244)
Transfers in 100,000 – 100,000
Change in net position 37,969 (77,213) (39,244)
Net position
Beginning of year (480,947) 105,383 (375,564)
End of year (442,978)$ 28,170$ (414,808)$
CITY OF PRIOR LAKE
Internal Service Funds
Combining Statement of Revenues, Expenses, and Changes in Net Position
Year Ended December 31, 2020
-120-
Severance
Compensation Insurance Total
Cash flows from operating activities
Cash received from customers 32,492$ –$ 32,492$
Cash payments to employees 215 (105,000) (104,785)
Other income – 23,989 23,989
Net cash flows from operating activities 32,707 (81,011) (48,304)
Cash flows from noncapital financing activities
Transfers in 100,000 – 100,000
Cash flows from investing activities
Interest received on cash and investments 13,163 3,741 16,904
Net increase (decrease) in cash and cash equivalents 145,870 (77,270) 68,600
Cash and cash equivalents, January 1 357,210 105,156 462,366
Cash and cash equivalents, December 31 503,080$ 27,886$ 530,966$
Reconciliation of operating income (loss) to net
cash flows from operating activities
Operating income (loss)(75,194)$ (105,000)$ (180,194)$
Other income – 24,046 24,046
Adjustments to reconcile operating income (loss)
to net cash flows from operating activities
(Increase) decrease in assets
Accounts receivable 124 (57) 67
Increase (decrease) in liabilities
Compensated absences payable 107,777 – 107,777
Net cash flows from operating activities 32,707$ (81,011)$ (48,304)$
CITY OF PRIOR LAKE
Internal Service Funds
Combining Statement of Cash Flows
Year Ended December 31, 2020
-121-
OTHER INFORMATION SECTION
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Percent
Increase
2020 2019 (Decrease)
Revenues
Taxes 14,366,193$ 13,536,829$ 6.1%
Franchise taxes 670,917 639,783 4.9%
Special assessments 936,363 1,079,348 (13.2%)
Licenses and permits 900,601 992,096 (9.2%)
Intergovernmental 4,839,981 4,143,994 16.8%
Charges for services 2,316,988 3,364,364 (31.1%)
Fines and forfeits 1,652 996 65.9%
Interest on investments 773,613 1,073,558 (27.9%)
Miscellaneous 250,514 343,951 (27.2%)
Total revenues 25,056,822$ 25,174,919$ (0.5%)
Per capita 920$ 938$ (1.8%)
Expenditures
Current
General government 3,284,404$ 3,000,299$ 9.5%
Public safety 6,706,401 6,186,859 8.4%
Public works 1,999,412 1,954,183 2.3%
Culture and recreation 1,639,924 1,938,999 (15.4%)
Economic development 170,354 175,749 (3.1%)
Capital outlay 4,383,058 10,089,051 (56.6%)
Debt service
Principal 4,199,126 4,193,512 0.1%
Interest and other charges 1,125,331 1,222,378 (7.9%)
Total disbursements 23,508,010$ 28,761,030$ (18.3%)
Per capita 864$ 1,071$ (19.4%)
Total long-term bonded indebtedness 33,100,000$ 37,030,000$ (10.6%)
Per capita 1,216$ 1,379$ (11.8%)
General Fund balance – December 31 10,114,088$ 7,903,175$ 28.0%
Per capita 372$ 294$ 26.2%
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) 447-9842.
Governmental Funds
Years Ended December 31, 2020 and 2019
Total
CITY OF PRIOR LAKE
Summary Financial Report
Revenues and Expenditures for General Operations
-122-
Final
Issue Maturity
Date Date
Bonded indebtedness
General obligation special assessment bonds
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 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
G.O. Improvement Bonds of 2019A 5.00 06/27/2019 12/15/2029
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 12/15/2024
G.O. Improvement Bonds of 2018A 4.00–5.00 08/15/2018 12/15/2028
G.O. Improvement Bonds of 2019A 5.00 06/27/2019 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, 2020
Interest
-123-
Outstanding Issued Outstanding
Authorized January 1 (Retired)December 31 Principal Interest
1,235,000$ 130,000$ (130,000)$ –$ –$ –$
2,130,000 445,000 (220,000) 225,000 225,000 5,625
2,280,000 730,000 (240,000) 490,000 245,000 11,148
3,240,000 1,290,000 (325,000) 965,000 325,000 23,955
2,170,000 1,170,000 (225,000) 945,000 230,000 21,300
4,640,000 4,640,000 – 4,640,000 – 115,825
160,000 75,000 (25,000) 50,000 25,000 1,088
1,105,000 770,000 (110,000) 660,000 110,000 13,200
4,135,000 3,330,000 (435,000) 2,895,000 445,000 59,963
4,465,000 4,035,000 (490,000) 3,545,000 455,000 159,100
1,850,000 1,850,000 (150,000) 1,700,000 205,000 85,000
27,410,000 18,465,000 (2,350,000) 16,115,000 2,265,000 496,204
290,000 135,000 (25,000) 110,000 25,000 3,175
3,500,000 2,820,000 (160,000) 2,660,000 175,000 78,136
9,825,000 6,440,000 (515,000) 5,925,000 545,000 137,858
2,330,000 900,000 (185,000) 715,000 290,000 15,653
760,000 490,000 (95,000) 395,000 95,000 7,900
370,000 275,000 (55,000) 220,000 55,000 4,400
1,165,000 1,045,000 (130,000) 915,000 110,000 41,100
215,000 215,000 (15,000) 200,000 20,000 10,000
18,165,000 12,185,000 (1,155,000) 11,030,000 1,290,000 295,047
5,360,000 5,210,000 (75,000) 5,135,000 75,000 131,500
1,640,000 1,035,000 (325,000) 710,000 345,000 14,200
2,640,000 2,430,000 (240,000) 2,190,000 240,000 99,300
9,640,000 8,675,000 (640,000) 8,035,000 660,000 245,000
55,505,000$ 39,460,000$ (4,170,000)$ 35,290,000$ 4,240,000$ 1,039,426$
Due in 2021
-124-
Final
Issue Maturity
Date Date Principal
General obligation
special assessment bonds
$2,130,000 General Obligation
Improvement Bonds, Series 2011A 08/31/2011 2.50 %12/15/2021 225,000$
$2,280,000 General Obligation
Improvement Bonds, Series 2011B 12/14/2011 2.50 %12/15/2021 245,000
3.00 12/15/2022 245,000
Total 490,000
$3,240,000 General Obligation
Improvement Bonds, Series 2013A 08/15/2013 2.30 %12/15/2021 325,000
2.50 12/15/2022 320,000
2.65 12/15/2023 320,000
Total 965,000
$2,170,000 General Obligation
Improvement Bonds, Series 2014A 09/25/2014 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 945,000
CITY OF PRIOR LAKE
Bond Schedules
December 31, 2020
Rate
Interest
-125-(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 2.10 %12/15/2021 25,000
2.25 12/15/2022 25,000
Total 50,000
$1,105,000 General Obligation
Improvement Bonds, Series 2016A 05/01/2016 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 660,000
$4,135,000 General Obligation
Improvement Bonds, Series 2017A 06/29/2017 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 2,895,000
CITY OF PRIOR LAKE
Bond Schedules (continued)
December 31, 2020
Interest
Rate
-126-(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 %12/15/2021 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 3,545,000
$1,850,000 General Obligation
Improvement Bonds, Series 2019A 06/27/2019 5.00 %12/15/2021 205,000
5.00 12/15/2022 210,000
5.00 12/15/2023 220,000
5.00 12/15/2024 235,000
5.00 12/15/2025 150,000
5.00 12/15/2026 160,000
5.00 12/15/2027 165,000
5.00 12/15/2028 175,000
5.00 12/15/2029 180,000
Total 1,700,000
Total general obligation special assessment bonds 16,115,000$
General obligation
tax increment bonds
$290,000 Tax Increment Refunding
Bonds, Series 2011A 08/31/2011 2.50 %12/15/2021 25,000
3.00 12/15/2022 25,000
3.00 12/15/2023 30,000
3.00 12/15/2024 30,000
Total general obligation tax increment bonds 110,000$
Bond Schedules (continued)
December 31, 2020
Interest
Rate
CITY OF PRIOR LAKE
-127-(continued)
Final
Issue Maturity
Date Date Principal
General obligation bonds
$3,500,000 General Obligation Improvement
Bonds, Series 2011B 12/14/2011 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 2,660,000
$9,825,000 General Obligation Capital
Improvement Refunding Bonds of 2012A 03/13/2012 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 5,925,000
$2,330,000 General Obligation
Street Reconstruction Bonds, Series 2015B 05/14/2015 2.10 %12/15/2021 290,000
2.25 12/15/2022 425,000
Total 715,000
$760,000 General Obligation
Street Reconstruction Bonds, Series 2016A 05/01/2016 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 395,000
CITY OF PRIOR LAKE
Bond Schedules (continued)
December 31, 2020
Interest
Rate
-128-(continued)
Final
Issue Maturity
Date Date Principal
General obligation bonds (continued)
$370,000 General Obligation
Improvement Bonds of 2017A 06/29/2017 2.00 %12/15/2021 55,000
2.00 12/15/2022 55,000
2.00 12/15/2023 55,000
2.00 12/15/2024 55,000
Total 220,000
$1,165,000 General Obligation
Improvement Bonds, Series 2018A 08/15/2018 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 915,000
$215,000 General Obligation
Improvement Bonds, Series 2019A 06/27/2019 5.00 %12/15/2021 20,000
5.00 12/15/2022 20,000
5.00 12/15/2023 25,000
5.00 12/15/2024 25,000
5.00 12/15/2025 25,000
5.00 12/15/2026 25,000
5.00 12/15/2027 30,000
5.00 12/15/2028 30,000
Total 200,000
Total general obligation bonds 11,030,000$
CITY OF PRIOR LAKE
Bond Schedules (continued)
December 31, 2020
Interest
Rate
-129-(continued)
Final
Issue Maturity
Date Date Principal
General obligation revenue bonds
$5,360,000 General Obligation Improvement
Refunding Bonds, Series 2015A 05/14/2015 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 5,135,000
$1,640,000 General Obligation Improvement
Refunding Bonds, Series 2016A 05/01/2016 2.00 %12/15/2021 345,000
2.00 12/15/2022 365,000
Total 710,000
$2,640,000 General Obligation Improvement
Bonds, Series 2018A 08/15/2018 4.00 %12/15/2021 240,000
4.00 12/15/2022 250,000
4.00 12/15/2023 260,000
4.00 12/15/2024 270,000
5.00 12/15/2025 270,000
5.00 12/15/2026 280,000
5.00 12/15/2027 300,000
5.00 12/15/2028 320,000
Total 2,190,000
Total general obligation revenue bonds 8,035,000$
December 31, 2020
Interest
Rate
CITY OF PRIOR LAKE
Bond Schedules (continued)
-130-
Year Principal Interest Principal Interest
2021 1,290,000$ 295,047$ 2,265,000$ 496,204$
2022 1,450,000 265,802 2,070,000 433,038
2023 1,080,000 232,316 2,165,000 373,318
2024 1,070,000 206,591 1,950,000 310,363
2025 1,060,000 179,620 1,845,000 255,188
2026 1,120,000 150,260 1,710,000 201,488
2027 1,135,000 118,430 1,575,000 145,813
2028 1,125,000 84,780 1,185,000 92,350
2029 1,085,000 51,630 780,000 44,100
2030 300,000 20,910 570,000 17,100
2031 315,000 10,710 – –
Total 11,030,000$ 1,616,096$ 16,115,000$ 2,368,962$
CITY OF PRIOR LAKE
Debt Service Requirements
December 31, 2020
General Obligation
General Obligation Bonds Special Assessment Bonds
-131-
Principal Interest Principal Interest
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
110,000$ 8,425$ 8,035,000$ 1,500,825$
Revenue Bonds
General ObligationGeneral Obligation
Tax Increment Bonds
-132-
Collection Collections
Total of Current of Prior Total
Year Levy Year Levy Years’ Levy Collections
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
2019 12,778,035 12,697,865 99.37 65,150 12,763,015 99.88
2020 13,326,387 13,260,149 99.50 32,451 13,292,600 99.75
*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
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
2019 728,099 699,440 96.06 13,554 712,994 97.93
2020 670,146 653,522 97.52 20,682 674,204 100.61
**Excludes prepaid assessment collections
Percentage
Percentage
Percentage
Collected
Percentage
Collectionsof Levy
of Total
of Total
to Levy
CITY OF PRIOR LAKE
Tax Levies and Collections, and
Special Assessment Levies and Collections
Special Assessment Levies and Collections
Prior Ten Years
Tax Levies and Collections
of Levy
Collected to Levy
Collections
-133-
2018 2019 2020
Taxable market value 3,261,128,200$ 3,447,986,900$ 3,713,161,300$
Tax levy 12,077,538$ 12,778,035$ 13,601,137$
Tax capacity, net of fiscal disparities,
and tax increment 33,172,374$ 35,200,266$ 37,983,304$
Tax capacity rate 33.040% 33.020% 32.496%
Market value rate 0.007% 0.007% 0.007%
EDA tax capacity rate 0.390% 0.395% 0.840%
CITY OF PRIOR LAKE
Schedules of Market Value, Tax Levy, Tax Capacity Values,
Tax Capacity Rate, and Market Value Rate
Prior Three Years
-134-
2018 2019 2020
Current population 26,207 26,849 27,222
Tax capacity, net of fiscal disparities,
and tax increment 33,172,374$ 35,200,266$ 37,983,304$
Percent of current property taxes collected 99.31% 99.37% 99.50%
City revenues per capita (governmental funds)869$ 938$ 921$
City expenditures per capita (governmental funds)1,013$ 1,071$ 862$
Ratio of bonded debt to tax capacity 108.36% 103.88% 88.10%
Bond rating AA+ (S&P)AA+ (S&P)N/A
Prior Three Years
Key Financial Indicators
CITY OF PRIOR LAKE
-135-
SINGLE AUDIT AND OTHER REQUIRED REPORTS
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Pass-Through
Entity
Federal Identification Federal
CFDA No.Number Expenditures
U.S. Department of Justice
Direct Program
Bulletproof Vest Partnership Program 16.607 3,754$
U.S. Department of Transportation
Passed through the City of Shakopee
State and Community Highway Safety 20.600 2,640
Management and Budget
COVID-19 – Coronavirus Relief Fund 21.019 SLT0016 1,969,018
COVID-19 – HAVA Election Security Grants 90.404 13,304
Total federal awards 1,988,716$
Note 1:
Note 2:
Note 3:
Note 4:
Federal Grantor/Pass-Through Grantor/Program Title
CITY OF PRIOR LAKE
Schedule of Expenditures of Federal Awards
Year Ended December 31, 2020
Unaudited Disclosure –The City received donated personal protective equipment (PPE)with an estimated value of
less than $1,000. The City was unable to determine whether federal dollars were used to purchase the donated PPE.
U.S. Department of Treasury
Passed through the Minnesota Department of
Unless noted in the table above,the pass-through entities use the same CFDA numbers as the federal grantors to
identify these grants, and have not assigned any additional identifying numbers.
The City did not elect to use the 10 percent de minimis indirect cost rate.
The Schedule of Expenditures of Federal Awards is prepared on the accrual basis of accounting.The information in
this schedule is presented in accordance with the OMB’s Uniform Administrative Requirements,Cost Principles,
and Audit Requirements for Federal Awards.Therefore,some amounts presented in this schedule may differ from
the amounts presented in, or used in the preparation of, the City’s basic financial statements.
U.S. Election Assistance Commission
Passed through Scott County
-136-
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-137-
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, 2020, 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 17, 2021.
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) as a basis for designing audit procedures that are appropriate in
the circumstances for the purpose of expressing our opinions on the financial statements, but not for the
purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we do not
express an opinion on the effectiveness of the City’s internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management
or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct,
misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in
internal control, such that there is a reasonable possibility that a material misstatement of the City’s financial
statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a
deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness,
yet important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this
section and was not designed to identify all deficiencies in internal control that might be material
weaknesses or significant deficiencies. Given these limitations, during our audit we di d 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
Kalen T. Karnowski, 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
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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
financial statements. However, providing an opinion on compliance with those provisions was not an
objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed
no instances of noncompliance or other matters that are required to be reported under Government Auditing
Standards.
PURPOSE OF THIS REPORT
The purpose of this report is solely to describe the scope of our testing of internal control and compliance
and the results of that testing, and not to provide an opinion on the effectiveness of the City’s internal
control or on compliance. This report is an integral part of an audit performed in accordance with
Government Auditing Standards in considering the City’s internal control and compliance. Accordingly,
this report is not suitable for any other purpose.
Minneapolis, Minnesota
May 17, 2021
-139-
INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE FOR
EACH MAJOR FEDERAL PROGRAM AND REPORT ON INTERNAL
CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE
To the City Council and Management
City of Prior Lake, Minnesota
REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM
We have audited the City of Prior Lake, Minnesota’s (the City) compliance with the types of compliance
requirements described in the U.S. Office of Management and Budget Compliance Supplement that could
have a direct and material effect on each of the City’s major federal programs for the year ended
December 31, 2020. The City’s major federal programs are identified in the Summary of Audit Results
section of the accompanying Schedule of Findings and Questioned Costs.
MANAGEMENT’S RESPONSIBILITY
Management is responsible for compliance with federal statutes, regulations, and the terms and conditions
of its federal awards applicable to its federal programs.
AUDITOR’S RESPONSIBILITY
Our responsibility is to express an opinion on compliance for each of the City’s major federal programs
based on our audit of the types of compliance requirements referred to above. We conducted our audit of
compliance in accordance with auditing standards generally accepted in the United States of America; the
standards applicable to financial audits contained in Government Auditing Standards, issued by the
Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal
Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for
Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and
perform the audit to obtain reasonable assurance about whether noncompliance with the types of
compliance requirements referred to above that could have a direct and material effect on a major federal
program occurred. An audit includes examining, on a test basis, evidence about the City’s compliance with
those requirements and performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal
program. However, our audit does not provide a legal determination of the City’s compliance.
OPINION ON EACH MAJOR FEDERAL PROGRAM
In our opinion, the City complied, in all material respects, with the types of compliance requirements
referred to above that could have a direct and material effect on each of its major federal programs for the
year ended December 31, 2020.
(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
Kalen T. Karnowski, 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
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REPORT ON INTERNAL CONTROL OVER COMPLIANCE
Management of the City is responsible for establishing and maintaining effective internal control over
compliance with the types of compliance requirements referred to on the previous page. In planning and
performing our audit of compliance, we considered the City’s internal control over compliance with the
types of requirements that could have a direct and material effect on each major federal program to
determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing
an opinion on compliance for each major federal program and to test and report on internal control over
compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on
the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the
effectiveness of the City’s internal control over compliance.
A deficiency in internal control over compliance exists when the design or operation of a control over
compliance does not allow management or employees, in the normal course of performing their assigned
functions, to prevent, or detect and correct, noncompliance with a type of complianc e requirement of a
federal program on a timely basis. A material weakness in internal control over compliance is a deficiency,
or combination of deficiencies, in internal control over compliance, such that there is a reasonable
possibility that material noncompliance with a type of compliance requirement of a federal program will
not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control
over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with
a type of compliance requirement of a federal program that is less severe than a material weakness in
internal control over compliance, yet important enough to merit attention by those charged with governance.
Our consideration of internal control over compliance was for the limited purpose described in the first
paragraph of this section and was not designed to identify all deficiencies in internal control over
compliance that might be material weaknesses or significant deficiencies. We did not identify any
deficiencies in internal control over compliance that we consider to be material weaknesses. However,
material weaknesses may exist that have not been identified.
PURPOSE OF THIS REPORT
The purpose of this report on internal control over compliance is solely to describe the scope of our testing
of internal control over compliance and the results of that testing based on the requirements of the Uniform
Guidance. Accordingly, this report is not suitable for any other purpose.
Minneapolis, Minnesota
May 17, 2021
-141-
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, 2020, 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 17, 2021.
MINNESOTA LEGAL COMPLIANCE
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 contracting and bidding, deposits and investments, conflicts of interest,
public indebtedness, claims and disbursements, miscellaneous provisions, and tax increment financing
sections of the Minnesota Legal Compliance Audit Guide for Cities, promulgated by the State Auditor
pursuant to Minnesota Statutes § 6.65, insofar as they relate to accounting matters. 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, insofar as they relate to accounting matters.
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 17, 2021
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
Kalen T. Karnowski, 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
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CITY OF PRIOR LAKE
Schedule of Findings and Questioned Costs
Year Ended December 31, 2020
-142-
A. SUMMARY OF AUDIT RESULTS
This summary is formatted to provide federal granting agencies and pass-through agencies answers to
specific questions regarding the audit of federal awards.
Financial Statements
What type of auditor’s report is issued? X
Internal control over financial reporting:
Material weakness(es) identified?Yes X No
Significant deficiency(ies) identified?Yes X
Noncompliance material to the financial statements noted?Yes X No
Federal Awards
Internal controls over major federal award programs:
Material weakness(es) identified?Yes X No
Significant deficiency(ies) identified?Yes X
Type of auditor’s report issued on compliance for major programs?
U.S. Department of Treasury – COVID-19 – Coronavirus Relief Fund Unmodified
Any audit findings disclosed that are required to be reported in
accordance with 2 CFR 200.516(a)?Yes X No
Programs tested as major programs:
Program or Cluster(s)CFDA No.
U.S. Department of Treasury – COVID-19 – Coronavirus Relief Fund 21.019
Threshold for distinguishing between type A and B programs. 750,000$
Does the auditee qualify as a low-risk auditee?Yes X No
Unmodified
Qualified
Adverse
Disclaimer
None reported
None reported
CITY OF PRIOR LAKE
Schedule of Findings and Questioned Costs (continued)
Year Ended December 31, 2020
-143-
B. FINANCIAL STATEMENT FINDINGS
None.
C. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
None.
D. MINNESOTA LEGAL COMPLIANCE FINDINGS
None.
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4646 Dakota Street SE
Prior Lake, MN 55372
Phone 952.447.9800/Fax 952.447.4245/www.cityofpriorlake.com
Corrective Action Plans and
Summary Schedule of Prior Audit Findings
Year Ended December 31, 2020
A. FINANCIAL STATEMENT FINDINGS
None.
B. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
None.
C. MINNESOTA LEGAL COMPLIANCE FINDINGS
None.
D. SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS
No audit findings were reported for the year ended December 31, 2019. The City of Prior
Lake did not require a single audit of federal awards for the year ended December 31, 2019.
Management Report
for
City of Prior Lake, Minnesota
December 31, 2020
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To the City Council and Management
City of Prior Lake, Minnesota
We have prepared this management report in conjunction with our audit of the City of Prior Lake,
Minnesota’s (the City) financial statements for the year ended December 31, 2020. 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 17, 2021
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
Kalen T. Karnowski, 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
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-1-
AUDIT SUMMARY
The following is a summary of our audit work, key conclusions, and other information that we consider
important or that is required to be communicated to the City Council, administration, or those charged
with governance of the City.
OUR RESPONSIBILITY UNDER AUDITING STANDARDS GENERALLY ACCEPTED IN THE UNITED
STATES OF AMERICA, GOVERNMENT AUDITING STANDARDS, AND TITLE 2 U.S. CODE OF FEDERAL
REGULATIONS (CFR) PART 200, UNIFORM ADMINISTRATIVE REQUIREMENTS, COST PRINCIPLES, AND
AUDIT REQUIREMENTS FOR FEDERAL AWARDS (UNIFORM GUIDANCE)
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, 2020. Professional standards require that we provide you with information about our
responsibilities under auditing standards generally accepted in the United States of America, Government
Auditing Standards, the Uniform Guidance, 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, 2020:
•We have issued an unmodified opinion on the City’s basic financial statements.
•We reported no deficiencies in the City’s internal control over financial reporting that we
considered to be material weaknesses.
•The results of our testing disclosed no instances of noncompliance required to be reported under
Government Auditing Standards.
•We reported that the Schedule of Expenditures of Federal Awards is fairly stated, in all material
respects, in relation to the basic financial statements.
•The results of our tests indicate that the City has complied, in all material respects, with the types
of compliance requirements that could have a direct and material effect on each of its major
federal programs.
•We reported no deficiencies in the City’s internal controls over compliance that we considered to
be material weaknesses with the types of compliance requirements that could have a direct and
material effect on each of its major federal programs.
•We reported no findings based on our testing of the City’s compliance with Minnesota laws and
regulations.
-2-
OTHER OBSERVATIONS AND RECOMMENDATIONS
Electronic Funds Transfers Fraud
As the use of electronic funds transfers and payment methods has become more prevalent, we have seen
increases in both the incidences of fraud related to these transactions and the dollar amounts involved.
Operational changes related to the COVID-19 pandemic, including greater reliance on technology and
more employees working remotely, have tended to increase risk in this area. We urge cities to carefully
review controls over these transactions, and consider best practices to address these risks, such as:
• Ensuring segregation of duties over these transactions by involving more than one employee in
the process.
• Requiring multi-factor authentication of requests for electronic payments from new vendors or for
changes in wiring instructions for existing vendors. It is recommended that changes for existing
vendors be verified through trusted contact information used previously for that vendor, not as
provided in the change request, to verify the accuracy of the change.
• Educate employees on the controls in place to protect the organization’s financial assets and
ensure management is supportive and accepting of the processes in place. Attempted fraudulent
transactions are often initiated using the profile of a supervisor. Employees must be comfortable
questioning unusual transactions or requests, and instructed not to circumvent internal control
procedures regardless of whom they believe initiated the transaction.
• Recommended cyber security measures, such as limiting network access and requiring robust
passwords that are changed regularly, should be implemented and followed by all city employees,
not just those directly involved with financial transactions.
• Review insurance policies to understand the coverage provided for financial losses due to
cybersecurity risks and evaluate whether they provide adequate coverage based on management’s
assessment of these risks.
Uniform Guidance Written Controls and Micro-Purchase Threshold
Federal Uniform Guidance requires that nonfederal entities must have and use documented pr ocurement
procedures consistent with 2CFR § 200.317-320 for the acquisition of property or services required under
a federal award or subaward. Effective August 31, 2020, the federal micro-purchase threshold, which is
the threshold that allows for procurements without soliciting competitive price or rate quotations given
certain conditions, was increased from $3,500 to $10,000 in the Federal Acquisition Regulations (FAR).
Effective November 12, 2020, the Uniform Guidance was also revised to allow nonfederal entities to
establish a micro-purchase threshold higher than the $10,000 threshold established in the FAR under
certain circumstances. The nonfederal entity may self-certify a micro-purchase threshold up to $50,000 if
the requirements in 2CFR § 200.320(a)(1)(iv) are followed. Requirements include an annual
self-certification and clear documentation of the justification to support the increase in the threshold.
Acceptable reasons for justification must meet one of the following criteria:
• A qualification as a low-risk auditee, in accordance with the criteria in §200.520 for the most
recent audit,
• An annual internal institutional risk assessment to identify, mitigate, and manage financial risks,
or,
• A higher threshold consistent with state law.
This flexibility would allow Minnesota local governments to increase and align their federal procurement
procedures, specifically the micro-purchase threshold, with state law, which allows for procurements
below $25,000 to be made without competitive price or rate quotations.
-3-
We recommend that the City review its current federal procurement policy. If the micro -purchase
threshold in your currently adopted policy is below the allowable FAR limit of $10,000, you would need
to make a one-time amendment to the policy to adopt the $10,000 FAR limit before using it. If you prefer
to increase your federal micro-purchase threshold to $25,000 to align it with state law, in addition to
amending your federal procurement policy, you would need to annuall y certify the higher threshold and
the justification for using the higher threshold.
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, 2020.
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 Governmental Accounting Standards Board
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.
• Assets Held for Resale – Management’s estimates of the assets are based on net realizable value
(lower of cost or acquisition value).
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.
Certain financial statement disclosures are particularly sensitive because of their significance to financial
statement users. The disclosures included in the notes to the basic financial statements related to OPEB
and pension benefits are particularly sensitive, due to the materiality of the liabilities, and the large and
complex estimates involved in determining the disclosures.
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.
-4-
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.
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 17, 2021.
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 and the Schedule of Expenditures of Federal
Awards accompanying the financial statements, which are not RSI. With respect to this supplementary
information, we made certain inquiries of management and evaluated the form, content, and methods of
preparing the information to determine that the information complies with accounting principles generally
accepted in the United States of America, the method of preparing it has not changed fr om the prior
period, and the information is appropriate and complete in relation to our audit of the financial statements.
We compared and reconciled the supplementary information to the underlying accounting records used to
prepare the financial statements or to the financial statements themselves.
We were not engaged to report on the introductory and other information sections, which accompany the
financial statements, but are not RSI. Such information has not been subjected to the auditing procedures
applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or
provide any assurance on it.
-5-
GOVERNMENTAL FUNDS OVERVIEW
This section of the report provides you with an overview of the financial trends and activities of the City’s
governmental funds, which includes the General, special revenue, debt service, and capital project funds.
These funds are used to account for the basic services the City provides to all of its citizens, whi ch 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 2019 fiscal year, local ad valorem property tax levies provided 40.8 percent of the total
governmental fund revenues for cities over 2,500 in population, and 37.6 percent for cities under 2,500 in
population. Total property taxes levied by all Minnesota cities for taxes payable in 2020 increased
6.1 percent from the prior year.
The total tax capacity value of property in Minnesota cities increased about 6.5 percent for the 2020 levy
year. The tax capacity values used for levying property taxes are based on the assessed market values for
the previous fiscal year (e.g., tax capacity values for taxes levied in 2020 were based on assessed market
values as of January 1, 2019), so the trend of change in these tax capacity values lags somewhat behind
the housing market and economy in general.
The City’s taxable market value increased 5.7 percent for taxes payable in 2019 and 7.7 percent for taxes
payable in 2020. 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
$4,000,000,000
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Taxable Market Value
-6-
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 6.1 percent and 7.9 percent for taxes payable in
2019 and 2020, 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
$40,000,000
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Local Net Tax Capacity
The following table presents the average tax rates applied to city residents for each of the last three levy
years:
2018 2019 2020
Average tax rate
City 33.0 33.0 32.5
County 35.1 33.8 32.7
School 33.0 31.7 29.9
Special taxing 8.7 7.8 7.3
Total 109.8 106.3 102.4
City of Prior Lake
Rates Expressed as a Percentage of Net Tax Capacity
The City’s portion of the tax rate has been consistent over the past three years.
-7-
GOVERNMENTAL FUND BALANCES
The following table summarizes the changes in the fund balances of the City’s governmental funds during
the year ended December 31, 2020, presented both by fund balance classification and by major fund:
2020 2019 Change
Fund balances of governmental funds
Total by classification
Nonspendable 70,006$ –$ 70,006$
Restricted 7,321,154 4,088,161 3,232,993
Assigned 9,416,770 11,295,634 (1,878,864)
Unassigned 9,783,378 7,578,463 2,204,915
Total governmental funds 26,591,308$ 22,962,258$ 3,629,050$
Total by fund
General 10,114,088$ 7,903,175$ 2,210,913$
Debt Service 2,834,191 3,003,467 (169,276)
Construction 493,808 261,269 232,539
Special revenue nonmajor funds 3,622,398 3,394,539 227,859
Capital projects nonmajor funds 9,526,823 8,399,808 1,127,015
Total governmental funds 26,591,308$ 22,962,258$ 3,629,050$
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 $3,629,050 during the year
ended December 31, 2020. The overall increase in fund balances relates to increase in the General Fund
balance and nonmajor capital project funds, including increases to the Trunk Reserve, Water Storage, and
Revolving Park Equipment Funds. The increases to restricted fund balance and decline in assigned fund
balance mostly relates to reclassifications of special revenue fund balances.
-8-
GOVERNMENTAL FUNDS REVENUE AND EXPENDITURES
The following table presents the per capita revenue of the City’s governmental funds for the past
three years, along with state-wide averages.
We have included the most recent comparative state-wide averages available from the Office of the State
Auditor to provide a benchmark for interpreting the City’s data. The amounts received from the typical
major sources of governmental fund revenue will naturally vary between cities based on factors , such as a
city’s stage of development, location, size and density of its population, property values, services it
provides, and other attributes. It will also differ from year -to-year, due to the effect of inflation and
changes in its operation. Also, certain data in these tables may be classified differently than how the y
appear in the City’s financial statements in order to be more comparable to the state-wide information,
particularly in separating capital expenditures from current expenditures.
We have designed this section of our management report using per capita d ata in order to better identify
unique or unusual trends and activities of the City. We intend for this type of comparative and trend
information to complement, rather than duplicate, information in the MD&A. An inherent difficulty in
presenting per capita information is the accuracy of the population count, which for most years is based
on estimates.
Year 2018 2019 2020
Population 2,500–10,000 10,000–20,000 20,000–100,000 26,207 26,849 27,222
Property taxes 514$ 489$ 512$ 460$ 475$ 498$
Tax increments 30 28 44 29 29 29
Franchise and other taxes 45 50 50 24 24 25
Special assessments 54 38 53 51 40 34
Licenses and permits 40 35 51 38 37 33
Intergovernmental revenues 342 297 201 71 154 178
Charges for services 135 108 115 168 125 85
Other 89 78 79 28 54 39
Total revenue 1,249$ 1,123$ 1,105$ 869$ 938$ 921$
December 31, 2019
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 2020 were $25,056,822, a decrease of $118,097
(0.5 percent) from the prior year. On a per capita basis, the City received $921 in governmental fund
revenue for 2020, a decrease of $17 from the prior year. Charges for services revenues decreased $40 per
capita, due to decreased services provided, as a result of COVID-19. In general, the City has generated
less governmental fund revenue per capita than the state-wide averages spread across all categories.
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The expenditures of governmental funds will also vary from state -wide averages and from year-to-year,
based on the City’s circumstances. Expenditures are classified into three types as follows:
• Current – These are typically the general operating type expenditures occurring on an annual
basis, and are primarily funded by general sources, such as taxes and intergovernmental revenues.
• Capital Outlay and Construction – These expenditures do not occur on a consistent basis, more
typically fluctuating significantly from year-to-year. Many of these expenditures are
project-oriented, and are often funded by specific sources that have benefited from the
expenditure, such as special assessment improvement projects.
• Debt Service – Although the expenditures for debt service may be relatively consistent over the
term of the respective debt, the funding source is the important factor. Some debt may be repaid
through specific sources, such as special assessments or redevelopment funding, while other debt
may be repaid with general property taxes.
The City’s expenditures per capita of its governmental funds for the past three years, together with
comparative state-wide averages, are presented in the following table:
Year 2018 2019 2020
Population 2,500–10,000 10,000–20,000 20,000–100,000 26,207 26,849 27,222
Current
152$ 128$ 107$ 105$ 112$ 121
300 282 306 222 230 246
146 149 119 72 73 73
103 124 106 73 72 60
74 75 97 6 7 6
775 758 735 478 494 506
Capital outlay
and construction 438 376 355 345 375 161
Debt service
168 182 88 151 156 154
43 41 28 39 46 41
211 223 116 190 202 195
Total expenditures 1,424$ 1,357$ 1,206$ 1,013$ 1,071$ 862$
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, 2019
City of Prior LakeState-Wide
Total expenditures in the City’s governmental funds for 2020 were $23,508,010, a decrease of $5,253,020
(18.3 percent) from the prior year. On a per capita basis, the City expended a total of $862 in 2020.
Capital outlay expenditures decreased $214 per capita from the prior year, due to less construction related
expenditures in 2020.
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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 transfers out to reflect the
change in the size of the General Fund operation over the same period.
2016 2017 2018 2019 2020
Fund Balance $6,684,920 $6,840,928 $7,213,402 $7,903,175 $10,114,088
Cash and Inv (Net of Borrowing)$7,211,301 $8,306,654 $8,938,262 $9,604,268 $11,068,473
Expenditures and Transfers Out $12,417,787 $13,208,933 $13,115,121 $13,350,330 $14,283,695
$–
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
$16,000,000
General Fund Financial Position
Year Ended December 31,
The City’s General Fund cash and investments balance increased $1,464,205 during the current year.
Total fund balance increased $2,210,913 from the prior year.
As the graph illustrates, the City has generally been able to maintain healthy cash and fund balance leve ls
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 percent and
50.0 percent of the subsequent year’s General Fund budgeted expenditures. At December 31, 2020, the
unrestricted fund balance of the General Fund was 66.6 percent of the subsequent year’s budgeted
expenditures and transfers out.
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The following graph reflects the City’s General Fund revenue sources for 2020 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 2020 was $16,022,005, which was $2,036,507 (14.6 percent) more than budget,
mainly due to the City receiving more intergovernmental aid in 2020 related to federal Coronavirus Aid,
Relief, and Economic Security (CARES) Act funding. Investment income, included in “all other” in the
graph above, also exceeded budgeted amounts by $84,120 as earnings exceeded conservative projected
amounts.
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
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
2019 $9,007,634 $992,096 $1,925,225 $1,193,113 $996 $454,862
2020 $9,594,699 $900,601 $4,092,040 $1,081,405 $1,652 $351,608
$–
$1,500,000
$3,000,000
$4,500,000
$6,000,000
$7,500,000
$9,000,000
$10,500,000
General Fund Revenue by Source
Year Ended December 31,
Total General Fund revenue for 2020 was $2,448,079 (18.0 percent) higher than last year.
Intergovernmental increased $2,166,815, or 112.5 percent, related to federal CARES Act funding.
Property taxes increased $587,065 related to an increased levy.
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The following graph illustrates the components of General Fund spending for 2020 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 2020 were $13,745,677, which was $631,515 (4.4 percent) under
budget. Culture and recreation was under budget by $585,401, mainly due to COVID-19 restrictions.
Public works was also under budget by $216,433. This amount includes amounts favorable to budget
variances in a number of areas, including engineering, central garage, and streets.
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
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
2019 $3,000,056 $6,071,462 $1,954,183 $1,889,264 $100,596
2020 $3,279,680 $6,693,505 $1,999,412 $1,628,772 $144,308
$–
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
General Fund Expenditures by Function
Year Ended December 31, 2020
Total General Fund expenditures for 2020 were $730,116 (5.6 percent) greater than the previous year.
Public safety expenditures increased $622,043, due to wages and benefits for additional police officers,
cost of living adjustments in the current year, and increased overtime costs. Expenditures were also higher
in general government by $279,624. This includes increases mainly for elections, personnel costs, and
community development.
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ENTERPRISE FUNDS OVERVIEW
The City maintains a number of enterprise funds to account for services the City provides that are
financed primarily through fees charged to those utilizing the service. This section of the report provides
you with an overview of the financial trends and activities of the City’s enterprise funds, which include
the Water, Sewer, and Water Quality Funds.
ENTERPRISE FUNDS FINANCIAL POSITION
The following table summarizes the changes in the financial position of the City’s enterprise funds during
the year ended December 31, 2020, presented by both classification and by fund:
2020 2019 Change
Net position of enterprise funds
Total by classification
Investment in capital assets 69,058,053$ 68,398,856$ 659,197$
Unrestricted 9,784,086 7,137,595 2,646,491
Total enterprise funds 78,842,139$ 75,536,451$ 3,305,688$
Total by fund
Water 46,737,472$ 45,354,364$ 1,383,108$
Sewer 27,724,006 26,381,082 1,342,924
Water Quality 4,380,661 3,801,005 579,656
Total enterprise funds 78,842,139$ 75,536,451$ 3,305,688$
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, 2020, this fund had assets
totaling $505,830, while liabilities totaled $948,808, leaving a deficit net position balance of ($442,978).
We recommend that the City continue to include the financing of these obligations as part of its
long-range financial plans.
The City has also established an Insurance Internal Service Fund to account for risk management
activities, including workers’ compensation, volunteer accident, and property/casualty insurance. At
December 31, 2020, this fund had assets totaling $28,170 and no liabilities, leading to a net position
balance of $28,170.
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WATER ENTERPRISE FUND
The following graph presents five years of comparative operating results for the City’s Water Fund:
2016 2017 2018 2019 2020
Oper Revenue $3,674,099 $3,796,097 $3,967,706 $3,792,321 $4,784,064
Oper Expenses $2,493,541 $2,621,448 $2,679,154 $2,983,966 $3,243,683
Oper Income (Loss)$1,180,558 $1,174,649 $1,288,552 $808,355 $1,540,381
Inc Before Depr $1,870,854 $1,912,281 $2,092,678 $1,696,804 $2,495,708
$–
$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 Enterprise Fund
Year Ended December 31,
The Water Fund ended 2020 with net position of $46,737,472, an increase of $1,383,108 from the prior
year. Of this, $41,436,018 represents the investment in capital assets, leaving $5,301,454 in unrestricted
net position. The Water Fund had transfers out totaling $1,215,160 in 2020 to support other funds, pay
debt service, and provide for construction projects.
Operating revenue in the Water Fund increased $991,743 (26.2 percent) from the prior year. This increase
was due to increased rates and increased usage in the current year.
Water Fund operating expenses for 2020 increased $259,717 (8.7 percent) from the previous year. This
increase was mainly for repairs and maintenance.
State and federal grants, interest revenue and expenses, miscellaneous income, and loss on sale of capital
assets, which are not included in the graph above, totaled $168,192 in 2020. After including these
revenues and expenses, the Water Fund reflected income before contributions and transfers of
$1,708,573.
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SEWER ENTERPRISE FUND
The following graph presents five years of comparative operating results for the City’s Sewer Fund:
2016 2017 2018 2019 2020
Oper Revenue $2,741,578 $3,090,773 $3,270,026 $3,622,033 $4,399,718
Oper Expenses $2,635,304 $2,771,143 $2,892,003 $3,281,824 $3,360,286
Oper Income (Loss)$106,274 $319,630 $378,023 $340,209 $1,039,432
Inc Before Depr $530,299 $789,288 $889,932 $904,035 $1,653,925
$–
$250,000
$500,000
$750,000
$1,000,000
$1,250,000
$1,500,000
$1,750,000
$2,000,000
$2,250,000
$2,500,000
$2,750,000
$3,000,000
$3,250,000
$3,500,000
$3,750,000
$4,000,000
$4,250,000
$4,500,000
Sewer Enterprise Fund
Year Ended December 31,
The Sewer Fund ended 2020 with net position of $27,724,006, an increase of $1,342,924 from the prior
year. Of this, $25,024,608 represents the City’s investment in capital assets, leaving $2,699,398 in
unrestricted net position. The Sewer Fund had transfers out totaling $632,110 in 2020 to support other
funds, pay debt service, and provide for construction projects.
Operating revenue in the Sewer Fund increased $777,685 (21.5 percent) from the prior year, mainly
related to increased usage and rates in 2020. Sewer Fund operating expenses for 2020 increased $78,462
(2.4 percent) from the previous year. These increases were mainly for disposal charges.
State and federal grants, interest revenue and expenses, and miscellaneous revenues, which are not
included in the graph above, totaled $45,796 in 2020. After including these revenues and expenses, the
Sewer Fund reflected income before contributions and transfers of $1,085,228.
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WATER QUALITY ENTERPRISE FUND
The following graph presents five years of comparative operating results for the City’s Water Quality
Fund:
2016 2017 2018 2019 2020
Oper Revenue $920,128 $925,988 $986,338 $1,060,295 $1,175,189
Oper Expenses $598,972 $633,557 $600,030 $611,654 $623,317
Oper Income (Loss)$321,156 $292,431 $386,308 $448,641 $551,872
Inc Before Depr $427,648 $402,799 $508,197 $583,068 $668,423
$–
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000
$900,000
$1,000,000
$1,100,000
$1,200,000
Water Quality Enterprise Fund
Year Ended December 31,
The Water Quality Fund ended 2020 with net position of $4,380,661, an increase of $579,656 from the
prior year. Of this, $2,597,427 represents the investment in capital assets, leaving $1,783,234 in
unrestricted net position.
Operating revenue in the Water Quality Fund increased $114,894 (10.8 percent) from the prior year, due
to an increase in the rates in 2020. Water Quality Fund operating expenses for 2020 increased $11,663
(1.9 percent) from the previous year.
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GOVERNMENT-WIDE FINANCIAL STATEMENTS
In addition to fund-based information, the current reporting model for governmental entities also requires
the inclusion of two government-wide financial statements designed to present a clear picture of the City
as a single, unified entity. These government-wide financial statements provide information on the total
cost of delivering services, including capital assets and long-term liabilities.
STATEMENT OF NET POSITION
The Statement of Net Position essentially tells you what the City owns and owes at a given point in time,
the last day of the fiscal year. Theoretically, net position represents the resources the City has leftover to
use for providing services after its debts are settled. However, those resources are not always in spendable
form, or there may be restrictions on how some of those resources can be used. Therefore, net position is
divided into three components: net investment in capital assets, restricted, and unrestricted.
The following table presents the components of the City’s net position as of December 31, 2020 and
2019, for governmental activities and business-type activities:
2020 2019 Change
Net position
Governmental activities
Net investment in capital assets 118,120,401$ 112,279,178$ 5,841,223$
Restricted 10,865,279 7,988,232 2,877,047
Unrestricted 11,944,650 11,418,431 526,219
Total governmental activities 140,930,330 131,685,841 9,244,489
Business-type activities
Net investment in capital assets 69,058,053 68,398,856 659,197
Unrestricted 9,784,086 7,137,595 2,646,491
Total business-type activities 78,842,139 75,536,451 3,305,688
Total net position 219,772,469$ 207,222,292$ 12,550,177$
As of December 31,
The City’s total net position at December 31, 2020 was $12,550,177 higher than the total net position
reported at the previous year-end. The increase in the net investment in capital assets balance was mostly
due to capital outlay and capital contribution activity during fiscal 2020.
The increase in restricted net position in governmental activities is related to reclassifications of special
revenue fund balances in the current year. Increases in unrestricted fund balance in the business-type
activities relates to positive operating results in these funds in the current year.
At the end of the current fiscal year, the City is able to present positive balances in all categories of net
position, both for the government as a whole, as well as for its separate governmental and business-type
activities. The same situation held true for the prior year.
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STATEMENT OF ACTIVITIES
The Statement of Activities tracks the City’s yearly revenues and expenses, as well as any other
transactions that increase or reduce total net position. These amounts represent the full cost of providing
services. The Statement of Activities provides a more comprehensive measure than just the amount of
cash that changed hands, as reflected in the fund-based financial statements. This statement includes the
cost of supplies used, depreciation of long-lived capital assets, and other accrual-based expenses.
The following table presents the change in the net position of the City for the years ended December 31,
2020 and 2019:
2019
Program
Expenses Revenues Net Change Net Change
Governmental activities
General government 3,831,010$ 493,819$ (3,337,191)$ (2,927,283)$
Public safety 7,025,367 3,153,992 (3,871,375) (3,348,722)
Public works 6,024,512 6,084,890 60,378 2,686,022
Culture and recreation 2,127,013 435,197 (1,691,816) (1,879,877)
Economic development 964,213 14,936 (949,277) (915,082)
Interest on long-term debt 896,377 – (896,377) (1,038,292)
Business-type activities
Water 3,281,173 5,692,694 2,411,521 1,059,788
Sewer 3,397,772 5,302,169 1,904,397 609,146
Water quality 623,317 1,212,230 588,913 466,628
28,170,754$ 22,389,927$ (5,780,827) (5,287,672)
General revenues
Taxes 15,066,374 14,176,838
Unrestricted grants and contributions 1,951,940 12,867
Investment income 1,089,194 1,385,288
Miscellaneous 184,583 144,924
Sale of assetsGain on sale of assets 38,913 –
Total general revenues 18,331,004 15,719,917
12,550,177$ 10,432,245$
Total net (expense) revenue
Change in net position
Net (expense) revenue
2020
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.
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LEGISLATIVE UPDATES
The 2020 legislative session, coming in the second half of the state’s fiscal biennium, was expected to be
a typical short session focused primarily on making relatively minor modifications to the biennial budget.
Given a projected budget surplus of $1.5 billion going into the session, consideration of a substantial
capital investment and bonding bill was also a potential focus.
The start of the legislative session in February was followed by a series of significant events that changed
the course of the session, including a world-wide health pandemic, the death of George Floyd while in
police custody and the ensuing protests and unrest, and a hotly contested national election. On March 13,
2020, the Governor issued an executive order declaring a peacetime emergency, giving his administration
the ability to quickly impose restrictions and measures aimed at mitigating the COVID-19 outbreak. By
early May, the state’s budget outlook had changed from a robust surplus to a projected deficit of
$2.4 billion. The legislative session ultimately encompassed an unprecedented seven special sessions,
more than double the previous state record of three, with the final special session in mid-December.
In the end, a $1.87 billion omnibus bonding bill was passed that included $1.36 billion in general
obligation state bonding for capital improvements, $31.0 million in supplemental General Fund budget
spending, and provisions for tax relief and economic assistance. The session also yielded a new Police
Accountability Act, and a $217.0 million economic relief package to help businesses negatively impacted
by the pandemic. The following is a brief summary of legislative changes from the 2020 session or
previous legislative sessions potentially impacting Minnesota cities.
Coronavirus Aid, Relief, and Economic Security (CARES) Act – The CARES Act provided federal
economic relief to protect the American people from the public health and economic impacts of
COVID-19. Minnesota received approximately $2.2 billion in funding under the CARES Act.
When the first legislative special session ended without an agreement on the distribution of approximately
$841.5 million of federal Coronavirus Relief Fund (CRF) funding earmarked for Minnesota local
governments, the Governor distributed the funds by executive order based on the framework of the
legislative agreement debated during the first special session. This resulted in $350.4 million being
distributed directly to Minnesota cities with populations equal to or greater than 200. The funds were
authorized for use for unbudgeted costs related to the COVID-19 pandemic, but not to replace lost
revenues. In accordance with CARES Act provisions, the CRF funding was available to cover costs that;
1) were necessary expenditures incurred due to the public health emergency related to COVID-19;
2) were not accounted for in the entity’s budget most recently approved as of March 27, 2020; and
3) were incurred during the period from March 1, 2020 through December 31, 2020 (the availability
period end date was revised by the state to November 15, 2020 for Minnesota cities).
Emergency Small Business Assistance Program – The Legislature created a program to appropriate
$60.0 million of federal CRF funding to make grants available through the Minnesota Department of
Employment and Economic Development for eligible small businesses impacted by COVID-19. Small
businesses employing up to 50 full-time employees are eligible to receive grants of up to $10,000. The
allocation is split between the metro area and greater Minnesota, with specific allocations for busines ses
owned by minorities, veterans, and women. $18.0 million of the allocation is earmarked for businesses
with 6 or less employees.
Workers’ Compensation Claims – COVID-19 Presumption – The Legislature adopted several new
provisions to state unemployment statutes related to COVID-19, including a presumption that an
employee who contracts COVID-19 has an “occupational disease” arising out of, and in the course of,
employment if the employee works in one of the specified occupations and has a confirmed case of
COVID-19. Covered occupations include nurses, healthcare workers, and workers required to provide
childcare for first responders and healthcare workers under Executive Orders 20 -02 and 20-19. The
COVID-19 presumption provision sunsets on May 1, 2021.
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Bonding Bill – The 2020 bonding bill provided financing for approximately $1.36 billion of projects.
Some of the more significant appropriations for local infrastructure included: $105 million in
undesignated grants for local road improvement and bridge replacement; $100 million for water
infrastructure and point source implementation grants; $25 million for state match of federal grants for
public facilities improvements, $20 million for natural resource asset preservation, $17 million for flood
control mitigation, $15 million for the Local Government Roads Wetlands Replacement Program;
$5 million for Metropolitan Council inflow and infiltration grants; and $5 million for metropolitan
regional parks and trails. The bill also included funding for a number of state initiatives, including:
$300 million in trunk highway bonds for the improvement of the state trunk highway system;
$145 million in appropriation bonds to fund the infrastructure and capital needs of the Minnesota Housing
Finance Agency, Minnesota Pollution Control Agency, and Minnesota Public Television; $30 million for
state agency projects aimed at promoting racial equity, $29.5 million for the state Emergency Operations
Center; and $16 million for the Minnesota Housing Finance Agency.
The bill provides authority for eligible local governments to own and operate childcare facilities, and
permits local governments to enter into management agreements with licensed childcare providers to
operate in publicly-owned facilities. It also makes cities, counties, school districts, and joint powers
boards located outside of the seven-county metro area eligible to apply for grants through the Greater
Minnesota Childcare Facility Capital Grant Program.
The bill also included a provision extending the equal pay certificate of compliance requirement to
contracts by any public entity, including political subdivisions, using state general obligation bond
proceeds for all or part of a capital project. Local governments will be responsible for requiring that bids
include proper certification on applicable projects, which applies to projects for goods or services valued
at more than $1 million utilizing appropriated bond proceeds on or after January 1, 2022.
Elections – A number of measures were passed to help ensure the safe and secure conduct of the 2020
state primary and general elections, including; allowing for the processing of absentee ballots to begin
14 days prior to the date of the election, extending the period during which absentee ballots could be
processed for 2 days following the election, accepting electronic filings for affidavits of candidacy or
nominating petitions, and specifying that municipalities were to use schools as polling places only when
no other public or private location was reasonably available. Funds from the federal Help America Vote
Act were made available for modernizing, securing, and improving election facilities, a portion of which
was made available for grants to local governments to fund activities prescribed by this program.
Minors Operating Lawn Care Equipment – Effective May 28, 2020, Minnesota Statutes lowered the
employment age for operating lawn care equipment to age 16. Minors aged 16 and 17 must be trained in
the safe operation of the equipment and wear appropriate personal protective equipment when operating
the lawn care equipment. The exception under this statute applies only to minors directly employed by
golf courses, resorts, rental property owners, or municipalities to perform lawn care on golf courses,
resort grounds, rental property, or municipal grounds.
Open Meeting Law Exception – The interactive television provision of the Minnesota Open Meeting
Law was amended to allow for participation in meetings by interactive electronic means, such as Skype or
Zoom, without requiring that an elected official be advised to do so by a healthcare professional for
personal or family medical reasons. This allowance is available only when a national security or
peacetime emergency has been declared and may be used up to 60 days after the emergency declaration
has been lifted. Whenever public meetings are held via interactive electronic means of this type, votes
must be conducted by roll call and be recorded in the minutes.
Expanded Authority for Electronic Signatures During COVID-19 – Effective May 17, 2020, cities
are allowed to accept certain documents, signatures, or filings electronically, by mail, or facsimile during
the COVID-19 pandemic, including; planning and zoning applications and permits; land use documents;
documents requiring the signature of licensed architects, engineers, land surveyors, geoscientists, or
interior designers; applications for birth or death certificates; or recording notary commissions. This
accommodation expires January 16, 2021, or 60 days following the termination of the peacetime public
health emergency.
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Solid Waste Recycling Exemption – The requirement that not more than 15 percent of mixed municipal
solid waste received by recycling or composting facilities be disposed of, rather than recycled or
composted, is suspended as long as the need for the exception is triggered by operational changes
implemented to address the COVID-19 pandemic.
Pension Changes – Effective January 1, 2021, the maximum lump-sum pension amount for volunteer
firefighters is increased from $10,000 to $15,000 per year of service. Municipalities are permitted to split
state fire aid received between its career firefighters and its affiliated volunteer firefighters, but only if the
amount allocated to the career firefighters is approved by the membership of the volunteer firefighter
relief association. Any aid allocated to career firefighters must be used to pay the Public Employees
Retirement Association (PERA) employer contributions on their behalf within 18 months of the transfer
or be returned to the relief association.
Police Accountability Act – The Legislature passed the Police Accountability Act, which enacted a
number of changes to laws governing police conduct, training, and oversight. Among the more significant
changes adopted were:
• Defined and authorized “public safety peer counseling” and “critical incident stress
management,” and classifies information shared in these settings as private data.
• Established an Independent Use of Force Investigations Unit within the Bureau of Criminal
Apprehension to investigate all officer-involved deaths in the state, as well as criminal sexual
assault allegations against peace officers, effective August 1, 2020.
• Authorized statutory or home rule charter cities to offer incentives to encourage a person hired as
a peace officer to be a resident of the city.
• Limited the use of certain restraint methods by peace officer unless the use of deadly force is
authorized in a given situation.
• Established and modified provisions related to law enforcement use of deadly force.
• Defined and prohibited “warrior-style” training for peace officers.
• Established a 15-member “Ensuring Police Excellence and Improving Community Relations
Advisory Council” under the Police Officer Standards and Training (POST) Board, to assist the
POST Board in maintaining policies and regulating peace officers in a manner that ensures the
protection of civil and human rights.
• Established a duty for peace officers to intercede when another officer is using excessive force
and report incidents of excessive force to supervisors.
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ACCOUNTING AND AUDITING UPDATES
The following is a summary of Governmental Accounting Standards Board (GASB) standards expe cted
to be implemented in the next few years. Due to the COVID-19 pandemic, the GASB has delayed the
original implementation dates of these and other standards as described below.
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 meet s 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 increase s 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 June 15, 2021.
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GASB Statement No. 91, Conduit Debt Obligations
The primary objectives of this statement are to provide a single method of reporting conduit debt
obligations by issuers and eliminate diversity in practice associated with (1) commitments extended by
issuers, (2) arrangements associated with conduit debt obligations, and (3) related note disclosures. This
statement achieves those objectives by clarifying the existing definition of a conduit debt obligation;
establishing that a conduit debt obligation is not a liability of the iss uer; establishing standards for
accounting and financial reporting of additional commitments and voluntary commitments extended by
issuers and arrangements associated with conduit debt obligations; and improving required note
disclosures.
A conduit debt obligation is defined as a debt instrument having all of the following characteristics:
• There are at least three parties involved: (1) an issuer, (2) a third party obligor, and (3) a debt
holder or a debt trustee.
• The issuer and the third party obligor are not within the same financial reporting entity.
• The debt obligation is not a parity bond of the issuer, nor is it cross -collateralized with other debt
of the issuer.
• The third party obligor or its agent, not the issuer, ultimately receives the proceeds fr om the debt
issuance.
• The third party obligor, not the issuer, is primarily obligated for the payment of all amounts
associated with the debt obligation (debt service payments).
This statement also addresses arrangements, often characterized as leases, that are associated with conduit
debt obligations. In those arrangements, capital assets are constructed or acquired with the proceeds of a
conduit debt obligation and used by third party obligors in the course of their activities.
This statement requires issuers to disclose general information about their conduit debt obligations,
organized by type of commitment, including the aggregate outstanding principal amount of the issuers’
conduit debt obligations and a description of each type of commitment. Issuers that recognize liabilities
related to supporting the debt service of conduit debt obligations also should disclose information about
the amount recognized and how the liabilities changed during the reporting period.
The requirements of this statement are effective for reporting periods beginning after December 15, 2021.
Earlier application is encouraged.
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GASB Statement No. 92, Omnibus 2020
The objectives of this statement are to enhance comparability in accounting and financial reporting and to
improve the consistency of authoritative literature by addressing practice issues that have been identified
during implementation and application of certain GASB Statements. This statement addresses a variety of
topics and includes specific provisions about the following:
• The effective date of Statement No. 87, Leases, and Implementation Guide No. 2019-3, Leases,
for interim financial reports
• Reporting of intra-entity transfers of assets between a primary government employer and a
component unit defined benefit pension plan or defined benefit other post-employment benefit
(OPEB) plan
• The applicability of Statements No. 73, Accounting and Financial Reporting for Pensions and
Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain
Provisions of GASB Statements 67 and 68, as amended, and No. 74, Financial Reporting for
Postemployment Benefit Plans Other Than Pension Plans, as amended, to reporting assets
accumulated for post-employment benefits
• The applicability of certain requirements of Statement No. 84, Fiduciary Activities, to
post-employment benefit arrangements
• Measurement of liabilities (and assets, if any) related to asset retirement obligations in a
government acquisition
• Reporting by public entity risk pools for amounts that are recoverable from reinsurers or excess
insurers
• Reference to nonrecurring fair value measurements of assets or liabilities in authoritative
literature
• Terminology used to refer to derivative instruments
The requirements of this statement are effective for fiscal years beginning after June 15, 2021. Earlier
application is encouraged.
GASB Statement No. 96, Subscription-Based Information Technology Arrangements
This statement provides guidance on the accounting and financial reporting for subscription-based
information technology arrangements (SBITAs) for government end users (governments). This statement
(1) defines a SBITA; (2) establishes that a SBITA results in a right-to-use subscription asset—an
intangible asset—and a corresponding subscription liability; (3) provides the capitalization criteria for
outlays other than subscription payments, including implementation costs of a SBITA; and (4) requires
note disclosures regarding a SBITA. To the extent relevant, the standards for SBITAs are based on the
standards established in Statement No. 87, Leases, as amended.
An SBITA is defined as a contract that conveys control of the right to use another party’s (an SBITA
vendor’s) information technology (IT) software, alone or in combination with tangible capital assets (the
underlying IT assets), as specified in the contract for a period of time in an exchange or exchange -like
transaction. Under this statement, a government generally should recognize a right-to-use subscription
asset—an intangible asset—and a corresponding subscription liability.
This statement provides an exception for short-term SBITAs with a maximum possible term under the
SBITA contract of 12 months, including any options to extend, regardless of their probability of being
exercised. Subscription payments for short-term SBITAs should be recognized as outflows of resources.
This statement requires a government to disclose descriptive information about its SBITAs other than
short-term SBITAs, such as the amount of the subscription asset, accumulated amortization, other
payments not included in the measurement of a subscription liability, principal and interest requirements
for the subscription liability, and other essential information.
The requirements of this statement are effective for fiscal years beginning after June 15, 2022, and all
reporting periods thereafter.
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GASB Statement No. 97, Certain Component Unit Criteria, and Accounting and
Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation
Plans—an Amendment of GASB Statement No. 14 and No. 84, and a Supersession of GASB
Statement No. 32
The primary objectives of this statement are to (1) increase consistency and comparability related to the
reporting of fiduciary component units in circumstances in which a potential component unit does not
have a governing board and the primary government performs the duties that a governing board typically
would perform; (2) mitigate costs associated with the reporting of certain defined contribution pension
plans, defined contribution OPEB plans, and employee benefit plans other than pension plans or OPEB
plans (other employee benefit plans) as fiduciary component units in fiduciary fund financial statements;
and (3) enhance the relevance, consistency, and comparability of the accounting and financial reporting
for Internal Revenue Code Section 457 deferred compensation plans (Section 457 plans) that meet the
definition of a pension plan and for benefits provided through those plans.
The requirements of this statement that (1) exempt primary governments that perform the duties that a
government board typically performs from treating the absence of a governing board the same as the
appointment of a voting majority of a governing board in determining whether they are financially
accountable for defined contribution pension plans, defined contribution OPEB plans, or other employee
benefit plans, and (2) limit the applicability of the financial burden criterion in paragraph 7 of
Statement 84 to defined benefit pension plans and defined benefit OPEB plans that are administered
through trusts that meet the criteria in paragraph 3 of Statement 67 or paragraph 3 of Statement 74,
respectively, are effective immediately.
The requirements of this statement that are related to the accounting and financial reporting for
Section 457 plans are effective for fiscal years beginning after June 15, 2021. For purposes of determining
whether a primary government is financially accountable for a potential component unit, the requirements
of this statement that provide that for all other arrangements, the absence of a governing board be treated
the same as the appointment of a voting majority of a governing board if the primary government
performs the duties that a governing board typically would perform, are effective for reporting periods
beginning after June 15, 2021. Earlier application of those requirements is encouraged and permitted by
requirement as specified within this statement.