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Home My WebLink About_06 01 2020 City Council Agenda PacketCHECK REGISTER FOR CITY OF PRIOR LAKE 1/5Page: 05/22/2020 11:00 AM User: Janet DB: Prior Lake CHECK DATE FROM 05/09/2020 - 05/22/2020 AmountDescriptionVendor NameVendorCheckBankCheck Date Bank 1 General Bank 122.50 PE License RenewalANDREW BROTZLER000276745928(A)105/15/2020 2,342.00 21/13 ImprovementsBOLTON & MENK INC000026375929(A)105/15/2020 455.00 General Engineering 708.00 DEV19-000017 Haven Ridge 3rd Addn 170.00 Hidden View Pond 1,544.50 DEV19-000006 Meadow of Cleary Lake 354.00 Trillium Cove 2nd Addn Dev18-000018 5,573.50 473.46 Apr 2020 Misc SuppliesCARLSON HARDWARE COMPANY000031255930(A)105/15/2020 7,890.00 May 2020 Facility CleaningCOVERALL000275715931(A)105/15/2020 193.16 472 Strobe lampEMERGENCY AUTOMOTIVE TECH INC000054805932(A)105/15/2020 224.26 1820 Squad supplies 417.42 56.98 PartsFASTENAL COMPANY000061405933(A)105/15/2020 530.50 518 Stucci docking station FORCE AMERICA000067735934(A)105/15/2020 955.80 Apr 2020 LocatesGOPHER STATE ONE-CALL INC000075255935(A)105/15/2020 1,815.00 Apr 2020 GeneralHOFF BARRY PA000273875936(A)105/15/2020 1,443.75 Apr 2020 COVID-19 Related 82.50 Apr 2020 Data Practices 247.50 Apr 2020 PW/Engineering 206.25 Apr 2020 AT&T at Cedarwood St 247.50 Apr 2020 Comm Dev 123.75 Apr 2020 EDA 866.25 Apr 2020 Development 123.75 Apr 2020 Police 577.50 Apr 2020 Code Pt 3 41.25 Apr 2020 Code Pt 6 1,608.75 Apr 2020 Code Pt 11 46.25 Apr 2020 Litigation 185.00 Apr 2020 Special Assmt Appeal 7,615.00 1,088.42 Apr 2020 UniformsHUEBSCH000275365937(A)105/15/2020 101.56 Chairmat, Phone Message BookINNOVATIVE OFFICE SOLUTIONS LLC000271495938(A)105/15/2020 105.00 Desk Sign Holders 20.53 Watson - Name Plate 87.50 Desk Sign Holders 314.59 316.00 501 Hydaulic oil KATH FUEL OIL SERVICE000024105939(A)105/15/2020 321.70 Grease 637.70 81.48 524 Deck repair MTI DISTRIBUTING INC000139515940(A)105/15/2020 121.00 Safety Boots 2020NATHAN BRIESE000028175941(A)105/15/2020 90.63 Purell Floor StandNETWORK SERVICES COMPANY000143815942(A)105/15/2020 91.86 Disinfectant 182.49 CHECK REGISTER FOR CITY OF PRIOR LAKE 2/5Page: 05/22/2020 11:00 AM User: Janet DB: Prior Lake CHECK DATE FROM 05/09/2020 - 05/22/2020 AmountDescriptionVendor NameVendorCheckBankCheck Date 1,858.00 Apr 2020 Labor & EmploymentNILAN JOHNSON LEWIS000081235943(A)105/15/2020 911.19 Apr 2020 Repair PartsO'REILLY AUTO PARTS000150885944(A)105/15/2020 53.18 SandPENTAGON MATERIALS INC000274265945(A)105/15/2020 130.66 Sand 196.56 Sand 138.45 Coarse Washed Sand 134.75 Coarse Washed Sand 653.60 400.00 May 2020 ROWay AppPERRILL000065025946(A)105/15/2020 565.36 Mar 2020 Data & SoftwarePRECISE MOBILE RESOURCE MGMT000165485947(A)105/15/2020 445.11 Apr 2020 Misc SuppliesPRIOR LAKE HARDWARE000166585948(A)105/15/2020 182.03 Rubber Cushion Clamps, GrommetsTERMINAL SUPPLY COMPANY000202705949(A)105/15/2020 394.98 Leak Detection - 16427 Northwood RoadWATER CONSERVATION SVCS INC000232005950(A)105/15/2020 170.31 452 Radiator hose repair WOLF MOTOR CO INC000236755951(A)105/15/2020 34.65 Mtce Center First Aid SuppliesZEE MEDICAL SERVICE000263505952(A)105/15/2020 2,400.00 Apr 2020 Animal Control4 PAWS ANIMAL CONTROL LLC000067985953(A)105/18/2020 372.00 May 2020 HRA Admin FeeMEDICA000133255954(E)105/13/2020 61.52 Carbon DioxideAIRGAS USA LLC000013135955(A)105/22/2020 50.50 Acetylene & Oxygen 112.02 955.00 Tow 2005 Nissan Murano #401022ALLEN'S SERVICE INC000013605956(A)105/22/2020 700.00 Risk AssessmentBOLTON & MENK INC000026375957(A)105/22/2020 1,762.50 Jun 2020 Managed ServicesCOMPUTER INTEGRATION TECH000037605958(A)105/22/2020 1,585.00 Dell Latitude, LED Monitor 350.00 LED Monitor 1,125.00 Jun 2020 CIT Managed Backup 345.00 Sonicwall 407.50 IT Support - Install Host Servers 84.75 IT Support - Install Host Servers 2,176.00 IT Support 7,835.75 541.68 Repair PartsCORE & MAIN000273285959(A)105/22/2020 242.29 Repair Parts 556.41 Hose Nozzle 92.75 Cutoff Disc 1,433.13 585.26 Vehicle Decal NumbersGRAFIX SHOPPE000076155960(A)105/22/2020 89.68 429 Tire HART BROS TIRE CO000082375961(A)105/22/2020 124.15 523 Front tire 213.83 6,783.78 Water Treatment ChemicalsHAWKINS INC000083125962(A)105/22/2020 22.63 Misc Office SuppliesINNOVATIVE OFFICE SOLUTIONS LLC000271495963(A)105/22/2020 4.00 Desk Pad Calendar 26.63 13.24 Gun Cleaning SuppliesJONATHAN CASSMAN000271045964(A)105/22/2020 CHECK REGISTER FOR CITY OF PRIOR LAKE 3/5Page: 05/22/2020 11:00 AM User: Janet DB: Prior Lake CHECK DATE FROM 05/09/2020 - 05/22/2020 AmountDescriptionVendor NameVendorCheckBankCheck Date 425.00 Vactor Discharge Permit FeeMETROPOLITAN COUNCIL000134005965(A)105/22/2020 475.00 WTP Discharge Permit 900.00 1,129.33 Repair PartsMTI DISTRIBUTING INC000139515966(A)105/22/2020 91.57 503 Mower belt 1,220.90 47,870.59 ROW Easement - CR 21 Between Duluth and SCOTT COUNTY000192125967(A)105/22/2020 408.90 AsphaltWM MUELLER & SONS INC000236455968(A)105/22/2020 220.11 Asphalt 265.35 Asphalt 894.36 640.84 501 Bucket pin actuator ZIEGLER INC000265005969(A)105/22/2020 101.00 2020 Dental ClaimsDELTA DENTAL000272135970(E)105/11/2020 77,977.83 May 2020 Health Insurance PremiumsMEDICA000133255971(E)105/11/2020 1,425.69 2019/2020 HRA Claims 79,403.52 197.37 May 2020 Merchant Card FeesTRANSFIRST000206935972(E)105/11/2020 13,466.64 May 2020 Electric BillsMN VALLEY ELECTRIC000137385973(E)105/15/2020 1,088.27 May 2020 Electric BillsSHAKOPEE PUBLIC UTILITIES000193885974(E)105/15/2020 1,298.93 2020 HRA ClaimsMEDICA000133255975(E)105/18/2020 42.00 Apr 2020 COBRA Admin FeeALERUS000013755976(E)105/20/2020 333.17 Apr 2020 Fuel TaxMN DEPT OF REVENUE000136125977(E)105/20/2020 1,351.00 Apr 2020 Sales Tax 1,684.17 2,107.29 May 2020 Phone BillsNUVERA000193045978(E)105/20/2020 260.00 Equipment RepairALEX AIR APPARATUS INC00001329106031105/15/2020 1,870.00 Office CabinetBERENS CABINETS LLC00002279106032105/15/2020 100.00 Water Efficiency RebateBHARTH KUMAR ARJAREFUND-MSC106033105/15/2020 100.00 Water Efficiency RebateBOB ADAMSREFUND-MSC106034105/15/2020 71.54 May 2020 Mtce Cetner RefuseBUCKINGHAM COMPANIES00002919106035105/15/2020 254.86 Ap 2020 Mtce Center Refuse 326.40 156.76 OilC EMERY NELSON INC00003052106036105/15/2020 2,135.38 Asphalt - Pot Hole RepairCITY OF ST PAUL00003521106037105/15/2020 1,867.00 US and State FlagsDISPLAY SALES COMPANY00004493106038105/15/2020 2,500.00 18-1096 3292 Thornton DriveETERNITY HOMESMISC-CD106039105/15/2020 1,435.00 Turf Chemical ApplicationFARMERS MILL & ELEVATOR INC00027632106040105/15/2020 2,413.90 MIU'sFERGUSON WATERWORKS #251600006231106041105/15/2020 282.34 TITLE CK REFUND ACCT: 2-03840-01FIRST AMERICAN TITLE INSURANCEREFUND-UB106042105/15/2020 1,370.59 Mtce Center Electrical RepairHAYES ELECTRIC INC00008315106043105/15/2020 204.00 DirtHERMAN'S LANDSCAPE SUPPLIES00008617106044105/15/2020 19.08 Apr 2020 Misc SuppliesHOME DEPOT CREDIT SERVICES00008865106045105/15/2020 82.49 Water Efficiency RebateJEFF HOUGLUMREFUND-MSC106046105/15/2020 90.00 Refund - ShelterJESS MEISNERREFUND-REC106047105/15/2020 390.00 FS #2 HVAC RepairKLAMM MECHANICAL CONTRACTORS INC00026904106048105/15/2020 148.20 Tire RecyclingLIBERTY TIRE RECYCLING LLC00012628106049105/15/2020 90.00 Refund - ShelterLORI FELTONREFUND-REC106050105/15/2020 2.00 Bal Due - Cyberdata IP Push ButtonMARCO TECHNOLOGIES LLC00027647106051105/15/2020 CHECK REGISTER FOR CITY OF PRIOR LAKE 4/5Page: 05/22/2020 11:00 AM User: Janet DB: Prior Lake CHECK DATE FROM 05/09/2020 - 05/22/2020 AmountDescriptionVendor NameVendorCheckBankCheck Date 415.42 Parks SuppliesMENARDS LUMBER CO00013318106052105/15/2020 5,000.00 Legislative RepresentationMESSERLI & KRAMER00027771106053105/15/2020 132.36 526 Mower deck repair MN EQUIPMENT00026912106054105/15/2020 7,796.00 Unit #523 Cab 5,925.00 #278 Trail Blower 13,853.36 62.00 Pre-Employment ScreeningMN OCCUPATIONAL HEALTH00027099106055105/15/2020 2,302.40 Hockey Rink Repair SuppliesMONNENS SUPPLY INC00013909106056105/15/2020 915.55 Apr 2020 Repair PartsNAPA AUTO PARTS00014060106057105/15/2020 5,425.52 Navy Pump RepairPOWERPLAN00022435106058105/15/2020 441.80 PD Card Reader RepairPRO-TECH DESIGN INC00027429106059105/15/2020 100.00 May 2020 Portable ToiletsSPECIALIZED SANITATION00019703106060105/15/2020 1,590.00 Annual Sprinkler InspectionSUMMIT FIRE PROTECTION CO00019949106061105/15/2020 326.81 468 Tarp lock assemblys TOWMASTER00020659106062105/15/2020 135.26 Apr 2020 Misc SuppliesTRACTOR SUPPLY CREDIT PLAN00020663106063105/15/2020 3,750.00 Leak DetectorUSA BLUEBOOK00021882106064105/15/2020 257.86 Electrical SuppliesVIKING ELECTRIC SUPPLY00022630106065105/15/2020 787.16 Apr 2020 Mtce Center RefuseBUCKINGHAM COMPANIES00002919106066105/22/2020 296.94 May 2020 Phone BillsCENTURY LINK00021220106067105/22/2020 1,197.00 Custom FlagsDISPLAY SALES COMPANY00004493106068105/22/2020 124.95 Square TubeEARL F ANDERSEN INC00005175106069105/22/2020 111.15 9290 Fire boat batteryFACTORY MOTOR PARTS COMPANY00006020106070105/22/2020 2,740.38 Turf ChemicalsFARMERS MILL & ELEVATOR INC00027632106071105/22/2020 300.00 Refund - PavilionGREGORY WEIGELREFUND-REC106072105/22/2020 596.10 Electrical RepairHAYES ELECTRIC INC00008315106073105/22/2020 274.20 Inspect/Repair Copco Air DryerINDUSTRIAL PNEUMATIC SYSTEMS00027680106074105/22/2020 90.00 Refund - Park ShelterJAMES LARSON00027037106075105/22/2020 300.00 Refund - PavilionKATHY MONNENSREFUND-REC106076105/22/2020 330.00 Refund - PavilionKERI ANDERSONREFUND-REC106077105/22/2020 72.41 Shipping/Insurance - Live Streaming EquiLEIGHTRONIX INC00027805106078105/22/2020 90.00 Refund - ShelterMARY HOLTON-BOYLEYREFUND-REC106079105/22/2020 188.65 Misc SuppliesMENARDS LUMBER CO00013318106080105/22/2020 2,500.00 18-2116 13697 Kensington AvenueMI HOMES OF MINNEAPOLIS LLCMISC-CD106081105/22/2020 23,299.00 2nd Qtr 2020 State SurchargeMN DEPT OF HEALTH00013618106082105/22/2020 54.38 505 hitch partsMN EQUIPMENT00026912106083105/22/2020 276.49 VSQS Hazardous Waste FeeMN POLLUTION CONTROL AGCY00013850106084105/22/2020 79.60 Straw BalesQUEEN BEE'Z INC00027687106085105/22/2020 150.00 2017 Jeep Cherokee #601430SCOTT COUNTY ATTORNEY00019232106086105/22/2020 132.41 Apr 2020 Legal AdsSOUTHWEST NEWSPAPERS00019676106087105/22/2020 87.00 Pistol PouchSTREICHERS00019900106088105/22/2020 49.20 May 2020 Phone BillT-MOBILE00026962106089105/22/2020 115.54 Clasp EnvelopesULINE00021250106090105/22/2020 285.60 Water PumpUNITED RENTALS INC00023195106091105/22/2020 75.00 Adelmann - DMT-G RecertificationUS BANK00002105106092105/22/2020 75.00 Griffin - DMT-G Recertification 395.00 Karfa - On-Line Training 499.30 Mager - EMR/EMS Refresher 4.40 Postage Due 122.50 Wedel - Annual Dues 309.28 Cleaning Supplies 26.54 Pressure Washer Scrubber 125.00 Radio Adapter 118.58 Coffee 108.00 Hand Sanitizer 280.00 AED Pads 68.00 Scheduling Software 123.80 Nitrile Gloves CHECK REGISTER FOR CITY OF PRIOR LAKE 5/5Page: 05/22/2020 11:00 AM User: Janet DB: Prior Lake CHECK DATE FROM 05/09/2020 - 05/22/2020 AmountDescriptionVendor NameVendorCheckBankCheck Date 301.60 Nitrile Gloves 237.46 Face Shields 387.00 Infrared Thermometers 5.00 Frazer - Dues 16.09 May 2020 Video License 379.98 Lobby TV & Bracket 18.91 Counter Cleaning Paper Towels 15.98 SD Card Reader 42.94 Lobby Display Board Fire Stick 23.49 Council Chambers Desktop Microphone 59.98 Webcams 443.73 Disposable Face Masks 20.99 Apr 2020 Adobe Dreamweaver 160.96 Video Conference License 821.50 New Employee Background Screening 171.50 New Employee Background Screening 543.96 Fire Hand Pumps 36.46 Face Mask Sorage Bins 144.00 Hand Sanitizer 0.99 50GB iCloud Storage 37.63 Roto Gloves 6,200.55 229.98 Sanitizer, Convex MirrorUS BANK00002105106093105/22/2020 30.99 Return to E-conolight 148.00 Laptop Docking Station 259.60 1 Gallon Pumps 11.99 Phone Clip 110.42 Brake Chamber Tools 213.64 Shop Light 37.57 Conical Lens 171.79 Shop Light 251.60 Door Foot Pulls 867.38 Rope, Bouys (78.37)Return Cleaning Supplies (407.32)Refund - 8/5/2020 Field Trip Cancelled (258.46)Refund - Wedel Conference Cancelled (520.00)Cancelled - Young - Conference (200.00)Cancelled - 8/5/2020 Field Trip (41.85)Return Supplies 826.96 225.00 City Council - city bus tourVOIGT MOTORCOACH TRAVEL INC00027488106094105/22/2020 203.94 Apr 2020 Investigative ServicesWEST PAYMENT CENTER00023420106095105/22/2020 79.00 Annual Log Me In Remote AccessYALE MECHANICAL INC00025010106096105/22/2020 1 TOTALS: 296,505.32 Total of 117 Disbursements: 0.00 Less 0 Void Checks: 296,505.32 Total of 117 Checks: City of Prior Lake Treasurers Report April 2020 Fund 4/1/2020 4/30/2020 Fund Type & Name No.Balance Receipts Disbursements Balance Business-Type Funds Water Fund 601 4,317,240.19$ 464,420.17$ 204,220.25$ 4,577,440.11$ Sewer Fund 604 1,751,351.32 514,175.31 238,770.88 2,026,755.75 Water Quality Fund 602 1,467,778.17 167,959.22 34,831.55 1,600,905.84 Total Business-Type Funds 7,536,369.68$ 1,146,554.70$ 477,822.68$ 8,205,101.70$ Governmental-Type Funds General Fund 101 6,492,937.14$ 342,409.05$ 1,249,038.02$ 5,586,308.17$ Special Revenue Funds Cable Franchise Fund 210 75,871.23 2,073.76 9,071.00 68,873.99$ Capital Park Fund 225 1,772,572.38 4,773.51 2,246.32 1,775,099.57 Police Forfeiture Fund 235 147,145.21 230.27 0.00 147,375.48 EDA Special Revenue 240 376,853.61 572.89 10,764.43 366,662.07 Econ Dev Federal Revolving Loan Fund 250 129,688.49 202.95 0.00 129,891.44 Econ Dev MN Revolving Loan Fund 255 171.53 0.27 0.00 171.80 Developer Agreement Fund 260 911,296.75 0.00 848.73 910,448.02 Total Special Revenue Funds 3,413,599.20$ 7,853.65$ 22,930.48$ 3,398,522.37$ Capital Project Funds Tax Increment 402 17,781.94 27.83 0.00 17,809.77$ TIF #1-3 413 106,560.37 166.76 0.00 106,727.13 TIF #3-1 414 164,537.90 257.48 0.00 164,795.38 TIF #5-1 416 9,796.38 15.33 0.00 9,811.71 TIF #6-1 417 385,534.44 603.32 0.00 386,137.76 TIF #1-4 418 1,286.53 2.01 0.00 1,288.54 TIF #1-5 419 16,998.96 26.60 0.00 17,025.56 Revolving Equipment Fund 410 786,214.84 828.71 256,650.22 530,393.33 Revolving Park Equipment Fund 430 902,597.71 1,412.47 0.00 904,010.18 Facilities Management Fund 440 492,832.79 771.23 0.00 493,604.02 Permanent Impr Revolving Fund 450 858,894.33 3,853.60 0.00 862,747.93 Construction Fund 501 3,998,897.34 1,425.25 3,126,227.65 874,094.94 Trunk Reserve Fund 502 3,412,133.83 16,703.32 0.00 3,428,837.15 Street Oversize Fund 503 1,276,983.03 1,998.35 0.00 1,278,981.38 Water Storage Fund 505 358,966.00 8,838.63 0.00 367,804.63 Total Capital Project Funds 12,790,016.39$ 36,930.89$ 3,382,877.87$ 9,444,069.41$ Debt Service Funds 314-351 & 549-573 $ 2,996,943.08 8,021.02$ -$ 3,004,964.10$ Agency Fund 801 1,020,672.50$ 15,000.00$ -$ 1,035,672.50$ Total Governmental Type Funds 26,714,168.31$ 410,214.61$ 4,654,846.37$ 22,469,536.55$ Internal Service Funds 7xx 473,691.29$ 3,180.25$ -$ 476,871.54$ Total All Funds 34,724,229.28$ 1,559,949.56$ 5,132,669.05$ 31,151,509.79$ Investment Pool & Ratio as of 4/30/2020 98.91%30,813,171.13$ This report does not reflect financial obligations from contracts, agreements, purchases, services received, etc. TREASURER’S REPORT FUND DESCRIPTIONS General Fund - Represents the resources to support general operating budget expenditures of the City. The year- end fund balance represents dollars that have accumulated over a period of time. The City Council has designated a minimum of 45% of the current operating budget, for working capital to finance city operations. Water Fund - For the collection of water billing utility revenue. This enterprise fund balance is allocated for the operational costs of the Water departments and normally reserved for large capital municipal system expenses. Sewer Fund - For the collection of sewer billing utility revenue. This enterprise fund balance is allocated for the operational costs of the Sewer department and normally reserved for large capital municipal system expenses. Water Quality Fund - An enterprise account funded by the storm water charge that is generated on the bi-monthly water and sewer utility bills. The funds in the account are dedicated to finance water quality improvements including departmental administration, storm water maintenance operations and improvement projects related to water quality. Cable Franchise Fund - Acts as a clearing house for funds received from the cable franchise company as specified by ordinance. Capital Park Fund - Dedicated funds received from developers in accordance with the City’s Park Dedication requirement when land is platted. Funds are collected for the purpose of developing the City’s neighborhood park and trail system. These dollars are programmed throughout the course of the City’s Capital Improvement Program. Police Forfeiture Fund – Special revenue fund created to track criminal and DWI forfeiture revenues and expenditures. ED Special Revenue – Reserved and expended at the direction of the Prior Lake Economic Development Authority for specific economic development activity as allowed by MN Statute. The purpose is to provide economic incentives for new business expansion within the community. ED Fed/MN Loan Funds - Accounts for the proceeds of economic development grants received either from the federal government or the State of Minnesota to provide seed money for a revolving loan account. This provides economic incentive for new business expansion within the community. DAG Special Revenue Fund - Special revenue fund related to costs the City incurs in connection with a subdivision. Fees are paid to the City by the developer when the Development Contract and Final Plat are approved by City Council. Revenues are used to pay for legal expenses incurred with review and approval of the plat and inspection services on developer installed-utilities for newly approved subdivisions within Prior Lake. Water Revenue Bond Fund – PW Bldg - Debt service fund to pay bonds issued to construct the public works maintenance building. The capital facility charge generated on the utility bill provides the funding for the bond payments which occur semi-annually. Funds are transferred from Sewer and Water Fund. Water Revenue Bond Fund – WT Plant - Debt service fund to pay bonds issued to construct the water treatment plant. Revenue from the utility bills provides the funding for the bond payments which occur semi-annually. Funds are transferred from Sewer and Water Fund. Tax Increment Funds - Represents an accumulation of funds such as bond proceeds and project administration fees charged to companies requesting project write-downs in the form of tax increment financing for new and/or redevelopment. The TIF district property taxes are then deposited in a number of tax increment funds established to track their respective revenue. Revolving Equipment Fund - A regular replacement schedule for equipment needs of the City in excess of $5,000 has been adopted. Periodic fund transfers are appropriated to provide a funding source for the acquisition and purchase of new and replacement vehicles and equipment. Revolving Park Equipment Fund – Consists of funds reserved for the replacement of park equipment. Facilities Management Fund – Established in conjunction with the Facilities Management Plan (FMP). The FMP provides a schedule of major repairs, replacements and upgrades to all of the City facilities. Permanent Improvement Revolving Fund – Consists of funds available for annual street mill and overlay projects with any remaining funds to be used to provide upfront funding for future improvements. Construction Fund - Represent unexpended bond proceeds that are reserved to pay for improvement projects approved by the City Council on an annual basis. These dollars are necessary to complete outstanding construction contracts and related engineering and professional services. Street Oversize Fund - Consists of dedicated revenue generated by fees associated with new development and new construction building permits for the funding of pedestrian related improvements i.e., bikeways, sidewalks, trails plus right of way acquisition along collector streets and occasional collector street links. Trunk Reserve Fund - Consists of dedicated revenue generated from utility connection permits and acreage fees assessed at time of sewer and water installation for the recovering of trunk oversizing costs and central municipal system improvements i.e., wells lift stations, force mains, etc. These dollars are programmed throughout the course of the City’s capital improvement plan. Water Storage Fund - Accounts for the water tower fee that is charged and collected on building permits. This fund balance is 100% reserved for the construction of elevated and ground water storage facilities. Debt Service Funds - Represents prepayments of special assessments, property tax collections and special levies needed to pay the outstanding bonded indebtedness of the City. This fund balance is 100% reserved for the payment of bond principal and interest. Agency Fund - Accounts for the residential building permit deposit that is refunded to the building contractor upon final inspection. This provides financial assurance that the property site will be adequately cleaned up and debris free before an occupancy permit is granted. Severance Compensation Fund – Internal Service Fund established to partially fund the City’s compensated absence liability associated with the accrued vacation and sick leave for employees upon termination as recommended by the State Auditor’s Office. Insurance Fund – Internal Service Fund established to track revenues and expenditures related to insurance funds. City of Prior Lake Treasurers Report April 2020 Fund Type & Name Fund Balance Classification Constraints Business-Type Funds Water Fund Unrestricted Identified on utility bill for this purpose Sewer Fund Unrestricted Identified on utility bill for this purpose Water Quality Fund Unrestricted Identified on utility bill for this purpose Governmental-Type Funds General Fund Unassigned Cash flow, emergencies, one-time opportunities Special Revenue Funds Cable Franchise Fund Assigned for communications Statutory obligation to use for PEG access Capital Park Fund Assigned for capital improvements Contractually obligated; park dedication fees EDA Special Revenue Assigned for development Economic Development Econ Dev Federal Revolving Loan Fund Restricted for economic development Economic Development Econ Dev MN Revolving Loan Fund Restricted for economic development Economic Development Developer Agreement Fund Assigned for development Contractually obligated; Capital Project Funds Tax Increment Restricted for tax increment Contractually obligated by tax increment agreements TIF #1-3 Restricted for tax increment Contractually obligated by tax increment agreements TIF #1-4 Restricted for tax increment Contractually obligated by tax increment agreements TIF #3-1 Restricted for tax increment Contractually obligated by tax increment agreements TIF #4-1 Restricted for tax increment Contractually obligated by tax increment agreements TIF #5-1 Restricted for tax increment Contractually obligated by tax increment agreements TIF #6-1 Restricted for tax increment Contractually obligated by tax increment agreements Revolving Equipment Fund Assigned for capital improvements Identified for equipment replacement Revolving Park Equipment Fund Assigned for capital improvements Identified for park equipment replacement Facilities Management Fund Assigned for capital improvements Identified for funding Facilities Management Plan Permanent Improvement Revolving Fund Assigned for capital improvements Identified for funding street improvement projects Construction Fund Restricted for capital improvements Construction projects in progress Trunk Reserve Fund Assigned for capital improvements Contractually obligated by developer agreements Street Oversize Fund Assigned for capital improvements Contractually obligated by developer agreements Water Storage Fund Assigned for capital improvements Contractually obligated by developer agreements Debt Service Funds Restricted for Debt Service Reserved for contractually obligated debt service Agency Fund N/A Escrows to be reimbursed to depositors Internal Service Funds Unrestricted Identified as payment for severance compensation and insurance CITY OF PRIOR LAKE SCOTT COUNTY, MINNESOTA Financial Statements and Supplemental Information Year Ended December 31, 2019 THIS PAGE INTENTIONALLY LEFT BLANK Page INTRODUCTORY SECTION ELECTED AND APPOINTED OFFICIALS 1 FINANCIAL SECTION INDEPENDENT AUDITOR’S REPORT 2–4 MANAGEMENT’S DISCUSSION AND ANALYSIS 5–19 BASIC FINANCIAL STATEMENTS Government-Wide Financial Statements Statement of Net Position 20 Statement of Activities 21–22 Fund Financial Statements Governmental Funds Balance Sheet 23–24 Reconciliation of the Balance Sheet to the Statement of Net Position 25 Statement of Revenues, Expenditures, and Changes in Fund Balances 26–27 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities 28 Statement of Revenues, Expenditures, and Changes in Fund Balances – General Fund – Budget and Actual 29 Proprietary Funds 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 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 OTHER REQUIRED REPORTS Independent Auditor’s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards 136–137 Independent Auditor’s Report on Minnesota Legal Compliance 138 CITY OF PRIOR LAKE SCOTT COUNTY, MINNESOTA Table of Contents (continued) INTRODUCTORY SECTION THIS PAGE INTENTIONALLY LEFT BLANK -1- Term Expires Kirt Briggs Mayor 12/31/2020 Zach Braid Councilmember 12/31/2020 Kevin Burkart Councilmember 12/31/2020 Warren Erickson Councilmember 12/31/2022 Annette Thompson Councilmember 12/31/2022 Jason Wedel City Manager Cathy Erickson Finance Director Jason Etter Accounting Manager ELECTED APPOINTED CITY OF PRIOR LAKE SCOTT COUNTY, MINNESOTA Elected and Appointed Officials As of December 31, 2019 THIS PAGE INTENTIONALLY LEFT BLANK FINANCIAL SECTION THIS PAGE INTENTIONALLY LEFT BLANK -2- INDEPENDENT AUDITOR’S REPORT To the City Council and Management City of Prior Lake, Minnesota REPORT ON THE FINANCIAL STATEMENTS We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Prior Lake, Minnesota (the City) as of and for the year ended December 31, 2019, 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 Standard Letterhead-r2.qxp_167639 Letterhead-RV1 9/7/18 6:34 PM Page 1 -3- OPINIONS In our opinion, the financial statements referred to on the previous page present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City as of December 31, 2019, 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 supplemental information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. The introductory and other information sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. (continued) -4- Prior Year Comparative Information We have previously audited the City’s 2018 financial statements, and we expressed unmodified audit opinions on the respective financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information in our report dated May 15, 2019. In our opinion, the partial comparative information presented herein as of and for the year ended December 31, 2018 is consistent, in all material respects, with the audited financial statements from which it has been derived. OTHER REPORTING REQUIRED BY GOVERNMENT AUDITING STANDARDS In accordance with Government Auditing Standards, we have also issued our report dated May 18, 2020 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 18, 2020 THIS PAGE INTENTIONALLY LEFT BLANK CITY OF PRIOR LAKE Management’s Discussion and Analysis Fiscal Year Ended December 31, 2019 -5- As the management of the City of Prior Lake, Minnesota (the City), we offer readers of the City’s financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended December 31, 2019. 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 $207,222,292 (net position). Of this amount, $18,556,026 (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 $10,432,245. • As of the close of the current fiscal year, the City’s governmental funds reported combined ending fund balances of $22,962,258, a decrease of $2,032,194 in comparison with the prior year. • At the end of the current fiscal year, the unrestricted fund balance (which includes committed, assigned, and unassigned classifications) for the General Fund was $7,903,175, or 53.9 percent, of budgeted 2020 expenditures, and transfers out of $14,656,748. The total fund balance reflects an increase of $689,773 from the prior year and an increase of $1,006,632 from the amended budget. The amended budget reflected the use of fund balance of $316,859 for a city-wide telephone system, funding a transfer to the Severance Compensation Fund, replenishment of fuel and ice management materials, and projects carried over from 2018. The increase in fund balance is primarily due to increased revenues from building permits and fees and expenditures less than planned, primarily in maintenance, professional services, and utilities. • Of the total fund balance of $7,903,175, $324,712 is assigned for the 2020 budget for a transfer to the Economic Development Authority (EDA) for strategic initiatives, city website redesign, and projects carried over from 2019. The unassigned amount of $7,578,463 is 51.7 percent of budgeted 2020 expenditures and transfers out of $14,656,748. 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 p rivate sector business. The Statement of Net Position presents information on all of the City’s assets, deferred outflows of resources, liabilities, and deferred inflows of resources, with the difference between them reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. -6- The Statement of Activities presents information showing how the City’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows . Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned, but unused, vacation leave). Both of the government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City include general government, public safety, public works, culture and recreation, and economic development. The business-type activities of the City include water, sewer, and water quality operations. The government-wide financial statements can be found in the financial section following this report. Fund Financial Statements – A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into two categories: governmental funds and proprietary funds. Governmental Funds – Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a city’s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government -wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the City’s near-term financing decisions. Both the governmental funds Balance Sheet and the governmental funds Statement of Revenues, Expenditures, and Changes in Fund Balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City maintains numerous individual governmental funds. Information is presented separately in the governmental funds Balance Sheet and in the governmental funds Statement of Revenues, Expenditures, and Changes in Fund Balances for the General Fund, Debt Service Fund, and Construction Fund, all of which are considered major funds. Data from the other governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these nonmajor governmental funds are provided in the form of combining statements elsewhere in this report. The City adopts an annual appropriated budget for its General Fund. A budgetary comparison statement has been provided for this fund to demonstrate compliance with this budget. The basic governmental fund financial statements can be found in the financial section of this report immediately following the government-wide financial statements. Proprietary Funds – The City maintains two types of proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses enterprise funds to account for its water, sewer, and water quality operations. -7- Proprietary funds provide the same type of information as shown in the government-wide financial statements, only in more detail. 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 the combining and individual fund statements and schedules (presented as supplemental information) referred to earlier in connection with nonmajor governmental funds and internal service funds, which are presented immediately following the basic financial statements. Further, an other information section has been included as part of the financial statements to facilitate additional analysis. GOVERNMENT-WIDE FINANCIAL ANALYSIS As noted earlier, net position may serve over time as a useful indicator of a city’s financial position. In the case of the City, assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $207,222,292 at the close of the most recent fiscal year. The City’s investment in capital assets (e.g., land, buildings, and machinery and equipment), less any related debt used to acquire those assets that is still outstanding, totaled 87.2 percent of total net position. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. -8- The following table provides the City’s Summary of Net Position: 2019 2018 2019 2018 2019 2018 Assets Current and other assets 35,015,361$ 34,335,059$ 10,461,812$ 10,343,542$ 45,477,173$ 44,678,601$ Capital assets 152,157,816 149,257,662 71,130,568 64,672,620 223,288,384 213,930,282 Total assets 187,173,177$ 183,592,721$ 81,592,380$ 75,016,162$ 268,765,557$ 258,608,883$ Deferred outflows of resources Pension and OPEB plan deferments 3,544,708$ 4,366,049$ 111,916$ 182,120$ 3,656,624$ 4,548,169$ Liabilities Long-term liabilities 46,988,267$ 48,847,077$ 4,083,650$ 4,210,298$ 51,071,917$ 53,057,375$ Other liabilities 7,256,426 3,819,740 1,846,603 2,986,575 9,103,029 6,806,315 Total liabilities 54,244,693$ 52,666,817$ 5,930,253$ 7,196,873$ 60,174,946$ 59,863,690$ Deferred inflows of resources Pension and OPEB plan deferments 4,787,351$ 6,200,450$ 237,592$ 302,865$ 5,024,943$ 6,503,315$ Net position Net investment in capital assets 112,279,178$ 107,929,953$ 68,398,856$ 61,697,384$ 180,678,034$ 169,627,337$ Restricted 7,988,232 8,491,635 – – 7,988,232 8,491,635 Unrestricted 11,418,431 12,669,915 7,137,595 6,001,160 18,556,026 18,671,075 Total net position 131,685,841$ 129,091,503$ 75,536,451$ 67,698,544$ 207,222,292$ 196,790,047$ Activities Activities Total Governmental Business-Type Summary of Net Position as of December 31, 2019 and 2018 Table 1 An additional portion of the City’s net position ($7,988,232, or 3.9 percent) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net position, $18,556,026, may be used to meet the government’s ongoing obligations to citizens and creditors. The significant reduction in deferred outflows of resources, long-term liabilities, and deferred inflows of resources relates to improvements in portfolio earnings in the Public Employees Retirement Association (PERA) pension plans in 2019. The Governmental Accounting Standards Board (GASB) Statement No. 68 requires the City to recognize its proportionate share of pension benefit obligations. At the end of the current fiscal year, the City is able to report positive balances in all three categories of net position, both for the government as a whole, as well as for its separate governmental and business-type activities. The same situation held true for the prior fiscal year. -9- 2019 2018 2019 2018 2019 2018 Revenues Program revenues Charges for services 2,552,868$ 2,698,360$ 8,474,649$ 8,225,463$ 11,027,517$ 10,923,823$ Operating grants and contributions 1,628,053 2,164,590 2,924 15,372 1,630,977 2,179,962 Capital grants and contributions 8,605,951 9,221,982 616,975 1,246,094 9,222,926 10,468,076 General revenues Property taxes and tax increments 13,537,055 12,812,307 – – 13,537,055 12,812,307 Franchise taxes 639,783 630,932 – – 639,783 630,932 Grants and contributions not restricted to specific programs 12,867 12,845 – – 12,867 12,845 Investment income 1,094,987 318,751 290,301 90,678 1,385,288 409,429 Miscellaneous 113,489 66,337 31,435 11,938 144,924 78,275 Total revenues 28,185,053 27,926,104 9,416,284 9,589,545 37,601,337 37,515,649 Expenses General government 3,582,241 3,346,943 – – 3,582,241 3,346,943 Public safety 6,490,001 6,283,264 – – 6,490,001 6,283,264 Public works 5,700,624 5,393,240 – – 5,700,624 5,393,240 Culture and recreation 2,462,914 2,376,137 – – 2,462,914 2,376,137 Economic development 936,034 825,975 – – 936,034 825,975 Interest on long-term debt 1,038,292 1,010,342 – – 1,038,292 1,010,342 Water – – 3,026,239 2,721,328 3,026,239 2,721,328 Sewer – – 3,321,093 2,934,670 3,321,093 2,934,670 Water quality – – 611,654 600,030 611,654 600,030 Total expenses 20,210,106 19,235,901 6,958,986 6,256,028 27,169,092 25,491,929 Increase in net position before transfers 7,974,947 8,690,203 2,457,298 3,333,517 10,432,245 12,023,720 Transfers (5,380,609) (3,177,982) 5,380,609 3,177,982 – – Changes in net position 2,594,338 5,512,221 7,837,907 6,511,499 10,432,245 12,023,720 Net position Beginning of year 129,091,503 123,579,282 67,698,544 61,187,045 196,790,047 184,766,327 End of year 131,685,841$ 129,091,503$ 75,536,451$ 67,698,544$ 207,222,292$ 196,790,047$ Activities Activities Total Table 2 Changes in Net Position for the Years Ended December 31, 2019 and 2018 Governmental Business-Type Governmental Activities – Governmental activities increased the City’s net position by $2,594,338. Key elements of this increase are seen in the table above. The increase is due primarily to the investment earnings of $1,094,987. The cost value of the City’s investment portfolio increased 3 percent in 2019, while the fair value of the portfolio was up almost 5 percent. The business-type activities increased the City’s net position in total by $7,837,907, mostly due to transfers/capital contributions of $5,380,609 from the governmental activities for water and sewer infrastructure replacement and the joint water treatment facility with the Shakopee Mdewakanton Sioux Community (SMSC). -10- Below are specific graphs that provide comparisons of the governmental activities program revenues and expenses. Public works revenue will vary based on development and transportation projects. In 2019, the City received about $3.1 million in easement donations from developers and about $1.7 million in development program trunk/connection fees. Revenue also included about $1.1 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 $9,000,000 General Government Public Safety Public Works Culture and Recreation Economic Development Interest on Long-Term Debt Expenses Program Revenues Governmental Activities – Revenue by Program -11- Business-Type Activities – Below are graphs showing the business-type activities program revenues and expense comparisons. Revenues are collected to fund operations, capital improvements, debt service, and the utility work completed as part of the street projects identified in the Five-Year Capital Improvement Program. $– $250,000 $500,000 $750,000 $1,000,000 $1,250,000 $1,500,000 $1,750,000 $2,000,000 $2,250,000 $2,500,000 $2,750,000 $3,000,000 $3,250,000 $3,500,000 $3,750,000 $4,000,000 $4,250,000 Water Sewer Water Quality Expenses Program Revenues Business-Type Activities – Revenue by Source -12- FINANCIAL ANALYSIS OF THE GOVERNMENT’S FUNDS As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds – The focus of the City’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City’s financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the City’s governmental funds reported comb ined ending fund balances of $22,962,258, a decrease of $2,032,194 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 $7,903,175. As a measure of the General Fund’s liquidity, it may be useful to compare the total fund balance to total fund expenditures. Total fund balance represents about 53.9 percent of total 2020 General Fund budgeted expenditures and transfers out $14,656,748. Of the total fund balance of $7,903,175, $324,712 is assigned for the 2020 for an operating transfer to the EDA for strategic initiatives, city website redesign, and projects carried over from fiscal 2019. This leaves an unassigned fund balance of the General Fund of $7,578,463, or 51.7 percent, of total 2020 General Fund budgeted expenditures, and transfers out of $14,656,748. The total fund balance reflects an increase of $689,773 from the prior year and an increase of $1,006,632 from the amended budget. The amended budget reflected the use of fund balance of $316,859 for a city-wide telephone system, funding a transfer to the Severance Compensation Fund, replenishment of fuel and ice management materials, and projects carried over from 2018. The increase in fund balance is primarily due to increased revenues from building permits and fees. The Debt Service Fund balance decreased by $53,114. The City manages cash flow in all debt service accounts and ensures adequate resources exist to fund future obligations. The Construction Fund balance decreased by $2,809,037. This is largely due to the issuance of 2019A general obligation bonds of $1,450,000, net transfers out of $511,282, and offsetting capital outlay of $6,355,340 for street projects. Capital outlay for the 2019 street improvement project alone was $3,549,366. Proprietary Funds – The City’s proprietary funds provide the same information for the business-type activities found in the government-wide financial statements, but in more detail. -13- GENERAL FUND BUDGETARY HIGHLIGHTS The City amends its budget at various points during the year. The General Fund budget was amended in 2019 to increase the spending of the fund balance by $100,059, for a health insurance reserve adjustment, and carryforward of 2018 projects/spending for capital outlay, parks, and police. Actual revenues were $692,707 over budget in 2019, due primarily to an increase in building permits, plan check fees, and investment income. Actual expenditures were $304,048 less than budget in 2019. Many factors impacted expenditures. The largest variance from budget was in parks being under budget by $121,974. This is primarily due to other services and charges coming in lower than expected by $84,752 . The City budgeted for landscaping and trails/sidewalk maintenance but was unable to get all projects completed during the year. The funds will be carried over to fiscal 2020. Additionally, maintenance expenditures and professional services were less than planned, primarily due to fewer repairs than expected and negotiating contracts at a lower cost than budgeted. 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, 2019 amounts to $223,288,384 (net of accumulated depreciation). This investment in capital assets includes items such as land, buildings and improvements, machinery and equipment, park facilities, roads, highways, and bridges. 2019 2018 2019 2018 2019 2018 Land 33,269,751$ 32,221,249$ –$ –$ 33,269,751$ 32,221,249$ Utility access agreement – – 2,499,970 1,492,167 2,499,970 1,492,167 Easements 48,173,410 47,095,500 218,912 218,912 48,392,322 47,314,412 Construction in progress 3,820,430 10,682,758 3,070 1,283,621 3,823,500 11,966,379 Land improvements 1,067,742 1,079,690 43,968 48,355 1,111,710 1,128,045 Machinery and equipment 2,797,763 2,807,013 565,623 935,532 3,363,386 3,742,545 Vehicles 2,448,016 1,708,031 360,330 4,993 2,808,346 1,713,024 Infrastructure 60,580,704 53,663,421 67,438,695 60,689,040 128,019,399 114,352,461 Total 152,157,816$ 149,257,662$ 71,130,568$ 64,672,620$ 223,288,384$ 213,930,282$ Table 3 Capital Assets (Net of Depreciation) Total Business-Type Activities Governmental Activities Additional information on the City’s capital assets can be found in Note 3 of the note s 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 $41,192,426. This amount comprises debt backed by the full faith and credit of the City. The City’s total long-term liabilities decreased during the current fiscal year, due to scheduled payments on debt obligations and energy loans payable. 2019 2018 2019 2018 2019 2018 G.O. bonds 12,185,000$ 13,200,000$ –$ –$ 12,185,000$ 13,200,000$ G.O. special assessment bonds 18,465,000 18,905,000 – – 18,465,000 18,905,000 G.O. tax increment bonds 135,000 160,000 – – 135,000 160,000 G.O. revenue bonds 6,245,000 6,630,000 2,430,000 2,640,000 8,675,000 9,270,000 Premium (discount) on bonds payable 1,430,714 1,199,452 301,712 335,236 1,732,426 1,534,688 Energy loan payable 1,552,924 1,816,436 – – 1,552,924 1,816,436 Compensated absences payable 841,031 838,524 200,014 167,619 1,041,045 1,006,143 Net OPEB obligation 654,579 819,780 141,945 86,353 796,524 906,133 Net pension liability – GERF and PEPFF 5,479,019 5,277,885 1,009,979 981,090 6,488,998 6,258,975 Total 46,988,267$ 48,847,077$ 4,083,650$ 4,210,298$ 51,071,917$ 53,057,375$ Table 4 Long-Term Liabilities Total Governmental Business-Type Activities Activities The City’s statutory debt limit is equal to 3 percent of estimated taxable market value of property located within the City. The taxable market value totals $3,447,986,900, which calculates to a debt limit of $103,439,607. 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 $12,185,000 of general obligation debt outstanding, leaving a debt limit of $91,254,607. 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 $14,656,748 for expenditures and other financing uses for fiscal 2020, an increase of $1,102,429, or 8.1 percent, from the 2019 original budget. • Subsequent to year-end 2019, the novel coronavirus (COVID-19) pandemic has caused significant volatility in economic conditions. While the true scale of the economic impact of COVID-19 isn’t known yet, the City is assessing the revenue impacts and making expenditure adjustments as needed. 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 projected 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 203 and 198 new single-family residential permits issued in 2019 and 2018, respectively. From 2005 to 2018, the City has ranked in the top 25 in the Twin Cities metro area in total number of residential units and ranked in the top 20 in the Twin Cities metro area in total single-family residential units. Source: Metropolitan Council, Community Profile, Building Permits, Residential, Twin Cities Region (7-county metro area). Since 2016, the City issued permits for six multi-family residential buildings, with a total of 440 units. The City anticipates issuing permits for two additional multi-family residential buildings in 2020, with a total of 163 units. Total commercial and industrial permit valuation (new and addition/alteration) has increased by an average of 58 percent year-over-year since 2011. • Continued staged development of land with the 2,000 acres annexed in 2004 from Spring Lake Township will provide most of the City’s anticipated market value growth over the course of the next 10 to 15 years. • The City has planned the addition of a water treatment plant to meet the City’s needs as it continues to grow. The City faced the prospect of a $15.0 million expenditure to build its own facility or spend $8.7 million to build the facility in collaboration with the SMSC. In 2017, the City entered into a Water Purchase and Facility Expansion Agreement with the SMSC. The SMSC completed construction of the new water treatment plant in 2019. The plant can supply additional water to the City and will have future expansion available to meet the City’s long-term needs. This approach provides the City with the flexibility to evaluate the pace and timing of development in the Orderly Annexation Area before a substantial investment is needed to construct the expansion of the water treatment plant. The initial improvements, combined with the long-term water purchase agreement, could provide the City with enough water capacity for the next 15 to 20 years, depending on the rate of development. Under the agreement, the initial maximum investment is $3,500,000, which was funded from Trunk Reserve and Water Storage Funds. The remainder will become due when the second half of the water treatment plant improvements are installed to make the facility expansion operational. The City has incorporated these anticipated costs in its Capital Improvement Plan and the water development trunk fees as part of its 2040 Comprehensive Plan update. Financial Management Policies The City has set a goal to establish “Financial Performance Standards” to measure the financial health of the City. These standards serve multiple purposes: a) To serve as best practice measures to strengthen the City’s financial position and maximize the return of the taxpayer dollar. b) To communicate the fiscal performance and condition of the City to residents in a consistent manner. c) To facilitate the setting of policy and financial direction by the City Council with resident input. -16- Objective 1: Aa2 Bond Rating Maintain or improve current Aa2 Bond Rating – Strong credit rating by Moody’s Investors Service (Moody’s), provides low cost financing for the City’s general obligation bonds. In April 2010, Moody’s recalibrated the City’s bond rating to the global rating scale and, therefore, changed the City’s bond rating from Aa3 to an Aa2. The Aa2 bond rating was reaffirmed with the 2015 bond issuances. The City also received an initial bond rating of AA+ from S&P in 2015. The AA+ bond rating was reaffirmed with the 2016, 2017, 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 maintain 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 47% 51%54% 53% 54% $11,500,000 $12,000,000 $12,500,000 $13,000,000 $13,500,000 $14,000,000 $14,500,000 $15,000,000 2015 2016 2017 2018 2019 Subsequent Year’s Budget Actual Fund Balance -17- Objective 3: Property Taxes Maintain or improve property tax rank when compared to a broader list of metro area cities. The favorable tax rate provides stimulus for growth of residential and commercial property tax base. This date 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. Metro 10,000–24,999 Seven-County Metro Area City of Prior Lake 2015 46.90 43.40 31.96 2016 46.96 42.95 31.95 2017 N/A N/A 32.69 2018 N/A N/A 33.04 2019 N/A 41.43 33.02 Source: League of Minnesota Cities and Scott County 2015 0.55 2016 – 2017 – 2018 – 2019 – N/A – Not Available Average City Tax Capacity Rate Average Prior Lake EDA 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 th e rate of inflation over time. This chart reflects community growth and the cost of inflation using the Minneapolis-St. Paul Consumer Price Index (CPI). $1,000 $1,050 $1,100 $1,150 $1,200 $1,250 $1,300 $1,350 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 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 $1,700 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 General Fund Total Operating Expenditures Per Household Expected Operating Expenditures/HH Operating Expenditures/HH REQUESTS FOR INFORMATION These financial statements are designed to provide a general overview of the City’s finances for all those with an interest in the City’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the office of the City’s Finance Director at the City of Prior Lake, 4646 Dakota Street Southeast, Prior Lake, Minnesota 55372-1714. THIS PAGE INTENTIONALLY LEFT BLANK BASIC FINANCIAL STATEMENTS THIS PAGE INTENTIONALLY LEFT BLANK Governmental Business-Type Activities Activities Total Assets Cash and investments 29,873,634$ 9,172,443$ 39,046,077$ Receivables Delinquent taxes 113,333 – 113,333 Accounts 408,968 1,173,750 1,582,718 Special assessments 3,679,437 100,881 3,780,318 Due from other governmental agencies 275,215 14,738 289,953 Restricted assets – temporarily restricted Cash and investments held in escrow 25,000 – 25,000 Net pension asset – fire relief 639,774 – 639,774 Capital assets not being depreciated 85,263,591 2,721,952 87,985,543 Capital assets net of accumulated depreciation 66,894,225 68,408,616 135,302,841 Total assets 187,173,177 81,592,380 268,765,557 Deferred outflows of resources Pension plan deferments – GERF and PEPFF 2,959,967 106,852 3,066,819 Pension plan deferments – fire relief 561,383 – 561,383 OPEB plan deferments 23,358 5,064 28,422 Total deferred outflows of resources 3,544,708 111,916 3,656,624 Total assets and deferred outflows of resources 190,717,885$ 81,704,296$ 272,422,181$ Liabilities Accounts and contracts payable 1,281,767$ 626,772$ 1,908,539$ Accrued salaries and employee benefits payable 516,934 104,491 621,425 Due to other governmental agencies 3,241,869 1,106,302 4,348,171 Deposits payable 1,471,675 4,500 1,476,175 Accrued interest payable 90,696 4,538 95,234 Unearned revenue 653,485 – 653,485 Long-term liabilities Total OPEB liability – due in more than one year 654,579 141,945 796,524 Net pension liability – GERF and PEPFF – due in more than one year 5,479,019 1,009,979 6,488,998 Due within one year 4,561,408 306,390 4,867,798 Due in more than one year 36,293,261 2,625,336 38,918,597 Total liabilities 54,244,693 5,930,253 60,174,946 Deferred inflows of resources Pension plan deferments – GERF and PEPFF 4,382,393 212,138 4,594,531 Pension plan deferments – fire relief 287,579 – 287,579 OPEB plan deferments 117,379 25,454 142,833 Total deferred inflows of resources 4,787,351 237,592 5,024,943 Net position Net investment in capital assets 112,279,178 68,398,856 180,678,034 Restricted for debt service 5,989,862 – 5,989,862 Restricted for net pension asset 913,578 – 913,578 Restricted for other purposes 1,084,792 – 1,084,792 Unrestricted 11,418,431 7,137,595 18,556,026 Total net position 131,685,841 75,536,451 207,222,292 Total liabilities, deferred inflows of resources, and net position 190,717,885$ 81,704,296$ 272,422,181$ CITY OF PRIOR LAKE Statement of Net Position as of December 31, 2019 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 3,582,241$ 551,710$ 3,248$ 100,000$ Public safety 6,490,001 1,436,811 1,607,605 96,863 Public works 5,700,624 266,959 1,089 8,118,598 Culture and recreation 2,462,914 276,595 15,952 290,490 Economic development 936,034 20,793 159 – Interest on long-term debt 1,038,292 – – – Total governmental activities 20,210,106 2,552,868 1,628,053 8,605,951 Business-type activities Water 3,026,239 3,792,321 1,583 292,123 Sewer 3,321,093 3,622,033 954 307,252 Water quality 611,654 1,060,295 387 17,600 Total business-type activities 6,958,986 8,474,649 2,924 616,975 Total 27,169,092$ 11,027,517$ 1,630,977$ 9,222,926$ General revenues Taxes Property taxes, levied for general purposes Property taxes, levied for debt service Franchise taxes Tax increments Grants and contributions not restricted to specific programs Investment income Miscellaneous Transfers Total general revenues and transfers Change in net position Net position Beginning of year End of year CITY OF PRIOR LAKE Statement of Activities Year Ended December 31, 2019 See notes to basic financial statements -21- Governmental Business-Type Activities Activities Total (2,927,283)$ –$ (2,927,283)$ (3,348,722) – (3,348,722) 2,686,022 – 2,686,022 (1,879,877) – (1,879,877) (915,082) – (915,082) (1,038,292) – (1,038,292) (7,423,234) – (7,423,234) – 1,059,788 1,059,788 – 609,146 609,146 – 466,628 466,628 – 2,135,562 2,135,562 (7,423,234) 2,135,562 (5,287,672) 9,501,524 – 9,501,524 3,262,774 – 3,262,774 639,783 – 639,783 772,757 – 772,757 12,867 – 12,867 1,094,987 290,301 1,385,288 113,489 31,435 144,924 (5,380,609) 5,380,609 – 10,017,572 5,702,345 15,719,917 2,594,338 7,837,907 10,432,245 129,091,503 67,698,544 196,790,047 131,685,841$ 75,536,451$ 207,222,292$ Changes in Net Position Net (Expense) Revenues and -22- THIS PAGE INTENTIONALLY LEFT BLANK FUND FINANCIAL STATEMENTS Debt General Service Construction Assets Cash and investments 9,604,268$ 2,979,978$ 4,406,915$ Cash held in escrow – – – Receivables Delinquent taxes 113,235 – – Accounts 193,058 10,214 5,542 Special assessments Delinquent 566 33,642 3,463 Deferred 19,833 2,592,099 64,560 Other (Green Acres)– 451,350 – Due from other governmental agencies 111,226 28,737 26,711 Total assets 10,042,186$ 6,096,020$ 4,507,191$ Liabilities, Deferred Inflows of Resources, and Fund Balances Liabilities Accounts and contracts payable 221,648$ 15,462$ 434,087$ Accrued salaries and employee benefits payable 508,682 – – Due to other governmental agencies 131,869 – 3,108,869 Deposits payable 1,151,673 – 17,353 Unearned revenue 2,145 – 617,590 Total liabilities 2,016,017 15,462 4,177,899 Deferred inflows of resources Unavailable revenue from delinquent taxes 113,235 – – Unavailable revenue from special assessments 9,759 3,077,091 68,023 Total deferred inflows of resources 122,994 3,077,091 68,023 Fund balances Restricted – 3,003,467 – Assigned 324,712 – 261,269 Unassigned 7,578,463 – – Total fund balances 7,903,175 3,003,467 261,269 Total liabilities, deferred inflows of resources, and fund balances 10,042,186$ 6,096,020$ 4,507,191$ CITY OF PRIOR LAKE Balance Sheet Governmental Funds as of December 31, 2019 See notes to basic financial statements -23- Nonmajor Total Governmental Governmental Funds Funds 12,420,107$ 29,411,268$ 25,000 25,000 98 113,333 197,052 405,866 1,285 38,956 512,639 3,189,131 – 451,350 108,541 275,215 13,264,722$ 33,910,119$ 610,570$ 1,281,767$ 8,252 516,934 1,131 3,241,869 302,649 1,471,675 33,750 653,485 956,352 7,165,730 98 113,333 513,925 3,668,798 514,023 3,782,131 1,084,694 4,088,161 10,709,653 11,295,634 – 7,578,463 11,794,347 22,962,258 13,264,722$ 33,910,119$ -24- THIS PAGE INTENTIONALLY LEFT BLANK 22,962,258$ Capital assets are included in net position,but are excluded from fund balances because they do not represent financial resources. Cost of capital assets 220,268,544 Less accumulated depreciation (68,110,728) Long-term liabilities are included in net position but are excluded from fund balances until due and payable. Bond principal payable (37,030,000) Energy loan payable (1,552,924) Total OPEB liability (654,579) Net pension liability – GERF and PEPFF (5,479,019) 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.(1,430,714) Accrued interest payable on long-term debt is included in net position,but is excluded from fund balances until due and payable.(90,696) 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.(375,563) 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 113,333 Special assessments 3,668,798 Net pension asset 639,774 Deferred outflows of resources – GERF and PEPFF pension plans 2,959,967 Deferred outflows of resources – fire relief pension plan 561,383 Deferred outflows of resources – OPEB 23,358 Deferred inflows of resources – GERF and PEPFF pension plans (4,382,393) Deferred inflows of resources – fire relief pension plan (287,579) Deferred inflows of resources – OPEB (117,379) Total net position – governmental activities 131,685,841$ Amounts reported for governmental activities in the Statement of Net Position are different because: as of December 31, 2019 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 8,367,851$ 3,262,774$ –$ Franchise taxes 639,783 – – Special assessments 140 699,910 11,920 Licenses and permits 992,096 – – Intergovernmental 1,925,225 – 2,118,769 Charges for services 1,193,113 – – Fines and forfeits 996 – – Interest on investments 260,434 146,926 196,568 Miscellaneous 194,288 – 40,000 Total revenues 13,573,926 4,109,610 2,367,257 Expenditures Current General government 3,000,056 – – Public safety 6,071,462 – – Public works 1,954,183 – – Culture and recreation 1,889,264 – – Economic development – – – Capital outlay 100,596 – 6,355,340 Debt service Principal – 4,193,512 – Interest and other – 1,166,139 39,489 Total expenditures 13,015,561 5,359,651 6,394,829 Excess (deficiency) of revenues over expenditures 558,365 (1,250,041) (4,027,572) Other financing sources (uses) Debt issued – – 1,450,000 Premium on debt issued – – 279,817 Transfers in 456,300 1,345,091 392,900 Transfers out (334,769) (148,164) (904,182) Sale of capital assets 9,877 – – Total other financing sources (uses)131,408 1,196,927 1,218,535 Net change in fund balances 689,773 (53,114) (2,809,037) Fund balances Beginning of year 7,213,402 3,056,581 3,070,306 End of year 7,903,175$ 3,003,467$ 261,269$ CITY OF PRIOR LAKE Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds Year Ended December 31, 2019 See notes to basic financial statements -26- Nonmajor Total Governmental Governmental Funds Funds 1,906,204$ 13,536,829$ – 639,783 367,378 1,079,348 – 992,096 100,000 4,143,994 2,171,251 3,364,364 – 996 469,630 1,073,558 109,663 343,951 5,124,126 25,174,919 243 3,000,299 115,397 6,186,859 – 1,954,183 49,735 1,938,999 175,749 175,749 3,633,115 10,089,051 – 4,193,512 16,750 1,222,378 3,990,989 28,761,030 1,133,137 (3,586,111) 615,000 2,065,000 88,749 368,566 254,927 2,449,218 (1,959,649) (3,346,764) 8,020 17,897 (992,953) 1,553,917 140,184 (2,032,194) 11,654,163 24,994,452 11,794,347$ 22,962,258$ -27- THIS PAGE INTENTIONALLY LEFT BLANK (2,032,194)$ Capital outlays are recorded in net position and the cost is allocated over their estimated useful lives as depreciation expense; however, fund balances are reduced for the full cost of capital outlays at the time of purchase. Capital outlay 7,432,222 Capital contributions 4,583,063 Depreciation expense (4,497,838) 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.(34,230) Capital assets constructed in the governmental funds then transferred to the enterprise funds are shown in the government-wide financial statements but not in the governmental funds statements.(4,583,063) 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 4,193,512 Debt issued (2,065,000) Premium on debt issued (368,566) 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 165,201 Net pension liability – GERF and PEPFF (201,134) 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.46,782 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. 137,304 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.(93,209) 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 1,192 Special assessments (299,261) Net pension asset (382,201) Deferred outflows of resources – GERF and PEPFF pension plans (1,105,858) Deferred outflows of resources – fire relief pension plan 296,772 Deferred outflows of resources – OPEB (12,255) Deferred inflows of resources – GERF and PEPFF pension plans 1,396,352 Deferred inflows of resources – fire relief pension plan 134,126 Deferred inflows of resources – OPEB (117,379) 2,594,338$ Change in net position – governmental activities CITY OF PRIOR LAKE Year Ended December 31, 2019 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 8,380,973$ 8,380,973$ 8,367,851$ (13,122)$ Franchise taxes 615,000 615,000 639,783 24,783 Special assessments 5,000 5,000 140 (4,860) Licenses and permits 642,118 642,118 992,096 349,978 Intergovernmental 1,861,819 1,861,819 1,925,225 63,406 Charges for services 1,101,170 1,101,170 1,193,113 91,943 Fines and forfeits – – 996 996 Investment income 87,400 87,400 260,434 173,034 Miscellaneous 187,739 187,739 194,288 6,549 Total revenues 12,881,219 12,881,219 13,573,926 692,707 Expenditures Current General government 2,950,692 2,963,041 3,000,056 37,015 Public safety Police 4,586,881 4,631,101 4,502,094 (129,007) Fire and rescue 932,896 933,636 936,755 3,119 Other 638,332 640,343 632,613 (7,730) Public works 2,060,778 2,066,295 1,954,183 (112,112) Culture and recreation 1,964,771 1,981,103 1,889,264 (91,839) Capital outlay 85,200 104,090 100,596 (3,494) Total expenditures 13,219,550 13,319,609 13,015,561 (304,048) Excess (deficiency) of revenues over expenditures (338,331) (438,390) 558,365 996,755 Other financing sources (uses) Transfers in 456,300 456,300 456,300 – Transfers out (334,769) (334,769) (334,769) – Sale of assets – – 9,877 9,877 Total other financing sources (uses)121,531 121,531 131,408 9,877 Net change in fund balances (216,800)$ (316,859)$ 689,773 1,006,632$ Fund balances Beginning of year 7,213,402 End of year 7,903,175$ CITY OF PRIOR LAKE Budgeted Amounts Year Ended December 31, 2019 General Fund Statement of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual See notes to basic financial statements -29- 2019 2018 2019 2018 Current assets Cash and investments 5,775,364$ 6,471,431$ 1,992,299$ 1,816,230$ Receivables Accounts 398,848 426,906 606,549 599,201 Special assessments Delinquent 49,624 38,431 49,624 38,431 Deferred 1,633 2,731 – – Due from other governmental agencies 2,231 914 180 172 Total current assets 6,227,700 6,940,413 2,648,652 2,454,034 Noncurrent assets Capital assets not being depreciated 2,575,270 2,201,760 – 634,293 Depreciable capital assets 51,188,338 46,392,214 34,182,869 31,108,724 Accumulated depreciation (11,068,791) (10,190,444) (8,323,323) (7,759,498) Total noncurrent assets 42,694,817 38,403,530 25,859,546 23,983,519 Total assets 48,922,517 45,343,943 28,508,198 26,437,553 Deferred outflows of resources Pension plan deferments – GERF 45,893 77,701 43,362 64,750 OPEB plan deferments 2,247 3,003 1,989 3,003 Total deferred outflows of resources 48,140 80,704 45,351 67,753 Total assets and deferred outflows of resources 48,970,657$ 45,424,647$ 28,553,549$ 26,505,306$ Current liabilities Accounts and contracts payable 382,909$ 250,311$ 129,511$ 172,745$ Accrued salaries and employee benefits payable 46,270 33,702 42,453 36,042 Due to other governmental agencies 1,098,043 2,240,059 5,848 7,520 Deposits payable 4,500 4,500 – – Accrued interest payable 2,269 24,438 2,269 24,438 Current portion of compensated absences payable 39,289 32,917 18,618 26,573 Current portion of bonds payable 120,000 105,000 120,000 105,000 Total current liabilities 1,693,280 2,690,927 318,699 372,318 Noncurrent liabilities Compensated absences payable 77,991 67,411 46,211 26,220 Bonds premium (discount)150,856 167,618 150,856 167,618 Bonds payable 1,095,000 1,215,000 1,095,000 1,215,000 Net pension liability – GERF 433,789 436,041 409,860 363,367 Total OPEB Liability 62,971 35,557 55,755 35,557 Total noncurrent liabilities 1,820,607 1,921,627 1,757,682 1,807,762 Total liabilities 3,513,887 4,612,554 2,076,381 2,180,080 Deferred inflows of resources Pension plan deferments – GERF 91,114 134,607 86,088 112,172 OPEB plan deferments 11,292 – 9,998 – Total deferred inflows of resources 102,406 134,607 96,086 112,172 Net position Net investment in capital assets 41,328,961 36,915,912 24,493,690 22,495,901 Unrestricted 4,025,403 3,761,574 1,887,392 1,717,153 Total net position 45,354,364 40,677,486 26,381,082 24,213,054 Total liabilities, deferred inflows of resources, and net position 48,970,657$ 45,424,647$ 28,553,549$ 26,505,306$ CITY OF PRIOR LAKE Statement of Net Position Proprietary Funds as of December 31, 2019 Business-Type Activities – Enterprise Funds Water Sewer (With Partial Comparative Information as of December 31, 2018) See notes to basic financial statements -30- Governmental Activities – Internal Service 2019 2018 2019 2018 Fund 1,404,780$ 796,256$ 9,172,443$ 9,083,917$ 462,366$ 168,353 152,839 1,173,750 1,178,946 3,102 – – 99,248 76,862 – – – 1,633 2,731 – 12,327 – 14,738 1,086 – 1,585,460 949,095 10,461,812 10,343,542 465,468 146,682 158,647 2,721,952 2,994,700 – 3,203,355 2,766,329 88,574,562 80,267,267 – (773,832) (639,405) (20,165,946) (18,589,347) – 2,576,205 2,285,571 71,130,568 64,672,620 – 4,161,665 3,234,666 81,592,380 75,016,162 465,468 17,597 32,375 106,852 174,826 – 828 1,288 5,064 7,294 – 18,425 33,663 111,916 182,120 – 4,180,090$ 3,268,329$ 81,704,296$ 75,198,282$ 465,468$ 114,352$ 35,026$ 626,772$ 458,082$ –$ 15,768 12,383 104,491 82,127 – 2,411 145,411 1,106,302 2,392,990 – – – 4,500 4,500 – – – 4,538 48,876 – 8,483 9,853 66,390 69,343 362,283 – – 240,000 210,000 – 141,014 202,673 2,152,993 3,265,918 362,283 9,422 4,645 133,624 98,276 478,748 – – 301,712 335,236 – – – 2,190,000 2,430,000 – 166,330 181,682 1,009,979 981,090 – 23,219 15,239 141,945 86,353 – 198,971 201,566 3,777,260 3,930,955 478,748 339,985 404,239 5,930,253 7,196,873 841,031 34,936 56,086 212,138 302,865 – 4,164 – 25,454 – – 39,100 56,086 237,592 302,865 – 2,576,205 2,285,571 68,398,856 61,697,384 – 1,224,800 522,433 7,137,595 6,001,160 (375,563) 3,801,005 2,808,004 75,536,451 67,698,544 (375,563) 4,180,090$ 3,268,329$ 81,704,296$ 75,198,282$ 465,468$ Water Quality Totals -31- 2019 2018 2019 2018 Operating revenues Sewer charges –$ –$ 3,341,491$ 3,006,814$ Water charges 3,338,696 3,558,027 – – Storm water charges – – – – Capital facility charges 280,532 263,705 280,542 263,212 Meter sales 153,312 137,964 – – Charges for services 19,781 8,010 – – Total operating revenues 3,792,321 3,967,706 3,622,033 3,270,026 Operating expenses Personal services 805,403 693,116 813,914 661,568 Supplies 321,455 381,771 44,624 42,217 Repairs and maintenance 234,088 102,527 123,317 20,826 Other services and charges 166,945 188,812 111,946 156,352 Insurance 36,733 1,516 36,733 17,997 Utilities 530,893 506,412 42,736 40,802 Disposal charges – – 1,544,728 1,440,332 Miscellaneous – 874 – – Depreciation 888,449 804,126 563,826 511,909 Total operating expenses 2,983,966 2,679,154 3,281,824 2,892,003 Operating income (loss)808,355 1,288,552 340,209 378,023 Nonoperating revenues (expenses) Intergovernmental 1,583 3,833 954 2,778 Investment income 184,077 58,716 68,827 24,562 Gain (loss) on sale of capital assets (3,000) 1,185 – 1,185 Interest expense (39,273)(42,174) (39,269) (42,174) Miscellaneous 18,166 11,938 942 – Total nonoperating revenues 161,553 33,498 31,454 (13,649) Income (loss) before contributions and transfers 969,908 1,322,050 371,663 364,374 Special assessments 6,614 54,401 – – Capital grants – – (3,734)– Capital contributions from other funds 2,537,191 2,691,005 1,709,980 576,051 Capital contributions from developers 285,509 507,943 310,986 487,277 Transfers in 1,873,151 2,608,475 306,280 17,434 Transfers out (995,495) (1,622,445) (527,147) (1,117,033) Change in net position 4,676,878 5,561,429 2,168,028 328,103 Net position Beginning of year 40,677,486 35,116,057 24,213,054 23,884,951 End of year 45,354,364$ 40,677,486$ 26,381,082$ 24,213,054$ Business-Type Activities – Enterprise Funds CITY OF PRIOR LAKE Statement of Revenues, Expenses, and Changes in Net Position Proprietary Funds Year Ended December 31, 2019 Water Sewer (With Partial Comparative Information for the Year Ended December 31, 2018) See notes to basic financial statements -32- Governmental Activities – Internal Service 2019 2018 2019 2018 Fund –$ –$ 3,341,491$ 3,006,814$ –$ – – 3,338,696 3,558,027 – 1,060,295 987,238 1,060,295 987,238 – – – 561,074 526,917 – – – 153,312 137,964 – – – 19,781 8,010 31,310 1,060,295 987,238 8,474,649 8,224,970 31,310 304,445 275,481 1,923,762 1,630,165 245,952 18,441 22,999 384,520 446,987 – 115,319 69,289 472,724 192,642 – 39,022 110,372 317,913 455,536 – – – 73,466 19,513 – – – 573,629 547,214 – – – 1,544,728 1,440,332 – – – – 874 – 134,427 121,889 1,586,702 1,437,924 – 611,654 600,030 6,877,444 6,171,187 245,952 448,641 387,208 1,597,205 2,053,783 (214,642) 387 7,291 2,924 13,902 – 37,397 7,400 290,301 90,678 21,433 – – (3,000) 2,370 – – – (78,542) (84,348) – 12,327 (900) 31,435 11,038 – 50,111 13,791 243,118 33,640 21,433 498,752 400,999 1,840,323 2,087,423 (193,209) – – 6,614 54,401 – – 130,000 (3,734) 130,000 – 335,892 361,550 4,583,063 3,628,606 – 17,600 66,473 614,095 1,061,693 – 267,517 143,612 2,446,948 2,769,521 100,000 (126,760) (480,667) (1,649,402) (3,220,145) – 993,001 621,967 7,837,907 6,511,499 (93,209) 2,808,004 2,186,037 67,698,544 61,187,045 (282,354) 3,801,005$ 2,808,004$ 75,536,451$ 67,698,544$ (375,563)$ Water Quality Totals -33- 2019 2018 2019 2018 Cash flows from operating activities Cash received from customers 3,808,967$ 3,949,892$ 3,603,484$ 3,132,049$ Cash payments to suppliers (2,299,532) (965,701) (1,948,990) (1,555,323) Cash payments to employees (750,358) (685,072) (722,460) (648,560) Miscellaneous revenue 18,166 11,938 942 – Net cash flows from operating activities 777,243 2,311,057 932,976 928,166 Cash flows from noncapital financing activities Intergovernmental revenue 1,583 3,833 954 2,778 Transfers in 1,873,151 2,608,475 306,280 17,434 Transfers (out)(995,495) (1,622,445) (527,147) (1,117,033) Net cash flows from noncapital financing activities 879,239 989,863 (219,913) (1,096,821) Cash flows from capital and related financing activities Special assessments 6,614 54,401 – – Capital grants – – (3,734) – Acquisition of capital assets (2,360,036) (1,238,425) (418,887) (726,371) Proceeds from issuance of debt – 1,487,618 – 1,487,618 Payments on bonds payable (105,000) – (105,000) – Proceeds from sale of capital assets – 1,185 – 1,185 Interest paid on long-term debt (78,204) (17,736) (78,200) (17,736) Net cash flows from capital and related financing activities (2,536,626) 287,043 (605,821) 744,696 Cash flows from investing activities Interest received 184,077 58,716 68,827 24,562 Net increase (decrease) in cash and cash equivalents (696,067) 3,646,679 176,069 600,603 Cash and cash equivalents, January 1 6,471,431 2,824,752 1,816,230 1,215,627 Cash and cash equivalents, December 31 5,775,364$ 6,471,431$ 1,992,299$ 1,816,230$ Business-Type Activities – Enterprise Funds CITY OF PRIOR LAKE Statement of Cash Flows Proprietary Funds Year Ended December 31, 2019 (With Partial Comparative Information for the Year Ended December 31, 2018) Water Sewer See notes to basic financial statements -34- Governmental Activities – Internal Service 2019 2018 2019 2018 Fund 1,032,454$ 993,294$ 8,444,905$ 8,075,235$ 31,456$ (236,456) (105,277) (4,484,978) (2,626,301) – (306,773) (274,567) (1,779,591) (1,608,199) (243,445) 12,327 (900) 31,435 11,038 119 501,552 612,550 2,211,771 3,851,773 (211,870) 387 7,291 2,924 13,902 – 267,517 143,612 2,446,948 2,769,521 100,000 (126,760) (480,667) (1,649,402) (3,220,145) – 141,144 (329,764) 800,470 (436,722) 100,000 – – 6,614 54,401 – – 130,000 (3,734) 130,000 – (71,569) (612,177) (2,850,492) (2,576,973) – – – – 2,975,236 – – – (210,000) – – – – – 2,370 – – – (156,404) (35,472) – (71,569) (482,177) (3,214,016) 549,562 – 37,397 7,400 290,301 90,678 21,433 608,524 (191,991) 88,526 4,055,291 (90,437) 796,256 988,247 9,083,917 5,028,626 552,803 1,404,780$ 796,256$ 9,172,443$ 9,083,917$ 462,366$ TotalsWater Quality -35-(continued) 2019 2018 2019 2018 Reconciliation of operating income (loss) to net cash flows from operating activities Operating income (loss)808,355$ 1,288,552$ 340,209$ 378,023$ Adjustments to reconcile operating income (loss) to net cash flows from operating activities Depreciation 888,449 804,126 563,826 511,909 Miscellaneous revenue 18,166 11,938 942 – (Increase) decrease in assets and deferred outflows of resources Accounts receivable 28,058 (11,351) (7,348) (129,719) Special assessments receivable (10,095) (7,262) (11,193) (8,226) Due from other governments (1,317) (701) (8) (32) Deferred outflows of resources – GERF 31,808 51,948 21,388 43,290 Deferred outflows of resources – OPEB 756 (3,003) 1,014 (3,003) Increase (decrease) in liabilities and deferred inflows of resources Accounts and contracts payable 132,598 193,971 (43,234) 158,203 Accrued salaries and employee benefits payable 12,568 1,247 6,411 10,013 Due to other governmental agencies (1,142,016) 2,225,964 (1,672) 5,000 Deposits payable – 1,500 – – Compensated absences payable 16,952 14,500 12,036 8,856 Net pension liability – GERF (2,252) (94,081) 46,493 (78,401) Total OPEB Liability 27,414 6,353 20,198 6,353 Deferred inflows of resources – GERF (43,493) 31,080 (26,084) 25,900 Deferred inflows of resources – OPEB 11,292 – 9,998 – Net cash flows from operating activities 777,243$ 4,514,781$ 932,976$ 928,166$ Schedule of noncash activities from capital and related financing activities Capital assets contributed from other funds 2,537,191$ 2,691,005$ 1,709,980$ 576,051$ Capital assets contributed by developers 285,509$ 507,943$ 310,986$ 487,277$ Capital assets for due to other governments –$ 2,203,724$ –$ –$ Business-Type Activities – Enterprise Funds Water CITY OF PRIOR LAKE Sewer Statement of Cash Flows (continued) Proprietary Funds Year Ended December 31, 2019 (With Partial Comparative Information for the Year Ended December 31, 2018) See notes to basic financial statements -36- Governmental Activities – Internal Service 2019 2018 2019 2018 Fund 448,641$ 387,208$ 1,597,205$ 2,053,783$ (214,642)$ 134,427 121,889 1,586,702 1,437,924 – 12,327 (900) 31,435 11,038 – (15,514) 5,054 5,196 (136,016) 265 – – (21,288) (15,488) – (12,327) 1,002 (13,652) 269 – 14,778 21,645 67,974 116,883 – 460 (1,288) 2,230 (7,294) – 79,326 (46,214) 168,690 305,960 – 3,385 1,689 22,364 12,949 – (143,000) 143,597 (1,286,688) 2,374,561 – – – - 1,500 – 3,407 2,395 32,395 25,751 2,507 (15,352) (39,201) 28,889 (211,683) – 7,980 2,724 55,592 15,430 – (21,150) 12,950 (90,727) 69,930 – 4,164 – 25,454 – – 501,552$ 612,550$ 2,211,771$ 6,055,497$ (211,870)$ 335,892$ 361,550$ 4,583,063$ 3,628,606$ –$ 17,600$ 66,473$ 614,095$ 1,061,693$ –$ –$ –$ –$ 2,203,724$ –$ TotalsWater Quality -37- THIS PAGE INTENTIONALLY LEFT BLANK CITY OF PRIOR LAKE Notes to Basic Financial Statements December 31, 2019 -38- NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES A. Organization The City of Prior Lake, Minnesota (the City) operates under “Optional Plan B” as defined in Minnesota Statutes. Under this plan, the government of the City is directed by a City Council composed of an elected mayor and four elected councilmembers. The City Council exercises legislative authority and determines all matters of policy. The City Council appoints personnel responsible for the proper administration of all affairs relating to the City. The City has considered all potential units for which it is financially accountable, and other organizations for which the nature and significance of their relationship with the City are such that exclusion would cause the City’s financial statements to be misleading or incomplete. The accounting policies of the City conform to accounting principles generally accepted in the United States of America as applicable to governmental units. B. Reporting Entity As required by accounting principles generally accepted in the United States of America, these financial statements include the City (the primary government) and its component units. Component units are legally separate entities for which the primary government is financially accountable, or for which the exclusion of the component unit would render the financial statements of the primary government misleading. The criteria used to determine if the primary government is financially accountable for a component unit includes whether or not the primary government appoints the voting majority of the potential component unit’s board, is able to impose its will on the potential component unit, is in a relationship of financial benefit or burden with the potential component unit, or is fiscally depended upon by the potential component unit. As a result of applying these criteria, certain organizations have been included or disclosed in this report as follows: Blended Component Unit – The Prior Lake Economic and Development Authority (EDA) was created pursuant to Minnesota Statutes § 469.090 through § 469.108 to carryout economic and industrial development and redevelopment within the City in accordance with policies established by the City Council. The five-member Board of Directors consists of two councilmembers and three members appointed from the community by the City Council. The EDA is reported as a blended component unit within the EDA Special Revenue Fund. Separate financial statements are not issued for this component unit. The EDA may not exercise any of the powers enumerated by the authorizing statutes without prior approval of the City Council. C. Government-Wide Financial Statements The government-wide financial statements (Statement of Net Position and Statement of Activities) display information about the reporting government as a whole. These statements include all of the financial activities of the City. Governmental activities, which are normally supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which significantly rely upon sales, fees, and charges for support. -39- NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The Statement of Activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include: 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment, 2) operating grants and contributions, and 3) capital grants and contributions, including special assessments that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other internally directed revenues are reported as general revenues. The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes and special assessments are recognized as revenues in the fiscal year for which they are certified for levy. Grants and similar items are recognized when all eligibility requirements imposed by the provider have been met. As a general rule, the effect of interfund activity has been eliminated from the government -wide financial statements. However, charges between the City’s enterprise funds and other functions are not eliminated, as that would distort the direct costs and program revenues reported in those functions. The City applies restricted resources first when an expense is incurred for which both restricted and unrestricted resources are available. Depreciation expense is included in the direct expenses of each function. Interest on long-term debt is considered an indirect expense and is reported separately on the Statement of Activities. D. Fund Financial Statement Presentation Separate fund financial statements are provided for governmental and proprietary funds. Major individual governmental and enterprise funds are reported as separate columns in the fund financial statements. Aggregated information for the remaining nonmajor governmental funds is reported in a single column in the fund financial statements. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this basis of accounting, transactions are recorded in the following manner: 1. Revenue Recognition – Revenue is recognized when it becomes measurable and available. “Measurable” means the amount of the transaction can be determined and “available” means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are coll ected within 60 days after year-end. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. Grants and similar items are recognized when all eligibility requirements imposed by the provider have been met. Proceeds of long-term debt and acquisitions under capital leases are reported as other financing sources. Major revenue that is susceptible to accrual includes property taxes, franchise taxes, special assessments, intergovernmental revenue, charges for services, and interest earned on investments. Major revenue that is not susceptible to accrual includes licenses and permits, fees, and miscellaneous revenue. Such revenue is recorded only when received because it is not measurable until collected. 2. Recording of Expenditures – Expenditures are generally recorded when a liability is incurred, except for principal and interest on long-term debt, compensated absences, and other long-term liabilities which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as capital outlay expenditures in the governmental funds. -40- NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Proprietary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, similar to the government-wide financial statements. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the City’s enterprise funds and internal service funds are charges to customers for sales and services . The operating expenses for the enterprise funds and internal service funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses that do not meet this definition are reported as nonoperating revenues and expenses. Aggregated information for the internal service funds is reported in a single column in the proprietary fund financial statements. Because the principal user of the internal services is the City’s governmental activities, the financial statements of the internal service funds are consolidated into the governmental column when presented in the government-wide financial statements. The cost of these services is reported in the appropriate functional activity. Description of Funds The City reports the following major governmental funds: General Fund – This is the general operating fund of the City. It is used to account for all financial resources except those required to be accounted for in another fund. Debt Service Fund – This fund accounts for the resources accumulated to provide repayment of the City’s general obligation debt. Construction Capital Project Fund – This fund accounts for the resources accumulated and payments made for city projects. The City reports the following major proprietary funds: Water Fund – This fund is used to account for the operation, maintenance, and improvement of the City’s water system. Sewer Fund – This fund is used to account for the operation, maintenance, and improvement of the City’s sewer collection operations. Water Quality Fund – This fund accounts for the costs associated with the City’s storm water system. The City also reports the following fund type: Internal Service Funds – Internal service funds account for the financing of goods and services provided to other departments or agencies of the City on a cost-reimbursement basis. The City utilizes a Severance Compensation Internal Service Fund and an Insurance Internal Service Fund in managing city operations. -41- NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) E. Cash and Investments 1. Deposits and Investments The City’s cash and cash equivalents are considered to be cash on hand, demand deposits, government securities, and short-term investments with original maturities of three months or less from the date of acquisition. Cash balances from all funds are combined and invested to the extent available in short-term investments. Earnings from the pooled investments are allocated to the individual funds based on the average monthly cash and investment balances of the respective funds. 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. 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 hi erarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; and Level 3 inputs are significant unobservable inputs. Debt securities classified in Level 2 of the fair value hierarchy are valued using a matrix pricing technique. Matrix pricing is used to value securities based on the securities’ relationship to benchmark quoted prices. See Note 2 for the City’s recurring fair value measurements as of year-end. -42- NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2. Investment Policy The City’s investment policy contains the following restrictions: a) Allowable Investments The City may invest in any type of security allowed by Minnesota Statutes and may be amended from time to time. The City has chosen to limit its allowable investments to those instruments listed below: 1) Bonds, notes, certificates of indebtedness, treasury bills, or other securities now or hereafter issued by the United States of America, its agencies and allowable instrumentalities. 2) Interest-bearing checking and savings accounts, or any other investments constituting direct obligations of any bank. 3) Certificates of deposit at state and federally-chartered institutions that are limited to the amount of coverage provided by the Federal Deposit Insurance Corporation (FDIC). 4) Money market accounts that are invested in the above referenced government securities. 5) State and local securities, which have at the time of investment one of the three highest credit ratings by a nationally recognized rating agency. 6) Investments may be made only in those savings banks or savings and loan associations the shares, or investment certificates, of which are insured by the FDIC. 7) Investment products that are considered as derivatives are specifically excluded from approved investments. b) Diversification It is the policy of the City to diversify its investment portfolio . Investments shall be diversified to eliminate the risk of loss resulting in over concentration in a specific maturity, issuers, or class of securities. Diversification strategies shall be determined and revised periodically by the City’s finance director. The diversification shall be as follows: 1) Up to 100 percent of 2. a) 1), but not less than 10 percent 2) Up to 90 percent of 2. a) 2) and 2. a) 3) 3) Up to 20 percent of 2. a) 4) 4) Up to 20 percent of 2. a) 5) c) Duration It is the policy of the City to require that all investment maturities shall not extend beyond 10 years with no more than 20 percent maturing beyond 5 years. Subject to market conditions and cash flow requirements, it is desirable for the City’s investments to be laddered over time in an effort to reduce interest rate market risk. F. Receivables Accounts receivable include amounts billed for services provided before year-end. The City annually certifies delinquent water and sewer accounts to the county for collection in the following year. Therefore, there has been no allowance for doubtful accounts established. -43- NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) G. Property Taxes Property tax levies are set by the City Council in December of each year and are certified to Scott County for collection in the following year. In Minnesota, counties act as collection agents for all property taxes. The county spreads all levies over taxable property. Such taxes become a lien on January 1 and are recorded as receivables by the City on that date. Real property taxes may be paid by taxpayers in two equal installments on May 15 and October 15. Personal property taxes are due in full on May 15. The county provides tax settlements to cities and other taxing districts three times a year; in July, December, and January. Taxes which remain unpaid on December 31 are classified as delinquent taxes receivable. H. Special Assessments Special assessments represent the financing for public improvements paid for by benefiting property owners. These assessments are recorded as delinquent (levied but unremitted) 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. Interfund Receivables and Payables In the fund financial statements, activity between funds that is representative of lending or borrowing arrangements is reported as either “due to/from other funds” (current portion) or “advances to/from other funds.” All other outstanding balances between funds are reported as “due to/from other funds.” Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as “internal balances.” J. Capital Assets Capital assets, which include property, buildings, improvements, equipment, infrastructure assets (roads, bridges, sidewalks, and similar items), and intangible assets such as water access agreements and easements, are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Such assets are capitalized at historical cost, or estimated historical cost for assets where actual historical cost is not available. Donated assets are recorded as capital assets at their estimated acquisition value on the date of donation. The City defines capital assets as those with an initial, individual cost of $5,000 or more with an estimated useful life in excess of one year. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized. In the case of initial capitalization of general infrastructure assets (i.e., those reported by governmental activities) the City chose to include items dating back to June 30, 1980. The City was able to estimate the historical cost for the initial reporting of these assets through back-trending (i.e., estimating the current replacement cost of the infrastructure to be capitalized and using an appropriate price-level index to deflate the cost to the acquisition year or estimated acquisition year). -44- NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Capital assets are recorded in the government-wide and proprietary fund financial statements, but are not reported in the governmental fund financial statements. Interest incurred during the construction phase of capital assets for business-type activities is included as part of the capitalized value of the assets constructed. Property, plant, and equipment of the City are depreciated using the straight-line method over the following estimated useful lives: Useful Lives Assets in Years Land improvements 5–20 Machinery and equipment 5–30 Vehicles 8–25 Infrastructure 10–65 Land, water access agreements, easements, and construction in progress are not depreciated. K. Compensated Absences It is the City’s policy to permit employees to accumulate earned but unused vacation and sick leave. Upon separation, unused vacation and 50 percent of sick pay are paid to the employee if employed longer than five years. The majority of separation benefits are paid into a retirement health savings plan. The City has provided funding for these obligations in the Severance Compensation Internal Service Fund and enterprise funds. L. Long-Term Liabilities In the government-wide and proprietary fund financial statements, long-term debt and other long-term obligations are reported as liabilities. Bond premiums and discounts are deferred and amortized over the life of the bonds using the straight-line method. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources , while discounts on debt issuances are reported as other financing uses. M. Other Post-Employment Benefits (OPEB) Under Minnesota Statutes § 471.61, Subd. 2b, public employers must allow retirees and their dependents to continue coverage indefinitely in an employer-sponsored healthcare plan, under the following conditions: 1) retirees must be receiving (or be eligible to receive) an annuity from a Minnesota public pension plan; 2) coverage must continue in a group plan until age 65, and retirees must pay no more than the group premium; and 3) retirees may obtain dependent coverage immediately before retirement. All premiums are funded on a pay-as-you-go basis. N. State-Wide Pension Plans For purposes of measuring the net pension liability, deferred outflows/inflows of resourc es, and pension expense, information about the fiduciary net position of the Public Employees Retirement Association (PERA) and additions to/deductions from the PERA’s fiduciary net position have been determined on the same basis as they are reported by the PERA except that the PERA’s fiscal year-end is June 30. For this purpose, plan contributions are recognized as of employer payroll paid dates and benefit payments and refunds are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. -45- NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The PERA has a special funding situation created by a direct aid contribution made by the state of Minnesota. The direct aid is a result of the merger of the Minneapolis Employees Retirement Fund into the PERA on January 1, 2015. O. Deferred Outflows/Inflows of Resources In addition to assets and liabilities, statements of financial position, or balance sheets, will sometimes report a separate section for deferred outflows and deferred inflows of resources. These separate financial statement elements represent a consumption or acquisition of net position that applies to future periods and so will not be recognized as an outflow of resources (expense/expenditure) or an inflow of financial resources until then. The City reports deferred outflows and inflows of resources related to pensions and other post-employment benefits (OPEB) in the government-wide and enterprise funds Statement of Net Position. These deferred outflows and inflows result from differences between expected and actual experience, changes in proportion, changes of assumptions, difference between projected and actual earnings on pension plan investments, and from contributions to the plan subsequent to the measurement date and before the end of the reporting period. These amounts are deferred and amortized as required under pension and OPEB standards. Unavailable revenue, arises only under a modified accrual basis of accounting and, therefore, is only reported in the governmental funds Balance Sheet. The governmental funds report unavailable revenue from two sources: property taxes and special assessments. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. P. Net Position In the government-wide and proprietary fund financial statements, net position represents the difference between assets, deferred outflows of resources, liabilities, and deferred inflows of resources. Net position is displayed in three components: • Net Investment in Capital Assets – Consists of capital assets, net of accumulated depreciation, reduced by any outstanding debt attributable to acquire capital assets. • Restricted Net Position – Consists of net position restricted when there are limitations imposed on their use through external restrictions imposed by creditors, grantors, or laws or regulations of other governments. • Unrestricted Net Position – All other elements of net position that do not meet the definition of “restricted” or “net investment in capital assets.” -46- NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Q. Fund Balance Classifications In the fund financial statements, governmental funds report fund balance in classifications that disclose constraints for which amounts in those funds can be spent. These classifications are as follows: • Nonspendable – Consists of amounts that are not in spendable form, such as prepaid items, inventory, and other long-term assets. • Restricted – Consists of amounts related to externally imposed constraints established by creditors, grantors, or contributors; or constraints imposed by state statutory provisions. • Committed – Consists of internally imposed constraints that are established by resolution of the City Council. Those committed amounts cannot be used for any other purpose unless the City Council removes or changes the specified use by taking the same type of action it employed to previously commit those amounts. • Assigned – Consists of internally imposed constraints. These constraints consist of amounts intended to be used by the City for specific purposes but do not meet the criteria to be classified as restricted or committed. In governmental funds, assigned amounts represent intended uses established by the governing body itself or by an official to which the governing body delegates the authority. Pursuant to City Council resolution, the finance director is authorized to establish assignments of fund balance. • Unassigned – The residual classification for the General Fund, which also reflects negative residual amounts in other funds. When both restricted and unrestricted resources are available for use, it is the City’s policy to first use restricted resources, then use unrestricted resources as they are needed. When committed, assigned, or unassigned resources are available for use, it is the City’s policy to use resources in the following order: 1) committed, 2) assigned, and 3) unassigned. R. Comparative Data The basic financial statements include certain prior year partial comparative information in total, but not at the level of detail required for a presentation in conformity with accounting principles generally accepted in the United States of America. Accordingly, such information should be read in conjunction with the City’s financial statements for the year ended December 31, 2018, from which the summarized information was derived. Also, certain amounts presented in the prior year data have b een reclassified in order to be consistent with the current year’s presentation. S. Budgets and Budgetary Accounting Annual budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America for the General Fund. All annual appropriations lapse at year-end. The City does not use encumbrance accounting. In June of each year, all departments of the City submit requests for appropriations to the finance director so that a budget may be prepared. In September, the proposed budget is presented to the City Council for review. The City Council holds public hearings and a final budget is prepared and adopted in early December. -47- NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The appropriated budget is prepared by fund, function, and department. The City’s department heads may make transfers of appropriations within a department. Transfers of appropriations between departments require the approval of the city manager. The legal level of budgetary control is the fund level. T. Statement of Cash Flows For purposes of the Statement of Cash Flows, the City considers all highly liquid debt instruments with an original maturity from the time of purchase by the City of three months or less to be cash equivalents. The proprietary funds’ portion in the government-wide cash and investment management pool is considered to be cash equivalent. U. Risk Management The City is exposed to various risks of loss related to torts: theft of, damage to, and destruction of assets; errors and omissions; and natural disasters. The City participates in the League of Minnesota Cities Insurance Trust (LMCIT), a public entity risk pool for its general property and casualty, workers’ compensation, and other miscellaneous insurance coverages. The LMCIT operates as a common risk management and insurance program for a large number of cities in Minnesota. The City pays an annual premium to the LMCIT for insurance coverage. The LMCIT agreement provides that the trust will be self-sustaining through member premiums and will reinsure through commercial companies for claims in excess of certain limits. Settled claims did not exceed insurance coverage in the past three fiscal years. There were no significant reductions in insurance coverage in the current year. V. Restricted Assets Restricted assets are cash, investments, and interest accrued thereon; the use of which is limited by external requirements, such as a bond indenture or trust agreements. W. Use of Estimates The preparation of financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assum ptions that affect amounts reported in the financial statements during the reporting period. Actual results could differ from those estimates. -48- NOTE 2 – CASH AND INVESTMENTS A. Components of Cash and Investments Cash and investments at year-end consist of the following: Deposits 866,640$ Investments 38,203,587 Cash on hand 850 Total 39,071,077$ Cash and investments are presented in the financial statements as follows: Statement of Net Position Cash and investments 39,046,077$ Restricted assets – temporarily restricted – cash and investments held in escrow 25,000 Total 39,071,077$ 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 $866,640, while the balance on the bank records was $1,153,704. At December 31, 2019, all deposits were fully covered by federal deposit insurance, surety bonds, or by collateral held by the City’s agent in the City’s name. -49- NOTE 2 – CASH AND INVESTMENTS (CONTINUED) C. Investments The City has the following investments at year-end: Fair Value Investment Type Rating Agency Measurement Less Than 1 1 to 5 Total U.S. agency securities AA S&P Level 2 1,796,390$ 1,150,115$ 2,946,505$ Local government securities AAA S&P Level 2 545,288 692,697 1,237,985 Local government securities AAA Moody’s Level 2 – 263,097 263,097 Local government securities AA S&P Level 2 989,318 3,067,993 4,057,311 Local government securities AA Moody’s Level 2 – 992,231 992,231 Local government securities A S&P Level 2 – 543,336 543,336 Negotiable certificates of deposit N/R N/A Level 2 2,263,991 13,636,651 15,900,642 5,594,987$ 20,346,120$ 25,941,107 Investment pools/mutual funds 4M Fund N/R N/A Amortized Cost 7,959,253 Federated Trust AAA S&P Amortized Cost 242,858 Western Asset Institutional AAA S&P Amortized Cost 3,998,353 U.S. Government Money Market Fund AAA S&P Amortized Cost 62,016 Total investment pools/mutual funds 12,262,480 Total investments 38,203,587$ 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 an d 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. -50- 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 $10,000,000; that are a primary reporting dealer in U.S. government securities to the Federal Reserve Bank of New York; or certain Minnesota securities broker-dealers. The City’s investment policy as described in Note 1 addresses credit risk. Concentration Risk – This is the risk associated with investing a significant portion of the City’s investment (considered 5.0 percent or more) in the securities of a single issuer, excluding U.S. guaranteed investments (such as treasuries), investment pools, and mutual funds. The City’s investment policy as described in Note 1, addresses concentration risk. Interest Rate Risk – This is the risk of potential variability in the fair value of fixed rate investments resulting from changes in interest rates (the longer the period for which an interest rate is fixed, the greater the risk). The City has an investment policy as described in Note 1, which addresses interest rate risk. -51- NOTE 3 – CAPITAL ASSETS Capital asset activity for the year ended December 31, 2019 was as follows: A. Changes in Capital Assets Used in Governmental Activities Transfers Beginning and Completed of Year Additions Deletions Construction End of Year Capital assets, not depreciated Land 32,221,249$ 1,048,502$ –$ –$ 33,269,751$ Easements 47,095,500 1,077,910 – – 48,173,410 Construction in progress 10,682,758 6,981,773 – (13,844,101) 3,820,430 Total capital assets, not depreciated 89,999,507 9,108,185 – (13,844,101) 85,263,591 Capital assets, depreciated Land improvements 2,774,127 58,001 – – 2,832,128 Machinery and equipment 7,086,794 478,228 (137,120) (67,140) 7,360,762 Vehicles 6,137,511 531,289 (335,086) 631,227 6,964,941 Infrastructure 107,310,589 1,839,582 – 8,696,951 117,847,122 Total capital assets, depreciated 123,309,021 2,907,100 (472,206) 9,261,038 135,004,953 Less accumulated depreciation on Land improvements (1,694,437) (69,949) – – (1,764,386) Machinery and equipment (4,279,781) (390,382) 107,164 – (4,562,999) Vehicles (4,429,480) (418,257) 330,812 – (4,516,925) Infrastructure (53,647,168) (3,619,250) – – (57,266,418) Total accumulated depreciation (64,050,866) (4,497,838) 437,976 – (68,110,728) Net capital assets, depreciated 59,258,155 (1,590,738) (34,230) 9,261,038 66,894,225 Total capital assets, net 149,257,662$ 7,517,447$ (34,230)$ (4,583,063)$ 152,157,816$ 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 1,492,167$ 1,007,803$ –$ –$ 2,499,970$ Easements 218,912 – – – 218,912 Construction in progress 1,283,621 1,825,513 – (3,106,064) 3,070 Total capital assets, not depreciated 2,994,700 2,833,316 – (3,106,064) 2,721,952 Capital assets, depreciated Land improvements 87,739 – – – 87,739 Machinery and equipment 1,694,380 – (13,101) (304,972) 1,376,307 Vehicles 93,100 – – 372,113 465,213 Infrastructure 78,392,046 631,271 – 7,621,986 86,645,303 Total capital assets, depreciated 80,267,265 631,271 (13,101) 7,689,127 88,574,562 Less accumulated depreciation on Land improvements (39,384) (4,387) – – (43,771) Machinery and equipment (758,848) (61,937) 10,101 – (810,684) Vehicles (88,107) (16,776) – – (104,883) Infrastructure (17,703,006) (1,503,602) – – (19,206,608) Total accumulated depreciation (18,589,345) (1,586,702) 10,101 – (20,165,946) Net capital assets, depreciated 61,677,920 (955,431) (3,000) 7,689,127 68,408,616 Total capital assets, net 64,672,620$ 1,877,885$ (3,000)$ 4,583,063$ 71,130,568$ -52- NOTE 3 – CAPITAL ASSETS (CONTINUED) C. Depreciation Expense by Function Depreciation expense for the year ended December 31, 2019 was charged to the following functions: Governmental activities General government 534,731$ Public safety 214,520 Public works 3,312,563 Culture and recreation 436,024 Total depreciation expense – governmental activities 4,497,838$ Business-type activities Water 888,449$ Sewer 563,826 Water quality 134,427 Total depreciation expense – business-type activities 1,586,702$ NOTE 4 – TRANSFERS A schedule of interfund transfers is as follows: Internal Service Funds Transfers Out General Debt Service Construction Nonmajor Severance Water Sewer Water Quality Total Governmental funds General –$ 234,769$ –$ –$ 100,000$ –$ –$ –$ 334,769$ Debt Service – 148,164 – – – – – – 148,164 Construction – 200,518 – – – 129,867 306,280 267,517 904,182 Nonmajor – 216,365 – – – 1,743,284 – – 1,959,649 Proprietary funds Water 196,220 545,275 100,000 154,000 – – – – 995,495 Sewer 196,220 – 250,000 80,927 – – – – 527,147 Water Quality 63,860 – 42,900 20,000 – – – – 126,760 456,300$ 1,345,091$ 392,900$ 254,927$ 100,000$ 1,873,151$ 306,280$ 267,517$ 4,996,166$ Transfer In Governmental Funds ProprietaryFunds 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 2,820,000$ Capital Improvement Refunding Bonds 2012A 9,825,000$ 2.00–2.70%03/13/2012 12/15/2029 6,440,000 Street Reconstruction Bonds of 2015B 2,330,000$ 1.00–2.25%05/14/2015 12/15/2022 900,000 Street Reconstruction Bonds of 2016A 760,000$ 2.00%05/01/2016 12/15/2026 490,000 Improvement Bonds 2017A 370,000$ 2.00–2.25%06/29/2017 12/15/2027 275,000 Improvement Bonds 2018A 1,165,000$ 4.00–5.00%08/15/2018 12/15/2028 1,045,000 Improvement Bonds 2019A 215,000$ 5.00%06/27/2019 12/15/2028 215,000 Total general obligation bonds 12,185,000 General obligation special assessment bonds Improvement Bonds of 2010A 1,235,000$ 0.80–3.20%05/26/2010 12/15/2020 130,000 Improvement Bonds of 2011A 2,130,000$ 1.80–2.50%08/31/2011 12/15/2021 445,000 Improvement Bonds of 2011B 2,280,000$ 2.00–2.35%12/14/2011 12/15/2022 730,000 Improvement Bonds of 2013A 3,240,000$ 2.00–2.65%08/15/2013 12/15/2023 1,290,000 Improvement Bonds of 2014A 2,665,000$ 2.00–2.50%09/25/2014 12/15/2024 1,170,000 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 75,000 Improvement Bonds of 2016A 1,105,000$ 2.00%05/01/2016 12/15/2026 770,000 Improvement Bonds of 2017A 4,135,000$ 2.00–2.25%06/29/2017 12/15/2024 3,330,000 Improvement Bonds of 2018A 4,465,000$ 4.00–5.00%08/15/2018 12/15/2028 4,035,000 Improvement Bonds of 2019A 1,850,000$ 5.00%06/27/2019 12/15/2028 1,850,000 Total general obligation special assessment bonds 18,465,000 Tax increment bonds Tax Increment Refunding Bonds of 2011A 290,000$ 1.80–3.00%08/31/2011 12/15/2024 135,000 General obligation revenue bonds General Obligation Improvement Bonds of 2015A 5,360,000$ 1.00–3.00%05/14/2015 12/15/2031 5,210,000 General Obligation Improvement Bonds of 2016A 1,640,000$ 2.00%05/01/2016 12/15/2022 1,035,000 Total general obligation revenue bonds 6,245,000 Premium (discount) on bonds payable 1,430,714 Energy loan payable 2,667,924$ 2.12%12/08/2014 06/19/2025 1,552,924 Compensated absences payable 841,031 Total governmental activity long-term liabilities 40,854,669 Business-type activiies General obligation revenue bonds General Obligation Improvement Bonds of 2018A 2,640,000$ 4.00–5.00%08/15/2018 12/15/2028 2,430,000 Premium (discount) on bonds payable 301,712 Compensated absences payable 200,014 Total business-type activity long-term liabilities 2,931,726 Total government-wide long-term liabilities 43,786,395$ -54- 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 13,200,000$ 215,000$ 1,230,000$ 12,185,000$ 1,155,000$ G.O. special assessment bonds 18,905,000 1,850,000 2,290,000 18,465,000 2,350,000 G.O. tax increment bonds 160,000 – 25,000 135,000 25,000 G.O. revenue bonds 6,630,000 – 385,000 6,245,000 400,000 Premium (discount) on bonds payable 1,199,452 368,566 137,304 1,430,714 – Total bonds payable, net of premium (discount)40,094,452 2,433,566 4,067,304 38,460,714 3,930,000 Energy loan payable 1,816,436 – 263,512 1,552,924 269,126 Compensated absences payable 838,524 102,945 100,438 841,031 362,282 Governmental activities long-term liabilities 42,749,412$ 2,536,511$ 4,431,254$ 40,854,669$ 4,561,408$ Business-type activities Bonds payable G.O. revenue bonds 2,640,000$ –$ 210,000$ 2,430,000$ 240,000$ Premium (discount) on bonds payable 335,236 – 33,524 301,712 – Total bonds payable, net of premium (discount)2,975,236 – 243,524 2,731,712 240,000 Compensated absences payable 167,619 32,395 – 200,014 66,390 Business-type activities long-term liabilities 3,142,855$ 32,395$ 243,524$ 2,931,726$ 306,390$ 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 2020 1,155,000$ 326,110$ 2,350,000$ 603,412$ 25,000$ 3,763$ 400,000$ 153,325$ 269,126$ 31,488$ 240,000$ 108,900$ 2021 1,290,000 295,048 2,265,000 488,202 25,000 3,175 420,000 145,700 274,859 25,755 240,000 99,300 2022 1,450,000 265,808 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 30,000 900 495,000 119,650 292,801 7,813 270,000 69,300 2025–2029 5,525,000 584,720 7,095,000 738,939 – – 2,755,000 423,200 148,731 1,576 1,170,000 150,500 2030–2031 615,000 31,620 570,000 17,100 – – 1,255,000 56,850 – – – – 12,185,000$ 1,942,213$ 18,465,000$ 2,964,372$ 135,000$ 12,188$ 6,245,000$ 1,165,650$ 1,552,924$ 100,452$ 2,430,000$ 597,400$ 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. -55- 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. -56- NOTE 5 – LONG-TERM DEBT (CONTINUED) Energy Loan Payable – In 2014, the City entered into an energy loan payable for the purpose of furnishing certain equipment and work designed to reduce energy consumption and operational costs in the City. In this energy loan payable agreement, the provider guarantees a minimum level of energy and operational savings in the City. Payments on the loan will be made semiannually in the amount of $150,307 commencing December 19, 2015 and each June and December 19 thereafter, until final payment is made on June 19, 2025. 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. 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, 2019 is $4,656,853 G. Revenue Pledged Future revenue pledged for the payment of long-term debt is as follows: Percent of Remaining Principal Pledged Use of Total Term of Principal and Interest Revenue Bond Issue Proceeds Type Debt Service Pledge and Interest Paid Received Tax Increment Refunding Street and site Tax increment 100%2011–2024 147,188$ 29,300$ 138,571$ Bonds of 2011A improvements financing General Obligation Partial refunding Utility charges 100%2015–2031 6,333,450$ 208,375$ 3,792,321$ Bonds of 2015A General Obligation Partial refunding Utility charges 100%2016–2022 1,077,200$ 336,800$ 3,792,321$ Bonds of 2016A General Obligation Water and sewer Utility charges 100%2018–2028 3,027,400$ 366,404$ 7,414,354$ Bonds of 2018A improvements Revenue Pledged Current Year -57- NOTE 5 – LONG-TERM DEBT (CONTINUED) H. Legal Debt Margin The City’s statutory debt limit is equal to 3 percent of estimated taxable market value of property located within the City. The taxable market value totals $3,447,986,900, which calculates to a debt limit of $103,439,607. 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 $12,185,000 of general obligation debt outstanding, leaving a debt margin of $91,254,607. NOTE 6 – FUND BALANCES A. Classifications At December 31, 2019, a summary of the City’s governmental fund balance classifications are as follows: Debt Construction Nonmajor General Fund Service Fund Fund Funds Total Restricted Future debt service –$ 3,003,467$ –$ –$ 3,003,467$ Economic development – – – 178,317 178,317 Tax increment – – – 764,021 764,021 Forfeiture sales – – – 142,356 142,356 Total restricted – 3,003,467 – 1,084,694 4,088,161 Assigned Subsequent year’s budget 324,712 – – – 324,712 Capital improvements – – 261,269 10,106,731 10,368,000 Development – – – 527,756 527,756 Communications – – – 75,166 75,166 Total assigned 324,712 – 261,269 10,709,653 11,295,634 Unassigned 7,578,463 – – – 7,578,463 Total 7,903,175$ 3,003,467$ 261,269$ 11,794,347$ 22,962,258$ 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, 2019, the unrestricted fund balance of the General Fund was 53.9 percent of the subsequent year’s budgeted expenditures and transfers out. -58- NOTE 6 – FUND BALANCES (CONTINUED) The City Council may consider the judicious use of reserve balances in the following situations: • to fund an expenditure of long-term benefit or legacy to the community • to fund a one-time (nonrecurring) expenditure or grant matching opportunity • to fund a one-time unplanned revenue shortfall • to fund an unplanned expenditure due to an emergency or disaster • to moderate property taxes • to retire existing debt • to fund policy shifts by other governmental entities having a negative impact on the City • to provide catch-up funding for long-term obligations not previously recognized In no case will the unrestricted balance be allowed to fall below 40 percent. In the event that the year-end unrestricted balance is projected to be less than the target level , due to the use of unrestricted balances for purposes identified above, a plan must be presented to the City Council at the time the unrestricted funds are appropriated that will reestablish the target level within 24 to 36 months. If restoration of the unrestricted balance cannot be accomplished within such period without severe hardship to the City, then the City Council will establish a different time period. NOTE 7 – DEFINED BENEFIT PENSION PLANS - STATE-WIDE A. Plan Description City employees participate in two state-wide cost-sharing, multi-employer defined benefit pension plans administered by the Public Employees Retirement Association (PERA) of Minnesota, including the General Employees Retirement Fund (GERF) and the Public Employees Police and Fire Fund (PEPFF). 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, 2019: Net Deferred Deferred Pension Outflows of Inflows of Pension Pension Plans Liabilities Resources Resources Expense GERF 3,754,038$ 397,165$ 788,502$ 421,621$ PEPFF 2,734,960 2,669,654 3,806,029 447,147 Total 6,488,998$ 3,066,819$ 4,594,531$ 868,768$ -59- NOTE 7 – DEFINED BENEFIT PENSION PLANS - STATE-WIDE (CONTINUED) 1. General Employees Retirement Fund (GERF) All full-time and certain part-time employees of the City are covered by the GERF. The GERF members belong to the Coordinated Plan. Coordinated Plan members are covered by Social Security. 2. Public Employees Police and Fire Fund (PEPFF) The PEPFF, originally established for police officers and firefighters not covered by a local relief association, now covers all police officers and firefighters hired since 1980. Effective July 1, 1999, the PEPFF also covers police officers and firefighters belonging to local relief associations that elected to merge with and transfer assets and administration to the PERA. B. Benefits Provided The PERA provides retirement, disability, and death benefits. Benefit provisions are established by state statutes and can only be modified by the State Legislature. Vested, terminated employees who are entitled to benefits but are not receiving them yet, are bound by the provisions in effect at the time they last terminated their public service. 1. GERF Benefits Benefits are based on a member’s highest average salary for any five success ive years of allowable service, age, and years of credit at termination of service. Two methods are used to compute benefits for the PERA’s Coordinated Plan members. Members hired prior to July 1, 1989, receive the higher of Method 1 or Method 2 formulas. Only Method 2 is used for members hired after June 30, 1989. Under Method 1, the accrual rate for Coordinated Plan members is 1.2 percent of average salary for each of the first 10 years of service, and 1.7 percent of average salary for each additional year. Under Method 2, the accrual rate for Coordinated Plan members is 1.7 percent of average salary for all years of service. For members hired prior to July 1, 1989, a full annuity is available when age plus years of service equal 90, and normal retirement age is 65. For members hired on or after July 1, 1989, normal retirement age is the age for unreduced Social Security benefits capped at age 66. 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 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. -60- NOTE 7 – DEFINED BENEFIT PENSION PLANS – STATE-WIDE (CONTINUED) 2. PEPFF Benefits Benefits for the PEPFF members first hired after June 30, 2010 but before July 1, 2014, vest on a prorated basis from 50 percent after five years, up to 100 percent after 10 years of credited service. Benefits for the PEPFF members first hired after June 30, 2014 vest on a prorated basis from 50 percent after 10 years, up to 100 percent after 20 years of credited service. The annuity accrual rate is 3 percent of average salary for each year of service. A full, unreduc ed pension is earned when members are age 55 and vested, or for members who were first hired prior to July 1, 1989, when age plus years of service equal at least 90. Annuities, disability benefits, and survivor benefits are increased effective every Janua ry 1. Beginning January 1, 2019, the post-retirement increase will be fixed at 1 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. Such benefits are financed by the General Fund and enterprise funds. 1. GERF Contributions Coordinated Plan members were required to contribute 6.50 percent of their annual covered salary in fiscal year 2019. 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, 2019, were $374,803. 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 10.80 percent of pay to 11.30 percent and employer rates increased from 16.20 percent to 16.95 percent on January 1, 2019. The City’s contributions to the PEPFF for the year ended December 31, 2019, were $498,625. The City’s contributions were equal to the required contributions as set by state statutes. -61- NOTE 7 – DEFINED BENEFIT PENSION PLANS – STATE-WIDE (CONTINUED) D. Pension Costs 1. GERF Pension Costs At December 31, 2019, the City reported a liability of $3,754,038 for its proportionate share of the GERF’s net pension liability. The net pension liability was measured as of June 30, 2019, 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, 2018 through June 30, 2019, relative to the total employer contributions received from all of the PERA’s participating employers. The City’s proportionate share was 0.0679 percent at the end of the measurement period and 0.0655 percent for the beginning of the period. The City’s net pension liability reflected a reduction, due to the state of Minnesota’s contribution of $16 million to the fund in 2019. The state of Minnesota is considered a nonemployer contributing entity and the state’s contribution meets the definition of a special funding situation. The amount recognized by the City as its proportionate share of the net pension liability, the direct aid, and total portion of the net pension liability that was associated with the City were as follows: City’s proportionate share of net pension liability 3,754,038$ State’s proportionate share of the net pension liability associated with the City 116,662$ For the year ended December 31, 2019, the City recognized pension expense of $412,884 for its proportionate share of the GERF’s pension expense. In addition, the City recognized an additional $8,737 as pension expense (and grant revenue) for its proportionate share of the state of Minnesota’s contribution of $16 million to the GERF. At December 31, 2019, the City reported its proportionate share of the GERF’s deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Deferred Outflows Inflows of Resources of Resources Differences between expected and actual economic experience 104,844$ –$ Changes in actuarial assumptions – 294,696 Differences between projected and actual investment earnings – 375,705 Changes in proportion 101,886 118,101 Contributions paid to the PERA subsequent to the measurement date 190,435 – Total 397,165$ 788,502$ -62- NOTE 7 – DEFINED BENEFIT PENSION PLANS – STATE-WIDE (CONTINUED) A total of $190,435 reported as deferred outflows of resources related to pensions resulting from city contributions subsequent to the measurement date that will be recognized as a reduction of the net pension liability in the year ending December 31, 2020. Other amounts reported as deferred outflows and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Pension Year Ending Expense December 31,Amount 2020 (221,567)$ 2021 (327,167)$ 2022 (39,089)$ 2023 6,051$ 2. PEPFF Pension Costs At December 31, 2019, the City reported a liability of $2,734,960 for its proportionate share of the PEPFF’s net pension liability. The net pension liability was measured as of June 30, 2019, 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, 2018 through June 30, 2019, relative to the total employer contributions received from all of the PERA’s participating employers. The City’s proportionate share was 0.2569 percent at the end of the measurement period and 0.2463 percent for the beginning of the period. For the year ended December 31, 2019, the City recognized pension expense of $412,466 for its proportionate share of the PEPFF’s pension expense. The City also recognized $34,681 for the year ended December 31, 2019, as revenue and an offsetting reduction of net pension liability for its proportionate share of the state of Minnesota’s on-behalf contributions to the PEPFF. Legislation passed in 2013 required the state of Minnesota to begin contributing $9 million to the PEPFF each year until the plan is 90 percent funded or until the State Patrol Plan (administered by the Minnesota State Retirement System) is 90 percent funded, whichever occurs later. In addition, the state will pay $4.5 million on October 1, 2018 and October 1, 2019 in direct state aid. Thereafter, by October 1 of each year, the state will pay $9 million until full funding is reached or July 1, 2048, whichever is earlier. -63- NOTE 7 – DEFINED BENEFIT PENSION PLANS – STATE-WIDE (CONTINUED) At December 31, 2019, the City reported its proportionate share of the PEPFF’s deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Deferred Outflows Inflows of Resources of Resources Differences between expected and actual economic experience 110,693$ 386,401$ Changes in actuarial assumptions 2,102,611 2,827,124 Differences between projected and actual investment earnings – 532,197 Changes in proportion 186,862 60,307 Contributions paid to the PERA subsequent to the measurement date 269,488 – Total 2,669,654$ 3,806,029$ A total of $269,488 reported as deferred outflows of resources related to pensions resulting from city contributions subsequent to the measurement date that will be recognized as a reduction of the net pension liability in the year ending December 31, 2020. Other amounts reported as deferred outflows and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Pension Year Ending Expense December 31,Amount 2020 (155,547)$ 2021 (330,558)$ 2022 (976,334)$ 2023 40,060$ 2024 16,516$ E. Actuarial Assumptions The total pension liability in the June 30, 2019 actuarial valuation was determined using an individual entry-age normal actuarial cost method and the following actuarial assumptions: Inflation 2.50% per year Active member payroll growth 3.25% per year Investment rate of return 7.50% Salary increases were based on a service-related table. Mortality rates for active members, retirees, survivors, and disabilitants for all plans were based on RP-2014 tables for males and females, as appropriate, with slight adjustments to fit the PERA’s experience. Cost of living benefit increases after retirement for retirees are assumed to be 1.25 percent per year for the GERF, and 1.00 percent per year for the PEPFF. -64- NOTE 7 – DEFINED BENEFIT PENSION PLANS – STATE-WIDE (CONTINUED) Actuarial assumptions used in the June 30, 2019 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 most recent four-year experience study for the PEPFF was completed in 2016. Economic assumptions were updated in 2018 based on a review of inflation and investment return assumptions. The following changes in actuarial assumptions and plan provisions occurred in 2019: 1. GERF CHANGES IN ACTUARIAL ASSUMPTIONS • The mortality projection scale was changed from MP-2017 to MP-2018. 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. 2. PEPFF CHANGES IN ACTUARIAL ASSUMPTIONS • The mortality projection scale was changed from MP-2017 to MP-2018. 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 equity 35.5 %5.10 % Private markets 25.0 5.90 % Fixed income 20.0 0.75 % International equity 17.5 5.90 % Cash equivalents 2.0 – % Total 100.0 % Allocation Target Real Rate of Return Long-Term Expected F. Discount Rate The discount rate used to measure the total pension liability in 2019 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. -65- NOTE 7 – DEFINED BENEFIT PENSION PLANS – STATE-WIDE (CONTINUED) 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 6,171,438$ 3,754,038$ 1,757,996$ City’s proportionate share of the PEPFF net pension liability 5,978,114$ 2,734,960$ 52,924$ 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. -66- 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, 2018, the plan covered 43 active firefighters and 12 vested terminated firefighters whose pension benefits are deferred. The plan was established November 1, 1957, and the Association operates under the provisions of Minnesota Laws 1965, Chapter 446, as amended and Minnesota Statutes, Chapters 69 and 424A. It is governed by a Board of Trustees (the Board) made up of six members elected by the members of the Association for three-year terms, and the mayor, city manager, and fire chief, who serve as ex officio voting members of the Board of Trustees. The Association maintains a separate Special Fund to accumulate assets to fund the retirement benefits earned by the Department’s membership. Funding for the Association is derived from an insurance premium tax in accordance with the Volunteer Firefighter’s Relief Association Financing Guidelines Act of 1971 (Chapter 261 as amended by Chapter 509 of Minnesota Statutes 1980). Funds are also derived from investment income. B. Benefits Provided Retirement Benefits According to the bylaws of the Association and pursuant to Minnesota Statutes, Chapter 424A.02, Subdivisions 2 and 4, the Association pays to each member who has served as an active firefighter in the Department for a period of 20 years or more to his/her resignation, and who has reached the age of 50 years or more, $8,000 per year of service for lump sum. A member who has served in the Department for at least 20 years but has not reached the age of 50, may retire and be placed on the deferred pension roll until he/she reaches the age of 50. Members who retire with less than 20 years of service, have reached the age of 50, and have completed at least 10 years of active membership are entitled to a reduced service pension. Disability Benefits If a member of the Association becomes totally or permanently disabled, the Association shall pay to such members the lump sum of $8,000 for each year that they have served as an active member of the Department. Death Benefit Upon the death of any member of the Association who is in good standing at the time of their death, the Association shall pay to the surviving spouse, if any, and if there is no surviving spouse, to surviving child or children, if any, and if no child or children survive, to the estate of such deceased member under 10 years of service, the sum of $8,000 for each year that they served as an acti ve member of the Department. -67- NOTE 8 – DEFINED BENEFIT PENSION PLANS – FIRE RELIEF ASSOCIATION 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 $234,651 in fire state aid to the plan on behalf of the Department for the year ended December 31, 2019, which was recorded as a revenue. Required employer contributions are calculated annually based on statutory provisions. The City’s statutorily-required contributions to the plan for the year ended December 31, 2019 were $232,651. 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, 2019. Furthermore, firefighters have no obligation to contribute to the plan. D. Pension Costs At December 31, 2019, the City reported a net pension liability (asset) of $639,774 for the plan. The net pension liability (asset) was measured as of December 31, 2018. 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, 2018. For the year ended December 31, 2019, the City recognized a pension expense of $267,697. The City also recognized $227,610 as revenue for the state of Minnesota’s on-behalf contributions to the Department. The following table presents the changes in net pension liability (asset) during the year: Total Pension Plan Fiduciary Net Pension Liability Net Position Liability (Asset) Beginning balance – January 1, 2019 3,876,642$ 4,898,617$ (1,021,975)$ Changes for the year Service cost 151,350 – 151,350 Interest on pension liability (asset)220,949 – 220,949 Assumption changes 53,174 – 53,174 Projected investment earnings – 280,535 (280,535) Contributions (employer)– 20,000 (20,000) Contributions (state)– 227,610 (227,610) Asset (gain) loss (60,490) (542,719) 482,229 Benefit payments (691,031) (691,031) – Administrative costs – (2,644) 2,644 Total net changes (326,048) (708,249) 382,201 Ending balance – December 31, 2019 3,550,594$ 4,190,368$ (639,774)$ -68- NOTE 8 – DEFINED BENEFIT PENSION PLANS – FIRE RELIEF ASSOCIATION (CONTINUED) At December 31, 2019, 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 244,705$ –$ Changes in actuarial assumptions 46,527 – Difference between expected and actual economic experience 17,500 52,928 State aid to the City subsequent to the measurement date – 234,651 Contributions from the City subsequent to the measurement date 252,651 – Total 561,383$ 287,579$ Deferred outflows of resources totaling $252,651 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, 2020. Deferred inflows of resources totaling $234,651 related to state aid received subsequent to the measurement date will be recognized for its impact on the net pension liability in the year ending December 31, 2020. Other amounts reported as deferred outflows and inflows of resources related to the plan will be recognized in pension expense as follows: Pension Year Ending Expense December 31,Amount 2020 94,605$ 2021 15,453 2022 33,859 2023 111,129 2024 2,584 Thereafter (1,826) E. Actuarial Assumptions The total pension liability at December 31, 2019 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 servicen 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 using the plan’s target investm ent allocation. along with long-term return expectations by asset class. Inflation expectations were applied to derive the nominal rate of return for the portfolio. -69- 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 Discount Rate 1% Increase (4.50%)(5.50%)(6.50%) Net pension liability (asset)(528,430)$ (639,774)$ (744,541)$ 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. Assumption Changes The discount rate was changed from 6.00 percent to 5.50 percent. -70- NOTE 9 – OTHER POST-EMPLOYMENT BENEFITS (OPEB) PLAN A. Plan Description The City provides post-employment insurance benefits to certain eligible employees through its OPEB Plan, a single-employer defined benefit plan administered by the City. All post-employment benefits are based on contractual agreements with employee groups. Eligibility for these benefits is based on years of service and/or minimum age requirements. These contractual agreements do not include any specific contribution or funding requirements. The Plan does not issue a publicly available financial report. No plan assets are accumulated in a trust that meets the criteria in paragraph 4 of GASB Statement No. 75. B. Benefits Provided All retirees of the City upon retirement have the option under state law to continue their medical insurance coverage through the City. For members of certain employee groups, the City pays for all or part of the eligible retiree’s premiums for medical and/or dental insurance from the time of retirement until the employee reaches the age of eligibility for Medicare. Benefits paid by the City differ by bargaining unit and date of hire, with some contracts specifying a certain dollar amount per month, and some covering premium costs as defined within each collective bargaining agreement. Retirees not eligible for these City-paid premium benefits must pay the full city premium rate for their coverage. The City is legally required to include any retirees for whom it provides health insurance coverage in the same insurance pool as its active employees until the retiree reaches Medicare eligibility, whether the premiums are paid by the City or the retiree. Consequently, participating retirees are considered to receive a secondary benefit known as an “implicit rate subsidy.” This benefit relates to the assumption that the retiree is receiving a more favorable premium rate than they would otherwise be able to obtain if purchasing insurance on their own, due to being included in the same pool with the City’s younger and statistically healthier active employees. C. Contributions The required contribution is based on projected pay-as-you-go financing requirements, with additional amounts to prefund benefits as determined periodically by the City. The City’s current year required pay-as-you-go contributions to finance the benefits described in the previous section totaled $28,422. Contributions for OPEB are be 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 -71- NOTE 9 – OTHER POST-EMPLOYMENT BENEFITS (OPEB) PLAN (CONTINUED) E. Total OPEB Liability of the City The City’s total OPEB liability of $796,524 as of year-end was measured as of January 1, 2019, and was determined by an actuarial valuation as of that date. 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 3.30 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). The mortality rates used in the previous study were based on the RP-2014 adjusted to MP-2016 Generational Improvement Scale (Blue Collar Tables for Police and Fire Personnel). Healthcare costs trend rates were also changed from the previous study to better anticipate short-term and long-term medical increases. Future retirees electing coverage is assumed to be 50 percent when a pre-age 65 subsidy is not available. Married future retirees electing spouse coverage is assumed to be 25 percent when a pre-age 65 subsidy is not available. -72- NOTE 9 – OTHER POST-EMPLOYMENT BENEFITS (OPEB) PLAN (CONTINUED) G. Changes in the Total OPEB Liability Total OPEB Liability Beginning balance – January 1, 2019 906,133$ Changes for the year Service cost 62,717 Interest 31,270 Assumption Changes (37,343) Difference between expected and actual experience (123,346) Benefit payments – employer-financed (42,907) Total net changes (109,609) Ending balance – December 31, 2019 796,524$ Assumption changes since the prior measurement date include the following: • The healthcare trend rates were changed from 6.25 percent grading to 5.00 percent over 5 years, to 6.50 percent grading to 5.00 percent over 6 years. • The mortality tables were updated to meet current actuarial standards • The discount rate was changed from 3.30 percent to 3.80 percent. H. Total OPEB Liability Sensitivity to Discount and Healthcare Cost Trend Rate Changes The following presents the total OPEB liability of the City, as well as what the City’s total OPEB liability would be if it were calculated using a discount rate that is 1 percentage point lower or 1 percentage point higher than the current discount rate: OPEB discount rate 3.80% Total OPEB liability 859,316$ 737,989$ 2.80%4.80% 1% Decrease in 1% Increase in Discount Rate Discount Rate Discount Rate 796,524$ -73- NOTE 9 – OTHER POST-EMPLOYMENT BENEFITS (OPEB) PLAN (CONTINUED) 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 713,907$ 893,610$ 4.00% over 6 years 6.00% over 6 years5.00% over 6 years 796,524$ 1% Decrease in 1% Increase in Rate Rate 5.50% decreasing to 7.50% decreasing to Healthcare Trend Rate 6.50% decreasing to Healthcare Trend Healthcare Trend 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 $47,710. As of year-end, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources: Deferred Deferred Outflows Inflows of Resources of Resources Changes in actuarial assumptions –$ 109,640$ Difference between expected and actual economic experience – 33,193 Contributions from the City subsequent to the measurement date 28,422 – 28,422$ 142,833$ -74- NOTE 9 – OTHER POST-EMPLOYMENT BENEFITS (OPEB) PLAN (CONTINUED) Deferred outflows of resources totaling $28,422 related to pensions resulting from city contributions to the Plan subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ending December 31, 2020. Other amounts reported as deferred outflows and inflows of resources related to the plan will be recognized in pension expense as follows: OPEB Year Ending Expense June 30,Amount 2020 (17,856)$ 2021 (17,856)$ 2022 (17,856)$ 2023 (17,856)$ 2024 (17,856)$ Thereafter (53,553)$ NOTE 10 – STEWARDSHIP AND ACCOUNTABILITY Deficit Net Position As of December 31, 2019, the Severance Compensation Internal Service Fund had a deficit net position of $480,946. This deficit will be eliminated by future charges for services. NOTE 11 – TAX ABATEMENT AGREEMENTS The City, in order to spur economic development and redevelopment, has entered into private development and redevelopment agreements to encourage a developer to construct, expand, or improve new or existing properties and buildings or clean-up and redevelop blighted areas. The City currently has six agreements that would be considered tax abatements. Outstanding Amount Principal Date of Abated During Balance Required Name Purpose the Fiscal Year at Year-End Decertification 1-3 Lakefront 1-4 River Valley Vet 3-1 Creekside Estates 54-unit senior housing facility 44,321$ 2,255$ 12/31/2029 5-1 Premier Dance 1-5 Gateway Center 12/31/2035 9,371$ 17,558$ 12/31/2022 2,933,914$ 12/31/2034 14,559$ 12/31/2034 80-unit owner-occupied senior housing facility and 12,000 square feet of retail space and related improvements 12/31/2029903,011$ 103,929$ 7,000 square foot addition to the existing veterinary clinic facility 6-1 Shepherds Path Acquisition,construction and equipping of a 170-unit multi-family senior housing development 80.03 acres,including 442 senior housing units,a YMCA facility,youth center,medical office/clinic,bank,park area,trails,and companion uses to the existing church 305,401$ 125,572$ 166,209$ 1,504,450$ 10,000 square foot commercial facility to be used as a dance studio -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 use of tax increment financing would be less than the increase in the market value estimated to result from the proposed development after subtracting the present value of the projected tax increments for the maximum duration of the district permitted by the plan. The requirements of this item do not apply if the district is a housing district; • The tax increment financing plan conforms to the general plan for the development or redevelopment of the municipality as a whole; and • The tax increment financing plan will afford maximum opportunity, consistent with the sound needs of the municipality as a whole, for the development or redevelopment of the project by private enterprise. The City has entered into private development agreements regarding certain tax increment properties. The vehicle used for this reimbursement is called a tax increment revenue note. These notes provide for the payment of principal, equal to the developer’s costs, plus interest at a set rate. Payments on the loan will be made at the lesser of the note payment or the actual net tax increment received (or a reduced percentage received in certain cases) during specific yea rs 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, 2019 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 recor ded on the City’s financial statements relating to these claims. C. Construction Contracts During fiscal 2019, the City awarded contracts for various construction and remodeling projects. The City’s commitment for uncompleted work on these contracts at December 31, 2019 is $403,640. D. Tax Increment Districts The City’s tax increment districts are subject to review by the Office of the State Auditor. Any disallowed claims or misuse of tax increments could become a liability of the applicable fund. Management has indicated that they are not aware of any instances of noncompliance, which would have a material effect on the financial statements. NOTE 13 – SUBSEQUENT EVENTS – INVESTMENT FAIR VALUES The City generally reports its investments at fair value based on standards described earlier in these notes. Subsequent to year-end, the novel coronavirus (COVID-19) pandemic has caused significant volatility in economic conditions, including substantial reductions in the quoted active-market prices of some investments. The City’s portfolio consists primarily of shorter-term investments, many with guaranteed maturity values. The City does not expect any losses ultimately realized from this market decline to be material. However, the potential negative impact could be heightened if increased demand on City resources and/or a sustained economic downturn hampers the City’s ability to hold such investments to maturity as planned. The potential future impact of these conditions on the fair value of the City’s investment portfolio is not determinable at this time. THIS PAGE INTENTIONALLY LEFT BLANK REQUIRED SUPPLEMENTARY INFORMATION Proportionate Share of the City’s Net Pension Proportionate Liability and City’s Share of the the City’s Proportionate Plan Fiduciary State of Share of the Share of the Net Position City’s City’s Minnesota’s State of Net Pension as a PERA Fiscal Proportion Proportionate Proportionate Minnesota’s Liability as a Percentage Year-End Date of the Net Share of the Share of the Share of the City’s Percentage of of the Total (Measurement Pension Net Pension Net Pension Net Pension Covered Covered Pension Date)Liability Liability Liability Liability Payroll Payroll Liability 06/30/2015 0.0719% 3,726,231$ –$ 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% 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% Note:The City implemented GASB Statement No.68 in fiscal 2015 (using a June 30,2015 measurement date).This schedule is intended to present 10-year trend information. Additional years will be added as they become available. 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, 2019 12/31/2017 Year Ended December 31, 2019 12/31/2018 12/31/2019 City Fiscal -77- City’s Proportionate Plan Fiduciary Share of the Net Position City’s City’s Net Pension as a PERA Fiscal Proportion Proportionate Liability as a Percentage Year-End Date of the Net Share of the City’s Percentage of of the Total (Measurement Pension Net Pension Covered Covered Pension Date)Liability Liability Payroll Payroll Liability 06/30/2015 0.2400% 2,726,962$ 2,244,215$ 121.51% 86.60% 06/30/2016 0.2380% 9,551,354$ 2,294,383$ 416.29% 63.90% 06/30/2017 0.2360% 3,186,282$ 2,425,426$ 131.37% 85.40% 06/30/2018 0.2463% 2,625,304$ 2,595,948$ 101.13% 88.80% 06/30/2019 0.2569% 2,734,960$ 2,713,440$ 100.79% 89.30% 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% Note: 12/31/2017 12/31/2017 12/31/2018 12/31/2018 12/31/2019 12/31/2019 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 OF PRIOR LAKE City Fiscal Year-End 12/31/2015 12/31/2016 PERA – Public Employees Police and Fire Fund Schedule of City’s Proportionate Share of Net Pension Liability PERA – Public Employees Police and Fire Fund Schedule of City Contributions City Fiscal Year-End 12/31/2015 12/31/2016 Year Ended December 31, 2019 Year Ended December 31, 2019 -78- City fiscal year-end dated December 31,2015 2016 2017 2018 2019 Measurement period – December 31,2014 2015 2016 2017 2018 Total pension liability Service cost 106,719$ 109,387$ 110,441$ 132,893$ 151,350$ Interest 148,718 164,204 192,181 208,100 220,949 Asset (gain) loss – – 28,006 – (60,490) Benefit payments – – (34,403) (209,373) (691,031) 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) Total pension liability – beginning 2,481,307 2,736,744 3,109,785 3,440,120 3,876,642 Total pension liability – ending 2,736,744$ 3,109,785$ 3,440,120$ 3,876,642$ 3,550,594$ Plan fiduciary net position Contributions (state and local)215,194$ 228,087$ 235,891$ 237,182$ 247,610$ Net investment income 154,856 (169,276) 320,811 640,986 (262,184) Benefit payments – – (34,403) (209,373) (691,031) 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) Total pension liability – beginning 3,301,229 3,664,632 3,716,803 4,229,942 4,898,617 Total pension liability – ending 3,664,632$ 3,716,803$ 4,229,942$ 4,898,617$ 4,190,368$ Net pension liability (asset) – ending (927,888)$ (607,018)$ (789,822)$ (1,021,975)$ (639,774)$ Plan fiduciary net position as a percentage of the total pension liability 133.90%119.52%122.96%126.36%118.02% 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. Note: CITY OF PRIOR LAKE Prior Lake Fire Relief Association Schedule of Changes in the Relief Association’s Net Pension Asset and Related Ratios (Last Ten Years) -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$ 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, 2019 (Last Ten Years) 12/31/2015 12/31/2016 12/31/2017 12/31/2018 12/31/2019 -80- 2018 2019 Total OPEB liability Service cost 61,214$ 62,717$ Interest 29,555 31,270 Changes of assumptions – (37,343) Differences between expected and actual experiences – (123,346) Benefit payments (37,688) (42,907) Net change in total OPEB liability 53,081 (109,609) Total OPEB liability – beginning of year 853,052 906,133 Total OPEB liability – end of year 906,133$ 796,524$ Covered payroll 6,560,761$ 7,134,065$ Total OPEB liability as a percentage of covered payroll 13.81%11.17% Note:The City implemented GASB Statement No.75 in fiscal 2018.This schedule is intended to present 10-year trend information. Additional years will be added as they become available. CITY OF PRIOR LAKE Other Post-Employment Benefits Plan Schedule of Changes in the City’s Total OPEB Liability and Related Ratios Year Ended December 31, 2019 -81- CITY OF PRIOR LAKE Notes to Required Supplementary Information December 31, 2019 -82- PERA – GENERAL EMPLOYEES RETIREMENT FUND 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, 2019 -83- 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. CITY OF PRIOR LAKE Notes to Required Supplementary Information December 31, 2019 -84- PERA – GENERAL EMPLOYEES RETIREMENT FUND (CONTINUED) 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, 2019 -85- PERA – PUBLIC EMPLOYEES POLICE AND FIRE FUND 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, 2019 -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, 2019 -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, 2019 -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 $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 $7,100 was reflected in the pension liability for 2016. OTHER POST-EMPLOYMENT BENEFITS PLAN 2019 CHANGES IN ACTUARIAL ASSUMPTIONS  The healthcare trend rates were changed from 6.25 percent, grading to 5.00 percent over five years, to 6.50 percent, grading to 5.00 percent over six years.  The mortality tables were updated to meet current actuarial standards.  The discount rate was changed from 3.30 percent to 3.80 percent. 2018 CHANGES IN ACTUARIAL ASSUMPTIONS  The healthcare trend rates were changed from 6.50 percent, grading to 5.00 percent over six years, to 6.25 percent, grading to 5.00 percent over five years.  The mortality table was updated from RP-2014 adjusted to 2006 White Collar Mortality Tables with MP-2016 Generational Improvement Scale, to RF-2014 White Collar with MP-2016 Generational Improvement Scale.  The actuarial cost method was changed from entry-age normal level dollar to entry-age level percent of pay.  The discount rate was changed from 3.50 percent to 3.30 percent. THIS PAGE INTENTIONALLY LEFT BLANK SUPPLEMENTAL INFORMATION Special Revenue Capital Projects Total Assets Cash and investments 3,698,420$ 8,721,687$ 12,420,107$ Cash held in escrow 25,000 – 25,000 Receivables Delinquent taxes 98 – 98 Accounts 58,337 138,715 197,052 Special assessments Delinquent – 1,285 1,285 Deferred – 512,639 512,639 Due from other governmental agencies 100,748 7,793 108,541 Total assets 3,882,603$ 9,382,119$ 13,264,722$ Liabilities Accounts and contracts payable 258,684$ 351,886$ 610,570$ Accrued salaries and employee benefits payable 8,252 – 8,252 Due to other governmental agencies 1,131 – 1,131 Deposits payable 186,149 116,500 302,649 Unearned revenue 33,750 – 33,750 Total liabilities 487,966 468,386 956,352 Deferred inflows of resources Unavailable revenue from delinquent taxes 98 – 98 Unavailable revenue from special assessments – 513,925 513,925 Total deferred inflows of resources 98 513,925 514,023 Fund balances Restricted 320,673 764,021 1,084,694 Assigned 3,073,866 7,635,787 10,709,653 Total fund balances 3,394,539 8,399,808 11,794,347 Total liabilities, deferred inflows of resources, and fund balances 3,882,603$ 9,382,119$ 13,264,722$ CITY OF PRIOR LAKE Nonmajor Governmental Funds Combining Balance Sheet as of December 31, 2019 -89- Special Revenue Capital Projects Total Revenue Taxes 149,698$ 1,756,506$ 1,906,204$ Special assessments – 367,378 367,378 Intergovernmental 100,000 – 100,000 Charges for services 615,170 1,556,081 2,171,251 Investment income 106,530 363,100 469,630 Miscellaneous Contributions and donations 12,800 – 12,800 Other 96,863 – 96,863 Total revenue 1,081,061 4,043,065 5,124,126 Expenditures Current General government 243 – 243 Public safety 115,397 – 115,397 Economic development 171,553 4,196 175,749 Culture and recreation 49,735 – 49,735 Capital outlay 804,847 2,828,268 3,633,115 Debt service Interest and other – 16,750 16,750 Total expenditures 1,141,775 2,849,214 3,990,989 Excess (deficiency) of revenues over expenditures (60,714) 1,193,851 1,133,137 Other financing sources (uses) Debt issued – 615,000 615,000 Premium on debt issued – 88,749 88,749 Transfers in – 254,927 254,927 Transfers out – (1,959,649) (1,959,649) Sale of capital assets – 8,020 8,020 Total other financing sources (uses)– (992,953) (992,953) Net change in fund balances (60,714) 200,898 140,184 Fund balances Beginning of year 3,455,253 8,198,910 11,654,163 End of year 3,394,539$ 8,399,808$ 11,794,347$ Year Ended December 31, 2019 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 1,814,074$ 129,896$ 658$ Cash held in escrow – – – Receivables Delinquent taxes – – – Accounts 3,186 616 347 Due from other governmental agencies 100,000 – – Total assets 1,917,260$ 130,512$ 1,005$ Liabilities Accounts and contracts payable 152,817$ –$ –$ Accrued salaries and employee benefits payable – – – Due to other governmental agencies – – – Deposits payable – – – Unearned revenue 33,750 – – Total liabilities 186,567 – – Deferred inflows of resources Unavailable revenue from delinquent taxes – – – Fund balances Restricted for economic development – 130,512 1,005 Restricted for forfeiture sales – – – Assigned for capital improvements 1,730,693 – – Assigned for development – – – Assigned for communications – – – Total fund balances 1,730,693 130,512 1,005 Total liabilities, deferred inflows of resources, and fund balances 1,917,260$ 130,512$ 1,005$ as of December 31, 2019 CITY OF PRIOR LAKE Nonmajor Special Revenue Funds Combining Balance Sheet -91- Cable Police Franchise EDA Forfeiture DAG Total 68,135$ 538,644$ 199,892$ 947,121$ 3,698,420$ 25,000 – – – 25,000 – 98 – – 98 7,031 46,881 276 – 58,337 – 748 – – 100,748 100,166$ 586,371$ 200,168$ 947,121$ 3,882,603$ –$ 2,334$ 57,812$ 45,721$ 258,684$ – 8,252 – – 8,252 – 1,131 – – 1,131 25,000 – – 161,149 186,149 – – – – 33,750 25,000 11,717 57,812 206,870 487,966 – 98 – – 98 – 46,800 – – 178,317 – – 142,356 – 142,356 – – – 740,251 2,470,944 – 527,756 – – 527,756 75,166 – – – 75,166 75,166 574,556 142,356 740,251 3,394,539 100,166$ 586,371$ 200,168$ 947,121$ 3,882,603$ -92- Capital ED Revolving Revolving Park Loan Loan Revenues Taxes –$ –$ –$ Intergovernmental 100,000 – – Charges for services 309,190 – – Investment income 70,957 5,058 7 Miscellaneous Contributions and donations 4,200 – – Other – – – Total revenues 484,347 5,058 7 Expenditures Current General government – – – Public safety – – – Economic development – – – Culture and recreation 49,735 – – Capital outlay 454,462 – 95,000 Total expenditures 504,197 – 95,000 Net change in fund balances (19,850) 5,058 (94,993) Fund balances Beginning of year 1,750,543 125,454 95,998 End of year 1,730,693$ 130,512$ 1,005$ Year Ended December 31, 2019 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 –$ 149,698$ –$ –$ 149,698$ – – – – 100,000 28,901 10,120 – 266,959 615,170 2,849 19,595 8,064 – 106,530 – 8,600 – – 12,800 – – 96,863 – 96,863 31,750 188,013 104,927 266,959 1,081,061 243 – – – 243 – – 115,397 – 115,397 – 171,553 – – 171,553 – – – – 49,735 20,020 – 29,081 206,284 804,847 20,263 171,553 144,478 206,284 1,141,775 11,487 16,460 (39,551) 60,675 (60,714) 63,679 558,096 181,907 679,576 3,455,253 75,166$ 574,556$ 142,356$ 740,251$ 3,394,539$ -94- Tax Revolving Trunk Increment Equipment Reserve Assets Cash and investments 15,528$ 823,388$ 3,337,679$ Receivables Accounts 70,997 5,614 29,870 Special assessments Delinquent – – 398 Deferred – – 6,158 Due from other governmental agencies – 3,204 – Total assets 86,525$ 832,206$ 3,374,105$ Liabilities Accounts and contracts payable –$ 4,163$ 3,647$ Deposits payable – – – Total liabilities – 4,163 3,647 Deferred inflows of resources Unavailable revenue from special assessments – – 6,556 Fund balances Restricted for tax increment 86,525 – – Assigned for capital improvements – 828,043 3,363,902 Total fund balances 86,525 828,043 3,363,902 Total liabilities, deferred inflows of resources, and fund balances 86,525$ 832,206$ 3,374,105$ CITY OF PRIOR LAKE Nonmajor Capital Projects Funds Combining Balance Sheet as of December 31, 2019 -95- Tax Tax Street Water Increment 1-3 Increment 3-1 Oversizing Storage Lakefront Creekside 1,286,836$ 301,177$ 148,627$ 166,359$ 4,036 19,761 733 444 – 306 – – – 3,180 – – – – 1,920 – 1,290,872$ 324,424$ 151,280$ 166,803$ –$ –$ 45,734$ 2,335$ 116,500 – – – 116,500 – 45,734 2,335 – 3,487 – – – – 105,546 164,468 1,174,372 320,937 – – 1,174,372 320,937 105,546 164,468 1,290,872$ 324,424$ 151,280$ 166,803$ -96-(continued) Tax Tax Tax Increment 5-1 Increment 6-1 Increment 1-4 Premiere Shepard’s Path River Vet Assets Cash and investments 16,723$ 530,457$ 5,938$ Receivables Accounts 42 1,284 1 Special assessments Delinquent – – – Deferred – – – Due from other governmental agencies – – – Total assets 16,765$ 531,741$ 5,939$ Liabilities Accounts and contracts payable 7,280$ 152,701$ 4,686$ Deposits payable – – – Total liabilities 7,280 152,701 4,686 Deferred inflows of resources Unavailable revenue from special assessments – – – Fund balances Restricted for tax increment 9,485 379,040 1,253 Assigned for capital improvements – – – Total fund balances 9,485 379,040 1,253 Total liabilities, deferred inflows of resources, and fund balances 16,765$ 531,741$ 5,939$ as of December 31, 2019 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 100,778$ 917,009$ 474,636$ 596,552$ 8,721,687$ 29 1,878 3,826 200 138,715 – – – 581 1,285 – – – 503,301 512,639 – 1,546 – 1,123 7,793 100,807$ 920,433$ 478,462$ 1,101,757$ 9,382,119$ 83,103$ 14,989$ –$ 33,248$ 351,886$ – – – – 116,500 83,103 14,989 – 33,248 468,386 – – – 503,882 513,925 17,704 – – – 764,021 – 905,444 478,462 564,627 7,635,787 17,704 905,444 478,462 564,627 8,399,808 100,807$ 920,433$ 478,462$ 1,101,757$ 9,382,119$ -98- Tax Revolving Trunk Increment Equipment Reserve Revenues Taxes –$ 599,619$ –$ Special assessments – – 4,738 Charges for services 10,673 – 1,147,660 Investment income 628 39,019 136,297 Total revenues 11,301 638,638 1,288,695 Expenditures Current Economic development 4,196 – – Capital outlay 9,967 1,175,387 84,124 Debt service Interest and other – 5,856 – Total expenditures 14,163 1,181,243 84,124 Excess (deficiency) of revenues over expenditures (2,862) (542,605) 1,204,571 Other financing sources (uses) Debt issued – 215,000 – Premium on debt issued – 40,040 – Transfers in – 160,000 – Transfers out – – (735,480) Sale of capital assets – 8,020 – Total other financing sources (uses)– 423,060 (735,480) Net change in fund balances (2,862) (119,545) 469,091 Fund balances Beginning of year 89,387 947,588 2,894,811 End of year 86,525$ 828,043$ 3,363,902$ CITY OF PRIOR LAKE Nonmajor Capital Projects Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Year Ended December 31, 2019 -99- Tax Tax Street Water Increment 1-3 Increment 3-1 Oversizing Storage Lakefront Creekside –$ –$ 138,571$ 93,305$ – 2,457 – – 54,802 342,946 – – 46,110 42,695 4,894 5,080 100,912 388,098 143,465 98,385 – – – – 34,564 – 106,639 45,331 – – – – 34,564 – 106,639 45,331 66,348 388,098 36,826 53,054 – – – – – – – – – – – – – (1,007,804) (29,432) – – – – – – (1,007,804) (29,432) – 66,348 (619,706) 7,394 53,054 1,108,024 940,643 98,152 111,414 1,174,372$ 320,937$ 105,546$ 164,468$ -100-(continued) Tax Tax Tax Increment 5-1 Increment 6-1 Increment 1-4 Premiere Shepard’s Path River Vet Revenues Taxes 16,177$ 339,335$ 10,412$ Special assessments – – – Charges for services – – – Investment income 439 15,739 97 Total revenues 16,616 355,074 10,509 Expenditures Current Economic development – – – Capital outlay 15,589 306,391 10,381 Debt service Interest and other – – – Total expenditures 15,589 306,391 10,381 Excess (deficiency) of revenues over expenditures 1,027 48,683 128 Other financing sources (uses) Debt issued – – – Premium on debt issued – – – Transfers in – – – Transfers out – – – Sale of capital assets – – – Total other financing sources (uses)– – – Net change in fund balances 1,027 48,683 128 Fund balances Beginning of year 8,458 330,357 1,125 End of year 9,485$ 379,040$ 1,253$ Year Ended December 31, 2019 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 174,956$ 289,269$ –$ 94,862$ 1,756,506$ – – – 360,183 367,378 – – – – 1,556,081 1,332 31,407 17,605 21,758 363,100 176,288 320,676 17,605 476,803 4,043,065 – – – – 4,196 167,219 158,797 48,925 664,954 2,828,268 – – – 10,894 16,750 167,219 158,797 48,925 675,848 2,849,214 9,069 161,879 (31,320) (199,045) 1,193,851 – – – 400,000 615,000 – – – 48,709 88,749 – – 94,927 – 254,927 – – – (186,933) (1,959,649) – – – – 8,020 – – 94,927 261,776 (992,953) 9,069 161,879 63,607 62,731 200,898 8,635 743,565 414,855 501,896 8,198,910 17,704$ 905,444$ 478,462$ 564,627$ 8,399,808$ -102- 2018 Variance With Original Final Actual Final Budget Actual Revenues Taxes Property taxes 8,380,973$ 8,380,973$ 8,367,851$ (13,122)$ 7,988,125$ Franchise taxes 615,000 615,000 639,783 24,783 630,932 Total taxes 8,995,973 8,995,973 9,007,634 11,661 8,619,057 Special assessments 5,000 5,000 140 (4,860) 4,691 Licenses and permits Business 82,680 82,680 81,320 (1,360) 85,535 Nonbusiness 559,438 559,438 910,776 351,338 909,078 Total licenses and permits 642,118 642,118 992,096 349,978 994,613 Intergovernmental Federal grants 17,000 17,000 1,821 (15,179) 7,504 State Road and bridge aid 377,209 377,209 378,807 1,598 376,210 Fire relief aid 227,000 227,000 273,282 46,282 238,189 Police aid 264,800 264,800 291,594 26,794 286,590 Other state aids 11,905 11,905 11,905 – 11,905 County and local Township fire and rescue aid 314,136 314,136 314,136 – 296,559 Liaison aid 49,769 49,769 52,680 2,911 48,793 Other local aids – – 1,000 1,000 – Payment in lieu of taxes 600,000 600,000 600,000 – 570,000 Total intergovernmental 1,861,819 1,861,819 1,925,225 63,406 1,835,750 Charges for services Zoning fees 20,857 20,857 32,104 11,247 39,712 Plan check fees 277,528 277,528 382,837 105,309 390,830 Park fees 74,300 74,300 202,125 127,825 204,608 Project fees 263,000 263,000 73,290 (189,710) 235,030 Park program revenue 67,000 67,000 75,084 8,084 68,957 Tower leases 291,967 291,967 312,116 20,149 290,462 Park admission/rent 66,500 69,500 76,419 6,919 74,090 Facility rental 38,418 35,418 37,536 2,118 52,217 Reports 1,600 1,600 1,602 2 1,143 Total charges for services 1,101,170 1,101,170 1,193,113 91,943 1,357,049 CITY OF PRIOR LAKE General Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual Year Ended December 31, 2019 (With Comparative Actual Amounts for the Year Ended December 31, 2018) 2019 Budgeted Amounts -103-(continued) 2018 Variance With Original Final Actual Final Budget Actual Revenues (continued) Fines and forfeits – – 996 996 1,448 Investment income Interest earnings 87,400 87,400 152,608 65,208 133,312 Amortization – premium/discount – – (8,690) (8,690) (20,302) Unrealized gain (loss)– – 116,516 116,516 (58,293) Total investment income 87,400 87,400 260,434 173,034 54,717 Miscellaneous Other 29,739 29,739 56,864 27,125 39,285 Contributions and donations – – 18,403 18,403 25,380 Developers’ agreements 158,000 158,000 119,021 (38,979) 260,974 Total miscellaneous 187,739 187,739 194,288 6,549 325,639 Total revenues 12,881,219 12,881,219 13,573,926 692,707 13,192,964 Expenditures Current expenditures General government Mayor and City Council Personal services 61,216 61,216 63,060 1,844 55,690 Supplies 300 300 311 11 522 Other services and charges 10,350 10,350 6,773 (3,577) 6,961 Total Mayor and City Council 71,866 71,866 70,144 (1,722) 63,173 Ordinance Other services and charges 7,500 7,500 4,025 (3,475) 7,091 Administration Personal services 371,664 372,714 464,153 91,439 364,416 Supplies 6,000 6,000 6,983 983 6,482 Other services and charges 59,271 59,271 57,863 (1,408) 71,265 Total administration 436,935 437,985 528,999 91,014 442,163 Boards and commissions Personal services 10,765 10,765 8,719 (2,046) 9,581 Other services and charges 1,000 1,000 – (1,000) 231 Total boards and commissions 11,765 11,765 8,719 (3,046) 9,812 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, 2019 (With Comparative Actual Amounts for the Year Ended December 31, 2018) 2019 -104-(continued) 2018 Variance With Original Final Actual Final Budget Actual Expenditures (continued) Current expenditures (continued) General government (continued) City Clerk Personal services 60,550 60,860 81,824 20,964 – Supplies – – 179 179 – Other services and charges – – 1,977 1,977 – Total City Clerk 60,550 60,860 83,980 23,120 – Election Personal services – – – – 18,103 Supplies – – – – 1,911 Other services and charges – – – – 543 Total election – – – – 20,557 Finance Personal services 462,310 464,410 465,968 1,558 430,368 Supplies 1,650 1,650 485 (1,165) 1,251 Other services and charges 16,350 21,745 14,122 (7,623) 15,247 Total finance 480,310 487,805 480,575 (7,230) 446,866 Auditing Other services and charges 31,300 31,300 37,564 6,264 30,615 Assessing Other services and charges 202,600 202,600 202,418 (182) 194,716 Legal services Other services and charges 200,000 200,000 152,275 (47,725) 162,462 Personnel Personal services 144,380 145,000 154,461 9,461 141,197 Supplies 250 250 69 (181) – Other services and charges 44,200 44,200 32,588 (11,612) 53,159 Total personnel 188,830 189,450 187,118 (2,332) 194,356 Communications Personal services 104,947 105,257 106,378 1,121 99,485 Supplies 300 300 – (300) 43 Other services and charges 23,050 23,050 20,183 (2,867) 17,406 Total communications 128,297 128,607 126,561 (2,046) 116,934 General Fund 2019 Year Ended December 31, 2019 CITY OF PRIOR LAKE Changes in Fund Balances – Budget and Actual (continued) (With Comparative Actual Amounts for the Year Ended December 31, 2018) Schedule of Revenues, Expenditures, and Budgeted Amounts -105-(continued) 2018 Variance With Original Final Actual Final Budget Actual Expenditures (continued) Current expenditures (continued) General government (continued) Community development Personal services 295,533 296,862 299,211 2,349 286,888 Supplies 2,500 2,500 1,530 (970) 940 Other services and charges 44,932 44,932 27,449 (17,483) 41,291 Total community development 342,965 344,294 328,190 (16,104) 329,119 Technology Personal services 149,360 149,855 150,439 584 145,204 Supplies 41,120 41,120 43,069 1,949 41,586 Other services and charges 129,370 129,370 134,730 5,360 101,136 Total technology 319,850 320,345 328,238 7,893 287,926 Buildings and plant Personal services 87,616 88,356 95,013 6,657 88,495 Supplies 8,000 8,000 8,388 388 7,484 Other services and charges 372,308 372,308 357,849 (14,459) 353,598 Total buildings and plant 467,924 468,664 461,250 (7,414) 449,577 Total general government 2,950,692 2,963,041 3,000,056 37,015 2,755,367 Public safety Police Personal services 4,126,665 4,160,395 4,126,264 (34,131) 3,818,418 Supplies 144,348 144,348 145,362 1,014 123,662 Other services and charges 315,868 326,358 230,468 (95,890) 230,513 Total police 4,586,881 4,631,101 4,502,094 (129,007) 4,172,593 Fire and rescue Personal services 665,413 666,153 691,220 25,067 673,258 Supplies 103,665 103,665 91,345 (12,320) 111,391 Other services and charges 163,818 163,818 154,190 (9,628) 176,265 Total fire and rescue 932,896 933,636 936,755 3,119 960,914 Building inspections Personal services 542,383 544,394 562,078 17,684 540,879 Supplies 17,800 17,800 14,713 (3,087) 7,745 Other services and charges 39,766 39,766 17,675 (22,091) 28,910 Total building inspections 599,949 601,960 594,466 (7,494) 577,534 Emergency management Other services and charges 11,935 11,935 9,947 (1,988) 9,083 Year Ended December 31, 2019 (With Comparative Actual Amounts for the Year Ended December 31, 2018) 2019 Budgeted Amounts CITY OF PRIOR LAKE General Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual (continued) -106-(continued) 2018 Variance With Original Final Actual Final Budget Actual Expenditures (continued) Current expenditures (continued) Public safety (continued) Animal control Other services and charges 26,448 26,448 28,200 1,752 26,400 Total public safety 6,158,109 6,205,080 6,071,462 (133,618) 5,746,524 Public works Engineering Personal services 297,946 299,406 303,932 4,526 281,211 Supplies 10,540 10,540 6,693 (3,847) 10,827 Other services and charges 65,358 65,358 37,671 (27,687) 59,086 Total engineering 373,844 375,304 348,296 (27,008) 351,124 Central garage Personal services 231,711 233,191 225,463 (7,728) 205,565 Supplies 182,410 182,410 144,447 (37,963) 151,544 Other services and charges 45,910 45,910 42,934 (2,976) 44,458 Total central garage 460,031 461,511 412,844 (48,667) 401,567 Streets Personal services 442,497 445,074 422,174 (22,900) 398,353 Supplies 309,072 309,072 332,140 23,068 253,454 Other services and charges 475,334 475,334 438,729 (36,605) 478,473 Total streets 1,226,903 1,229,480 1,193,043 (36,437) 1,130,280 Total public works 2,060,778 2,066,295 1,954,183 (112,112) 1,882,971 Culture and recreation Recreation Personal services 301,246 283,096 304,211 21,115 316,831 Supplies 80,552 80,552 103,307 22,755 92,716 Other services and charges 34,877 34,877 26,050 (8,827) 26,067 Total recreation 416,675 398,525 433,568 35,043 435,614 Parks Personal services 1,008,916 1,013,338 990,650 (22,688) 1,002,580 Supplies 158,125 158,125 143,591 (14,534) 159,200 Other services and charges 314,100 344,160 259,408 (84,752) 204,412 Total parks 1,481,141 1,515,623 1,393,649 (121,974) 1,366,192 Budgeted Amounts Year Ended December 31, 2019 (With Comparative Actual Amounts for the Year Ended December 31, 2018) Changes in Fund Balances – Budget and Actual (continued) Schedule of Revenues, Expenditures, and General Fund CITY OF PRIOR LAKE 2019 -107-(continued) 2018 Variance With Original Final Actual Final Budget Actual Expenditures (continued) Current expenditures (continued) Culture and recreation (continued) Libraries Supplies 5,000 5,000 10,449 5,449 3,615 Other services and charges 61,955 61,955 51,598 (10,357) 45,166 Total libraries 66,955 66,955 62,047 (4,908) 48,781 Total culture and recreation 1,964,771 1,981,103 1,889,264 (91,839) 1,850,587 Total current expenditures 13,134,350 13,215,519 12,914,965 (300,554) 12,235,449 Capital outlay Community development 5,400 5,400 – (5,400) – Technology 74,800 93,690 74,206 (19,484) 56,283 Police – – 3,588 3,588 – Fire – – 7,595 7,595 – Streets – – 7,485 7,485 – Buildings and plant 5,000 5,000 7,722 2,722 3,738 Total capital outlay 85,200 104,090 100,596 (3,494) 60,021 Total expenditures 13,219,550 13,319,609 13,015,561 (304,048) 12,295,470 Excess (deficiency) of revenues over expenditures (338,331) (438,390) 558,365 996,755 897,494 Other financing sources (uses) Transfers in 456,300 456,300 456,300 – 443,000 Transfers out (334,769) (334,769) (334,769) – (819,651) Sale of assets – – 9,877 9,877 3,323 Total other financing sources (uses)121,531 121,531 131,408 9,877 (373,328) Net change in fund balances (216,800)$ (316,859)$ 689,773 1,006,632$ 524,166 Fund balances Beginning of year 7,213,402 6,689,236 End of year 7,903,175$ 7,213,402$ General Fund CITY OF PRIOR LAKE Budgeted Amounts Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual (continued) Year Ended December 31, 2019 2019 (With Comparative Actual Amounts for the Year Ended December 31, 2018) -108- Water Tax City Hall Fire Treatment Increment 2005 Station #2 Plant 2004 Assets Cash and investments 16,788$ 147$ 1,312$ 28,927$ Receivables Accounts 192 – – 135 Special assessments Delinquent – – – – Deferred – – – – Other (Green Acres)– – – – Due from other governmental agencies 3,436 – – – Total assets 20,416$ 147$ 1,312$ 29,062$ Liabilities Accounts and contracts payable 178$ 89$ –$ 63$ Deferred inflows of resources Unavailable revenue from special assessments – – – – Fund balances Restricted for debt service 20,238 58 1,312 28,999 Total liabilities, deferred inflows of resources, and fund balances 20,416$ 147$ 1,312$ 29,062$ CITY OF PRIOR LAKE Debt Service Fund Balance Sheet by Account as of December 31, 2019 -109- Brooksville CR 12 and Fish Hills II/Maple 2010 Boudin Boudin Welcome, Point Glen 2nd Reconstruction Phase I Phase II CR 12, Sunset –$ –$ 36,373$ 116,315$ 179,009$ 458,690$ – – 2,352 1,498 1,065 3,978 – – – – – 12,274 30,112 – 29,018 60,169 63,203 355,200 451,350 – – – – – – – 640 1,173 1,452 982 481,462$ –$ 68,383$ 179,155$ 244,729$ 831,124$ –$ –$ 1$ 63$ 90$ 173$ 481,462 – 29,018 60,169 63,203 367,474 – – 39,364 118,923 181,436 463,477 481,462$ –$ 68,383$ 179,155$ 244,729$ 831,124$ -110 (continued) CSAH 44,Street TH 13, 150th Crest,Reconstruction Street 2015 Maplewood GESP Lease 2015 Reconstruction Assets Cash and investments 273,268$ 2,491$ 375,302$ 411,776$ Receivables Accounts 263 42 792 (59) Special assessments Delinquent – – 14,417 – Deferred 25,385 – 629,535 – Other (Green Acres)– – – – Due from other governmental agencies 2,328 – 1,749 2,021 Total assets 301,244$ 2,533$ 1,021,795$ 413,738$ Liabilities Accounts and contracts payable 175$ –$ 13,749$ 175$ Deferred inflows of resources Unavailable revenue from special assessments 25,385 – 643,952 – Fund balances Restricted for debt service 275,684 2,533 364,094 413,563 Total liabilities, deferred inflows of resources, and fund balances 301,244$ 2,533$ 1,021,795$ 413,738$ Balance Sheet by Account (continued) Debt Service Fund CITY OF PRIOR LAKE as of December 31, 2019 -111- Cates, Balsam, Franklin Trail, Sycamore Trail, Maintenance 2017 2018 TH 13, 150th Center Roof Mill and Franklin, Manitou Road Street 2016 Equipment Improvements Overlay Huron, Improvement Reconstruction 2016 2017 Improvements Woodside 151,294$ 7,071$ 10,728$ 515,904$ 4,307$ 270,119$ (114) 2 2 170 – (93) 3,645 – – 2,699 – 607 146,733 – – 720,435 – 520,579 – – – – – – 413 232 369 10,369 13 3,529 301,971$ 7,305$ 11,099$ 1,249,577$ 4,320$ 794,741$ 61$ 60$ 58$ 138$ 40$ 138$ 150,377 – – 723,135 – 521,186 151,533 7,245 11,041 526,304 4,280 273,417 301,971$ 7,305$ 11,099$ 1,249,577$ 4,320$ 794,741$ -112 (continued) THIS PAGE INTENTIONALLY LEFT BLANK 2019 2018 Street Street Overlay Improvements Total Assets Cash and investments 5,877$ 114,280$ 2,979,978$ Receivables Accounts – (11) 10,214 Special assessments Delinquent – – 33,642 Deferred – 11,730 2,592,099 Other (Green Acres)– – 451,350 Due from other governmental agencies 31 – 28,737 Total assets 5,908$ 125,999$ 6,096,020$ Liabilities Accounts and contracts payable 37$ 174$ 15,462$ Deferred inflows of resources Unavailable revenue from special assessments – 11,730 3,077,091 Fund balances Restricted for debt service 5,871 114,095 3,003,467 Total liabilities, deferred inflows of resources, and fund balances 5,908$ 125,999$ 6,096,020$ CITY OF PRIOR LAKE Debt Service Fund Balance Sheet by Account (continued) as of December 31, 2019 -113- Water Tax City Hall Fire Treatment Increment 2005 Station #2 Plant 2004 Revenues Taxes 642,951$ –$ –$ –$ Special assessments – – – – Investment income 5,042 – – 1,071 Total revenues 647,993 – – 1,071 Expenditures Debt service Principal 485,000 150,000 385,000 25,000 Interest and other 158,528 84,769 161,025 4,407 Total expenditures 643,528 234,769 546,025 29,407 Excess (deficiency) of revenues over expenditures 4,465 (234,769) (546,025) (28,336) Other financing sources (uses) Transfers in – 234,769 545,275 29,432 Transfers out – – – – Total other financing sources (uses)– 234,769 545,275 29,432 Net change in fund balances 4,465 – (750) 1,096 Fund balances Beginning of year 15,773 58 2,062 27,903 End of year 20,238$ 58$ 1,312$ 28,999$ Year Ended December 31, 2019 and Changes in Fund Balances by Account CITY OF PRIOR LAKE Debt Service Fund Schedule of Revenues, Expenditures, -114- Brooksville CR 12 and Fish Hills II/Maple 2010 Boudin Boudin Welcome, Point Glen 2nd Reconstruction Phase I Phase II CR 12, Sunset –$ 126,482$ 113,600$ 132,338$ 175,670$ 183,868$ – 18,351 12,536 41,712 46,799 61,016 – 3,276 2,799 8,547 10,150 22,634 – 148,109 128,935 182,597 232,619 267,518 – 175,000 130,000 220,000 230,000 325,000 – 6,125 8,685 16,039 20,988 37,950 – 181,125 138,685 236,039 250,988 362,950 – (33,016) (9,750) (53,442) (18,369) (95,432) – – – – – – – (13,164)– – – – – (13,164) – – – – – (46,180) (9,750) (53,442) (18,369) (95,432) – 46,180 49,114 172,365 199,805 558,909 –$ –$ 39,364$ 118,923$ 181,436$ 463,477$ -115-(continued) CSAH 44,Street TH 13, 150th Crest,Reconstruction Street 2015 Maplewood GESP Lease 2015 Reconstruction Revenues Taxes 199,191$ 236,470$ –$ 275,216$ Special assessments 6,298 – 48,271 124,727 Investment income 13,947 2,053 20,677 13,437 Total revenues 219,436 238,523 68,948 413,380 Expenditures Debt service Principal 220,000 263,512 – 355,000 Interest and other 30,375 37,102 130,068 27,080 Total expenditures 250,375 300,614 130,068 382,080 Excess (deficiency) of revenues over expenditures (30,939) (62,091) (61,120) 31,300 Other financing sources (uses) Transfers in – – 31,759 135,000 Transfers out – – (135,000)– Total other financing sources (uses)– – (103,241) 135,000 Net change in fund balances (30,939) (62,091) (164,361) 166,300 Fund balances Beginning of year 306,623 64,624 528,455 247,263 End of year 275,684$ 2,533$ 364,094$ 413,563$ and Changes in Fund Balances by Account (continued) Year Ended December 31, 2019 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, Manitou Road Street 2016 Equipment Improvements Overlay Huron, Improvement Reconstruction 2016 2017 Improvements Woodside 77,295$ 43,332$ 69,097$ 318,548$ 2,342$ 660,518$ 26,077 – – 187,637 – 92,438 7,489 495 833 19,270 90 14,776 110,861 43,827 69,930 525,455 2,432 767,732 110,000 35,000 60,000 405,000 70,000 465,000 17,659 5,758 6,058 78,001 5,838 303,338 127,659 40,758 66,058 483,001 75,838 768,338 (16,798) 3,069 3,872 42,454 (73,406) (606) – – – 101,988 75,800 – – – – – – – – – – 101,988 75,800 – (16,798) 3,069 3,872 144,442 2,394 (606) 168,331 4,176 7,169 381,862 1,886 274,023 151,533$ 7,245$ 11,041$ 526,304$ 4,280$ 273,417$ -117-(continued) THIS PAGE INTENTIONALLY LEFT BLANK 2019 2018 Street Street Overlay Improvements Total Revenues Taxes 5,856$ –$ 3,262,774$ Special assessments – 34,048 699,910 Investment income 53 287 146,926 Total revenues 5,909 34,335 4,109,610 Expenditures Debt service Principal 85,000 – 4,193,512 Interest and other 26,171 175 1,166,139 Total expenditures 111,171 175 5,359,651 Excess (deficiency) of revenues over expenditures (105,262) 34,160 (1,250,041) Other financing sources (uses) Transfers in 111,133 79,935 1,345,091 Transfers out (148,164) Total other financing sources (uses)111,133 79,935 1,196,927 Net change in fund balances 5,871 114,095 (53,114) Fund balances Beginning of year – – 3,056,581 End of year 5,871$ 114,095$ 3,003,467$ CITY OF PRIOR LAKE Debt Service Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances by Account (continued) Year Ended December 31, 2019 -118- Severance Compensation Insurance Total Assets Cash and investments 357,210$ 105,156$ 462,366$ Receivables Accounts 2,875 227 3,102 Total assets 360,085$ 105,383$ 465,468$ Current liabilities Current portion of compensated absences payable 362,283$ –$ 362,283$ Noncurrent liabilities Compensated absences payable 478,748 – 478,748 Total liabilities 841,031 – 841,031 Net position (deficit) Unrestricted (480,946) 105,383 (375,563) Total liabilities and net position 360,085$ 105,383$ 465,468$ CITY OF PRIOR LAKE Internal Service Funds Combining Statement of Net Position as of December 31, 2019 -119- Severance Compensation Insurance Total Operating revenues Charges for services 31,310$ –$ 31,310$ Operating expenses Personal services 58,897 187,055 245,952 Operating income (loss)(27,587) (187,055) (214,642) Nonoperating revenues Investment income 11,777 9,656 21,433 Income (loss) before transfers (15,810) (177,399) (193,209) Transfers in 100,000 – 100,000 Change in net position 84,190 (177,399) (93,209) Net position Beginning of year (565,136) 282,782 (282,354) End of year (480,946)$ 105,383$ (375,563)$ CITY OF PRIOR LAKE Internal Service Funds Combining Statement of Revenues, Expenses, and Changes in Net Position Year Ended December 31, 2019 -120- Severance Compensation Insurance Total Cash flows from operating activities Cash received from customers 31,456$ –$ 31,456$ Cash payments to employees (56,390) (187,055) (243,445) Miscellaneous revenue – 119 119 Net cash flows from operating activities (24,934) (186,936) (211,870) Cash flows from non-capital financing activities Transfers in 100,000 – 100,000 Cash flows from investing activities Interest received on cash and investments 11,777 9,656 21,433 Net increase (decrease) in cash and cash equivalents 86,843 (177,280) (90,437) Cash and cash equivalents, January 1 270,367 282,436 552,803 Cash and cash equivalents, December 31 357,210$ 105,156$ 462,366$ Reconciliation of operating income (loss) to net cash flows from operating activities Operating income (loss)(27,587)$ (187,055)$ (214,642)$ Adjustments to reconcile operating income (loss) to net cash flows from operating activities (Increase) decrease in assets Accounts receivable 146 119 265 Increase (decrease) in liabilities Compensated absences payable 2,507 – 2,507 Net cash flows from operating activities (24,934)$ (186,936)$ (211,870)$ CITY OF PRIOR LAKE Internal Service Funds Combining Statement of Cash Flows Year Ended December 31, 2019 -121- OTHER INFORMATION SECTION THIS PAGE INTENTIONALLY LEFT BLANK Percent Increase 2019 2018 (Decrease) Revenues Taxes 13,536,829$ 12,806,046$ 5.7% Franchise taxes 639,783 630,932 1.4% Special assessments 1,079,348 1,340,085 (19.5%) Licenses and permits 992,096 994,613 (0.3%) Intergovernmental 4,143,994 1,864,964 122.2% Charges for services 3,364,364 4,401,009 (23.6%) Fines and forfeits 996 1,448 (31.2%) Interest on investments 1,073,558 312,320 243.7% Miscellaneous 343,951 412,650 (16.6%) Total revenues 25,174,919$ 22,764,067$ 10.6% Per capita 938$ 869$ 7.9% Expenditures Current General government 3,000,299$ 2,759,974$ 8.7% Public safety 6,186,859 5,813,331 6.4% Public works 1,954,183 1,882,971 3.8% Culture and recreation 1,938,999 1,907,552 1.6% Economic development 175,749 149,852 17.3% Capital outlay 10,089,051 9,057,805 11.4% Debt service Principal 4,193,512 3,953,016 6.1% Interest and other charges 1,222,378 1,020,244 19.8% Total disbursements 28,761,030$ 26,544,745$ 8.3% Per capita 1,071$ 1,013$ 5.8% Total long-term bonded indebtedness 37,030,000$ 38,895,000$ (4.8%) Per capita 1,379$ 1,484$ (7.1%) General Fund balance – December 31 7,903,175$ 7,213,402$ 9.6% Per capita 294$ 275$ 6.9% The purpose of this report is to provide a summary of financial information concerning the City to interested citizens.The complete financial statements may be examined at City Hall,4646 Dakota Street Southeast,Prior Lake,Minnesota 55372. Questions about this report should be directed to the Finance Director at (952) 447-9841. Governmental Funds Years Ended December 31, 2019 and 2018 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 2009A 1.10–3.50 %05/15/2009 12/15/2019 G.O. Improvement Bonds of 2010A 0.80–3.20 05/26/2010 12/15/2020 G.O. Improvement Bonds of 2011A 1.80–2.50 08/31/2011 12/15/2021 G.O. Improvement Bonds of 2011B 2.00–2.35 12/14/2011 12/15/2022 G.O. Improvement Bonds of 2013A 2.00–2.65 08/15/2013 12/15/2023 G.O. Improvement Bonds of 2014A 2.00–2.50 09/25/2014 12/15/2024 G.O. Improvement 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, 2019 Interest -123- Outstanding Issued Outstanding Authorized January 1 (Retired)December 31 Principal Interest 1,700,000$ 175,000$ (175,000)$ –$ –$ –$ 1,235,000 260,000 (130,000) 130,000 130,000 4,160 2,130,000 665,000 (220,000) 445,000 220,000 10,795 2,280,000 960,000 (230,000) 730,000 240,000 16,061 3,240,000 1,615,000 (325,000) 1,290,000 325,000 30,780 2,170,000 1,390,000 (220,000) 1,170,000 225,000 25,800 4,640,000 4,640,000 – 4,640,000 – 115,825 160,000 100,000 (25,000) 75,000 25,000 1,563 1,105,000 880,000 (110,000) 770,000 110,000 15,400 4,135,000 3,755,000 (425,000) 3,330,000 435,000 68,663 4,465,000 4,465,000 (430,000) 4,035,000 490,000 178,700 1,850,000 – 1,850,000 1,850,000 150,000 135,665 29,110,000 18,905,000 (440,000) 18,465,000 2,350,000 603,412 290,000 160,000 (25,000) 135,000 25,000 3,763 3,500,000 2,970,000 (150,000) 2,820,000 160,000 81,418 9,825,000 6,925,000 (485,000) 6,440,000 515,000 148,158 2,330,000 1,230,000 (330,000) 900,000 185,000 19,168 760,000 585,000 (95,000) 490,000 95,000 9,800 370,000 325,000 (50,000) 275,000 55,000 5,500 1,165,000 1,165,000 (120,000) 1,045,000 130,000 46,300 215,000 – 215,000 215,000 15,000 15,766 18,165,000 13,200,000 (1,015,000) 12,185,000 1,155,000 326,110 5,360,000 5,285,000 (75,000) 5,210,000 75,000 132,625 1,640,000 1,345,000 (310,000) 1,035,000 325,000 20,700 2,640,000 2,640,000 (210,000) 2,430,000 240,000 108,900 9,640,000 9,270,000 (595,000) 8,675,000 640,000 262,225 57,205,000$ 41,535,000$ (2,075,000)$ 39,460,000$ 4,170,000$ 1,195,510$ Due in 2020 -124- Final Issue Maturity Date Date Principal General obligation special assessment bonds $1,235,000 General Obligation Improvement Bonds, Series 2010A 05/26/2010 3.50 %12/15/2020 130,000$ $2,130,000 General Obligation Improvement Bonds, Series 2011A 08/31/2011 2.35 %12/15/2020 220,000 2.50 12/15/2021 225,000 Total 445,000 $2,280,000 General Obligation Improvement Bonds, Series 2011B 12/14/2011 2.35 %12/15/2020 240,000 2.50 12/15/2021 245,000 3.00 12/15/2022 245,000 Total 730,000 $3,240,000 General Obligation Improvement Bonds, Series 2013A 08/15/2013 2.10 %12/15/2020 325,000 2.30 12/15/2021 325,000 2.50 12/15/2022 320,000 2.65 12/15/2023 320,000 Total 1,290,000 $2,170,000 General Obligation Improvement Bonds, Series 2014A 09/25/2014 2.00 %12/15/2020 225,000 2.00 12/15/2021 230,000 2.00 12/15/2022 235,000 2.50 12/15/2023 235,000 2.50 12/15/2024 245,000 Total 1,170,000 CITY OF PRIOR LAKE Bond Schedules December 31, 2019 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 1.90 %12/15/2020 25,000 2.10 12/15/2021 25,000 2.25 12/15/2022 25,000 Total 75,000 $1,105,000 General Obligation Improvement Bonds, Series 2016A 05/01/2016 2.00 %12/15/2020 110,000 2.00 12/15/2021 110,000 2.00 12/15/2022 110,000 2.00 12/15/2023 110,000 2.00 12/15/2024 110,000 2.00 12/15/2025 110,000 2.00 12/15/2026 110,000 Total 770,000 $4,135,000 General Obligation Improvement Bonds, Series 2017A 06/29/2017 2.00 %12/15/2020 435,000 2.00 12/15/2021 445,000 2.00 12/15/2022 450,000 2.00 12/15/2023 385,000 2.00 12/15/2024 390,000 2.00 12/15/2025 400,000 2.25 12/15/2026 410,000 2.25 12/15/2027 415,000 Total 3,330,000 CITY OF PRIOR LAKE Bond Schedules (continued) December 31, 2019 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 %12/15/2020 490,000 4.00 12/15/2021 455,000 4.00 12/15/2022 475,000 4.00 12/15/2023 490,000 4.00 12/15/2024 395,000 5.00 12/15/2025 410,000 5.00 12/15/2026 420,000 5.00 12/15/2027 440,000 5.00 12/15/2028 460,000 Total 4,035,000 $1,850,000 General Obligation Improvement Bonds, Series 2019A 06/27/2019 5.00 %12/15/2020 150,000 5.00 12/15/2021 205,000 5.00 12/15/2022 210,000 5.00 12/15/2023 220,000 5.00 12/15/2024 235,000 5.00 12/15/2025 150,000 5.00 12/15/2026 160,000 5.00 12/15/2027 165,000 5.00 12/15/2028 175,000 5.00 12/15/2029 180,000 Total 1,850,000 Total general obligation special assessment bonds 18,465,000$ General obligation tax increment bonds $290,000 Tax Increment Refunding Bonds, Series 2011A 08/31/2011 2.35 %12/15/2020 25,000 2.50 12/15/2021 25,000 3.00 12/15/2022 25,000 3.00 12/15/2023 30,000 3.00 12/15/2024 30,000 Total general obligation tax increment bonds 135,000$ Bond Schedules (continued) December 31, 2019 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 2.05 %12/15/2020 160,000 2.20 12/15/2021 175,000 2.35 12/15/2022 180,000 2.50 12/15/2023 195,000 2.65 12/15/2024 215,000 2.75 12/15/2025 230,000 2.85 12/15/2026 240,000 3.00 12/15/2027 255,000 3.20 12/15/2028 270,000 3.20 12/15/2029 285,000 3.40 12/15/2030 300,000 3.40 12/15/2031 315,000 Total 2,820,000 $9,825,000 General Obligation Capital Improvement Refunding Bonds of 2012A 03/13/2012 2.00 %12/15/2020 515,000 2.00 12/15/2021 545,000 2.00 12/15/2022 565,000 2.00 12/15/2023 590,000 2.15 12/15/2024 615,000 2.30 12/15/2025 645,000 2.40 12/15/2026 685,000 2.50 12/15/2027 720,000 2.60 12/15/2028 760,000 2.70 12/15/2029 800,000 Total 6,440,000 $2,330,000 General Obligation Street Reconstruction Bonds, Series 2015B 05/14/2015 1.90 %12/15/2020 185,000 2.10 12/15/2021 290,000 2.25 12/15/2022 425,000 Total 900,000 $760,000 General Obligation Street Reconstruction Bonds, Series 2016A 05/01/2016 2.00 %12/15/2020 95,000 2.00 12/15/2021 95,000 2.00 12/15/2022 95,000 2.00 12/15/2023 95,000 2.00 12/15/2024 35,000 2.00 12/15/2025 35,000 2.00 12/15/2026 40,000 Total 490,000 CITY OF PRIOR LAKE Bond Schedules (continued) December 31, 2019 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 %12/15/2020 55,000 2.00 12/15/2021 55,000 2.00 12/15/2022 55,000 2.00 12/15/2023 55,000 2.00 12/15/2024 55,000 Total 275,000 $1,165,000 General Obligation Improvement Bonds, Series 2018A 08/15/2018 4.00 %12/15/2020 130,000 4.00 12/15/2021 110,000 4.00 12/15/2022 110,000 4.00 12/15/2023 120,000 4.00 12/15/2024 125,000 5.00 12/15/2025 125,000 5.00 12/15/2026 130,000 5.00 12/15/2027 130,000 5.00 12/15/2028 65,000 Total 1,045,000 $215,000 General Obligation Improvement Bonds, Series 2019A 06/27/2019 5.00 %12/15/2020 15,000 5.00 12/15/2021 20,000 5.00 12/15/2022 20,000 5.00 12/15/2023 25,000 5.00 12/15/2024 25,000 5.00 12/15/2025 25,000 5.00 12/15/2026 25,000 5.00 12/15/2027 30,000 5.00 12/15/2028 30,000 Total 215,000 Total general obligation bonds 12,185,000$ CITY OF PRIOR LAKE Bond Schedules (continued) December 31, 2019 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 %12/15/2020 75,000 1.50 12/15/2021 75,000 1.50 12/15/2022 75,000 2.00 12/15/2023 480,000 2.00 12/15/2024 495,000 2.00 12/15/2025 515,000 2.50 12/15/2026 530,000 2.50 12/15/2027 550,000 3.00 12/15/2028 570,000 3.00 12/15/2029 590,000 3.00 12/15/2030 615,000 3.00 12/15/2031 640,000 Total 5,210,000 $1,640,000 General Obligation Improvement Refunding Bonds, Series 2016A 05/01/2016 2.00 %12/15/2020 325,000 2.00 12/15/2021 345,000 2.00 12/15/2022 365,000 Total 1,035,000 $2,640,000 General Obligation Improvement Bonds, Series 2018A 08/15/2018 4.00 %12/15/2020 240,000 4.00 12/15/2021 240,000 4.00 12/15/2022 250,000 4.00 12/15/2023 260,000 4.00 12/15/2024 270,000 5.00 12/15/2025 270,000 5.00 12/15/2026 280,000 5.00 12/15/2027 300,000 5.00 12/15/2028 320,000 Total 2,430,000 Total general obligation revenue bonds 8,675,000$ December 31, 2019 Interest Rate CITY OF PRIOR LAKE Bond Schedules (continued) -130- Year Principal Interest Principal Interest 2020 1,155,000$ 326,110$ 2,350,000$ 603,412$ 2021 1,290,000 295,048 2,265,000 488,202 2022 1,450,000 265,808 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 12,185,000$ 1,942,213$ 18,465,000$ 2,964,372$ CITY OF PRIOR LAKE Debt Service Requirements December 31, 2019 General Obligation General Obligation Bonds Special Assessment Bonds -131- Principal Interest Principal Interest 25,000$ 3,763$ 640,000$ 262,225$ 25,000 3,175 660,000 245,000 25,000 2,550 690,000 227,375 30,000 1,800 740,000 208,950 30,000 900 765,000 188,950 – – 785,000 168,250 – – 810,000 144,450 – – 850,000 117,200 – – 890,000 88,450 – – 590,000 55,350 – – 615,000 37,650 – – 640,000 19,200 135,000$ 12,188$ 8,675,000$ 1,763,050$ Revenue Bonds General ObligationGeneral Obligation Tax Increment Bonds -132- Collection Collections Total of Current of Prior Total Year Levy Year Levy Years’ Levy Collections 2010 10,079,186$ 10,079,186$ 100.00 %*235,004$ 9,999,856$ 99.21 % 2011 10,114,124 10,114,124 100.00 *148,029 10,262,153 101.46 2012 9,414,124 9,414,124 100.00 132,726 9,546,850 101.41 2013 9,414,124 9,414,124 100.00 79,901 9,494,025 100.85 2014 9,448,918 9,448,918 100.00 86,180 9,535,098 100.91 2015 10,394,086 10,394,086 100.00 48,336 10,442,422 100.47 2016 11,078,361 11,034,353 99.60 68,478 11,102,831 100.22 2017 11,568,155 11,520,353 99.59 12,692 11,533,045 99.70 2018 12,077,538 11,994,082 99.31 61,762 12,055,844 99.82 2019 12,778,035 12,697,865 99.37 65,150 12,763,015 99.88 *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 2010 441,066$ 435,017$ 98.63 %3,522$ 438,539$ 99.43 % 2011 347,795 345,533 99.35 6,113 351,646 101.11 2012 385,017 384,144 99.77 4,477 388,621 100.94 2013 393,347 391,132 99.44 5,606 396,738 100.86 2014 526,584 460,800 87.51 4,946 465,746 88.45 2015 354,412 365,481 103.12 11,655 377,136 106.41 2016 453,962 475,376 104.72 2,611 477,987 105.29 2017 504,420 474,936 94.15 7,331 482,267 95.61 2018 657,443 635,553 96.67 34,485 670,038 101.92 2019 728,099 699,440 96.06 13,554 712,994 97.93 **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- 2017 2018 2019 Taxable market value 3,030,449,778$ 3,261,128,200$ 3,447,986,900$ Tax levy 11,568,155$ 12,077,538$ 12,778,035$ Tax capacity, net of fiscal disparities, and tax increment 29,819,702$ 33,172,374$ 35,200,266$ Tax capacity rate 32.685% 33.040% 33.020% Market value rate 0.034% 0.007% 0.007% EDA tax capacity rate 0.434% 0.390% 0.395% CITY OF PRIOR LAKE Schedules of Market Value, Tax Levy, Tax Capacity Values, Tax Capacity Rate, and Market Value Rate Prior Three Years -134- 2017 2018 2019 Current population 26,053 26,207 26,849 Tax capacity, net of fiscal disparities, and tax increment 29,819,702$ 33,172,374$ 35,200,266$ Percent of current property taxes collected 99.59% 99.31% 99.37% City revenues per capita (governmental funds)872$ 869$ 938$ City expenditures per capita (governmental funds)1,101$ 1,013$ 1,071$ Ratio of bonded debt to tax capacity 114.30% 108.36% 103.88% Bond rating AA+ (S&P)AA+ (S&P)AA+ (S&P) Prior Three Years Key Financial Indicators CITY OF PRIOR LAKE -135- OTHER REQUIRED REPORTS THIS PAGE INTENTIONALLY LEFT BLANK -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 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, 2019, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements, and have issued our report thereon dated May 18, 2020. INTERNAL CONTROL OVER FINANCIAL REPORTING In planning and performing our audit of the financial statements, we considered the City’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the City’s financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. (continued) 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 Standard Letterhead-r2.qxp_167639 Letterhead-RV1 9/7/18 6:34 PM Page 1 -137- COMPLIANCE AND OTHER MATTERS As part of obtaining reasonable assurance about whether the City’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. PURPOSE OF THIS REPORT The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control and compliance. Accordingly, this report is not suitable for any other purpose. Minneapolis, Minnesota May 18, 2020 -138- 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, 2019, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements, and have issued our report thereon dated May 18, 2020. 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 18, 2020 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 Standard Letterhead-r2.qxp_167639 Letterhead-RV1 9/7/18 6:34 PM Page 1 THIS PAGE INTENTIONALLY LEFT BLANK Management Report for City of Prior Lake, Minnesota December 31, 2019 THIS PAGE INTENTIONALLY LEFT BLANK To the City Council and Management City of Prior Lake, Minnesota We have prepared this management report in conjunction with our audit of the City of Prior Lake, Minnesota’s (the City) financial statements for the year ended December 31, 2019. 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, mana gement, and those who have responsibility for oversight of the financial reporting process comments resulting from our audit process and information relevant to city finances in Minnesota. Accordingly, this report is not suitable for any other purpose. Minneapolis, Minnesota May 18, 2020 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 Standard Letterhead-r2.qxp_167639 Letterhead-RV1 9/7/18 6:34 PM Page 1 THIS PAGE INTENTIONALLY LEFT BLANK -1- AUDIT SUMMARY The following is a summary of our audit work, key conclusions, and other information that we consider important or that is required to be communicated to the City Council, administration, or those charged with governance of the City. OUR RESPONSIBILITY UNDER AUDITING STANDARDS GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA AND GOVERNMENT AUDITING STANDARDS We have audited the financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City as of and for the year ended December 31, 2019. Professional standards require that we provide you with information about our responsibilities under auditing standards generally accepted in the United States of America and Government Auditing Standards, as well as certain information related to the planned scope and timing of our audit. We have communicated such information to you verbally and in our audit engagement letter. Professional standards also require that we communicate the following information related to our audit. PLANNED SCOPE AND TIMING OF THE AUDIT We performed the audit according to the planned scope and timing previously discussed and coordinated in order to obtain sufficient audit evidence and complete an effective audit. AUDIT OPINION AND FINDINGS Based on our audit of the City’s financial statements for the year ended December 31, 2019: • 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 no findings based on our testing of the City’s compliance with Minnesota laws and regulations. FOLLOW-UP ON PRIOR YEAR FINDINGS AND RECOMMENDATIONS As a part of our audit of the City’s financial statements for the year ended December 31, 2019, we performed procedures to follow-up on the findings and recommendations that resulted from our prior year audit. We reported the following findings that were corrected by the City in the current year: • Minnesota Statutes § 423A.022, Subd. 2 states that annually, the commissioner of revenue shall allocate police and firefighter retirement supplemental state aid. Of the total amount appropriated as supplemental state aid, a percentage is paid to the executive director of the Public Employees Retirement Association (PERA) for deposit in the Public Employees Police and Fire Retirement Fund. A percentage is then paid to municipalities that qualify to receive fire sta te aid in that calendar year. For municipalities that are allocated amounts for fire departments participating in the voluntary state-wide lump sum volunteer firefighter retirement plans, this balance is required to be paid to the treasurer of each municipality for transmittal within 30 days of receipt to the treasurer of the applicable volunteer firefighter relief association for deposit in its Special Fund. For the 2019 allocation of this aid to the City, the City paid the fire relief association within t he 30-day period set by Minnesota Statutes. -2- OTHER OBSERVATIONS AND RECOMMENDATIONS Impact of Novel Coronavirus (COVID-19) Shortly after the end of the 2019 fiscal year, the onset of the novel coronavirus (COVID-19) pandemic caused substantial volatility in economic conditions and tremendous disruption in the way governments, businesses, and individuals function. Minnesota cities may experience the impact of this pandemic in a myriad of financial areas, such as: declines in investment rates of return, cash flow issues, increased utility billing and property tax delinquencies, significant increases in the number and frequency of employees working remotely, challenges in processing general and payroll disbursements, disruption of prescribed internal control procedures, delays in internal and external financial reporting, and new compliance requirements attached to potential federal relief subsidies. As your city adapts to the new normal of municipal operations in a post-COVID-19 world, the assessment of and responses to new risks that may accompany operational changes will be critical to the safeguarding of city resources and sound financial stewardship. We encourage management and governance to include a robust financial risk assessment process when planning responses to these challenges, and to reassess and adapt internal controls over financial transactions and reporting to align with significant changes made to daily operations, even those intended to be temporary. 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, 2019; however, the City implemented the following governmental accounting standards during the fiscal year: • Governmental Accounting Standards Board (GASB) Statement No. 83, Certain Asset Retirement Obligations, which addressed accounting and financial reporting for certain asset retirement obligations, which are legally enforceable liabilities associated with the retirement of a tangible capital asset. • GASB Statement No. 84, Fiduciary Activities, which established new criteria for identifying and reporting fiduciary activities. • GASB Statement No. 88, Certain Disclosures Related to Debt, Including Direct Borrowings and Direct Placements, which improved and clarified the information to be disclosed in notes to government financial statements related to debt, including direct borrowings and direct placements. • GASB Statement No. 90, Majority Equity Interest—an Amendment of GASB Statements No. 14 and No. 61, which improved the consistency and comparability of reporting a government’s majority equity interest in a legally separate organization and the relevance of financial statement information for certain component units. 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. -3- ACCOUNTING ESTIMATES AND MANAGEMENT JUDGMENTS Accounting estimates are an integral part of the financial statements prepared by management and are based on management’s knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the financial statements were: • Depreciation – Management’s estimates of depreciation expense are based on the estimated useful lives of the assets. • Compensated Absences – Estimates for compensated absences payable are based on current sick and vacation leave balances. • Total Other Post-Employment Benefits (OPEB) and Net Pension Liabilities – The City has recorded liabilities and activity for pension benefits and OPEB. These obligations are calculated using actuarial methodologies described in GASB Statement Nos. 68 and 75. These actuarial calculations include significant assumptions, including projected changes, healthcare insurance costs, investment returns, retirement ages, proportionate share, and employee turnover. We evaluated the key factors and assumptions used by management to develop these estimates in determining that they are reasonable in relation to the basic financial statements taken as a whole. 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. 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 18, 2020. -4- MANAGEMENT CONSULTATIONS WITH OTHER INDEPENDENT ACCOUNTANTS In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a “second opinion” on certain situations. If a consultation involves application of an accounting principle to the City’s financial statements or a determination of the type of auditor’s opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. OTHER AUDIT FINDINGS OR ISSUES We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the City’s auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. OTHER MATTERS We applied certain limited procedures to the management’s discussion and analysis (MD&A) and the pension and OPEB-related required supplementary information (RSI) that supplements the basic financial statements. Our procedures consisted of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We did not audit the RSI and do not express an opinion or provide any assurance on the RSI. We were engaged to report on the supplemental information accompanying the financial statements, which is not RSI. With respect to this supplemental information, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplemental information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves. We were not engaged to report on the introductory and other information sections, which accompany the financial statements, but are not RSI. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on it. -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 t o all of its citizens, which are financed primarily with property taxes. The governmental fund information in the City’s financial statements focuses on budgetary compliance and the sufficiency of each governmental fund’s current assets to finance its current liabilities. PROPERTY TAXES Minnesota cities rely heavily on local property tax levies to support their governmental fund activities. For the 2018 fiscal year, local ad valorem property tax levies provided 41.5 percent of the total governmental fund revenues for cities over 2,500 in population, and 36.7 percent for cities under 2,500 in population. Total property taxes levied by all Minnesota cities for taxes payable in 2019 increased 5.6 percent from the prior year. The total tax capacity value of property in Minnesota cities increased about 7.1 percent for the 2019 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 2019 were based on assessed market values as of January 1, 2018), 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 7.6 percent for taxes payable in 2018 and 5.7 percent for taxes payable in 2019. 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 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 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 11.2 percent and 6.1 percent for taxes payable in 2018 and 2019, 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 $40,000,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Local Net Tax Capacity The following table presents the average tax rates applied to city residents for each of the last three levy years: 2017 2018 2019 Average tax rate City 32.7 33.0 33.0 County 35.9 35.1 33.8 School 30.6 33.0 31.7 Special taxing 7.8 8.7 7.8 Total 107.0 109.8 106.3 City of Prior Lake Rates Expressed as a Percentage of Net Tax Capacity The City’s portion of the tax rate has been consistent over the past three years. -7- GOVERNMENTAL FUND BALANCES The following table summarizes the changes in the fund balances of the City’s governmental funds during the year ended December 31, 2019, presented both by fund balance classification and by major fund: 2019 2018 Change Fund balances of governmental funds Total by classification Restricted 4,088,161$ 4,154,268$ (66,107)$ Assigned 11,295,634 13,908,417 (2,612,783) Unassigned 7,578,463 6,931,767 646,696 Total governmental funds 22,962,258$ 24,994,452$ (2,032,194)$ Total by fund General 7,903,175$ 7,213,402$ 689,773$ Debt Service 3,003,467 3,056,581 (53,114) Construction 261,269 3,070,306 (2,809,037) Special revenue nonmajor funds 3,394,539 3,455,253 (60,714) Capital projects nonmajor funds 8,399,808 8,198,910 200,898 Total governmental funds 22,962,258$ 24,994,452$ (2,032,194)$ Governmental Funds Change in Fund Balance Fund Balance as of December 31, In total, the fund balances of the City’s governmental funds decreased by $2,032,194 during the year ended December 31, 2019. The decrease in the assigned balance mostly relates to the decrease in assigned balances for capital improvements as expenditures for construction projects exceeded intergovernmental aid and other revenue sources by $2,809,037 in 2019. -8- GOVERNMENTAL FUNDS REVENUE AND EXPENDITURES The following table presents the per capita revenue of the City’s governmental funds for the past three years, along with state-wide averages. We have included the most recent comparative state-wide averages available from the Office of the State Auditor to provide a benchmark for interpreting the City’s data. The amounts received from the typical major sources of governmental fund revenue will naturally vary between cities based on factors , such as a city’s stage of development, location, size and density of its population, property values, services it provides, and other attributes. It will also differ from year -to-year, due to the effect of inflation and changes in its operation. Also, certain data in these tables may be classified differently than how they appear in the City’s financial statements in order to be more comparable to the state-wide information, particularly in separating capital expenditures from current expenditures. We have designed this section of our management report using per capita data in order to better id entify unique or unusual trends and activities of the City. We intend for this type of comparative and trend information to complement, rather than duplicate, information in the MD&A. An inherent difficulty in presenting per capita information is the accuracy of the population count, which for most years is based on estimates. Year 2017 2018 2019 Population 2,500–10,000 10,000–20,000 20,000–100,000 26,053 26,207 26,849 Property taxes 495$ 472$ 493$ 442$ 460$ 475$ Tax increments 28 27 43 20 29 29 Franchise and other taxes 41 48 50 24 24 24 Special assessments 53 40 57 57 51 40 Licenses and permits 38 35 47 31 38 37 Intergovernmental revenues 303 271 157 65 71 154 Charges for services 130 102 112 202 168 125 Other 97 78 49 31 28 54 Total revenue 1,185$ 1,073$ 1,008$ 872$ 869$ 938$ December 31, 2018 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 2019 were $25,174,919, an increase of $2,410,852 (10.6 percent) from the prior year. On a per capita basis, the City received $938 in governmental fund revenue for 2019, an increase of $69 from the prior year. Intergovernmental revenues increased $83 per capita, due to additional state road aid received in 2019. In general, the City has generated less governmental fund revenue per capita than the state-wide averages. -9- The expenditures of governmental funds will also vary from state -wide averages and from year-to-year, based on the City’s circumstances. Expenditures are classified into three types as follows: • Current – These are typically the general operating type expenditures occurring on an annual basis, and are primarily funded by general sources, such as taxes and intergovernmental revenues. • Capital Outlay and Construction – These expenditures do not occur on a consistent basis, more typically fluctuating significantly from year-to-year. Many of these expenditures are project-oriented, and are often funded by specific sources that have benefited from the expenditure, such as special assessment improvement projects. • Debt Service – Although the expenditures for debt service may be relatively consistent over the term of the respective debt, the funding source is the important factor. Some debt may be repaid through specific sources, such as special assessments or redevelopment funding, while other debt may be repaid with general property taxes. The City’s expenditures per capita of its governmental funds for the past three years, together with comparative state-wide averages, are presented in the following table: Year 2017 2018 2019 Population 2,500–10,000 10,000–20,000 20,000–100,000 26,053 26,207 26,849 Current 150$ 121$ 104$ 105$ 105$ 112 286 272 294 205 222 230 135 125 106 69 72 73 96 115 104 64 73 72 75 74 78 4 6 7 742 707 686 447 478 494 Capital outlay and construction 417 351 307 451 345 375 Debt service 178 153 109 153 151 156 41 39 29 50 39 46 219 192 138 203 190 202 Total expenditures 1,378$ 1,250$ 1,131$ 1,101$ 1,013$ 1,071$ 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, 2018 City of Prior LakeState-Wide Total expenditures in the City’s governmental funds for 2019 were $28,761,030, an increase of $2,216,285 (8.3 percent) from the prior year. On a per capita basis, the City expended a total of $1,071 in 2019. Capital outlay expenditures increased $30 per capita from the prior year, due to more construction related expenditures in 2019. -10- 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. 2015 2016 2017 2018 2019 Fund Balance $6,124,751 $6,684,920 $6,840,928 $7,213,402 $7,903,175 Cash and Inv (Net of Borrowing)$6,902,926 $7,211,301 $8,306,654 $8,938,262 $9,604,268 Expenditures and Transfers Out $12,343,815 $12,417,787 $13,208,933 $13,115,121 $13,350,330 $– $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 $14,000,000 General Fund Financial Position Year Ended December 31, The City’s General Fund cash and investments balance increased $666,006 during the current year. Total fund balance increased $689,773 from the prior year. As the graph illustrates, the City has generally been able to maintain healthy cash and fund balance levels as the volume of financial activity has grown. This is an important factor because a government, like any organization, requires a certain amount of equity to operate. A healthy financial position allows the City to avoid volatility in tax rates; helps minimize the impact of state funding changes; allows for the adequate and consistent funding of services, repairs, and unexpected costs; and is a factor in determining the City’s bond rating and resulting interest costs. Maintaining an adequate fund balance has become increasingly important given the fluctuations in state funding for cities in recent years. The City has formally adopted a fund balance policy regarding the minimum unrestricted fund balance for the General Fund. The policy establishes that the City will strive to maintain an unrestricted General Fund balance (which includes committed, assigned, and unassigned classifications) between 40.0 and 50.0 percent of the subsequent year’s General Fund budgeted expenditures. At December 31, 2019, the unrestricted fund balance of the General Fund was 53.9 percent of the subsequent year’s budgeted expenditures and transfers out. -11- The following graph reflects the City’s General Fund revenue sources for 2019 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 2019 was $13,573,926, which was $692,707 (5.4 percent) more than budget, mainly due to the City having more development than expected, leading to more building permits and charges for services. Investment income, included in “all other” in the graph above, also exceeded budgeted amounts by $173,034 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 2015 $8,692,425 $587,464 $1,573,865 $1,048,564 $1,390 $425,561 2016 $8,886,211 $751,824 $1,581,752 $1,132,504 $4,743 $248,153 2017 $8,779,030 $820,433 $1,657,988 $1,346,676 $2,250 $324,924 2018 $8,619,057 $994,613 $1,835,750 $1,357,049 $1,448 $385,047 2019 $9,007,634 $992,096 $1,925,225 $1,193,113 $996 $454,862 $– $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 2019 was $380,962 (2.9 percent) higher than last year. Tax revenue increased by $388,577, or 4.5 percent. Charges for services decreased $163,936, mainly in project fees as the number of building permits declined in 2019. -12- The following graph illustrates the components of General Fund spending for 2019 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 2019 were $13,015,561, which was $304,048 (2.3 percent) under budget. Public safety expenditures were $133,618 under budget, mainly in other services and charges, including training, employee development, and small equipment for police. Public works was also under budget by $112,112. This amount includes amounts favorable to budget 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 2015 $2,568,472 $4,821,150 $2,078,309 $1,600,071 $239,568 2016 $2,531,266 $5,034,978 $1,875,534 $1,593,975 $222,808 2017 $2,741,278 $5,239,456 $1,798,918 $1,677,597 $115,563 2018 $2,755,367 $5,746,524 $1,882,971 $1,850,587 $60,021 2019 $3,000,056 $6,071,462 $1,954,183 $1,889,264 $100,596 $– $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, 2019 Total General Fund expenditures for 2019 were $720,091 (5.9 percent) greater than the previous year. Public safety expenditures increased $324,938, due to wages and benefits for additional police officers, cost of living adjustments in the current year, increased overtime costs, and increased state fire relief pension pass-through contributions. Expenditures were also higher in general government by $244,689. This includes salary and benefit increases for the city manager’s office, city clerk‘s office, and information technology services. -13- ENTERPRISE FUNDS OVERVIEW The City maintains a number of enterprise funds to account for services the City provides that are financed primarily through fees charged to those utilizing the service. This section of the report provides you with an overview of the financial trends and activities of the City’s enterprise funds, which includes the Water, Sewer, and Water Quality Funds. ENTERPRISE FUNDS FINANCIAL POSITION The following table summarizes the changes in the financial position of the City’s enterprise funds during the year ended December 31, 2019, presented by both classification and by fund: 2019 2018 Change Net position of enterprise funds Total by classification Investment in capital assets 68,398,856$ 61,697,384$ 6,701,472$ Unrestricted 7,137,595 6,001,160 1,136,435 Total enterprise funds 75,536,451$ 67,698,544$ 7,837,907$ Total by fund Water 45,354,364$ 40,677,486$ 4,676,878$ Sewer 26,381,082 24,213,054 2,168,028 Water Quality 3,801,005 2,808,004 993,001 Total enterprise funds 75,536,451$ 67,698,544$ 7,837,907$ 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, 2019, this fund had assets totaling $360,085, while liabilities totaled $841,031, leaving a deficit net position balance of ($480,946). We recommend that the City continue to include the financing of these obligations as part of its long-range financial plans. The City also has established an Insurance Internal Service Fund to account for risk management activities, including workers’ compensation, volunteer accident, and property/casualty insurance. At December 31, 2019, this fund had assets totaling $105,383 and no liabilities, leading to a net position balance of $105,383. -14- WATER ENTERPRISE FUND The following graph presents five years of comparative operating results for the City’s Water Fund: 2015 2016 2017 2018 2019 Oper Revenue $3,390,052 $3,674,099 $3,796,097 $3,967,706 $3,792,321 Oper Expenses $2,347,154 $2,493,541 $2,621,448 $2,679,154 $2,983,966 Oper Income (Loss)$1,042,898 $1,180,558 $1,174,649 $1,288,552 $808,355 Inc Before Depr $1,700,029 $1,870,854 $1,912,281 $2,092,678 $1,696,804 $– $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 $3,500,000 $4,000,000 $4,500,000 Water Enterprise Fund Year Ended December 31, The Water Fund ended 2019 with net position of $45,354,364, an increase of $4,676,878 from the prior year. Of this, $41,328,961 represents the investment in capital assets, leaving $4,025,403 in unrestricted net position. The Water Fund had transfers out totaling $995,495 in 2019 to support other funds, pay debt service, and provide for construction projects. Operating revenue in the Water Fund decreased $175,385 (4.4 percent) from the prior year. This decrease was due to decreased usage in the current year. Water Fund operating expenses for 2019 increased $304,812 (11.4 percent) from the previous year. This increase includes increases in salaries and benefits and 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 $161,553 in 2019. After including these revenues and expenses, the Water Fund reflected income before contributions and transfers of $969,908. -15- SEWER ENTERPRISE FUND The following graph presents five years of comparative operating results for the City’s Sewer Fund: 2015 2016 2017 2018 2019 Oper Revenue $2,432,925 $2,741,578 $3,090,773 $3,270,026 $3,622,033 Oper Expenses $2,468,932 $2,635,304 $2,771,143 $2,892,003 $3,281,824 Oper Income (Loss)$(36,007)$106,274 $319,630 $378,023 $340,209 Inc Before Depr $371,068 $530,299 $789,288 $889,932 $904,035 $(250,000) $– $250,000 $500,000 $750,000 $1,000,000 $1,250,000 $1,500,000 $1,750,000 $2,000,000 $2,250,000 $2,500,000 $2,750,000 $3,000,000 $3,250,000 $3,500,000 $3,750,000 Sewer Enterprise Fund Year Ended December 31, The Sewer Fund ended 2019 with net position of $26,381,082, an increase of $2,168,028 from the prior year. Of this, $24,493,690 represents the City’s investment in capital assets, leaving $1,887,392 in unrestricted net position. The Sewer Fund had transfers out totaling $527,147 in 2019 to support other funds, pay debt service, and provide for construction projects. Operating revenue in the Sewer Fund increased $352,007 (10.8 percent) from the prior year, mainly related to increased rates in 2019. Sewer Fund operating expenses for 2019 increased $389,821 (13.5 percent) from the previous year. These increases include increases in salaries and benefits, repairs and maintenance, and disposal charges. State and federal grants, interest revenue and expenses, and miscellaneous revenues, which are not included in the graph above, totaled $31,454 in 2019. After including these revenues and expenses, the Sewer Fund reflected income before contributions and transfers of $371,663. -16- WATER QUALITY ENTERPRISE FUND The following graph presents five years of comparative operating results for the City’s Water Quality Fund: 2015 2016 2017 2018 2019 Oper Revenue $865,244 $920,128 $925,988 $986,338 $1,060,295 Oper Expenses $560,820 $598,972 $633,557 $600,030 $611,654 Oper Income (Loss)$304,424 $321,156 $292,431 $386,308 $448,641 Inc Before Depr $396,392 $427,648 $402,799 $508,197 $583,068 $– $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 2019 with net position of $3,801,005, an increase of $993,001 from the prior year. Of this, $2,576,205 represents the investment in capital assets, leaving $1,224,800 in unrestricted net position. Operating revenue in the Water Quality Fund increased $73,957 (7.4 percent) from the prior year, due to an increase in the rates in 2019. Water Quality Fund operating expenses for 2019 increased $11,624 (1.9 percent) from the previous year. -17- GOVERNMENT-WIDE FINANCIAL STATEMENTS In addition to fund-based information, the current reporting model for governmental entities also requires the inclusion of two government-wide financial statements designed to present a clear picture of the City as a single, unified entity. These government-wide financial statements provide information on the total cost of delivering services, including capital assets and long-term liabilities. STATEMENT OF NET POSITION The Statement of Net Position essentially tells you what the City owns and owes at a given point in time, the last day of the fiscal year. Theoretically, net position represents the resources the City has leftover to use for providing services after its debts are settled. However, those resources are not always in spendable form, or there may be restrictions on how some of those resources can be used. Therefore, net position is divided into three components: net investment in capital assets, restricted, and unrestricted. The following table presents the components of the City’s net position as of December 31, 2019 and 2018, for governmental activities and business-type activities: 2019 2018 Change Net position Governmental activities Net investment in capital assets 112,279,178$ 107,929,953$ 4,349,225$ Restricted 7,988,232 8,491,635 (503,403) Unrestricted 11,418,431 12,669,915 (1,251,484) Total governmental activities 131,685,841 129,091,503 2,594,338 Business-type activities Net investment in capital assets 68,398,856 61,697,384 6,701,472 Unrestricted 7,137,595 6,001,160 1,136,435 Total business-type activities 75,536,451 67,698,544 7,837,907 Total net position 207,222,292$ 196,790,047$ 10,432,245$ As of December 31, The City’s total net position at December 31, 2019 was $10,432,245 higher than the total net position reported at the previous year-end. The increase in the net investment in capital assets balance was mostly due to capital outlay and capital contribution activity during fiscal 2019. At the end of the current fiscal year, the City is able to present positive balances in all categories of net position, both for the government as a whole, as well as for its separate governmental and business-type activities. The same situation held true for the prior year. -18- STATEMENT OF ACTIVITIES The Statement of Activities tracks the City’s yearly revenues and expenses, as well as any other transactions that increase or reduce total net position. These amounts repr esent the full cost of providing services. The Statement of Activities provides a more comprehensive measure than just the amount of cash that changed hands, as reflected in the fund-based financial statements. This statement includes the cost of supplies used, depreciation of long-lived capital assets, and other accrual-based expenses. The following table presents the change in the net position of the City for the years ended December 31, 2019 and 2018: 2018 Program Expenses Revenues Net Change Net Change Governmental activities General government 3,582,241$ 654,958$ (2,927,283)$ (2,658,353)$ Public safety 6,490,001 3,141,279 (3,348,722) (2,626,653) Public works 5,700,624 8,386,646 2,686,022 3,525,751 Culture and recreation 2,462,914 583,037 (1,879,877) (1,573,870) Economic development 936,034 20,952 (915,082) (807,502) Interest on long-term debt 1,038,292 – (1,038,292) (1,010,342) Business-type activities Water 3,026,239 4,086,027 1,059,788 1,813,739 Sewer 3,321,093 3,930,239 609,146 827,090 Water quality 611,654 1,078,282 466,628 590,072 27,169,092$ 21,881,420$ (5,287,672) (1,920,068) General revenues Taxes 14,176,838 13,443,239 Unrestricted grants and contributions 12,867 12,845 Investment income 1,385,288 409,429 Miscellaneous 144,924 78,275 Total general revenues 15,719,917 13,943,788 10,432,245$ 12,023,720$ Total net (expense) revenue Change in net position Net (expense) revenue 2019 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. -19- LEGISLATIVE UPDATES The 2019 legislative session began with a projected state general fund surplus of $1.052 billion. The legislative agenda was primarily focused on setting an operating budget for the state’s fiscal 2020-2021 biennium. At the end of the regular session, only a higher education budget bill had been completed. However, after a special session, the Legislature was able to address the 11 remaining budget bills, as well as pass an omnibus tax bill and small pension bill. The following is a brief summary of specific legislative changes from the 2019 session or previous legislative sessions potentially impacting Minnesota cities. Local Government Aid (LGA) – An additional $26 million was added to the appropriation for the city LGA formula beginning in fiscal 2020, bringing the total state-wide appropriation to $560.4 million. An additional $4 million was added to the appropriation beginning in fiscal 2021. The LGA distribution formula for 2020 was altered to provide that a city’s 2020 LGA may not be less than its 2019 aid, and the cap on maximum aid losses in any year thereafter was modified. Bonding Bill – The 2019 bonding bill provided financing for approximately $102 million of projects and funding authorized by the 2018 omnibus bonding bill, which had been legally challenged due to their reliance on the use of the Environment and Natural Resources Trust Fund to generate appropriation bonds. The 2019 Legislature changed the funding source for these projects to general obligation bonds, clearing the way for the projects to go forward. Included in this was $59 million earmarked for city water and wastewater projects through the state Public Facilities Authority. Local Option Sales Tax Process – Effective May 1, 2019, the process for cities to enact a local option sales tax have been modified, requiring special legislation prior to a local referendum vote. Cities must now adopt a resolution specifying the proposed sales tax rate and time frame for the sales tax. The resolution must also include a detailed description of the project or projects (up to five) to be funded by the sales tax, the amount to be raised for each project, and documentation of the regional significance of each project. The resolution must be submitted to the House and Senate tax committee chairs by January 31st to be considered for special legislation by the State Legislature. If special legislation is approved, voter approval must be obtained by referendum at a general election within two years of legislative approval. Wage Theft – The Legislature enacted a number of changes in employment law aimed at reducing wage theft by employers. The changes require employers to provide written notice to new employees of specific wage information including rate of pay, allowances, paid leave, deductions, days in a pay period, and the employer’s legal name, address, and phone number. Employers must also provide an earnings statement that includes similar information. The changes also create new requirements for employer recordkeeping for hours worked each day and each workweek, and imposes penalties for failure to do so and for refusal to make the records available for inspection by the Department of Labor. Written Estimates of Consulting Fees – Effective August 1, 2019, upon request by applicants for a permit, license, or other approval relating to real estate development or construction, cities are required to provide a written, nonbinding estimate of consulting fees to be charged to the applicant based on information available at that time. The related application will not be considered complete until the city has provided the estimate, received the required application fees, and received the applicant’s signed acceptance of the fee estimate along with a signed statement that the applicant has not relied on the fee estimate in its decision to proceed with the application. Contract Retainage – Effective for contracts entered into August 1, 2019 or later, contract retainage must be released no later than 60 days after the related construction project reaches substantial completion as defined by statute. After substantial completion, cities can still withhold amounts equal to, 1) 250 percent of the cost to correct or complete work known at the time of substantial completion, and 2) the greater of $500 or 1 percent of the value of the contract pending the completion of “final paperwork,” including documents required to fulfill contractual obligations such as operating manuals, payroll documents for projects subject to prevailing wage requirements, and contractor payroll tax withholding affidavits. Any resulting reduction in retainage must be passed from the contractor to all subcontractors at the same rate. -20- Driver and Vehicle Registration System (VTRS) – The Legislature selected VTRS, a third party vendor system, to replace the failed Minnesota Licensing and Registration System (MNLARS). Fees from driver’s licenses, license plates, and filing fees were increased and a technology surcharge imposed on vehicle registration renewals to pay for the implementation of VTRS, the decommissioning of MNLARS, and to temporarily increase the capacity of Driver and Vehicle Services to meet public service needs. Included in this is $13 million appropriated in 2019 for reimbursement grants to deputy registrars for costs related to MNLARS. The grants, which would be determined by formula, would require the deputy registrar accepting the grant to release the state from any further liability or claims related to MNLARS. Vaping Ordinance Authority – Effective July 1, 2019, cities are allowed to enact and enforce ordinances with more stringent measures than the Minnesota Clean Indoor Air Act to protect individuals from involuntary exposure to aerosol or vapor from electronic delivery devices. Water Connection Fees – Effective January 1, 2020, the annual water connection fees cities are required to collect on behalf of the Minnesota Department of Health for water testing and support has been increased from $6.36 to $9.72. Military Exception to Open Meeting Law – Effective August 1, 2019, members of a public body that are in the military will be allowed to participate in public meetings via interactive television when they are at a required drill, deployed, or on active duty. The member may participate under this exception up to three times a year. Pension Plan Changes – The 2019 pension bill included several changes to the various pension plans throughout the state: • Changes to plans administered by the Public Employees Retirement Association (PERA) included: o The rights of PERA General Employees Retirement Fund (GERF) plan and Public Employees Police and Fire Fund (PEPFF) plan members to purchase service credit for periods of military leave were expanded. This gives plan members the right to purchase up to five years of service credit for military service leave that is not federally protected because the service occurred prior to public employment or the member did not meet the payment deadlines applicable to federally protected leave service credit purchases. o The Phased Retirement Option (PRO) program, which gives cities an opportunity to retain potentially retiring employees that are GERF plan members aged 62 or over, was altered and made permanent. Under a PRO arrangement, an employee would begin collecting a retirement annuity, but could continue working for their current employer for up to five years if they agree to a work schedule that represents a reduction of at least 25 percent each pay period from their current schedule, up to a maximum of 1,044 hours per year. Employees would not be allowed to contribute to a pension benefit plan or accrue additional service time while working under a PRO. o A process was established for municipalities and joint powers entities to terminate participation in the PERA Statewide Volunteer Firefighter (SVF) plan if, 1) the entity has either eliminated its fire department or ceased using the services of all departing firefighters and any other noncareer or volunteer firefighters, and 2) the entity’s account has assets sufficient to cover all liabilities including the fully vested liabilities for all departing firefighters and administrative expenses. -21- • Changes impacting volunteer firefighter relief associations (VRFAs) included: o Effective January 1, 2020, vesting schedules for defined contribution plans cannot require that a member have more than 20 years of active service to become 100 percent vested in the member’s account, or provide for a larger vesting percentage with respect to the completed years of service than as provided in the statutory schedule. o Effective January 1, 2020, the permitted graded vesting schedule for defined benefit pension plans is reduced from 20 years to 10 years for full vesting. Also, plans cannot require that a member have more than 20 years of active service to become 100 percent vested in the member’s accrued service pension, or provide for a larger vesting percentage with respect to the completed years of service than as provided in the statutory schedule. o Effective January 1, 2020, supplemental benefits are allowed to be paid to designated beneficiaries or estates when plan members have no surviving spouse or children. THIS PAGE INTENTIONALLY LEFT BLANK -22- ACCOUNTING AND AUDITING UPDATES The following is a summary of GASB standards expected to be implemented in the next few years. Due to the COVID-19 outbreak, 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 meets this definition should be accounted for under the leases guidance, unless specifically excluded in this statement. Governments enter into leases for many types of assets. Under the previous guidance, leases were classified as either capital or operating depending on whether the lease met any of the four tests. In many cases, the previous guidance resulted in reporting lease transactions differently than similar nonlease financing transactions. The goal of this statement is to better meet the information needs of users by im proving accounting and financial reporting for leases by governments. It establishes a single model for lease accounting based on the principle that leases are financings of the right to use an underlying asset. This statement increases the usefulness of financial statements by requiring recognition of certain lease assets and liabilities for leases that previously were classified as operating leases and recognized as inflows of resources or outflows of resources based on the payment provisions of the contract. Under this statement, a lessee is required to recognize a lease liability and an intangible right to use lease asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources, thereby enhancing the relevance and consistency of information about governments’ leasing activities. To reduce the cost of implementation, this statement includes an exception for short -term leases, defined as a lease that, at the commencement of the lease term, has a maximum possible term under the lease contract of 12 months (or less), including any options to extend, regardless of their probability of being exercised. Lessees and lessors should recognize short-term lease payments as outflows of resources or inflows of resources, respectively, based on the payment provisions of the lease contract. The requirements of this statement were originally effective for reporting periods beginning after December 15, 2019 and are now effective for fiscal years beginning after June 15, 2021. 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 issuer; 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. -23- 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 from 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 were originally effective for reporting periods beginning after December 15, 2020 and are not effective after December 15, 2021. Earlier application is encouraged. CITY OF PRIOR LAKE AUDIT REPORT YEAR ENDED DECEMBER 31, 2019 James H. Eichten, CPA Opinion on Financial Statements ▪Financial statements are fairly presented in accordance with accounting principles generally accepted in the United States of America Testing of Internal Controls and Compliance ▪Internal controls over financial reporting ▪Compliance with laws and regulations related to financial reporting State Laws and Regulations ▪Compliance with Minnesota laws and regulations Single Audit of Federal Awards ▪Not required for calendar 2019 AUDITOR’S ROLE Audit Summary ▪Planned scope and timing of audit ▪Audit opinions and findings MANAGEMENT REPORT Financial Report ▪Unmodified or Clean Opinion Internal Controls Over Financial Reporting ▪No Findings Legal Compliance Audit Findings ▪No Findings AUDIT OPINIONS AND FINDINGS Audit Summary Governmental Funds Overview MANAGEMENT REPORT (CONT.) MANAGEMENT REPORT (CONT.) $– $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 $4,000,000,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Taxable Market Value MANAGEMENT REPORT (CONT.) Tax Rates 2017 2018 2019 Average tax rate City 32.7 33.0 33.0 County 35.9 35.1 33.8 School 30.6 33.0 31.7 Special taxing 7.8 8.7 7.8 Total 107.0 109.8 106.3 City of Prior Lake Rates Expressed as a Percentage of Net Tax Capacity MANAGEMENT REPORT (CONT.) Year 2017 2018 2019 Population 2,500–10,000 10,000–20,000 20,000–100,000 26,053 26,207 26,849 Property taxes 495$ 472$ 493$ 442$ 460$ 475$ Tax increments 28 27 43 20 29 29 Franchise and other taxes 41 48 50 24 24 24 Special assessments 53 40 57 57 51 40 Licenses and permits 38 35 47 31 38 37 Intergovernmental revenues 303 271 157 65 71 154 Charges for services 130 102 112 202 168 125 Other 97 78 49 31 28 54 Total revenue 1,185$ 1,073$ 1,008$ 872$ 869$ 938$ December 31, 2018 City of Prior LakeState-Wide Governmental Funds Revenue per Capita With State-Wide Averages by Population Class MANAGEMENT REPORT (CONT.) Year 2017 2018 2019 Population 2,500–10,000 10,000–20,000 20,000–100,000 26,053 26,207 26,849 Current 150$ 121$ 104$ 105$ 105$ 112 286 272 294 205 222 230 135 125 106 69 72 73 96 115 104 64 73 72 75 74 78 4 6 7 742 707 686 447 478 494 Capital outlay and construction 417 351 307 451 345 375 Debt service 178 153 109 153 151 156 41 39 29 50 39 46 219 192 138 203 190 202 Total expenditures 1,378$ 1,250$ 1,131$ 1,101$ 1,013$ 1,071$ General government Governmental Funds Expenditures per Capita With State-Wide Averages by Population Class December 31, 2018 City of Prior LakeState-Wide Interest and fiscal charges Public safety Streets and highways Culture and recreation All other Principal MANAGEMENT REPORT (CONT.) Increase 2019 2018 (Decrease) Fund balances of governmental funds Total by classification Restricted 4,088,161$ 4,154,268$ (66,107)$ Assigned 11,295,634 13,908,417 (2,612,783) Unassigned 7,578,463 6,931,767 646,696 Total governmental funds 22,962,258$ 24,994,452$ (2,032,194)$ Total by fund General 7,903,175$ 7,213,402$ 689,773$ Debt Service 3,003,467 3,056,581 (53,114) Construction 261,269 3,070,306 (2,809,037) Special revenue nonmajor funds 3,394,539 3,455,253 (60,714) Capital projects nonmajor funds 8,399,808 8,198,910 200,898 Total governmental funds 22,962,258$ 24,994,452$ (2,032,194)$ Governmental Funds Change in Fund Balance Fund Balance as of December 31, MANAGEMENT REPORT (CONT.) 2015 2016 2017 2018 2019 Fund Balance $6,124,751 $6,684,920 $6,840,928 $7,213,402 $7,903,175 Cash and Inv (Net of Borrowing)$6,902,926 $7,211,301 $8,306,654 $8,938,262 $9,604,268 Expenditures and Transfers Out $12,343,815 $12,417,787 $13,208,933 $13,115,121 $13,350,330 $– $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 $14,000,000 General Fund Financial Position Year Ended December 31, MANAGEMENT REPORT (CONT.) Taxes Licenses and Permits Intergovernmental Charges for Services Fines and Forfeits All Other 2015 $8,692,425 $587,464 $1,573,865 $1,048,564 $1,390 $425,561 2016 $8,886,211 $751,824 $1,581,752 $1,132,504 $4,743 $248,153 2017 $8,779,030 $820,433 $1,657,988 $1,346,676 $2,250 $324,924 2018 $8,619,057 $994,613 $1,835,750 $1,357,049 $1,448 $385,047 2019 $9,007,634 $992,096 $1,925,225 $1,193,113 $996 $454,862 $– $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, MANAGEMENT REPORT (CONT.) General Government Public Safety Public Works Culture and Recreation All Other 2015 $2,568,472 $4,821,150 $2,078,309 $1,600,071 $239,568 2016 $2,531,266 $5,034,978 $1,875,534 $1,593,975 $222,808 2017 $2,741,278 $5,239,456 $1,798,918 $1,677,597 $115,563 2018 $2,755,367 $5,746,524 $1,882,971 $1,850,587 $60,021 2019 $3,000,056 $6,071,462 $1,954,183 $1,889,264 $100,596 $– $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 General Fund Expenditures by Function Year Ended December 31, 2019 MANAGEMENT REPORT (CONT.) Audit Summary Governmental Funds Overview Enterprise Funds Overview MANAGEMENT REPORT (CONT.) Increase 2019 2018 (Decrease) Net position of enterprise funds Total by classification Investment in capital assets 68,398,856$ 61,697,384$ 6,701,472$ Unrestricted 7,137,595 6,001,160 1,136,435 Total enterprise funds 75,536,451$ 67,698,544$ 7,837,907$ Total by fund Water 45,354,364$ 40,677,486$ 4,676,878$ Sewer 26,381,082 24,213,054 2,168,028 Water Quality 3,801,005 2,808,004 993,001 Total enterprise funds 75,536,451$ 67,698,544$ 7,837,907$ Enterprise Funds Change in Financial Position Net Position as of December 31, MANAGEMENT REPORT (CONT.) 2015 2016 2017 2018 2019 Oper Revenue $3,390,052 $3,674,099 $3,796,097 $3,967,706 $3,792,321 Oper Expenses $2,347,154 $2,493,541 $2,621,448 $2,679,154 $2,983,966 Oper Income (Loss)$1,042,898 $1,180,558 $1,174,649 $1,288,552 $808,355 Inc Before Depr $1,700,029 $1,870,854 $1,912,281 $2,092,678 $1,696,804 $– $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 $3,500,000 $4,000,000 $4,500,000 Water Enterprise Fund Year Ended December 31, MANAGEMENT REPORT (CONT.) 2015 2016 2017 2018 2019 Oper Revenue $2,432,925 $2,741,578 $3,090,773 $3,270,026 $3,622,033 Oper Expenses $2,468,932 $2,635,304 $2,771,143 $2,892,003 $3,281,824 Oper Income (Loss)$(36,007)$106,274 $319,630 $378,023 $340,209 Inc Before Depr $371,068 $530,299 $789,288 $889,932 $904,035 $(250,000) $– $250,000 $500,000 $750,000 $1,000,000 $1,250,000 $1,500,000 $1,750,000 $2,000,000 $2,250,000 $2,500,000 $2,750,000 $3,000,000 $3,250,000 $3,500,000 $3,750,000 Sewer Enterprise Fund Year Ended December 31, MANAGEMENT REPORT (CONT.) 2015 2016 2017 2018 2019 Oper Revenue $865,244 $920,128 $925,988 $986,338 $1,060,295 Oper Expenses $560,820 $598,972 $633,557 $600,030 $611,654 Oper Income (Loss)$304,424 $321,156 $292,431 $386,308 $448,641 Inc Before Depr $396,392 $427,648 $402,799 $508,197 $583,068 $– $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, Audit Summary Governmental Funds Overview Enterprise Funds Overview Legislative Updates Accounting and Auditing Updates MANAGEMENT REPORT (CONT.) Clean Opinion on Financial Statements No Findings Reported Improved General Fund Financial Results Improved Enterprise Fund Financial Results Continued Ongoing Assessment of Financial Projections and Results Including General, Other Operational and Enterprise Fund Activities SUMMARY