HomeMy WebLinkAbout06(A) - Resolution Approving the 2025 Annual Financial Report and Management Letter ReportITEM: 6ACITYCOUNCILAGENDAREPORT
MEETING DATE: June 09, 2026
PREPARED BY: Jason Etter, Accounting Manager
Nicole Klekner, Finance Director
PRESENTED BY: Nicole Klekner
AGENDA ITEM: Resolution Approving the 2025 Annual Financial Report and
Management Letter and Special Purpose Audit Report
RECOMMENDED ACTION:
Adopt the attached resolution accepting the 2025 Annual Financial Report and Management
Letter and Special Purpose Audit Report.
BACKGROUND:
Introduction
The 2025 annual audit was conducted inaccordance with generally accepted auditing standards
and represents an independent opinion of the financial activities during the year and position of the
City of Prior Lake as of 12/31/2025. The purpose of the audit is to express an opinion about whether
the financial statements prepared are fairly presented, in all material respects, and in conformity
with accounting principles generally accepted in the United States of America. A Single Audit was
also completed for fiscal year 2025 as the City expended more than $1,000,000 in Federal Awards.
This special purpose audit covers both the financial statements and compliance with Federal
program requirements.
History
All cities with a population of more than 2,500 are required by state statute to complete an audit
each year. The firm of LB Carlson, LLP, has been retained by the city for this purpose.
Current Circumstances
Copies of the reports are included in the June 9 meeting packet that is distributed to Council
members. Copies of the 2025 Annual Financial Report and Management Letter will also be
available for the Council and public prior to the Council meeting on June 9.
The Annual Financial Report represents the financial reporting model that reflects GASB Statement
No. 34 as required by the Governmental Accounting Standards Board (GASB). This format
consolidates the City’s financial reporting activity into two groups (governmental activities and
business-type activities) and includes a statement ofnet assets. A statement of net assets identifies
capital assets (i.e., land, buildings, and improvements) and long-term liabilities. As stated in the
Financial Report, the City’s overall net asset financial position (governmental and business-type
activities combined) is $288,668,100 and represents an increase of $15,778,388 from December
31, 2024.
The Management Letter is intended to bring to the City Council’s attention any deficiencies or
conditions recommended for improvement within the design or administration ofthe City’s financial
operations and to follow up on prior year findings and recommendations.
City ofPrior Lake | 4646 Dakota Street SE | Prior Lake MN 55372
Item 6A
Page | 2
Based on their audit of the City’s financial statements for the year ended December 31, 2025:
LB Carlson issued an unmodified opinion on the City’s financial statements.
LB Carlson reported no deficiencies in the City’s internal control over financial reporting that
they considered to be material weaknesses.
The results of LB Carlson’s testing disclosed no instances of noncompliance required to be
reported under Government Auditing Standards.
LB Carlson reported that the Schedule of Expenditures ofFederal Awards isfairly stated, in
all material respects, in relation to the basic financial statements.
The results of LB Carlson’s testing indicated that the City has complied, in all material
respects, with the types of compliance requirements that could have a direct and material
effect on each of its major federal programs.
LB Carlson reported one deficiency involving the City’s internal controls over compliance
that they consider to be a significant deficiency in their testing of major federal programs:
o For the highway planning and construction federal program, the City did not have
sufficient controls in place to assure that it was not contracting for goods or services
with parties that are suspended or debarred, or whose principals are suspended or
debarred.
LB Carlson reported one finding based on their testing of the City’s compliance with
Minnesota laws and regulations:
o For two of the four contracts tested exceeding $25,000, the City did not obtain
multiple quotations prior to awarding the contract as required by Minnesota Statutes
471.325 Subd. 4.
The Management Letter also includes summaries and graphs for operational activity for the General
Fund and proprietary funds, information on property taxes and governmental fund revenues and
expenditures, and accounting and auditing updates.
GASB requires that a Management’s Discussion and Analysis (known as an MD&A) be assimilated
in the Annual Financial Report to provide supplementary information to facilitate a greater
understanding of the audit report by the general reader. This includes an overview of the financial
statements, financial analysis, General Fund budgetary highlights, and information on economic
factors.
FINANCIAL IMPACT:
General Fund:
The primary results for the General Fund as indicated within the 2025 Annual Financial Report are:
1. Actual revenues were $23,309,139 (including transfers and sale of assets) compared to
amended budgeted revenues of $22,274,918 or 105% of budget.
2. Actual expenditures were $22,318,361 (including transfers out) compared to amended
budgeted expenditures of $23,024,456 or 97% of budget.
3. Gross revenue exceeded expenditures/transfers by $990,777.
At the end ofthe current fiscal year, the total fund balance for the General Fund was $14,402,346
or 59.8percent of budgeted 2026 expenditures and transfers out of $24,093,139. The fund balance
is maintained for cash flow, emergency purposes, etc. This level of reserve is slightly higher than
the targeted range of 40-50% as identified in the City’s Comprehensive Financial Management
Policy to ensure adequate reserves in future years as discussed with the City Council during review
of the city’s 10-year financial plan.
Item 6A
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Of the total fund balance of $14,402,346, $372,060 isassigned to the 2026 budget for funds
earmarked for specific programs or for projects carried over from fiscal 2025. The unassigned
amount of $14,030,286 is 58.2 percent of budgeted 2026 expenditures and transfers out of
24,093,139.
The total fund balance of $14,402,346 reflects an increase of $990,777 from the prior year.
The increase in fund balance isprimarily due to revenues and other financing sources more than
budget by $1,034,221 and expenditures less than budget by $706,095, along with a planned use
of reserves for budget amendments in 2025 of $749,539.
The drivers in the revenue above budget were investment income higher in budget by $349,302
due to market conditions. Intergovernmental revenue was higher than budgeted by $356,879, due
to the city receiving higher than anticipated fire relief and police state aid. Additionally, there was
additional $77,948 in administrative fee revenue per developer agreements due to the timing of
development projects, and $161,825 in additional miscellaneous revenue mainly due toreturn of
excess tax increment financing (TIF) after the Lakefront Plaza TIF district close out.
Expenditures were less than budgeted primarily in Public Works and Police driven by fuel savings,
and open positions throughout the year. Fuel was budgeted at a higher rate, but the price remained
lower through the end of 2025. The amended budget reflected the wage adjustments made in 2025
for Police Officers and Police Sergeants as a result of the completion of a compensation market
analysis that was negotiated as part of the collective bargaining agreement.
The total fund balance of $14,402,346 reflects an increase of $1,740,315 from the amended budget.
The original budget was balanced with no use of fund balance. An amendment was made to
increase the spending of the fund balance by $749,538.
Please feel free to contact Staff prior to the meeting if you have any questions or would like to
review the Report on amore comprehensive basis.
Jim Eichten of the firm LB Carlson, LLP will make a brief presentation regarding the Report and
Management Letter and respond to any questions the Council may have.
Additional Reporting Required
A City Financial Reporting Form, which is a condensed excerpt ofthe official document, is required
to be submitted to the Office of the State Auditor by June 30, 2026, along with this report.
ALTERNATIVES:
1. Motion and second to adopt the attached resolution accepting the 2025 Annual Financial
Report and Management Letter and Special Purpose Audit Report as submitted.
2. Delay action according to a specific Council reason.
ATTACHMENTS:
1. Resolution - Consider Approval of the 2025 Annual Financial Report and Management
Letter and Special Purpose Audit Report
2. LB Carlson 2025 Prior Lake Audit Presentation
3. 2025 City of Prior Lake Financial Statements
4. 2025 City of Prior Lake Management Letter
5. 2025 City of Prior Lake Special Purpose Audit Reports
4646 Dakota Street SE
Prior Lake, MN 55372
RESOLUTION 26-
RESOLUTION APPROVING THE 2025 ANNUAL FINANCIAL REPORT AND MANAGEMENT
LETTER AND SPECIAL PURPOSE AUDIT REPORT
Motion By: Second By:
WHEREAS, Minnesota Statutes requires that the City’s financial records be annually
audited; and,
WHEREAS, the annual audit is conducted in conformance with generally accepted
accounting principles; and,
WHEREAS, the purpose ofthe audit is toexpress an opinion about whether the financial
statements prepared by the City are fairly presented in all material respects in
conformity with accounting principles generally accepted in the United States
of America; and,
WHEREAS, the firm of LB Carlson, LLP have been retained by the City Council for this
purpose; and,
WHEREAS, LB Carlson, LLP has submitted the 2025 Annual Financial Report and
Management Letter; Special Purpose Audit Report; and,
WHEREAS, LB Carlson, LLP has issued an unmodified opinion with respect tothe City’s
2025 financial statements; and,
WHEREAS, The City staff and City Council have carefully examined the submitted
statements and reports and their contents at a regular City Council meeting.
NOW THEREFORE, BE IT HEREBY RESOLVED BY THE CITY COUNCIL OF PRIOR LAKE,
MINNESOTA as follows:
1. The recitals set forth above are incorporated herein.
2. The City Council hereby accepts the 2025 Annual Financial Report and Management Letter
and Special Purpose Audit Report.
3. The staff is hereby directed to submit the reports to the Office of the State Auditor.
Passed and adopted by the Prior Lake City Council this 9th day of June 2026.
VOTE Briggs Braid Churchill Lake Hellier
Aye
Nay
Abstain
Absent
Jason Wedel, City Manager
City of Prior Lake, Minnesota
Audit Report for Year Ended December 31, 2025
Presented by:James H. Eichten, CPA
Principal
952-224-1628jeichten@lbcarlson.com
AUDITOR’S ROLE
•Basic Financial Statements
•Schedule of Expenditures of Federal
Awards
Opinion on Financial
Statements and
Federal Awards
•Financial Statement Audit
•Federal “Single Audit”
•MN Legal Compliance Audit
Internal Controls and
Compliance
AUDIT RESULTS
•Unmodified Opinion on Basic Financial
Statements
•Unmodified Opinion on Schedule of
Expenditures of Federal Awards
Financial Statements
and Federal Awards
•No Deficiencies on Financial Reporting Internal Controls
•No Single Audit Findings on Compliance Related Matters
•One Internal Control Deficiency in Controls over Federal
Suspension and Debarment Requirements
Internal Control and
Compliance –
Financial Audit and
Single Audit
AUDIT RESULTS
•Minnesota Legal Compliance
One Finding on Contracting –
Obtaining Multiple QuotationsMN Legal Compliance
GOVERNMENTAL FUNDS
GENERAL FUND YEAR-END FUND BALANCE
GENERAL FUND YEAR-END FUND BALANCE
GENERAL FUND REVENUE
Taxes Intergovernmental
Fines and
Forfeits
Charges for
Services
Licenses
and Permits All Other
2021 $10,125,022 $2,322,956 $38 $1,528,506 $999,906 $635,157
2022 $10,838,670 $2,795,110 $2,998 $1,370,410 $752,021 $(46,221)
2023 $12,676,918 $3,007,580 $2,895 $1,344,465 $694,943 $667,508
2024 $14,494,849 $3,586,085 $103,766 $1,511,428 $868,936 $1,311,568
2025 $15,590,608 $4,069,215 $99,753 $1,267,227 $622,493 $1,010,235
$(1,000,000)$– $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 $8,000,000 $9,000,000 $10,000,000 $11,000,000 $12,000,000 $13,000,000 $14,000,000 $15,000,000 $16,000,000
General Fund Revenue by Source
Year Ended December 31,
GENERAL FUND EXPENDITURES
General
Government Public Safety Public Works Culture and
Recreation All Other
2021 $3,260,266 $7,261,344 $2,099,230 $1,982,787 $131,754
2022 $3,518,433 $8,083,971 $2,074,630 $2,209,617 $126,878
2023 $3,671,376 $9,140,389 $2,513,194 $2,281,006 $168,281
2024 $4,084,901 $10,642,427 $2,657,086 $2,602,420 $116,471
2025 $4,529,498 $11,645,509 $2,707,281 $2,726,106 $157,224
$– $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 $8,000,000 $9,000,000 $10,000,000 $11,000,000 $12,000,000
General Fund Expenditures by Function
Year Ended December 31,
ENTERPRISE FUNDSCHANGEINNETPOSITION
WATER ENTERPRISE FUND
SEWER ENTERPRISE FUND
WATER QUALITY ENTERPRISE FUND
MANAGEMENT REPORT
•Implemented New GASB
Standards
•Updates Provided for Calendar
2026
Accounting and
Auditing Updates
SUMMARY
•Clean Opinion on Financial Statements
•Single Audit of Federal Awards
•Two Findings to Report
•Improving General Fund Financial Condition
•Adherence to General Fund Balance Policy
•Improving Net Position of Enterprise Funds
•Implemented New Accounting Standards
•Commitment to Audit Process and Results
CITY OF PRIOR LAKE
SCOTT COUNTY, MINNESOTA
Financial Statements
and Supplementary Information
Year Ended
December 31, 2025
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Page
INTRODUCTORY SECTION
ELECTED AND APPOINTED OFFICIALS 1
FINANCIAL SECTION
INDEPENDENT AUDITOR’S REPORT 2–4
MANAGEMENT’S DISCUSSION AND ANALYSIS 5–15
BASIC FINANCIAL STATEMENTS
Government-Wide Financial Statements
Statement of Net Position 16
Statement of Activities 17–18
Fund Financial Statements
Governmental Funds
Balance Sheet 19–20
Reconciliation of the Balance Sheet to the Statement of Net Position 21
Statement of Revenues, Expenditures, and Changes in Fund Balances 22–23
Reconciliation of the Statement of Revenues, Expenditures, and Changes
in Fund Balances to the Statement of Activities 24
Statement of Revenues, Expenditures, and Changes in Fund Balances –
General Fund – Budget and Actual 25
Proprietary Funds
Statement of Net Position 26–27
Statement of Revenues, Expenses, and Changes in Net Position 28–29
Statement of Cash Flows 30–33
Notes to Basic Financial Statements 34–73
REQUIRED SUPPLEMENTARY INFORMATION
PERA – General Employees Retirement Fund
Schedule of City’s and Nonemployer Proportionate Share
of Net Pension Liability 74
Schedule of City Contributions 74
PERA – Public Employees Police and Fire Fund
Schedule of City’s and Nonemployer Proportionate Share of Net Pension Liability 75
Schedule of City Contributions 75
Prior Lake Fire Relief Association
Schedule of Changes in the Relief Association’s Net Pension Liability (Asset)
and Related Ratios 76–77
Schedule of City Contributions 78
Other Post-Employment Benefits Plan
Schedule of Changes in the City’s Total OPEB Liability
and Related Ratios 79
Notes to Required Supplementary Information 80–87
CITY OF PRIOR LAKE
SCOTT COUNTY, MINNESOTA
Table of Contents
Page
SUPPLEMENTARY INFORMATION
Combining and Individual Fund Statements and Schedules
Nonmajor Governmental Funds
Combining Balance Sheet 88
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 89
Nonmajor Special Revenue Funds
Combining Balance Sheet 90–91
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 92–93
Nonmajor Capital Projects Funds
Combining Balance Sheet 94–95
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 96–97
General Fund
Schedule of Revenues, Expenditures, and Changes in Fund Balances –
Budget and Actual 98–103
Debt Service Fund
Balance Sheet by Account 104–106
Schedule of Revenues, Expenditures, and Changes in Fund Balances by Account 107–109
Internal Service Funds
Combining Statement of Net Position 110
Combining Statement of Revenues, Expenses, and Changes in Net Position 111
Combining Statement of Cash Flows 112
OTHER INFORMATION SECTION
Summary Financial Report
Revenues and Expenditures for General Operations 113
Combined Schedule of Indebtedness 114–115
Bond Schedules 116–120
Debt Service Requirements 121
Tax Levies and Collections, and Special Assessment Levies and Collections 122
Schedules of Market Value, Tax Levy, Tax Capacity Values, Tax Capacity Rate,
and Market Value Rate 123
Key Financial Indicators 124
CITY OF PRIOR LAKE
SCOTT COUNTY, MINNESOTA
Table of Contents (continued)
INTRODUCTORY SECTION
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Term Expires
Kirt Briggs Mayor 12/31/2028
Zach Braid Councilmember 12/31/2028
Kimberly Churchill Councilmember 12/31/2026
Ethan Hellier Councilmember 12/31/2028
Victor Lake Councilmember 12/31/2026
Jason Wedel City Manager
Lori Olson Assistant City Manager
Nicole Klekner Finance Director
Jason Etter Accounting Manager
Angela Gieseke Finance Supervisor
ELECTED
APPOINTED
CITY OF PRIOR LAKE
SCOTT COUNTY, MINNESOTA
Elected and Appointed Officials
as of December 31, 2025
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FINANCIAL SECTION
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INDEPENDENT AUDITOR’S REPORT
To the City Council and Management
City of Prior Lake, Minnesota
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
OPINIONS
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, 2025, and the related notes to the financial
statements, which collectively comprise the City’s basic financial statements as listed in the table of
contents.
In our opinion, the financial statements referred to above 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, 2025, 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 generall y accepted in
the United States of America.
BASIS FOR OPINIONS
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. Our responsibilities under those standards are
further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our
report. We are required to be independent of the City, and to meet our other ethical responsibilities, in
accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence
we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
RESPONSIBILITIES OF MANAGEMENT FOR THE FINANCIAL STATEMENTS
Management is responsible for the preparation and fair presentation of the financial statements in
accordance with accounting principles generally accepted in the United States of America, and for 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.
In preparing the financial statements, management is required to evaluate whether there are conditions or
events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a
going concern for 12 months beyond the financial statement date, including any currently known
information that may raise substantial doubt shortly thereafter.
(continued)
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AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinions. Reasonable assurance is a high level of assurance, but is not absolute assurance and, therefore, is
not a guarantee that an audit conducted in accordance with generally accepted auditing standards and
Government Auditing Standards will always detect a material misstatement when it exists. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud
may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal
control. Misstatements are considered material if there is a substantial likelihood that, individually or in the
aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with generally accepted auditing standards and Government Auditing
Standards, we:
• Exercise professional judgment and maintain professional skepticism throughout the audit.
• Identify and assess the risks of material misstatement of the financial statements, whether due to
fraud or error, and design and perform audit procedures responsive to those risks. Such procedures
include examining, on a test basis, evidence regarding the amounts and disclosures in the financial
statements.
• Obtain an understanding of internal control relevant to the audit 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, no such opinion is expressed.
• Evaluate the appropriateness of accounting policies used and the reasonableness of significant
accounting estimates made by management, as well as evaluate the overall presentation of the
financial statements.
• Conclude whether, in our judgment, there are conditions or events, considered in the aggregate,
that raise substantial doubt about the City’s ability to continue as a going concern for a reasonable
period of time.
We are required to communicate with those charged with governance regarding, among other matters, the
planned scope and timing of the audit, significant audit findings, and certain internal control related matters
that we identified during the audit.
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 is the responsibility of
management and, 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.
(continued)
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SUPPLEMENTARY 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 accompanying combining and individual fund
statements and schedules, as listed in the table of contents, are presented for purpose of additional analysis
and are not a required part of the basic financial statements. Such 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. The information has been subjected to the auditing procedures
applied in the audit of the basic financial statements and certain additional procedures, including comparing
and reconciling such information directly to the underlying accounting and other records used to prepare
the basic financial statements or to the basic financial statements themselves, and other additional
procedures in accordance with auditing standards generally accepted in the United States of America. In
our opinion, the combining and individual fund financial statements and schedules are fairly stated, in all
material respects, in relation to the basic financial statements as a whole.
OTHER INFORMATION
Management is responsible for the other information included in the annual report. The other information
comprises the introductory and other information sections, but does not include the basic financial
statements and our auditor’s report thereon. Our opinions on the basic financial statements do not cover the
other information, and we do not express an opinion or any form of assurance thereon.
In connection with our audit of the basic financial statements, our responsibility is to read the other
information and consider whether a material inconsistency exists between the other information and the
basic financial statements, or the other information otherwise appears to be materially misstated. If, based
on the work performed, we conclude that an uncorrected material misstatement of the other information
exists, we are required to describe it in our report.
PRIOR YEAR COMPARATIVE INFORMATION
We have previously audited the City’s 2024 financial statements and 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 their report dated May 28, 2025. In our opinion, the
partial comparative information presented herein as of and for the year ended December 31, 202 4, 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 June 2, 2026 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.
Respectfully submitted,
LB CARLSON, LLP
Minneapolis, Minnesota
June 2, 2026
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CITY OF PRIOR LAKE
Management’s Discussion and Analysis
Fiscal Year Ended December 31, 2025
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As the management of the City of Prior Lake, Minnesota (the City), we offer readers of the City’s
financial statements this narrative overview and analysis of the financial activities of the City for the
fiscal year ended December 31, 2025.
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 $288,668,100 (net position). Of
this amount, $38,635,144 (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 $15,778,388.
• As of the close of the current fiscal year, the City’s governmental funds reported combined
ending fund balances of $34,751,877, an increase of $910,579 in comparison with the prior year.
• At the end of the current fiscal year, the total fund balance for the General Fund was $14,402,346,
or 59.8 percent, of budgeted 2026 expenditures and transfers out of $24,093,139. Of the total fund
balance, $372,060 is assigned for future projects and programs. The total fund balance reflects an
increase of $990,777 from the prior year.
OVERVIEW OF THE FINANCIAL STATEMENTS
This discussion and analysis is intended to serve as an introduction to the City’s basic financial
statements. The City’s basic financial statements include three components: 1) government-wide financial
statements, 2) fund financial statements, and 3) notes to basic financial statements. This report also
contains supplemental information in addition to the basic financial statements themselves.
Government-Wide Financial Statements – The government-wide financial statements are designed to
provide readers with a broad overview of the City’s finances, in a manner similar to a private sector
business.
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The Statement of Net Position presents information on all of the City’s assets, deferred outflows of
resources, liabilities, and deferred inflows of resources, with the difference between them reported as net
position. Over time, increases or decreases in net position may serve as a useful indicator of whether the
financial position of the City is improving or deteriorating. The Statement of Activities presents
information showing how the City’s net position changed during the most recent fiscal year. All changes
in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of
the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some
items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned, but
unused, vacation leave).
Both of the government-wide financial statements distinguish functions of the City that are principally
supported by taxes and intergovernmental revenues (governmental activities) from other functions that are
intended to recover all or a significant portion of their costs through user fees and charges (business-type
activities). The governmental activities of the City include general government, public safety, public
works, culture and recreation, and economic development. The business-type activities of the City include
water, sewer, and water quality operations.
The government-wide financial statements can be found in the financial section following this report.
Fund Financial Statements – A fund is a grouping of related accounts that is used to maintain control
over resources that have been segregated for specific activities or objectives. The City, like other state and
local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal
requirements. All of the funds of the City can be divided into two categories: governmental funds and
proprietary funds.
Governmental Funds – Governmental funds are used to account for essentially the same functions
reported as governmental activities in the government-wide financial statements. However, unlike the
government-wide financial statements, governmental fund financial statements focus on near-term
inflows and outflows of spendable resources, as well as on balances of spendable resources available at
the end of the fiscal year. Such information may be useful in evaluating a city ’s near-term financing
requirements.
Because the focus of governmental funds is narrower than that of the government -wide financial
statements, it is useful to compare the information presented for governmental funds with similar
information presented for governmental activities in the government -wide financial statements. By doing
so, readers may better understand the long-term impact of the City’s near-term financing decisions. Both
the governmental funds Balance Sheet and the governmental funds Statement of Revenues, Expenditures,
and Changes in Fund Balances provide a reconciliation to facilitate this comparison between
governmental funds and governmental activities.
The City maintains numerous individual governmental funds. Information is presented separately in the
governmental funds Balance Sheet and in the governmental funds Statement of Revenues, Expenditures,
and Changes in Fund Balances for the General Fund, Debt Service Fund, Construction Capital Projects
Fund, and Trunk Reserve Capital Projects 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.
-7-
Proprietary Funds – The City maintains two types of proprietary funds. Enterprise funds are used to
report the same functions presented as business-type activities in the government-wide financial
statements. The City uses enterprise funds to account for its water, sewer, and water quality operations.
Proprietary funds provide the same type of information as shown in the government-wide financial
statements, only in more detail. The proprietary fund financial statements provide separate information
for the enterprise funds, all of which are considered to be major funds of the City.
Internal service funds are an accounting device used to accumulate and allocate costs internally among
the City’s various functions. The City uses internal service funds to account for severance compensation
and insurance benefits. All internal service funds are combined into a single, aggregated presentation in
the proprietary fund financial statements, labeled Governmental Activities – Internal Service Funds.
Because these internal service funds activities predominantly benefit governmental rather than
business-type functions, they have been included within governmental activities in the government -wide
financial statements. Individual fund data for the internal service funds is provided in the form of
combining statements elsewhere in this report.
The basic proprietary fund financial statements can be found in the financial section of this report
immediately following the governmental fund statements.
Notes to Basic Financial Statements – The notes to basic financial statements provide additional
information that is essential to a full understanding of the data provided in the government-wide and fund
financial statements. The notes to basic financial statements can be found following the proprietary fund
statements within the financial section of this report.
Other Information – In addition to the basic financial statements and accompanying notes, the financial
section also presents required supplementary information, and t he combining and individual fund
statements and schedules (presented as supplementary information) referred to earlier in connection with
nonmajor governmental funds and internal service funds, which are presented immediately following the
basic financial statements.
The 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 $288,668,100 at the close of the most recent fiscal year.
The City’s investment in capital assets (e.g., land, buildings, and machinery and equipment), less any
related debt used to acquire those assets that is still outstanding, totaled 82.4 percent of total net position.
The City uses these capital assets to provide services to citizens; consequently, these assets are not
available for future spending. Although the City’s investment in its capital assets is reported net of related
debt, it should be noted that the resources needed to repay this debt must be provided from other sources,
since the capital assets themselves cannot be used to liquidate these liabilities.
-8-
The following table provides the City’s Summary of Net Position:
2025 2024 2025 2024 2025 2024
Assets
Current and other assets 46,214,385$ 45,827,258$ 22,833,078$ 20,628,826$ 69,047,463$ 66,456,084$
Capital assets, net 183,938,104 175,413,322 79,949,863 78,659,980 263,887,967 254,073,302
Total assets 230,152,489$ 221,240,580$ 102,782,941$ 99,288,806$ 332,935,430$ 320,529,386$
Deferred outflows of resources
Pension and OPEB plan deferments 8,479,877$ 8,813,333$ 249,519$ 177,890$ 8,729,396$ 8,991,223$
Liabilities
Long-term liabilities 33,148,438$ 35,699,376$ 3,258,092$ 3,514,536$ 36,406,530$ 39,213,912$
Other liabilities 2,589,127 2,851,682 903,749 702,782 3,492,876 3,554,464
Total liabilities 35,737,565$ 38,551,058$ 4,161,841$ 4,217,318$ 39,899,406$ 42,768,376$
Deferred inflows of resources
Revenue for subsequent years 3,219,073$ 3,866,944$ –$ –$ 3,219,073$ 3,866,944$
Pension and OPEB plan deferments 9,441,154 9,485,364 437,093 510,213 9,878,247 9,995,577
Total deferred inflows of resources 12,660,227$ 13,352,308$ 437,093$ 510,213$ 13,097,320$ 13,862,521$
Net position
Net investment in capital assets 160,100,601$ 149,536,208$ 77,737,580$ 76,823,473$ 237,838,181$ 226,359,681$
Restricted 12,194,775 12,716,329 – – 12,194,775 12,716,329
Unrestricted 17,939,198 15,898,010 20,695,946 17,915,692 38,635,144 33,813,702
Total net position 190,234,574$ 178,150,547$ 98,433,526$ 94,739,165$ 288,668,100$ 272,889,712$
Governmental Activities Business-Type Activities Total
Summary of Net Position
as of December 31, 2025 and 2024
Table 1
An additional portion of the City’s net position, $12,194,775, or 4.2 percent, represents resources that are
subject to external restrictions on how they may be used. The remaining balance of unrestricted net
position, $38,635,144, may be used to meet the government’s ongoing obligations to citizens and
creditors.
The increase in current and other assets is mainly the result of positive operative results during the year in
the enterprise funds. The increase in capital assets is related to continuing development activity in the
current year. The decrease in long-term liabilities is the result of payments on outstanding debt.
At the end of the current fiscal year, the City is able to report positive balances in all three categories of
net position, both for the government as a whole, as well as for its separate governmental and
business-type activities. The same situation held true for the prior fiscal year.
-9-
2025 2024 2025 2024 2025 2024
Revenues
Program revenues
Charges for services 2,603,367$ 2,668,089$ 13,118,497$ 11,721,041$ 15,721,864$ 14,389,130$
Operating grants and
contributions 3,688,747 3,745,857 2,005 72,146 3,690,752 3,818,003
Capital grants and
contributions 8,492,093 5,991,477 711,229 4,587 9,203,322 5,996,064
General revenues
Property taxes and tax
increments 20,470,856 19,695,282 – – 20,470,856 19,695,282
Franchise taxes 1,806,412 1,640,516 – – 1,806,412 1,640,516
Investment income 1,624,523 1,686,246 929,452 693,818 2,553,975 2,380,064
Miscellaneous 737,423 774,285 41,239 21,185 778,662 795,470
Gain (loss) on sale of assets 94,219 299,790 (24,480) – 69,739 299,790
Total revenues 39,517,640 36,501,542 14,777,942 12,512,777 54,295,582 49,014,319
Expenses
General government 4,847,796 4,744,079 – – 4,847,796 4,744,079
Public safety 12,269,112 11,342,029 – – 12,269,112 11,342,029
Public works 7,441,660 6,632,534 – – 7,441,660 6,632,534
Culture and recreation 3,363,339 3,321,497 – – 3,363,339 3,321,497
Economic development 680,614 1,376,697 – – 680,614 1,376,697
Interest on long-term debt 639,469 666,504 – – 639,469 666,504
Water – – 4,081,115 3,806,405 4,081,115 3,806,405
Sewer – – 4,075,175 4,160,496 4,075,175 4,160,496
Water quality – – 1,118,914 818,296 1,118,914 818,296
Total expenses 29,241,990 28,083,340 9,275,204 8,785,197 38,517,194 36,868,537
Increase in net position
before transfers 10,275,650 8,418,202 5,502,738 3,727,580 15,778,388 12,145,782
Transfers 1,808,377 (1,651,656) (1,808,377) 1,651,656 – –
Changes in net position 12,084,027 6,766,546 3,694,361 5,379,236 15,778,388 12,145,782
Net position
Beginning of year 178,150,547 171,384,001 94,739,165 89,359,929 272,889,712 260,743,930
End of year 190,234,574$ 178,150,547$ 98,433,526$ 94,739,165$ 288,668,100$ 272,889,712$
Governmental Activities Business-Type Activities Total
Table 2
Changes in Net Position
for the Years Ended December 31, 2025 and 2024
Governmental activities increased the City’s net position by $12,084,027. Property tax increases were the
result of an increased levy in the current year. Capital grants and contributions increased, mainly from
special assessment revenues along with an increase in federal funds received. The increase in public
safety expenses is due to an increase in wages due to labor negotiations. The decrease in economic
development expenses is due to the decertification of Shepherd’s Path Tax Increment Financing (TIF)
District 6-1 in the prior year.
The business-type activities increased the City’s net position in total by $3,694,361. The charges for
services increase was the result of more water and sewer consumption and rate increases. Total expenses
were up due to increases in the number of employees and professional service costs. The decrease in
transfers was due to less infrastructure contributed to the enterprise funds.
-10-
Below are specific graphs that provide comparisons of the governmental activities program revenues and
expenses. The City’s emphasis on public safety continued in 2025. General government and culture and
recreation revenue will vary by year, based on grant funding for operations and capital projects. Public
works revenue will vary by year, based on development projects and transportation projects.
$–
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
General
Government
Public Safety Public Works Culture and
Recreation
Economic
Development
Interest on
Long-Term
Debt
Expenses Program Revenues
Governmental Activities – Revenue by Source
Charges for
Services
7%
Operating Grants
and Contributions
9%
Capital Grants
and Contributions
21%Property Taxes and
Tax Increments
52%
Franchise Taxes
5%
Other
6%
-11-
Business-Type Activities – Below are graphs showing the business-type activities program revenues and
expense comparisons.
Revenues are collected to fund operations, current and future capital improvements, debt service, and the
utility work completed as part of the street projects identified in the Five-Year Capital Improvement
Program.
$–
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
$4,000,000
$4,500,000
$5,000,000
$5,500,000
$6,000,000
$6,500,000
Water Sewer Water Quality
Expenses Program Revenues
Business-Type Activities – Revenue by Source
Charges for
Services
89%
Operating Grants
and Contributions
> 1%
Capital Grants and
Contributions
5%
Other
6%
-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.
At the end of the current fiscal year, the City’s governmental funds reported combined ending fund
balances of $34,751,877, an increase of $910,579 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 $14,402,346. 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 59.8 percent of total
2026 General Fund budgeted expenditures and transfers out of $24,093,139. Of the total fund balance of
$14,402,346, $372,060 is assigned for future projects and programs. This leaves an unassigned fund
balance in the General Fund of $14,030,286.
The total fund balance reflects an increase of $990,777 from the prior year and an increase of $1,740,315
above the amended budget, which reflected the use of fund balance of $749,538. The components of the
$990,777 increase in fund balance are revenues and other financing sources over budget by $1,033,965
and expenditures less than budget by $706,350. Revenues above budget are primarily from investment
income, additional state and federal funding, and other revenue from a decertified TIF District.
Expenditures are lower than budget due to personnel saving and lower fuel rate and usage
The Debt Service Fund balance decreased by $58,129. The City manages cash flow in all debt service
accounts and ensures adequate resources exist to fund future obligations.
The Construction Capital Projects Fund balance increased by $339,791, due to timing differences
between project financing inflows and capital outlays.
The Trunk Reserve Capital Projects Fund balance increased by $859,125, due to positive operating
results.
Proprietary Funds – The City’s proprietary funds provide the same information for the business-type
activities found in the government-wide financial statements, but in more detail.
-13-
GENERAL FUND BUDGETARY HIGHLIGHTS
The original budget reflected no change in fund balance.
The City amends its budget at various points during the year. The General Fund budget was amended in
2025 to increase the spending of the fund balance by $749,538, primarily for wage increases due to labor
negotiations.
Actual revenues and other financing sources were $1,033,965 over budget in 2025. Investment income
was higher than budget by $349,302, due to market conditions. Intergovernmental was over budget by
$356,381 due to conservative budgeting. Miscellaneous was over budget due to the City receiving
decertified TIF District revenue.
Actual expenditures were $706,350 less than budget in 2025. Police department expenditures were lower
than budget by $430,968 due to less than anticipated wages. Public works expenditures were lower than
budget by $347,740, primarily for fuel and snow and ice management material savings.
CAPITAL ASSETS AND LONG-TERM LIABILITIES
Capital Assets – The City’s investment in capital assets for its governmental and business-type activities
as of December 31, 2025 amounts to $263,877,967 (net of accumulated depreciation/amortization). This
investment in capital assets includes items, such as land, buildings and improvements, machinery and
equipment, park facilities, roads, highways, and bridges.
2025 2024 2025 2024 2025 2024
Land 34,790,601$ 35,016,051$ –$ –$ 34,790,601$ 35,016,051$
Utility access agreement – – 2,499,970 2,499,970 2,499,970 2,499,970
Easements 56,152,920 56,152,920 218,912 218,912 56,371,832 56,371,832
Construction in progress 14,956,384 9,052,106 1,792,350 719,749 16,748,734 9,771,855
Land improvements 651,748 716,947 17,647 22,034 669,395 738,981
Machinery and equipment 3,329,381 3,227,605 902,311 780,435 4,231,692 4,008,040
Vehicles 2,146,568 2,488,171 610,675 393,696 2,757,243 2,881,867
Infrastructure 71,702,684 68,450,401 73,907,998 74,025,184 145,610,682 142,475,585
Technology subscriptions 207,818 309,121 – – 207,818 309,121
Total 183,938,104$ 175,413,322$ 79,949,863$ 78,659,980$ 263,887,967$ 254,073,302$
Table 3
Capital Assets
(Net of Depreciation/Amortization)
TotalBusiness-Type ActivitiesGovernmental Activities
Additional information on the City’s capital assets can be found in Note 4 of the notes to basic financial
statements.
-14-
Long-Term Liabilities – At the end of the current fiscal year, the City had total long-term liabilities of
$36,406,530. This amount includes debt backed by the full faith and credit of the City. The City’s total
long-term liabilities decreased during the current fiscal year, due to scheduled payments on debt
obligations and energy loans payable and changes in the net pension liability.
2025 2024 2025 2024 2025 2024
G.O. bonds 10,360,000$ 12,150,000$ –$ –$ 10,360,000$ 12,150,000$
G.O. special assessment bonds 8,130,000 7,830,000 – – 8,130,000 7,830,000
G.O. revenue bonds 3,495,000 4,010,000 2,060,000 2,350,000 5,555,000 6,360,000
Premium (discount) on bonds payable 1,682,701 1,919,978 152,283 187,600 1,834,984 2,107,578
Energy loan payable – 148,731 – – – 148,731
Compensated absences payable 1,814,026 1,664,718 253,658 225,891 2,067,684 1,890,609
Subscription liabilities 169,802 285,857 – – 169,802 285,857
Total OPEB obligation 1,487,393 849,713 234,260 136,338 1,721,653 986,051
Net pension liability – GERF and PEPFF 6,009,516 6,840,379 557,891 614,707 6,567,407 7,455,086
Total 33,148,438$ 35,699,376$ 3,258,092$ 3,514,536$ 36,406,530$ 39,213,912$
Table 4
Long-Term Liabilities
TotalGovernmental Activities Business-Type Activities
The City’s statutory debt limit is equal to 3 percent of estimated taxable market value of property located
within the City. The taxable market value totals $5,682,110,817, which calculates to a debt limit of
$170,463,325. 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 $10,360,000 of general obligation debt outstanding, leaving a debt limit
of $160,103,325.
Additional information on the City’s long-term debt can be found in Note 6 of the notes to basic financial
statements.
ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES
• The City adopted a General Fund operating budget of $24,093,139 for expenditures and other
financing uses for fiscal 2026, an increase of $1,068,683, or 4.6 percent, from the 2025 final
budget. Fiscal 2026 expenditures include a new Network Administrator, and the addition of a
Police Sergeant and Police Records Specialist.
• The City’s local tax capacity increased 5.1 percent for property taxes payable in 2026.
• Although detached single-family residential construction activity was slower in 2025 than in
recent years, the City continues to grow. The City issued 29 single-family detached building
permits in 2025, compared to an average of 107 single-family permits over the previous 10 years.
• Over the past five years (2021–2025) the City has issued 393 single-family home permits.
• Since 2006, the City has consistently ranked in the top 25 in the Twin Cities metro area in total
number of residential units and in the top 20 in total single-family residential units.
(Source: Metropolitan Council, Community Profile, Building Permits, Residential, Twin Cities
Region [7-county metro area].)
-15-
•Since 2016, the City has issued permits for eight multi-family residential buildings with a total of
756 units. Additional units are anticipated to start construction in 2026. As of May 2026, the City
is processing an application for a 72-unit 55+ independent living apartment building that plans to
start construction in the fall of 2026 and a 175-unit market rate apartment building that plans to
start construction in the fall of 2026 or spring of 2027. In addition, the City approved a 140 -unit
market rate rental building in 2025 that is expected to start construction in 2027.
•Total building permit valuation (new and addition/alteration) over the past five years
(2021–2025), has averaged $71.4 million per year. The total building permit valuation in 2025
was $56.1 million.
•Commercial building permit valuation (new and addition/alteration) had an average annual
valuation of $10.4 million over the past five years (2021–2025). The total commercial building
permit valuation in 2025 was $12.9 million.
•The City and Spring Lake Township entered into a new Orderly Annexation Agreement in
September 2024, which includes 1,900 acres of land for future residential and
commercial/industrial development. Continued staged development of land within the City and
areas to be annexed under the orderly annexation agreement with Spring Lake Township will
provide most of the City’s anticipated market value growth over the course of the next 10 to
15 years.
•To meet the City’s water needs as it continues to grow, the City entered into a Water Purchase
and Facility Expansion Agreement with the Shakopee Mdewakanton Sioux Community. The
plant can supply additional water to the City and will have future expansion available to meet the
City’s long-term needs. This approach provides the City with the flexibility to evaluate the pace
and timing of development in the Orderly Annexation Area before a substantial investment is
needed to construct the expansion of the water treatment plant. The initial improvements,
combined with the long-term water purchase agreement, could provide the City with enough
water capacity for the next 15 to 20 years, depending on the rate of development.
•Economic indicators, including a slowdown in residential construction and inflationary impacts,
will be evaluated and incorporated in future budget cycles. Staffing represents 72 percent of the
City’s General Fund annual budget. Three-year labor agreements are in place for the Police
Officers and Police Sergeants for 2026–2028. A two-year labor agreement is in place for the
AFSCME union for 2026–2027.
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.
REQUESTS FOR INFORMATION
These financial statements are designed to provide a general overview of the City’s finances for all
those with an interest in the City’s finances. Questions concerning any of the information provided
in this report, or requests for additional financial information, should be addressed to the office of
the City’s Finance Director at the City of Prior Lake, 4646 Dakota Street Southeast, Prior Lake,
Minnesota 55372-1714.
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BASIC FINANCIAL STATEMENTS
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Governmental Business-Type
Activities Activities Total
Assets
Cash and investments 35,328,963$ 21,096,359$ 56,425,322$
Receivables
Delinquent taxes 203,577 – 203,577
Accounts 786,112 1,598,049 2,384,161
Leases 2,338,451 – 2,338,451
Special assessments 2,512,436 137,376 2,649,812
Due from other governmental agencies 1,752,167 1,294 1,753,461
Restricted assets – temporarily restricted
Cash and investments held in escrow 31,366 – 31,366
Assets held for resale 1,315,577 – 1,315,577
Net pension asset – fire relief 1,945,736 – 1,945,736
Capital assets not being depreciated/amortized 105,899,905 4,511,232 110,411,137
Capital assets net of accumulated depreciation/amortization 78,038,199 75,438,631 153,476,830
Total assets 230,152,489 102,782,941 332,935,430
Deferred outflows of resources
Pension plan deferments – GERF and PEPFF 7,189,019 140,092 7,329,111
Pension plan deferments – fire relief 596,068 – 596,068
OPEB plan deferments 694,790 109,427 804,217
Total deferred outflows of resources 8,479,877 249,519 8,729,396
Total assets and deferred outflows of resources 238,632,366$ 103,032,460$ 341,664,826$
Liabilities
Accounts and contracts payable 1,288,771$ 716,379$ 2,005,150$
Accrued salaries and employee benefits payable 592,948 98,549 691,497
Due to other governmental agencies 130,827 83,114 213,941
Deposits payable 400,057 1,500 401,557
Accrued interest payable 68,544 4,207 72,751
Unearned revenue 107,980 – 107,980
Total OPEB liability
Due within one year 90,430 11,794 102,224
Due in more than one year 1,396,963 222,466 1,619,429
Net pension liability
GERF and PEPFF – due in more than one year 6,009,516 557,891 6,567,407
Bonds, energy loans, subscription liabilities, and compensated absences payable
Due within one year 5,004,088 419,293 5,423,381
Due in more than one year 20,647,441 2,046,648 22,694,089
Total liabilities 35,737,565 4,161,841 39,899,406
Deferred inflows of resources
Lease revenue for subsequent years 2,278,460 – 2,278,460
State aid for subsequent years 940,613 – 940,613
Pension plan deferments – GERF and PEPFF 8,572,032 410,306 8,982,338
Pension plan deferments – fire relief 699,043 – 699,043
OPEB plan deferments 170,079 26,787 196,866
Total deferred inflows of resources 12,660,227 437,093 13,097,320
Net position
Net investment in capital assets 160,100,601 77,737,580 237,838,181
Restricted for debt service 5,978,004 – 5,978,004
Restricted for net pension asset 1,945,736 – 1,945,736
Restricted for capital improvements 922,281 – 922,281
Restricted for development 2,075,267 – 2,075,267
Restricted for other purposes 1,273,487 – 1,273,487
Unrestricted 17,939,198 20,695,946 38,635,144
Total net position 190,234,574 98,433,526 288,668,100
Total liabilities, deferred inflows of resources, and net position 238,632,366$ 103,032,460$ 341,664,826$
CITY OF PRIOR LAKE
Statement of Net Position
as of December 31, 2025
See notes to basic financial statements -16-
Program Revenues
Operating Capital
Charges for Grants and Grants and
Functions/Programs Expenses Services Contributions Contributions
Governmental activities
General government 4,847,796$ 675,117$ 270,740$ 1,000,000$
Public safety 12,269,112 947,871 3,253,095 –
Public works 7,441,660 225,507 164,912 7,429,304
Culture and recreation 3,363,339 727,884 – 62,789
Economic development 680,614 26,988 – –
Interest on long-term debt 639,469 – – –
Total governmental activities 29,241,990 2,603,367 3,688,747 8,492,093
Business-type activities
Water 4,081,115 5,378,964 119 416,762
Sewer 4,075,175 5,676,755 (634) 186,083
Water quality 1,118,914 2,062,778 2,520 108,384
Total business-type activities 9,275,204 13,118,497 2,005 711,229
Total 38,517,194$ 15,721,864$ 3,690,752$ 9,203,322$
General revenues
Taxes
Property taxes, levied for general purposes
Property taxes, levied for debt service
Tax increments
Franchise taxes
Investment income
Miscellaneous
Gain (loss) on sale of assets
Transfers
Total general revenues and transfers
Change in net position
Net position
Beginning of year
End of year
CITY OF PRIOR LAKE
Statement of Activities
Year Ended December 31, 2025
See notes to basic financial statements -17-
Governmental Business-Type
Activities Activities Total
(2,901,939)$ –$ (2,901,939)$
(8,068,146) – (8,068,146)
378,063 – 378,063
(2,572,666) – (2,572,666)
(653,626) – (653,626)
(639,469) – (639,469)
(14,457,783) – (14,457,783)
– 1,714,730 1,714,730
– 1,787,029 1,787,029
– 1,054,768 1,054,768
– 4,556,527 4,556,527
(14,457,783) 4,556,527 (9,901,256)
17,155,345 – 17,155,345
3,076,197 – 3,076,197
239,314 – 239,314
1,806,412 – 1,806,412
1,624,523 929,452 2,553,975
737,423 41,239 778,662
94,219 (24,480) 69,739
1,808,377 (1,808,377) –
26,541,810 (862,166) 25,679,644
12,084,027 3,694,361 15,778,388
178,150,547 94,739,165 272,889,712
190,234,574$ 98,433,526$ 288,668,100$
Changes in Net Position
Net (Expense) Revenues and
-18-
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FUND FINANCIAL STATEMENTS
Formerly
Major Formerly
Permanent Nonmajor
Debt Improvement Trunk
General Service Construction Revolving Reserve
Assets
Cash and investments 14,917,327$ 3,116,313$ 2,153,890$ –$ 7,610,308$
Cash and investments held in escrow – – – – –
Receivables
Delinquent taxes 199,773 – – – –
Accounts 334,260 21,602 344,786 – 41,909
Lease 2,330,104 – – – –
Special assessments
Delinquent – 15,529 1,498 – –
Deferred 9,959 1,908,432 16,140 – 1,960
Due from other governmental agencies 453,515 10,412 282,000 – –
Due from other funds 2,688 – – – –
Assets held for resale – – – – –
Total assets 18,247,626$ 5,072,288$ 2,798,314$ –$ 7,654,177$
Liabilities
Accounts and contracts payable 272,486$ –$ 246,224$ –$ –$
Accrued salaries and employee benefits payable 586,271 – – – –
Due to other governmental agencies 129,727 – – – –
Due to other funds 2,688 – – – –
Deposits payable 314,595 – – – –
Unearned revenue 59,680 – – – –
Total liabilities 1,365,447 – 246,224 – –
Deferred inflows of resources
Lease revenue for subsequent years 2,270,301 – – – –
State aid for subsequent years – – 995,843 – –
Unavailable revenue from delinquent taxes 199,773 – – – –
Unavailable revenue from special assessments 9,759 1,923,960 17,638 – 1,960
Total deferred inflows of resources 2,479,833 1,923,960 1,013,481 – 1,960
Fund balances (deficits)
Restricted – 3,148,328 – – –
Assigned 372,060 – 1,538,609 – 7,652,217
Unassigned 14,030,286 – – – –
Total fund balances 14,402,346 3,148,328 1,538,609 – 7,652,217
Total liabilities, deferred inflows
of resources, and fund balances 18,247,626$ 5,072,288$ 2,798,314$ –$ 7,654,177$
Capital Projects Funds
CITY OF PRIOR LAKE
Balance Sheet
Governmental Funds
as of December 31, 2025
See notes to basic financial statements -19-
Nonmajor Total
Governmental Governmental
Funds Funds
6,529,797$ 34,327,635$
31,366 31,366
3,804 203,577
38,808 781,365
8,347 2,338,451
1,425 18,452
557,493 2,493,984
1,006,240 1,752,167
– 2,688
1,315,577 1,315,577
9,492,857$ 43,265,262$
770,061$ 1,288,771$
6,677 592,948
1,100 130,827
– 2,688
85,462 400,057
48,300 107,980
911,600 2,523,271
8,159 2,278,460
– 995,843
3,804 203,577
558,917 2,512,234
570,880 5,990,114
4,510,472 7,658,800
3,507,155 13,070,041
(7,250) 14,023,036
8,010,377 34,751,877
9,492,857$ 43,265,262$
-20-
THIS PAGE INTENTIONALLY LEFT BLANK
34,751,877$
Capital assets are included in net position,but are excluded from fund balances because they do not
represent financial resources.
Cost of capital assets 279,602,900
Less accumulated depreciation/amortization (95,664,796)
Net pension assets are included in net position,but are excluded from fund balances because they do
not represent financial resources.1,945,736
Long-term liabilities are included in net position,but are excluded from fund balances until due and
payable.
Bond principal payable (21,985,000)
Total OPEB liability (1,487,393)
Net pension liability – GERF and PEPFF (6,009,516)
Subscription liabilities (169,802)
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.(1,682,701)
Accrued interest payable on long-term debt is included in net position,but is excluded from fund
balances until due and payable.(68,544)
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.(807,951)
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.
State aid 55,230
Delinquent taxes 203,577
Special assessments 2,512,234
Deferred outflows of resources – GERF and PEPFF pension plans 7,189,019
Deferred outflows of resources – fire relief pension plan 596,068
Deferred outflows of resources – OPEB 694,790
Deferred inflows of resources – GERF and PEPFF pension plans (8,572,032)
Deferred inflows of resources – fire relief pension plan (699,043)
Deferred inflows of resources – OPEB (170,079)
Total net position – governmental activities 190,234,574$
Amounts reported for governmental activities in the Statement of Net Position are different because:
as of December 31, 2025
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 -21-
Formerly
Major Formerly
Permanent Nonmajor
Debt Improvement Trunk
General Service Construction Revolving Reserve
Revenues
Taxes 15,071,778$ 2,925,685$ –$ –$ –$
Franchise taxes 518,830 – 1,287,582 – –
Special assessments 4,611 760,474 10,591 – 757
Licenses and permits 622,493 – – – –
Intergovernmental 4,069,215 – 1,092,583 – –
Charges for services 1,267,227 – – – 528,497
Fines and forfeits 99,753 – – – –
Investment income 606,802 185,249 134,390 – 329,871
Miscellaneous 398,822 – – – –
Total revenues 22,659,531 3,871,408 2,525,146 – 859,125
Expenditures
Current
General government 4,529,498 – – – –
Public safety 11,645,509 – – – –
Public works 2,707,281 – – – –
Culture and recreation 2,726,106 – – – –
Economic development – – – – –
Capital outlay 157,224 – 4,922,627 – –
Debt service
Principal – 4,278,731 – – –
Interest and other – 907,775 83,369 – –
Total expenditures 21,765,618 5,186,506 5,005,996 – –
Excess (deficiency) of revenues
over expenditures 893,913 (1,315,098) (2,480,850) – 859,125
Other financing sources (uses)
Bonds issued – – 2,125,000 – –
Premium on bonds issued – – 118,690 – –
Sale of capital assets 22,634 – – – –
Transfers in 626,975 1,259,807 906,734 – –
Transfers out (552,745) (2,838) (329,783) – –
Total other financing sources (uses)96,864 1,256,969 2,820,641 – –
Net change in fund balances 990,777 (58,129) 339,791 – 859,125
Fund balances
Beginning of year, as previously reported 13,411,569 3,206,457 1,198,818 1,001,546 –
Change within financial reporting
entity (change in major funds)– – – (1,001,546) 6,793,092
Beginning of year, restated 13,411,569 3,206,457 1,198,818 – 6,793,092
End of year 14,402,346$ 3,148,328$ 1,538,609$ –$ 7,652,217$
Capital Projects Funds
CITY OF PRIOR LAKE
Statement of Revenues, Expenditures, and Changes in Fund Balances
Governmental Funds
Year Ended December 31, 2025
See notes to basic financial statements -22-
Nonmajor Total
Governmental Governmental
Funds Funds
2,455,903$ 20,453,366$
– 1,806,412
257,549 1,033,982
– 622,493
1,320,069 6,481,867
532,423 2,328,147
– 99,753
325,728 1,582,040
338,601 737,423
5,230,273 35,145,483
32,353 4,561,851
12,264 11,657,773
– 2,707,281
32,787 2,758,893
363,409 363,409
6,530,344 11,610,195
– 4,278,731
– 991,144
6,971,157 38,929,277
(1,740,884) (3,783,794)
– 2,125,000
– 118,690
113,242 135,876
1,059,375 3,852,891
(652,718) (1,538,084)
519,899 4,694,373
(1,220,985) 910,579
15,022,908 33,841,298
(5,791,546) –
9,231,362 33,841,298
8,010,377$ 34,751,877$
-23-
THIS PAGE INTENTIONALLY LEFT BLANK
910,579$
Capital outlays are recorded in net position and the cost is allocated over their estimated useful lives as
depreciation/amortization expense;however,fund balances are reduced for the full cost of capital outlays at the time of
purchase.
Capital outlay 9,992,309
Depreciation/amortization expense (5,670,625)
Contributed capital asset 5,739,185
Capital contributions to enterprise funds (506,430)
Exchange of land for contributed capital asset (988,000)
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.(41,657)
Net pension assets are only recorded in the government-wide financial statements,as they are not current financial resources
to governmental funds.654,644
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.
Debt issued (2,125,000)
Premium on debt issued (118,690)
Principal repayments 4,278,731
Subscription liability payments 116,055
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 (637,680)
Net pension liability – GERF and PEPFF 830,863
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.(4,292)
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. 355,967
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.(25,354)
The recognition of certain revenues and expenses/expenditures differ between the full accrual governmental activities
financial statements and the modified accrual governmental fund financial statements.
State aid (39,538)
Delinquent property taxes 17,490
Special assessments (365,284)
Deferred outflows of resources – GERF and PEPFF pension plans (737,537)
Deferred outflows of resources – fire relief pension plan (123,388)
Deferred outflows of resources – OPEB 527,469
Deferred inflows of resources – GERF and PEPFF pension plans 262,827
Deferred inflows of resources – fire relief pension plan (226,893)
Deferred inflows of resources – OPEB 8,276
12,084,027$ Change in net position – governmental activities
CITY OF PRIOR LAKE
Year Ended December 31, 2025
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 -24-
THIS PAGE INTENTIONALLY LEFT BLANK
Actual Variance With
Original Final Amounts Final Budget
Revenues
Taxes
Property taxes 15,111,220$ 15,111,220$ 15,071,778$ (39,442)$
Franchise taxes 555,000 555,000 518,830 (36,170)
Special assessments 4,000 4,000 4,611 611
Licenses and permits 550,842 550,842 622,493 71,651
Intergovernmental 3,606,584 3,712,834 4,069,215 356,381
Charges for services 1,240,722 1,240,722 1,267,227 26,505
Fines and forfeits 108,000 108,000 99,753 (8,247)
Investment income 257,500 257,500 606,802 349,302
Miscellaneous 119,800 119,800 398,822 279,022
Total revenues 21,553,668 21,659,918 22,659,531 999,613
Expenditures
Current
General government 4,517,683 4,554,958 4,529,498 (25,460)
Public safety
Police 7,702,835 7,962,263 7,531,295 (430,968)
Fire and rescue 3,029,286 3,029,286 3,201,759 172,473
Other 971,494 971,494 912,455 (59,039)
Public works 2,894,521 3,055,021 2,707,281 (347,740)
Culture and recreation 2,752,861 2,775,336 2,726,106 (49,230)
Capital outlay 37,500 123,610 157,224 33,614
Total expenditures 21,906,180 22,471,968 21,765,618 (706,350)
Excess (deficiency) of revenues
over expenditures (352,512) (812,050) 893,913 1,705,963
Other financing sources (uses)
Transfers in 615,000 615,000 626,975 11,975
Transfers out (262,488) (552,488) (552,745) (257)
Sale of assets – – 22,634 22,634
Total other financing sources (uses)352,512 62,512 96,864 34,352
Net change in fund balances –$ (749,538)$ 990,777 1,740,315$
Fund balances
Beginning of year 13,411,569
End of year 14,402,346$
CITY OF PRIOR LAKE
Budgeted Amounts
Year Ended December 31, 2025
General Fund
Statement of Revenues, Expenditures, and Changes in Fund Balances
Budget and Actual
See notes to basic financial statements -25-
2025 2024 2025 2024
Current assets
Cash and investments 11,023,454$ 9,692,062$ 5,479,065$ 5,120,355$
Receivables
Accounts 549,202 545,183 769,493 723,878
Special assessments
Delinquent 56,462 48,657 67,325 49,112
Deferred – 150 – –
Due from other governmental agencies 647 3,660 647 771
Total current assets 11,629,765 10,289,712 6,316,530 5,894,116
Noncurrent assets
Capital assets not being depreciated/amortized 2,646,811 2,689,488 1,720,809 94,106
Depreciable/amortizable capital assets 59,405,499 58,510,808 41,016,837 40,691,472
Accumulated depreciation/amortization (17,042,348) (16,039,306) (12,402,825) (11,612,718)
Total noncurrent assets 45,009,962 45,160,990 30,334,821 29,172,860
Total assets 56,639,727 55,450,702 36,651,351 35,066,976
Deferred outflows of resources
Pension plan deferments – GERF 74,292 82,755 43,039 52,185
OPEB plan deferments 57,565 14,598 34,387 9,315
Total deferred outflows of resources 131,857 97,353 77,426 61,500
Total assets and deferred outflows of resources 56,771,584$ 55,548,055$ 36,728,777$ 35,128,476$
Current liabilities
Accounts and contracts payable 152,798$ 29,081$ 536,603$ 416,641$
Accrued salaries and employee benefits payable 54,989 46,305 29,539 29,081
Due to other governmental agencies 76,663 86,757 4,310 2,429
Deposits payable 1,500 1,575 – –
Accrued interest payable 1,000 1,300 1,000 1,300
Current portion of total OPEB liability 6,066 6,066 4,245 4,245
Current portion of compensated absences payable 53,294 32,272 28,303 21,475
Current portion of bonds payable 140,000 135,000 140,000 135,000
Total current liabilities 486,310 338,356 744,000 610,171
Noncurrent liabilities
Compensated absences payable 99,471 98,767 34,842 50,651
Bonds premium (discount)47,762 63,923 47,762 63,923
Bonds payable 310,000 450,000 310,000 450,000
Net pension liability – GERF 295,855 336,793 171,393 212,380
Total OPEB liability 117,168 68,067 69,370 43,061
Total noncurrent liabilities 870,256 1,017,550 633,367 820,015
Total liabilities 1,356,566 1,355,906 1,377,367 1,430,186
Deferred inflows of resources
Pension plan deferments – GERF 217,589 263,862 126,053 166,390
OPEB plan deferments 14,091 15,561 8,418 9,930
Total deferred inflows of resources 231,680 279,423 134,471 176,320
Net position
Net investment in capital assets 44,512,200 44,512,067 29,837,059 28,523,937
Unrestricted 10,671,138 9,400,659 5,379,880 4,998,033
Total net position 55,183,338 53,912,726 35,216,939 33,521,970
Total liabilities, deferred inflows of
resources, and net position 56,771,584$ 55,548,055$ 36,728,777$ 35,128,476$
CITY OF PRIOR LAKE
Statement of Net Position
Proprietary Funds
as of December 31, 2025
Business-Type Activities – Enterprise Funds
Water Sewer
(With Partial Comparative Information as of December 31, 2024)
See notes to basic financial statements -26-
Governmental
Activities –
Internal Service
2025 2024 2025 2024 Funds
4,593,840$ 4,172,167$ 21,096,359$ 18,984,584$ 1,001,328$
279,354 263,305 1,598,049 1,532,366 4,747
13,589 9,526 137,376 107,295 –
– – – 150 –
– – 1,294 4,431 –
4,886,783 4,444,998 22,833,078 20,628,826 1,006,075
143,612 655,037 4,511,232 3,438,631 –
5,878,238 4,991,928 106,300,574 104,194,208 –
(1,416,770) (1,320,835) (30,861,943) (28,972,859) –
4,605,080 4,326,130 79,949,863 78,659,980 –
9,491,863 8,771,128 102,782,941 99,288,806 1,006,075
22,761 16,103 140,092 151,043 –
17,475 2,934 109,427 26,847 –
40,236 19,037 249,519 177,890 –
9,532,099$ 8,790,165$ 103,032,460$ 99,466,696$ 1,006,075$
26,978$ 61,734$ 716,379$ 507,456$ –$
14,021 6,063 98,549 81,449 –
2,141 2,085 83,114 91,271 –
– – 1,500 1,575 –
2,207 18,431 4,207 21,031 –
1,483 1,483 11,794 11,794 –
17,696 10,020 99,293 63,767 669,860
40,000 20,000 320,000 290,000 –
104,526 119,816 1,334,836 1,068,343 669,860
20,052 12,706 154,365 162,124 1,144,166
56,759 59,754 152,283 187,600 –
1,120,000 1,160,000 1,740,000 2,060,000 –
90,643 65,534 557,891 614,707 –
35,928 13,416 222,466 124,544 –
1,323,382 1,311,410 2,827,005 3,148,975 1,144,166
1,427,908 1,431,226 4,161,841 4,217,318 1,814,026
66,664 51,343 410,306 481,595 –
4,278 3,127 26,787 28,618 –
70,942 54,470 437,093 510,213 –
3,388,321 3,787,469 77,737,580 76,823,473 –
4,644,928 3,517,000 20,695,946 17,915,692 (807,951)
8,033,249 7,304,469 98,433,526 94,739,165 (807,951)
9,532,099$ 8,790,165$ 103,032,460$ 99,466,696$ 1,006,075$
Water Quality Totals
-27-
2025 2024 2025 2024
Operating revenues
Sewer charges –$ –$ 4,352,818$ 3,909,836$
Water charges 3,811,953 3,525,016 – –
Storm water charges – – – –
Base fees 1,526,931 1,389,992 1,323,937 1,206,346
Meter sales 40,080 61,407 – –
Charges for services – – – –
Total operating revenues 5,378,964 4,976,415 5,676,755 5,116,182
Operating expenses
Personal services 1,074,136 1,043,398 606,435 655,407
Supplies 419,532 422,363 78,464 89,879
Repairs and maintenance 264,739 279,045 116,206 362,870
Other services and charges 323,216 155,715 294,848 127,091
Insurance 7,985 7,514 8,753 8,576
Utilities 829,530 793,367 77,371 72,154
Disposal charges – – 2,090,201 2,055,457
Miscellaneous 14,725 4,433 – –
Depreciation/amortization 1,134,462 1,082,320 790,107 770,812
Total operating expenses 4,068,325 3,788,155 4,062,385 4,142,246
Operating income (loss)1,310,639 1,188,260 1,614,370 973,936
Nonoperating revenues (expenses)
Intergovernmental 119 21,166 (634) 9,919
Investment income 469,562 355,389 242,869 177,775
Interest expense (12,790) (18,250) (12,790) (18,250)
Gain (loss) on sale of assets (24,480) – – –
Miscellaneous 8,609 14,935 32,630 6,250
Total nonoperating revenues (expenses)441,020 373,240 262,075 175,694
Income before contributions and transfers 1,751,659 1,561,500 1,876,445 1,149,630
Special assessments (payback)8,417 6,248 – –
Capital grants – – 7,956 4,911
Capital contributions from developers 408,345 – 178,127 –
Capital contributions from other funds 187,933 1,856,220 65,744 1,229,310
Transfers in 41,145 257,313 10,309 88,032
Transfers out (1,126,887) (1,040,002) (443,612) (718,318)
Change in net position 1,270,612 2,641,279 1,694,969 1,753,565
Net position
Beginning of year 53,912,726 51,271,447 33,521,970 31,768,405
End of year 55,183,338$ 53,912,726$ 35,216,939$ 33,521,970$
Business-Type Activities – Enterprise Funds
CITY OF PRIOR LAKE
Statement of Revenues, Expenses, and Changes in Net Position
Proprietary Funds
Year Ended December 31, 2025
Water Sewer
(With Partial Comparative Information for the Year Ended December 31, 2024)
See notes to basic financial statements -28-
Governmental
Activities –
Internal Service
2025 2024 2025 2024 Funds
–$ –$ 4,352,818$ 3,909,836$ –$
– – 3,811,953 3,525,016 –
2,062,778 1,628,444 2,062,778 1,628,444 –
– – 2,850,868 2,596,338 –
– – 40,080 61,407 –
– – – – 81,471
2,062,778 1,628,444 13,118,497 11,721,041 81,471
395,688 198,984 2,076,259 1,897,789 149,308
31,278 36,097 529,274 548,339 –
358,839 306,278 739,784 948,193 –
189,434 117,802 807,498 400,608 –
127 127 16,865 16,217 –
– – 906,901 865,521 –
– – 2,090,201 2,055,457 –
– – 14,725 4,433 –
95,936 107,074 2,020,505 1,960,206 –
1,071,302 766,362 9,202,012 8,696,763 149,308
991,476 862,082 3,916,485 3,024,278 (67,837)
2,520 41,061 2,005 72,146 –
217,021 160,654 929,452 693,818 42,483
(47,612) (51,934) (73,192) (88,434) –
– – (24,480) – –
– – 41,239 21,185 –
171,929 149,781 875,024 698,715 42,483
1,163,405 1,011,863 4,791,509 3,722,993 (25,354)
(9,526) (6,572) (1,109) (324) –
– – 7,956 4,911 –
117,910 – 704,382 – –
252,753 414,512 506,430 3,500,042 –
9,810 2,395 61,264 347,740 –
(805,572) (437,806) (2,376,071) (2,196,126) –
728,780 984,392 3,694,361 5,379,236 (25,354)
7,304,469 6,320,077 94,739,165 89,359,929 (782,597)
8,033,249$ 7,304,469$ 98,433,526$ 94,739,165$ (807,951)$
Water Quality Totals
-29-
2025 2024 2025 2024
Cash flows from operating activities
Cash received from customers 5,370,228$ 4,909,498$ 5,613,051$ 4,998,125$
Cash payments to suppliers (1,746,104) (1,712,835) (2,544,000) (2,477,742)
Cash payments to employees (1,117,810) (1,080,879) (687,411) (727,745)
Miscellaneous/other revenue 8,609 14,935 32,630 6,250
Net cash flows from operating
activities 2,514,923 2,130,719 2,414,270 1,798,888
Cash flows from noncapital financing activities
Intergovernmental revenue 119 21,166 (634) 9,919
Transfers in (out)(1,085,742) (782,689) (433,303) (630,286)
Net cash flows from noncapital
financing activities (1,085,623) (761,523) (433,937) (620,367)
Cash flows from capital and related financing
activities
Special assessments 8,417 6,248 – –
Capital grants – – 7,956 4,911
Acquisition of capital assets (411,636) (151,617) (1,708,197) (543,466)
Bonds issued – – – –
Premium on bonds issued – – – –
Payments on bonds payable (135,000) (135,000) (135,000) (135,000)
Interest paid on long-term debt (29,251) (34,650) (29,251) (34,650)
Net cash flows from capital
and related financing activities (567,470) (315,019) (1,864,492) (708,205)
Cash flows from investing activities
Interest received 469,562 355,389 242,869 177,775
Net increase in cash and cash
equivalents 1,331,392 1,409,566 358,710 648,091
Cash and cash equivalents, January 1 9,692,062 8,282,496 5,120,355 4,472,264
Cash and cash equivalents, December 31 11,023,454$ 9,692,062$ 5,479,065$ 5,120,355$
Water Sewer
Business-Type Activities – Enterprise Funds
CITY OF PRIOR LAKE
Statement of Cash Flows
Proprietary Funds
Year Ended December 31, 2025
(With Partial Comparative Information for the Year Ended December 31, 2024)
See notes to basic financial statements -30-
Governmental
Activities –
Internal Service
2025 2024 2025 2024 Funds
2,042,666$ 1,565,488$ 13,025,945$ 11,473,111$ 81,289$
(614,378) (545,893) (4,904,482) (4,736,470) –
(329,814) (230,555) (2,135,035) (2,039,179) –
– – 41,239 21,185 –
1,098,474 789,040 6,027,667 4,718,647 81,289
2,520 41,061 2,005 72,146 –
(795,762) (435,411) (2,314,807) (1,848,386) –
(793,242) (394,350) (2,312,802) (1,776,240) –
(9,526) (6,572) (1,109) (324) –
– – 7,956 4,911 –
(4,223) (511,425) (2,124,056) (1,206,508) –
– 1,180,000 – 1,180,000 –
– 61,001 – 61,001 –
(20,000) – (290,000) (270,000) –
(66,831) (34,750) (125,333) (104,050) –
(100,580) 688,254 (2,532,542) (334,970) –
217,021 160,654 929,452 693,818 42,407
421,673 1,243,598 2,111,775 3,301,255 123,696
4,172,167 2,928,569 18,984,584 15,683,329 877,632
4,593,840$ 4,172,167$ 21,096,359$ 18,984,584$ 1,001,328$
TotalsWater Quality
-31-(continued)
2025 2024 2025 2024
Reconciliation of operating income to net
cash flows from operating activities
Operating income (loss)1,310,639$ 1,188,260$ 1,614,370$ 973,936$
Adjustments to reconcile operating income (loss)
to net cash flows from operating activities
Depreciation/amortization 1,134,462 1,082,320 790,107 770,812
Miscellaneous/other revenue 8,609 14,935 32,630 6,250
(Increase) decrease in assets
and deferred outflows of resources
Accounts receivable (4,019) (46,305) (45,615) (104,530)
Special assessments receivable (7,655) (13,654) (18,213) (12,935)
Due from other governments 3,013 (540) 124 (592)
Deferred outflows of resources – GERF 8,463 82,271 9,146 58,803
Deferred outflows of resources – OPEB (42,967) 2,466 (25,072) 2,628
Increase (decrease) in liabilities
and deferred inflows of resources
Accounts and contracts payable 123,717 (54,927) 119,962 240,140
Accrued salaries and employee benefits payable 8,684 13,902 458 (208)
Due to other governmental agencies (10,094) 4,529 1,881 (1,855)
Deposits payable (75) (6,418) – –
Compensated absences payable 21,726 6,702 (8,981) (6,614)
Net pension liability – GERF (40,938) (221,760) (40,987) (163,273)
Total OPEB liability 49,101 (1,621) 26,309 (5,713)
Deferred inflows of resources – GERF (46,273) 84,590 (40,337) 45,821
Deferred inflows of resources – OPEB (1,470) (4,031) (1,512) (3,782)
Net cash flows from operating
activities 2,514,923$ 2,130,719$ 2,414,270$ 1,798,888$
Schedule of noncash activities from capital and
related financing activities
Capital assets contributed from developers 408,345$ –$ 178,127$ –$
Capital assets contributed from other funds 187,933$ 1,856,220$ 65,744$ 1,229,310$
Trade-in of capital asset –$ –$ –$ 135,957$
Amortization of premium (discount)16,161$ 16,160$ 16,161$ 16,160$
(Loss) on sale of assets 24,479$ –$ –$ –$
Business-Type Activities – Enterprise Funds
Water
CITY OF PRIOR LAKE
Sewer
Statement of Cash Flows (continued)
Proprietary Funds
Year Ended December 31, 2025
(With Partial Comparative Information for the Year Ended December 31, 2024)
See notes to basic financial statements -32-
Governmental
Activities –
Internal Service
2025 2024 2025 2024 Funds
991,476$ 862,082$ 3,916,485$ 3,024,278$ (67,837)$
95,936 107,074 2,020,505 1,960,206 –
– – 41,239 21,185 –
(16,049) (60,002) (65,683) (210,837) (182)
(4,063) (2,954) (29,931) (29,543) –
– – 3,137 (1,132) –
(6,658) 24,521 10,951 165,595 –
(14,541) 1,516 (82,580) 6,610 –
(34,756) (84,964) 208,923 100,249 –
7,958 (2,175) 17,100 11,519 –
56 (625) (8,157) 2,049 –
– – (75) (6,418) –
15,022 16,155 27,767 16,243 149,308
25,109 (71,963) (56,816) (456,996) –
22,512 (4,855) 97,922 (12,189) –
15,321 7,212 (71,289) 137,623 –
1,151 (1,982) (1,831) (9,795) –
1,098,474$ 789,040$ 6,027,667$ 4,718,647$ 81,289$
117,910$ –$ 704,382$ –$ –$
252,753$ 414,512$ 506,430$ 3,500,042$ –$
–$ –$ –$ 135,957$ –$
2,995$ 1,247$ 35,317$ 33,567$ –$
–$ –$ 24,479$ –$ –$
TotalsWater Quality
-33-
THIS PAGE INTENTIONALLY LEFT BLANK
CITY OF PRIOR LAKE
Notes to Basic Financial Statements
December 31, 2025
-34-
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.
-35-
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/amortization 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. Debt proceeds are reported as other financing sources.
Major revenue that is susceptible to accrual includes property taxes, franchise taxes, special
assessments, intergovernmental revenue, charges for services, and interest earned on investments.
Major revenue that is not susceptible to accrual includes licenses and permits, fees, and
miscellaneous revenue. Such revenue is recorded only when received because it is not measurable
until collected.
2.Recording of Expenditures – Expenditures are generally recorded when a liability is incurred,
except for principal and interest on long-term debt and other long-term obligations, which are
recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported
as capital outlay expenditures in governmental funds.
-36-
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/amortization 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 Projects Fund – This fund accounts for the resources accumulated and
payments made for city projects.
Trunk Reserve Capital Projects Fund – This fund accounts for the revenue generated from utility
connection permits and acreage fees.
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.
-37-
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 cash
deposits in the police department and the Cable Franchise Fund. Earnings on these accounts are
allocated directly to those funds.
The City categorizes its fair value measurements within the fair value hierarchy established by
accounting principles generally accepted in the United States of America. The hierarchy is based
on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices
in active markets for identical assets; Level 2 inputs are significant other observable inputs; and
Level 3 inputs are significant unobservable inputs.
Debt securities classified in Level 2 of the fair value hierarchy are valued using a matrix pricing
technique. Matrix pricing is used to value securities based on the securities’ relationship to
benchmark quoted prices.
See Note 2 for the City’s recurring fair value measurements as of year-end.
-38-
NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.Investment Policy
The City’s investment policy contains the following restrictions:
a)Allowable Investments
The City may invest in any type of security allowed by Minnesota Statutes and may be amended
from time to time. The City has chosen to limit its allowable investments to those instruments
listed below:
1)Bonds, notes, certificates of indebtedness, treasury bills, or other securities now or
hereafter issued by the United States of America, its agencies, and allowable
instrumentalities.
2)Interest-bearing checking and savings accounts, or any other investments constituting
direct obligations of any bank.
3)Certificates of deposit at state and federally-chartered institutions that are limited to
the amount of coverage provided by the Federal Deposit Insurance Corporation
(FDIC).
4)Money market accounts that are invested in the above referenced government
securities.
5)State and local securities, which have at the time of investment one of the three highest
credit ratings by a nationally recognized rating agency.
6)Investments may be made only in those savings banks or savings and loan associations
the shares, or investment certificates, of which are insured by the FDIC.
7)Bankers’ acceptances issued by United States banks and commercial paper issued by
a United States corporation or its Canadian subsidiary that is rated in the highest quality
category by at least two nationally recognized rating agencies and mature in 270 days
or less.
8)Investment products that are considered as derivatives are specifically excluded from
approved investments.
b)Diversification
It is the policy of the City to diversify its investment portfolio. Investments shall be diversified
to eliminate the risk of loss resulting in over concent ration in a specific maturity, issuers, or
class of securities. Diversification strategies are implemented by the City’s finance director.
The diversification of the allowable investments noted above shall be as follows:
Issuer Type
U.S. treasury obligations
Agency securities (GSEs)
Certificates of deposit
Municipal securities
Money market funds
Savings/demand deposits
Bankers acceptance
Commercial paper
10%
10%
10%
Max % of Total Portfolio
100%
100%
100%
30%
25%
-39-
NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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. Receivables not expected to be collected in
one year include taxes, leases, and special assessments.
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.
Property taxes are recognized as revenue in the year levied in the government-wide financial statements. In
the governmental fund financial statements, taxes are recognized as revenue when received in cash or within
60 days after year-end. Taxes which remain unpaid at December 31, are classified as delinquent taxes
receivable, and are offset by a deferred inflow of resources in the governmental fund financial statements.
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.Assets Held for Resale
Assets held for resale are reported as an asset in the government-wide and fund financial statements. These
assets are reported at the lower of cost or acquisition value.
J.Interfund Receivables and Payables
In the fund financial statements, activity between funds that is representative of lending or borrowing
arrangements is reported as either “due to/from other funds” (current portion) or “advances to/from other
funds.” All other outstanding balances between funds are reported as “due to/from other funds.” Any
residual balances outstanding between the governmental activities and business-type activities are reported
in the government-wide financial statements as “internal balances.”
-40-
NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
K.Capital Assets
Capital assets, which include property, buildings, improvements, equipment, infrastructure assets (roads,
bridges, sidewalks, and similar items), technology subscriptions 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. Technology subscriptions are recorded
based on the measurement of any subscription liability plus any payments due to the subscription vendor at
the commencement of the subscription term, including any applicable initial implementation costs . The
City defines capital assets as those with an initial, individual cost of $10,000 or more with an estimated
useful life in excess of one year, including technology subscriptions. Groups of similar assets acquired at
or near the same time for a single objective, with individual acquisition costs below this threshold, are also
capitalized if the cost of the assets is considered significant in the aggregate. Assets purchased with federal
funding is capitalized when the cost exceeds $5,000. The cost of normal maintenance and repairs that do
not add to the value of the asset or materially extend asset lives are not capitalized.
In the case of initial capitalization of general infrastructure assets (i.e., those reported by governmental
activities) the City chose to include items dating back to June 30, 1980. The City was able to estimate the
historical cost for the initial reporting of these assets through back-trending (i.e., estimating the current
replacement cost of the infrastructure to be capitalized and using an appropriate price-level index to deflate
the cost to the acquisition year or estimated acquisition year).
Capital assets are recorded in the government-wide and proprietary fund financial statements, but are not
reported in the governmental fund financial statements. Property, plant, and equipment of the City are
depreciated/amortized using the straight-line method over the following estimated useful lives:
Useful Lives
Assets in Years
Land improvements –
Machinery and equipment –
Vehicles –
Infrastructure –
Technology subscriptions are amortized in a systematic and rational manner over the shorter of the
subscription term or the useful life of the underlying information technology (IT) assets. Land, utility access
agreements, easements, and construction in progress are not depreciated.
-41-
NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
L.Compensated Absences
The City recognizes a liability for compensated absences for leave time that (1) has been earned for services
previously rendered by employees, (2) accumulates and is allowed to be carried over to subsequent years,
and (3) is more likely than not to be used as time off or settled during or upon separation from employment.
Based on these criteria, two types of leave qualify for liability recognition for compensated absences,
vacation and sick leave. The liability for compensated absences is reported as incurred in the
government-wide and proprietary fund financial statements. A liability for compensated absences is
recorded in the governmental funds only if the liability has matured because of employee resignations or
retirements. The liability for compensated absences includes salary-related benefits, where applicable.
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.
M.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.
N.Subscription-Based Information Technology Arrangements (SBITAs)
A SBITA is a contract that conveys control of the right to use another party’s IT software, alone or in
combination with tangible capital assets (the underlying IT assets), as specified in the contract for a period
of time in an exchange or exchange-like transaction. The City has entered into certain technology
subscriptions for public safety software solutions. Capital assets associated with SBITAs are presented
separately from other capital assets in Note 4. SBITAs related liabilities are reported in Note 6, which
include the terms and related disclosures associated with any subscription liabilities.
O.Other Post-Employment Benefits (OPEB)
Under Minnesota Statutes § 471.61, Subd. 2b, public employers must allow retirees and their dependents
to continue coverage indefinitely in an employer-sponsored healthcare plan, under the following
conditions: 1) retirees must be receiving (or be eligible to receive) an annuity from a Minnesota public
pension plan; 2) coverage must continue in a group plan until age 65, and retirees must pay no more than
the group premium; and 3) retirees may obtain dependent coverage immediately before retirement. All
premiums are funded on a pay-as-you-go basis.
-42-
NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
P.State-Wide Pension Plans
For purposes of measuring the net pension liability, deferred outflows/inflows of resources, and pension
expense, information about the fiduciary net position of the Public Employees Retirement Association
(PERA) and additions to/deductions from the PERA’s fiduciary net position have been determined on the
same basis as they are reported by the PERA. For this purpose, plan contributions are recognized as of
employer payroll paid dates and benefit payments, and refunds are recognized when due and payable in
accordance with the benefit terms. Investments are reported at fair value.
Q.Deferred Outflows/Inflows of Resources
In addition to assets and liabilities, statements of financial position, or balance sheets, will sometimes report
a separate section for deferred outflows and deferred inflows of resources. These separate financial
statement elements represent a consumption or acquisition of net assets that applies to future periods and
so will not be recognized as an outflow of resources (expense/expenditure) or an inflow of financial
resources (revenue) until then.
The City reports deferred outflows and inflows of resources related to pensions and OPEB in the
government-wide and enterprise funds Statement of Net Position. These deferred outflows and inflows
result from differences between expected and actual experience, changes in proportion, changes of
assumptions, difference between projected and actual earnings on pension plan investments, and from
contributions to the plan subsequent to the measurement date and before the end of the reporting period.
These amounts are deferred and amortized as required under pension and OPEB standards.
The City reports deferred inflows of resources related to lease receivables in the government-wide
Statement of Net Position and governmental funds Balance Sheet, which requires lessors to recognize
deferred inflows of resources to correspond to lease receivables. These amounts are deferred and amortized
in a systematic and rationale manner over the term of the lease. The City reports deferred inflows of
resources related to municipal state aid. The amounts received in advance of state aid allotments are
deferred and reported as revenue in the year allotted to the City.
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.
R.Net Position
In the government-wide and proprietary fund financial statements, net position represents the difference
between assets, deferred outflows of resources, liabilities, and deferred inflows of resources. Net position
is displayed in three components:
•Net Investment in Capital Assets – Consists of capital assets, net of accumulated
depreciation/amortization, reduced by any outstanding debt attributable to acquire capital assets.
•Restricted Net Position – Consists of net position restricted when there are limitations imposed
on their use through external restrictions imposed by creditors, grantors, or laws or regulations of
other governments.
•Unrestricted Net Position – All other elements of net position that do not meet the definition of
“restricted” or “net investment in capital assets.”
The City applies restricted resources first when an expense is incurred for which both restricted and
unrestricted resources are available.
-43-
NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
S.Fund Balance Classifications
In the fund financial statements, governmental funds report fund balance in classifications that disclose
constraints for which amounts in those funds can be spent. These classifications are as follows:
•Nonspendable – Consists of amounts that are not in spendable form, such as prepaid items,
inventory, and other long-term assets.
•Restricted – Consists of amounts related to externally imposed constraints established by creditors,
grantors, or contributors; or constraints imposed by state statutory provisions.
•Committed – Consists of internally imposed constraints that are established by resolution of the
City Council. Those committed amounts cannot be used for any other purpose unless the City
Council removes or changes the specified use by taking the same type of action it employed to
previously commit those amounts.
•Assigned – Consists of internally imposed constraints. These constraints consist of amounts
intended to be used by the City for specific purposes but do not meet the criteria to be classified as
restricted or committed. In governmental funds, assigned amounts represent intended uses
established by the governing body itself or by an official to which the governing body delegates
the authority. Pursuant to City Council resolution, the finance director is authorized to establish
assignments of fund balance.
•Unassigned – The residual classification for the General Fund, which also reflects negative residual
amounts in other funds.
When both restricted and unrestricted resources are available for use, it is the City’s policy to first use
restricted resources, then use unrestricted resources as they are needed. When committed, assigned, or
unassigned resources are available for use, it is the City’s policy to use resources in the following
order: 1) committed, 2) assigned, and 3) unassigned.
T.Comparative Data
The basic financial statements include certain prior year partial comparative information in total, but not at
the level of detail required for a presentation in conformity with accounting principles generally accepted
in the United States of America. Accordingly, such information should be read in conjunction with the
City’s financial statements for the year ended December 31, 2024, from which the summarized information
was derived. Also, certain amounts presented in the prior year data have been reclassif ied in order to be
consistent with the current year’s presentation.
-44-
NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
U.Budgets and Budgetary Accounting
Annual budgets are adopted on a basis consistent with accounting principles generally accepted in the
United States of America for the General Fund. All annual appropriations lapse at year-end. The City does
not use encumbrance accounting.
In June of each year, all departments of the City submit requests for appropriations to the finance director
so that a budget may be prepared. In September, the proposed budget is presented to the City Council for
review. The City Council holds public hearings and a final budget is prepared and adopted in early
December.
The appropriated budget is prepared by fund, function, and department. The City’s department heads may
make transfers of appropriations within a department. Transfers of appropriations between departments
require the approval of the city manager. The legal level of budgetary control is the fund level.
V.Statement of Cash Flows
For purposes of the Statement of Cash Flows, the City considers all highly liquid debt instruments with an
original maturity from the time of purchase by the City of three months or less to be cash equivalents. The
proprietary funds’ portion in the government-wide cash and investment management pool is considered to
be cash equivalent.
W.Risk Management
The City is exposed to various risks of loss related to torts: theft of, damage to, and destruction of assets;
errors and omissions; and natural disasters. The City participates in the League of Minnesota Cities
Insurance Trust (LMCIT), a public entity risk pool for its general property and casualty, workers’
compensation, and other miscellaneous insurance coverages. The LMCIT operates as a common risk
management and insurance program for a large number of cities in Minnesota. The City pays an annual
premium to the LMCIT for insurance coverage. The LMCIT agreement provides that the trust will be
self-sustaining through member premiums and will reinsure through commercial companies for claims in
excess of certain limits. Settled claims did not exceed insurance coverage in the past three fiscal years.
There were no significant reductions in insurance coverage in the current year.
X.Restricted Assets
Restricted assets are cash, investments, and interest accrued thereon; the use of which is limited by external
requirements, such as a bond indenture or trust agreements.
Y.Use of Estimates
The preparation of financial statements, in conformity with accounting principles generally accepted in the
United States of America, requires management to make estimates and assumptions that affect amounts
reported in the financial statements during the reporting period. Actual results could differ from those
estimates.
-45-
NOTE 2 – CASH AND INVESTMENTS
A.Components of Cash and Investments
Cash and investments at year-end consist of the following:
Deposits 994,410$
Investments 55,461,428
Cash on hand 850
Total 56,456,688$
Cash and investments are presented in the financial statements as follows:
Statement of Net Position
Cash and investments 56,425,322$
RHVWULFWHG DVVHWV – WHPSRUDULO\ UHVWULFWHG –
cash and investments held in escrow 31,366
Total 56,456,688$
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 Fed eral
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 cont rolled
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 $994,410, while the balance on the bank
records was $2,155,228. At December 31, 2025, all deposits were fully covered by federal deposit
insurance, surety bonds, or by collateral held by the City’s agent in the City’s name.
-46-
NOTE 2 – CASH AND INVESTMENTS (CONTINUED)
C.Investments
The City has the following investments at year-end:
Fair Value
Investment Type Rating Agency Measurement Less Than 1 1 to 5 6 to 10 Total
U.S. treasuries AA MRRG\’V Level 2 1,999,930$ 473,885$ –$ 2,473,815$
U.S. agency securities AA S&P Level 2 4,053,630 2,435,689 2,787,064 9,276,383
U.S. agency securities N/R N/A Level 2 – 324,330 537,066 861,396
Local government securities AAA S&P Level 2 – 2,135,933 – 2,135,933
Local government securities AAA MRRG\’V Level 2 – 923,626 – 923,626
Local government securities AA S&P Level 2 1,652,921 2,426,564 2,315,594 6,395,079
Local government securities AA MRRG\’V Level 2 492,245 3,379,425 516,235 4,387,905
Local government securities A S&P Level 2 – 211,534 – 211,534
Local government securities A Moodys Level 2 – 602,838 – 602,838
Negotiable certificates of deposit N/A N/R Level 2 1,461,009 10,193,979 – 11,654,988
9,659,735$ 23,107,803$ 6,155,959$ 38,923,497
Investment pools/mutual funds
4M Fund AAA S&P Amortized Cost 10,911,342
Federated Hermes Treasuries Fund AAA S&P Level 1 5,626,589
Total investment pools/
mutual funds 16,537,931
Total investments 55,461,428$
NA – NRW ASSOLFDEOH
NR – NRW RDWHG
Credit Risk Segmented Time Distribution in Years
IQWHUHVW RLVN –
The City’s investments include investment pools managed by the 4M Fund, which is an external investment
pool regulated by Minnesota Statutes and is not registered with the Securities and Exchange Commission.
The City’s investments in this investment pool are measured at the net asset value per share provided by
the pools, which are based on amortized cost methods that approximate fair value. The 4M Fund is
sponsored by the League of Minnesota Cities. Investments are purchased and regulated according to
Minnesota Statutes. For this investment pool, there are no unfunded commitments, redemption frequency
is daily, and there is no redemption notice required for the Liquid Class; the redemption notice period is
14 days for the Plus Class.
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 poss ession 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.
-47-
NOTE 2 – CASH AND INVESTMENTS (CONTINUED)
Credit Risk – This is the risk that an issuer or other counterparty to an investment will not fulfill its
obligations. Minnesota Statutes limit the City’s investments to direct obligations or obligations
guaranteed by the United States or its agencies; shares of investment companies registered under the
Federal Investment Company Act of 1940 that receive the highest credit rating, are rated in one of the
two highest rating categories by a statistical rating agency, and all of the investments have a final
maturity of 13 months or less; general obligations rated “A” or better; revenue obligations rated “AA”
or better; general obligations of the Minnesota Housing Finance Agency rated “A” or better; bankers’
acceptances of United States banks eligible for purchase by the Federal Reserve System; commercial
paper issued by United States corporations or their Canadian subsidiaries, rated of the highest quality
category by at least two nationally recognized rating agencies, and maturing in 270 days or less;
Guaranteed Investment Contracts guaranteed by a United States commercial bank, domestic branch of
a foreign bank, or a United States insurance company, and with a credit quality in one of the top
two highest categories; repurchase or reverse purchase agreements and securities lending agreements
with financial institutions qualified as a “depository” by the government entity, with banks that are
members of the Federal Reserve System with capitalization exceeding $10,000,000; that are a primary
reporting dealer in U.S. government securities to the Federal Reserve Bank of New York; or certain
Minnesota securities broker-dealers. The City’s investment policy as described in Note 1 addresses
credit risk.
Concentration Risk – This is the risk associated with investing a significant portion of the City’s
investment (considered 5.0 percent or more) in the securities of a single issuer, excluding
U.S. guaranteed investments (such as treasuries), investment pools, and mutual funds. At December 31,
2025, the City had 10.1 percent of its portfolio invested with Federal Home Loan Bank and 6.3 percent
invested in Federal Farm Credit Bank. 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.
NOTE 3 – LEASE RECEIVABLE
The City has entered into 10 lease receivable agreements for cell tower rental and space rental at various
city sites. The lease terms include interest rates ranging from 0.2 percent to 3.6 percent with final maturities
through 2040. These leases are reported as lease receivables totaling $2,338,451. These receivables are
offset by deferred inflows of resources as lease revenue for subsequent years totaling $2,278,460. During
the current year, the City received principal and interest payments of $239,886 and $15,490, respectively,
on these leases. The deferred inflows of resources are being amortized to revenue over the life of the leases.
-48-
NOTE 4 – CAPITAL ASSETS
Capital asset activity for the year ended December 31, 2025 was as follows:
A.Changes in Capital Assets Used in Governmental Activities
Transfers and
Beginning Completed
of Year Additions Deletions Construction End of Year
Capital assets, not depreciated/amortized
Land 35,016,051$ 762,550$ (988,000)$ –$ 34,790,601$
Easements 56,152,920 – – – 56,152,920
Construction in progress 9,052,106 8,977,075 – (3,072,797) 14,956,384
Total capital assets, not depreciated/amortized 100,221,077 9,739,625 (988,000) (3,072,797) 105,899,905
Capital assets, depreciated/amortized
Land improvements 2,832,128 – – – 2,832,128
Machinery and equipment 8,816,573 628,936 (62,290) – 9,383,219
Vehicles 8,113,551 240,289 (502,371) 209,908 8,061,377
Infrastructure 145,403,719 5,122,644 – 2,356,459 152,882,822
Technology subscriptions 543,449 – – – 543,449
Total capital assets, depreciated/amortized 165,709,420 5,991,869 (564,661) 2,566,367 173,702,995
Less accumulated depreciation/amortization on
Land improvements (2,115,181) (65,199) – – (2,180,380)
Machinery and equipment (5,588,968) (514,892) 50,022 – (6,053,838)
Vehicles (5,625,380) (762,411) 472,982 – (5,914,809)
Infrastructure (76,953,318) (4,226,820) – – (81,180,138)
Technology subscriptions (234,328) (101,303) – – (335,631)
Total accumulated depreciation/amortization (90,517,175) (5,670,625) 523,004 – (95,664,796)
Net capital assets, depreciated/amortized 75,192,245 321,244 (41,657) 2,566,367 78,038,199
Total capital assets, net 175,413,322$ 10,060,869$ (1,029,657)$ (506,430)$ 183,938,104$
B.Changes in Capital Assets Used in Business-Type Activities
Transfers and
Beginning Completed
of Year Additions Deletions Construction End of Year
Capital assets, not depreciated
Utility access agreements 2,499,970$ –$ –$ –$ 2,499,970$
Easements 218,912 – – – 218,912
Construction in progress 719,749 1,975,175 – (902,574) 1,792,350
Total capital assets, not depreciated 3,438,631 1,975,175 – (902,574) 4,511,232
Capital assets, depreciated
Land improvements 87,740 – – – 87,740
Machinery and equipment 1,972,016 96,319 (155,899) 163,909 2,076,345
Vehicles 580,398 52,561 – 223,018 855,977
Infrastructure 101,554,053 704,382 – 1,022,077 103,280,512
Total capital assets, depreciated 104,194,207 853,262 (155,899) 1,409,004 106,300,574
Less accumulated depreciation on
Land improvements (65,706) (4,387) – – (70,093)
Machinery and equipment (1,191,581) (113,873) 131,420 – (1,174,034)
Vehicles (186,702) (58,600) – – (245,302)
Infrastructure (27,528,869) (1,843,645) – – (29,372,514)
Total accumulated depreciation (28,972,858) (2,020,505) 131,420 – (30,861,943)
Net capital assets, depreciated 75,221,349 (1,167,243) (24,479) 1,409,004 75,438,631
Total capital assets, net 78,659,980$ 807,932$ (24,479)$ 506,430$ 79,949,863$
-49-
NOTE 4 – CAPITAL ASSETS (CONTINUED)
C.Depreciation/Amortization Expense by Function
Depreciation/amortization expense for the year ended December 31, 2025 was charged to the following
functions:
Governmental activities
General government 516,387$
Public safety 807,437
Public works 3,670,772
Culture and recreation 676,029
TRWDO GHSUHFLDWLRQDPRUWL]DWLRQ H[SHQVH – JRYHUQPHQWDO DFWLYLWLHV 5,670,625$
Business-type activities
Water 1,134,462$
Sewer 790,107
Water quality 95,936
TRWDO GHSUHFLDWLRQ H[SHQVH – EXVLQHVVW\SH DFWLYLWLHV 2,020,505$
NOTE 5 – TRANSFERS AND INTERFUND BALANCES
A.Transfers
A schedule of interfund transfers is as follows:
Transfers Out General Debt Service Construction Nonmajor Water Sewer Water Quality Total
Governmental funds
General –$ 262,488$ –$ 290,257$ –$ –$ –$ 552,745$
Debt Service – 2,838 – – – – – 2,838
Construction – –– 300,000 15,067 4,906 9,810 329,783
Nonmajor 11,975 369,731 265,609 – – 5,403 – 652,718
Proprietary funds
Water 251,000 624,750 27,709 223,428 – – – 1,126,887
Sewer 249,000 – 76,201 92,333 26,078 – – 443,612
Water Quality 115,000 – 537,215 153,357 – – – 805,572
626,975$ 1,259,807$ 906,734$ 1,059,375$ 41,145$ 10,309$ 9,810$ 3,914,155$
Governmental Funds Proprietary Funds
Transfers In
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.
Transfers and interfund balances are reported in the fund financial statements but are eliminated in the
government-wide financial statements, as applicable.
B.Intrafund Balances
The General Fund has an intrafund due to/from balance of $2,688. These balances are the result of cash
flow deficits within components of this fund.
-50-
NOTE 6 – LONG-TERM DEBT
A.Components of Long-Term Debt
Final %DODQFH –
Original Issue Interest Rate Issue Date Maturity Date End of Year
Governmental activities
General obligation bonds
Street Reconstruction Bonds of 2016A 760,000$ 2.00%05/01/2016 12/15/2026 40,000$
Improvement Bonds of 2018A 2,485,000$ –08/15/2018 12/15/2028 775,000
Improvement Bonds of 2019A 1,665,000$ 5.00%06/27/2019 12/15/2029 765,000
Improvement Bonds of 2021A 5,270,000$ –07/15/2021 12/15/2031 3,305,000
Improvement Bonds of 2021B 4,990,000$ 5.00%07/26/2021 12/15/2029 2,625,000
Improvement Bonds of 2022A 1,910,000$ –09/08/2022 12/15/2032 1,450,000
Improvement Bonds of 2023A 1,620,000$ 5.00%07/19/2023 12/15/2033 1,400,000
Total general obligation bonds 10,360,000
Improvement Bonds of 2015A 4,640,000$ –05/14/2015 12/15/2030 2,885,000
Improvement Bonds of 2016A 1,105,000$ 2.00%05/01/2016 12/15/2026 110,000
Improvement Bonds of 2017A 4,135,000$ –06/29/2017 12/15/2027 825,000
Improvement Bonds of 2018A 3,145,000$ –08/15/2018 12/15/2028 870,000
Improvement Bonds of 2024A 1,580,000$ 5.00%08/20/2024 12/15/2029 1,315,000
Improvement Bonds of 2025A 2,125,000$ –08/14/2025 12/15/2040 2,125,000
Total general obligation special
assessment bonds 8,130,000
General obligation revenue bonds
General Obligation Improvement
Bonds of 2015A 5,360,000$ –05/14/2015 12/15/2031 3,495,000
Premium (discount) on bonds payable 1,682,701
Subscription liabilities 543,449$ 2.60%08/15/2022 06/30/2028 169,802
Compensated absences payable 1,814,026
Total governmental activity
long-term liabilities 25,651,529
Business-type activities
General obligation revenue bonds
General Obligation Improvement
Bonds of 2018A 2,640,000$ –08/15/2018 12/15/2028 900,000
General Obligation Improvement
Bonds of 2024A 1,180,000$ –08/20/2024 12/15/2044 1,160,000
Total general obligation revenue bonds 2,060,000
Premium (discount) on bonds payable 152,283
Compensated absences payable 253,658
Total business-type activity
long-term liabilities 2,465,941
Total government-wide
long-term liabilities 28,117,470$
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NOTE 6 – LONG-TERM DEBT (CONTINUED)
B.Changes in Long-Term Debt
%DODQFH –
Beginning %DODQFH –Due Within
of Year Additions Deletions End of Year One Year
Governmental activities
Bonds payable
G.O. bonds 12,150,000$ –$ 1,790,000$ 10,360,000$ 1,890,000$
G.O. special assessment bonds 7,830,000 2,125,000 1,825,000 8,130,000 1,785,000
G.O. revenue bonds 4,010,000 – 515,000 3,495,000 530,000
Premium (discount) on bonds payable 1,919,978 118,690 355,967 1,682,701 –
Total bonds payable, net of premium (discount)25,909,978 2,243,690 4,485,967 23,667,701 4,205,000
Energy loan payable 148,731 – 148,731 – –
Subscription liabilities 285,857 – 116,055 169,802 129,228
Compensated absences payable 1,664,718 236,935 87,627 1,814,026 669,860
Governmental activities long-term liabilities 28,009,284$ 2,480,625$ 4,838,380$ 25,651,529$ 5,004,088$
Business-type activities
Bonds payable
G.O. revenue bonds 2,350,000$ –$ 290,000$ 2,060,000$ 320,000$
Premium (discount) on bonds payable 187,600 – 35,317 152,283 –
Total bonds payable, net of premium (discount)2,537,600 – 325,317 2,212,283 320,000
Compensated absences payable 225,891 50,991 23,224 253,658 99,293
Business-type activities long-term liabilities 2,763,491$ 50,991$ 348,541$ 2,465,941$ 419,293$
-52-
NOTE 6 – LONG-TERM DEBT (CONTINUED)
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
2026 1,890,000$ 423,765$ 1,785,000$ 336,866$ 530,000$ 99,450$ 129,228$ 4,427$
2027 1,955,000 340,665 1,685,000 245,713 550,000 86,200 20,027 1,088
2028 1,995,000 253,515 1,295,000 186,750 570,000 72,450 20,547 567
2029 1,880,000 164,965 1,075,000 133,000 590,000 55,350 – –
2030 1,015,000 82,465 695,000 91,250 615,000 37,650 – –
–1,625,000 97,665 715,000 272,750 640,000 19,200 – –
–– – 880,000 108,600 – – – –
10,360,000$ 1,363,040$ 8,130,000$ 1,374,929$ 3,495,000$ 370,300$ 169,802$ 6,082$
Subscription Liabilities
Governmental Activities
General Obligation G.O. Special Assessment G.O. Revenue
Year Ending
December 31,Principal Interest
2026 320,000$ 94,650$
2027 340,000 78,650
2028 365,000 61,650
2029 45,000 43,400
2030 50,000 41,150
–280,000 168,200
–340,000 106,200
–320,000 32,600
2,060,000$ 626,500$
Business-Type Activities
G.O. Revenue
D.Other Long-Term Liabilities
The City offers a number of benefits to its employees, including compensated absences payable. The details
of these various benefit liabilities are discussed elsewhere in these notes. Such benefits are financed
primarily from the General Fund, enterprise funds, and internal service funds.
-53-
NOTE 6 – 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.
General Obligation Special Assessment Bonds – Special assessment bonds were issued to finance various
improvements and will be repaid primarily from special assessments levied on the properties benefiting
from the improvements. Some issues, however, are partly financed by ad valorem tax levies. All special
assessment debt is backed by the full faith and credit of the City.
General Obligation Tax Increment Bonds – These bonds were issued for downtown redevelopment
projects. The additional tax increments resulting from increased tax capacity of the redeveloped properties
will be used to retire related debt.
General Obligation Revenue Bonds – These bonds were used to finance maintenance and building
improvements. They will be repaid with ad valorem taxes and revenue from the utilities . The bonds are
backed by the full faith and credit of the City.
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 was made
on June 19, 2025.
Subscription Liabilities – The City entered into an agreement to finance the use of technology software,
which calls for monthly principal and interest payments through 2028. This subscription liability is paid by
the General Fund. The total amount of the underlying technology subscriptions assets and the related
accumulated amortization is presented in Note 4 of the notes to basic financial statements.
Compensated Absences – This liability represents compensated absences balances as described in Note 1
of the notes to basic financial statements.
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, 2025 is $3,635,266.
-54-
NOTE 6 – LONG-TERM DEBT (CONTINUED)
G.Revenue Pledged
Future revenue pledged for the payment of long-term debt is as follows:
Percent of Remaining Principal Pledged
Use of Total Term of Principal and Interest Revenue
Bond Issue Proceeds Type Debt Service Pledge and Interest Paid Received
General Obligation Partial refunding Utility charges 100%–3,865,300$ 624,750$ 5,378,964$
Bonds of 2015A
General Obligation Water and sewer Utility charges 100%–992,000$ 328,500$ 11,055,719$
Bonds of 2018A improvements
General Obligation Water quality Utility charges 100%–1,694,500$ 86,830$ 2,062,778$
Bonds of 2024A improvements
Revenue Pledged Current Year
H.Legal Debt Margin
The City’s statutory debt limit is equal to 3 percent of estimated taxable market value of property located
within the City. The taxable market value totals $5,682,110,817, which calculates to a debt limit of
$170,463,325. 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 $10,360,000 of general obligation debt outstanding, leaving a debt margin of
$160,103,325.
NOTE 7 – NET POSITION/FUND BALANCES
A.Net Investment in Capital Assets
The government-wide Statement of Net Position at December 31, 2025 includes the City’s net investment
in capital assets calculated as follows:
Governmental Business-Type
Activities Activities Total
Net investment in capital assets:
Capital assets
Nondepreciable/amortized 105,899,905$ 4,511,232$ 110,411,137$
Depreciable, net of accumulated depreciation/amortization 78,038,199 75,438,631 153,476,830
Less capital-related long-term debt outstanding (22,154,802) (2,060,000) (24,214,802)
Less bond premiums (discounts)(1,682,701) (152,283) (1,834,984)
Total net investment in capital assets 160,100,601$ 77,737,580$ 237,838,181$
-55-
NOTE 7 – NET POSITION/FUND BALANCES (CONTINUED)
B.Classifications
At December 31, 2025, a summary of the City’s governmental fund balance classifications are as follows:
Debt Construction Trunk Nonmajor
General Fund Service Fund Fund Reserve Funds Total
Restricted
Future debt service –$ 3,148,328$ –$ –$ –$ 3,148,328$
Economic development – –– – 382,943 382,943
Forfeiture sales – –– – 107,195 107,195
Public safety – –– – 583,864 583,864
Capital improvements – –– – 1,161,718 1,161,718
Development – –– – 2,075,267 2,075,267
Communications – –– – 117,368 117,368
Tax increment – –– – 82,117 82,117
Total restricted – 3,148,328 – – 4,510,472 7,658,800
Assigned
Budget carryover 72,352 – – – – 72,352
Capital improvements – – 1,538,609 7,652,217 3,507,155 12,697,981
Future chip seal 121,132 – – – – 121,132
Shop with a cop 9,818 – – – – 9,818
Charitable gambling donations 58,208 – – – – 58,208
Tree planting 110,550 – – – – 110,550
Total assigned 372,060 – 1,538,609 7,652,217 3,507,155 13,070,041
Unassigned 14,030,286 – – – (7,250) 14,023,036
Total 14,402,346$ 3,148,328$ 1,538,609$ 7,652,217$ 8,010,377$ 34,751,877$
C.Minimum Unrestricted Fund Balance Policy
The City Council has formally adopted a fund balance policy regarding the minimum unrestricted fund
balance for the General Fund. The policy establishes that the City will strive to maintain an unrestricted
General Fund balance (which includes committed, assigned, and unassigned classifications) between
40.0 and 50.0 percent of the subsequent year’s General Fund budgeted expenditures. At December 31,
2025, the total fund balance of the General Fund was 59.8 percent of the subsequent year’s budgeted
expenditures and transfers out of $24,093,139.
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
-56-
NOTE 7 – NET POSITION/FUND BALANCES (CONTINUED)
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 8 – DEFINED BENEFIT PENSION PLANS - STATE-WIDE
A.Plan Description
The City participates in the following cost-sharing, multiple-employer defined benefit pension plans
administered by the PERA of Minnesota. These plan provisions are established and administered according
to Minnesota Statutes, Chapters 353 and 356. Minnesota Statutes Chapter 356 defines each plan’s financial
reporting requirements. The PERA’s defined benefit pension plans are tax qualified plans under
Section 401(a) of the Internal Revenue Code (IRC).
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, 2025:
Net Deferred Deferred
Pension Outflows of Inflows of Pension
Pension Plans Liabilities Resources Resources Expense
GERF 2,300,582$ 577,701$ 1,691,985$ (146,375)$
PEPFF 4,266,825 6,751,410 7,290,353 1,379,813
Total 6,567,407$ 7,329,111$ 8,982,338$ 1,233,438$
1.General Employees Retirement Fund (GERF)
Membership in the GERF includes employees of counties, cities, townships, schools in noncertified
positions, and other governmental entities whose revenues are derived from taxation, fees, or
assessments. Plan membership is required for any employee who is expected to earn more than
$425 in a month, unless the employee meets exclusion criteria.
2.Public Employees Police and Fire Fund (PEPFF)
Membership in the PEPFF includes full-time, licensed police officers and firefighters who meet the
membership criteria defined in Minnesota Statutes Section 353.64 and who are not earning service
credit in any other PERA retirement plan or a local relief association for the same service.
Employers can provide PEPFF coverage for part-time positions and certain other public safety
positions by submitting a resolution adopted by the entity’s governing body. The resolution must
state that the position meets plan requirements.
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NOTE 8 – DEFINED BENEFIT PENSION PLANS – STATE-WIDE (CONTINUED)
B.Benefits Provided
The PERA provides retirement, disability, and death benefits. Benefit provisions are established by state
statutes and can only be modified by the State Legislature. Vested, terminated employees who are entitled
to benefits, but are not receiving them yet, are bound by the provisions in effect at the time they last
terminated their public service. When a member is “vested,” they have earned enough service credit to
receive a lifetime monthly benefit after leaving public service and reaching an eligible retirement age.
Members who retire at or over their Social Security full retirement age with at least one year of service
qualify for a retirement benefit.
1.GERF Benefits
The GERF requires three years of service to vest. Benefits are based on a member’s highest average
salary for any five successive years of allowable service, age, and years of credit at termination of
service. Two methods are used to compute benefits for GERF members. Members hired prior to
July 1, 1989, receive the higher of the Step or Level formulas. Only the Level formula is used for
members hired after June 30, 1989. Under the Step formula, GERF members receive 1.20 percent
of the highest average salary for each of the first 10 years of service, and 1.70 percent for each
additional year. Under the Level formula, GERF members receive 1.70 percent of highest average
salary for all years of service. For members hired prior to July 1, 1989, a full retirement benefit is
available when age plus years of service equal 90, and normal retirement age is 65. Members can
receive a reduced retirement benefit as early as age 55 if they have three or more years of service.
Early retirement benefits are reduced by 0.25 percent for each month under age 65. Members with
30 or more years of service can retire at any age with a reduction of 0.25 percent for each month
the member is younger than age 62. The Level formula allows GERF members to receive a full
retirement benefit at age 65 if they were first hired before July 1, 1989 or at age 66 if they were
hired on or after July 1, 1989. Early retirement begins at age 55 with an actuarial reduction applied
to the benefit.
Benefit increases are provided to benefit recipients each January. The post-retirement increase is
equal to 50.00 percent of the cost of living adjustment (COLA) announced by the Social Security
Administration, with a minimum increase of at least 1.00 percent and a maximum of 1.50 percent.
The 2025 annual increase was 1.25 percent. Recipients that have been receiving the annuity or
benefit for at least a full year as of the June 30 before the effective date of the increase, will receive
the full increase. 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 prorated increase.
2.PEPFF Benefits
Benefits for PEPFF members first hired before July 1, 2010, are vested after three years of service.
Members hired on or after July 1, 2010, are 50.00 percent vested after five years of service, and
100.00 percent vested after 10 years. After five years, vesting increases by 10.00 percent each full
year of service until members are 100.00 percent vested after 10 years. Police and Fire Plan
members receive 3.00 percent of highest average salary for all years of service. Police and Fire
Plan members receive a full retirement benefit when they are age 55 and vested, or when their age
plus their years of service equals 90 or greater if they were first hired before July 1, 1989. Early
retirement starts at age 50, and early retirement benefits are reduced by 0.417 percent each month
members are younger than age 55.
Benefit increases are provided to benefit recipients each January. The post-retirement increase is
fixed at 1.00 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.
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 prorated increase.
-58-
NOTE 8 – DEFINED BENEFIT PENSION PLANS – STATE-WIDE (CONTINUED)
C.Contributions
Minnesota Statutes, Chapter 353 and 356 set the rates for employer and employee contributions.
Contribution rates can only be modified by the State Legislature.
1.GERF Contributions
General Plan members were required to contribute 6.50 percent of their annual covered salary in
fiscal year 2025, and the City was required to contribute 7.50 percent for General Plan members.
The City’s contributions to the GERF for the year ended December 31, 2025 were $487,715. The
City’s contributions were equal to the required contributions as set by state statutes.
2.PEPFF Contributions
Police and Fire Plan members were required to contribute 11.80 percent of their annual covered
salary in fiscal year 2025, and the City was required to contribute 17.70 percent for Police and Fire
Plan members. The City’s contributions to the PEPFF for the year ended December 31, 2025 were
$1,058,743. The City’s contributions were equal to the required contributions as set by state
statutes.
D.Pension Costs
1.GERF Pension Costs
At December 31, 2025, the City reported a liability of $2,300,582 for its proportionate share of the
GERF’s net pension liability. The City’s net pension liability reflected a reduction, due to the state
of Minnesota’s contribution of $16.0 million. The state of Minnesota is considered a nonemployer
contributing entity and the state’s contribution meets the definition of a special funding situation.
The state of Minnesota’s proportionate share of the net pension liability associated with the City
totaled $55,497.
CLW\’V SURSRUWLRQDWH VKDUH RI QHW SHQVLRQ OLDELOLW\2,300,582$
SWDWH’V SURSRUWLRQDWH VKDUH RI WKH QHW SHQVLRQ OLDELOLW\
associated with the City 55,497
Total 2,356,079$
The net pension liability was measured as of June 30, 2025, 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, 2024 through
June 30, 2025, relative to the total employer contributions received from all of the PERA’s
participating employers. The City’s proportionate share was 0.0694 percent at the end of the
measurement period and 0.0711 percent for the beginning of the period.
For the year ended December 31, 2025, the City recognized negative pension expense of $137,863
for its proportionate share of the GERF’s pension expense. In addition, the City recognized an
additional $8,512 as negative pension expense (and grant revenue) for its proportionate share of
the state of Minnesota’s contribution of $16.0 million to the GERF.
-59-
NOTE 8 – DEFINED BENEFIT PENSION PLANS – STATE-WIDE (CONTINUED)
At December 31, 2025, the City reported deferred outflows of resources and deferred inflows of
resources related to pensions from the following sources:
Deferred Deferred
Outflows Inflows
of Resources of Resources
Differences between expected and actual economic experience 219,195$ –$
Changes in actuarial assumptions 55,431 529,356
Net difference between projected and actual earnings
on pension plan investments – 915,423
Changes in proportion 57,494 247,206
Employer contributions subsequent to the
measurement date 245,581 –
Total 577,701$ 1,691,985$
The $245,581 reported as deferred outflows of resources related to pensions resulting from city
contributions subsequent to the measurement date will be recognized as a reduction of the net
pension liability in the year ending December 31, 2026. Other amounts reported as deferred
outflows and deferred inflows of resources related to pensions will be recognized in pension
expense as follows:
Pension
Year Ending Expense
December 31,Amount
2026 (312,279)$
2027 (544,622)$
2028 (339,433)$
2029 (163,531)$
2.PEPFF Pension Costs
At December 31, 2025, the City reported a liability of $4,266,825 for its proportionate share of the
PEPFF’s net pension liability. The net pension liability was measured as of June 30, 2025, 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 proportionate share 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, 2024 through June 30, 2025, relative to the total employer contributions
received from all of the PERA’s participating employers. The City’s proportionate share was
0.3642 percent at the end of the measurement period and 0.3669 percent for the beginning of the
period.
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NOTE 8 – DEFINED BENEFIT PENSION PLANS – STATE-WIDE (CONTINUED)
The state of Minnesota contributed $18.0 million to the PEPFF in the plan fiscal year ended
June 30, 2025. The contribution consisted of $9.0 million in direct state aid that meets the definition
of a special funding situation and $9.0 million in supplemental state aid that does not meet the
definition of a special funding situation. The $9.0 million direct state aid was paid on October 1,
2024. The direct state aid payment will increase by $17.7 million, which was paid on October 1,
2025. Thereafter, by October 1 of each year, the state will pay $26.7 million to the Police and Fire
Fund until the fund is 110.00 percent funded for a minimum of three consecutive years (on an
actuarial value of assets basis). The $9.0 million in supplemental state aid will continue until the
fund and the State Patrol Plan (administered by the Minnesota State Retirement System) are
100.00 percent funded for three consecutive years (on an actuarial value of assets basis). The state
of Minnesota’s proportionate share of the net pension liability associated with the City totaled
$147,909.
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SWDWH’V SURSRUWLRQDWH VKDUH RI WKH QHW SHQVLRQ OLDELOLW\
associated with the City 147,909
Total 4,414,734$
For the year ended December 31, 2025, the City recognized pension expense of $1,308,247 for its
proportionate share of the Police and Fire Plan’s pension expense. The City recognized $71,566 as
grant revenue and pension expense for its proportionate share of the state of Minnesota ’s pension
expense for the contribution of $9.0 million to the PEPFF special funding situation.
The state of Minnesota is not included as a nonemployer contributing entity in the Police and Fire
Pension Plan pension allocation schedules for the $9.0 million in supplemental state aid because
this contribution was not considered to meet the definition of a special funding situation. The City
recognized $97,233 for the year ended December 31, 2025, as revenue and an offsetting reduction
of net pension liability for its proportionate share of the state of Minnesota ’s on-behalf
contributions to the PEPFF.
At December 31, 2025, the City reported deferred outflows of resources and deferred inflows of
resources related to pensions from the following sources:
Deferred Deferred
Outflows Inflows
of Resources of Resources
Differences between expected and actual economic experience 1,971,409$ –$
Changes in actuarial assumptions 3,235,622 5,346,154
Net difference between projected and actual
earnings on pension plan investments – 1,904,344
Changes in proportion 969,152 39,855
Employer contributions subsequent to the
measurement date 575,227 –
Total 6,751,410$ 7,290,353$
-61-
NOTE 8 – DEFINED BENEFIT PENSION PLANS – STATE-WIDE (CONTINUED)
The $575,227 reported as deferred outflows of resources related to pensions resulting from city
contributions subsequent to the measurement date will be recognized as a reduction of the net
pension liability in the year ending December 31, 2026. 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
2026 $ 1,289,340
2027 $ (677,000)
2028 $ (1,900,407)
2029 $ 70,149
2030 $ 103,748
E.Long-Term Expected Return on Investments
The Minnesota State Board of Investment, which manages the investments of the PERA, prepares an
analysis of the reasonableness on a regular basis of the long-term expected rate of return using a
building-block method in which best-estimate ranges of expected future rates of return are developed for
each major asset class. These ranges are combined to produce an expected long-term rate of return by
weighting the expected future rates of return by the target asset allocation percentages. The target allocation
and best-estimates of geometric real rates of return for each major asset class are summarized in the
following table:
Asset Class
Domestic equity 33.50 %5.10 %
International equity 16.50 5.30 %
Fixed income 25.00 0.75 %
Private markets 25.00 5.90 %
Total 100.00 %
Long-Term Expected
Allocation
Target
Real Rate of Return
F.Actuarial Methods and Assumptions
The total pension liability for each of the cost-sharing defined benefit plans was determined by an actuarial
valuation as of June 30, 2025, using the entry-age normal actuarial cost method. The long-term rate of
return on pension plan investments used in the determination of the total liability is 7.00 percent. This
assumption is based on a review of inflation and investments return assumptions from a number of national
investment consulting firms. The review provided a range of investment return rates considered reasonable
by the actuary. An investment return of 7.00 percent is within that range.
Inflation is assumed to be 2.25 percent for the General Employees Plan and the Police and Fire Plan. Benefit
increases after retirement are assumed to be 1.50 percent for the General Employees Plan and 1.00 percent
for the Police and Fire Plan.
Salary growth assumptions in the General Employees Plan range in annual increments from 11.50 percent
after one year of service to 3.00 percent after 27 years of service. In the Police and Fire Plan, salary growth
assumptions range in annual increments from 10.75 percent after one year of service to 3.00 percent after
23 years of service.
-62-
NOTE 8 – DEFINED BENEFIT PENSION PLANS – STATE-WIDE (CONTINUED)
Mortality rates for the General Employees Plan are based on the Pub-2010 General Employee Mortality
Table. Mortality rates for the Police and Fire Plan are based on the Pub-2010 Public Safety Employee
Mortality tables. The tables are adjusted slightly to fit the PERA’s experience.
Actuarial assumptions for the General Employees Plan are reviewed every four years. The General
Employees Plan was last reviewed in 2022. The assumption changes were adopted by the Board and became
effective with the July 1, 2023 actuarial valuation. The Police and Fire Plan was reviewed in 2024. The
assumption changes were adopted by the Board and became effective with the July 1, 2025 actuarial
valuation.
The following changes in actuarial assumptions and plan provisions occurred in 2025:
1.GERF
CHANGES IN ACTUARIAL ASSUMPTIONS
•The combined service annuity loading factors increased from 15.00 percent to 19.00 percent
for vested terminated members and from 3.00 percent to 44.00 percent for nonvested,
terminated members.
•The assumed post-retirement benefit increase changed from 1.25 percent to 1.50 percent.
CHANGES IN PLAN PROVISIONS
•The post-retirement benefit increase formula changed to 100.00 percent of the Social Security
annual increase, between 1.00 percent and 1.75 percent, beginning January 1, 2026. If the
funded ratio (on a market value of assets basis) is less than 85.00 percent for the last
two consecutive annual valuations or is less than 80.00 percent in the most recent actuarial
valuation, the maximum is reduced to 1.50 percent. Previously, the benefit increase was
50.00 percent of the Social Security annual increase, between 1.00 percent and 1.50 percent.
•The 1.00 percent additional employer contribution is eliminated when the plan reaches
98.00 percent funded status (on an actuarial value of assets basis); this contribution was
previously scheduled to stop when the plan reached 100.00 percent funded status.
2.PEPFF
CHANGES IN ACTUARIAL ASSUMPTIONS
•Assumed rates of salary increases were reduced slightly.
•Assumed rates of retirement were adjusted, resulting in an overall increase in unreduced (full)
retirements and an overall increase in reduced (early) retirements.
•Assumed rates of withdrawal were modified; the new rates will increase predicted terminations,
especially in the first few years of employment.
•Assumed rates of disabled retirement were significantly increased, especially for ages over
age 30.
•Continued used of Pub-2010 Public Safety Mortality Table with rates adjusted to better fit
observed experience.
•Percent married assumption for female retirees lowered from 70.00 percent to 65.00 percent.
•Minor changes were made to form of payment assumptions for retirees.
•Minor changes were made to assumptions made with respect to missing participant data.
•The combined service annuity load changed from 33.00 percent to 13.00 percent for vested,
terminated members and from 2.00 percent to 38.00 percent for nonvested, terminated
members.
-63-
NOTE 8 – DEFINED BENEFIT PENSION PLANS – STATE-WIDE (CONTINUED)
CHANGES IN PLAN PROVISIONS
•The period of time needed for benefit recipients to receive their first benefit increase was
reduced by one year (from 36 months to 24 months for a full increase).
•The January 1, 2026 benefit increase changed from 1.00 percent to 3.00 percent; subsequent
January 1 increases will be 1.00 percent.
•The threshold to end the $9.0 million annual state aid contribution changed from the earlier of
July 1, 2048 or 90.00 percent funded for both PERA Police & Fire and MSRS State Patrol for
three consecutive years to 100.00 percent funded for both PERA Police & Fire and MSRS State
Patrol for three consecutive years (on an actuarial value of assets basis).
•The threshold to end the additional $9.0 million annual state aid contribution changed from the
earlier of July 1, 2048 or 100.00 percent funded for a minimum of three consecutive years to
110.00 percent funded for a minimum of three consecutive years (on an actuarial value of assets
basis).
•An additional $17.7 million in direct state aid will be paid annually each October 1 beginning
October 1, 2025 through June 30, 2048.
•Joint and survivor actuarial equivalent factors were updated to reflect changes in assumptions.
G.Discount Rate
The discount rate used to measure the total pension liability in 2025 was 7.00 percent. The projection of
cash flows used to determine the discount rate assumed that contributions from plan members and
employers will be made at rates set in Minnesota Statutes. Based on these assumptions, the fiduciary net
position of the General Employees Fund and the Police and Fire Fund were projected to be available to
make all projected future benefit payments of current plan members. Therefore, the long-term expected rate
of return on pension plan investments was applied to all periods of projected benefit payments to determine
the total pension liability.
H.Pension Liability Sensitivity
The following table presents the City’s proportionate share of the net pension liability for all plans it
participates in, calculated using the discount rate disclosed in the preceding section, as well as what the
City’s proportionate share of the net pension liability would be if it were calculated using a discount rate
1.00 percentage point lower or 1.00 percentage point higher than the current discount rate:
CLW\’V SURSRUWLRQDWH VKDUH RI
the GERF net pension liability
CLW\’V SURSRUWLRQDWH VKDUH RI
the PEPFF net pension liability
(6.00%)(7.00%)(8.00%)
1% Decrease in
Discount Rate
Current 1% Increase in
Discount Rate Discount Rate
11,179,986$ 4,266,825$ (1,409,971)$
5,587,752$ 2,300,582$ (366,053)$
I.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 internet at www.mnpera.org.
-64-
NOTE 9 – DEFINED CONTRIBUTION PLAN
Councilmembers of the City are covered by the Public Employees Defined Contribution Plan (PEDCP), a
multiple-employer deferred compensation plan administered by the PERA. The PEDCP is a tax qualified
plan under Section 401(a) of the IRC, and all contributions by or on behalf of employees are tax deferred
until time of withdrawal.
Plan benefits depend solely on amounts contributed to the plan plus investment earnings, less administrative
expenses. Minnesota Statutes, Chapter 353D and 356, specifies plan provisions, including the employee
and employer contribution rates for those qualified personnel who elect to participate. An eligible elected
official who decides to participate contributes 5.00 percent of their salary, which is matched by the elected
official’s employer. For ambulance service personnel, employer contributions are determined by the
employer, and for salaried employees, contributions must be a fixed percentage of salary. Employer
contributions for volunteer personnel may be a unit value for each call or period of alert duty. Employees
who are paid for their services may elect to make member contributions in an amount not to exceed the
employer share. Employer and employee contributions are combined and used to purchase shares in one or
more of the seven accounts of the Minnesota Supplemental Investment Fund. For administering the plan,
the PERA receives 2.00 percent of employer contributions and 25 hundredths of 1.00 percent (0.25 percent)
of the assets in each member’s account annually.
Total contributions made by the City during fiscal year 2025 were:
Required Rate
for Employees
Employee Employer Employee Employer and Employers
2,407$ 2,407$ 5.00%5.00%5.00%
Contribution Amount Percentage of Covered Payroll
NOTE 10 – 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,
2024, the plan covered 22 active firefighters and 11 vested terminated firefighters whose pension benefits
are deferred. The plan was established November 1, 1957, and the Association operates under the provisions
of Minnesota Laws 1965, Chapter 446, as amended and Minnesota Statutes, Chapters 69 and 424A. It is
governed by a Board of Trustees (the Board) made up of six members elected by the members of the
Association for three-year terms, and the mayor, city manager, and fire chief, who serve as ex officio voting
members of the Board of Trustees.
The Association maintains a separate Special Fund to accumulate assets to fund the retirement benefits
earned by the Department’s membership. Funding for the Association is derived from an insurance
premium tax in accordance with the Volunteer Firefighter’s Relief Association Financing Guidelines Act.
Funds are also derived from investment income.
-65-
NOTE 10 – DEFINED BENEFIT PENSION PLANS – FIRE RELIEF ASSOCIATION
(CONTINUED)
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 prior to his/her resignation, and who has reached the age of
50 years or more, $10,500 per year of service. A member who has served in the Department for at least
20 years but has not reached the age of 50, may retire and be placed on the deferred pension roll until he/she
reaches the age of 50. Members who retire with less than 20 years of service, have reached the age of 50,
and have completed at least 10 years of active membership are entitled to a reduced service pension.
Disability Benefits
If a member of the Association becomes totally or permanently disabled, the Association shall pay to such
members the lump sum of $10,500 for each year that they have served as an active member of the
Department.
Death Benefit
Upon the death of any member of the Association who is in good standing at the time of their death, the
Association shall pay to the surviving spouse, if any, and if there is no surviving spouse, to surviving child
or children, if any, and if no child or children survive, to the estate of such deceased member under 10 years
of service, the sum of $10,500 for each year that they served as an active member of the Department.
C.Contributions
Minnesota Statutes Chapter 424A authorizes 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
$449,938 in fire state aid to the plan on behalf of the Department for the year ended December 31, 2025,
which was recorded as revenue. Required employer contributions are calculated annually based on statutory
provisions. The City’s statutorily-required contributions to the plan for the year ended December 31, 2025
were $449,938. The City’s contributions were equal to the required contributions as set by state statutes
plus an additional $20,000 voluntary contribution. Furthermore, firefighters have no obligation to
contribute to the plan.
D.Pension Costs
At December 31, 2025, the City reported a net pension liability (asset) of ($1,945,736) for the plan. The net
pension liability (asset) was measured as of December 31, 2024. The total pension liability used to calculate
the net pension liability (asset) in accordance with Governmental Accounting Standards Board (GASB)
Statement No. 68 was determined by applying an actuarial formula to specific census data certified by the
Department as of December 31, 2024.
For the year ended December 31, 2025, the City recognized pension expense of $696,583. The City also
recognized $392,220 as revenue for the state of Minnesota’s on-behalf contributions to the Department.
-66-
NOTE 10 – DEFINED BENEFIT PENSION PLANS – FIRE RELIEF ASSOCIATION
(CONTINUED)
The following table presents the changes in net pension liability (asset) during the year:
Total Pension Plan Fiduciary Net Pension
Liability Net Position Liability (Asset)
Beginning balance 3,688,065$ 4,979,157$ (1,291,092)$
Changes for the year
Service cost 123,149 – 123,149
Interest on pension liability (asset)200,624 – 200,624
Assumption changes (46,669) – (46,669)
Municipal contributions – 20,000 (20,000)
Projected investment earnings – 278,639 (278,639)
Contributions (state)– 375,220 (375,220)
Asset (gain) loss (166,863) 108,550 (275,413)
Benefit payments (644,204) (644,204) –
Administrative expenses – (17,524) 17,524
Total net changes (533,963) 120,681 (654,644)
Ending balance 3,154,102$ 5,099,838$ (1,945,736)$
At December 31, 2025, 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 139,485$ –$
Changes in actuarial assumptions 6,645 51,230
Difference between expected and actual economic experience – 197,875
State aid to the City subsequent to the measurement date – 449,938
Contributions from the City subsequent to the measurement date 449,938 –
Total 596,068$ 699,043$
Deferred outflows of resources totaling $449,938 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, 2026. Deferred inflows of resources totaling $449,938 related to state aid
received subsequent to the measurement date will be recognized for its impact on the net pension liability
in the year ending December 31, 2026. Other amounts reported as deferred outflows and inflows of
resources related to the plan will be recognized in pension expense as follows:
Pension
Year Ending Expense
December 31,Amount
2026 27,737$
2027 69,586$
2028 (107,416)$
2029 (57,300)$
2030 (35,582)$
-67-
NOTE 10 – DEFINED BENEFIT PENSION PLANS – FIRE RELIEF ASSOCIATION
(CONTINUED)
E.Actuarial Methods and Assumptions
The total pension liability (asset) at December 31, 2025 was determined using the entry-age normal
actuarial cost method and the following actuarial assumptions:
Retirement eligibility at 100.00 percent service pension at age 50 with 20 years of service, early
vested retirement at age 50 with 10 years of service vested at 60.00 percent and increased by
4.00 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
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The 6.25 percent long-term expected rate of return on pension plan investments has been set based on the
plan’s target investment allocation, along with long-term return expectations by asset class. When there is
sufficient historical evidence of market outperformance, historical average returns are considered.
The discount rate changed from 5.75 to 6.25 percent for 2025.
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 13.00 %3.30 %
Fixed income 29.00 4.70 %
Equities 58.00 7.90 %
Total 100.00 %6.25 %
Weight
Portfolio
Class Return
Expected
F.Discount Rate
The discount rate used to measure the total pension liability was 6.25 percent. The discount rate was
projected using expected benefit payments and expected asset returns. Expected benefit payments by year
were discounted using the expected asset return assumption for years in which the assets were sufficient to
pay all benefit payments. Any remaining benefit payments after the pension assets are exhausted are
discounted at the municipal bond rate. The equivalent single rate is the discount rate.
G.Pension Liability (Asset) Sensitivity
The following presents the City’s net pension liability (asset) for the plan, calculated using the discount rate
disclosed in the preceding paragraph, as well as what the City’s net pension liability (asset) would be if it
were calculated using a discount rate 1 percent lower or 1 percent higher than the current discount rate:
1% Decrease in Current 1% Increase in
Discount Rate Discount Rate Discount Rate
(5.25%)(6.25%)(7.25%)
Net pension liability (asset)(1,851,305)$ (1,945,736)$ (2,035,791)$
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NOTE 10 – DEFINED BENEFIT PENSION PLANS – FIRE RELIEF ASSOCIATION
(CONTINUED)
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, 4646 Dakota Street SE, Prior Lake, Minnesota 55372.
NOTE 11 – 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 $79,922.
Contributions for OPEB are paid by the General Fund and enterprise funds.
D.Membership
Membership in the Plan consisted of the following as of the latest actuarial valuation:
Retirees and beneficiaries receiving benefits 8
Active plan members 112
Total members 120
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NOTE 11 – OTHER POST-EMPLOYMENT BENEFITS (OPEB) PLAN (CONTINUED)
E.Total OPEB Liability of the City
The City’s total OPEB liability of $1,721,653 at year-end was measured as of January 1, 2025 and was
determined by an actuarial valuation as of January 1, 2025.
F.Changes in the Total OPEB Liability
Total OPEB
Liability
Beginning balance 986,051$
Changes for the year
Service cost 92,570
Interest 41,632
Assumption changes (38,082)
Difference between expected and actual
experience 715,875
%HQHILW SD\PHQWV – HPSOR\HUILQDQFHG (76,393)
Total net changes 735,602
Ending balance 1,721,653$
G.Actuarial Methods and Assumptions
The total OPEB liability was determined by an actuarial valuation as of January 1, 2024, 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 4.20%
20-year municipal bond yield 4.20%
Inflation rate 2.50%
Salary increases Service graded table
Healthcare trend rate 6.50% , grading to 5.00% over 6 years and then 4.00% over the next 48 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 4.20 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.
Mortality rates were based on Pub-2010 Public Retirement Headcount-Weighted Mortality Tables with
MP-2021 Generational Improvement Scale.
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.
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NOTE 11 – OTHER POST-EMPLOYMENT BENEFITS (OPEB) PLAN (CONTINUED)
Assumption changes since the prior measurement date include the following:
•The healthcare trend rates were changed to better anticipate short -term and long-term medical
increases.
•The retirement, withdrawal, and salary increase rates for non-police employees were updated to
reflect the latest experience study.
•The discount rate was changed from 4.00 percent to 4.20 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
Total OPEB liability 1,920,899$ 1,552,102$
3.20% 5.20%
1% Decrease in 1% Increase in
Discount Rate Discount Rate
Current
Discount Rate
1,721,653$
4.20%
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 healthcare cost trend rates that are 1 percentage point lower or
1 percentage point higher than the current healthcare cost trend rates:
OPEB healthcare trend rate
Total OPEB liability 1,529,693$ 1,950,745$
4.00%, then 3.00%6.00%, then 5.00%5.00%, then 4.00%
1,721,653$
1% Decrease in 1% Increase in
5.50% decreasing to 7.50% decreasing to
Healthcare Trend Rate
6.50% decreasing to
Healthcare Trend Rate Healthcare Trend Rate
Current
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 $195,082. As of year-end, the City
reported deferred outflows of resources and deferred inflows of resources related to OPEB from the
following sources:
Deferred Deferred
Outflows Inflows
of Resources of Resources
Changes in actuarial assumptions 74,372$ 33,852$
Difference between expected and actual economic experience 649,923 163,014
Contributions from the City subsequent to the measurement date 79,922 –
804,217$ 196,866$
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NOTE 11 – OTHER POST-EMPLOYMENT BENEFITS (OPEB) PLAN (CONTINUED)
Deferred outflows of resources totaling $79,922 related to OPEB resulting from city contributions to the
Plan subsequent to the measurement date will be recognized as a reduction of the total OPEB liability in
the year ending December 31, 2026. Other amounts reported as deferred outflows and inflows of resources
related to the plan will be recognized in OPEB expense as follows:
OPEB
Year Ending Expense
December 31 Amount
2026 60,880$
2027 60,895$
2028 78,736$
2029 78,736$
2030 78,733$
Thereafter 169,449$
NOTE 12 – STEWARDSHIP AND ACCOUNTABILITY
Deficit Net Position
As of December 31, 2025, the Severance Compensation Internal Service Fund had a deficit net position of
$1,060,062. This deficit will be eliminated by future charges for services. The Tax Increment Nonmajor
Capital Projects Fund had a deficit fund balance of $7,250. This deficit will be funded by future tax
increment.
NOTE 13 – TAX ABATEMENT AGREEMENTS
The City, in order to spur economic development and redevelopment, has entered into private development
and redevelopment agreements to encourage a developer to construct, expand, or improve new or existing
properties and buildings or clean-up and redevelop blighted areas. The City currently has the following
agreements that would be considered tax abatements.
Outstanding
Amount Principal Date of
Abated During Balance Required
Name Purpose the Fiscal Year at Year-End Decertification
5-1 Premier Dance 10,000 square foot commercial facility to
be used as a dance studio 13,031$ 43,295$ 12/31/2034
1-5 Gateway Center Acquisition,construction,and equipping
of a 170-unit multi-family senior housing
development 72,044$ 787,789$ 12/31/2034
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NOTE 13 – TAX ABATEMENT AGREEMENTS (CONTINUED)
The City is authorized to create a tax increment financing plan under Minnesota Statutes, Chapter 469.175.
The criteria that must be met under the state statutes are that, in the opinion of the municipality:
•The proposed development or redevelopment would not reasonably be expected to occur solely
through private investment within the reasonably foreseeable future;
•The increased market value of the site that could reasonably be expected to occur without the use
of tax increment financing would be less than the increase in the market value estimated to result
from the proposed development after subtracting the present value of the projected tax increments
for the maximum duration of the district permitted by the plan. The requirements of this item do
not apply if the district is a housing district;
•The tax increment financing plan conforms to the general plan for the development or
redevelopment of the municipality as a whole; and
•The tax increment financing plan will afford maximum opportunity, consistent with the sound
needs of the municipality as a whole, for the development or redevelopment of the project by
private enterprise.
The City has entered into private development agreements regarding certain tax increment properties. The
vehicle used for this reimbursement is called a tax increment revenue note.
These notes provide for the payment of principal, equal to the developer’s costs, plus interest at a set rate.
Payments on the loan will be made at the lesser of the note payment or the actual net tax increment received
(or a reduced percentage received in certain cases) during specific years as stated in the agreement.
Payments are first applied to accrued interest and then to the principal balance. The note is canceled at the
end of the agreement term, whether or not the note has been repaid. Any additional tax increments received
in years following the term are retained by the City.
The outstanding principal balances as of December 31, 2025 for these agreements are listed on the previous
page. These amounts are not included in long-term debt because the nature of these notes is that repayment
is required only if sufficient tax increments are received. The City’s position is that these are obligations to
assign future and uncertain revenue sources and, as such, is not actual debt in-substance.
NOTE 14 – COMMITMENTS AND CONTINGENCIES
A.Federal and State Funding
Amounts received or receivable from federal and state agencies are subject to agency audit and adjustment.
Any disallowed claims, including amounts already collected, may constitute a liability of the applicable
funds. The amount, if any, of funds that may be disallowed by the agencies cannot be determined at this
time although the City expects such amounts, if any, to be immaterial.
B.Legal Claims
The City has the usual and customary type of miscellaneous legal claims pending at year-end. Although the
outcome of these lawsuits is not presently determinable, the City’s management believes that the City will
not incur any material monetary loss resulting from these claims. No loss has been recorded on the City ’s
financial statements relating to these claims.
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NOTE 14 – COMMITMENTS AND CONTINGENCIES (CONTINUED)
C.Construction Contracts
The City has awarded contracts for various construction and remodeling projects. The City’s commitment
for uncompleted work on these contracts at December 31, 2025 is $867,206.
D.Tax Increment Districts
The City’s tax increment districts are subject to review by the Office of the State Auditor. Any disallowed
claims or misuse of tax increments could become a liability of the applicable fund. Management has
indicated that they are not aware of any instances of noncompliance, which would have a material effect
on the financial statements.
E.Water Purchase Agreement
To meet the City’s water needs as it continues to grow, the City entered into a Water Purchase and Facility
Expansion Agreement with the Shakopee Mdewakanton Sioux Community. The agreement can help supply
additional water to the City and will have future expansion available to meet the City’s long-term needs.
This approach provides the City with the flexibility to evaluate the pace and timing of development in the
Orderly Annexation Area before a substantial investment is needed to construct the expansion of the water
treatment plant. The initial improvements, combined with the long-term water purchase agreement, could
provide the City with enough water capacity for the next 15 to 20 years, depending on the rate of
development.
REQUIRED SUPPLEMENTARY INFORMATION
Proportionate
Share of the
City’s Net Pension
Proportionate Liability and City’s
Share of the the City’s Proportionate Plan Fiduciary
State of Share of the Share of the Net Position
City’s City’s Minnesota’s State of Net Pension as a
PERA Fiscal Proportion Proportionate Proportionate Minnesota’s Liability as a Percentage
Year-End Date of the Net Share of the Share of the Share of the City’s Percentage of of the Total
(Measurement Pension Net Pension Net Pension Net Pension Covered Covered Pension
Date)Liability Liability Liability Liability Payroll Payroll Liability
06/30/2016 0.0691% 5,610,578$ 73,274$ 5,683,852$ 4,285,600$ 130.92% 68.9%
06/30/2017 0.0692% 4,417,682$ 55,547$ 4,473,229$ 4,457,941$ 99.10% 75.9%
06/30/2018 0.0655% 3,633,671$ 119,282$ 3,752,953$ 4,405,847$ 82.47% 79.5%
06/30/2019 0.0679% 3,754,038$ 116,662$ 3,870,700$ 4,803,433$ 78.15% 80.2%
06/30/2020 0.0714% 4,280,758$ 132,000$ 4,412,758$ 5,090,738$ 84.09% 79.1%
06/30/2021 0.0728% 3,108,888$ 94,910$ 3,203,798$ 5,239,605$ 59.33% 87.0%
06/30/2022 0.0728% 5,765,783$ 169,184$ 5,934,967$ 5,454,052$ 105.72% 76.7%
06/30/2023 0.0766% 4,283,385$ 118,061$ 4,401,446$ 6,093,842$ 70.29% 83.1%
06/30/2024 0.0711% 2,627,523$ 67,942$ 2,695,465$ 6,007,302$ 43.74% 89.1%
06/30/2025 0.0694% 2,300,582$ 55,497$ 2,356,079$ 6,287,438$ 36.59% 90.8%
Contributions Contributions
in Relation to as a
Statutorily the Statutorily Contribution Percentage
Required Required Deficiency Covered of Covered
Contributions Contributions (Excess)Payroll Payroll
332,258$ 332,258$ –$ 4,430,122$ 7.50%
328,001$ 328,001$ –$ 4,373,614$ 7.50%
344,234$ 344,234$ –$ 4,589,776$ 7.50%
374,803$ 374,803$ –$ 4,999,585$ 7.50%
395,820$ 395,820$ –$ 5,278,601$ 7.50%
406,799$ 406,799$ –$ 5,423,990$ 7.50%
420,458$ 420,458$ –$ 5,606,111$ 7.50%
447,938$ 447,938$ –$ 5,972,500$ 7.50%
459,747$ 459,747$ –$ 6,121,985$ 7.51%
487,715$ 487,715$ –$ 6,502,842$ 7.50% 12/31/2025
12/31/2024
12/31/2020
12/31/2020
Year-End Date
12/31/2017
12/31/2018
12/31/2019
12/31/2021
12/31/2021
12/31/2022
12/31/2022
12/31/2023
12/31/2023
12/31/2016
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
Year Ended December 31, 2025
City Fiscal
Year-End Date
12/31/2016
12/31/2017
12/31/2025
Year Ended December 31, 2025
12/31/2018
12/31/2019
City Fiscal
12/31/2024
Schedule of City Contributions
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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
06/30/2016 0.2380% 9,551,354$ –$ 9,551,354$ 2,294,383$ 416.29% 63.9%
06/30/2017 0.2360% 3,186,282$ –$ 3,186,282$ 2,425,426$ 131.37% 85.4%
06/30/2018 0.2463% 2,625,304$ –$ 2,625,304$ 2,595,948$ 101.13% 88.8%
06/30/2019 0.2569% 2,734,960$ –$ 2,734,960$ 2,713,440$ 100.79% 89.3%
06/30/2020 0.2570% 3,387,534$ 79,788$ 3,467,322$ 3,019,145$ 112.20% 87.2%
06/30/2021 0.2638% 2,036,257$ 91,525$ 2,127,782$ 3,117,270$ 65.32% 93.7%
06/30/2022 0.2998% 13,046,112$ 569,932$ 13,616,044$ 3,640,885$ 358.32% 70.5%
06/30/2023 0.3003% 5,185,791$ 208,890$ 5,394,681$ 3,943,912$ 131.49% 86.5%
06/30/2024 0.3669% 4,827,563$ 184,025$ 5,011,588$ 5,081,238$ 95.01% 90.2%
06/30/2025 0.3642% 4,266,825$ 147,909$ 4,414,734$ 5,526,882$ 77.20% 91.8%
Contributions Contributions
in Relation to as a
Statutorily the Statutorily Contribution Percentage
Required Required Deficiency Covered of Covered
Contributions Contributions (Excess)Payroll Payroll
377,586$ 377,586$ –$ 2,337,729$ 16.15%
400,549$ 400,549$ –$ 2,472,531$ 16.20%
431,541$ 431,541$ –$ 2,666,989$ 16.18%
498,625$ 498,625$ –$ 2,941,707$ 16.95%
555,781$ 555,781$ –$ 3,139,767$ 17.70%
596,631$ 596,631$ –$ 3,370,797$ 17.70%
668,511$ 668,511$ –$ 3,775,388$ 17.71%
774,423$ 774,423$ –$ 4,375,283$ 17.70%
946,330$ 946,330$ –$ 5,346,497$ 17.70%
1,058,743$ 1,058,743$ –$ 5,981,602$ 17.70%
12/31/2025
12/31/2025
12/31/2016
12/31/2021
12/31/2022
12/31/2020
City Fiscal
Year-End Date
12/31/2016
12/31/2020
12/31/2017
12/31/2018
12/31/2019
12/31/2021
12/31/2023
12/31/2022
12/31/2024
CITY OF PRIOR LAKE
12/31/2017
12/31/2018
12/31/2019
Schedule of City Contributions
Year Ended December 31, 2025
PERA – Public Employees Police and Fire Fund
Schedule of City’s and Nonemployer Proportionate Share of Net Pension Liability
Year Ended December 31, 2025
PERA – Public Employees Police and Fire Fund
City Fiscal
12/31/2023
Year-End Date
12/31/2024
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City fiscal year-end dated December 31,2016 2017 2018 2019
Measurement period – December 31,2015 2016 2017 2018
Total pension liability
Service cost 109,387$ 110,441$ 132,893$ 151,350$
Interest 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 373,041 330,335 436,522 (326,048)
Total pension liability – beginning 2,736,744 3,109,785 3,440,120 3,876,642
Total pension liability – ending 3,109,785$ 3,440,120$ 3,876,642$ 3,550,594$
Plan fiduciary net position
Contributions (state and local)228,087$ 235,891$ 237,182$ 247,610$
Net investment income (169,276) 320,811 640,986 (262,184)
Benefit payments – (34,403) (209,373) (691,031)
Administrative costs (6,640) (9,160) (120) (2,644)
Net change in plan fiduciary net position 52,171 513,139 668,675 (708,249)
Total plan fiduciary net position – beginning 3,664,632 3,716,803 4,229,942 4,898,617
Total plan fiduciary net position – ending 3,716,803$ 4,229,942$ 4,898,617$ 4,190,368$
Net pension liability (asset) – ending (607,018)$ (789,822)$ (1,021,975)$ (639,774)$
Plan fiduciary net position as a percentage
of the total pension liability 119.52%122.96%126.36%118.02%
CITY OF PRIOR LAKE
Prior Lake Fire Relief Association
Schedule of Changes in the Relief Association’s
Net Pension Liability (Asset) and Related Ratios
(Last Ten Years)
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2020 2021 2022 2023 2024 2025
2019 2020 2021 2022 2023 2024
153,304$ 157,137$ 147,320$ 151,003$ 120,145$ 123,149$
197,843 193,390 194,644 196,874 214,058 200,624
– (42,606) – (70,586) – (166,863)
(213,500) (658,375) (401,000) (209,168) (497,485) (644,204)
– – – (24,682) – (46,669)
– 254,366 – 274,789 – –
137,647 (96,088) (59,036) 318,230 (163,282) (533,963)
3,550,594 3,688,241 3,592,153 3,533,117 3,851,347 3,688,065
3,688,241$ 3,592,153$ 3,533,117$ 3,851,347$ 3,688,065$ 3,154,102$
253,651$ 271,275$ 262,564$ 316,956$ 357,782$ 395,220$
685,784 357,043 468,887 (596,082) 411,317 387,189
(213,500) (658,375) (401,000) (209,168) (497,485) (644,204)
– (13,666) – (5,569) (1,625) (17,524)
725,935 (43,723) 330,451 (493,863) 269,989 120,681
4,190,368 4,916,303 4,872,580 5,203,031 4,709,168 4,979,157
4,916,303$ 4,872,580$ 5,203,031$ 4,709,168$ 4,979,157$ 5,099,838$
(1,228,062)$ (1,280,427)$ (1,669,914)$ (857,821)$ (1,291,092)$ (1,945,736)$
133.30%135.65%147.26%122.27%135.01%161.69%
-77-
Contributions in
Relation to the
Statutorily Statutorily Contribution Voluntary
Required Required Deficiency City
Contributions Contributions (Excess)Contribution
215,891$ 215,891$ –$ 20,000$
217,182$ 217,182$ –$ 20,000$
225,610$ 225,610$ –$ 20,000$
234,651$ 234,651$ –$ 20,000$
247,275$ 247,275$ –$ 20,000$
260,564$ 260,564$ –$ 20,000$
293,956$ 293,956$ –$ 20,000$
334,782$ 334,782$ –$ 20,000$
372,220$ 372,220$ –$ 20,000$
449,938$ 449,938$ –$ –$
12/31/2020
12/31/2025
12/31/2021
12/31/2022
12/31/2024
12/31/2023
CITY OF PRIOR LAKE
Prior Lake Fire Relief Association
Schedule of City Contributions
Year Ended December 31, 2025
(Last Ten Years)
12/31/2019
City Fiscal
Year-End Date
12/31/2016
12/31/2017
12/31/2018
-78-
2018 2019 2020 2021 2022 2023 2024 2025
Total OPEB liability
Service cost 61,214$ 62,717$ 64,598$ 75,099$ 77,355$ 57,646$ 59,375$ 92,570$
Interest 29,555 31,270 32,188 35,042 22,440 22,740 39,498 41,632
Changes of assumptions – (37,343) – 148,752 – (194,243) – (38,082)
Differences between expected and
actual experiences – (123,346) – (12,906) – 37,657 – 715,875
Benefit payments (37,688) (42,907) (28,422) (36,020) (60,688) (69,560) (81,024) (76,393)
Net change in total OPEB liability 53,081 (109,609) 68,364 209,967 39,107 (145,760) 17,849 735,602
Total OPEB liability – beginning of year 853,052 906,133 796,524 864,888 1,074,855 1,113,962 968,202 986,051
Total OPEB liability – end of year 906,133$ 796,524$ 864,888$ 1,074,855$ 1,113,962$ 968,202$ 986,051$ 1,721,653$
Covered employee payroll 6,560,761$ 7,134,065$ 7,348,087$ 8,306,510$ 8,555,705$ 9,121,595$ 9,395,243$ 11,340,539$
Total OPEB liability as a percentage
of covered employee payroll 13.81% 11.17% 11.77% 12.94% 13.02% 10.61% 10.50% 15.18%
Note:
Fiscal Year-End
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, 2025
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.
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THIS PAGE INTENTIONALLY LEFT BLANK
CITY OF PRIOR LAKE
Notes to Required Supplementary Information
December 31, 2025
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PERA – GENERAL EMPLOYEES RETIREMENT FUND
2025 CHANGES IN ACTUARIAL ASSUMPTIONS
•The combined service annuity loading factors increased from 15.00 percent to 19.00 percent
for vested terminated members and from 3.00 percent to 44.00 percent for nonvested,
terminated members.•The assumed post-retirement benefit increase changed from 1.25 percent to 1.50 percent.
2025 CHANGES IN PLAN PROVISIONS
•The post-retirement benefit increase formula changed to 100.00 percent of the Social Security
annual increase, between 1.00 percent and 1.75 percent , beginning January 1, 2026. If the
funded ratio (on a market value of assets basis) is less than 85.00 per cent for the last
two consecutive annual valuations or is less than 80.00 percent in the most recent actuarial
valuation, the maximum is reduced to 1.50 percent. Previously, the benefit increase was
50.00 percent of the Social Security annual increase, between 1.00 percent and 1.50 percent.•The 1.00 percent additional employer contribution is eliminated when the plan reaches
98.00 percent funded status (on an actuarial value of assets basis); this contribution was
previously scheduled to stop when the plan reached 100.00 percent funded status.
2024 CHANGES IN ACTUARIAL ASSUMPTIONS
•Rates of merit and seniority were adjusted, resulting in slightly higher rates.
•Assumed rates of retirement were adjusted as follows: increase the rate of assumed unreduced
retirements, slight adjustments to Rule of 90 retirement rates, and slight adjustments to early
retirement rates for Tier 1 and Tier 2 members.
•Minor increase in assumed withdrawals for males and females.
•Lower rates of disability.
•Continued use of Pub-2010 General Mortality Table, with slight rate adjustments as
recommended in the most recent experience study.
•Minor changes to form of payment assumptions for male and female retirees.•Minor changes to assumptions made with respect to missing participant data.
2024 CHANGES IN PLAN PROVISIONS
•The workers’ compensation offset for disability benefits was eliminated. The actuarial
equivalent factors were updated to reflect the changes in assumptions.
2023 CHANGES IN ACTUARIAL ASSUMPTIONS
•The investment return assumption and single discount rate were changed from 6.50 percent to
7.00 percent.
2023 CHANGES IN PLAN PROVISIONS
•An additional one-time direct state aid contribution of $170.1 million will be contributed to the
Plan on October 1, 2023.
•The vesting period of those hired after June 30, 2010, was changed from five years of allowable
service to three years of allowable service.
•The benefit increase delay for early retirements on or after January 1, 2024, was eliminated.
•A one-time, noncompounding benefit increase of 2.50 percent minus the actual
2024 adjustment will be payable in a lump sum for calendar year 2024 by March 31, 2024.
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PERA – GENERAL EMPLOYEES RETIREMENT FUND (CONTINUED)
2022 CHANGES IN ACTUARIAL ASSUMPTIONS
•The mortality improvement scale was changed from Scale MP-2020 to Scale MP-2021.
2021 CHANGES IN ACTUARIAL ASSUMPTIONS
•The investment return and single discount rates were changed from 7.50 percent to
6.50 percent, for financial reporting purposes.
•The mortality improvement scale was changed from Scale MP-2019 to Scale MP-2020.
2020 CHANGES IN ACTUARIAL ASSUMPTIONS
•The price inflation assumption was decreased from 2.50 percent to 2.25 percent.
•The payroll growth assumption was decreased from 3.25 percent to 3.00 percent.
•Assumed salary increase rates were changed as recommended in the June 30, 2019 experience
study. The net effect is assumed rates that average 0.25 percent less than previous rates.
•Assumed rates of retirement were changed as recommended in the June 30, 2019 experience
study. The changes result in more unreduced (normal) retirements and slightly fewer
Rule of 90 and early retirements.
•Assumed rates of termination were changed as recommended in the June 30, 2019 experience
study. The new rates are based on service and are generally lower than the previous rates for
years two through five, and slightly higher thereafter.
•Assumed rates of disability were changed as recommended in the June 30, 2019 experience
study. The change results in fewer predicted disability retirements for males and females.
•The base mortality table for healthy annuitants and employees was changed from the RP-2014
Table to the Pub-2010 General Mortality Table, with adjustments. The base mortality table for
disabled annuitants was changed from the RP-2014 Disabled Annuitant Mortality Table to the
Pub-2010 General/Teacher Disabled Annuitant Mortality Table, with adjustments.
•The mortality improvement scale was changed from MP-2018 to MP-2019.
•The assumed spouse age difference was changed from two years older for females to one year
older.
•The assumed number of married male new retirees electing the 100.00 percent joint and
survivor option changed from 35.00 percent to 45.00 percent. The assumed number of married
female new retirees electing the 100.00 percent joint and survivor option changed from
15.00 percent to 30.00 percent. The corresponding number of married new retirees electing the
life annuity option was adjusted accordingly.
2020 CHANGES IN PLAN PROVISIONS
•Augmentation for current privatized members was reduced to 2.00 percent for the period July 1,
2020 through December 31, 2023, and zero percent thereafter. Augmentation was eliminated
for privatizations occurring after June 30, 2020.
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.
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PERA – GENERAL EMPLOYEES RETIREMENT FUND (CONTINUED)
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.
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.
-83-
PERA – PUBLIC EMPLOYEES POLICE AND FIRE FUND
2025 CHANGES IN ACTUARIAL ASSUMPTIONS
•Assumed rates of salary increases were reduced slightly.
•Assumed rates of retirement were adjusted, resulting in an overall increase in unreduced (full)
retirements and an overall increase in reduced (early) retirements.
•Assumed rates of withdrawal were modified; the new rates will increase predicted terminations,
especially in the first few years of employment.
•Assumed rates of disabled retirement were significantly increased, especially for ages over
age 30.
•Continued used of Pub-2010 Public Safety Mortality Table with rates adjusted to better fit
observed experience.
•Percent married assumption for female retirees lowered from 70.00 percent to 65.00 percent.
•Minor changes were made to form of payment assumptions for retirees.
•Minor changes were made to assumptions made with respect to missing participant data.
•The combined service annuity load changed from 33.00 percent to 13.00 percent for vested,
terminated members and from 2.00 percent to 38.00 percent for nonvested, terminated
members.
2025 CHANGES IN PLAN PROVISIONS
•The period of time needed for benefit recipients to receive their first benefit increase was
reduced by one year (from 36 months to 24 months for a full increase).
•The January 1, 2026 benefit increase changed from 1.00 percent to 3.00 percent; subsequent
January 1 increases will be 1.00 percent.
•The threshold to end the $9.0 million annual state aid contribution changed from the earlier of
July 1, 2048, or 90.00 percent funded for both PERA Police & Fire and MSRS State Patrol for
three consecutive years to 100.00 percent funded for both PERA Police & Fire and MSRS State
Patrol for three consecutive years (on an actuarial value of assets basis).
•The threshold to end the additional $9.0 million annual state aid contribution changed from the
earlier of July 1, 2048, or 100.00 percent funded for a minimum of three consecutive years to
110.00 percent funded for a minimum of three consecutive years (on an actuarial value of assets
basis).
•An additional $17.7 million in direct state aid will be paid annually each October 1 beginning
October 1, 2025 through June 30, 2048.
•Joint and survivor actuarial equivalent factors were updated to reflect changes in assumptions.
2024 CHANGES IN PLAN PROVISIONS
•The state contribution of $9.0 million per year will continue until the earlier of 1) both the
Police and Fire Plan and the State Patrol Retirement Fund attain 90.00 percent funded status
for three consecutive years (on an actuarial value of assets basis) or 2) July 1, 2048. The
contribution was previously due to expire after attaining a 90.00 percent funded status for
one year.
•The additional $9.0 million contribution will continue until the Police and Fire Plan is fully
funded for a minimum of three consecutive years on an actuarial value of assets basis, or July 1,
2048, whichever is earlier. This contribution was previously due to expire upon attainment of
fully funded status on an actuarial value of assets basis for one year (or July 1, 2048 if earlier).
2023 CHANGES IN ACTUARIAL ASSUMPTIONS
•The investment return assumption was changed from 6.50 percent to 7.00 percent.
•The single discount rate changed from 5.40 percent to 7.00 percent.
-84-
PERA – PUBLIC EMPLOYEES POLICE AND FIRE FUND (CONTINUED)
2023 CHANGES IN PLAN PROVISIONS
• Additional one-time direct state aid contribution of $19.4 million will be contributed to the
Plan on October 1, 2023.
• Vesting requirement for new hires after June 30, 2014, was changed from a graded 20 -year
vesting schedule to a graded 10-year vesting schedule, with 50.00 percent vesting after
five years, increasing incrementally to 100.00 percent after 10 years.
• A one-time, noncompounding benefit increase of 3.00 percent will be payable in a lump sum
for calendar year 2024 by March 31, 2024.
• Psychological treatment is required effective July 1, 2023, prior to approval for a duty disability
benefit for a psychological condition relating to the member’s occupation.
• The total and permanent duty disability benefit was increased, effective July 1, 2023.
2022 CHANGES IN ACTUARIAL ASSUMPTIONS
• The mortality improvement scale was changed from Scale MP-2020 to Scale MP-2021.
• This single discount rate changed from 6.50 percent to 5.40 percent.
2021 CHANGES IN ACTUARIAL ASSUMPTIONS
• The investment return and single discount rates were changed from 7.50 percent to
6.50 percent, for financial reporting purposes.
• The inflation assumption was changed from 2.50 percent to 2.25 percent.
• The payroll growth assumption was changed from 3.25 percent to 3.00 percent.
• The base mortality table for healthy annuitants and employees was changed from the RP-2014
Table to the Pub-2010 Public Safety Mortality Table. The mortality improvement scale was
changed from MP-2019 to MP-2020.
• The base mortality table for disabled annuitants was changed from the RP-2014 Healthy
Annuitant Mortality Table (with future mortality improvement according to Scale MP-2019)
to the Pub-2010 Public Safety Disabled Annuitant Mortality Table (with future mortality
improvement according to Scale MP-2020).
• Assumed rates of salary increase were modified as recommended in the July 14, 2020
experience study. The overall impact is a decrease in gross salary increase rates.
• Assumed rates of retirement were changed as recommended in the July 14, 2020 experience
study. The changes result in slightly more unreduced retirements and fewer assumed early
retirements.
• Assumed rates of withdrawal were changed from select and ultimate rates to service -based
rates. The changes result in more assumed terminations.
• Assumed rates of disability were increased for ages 25–44 and decreased for ages over 49.
Overall, proposed rates result in more projected disabilities.
• Assumed percent married for active female members was changed from 60.00 percent to
70.00 percent. Minor changes to form of payment assumptions were applied.
2020 CHANGES IN ACTUARIAL ASSUMPTIONS
• The mortality projection scale was changed from MP-2018 to MP-2019.
2019 CHANGES IN ACTUARIAL ASSUMPTIONS
• The mortality projection scale was changed from MP-2017 to MP-2018.
-85-
PERA – PUBLIC EMPLOYEES POLICE AND FIRE FUND (CONTINUED)
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.
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.
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.
-86-
PRIOR LAKE FIRE RELIEF ASSOCIATION
• The discount rate was changed from 5.75 percent to 6.25 percent for 2025.
• The discount rate was changed from 5.50 percent to 5.75 percent for 2023.
• A benefit level increase from $9,000 to $10,500 occurred starting January 1, 2022.
• A benefit level increase from $8,500 to $9,000 was reflected in the pension liability for 2021.
• The discount rate was changed from 6.00 percent to 5.50 percent for 2019.
• A benefit level increase from $8,000 to $8,500 was reflected in the pension liability for 2019.
• A benefit level increase from $7,200 to $8,000 was reflected in the pension liability for 2018.
• A benefit level increase from $7,100 to $7,200 was reflected in the pension liability for 2017.
• A benefit level increase from $6,800 to $7,100 was reflected in the pension liability for 2016.
OTHER POST-EMPLOYMENT BENEFITS PLAN
2024 CHANGES IN ACTUARIAL ASSUMPTIONS
• The healthcare trend rates were changed to better anticipate short-term and long-term medical
increases.
• The retirement, withdrawal, and salary increase rates for non-police employees were updated
to reflect the latest experience study.
• The discount rate was changed from 4.00 percent to 4.20 percent.
2023 CHANGES IN ACTUARIAL ASSUMPTIONS
• The healthcare trend rates were changed to better anticipate short-term and long-term medical
increases.
• The mortality tables were updated from the Pub-2010 Public Retirement Plans
Headcount-Weighted Mortality Tables (General, Safety) with MP-2020 Generational
Improvement Scale to the Pub-2010 Public Retirement Plans Headcount-Weighted Mortality
Tables (General, Safety) with MP-2021 Generational Improvement Scale.
• The retirement, withdrawal, and salary increase rates for public safety employees were updated
to reflect the latest experience study.
• The inflation rate changed from 2.00 percent to 2.50 percent.
• The discount rate was changed from 2.00 percent to 4.00 percent.
2021 CHANGES IN ACTUARIAL ASSUMPTIONS
• The healthcare trend rates were changed to better anticipate short-term and long-term medical
increases.
• The mortality tables were updated from the RP-2014 Mortality Tables (Blue Collar for Public
Safety, White Collar for Others) with MP-2018 Generational Improvement Scale to the
Pub-2010 Public Retirement Plans Headcount-Weighted Mortality Tables (General, Safety)
with MP-2020 Generational Improvement Scale.
• The inflation rate changed from 2.50 percent to 2.00 percent.
• The salary increase rates were changed from a flat 3.00 percent per year for all employees, to
rates which vary by service and contract group.
• The discount rate was changed from 3.80 percent to 2.00 percent.
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.
-87-
OTHER POST-EMPLOYMENT BENEFITS PLAN (CONTINUED)
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.
SUPPLEMENTARY INFORMATION
Special
Revenue Capital Projects Total
Assets
Cash and investments 2,510,073$ 4,019,724$ 6,529,797$
Cash held in escrow 31,366 – 31,366
Receivables
Delinquent taxes 3,804 – 3,804
Accounts 15,815 22,993 38,808
Lease 8,347 – 8,347
Special assessments
Delinquent – 1,425 1,425
Deferred – 557,493 557,493
Due from other governmental agencies 1,000,000 6,240 1,006,240
Assets held for resale 1,315,577 – 1,315,577
Total assets 4,884,982$ 4,607,875$ 9,492,857$
Liabilities
Accounts and contracts payable 303,125$ 466,936$ 770,061$
Accrued salaries and employee benefits payable 6,677 – 6,677
Due to other governmental agencies 1,100 – 1,100
Deposits payable 85,462 – 85,462
Unearned revenue 48,300 – 48,300
Total liabilities 444,664 466,936 911,600
Deferred inflows of resources
Lease revenue for subsequent years 8,159 – 8,159
Unavailable revenue from delinquent taxes 3,804 – 3,804
Unavailable revenue from special assessments – 558,917 558,917
Total deferred inflows of resources 11,963 558,917 570,880
Fund balances (deficit)
Restricted 4,428,355 82,117 4,510,472
Assigned – 3,507,155 3,507,155
Unassigned – (7,250) (7,250)
Total fund balances 4,428,355 3,582,022 8,010,377
Total liabilities, deferred inflows
of resources, and fund balances 4,884,982$ 4,607,875$ 9,492,857$
CITY OF PRIOR LAKE
Nonmajor Governmental Funds
Combining Balance Sheet
as of December 31, 2025
-88-
Special
Revenue Capital Projects Total
Revenue
Taxes 404,037$ 2,051,866$ 2,455,903$
Special assessments – 257,549 257,549
Charges for services 532,423 – 532,423
Intergovernmental 1,320,069 – 1,320,069
Investment income 136,025 189,703 325,728
Miscellaneous
Other 11,022 327,579 338,601
Total revenue 2,403,576 2,826,697 5,230,273
Expenditures
Current
General government 14,302 18,051 32,353
Public safety 12,264 – 12,264
Culture and recreation 29,806 2,981 32,787
Economic development 363,409 – 363,409
Capital outlay 3,039,872 3,490,472 6,530,344
Total expenditures 3,459,653 3,511,504 6,971,157
Excess (deficiency) of revenues over expenditures (1,056,077) (684,807) (1,740,884)
Other financing sources (uses)
Sale of capital assets – 113,242 113,242
Transfers in 290,000 769,375 1,059,375
Transfers out (11,975) (640,743) (652,718)
Total other financing sources (uses)278,025 241,874 519,899
Net change in fund balances (778,052) (442,933) (1,220,985)
Fund balances
Beginning of year, as previously reported 5,206,407 9,816,501 15,022,908
Change within financial reporting
entity (major to nonmajor fund)– (5,791,546) (5,791,546)
Beginning of year, restated 5,206,407 4,024,955 9,231,362
End of year 4,428,355$ 3,582,022$ 8,010,377$
Year Ended December 31, 2025
CITY OF PRIOR LAKE
Nonmajor Governmental Funds
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances
-89-
Federal Economic
Capital Revolving Cable Development
Park Loan Franchise Authority
Assets
Cash and investments 156,325$ 148,865$ 114,859$ 766,340$
Cash held in escrow – – 25,000 –
Receivables
Delinquent taxes – – – 3,804
Accounts 8,687 950 2,509 2,131
Lease 8,347 – – –
Due from other governmental agencies 1,000,000 – – –
Assets held for resale – – – 1,315,577
Total assets 1,173,359$ 149,815$ 142,368$ 2,087,852$
Liabilities
Accounts and contracts payable 292,866$ –$ –$ 1,088$
Accrued salaries and employee benefits payable – – – 6,677
Due to other governmental agencies – – – 1,016
Deposits payable – – 25,000 –
Unearned revenue 48,300 – – –
Total liabilities 341,166 – 25,000 8,781
Deferred inflows of resources
Lease revenue for subsequent years 8,159 – – –
Unavailable revenue from delinquent taxes – – – 3,804
Total deferred inflows of resources 8,159 – – 3,804
Fund balances
Restricted for economic development – 149,815 – –
Restricted for forfeiture sales – –– –
Restricted for public safety – –– –
Restricted for capital improvements 824,034 – – –
Restricted for development – – – 2,075,267
Restricted for communications – – 117,368 –
Total fund balances 824,034 149,815 117,368 2,075,267
Total liabilities, deferred inflows
of resources, and fund balances 1,173,359$ 149,815$ 142,368$ 2,087,852$
CITY OF PRIOR LAKE
Nonmajor Special Revenue Funds
Combining Balance Sheet
as of December 31, 2025
-90-
Local
Police Development MN Public Affordable
Forfeiture Agreement Safety Housing Aid Total
106,698$ 400,951$ 582,907$ 233,128$ 2,510,073$
6,366 – – – 31,366
– – – – 3,804
581 – 957 – 15,815
– – – – 8,347
– – – – 1,000,000
– – – – 1,315,577
113,645$ 400,951$ 583,864$ 233,128$ 4,884,982$
–$ 9,171$ –$ –$ 303,125$
– – – – 6,677
84 – – – 1,100
6,366 54,096 – – 85,462
– – – – 48,300
6,450 63,267 – – 444,664
– – – – 8,159
– – – – 3,804
– – – – 11,963
– – – 233,128 382,943
107,195 – – – 107,195
– – 583,864 – 583,864
– 337,684 – – 1,161,718
– –– – 2,075,267
– –– – 117,368
107,195 337,684 583,864 233,128 4,428,355
113,645$ 400,951$ 583,864$ 233,128$ 4,884,982$
-91-
Federal Economic
Capital Revolving Cable Development
Park Loan Franchise Authority
Revenues
Taxes –$ –$ –$ 404,037$
Charges for services 291,958 – 10,245 26,988
Intergovernmental 1,053,171 – – –
Investment income 66,655 6,592 5,017 27,615
Miscellaneous
Other – – – –
Total revenues 1,411,784 6,592 15,262 458,640
Expenditures
Current
General government – – 14,302 –
Public safety – – – –
Culture and recreation 29,806 – – –
Economic development – – – 250,094
Capital outlay 2,254,381 – – –
Total expenditures 2,284,187 – 14,302 250,094
Excess (deficiency) of revenues
over expenditures (872,403) 6,592 960 208,546
Other financing (uses)
Transfers in 290,000 – – –
Transfers out – – – –
Total other financing sources (uses)290,000 – – –
Net change in fund balances (582,403) 6,592 960 208,546
Fund balances
Beginning of year 1,406,437 143,223 116,408 1,866,721
End of year 824,034$ 149,815$ 117,368$ 2,075,267$
CITY OF PRIOR LAKE
Nonmajor Special Revenue Funds
Combining Statement of Revenues, Expenditures,
and Changes in Fund Balances
Year Ended December 31, 2025
-92-
Local
Police Development MN Public Affordable
Forfeiture Agreement Safety Housing Aid Total
–$ –$ –$ –$ 404,037$
– 203,232 – – 532,423
– –– 266,898 1,320,069
5,173 – 24,973 – 136,025
11,022 – – – 11,022
16,195 203,232 24,973 266,898 2,403,576
– – – – 14,302
12,264 – – – 12,264
– – – – 29,806
– – – 113,315 363,409
– 785,491 – – 3,039,872
12,264 785,491 – 113,315 3,459,653
3,931 (582,259) 24,973 153,583 (1,056,077)
– – – – 290,000
– – (11,975) – (11,975)
– – (11,975) – 278,025
3,931 (582,259) 12,998 153,583 (778,052)
103,264 919,943 570,866 79,545 5,206,407
107,195$ 337,684$ 583,864$ 233,128$ 4,428,355$
-93-
Formerly
Nonmajor Tax Tax
Tax Revolving Trunk Increment 1-3 Increment 5-1
Increment Equipment Reserve Lakefront Premiere
Assets
Cash and investments –$ 1,241,410$ –$ –$ 19,709$
Receivables
Accounts (refund)– 7,602 – – 22
Special assessments
Delinquent – – – – –
Deferred – – – – –
Due from other governmental agencies – 3,525 – – –
Total assets –$ 1,252,537$ –$ –$ 19,731$
Liabilities
Accounts and contracts payable 7,250$ 145,785$ –$ –$ 6,516$
Deferred inflows of resources
Unavailable revenue from special assessments – – – – –
Fund balances (deficit)
Restricted for tax increment – – – – 13,215
Assigned for capital improvements – 1,106,752 – – –
Unassigned (7,250) – – – –
Total fund balances (deficit)(7,250) 1,106,752 – – 13,215
Total liabilities, deferred inflows
of resources, and fund balances –$ 1,252,537$ –$ –$ 19,731$
as of December 31, 2025
Combining Balance Sheet
Nonmajor Capital Projects Funds
CITY OF PRIOR LAKE
-94-
Formerly
Major
Tax Revolving Permanent
Increment 1-5 Park Facility Improvement
Gateway Center Equipment Management Revolving Total
105,339$ 519,987$ 750,767$ 1,382,512$ 4,019,724$
(415) 5,333 7,505 2,946 22,993
– – – 1,425 1,425
– – – 557,493 557,493
– 1,840 875 – 6,240
104,924$ 527,160$ 759,147$ 1,944,376$ 4,607,875$
36,022$ 76,599$ 194,764$ –$ 466,936$
– – – 558,917 558,917
68,902 – – – 82,117
– 450,561 564,383 1,385,459 3,507,155
– – – – (7,250)
68,902 450,561 564,383 1,385,459 3,582,022
104,924$ 527,160$ 759,147$ 1,944,376$ 4,607,875$
-95-
Formerly
Nonmajor Tax Tax
Tax Revolving Trunk Increment 1-3 Increment 5-1
Increment Equipment Reserve Lakefront Premiere
Revenues
Taxes –$ 1,024,083$ –$ 149,000$ 14,479$
Special assessments – – – – –
Investment income – 28,163 – 8,043 661
Miscellaneous
Other – – – – –
Total revenues – 1,052,246 – 157,043 15,140
Expenditures
Current
General government – – – – –
Culture and recreation – – – – –
Capital outlay 7,250 1,146,554 – 313,344 14,946
Total expenditures 7,250 1,146,554 – 313,344 14,946
Excess (deficiency) of revenues
over expenditures (7,250) (94,308) – (156,301) 194
Other financing sources (uses)
Sale of capital assets – 113,242 – – –
Transfers in – 317,563 – 257 –
Transfers out – –– – –
Total other financing sources (uses)– 430,805 – 257 –
Net change in fund balances (7,250) 336,497 – (156,044) 194
Fund balances (deficit)
Beginning of year, as previously reported – 770,255 6,793,092 156,044 13,021
Change within financial reporting
entity (change in major funds)– – (6,793,092) – –
Beginning of year, restated – 770,255 – 156,044 13,021
End of year (deficit)(7,250)$ 1,106,752$ –$ –$ 13,215$
Nonmajor Capital Projects Funds
CITY OF PRIOR LAKE
Year Ended December 31, 2025
and Changes in Fund Balances
Combining Statement of Revenues, Expenditures,
-96-
Formerly
Major
Tax Revolving Permanent
Increment 1-5 Park Facility Improvement
Gateway Center Equipment Management Revolving Total
75,835$ 534,304$ 254,165$ –$ 2,051,866$
– – – 257,549 257,549
3,208 48,219 41,519 59,890 189,703
– 88,000 239,579 – 327,579
79,043 670,523 535,263 317,439 2,826,697
– – 18,051 – 18,051
– 2,981 – – 2,981
73,959 1,175,255 749,217 9,947 3,490,472
73,959 1,178,236 767,268 9,947 3,511,504
5,084 (507,713) (232,005) 307,492 (684,807)
– – – – 113,242
– – – 451,555 769,375
– (265,609) – (375,134) (640,743)
– (265,609) – 76,421 241,874
5,084 (773,322) (232,005) 383,913 (442,933)
63,818 1,223,883 796,388 – 9,816,501
– – – 1,001,546 (5,791,546)
63,818 1,223,883 796,388 1,001,546 4,024,955
68,902$ 450,561$ 564,383$ 1,385,459$ 3,582,022$
-97-
2024
Variance With
Original Final Actual Final Budget Actual
Revenues
Taxes
Property taxes 15,111,220$ 15,111,220$ 15,071,778$ (39,442)$ 13,950,980$
Franchise taxes 555,000 555,000 518,830 (36,170) 543,869
Total taxes 15,666,220 15,666,220 15,590,608 (75,612) 14,494,849
Special assessments 4,000 4,000 4,611 611 5,057
Licenses and permits
Business 90,620 90,620 98,235 7,615 89,370
Nonbusiness 460,222 460,222 524,258 64,036 779,566
Total licenses and permits 550,842 550,842 622,493 71,651 868,936
Intergovernmental
Federal grants – – 25,129 25,129 12,350
State
Road and bridge aid 476,340 476,340 593,917 117,577 443,943
Fire relief aid 348,527 348,527 500,028 151,501 413,849
Police aid 348,000 348,000 503,190 155,190 427,244
Other state aids – 106,250 7,473 (98,777) 34,131
County and local
Township fire and rescue aid 961,430 961,430 961,430 – 960,250
Liaison aid 72,287 72,287 68,430 (3,857) 84,742
Other local aids – – 9,618 9,618 9,576
Payment in lieu of taxes 1,400,000 1,400,000 1,400,000 – 1,200,000
Total intergovernmental 3,606,584 3,712,834 4,069,215 356,381 3,586,085
Charges for services
Zoning fees 40,000 40,000 34,941 (5,059) 37,778
Plan check fees 203,430 203,430 202,176 (1,254) 332,114
Park fees 259,960 259,960 221,869 (38,091) 289,701
Project fees 150,000 150,000 134,775 (15,225) 240,223
Park program revenue 127,000 127,000 140,580 13,580 137,742
Tower leases 273,183 273,183 332,757 59,574 276,344
Park admission/rent 47,500 47,500 56,210 8,710 59,995
Facility rental 138,449 138,449 140,933 2,484 136,601
Reports 1,200 1,200 2,986 1,786 930
Total charges for services 1,240,722 1,240,722 1,267,227 26,505 1,511,428
Fines and forfeits 108,000 108,000 99,753 (8,247) 103,766
Investment income
Interest earnings 257,500 257,500 269,128 11,628 525,044
Amortization – (premium)/discount – – 174,463 174,463 73,934
Unrealized gain – – 163,211 163,211 93,577
Total investment income 257,500 257,500 606,802 349,302 692,555
CITY OF PRIOR LAKE
General Fund
Schedule of Revenues, Expenditures, and
Changes in Fund Balances – Budget and Actual
Year Ended December 31, 2025
(With Comparative Actual Amounts for the Year Ended December 31, 2024)
2025
Budgeted Amounts
-98-(continued)
2024
Variance With
Original Final Actual Final Budget Actual
Revenues (continued)
Miscellaneous
Other 69,800 69,800 231,626 161,826 523,543
Contributions and donations – – 39,248 39,248 62,378
Developers’ agreements 50,000 50,000 127,948 77,948 28,035
Total miscellaneous 119,800 119,800 398,822 279,022 613,956
Total revenues 21,553,668 21,659,918 22,659,531 999,613 21,876,632
Expenditures
Current expenditures
General government
Mayor and City Council
Personal services 77,668 77,668 66,418 (11,250) 73,600
Supplies 300 300 – (300) 111
Other services and charges 6,550 6,550 4,889 (1,661) 4,813
Total Mayor and City Council 84,518 84,518 71,307 (13,211) 78,524
Ordinance
Other services and charges 6,000 6,000 3,965 (2,035) 8,453
Administration
Personal services 331,918 331,918 328,975 (2,943) 320,998
Supplies 10,000 10,000 7,880 (2,120) 11,885
Other services and charges 71,963 71,963 77,317 5,354 59,438
Total administration 413,881 413,881 414,172 291 392,321
Boards and commissions
Personal services 7,750 7,750 5,276 (2,474) 7,750
Other services and charges 400 400 513 113 –
Total boards and commissions 8,150 8,150 5,789 (2,361) 7,750
City Clerk
Personal services 140,223 140,223 139,365 (858) 130,596
Supplies 500 500 74 (426) 69
Other services and charges 8,229 11,504 7,479 (4,025) 3,637
Total City Clerk 148,952 152,227 146,918 (5,309) 134,302
Election
Personal services 15,055 15,055 21,846 6,791 84,660
Supplies 7,500 7,500 9,180 1,680 7,293
Other services and charges 5,000 5,000 812 (4,188) 13,545
Total election 27,555 27,555 31,838 4,283 105,498
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, 2025
(With Comparative Actual Amounts for the Year Ended December 31, 2024)
2025
-99-(continued)
2024
Variance With
Original Final Actual Final Budget Actual
Expenditures (continued)
Current expenditures (continued)
General government (continued)
Finance
Personal services 751,900 751,900 704,433 (47,467) 692,119
Supplies 1,650 1,650 1,176 (474) 487
Other services and charges 33,306 38,306 88,719 50,413 25,450
Total finance 786,856 791,856 794,328 2,472 718,056
Auditing
Other services and charges 50,100 50,100 42,275 (7,825) 42,019
Assessing
Other services and charges 271,705 271,705 264,790 (6,915) 252,942
Legal services
Other services and charges 269,253 269,253 300,940 31,687 271,394
Personnel
Personal services 327,059 327,059 328,177 1,118 312,209
Supplies 250 250 – (250) 51
Other services and charges 70,730 70,730 56,744 (13,986) 46,645
Total personnel 398,039 398,039 384,921 (13,118) 358,905
Communications
Personal services 153,643 153,643 152,432 (1,211) 142,412
Other services and charges 18,500 18,500 15,170 (3,330) 16,651
Total communications 172,143 172,143 167,602 (4,541) 159,063
Community development
Personal services 357,103 357,103 293,359 (63,744) 247,558
Supplies 3,300 3,300 2,212 (1,088) 4,088
Other services and charges 34,400 34,400 34,886 486 34,385
Total community development 394,803 394,803 330,457 (64,346) 286,031
Technology
Personal services 270,592 270,592 271,552 960 258,175
Supplies 81,300 81,300 77,645 (3,655) 63,824
Other services and charges 213,610 213,610 188,453 (25,157) 142,133
Total technology 565,502 565,502 537,650 (27,852) 464,132
General Fund
2025
Year Ended December 31, 2025
CITY OF PRIOR LAKE
Changes in Fund Balances – Budget and Actual (continued)
(With Comparative Actual Amounts for the Year Ended December 31, 2024)
Schedule of Revenues, Expenditures, and
Budgeted Amounts
-100-(continued)
2024
Variance With
Original Final Actual Final Budget Actual
Expenditures (continued)
Current expenditures (continued)
General government (continued)
Buildings and plant
Personal services 153,146 153,146 151,692 (1,454) 96,880
Supplies 65,850 94,850 92,204 (2,646) 23,970
Other services and charges 701,230 701,230 788,650 87,420 684,661
Total buildings and plant 920,226 949,226 1,032,546 83,320 805,511
Total general government 4,517,683 4,554,958 4,529,498 (25,460) 4,084,901
Public safety
Police
Personal services 6,752,630 6,982,458 6,724,025 (258,433) 6,065,446
Supplies 265,735 280,735 203,420 (77,315) 257,278
Other services and charges 684,470 699,070 603,850 (95,220) 665,873
Total police 7,702,835 7,962,263 7,531,295 (430,968) 6,988,597
Fire and rescue
Personal services 2,593,301 2,593,301 2,767,213 173,912 2,367,944
Supplies 201,225 201,225 182,057 (19,168) 187,194
Other services and charges 234,760 234,760 252,489 17,729 204,094
Total fire and rescue 3,029,286 3,029,286 3,201,759 172,473 2,759,232
Building inspections
Personal services 885,693 885,693 856,148 (29,545) 819,895
Supplies 11,450 11,450 6,871 (4,579) 7,633
Other services and charges 20,671 20,671 8,252 (12,419) 8,992
Total building inspections 917,814 917,814 871,271 (46,543) 836,520
Emergency management
Supplies – – – – 15,360
Other services and charges 17,680 17,680 11,784 (5,896) 13,918
Total emergency management 17,680 17,680 11,784 (5,896) 29,278
Animal control
Other services and charges 36,000 36,000 29,400 (6,600) 28,800
Total other 971,494 971,494 912,455 (59,039) 894,598
Total public safety 11,703,615 11,963,043 11,645,509 (317,534) 10,642,427
Year Ended December 31, 2025
(With Comparative Actual Amounts for the Year Ended December 31, 2024)
2025
Budgeted Amounts
CITY OF PRIOR LAKE
General Fund
Schedule of Revenues, Expenditures, and
Changes in Fund Balances – Budget and Actual (continued)
-101-(continued)
2024
Variance With
Original Final Actual Final Budget Actual
Expenditures (continued)
Current expenditures (continued)
Public works
Engineering
Personal services 406,131 406,131 344,487 (61,644) 391,994
Supplies 14,000 14,000 6,694 (7,306) 8,114
Other services and charges 59,542 220,042 146,329 (73,713) 92,513
Total engineering 479,673 640,173 497,510 (142,663) 492,621
Central garage
Personal services 312,029 312,029 303,500 (8,529) 279,196
Supplies 227,850 227,850 204,245 (23,605) 200,956
Other services and charges 92,750 92,750 68,815 (23,935) 76,793
Total central garage 632,629 632,629 576,560 (56,069) 556,945
Streets
Personal services 598,237 598,237 617,019 18,782 564,332
Supplies 475,075 475,075 361,705 (113,370) 316,158
Other services and charges 708,907 708,907 654,487 (54,420) 727,030
Total streets 1,782,219 1,782,219 1,633,211 (149,008) 1,607,520
Total public works 2,894,521 3,055,021 2,707,281 (347,740) 2,657,086
Culture and recreation
Recreation
Personal services 448,195 448,195 445,752 (2,443) 382,145
Supplies 111,000 111,000 108,922 (2,078) 105,038
Other services and charges 93,355 93,355 104,335 10,980 95,108
Total recreation 652,550 652,550 659,009 6,459 582,291
Parks
Personal services 1,300,856 1,300,856 1,249,995 (50,861) 1,241,217
Supplies 306,000 306,000 298,626 (7,374) 241,138
Other services and charges 470,315 492,790 489,222 (3,568) 513,274
Total parks 2,077,171 2,099,646 2,037,843 (61,803) 1,995,629
Libraries
Supplies – – – – 260
Other services and charges 23,140 23,140 29,254 6,114 24,240
Total libraries 23,140 23,140 29,254 6,114 24,500
Total culture and recreation 2,752,861 2,775,336 2,726,106 (49,230) 2,602,420
Total current expenditures 21,868,680 22,348,358 21,608,394 (739,964) 19,986,834
Budgeted Amounts
Year Ended December 31, 2025
(With Comparative Actual Amounts for the Year Ended December 31, 2024)
Changes in Fund Balances – Budget and Actual (continued)
Schedule of Revenues, Expenditures, and
General Fund
CITY OF PRIOR LAKE
2025
-102-(continued)
2024
Variance With
Original Final Actual Final Budget Actual
Expenditures (continued)
Capital outlay
General government
City hall 20,000 50,000 18,634 (31,366) 39,518
Community development – – 15,000 15,000 –
Public safety
Police 14,000 41,000 32,527 (8,473) 17,790
Fire – – – – 20,017
Public works
Buildings and plant 3,500 32,610 26,703 (5,907) 9,060
Development projects – – 30,324 30,324 30,086
Parks
Infrastructure – – 34,036 34,036 –
Total capital outlay 37,500 123,610 157,224 33,614 116,471
Total expenditures 21,906,180 22,471,968 21,765,618 (706,350) 20,103,305
Excess (deficiency) of revenues
over expenditures (352,512) (812,050) 893,913 1,705,963 1,773,327
Other financing sources (uses)
Transfers in 615,000 615,000 626,975 11,975 876,400
Transfers out (262,488) (552,488) (552,745) (257) (248,488)
Sale of assets – – 22,634 22,634 5,086
Total other financing
sources (uses)352,512 62,512 96,864 34,352 632,998
Net change in fund balances –$ (749,538)$ 990,777 1,740,315$ 2,406,325
Fund balances
Beginning of year 13,411,569 11,005,244
End of year 14,402,346$ 13,411,569$
Budgeted Amounts
Schedule of Revenues, Expenditures, and
Changes in Fund Balances – Budget and Actual (continued)
Year Ended December 31, 2025
2025
(With Comparative Actual Amounts for the Year Ended December 31, 2024)
General Fund
CITY OF PRIOR LAKE
-103-
Guaranteed
Water Energy Savings Street
Treatment Fish Performance Reconstruction Manitou Road
Plant Point Lease 2015 Improvement
Assets
Cash and investments –$ –$ –$ 201,054$ 37,391$
Receivables
Accounts (refunds)– – – 4,301 173
Special assessments
Delinquent – – – 8,584 –
Deferred – 481,461 – 85,114 18,523
Due from other
governmental agencies – – – 2,363 237
Total assets –$ 481,461$ –$ 301,416$ 56,324$
Deferred inflows of resources
Unavailable revenue from
special assessments –$ 481,461$ –$ 93,698$ 18,523$
Fund balances
Restricted for debt service – – – 207,718 37,801
Total liabilities, deferred inflows
of resources, and fund balances –$ 481,461$ –$ 301,416$ 56,324$
as of December 31, 2025
Balance Sheet by Account
Debt Service Fund
CITY OF PRIOR LAKE
-104-
Cates, Balsam,
Franklin Trail,
Sycamore Trail,
Maintenance 2018
Highway 13,Center Roof Franklin,2019 Fish
150th Street 2016 Improvements Huron,Street Point 2021B
Reconstruction 2017 Woodside Improvements Road Refunding
22,694$ 221,777$ 240,628$ 64,206$ 241,740$ 326,889$
244 5,535 8,425 281 1,687 1,330
– 2,771 – – 2,286 –
– 131,151 241,384 4,692 236,592 –
135 1,364 1,646 709 918 2,484
23,073$ 362,598$ 492,083$ 69,888$ 483,223$ 330,703$
–$ 133,922$ 241,383$ 4,692$ 238,878$ –$
23,073 228,676 250,700 65,196 244,345 330,703
23,073$ 362,598$ 492,083$ 69,888$ 483,223$ 330,703$
-105 (continued)
THIS PAGE INTENTIONALLY LEFT BLANK
Downtown Fish Point 2024A 2025A
South Road Wilds Jeffers Street
Reconstruction Phase II Mill & Overlay Improvements Total
Assets
Cash and investments 144,554$ 1,271,320$ –$ 344,060$ 3,116,313$
Receivables
Accounts (refunds)(551) 442 – (265) 21,602
Special assessments
Delinquent 1,888 – – – 15,529
Deferred 383,689 129,854 – 195,972 1,908,432
Due from other
governmental agencies 556 – – – 10,412
Total assets 530,136$ 1,401,616$ –$ 539,767$ 5,072,288$
Deferred inflows of resources
Unavailable revenue from
special assessments 385,577$ 129,854$ –$ 195,972$ 1,923,960$
Fund balances
Restricted for debt service 144,559 1,271,762 – 343,795 3,148,328
Total liabilities, deferred inflows
of resources, and fund balances 530,136$ 1,401,616$ –$ 539,767$ 5,072,288$
as of December 31, 2025
CITY OF PRIOR LAKE
Debt Service Fund
Balance Sheet by Account (continued)
-106-
Guaranteed
Water Energy Savings Street
Treatment Fish Performance Reconstruction Manitou Road
Plant Point Lease 2015 Improvement
Revenues
Taxes –$ –$ 109,458$ 610,368$ 68,643$
Special assessments – – 2,558 84,525 22,157
Investment income – – 837 24,545 3,777
Total revenues – – 112,853 719,438 94,577
Expenditures
Debt service
Principal 515,000 – 148,731 775,000 110,000
Interest and other 109,750 – 1,576 98,220 4,895
Total expenditures 624,750 – 150,307 873,220 114,895
Excess (deficiency) of revenues
over expenditures (624,750) – (37,454) (153,782) (20,318)
Other financing sources (uses)
Transfers in 624,750 – – – –
Transfers out – – (2,838) – –
Total other financing sources (uses)624,750 – (2,838) – –
Net change in fund balances – – (40,292) (153,782) (20,318)
Fund balances
Beginning of year – – 40,292 361,500 58,119
End of year –$ –$ –$ 207,718$ 37,801$
CITY OF PRIOR LAKE
Debt Service Fund
Schedule of Revenues, Expenditures,
and Changes in Fund Balances by Account
Year Ended December 31, 2025
-107-
Cates, Balsam,
Franklin Trail,
Sycamore Trail,
Maintenance 2018
Highway 13,Center Roof Franklin,2019 Fish
150th Street 2016 Improvements Huron,Street Point 2021B
Reconstruction 2017 Woodside Improvements Road Refunding
38,960$ 263,442$ 478,647$ 205,930$ 267,152$ 721,681$
– 74,210 68,943 1,410 65,776 –
1,383 18,047 19,545 5,619 14,634 20,772
40,343 355,699 567,135 212,959 347,562 742,453
35,000 400,000 535,000 175,000 495,000 530,000
1,500 27,058 109,000 47,000 92,160 158,245
36,500 427,058 644,000 222,000 587,160 688,245
3,843 (71,359) (76,865) (9,041) (239,598) 54,208
– 2,838 – – 262,488 –
– – – – – –
– 2,838 – – 262,488 –
3,843 (68,521) (76,865) (9,041) 22,890 54,208
19,230 297,197 327,565 74,237 221,455 276,495
23,073$ 228,676$ 250,700$ 65,196$ 244,345$ 330,703$
-108-(continued)
THIS PAGE INTENTIONALLY LEFT BLANK
Downtown Fish Point 2024A 2025A
South Road Wilds Jeffers Street
Reconstruction Phase II Mill & Overlay Improvements Total
Revenues
Taxes 161,404$ –$ –$ –$ 2,925,685$
Special assessments 70,758 31,971 – 338,166 760,474
Investment income 8,666 61,795 – 5,629 185,249
Total revenues 240,828 93,766 – 343,795 3,871,408
Expenditures
Debt service
Principal 170,000 125,000 265,000 – 4,278,731
Interest and other 76,895 76,745 104,731 – 907,775
Total expenditures 246,895 201,745 369,731 – 5,186,506
Excess (deficiency) of revenues
over expenditures (6,067) (107,979) (369,731) 343,795 (1,315,098)
Other financing sources (uses)
Transfers in – – 369,731 – 1,259,807
Transfers out – – – – (2,838)
Total other financing sources (uses)– – 369,731 – 1,256,969
Net change in fund balances (6,067) (107,979) – 343,795 (58,129)
Fund balances
Beginning of year 150,626 1,379,741 – – 3,206,457
End of year 144,559$ 1,271,762$ –$ 343,795$ 3,148,328$
Debt Service Fund
Schedule of Revenues, Expenditures,
and Changes in Fund Balances by Account (continued)
Year Ended December 31, 2025
CITY OF PRIOR LAKE
-109-
Severance
Compensation Insurance Total
Current assets
Cash and investments 749,740$ 251,588$ 1,001,328$
Receivables
Accounts and interest 4,224 523 4,747
Total current assets 753,964$ 252,111$ 1,006,075$
Current liabilities
Current portion of compensated absences payable 669,860$ –$ 669,860$
Noncurrent liabilities
Compensated absences payable 1,144,166 – 1,144,166
Total liabilities 1,814,026 – 1,814,026
Net position
Unrestricted (1,060,062) 252,111 (807,951)
Total liabilities and net position 753,964$ 252,111$ 1,006,075$
CITY OF PRIOR LAKE
Internal Service Funds
Combining Statement of Net Position
as of December 31, 2025
-110-
Severance
Compensation Insurance Total
Operating revenues
Charges for services 81,471$ –$ 81,471$
Operating expenses
Personal services 149,308 – 149,308
Operating income (loss)(67,837) – (67,837)
Nonoperating revenues
Investment income 31,622 10,861 42,483
Change in net position (36,215) 10,861 (25,354)
Net position
Beginning of year (1,023,847) 241,250 (782,597)
End of year (1,060,062)$ 252,111$ (807,951)$
CITY OF PRIOR LAKE
Internal Service Funds
Combining Statement of Revenues, Expenses, and Changes in Net Position
Year Ended December 31, 2025
-111-
Severance
Compensation Insurance Total
Cash flows from operating activities
Cash received from customers 81,289$ –$ 81,289$
Cash flows from investing activities
Interest received on cash and investments 31,622 10,785 42,407
Net increase in cash and cash equivalents 112,911 10,785 123,696
Cash and cash equivalents, January 1 636,829 240,803 877,632
Cash and cash equivalents, December 31 749,740$ 251,588$ 1,001,328$
Reconciliation of operating income (loss) to net
cash flows from operating activities
Operating income (loss)(67,837)$ –$ (67,837)$
Adjustments to reconcile operating income (loss)
to net cash flows from operating activities
(Increase) decrease in assets
Accounts receivable (182) – (182)
Increase (decrease) in liabilities
Compensated absences payable 149,308 – 149,308
Net cash flows from operating activities 81,289$ –$ 81,289$
CITY OF PRIOR LAKE
Internal Service Funds
Combining Statement of Cash Flows
Year Ended December 31, 2025
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OTHER INFORMATION SECTION
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Percent
Increase
2025 2024 (Decrease)
Revenues
Taxes 20,453,366$ 19,654,454$ 4.1%
Franchise taxes 1,806,412 1,640,516 10.1%
Special assessments 1,033,982 2,727,577 (62.1%)
Licenses and permits 622,493 868,936 (28.4%)
Intergovernmental 6,481,867 5,423,407 19.5%
Charges for services 2,328,147 2,325,931 0.1%
Fines and forfeits 99,753 103,766 (3.9%)
Interest on investments 1,582,040 1,652,891 (4.3%)
Miscellaneous 737,423 732,956 0.6%
Total revenues 35,145,483$ 35,130,434$ 0.0%
Per capita 1,210$ 1,223$ (1.1%)
Expenditures
Current
General government 4,561,851$ 4,272,088$ 6.8%
Public safety 11,657,773 10,658,868 9.4%
Public works 2,707,281 2,657,086 1.9%
Culture and recreation 2,758,893 2,612,010 5.6%
Economic development 363,409 186,360 95.0%
Capital outlay 11,610,195 12,391,369 (6.3%)
Debt service
Principal 4,278,731 4,202,801 1.8%
Interest and other charges 991,144 1,019,737 (2.8%)
Total expenditures 38,929,277$ 38,000,319$ 2.4%
Per capita 1,340$ 1,323$ 1.2%
Total long-term bonded indebtedness 21,985,000$ 23,990,000$ (8.4%)
Per capita 757$ 835$ (9.4%)
General Fund balance – December 31 14,402,346$ 13,411,569$ 7.4%
Per capita 496$ 467$ 6.1%
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) 447-9847.
Governmental Funds
Years Ended December 31, 2025 and 2024
CITY OF PRIOR LAKE
Summary Financial Report
Revenues and Expenditures for General Operations
Total
-113-
Final
Issue Maturity
Date Date
Bonded indebtedness
General obligation special assessment bonds
G.O. Improvement Bonds of 2015A 2.00–3.00 %05/14/2015 12/15/2030
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 2024A 5.00 08/20/2024 12/15/2029
G.O. Improvement Bonds of 2025A 4.00–5.00 08/14/2025 12/15/2040
Total general obligation special assessment bonds
General obligation bonds
G.O. Street Reconstruction Bonds of 2016A 2.00 05/01/2016 12/15/2026
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
G.O. Improvement Bonds of 2021A 1.00–3.00 07/15/2021 12/15/2031
G.O. Improvement Bonds of 2021B 5.00 07/26/2021 12/15/2029
G.O. Improvement Bonds of 2022A 4.00–5.00 09/08/2022 12/15/2032
G.O. Improvement Bonds of 2023A 5.00 07/19/2023 12/15/2033
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 Bonds of 2018A 4.00–5.00 08/15/2018 12/15/2028
G.O. Improvement Bonds of 2024A 4.00–5.00 08/20/2024 12/15/2044
Total general obligation revenue bonds
Total bonded indebtedness
Rate
CITY OF PRIOR LAKE
Combined Schedule of Indebtedness
Year Ended December 31, 2025
Interest
-114-
Outstanding Issued Outstanding
Authorized January 1 (Retired)December 31 Principal Interest
4,640,000$ 3,660,000$ (775,000)$ 2,885,000$ 610,000$ 80,725$
1,105,000 220,000 (110,000) 110,000 110,000 2,200
4,135,000 1,225,000 (400,000) 825,000 410,000 18,563
3,145,000 1,145,000 (275,000) 870,000 280,000 43,500
1,580,000 1,580,000 (265,000) 1,315,000 305,000 65,750
2,125,000 – 2,125,000 2,125,000 70,000 126,128
16,730,000 7,830,000 300,000 8,130,000 1,785,000 336,866
760,000 75,000 (35,000) 40,000 40,000 800
2,485,000 1,035,000 (260,000) 775,000 270,000 38,750
1,665,000 940,000 (175,000) 765,000 185,000 38,250
5,270,000 3,800,000 (495,000) 3,305,000 510,000 76,815
4,990,000 3,155,000 (530,000) 2,625,000 580,000 131,250
1,910,000 1,620,000 (170,000) 1,450,000 180,000 67,900
1,620,000 1,525,000 (125,000) 1,400,000 125,000 70,000
18,700,000 12,150,000 (1,790,000) 10,360,000 1,890,000 423,765
5,360,000 4,010,000 (515,000) 3,495,000 530,000 99,450
2,640,000 1,170,000 (270,000) 900,000 280,000 45,000
1,180,000 1,180,000 (20,000) 1,160,000 40,000 49,650
9,180,000 6,360,000 (805,000) 5,555,000 850,000 194,100
44,610,000$ 26,340,000$ (2,295,000)$ 24,045,000$ 4,525,000$ 954,731$
Due in 2026
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Final
Issue Maturity
Date Date Principal
General obligation
special assessment bonds
$4,640,000 General Obligation
Improvement Bonds, Series 2015A 05/14/2015 2.50 %12/15/2026 610,000$
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 2,885,000
$1,105,000 General Obligation
Improvement Bonds, Series 2016A 05/01/2016 2.00 12/15/2026 110,000
$4,135,000 General Obligation
Improvement Bonds, Series 2017A 06/29/2017 2.00 12/15/2026 410,000
2.25 12/15/2027 415,000
Total 825,000
$3,145,000 General Obligation
Improvement Bonds, Series 2018A 08/15/2018 5.00 12/15/2026 280,000
5.00 12/15/2027 290,000
5.00 12/15/2028 300,000
Total 870,000
CITY OF PRIOR LAKE
Bond Schedules
December 31, 2025
Rate
Interest
-116-(continued)
Final
Issue Maturity
Date Date Principal
General obligation
special assessment bonds (continued)
$1,580,000 General Obligation
Improvement Bonds, Series 2024A 08/20/2024 5.00 %12/15/2026 305,000$
5.00 12/15/2027 320,000
5.00 12/15/2028 335,000
5.00 12/15/2029 355,000
Total 1,315,000
$2,125,000 General Obligation
Improvement Bonds, Series 2025A 08/14/2025 5.00 12/15/2026 70,000
5.00 12/15/2027 105,000
5.00 12/15/2028 110,000
5.00 12/15/2029 120,000
5.00 12/15/2030 125,000
5.00 12/15/2031 130,000
5.00 12/15/2032 135,000
5.00 12/15/2033 145,000
4.00 12/15/2034 150,000
4.00 12/15/2035 155,000
4.00 12/15/2036 160,000
4.00 12/15/2037 170,000
4.00 12/15/2038 175,000
4.00 12/15/2039 185,000
4.00 12/15/2040 190,000
Total 2,125,000
Total general obligation special assessment bonds 8,130,000$
Bond Schedules (continued)
December 31, 2025
Interest
Rate
CITY OF PRIOR LAKE
-117-(continued)
Final
Issue Maturity
Date Date Principal
General obligation bonds
$760,000 General Obligation
Street Reconstruction Bonds, Series 2016A 05/01/2016 2.00 %12/15/2025 40,000$
$2,485,000 General Obligation
Improvement Bonds, Series 2018A 08/15/2018 5.00 12/15/2026 270,000
5.00 12/15/2027 280,000
5.00 12/15/2028 225,000
Total 775,000
$1,665,000 General Obligation
Improvement Bonds, Series 2019A 06/27/2019 5.00 12/15/2026 185,000
5.00 12/15/2027 195,000
5.00 12/15/2028 205,000
5.00 12/15/2029 180,000
Total 765,000
CITY OF PRIOR LAKE
Bond Schedules (continued)
December 31, 2025
Interest
Rate
-118-(continued)
Final
Issue Maturity
Date Date Principal
General obligation bonds (continued)
$5,270,000 General Obligation
Improvement Bonds, Series 2021A 07/15/2021 3.00 %12/15/2026 510,000$
3.00 12/15/2027 530,000
3.00 12/15/2028 560,000
3.00 12/15/2029 575,000
1.00 12/15/2030 600,000
1.05 12/15/2031 530,000
Total 3,305,000
$4,990,000 General Obligation
Improvement Bonds, Series 2021B 07/26/2021 5.00 12/15/2026 580,000
5.00 12/15/2027 630,000
5.00 12/15/2028 680,000
5.00 12/15/2029 735,000
Total 2,625,000
$1,910,000 General Obligation
Improvement Bonds, Series 2022A 09/08/2022 5.00 12/15/2026 180,000
5.00 12/15/2027 190,000
5.00 12/15/2028 195,000
5.00 12/15/2029 205,000
5.00 12/15/2030 220,000
4.00 12/15/2031 230,000
4.00 12/15/2032 230,000
Total 1,450,000
$1,620,000 General Obligation
Improvement Bonds, Series 2023A 07/19/2023 5.00 12/15/2026 125,000
5.00 12/15/2027 130,000
5.00 12/15/2028 130,000
5.00 12/15/2029 185,000
5.00 12/15/2030 195,000
5.00 12/15/2031 200,000
5.00 12/15/2032 215,000
5.00 12/15/2033 220,000
Total 1,400,000
Total general obligation bonds 10,360,000$
CITY OF PRIOR LAKE
Bond Schedules (continued)
December 31, 2025
Interest
Rate
-119-(continued)
Final
Issue Maturity
Date Date Principal
General obligation revenue bonds
$5,360,000 General Obligation Improvement
Bonds, Series 2015A 05/14/2015 2.50 %12/15/2026 530,000$
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 3,495,000
$2,640,000 General Obligation Improvement
Bonds, Series 2018A 08/15/2018 5.00 12/15/2026 280,000
5.00 12/15/2027 300,000
5.00 12/15/2028 320,000
Total 900,000
$1,180,000 General Obligation Improvement
Bonds, Series 2024A 08/20/2024 5.00 12/15/2026 40,000
5.00 12/15/2027 40,000
5.00 12/15/2028 45,000
5.00 12/15/2029 45,000
5.00 12/15/2030 50,000
5.00 12/15/2031 50,000
5.00 12/15/2032 55,000
4.00 12/15/2033 55,000
4.00 12/15/2034 60,000
4.00 12/15/2035 60,000
4.00 12/15/2036 60,000
4.00 12/15/2037 65,000
4.00 12/15/2038 70,000
4.00 12/15/2039 70,000
4.00 12/15/2040 75,000
4.00 12/15/2041 75,000
4.00 12/15/2042 80,000
4.00 12/15/2043 80,000
4.00 12/15/2044 85,000
Total 1,160,000
Total general obligation revenue bonds 5,555,000$
December 31, 2025
Interest
Rate
CITY OF PRIOR LAKE
Bond Schedules (continued)
-120-
Year Principal Interest Principal Interest Principal Interest
2026 1,890,000$ 423,765$ 1,785,000$ 336,866$ 850,000$ 194,100$
2027 1,955,000 340,665 1,685,000 245,713 890,000 164,850
2028 1,995,000 253,515 1,295,000 186,750 935,000 134,100
2029 1,880,000 164,965 1,075,000 133,000 635,000 98,750
2030 1,015,000 82,465 695,000 91,250 665,000 78,800
2031 960,000 55,715 130,000 67,900 690,000 57,850
2032 445,000 30,950 135,000 61,400 55,000 36,150
2033 220,000 11,000 145,000 54,650 55,000 33,400
2034 – – 150,000 47,400 60,000 31,200
2035 – – 155,000 41,400 60,000 28,800
2036 – – 160,000 35,200 60,000 26,400
2037 – – 170,000 28,800 65,000 24,000
2038 – – 175,000 22,000 70,000 21,400
2039 – – 185,000 15,000 70,000 18,600
2040 – – 190,000 7,600 75,000 15,800
2041 – – – – 75,000 12,800
2042 – – – – 80,000 9,800
2043 – – – – 80,000 6,600
2044 – – – – 85,000 3,400
Total 10,360,000$ 1,363,040$ 8,130,000$ 1,374,929$ 5,555,000$ 996,800$
CITY OF PRIOR LAKE
Debt Service Requirements
December 31, 2025
Revenue Bonds
General Obligation General Obligation
General Obligation Bonds Special Assessment Bonds
-121-
Collection Collections
Total of Current of Prior Total
Year Levy Year Levy Years’ Levy Collections
2016 11,078,361$ 11,034,353$ 99.60 %68,478$ 11,102,831$ 100.22 %
2017 11,568,155 11,520,353 99.59 12,692 11,533,045 99.70
2018 12,077,538 11,994,082 99.31 61,762 12,055,844 99.82
2019 12,778,035 12,697,865 99.37 65,150 12,763,015 99.88
2020 13,326,387 13,260,149 99.50 32,451 13,292,600 99.75
2021 13,965,457 13,962,613 99.98 47,700 14,010,313 100.32
2022 14,892,761 14,843,467 99.67 36,947 14,880,414 99.92
2023 16,863,956 16,772,934 99.46 36,842 16,809,776 99.68
2024 18,714,895 18,579,962 99.28 17,543 18,597,505 99.37
2025 19,855,410 19,724,062 99.34 113,858 19,837,920 99.91
Collection Collections
Total of Current of Prior Total
Year Levy Year Levy*Years’ Levy Collections
2016 453,962$ 475,376$ 104.72 %2,611$ 477,987$ 105.29 %
2017 504,420 474,936 94.15 7,331 482,267 95.61
2018 657,443 635,553 96.67 34,485 670,038 101.92
2019 728,099 699,440 96.06 13,554 712,994 97.93
2020 670,146 653,522 97.52 20,682 674,204 100.61
2021 644,393 633,503 98.31 30,387 663,890 103.03
2022 620,685 604,609 97.41 11,963 616,572 99.34
2023 613,078 603,886 98.50 16,168 620,054 101.14
2024 547,895 541,645 98.86 12,703 554,348 101.18
2025 730,159 709,112 97.12 19,350 728,462 99.77
*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
Last Ten Years
Tax Levies and Collections
of Levy
Collected to Levy
Collections
-122-
2023 2024 2025
Taxable market value 5,302,936,749$ 5,485,388,057$ 5,682,110,817$
Tax levy 16,863,956$ 18,714,895$ 19,855,410$
Tax capacity, net of fiscal disparities,
and tax increment 55,284,933$ 57,582,426$ 62,470,420$
Tax capacity rate 28.113% 30.303% 30.502%
Market value rate 0.004% 0.005% 0.005%
EDA tax capacity rate 0.622% 0.638% 0.630%
CITY OF PRIOR LAKE
Schedules of Market Value, Tax Levy, Tax Capacity Values,
Tax Capacity Rate, and Market Value Rate
Last Three Years
-123-
2023 2024 2025
Current population 28,536 28,716 29,057
Tax capacity, net of fiscal disparities,
and tax increment 55,284,933$ 57,582,426$ 62,470,420$
Percent of current property taxes collected 99.46% 99.28% 99.34%
City revenues per capita (governmental funds)1,149$ 1,223$ 1,210$
City expenditures per capita (governmental funds)1,298$ 1,323$ 1,340$
Ratio of bonded debt to tax capacity 50.21% 41.66% 36.61%
Bond rating AAA (S&P)AAA (S&P)AAA (S&P)
CITY OF PRIOR LAKE
Key Financial Indicators
Last Three Years
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Management Report
for
City of Prior Lake, Minnesota
December 31, 2025
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To the City Council and Management
City of Prior Lake, Minnesota
We have prepared this management report in conjunction with our audit of the City of Prior Lake,
Minnesota’s (the City) financial statements for the year ended December 31, 2025. We have organized this
report into the following sections:
•Audit Summary
•Governmental Funds Overview
•General Fund Overview
•Enterprise Funds Overview
•Government-Wide Financial Statements
•Accounting and Auditing Updates
We would be pleased to further discuss any of the information contained in this report or any other concerns
that you would like us to address. We would also like to express our thanks for the courtesy and assistance
extended to us during the course of our audit.
The purpose of this report is solely to provide those charged with governance of the City, management, and
those who have responsibility for oversight of the financial reporting process comments resulting from our
audit process and information relevant to city finances in Minnesota. Accordingly, this report is not suitable
for any other purpose.
Respectfully submitted,
LB CARLSON, LLP
Minneapolis, Minnesota
June 2, 2026
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-1-
AUDIT SUMMARY
The following is a summary of our audit work, key conclusions, and other information that we consider
important or that is required to be communicated to the City Council, administration, or those charged with
governance of the City.
OUR RESPONSIBILITY UNDER AUDITING STANDARDS GENERALLY ACCEPTED IN THE UNITED
STATES OF AMERICA AND GOVERNMENT AUDITING STANDARDS AND TITLE 2 U.S. CODE OF
FEDERAL REGULATIONS (CFR) PART 200, UNIFORM ADMINISTRATIVE REQUIREMENTS, COST
PRINCIPLES, AND AUDIT REQUIREMENTS FOR FEDERAL AWARDS (UNIFORM GUIDANCE)
We have audited the financial statements of the governmental activities, the business -type activities, each
major fund, and the aggregate remaining fund information of the City as of and for the year ended
December 31, 2025. Professional standards require that we provide you with information about our
responsibilities under auditing standards generally accepted in the United States of America, Government
Auditing Standards, the Uniform Guidance, as well as certain information related to the planned scope and
timing of our audit. We have communicated such information to you verbally and in our audit engagement
letter. Professional standards also require that we communicate the following information related to our
audit.
PLANNED SCOPE AND TIMING OF THE AUDIT
We performed the audit according to the planned scope and timing previously discussed and coordinated
in order to obtain sufficient audit evidence and complete an effective audit.
AUDIT OPINIONS AND FINDINGS
Based on our audit of the City’s financial statements for the year ended December 31, 2025:
•We have issued unmodified opinions on the City’s basic financial statements.
•We reported no deficiencies in the City’s internal control over financial reporting that we
considered to be material weaknesses.
•The results of our testing disclosed no instances of noncompliance required to be reported under
Government Auditing Standards.
•We reported that the Schedule of Expenditures of Federal Awards is fairly stated, in all material
respects, in relation to the basic financial statements.
•The results of our tests indicate that the City has complied, in all material respects, with the types
of compliance requirements that could have a direct and material effect on each of its major federal
programs.
•We reported one deficiency in the City’s internal controls over compliance that we considered to
be a significant deficiency with the types of compliance requirements that could have a direct and
material effect on each of its major federal programs.
1.For the highway planning and construction federal program, the City did not have sufficient
controls in place to assure that it was not contracting for goods or services with parties that
are suspended or debarred, or whose principals are suspended or debarred.
•We reported one finding based on our testing of the City’s compliance with Minnesota laws and
regulations:
1.For two of four contracts tested between $25,000 and $175,000, the City did not obtain
multiple quotations prior to awarding the contract as required by Minnesota Statutes
§471.325 Subd. 4.
-2-
OTHER OBSERVATIONS AND RECOMMENDATIONS
Internal Controls Over Vendors
A relatively common method of attempting to defraud local governments involves inducing them to pay
claims from fictitious vendors for goods or services that were never provided. Strong safeguards over
adding new vendors or making changes to existing vendors within the government’s accounts payable
system is an important control to mitigate this risk. Some considerations in this area include:
•Limiting the number of employees with access to add or alter vendor records within the accounts
payable system,
•Requiring vendor additions or changes to be reviewed and approved by supervisory personnel,
preferably one not directly involved in processing accounts payable,
•Verifying the legitimacy of vendors by obtaining a W-9 or other means,
•Verifying any changes to vendor address or banking information prior to processing payments, and
•Periodically reviewing the vendor listing to remove inactive vendors from the system.
Uniform Guidance Revisions
The U.S. Office of Management and Budget issued a revision to Title 2 U.S. Code of Federal Regulations
Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal
Awards (Uniform Guidance) in 2024, aiming to streamline grant management and reduce grantor agency
and recipient burden. The revised guidance is effective for new federal grant entitlements awarded on or
after October 1, 2024.
The revision includes a number of significant changes to the federal Single Audit process, including: an
increase in dollar threshold for requiring a Single Audit from $750,000 to $1,000,000; changes to the
thresholds and process used for determining major programs; an increase in the threshold for the disposition
of equipment and remitting unused supplies from $5,000 to $10,000; and an increase in the federal
de minimis indirect cost rate from 10 percent to 15 percent. Key changes to written policy requirements for
recipients include: enhancement of cybersecurity controls, inclusion of veteran-owned businesses to the
group of entities for procurement preference, and a broadened scope for reporting of mandatory disclosures.
We recommend the City review its internal control policies to ensure compliance with current guidance.
Payroll Withholdings
Management is responsible for establishing and maintaining effective internal controls over payroll
processing. During our audit, we identified an employee who updated their Internal Revenue Service
Form W-4, but the City had not updated the payroll system. We recommend that the City review its policies
and procedures regarding the processing of W-4’s and related payroll information to verify all information
is being updated properly into the payroll system and supporting forms are retained on file.
-3-
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, 2025.
We noted no transactions entered into by the City during the year for which there is a lack of authoritative
guidance or consensus. All significant transactions have been recognized in the financial statements in the
proper period.
ACCOUNTING ESTIMATES AND MANAGEMENT JUDGMENTS
Accounting estimates are an integral part of the financial statements prepared by management and are based
on management’s knowledge and experience about past and current events and assumptions about future
events. Certain accounting estimates are particularly sensitive because of their significance to the financial
statements and because of the possibility that future event s affecting them may differ significantly from
those expected. The most sensitive estimates affecting the financial statements were:
•Depreciation/Amortization – Management’s estimates of depreciation/amortization 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, and the likelihood that balances will ultimately be used during future
years of employment or paid out at termination.
•Total Other Post-Employment Benefits (OPEB) and Net Pension Liabilities – The City has
recorded liabilities and activity for pension benefits and OPEB. These obligations are calculated
using actuarial methodologies described in Governmental Accounting Standards Board Statement
Nos. 68 and 75. These actuarial calculations include significant assumptions, including projected
changes, healthcare insurance costs, investment returns, retirement ages, proportionate share, and
employee turnover.
•Assets Held for Resale – Management’s estimates of the assets are based on net realizable value
(lower of cost or acquisition value).
We evaluated the key factors and assumptions used by management to develop these accounting estimates
in determining that they are reasonable in relation to the basic financial statements taken as a whole.
Certain financial statement disclosures are particularly sensitive because of their significance to financial
statement users. The disclosures included in the notes to the basic financial statements related to OPEB and
pension benefits are particularly sensitive, due to the materiality of the liabilities, and the large and complex
estimates involved in determining the disclosures.
The financial statement disclosures are neutral, consistent, and clear.
DIFFICULTIES ENCOUNTERED IN PERFORMING THE AUDIT
We encountered no significant difficulties in dealing with management in performing and completing our
audit.
-4-
CORRECTED AND UNCORRECTED MISSTATEMENTS
Professional standards require us to accumulate all known and likely misstatements identified during the
audit, other than those that are clearly trivial, and communicate them to the appropriate level of
management. Management has corrected all such misstatements. In addition, none of the misstatements
detected as a result of audit procedures and corrected by management 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 June 2, 2026.
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.
-5-
OTHER MATTERS
We applied certain limited procedures to the management’s discussion and analysis and the pension and
OPEB-related required supplementary information (RSI) that supplement 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 statement s.
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 supplementary information, as described in the table of contents, and the
separately issued Schedule of Expenditures of Federal Awards, which accompany the financial statements,
but are not RSI. With respect to this supplementary information, we made certain inquiries of management
and evaluated the form, content, and methods of preparing the information to determine that the information
complies with accounting principles generally accepted in the United States of America, the method of
preparing it has not changed from the prior period, and the information is appropriate and complete in
relation to our audit of the financial statements. We compared and reconciled the supplementary
information to the underlying accounting records used to prepare the financial statements or to the financial
statements themselves.
We were not engaged to report on the introductory and other information sections, which accompany the
financial statements, but are not RSI. Such information has not been subjected to the auditing procedures
applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or
provide any assurance on it.
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-6-
GOVERNMENTAL FUNDS OVERVIEW
This section of the report provides you with an overview of the financial trends and activities of the City’s
governmental funds, which includes the General, special revenue, debt service, and capital project funds .
These funds are used to account for the basic services the City provides to all of its citizens, which are
financed primarily with property taxes. The governmental fund information in the City’s financial
statements focuses on budgetary compliance and the sufficiency of each governmental fund’s current assets
to finance its current liabilities.
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, 2025, presented both by fund balance classification and by major fund:
2025 2024 Change
Fund balances of governmental funds
Total by classification
Restricted 7,658,800$ 9,113,199$ (1,454,399)$
Assigned 13,070,041 11,839,301 1,230,740
Unassigned 14,023,036 12,888,798 1,134,238
Total governmental funds 34,751,877$ 33,841,298$ 910,579$
Total by fund
General 14,402,346$ 13,411,569$ 990,777$
Debt Service 3,148,328 3,206,457 (58,129)
Construction 1,538,609 1,198,818 339,791
Permanent Improvement Revolving – 1,001,546 (1,001,546)
Trunk Reserve 7,652,217 – 7,652,217
Nonmajor funds 8,010,377 15,022,908 (7,012,531)
Total governmental funds 34,751,877$ 33,841,298$ 910,579$
as of December 31,
Governmental Funds Change in Fund Balance
Fund Balance
In total, the fund balances of the City’s governmental funds increased by $910,579 during the year ended
December 31, 2025. The increase is largely due to an increase in assigned and unassigned fund balance
offset by a decrease in restricted fund balance. The increase in fund balance is due to an increase in the
Capital Projects Construction and Trunk Reserve Fund balances and positive operating results in the
General Fund. The decrease in restricted fund balance is due to a decrease in fund balance restricted for
development.
-7-
GOVERNMENTAL FUNDS REVENUE
The following table presents the City’s governmental funds revenue by source for the last two fiscal years.
Dollar
Revenue Revenue Change
Property taxes 20,214,052$ 57.6 %18,985,190$ 54.0 %1,228,862$ 6.5 %
Tax increments 239,314 0.7 669,264 1.9 (429,950) (64.2) %
Franchise and other taxes 1,806,412 5.1 1,640,516 4.7 165,896 10.1 %
Special assessments 1,033,982 2.9 2,727,577 7.8 (1,693,595) (62.1) %
Licenses and permits 622,493 1.8 868,936 2.5 (246,443) (28.4) %
Intergovernmental 6,481,867 18.4 5,423,407 15.4 1,058,460 19.5 %
Charges for services 2,328,147 6.6 2,325,931 6.6 2,216 0.1 %
Other 2,419,216 6.9 2,489,613 7.1 (70,397) (2.8) %
Total revenue 35,145,483$ 100.0 %35,130,434$ 100.0 %15,049$ – %
Percent
Change
Year-to-Year Change
Governmental Funds Revenue by Source
2025
Percent
of Total
2024
Percent
of Total
The City’s governmental fund revenues for 2025 were $35,145,483, an increase of $15,049 from the prior
year. The largest change occurred with increase in property taxes with the increased property tax levy
approved by the City Council along with an increase in intergovernmental revenue due to the City receiving
federal funds. Increase is offset by a decrease in special assessments due to large prepayments in the prior
year.
-8-
PROPERTY TAXES
Minnesota cities rely heavily on local property taxes to support governmental fund activities. In the 2025
fiscal year, ad valorem property taxes provided 57.6 percent, while tax increment provided .7 percent of the
City’s total governmental funds revenue.
The City’s taxable market value increased 3.4 percent for taxes payable in 2024 and 3.6 percent for taxes
payable in 2025. The following graph shows the City’s changes in taxable market value over the past
10 years:
$–
$1,000,000,000
$2,000,000,000
$3,000,000,000
$4,000,000,000
$5,000,000,000
$6,000,000,000
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Taxable Market Value
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, a s 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 4.2 percent and 8.5 percent for taxes payable in 2024
and 2025, respectively.
The following graph shows the City’s change in tax capacities over the past 10 years:
$–
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
$70,000,000
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Local Net Tax Capacity
-9-
The following graph presents the City’s certified tax levy and resulting tax rates applied to city residents
for each of the last five levy years:
$13,965,457 $14,892,761 $16,863,956
$18,714,895
$19,855,410
30.3%
30.5%
28.1%
30.3%30.5%
26.5%
27.0%
27.5%
28.0%
28.5%
29.0%
29.5%
30.0%
30.5%
31.0%
$–
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
2021 2022 2023 2024 2025
Tax Levies and Rates
Certified Tax Levy City Tax Rate
The City’s certified levy has continued to grow over the last five years, while increases in property
valuations have contributed to the change in the average tax rate.
-10-
GOVERNMENTAL FUNDS EXPENDITURES
The City’s governmental funds expenditures are classified into three types as follows:
•Current – These are typically the general operating type expenditures occurring on an annual basis,
and are primarily funded by general sources, such as taxes and intergovernmental revenues.
•Capital Outlay – These expenditures do not occur on a consistent basis, more typically fluctuating
significantly from year-to-year. Many of these expenditures are project-oriented, and are often
funded by specific sources that have benefited from the expenditure, such as s pecial assessment
improvement projects.
•Debt Service – Although the expenditures for debt service may be relatively consistent over the
term of the respective debt, the funding source is the important factor. Some debt may be repaid
through specific sources, such as special assessments or redevelopment funding, while other debt
may be repaid with general property taxes.
The following table presents the City’s governmental funds expenditures by type for the last two fiscal
years:
Dollar
Expenditures Expenditures Change
Current
General government 4,561,851$ 11.7 %4,272,088$ 11.2 %289,763$ 6.8 %
Public safety 11,657,773 29.9 10,658,868 28.0 998,905 9.4 %
Public works 2,707,281 7.0 2,657,086 7.0 50,195 1.9 %
Culture and recreation 2,758,893 7.1 2,612,010 6.9 146,883 5.6 %
All other 363,409 0.9 186,360 0.5 177,049 95.0 %
Total current 22,049,207 56.6 20,386,412 53.6 1,662,795 8.2 %
Capital outlay 11,610,195 29.9 12,391,369 32.7 (781,174) (6.3) %
Debt service 5,269,875 13.5 5,222,538 13.7 47,337 0.9 %
Total revenue 38,929,277$ 100.0 %38,000,319$ 100.0 %928,958$ 2.4 %
Governmental Funds Expenditures by Type
of Total of Total Change
2025 2024 Year-to-Year Change
Percent Percent Percent
In total, the City’s governmental fund expenditures for 2025 were $38,929,277, an increase of $928,928
from the prior year. The largest change occurred within public safety mostly related to increases in
personal-related expenditures. This increase in offset by a decrease in capital outlay as project-related costs
can vary from one year to the next.
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-11-
GENERAL FUND OVERVIEW
This section of the report focuses specifically on the financial trends and activities of the General Fund,
which accounts for the financial activity of the basic services provided to the community. The primary
services included within this fund include the administration of municipal operations, police and fire
protection, permitting and building inspection, streets and highway maintenance, culture and recreation,
and economic development.
GENERAL FUND FINANCIAL POSITION
The graph below illustrates the change in the fund balances of the General Fund over the last five years.
2021 2022 2023 2024 2025
Unassigned $9,857,197 $9,892,387 $10,540,044 $12,888,798 $14,030,286
Assigned $573,420 $566,010 $465,200 $522,771 $372,060
$–
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
$16,000,000
General Fund Year-End Fund Balance
As of December 31,
The total fund balance of the City’s General Fund at year-end represents an increase of $990,777 in 2025,
as compared to a $749,538 decrease in total fund balance projected in the final budget.
Fund Balance Policy
The City has formally adopted a fund balance policy regarding the minimum unrestricted fund balance for
the General Fund. The policy establishes that the City will strive to maintain an unrestricted General Fund
balance (which includes committed, assigned, and unassigned classifications) between 40.0 percent and
50.0 percent of the subsequent year’s General Fund budgeted expenditures. At December 31, 2025, the total
fund balance of the General Fund was 59.8 percent of the subsequent year’s budgeted expenditures and
transfers out of $24,093,139.
-12-
The following graph presents this ratio for the last five years compared to the City’s policy:
2021 2022 2023 2024 2025
Fund Balance Policy 40%40%40%40%40%
Unassigned Fund Balance 62.9%55.6%52.3%60.5%59.8%
30%
35%
40%
45%
50%
55%
60%
65%
Fund Balance as a Percentage of Expenditures
Year Ended December 31,
As the graph illustrates, the City has been in compliance with this policy. The City should review the level
of fund balance on an ongoing basis to determine the optimal level for efficient operations.
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.
A trend that is typical to Minnesota local governments, especially the General Fund of cities, is the unusual
cash flow experienced throughout the year. The City’s General Fund cash disbursements are spread
relatively evenly throughout the year, other than the impact of seasonal services such as snowplowing,
street maintenance, and recreation activities. Cash receipts of the General Fund are quite a different story.
Property taxes comprise about 58 percent of the fund’s total annual revenue. Approximately half of the
City’s annual property tax levy is collected and remitted to the City by the end of June and the rest by
December. Consequently, cities depend on the resources this fund balance represents to provide adequate
cash reserves to finance its everyday operations between these collections.
-13-
GENERAL FUND REVENUE
The following graph reflects the City’s General Fund revenue sources for 2025 compared to budget:
All Other
Licenses and Permits
Charges for Services
Fines and Forfeits
Intergovernmental
Taxes
General Fund Revenue
Budget and Actual
Budget Actual
General Fund revenue for 2025 was $22,659,531, which was $999,613 (4.6 percent) more than budget.
Intergovernmental revenue was higher than budget by $356,381 which was the result of conservative
budgeting. Investment income (included in all other in the table above) was more than budget by $349,302,
the result of market conditions. Miscellaneous revenue (included in all other in the table above) was more
than budget by $279,022, mainly from excess tax increment proceeds received in the current year.
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 tax revenue in recent years.
Taxes Intergovernmental Fines and
Forfeits
Charges for
Services
Licenses
and Permits All Other
2021 $10,125,022 $2,322,956 $38 $1,528,506 $999,906 $635,157
2022 $10,838,670 $2,795,110 $2,998 $1,370,410 $752,021 $(46,221)
2023 $12,676,918 $3,007,580 $2,895 $1,344,465 $694,943 $667,508
2024 $14,494,849 $3,586,085 $103,766 $1,511,428 $868,936 $1,311,568
2025 $15,590,608 $4,069,215 $99,753 $1,267,227 $622,493 $1,010,235
$(1,000,000)$– $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 $8,000,000 $9,000,000 $10,000,000 $11,000,000 $12,000,000 $13,000,000 $14,000,000 $15,000,000 $16,000,000
General Fund Revenue by Source
Year Ended December 31,
Total General Fund revenue for 2025 was $782,899 (3.6 percent) higher than last year. Taxes increased
$1,095,759 related to a levy increase. Intergovernmental revenue increased $483,130 in a variety of
categories, including public safety and road and bridge grants.
-14-
GENERAL FUND EXPENDITURES
The following graph illustrates the components of General Fund spending for 2025 compared to budget:
All Other
Culture and Recreation
Public Works
Public Safety
General Government
General Fund Expenditures
Budget and Actual
Budget Actual
Total General Fund expenditures for 2025 were $21,765,618, which was $706,350 (3.1 percent) under
budget. Police department expenditures were lower than budget by $430,968 due to less than anticipated
wages. Public works expenditures were lower than budget by $347,740, primarily for fuel and snow and
ice management material savings.
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
2021 $3,260,266 $7,261,344 $2,099,230 $1,982,787 $131,754
2022 $3,518,433 $8,083,971 $2,074,630 $2,209,617 $126,878
2023 $3,671,376 $9,140,389 $2,513,194 $2,281,006 $168,281
2024 $4,084,901 $10,642,427 $2,657,086 $2,602,420 $116,471
2025 $4,529,498 $11,645,509 $2,707,281 $2,726,106 $157,224
$–
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
$8,000,000
$9,000,000
$10,000,000
$11,000,000
$12,000,000
General Fund Expenditures by Function
Year Ended December 31,
Total General Fund expenditures for 2025 were $1,662,313 (8.3 percent) greater than the previous year.
Public safety expenditures increased $1,003,082. The increase in public safety expenditures is due to an
increase in wages. General government increased $444,597, mainly due to an increase in wages and
insurance.
-15-
ENTERPRISE FUNDS OVERVIEW
The City maintains a number of enterprise funds to account for services the City provides that are financed
primarily through fees charged to those utilizing the service. This section of the report provides you with
an overview of the financial trends and activities of the City’s enterprise funds, which include the Water,
Sewer, and Water Quality Funds.
ENTERPRISE FUNDS FINANCIAL POSITION
The following table summarizes the changes in the financial position of the City’s enterprise funds during
the year ended December 31, 2025, presented by both classification and by fund:
2025 2024 Change
Net position of enterprise funds
Total by classification
Net investment in capital assets 77,737,580$ 76,823,473$ 914,107$
Unrestricted 20,695,946 17,915,692 2,780,254
Total enterprise funds 98,433,526$ 94,739,165$ 3,694,361$
Total by fund
Water 55,183,338$ 53,912,726$ 1,270,612$
Sewer 35,216,939 33,521,970 1,694,969
Water Quality 8,033,249 7,304,469 728,780
Total enterprise funds 98,433,526$ 94,739,165$ 3,694,361$
Enterprise Funds Change in Financial Position
Net Position
as of December 31,
In total, the net position of the City’s enterprise funds increased by $3,694,361 during the year ended
December 31, 2025. This increase is mainly in unrestricted net position due to the overall improved
performance in the enterprise funds.
INTERNAL SERVICE FUNDS
The City has established a Severance Compensation Internal Service Fund to finance the compensated
absence obligations of the governmental funds of the City. At December 31, 2025, this fund had assets
totaling $753,964, while liabilities totaled $1,814,026, leaving a deficit net position balance of
($1,060,062). We recommend that the City continue to include the financing of these obligations as part of
its long-range financial plans.
The City has also established an Insurance Internal Service Fund to account for risk management activities,
including workers’ compensation, volunteer accident, and property/casualty insurance. At December 31,
2025, this fund had a net position balance of $252,111.
-16-
WATER ENTERPRISE FUND
The following graph presents five years of comparative operating results for the City’s Water Fund:
2021 2022 2023 2024 2025
Operative Revenues $5,569,995 $5,595,073 $6,063,587 $4,976,415 $5,378,964
Operating Expenses $3,212,458 $3,755,290 $4,361,701 $3,788,155 $4,068,325
Operating Income $2,357,537 $1,839,783 $1,701,886 $1,188,260 $1,310,639
Income Before
Depreciation/Amortization $3,346,673 $2,877,384 $2,761,203 $2,270,580 $2,445,101
$–
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
$4,000,000
$4,500,000
$5,000,000
$5,500,000
$6,000,000
$6,500,000
Water Enterprise Fund
Year Ended December 31,
The Water Fund ended 2025 with a net position of $55,183,338, an increase of $1,270,612 from the prior
year. Of this, $44,512,200 represents the net investment in capital assets, leaving $10,671,138 in
unrestricted net position. The Water Fund had transfers out totaling $1,126,887 in 2025 to support other
funds, pay debt service, and provide for construction projects.
Operating revenue in the Water Fund increased $402,549 (8.1 percent) from the prior year. This increase
was due to increased consumption in the current year and increased rates.
Water Fund operating expenses for 2025 increased $280,170 (7.4 percent) from the previous year. This
includes increases in personnel costs, including wages and benefits, professional services, and utility costs.
-17-
SEWER ENTERPRISE FUND
The following graph presents five years of comparative operating results for the City’s Sewer Fund:
2021 2022 2023 2024 2025
Operative Revenues $4,761,256 $4,814,666 $4,689,458 $5,116,182 $5,676,755
Operating Expenses $3,365,918 $3,741,083 $3,689,753 $4,142,246 $4,062,385
Operating Income $1,395,338 $1,073,583 $999,705 $973,936 $1,614,370
Income Before
Depreciation/Amortization $2,036,083 $1,757,988 $1,730,389 $1,744,748 $2,404,477
$–
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
Sewer Enterprise Fund
Year Ended December 31,
The Sewer Fund ended 2025 with a net position of $35,216,939, an increase of $1,694,969 from the prior
year. Of this, $29,837,059 represents the City’s net investment in capital assets, leaving $5,379,880 in
unrestricted net position. The Sewer Fund had transfers out totaling $443,612 in 2025 to support other
funds, pay debt service, and provide for construction projects.
Operating revenue in the Sewer Fund increased $560,573 (11.0 percent) from the prior year, mainly related
to increased usage and increased rates. Sewer Fund operating expenses for 2025 decreased $79,861 from
the previous year mainly in repairs and maintenance.
-18-
WATER QUALITY ENTERPRISE FUND
The following graph presents five years of comparative operating results for the City’s Water Quality Fund:
2021 2022 2023 2024 2025
Operative Revenues $1,206,566 $1,254,521 $1,413,198 $1,628,444 $2,062,778
Operating Expenses $730,212 $900,535 $819,451 $766,362 $1,071,302
Operating Income $476,354 $353,986 $593,747 $862,082 $991,476
Income Before Depreciation/Amortization $594,451 $451,879 $701,135 $969,156 $1,087,412
$–
$250,000
$500,000
$750,000
$1,000,000
$1,250,000
$1,500,000
$1,750,000
$2,000,000
$2,250,000
Water Quality Enterprise Fund
Year Ended December 31,
The Water Quality Fund ended 2025 with a net position of $8,033,249, an increase of $728,780 from the
prior year. Of this, $3,388,321 represents the investment in capital assets, leaving $4,644,928 in unrestricted
net position.
Operating revenue in the Water Quality Fund increased $434,334 from the prior year, due to an increase in
rates in 2025. Water Quality Fund operating expenses for 2025 increased $304,940 (39.8 percent) from the
previous year, mainly in personal services.
-19-
GOVERNMENT-WIDE FINANCIAL STATEMENTS
In addition to fund-based information, the current reporting model for governmental entities also requires
the inclusion of two government-wide financial statements designed to present a clear picture of the City
as a single, unified entity. These government-wide financial statements provide information on the total
cost of delivering services, including capital assets and long-term liabilities.
STATEMENT OF NET POSITION
The Statement of Net Position essentially tells you what the City owns and owes at a given point in time,
the last day of the fiscal year. Theoretically, net position represents the resources the City has leftover to
use for providing services after its debts are settled. However, those resources are not always in spendable
form, or there may be restrictions on how some of those resources can be used. Therefore, net position is
divided into three components: net investment in capital assets, restricted, and unrestricted.
The following table presents the components of the City’s net position as of December 31, 2025 and 2024
for governmental activities and business-type activities:
2025 2024 Change
Net position
Governmental activities
Net investment in capital assets 160,100,601$ 149,536,208$ 10,564,393$
Restricted 12,194,775 12,716,329 (521,554)
Unrestricted 17,939,198 15,898,010 2,041,188
Total governmental activities 190,234,574 178,150,547 12,084,027
Business-type activities
Net investment in capital assets 77,737,580 76,823,473 914,107
Unrestricted 20,695,946 17,915,692 2,780,254
Total business-type activities 98,433,526 94,739,165 3,694,361
Total net position 288,668,100$ 272,889,712$ 15,778,388$
As of December 31,
The City’s total net position at December 31, 2025, was $15,778,388 higher than the total net position
reported at the previous year-end.
The increase in the governmental activities and business-type activities net investment in capital assets
balance was mostly due to capital outlay and capital contribution activity during fiscal 2025. The increase
in unrestricted net position in governmental activities is mostly related to the improved General Fund
financial position and pension-related activity in the current year. The change in unrestricted net position
in the business-type activities is related to positive operating results in the utility operations in the current
year.
At the end of the current fiscal year, the City is able to present positive balances in all categories of net
position, both for the government as a whole, and for its separate governmental and business-type activities.
The same situation held true for the prior year.
-20-
STATEMENT OF ACTIVITIES
The Statement of Activities tracks the City’s yearly revenues and expenses, as well as any other transactions
that increase or reduce total net position. These amounts represent the full cost of providing services. The
Statement of Activities provides a more comprehensive measure than just the amount of cash that changed
hands, as reflected in the fund-based financial statements. This statement includes the cost of supplies used,
depreciation/amortization of long-lived capital assets, and other accrual-based expenses.
The following table presents the change in the net position of the City for the years ended December 31,
2025 and 2024:
2024
Program
Expenses Revenues Net Change Net Change
Net (expense) revenue
Governmental activities
General government 4,847,796$ 1,947,142$ (2,900,654)$ (3,815,650)$
Public safety 12,269,112 4,201,118 (8,067,994) (7,100,856)
Public works 7,441,660 7,819,723 378,063 (477,128)
Culture and recreation 3,363,339 789,388 (2,573,951) (2,272,206)
Economic development 680,614 26,836 (653,778) (1,345,573)
Interest on long-term debt 639,469 – (639,469) (666,504)
Business-type activities
Water 4,081,115 5,795,845 1,714,730 1,197,424
Sewer 4,075,175 5,862,204 1,787,029 970,516
Water quality 1,118,914 2,173,682 1,054,768 844,637
Total net (expense) revenue 38,517,194$ 28,615,938$ (9,901,256) (12,665,340)
General revenues
Property taxes and tax increments 22,277,268 21,335,798
Investment income 2,553,975 2,380,064
Other revenues 848,401 1,095,260
Total general revenues 25,679,644 24,811,122
Change in net position 15,778,388$ 12,145,782$
2025
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.
-21-
ACCOUNTING AND AUDITING UPDATES
The following is a summary of Governmental Accounting Standards Board (GASB) standards expected to
be implemented in the next few years.
GASB STATEMENT NO. 103, FINANCIAL REPORTING MODEL IMPROVEMENTS
The objective of this statement is to improve key components of the financial reporting model to enhance
its effectiveness in providing information that is essential for decision making and assessing a government’s
accountability. This statement also addresses certain application issues.
This statement continues the requirement that the basic financial statements be preceded by management’s
discussion and analysis (MD&A), which is presented as required supplementary information (RSI). This
statement requires that the information presented in MD&A be limited to the related topics discussed in
five sections: (1) Overview of the Financial Statements, (2) Financial Summary, (3) Detailed Analyses,
(4)Significant Capital Asset and Long-Term Financing Activity, and (5) Currently Known Facts,
Decisions, or Conditions. Furthermore, this statement stresses that the detailed analyses should explain why
balances and results of operations changed rather than simply presenting the amounts or percentages by
which they changed. In addition, this statement continues the requirement that information included in
MD&A distinguish between that of the primary government and its discretely presented component units.
This statement defines unusual or infrequent items as transactions and other events that are either unusual
in nature or infrequent in occurrence, and requires governments to display the inflows and outflows related
to each unusual or infrequent item separately.
This statement requires that the proprietary fund statement of revenues, expenses, and changes in fund net
position continue to distinguish between operating and nonoperating revenues and expenses. In addition to
the subtotals currently required in a proprietary fund statement of revenues, expenses, and changes in fund
net position, this statement requires that a subtotal for operating income (loss) and noncapital subsidies be
presented before reporting other nonoperating revenues and expenses.
This statement requires governments to present each major component unit separately in the reporting
entity’s statement of net position and statement of activities if it does not reduce the readability of the
statements. If the readability of those statements would be reduced, combining statements of major
component units should be presented after the fund financial statements.
This statement requires governments to present budgetary comparison information using a single method
of communication—RSI. Governments also are required to present (1) variances between original and final
budget amounts and (2) variances between final budget and actual amounts. An explanation of significant
variances is required to be presented in the notes to RSI.
The requirements of this statement are effective for fiscal years beginning after June 15, 2025, and all
reporting periods thereafter. Earlier application is encouraged.
-22-
GASB STATEMENT NO. 104, DISCLOSURE OF CERTAIN CAPITAL ASSETS
The objective of this statement is to provide users of government financial statements with essential
information about certain types of capital assets.
This statement requires certain types of capital assets to be disclosed separately in the capital assets note
disclosures required by GASB Statement No. 34. Lease assets recognized in accordance with Statement
No. 87, Leases, and intangible right-to-use assets recognized in accordance with Statement No. 94,
Public-Private and Public-Public Partnerships and Availability Payment Arrangements, should be
disclosed separately by major class of underlying asset in the capital assets note disclosures. Subscription
assets recognized in accordance with Statement No. 96, Subscription-Based Information Technology
Arrangements, also should be separately disclosed. In addition, this statement requires intangible assets
other than those three types to be disclosed separately by major class.
This statement also requires additional disclosures for capital assets held for sale. A capital asset is
considered held for sale if (a) the government has decided to pursue the sale of the capital asset and (b) it
is probable that the sale will be finalized within one year of the financial statement date. Governments
should consider relevant factors to evaluate the likelihood of the capital asset being sold within the
established time frame. Capital assets held for sale are required to be evaluated each reporting period.
Governments should disclose (1) the ending balance of capital assets held for sale, with separate disclosure
for historical cost and accumulated depreciation by major class of asset, and (2) the carrying amount of debt
for which the capital assets held for sale are pledged as collateral for each major class of asset.
The requirements of this statement are effective for fiscal years beginning after June 15, 2025, and all
reporting periods thereafter. Earlier application is encouraged.
GASB STATEMENT NO. 105, SUBSEQUENT EVENTS
The objective of this statement is to improve the financial reporting requirements for subsequent events,
thereby enhancing consistency in their application and better meeting the information needs of financial
statement users.
This statement defines subsequent events as transactions or other events that occur after the date of the
financial statements but before the date the financial statements are available to be issued. This statement
describes the date the financial statements are available to be issued as the date at which (1) the financial
statements are complete in a form and format that complies with generally accepted accounting principles
and (2) approvals necessary for issuance have been obtained. That definition modifies the subsequent events
time frame throughout the GASB literature. This statement also requires the date through which subsequent
events have been evaluated to be disclosed.
This statement clarifies the subsequent events that constitute recognized and nonrecognized events and
establishes specific note disclosure requirements for nonrecognized events.
The requirements of this statement are effective for fiscal years beginning after June 15, 2026, and all
reporting periods thereafter. Earlier application is encouraged.
CITY OF PRIOR LAKE
SCOTT COUNTY, MINNESOTA
Special Purpose Audit Reports
Year Ended
December 31, 2025
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Page
Schedule of Expenditures of Federal Awards 1
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 2–3
Independent Auditor’s Report on Compliance for Each Major Program;
Report on Internal Control Over Compliance; and Report on the Schedule of
Expenditures of Federal Awards Required by the Uniform Guidance 4–7
Independent Auditor’s Report on Minnesota Legal Compliance 8–9
Schedule of Findings and Questioned Costs 10–12
CITY OF PRIOR LAKE
Table of Contents
SCOTT COUNTY, MINNESOTA
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Federal Federal
ALN Expenditures
Direct program
Bulletproof Vest Partnership Program 16.607 5,208$
U.S. Department of Transportation
Passed through the Minnesota Department of Public Safety
Highway Planning and Construction 20.205 1,000,000
Pass through the City of Shakopee
Highway Safety Cluster
State and Community Highway Safety 20.600 7,549
Minimum Penalties for Repeat Offenders for Driving
While Intoxicated 20.608 1,385
Total federal awards 1,014,142$
Note 1:
Note 2:
Note 3:
Federal Grantor/Pass-Through Grantor/Program Title
The Schedule of Expenditures of Federal Awards is prepared on the accrual basis of accounting.The information
in this schedule is presented in accordance with the OMB’s Uniform Administrative Requirements,Cost
Principles,and Audit Requirements for Federal Awards.Therefore,some amounts presented in this schedule may
differ from the amounts presented in, or used in the preparation of, the City’s basic financial statements.
The pass-through entities above use the same assistance listing numbers (ALN)as the federal grantors to identify
these grants, and have not assigned any additional identifying numbers.
The City did not elect to use the federal de minimis indirect cost rate.
U.S. Department of Justice
CITY OF PRIOR LAKE
Schedule of Expenditures of Federal Awards
Year Ended December 31, 2025
-1-
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-2-
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, 2025, and the related notes to the
financial statements, which collectively comprise the City’s basic financial statements, and have issued our
report thereon dated June 2, 2026.
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
In planning and performing our audit of the financial statements, we considered the City’s internal control
over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in
the circumstances for the purpose of expressing our opinions on the financial statements, but not for the
purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we do not
express an opinion on the effectiveness of the City’s internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management
or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct,
misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in
internal control such that there is a reasonable possibility that a material misstatement of the City’s financial
statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a
deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness,
yet important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this
section and was not designed to identify all deficiencies in internal control that might be material
weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any
deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses
or significant deficiencies may exist that were not identified.
(continued)
-3-
REPORT ON COMPLIANCE AND OTHER MATTERS
As part of obtaining reasonable assurance about whether the City’s financial statements are free from
material misstatement, we performed tests of its compliance with certain provisions of laws, regulations,
contracts, and grant agreements, noncompliance with which could have a direct and material effect on the
financial statements. However, providing an opinion on compliance with those provisions was not an
objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed
no instances of noncompliance or other matters that are required to be reported under Government Auditing
Standards.
PURPOSE OF THIS REPORT
The purpose of this report is solely to describe the scope of our testing of internal control and compliance
and the results of that testing, and not to provide an opinion on the effectiveness of the City’s internal
control or on compliance. This report is an integral part of an audit performed in accordance with
Government Auditing Standards in considering the City’s internal control and compliance. Accordingly,
this report is not suitable for any other purpose.
Respectfully submitted,
LB CARLSON, LLP
Minneapolis, Minnesota
June 2, 2026
-4-
INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE FOR
EACH MAJOR PROGRAM; REPORT ON INTERNAL CONTROL
OVER COMPLIANCE; AND REPORT ON THE SCHEDULE OF EXPENDITURES
OF FEDERAL AWARDS REQUIRED BY THE UNIFORM GUIDANCE
To the City Council and Management
City of Prior Lake, Minnesota
REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM
OPINION ON EACH MAJOR FEDERAL PROGRAM
We have audited the City of Prior Lake, Minnesota’s (the City) compliance with the types of compliance
requirements identified as subject to audit in the U.S. Office of Management and Budget Compliance
Supplement that could have a direct and material effect on each of the City’s major federal programs for
the year ended December 31, 2025. The City’s major federal programs are identified in the Summary of
Audit Results section of the accompanying Schedule of Findings and Questioned Costs.
In our opinion, the City complied, in all material respects, with the compliance requirements referred to
above that could have a direct and material effect on each of its major programs for the year ended
December 31, 2025.
BASIS FOR OPINION ON EACH MAJOR FEDERAL PROGRAM
We conducted our audit of compliance in accordance with auditing standards generally accepted in the
United States of America; the standards applicable to financial audits contained in Government Auditing
Standards issued by the Comptroller General of the United States; and the audit requirements of Title 2
U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and
Audit Requirements for Federal Awards (Uniform Guidance). Our responsibilities under those standards
and the Uniform Guidance are further described in the Auditor’s Responsibilities for the Audit of
Compliance section of our report.
We are required to be independent of the City and to meet our other ethical responsibilities, in accordance
with relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our opinion on compliance for each major federal
program. Our audit does not provide a legal determination of the City’s compliance with the compliance
requirements referred to above.
(continued)
-5-
RESPONSIBILITIES OF MANAGEMENT FOR COMPLIANCE
Management is responsible for compliance with the requirements referred to on the previous page and for
the design, implementation, and maintenance of effective internal control over compliance with the
requirements of laws, statutes, regulations, rules, and provisions of contracts or grant agreements applicable
to the City’s federal programs.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF COMPLIANCE
Our objectives are to obtain reasonable assurance about whether material noncompliance with the
compliance requirements referred to on the previous page occurred, whether due to fraud or error, and
express an opinion on the City’s compliance based on our audit. Reasonable assurance is a high level of
assurance, but is not absolute assurance and, therefore, is not a guarantee that an audit conducted in
accordance with generally accepted auditing standards, Government Auditing Standards, and the Uniform
Guidance will always detect material noncompliance when it exists. The risk of not detecting material
noncompliance from fraud is higher than for that resulting from error, as fraud may involve collusion,
forgery, intentional omissions, misrepresentations, or the override of internal control. Noncompliance with
the compliance requirements referred to on the previous page is considered material if there is a substantial
likelihood that, individually or in the aggregate, it would influence the judgment made by a reasonable user
of the report on compliance about the City’s compliance with the requirements of each major federal
program as a whole.
In performing an audit in accordance with generally accepted auditing standards, Government Auditing
Standards, and the Uniform Guidance, we:
• Exercise professional judgment and maintain professional skepticism throughout the audit.
• Identify and assess the risks of material noncompliance, whether due to fraud or error, and design
and perform audit procedures responsive to those risks. Such procedures include examining, on a
test basis, evidence regarding the City’s compliance with the compliance requirements referred to
on the previous page and performing such other procedures as we consider necessary in the
circumstances.
• Obtain an understanding of the City’s internal control over compliance relevant to the audit in order
to design audit procedures that are appropriate in the circumstances and to test and report on internal
control over compliance in accordance with the Uniform Guidance, but not for the purpose of
expressing an opinion on the effectiveness of the City’s internal control over compliance.
Accordingly, no such opinion is expressed.
We are required to communicate with those charged with governance regarding, among other matters, the
planned scope and timing of the audit and any significant deficiencies and material weaknesses in internal
control over compliance that we identified during the audit.
(continued)
-6-
REPORT ON INTERNAL CONTROL OVER COMPLIANCE
Our consideration of internal control over compliance was for the limited purpose described in the Auditor’s
Responsibilities for the Audit of Compliance section on the previous page and was not designed to identify
all deficiencies in internal control over compliance that might be material weaknesses or significant
deficiencies in internal control over compliance and, therefore, material weaknesses or significant
deficiencies may exist that were not identified. We did not identify any deficiencies in internal control over
compliance that we consider to be material weaknesses, as defined below. However, as discussed below,
we did identify one deficiency in internal control over compliance that we consider to be a significant
deficiency.
A deficiency in internal control over compliance exists when the design or operation of a control over
compliance does not allow management or employees, in the normal course of performing their assigned
functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a
federal program on a timely basis. A material weakness in internal control over compliance is a deficiency,
or combination of deficiencies, in internal control over compliance, such that there is a reasonable
possibility that material noncompliance with a type of compliance requirement of a federal program will
not be prevented, or detected and corrected, on a timely basis.
A significant deficiency in internal control over compliance is a deficiency, or a combination of
deficiencies, in internal control over compliance with a type of compliance requirement of a federal program
that is less severe than a material weakness in internal control over compliance, yet important enough to
merit attention by those charged with governance. We consider the deficiency in internal control over
compliance described in the accompanying Schedule of Findings and Questioned Costs as
finding 2025-001 to be a significant deficiency.
Our audit was not designed for the purpose of expressing an opinion on the effectiveness of internal control
over compliance. Accordingly, no such opinion is expressed.
Government Auditing Standards requires the auditor to perform limited procedures on the City’s response
to the internal control over compliance finding identified in our compliance audit described in the
accompanying Schedule of Findings and Questioned Costs. The City’s response was not subjected to the
other auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on
the response.
The purpose of this report on internal control over compliance is solely to describe the scope of our testing
of internal control over compliance and the results of that testing based on the requirements of the Uniform
Guidance. Accordingly, this report is not suitable for any other purpose.
(continued)
-7-
REPORT ON THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS REQUIRED BY THE UNIFORM
GUIDANCE
We have audited the financial statements of the governmental activities, the business -type activities, each
major fund, and the aggregate remaining fund information of the City as of and for the year ended
December 31, 2025, and the related notes to the financial statements, which collectively comprise the City’s
basic financial statements. We issued our report thereon dated June 2, 2026, which contained unmodified
opinions on those financial statements. Our audit was performed for the purpose of forming opinions on
the financial statements that collectively comprise the basic financial statements. The accompanying
Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by
the Uniform Guidance and is not a required part of the basic financial statements. Such 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. The information has been subjected to the
auditing procedures applied in the audit of the 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 Schedule of Expenditures of Federal Awards is fairly stated, in all material
respects, in relation to the basic financial statements as a whole.
Respectfully submitted,
LB CARLSON, LLP
Minneapolis, Minnesota
June 2, 2026
-8-
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, 2025, and the related notes to the
financial statements, which collectively comprise the City’s basic financial statements, and have issued our
report thereon dated June 2, 2026.
MINNESOTA LEGAL COMPLIANCE
In connection with our audit, we noted that the City failed to comply with provisions of the contracting –
bid laws 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 as described in the
Schedule of Findings and Questioned Costs as finding 2025-002. Also, 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 depositories of public funds and public 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, 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.
CITY’S RESPONSE TO FINDING
Government Auditing Standards requires the auditor to perform limited procedures on the City’s response
to the legal compliance finding identified in our audit and described in the accompanying Schedule of
Findings and Questioned Costs. The City’s response was not subjected to the other auditing procedures
applied in the audit of the financial statements and, accordingly, we express no opinion on the response.
(continued)
-9-
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.
Respectfully submitted,
LB CARLSON, LLP
Minneapolis, Minnesota
June 2, 2026
CITY OF PRIOR LAKE
Schedule of Findings and Questioned Costs
Year Ended December 31, 2025
-10-
A. SUMMARY OF AUDIT RESULTS
This summary is formatted to provide federal granting agencies and pass -through agencies answers to
specific questions regarding the audit of federal awards.
Financial Statements
What type of auditor’s report is issued?X Unmodified
Qualified
Adverse
Disclaimer
Internal control over financial reporting:
Material weakness(es) identified?Yes X No
Significant deficiency(ies) identified?Yes X None reported
Noncompliance material to the financial statements noted?Yes X No
Federal Awards
Internal controls over major federal award programs:
Material weakness(es) identified?Yes X No
Significant deficiency(ies) identified?X Yes None reported
Type of auditor’s report issued on compliance for major programs?
U.S. Department of Transportation
Highway Planning and Construction Unmodified
Any audit findings disclosed that are required to be reported
in accordance with 2 CFR 200.516(a)?X Yes No
Programs tested as major programs:
Program or Cluster Federal ALN
U.S. Department of Transportation
Highway Planning and Construction
Threshold for distinguishing type A and B programs:750,000$
Does the auditee qualify as a low-risk auditee?Yes X No
20.205
CITY OF PRIOR LAKE
Schedule of Findings and Questioned Costs (continued)
Year Ended December 31, 2025
-11-
B. FINANCIAL STATEMENT FINDINGS
None.
C. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
SIGNIFICANT DEFICIENCY IN INTERNAL CONTROL OVER COMPLIANCE – U.S. DEPARTMENT OF
TRANSPORTATION, PASSED THROUGH MINNESOTA DEPARTMENT OF TRANSPORTATION, HIGHWAY
PLANNING AND CONSTRUCTION
2025-001 Internal Control Over Compliance With Federal Suspension and Debarment
Requirements
Criteria – 2 CFR § 180 requires City of Prior Lake (the City) to establish and maintain effective
internal control over compliance with requirements applicable to federal program expenditures,
including suspension and debarment requirements applicable to the highway planning and
construction grant.
Condition – During our audit, we noted the City did not have sufficient controls in place within
its highway planning and construction grant federal program to assure that it was not
contracting for goods or services with parties that are suspended or debarred, or whose
principals are suspended or debarred from participating in contracts involving the expenditures
of federal program funds.
Questioned Costs – None. Our testing did not indicate any instances of noncompliance with
these requirements.
Context – The City did not obtain the appropriate documentation for one of one vendor tested
to ensure the vendor was not suspended or debarred from participation in federal program
contracts.
Repeat Finding – This is a current year finding.
Cause – This was an oversight by city personnel.
Effect – Noncompliance with the suspension and debarment requirements could result in the
City expending federal funds with vendors that are not eligible to be parties to such
transactions, which could be viewed as a violation of the award agreement.
Recommendation – We recommend that the City review its internal control procedures
relating to suspension and debarment for the highway planning and construction grant federal
program. Internal controls over compliance for this area should include verification that any
vendor with which the City contracts for goods or services exceeding $25,000 is not listed as
suspended or debarred on the federal Excluded Parties List System website.
View of Responsible Official and Planned Corrective Actions – The City agrees with the
finding. The City will review and update its policies and procedures relating to suspension and
debarment for its federal programs to ensure compliance with the Uniform Guidance in the
future. The City has separately issued a Corrective Action Plan related to this finding.
CITY OF PRIOR LAKE
Schedule of Findings and Questioned Costs (continued)
Year Ended December 31, 2025
-12-
D. MINNESOTA LEGAL COMPLIANCE FINDINGS
2025-002 Contracting – Quotes
Criteria – Minnesota Statutes § 471.345, Subd. 4.
Condition – Minnesota Statutes require that each contract from $25,000 to $175,000 be
awarded either upon sealed bids or by direct negotiation, by obtaining two or more quotations
for the purchase or sale when possible, and without advertising for bids or otherwise complying
with the requirements of competitive bidding. All quotations obtained shall be kept on file for
a period of at least one year after receipt thereof. For two of four purchases tested to which this
requirement applied, the City did not follow this process or retain documentation to support
that proper procedures were completed.
Questioned Costs – Not applicable.
Context – Two of four purchases tested were not in compliance.
Repeat Finding – This is a current year finding.
Cause – This was an oversight by city personnel.
Effect – The City did not obtain multiple quotes as required or retain documentation that proper
quote procedures were completed.
Recommendation – We recommend that the City review purchasing and contracting
procedures in place to ensure future compliance with this statute.
View of Responsible Official and Planned Corrective Actions – The City agrees with the
finding. The City will review its procedures in place to ensure future compliance with
Minnesota Statutes. The City has issued a separate Corrective Action Plan related to this
finding.
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