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Home My WebLink About2017 Audit Management Report CITY OF OAK PARK HEIGHTS, MINNESOTA AUDIT MANAGEMENT LETTER December 31, 2017 City of Oak Park Heights, Minnesota Audit Management Letter Report Summary Report Summary Several reports are issued in conjunction with the audit. A brief summary is as follows: Report Name Elements of Report Overview Annual Financial Report (AFR) Financial statements Unmodified (“clean”) opinion on the Financial Footnotes Statements Required supplementary information Statistical information Report on Internal Control and on Results of testing No findings of Compliance and Other Matters Internal controls over financial noncompliance reporting No internal control findings. Compliance with laws, regulations, contracts and grants State Legal Compliance Report Results of testing certain No findings of provisions of Minnesota noncompliance Statutes Audit Management LetterIntended to be a working tool for City Council Comparisons and trend analysis Outside factors influencing City financial reporting Policies and procedures 2 City of Oak Park Heights, Minnesota Audit Management Letter Analysis of Selected Accounts A NALYSIS OF S ELECTED A CCOUNTS Summary of Financial Activity The schedule below presents a condensed financial summary of all funds: Increase (Decrease) inFund Balance/ Revenue ExpendituresFund Balance/Net and Otherand OtherTransfersNetPosition FundSourcesUses(Net)Position12/31/17 1$5,916,978$3,555,913($2,528,949)($167,884)$4,842,448 General Special Revenue Funds: 2Forfeiture and Seizure8,1575,488 - 2,66910,037 3Economic Development431 - - 43133,999 4TIF District #1216,880172,941 - 43,939165,997 5TIF District #2501,680 - (1,630)(407,594) Debt Service Funds: 6Bonds of 2009488144,609143,000(1,121)17,879 7G.O. CIP Refunding Bonds of 2012A1,003410,252410,000751115,024 8G.O. Capital Improvement Bonds of 2014A157,137474,391226,100(91,154)961,778 Capital Project Funds: 9Capital Revolving4,8231,942 - 2,881378,765 10Budgeted Projects and Equipment Revolving41,755829,1041,193,574406,2253,734,261 11Street Reconstruction71,18484,382380,126366,9282,235,545 12City Hall Improvements1,1898,661 - (7,472)86,209 13Park Development51,670620,819345,000(224,149)507,381 14Moelter Park2,7831,505(140,000)(138,722)104,527 15Renewal and Replacement43,85698,054513,256459,0583,895,511 16Storm Sewer Renewal/Replacement6,377 - 87,62494,001570,450 17Sanitary Sewer Connection 21,155 - - 21,155481,190 18Water Connection87,307 - - 87,307712,573 19Storm Sewer Connection20,103 - - 20,1031,029,920 20Water Tower Rehabilitation46,448 - 40,47986,927526,940 21Well Rehabilitation1,53121,18011,445(8,204)126,283 22Sewer Rehabilitation708 - 1,9382,64658,262 Enterprise Funds: 23Water879,609606,224(448,715)(175,330)8,779,955 24Sanitary Sewer1,051,570851,809(221,028)(21,267)4,818,424 25Storm Sewer86,18654,970(13,850)17,366205,461 Total$8,719,378$7,943,924$0$775,454$33,991,225 3 City of Oak Park Heights, Minnesota Audit Management Letter Analysis of Selected Accounts Property Taxes A summary of property tax activity for the past five years is as follows: 20132014201520162017 Tax levy certified$4,538,193$4,784,896$5,022,731$5,191,593$5,193,661 Plus excess tax increment11,23819,06322,14824,00724,860 Net levy4,549,4314,803,9595,044,8795,215,6005,218,521 Receipts: Current property taxes4,515,2024,730,3425,029,8145,242,8605,198,633 Delinquent property taxes33,252(176,758)(6,734)23,80314,090 Total receipts4,548,4544,553,5845,023,0805,266,6635,212,723 Adjustments - (289,042)($21,976)$22,588($3,245) Increase (decrease) in delinquent taxes receivable977(38,667)(177)(28,475)2,553 Delinquent taxes - January 1100,357101,33462,66762,49034,015 Delinquent taxes - December 31$101,334$62,667$62,490$34,015$36,568 Current collection as a percent of current levy99.2%98.5%99.7%100.5%99.6% Total collections as a percent of current levy100.0%94.8%99.6%101.0%99.9% 4 City of Oak Park Heights, Minnesota Audit Management Letter Analysis of Selected Accounts Tax Levies, Tax Rates and Tax Capacity A comparison of values for taxes payable in 2014 through 2018 is as follows: 20142015201620172018 Taxable market value$640,880,000$689,680,000$710,998,000$739,385,400$785,193,200 Tax capacity values: Real estate$10,165,672$10,715,786$10,998,502$11,409,785$12,001,551 Personal property95,59089,89693,89498,140104,320 Subtotal10,261,26210,805,68211,092,39611,507,92512,105,871 Tax increment(126,677)(185,870)(187,904)(217,932)(229,872) Fiscal disparity contribution(2,467,230)(2,214,196)(2,292,994)(2,485,407)(2,570,152) Fiscal disparity distribution386,218415,839388,319434,020463,704 Total$8,053,573$8,821,455$8,999,817$9,238,606$9,769,551 Tax capacity rates59.400 56.803 57.725 56.217 54.482 Tax levy$4,784,896$5,022,731$5,191,593$5,193,661$5,328,501 5 City of Oak Park Heights, Minnesota Audit Management Letter Analysis of Selected Accounts A schedule of tax capacity by classification is as follows: CITY OF OAK PARK HEIGHTS 20162017 Percent ofPercent of AmountCity TotalAmountCity Total Real estate: Agricultural$24,9830.2% $51,0700.4% Seasonal1,4340.0% 1,7110.0% Residential homestead1,975,92217.8% 2,061,83917.9% Residential nonhomestead1,487,81513.4% 1,817,33615.8% Commercial/industrial3,271,74829.6% 3,066,36726.7% Public utility4,228,71038.1% 4,401,36638.3% Railroad7,8900.1% 10,0960.1% Total real estate10,998,50299.2% 11,409,78599.2% Personal property93,8940.8% 93,8940.8% Total tax capacity$11,092,396100.0% $11,503,679100.0% As shown above, the City’s major taxpayer (Xcel Energy) is 38.3% of total tax capacity. 6 City of Oak Park Heights, Minnesota Audit Management Letter General Fund Pension Liability In 2015, the City implemented GASB Statement No. 68, which required the reporting of the City of Oak Park Heights’ proportionate share of the PERA Net Pension Liability (NPL). During 2017, the City’s share of PERA’s NPL decreased. The schedule below presents the components of the change in NPL. During 2017, the City paid it’s required contribution to the Plan. The required contribution is a percentage of eligible wages. GeneralPolice Employeesand Fire PlanPlanTotal Change in net pension liability: (1) Change in actuarial assumptions($74,000)($1,629,000)($1,703,000) (2) Change in proportion (201,000)(213,000)(12,000) (3) Experience difference 27,00051,00024,000 (4) Earnings difference (364,000)(490,000)(126,000) Oak Park Heights' share of 2017 pension expense26,000 (188,000)(162,000) Contributions to the plan by City of Oak Park Heights(56,000)(142,000)(198,000) Contributions to the plan by State of Minnesota - (8,000)(8,000) Unallocated Contributions - - - Increase (decrease) in net pension liability(218,000)(2,505,000)(2,723,000) Net pension liability - December 31, 2016958,0003,652,0004,610,000 Net pension liability - December 31, 2017$740,000$1,147,000$1,887,000 1. The assumed investment return was changed from 5.6% to 7.5% for Police and Fire. The assumed post-retirement benefit increase was reduced. 2. The City's proportionate share of the total NPL decreased. 3. This is the change between expected and actual experience in the measurement of the pension liability. 4. This is the difference between projected and actual earnings on plan investments. 7 City of Oak Park Heights, Minnesota Audit Management Letter General Fund G ENERAL F UND The General Fund of the City is maintained to account for expenditures common to all cities (general government, public safety, public works, and parks and recreation). A ten- year history of major revenue sources that support the General Fund are as follows: (1) State AidsAll OtherTotal Revenue Property Taxes YearAmountPercentAmountPercentAmountPercentAmountPercent 20083,156,807 82%120,701 3%592,538 15%3,870,046 100% 20093,134,378 82%249,822 7%439,143 11%3,823,343 100% 20103,305,004 79%180,174 4%673,969 17%4,159,147 100% 20113,583,487 87%75,860 2%468,768 11%4,128,115 100% 20124,245,360 90%69,677 1%423,580 9%4,738,617 100% 20134,433,202 87%86,775 2%568,367 11%5,088,344 100% 20144,620,521 89%79,354 2%481,640 9%5,181,515 100% 20155,104,956 89%135,133 2%492,192 9%5,732,281 100% 20165,347,035 89%87,542 2%549,159 9%5,983,736 100% 20175,286,120 89%115,868 2%506,802 9%5,908,790 100% (1) Since 2010, the General Fund has levied property taxes which have been transferred out to Debt Service Funds. Those levies were $603,000, $620,000, and $608,000 for the years ended December 31, 2017, 2016, and 2015, respectively. 8 City of Oak Park Heights, Minnesota Audit Management Letter General Fund A graph of property taxes, state aids, and other revenue for the General Fund is as follows: 9 City of Oak Park Heights, Minnesota Audit Management Letter General Fund Budget Versus Actual Comparison The General Fund balance decreased by $168,000. Charges for services revenue exceeding budget resulted in higher than anticipated revenue. Expenditures in most City departments were also less than budgeted. A summary is as follows: BudgetActualVariance Revenue$5,640,000$5,909,000$269,000 Expenditures3,942,0003,556,000(386,000) Revenue over expenditures1,698,0002,353,000655,000 Other financing sources (uses): Sale of Property - 8,0008,000 Transfers in - - - Transfers out(1,698,000)(2,529,000)(831,000) Total other financing sources (uses)(1,698,000)(2,521,000)(823,000) Net change in fund balance$0($168,000)($168,000) 10 City of Oak Park Heights, Minnesota Audit Management Letter General Fund 2017 Favorable (Unfavorable) BudgetActualVariance Expenditures: General government: Mayor and council$115,004$91,629$23,375 City administration280,520276,1024,418 Legal 36,00022,89813,102 General management and building 174,600149,35725,243 Elections 1,2001,660(460) Finance 206,778199,8986,880 Computer system 47,70035,76111,939 Audit 31,12032,800(1,680) Insurance 400,650388,79811,852 Assessing 23,60024,039(439) Planning and zoning 32,00037,256(5,256) Engineering 30,00024,2745,726 General contingency 15,00078614,214 Total general government1,394,1721,285,258108,914 Public safety: Police department 1,387,9161,297,43390,483 Building inspections 105,92198,7527,169 Fire protection 240,300246,982(6,682) Civil defense1,6102,213(603) Animal control 1,650920730 Capital outlay - - - Total public safety1,737,3971,646,30091,097 Public works: Street maintenance 101,98066,32235,658 Snow removal 202,000114,43887,562 Sanitation216,900203,99712,903 Street lighting 70,60061,4389,162 Arborist 5,3006224,678 Tree removal and planting 35,00034,725275 Total public works631,780481,542150,238 Recreation: Parks, playgrounds and rinks 178,472142,81335,659 Total expenditures3,941,8213,555,913385,908 Revenue over expenditures1,697,8252,352,877655,052 Other financing sources (uses): Sale of property - 8,1888,188 Transfers to Debt Service Fund(603,000)(677,100)(74,100) Transfers to Capital Project Fund - - - Transfers to Enterprise Fund - - Transfers to Nonmajor Governmental Fund(1,094,825)(1,851,849)(757,024) Total other financing sources (uses)(1,697,825)(2,520,761)(822,936) Net increase (decrease) in fund balance$0($167,884)($167,884) 11 City of Oak Park Heights, Minnesota Audit Management Letter General Fund Transfers to other funds for 2017 included the following amounts: BudgetActualDifference Fund Street Reconstruction375,126$ 380,126$ 5,000$ Storm Sewer Renewal/Replacement87,62487,624 - Debt Service - 2008 Bonds410,000410,000 - Debt Service - 2009 Bonds143,000143,000 - Debt Service - 2014 Bonds50,000124,10074,100 Budgeted Projects Fund632,0751,184,099552,024 Park Development Fund - 100,000100,000 Water and Sewer Renewal/Replacement - 100,000100,000 $1,697,825$2,528,949$831,124 12 City of Oak Park Heights, Minnesota Audit Management Letter General Fund General Fund Reserves The fund balance of the General Fund increased in 2017. The schedule below reflects the General Fund balance for the past five years: Year EndedFundIncrease December 31,Balance(Decrease) 2013$3,514,371$3,514,371 20143,902,807388,436 20154,632,533729,726 20165,010,332377,799 20174,842,448(167,884) 13 City of Oak Park Heights, Minnesota Audit Management Letter General Fund Reserve balances are an important component of City financial management. When evaluating the adequacy of reserve balances, there are a number of important factors that must be considered. Several areas to consider are illustrated as follows: Need for Reserve Balances Benefits of Reserve Balances Cash Flow Timing Favorable bond rating Supplements revenues Difference indicatorwith investment income Intergovernmental Capital Outlay Revenue Cutbacks Replacement Avoids temporary Provides resources for overdrafts prior to major minor projects or receipts feasibility reports Avoids overburdening Provides the City of annual budgets for greater options to deal Emergency or certain capital outlay with unexpected events Special Unanticipated Projects Expenditures 14 City of Oak Park Heights, Minnesota Audit Management Letter General Fund The City’s current fund balance policy was adopted on November 15, 2011. The purpose of the policy is to establish appropriate fund balance levels for each fund that is primarily supported by property tax revenues or user fees. The City’s fund balance policy states the City will maintain funds for the following: Compensated absences Cash flow Contingencies The compensated absences reserve is an amount equal to 50% of accumulated vacation leave and 100% of that portion of sick leave that would be payable under the City’s severance pay policy. Assigned Fund Balance For Employee Benefits December 31, Employee Benefit20162017 Vacation leave carryover (50%)$46,494$52,605 Severance93,842118,278 Total$140,336$170,883 Rounded amount$171,000 15 City of Oak Park Heights, Minnesota Audit Management Letter General Fund Cash Flow Reserve Property taxes and related state aids have accounted for 80% to 85% of the revenue of the General Fund in recent years. Property taxes and the majority of state aid are not received until July and December of each year (i.e., the second half of the year). As a result, the City is required to have sufficient reserves at the beginning of the year to fund operations of the first half of the year. The City’s fund balance policy states that its cash flow reserve should be equal to 45-55% of the subsequent year’s budgeted operating expenditures. The recommended cash flow reserve is $2,426,000, computed as follows: Cash Flow Reserve 2018 tax levy $5,328,501 Less transfers out which occur after taxes are received(476,633) $4,851,868 Reserve amount @ 50%$2,426,000 16 City of Oak Park Heights, Minnesota Audit Management Letter General Fund The following graph of monthly General Fund cash balances illustrates the impact of receiving property taxes and state aids in the second half of the year: As shown above, the cash balance decreased $1,318,700 between January 1 and June 30, illustrating the need for the cash flow reserve. 17 City of Oak Park Heights, Minnesota Audit Management Letter General Fund General Contingency Reserve The amount of General Fund reserve required to meet emergency and/or unanticipated expenditures is not readily quantifiable. Rather, the level of this requirement must be established by the City based on the history of the City and the philosophy of "adequate" reserve coverage. The City’s fund balance policy states this amount should be 10-15% of the subsequent year’s General Fund budgeted expenditures, computed as follows: General Contingency Reserve December 31, Description20162017 Ensuing year's budget$5,639,646$5,808,438 Reserve amount @ 15%$846,000$871,000 18 City of Oak Park Heights, Minnesota Audit Management Letter General Fund General Fund Balance Summary In summary, the fund balance of the General Fund at December 31, 2017, was as follows: General Fund Balance Constraint December 31, 20162017 Nonspendable: Prepaid items$63,813$71,178 Assigned for: Employee benefits140,000171,000 Unassigned: Cash flow reserve2,365,0002,426,000 General contingency reserve846,000871,000 Snow Plow reserve137,000140,000 Tax petition adjustments - 65000 Remaining balance1,458,5191,098,270 Subtotal - unassigned4,806,5194,600,270 Total fund balance$5,010,332$4,842,448 19 City of Oak Park Heights, Minnesota Audit Management Letter Special Revenue Funds S PECIAL R EVENUE F UNDS Special Revenue Funds are a classification of funds to account for revenues (and expenditures related thereto) segregated by City policy, Federal or State statutes for specific purposes. The City maintained four Special Revenue Funds during 2017. Forfeiture and Seizure Fund This fund was established in 1991 to account for property forfeited pursuant to MS 609.531. A summary of the financial activity of this fund from inception is as follows: Prior Years2017Total Revenue: Intergovernmental $9,825$ - $9,825 Earnings on investments16,5469716,643 Reimbursements9,022 - 9,022 Confiscated property193,0568,060201,116 Sale of municipal property5,046 - 5,046 Transfer from General Fund3,000 - 3,000 Total revenue$236,495$8,157$244,652 Expenditures: Public safety: Materials and supplies$99,013$5,488$104,501 Contractual services28,998 - 28,998 Capital outlay101,116 - 101,116 Total expenditures$229,127$5,488$234,615 Fund balance - December 31, 2017$10,037 The use of these funds is restricted by MS 609.531 subd. 5 to "supplement the agency's operating fund or similar fund for use in law enforcement." 20 City of Oak Park Heights, Minnesota Audit Management Letter Special Revenue Funds Economic Development Fund This fund was established in 1998 to account for the activity of the Oak Park Heights Economic Development Authority. A summary of the financial activity of this fund is as follows: Prior Years2017Total Revenue: Earnings on investments$36,537$431$36,968 Interfund loan interest1,113 - 1,113 Refunds and reimbursements3,532 - 3,532 Sale of municipal property76 - 76 Transfer from Capital Revolving Fund410,000 - 410,000 Total revenue$451,258$431451,689 Expenditures: Community development: Materials and supplies$645$ - 645 Contractual services45,914 - 45,914 Interfund loan interest70,000 - 70,000 Capital outlay290,018 - 290,018 Transfer to Capital Revolving Fund11,113 - 11,113 Total expenditures$417,690$0417,690 Fund balance - December 31, 2017$33,999 During 1998, the City purchased the Bell property and demolished the building in 1999. In prior years, this fund had a deficit that was funded by a $260,000 interfund loan from the Capital Revolving Fund. This fund did not have the resources to repay the interfund loan. Therefore, the interfund loan was forgiven. If a sale of the Bell property occurs, the proceeds should be receipted in the Capital Revolving Fund. During 2010, the City purchased property on Osgood Avenue, with the intent to resell the property. The purchase was funded by a $150,000 transfer from the Capital Revolving Fund. This was not a loan from the Capital Revolving Fund, but the intent is to transfer back sales proceeds to the Capital Revolving Fund once the property is sold. 21 City of Oak Park Heights, Minnesota Audit Management Letter Special Revenue Funds TIF District #1 Fund This fund was established in 2012 to account for Tax Increment District 1-1 (Oakgreen Commons). A summary of the financial activity of this fund from inception is as follows: Prior Years2017Total Revenue: Tax increment$628,417$215,197$843,614 Investment income1,4361,6833,119 Transfer in from TIF #25,049 - 5,049 Total revenue$634,902$216,880$851,782 Expenditures: General government: TIF note payment$509,311$172,158$681,469 Other 3,5337834,316 $512,844$172,941$685,785 Fund balance - December 31, 2017$165,997 The City issued a TIF Note in the principal sum of $1,200,000. The TIF Note is payable solely from “available” tax increment revenue. Available tax increment revenue is an amount equal to 80% of tax increment revenue received by the City. The City has no obligation on the note after February 21, 2026. 22 City of Oak Park Heights, Minnesota Audit Management Letter Special Revenue Funds TIF District #2 Fund This fund was established in 2014. A summary of the financial activity is as follows: Prior Years2016Total Revenue: Investment income$104$50$154 Refunds and reimbursements 1,000 - 1,000 Total revenue$1,104$50$1,154 Expenditures: Land purchase$341,710$ - $341,710 Other60,3091,68061,989 Transfer to TIF #15,049 - 5,049 Total expenditures$407,068$1,680$408,748 Fund balance - December 31, 2017($407,594) The fund deficit was financed by an internal loan from the General Fund. The district th was formally established in 2017 and is located at Osgood and 60 Street. 23 City of Oak Park Heights, Minnesota Audit Management Letter Debt Service Funds D EBT S ERVICE F UNDS Debt Service Funds are a type of governmental fund used to account for the accumulation of resources for the payment of interest and principal on debt (other than Enterprise Fund debt). The City maintained three Debt Service Funds during 2017. Financial projections for each fun/bond issue are presented on the following pages. 24 City of Oak Park Heights, Minnesota Audit Management Letter Debt Service Funds Capital Improvement Bonds of 2008/2012A The bond was issued to finance construction of City Hall. The repayment of the bond issue is being funded by property tax levies. Taxes for 2009-2011 were levied in the Debt Service Fund. Since 2012, property taxes have been levied in the General Fund and transferred into the Debt Service Fund. In 2012, the Crossover Refunding Bonds of 2012A were issued to refund the 2008 Bonds on December 15, 2016. The refunding resulted in a debt service savings of $404,000. A schedule of actual and projected tax levies (per the bond resolution) and debt payments are as follows: City of Oak Park Heights, Minnesota Projection of Cashflow Capital Improvement Bonds of 2008/2012A Cash and CurrentTotalCash and Current Assets BalancePropertyBondInvestmentProjectedDebtAssets Balance YearJanuary 1TaxesProceedsInterestReceiptsPaymentsDecember 31 2008$ - $ - $242,303$7,457$249,760$122,513$127,247 2009127,247336,292 - 3,250339,542380,02586,764 201086,764392,805 - 1,656394,461391,65089,575 201189,575400,902 - 1,556402,458392,52599,508 201299,508400,0005,191,2835,1975,596,480403,0305,292,958 20135,292,958410,000 - (7,988)402,012521,6775,173,293 20145,173,293420,000 - 45,662465,662526,7765,112,179 20155,112,179430,000 - 30,720460,720535,1755,037,724 20165,037,724440,000 - 48,601488,6015,412,052114,273 2017114,273410,000 - 1,003411,003410,252115,024 2018115,024420,000 - 802420,802418,658117,168 2019117,168430,000 - 828430,828432,258115,738 2020115,738440,000 - 843440,843445,458111,123 2021111,123460,000 - 842460,842458,258113,707 2022113,707475,000 - 872475,872470,658118,921 2023118,921490,000 - 924490,924492,658117,187 2024117,187505,000 - 943505,943509,058114,072 2025114,072520,000 - 963520,963539,95895,077 202695,077535,000 - 898535,898560,05870,917 202770,917550,000 - 798550,798569,29452,421 202852,421575,000 - 744575,744597,57630,589 Total$9,039,999$5,433,586$146,571$14,620,156$14,589,567 Assumptions Property tax collection rate.....................................100% Investment interest rate...........................................0.50% Negative interest charged to funds?.....................no 25 City of Oak Park Heights, Minnesota Audit Management Letter Debt Service Funds Capital Improvement Bonds of 2009 The bond was issued as additional financing for construction of City Hall. The repayment of the bond is being funded by property tax levies. Taxes are levied in the General Fund and then transferred into the Debt Service Fund. A schedule of actual and projected tax levies (per the bond resolution) and debt payments are as follows: Cash and CurrentTransfers/TotalCash and Current Assets BalancePropertyBondInvestmentProjectedDebtAssets Balance YearJanuary 1TaxesProceedsInterestReceiptsPaymentsDecember 31 2009$ - $ - $21,582$1,357$22,939$7,588$15,351 201015,351122,000 - 720122,720130,3507,721 20117,721134,000 - 492134,492129,15013,063 201213,063136,000 - 460136,460132,65016,873 201316,873138,000 - 133138,133135,76019,246 201419,246139,000 - 586139,586138,56020,272 201520,272140,000 - 327140,327140,85819,741 201619,741142,000 - 432142,432143,17319,000 201719,000143,000 - 488143,488144,60917,879 201817,879144,000 - 389144,389150,08412,184 201912,184145,000 - 342145,342155,3262,200 Total$1,383,000$21,582$5,726$1,410,308$1,408,108 Assumptions Property tax collection rate................................100% Investment interest rate....................................1.00% Negative interest charged to funds?..................no 26 City of Oak Park Heights, Minnesota Audit Management Letter Debt Service Funds Capital Improvement Bonds of 2014A The bond was issued as financing for the 2015 street reconstruction project. The repayment of the bond is being funded by property tax levies and special assessments. Taxes are levied in the General Fund and then transferred into the Debt Service Fund. Assessments are levied in the Debt Service Fund. A schedule of actual and projected tax and assessment levies (per the bond resolution) and debt payments are as follows: City of Oak Park Heights, Minnesota Projection of Cashflow Capital Improvement Bonds of 2014A Bond Cash and CurrentTransfers/ProceedsTotalCash and Current Assets BalancePropertySpecialand OtherInvestmentProjectedDebtAssets Balance YearJanuary 1TaxesAssessmentsReceiptsInterestReceiptsPaymentsDecember 31 2014$ - $ - $218,041$87,054$2,021$307,116$45,859$261,257 2015261,257411,314381,071359,0122,1651,153,562250,1001,164,719 20161,164,719139,000220,052 - 11,586370,638482,4251,052,932 20171,052,932226,100142,146 - 14,991383,237474,391961,778 2018961,778142,000104,682 - 9,682256,364465,800752,342 2019752,342144,000101,021 - 7,631252,652432,800572,194 2020572,194145,00097,361 - 5,848248,209425,300395,103 2021395,103147,00093,700 - 4,118244,818392,800247,121 2022247,121149,00090,039 - 2,658241,697385,800103,018 2023103,018150,00086,378 - 1,254237,632353,800(13,150) 2024(13,150)152,00082,717 - 121234,838344,050(122,362) 2025(122,362)153,00030,352 - - 183,352319,300(258,310) Total$1,958,414$1,647,560$446,066$62,075$4,114,115$4,372,425 Assumptions Special assessment collection rate....................100% Property tax collection rate................................100% Investment interest rate....................................1.00% Negative interest charged to funds?..................no 27 Capital Project Funds Capital Project Funds City of Oak Park Heights, Minnesota Audit Management Letter Enterprise Funds E NTERPRISE F UNDS Enterprise funds account for water, sanitary sewer and storm sewer operations. Water Utility Fund A chart of income from operations for the past seven years is as follows: 30 City of Oak Park Heights, Minnesota Audit Management Letter Enterprise Funds Sewer Utility Fund A chart of income from operations for the past seven years is as follows: 31 City of Oak Park Heights, Minnesota Audit Management Letter Enterprise Funds The City’s water and sewer rates for the past seven years are as follows: Monthly RateQuarterly Rate EffectiveEffectiveEffectiveEffectiveEffectiveEffectiveEffectiveEffective Type of Charge01/01/1001/01/1101/01/1201/01/1301/01/1401/01/1501/01/1601/01/17 Water: Base fee$28.31$29.91$30.70$30.70$30.70$38.19$38.19$38.19 Charge per 1,000 gallons for: Usage between 15,000 and 50,000 gallons$1.96$2.48$2.55$2.55$2.55$3.05$3.05$3.05 Usage between 50,000 and 99,000 gallons$2.68$2.97$3.05$3.05$3.05$3.55$3.55$3.55 Usage between 99,000 and 200,000 gallons$3.23$3.81$3.92$3.92$3.92$4.42$4.42$4.42 Usage in excess of 200,000 gallons$3.91$4.61$4.74$4.74$4.74$5.24$5.24$5.24 Sewer: Base fee$56.99$60.41$62.10$66.00$66.00$66.00$70.50$78.50 Charge per 1,000 gallons for: Usage between 15,000 and 50,000 gallons$4.07$4.31$4.43$4.60$4.80$4.90$5.20$5.40 Usage in excess of 50,000 gallons$4.50$4.77$4.90$4.90$5.20$5.30$5.60$5.75 32 City of Oak Park Heights, Minnesota Audit Management Letter Enterprise Funds Storm Sewer Utility Fund The City created the stormwater utility during 1999. A monthly fee (effective October 1, 1999) was established at $1 per household and $10 per acre for commercial properties. The fee for vacant residential property is 50 cents per month and undeveloped commercial property is $1.50 an acre per month. A chart of income from operation for the past seven years is as follows: 33 City of Oak Park Heights, Minnesota Audit Management Letter Communication With Those Charged With Governance C OMMUNICATION W ITH T HOSE C HARGED W ITH G OVERNANCE 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 of Oak Park Heights, Minnesota (the City) for the year ended December 31, 2017. Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards and the standards applicable to financial audits contained in Government Auditing Standards, as well as certain information related to the planned scope and timing of our audit. We have communicated such information in our letter to you dated January 4, 2018. Professional standards also require that we communicate to you the following information related to our audit. Qualitative Aspects of Accounting Practices 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 to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during 2017. 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 are an integral part of the financial statements prepared by management and are based on management’s knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. 34 City of Oak Park Heights, Minnesota Audit Management Letter Communication With Those Charged With Governance The most sensitive estimates affecting the financial statements were management’s estimation of the net pension liability, pension related deferred inflows and outflows of resources, and pension expense. We evaluated the key factors and assumptions used to develop these estimates in determining that they are reasonable in relation to the financial statements taken as a whole. The pension estimates are based on actuarial studies. Certain financial statement disclosures are particularly sensitive because of their significance to financial statement users. The most sensitive disclosure affecting the financial statements are in Note 7 – Defined Benefit Pension Plans. The disclosures in the financial statements are neutral, consistent, and clear. Difficulties Encountered in Performing the Audit We encountered no difficulties in dealing with management in performing and completing our audit. Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management. There were no uncorrected misstatements that have an effect on our opinion on the financial statements. Disagreements with Management For purposes of this letter, 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. 35 City of Oak Park Heights, Minnesota Audit Management Letter Communication With Those Charged With Governance Management Representations We have requested certain representations from management that are included in the management representation letter dated March 27, 2018. Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a “second opinion” on certain situations. If a consultation involves application of an accounting principle to the governmental unit’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 governmental unit’s auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. Other Information in Documents Containing Audited Financial Statements We applied certain limited procedures to the management’s discussion and analysis, the budgetary comparison information and the schedules of proportionate share of pension liability, which required supplementary information (RSI) that supplements the basic financial statements. Our procedures consisted of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other 36 City of Oak Park Heights, Minnesota Audit Management Letter Communication With Those Charged With Governance knowledge we obtained during our audit of the basic financial statements. We did not audit the RSI and do not express an opinion or provide any assurance on that RSI. We were engaged to report on the combining and individual nonmajor fund financial statements and schedules, 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 are not engaged to report on the introductory section, statistical section and other information section, which accompany the financial statements but are not RSI. We did not audit or perform other procedures on this other information and we do not express an opinion or provide any assurance on it. Closing This information is intended solely for the information and use of the City Council and Management of the City of Oak Park Heights, Minnesota and is not intended to be, and should not be, used by anyone other than these specified parties. 37