HomeMy WebLinkAboutManagement Report and Recommendations CITY OF OAK PARK HEIGHTS, MINNESOTA
MANAG REPORT
AND RECOMMENDATIONS
DECEMBER 31, 1991
CITY OF OAK PARK HEIGHTS, MINNESOTA
MANAGEMENT REPORT AND RECOMMENDATIONS
TABLE OF CONTENTS
Page
Transmittal Page 1
General Fund - Summary data and analysis
of 1991 revenue and expenditures compared to prior periods 6
Combined Financial Statements Balance Sheet Analysis) - A look at
changes in various accounts such as cash, investments and receivables 12
Individual Fund/Fund Type Analysis - Review of significant changes in
fund balances and other matters:
• General Fund 21
• Special Revenue Fund 24
• Debt Service Funds 25
• Capital Project Funds 28
• Enterprise Fund 33
Internal Control Report 39
Summary of Recommendations 40
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City of Oak Park Heights, Minnesota
Management Report, Page 2
RECENT LEGISLATIVE ACTIONS
The State legislature has made a progression of changes in funding cities. The most
significant changes started with the 1988 Legislative session and continued through the 1992
session. Appendix A of this report presents a summary of this Legislation and an estimate of the
initial year impact on 1) cities - statewide; and 2) the City of Oak Park Heights.
The 1992 legislative actions impact City finances and affect not only the General Fund, but
other funds as well. A summary of the 1992 legislative actions is as follows:
Levy Lir=, . The 1992 legislature did not change the 1990 law which repeals levy limits
starting with taxes payable in 1993.
Sales Tax. The omnibus tax bill imposes a sales tax on purchases by local governments. The
sales tax becomes effective June 1, 1992. The sales tax rate is 6.5% and generally applies to
purchase of goods and certain services. An estimated impact of sales tax on the City of Oak
Park Heights for 1992 is as follows:
Fund Amount
General Fund $7,000
Water and Sewer 3,000
Total $10,000
Water Connection Fee. The omnibus finance bill includes a provision which requires Cities to
collect a $5.21 annual fee from all accounts to which the City supplies water. This fee must
be remitted to the Department of Revenue and will be used for testing water supplies. The
City increased water rates by $1.30 per quarter to cover this additional cost.
City of Oak Park Heights, Minnesota
Management Report, Page 3
The estimated effects of the 1988 through 1992 legislative changes in State -wide city funding
is as follows:
State Totals for Cities (In Thousands)
Local Homestead and Tax Base Disparity
Govenunent Agricultural Equalization Reduction Increase/(Decrease)
Year Aid Credit Aid Aid Aid Sales Tax Total Amount Percent
1988 $297,037 $111,873 $0 $0 $408,910
1989 376,376 106,308 0 20,853 503,537 $94,627 23.14%
1990 317,343 146,523 19,513 14,201 497,580 (5,957) (1.18)%
1991 283,640 155,690 19,476 14,500 473,306 (24,274) (4.88)%
1992 279,700 173,191 19,427 14,028 ($34,000) 452,346 (20,960) (4.43)%
A chart of the above major funding categories to all Minnesota cities is as follows:
-- - -- - - - - - -- -- State Funding to Cities] --
-
$550,000 - (in thousands)
- -
$500,000
$450 000
r «<
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$400,000 ,•�:::.
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$ 250,0 00
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1988 1989 1990 1991 1992
City of Oak Park Heights, Minnesota
Management Report, Page 4
The 1988 through 1992 legislative changes have impacted the funding of the City of Oak Park
Heights as follows:
City of Oak Park Heights
Local Homestead and
Government Agricultural Increase/(decrease)
Year Aid Credit Aid Total Amount Percent
1986 $99,656 $58,242 $157,898
1987 99,522 63,033 162,555 $4,657 2.9%
1988 99,521 71,050 170,571 8,016 4.9%
1989 101,527 75,082 176,609 6,038 3.5%
1990 0 0 0 (176,609) (100.0 %)
1991 0 4,903 4,903 4,903
1992 0 38,187 38,187 33,284
The City of Oak Park Heights has had greater State Aid cuts than the Statewide cuts to cities as
follows:
City of Oak Park Heights State Totals (in $1,000)
$200,000 - -- $550,000
$175,000 - °- $500,000
-- $450,000
® $400,000
r - 350 000
$125,000 ,,, �;� $:=::':::'`:' >: >. >1 Local Government Aid
$300,000
$100,000 .:; :..: € HACA
- $250,000
$75,000 - <:: ` >ti - $200,000 Statewide Aid
$50,000 - $150,000
-- $100,000
$25,000
' --- $50,0
$0 $0
1996 1987 1998 1989 1990 1991 1992
City of Oak Park Heights, Minnesota
Management Report, Page 5
As clearly shown on the previous page, the City of Oak Park Heights lost 100% of its State
Aids for 1990. A nominal amount ($48,141) was re- instated for 1991 (HACA Aid). However,
subsequent aid cuts reduced this amount to $4,903. HACA aid for 1992 is expected to be
$38,187.
Revenue base is a concept which has been used to calculate funding of cities for a number of
years. The revenue base consists of a City's total property tax levy plus LGA. Recently, this
revenue base has been used to calculate aid cuts. The revenue base for the City of Oak Park
Heights has been as follows:
Year Tax LGA Total
1988 $923,731 $99,521 $1,023,252
1989 1,009,248 101,527 1,110,775
1990 1,205,556 0 1,205,556
1991 1,199,554 0 1,199,554
1992 1,199,554 0 1,199,554
The 1991 aid cuts were calculated as follows:
July December
Revenue base $1,199,554 $1,199,554
Reduction percentage 2.052% 1.600%
Aid reduction 24,615 19,167
Certified HACA 24,070 24,070
Adjusted HACA (1) $0 $4,903
(1) amount cannot be less than zero
The decrease in State aids will continue to impact the funding of basic governmental services.
The following section of this report illustrates the funding of basic services over the past several
years.
City of Oak Park Heights, Minnesota
Management Report, Page 6
-QENERAL FIND
The General Fund of the City is maintained to account for the current and capital outlay
expenditures common to all cities. Uniform financial reporting standards allow a city to compare
its financial operations with other similar cities.
Since 1982, State aids, local property taxes, and all other revenue (used to finance the General
Fund of the City of Oak Park Heights) and their percent to total revenue for these funds, were as
follows (including 1992 budgeted):
State Aids Property Taxes All Other Total Revenue
Year Amount Percent Amount Percent Amount Percent Amount Percent
1982* $122,425 18% $423,843 63% $123,559 19% $669,827 100%
1983* 149,391 20% 482,084 64% 125,030 17% 756,505 100%
1984* 152,245 17% 543,573 62% 181,288 21% 877,106 100%
1985* 157,995 18% 559,613 63% 163,771 19% 881,379 100%
1986* 168,341 18% 579,557 63% 165,625 19% 913,523 100%
1987* 183,194 18% 681,636 68% 132,538 14% 997,368 100%
1988 194,072 17% 804,441 70% 152,137 13% 1,150,650 100%
1989 199,513 16% 868,420 68% 210,945 16% 1,278,878 100%
1990 25,627 2% 1,142,770 79% 280,348 19% 1,448,745 100%
1991 36,322 2% 1,057,578 72% 366,515 25% 1,460,415 100%
1992 ** 62,739 4% 1,117,313 73% 341,105 22% 1,521,157 100%
* includes Federal Revenue Sharing
** Budgeted
City of Oak Park Heights, Minnesota
Management Report, Page 7
A graph of State aids, property taxes, and other revenue for the City is as follows:
General and Special Revenue Funds
$1,200,000 $1,200,000
$ 1,000 , 000 -
$800,000 $800,000
$600,000 $600,000
$400,000 ,.,,- ,.� ®........... $400,000
2
..........
,000 $200,000
$0 $0
1984 1985 1986 1987 1988 1989 1990 1991 1992 budgeted
State Aids:::: =:== ':= :::`?::: Other Revenue Property Taxes
The preceding data indicates that the City will be required to rely solely on increased property
taxes to fund the increased levels and costs of providing City services.
City of Oak Park Heights, Minnesota
Management Report, Page 8
State aids have consisted of the following for the past five years (with 1992 budget):
1992
Description 1987 1988 1989 1990 1991 Budget
Local government aid $99,522 $99,521 $101,527 $0 $0 $0
Homestead credits 59,636 67,760 72,498 578 4,611 36,739
Police aid 21,161 23,856 24,863 25,049 31,651 26,000
Other 2,875 2,935 625 0 60 0
Totals $183,194 $194,072 $199,513 $25,627 $36,322 $62,739
Change $14,853 $10,878 $5,441 ($173,886) $10,695 $26,417
% Change 9% 6% 3% (87 %) 42% 103%
A graph of State aids for the past seven years (with the 1992 budget) is presented below:
$200,040
$180,400 State Aids
< :<:::. :
$160,000
<.'
$140,000
$120,000
$100,000 -,
$80,00
$60,000
$40,000
20o00 -
$
$0 -- ,
1985 1986 1987 1988 1989 1990 1991 1992
Budget
Local Gov't Aid El Homestead Credit El Other State Aids
City of Oak Park Heights, Minnesota
Management Report, Page 9
Local property taxes are levied by the City each December for collection in the subsequent year.
However, this tax levy is not entirely paid by the property owners. A part of each annual tax levy
is /was paid by the State (HACA) and from the fiscal disparities pool. Current tax revenue of the
General Fund (by payor) was as follows for the past four years including 1992 budgeted.
1992
Payor 1988 _ 1989 1990 1991 Budgeted
Local taxpayor $877,014 $958,384 $1,198,139 $1,238,042 $1,238,908
State homestead credits 71,050 75,082 0 48,141 * 38,187
Fiscal disparities:
Contribution (50,461) (64,237) (86,873) (148,448) (131,641)
Distribution 26,128 40,117 45,727 61,819 54,100
Totals $923,731 $1,009,346 $1,156,993 $1,199,554 $1,199,554
* prior to aid cut of $43,238
Shown on a basis of percents, current tax collections (by payor) were as follows for the past
four years including 1992 budgeted.
1992
Payor 1988 1989 1990 1991 Budgeted
Local taxpayor 94.94% 94.95% 103.56% 103.21% 103.28%
State homestead credits 7.69% 7.44% 0.00% 4.01% 3.18%
Fiscal disparities:
Contribution (5.46 %) (6.36 %) (7.51 %) (12.38 %) (10.97 %)
Distribution 2.83% 3.97% 3.95% 5.16% 4.51%
Totals 100.00% 100.00% 100.00% 100.00% 100.00%
Local property taxpayers (i.e. property located within the City of Oak Park Heights) pay more
than the actual amount levied by the City because of fiscal disparities. The above amounts and
percents are indicative that the City of Oak Park Heights is a "net loser" under the fiscal disparity
program. The City contributes more tax base to the fiscal disparity "pool" than it receives in tax
benefit.
City of Oak Park Heights, Minnesota
Management Report, Page 10
The following schedules and graphs reflect the revenue of the General Fund for the past two
years including 1992 budgeted, Additional detail of the revenue is presented in Statement 7 of the
1991 Annual Financial Report.
_ 1990 1991 1992 Budget
Description Amount Percent Amount Percent Amount Percent
General property taxes $1,142,770 78.9% $1,057,578 72.4% $1,117,313 73.5%
Intergovernmental:
State 25,627 1.8% 36,322 2.5% 62,739 4.1%
County 14,410 1.0% 15,138 1.0% 16,400 1.1%
Licenses and permits 48,870 3.4% 122,804 8.4% 74,405 4.9%
Charges for services 102,836 7.1% 123,969 8.5 % 158,800 10.4%
Interest on investments 62,064 4.3% 51,983 3.6% 50,000 3.3%
All other 52,168 3.5% 52,621 3.6% 41,500 2.7%
Totals $1,448,745 100.0% $1,460,415 100.0% $1,521,157 100.0%
1991
Interest on Investments All Other
Charges for services
Licenses and Permits
Intergovern mental Milo
Property Taxes
City of Oak Park Heights, Minnesota
Management Report, Page 11
Expenditures (by major classification) for the past two years including 1992 budgeted, were as
follows:
1990 1991 1992 Budget
Description _ Amount Percent Amount Percent Amount Percent
Current expenditures:
General government $285,328 23.9% $318,948 22.4% $347,230 23.2%
Public safety 469,581 39.4% 563,736 39.5% 607,150 40.5%
Streets and highways 71,359 6.0% 107,828 7.6% 88,800 5.9%
Sanitation 228,675 19.2% 262,838 18.4% 293,000 19.6%
Recreation 129,226 10.8% 139,726 9.8% 154,590 10.3%
Capital outlay 8,925 0.7% 32,569 2.3% 7,730 0.5%
Totals $1,193,094 100.0% $1,425,645 100.0% $1,498,500 100.0%
A graphic illustration of the above expenditures is presented below:
1991
Recreation Capital Outlay
General Government
Sanitation
Streets & Highways
Public Safety
City of Oak Park Heights, Minnesota
Management Report, Page 12
(COMBINED FINANCIAL STATEMENTS
The Combined Financial Statements of the City are presented in Statements 1 through 5 of the
1991 Annual Financial Report. The following comments relate to these financial statements of the
City.
Cash and Investments
December 31, Increase
Description 1991 1990 (Decrease)
Checking account ($11,303) ($14,872) $3,569
Investments 4,201,215 3,587,727 613,488
Petty cash 50 50 0
Totals $4,189,962 $3,572,905 $617,057
The December 31, 1991 and 1990 checking account overdrafts are book overdrafts only and do
not reflect bank overdrafts. These balances are a result of the City's policy of depositing cash in
interest bearing accounts in order to maximize investment earnings on City monies not needed for
current expenditures. The City earned $225,539 of interest on investments during 1991 compared
to $255,668 in 1990. This decrease is primarily the result of decreased rates available during
1991. Investments at December 31, 1991 and 1990 were as follows:
December 31,
1991 1990
Investment Description Yield Balance Yield Balance
Money Market 4.20% $310,444 6.00% $90,227
AIM Government Fund Various 250,771
Certificate of Deposit 6.25% 295,000 7.35% 567,000
Certificate of Deposit 5.80% 535,000 7.40% 770,500
Certificate of Deposit 5.65% 265,000 7.50% 724,000
Certificate of Deposit 5.00% 235,000 7.55% 430,000
Certificate of Deposit 5.00% 133,000 7.80% 306,000
Certificate of Deposit 5.10% 600,000 7.85% 700,000
Certificate of Deposit 5.10% 605,000
Certificate of Deposit 5.10% 797,000
Certificate of Deposit 4.50% 175,000
Totals $4,201,215 $3,587,727
City of Oak Park Heights, Minnesota
Management Report, Page 13
Security for De Wsits/D=!2sit
Minnesota Statutes (MS 118) requires City Council approval of depositories and that certain
levels of pledged securities be maintained for deposits which are not insured and/or guaranteed by
the Federal Government. Audit tests disclosed that the City of Oak Park Heights was in full
compliance with such statutes at December 31, 1991.
Due From Other Governmental Unit,
December 31, Increase
Description 1991 1990 (Decrease)
Fines $2,152 $2,807 ($655)
Gravel tax 317 317 0
MWCC - final cost allocation 2,233 0 2,233
City of Bayport- feasability study 1,000 0 1,000
Totals $5,702 $3,124 $2,578
All of the above amounts are currently collectible.
Due From Developers
December 31, Increase
Description 1991 1990 (Decrease)
Developers Deposit Fund:
Cost reimbursement $12,113 $3,332 $8,781
Totals $12,113 $3,332 $8,781
The amounts receivable consist of expenditures incurred on behalf of developers. City policy
is to collect in advance an amount to cover any related expenditures. Additionally, the City bills
each developer on a monthly basis to cover any costs incurred. The increase in amounts due from
developers relate to costs incurred on behalf of Wal -Mart Stores and ISD #834 for development
activities within the City. The City has excellent policy and procedures in this area. We commend
the City for its efforts in monitoring and controlling developer accounts and encourage the City to
continue such efforts.
City of Oak Park Heights, Minnesota
Management Report, Page 14
Taxes Receivable - Delinauent
Taxes receivable - delinquent consist of taxes levied in the previous seven years by the City but
not yet collected by the County and remitted to the City. The collection rates on property taxes
remains strong as illustrated below.
1988 1989 1990 1991
Delinquent taxes - January 1 $29,641 $21,293 $30,833 $33,458
Current levy 923,731 1,009,248 1,205,556 1,199,554
Total collectible 953,372 1,030,541 1,236,389 1,233,012
Receipts:
Current 914,738 983,758 1,177,795 1,134,365
Delinquent 160 1,898 13,024 15,103
Total receipts 914,898 985,656 1,190,819 _ 1,149,468
Adjustments (117,181) (14,052) (12,112) (48,508)
Delinquent taxes - December 31 $21,293 $30,833 $33,458 $35,036
Current collection as a percent of current levy 99% 97% 98% 95 %/98%
Total collections as a percent of current levy 99% 98% 99% 96 %/99%
The adjustments to delinquent taxes receivable consist of abatements of property taxes as a
result of market valuation adjustments. A major portion of these adjustments relate to apartment
complexes within the City. The 1991 adjustments includes $43,238 related to the State HACA cut.
The City's HACA was cut subsequent to the levy certification. Had this aid been received, the
1991 total collection rate would have been 99 %.
As shown above, tax collection rates have averaged 99% over the past four years representing
an excellent/solid collection rate for the City. This financial indicator (i.e. property tax collection
rate) is one of the major criteria used by the City's bond rating agency.
City of Oak Park Heights, Minnesota
Management Report, Page 15
Special AsK,sments Receivable
Special assessments receivable consisted of the following types and amounts:
December 31, Increase
Description 1991 1990 (Decrease)
Delinquent $57,391 $71,842 ($14,451)
Due from County 11,431 16,068 (4,637)
Deferred 183,451 184,728 (1,277)
Special Deferred 14,800 14,800 0
Totals $267,073 $287,438 ($20,365)
Deferred special assessments consist of the remaining principal installments on assessment
rolls. These assessments are generally collectible over a time period consistent with the debt
payment schedule of the related bond issue.
Delinquent special assessments have been as follows for the past several years.
Percent
Delinquent Increase Increase
December 31, Assessments (Decrease) (Decrease)
1979 $7,368 $1,501 26%
1980 12,177 4,809 65%
1981 16,356 4,179 34%
1982 27,275 10,919 67%
1983 8,195 (19,080) (70 %)
1984 13,850 5,655 69%
1985 12,020 (1,830) (13 %)
1986 10,882 (1,138) (9%)
1987 10,781 (101) (1 %)
1988 12,408 1,627 15%
1989 101,058 88,650 714%
1990 71,842 (29,216) (29 %)
1991 57,391 (14,451) (20 %)
City of Oak Park Heights, Minnesota
Management Report, Page 16
The change in delinquent assessments receivable over the past four years was as follows:
1988 1989 1990 1991
Delinquent balance - January 1 $10,781 $12,408 $101,058 $71,842
Add:
Current installments 30,286 210,918 136,458 74,246
Amount collectible 41,067 223,326 237,516 146,088
Less collections:
Current 27,685 113,895 104,145 45,782
Delinquent 918 7,184 61,407 42,965
Total collections 28,603 ® 121,079 165,552 88,747
Adjustments (56) (1,189) (122) 50
Delinquent balance - December 31 $12,408 $101,058 $71,842 $57,391
Current collections as a percent of current levy 91% 54% 76% 62%
Total collections as a percent of current levy 94% 57% 121% 120%
City of Oak Park Heights, Minnesota
Management Report, Page 17
The above schedule indicates that the City had a poor current collection rate for special
assessments in 1989, 1990 and 1991. This financial indicator (i.e. special assessment collection
rate) is also one of the major criteria used by the City's rating agency when the City is rated for
bonding purposes. This poor collection rate is partially attributable to the Swager's 9th addition
improvement project which was financed by the Improvement Bonds of 1987. A schedule of the
1991 assessment activity for this fund is as follows:
1991
Bonds of All Other
1987 Funds Total
Delinquent balance - January 1, 1991 $67,442 $4,400 $71,842
Add-
Current installments 39,974 34,272 74,246
Amount collectible 107,416 ® 38,672 146,088 -
Less collections:
Current 26,121 19,661 45,782
Delinquent 42,006 959 42,965
Total collections 68,127 ® 20,620 88,747
Adjustments 0 50 50
Delinquent balance - December 31, 1991 $39,289 $18,102 $57,391
Current collections as a percent of current levy 65% 57% 62%
Total collections as a percent of current levy 170% 60% 120%
As shown above, the poor special assessment current collection rate for 1991 is partially the
result of the single project financed by the Bonds of 1987. Delinquent assessments on this project
account for 68% of all special assessment delinquencies at December 31, 1991. This potential
problem situation has been resolved by actions of the City over the past two years. A special
report will be provided to the City on the current status of this situation.
The increase in delinquencies in all other funds is attributed to the Rapid Oil Project that was
assessed in 1990. The first year of collection was 1991. The principal and interest for 1991 was
$14,489, all of which remained unpaid at December 31, 1991. We recommend that the City
contact this property owner to discuss this delinquency situation.
City of Oak Park Heights, Minnesota
Management Report, Page 18
The amount reported as "special deferred" consists of an assessment which has been deferred
pending future connection to the sanitary sewer line. This amount was deferred by City Council
Resolution 84 -1 -1. The resolution does not stipulate the amount of interest to be collected upon
connection (if any). We recommend that the City determine and stipulate the specific terms for this
(and future) special assessment deferrals. See later comments relating to the Improvement Bonds
of 1982.
Fixed Asseta
During 1991, the City completed an inventory of all City assets and implemented computerized
fixed asset inventory records. This action allows (for the first time) a 100% "clean" auditor's
opinion for the City's 1991 Annual Financial Report We commend the City for this achievement.
To keep the system functioning properly, we encourage and recommend the following:
1) Update the system (recording asset additions and deletions) at least quarterly.
2) Prepare written procedures that govern the transfer of assets between departments plus
additions and deletions within departments.
3) Periodic internal audit of assets by department.
Compensated Absences Pavabg
Compensated absences payable consist of employee benefits for vacation and severance pay
which are vested by the employee and for which payment is probable. Severance pay benefits are
payable to the City's employees who have been with the City in excess of 10 years. These
employees have vested severance pay which totaled $42,776 and $38,581 at December 31, 1991
and 1990, respectively. Also included in the accrual for compensated absences is vacation pay
benefits for all City employees of $4,907 at December 31, 1991 and $2,821 at December 31,
1990.
City of Oak Park Heights, Minnesota
Management Report, Page 19
Bonds Pavel
Bond Issues
Special Special Revenue
Assessments District Bonds Totals
Balance - January 1, 1991 $991,000 $160,000 $80,000 $1,231,000
Bond Issued 0 0 1,250,000 1,250,000
Principal payments (239,000) (10,000) (20,000) (269,000)
Balance - December 31, 1991 $752,000 $150,000 $1,310,000 $2,212,000
Retirement Schedule:
1992 $279,000 $10,000 $20,000 $309,000
1993 348,000 10,000 70,000 428,000
1994 125,000 10,000 75,000 210,000
1995 10,000 55,000 65,000
1996 10,000 60,000 70,000
1997 -2003 100,000 1,030,000 1,130,000
Total $752,000 $150,000 $1,310,000 $2,212,000
Detail of outstanding bond issues are contained in Exhibits 2 and 3 of the 1991 Annual
Financial Report.
In November 1984, the City defeased the $900,000 General Obligation Sanitary Sewer
Improvement Bonds of 1967 and the $500,000 General Obligation Water and Sanitary Sewer
Improvement Bonds of 1968 by placing sufficient monies in an irrevocable trust to provide for all
future debt service payments of these bond issues. The escrow agreement between the City and
First Trust Co. states the City may annually withdraw investment earnings from the escrow
account in excess of minimum balances. During 1991, the City withdrew $3,070 of interest
earnings in excess of the minimum balance.
City of Oak Park Heights, Minnesota
Management Report, Page 20
Fund Eauitv
December 31, Increase
Fund Group 1991 _ 1990 (Decrease)
Fund Balance:
General $1,001,051 $1,066,281 ($65,230)
Special Revenue 2,288 0 2,288
Debt Service 801,051 776,731 24,320
Capital Projects 1,266,270 929,100 337,170
Totals 3,070,660 2,772,112 298,548
Retained earnings:
Enterprise 1,167,816 ® 1,024,451 143,365
Totals $4,238,476 $3,796,563 $441,913
As shown above, all fund groups of the City are in a positive financial position. This financial
indicator (i.e. reserved balances in all fund groups) is another major criteria used by the City's
bond rating agency.
City of Oak Park Heights, Minnesota
Management Report, Page 21
MD— VIDT.JAL F1JND TYPE ANALYM
General Fund
The financial statements for the General Fund are presented in Statements 6 and 7 of the City's
1991 Annual Financial Report. The fund balance of the General Fund was $1,001,051 at
December 31, 1991 representing an $65,230 decrease during 1991 as follows:
Budeted decrease in fund balance ($48,563)
Actual Revenue Greater Than
(Less Than) Budgeted Revenue:
• General property taxes (5,919)
• Intergovernmental (36,605)
• Licenses and permits 28,294
• Fines and forfeits (11,126)
• Interest on investments 1,983
• Charges for current services (2,331)
• Other 15,947 ($9,757)
Budgeted Expenditures Less Than
(In Excess Of) Actual Expenditures:
• General government 9,141
• Public safety 19,180
• Streets and highways 1,537
• Sanitation 1,494
• Recreation 6,810
• Contingency 54,928 93,090
Transfer to Capital Improvements Fund (100,000)
Net decrease in fund balance for 1991 ($65,230)
Details of the above amounts are presented in Statement 7 of the Annual Financial Report. The
City has achieved and maintained a sound fund balance level for its General Fund.
The budgeted decrease was due to an error in certifying the 1989/90 tax levy to Washington
County. This error resulted in an excess tax levy of $48,563. The 1990/91 tax levy was reduced
by $48,563 to correct this error. The $65,230 fund balance decrease for 1992 was in accordance
with the 1992 budget and should not be a concern to the City.
City of Oak Park Heights, Minnesota
Management Report, Page 22
The fund balance of the General Fund has increased over the past several years. The schedule
below reflects the fund balances for the past several years:
Year Ended Fund Increase
December 31, Balance (Decrease)
1979 $186,836 ($39,107)
1980 127,647 (59,189)
1981 182,939 55,292
1982 300,999 118,060
1983 453,507 152,508
1984 579,612 126,105
1985 656,865 77,253
1986 692,520 35,655
1987 782,771 90,251
1988 870,705 87,934
1989 910,630 39,925
1990 1,066,281 155,651
1991 1,001,051 (65,230)
As shown on the above table, the City has significantly improved the fund balance of the
General Fund over the past several years. A table of the purposes and benefits of General Fund
Reserve balances is as follows:
Purpose of Reserves s4u1..e Benefits of Reserves
ash flow timin differences. Favorable bond rating indicator.
Expenditures ate incurred somewhat evenly dunughout the
year. Property taxes & State aids are not received until the
second half of the year. A reserve of one-half of such
revenues is therefore recommended. • Supplements revenues with investment earnings.
Intereovernmental reven cutbacks. Provides resources for minor projects or
The City is vulnerable to legislative actions at both the Federal feasibility reports
& State level. Federal funding to local government has been
substantially curtailed in recent years. Annual adjustment of Avoids temporary overdrafts prior to
Local Government Aid & HACA formulas is a constant threat. major receipts.
Capital outlay replacement. City may study effects of revenue cuts before
Internal escrow for purchase which may exceed amounts gradual program reductions
available in any single budget cycle. This may also be
accomplished through transfers to dedicated replacement funds. . Avoids overburdening of annual budgets for
Emergency or unanticipated expenditures, certain capital outlay.
Examples include natural disasters, lawsuits, comparable
worth implementation and premature breakdown . Provides the City greater options to deal with
of vital equipment
unexpected events.
, ' per l Citv Co uncil Pr�iects.
Preliminary studies, interfund loans and minor projects
are examples of reserve uses.
City of Oak Park Heights, Minnesota
Management Report, Page 23
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 of Oak Park Heights has quantified this reserve requirement need by designating a general
contingency reserve equal to $228,600 at December 31, 1991 representing 15% of the 1992
General Fund operating budget.
The reserve requirement to deal with unforeseen intergovernmental revenue reductions is also
difficult to quantify. State and Federal legislation dealing with shared aids is somewhat
unpredictable. The City must strive to remain current on the effects of changing legislation and
budget such aids accordingly. Prudent fiscal management leads to the conclusion that a reserve
balance in the City's General Fund will mitigate the adverse effects of aid reductions.
The City's minimum cash flow reserve requirement is measurable. For the City of Oak Park
Heights, the minimum required surplus is $577,100 computed as follows:
1992 Budgeted Levy (includes HACA) $1,154,052
1992 Anticipated Local Government Aid 0
Total $1,154,052
Minimum Required Cash Flow Reserve
(one -half of total) $577,100
The City has demonstrated that a financially sound General Fund is attainable through prudent
fiscal planning. The City has met its cash flow required reserve and also has approximately
$524,000 of other General Fund reserves to fulfill the various other reserve requirements.
City of Oak Park Heights, Minnesota
Management Report, Page 24
During 1987, the City adopted Resolution 87 -10 -42 establishing General Fund reserves/
designations for cash flow, contingent employee benefits and general contingency based upon
formulas for each category. At December 31, 1991, the General Fund balance was designated as
follows:
Designated for
Cash flow $577,100
Contingent employee benefits 117,800
General contingency 228,600
State Aid reduction 0
Ensuing years' budget 2,500
Subtotal 926,000
Undesignated 75,051
Total fund balance $1,001,051
The City of Oak Park Heights has taken actions over the past several years to improve the
financial position of its General Fund. These actions have provided the City the ability to establish
a Capital Improvement Fund funded primarily from General Fund transfers (see later comments -
Capital Improvement Fund and Capital Replacement/Acquisition Budgeting). We commend the
City for these actions and encourage the City to continue to monitor its reserve balances. An
adequate reserve structure will enable the City to retain its financial independence and integrity
during the present change in the economic environment.
SPECIAL REVENUE FUNDS
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 speck purposes. The City
maintained one Special Revenue Fund during 1991.
Forfeiture and Seizure Fund
This fund was established in 1991 to account for property forfeited pursuant to MS 609.53.
This fund had a fund balance of $2,288 at December 31, 1991.
City of Oak Park Heights, Minnesota
Management Report, Page 25
DEBT SERVICE FUNDS
The combining financial statements for the Debt Service Funds are presented in Statements 10
and 11 of the 1991 Annual Financial Report. Debt Service Funds are a type of governmental fund
to account for the accumulation of resources for the payment of interest and principal on debt (other
than Enterprise Fund debt). The City maintained seven Debt Service Funds during 1991 as
follows:
Fund Balance
December 31, Increase
Fund 1991 1990 (Decrease)
G.O. Storm Sewer Improvement Bonds of 1971 $0 $28,377 ($28,377)
Storm Sewer Bonds of 1982 10,105 10,050 55
Improvement Bonds of 1982 46,672 51,867 (5,195)
G.O. Improvement Bonds of 1983 28,512 32,181 (3,669)
G.O. Improvement Bonds of 1987 528,741 574,742 (46,001)
G.O. Improvement Bonds of 1990 141,223 79,514 61,709
G.O. Water and Sewer Bonds of 1991 45,798 0 45,798
Totals $801,051 $776,731 $24,320
Debt Service Funds may have one or a combination of the following revenue sources pledged
to retire debt as follows:
• Property Taxes - primarily for general City benefit projects such as parks and municipal
buildings. Property taxes may also be used to fund special assessment bonds which are
not fully assessed.
• ][ax Jamment - pledged exclusively for tax increment/economic development districts.
• Capitalized Interest Portion of Bond Proceeds - after the sale of bonds, the project may
not produce revenue (tax increments or special assessments) for a period of one to two
years. Bonds are issued with this timing difference considered in the form of capitalized
interest.
• Special Asse m n - charges to benefited properties for various improvements.
In addition to the above pledged assets, other funding sources may be received by Debt Service
Funds as follows:
• Residual project proceeds from the Capital Project Fund.
• Investment earnings.
• State or Federal grants.
• Transfers from other funds.
City of Oak Park Heights, Minnesota
Management Report, Page 26
Pledged assets may be divided into three categories: 1) recorded as fund assets with the
revenue deferred until collected (levied assessments and levied taxes); 2) actually received by the
fund and included in fund balances (collected assessments, interest, bond proceeds, etc.); and, 3)
future pledged assets not recorded as assets but intended to be collected at a future date (scheduled
property taxes and estimated tax increment collections).
Special assessment and general obligation debt funds are combined in the City's Debt Service
Fund type. The diverse nature of the type of debt included in the same fund type requires careful
analysis to determine the adequacy of the fund balance and projected fund balance. The following
schedule extracts information from several sections of the Annual Financial Report to assist in this
analysis.
December 31, 1991 Final
Find Defered Deferred Remaining Maturity
Fund Description Balance Revenues Taxes Total Debt Service Date
General Debt:
Storm Sewer Bonds of 1982 $10,105 $821 $273,220 $284,146 $260,188 12/1/03
Water and Sewer Bonds of 1991 45.798 0 0 45.798 2,050,408 12/1/06
Sub -total 55,903 821 273,220 329,944 2,310,596
Special Assessment Debt:
Improvement Bonds of 1982 46,672 18,471 18,881 84,024 46,700 8/1/93
Improvement Bonds of 1983 28,512 2,932 0 31,444 18,481 2/1/93
Improvement Bonds of 1987 528,741 70,927 0 599,668 431,180 12/1/93
Improvement Bonds of 1990 141,223 0 500 141,723 344,200 12/1/94
Sub -total 745,148 92,330 19,381 856,859 840,561
Totals -All Debt Service Funds $801.051 $93,151 $292.601 $1.186.803 $3.151,157
Deferred revenue of the preceding schedule primarily consists of uncollected special
assessments. The preceding schedule compares outstanding debt with: 1) fund balance; and, 2)
deferred revenue.
City of Oak Park Heights, Minnesota
Management Report, Page 27
Storm Sewer Bonds of 1982
These bonds were issued to provide financing for the Storm Sewer District construction. The
City Council established this district in October, 1982 per City ordinance 1600. A Dro_iection of the
final fund position based on scheduled levies and debt requirements is as follows:
Fund Balance - December 31, 1991 $10,105
Additions:
Future Scheduled tax levies @ 100% 273,220
Total 283,325
Deductions:
Debt Requirements:
Principal 150,000
Interest 110,188
Total 260,188
Projected Fund Balance $23,137
Normal Projected Fund Balance -
5% of debt requirements $13,000
The above projection indicates that this fund will have adequate assets to meet bonded debt
requirements over the schedule term of this bond issue.
Water and Sewer BondL- gLIM
These bonds were issued in 1991 to provide financing for Phase I of the City's Annexation
Area Extended Trunk facility improvements. The City has established special area connection
charges to provide for the retirement of these bonds and for financing additional trunk facilities in
this area.
Special Assessment Debt Service Funda
The Improvement Bonds of 1982, 1983 and 1987 are in a strong financial position. The cash
balance in each of these debt service accounts exceed the bonds outstanding. These bonds are
scheduled to mature in 1993.
Storm Sewer Bonds of 1971
Final maturity of this bond issue was May 1, 1991. The City closed this fund and transferred
the remaining assets to the Closed Bond Fund during 1991.
City of Oak Park Heights, Minnesota
Management Report, Page 28
Improvement Bonds of 1990
These bonds were issued to provide financing for the Valley Point 2nd Addition Project.
These bonds are scheduled to be retired entirely by capitalized interest and special assessment
collections. This project will be assessed in 1992.
CAPITAL PROTECT FUNDS
The financial statements for the Capital Project Funds are presented in Statements 12 and 13 of
the City's 1991 Annual Financial Report. Pursuant to changes in reporting standards, the Capital
Project Fund type includes special assessment projects. The fund balance (deficits) of the Capital
Project Funds were as follows at December 31, 1991 and 1990:
December 31, Increase
Fund - 1991 1990 (Decrease)
Closed Bond Fund $872,891 $784,901 $87,990
Capital Improvements Fund 338,590 245,832 92,758
AAE - Sanitary Sewer Connection 1,420 0 1,420
AAE - Water Connection 2,313 0 2,313
AAE - Storm Sewer Connection 1,793 0 1,793
AAE - 1991 Utility Improvements 147,666 0 147,666
River Hills (Heritage) Utility 0 0 0
St. Croix Mall (TIF) (117,926) (125,676) 7,750
Park & Recreation Development 16,009 2,171 13,838
Valley Point 2nd Addition 3,514 21,872 (18,358)
Totals $1,266,270 $929,100 $337,170
City of Oak Park Heights, Minnesota
Management Report, Page 29
-]iced Bond Fund
During 1984, the City established the Closed Bond Fund. Initial financing for this fund was
provided through the residual balances of closed (or defeased) special assessment bond funds of
the City. A summary of transactions from inception is as follows:
Prior
Years 1991 Total
Financing Sources:
General property taxes $1,807 $26 $1,833
Special assessments 116,989 37,616 154,605
Interest on investments 307,355 51,056 358,411
Interfund interest 7,413 7,413
Escrow invement earnings 0 3,070 3,070
Connection charges 104,219 38,394 142,613
Transfers in:
G. O. Bonds of 1967 and 1968 345,901 345,901
G. O. Bonds of 1976 56,755 56,755
G. O. Bonds of 1977 71,179 71,179
G. O. Bonds of 1978 and 1979 83,960 83,960
Sewer and Water Bonds of 1982 1,764 1,764
Completed Construction 5443 18,845 24,288
Total financing sources $1,102,785 $149,007 1,251,792
Financing Uses:
Professional services $13,862 $9,040 22,902
Construction Costs:
County Seat Estates 5,985 3,732 9,717
Valvoline Rapid Oil 31,303 31,303
Transfers out:
Sewer and Water Bonds of 1982 (construction) 40,364 40,364
G. O. Bonds of 1983 (construction) 4,270 4,270
General Fund 22,100 22,100
Interim Construction 0 48,245 48,245
Capital Improvements Fund 200,000 200,000
Total financing uses $317,884 $61,017 378,901
Fund balance - December 31, 1991 $872,891
The County Seat Estates Project was completed and assessed in 1991. The transfer to the
Interim Construction Fund was to finance the Orleans Street Project.
City of Oak Park Heights, Minnesota
Management Report, Page 30
The purpose of the Closed Bond Fund is to receive residual balances of closed special
assessment bonds. Amounts on hand at December 31, 1991 are available for use at the Council's
discretion. City policy regarding the allowable use of such monies include the following areas:
® Temporary funding of other Debt Service Fund deficits.
® Supplemental financing of construction deficits.
® Full financing of minor construction projects.
® Supplemental financing of replacement of systems (water and sewer) which had been
previously assessed.
® Long -term capital improvement program financing (see later comments).
Interim Construction Fund
This fund was established in 1991 to account for projects in preliminary stages and projects not
financed by bond proceeds. The financial activity of this fund was as follows:
Financial Resources
Special assessments $3,696
Transfers in:
Closed Bond Fund 48,245
Total financial resources 51,941
Financial Uses
Construction costs:
Orleans Street 51,941
Fund balance - December 31, 1991 $0
The Orleans Street Project was assessed in 1991 in the amount of $32,023. The remaining
financing was provided by the Closed Bond Fund in accordance with City Council action of April
8, 1991.
City of Oak Park Heights, Minnesota
Management Report, Page 31
Capital Improvemen Fund (4Q I)
The Capital Improvements Fund was established in 1978 to account for monies set aside for
various capital improvements. A schedule of activity from inception is as follows:
Municipal
Land Street Building
Acquisition ReconstructionUnallocated Expansion Sealcoat Recreation Total
Revenue and Other Sources:
Transfers from General Fund:
1978 through 1980 $70,000 $40,000 $7,500 $117,500
1981 through 1985 100,000 16,075 116,075
1986 through 1990 $250,000 $4,500 100,000 80,000 127,000 561,500
1991 100,000 100,000
Transfer from Closed Bond Fund 200,000 200,000
Total transfers $0 250,000 104,500 370,000 220,000 150,575 1,095,075
Sale of property 9,414 9,414
Donation 2,062 25,761 27,823
Interest earnings 113,291 31,387 2,621 147,299
1989 Budget reallocation (150,000) (41,675) 191,675 0
1991 reallocation 29,848 (29,848) 0
Total revenue and other sources '
29,848 100,000 148,330 602,476 - 220,000 178,957 1,279,611
Expenditures and Other Uses:
Transfers out:
Municipal building expansion (91,438) (91,438)
Direct expenditures (507,437) (181,794) (160,352) (849,583)
Fund balance - December 31, 1991 $29,848 $100,000 $148,330 $3,601 $38,206 $18,605 $338,590
The City Hall expansion project was complete at December 31, 1991. We recommend that this
account be closed in 1992 and that the remaining balance be transferred to the unallocated account
within this Fund.
River Hills (Heritage) Utilitv
This project was started in 1991. Financing is provided by the developer under a letter of
credit arrangement.
Vallev Point 2nd Edition
This project was substantially complete at December 31, 1991. Financing was provided by the
$300,000 G.O. Improvement Bonds of 1990. This project is scheduled to be completed and
assessed in 1992.
City of Oak Park Heights, Minnesota
Management Report, Page 32
Park and Recreation Develo m n
This fund was established by Resolution 88 -12 -33 to account for the development of the City's
parks and recreational areas. The fund balance was $16,009 at December 31, 1991, as follows:
Prior
® Years 1991 Total
Financing Resources:
Park fees $0 $13,950 $13,950
Donations and contributions 4,112 0 4,112
Interest on investments 219 428 647
Total financing sources 4,331 428 18,709
Financing Uses:
Professional services $2,160 $540 2,700
Fund balance - December 31, 1991 $16,009
St. Croix Mall (TIF)
This fund was established in 1989 to account for the St. Croix Mall TIF project. Expenditures
totaling $26,695 (primarily consulting fees) through December 31, 1989 were fully reimbursable
from the developer, leaving a zero fund balance at December 31, 1989. This fund was used to
account for the City's 58th Street and Osgood Avenue Improvement Project. This Project involves
street re- alignment for traffic control purposes, and is to be financed from future incremental taxes
not committed to this developer.
The City received its first TIF tax collection in 1991. A portion of these taxes ($30,908) are
committed and were remitted to the St. Croix Mall developer with the remaining balance ($21,414)
being used by the City to partially finance the City's 58th Street and Osgood Avenue Improvement
Project.
The 58th Street and Osgood Avenue Project was in process at December 31, 1991 and should
be completed in 1992. Cost to date (December 31, 1991) totaled $139,340. A portion of these
costs ($21,414) were financed by 1991 City TIF proceeds leaving a $117,926 fund balance deficit
to be financed by future 1992 and 1993 City TIF proceeds.
City of Oak Park Heights, Minnesota
Management Report, Page 33
Annexation Area Extended (A.A•lE.l
In response to development projects from non - resident property owners, the City developed a
plan of action to provide trunk utility services (water, sanitary sewer, and storm sewer) to
properties annexed to the City after July 28, 1988. The Annexation Area Extended includes
approximately 950 acres of property generally south of State Highway 36 between Oakgreen
Avenue (on the east) and State Highway 5 (on the west).
During 1991, the City established connection charges for the purpose of financing these trunk
facilities and issued revenue based improvement bonds to finance the first phase (Water Tower) of
such improvements. This project was in its earliest stage at December 31, 1991, but has been
progressing rapidly during 1992. A special report on this topic will be provided to the City.
ENTERPRISE FUND
The financial statements for the Enterprise Fund (Water and Sewer Utilities) are presented in
Statements 14, 15 and 16 of the City's 1991 Annual Financial Report. Condensed comparative
operating statements of income and expense for the utility operations excluding depreciation on
contributed assets of the City are as follows:
City of Oak Park Heights, Minnesota
Management Report, Page 34
Water DeDartment
1991 1990
Amount Percent Amount Percent
Revenue:
Customer billings and other $152,992 100.00% $127,063 100.00%
Operating expenses:
Contractual services 48,923 31.98% 45,469 35.78%
Administrative and personnel charges 28,500 18.63% 28,500 22.43%
Other 9,144 5.98% 6,828 5.37%
Total operating expenses 86,567 56.59% e 80,797 63.58%
Net income before depreciation 66,425 43.41% 46,266 36.42%
Depreciation - purchased assets 8,442 7,140
Net operating income $57,983 $39,126
$160,000 _ Water Operating
Revenue & Expense
$140,000 ................... .
$120,000 „- =� P r o f i t
All Other Expenses
$100,000
$80,000 Contractual
Services
$60'000 — Operating Revenue
$40,000
•:. ;;...,;:'P :} .`�� -:: •�.. •. .•'.. vi:: \'i�t
Fitt•; Y +i, ...:ti: ?Tti..
1987 1988 1989 1990 1991
City of Oak Park Heights, Minnesota
Management Report, Page 35
Sewer Department
1991 1990
Amount Percent W Amount Percent
Revenue:
Customer billings and other $225,909 100.00% $212,448 100.00%
Operating expenses:
MWCC 144,150 63.81% 139,861 65.83%
Other contractual services 9,318 4.12% 13,190 6.21%
Administrative and personnel charges 28,500 12.62% 28,500 13.42%
Other 966 0.43% 208 0.10%
182,934 80.98% 181,759 85.56%
Net income before depreciation 42,975 19.02% 30,689 14.44%
Depreciation - purchased assets 2,367 2,365
Net operating income $40,608 $28,324
$250,000 -
Sewer Operating
$225,000 Revenue & Expense
$200,000
$175,000 -
$150,000 All Other Expenses
:' ;<<: :. MWCC
$125,000 >, k:: - k::<::: >>:
.` \4.41:: •i':>
100,000 � :M NtiN >> �� Operating Revenue
\'a vnti �::• }:•:
75,000 •:•: }: }•;:;. } }}
ov;?c:ti� \'
;y: i }k:;:i; :: v: 4 :- .•.,it; {; itih:'i•v.4.;.'r }}:itti$ {}ki(
$50,000 M�c;:�., }.
. \4 ^ \ w:k:? -. \tiy�Y`:C:: :' { tij • ]'CQ • '. • •, • .jijjj
�;iJih \ \ii:Jk ti4q JJw:t -
$25,000
?;x...4; .. . :;:•-..'•�.•'.,:;'�,-:
E
' {v.; l.v.. :. .v:v::v}.i ;} x•444.::
.,,^ 'T?:.?\tij ia} \:ivii•�i: \i \tiff
Wllvi 1987 1988 1989 1990 1991
City of Oak Park Heights, Minnesota
Management Report, Page 36
The Sewer Utility had reflected decreasing operating profits in 1988 and 1989 primarily due to
the MWCC costs which have increased substantially. During 1990, the City increased water and
sewer rates. Additionally, the City increased water rates in 1991. We concur with such actions
and encourage the City to continue to monitor such operations.
Also during 1990, the City began a project of changing its water metering system to a new
electronic, remote -reader system. Under the new system the City is changing all of its old water
meters. The old water meters were subject to a "water meter deposit" which has been
recorded/carried as an ongoing liability. Under the new system, the new water meters are subject
to a "water meter fee or charge ". This new "fee" or "charge" is apparently not subject to a refund
nor does it require the City to report a liability. Proper accounting for the old "water meter
deposits" is unclear. The City attorney is pursuing this question and the accounting records of the
City will be adjusted at December 31, 1992 based upon the City attorney's recommendations.
The single largest expense of the sewer operations is the contractual services of the
Metropolitan Waste Control Commission (MWCC). The MWCC charges comprise over 75% of
sewer expenses for 1990 and 1991. The City must set rates at levels adequate to pay for the pass -
through cost, or provide funding from other City funds. In view of this financial structure and
arrangement, the City's ability to exercise control over its sewer operations is limited. The City
could be construed to be acting only as an agent for the MWCC with regard to sanitary sewer
operations. A summary of MWCC charges is as follows:
$160'000 MWCC Billings
$140,000
$120,000 —
$100,000
$80,000 - a ,.T: : T< <•:.:.: >:::
l
$60,000
$40,000 -
$20,000 - ,: . \;;
�� T4 ti:
$0 '
1985 1986 1987 1988 1989 1990 1991 1992
MWCC Estimated 0 MWCC Actual
City of Oak Park Heights, Minnesota
Management Report, Page 37
The MWCC bills the City annually on an estimated basis. These estimated billings are adjusted
at a later date and the City is billed the additional amount or given a refund. These estimated
billings vary from year to year and may cause material variances in annual profits or losses of the
sewer operations. The Metropolitan Waste Control Commission billings for the period 1981
through 1991 were as follows:
Estimated Actual
Percent Percent
Year Amount Change Amount Change
1981 $39,492 105.1% $34,048 (0.4 %)
1982 56,553 43.2% 47,736 40.2%
1983 66,348 17.3% 43,970 (7.9 %)
1984 75,338 13.5% 68,712 56.3%
1985 71,879 (4.6%) 69,509 1.2%
1986 85,742 19.3% 72,992 5.0%
1987 95,219 11.1% 98,921 35.5%
1988 98,135 3.1% 118,951 20.2%
1989 108,742 10.8% 116,235 (2.3 %)
1990 132,368 21.7% 130,135 12.0%
1991 146,388 10.6% Not Available
1992 157,574 7.6% Not Available
There are two basic factors which affect billings from the MWCC. The first is changes in use
of the system. The estimated usage decreased from 150 million gallons for 1991 to 148 million
gallons for 1992. The second factor which affects the billings from the MWCC is their cost to
process gallonage. Their cost to process (per million gallons) increased for 1992 to $1,156 from
$1,070 for 1991. The combination of these factors increased the City's estimated cost in 1992 by
7 %. As the system gains users, the increased usage part of overall increases should be offset by
the billings to new users. The per unit portion of the increase, however, must be borne in full by
existing users or be subsidized by overall City operations. The City must maintain an adequate
level of income to:
• Offset MWCC expenses (and other City expenses).
• Meet bonded debt requirements.
• Provide for capital replacement.
• Establish a means of paying for emergency or unanticipated expenses such as major
repairs.
We concur with the City's efforts to commission rate studies and recommend that annual
reviews continue to be a standard procedure of the City.
City of Oak Park Heights, Minnesota
Management Report, Page 38
The financial position of the City's Enterprise (Water and Sewer Utilities) Fund has grown
substantially over the past several years as follows:
Cash Balance Retained Earnings
December 31, Amount Increase Amount Increase
1983 $222,576 $348,692
1984 293,457 $70,881 393,916 $45,224
1985 378,492 85,035 458,555 64,639
1986 429,969 51,477 530,939 72,384
1987 557,162 127,193 656,586 125,647
1988 661,765 104,603 785,756 129,170
1989 778,373 116,608 899,696 113,940
1990 864,080 85,707 1,024,451 124,755
1991 1,096,888 232,808 1,167,816 143,365
The above balances reflect the results of positive (profitable) operations as shown previously.
The City Council has discussed the need for a second City water tower (and related improvements)
for the past several years. The above increasing balance is partially for the purpose of such
improvements. During 1989 the City Council took formal action to document and appropriate a
portion of this balance ($661,765) for the water tower improvements.
A summary of the combined water and sewer operations, excluding depreciation on contributed
assets, for the last four years is as follows:
1988 1989 1990 1991
Revenue:
Customer billings and other $295,325 $304,928 $339,511 $378,901
Operating expenses:
Contractual services 149,325 189,701 198,520 202,391
Administrative and personnel charges 36,250 38,000 57,000 57,000
Other 10,985 6,208 7,036 10,110
Depreciation - purchased assets 9,485 10,175 9,505 10,809
Total operating expenses 206,045 244,084 272,061 280,310
Operating income $89,280 $60,844 $67,450 $98,591
In May of 1991, the City approved the sale of General Obligation Water and Sewer Revenue
Bonds in the amount of $1,250,000. This bond issue will provide financing for various water and
sewer system improvements in the "Annexation Area Extended ". Included in such improvements
is a second water tower which will benefit both the existing area of the City and the "Annexation
Area Extended ". These bonds are expected to be financed by special connection charges in the
Annexation Area Extended. The existing balance in the City Water and Sewer Operating Fund is
designed and intended to provide "back -up" financing for these bonds.
City of Oak Park Heights, Minnesota
Management Report, Page 39
INTERNAL ACCOUNTING CONTROLS
Current auditing standards require an auditor to communicate any material weaknesses in
internal accounting controls directly to City Council and/or City Administrators. Our audit for
1991 disclosed no material deficiencies in the City's system of internal controls not identified in
this report or past reports to the City Council.
We have audited the general purpose financial statements of the City of Oak
Park Heights, Minnesota as of and for the year ended December 31, 1991, and
have issued our report thereon dated February 14, 1992.
We conducted our audit in accordance with generally accepted auditing
standards and Government Auditing Standards, issued by the Comptroller General
of the United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the general purpose financial statements
are free of material misstatement.
In planning and performing our audit of the general purpose financial statements
of the City of Oak Park Heights, Minnesota for the year ended December 31, 1991,
we considered its internal control structure in order to determine our auditing
procedures for the purpose of expressing our opinion on the general purpose
financial statements and not to provide assurance on the internal control structure.
The management of the City of Oak Park Heights, Minnesota is responsible for
establishing and maintaining an internal control structure. In fulfilling this
responsibility, estimates and judgments by management are required to assess the
expected benefits and related costs of internal control structure policies and
procedures. The objectives of an internal control structure are to provide
management with reasonable, but not absolute, assurance that assets are
safeguarded against loss from unauthorized use or disposition, and that transactions
are executed in accordance with management's authorization and recorded properly
to permit the preparation of general purpose financial statements in accordance with
generally accepted accounting principles. Because of inherent limitations in any
internal controls structure, errors or irregularities may nevertheless occur and not be
detected Also projection of any evaluation of the structure to future periods is
subject to the risk that procedures may become inadequate because of changes in
conditions or that the effectiveness of the design and operation or policies and
procedures may deteriorate.
For the purpose of this report, we have classified the significant internal control
structure policies and procedures in the following categories:
• control environment
• accounting system
• control procedures
For all of the internal control structure categories listed above, we obtained an
understanding of the design of relevant policies and procedures and whether they
have been placed in operation, and we assessed control risk.
City of Oak Park Heights, Minnesota
Management Report, Page 40
We noted certain matters involving the internal control structure and its
operation that we consider to be reportable conditions under standards established
by the American Institute of Certified Public Accountants. Reportable conditions
involve matters coming to our attention relating to significant deficiencies in the
design or operation of the internal control structure that, in our judgment, could
adversely affect the entity's ability to record, process, summarize, and report
financial data consistent with the assertions of management in the general purpose
financial statements.
A material weakness is a reportable condition in which the design or operation
of the specific internal control structure elements does not reduce to a relatively low
level the risk that errors or irregularities in amounts that would be material in
relation to the general purpose financial statements being audited may occur and not
be detected within a timely period by employees in the normal course of performing
their assigned functions.
Our study and evaluation disclosed that the accounting process is performed by
a single employee. Ideal conditions call for segregation of duties to establish a
system of internal testing of procedures performed. This condition is common to
cities of this size. Any modification of internal controls in this area must be viewed
from a cosVbenefit perspective.
Our consideration of the internal control structure would not necessarily
disclose all matters in the internal control structure that might be reportable
conditions and, accordingly, would not necessarily disclose all reportable
conditions that are also considered to be material weaknesses as defined above.
However, we believe none of the reportable conditions described above is a
material weakness.
This condition was considered in determining the nature, timing, and extent of
the audit tests to be applied in our examination of the December 31, 1991 general
purpose financial statements and this report does not affect our report on the general
purpose financial statements dated February 14, 1992.
This report is intended solely for the use of the City of Oak Park Heights and
should not be used for any other purpose.
City of Oak Park Heights, Minnesota
Management Report, Page 41
SUMMARY
The following listing is a summary of the items which should be recorded, investigated and/or
resolved during 1992.
• Contact the property owner of Rapid Oil and discuss the delinquency situation. (Page 17)
• Keep the Fixed Assets Inventory system functioning properly. (Page 18)
• Determine and stipulate the specific terms for the amount of interest to be collected upon
connection (if any) and future special assessment deferrals. (Page 18)
• Monitor the City's reserve balances. (Page 24)
• Close the City Hall expansion account and the remaining balance be transferred to the
unallocated account. (Page 31)
• Monitor operations in the Sewer Utility Fund. (Page 36)
• Continue the standard procedure of the City to review MWCC costs. (Page 37)
APPENDIX A
Page 1 of 13
CITY O F OAK PARK HEIGHTS. MINNESOTA
YEAR & INITIAL YEAR
STATUTE ESTIMATED
REFERENCE STATE LEGISLATIVE ACTION IMPACT
1992 MS #37 Authorized the Commissioner of Health to assess an Statewide estimates
144.3831 annual fee of $5.21 for every service connection to a public not yet available. No
Subd. 1 water supply that is owned or operated by a City or Town. impact on City of
Oak Park Heights if
fee is passed through
to user.
1992 MS #36 Sales tax on purchases by political subdivisions of the Statewide impact of
297A.25 Subd. State is imposed. School districts, hospitals, nursing homes $68 million for State
11 and ambulance services owned and operated by political fiscal year 1993.
subdivisions. The tax is effective for sales made after May City of Oak Park
31, 1992 pursuant to Article 8 Section 39. Heights estimated
impact of $10,000
for 1992 and
$20,000 per year
thereafter.
1992 MS #35 Expenses incurred by Counties and Cities in the City of Oak Park
207A.10 Subd. administration of the presidential primary shall be reimbursed Heights impact is
1 by the Secretary of State. $775.
1992 MS #34 Increased the total amount of equalization Aid to State wide increase
477A.03 Subd. $20,011,000 for aids payable in 1993 and thereafter. of $525,316.
1
1992 MS #33 Adjusted LGA formula. For aids payable in 1993 and
477A.013 Subd. thereafter, City will receive an amount equal to 103% of
3 LGA it received in 1992 before any non - permanent
reductions made under 477A.0132.
1992 MS #32 Authorize the Commissioner of Revenue to make
16A.711 Subd. adjustments in aid amounts in the second fiscal year of each
5 biennium if anticipated total revenues is less than anticipated
total obligations of the local government trust fund.
Prepared by Tautges, Redpath & Co., Ltd. April 30, 1992
APPENDIX A
Page 2 of 13
CITY OF OAK PARK HEIGHTS. MINNESOTA
YEAR & INITIAL YEAR
STATUTE ESTIMATED
REFERENCE STATE LEGISLATIVE ACTION IMPACT
1991 MS 275.51 #31 Authorized contingent addition to the levy limit by the If local sales and use
Subd. 7 amount of lost aid of local governments located in a County tax is adopted there
where the local sales and use tax was not enacted. will be no impact.
1991 MS #30 Further reductions in local government aid for aids Statewide decrease in
477A.0132 payable in 1992. Estimated reduction percent is 4.034% of 1992 LGA of $43
Subd. 1 and 2 1992 revenue base. Revenue replaced by property tax levy million. City of Oak
authority. Park Heights - no
impact.
1991 #29 Approved LGA cut for December, 1991 aid payment. Statewide reduction
MS 477A.0132 Cut is estimated to be 1.6% of 1992 revenue base. Aid cut of $16.7 million.
Subd. 1 and 2 not replaced with levy authority. City of Oak Park
Heights reduction
$19,200. This
decrease will reduce
HACA as the City
does not receive
LGA.
1991 #28 Adjusted the HACA base as the 1991 certified HACA Statewide estimates
MS 273.1398 leis any 1991 permanent HACA reductions. not yet calculated.
Subd. 1 City of Oak Park
Heights - no impact.
Prepared by Tautges, Redpath & Co., Ltd. April 30, 1992
APPENDIX A
Page 3 of 13
CITY OF O AK PARK JJEIGHTS. MINNESOTA
YEAR & INITIAL YEAR
STATUTE ESTIMATED
REFERENCE STATE LEGISLATIVE ACTION IMPACT
1991 HF 1698 #27 Authorized the establishment of a local option sales tax Because it is likely
Art 2 Section 6 of 1/2% on all retail sales in the County. If the County does that most Counties
not authorize the additional 1/2% sales tax, Cities and Towns will approve the local
within the County which have a majority of the population option sales tax,
may override the County action by sending copies of there will not likely
approving resolutions to the County Auditor by August 1, be a competitive
1991. disadvantage within
the State of
Minnesota. The
increase of 1/2% in
sales tax however,
provides a possibly
greater competitive
edge for surrounding
States.
1991 HF 1698 #26 If any County does not approve the local option sales If the local option
Section 5 tax of 1/2% there would be no payments made to the local sales tax is not
government trust fund to the County or to City, Town or passed, the City of
Special Taxing Jurisdictions located in the County. (See #30 Oak Park Heights
for increased levy authority). would lose $48,400
of State aid
beginning in 1992.
Prepared by Tautges, Redpath & Co., Ltd. April 30, 1992
APPENDIX A
Page 4 of 13
SLT'ti' OF O AK PARK HEIGHTS MINNESOTA
YEAR & INITIAL YEAR
STATUTE ESTIMATED
REFERENCE STATE LEGISLATIVE ACTION IMPACT
1991 BF 1698 #25 The local government trust fund is authorized to make There should be no
Art. 2 Section 3 the following payments to Counties, Cities, Towns and impact on the City of
special taxing districts: Oak Park Heights or
other governmental
1) HACA jurisdictions if
revenues reach
2) Disparity Reduction Aid forecasted levels. If
however, revenue is
less than anticipated,
3) Local Government Aid and Equalization Aid there likely will be
reductions in HACA
4) Increased HACA Guarantees and local government
aid. The HACA
5) Supplemental Homestead Property Tax Relief reductions, if made
during the year, will
6) Disparity Reduction Credit cause property tax
collection rates to be
reduced. This is an
7) 25% of the State Aid for County Human Services extremely
unfavorable bond
8) Attach Machinery Aid, a fee for the Commissioner of indicator which is
Revenue to administer the local option tax ($852,000 already impacting
for 1992 and $660,000 for fiscal year 1993). Minnesota Local
Governments based
9) Other fees to the Commissioner of Finance and to the on 1991 reductions
Advisory Commission on inter- governmental in HACA. Note:
relations. The tax rate "buy
down" will increase
HACA.
If revenue is insufficient to pay each of the above amounts,
the Commissioner of Revenue is authorized to reduce the
payments of the first four items (HACA and LGA).
Prepared by Tautges, Redpath & Co., Ltd. April 30, 1992
APPENDIX A
Page 5 of 13
CITY OF OAK PARK HEI GHTS. M INNESOTA
YEAR & INITIAL YEAR
STATUTE ESTIMATED
REFERENCE STATE LEGISLATIVE ACTION IMPACT
1991 BF 1698 #24 Created the local government trust fund to be used The creation of the
Art. 2 Section 2 exclusively to pay local governments for inter - governmental local government
aid and to repay advances made by the State's general fund trust fund will impact
as may have been required to make all required payments as the City of Oak Park
provided by law. If revenues of the trust fund are Heights only if the
insufficient to pay commitments, all commitments to local estimated revenues of
governments will be proportionately reduced unless other the fund fluctuate
provisions have been made. If the estimated receipts of the significantly from
trust fund exceed estimated payments by $1 million or more estimates. Revenue
the appropriation from the trust fund to each inter- shortfalls should be
governmental aid program would be increased budgeted to anticipate
proportionately unless there are specific provisions which cuts late in the
prohibit such increase. operating year.
Budget practices
should therefore be
amended to consider
a factor for possible
reductions based on
suppressed economic
conditions in any
given year.
1991 BF 1698 #23 Establish the advisory commission on inter - The commission is in
Art. 2 Section 1 governmental relations with an initial membership of twenty an "advisory"
through July 1, 1992. After July 1, 1992 the commission is position to the
reduced to fourteen members. The commissioners are to be legislature. As such
representatives of the various geographic and governmental the commission has
jurisdictions of the State. little or no power and
therefore cannot
directly impact the
State or the City of
Oak Park Heights.
Prepared by Tautges, Redpath & Co., Ltd. April 30, 1992
APPENDIX A
Page 6 of 13
CITY OF OAK PARK HEIGHTS. MINNESOTA,
YEAR & INITIAL YEAR
STATUTE ESTIMATED
REFERENCE STATE LEGISLATIVE ACTION IMPACT
1991 MS 273.13 #22 Approve further adjustments to the commercial Tax burden shifts
Subd. 32 industrial tax rate for valuations in excess of $100,000, from commercial
Adjusted rates effective through 1994 as follows: industrial property.
Tax increment
districts may reflect
1990 1991 1992 1993 1994 1995 lower than
Rate Rate Rate Rate Bate Rate anticipated revenue
First $100,000 of flows.
market value 3.30% 3.20% 3.10% 3.00% 3.00% 3.00%
Market value over Targeted to
$100,000 5.06% 4.95% 4.75% 4.70% 4.60% eventually be
4%
1991 MS #21 Prohibits municipalities from conscientiously excluding For those
Section 473F.02 most commercial - industrial development within their communities deemed
Subd. 8 community for reasons other than preserving agricultural use to violate this statute,
through restrictive comprehensive zoning and planning they may be excluded
policies. from the fiscal
disparities pool
within the seven
county metropolitan
area. The impact for
such excluded
communities would
likely be a significant
increase in their local
tax rates.
1991 #20 For aid payable in 1992, HACA will increase for State aid increase in
MS 273.13 certain cities as a result of the adjusted property class rates funding to cities not
Subd. 22 (see #19 and #22) and the net tax capacity adjustment (see yet available. 1992
#12). The net tax capacity adjustment is calculated as HACA increase to
follows: City of Oak Park
Heights of $3,349.
(previous year total net tax capacity - current year total net tax
capacity) x current local tax rate.
Prepared by Tautges, Redpath & Co., Ltd. April 30, 1992
APPENDIX A
Page 7 of 13
Y OF OAK PARK HEIGHTS. MINNESOTA
YEAR & INITIAL YEAR
STATUTE ESTIMATED
REFERENCE STATE LEGISLATIVE ACTION IMPACT
1991 MS 273.13 #19 Approved adjustments to residential homestead The change in class
Subd. 22 property (class la). Adjusted rates are as follows: rates applied to
residential property
will not impact the
Payable Payable Payable total revenue raised
1991 1992 1993 by the City or shift
Rate Rate Rate the tax burden
between property
First Tier of Market Value classes but rather will
increase the amount
Up to $68,000 1.00%
Up to $72,000 1.00% 1.00% of HACA received
by the City. (see
Second Tier of Market Value #20) Note: The increased HACA
$68,001 to $110,000 2.00% payments are subject
$72,001 to $115,000 2.00% to adequate revenue
over $72,000 2.00% available in the local
Third Tier of Market Value government trust fund. (see #25)
over $110,000 3.00%
over $115,000 2.50%
Prepared by Tautges, Redpath & Co., Ltd. April 30, 1992
APPENDIX A
Page 8 of 13
CITY OF OAK PARK HEIGHTS. M INNESOTA
YEAR & INITIAL YEAR
STATUTE ESTIMATED
REFERENCE STATE LEGISLATIVE ACTION IMPACT
1991 #18 Establish methodology used in preparing assessments The assessment/sales
MS 270.12 /sales ratio studies requiring them to be consistent with the ratio factor of the
Subd. 2 most recent Standard on Assessment /Sales Ratio Studies local government aid
published by the Assessment Standards Committee of the formula affected a
International Association of Assessment Officers. variety of Cities in
1990. This current
change in
methodology should
be reviewed and
challenged by Cities
if they believe the
methodology results
in a higher
adjustment to market
values within the
City which directly
impacts tax capacity.
Recent state
legislative actions
have targeted aid
reductions to Cities
with high tax
capacity.
1991 #17 1991 LGA initially frozen at 1990 levels, then in Statewide reduction
MS 477A.0132 subsequent actions, aid was cut. The 1991 reduction equals in funding to cities
Subd. 1 & 2 2.052% of the City's Revenue Base. This aid cut will first $20.5 million. City
reduce LGA. If the City's LGA is insufficient, then the cut of Oak Park Heights
will affect Equalization Aid, HACA and Disparity Reduction reduction $24,600.
Aid, in that order. Aid cut not replaced by levy authority.
1991 BF 47 #16 State Aid road allotments were reduced to Cities. Statewide reduction
$3.8 million. City of
Oak Park Heights no
impact.
Prepared by Tautges, Redpath & Co., Ltd. April 30, 1992
APPENDIX A
Page 9 of 13
- CITY OF OAK PARK HE IGHTS. MINNE SOTA
YEAR & INITIAL YEAR
STATUTE ESTIMATED
REFERENCE STATE LEGISLATIVE ACTION IMPACT
1990 Ch. 604 #15 Levy limits for Cities repealed starting with Anticipated extension
Art. 3 Section 47 collectible 1993 levy. and delay of start
likely to result in no
impact.
1990 #14 Approved potential LGA and HACA cuts related to Estimated reduction
MS 273.1399 tax increment districts formed after April 30, 1990. in aids not calculated.
Subd. 5 Legislation designed
to discourage new
tax increment
districts.
1990 #13 Further reductions in LGA to cities. The Legislature Statewide decrease
MS 477A.013 reduced LGA by 1.53% of the revenue base. This in 1990 LGA
Subd. 7 permanent cut occurred after City budgets were adopted and $14.4 million, City
the operating year was one third elapsed. The Legislation of Oak Park Heights
did not provide a replacement revenue source. no impact.
1990 #12 The prior year (1990) HACA cut related to LGA is Reduction equal or
MS 273.1398 extended to also reduce 1991 HACA. Established a greater than 1990
Subd. 2 "Homestead and Agricultural Credit Base ". HACA base is HACA cut. For aid
defined as the previous year's certified HACA aid. For aid payable in 1992,
payable in 1991, HACA is determined as shown in #7. For HACA will increase
aid payable in 1992, HACA is determined as follows: for certain cities
based on the tax rate
change "buy down ".
(HACA base x growth adjustment factor) + net tax capacity (see #20)
adjustment + fiscal disparity adjustment.
Prepared by Tautges, Redpath & Co., Ltd. April 30, 1992
APPENDIX A
Page 10 of 13
CITY OF OAK PARK HEIGHTS. MINNESOTA
YEAR & INITIAL YEAR
STATUTE ESTIMATED
REFERENCE STATE LEGISLATIVE ACTION IMPACT
1990 #11 Commercial property tax rates lowered. (See #22). Tax burden shifted to
MS 273.13 residential and other
Subd. 24 & 32 property classes.
1990 1991 1992 1993 Existing commercial
based tax increment
Rate Rate Rate Rate districts to produce
First $100,000 of lower revenue
market value 3.30% 3.20% 3.10% 3.00% stream to cities.
Market value over Targeted to City of Oak Park
$100,000 5.06% 4.95% eventually be 4% Heights - 5.7%
reduction in 1991
TIF revenue -
$3,200.
1990 #10 Equalization Aid limited to 12% increase over 1990 Maximum
MS 477A.013 Equalization Aid. Also Equalization Aid subject to reduction equalization aid
Subd. 5,6,7 if LGA is not sufficient to absorb cuts based on revenue established to limit
base. Equalization Aid capped Statewide at $19,485,684. future increases.
No impact on Oak
Park Heights.
1989 #9 Tax Base Equalization Aid, is a program that Statewide initial year
MS 477A.013 targets aid to low tax base cities starting in 1990. Tax Base increase in aid
Subd. 5 Equalization Aid to be administered similar to HACA $19.5 million. No
whereby the county auditor to deduct the aid from the impact on Oak Park
amount of taxes certified by the city. Payments of Tax Base Heights.
Equalization Aid to be made on July 20 and December 15,
1990 from the Department of Revenue.
1989 SP1 Ch 1, #8 1989 levy limits for Cities repealed starting with Anticipated extension
Art. 5 Section 51 collectible 1992 levy. In 1990 the effective date was and delay of start
extended to collectible 1993 levies. (See #15). likely to result in no
impact.
Prepared by Tautges, Redpath & Co., Ltd. April 30, 1992
APPENDIX A
Page 11 of 13
CITY O F OAK PARKJMJQHLJMINNESOTA
YEAR & INITIAL YEAR
STATUTE ESTIMATED
REFERENCE STATE LEGISLATIVE ACTION IMPACT
1989 #7 Transition Aid re- termed to Homestead and Statewide HACA
MS 273.1398 Agricultural Credit Aid (HACA). The formula for reductions totaled
Subd. 2 distribution was modified from the 1988 Transition Aid $1.9 million. City of
formula for Unique Taxing Jurisdictions (UTJ) as follows: Oak Park Heights -
no HACA cut
because LGA was
Payable 1989 gross taxes of UTJ less [Payable 1989 local sufficient to absorb
tax rate X payable 1990 net tax capacity X.9767) entire cut.
As with the original Transition Aid the above HACA to be
distributed to local governments based on the percent of local
government levy to total UTJ levies. HACA was subject to
additional reductions if the level of local government aid was
insufficient to absorb the education aid shift and other cuts.
The education shift and the subsequent cuts were first taken
from LGA, then from Equalization Aid, then from HACA
and finally from Disparity Reduction Aid.
1989 #6 LGA initially increased for 1990 by approximately $30 Statewide 1990
MS 273.1398 million from the 1989 level. Funding transfer to school decrease in LGA
Subd. 2 districts subsequently approved. The aid transfer to school $44.6 million. City
districts is a method of increasing the State financial support of Oak Park Heights
for education while decreasing financial support for cities. decrease related to
The aid transfer for a city is an amount equal to 3.4% of its the transfer to
adjusted net tax capacity. Cities received increased property schools of $242,034
tax levy authority to replace the aid transfer. See #13 for
additional LGA
reduction.
1989 #5 LGA formula revised to reduce household guarantee Aid increases were
MS 477A.013 factor from 1.08 in 1989 to 1.04 in 1990 to reduce the subsequently entirely
Subd. 3 expenditure/unlimited ratio factor by 50 %. A 15% ceiling wiped out by shift
increase over prior year LGA factor was also added. to school districts.
Initial aid increase
for 1990 was $30
million Statewide.
City of Oak Park
Heights increase of
$2,033.
Prepared by Tautges, Redpath & Co., Ltd. April 30, 1992
APPENDIX A
Page 12 of 13
CITY OF OAK PARK HEIGHTS. MINNESOTA
YEAR & INITIAL YEAR
STATUTE ESTIMATED
REFERENCE STATE LEGISLATIVE ACTION FACT
1988 #4 Taxes spread to property owners based on tax Re- measurement of
MS 273.13 capacity valuations. Taxes levied divided by tax capacity valuations were
valuations equal tax capacity rates. This is a change from the designed to have no
prior system in which taxes were spread to property owners impact on aids or
based on assessed valuations. Taxes levied divided by relative valuations.
assessed valuations equaled mill rates.
1988 #3 Cities to receive Transition Aid in lieu of homestead The freeze nature of
MS 273.1398 credits. Transition aid to be calculated on each unique the legislation will
Subd. 2 taxing jurisdiction (UTJ) and then allocated to the local units result in gradual
of government within the UTJ based on the proportion of decrease of HACA
local governments gross tax levy to total taxes within the in 1991 and future
UTJ as follows for 1990: years. Actual
comparisons not
available because
Gross taxes of UTJ less (46% X 2.17% X 1989 tax capacity Homestead Credit no
rate X 1988 aggregate assessment sales ratio) X UTJ net tax longer calculated on
capacity X 103 the prior method.
The above UTJ amount to be allocated to local governments
based on percent of local governments levy to total UTJ
levies. Transition Aid to be frozen at 1990 levels.
Considering growth and inflation, this freeze is a reduction
of State funding. Transition Aid was the replacement of the
Homestead Credit Program. This Transition Aid was
subsequently re- termed as Homestead Credit and
Agricultural Aid (HACA) - see #7.
1988 #2 Targeted Cities (primarily non -metro cities) to receive 1989 increase in
MS 273.1398 disparity reduction aid. The 1989 disparity reduction Aids to Cities State -
Subd. 3 aid to be based on 1988 gross taxes and gross tax capacity wide $54.3 million,
rates. Disparity reduction aid will be frozen at 1989 levels. City of Oak Park
Metropolitan suburban cities to receive one -half of one Heights no increase
percent of this aid ($300,000 of $54.3 million). in aids.
Prepared by Tautges, Redpath & Co., Ltd. April 30, 1992
APPENDIX A
Page 13 of 13
CITY OF OAK PARK HEIGHTS, MINNESOTA
YEAR & INITIAL YEAR
STATUTE ESTIMATED
REFERENCE STATE LEGISLATIVE ACTION IMPACT
1988 #1 Local government aid (LGA) formula modified to Statewide 1989 aid
MS 477A.013 reflect a per household aid factor compared to prior year tax increased $79.3
Subd. 3 capacity and tax base increase. Expenditure/unlimited ratio million, Oak Park
factor established as component of LGA formula. Lower of Heights increase of
three -part formula to calculate initial LGA increase. $1,993.
Prepared by Tautges, Redpath & Co., Ltd. April 30, 1992