HomeMy WebLinkAboutManagement Report and Recommendations CITY OF OAK PARK HEIGHTS, MINNESOTA
MANAGEMENT REPORT
AND RECOMMENDATIONS
DECEMBER 31, 1992
CITY OF OAK PARK HEIGHTS, MINNESOTA
MANAGEMENT REPORT AND RECOMMENDATIONS
TABLE OF CONTENTS
P
Transmittal Page 1
General Fund ® Summary data and analysis
of 1992 revenue and expenditures compared to prior periods 5
Combined Financial Statements Balance Sheet Analysis) a A look at
changes in various accounts such as cash, investments and receivables 10
Individual Fund/Fund Type Analysis ® Review of significant changes in
fund balances and other matters:
• General Fund 18
• Special Revenue Fund 22
• Debt Service Funds 23
• Capital Project Funds 29
• Enterprise Fund 49
Internal Control Retort 55
Summ= of Recommendations 57
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City of Oak Park Heights, Minnesota
Management Report, Page 2
STATE FUNDING
State aids represent approximately five percent of the revenue of the City's General Fund.
The significance of this single revenue source requires the City to closely monitor state legislation
affecting aids to cities. To assist the City in this regard, we have gathered historical data on state
aids received by cities. A schedule of levy related aids is as follows:
State Totals for Cities (in thousands)
Local Homestead and Tax Base Disparity
Government Agricultural Equalization Reduction hrrease/(Decrease)
Year Aid Credit Aid Aid Aid Total Amount Percent
1989 $376,376 $106,308 $20,853 $503,537
1990 317,343 143,523 $19,513 14,201 494,580 ($8,957) (1.78)%
1991 283,640 155,690 19,476 14,500 473,306 (21,274) (4.30)%
1992 303,500 173,220 21,100 13,954 511,774 38,468 8.13%
1993 288,109 189,181 20,011 13,767 511,068 (706) (0.14)%
A chart of the above major funding categories to Cities is as follows:
State Funding
$600>000 to Cities
:::` > >'' (in $1,000's)
$500,000
$400,000 Disparity
Equalization
3 >
00 000
HA CA
C
$200,000
El L A
G
$100,000 000
0
1989 1990 1991 1992 1993
City of Oak Park Heights, Minnesota
Management Report, Page 3
The 1988 through 1993 state aids of the City of Oak Park Heights are as follows:
City of Oak Park Heights
Local Homestead and
Government Agricultural Increase/
Year Aid Credit Aid Total Amount Percent
1988 $99,521 $71,050 $170,571
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 33,284 678.8%
1993 0 55,377 55,377 17,190 45.0%
As shown above, the City anticipates receiving an increase in State aids for 1993. A graph of
State aids of the City of Oak Park Heights compared to Statewide totals is as follows:
City of Oak Park Heights State (in $1,000)
$200,000 $550,000
$175,000 ® ® $500,000
$450,000
$150,000 $400,000
HACA
$125,000 $350,000
$300,000 Local Government
$100,000 Aid
$250,000
$75,000 $200,000 Statewide Aid (in
$50,000 $150,000 $1,000)
$100,000
$25,000
$50,000
$0 $0
1988 1989 1990 1991 1992 1993
City of Oak Park Heights, Minnesota
Management Report, Page 4
FISCAL DISPARITIES
Local property taxes are levied by the City each December for collection in the subsequent year.
However, this tax levy •sl ��ot 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. The fiscal disparities formula
is governed by Minnesota Statute 473F. This statute provides a means of spreading a portion of
the taxable valuation of commerciaLl ndustrial real property to various taxing authorities within the
defined metropolitan area. The valuation "shared" is a portion of commercial/industrial property
valuation growth since 1971. Current tax revenue (by payer) was as follows for the past five
years:
1993
Payer 1989 1990 1991 1992 Budgeted
Local taxpayer $958,384 $1,198,139 $1,238,042 $1,240,460 $1,339,277
State credits 75,082 0 48,141 * 38,187 55,377
Fiscal disparities:
Contribution (64,237) (86,873) (148,448) (134,275) (150,976)
Distribution 40 45 61,819 55 58
Totals $1,009 $1,156,993 $1,199,554 $1,199,554 $1,302,310
* prior to aid cut of $43,238
Shown on a basis of percents, current tax collections (by payer) were as follows for the past
four years including 1993 budgeted.
1993
Payer 1989 1990 1991 1992 BukQ d
Local taxpayer 95.0% 103.6% 103.2% 103.4% 102.8%
State homestead credits 7.4% 0.0% 4.0% 3.2% 4.3%
Fiscal disparities:
Contribution (6.4 %) (7.6%) (12.4 %) (11.2 %) (11.6 %)
Distribution 4.0% 4.0% 5.2% 4.6% 4.5%
Totals 100.0% 100.0% 100.0% 100.0% 100.0%
Local property taxpayers (i.e., those whose property is 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 benefits.
City of Oak Park Heights, Minnesota
Management Report, Page 5
GENERALEUND
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 1993 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 18% $669,827 99%
1983* 149,391 20% 482,084 64% 125,030 17% 756,505 101%
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 198,888 16% 868,420 68% 211,570 17% 1,278,878 101%
1990 25,627 2% 1,142,770 79% 280,348 19% 1,448,745 100%
1991 36,262 2% 1,057,578 72% 366,575 25% 1,460,415 100%
1992 69,172 4% 1,121,894 73% 349,717 23% 1,543,717 99%
1993 ** 85,356 5% 1,278,310 76% 316,804 19% 1,680,470 100%
* includes Federal Revenue Sharing
* * Budgeted
City of Oak Park Heights, Minnesota
Management Report, Page 6
A graph of State aids, property taxes, and other revenue for the City is as follows:
General and Special Revenue Funds
$1,400,000 - $1,400,000
$1,200,000 - $1,200,000
$1,000,000 - $1,000,000
$800,000 - $800,000
$600,000 - -$600,000
$400,000 - $400,000
-
$200,000 $200,000
0,
$0 .$0
1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 budgeted
State Aids Other Revenue - Property Taxes
The preceding data indicates that the City is required to rely primarily on increased property
taxes to fund the increased levels and costs of providing City services.
City of Oak Park Heights, Minnesota
Management Report, Page 7
State aids have consisted of the following for the past five years (with 1993 budget):
1993
Description 1988 1989 1990 1991 1992 B
Local government aid $99,521 $101,527 $0 $0 $0 $0
Homestead credits 67,760 72,498 578 4,611 36,740 54,356
Police aid 23,856 24,863 25,049 31,651 32,432 31,000
Other 2,935 0 0 0 0 0
Totals $194,072 $198 $25,627 $36,262 $69,172 $85 356
Change $10,878 $4,816 $173,261) $10,635 $32,910 $16184
% Change 6% 2 8 7% 41% 91% 23%
A graph of State aids for the past seven years (with the 1993 budget) is presented below:
$200,000
180 000 y >.- ::: \ >;�' }., •x }ri >: { '•:
..� ::<< State Aids
>
$160,000
$140,000
$120,000
$100,000
$80,000
$60,000
?<<;:<::c : >:4:w = > =:
$40,000 ..,....... } }
$20,000
$0 •.:..�- :,\y��� �� :{;};:;:..-
1986 1987 1988 1989 1990 1991 1992 1993
Budget
Local Gov't Aid ® Homestead Credit Other State Aids
City of Oak Park Heights, Minnesota
Management Report, Page 8
The following schedules and graphs reflect the revenue of the General Fund for the past two
years including 1993 budget. Additional detail of the revenue is presented in Statement 7 of the
1992 Annual Financial Report.
1991 1992 1993 Bud et
Description Amount Percent Amount Percent Amount Percent
General property taxes $1,057,578 72.4% $1,121,894 72.7% $1,278,310 73.7%
Intergovernmental:
State 36,262 2.5% 69,172 4.5% 85,356 4.9%
County and other 15,198 1.0% 18,022 1.2% 14,740 0.8%
Licenses and permits 122,804 8.4% 93,908 6.1% 108,820 6.3%
Charges for services 123,969 8.5% 146,702 9.5% 167,000 9.6%
Interest on investments 51,983 3.6% 33,728 2.2% 35,000 2.0%
All other 52 3.6% 60 3.8% 45 2.7%
Totals $1,460,415 100.0% $1,543,717 100.0% $1,734,826 100.0%
1993 Budget
Property Taxes
73.7%
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Licenses and Permits 6.3%
All Other Interest on Charges for Services
2.7% Investments 9.6%
2.0%
City of Oak Park Heights, Minnesota
Management Report, Page 9
Expenditures (by major classification) for the past two years plus the 1993 budget, are as
follows:
1991 1992 1993 Budg
Descri tion Amount Percent Amount Percent Amount Percent
Current expenditures:
General government $318,948 22.4% $335,835 22.3% $393,430 23.4%
Public safety 563,736 39.5% 605,414 40.2% 716,135 42.6%
Streets and highways 107,828 7.6% 83,638 5.5% 85,875 5.1%
Sanitation 262,838 18.4% 267,557 17.8% 303,000 18.0%
Recreation 139,726 9.8% 156,321 10.4% 163,930 9.8%
Capital outlay 32 2.3% 58 31 3.9% 18,100 1.1%
Totals $1,425,645 100.0% _ 1,506,996 100.1% $1,680,470 100.0%
A graph of the above expenditures is presented below:
1993 Budget
Recreation 9.8% Capital Outlay 1.1% General Government
w. v 23.4%
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. \: ?:;:;+`S <;:ti ` : w�Y•x,' • : i h• `'L ', L ' }:;;�`.; °V . sky ;.,.•k '} ;. \: :,.,.
Streets & HighwaYst- .iL�ti: • ::< ; }4iticti "'. }� }• ,,,,
?'- :•.. a.,;::{ L ;? { ; . `} ; ,' + :`y':�•: • `C;:;:.�v,S?;:; mom.
Public Safety 42.6%
City of Oak Park Heights, Minnesota
Management Report, Page 10
COMBINED FINANCIAL STAIEhF TS
The Combined Financial Statements of the City are presented in Statements 1 through 5 of the
1992 Annual Financial Report. The following comments relate to these financial statements of the
City.
'ash and Investments
December 31, Increase
Descri lion 1991 1992 (Ouse)
Checking account ($11,303) ($18,994) ($7,691)
Investments 4,201,215 4,084,106 (117,109)
Petty cash 50 50 0
Totals $4 $4 065162 ($124,800)
The December 31, 1991 and 1992 checking account overdrafts are hQqkDy&rdmft&Dn1y 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 $188,947 of interest on investments during 1992 compared
to $225,539 in 1991. This decrease is primarily the result of decreased rates available during 1992
as shown below. Investments at December 31, 1991 and 1992 were as follows:
December 31,
1991 1992
Investment Description Yield Balance Yield Balance
Money Market 4.20% $310,444 2.89% $238,824
AIM Government Fund Various 250,771 Various 1,235,282
Certificate of Deposit 4.50% 175,000 2.90% 500,000
Certificate of Deposit 5.00% 368,000 3.00% 630,000
Certificate of Deposit 5.10% 2,002,000 3.05% 665,000
Certificate of Deposit 5.65% 265,000 3.13% 615,000
Certificate of Deposit 5.80% 535,000 3.25% 200,000
Certificate of Deposit 6.25% 295,000
Totals $4,201 $4,084,106
City of Oak Park Heights, Minnesota
Management Report, Page 11
Security for Denosits/Depositories
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, 1992.
Due From Other Governmental Units
December 31, Increase
Description 1991 1992 (Decrease)
Fines $2,152 $3,541 $1,389
Gravel tax 317 309 (8)
MWCC - final cost allocation 2,233 3,222 989
City of Bayport- feasability study 1,000 (1
MN DOT (Norell Ave.) 400,000 400 000
Totals 5,702 $407 1,370
All of the above amounts are currently collectible.
Due From Developers
December 31, Increase
Description 1991 1992 (Decrease)
Developers' Deposit Fund:
Cost reimbursement $12 $2 ($9,481)
Totals $12,113 $2 $9, 481
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 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 12
Taxes Receivable - Delinquent
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 rate on property taxes
remains strong as illustrated below.
1989 1990 1991 1992
Delinquent taxes - January 1 $21,293 $30,833 $33,458 $35,036
Current levy 1 1,205,556 1 1
Total collectible 1,030,541 1,236,389 1 1234,590
Receipts:
Current 983,758 1,177,795 1,134,365 1,182,272
Delinquent 1 13 15 8
Total receipts 985 1 1 1,191,087
Adjustments (14,052) (12 (48 (4,4861
Delinquent taxes - December 31 $30,833 $33,458 $35,036 $39
Current collection as a percent of current levy 97% 98% 95 %/98 99%
Total collections as a percent of current levy 98% 99% 96 %/99% 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 include $43,238 related to the State HACA cut.
The City's HACA was cut subsequent to the levy certification. Had this aid been received, the
1991 total collection rate would have been 99 %.
As shown above, tax collection rates have averaged 99% over the past four years representing
an excellent collection rate for the City. This financial indicator (i.e., property tax collection rate) is
one of the major criteria used by the City's bond rating agency.
City of Oak Park Heights, Minnesota
Management Report, Page 13
,$pedal Assessments Receivable
Special assessments receivable consisted of the following types and amounts:
December 31, Increase
Description 1991 1992 (Decrease)
Delinquent $57,391 $50,522 ($6,869)
Due from County 11,431 2,523 (8,908)
Deferred 183,451 245,586 62,135
Special Deferred 14 14 0
Totals $267 073 $313,431 $46,358
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) 22g a )
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 %n)
1988 12,408 1,627 15%
1989 101,058 88,650 714%
1990 71,842 (29,216) (29 %)
1991 57,391 (14,451) (20 %)
1992 50,522 (6,869) (12 %)
City of Oak Park Heights, Minnesota
Management Report, Page 14
The change in delinquent assessments receivable over the past four years was as follows:
1989 1990 1991 1992
Delinquent balance - January 1 $12,408 $101,058 $71,842 $57,391
Add:
Current installments 210,918 136,458 74 119
Amount collectible 223,326 237 146 177
Less collections:
Current 113,895 104,145 45,782 101,283
Delinquent 7 61,407 42 24
Total collections 121,079 165,552 88,747 126
Adjustments (1,189) 122 50 (633)
Delinquent balance - December 31 $101,058 $71,842 $57,391 $50
Current collections as a percent of current levy 54% 76% 62% 85%
Total collections as a percent of current levy 57% 121% 120% 105%
City of Oak Park Heights, Minnesota
Management Report, Page 15
The preceding 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 mainly attributable to the Swager's 9th Addition
improvement project which was financed by the Improvement Bonds of 1987 and Osgood
Partners, Inc. for their Rapid Oil Project. A schedule of the 1992 assessment activity for these
projects is as follows:
1992
Bonds of Osgood All Other
1987 Partners Funds Total
Delinquent balance - January 1, 1992 $39,289 $14,939 $3,163 $57,391
Add.
Current installments 17,893 13,508 89,316 120,717
Amount collectible 57 28,447 92 178
Less collections:
Current 13,588 0 88,629 102,217
Delinquent 24,497 0 364 24,861
Total collections 38,085 0 88,993 127
Adjustments 0 0 (508) (508)
Delinquent balance - December 31, 1992 $19 $28,447 $2,978 $50,522
Current collections as a percent of current levy 76% 0% 99% 85%
Total collections as a percent of current levy 213% 0% 100% 105%
As shown above, the poor special assessment current collection rate for past years was entirely
the result of two projects. Delinquent assessments on these projects account for 94% of all special
assessment delinquencies at December 31, 1991 and 1992. This potential problem situation has
been resolved by actions of the City over the past two years.
During the course of this audit, the City Administrator inquired of Washington County as to the
current status of the above delinquent special assessments. We are delighted to report that the
above delinquencies for Swager's 9th Addition and the Rapid Oil Project were paid in full in 1993.
Accordingly, remaining unpaid special assessments are now less than $3,000. We congratulate the
City for its successful efforts with regard to these delinquencies.
City of Oak Park Heights, Minnesota
Management Report, Page 16
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.
Fixed Assets
During 1991, the City completed an inventory of all City assets and implemented computerized
fixed asset inventory records. This action allowed 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 by 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 Payable
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 $50,248 and $42,776 at December 31, 1992
and 1991, respectively. Also included in the accrual for compensated absences is vacation pay
benefits for all City employees of $7,119 at December 31, 1992 and $4,907 at December 31,
1991.
City of Oak Park Heights, Minnesota
Management Report, Page 17
Bonds PaLable
Bond Issues
Special Special Revenue
Assessments District Bonds Totals
Balance - January 1, 1992 $752,000 $150,000 $1,310,000 $2,212,000
Bond Issued 0 150,000 0 150,000
Principal payments (279,000) (150,000) (20,000) (449,000)
Balance - December 31, 1992 $473,000 $150 $1,290,000 $1,913,000
Retirement Schedule:
1993 $348,000 $15,000 $70,000 $433,000
1994 125,000 15,000 75,000 215,000
1995 15,000 55,000 70,000
1996 15,000 60,000 75,000
1997 -2003 90,000 1,030,000 1,120,000
Total $473,000 $150 $1,290 000 $1,913,000
Scheduled debt payments total $433,000 for 1993 representing 23% of outstanding debt at
December 31, 1992. Detail of outstanding bond issues is contained in Exhibits 2 and 3 of the 1992
Annual Financial Report.
Fund Eauity
December 31, Increase
Fund Group 1991 1992 (Decrease)
Fund Balance:
General $1,001,051 $1,013,422 $12,371
Special Revenue 2,288 5,127 2,839
Debt Service 801,051 917,581 116,530
Capital Projects 1,266 1 221,979
Totals 3,070,660 3,424,379 353,719
Retained earnings:
Enterprise 1,167,816 1,190,251 22,435
Totals $4,238,476 $4,614,630 $376,154
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 18
INDIVIDUAL FIINDIaM TYPE ANALYSIS
General Fund
The financial statements for the General Fund are presented in Statements 6 and 7 of the City's
1992 Annual Financial Report. The fund balance of the General Fund was $1,013,422 at
December 31, 1992 representing a $12,371 increase during 1992 as follows:
Budgeted Decrease in Fund Balance ($2,473)
Actual Revenue Greater Than
(Less Than) Budgeted Revenue:
• General property taxes $4,582
• Intergovernmental 8,054
• Licenses and permits 3,503
• Fines and forfeits (443)
• Interest on investments (16,272)
• Charges for current services (98)
• Other 18,459 17,785
Budgeted Expenditures Less Than
Actual Expenditures:
• General government 13,170
• Public safety 16,450
• Streets and highways 7,182
• Sanitation 1,744
• Recreation 4,533
• Contingency 3,980 47,059
Transfer to Capital Improvements Fund (50,000)
Net increase in fund balance for 1992 $12,371
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,
City of Oak Park Heights, Minnesota
Management Report, Page 19
The fund balance of the General Fund has increased over the past several years. The schedule
below reflects the fund balances for the past ten years:
Year Ended Fund Merease
December 31, Balance (Decrease)
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)
1992 1,013,422 12,371
As shown on the above table, the City has significantly improved the fund balance of the
General Fund over the past ten years. A table of the purposes and benefits of General Fund
Reserve balances is as follows:
Purpose of Reserves benefits of Reserves
Cat flow tming differeno
Expenditures are incurred somewhat evenly throughout the °Provides favorable bond rating indicator.
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.
TnterPOVe m .n at rev n > > a ke ° 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.
Qpital outlay replacement ° Allows time for City to study effects of revenue
Internal escrow for purchases which may exceed amounts cuts before 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 unanticip edt xnenditurec certain capital outlay.
Examples include natural disasters, lawsuits, comparable
worth implementation and premature breakdown provides the City eater of vital equipment. y g options to deal with p
unexpected events.
S vial City-Council proj
Preliminary studies, interfund loans and minor projects
are examples of reserve uses.
City of Oak Park Heights, Minnesota
Management Report, Page 20
The City's minimum cash flow reserve requirement is measurable. For the City of Oak Park
Heights, the minimum required surplus is $639,000 computed as follows:
1993 Budgeted Levy (includes HACA) $1,278,310
1993 Anticipated Local Government Aid 0
TOW $1,278,310
Minimum Required Cash Flow Reserve
(one-half of total - rounded) $639,000
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 15% of the General Fund operating budget subject to availability of
such amounts.
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.
City of Oak Park Heights, Minnesota
Management Report, Page 21
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 and 1992, the General Fund balance was
designated as follows:
December 31,
1991 1992
Designated for
Cash flow $577,100 $639,000
Contingent employee benefits 117,800 142,000
General contingency 228,600 221,950
Capital Improvements 2,500 10472
Subtotal 926,000 1,013,422
Undesignated 75,051 0
Total fund balance $1,001,051 $1,013,422
The City's cash flow reserve is computed as stated previously. This reserve increased by
$61,900 at December 31, 1992 based upon the increased General Fund Operating Budget for
1993.
The Contingent Employee Benefits reserve is computed based upon accrued, but unpaid,
employee benefits as follows:
December 31,
Employee Benefit 1991 1992
Vacation heave $4,900 $7,100
Sick/Severance Leave 112 135,100
Total $117,800 $142,200
City of Oak Park Heights, Minnesota
Management Report, Page 22
The General Contingency reserve is computed based upon 15% of the ensuing year's General
Fund operating budget, subject to availability of such amounts as follows:
December 31,
Description 1991 1992
Ensuing Year`s Budget $1,524,000 $1,680,000
Reserve Amount @ 15% $228,600 $252,000
Less: Unavailable Adjustment N/A 30,05)
Reserve Amount $228,600 $221,950
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). We commend the City for these actions and encourage the City to
continue to monitor its reserve balances. An adequate reserve structure has enabled 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 specific purposes. The City
maintained one Special Revenue Fund during 1992.
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 $5,127 at December 31, 1992.
City of Oak Park Heights, Minnesota
Management Report, Page 23
DEBT SERVICE FUNDS
The combining financial statements for the Debt Service Funds are presented in Statements 10
and 11 of the 1992 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 six Debt Service Funds during 1992 as follows:
Fund Balance
December 31, Increase
Fund 1991 1992 (Decrease)
Storm Sewer Bonds of 1982/Refunding Bonds of 1992 $10,105 $12,453 $2,348
Improvement Bonds of 1982 46,672 43,365 (3,307)
G.O. Improvement Bonds of 1983 28,512 20,527 (7,985)
G.O. Improvement Bonds of 1987 528,741 377,763 (150,978)
G.O. Improvement Bonds of 1990 141,223 200,393 59,170
G.O. Water and Sewer Bonds of 1991 45,798 263 217,282
Totals 801,051 $917,581 $116,530
Debt Service Funds may have one or a combination of the following revenue sources pledged
to retire debt as follows:
®
Property Faxes - 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.
® Tax Increment - pledged exclusively for tax increment/economic development districts.
® Capitalized Interest Eortion of Bond eeds - 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.
® Svecial Assessment s - 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 24
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, 1992 Final
Fund Defened Deferred Remaining Maturity
Fund Descri ption Balance Revenues Taxes Total Debt Service Date
General Debt:
Storm Sewer Bonds of 1982
/Refunding Bonds of 1992 $12,453 $887 $198,000 $211,340 $189,975 12/1/00
Water and Sewer Bonds of 1991 263,080 124 387 1,972,713 12/1/06
Sub -total 275 125 198 598,591 2
Special Assessment Debt:
Improvement Bonds of 1982 43,365 17,502 0 60,867 22,500 8/1/93
Improvement Bonds of 1983 20,527 1,955 0 22,482 8,360 2/1 /93
Improvement Bonds of 1987 377,763 29,336 0 407,099 207,090 12/1/93
Improvement Bonds of 1990 200,393 44,715 500 245,608 _ 274,625 12/1/94
Sub -total 642 93,508 500 736,056 512,575
Totals -All Debt Service Funds $917,581 $218,566 $198,500 $1,334,647 $2 675,263
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 25
Storm Sewer Bonds Q 1982&efunding Bonds of 1992
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 1640. A nE°ection of the
final fund position based on scheduled levies and debt requirements is as follows:
Fund Balance - December 31, 1992 $12,453
Additions:
Future Scheduled tax levies @ 100% __198
Total 210,453
Deductions:
Debt Requirements:
Principal 150,000
Interest 39
Total 189,970
Projected Fund Balance $20,483
Normal Projected Fund Balance -
5% of debt requirements _ $9,500
The above projection indicates that this fund will have adequate assets to meet bonded debt
requirements over the scheduled term of this bond issue.
The Storm Sewer Bonds of 1982 were refinanced by the Refunding Bonds of 1992. By such
refinancing, the City was able to accomplish the following:
1. Reduce interest costs by $53,500 over the remaining term of the refunding bond issue.
2. Maintain annual debt payments (and the related annual tax levy) at approximately $25,000
per year.
3. Shorten the final maturity date by three years.
4. Reduce future debt service tax levies by eliminating the 2001, 2002 and 2003 tax levies for
this bond issue.
City of Oak Park Heights, Minnesota
Management Report, Page 26
Water and Sewer Bonds of 1921
These bonds were issued in 1991 to provide financing for Phase I of the City's Annexation
Area Extended (A.A.E.) 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.
During 1992, the City transferred $135,500 from the A.A.E. Connection Charge Fund to this
debt service fund for this bond issue. This cash transfer (along with special assessments and other
assets committed to these bonds) will be sufficient to meet the 1993 and 1994 scheduled debt
payments.
Similar projected cash transfers for December 31, 1993 (Sanitary Sewer $6,500 and Water
Works $50,000) are designed to meet the 1995 scheduled debt payments. The City should record
these cash transfers at December 31, 1993. City Council approval is required to effect these cash
transfers.
Future (1994 through 2004) projected cash transfers are as follows:
Sanitary Water
Year Sewer Works Total
1994 $6,500 $50,000 $56,500
1995 55,000 50,000 105,000
1996 70,000 50,000 120,000
1997 35,000 75,000 110,000
1998 0 120,000 120,000
1999 0 125,000 125,000
2000 0 125,000 125,000
2001 0 135,000 135,000
2002 0 150,000 150,000
2003 0 150,000 150,000
2004 0 160,000 160,000
Totals $166,500 $1,190,000 $1,356,500
City of Oak Park Heights, Minnesota
Management Report, Page 27
Special ASGessment Debt Service Fund
The Improvement Bonds of 1982, 1983 and 1987 are in a strong financial position. The cash
balance in each of these debt service accounts exceeds the bonds outstanding. The following
schedule summarizes the projected financial positions of these debt service accounts after final debt
service payments in 1993:
Improvement Bonds of
Description 1982 1983 1987
Fund Balance - December 31, 1992 $43,365 $20,527 $377,763
1993 Projected
1. Special Assessments:
Current 1,792 1,192 10,328
Delinquent 19,097
Penalties and Interest 6,000
2. Investment Earnings @ 4% 1,400 500 15,000
3. Debt Payments (22,250) (8360) (207,090)
4. Paying Agent Fees 1,000,E (1 (1,000)
Projected Balance - December 31, 1993 $23,307 $12,859 $220,098
The above projected balances at December 31, 1993 are the result of the following;
_ Improvements bonds of:
Description 1982 1983 1987
1. Statutory (5 %) Reserve $14,400 $6,100 $83,300
2. Excess Investment Interest Earnings 8,900 6,800 85,900
3. Special/Additional Property Tax Levies 45,800
4. Other 5
Totals $23,300 $12,900 $220100
All of the above bond issues are scheduled to mature in 1993, and substantially all special
assessments should be collected at that date. Accordingly, all of the above bond accounts may be
closed and the remaining balances may be transferred for other City Council designated purposes.
City of Oak Park Heights, Minnesota
Management Report, Page 28
We recommend that each of the above debt service accounts be closed at December 31, 1993
and that the remaining assets be transferred to the Closed Bond Fund in accordance with
established City policy. City Council action is required to effect such final closing and related
transfers of cash and other remaining assets.
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. The following schedule summarizes past and projected financial activity for this bond
issue:
Actual Projected Projected
1990-1992 1993-1994 Totals
FINANCIAL RESOURCES:
Bond Proceeds $39,694 $39,694
Special Assessments:
Principal 164,900 $61,425 226,325
Interest 6,900 6,900
Cash Transfers - A.A.E. Connection Charges 74,438 74,438
Investment Earnings 14 880 11800 26
Total Financial Resources $293,912 $80,125 374,037
DEBT SERVICE PAYMENTS:
Bond Principal 50,000 250,000 300,000
Bond Interest 42,412 24,625 67,037
Paying Agent Fee 1,108 2,000 3,108
Total Debt Service $93,520 $276,625 370,145
PROJECTED BALANCE - December 31, 1994 $3,892
The above schedule indicates that this fund will have adequate assets to meet bonded debt
requirements over the scheduled term of this bond issue.
City of Oak Park Heights, Minnesota
Management Report, Page 29
CAPITAL PROJECT FUNDS
The financial statements for the Capital Project Funds are presented in Statements 12 and 13 of
the City's 1992 Annual Financial Report, The fund balance (deficits) of the Capital Project Funds
were as follows at December 31, 1991 and 1992:
December 31, Increase
Fund 1991 1992 (Decrease)
Closed Bond Fund $872,891 $351,249 ($521,642)
Capital Improvements Fund 338,590 369,148 30,558
Park Lei Recreation Development 16,009 51,462 35,453
River Hills (Heritage) Utility 0 0 0
St. Croix Mall (TIF) (117,926) (52,322) 65,604
Valley Point 2nd Addition 3,514 32,174 28,660
AAE - 1991 Utility Improvements 147,666 17,068 (130,598)
AAE - Wal -Mart Addition 0 20,604 20,604
AAE - High School Improvement 0 113,464 113,464
AAE - Norell Ave/MN DOT Improvement 0 200,000 200,000
AAE - 58th Street Improvement 0 240,786 240,786
AAE - Sanitary Sewer Connection 1,420 8,284 6,864
AAE - Water Connection 2,313 129,966 127,653
AAE - Storm Sewer Connection 1 6 4
Totals $1,266,270 $1 $221,979
City of Oak Park Heights, Minnesota
Management Report, Page 30
Closed 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 Total Projected
Description Years 1992 12/31/92 1993
FINANCING SOURCES:
Transfers In:
1960's Bond Issues $345,901 $345,901
1970's Bond Issues 211,894 211,894
1980's Bond Issues 1,764 1,764 $256,200
Construction Funds 24,288 24,288
General Property Taxes 1,833 1,833
Special Assessments 154,605 $89,537 244,142 60,000
Connection Charges - Old 142,613 2,400 145,013
Escrow Interest Earnings 3,070 137 3,207
Investment Interest 365824 38 906 404 15,000
TOTAL FINANCING SOURCES $1,251 130,980 1,382,772 331,200
FINANCING USES:
Transfers Out/Expenditures
General Fund $22,100 22,100
Capital Improvement Fund 200,000 200,000
Professional Services 22,902 $27,622 50,524
Construction Funds:
Other City Projects 133,899 30,000 163,899
AAE - Storm Sewer 0 360,000 360,000 (35,000)
AAE - Streets 0 235,000 235,000 (35,000)
TOTAL FINANCING USES $3 78,901 $652,622 1,031,523 (70,000)
FUND BALANCE - December 31, 1992 $351249
PROJECTED FUND BALANCE - December 31, 1993 $752,449
City of Oak Park Heights, Minnesota
Management Report, Page 31
The purpose of the Closed Bond Fund is to receive residual balances of closed special
assessment bonds. Amounts on hand at December 31, 1992 are available for use at the Council's
discretion. City policy regarding the allowable use of such monies includes 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.
The fund balance of the Closed Bond Fund was $351,200 at December 31, 1992 representing
a $521,600 decrease during 1992. This decrease was the result of cash transfers to finance a
portion of each of the following construction projects:
Project Amount
Valley Point - 2nd Addition
- Trunk Storm Sewer $30,000
School District
- Trunk Storm Sewer 360,000
Wal -Mart - Street 35,000
Norell Avenue/MN DOT
- Highway 36 Construction 200
Total $625,000
City of Oak Park Heights, Minnesota
Management Report, Page 32
Financial projections indicate that the fund balance of the Closed Pond Fund should increase
by $400,000 during 1993 as shown previously and as detailed below:
Description Amount
1. Transfers in from debt service accounts
after final bond maturities
Improvement Bond of 1982 $23,300
Improvement Bond of 1983 12,800
Improvement Bond of 1987 220,100
2. Special assessments - projects previously
financed by fully matured bond issues and/or
financed directly by the Closed Bond Fund 60,000
3. Projected interest @ 4% 15,000
4. Reduction of 1992 transfers out used to
finance A.A.E. storm sewer and street projects 70
Total $42L200
City of Oak Park Heights, Minnesota
Management Report, Page 33
vita provements Fund
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
Building Land Street Unallocated/
Expansion Sealcoat Recreation Acquisition Other Totals
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 100,000 80,000 127,000 $150,000 $104,500 561,500
1991 through 1992 150,000 150,000
Transfer from Closed Bond Fund 200,000 200,000
Subtotals 370,000 220,000 150,575 $0 150,000 254,500 1,145,075
Reallocations:
1986 through 1990 191,675 47,000 (150,000) (88,675) 0
1991 through 1992 K9,054 Q5,000 20,000 15,000 100,000 __ &,9461 0
Total transfers 552,621 232,000 170,575 15,000 100,000 74,879 1,145,075
Interest Earnings
1978 through 1980 14,746 14,746
1981 through 1985 12,625 2,621 6,435 21,681
1986 through 1990 4,016 91,791 95,807
1991 through 1992 29,692 29,692
Sale of Property 9,414
9,414
Donations/Other 26,436 1 28 298
Total Sources 593,422 232,000 199,632 15,000 100,000 204,659 1,344,713
Expenditures and Other Uses:
1978 through 1980 93,033 93,033
1981 through 1985 13,752 95,684 21,946 131,382
1986 through 1990 481,498 85,367 124,134 2,638 693,637
1991 through 1992 5,139 1,579 21,166 3,979 31,863
Transfers out:
General Fund 25.650 25.650
Total Uses 593.422 182.630 167.246 0 0 32.267 Q$369,148
Fund Balance - December 31, 1992 $0 $49,370 $32,386 $15,000 $100,000 $172,392
The Municipal Building Expansion project was completed in 1991 and the remaining balance
($9,054) was transferred back to the Unallocated Account within this fund. The Seacoat and
Recreation projects are ongoing projects. The remaining balances at December 31, 1992 are
Council - designated for these speck programs.
City of Oak Park Heights, Minnesota
Management Report, Page 34
The Land Acquisition and Street Reconstruction projects are future City projects. The City
Council ordered a feasibility study for street reconstruction in 1993. This project will be a multi-
phase project and a multi - million dollar project. Possible sources of financing for this project
include the following:
1. Special Assessment Bond Financing:
A. Minimum 20% assessment rate
B. Maximum 80% debt service tax levies or other sources
2. Uncommitted T.I.F. Taxes (City Portion):
Year Amount Accumulative
1994 $67,500 $67,500
1995 63,100 130,600
1996 58,300 188,900
1997 53,500 242,200
1998 48,000 290,200
3. The City portion of "lost T.I.F." in the amount of $10,472 received in 1992; $15,037 to be
received in 1993; and, approximately $10,000 to $15,000 per year to be received in the
years 1994 through 1998.
4. Existing or future reserved balances:
A. The balance ($100,000) of the Street Reconstruction Account within this Fund.
B. The balance (172,392) of the Unallocated Account within this fund.
A feasibility study for the City's Street Reconstruction Program was approved by the City
Council in 1993. This study is expected to be completed in July, 1993. At such time, an overall
financing plan for this program will be developed.
City of Oak Park Heights, Minnesota
Management Report, Page 35
Park and &matim Development
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 $51,462 at December 31, 1992, as follows:
Prior
Years 1992 Total
Financing Resources:
Park fees $13,950 $13,950
Donations and contributions 4,112 $36,750 40,862
Interest on investments 647 1,931 2,578
Total financing sources $4,759 $38,681 57,390
Financing Uses:
Professional services $2,700 $3,228 5,928
Fund balance - December 31, 1992 $51,462
River Hills ffl-k-ritage) 1 st Addition
This project was started in 1989. Financing is provided by the developer under a letter of
credit arrangement. The following schedule summarizes the past and projected financial activity
for this project:
Actual Projected Projected
1989-1992 1993 Totals
FINANCIAL RESOURCES:
Developer Charges $261,925 $261,925
Cash Transfers: 0
A.A.E. Connection Charges 0
Storm Sewer 17,211 17,211
Investment Earnings 437 437
TOTAL FINANCIAL RESOURCES $279,573 $0 279,573
CONSTRUCTION COSTS:
Contractors $202,829 202,829
Engineering, Testing, etc. 55,518 $4,038 59,556
Legal and Fiscal 3,836 2,000 5,836
Other Costs 179 179
TOTAL CONSTRUCTION COSTS $262,362 $6,038 268,400
PROJECTED FUND BALANCE - December 31, 1993 $11,173
City of Oak Park Heights, Minnesota
Management Report, Page 36
This project is 100% developer financed exce, �.li fa trunk storm sewer costs totaling $17,211
which have been financed by a cash transfer of A.A.E. - Storm Sewer Connection Charges. Any
balance remaining at the Completion of this project should be transferred to the River Hills
(Heritage) - 2nd Addition project which was started in 1993.
St. Croix Mall (!IF),
This fund was established in 1989 to account for the St. Croix Mall'T'IF 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 is now 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 following schedule summarizes the past and projected financial activity for this project:
Actual Projected Projected
1990-1992 1993 Totals
FINANCIAL RESOURCES:
T.I.F. Taxes m City Portion $97,756 $71 $169
TOTAL FINANCIAL RESOURCES $97,756 $71,780 169,536
CONSTRUCTION COSTS:
Contractors $114,705 114,705
Engineering, Testing, etc. 25,394 25,394
Legal and Fiscal 9,780 $2,000 11,780
Other Costs 199 199
TOTAL CONSTRUCTION COSTS $150,078 $2,000 152,078
PROJECTED FUND BALANCE - December 31, 1993 $17,458
City of Oak Park Heights, Minnesota
Management Report, Page 37
This project was substantially completed at December 31, 1992 and should be fully financed by
December 31, 1993. City T.I.F. taxes committed to this project are as follows:
Year Amount
1991 $21,414
1992 76,342
1993 71,780
Total $169,536
Any balance remaining after completion of this project will be re- allocated to other T.I.F.
projects at the discretion of the City Council. See comments relating to street reconstruction.
alley Point 2nd Addition
Financing for the Valley Point 2nd Addition Project was provided by the $300,000 O.O.
Improvement Bonds of 1990. The following schedule summarizes the past and projected financial
activity for this project:
Actual Projected Projected
FINANCIAL RESOURCES: 1990-1992 1993 Totals
Bond Proceeds - 1990 S.A. Bonds $256,057 $256,057
Cash Transfers:
Closed Bond Fund 30,000 30,000
Investment Earnings 4,042 4,042
TOTAL FINANCIAL RESOURCES $290,099 $0 290,099
CONSTRUCTION COSTS:
Contractors $209,077 $26,268 235,345
Engineering, Testing, etc. 42,217 3,000 45,217
Legal and Fiscal 4,889 2,000 6,889
Land/Right of Way 1,550 1,550
Other Costs 192 192
TOTAL CONSTRUCTION COSTS $257,925 $31,268 289,193
PROJECTED FUND BALANCE - December 31,1993 $906
City of Oak Park Heights, Minnesota
Management Report, Page 38
This project was substantially complete at December 31, 1992 and should be fully completed in
1993. The cash transfer from the Closed Bond Fund was necessary to finance a storm sewer
change order unrelated to the original developer's project. This fund should be closed at December
31, 1993 and any remaining balance /(deficit) should be transferred to /from the Closed Bond Fund
at that date. Council action is required to effect this fund closing and related cash transfer.
Annexation Area Extended (A.A.EJ
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 progressed
rapidly during 1992. All of the following projects are part of the City's A.A.E. Program.
City of Oak Park Heights, Minnesota
Management Report, Page 39
A.A.E. - 1991 Utility Improvements
This fund was established in 1991 to account for the City's fast A.A.E. construction project
which includes the City's second water tower and sanitary sewer and water facilities along
Highway 36. The following schedule summarizes the past and projected financial activity for this
project:
Actual Projected Projected
1991-1992 1993 Totals
FINANCIAL RESOURCES:
Bond Proceeds -1991 Revenue Bonds $1,149,805 $1,149,805
Cash Transfers:
Water and sewer operations 75,000 2,500 77,500
Investment Earnings 28 28,815
TOTAL FINANCIAL RESOURCES $1,253,620 $2,500 1,256,120
CONSTRUCTION COSTS:
Contractors $970,615 $5,426 976,041
Engineering, Testing, etc. 134,097 8,784 142,881
Legal and Fiscal 36,272 5,000 41,272
Land/Rightof Way 93,189 93,189
Other Costs 2 20 2,399
TOTAL CONSTRUCTION COSTS $1,236,552 $19 1,255,782
PROJECTED FUND BALANCE - December 31, 1993 $338
This project was substantially complete at December 31, 1992 and should be fully completed in
1993. After completion (or December 31, 1993) this fund should be closed and any remaining
balance /(deficit) should be transferred to /from the City's Water and Sewer Operating Fund. City
Council action is required to effect this fund closing and related cash transfer.
City of Oak Park Heights, Minnesota
Management Report, Page 40
A.A.E. - Wal -Mart Addition
This fund was established in 1992 to account for the Wal -Mart addition construction project
which includes A.A.E. - Sanitary Sewer, Water Works and Storm Sewer Trunk facilities plus
lateral facilities and streets. The following schedule summarizes the past and projected financial
activity for this project:
Actual Projected Projected
1992 1993 Totals
FINANCIAL RESOURCES:
Developer Charges:
Wal -Mart $171,900 $171,900
A.A.E. Connection Charges:
Storm Sewer (Wal -Mart) 45,000 45,000
Closed Bond Fund 35,000 35,000
Investment Earnings 3,899 3,899
TOTAL FINANCIAL RESOURCES $255,799 $0 255,799
CONSTRUCTION COSTS:
Contractors $176,463 $11,352 187,815
Engineering, Testing, etc. 52,655 1,703 54,358
Legal and Fiscal 3,602 5,000 8,602
Land/Right of Way 1,840 1,840
Other Costs 636 636
TOTAL CONSTRUCTION COSTS $235,196 $18,055 253,251
PROJECTED FUND BALANCE - December 31, 1993 $2,548
This project was substantially complete at December 31, 1992 and should be fully completed in
1993. The cash transfer from the Closed Bond Fund was necessary to finance a portion of the
street improvements not chargeable to the developer (i.e., western side of street). After completion
(or December 31, 1993) this fund should be closed and any remaining balance /(deficit) should be
transferred to /from the City's Closed Bond Fund. City Council action is required to effect this
fund closing and related cash transfer.
City of Oak Park Heights, Minnesota
Management Report, Page 41
A.A.E. - High School Improvements
This fund was established in 1992 to account for the high school construction project which
includes A.A.E. - Storm Sewer Trunk facilities. A second phase to the high school development
project (58th Street Improvements) is accounted for in a separate fund. The following schedule
summarizes the past and projected financial activity for this project:
Actual Projected Projected
FINANCIAL RESOURCES: 1992 1993 Totals
A.A.E. Connection Charges:
Storm Sewer (I.S.D. #834) $289,348 $289,348
Cash Transfers:
Closed Bond Fund 360,000 360,000
Investment Earnings 5 5
TOTAL FINANCIAL RESOURCES $655,342 $0 655,342
CONSTRUCTION COSTS:
Contractors $456,846 $8,154 465,000
Engineering, Testing, etc. 64,472 4,094 68,566
Legal and Fiscal 5,221 10,000 15,221
Land/Right of Way 11,580 88,000 99,580
Other Costs 3 3,759
TOTAL CONSTRUCTION COSTS $541,878 $110,248 652,126
PROJECTED FUND BALANCE - December 31, 1993 $3
This project was substantially complete at December 31, 1992 and should be fully completed in
1993. The cash transfer from the Closed Bond Fund was necessary because of the scope of this
project which represents approximately 35% of the 1989 original budget for storm sewer trunk
facilities. Future A.A.E. Connection charges (from future development) should replace this
financing. After completion (or December 31, 1993) this fund should be closed and any remaining
balance /(deficit) should be transferred to /from the City's Closed Bond Fund. City Council action
is required to effect this fund closing and related cash transfer.
City of Oak Park Heights, Minnesota
Management Report, Page 42
A.A.E. - Norell Avenup MN DOT Improvements
This fund was established in 1992 to account for a MN DOT modification to the Wal -Mart
construction project in the form of a revised connection of Norell Avenue to State Highway 36.
The following schedule summarizes the past and projected financial activity for this project:
Actual Projected Projected
1992 1993 Totals
FINANCIAL RESOURCES:
State - MN DOT
Storm Sewer (I.S.D. #834) $295,062 $104,938 $400,000
Cash Transfers:
Closed Bond Fund 200,000 200,000
Water and Sewer Operations
TOTAL FINANCIAL RESOURCES $495 _ $104,938 600,000
CONSTRUCTION COSTS:
Contractors $233,190 $6,768 239,958
Engineering, Testing, etc. 17,453 1,015 18,468
Legal and Fiscal 6,229 10,000 16,229
Land/Right of Way 38 284 322
TOTAL CONSTRUCTION COSTS $295,062 $301,783 596,845
PROJECTED FUND BALANCE - December 31, 1993 $3,155
This project was substantially complete at December 31, 1992 and should be fully completed in
1993. The cash transfer from the Closed Bond Fund was necessary to provide financing above the
initial State -MN Dot commitment. Ongoing negotiations with MN Dot may alter the above
financing. After completion (or December 31, 1993) this fund should be closed and any remaining
balance /(deficit) should be transferred to /from the City's Closed Bond Fund. City Council action
is required to effect this fund closing and related cash transfer.
City of Oak Park Heights, Minnesota
Management Report, Page 43
A.A.E. - 58th Stre LL=rovements
This fund was established in 1992 to account for the second phase of the high school
construction project which includes A.A.E. - Sanitary Sewer, Water Works and Storm Sewer
Trunk facilities plus street construction from the high school site to State Highway 5. The
following schedule summarizes the past and projected financial activity for this project:
Actual Projected Projected
FINANCIAL RESOURCES: 1992 1993 Totals
Developer Charges (I.S.D. #834) $168,129 $176,255 $344,384
A.A.E. Connection Charges:
Sanitary Sewer (I.S.D. #834) 27,885 173,488 201,373
Water Works (I.S.D. #834) 150,000 150,000
Cash Transfers:
Closed Bond Fund (70,000) (70,000)
Water and Sewer Operations 95,000 (45,000) 50,000
TOTAL FINANCIAL RESOURCES $291,014 $384,743 675,757
CONSTRUCTION COSTS:
Contractors $498,000 498,000
Engineering, Testing, etc. $15,642 99,600 115,242
Legal and Fiscal 4,288 24,900 29,188
Land/Right of Way 30,261 30,261
Other Costs 36 36
TOTAL CONSTRUCTION COSTS $50,227 $622,500 672,727
PROTECTED FUND BALANCE - December 31, 1993 $3,030
This project was awarded in 1993 and should be completed in 1993 by the opening of the
1993/94 school year. After completion (or December 31, 1993), this fund should be closed and
any remaining balance should be transferred as stated below.
When original financing for this project was planned (March, 1993), it was anticipated that this
project would total approximately $800,000. Construction bids received lowered this estimate to
the $675,000 shown above. Accordingly, the A.A.E. - Water Works Connection Charge
financing has been decreased by $15,000 to the $150,000 shown above. Additionally, the 1992
cash transfer of $95,000 from the City's Water and Sewer Operating Fund can be reduced by
$45,000 to the $50,000 shown above. In addition, the developer (I.S.D. #834) charge in the
amount of $344,384 will allow for a $70,000 cash transfer to the City's Closed Bond Fund. This
$70,000 will reduce the $360,000 cash transfer from the Closed Bond Fund used to finance the
first phase of the high school construction project (i.e., storm sewer trunk facilities). These
"reverse" cash transfers should be made at December 31, 1993 or at the completion of this project
in 1993 or 1994. City Council action is required to effect such fund closing and related cash
transfers.
City of Oak Park Heights, Minnesota
Management Report, Page 44
A.A.E. - Connection Charges
A major element to the financing or improvements in the A.A.E. section of the City is A.A.E.
connection charges levied against new development. The following schedule summarizes the
1991, 1992 and projected 1993 financial activity for the City's A.A.E. Connection Charge Funds:
A.A.E. Connection Charges
Sanitary Water Storm
Description Sewer Works Sewer Totals
1991 AND 1992 ACTUAL:
River hills - 1st Addition:
Heritage - Partial $12,022 $19,621 $15,242 $46,885
E. Ludowese 1,538 2,472 1,996 6,006
Less: Amounts used for construction:
River Hills - 1st Addition (30,942) (29,739) (13,757) (74,438)
Valley Point - 2nd Addition (17,211) (17,211)
Highway 36 Improvements:
Various 10,339 17,983 22,785 51,107
Less: amounts assessed (7,617) (13,249) (16,786) (37,652)
Wal -Mart Development:
Wal -Mart 49,543 86,172 109,182 244,897
Less: credit for ponding area (36,394) (36,394)
amounts assessed (10,792) (19,084) (16,120) (45,996)
amount used for construction (45,000) (45,000)
School District Improvements:
I.S.D. #834 - Partial 27,885 180,899 289,348 498,132
Less: amounts used for construction (27,885) 0 (289,348) (317,233)
Investment Earnings 1,693 2,891 2,430 7,014
Cash Transfers:
Debt Service -1991 Bonds (17 118 000 0 (135,500)
FUND BALANCE - December 31, 1992 8,284 129,966 6,367 144,617
1993 PROJECTED:
River Hills - 1st Addition:
Heritage - Final 7,072 11,542 8,966 27,580
School District Improvements:
I.S.D. #834 - Final 173,488 224,442 0 397,930
Less: amounts used for construction (173,488) (150,000) 0 (323,488)
Cash Transfers:
Debt Service -1991 Bonds 6,500 00M 56 500
PROJECTED BALANCE - December 31, 1993 8.856 1 $15.333 $191139
City of Oak Park Heights, Minnesota
Management Report, Page 45
The preceding projections for 1993 include the completion and full financing of all A.A.E.
construction projects approved by the City Council through March 31, 1993.
The projected balance at December 31, 1993 is committed for future debt service payments for
the City's Water and Sewer Revenue Bonds of 1991. Such future commitments (cash transfers)
are as follows:
Sanitary Water
Year Sewer Works Total
1994 $6,500 $50,000 $56,500
1995 55,000 50,000 105,000
1996 70,000 50,000 120,000
1997 35,000 75,000 110,000
1998 120,000 120,000
1999 125,000 125,000
2000 125,000 125,000
2001 135,00 135,000
2002 150,000 150,000
2003 150,000 150,000
2004 160 160,000
Totals $166,500 $1,190 $1
As shown above, the projected A.A.E. Connection Charge balances at December 31, 1993
represent sufficient amounts to meet the sanitary sewer debt commitments for 1994 and the water
works debt service commitments for 1994, 1995 and 1996. Should such balances be insufficient
to meet future debt service commitments, the City has the option of using the reserved balance
($661,800) in its Water and Sewer Operating Fund. See later comments relating to the Water and
Sewer Operating Fund.
City of Oak Park Heights, Minnesota
Management Report, Page 46
A.A.E. - Construction Summary
The A.A.E. construction program represents a major endeavor on the part of the City.
Construction costs totaling $3.7 million will have been spent by the end of 1993 on the City's
A.A.E. - Construction program as follows:
Total
Projects Estimated Costs
River Hills - 1st Addition $268,400
1991 Utility Improvements 1,255,800
Wal -Mart Addition 253,200
High School Improvements 652,100
Norell Avenue/MN DOT 600,000
58th Street Improvements 675,000
Total Estimated Costs $3
Allocation of the above estimated total costs between A.A.E. Trunk Facilities and additional
facilities is as follows:
Description Amount
A.A.E. Trunk Facilities-
Sanitary Sewer:
Lift Station $134,000
Trunk Lines 303,000
Water Works:
Water Tower 704,200
Trunk Lines 205,100
Storm Sewer.
Trunk Lines 654
Total A.A.E. Trunk Facilities 2,000,900
Qther Facilities:
Land/Right of Way 517,800
Streets 782,800
Lateral Lines:
Sanitary Sewer 185,800
Water Works 189,100
Storm Sewer 28
Grand Total $3,704,500
City of Oak Park Heights, Minnesota
Management Report, Page 47
As shown previously, A.A.E. Trunk facilities to date total $2,000,900 representing 45% of the
original (August, 1989) budget for these facilities. The other facilities (detailed above) were not
part of the original (1989) budget as shown below:
Original
1989
Description Budget
Sanitary Sewer.
Lift station $95,000
Trunk lines 997,500
Water Works:
Water tower 687,500
Water well 350,000
Trunk lines 776,250
Storm Sewer,
Pond excavation 120,000
Trunk lines 1
Total original (1989) budget $4
Overall financing for the above projects has been/will be financed as follows:
Description Amount Percent
Bond Proceeds -1991 Revenue Bonds $1,149,805 30.9%
Developer Charges:
Heritage/River Hills 261,925 7.0%
Wal-Mart 171,900 4.6%
School District 633,732 17.0%
A.A.E. Connection Charges:
Heritage/River Hills 17,211 0.5%
Wal-Mart 45,000 1.2%
School District 351,373 9.4%
Stated DOT 400,000 10.8%
Cash Transfers:
Closed Bond Fund 525,000 14.1%
Utility Operations 127,500 3.4%
Interest Earnings 39 1.1%
Grand Total $3,722,591 100.0%
City of Oak Park Heights, Minnesota
Management Report, Page 48
Additional A.A.E. Connection Charges from the above developers and others have been or will
be committed to debt service payments ($275,648) or will be on hand in the various A.A.E.
Connection Charges funds at December 31, 1993 ($190,139).
The cash transfers from the Closed Bond Fund were/will be necessitated by 1991 -93
construction costs exceeding other monies available for such financing as follows:
ProjecyDescription Amount
High School - Storm Sewer Improvements $325,000
Norell/MN DOT Project 200 > 000
Total $525,000
The High School - Storm Sewer Improvements represent approximately 35% of the total
original budget for storm sewer trunk facilities (excluding land/right of way). Future A.A.E.
Storm Sewer Connection Charges should replace the $325,000 cash transfer as the ultimate source
of financing for this project.
The Norell/MN DOT project is expected to total $600,000 at completion. The City was able to
negotiate a $400,000 participation by the State/MN DOT. Future negotiations may increase the
State/MN DOT participation in this project.
The cash transfers from the Utility Operations were also necessitated by 1991 -93 construction
costs exceeding other monies available for such financing as follows:
ProjecVDescription Amount
1991 Utility Improvements - Water Tower $77,500
58th Street Improvements -
Sanitary Sewer and Water Trunk Lines 50
Total $127,500
The Utility Operations of the City will be the ultimate user of the A.A.E. - Sanitary Sewer and
Water Works Trunk Facilities. User rates are designed to partially finance such trunk facilities.
Accordingly, City policy includes the use of Utility Operations as back -up financing when
necessary.
City of Oak Park Heights, Minnesota
Management Report, Page 49
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 1992 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:
Water L7e artmen
1991 1992
Amount Percent Amount Percent
Revenue:
Customer billings and other $152 100.00% $166 100.00%
Operating expenses:
Contractual services 48,923 31.98% 46,554 27.98%
Administrative and personnel charges 28,500 18.63% 39,000 23.44%
Other 9,144 5.98% 2 1.68%
Total operating expenses 86,567 56.59% 88 53.10%
Net income before depreciation 66,425 43.41% 78,005 46.90%
Depreciation - purchased assets 8,442 9
Net operating income $57,983 $68,264
$180,000 Water Operating
$160,000 Revenue & Expense
$140,000
$120,000 Profit
All Other Expenses
$100,000
Contractual Services
$80,000
$60,000
s Operating Revenue
Q 00 0 . x
$40,00 �a::�c%: ' . tic Sc
\m<i:�:i t{j
$2 0,000
i}
$ 0
1987 1988 1989 1990 1991 1992
City of Oak Park Heights, Minnesota
Management Report, Page 50
S ewer De n
1991 1992
Amount Percent Amount Percent
Revenue:
Customer billings and other $225,909 100.00% $225,314 100.00%
Operating expenses:
MWCC 144,150 63.81% 154,351 68.50%
Other contractual services 9,318 4.12% 10,557 4.69%
Administrative and personnel charges 28,500 12.62% 39,000 17.31%
Other 966 0.43% 224 0.10%
182,934 80.98% 204 90.60%
Net income before depreciation 42,975 19.02% 21,182 9.40%
Depreciation - purchased assets 2,367 2
Net operating income $40,608 $18
$250,000 Sewer Operating
$225,000 Revenue & Expense
$200,000
$175,000
$150,000 All Other Expenses
<:> a
:<: >:::<�::::
$125 000 MWCC
, {;: {iii; nvv. 'vi \ \• }ik is
$1 00,000 : • •.v, ,K• -�:i} .::i h46 "��,. \ \• _
Pv' ; \... Operating Revenue
$75,000
y \:L•y,•. • ' } �C�:h�1i> �i:i • } : \ti. } .:it: :¢.S:Yi.:k } i.: }�i \::•:'
$50,000 ;�:ti:< }<, : >:` } }:..:�. � }... :�i•��: <•C�:.::
♦ \titi }.•.; :; \.: ':nt i�i'n }:i :i 4'',.w: :2:ihv':i. :ti \ }:\.Ci}
$
25 000 ....:,
1987 1988 1989 1990 1991 1992
City of Oak Park Heights, Minnesota
Management Report, Page 51
The Sewer Utility had reflected decreasing operating profits in 1988 and 1989 primarily due to
the MWCC costs which had 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 not subject to a refund nor does it
require the City to report a liability. Proper accounting for the old "water meter deposits" was
unclear. The City attorney answered this question and the accounting records of the City have
been adjusted at December 31, 1992 based upon the City attorney's recommendations.
A summary of the combined water and sewer operations, excluding depreciation on contributed
assets, for the last four years is as follows:
1989 1990 1991 1992
Revenue:
Customer billings and other $304,928 $339,511 $378,901 $391668
Operating expenses:
Contractual services 189,701 198,520 202,391 211,462
Administrative and personnel charges 38,000 57,000 57,000 78,000
Other 6,208 7,036 10,110 3,019
Depreciation - purchased assets 10,175 9,505 10 12 152
Total operating expenses 244,084 272 280,310 304
Operating income $60,844 $67,450 $98 $87,035
City of Oak Park Heights, Minnesota
Management Report, Page 52
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, 1991 and 1992. 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:
$200,000
$180,000 MWCC Billings .x
$160,000
� :v v •: h'4:?
$140,000
$120,000.,
$100,000
$80,000 >_ : >'::?? #
x• :i;x a'
$60,000 . : ?. ?... ?••: {+:; :�?v
$40,000
$20,000 ';::?' :'x: t
$0
1985 1986 1987 1988 1989 1990 1991 1992 1993
MWCC Estimated M MWCC Actual
City of Oak Park Heights, Minnesota
Management Report, Page 53
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 1993 were as follows:
Estimated Actual
Percent Percent
Year Amount Change Amount Chan e
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 (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 146,393 10.6% 143,171 10.0%
1992 157,574 7.6% 143,328 0.1%
1993 186,294 18.2% 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 increased from 148 million gallons for 1992 to 166 million
gallons for 1993 representing a 12% usage increase. The second factor which affects the billings
from the MWCC is their cost to process gallonage. Their cost to process (per million gallons)
increased from $1,157 for 1992 to $1,201 for 1993 representing a 4% rate increase. The
combination of these factors increased the City's estimated cost by 7% for 1993. 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 54
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
1992 878,334 (218,554) 1,190,251 22,435
The increased cash balance of $232,800 for 1991 was partially the result of returned profits,
but it was also the result of a S.A.C. charge ($165,548) received from the School District in
December, 1991 and refunded or remitted to the M.W.C.C. in January, 1992. The following
schedule summarizes the change in overall cash balance for 1991 and 1992:
Descri ption 1991 1992
1. Net Cash Flow from Operations $82,400 $103,700
2. Net Cash Flow to Asset Acquisitions
and Debt Service Payments (69,400) (30,000)
3. Interest on Investments 54,300 43,200
4. December, 1991 S.A.C. Charge Paid in January, 1992 165,500 (165,500)
5. Cash Transfers to Finance A.A.E. - Construction Projects 0 (170,000
Total $232 ($218,600)
The above balances reflect the results of positive (profitable) operations as shown previously.
The City Council had 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.
City of Oak Park Heights, Minnesota
Management Report, Page 55
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 did 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. We recommend that the
City Council formally change the intended use of the $661,765 reserved/appropriated balance in
this fund to include the "back -up" financing for the 1991 Revenue Bonds.
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
1992 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, 1992, and
have issued our report thereon dated February 26, 1993.
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, 1992,
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.
City of Oak Park Heights, Minnesota
Management Report, Page 56
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 control 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.
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 cosOxnefit perspective.
City of Oak Park Heights, Minnesota
Management Report, Page 57
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 report is intended solely for the use of the City of Oak Park Heights and
should not be used for any other purpose.
SUMMARY
The following listing is a summary of the items which should be recorded, investigated and/or
resolved during 1993.
• Continue to monitor special assessments collection rates to verify the elimination of past
delinquencies. (Page 13 - 15)
• Determine and stipulate the specific terms of interest to be collected until connection to the
sanitary sewer line and future special assessment deferrals. (Page 16)
• Continue to keep the fixed asset system functioning properly through quarterly updates of
the system, recording fixed asset transfers between departments, and periodic internal
audits of assets by department. (Page 16)
• Continue to monitor General Fund reserve balances. (Page 22)
• Make the necessary transfers to the Water and Sewer Bonds of 1991 Fund designed to
meet the 1995 scheduled debt payments. (Page 26)
• Close out various Debt Service and Capital Project Funds by making the necessary
transfers as detailed within this report.
• Continue annual reviews of utility rates. (Page 54)
• Change the intended use of the $661,765 appropriated retained earnings balance in the
Water and Utility Operating Fund to include the "back -up" financing for the 1991 Revenue
Bonds. (Page 56)