HomeMy WebLinkAboutManagement Report and Recommendations CITY OF OAK PARK HEIGHTS, MINNESOTA
MANAGEMENT REPORT
AND RECOMMENDATIONS
DECEMBER 31, 1993
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City of Oak Park Heights, Minnesota
Management Report, Page 2
GENERAL GOVERNMENT OPERATIONS
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 1983, 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 1994 budgeted):
State Aids Property Taxes All Other Total Revenue
Year Amount Percent Amount Percent Amount Percent Amount Percent
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% 1,540,783 99% _
1993 87,874 5% 1,241,127 71% 413,444 24% 1,742,445 100%
1994 ** 107,746 6% 1,244,884 70% 429,290 24% 1,781,920 100%
* includes Federal Revenue Sharing
** Budgeted
City of Oak Park Heights, Minnesota
Management Report, Page 3
A graph of State aids, property taxes, and other revenue for the City is as follows:
General and Special Revenue Funds
$1,40,000
$1,200,000 .$1,200
$1,000,000 $1,000,000
$800,000 $800,000
$600,000 $600,000
$400,000 . . : . v v:: — $400,000
$200000
2
.. >'.:. <vN: }.� ,
$0 $0
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 budgeted
State Aids < .._. <'? 4 __<l 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 4
State aids have consisted of the following for the past five years (with 1994 budget):
1994
Description 1989 1990 1991 1992 1993 Budget
Local government aid $101,527 $0 $0 $0 $0 $0
H.A.C.A. 72,498 578 4,611 36,740 54,358 75,246
Police aid 24,863 25,049 31,651 32,432 33,516 32,500
Totals $198,888 $25.627 $36,262 $69,172 $87,874 $107,746
Change $4.816 ($173,261) $10,635 $32,910 $18,702 $19,872
% Change 2% (87 %) 41% 91% 27% 23%
A graph of State aids for the past seven years (with the 1994 budget) is presented below:
® -
200,000 �
........
$180,000 State Aids .................
$160,000 - _ _..........._..
$140,000
$120 = — _ ............ ....
$100,000 - --- -
$80,000 -
$60,000 -
$40,000
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1987 1988 1989 1990 1991 1992 1993 1994
Budget
Police Aid ® H.A.C.A, M L.G.A.
City of Oak Park Heights, Minnesota
Management Report, Page 5
FISCAL DISPARITIES,
Local property taxes are levied by the City each December for collection in the subsequent year.
However, this tax levy iLn_Qt entirely paid by the property owners. A part of each annual tax levy
is 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 commercialfindustrial 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 four
years including 1994 budgeted:
1994
Payer 1990 1991 1992 1993 Budgeted
L.ocaltaxpayer $1,270,002 $1,243,053 $1,243,786 $1,358,593 $1,372,448
State credits 0 48,141 * 38,187 55,377 76,640
Fiscal disparities:
Contribution (110,173) (153,459) (137,601) (170,292) (167,432)
Distribution 45,727 61,819 55,182 58,632 62,974
Totals $1,205,556 $1,199,554 $1,199,554 $1,302,310 $1,344,630
* 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 1994 budgeted.
1994
Payer 1990 1991 1992 1993 Budgeted
Local taxpayer 105.3% 103.6% 103.7% 104.3% 102.1%
State homestead credits 0.0% 4.0% 3.2% 4.3% 5.7%
Fiscal disparities:
Contribution (9.1 %) (12.8 %) (11.5 %) (13.1 %) (12.5 %)
Distribution 3.8% 5.2% 4.6% 4.5% 4.7%
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 6
REVENUE SUMMARY
The following schedules and graphs reflect the revenue of the General Fund for the past two
years including 1994 budget, Additional detail of the revenue is presented in Statement 7 of the
1993 Annual Financial Report.
1992 1993 1994 Budget
Description Amount Percent Amount Percent Amount Percent
General property taxes $1,121,894 72.7% $1,262,465 72.5% $1,244,884 69.9%
Intergovernmental:
State 69,172 4.5% 87,874 5.0% 107,746 6.0%
County and other 18,022 1.2% 21,116 1.2% 15,550 0.9%
Licenses and permits 93,908 6.1% 62,898 3.6% 102,425 5.7%
Charges for services 146,702 9.5% 208,315 12.0% 212,865 11.9%
Interest on investments 33,728 2.2% 25,180 1.4% 25,000 1.4%
All other 60,291 3.8% 74,597 43% 73,450 4.2%
Totals $1,543,717 100.0% $1,742,445 100.0% $1,781,920 100.0%
1994 Budget
Property Taxes
69.9%
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4.2% Interest on 11.9%
Investments
1.4%
City of Oak Park Heights, Minnesota
Management Report, Page 7
EXPENDITURES SUMMARY
Expenditures (by major classification) for the past two years plus the 1994 budget, are as
follows:
1992 1993 1994 Budget
Description Amount Percent Amount Percent Amount Percent
Current expenditures:
General government $335,835 22.3% $364,284 22.8% $397,065 22.3%
Public safety 605,414 40.2% 651,867 40.8% 722,335 40.5%
Streets and highways 83,638 5.5% 94,365 5.9% 88,150 4.9%
Sanitation 267,557 17.8% 312,423 19.5% 347,400 19.5%
Recreation 156,321 10.4% 160,257 10.0% 179,270 10.1%
Contingency 15,000 0.8%
Capital outlay 58,231 3.9% 15,789 1.0% 32,700 1.9%
Totals $1,506,996 100.1% $1,598,985 100.0% $1,781,920 100.0%
A graph of the above expenditures is presented below:
1994 Budget
Capital Outlay &
Recreation 10.1% Other 2.7% General Government
22.3%
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Public Safety 40.5%
City of Oak Park Heights, Minnesota
Management Report, Page 8
COMBINED FINANCIAL STATEMENTS.
The Combined Financial Statements of the City are presented in Statements 1 through 5 of the
1993 Annual Financial Report. The following comments relate to these financial statements of the
City.
Cash and Investments
December 31, Increase
Description 1992 1993 (Decrease)
Checking account ($18,994) ($19,384) ($390)
Investments 4,084,106 3,923,666 (160,440)
Petty cash 50 100 50
Totals $4,065,162 $3,904,382 ($160,780),
The December 31, 1992 and 1993 checking account overdrafts are wok 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 $160,259 of interest on investments during 1993 compared
to $ 188,984 in 1992. This decrease is primarily the result of lower investment yields available to
the City. Investments at December 31, 1992 and 1993 were as follows:
December 31.
1992 1993
Investment Description Yield Balance Yield Balance
Money Market 2.89% $238,824 2.60% $178,088
AIM Government Fund Various 1,235,282 Various 1,287,326
Dreyfus Government Cash Management Various 252
Certificate of Deposit 2.90% 500,000 3.30% 277,000
Certificate of Deposit 3.00% 630,000 3.30% 142,000
Certificate of Deposit 3.05% 665,000 3.20% 430,000
Certificate of Deposit 3.13% 615,000 5.00% 200,000
Certificate of Deposit 3.25% 200,000 3.20% 365,000
Certificate of Deposit 3.25% 600,000
Certificate of Deposit 3.17% 244,000
Certificate of Deposit 3.17% 200,000
Totals $4,084,106 $3,923,666
City of Oak Park Heights, Minnesota
Management Report, Page 9
5.mirritv for D
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, 1993.
Due From Other Governmental Units
December 31, Increase
Description 1992 1993 ( Decrease)
Fines $3,541 $2,682 ($859)
Gravel tax 309 506 197
MWCC - final cost allocation 3,222 11,350 8,128
City of Bayport 0 1,811 1,811
MN DOT (Norell Ave.) 400,000 631,594 231,594
ISD #834 - Liaison officer 0 8,310 8,310
Totals $407,072 $656,253 $249,181
All of the above amounts are currently collectible. The $400,000/$631,594 MN Dot receivable
was scheduled to be received by the City in May, 1994.
Due From Developers
December 31, Increase
Description 1992 1993 (Decrease)
Developers' Deposit Fund:
Cost reimbursement $2,632 $6,460 $3,828
Totals $2,632 $6,460 $3,828
The above receivables 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 10
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 rate on property taxes
remains strong as illustrated below.
1990 1991 1992 1993
Delinquent taxes - January 1 $30,833 $33,458 $35,036 $39,017
Current levy _ 1,205,556 1,199,554 1,199,554 1,302,310
Total collectible 1,236,389 1,233,012 1,234,590 1,341,327
Receipts:
Current 1,177,795 1,134,365 1,182,272 1,294,478
Delinquent 13,024 15,103 8,815 26,441
Total receipts 1,190 1,149,468 1,191,087 1,320,919
Adjustments (12,112) (48,508) ____ (4,486), (2,8451
'Delinquent taxes - December 31 $33,458 $35,036 $39,017 $17,563
Current collection as a percent of current levy 98% 95 %/98% 99% 99% m
Total collections as a percent of current levy 99% 96 %/99% 99% 101%
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.
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 11
apecial Assessments Receivable
Special assessments receivable consisted of the following types and amounts:
December 31, Increase
Description 1992 1993 (Decrease)
Delinquent $50,522 $1,217 ($49,305)
Due from County 2,523 587 (1,936)
Deferred 245,586 126,109 (119,477)
Special Deferred 14,800 144,800 130,000
Totals $313,431 $272,713 ($40,718)
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)
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 0 / 0 )
1987 10,781 (101) ( 0 /)
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 %)
1993 1,217 (49,305) (98 %)
City of Oak Park Heights, Minnesota
Management Report, Page 12
The preceding schedule indicates that the City W a poor current collection rate for special
assessments in 1989 and 1990. 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 was 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 1993 assessment activity for these
projects is as follows:
1993
Bonds of Osgood All Other
1987 Partners Funds Total
Delinquent balance ® January 1, 1993 $19,097 $28,447 $2,978 $50,522
Add
Current installments 10,328 0 . 107,379 117,707
Amount collectible r 29,425 28,447 110,357 168,229
Less collections:
Current 9,330 0 107,283 116,613
Delinquent 19,097 28 495 48,039
Total collections 28, 28,447 107,778 164,652
Adjustments 0 0 (2,360) (2,360)
Delinquent balance - December 31, 1993 $998 $0 $219 $1,217
Current collections as a percent of current levy s 90% N/A 100% 99%
Total collections as a percent of current levy 275% N/A 100% 140%
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 three years. We congratulate the City for its
successful efforts with regard to these delinquencies.
City of Oak Park Heights, Minnesota
Management Report, Page 13
The amount reported as "special deferred" consists (partially) of an assessment ($14,800)
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.
The $130,000 increase to "special deferred" assessments consists of one parcel for Phase 1 of
the City's 58th Street Improvement (Kern Property). This parcel was given a special deferment by
City Council Resolution 93- 12 -50. This assessment is deferred pending future sale or
development of this parcel.
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 ten years. These
employees have vested severance pay which totaled $37,162 and $50,248 at December 31, 1993
and 1992, respectively. Also included in the accrual for compensated absences is vacation pay
benefits for all City employees of $7,287 at December 31, 1993 and $7,119 at December 31,
1992.
City of Oak Park Heights, Minnesota
Management Report, Page 14
Bonds Pavable
Bond Issues
Special Special Revenue
Assessments District Bonds* Totals*
Balance ®January 1, 1993 $473,000 $150,000 $1,290,000 $1,913,000
Principal payments (348,000) (15,000) (70,000) _ (433,000)
Balance - December 31, 1993 $125,000 $135,000 $1,220,000 $1,480,000
Retirement Schedule:
1994 $125,000 $15,000 $75,000 $215,000
1995 15,000 55,000 70,000
1996 15,000 75,000 90,000
1997 20,000 80,000 100,000
1998 -2006 70,000, 935,000 1,005,000
Total $125,000 $135,000 $1,220,000 $1,480,000 -
*Excl uding revenue bonds to be paid from escro monies.
Scheduled debt payments total $215,000 for 1994 representing 14.5% of outstanding debt at
December 31, 1993. Detail of outstanding bond issues is contained in Exhibits 2 and 3 of the 1993
Annual Financial Report,
Fund Eauitv
December 31, Increase
Fund Group 1992 1993 (Decrease)
Fund Balance:
General $1,013,422 $1,106,882 $93,460
Special Revenue 5,127 7,611 2,484
Debt Service 917,581 1,481,100 563,519
Capital Projects 1,488,249 1,852,057 363,808
Totals 3,424,379 4,447,650 1,023,271
Retained earnings:
Enterprise 1,190,251 1,303,756 113,505
Totals $4,614,630 $5,751,406 $1,136,776
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 15
INDIVIDUAL FUND/FUND TYPE ANALYSIS
General Fund
The financial statements for the General Fund are presented in Statements 6 and 7 of the City's
1993 Annual Financial Report. The fund balance of the General Fund was $1,106,882 at
December 31, 1993 representing a $93,460 increase during 1993 as follows:
Budgeted Change in Fund Balance $0
Actual Revenue Greater Than
(Less Than) Budgeted Revenue:
• General property taxes:
• Current and deliquent $17,175
• Payment in lieu of tax 6,301
• Excess TIF 15,037
• Intergovernmental 3,042
• Licenses and permits (2,422)
• Charges for services 5,515
• Fines and forfeits 5,039
• Interest on investments 2,180
• Other 22,068 73,935
Budgeted Expenditures (Greater Than)
Less Than Actual Expenditures:
• General government 7,698
• Public safety 51,619
• Streets and highways (1,574)
• Sanitation (1,423)
• Recreation 3,849
• Contingency 9,356 ® 69,525
Transfer to Capital Improvements Fund (50,000)
Net increase in fund balance for 1993 $93,460
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 16
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 Increase
December 31, Balance (Decrease)
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 (65230)
1992 1,013,422 12,371
1993 1,106,882 93,460
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:
Pu rpose o Rese Benefits of Reserves
Cash flow timine differences. = Provides favorable bond rating indicator.
Expenditures are incurred somewhat evenly throughout 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.
= r omen al revenue =hacks, _ ° 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 outlav 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
Emer eencv 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.
special Citv Council proiectss,
Preliminary studies, interfund loans and minor projects
are examples of reserve uses.
City of Oak Park Heights, Minnesota
Management Report, Page 17
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, 1992 and 1993, the General Fund balance was
designated as follows:
December 31,
1992 1993
Designated for
Cash flow $639,000 $660,000
Contingent employee benefits 142,000 129,000
General contingency 221,950 267,000
Capital Improvements 10,472 27,982
Consolidation study 8,340
Subtotal 1,013,422 1,092,322
Undesignated 0 14,560
Total fund balance $1,013,422 $1,106,882
The City's minimum cash flow reserve requirement is measurable. For the City of Oak Park
Heights, the minimum required surplus is $660,000 computed as follows:
December 31,
1992 1993
1994 Budgeted Levy (includes HACA) $1,278,310 $1,320,130
1994 Anticipated Local Government Aid 0 0
Total $1,278,310 $1,320,130
Minimum Required Cash Flow Reserve
(one -half of total - rounded) $639,000 $660,000
City of Oak Park Heights, Minnesota
Management Report, Page 18
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, as follows:
December 31,
Description 1992 1993
Ensuing Year's Budget $1,680,000 $1,782,000
Reserve Amount @ 15% $252,000 $267,000
Less: Unavailable Adjustment __ (30,050) 0
Reserve Amount $221,950 $267,000
The Contingent Employee Benefits reserve is computed based upon accrued, but unpaid,
employee benefits as follows:
December 31,
Employee Benefit 1992 1993
Vacation Leave $7,100 $7,550
Sick/SeveranceLeave 135,100 121,450
Total $142,200 $129,000
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.
City of Oak Park Heights, Minnesota
Management Report, Page 19
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 1993.
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 $7,611 at December 31, 1993.
DEBT SERVICE FUNDS
The combining financial statements for the Debt Service Funds are presented in Statements 10
and 11 of the 1993 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 1993 as follows:
I
Fund Balance
December 31, Increase
Fund 1992 1993 (Decrease)
Storm Sewer Bonds of 1982/Refunding Bonds of 1993 $12,453 $13,208 $755
Improvement Bonds of 1982 43,365 0 (43,365)
G.O. Improvement Bonds of 1983 20,527 0 (20,527)
G.O. Improvement Bonds of 1987 377,763 0 (377,763)
G.O. Improvement Bonds of 1990 200,393 114,071 (86,322)
G.O. Revenue Bonds of 1991/Refunding Bonds of 1993 263,080 1,353,821 1,090,741
Totals $917,581 $1,481,100 $563,519
City of Oak Park Heights, Minnesota
Management Report, Page 20
Storm Sewer Bonds, of 1982/Refundine Bonds of 1993
The Storm Sewer Bonds of 1982 were refinanced by the Refunding Bonds of 1993. 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.
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 prQ°ecrion of the
final fund position based on scheduled levies and debt requirements is as follows:
Fund Balance ® December 31,1993 $13,208
Additions:
Future Scheduled tax levies @ 100% 174,000
Total 187,208
Deductions:
Debt Requirements:
Principal 135,000
Interest 30,757
Total 165,757
Projected Fund Balance $21,451
Normal Projected Fund Balance -
5% of debt requirements $8,300
The above projection 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 21
Improvement Bonds of 1992. 1983 and 1987
The Improvement Bonds of 1982, 1983 and 1987 were fully matured and final bond payments
were made in 1993. Each of these debt service funds were closed and the remaining assets
($255,000) were transferred to the closed bond fund in accordance with established City policy
and City Council action.
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- 1993 1994 Totals
FINANCIAL, RESOURCES:
Bond Proceeds $39,694 $39,694
Special Assessments:
Principal 209,615 209,615
Interest 3,353 3,353
Cash Transfers - A.A.E. Connection Charges 74,438 74,438
Cash Transfers - Construction Fund 1,143 1,143
Investment Earnings 21,410 $3,500 24,910
Total Financial Resources $349,653 $3,500 353,153
DEBT SERVICE PAYMENTS:
Bond Principal $175,000 $125,000 300,000
Bond Interest 58,787 8,250 67,037
Paying Agent Fee 1,795 1,000 2,795
Total Debt Service $235,582 $134,250 369,832
PROJECTED BALANCE (DEFICT) - December 31,1994 ($16,679)
The above schedule indicates that this fund will not have sufficient assets to meet bonded debt
requirements over the scheduled term of this bond issue. The projected deficit is the result of the
City's failure to effect collection of special assessments. These assessments were abated by the
City Council in March, 1994. Such abatement requires an alternative source of financing. We
recommend that the City provide such alternative financing by a cash transfer from the City's
Closed Bond Fund at December 31, 1994. City Council action is required to effect this cash
transfer.
City of Oak Park Heights, Minnesota
Management Report, Page 22
Water and Sewer Revenue Bonds of 1 1/Refundina Bonds of 1993.
The Water and Sewer Revenue Bonds of 1991 were issued 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. These bonds were refinanced by the Refunding
Bonds of 1993 to reduce interest costs by approximately $95,000 over the remaining term of these
bond issues.
During 1993, the City transferred $65,000 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 1994 and 1995 scheduled debt
payments.
Similar projected cash transfers for December 31, 1994 (Sanitary Sewer $10,000 and Water
Works $55,000) are designed to meet the 1996 scheduled debt payments. The City should record
these cash transfers at December 31, 1994. 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 $10,000 $55,000 $65,000
1995 15,000 80,000 95,000
1996 20,000 100,000 120,000
1997 20,000 105,000 125,000
1998 20,000 105,000 125,000
1999 20,000 105,000 125,000
2000 20,000 115,000 135,000
2001 20,000 120,000 140,000
2002 20,000 125,000 145,000
2003 30,000 135,000 165,000
2004 5,000 50,001 55,000
Totals $200,000 $1,095,000 $1,295,000
City of Oak Park Heights, Minnesota
Management Report, Page 23
CAPITAL PROJECT FUNDS,
The financial statements for the Capital Project Funds are presented in Statements 12 and 13 of
the City's 1993 Annual Financial Report. The fund balance (deficits) of the Capital Project Funds
were as follows at December 31, 1992 and 1993:
December 31, Increase
Fund 1992 1993 (Decrease)
Closed Bond Fund $351,249 $980,678 $629,429
Capital Improvements Fund 369,148 263,476 (105,672)
Park & Recreation Development 51,462 65,267 13,805
St. Croix Mall (TIF) (52,322) 18,327 70,649
Valley Point 2nd Addition 32,174 0 (32,174)
Street reconstruction 0 66,437 66,437
AAE - 1991 Utility Improvements 17,068 0 (17,068)
AAE - Wal-Mart Addition 20,604 0 (20,604)
AAE - High School Improvement 113,464 109,843 (3,621)
AAE - Norell Ave/MN DOT Improvement 200,000 22,726 (177,274)
AAE - 58th Street Improvement 240,786 42,228 (198,558)
AAE - Sanitary Sewer Connection 8,284 55,607 47,323
AAE - Water Connection 129,966 184,663 54,697
AAE - Storm Sewer Connection _6,366 42,805, 36,439
Totals $1,488,249 $1,852,057 $363,808
----------- - - — -----
City of Oak Park Heights, Minnesota
Management Report, Page 24
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 1993 12/31/93 1994
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 $254,953 256,717
1990's Bond Issues 0 ($17,000)
Construction Funds 24,288 956 25,244
General Property Taxes 1,833 5 1,838
Special Assessments 244,142 66,325 310,467 12,700
Connection Charges - Old 145,013 1,650 146,663
Escrow Interest Earnings 3,207 118 3,325
Investment Interest 404,730 12,349 417,079
Temp. Loan Interest 0 20,000
TOTAL FINANCING SOURCES $1,382,772 $336,356 1,719,128 15,700
FINANCING USES:
Transfers Out/Expenditures
General Fund $22,100 22,100
Capital Improvement Fund 200,000 200,000
Professional Services 50,524 $6,310 56,834
Construction Funds:
Other City Projects 163,899 163,899
AAE - Storm Sewer 360,000 (90,000) 270,000
AAE - Streets 235,000 (209,383) 25,617
Temp. Loan:
MN - Dot 610,000 610,000 (610,000)
TOTAL FINANCING USES $1,031,523 $316,927 1,348,450 (610,000)
FUND BALANCE AVAILABLE - December 31, 1993 $370,678
PROJECTED FUND BALANCE - December 31, 1994 $996,378
City of Oak Park Heights, Minnesota
Management Report, Page 25
The purpose of the Closed Bond Fund is to receive residual balances of closed special
assessment bonds. Amounts on hand at December 31, 1993 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.
• Fong -term capital improvement program financing.
The existence of reserved balance in the City's Closed Bond Fund gives the City a valuable,
financial tool. Some of the past uses of these monies are as follows:
a) Interim financing of all local improvement projects.
b) Supplemental financing of construction deficits and debt service deficits.
c) Construction perm and assessment collection period financing of small assessable
projects.
d) Temporary financing for the 1987 Improvements Bonds (Swagger's 9th) during a period
of high assessment delinquencies.
e) Partial ($200,000) financing of the municipal building expansion program.
f) Partial ($270,000) financing of the storm sewer improvements at the new high school.
g) Temporary financing for the Norell Avenue/MN DOT project pending receipt of State
monies.
The City's Closed Bond Fund reserve balance Should not be considered neither adeauate nor
excessive. It should be considered only as a financial tool. It is sometimes used (depleted) to
provide permanent financing: 1) construction/debt service deficits 2) municipal building
expansion 3) high school storm sewer improvements. At other times it is used to provide
temporary financing without depleting the overall balance: 1) 1987 Improvement Bonds 2)
Norell Avenue/MN DOT 3) interim financing of construction projects 4) temporary financing of
assessment rolls.
The City could consider the Closed Bond Fund as excess balance to be expended.
Alternatively, the Closed Bond Fund could be viewed as a revolving fund (i.e. temporary rather
than permanent uses). The existence of the Closed Bond Fund allows the City Council a great deal
of flexibility by providing temporary (or backup) financing for various City projects/programs.
Accordingly. the Closed Bond Fund is probably best used as a. revolvina fund rather than as an
excess fund to be expended.
City of Oak Park Heights, Minnesota
Management Report, Page 26
Capital Improve ents -Fun_d
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:
Prior Total Projected
Description W Years 1993 12/31/93 1994
FINANCIAL RESOURCES:
Transfers In:
General Fund $945,075 $50,000 $995,075
Closed Bond Fund 200,000 0 200,000
Interest Earnings 161,926 11,397 173,323
Sale of Property 9,414 0 9,414
Donations/Other 28,298 1,200 _ 29,498
Total Financial Resources $1,344,713 - $62,597 1,407,310 $0
FINANCIAL USES:
Expenditures:
Municipal Bldg. - Phase I $106,785 $0 106,785
Municipal Bldg. - Phase 2 486,637 0 486,637
Sealcoat 182,630 35,661 218,291
Recreation 167,246 31,108 198,354
A.D.A. 0 0 0 100,000
City Hall - Lights Retrofit 0 0 0 5,600
City Defense Siren 0 0 0 15,000
Other 6,617 1,500 8,117
Transfer Out:
General Fund 25,650 0 25,650 15,000
Street Reconstruction 0 100,000 m 100,000
Total Financial Uses $975,565 $168,269 1,143,834 135,600
FUND BALANCE - December 31,1993 $263,476
PROJECTED FUND BALANCE - December 31, 1994 $127,876
City of Oak Park Heights, Minnesota
Management Report, Page 27
The Capital Improvement Fund is budgeted annually by the City Council in conjunction with
the City's normal budget process. As part of such process, the City allocates the monies in this
fund to specific projects and/or programs. Such allocation/designations were as follows at
December 31, 1993:
Purpose Amount
Sealcoat $13,273
Recreation 2,478
A.D.A. (Americans with Disabilities Act) 100,000
General Fund Transfer 15,000
Land Acquisition 15,000
Undesignated 117,725
Total $263,476
Subsequent to December 31, 1993, the City Council added additional allocations/ designations
to the above undesignated amount, as follows:
Purpose Amount
City Hall - Lights Retrofit $5,600
Civil Defense Siren 15,000
Total $20,600
City of Oak Park Heights, Minnesota
Management Report, Page 28
Park and Recreation Dev 1 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 $65,267 at December 31, 1993, as follows:
Prior
Years 1993 Total
Financing Resources:
Park fees - A.A.E. area $50,700 $12,600 $63,300
Donations and contributions 4,112 4,112
Interest on investments 2,578 1,944 4,522
Total financing sources $6,690 $1,944 71,934
Financing Uses:
Professional services $5,928 $739 6,667
Fund balance - December 31, 1993 $65,267
The above balance at December 31, 1993 has not been designated for any specific project. The
City Council has discussed the possibility of another City park within the A.A.E. Area of the City.
The above balance is available for such purpose at the discretion of the City Council.
City of Oak Park Heights, Minnesota
Management Report, Page 29
River Hills (Heritage) 1 st Addition
This project was started in 1989. Financing is provided by the developer under a letter of
credit arrangement. The following schedule s ummariz es the financial activity for this project:
Actual Actual
- 1989-1992 1993 Totals
FINANCIAL RESOURCES:
Developer Charges $261,925 $2,038 $263,963
Cash Transfers:
A.A.E. Connection Charges
Storm Sewer 17,211 17,211
Investment Earnings 437 519 956
TOTAL FINANCIAL RESOURCES $279,573 $2,557 282,130
CONSTRUCTION COSTS:
Contractors $202,829 202,829
Engineering, Testing, etc. 55,518 $3,044 58,562
Legal and Fiscal 3,836 2,092 5,928
Other Costs 179 179
TOTAL CONSTRUCTION COSTS $262,362 $5,136 267,498
PRELIMINARY FUND BALANCE - December 31, 1993 14,632
Transfers:
River hills (heritage) - 2nd Addition $13,677
Closed Bond Fund (Interest) 955 14,632
FUND BALANCE - December 31,1993 $0
This project is 100% developer financed except for trunk storm sewer costs totaling $17,211
which have been financed by a cash transfer of A.A.E. - Storm Sewer Connection Charges. The
balance remaining at the Completion of this project was transferred to the River Hills (Heritage) -
2nd Addition project which was started in 1993.
City of Oak Park Heights, Minnesota
Management Report, Page 30
River Hills (HeritaLye) 2nd Addition,
This project was started in 1993. 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
1993 1994 Totals
FINANCIAL RESOURCES:
Developer Charges $140,070 $61,184 $201,254
Investment Earnings 7 7
Transfer In:
From 1st Addition e 13,677 13,677
Total Financial Resources $153,754 $61,184 214,938
CONSTRUCTION COST:
Construction $123,667 $57,001 180,668
Engineering, Testing, Etc. 21,524 8,550 30,074
Legal and Fiscal 1,009 3,000 4,009
Other Costs 187 187
Total Construction Costs $146,387 $68,551 214,938
PROJECTED FUND BALANCE - December 31, 1994 $0
This project is 100% developer financed. Any balance remaining at the completion of this
project should be transferred to the River Hills (Heritage) ® 3rd Addition project which has been
planned for 1994.
City of Oak Park Heights, Minnesota
Management Report, Page 31
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 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:
Prior Projected
Years 1993 Totals 1994-98
FINANCIAL RESOURCES:
T.I.F. Taxes $243,177 $179,450 $422,627 $710,247
Investment Earnings 193 193
Total Financial Resources $243,177 $179,643 422,820 $710,247
FINANCIAL USES:
Construction Costs:
58th Street/Osgood Improvement Project $150,078 150,078
Developer Assistance 145,421 $107,670 253,091 $426,149
Professional Fees 1,324 1,324
Total Financial Uses $295,499 $108,994 404,493 $426,149
FUND BALANCE - December 31,1993 $18,327
PROJECTED FUND BALANCE - December 31, 1998 $302,425
The City Council has discussed the use of the above TIF revenue to help finance Phase I of the
City's Street Reconstruction Program. The use of TIF revenue for such purposes requires formal
action by the City Council and (probably) changes to the City's overall financial plan for this TIF
District. The City's TIF consultant has been asked to prepare the necessary paperwork to effect
such action.
City of Oak Park Heights, Minnesota
Management Report, Page 32
Vallev Point 2nd Addition
Financing for the Valley Point 2nd Addition Project was provided by the $300,000 G.O.
Improvement Fonds of 1990. The following schedule summarizes the financial activity for this
project:
Actual Actual
1990 - 1992 1993 Totals
FINANCIAL RESOURCES:
Bond Proceeds -1990 S.A. Bonds $256,057 $256,057
Cash Transfers:
Closed Bond Fund 30,000 30,000
Investment Earnings 4,042 $270 4,312
TOTAL FINANCIAL RESOURCES $290,099 - $270 290,369
CONSTRUCTION COSTS:
Contractors $209,077 $26,270 235,347
Engineering, Testing, etc. 42,217 3,031 45,248
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 ® $31,301 289,226
INITIAL FUND BALANCE - December 31,1993 1,143
Cash Transfer:
1990 Debt Service Fund 1,143
FUND BALANCE - December 31, 1993 $0
This project was fully completed in 1993. The cash transfer from the Closed Pond Fund was
necessary to finance a storm sewer change order unrelated to the original developer's project. This
fund was closed at December 31, 1993 and the remaining balance was transferred to the related
debt service fund at that date.
City of Oak Park Heights, Minnesota
Management Report, Page 33
Citv -Wide Street Reconstruction
The City -wide Street Reconstruction Project has been under consideration for several years and
the City Council ordered its first formal study in 1993. This project will be a multi -phase and
multi - mullion dollar project. Initial City engineer estimates for this total project (Phase A through
E) are as follows:
Special City
Description Assessments, Portion Total
STREET RECONSTRUCTION m ONLY:
Construction Costs $1,702,500 $1,508,500 $3,211,000
Financing Costs 133,000 119,500 252,500
STORM SEWER:
Construction Costs N/A 525,300 525,300
Financing Costs N/A 40,900 40,900
UTILITY REPAIRS:
Construction Costs N/A 157,200 157,200
Financing Costs N/A N/A 0
GRAND TOTALS $1,835,500 $2,351,400 $4,186,900
Probable sources of financing for the City portion of the above costs are as follows:
1) Street Reconstruction Only:
• Debt service tax levies totaling $2.26 mullion over sixteen plus years, nod
• "City T.I.F." and "Excess T.I.F." totaling approximately $378,000 to "buy- down"
selected tax levies during certain years.
2) Storm Sewer:
• Closed bond fund reserved balances, or
• Debt service tax levies totaling $566,200 over sixteen plus years.
3) Utility Repairs:
0 Reserved balances from the Water and Sewer Utility operations ($157,200).
City of Oak Park Heights, Minnesota
Management Report, Page 34
Annexation Area Extended (A.A.E.)
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).
A.A.E. - 1991 Utility Im provements
This fund was established in 1991 to account for the City's first 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 financial activity for this project:
Actual Actual
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 75,000
Investment Earnings 28,815 $352 29,167
TOTAL FINANCIAL RESOURCES $1,253,620 $352 1,253,972
CONSTRUCTION COSTS:
Contractors $970,615 $5,426 976,041
Engineering, Testing, etc. 134,097 9,192 143,289
Legal and Fiscal 36,272 3,750 40,022
Land/Rightof Way 93,189 93,189
Other Costs 2,379 88 2,467
TOTAL CONSTRUCTION COSTS $1,236,552 $18,456 1,255,008
INITIAL FUND BALANCE - December 31, 1993 (1,036)
Cash Transfer From:
Water and Sewer Operations 1,036
FUND BALANCE - December 31,1993 $0
This project was substantially complete at December 31, 1992 and fully completed in 1993.
After completion this fund was closed and the remaining deficit was financed by a cash transfer
from the City's Water and Sewer Operating Fund in accordance with City Council action.
City of Oak Park Heights, Minnesota
Management Report, Page 35
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 financial activity for this
project:
Actual Actual
1992 1993 Totals
FINANCIAL RESOURCES:
Developer Charges:
Wal -Mart $171,900 ($1,239) $170,661
A.A.E. Connection Charges:
Storm Sewer (Wal -Mart) 45,000 45,000
Closed Bond Fund 35,000 35,000
Investment Earnings 3,899 1,306 5,205
TOTAL FINANCIAL RESOURCES $255,799 $67 255,866
CONSTRUCTION COSTS:
Contractors $176,462 $1,164 177,626
Engineering, Testing, etc. 52,655 3,161 55,816
Legal and Fiscal 3,602 3,195 6,797
Land/Right of Way 1,840 1,840
Other Costs 636 636
TOTAL CONSTRUCTION COSTS $235,195 $7,520 242,715
INITIAL FUND BALANCE - December 31,1993 13,151
Cash Transfers To:
Closed Bond Fund ($9,383)
A.A.E. Connection Charges - Storm Sewer (3,768 (13,151)
FUND BALANCE - December 31, 1993 $0
This project was substantially complete at December 31, 1992 and 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 this
fund was closed and the remaining balance was transferred as shown above in accordance with
City Council action.
The Wal -Mart development agreement stipulated a developer deposit/escrow in the amount of
$18,680 to ensure the completion of Plan A improvement by the developer. This project has been
completed and the developer has been given a partial refund for Plan B improvements (i.e. those
improvements done by the City). However, no such refund was effected for the Plan A deposit
and the City still holds the $18,680 developer deposit/escrow.
Some of the Plan A improvements may have been completed by the City as part of the Plan B
construction. The City engineer has been asked to resolve this situation.
City of Oak Park Heights, Minnesota
Management Report, Page 36
A.A.E. - Hiah 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 projects
Actual Projected Projected
1992-1993 1994 Totals
FINANCIAL RESOURCES:
A.A.E. Connection Charges:
Storm Sewer (I.S.D. #834) $291,905 $291,905
Cash Transfers:
Closed Bond Fund 360,000 360,000
Investment Earnings 9 ,883 _ 9,883
TOTAL FINANCIAL RESOURCES $661,788 $0 661,788
CONSTRUCTION COSTS:
Contractors $459,676 $5,195 464,871
Engineering, Testing, etc. 67,000 5,000 72,000
Legal and Fiscal 8,430 10,000 18,430
Land/Right of Way 13,080 85,000 98,080
Other Costs 3,758 3,758
TOTAL CONSTRUCTION COSTS $551,944 $105,195 657,139
PROJECTED FUND BALANCE m December 31, 1994 $4,649
This project was substantially complete at December 31, 1993 and should be fully completed in
1994 after land acquisition is finalized. 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, 1994) 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 37
A A.E. - No rell Avenue/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 1994 Totals
FINANCIAL RESOURCES:
State - MN DOT $631,594 $631,594
Temporary loan:
Closed Bond Fund $610,000 (610,000) 0
TOTAL FINANCIAL RESOURCES $610,000 $21,594 631,594
CONSTRUCTION COSTS:
Contractors $250,813 250,813
Engineering, Testing, etc. 19,792 19,792
Legal and Fiscal 12,409 3,000 15,409
Land/Right of Way 325 325,853
TOTAL CONSTRUCTION COSTS $608,867 $3,000 611,867
PROJECTED FUND BALANCE - December 31, 1994 $19,727
This project was substantially complete at December 31, 1993 and should be fully completed in
1994. The temporary loan from the Closed Bond Fund was necessary to provide interim financing
before receipt of the State -MN Dot commitment. After completion (or December 31, 1994) this
fund should be closed and any remaining balance should be transferred to the City's Closed Bond
Fund as an interest payment for the use of the $610,000 temporary loan. City Council action is
required to effect this fund closing and related cash transfer.
City of Oak Park Heights, Minnesota
Management Report, Page 38
.A.A.E. - 58th Street Imnrovementa
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
1992-1993 1994 Totals
FINANCIAL RESOURCES:
Developer Charges (I.S.D. #834) $344,384 $344,384
A.A.E. Connection Charges:
Sanitary Sewer (I.S.D. #834) 160,000 160,000
Water Works (I.S.D. #834) 145,000 145,000
Cash Transfers:
Closed Bond Fund (90,000) (90,000)
Water and Sewer Operations 125,000 125,000
Interest earnings 6,537 6,537
TOTAL FINANCIAL RESOURCES $690,921 $0� 690,921
CONSTRUCTION COSTS:
Contractors $516,615 $23,385 540,000
Engineering, Testing, etc. 89,670 4,677 94,347
Legal and Fiscal 11,692 7,000 18,692
Land/Right of Way 30,486 30,486
Other Costs 230 _ 230 .
TOTAL CONSTRUCTION COSTS $648,693 $35,062 683,755
PROJECTED FUND BALANCE - December 31,1994 $7,166
This project was awarded in 1993 and should be completed in 1994. After completion (or
December 31, 1994), this fund should be closed and any remaining balance should be transferred
based upon final construction cost type and in accordance with City policy. City Council action is
required to effect such fiscal closing and related transfer of assets.
City of Oak Park Heights, Minnesota
Management Report, Page 39
A,AR - Connection Chartyes
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 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
River Hills - 1st and 2nd Additions
Heritage - Partial $25,458 $41,551 $32,276 $99,285
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 (6,056) (10,533) (13,345) (29,934)
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 (41,232) (41,232)
School District Improvements:
I.S.D. #834 201,373 405,341 289,348 896,062
Less: amounts used for construction (160,000) (145,000) (289,348) (594,348)
Investment Earnings 2,646 8,500 2,782 13,928
Cash Transfers:
Debt Service - 1991 Bonds (27,500) (173,000) (200,500)
Debt Service - Assessments 11,843 11,843
FUND BALANCE - December 31, 1993 $55,607 $184,663 $42,805 $283,075
City of Oak Park Heights, Minnesota
Management Report, Page 40
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/Refunding Bonds of 1993. Such future
commitments (cash transfers) are as follows:
Sanitary Water
Year Sewer Works Total
1994 $10,000 $55,000 $65,000
1995 15,000 80,000 95,000
1996 20,000 100,000 120,000
1997 20,000 105,000 125,000
1998 20,000 105,000 125,000
1999 20,000 105,000 125,000
2000 20,000 115,000 135,000
2001 20,000 120,000 140,000
2002 20,000 125,000 145,000
2003 30,000 135,000 165,000
2004 5,000 50,000 55,000
Totals $200,000 $1,095,000 $1,295,000
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, 1995 and
1996 and the water works debt service commitments for 1994 and 1995. 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 41
.A.A.E. - Construction Summary
The A.A.E. construction program represents a major endeavor on the part of the City.
Construction costs totaling $3.9 million will have been spent by the end of 1994 on the City's
A.A.E. - Construction program as follows:
Total
Projects Estimated Costs
River Hills - 1st Addition $267,500
River Hills - 2nd Addition 214,900
1991 Utility Improvements 1,255,000
Wal -Mart Addition 242,700
High School Improvements 657,100
Norell Avenue/MN DOT 611,900
58th Street Improvements 683,800
Total Estimated Costs $3,932,900
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 F
Sanitary Sewer:
Lift Station $133,800
Trunk Lines 327,400
Water Works:
Water Tower 704,200
Trunk Lines 210200
Storm Sewer.
Trunk Lines 647,600
Total A.A.E. Trunk Facilities 2,023,200
Other Facilities:
Land/Right of Way 537,400
Streets 843,500
Lateral Lines:
Sanitary Sewer 234,700
Water Works 249,800
Storm Sewer 44,300
Grand Total $3,932,900
City of Oak Park Heights, Minnesota
Management Report, Page 42
As shown previously, A.A.E. Trunk facilities to date total $2,023,200 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 1,459,500
Total original (1989) budget $4,485,750
Overall financing for the above projects has been/will be financed as follows:
Description Amount Percent
Bond Proceeds -1991 Revenue Bonds $1,149,805 29.0%
Developer Charges:
Heritage/River Hills 465,217 11.7%
Wal-Mart 170,661 4.3%
School District 344,384 8.7%
A.A.E. Connection Charges:
Heritage/River Hills 17,211 0.4%
Wal-Mart 41,232 1.0%
School District 596,905 15.1%
State/MN DOT 631,594 15.9%
Cash Transfers:
Closed Bond Fund 295,617 7.5%
Utility Operations 201,036 5.1%
Interest Earnings 50,793 1.3%
Grand Total $3,964,455 100.0%
City of Oak Park Heights, Minnesota
Management Report, Page 43
Additional A.A.E. Connection Charges from the above developers and others have been
committed to debt service payments ($200,500) or are on hand in the various A.A.E. Connection
Charges funds at December 31, 1993 ($283,075).
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:
Project/Description Amount
Wal -Mart Addition $25,617
High School - Storm Sewer 360,000
High School - 58th Street (90,000)
Total $295,617
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 $270,000 cash transfer as the ultimate source
of financing for 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:
Project/Description Amount
1991 Utility Improvements - Water Tower $76,036
58th Street Improvements -
Sanitary Sewer and Water Trunk Lines 125,000
Total $201,036
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 44
NTERPRISE FUND
Ile financial statements for the Enterprise Fund (Water and Sewer Utilities) are presented in
Statements 14, 15 and 16 of the City's 1993 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 Department
1992 1993
Amoun Percent Amount Percent
Revenue.
Customer billings and other $166,354 100.00% $162,148 100.00%
Operating expenses:
Contractual services 46,554 27.98% 37,534 23.15%
Administrative and personnel charges 39,000 23.44% 40,000 24.67%
Other 2,795 1.68% 2,237 1.38%
Total operating expenses 88,349 53.10% 79,771 49.20%
Net income before depreciation 78,005 46.90% 82,377 50.80%
Depreciation w purchased assets _ 9,741 7
Net operating income $68,264 $74,977
$180,000 Water Operating
Revenue & Expense
$160,000
$140,000
$120,000 Profit
All Other Expenses
$100,000
Contractual Services
$80,000 WNEIr . ...... . N Operating Revenue
$60,000
$40,000
IN.'
.M.
$ 20,000 —
f
0 ...
1988 1989 1990 1991 1992 1993
IV�VW',�'WiVV!dIVWWI' ItlJViVVWIIYIIiu! rV' �I�I WVdWViVuo, W! 1iIIIWw�uiVls' mi6lluiillIhIIVIV'JrWIV,'�tY Yl'�,�VLI��WI'WWtiuliiJm � u�dVWIIIIViIVWIio�iud�dr<' i, d> ISIWWuIr li�rsl�Bu�l �' il�dl' dBJ mWI�VIWd! V' iiltVIWI' V��EIV�V�VV�' �YVWiIW�iW' tW�iW�IIyWt' W' VIVIWiI�IWYiWVIVV� 'Iul�dVIVllYWVd'i�l
City of Oak Park Heights, Minnesota
Management Report, Page 45
Sewer Department
1992 1993
Amount Percent Amount Percent
Revenue:
Customer billings and other $225,314 100.00% $273,919 ® 100.00%
Operating expenses:
MWCC 154,351 68.50% 174,944 63.87%
Other contractual services 10,557 4.69% 12,286 4.49%
Administrative and personnel charges 39,000 17.31% 40,000 14.60%
Other 224 0.10 2,517 0.92%
204,132 90.60% 229,747 83.88%
Net income before depreciation 21,182 9.40% 44,172 16.12%
Depreciation - purchased assets 2,411 „ 2,389
Net operating income $18,771 $41,783
$275,000 fewer Operating
Revenue & Expense
$250,000
$22 5,000 I
$200,000
1_
$ 75,000 j r/ / / /�� /� / / /•1 All other Expenses
$150,000
MW
cc
$125,000
_<<< :�.:: Operating Revenue
$100 000 — ... }�::. }:�: ":. — �v �..:.. ... :. } }} � g
}:5.::• };:.v} }::v S•; }S \•.l \•.S•: :.., \.' S} tip\ \ \•v
"i \Ytititi \L } :i •} 'v4U \ti•.L \tiv.. v. \. \.S:J'S•:ui• ti ; -j N• Y4 \:4M' �fitiv
}:SA�•i.�� � \:♦`i ��i }\ :ti:+` \:•h. 4 �`.•:l \C: {i {' •
$75,000 : :.:. •.. �:• : ,5: «5�5 . �: : �:•.v,
::i ::'4iin ?f :; \O�. \ \' ' •. 5 :.4:5• }:YS•':
•' Tiiii :•� \ti : }fti:• i�ti2}V x:4 Cv \ \ \: \. >�:2 4� \�} \Q: ` }:v:•:;;'•:S�i
$50,0
00
, :i \:i ' ?: "rt• i�:iv':�tti;�: {v { :h \}�• } n \ti %iii
$25,000
'�'i�:k:;:;'•: ::}`. {; }•• }i :: •iiiii: ii?f,.•ri• >:• t�titi \i
$0 }::::.
1988 1989 1990 1991 1992 1993
City of Oak Park Heights, Minnesota
Management Report, Page 46
The single largest expense of the sewer operations is the contractual services of the
Metropolitan Waste Control Commission (MWCC). The MWCC charges comprise over 60% of
total sewer expenses. The City must set rates at levels adequate to pay for this 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:
$250,000
MWCC Billings
$200,000
$150,000
$100,000 °� l' :.. t -` ':; }`
'`• #i: .:t?:C: 4:..
IS a; :'i.'$i.:: ::.$Ti:?_
NE
$50 000
qq /�(� ;::v':2: 'r3�`.�3: `'�' {•'. io-`k1.,'v: <:' _ ?4:Cv; - :�:t :: -°}`; <2• {`w`'
4 \\ . _ , \: \:? :4t•:i;
_ ':: : tiiv, \ti; :ti-.;: :,�• '.}vim; hC\ v'
1986 1987 1988 1989 1990 1991 1992 1993 1994
MWCC Estimated MWCC Actual
City of Oak Park Heights, Minnesota
Management Report, Page 47
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 1994 were as follows:
Estimated Actual
Percent Percent
Year Amount Change Amount Change
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 0 1o) 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
1994 206,537 10.9% 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.
City of Oak Park Heights, Minnesota
Management Report, Page 48
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
Increase Ina
December 31, Amount (Decrease) Amount (Decrease)
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
1993 944,554 66,220 1,303,756 113,505
The Water and Sewer Utility operations of the City are financed by user charges designed to
coverall operafag expenses; including depreciation of the waterworks distribution system and
sanitary sewer collection system. Such user rates are reviewed annually by the City Engineer and
adjusted by the City Council (when necessary) to provide sufficient revenues to cover all operating
expenses. The retained earnings of the City's Water and Sewer Operating Fund was $1,303,756
at December 31, 1993. This retained earning is partially the result of City policy setting utility rates
at levels sufficient to cover all operating expenses plus depreciation on assessed/donated systems.
City of Oak Park Heights, Minnesota
Management Report, Page 49
The following schedule summarizes the financial operations of the City's Water and Sewer
Utility from inception through December 31, 1993.
Amount
Net income from operations (1969 -93) $315,230
Credit arising from depreciation on assessed/donated systems 930,363
Interest:
Earned on investments $499,269
Paid on bonded debt (129,245) 370,024
Cash transfers to partially finance assessed/donated systems:
Well and pumphouse #2 (145,515)
Second water tower (76,036)
58th street - sanitary sewer costs (125,000)
Other projects (9,434) (355,985)
Other non - operating income 44,124
Retained Earnings - December 31, 1993 $1,303,756
The above "credit arising from depreciation on assessed/donated systems" is substantially
equivalent to the City Engineers "renewal and replacement" and "capital reserve" costs which are
used for establishing user rates. This "cost" ($930,363 over the past twenty-five years) represents
a major portion of the existing retained earnings of the City's Water and Sewer Operating Fund.
The purpose of this "cost" is to create a reserved balance for partial financing of future cost to
°'renew" and/or "replace" the existing systems. Such partial financing will be required as these
systems are replaced because the City will probably be unable to assess 100% of such replacement
costs (i.e. City-wide Street Reconstruction Program).
We recommend that the City Council create a separate capital project fund (Renewal and
Replacement Fund) to separate this reserved balance from the Water and Sewer Utility Operating
Fund. The initial cash transfer into this separate fund should be $574,378 representing the net
depreciation charges accumulated since 1969 (i.e.: $930,363 - $355,985). Annually, thereafter
(starting at December 31, 1994) additional cash transfers equal to such depreciation (subject to
sufficient levels of net income) should be transferred Such reserved balance shall be used to
finance water system and sanitary sewer system costs as deemed appropriate. All such annual cash
transfers nod uses of such monies shall be subject to approval (including budget approval) of the
City Council.
City of Oak Park Heights, Minnesota
Management Report, Page 50
After the above recommended cash transfer the retained earnings will decrease from
$1,303,756 to $729,378; of which $661,765 has been reserved/designated for the construction of
a second water tower. Such water tower has been constructed and financed by the General
Obligation Water and Sewer Revenue Bonds of 1991. Such bonds are expected to be financed by
special connection charges in the Annexation Area Extended. When such bonds were sold, the
then existing balance ($661,765) was intended to provide "back -up" financing for such bonds.
Accordingly, the purpose of this designation should be redefined as a Debt Service Reserve for
Revenue Bonds. City Council action is required to effect this redefinition.
SUMMARY
The following listing is a summary of the items which should be monitored, investigated
and/or resolved during 1994.
• Continue to monitor property tax and special assessment collection rates.
• Continue the City policy of balanced and conservative operating budgets to assure the
continued financial strength of the City.
• Approve and effect a cash transfer from the Closed Bond Fund to the Improvement Bonds
of 1990 Debt Service Fund at December 31, 1994.
• Analyze and review all capital project construction accounts at December 31, 1994 and
provide additional financing, as necessary.
• Develop a plan of action for the financing of future capital improvements (City-wide street
reconstruction, etc.).
• Approve and effect the creation of a new "Renewal and Replacement Fund" to better define
the intended purpose of Water and Sewer Utility Reserves.
• Redefine the existing reserved/designated balance of the City's Water and Sewer Operating
Fund as a Revenue Bond Debt Service Reserve ($661,765).