HomeMy WebLinkAboutManagement Report and Recommendations CITY OF OAK PARK HEIGHTS, MINNESOTA
MANAGEMENT REPORT
AND RE COMMENDATIONS
DECEMBER 31, 1994
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City of Oak Park Heights, Minnesota
Management Report, Page 2
COMBINED BALANCE SHEET
The Combined Financial Statements of the City are presented in Statements 1 through 5 of the
1994 Annual Financial Report. The following comments relate to these financial statements of the
City.
Cash and Invf stments
December 31, Increase
Description 1993 1994 (per)
Checking account ($19,384) ($13,443) $5,941
Investments 3,923,666 4,131,459 207,793
Petty cash 100 100 0
Totals $3,904,382 $4,118,116 $213,734
The December 31, 1993 and 1994 checking account overdrafts are book overdrafts only and do
not reflect bank overdrafts. These balances are a result of the City's policy of depositing cash in
interest bearing accounts in order to maximize investment earnings on City monies not needed for
current expenditures. The City earned $195,803 of interest on investments during 1994 compared
to $160,259 in 1993. This increase is primarily the result of higher investment yields available to
the City. Investments at December 31, 1993 and 1994 were as follows:
- December 31,
1993 1994
Investment Description Yield Balance Yield Balance
Money Market Savings 2.60% $178,088 2.70% $178,947
AIM Government Fund Various 1,287,326 Various 1,084,572
Dreyfus Government Cash Management Various 252 - -
Certificate of Deposit 3.30% 277,000 5.00% 200,000
Certificate of Deposit 3.30% 142,000 4.60% 445,000
Certificate of Deposit 3.20% 430,000 4.85% 200,000
Certificate of Deposit 5.00% 200,000 4.85% 195,000
Certificate of Deposit 3.20% 365,000 5.75% 500,000
Certificate of Deposit 3.25% 600,000 5.75% 200,000
Certificate of Deposit 3.17% 244,000 5.40% 168,000
Certificate of Deposit 3.17% 200,000 5.92% 200,000
Certificate of Deposit - - 6.00% 630,000
Certificate of Deposit - - 5.90% 130,000
Totals $3,923,666 $4,131,519
City of Oak Park Heights, Minnesota
Management Report, Page 3
Collateral for Deposits
Minnesota Statutes (MS 118) requires City Council approval of depositories and that certain
levels of pledged securities (collateral) 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, 1994.
Daze From Other Governmental Units
December 31, Increase
Description 1993 1994 Decrease)
Fines $2,682 $4,063 $1,381
Gravel tax 506 - (506)
MWCC - final cost allocation 11,350 33,461 22,111
City of Bayport 1,811 1,027 (784)
MN DOT (Norell Ave.) 631,594 - (631,594)
ISD #834 - Liaison officer 8 7 (1,072)
Totals $656,253 $45,789 ($610,464)
All of the above amounts are currently collectible.
City of Oak Park Heights, Minnesota
Management Report, Page 4
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.
1991 1992 1993 1994
Delinquent taxes - January 1 $33,458 $35,036 $39,017 $17,563
Current levy 1 1 1 1
Total collectible 1,233 012 1,234 1 1
Receipts:
Current 1,134,365 1,182,272 1,294,478 1,336,980
Delinquent 15 8,815 26,441 3,359
Total receipts 1,149,468 1,191,087 1,320 1,340,339
Adjustments (48,508) (4,486L (2,845) (708)
Delinquent taxes - December 31 $35,036 $39,017 $17,563 $21,146
Current collection as a percent of current levy 95 %/98 99% 99% 99%
Total collections as a percent of current levy 96 0 /o/99% 99% 101% 100%
The adjustments to delinquent taxes receivable consist of abatements of property taxes as a
result of market valuation adjustments. 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 5
Local property taxes are levied by the City each December for collection in the subsequent year.
However, this tax levy is not entirely paid by the property owners. A part of each annual tax levy
is 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 commercial /industrial 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 1995 budgeted:
1995
Payer 1991* 1992 1993 1994 Budgeted
Local taxpayer $1,243,053 $1,243,786 $1,358,593 $1,372,448 $1,470,166
State credits 48,141 38,187 55,377 76,640 77,980
Fiscal disparities:
Contribution (153,459) (137,601) (170,292) (167,432) (172,431)
Distribution 61,819 55,182 58,632 62,974 55,270
Totals $1,199,554 $1,199,554 $1,302,310 $1,344,630 $1,430,985
* 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 1995 budgeted.
1995
Payer 1991 1992 1993 1994 Budgeted
Local taxpayer 103.6% 103.7% 104.3% 102.1% 102.7%
State homestead credits 4.0% 3.2% 4.3% 5.7% 5.4%
Fiscal disparities:
Contribution (12.8 %) (11.5 %) (13.1 %) (12.5 %) (12.0 %)
Distribution 5.2% 4.6% 4.5% 4.7% 3.9%
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
Special Assessments Receivable
Special assessments receivable consisted of the following types and amounts:
December 31, Increase
Description 1993 1994 (Decrease)
Delinquent $1,217 $1,246 $29
Due from County 587 95 (492)
Deferred 126,109 93,257 (32,852)
Special Deferred 144,800 144 -
Totals $272,713 $239,398 ($33,315)
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.
Special deferred assessments 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 remaining amount ($130,000) 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.
City of Oak Park Heights, Minnesota
Management Report, Page 7
Delinquent special assessments have been as follows for the past several years:
Delinquent Increase
December 31, Assessments (Dec=91 -1
1985 $12,020 ($1,830)
1986 10,882 (1,138)
1987 10,781 (101)
1988 12,408 1,627
1989 101,058 88,650
1990 71,842 (29,216)
1991 57,391 (14,451)
1992 50,522 (6,869)
1993 1,217 (49,305)
1994 1,246 29
The above 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 Ponds of 1987 and Osgood
Partners, Inc. for their Rapid Oil Project. A schedule of the 1994 assessment activity for these
projects is as follows:
Delinquent balance - January 1, 1994 $1,217
Add
Current installments 41,975
Amount collectible 43,192
Less collections:
Current 41,911
Delinquent 35
Total collections 41,946
Delinquent balance - December 31, 1994 $1,246
Current collections as a percent of current levy 100%
Total collections as a percent of current levy 100%
City of Oak Park Heights, Minnesota
Management Report, Page 8
CCom nsated Absences Paablg
Compensated absences payable consist of earned but unused vacation and severance pay
benefits. Severance pay benefits are payable to the City's employees who have been with the City
in excess of ten years and is an amount equal to fifty percent of unused sick leave. A schedule of
compensated absences is as follows:
1993 1994
Severance $37,162 $61,169
Vacation 7 10,643
Total $44,449 $71,812
Bonds Pale
The City had three bond issues outstanding during 1994. A summary of the 1994 activity of
each bond issue is as follows:
Bond Issues
Water &
Sewer Bonds
Storm Sewer of 1991/
Improvement Refunding Refunding
Bonds Bonds Bonds
of 1990 of 1992 of 1993 Totals*
Balance - January 1, 1994 $125,000 $135,000 $1,250,000 $1,510,000
Principal payments 125200 15,000 55,000 195,000
Balance - December 31, 1994 $0 $120,000 $1,195,000 $1,315,000
Retirement Schedule:
1995 $ - $15,000 $55,000 $70,000
1996 - 15,000 75,000 90,000
1997 - 20,000 80,000 100,000
1998 - 20,000 85,000 105,000
1999 -2006 - 50 900,000 950,000
Total $0 $120,000 $1,195,000 $1,315,000
*Excluding revenue bonds to be paid from escrowed monies.
Detail of outstanding bond issues is contained in Exhibit 2 of the 1994 Annual Financial
Report.
City of Oak Park Heights, Minnesota
Management Report, Page 9
Fund Equity
December 31, Increase
Fund Group 1993 1994 (Decrease}
Fund Balance:
General $1,106,882 $1,197,835 $90,953
Special Revenue 7,611 9,111 1,500
Debt Service 1,481,100 1,334,697 (146,403)
Capital Projects 1,852,057 2,486,524 634,467
Totals 4,447,650 5,028,167 580,517
Retained earnings:
Enterprise (water & sewer utility) 1,303,756 802,498 (501,258}
Totals $5 $5 $79,259
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. The decrease in the Enterprise Fund retained earnings is the result of the
transfer of $664,077 to the Renewal and Replacement Capital Project Fund.
City of Oak Park Heights, Minnesota
Management Report, Page 10
GENERAL, FiJND
The General Fund of the City is maintained to account for the current and capital outlay
expenditures common to all cities. Property taxes are the primary revenue source for the City's
General Fund. A history of General Fund revenue is as follows:
Property Takes State Aids All Other Total Revenue
Year Amount Percent Amount Percent Amount Percent Amount Percent
1984* $543,573 62% $152,245 17% $181,288 21% $877,106 100%
1985* 559,613 63% 157,995 18% 163,771 19% 881,379 100%
1986* 579,557 63% 168,341 18% 165,625 19% 913,523 100%
1987* 681,636 68% 183,194 18% 132,538 14% 997,368 100%
1988 804,441 70% 194,072 17% 152,137 13% 1,150,650 100%
1989 868,420 . 68% 198,888 16% 211,570 17% 1,278,878 101%
1990 1,142,770 79% 25,627 2% 280,348 19% 1,448,745 100%
1991 1,057,578 72% 36,262 2% 366,575 25% 1,460,415 100%
1992 1,121,894 73% 69,172 4% 349,717 23% 1,540,783 99%
1993 1,241,127 71% 87,874 5% 413,444 24% 1,742,445 100%
1994 1,232,906 68% 118,768 7% 465,964 26% 1,817,638 101%
1995 ** 1,329,370 71% 120,115 6% 412,615 22% 1,862,100 99%
* includes Federal Revenue Sharing
** Budgeted
City of Oak Park Heights, Minnesota
Management Report, Page 11
A graph of property taxes, state aids, and other revenue for the General Fund is as follows:
General Fund
Revenue by Source
$1,400,000
$1,200,000
$1,000,000
$800,000
$600,000
$400,000
$200,000
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
budgeted
® State A 0 Ot h e r R E Property T
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 12
@ Aids
State aids of the General Fund have consisted of the following for the past six years (with 1995
budget):
1995
State Aid 1989 1990 1991 1992 1993 1994 Bu et
Local government aid $101,527 $ - $ - $ - $ - $ - $ -
H.A.C.A. 72,498 578 4,611 36,740 54,358 75,245 76,615
Police aid 24.863 25,049 31,651 32,432 33.516 43.523 43,500
Totals $198,888 $25,627 $36,262 $69,172 $87,874 $118,768 $120,115
Change ($173,261) $10.635 $32,910 $18,702 $30,894 1347
% Change (87%) 41% 91% 27% 35% 1%
A graph of State aids for the past seven years (with the 1995 budget) is presented below:
$200,000
$180,000 State Aids
$160,000
$140,000
$120,000
$100,000
$80,000
$60,000
$40,000
$ 20,000
: i • ? } ? % ?xnv}:. }•• } } }F:. ? ?? ?'• }i }: nisi:: tititi }:Jti• ?:ii:$i}i::'}:•'.:i'ifw:: ice}:: i:::::x } :: ?.i' ?{ ?:iii .:::hv ? } ?:: :.: ^:fii:•:::
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1988 1989 1990 1991 1992 1993 1994 1995
Btxiget
Police Aid II H.A.C.A. L.G.A.
City of Oak Park Heights, Minnesota
Management Report, Page 13
Other General Fund Revenue
Other revenue of the General Fund have consisted of the following for the past five years (with
1995 budget):
1995
Description 1990 1991 1992 1993 1994 Budget
Licenses and permits $48,870 $122,804 $93,908 $62,898 $60,914 $71,765
Charges for services:
Refuse collection 43,095 64,721 66,076 103,039 108,310 113,000
Enterprise 57,000 57,000 78,000 80,000 94,250 95,000
Other 2,741 2,248 2,626 4,476 2,681 2,000
Inspections - - - 20,800 34,402 20,000
Fines and forfeits 42,165 36,174 38,557 44,189 55,111 49,200
Interest earnings 51,983 62,064 33,728 25,180 34,473 30,000
Other 34,494 21,564 36,822 72,862 75,823 31650
Total $280,348 $366,575 $ 349,717 $413,444 $465,964 $412,615
The City began charging for refuse collection in 1988. Refuse collection revenue as a percent
of refuse collection expenditures is as follows:
Refuse Refuse Revenue as
Collection Collection Percent of
Year Revenue Expenditures Difference Expenditures
1988 $7,947 $129,000 ($121,053) 6%
1989 26,850 174,244 (147,394) 15%
1990 43,095 216,388 (173,293) 20%
1991 64,721 248,806 (184,085) 26%
1992 66,076 251,121 (185,045) 26%
1993 103,039 297,452 (194,413) 35%
1994 108,310 326,926 (218,616) 33%
1995* 113,000 348,000 (235,000) 33%
*Budget
City of Oak Park Heights, Minnesota
Management Report, Page 14
The following schedule and graph reflect the revenue of the General Fund for the past two
years including 1995 budget. Additional detail of the revenue is presented in Statement 7 of the
1994 Annual Financial Report.
General Fund Revenue
1993 1994 1995 Bud et
Descri Lion Amount Percent Amount Percent Amount Percent
General property taxes $1,262,465 72.5% $1,254,999 69.0% $1,329,370 71.4%
Intergovernmental: -
State 87,874 5.0% 118,768 6.5% 120,115 6.5%
County and other 21,116 1.2% 17,591 1.0% 15,150 0.8%
Licenses and permits 62,898 3.6% 60,914 3.4% 71,765 3.9%
Charges for services 208,315 12.0% 239,643 13.2% 230,000 12.4%
Interest on investments 25,180 1.4% 34,473 1.9% 30,000 1.6%
Fines and forfeits 44,189 2.5% 55,111 3.0% 49,200 2.6%
All other 30,408 1.8% 36,139 2.0% 16 0.8%
Totals $1,742,445 100.0% $1,817,638 100.0% $1,862,100 100.0%
General Fund
Property Taxes 1995 Budgeted Revenue
71.4% {...{ ::.•:::.. :.. : {:..
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g
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a
� n Permits Io
ce ses and e 3
''}::i:: i. fi{ Ih \ � :i: " ;:• . \{ \i- { %.::' -Ti: }: :}i:::i;LF•:
All Other \\ Interest on Charges for Services
12.4%
3.4% Investments
1.6%
City of Oak Park Heights, Minnesota
Management Report, Page 15
Expenditures (by major classification) for the past two years plus the 1995 budget, are as
follows:
General Fund Expenditures
1993 1994 1995 Budget
Descri ption Amount Percent Amount Percent Amount Percent
Current expenditures:
General government $364284 22.1% $370,356 21.3% $410,515 22.0%
Public safety 651,867 39.5% 682,063 39.2% 737,570 39.5%
Streets and highways 94,365 5.7% 100,059 5.7% 94,925 5.1%
Sanitation 312,423 18.9% 338,498 19.4% 363,000 19.4%
Recreation 160,257 9.7% 164,685 9.5% 180,540 9.7%
Contingency - 0.0% - 0.0% 15,000 0.8%
Capital outlay 15,789 1.0% 36,024 2.1% 30,550 1.6%
Transfer out 50 3.1% 50 2.8% 35 1.9%
Totals $1,648,985 100.0% $1,741,685 100.0% $1,867100 100.0%
A graph of the above expenditures is presented below:
General Fund
1995 Budgeted Expenditures
Streets & Highways
Public Safety 39.5% :f- <ii : ::: >:: <: : {..:. }.::{::
:tiN; Ali }Yii }y} }iii: }y }: }2 } } }i14:: }i }v4 ?i n.= `}yX•}::v,v.•:h� \:t:8.ii� tiv. %vy.
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Recreation 9.7
0
General Government
22.0% Capital Outlay & Other
4.3%
City of Oak Park Heights, Minnesota
Management Report, Page 16
The fund balance of the General Fund was $1,197,835 at December 31, 1994 representing a
$90,953 increase during 1994 as follows:
Actual Revenue Greater Than
(Less Than) Budgeted Revenue:
• General property taxes:
• Current and deliquent ($11,978)
• Payment in lieu of tax 7,696
• Lost TIF 14,397
• Intergovernmental 13,063
• Licenses and permits 4,614
• Charges for services (6,722)
• Fines and forfeits 14,511
• Interest on investments 9,473
• Other 17 $62,843
Budgeted Expenditures (Greater Than)
Less Than Actual Expenditures:
• General government 28,369
• Public safety 24,478
• Streets and highways 3,156
• Sanitation 8,902
• Recreation 13,205 78,110
Transfer to Capital Improvements Fund (50,000)
Net increase in fund balance for 1994 $90,953
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 17
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)
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
1993 1,106,882 93,460
1994 1,197,835 90,953
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 I the Benefits of Reserves
Cash flow timing. differences Provides favorable bond rating indicator.
Expenditures are incurred somewhat evenly througho
year. Property taxes & State aids are not received unti
second half of the year. A reserve of one -half of such
revenues is therefore recommended. Supplements revenues with inves tment earnings.
Inter nm govetental revenue cutbacks. Provides resources for minor projects or
The City is vulnerable to legislative actions at both thfeasibility reports.
& State level. Federal funding to local government ha
substantially curtailed in recent years. Annual adjustment of ° Avoids temporary overdrafts prior to
Local Government Aid & HACA formulas is a constant threat. major receipts.
Capital outlay replacement. ® 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 unanticipated expenditures. certain capital outlay.
Examples include natural disasters, lawsuits, comparable
worth implementation and premature breakdown
of vital equipment ° Provides the City greater options to deal with
unexpected events.
Special City Council projects.
Preliminary studies, interfund loans and minor projects
are examples of reserve uses.
City of Oak Park Heights, Minnesota
Management Report, Page 18
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, 1993 and 1994, the General Fund balance was
designated as follows:
December 31,
1993 1994
Designated for
Cash flow $660,000 $703,000
Contingent employee benefits 129,000 158,744
General contingency 267,000 280,000
Capital Improvements 27,982 42,379
Consolidation study 8,340 5,559
Ensuing years budget deficit - 5,000
Subtotal 1,092,322 1,194,682
Undesignated 14 3,153
Total fund balance $1,106,882 $1,197,835
Property taxes and state aids account for over 75% of the revenue of the general fund.
Property taxes and state aids are not received until July and December of each year (i.e., the second
half of the year). As a result, the City is required to have sufficient reserves at the beginning of the
year to fund operations of the first half of the year. For the City of Oak Park Heights, the
recommended cash flow reserve is $703,000, computed as follows:
Cash Flow Reserve
1995 tax levy $1,329,370
1995 budgeted HACA 76,615
Total $1,405,985
Recommended reserve (one -half of tax levy and state aids) $702,992
City of Oak Park Heights, Minnesota
Management Report, Page 19
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:
General Contingency Reserve
December 31,
Description 1993 1994
Ensuing Year's Budget $1,782,000 $1,867,100
Reserve Amount @ 15% $267,000 $280,000
The Contingent Employee Benefits reserve is computed based upon accrued, but unpaid,
employee benefits as follows:
Employee Benefits Reserve
December 31,
Employee Benefit 1993 1994
Vacation Leave $7,550 $10,643
Sick/Severance Leave 121 148,101
Total $129,000 $ 158,744
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.
City of Oak Park Heights, Minnesota
Management Report, Page 20
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 1994.
Forfeiture and Seizure Fund
This fund was established in 1991 to account for property forfeited pursuant to MS 609.531.
A summary of the financial activity of this fund from inception is as follows:
Prior
Years 1994 Total
Revenue:
City share of confiscated property $18,142 $4,000 $22,142
Interest earnings 518 310 828
Total 118,660 $4,310 22,970
Expenditures:
Public safety:
Contractual services $4,420 $1,865 6,285
Capital outlay 6,629 945 7,574
Total $11 $2,810 13,859
Fund balance - December 31, 1994 $9,111
The use of these funds is restricted by MS 609.5315 subd. 5 to "supplement the agency's
operating fund or similar fund for use in law enforcement."
City of Oak Park Heights, Minnesota
Management Report, Page 21
DEBT SERVICE FUNDS
The combining financial statements for the Debt Service Funds are presented in Statements 10
and 11 of the 1994 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 three Debt Service Funds during 1994 as
follows:
Fund Balance
December 31, Increase
Fund 1993 1994 (Decrease)
Storm Sewer Bonds of 1982/Refunding Bonds of 1992 $13,208 $15,971 $2,763
G.O. Improvement Bonds of 1990 114,071 - (114,071)
G.O. Revenue Bonds of 1991/Refunding Bonds of 1993 1 1 (35,095)
Totals $1,481,100 $1,334,697 ($146,403)
Storm Sewer Bonds of 1982 /Refunding Bonds of 1992
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 22
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 projection of the
final fund position based on scheduled levies and debt requirements is as follows:
Fund Balance - December 31, 1994 $15,971
Additions:
Future Scheduled tax levies @ 100% 150,000
Total 165
Deductions:
Debt Requirements:
Principal 120,000
Interest 24,010
Total 144,010
Projected Fund Balance $21,961
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 23
G.O. Improvement Bonds of 1990
These bonds were issued to provide financing for the Valley Point 2nd Addition Project. Final
bond maturity was in 1994.
This fund did not have sufficient assets to meet bonded debt requirements. The deficit was
incurred because the City was not able to collect certain special assessments. These assessments
were abated by the City Council in March, 1994. This abatement required an alternative source of
financing. The City provided such alternative financing by a cash transfer from the City's Closed
Bond Fund of $15,775.
Water and Sewer Revenue Bonds of 1991/Refunding 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 1994, 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 1995 and 1996 scheduled debt
payments.
Similar projected cash transfers for December 31, 1995 (Sanitary Sewer $15,000 and Water
Works $80,000) are designed to meet the 1996 scheduled debt payments. The City should record
these cash transfers at December 31, 1995. City Council approval is required to effect these cash
transfers.
City of Oak Park Heights, Minnesota
Management Report, Page 24
Future (1995 through 2004) projected cash transfers are as follows:
Sanitary Water
Year Sewer Works Total
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 $190,000 $1,040,000 $1,230,000
City of Oak Park Heights, Minnesota
Management Report, Page 25
A projection of cash flow of the Water and Sewer Revenue Bonds of 1993 assuming cash
transfers from the Connection Charge Fund is as follows:
City of Oak Park Heights, Minnesota
Projection of Cashflow
Water and Sewer Revenue Bonds of 1993
Total
Cash Balance Property Special Other Investment Projected Debt Other Cash Balance
Year January 1 Taxes Assessments Receipts Interest Receipts Payments Disbursement December 31
1995 $221,277 $0 $25,547 $95,000 $10,346 $130,893 $127,258 $o $224,912
1996 224,912 0 24,009 120,000 10,869 154,878 126,830 0 252,960
1997 252,960 0 22,471 125,000 12,298 159,769 129,130 0 283,598
1998 283,598 0 6,114 125,000 13,655 144,769 131,090 0 297,277
1999 297,277 0 0 125,000 14,298 139,298 132,690 0 303,886
2000 303,886 0 0 135,000 14,712 149,712 133,910 0 319,688
2001 319,688 0 0 140,000 15,571 155,571 134,826 0 340,433
2002 340,433 0 0 145,000 16,620 161,620 150,326 0 351,727
2003 351,727 0 0 165,000 17,340 182,340 149,806 0 384,261
2004 384,261 0 0 55,000 18,545 73,545 158,806 0 299,000
2005 299,000 0 0 0 14,107 14,107 166,806 0 146,301
2006 146,301 0 0 0 6,938 6,938 78,900 0 74,339
Total $0 $78,141 $1,230,000 $165,299 $1,473,440 $1,620,378 $0
Assum tions
Special assessment collection rate .................... 95%
Property tax collection rate . ............................... 99%
Investment interest rate ..... ............................... 5.00%
Negative interest charged to funds ? .................. no
As shown above, this fund has a projected surplus of $74,339 upon final bond maturity. This
projection is dependent on sufficient transfers from the Connection Charge Fund. We recommend
periodic updates of projected connection charges to determine if connection charges will be
sufficient to finance repayment of this bond issue.
The City has established a reserve in the Water and Sewer Utility Fund of $661,765. This
reserve was established to provide "back -up" financing for this bond issue.
City of Oak Park Heights, Minnesota
Management Report, Page 26
CAPITAL PROJECT FUNDS
The financial statements for the Capital Project Funds are presented in Statements 12 and 13 of
the City's 1994 Annual Financial Report. The fund balance (deficits) of the Capital Project Funds
were as follows at December 31, 1993 and 1994:
December 31, Increase
Fund 1993 1994 (Decrease)
Closed Bond Fund $980,678 $1,036,303 $55,625
Capital Improvements Fund 263,476 255,767 (7,709)
Park & Recreation Development 65,267 90,237 24,970
St. Croix Mall (TIF) 18,327 84,811 66,484
River Hills 2nd Addition 0 0 0
Street reconstruction 66,437 53,784 (12,653)
East Oaks - Swagar Bros. 0 1,173 1,173
Valley View States - Krongard 0 0 0
Renewal and Replacement 0 676,284 676,284
AAE - Wal -Mart Addition 0 434 434
AAE - High School Improvement 109,843 23,984 (85,859)
AAE - Alorell Ave /MN DOT Improvement 22,726 0 (22,726)
AAE - 58th Street Improvement 42,228 19,780 (22,448)
AAE - 58th Street Improvement - Phase II 0 (16,381) (16,381)
AAE - Sanitary Sewer Connection 55,607 55,767 160
AAE - Water Connection 184,663 150,004 (34,659)
AAE - Storm Sewer Connection 42 54 11
Totals $1 $2,486,524 $634,467
City of Oak Park Heights, Minnesota
Management Report, Page 27
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
Description Years 1994 12/31/94
Financial Resources:
Transfers In:
1960's Bond Issues $345,901 $ - $345,901
1970's Bond Issues 211,894 - 211,894
1980's Bond Issues 256,717 - 256,717
Construction Funds:
AAE - Storm Sewer 90,000 - 90,000
AAE - Streets 209,383 - 209,383
Other 25,244 - 25,244
General Property Taxes 1,838 206 2,044
Special Assessments 310,467 13,690 324,157
Connection Charges:
Krongard - 21,821 21,821
Other 146,663 3,150 149,813
Escrow Interest Earnings 3,325 - 3,325
Investment Interest 417,079 29,651 446,730
Temp. Loan Interest - 19161 19
Total Financial Resources $2,018,511 $87,679 2,106,190
Financial Uses:
Expenditures:
Professional services 56,834 16,279 73,113
Transfers Out:
General Fund 22,100 - 22,100
Bonds of 1990 - 15,775 15,775
Capital Improvement Fund 200,000 - 200,000
Construction Funds:
Other City Projects 163,899 - 163,899
AAE - Storm Sewer 360,000 - 360,000
AAE - Streets 235,000 - 235,000
Temp. Loan:
MN - Dot 610,000 (610,000) -
Total Financial Uses $1 ($577,946) 1,069,887
Fund Balance - December 31, 1994 $1,036,303
City of Oak Park Heights, Minnesota
Management Report, Page 28
The purpose of the Closed Bond Fund is to receive residual balances of closed special
assessment bonds. Amounts on hand at December 31, 1994 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.
• bong -term capital improvement program financing.
The existence of reserved balance in the City's Closed Bond Fund gives the City a v 1 IMb&l
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 period and assessment collection period financing of small assessable
projects.
d) Temporary financing for the 1987 Improvement 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 k considered neither adequate 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. Closed Bond Fund is probably best used as a revolving fund rather than as an
excess fund to be expended
City of Oak Park Heights, Minnesota
Management Report, Page 29
A projection of Closed Bond Fund activity is as follows:
1984- Estimated Estimated Estimated
Description 1994 1995 1996 1997
Financial Resources:
Transfers In:
1960's Bond Issues $345,901 $ - $ - $ -
1970's Bond Issues 211,894 - - -
1980's Bond Issues 256,717 - - -
1990's Bond Issues - - - -
Construction Funds: -
AAE - Storm Sewer 90,000 50,000 - 50,000
AAE - Streets 209,383 - - -
Other 25,244 - - -
General Property Taxes 2,044 - - -
Special Assessments 324,157 10,900 8,100 3,700
Connection Charges:
Krongard 21,821 50,000 50,000 38,253
Swager - - - -
Other 149,813 - - -
Escrow Interest Earnings 3,325 - - -
Investment Interest 446,730 - - -
Temp. Loan Interest 19,161 - - -
Total Financial Resources 2106,190 110,900 58 91,953
Financial Uses:
Expenditures:
Professional Services 73,113 - - -
Transfers Out:
General Fund 22,100 - - -
Bonds of 1990 15,775 - - -
Capital Improvement Fund 200,000 - - -
Construction Funds:
Other City Projects 163,899 - - -
AAE - Storm Sewer 360,000 - - -
AAE - Streets 235,000 - - -
Street Reconstruction - 59,600 - 25,000
Valley View Estates - Krongard - 40,000 - -
58th Street - Phase II - 30,000 - -
Total Financial Uses 1,069,887 129,600 0 25,000
Fund Balance - December 31 $1,036,303 $1,017,603 $1,075,703 $1,142,656
As shown above, the projection anticipates transfers from the Storm Sewer Connection Fund
as repayment of the $360,000 transfer to the High School Improvement Fund.
City of Oak Park Heights, Minnesota
Management Report, Page 30
Capital Improvements 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:
Prior
Description Years 1994 Total
Financial Resources:
Transfers In:
General Fund $995,075 $50,000 $1,045,075
Closed Bond Fund 200,000 - 200,000
Interest Earnings 173,323 9,509 182,832
Sale of Property 9,414 - 9,414
Donations /Other 29,498 2,531 32,029
Total Financial Resources $1,407,310 $62 1,469,350
Financial Uses:
Expenditures:
Municipal Bldg. - Phase I $106,785 $ - 106,785
Municipal Bldg. - Phase 2 486,637 - 486,637
Sealcoat 218,291 436 218,727
Recreation 198,354 - 198,354
A.D.A. - 34,553 34,553
City Hall - Lights Retrofit - 8,160 8,160
City Defense Siren - - -
Phone system - 10,600 10,600
Other 8,117 1,000 9,117
Transfer Out:
General Fund 25,650 15,000 40,650
Street Reconstruction 100,000 - 100,000
Total Financial Uses $1,143,834 $69,749 1,213,583
Fund Balance - December 31, 1994 $2552767
City of Oak Park Heights, Minnesota
Management Report, Page 31
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, 1994:
Purpose Amount
Sealcoat $13,273
Recreation 2,478
A.D.A. (Americans with Disabilities Act) 65,447
Land Acquisition 15,000
Unallocated 159,569
Total $255,767
Park and Recreation 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 $90,237 at December 31, 1994, as follows:
Prior
Years 1994 Total
Financing Resources:
Park fees $63,300 $28,540 $91,840
Donations and contributions 4,112 - 4,112
Interest on investments 4 2,774 7,296
Total fmancing sources $8,634 $2,774 103,248
Financing Uses:
Professional services $6,667 $6,344 13,011
Fund balance - December 31, 1994 $90,237
The above balance at December 31, 1994 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 32
River Hills (Hem) 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:
1993 Through_ Projected Projected
1994 1995 Totals
Financial Resources:
Developer Charges $186,812 $3,212 $190,024
Investment Earnings 529 - 529
Transfer In:
From 1st Addition 13 - 13,677
Total Financial Resources $201,018 $3,212 204,230
Construction Cost:
Construction $170,992 $ - 170,992
Engineering, Testing, Etc. 26,584 2,212 28,796
Legal and Fiscal 3,255 1,000 4,255
Other Costs 187 - 187
Total Construction Costs $201 $3,212 204,230
Projected Fund Balance - December 31, 1995 $0
This project is 100% developer financed. Any balance remaining upon final close -out of this
project should be returned to the developer.
City of Oak Park Heights, Minnesota
Management Report, Page 33
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
Years 1994 Totals
Financial Resources:
T.I.F. Taxes $422,627 $165,260 $587,887
Investment Earnings 193 1,799 1,992
Total Financial Resources $422,820 $167 589,879
Financial Uses:
Construction Costs:
58th Street/Osgood Improvement Project $150,078 $ - 150,078
Developer Assistance 253,091 99,156 352,247
Professional Fees 1,324 1,419 2,743
Total Financial Uses $404,493 $100,575 505,068
Fund Balance - December 31, 1994 $84,811
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 34
East Oaks - Swager Bros.
This fund was established in 1994 to account for expenditures associated with the developer
agreement with Swager Bros. Key points of the developer agreement are as follows:
• all improvements will be completed and paid for by the developer
• park dediciation fee of $10,400
® connection charges of $55,250 (26 lots @ $2,125). This project is not in the A.A.E. area
and therefore the connection charges will be receipted in the Closed Bond Fund
® reimbursement of all administrative, legal or engineering costs incurred by the City.
Valla View Estgte5 - Krongard
This fund was established in 1994 to account for expenditures associated with the developer
agreement with Krongard Construction. Key points of the developer agreement are as follows:
• all improvements will be completed and paid for by the developer
• park dedication fee of $18,140
• connection charges of $154,161 (see schedule below)
• reimbursement of all administrative, legal or engineering costs incurred by the City.
A summary of the connection charges related to this project are as follows:
Budgeted Received through 12/31/94
Unit No. Per/Unit Total No. Amount
Single family 8 $2,785.73 $22,285.84 0 $0.00
Twinhome 24 2,151.35 51,632.40 6 12,908.10
Townhome 52 1,485.44 77,242.88 6 8
Total $151,161.12 $21,820.74
City of Oak Park Heights, Minnesota
Management Report, Page 35
Renewal and Replacement
This fund was established in 1994 for the purpose of creating a reserve balance for partial
financing of future costs to renew and/or replace existing utility systems. This partial financing
will be required as these systems are replaced because it is anticipated the City will be unable to
assess 100% of such replacements.
Initial funding was provided by a transfer of $574,378 from the dater and Sewer Utility Fund.
This transfer represented depreciation charges accumulated since 1969. Annually thereafter,
additional transfers equal to depreciation on contributed assets are to be transferred.
A summary of the financial activity for 1994 is as follows:
Financial sources:
Transfer from water and sewer utility:
Initial $574,378
Annual 89,699
Interest earning 12,207
Total financial sources 676,284
Financial uses 0
Fund balance - December 31, 1994 $676,284
City of Oak Park Heights, Minnesota
Management Report, Page 36
City -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- million dollar project. City engineer estimates for this total project (Phase A through E) are
as follows:
Special City
Description Assessments Portion Total
Street Reconstruction - Only:
Construction Costs $1,702,500 $1,508,500 $3,211,000
Financing Costs 133,000 119,500 252,480
Storm Sewer:
Construction Costs N/A 525,300 525,300
Financing Costs N/A 40,900 40,900
Utility Repairs:
Construction Costs N/A 170,000 170,000
Financing Costs N/A N/A -
Grand Totals $1 $2,364,200 $4,199
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 million over sixteen plus years, and
® "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:
® Reserved balances from the Water and Sewer Utility operations ($157,200).
City of Oak Park Heights, Minnesota
Management Report, Page 37
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, - 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.
This project was completed in 1993. 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.
City of Oak Park Heights, Minnesota
Management Report, Page 38
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 financial activity for this project:
Financial Resources:
A.A.E. Connection Charges:
Storm Sewer (I.S.D. #834) $291,905
Cash Transfers:
Closed Bond Fund 360,000
Investment Earnings 12,280
Total Financial Resources 664
Construction Costs:
Contractors 464,871
Engineering, Testing, etc. 68,250
Legal and Fiscal 19,257
Land/Right of Way 84,065
Other Costs 3
Total Construction Costs 640,201
Fund Balance - December 31, 1994 $23,984
This project was substantially complete at December 31, 1994. 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,
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 39
A A.E - Nee ll 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 financial activity for this project:
Financial Resources:
State - MN DOT $632,355
Interest earnings 502
Total Financial Resources 632,857
Construction Costs:
Contractors 250,813
Engineering, Testing, etc. 19,807
Legal and Fiscal 17,223
Land/Right of Way 325,853
Total Construction Costs 613,696
Transfer to Closed Bond Fund 19,161
Fund Balance - December 31, 1994 $0
This project was completed in 1994. A temporary loan from the Closed Bond Fund was
necessary to provide interim financing before receipt of the State -MN Dot commitment. This fund
was closed and the remaining balance was transferred to the City's Closed Bond Fund as an
interest payment for the use of the $610,000 temporary loan.
City of Oak Park Heights, Minnesota
Management Report, Page 40
A.A.E. - 58th Street Improvements
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 financial activity for this project:
Financial Resources:
Developer Charges (I.S.D. #834) $344,384
A.A.E. Connection Charges:
Sanitary Sewer (I.S.D. #834) 160,000
Water Works (I.S.D. #834) 145,000
Cash Transfers:
Closed Bond Fund (90,000)
Water and Sewer Operations 125,000
Interest earnings 8,209
Total Financial Resources 692,593
Construction Costs:
Contractors 532,162
Engineering, Testing, etc. 91,332
Legal and Fiscal 18,603
Land/Right of Way 30,486
Other Costs 230
Total Construction Costs 672,813
Fund Balance - December 31, 1994 $19,780
After completion, 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 41
AAE - 58th Street Improvements - Phase II
This fund accounts for the costs associated with the extension of 58th Street from the High
School Driveway east to Norell Avenue. A summary of financial activity for 1994 is as follows:
Revenues $0
Expenditures:
Preliminary costs 16,381
Fund balance (deficit) - December 31, 1994 ($16,381)
City of Oak Park Heights, Minnesota
Management Report, Page 42
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
through 1994 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 Addition:
Heritage - Partial $33,237 $54,247 $42,139 $129,623
E. Ludowese 1,538 2,472 1,996 6,006
Less: Amounts used for construction:
River Hills - lst 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 5,027 16,145 4,691 25,863
Cash 'Transfers:
Debt Service - 1991 Bonds (37,500) (228,000) - (265,500)
Debt Service - Assessments - - 11,843 11,843
Fund Balance - December 31, 1994 $55,767 $150,004 $54,577 $260,348
City of Oak Park Heights, Minnesota
Management Report, Page 43
The balance at December 31, 1994 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
1995 $15,00 $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 50 55,000
Totals $190,00 $1,040,000 $1,230,000
As shown above, the A.A.E. Connection Charge balances at December 31, 1994 represent
sufficient amounts to meet the sanitary sewer debt commitments for 1995, 1996 and 1997 and the
water works debt service commitments for 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.
Additional commitments of the Connection Charge Funds include transfers to the Closed Bond
Fund as repayment for the $360,000 transfer to the High School Improvement Fund. This
commitment was $270,000 at December 31, 1994.
City of Oak Park Heights, Minnesota
Management Report, Page 44
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 1994 Annual Financial Report. Condensed comparative
operating statements of income and expense for the utility operations of the City are as follows:
Water Department
1993 1994
Amount Percent Amount Percent
Revenue:
Customer billings and other $162 100.00% $173,324 100.00%
Operating expenses:
Contractual services 37,534 23.15% 45,897 26.48%
Administrative and personnel charges 40,000 24.67% 47,125 27.19%
Other 2,237 1.38% 2,888 1.67%
Depreciation:
On purchased assets 7,400 4.56% 7,216 4.16%
On contributed assets 46,827 28.88% 51,747 29.86%
Total operating expenses 133,998 82.64% 154,873 89.36%
Net operating income $28,150 17.36% $18,451 10.64%
$180,000 — Water ' perating
$160,000 revenue k Expense
$140,000
$120,000
All Other Expenses
$1 00,000 EM Depreciation
$80,000
Contractual Services
Operating Revenue
$60,000
00
...................
$4
$20,000
000
0
1990 1991 1992 1993 1994
City of Oak Park Heights, Minnesota
Management Report, Page 45
Sewer Department
1993 1994
Amount Percent Amount Percent
Revenue:
Customer billings and other $273 100.00% $290,271 100.00%
Operating expenses:
MWCC 174,944 63.87% 147,893 50.95%
Other contractual services 12,286 4.49% 23,424 8.07%
Administrative and personnel charges 40,000 14.60% 47,125 16.23%
Other 2,517 0.92% 980 0.34%
Depreciation:
On purchased assets 2,389 0.87% 2,168 0.75%
On contributed assets 30 11.13% 37 13.07%
262,625 95.88% 259,541 89.41%
Net operating income $11,294 4.12% $30,730 10.59%
$300,000
$275,000
ever Operating
$250,000 Revenue & Expense
$225,000
$200,000
$175,000 kx: >' >ti All Other Expenses
$150,000 .,,: >..::: {:. .>; { } {,>.:• {�. {::
>�:r »:'< ��::��:�: >{': ».�•� r'�� }n�`: EMM Depreciation
$125,000
»,:;::k <.;�,; ,t ; ;fi ..•:: ... Operating Revenue
{ nr1 �$A � {: >.•'.:tihvi \ti:• i: � , �'. { v�v�'++ :''•�
$1(�(\ /W� { { :;..+v. ?. }:w: .v•v { \ \ti,' i':1i::•.T;, V \w
� /,/ •i;'.•'.;{i \�'}s.*: 4}. Y..:ti:k:
.? h .:..
$ f
75 000
:n4 {•. :i ii '� {;ti :<'i�
i.{{.. 1:.. :S {�fii} +:i {i: i'.'v:{�G:•:: :'.$�•�. .{•i r,i: {ti
$
50 000 ::.,��..�.:....•:
f.'
$25,000
$0
1990 1991 1992 1993 1994
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:
$200,000
MCC Billing
$180,000
$160,000
$140,000
$120,000 -<: r:; ti•' ;« ?:: :?: ^ ';'<it:
$100,000 � > >���� •::.;,': ::. }:_<. ..:?.... }: ... yt. . ?,,
': \i:ifi� i:<Jri \: ,';:iriL vi: 'in_i'�:u }v s: �
$60,000 < :::.: 2: ? . fCfS: ..#2
:;: :n:.}i': '•"J'Y�': , ''v'••' \•_•• v.' ?}.•.;?4$
$ 2 0 , 000 \4:vtiu
} 'vti:: • 'r'tiLv
$0
1987 1988 1989 1990 1991 1992 1993 1994 1995
0 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 1995 were as follows:
Estimated Actual
Percent Percent
Year Amount Change Amount Change
1983 $66,348 17.3% $43,970 (7.9 %)
1984 75,338 13.5% 68,712 56.3%
1985 71,879 (4.6 %) 69,509 1.2%
1986 85,742 19.3% 72,992 5.0%
1987 95,219 11.1% 98,921 35.5%
1988 98,135 3.1% 118,951 20.2%
1989 108,742 10.8% 116,235 (2.3 %)
1990 132,368 21.7% 130,135 12.0%
1991 146,393 10.6% 143,171 10.0%
1992 157,574 7.6% 143,328 0.1%
1993 186,294 18.2% 152,833 6.6%
1994 181,353 (2.7 %) Not Available
1995 192,222 6.0% 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 156 million gallons for 1994 to 160 million
gallons for 1995 representing a 25% 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 $1,243 for 1994 to $1,277 for 1995 representing a 2.7% rate increase. The
combination of these factors increased the City's estimated cost by 5.3% for 1995. 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 Increase
December 31, Amount (Decrease) Amount (Decrease)
1984 $293,457 $393,916
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
1994 420,252 (524,302) 802,498 (501,258)
The Water and Sewer Utility operations of the City are financed by user charges designed to
cover all operp atina 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 $802,498 at
December 31, 1994 representing a decrease of $501,258. This decrease was the result of a
transfer to the Renewal and Replacement Fund.
The City Council established a separate capital project fund (Renewal and Replacement Fund)
to separate the reserved balance for renewal and replacement and capital reserve from the Water and
Sewer Utility Operating Fund. The initial cash transfer into this separate fund was $574,378
representing the net depreciation charges accumulated since 1969 (i.e., $930,363 - $355,985).
Annually, thereafter 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 and 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 49
The Utility operations are financed by user fees which are billed and collected only after the
services are provided. This creates a timing difference between payment of expenses and
collection of service charges (i.e., accounts receivable). Additionally, certain costs are paid in
advance (i.e., prepaid expenses) and/or supply items are purchased in advance (i.e., inventories).
These items create a timing difference between payment of expenses and cost recovery through
service changes. Those items (commonly referred to as Working Capital needs) are noncash assets
and are not an "available" reserved balance.
In addition, the retained earnings of the utility operation include the fixed assets of such
operations which are depreciated and charged (annually) against income. Such undepreciated fixed
assets are also a noncash asset and are not an "available" reserve balance. The following schedule
has been prepared to illustrate the effects of working capital needs and fixed assets upon the
retained earnings of the City's Utility Operations:
Cash and investments $420,252
Working capital needs:
Accounts receivable $118,672
Prepaid expenses 13,230
Due from other governments 33,461
Payables K19,433) 145,930
Fixed assets - net 236,316
Retained earnings/contributed capital $802,498
At December 31, 1994, $661,765 of retained earnings 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.
City of Oak Park Heights, Minnesota
Management Report, Page 50
SUMMARY
The following listing is a summary of the items which should be monitored, investigated
and/or resolved during 1995.
• Continue to monitor property tax and special assessment collection rates.
• Continue the City policy of balanced and conservative operating budgets to assure
continued financial strength of the City.
• Approve cash transfers from the Sanitary Sewer Connection Charge Fund ($15,000) and
the Water Works Connection Charge Fund ($50,000) to the Water and Sewer Revenue
Bonds of 1993. (Page 23)
• Perform periodic updates of projected connection charges to determine if connection
charges will be sufficient to finance repayment of the Water and Sewer Revenue Bonds of
1993. (Page 25)
• Monitor the commitments of the Closed Bond Fund. (Page 29)
• Make the necessary changes to the TIF financial plan to allow for the use of TIF for street
reconstruction purposes. (Page 33)