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HomeMy WebLinkAboutManagement Report and Recommendations CITY OF OAK PARK BEIGHTS, M1114NESOTA MANAGEMENT REPORT AND RECOMMENDATIONS DECEMBER 31, 1995 E �i t; LIML dftm _ r - .- - - dd W�m �d� W� ri Z &M - ' . - - - - - . - At I � 0 t I i .4i 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 1995 Annual Financial Report. The following comments relate to these financial statements of the City. Cash and Investments December 31, Increase Description 1994 1995 (Decrease) Checking account ($13,443) ($12,059) $1,384 Investments 4,131,459 5,078,924 947,465 Petty cash 100 100 Totals $4,118,116 $5,066,965 $948,849 The December 31, 1994 and 1995 checking account overdrafts are book overdrafts onlv 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 $279,842 of interest on investments during 1995 compared to $195,803 in 1994. This increase is primarily the result of higher investment yields available to the City. City of Oak Park Heights, Minnesota Management Report, Page 3 A schedule of cash and investment balances by fund type is as follows: December 31, Increase Fund Type 1994 1995 (Decrease) General $901,811 $1,306,755 $404,944 Special Revenue 9,111 8,796 (315) Debt Service 231,554 440,879 209,325 Capital Project 2,594,586 2,833,015 238,429 Enterprise 420,252 523,903 103,651 Agency (39,198) (46,383) (7,185) Total $4,118,116 $5,066,965 $948,849 The General Fund increase relates primarily to the timing of tax collections. At December 31, 1994, the City had a property tax receivable of $319,832 (i.e., 1994 taxes were not received until January, 1995). At December 31, 1995, the property tax receivable was $8,397. The Debt Service Fund increase relates primarily to the receipt of bond proceeds and assessment prepayments. Investments at December 31, 1994 and 1995 were as follows: December 31, 1994 1995 Investment Description Yield Balance Yield Balance Money Market Savings 2.70% $178,947 3.50% $185,820 AIM Government Fund Various 1,084,572 Various 857,104 Certificate of Deposit 5.00% 200,000 5.40% 325,000 Certificate of Deposit 4.60% 445,000 5.75% 350,000 Certificate of Deposit 4.85% 200,000 5.50% 420,000 Certificate of Deposit 4.85% 195,000 5.40% 456,000 Certificate of Deposit 5.75% 500,000 5.40% 150,000 Certificate of Deposit 5.75% 200,000 5.35% 100,000 Certificate of Deposit 5.40% 168,000 5.40% 100,000 Certificate of Deposit 5.92% 200,000 5.48% 200,000 Certificate of Deposit 6.00% 630,000 5.48% 900,000 Certificate of Deposit 5.90% 130,000 5.40% 550,000 Certificate of Deposit 5.40% 105,000 Certificate of Deposit 5.40% 100,000 Certificate of Deposit 4.91% 280,000 Totals $4,131,519 $5,078,924 City of Oak Park Heights, Minnesota Management Report, Page 4 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, 1995. Due From Other Governmental Units December 31, Increase Description 1994 1995 (Decrease) Fines $4,063 $3,022 ($1,041) Gravel tax - 487 487 MCES - final cost allocation 33,461 - (33,461) City of Bayport 1,027 - (1,027) MN DOT: Norell Avenue - 2,321 2,321 58th Street - Phase II - 230,000 230,000 ISD #834 - Liaison officer 7,238 6,601 (637) Totals $45,789 $242,431 - $ 196,642 All of the above amounts are currently collectible. City of Oak Park Heights, Minnesota Management Report, Page 5 Property Taxes Receivable Property taxes receivable 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. 1992 1993 1994 1995 Delinquent taxes - January 1 $35,036 $39,017 $17,563 $21,146 Current levy 1,199,554 1,302,310 1,344,630 1,430,985 Total collectible 1,234,590 1,341,327 1,362,193 1,452,131 Receipts: Current 1,182,272 1,294,478 1,336,980 1,421,284 Delinquent 8,815 26,441 3,359 12,034 Total receipts 1,191,087 1,320,919 1,340,339 1,433,318 Adjustments (4,486) (2,845) (708) - Delinquent taxes - December 31 $39,017 $17,563 $21,146 $18,813 Current collection as a percent of current levy 99% 99% 99% 99% Total collections as a percent of current levy 99% 101% 100% 100% The adjustments to property taxes receivable consist of abatements of property taxes as a result of market valuation adjustments. 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 6 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 1996 budgeted: 1996 Payer 1992 1993 1994 1995 Budgeted Local taxpayer $1,243,786 6 $1,358,593 $1,372,448 $1,470,166 $1,494,440 State credits 38,187 55,377 76,640 77,980 77,980 Fiscal disparities: Contribution (137,601) (170,292) (167,432) (172,431) (179,486) Distribution 55,182 58,632 62,974 55,270 66,681 Totals $1,199,554 $1,302,310 $1,344,630 $1,430,985 $1,459,615 Shown on a basis of percents, current tax collections (by payer) were as follows for the past four years including 1996 budgeted. 1996 Payer 1992 1993 1994 1995 Budgeted Local taxpayer 103.7% 104.3% 102.1% 102.7% 102.4% State credits 3.2% 4.3% 5.7% 5.4% 5.3% Fiscal disparities: Contribution (11.5 %) (13.1 %) (12.5 %) (12.0 %) (12.3 %) Distribution 4.6% 4.5% 4.7% 3.9% 4.6% 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 7 Special Assessments Receivable Special assessments receivable consisted of the following types and amounts: December 31, Increase Description 1994 1995 (Decrease) Delinquent $1,246 $1,318 $72 Due from County 95 - (95) Deferred 93,257 829,515 736,258 Special Deferred 144,800 144,800 - Totals $239,398 $975,633 $736,235 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 I 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 8 Compensated Absences Pavable 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: 1994 1995 Severance $61,169 $61,915 Vacation 10,643 12,310 Total $71,812 $74,225 City of Oak Park Heights, Minnesota Management Report, Page 9 Bonds Pavable The City had three bond issues outstanding during 1995. A summary of the 1995 activity of each bond issue is as follows: Bond Issues Water & Storm Sewer Sewer Refunding Refunding Improvement Bonds Bonds Bonds of 1992 of 1993 of 1995 Totals* Balance - January 1, 1995 $120,000 $1,195,000 $ - $1,315,000 Bonds issued - - 1,130,000 1,130,000 Principal payments (15,000) (55,000) - (70,000) Balance - December 31, 1995 $105,000 $1,140,000 $1,130,000 $2,375,000 Retirement schedule: 1996 $15,000 $75,000 $70,000 $160,000 1997 20,000 80,000 110,000 210,000 1998 20,000 85,000 110,000 215,000 1999 25,000 90,000 120,000 235,000 2000 -2006 25,000 810,000 720,000 1,555,000 Total $105,000 $1,140,000 $1,130,000 $2,375,000 *Excluding revenue bonds to be paid from escrowed monies. Detail of outstanding bond issues is contained in Exhibit 2 of the 1995 Annual Financial Report. The Bonds of 1992 are being repaid by property taxes. The annual property levy for this bond issue is $25,000 and continues through 2000. The Bonds of 1993 are being repaid by AAE connection charges (see later comments regarding this Debt Service Fund). The Bonds of 1995 are being repaid by a combination of property taxes and special assessments (see later comments regarding this Debt Service Fund). City of Oak Park Heights, Minnesota Management Report, Page 10 GENERAL FUND 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 Taxes State Aids All Other Total Revenue Year Amount Percent Amount Percent Amount Percent Amount Percent 1985* ® $559,613 63% $157,995 18% $163,771 19 0 /0 $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 0 /0 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 1,354,677 68% 124,860 6% 520,466 26% 2,000,003 100 1996 ** 1,367,545 70% 113,070 6% 469,990 24% 1,950,605 100% * includes Federal Revenue Sharing ** Budgeted A graph of property taxes, state aids, and other revenue for the General Fund is as follows: General Fund $1,400,000 Revenue by Source $1,200,000 $800,000 ■ State Aids ® Other Revenue $600,000 - - ® Property Taxes E $400,000 - '17 m $200,000 \ $0 - 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 City of Oak Park Heights, Minnesota Management Report, Page 11 State Aids State aids of the General Fund have consisted of the following for the past six years (with 1996 budget): 1996 State Aid 1990 1991 1992 1993 1994 1995 Budget Local government aid $ _ $ _ $ _ $ _ $ _ $ _ $ H.A.CA. 578 4,611 36,740 54,358 75,245 76,615 67,070 Police aid 25,049 31,651 32,432 33,516 43,523 48,245 46,000 Totals $25,627 $36,262 $69,172 $87,874 $118,768 $124,860 $113,070 Change $10,635 $32,910 $18,702 $30,894 $6,092 ($11,790) % Change 41% 91% 27% 35% 5% (9 %) A graph of State aids for the past eight years (with the 1996 budget) is presented below: $200,000 $180,000 ( i State Aids $160,000 $140,000 $120,000 $100,000 $80,000 $60,000 ji, %% $40,000 - ��� / / $20,000 - $0 1988 1989 1990 1991 1992 1993 1994 1995 1996 Budget 0 Police Aid 0 H.A.C.A. 0 L.G.A. City of Oak Park Heights, Minnesota Management Report, Page 12 Other General Fund Revenue Other revenue of the General Fund have consisted of the following for the past five years (with 1996 budget): 1996 Description 1991 1992 1993 1994 1995 Budget Licenses and permits $122,804 $93,908 $62,898 $60,914 $117,511 $102,370 Charges for services: Refuse collection 64,721 66,076 103,039 108,310 110,021 114,000 Enterprise 57,000 78,000 80,000 94,250 95,000 98,850 Other 2,248 2,626 4,476 2,681 2,329 2,000 Inspections m 20,800 34,402 34,524 25,000 Fines and forfeits 36,174 38,557 44,189 55,111 49,020 51,100 Interest earnings 62,064 33,728 25,180 34,473 54,912 45,000 Other 21,564 36,822 72,862 75,823 57,144 31,670 Total $366,575 $349,717 $413,444 $465,964 $520,461 $469,990 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 Net Percent of Year Revenue Expenditures Cost 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 110,021 334,053 (224,032) 33% 1996* 114,000 356,000 (242,000) 32% *Budget City of Oak Park Heights, Minnesota Management Report, Page 13 The following schedule and graph reflect the revenue of the General Fund for the past two years including 1996 budget. Additional detail of the revenue is presented in Statement 7 of the 1995 Annual Financial Report. General Land Revenue 1994 1995 1996 Budget Description Amount Percent Amount Percent Amount Percent General property taxes $1,254,999 69.0% $1,354,677 67.7% $1,367,545 70.1% Intergovernmental: State 118,768 6.5% 124,860 6.2% 113,070 5.8% County and other 17,591 1.0% 19,620 1.0% 18,470 0.9% Licenses and permits 60,914 3.4% 117,511 5.9% 102,370 5.2% Charges for services 239,643 13.2% 241,874 12.1% 239,850 12.3% Interest on investments 34,473 1.9% 54,917 2.7% 45,000 2.3% Fines and forfeits 55,111 3.0% 49,020 2.5% 51,100 2.6% All other 36,139 2.0% 37,524 1.9% 13,200 0.8% Totals $1,817,638 100.0% $2,000,003 100.0% $1,950,605 100.0% General Fund Property Taxes 1996 Budgeted Revenue 70.1% tergovernmental 6.7% icenses and Permits 5.2% All Other Interest on Charges for Services 3.4% Investments 12.3% 2.3% City of Oak Park Heights, Minnesota Management Report, Page 14 Expenditures (by major classification) for the past two years plus the 1996 budget, are as follows: General Fund Expenditures 1994 1995 1996 Budget Description ® Amount Percent Amount Percent Amount Percent Current expenditures: General government $370,356 21.3% $398,640 20.4% $411,340 21.1% Public safety 682,063 39.2% 723,034 37.0% 802,690 41.2% Streets and highways 100,059 5.7% 86,000 4.4% 104,000 5.3% Sanitation 338,498 19.4% 344,396 17.6% 353,000 18.1% Recreation 164,685 9.5% 178,567 9.1% 197,575 10.1% Contingency - 0.0% - 0.0% 15,000 0.8% Capital outlay 36,024 2.1% 61,604 3.2% 32,000 1.6% Transfer out 50,000 2.8% 160,000 8.3% 35,000 1.8% Totals $1,741,685 100.0% $1,952,241 100.0% $1,950,605 100.0 A graph of the above expenditures is presented below: General Fund 1996 Budgeted Expenditures Streets & lEghways Public Safety 41.2% eg+ "" 5.3% Sanitation 18.1% Recreation 10.1% General Government Capital Outlay & Other 21.1% 4.2% City of Oak Park Heights, Minnesota Management Report, Page 15 The fund balance of the General Fund was $1,280,597 at December 31, 1995 representing a $82,762 increase during 1995 as follows: Actual Revenue Greater Than (Less Than) Budgeted Revenue: General property taxes: Current and deliquent $2,129 Payment in lieu of tax 7,306 Lost TIF 15,872 Intergovernmental 9,215 Licenses and permits 28,646 Charges for services 11,874 Fines and forfeits (180) Interest on investments 18,017 Other 17,824 $110,703 Budgeted Expenditures (Greater Than) Less Than Actual Expenditures: General government 19,391 Public safety 20,984 Streets and highways 4,925 Sanitation 18,604 Recreation 3,155 67,059 Transfer to Capital Improvements Fund (125,000) Transfer from Capital Improvements Fund 35,000 Budgeted decrease in General Fund (5,000) Net increase in fund balance for 1995 $82,762 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) 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 1995 1,280,597 82,762 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 a Benefits of eserves Cash flow timing differences. _ • 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. Intergovernmental revenue cutbacks. ® Provides resources for minor projects or The City is vulnerable to legislative actions at both the Federal feasibility reports. & State level. Federal funding to local government has been substantially curtailed in recent years. Annual adjustment of ® Avoids temporary overdrafts prior to Local Government Aid & HACA formulas is a constant threat major receipts. Capital outlav replacement. • City may study effects of revenue cuts before Internal escrow accumulation for purchases which may exceed amounts available in any single budget cycle. This = gradual program reductions. may also be accomplished through transfers to dedicated replacement funds. - • Avoids overburdening of annual budgets for Emeraencv 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 City Council projects. 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, 1994 and 1995, the General Fund balance was designated as follows: December 31, 1994 1995 Designated for: Cash flow $703,000 $717,000 Contingent employee benefits 158,744 168,606 General contingency 280,000 292,000 Capital improvements 42,379 58,251 Cooperation study 5,559 2,780 Comprehensive plan - 35,000 Ensuing year's budget deficit 5,000 - Subtotal 1,194,682 1,273,637 Undesignated 3,153 6,960 Total fund balance 1,197,835 1,280,597 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 $717,000, computed as follows: Cash Flow Reserve 1996 tax levy $1,367,545 1996 budgeted RACA 67,070 Total $1,434,615 Recommended reserve (one -half of tax levy and state aids) $717,000 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: General Contingency Reserve December 31, Description 1994 1995 Ensuing Year's Budget $1,867,100 $1,950,605 Reserve Amount @ 15% $280,000 $292,000 The Contingent Employee Benefits reserve is computed based upon accrued, but unpaid, employee benefits as follows: Employee Benefits Reserve December 31, Employee Benefit 1994 1995 Vacation Leave $10,643 $12,310 Sick/Severance Leave 148,101 156,296 Total $158,744 $168,606 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 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 1995. 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 Fears 1995 Total Revenue: Confiscated property $22,142 $2,700 $24,842 Interest earnings 828 519 1,347 Total $22,970 $3,219 26,189 Expenditures: Public safety: Contractual services $6,285 $1,078 7,363 Capital outlay 7,574 2,456 10,030 Total $13,859 $3,534 17,393 Fund balance m December 31, 1995 $8,796 The use of these funds is restricted by MS 609.531 subd. 5 to "supplement the agency's operating fund or similar fund for use in law enforcement." City of Oak Park Heights, Minnesota Management Report, Page 20 DEBT SERVICE FUNDS The combining financial statements for the Debt Service Funds are presented in Statements 10 and 11 of the 1995 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 1995 as follows: Fund Balance ® December 31, Increase Fund 1994 1995 a ® ( Decrease) Storm Sewer Refunding Bonds of 1992 $15,971 $21,068 $5,097 G.O. Refunding Bonds of 1993 1,318,726 226,438 (1,092,288) G.O. Improvement Bonds of 1995 - 192,547 192,547 Totals $1,334,697 $440,053 ($894,644) Storm Sewer Refunding Bonds of 1992 These bonds were issued to provide financing for the Storm Sewer District construction. The City Council established this district in October, 1982 per City ordinance 1600. A projection of the final fund position based on scheduled levies and debt requirements is as follows: Fund balance - December 31, 1995 $21,058 Additions: Future scheduled tax levies @ 100% 125,000 Total 146,068 Deductions: Debt requirements: Principal 105,000 Interest 17,907 Total 122,907 Projected fund balance $23,161 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 Water and Sewer Refundine 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 1995, the City transferred $95,000 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 1996 and 1997 scheduled debt payments. Future (1996 through 2004) projected cash transfers are as follows: Sanitary Water Year Sewer Works Total 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 $175,000 $960,000 $1,135,000 City of Oak Park Heights, Minnesota Management Report, Page 22 A projection of cash flow of the Water and Sewer Refunding Bonds of 1993 assuming cash transfers from the Connection Charge Fund is as follows: City of Oak Park Heights, Minnesota projection of C.,ashliow Water and Sewer Refunding Bonds of 1993 Total Cash Balance Property special Other Investment Projected Debt Other Cash Balance Year January 1 Taxes Assessments Receipts Interest Receipts Payments Disbursements December 31 1496 $226,438 $0 $24,009 $120,000 $10,946 $154,955 $126,830 $0 $254,563 1997 254,563 0 22,471 125,000 12,378 159,849 129,130 0 285,281 1998 285,281 0 6,114 125,000 13,739 144,853 131,090 0 299,044 1999 299,044 0 0 125,000 14,387 139,387 132,690 0 305,741 2000 305,741 0 0 135,000 14,805 149,805 133,910 0 321,636 2001 321,636 0 0 140,000 15,668 155,668 134,826 0 342,478 2002 342,478 0 0 145,000 16,723 161,723 150,326 0 353,874 2003 353,874 0 0 165,000 17,447 182,447 149,806 0 386,515 2004 386,515 0 0 55,000 18,658 73,658 158,806 0 301,368 2005 301,368 0 0 0 14,226 14,226 166,806 0 148,787 2006 148,787 0 0 0 7,062 7,062 78,900 0 76,949 Total $0 $52,594 $1,135,000 $156,037 $1,343,631 $1,493,120 $0 Assumptions Special assessment collection rate .................... 95% Property tax collection rate . ............................... 99 0 /0 Investment interest rate ..... ............................... 5.00 /o Negative interest charged to funds ? .................. no As shown above, this fund has a projected surplus of $76,949 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 23 G.O. IMDr°ovement Bonds of 1995 This bond was issued to provide financing for the first phase of the street reconstruction project. This bond will be repaid by a combination of special assessments and property taxes. A projection of cash flow of the Improvement Bonds of 1995 is as follows: City of Oak Park Heights, Minnesota Projection of Cashilow General Obligation Improvement Bonds of 1995 Total Cash Balance Property Special Other Investment Projected Debt Other Cash Balance Year January 1 Taxes Assessments Receipts Interest Receipts Payments Disbursements December 31 1996 $192,547 $0 $80,035 $0 $9,478 $89,513 $121,496 $0 $160,564 1997 160,564 60,390 76,882 0 8,475 145,747 158,660 0 147,651 1998 147,651 58,410 73,729 0 7,841 139,981 154,096 0 133,536 1999 133,536 59,400 70,577 0 7,145 137,121 159,420 0 111,237 2000 111,237 59,400 67,424 0 6,078 132,902 154,140 0 89,999 2001 89,999 59,400 64,271 0 5,067 128,738 148,740 0 69,997 2002 69,997 59,400 61,118 0 4,118 124,636 143,280 0 51,353 2003 51,353 59,400 57,965 0 3,240 120,605 137,700 0 34,258 2004 34,258 59,400 54,812 0 2,441 116,653 132,000 0 18,910 2005 18,910 59,400 51,659 0 1,734 112,793 126,000 0 5,703 2006 5,703 0 0 0 285 285 0 0 5,988 Total $534,600 $658,472 $0 $55,901 $1,248,973 $1,435,532 $0 Assumptions Special assessment collection rate .................... 95% Property tax collection rate . ............................... 99 0 /0 Investment interest rate ..... ............................... 5.00% Negative interest charged to funds ? .................. no As shown above, this fund is projected to have a surplus of $5,703 upon final bond maturity. This projection is dependent on levying the scheduled property taxes (see Exhibit 4 of the Annual Financial Report) and experiencing a special assessment collection rate of 95 %. City of Oak Park Heights, Minnesota Management Report, Page 24 CAPITAL PROJECT FUNDS The financial statements for the Capital Project Funds are presented in Statements 12 and 13 of the City's 1995 Annual Financial Report. The fund balance (deficits) of the Capital Project Funds were as follows at December 31, 1994 and 1995: December 31, Increase Fund 1994 1995 (Decrease) Closed Bond Fund $1,036,303 $792,799 ($243,504) Capital Improvements Fund 255,767 297,353 41,586 Park & Recreation Development 90,237 250,301 160,064 St. Croix Mall (TIF) 84,811 6,156 (78,655) River Hills 2nd Addition - - - Street reconstruction 53,784 152,589 98,805 East Oaks - Swagar Bros. 1,173 622 (551) Valley View States - Krongard - - - Renewal and Replacement 676,284 799,452 123,168 AAE - Wal -Mart Addition 434 - (434) AAE - High School Improvement 23,984 - (23,984) AAE - 58th Street Improvement - Phase I 19,780 - (19,780) AAE - 58th Street Improvement - Phase 11 (16,381) 111,077 127,458 AAE - Sanitary Sewer Connection 55,767 93,091 37,324 AAE - Water Connection 150,004 161,005 11,001 AAE - Storm Sewer Connection 54,577 155,429 100,852 AAE - 58th Improvement - Phase III - (5,987) (5,987) AAE - Autumn Ridge - 378 378 AAE - Brackey Addition - 108,501 108,501 AAE - Haase Addition - 9 9 AAE - Autumn Ridge 2nd Addition - - - Totals $2,486,524 $2,922,775 $436,251 City of Oak Park Heights, Minnesota Management Report, Page 25 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 1995 12/30/95 _ 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 44,900 70,144 General property taxes 2,044 124 2,168 Special assessments 324,157 41,591 365,748 Connection charges: Krongard 21,821 41,789 63,610 Other 149,813 3,372 153,185 Escrow interest earnings 3,325 430 3,755 Investment interest 446,730 62,475 509,205 Temp. loan interest 19,161 - 19,161 Total financial resources $2,106,190 $194,681 2,300,871 Financial Uses: Expenditures: Professional services 73,113 31,271 104,384 Construction costs - 61,914 61,914 Transfers out: General Fund 22,100 - 22,100 Bonds of 1990 15,775 - 15,775 Capital Improvement Fund 200,000 - 200,000 Construction Funds: 58th Street - Phase II - 345,000 345,000 Other City Projects 163,899 - 163,899 AAE - Storm Sewer 360,000 - 360,000 AAE - Streets 235,000 - 235,000 Temp. Loan: MN - Dot - - - Total financial uses $1,069,887 $438,185 1,508,072 Fund balance - December 31, 1995 $792,799 City of Oak Park Heights, Minnesota Management Report, Page 26 In addition to the above fund balance, this fund has assessment receivable of $415,974. Additionally, this fund is to be repaid by future storm sewer connections for the $360,000 transfer to the AAE High School Improvement Bond. The amount remaining to be repaid was $270,000 at December 31, 1995. The purpose of the Closed Bond Fund is to receive residual balances of closed special assessment bonds. Amounts on hand at December 31, 1995 are available for use at the Council's discretion. City policy regarding the allowable use of such monies includes the following areas: • Temporary funding of other Debt Service Fund deficits. • Supplemental financing of construction deficits. • Full financing of minor construction projects. • Supplemental financing of replacement of systems (water and sewer) which had been previously assessed. • Long-term capital improvement program financing. City of Oak Park Heights, Minnesota Management Report, Page 27 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 1995 Total Financial Resources: Transfers in: General Fund $1,045,075 $125,000 $1,170,075 Closed Bond Fund 200,000 - 200,000 Interest earnings 182,832 11,583 194,415 Sale of property 9,414 - 9,414 Donations/other 32,029 590 32,619 Total financial resources $1,469,350 $137,173 1,606,523 Financial Uses: Expenditures: Municipal Bldg. - Phase I $106,185 $ - 106,785 Municipal Bldg. - Phase 2 486,637 - 486,637 Sealcoat 218,727 - 218,727 Recreation 198,354 9,462 207,816 A.D.A. 34,553 816 35,369 City Hall - lights retrofit 8,160 - 8,160 City defense siren - 14,668 14,668 Phone system 10,600 - 10,600 Prison pond - 12,532 12,532 Other 9,117 3,109 12,226 Transfer out: General Fund 40,650 - 40,650 Street reconstruction 100,000 55,000 155,000 Total financial uses $1,213,583 $95,587 1,309,170 Fund balance - December 31, 1995 $297,353 City of Oak Park Heights, Minnesota Management Report, Page 28 The Capital Improvements 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, 1995: Purpose Amount Sealcoat $13,273 Recreation 15,316 A.D.A. (Americans with Disabilities Act) 22,273 Land acquisition 40,000 Unallocated 206,491 Total $297,353 Park and Recreation Develooment 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 $250,301 at December 31, 1995, as follows: Prior Years 1995 Total Financing Resources: Park fees $91,840 $153,104 $244,944 Donations and contributions 4,112. - 4,112 Interest on investments 7,296 8,719 16,015 Total financing sources $11,408 $8,719 265,071 Financing Uses: Professional services $13,011 $1,759 14,770 Fund balance - December 31, 1995 $250,301 The above balance at December 31, 1995 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) 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 1994 1995 Totals Financial Resources: Developer charges $190,024 $3,474 $193,498 Investment earnings 529 821 1,350 Transfer in: From 1st addition 13,677 - 13,677 Total financial resources $204,230 $4,295 208,525 Construction Cost: Construction $170,992 $4,295 175,287 Engineering, testing, etc. 28,796 - 28,796 Legal, and fiscal 4,255 - 4,255 Other costs 187 - 187 Total construction costs $204,230 $4,295 208,525 Fund balance - December 31, 1995 $ This project is 100% developer financed. City of Oak Park Heights, Minnesota Management Report, Page 30 St. Croix Mall (TTFJ This fund was established in 1989 to account for the St. Croix Mall TIF project. Additionally, this fund accounted for the City's 58th Street and Osgood Avenue Improvement Project. The City entered into a development agreement with Watson Center, Inc., whereby 60% of the tax increment generated is paid to the developer as reimbursement for land acquisition and site improvement costs. The maximum amount of developer assistance is $847,770. The following schedule summarizes the past financial activity for this project: Prior Years 1995 Totals Financial Resources: T.I.F. taxes $587,887 $154,306 $742,193 Investment earnings e 1,992 5,423 7,415 Total financial resources $589,879 $159,729 749,608 Financial Uses: Construction costs: 58th Street/Osgood improvement project $150,078 $ - 150,078 Developer assistance 352,247 92,584 444,831 Professional fees 2,743 - 2,743 Transfer out: Street reconstruction - 145,800 145,800 Total financial uses $505,068 $238,384 743,452 Fund balance - December 31, 1995 $6,156 During 1995, the City adopted resolution 95 -03 -12 modification No. 1 to the 1989 St. Croix Mall Tax Increment Plan. This modification provided for street reconstruction costs to be included in the tax increment financing plan. City of Oak Park Heights, Minnesota Management Report, Page 31 East Oaks - Swager Bros. This fund was established in 1994 to account for expenditures associated with the developer agreement with Swager Bros. Ivey points of the developer agreement are as follows: • All improvements will be completed and paid for by the developer. • Park dedication 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. Valley View Estates - Kron2ard This fund was established in 1994 to account for expenditures associated with the developer agreement with Krongard Construction. Ivey 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 $150,939 (see schedule below). This project is not in the AAE 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. A summary of the connection charges related to this project are as follows: Budgeted Received through 12/31/95 Unit No. Per/Unit Total No. Amount Single family 8 $2,757.97 $22,063.76 1 $2,757.97 Twinhome 24 2,151.35 51,632.40 20 43,027.00 Townhome 52 1,485.44 77,242.88 12 17,825.28 Total $150,939.04 $63,610.25 City of Oak Park Heights, Minnesota Management Report, Page 32 Autumn Ridge This fund was established in 1995 to account for expenditures associated with the developer agreement with Arcon Development. Key points of the developer agreement are as follows: • All improvements paid for by the developer. • Park dedication fees of $11,700 for Phase I and $4,294 for Phase H. • Connection charges of $196,595 (see schedule below). • Reimbursement of all administrative, legal and engineering costs incurred by the City. A summary of connection charges related to this project are as follows: Received Through Budgeted December 31, 1995 Phase No. Per/Unit Total No. Amount I 26 $3,854.80 $100,224.80 15 $57,822.00 II 25 3,854.80 9 6,370.00 2 7,709.60 Total $196,594.80 $65,531.60 City of Oak Park Heights, Minnesota Management Report, Page 33 Brackev Addition This fund was established in 1995 to account for expenditures associated with the developer agreement with Robert L. and Janet M. Brackey. Ivey points of the developer agreement are as follows: • All improvements will be paid for by the developer. • Park dedication fee of $98,735. • Connection charges of $497,602 (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: Received Through Budgeted December 31, 1995 Unit No. Per/Unit Total No. Amount Menards 1 $125,785.80 $125,785.80 1 $125,785.80 Outlot A 1 114,717.10 114,717.10 0 0.00 Outlot B 1 257,099.50 257,099.50 0 0.00 Total $497,602.40 $125,785.80 City of Oak Park Heights, Minnesota Management Report, Page 34 Haase Addition This fund was established in 1995 to account for expenditures associated with the developer agreement with Elmer and Ruth Haase. Key points of the developer agreement are as follows: • All improvements will be paid for by the developer. • Park dedication fee of $25,795. • Connection charges of $163,346 (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: Deceived Through Budgeted December 31, 1995 Unit No. Per/Unit Total No. A mount Applebees 1 $15,749.20 $15,749.20 1 $15,749.20 Outlot A 1 65,225.00 65,225.00 0 0.00 Outlot B 1 82,371.60 82,371.60 0 0.00 Total $163,345.80 $15,749.20 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 Water 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 and 1995 is as follows: 1994 1995 n Total Financial Sources: Transfer from water and sewer utility: Initial $574,378 $ ® $574,378 Annual 89,699 98,324 188,023 Interest earning 12,207 40,698 52,905 Total financial sources $676,284 $139,022 815,306 Financial Uses: Transfer out: Street reconstruction $ ® $15,854 15,854 Fund balance - December 31, 1995 $799,452 City of Oak Park Heights, Minnesota Management Report, Page 36 Street Reconstruction This fund was established in 1995 to account for the first phase of the street reconstruction program. A summary of financial activity is as follows: Prior Years 1995 Total Financial resources: Bond proceeds $ - $1,062,456 $1,062,456 Interest earnings 2,578 11,266 13,844 Transfers in: Capital Improvement Fund 100,000 55,000 155,000 St. Croix Mall TIF - 145,800 145,800 Renewal and Replacement - 15,854 15,854 Total financial resources $102,578 $1,290,376 1,392,954 Financial uses: Project costs $48,794 $1,191,571 1,240,365 Fund balance - December 31, 1995 $152,589 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. This fund was closed in 1995 and the remaining fund balance of $2,318 was transferred to the Closed Bond Fund. City of Oak Park Heights, Minnesota Management Report, Page 37 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) $292,637 Cash transfers: Closed Bond Fund 360,000 Investment earnings 12,769 Total financial resources 665,406 Construction Costs: Contractors 464,871 Engineering, testing, etc. 68,763 Legal and fiscal 19,257 Land/right of way 84,065 Other costs 3,758 Total construction costs 640,714 Residual equity transfer out (24,692) Fund balance m December 31, 1995 $0 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. This fund was closed in 1995 to the Closed Bond Fund. City of Oak Park Heights, Minnesota Management Report, Page 38 A.A.E. - 58th Street Improvements - Phase I 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,x) Water and sewer operations 125,000 Interest earnings 9,197 Total financial resources 693,581 Construction Costs: Contractors 532,162 Engineering, testing, etc. 94,185 Legal and fiscal 18,629 Land/right of way 30,486 Other costs 230 Total construction costs 675,692 Transfer to Closed Bond Fund (17,889) Fund balance - December 31, 1995 $0 This fund was closed in 1995 to the Closed Bond Fund. City of Oak Park heights, Minnesota Management Report, Page 39 AAE - 58th Street Improvements - Phase U 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 to date is as follows: Revenues: MN Dot $230,000 Transfer in: Closed Bond Fund 345,000 Total revenues 575,000 Expenditures: Preliminary costs 16,381 Construction costs: Contractors 383,797 Engineering, testing, etc. 63,335 Other costs 410 Total expenditures 4 63,923 Fund balance (deficit) m December 31, 1995 $111,077 The transfer from the Closed Bond Fund provided internal financing of this project. This project was assessed in 1995 and the assessment roll ($287,380) was assigned to the Closed Bond Fund. Upon completion of the project, we recommend the remaining funds be transferred to the Closed Bond Fund. City of Oak Park Heights, Minnesota Management Report, Page 40 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 1995 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 Krongard 4,950 8,079 6,276 19,305 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) Brackey Addition 25,447 44,260 56,079 125,786 Less: City portion - - (1,148) (1,148) Autumn Ridge 14,662 23,123 27,747 65,532 Haase Addition 3,186 5,542 7,021 15,749 Investment Earnings 9,106 26,142 9,568 44,816 Cash transfers: Debt service - 1991 Bonds (52,500) (308,000) - (360,500) Debt service - assessments - - 11,843 11,843 Fund balance - December 31, 1995 $93,091 $161,005 $155,429 $409,525 City of Oak Park Heights, Minnesota Management Report, Page 41 The balance at December 31, 1995 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 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 $175,000 $960,000 $1,135,000 As shown above, the A.A.E. Connection Charge balances at December 31, 1995 represent sufficient amounts to meet the sanitary sewer debt commitments for 1996 and 1997 and the water works debt service commitments for 1996 and 1997. 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, 1995. City of Oak Park Heights, Minnesota Management Report, Page 42 At December 31, 1995, the Connection Charge Funds are scheduled to receive the following connection charges: Sanitary Water Storm Sewer Work Water Total Autumn Ridge $29,324 $46,245 $55,494 $131,063 Brackey Addition 75,458 130,726 165,633 371,817 Haase Addition 29,857 51,930 65,809 147,596 Total $134,639 $228,901 $286,936 $650,476 City of Oak Park Heights, Minnesota Management Report, Page 43 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 1995 Annual Financial Report. Condensed comparative operating statements of income and expense for the utility operations of the City are as follows: Water Department 1994 1995 Amount Percent Amount Percent Revenue: Customer billings and other $173,324 100.00 $177,345 100.00% Operating expenses: Contractual services 45,897 26.48% 35,185 19.84% Administrative and personnel charges 47,125 27.19% 47,500 26.78% Other 2,888 1.67% 4,698 2.65% Depreciation: On purchased assets 7,216 4.16% 7,607 4.29% On contributed assets 51,747 29.86% 55,486 31.29% Total operating expenses 154,873 89.35% 150,476 84.85% Net operating income $18,451 10.65% $26,869 15.15% $180,000 Water Operating Revenue & Expense �� I $160,000 - 'i- $140,000 — MM All Other Expenses $120,000 ___ ®Depreciation $100,000 EM Contractual Services $80,000 % J -t Operating Revenue $60,000 %! $40,000 $20,000 — i'i' $0 E' f 1991 1992 1993 1994 1995 City of Oak Park Heights, Minnesota Management Report, Page 44 Sewer Department 1994 1995 Amount Percent Amount Percent Revenue: Customer billings and other $290,271 100.00% $282,920 100.00% Operating expenses: MCES 147,893 50.95% 207,485 73.34% Other contractual services 23,424 8.07% 12,022 4.25% Administrative and personnel charges 47,125 16.23% 47,500 16.79% Other 980 0.34% 837 0.30 % Depreciation: On purchased assets 2,168 0.75% 2,311 0.82% On contributed assets 37,951 13.07% 42,838 15.14% 259,541 89.41% 312,993 110.63% Net operating income $30,730 10.59% ($30,073) ®10.63% $325,000 Sewer Operating $300,000 Revenue & Expense $275,000- $250,000 - ® All Other Expenses $225,000 EMMCES $200,000 _ — Depreciation $175,000 '''/ %' $150,000 i = = % Operating Revenue $125,000 $100 75,000 //= %! % $50,000 — y_ "%— / $25,000 — $0 — 1991 1992 1993 1994 1995 City of Oak Park Heights, Minnesota Management Report, Page 45 The single largest expense of the sewer operations is the contractual services of the Metropolitan Council Environmental Services (MCES). The MCES 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 MCES with regard to sanitary sewer operations. A summary of MCES charges is as follows: MCES Billings $250,000 $200,000 $150,000 $100,000 $50,0 WV 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1 13MCESE-stimated ® MCES Actual City of Oak Park Heights, Minnesota Management Report, Page 46 The MCES 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 MCES 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 0 /6) 1984 75,338 13.5% 68,712 56.3% 1985 71,879 (4.6 0 /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 1 /6) 196,617 28.6% 1995 192,222 6.0% Not Available 1996 232,258 20.8% Not Available There are two basic factors which affect billings from the MCES. The first is changes in use of the system. The estimated usage increased from 160 million gallons for 1995 to 185 million gallons for 1996 representing a 15% usage increase. The second factor which affects the billings from the MCES is their cost to process gallonage. Their cost to process (per million gallons) increased from $1,276 for 1995 to $1,318 for 1996 representing a 3.3% rate increase. The combination of these factors increased the City's estimated cost by 20.8% for 1996. The City responded to the increases in sewage treatment costs and increased sewer rates effective January 1, 1996.