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Home My WebLink AboutManagement Report and Recommendations CITY OF OAK PARK HEIGHTS, MINNESOTA MANAGEMENT REPORT AND RECOMMENDATIONS DECEMBER 31, 1997 a . I MCI ma - i j I I I I� i d t ,I ' e u' a n 9 Y. a 9 City of Oak Park Heights, Minnesota Management Report and Recommendations Executive Summary EXECUTIVE SUMMARY Throughout this report various topics are tagged for easier reference as follows: [J State statute or federal legislation. D Financial comparison or trend analysis. CAM Impact of accounting and reporting standards of the Governmental Accounting Standards Board. C* Options to continue improvement in policies, procedures, systems and/or long -range plamling. O City's accomplishments. Several areas highlighted for your reference include the following: O During 1997, the City adopted an investment policy. Page 4 • The City was in compliance with statutes regarding collateral for deposits. Page 4 • The City has an excellent property tax collection rate. Page 6 GRIM Effective for 1998, the City will be required to report investments at market value in the financial statements. Page 6 The 1997 and 1998 state legislature lowered tax capacity rates for several classes of property including commercial/ industrial properties. This change will adversely impact tax capacity rates. We recommend that the impact on the City of Oak Park Heights be closely monitored. Page 7 b Periodically review the status of properties with special deferred assessments. Page 9 Page 2 City of Oak Park Heights, Minnesota Management Report and Recommendations Executive Summary q Consider establishing a fund to account for refuse collection activities. Page 15 b Consider establishing an administrative fee - Enterprise Funds. Page 15 C* Consider establishing an administrative fee - Capital Improvement Projects. Page 15 C* Monitor the committments of the Capital Revolving Fund to assure full funding of all projects. Page 35 a Close the River Hills 2nd Addition Capital Project Fund. I Page 40 Ga Determine all qualifying expenditures of the St. Croix Mall TIF district prior to the district termination date of December 31, 1998. Page 41 G* Determine a funding source for the projects in the Interim Construction Fund. Page 45 q Determine a source of funding for the City portion of the Brackey West Improvements. Page 49 G4f Reporting of deferred compensation plans has changed as a result of Internal Revenue Tax Law changes. Page 62 Page 3 City of Oak Park Heights, Minnesota Management Report and Recommendations Combined Balance Sheet XYWkbnhWYllYWwwNmduLwirdddtld. iiil: swWiei. iWibdeii�ein: dd.: iL6' ioei4dWddiiL'L6JLiYiIL6LW'dWW' IW ' COMBINED BALANCE SHEET L The Combined Financial Statements of the City are presented in Statements 1 through 5 of the 1997 Annual Financial Report. The following comments relate to these financial statements of the City. Cash and Investments December 31, Increase Description 1996 1997 (Decrease) Checking account ($14,079) ($27,449) ($13,370) Investments 5,507,474 5,873,794 366,320 Petty cash 100 100 - Totals $5,493,495 $5,846,445 $352,950 The December 31, 1996 and 1997 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 $329,041 of interest on investments during 1997 compared to $279,229 in 1996. Page 4 City of Oak Park Heights, Minnesota Management Report and Recommendations Combined Balance Sheet Cash balances of Minnesota cities are commonly restricted by statutory requirements and long range financial planning objectives. The following schedule illustrates this point by presenting cash balances by fund type with a comparison to reserved /designated fund balance: Reserved and /or Cash and Investment Balance Designated December 31, Increase Fund Fund Type 1996 1997 (Decrease) Balance General $1,453,511 $1,337,184 ($116,327) $1,188,814 Special Revenue 6,334 21,745 15,411 14,326 Debt Service 495,055 518,953 23,898 519,084 Capital Project 3,067,464 3,564,689 497,225 2,575,636 Enterprise 512,062 538,004 25,942 661,765 Agency (40,432) (134,130) (93,698) N/A Total $5,493,994 $5,846,445 $352,451 $4,959,625 Page 5 City of Oak Park Heights, Minnesota Management Report and Recommendations Combined Balance Sheet Investments at December 31, 1996 and 1997 were as follows: December 31, 1996 1997 Investment Description Yield Balance Yield Balance Money Market Savings $360,054 $562,896 AIM Government Fund Various 707,319 Various 407,319 Certificate of Deposit 5.60% 823,000 5.53% 250,000 Certificate of Deposit 5.50% 570,000 8.50% 95,000 Certificate of Deposit 5.20% 119,000 6.05% 585,000 Certificate of Deposit 5.70% 500,000 5.88% 500,000 Certificate of Deposit 5.50% 200,000 5.88% 280,000 Certificate of Deposit 5.90% 500,000 5.88% 200,000 Certificate of Deposit 5.75% 350,000 6.10% 500,000 Certificate of Deposit 5.75% 342,000 6.10% 385,000 Certificate of Deposit 5.70% 749,000 5.88% 775,000 Certificate of Deposit 5.47% 140,700 5.90% 250,000 Certificate of Deposit 5.75% 146,400 5.90% 400,000 Certificate of Deposit 5.88% 400,000 Certificate of Deposit 5.80% 94,560 Certificate of Deposit 5.80% 94,546 Certificate of Deposit 5.90% 94,472 Totals $5,507,473 $5,873,793 O During 1997, the City adopted an investment policy. This policy addresses various items including objectives, authorized institutions and authorized investments. We concur with the City's action in this area. Collateral for Deposits O Minnesota Statutes (MS I I8A) 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 compliance with such statutes at December 31, 1997. Page 6 City of Oak Park Heights, Minnesota Management Report and Recommendations Combined Balance Sheet GAM The Governmental Accounting Standards Board (GASB) issued in March, 1997, a statement on accounting and financial reporting for certain investments. This statement will require investments in (a) interest - earning investment contracts, (b) external investment pools and open -end mutual fiends, (c) debt securities, and (d) equity securities to be reported at fair value. Fair value is the amount at which a financial investment could be exchanged in a current transaction between willing parties. Essentially, this statement will require cities to record virtually all investments at fair value. Currently, the City's investments are recorded at amortized cost in accordance with current accounting principles. Due From Other Governmental Units December 31, Increase Description 1996 1997 (Decrease) Fines $3,982 $4,518 $536 Gravel tax - 476 476 MCES 900 22,281 21,381 City of Forest Lake - Safe and Sober 1,805 2,283 478 ISD #834 - Liaison officer 7,451 7,979 528 Totals $14,138 $37,537 $23,399 All of the above amounts are currently collectible. Page 7 City of Oak Park Heights, Minnesota Management Report and Recommendations Combined Balance Sheet Proverty Taxes 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. 1994 1995 1996 1997 Delinquent taxes - January 1 $17,563 $21,146 $18,813 $18,196 Current levy (includes Homestead and Agricultural Credit Aid - HACA) 1,344,630 1,430,985 1,459,621 1,469,247 Total collectible 1,362,193 1,452,131 1,478,434 1,487,443 Receipts: Current 1,336,980 1,421,284 1,452,563 1,460,795 Delinquent 3,359 12,034 7,675 4,194 Total receipts 1,340,339 1,433,318 1,460,238 1,464,989 Adjustments (708) - - (11,508) Delinquent taxes - December 31 $21,146 $18,813 $18,196 $10,946 Current collection as a percent of current levy 99.4% 99.3% 99.5% 99.4% Total collections as a percent of current levy 99.7% 100.2% 100.0% 99.7% The adjustments to property taxes receivable consist of abatements of property taxes as a result of market valuation adjustments. The adjustments for 1997 include abatement for 1995 and 1996. The County records were not previously available to adjust the delinquent taxes for these years. O 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 criteria used by the City's bond rating agency. Page 8 City of Oak Park Heights, Minnesota Management Report and Recommendations Combined Balance Sheet 1dYiYYUWuWYuLMuiutlWYWUJm1YJ4uIWUdlWbuu LWiY:WJWWiWJYUUimWuYWWILbWWl6 tlJYJLY " "' WYWLYIM1i tlYIWI'I'LY W'W'4W'WIW 4YY6'YWUW+Y..iW1.bbY 4rVAWWiWlJINIW' JLLLWJJWhWWII.. LLiiVLWVIYWYLWSLW144LVWWWLILLLWJL :W...YLI .Y. d.Y. .J J..Y,. J.,, u+,u ED The 1997 and 1998 legislature lowered class rates for residential, commercial /industrial and several other property classes. However, the result of this change was to shift property taxes between classes of property. A comparison of values for taxes payable 1997 and taxes payable 1998 is as follows: Increase (Decrease) Tax Capacity Values 1997 1998 Amount Percent Real estate $6,591,894 $5,987,202 ($604,692) Personal property 136,796 120,878 (15,918) Subtotal 6,728,690 6,108,080 (620,610) Fiscal disparity contribution (750,991) (663,765) 87,226 Fiscal disparity distribution 313,429 300,520 (12,909) Capture tax increment (143,528) (47,749) 95,779 $6,147,600 $5,697,086 ($450,514) (7.3 %) Tax capacity rates 22.898 27.141 4.243 18.5% Tax levy $1,394,898 $1,524,047 $129,149 9.2% Page 9 City of Oak Park Heights, Minnesota Management Report and Recommendations Combined Balance Sheet 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 Homestead and Agricultural Credit Aid (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 1998 budgeted: 1998 Payer 1994 1995 1996 1997 Budgeted Local taxpayer $1,372,448 $1,470,166 $1,494,440 $1,497,143 $1,598,420 State credits 76,640 77,980 77,980 74,329 74,493 Fiscal disparities: Contribution (167,432) (172,431) (179,486) (175,450) (151,988) Distribution 62,974 55,270 66,681 73,225 77,615 Totals $1,344,630 $1,430,985 $1,459,615 $1,469,247 $1,598,540 Shown on a basis of percents, current tax collections (by payer) were as follows for the past four years including 1998 budgeted. 1998 Payer 1994 1995 1996 1997 Budgeted Local taxpayer 102.1% 102.7% 102.4% 101.9% 100.0% State credits 5.7% 5.4% 5.3% 5.1% 4.7% Fiscal disparities: Contribution (12.5 %) (12.0 %) (12.3 %) (11.9 %) (9.5 %) Distribution 4.7% 3.9% 4.6% 4.9% 4.8% 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. Page 10 City of Oak Park Heights, Minnesota Management Report and Recommendations Combined Balance Sheet Special Assessments Receivable Special assessments receivable consisted of the following types and amounts: December 31, Increase Description 1996 1997 (Decrease) Delinquent $2,913 $4,967 $2,054 Due from County 1,836 1,031 (805) Deferred 642,151 476,768 (165,383) Special Deferred 144,800 14,800 (130,000) Totals $791,700 $497,566 ($294,134) 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. Included in deferred special assessments are amounts that are billed directly to the property owner by the City. These assessments are for 58th Street improvements to Outlots A and B of the Brackey Addition. This property is classified as "green acre" status by the County and therefore the County is unable to include the assessments on the property tax statement. The amount of these direct billed assessments was $104,622 at December 31, 1997. C* Special deferred assessments consists partially of an assessment which has been deferred pending future connection to the sanitary sewer line. This amount was deferred by City Council Resolution 84 -1 -1. The resolution does not stipulate the amount of interest to be collected upon connection, if any. We recommend the City periodically review the status of this property. Page 11 City of Oak Park Heights, Minnesota Management Report and Recommendations Combined Balance Sheet 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: Balance at December 31, 1996 1997 Severance $67,265 $80,848 Vacation 13,009 14,966 Total $80,274 $95,814 Page 12 City of Oak Park Heights, Minnesota Management Report and Recommendations Combined Balance Sheet Y'ISIWWOJWIYIJII1"AlIJIYIII Id, wIV „J I IIII,W 1,11 JIIIJ IW AIIJIlWi,111'WIIINJ11111All J 11 U,, IIIIIIIIIINAIdial"I III �Il III I A WtlI111Wlll dlUJdl 'JNYM111111111 Ji1111111V,dIJJi 11 dIVll�, JWiJ I II,VW llllul�lWWlllll !IJ.IIYIIIII!IUIIIWIIJ'LJWII', Ad Ill I! IJIIIY�, iYdL�WIUIdIIIJI1WYJeYW ,YIJd11VIJl dIWII 111111 All Y IIWYY WWIJd,WWlll!Y I JIIWU1W LIll'YWW1dlYdlll�l YlY 111 {LLI,YIIWWYVVd I Bonds Pavable The City had three bond issues outstanding during 1997. A summary of the 1997 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, 1997 $90,000 $1,065,000 $1,060,000 $2,215,000 Principal payments (20,000) (80,000) (110,000) (210,000) Balance - December 31, 1997 $70,000 $985,000 $950,000 $2,005,000 Retirement schedule: 1998 $20,000 $85,000 $110,000 $215,000 1999 25,000 90,000 120,000 235,000 2000 25,000 90,000 120,000 235,000 2001 - 100,000 120,000 220,000 2002 -2006 - 620,000 480,000 1,100,000 Total $70,000 $985,000 $950,000 $2,005,000 Detail of outstanding bond issues is contained in Exhibit 2 of the 1997 Annual Financial Report. The Bonds of 1992 are being repaid by property taxes. The annual property tax levy for this bond issue is $25,000 and continues through 2000. The Bonds of 1993 are being repaid by AAE (Annexation Area Extended) 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). Page 13 City of Oak Park Heights, Minnesota Management Report and Recommendations General Fund 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 1988 $804,441 70% $194,072 17% 5152,137 13% $1,150,650 100% 1989 868,420 68% 198,888 16% 211,570 16% 1,278,878 100% 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 24% 1,540,783 100% 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 25% 1,817,638 100% 1995 1,354,677 68% 124,860 6% 520,466 26% 2,000,003 100% 1996 1,390,443 66% 119,274 6% 581,850 28% 2,091,567 100% 1997 1,387,227 65% 137,951 6% 619,874 29% 2,145,052 100% 1998* 1,440,637 70% 141,666 7% 470,475 23% 2,052,778 100% * Budgeted A graph of property taxes, state aids, and other revenue for the General Fund is as follows: $1,600,000 Genera( Fund $1,400,000 X -Revenue by Source r $1,200,000 r; h f, E7 $1,000,000 State Aids �? - _ . 0 Other Revenue $800 Property Taxes f f V E P Y P $600,000 r fa, $400,000 — - .;, — — — { = $200,000 - — _——— IS - — \ —Y ` $0 — 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 Budget Page 14 City of Oak Park Heights, Minnesota Management Report and Recommendations General Fund 1ItlWIYlW1 I I u'�4'. YIVVi Itl YL;lldlilwii1110L Y1 'o�i YIIYW 4' LV JiiluJllY, ILL I I'LL Y Iill: ,I IIY, ill III JI'IIY YYdII.tl,ll'.1111YJIi',II IV 1 Y1uYI1,�li IJ1(IY.W1 1 YYIl�YYI4 ILYIIY aI,I lIIY IY 111 L.IIJI!YIIWIII11Y 111JiVYl1II IIY',!IIWII Iid IY Y'! Y IYIIIYIU IIIYILL JVIIY WI, YIIiYV11LLI111JIYltlWLJ !YILVll,Y�IYId1Y111'i IIWll11111u Al JYd W1 „� YJYJ� 4ryWUi I�II�tl�Will dWl IYJYJII(l'YIWWI�YIrYlIUJJ .! I State Aids State aids of the General Fund have consisted of the following for the past six years (with 1998 budget): 1998 State Aid 1992 1993 1994 1995 1996 1997 Budget Local performance aid S - $ - $ - $ - S - $4,186 S5,133 H.A.C.A. 36,740 54,358 75,245 76,615 67,063 73,065 74,493 Police aid 32,432 33,516 43,523 48,245 52,211 44,900 60,000 Other state revenue - - - - - - 2,040 Snowplowing - - - - 15,800 - Totals $69,172 $87,874 $118,768 $124,860 S119,274 $137,951 $141,666 Change $18,702 $30,894 $6,092 ($5,586) $18,677 $3,715 % Change 27% 35% 5% (4 %) 16% 3% A graph of State aids for the past eight years (with the 1998 budget) is presented below: $200,000 $180,000 State Aids $160,000 u $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 1990 1991 1992 1993 1994 1995 1996 1997 1998 (0 L.G.A. ® H.A.C.A. 0 Police Aid Budget WYWW 11YiY'41 YWWWbdWJYa We�4Y' JIIIWYWBiLLLWWWYeLLYrbdtlJlWldwtl vWIEMWIYeuJIBWU WItl! LwWWidWUUtlLW "• �� . " "'• ". '. ° " Page 15 City of Oak Park Heights, Minnesota Management Report and Recommendations General Fund iWeW1WYnIUm+.WUULLLOLdYYI° "'LLYYYW{llWWl i iumaui iunuu w .uumunu Other General Fund Revenue Other revenue of the General Fund have consisted of the following for the past five years (with 1998 budget): 1998 Description 1993 1994 1995 1996 1997 Budget Licenses and permits $62,898 $60,914 $117,511 $156,181 $204,986 $149,425 Charges for services: Refuse collection 103,039 108,310 110,021 103,444 87,830 121,700 Enterprise 80,000 94,250 95,000 98,850 102,100 - Other 4,476 2,681 2,329 2,674 2,456 2,500 Inspections 20,800 34,402 34,524 25,611 24,150 23,450 Fines and forfeits 44,189 55,111 49,020 56,545 60,682 54,600 Interest earnings 25,180 34,473 54,912 56,468 55,885 49,500 Other 72,862 75,823 57,144 82,077 81,785 69,300 Total $413,444 $465,964 $520,461 $581,850 $619,874 $470,475 Refuse Collection 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 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 103,444 326,036 (222,592) 32% 1997 87,830 298,842 (211,012) 29% 1998 95,700 312,100 (216,400) 30% ( ` ) Budgeted amounts, does not include $6.50 surcharge ($26,000) Page 16 City of Oak Park Heights, Minnesota Management Report and Recommendations General Fund Effective January 1, 1998, the City council authorized an additional charge of $6.50 per quarter. This additional charge is effective for five years. The refuse surcharge will increase revenue by an estimated $26,000 annually. This surcharge was designed to replenish fund balance reserves used to pay for the Junker Landfill lawsuit. However, the 1998 General Fund budget (including the surcharge) is a balanced budget. Therefore, for 1998 the surcharge will, in effect, be used to fund current expenditures and not replenish fund balance. a Commonly, activities such as refuse collection are accounted for in a separate fund. We recommend the City consider establishing a fiend to account for refuse collection activities. This fund would receive a transfer from the General Fund in an amount equal to the "net cost" as illustrated in the previous table. Administrative Fee - Enterprise Prior to 1998, the General Fund received an administrative fee from the Water and Sewer Utility Fund. This fee was designed to reimburse the General Fund for labor and overhead costs incurred. For 1998, the City eliminated the administrative fee and began charging the Water and Sewer Utility Fund directly for labor costs. However, under this procedure, the General Fund is not reimbursed for overhead costs. C* We recommend the City consider establishing an administrative fee for overhead costs. Administrative Fee - Capital Projects The City's General Fund incurs costs related to capital improvement projects. These costs include staff time, supplies, and other overhead items. G* We recommend the City consider establishing an administrative fee to recover these costs. An administrative fee would be charged to a project with the corresponding revenue receipted in the General Fund. Commonly, an administrative fee is based on a percentage of total project cost. We are available to assist the City in establishing an administrative fee for Capital Projects. Page 17 City of Oak Park Heights, Minnesota Management Report and Recommendations General Fund The following schedule and graph reflect the revenue of the General Fund for the past two years including 1998 budget. Additional detail of the revenue is presented in Statement 7 of the 1997 Annual Financial Report. General Fund Revenue 1996 1997 1998 Budget Description Amount Percent Amount Percent Amount Percent General property taxes $1,390,443 66.5% $1,387,227 64.7% $1,440,637 70.2% Intergovernmental• State 119,274 5.7% 137,951 6.4% 141,666 6.9% County and other 26,467 1.3% 26,401 1.2% 49,000 2.4% Licenses and permits 156,181 7.5% 204,986 9.6% 149,425 7.3% Charges for services 230,579 11.0% 216,536 10.1% 147,650 7.2% Interest on investments 56,468 2.7% 55,885 2.6% 49,500 2.4% Fines and forfeits 56,545 2.7% 60,682 2.8% 54,600 2.7% All other 55,610 2.6% 55,384 2.6% 20,300 0.9% Totals $2,091,567 100.0% $2,145,052 100.0% $2,052,778 100.0% General Fund 1998 Budgeted Revenue Property Taxes 70.2% 2 %A s r. Intergovernmental 9.3% k Licenses and Permits 7.3% - All Other Interest on Charges for Services 3 Investments 7.2% 2.4% Page 18 City of Oak Park Heights, Minnesota Management Report and Recommendations General Fund dIWW�44uW " . ., . . ' YiY .1iWW4Y4WWYi'HWYb461iLl4JLIi YlyWi1WILLYb W411 iadWld�uYYJ. LJJll: IY . " • . " . YLWJ '.i.. ,., ��y uu.. LIYWWWt •• iWLJWW4iLLL :lLJi..{L41.1luilWl A "•:, .l.Yly,W Expenditures (by major classification) for the past two years plus the 1998 budget, are as follows: General Fund Expenditures 1996 1997 1998 Budget Description Amount Percent Amount Percent Amount Percent Current expenditures: General government $441,852 21.5% $507,902 23.0% $438,300 21.4% Public safety 791,916 38.5% 845,287 38.2% 912,020 44.4% Streets and highways 136,611 6.6% 99,412 4.5% 114,175 5.6% Sanitation 334,175 16.2% 313,302 14.2% 327,100 15.9% Recreation 185,372 9.0% 211,244 9.6% 122,835 6.0% Court judgment 100,000 49% - 0.0% - 0.0% Capital outlay 34,645 1.7% 52,018 2.4% 47,425 2.3% Transfer out 35,000 1.6% 182,133 8.1% 90,923 4.4% Totals $2,059,571 100.0% $2,211,298 100.0% $2,052,778 100.0% A graph of the above expenditures is presented below: General Fund 1998 Budgeted Expenditures Public Safety 44.4% Streets &Highways 5.6% ' S S "'SSS Sanitation 15.9% 3 Recreation 6.0% General Government Capital Outlay & 21.4% Other 6.7% Page 19 City of Oak Park Heights, Minnesota Management Report and Recommendations General Fund The fund balance of the General Fund was $1,246,347 at December 31, 1997 representing a $66,246 decrease during 1997 as follows: Budgeted increase (decrease) in fund balance ($74,850) Actual Revenue Greater /(Less) Than Budgeted Revenue: General property taxes: Current and delinquent ($4,242) Payment in lieu of tax 8,116 Excess TIF 12,059 Othertaxes 40 Intergovernmental 9,951 Licenses and permits 39,006 Charges for services 4,236 Fines and forfeits 8,582 Interest on investments 10,885 Other 33,599 122,232 Actual Expenditures (Greater) /Less Than Budgeted Expenditures: General government (78,927) Public safety 43,837 Streets and highways (185) Sanitation 14,298 Recreation (6,518) (27,495) Transfer to Capital Improvements Fund of excess TIF (85,021) Transfer to Law Enforcement Grant Fund (1,112) Net decrease in fund balance for 1997 ($66,246) A summary of the significant budget variances is as follows: Revenue: Excess TIF - TIF districts do not benefit from increases in the tax rate. This "excess" TIF by statute must be allocated to the General Fund. The City does not budget for excess TIF as this money has been designated for street reconstruction. Page 20 City of Oak Park Heights, Minnesota Management Report and Recommendations General Fund Intergovernmental - The positive budget various related primarily to the snowplowing grant for $15,800, which was not budgeted for. License and permits - This budget variance relates primarily to the permits issued for Rainbow, Menards, Hollywood Video and Bayport Bank which were not budgeted. Other - The positive budget variances is primarily the result of receiving insurance dividends of $29,429 from the League of Minnesota Cities. Expenditures: General government - The negative variance is in part due to legal costs associated with the Junker Settlement, unanticipated administrator search expenditures and the purchase of an unbudgeted audio system. Sanitation - The positive variance is primarily due to a change in the rate structure for apartment buildings and an overall decrease in the rates the City pays. Public safetv - The positive variance is primarily the result of attorney costs being less than budgeted. Page 21 City of Oak Park Heights, Minnesota Management Report and Recommendations General Fund LllJUWJ..uli " ". .... ..... d1.'. ii, ".y ul General Fund Reserves The fund balance of the General Fund decreased in 1997. The schedule below reflects the fund balances for the past ten years: Year Ended Fund Increase December 31, Balance (Decrease) 1988 $870,705 $870,705 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 1996 1,312,593 31,996 1997 1,246,347 (66,246) Page 22 City of Oak Park Heights, Minnesota Management Report and Recommendations General Fund 1 1. 1 LWA 1, il 1, lull, ,vii, iu "I ..O I I , 11 wr ru„ su ,.,u a .r nau , mi1 1 � 1 1 1,1 u1,1 a, A dWJp WOW M W 110111,6 J IW,1 11 !,, 11 1 "1 1, u. i1, Reserve balances are an important component of City financial management. When evaluating the adequacy of reserve balance, there are a number of important factors that must be considered. A summary of some of these considerations for general fund reserve balances is as follows: Considerations for Reserves Benefits of Reserves 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 • Supplements revenues with investment earnings. revenues is therefore recommended. Intereovernmental 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 & I-IACA formulas is a constant threat. = major receipts (cash flow). Capital outlay 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 EmerRencv 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. Soecial City Council proiects. Preliminary studies, interfund loans and minor projects are examples of reserve uses. Resources available in other funds A city may have reserves in other funds for purposes such as compensated absences, capital acquisition or special projects. Page 23 City of Oak Park Heights, Minnesota Management Report and Recommendations General Fund During 1987, the City adopted Resolution 87 -10 -42 establishing General Fund reserves/ designations for cash flow, employee benefits and general contingency based upon formulas for each category. At December 31, 1996 and 1997, the General Fund balance was designated as follows: General Fund Balance December 31, 1996 1997 Designated for: Cash flow $724,000 $760,000 Contingent employee benefits 197,308 120,814 General contingency 245,823 308,000 Capital improvements 72,962 - Comprehensive plan 11,500 - Ensuing year's budget deficit 61,000 - Subtotai 1,312,593 1,188,814 Undesignated - 57,533 Total fund balance 1,312,593 1,246,347 Cash Flow Reserve Property taxes and state aids account for approximately 71% 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 $760,000, computed as follows: Cash Flow Reserve 1998 tax levy $1,440,637 1998 budgeted HACA & LPA 79,626 Total $1,520,263 Recommended reserve (one -half of tax levy and state aids) $760,000 Page 24 City of Oak Park Heights, Minnesota Management Report and Recommendations General Fund 4101: 1 , I,¢ 4,1,,., 'J , I I!ILlj"jll 11114 11 1 J „J idil I IY Wp, LNollll4JIIJY,YYIO NII'sli lO ,IJ,IIWl1Ul;lUJI,,,, l, 1:IJ41,Y I,', uN,WYI!`I, Will,,IY IL ll " I'll " IIII& The following graph of monthly general fund cash balances illustrates the impact of receiving property taxes and state aids in the second half of the year: $1,600,000 General Fund Monthly Cash Balances — - - - - - ----------------- - - - - -n $1,400,000 — — - - - - -- -- -- $1,200,000 — — $1,000,000 -- - ( S990,000 - decrease $800,000 — — $600,000 -- — — — v $400,000 — _ -- -- -- - -- — $200,000 — — — — — $0 ----= + — + - - + - -- -i- - -+ — + - - +— -- --+- i C co 0 0 0 0 � M N M M M M M M M M M M - N I'D 1 0 0� O N As shown above, the cash balance decreased $980,000 between January 1 and June 30, illustrating the need for a cash flow reserve. Page 25 City of Oak Park Heights, Minnesota Management Report and Recommendations General Fund .. „y Emplovee Benefits Reserve The employee benefits reserve is computed based upon accrued, but unpaid, employee benefits as follows: Employee Benefits Reserve December 31, Employee Benefit 1996 1997 Vacation leave carryover $13,008 $14,966 Severance 67,264 80,848 Reserve for unused sick leave 117,036 25,000 Total $197,308 $120,814 The reserve for unused sick leave is the remaining balance after deducting the portion that qualifies as severance. The purpose of this reserve is to provide funds in the event that a temporary employee is required while a permanent employee is on sick leave. The amount required for this reserve was estimated to be $25,000 at December 31, 1997. General Continaenev Reserve 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. Currently, the City of Oak Park Heights has set this reserve equal to 15% of the General Fund operating budget subject to availability of such amounts, as follows: General Contingency Reserve December 31, Description 1996 1997 Ensuing Year's Budget $2,067,585 $2,052,778 Reserve Amount @ 15% $310,000 $308,000 Page 26 City of Oak Park Heights, Minnesota Management Report and Recommendations General Fund Capital Improvements Reserve The capital improvements reserve in 1996 was the accumulation of "excess TIF" monies. TIF districts do not benefit from increases on the tax capacity rate. The "excess TIF" related to the increased tax rate is required by statute to be allocated to the General Fund. These funds have been designated for street reconstruction activities. The City transferred the prior year reserve amounts to the Capital Improvement Fund during 1997. Additionally the City transferred an amount equal to the 1997 Excess TIF received in the General Fund to the Capital Improvement Fund in 1997. Emplovee Health Insurance The City self insures for a portion of employee health insurance. Currently the City budgets for the maximum out -of- pocket costs that may be incurred. For 1997, the deductible portion was significantly less than budgeted as follows: $8,016 Maximum claims exposure - single 37,906 Maximum claims exposure - family 45,922 Subtotal (10,000) Claims deposits made in 1997 $35,922 Budget variance As shown above, the City experienced a favorable budget variance of $35,922. This was the result of budgeting for the maximum claims exposure. Beginning in 1998, the City will establish a reserve for the self - insured portion of employee health insurance. This will enable the City to annually budget health insurance at an amount that would be an average of claims cost over a multi -year period. Page 27 City of Oak Park Heights, Minnesota Management Report and Recommendations Special Revenue Funds 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 two Special Revenue Fund during 1997. 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 1997 Total Revenue: Confiscated property $28,692 $8,500 $37,192 Reimbursements 1,680 - 1,680 Interest earnings 1,747 463 2,210 Total $32,119 $8,963 41,082 Expenditures: Public safety: Materials and supplies $12,004 $1,030 13,034 Contractual services - 698 698 Capital outlay 13,781 199 13,980 Total $25,785 $1,927 27,712 Fund balance - December 31, 1997 $13,370 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." Page 28 City of Oak Park Heights, Minnesota Management Report and Recommendations Special Revenue Funds Law Enforcement Grant Fund This fund was established in 1997 to account for a federal block grant. A summary of the financial activity of this fund is as follows: 1997 Revenue: Federal grant $2,780 Interest on investments 153 Total $2,933 Expenditures: Public safety: Capital outlay $3,089 Other financing sources: Transfer from General Fund - local share $1,112 Fund balance - December 31, 1997 $956 Page 29 City of Oak Park Heights, Minnesota Management Report and Recommendations Debt Service Funds DEBT SERVICE FUNDS The combining financial statements for the Debt Service Funds are presented in Statements 10 and 11 of the 1997 Annual Financial Report. Debt Service Funds are a type of governmental fiend 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 1997 as follows: Fund Balance December 31, Increase Fund 1996 1997 (Decrease) Storm Sewer Refunding Bonds of 1992 $26,961 $29,049 $2,088 Water and Sewer Refunding Bonds of 1993 256,625 259,209 2,584 G.O. Improvement Bonds of 1995 212,722 230,826 18,104 Totals $496,308 $519,084 $22,776 Storm Sewer Refundinty 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 broiection of the final fund position based on scheduled levies and debt requirements is as follows: Fund balance - December 31, 1997 $29,049 Additions: Future scheduled tax levies @ 100% 75,000 Total 104,049 Deductions: Debt requirements: Principal 70,000 Interest 7,795 Total 77,795 Projected fund balance $26,254 The above projection indicates that this fund will have adequate assets to meet bonded debt requirements over the scheduled term of this bond issue. The above projection also indicates the City may be able to cancel the final year's tax levy (year 2000) for the bond issue. The scheduled tax levy for the year 2000 is $25,000. Page 30 City of Oak Park Heights, Minnesota Management Report and Recommendations Debt Service Funds Water and Sewer 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 1997, the City transferred $125,000 from the A.A.E. Connection Charge Funds 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 1998 and 1999 scheduled debt payments. Future (1998 through 2004) projected cash transfers are as follows: Sanitary Water Year Sewer Works Total 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 $135,000 $755,000 $890,000 Page 31 City of Oak Park Heights, Minnesota Management Report and Recommendations Debt Service Funds " '•• "' "'",• ' """!: 1. ulll.. WL. lai.. WWSL4. ILl: u:'. 4S_.!. L1._ll.uisllLLLl.i..:�...f' , u a iii,iii u ii l I Ill liili Ji 4lY Iu II IY iJl.1111'1 Y .L,I,I O ,I "I Ld dl u, Lll4 di IIIJLL ei lil .u. ,IJI 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, Nrinnesota Projection of Cashflow 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 1998 $259,208 $0 $6,113 $125,000 $12,435 $143,548 $131,090 $0 $271,667 1999 271,667 0 0 125,000 13,018 138,018 132,690 0 276,995 2000 276,994 0 0 135,000 13,368 148,368 133,910 0 291,452 2001 291,452 0 0 140,000 14,159 154,159 134,825 0 310,786 2002 310,786 0 0 145,000 15,138 160,138 150,325 0 320,599 2003 320,599 0 0 165,000 15,783 180,783 149,805 0 351,577 2004 351,577 0 0 55,000 16,911 71,911 158,805 0 264,683 2005 264,683 0 0 0 12,392 12,392 166,805 0 110,270 2006 110,270 0 0 0 5,136 5,136 78,900 0 36,506 Total $0 $6,113 $890,000 $118,340 $1,014,453 $1,237,155 $0 Assumptions Special assessment collection rate .................... 95% Property tax collection rate . ............................... 99% Investment interest rate ..... ............................... 5.00% Negative interest charged to fiords ? .................. no As shown above, this fund has a projected surplus of $36,506 upon final bond maturity. This projection is dependent on sufficient transfers from the Connection Charge Fund. 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. The connection charge revenue from existing development /developer agreements is not sufficient to fund the debt service of this bond issue. Therefore, if no additional development occurs, the Utility Fund reserve will be needed. Page 32 City of Oak Park Heights, Minnesota Management Report and Recommendations „ „, , ,. , „,.,,., , , „„ „„ Debt Service Funds kll.l IYASL AI.1 iJi i�.4 U a,iJ i, � ml 14ii,L Wi VA �, I IIIY,U�I lIYY i1JYli W.,.il 1 YLIU,IiAJ.I w,j! IV lu IW i .¢uIJ � J Aly G.O. Improvement 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 Cashflow General Obligation Improvement Bonds of 1995 Total Cash Balance Property Special Other Investment Projected Debt Other Cash Balance Year January I Taxes Assessments Receipts Interest Receipts Payments Disbursements December 31 1998 $229,975 $57,826 $60,362 $0 $11,783 $129,971 $154,095 $0 $205,851 1999 205,851 59,400 57,780 0 10,600 127,780 159,420 0 174,211 2000 174,212 59,400 55,199 0 9,074 123,673 154,140 0 143,745 2001 143,745 59,400 52,618 0 7,608 119,626 148,740 0 114,631 2002 114,631 59,400 50,037 0 6,212 115,649 143,280 0 87,000 2003 87,000 59,400 47,455 0 4,891 111,746 137,700 0 61,046 2004 61,046 59,400 44,874 0 3,656 107,930 132,000 0 36,976 2005 36,976 59,400 42,293 0 2,520 104,213 126,000 0 15,189 Total $473,626 $410,618 $0 $56,344 $940,588 $1,155,375 $0 Assumptions 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 is projected to have a surplus of $15,189 upon final bond maturity. This projection is dependent on levying the scheduled property taxes (or providing alternative financing) and experiencing a special assessment collection rate of 95 %. Page 33 City of Oak Park Heights, Minnesota Management Report and Recommendations Capital Project Funds i,, „ um�unel,u�uwli�o ;Dieu.�u,tiu'uaoe,i,itu i,!i J.,,I, i,ww ,n!iiul, �IlI 6 ir!,u!a! „n,”' "1 „1 „wna CAPITAL PROJECT FUNDS The financial statements for the Capital Project Funds are presented in Statements 12 and 13 of the City's 1997 Annual Financial Report. The fund balance (deficits) of the Capital Project Funds were as follows at December 31, 1996 and 1997: December 31, Increase Fund 1996 1997 (Decrease) Capital Revolving Fund $1,004,721 $967,924 ($36,797) Budgeted Projects and Equipment Revolving Fund 236,680 300,487 63,807 Park Development 275,641 326,210 50,569 St. Croix Mall (TIF) 64,466 121,447 56,981 River Hills 2nd Addition - (65) (65) Street Reconstruction 128,711 114,646 (14,065) East Oaks - Swager Bros. 41 95 54 Valley View Estates - Krongard - 77 77 Renewal and Replacement 942,654 1,101,175 158,521 West Frontage Road Connection (947) (947) - Interim Construction (1,386) (3,458) (2,072) AAE - Brackey West - Oak Park Pond - 150,695 150,695 AAE - Brackey West - Outlots A & B - - - AAE - Sanitary Sewer Connection 112,114 157,997 45,883 AAE - Water Connection 123,021 126,142 3,121 AAE - Storm Sewer Connection 67,668 151,194 83,526 AAE - 58th Street Improvement - Phase II 57,304 53,180 (4,124) AAE - 58th Street Improvement - Phase II1 (27,414) (50,866) (23,452) AAE - Brackey Addition 6,444 6,489 45 AAE - Haase Addition 22 22 AAE - Autumn Ridge 471 494 23 AAE - Autumn Ridge 2nd Addition - - - AAE - Autumn Ridge 3rd Addition - (9,378) (9,378) Totals $2,990,211 $3,513,560 $523,349 Page 34 City of Oak Park Heights, Minnesota Management Report and Recommendations Capital Project Funds WWIIILILIW "I I'll IILIJLIII JANIII: WI4111V 11 IILIJ,LI:IIII IIYI IIYI IL VIIVY'WiJ dN IYI'I,LJl Y41'IJIJ'IIIJ WIWdLIIIYI,IIIIIJ11YlY lIIJV. J' IIWYLLIWYIII 'JIGOYIYIIYIIIW,IItl IWWIIIIYIILl,IV11dYYIIJ W!t'IWWdIII WIaIIIIIWYLLVWIIdWYIWIYIIIIYI ,IIYY WI'JWL'Ie14W,11WW JW',IYIWILLWM1l tlWd 1',Y(Yi,J „I:LJu dJ,I ILILI ll Ii'J:I, IJII I, ,Id1161IIIlY IdIYIIYIIWW'LL. Capital Revolving Fund During 1984, the City established the Capital Revolving Fund (formerly Closed Bond Fund). Initial financing for this fund was provided through the residual balances of closed (or defeased) special assessment Debt Service Funds of the City. Debt Service Funds accumulate surplus balances because of several factors: Some of these factors include the following: 1) Minnesota statutes require assets pledged for debt retirement (assessments and/or taxes) in an amount equal to 105% of debt service requirements. If a City experiences a good collection rate for assessments and taxes, the 5% excess requirement accumulates, creating a surplus. 2) Changes in investment interest rates may create surplus balances. For example, during the mid- 1980's, the City's investments were earning in excess of 10 %. The bond issues outstanding at that time had interest rates of 4% to 6 %. This difference in rates provided the City the opportunity to purchase investments at a cost of $582,000 which were sufficient to pay off bonds totaling $805,000, creating a surplus balance. Page 35 City of Oak Park Heights, Minnesota Management Report and Recommendations Capital Project Funds Willl„11Y.i f._' _ S 'i '" v.. iu i „ „ I lui., Y. Ii I; il II'1„ I I W,iliil ILY II,',J plu uYJ+d IIIJ llllu.l l,,llY vI IJJ 1'WiJ IY4 11 YlJY 1 IIIIIW I I I. li",I, I. i I li J l; I„ I ll "Ililu,' IJ.I JYIW;i A summary of transactions from inception is as follows: Capital Revolving Fund Prior Description Years 1997 Total 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 140,000 50,000 190,000 AAE - Streets 209,383 - 209,383 Other 70,144 - 70,144 General property taxes 2,257 - 2,257 Special assessments 445,447 219,917 665,364 Connection charges: Valley View Estates 97,315 31,880 129,195 Other 179,620 8,800 188,420 Escrow interest earnings 3,962 231 4,193 Investment interest 557,629 63,630 621,259 Temp. loan interest 19,161 - 19,161 Refunds and reimbursements - 7,389 7,389 Total financial resources $2,539,430 $381,847 2,921,277 Financial Uses: Expenditures 192,935 43,094 236,029 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 Brackey - Oak Park Ponds - 375,550 375,550 Total financial uses $1,534,709 $418,644 1,953,353 Fund balance - December 31, 1997 $967,924 M. Wd6MdJtlILLY11VVPIWI1WUlYJIUWdJYY4 YlJJ1'I II as YY11WIYJIlYIW11 iW111YJIlYYIIWWWYW III JIIYdIWI WI IY' YIYYII41WIJVYIII. WWIII; IILId 'V'JLIIIYLL'1114WJItl4!IiYWL'Yd W,YWYI: 1010 lM LIMA IAWIIWI,IlJl14dd1Y 146 Y.11'IULY i, WY 1111ll ullWI11LWILiLIr, ul u11W.1WYJWY'WIW'Yd11 dWY IJYIJWwllli \'WlinYlLLl Page 36 City of Oak Park Heights, Minnesota Management Report and Recommendations Capital Project Funds .: I WdJ:lllul LkIkk 11113, 1d. II[I161J::L WWIIIYJI'J::LIIIIILI IIIJYI IJJ6111111: LOIU I:IIJ I"[ ll IJII,I::ILIIiI11Ll JJIII IIIId1: 1111 W] III 141Y'�,IIIJWIYJUW:I:IIU1 111N, 6! NdIJJ :1111:I16 WIIIW114111W1111J1. eWIYIWiJi11Ll1:ilYII LYJIIIIiILI11Jll: Y.! Y I1011J. 11. iIIIJI'J11111AIYId'Jillll'llJll AL1' J11! H: i1ldltllY1111111JY: Iwi: IJUd :11�:YI111Y11JIYld',JIJIdiulh pW111:IJOIIJUIWdJ:IIWI! IlY,i 1111 1:Y: J,W11!�111,1Jd lall:l.l.11 l 111:1 �:�I 1:. In addition to the above fund balance, this fund has assessments receivable of $154,000 relating to the 58th Street Improvement Project. Additionally, this fund provided financing of the storm sewer portion of the High School Road improvement ($360,000 transfer) which is to be repaid by future stone sewer connections. The amount remaining to be repaid was $170,000 at December 31, 1997. A summary of existing and future assets is as follows: Existing assets $892,924 Future assets: Interfund loan 75,000 Storm sewer repayment 110,000 Assessments - existing rolls 154,000 Assessments - future rolls 375,000 $1,606,924 b We recommend the City prepare a long -tern cash flow budget for this fund to assure financing of existing and future commitments of this fund. VI: IbLWW ,'LWIJYWLYMWYLtl,WWY�diY „ J. . IYW! J�LLLY6�4WeYYAYw ilYYYY: WWNIJY1414WllWW4WYi1W :W�WW1Y4'1'IWaWYIJI61YtlY •�•.. WYi'JLWIIJdW'ti4JJ'u�li'41iW 4l4JeWWIWJduWWYlWYU44WMYL 'llYW"WI,IIYYWIJWJ - =: "ply"Wi WWWItlYWbV 61WNWUyYlY111'JII IW,IE'IWJWdI " „ •• , ": YJ'Jd'whA.Ilk Page 37 City of Oak Park Heights, Minnesota Management Report and Recommendations Capital Project Funds W l:1 !a: 1 AN I:1 '1ii I'll I 1,1 I , I 11, :: 1::, 1, 1 1. 1 11111111 11 I 1 ,'11!ul: I'll V..I111 YI 11:JJ II.YIWIRAll Y611!: W „11 Mill, Al "A IU1111116,111 11"Alll,i:: Il Jl lll!J Yi LI:1:L1'Illll l ILL 11 li::il„ d l ldlilk. Budg eted Proiects and Eauipment Revolvin Fund The Budgeted Projects and Equipment Revolving Fund (formerly 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 1997 Total Financial Resources: Transfers in: General Fund $1,205,075 $120,021 $1,325,096 Revolving Capital Fund 200,000 - 200,000 Interest earnings 209,133 17,707 226,840 Sale of property 9,414 - 9,414 Donations /other 33,691 3,132 36,823 Total financial resources $1,657,313 $140,860 1,798,173 Financial Uses: Expenditures: Municipal Bldg. - Phase I $106,785 $ - 106,785 Municipal Bldg. - Phase 11 486,637 - 486,637 Sealcoat 218,727 - 218,727 Land acquisition (Connel) 20,000 - 20,000 Recreation 241,943 40,339 282,282 A.D.A. 82,012 984 82,996 Street reconstruction: Expenditure 321 22,616 22,937 Transfer out 155,000 - 155,000 Perro Creek 7,820 - 7,820 Unallocated: 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 14,778 13,114 27,892 General Fund 40,650 - 40,650 Total financial uses $1,420,633 $77,053 1,497,686 Fund balance - December 31, 1997 $300,487 auulu' wa: wawawsuY! uY�ms +uY � wuw,uwu'Ywlw:Iwuiwusell: we' ww wul: kYll luvrbv' rs uuuYYUSr , tiw , w>r:suuuuauwmwJUUUw . . .:.:.. ..: ... ..�:ssr.ov --- wewulil: �JU' rsuluwualxlrWwwulwx. u'.r:�.IWw.IwrISlnaLLL,fruuwlrl Page 38 City of Oak Park Heights, Minnesota Management Report and Recommendations Capital Project Funds 111 is 1114 1111i I'M ::111'ail l: i 64 I I, J; 11 111111111.10A 1,1,III1I 11111,11111:1,IOW 111 JW111 :3,,:I11IYII:I1111 J 11 d d411 I 1i1hII ,iI I,IId I1 !11I II,I,, „IIII11iIY�I,I J II:I Y',:lIdi:ll�ll This fund is budgeted annually by the City Council in conjunction with the City's 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, 1997: Purpose Amount Sealcoat $40,273 Land acquisition 20,000 Recreation 6,043 A.D.A. (Americans with Disabilities Act) (354) Street reconstruction 167,084 Perro Creek 7,180 Unallocated 60,261 Total $300,487 During 1996, the City approved a pledge of $200,000 to the St. Croix Sport Facility Commission. The City paid $50,000 in 1998 and the remaining amount will be paid in annual installments of $15,000 for ten years. Page 39 City of Oak Park Heights, Minnesota Management Report and Recommendations Capital Project Funds Park 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 $326,210 at December 31, 1997, as follows: Prior Years 1997 Total Financing Resources: Park fees $256,194 $37,870 $294,064 Donations and contributions 4,112 - 4,112 Interest on investments 30,516 17,887 48,403 Total financing sources $290,822 $55,757 346,579 Financing Uses: Professional services $15,181 $5,188 20,369 Fund balance - December 31, 1997 $326,210 W' YIYYIYYJU' JIdWJi111hLIlWL'' IOUI!! WIYIJYIYill, Y11pJ111YVWIIIYWII: IWWIJII !WYIWJWIY'IWY'AWIdIL;ILLLIJI W WIEWWIYWY; WIWWYI YWWIWLWII'IIJWYLWWWYYtl'lYIW YW,uI YI'IAIAJWAL Al ,WIWWlaWAM14"I.V!WBIYWlILW�WWl Ii Wu. uL' II. WWIVJU: WYJIi,!' ul1 .YWWWPIIY!!'LIIWJ1Lillldl:lllO liftil 1:�Ii'A'�YY:i6 YW1LLdd Y d'flUW e;. "AIlA] Page 40 City of Oak Park Heights, Minnesota Management Report and Recommendations Capital Project Funds I , J I I A I I I I I I I I' Lk JIIIJI,k h III I II IIIIJ I IIIUJIII III WIJ I N,JI'IIII LWWll1LI WIIII! WUAIJUILIINIIIIJ tlWII Ud IYi IId11WJkIJL11 ,LIWIIYIIWIWJ1iIII1Ll11 YW,101 h6;II.IMdtlM �Jd IIIJLiWpleJ�WW. rldllll llt �4J�h1V ��Il hLdlael , k 1 .1;111111 J.'il,IU1L8&A A summary of park dedication fees is as follows: Park Development Fee AAE Area: Autumn Ridge - Phase I $11,700 Autumn Ridge - Phase II 4,294 Autunm Ridge - Phase III 11,250 Brackey Addition 98,735 Haase Addition 25,795 River Hills 12,150 Wal -Mart 36,750 Brackey - Oak Park Pond 28,823 Brackey - Outlots A & B 9,047 Subtotal 238,544 All Other: East Oaks - Swager 10,400 Valley View Estates - I 18,140 Valley View Estates - II 12,580 Other 14,400 Subtotal 55,520 Total $294,064 The above balance at December 31, 1997 has not been designated for any specific project. Page 41 City of Oak Park Heights, Minnesota Management Report and Recommendations Capital Project Funds 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 1996 1997 Totals Financial Resources: Developer charges $206,756 $ - $206,756 Investment earnings 1,900 - 1,900 Transfer in: From 1st addition 13,677 - 13,677 Total financial resources $222,333 $0 222,333 Financial Uses: Construction costs: Contractor $183,987 $65 184,052 Engineering, testing, etc. 31,474 - 31,474 Legal and fiscal 4,255 - 4,255 Other costs 2,617 - 2,617 Total financial uses $222,333 $65 222,398 Fund balance - December 31, 1997 ($65) As shown above, this fund has a deficit of $65 at December 31, 1997. Additionally, this fund has an account receivable of $776 for which collection is not likely. G* We recommend the City close this fund in 1998. LA WWWLLLI1 LAIL6LL ILA 'h6LL IYIIJ WW' 1'll 4:'WW1I,IYWJILIYIJIIW IIIYIhIW1141110YWwYWJ411V WIJILVY44YItlIuWiWE all! 1Y&!! YWYYWLLWIYIW WYLdW1YJllIflWW144J1111 Wtl:WWlu1.JIJILLY,iII 'W! 10"! 11111111!IJILE 4 YWY1 Ylilll Wv .ItrI YLLWWIIllOJ4W1iIW111YWllY itl . YULIaW4LV! e. IYIYWV.' IiluY11'J',WIWIdItIYdL'YIWYJLYY W V tl J161dLi41WilWIW,YdWIV'VWill!kW dELLl1WIWWL4� Page 42 City of Oak Park Heights, Minnesota Management Report and Recommendations Capital Project Funds IIA16111,LI IW!II I. Y,IILL41II JI J , I I lI IV 1 JI 111 , I� IIIJ d IuI II l I I lIJII!I m911 �:11JIW1pl1! II WYII II 1 0 VI I I I d 1 011111 I Y! WH!dI IIWI!Wl11h :III!0If III II! 4 JI, I, I l II I I II IVw id!AlJ I l I I I III IILI.. 1"IYI I I I I I IJIIIIIIiWIIILLd14I�I"I L i I lI, ,, IL i wl I!I,I III I,ILI un L, I I 111 w 111 1 LJ Ill. 1, IAA 1 Jd 11 St. Croix Mall (TIF) 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 1997 Totals Financial Resources: T.I.F. taxes $884,779 $130,343 $1,015,122 Investment earnings 8,690 4,844 13,534 Total financial resources $893,469 $135,187 1,028,656 Financial Uses: Construction costs: 58th Street/Osgood improvement project $150,078 $ - 150,078 Developer assistance 530,382 78,206 608,588 Professional fees 2,743 - 2,743 Transfer out: Street reconstruction 145,800 - 145,800 Total financial uses $829,003 $78,206 907,209 Fund balance - December 31, 1997 $121,447 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. G� This district is scheduled to terminate on December 31, 1998. Accordingly, we recommend the City determine all qualifying expenditures of this TIF prior to the termination date. Housing TIF No. 1 The City established Housing TIF No. 1 through the adoption of resolution 96- 06 -15. The district was decertified in 1997. WOYL w�� !uooau;umi�uilwnl�l�wee,a�:!, merle,: ldur�, uamiuv! 61�, u�wei�ud�nuu�wWl! eumeulwww�lauwuuunumnam: a! ulnn�eami. � u�uw�w; wiuuas�luwsiw , uaae�i�.u�uue , ovw!aumuwu ail�runa ,�.u�rm�.muuww�m�,mva�wu�:w u1m.m,luuL�u�w�ws;uwe,; mumunluwln; e. rule, �midu; Ww!: L;; ws��l� uuuw+ ommuminao�u ;rwnud�w.imlrauiulwuuo� wwlwuwul Page 43 City of Oak Park Heights, Minnesota Management Report and Recommendations Capital Project Funds Wl .0 tl,W6m MY W.16a 1'e 1.! 1 L. Y'61,6 ... ,.:.'..6 d. 1. 'a{:L, , •" " "' ,1J.1.L1.auW..:_lL" , J!L 11 IJ J.!uunnu! ! ll, J d. k, 6 I U , I Li 1, t 11rt1, L111 I111,16111' J" JiI Lb"' i6 10J1 . J.IM1 1161:11111.11 J 1 l,luA :.1J 11 lL I 1dI II "IL 'I d.La 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 dedication fee of $10,400 (received in 1994). ® Connection charges of $55,250 (26 lots @ $2,125). This project is not in the A.A.E. area and therefore the comnection charges will be receipted in the Revolving Capital Fund. ® Reimbursement of all administrative, legal or engineering costs incurred by the City. Vallev View Estates - KronEard, 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 (received in 1994). ® Connection charges of $164,565 (the original budget was for connection of $150,939; 8 single family, 24 twinhome and 52 townhome). This project is not in the AAE area and therefore the connection charges will be receipted in the Revolving Capital 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 12/31/97 Unit No. Per /Unit Total No. Amount Single family 2 $2,785.73 $5,571.46 3 $8,329.43 Twinhome 38 2,151.35 81,751.30 34 73,146.90 Townhome 52 1,485.44 77,242.88 34 50,504.96 Total $164,565.64 $131,981.29 dhhWtllIWINWWYW! Id' IIWbYlY1 L! JL' IY. IYi1111Wtl14NW: 1: 1iW; I tLltldWIIIYIIJViII'IJJYJYWIY:Itl YYi,IWI:N:II.IWIWYIIY0.lILIYI IIJIbtlYWY+ IEII lWYWLYYWVY+ YI. YIIIYLYYWIdtlIWl !dYWlllllW'JW:WWIIllI1NlIW YI DWI' JdYLlIdWL, sI16VWW1! I. LUI:. W. W:: t!WI+WWWuW1JW.:d:uWJWLuIdWWl.JY 4lJW'. WI' JJLLWYJWYeILLL' 11b14: WY :WW114un6 "JI.J'id6'JUY L. IniWUi:! LWtWLIIWllJ:I,iJWtlW11dW'+'Y11eiJ Page 44 City of Oak Park Heights, Minnesota Management Report and Recommendations Capital Project Funds di ll IYIIII YA111tl W YWIWld11,, 111 1410lil,111,11INYI Al"I'WIIYJLY'uY 1�i.IIII I IW11I" I lllldd "I' dJW',�11!Y!WIJWIY111Y 111, III I W1 i,1 e W 1' 1. „11 WI,W IC .1, Ill ..l .1 „LIJd Y W IW11111� W,u Y, ie..V�I lYl11 YIpJiIl11 II1111 i /11111111 11,.01. II d i, 111,111 Ill ,1.1 IIJI L1 IL, ill 1111 111 JIIlllipl 111111 ll 1111 IIIJIL IVI II IIIYIYalll�da111111LIJIIl1�V , 1!I�I dd WIIOIIIIWIV "Ill 1 111 1 1 1i11i1 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 from inception is as follows: Prior Years 1997 Total Financial Sources: Transfer from water and sewer utility: Initial (1994) $574,378 $101,203 $675,581 Annual 286,347 - 286,347 Interest earnings 97,783 57,318 155,101 Total financial sources $958,508 $158,521 1,117,029 Financial Uses: Transfer out: Street reconstruction $15,854 $ - 15,854 Fund balance - December 31, 1997 $1,101,175 i WliYVW11LIlIWI! u{ IIUYY' W' WIW1411, IIILWV1dVJJ .YiIYY:'WILLWLLIl�W111JIWl WYUW4WYl u' 11JV�IWWIlY14YUlYJ11M�Wtlillll '.IYW�LLIIIWIVWVJILWYWIWIUIl1 IVY U11WWeY1 111111. 1v” YWhIWIWWYIYIIIIWIWJd11 '.WLI11�lYLd IIIJ dlu1,LJIWu L1Yl' uuWO .1,WWJ.LIYYYdWIY1.1�111111d1d1 YU4h.VW WtlLtl116WW1Ih11L IUWJ ✓,hlu IW JI{LLJ41'WJ1 1WIJtlItla,aW1W, J' WYIJ6u41YdWJWWV�W 'JiIIW,!YWILiI Page 45 City of Oak Park Heights, Minnesota Management Report and Recommendations Capital Project Funds 1:1Y14�A:..ld'1L::LU1" "' "' " "' "," " " "• ".!:"" ",' '•' ".' " " "' "'' "''r ii 1. uii, i ili blJl_+ WiJ1W0YY4,[ I' 0l 41i ll' AHJI I: IJ. tl1. 11"I fillW YIWIY w0.'111.11e 1141.111111liIJl11111 1'J 10 l llWlllIIJ11 ,111YlIWII IJd!'lIkll Street Reconstruction This fund was established in 1997 to account for the first phase of the street reconstruction program. A summary of financial activity is as follows: Prior Years 1997 Total Financial resources: Bond proceeds $1,062,456 $ - $1,062,456 Interest earnings 24,282 10,200 34,482 Transfers in: Capital Improvement Fund 155,000 - 155,000 St. Croix Mall TIF 145,800 - 145,800 Renewal and Replacement 15,854 - 15,854 Total financial resources $1,403,392 $10,200 1,413,592 Financial uses: Project costs $1,274,681 $24,285 1,298,966 Fund balance -December 31, 1997 $114,626 This project is substantially complete at December 31, 1997. We recommend the City combine all street reconstruction monies and consider transferring the street reconstruction portion of the Capital Improvements Fund to this fund. These monies would provide partial financing for the next phase of street reconstruction. West Frontage Road Connection This fund was established in 1996 to account for the preliminary costs related to the above mentioned project. This fund incurred no expenditures during 1997. Page 46 City of Oak Park Heights, Minnesota Management Report and Recommendations Capital Project Funds 'WWiM1WJ1IWLII IIaWId ,I6111Y111 Yulll'YAImJI'll,i,J,IIU IIWAAdlulll udl111III.'Id.4I JIILLIll 81,ILL 11'l,llillM1YII WI Ildlubu.IlYlI,WW Ll utl lIlw,',IJLI J.11Y1141'4ll14q lJl,uI VIILW'1111YI,11i11641Y'LL10ddl LIIl 11,11ul l,ll , IJehli,,, L. d'lLlul ''. 4.. J'. ^L Interim Construction This fund accounts for preliminary costs of various projects. The expenditures for 1997 were $2,072 for planner services relating to the Stillwater Fund portion of the Brackey Improvements. The deficit of this fund consists of the following: Amount Project $1,386 Haase light industrial development 2,072 Brackey West - Stillwater Ford portion $3,458 We recommend the City determine a funding source for these costs. 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). AAE - Autumn Ridge (Phases h II and III) These fiends were established 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 as follows: Phase I - $11,700 (received in 1995) Phase 11- $4,294 (received in 1995) Phase III - $11,250 (received in 1996) • Connection charges of $296,819 (see schedule below). • Reimbursement of all administrative, legal and engineering costs incurred by the City. k16161YIkill Yi61tl ll I. W16dW I. 1, 4'.WLLllVllll'J 1! 1 li l ul II,Y 1 bil 0I I,W A" III I JI I Y uII11 Ii Il W4d111.LYWWuI 11!I1111W "llu'WYWIWlV1.1191 d111ILllll1 Ill 116 kY WJ:IdYIIILIY11Ilk I l6 WIWIYWLLIIIa I JIIILLI..ILiLLI I II'ld Y101u 1YIll) LI'JWINIJIWII lWAA il a4WIWIkA,il lYd0i181l 11 VYdWYllllll I.I'ulllll IIIII.16 Page 47 City of Oak Park Heights, Minnesota Management Report and Recommendations Capital Project Funds A summary of connection charges related to this project are as follows: Received Through Budgeted December 31, 1997 Phase No. Per /Unit Total No. Amount I 26 $3,854.80 $100,224.80 21 $80,950.80 II 25 3,854.80 96,370.00 20 77,177.00 III 26 3,854.80 100,224.80 25 96,370.00 Total $296,819.60 $254,497.80 Each connection charge is allocated as follows: Amount Type of Charge $862.46 Sanitary sewer 1,360.15 Water 1,632.19 Storm sewer $3,854.80 Page 48 City of Oak Park Heights, Minnesota Management Report and Recommendations Capital Project Funds 1111:Ah"I L a i d J6 : : L J J ! 1 ! ' i ll „ ' u { 1 1 1 1 J i L tl l l 1 1 F ; I l d l h ! L L 1 ! I L l 4 W I dl.Lod 1 i l J I I , A I Y I , I i d J L tl , 1 d a11 I'm 1 1 1 ' L : I L VL Jtl l 9 i ' L : I ' L l p : l l " IIWIJ4u L WLJ.ILYl 1 1 141.11111 Lill Jill I I I a . [hi Ji I 1 111 ! e e l : e i I I W II ,411,;,: ! :,tl 1I I'll 14, I111114l Brackev - Oak Park Pond This fund was established in 1997 to account for expenditures associated with the developer agreement with KTJ Limited Partnership Eleven. Key points of the developer agreement are as follows: ® all improvements paid for by the developer ® park dedication fees of $28,822.50 (received in 1997) ® connection charges as follows Sanitary sewer $41,580 Water 72,180 Storm sewer 91,440 $205,200 A summary of the connection charges related to this project are as follows: Received Through Budgeted December 31, 1997 Unit No. Per /Unit Total No. Amount I 1 $205,200.00 $205,200.00 1 $205,200.00 iY sLYWIYUNUIYJY, YWllldu➢ lYlu. 1' tlWl 'W1WIU,1!JYt;ll:u!u1114LW!klYl uul lL4lt4J, ,wIN'.IIYLLIuY,YWIWUIUtIWLLIW eIWJ „Id.JOUIUYLUJ,I �'.WW,4 ,IeLLWId.Iwal,;YU4ulu, LOl,l iil::'ItluILUlY1LU110 u1LLIa,IL�LLd1ulYL YL�t1111Y i4'YUea11,u1�Y ulYUll, lla ,BllulIW4:da!:'u:lleuuW:wlll lW�LL4✓V,.I,r1 dLI4tluW�lul3L4w�1 ,YU1YL14IWkYllELtld, Page 49 City of Oak Park Heights, Minnesota Management Report and Recommendations Capital Project Funds ehd VUrWY.uwWry au YYYUVminmY�JkWu YU ��WUiLi Y�uY�Y.uuLW JVeue'nWY� di aV.YwY'.B dY.a" �I. L; 6Y.. , . , . , ' N�: ukl, d�Y ..aW'.d.Y�YYIe.Ldb..ly...J.�V Wdl.d.�l LLYall,.L.LL,.._..,L.IL.: s.1.�.J. ^u�la.i.+,L..,i �.,�,�„�� Brackev - Outlot A & B This fund was established in 1997 to account for expenditures associated with the developer agreement with Robert L. and Janet M. Brackey. Key points of the developer agreement are as follows: • all improvements paid for by the developer • park dedication fees as follows: * Outlot A - $5,562.50 (received in 1997) * Outlot B - $3,395.00 (received in 1997) • connection charges as follows Outlot A Outlot B Sanitary sewer $10,117.80 $6,606.60 Water works 17,563.80 11,468.60 Storm sewer 22,250.40 14,528.80 Total $49,932.00 $32,604.00 A summary of the connection charges related to this project are as follows: Received Through Budgeted December 31, 1997 Unit No. Per /Unit Total No. Amount Outlot A 1 $49,932.00 $49,932.00 0 $0.00 Outlot B 1 32,604.00 32,604.00 0 0.00 Total $82,536.00 $0.00 �teWIWWLLWYYAIW' WW1YYdYJU^ 1' WY: WNiliWeJIIiWJIWW4VYeWNdau .JW'WtrJfa4lWUI.WWWWYYWUwJWYLLtlW III, iu4' YWYlI6iWYW' WiLW1Y1VVIWWIW01LWIf YUdYeYJYWWIS�YYWWYYWWYWVI Y�YYYUVUIWIYYIY. YVllYdwb' WdY+ LYYJWWLWdtlYIYWWiiYWWW1dWYY!'. tl1YYYtlIllYWW�WNY iYY. w' eWLLIYYWUiVWrVWUUILYWeWLLniYllNYWY1YWlWW6 'Y111�IYitlYS+vWWY'Ji� Page 50 City of Oak Park Heights, Minnesota Management Report and Recommendations Capital Project Funds AAE - Brackev - Utility and Street Improvement This fund was established in 1995 to account for expenditures associated with the developer agreement with Robert L. and Janet M. Brackey. Key points of the developer agreement are as follows: • All improvements will be paid for by the developer. • Park dedication fee of $98,735 (received in 1995). • Connection charges of $497,602 (see schedule below). • Reimbursement of all administrative, legal or engineering costs incurred by the City. • summary of the connection charges related to this project are as follows: Received Through Budgeted December 31, 1997 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 • summary of the estimated costs of these improvements is as follows: Estimated Costs Financing Sanitary Street Traffic Developer Sewer Water Improvements Signals Total Assess Reimburse Other Lot 1, block 1, Brackey West $80,640 $78,960 $127,700 $111,500 $398,800 $398,800 $ - $ Outlot A, Brackey West 22,080 21,620 35,000 13,400 92,100 - 92,100 Outlet B, Brackey West 14,400 14,100 22,800 10,100 61,400 - 61,400 Stillwater Ford, West 15,600 15,275 32,300 - 63,175 63,175 - Stillwater Ford, East 20,400 19,925 24,700 - 65,025 65,025 ISO No. 834 - - - 52,500 52,500 - 52,500 Outlot A, Brackey 19,680 19,270 - - 38,950 38,950 - City of Oak Park Heights - - 32,500 22,500 55,000 - - 55,000 Total $172,800 $169,150 $275,000 $210,000 $826,950 $565,950 $153,500 $107,500 The amounts that are to be assessed will be financed by the Capital Revolving Fund. The City will need to determine a source of funding for the City portion of the project. Page 51 City of Oak Park Heights, Minnesota Management Report and Recommendations Capital Project Funds YIW LL11. v..111.1. 11 1.111111 Il" +1111111 Jll,kl l 1.1111111 J 1 „111111 I.J, ill 11 111 JI 111,411 IWIIII 11 All ” I II .1IL 11 1,I l I III,Id' J I WHIM, 1 111'IIIIIIl1111YII W1111Y Ii16WINIY JIi I LII II ILIW�II,II „I 1 1, 11 i11.J' ilk 141 I X111 Y1 In„ 111 I' I 1,11'a ui,i All i LL AAE - 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 (received in 1995). • 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: Received Through Budgeted December 31, 1997 Unit No. Per /Unit Total No. Amount Applebees 1 $15,749.20 $1 5,749.20 1 $15,749.20 Outlot A 1 65,225.00 65,225.00 0 0.00 Outlet B 1 82,371.60 82,371.60 0 0.00 Total $163,345.80 $15,749.20 . Mi MIA ' AI.41!WWJ4.LW11111I.Ial.Ol,IlAd WWIIILIAAW ,LM,IIIY1111u1,Iw16 AILALIY IIU, YWU 'JlWYIwaw1INWL,IW'WUW'J1144EI III IL WJ' muA!I 9,.Um: WIW4,Iw1IIIIJU9io.ulluW— AIMY11u A III g1uLLW4L W11deWI1W 4W1iU"IL 11 ,1iAMWi!IIJ4Ili'1Y0! 1A 11Y 111 1IWWAIIIA,MI10 ,6 MJMIL111u LLWAAllmm4u5W4 I AIL l U, W,OIiAL Page 52 City of Oak Park Heights, Minnesota Management Report and Recommendations Capital Project Funds 1WIII J;J.111J1 dl AAIIY .1111'IWI14A11111111 1W x,.. 1.1.; 1 Oil I. II,IIJ11 1111 LLLI'IA11141l ill AIIJ IJII '' J !tlrIAY11{I;Ii1�11J1111�11:1iI11 :IV 11J,i�II.�1 JiJlili;ill�, III I IYli,1�4,I1111uV U,iI IW111, IV III III��L11iL11Lll LLVl0ul 11111YJIU 1:11WI111 VJl w LJI.I J1111WL IA III U lb 111111 YYI p Ll6lr llll.i LLIJ11' AIII :LIIVJYV W '1JWWWlIIIIIJIIIII:V; 411! IW1LW' 1JII ,iLW111LY11Y: W1111'J IJ I.IIWI Lhlldd 1 111 I 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 to date is as follows: Revenues: MN Dot $230,000 Interest earnings 5,842 Transfer in: Capital Revolving Fund 345,000 Total revenues 580,842 Expenditures: Preliminary costs 16,381 Construction costs: Contractors 432,895 Engineering, testing, etc. 77,228 Other costs 1,158 Total expenditures 527,662 Fund balance - December 31, 1997 $53,180 The transfer from the Capital Revolving Fund provided internal financing of this project. This project was assessed in 1995 and the assessment roll ($287,380) was assigned to the Capital Revolving Fund. Upon completion of the project, we recommend the remaining funds be transferred to the Capital Revolving Fund. YJLW W4IWIWI,VIWllILLILIrIYW +IlYY1t�uW I: 11uIYWWWWIVIIL" LYLIYLIIY114YIJ�4 fIeiYlll rW LVW', IIIILdIWWJY Y 'eiL'e11W11 4,1�'LLIIVaLI'JI YY IVWIIY1, 11, 6' 111' L', IWI�I. YYYW, 1WJluI111YlYEYeI IbIVIOYILLdYdIL; 11WY IilYU' W' 4lYJlY: YLLIdb, NlIM1: 4WVI11101W111L1WWlIJ !IYdIIWIIdIIW4YI tl141 Y LL 'IIYJ.YI'JIWII ! IWIlYl4 '4WWWIILL4illllltl'.YIL6LIrIuXI� Page 53 City of Oak Park Heights, Minnesota Management Report and Recommendations Capital Project Funds LL1401 IIIIJI LI LI I, I Q6P WIL, I111,LAU did"HIi IN I IIIII i L,L ILL 11 1 ILL , , LYeJJIiIWJ 1'h ILItli.I IILII II IY U116 'I IHLI, I'LL L 1111 I III I!I lL„W,YI Ili 4ILLL.IW1W"JJJ16' ILI LIA IN lll. LIL ll 01 LI lhlulL4, 111 ALI I1, 40.111 III,1111' 11 p1 ;110 IJ hILLAIIIIIII 11111ad I.1L1 I.I a, 19d. AAE - 58th Street Improvements - Phase III This fund accounts for costs associated with the extension of 58th Street from Wal -Mart to Oakgreen Avenue. A summary of financial activity to date is as follows: Revenues $969 Expenditures: Legal and other 31,522 Land acquisition 20,313 Total expenditures 51,835 Fund balance (deficit) - December 31, 1997 ($50,866) Interim financing for this project is provided by a $75,000 interfund loan from the Capital Revolving Fund. Page 54 City of Oak Park Heights, Minnesota Management Report and Recommendations Capital Project Funds i� � . Feu ,l "JII:W@�A " :!I IIWI"; e114[h YIIYWW'W III IIIWYIh41Y11111l I1 11 "Jill , ud' WIiIIJI IlYIIIWY' YWLI .JII III! �Y:IM1IIIWUI�nI YIlY J1l p 1141, IL I111i ,WJ1111',',IiIJJIW'JL'eIIII IIJ,IYeW 1111' ell11 4. YIIIII6Y4W, il, W . Y�11111441111JI4' ItlIWW111111IY11YlIlYUIlIYI1W14 lIYIY 'u Y' 114, W11i14 'IIIIJI4411111,OiYIIW4111i1l III JYIIdIIYWIW': JIIIIIY WI. IWAIIW Ill II 'J.WIIYL4iIIII.Y I111,1 ��I�'A�d .11 Ill 1lW Sanitary Sewer Connection Charge Fund A summary of the financial activity of this fund from inception is as follows: Prior Years 1997 Total Revenue: Connection charges: River Hills 1st and 2nd $39,725 $ - $39,725 Highway 36 4,283 6,268 10,551 Wal -Mart 38,751 - 38,751 ISD #834 201,373 - 201,373 Brackey 25,447 - 25,447 Brackey West - Oak Park Pond - 41,580 41,580 Brackey West - Outlets A & B - - - Autumn Ridge 18,112 - 18,112 Autumn Ridge 2nd 12,937 4,312 17,249 Autumn Ridge 3rd 16,386 5,175 21,561 Haase addition 3,186 - 3,186 Investment earnings 15,356 8,548 23,904 Total revenue $375,556 $65,883 441,439 Expenditures: Transfer to debt service $72,500 $20,000 $92,500 School District improvements 160,000 - 160,000 River Hills 1st 30,942 - 30,942 Total expenditures $263,442 $20,000 283,442 Fund balance - December 31, 1997 $157,997 IYIYNWYYYWWtlWWIWLY. W' BWVl1, WWWY�I IWIWdY'WUYNtlLLYWWYWVLV,YmLLY " I' LWW4' YYYLL' WIW �_' a' �9' 9_ 4"" � LYtlkIWIWI tlYWtlhWW4; JIYY111§ IYLW' aW4YYWWWIYIi!' W' 411Y1YIW66111d4llWlt !lu11�:4uYYI.ILL4 ' " ' Wik' WdWrYWNINIdId +'w46J414114eY6Y1WV'11� Page 55 City of Oak Park Heights, Minnesota Management Report and Recommendations Capital Project Funds l l .I!. ..... ',.1, 1l 111111 1 I i I'll J li III i, I, 'LIJ" I I III,J MIJ11�,11" 111 .1:1114111 11 ! L Ull l VL III JnJIIYlll llul l.'.II, "ILIiw.I 115"!, I!N" ILA YI I l =L„ 11111 n11, , d!1,1 W,� ulll,l'Jl iilll Water Connection Charge Fund A summary of the financial activity of this fund from inception is as follows: Prior Years 1997 Total Revenue: Connection charges: River Hills 1st and 2nd $64,798 $ - $64,798 Highway 36 7,450 10,902 18,352 Wal -Mart 67,088 - 67,088 ISD #834 405,341 - 405,341 Brackey 44,260 - 44,260 Brackey West - Oak Park Pond - 72,180 72,180 Brackey West - Outlots A & B - - - Auturrui Ridge 28,563 - 28,563 Autumn Ridge 2nd 20,402 6,801 27,203 Autumn Ridge 3rd 25,843 8,161 34,004 Haase addition 5,542 - 5,542 Investment earnings 36,473 10,077 46,550 Total revenue $705,760 $108,121 813,881 Expenditures: Transfer to debt service $408,000 $105,000 $513,000 School District improvements 145,000 - 145,000 River Hills 1st 29,739 - 29,739 Total expenditures $582,739 $105,000 687,739 Fund balance - December 31, 1997 $126,142 uwwuWaL' uLUSI�, LOwr�IwWauLlua�rluuelulluldu. Y�uoeewl, Wl�uaW' alJLm�lw�wwu'euulymawwLUl +�u.su '." ' , °.'° . IwuwuJl�wu�wJmwuuwll�JUeYdw�auluvaww+ uaJ„ Yyuwuw�JllYaYwLUJwmlawwwwbulwwluuallu 'mu.wr�snLSUSww w�ewlwtlw.11wuwuwuuu " 'm�I�L'wruwY�mn'�wuwwmm'acllwml Page 56 City of Oak Park Heights, Minnesota Management Report and Recommendations Capital Project Funds W1114IYIIY14kIl III YY I,I II IL !'I I 411LI IlLLI IIIII h 11,1 1 1111 V JIIYIJIIIIWII II 1 1 1, ILL 1, I 11111 1 IIi,L I III '1 ;kLI116u Ill', JIII I.Y Storm Sewer Connection Charge Fund A summary of the financial activity of this fund from inception is as follows: Prior Years 1997 Total Revenue: Connection charges: River Hills 1st and 2nd $50,411 $ - $50,411 Highway 36 9,440 13,813 23,253 Wal -Mart 68,511 - 68,511 ISD #834 289,348 - 289,348 Brackey 56,079 - 56,079 Brackey West - Oak Park Pond - 91,440 91,440 Brackey West - Outlets A & B - - - Autunm Ridge 34,276 - 34,276 Autumn Ridge 2nd 24,483 8,161 32,644 Autumn Ridge 3rd 31,011 9,793 40,804 Haase addition 7,021 - 7,021 Investment earnings 19,153 8,002 27,155 Total revenue $589,733 $131,209 720,942 Expenditures: Transfer to revolving capital $50,000 $50,000 $100,000 Wal -Mart 41,232 - 41,232 Storm drainage report 9,910 - 9,910 River Hills 1st 13,757 - 13,757 Valley Point 2nd 17,211 - 17,211 School district improvement 289,348 - 289,348 Brackey addition 100,607 (2,317) 98,290 Total expenditures $522,065 $47,683 569,748 Fund balance - December 31, 1997 $151,194 ' IILLIItlIYdYiINIJYLd, 6�YJ111u. Y:' W4WIwtlVIJYJwd41LYw10WLIVHllWOnlnuudtal 'WYYWIUluuu61udLLIm11W1 WeuYl"Alk YJYIIlilk, 'IYY/dw'ARILIJWWII AlL'IA,LLL1u16YUtWUNYp111uIJ IIhJw41lY 'J114p!IL'uLJYu4.W11 Ilw 4kil U 111L1;I Ill IIYI I,W OdW WI YWYYEY111'Yw KIlk wlln L11 00.11 JIJ, II hauw,. Page 57 City of Oak Park Heights, Minnesota Management Report and Recommendations Capital Project Funds =~�_~�~_-_ ' —' Connection Charge Fund Commitments The fund balance at December 31, 1997 is committed for future debt service payments for the City's Water and Sewer Revenue Bonds ofl90l/Rnfundiog Bonds ofl093. Such future cncooni{rnooto (cash transfers) are as follows: Future Transfers to Debt Service Fund ' Sanitary Water Year Sewer Works Total 1998 $20.000 $105,000 $125,000 1999 20 105 125,000 2000 20 115.000 135,000 2001 20 120 140 2002 20.880 125 145 2003 30,000 135 165,000 2004 5 50,000 55,000 Totals $135,000 $755,000 $890 As shown above, the A.A.E. Connection Charge balances at December 31, 1997 represent sufficient nnnouotu to meet the sanitary sewer debt commitments for 1998 and 1949 and the water works debt service commitments for 1998 and 1990. Should such balances he insufficient tn nuoo\ future debt service 000uooiiooco1n, the City has the option of using the reserved balance ($66I,765) 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 Revolving Capital Fund uo repayment for the $3bU,00A transfer to the High School Road Improvement Fund. This commitment was $l70,0O0o1 December 3l, 1907. ' Al W] "==~= Page 58 City of Oak Park Heights, Minnesota Management Report and Recommendations Capital Project Funds 6VIJYJYYJIII:IIY.!IWJi1,L I lY!luli YIV,Y,III I'.1II:OVIW YI .IY4WJIVIII:!;ILIIII:IIYIIU!II ll',', Ili III!,IiYJWl411J1111J141YlAllYl iLY IY;11111'.1 1111:IIW4YIJ:dd6I1WIIJIII: WIi NW 1141JYU4101 L:IWill IWI:Y:YYI 111 11,1 6, I'll I1 ; II!IIYJ.W,,,;1 11WJ11 Based on existing developer agreements, the Connection Charge Funds are scheduled to receive the following future connection charges as development occurs: Future Connection Charges Sanitary Water Storm Sewer Works Water Total Autumn Ridge $9,487 $14,961 $17,954 $42,402 Brackey Addition 75,458 130,726 165,633 371,817 Brackey West 16,724 29,033 36,779 82,536 Haase Addition 29,857 51,930 65,809 147,596 Total $131,526 $226,650 $286,175 $644,351 As previously mentioned, the fund balance of the Connection Charge Funds at December 31, 1997 plus future connection charges (based on existing developer agreements) is not sufficient to cover the debt service requirements of the Bonds of 1993. Sanitary Water Storm Sewer Works Water Total Fund balance - December 31, 1997 $157,997 $126,142 $151,194 $435,333 Future connection charges 131,526 226,650 286,175 644,351 Subtotal 289,523 352,792 437,369 1,079,684 Debt service commitments (135,000) (755,000) - (890,000) Repayment commitment - - (170,000) (170,000) Sufficient/(insufficient) amount $154,523 ($402,208) $267,369 $19,684 As shown above, water works connection charges may not be sufficient to fund the debt service requirement. However, the City has designated a portion ($661,765) of the retained earnings of the Utility Fund to provide additional financing if needed. �dIW1!!WIAYWIIWYYYY,. WSW! iWIYWiWY4iWiIWYLLJWIIY' LW{ IWIJUNIWYY '.11➢ILIWYYllWWdIWIylyllltYJIY WyII,uW1111YUJW4W�Yl WuJYIJIdUtlJ11YY1,1 tYl WW' IYI;tl:WYIYYlY14'VludWl! WWO bu YWIY.IUJ1 J IttJ1IYW:WIA i.AI W. NIJ ,, WJ.it 111JYWJW11YalIWI IL I IIWIII'1WI L IIY'JYL'M Y0. 11 YY,11IWI WWW III, LL WI :YUI'Y!dL1:1'YI A LWk1iIW!YWLIIWil111�WIWL14WWi� Page 59 City of Oak Park Heights, Minnesota Management Report and Recommendations Enterprise Fund 11. Iliq,Il Iixdp p1up, I1,1, I.11 ii i', u. .I. ,, mi 111 1 , 1 1 del,3 I, 1 L , 11 l... I I I I 1 1111111 11 11 1Yl',d I;1 II l I L I i 111111 � I j 1 6j. J 1l11inl.l it a 1 1 111 I P L 1u .,I L 1. I l .L 111111.,,,, Idl4dmil I,lo dll ENTERPRISE FUND l The financial statements for the Enterprise Fund (Water and Sewer Utilities) are presented in l Statements 14, 15 and 16 of the City's 1997 Annual Financial Report. Condensed comparative operating statements of income and expense for the utility operations of the City are as follows: Water Department 1996 1997 Amount Percent Amount Percent Revenue: Customer billings and other $184,542 100.00% $186,027 100.00% Operating expenses: Contractual services 52,196 28.28% 65,043 34.96% Administrative and personnel charges 49,425 26.78% 51,050 27.44% Other 8,142 4.41% 11,696 6.29% Depreciation: On purchased assets 7,929 4.30% 8,770 4.71% On contributed assets 55,486 30.07% 57,062 30.67% Total operating expenses 173,178 93.84% 193,621 104.08% Net operating income $11,364 6.16% ($7,594) (4.08 %) Water Operating $200,000 - Revenue &Expense $180,000 — $160,000 — ® All Other Expenses $140,000 — .... — - 5 — _ — r5 °� � Depreciation $120,000 — .. — - » -- — ® Contractual Services $100 000 --0— Operating Revenue M $60,000 -- ° F -- S — W $40,000 -- $20,000 — $0 + 1993 1994 1995 1996 1997 AllkI1W1WIALL{11'Yl lilYW Lj,: wa WW 11 whill1 L L11.111111111. 111 I LLI 1 1 4 Al 11,1,!ki 11 611A1,1,11'YWIill JI 11114'{ 1411,itll'J kA 611 LILJ1 1111,1111tlJI11611dI!,i d 1916 A 1111111Ii :L,k"I 14111 ilILWi L'10'1 ILI L11 LU&: U il,ItlILI IW11L :AU L:*11L,W11A '11 LAU"Ll, I JAW lull IIJ I "L111!A41!la All, lillia W 1:11 Id! ILL UWIWBI Page 60 City of Oak Park Heights, Minnesota Management Report and Recommendations Enterprise Fund Wl, lel liillllul'LI IIILl I "Illlll idI YIIIOIi(IIIIJI' Ili I III d dI'L111LllIll 11 11111 Willi) 11 I I II l,l11 11!6 Iv IiAl.ddl l LI"LI, Ill,l1111 Will 111 IIANA 1 61tlJYJI11LIiJ II 11111 "lliI6 WWLiiII.VIlYI6J IIl II'dJI W,�I1111 aIWl 1 I'll 111 YI'.'l I I 1 i.1, 111A11. Sewer Department 1996 1997 Amount Percent Amount Percent Revenue: Customer billings and other $327,933 100.00% $322,671 100.00% Operating expenses: MCES 266,494 81.26% 226,198 70.10% Other contractual services 9,535 2.91% 15,609 4.84% Administrative and personnel charges 49,425 15.07% 51,050 15.82% Other 183 0.06% 5,851 1.81% Depreciation: On purchased assets 2,311 0.70% 2,311 0.72% On contributed assets 42,838 13.06% 44,141 13.68% Total operating expenses 370,786 113.07% 345,160 106.97% Net operating income (loss) ($42,853) (13.07 %) ($22,489) (6.97 %) $375 ,000 Sewer Operating $350 ,000 Revenue & Expense $325,000 x $300,000 $275,000 - G / - -I, — ® All Other Expenses $250,000 — j ® MCES $225,000 — • • • • Depreciation ✓ — — — - Operating Revenue $200,000 — — —N p g $150,000 '01 -- — — $125,000 _ 00 00' $100,000 — — 0 $50 $25,000 .... ... .........• ......... ......... — +0000000 �O.•..O •.•. ❖.•.•..•.. — »00 ❖. ❖.•.o . 0000000•.•. ooro•. ❖.•. o•.•.o•. ❖..•. .s000 ❖..•.: .•:o ❖.•.•.00• �•.•.•.•.•.... .�.,.•.... 0•. �o. ❖o. ❖.. - •'.� •04�, •..•.•.•. 1993 1994 1995 1996 1997 ' IWYI�VSWWWdWWIYJWi651WWnWYW 'YYY1W1'WWIilYIAWW'I III 'L LYW lid 11, W IJJLILLWWItlIhiYWWUYYtl6WdlW 'LIIIWYW'dylWYdlW'IW�JWJLYIYII _`v l� ywyyyWYlldu+ulYW 1WW444'bYWLLLVbI!Idsc1S6WY4W d4�Jd11uLJYiia. ULYd11YW1tYWId1IIIViLIiYIWJbpWIYW1 'dd1WW4WuW Page 61 City of Oak Park Heights, Minnesota Management Report and Recommendations Enterprise Fund `' !x.'11 1 11 1 „ICJ 1Y 1, "1111 1 . 1!,1411 LININ J1,ha J, 1, I.Y i 11111 J l '1&111 WA 16 1, I. Y:. 11 1' I : ;, ,,11 „4L11 11 "1 1 11.,11'JI The single largest expense of the sewer operations is the contractual services of the Metropolitan Council Environmental Services (MCES). The MCES charges comprise over 65% 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 - - - - - $50,000 - - - - - - - $0 � 1989 1990 1991 1992 1993 1994 1995 1996 1997 Prior to 1998, the MCES billed the City annually on an estimated basis. These estimated billings were adjusted at a later date and the City is billed the additional amount or given a refund. These estimated billings varing from year to year and caused variances in annual profits or losses of the sewer operations. The MCES changed their billing methods effective January 1, 1998. The MCES now bills on a quarterly basis based on actual flows with a two quarter delay in flow determination. The 1998 charges reflect the actual cost adjsutment for 1996 estimated billings. The 1999 charges will be the last year to reflect a final cost allocation (1997 estimated adjusted to actual). The new billing �dWYY1111YLLIY IWWW' i1111111 4 11 4u. IJ! IIYII. IWJJWlY1. LlLL' 14.. IUW' vtl0. Y, 4JJW1W1LuJIWIIU .IIYIIIiIIWUlu111111LuLL 1111W.! I'' IM1! uA 11IffilY 1'WlY'WWWJ'11 tlIW4' WW' W4YIIW 4I411111L'IIW1W411111I :1.11 W, AIA1111/ J1' JL4111YJW1W. W9L. 1WiiW' 1' Ivi81JWd. W' dIY11WY. 1l WIVIIUVHJILI, LYI. IId41Y1' JI'6'1'uWYtlhu'LLIIYJIk1.ltl'Y4 Page 62 City of Oak Park Heights, Minnesota Management Report and Recommendations Enterprise Fund 1111 11 l I I d , i 1 . 1 v I i J 1 s I u Idn;L l6 ILI L i t ph " I 1 I 011 :! I WIV I I1 U I I'I.1,W I! 11111111, 1 L i 1, . ILI I;11 ;II I [ , 11 11 11 11',.I I1. 1.. „ I I, l 1.01, 1 Id, I lthti 1 h1 1 1iII III IIIYI It ,.I I.IE Y 1 It, ILI 1 III 1WL dJt t II IIJII ;1111 J1l I II LL 1 11 L 1I 'I I;II IJ I"' a I'll method eliminates (by the year 2000) variances in MCES charges from year to year due to final cost adjustments of prior year estimated charges. The City received billings for the first three months of 1998 in mid - December, 1997. While the rate per million gallons will not change during 1998, ($1,350 per million gallons) the flows will change each quarter resulting in varying billing amounts throughout the year. We recommend that the City monitor the quarterly flows and determine if there are material variances from expected results (such as correlating water pumped statistics with quarterly flow data). As shown on the previous pages, the water and sewer operating accounts incurred losses for 1997 of $7,594 and $22,489, respectively. The City's consulting engineer prepared a water and sewer rate study in 1997. Based on this study, the City increased rates effective January 1, 1998 as follows: Rate Prior Effective Type of Charge Rate 1/1/98 Water: Base fee $18.30 $19.20 Charge per 1,000 gallons for usage in excess of 15,000 gallons $0.95 $1.00 Sewer: Base fee $31.50 $31.50 Charge per 1,000 gallons for usage in excess of 15,000 gallons $1.95 $1.95 � - effective 7/1/95; Sewer - effective 1/1/96 Although the rate for sewer did not change, the method of billing did change. Prior to 1998, all customers were billed throughout the year based on winter quarter usage. Effective January 1, 1998, commercial customers will be charged based on actual usage for each quarter. Page 63 City of Oak Park Heights, Minnesota Management Report and Recommendations Agency Funds EJJ11JIa Y,I 11 „1','I1: liJ I'4Ylle b L11” illidL Ld .ILIJL"I.IIIA1111,11611 11. 11 IJ 1 411.1.11LI1111,111.1 , J 1, 1 1 11111111 111 d JA II 1 1 III IL W1111 I Lhilh III, 11 11 Ili, „1I WJ.LI, I III', IIIJJaI b IIIIA6 111 1 40.4111 I'Jle I,l J411 V. ":1,1 IJ IdI IIIII J.I ,III,IIlilll AGENCY FUNDS I Deferred Compensation Plans GAB The Deferred Compensation Fund was established in response to the issuance of the Governmental Accounting Standards Board (GASB) Statement No. 2. GASB Statement No. 2 requires deferred compensation plans adopted under the provisions of Internal Revenue Code Section 457 to be included in the City's Annual Financial Report because they are subject to the claims of the employer's general creditors. In 1996, Congress adopted law changes to the provisions of Internal Revenue Code Section 457. Under the current law, 457 assets were to remain solely the property of the employer, subject to the claims of the employer's general creditors. With the new law change, all amounts deferred under a Section 457 plan must be held in trust for the exclusive benefit of plan participants and/or beneficiaries. As a result of the new law change, 457 assets are no longer the sole property of the employer or subject to the claims of the employer's general creditors. Therefore, GASB Statement No. 2 no longer applies, and 457 assets will no longer be required to be included in the City's Annual Financial Report. The new law changes relating to the provisions of the Internal Revenue Code Section 457 was effective as of January 1, 1997. tlJt1W 6111vY11VUlYll: tu!:IIWJUWIJWI0111.IIJ' "IIIVil6 WIJ'1Will LliluW WlLUIaWJlII: WWIIWI1111WLLWWYLW1111WtlLLWL ;' WJ•19 JL'W1'YIL'ILLtilulul WlL nI.IYLIJIWIUWIU:LIIJ'ot11111 dll pJU.I,d.IW N11w1u.4u111W1u WJ1 WWil111'lIi IYIWWIL1YI uW IIILLUJIJJ IIIU.IwIJrtlWJU WWI11,iIJIJILLW WIW: WWv! ELIIYUi1LlILLWU1 ,luil1WIULw:IWIJIllIIIJWIWI WIY :WWVIWWYIJW,IiIIWLllAI Page 64 City of Oak Park Heights, Minnesota Management Report and Recommendations Governmental Accounting Standards Update �www „iwwd;w;e,u,r,,rui,,d bd,41d1, a "a."Lew,u ee u, uwu 11,11) A 1, 141d"I"1,! e 1 i, d, .11 - ;, 'I" , iJ e .,, 1, ;A , I "I "U,,, "I" „i,,,,,a GOVERNMENTAL ACCOUNTING STANDARDS UPDATE Reporting Model Ck The Governmental Accounting Standards Board (GASB) has issued an "exposure draft” document on issues related to the Governmental Financial Reporting Model. This document proposes significant changes in governmental accounting which will impact internal financial accounting and external financial reporting of the City. A summary of the key provisions of the exposure draft document is presented below: • Fund Perspective Financial Statements. These financial statements would be similar to current financial statements with modified accrual basis of accounting for governmental fiends, accrual basis of accounting for business type activities (formerly enterprise and internal service funds). However, the GASB proposes a new definition for fiduciary funds and the elimination of the account groups. • Entity -wide Perspective Financial Statements. These financial statements include full accrual accounting for all activities. The income statement will be replaced by a statement of activities using the net program cost format. Additionally, capital use charges (depreciation) on general fixed assets and infrastructure assets will be required to be reported in the financial statements. • Management's Discussion and Analvsis of Financial Condition and Results of Operations (MD &A). The MD &A letter will be similar to (although will not replace) the current letter of transmittal. Currently, Securities and Exchange Commission (SEC) regulations require private sector registrants to provide a MD &A letter discussing financial conditions, results of operations, etc. Page 65 City of Oak Park Heights, Minnesota Management Report and Recommendations Other Matters 14111, 1111, 111111,11 l l' 11' I I 11. 4, 1, 1111 I, 11, 111. 11 LI'I,I,III A I IIII I I, 1111A 1', 11,LdI I I, I L II I11 i I I 1 1111 II Il iki: I "I'll 111, 1111AILI ILI I I Lill Ill,Ld,YllAll l l I 111 il'Ill 4 .II1 Il11l Ill 1I111L it I IL 11;111 ),I YNLI'AIlLlll dl'll l,k le,ll AilII .J II�I.II 11 1 1 1111!11IIi. OTHER MATTERS Year 2000 Svstems Issues With the year 2000 approaching, many computer systems, as well as a number of other systems, may be impacted by the change to the year 2000. The issue is based on the ability of your current systems to read a two -digit year (00) as the year 2000 as opposed to 1900. Computer programmers have historically used only two digits to designate the year within computer software. A number of systems will, therefore, read 00 as 1900. If this occurs, corrupt data may be generated inside your computer software as well as other systems (fax machines, VCRs, clocks, air conditioning units, switchboards, alarm systems, information backup systems, and e -mail just to name a few). C* We recommend that 1) the City continue efforts to identify all systems impacted by the change, and 2) budget adequate resources (both staff time and, if appropriate, system replacements) to avoid any problems associated with the change to the year 2000. If unanticipated problems occur, the cost to fix the situation may far outweigh the cost, time and effort to anticipate the changes and implement them prior to the year 2000. We are available to assist the City in organizing or implementing a year 2000 compliance plan. LIWbiLLIIYtlIW'll'lu'Jtll lldiw'lIItl111t 11Y 111 .'YY,IJIWeuu11u,1,d11W,I,rWU� lam l.u'llw11, 111, IduIwW6wJWW' JILluJ6aL. idwu: u141a61. uuanlululuN.JY+uLIIW ; ru m6,1 I1 LLWml,x "dJIwW11s,Yam wIWY1WUUWa11WLI. JV, uw11, JV. lwlLm .l4rrrmultuWun,udlua,Yl', 16llLU'adlrll,YU ,a1 Wru'rbluilrww,llrumLU" ur l:.mlu.nlaiwellll Page 66 City of Oak Park Heights, Minnesota Management Report and Recommendations Other Matters IIN dill" 111,11 IIIL1 11 1111 fi .l 1 : I � IJ is I,i l li Y. I lidl IJ�d"Il l A114LLIi, to li II 11lp1111, i 11 i 111001111,11111 h ' l'Ll 4 dii 1l l I ' d I i tl IL 111 11 W Id, J:',1 i, 111iLtl II J-1 IU A d 11 !, 111 W L , 1,140 " 1 1 1 61 1 LI, d 11'1 NI Jlb 4,I 'LiId "Y.1j,I Yi, 1 Y. k1li i I I .IW dI Ih, WLd. Fraud Prevention Fraud prevention has become a priority with a number of organizations based on increased awareness of the impact of fraud on organizations. $400 billion is lost to fraud in the U.S. annually. We are recommending that all clients re- evaluate their systems to prevent fraud. Our position has been prompted by: • The campaign waged by our international association (HLB International) to create greater awareness globally with respect to fraud issues. • The issuance of Statement of Auditing Standards (SAS) No. 82 - Consideration of Fraud in a Financial Statement Audit, which as expanded the auditor's responsibility with respect to potential fraud within organizations. While an auditor has always been responsible for reporting any suspected fraud, it has not been a specific requirement of audit procedures to assess the risk of fraud. SAS No. 82 has changed this. It is important to understand, however, that the existence of fraud may often not be detected by existing or even expanded audit procedures within many organizations. Fraud by its nature is often undetectable by normal financial statement audit procedures. The new SAS requires the auditor to "specifically assess the risk of "misstatement misstatement due to fraud and provides categories of fraud risk factors that should be considered in the auditor's assessment. Fraud is often very difficult to detect because, to some degree, certain forms of fraud become accepted by the culture created within the working environment. Additionally, material instances may involve more than one participant (collusion) which further complicates its detection. dWWld' ul 'lliWbeWUWLWWk4WdYlWlltll'.YWY4 hLL �_ WYJW1tlW Y:IJLIWYI ILLdu IYiIYLWYi :IIJtlYJtlWdYY'IYJ11Wdtl431W W1tlVLVWl 61WNJl LLLWW' YIUIY' JWJIYWV14WWL �i!'- �S"!._.' w°. id1YbIW' 4W18" wLrVYdYvYdll. YrIeWAWLYYWiALIi 'IYYLWIWJYJWbt' Page 67 City of Oak Park Heights, Minnesota Management Report and Recommendations Other Matters Some common examples of fraud which many cities may be exposed to include: • Personal use of assets • Personal use of supplies • Use of City facilities without paying market rate. (For instance, a recreation department employee who allows acquaintances to use facilities at reduced or no charge.) It is important to understand that we are not suggesting that fraud is occurring at the City of Oak Park Heights. This management report comment is directed to virtually all of our clients to assist them in increasing their awareness of the potential for fraud. We specifically recommend the following steps to improve your comfort that fraud is not existing within your organization. 1. Conduct a series of interviews with each department head to determine likely areas in which fraud may occur. 2. Designate a position of authority that any City employee can confidentially approach if they observe or suspect fraud may be taking place. 3. Adopt a written policy that defines fraud within the City and specifically states the "ramifications of noncompliance." 4. Require employees to read the above policy when they are hired and periodically (once a year) sign an acknowledgment that they are aware of the policy and they are in compliance with it. We are available to assist the City to increase awareness of fraud and establish policies to improve the likelihood of preventing fraud. yY .. , 'w:iu , r.. o ld' u' WWY�' WdYWl4' WdWd' tlWW' d6' J�JWL' tldW4W !WUWYJY14WllW "WWN4L3NY4:.lJL i:u: �Al!6'Y�'L liJ1W149alWd • " " „ •• .YdWdLWYN4i1dWIYYe4V -•: : , WJWh6�lYWIW6WWIL. '. "- •_ "••' ILLWIwWWL'IYY �..iSv i�S.a.2.d. Page 68 City of Oak Park Heights, Minnesota Management Report and Recommendations Other Matters IIJ, Al I 2LL .:dl u'Yludmll All,, m Iil I1, 6ul. 411Y '' etl, I Im1111111.1'e1. W J1.11 :11111 'J I611i1 : l IN VVI I; :'iIIJII1W1:11Alll I; 1 �11, ILE, I', plID Il ; lYlLl, ulLLYlul 11111111I 'Al 1�W u' JYWtlWYY' uLdJ1114YIWI1dI: YW11YJduIIJVaiV1! J ' JUI: WLLILYW: IWIYIIULLW I ,J ,:Y'YII YI::J� WI:llYW 4L11eWlI�I,i4Y 'I ICY ;,1 X41 Distortion of Subsidies Act of 1997 Federal legislation had been proposed in 1997 to effectively tax (at a federal level) subsidies provided by state and local government to private business. The purpose of the legislation is to reduce unfair competition between states to acquire businesses at the cost of increased taxes to local jurisdictions. Specifically, this Act would tax incentives provided by local government to private enterprises. This would include tax increment payments. The tax would not necessarily be a burden on the City of Oak Park Heights; however, it would reduce the incentives available to private enterprise, which seeks subsidies in the form of tax increments, or other concessions from city government. The law is also directed to major sports franchises. In order for private enterprise to receive the same net (after -tax) benefit as is currently available, significantly greater funds would need to be provided. This proposed federal legislation would not impact the City; however, it would adversely impact the recipients of future tax increment benefits because they would have an additional tax at the federal level for any such amounts received. Strategic Dricing As is discussed previously in this report, the Governmental Accounting Standards Board (GASB) is considering sweeping changes in the financial reporting model for cities. The changes in the financial reporting model will require the presentation on a statement of a Statement of Net Activities. If passed, this statement will require the "full loading" of expenses for each activity of the City. Specifically, the additional amounts included in activity expense will be capital use charges (depreciation) to each activity of the City. The fully - loaded activity cost will then present a deduction for direct revenues generated by that activity to determine the subsidy level that the local government provides to each activity. This new presenation may prompt local government to review cost recovery and pricing strategies. Page 69 City of Oak Park Heights, Minnesota Management Report and Recommendations Other Matters J10111dLI,Wu J., 11111411i11L, 1111 1 11 ll. I II I III I IWI1I, 1: k 1' 11! 11,1111113 I UIJII II 1111" 1111111 AII III I 1 III, 1111,11141 A I4 ,.Jf, III III iLIIIIIINI IJ, Al "1 J11 IIJIW IIIWIl11111111 I1 We believe that this type of presentation will prompt questions regarding charges for services that the City provides. Pricing within cities is often cost recovery based. We believe there can be significant benefit for local government to review prices from the standpoint of the value of the service delivered. Several points to consider when evaluating your prices would include targeting the following overall outcomes: 1. Develop an equitable approach 2. Develop a self - sustaining approach 3. Understand the role of the costs in delivering services and cost allocation systems within the City 4. Be able to provide better justification to constituents S. Be able to measure service efforts and accomplishments (institute greater accountability) We believe that evaluating pricing philosophies for services with cities can produce some very positive results in directing the charges for services to those who more directly benefit from each specific service. We are available to assist the City in evaluating pricing of services. LiY/ 1w1YYi d'110 JYIW4YIIYIIIJ1111WAI1,uu JIYYYWIWIWWII L' IYII YYIIIIWII ILLILIJ!! IIIdIdWYIW' W. 14W�. YJ, IWWV1: lYJWIW11iWYY' sNid1 Y1! IIIWd1lJ11IiI1tL1Y . II1IWI,A 'iI'Y1dIW WIJLYIYWIIWIIWIJ EWIY+ilAI"IIN W I11W11ldulYllfJllWdItlIIIIIl1Y11uV1! JdlWIL1: 1, J11' 11JVI1WLSIJIIIUJI' LIYU1Y51 'uW11i1 Page 70