HomeMy WebLinkAboutFinancial Analysis and Management Considerations CITY OF OAK PARK HEIGHTS, MINNESOTA
FINANCIAL ANALYSIS AND
MANAGEMENT CONSIDERATIONS
DECEMBER 31, 1998
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City of Oak Park Heights, Minnesota
Management Report and Recommendations
Executive Summary
EXECUTIV E SUMMARY
Throughout this report various topics are tagged for easier reference as follows:
M_ State statute or federal legislation.
0 Financial comparison or trend analysis.
GPM Impact of accounting and reporting standards of the
Governmental Accounting Standards Board.
Options to continue improvement in policies, procedures,
systems and/or long-range planning.
O City's accomplishments.
Several areas highlighted for your reference include the following:
- --------- - ------- <* The City was not in compliance with statutes regarding collateral for
deposits. The collateral deficiency at December 31, 1998 was $251,089. Page 6
G Effective for 1998, the City is required to report investments at market
value. Page 6
O The City's property tax collection rate continues to be very strong (99%
for 1990. Page 8
The 1997 and 1998 state legislature lowered tax capacity rates for
several classes of property including commercial/ industrial properties.
The City is taking action to mitigate the impact of reduced tax rates
including 1) revenue diversification and 2) reviewing assessed
valuations of utility property. Page 10
Page 2
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Executive Summary
Periodically review the status of properties with special deferred
assessments to determine these properties continue to qualify for the Page 11
special deferred status.
O The City revised its policy regarding the administrative fee charged to
Enterprise Funds. The revised administrative fee does not include a
charge for labor costs. These costs are now charged directly to the
Enteprise Fund. Page 18
O The City established an administrative fee ® Capital Projects effective
January 1, 1999. Page 18
O The December 31, 1998 General Fund balance was sufficient to fulfill
the City's reserve requirements. Page 26
Ga An analysis of the Storm Sewer Bonds Debt Service Fund indicates the
City may be able to cancel the year 2000 tax levy which is the final levy Page 35
for this bond issue.
Monitor the committments of the Capital Revolving Fund to assure fall
funding of all projects. Page 42
Close the Autumn Ridge Phase III Fund in 1999. Page 60
CJ The City negotiated a new refuse contract which resulted in substantial
savings. Page 77
O During 1998, the City took actions to improve internal accounting
controls by further segregating certain duties/functions.
Page 3
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Combined Balance Sheet
COMBINED BALANCE SHEET
The Combined Financial Statements of the City are presented in Statements I through 5 of
the 1998 Annual Financial Report. The following comments relate to these financial statements
of the City.
Cash and Investments
December 31, Increase
Description 1997 1998 (Decrease)
Checking account ($27,449) ($87,316) ($59,867)
Investments 5,873,794 7,467,144 1,593,350
Petty cash 100 100 -
Totals $5,846,445 $7,379,928 $1,533,483
The December 31, 1997 and 1998 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 $318,936 of interest on investments during 1998
compared to $329,041 in 1997.
Page 4
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Combined Balance Sheet
Cash and investment 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 and investment 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 1997 1998 (Decrease) Balance
General $1,337,184 $1,163,632 ($173,552) $1,186,663
Special Revenue 21,745 130,192 108,447 3,242
Debt Service 518,953 541,554 22,601 544,441
Capital Project 3,564,689 5,185,002 1,620,313 5,358,210
Enterprise 538,004 508,312 (29,692) 661,765
Agency (134,130) (148,764) (14,634) N/A
Total $5,846,445 $7,379,928 $1,533,483 $7,754,321
The large increase in the Capital Project Fund is the result of the City issuing the $1,990,000
G.O. Improvement Bonds on October 1, 1998.
O The City has an investment policy that addresses various items including objectives,
authorized institutions and authorized investments. This policy was adopted during 1997 and
reapproved in 1998. We concur with the City's action in this area.
Page 5
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Combined Balance Sheet
Collateral for Deposits
G* Minnesota Statutes (MS I I 8A) 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 not in compliance with such statutes at December 31, 1998. The required collateral
at Central Bank at December 31, 1998 was $1,765,192. Collateral of $1,514,103 was provided
resulting in a collateral deficiency of $251,089.
The collateral deficiency resulted from the receipt of connection charges from Valley Senior
Service Alliance (VSSA). On December 31, 1998, the City deposited $742,000 which included
the VSSA connection charges. Also on December 31, 1998, the City wrote a check for $740,000
to be deposited in the 4M Fund. This check did not clear the bank until after year end and
therefore caused the checking account balance to exceed the amount of collateral provided.
Accounting Standards for Investments
Gk9B The Governmental Accounting Standards Board (GASB) issued in March, 1997, a
final statement on accounting and financial reporting for certain investments (Statement
No. 31). The City implemented this Statement during 1998.
Essentially, this new accounting standard requires the City to record its investments at
market value. Previously, the City's investments are recorded at amortized cost. However,
the City currently invests in certificates of deposit and the 4M funds which are not subject
to market value fluctuations. Therefore, at December 31, 1998, the market value of the
City's investments was equal to the carrying value.
Page 6
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Combined Balance Sheet
Due From Other Governmental Units
December 31, Increase
Description 1997 1998 (Decrease)
Fines $4,518 $4,186 ($332)
Gravel tax 476 - (476)
MCES 22,281 20,733 (1,548)
City of Forest Lake - Safe and Sober 2,283 2,341 58
ISD #834 - Liaison officer 7,979 8,335 356
Federal government - COPS - 8,464 8,464
Totals $37,537 $44,059 $6,522
All of the above amounts are currently collectible.
Page 7
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Combined Balance Sheet
Property 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.
1995 1996 1997 1998
Delinquent taxes - January 1 $21,146 $18,813 $18,196 $10,946
Current levy 1,354,370 1,391,385 1,394,918 1,524,047
Total collectible 1,375,516 1,410,198 1,413,114 1,534,993
Receipts:
Current 1,344,669 1,384,327 1,386,466 1,541,155
Delinquent 12,034 7,675 4,194 5,726
Total receipts 1,356,703 1,392,002 1,390,660 1,546,881
Adjustments - - (11,507) 28,751
Delinquent taxes - December 31 $18,813 $18,196 $10,947 $16,863
Current collection as a percent of current levy 99.3% 99.5% 99.4% 99.2%
Total collections as a percent of current levy 100.2% 100.0% 99.7% 101.5%
The negative 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. The positive adjustments to property taxes consist of additions recorded at
Washington County.
0 As shown above, tax collection rates have averaged 100% 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
T'ax_Levies, and 'Tax Rates
A comparison of values for taxes payable 1998 and taxes payable 1999 is as follows:
Increase (Decrease)
Tax Capacity Values 1998 1999 Amount Percent
Real estate $5,987,202 $6,205,368 $218,166
Personal property 120,878 114,675 (6,203)
Subtotal 6,108,080 6,320,043 211,963
Fiscal disparity contribution (663,765) (547,377) 116,388
Fiscal disparity distribution 300,520 299,919 (601)
Captured tax increment (47,749) (30,380) 17,369
$5,697,086 $6,042,205 $345,119 (7.3 %)
Tax capacity rates 27.141 23.870 4.243 18.5%
Tax levy $1,524,047 $1,409,400 $129,149 9.2%
The City portion of the property tax on a typical property for 1998 and 1999 is as follows:
Percent
Property 1998 1999 Decrease Decrease
$150,000 homestead $580 $483 ($97) (16.7 %)
$500,000 commercial 4,898 3,801 (1,097) (22.4 %)
Page 9
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Combined Balance Sheet
Fiscal Disparities
The fiscal disparities 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 1999 budgeted:
1999
Payer 1995 1996 1997 1998 Budgeted
Local taxpayer $1,470,166 $1,494,440 $1,497,143 $1,598,450 $1,456,913
State credits (RACA) 77,980 77,980 74,329 74,464 74,983
Fiscal disparities:
Contribution (172,431) (179,486) (175,450) (151,989) (148,563)
Distribution 55,270 66,681 73,225 77,615 91,050
Totals $1,430,985 $1,459,615 $1,469,247 $1,598,540 $1,474,383
Shown on a basis of percents, current tax collections (by payer) were as follows for the past
four years including 1999 budgeted.
1999
Payer 1995 1996 1997 1998 Budgeted
Local taxpayer 102.7% 102.4% 101.9% 100.0% 98.9%
State credits 5.4% 5.3% 5.1% 4.7% 5.1%
Fiscal disparities:
Contribution (12.0%) (12.3%) (11.9%) (9.5%) (10.1%)
Distribution 3.9% 4.6% 4.9% 4.8% 6.1%
Totals 100.0% 100.0% 100.0% 100.0% 100.0%
Page 10
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Combined Balance Sheet
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.
Special Assessments Receivab
Special assessments receivable consisted of the following types and amounts:
December 31, Increase
Description 1997 1998 (Decrease)
Delinquent $4,967 $5,054 $87
Due from County 1,031 788 (243)
Deferred 476,768 925,512 448,744
Special Deferred 14,800 14,800 -
Totals $497,566 $946,154 $448,588
Deferred special assessments consist of the remaining principal installments on assessment
rolls. These assessments are generally collectible over a time period consistent with the debt
payment schedule of the related bond issue.
<* Special deferred assessments are amounts that are not currently being collected, i.e., deferred
until a specific future event. For the City of Oak Park Heights, special deferred assessments
consists of an assessment which has been deferred pending future connection to the sanitary
sewer line. This amount was deferred by City Council Resolution 84-1-1. The resolution does
not stipulate the amount of interest to be collected upon connection, if any. We recommend 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,
1997 1998
Severance $80,848 $62,141
Vacation 14,966 27,865
Total $95,814 $90,006
Page 12
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Combined Balance Sheet
Bonds Payable
The City had four bond issues outstanding during 1998. A summary Of the l448 activity o[
each bond issue is as follows:
Bond Issues
Water &
8touuSewer Sewer
Refunding Refunding Improvement Improvement
Bonds Bonds Bonds Bonds
of 1992 of 1993 of 1995 of 1998 7otx|o
Balance - January |, 1998 $70,000 $985,000 $950,000 $ ' $2,005,000
New issue
- - 1,990,000 1,990,000
Principal payments 28,000 85,000 110,000 - 215,000
Balance - December 3| $50,000 $900 $840 $1,990,000 *3,780,000
Retirement schedule:
1990 $25,000 $90,000 $120,000 $140,000 $375,000
2000 25,000 95,000 128,000 150,000 390,000
2001 - 100 120,000 150,000 370,000
2002 - 120,000 120,080 150.000 390,000
2003-2006 - 495,000 360,000 1 2,255,000
Total $50,000 $900,000 $840,000 $1,990,000 $3,780
Detail of outstanding bond issues iocontained io Exhibit 20f the l4g8 Annual Financial
Report.
Page 13
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Combined Balance Sheet
A summary of the City's bond issues is as follows:
Bond Issue Repayment Source Maturity Date
Bonds of 1992 Property taxes 12/1/00
Bonds of 1993 Connection charges 12/1/06
Bonds of 1995 Property taxes and special assessments 12/1/05
Bonds of 1998 Special assessments 12/1/13
Page 14
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
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 1,479,490 69% 133,484 6% 529,143 25% 2,142,117 100%
1999* 1,325,000 61% 131,907 6% 718,545 33% 2,175,452 100%
Budgeted
As shown above, 1999 budgeted revenue reflects the City's efforts of revenue diversification.
Property tax revenue is 61 % of 1999 budgeted revenue, down from 69% in 1998 and 79% in
19W
Page 1 5
City of Oak Park Heights, Minnesota
Management Report and Recommendations
General Fund
A graph of property taxes, state aids, and other revenue for the General Fund is as follows:
100%
General Fund
90%
Revenue
By Source
80%
IV'/0
60%
--*—Property Taxes
50%
State Aids
� - All Other
40%
30%
20%
10%
0%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999*
State Aids
State aids of the General Fund have consisted of the following for the past six years (with
1999 budget):
1999
State Aid 1993 1994 1995 1996 1997 1998 Budget
H.A.C.A. $54,358 $75,245 $76,615 $67,063 $73,065 $74,464 $74,983
LGA - - - - - - -
Local performance aid - - - - 4,186 5,133 4,884
Police aid 33,516 43,523 48,245 52,211 44,900 51,198 50,000
Other state revenue - - - - - 2,689 2,040
Snowplowing - - - - 15,800 - -
Totals $87,874 $118,768 $124,860 $119,274 $137,951 $133,484 $131,907
Change $30,894 $6,092 ($5,586) $18,677 ($4,467) ($1,577)
% Change 35% 5% (4%) 16% (3%) (
As shown above, state aids have been fairly constant for the past three years.
Page 16
City of Oak Park Heights, Minnesota
Management Report and Recommendations
General Fund
Other General Fund revenue
Other revenue of the General Fund have consisted of the following for the past five years
(with 1999 budget):
1999
Description 1994 1995 1996 1997 1998 Budget
Licenses and permits $60,914 $117,511 $156,181 $204,986 $125,678 $215,190
Charges for services:
Refuse collection 108,310 110,021 103,444 87,830 m
Refuse collections - Junker lawsuit - - _ 28,887 31,600
Enterprise 94,250 95,000 98,850 102,100 63,525 80,655
Tax increment administration fee m m A _ 27,009 50,000
Construction /engineering fee A - - - - 100,000
Other 2,681 2,329 2,674 2,456 26,910 11,700
Inspections 34,402 34,524 25,611 24,150 40,468 25,000
Fines and forfeits 55,111 49,020 56,545 60,682 60,183 60,150
Interest earnings 34,473 54,912 56,468 55,885 45,848 52,000
Other 75,823 57,144 82,077 81,785 110,635 92,250
Total $465,964 $520,461 $581,850 $619,874 $529,143 $718,545
R efuse - Collection
Prior to 1998, the City accounted for refuse collection in the General Fund. Beginning in
1998, this activity is reported in the Enterprise Fund which also accounts for the water and sewer
operations. The General Fund transferred $190,400 to the Enterprise Fund during 1998 to
subsidize refuse collection operations.
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 is estimated to
increase revenue by an estimated $26,000 annually. The surcharge revenue during 1998 was
$28,887. This surcharge was designed to recover a 1996 count judgment of $100,000 related to
the landfill lawsuit.
Page 17
City of Oak Park Heights, Minnesota
Management Report and Recommendations
General Fund
Administrative Fee ® Entervrise
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 labor portion of the administrative fee and began allocating
actual labor costs directly to the Water and Sewer Utility Fund. The reduced administrative fee
is designed to reimburse the General Fund for overhead costs only. We concur with the City's
action.
Administrative Fee - CaDital . Proiects
The City's General Fund incurs costs related to capital improvement projects. These costs
include staff time, supplies, and other overhead items.
0 The City established a 1 1 /2% administrative fee to recover these costs effective January 1,
1999. The administrative fee will be charged to a project with the corresponding revenue
receipted in the General Fund. We concur with the City's action in establishing this fee.
Page 18
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 1999 budget. Additional detail of the revenue is presented in Statement 7 of the
1998 Annual Financial Report.
General Fund Revenue
1997 1998 1999 Budget
Description Amount Percent Amount Percent Amount Percent
General property taxes $1,387,227 64.7% $1,479,490 69.1% $1,325,000 60.9%
Intergovernmental:
State 137,951 6.4% 133,484 6.2% 131,907 6.1%
County and other 26,401 1.2% 59,664 2.8% 52,250 2.4%
Licenses and permits 204,986 9.6% 125,678 5.9% 215,190 9.9%
Charges for services 216,536 10.1% 186,799 8.7% 298,955 13.7%
Interest on investments 55,885 2.6% 45,848 2.1% 52,000 2.4%
Fines and forfeits 60,682 2.8% 60,183 2.8% 60,150 2.8%
All other 55,384 2.6% 50,971 2.4% 40,000 1.8%
Totals $2,145,052 100.0% $2,142,117 100.0% $2,175,452 100.0%
General Fund
1999 Budgeted
Property Taxes
Revenue 60.9%
N
AA Y;g N
"X
Intergovernmental 8.5%
ME OWN
Ng N 'm
g,
VA
Other Revenue
30.6%
Page 19
City of oak Park Heights, Minnesota
Management Report and Recommendations
General Fund
Expenditures (by major classification) for the past two years plus the 1999 budget, are as
follows:
General Fund Expenditures and Other Uses
1997 1998 1999 Budget
Description Amount Percent Amount Percent Amount Percent
Current expenditures:
General government $507,902 23.0% $774,444 35.0% $698,415 32.6%
Public safety 845,287 38.2% 834,268 37.7% 909,875 42.4%
Public works 99,412 4.5% 139,948 6.3% 234,280 109%
Sanitation 313,302 14.2% - 0.0% d 0.0%
Recreation 211,244 9.6% 120,255 5.4% 83,635 3.9%
Community development - 0.0% 25,850 1.2% 69,810 3.3%
Capital outlay 52,018 2.4% 32,005 1.4% 55,600 2.6%
Transfer out:
Sanitation A 0.0% 190,400 8.6% 65,000 3.0%
Other 182,133 8.1% 95,222 4.4% 27,000 1.3%
Totals $2,211,298 100.0% $2,212,392 100.0% $2,143,615 100.0%
A graph of the above expenditures is presented below:
General Fund
1999 Budgeted Public Safety 41.8%
Expenditures
�N
it �:.'Ei,'/ '5��9'"/r..2 f � F 3 � , /,,:� h...9 �• /• :;.
��1/ :5�.'., � ..,.s ..`:ii�s,:irJ Js: :�F�:m. ax%:�,F_'•7r';.;7 sf i
fir:::.; :.Y %`/,'.>.' %r! %E?f�'s'.' :r ys. ; :k:flnrg3 ✓r.,;5?4 / / : li %? o
', / €#.. ✓,^ { y . ,'/ y . nj / g� /// P ublic Works 10.8
X.
63» 'G's'C/i. ✓�p
- ,;
`�' J% �' `C• f ..Y3: :fs,S,E.%. //` / n.�U„i; ''' ::.7 >,• f /��
tit Recreation 3.8%
Community Development
General Government 32.1% 3 2%
f
Capital Outlay & Other
8.3%
Page 20
City of Oak Park Heights, Minnesota
Management Report and Recommendations
General Fund
The fund balance of the General Fund was $1,186,663 at December 31, 1998 representing a
$59,684 decrease during 1998. The following schedule illustrates the change in fund balance on
a budget variance basis.
Budgeted increase (decrease) in fund balance ($83,280)
Favorable/(unfavorable) budget variance:
General property taxes:
Current and delinquent $21,869
Payment in lieu of tax 10,723
Excess TIF 6,204
Other taxes 57
Intergovernmental 2,482
Licenses and permits (48,747)
Charges for services 39,090
Fines and forfeits 5,583
Interest on investments (3,652)
Other 10,021 43,630
Favorable/(unfavorable) budget variance:
General government (61,033)
Public safety 27,415
Public works (2,713)
Recreation 10,727
Community development 9,869 (15,735)
Transfer to Interim Construction Fund (3,458)
Transfer to River Hills 2nd Addition fund (841)
Net decrease in fund balance for 1998 ($59,684)
Page 71
City of Oak Park Heights, Minnesota
Management Report and Recommendations
General Fund
A summary of the significant budget variances is as follows:
Revenue:
Current and delinquent general Property taxes — The City received more current taxes
than were levied due to net additions (exceeding abatements) at the County.
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.
License and permits — This budget variance relates to VSSA and Carriage Homes which
were anticipated for 1999, but delayed until 1999.
Charges for services — The positive budget variance is primarily the result of the refuse
charge for the Junker settlement which was not budgeted.
Expenditures:
General government - The negative variance relates primarily to costs incurred for the
comp plan and mapping.
Public safety - The positive variance is primarily the result of good budget management.
Community development - The positive variance is primarily due to a delay in the hiring
of a community development director.
Page 22
City of Oak Parr Heights, Minnesota
Management Report and Recommendations
Nufflaffim G ener al Fund
General Fund Reserves
The fund balance of the General Fund decreased in 1998. The schedule below reflects the
General Fund balance for the past ten years:
Year Ended Fund Increase
December 31, Balance (Decrease)
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)
1998 1,186,663 (59,684)
Page 23
City of Oak Park Heights, Minnesota
Management Report and Recommendations
General Fund
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. Several areas to consider are illustrated as follows:
Need For Reserve Balances
Cash Flow
Timing Difference
Intergoverrunental Capital Outlay
Revenue Cutbacks l Replacement
Emergency or
Unanticipated Special Projects
Expenditures
NNEEM.0
Page 24
City of Oak Park Heights, Minnesota
Management Report and Recommendations
General Fund
Benefits of Reserves
Favorable bond l
I rating indicator J
Supplements revenues 1
I with investment income ) I
Provides resources rt> Avoids temporary
for minor projects G = overdrafts prior
or feasibility reports to major receipts
Provides the City Avoids overburdening
greater options to deal of annual budgets for
with unexpected events certain capital outlay
Page 25
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, 1997 and 1998, the General Fund balance was reserved or
designated as follows:
General Fund Balance
December 31,
1997 1998
Reserved for inventory $3,056 $2,624
Designated for:
Cash flow 760,000 702,000
Contingent employee benefits 120,814 101,617
General contingency 308,000 326,000
Capital improvement - 6,204
Employee insurance benefits - 25,091
Subtotal - designated 1,191,870 1,163,536
Undesignated 54,477 23,127
Total find balance $1,246,347 $1,186,663
As shown above, the year end fund balance was sufficient to fulfill the City's reserve
requirements.
Page 26
City of Oak Park Heights, Minnesota
Management Report and Recommendations
General Fund
Reserve for Inventory
The inventory in the General Fund represents an asset that is not available for appropriation.
Therefore, a portion of the fund balance is reserved in an amount equal to the value of inventory.
Cash Flow
Property taxes and state aids account for approximately 70% 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 $702,000, computed as follows:
Cash Flow Reserve
1999 tax levy $1,325,000
1999 budgeted RACA & LPA 79,867
Total $1,404,867
Recommended reserve (one-half of tax levy and state aids) $702,000
Page 27
City of Oak Park Heights, Minnesota
Management Report and Recommendations
General Fund
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
$1,400,000
$1,200,000
$1,000,000
F — $ 1 8 11- -- ]
ea
.-X.X-: .....
$800,000
X
..... . ......
0 ......
$600,00 .....
...... ......
...... .....
...... I. .....
...... I. .....
...... . .....
X.
X
...... . .....
..... . ....
. .... ......
X ... . .....
....... .... ...... .... ... .......
...... ..... . ...... ....
...... .....
.... ......
$400,000
Xx
...... ...... X
...... .... :-
..... ....
.... ....
..... ..... ....
.... ..... .... ....
..... ..... ...
... ...... ...
.. ..... ...
.... ...... ... ..
$200,000
..... ... ..... I
"XI
.... ..... .....
X ,
...... ......
.. .... .....
$0 3-
— 1 4;30/98 5131/98 6/30/98 7/31/ 9
/31/98 2/28/98 3/31/98 .... 4 8MN8 9/30/98
1/1/98 1 10/31/98 11/30/98 12/31/98
$872
,
,
,
,
,
$949878 $817899 $622782 $534181 $354499 ,1 $876,,
IMSeriesi :$1,341,4711$1,224,695: ------ 377 $712184 $591,986 1$1,164,0321
--
As shown above, the cash balance decreased $987,000 between January I and June 30,
illustrating the need for a cash flow reserve.
Page 28
City of Oak Park Heights, Minnesota
Management Report and Recommendations
General Fund
Contingent Emplovee Benefit,
The employee benefits reserve is computed based upon accrued, but unpaid, employee
benefits as follows:
Employee Benefits Reserve
December 31,
Employee Benefit 1997 1998
Vacation leave carryover $14,966 $23,232
Severance 80,848 53,385
Reserve for unused sick leave 25,000 25,000
Total $120,814 $101,617
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, 1998,
Page 29
City of Oak Park Heights, Minnesota
Management Report and Recommendations
General Fund
General Contin2ency 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 1997 1998
Ensuing Year's Budget $2,052,778 $2,175,215
Reserve Amount @ 15% $308,000 $326,000
Capital Improvements
TIF districts do not benefit from increases in 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 "excess TIF" collected in 1998 has
not yet been transferred to the Street Reconstruction Fund and is therefore shown as designated at
December 31, 1998.
Emplovee Health Insurance
The City self insures for a portion of employee health insurance. During 1998, the City
adopted resolution 98-04-33 establishing a General Fund designation for employee insurance
benefits. This designation is equal to 20% of the total possible City cost for employee health,
dental and life benefits. The remaining 80% is included in the annual budget.
Page 30
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 three Special Revenue Fund during 1998.
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 1998 Total
Revenue:
Confiscated property $37,192 $1,850 $39,042
Reimbursements 1,680 - 1,680
Interest earnings 2,210 393 2,603
Total $41,082 $2,243 43,325
Expenditures:
Public safety:
Materials and supplies $13,034 $1,012 14,046
Contractual services 698 13 711
Capital outlay 13,980 11,346 25,326
Total $27,712 $12,371 40,083
Fund balance - December 31, 1998 $3,242
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 31
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Special Revenue Funds
Economic Development Fund
This fund was established in 1998 to account for the activity of the Oak Park Heights
Economic Development Authority. A summary of the financial activity of this fund is as
follows:
1998
Revenue:
Interest on investments $3,540
Reftinds and reimbursements 2,531
Total revenue $6,071
Expenditures:
Community development:
Materials and supplies $7
Contractual services 7,614
Interfund loan interest 10,000
Capital outlay 121,500
Total expenditures $139,121
Fund balance (deficit) - December 31, 1998 ($133,050)
The 1998 expenditures consist primarily of the Bell property purchase. The City anticipates
demolition of the building in 1999 and marketing the property as an industrial site. The
estimated value of the property is approximately $122,000 (61,000 square feet @ $2.00 per
square foot).
Page 32
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. The City closed this
fund during 1998 upon completion of the grant activities. A summary of the financial activity of
this fund is as follows:
1997 1998 Total
Revenue:
Federal grant $2,780 $7,220 $10,000
Interest on investments 153 131 284
Total $2,933 $7,351 10,284
Expenditures:
Public safety:
Capital outlay $3,089 $8,307 11,396
Other financing sources:
Transfer from General Fund - local share $1,112 $ - 1,112
Fund balance - December 31, 1998 $0
Page 33
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 1998 Annual Financial Report. Debt Service Funds are a type of governmental
fund to account for the accumulation of resources for the payment of interest and principal on
debt (other than Enterprise Fund debt). The City maintained four Debt Service Funds during
1998 as follows:
Fund Balance
December 31, Increase
Fund 1997 1998 (Decrease)
G.O. Refunding Bonds of 1992 (Storm Sewer) $29,049 $32,523 $3,474
G.O. Revenue Bonds of 1991/Crossover Refunding Bonds of 1993 259,209 267,057 7,848
G.O. Improvement Bonds of 1995 230,826 228,133 (2,693)
G.O. Improvement Bonds of 1998 - 16,728 16,728
Totals $519,084 $544,441 $25,357
Page 34
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Debt Service Funds
Storm Sewer Refunding Bonds of 1992
These bonds were issued to provide financing for the Storm Sewer District construction. The
City Council established this district in October, 1982 per City ordinance 1600. A projection of
the final fund position based on scheduled levies and debt requirements is as follows:
Fund balance - December 31, 1998 $32,523
Additions:
Future scheduled tax levies @ 100% 50,000
Total 82,523
Deductions:
Debt requirements:
Principal 50,000
Interest 4,075
Total 54,075
Projected fund balance $28,448
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 35
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 1998, 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 1999 and 2000 scheduled
debt payments.
Future (1999 through 2004) projected cash transfers are as follows:
Sanitary Water
Year Sewer Works Total
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 $115,000 $650,000 $765,000
Page 36
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Debt Service Funds
A, projection of cash flow of the Water and Sewer Refunding Bonds of 1993 assuming cash
transfers from the Connection Charge Fund is as follows:
City of Oak Park heights, Minnesota
Projection of 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
1999 $267,057 $0 $0 $125,000 $12,787 $137,787 $132,690 $0 $272,154
2000 272,154 0 0 135,000 13,126 148,126 133,910 0 286,370
2001 286,370 0 0 140,000 13,905 153,905 134,825 0 305,450
2002 305,450 0 0 145,000 14,871 159,871 150,325 0 314,996
2003 314,996 0 0 165,000 15,503 180,503 149,805 0 345,694
2004 345,694 0 0 55,000 16,617 71,617 158,805 0 258,506
2005 258,506 0 0 0 12,083 12,083 166,805 0 103,784
2006 103,784 0 0 0 4,812 4,812 78,900 0 29,696
Total $0 $0 $765,000 $103,704 $868,704 $1,106,065 $0
Assmnptions
Special assessment collection rate .................... 95%
Property tax collection rate . ............................... 99%
Investment interest rate ..... ............................... 5.00%
Negative interest charged to funds ? .................. no
As shown above, this fund has a projected surplus of $29,696 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 may not be sufficient to fund
the debt service of this bond issue. Therefore, if no additional development occurs, the Utility
Fund reserve may be needed.
Page 37
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Debt Service Funds
Ge®> 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 1 Taxes Assessments Receipts Interest Receipts Payments Disbursements December 31
1999 $225,919 $58,806 $54,856 $0 $11,560 $125,222 $159,420 $0 $191,721
2000 191,721 59,400 52,405 0 9,915 121,720 154,140 0 159,301
2001 159,301 59,400 49,954 0 8,353 117,707 148,740 0 128,268
2002 128,268 59,400 47,504 0 6,862 113,766 143,280 0 98,754
2003 98,754 59,400 45,053 0 5,448 109,901 137,700 0 70,955
2004 70,955 59,400 42,603 0 4,123 106,126 132,000 0 45,081
2005 45,081 59,400 40,152 0 2,898 102,450 126,000 0 21,531
Total $415,206 $332,527 $0 $49,159 $796,892 $1,001,280 $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 $21,531 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 38
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Debt Service Funds
G.O. Improvement Bonds of 1998
This bond was issued in 1998 to provide financing for Fern Center and Phase Three of the
58 Street improvement. This bond is scheduled to be repaid by special assessments.
Page 39
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Capital Project Funds
CAPITAL PROJECT FUNDS
The financial statements for the Capital Project Funds are presented in Statements 12 and 13
of the City's 1998 Annual Financial Report. The fund balance (deficits) of the Capital Project
Funds were as follows at December 31, 1997 and 1998:
December 31, Increase
Fund 1997 1998 (Decrease)
Capital Revolving Fund $967,924 $354,283 ($613,641)
Budgeted Projects and Equipment Revolving Fund 300,487 83,397 (217,090)
57th Street/Oakgreen extension - 21,737 21,737
Osgood Highway 36 Intersection - (5,447) (5,447)
Kern Center - 932,498 932,498
Superamerica/Valvoline Oil - 167 167
Park Development 326,210 365,518 39,308
Interim Construction (3,458) - 3,458
St. Croix Mall (TIF) 121,447 101,873 (19,574)
River Hills 2nd Addition (65) - 65
Street Reconstruction 114,646 326,565 211,919
East Oaks Swager 95 95 -
Valley View Estates Krongard 77 102 25
West Frontage Road Connection (947) - 947
Renewal and Replacement 1,101,175 1,273,052 171,877
AAE - Brackey West - Oak Park Pond 150,695 (3,090) (153,785)
AAE - Brackey West - Outlots A & B - 55,727 55,727
AAE - 58th Street Improvement - Phase 11 53,180 - (53,180)
AAE - Autumn Ridge 494 (494)
AAE - Brackey Addition 6,489 - (6,489)
AAE - 58th Street Improvement - Phase 111 (50,866) 808,925 859,791
AAE - Haase Addition 22 - (22)
AAE - Autumn Ridge 3rd Addition (9,378) (16,719) (7,341)
AAE - Sanitary Sewer Connection 157,997 301,570 143,573
AAE - Water Connection 126,142 295,504 169,362
AAE - Storm Sewer Connection 151,194 447,197 296,003
Totals $3,513,560 $5,342,954 $1,829,394
Page 40
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Capital Project Funds
Capital Revolving Fund
During 1984, the City established the Capital Revolving Fund (formerly Closed Bond Fund).
Initial financing for this Rind was provided through the residual balances of closed (or defeased)
special assessment Debt Service Funds of the City.
A summary of transactions for 1997 and 1998 is as follows:
Capital Revolving Fund
Description 1997 1998
Financial Resources:
Transfers in:
58th Street - Phase 11 $ - $52,886
AAE - Storm Sewer 50,000 50,000
Special assessments 219,917 91,566
Connection charges:
Valley View Estates 31,880 28,070
East Oaks - 17,000
Other 8,800 -
Investment interest 63,861 36,203
Interfund loan interest - 10,000
Refunds and reimbursements 7,389 -
Total financial resources 381,847 -- 2 - 85,725
Financial Uses:
Expenditures 43,094 504,619
Transfers out:
Brackey - Oak Park Ponds 375,550 173,800
57th Street/Oakgreen extension - 220,000
West Frontage Road connection - 947
Total financial uses 418,644 899,366
Increase (decrease) in fund balance (36,797) (613,641)
Fund balance - January 1 1,004,721 967,924
Fund balance - December 31 $967,924 $354,283
Page 41
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Capital Project Funds
In addition to the above fund balance, this fund has assessments receivable of $589,000
relating to the 58th Street Improvement Project and the Brackey West/Stillwater Ford utility and
street improvements. 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 storm
sewer connections. The amount remaining to be repaid was $120,000 at December 31, 1998. A
summary of existing and future assets is as follows:
Existing assets (cash and investments) $114,273
Future assets:
Interfund loan 250,000
Storm sewer repayment 120,000
Assessments - existing rolls 589,000
$1,073,273
However, as shown above, the cash balance of this fund is down to $114,000, limiting the use
of this fund until future assets are collected.
Page 42
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Capital Project Funds
The 1998 expenditures of the Capital Revolving Fund were as follows:
City hall computer system $48,700
City hall remodeling and equipment 224,987
City hall roof 113,821
60th Street pathway 37,309
Generator and garbarge enclosure 49,763
Other 30,039
Total $504,619
The transfer to Bracket' — Oak Park Ponds was for the purpose of financing project costs.
This project was assessed and the assessments will be received in this fund.
The transfer to 57 Street/Oakgreen was for the purpose of financing project costs.
Repayment of this transfer has not been determined.
Page 43
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Capital Project Funds
Budgeted Projects and Equipment Revolving 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 for 1997 and 1998 is as follows:
Description 1997 1998
Financial Resources:
Transfers in:
General Fund $120,021 $90,923
Enterprise Fund - 8,500
DNR grant - 8,192
Interest earnings 17,707 10,611
Donations/other 3,132 4,927
Total financial resources 140,860 123,153
Financial Uses:
Expenditures:
Sealcoat - 37,160
Recreation 40,339 26,088
Police vehicles - 14,911
A.D.A. 984 -
Street reconstruction:
Expenditure 22,616 4,366
Transfer out - 197,718
Computer system 10,000
St. Croix Sport Facility - 50,000
Unallocated:
Other 13,114 -
Total financial uses 77,053 340,243
Increase (decrease) 63,807 (217,090)
Fund balance - January 1 236,680 300,487
Fund balance - December 31 $300,487 $83,397
Page 44
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Capital Project Funds
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, 1998°
Purpose Amount
Sealcoat $38,928
Land acquisition 20,000
Perro Creek 7,180
Public works vehicles 11,000
Building inspector vehicle 3,500
Unallocated 2,789
Total $83,397
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 45
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Capital Project Funds
57t Street/Oakgreen Extension
This fund accounts for costs associated with the extension of 57 Street from City Hall to
Oakgreen. This project is being financed by transfers from the Capital Revolving Fund. A
summary of financial activity to date is as follows:
Revenues and other sources:
Transfer from Capital Revolving Fund $220,000
Interest on investments 113
Total revenues and other sources 220,113
Expenditures and other uses:
Land acquisition 184,759
Engineer 9,388
Legal and fiscal 2,780
Other 1,449
Total expenditures and other uses 198,376
Fund balance - December 31, 1998 $21,737
Page 46
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Capital Project Funds
Osgood/Highwav 36 Intersection
This fund accounts for costs associated with the intersection improvements at Osgood and
Highway 36. This project is in its initial stages and financing has not yet been fully determined.
A summary of financial activity to date is as follows:
Revenues $ -
Expenditures:
Engineer 5,447
Fund balance (deficit) - December 31, 1998 ($5,447)
Kern Center
This fund accounts for costs associated with the Kern Business Center. This project is being
financed by the 1998 G.O. Improvement Bonds. A summary of financial activity to date is as
follows:
Revenues and other sources:
Bond proceeds $995,983
Interest on investments 12,514
Total revenue and other sources 1,008,497
Expenditures and other uses:
Engineer 57,203
Legal 2,798
Other 15,998
Total expenditures and other uses 75,999
Fund balance - December 31, 1998 $932,498
Page 47
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Capital Project Funds
.. .. ....... -- . .... . I
SuDeramericaNalvoline Oil
This fund accounts for the escrow deposits associated with the development agreement with
SuperamericaNalvoline Oil. The City does not anticipate any City costs associated with this
project.
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 $365,518 at December 31, 1998, as
follows:
Prior
Years 1998 Total
Financing Resources:
Park fees $294,064 $20,556 $314,620
Donations and contributions 4,112 - 4,112
Interest on investments 48,403 19,808 68,211
Total financing sources $346,579 $40,364 386,943
Financing Uses:
Professional services $20,369 $1,056 21,425
Fund balance - December 31, 1998 $365,518
Page 48
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Capital Project Funds
A summary of park dedication fees is as follows:
Park
Development Fee
AAE Area:
Autumn Ridge - Phase 1 $11,700
Autumn Ridge - Phase 11 4,294
Autumn Ridge - Phase 111 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 -1 18,140
Valley View Estates - 11 12,580
Stillwater Ford 20,556
Other 14,400
Subtotal 76,076
Total $314,620
The above balance at December 31, 1998 has not been designated for any specific project.
Page 49
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Capital Project Funds
Interim Construction
This fund accounts for preliminary costs of various projects. The City does not have any
unfunded interim construction at December 31, 1998.
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 1998 Totals
Financial Resources:
T.I.F. taxes $1,015,122 $43,834 $1,058,956
Investment earnings 13,534 7,254 20,788
Total financial resources $1,028,656 $51,088 1,079,744
Financial Uses:
Construction costs:
58th Street/Osgood improvement project $150,078 $ - 150,078
Developer assistance 608,588 26,300 634,888
Professional fees 2,743 6,762 9,505
Administrative charge - 27,009 27,009
Transfer out:
General Fund (investment interest) - 10,591 10,591
Street reconstruction 145,800 - 145,800
Total financial uses $907,209 $70,662 977,871
Fund balance - December 31, 1998 $101,873
Page 50
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Capital Project Funds
During 1995, the City adopted resolution 95-03-12 modification No. I 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.
<* This district is scheduled to terminate in mid -1999. Accordingly, we recommend the City
determine all qualifying expenditures of this TIF prior to the termination date.
River Hills (Heritage) 2nd Addition,
This project was started in 1993. Financing is provided by the developer under a letter of
credit arrangement. This fund was closed during 1998 through a transfer from the General Fund.
Page 51
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Capital Project Funds
Street Reconstruction
This fund was established to account for the first phase of the street reconstruction program.
A summary of financial activity is as follows:
Prior
Years 1998 Total
Financial resources:
Bond proceeds $1,062,456 $ ® $1,062,456
Interest earnings 34,502 11,318 45,820
Refunds and reimbursements - 10,000 10,000
Transfers in:
St. Croix Mall TIF 145,800 - 145,800
Budgeted projects and equipment revolving 155,000 197,718 352,718
Renewal and replacement 15,854 - 15,854
Total financial resources $1,413,612 $219,036 1,632,648
Financial uses:
Project costs $1,298,966 $7,117 1,306,083
Fund balance - December 31, 1998 $326,565
The City combined all street reconstruction monies during 1998 by transferring the street
reconstruction portion of the Budgeted Projects and Equipment Revolving Fund to this fund.
These monies will provide partial financing for the next phase of street reconstruction.
Page 52
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Capital Project Funds
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 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 R eceived Through 12/31/98
Unit No. Per Unit Total No. Amount
Single family 26 $2,125.00 $55,250.00 8 $17,000.00
Page 53
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Capital Project Funds
Vallev View Estates ® Kron2ard
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 12/31/98
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 36 77,449.60
Townhome 52 1,485.44 77,242.88 50 74,272.00
Total $164,565.64 $160,051.03
West Frontage Road Connection
This fund was established in 1996 to account for the preliminary costs related to the above
mentioned project. This fund was closed during 1998 through a transfer from Capital Revolving
Fund.
Page 54
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Capital Project Funds
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 1998 Total
Financial Sources:
Transfer from water and sewer utility:
Initial (1994) $574,378 $ - $574,378
Annual 387,550 107,253 494,803
Interest earnings 155,101 64,624 219,725
Total financial sources $1,117,029 $171,877 1,288,906
Financial Uses:
Transfer out:
Street reconstruction $15,854 $ - 15,854
Fund balance - December 31, 1998 $1,273,052
Page 55
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Capital Project Funds
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).
Brackey West - 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
------ ----
Page 56
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Capital Project Funds
A summary of the connection charges related to this project are as follows:
Received Through
Budgeted December 31, 1998
Unit No. Per/Unit Total No. Amount
1 1 $205,200.00 $205,200.00 1 $205,200.00
Page 57
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Capital Project Funds
Brackev West ® 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, 1998
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 1 29,868.00
Total $82,536.00 $29,868.00
Page 58
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Capital Project Funds
AAE ® 58th Street Imurovements ® Phase 11
This fund accounts for the costs associated with the extension of 58th Street from the High
School Driveway east to Norell Avenue. The City closed this fund during 1998 through a
transfer to the Capital Revolving Fund.
AAE-- Autumn Ridge (Phases 1, 11 and III
- M
These funds 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 (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.
Page 59
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, 1998
Phase No. Per/Unit Total No. Amount
1 26 $3,854.80 $100,224.80 23 $88,660.40
11 25 3,854.80 96,370.00 22 84,886.60
111 26 3,854.80 100,224.80 25 96,370.00
Total $296,819.60 $269,917.00
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
The City closed the Autumn Ridge Phase I and Phase 11 funds during 1998. The construction
for Autumn Ridge Phase III is substantially complete at December 31, 1998.
We recommend that the City close the Autumn Ridge Phase III fund in 1999.
Page 60
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Capital Project Funds
AAE - Brackey - Utility 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.
A summary of the connection charges related to this project are as follows:
Received Tbrough
Budgeted December 31, 1998
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
A portion of the project costs were assessed. The amounts assessed were financed by the
Capital Revolving Fund. The City adopted assessment rolls totaling $550,000 during 1998. The
assessment rolls were recorded in the Capital Revolving Fund.
The City closed this fund during 1998 upon project completion.
Page 61
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Capital Project Funds
AAE
® 58th Street Improvements - Phase III
This fund accounts for costs associated with the extension of 58th Street from Wal-Mart to
Oakgreen Avenue. This project is being financed by the 1998 G.O. Improvement Bonds. A
summary of financial activity to date is as follows:
Revenues:
Bond proceeds $945,808
Interest earnings 12,963
Total revenues 958,771
Expenditures:
Engineer 51,039
Legal and other 24,075
Land acquisition 74,732
Total expenditures 149,846
Fund balance - December 31, 1998 $808,925
Page 62
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Im Capital Project Funds
AAIE - 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 o'L$16'1,346 (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, 1998
Unit No. Per/Unit Total No. Amount
Applebees 1 $15,749.20 $15,749.20 1 $15,749.20
Outlot A 1 65,225.00 65,225.00 0 0.00
Outlot B 1 82,371.60 82,371.60 0 0.00
Total $163,345.80 $15,749.20
The City closed this fund during 1998 upon project completion.
Page 63
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Capital Project Funds
Sanitary Sewer Connection Charge Fund
A summary of the financial activity of this fund from inception is as follows:
Prior
Years 1998 Total
Revenue:
Connection charges:
River Hills 1st and 2nd $39,725 $ - $39,725
Highway 36 10,551 - 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 3,881 45,461
Brackey West - Outlots A & B - 6,052 6,052
Autumn Ridge I st, 2nd and 3rd 56,922 3,450 60,372
Haase addition 3,186 - 3,186
Valley Senior Service Alliance - 139,131 139,131
Investment earnings 23,904 10,142 34,046
Special assessments - 917 917
Total revenue $441,439 $163,573 605,012
Expenditures:
Transfer to debt service $92,500 $20,000 112,500
School District improvements 160,000 - 160,000
River Hills 1st 30,942 - 30,942
Total expenditures $283,442 $20,000 303,442
Fund balance - December 31, 1998 $301,570
Page 64
City of Oak Park Heights Minnesota
Management Report and Recommendations
Capital Project Funds
Water Connection ChmremFund
A summary ofthe financial activity 0f this fund from inception isamfollows:
Prim
Years 1998 Total
Revenue:
Connection charges:
'
River Hills l stand 2nd $64,798 $ - $64,798
Highway 36 18,252 - 18,352
Wal-Mart 67,088 - 67,008
ISD#834 405,341 - 405,341
8raokey 44 - 44,260
Bzuokey West - Oak Park Pond 72,180 6 78,817
Qruxkay West -0ndo/u/\JtB ' 10,506 10
Autumn Ridge lu/ 2nd and 3rd 89,770 5,441 95
Haase addition 5,542 - 5,542
Valley Senior Service Alliance - 241,522 241,522
h/voxUnent earni 46,550 8,562 55
Special assessments - 1,594 1,594
Total revenue $813,881 $274,362 1,088
Expenditures:
Transfer <o debt serv $513,000 $105,000 618,000
School District i 145,000 - |45,000
River 8U�lo1 29,739 - 29,729
Total cxpoudbzoea $687,739 $105,000 792,739
'
Fund balance - December 3l,1998 $295,504
-
Page 65
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Capital Project Funds
Storm Sewer Connection Charge Fund
A summary of the fiuooci8}activity of this fund from inception ioomfollows:
Prior
Youm 1998 Total
Revenue:
Connection charges:
River Hills |mt and 2nd $50,411 $ - $50,411
Highway 36 33,253 - 23,253
VVu-Mod 68,511 - 68,511
TSD#834 289,348 - 289,348
Brucboy 56,079 ' 56,079
Bruukoy West ' Oak Park Pond 91 8,534 99,974
Braobuy West -0ndotzA &B - 13,310 13,310
Autumn Ridge \mt, 2nd and 3rd 107,724 6,529 114,253
Haase addition 7,021 - 7,021
Valley Senior Service Alliance - 305,968 305,968
Investment earnings 27,155 10,692 37,847
Special assessments - 2,020 2,020
Total revenue $720,942 $347,059 1
8opuoJitorou:
Transfer ro revolving capital *100,000 $50,000 150,000
Wal-Mart 41,232 - 41,232
Storm drainage report 9,910 - 9,910
River Hills lut 13,757 - 13,757
Valley Point 2nd 17 - 17,211
School district improvement 289,348 - 289,348
Brucbeyadditiou 98,290 1 99,340
Total expenditures $569,740 $51,050 620,798
Fund balance - December 3l,l99X $447,197
'
Page 66
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Capital Project Funds
Connection Charge Fund Commitments
The fund balance at December 31, 1998 is committed for future debt service payments for the
City's Water and Sewer Revenue Bonds of 1991/Refunding Bonds of 1993. Such future
commitments (cash transfers) are as follows:
Future Transfers to Debt Service Fund
Sanitary Water
Year Sewer Works Total
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 $115,000 $650,000 $765,000
As shown above, the A.A.E. Connection Charge balances at December 31, 1998 represent
sufficient amounts to meet the sanitary sewer debt commitments for 1998 through 2004 and the
water works debt service commitments for 1999 and 2000. Should such balances be insufficient
to meet future debt service commitments, the City has the option of using the reserved balance
($661,765) 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 as repayment for the $360,000 transfer to the High School Road Improvement
Fund. This commitment was $120,000 at December 31, 1998.
Page 67
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Capital Project Funds
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 $6,038 $9,521 $11,425 $26,984
Brackey Addition 75,458 130,726 165,633 371,817
Brackey West 10,118 17,564 22,250 49,932
Haase Addition 29,857 51,930 65,809 147,596
Total $121,471 $209,741 $265,117 $596,329
Page 68
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Capital Project Funds
As previously mentioned, the fund balance of the Connection Charge Funds at December 31,
1998 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, 1998 $301,570 $295,504 $447,197 $1,044,271
Future connection charges 121,471 209,741 265,117 _ 596,329
Subtotal 423,041 505,245 712,314 1,640,600
Debt service commitments (115,000) (650,000) (765,000)
Repayment commitment - (120,000) (120,000)
Sufficient /(insufficient) amount $308,041 ($144,755) $592,314 $755,600
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. The City should review
the debt service requirements of the Connection Charge Fund to determine if the designation of
the Utility Fund retained earnings should be reduced.
Page 69
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Enterprise Fund
ENTERPRISE FUND
The financial statements for the Enterprise Fund (Water, Sewer and Sanitation Utilities) are
presented in Statements 14, 15 and 16 of the City's 1998 Annual Financial Report. Condensed
comparative operating statements of income and expense for the utility operations of the City are
as follows:
Water Department
1997 1998
Amount Percent Amount Percent
Revenue:
Customer billings and other $186,027 100.00% $214,156 100.00%
Operating expenses:
Personal services - 0.00% 70,815 33.07%
Contractual services 65,043 34.96% 90,172 42.11%
Administrative and personnel charges 51,050 27.44% 17,000 794%
Other 11,696 6.29% 10,120 4.73%
Depreciation:
On purchased assets 8,770 4.71% 9,132 4.26%
On contributed assets 57,062 30.67% 60,381 28.19%
Total operating expenses 193,621 104.08% 257,620 120.30%
Net operating income ($7,594) (4.08%) ($43,464) (20.30%)
The City allocated salaries and benefits to the water department during 1998. Prior to 1998,
the City paid an administrative fee to the General Fund which included these direct personnel
charges.
Page 70
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Enterprise Fund
$300,000 -- -- -- - -- -- - -
Water Operating
Revenue & Expense
$250,000 yie'u3 --
$200,000
(Depreciation
All Other Expenses
$150,000 G.'. Contractual Service
i
Personal Services
Operating Revenu
$100,000 -
ff/ ... lr
$50,000
$0!--
1994 1995 1996 1997 1998
Page 71
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Enterprise Fund
Sewer Department
1997_ 1998
Amount Percent _ Amount Percent
Revenue:
Customer billings and other $322,671 100.00% $330,376 100.00%
Operating expenses:
Personal services - 0.00% 77,012 23.31%
MCES 226,198 70.10% 213,651 64.67%
Other contractual services 15,609 4.84% 6,928 2.10%
Administrative and personnel charges 51,050 15.82% 32,000 9.69%
Other 5,851 1.81% 1,543 0.47%
Depreciation:
On purchased assets 2,311 0.72% 2,311 0.70%
On contributed assets 44,141 13.68% 46,872 14.19%
Total operating expenses 345,160 106.97% 380,317 115.12%
Net operating income (loss) ($22,489) (6.97 %) ($49,941) (15.12 %)
The City allocated salaries and benefits to the sewer department during 1998. Prior to 1998,
the City paid an administrative fee to the General Fund which included these direct personnel
charges.
$400,000 - - -- - -- - -
Sewer Operating
$350,000 Revenue & Expense
$300,000
$250,000 Sy:�c
$200,000 . - - - -- - --
i" s _ Depreciation
- -- •� ., -- Personal Services
y -- -�: -
y ;j /.� Y/ • i' E All Other Expenses
IF
a
MCES
$150,000 m . r --, - - - -- -- - - - - - - -� ?y - • �,;,>,z. ng R - --
--A— O Re v enue
e f ' y r - �`:,;. � ` 5
%f M �f 1� c am'%'
$ 100 , 000 - �i'��%�`i' - -- -
`5s
// FE s' $50.000 s'ra - --
1994 1995 1996 1997 1998
Page 72
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Enterprise Fund
The single largest expense of the sewer operations is the contractual services of the
Metropolitan Council Environmental Services (MCES). The MCES charges comprise over 56%
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 Biflings
$250,000
$200,000
$150,000
$100,000
R
$50,000
1990 1991 1992 1993 1994 1995 1996 1997 1998
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 vary from year to year and caused variances in annual profits or
losses of the sewer operations.
Page 73
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Enterprise Fund
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 adjustment 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
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 1999 in mid-December, 1998. While
the rate per million gallons will not change during 1999, ($1,257 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).
Page 74
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Enterprise Fund
As shown on the previous pages, the water and sewer operating accounts incurred losses for
1998 of $43,464 and $49,941, 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 $095 $1.00
Sewer:
Base fee $31.50 $31.50
Charge per 1,000 gallons for
usage in excess of 15,000 gallons $195 $195
( ' ) Water - effective 7/l/95; Sewer ® effective l/l/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 75
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Enterprise Fund
The City revised water rates effective October 1, 1998 and implemented a tiered rate
structure as follows:
Rate
Effective
Type of Charge 10/1/98
Water:
Base fee $19.20
Charge per 1,000 gallons for
usage in excess of:
15,000 gallons $1.00
50,000 gallons $1.25
100,000 gallons $1.50
Page 76
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Enterprise Fund
Refuse Collection
The City began charging for refuse collection in 1988. Prior to 1998, this activity was
accounted for in the General Fund. The City moved this activity to the Enterprise Fund during
1998. Refuse collection revenue as a percent of refuse collection expenditures/expense is as
follows:
Refuse Transfer
Refuse Collection Revenue as from Net
Collection Expenditures/ Net Percent of General Income
Year Revenue Expenses Cost Expenditures Fund (Loss)
General Fund:
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% - -
Enterprise Fund:
1998 93,014 309,051 (216,037) 30% 190,400 (25,637)
1999 121,700 164,180 (42,480) 74% 65,000 22,520
(I) Budgeted amounts, does not include $6.50 surcharge ($31,600) which is accounted for in the
----General Fund
Revenues are budgeted to increase during 1999 primarily due to an increase in charges to
multi unit buildings (over 4 units). The City will no longer be subsidizing refuse collection for
these units. The City negotiated a new contract with Superior. The new contract resulted in
substantial savings to the City, a reduction of $130,000 per year. The impact of this cost
reduction is a reduced General Fund subsidy.
Page 77
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Governmental Accounting Standards Update
GOVERNMENTAL ACCOUNTING STANDARDS UPDATE
Revortim Model
Gk% 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:
Dual Pers Financial Statements:
• Fund Permective Financial Statements. These financial statements would be similar to
current financial statements with modified accrual basis of accounting for governmental
funds and the 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.
Manaaement's Discussion and Analvsis of Financial Condition and Results of 0I)erations
(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 78
City of Oak Park Heights, Minnesota
Management Report and Recommendations
Other Matters
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.
Page 79
City of Oak Park heights, Minnesota
Financial Analysis and
Management Considerations
Tax Increment District Reporting
TAX INCREMENT DISTRICT REPORTING
The 1995 legislature transferred the responsibility for State oversight of tax increment
financing (reporting and compliance) from the Commissioner of Revenue to the Office of the
State Auditor (OSA). The transfer of the responsibility was accompanied by a funding equal
to one-tenth of one percent of tax increment revenues. The 1998 legislature subsequently
increased the funding to .25 percent of tax increment revenues. Actions taken by the OSA
since 1995 include the following:
1. Re- design of initial year annual reporting forms and modification of those forms in
each subsequent reporting year.
2. Educational seminars.
3. "Desk review" procedures of annually submitted tax increment reporting forms.
4. Follow -up letter requesting clarification of amounts and information submitted on tax
increment reporting forms.
5. Audits of certain districts which resulted in the issuance of audit reports specifying
findings.
The OSA's audit procedures include a detail review of transactions from the inception of
a City's tax increment financing district. Several aspects of these audits should be anticipated
by cities selected for audit including:
® Although the OSA does not charge the Authority (City, II , or EDA) to conduct the
audit, a significant amount of City personnel time can be consumed in the process.
® Assembling of financial records and supporting documents from the inception of the
district (often over 15 years).
® Responding to auditor inquiries and clarifying reporting practices.
Page 80
City of Oak Park Heights, Minnesota
Financial Analysis and
Management Considerations
Tax Increment District Reporting
® Reconciliation of reported amounts on TIF form with the City's published financial
statements.
® Resurrect budgets and interpreting the amounts and language of the budgets for
inclusion on reporting forms. Note that budgets were often prepared on a basis
different from amended and reviewed OSA TIF reporting forms.
Preparation of written responses to findings, if any.
® Potential legal response if the County attorney's office chooses to prosecute for OSA
findings with which the City disagrees.
Audits focus on a number of compliance areas. The City should be prepared to respond
to inquiries regarding a range of topics including:
® Documentation of expenditures
Administrative
Other
Pooling of revenue by "gap" districts (Districts certified in 1979 to 1982).
® Commingling of TIF revenue with non -TIF revenue.
® Transfers and related authorization and reporting issues.
® Potential overpayment of increment.
® Budget specificity.
® Various other compliance areas related to District formation and subsequent
administration.
We are recommending that cities review their "readiness" for a potential OSA audit of
TIF districts and, if appropriate, modify practices to assure compliance.
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