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CITY OF ®AID PARK HEIGHT'S, MINNESOTA.
FINANCIAL ANALYSIS AND
MANAGEMENT CONSIDERATIONS
- -- -- - - - - - --
DECEMBER 31, 1999
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Report Summary
REPORT SUMMARY
Several reports are issued in conjunction with the audit. A very brief summary is as
follows:
Required e
Annual Financial Report (AFR) ® Financial statements ® Unqualified ( "clean ")
® Footnotes opinion on the General
® Supplemental information Purpose Financial
Statements
Report on Compliance and Internal Results of testing ® No compliance findings
Control ® Internal controls over ® No reportable conditions
financial reporting in internal control
® Compliance with laws,
regulations, contracts and
grants
State Legal Compliance Report ® Results of testing certain e No findings
provisions of Minnesota
Statutes
Discretionary
Financial Analysis and Intended to be primary working tool ® See page 3 and 4 of this
Management Considerations for City Council report for Executive
(FA MC) ® Comparisons and trend Summary
analysis
• Available strategies to
address long -term financial
planning
• Systems
• Benchmarking to statistics
and trends
• Outside factors influencing
the City, such as State
funding
• Policies and procedures
Page 2
City of oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Executive Summary
EXECUTIVE SUMMARY
Throughout this report various topics are tagged for easier reference as follows:
M State statute or federal legislation.
El Financial comparison or trend analysis.
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:
O The City's property tax collection rate continues to be very strong (99%
for 1999). Page 8
O The City has minor delinquent special assessment balances, which is the
result of very good collection rates (99% for 1999). Page 11
O The City established an administrative fee - Capital Projects effective
January 1, 1999. Administrative fee revenue was $56,000 for 1999. Page 18 i
The General Fund balance increased $4,400 during 1999. The increase
was $27,000 less than budgeted, primarily due to revenues less than
Page 20
budget. gg
Page 3
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Executive Summary
4* The General Fund cash decrease during the first half of 1999 exceeded
the cash flow reserve by $200,000. We recommend the City monitor the
cash flow needs of the General Fund during 2000 and after mid-year Page 28
determine if a modification is appropriate.
El The General Fund balance at December 31, 1999 was not sufficient to
fulfill the reserve requirements per City policy. The contingency reserve Page 30
was $53,000 less than required by City policy.
The Economic Development Fund will require a permanent funding
source of approximately $45,000 to eliminate the fund deficit (after sale Page 34
of property).
A portion of the Utility Fund retained earnings ($661,765) is designated
to provide additional funding of debt service on the Bonds of 1993
should connection charge revenue not be sufficient. This designation
was made in 1993, Based on existing conditions of the Connection
Charge Fund, the City should revisit this designation to determine if a Page 67
reduction is appropriate.
Ga Variances exist in the number of gallons of sewage billed by the City Page 73
and processed by MCES. We recommend the City determine the nature and 74
of these variances.
Prior years reports on internal control included reportable conditions
relating to the lack of segregating accounting duties. The City has taken
action to resolve these issues. The 1999 internal control report did not
have any findings.
Page 4
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Combined Balance Sheet
COMBINED BALANCE SHEET
The Combined Financial Statements of the City are presented in Statements 1 through 5
of the 1999 Annual Financial Deport, The following comments relate to these financial
statements of the City.
Cash and Investments
December 31, Increase
Description 1998 1999 (Decrease)
Checking account ($87,316) ($70,350) $16,966
Investments 7,467,144 5,762,764 (1,704,380)
Petty cash 100 100
Totals $7,379,928 $5,692,514 ($1,687,414)
-- -- -- -- - - -- - -
The December 31, 1993 and 1999 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 $329,736 of interest on
investments during 1999 compared to $313,936 in 1993.
Page 5
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
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 1998 1999 (Decrease) Balance
General $1,163,632 $1,172,829 $9,197 $1,191,081
Special Revenue 130,192 86,567 (43,625) 14,437
Debt Service 541,554 555,486 13,932 593,415
Capital Project 5,185,002 3,560,479 (1,624,523) 3,749,532
Enterprise 508,312 436,920 (71,392) 661,765
Agency (148,764) (119,767) 28,997 -
Total $7,379,928 $5,692,514 ($1,687,414) $6,210,230
The large decrease in the Capital Project Funds is the result of the City expending in 1999
the proceeds of the $1,990,000 G.O. Improvement Bonds of 1998.
0 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 and 1999. We concur with the City's action in this area.
Page 6
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Combined Balance Sheet
Due From Other Governmental Units
A schedule of due from other governmental units at December 31, 1998 and 1999 is as
follows:
December 31, Increase
Description 1998 1999 (Decrease)
Fines $4,186 $3,649 ($537)
Gravel tax - 297 297
MCES 20,733 - (20,733)
City of Forest Lake - Safe and Sober 2,341 - (2,341)
ISD #834 - Liaison officer 8,335 17,7 9,443
ISD #834 - other - 100 100
Federal government - COPS 8,464 9,801 1,337
City of Bayport u Inspections - 4,763 4,763
City of Bayport - Other m 1,100 1,100
Due from County - certified bills - 480 480
Totals $44,059 $37,968 ($6,091)
All of the above amounts are currently collectible,
NEW
Page 7
City of oak Park Heights, Minnesota
Financial Analysis and Management Considerations
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.
1996 1997 1998 1999
Delinquent taxes - January 1 $18,813 $18,196 $10,947 $16,863
Current levy 1,391,385 1,394,918 1,524,047 1,409,400
Total collectible 1,410,198 1,413,114 1,534,994 1,426,263
Receipts:
Current 1,384,327 1,3 86,466 1,541,155 1,394,993
Delinquent 7,675 4,194 5,726 4,296
Total receipts 1,392,002 1,390,660 1,546,881 1,399,289
Adjustments - (11,507) 28,750 (2,994)
Delinquent taxes - December 31 $18,196 $10,947 $16,863 $23,980
Current collection as a percent of current levy 99.5% 99.4% 99.2% 99.0%
Total collections as a percent of current levy 100.0% 99.7% 101.5% 99.3%
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.
O 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
Financial Analysis and Management Considerations
Combined Balance Sheet
Tax Levies and Tax Rates
A comparison of values for taxes payable 1999 and taxes payable 2000 is as
follows:
Increase (Decrease)
1998 1999 2000 Amount Percent
Tax capacity values:
Real estate $5,987,202 $6,240,081 $6,571,300 $331,219
Personal property 120,878 114,675 120,574 5,899
Subtotal 6,108,080 6,354,756 6,691,874 337,118
Fiscal disparity contribution (663,765) (547,378) (784,872) (237,494)
Fiscal disparity distribution 300,520 299,919 298,275 (1,644)
Captured tax increment (47,749) (30,380) m 30,380
Total $5,697,086 $6,076,917 $6,205,277 $128,360 2.1%
Tax capacity rates 27.141 23.728 23.620 (0.108) (0.5 %)
Tax levy $1,524,047 $1,409,400 $1,440,200 $30,800 2.2%
The City portion of the property tax on a typical property for 1999 and 2000 is as follows:
Percent
Property 1999 2000 Decrease Decrease
$150,000 homestead $480 $467 ($13) (2.7 %)
$500,000 commercial 3,787 3,661 (126) (3.3 %)
Page 9
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
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 2000 budgeted:
2000
Payer 1996 1997 1998 1999 Budgeted
Local taxpayer $1,494,440 $1,497,143 $1,598,450 $1,484,525 $1,626,120
State credits (HACA) 77,980 74,329 74,464 74,983 79,583
Fiscal disparities:
Contribution (179,486) (175,450) (151,989) (166,175) (186,235)
Distribution 66,681 73,225 77,615 91,050 70,515
Totals $1,459,615 $1,469,247 $1,598,540 $1,484,383 $1,589,983
Shown on a basis of percents, current tax collections (by payer) were as follows for the
past four years including 2000 budgeted.
2000
Payer 1996 1997 1998 1999 Budgeted
Local taxpayer 102.4% 101.9% 100.0% 100.1% 102.3%
State credits (HACA) 5.3% 5.1% 4.7% 5.1% 5.0%
Fiscal disparities:
Contribution (12.3 %) (11.9 %) (9.5 %) (11.2 %) (11.7 %)
Distribution 4.6% 4.9% 4.8% 6.0% 4.4%
Totals 100.0% 100.0% 100.0% 100.0% 100.0%
Page 10
City of oak Park Heights, Minnesota
Financial Analysis and Management Considerations
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 amounts and percents on the previous page 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 Receivable
Special assessments receivable consisted of the following types and amounts:
December 31, Increase
Description 1998 1999 (Decrease)
Delinquent $5,054 $4,704 ($350)
Due from County 788 23,187 22,399
Deferred 925,512 1,809,155 883,643
Special deferred 14,800 - (14,800)
Totals `6946,154 $1 ,837,046 $890,892
Delinquent special assessments receivable consist of amounts which have been spread for
collection in 1999 and prior years but have not been collected at December 31, 1999. O The
City has minor delinquent balances which is the result of very good collection rates (99% for
1999).
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.
Page 11
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Combined Balance Sheet
Compensated Absences Payable
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,
1998 1999
Severance $62,141 $85,657
Vacation 27,865 40,288
Total $90,006 $125,945
Page 12
City of oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Combined Balance Sheet
Bonds Payable
The City had four bond issues outstanding during 1999. A summary of the 1999 activity
of each bond issue is as follows:
Water &
Storm Sewer Sewer
Refunding Refunding Improvement Improvement
Bonds Bonds Bonds Bonds
of 1992 of 1993 of 1995 of 1998 Totals
Balance - January 1, 1999 $50,000 $900,000 $840,000 $1,990,000 $3,780,000
Principal payments 25,000 90,000 120,000 140,000 375,000
Balance - December 31, 1999 $25,000 $810,000 $720,000 $1,850,000 $3,405,000
Retirement schedule:
2000 $25,000 $95,000 $120,000 $150,000 $390,000
2001 - 100,000 120,000 150,000 370,000
2002 - 120,000 120,000 150,000 390,000
2003 - 125,000 120,000 150,000 395,000
2004• -2006 w 370,000 240,000 1,250,000 1,860,000
Total $25,000 $810,000 $720,000 $1,850,000 $3,405,000
Detail of outstanding bond issues is contained in Exhibit 2 of the 1999 Annual Financial
Report.
Page 13
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Combined Balance Sheet
A summary of the City's bond issues is as follows:
Maturity
Bond Issue Repayment Source 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 and connection charges 12/1/13
Page 14
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
General Fund
GENERAL FUND I
The General Fund of the City is maintained to account for expenditures common to all
cities (general government, public safety, public works, recreation and community
development). A history of major revenue sources that support the General Fund are as
follows:
Property Taxes State Aids All Other Total Revenue
Year Amount Percent Amount Percent Amount Percent Amount Percent
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 1,35077 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 1,333,194 62% 139,875 7% 674,762 31% 2,147,831 100%
2000* 1,425,800 64% 143,461 6% 668,935 30 2,238,196 100%
Budgeted
As shown above, 1999 reflects a shift in revenue sources from property taxes to "all
other," Property taxes were 62% of the total sources in 1999, down from 69% in 1998. This
shift reflects the council's efforts to establish user fees for Enterprise Fund activity and
Capital Improvement Projects.
Page 15
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
General Fund
A graph of property taxes, state aids, and other revenue for the General Fund is as follows:
$1,600,000
-
General Fund
Revenue by source
$1,400,000
$1,200,000
$1,000,000
'D State Aids
XX El Other Revenue
$800,000
Taxes
El Property
$600,000
$400,000
$200,000
$0
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Budget
State Aids
State aids of the General Fund have consisted of the following for the past six years (with
2000 budget):
2000
State Aid 1994 1995 1996 1997 1998 1999 Budget
H.A.C.A. $75,245 $76,615 $67,063 $73,065 $74,464 $74,983 $79,583
LGA - - - - - - 4,878
Local performance aid - - - 4,186 5,133 4,884 -
Police aid 43,523 48,245 52,211 44,900 51,198 56,409 57,000
Other state revenue - - - - 2,689 3,599 2,000
Snowplowing - - - 15,800 - - -
Totals $118,768 $124,860 $119,274 $137,951 $133,484 $139,875 $143,461
Change $6,092 ($5,586) $18,677 ($4,467) $6,391 $3,586
% Change 5% (4%) 16% (3%) 5% 3%
As shown above, state aids have been fairly constant for the past three years.
Page 16
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
General Fund
Other General Fund Revenue
Other revenue of the General Fund have consisted of the following for the past five years
(with 2000 budget):
2000
Description 1995 1996 1997 1998 1999 Budget
Licenses and permits $117,511 $156,181 $204,986 $125,678 $227,693 $241,535
Charges for services:
Refuse collection 110,021 103,444 87,830 - - -
Refuse charge a Junker settlement - - - 28,887 25,718 28,000
Enterprise 95,000 98,850 102,100 63,525 80,655 99,400
Tax increment administration fee - - - 27,009 7,253 15,600
Construction/engineering fee - - - - 56,632 20,000
Other 2,329 2,674 2,456 26,910 23,767 22,200
Inspections 34,524 25,611 24,150 40,468 36,122 27,500
Fines and forfeits 49,020 56,545 60,682 60,183 58,886 63,150
Earnings on investments 54,912 56,468 55,885 45,848 36,970 52,500
Other 57,144 82,077 81,785 110,635 121,066 99,050
Total $520,461 $581,850 $619,874 $529,143 $674,762 $668,935
Refuse 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 $65,000 to the Enterprise Fund during 1999
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 surcharge revenue during
1999 was $25,71 S. This surcharge was designed to recover a 1996 court judgment of
$100,000 related to the landfill lawsuit.
Page 17
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
General Fund
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.
Beginning in 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 - Capital Proiects
The City's General Fund incurs costs related to capital improvement projects. These
costs include staff time, supplies, and other overhead items. The City established a 1 1 /2%
administrative fee to recover these costs effective January 1, 1999. The administrative fee is
charged to a project with the corresponding revenue receipted in the General Fund. We
concur with the City's action.
Page 18
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
General Fund
The fund balance of the General Fund was $1,191,081 at December 31, 1999 representing
a $4,418 increase during 1999. The following schedule illustrates the change in fund balance
on a budget variance basis,
1999
Favorable
(Unfavorable) 2000
Budget Actual Variance Budget
Revenue:
General property taxes:
Current and delinquent $1,325,000 $1,315,529 ($9,471) $1,380,800
Payment in lieu of taxes 11,778 11,778 45,000
Excess TIF - 5,808 5,808 -
Other taxes - 79 79 -
Total general property taxes 1,325,000 1,333,194 8,194 1,425,800
Intergovernmental 184,157 192,194 8,037 185,511
Licenses and permits 215,190 227,693 12,503 241,535
Charges for services 298,955 230,147 (68,808) 212,700
Fines and forfeits 60,150 58,886 (1,264) 63,150
Earnings on investments 52,000 36,970 (15,030) 52,500
Refunds and reimbursements 40,000 65,295 25,295 57,000
Donations and contributions - 365 365 -
5ale of property - 3,087 3,087 -
Total revenue 2,175,452 2,147,831 (27,621) 2,238,196
Expenditures
General government:
Mayor and council 52,650 60,296 (7,646) 61,900
City administrator 177,350 194,600 (17,250) 213,650
Legal 32,000 23,337 8,663 30,000
General management and building 49,850 78,366 (28,516) 66,675
Elections 800 - 800 4,800
Finance 112,060 129,719 (17,659) 150,100
Computer system 9,200 22,622 (13,422) 15,300
Audit 11,705 7,141 4,564 15,120
Insurance 159,800 165,725 (5,925) 151,300
Assessing 17,000 16,735 265 17,000
Planning and zoning 35,000 43,704 (8,704) 30,000
Engineering 30,000 29,421 579 30,000
General contingency 12,500 5,396 7,104 12,000
Total general government 699,915 777,062 (77,147) 797,845
Page 19
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
General Fund
1999
Favorable
(Unfavorable) 2000
Budget Actual Variance Budget
Expenditures (continued):
Public safety:
Police department $761,725 $745,616 $16,109 $788,485
Building inspections 98,550 88,114 10,436 88,590
Fire protection 80,000 83,019 (3,019) 81000
Animal control 1,100 970 130 925
Total public safety 941,375 917,719 23,656 960,000
Public works:
Street maintenance 43,960 58,976 (15,016) 34,205
Snow removal 55,000 58,259 (3,259) 69,750
Street lighting 45,000 45,439 (439) 45,000
Arborist 11,820 11,531 289
'free removal and planting 23,500 21,722 1,778 28,925
Total public works 179,280 195,927 (16,647) 177,880
Recreation:
Parks, playgrounds and rinks 95,235 74,005 21,230 110,040
Community development 59,810 84,700 (24,890) 104,430
Total expenditures 1,975,615 2,049,413 (73,798) 2,150,195
Revenue over (under) expenditures 199,837 98,418 (101,419) 88,001
Other financing sources (uses):
Operating transfers fi•om Capital Project Fund - n 15,000
Operating transfers to Enterprise Fund (65,000) (65,000) - (75,000)
Operating transfers to Capital Project Fund (103,000) (29,000) 74,000
Total other fmancing sources (uses) (168,000) (94,000) 74,000 (60,000)
Net increase (decrease) in fiord balance $31,837 4,418 ($27,419) 28,001
Page 20
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
General Fund
A summary of the significant budget variances is as follows:
Revenue:
License and permits — This budget variance relates to VSSA and Fern Center, which
were budgeted for 1998, but delayed until 1999.
Charles for services — The budget variance is primarily reduced administrative
charges to TIF and construction funds. The budget anticipated fees for well
construction and water looping that have been delayed until 2000,
Earnings on investments — This budget variance is the result of lower than anticipated
interest rates and lower investments balances.
Other — The positive budget variance is primarily the result of receiving
approximately $18,000 of unbudgeted insurance dividends.
Expenditures:
General government:
City administrator — The budget variance relates to unanticipated salary increases.
General management and building — The budget variance relates to unanticipated
expenditures for cleaning and building maintenance.
Finance — The negative variances relates to a part -time employee becoming a full -
time employee and the budget did not anticipate the full -time status.
Computer system — The negative variance relates to unanticipated use of computer
consultants.
Planning and zoning — The negative variance relates to the completion of the
comprehensive plan.
Public safety - The positive variance is primarily the result of good budget
management.
Page 21
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
General Fund
Public works — The negative variance is primarily the result of increased costs
incurred for street maintenance and snow removal. Also, the budget was reduced by
$27,000 for sealcoating that was not done in 1999.
Recreation — The positive variance is primarily due to the use of sentence to serve for
re-roofing park buildings.
General Fund Reserves
The fund balance of the General Fund increased slightly in 1999. The schedule below
reflects the General Fund balance for the past ten years:
Year Ended Fund Increase
December 31, Balance (Decrease)
1990 $1,066,281
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)
1999 1,191,081 4,418
Page 22
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
General Fund
The 1997 decrease in fund balance was the result of the council decision to use fund
balance rather than levy taxes for the Bonds of 1995. The 1998 decrease in fund balance was
a budgeted decrease.
Fund Balgnce
$1,400,000 -
$1,300,000 - - - -
$1,200,000 ❑ .._.�
$1,100,000
—6—Actual Fund Balance
$1,000,000 -- ❑-- RequiredFundBalance i
$900,000
$800,000
$700,000
$600,000
1993 1994 1995 1996 1997 1998 1999
Page 23
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
General Fund
Reserve balances are an important component of City financial management. When
evaluating the adequacy of reserve balances, 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
Intergovernmental Capital Outlay
Revenue Cutbacks Replacement
Emergency or
Unanticipated Special Projects
Expenditures
Page 24
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
General Fund
Benerits of Reserves
Favorable bond
rating indicator Supplements revenues
with investment income
Avoids temporary
Provides resources
for minor projects 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
Financial Analysis and Management Considerations
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, 1998 and 1999, the General Fund balance was reserved
or designated as follows:
General Fund Balance
December 31,
1998 1999
Reserved for inventory $2,624 $ -
Designated for:
Cash flow 702,000 733,000
Contingent employee benefits 101,617 135,153
General contingency 326,000 285,526
Capital improvement 6,204 12,011
Employee insurance benefits 25,091 25,391
Subtotal - designated 1,163,536 1,191,081
Undesignated 23,127
Total fund balance $1,186,663 $1,191,081
Page 26
City of Oak Parr Heights, Minnesota
Financial Analysis and Management Considerations
General Fund
Cash Flow
Property taxes and state aids account for approximately 69% 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 fiend operations of the first half of the year. For the
City of Oak Park Heights, the recommended cash flow reserve is $733,000, computed as
follows:
Cash Flow Reserve
2000 tax levy $1,380,800
2000 budgeted HACA & LGA 84,461
Total $1,465,261
Recommended reserve (one -half of tax levy and state aids) $733,000
Page 27
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
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:
$1,400,000 General Fund! Monthly Cash Balances
$1,200,000 - - -
$1,000,000
$800,000 5910, 5910,000
$600,000
$400,000
$200,000
$0 01,01/1999' 01,31/1999 02/28/1999 03,31 /1999 04,30/1999 05/31/1999 06/30/1999 07,31/1399 08,31/1999', 09,3011999 10.31 /1999 11/30/1999 12/31/1999
U Series $1,164,032 1 1 $1,069,422 ��, $845,978 $707,902 $551,873 li $368,004 1,, $254;117 $891,571 $811.354 $694906 $611,390 $534,466 !$1,172,729
As show above, the cash balance decreased $910,000 between January 1 and June 30.
This decrease exceeded the cash flow reserve by $200,000. We recommend the City monitor
the cash flow needs of the General Fund during 2000 and review the current City policy after
June 30 to determine if a modification is appropriate.
Page 28
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
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 1998 1999
Vacation leave carryover $23,232 $34,494
Severance 53,385 68,463
Deserve for unused sick leave 25,000 32,196
Total $101,617 $135,153
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.
Page 29
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
General Fund
General Contingenev 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 1998 1999
Ensuing Year's Budget $2,175,215 $2,253,195
Reserve Amount @ 15% $326,000 $338,000
Amount available @ December 31 $326,000 $285,526
As shown above, the fund balance available at December 31, 1999 is less than the amount
needed to fulfill the contingency reserve requirement.
Page 30
City of oak Park Heights, Minnesota
Financial .Analysis and Management Considerations
General Fund
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 and 1999 has not yet been transferred to the Street Reconstruction Fund and
is therefore shown as designated at December 31, 1999.
E vlovee 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.
Rage 31
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
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 Funds during 1999.
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 1999 Total
Revenue:
Earnings on investments $2,603 $214 $2,817
Confiscated property 39,042 2,649 41,691
Reimbursements 1,680 - 1,680
Sale of municipal property - - 1,305 1,305
Total $43,325 $4,168 47,493
Expenditures:
Public safety:
Materials and supplies $14,046 $ - 14,046
Contractual services 711 977 1,688
Capital outlay 25,326 2,309 27,635
Total $40,083 $3,286 43,369
Fund balance -December 31, 1999 $4,124
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 32
City of Oak Park Heights, Minnesota
Financial analysis and Management Considerations
Special Revenue Funds
Economic Development Fun
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 1999 Total
Revenue:
Earnings on investments $3,540 $5,527 $9,067
Interfund loan interest - 313 313
Refiulds and reimbursements 2,531 - 2,531
Sale of municipal property - 76 76
Total revenue $6,071 $5,916 11,987
Expenditures:
Community development:
Materials and supplies $7 450 457
Contractual services 7,614 19,660 27,274
Interfund loan interest 10,000 20,000 30,000
Capital outlay 121,500 - 121,500
Total expenditures $139,121 $40,110 179,231
Fund balance (deficit) - December 31, 1999 ($167,244)
Page 33
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Special Revenue Funds
The 1998 expenditures consist primarily of the Bell property purchase. The City
demolished the building in 1999 and is marketing the property as an industrial site. The
estimated value of the property is approximately $124,500 (61,000 square feet @ $2.04 per
square foot).
The fund deficit is funded by a $260,000 interfund loan from the Capital Revolving Fund.
As shown above, the estimated selling price of the Bell property will not be sufficient to
eliminate the fund deficit and repay the interfund loan. We recommend the City determine a
permanent funding source for this deficit.
Page 34
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Debt Service Funds
DEBT SERVICE FUNDS
-- -- — -- - - - - -- -- - – -- _ --- ------
-- - - - - -- -- - - - . -
The combining financial statements for the Debt Service Funds are presented in
Statements 10 and I I of the 1999 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 1999 as follows:
Fund Balance
December 31, Increase
Fund 1998 1999 (Decrease)
G.O. Reftmding Bonds of 1992 (Storm Sewer) $32,523 $31,458 ($1,065)
G.O. Revenue Bonds of 1991 /Crossover Refunding Bonds of 1993 267,057 282,630 15,573
G.O. Improvement Bonds of 1995 228,133 221,869 (6,264)
G.O. Improvement Bonds of 1998 16,728 57,458 40,730
Totals $544,441 $593,415 $48,974
Page 35
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
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, 1999 $31,458
Additions -
Deductions:
Debt requirements:
Principal 25,000
Interest 1,375
Total 26,375
Projected fund balance $5,083
The City cancelled the final year's tax levy (year 2000) of $25,000 for this bond issue.
Page 36
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
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 1999, the City transferred $135,000 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 2000
and 2001 scheduled debt payments.
Future (2000 through 2004) projected cash transfers are as follows:
Sanitary Water
Year Sewer Works Total
2000 $20,000 $115,000 $135,000
2001 20,000 12 0, 000 140,000
2002 20,000 125,000 145,000
2003 30,000 135,000 165,000
2.004 5,000 50,000 55,000
Totals $95,000 $545,000 $640,000
Page 37
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
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
2000 $282,630 $0 $0 $135,000 $13,650 $148,650 $133,910 $0 $297,370
2001 297,370 0 0 140,000 14,455 154,455 134,825 0 317,000
2002 317,000 0 0 145,000 15,449 160,449 150,325 0 327,124
2003 327,124 0 0 165,000 16,109 181,109 149,805 0 358,428
2004 358,428 0 0 55,000 17,254 72,254 158,805 0 271,877
2005 271,877 0 0 0 12,751 12,751 166,805 0 117,823
2006 117,823 0 0 0 5,514 5,514 78,900 0 44,437
Total $0 $0 $640,000 $95,182 $735,182 $973,375 $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 has a projected surplus of $44,437 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 "backup" 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 38
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Debt Service Funds
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 1 Taxes Assessments Receipts Interest Receipts Payments Disbursements December 31
2000 $221,869 $58,806 $47,224 $0 $11,350 $117,380 $154,140 $0 $185,109
2001 185,109 59,400 45,016 0 9,582 113,998 148,740 0 150,367
2002 150,367 59,400 42,808 0 7,908 110,116 143,280 0 117,203
2003 117,203 59,400 40,599 0 6,315 106,314 137,700 0 85,817
2004 85,817 59,400 38,391 0 4,813 102,604 132,000 0 56,421
2005 56,421 59,400 36,183 0 3,416 98,999 126,000 0 29,419
Total $355,806 $250,220 $0 $43,384 $649,410 $841,860 $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 $29,419 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 39
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Debt Service Funds
G. O. Improvement Bonds of 1998
This bond was issued in 1998 to provide financing for Kern Center and Phase Three of
the 58 Street improvement. This bond is scheduled to be repaid by special assessments and
connection charges. The assessment rolls for both projects were adopted in 1999.
A projection of cash flow of the Improvement Bonds of 1998 is as follows:
City of Oak Park Heights, Nfinnesota
Projection of Cashflow
General Obligation Improvement Bonds of 1998
Total
Cash Balance Property Special Other Investment Projected Debt Other Cash Balance
Year January I Taxes Assessments Receipts Interest Receipts Payments Disbursements December 31
2000 $57,458 $0 $147,408 $0 $2,836 $150,244 $225,263 $0 ($17,561)
2001 (17,561) 0 142,753 0 0 142,753 219,787 0 (94,595)
2002 (94,595) 0 138,098 0 0 138,098 214,163 0 (170,659)
2003 (170,659) 0 133,443 0 0 133,443 208,462 0 (245,678)
2004 (245,678) 0 128,788 0 0 128,788 177,688 0 (294,578)
2005 (294,578) 0 124,133 0 0 124,133 172,812 0 (343,257)
2006 (343,257) 0 119,478 0 0 119,478 167,813 0 (391,591)
2007 (391,591) 0 114,823 0 0 114,823 162,687 0 (439,455)
2008 (439,455) 0 110,168 0 0 110,168 157,500 0 (486,787)
2009 (486,787) 0 105,513 0 0 105,513 152,250 0 (533,524)
2010 (533,524) 0 100,858 0 0 100,858 146,938 0 (579,603)
2011 (579,603) 0 96,203 0 0 96,203 141,562 0 (624,962)
2012 (624,962) 0 91,548 0 0 91,548 136,125 0 (669,539)
2013 (669,539) 0 86,893 0 0 86,893 130,625 0 (713,271)
2014 (713,271) 0 82,238 0 0 82,238 0 0 (631,032)
Total $0 $1,722,349 $0 $2,836 $1,725,185 $2,413,675 $0
Assumptions
Special assessment collection rate .................... 95%
Property tax collection rate ..................... ........ 99%
Investment interest rate ....................... ........ 5.00%
Negative interest charged to funds? .................. no
Page 40
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Debt Service Funds
As shown above, this debt set - vice fund will require connection charge revenue to finance
the debt service. The following projection of cash flow includes the minimum amount of
connection charge revenue to maintain a positive cash balance.
City of Oak Park Heights, Nfinnesota
Projection of Cashflow
General Obligation Improvement Bonds of 1998
Total
Cash Balance Property Special Other Investment Projected Debt Other Cash Balance
Year January 1 Taxes Assessments Receipts Interest Receipts Payments Disbursements December 31
2000 $57,458 $0 $147,408 $20,000 $2,919 $170,327 $225,263 $0 $2,522
2001 2,522 0 142,753 75,000 435 218,188 219,787 0 923
2002 923 0 138,098 75,000 391 213,489 214,163 0 250
2003 250 0 133,443 75,000 394 208,837 208,462 0 625
2004 625 0 128,788 50,000 450 179,238 177,688 0 2,175
2005 2,175 0 124,133 50,000 551 174,684 172,812 0 4,047
2006 4,047 0 119,478 50,000 670 170,148 167,813 0 6,383
2007 6,383 0 114,823 50,000 814 165,637 162,687 0 9,333
2008 9,333 0 110,168 50,000 990 161,158 157,500 0 12,991
2009 12,991 0 105,513 50,000 1,202 156,715 152,250 0 17,456
2010 17,456 0 100,858 40,000 1,414 142,272 146,938 0 12,791
2011 12,791 0 96,203 40,000 1,212 137,415 141,562 0 8,644
2012 8,644 0 91,548 40,000 1,037 132,585 136,125 0 5,104
2013 5,104 0 86,893 40,000 893 127,786 130,625 0 2,265
2014 2,265 0 82,238 0 1,141 83,379 0 0 85,645
Total $0 $1,722,349 $705,000 $14,513 $2,441,862 $2,413,675 $0
Assumptions
Special assessment collection rate .................... 95%
Property tax collection rate ............................... 99%
Investment interest rate .. ............................... 5.00%
Negative interest charged to funds ? .................. no
Page 41
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
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 1999 Annual Financial Report. The fund balance (deficits) of the Capital
Project Funds were as follows at December 31, 1998 and 1999:
December 31, Increase
Fund 1998 1999 (Decrease)
Capital Revolving Fund $354,283 $335,428 ($18,855)
Budgeted Projects and Equipment Revolving Fund 83,397 35,715 (47,682)
57th Street/Oakgreen extension 21,737 23,396 1,659
Osgood/Highway 36 Intersection (5,447) (7,666) (2,219)
Superamerica/Valvoline Oil 167 681 514
Park Development 365,518 385,245 19,727
St. Croix Mall (TIF) 101,873 94,966 (6,907)
Street Reconstruction 326,565 336,347 9,782
East Oaks Swager 95 95 -
Valley View Estates Krongard 102 - (102)
Renewal and Replacement 1,273,052 1,451,052 178,000
Central Business District - (12,770) (12,770)
Brekke Park Memorial - 362 362
AAE - Kern Center 932,498 (29,835) (962,333)
AAE - Brackey West - Oak Park Pond (3,090) (22,390) (19,300)
AAE - Brackey West - Outlots A & B 55,727 23,219 (32,508)
AAE - 58th Street Improvement - Phase 111 808,925 93,202 (715,723)
AAE - Autumn Ridge 3rd Addition (16,719) - 16,719
AAE - Boutwells Landing - - -
AAE - Sanitary Sewer Connection 301,570 309,470 7,900
AAE - Water Connection 295,504 215,433 (80,071)
AAE - Storm Sewer Connection 447,197 444,921 (2,276)
Totals $5,342,954 $3,676,871 ($1,666,083)
Page 42
Clay of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Capital Project Funds
Capital Revolvin Fund
During 1984, the City established the Capital Devolving 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.
A summary of transactions for 1998 and 1999 is as follows:
Capital Revolving Fund
Description 1998 1999
Financial resources:
Transfers in:
58th Street e Phase II $52,886 $
AAE - Storm Sewer 50,000 50,000
Special assessments 91,566 322,927
Earnings on investments 36,203 4,100
Connection charges:
Valley View Estates 28,070 m
East Oaks 17,000 8,553
Other - 150
Interfund loan interest 10,000 20,000
Sale of property - 250
Total financial resources 285,725 405,980
Financial uses:
Expenditures 504,619 124,835
Transfers out:
Brackey - Oak Park Ponds 173,800
57th Street /Oakgreen extension 220,000 300,000
West Frontage Road connection 947
Total financial uses 899,366 424,835
Increase (decrease) in find balance (613,641) (18,855)
Fund balance v January 1 967,924 354,283
Fund balance - December 31 $354,283 $335,428
Page 43
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Capital Project Funds
In addition to the fund balance on the previous page, this fund has assessments receivable
of $321,000 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 $70,000
at December 31, 1999. A summary of existing and future assets is as follows:
Existing assets (cash and investments) $53,813
Future assets:
Interfund loan 260,000
Storm sewer repayment 70,000
Assessments - existing rolls 321,000
Connection charges - 57th Street (to be determined) -
$704,813
However, as shown above, the cash balance of this fund is down to $53,813, limiting the
use of this fund until future assets are collected. The 57 Street/Oakgreen Extension will
require additional funds of approximately $30,000, further reducing the assets of this fund.
The 1999 expenditures of the Capital Revolving Fund were as follows:
City hall computer system $40,972
City hall remodeling and equipment 18,995
City hall audio system 13,260
60th Street pathway 18,804
Generator and garbarge enclosure 25,560
Other 7,244
Total $124,835
Page 44
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Capital Project Funds
Budgeted Projects and Equipment Fund
The Budgeted PrniectQ and Equipment Revolving Fund (formerly Capital Improvements
Fund) was established io]478to account for monies set aside for various capital
improvements. A schedule of activity for ]498 and ]494ioomfollows:
Description \VoX 1999
Financial resources:
Transfers in:
General Fund $90,923 $19,000
Enterprise Fund 8,500 15,000
DN\lgrant 8,192 '
Earnings ooinvestments 10,611 4,069
Dooutioux/othcx 4,927 1,112
Total financial resources 123 39
Financial uses:
Expenditures:
8ealcoo1 37,160
Bemeodou 26,088
Police vehicles 14,911 -
Public works vehicles ' 78,511
Street reconstruction:
Expenditure 4,366 -
Transfer out 197,710 -
Computer system 10,000 -
St. Croix Sport Facility 50,000 15,000
DuoDooutod:
Other - 1
Total financial uses 340,243 86,863
Increase (docreuxe)in fund balance ( (47,682)
Fund balance - January | 300,487 83,397
/
Fund balance ' December 3| $83,397 $35
Page 45
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
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,
1999
Balance Balance Balance
Put 12/31/98 Revenues Expenditures 12/31/99 Reallocation 12/31/99
Sealcoat /crack seal $38,113 $8,000 $ - $46,113 $ - $46,113
Recreation (2,004) 1,112 (453) (1,345) 2,869 1,524
Land acquisition 20,000 - - 20,000 (15,000) 5,000
ADA (354) (354) 354
Perro Creek 7,180 7,180 - 7,180
St. Croix Valley Hockey Arena - - (15,000) (15,000) 15,000 -
Vchicles 14,500 26,000 (70,510) (30,010) - (30,010)
Unallocated 5,962 4,069 (900) 9,131 (3,223) 5,908
Totals $83,397 $39,181 ($86,863) $35,715 $0 $35,715
During 1996, the City approved a pledge of $200,000 to the St. Croix Sport Facility
Commission. The City paid $50,000 in 1998, $15,000 in 1999 and the remaining amount
will be paid in annual installments of $ 15,000 for nine years.
Page 46
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Capital Project Funds
57t Street/ akgreen 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 $520,000
Earnings on investments 776
Sale of property 15,158
Total revenues and other sources 535,934
Expenditures and other uses:
Land acquisition 190,659
Contractor 211,376
Engineer 86,378
Legal and fiscal 6,256
Other 17,869
Total expenditures and other uses 512,538
Fund balance m December 31, 1999 $23,396
Additional costs for this project are estimated to be $60,000. This will require funding
from the Revolving Capital Fund.
Page 47
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Capital Project Funds
Osgood[Highway 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 7,666
Fund balance (deficit) - December 31, 1999 ($7,666)
Superamerica/Valvoline Oil
This fund accounts for the escrow deposits associated with the development agreement
with Superamerica/Valvoline Oil. The City does not anticipate any City costs associated with
this project.
Page 48
City of oak Park Heights, Minnesota
Financial analysis and Management Considerations
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 $385,245 at December 31, 1999, as
follows:
Prior
Years 1999 Total
Financing resources:
Park fees $314,620 $480 $315,100
]Earnings on investments 68,211 19,745 87,956
Donations and contributions 4,112 665 4,777
Total financing sources $386,943 $20,890 407,833
Financing rises:
Professional services $21,425 $1,163 22,588
Fund balance n December 31, 1999 $385,245
Page 49
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
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 -1I 12,580
Stillwater Ford 21,036
Other 14,400
Subtotal 76,556
Total $315,100
The above balance at December 31, 1999 has not been designated for any specific project.
Page 50
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Capital Project Funds
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. 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.
The following schedule summarizes the past financial activity for this project:
Prior
Years 1999 Totals
Financial resources:
T.I.F. taxes $1,058,956 $13,945 $1,072,901
Earnings on investments 20,788 5,385 26,173
Total financial resources $1,079,744 $19,330 1,099,074
Financial uses:
Construction costs:
58th Street /Osgood improvement project $150,078 $ - 150,078
Professional fees 9,505 9,755 19,260
Contractual services - 862 862
Developer assistance 634,888 8,367 643,255
Administrative charge 27,009 7,253 34,262
Transfer out:
General Fund (investment interest) 10,591 10,591
Street reconstruction 145,800 - 145,800
Total financial uses $977,871 $26,237 1,004,108
Fund balance - December 31, 1999 $94,966
This district was decertified in 1999. The City adopted resolution #99 ®06 ®28 providing
for the remaining balance to be carried forward for a period of eighteen months.
Page 51
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
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 1999 Total
Financial resources:
Bond proceeds $1,062,456 $ ® $1,062,456
Earnings on investments 45,820 17,335 63,155
Refunds and reimbursements 10,000 m 10,000
Transfers in:
St. Croix Mall TIF 145,800 w 145,800
Budgeted projects and equipment revolving 352,718 - 352,718
Renewal and replacement 15,854 - 15,854
Total fmancial resources $1,632,648 $17,335 1,649,983
Financial uses:
Project costs $1,306,083 $7,553 1,313,636
Fund balance -December 31, 1999 $336,347
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
Financial Analysis and Management Considerations
Capital Project Funds
East Oaks r Swager Bros.
This fund was established in 1994 to account for expenditures associated with the
developer agreement with Swager Bros. ley 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 Capital Revolving
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 12/31/99
Unit Flo. Per Unit Total loco. Amount
Single family 26 $2,125.00 $55,250.00 12 $25,552.70
Page 53
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Capital Project Funds
Valley View Estates - Krongard
This fund was established in 1994 to account for expenditures associated with the
developer agreement with Kiongard 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 Capital Revolving 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 12/31/99
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
Page 54
City of oak Park Heights, Minnesota
Financial Analysis and Management Considerations
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 Mater 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 ltom inception is as follows:
Prior
Years 1999 Total
Financial sources:
Transfer from water and sewer utility:
Initial (1994) $574,378 $ ® $574,378
Annual 494,803 109,225 604,028
Earnings on investments 219,725 68,775 288,500
Total financial sources $1,288,906 $178,000 1,466,906
Financial uses:
Transfer out:
Street reconstruction $15,854 $ ® 15,854
Fund balance m December 31, 1999 $1,451,052
This fund will finance a portion of the well project (50% or approximately $380,000) that
is scheduled for 2000.
Page 55
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Capital Project Funds
Central Business District
This fund was established in 1999 to account for costs associated with the Central
Business District. This project is in its initial stages, with initial financing provided by a
$10,000 transfer from the General Fund, a $10,000 interfund loan from the Economic
Development Fund and planning assistance from property owners ($2,500 VSSA, $500
Nolde, $2,000 promised from Haase estate).
Brekke Park Memorial
This fund was established in 1999 to account for the donations received for Brekke Park.
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).
Page 56
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Capital Project Funds
Fern Center
This fund accounts for costs associated with the Fern Business Center (Phase I and I1).
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
Earnings on investments 37,559
Total revenue and other sources 1,033,542
]Expenditures and other uses:
Contractor 777,125
Engineer 145,416
Legal and fiscal 16,227
Other 124,609
Total expenditures and other uses 1,063,377
Fund balance - December 31, 1999 ($29,835)
The above deficit will be funded by future connection charges when they become
available.
Page 57
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Capital Project Funds
This project is complete and was assessed in 1999. The amount of the assessment roll
was $560,000. In addition to the assessment, there are connection charges related to this
project. A. summary of the connection charges is as follows:
Sanitary sewer $214,376
Water 373,048
Storm sewer 472,640
Total $1,060,064
These connection charges have the following commitments:
® A portion of the connection charges are committed to pay debt service on the Bonds
of 1998.
® Several of the properties in this area currently have septic systems. These properties
are not required to connect (and pay) for six years (by 2005).
Page 58
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Capital Project Funds
rack et/ 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
A summary of the connection charges related to this project are as follows:
Received Through
Budgeted December 31, 1999
Unit No. Per /Unit Total No. Amount
I 1 $205,200.00 $205,200.00 1 $205,200.00
This fund has a deficit of $22,390 at December 31, 1999. This deficit will be eliminated
by a transfer from the Brackey West — ®utlot A & E Fund.
Page 59
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
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, 1999
Unit No. Per/[Jnit 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 60
City of Oak Park heights, Minnesota
Financial Analysis and Management Considerations
Capital Project Funds
AAE m 58th Street Improvements a Ph III
This fund accounts for costs associated with the extension of 58th Street from Wal -Mart
to ®akgreen 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
Earnings on investments 38,274
Total revenues 984,082
Expenditures:
Contractor 649,874
Engineer 119,772
Legal and fiscal 6,597
Land acquisition 75,682
Other 38,955
Total expenditures 890,880
Fund balance w December 31, 1999 $93,202
This project is anticipated to be completed in 2000.
Page 61
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Capital Project Funds
AAE
® Autumn Ridge (Phases - and 111)
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 - $11,700 (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
A summary of connection charges related to this project are as follows:
Received Through
Budgeted December 31, 1999
Phase No. Per/Unit Total No. Amount
1 26 $3,854.80 $100,224.80 25 $96,370.00
11 25 3,854.80 96,370.00 25 96,370.00
111 26 3,854.80 100,224.80 26 100,224.80
Total $296,819.60 $292,964.80
Page 62
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Capital Project Funds
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 Kedge Phase I and Phase 11 funds during 1998 and Phase III
during 1999.
AAE — Bo ells Landing
This fiend was established in 1999 to account for expenditures associated with the
developer agreement with Malley Senior Service Alliance. Ivey points of the developer
agreement are as follows:
w see improvements reimbursed by the developer
® park dedication fees /park improvements of $341,500
connection charges for Phase I as follows:
Budgeted
Sanitary sewer $139,131.30 Received 1998
Water 241,522.30 Received 1998
Storm sewer 305,968.40 Received 1998
Total $686,622.00
Page 63
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Capital Project Funds
Sanitary Sewer Connection Charge Fund
A summary of the financial activity of this fund from inception is as follows:
Prior
Years 1999 Total
Revenue:
Special assessments $917 $6,244 $7,161
Earnings on investments 34,046 16,481 50,527
Connection charges:
River Hills I stand 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 45,461 - 45,461
Brackey West - Outlots A & B 6,052 - 6,052
Autumn Ridge I st, 2nd and 3rd 60,372 5,175 65,547
Haase addition 3,186 - 3,186
Valley Senior Service Alliance 139,131 - 139,131
Total revenue $605,012 $27,900 632,912
Expenditures:
Transfer to debt set $112,500 $20,000 132,500
School District improvements 160,000 - 160,000
River Hills 1st 30,942 - 30,942
Total expenditures $303,442 $20,000 323,442
Fund balance - December 31, 1999 $309,470
Page 64
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Capital Project Funds
Water Connection Charge Fund
A summary of the financial activity of this fund from inception is as follows:
Prior
Years 1999 Total
Revenue:
Special assessments $1,594 $10,840 $12,434
Earnings on investments 55,112 15,928 71,040
Connection charges:
River Hills 1st and 2nd 64,798 m 64,798
Highway 36 18,352 w 18,352
Wal-Mart 67,088 - 67,088
lSD #834 405,341 405,341
Brackey 44,260 w 44,260
Brackey west m Oak Park Pond 78,917 78,917
Brackey west A Outlots A & B 10,506 10,506
Autumn Ridge 1st, 2nd and 3rd 95,211 8,161 103,372
Haase addition 5,542 - 5,542
Valley Senior Service Alliance 241,522 - 241,522
Total revenue $1,088,243 $34,929 1,123,172
Expenditures:
Transfer to debt service $618,000 $115,000 733,000
School District improvements 145,000 - 145,000
River Hills 1st 29,739 - 29,739
Total expenditures $792,739 $115,000 907,739
Fund balance - December 31, 1999 $215,433
Page 65
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Capital Project Funds
Storm Sewer Connection Charge Fund
A summary of the financial activity Vf this fund from inception isns follows:
Prior
Years 1999 Total
Revenue:
Special assessments *2,020 $13,436 $15/456
Earnings uuinvestments 37,847 24,495 62,342
Conn charges:
River Hills | stand 2nd 50,411 - 50,411
Highway 36 23 - 23,353
Wal-Mart 68,511 - 68,511
iSD#834 289,248 - 289,348
56079 56
B/uok�y , - , 079
Bnsck*y West - Oak Park Pond 99.974 - 99,974
8rooboy West -0udma/k&B 13,310 - 13,210
Autumn Ridge lor, 2nd and 3rd 114,253 9,703 124,046
Haase addition 7,021 - 7,021
Valley Senior Service Alliance 305,968 - 305,968
Total revenue *1,067,995 $47.724 1
Expenditures:
Transfer ro revolving capital $150 $50,000 200,000
Wal-Mart 41,232 - 41,232
Storm drainage report 9,910 - 9,910
River Hills |ut 13,757 - 13
Valley Point 2nd 17,211 - 17,211
School district improvement 289,348 - 289,348
8rookeyoddbioo 90,340 - 99,340
Total expenditures $620,790 $50,000 670,708
Fund balance - December 3\,\999 $444
Page 66
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Capital Project Funds
Connection Charge Fund Commitments
The fund balance at December 31, 1999 is committed for future debt service payments for
the Refunding Bonds of 1993. Such future commitments (cash transfers) are as follows:
Future Transfers to 1993 Bonds Debt Service Fund
Sanitary Water
Year Sewer Works Total
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 $95,000 $545,000 $640,000
As shown above, the A.A.E. Connection Charge balances at December 31, 1999 represent
sufficient amounts to meet the sanitary sewer debt comi for 2000 through 2004 and
the water works debt service commitments for 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 Mater and Sewer Operating Fund, See later comments relating to the Water
and Sewer Operating Fund,
Page 67
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Capital Project Funds
This fund is also committed for future debt service payments on the Bonds of 1998. Such
future commitments (cash transfer) are as follows:
Future Transfers to 1998 Bond Debt Service Fund
Sanitary Water Storm
Year Sewer Works Sewer Total
2000 $10,100 $3,500 $6,400 $20,000
2001 37,875 13,125 24,000 75,000
2002 37,875 13,125 24,000 75,000
2003 37,875 13,125 24,000 75,000
2004 25,250 8,750 16,000 50,000
2005 25,250 8,750 16,000 50,000
2006 25,250 8,750 16,000 50,000
2007 25,250 8,750 16,000 50,000
2008 25,250 8,750 16,000 50,000
2009 25,250 8,750 16,000 50,000
2010 20,200 7,000 12,800 40,000
2011 20,200 7,000 12,800 40,000
2012 20,200 7,000 12,800 40,000
2013 20,200 7,000 12,800 40,000
Total $356,025 $123,375 $225,600 $705,000
Additional commitments of the Connection Charge Funds include transfers to the
Revolving Capital Fund as repayment for the $360,000 transfer to the Nigh School Road
Improvement Fund. This commitment was $70,000 at December 31, 1999.
Page 68
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
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 $863 $1,360 $1,632 $3,855
Brackey Addition e Outlot A and B 75,458 130,726 165,633 371,817
Brackey West - Outlot A 10,118 17,564 22,250 49,932
Haase Addition - Outlot A and B 29,857 51,930 65,809 147,596
Fern Center 214,376 373,048 472,640 1,060,064
VSSA - Phase II (to be determined) - n -
VSSA - Phase III (to be determined) -
Total $330,672 $574,628 $727,964 $1,633,264
- -- -- - - - - -- --
Page 69
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Capital Project Funds
As an analysis of the commitments of the connection charge funds is as follows:
Sanitary Water Storm
Sewer Works Water Total
Fund balance - December 31, 1999 $309,470 $215,433 $444,921 $969,824
Future connection charges 330,672 574,628 727,964 1,633,264
Subtotal 640,142 790,061 1,172,885 2,603,088
Debt service commitments:
Bonds of 1993 (95,000) (545,000) - (640,000)
Bonds of 1998 (356,025) (123,375) (225,600) (705,000)
Repayment commitment - - (70,000) (70,000)
Uncommitted $189,117 $121,686 $877,285 $1,188,088
As shown above, connection charges should be sufficient to fund the debt service
requirement. However, in the event of a cash flow shortfall, the City has designated a portion
($661,765) of the retained earnings of the Utility Fund to provide additional financing if
needed. Based on the existing condition of these funds, we recommend the City revisit the
policy designating the Utility Fund retained earnings to determine if the amount of the
designation should be reduced.
Page 70
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Enterprise Fund
ENTERPRISE FUND
The financial statements for the Enterprise Fund (Mater, Seeder and Sanitation Utilities)
are presented in Statements 14, 15 and 16 of the City's 1999 Annual Financial Deport.
Condensed comparative operating statements of income and expense for the utility operations
of the City are as follows:
Water Department
1998 1999
Amount Percent Amount Percent
Revenue:
Customer billings and other $214,156 100.00% $299,430 100.00%
Operating expenses:
Personal services 70,815 33.07% 112,133 37.45%
Contractual services 90,172 42.11% 45,886 15.32%
Administrative and personnel charges 17,000 7.94% 19,550 6.53%
Other 10,120 4.73% 7,146 2.39%
Depreciation:
On purchased assets 9,132 4.26% 9,285 3.10%
On contributed assets 60,381 28.19% 61,908 20.68%
Total operating expenses 257,620 120.30% 255,908 85.47%
Net operating income (loss) ($43,464) (20.30 %) $43,522 14.53%
Page 71
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Enterprise Fund
A chart of income from operation is as follows:
$350,000 Water Operating
Revenue & Expense
$300,000 - ----- $250,000
C EO
Depreciation
$200,000
All Other Expenses
Contractual Smile,
Personal Services i
$150,000
—S -0 perating Revenue
A,
$100,000
$50,000
so
1995 1996 1997 1998 1999
Page 72
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Enterprise Fund
Sewer Department
1998 1999
Amount Percent Amount Percent
Revenue:
Customer billings and other $330,376 100.00% $356,652 100.00%
Operating expenses:
Personal services 77,012 23.31% 123,039 34.50%
MCES 213,651 64.67% 250,780 70.32%
Other contractual services 6,928 2.10% 8,684 2.43%
Administrative and personnel charges 32,000 9.69% 40,025 11.22%
Other 1,543 0.47% 2,228 0.62%
Depreciation:
On purchased assets 2,311 0.70% 2,420 0.68%
On contributed assets 46,872 14.19 47,317 13.27%
Total operating expenses 380,317 115.12% 474,493 133.04%
Net operating income (loss) ($49,941) (15.12 %) ($117,841) (33.04 %)
The largest component of operating expenses is the processing charge from MCES. The
MCES charges are based on gallons of sewage processed. An analysis of 1999 gallons
pumped by the City, billed by MCES and billed by the City to customers is as follows:
Gallons of water pumped by the City in 1999 ......................... 233 million
Gallons of sewage processed by MCES .... ............................... 199 million
Gallons of sewage billed by City to customers ........................ 160 million
Page 73
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Enterprise Fund
It is expected that the number of gallons of water pumped by the City would exceed the
gallons of sewage processed by MCES because not all water pumped ends up in the sanitary
sewer system (primarily due to lawn sprinkling). However, the gallons of sewage billed by
the City in theory should more closely correspond to gallons of sewage processed by MCES.
This difference may be the result of one or a combination of the following factors:
1. MCES estimates of sewage processed is incorrect.
2. Inflow /infiltration of ground water into sanitary sewer lines.
3. Gallon charge for residential may be too low. The residential charge is based on
winter quarter usage. Increased usage in other quarters is assumed to be the result of
lawn sprinkling.
4. Sump pumps putting water into the sanitary sewer system.
We recommend the City determine the nature of the gallonage differences and adjust the
billing method if appropriate.
Page 74
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Enterprise Fund
A chart of income from operations is as follows:
$500,000 ----- - - -- -- --- - ---
Seaver Operating
$450,000
- -- - — Revenue & Expense
$400,000 - - - -- - - - - --
$350,000 - - - -- - - _` - -- -- : - - - - - -- -- .i : :_- -®
$300,000 + -- - ', '',O Depreciation
L= Personal Services ,
$250,000 All Other Expenses
.............
E•:MCES
I�
$200,000 - --
-- Operating Revenue
\.,
$150
i a
$50
000
1995 1996 1997 1998 1999
The MCES changed their billing methods effective January 1, 1994. The MCES now
bills on a quarterly basis based on actual flows with a two quarter delay in flow
determination. The 1994 charges reflect the actual cost adjustment for 1996 estimated
billings. The 1999 charges are 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,
Page 75
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Enterprise Fund
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 sewer operating account incurred losses for 1998
and 1999 of $49,941 and $117,841, respectively. The City revised rates effective January 1,
1999 as follows:
Monthly Rate
Effective
Type of Charge 01/01/99
Water:
Base fee $7.05
Charge per 1,000 gallons for:
Usage between 6,000 and 16,000 gallons $1.10
Usage between 17,000 and 33,000 gallons $1.38
Usage in excess of 33,000 gallons $1.65
Sewer:
Base fee $11.55
Charge per 1,000 gallons for
usage in excess of 5,000 gallons $2.15
The City implemented monthly utility billings effective January 1, 1999.
Page 76
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Enterprise Fund
A comparison to other metropolitan cities is as follows. The reader is cautioned in using
comparative information such as this. Each city may have a different philosophy as to which
specific costs rate are designed to cover (i.e., depreciation, debt service, replacement, etc.):
Residential Quarterly Billing Based
on 20,000 Gallons of Usage
]Effective
Rank Water Sewer Total Year
Bayport 1 57.50 62.25 119.75 1998
Cambridge 2 43.50 7173 117.23 1999
Chanhassen 9 26.00 52.00 78.00 1997
Columbia Heights 5 46.54 40.10 86.64 1999
Cottage Grove 15 25.20 42.00 67.20 1997
Fridley 13 20.00 50.00 70.00 1997
Little Canada 7 37.60 46.20 83.80 1999
Mahtomedi 8 29.65 51.26 80.91 1996
New Brighton 14 21.40 47.00 68.40 1999
Oak Park Heights 11 26.65 45.40 72.05 1999
Oakdale 6 26.70 57.80 84.50 1999
Richfield 10 30.40 43.80 74.20 1999
Shoreview 16 2111 44.31 66.42 1999
St. Louis Park 12 24.43 47.60 72.03 1999
St. Paul 4 36.09 64.70 100.79 1999
West St. Paul * 3 43.31 64.70 108.01 1999
Woodbury 17 16.94 45.84 62.78 1999
*Billed and collected by St. Paul
Page 77
City of Oak Park heights, Minnesota
Financial Analysis and Management Considerations
Enterprise Fund
User rates must be sufficient to cover operating expenses plus meet the additional
financial commitments of the City's Sewer and Mater Enterprise Fund. These additional
financial commitments are as follows:
1. Capital outlay and /or depreciation for the non - system fixed assets (i.e., machinery and
equipment).
2. Future system improvements to be financed directly from user rates (if any).
3. Debt payments (principal and interest) for a portion of the City's Sewer and Water
Revenue Bond Issues which are used to finance portions of the City's water and
sanitary sewer systems (i.e., water towers, wells, pumphouses, sanitary sewer
interceptors and lift stations, and water and sewer overpass).
4. reserve balances for the Sewer and Water Enterprise Fund at sufficient levels to meet
current and future City policy.
Our office prepares utility rate studies which can present a variety of both tiered and non-
tiered water rate alternatives for the City. If the City would like assistance in preparing such
a study, please advise and we will provide an outline of the procedures which we would
perform as well as a description of the anticipated results of our work.
Page 78
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Enterprise Fund
The City revised rates effective April 1, 2000 as follows:
Monthly Rate
]Effective
Type of Charge April 1, 2000
Water:
Base fee $7.50
Charge per 1,000 gallons for:
Usage between 6,000 and 16,000 gallons 1.17
Usage between 16,000 and 33,000 gallons 1.47
Usage in excess of 33,000 gallons 1.76
Sewer:
Base fee 12.45
Charge per 1,000 gallons for:
Usage in excess of 5,000 gallons 2.32
Page 79
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Enterprise Fund
Sanitation
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 a 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 71,585 169,210 (97,625) 42% 65,000 (32,625)
2000 87,000 162,080 (75,080) 54% 75,000 (80)
( "Budgeted amounts, does not include $6.50 surcharge, $28,000 which is accounted for in the
General Fund
The 1999 loss was funded by fund balance. A transfer to the "All Funds" reserve account
of $23,000 was cancelled to cover this loss.
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City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Enterprise Fund
Storm Sewer Overating
The City created the stormwater utility during 1999. A monthly fee (effective October 1,
1999) was established at $1 per household and $10 per acre for commercial properties. The
fee for vacant residential property is 50 cents per month and undeveloped commercial
property is $1.50 an acre per month. A condensed operating statement of income and
expense for this fund is as follows:
Storm Sewer
1999
Amount Percent
Revenue:
Customer billings $13,628 100.00%
Expenses:
Personal services 345 2.53%
Contractual services 753 5.53%
Materials and supplies 251 1.84%
Total operating expenses 1,349 9.90%
Net operating income $12,279 90.10%
Page 81
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Other Matters
OTH ER MATTERS
GASB 34 — the reporting model
In June, 1999, GASB issued Statement No. 34, Basic Financial Statements — and
Management's Discussion and Analysis —for State and Local Governments. The statement
is the most comprehensive governmental accounting rule ever developed. The new standard
will significantly change the way state and local governments report their financial activity to
the public. In general, the new standards make government financial reporting more like the
private sector. To understand the impact of the new statement, it is helpful to highlight the
current differences between private sector and government financial reporting:
* Governmental reporting focuses on groupings of various funds that segregate
resources for specific activities. In the private sector, even the most complex business
is presented as a single reporting entity;
* The private sector's financial reporting focuses on earnings and changes in total
business resources, including long-term assets and liabilities. This contrasts to
government's more short-term focus on current resources available for appropriation
and spending; and,
* The budget functions more as a financial plan in the private sector; whereas in
government the budget is more important in demonstrating compliance by comparing
actual financial results to the budget.
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City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Other Matters
The most significant changes
Although the new GAS13 requirements are numerous, the major changes include:
® Reporting on the major individual funds as opposed to the aggregation of fund
groups,
® Comparison of actual financial results to both the original and amended budgets;
Requiring infrastructure reporting and additional "government -wide" financial
statements on a totally different basis of accounting. This means the "checkbook"
basis of accounting at the fund level would remain alongside the new and different
entity-wide statements, which would include long-term assets and liabilities. Major
points of contention during the comment phase of the GAS13 project were this "dual
reporting" requirement and the reporting of infrastructure. (Although GASB states
the revision will help financial statement readers have a "clearer picture of the costs
of government activities," the potential for confusion with dual reporting is obvious.),
and,
Requiring a narrative analysis of the government's financial activities.
Three phases of implementation dates
The implementation dates are effective in three phases based on a government's annual
revenues in the first fiscal year ending after June 15, 1999, as follows:
Phase 1. Governments with total annual revenues (excluding extraordinary items) of
$ 100 million or more should apply this statement for periods beginning after June 15,
2001.
Phase 2. Governments with total annual revenues of at least $10 million, but less
than $100 million, should apply this statement for periods beginning after June 15,
2002.
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City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Other Matters
Phase 3. Governments with less than $10 million in revenues should apply this
statement for periods beginning after June 15, 2003.
The City of Oak Park Heights is a Phase 3 City and will be required to implement GASB
34 for the year ended December 31, 2004.
The j of GASB 34 will be a ma implementation or effort for the City and cannot be
p
completed in a short time frame. Therefore, we recommend the City begin the process of
implementing GASB 34 as soon as possible. Several initial action items are as follows:
* Amend chart of accounts to allow for coding of revenue by program.
* Determine if current software has the ability to depreciate general fixed assets and
produce reports with subtotals by activity (general government, public safety, etc.).
* Begin process of inventorying infrastructure assets.
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City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Other Matters
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). Since that law change, the OSA has increased staffing to allow for
increased compliance testing and analysis. Actions taken by the OSA since 1995 include the
following:
* "Desk review" procedures of annually submitted tax increment reporting forms.
* Follow-up letter requesting clarification of amounts and information submitted on tax
increment reporting forms.
* 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, IBIZA, 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.
* Reconciliation of reported amounts on TIF form with the City's published financial
statements.
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City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Other Matters
* 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 or State's Attorney General'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
* 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.
Page 86
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Other Matters
Q Tax increment revenue totaled $13,945 and $43,834 for 1999 and 1998, respectively.
The City is required by statute to expend such revenues exclusively for qualified purposes.
The City of Oak Park Heights completed the reporting forms for 1998 and anticipates
completing the 1999 reporting forms by August 1, 2000.
Abatement
The 1997 Legislature passed a tax abatement statue that allows cities greater flexibility in
funding economic development efforts. The abatement statute, by comparison to tax
increment financing statutes, is far less restrictive but also may tend to produce less revenue
than an expanding tax increment district. Tax abatement allows the political subdivision to
designate a portion of the tax levy to be taken out of the tax base on a per parcel basis. The
property tax revenue produced by the properties excluded from the tax base is paid directly to
the city. The city is in control of designating its own portion to be abated. Additionally, the
city may petition the county and school district to participate in tax abatement. They may
decline participation if the use of the proceeds is not consistent with their vision and
objectives. Additionally, use of the abatement system increases the overall tax capacity rate
of taxing authorities because the tax base is reduced by parcels designated for abatement.
The tax abatement may be used if the use of the funding is in the public interest because it
provides one of the following:
Improvement in the tax base
® Improved employment opportunities
Acquisition or construction of public facilities
® Improvement of blighted areas
® Improved access for services to residents
To finance public improvements
Page 87
City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Other Matters
There is a series of statutory requirements to meet prior to approving abatement,
including public hearings. If the City uses the abatement option, we recommend that
compliance systems are implemented including:
Summarize resolution authorizing abatement
Track abatement collections and delinquencies separate from other property taxes
® Document uses of abatement
® Designate unspent balances to assure final disposition in accordance with the
authorizing resolution
Page 88
City of oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Other Matters
Arbitrage
In the area of municipal bonds, arbitrage is a city's profit from borrowing funds in the tax
exempt market and investing those funds in the taxable market. Federal tax law prohibits this
type of transaction. A governmental bond will maintain its tax exempt status if the issuer
complies with the requirements of the Internal Revenue Code. The Internal Revenue Code
relative to arbitrage has two major compliance areas: 1) arbitrage restriction requirements;
and, ?) arbitrage rebate requirements. Arbitrage restriction requirements describe the
circumstances in which investments in materially higher yielding securities is allowed
without compromising the tax - exempt status of the bond issue. Arbitrage rebate
requirements describe what to do with profits earned on investments subject to arbitrage
restriction requirements.
Arbitrage Restriction
A common misunderstanding of arbitrage is that bond proceeds may be invested at
market rates provided that any profits are rebated to the federal governinent. Not so.
Generally, arbitrage may be earned on tax - exempt bond proceeds only if an exception is
permitted.
A summary of exceptions to yield restrictions are as follows:
1. Three Year TeMDorary Period for Prolect Fund: The regulations provide for a three
year temporary period during which the proceeds of an issue may be invested in
higher yielding investments without causing bonds to be arbitrage bonds. The three
year temporary period applies only if at the date of issuance the issuer `treasonable
expects" that:
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City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Other Matters
(i) within six months the issuer will incur substantial binding obligation to a third
party to expend at least 5 percent of the net sale proceeds on capital projects;
(ii) completion of the capital projects and allocation of the net sale proceeds to
expenditures will proceed with due diligence; and,
(iii) within three years the issuer will spend at least 85 percent of the net sale
proceeds on capital projects.
2. Reserve Fund: The regulations provide for "reasonably required" reserve fund in
which the issuer may invest sale proceeds or replacement proceeds without yield
restriction. A reasonably required reserve fund cannot exceed the least of the
following:
(i) 10 percent of the principal amount of the issue
(ii) maximum annual debt service on the issue
(iii) 125 percent of the average annual debt service on the issue
Regulation 1. 1 48-5(c)(3)(i)(E) allows a reserve fund to exceed the amount determined
by the above three -part test if it complies with the following:
(i) the portion that exceeds the three -part test cannot be invested materially above
the bond yield. The issuer can use yield reduction payments to comply with this rule.
(ii) any portion in excess of 10 percent of the principal amount of the issue must
come from revenues, rather than sale proceeds.
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City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Other Matters
3. Minor Portion: Section 148(e) permits an issuer to arbitrage the lesser of $100,000 or
5 percent of sale proceeds as a de minimus minor portion of the issue. For bonds
issued after 1986, the minor portion is in addition to a reasonably required reserve
fund.
As previously stated, the above exceptions are from yield restriction, not from rebate.
Therefore, any amounts earned in excess of the bond yield are subject to rebate.
Arbitrage Rebate
In general, any profits earned on investments subject to arbitrage are required to be
rebated to the federal government. however, there are several exceptions to the rebate
requirement, which are as follows:
1. Small Issuer Exception: Section 148(f)(4)(D) establishes an exception from rebate
requirement for an issue meeting the following requirements:
(i) the issuer must have general taxing powers
(ii) the bonds must be governmental bonds and not private activity bonds
(iii) at least 95 percent of the proceeds must be used for local government
activities of the issuer or of governmental units located within the issuer's boundaries.
(iv) on the date of issuance, the issuer must reasonably expect that it will not issue
more than $5 million aggregate amount of governmental bonds during the current
calendar year, together with issues in that year by related entities that are subject to
aggregation with the issuer.
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City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Other Matters
A common misunderstanding of the small issuer exception is that an issuer that
qualifies for this exception is not subject to any arbitrage compliance. Not so. The
small issuer exception is an exception from rebate, not from arbitrage rules. As such,
a small issuer will need to establish a temporary period for project fund investments
and determine that the reserve fund is reasonably required. For profits earned after
the expiration of the temporary period and on profits earned on amounts in a reserve
fund that exceed what is reasonably required, yield reduction payments (Y 's) are
required to be made.
2. Proiect Fund Spending Excei)tions: A project fund is exempt from rebate if it meets
either a six-month spending exception, an eighteen-month spending exception, or a
two-year spending exception.
(i) The six-month exception applies to any type of tax exempt bond. This
exception requires an issuer to spend 100 percent of the proceeds within six months.
(ii) The eighteen-month exception can apply to any type of bond for a capital
project, including industrial development bonds or qualified mortgage bonds. The
eighteen-month exception requires expenditure of proceeds within eighteen months
on the following schedule:
6 months — 15 percent
12 months — 60 percent
18 months — 100 percent
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City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Other Matters
(iii) The two year exception can be used only for construction issues. To qualify as
a construction issue, the following requirements must be mete
(a) the issuer must reasonably expect that at least 75 percent of available
construction proceeds of the issue will be used for construction expenditures
(b) the construction expenditures must be on property that is owned by a
governmental unit or a 501(c)(3) organization
(c) the bonds must be governmental bonds
The regulations define construction expenditures as capital expenditures that are
allocable to the cost of real property (buildings) or constructed personal property
(equipment). Construction expenditures do not include expenditures for acquisition
of land. The two year exception requires expenditure of proceeds within two years on
the following schedule:
6 months - 10 percent
12 months - 45 percent
18 months - 75 percent
24 months - 100 percent
3) Bona Fide Debt Service Fund (BDSF) Exception, regulations define a BDSF as a
fund that is used primarily to achieve a proper matching of revenues within each bond
year and that it is depleted at least once each bond year, except for a reasonable
carryover amount not to exceed the greater of: 1) the earnings on the fund for the
immediately preceding bond year; or, 2) one - twelfth of the principal and interest
payments on the issue for the immediately preceding bond year. Earnings of a BDSF
are exempt from rebate.
Page 93
City of Oak Park Heights, Minnesota
]Financial Analysis and Management Considerations
Other Matters
Penalties for Noncompliance
The IRS has two options available for failure to comply with the rebate requirement:
Taxing interest on the issue; or,
® Assessing a penalty against the issuer.
Failure to pay the correct rebate when required will cause the bonds to be arbitrage bonds,
unless the IRS determines the failure was not caused by willful neglect and the issuer pays a
penalty. For governmental bonds, the penalty is equal to 50 percent of the rebate amount not
paid plus interest on the amount not paid. The penalty is automatically waived if the rebate
amount plus interest is paid within 180 days after discovery of the failure, unless failure was
due to willful neglect.
Computer Systems
The City's core computer systems consist of the following:
Date Implemented
Finance -® Owatonna
AS400 Computer Ongoing
Public Safety
Enforce Spring, 1999
Office Automation
Local area network featuring Microsoft Ongoing
Office `97
Workstation Internet access for research
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City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Other Matters
Efficiency gains are an advantage of employing current technology. As new systems are
implemented, careful attention to the following is recommended:
System security -- access controls, remote access controls, back-up procedures,
disaster recovery and internal audit of use and transactions
Allocation of sufficient resources to support and training
Efficiency gains are dependent upon directing adequate attention to the above areas.
Records and Information Management
In today's information -intensive organizations, records and documents are part of daily
operations. They record history, document today's transactions, and provide the basis for
tomorrow's decisions. Managing them systematically is the key to finding information when
it is needed, organizing it in a useful way, maintaining it for a period of time, protecting it to
comply with various rules and regulations, and then destroying it before it takes over the
workplace. Managing these processes is what records and information management is all
about.
And it's not just paper anymore. Add electronic records into the picture, because records
take many forms — paper, computer files (e.g., PC documents and e-mail), microfilm and
microfiche, magnetic tape, etc. The same concepts of organizing and retaining paper apply to
their electronic counterparts. The electronic version is just as discoverable in a court of law as
the paper version.
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City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Other Matters
The benefits from establishing a records management program include:
* Minimizing litigation
* Improving use and retrieval
* Controlling the growth of records
(and reclaiming desk drawers and hard drive space)
* Protecting the organization's records and the information on its citizens
* Assisting in compliance with data practices legislation
* Reducing operating costs
* Supporting decision making
* Preserving organizational history
We recommend reviewing your records and information management practices using the
following checklist.
* Is a records management program in place?
* Is someone responsible for the records and information management?
* Has a records inventory been taken and documented?
* Is records management or document management software used?
* Is there a uniform classification system in place, at least by department, preferably
organization wide?
* Has your organization adopted the State of Minnesota's General Records Retention
Schedule for Cities? Have other records not listed on the Schedule been identified and
retention periods established?
* Are records transferred to the Minnesota Historical Society?
* Does the organization maintain a listing of the records destroyed?
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City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Other Matters
® Is there a written policies and procedures manual for records and information
management?
Have vital records been identified and protected as part of a disaster recovery plan
that covers all types of records media?
Establishing good records practices is part of establishing good internal controls. Just as
operating procedures establish a routine, document them, and carry them out, records
management procedures do the same for records created as part of day -to -day operations. We
can provide further assistance and help answer the above questions positively.
Data Practices
Cities need to be aware of several laws passed during the 1999 Minnesota legislative
session relating to the Data Practices Act. Complying with the Act is a natural extension of
managing records and information, because the records program identifies what the City
maintains and establishes operating procedures. The specifics supporting data practices
legislation, such as those listed below, can be extracted from the overall records management
program.
1) Minnesota Statutes 1999, 13.073, Subd. 6, Preparation of model policies and
procedures. This subdivision requires government entities to either adopt or develop
their own policies and procedures as they 66 relate to public access to government data
and rights of subjects of data. " The Department of Administration commissioner is
preparing model policies and procedures to assist government entities in complying
these requirements. Cities are, however, allowed to reject the model and develop their
own. This section is effective July 1, 2000.
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City of Oak Park Heights, Minnesota
Financial Analysis and Management Considerations
Other Matters
Minnesota Statutes 1999, 13.03, Subd. 2, Procedures. This subdivision requires
government entities to prepare public access procedures and 66 update them no later
than August 1 of each year as necessary to reflect any changes in personnel or
circumstances that might affect public access to government data." This section is
effective January 1, 2001.
A records management program includes training new employees by informing them
oj'the different data classifications and how to handle requests. Public access
procedures would be similar to (but reverse ofi internal procedures.
2) Minnesota Statutes 1999, 13.05, Subd. 1, Public document of data categories. This
subdivision requires government entities to create and annually update an inventory of
record categories and data collection forms "relating to private or confidential data on
individuals maintained by the authority." This section is currently effective.
These categories, also known as record series, are identified as part of a records
inventory. The data collection forms are already identified as part of a forms
management program, a related component of records management.
The Department of Administration is currently preparing training materials on data
practices for government entities, which can be shared when available (Spring 2000).
Complying with data practices legislation is much easier when records are managed
systematically as part of a records management program. They are most efficiently addressed
together.
Page 98
APPENDIX A
CITY OF OAK PARK HEIGHTS, MINNESOTA
YEAR &
STATUTE
REFERENCE STATE LEGISLATIVE ACTION
1999 421 Business Subsidies: For business subsidies in excess of $25,000 granted to
private enterprise after August 1, 1999, agreement provision requirements are
established, and for subsidies in excess of $ 100,000, a public hearing is required.
1999 #20 LPA: Repealed Local Performance Aid in 2000 and added amount equal to
each cities 1999 LPA to local government aid for the same year. Also LPA
increases the LGA base.
1999 919 ACA: Increased HACA to compensate local governments for class rate
reductions to agricultural homestead property.
1999 #18 Class Rate: Further reduce class rates.
Payable Payable Payable Payable
Property Type 1997 1998 1999 2000
Residential Homestead:
<$76,000 1.00% 1.00% 1.00% 1.00%
>$76,000 2.00 1.85 1.70 1.65
Residential Non-homstead:
Single unit:
<$76,000 2.30 1.90 1.25 1.20
>$76,000 2.30 2.10 1.70 1.65
2-3 unit and
undeveloped land 2.30 2.10 1.70 1.65
Market-rate Apartments:
Regular 3.40 2.90 2.50 2.40
Small City 2.30 2.30 2.15 2.15
Commercial/Industrial/Utility
<$150,000 3.00 2.70 2.45 2.40
>$150,000 4.60 4.00 3.50 3.40
1999 #17 Levy Limit: Extended levy limits for taxes payable in 2000. Levy limit will
based on levy limit for collectible for 1999 (as opposed to actual 1999 collectible
levy).
1999 #16 Tax Rate Increase: Increased the requirements for cities that have an
increase in tax rate to pass a resolution indicating if the levy for the subsequent
year will result in a tax rate increase.
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APPENDIX A
CITY OF OAK PARK HEIGHTS, MINNESOTA
YEAR &
STATUTE
REFERENCE STATE LEGISLATIVE ACTION
1999 #15 Abatement: With respect to abatement, expanded the authority of local
government to also abate fiscal disparities taxes in an amount equal to the local
tax rate multiplied by the tax capacity of the parcel.
1999 #14 TIF Grant- Increased TIF grant program from $2,000,000 to $6,000,000.
Also improved the application process to exclude requirement for specific
property additional levies.
1999 #13 TIF Authority: Added the Attorney General to TIF enforcement
responsibilities. If county attorneys choose not to prosecute based on reports
provided by the OSA, the Attorney General will review the case and has the
authority to suspend the local authority's power to use TIF for up to five years.
1999 #12 TIF Coverage: Provided relief for "gap" districts (those districts for which
certification was made between July 31, 1979 and July 1, 1982) with respect to
expending amounts inside the development district but outside the tax increment
district.
1999 #11 TIF Pooling: Increased TIF pooling authority between districts to assist in
alleviating deficits caused by rate compression in 1997 and 1998 class rate
compression.
1999 #10 TIF Restrictions: Further restrictions on tax increments related to social and
recreational facilities. Restriction is in effect for expenditures or binding contracts
entered into after January 1, 2000.
1999 #9 Housing Districts: For requests for certification after June 30, 1999, there is a
reduction in the local contribution from 10% to 5%.
1998 #8 Data Privacy: Effective July 1, 1998, data, notes and preliminary drafts of
MS 13.794 audit reports created, collected and maintained by cities relating to internal audit
or investigation remain confidential or protected nonpublic data until final audit
report published or audit or investigation concluded.
1998 #7 Property Tax Reform: Cities are authorized to create special taxing districts
MS 469.1791 within tax increment financing districts to address impacts of 1997 and 1998
property tax class rate changes on existing TIF districts.
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APPENDIX A
CITY OF OAK PARK HEIGHTS, MINNESOTA
YEAR &
STATUTE
REFERENCE STATE LEGISLATIVE ACTION
1998 #6 TIF Deadlines: Beginning in 1999, annual TIF reporting deadline is extended
MS 469.175 from July I to August 1. Also, if annual reports are not submitted by the third
and Tuesday in November, State Auditor may place a hold on tax increment
469.1771 distributions. For distributions made between the third Friday in November and
the end of the year, 25% will be withheld, and for distributions made after January
1, 100% will be withheld.
1998 #5 Miscellaneous TIF:
MS 469.177 a. Parcels classified as green acres, open space or ag preserves can now be
included in certain TIF districts.
b. The terms "decertify" and "decertification" are clarified to refer to termination
of a district.
c. Clarifies disclosure and reporting requirements for when the requirements
begin and end.
d. TIF recodification task force extended to May 1, 1999.
1998 94 TIF Enforcement: The TIF revenues deduction rate increases from. 10 to .25
percent to fund the Office of the State Auditor's enforcement responsibilities. This
increase will be used to employ six auditors and one clerical support staff person.
1998 #3 Audit Results: Requires Auditors to present copy of audited financial
MS 479.697 statement and any management letter or written findings to each city council
member and mayor no later than 30 days after report is due to state auditor. Audit
results must be presented at a scheduled city council meeting prior to October 31
each year.
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APPENDIX A
CITY OF OAK PARK HEIGHTS, MINNESOTA
YEAR &
STATUTE
REFERENCE STATE LEGISLATIVE ACTION
1998 #2 Class Rates: 1998 tax bill continued class rate compression begun by 1997
tax bill. Examples of changes include the following:
Homestead from 1% on first $75,000 plus 2% for amounts over $75,000 to 1% on
first $75,000 plus 1.85% on amounts over $75,000.
Sample Tax Capacity Differences
Values Before After Amount Percent
$70,000 $700 $700 $ p 0.00%
75,000 750 750 n 0.00%
100,000 1,213 1,175 (38) (3.09 %)
150,000 2,138 2,025 (113) (5.26 %)
200,000 3,063 2,875 (188) (6.12%)
500,000 8,613 7,975 (638) (7.40 %)
750,000 13,238 12,225 (1,013) (7.65 %)
1,000,000 17,863 16,475 (1,388) (7.77 %)
Commercial Industrial from 2.7% on first $150,000 plus 4.0% on amounts over
$150,000 to 2.45% on first $150,000 plus 3.5% on amounts over $150,000.
Sample Tax Capacity Differences
Values Before After Amount Percent
$50,000 $1,350 $1,225 ($125) (9.26 %)
100,000 2,700 2,450 (250) (9.26%)
150,000 4,050 3,675 (375) (9.26 %)
200,000 6,050 5,425 (625) (10.33 %)
500,000 18,050 15,925 (2,125) (11.77 %)
750,000 28,050 24,675 (3,375) (12.03°/x)
1,000,000 38,050 33,425 (4,625) (12.16 %)
10,000,000 398,050 348,425 (49,625) (12.47 %)
1998 #1 State Aida In addition to current annual inflationary increase in L,GA, cities
will receive $3 million a year of new L,GA. Jurisdictions in metropolitan area will
also receive increases in HACA in year 2000 to partially offset decrease in fiscal
disparities pool due to class rate compression.
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