6.2. SR 06-17-2019Request for Action
To
Item Number
Mayor and City Council
6.2
Agenda Section
Meeting Date
Prepared by
Presentations, Awards,
June 17, 2019
Lori Ziemer, Finance Director
and Recognition
Item Description
Reviewed by
Comprehensive Annual Financial Report for the
Cal Portner, City Administrator
Year Ended December 31, 2018
Reviewed by
Action Requested
Accept, by motion, the Comprehensive Annual Financial Report for the City of Elk River for the year
ended December 31, 2018.
Background/Discussion
The city is required to have an annual independent audit of its financial statements in which the audit firm
issues an opinion on the financial statements.
For fiscal year 2018, CliftonLarsonAllen LLP (CLA) conducted the city's audit and will present a
summary of the 2018 Comprehensive Annual Financial Report and audit results.
Financial Impact
N/A
Attachments
■ CLA Audit Presentation
■ Comprehensive Annual Financial Report for the year ended December 31, 2018
■ Minnesota Legal Compliance Letter
■ Internal Control Letter
■ Governance Letter
The Elk River Vision
A PehoMing community Pitb revolutionary and spirited resourcefulness, exceptional P,` 01 W E H E 8 6 T
service, and community engagement that encourages and inspires prosperity INAWRE1
City of Elk River, Minnesota
Audit Presentation
Year Ending December. 31, 2018
Monday, June 17, 201914
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WEALTH ADVISORY I OUTSOURCING I AUDIT, TAX, AND CONSULTING
Investment advisory services are offered through Clifton LarsonAl len Wealth Advisors, LLC, an SEC -registered investment advisor
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Required Communications
• The City has an unmodified (clean) opinion for the
December 31, 2018 financial statement audit.
• See separate Governance Communication Letter.
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Internal Control Items
Material Weaknesses— deficiencies in internal control such
that there is a reasonable possibility that a material
misstatement would not be prevented or detected and
corrected on a timely basis.
■ None Noted
Significant Deficiencies -deficiencies in internal control
that are less severe than material weaknesses, yet
important enough to merit attention by those charged
with governance.
■ None Noted
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Minnesota legal Compliance
Auditors conducted applicable testing and completed a
25 page check list to verify that the City complied
with the applicable Minnesota State Statutes.
■ No Findings
0
4
General Fund Financial Results - Revenues
$16,000,000
$14,000,000
$12,000,000
$10,000,000
$8,000,000
$6,000,000
$4,000,000
$2,000,000
General Fund Revenue by Source
Year Ended December 311,
2014 2015 2016
■Taxes ■ Licenses and Permits ■ Intergovernmental
2017
Charges for Services
I
2018
All Other
Proportion of taxes
sliding up in 2018 while
licenses and permits
slightly down.
Intergovernmental,
Charges for Services,
and Other are similar
to the prior year.
0
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General Fund Financial Results — Revenue Budget
Taxes
Intergovernmental -
Charges for Services _
Licenses and Permits =
All Other
General Fund Revenue
Budget and Actual
$- $1 $2 $3 $4 $5 $6 $7 $8
Budget ■ Actual
$9 $10
Millions
0
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0
N
0
• Under budget $34k
(0.25%)
— Licenses and
Permits revenue
had largest
variance from
budget ($87k)
— Intergovernmental
revenue over
budget ($27k)
— Other revenue over
budget ($35k)
L
General Fund Financial Results - Expenditures
$14,000,000
$12,000,000
$10,000,000
$8,000,000
$6,000,000
$4,000,000
$2,000,000
General Fund Expenditures by Function
Year Ended December 31,
2014 2015 2016 2017 2018
■ General Government ■ Public Safety ■ Public Works Culture and Recreation
• Total expenditures
increased each year
between 2.1% (2014
and 2017) and 6.4%
(2018)
• Overall increase of
17.2% from 2014 to
2018
• Proportions by
function remained the
very similar in 2018
compared to 2017.
Public safety (49%)and
General Government
(25%)are the largest
0
7
General Fund Financial Results — Expenditure Budget
General Government
Public Safety
Public Works
Parks and Recreation
General Fund Expenditures
Budget and Actual
$- $1 $2 $3 $4 $5 $6 $7
Millions
■ Budget ■ Actual
• Under budget
$404K (2.7%)
— All functions
were under
budget except
Park and
Recreation,
which was $1K
over
— Public Works
under budget by
$190k, mostly in
wages and
benefits
— General
Government
under budget by
$147k
0
E-?
General Fund Financial Results — Fund Balance
$16,500,000
$14,500,000
$12,500,000
$10,500,000
$8,500,000
$6,500,000
$4,500,000
$2,500,000
$500,000
$(1,500,000)
2014
General Fund Financial Position
Year Ended December 31,
47%
2015
47%8
2016
48%
2017
� Unassigned Fund Balance Cash Balance (net)
� Expenditures % of Total Fund Balance
2018
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• Fund Balance
Policy
50%
— Unassigned of
40%-45% of
next year's
budget
— 2018 total
fund balance
is 47% of next
45%
year's
budgeted
expenditures
to allow for
assignments
40%
0
$3.0
$2.5
$1.5
$1.0
$0.5
Financial Results — Sewer Fund
Sewer Fund
Year Ended December 31,
2014 2015 2016 2017 2018
Operating Expense � Depreciation Operating Revenue Income Before Depreciation
• Covering approximately
39% of depreciation.
— Increase from 36% in 2017
— Peak was 78% in 2015
•Operating revenues
increased 6.1% from prior
year. (usage and rate
increase).
•Cash and investments
provided by operations
$266K in 2018.
•Total cash and
investments of $4.4M and
operating expenses of
$3.3M.
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$1.s
i
$1.6
$1.4
$1.2
$1.0
$ 0.8
$ 0.6
$ 0.4
$ 0.2
$ 0.0
-$0.2
Financial Results — Garbage Fund
Garbage Fund
Year Ended December 31,
2014 2015
� Operating Expense
� Operating Revenue
Create Opportunities
2016 2017
Depreciation
Income Before Depreciation
• No depreciation in Fund
• Operating revenues 14.8%
increase from prior year.
• Operating expenses
increased 4.4% from prior
year (contracted services)
• Cash and investments used
by operations $47K in 2018.
• Total cash and investments
of $201K and operating
expenses of $1.59M.
0
11
$0.9
C
0
2 $0.8
$0.7
$0.6
$0.5
$0.4
$0.3
$0.2
$0.1
$0.0
Financial Results — Storm Water Fund
Storm Water Fund
Year Ended December 31,
2015 2016 2017 2018
Operating Expense � Depreciation � Operating Revenue --s---Income Before Depreciation
• Covering 68% of
Depreciation in 2018 and
41% in 2017
•Operating revenues slight
decrease from prior year.
•Operating expenses
decrease from prior year
(storm water dredging
project in 2017)
• Cash and investments
provided by operations
$356K in 2018.
• Total cash and investments
of $792K and operating
expenses of $634K.
0
31.0%
30.0%
29.0%
28.0%
27.0%
26.0%
25.0%
Financial Results — Liquor
Gross Profit Percentage •
30.4%
29.1%
29.6% ��28.7%
28.9%
28.2%
ON— 27.9%
26.9%
27.0%
2014 2015 2016 2017 2018
Gross Profit as a percentage of Sales Region 7W
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0
Gross profit percentage
down slightly from prior
yea r.
2017 gross profit % for
the 7 -County Metro area
was 26.0%.
2018 gross profit % for
the 7 -County Metro area
is unknown at this time.
Equal or higher than
other Metro Cities
— Anoka — 23.1%
— Savage — 24.1%
— Lexington — 23.7%
— Saint Anthony— 23.8%
13
Financial Results — Taxable Market Values
Taxable Market Value
$2,500,000,000 0 2018 =
$2.056
$2,000,000,000 — $116.5M
increase
•
$1,500,000,000 2009 was the
previous peak
at $2.256
$1,000,000,000
$500,000,000
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
■ Taxable Market Value
C
14
Financial Results
Tax Rates
0
*Rates Expressed as a percentage of net tax capacity
City of
Elk River
2017 2018
Average Tax Rate
City 46.2 46.0
County 50.5 49.4
School 36.9 36.1
Special Taxing 4.5 4.3
Tota 1 138.0 135.8
• 2017 and 2018 data for other cities is not yet available
• Controlling what the City can control.
• School rate — is a blend of Districts serving the City.
Governmental Activities Bond Maturities
Governmental Activities Bonded Debt - Maturities
3,500,000
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
2010A G.O. Capita
Improvement Bonds
■■■
2012A G.O. Capital
Improvement Bonds
2013A EDA G.O. Refunding
Bonds
■ 2019 ■ 2020 ■ 2021 2022 2023 2024 - 2028 ■ 2029 - 2033
0
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City Business -Type Activities Bond Maturities
City Business -Type Activities Bonded Debt - Maturities
3,000,000.00
2,500,000.00
2,000,000.00
1,500,000.00
1,000,000.00
500,000.00
■ 2019 ■ 2020 ■ 2021
4 a
2014B G.O. Sewer Revenue Bonds
2022 2023 2024 - 2028 0 2029 - 2033 0 2034 - 2038
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0
0
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0
N
0
17
Conclusion
• Meeting fund balance policy for General Fund
• No internal control or legal compliance findings
• Liquor, Sewer, and Storm Water funds are providing cash
flows from operations, Garbage is not
• Garbage fund will continue to need to be monitored as
change in fund balance and operating cash flows are negative
and fund balance is on track to be depleted
• Liquor fund transferred over $689kto other funds
• Last year, for the 2017 CAFR audit, the City was awarded the
GFOA Certificate for Excellence in Financial Reporting.
— 29 consecutive years!
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Accounting Standards
• Governmental Accounting Standards Board Statement No. 83
—Asset Retirement Obligations
— December 3112019
• Statement No. 84 — Fiduciary Activities
— December 3112019
• Statement No. 87 — Leases
— December 3112020
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Thank you to all for helping to get this
audit completed timely and for
allowing us to serve you !
Contact Information:
Chris Knopik
612-397-3266
christopher.knopik@claconnect.com
Michelle Hoffman
612-397-3269
michelle.hoffman@claconnect.com
k
r
E
Kiver
Minnesota
Comprehensive Annual
Financial Report
For the Year Ended
December 31, 2018
CITY OF ELK RIVER, MINNESOTA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
For the Year Ended December 31, 2018
PREPARED BY THE FINANCE DEPARTMENT
Member of Government Finance Officers Association
of the United States and Canada
CITY OF ELK RIVER, MINNESOTA
TABLE OF CONTENTS
FOR THE YEAR ENDED DECEMBER 31, 2018
Page No.
L INTRODUCTORY SECTION
Letterof Transmittal......................................................................................... 1
Certificate of Achievement.................................................................................. 4
OrganizationalChart ......................................................................................... 5
Elected and Appointed Officials........................................................................... 6
IL FINANCIAL SECTION
Independent Auditors' Report ..............................................................................
7
Management's Discussion and Analysis..................................................................
10
Basic Financial Statements:
Government -wide Financial Statements:
77
Statement of Net Position.............................................................................
20
Statement of Activities.................................................................................
21
Fund Financial Statements:
Balance Sheet - Governmental Funds...............................................................
22
Reconciliation of the Governmental Funds Balance Sheet to
the Statement of Net Position......................................................................
23
Statement of Revenues, Expenditures, and Changes in
Fund Balances - Governmental Funds............................................................
24
Reconciliation of the Statement of Revenues, Expenditures, and
Changes in Fund Balances of Governmental Funds to the
Statement of Activities..............................................................................
25
Statement of Revenues, Expenditures, and Changes in
Fund Balance - Budget and Actual - General Fund .............................................
26
Statement of Net Position - Proprietary Funds ......................................................
27
Statement of Revenues, Expenses, and Changes in
Net Position - Proprietary Funds...................................................................
29
Statement of Cash Flows - Proprietary Funds .......................................................
31
Statement of Fiduciary Net Position - Agency Funds ...............................................
35
Notes to Financial Statements...........................................................................
36
Required Supplementary Information
Schedule of City Contributions - PERA................................................................
75
Schedule of City Contributions - Elk River Fire Relief ................................................
76
Schedule of the City's Proportionate Share of the Net Pension
Liability- PERA........................................................................................
77
Schedule of Changes in the Net Pension Liability and Related Ratios -
Elk River Fire Relief Pension Plan ...................................................................
78
Schedule of Changes in the Total OPEB Liability and Related Ratios -
Municipal Retirees Health Plan .......................................................................
79
Schedule of Changes in the Total OPEB Liability and Related Ratios -
Utilities Retirees Health Plan .........................................................................
80
Combining and Individual Fund Statements and Schedules:
Nonmajor Governmental Funds:
Combining Balance Sheet - Nonmajor Governmental Funds .................................... 82
Combining Statement of Revenues, Expenditures, and Changes
in Fund Balances - Nonmajor Governmental Funds ............................................ 83
CITY OF ELK RIVER, MINNESOTA
TABLE OF CONTENTS
FOR THE YEAR ENDED DECEMBER 31, 2018
Page No.
Nonmajor Special Revenue Funds:
Subcombining Balance Sheet - Nonmajor Special Revenue Funds .............................
Subcombining Statement of Revenues, Expenditures, and Changes in
Fund Balances - Nonmajor Special Revenue Funds ............................................
Special Revenue Funds:
Schedules of Revenues, Expenditures, and Changes in
Fund Balance - Budget and Actual:
Library...........................................................................................
IceArena.........................................................................................
Economic Development Authority...........................................................
Nonmajor Debt Service Funds:
Subcombining Balance Sheet - Nonmajor Debt Service Funds .................................
Subcombining Statement of Revenues, Expenditures, and Changes in
Fund Balances - Nonmajor Debt Service Funds ................................................
Nonmajor Capital Projects Funds:
Subcombining Balance Sheet — Nonmajor Capital Projects Funds ..............................
Subcombining Statement of Revenues, Expenditures, and Changes in
85
87
89
90
91
93
94
96
Fund Balances — Nonmajor Capital Projects Funds ............................................ 98
Statement of Changes in Assets and Liabilities - Agency Funds .................................... 101
Component Unit Financial Statements:
Housing and Redevelopment Authority:
Fund Financial Statements:
BalanceSheet..................................................................................... 103
Reconciliation of the Governmental Fund Balance Sheet
to the Statement of Net Position.............................................................. 104
Statement of Revenues, Expenditures, and Change in Fund Balance ..................... 105
Reconciliation of the Statement of Revenues, Expenditures,
and Change in Fund Balance of Governmental Fund to the
Statement of Activities........................................................................ 106
III. STATISTICAL SECTION (UNAUDITED)
Net Position by Component...............................................................................
108
Changes in Net Position....................................................................................
110
Fund Balances of Governmental Funds..................................................................
114
Changes in Fund Balances of Governmental Funds ....................................................
116
ElectricSales................................................................................................
118
Principal Electric Customers..............................................................................
119
Tax Capacity, Market Value and Estimated Actual Value of Taxable Property ...................
120
PropertyTax Rates.........................................................................................
122
Principal Taxpayers........................................................................................
123
Property Tax Levies and Collections....................................................................
124
Ratios of Outstanding Debt by Type.....................................................................
125
Ratios of General Bonded Debt Outstanding...........................................................
127
Direct and Overlapping Governmental Activities Debt ...............................................
128
Legal Debt Margin Information..........................................................................
129
Pledged -Revenue Coverage...............................................................................
131
Demographic and Economic Statistics..................................................................
133
PrincipalEmployers.......................................................................................
134
Full -Time Equivalent Employees by Function.........................................................
135
Operating Indicators by Function........................................................................
136
Capital Asset Statistics by Function.....................................................................
137
INTRODUCTORY SECTION
of
iver
June 17, 2019
Honorable Mayor, Members of the City Council,
and Citizens of Elk River:
The Comprehensive Annual Financial Report (CAFR) for the City of Elk River for the fiscal year ended December
31, 2018, is hereby submitted. Minnesota State Statutes and the City's ordinance require an annual audit of the
City's accounts by the State Auditor's Office or by independent certified public accountants. The firm of
CliftonLarsonAllen, LLP was selected to perform the City's audit and their unmodified opinion has been included in
this report. The independent auditors' report is included in the financial section of this report.
This report was prepared by the City's Finance Department and responsibility for both the completeness and
accuracy of this data, as well as the fairness of this presentation including all enclosures, rests with the City. To the
best of my knowledge and belief, the enclosed data are accurate in all material respects and are recorded in a manner
designed to present fairly the financial position and the results of operations of the various funds of the City. To
provide a reasonable basis for making these representations, management of the City has established a
comprehensive internal control framework that is designed to both protect the City's assets from loss, theft, or
misuse, and to compile sufficient reliable information for the preparation of these financial statements in accordance
with generally accepted accounting principles (GAAP). Internal accounting controls are designed to provide
reasonable but not absolute assurance regarding the safeguarding of the City's assets against loss, theft, or misuse,
and ensuring that adequate financial records are maintained for preparing financial statements, and maintaining
accountability for assets. The development of an appropriate internal control system requires estimates and
judgments by management to ensure that the costs do not exceed the benefits of the system. The City of Elk River's
internal control structure is designed so that the estimated costs of control do not exceed the benefits.
Generally accepted accounting principles require that management provide a narrative introduction, overview and
analysis to accompany the basic financial statements in the form of a Management's Discussion and Analysis
(MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with
it. The City of Elk River's MD&A immediately follows the independent auditors' report and provides a narrative
introduction, overview, and analysis of the basic financial statements.
Profile of the Government
The City of Elk River was originally incorporated in 1880 and consolidated with Elk River Township in 1978 to
form a city of 44 square miles. The City of Elk River is located in Sherburne County and serves as the county seat.
Elk River is located approximately halfway between the metropolitan areas of Minneapolis/St. Paul and Saint Cloud
along the Mississippi River. The City of Elk River has been growing and will not reach full development in the near
future. The current population is approximately 25,000. Urban services are available to about one-third of the land
area in the City.
The City of Elk River operates under a statutory form of government consisting of a four member City Council and
a Mayor who is also a voting member. Council members are elected by ward to a four-year term with two Council
seats up for election each even year. The Mayor is also elected to a four-year term. The City Council is responsible
for adopting the City's budget and tax levy, passing resolutions and ordinances, all hiring and firing decisions,
policy making, development and growth planning, and overall direction of the City.
In addition to providing general government services, the City of Elk River provides a full range of other services
including police and fire protection, building and other safety inspections, planning and zoning, economic
development, environmental services, parks and recreation, library, street, snow removal, infrastructure maintenance
and repair, and others. The City also provides municipal water, sewer, storm water, garbage, and electric services
and operates two off -sale liquor stores.
The annual budget serves as the foundation for the City of Elk River's financial planning and control. Budget
requests are submitted by all departments to the Finance Department each May. The Finance Department compiles
these requests into a proposed budget. The Finance Department and city administrator review the information and
present a draft budget to the Council in July for consideration. Following Council discussion and public input, the
final tax levy and budget are approved in December. The City's Financial Management Policies allow department
heads to make administrative budget amendments (excluding personal service and capital outlay) throughout the
year as long as the total department budget does not change and the amendment is approved by the city
administrator and finance director. The Council approves additional budget amendments in December of each year.
Budget to actual comparisons are provided in this report for each individual governmental fund for which an
appropriated annual budget has been adopted. For the general fund this comparison is presented on page 26 as part
of the basic financial statements for the governmental funds. For other governmental funds with appropriated
annual budgets this comparison is presented in the governmental fund subsection of this report.
Local economy
The local economy has continued to grow by the increase in building permits with a construction value of
$66,048,488 being issued in 2018. $48,387,226 accounts for new construction and $17,661,262 of additions and
remodels make up the balance. The number of new housing permits increased from 113 in 2017 to 153 in 2018, the
largest number of housing starts since 2009. Single family homes accounted for 152 of the new housing permits
along with a multi -family 40 -unit apartment building. The average value new home is about $245,000 compared to
$230,000 in 2017.
Many of Elk River's largest employers reported stable or steady growth of employment levels between 2017 and
2018. This is largely due to the upward trend in manufacturing activity in the region. There has been continued
interest in both affordable and market rate multi -family housing projects.
The commercial/industrial sector has experienced notable growth, expansion and reinvestment as well. In 2018,
there were several facility expansions and completion of two senior housing projects. The outlook in this region
looks promising with commercial industrial activity and the recent increase in single-family residential development
projects.
Long-term financial planning
As part of a yearly budget process, the City Council reviews the updated Financial Management Plan. The Financial
Management Plan provides a long-range forecast that brings together future expenditures, revenues, and
development of the City. The Council has been diligent in maintaining a level tax rate. This plan provides the
information needed to develop in a manner that will sustain or expand City services while keeping the property taxes
stable. Department heads take part in this process to estimate staff additions, service levels, and capital needs for the
next ten years.
In addition, the City Council continually reviews cash flow analysis and long-term planning as part of the
comprehensive Capital Improvement Plan (CIP) process. The CIP is a 5 -year planning tool that forecasts the City's
capital needs based on the City's long-range plans, goals, and policies.
Relevant Financial Policies
The City Council has adopted a comprehensive set of Financial Management Policies that provide the basic
framework for the overall fiscal management of the City. The Financial Management Policies include: revenues,
property taxes, investments, purchasing, financial reporting, reserves, fund balance, capital investment, and debt
policies. The City's policy on fund balance states that the City will maintain an unassigned fund balance of not less
than 40-45% of budgeted general fund operating expenditures. The percentage of unassigned fund balance at
December 31, 2018 is 45%. Since property tax payments are received by the City in two installments in July and
December, the City needs adequate cash reserves for cash flow in order to avoid short-term borrowing to finance
operations.
Major Initiatives
Through the state's Corridors of Commerce program, Highway 169, which runs north -south through Elk River, was
selected for $157 million state transportation funding. The project will convert Highway 169 to a freeway by
removing five stop lights through Elk River. The signalized intersections along this stretch of highway are over
capacity, resulting in significant delays and congestion, leading to traffic safety concerns. Project construction is
expected to start in 2023. City officials will be heavily involved with the preliminary design beginning in 2019 and
throughout all stages of the project to assure local interests are met. Local frontage road street improvement projects
will need to take place prior to the Highway 169 construction.
City voters' approved the local option sales tax referendum in November, directing the City to move forward with
the Active Elk River plan design. The plan is a $35,000,000 comprehensive investment in a multi-purpose
recreational facility, major park improvements, as well as funds designated to trails and natural/outdoor resources.
The city will be working closely with our leaders at the state Legislature to get the proper approvals during the
legislative session in early 2019.
Implementation of the first of three phases of the Wayfmding Master Plan began in late 2018. Signs were installed
in our neighborhood and signature parks to ease navigation for visitors and enhance the experiences in our
recreational areas. The next phases will include entrance monuments for city gateways, directional signs, and
informational kiosks. The wayfinding program ensures consistency and continuity for all city signage throughout the
city.
The City received grant approval from the Minnesota Department of Natural Resources for the funding of $362,000
for improvements to Woodland Trails Regional Park. Improvements will include a picnic shelter, a nature play area,
biathlon/archery range upgrades, and park signage.
The City has begun acquiring blighted properties near downtown for future redevelopment and development of new
commercial and retail projects along Highway 10, one of the major roadways through the City.
Awards and Acknowledgements
The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of
Achievement for Excellence in Financial Reporting to the City of Elk River for its Comprehensive Annual Financial
Report for the fiscal year ended December 31, 2017. This was the 29th consecutive year that the City has received
this prestigious award. In order to be awarded a Certificate of Achievement, a government must publish an easily
readable and efficiently organized Comprehensive Annual Financial Report. This report must satisfy both generally
accepted accounting principles and applicable legal requirements.
A Certificate of Achievement is valid for a period of one year only. We believe that our current Comprehensive
Annual Financial Report continues to meet the Certificate of Achievement Program's requirements and we are
submitting it to the GFOA to determine its eligibility for another certificate.
The City received the GFOA Award for the Distinguished Budget Presentation for the City budget for the fiscal year
beginning January 1, 2018. It was the tenth consecutive year the City received the award for the document.
The preparation of this report is made possible by the efficient and dedicated services of the entire staff of the City
Administrator's office and Finance Department. The Mayor and City Council are to be commended for their
diligence and resolve in keeping the City in sound and stable financial condition. The City Council's commitment
to continually plan for the City's future and dedication to maintain high financial standards has helped the City
maintain its strong financial condition during a period of growth and market changes.
Respectfully submitted,
Lori Ziemer
Finance Director
Government Finance Officers Association
Certificate of
Achievement
for Excellence
in Financial
Reporting
Presented to
City of Elk River
Minnesota
For its Comprehensive Annual
Financial Report
for the Fiscal Year Ended
December 31, 2017
Executive Director/CEO
4
CITY OF ELK RIVER
ORGANIZATIONAL CHART
- City Clerk - Finance - Planning - Police Admin. - Fire - Recreation - Engineering - Water
- Human Resources - Payroll - Environmental - Patrol - Emergency Mgmt. - Sr. Center - Building Maint. - Electric
- Communications - Information Tech. - Building Safety - Investigations -Ice Arena - Streets/Parks
- Liquor - Code Enforcement - Support Services - Library - Equip. Services
- Reserves - Golf Course - Sewer
- Storm Water
CITY OF ELK RIVER, MINNESOTA
ELECTED AND APPOINTED OFFICIALS
FOR THE YEAR ENDED DECEMBER 31, 2018
CITY COUNCIL
John Dietz
Jerry Olsen
Nate Ovall
Jennifer Wagner
Matthew Westgaard
APPOINTED PERSONNEL
Calvin Portner
Lori Ziemer
Ron Nierenhausen
Mark Dickinson
Michael Hecker
Justin Femrite
Suzanne Fischer
Term Expires
December 31,
Mayor
2018
Council member
2018
Council member
2020
Council member
2018
Council member
2020
City Administrator
Finance Director
Police Chief
Fire Chief
Parks & Recreation Director
Public Works Director/City Engineer
Community Development Director
FINANCIAL SECTION
CliftonLarson4en LLP
CLAconnect.com
INDEPENDENT AUDITORS' REPORT
Honorable Mayor and City Council
City of Elk River
Elk River, Minnesota
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, the business -
type activities, the discretely presented component unit, each major fund, and the aggregate remaining
fund information of the City of Elk River, as of and for the year ended December 31, 2018, and the
related notes to the financial statements, which collectively comprise the entity's basic financial
statements as listed in the table of contents.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with accounting principles generally accepted in the United States of America; this includes
the design, implementation, and maintenance of internal control relevant to the preparation and fair
presentation of financial statements that are free from material misstatement, whether due to fraud
or error.
Auditors' Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We did not
audit the financial statements of the Electric and Water proprietary funds, which represent 63% of the
assets and deferred outflows, 58% of the net position, and 83% of the revenues of the proprietary funds
and business -type activities. Those financial statements were audited by other auditors whose report
thereon has been furnished to us, and our opinion, insofar as it relates to the amounts included for the
proprietary funds and business -type activities, is based solely on the report of the other auditors. We
conducted our audit in accordance with auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Government Auditing Standards,
issued by the Comptroller General of the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free from
material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. The procedures selected depend on the auditors' judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the entity's
preparation and fair presentation of the financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the entity's internal control. Accordingly, we express no such opinion. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of significant
accounting estimates made by management, as well as evaluating the overall presentation of the
financial statements.
�A member of
Nexia
International
Honorable Mayor and City Council
City of Elk River
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinions.
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the
respective financial position of the governmental activities, the business -type activities, the discretely
presented component unit, each major fund, and the aggregate remaining fund information of the City
of Elk River as of December 31, 2018, and the respective changes in financial position and, where
applicable, cash flows thereof and the respective the budgetary comparison for the General fund for the
year then ended in accordance with accounting principles generally accepted in the United States of
America.
Emphasis of Matter
For the year ended December 31, 2018, the City adopted GASB Statement No. 75, Accounting and
Financial Reporting for Postemployment Benefits Other Than Pension. As a result of the
implementation of this standard, the City reported a restatement for the change in accounting principle
(see Note 15). Our auditors' opinion was not modified with respect to the restatement.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the
management's discussion and analysis, schedules of proportionate share of net pension liability,
schedules of City's pension contributions, schedule of changes in the net pension liability and related
ratios - fire relief, schedule of city contributions - fire relief, and the schedule of changes in the total
OPEB liability and related ratios, as listed in the table of contents, be presented to supplement the
basic financial statements. Such information, although not a part of the basic financial statements, is
required by the Governmental Accounting Standards Board who considers it to be an essential part of
financial reporting for placing the basic financial statements in an appropriate operational, economic, or
historical context. We have applied certain limited procedures to the required supplementary
information in accordance with auditing standards generally accepted in the United States of America,
which consisted of inquiries of management about the methods of preparing the information and
comparing the information for consistency with management's responses to our inquiries, the basic
financial statements, and other knowledge we obtained during our audit of the basic financial
statements. We do not express an opinion or provide any assurance on the information because the
limited procedures do not provide us with sufficient evidence to express an opinion or provide any
assurance.
Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that
collectively comprise the City of Elk River's basic financial statements. The introductory section,
combining and individual fund statements and schedules, and statistical sections are presented for
purposes of additional analysis and are not a required part of the basic financial statements.
The combining and individual fund statements and schedules are the responsibility of management and
were derived from and relates directly to the underlying accounting and other records used to prepare
the basic financial statements. Such information has been subjected to the auditing procedures applied
in the audit of the basic financial statements and certain additional procedures, including comparing
and reconciling such information directly to the underlying accounting and other records used to
prepare the basic financial statements or to the basic financial statements themselves, and other
additional procedures in accordance with auditing standards generally accepted in the United States of
America. In our opinion, the combining and individual statements and schedules are fairly stated, in all
material respects, in relation to the basic financial statements as a whole.
Honorable Mayor and City Council
City of Elk River
The introductory and statistical sections have not been subjected to the auditing procedures applied in
the audit of the basic financial statements and, accordingly, we do not express an opinion or provide
any assurance on them.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated June 7,
2019, on our consideration of the City of Elk River's internal control over financial reporting and on our
tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and
other matters. The purpose of that report is solely to describe the scope of our testing of internal control
over financial reporting and compliance and the result of that testing, and not to provide an opinion on
the effectiveness of City of Elk River's internal control over financial reporting or on compliance. That
report is an integral part of an audit performed in accordance with Government Auditing Standards in
considering City of Elk River's internal control over financial reporting and compliance.
zz�
CliftonLarsonAllen LLP
Minneapolis, Minnesota
June 7, 2019
Management's Discussion and Analysis
As management of the City of Elk River, we offer readers of the City's financial statements this narrative overview and
analysis of the financial activities of the City for the fiscal year ended December 31, 2018. We encourage readers to
consider the information presented here in conjunction with the additional information that we have furnished in our
letter of transmittal, which can be found on pages 1 - 3 of this report.
Financial Highlights
The assets and deferred outflows of resources of the City of Elk River exceeded its liabilities and deferred inflows of
resources at the close of the most recent fiscal year by $209,688,313 (net position). Of this amount, $41,994,114
(unrestricted net position) may be used to meet the City's ongoing obligations to citizens and creditors.
The City's total net position increased by $5,194,969, an increase of $1,349,424 in the governmental activities
attributable to grants and contributions in public works and an increase of $3,845,545 in the business -type activities
attributable to revenues in excess of expenses of $3,823,092 in the Electric fund due to increased usage impacted by
additional territory acquisition.
As of the close of the current fiscal year, the City of Elk River's governmental funds reported combined ending fund
balances of $30,777,279.
The City of Elk River's total long-term liabilities increased $7,279,785 during the current fiscal year, from $45,167,589
to $52,447,374.
Governmental activities:
Bonds payable
Compensated absences
Total governmental activities
Business -type activities:
Bonds payable
Notes payable
Compensated absences
Total business -type activities
Total City long-term liabilities
Beginning Ending
Balance Additions Reductions Balance
$ 19,247,312 $ - $ (1,615,296) $ 17,632,016
1,555,037 611,591 (586,661) 1,579,967
20,802,349 611,591 (2,201,957) 19,211,983
22,914,706 10,435,104 (1,439,474) 31,910,336
1,018,860 - (198,252) 820,608
431,674 281,904 (209,131) 504,447
24,365,240 10,717,008 (1,846,857) 33,235,391
$ 45,167,589 $ 11,328,599 $ (4,048,814) $ 52,447,374
Ilt
Special
Debt
Capital
General
Revenue
Service
Projects
Total
Nonspendable
$ 124,064
$ 114,976
$ -
$ -
$ 239,040
Restricted
-
1,358,784
1,473,230
318,729
3,150,743
Committed
-
7,278,866
-
4,789,748
12,068,614
Assigned
237,813
-
-
10,716,044
10,953,857
Unassigned
7,299,540
-
-
(2,934,515)
4,365,025
$ 7,661,417
$ 8,752,626
$ 1,473,230
$ 12,890,006
$ 30,777,279
The City of Elk River's total long-term liabilities increased $7,279,785 during the current fiscal year, from $45,167,589
to $52,447,374.
Governmental activities:
Bonds payable
Compensated absences
Total governmental activities
Business -type activities:
Bonds payable
Notes payable
Compensated absences
Total business -type activities
Total City long-term liabilities
Beginning Ending
Balance Additions Reductions Balance
$ 19,247,312 $ - $ (1,615,296) $ 17,632,016
1,555,037 611,591 (586,661) 1,579,967
20,802,349 611,591 (2,201,957) 19,211,983
22,914,706 10,435,104 (1,439,474) 31,910,336
1,018,860 - (198,252) 820,608
431,674 281,904 (209,131) 504,447
24,365,240 10,717,008 (1,846,857) 33,235,391
$ 45,167,589 $ 11,328,599 $ (4,048,814) $ 52,447,374
Ilt
Overview of the Financial Statements
This discussion and analysis are intended to serve as an introduction to the City of Elk River's basic financial
statements. The City's basic financial statements comprise three components: 1) government -wide financial statements,
2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary
information in addition to the basic financial statements themselves.
Government -wide Financial Statements
The government -wide financial statements are designed to provide readers with a broad overview of the City of Elk
River's finances, in a manner similar to a private -sector business.
The statement of net position presents information on all of the City of Elk River's assets and deferred outflows of
resources, and liabilities and deferred inflows of resources, with the difference between the two reported as net position.
Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the
City of Elk River is improving or deteriorating.
The statement of activities presents information showing how the City's net position changed during the most recent
fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs,
regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items
that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave).
Both of the government -wide financial statements distinguish functions of the City of Elk River that are principally
supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to
recover all or a significant portion of their costs through user fees and charges (business -type activities). The
governmental activities of the City of Elk River include general government, public safety, public works, culture and
recreation, economic development and interest on long-term debt. The business -type activities of the City of Elk River
include municipal liquor, garbage, sewer, storm water, water, and electric.
The government -wide financial statements include not only the City of Elk River itself (known as the primary
government), but also a legally separate Housing & Redevelopment Authority (HRA) for which the City of Elk River is
financially accountable. Financial information for the HRA is reported separately from the financial information
presented for the primary government itself. The Elk River Municipal Utilities, although also legally separate, functions
for all practical purposes as a department of the City of Elk River, and therefore has been included as an integral part of
the primary government.
The government -wide financial statements can be found starting on page 20 of this report.
Fund Financial Statements. A fund is a grouping of related accounts that is used to maintain control over resources
that have been segregated for specific activities or objectives. The City of Elk River, like other state and local
governments, uses fund accounting to ensure and demonstrate compliance with finance -related legal requirements. All
of the funds of the City of Elk River can be divided into three categories: governmental funds, proprietary funds and
fiduciary funds.
Governmental Funds. Governmental funds are used to account for essentially the same functions reported as
governmental activities in the government -wide financial statements. However, unlike the government -wide financial
statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as
well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in
evaluating a government's near-term financing requirements.
Because the focus of governmental funds is narrower than that of the government -wide financial statements, it is useful
to compare the information presented for governmental funds with similar information presented for governmental
activities in the government -wide financial statements. By doing so, readers may better understand the long-term impact
of the government's near-term financing decisions. Both the governmental fund balance sheet and the governmental
fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this
comparison between governmental funds and governmental activities.
11
The City of Elk River maintains two individual major governmental funds. Information is presented separately in the
governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in
fund balances for the General and Pavement Management funds. Data from the other governmental funds are combined
into a single, aggregated presentation. Individual fund data for each of these nonmajor funds is provided in the form of
combining statements elsewhere in this report.
The City of Elk River adopts an annual budget for its General Fund and some special revenue funds. A budgetary
comparison statement has been provided for those funds to demonstrate compliance with this budget.
The basic governmental fund financial statements can be found starting on page 22 of this report.
Proprietary Funds. When the City of Elk River charges customers for the services it provides - whether to outside
customers or to other departments of the City - these services are generally reported in proprietary funds. Proprietary
funds are reported in the same way that all activities are reported in the statement of net position and the statement of
revenues, expenses, and changes in net position. The enterprise funds are the same as the business -type activities
reported in the government -wide statements but provide more detail and additional information, such as cash flows, for
proprietary funds. The City of Elk River uses enterprise funds to account for its municipal liquor, garbage, sewer, storm
water, water, and electric operations.
The basic proprietary fund financial statements can be found starting on page 27 of this report.
Fiduciary Funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the
government. Fiduciary funds are not reflected in the government -wide financial statements because the resources of
those funds are not available to support the City of Elk River's own programs. The accounting used for fiduciary funds
is much like that used for proprietary funds.
The basic fiduciary fund financial statements can be found on page 35 of this report.
Notes to Financial Statements. The notes provide additional information that is essential to a full understanding of the
data provided in the government -wide and fund financial statements. The notes to the financial statements can be found
starting on page 36 of this report.
Other Information. In addition to the basic financial statements and accompanying notes, this report also presents
certain required supplementary information concerning the City of Elk River's share of net pension liabilities (assets)
for defined benefit plans, schedules of contributions, and progress in funding its obligation to provide pension and other
postemployment benefits to its employees. Required supplementary information can be found starting on page 75 of this
report.
The combining statements referred to earlier in connection with nonmajor governmental funds are presented
immediately following the required supplementary information. Combining and individual fund statements and
schedules can be found starting on page 82 of this report.
Government -wide Financial Analysis
As noted earlier, net position may serve over time as a useful indicator of a government's financial position. In the case
of the City of Elk River, assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources
by $209,688,313 at the close of the most recent fiscal year.
By far, the largest portion of the City of Elk River's net position (77 percent) reflects its investment in capital assets
(e.g., land, buildings, machinery, and equipment) less any related debt used to acquire those assets that is still
outstanding. The City of Elk River uses these capital assets to provide services to citizens; consequently, these assets are
not available for future spending. Although the City of Elk River's investment in its capital assets is reported net of
related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since
the capital assets themselves cannot be used to liquidate these liabilities.
IVA
Current and other assets
Capital assets
Total assets
Deferred outflows of resources
Long-term liabilities
Other liabilities
Total liabilities
Deferred inflows of resources
Net Position:
Net investment in capital assets
Restricted
Unrestricted
Total net position
City of Elk River Net Position
Governmental
Activities
2018 2017
$35,189,365 $32,661,895
Business -type
Activities
2018 2017
$35,963,873 $33,385,869
Total
2018 2017
$71,153,238 $66,047,764
6,294,084
8,677,833
828,823
1,373,281
7,122,907
10,051,114
27,502,045
30,660,026
37,166,952
28,982,292
64,668,997
59,642,318
1,758,155
2,015,482
5,689,316
5,689,085
7,447,471
7,704,567
29,260,200
32,675,508
42,856,268
34,671,377
72,116,468
67,346,885
7,784,239
8,778,520
1,062,545
1,028,211
8,846,784
9,806,731
77,092,055
78,958,608
85,104,737
83,919,324
162,196,792
162,877,932
4,236,048
2,925,562
1,261,359
997,660
5,497,407
3,923,222
17,685,456
16,021,664
24,308,658
21,952,303
41,994,114
37,973,967
$99,013,559
$97,905,834
$110,674,754
$106,869,287
$209,688,313
$204,775,121
An additional portion of the City of Elk River's net position (3 percent) represents resources that are subject to external
restrictions on how they may be used. The remaining balance of unrestricted net position ($41,994,114) may be used to
meet the City of Elk River's ongoing obligations to citizens and creditors.
At the end of the current fiscal year, the City of Elk River is able to report positive balances in all three categories of net
position, both for the City as a whole, as well as for its separate governmental and business -type activities.
13
Revenues:
Program revenues:
Charges for services
Operating grants and contributions
Capital grants and contributions
General revenues:
Property taxes
Other taxes
Unrestricted investment earnings
Miscellaneous revenue
Gain on disposal of capital assets
Total revenues
Expenses:
General government
Public safety
Public works
Culture and recreation
Economic development
Interest on long-term debt
Municipal liquor
Garbage
Sewer
Storm Water
Water
Electric
Total expenses
City of Hk River Changes in Net Position
Governmental
Business -type
Activities
Activities
Total
2018
2017
2018
2017
2018
2017
$ 3,143,111 $
3,544,605
$ 53,452,010 $
49,950,014
$ 56,595,121 $
53,494,619
1,381,151
1,319,377
-
-
1,381,151
1,319,377
1,721,638
3,187,830
2,295,004
2,196,626
4,016,642
5,384,456
12,192,911
11,645,328
-
-
12,192,911
11,645,328
1,591,663
1,543,086
-
-
1,591,663
1,543,086
430,642
498,235
467,294
231,599
897,936
729,834
1,754,373
1,720,932
-
-
1,754,373
1,720,932
-
116,012
2,462
17,500
2,462
133,512
22,215,489
23,575,405
56,216,770
52,395,739
78,432,259
75,971,144
3,981,134
3,932,100
-
-
3,981,134
3,932,100
7,398,041
7,670,839
7,398,041
7,670,839
5,619,836
6,803,504
5,619,836
6,803,504
4,474,619
4,157,960
4,474,619
4,157,960
969,443
1,221,761
969,443
1,221,761
486,630
549,303
-
-
486,630
549,303
-
-
6,233,700
6,030,973
6,233,700
6,030,973
1,588,956
1,521,803
1,588,956
1,521,803
3,504,489
3,377,828
3,504,489
3,377,828
634,073
774,805
634,073
774,805
2,666,149
2,856,343
2,666,149
2,856,343
-
-
35,680,220
33,688,690
35,680,220
33,688,690
22,929,703
24,335,467
50,307,587
48,250,442
73,237,290
72,585,909
Change in net position before transfers (714,214) (760,062) 5,909,183 4,145,297
Transfers
Change in net position
Net position - beginning,
as restated (Note 15)
Net position - ending
2,063,638 1,971,250 (2,063,638) (1,971,250)
5,194,969 3,385,235
1,349,424 1,211,188 3,845,545 2,174,047 5,194,969 3,385,235
97,664,135 96,694,646 106,829,209 104,695,240 204,493,344 201,389,886
$ 99,013,559 $ 97,905,834 $ 110,674,754 $ 106,869,287 $ 209,688,313 $ 204,775,121
Governmental Activities. Governmental activities account for 47 percent of the City of Elk River's net position.
Governmental activities increased the City's net position by $1,349,424. Key elements of the relevant changes are as
follows:
• Program expenses decreased $1,405,764 or 6%, program revenues decreased $1,805,912 or 22%, and
general revenues increased $445,996 or 3%.
• The decrease in public works expenses is due to the establishment of a quiet zone along the railroad
corridor through Elk River that was completed in 2017.
• The City's pension expense decreased $920,187 compared to the expense in the prior year due to a
change in actuarial assumptions in 2018.
• The charges for services decrease is related to larger commercial building projects in 2017 than in
2018.
• The decrease in grants and contributions is related to state aid reimbursement in 2017 for street
improvement projects. The City plans for major street improvement projects every odd year.
• Property taxes increased by $547,583 due to the increased tax levy from the prior year and the related
additional collections.
14
Expenses and Program Revenues - Governmental Activities
$8,000,000
$7,000,000
$6,000,000
$5,000,000
$4,000,000
$3,000,000
$2,000,000
$1,000,000
General Public safety Public works Culture and Economic Interest on
government recreation development long-term debt
Revenues ■Expenses
Revenues by Source - Governmental Activities
Unrestricted investment Net transfers
8 Soho Charges for services
earnings 12.9% Operating grants and
1.8% contributions
Other taxes 5.7%
6.6%
Capital grants and
contributions
7.1%
Miscellaneous
7.2%
Property taxes
50.2%
IR
Business -type Activities. Business -type activities increased the City of Elk River's net position by $3,845,545. Key
elements of this increase are as follows:
• Charges for services for business -type activities increased $3.5 million due largely to an increase in electric
revenues impacted by increased electric usage due in part by territory acquisition. The electric utility accounts
for 73% of the total charges for services.
• Garbage rates were restructured and increased an average of 10% to offset the increased garbage hauling and
disposal fees.
• Investment income increased $235,695 during 2018 due to investment market conditions.
Expenses and ProgramRevenues - Business -type Activities
$45,000,000
$40,000,000
$35,000,000
$30,000,000
$25,000,000 — $20,000,000
$15,000,000
$10,000,000
$5,000,000
Municipal liquor Garbage Sewer Storm Water Water Electric
■ Revenues ■ Expenses
Revenues by Source - Business -type Activities
Unrestricted
in ,,,trr t -i- Gain on disnosalof
95.0%
Financial Analvsis of the Government's Funds
Governmental Funds. The focus of the City's governmental funds is to provide information on near-term inflows,
outflows, and balances of spendable resources. Such information is useful in assessing the City's financing
requirements. In particular, unassigned fund balance may serve as a useful measure of a government's net resources
available for spending at the end of the fiscal year.
As of the end of the current fiscal year, the City's governmental funds reported combined ending fund balances of
$30,777,279. Approximately 14 percent of this total amount ($4,365,025) constitutes unassigned fund balance. The
remainder of fund balance ($26,412,254) is not available for new spending because it is either 1) non -spendable
($239,040), 2) restricted ($3,150,743), 3) committed ($12,068,614) or 4) assigned ($10,953,857) for other purposes.
The General Fund is the chief operating fund of the City of Elk River. The total fund balance of the General Fund
increased $363,907 during the current year, resulting primarily from property taxes.
The Pavement Management fund increased $1,651,191 due to the collection of franchise fees and intergovernmental
revenues in excess of current year street project expenditures.
Proprietary Funds. The City of Elk River's proprietary funds provide the same type of information found in the
government -wide statements, but in more detail.
Unrestricted net position in the respective proprietary funds are Municipal Liquor - $4,296,260, Garbage - $196,078,
Sewer - $4,529,146, Storm Water - $723,564, Water - $6,163,714 and Electric - $8,399,896. The Garbage fund net
position decreased $32,343 due to an increase in garbage disposal fees. The Sewer fund net position decreased $116,234
due to budgeted transfers to other funds for administrative expenses. The Storm Water fund net position decreased
$142,576 due mainly to depreciation expense. All other proprietary funds had increases in net position.
General Fund Budgetary Highlights
The original budget for the General Fund was amended to reflect an increase in public safety state aid revenue with a
corresponding increase in public safety expenditures. Key factors are as follows:
• Total revenue collections were 99.8% of final budget. Licenses and permits were under budget $87,069 and
interest income was over $40,484.
• Expenditures were under budget by $403,597 due mainly to personnel vacancies and sound fiscal control by
City departments.
Capital Asset and Debt Administration
Capital Assets. The City of Elk River's investment in capital assets for its governmental and business -type activities as
of December 31, 2018, amounts to $212,375,421 (net of accumulated depreciation). This investment in capital assets
includes land, buildings, improvements, equipment and infrastructure. The total increase in the City of Elk River's
investment in capital assets for the current year was $6,545,562 or 3 percent.
Major capital asset events during the current fiscal year included the following:
• $740,000 in public safety equipment, $493,000 in public works equipment, and $270,000 in parks equipment.
• Improvements to various parks totaled $313,000.
• The Electric utility acquired additional infrastructure territory and completed the MMPA membership buy -in
increasing intangibles.
`1Fi
City of Ilk River Capital Assets
(Net of Depreciation)
Additional information on the City's capital assets can be found in Note 5 starting on page 48 of this report.
Long-term Debt. At the end of the current fiscal year, the City had total long-term debt outstanding of $64,668,997, an
increase of $5,026,679 from 2017. General obligation improvement bonds ($17,280,000) financed the construction of a
recreation facility, a public safety/city hall facility, and a public works facility. General obligation revenue bonds
($10,355,000) were used to finance sewer and water systems. Revenue bonds ($20,685,000) were used to finance
electric system improvements.
City of Elk River Outstanding Debt
Governmental
Business -type
Activities
Activities
Total
2018
2017
2018
2017
2018
2017
Land
$ 40,927,633
$ 40,984,633
$ 1,843,977
$ 1,843,977
$ 42,771,610
$ 42,828,610
Construction in progress
-
23,415
467,470
736,872
467,470
760,287
Buildings
23,013,163
24,559,757
18,022,254
18,867,534
41,035,417
43,427,291
Other improvements
2,309,751
2,240,194
-
-
2,309,751
2,240,194
Equipment
4,483,814
3,852,427
7,723,803
8,070,109
12,207,617
11,922,536
Intangible assets
-
-
23,114,072
10,375,677
23,114,072
10,375,677
Infrastructure
23,840,189
26,359,708
66,629,295
67,915,556
90,469,484
94,275,264
Total
$ 94,574,550
$ 98,020,134
$117,800,871
$107,809,725
$212,375,421
$205,829,859
Additional information on the City's capital assets can be found in Note 5 starting on page 48 of this report.
Long-term Debt. At the end of the current fiscal year, the City had total long-term debt outstanding of $64,668,997, an
increase of $5,026,679 from 2017. General obligation improvement bonds ($17,280,000) financed the construction of a
recreation facility, a public safety/city hall facility, and a public works facility. General obligation revenue bonds
($10,355,000) were used to finance sewer and water systems. Revenue bonds ($20,685,000) were used to finance
electric system improvements.
City of Elk River Outstanding Debt
Additional long-term debt in the amount of $820,608 is for notes payable, $2,084,414 is for compensated absences,
$1,017,081 is for other postemployment benefits obligations, and $11,204,542 is for net pension liability.
The City maintains a bond rating of AA+ from Standard & Poor's for general obligation debt.
State statutes limit the amount of general obligation debt a Minnesota City may issue to 3% of total Estimated Taxable
Market Value. The current debt limitation for the City of Elk River is $65,358,630. $12,762,883 of the City's net
outstanding debt is counted within the statutory limitation.
Additional information on the City's long-term debt can be found in Note 7 starting on page 52 of this report.
18
Governmental
Business -type
Activities
Activities
Total
2018
2017
2018
2017
2018
2017
Bonds payable:
General obligation bonds
$ 17,280,000
$ 18,560,000
$ -
$ -
$ 17,280,000
$ 18,560,000
G.O. revenue bonds
-
-
10,355,000
11,105,000
10,355,000
11,105,000
Revenue bonds
-
-
20,685,000
11,325,000
20,685,000
11,325,000
Special assessment bonds
-
295,000
-
-
-
295,000
Issuance premium
352,016
392,312
870,336
484,706
1,222,352
877,018
Total bonds payable, net
17,632,016
19,247,312
31,910,336
22,914,706
49,542,352
42,162,018
Notes payable
-
-
820,608
1,018,860
820,608
1,018,860
Compensated absences
1,579,967
1,555,037
504,447
431,674
2,084,414
1,986,711
Net OPEB obligation
813,033
468,119
204,048
156,161
1,017,081
624,280
Net pension liability
7,477,029
9,389,558
3,727,513
4,460,891
11,204,542
13,850,449
Total
$ 27,502,045
$ 30,660,026
$ 37,166,952
$ 28,982,292
$ 64,668,997
$ 59,642,318
Additional long-term debt in the amount of $820,608 is for notes payable, $2,084,414 is for compensated absences,
$1,017,081 is for other postemployment benefits obligations, and $11,204,542 is for net pension liability.
The City maintains a bond rating of AA+ from Standard & Poor's for general obligation debt.
State statutes limit the amount of general obligation debt a Minnesota City may issue to 3% of total Estimated Taxable
Market Value. The current debt limitation for the City of Elk River is $65,358,630. $12,762,883 of the City's net
outstanding debt is counted within the statutory limitation.
Additional information on the City's long-term debt can be found in Note 7 starting on page 52 of this report.
18
Economic Factors and Next Year's Budget
The City of Elk River estimates that the demand for City services will continue at stable growth levels due to the
improved economy and recent building activity. This was taken into consideration in preparation of the City's 2019
budget. The property tax levy is set annually and is adjusted as necessary to fund the cost of providing services to our
citizens and customers. Charges for services are evaluated each year and adjusted if warranted. The City expects to keep
the tax levy consistent in upcoming years.
Requests for Information
This financial report is designed to provide a general overview of the City of Elk River's finances for all those with an
interest in the City's finances. Questions concerning any of the information provided in this report or requests for
additional financial information should be addressed to City of Elk River, Attn: Finance Director, 13065 Orono Pkwy,
Elk River, Minnesota 55330 or by calling (763) 635-1000.
19
This page has been left blank intentionally
BASIC FINANCIAL STATEMENTS
CITY OF ELK RIVER, MINNESOTA
STATEMENT OF NET POSITION
DECEMBER 31, 2018
The notes to the financial statements are an integral part of this statement.
20
Primary Government
Governmental
Business -type
Component
Activities
Activities
Total
Unit - HRA
ASSETS
Cash and investments
$ 28,964,224
$ 30,263,783
$ 59,228,007
$ 893,978
Restricted cash and investments
-
1,261,359
1,261,359
-
Receivables:
Interest
132,030
45,868
177,898
-
Taxes
256,578
-
256,578
6,279
Accounts
449,945
2,351,840
2,801,785
-
Special assessments
355,487
-
355,487
-
Notes, net
1,969,512
1,969,512
623,206
Due from other governments
1,330,625
1,330,625
-
Due from primary government
-
-
195,682
Internal balances
170,202
(170,202)
-
-
Inventories
-
2,012,308
2,012,308
Prepaid items
239,040
198,917
437,957
-
Property held for resale
175,000
-
175,000
174,100
Pension asset
1,146,722
-
1,146,722
-
Capital assets:
Nondepreciable
40,927,633
2,311,447
43,239,080
257,100
Depreciable (net)
53,646,917
115,489,424
169,136,341
103,607
Total assets
129,763,915
153,764,744
283,528,659
2,253,952
DEFERRED OUTFLOWS OF RESOURCES
Deferred outflows - pensions
6,108,495
788,033
6,896,528
10,241
Deferred outflows - other postemployment benefits
36,068
5,980
42,048
-
Deferred charge on refunding
149,521
34,810
184,331
-
Total deferred outflows of resources
6,294,084
828,823
7,122,907
10,241
LIABILITIES
Accounts payable
503,323
3,783,510
4,286,833
31,333
Salaries payable
243,610
169,648
413,258
2,959
Due to other governments
17,678
222,652
240,330
-
Due to primary government
-
-
-
Due to component unit
195,682
-
195,682
Accrued interest payable
184,755
356,718
541,473
Customer deposits payable
-
1,056,735
1,056,735
Unearned revenue
613,108
100,053
713,161
Non-current liabilities:
Other due within one year
1,932,411
2,068,097
4,000,508
Other due in more than one year
17,279,572
31,167,294
48,446,866
Net OPEB liability due in more than one year
813,033
204,048
1,017,081
-
Net pension liability due in more than one year
7,477,029
3,727,513
11,204,542
51,835
Total liabilities
29,260,201
42,856,268
72,116,469
86,127
DEFERRED INFLOWS OF RESOURCES
Deferred inflows - pensions
7,784,239
1,062,545
8,846,784
15,585
NET POSITION
Net investment in capital assets
77,092,055
85,104,737
162,196,792
360,707
Restricted for:
Debt service
1,294,423
1,261,359
2,555,782
-
Landfill mitigation
76,896
-
76,896
Economic development
1,263,463
1,263,463
Law enforcement
20,742
20,742
Park improvements
318,729
318,729
Streets
1,261,795
1,261,795
-
Housing and redevelopment
-
-
-
1,801,774
Unrestricted
17,685,456
24,308,658
41,994,114
-
Total net position
$ 99,013,559
$ 110,674,754
$ 209,688,313
$ 2,162,481
The notes to the financial statements are an integral part of this statement.
20
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R
CITY OF ELK RIVER, MINNESOTA
GOVERNMENTAL FUNDS
BALANCESHEET
DECEMBER 31, 2018
ASSETS
Cash and investments
Receivables:
Interest
Taxes
Accounts
Special assessments
Notes, net
Due from other governments
Due from other funds
Due from component unit
Prepaid items
Property held for resale
Total assets
LIABILITIES
Accounts payable
Salaries payable
Due to other governments
Due to other funds
Due to component unit
Unearned revenue
Total liabilities
DEFERRED INFLOWS OF RESOURCES
Unavailable revenue - property taxes
Unavailable revenue - special assessments
Unavailable revenue - other
Total deferred inflows of resources
FUND BALANCES
Nonspendable
Restricted
Committed
Assigned
Unassigned
Total fund balances
Total liabilities, deferred inflows of
resources, and fund balances
The notes to the financial statements are an integral part of this statement.
22
Other
Total
General
Pavement
Governmental
Governmental
Fund
Management
Funds
Funds
$
7,573,318
$ 4,393,545
$
16,997,361
$
28,964,224
36,215
21,107
74,708
132,030
225,837
-
30,741
256,578
8,677
140,153
301,115
449,945
-
-
355,487
355,487
-
-
1,969,512
1,969,512
68,816
1,261,795
14
1,330,625
209,216
275,286
1,840,269
2,324,771
6,622
-
-
6,622
124,064
-
114,976
239,040
-
-
175,000
175,000
$
8,252,765
$ 6,091,886
$
21,859,183
$
36,203,834
$
278,174
$ 40,343
$
184,806
$
503,323
229,223
-
14,387
243,610
15,643
-
2,035
17,678
2,515
-
2,152,054
2,154,569
-
-
202,304
202,304
-
-
613,108
613,108
525,555
40,343
3,168,694
3,734,592
65,793
-
10,100
75,893
-
-
354,275
354,275
-
1,261,795
-
1,261,795
65,793
1,261,795
364,375
1,691,963
124,064
-
114,976
239,040
-
-
3,150,743
3,150,743
-
4,789,748
7,278,866
12,068,614
237,813
-
10,716,044
10,953,857
7,299,540
-
(2,934,515)
4,365,025
7,661,417
4,789,748
18,326,114
30,777,279
$
8,252,765
$ 6,091,886
$
21,859,183
$
36,203,834
The notes to the financial statements are an integral part of this statement.
22
CITY OF ELK RIVER, MINNESOTA
RECONCILIATION OF THE GOVERNMENTAL FUNDS
BALANCE SHEET TO THE STATEMENT OF NET POSITION
DECEMBER 31, 2018
FUND BALANCE - TOTAL GOVERNMENTAL FUNDS $ 30,777,279
Amounts reported for governmental activities in the statement of net position
are different because:
1. Capital assets used in governmental activities are not financial resources
and therefore are not reported in the governmental funds.
Governmental capital assets $176,820,497
Less accumulated depreciation (82,245,947) 94,574,550
2. Long-term assets for pensions reported in governmental activities are not
financial resources and therefore are not reported as assets in the funds. 1,146,722
3. Unavailable revenue in governmental funds is susceptible to full accrual
on the government -wide statements. 1,691,963
4. Long-term liabilities are not due and payable in the current period and
therefore are not reported in the governmental funds.
Bonds payable
(17,280,000)
Deferred charge on refunding
149,521
Issuance premium
(352,016)
Accrued interest payable
(184,755)
Compensated absences
(1,579,967)
Net pension liability
(7,477,029)
Net OPEB liability
(813,033) (27,537,279)
5. Governmental funds do not report long-term amounts related to pensions.
Deferred outflows of pension resources 6,108,495
Deferred inflows of pension resources (7,784,239) (1,675,744)
6. Governmental funds do not report long-term amounts related to other
postemployment benefits.
Deferred outflows of other postemployment benefits resources 36,068
NET POSITION OF GOVERNMENTAL ACTIVITIES $ 99,013,559
The notes to the financial statements are an integral part of this statement.
23
CITY OF ELK RIVER, MINNESOTA
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2018
EXPENDITURES
Current:
General government
3,631,936
- 101,810
Other
Total
7,269,887
General
Pavement
Governmental
Governmental
- 78,801
Fund
Management
Funds
Funds
REVENUES
Economic development
-
- 964,926
964,926
Taxes:
General government
Property taxes
$ 10,508,700
$ -
$ 1,706,002
$ 12,214,702
Other taxes
137,532
1,454,131
-
1,591,663
Licenses and permits
790,831
-
-
790,831
Intergovernmental revenue
578,324
390,620
436,987
1,405,931
Charges for services
960,294
-
1,222,623
2,182,917
Fines and forfeits
137,114
-
20,378
157,492
Special assessments
-
-
379,054
379,054
Interest income
130,484
16,143
284,015
430,642
Miscellaneous:
Landfill expansion fee
-
-
1,107,321
1,107,321
Refunds and reimbursements
114,548
180,091
90,203
384,842
Contributions
21,335
-
626,297
647,632
Other
9,384
-
63,639
73,023
Total revenues
13,388,546
2,040,985
5,936,519
21,366,050
EXPENDITURES
Current:
General government
3,631,936
- 101,810
3,733,746
Public safety
7,269,887
- 55,837
7,325,724
Public works
1,796,844
- 78,801
1,875,645
Culture and recreation
2,044,286
- 1,393,817
3,438,103
Economic development
-
- 964,926
964,926
Capital outlay:
General government
-
- 79,173
79,173
Public safety
-
- 740,275
740,275
Public works
-
389,794 646,810
1,036,604
Culture and recreation
-
- 575,051
575,051
Debt service:
Principal
-
- 1,575,000
1,575,000
Interest and service charges
-
- 507,661
507,661
Total expenditures
14,742,953
389,794 6,719,161
21,851,908
Excess (deficiency) of revenues
over (under) expenditures (1,354,407) 1,651,191 (782,642) (485,858)
OTHER FINANCING SOURCES (USES)
Transfers in 2,028,314 - 1,325,721 3,354,035
Transfers out (310,000) - (980,397) (1,290,397)
Sale of capital assets - - 86,586 86,586
Total other financing sources (uses) 1,718,314 - 431,910 2,150,224
Net change in fund balances 363,907 1,651,191 (350,732) 1,664,366
Fund balances - January 1 7,297,510 3,138,557 18,676,846 29,112,913
Fund balances - December 31 $ 7,661,417 $ 4,789,748 $ 18,326,114 $ 30,777,279
The notes to the financial statements are an integral part of this statement.
24
CITY OF ELK RIVER, MINNESOTA
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES,
AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS
TO THE STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED DECEMBER 31, 2018
NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS $ 1,664,366
Amounts reported for governmental activities in the statement of activities
are different because
1. Governmental funds report capital outlays as expenditures. However, in the
statement of activities, the cost of these assets is allocated over their estimated
useful lives and reported as depreciation expense. This is the amount by
which depreciation expense exceeded capital outlays in the current period.
Capital outlay $ 1,829,054
Capital contributions 142,936
Proceeds from the sale of capital assets (86,586)
Loss on disposal of capital assets (41,362)
Depreciation expense (5,289,626) (3,445,584)
2. Revenues in the statement of activities that do not provide current financial
resources are not reported as revenues in the governmental funds.
Property taxes (21,791)
Special assessments (366,412)
Other revenue 1,094,704 706,501
3. The issuance of long-term debt provides current financial resources to
governmental funds, while the repayment of the principal of long-term debt
consumes the current financial resources of governmental funds. Neither
transaction, however, has any effect on net position. Also, governmental
funds report the effect of premiums, discounts and similar items when debt
is first issued, whereas these amounts are deferred and amortized in the
statement of activities. The amounts below are the effects of these differences
in the treatment of long-term debt and related items.
Repayment of principal of long-term debt 1,575,000
Amortization of issuance premium 40,296
Amortization of deferred charge from refunding (36,265)
Accrued interest payable 17,000 1,596,031
4. Some expenses reported in the statement of activities do not require use of
current financial resources and, therefore, are not reported as expenditures
in governmental funds.
Compensated absences (24,930)
Net OPEB obligation (67,147) (92,077)
5. Long-term pension activity is not reported in governmental funds. 920,187
CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES $ 1,349,424
The notes to the financial statements are an integral part of this statement.
40i
CITY OF ELK RIVER, MINNESOTA
GENERAL FUND
STATEMENT OF REVENUES, EXPENDITURES,
AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
FOR THE YEAR ENDED DECEMBER 31, 2018
REVENUES
Taxes:
Property taxes
Other taxes
Licenses and permits
Intergovernmental revenue
Charges for services
Fines and forfeits
Interest income
Miscellaneous revenue:
Refunds and reimbursements
Contributions
Other
Total revenues
EXPENDITURES
Current:
General government
Public safety
Public works
Culture and recreation
Total expenditures
Excess (deficiency) of revenues over
(under) expenditures
OTHER FINANCING SOURCES (USES)
Transfers in
Transfers out
Total other financing sources (uses)
Net change in fund balance
Budget
3,779,150
Variance with
Original
Final
Actual
Final Budget
$ 10,497,800
$ 10,497,800
$ 10,508,700
$ 10,900
150,000
150,000
137,532
(12,468)
877,900
877,900
790,831
(87,069)
324,500
551,500
578,324
26,824
967,900
967,900
960,294
(7,606)
151,000
151,000
137,114
(13,886)
90,000
90,000
130,484
40,484
110,000
110,000
114,548
4,548
20,000
20,000
21,335
1,335
6,500
6,500
9,384
2,884
13,195,600
13,422,600
13,388,546
(34,054)
3,821,100
3,779,150
3,631,936
147,214
7,110,250
7,337,250
7,269,887
67,363
1,959,600
1,986,550
1,796,844
189,706
2,028,600
2,043,600
2,044,286
(686)
14,919,550
15,146,550
14,742,953
403,597
(1,723,950)
(1,723,950)
(1,354,407)
369,543
2,033,950
2,033,950
2,028,314
(5,636)
(310,000)
(310,000)
(310,000)
-
1,723,950
1,723,950
1,718,314
(5,636)
-
-
363,907
363,907
Fund balance -
January 1
7,297,510
7,297,510
7,297,510 -
Fund balance -
December 31
$ 7,297,510
$ 7,297,510
$ 7,661,417 $ 363,907
The notes to the financial statements are an integral part of this statement.
0.
CITY OF ELK RIVER, MINNESOTA
STATEMENT OF NET POSITION
PROPRIETARY FUNDS
DECEMBER 31, 2018
NET POSITION
Net investment in capital assets 1,658,234 25,155,640 9,622,325
Restricted for debt service - - - -
Unrestricted 4,296,260 196,078 4,529,146 723,564
Total net position $ 5,954,494 $ 196,078 $ 29,684,786 $ 10,345,889
The notes to the financial statements are an integral part of this statement.
27
Municipal
Storm
Liquor
Garbage
Sewer
Water
ASSETS
Current assets:
Cash and investments
$ 4,150,475
$ 201,306
$ 4,383,877
$ 791,886
Restricted cash and investments
-
-
-
-
Receivables (net):
Interest
19,939
751
21,106
2,801
Accounts
-
4,765
363,494
570
Due from other funds
-
130,039
345,343
40,862
Inventories
1,192,258
-
-
-
Prepaid items
-
-
-
-
Total current assets
5,362,672
336,861
5,113,820
836,119
Noncurrent assets:
Capital assets:
Nondepreciable
753,961
-
411,095
-
Depreciable
3,021,987
52,797,991
18,187,777
Accumulated depreciation
(2,117,714)
(19,273,446)
(8,565,452)
Total noncurrent assets
1,658,234
-
33,935,640
9,622,325
Total assets
7,020,906
336,861
39,049,460
10,458,444
DEFERRED OUTFLOWS OF RESOURCES
Deferred outflows - pensions
87,618
2,969
65,376
10,559
Deferred outflows - other postemployment benefits
2,837
-
2,957
186
Deferred charge on refunding
-
-
-
-
Total deferred outflows of resources
90,455
2,969
68,333
10,745
LIABILITIES
Accounts and contracts payable
366,510
122,139
27,837
29,404
Salaries payable
16,551
547
12,625
1,892
Due to other governments
69,982
-
-
-
Due to other funds
-
1,525
523
9,268
Unearned revenue
2,984
-
-
-
Accrued interest
-
105,002
Customer deposits payable
-
-
-
Compensated absences payable - current
29,748
18,378
1,923
Notes payable - current
-
-
-
Bonds payable - current
-
-
420,000
-
Total current liabilities
485,775
124,211
584,365
42,487
Noncurrent liabilities:
Compensated absences payable
42,588
-
13,940
3,919
Net other postemployment benefits obligation
51,738
-
44,347
7,391
Net pension liability
443,436
15,024
330,870
53,436
Notes payable
-
-
-
-
Bonds payable
-
-
8,360,000
-
Total noncurrent liabilities
537,762
15,024
8,749,157
64,746
Total liabilities
1,023,537
139,235
9,333,522
107,233
DEFERRED INFLOWS OF RESOURCES
Deferred inflows - pensions
133,330
4,517
99,485
16,067
NET POSITION
Net investment in capital assets 1,658,234 25,155,640 9,622,325
Restricted for debt service - - - -
Unrestricted 4,296,260 196,078 4,529,146 723,564
Total net position $ 5,954,494 $ 196,078 $ 29,684,786 $ 10,345,889
The notes to the financial statements are an integral part of this statement.
27
$ 6,718,151
$ 14,018,088
$ 30,263,783
-
1,261,359
1,261,359
254
1,017
45,868
177,966
1,805,045
2,351,840
129,289
13,392
658,925
15,115
804,935
2,012,308
24,632
174,285
198,917
7,065,407
18,078,121
36,793,000
458,926
687,465
2,311,447
37,160,524
79,817,637
190,985,916
(17,613,963)
(27,925,917)
(75,496,492)
20,005,487
52,579,185
117,800,871
27,070,894
70,657,306
154,593,871
97,897
523,614
788,033
-
-
5,980
6,962
27,848
34,810
104,859
551,462
828,823
75,962
3,161,658
3,783,510
21,283
116,750
169,648
2,863
149,807
222,652
23,598
794,213
829,127
97,069
-
100,053
16,796
234,920
356,718
110,275
946,460
1,056,735
27,757
169,375
247,181
-
200,916
200,916
260,000
940,000
1,620,000
635,603
6,714,099
8,586,540
23,988
172,831
257,266
18,159
82,413
204,048
454,388
2,430,359
3,727,513
-
619,692
619,692
874,455
21,055,881
30,290,336
1,370,990
24,361,176
35,098,855
2,006,593
31,075,275
43,685,395
127,452
681,694
1,062,545
18,877,994
29,790,544
85,104,737
-
1,261,359
1,261,359
6,163,714
8,399,896
24,308,658
$ 25,041,708
$ 39,451,799
$ 110,674,754
The notes to the financial
statements are
an integral part of this statement.
28
CITY OF ELK RIVER, MINNESOTA
STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION
PROPRIETARY FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2018
Operating expenses:
Personal services
Supplies
Purchased power
Other service charges
Depreciation
Total operating expenses
Operating income (loss)
Nonoperating revenues (expenses):
Interest income
Miscellaneous revenue
Interest expense
Gain (loss) on disposal of capital assets
Total nonoperating revenues (expenses)
Income (loss) before contributions and transfers
Capital contributions
Transfers in
Transfers out
Change in net position
Net position - beginning, as restated (Note 15)
Net position - ending
716,243
Municipal
536,657
95,117
Storm
16,169
Liquor
Garbage
Sewer
Water
Sales and cost of sales:
81,304
119,186
-
1,639,461
Sales
$ 7,201,031
$
$
$
Cost of sales
(5,119,654)
(1,004,498)
(148,589)
Gross profit
2,081,377
4,865
48,050
3,700
Operating revenues:
-
54,634
-
User charges
-
1,550,274
2,116,555
485,087
Delinquency collections
-
2,674
1,242
397
Other
2,124
550
128,997
-
Total operating revenues
2,124
1,553,498
2,246,794
485,484
Operating expenses:
Personal services
Supplies
Purchased power
Other service charges
Depreciation
Total operating expenses
Operating income (loss)
Nonoperating revenues (expenses):
Interest income
Miscellaneous revenue
Interest expense
Gain (loss) on disposal of capital assets
Total nonoperating revenues (expenses)
Income (loss) before contributions and transfers
Capital contributions
Transfers in
Transfers out
Change in net position
Net position - beginning, as restated (Note 15)
Net position - ending
716,243
25,887
536,657
95,117
15,850
16,169
244,354
174
262,767
1,546,900
830,820
81,304
119,186
-
1,639,461
457,478
1,114,046
1,588,956
3,251,292
634,073
969,455
(35,458)
(1,004,498)
(148,589)
55,235
4,865
48,050
3,700
-
-
54,634
-
(253,197)
55,235
4,865
(150,513)
3,700
1,024,690
(30,593)
(1,155,011)
(144,889)
- 1,188,777 37,313
45,000 - -
(689,174) (46,750) (150,000) (35,000)
335,516 (32,343) (116,234) (142,576)
5,618,978 228,421 29,801,020 10,488,465
$ 5,954,494 $ 196,078 $ 29,684,786 $ 10,345,889
The notes to the fmancial statements are an integral part of this statement.
29
$ $ $ 7,201,031
(5,119,654)
2,081,377
2,445,688
39,039,573
45,637,177
18,081
199,753
222,147
52,052
(459,421)
(275,698)
2,515,821
38,779,905
45,583,626
602,831
2,615,460
4,592,195
237,888
124,830
639,265
-
26,710,514
26,710,514
589,820
3,453,253
6,764,864
1,193,745
2,297,349
5,707,219
2,624,284
35,201,406
44,414,057
(108,463)
3,578,499
3,250,946
25,334
330,110
467,294
241,416
371,303
667,353
(41,865)
(478,814)
(773,876)
7,425
(4,963)
2,462
232,310
217,636
363,233
123,847
3,796,135
3,614,179
716,810 352,104 2,295,004
- - 45,000
- (1,187,714) (2,108,638)
840,657 2,960,525 3,845,545
24,201,051 36,491,274 106,829,209
$ 25,041,708 $ 39,451,799 $ 110,674,754
The notes to the financial statements are an integral part of this statement.
30
CITY OF ELK RIVER, MINNESOTA
STATEMENT OF CASH FLOWS - CONTINUED
PROPRIETARY FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2018
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers and users
Other operating cash receipts
Payments to suppliers
Payments to employees
Net cash provided (used) by operating activities
CASH FLOWS FROM NONCAPITAL
FINANCING ACTIVITIES
Transfers from other funds
Transfers to other funds
Decrease (increase) in due from other funds
Increase (decrease) in due to other funds
Net cash provided (used) by
noncapital financing activities
CASH FLOWS FROM CAPITAL AND
RELATED FINANCING ACTIVITIES
Connection fees received
Grants received
Acquisition of capital assets
Proceeds from sale of capital assets
Principal paid on capital debt
Proceeds of bonds issued, net of issuance costs
and premium on bonds
Interest paid on capital debt
Principal paid on promissory note
Net cash provided (used) by capital
and related financing activities
CASH FLOWS FROM INVESTING ACTIVITIES
Interest received
Net increase (decrease)in cash and cash equivalents
Cash and cash equivalents, January 1
Cash and cash equivalents, December 31
Reconciliation of cash and cash equivalents
to the statement of net position:
Cash and investments
Restricted cash and investments
Total cash and cash equivalents
Municipal
1,156,466
Storm
Liquor
Garbage
Sewer
Water
$ 7,201,836
$ 1,536,303
$ 2,076,989
$ 483,295
2,124
550
183,630
-
(5,435,336)
(1,560,142)
(1,415,964)
(43,735)
(736,746)
(23,831)
(578,629)
(83,825)
1,031,878
(47,120)
266,026
355,735
45,000
(689,174) (46,750) (150,000) (35,000)
(689,174) (1,750) (150,000) (35,000)
-
1,156,466
37,313
-
-
32,311
-
-
(73,478)
-
-
(415,000)
-
(256,655)
-
-
-
443,644
37,313
53,712
5,100
45,479
3,755
396,416
(43,770)
605,149
361,803
3,754,059
245,076
3,778,728
430,083
$ 4,150,475
$ 201,306
$ 4,383,877
$ 791,886
$ 4,150,475 $ 201,306 $ 4,383,877 $ 791,886
$ 4,150,475 $ 201,306 $ 4,383,877 $ 791,886
The notes to the financial statements are an integral part of this statement.
KSI
$ 2,550,717
$ 40,429,994
$ 54,279,134
252,622
387,970
826,896
(886,313)
(30,616,974)
(39,958,464)
(539,466)
(2,326,410)
(4,288,907)
1,377,560
7,874,580
10,858,659
-
-
45,000
-
(1,187,714)
(2,108,638)
60
(2,517)
(2,457)
(3,566)
3,755
189
(3,506) (1,186,476) (2,065,906)
716,810
-
1,910,589
-
-
32,311
(442,368)
(14,657,362)
(15,173,208)
7,425
16,000
23,425
(255,000)
(720,000)
(1,390,000)
10,33 8,289
10,33 8,289
(44,587)
(326,785)
(628,027)
(198,252)
(198,252)
(17,720)
(5,548,110)
(5,084,873)
26,747
335,761
470,554
1,383,081
1,475,755
4,178,434
5,335,070
13,803,692
27,346,708
$ 6,718,151
$ 15,279,447
$ 31,525,142
$ 6,718,151 $ 14,018,088 $ 30,263,783
- 1,261,359 1,261,359
$ 6,718,151 $ 15,279,447 $ 31,525,142
The notes to the financial statements are an integral part of this statement.
W -A
CITY OF ELK RIVER, MINNESOTA
STATEMENT OF CASH FLOWS - CONTINUED
PROPRIETARY FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2018
Reconciliation of operating income (loss) to net cash
provided (used) by operating activities:
Operating income (loss)
Adjustments to reconcile operating income (loss) to
net cash provided (used) by operating activities:
Other revenue related to operations
Depreciation expense
(Increase) decrease in assets and deferred outflows:
Accounts receivable
Due from other funds
Due from other goverments
Inventories
Prepaid items
Deferred outflows - pensions
Deferred outflows - other postemployment benefits
Increase (decrease) in liabilities and deferred inflows:
Accounts payable
Salaries payable
Due to other funds
Due to other governments
Unearned revenue
OPEB liability
Compensated absences payable
Net pension liability
Deferred inflows - pensions
Net cash provided (used) by operating activities
Noncash capital and related financing activities:
Municipal
Storm
Liquor
Garbage
Sewer
Water
$ 969,455
$ (35,458)
$ (1,004,498)
$ (148,589)
-
-
54,633
-
119,186
1,639,461
457,478
-
(40,601)
187
-
(17,175)
(207)
(2,376)
-
530
-
-
(58,753)
-
-
56,845
1,143
47,525
6,369
399
-
416
27
19,858
6,225
(340,796)
29,351
5,599
154
2,744
8,392
-
(3,298)
6
483
1,830
-
-
-
805
-
-
(7,332)
-
(17,227)
3,511
7,162
-
9,975
1,732
(86,133)
(48)
(83,000)
(1,620)
2,957
807
(2,405)
790
$ 1,031,878
$ (47,120)
$ 266,026
$ 355,735
Amortization of bond premium $ $ $ $
Amortization of deferred charges on refunding -
Contribution of capital assets
Capital assets purchased on account -
Loss on disposal of capital assets
The notes to the financial statements are an integral part of this statement.
33
$ (108,463)
$ 3,578,499
$ 3,250,946
241,416
371,303
667,352
1,193,745
2,297,349
5,707,219
14,827
1,526,245
1,500,658
-
-
(19,758)
-
-
530
1,161
144,759
87,167
7,943
17,798
25,741
71,948
358,253
542,083
-
-
842
21,283
(123,403)
(387,482)
6,720
15,179
38,788
-
-
(2,809)
861
(13,222)
(10,531)
5,333
77,059
83,197
16,765
5,270
987
4,379
49,525
72,773
(102,335)
(460,242)
(733,378)
1,977
30,208
34,334
$ 1,377,560 $ 7,874,580 $ 10,858,659
$ 829 $ 48,645 $ 49,474
1,671 6,684 8,355
- 352,104 352,104
7,652 757,087 764,739
- (20,961) (20,961)
The notes to the financial statements are an integral part of this statement.
34
CITY OF ELK RIVER, MINNESOTA
STATEMENT OF FIDUCIARY NET POSITION
AGENCY FUNDS
DECEMBER 31, 2018
ASSETS
Cash
Accounts receivable
Prepaid items
Total assets
LIABILITIES
Accounts payable
Refundable deposits payable
Total liabilities
690,556
22,109
428
$ 713,093
$ 15,792
697,301
$ 713,093
The notes to the financial statements are an integral part of this statement.
mei
CITY OF ELK RIVER, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2018
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Organization
The City of Elk River operates under the "Optional Plan A" form of government as defined in the State of Minnesota
statutes. Under this plan, the City Council is composed of an elected mayor and four elected Council Members. The
Council appoints personnel responsible for the proper administration of all affairs relating to the City.
The financial statements and the accounting policies of the City conform to accounting principles generally accepted in
the United States of America as applicable to governmental units. The Governmental Accounting Standards Board
(GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting
principles.
B. Reporting Entity
As required by generally accepted accounting principles, the financial statements of the reporting entity include those of
the City of Elk River (the primary government) and its component units. The Elk River Municipal Utilities is considered
to be part of the primary government.
The Elk River Municipal Utilities was established and statutory authority is provided in accordance with Chapter
412.321 of the Minnesota statutes and is considered to be part of the City. The Utilities Commission has five council
approved members who serve overlapping three-year terms. The statutes provide the City Council all the discretionary
authority necessary to operate the Utilities, except as its powers have been delegated to the Commission. The Utility
funds are included with the enterprise funds of this report. Separate financial statements for the Utilities may be obtained
at the Elk River Municipal Utilities, 13069 Orono Pkwy, Elk River, MN 55330.
The City has considered all potential units for which it is financially accountable, and other organizations for which the
nature and significance of their relationship with the City are such that exclusion would cause the City's financial
statements to be misleading or incomplete. The Governmental Accounting Standards Board (GASB) has set forth
criteria to be considered in determining financial accountability. These criteria include appointing a voting majority of
an organization's governing body, and (1) the ability of the primary government to impose its will on that organization or
(2) the potential for the organization to provide specific benefits to or impose specific financial burdens on the primary
government. Based upon the application of these criteria, the City has the following component units:
Blended Component Unit
The Economic Development Authority (EDA) was created to carry out economic and industrial development and
redevelopment within the City in accordance with policies established by the City Council. The seven -member board
consists of three Council Members, the Mayor and three other Council -approved members. The EDA may not exercise
any of its authorized powers without prior approval of the City Council. The City has operational responsibility and it is
this criterion that results in the EDA being reported as a blended component unit The EDA is reported as a special
revenue fund and does not issue separate financial statements.
Discretely Presented Component Unit
The Housing and Redevelopment Authority (HRA) is a legally separate entity created to carry out community
development consistent with policies established by the City Council. The HRA is governed by five Council -appointed
members, one of which is a Council Member; however, the City does not have a financial benefit or burden relationship
and does not have operational responsibility. The criterion that results in the HRA being reported as a discretely
presented component unit include 1) the five -member Council -appointed board and 2) the ability of the City to impose
its will on the HRA by significantly influencing the programs, projects, activities or level of service performed by the
HRA by approving the HRA's budget. The HRA does not issue separate financial statements and they are included in
the financial section of this report.
Kr:
CITY OF ELK RIVER, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2018
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — CONTINUED
C. Government -Wide Financial Statements
The government -wide financial statements (statement of net position and statement of activities) display information
about the reporting government as a whole. These statements include all of the financial activities of the City, except
fiduciary funds. Since, by definition, fiduciary fund assets are held for the benefit of a third party and cannot be used for
activities or obligations of the City, these funds are excluded from the government -wide financial statements.
Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately
from business -type activities, which rely to a significant extent on sales, fees, and charges for support.
The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset
by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program
revenues include: 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or
privileges provided by a given function or segment, 2) operating grants and contributions, and 3) capital grants and
contributions, including special assessments that are restricted to meeting the operational or capital requirements of a
particular function or segment. Taxes and other internally directed revenues are reported as general revenues.
The government -wide financial statements are reported using the economic resources measurement focus and the accrual
basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred,
regardless of the timing of related cash flows. Property taxes and special assessments are recognized as revenues in the
fiscal year for which they are levied. Grants and similar items are recognized when all eligibility and time requirements
imposed by the provider have been met.
As a general rule, the effect of interfund activity has been eliminated from the government -wide financial statements.
However, charges between the City's enterprise funds and other functions are not eliminated, as that would distort the
direct costs and program revenues reported in those functions. The City applies restricted resources first when an
expense is incurred for which both restricted and unrestricted resources are available. Depreciation expense can be
specifically identified by function. Interest on long-term debt is considered an indirect expense and is reported separately
on the statement of activities.
D. Fund Financial Statement Presentation
The fund financial statements provide information about the City's funds, including its fiduciary funds and blended
component units. Separate statements for each fund category — governmental, proprietary, and fiduciary — are presented.
The emphasis of fund financial statements is on major governmental and enterprise funds, each displayed in a separate
column. All remaining governmental and enterprise funds are aggregated and reported as nonmajor funds. Major
individual governmental and enterprise funds are reported as separate columns in the fund financial statements.
Governmental fund financial statements are reported using the current financial resources measurement focus and the
modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available.
Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to
pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are
collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is
incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to
compensated absences and claims and judgments, are recorded only when payment is due.
Property taxes, franchise taxes, licenses, and interest associated with the current fiscal period are all considered to be
susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of special
assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the
current period. All other revenue items are considered to be measurable and available only when cash is received by the
government.
37
CITY OF ELK RIVER, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2018
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — CONTINUED
D. Fund Financial Statement Presentation (Continued)
Proprietary fund financial statements are reported using the economic resources measurement focus and accrual basis of
accounting, similar to the government -wide financial statements. Proprietary funds distinguish operating revenues and
expenses from nonoperating items. Operating revenues and expenses generally result from providing services and
producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal
operating revenues of the City's enterprise funds are charges to customers for sales and services. The operating expenses
for the enterprise funds include the cost of sales and services, administrative expenses, and depreciation on capital assets.
All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses.
Fiduciary fund financial statements use the accrual basis of accounting. Agency funds, the City's only fiduciary type, are
custodial in nature (assets equal liabilities) and do not have a measurement focus.
The government reports the following major governmental funds:
The General fund is the City's primary operating fund. It accounts for all financial resources of the general
government, except those required to be accounted for in another fund.
The Pavement Management fund is used to account for franchise taxes collected to fund expenditures for the
ongoing maintenance and repair of City streets.
The government reports the following major enterprise funds:
The Municipal Liquor fund accounts for the operations of the City's off -sale liquor stores.
The Garbage fund accounts for the activities of the garbage and recycling collection programs.
The Sewer fund accounts for the activities of the sanitary sewer treatment system.
The Storm Water fund accounts for the activities of the storm water collection system.
The Water fund accounts for the activities of the water distribution system.
The Electric fund accounts for the activities of the electric distribution system.
Additionally, the government reports the following fund types:
The Developer Escrow agency fund is used to account for resources received from developers for the payment of
expenses incurred by the City for private development projects.
The FSA Plans agency fund is used to account for resources received from employees for the City's self-
administered medical and dependent care FSA plans.
38
CITY OF ELK RIVER, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2018
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — CONTINUED
E. Budgetary Information
Annual budgets are adopted on a basis consistent with generally accepted accounting principles. Annual appropriated
budgets are legally adopted for the General fund and the Library, Ice Arena, and Economic Development Authority
special revenue funds. Project -length financial plans are adopted for all capital projects funds. All annual appropriations
lapse at fiscal year-end.
On or before July 1 of each year, all departments and agencies of the City submit requests for appropriation to the City's
administrator so that a budget may be prepared. Before September 30, the proposed budget is presented to the City
Council for review and approval. The City Council holds public hearings and may add to, subtract from, or change
appropriations. Any changes in the budget must be within the revenue and reserves estimated as available or the revenue
estimates must be changed by an affirmative vote by a majority of the City Council.
The budget is prepared by fund, function, and activity and includes information on the past year, current year estimates,
and requested appropriations for the next fiscal year. Expenditures may not legally exceed budgeted appropriations at
the fund level without Council approval. Spending control is established by the amount of expenditures budgeted for the
fund, but management control is exercised at the department level. Reported budget amounts are as originally adopted or
as amended by Council approved supplemental appropriations and budget transfers.
F. Cash and Investments
The City's cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments
with original maturities of three months or less from the date of acquisition. Cash balances from all funds are combined
and invested to the extent available in authorized investments. Earnings from such investments are allocated to the
respective funds on the basis of applicable cash balance participation of each fund. Investments are generally reported at
fair value or amortized cost, based upon quoted market prices. The Minnesota Municipal Money Market (4M) is an
external investment pool regulated by Minnesota statutes that is not registered with the Securities and Exchange
Commission (SEC). The City's investment in this fund is measured based on the amortized cost method that
approximates fair value.
G. Accounts Receivable
Accounts receivable include amounts billed for services provided before year-end. It is the City's policy to charge
uncollectibles directly to operations as accounts become worthless. The Utilities has established a reserve for
uncollectible accounts which is adjusted annually based on the receivable activity. No substantial losses from present
receivable balances are anticipated. A summary of the Utilities' uncollectible account balances at December 31, 2018 is
as follows:
2018
Electric $ 25,355
Water 250
Total $ 25.605
39
CITY OF ELK RIVER, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2018
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — CONTINUED
H. Property Taxes
The City Council annually adopts a tax levy and certifies it to the County in December each year for collection the
following year. The County is responsible for collecting all property taxes for the City. Property tax levies are based on
property values assessed on January 2 of the preceding year. The County spreads all levies over all taxable property.
These taxes attach an enforceable lien on taxable property as of January 1 and are payable by the property owner in May
and October each year. The taxes are collected by the County Treasurer and tax settlements are made to the City three
times a year, in January, July and December.
In the fund financial statements, taxes that remain unpaid at December 31 are classified as delinquent taxes and are offset
by a deferred inflow of resources for delinquent taxes not received within 60 days after year end. Deferred inflows of
resources for taxes in governmental activities is susceptible to full accrual on the government -wide statements.
I. Special Assessments
Special assessments receivable includes the following components:
Delinquent - includes amounts billed to property owners but not paid.
Unavailable - includes assessment installments that will be billed to property owners in future
years.
Special assessments represent the financing for public improvements paid for by benefiting property owners. These
assessments are recorded as receivables upon certification to the County. In governmental fund financial statements,
special assessments are recognized as revenue when they are received in cash or within 60 days after year end. All
governmental special assessments receivable not received within 60 days after year end are offset by a deferred inflow of
resources in the governmental fund financial statements.
J. Notes Receivable
Notes receivable consists primarily of loans made by the City to area businesses for development purposes. The terms
and interest rates of the individual loans vary.
K. Inventories and Prepaid Items
For the proprietary funds, inventories are valued at cost, which approximates market, using the first -in, first -out (FIFO)
method. Inventories are recorded as an expense when sold or consumed rather than when purchased.
Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in
both government -wide and fund financial statements. The cost of prepaid items is recorded as an expenditure/expense
when consumed rather than when purchased.
L. Property Held for Resale
These assets are recorded at the lower of original cost or current net realizable value in the governmental fund which
purchased them.
M. Restricted Assets
The amounts in the restricted cash account are set aside in accordance with the issuing resolution for specific bond
issues. They will be used for future debt service.
est
CITY OF ELK RIVER, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2018
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — CONTINUED
N. Capital Assets
Capital assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, bridges, sidewalks, and
similar items), are reported in the applicable governmental or business -type activities columns in the government -wide
financial statements. Capital assets are defined by the government as assets with an initial, individual cost of more than
$10,000 and an estimated useful life in excess of two years. Such assets are recorded at historical cost or estimated
historical cost if purchased or constructed. The costs of normal maintenance and repairs that do not add to the value of
the asset or materially extend assets' lives are not capitalized. Donated capital assets are recorded at acquisition value at
the date of donation.
With the initial capitalization of general infrastructure assets (i.e., those reported by governmental activities), the City
chose to include all such items regardless of their acquisition date. The City was able to obtain historical costs for the
initial reporting of these assets through public works project records. Major expenditures for improvements or capital
asset projects are capitalized as projects are constructed.
Property, plant, and equipment of the City, as well as the component units, are depreciated using the straight line method
over the following estimated useful lives:
Assets
Years
Buildings and improvements
10-40
Other park improvements
10-20
Machinery and equipment
3-20
Public domain infrastructure
15-50
System infrastructure
4-50
O. Deferred Outflows/Inflows of Resources
In addition to assets, the statement of financial position will sometimes report a separate section for deferred outflows of
resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net
position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure)
until then. The City has three items that qualify for reporting in this category. A deferred charge on refunding, reported
only in the statements of net position, results from the difference in the carrying value of refunded debt and its
reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt.
Deferred pension resources, reported only in the statements of net position, result from actuarial calculations and current
year pension contributions made subsequent to the measurement date. Deferred other postemployment benefits, reported
only in the statements of net position, result from actuarial calculations involving participant and financial data of the
benefit plans.
In addition to liabilities, the statement of financial position and fund financial statements will sometimes report a
separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of
resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an
inflow of resources (revenue) until that time. The City has only two types of items that qualify for reporting in this
category. Accordingly, unavailable revenue is reported only in the governmental funds balance sheet. The governmental
funds report unavailable revenues from three sources: property taxes, special assessments and other. These amounts are
deferred and recognized as an inflow of resources in the period that the amounts become available. Furthermore, the City
has one additional item which qualifies for reporting in this category on the statements of net position. The item,
deferred pension resources, is reported only in the statements of net position and results from actuarial calculations.
41
CITY OF ELK RIVER, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2018
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — CONTINUED
P. Pensions
For purposes of measuring the net pension liability, deferred outflows/inflows of resources, and pension expense,
information about the fiduciary net position of the Public Employees Retirement Association (PERA) and additions
to/deductions from PERA's fiduciary net position have been determined on the same basis as they are reported by PERA
except that PERA's fiscal year is June 30. For this purpose, plan contributions are recognized as of employer payroll
paid dates and benefit payments and refunds are recognized when due and payable in accordance with the benefit terms.
Investments are reported at fair value.
For purposes of measuring the net pension liability (asset), deferred outflows of resources and deferred inflows of
resources related to pensions, and pension expense, information about the fiduciary net position of the defined benefit
plan administered by Elk River Fire Relief Association and additions to and deductions from the plan's fiduciary net
position have been determined on the same basis as they are reported by the plan. Investments are reported at fair value
or amortized cost.
Q. Unearned Revenue
Unearned revenue arises when assets are recognized before revenue recognition criteria have been satisfied. Grants and
entitlements received before eligibility requirements are met are also recorded as unearned revenue. At December 31,
2018, the balance reported in the governmental fund financial statements consists of $613,108 from unearned park
dedication credits.
R. Long -Term Liabilities
In the government -wide financial statements, and proprietary fund types in the fund financial statements, long-term debt
and other long-term obligations are reported as liabilities. Bond premiums and discounts, if material, are amortized over
the life of the bonds using the straight-line method. Bond issuance costs are expensed as incurred.
In the governmental fund financial statements, long-term debt and other long-term obligations are not reported as
liabilities. The face amount of debt issued is reported as other financing sources. Premiums or discounts on debt
issuances are reported as other financing sources or uses, respectively. Issuance costs, whether or not withheld from the
actual debt proceeds received, are reported as debt service expenditures.
S. Compensated Absences
It is the City's policy to permit employees to accumulate earned but unused vacation and sick pay benefits. Unused
vacation can be accrued by the employees up to a maximum of 240 hours, the limit of which is determined by years of
service. All vacation pay is accrued when incurred in the government -wide and proprietary fund financial statements. A
liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of
employee resignations and retirements. In the event a liability is recorded in the governmental funds, the General fund
would be used to liquidate the compensated absences payable.
Employees can also accrue an unlimited amount of unused sick leave. Employees with two or more years of service are
entitled to receive severance pay equal to 50 percent of unused sick leave, up to a maximum of 480 hours. The liability
for severance pay is accounted for the same as accrued vacation pay.
ey:
CITY OF ELK RIVER, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2018
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — CONTINUED
T. Fund Balance
In the fund financial statements, fund balance is divided into five classifications based primarily on the extent to which
the City is bound to observe constraints imposed upon the use of resources reported in governmental funds. These
classifications are as follows:
Nonspendable - consists of amounts that cannot be spent because they are not in spendable form, such as prepaid
items.
Restricted - consists of amounts related to externally imposed constraints established by creditors, grantors or
contributors; or constraints imposed by state statutory provisions.
Committed - consists of amounts that are constrained for specific purposes that are internally imposed by formal
action (resolution) of the City Council. Those committed amounts cannot be used for any other purpose unless
City Council removes or changes the specified use by taking the same type of action it employed to previously
commit those amounts.
Assigned - consists of amounts intended to be used by the City for specific purposes but do not meet the criteria
to be classified as restricted or committed. In governmental funds other than the General Fund, assigned fund
balance represents the remaining amount that is not restricted or committed. In the General Fund, assigned
amounts represent intended uses established by the governing body itself or by an official to which the governing
body delegates the authority. Pursuant to City Council Resolution, the City's Finance Director or City
Administrator is authorized to establish assignments of fund balance.
Unassigned - is the residual classification for the General Fund and also reflects negative residual amounts in
other funds.
The City considers restricted amounts to be spent first when both restricted and unrestricted fund balance is available.
Additionally, the City would first use committed, then assigned, and lastly unassigned amounts of unrestricted fund
balance when expenditures are made.
The City Council has formally adopted a fund balance policy for the General Fund. The City's policy is to maintain a
minimum unassigned fund balance of 40-45% of budgeted operating expenditures for cash-flow timing needs.
U. Net Position
Net position represents the difference between assets and deferred outflows and liabilities and deferred inflows. Net
position is displayed in three components:
Net investment in capital assets - Consists of capital assets, net of accumulated depreciation reduced by any
outstanding debt attributable to acquire capital assets.
Restricted net position - Consists of net position balances restricted when there are limitations imposed on their
use through external restrictions imposed by creditors, grantors, laws or regulations of other governments.
Unrestricted net position - All other net position balances that do not meet the definition of "restricted" or "net
investment in capital assets".
When both restricted and unrestricted resources are available for use, it is the City's policy to use restricted resources
first, then unrestricted resources as they are needed.
43
CITY OF ELK RIVER, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2018
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — CONTINUED
V. Interfund Receivables and Payables
Activity between funds that is representative of lending or borrowing arrangements is reported as either "due to/from
other funds" (current portion) or "advances to/from other funds". Any residual balances outstanding between the
governmental activities and business -type activities are reported in the government -wide financial statements as "internal
balances".
W. Revenues and Expenditures/Expenses
Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges
provided, 2) operating grants and contributions, and 3) capital grants and contributions, including special assessments.
Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general
revenues include all taxes.
Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and
expenses generally result from providing services and producing and delivering goods in connection with a proprietary
fund's principal ongoing operations. The principal operating revenues of the City's enterprise funds are charges to
customers for sales and services. Operating expenses for enterprise funds include the cost of sales and services,
administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are
reported as nonoperating revenues and expenses.
NOTE 2: STEWARDSHIP AND ACCOUNTABILITY
A. Expenditures in Excess of Appropriations
For the year ended December 31, 2018, expenditures exceeded appropriations in the Ice Arena fund by $30,168, which
was funded by available fund balance.
B. Deficit Fund Balance
The following funds had deficit fund balances at December 31, 2018:
Primary Government:
Park Dedication — capital projects fund $ 284,335
TIF Districts — capital projects fund $2,331,451
The City plans to eliminate these deficits through future park dedication and tax increment fund revenues.
44
CITY OF ELK RIVER, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2018
NOTE 3: DEPOSITS AND INVESTMENTS
A. Components of Cash and Investments
Cash and investments at year-end consist of the following:
Primary Component
Government Unit - HRA
Deposits $ 19,684,436 $ 893,978
Investments 41,476,911 -
Cash on Hand 18,575 -
Total $ 61,179,922 $ 893,978
Cash and investments are presented in the financial statements as follows:
Primary Component
Government Unit - HRA
Statement of Net Position
Cash and investments $ 59,228,007 $ 893,978
Restricted cash and investments 1,261,359 -
Statement of Fiduciary Net Position
Cash and investments - Agency Funds 690,556 -
Total $ 61,179,922 $ 893,978
B. Deposits
In accordance with applicable Minnesota statutes, the City maintains deposits at depository banks authorized by the City
Council, including checking accounts and certificates of deposits. The following is considered the most significant risk
associated with deposits:
Custodial credit risk— In the case of deposits, this is the risk that in the event of a bank failure, the City's deposits may
be lost.
Minnesota statutes require that all deposits be protected by federal deposit insurance, corporate surety bond, or collateral.
The value of collateral pledged must equal 110% of the deposits not covered by federal deposit insurance or corporate
surety bonds. Authorized collateral includes treasury bills, notes, and bonds; issues of U.S. government agencies;
general obligations rated "A" or better; revenue obligations rated "A" or better; irrevocable standby letters of credit
issued by the Federal Home Loan Bank; and certificates of deposit. Minnesota statutes require that securities pledged as
collateral be held in safekeeping in a restricted account at the Federal Reserve Bank or in an account at a trust
department of a commercial bank or other financial institution that is not owned or controlled by the financial institution
furnishing the collateral.
The City (including Elk River Municipal Utilities) has an investment policy in place to address custodial credit risk for
deposits, stating all deposits and investments must be in compliance with Minnesota Statutes 118A, with collateralization
levels of 110% of the market value of the principal and accrued interest.
At year-end, the carrying amount of the City's deposits was $19,684,436 while the balance on the bank records was
$19,499,441. At December 31, 2018, all deposits were fully covered by federal depository insurance, surety bonds, or
by collateral held by the City's agent in the City's name.
At year-end, the carrying amount of deposits for the HRA, a discretely presented component unit, was $893,978 and the
bank balance was $893,495. At December 31, 2018, all deposits were fully covered by federal depository insurance,
surety bonds, or by collateral held by the City's agent in the City's name.
:P
CITY OF ELK RIVER, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2018
NOTE 3: DEPOSITS AND INVESTMENTS — CONTINUED
C. Investments
Minnesota statutes and the City's investment policy authorize the City to invest in the following:
a. Direct obligations or obligations guaranteed by the United States or its agencies.
b. Shares of investment companies registered under the Federal Investment Company Act of 1940 and whose only
investments are in securities described in (a) above.
c. General obligations of the State of Minnesota or any of its municipalities.
d. Bankers acceptances of United States banks eligible for purchase by the Federal Reserve System.
e. Commercial paper of the highest quality issued by United States corporations or their Canadian subsidiaries and
maturing in 270 days or less.
The City has the following investments at year-end:
Fair Value
Measurement
Maturity
Duration in Years
Investment Type
Rating
Using
Less than 1
1 to 5
More than 5
Total
Investments Measured at Fair Value
Negotiable CertificatesofDeposit
Not Rated
Level
$ 2,670,575 $
6,523,850
$ 461,573
$ 9,655,998
FNMA & FHLI3
AAA
Level2
-
494,880
2,232,400
2,727,280
Municipal Bonds
AA -to AAA
Leve12
1,149,720
12,911,108
5,042,599
19,103,427
Total Investments Measured at Fair Value
3,820,295
19,929,838
7,736,572
31,486,705
Investments Measured at Amortized Cost
UBS Select Prime Institutional Money Market
Not Rated
5,298,719
4M Fund
Not Rated
4,675,057
Other Money Market Funds
Not Rated
16,430
Total Investments Measured at Amortized Cost
9,990,206
Total Investments
$ 41,476,911
Investments are subject to various risks, the following of which are considered the most significant:
Custodial credit risk - For investments, the custodial credit risk is the risk that in the event of a failure of the
counterparty to an investment transaction (typically a broker-dealer) the City would not be able to recover the value of its
investments or collateral securities that are in the possession of an outside party. The City typically limits its exposure
by purchasing insured or registered investments, or by the control of who holds the securities. As of December 31, 2018,
all investments were insured or registered, or securities were held by the City or its agent in the City's name.
Credit risk— This is the risk that an issuer or other counterparty to an investment will not fulfill its obligations.
Minnesota statutes limit the City's investments in certain types of investments. The City's investment policy does not
further limit the ratings of their investments.
Concentration risk— This is the risk associated with investing a significant portion of the City's investment (considered
5% or more) in the securities of a single issuer and no more than 50% of the City's total investment portfolio may be
invested in certificates of deposit or commercial paper.
At December 31, 2018, the following is a list of investments which individually comprise more that 5% of the City's
total investments:
UBS Select Prime Institutional Money Market $5,298,719 12.8%
4M Fund $4,675,057 11.3%
:
CITY OF ELK RIVER, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2018
NOTE 3: DEPOSITS AND INVESTMENTS — CONTINUED
C. Investments (Continued)
Interest rate risk — This is the risk of potential variability in the fair value of fixed rate investments resulting from
changes in interest rates (the longer the period for which an interest rate is fixed, the greater the risk). The City's
investment policy uses diversification of maturity dates as a means of managing exposure to fair value by stating that no
more the 30% of the City's investments may extend beyond a five-year maturity.
Fair Value Measurements — The City uses fair value measurements to record fair value adjustments to certain assets
and liabilities and to determine fair value disclosures.
The City follows an accounting standard which defines fair value, establishes framework for measuring fair value,
establishes a fair value hierarchy based on the quality of inputs used to measure fair value, and requires expanded
disclosures about fair value measurements. In accordance with this standard, the City has categorized its investments,
based on the priority of inputs to the valuation technique, into a three-level fair value hierarchy. The fair value hierarchy
gives the highest priority to quotes and prices in active markets for identical assets and liabilities (Level 1) and the lowest
priority to unobservable inputs (Level 3). If the inputs used to measure the financial instruments fall within different
levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value
measurement of the instrument.
Financial assets and liabilities recorded on the combined statements of financial position are categorized based on the
inputs to the valuation techniques as follows:
Level I — Financial assets and liabilities are valued using inputs that are unadjusted quoted prices in active markets
accessible at the measurement date of identical financial assets and liabilities.
Level 2 — Financial assets and liabilities are valued based on quoted prices for similar assets or inputs that are observable,
either directly or indirectly, for substantially the full term through corroboration with observable market data.
Level 3 — Financial assets and liabilities are valued using pricing inputs which are unobservable for the asset, inputs that
reflect the reporting entity's own assumptions about the assumptions market participants would use in pricing the asset.
NOTE 4: NOTES RECEIVABLE
The City has made several business subsidy loans to local businesses, some of which were funded with grant proceeds
received from the state and federal governments. The terms of repayment vary with each loan and will be repaid over a
period of ten years. Under the terms of the grant agreement, the City retains the grant repayments. Notes receivable of
$456,945 in the State Deed fund and $403,919 in the Revolving Loan fund are outstanding at December 31, 2018.
In 2015, the City issued a $1,288,589 long-term note receivable related to the sale of property to a developer under an
abatement agreement. The note shall be payable in semiannual installments as tax abatement revenues are received,
commencing on August 1, 2017, and maturing February 1, 2037. A note receivable of $1,108,648 in the Development
fund is outstanding at December 31, 2018.
In 2006, the HRA issued a loan to a developer to assist in the financing of a housing development for the benefit of low
and moderate income residents which was funded with state grant proceeds. Repayment of the loan is deferred for 30
years, payable in one lump sum at an interest rate of one percent. Notes receivable of $400,000 in the HRA is
outstanding at December 31, 2018.
Since 2015, the HRA has issued loans to applicants under the rehabilitation loan program. The terms of each loan vary
and are payable over 5-15 years with rates from 1.25% -3.25%. Note receivables of $223,206 in the HRA are
outstanding at December 31, 2018.
47
CITY OF ELK RIVER, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2018
NOTE 5: CAPITAL ASSETS
Capital asset activity for the year ended December 31, 2018 was as follows:
Beginning Ending
Primary Government Balance Additions Deletions Balance
Governmental activities:
Capital assets not being depreciated
Land
$ 40,984,633
$ -
$ (57,000)
$ 40,927,633
Construction in progress
23,415
103,358
(126,773)
11,338,300
Total capital assets
10,375,677
12,904,278
23,279,955
not being depreciated
41,008,048
103,358
(183,773)
40,927,633
Capital assets being depreciated:
Buildings
45,048,097
-
(69,618)
45,048,097
Other improvements
6,244,291
313,480
6,557,771
Equipment
13,110,395
1,538,989
(800,244)
13,849,140
Infrastmcture
70,294,922
142,936
(36,366)
70,437,858
Total capital assets
-
165,883
165,883
being depreciated
134,697,705
1,995,405
(800,244)
135,892,866
Uss accumulated depreciation for.
69,837,930
5,707,219
(48,657)
75,496,492
Buildings
20,488,340
1,546,594
22,034,934
Other improvements
4,004,097
243,923
(20,961)
4,248,020
Equipment
9257,968
836,654
(729,296)
9,365,326
Infrastmcture
43,935,214
2,662,455
$ (3,408,730)
46,597,669
Total accumulated depreciation
77,685,619
5,289,626
(729,296)
82,245,949
Total capital assets
being depreciated, net
57,012,086
(3,294,221)
(70,948)
53,646,917
Governmental activities
capital assets, net
$ 98,020,134
$ (3,190,863)$
(254,721)
$ 94,574,550
Business -type activities:
Capital assets not being depreciated:
Land
$ 1,843,977
$ -
$
$ 1,843,977
Construction in progress
736,872
3,118,367
(3,387,769)
467,470
Total capital assets
not being depreciated
2,580,849
3,118,367
(3,387,769)
2,311,447
Capital assets being depreciated
Buildings
27,277,857
67,725
27,345,582
Equipment
11,035,823
338,843
(36,366)
11,338,300
Intangible assets
10,375,677
12,904,278
23,279,955
Collection and distribution
126,377,449
2,677,882
(33,252)
129,022,079
Total capital assets
being depreciated
175,066,806
15,988,728
(69,618)
190,985,916
Less accumulated depreciation for.
Buildings
8,410,323
913,005
9,323,328
Equipment
2,965,714
685,149
(36,366)
3,614,497
Intangible assets
-
165,883
165,883
Collection and distribution
58,461,893
3,943,182
(12,291)
62,392,784
Total accumulated depreciation
69,837,930
5,707,219
(48,657)
75,496,492
Total capital assets
being depreciated, net
105,228,876
10,281,509
(20,961)
115,489,424
Business -type activities
capital assets, net
$ 107,809,725
$ 13,399,876
$ (3,408,730)
$ 117,800,871
48
CITY OF ELK RIVER, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2018
NOTE 5: CAPITAL ASSETS - CONTINUED
Capital asset activity for the HRA component unit for the year ended December 31, 2018 was as follows:
Beginning Ending
Component Unit Balance Additions Deletions Balance
Capital assets not being depreciated:
Land
Capital assets being depreciated:
Other improvements
Less accumulated depreciation for:
Other improvements
Total capital assets
being depreciated, net
Component unit
capital assets, net
$ 257,100 $ - $ - $ 257,100
174,290 - - 174,290
59,065 11,618 - 70,683
115,225 (11,618) - 103,607
$ 372,325 $ (11,618) $ - $ 360,707
Depreciation expense was charged to functions/programs of the primary government as follows:
Governmental activities:
General government
$
269,353
Public safety
666,601
Public works
3,273,313
Culture and recreation
1,080,359
Total depreciation expense - governmental activities
$
5,2892626
Business -type activities:
Municipal liquor
$
119,186
Sewer
1,639,461
Storm Water
457,478
Water
1,193,745
Electric
2,297,349
Total depreciation expense -business-type activities
$
5,707,219
49
CITY OF ELK RIVER, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2018
NOTE 6: INTERFUND RECEIVABLES, PAYABLES, AND TRANSFERS
The composition of interfund balances as of December 31, 2018 is as follows:
Due to/from other funds:
Receivable Fund
General
General
General
Pavement Management
Nonmajor governmental funds
Sewer
Sewer
Garbage
Sto rm W ater
Electric
Water
Water
Electric
Electric
Electric
Total
Payable Fund
Nonmajor governmental funds
Water
Electric
Electric
Nonmajor governmental funds
Nonmajor governmental funds
Electric
Electric
Electric
General
General
Nonmajor governmental funds
Garbage
Sewer
Storm W ater
A ninnnt
$ 11,135
23,598
174,483
275,286
1,840,269
171,800
173,543
130,039
40,862
2,076
439
128,850
1,525
523
9,268
$ 2,983,696
The interfund receivable/payable balances result from the distribution of utility collections and the lending/borrowing
arrangements between funds for operating or capital purposes.
Due to/from component unit:
Receivable Entity Payable Entity Amount
Primary government - General Fund Component unit - HRA $ 6,622
Component unit - HRA Primary government - TIF Districts 202,304
The outstanding balance between the primary government and the component unit represents the transfer for
administrative services and the lending/borrowing arrangement to finance construction costs. The $202,304 payable to
the HRA will be paid with the collection of tax increment revenue and will not be repaid within one year.
50
CITY OF ELK RIVER, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2018
NOTE 6: INTERFUND RECEIVABLES, PAYABLES, AND TRANSFERS - CONTINUED
Interfund transfers:
Governmental funds:
Major fund - General
Nonmajor funds
Total governmental funds
Proprietary funds:
Municipal liquor
Garbage
Sewer
Storm W ater
Electric
Total proprietary funds
Total
Transfer In Transfer Out
$ 2,028,314 $ 310,000
1,325,721 980,397
3,354,035 1,290,397
- 689,174
45,000 46,750
- 150,000
- 35,000
- 1,187,714
45,000 2,108,638
$ 3,399,035 $ 3,399,035
Interfund transfers are used to provide additional capital funding or to move revenues from the fund with collection
authorization to debt service funds as principal and interest payments come due. In addition, interfund transfers are
occasionally authorized to allow redistribution of resources between funds for the most efficient use of funds.
51
CITY OF ELK RIVER, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2018
NOTE 7: LONGTERM DEBT
A. Components of Long-term Debt
The City had the following long-term liabilities outstanding at December 31, 2018:
BUSINESS -TYPE ACTIVITIES:
Issue
Maturity
Interest
Oroginal
Payable
PRIMARY GOVERNMENT
Date
Date
Rate
Issue
12/31/18
GOVERNMENTAL ACTIVITIES:
2016A Electric Revenue Bonds
7/14/2016
2016B Electric Revenue Refunding Bonds
7/14/2016
General Obligation Bonds:
7/14/2016
Total Revenue Bonds
2010A G.O. Capital Improvement Bonds
4/21/2010
2/1/2023
2.00-4.00%
$ 6,105,000
$ 2,625,000
2012A G.O. Capital Improvement Bonds
3/15/2012
2/1/2033
1.00-2.50%
6,975,000
5,475,000
2013A EDA G.O. Refunding Bonds
2/12/2013
2/1/2033
2.00-3.00%
9,685,000
9,180,000
Total General Obligation Bonds
17,280,000
Unamortized bond premiums
352,016
Compensated absences payable
1,579,967
Total Governmental Activities
$ 19,211,983
BUSINESS -TYPE ACTIVITIES:
General Obligation Revenue Bonds:
2008A G.O. Water Revenue Refunding Bonds
2/20/2008
2010A G.O. Capital Improvement Bonds
4/21/2010
2014B G.O. Sewer Revenue Bonds
8/21/2014
Total General Obligation Revenue Bonds
Revenue Bonds:
2016A Electric Revenue Bonds
7/14/2016
2016B Electric Revenue Refunding Bonds
7/14/2016
2018A Electric Revenue Bonds
7/14/2016
Total Revenue Bonds
Total Bonds
Unamortized bond premiums
Promissory note
Compensated absences payable
Total Business -type Activities
Total Primary Government
2/1/2022 2.50-3.65% $ 3,085,000 $ 1,020,000
8/1/2023 2.00-4.00% 1,265,000 555,000
2/1/2035 2.00-3.50% 10,000,000 8,780,000
10,355,000
2/1/2036 2.00-4.00%
2/1/2022 2.00-4.00%
2/1/2022 2.00-4.00%
3/19/2002 2/19/2022
6%
9,755,000 9,755,000
1,370,000 930,000
1,370,000 10,000,000
20,685,000
31,040,000
870,336
3,521,000 820,608
504,447
$ 33,235,391
$ 52,447,374
CITY OF ELK RIVER, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2018
NOTE 7: LONGTERM DEBT — CONTINUED
A. Components of Long-term Debt (Continued)
For the governmental activities, bonds payable can be summarized in the following categories:
The general obligation bonds were used to construct a recreation facility, a public safety facility, and a public works
facility. The recreation facility is leased to the YMCA, which has pledged to pay one-third of the bonds outstanding.
The bonds are general obligations of the City and are backed by its full faith and credit.
For the business -type activities, the general obligation revenue bonds were issued to finance capital improvements. The
bonds are payable from future revenues pledged from the Sewer and Water funds and are backed by the full faith and
credit of the City. Annual principal and interest payments on the bonds are expected to require about 30% and 12% of
revenues from the Sewer and Water funds, respectively.
The revenue bonds were issued to finance the acquisition and construction of major capital facilities and are to be repaid
from future revenues pledged from the Electric fund. Annual principal and interest payment on the bonds require about
3% of revenues from the Electric fund.
The City also issued a promissory note to provide for the construction of a landfill gas generator. The note is to be paid
from revenue of the system and is secured by the facility.
53
CITY OF ELK RIVER, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2018
NOTE 7: LONGTERM DEBT — CONTINUED
B. Changes in Long -Term Debt
Long-term liability activity for the year ended December 31, 2018 was as follows:
PRIMARY GOVERNNUNT
GOVERNMENTAL ACTIVITIES:
Bonds payable:
General obligation bonds
Special assessment bonds
Issuance premium
Total bonds payable
Compensated absences
Total Governmental Activities
BUSINESS -TYPE ACTIVITIES:
Bonds payable
General obligation revenue bonds
Revenue bonds
Issuance premium
Total bonds payable
Notes payable
Compensated absences
Beginning
-
Ending
Due Within
Balance
Additions Reductions
Balance
One Year
20,685,000
860,000
484,706
$ 18,560,000
$ - $ (1,280,000)
$ 17,280,000
$ 1,315,000
295,000
- (295,000)
-
-
392,312(40,296)
1,018,860
352,016
(198,252)
19,247,312
- (1,615,296)
17,632,016
1,315,000
1,555,037
611,591 (586,661)
1,579,967
617,411
20,802,349
611,591 (2,201,957)
19,211,983
1,932,411
11,105,000
-
(750,000)
10,355,000
760,000
11,325,000
10,000,000
(640,000)
20,685,000
860,000
484,706
435,104
(49,474)
870,336
-
22,914,706
10,435,104
(1,439,474)
31,910,336
1,620,000
1,018,860
-
(198,252)
820,608
200,916
431,674
281,904
(209,131)
504,447
247,181
Total Business -type Activities 24,365,240 10,717,008 (1,846,857) 33,235,391 2,068,097
Total Primary Government $ 45,167,589 $ 11,328,599 $ (4,048,814) $ 52,447,374 $ 4,000,508
54
CITY OF ELK RIVER, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2018
NOTE 7: LONGTERM DEBT - CONTINUED
C. Future Minimum Debt Payments
Annual debt service requirements to maturity for long-term obligations are as follows:
Primary Government -
Governmental Activities
General Obligation Bonds
Total $17,280,000 $ 3,141,232
Principal
Interest
2019
$ 1,315,000
$ 425,413
2020
1,350,000
388,862
2021
1,390,000
351,163
2022
1,430,000
312,262
2023
1,470,000
262,163
2024-2028
4,830,000
1,013,925
2029-2033
5,495,000
387,444
Total $17,280,000 $ 3,141,232
W.
Primary Government - Business -Type Activities
G.O. Revenue Bonds
Revenue Bonds
Notes Payable
Principal
Interest
Principal
Interest
Principal Interest
2019
$ 760,000
$ 299,795
$ 860,000
$ 624,210
$ 200,916 $ -
2020
785,000
278,803
840,000
652,431
203,952 -
2021
810,000
256,875
865,000
621,431
206,616 -
2022
835,000
233,933
900,000
589,081
209,124 -
2023
580,000
214,017
680,000
560,531
- -
2024-2028
2,455,000
870,850
3,785,000
2,437,581
-
2029-2033
2,845,000
467,883
4,385,000
1,845,206
-
2034-2038
1,285,000
45,097
3,720,000
1,135,831
-
2039-2043
-
-
2,125,000
686,033
-
2044-2048
-
-
2,525,000
281,119
- -
Total
$10,355,000
$ 2,667,253
$ 20,685,000
$ 9,433,454
$ 820,608 $ -
W.
CITY OF ELK RIVER, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2018
NOTE 8: FUND BALANCES
At December 31, 2018, a summary of the governmental fund balance classifications are as follows:
Other
General Pavement Governmental
Fund Management Funds Total
Nonspendable:
Prepaid items $ 124,064 $ - $ 114,976 $ 239,040
Restricted for
Debt service
$
- $ -
$
1,473,230
$
1,473,230
Landfill mitigation
- -
76,896
76,896
Law enforcement
- -
20,742
20,742
Economic development
- -
1,261,146
1,261,146
Park improvements
- -
318,729
318,729
Total restricted
$
- $ -
$
3,150,743
$
3,150,743
Committed to:
Library operations
$
- $ -
$
430,472
$
430,472
Ice arena
- -
613,679
613,679
Golf course
- -
387
387
Landfill mitigation
- -
869,961
869,961
Law enforcement
- -
2,880
2,880
Economic development
- -
5,313,630
5,313,630
Insurance reserve
- -
47,857
47,857
Street improvements
- 4,789,748
-
4,789,748
Total committed
$
- $ 4,789,748
$
7,278,866
$
12,068,614
Assigned to
Capital equipment $ 237,813 $ - $ 1,388,845 $ 1,626,658
Building cons truction/improvements - - 2,396,403 2,396,403
Street improvements - - 717,646 717,646
Other improvement projects - - 6,193,644 6,193,644
Park improvements - - 19,506 19,506
Total assigned $ 237,813 $ - $ 10,716,044 $ 10,953,857
6V
CITY OF ELK RIVER, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2018
NOTE 9: DEFINED BENEFIT PENSION PLANS — STATE-WIDE
A. Plan Description
The City participates in the following cost-sharing multiple -employer defined benefit pension plans administered by the
Public Employees Retirement Association of Minnesota (PERA). PERA's defined benefit pension plans are established
and administered in accordance with Minnesota statutes, chapters 353 and 356. PERA's defined benefit pension plans
are tax qualified under section 401(a) of the Internal Revenue Code.
1. General Employees Retirement Fund (GERF)
All full-time and certain part-time employees of the City of Elk River are covered by the GERF. GERF members belong
to either the Coordinated Plan or the Basic Plan. Coordinated Plan members are covered by Social Security and Basic
Plan members are not. The Basic Plan was closed to new members in 1967. All new members must participate in the
Coordinated Plan.
2. Public Employees Police and Fire Fund (PEPPF)
The PEPFF, originally established for police officers and firefighters not covered by a local relief association, now
covers all police officers and firefighters hired since 1980. Effective July 1, 1999, the PEPFF also covers police officers
and firefighters belonging to a local relief association that elected to merge with and transfer assets and administration to
PERA.
B. Benefits Provided
PERA provides retirement, disability, and death benefits. Benefit provisions are established by state statute and can only
be modified by the state legislature.
Benefit increases are provided to benefit recipients each January. Increases are related to the funding ratio of the plan.
Members in plans that are at least 90% funded for two consecutive years are given 2.5% increases. Members in plans
that have not exceeded 90% funded, or have fallen below 80%, are given 1 % increases.
The benefit provisions stated in the following paragraphs of this section are current provisions and apply to active plan
participants. Vested, terminated employees who are entitled to benefits but are not receiving them yet are bound by the
provisions in effect at the time they last terminated their public service.
1. GERF Benefits
Benefits are based on a member's highest average salary for any five successive years of allowable service, age, and
years of credit at termination of service. Two methods are used to compute benefits for PERA's Coordinated and Basic
Plan members. The retiring member receives the higher of a step -rate benefit accrual formula (Method 1) or a level
accrual formula (Method 2). Under Method 1, the annuity accrual rate for a Basic Plan member is 2.2% of average
salary for each of the first 10 years of service and 2.7% for each remaining year. The annuity accrual rate for a
Coordinated Plan member is 1.2% of average salary for each of the first 10 years and 1.7% for each remaining year.
Under Method 2, the annuity accrual rate is 2.7% of average salary for Basic Plan members and 1.7% for Coordinated
Plan members for each year of service. For members hired prior to July 1, 1989, a full annuity is available when age
plus years of service equal 90 and normal retirement age is 65. For members hired on or after July 1, 1989, normal
retirement age is the age for unreduced Social Security benefits capped at 66.
57
CITY OF ELK RIVER, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2018
NOTE 9: DEFINED BENEFIT PENSION PLANS — STATE-WIDE - CONTINUED
B. Benefits Provided (Continued)
2. PEPFF Benefits
Benefits for the PEPFF members first hired after June 30, 2010, but before July 1, 2014, vest on a prorated basis from
50% after five years up to 100% after ten years of credited service. Benefits for PEPFF member first hired after June 30,
2014, vest on a prorated basis from 50% after ten years up to 100% after twenty years of credited service. The annuity
accrual rate is 3% of average salary for each year of service. For PEPFF members who were first hired prior to July 1,
1989, a full annuity is available when age plus years of service equal at least 90.
C. Contributions
Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. Contribution rates can only be
modified by the state legislature.
1. GERF Contributions
Basic Plan members and Coordinated Plan members were required to contribute 9.10% and 6.50%, respectively, of their
annual covered salary in calendar year 2018. The City was required to contribute 11.78% of pay for Basic Plan members
and 7.50% for Coordinated Plan members in calendar year 2018. The City and HRA contributions to the GERF for the
year ended December 31, 2018 were $736,804 and $4,810, respectively. Both the City and HRA contributions were
equal to the required contributions set by state statute.
2. PEPFF Contributions
Plan members were required to contribute 10.8% of their annual covered salary in calendar year 2018. The City was
required to contribute 16.20% of pay for members in calendar year 2018. The City contributions to the PEPFF for the
year ended December 31, 2018 were $533,296. The City contributions were equal to the required contributions set by
state statute.
D. Pension Costs
1. GERF Pension Costs
At December 31, 2018, the City and HRA reported liabilities of $7,958,885 and $51,835, respectively, for its
proportionate share of the GERF's net pension liability. The net pension liability reflected a reduction due to the State of
Minnesota's contribution of $16 million to the fund in 2018. The State of Minnesota is considered a non -employer
contributing entity and the state's contribution meets the definition of a special funding situation. The State of
Minnesota's proportionate share of the net pension liability associated with the City and the HRA totaled $261,004 and
$1,698, respectively. The net pension liability was measured as of June 30, 2018 and the total pension liability used to
calculate the net pension liability was determined by an actuarial valuation as of that date. The City and HRA's
proportions of the net pension liability was based on their respective contributions received by PERA during the
measurement period for employer payroll paid dates from July 1, 2017 through June 30, 2018 relative to the total
employer contributions received from all of PERA's participating employers. At June 30, 2018 the City and HRA's
combined proportion was .1444%, an increase of .0071 % from its proportion measured as of June 30, 2017.
58
CITY OF ELK RIVER, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2018
NOTE 9: DEFINED BENEFIT PENSION PLANS — STATE-WIDE - CONTINUED
D. Pension Costs (Continued)
For the year ended December 31, 2018, the City and HRA recognized pension expense of $224,874 and $640,
respectively, for its proportionate share of the GERF's pension expense. In addition, the City and HRA recognized an
additional $60,865 and $396, respectively, for its proportionate share of the State of Minnesota's contribution of $16
million to GERF.
At December 31, 2018, the City reported its proportionate share of GERF's deferred outflows of resources and deferred
inflows of resources related to pensions from the following sources:
Differences between expected and
actual experience
Changes in actuarial assumptions
Net difference between projected and
actual earnings on plan investments
Changes in proportion
Contributions to GERF subsequent
to the measurement date
Total
Deferred Deferred
Outflows Inflows
of Resources of Resources
$ 210,914 $ 218,272
758,465 894,267
- 836,618
283,923 385,662
370,798 -
$ 1,624,100 $ 2,334,819
A total of $370,798 reported as deferred outflows of resources related to pensions resulting from City contributions
subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended
December 31, 2019. Other amounts reported as deferred outflows and deferred inflows of resources related to pensions
will be recognized in pension expense as follows:
Year Ending December 31,
2019
2020
2021
2022
59
Pension Expense
Amount
$ 278,813
(425,931)
(768,282)
(166,117)
CITY OF ELK RIVER, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2018
NOTE 9: DEFINED BENEFIT PENSION PLANS — STATE-WIDE - CONTINUED
D. Pension Costs (Continued)
1. GERF Pension Costs
At December 31, 2018, the HRA reported its proportionate share of the GERF's deferred outflows of resources and
deferred inflows of resources related to pensions from the following sources:
Differences between expected and
actual experience
Changes in actuarial assumptions
Net difference between projected and
actual earnings on plan investments
Changes in proportion
Contributions to CERF subsequent
to the measurement date
Total
Deferred Deferred
Outflows Inflows
of Resources of Resources
1,372 $ 1,512
4,952 5,824
- 5,297
1,480 2,953
2,436
$ 10,240 $ 15,586
A total of $2,436 reported as deferred outflows of resources related to pensions resulting from HRA contributions
subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended
December 31, 2019. Other amounts reported as deferred outflows and deferred inflows of resources related to pensions
will be recognized in pension expense as follows:
Pension Expense
Year Ending December 31, Amount
2019
$ 1,230
2020
(2,894)
2021
(5,036)
2022
(1,082)
2. PEPFF Pension Costs
At December 31, 2018, the City reported a liability of $3,245,656 for its proportionate share of the PEPFF's net pension
liability. The net pension liability was measured as of June 30, 2018, and the total pension liability used to calculate the
net pension liability was determined by an actuarial valuation as of that date. The City's proportion of the net pension
liability was based on the City's contributions received by PERA during the measurement period for employer payroll
paid dates from July 1, 2017 through June 30, 2018 relative to the total employer contributions received from all of
PERA's participating employers. At June 30, 2018, the City's proportionate share was .3045%, an increase of .0095%
from its proportion measured as of June 30, 2017. The City also recognized $27,405 for the year ended December 31,
2018 as revenue and an offsetting reduction of net pension liability for its proportionate share of the State of Minnesota's
on -behalf contributions to the PEPFF. Legislation passed in 2013 required the State of Minnesota to begin contributing
$9 million to the PEPFF each year, starting in fiscal year 2014.
60
CITY OF ELK RIVER, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2018
NOTE 9: DEFINED BENEFIT PENSION PLANS — STATE-WIDE - CONTINUED
D. Pension Costs (Continued)
For the year ended December 31, 2018, the City recognized pension expense of $237,279 for its proportionate share of
PEPFF's of the PEPFF pension expense. At December 31, 2018, the City reported its proportionate share of PEPFF's
deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:
Differences between expected and
actual experience
Changes in actuarial assumptions
Net difference between projected and
actual earnings on plan investments
Changes in proportion
Contributions to PEPFF subsequent
to the measurement date
Total
Deferred Deferred
Outflows Inflows
of Resources of Resources
$ 131,737 $ 796,242
4,199,560 4,778,031
- 679,812
435,691 145,352
284,551
$ 5,051,539 $ 6,399,437
A total of $284,551 reported as deferred outflows of resources related to pensions resulting from City contributions
subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended
December 31, 2019. Other amounts reported as deferred outflows and inflows of resources related to pensions will be
recognized in pension expense as follows:
Year Ending December 31,
Pension Expense
Amount
2019
$ 198,648
2020
(117,379)
2021
(369,534)
2022
(1,304,411)
2023
(39,774)
The City's and HRA's total pension expense for the year ended December 31, 2018 for all of the defined benefit pension
plans in which it participates, including the Fire Relief Association plan found in Note 11, was $356,980 and $640,
respectively.
E. Actuarial Assumptions
The total pension liability in the June 30, 2018 actuarial valuation was determined using the following actuarial
assumptions:
Inflation
Active member payroll growth
Investment rate of return
2.5% per year
3.25% per year
7.50%
Salary increases were based on a service -related table. Mortality rates for active members, retirees, survivors and
disabilitants were based on RP -2014 tables for all plans for males or females, as appropriate, with slight adjustments to
fit PERA's experience. Cost of living benefit increases for retirees are assumed to be 1.25% per year for GERF and
1.0% per year for PEPFF.
61
CITY OF ELK RIVER, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2018
NOTE 9: DEFINED BENEFIT PENSION PLANS — STATE-WIDE - CONTINUED
E. Actuarial Assumptions (Continued)
Actuarial assumptions used in the June 30, 2018 valuation were based on the results of actuarial experience studies. The
most recent six-year experience study in the GERF was completed in 2015. The most recent four-year experience study
for PEPFF was completed in 2016.
There following changes in actuarial assumptions occurred in 2018:
General Employees Fund
The mortality projection scale was changed from MP -2015 to MP -2017.
The assumed post-retirement benefit increase was changed from 1.0% per year through 2044 and 2.50% per
year thereafter to 1.25% per year.
Police and Fire Fund
• The mortality projection scale was changed from MP -2015 to MP -2017.
• As set by statute, the assumed post-retirement benefit increase was changed from 1.0% per year through 2064
and 2.5% per year, thereafter, to 1.0% for all years, with no trigger.
The State Board of Investment, which manages the investments of PERA, prepares an analysis of the reasonableness of
the long-term expected rate of return on a regular basis using a building-block method in which best -estimate ranges of
expected future rates of return are developed for each major asset class. These ranges are combined to produce an
expected long-term rate of return by weighting the expected future rates of return by the target asset allocation
percentages. The target allocation and best estimates of arithmetic real rates of return for each major asset class are
summarized in the following table:
F. Discount Rate
The discount rate used to measure the total pension liability in 2018 was 7.5%. The projection of cash flows used to
determine the discount rate assumed that contributions from plan members and employers will be made at rates set in
Minnesota Statutes. Based on these assumptions, the fiduciary net positions of the GERF and PEPFF was projected to
be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected
rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total
pension liability.
62
Long-term
Target
Expected Real
Asset Class
Allocation
Rate of Return
Domestic stocks
36.00 %
5.10 %
International stocks
17.00
5.30
Bonds
20.00
0.75
Alternative assets
25.00
5.90
Cash
2.00
0.00
Totals
100.00%
F. Discount Rate
The discount rate used to measure the total pension liability in 2018 was 7.5%. The projection of cash flows used to
determine the discount rate assumed that contributions from plan members and employers will be made at rates set in
Minnesota Statutes. Based on these assumptions, the fiduciary net positions of the GERF and PEPFF was projected to
be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected
rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total
pension liability.
62
CITY OF ELK RIVER, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2018
NOTE 9: DEFINED BENEFIT PENSION PLANS — STATE-WIDE - CONTINUED
G. Pension Liability Sensitivity
The following presents the City's proportionate share of the net pension liability for all plans it participates in, calculated
using the discount rate disclosed in the preceding paragraph, as well as what the City's proportionate share of the net
pension liability would be if it were calculated using a discount rate 1 percentage point lower or 1 percentage point
higher than the current discount rate:
Primary Government: GERF - City
PEPFF
Component Unit: GERF - HRA
H. Pension Plan Fiduciary Net Position
City Proportionate Share of NPL
Current Discount
1% Lower (6.5%) Rate (7.5%) 1% Higher (8.5%)
$ 12,934,309 $ 7,958,885 $ 3,851,929
6,958, 891 3,245,656 174,966
84,137 51,835 25,056
Detailed information about each pension plan's fiduciary net position is available in a separately -issued PERA financial
report that includes financial statements and required supplementary information. That report may be obtained on the
Internet at www.mnpera.org; by writing to PERA at 60 Empire Drive #200, St. Paul, Minnesota, 55103-2088; or by
calling (651) 296-7460 or (800) 652-9026.
NOTE 10: DEFINED CONTRIBUTION PLAN
Three council members of the City of Elk River are covered by the Public Employees Defined Contribution Plan
(PEDCP), a multiple -employer deferred compensation plan administered by PERA. The PEDCP is a tax qualified plan
under Section 401(a) of the Internal Revenue Code and all contributions by or on behalf of employees are tax deferred
until time of withdrawal.
Plan benefits depend solely on amounts contributed to the plan plus investment earnings, less administrative expenses.
Minnesota Statutes, Chapter 353D.03, specifies plan provisions, including the employee and employer contribution rates
for those qualified personnel who elect to participate. An eligible elected official who decides to participate contributes
5% of salary which is matched by the elected official's employer. Employees who are paid for their services may elect to
make member contributions in an amount not to exceed the employer share. Employer and employee contributions are
combined and used to purchase shares in one or more of the seven accounts of the Minnesota Supplemental Investment
Fund. For administering the plan, PERA receives 2% of employer contributions and twenty-five hundredths of one
percent (.0025) of the assets in each member's account annually.
Total contributions made by the City of Elk River during fiscal year 2018 were:
Contribution Amount
Employee Employer
$1,405 $1,405
Percentage of Covered Payroll
Employee Employer
5.0% 5.0%
63
Required
Rate
5.0%
CITY OF ELK RIVER, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2018
NOTE 11: DEFINED BENEFIT PENSION PLANS — FIRE RELIEF ASSOCIATION
A. Plan Description
All members of the Elk River Fire Department (the Department) are covered by a defined benefit plan administered by
the Elk River Fire Department Relief Association (the Association). As of December 31, 2018, the plan covered 42
active firefighters and 6 vested terminated fire fighters whose pension benefits are deferred. The plan is a single
employer retirement plan and is established and administered in accordance with Minnesota Statute, Chapter 69.
The Association maintains a separate Special fund to accumulate assets to fund the retirement benefits earned by the
Department's membership. Funding for the Association is derived from an insurance premium tax in accordance with the
Volunteer Firefighter's Relief Association Financing Guidelines Act of 1971 (Chapter 261 as amended by Chapter 509
of Minnesota Statutes 1980). Funds are also derived from investment income.
B. Benefits Provided
A fire fighter who completes at least 20 years as an active member of the Department is entitled, after age 50, to a full
service pension upon retirement.
The bylaws of the Association also provide for an early vested service pension for a retiring member who has completed
fewer than 20 years of service. The reduced pension, available to members with a minimum of 5 years of service, shall
be equal to 40% of the pension as prescribed by the bylaws. This percentage increases 4% per year so that at 20 years of
service, the full amount prescribed is paid. Members who retire with less than 20 years of service and have reached the
age of 50 years and have completed at least 5 years of active membership are entitled to a reduced service pension not to
exceed the amount calculated by multiplying the member's service pension for the completed years of service times the
applicable non -forfeitable percentage of pension.
C. Contributions
Minnesota Statutes, Chapters 424 and 424A authorize pension benefits for volunteer fire relief associations. The plan is
funded by fire state aid, investment earnings and, if necessary, employer contributions as specified in Minnesota Statutes
and voluntary City contributions (if applicable). The state of Minnesota contributed $188,502 in fire state aid to the plan
on behalf of the City Fire Department for the year ended December 31, 2018, which was recorded as revenue. Required
employer contributions are calculated annually based on statutory provisions. The City's statutorily -require contribution
to the plan for the year ended December 31, 2018 was $0 but the City voluntarily contributed $30,000.
D. Pension Costs
At December 31, 2018, the City reported a net pension asset of $1,146,722 for the plan. The net pension liability (asset)
was measured as of December 31, 2017. The total pension liability used to calculate the net pension liability (asset) in
accordance with GASB 68 was determined by Vanlwaarden Associates applying an actuarial formula to specific census
data certified by the Department as of December 31, 2017.
For the year ended December 31, 2018, the City recognized pension expense of ($222,651).
64
CITY OF ELK RIVER, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2018
NOTE 11: DEFINED BENEFIT PENSION PLANS — FIRE RELIEF ASSOCIATION - CONTINUED
D. Pension Costs (Continued)
At December 31, 2018, the City reported deferred outflows of resources and deferred inflows of resources, including its
contributions subsequent to the measurement date, related to pension from the following sources:
Changes in actuarial assumptions
Net difference between projected and
actual earnings on plan investments
Contributions to plan subsequent
to the measurement date
Total
Deferred Deferred
Outflows Inflows
of Resources of Resources
$ 190,887
112,530
30,000
$ 220,887 $ 112,530
Deferred outflows of resources totaling $30,000 related to pensions resulting from the City's contributions to the plan
subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended
December 31, 2019. Other amounts reported as deferred outflows and inflows of resources related to the plan will be
recognized in pension expense as follows:
Year Endine December 31_
2019
2020
2021
Thereafter
E. Actuarial Assumptions
Pension Expense
Amount
$ 33,791
(17,255)
(80,820)
142,641
The total pension liability at December 31, 2018 was determined using the entry age normal actuarial cost and level
dollar closed amortization methods with the following actuarial assumptions:
Retirement eligibility
Age 50 or after 20 years of service
If both age 50 and minimum 5 years of service but not 20 years,
pension reduced 4% for each year les s than 20 years
Inflation 2.75% per year
Discount rate 5.75% per year
Investment rate of return 5.75% per year
20 -year municipal bond yield 3.31%per year
The 5.75% long-term expected rate of return on pension plan investments was determined using a building-block method
in which best estimates for expected future real rates of return (expected returns, net of inflation) were developed for
each asset class using the plan's target investment allocation along with long-term return expectations by asset class.
Inflation expectations were applied to derive the nominal rate of return for the portfolio.
65
CITY OF ELK RIVER, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2018
NOTE 11: DEFINED BENEFIT PENSION PLANS — FIRE RELIEF ASSOCIATION - CONTINUED
E. Actuarial Assumptions (Continued)
The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the
following table:
F. Discount Rate
The discount rate used to measure the total pension liability was 5.75%. The projection of cash flows used to determine
the discount rate assumed that contributions to the plan will be made as specified in statute. Based on that assumption
and considering the funding ratio of the plan, the fiduciary net position was projected to be available to make all
projected future benefit payments of current active and inactive members. Therefore, the long-term expected rate of
return on pension plan investments was applied to all periods of projected benefit payments to determine the total
pension liability.
G. Pension Liability Sensitivity
The following presents the City's net pension liability (asset) for the plan, calculated using the discount rate disclosed in
the preceding paragraph, as well as what the City's net pension liability (asset) would be if it were calculated using a
discount rate 1 percent lower or 1 percent higher than the current discount rate:
1% Lower (4.75%) C un-ent (5.75%) 1% Higher (6.75%)
Net pension liability (asset) ($1,101,139) ($1,146,722) ($1,191,022)
66
Long-term
Target
Expected Real
Asset Class
Allocation
Rate of Return
Domestic equities
42.59%
5.39%
International equities
10.87
5.20
Fixed income
32.39
1.98
Real estate and alternative
1.18
4.25
Cash and cash equivalents
12.97
0.79
Total
100.00 %
F. Discount Rate
The discount rate used to measure the total pension liability was 5.75%. The projection of cash flows used to determine
the discount rate assumed that contributions to the plan will be made as specified in statute. Based on that assumption
and considering the funding ratio of the plan, the fiduciary net position was projected to be available to make all
projected future benefit payments of current active and inactive members. Therefore, the long-term expected rate of
return on pension plan investments was applied to all periods of projected benefit payments to determine the total
pension liability.
G. Pension Liability Sensitivity
The following presents the City's net pension liability (asset) for the plan, calculated using the discount rate disclosed in
the preceding paragraph, as well as what the City's net pension liability (asset) would be if it were calculated using a
discount rate 1 percent lower or 1 percent higher than the current discount rate:
1% Lower (4.75%) C un-ent (5.75%) 1% Higher (6.75%)
Net pension liability (asset) ($1,101,139) ($1,146,722) ($1,191,022)
66
CITY OF ELK RIVER, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2018
NOTE 11: DEFINED BENEFIT PENSION PLANS — FIRE RELIEF ASSOCIATION - CONTINUED
F. Pension Plan Fiduciary Net Position
The following presents changes in the total pension liability, plan fiduciary net position, and the net pension asset:
Changes forthe year:
Service cost
Interest
Assumption changes
Plan changes
Contributions (employer)
Contributions (state)
Difference between expected and actual experience
Benefit payments
Net investment income
Administrative costs
Total net changes
Total - beginning
Total- ending
Net Pension
Total Pension P1anFiduciary Liability
Liability (a) Net Position (b) (Asset) (a -b)
$ 101,600
$ -
$ 101,600
146,894
-
146,894
11,196
-
11,196
-
30,000
(30,000)
182,297
(182,297)
-
457,331
(457,331)
-
(13,009)
13,009
259,690
656,619
(396,929)
2,346,626 3,096,419 (749,793)
$ 2,606,316 $ 3,753,038 $ (1,146,722)
The Association issues a publicly available financial report. The report may be obtained by writing to the Elk River Fire
Department Relief Association, 13073 Orono Parkway, Elk River, MN 55330.
67
CITY OF ELK RIVER, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2018
NOTE 12: POST EMPLOYMENT BENEFITS OTHER THAN PENSIONS
At December 31, 2018, the City adopted Governmental Accounting Standards Board (GASB) Statement No. 75, Accounting
and Financial Reporting for Postemployment Benefits Other than Pensions.
A. Plan Description
The City provides other postemployment health insurance benefits for retired employees through two defined benefit
plans: Municipal Retirees Health Plan (MRHP), a single -employer plan, and Utilities Retirees Health Plan (URHP), a
multi-employer plan. Each plan provides benefits for eligible retirees and their dependents through the City's group
health insurance plans, which cover both active and retired members. Since the premium is a blended rate determined on
the active and retiree population, the retirees are receiving an implicit rate subsidy. The MRHP and URHP do not issue
publicly available financial reports.
At December 31, 2018, the following employees were covered by the benefit terms:
Active plan members
Inactive members receiving benefits
Inactive members waiving benefits
Total plan members
B. Funding Policy
Municipal
Retiree
Health Plan
123
Utility
Retiree
Health Plan
38
132 43
Contribution requirements are reviewed at the time changes are made to the plans. Benefit provisions for MRHP are
established and amended by the City. The Utilities has been delegated authority to establish and amend benefit
provisions for URHP. Eligible retirees receiving benefits are required to pay 100% of the total premium.
C. Total OPEB Liability
The City's (MRHP) total OPEB liability was measured as of January 1, 2018.
The total OPEB liability in the January 1, 2017 actuarial valuation was determined using the following actuarial
assumptions, applied to all periods included in the measurement, unless otherwise specified:
Actuarial cost method
Entry age
Amortization method
Level percentage of pay
Amortization period
Investment gains/losses are amortized over 5 years and liability
gains/losses are amortized over Average Working Lifetime
Inflation
2.50%
Healthcare cost trend rate
6.25% in 2018 grading to 5.00% over 5 years
Salary increases
3.00%
Discount rate
3.30%
Retirement age
Age 55 for Police and Fire, Age 63 for all others (based on PERA
average rates)
Mortality
RP -2014 with MP -2016 generational improvements
68
CITY OF ELK RIVER, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2018
C. Total OPEB Liability (Continued)
The City's OPEB plan is not funded by a trust, and therefore, the City uses the 20 -year municipal bond index rate to
develop its long-term rate of return and discount rate. This rate was 3.30% in the current actuarial valuation, which was
updated from the 3.50% used in the prior actuarial valuation.
The Utilities (URHP) total OPEB liability was measured as of December 31, 2018.
The total OPEB liability in the January 1, 2018 was determined using the following actuarial assumptions, applied to all
periods included in the measurement, unless otherwise specified:
Discount rate 3.31%
Inflation rate 2.75%
Salary increases 3.25%
Healthcare cost trend rate 6.9% in 2018 grading to 5.2% over 3 years until 2055 grading down
to 4.4% ultimate rate in 2074
Mortality RP -2014 with MP -2016 generational improvements
The discount rate used to measure the total OPEB liability of 3.31%. The actuarial assumption used in the December 31,
2018 valuation were based on input from a variety of published sources of historical and projected future financial data.
Each assumption was reviewed for reasonableness with the source information as well as for consistency with the other
economic assumptions.
D. Changes in the Total OPEB Liability
Balances at December 31, 2017
Changes for the Year:
Service cost
Interest
Benefit payments
Changes in assumptions or other inputs
Net Changes
Balances at December 31, 2018
MRHP URHP
Total OPEB Total OPEB
Liability (a) Liability (a)
$ 875,478
$ 81,453
58,939
11,084
30,051
3,526
(47,958)
-
-
4,509
41,032
19,119
$ 916,510
$ 100,572
The following changes in assumptions occurred between the current and prior actuarial valuations:
City - MRHP
• The discount rate was changed from 3.50% to 3.30%.
• The withdrawal and retirement tables for all employees were updated.
• The health care trend rates were changed to better anticipate short term and long term medical increases.
• The mortality table was updated from the projection of RP 2000 rates to 2014(with Blue collar adjustment
for Police and Fire personnel) to the RP -2014 adjusted to 2006 White Collar Mortality Tables with MP -2016
Generational Improvement Scale (Blue Collar Tables for Police and Fire personnel).
• The percentage of future retirees assumed to elect spouse medical coverage post -employment was increased
from 15% to 25% to better reflect actual plan experience.
69
CITY OF ELK RIVER, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2018
D. Changes in the Total OPEB Liability (Continued)
Utility - URHP
• The discount rate was changed from 3.81% to 3.31%.
• Withdrawal rates were updated from the Small Plan age -based table in the 2003 SOA Turnover, adjusted by
50% to the rate used in the 7/1/17 PERA General Employees Retirement Plan valuation.
• The health care trend rates were reset to reflect updated cost increase expectations, including an adjustment to
reflect the impact of the Affordable Care Act's Excise Tax on high-cost health insurance plans.
• Medical per capita claims cost were updated to reflect recent experience.
• The salary scale assumption was changed from a flat rate of 3.25% to the rates used in the 7/1/2017 PERA
General Employees Retirement Plan valuation.
E. Sensitivity of Total OPEB Liability
The following presents the total OPEB liability, as well as what the net OPEB liability would be if it were calculated
using a discount rate the 1 -percentage point lower or 1 -percentage point higher than the current discount rate:
City - MRHP
Net OPEB Liability
Utility - URHP
Net OPEB Liability
1% Decrease
(230%)
$ 987,172
1% Decrease
(231%)
$ 110,190
Discount Rate
(330%)
$ 916,510
Discount Rate
(331%)
$ 100,572
1% Increase
(430%)
$ 850,859
1% Increase
—(4.31%)
$ 91,750
The following presents the net OPEB liability, as well as what the net OPEB liability would be if it were calculated
using healthcare cost trend rates that are 1 -percentage point lower or 1 -percentage point higher than the current
healthcare cost trend rates:
City - MRHP
Net OPEB Liability
Utility – URHP
Net OPEB Liability
1% Decrease
(525% decreasing
to 4%)
$ 819,491
1% Decrease
(5.9% decreasing
to 3.4%)
$ 87,443
70
Healthcare Cost
Trend Rates
(625% decreasing
to 5%)
$ 916,510
Healthcare Cost
Trend Rates
(6.9% decreasing
to 4.4%)
$ 100,572
1% Increase
(725% decreasing
to 6%)
$ 1,030,114
1% Increase
(7.9% decreasing
to 5.4%)
$ 116,283
CITY OF ELK RIVER, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2018
NOTE 12: POST EMPLOYMENT BENEFITS OTHER THAN PENSIONS — CONTINUED
F. OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB
For the year ended December 31, 2018, the City recognized OPEB expense of $88,990. At December 31, 2018, the City
reported deferred outflow of resources and deferred inflows of resources related to OPEB from the following sources:
A total of $42,048 reported as deferred outflows or resources related to OPEB resulting from city contributions
subsequent to the measurement date will be recognized as a reduction of the total OPEB liability in the year ended
December 31, 2019.
NOTE 13: OTHER INFORMATION
A. Risk Management
The City is exposed to various risks of loss related to torts; theft of damage to and destruction of assets; errors and
omissions; injuries to employees; and natural disasters for which the City carries insurance. The City obtains insurance
through participation in the League of Minnesota Cities Insurance Trust (LMCIT) which is a risk sharing pool with
approximately 800 other governmental units. The City pays an annual premium to LMCIT for its workers compensation
and property and casualty insurance. The LMCIT is self-sustaining through member premiums and will reinsure for
claims above a prescribed dollar amount for each insurance event. Settled claims have not exceeded the City's coverage
in any of the past three fiscal years.
Liabilities are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably
estimated. Liabilities, if any, include an amount for claims that have been incurred but not reported (IBNRs). The City's
management is not aware of any incurred but not reported claims.
B. Contingent Liabilities
Amounts received or receivable from grant agencies are subject to audit and adjustment by grantor agencies, principally
the federal government. Any disallowed claims, including amounts already collected, may constitute a liability of the
applicable funds. The amount, if any, of expenditures that may be disallowed by the grantor cannot be determined at this
time, although the government expects such amounts, if any, to be immaterial.
The City's tax increment districts are subject to review by the State of Minnesota Office of the State Auditor (OSA).
Any disallowed claims or misuse of tax increments could become a liability of the applicable fund. The City's
management is not aware of any instances of noncompliance which would have a material effect on the financial
statements.
VA
Deferred Deferred
Outflows of Inflows of
Resources Resources
Differences between expected and actual experience
$ - $ -
Changes of assumptions
-
Net difference between projected and actual
earnings on OPEB plan investments
- -
Contributions subsequent to the measurement date
42,048 -
Total
$ 42,048 $ -
A total of $42,048 reported as deferred outflows or resources related to OPEB resulting from city contributions
subsequent to the measurement date will be recognized as a reduction of the total OPEB liability in the year ended
December 31, 2019.
NOTE 13: OTHER INFORMATION
A. Risk Management
The City is exposed to various risks of loss related to torts; theft of damage to and destruction of assets; errors and
omissions; injuries to employees; and natural disasters for which the City carries insurance. The City obtains insurance
through participation in the League of Minnesota Cities Insurance Trust (LMCIT) which is a risk sharing pool with
approximately 800 other governmental units. The City pays an annual premium to LMCIT for its workers compensation
and property and casualty insurance. The LMCIT is self-sustaining through member premiums and will reinsure for
claims above a prescribed dollar amount for each insurance event. Settled claims have not exceeded the City's coverage
in any of the past three fiscal years.
Liabilities are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably
estimated. Liabilities, if any, include an amount for claims that have been incurred but not reported (IBNRs). The City's
management is not aware of any incurred but not reported claims.
B. Contingent Liabilities
Amounts received or receivable from grant agencies are subject to audit and adjustment by grantor agencies, principally
the federal government. Any disallowed claims, including amounts already collected, may constitute a liability of the
applicable funds. The amount, if any, of expenditures that may be disallowed by the grantor cannot be determined at this
time, although the government expects such amounts, if any, to be immaterial.
The City's tax increment districts are subject to review by the State of Minnesota Office of the State Auditor (OSA).
Any disallowed claims or misuse of tax increments could become a liability of the applicable fund. The City's
management is not aware of any instances of noncompliance which would have a material effect on the financial
statements.
VA
CITY OF ELK RIVER, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2018
NOTE 13: OTHER INFORMATION — CONTINUED
C. Territorial Acquisition Agreement
In 1991, the Utilities entered into a 20 year agreement to transfer ownership of electric plant and electric service to
customers in certain areas receiving electric service from Anoka Electric Cooperative, Inc. (AEC). In 2010 the Utility
completed the final purchase under this agreement.
The agreed cost of property purchased from AEC is net book value. The Utilities also pays AEC for loss of revenue for
each area acquired based on a formula outlined in the agreement.
In addition, the Utilities will compensate AEC for the loss of revenue from the future sale of electricity to electric
customers in the areas acquired from AEC for a period of ten years from the date of sale of each individual area.
The Utilities paid $0 in 2018 for loss of revenues under this agreement. All amounts paid are included in property and
equipment.
In 2015, the Utilities entered into an agreement to transfer ownership of electric plant and electric service to customers in
eight designated areas receiving service from Connexus Energy. Specific payment terms have been negotiated for 5
years, and if any of the eight areas are not acquired within this timeframe, the payment terms may be renegotiated.
The agreed cost of property purchased from Connexus Energy is net book value, integration expenses, and a loss of
revenue payment. The loss of revenue payment for each area acquired is based on a formula outlined in the agreement,
payable for the subsequent ten years after initial purchase.
The Utilities acquired designated service area 1 in 2015 for $877,807 and service area 2 in 2016 for $663,586. Service
areas 3 and 4 were acquired in 2017 for $276,776, and service areas 5 and 6 were acquired in 2018 for $298,736. The
loss of revenue payments made were $411,157 in 2017, $570,725 in 2018, and will be $751,860 in 2019. All amounts
paid are included in property and equipment, and loss of revenue payments are included in intangible assets.
D. Conduit Debt Obligations
From time to time, the City has issued revenue bonds to provide financial assistance to private -sector entities for the
acquisition and construction of industrial and commercial, multi -family and educational facilities deemed to be in the
public interest. The bonds are secured by the property financed and are payable solely from payment received from the
benefited entity. Neither the City, the state, nor any political subdivision thereof is obligated in any manner for
repayment of the bonds. Accordingly, the bonds are not reported as liabilities in the accompanying financial statements.
As of December 31, 2018, there were two series of revenue bonds outstanding, with an aggregate principal payable
amount of $5,165,000.
E. Commitments
The Utilities has received notice from their power supplier exercising their right to give ten years notice to cancel the
existing power contract. The cancellation date was effective September 30, 2018. On May 14, 2013 the Utilities signed a
new agreement with Minnesota Municipal Power Agency (MMPA), and started taking power on October 1, 2018.
The Utilities entered into an agreement in 2007 with Central Municipal Power Agency/Services (CMPAS) to acquire an
interest in the CAPX Initiative Brookings Project, a power transmission line in Minnesota. The project is a 250 mile, 345
W AC transmission line with a rating of 2,300 MW, between Brookings, South Dakota, and the Southeast Twin Cities.
In 2011 there was increased opportunity for investment, and subsequent agreements provide the Utilities with an
ownership share of $5.6 million or 18.89 percent. The return on this investment through CMPAS is designed to provide
approximately $124,000 annually over the 40 -year project life. To ensure bond payment obligations, cash distributions
for 2018 were curtailed. In 2018, the principal bond payment increased approximately by $700,000. This increase
remains in effect through 2020. In 2021, the bond payment drops nearly $1,000,000. A contributing factor in reduced
O:
CITY OF ELK RIVER, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2018
NOTE 13: OTHER INFORMATION — CONTINUED
E. Commitments (Continued)
participant cash distributions in 2018 is under recovery. The projected under recovery in 2018 is estimated to be
$250,000 - $300,000. The bond obligations are satisfied first and distributions to participants are directly affected by
under recovery. The under recovery is rolled forward under the true -up. However, the estimated under recovery in 2018
would be included in the recovery requirements in 2020. The transmission payments for 2018 were $13,766, of which
$3,306 was receivable at December 31, 2018.
F. Joint Ventures
The City has agreements with government and other entities which provide reduced costs, better service and additional
benefits to the participants. In 2007, the City and neighboring municipalities formed the Sherburne/Wright Cable
Communications Commission (the "Commission"). The purpose of the organization is to monitor the operation and
activities of cable communications of the member municipalities. The Commission also provides coordination,
administration and enforcement of the franchises for the cable communication system. Financial statements for the
Commission can be obtained by writing to: Sherburne/Wright Cable Communications Commission at 444 Cedar St,
Suite 950, St. Paul, MN 55101.
NOTE 14: TAX ABATEMENTS
The City of Elk River has established a tax abatement program pursuant to Minnesota Statutes, Sections 469.1812
through 469.1815. As part of the program the City enters into agreements through the use of tax increment financing
districts under Minnesota Statutes Section 469.174 to 469.179 (the Tax Increment Act). Under these statutes the City
annually abates taxes collected above the district's base tax capacity which is established during adoption of the Tax
increment district. These agreements are established to foster economic development and redevelopment through
creating jobs, removing blight and providing affordable housing.
For fiscal year ending December 31, 2018, the City has three agreements established under Minnesota Statutes Section
469.174 to 469.179 which resulted in property taxes totaling $265,184 being abated. Individual abatement payments
which constituted more than 1% of the City's 2018 tax levy include:
• A pay-as-you-go note resulting in an abatement amount of $131,083 for a financial institution.
• A pay-as-you-go note resulting in an abatement amount of $134,101 for an industrial developer.
As part of the City's tax abatement program, the City also enters into agreements with local businesses in the form of
business subsidy agreement established under Minnesota Statutes Section I I6J.993 through I I6J.995. These agreements
must meet a public purpose which may include, by may not be limited to, increasing the tax base.
In 2018 the City of Elk River had eight business subsidy agreements in place which resulted in property taxes totaling
$171,290 being abated. Individual agreements which result in taxes abated in excess of 1% of the City's total tax levy
would be disclosed individually. There were no such payments made in 2018 in excess of this amount.
73
CITY OF ELK RIVER, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2018
NOTE 15: CHANGE IN ACCOUNTING STANDARDS
During 2018, the City implemented new accounting pronouncements issued by the Governmental Accounting Standards
Board (GASB), including Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other
than Pensions, for the year ended December 31, 2018. These standards required a retroactive implementation which
resulted in the restatement of beginning balances in the December 31, 2018 financial statements. Changes related to
these standards are reflected in the financial statements and schedules and related disclosures are included in Note 12.
As a result of the restatement of beginning balances, the following schedule reconciles the previously reported December
31, 2017 balances to the December 31, 2018 financial statements:
Primary Government
Governmental activities
Business -type activities
Municipal Liquor
Garbage
Sewer
Storm Water
Water
Electric
Total business -type activities
December 31. 2018
Net Position
January 1, 2018
as Previously Prior Period
Reported Restatement (1)
Net Position
January 1, 2018
as Restated
$ 97,905,834 $ (241,699) $ 97,664,135
$ 5,637,990 $
(19,012) $ 5,618,978
228,421
- 228,421
29,820,838
(19,818) 29,801,020
10,489,713
(1,248) 10,488,465
24,201,051
- 24,201,051
36,491,274
- 36,491,274
$ 106,869,287 $ (40,078) $ 106,829,209
(1) To record net other postemployment benefits liability and deferred outflows of resources at December 31, 2017.
74
REQUIRED SUPPLEMENTARY INFORMATION
CITY OF ELK RIVER, MINNESOTA
SCHEDULE OF CITY CONTRIBUTIONS - PERA
DECEMBER 31, 2018
Primary Government:
Contributions
General Employees
Retirement Fund
in Relation to
Contribution
Contributions as
Contributions
Statutorily
the Statutorily
Deficiency
City's
a Percentage
in Relation to
Contribution
Required
Contributions as
Covered
Statutorily
the Statutorily
Deficiency
City's
a Percentage
Year
Required
Required
(Excess)
Covered
of Covered
Ending
Contribution (a)
Contribution (b)
(b - a)
Payroll (c)
Payroll (b/c)
12/31/18
$ 736,804
$ 736,804
- $
9,824,053
7.5%
12/31/17
706,711
706,711
-
9,422,813
7.5%
12/31/16
684,325
684,325
-
9,124,333
7.5%
12/31/15
662,664
662,664
-
8,835,520
7.5%
12/31/14
609,362
609,362
-
8,124,827
7.5%
Public Employees Police and Fire Fund
Ten years of data will eventually be presented when available.
vii
Contributions
in Relation to
Contribution
Contributions as
Statutorily
the Statutorily
Deficiency
City's
a Percentage
Year
Required
Required
(Excess)
Covered
of Covered
Ending
Contribution (a)
Contribution (b)
(b - a)
Payroll (c)
Payroll (b/c)
12/31/18
$ 533,296
$ 533,296
-
$ 3,291,950
16.2%
12/31/17
508,774
508,774
-
3,140,580
16.2%
12/31/16
495,478
495,478
-
3,058,506
16.2%
12/31/15
478,192
478,192
-
2,951,802
162%
12/31/14
418,280
418,280
-
2,581,975
16.2%
Component Unit:
General Employees
Retirement Fund
Contributions
in Relation to
Contribution
Contributions as
Statutorily
the Statutorily
Deficiency
HRA's
a Percentage
Year
Required
Required
(Excess)
Covered
of Covered
Ending
Contribution (a)
Contribution (b)
(b - a)
Payroll (c)
Payroll (b/c)
12/31/18
$ 4,810
$ 4,810
-
$ 64,133
7.5%
12/31/17
4,494
4,494
-
59,920
7.5%
12/31/16
4,352
4,352
-
58,027
7.5%
12/31/15
4,212
4,212
-
56,160
7.5%
12/31/14
3,877
3,877
-
51,693
7.5%
Ten years of data will eventually be presented when available.
vii
Year
Ending
12/31/18
CITY OF ELK RIVER, MINNESOTA
SCHEDULE OF CITY CONTRIBUTIONS
ELK RIVER FIRE RELIEF
DECEMBER 31, 2018
Actuarial Actual Contribution
Determined Contributions Deficiency
Contribution (a) Paid (b) (Excess) (a -b)
$ 189,502
12/31/17
182,297
12/31/16
179,192
12/31/15
174,826
12/31/14
164,825
12/31/13
167,103
Ten years of data will eventually be presented when available
W[.
219,502 $ (30,000)
212,297
(30,000)
209,192
(30,000)
204,826
(30,000)
194,825
(30,000)
197,103
(30,000)
Primary Government:
Fiscal
Year
Ending
06/30/18
06/30/17
06/30/16
06/30/15
06/30/14
Fiscal
Year
Ending
06/30/18
06/30/17
06/30/16
06/30/15
06/30/14
City's
Proportion of
the Net Pension
Liability
0.1435%
0.1506%
0.1426%
0.1428%
0.1577%
City's
Proportion of
the Net Pension
Liability
0.3045%
0.3140%
0.3060%
0.3040%
0.2990%
CITY OF ELK RIVER, MINNESOTA
SCHEDULE OF THE CITY'S PROPORTIONATE SHARE
OF THE NET PENSION LIABILITY - PERA
DECEMBER 31, 2018
General Employees Retirement Fund
City's
Proportionate
Share of
the Net Pension
Liability (a)
$ 7,958,885
9,611,075
11,604,537
7,405,496
7,407,964
State's
Proportionate
Share of
the Net Pension
Liability
Associated
with the City (b)
$ 261,004
120,624
152,173
Total
(a+b)
$ 8,219,889
9,731,699
11,756,710
7,405,496
7,407,964
City's
Covered
Payroll (c)
$ 9,702,980
9,695,118
8,847,114
8,659,539
8,279,769
Public Employees Police and Fire Fund
City's
Proportionate
Share of
the Net Pension
Liability (a)
$ 3,245,656
4,239,374
12,280,312
3,454,151
3,229,323
State's
Proportionate
Share of
the Net Pension
Liability
Associated
with the City (b)
43,337
53,870
Total
(a+b)
$ 3,245,656
4,282,711
12,334,182
3,454,151
3,229,323
City's
Covered
Payroll (c)
$ 3,220,233
3,211,726
2,952,673
2,788,952
2,440,932
City's
Proportionate
Share of the
Net Pension
Liability as a
Percentage
of Covered
Payroll ((a+b)/c)
84.7%
100.4%
132.9%
85.5%
89.5%
City's
Proportionate
Share of the
Net Pension
Liability as a
Percentage
of Covered
Payroll ((a+b)/c)
100.8%
133.3%
417.7%
123.9%
132.3%
Plan Fiduciary
Net Position
as a Percentage
of the Total
Pension Liability
79.5%
75.9%
68.9%
78.2%
78.7%
Plan Fiduciary
Net Position
as a Percentage
of the Total
Pension Liability
88.8%
85.4%
63.9%
86.6%
87.1%
Component Unit:
General Employees Retirement Fund
HRA's
State's
Proportionate
Proportionate
Share of the
HRA's
Share of
Net Pension
Plan Fiduciary
HRA's
Proportionate
the Net Pension
Liability as a
Net Position
Fiscal
Proportion of
Share of
Liability
HRA's
Percentage
as a Percentage
Year the
Net Pension
the Net Pension Associated
Total
Covered
of Covered
of the Total
Ending
Liability
Liability (a)
with the HRA (b)
(a+b)
Payroll (c)
Payroll ((a+b)/c)
Pension Liability
06/30/18
0.0009%
$ 51,835
$ 1,698
$ 53,533 $
62,892
85.1%
79.5%
06/30/17
0.0010%
60,586
1,170
61,756
61,433
100.4%
75.9%
06/30/16
0.0009%
73,404
959
74,363
56,083
132.6%
68.9%
06/30/15
0.0009%
46,951
-
46,951
54,886
85.5%
78.2%
06/30/14
0.0010%
46,966
46,966
52,493
89.5%
78.7%
Ten years of data will eventually be presented when available.
77
CITY OF ELK RIVER, MINNESOTA
SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY AND
RELATED RATIOS - ELK RIVER FIRE RELIEF
DECEMBER 31, 2018
Total pension liability
Service cost
Interest
Assumption changes
Plan changes
Difference between expected and actual experience
Benefit payments
Net change in pension liability
Total pension liability - beginning
Total pension liability - ending (a)
Plan fiduciary net position
Contributions - employer
Contributions - state
Net investment income
Net gain (loss) on investments
Benefite payments
Administrative expense
Net change in plan fiduciary net position
Plan fiduciary net position - beginning
Plan fiduciary net position - ending (b)
Fire Reliefs net pension
liability (asset) - (a -b)
Plan fiduciary net position as a percentage
of the total pension liability
Covered payroll
Fire reliefs net pension liability (asset) as a
percentage of covered payroll
2017 2016 2015 2014
$ 101,600 $ 107,095 $ 99,459 $ 93,312
146,894 142,222 127,413 126,522
11,196 - 297,706 -
- 55,532 - 62,318
(147,992) - -
- (147,015) (423,760) -
259,690 9,842 100,818 282,152
2,346,626 2,336,784 2,235,966 1,953,814
$ 2,606,316 $ 2,346,626 $ 2,336,784 $ 2,235,966
$ 30,000 $ 30,000 $ 30,000 $ 30,000
182,297 179,192 177,826 164,825
54,007 55,756 54,358 77,412
403,324 173,668 (197,938) 46,697
- (147,015) (423,760) -
(13,009) (12,884) (13,663) (8,634)
656,619 278,717 (373,177) 310,300
3,096,419 2,817,702 3,190,879 2,880,579
$ 3,753,038 $ 3,096,419 $ 2,817,702 $ 3,190,879
$(1,146,722) $ (749,79-3 $ (480,918) $ (954,913)
144.0% 132.0% 120.6% 142.7%
N/A N/A N/A N/A
N/A N/A N/A N/A
Notes to Schedule:
Changes of assumptions.
The expected investment return and discount rate decreased from 6.00% to
5.75% to reflect updated capital market assumptions.
Ten years of data will eventually be presented when available.
78
CITY OF ELK RIVER, MINNESOTA
SCHEDULE OF CHANGES IN THE TOTAL OPEB
LIABILITY AND RELATED RATIOS
MUNICIPAL RETIREES HEALTH PLAN
DECEMBER 31, 2018
2018
Total OPEB Liability:
Service cost $ 58,939
Interest 30,051
Benefit payments (47,958)
Net change in total OPEB liability 41,032
Total OPEB liability - beginning 875,478
Total OPEB liability - ending (a) $ 916,510
Covered payroll $ 8,658,239
Total OPEB liability as a percentage of covered payroll 10.59%
Notes to Schedule:
The City implemented GASB 75 in fiscal year 2018. The schedule is provided prospectively beginning
with the City's fiscal year ended December 31, 2018. Additional years will be added as they become available.
No assets are accumulated in a trust that meets the criteria in paragraph 4 of GASB Statement No. 75.
Changes in Benefit Terms:
There were no significant changes in benefit terms.
Changes in Assumptions:
The discount rate was changed from 3.50% to 3.30%.
79
CITY OF ELK RIVER, MINNESOTA
SCHEDULE OF CHANGES IN THE TOTAL OPEB
LIABILITY AND RELATED RATIOS
UTILITIES RETIREES HEALTH PLAN
DECEMBER 31, 2018
2018
Total OPEB Liability:
Service cost $ 11,084
Interest 3,526
Assumption changes 4,509
Net change in total OPEB liability 19,119
Total OPEB liability - beginning 81,453
Total OPEB liability - ending (a) $ 100,572
Covered payroll $ 3,584,096
Total OPEB liability as a percentage of covered payroll 2.81%
Notes to Schedule:
The Utilities implemented GASB 75 in fiscal year 2018. The schedule is provided prospectively beginning with
the Utilities's fiscal year ended December 31, 2018. Additional years will be added as they become available.
No assets are accumulated in a trust that meets the criteria in paragraph 4 of GASB Statement No. 75.
Changes in Benefit Terms:
There were no significant changes in benefit terms.
Changes in Assumptions:
The discount rate was changed from 3.81% to 3.31%.
80
COMBINING AND INDIVIDUAL FUND
STATEMENTS AND SCHEDULES
NONMAJOR GOVERNMENTAL FUNDS
Special Revenue - Special revenue funds are used to account for the proceeds of proceeds of specific
revenue sources that are legally restricted to expenditures for specified purposes. They are usually required
by statute or local ordinance to finance particular functions or activities of government.
Debt Service - Debt service funds account for the accumulation of resources for, and the payment of,
general long-term debt principal, interest and other related costs.
Capital Projects - Capital projects funds are used to account for the acquisition and construction of major
capital facilities other than those financed by proprietary funds.
81
CITY OF ELK RIVER, MINNESOTA
COMBINING BALANCE SHEET
NONMAJOR GOVERNMENTAL FUNDS
DECEMBER 31, 2018
82
Special
Debt
Capital
Total Nonmajor
Revenue
Service
Projects
Governmental
Funds
Funds
Funds
Funds
ASSETS
Cash and investments
$
4,574,055
$ 1,457,117
$ 10,966,189
$ 16,997,361
Receivables:
Interest
17,954
4,204
52,550
74,708
Taxes
12,537
17,857
347
30,741
Accounts
133,986
-
167,129
301,115
Special assessments
-
-
355,487
355,487
Notes, net
1,969,512
-
-
1,969,512
Due from other governments
14
-
-
14
Due from other funds
1,840,269
-
-
1,840,269
Prepaid items
114,976
-
-
114,976
Property held for resale
175,000
-
-
175,000
Total assets
$
8,838,303
$ 1,479,178
$ 11,541,702
$ 21,859,183
LIABILITIES
Accounts payable
$
52,665
$ -
$ 132,141
$ 184,806
Salaries payable
14,387
-
-
14,387
Due to other governments
2,035
-
-
2,035
Due to other funds
12,735
-
2,139,319
2,152,054
Due to component unit
-
-
202,304
202,304
Unearned revenue
-
-
613,108
613,108
Total liabilities
81,822
-
3,086,872
3,168,694
DEFERRED INFLOWS OF RESOURCES
Unavailable revenue - taxes
3,855
5,948
297
10,100
Unavailable revenue - special assessments
-
-
354,275
354,275
Total deferred inflows of resources
3,855
5,948
354,572
364,375
FUND BALANCES
Nonspendable
114,976
-
-
114,976
Restricted
1,358,784
1,473,230
318,729
3,150,743
Committed
7,278,866
-
-
7,278,866
Assigned
-
-
10,716,044
10,716,044
Unassigned
-
-
(2,934,515)
(2,934,515)
Total fund balances
8,752,626
1,473,230
8,100,258
18,326,114
Total liabilities, deferred inflows
of resources, and fund balances
$
8,838,303
$ 1,479,178
$ 11,541,702
$ 21,859,183
82
CITY OF ELK RIVER, MINNESOTA
COMBINING STATEMENT OF REVENUES, EXPENDITURES,
AND CHANGES IN FUND BALANCES
NONMAJOR GOVERNMENTAL FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2018
REVENUES
Taxes:
Property taxes
Intergovernmental revenue
Charges for services
Fines and forfeits
Special assessments
Interest income
Miscellaneous revenue:
Landfill expansion fee
Refunds and reimbursements
Contributions
Other
Total revenues
EXPENDITURES
Current:
General government
Public safety
Public works
Culture and recreation
Economic development
Capital outlay:
General government
Public safety
Public works
Culture and recreation
Debt service:
Principal
Interest and service charges
Total expenditures
Excess (deficiency) of revenues
over (under) expenditures
OTHER FINANCING SOURCES (USES)
Transfers in
Transfers out
Sale of capital assets
Total other financing sources (uses)
Net change in fund balances
Fund balances - January 1
Fund balances - December 31
Special
Debt
Capital
Total Nonmajor
Revenue
Service
Projects
Governmental
Funds
Funds
Funds
Funds
1,013,449
-
380,368
$ 572,527
$ 881,239
$ 252,236
$ 1,706,002
11,545
-
425,442
436,987
994,507
-
228,116
1,222,623
20,378
-
-
20,378
-
-
379,054
379,054
90,452
16,460
177,103
284,015
-
-
1,107,321
1,107,321
90,203
-
-
90,203
5,458
241,863
378,976
626,297
37,814
-
25,825
63,639
1,822,884
1,139,562
2,974,073
5,936,519
64,638
-
37,172
101,810
12,090
-
43,747
55,837
48,463
-
30,338
78,801
1,013,449
-
380,368
1,393,817
390,162
-
574,764
964,926
-
-
79,173
79,173
-
-
740,275
740,275
-
-
646,810
646,810
9,019
-
566,032
575,051
-
1,575,000
-
1,575,000
-
470,409
37,252
507,661
1,537,821
2,045,409
3,135,931
6,719,161
285,063
(905,847)
(161,858)
(782,642)
28,350
770,197
527,174
1,325,721
(151,600)
-
(828,797)
(980,397)
-
-
86,586
86,586
(123,250)
770,197
(215,037)
431,910
161,813
(135,650)
(376,895)
(350,732)
8,590,813
1,608,880
8,477,153
18,676,846
$ 8,752,626
$ 1,473,230
$ 8,100,258
$ 18,326,114
83
NONMAJOR SPECIAL REVENUE FUNDS
Library - This fund accounts for any library maintenance costs which are not paid by the Great River
Regional Library System.
Ice Arena - This fund accounts for the operation and maintenance of the ice arena which is funded by user
fees.
Pinewood Golf Course - This fund was established to account for the operation and maintenance of the
municipal -owned nine -hole golf course which is funded by user fees.
Landfill - This fund was established to segregate solid waste surcharge revenues to be used for landfill
abatement and other environmental issues.
Revolving Loan - This fund was established to account for the City's portion of state economic
development grant repayments which are used to fund other economic development projects.
State DEED — This fund was established to account for the state share of Department of Employment and
Economic Development grant repayments which are used to fund economic development projects.
Development Fund - This fund was established to attract businesses to develop within the City's business
park.
Insurance Reserve - This fund was opened to account for insurance deductibles and litigation costs not
covered by insurance. The major source of revenue is from insurance premium refunds.
Drug Forfeiture Reserve - This fund was established to account for revenues received as a result of drug
related crimes. These funds must be used for drug education and prevention.
Economic Development Authority - This fund was established to account for a special tax levy authorized
to help encourage development in the City.
84
CITY OF ELK RIVER, MINNESOTA
COMBINING BALANCE SHEET
NONMAJOR SPECIAL REVENUE FUNDS
DECEMBER 31, 2018
85
Pinewood
Library
Ice Arena
Golf Course
Landfill
ASSETS
Cash and investments
$ 430,548
$ 524,621
$
19,202
$
941,564
Receivables:
Interest
2,000
2,370
-
4,740
Taxes
1,206
-
-
-
Accounts
-
119,424
-
2,226
Notes, net
-
-
-
-
Due from other governments
-
-
-
-
Due from other funds
-
1,600
-
-
Prepaid items
-
-
-
-
Property held for resale
-
-
-
-
Total assets
$ 433,754
$ 648,015
$
19,202
$
948,530
LIABILITIES
Accounts payable
$ 2,898
$ 22,535
$
18,815
$
1,491
Salaries payable
-
9,766
-
182
Due to other governments
-
2,035
-
-
Due to other funds
-
-
-
-
Total liabilities
2,898
34,336
18,815
1,673
DEFERRED INFLOWS OF RESOURCES
Unavailable revenue - taxes
384
-
-
-
FUND BALANCES
Nonspendable
-
-
-
-
Restricted
-
-
-
76,896
Committed
430,472
613,679
387
869,961
Total fund balances
430,472
613,679
387
946,857
Total liabilities, deferred inflows
of resources, and fund balances
$ 433,754
$ 648,015
$
19,202
$
948,530
85
86
Drug
Economic
Total Nonmajor
Revolving
State
Development
Insurance
Forfeiture
Development
Special Revenue
Loan
DEED
Fund
Reserve
Reserve
Authority
Funds
$ 790,206
$
48,297
$ 550,875
$ 46,734
$ 23,499
$ 1,198,509
$ 4,574,055
3,796
232
4,483
224
109
-
17,954
-
-
3,321
-
-
8,010
12,537
-
-
11,234
998
-
104
133,986
403,919
456,945
1,108,648
-
-
-
1,969,512
-
-
-
-
14
-
14
-
-
1,838,669
-
-
-
1,840,269
-
-
-
114,976
-
-
114,976
-
-
-
-
-
175,000
175,000
$ 1,197,921
$
505,474
$ 3,517,230
$ 162,932
$ 23,622
$ 1,381,623
$ 8,838,303
$ -
$
-
$ -
$ 99
$ -
$ 6,827
$ 52,665
-
-
-
-
-
4,439
14,387
-
-
-
-
-
-
2,035
-
-
-
-
-
12,735
12,735
-
-
-
99
-
24,001
81,822
-
-
1,154
-
-
2,317
3,855
-
-
-
114,976
-
-
114,976
-
505,474
-
-
20,742
755,672
1,358,784
1,197,921
-
3,516,076
47,857
2,880
599,633
7,278,866
1,197,921
505,474
3,516,076
162,833
23,622
1,355,305
8,752,626
$ 1,197,921
$
505,474
$ 3,517,230
$ 162,932
$ 23,622
$ 1,381,623
$ 8,838,303
86
CITY OF ELK RIVER, MINNESOTA
COMBINING STATEMENT OF REVENUES, EXPENDITURES,
AND CHANGES IN FUND BALANCES
NONMAJOR SPECIAL REVENUE FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2018
REVENUES
Property taxes
Intergovernmental revenue
Charges for services
Fines and forfeits
Interest income
Miscellaneous revenue:
Refunds and reimbursements
Contributions
Other
Total revenues
EXPENDITURES
Current:
General government
Public safety
Public works
Culture and recreation
Economic development
Capital outlay:
Culture and recreation
Total expenditures
Excess (deficiency) of revenues
over (under) expenditures
OTHER FINANCING SOURCES (USES)
Transfers in
Transfers out
Total other financing sources (uses)
Net change in fund balances
Fund balances - January 1
Fund balances - December 31
Pinewood
Library Ice Arena Golf Course Landfill
$ 54,113 $ - $ - $ -
- - - 11,349
- 796,823 125,914 23,029
8,845 11,670 - 19,766
- 5,458 - -
- 17,076 - -
62,958 831,027 125,914 54,144
- - - 48,463
88,904 799,018 125,527 -
9,019 - - -
97,923 799,018 125,527 48,463
(34,965)
32,009
387 5,681
28,350
-
- -
-
-
- (101,000)
28,350
-
- (101,000)
(6,615)
32,009
387 (95,319)
437,087
581,670
- 1,042,176
$ 430,472
$ 613,679
$ 387 $ 946,857
87
-
-
-
64,638
Drug
Economic
Total Nonmajor
Revolving
State
Development
Insurance
Forfeiture
Development
Special Revenue
Loan
DEED
Fund
Reserve
Reserve
Authority
Funds
$ -
$ -
$ 142,783
$ -
$ -
$ 375,631
$ 572,527
-
-
-
-
-
196
11,545
1,149
1,630
42,462
-
-
3,500
994,507
-
-
-
-
20,378
-
20,378
8,756
6,474
19,983
6,111
471
8,376
90,452
-
-
43,552
46,651
-
-
90,203
-
-
-
-
-
-
5,458
12,723
8,015
-
-
-
-
37,814
22,628
16,119
248,780
52,762
20,849
387,703
1,822,884
-
-
-
64,638
-
-
64,638
-
-
-
-
12,090
-
12,090
-
-
-
-
-
-
48,463
-
-
-
-
-
-
11013,449
1,563
1,631
147,141
-
-
239,827
390,162
-
-
-
-
-
-
9,019
1,563
1,631
147,141
64,638
12,090
239,827
1,537,821
21,065
14,488
101,639
(11,876)
8,759
147,876
285,063
-
-
-
-
-
-
28,350
-
-
(14,000)
-
-
(36,600)
(151,600)
-
-
(14,000)
-
-
(36,600)
(123,250)
21,065
14,488
87,639
(11,876)
8,759
111,276
161,813
1,176,856
490,986
3,428,437
174,709
14,863
1,244,029
8,590,813
$ 1,197,921
$ 505,474
$ 3,516,076
$ 162,833
$ 23,622
$ 1,355,305
$ 8,752,626
88
CITY OF ELK RIVER, MINNESOTA
SPECIAL REVENUE FUND - LIBRARY FUND
SCHEDULE OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
FOR THE YEAR ENDED DECEMBER 31, 2018
EXPENDITURES
Current:
Culture and recreation
Capital outlay:
Culture and recreation
Total expenditures
Excess (deficiency) of revenues
over (under) expenditures
OTHER FINANCING SOURCES
Transfers in
Net change in fund balance
Fund balance - January 1
Fund balance - December 31
88,850
Budget
88,904
(54)
Variance with
30,000
Original
Final
Actual
Final Budget
REVENUES
20,927
(58,350)
Property taxes
$ 54,000 $
54,000
$ 54,113
$ 113
Interest income
6,500
6,500
8,845
2,345
Total revenues
60,500
60,500
62,958
2,458
EXPENDITURES
Current:
Culture and recreation
Capital outlay:
Culture and recreation
Total expenditures
Excess (deficiency) of revenues
over (under) expenditures
OTHER FINANCING SOURCES
Transfers in
Net change in fund balance
Fund balance - January 1
Fund balance - December 31
88,850
88,850
88,904
(54)
30,000
30,000
9,019
20,981
118,850
118,850
97,923
20,927
(58,350)
(58,350)
(34,965)
23,385
28,350
28,350
28,350
-
$ (30,000)
$ (30,000)
(6,615)
$ 23,385
89
437,087
$ 430,472
CITY OF ELK RIVER, MINNESOTA
SPECIAL REVENUE FUND - ICE ARENA FUND
SCHEDULE OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
FOR THE YEAR ENDED DECEMBER 31, 2018
Fund balance - January 1 581,670
Fund balance - December 31 $ 613,679
90
Budget
Variance with
Original
Final
Actual
Final Budget
REVENUES
Charges for services
$ 788,300 $
788,300
$ 796,823
$ 8,523
Interest income
4,500
4,500
11,670
7,170
Miscellaneous revenue:
Vending machines
17,250
17,250
13,635
(3,615)
Contributions
5,900
5,900
5,458
(442)
Other
3,900
3,900
3,441
(459)
Total revenues
819,850
819,850
831,027
11,177
EXPENDITURES
Current:
Culture and recreation
768,850
768,850
799,018
(30,168)
Net change in fund balance
$ 51,000 $
51,000
32,009
$ (18,991)
Fund balance - January 1 581,670
Fund balance - December 31 $ 613,679
90
CITY OF ELK RIVER, MINNESOTA
SPECIAL REVENUE FUND - ECONOMIC DEVELOPMENT AUTHORITY FUND
SCHEDULE OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
FOR THE YEAR ENDED DECEMBER 31, 2018
Net change in fund balance
Fund balance - January 1
Fund balance - December 31
$ 64,450 $ 64,450
91
111,276 $ 46,826
1,244,029
$ 1,355,305
Budget
Variance with
Original
Final
Actual
Final Budget
REVENUES
Property taxes
$ 384,200 $
384,200
$ 375,631
$ (8,569)
Intergovernmental revenue
-
-
196
196
Charges for services
3,500
3,500
3,500
-
Interest income
5,500
5,500
8,376
2,876
Total revenues
393,200
393,200
387,703
(5,497)
EXPENDITURES
Current:
Economic development
292,150
292,150
239,827
52,323
Excess (deficiency) of revenues
over (under) expenditures
101,050
101,050
147,876
46,826
OTHER FINANCING USES
Transfers out
(36,600)
(36,600)
(36,600)
-
Net change in fund balance
Fund balance - January 1
Fund balance - December 31
$ 64,450 $ 64,450
91
111,276 $ 46,826
1,244,029
$ 1,355,305
NONMAJOR DEBT SERVICE FUNDS
Improvement Bonds - This fund is used to account for the accumulation of resources and payment of
principal and interest on long-term general obligation special assessment debt used to finance various
street, water, sewer and storm sewer improvements.
Government Building Bonds - This fund is used to account for the accumulation of resources and payment
of principal and interest to finance the construction of city facilities.
YMCA Bonds - This fund is used to account for the accumulation of resources and payment of principal
and interest to finance the construction of the YMCA facilities.
MA
CITY OF ELK RIVER, MINNESOTA
COMBINING BALANCE SHEET
NONMAJOR DEBT SERVICE FUNDS
DECEMBER 31, 2018
ASSETS
Cash and investments
Receivables:
Interest
Taxes
Total assets
DEFERRED INFLOWS OF RESOURCES
Unavailable revenue - taxes
FUND BALANCES
Restricted
Total deferred inflows of resources
and fund balances
Government Total Nonmajor
Improvement Building YMCA Debt Service
Bonds Bonds Bonds Funds
$ - $ 904,973 $ 552,144 $ 1,457,117
4,204 - 4,204
$ - $ 917,213 $ 561,965 $ 1,479,178
$ - $ 2,402 $ 3,546 $ 5,948
914,811 558,419 1,473,230
$ - $ 917,213 $ 561,965 $ 1,479,178
93
CITY OF ELK RIVER, MINNESOTA
COMBINING STATEMENT OF REVENUES, EXPENDITURES,
AND CHANGES IN FUND BALANCES
NONMAJOR DEBT SERVICE FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2018
REVENUES
Property taxes
Interest income
Miscellaneous revenue:
Contributions
Total revenues
EXPENDITURES
Debt service:
Principal
Interest and service charges
Total expenditures
Excess (deficiency) of revenues
over (under) expenditures
OTHER FINANCING SOURCES
Transfers in
Net change in fund balances
Fund balances - January 1
Fund balances - December 31
Government
Total Nonmaj or
Improvement Building
YMCA
Debt Service
Bonds Bonds
Bonds
Funds
$ - $ 369,741
$ 511,498
$ 881,239
- 11,950
4,510
16,460
- -
241,863
241,863
295,000 775,000 505,000 1,575,000
297,950 1,018,772 728,687 2,045,409
(297,950) (637,081) 29,184 (905,847)
83,722 686,475 - 770,197
(214,228) 49,394 29,184 (135,650)
$ - $ 914,811 $ 558,419 $ 1,473,230
94
This page has been left blank intentionally
NONMAJOR CAPITAL PROJECTS FUNDS
Capital Reserve - This fund was established to help build reserves for the purchase of capital equipment.
Equipment Replacement - This fund is used to account for the purchase of capital equipment.
Park Dedication - This fund accounts for park dedication fees from developers and expenditures for park
land acquisitions and park capital improvements.
Park Improvements - This fund was established to account for the replacement and maintenance of park
equipment and for the beautification of city parks.
Government Buildings - This fund is used to account for resources and expenditures related to city facilities
projects. The major source of revenue is from landfill expansion fees.
GRE Reserve - This fund was established to account for revenues received from the license agreement
between the City and Great River Energy.
Street Improvements - This fund is used to account for the construction of street improvement projects
throughout the city.
Improvement Projects - This fund is used to account for the construction of various improvements within
the city.
TIF Districts - This fund is us to account for administrative and development costs associated with the
various tax increment financing projects.
4i
CITY OF ELK RIVER, MINNESOTA
COMBINING BALANCE SHEET
NONMAJOR CAPITAL PROJECTS FUNDS
DECEMBER 31, 2018
4.
Capital
Equipment
Park
Park
Reserve
Replacement
Dedication
Improvements
ASSETS
Cash and investments
$
913,034
$ 585,529
$ 327,253
$
26,581
Receivables:
Interest
4,373
2,767
1,520
123
Taxes
-
30
-
-
Accounts
-
-
-
-
Special assessments
915
-
-
-
Total assets
$
918,322
$ 588,326
$ 328,773
$
26,704
LIABILITIES
Accounts payable
$
9,129
$ 107,950
$ -
$
7,198
Due to other funds
-
-
-
-
Due to component unit
-
-
-
-
Unearned revenue
-
-
613,108
-
Total liabilities
9,129
107,950
613,108
7,198
DEFERRED INFLOWS OF RESOURCES
Unavailable revenue - taxes
-
-
-
-
Unavailable revenue - special assessments
724
-
-
-
Total deferred inflows of resources
724
-
-
-
FUND BALANCES
Restricted
-
-
318,729
-
Assigned
908,469
480,376
-
19,506
Unassigned
-
-
(603,064)
-
Total fund balances
908,469
480,376
(284,335)
19,506
Total liabilities, deferred inflows
of resources, and fund balances
$
918,322
$ 588,326
$ 328,773
$
26,704
4.
Total Nonmajor
Government
Street
Improvement
TIF
Capital Projects
Buildings
GRE Reserve
Improvements
Projects
Districts
Funds
$ 2,232,853
$ 2,081,661
$
713,433
$ 4,082,370
$ 3,475
$
10,966,189
10,727
10,001
3,427
19,612
-
52,550
-
-
317
-
-
347
156,116
-
-
-
11,013
167,129
-
-
170,772
183,800
-
355,487
$ 2,399,696
$ 2,091,662
$
887,949
$ 4,285,782
$ 14,488
$
11,541,702
$ 3,293
$ -
$
255
$ -
$ 4,316
$
132,141
-
-
-
-
2,139,319
2,139,319
-
-
-
-
202,304
202,304
-
-
-
-
-
613,108
3,293
-
255
-
2,345,939
3,086,872
-
-
297
-
-
297
-
-
169,751
183,800
-
354,275
-
-
170,048
183,800
-
354,572
-
-
-
-
-
318,729
2,396,403
2,091,662
717,646
4,101,982
-
10,716,044
-
-
-
-
(2,331,451)
(2,934,515)
2,396,403
2,091,662
717,646
4,101,982
(2,331,451)
8,100,258
$ 2,399,696
$ 2,091,662
$
887,949
$ 4,285,782
$ 14,488
$
11,541,702
97
CITY OF ELK RIVER, MINNESOTA
COMBINING STATEMENT OF REVENUES, EXPENDITURES,
AND CHANGES IN FUND BALANCES
NONMAJOR CAPITAL PROJECTS FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2018
98
Capital
Equipment
Park
Park
Reserve
Replacement
Dedication
Improvements
REVENUES
Taxes:
Property taxes
$ -
$ 34
$ -
$ -
Intergovernmental revenue
31,838
324,688
-
-
Charges for services
5,000
-
223,116
-
Special assessments
766
-
-
-
Interest income
15,398
18,773
5,836
1,643
Miscellaneous revenue:
Landfill expansion fee
-
-
-
-
Contributions
116,531
-
-
66,772
Other
-
3,800
-
-
Total revenues
169,533
347,295
228,952
68,415
EXPENDITURES
Current:
General government
5,190
-
-
-
Public safety
43,747
-
-
-
Public works
30,338
-
-
-
Culture and recreation
-
-
-
70,774
Economic development
-
-
-
-
Capital outlay:
General government
73,231
5,942
-
-
Public safety
11,508
728,767
-
-
Public works
-
466,814
-
-
Culture and recreation
-
157,148
-
408,884
Debt service:
Interest and service charges
-
-
24,981
-
Total expenditures
164,014
1,3581671
24,981
479,658
Excess (deficiency) of revenues
over (under) expenditures
5,519
(1,011,376)
203,971
(411,243)
OTHER FINANCING SOURCES (USES)
Transfers in
-
330,000
-
197,174
Transfers out
(13,600)
-
-
-
Sale of capital assets
-
86,586
-
-
Total other financing sources (uses)
(13,600)
416,586
-
197,174
Net change in fund balances
(8,081)
(594,790)
203,971
(214,069)
Fund balances - January 1
916,550
1,075,166
(488,306)
233,575
Fund balances - December 31
$ 908,469
$ 480,376
$ (284,335)
$ 19,506
98
Total Nonmajor
Government Street Improvement TIF Capital Projects
Buildings GRE Reserve Improvements Projects Districts Funds
$ - $ - $ 30 $ - $ 252,172 $ 252,236
- - 68,916 - - 425,442
- - - - 228,116
- 69,796 308,492 - 379,054
31,156 31,146 15,420 57,731 - 177,103
1,107,321 - - - - 1,107,321
1,000 194,673 - - - 378,976
- - - - 22,025 25,825
1,139,477 225,819 154,162 366,223 274,197 2,974,073
31,982 - - - - 37,172
- - - - - 43,747
- - - - - 30,338
309,594 - - - - 380,368
- - - - 574,764 574,764
- - - - 79,173
- - - - 740,275
- - 179,996 - - 646,810
- - - - - 566,032
- - - - 12,271 37,252
341,576 - 179,996 - 587,035 3,135,931
797,901 225,819 (25,834) 366,223 (312,838) (161,858)
- - - - - 527,174
(686,475) (45,000) (83,722) - - (828,797)
86,586
11 1,4z() 125U,2S1V (IUy,JJb) S0b,223 (JIL,2S32S) (3/b,2SyJ)
1) L,3yb,4U3 1) L,UVI,bbL J /1/,040 1) 4,1V1,V6Z 1) (L,331,4J1) 1) 6,1VV,/-D6
99
AGENCY FUNDS
Agency Funds are used to account for assets held by the City as an agent for individuals, private
organizations and/or other governmental units. The City of Elk River had the following Agency Funds
during the year:
Developer Fee Escrow - This fund is used to account for the collection and distribution of funds relating to
private development projects.
FSA Plans - This fund is used to account for the collection of contributions from employees and
distributions related to the City's self-administered medical and dependent care FSA plans.
100
CITY OF ELK RIVER, MINNESOTA
STATEMENT OF CHANGES IN ASSETS AND LIABILITIES
AGENCY FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2018
ASSETS
Cash
Accounts receivable
Prepaid items
Total assets
LIABILITIES
Accounts payable
Refundable deposits payable
Total liabilities
1181
Developers Escrow
Beginning
Ending
Balance
Ending
Balance
ASSETS
Additions
Deductions
Balance
$ 1,099,253
$
295,950
$ (713,249)
$
681,954
1,406
Accounts payable
22,561
(1,858)
$ 8,602
22,109
38
2,000
(1,610)
428
$ 1,100,697
$
320,511
$ (716,717)
$
704,491
$ -
$
657,869
$ 650,679
$
7,190
1,100,697
293,972
(697,368)
697,301
$ 1,100,697
$
951,841
$ (46,689)
$
704,491
1181
FSA Plans Fund
Beginning
Ending
Balance
Additions Deductions
Balance
ASSETS
Cash
$ 13,212
$ 12,379 $ (16,989)
$ 8,602
LIABILITIES
Accounts payable
$ 13,212
$ 28,625 $ (33,235)
$ 8,602
1181
COMPONENT UNIT FINANCIAL STATEMENTS
The Housing and Redevelopment Authority of Elk River is a component unit of the City. Its operations are
presented as a separate column on the combined financial statements.
Governmental Fund
Housing and Redevelopment Authority Fund - This fund is used to account for housing and
redevelopment activities. Revenues are derived from the HRA property tax levy.
KIN
CITY OF ELK RIVER, MINNESOTA
HOUSING AND REDEVELOPMENT AUTHORITY
BALANCESHEET
GOVERNMENTAL FUND
DECEMBER 31, 2018
ASSETS
Cash and investments
Receivables:
Taxes
Notes
Due from primary government
Land held for redevelopment
Total assets
LIABILITIES
Accounts payable
Salaries payable
Due to primary government
Total liabilities
DEFERRED INFLOWS OF RESOURCES
Unavailable revenue - taxes
FUND BALANCES
Nonspendable
Restricted
Total fund balances
Total liabilities, deferred inflows of resources and fund balances
103
$ 893,978
6,279
623,206
202,305
174,100
$ 1,899,868
$ 31,332
2,959
6,623
40,914
1,885
797,306
1,059,762
1,857,068
$ 1,899,867
CITY OF ELK RIVER, MINNESOTA
HOUSING AND REDEVELOPMENT AUTHORITY
RECONCILIATION OF THE GOVERNMENTAL FUND
BALANCE SHEET TO THE STATEMENT OF NET POSITION
DECEMBER 31, 2018
FUND BALANCE - HOUSING AND REDEVELOPMENT AUTHORITY
Amounts reported for governmental activities in the statement of net position
are different because:
1. Capital assets used in governmental activities are not current financial
resources and therefore are not reported in the governmental funds:
$ 1,857,068
Land $ 257,100
Other Improvements 174,290
Total Capital Assets 431,390
Less accumulated depreciation (70,683) 360,707
2. Unavailable revenue in governmental funds is susceptible to full accrual
on the government -wide statements. 1,885
3. Long-term liabilities are not due and payable in the current period and
therefore not reported in the governmental funds:
Net pension liability (51,835)
4. Governmental funds do not report long-term amounts related to pensions.
Deferred outflows of pension resources 10,241
Deferred inflows of pension resources (15,585) (5,344)
NET POSITION OF HOUSING AND REDEVELOPMENT AUTHORITY $ 2,162,481
104
CITY OF ELK RIVER, MINNESOTA
HOUSING AND REDEVELOPMENT AUTHORITY
STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGE IN FUND BALANCE
GOVERNMENTAL FUND
FOR THE YEAR ENDED DECEMBER 31, 2018
REVENUES
Property taxes
Intergovernmental revenue
Interest income
Total revenues
EXPENDITURES
Economic development:
Current
Net change in fund balance
Fund balance - January 1
Fund balance - December 31
105
$ 290,055
152
10,200
300,407
534,303
(233,896)
2,090,964
$ 1,857,068
CITY OF ELK RIVER, MINNESOTA
HOUSING AND REDEVELOPMENT AUTHORITY
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES,
AND CHANGE IN FUND BALANCE OF GOVERNMENTAL FUND
TO THE STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED DECEMBER 31, 2018
NET CHANGE IN FUND BALANCES - HOUSING AND REDEVELOPMENT AUTHORITY $ (233,896)
Amounts reported for governmental activities in the statement of activities are
different because:
1. Governmental funds report capital outlays as expenditures. However, in the
statement of activities the cost of those assets is allocated over their estimated
useful lives and reported as depreciation expense. This is the amount by which
depreciation expense exceeded capital outlays in the current period.
Depreciation expense (11,619)
Revenues in the statement of activities that do not provide current financial
resources are not reported as revenues in the governmental funds.
Unavailable Revenue - Property taxes (594)
3. Long-term pension activity is not reported in governmental funds.
Pension expense 1,796
CHANGE IN NET POSITION OF HOUSING AND REDEVELOPMENT AUTHORITY $ (244,313)
106
STATISTICAL SECTION
(UNAUDITED)
This part of the City of Elk River's comprehensive annual financial report presents detailed information as
a context for understanding what the information in the financial statements, note disclosures, and required
supplementary information says about the government's overall financial health.
Contents
Page
Financial Trends 108
These schedules contain trend information to help the reader understand how the city's
financial performance and well-being have changed over time.
Revenue Capacity 118
These schedules contain information to help the reader assess the city's most significant
local revenue sources; electric sales and property taxes.
Debt Capacity 125
These schedules present information to help the reader assess the affordability of the
city's current levels of outstanding debt and the city's ability to issue additional debt in
the future.
Demographic and Economic Information 133
These schedules offer demographic and economic indicators to help the reader
understand the environment within which the city's financial activities take place.
Operating Information 136
These schedules contain service and infrastructure data to help the reader understand
how the information in the city's financial report relates to the services the city provides
and the activities it performs.
Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive
annual financial reports for the relevant year.
fNfl
CITY OF ELK RIVER, MINNESOTA
NET POSITION BY COMPONENT
LAST TEN FISCAL YEARS
(accrual basis of accounting)
Primary government
Net investment in capital assets
$ 145,751,278
Fiscal Year
$ 145,267,175
$ 144,328,987
2009
2010
2011
2012
Governmental activities
Unrestricted
48,382,060
46,609,668
48,703,336
Net investment in capital assets
$ 86,149,417
$ 84,629,091
$ 84,741,957
$ 84,060,768
Restricted
4,723,030
7,341,554
6,283,346
6,391,182
Unrestricted
28,588,304
26,702,252
29,282,251
27,448,688
Total governmental activities net position
$ 119,460,751
$ 118,672,897
$ 120,307,554
$ 117,900,638
Business -type activities
Net investment in capital assets
$ 59,601,861
$ 60,972,838
$ 60,525,218
$ 60,268,219
Restricted
724,500
724,500
724,500
724,500
Unrestricted
19,793,756
19,907,416
19,421,085
22,376,508
Total business -type activities net position
$ 80,120,117
$ 81,604,754
$ 80,670,803
$ 83,369,227
Primary government
Net investment in capital assets
$ 145,751,278
$ 145,601,929
$ 145,267,175
$ 144,328,987
Restricted
5,447,530
8,066,054
7,007,846
7,115,682
Unrestricted
48,382,060
46,609,668
48,703,336
49,825,196
Total primary government net position
$ 199,580,868
$ 200,277,651
$ 200,978,357
$ 201,269,865
Note:
- The City implemented GASB Statement No. 63 and GASB Statement No. 65 in fiscal year 2012. Net position
information has been restated for 2011 for this accounting change. Years prior to 2011 have not been restated.
- The City implemented GASB Statement No. 75 in fiscal year 2018. Net position information has been restated for
2017 for this accounting change. Years prior to 2017 have not been restated.
108
Fiscal Year
2013 2014 2015 2016 2017 2018
$
84,353,785
$
84,921,650
$
75,030,579
$
78,119,790
$
78,958,608
$
77,092,055
5,256,724
4,192,856
3,675,588
11,990,647
2,925,562
4,236,048
24,069,710
24,902,387
20,170,751
6,584,209
15,779,965
17,685,456
$
113,680,219
$
114,016,893
$
98,876,918
$
96,694,646
$
97,664,135
$
99,013,559
$
62,035,437
$
63,392,972
$
76,747,269
$
82,230,963
$
83,919,324
$
85,104,737
647,000
490,500
490,500
997,660
997,660
1,261,359
22,957,506
24,718,391
24,504,299
21,466,617
21,912,125
24,308,658
$
85,639,943
$
88,601,863
$
101,742,068
$
104,695,240
$
106,829,109
$
110,674,754
$
146,389,222
$
148,314,622
$
151,777,848
$
160,350,753
$
162,877,932
$
162,196,792
5,903,724
4,683,356
4,166,088
12,988,307
3,923,222
5,497,407
47,027,216
49,620,778
44,675,050
28,050,826
37,692,090
41,994,114
$
199,320,162
$
202,618,756
$
200,618,986
$
201,389,886
$
204,493,244
$
209,688,313
109
CITY OF ELK RIVER, MINNESOTA
CHANGES IN NET POSITION
LAST TEN FISCAL YEARS
(accrual basis of accounting)
Net (expense)/revenue
Governmental activities $ (15,360,690) $ (16,384,473) $ (16,630,851) $ (17,049,774)
Business -type activities 1,625,701 1,919,373 2,407,187 3,633,218
Total primary government net (expense)/revenue $ (13,734,989) $ (14,465,100) $ (14,223,664) $ (13,416,556)
Note:
- The City implemented GASB Statement No. 63 and GASB Statement No. 65 in fiscal year 2012. Net position
information has been restated for 2011 for this accounting change. Years prior to 2011 have not been restated.
- The City implemented GASB Statement No. 75 in fiscal year 2018. Net position information has been restated for
2017 for this accounting change. Years prior to 2017 have not been restated.
110
Fiscal Year
2009
2010
2011
2012
Expenses
Governmental activities:
General government
$
2,777,568
$
3,028,102
$
3,495,458
$
2,994,342
Public safety
6,106,181
6,011,477
6,238,611
6,187,246
Public works
5,397,058
5,447,282
5,720,759
6,037,000
Culture and recreation
3,767,312
3,702,671
3,851,181
4,013,098
Economic development
1,569,432
1,438,742
1,451,109
1,059,058
Interest and fiscal charges
1,252,493
1,138,414
1,045,905
1,163,352
Total governmental activities expenses
20,870,044
20,766,688
21,803,023
21,454,096
Business -type activities:
Municipal Liquor
5,374,453
5,267,041
5,366,557
5,622,305
Garbage
1,256,177
1,331,514
1,304,238
1,276,887
Sewer
1,781,804
1,962,431
2,130,287
2,239,914
Storm Water
-
-
-
-
Water
2,334,388
2,089,889
2,108,499
2,264,814
Electric
23,258,383
25,452,567
26,726,349
27,586,573
Total business -type activities expenses
34,005,205
36,103,442
37,635,930
38,990,493
Total primary government expenses
$
54,875,249
$
56,870,130
$
59,438,953
$
60,444,589
Program Revenues
Governmental activities:
Charges for services:
General government
$
334,100
$
301,509
$
425,954
$
369,794
Public safety
634,242
722,073
787,884
789,728
Public works
47,860
61,605
79,073
82,173
Culture and recreation
1,074,266
1,089,058
1,102,630
1,128,070
Economic development
60,335
125,759
70,976
8,244
Operating grants and contributions
758,958
763,551
954,831
1,018,519
Capital grants and contributions
2,599,593
1,318,660
1,750,824
1,007,794
Total governmental activities program revenues
5,509,354
4,382,215
5,172,172
4,404,322
Business -type activities:
Charges for services:
Municipal Liquor
6,094,058
5,953,626
6,145,692
6,525,234
Garbage
1,194,937
1,282,013
1,310,014
1,302,920
Sewer
1,504,785
1,483,120
1,491,460
1,533,851
Storm Water
-
-
-
-
Water
2,218,816
1,961,760
1,917,384
2,343,881
Electric
24,258,120
26,840,983
28,657,698
30,403,469
Operating grants and contributions
92,957
103,324
38,550
23,440
Capital grants and contributions
267,233
397,989
482,319
490,916
Total business -type activities program revenues
35,630,906
38,022,815
40,043,117
42,623,711
Total primary government program revenues
$
41,140,260
$
42,405,030
$
45,215,289
$
47,028,033
Net (expense)/revenue
Governmental activities $ (15,360,690) $ (16,384,473) $ (16,630,851) $ (17,049,774)
Business -type activities 1,625,701 1,919,373 2,407,187 3,633,218
Total primary government net (expense)/revenue $ (13,734,989) $ (14,465,100) $ (14,223,664) $ (13,416,556)
Note:
- The City implemented GASB Statement No. 63 and GASB Statement No. 65 in fiscal year 2012. Net position
information has been restated for 2011 for this accounting change. Years prior to 2011 have not been restated.
- The City implemented GASB Statement No. 75 in fiscal year 2018. Net position information has been restated for
2017 for this accounting change. Years prior to 2017 have not been restated.
110
Fiscal Year
2013 2014 2015 2016 2017 2018
$ 3,344,317
$ 3,554,136
$ 3,619,293
$ 3,996,316
$ 3,932,100
$ 3,981,134
6,173,244
6,615,593
6,720,283
9,231,492
7,670,839
7,398,041
6,535,616
6,860,673
5,351,630
5,539,045
6,803,504
5,619,836
3,914,000
4,088,992
3,970,704
4,014,737
4,157,960
4,474,619
2,088,064
1,091,125
959,414
954,723
1,221,761
969,443
1,288,020
1,075,408
1,084,902
996,933
549,303
486,630
23,343,261
23,285,927
21,706,226
24,733,246
24,335,467
22,929,703
5,706,760
5,776,873
5,945,126
6,063,922
6,030,973
6,233,700
1,251,420
1,303,943
1,3 82,890
1,475,027
1,521, 803
1,588,956
2,320,743
2,156,329
2,318,709
2,473,139
3,377,828
3,504,489
-
-
736,411
645,596
774,805
634,073
2,332,680
2,459,319
2,478,904
2,532,653
2,856,343
2,666,149
28,422,759
29,597,247
30,012,830
32,190,114
33,688,690
35,680,220
40,034,362
41,293,711
42,874,870
45,380,451
48,250,442
50,307,587
$ 63,377,623
$ 64,579,638
$ 64,581,096
$ 70,113,697
$ 72,585,909
$ 73,237,290
$
338,469
$
385,238
$
439,826
$
678,679
$
756,586
$
648,183
961,072
1,063,725
1,194,458
1,041,141
1,471,063
1,219,783
206,606
233,593
174,452
199,034
177,802
111,740
1,075,576
906,291
925,591
931,674
1,051,312
1,071,902
274,833
77,430
92,716
32,961
87,842
91,503
954,164
1,049,744
1,033,338
1,692,517
1,319,377
1,381,151
807,208
4,020,851
3,574,036
1,333,057
3,187,830
1,721,638
4,617,928
7,736,872
7,434,417
5,909,063
8,051,812
6,245,900
6,756,581
6,825,342
6,974,336
7,009,574
6,951,988
7,203,155
1,285,138
1,304,750
1,321,301
1,342,900
1,352,728
1,553,498
1,613,276
1,734,141
1,818,476
1,921,190
2,116,900
2,301,428
-
-
355,454
477,377
509,365
485,484
2,381,651
2,290,824
2,379,835
2,370,221
2,553,651
2,757,237
31,029,299
31,596,217
32,831,209
34,746,098
36,465,382
39,151,208
924,641
935,909
2,708,564
1,758,131
2,196,626
2,295,004
43,990,586
44,687,183
48,389,175
49,625,491
52,146,640
55,747,014
$
48,608,514
$
52,424,055
$
55,823,592
$
55,534,554
$
60,198,452
$
61,992,914
$
(18,725,333)
$
(15,549,055)
$
(14,271,809)
$
(18,824,183)
$
(16,283,655)
$
(16,683,803)
3,956,224
3,393,472
5,514,305
4,245,040
3,896,198
5,439,427
$
(14,769,109)
$
(12,155,583)
$
(8,757,504)
$
(14,579,143)
$
(12,387,457)
$
(11,244,376)
ISE
Fiscal Year
2009 2010 2011 2012
General Revenues and Other Changes in Net Position
Governmental activities:
Property taxes
$
11,440,991
$
11,254,752
$
11,398,819
$
10,854,241
Tax increment
1,080,142
1,071,099
947,486
830,204
Othertaxes
156,894
193,466
83,748
125,623
Unrestricted grants and contributions
1,940,274
2,000,923
1,702,334
1,307,662
Investment earnings
548,651
359,733
499,034
319,654
Miscellaneous
20,013
61,308
23,233
49,470
Transfers of capital assets
-
(303,051)
-
(348,259)
Transfers
1,045,002
958,389
3,610,854
1,504,263
Total governmental activities
16,231,967
15,596,619
18,265,508
14,642,858
Business -type activities:
Investment earnings
367,883
220,602
269,716
219,950
Miscellaneous
-
-
-
1,260
Transfers of capital assets
303,051
348,259
Transfers
(1,045,002)
(958,389)
(3,610,854)
(1,504,263)
Total business -type activities
(677,119)
(434,736)
(3,341,138)
(934,794)
Total primary government
$
15,554,848
$
15,161,883
$
14,924,370
$
13,708,064
Change in Net Position
Governmental activities
$
871,277
$
(787,854)
$
1,634,657
$
(2,406,916)
Business -type activities
948,582
1,484,637
(933,951)
2,698,424
Total primary government
$
1,819,859
$
696,783
$
700,706
$
291,508
Note:
- The City implemented GASB Statement No. 63 and GASB Statement No. 65 in fiscal year 2012. Net position
information has been restated for 2011 for this accounting change. Years prior to 2011 have not been restated.
- The City implemented GASB Statement No. 75 in fiscal year 2018. Net position information has been restated for
2017 for this accounting change. Years prior to 2017 have not been restated.
112
Fiscal Year
2013 2014 2015 2016 2017 2018
$ 10,742,370
$
10,378,906
$
10,667,306
$
10,870,308
$
11,405,589
$
11,940,739
87,848
130,325
264,639
266,002
239,739
252,172
829,112
1,441,259
1,513,621
1,552,499
1,543,086
1,591,663
1,436,135
1,749,886
1,642,098
1,820,248
1,720,932
1,754,373
(663,762)
1,137,024
512,193
311,469
498,235
430,642
629,177
29,593
2,796,041
29,695
116,012
-
(121,172)
(313,287)
(11,188,695)
-
-
-
1,565,206
1,332,023
297,362
1,791,690
1,971,250
2,063,638
14,504,914
15,885,729
6,504,565
16,641,911
17,494,843
18,033,227
(243,047)
557,659
259,494
167,849
231,599
467,294
1,572
29,525
8,899
331,973
17,500
2,462
121,172
313,287
11,188,695
-
-
-
(1,565,206)
(1,332,023)
(297,362)
(1,791,690)
(1,971,250)
(2,063,638)
(1,685,509)
(431,552)
11,159,726
(1,291,868)
(1,722,151)
(1,593,882)
$ 12,819,405
$
15,454,177
$
17,664,291
$
15,350,043
$
15,772,692
$
16,439,345
$ (4,220,419)
$
336,674
$
(7,767,244)
$
(2,182,272)
$
1,211,188
$
1,349,424
2,270,715
2,961,920
16,674,031
2,953,172
2,174,047
3,845,545
$ (1,949,704)
$
3,298,594
$
8,906,787
$
770,900
$
3,385,235
$
5,194,969
IMIG]
CITY OF ELK RIVER, MINNESOTA
FUND BALANCES OF GOVERNMENTAL FUNDS
LAST TEN FISCAL YEARS
(modified accrual basis of accounting)
General fund
Unreserved
Nonspendable
Restricted
Committed
Assigned
Unassigned
Total General fund
All other governmental funds
Reserved
Unreserved, reported in:
Special revenue funds
Capital projects funds
Nonspendable
Restricted
Committed
Assigned
Unassigned
Total all other governmental funds
Fiscal Year
2009 2010 2011 2012
$ 5,699,575 $ - $ - $ -
- - - 20,201
- - 20,390 -
- 91,502 156,323 208,486
- 727,443 859,508 200,000
- 5,187,520 5,261,391 5,776,627
$ 5,699,575 $ 6,006,465 $ 6,297,612 $ 6,205,314
$ 6,535,205
7,844,537 - - -
10,101,066 - - -
- 93,080 57,870 101,812
- 6,936,113 5,942,368 7,608,842
- 2,506,814 2,712,645 2,456,185
- 16,984,061 19,736,795 19,219,810
- (1,011,820) (1,059,647) (1,384,984)
$ 24,480,808 $ 25,508,248 $ 27,390,031 $ 28,001,665
Note: The City implemented GASB 54 in fiscal year 2010, resulting in significant reclassification
of the components of fund balance. Years prior to 2010 have not been restated.
114
Fiscal Year
2013 2014 2015 2016 2017 2018
115
14,628
22,725
23,676
20,964
88,038
124,064
-
-
7,000
-
-
-
247,937
317,929
376,943
-
-
-
-
-
-
266,832
356,174
237,813
5,791,725
5,822,948
6,157,179
6,470,281
6,853,298
7,299,540
$
6,054,290
$
6,163,602
$
6,564,798
$
6,758,077
$
7,297,510
$
7,661,417
99,703
101,910
103,295
108,176
-
114,976
14,800,868
13,925,683
13,202,500
12,245,679
3,104,196
3,150,743
4,393,689
5,829,001
8,099,951
9,250,014
10,354,648
12,068,614
15,455,671
15,883,279
15,579,524
12,632,948
10,984,072
10,716, 044
(2,324,550)
(2,527,613)
(2,438,049)
(2,660,264)
(2,627,513)
(2,934,515)
$
32,425,381
$
33,212,260
$
34,547,221
$
31,576,553
$
21,815,403
$
23,115,862
115
CITY OF ELK RIVER, MINNESOTA
CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS
LAST TEN FISCAL YEARS
(modified accrual basis of accounting)
Expenditures
General government
2,458,879
Fiscal Year
3,157,307
2,615,582
2009
2010
2011
2012
Revenues
Public works
2,656,097
2,291,196
2,752,469
Property taxes
$ 12,329,194
$ 12,355,953
$ 12,461,403
$ 11,720,311
Other taxes
156,894
193,466
83,748
125,623
Licenses and permits
322,338
402,076
432,875
408,232
Intergovernmental revenue
3,117,997
1,135,060
1,678,555
1,436,613
Charges for services
1,465,898
1,727,276
1,573,367
1,659,986
Fines and forfeits
141,629
161,074
149,102
137,819
Special assessments
1,464,348
999,633
989,101
845,112
Interest
548,651
359,731
499,034
319,654
Miscellaneous
1,853,966
2,587,771
2,568,159
1,980,207
Total revenues
21,400,915
19,922,040
20,435,344
18,633,557
Expenditures
General government
2,458,879
2,629,731
3,157,307
2,615,582
Public safety
5,377,208
5,266,803
5,291,617
5,352,249
Public works
2,656,097
2,291,196
2,752,469
2,931,726
Culture and recreation
2,666,146
2,569,464
2,663,806
2,839,466
Economic development
1,589,464
1,512,138
1,479,140
1,087,467
Capital outlay
4,627,322
1,879,604
2,874,212
10,264,274
Debt service
3,135,942
1,155,281
3,634,087
10,168,897
Principal
3,162,117
2,411,062
2,618,146
2,127,000
Interest and service charges
1,289,087
1,126,789
1,059,804
996,454
Bond issuance costs
-
56,204
-
68,900
Total expenditures
23,826,320
19,742,991
21,896,501
28,283,118
Excess (deficiency) of revenues
over (under) expenditures
(2,425,405)
179,049
(1,461,157)
(9,649,561)
Other financing sources (uses)
Transfers in
2,887,624
2,682,562
5,978,905
4,792,943
Transfers out
(1,842,622)
(1,724,173)
(2,368,051)
(3,288,680)
Proceeds of long-term debt
2,074,311
6,184,243
-
8,500,000
Premium on long-term debt issued
-
255,238
-
115,164
Payment to refunded bond escrow agent
-
(6,303,897)
-
-
Sale of capital assets
16,629
61,308
23,233
49,470
Total other financing sources (uses)
3,135,942
1,155,281
3,634,087
10,168,897
Net change in fund balances
$ 710,537
$ 1,334,330
$ 2,172,930
$ 519,336
Debt service as a percentage of
noncapital expenditures
23.7%
19.8%
19.6%
17.1%
116
Fiscal Year
2013 2014 2015
2016
2017
2018
$ 10,930,129
$ 10,640,251
$ 10,953,633
$ 11,171,496
$ 11,642,778
$ 12,214,702
829,112
1,441,259
1,513,621
1,552,499
1,543,086
1,591,663
513,779
559,286
639,791
655,607
1,007,543
790,831
1,161,458
838,573
3,913,721
1,681,666
3,928,374
1,405,931
1,926,906
2,091,107
1,761,958
1,851,408
2,226,936
2,182,917
163,481
160,298
169,459
167,526
205,456
157,492
764,006
881,271
315,259
456,666
241,304
379,054
(663,763)
1,146,462
512,193
311,469
498,235
430,642
2,193,571
2,358,709
2,169,789
1,455,555
2,313,388
2,212,818
17,818,679
20,117,216
21,949,424
19,303,892
23,607,100
21,366,050
2,956,500
3,181,547
3,365,570
3,601,468
3,524,634
3,733,746
5,497,493
5,909,653
6,203,211
6,859,139
6,791,738
7,325,724
2,800,012
2,974,219
2,318,123
1,861,251
1,974,095
1,875,645
2,652,817
2,881,985
2,816,411
2,872,281
2,937,333
3,438,103
1,656,922
1,095,535
954,673
949,205
1,122,261
964,926
5,243,189
2,277,477
5,251,352
2,682,358
7,165,286
2,431,103
2,194,000
1,535,000
1,505,000
5,100,000
10,675,000
1,575,000
1,129,572
1,105,114
1,113,963
1,148,535
725,732
507,661
153,795
-
-
-
-
-
24,284,300
20,960,530
23,528,303
25,074,237
34,916,079
21,851,908
(6,465,621)
(843,314)
(1,578,879)
(5,770,345)
(11,308,979)
(485,858)
6,457,233
4,837,016
4,703,787
6,524,537
4,275,797
3,354,035
(4,892,027)
(3,504,993)
(4,406,425)
(4,832,400)
(2,304,547)
(1,290,397)
9,685,000
-
-
-
-
-
341,700
-
-
-
-
-
686,407
44,827
3,017,674
80,587
116,012
86,586
12,278,313
1,376,850
3,315,036
1,772,724
2,087,262
2,150,224
$ 5,812,692 $ 533,536 $ 1,736,157
16.9% 14.1% 14.3%
$ (3,997,621) $ (9,221,717) $ 1,664,366
27.4% 38.4% 10.4%
117
CITY OF ELK RIVER, MINNESOTA
ELECTRIC SALES
LAST TEN FISCAL YEARS
Fiscal
Number of
Total
Year
Customers
KWWs Sold
Billings
2009
9,170
232,772,722
$ 23,591,485
2010
9,207
250,711,834
26,060,301
2011
9,227
261,235,297
27,894,341
2012
9,285
273,455,846
30,070,045
2013
9,358
273,945,354
30,983,220
2014
9,449
274,546,059
31,517,888
2015
10,499
282,265,268
32,704,279
2016
10,816
305,337,641
34,569,098
2017
11,448
313,952,561
36,458,061
2018
11,983
331,124,011
39,039,573
Source: Elk River Municipal Utilities
118
CITY OF ELK RIVER, MINNESOTA
PRINCIPAL ELECTRIC CUSTOMERS
CURRENT YEAR AND NINE YEARS AGO
Source: Elk River Municipal Utilities
Minnesota Statute 13.685 considers data on customers of municipal electric utilities as private data
and will no longer be disclosing customer names.
119
2018
2009
Percentage
Percentage
Total kWh
Total
of Total
Total kWh
Total
of Total
Customer
Sold
Billings
Billings
Sold
Billings
Billings
Customer 1
56,246,400
$ 4,187,790
10.73%
25,780,800
$ 1,821,216
8.36%
Customer 2
28,564,800
2,505,827
6.42%
14,673,600
1,123,959
5.16%
Customer 3
4,985,000
438,235
1.12%
5,038,500
376,613
1.73%
Customer 4
4,793,250
438,235
1.12%
5,038,500
376,613
1.73%
Customer 5
4,572,800
430,327
1.10%
3,869,600
314,703
1.45%
Customer 6
4,483,080
341,838
0.88%
4,876,080
351,402
1.61%
Customer 7
4,282,400
419,660
1.07%
5,032,000
405,868
1.86%
Customer 8
3,242,000
304,762
0.78%
3,567,500
279,928
1.29%
Customer 9
3,124,000
309,706
0.79%
-
-
-
Customer 10
2,888,800
259,338
0.66%
-
-
-
Customer 11
-
-
-
3,986,400
309,242
1.42%
Customer 12
-
-
-
3,123,840
259,532
1.19%
TOTAL
117,182,530
$ 9,635,718
24.68%
74,986,820
$ 5,619,076
25.80%
Source: Elk River Municipal Utilities
Minnesota Statute 13.685 considers data on customers of municipal electric utilities as private data
and will no longer be disclosing customer names.
119
CITY OF ELK RIVER, MINNESOTA
TAX CAPACITY, MARKET VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY
LAST TEN FISCAL YEARS
Tax capacity
Real property
Personal property
Total tax capacity
Tax increment
Taxable net tax capacity
Total tax capacity rate
Taxable market value
Real property
Personal property
Taxable market value
Estimated actual market value
of taxable property
Taxable market value as a percentage
of estimated actual market value
2009
2010
2011
2012
$ 26,550,210
$ 25,611,065
$ 24,736,999
$ 21,946,865
302,166
310,180
350,946
344,032
26,852,376
25,921,245
25,087,945
22,290,897
(899,835)
(888,285)
(784,101)
(698,130)
$ 25,952,541
$ 25,032,960
$ 24,303,844
$ 21,592,767
43.280%
44.560%
45.723%
47.588%
$ 2,235,538,000
$ 2,121,774,900
$ 2,035,543,052
$ 1,775,334,600
15, 363,900
15, 764, 700
17, 758,600
17,412,900
$ 2,250,901,900
$ 2,137,539,600
$ 2,053,301,652
$ 1,792,747,500
$ 2,429,563,505
$ 2,191,955,185
$ 2,403,906,238
$ 1,907,992,306
92.65% 97.52% 85.42% 93.96%
Source: Sherburne County Assessor
Note: Property in the county is reassessed annually. The county assessor's market value of property is approximately 94 percent
of actual value for all types of real and personal property.
120
2013
2014
2015
2016
2017
2018
$ 19,969,977
$ 20,047,632
$ 21,060,822
$ 21,850,219
$ 22,672,085
$ 23,858,008
353,390
367,641
366,113
385,056
381,355
384,540
20,323,367
20,415,273
21,426,935
22,235,275
23,053,440
24,242,548
(122,648)
(116,513)
(198,997)
(204,017)
(184,717)
(196,166)
$ 20,200,719
$ 20,298,760
$ 21,227,938
$ 22,031,258
$ 22,868,723
$ 24,046,382
50.373%
48.544%
47.190%
46.170%
46.193%
46.011%
$ 1,599,513,500
$ 1,622,624,100
$ 1,735,898,300
$ 1,826,858,800
$ 1,909,814,070
$ 2,026,119,675
18,05 5,900
18, 736,600
18, 585,200
19,469,900
19,234,400
19,393,900
$ 1,617,569,400
$ 1,641,360,700
$ 1,754,483,500
$ 1,846,328,700
$ 1,929,048,470
$ 2,045,513,575
$ 1,758,428,600
$ 1,796,401,800
$ 1,900,894,800
$ 1,978,763,900
$ 2,060,082,600
$ 2,178,621,000
91.99% 91.37% 92.30% 93.31% 93.64% 93.89%
121
CITY OF ELK RIVER, MINNESOTA
PROPERTY TAX RATES
DIRECT AND OVERLAPPING' GOVERNMENTS
LAST TEN FISCAL YEARS
Source: Sherburne County Auditor/Treasurer
1 Overlapping rates are those of local and county governments that apply to property owners within the City of Elk River.
Not all overlapping rates apply to all City of Elk River property owners (e.g., the rates for special districts apply only to the
proportion of the city's property owners whose property is located within the geographic boundaries of the special district.
122
Overlapping
City of Elk River
Total
Fiscal
Debt
Year
Operating
Service
Total
2009
38.319
4.961
43.280
2010
40.940
3.620
44.560
2011
42.449
3.274
45.723
2012
44.925
2.663
47.588
2013
47.222
3.151
50.373
2014
46.740
1.804
48.544
2015
45.433
1.757
47.190
2016
44.507
1.663
46.170
2017
44.584
1.609
46.193
2018
44.474
1.537
46.011
Source: Sherburne County Auditor/Treasurer
1 Overlapping rates are those of local and county governments that apply to property owners within the City of Elk River.
Not all overlapping rates apply to all City of Elk River property owners (e.g., the rates for special districts apply only to the
proportion of the city's property owners whose property is located within the geographic boundaries of the special district.
122
Overlapping
Rates
Total
School District
Direct &
Referendum
Special
Overlapping
County
Operating
Mkt. Value
Districts
Rates
41.999
36.215
0.164
4.040
125.698
44.519
40.050
0.183
4.703
134.015
46.342
43.489
0.188
4.956
140.698
52.014
45.548
0.187
5.296
150.633
54.420
50.058
0.190
5.260
160.301
54.861
51.286
0.156
4.987
159.834
51.979
42.483
0.209
4.779
146.640
50.478
39.268
0.215
4.778
140.909
50.460
36.659
0.219
4.509
138.040
49.356
36.137
0.218
4.269
135.991
Source: Sherburne County Auditor/Treasurer
1 Overlapping rates are those of local and county governments that apply to property owners within the City of Elk River.
Not all overlapping rates apply to all City of Elk River property owners (e.g., the rates for special districts apply only to the
proportion of the city's property owners whose property is located within the geographic boundaries of the special district.
122
CITY OF ELK RIVER, MINNESOTA
PRINCIPAL TAXPAYERS
CURRENT YEAR AND NINE YEARS AGO
Source: Sherburne County Assessor
123
2018
2009
Percentage
Percentage
Net Tax
of Total Net
Net Tax
of Total Net
Taxpayer
Capacity
Rank
Tax Capacity
Capacity
Rank
Tax Capacity
Great River Energy
$ 1,009,205
1
4.41%
$ 698,478
1
2.60%
JPM Capital Corporation
368,864
2
1.61%
270,060
5
1.01%
Target Corp.
254,630
3
1.11%
405,240
2
1.51%
BRE Retail Residual Owner, LLC
236,504
4
1.03%
-
-
-
Walmart Stores
210,292
5
0.92%
295,786
4
1.10%
Minnegasco
171,816
6
0.75%
-
-
-
Broadstone STI Minnesota, LLC
133,164
7
0.58%
-
-
-
Menards, Inc
129,390
8
0.57%
191,466
7
0.71%
Home Depot
111,230
9
0.49%
145,284
10
0.54%
Meritex Elk River, LLC
105,630
10
0.46%
-
-
-
Resource Recovery Technology
-
-
-
312,078
3
1.16%
Bradley Operating LP
-
-
-
194,666
6
0.72%
Phoenix Enterprises
-
-
-
170,952
8
0.64%
Minn West Bank
-
-
-
162,560
9
0.61%
TOTAL
$ 2,730,725
11.93%
$ 2,846,570
10.60%
Source: Sherburne County Assessor
123
CITY OF ELK RIVER, MINNESOTA
PROPERTY TAX LEVIES AND COLLECTIONS
LAST TEN FISCAL YEARS
124
Collected within the
Fiscal Year of the Levy
Collections in
Total Collections to Date
Fiscal
Total
Year's
Percentage
Subsequent
Percentage
Year
Tax Levy
Amount
of Levy
Years
Amount
of Levy
2009
$11,433,704
$11,074,590
96.86
$ 354,657
$ 11,429,247
99.96
2010
11,164,258
10,920,348
97.82
238,576
11,158,924
99.95
2011
11,164,581
11,052,081
98.99
101,247
11,153,328
99.90
2012
10,701,225
10,592,493
98.98
98,018
10,690,511
99.90
2013
10,685,603
10,574,080
98.96
65,687
10,639,767
99.57
2014
10,315,213
10,300,688
99.86
11,432
10,312,120
99.97
2015
10,541,719
10,511,527
99.71
24,864
10,536,391
99.95
2016
10,862,662
10,843,359
99.82
8,265
10,851,624
99.90
2017
11,415,935
11,362,631
99.53
35,973
11,398,604
99.85
2018
11,930,908
11,899,143
99.73
-
11,899,143
99.73
124
city
E:
iuver
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CITY OF ELK RIVER, MINNESOTA
RATIOS OF OUTSTANDING DEBT BY TYPE
LAST TEN FISCAL YEARS
Note: Details regarding the city's outstanding debt can be found in the notes to the financial statements.
' See the Schedule of Demographic and Economic Statistics for personal income and population data.
125
Governmental Activities
General
Fiscal
General
Obligation
Lease Special
Tax
Year
Obligation
Revenue
Revenue Assessment
Increment
2009
$ 16,677,757
$ 700,000
$ 6,175,000 $ 3,970,000
$ 440,000
2010
22,002,000
540,000
- 3,460,000
375,000
2011
20,897,939
-
- 2,955,000
305,000
2012
26,579,666
-
- 4,035,306
-
2013
35,223,141
-
- 1,633,459
-
2014
34,023,916
-
- 1,246,612
-
2015
32,789,690
-
- 924,765
-
2016
29,365,466
-
- 607,918
-
2017
18,951,241
-
- 296,071
-
2018
17,632,016
-
- -
-
Note: Details regarding the city's outstanding debt can be found in the notes to the financial statements.
' See the Schedule of Demographic and Economic Statistics for personal income and population data.
125
Governmental Activities
Business -Type Activities
General
Total
Percentage
Certificates of
Obligation
Revenue
Notes
Primary
of Personal
Per
Indebtedness
Other
Revenue
Bonds
Payable
Government
Income'
Capital
$ 421,716
$ 1,646,492
$ 8,070,000
$ 8,840,000
$ 2,524,646
$ 49,465,611
7.14%
$ 2,093
87,400
1,499,746
6,180,000
6,940,000
2,345,318
43,429,464
6.32%
1,890
-
1,410,000
5,520,656
6,310,000
2,162,882
39,561,477
5.81%
1,713
-
1,410,000
4,791,567
5,085,000
1,975,812
43,877,351
6.30%
1,890
-
1,410,000
4,027,478
4,340,000
1,789,224
48,423,302
7.00%
2,072
-
1,410,000
12,868,388
3,634,845
1,599,876
54,783,637
7.14%
2,316
-
1,410,000
12,564,299
3,020,935
1,408,368
52,118,057
6.69%
2,183
-
-
11,858,552
12,462,779
1,214,076
55,508,791
6.81%
2,294
-
-
11,132,723
11,781,983
1,018,860
43,180,878
5.19%
1,758
-
-
10,381,894
21,528,442
820,608
50,362,960
na
2,014
126
CITY OF ELK RIVER, MINNESOTA
RATIOS OF GENERAL BONDED DEBT OUTSTANDING
LAST TEN FISCAL YEARS
Note: Details regarding the city's outstanding debt can be found in the notes to the financial
statements.
' Only includes debt supported by tax levy.
2 See the Schedule of Tax Capacity, Market Value and Estimated Actual Value of Taxable
Property for property value data.
3 Population data can be found in the Schedule of Demographic and Economic Statistics.
MIA
Less
Amounts
Less
Percentage
Net
General
Restricted
Cash with
Net
of Net Bonded
Bonded
Fiscal
Bonded
for Debt
Fiscal
Bonded
Debt to Tax
Debt per
Year
Debt'
Service
Agent
Debt
Capacity
Capita
2009
$ 17,471,716
$ 3,027,915
$ -
$ 14,443,801
55.65%
$ 611
2010
18,040,733
3,787,324
-
14,253,409
56.94%
620
2011
17,120,000
3,234,939
-
13,885,061
57.13%
601
2012
23,286,667
3,044,599
-
20,242,068
93.74%
875
2013
32,141,667
2,329,723
9,712,875
20,099,069
99.50%
860
2014
31,001,667
1,599,852
9,580,144
19,821,671
97.65%
838
2015
28,986,667
1,154,728
9,423,440
18,408,499
86.72%
771
2016
25,728,333
1,556,232
9,284,303
14,887,798
67.58%
611
2017
15,331,667
1,608,880
-
13,722,787
60.01%
559
2018
14,220,000
1,473,230
-
12,746,770
53.01%
510
Note: Details regarding the city's outstanding debt can be found in the notes to the financial
statements.
' Only includes debt supported by tax levy.
2 See the Schedule of Tax Capacity, Market Value and Estimated Actual Value of Taxable
Property for property value data.
3 Population data can be found in the Schedule of Demographic and Economic Statistics.
MIA
CITY OF ELK RIVER, MINNESOTA
DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT
DECEMBER 31, 2018
Direct Debt:
City of Elk River'
Overlapping Debt:
Sherburne County
School District #728
Total overlapping debt
Total direct and overlapping debt
Debt Ratios:
Ratio of debt per capita (25,003 population)
Ratios of debt to taxable market value of $2,045,513,575
Source: Sherburne County and School District #728
City's
Share
of Debt
$ 17,632,016
48,320,000
68,266,527
116,586,527
$ 134,218,543
$5,368
6.56%
' The percentage of overlapping debt applicable is estimated using taxable market property values.
Applicable percentages were estimated by determining the portion of the county's and school
district's taxable market value that is within the city's boundaries and dividing it by the county's
and school district's total taxable market value.
2 Excludes debt payable from enterprise revenue.
Note: Overlapping governments are those that coincide, at least in part, with the geographic
boundaries of the city. This schedule estimates the portion of the outstanding debt of those
overlapping governments that is borne by the residents and business of the City of Elk River.
This process recognizes that, when considering the city's ability to issue and repay
long-term debt, the entire debt burden borne by the residents and businesses should be taken
into account. However, this does not imply that every taxpayer is a resident, and therefore
responsible for repaying the debt of each overlapping government.
128
Percent
of Debt
Outstanding
Applicable
Debt
to City'
$ 17,632,016
100.00%
45,529,045
25.61%
226,906,065
30.09%
272,435,110
$ 290,067,126
Ratio of debt per capita (25,003 population)
Ratios of debt to taxable market value of $2,045,513,575
Source: Sherburne County and School District #728
City's
Share
of Debt
$ 17,632,016
48,320,000
68,266,527
116,586,527
$ 134,218,543
$5,368
6.56%
' The percentage of overlapping debt applicable is estimated using taxable market property values.
Applicable percentages were estimated by determining the portion of the county's and school
district's taxable market value that is within the city's boundaries and dividing it by the county's
and school district's total taxable market value.
2 Excludes debt payable from enterprise revenue.
Note: Overlapping governments are those that coincide, at least in part, with the geographic
boundaries of the city. This schedule estimates the portion of the outstanding debt of those
overlapping governments that is borne by the residents and business of the City of Elk River.
This process recognizes that, when considering the city's ability to issue and repay
long-term debt, the entire debt burden borne by the residents and businesses should be taken
into account. However, this does not imply that every taxpayer is a resident, and therefore
responsible for repaying the debt of each overlapping government.
128
CITY OF ELK RIVER, MINNESOTA
LEGAL DEBT MARGIN INFORMATION
LAST TEN FISCAL YEARS
Total net debt applicable to the
limit as a percentage of debt limit 23.77% 26.32% 26.12% 37.87%
Note: Under state law, the City of Elk River's outstanding general obligation debt should not exceed
3 percent of the market value of taxable property_ By law, the general obligation debt subject to the
limitation may be offset by amounts set aside for the extinguishment of those obligations.
1 Only 2/3 of the $9,180,000 GO EDA Refunding Bonds, Series 2013A
are subject to the debt limit. The remaining 1/3 will be paid by the YMCA.
129
2009
2010
2011
2012
Debt limit
$ 67,527,057
$ 64,126,188
$ 61,599,050
$ 58,316,472
Bonds
17,471,716
18,040,733
17,120,000
23,286,667
Reserves
1,418,700
1,164,060
1,030,418
1,202,093
Total net debt applicable to limit
16,053,016
16,876,673
16,089,582
22,084,574
Legal debt margin
$ 51,474,041
$ 47,249,515
$ 45,509,468
$ 36,231,898
Total net debt applicable to the
limit as a percentage of debt limit 23.77% 26.32% 26.12% 37.87%
Note: Under state law, the City of Elk River's outstanding general obligation debt should not exceed
3 percent of the market value of taxable property_ By law, the general obligation debt subject to the
limitation may be offset by amounts set aside for the extinguishment of those obligations.
1 Only 2/3 of the $9,180,000 GO EDA Refunding Bonds, Series 2013A
are subject to the debt limit. The remaining 1/3 will be paid by the YMCA.
129
2013
2014
2015
2016
2017
2018
$ 52,752,858
$ 53,892,054
$ 57,026,844
$ 59,362,917
$ 61,802,478
$ 65,358,630
32,141,667
30,071,667
28,986,667
25,706,667
15,331,667
14,220,000
10,819,006
10,743,409
10,673,852
10,560,614
1,377,746
1,457,117
21,322,661
19,328,258
18,312,815
15,146,053
13,953,921
12,762,883
$ 31,430,197
$ 34,563,796
$ 38,714,029
$ 44,216,864
$ 47,848,557
$ 52,595,747
40.42%
35.86%
32.11%
25.51%
22.58%
19.53%
Legal Debt Margin Calculation for Fiscal Year 2017
Estimated taxable market value
Debt limit (3% of market value)
Debt applicable to limit:
G.O. capital improvement bonds
G.O. EDA bonds
Less: Cash and investments in related
debt service funds
Total net debt applicable to limit
Legal debt margin
130
$ 2,178,621,000
$ 65,358,630
8,100,000
6,120,000
(1,457,117)
12,762,883
$ 52,595,747
CITY OF ELK RIVER, MINNESOTA
PLEDGED -REVENUE COVERAGE
LAST TEN FISCAL YEARS
Note: Details regarding the government's outstanding debt can be found in the notes to the financial statements.
' Includes Liquor, Sewer, Water and Electric revenue bonds
2 Gross revenue excludes interest income, connection fees and miscellaneous revenues
3 Expenses exclude depreciation, interest on bonds and miscellaneous expenses
4 Excludes $1,540,000 refunded principal paid through cash with fiscal agent.
`K1
Revenue Bonds'
Net
Fiscal
Gross
Operating
Revenue
Debt Service
Year
Revenue
Expenses 3
Available
Principal
Interest
Coverage
2009
$ 29,665,332
$ 23,654,659
$ 6,010,673
$ 1,000,000
$ 681,124
3.58
2010
31,869,940
25,849,033
6,020,907
3,785,000
564,105
1.38
2011
33,672,393
27,326,836
6,345,557
1,335,000
458,888
3.54
2012
35,944,367
28,444,321
7,500,046
1,950,000
410,320
3.18
2013
34,737,779
28,629,356
6,108,423
1,505,000
341,419
3.31
2014
35,249,153
29,806,010
5,443,143
3,940,000
282,209
1.29
2015
36,586,235
30,281,264
6,286,971
900,000
464,938
4.61
2016
38,559,107
32,376,907
6,182,200
2,860,000
183,634
2.03
2017
40,563,969
34,509,407
6,054,562
1,355,000
673,662
2.98
2018
43,542,520
35,946,427
7,596,093
1,390,000
627,528
3.77
Note: Details regarding the government's outstanding debt can be found in the notes to the financial statements.
' Includes Liquor, Sewer, Water and Electric revenue bonds
2 Gross revenue excludes interest income, connection fees and miscellaneous revenues
3 Expenses exclude depreciation, interest on bonds and miscellaneous expenses
4 Excludes $1,540,000 refunded principal paid through cash with fiscal agent.
`K1
Special Assessment Bonds
Special
Assessment Debt Service
Collections
Pnncipal
Interest
$ 421,724
$ 510,000
$ 168,335
368,936
510,000
148,276
327,975
505,000
124,185
287,759
505,000
122,209
202,457
850,000 4
87,268
182,191
375,000
29,000
162,519
310,000
21,550
135,447
305,000
15,400
106,349
300,000
8,900
-
295,000
2,950
Coverage
0.62
0.56
0.52
0.46
0.22
0.45
0.49
0.42
0.34
0.00
132
CITY OF ELK RIVER, MINNESOTA
DEMOGRAPHIC AND ECONOMIC STATISTICS
LAST TEN FISCAL YEARS
Data Sources:
' State Demographer
2 Bureau of Economic Analysis
3 US Census Bureau
4 School District
5 Minnesota Department of Employment and Economic Development
na - not available
133
Personal
Fiscal
Income
Per Capita
Median
School
Unemployment
Year
Population'
(in thousands)
Income2
Age
Enrollment4
Rates
2009
23,633
$ 692,376
$ 29,297
33
13,073
9.0%
2010
22,974 3
687,129
29,909
33
13,036
8.1%
2011
23,101
681,179
29,487
34
13,117
7.3%
2012
23,147
696,794
30,103
34
13,255
6.4%
2013
23,370
691,962
29,609
35
13,367
5.5%
2014
23,730
767,666
32,350
36
13,627
4.1%
2015
23,987
782,528
32,623
35
13,751
4.0%
2016
24,368
815,597
33,470
36
14,077
3.4%
2017
24,567
832,784
33,899
36
14,294
4.0%
2018
25,003
858,278
34,327
36
14,448
3.8%
Data Sources:
' State Demographer
2 Bureau of Economic Analysis
3 US Census Bureau
4 School District
5 Minnesota Department of Employment and Economic Development
na - not available
133
CITY OF ELK RIVER, MINNESOTA
PRINCIPAL EMPLOYERS
CURRENT YEAR AND NINE YEARS AGO
1 Total District
2 Minnesota Department of Employment and Economic Development
134
2018
2009
Percentage
Percentage
of Total City
of Total City
Employer
Employees
Rank
Employment
Employees
Rank
Employment
Independent School District 728 1
2,589
1
20.78%
1,544
1
14.96%
Sherburne County
653
2
5.24%
632
2
6.12%
Guardian Angels of Elk River
395
3
3.17%
315
4
3.05%
Walmart
354
4
2.84%
435
3
4.21%
City of Elk River
228
6
1.83%
200
5
1.94%
Great River Energy
210
7
1.69%
193
6
1.87%
Sportech, Inc.
185
5
1.48%
-
-
-
Menards
173
8
1.39%
141
8
1.37%
Tescom Corporation
170
9
1.36%
153
7
1.48%
First National Financial Services
142
10
1.14%
-
-
-
Cub Foods
-
-
-
120
10
1.16%
Coborn's
-
-
-
134
9
1.30%
Total
5,099
40.92%
3,867
37.46%
Total Employment 2
12,460
10,321
1 Total District
2 Minnesota Department of Employment and Economic Development
134
Function
General government
Public safety:
Police
Officers
Civilians
Fire
Fire administration
Paid on-call volunteers
Other public safety
Public works
Culture and recreation
Economic development
Municipal liquor
Sewer
Storm Water
Water
Electric
Total
CITY OF ELK RIVER, MINNESOTA
FULL-TIME EQUIVALENT EMPLOYEES BY FUNCTION
LAST TEN FISCAL YEARS
Source: City of Elk River Finance Department
135
Fiscal Year
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
24.8
24.8
24.8
25.8
26.9
28.3
29.3
29.3
29.3
30.3
31.0
31.0
30.0
31.0
31.0
31.0
32.0
32.0
32.0
34.0
8.0
8.0
8.0
8.0
9.0
9.0
9.0
9.0
9.0
9.0
3.5
3.7
3.7
1.7
1.7
2.7
3.0
3.0
3.0
3.0
39.0
38.0
40.0
40.0
40.0
40.0
44.0
44.0
44.0
45.0
7.6
7.6
7.6
8.4
8.6
9.0
9.0
9.0
9.0
9.0
13.1
14.0
14.5
15.5
15.0
15.0
15.0
15.0
15.0
15.0
19.4
19.4
19.4
18.5
18.5
18.5
17.5
17.5
17.8
18.3
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
12.0
14.0
12.5
13.0
13.0
13.0
13.0
13.0
13.0
13.0
6.0
6.0
6.0
6.0
6.0
6.0
6.0
6.0
6.0
6.0
-
-
-
-
-
-
1.0
1.0
1.0
1.0
5.0
5.0
5.0
8.0
8.0
8.0
8.0
8.0
8.0
8.0
28.5
29.0
29.0
30.0
31.0
31.0
34.0
34.0
34.0
34.0
199.9
202.5
202.5
207.9
210.7
213.5
222.8
222.8
223.1
227.6
Source: City of Elk River Finance Department
135
CITY OF ELK RIVER, MINNESOTA
OPERATING INDICATORS BY FUNCTION
LAST TEN FISCAL YEARS
Sources: Various city departments
001
Fiscal Year
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Function
Planning
Land use applications
64
43
54
56
71
85
118
138
122
103
Police
Police calls
22,231
21,751
20,707
20,451
20,676
21,585
21,930
24,728
26,329
27,061
Traffic citations
2,620
2,638
2,125
1,840
1,925
1,930
2,778
2,818
3,294
2,309
Fire
Fire calls
364
443
469
355
446
411
436
442
473
483
Building/environmental
Permits issued
1,369
2,105
1,841
1,683
1,866
1,956
1,722
1,804
2,245
2,316
Valuation of permits
$ 14,265
$ 22,312
$ 20,719
$ 25,585
$38,440
$47,037
$ 57,965
$51,368
$106,983
$66,048
(thousands of dollars)
Public works
Street sweeping (hours)
1,287
1,063
1,494
1,811
1,652
1,888
1,824
1,520
1,314
991
Snowplowing (hours)
2,305
3,425
2,964
1,675
4,263
5,872
3,018
3,368
3,812
5,122
Equipment repair (hours)
6,482
5,378
5,711
5,051
5,125
5,210
3,575
3,688
4,196
5,140
Culture and recreation
Recreation participants
26,124
26,061
26,934
26,803
27,065
27,330
27,348
27,452
27,608
27,637
Ice arena usage (hours)
4,684
4,624
4,740
4,752
4,736
4,568
5,469
4,583
4,518
4,459
Sewer
Average daily treatment flow
1,300
1,200
1,245
1,200
1,203
1,200
1,200
1,300
1,300
1,300
(thousands of gallons)
Water
Number of customers
4,467
4,511
4,515
4,542
4,613
4,676
4,672
4,903
5,011
5,140
Average daily consumption
1,941
1,718
1,786
2,321
2,152
2,143
2,192
2,196
2,159
2,254
(thousands of gallons)
Electric
Number of customers
9,170
9,207
9,227
9,285
9,358
9,449
10,499
10,816
11,448
11,983
Average daily consumption
638
687
716
749
795
790
773
837
878
931
(thousands of KWh's)
Sources: Various city departments
001
Function
Public safety
Police:
Stations
Patrol units
Fire Stations
Public works
Streets (miles)
Culture and recreation
Parks
Parks acreage
Sewer
Sanitary sewers (miles)
Lift stations
Maximum daily treatment capacity
(thousands of gallons)
Water
Maximum daily capacity
(thousands of gallons)
Electric
Generating facilities
CITY OF ELK RIVER, MINNESOTA
CAPITAL ASSET STATISTICS BY FUNCTION
LAST TEN FISCAL YEARS
Fiscal Year
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
1
1
1
1
1
1
12
12
12
12
12
12
2
2
2
2
2
2
151
151
151
151
151
151
44
44
44
45
45
46
964
964
964
988
988
1,324
79
79
80
80
80
80
21
21
21
21
21
21
2,200
2,200
2,200
2,200
2,200
2,200
1
1
1
1
13
13
13
14
2
2
2
2
151
155
155
155
46
46
46
46
1,324
1,324
1,324
1,324
80
80
80
80
21
21
21
21
2,200
4,500
4,500
4,500
8,100 8,100 8,100 10,000 10,000 10,000 10,000 10,000 10,000 10,000
6 6 6 6 6 6 6 6 6 6
Sources: Various city departments
Note: No capital asset indicators are available for the general government function.
137
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INDEPENDENT AUDITORS' REPORT ON MINNESOTA LEGAL COMPLIANCE
Honorable Mayor and
Members of the City Council
City of Elk River
Elk River, Minnesota
We have audited, in accordance with auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Government Auditing Standards
issued by the Comptroller General of the United States, the financial statements of the governmental
activities, the business -type activities, the discretely presented component unit, each major fund, and
the aggregate remaining fund information of the City of Elk River, Minnesota as of and for the year then
ended December 31, 2018, and the related notes to the financial statements, which collectively
comprise the City's basic financial statements, and have issued our report thereon dated June 7, 2019.
Our report includes a reference to other auditors who audited the financial statements of the City of Elk
River Municipal Utilities, as described in our report on the City of Elk River's financial statements. This
report does not include the results of the other auditors' testing of internal control over financial
reporting or compliance and other matters that are reported on separately by those auditors.
The Minnesota Legal Compliance Audit Guide for Cities promulgated by the State Auditor pursuant to
Minnesota Statute § 6.65 contains seven categories of compliance to be tested: contracting and
bidding, deposits and investments, conflicts of interest, public indebtedness, claims and disbursements,
miscellaneous provisions, and tax increment financing. Our audit considered all of the listed categories.
In connection with our audit, nothing came to our attention that caused us to believe that the City of Elk
River, Minnesota failed to comply with the provisions of the Minnesota Legal Compliance Audit Guide
for Cities. However, our audit was not directed primarily toward obtaining knowledge of such
noncompliance. Accordingly, had we performed additional procedures, other matters may have come to
our attention regarding the City of Elk River, Minnesota's noncompliance with the above -referenced
provisions insofar as they relate to accounting matters.
The purpose of this report is solely to describe the scope of our testing of compliance relating to the
provisions of the Minnesota Legal Compliance Audit Guide for Cities and the results of that testing, and
not to provide an opinion on compliance. Accordingly, this communication is not suitable for any other
purpose.
zz_>7,>
CliftonLarsonAllen LLP
Minneapolis, Minnesota
June 7, 2019
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CLAconnect.corri
INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL OVER
FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS
BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED
IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Honorable Mayor and City Council
City of Elk River
Elk River, Minnesota
We have audited, in accordance with the auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Government Auditing Standards
issued by the Comptroller General of the United States, the financial statements of the governmental
activities, the business -type activities, the discretely presented component unit, each major fund, and
the aggregate remaining fund information of the City of Elk River, as of and for the year ended
December 31, 2018, and the related notes to the financial statements, which collectively comprise the
City of Elk River's basic financial statements, and have issued our report thereon dated June 7, 2019.
Our report includes a reference to other auditors who audited the financial statements of the City of Elk
River Municipal Utilities, as described in our report on the City of Elk River's financial statements. This
report does not include the results of the other auditors' testing of internal control over financial
reporting or compliance and other matters that are reported on separately by those auditors. The
financial statements of Elk River Municipal Utilities were not audited in accordance with Government
Auditing Standards.
Internal control over financial reporting
In planning and performing our audit of the financial statements, we considered the City of Elk River's
internal control over financial reporting (internal control) to determine the audit procedures that are
appropriate in the circumstances for the purpose of expressing our opinions on the financial
statements, but not for the purpose of expressing an opinion on the effectiveness of the City of Elk
River's internal control. Accordingly, we do not express an opinion on the effectiveness of the City of
Elk River's internal control.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, to prevent, or
detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a
combination of deficiencies, in internal control, such that there is a reasonable possibility that a material
misstatement of the entity's financial statements will not be prevented, or detected and corrected on a
timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control
that is less severe than a material weakness, yet important enough to merit attention by those charged
with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this
section and was not designed to identify all deficiencies in internal control that might be material
weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any
deficiencies in internal control that we consider to be material weaknesses. However, material
weaknesses may exist that have not been identified.
�A member of
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International
Honorable Mayor and City Council
City of Elk River
Compliance and other matters
As part of obtaining reasonable assurance about whether the City of Elk River's financial statements
are free from material misstatement, we performed tests of its compliance with certain provisions of
laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and
material effect on the determination of financial statement amounts. However, providing an opinion on
compliance with those provisions was not an objective of our audit and, accordingly, we do not express
such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that
are required to be reported under Government Auditing Standards.
Purpose of this report
The purpose of this report is solely to describe the scope of our testing of internal control and
compliance and the result of that testing, and not to provide an opinion on the effectiveness of the
City's internal control or on compliance. This report is an integral part of an audit performed in
accordance with Government Auditing Standards in considering the City's internal control and
compliance. Accordingly, this communication is not suitable for any other purpose.
zz->z,>CliftonLarsonAllen LLP
Minneapolis, Minnesota
June 7, 2019
CIiftonLarsanA111en LLQ
CLAconnectcom
Honorable Mayor and City Council
City of Elk River
Elk River, Minnesota
We have audited the financial statements of the governmental activities, the business -type activities,
the discretely presented component unit, each major fund, and the aggregate remaining fund
information of the City of Elk River (the City) as of and for the year ended December 31, 2018, and
have issued our report thereon dated June 7, 2019. We have previously communicated to you
information about our responsibilities under auditing standards generally accepted in the United States
of America and Government Auditing Standards, as well as certain information related to the planned
scope and timing of our audit. Professional standards also require that we communicate to you the
following information related to our audit.
Significant audit findings
Qualitative aspects of accounting practices
Accounting policies
Management is responsible for the selection and use of appropriate accounting policies. The significant
accounting policies used by the City are described in Note 1 to the financial statements.
As described in Note 15, the City adopted Statement of Governmental Accounting Standards (GASB)
Statement No. 75, Accounting and Financial Reporting of Postemployment Benefits Other Than
Pension, in 2018. The City restated beginning net position as a result of implementing this statement. In
addition, the City also implemented (GASB) Statement No. 89, Accounting for Interest Cost Incurred
Before the End of a Construction Period, in 2018. There were no significant effects on the financial
statements as a result of implementing this statement.
We noted no transactions entered into by the City during the year for which there is a lack of
authoritative guidance or consensus. All significant transactions have been recognized in the financial
statements in the proper period.
Accounting estimates
Accounting estimates are an integral part of the financial statements prepared by management and are
based on management's knowledge and experience about past and current events and assumptions
about future events. Certain accounting estimates are particularly sensitive because of their
significance to the financial statements and because of the possibility that future events affecting them
may differ significantly from those expected. The most sensitive estimates affecting the financial
statements were:
• Management's estimate of the valuation of investments is based on published market values as
of December 31, 2018. We evaluated the key factors and assumptions used to develop the
value of investments in determining that it is reasonable in relation to the financial statements
taken as a whole.
• Management's estimate of the depreciation expense on capital assets is based on
management's estimated useful lives of those assets. We evaluated the key factors and
assumptions used to develop the allowance in determining that it is reasonable in relation to the
financial statements taken as a whole.
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International
Honorable Mayor and City Council
City of Elk River
Page 2
• Management's estimate of the valuation of land held for resale is based on the lower of the cost
of the land or the current market value. We evaluated the key factors and assumptions used to
develop the allowance in determining that it is reasonable in relation to the financial statements
taken as a whole.
• Management's estimate of City's liability for other postemployment benefits is based on an
actuarial determined liability which is based on various assumptions, including investment rates
of return, health care trend rates, mortality rates, etc. We evaluated the key factors and
assumptions used to develop the liability in determining that it is reasonable in relation to the
financial statements taken as a whole.
• Management's estimate of the City's liability for compensated absences is based on employee
wage information and the City's policies of earning vacation and sick pay. We evaluated the key
factors and assumptions used to develop the liability in determining that it is reasonable in
relation to the financial statements taken as a whole.
• Management's estimate of the City's proportionate share of PERA's GERF, and PEPFF net
pension liabilities as well as the related deferred inflows and outflows is based on guidance from
GASB Statement No. 68, GASB Statement No. 71, and the plans' allocation tables. The plans'
allocation tables allocate a portion of the plans' net pension liabilities based on the City's
contributions during the plans' fiscal years as a percentage of total contributions received for the
related fiscal year by the plans. We evaluated the key factors and assumptions used to develop
the liability in determining that it is reasonable in relation to the financial statements taken as
a whole.
Management's estimate of the City's net pension asset and related deferred inflows and
outflows related to the City's Fire Relief Association are based on an actuarially determined
liability. This liability is based on various assumptions including the investments rate of return,
projected salary increases, and mortality rates. We evaluated the key factors and assumptions
used to develop the liability in determining that it is reasonable in relation to the financial
statements taken as a whole.
Financial statement disclosures
Certain financial statement disclosures are particularly sensitive because of their significance to
financial statement users. The most sensitive disclosure affecting the City's financial statements was:
• The disclosures surrounding GASB 68 pension accounting for the City's participation in the
Minnesota Public Employees Retirement Plan and the Fire Relief Association.
The financial statement disclosures are neutral, consistent, and clear.
Difficulties encountered in performing the audit
We encountered no significant difficulties in dealing with management in performing and completing
our audit.
Uncorrected misstatements
Professional standards require us to accumulate all misstatements identified during the audit, other
than those that are clearly trivial, and communicate them to the appropriate level of management.
Management did not identify and we did not notify them of any uncorrected financial statement
misstatements.
Honorable Mayor and City Council
City of Elk River
Page 3
Corrected misstatements
None of the misstatements detected as a result of audit procedures and corrected by management
were material, either individually or in the aggregate, to the financial statements taken as a whole.
Disagreements with management
For purposes of this letter, a disagreement with management is a financial accounting, reporting, or
auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial
statements or the auditors' report. No such disagreements arose during our audit.
Management representations
We have requested certain representations from management that are included in the management
representation letter dated June 7, 2019.
Management consultations with other independent accountants
In some cases, management may decide to consult with other accountants about auditing and
accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation
involves application of an accounting principle to the City's financial statements or a determination of
the type of auditors' opinion that may be expressed on those statements, our professional standards
require the consulting accountant to check with us to determine that the consultant has all the relevant
facts. To our knowledge, there were no such consultations with other accountants.
Significant issues discussed with management prior to engagement
We generally discuss a variety of matters, including the application of accounting principles and
auditing standards, with management each year prior to engagement as the City's auditors. However,
these discussions occurred in the normal course of our professional relationship and our responses
were not a condition to our engagement.
Other audit findings or issues
We have provided a separate letter to you dated June 7, 2019, communicating internal control related
matters identified during the audit.
Audits of group financial statements
We noted no matters related to the group audit that we consider to be significant to the responsibilities
of those charged with governance of the group.
Quality of component auditor's work
There were no instances in which our evaluation of the work of a component auditor gave rise to a
concern about the quality of that auditor's work.
Limitations on the group audit
There were no restrictions on our access to information of components or other limitations on the
group audit.
Honorable Mayor and City Council
City of Elk River
Page 4
Other information in documents containing audited financial statements
With respect to the required supplementary information (RSI) accompanying the financial statements,
we made certain inquiries of management about the methods of preparing the RSI, including whether
the RSI has been measured and presented in accordance with prescribed guidelines, whether the
methods of measurement and preparation have been changed from the prior period and the reasons
for any such changes, and whether there were any significant assumptions or interpretations underlying
the measurement or presentation of the RSI. We compared the RSI for consistency with management's
responses to the foregoing inquiries, the basic financial statements, and other knowledge obtained
during the audit of the basic financial statements. Because these limited procedures do not provide
sufficient evidence, we did not express an opinion or provide any assurance on the RSI.
With respect to the combining and individual fund financial statements and component unit financial
statements (collectively, the supplementary information) accompanying the financial statements, on
which we were engaged to report in relation to the financial statements as a whole, we made certain
inquiries of management and evaluated the form, content, and methods of preparing the information to
determine that the information complies with accounting principles generally accepted in the United
States of America, the method of preparing it has not changed from the prior period or the reasons for
such changes, and the information is appropriate and complete in relation to our audit of the financial
statements. We compared and reconciled the supplementary information to the underlying accounting
records used to prepare the financial statements or to the financial statements themselves. We have
issued our report thereon dated June 7, 2019.
The introductory and statistical accompanying the financial statements, which is the responsibility of
management, was prepared for purposes of additional analysis, and is not a required part of the
financial statements. Such information was not subjected to the auditing procedures applied in the audit
of the financial statements and, accordingly, we did not express an opinion or provide any assurance
on it.
Other information is being included in documents containing the audited financial statements and the
auditors' report thereon. Our responsibility for such other information does not extend beyond the
financial information identified in our auditors' report. We have no responsibility for determining whether
such other information is properly stated and do not have an obligation to perform any procedures to
corroborate other information contained in such documents. As required by professional standards, we
read the introductory and statistical sections (the other information) in order to identify material
inconsistencies between the audited financial statements and the other information. We did not identify
any material inconsistencies between the other information and the audited financial statements.
Our auditors' opinion, the audited financial statements, and the notes to financial statements should
only be used in their entirety. Inclusion of the audited financial statements in a document you prepare,
such as an annual report, should be done only with our prior approval and review of the document.
This communication is intended solely for the information and use of the City council and management
of the City of Elk River, and is not intended to be, and should not be, used by anyone other than these
specified parties.
ZZ—
CliftonLarsonAllen LLP
Minneapolis, Minnesota
June 7, 2019