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6.1. SR 06-07-2021Request for Action To Item Number Mayor and City Council 6.1 Agenda Section Meeting Date Prepared by Presentations, Awards, and June 7, 2021 Lori Ziemer, Finance Director Recognition Item Description Reviewed by Comprehensive Annual Financial Report for the Cal Portner, City Administrator Year Ended December 31, 2020 Reviewed by Action Requested Accept, by motion, the Comprehensive Annual Financial Report for the City of Elk River for the year ended December 31, 2020. 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 city's financial statements. For the year 2020, a single audit, which is triggered by the spending of $750,000 or more in federal grant funds, was also required for federal compliance of the CARES Act grant. CliftonLarsonAllen (CLA) conducted the city's audit for the year 2020 and will present a summary of the 2020 Comprehensive Annual Financial Report and audit results. Financial Impact N/A Mission/Policy/Goal N/A Attachments ■ CLA Audit Presentation ■ Comprehensive Annual Financial Report for the year ended December 31, 2020 ■ Governance Communication Letter ■ Single Audit Report The Elk River Vision A welcoming community with revolutionary and spirited resourcefulness, exceptional service, and community engagement that encourages and inspires pi ospei ly. M TUREJ Updated.• August 2020 City of Elk River, Minnesota Audit Presentation Year Ending December 31, 2020 Monday, June 7, 2021 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 Required Communications Q 0 J C The City has an unmodified (clean) opinion for the December N O 3111 2020 financial statement audit. See separate Governance Communication Letter. J Internal Control Items Q 0 J C Material Weaknesses deficiencies in internal control such N 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 Create Opportunities a Single Audit - CARES Funding Results Q 0 J C We conducted a single audit over CFDA 21.019 the N O Coronavirus Relief Fund and noted one reportable item during that testing: There was not formal documentation of review of the reports submitted to the State of Minnesota for the grant. Minnesota Legal Compliance Q 0 J C Auditors conducted applicable testing and completed the N O Minnesota Legal Compliance Checklist to verify that the City complied with the applicable Minnesota State Statutes that we are required to test. No issues noted General Fund Financial Results - Revenues $13 •-✓ $12 $11 $10 $9 $8 $7 $6 $5 $4 $3 $2 $1 $- General Fund Revenue by Source Year Ended December 31, Taxes Licenses and Permits Intergovernmental Charges for Services All Other ■ 2016 ■ 2017 ■ 2018 ■ 2019 ■ 2020 All categories within 4% of the prior year breakout Overall increase in revenue of $277,382 ($797,243 increase in taxes) Offset by decreases in Licenses and Permits, Charges for Services and other Q 0 J C 0 0 General Fund Financial Results - Revenue Budget General Fund Revenue Budget and Actual Taxes Intergovernmental Charges for Services Licenses and Permits All Other' $- $1 $2 $3 $4 $5 $6 $7 $8 $9 $10 $11 $12 $13 Millions ■ Budget ■ Actual Under budget $228k (1.5%) Charges for Services under budget $160k Licenses and Permits under budget $133k General Fund Financial Results - Expenditures LO $8 C $7 $6 $5 $4 $3 $2 $1 General Fund Expenditures by Function Year Ended December 31, General Public Safety Public Works Culture and Government Recreation ■ 2016 0 2017 2018 ■ 2019 ■ 2020 Total expenditures increased each year between 2.1% (2017) and 6.4% (2018). Overall increase of 16.2% from 2016 to 2020. Proportions by function remained very similar in 2020 compared to 2019, all within 2%. Public Safety (48%) and General Government (26%) are the largest. J General Fund Financial Results - Expenditure Budget Q 0 General Fund Expenditures J 0 Budget and Actual Under budget $1.056M (6.3%): 0 General Governmenton"" All functions were under budget. Public Safety Public Safety under budget $599k PublicWorks General Government under budget $208k Parks and Recreation Parks and Recreation under budget $195k $ $1 $2 $3 $4 $5 $6 $7 $$ $9 Public Works under Millions budget $54k ■Budget ■Actual ' Opportunities CL 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 General Fund Financial Position Year Ended December 31, 2016 2017 2018 2019 2020 $(1,500,000) Unassigned Fund Balance iiiiiiiiiiiiiiiiiiRevenue 45% Expenditures t%of Total Fund Balance Fund Balance Policy: 50% Unassigned of 40% - 45% of next year's budget 2020 Unassigned fund balance is 45% of next year's budgeted expenditures. 45 40% Financial Results - Sewer Fund Sewer Fund Year Ended December 31, N $4.0 0 $3.5 $3.0 $2.5 $2.0 5 0 5 - — 0 — — 2016 2017 2018 2019 2020 Operating Expense (other than depreciation) � Depreciation Operating Revenue --@—Inco me Before Depreciation • Covering approximately 47% of depreciation. o Increase of 3% in 2020 Peak was 70% in 2016 Operating revenues increased 4.1% from prior year (usage and rate increase). • Cash and investments provided by operations $433K in 2020. • Total cash and investments not held by trustee of $6.3M and operating expenses of $3.3M. Q 0 0 0 0 0 Financial Results - Garbage Fund Q 0 Garbage Fund Year Ended December31, No depreciation in Fund. $1.8 Operating revenues 2.5% o $1.6 increase from prior year. $1.4 Operating expenses $1.2 increased 7.5% from prior $1.0 year (Previous year had 8.3% $08 decrease). $0.60 Cash and investments provided by operations $0.4 $131k in 2020. $0.2 • Total cash and investments $0.0 of $443k and operating -$0.2 expenses of $1.56M. 2016 2017 2018 2019 2020 Operating Expense (other than depreciation) Depreciation Operating Revenue Financial Results - Storm Water Fund $0.9 $0.8 $0.7 $0.6 $0.5 $0.4 $0.3 $0.2 $0.1 $0.0 -$0.1 -$0.2 Storm Water Fund Year Ended December 31, Operating Expense (other than depreciation) Depreciation Operating Revenue tIncome Before Depreciation Operating loss of $6.4k. Operating revenues 10.5% increase from prior year. Operating expenses decreased $454k from prior year. Cash and investments provided by operations $417k in 2020. Total cash and investments of $1.18M and operating expenses of $571k. Q 0 0 0 N 0 0 Create Opportunities 13 Financial Results - Liquor Q Gross Profit Percentage 0 J 0 30.0% Gross profit percentage 29.1% 28.9% down slightly from prior 28.7% 29.1% O 29.0% year. 28.3% 2019 gross profit % for the 7 28.0% County Twin Cities Metro area was 26.7%. 27.0% - 26.7% 2020 Gross profit % for the 7 26.0% 25.6% 26.5% County Twin Cities Metro 26.0% 40/ area is unknown at this time. 25.0% Equal or higher than other similar Cities (2019). 24.0% Anoka — 23.5% Savage — 26.2% 23.0% 2016 2017 2018 2019 2020 Lexington — 24.3% {Gross Profit as a percentage of Sales tRegion 7 -County Twin Cities Metro Saint Anthony — 25.1% EF If UT-ClUT-Clr,,pj�ortunities Governmental Activities Bonded Debt - Maturities 9,000,000 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 2010A G.O. Capital Improvement Bonds 2012A G.O. Capital Improvement Bonds 1 1 2013A EDA G.O. Refunding Bonds 1111111 2019A G.O. Sales Tax Revenue Bonds ■ i■ III 2020A Capita I Improvement Bonds 02021 2022 ■ 2023 ■ 2024 ■ 2025 2026 - 2030 02031 - 2035 02036 - 2040 02041 - 2044 1. 2020B Capital Improvement Refunding Bonds City Business -Type Activities Bonded Debt - v Maturities J C 8,000,000.00 $ N 7,000,000.00 6,000,000.00 5,000,000.00 4,000,000.00 3,000,000.00 2,000,000.00 1,000,000.00 mm m ■■ 2014B G.O. Sewer Revenue Bonds 2020C G.O. Sewer Revenue Refunding Bonds 02020 02021 2022 02023 2024 2025 - 2029 02030 - 2034 02035 J Conclusion Q 0 J C Unassigned fund balance for the General Fund is meeting the fund balance policy as of year end for 2020. 0 No internal control findings or legal compliance findings. One single audit finding related to report review documentation. Liquor, Sewer, Garbage, and Storm Water funds provided cash flows from operations. All four funds transferred out a total of $976k to other funds ($775k from the liquor fund) Last year, for the 2019 ACFR audit, the City was awarded the GFOA Certificate for Excellence in Financial Reporting. 31 consecutive years! Create Opportunities 17 Accounting Standards & Upcoming Changes 0 J C GASB 87 — Leases N December 31, 2022 0 GASB 96 — Subscription based Software December 31, 2023 American Rescue Plan Act Additional funding for municipalities. We are here to help (Information, trainings, fielding questions on eligibility and internal controls, etc.) ! 0 Create Opportunities 18 CLAconnect.com WEALTH ADVISORY I OUTSOURCING I AUDIT, TAX, AND CONSULTING Investment advisory services are offered through Clifton LarsonAllen Wealth Advisors, LLC, an SEC -registered investment advisor City of Elk -�-� c'�� Comprehensive Annual Financial Report 74� Ar IL M U2 For the Year Ended December 31, 2020 CITY OF ELK RIVER, MINNESOTA COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED DECEMBER 31, 2020 PREPARED BY THE FINANCE DEPARTMENT MEMBER OF GOVERNMENTAL FINANCE OFFICERS ASSOCIATION OF THE UNITED STATES AND CANADA CITY OF ELK RIVER, MINNESOTA TABLE OF CONTENTS YEAR ENDED DECEMBER 31, 2020 INTRODUCTORY SECTION LETTER OF TRANSMITTAL 1 ELECTED AND APPOINTED OFFICIALS 5 ORGANIZATIONAL CHART 6 CERTIFICATE OF ACHIEVEMENT FOR EXCELLENCE IN FINANCIAL REPORTING 7 FINANCIAL SECTION INDEPENDENT AUDITORS' REPORT 8 MANAGEMENT'S DISCUSSION AND ANALYSIS 11 BASIC FINANCIAL STATEMENTS STATEMENT OF NET POSITION 22 STATEMENT OF ACTIVITIES 23 BALANCE SHEET - GOVERNMENTAL FUNDS 24 RECONCILIATION OF THE BALANCE SHEET TO THE STATEMENT OF NET POSITION - GOVERNMENTAL ACTIVITIES 25 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS 26 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES - GOVERNMENTAL ACTIVITIES 27 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - GENERAL FUND - BUDGET TO ACTUAL (GAAP BASIS) 28 STATEMENT OF NET POSITION - PROPRIETARY FUNDS 29 STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION - PROPRIETARY FUNDS 31 STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS 33 NOTES TO BASIC FINANCIAL STATEMENTS 37 REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CHANGES IN TOTAL OPEB LIABILITY AND RELATED RATIOS - MUNICIPAL RETIREES HEALTH PLAN 84 SCHEDULE OF CHANGES IN TOTAL OPEB LIABILITY AND RELATED RATIOS - UTILITIES RETIREES HEALTH PLAN 86 PERA SCHEDULE OF THE CITY'S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY 88 PERA SCHEDULE OF CITY CONTRIBUTIONS 95 SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY AND RELATED RATIOS - ELK RIVER FIRE RELIEF 96 SCHEDULE OF CITY CONTRIBUTIONS - ELK RIVER FIRE RELIEF 97 CITY OF ELK RIVER, MINNESOTA TABLE OF CONTENTS YEAR ENDED DECEMBER 31, 2020 COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET 99 COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES 100 NONMAJOR SPECIAL REVENUE FUNDS COMBINING BALANCE SHEET 102 COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES 104 LIBRARY SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL 106 MULTI -PURPOSE FACILITY SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL 107 ECONOMIC DEVELOPMENT AUTHORITY SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL 108 NONMAJOR DEBT SERVICE FUNDS COMBINING BALANCE SHEET 110 COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES 111 NONMAJOR CAPITAL PROJECTS FUNDS COMBINING BALANCE SHEET 113 COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES 115 COMPONENT UNIT FINANCIAL STATEMENTS HOUSING AND REDEVELOPMENT AUTHORITY BALANCE SHEET 118 RECONCILIATION OF THE GOVERNMENTAL FUND BALANCE SHEET TO THE STATEMENT OF NET POSITION 119 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCES 120 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES 121 CITY OF ELK RIVER, MINNESOTA TABLE OF CONTENTS YEAR ENDED DECEMBER 31, 2020 STATISTICAL SECTION (UNAUDITED) NET POSITION BY COMPONENT - LAST TEN FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) 123 CHANGES IN NET POSITION - LAST TEN FISCAL YEARS 124 FUND BALANCES, GOVERNMENTAL FUNDS - LAST TEN FISCAL YEARS 126 CHANGES IN FUND BALANCES OF GOVERNMENT FUNDS - LAST TEN FISCAL YEARS 127 ELECTRIC SALES - LAST TEN FISCAL YEARS 128 PRINCIPAL ELECTRIC CUSTOMERS - CURRENT YEAR AND NINE YEARS AGO 129 TAX CAPACITY, MARKET VALUE, AND ESTIMATED VALUE OF TAXABLE PROPERTY - LAST TEN FISCAL YEARS 130 PROPERTY TAX RATES - DIRECT AND OVERLAPPING GOVERNMENTS - LAST TEN FISCAL YEARS 132 PRINCIPAL TAXPAYERS - CURRENT YEAR AND NINE YEARS AGO 133 PROPERTY TAX LEVIES AND COLLECTIONS - LAST TEN FISCAL YEARS 134 RATIOS OF OUTSTANDING DEBT BY TYPE - LAST TEN FISCAL YEARS 135 RATIOS OF GENERAL BONDED DEBT OUTSTANDING - LAST TEN FISCAL YEARS 137 DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT 138 LEGAL DEBT MARGIN INFORMATION - LAST TEN FISCAL YEARS 139 PLEDGED -REVENUE COVERAGE - LAST TEN FISCAL YEARS 141 DEMOGRAPHIC AND ECONOMIC STATISTICS - LAST TEN FISCAL YEARS 143 PRINCIPAL EMPLOYERS - CURRENT YEAR AND NINE YEARS AGO 144 FULL-TIME EQUIVALENT BY FUNCTION - LAST TEN FISCAL YEARS 145 OPERATING INDICATORS BY FUNCTION - LAST TEN FISCAL YEARS 146 CAPITAL ASSET STATISTICS BY FUNCTION - LAST TEN FISCAL YEARS 147 This page intentionally left blank. INTRODUCTORY SECTION River May 25, 2021 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, 2020, 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 Clifton LarsonAllen 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 St. 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 25,590. Urban services are available to about one-third of the land area in the City. (1) 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 safety inspections, planning and zoning, economic development, environmental services, parks and recreation, library, street maintenance, snow removal, infrastructure maintenance, 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 28 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 as indicated by the building permits with a construction value of $67,780,871 being issued in 2020. New construction accounts for $29,742,347 and additions/remodels make up the $38,038,524 balance. In 2020, the city issued 116 new housing permits which is comparable to the 118 housing permits issued in 2019. Single family homes accounted for all of the new housing permits. The average value home is about $267,000 compared to $250,000 in 2019. There remains continued interest in both affordable and market rate multi -family housing projects. Many of Elk River's employers reported stable employment levels during 2020 through the pandemic and are expected to remain stable. This is largely due to the diverse industry sectors of manufacturing, retail trade, government, and health services that drive the local economy within the region. The economic outlook in this region continues to look promising with the recent developments that should continue spurring tax base growth and employment. (2) 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 on December 31, 2020 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 redesign and reconstruct three miles of Highway 169 to a new freeway by removing five stop lights through Elk River. During 2020, the `169 Redefine' project team consisting of MnDOT, the City of Elk River and Sherburne County completed the preliminary design layouts, hosted public information meetings, and began utility relocations in preparation for the three-year construction project that will begin in 2022. When complete, the estimated $157 million project will increase capacity, improve overall traffic flow, and improve accessibility and safety. Updating the city's Comprehensive Plan began in the fall of 2020 and when completed will be the long-term plan for city development. The goal of the update is to address anticipated changes resulting from the Highway 169 improvements, with additional focus on transportation and urban service area plans and create a vision for Elk River's continued growth and development for the next 20 years. As part of the $35,000,000 Active Elk River projects, the city completed construction of the 150,000 square foot multipurpose recreation facility that will provide year-round ice, a synthetic turf field house, community event/banquet rooms, and dedicated senior citizen programming space. Park improvements were also completed to Lion John Weicht Park which include two lighted ballfields, modern restrooms, and a picnic/concession pavilion. Improvements for Orono Park and the Youth Athletic Complex were designed in 2020 for construction to begin in the spring of 2021. The Lake Orono dredging project to remove 125,000 cubic yards of sediment to restore fish habitat and recreational improvements got underway late in 2020. (3) Expansion of the Public Safety Facility broke ground to build out the police department second floor office space, expand the police parking garage, and add fire department office space and training rooms. Plans were approved for spring 2021 construction of Fire Station #3 to ensure fire protection services for our primary residential growth area during the future construction of Highway 169. 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, 2019. This was the 31st 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, 2020. It was the 12th 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 (4) CITY OF ELK RIVER, MINNESOTA ELECTED AND APPOINTED OFFICIALS YEAR ENDED DECEMBER 31, 2020 CITY COUNCIL Term Expires December 31, John Dietz Mayor 2022 Garrett Christianson Council Member 2022 Nate Ovall Council Member 2020 Matthew Westgaard Council Member 2020 Jennifer Wagner Council Member 2022 APPOINTED PERSONNEL Calvin Portner City Administrator Lori Ziemer Finance Director Ron Nierenhausen Police Chief Mark Dickinson Fire Chief Michael Hecker Parks and Recreation Director Justin Femrite Public Works Director/Chief Engineer Suzanne Fischer Community Operations and Development Director (5) CITY OF ELK RIVER ORGANIZATIONAL CHART YEAR ENDED DECEMBER 31, 2020 Citizens of Elk River Mayor & City Council Planning Parks & Recreation Multipurpose Facility Energy City Heritage Preservation Library Economic Develop. Authority Housing & Redevelop. Authority City Administrator Legal Administration Finance Community Parks & public Works Development Recreation Admin. Services Finance Planning Recreation Street Maintenance Communications Information Tech. Building Safety Senior Citizens Snow Removal Human Resources Liquor Code Enforcement Library Equipment Services Elections Environmental Multipurpose Facility Park Maintenance Energy City Building Maint. Garbage Engineering Stormwater Wastewater E Police vouce Hamin. Patrol Investigations Support Services Reserves Public Safety Bldq. Fire EEle Fire Administration Fire Operations Emerqencv Mgmt. CITY OF ELK RIVER, MINNESOTA CERTIFICATE OF ACHIEVEMENT FOR EXCELLENCE IN FINANCIAL REPORTING DECEMBER 31, 2020 vwrr eut Finance Officers Association Certificate of Achievement for Excellence in Financial eportm' Presented to City of Elk River 4 Minnesota For its Comprehensive Aunuzl Financial Report For the Fiscal Year Ended December 31. 210 19 Executive Dbwtar/CEO (7) This page intentionally left blank. FINANCIAL SECTION This page intentionally left blank. CliftonLarsonAllen LLP . CLAconnect.com INDEPENDENT AUDITORS' REPORT Honorable Mayor and the City Council City of 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, 2020, 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 61 % of the assets and deferred outflows, 60% of the net position, and 75% 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 �8> International Honorable Mayor and the City Council City of Elk River, Minnesota 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, based on our audit and the report of other auditors, 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, 2020, and the respective changes in financial position and, where applicable, cash flows thereof and the respective budgetary comparison for the General fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. 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 fund statements and schedules are fairly stated, in all material respects, in relation to the basic financial statements as a whole. N Honorable Mayor and the City Council City of Elk River, Minnesota 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 May 25, 2021, 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 results 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. LLB CliftonLarsonAllen LLP Minneapolis, Minnesota May 25, 2021 (10) CITY OF ELK RIVER, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2020 As management of the City of Elk River (the City), 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, 2020. 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 1-4 of this report. Financial Highlights The assets and deferred outflows of resources of the City of Elk River exceeded its liabilities and deferred inflows at the close of the most recent fiscal year by $229,077,868 (net position). Of this amount, $46,045,541 (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 $13,978,669, including an increase of $8,308,259 in governmental activities, primarily attributable to sales taxes and operating and capital grants and contributions, and an increase in business -type activities of $5,670,410, which is primarily attributable to revenues in excess of expenses of $4 million in the Electric fund. As of the close of the current fiscal year, the City of Elk River's governmental funds reported combined ending fund balances of $58,504,345. Nonspendable Restricted Committed Assigned Unassigned Total Net Position Special General Revenue 282,860 Capital Debt Service Projects Total - $ 16 $ 282,876 1,404,656 9,299,633 15,546,193 26,250,482 5,893,257 - 5,812,249 11,705,506 - 1,641,501 - 13,308,918 14,950,419 7,967,868 - - (2,652,806) 5,315,062 $ 8,250,728 $ 8,939,414 $ 9,299,633 $ 32,014,570 $ 58,504,345 The City of Elk River's total long-term liabilities increased $19,580,182 during the current fiscal year, from $85,147,810 to $104,727,992. This was primarily due to the issuance of the 2020B G.O. CIP Refunding Bonds and the 2020C G.O. Sewer Revenue Refunding Bonds. The bonds do not qualify as in -substance defeasances until 2021 and 2022, respectively. As such both the refunded bonds and new refunding bonds are outstanding at year-end. The City also issued $9,435,000 in G.O. Capital Improvement Bonds, Series 2020A, to finance projects included in the City's capital improvement plan, including improvements to the public safety building and fire station #3. Beginning Ending GOVERNMENTAL ACTIVITIES Balance Additions Reductions Balance Bonds Payable $ 52,191,113 $ 16,139,913 $ (2,067,481) $ 66,263,545 Compensated Absences 1,607,604 747,583 (644,219) 1,710,968 Total $ 53,798,717 $ 16,887,496 $ (2,711,700) $ 67,974,513 Beginning Ending BUSINESS -TYPE ACTIVITIES Balance Additions Reductions Balance Bonds Payable $ 30,238,036 $ 7,234,705 $ (1,677,296) $ 35,795,445 Notes Payable 619,692 - (203,952) 415,740 Compensated Absences 491,365 496,934 (446,005) 542,294 Total $ 31,349,093 $ 7,731,639 $ (2,327,253) $ 36,753,479 CITY OF ELK RIVER, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2020 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 supplemental 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 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 pages 22-23 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. CITY OF ELK RIVER, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2020 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 by 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. The City of Elk River maintains three 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, Active ER Projects, 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 24 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 29 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 37 of this report. CITY OF ELK RIVER, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2020 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 benefits 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 84 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 98 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 $229,077,868 at the close of the most recent fiscal year. By far, the largest portion of the City of Elk River's net position (72%) 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. Governmental Activities Business -Type Activities Total 2020 2019 2020 2019 2020 2019 Current and Other Assets $ 67,567,102 $ 65,755,084 $ 51,144,716 $ 39,855,455 $ 118,711,818 $ 105,610,539 Capital Assets 123,897,665 105,835,140 115,113,596 115,158,305 239,011,261 220,993,445 Total Assets 191,464,767 171,590,224 166,258,312 155,013,760 357,723,079 326,603,984 Deferred Outflows of Resources 3,017,320 4,757,778 462,666 411,293 3,479,986 5,169,071 Noncurrent Liabilities Outstanding 68,935,002 59,536,643 39,023,106 33,202,304 107,958,108 92,738,947 Other Liabilities 11,807,143 8,743,380 8,553,380 8,157,881 20,360,523 16,901,261 Total Liabilities 80,742,145 68,280,023 47,576,486 41,360,185 128,318,631 109,640,208 Deferred Inflows of Resources 3,577,870 6,214,166 228,696 819,482 3,806,566 7,033,648 Net Position: Net Investment in Capital Assets 78,477,651 78,288,782 86,155,217 84,327,032 164,632,868 162,615,814 Restricted 17,138,100 3,741,368 1,261,359 1,261,359 18,399,459 5,002,727 Unrestricted 14,546,321 19,823,663 31,499,220 27,656,995 46,045,541 47,480,658 Total Net Position $ 110,162,072 $ 101,853,813 $ 118,915,796 $ 113,245,386 $ 229,077,868 $ 215,099,199 An additional portion of the City of Elk River's net position (8%) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net position ($46,045,541) may be used to meet the City of Elk River's ongoing obligations to citizens and creditors. CITY OF ELK RIVER, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2020 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. REVENUES Program Revenues: Charges for Services Operating Grants and Contributions Capital Grants and Contributions General Revenues: Property Taxes Sales Tax Other Taxes Unrestricted Investment Earnings Grants and Contributions Not Restricted Miscellaneous Revenue Gain on Sale of Capital Assets Total Revenues EXPENSES General Government Public Safety Public Works Culture and Recreation Economic Development Interest on Long -Term Debt Municipal Liquor Sewer Garbage Storm Water Electric Water Total Expenses CHANGE IN NET POSITION BEFORE TRANSFERS Governmental Activities 2020 2019 Business -Type Activities 2020 2019 Total 2020 2019 $ 2,407,238 $ 2,995,949 $ 54,066,962 $ 53,372,888 $ 56,474,200 $ 56,368,837 3,354,583 1,396,313 - 1,200 3,354,583 1,397,513 3,254,122 1,509,650 3,331,984 1,277,596 6,586,106 2,787,246 13,972,068 13,022,991 - - 13,972,068 13,022,991 3,030,938 652,665 3,030,938 652,665 1,698,040 1,636,333 - - 1,698,040 1,636,333 1,240,595 1,420,677 716,582 704,099 1,957,177 2,124,776 2,644,469 2,588,461 - - 2,644,469 2,588,461 56,457 - - - 56,457 - - 41,698 26,770 8,280 26,770 49,978 31,658,510 25,264,737 58,142,298 55,364,063 89,800,808 80,628,800 4,526,987 3,786,257 - - 4,526,987 3,786,257 8,372,884 9,188,562 8,372,884 9,188,562 4,468,711 5,920,022 4,468,711 5,920,022 6,080,466 4,094,690 6,080,466 4,094,690 691,956 540,497 691,956 540,497 1,490,127 979,755 - - 1,490,127 979,755 - - 7,119,662 6,772,414 7,119,662 6,772,414 3,672,176 3,550,622 3,672,176 3,550,622 1,565,482 1,456,482 1,565,482 1,456,482 571,170 1,024,928 571,170 1,024,928 34,565,317 35,200,295 34,565,317 35,200,295 - - 2,697,201 2,703,390 2,697,201 2,703,390 25,631,131 24,509,783 50,191,008 50,708,131 75,822,139 75,217,914 6,027,379 754,954 7,951,290 4,655,932 13,978,669 5,410,886 Transfers and Contributions 2,280,880 2,085,300 (2,280,880) (2,085,300) CHANGE IN NET POSITION 8,308,259 2,840,254 5,670,410 2,570,632 13,978,669 5,410,886 Net Position - Beginning of Year 101,853,813 99,013,559 113,245,386 110,674,754 215,099,199 209,688,313 NET POSITION - END OF YEAR $ 110,162,072 $ 101,853,813 $ 118,915,796 $ 113,245,386 $ 229,077,868 $ 215,099,199 Governmental Activities. Governmental activities account for 48% of the City of Elk River's net position. Governmental activities increased the City's net position by $8,308,259. Key elements of the relevant changes are as follows: • $2,378,000 increase in sales taxes related to the implementation of a local sales tax in the fall of 2019 to fund park and recreation improvements. • $949,000 increase in property taxes related to the increase in the tax levy. • $1,875,000 federal grant associated with the COVID-19 pandemic. • $1,900,000 special assessments were levied to fund infrastructure improvements. • $2,044,000 increase in culture and recreation expenses is related to operations of the newly constructed multipurpose facility and the various park improvements associated with the Active Elk River projects. CITY OF ELK RIVER, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2020 Expenses and Program Revenues - Governmental Activities $10,000,000 $9,000,000 $8,000,000 $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $0 General Public Safety Public Works Culture and Economic Interest and Government Recreation Development Fiscal Charges Revenues ■ Expenses Revenues by Source - Governmental Activities Grants and Contributions Not Restricted, 8.35% Charges for Services, Unrestricted Investment Other, .19% 7.60% Farninac 3 9?O/ Other Taxe Sales Tax, 9.57% Property Taxes, 44.13% ;rants and ns, 10.60% :apital Grants and ntributions, 10.28% (16) CITY OF ELK RIVER, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2020 Business -Type Activities. Business -type activities increased the City of Elk River's net position by $5,670,410 in 2020 as compared to an increase in net position of $2,570,632 in 2019. Key elements of this increase in net income are as follows: • Capital grants and contributions increased $1,600,000 due to utility connection fees related to development activity in 2020. • Charges for services increased $694,000 due largely to increased liquor sales and increased water usage from the prior year. • Stormwater fund operating expenses decreased $453,000 due to storm water pond maintenance projects conducted every other year. • Electric fund operating expenses decreased $635,000 due to purchased power expenses decreased 2.5%. Expenses and Program Revenues - Business -Type Activities $40,000,000 $35,000,000 $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $0 • Municipal Liquor Sewer Garbage Revenues Storm Water Electric Expenses Water CITY OF ELK RIVER, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2020 Revenues by Source - Business -Type Activities Capital Grants a Contributions, 5. Financial Analysis of the Government's Funds ✓enue, :harges for Services, 92.99% 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 $58,504,345. Approximately 9% of this total amount ($5,315,062) constitutes unassigned fund balance. The remainder of fund balance ($53,189,283) is not available for new spending because it is either 1) nonspendable ($282,876), 2) restricted ($26,250,482), 3) committed ($11,705,506) or 4) assigned ($14,950,419) 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 $379,270 during the current year, resulting primarily from budgeted transfers in. The Active ER Projects fund decreased $18,468,870 due to capital outlay expenditures incurred for the acquisition and betterment of certain recreational facility improvements, park improvements, trail improvements, and the dredging of Lake Orono, which were paid for with proceeds from the 2019 G.O. Sales Tax Revenue Bonds. The Pavement Management fund increased $1,458,923 due to the collection of franchise fees and intergovernmental revenues exceeding expenditures in the current year. (18) CITY OF ELK RIVER, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2020 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— $5,111,153, Sewer — $6,602,622, Garbage — $438,738, Storm Water — $1,181,615, Electric — $10,393,110, and Water — $7,771,982. All of the proprietary funds had increases in net position. General Fund Budgetary Highlights There was no difference between the original budget and the final budget for the General fund, other than an increase in the budgeted transfers in. Key factors are as follows: • Total revenue collections were 98% of budget. Licenses and permits were $132,981 under budget mainly due to the abatement of business liquor licenses resulting from the closure of the hospitality sector during 2020. Charges for services were under budget $159,536 largely due to the cancellation of recreational programs due to the pandemic. • Expenditures were under budget by $1,056,919. General government expenditures were $208,127 under budget and public safety expenditures were $599,287 under budget mainly due to personnel vacancies and savings related to conferences/schools ending the year lower than budgeted. 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, 2020, amounts to $239,011,261 (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 $18,017,816 or 8.2%. Major capital asset events during the current fiscal year included the following: • $1.3 million in additions to construction in progress related to the public safety facility and fire station #3. • $1 million in additions to construction in progress HVAC and energy improvements to city facilities. • Completion of the $27 million multi -purpose facility. • $3.5 million in park improvements. • $537,000 in public works equipment and $337,000 in public safety equipment. • A new storage facility for the Electric and Water departments. • Depreciation expense totaling $11,698,823. W CITY OF ELK RIVER, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2020 Capital Assets at Year -End (Net of Accumulated Depreciation) Governmental Activities Business -Type Activities Total 2020 2019 2020 2019 2020 2019 Land $ 40,769,513 $ 40,946,181 $ 1,844,071 $ 1,843,977 $ 42,613,584 $ 42,790,158 Construction in Progress 2,586,460 12,883,985 1,209,742 1,011,708 3,796,202 13,895,693 Intangible Assets - - 24,971,677 24,114,139 24,971,677 24,114,139 Buildings 67,975,766 44,997,927 28,157,885 27,372,648 96,133,651 72,370,575 Other Improvements 10,387,112 6,557,771 - - 10,387,112 6,557,771 Infrastructure 72,706,872 71,116,985 134,340,283 130,506,501 207,047,155 201,623,486 Equipment 14,857,960 14,298,469 11,916,424 11,625,356 26,774,384 25,923,825 Total Capital Assets 209,283,683 190,801,318 202,440,082 196,474,329 411,723,765 387,275,647 Less: Accumulated Depreciation (85,386,018) (84,966,178) (87,326,486) (81,316,024) (172,712,504) (166,282,202) Total Capital Assets, Net $ 123,897,665 $ 105,835,140 $ 115,113,596 $ 115,158,305 $ 239,011,261 $ 220,993,445 Additional information on the City of Elk River's capital assets can be found in Note 5 starting on page 52 of this report. Long -Term Debt. At the end of the current fiscal year, the City had total long-term debt outstanding of $118,863,707, an increase of $21,305,584 from 2019. General obligation improvement bonds ($9,435,000) were issued to finance improvements to the public safety building and fire station #3. General obligation improvement refunding bonds ($5,340,000) were issued and will be used to refund and call the outstanding balance on the City's 2010A and 2012A bonds on February 1, 2021. General obligation sewer revenue refunding bonds ($7,200,000) were issued and will be used to crossover refund the City's 2014B General obligation sewer revenue bonds in 2022. Governmental Activities Business -Type Activities Total 2020 2019 2020 2019 2020 2019 General Obligation Bonds $ 29,390,000 $ 15,965,000 $ - $ - $ 29,390,000 $ 15,965,000 General Obligation Revenue Bonds 32,165,000 32,715,000 16,010,000 9,595,000 48,175,000 42,310,000 Revenue Bonds - - 18,985,000 19,825,000 18,985,000 19,825,000 Issuance Premium 4,708,545 3,511,113 800,445 818,036 5,508,990 4,329,149 Total Bonds Payable, Net 66,263,545 52,191,113 35,795,445 30,238,036 102,058,990 82,429,149 Notes Payable - - 415,740 619,692 415,740 619,692 Compensated Absences 1,710,968 1,607,604 542,294 491,365 2,253,262 2,098,969 Net Pension Liability 8,670,701 7,541,740 4,294,798 3,816,162 12,965,499 11,357,902 Other Postemployment Benefits 821,235 740,405 348,981 312,006 1,170,216 1,052,411 Total Outstanding Debt $ 77,466,449 $ 62,080,862 $ 41,397,258 $ 35,477,261 $ 118,863,707 $ 97,558,123 Additional long-term debt in the amount of $415,740 is for notes payable, $2,253,262 is for compensated absences, $12,965,499 is for the City's net pension liability, and $1,170,216 is for the City's total other postemployment benefits 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 $76,424,256. $19,165,251 of the City's net outstanding debt is counted within the statutory limitation. Additional information on the City of Elk River's long-term debt can be found in Note 7 starting on page 55 of this report. (20) CITY OF ELK RIVER, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2020 Economic Factors and Next Year's Budaet The City of Elk River estimates that the demand for City services will continue at stable growth levels due to the economic environment and the outlook of recent building activity. This was taken into consideration in preparation of the City's 2021 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. BASIC FINANCIAL STATEMENTS This page intentionally left blank. ASSETS Cash and Investments Restricted Cash and Investments Receivables: Accrued Interest Taxes Special Assessments Other Accounts Receivable Notes Receivable, Net Due from Other Governments Due from Primary Government Due from Component Unit Internal Balances Prepaid Items Inventories Land Held for Resale Pension Asset Capital Assets: Nondepreciable: Land Construction in Progress Depreciable: Buildings and Building Improvements Improvements Other Than Buildings Infrastructure Distribution/Collection Systems Intangible Assets Equipment and Furniture Total Capital Assets Less: Accumulated Depreciation Total Capital Assets, Net Total Assets DEFERRED OUTFLOWS OF RESOURCES Deferred Outflows - Pensions Deferred Outflows - OPEB Deferred Charge on Debt Refunding Total Deferred Outflows of Resources LIABILITIES Accounts and Contracts Payable Accrued Salaries Payable Due to Other Governments Due to Primary Government Due to Component Unit Customer Deposits Payable Unearned Revenue Accrued Interest Payable Compensated Absences - Due Within One Year Notes Payable - Due Within One Year Bonds Payable - Due Within One Year Noncurrent Liabilities: Other Postemployment Benefits Net Pension Liability Compensated Absences - Due in More Than One Year Notes Payable - Due in More Than One Year Bonds Payable - Due in More Than One Year Total Liabilities DEFERRED INFLOWS OF RESOURCES Deferred Inflows - Pensions Deferred Inflows - OPEB Total Deferred Inflows of Resources NET POSITION Net Investment in Capital Assets Restricted for: Debt Service Parks and Recreation Improvements Landfill Mitigation Economic Development Public Safety Capital Projects Net Pension Asset Housing and Redevelopment Unrestricted Total Net Position CITY OF ELK RIVER, MINNESOTA STATEMENT OF NET POSITION DECEMBER 31, 2020 Primary Government Governmental Business -Type Component Unit Activities Activities Total HRA $ 57,578,342 $ 37,720,296 $ 95,298,638 $ 548,530 - 8,392,911 8,392,911 - 137,072 69,232 206,304 8,897 899,684 - 899,684 - 1,631,458 - 1,631,458 - 584,784 2,830,457 3,415,241 2,258 1,626,577 - 1,626,577 559,584 3,800,863 - 3,800,863 - - - - 187,499 9,686 9,686 - 209,392 (209,392) - - 282,876 244,481 527,357 - - 2,096,731 2,096,731 - 175,000 - 175,000 382,000 631,368 - 631,368 - 40,769,513 1,844,071 42,613,584 257,100 2,586,460 1,209,742 3,796,202 - 67,975,766 28,157,885 96,133,651 - 10,387,112 - 10,387,112 174,290 72,706,872 - 72,706,872 - - 134,340,283 134,340,283 - 24,971,677 24,971,677 14,857,960 11,916,424 26,774,384 209,283,683 202,440,082 411,723,765 431,390 (85,386,018) (87,326,486) (172,712,504) (93,923) 123,897,665 115,113,596 239,011,261 337,467 191,464,767 166,258,312 357,723,079 2,026,235 2,858,791 435,015 3,293,806 5,548 81,538 9,550 91,088 - 76,991 18,101 95,092 3,017,320 462,666 3,479,986 5,548 1,730,620 4,027,718 5,758,338 27,467 414,824 253,762 668,586 1,159 20,418 254,257 274,675 - - - - 9,686 187,499 - 187,499 - - 1,018,609 1,018,609 4,398 675,385 249,560 924,945 - 246,950 375,322 622,272 - 711,447 492,536 1,203,983 - 206,616 206,616 7,820,000 1,675,000 9,495,000 - 821,235 348,981 1,170,216 - 8,670701 4,294,798 12965499 51,316 999:521 49,758 1:049:279 - - 209,124 209,124 58,443,545 34,120,445 92,563,990 - 80,742,145 47,576,486 128,318,631 94,026 3,504,137 220,060 3,724,197 2,820 73,733 8,636 82,369 3,577,870 228,696 3,806,566 2,820 78,477,651 86,155,217 164,632,868 337,467 9,060,049 1,261,359 10,321,408 - 721,238 - 721,238 30,455 30,455 1,347,565 - 1,347,565 - 28,743 28,743 5,318,682 - 5,318,682 - 631,368 631,368 - - - - 1,597,470 14,546,321 31,499,220 46,045,541 $ 110,162,072 $ 118,915,796 $ 229,077,868 $ 1,934,937 See accompanying Notes to Basic Financial Statements. (22) Functions/Programs Expenses Primary Government: Governmental Activities: General Government $ 4,526,987 Public Safety 8,372,884 Public Works 4,468,711 Culture and Recreation 6,080,466 Economic Development 691,956 Interest and Fiscal Charges 1,490,127 Total Governmental Activities 25,631,131 Business -Type Activities: Municipal Liquor Sewer Garbage Storm Water Electric Water Total Business -Type Activities Total Primary Government Component Unit: Housing and Redevelopment Authority CITY OF ELK RIVER, MINNESOTA STATEMENT OF ACTIVITIES YEAR ENDED DECEMBER 31, 2020 Program Revenues Net (Expense) Revenue and Changes in Net Position Primary Government Component Unit Charges for Operating Grants Capital Grants Governmental Business -Type Services and Contributions and Contributions Activities Activities Total HRA $ 647,010 $ 105,373 $ $ (3,774,604) $ $ (3,774,604) $ 1,176,435 2,509,835 (4,686,614) (4,686,614) 51,986 488,655 3,117,055 (811,015) (811,015) 448,022 250,720 137,067 (5,244,657) (5,244,657) 83,785 - - (608,171) (608,171) (1,490,127) (1,490,127) 2,407,238 3,354,583 3,254,122 (16,615,188) (16,615,188) 7,119,662 7,927,706 - 3,672,176 2,481,522 1,638,323 1,565,482 1,686,664 - 571,170 564,699 446,428 34,565,317 38,469,516 174,557 2,697,201 2,936,855 1,072,676 50,191,008 54,066,962 3,331,984 $ 75,822,139 $ 56,474,200 $ 3,354,583 $ 6,586,106 $ 597,777 $ 10,167 $ 177 $ - General Revenues: Property Taxes Franchise and Gravel Taxes Sales Taxes Grants and Contributions Not Restricted Unrestricted Investment Earnings Miscellaneous Revenue Capital Contributions Gain on Sale of Capital Assets Transfers and Contributions Total General Revenues and Transfers Change in Net Position Net Position - Beginning of Year Net Position - End of Year See accompanying Notes to Basic Financial Statements. (23) 808,044 808,044 447,669 447,669 121,182 121,182 439,957 439,957 4,078,756 4,078,756 1,312,330 1,312,330 7,207,938 7,207,938 (16,615,188) 7,207,938 (9,407,250) (587,433) 13,972,068 13,972,068 369,965 1,698,040 1,698,040 - 3,030,938 - 3,030,938 2,644,469 2,644,469 - 1,240,595 716,582 1,957,177 8,825 56,457 - 56,457 - - 26,770 26,770 2,280,880 (2,280,880) 24,923,447 (1,537,528) 23,385,919 378,790 8,308,259 5,670,410 13,978,669 (208,643) 101,853,813 113,245,386 215,099,199 2,143,580 $ 110,162,072 $ 118,915,796 $ 229,077,868 $ 1,934,937 CITY OF ELK RIVER, MINNESOTA BALANCE SHEET - GOVERNMENTAL FUNDS DECEMBER 31, 2020 ASSETS Cash and Investments Receivables: Accrued Interest Taxes Special Assessments Other Accounts Receivable Notes Receivable, Net Due from Other Governments Due from Other Funds Due from Component Unit Prepaids Land Held for Resale Total Assets LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCE General Active ER Pavement Fund Projects Management - $ 8,015,854 $ 6,257,282 $ 5,316,857 Other Governmental Funds Totals $ 37,988,349 $ 57,578,342 37,281 - 21,748 78,043 137,072 289,451 2,196 - 608,037 899,684 - - - 1,631,458 1,631,458 21,962 141,377 421,445 584,784 - - 1,626,577 1,626,577 66,992 3,689,229 44,642 3,800,863 263,652 270,342 1,598,564 2,132,558 9,686 - - 9,686 282,860 16 282,876 - - - 175,000 175,000 $ 8,987,738 $ 6,259,478 $ 9,439,553 $ 44,172,131 $ 68,858,900 LIABILITIES Accounts and Contracts Payable $ 254,330 $ 173,130 $ 37,442 $ 1,283,131 $ 1,748,033 Accrued Salaries Payable 380,052 - - 17,359 397,411 Due to Other Governments 20,257 161 20,418 Due to Other Funds 8,464 1,914,702 1,923,166 Due to Component Unit - 187,499 187,499 Unearned Revenue 1,300 - 674,085 675,385 Total Liabilities 664,403 173,130 37,442 4,076,937 4,951,912 DEFERRED INFLOWS OF RESOURCES Unavailable Revenue - Taxes 72,607 449 - 10,905 83,961 Unavailable Revenue - Special Assessments - - - 1,629,453 1,629,453 Unavailable Revenue - Other - 3,689,229 3,689,229 Total Deferred Inflows of Resources 72,607 449 3,689,229 1,640,358 5,402,643 FUND BALANCE Nonspendable 282,860 - - 16 282,876 Restricted - 5,841,159 - 20,409,323 26,250,482 Committed 99,367 5,712,882 5,893,257 11,705,506 Assigned - 145,373 - 14,805,046 14,950,419 Unassigned 7,967,868 (2,652,806) 5,315,062 Total Fund Balance 8,250,728 6,085,899 5,712,882 38,454,836 58,504,345 Total Liabilities, Deferred Inflows of Resources, and Fund Balance $ 8,987,738 $ 6,259,478 $ 9,439,553 $ 44,172,131 $ 68,858,900 See accompanying Notes to Basic Financial Statements. (24) CITY OF ELK RIVER, MINNESOTA RECONCILIATION OF THE BALANCE SHEET TO THE STATEMENT OF NET POSITION - GOVERNMENTAL ACTIVITIES DECEMBER 31, 2020 Total Fund Balances for Governmental Funds Total net position reported for governmental activities in the statement of net position is different because: Capital assets used in governmental funds are not financial resources and, therefore, are not reported in the funds. Those assets consist of: Land $ 40,769,513 Construction in Progress 2,586,460 Buildings 67,975,766 Other Improvements 10,387,112 Streets and Infrastructure 72,706,872 Equipment and Furniture 14,857,960 Total Capital Assets 209,283,683 Less: Accumulated Depreciation (85,386,018) Long-term assets for pensions reported in governmental activities are not financial resources and, therefore, are not reported as assets in the funds. Some of the City's receivables (including property taxes, special assessments and other long- term receivables) will be collected after year-end, but are not available soon enough to pay for the current period's expenditures and, therefore, are reported as deferred inflows of resources in the governmental funds. The City's net pension liability and related deferred inflows and deferred outflows are recorded only on the statement of net position. Balances at year-end are: Net Pension Liability (8,670,701) Deferred Inflows of Resources - Pensions (3,504,137) Deferred Outflows of Resources - Pensions 2,858,791 The City's OPEB liability and related deferred inflows and deferred outflows are recorded only on the statement of net position. Balances at year-end are: OPEB Liability (821,235) Deferred Inflows of Resources - OPEB (73,733) Deferred Outflows of Resources - OPEB 81,538 Long-term liabilities that pertain to governmental funds, including bonds payable, are not due and payable in the current period and, therefore, are not reported as fund liabilities. All liabilities - both current and long term - are reported in the statement of net position. Bonds Payable (61,555,000) Unamortized Premiums (4,708,545) Deferred Charge on Refunding 76,991 Accrued Interest Payable (246,950) Compensated Absence Payable (1,710,968) Total Net Position of Governmental Activities 58,504,345 123,897,665 631,368 5,402,643 (9,316,047) (813,430) (68,144,472) $ 110,162,072 See accompanying Notes to Basic Financial Statements. (25) CITY OF ELK RIVER, MINNESOTA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS YEAR ENDED DECEMBER 31, 2020 REVENUE Property Taxes Sales Tax Revenue Other Taxes Special Assessments Licenses and Permits Intergovernmental Revenue Charges for Services Fines and Forfeitures Other Revenue: Landfill Expansion Fee Investment Earnings Refunds and Reimbursements Contributions Miscellaneous Revenue Total Revenue 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 Retirement Interest and Fiscal Charges Total Expenditures EXCESS (DEFICIENCY) OF REVENUE OVER (UNDER) EXPENDITURES OTHER FINANCE SOURCES (USES) Issuance of Bonds and Other Debt Premium on Issued Debt Transfers In Transfers Out Proceeds from Sale of Capital Assets Total Other Finance Sources NET CHANGE IN FUND BALANCES FUND BALANCES Beginning of Year End of Year Other General Active ER Pavement Governmental Fund Projects Management Funds Totals $ 11,934,048 $ 99,367 $ $ 1,941,599 $ 13,975,014 - - 3,030,938 3,030,938 193,275 1,504,765 - 1,698,040 - - 122,000 122,000 665,519 - - 665,519 674,061 419,738 2,771,270 3,865,069 820,666 - 652,915 1,473,581 89,359 17,659 107,018 - - - 2,065,125 2,065,125 118,729 139,844 228,905 753,117 1,240,595 147,378 40,000 - 47,394 234,772 - 105,373 - 374,238 479,611 13,659 175 106,038 119,872 14,656,694 384,584 2,153,583 11,882,293 29,077,154 4,036,523 - - 296,495 4,333,018 7,503,513 261,330 7,764,843 2,132,913 - 141,703 2,274,616 1,941,732 6,942 1,108,083 3,056,757 - - 693,157 693,157 1,497,763 1,497,763 1,623,866 1,623,866 - 694,660 921,625 1,616,285 18,846,512 - 972,209 19,818,721 - 1,900,000 1,900,000 - - 1,865,033 1,865,033 15,614,681 18,853,454 694,660 11,281,264 46,444,059 (957,987) (18,468,870) 1,458,923 601,029 (17,366,905) - 14,775,000 14,775,000 - 1,364,913 1,364,913 2,573,243 1,960,183 4,533,426 (1,235,986) (1,016,560) (2,252,546) - 432,271 432,271 1,337,257 - 17,515,807 18,853,064 379,270 (18,468,870) 1,458,923 18,116,836 1,486,159 7,871,458 24,554,769 4,253,959 20,338,000 57,018,186 $ 8,250,728 $ 6,085,899 $ 5,712,882 $ 38,454,836 $ 58,504,345 See accompanying Notes to Basic Financial Statements. (26) CITY OF ELK RIVER, MINNESOTA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES — GOVERNMENTAL ACTIVITIES YEAR ENDED DECEMBER 31, 2020 Net Change in Fund Balances -Total Governmental Funds Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures and proceeds from the sale of capital assets as revenues. However, in the statement of activities, assets are capitalized and the cost is allocated over their estimated useful lives and reported as depreciation expense. In addition, governmental funds report proceeds received on capital asset disposal are other financing sources while on the statement of activities these amounts are applied to the net book value of the assets disposed of to determine a gain or loss on disposal. These are the amounts by which depreciation exceeded capital outlays in the current period and by which the net book value of disposals exceeded proceeds received. Capital Outlays $ 25,687,224 Loss on Disposal of Capital Assets (1,719,092) Proceeds from the Sale of Capital Assets (432,271) Depreciation Expense (5,473,336) The governmental funds report bond proceeds as financing sources, while repayment of bond principal is reported as an expenditure. In the statement of net position, however, issuing debt increases long-term liabilities and does not affect the statement of activities and repayment of principal reduces the liability. Interest is recognized as an expenditure in the governmental funds when it is due. In the statement of activities, however, interest expense is recognized as it accrues, regardless of when it is due. The net effect of these differences in the treatment of general obligation bonds and related items is as follows: Repayment of Principal on Long -Term Debt 1,900,000 Proceeds from Issuance of Bonds (14,775,000) Premium on Bonds Issued (1,364,913) Amortization of Bond Premium 167,481 Amortization of Deferred Charge on Refunding (36,265) Change in Accrued Interest Payable 243,690 Delinquent and certain other property taxes, special assessments, and intergovernmental receivables will be collected subsequent to year-end, but are not available soon enough to pay for the current period's expenditures and, therefore, are reported as deferred inflows of resources and excluded from revenues in the governmental funds. Deferred Inflows of Resources - December 31, 2019 2,822,950 Deferred Inflows of Resources - December 31, 2020 5,402,643 In the statement of activities, compensated absences and other postemployment benefits are measured by the amounts earned during the year. In the governmental funds, however, expenditures for these items are measured by the amount of financial resources used (essentially, the amounts actually paid). Pension expenditures in the governmental funds are measured by current year employee contributions. Pension expenses on the statement of activities are measured by the change in net pension liability and the related deferred inflows and outflows of resources. Change in Net Position of Governmental Activities 1,486,159 18,062,525 (13,865, 007) 2,579,693 (134,649) 179,538 $ 8,308,259 See accompanying Notes to Basic Financial Statements. (27) CITY OF ELK RIVER, MINNESOTA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GENERAL FUND - BUDGET TO ACTUAL (GAAP BASIS) YEAR ENDED DECEMBER 31, 2020 REVENUE Taxes: Property Taxes Other Taxes Licenses and Permits Intergovernmental Revenue Charges for Services Fines and Forfeits Other Revenue: Investment Earnings Refunds and Reimbursements Contributions Miscellaneous Revenue Total Revenue EXPENDITURES General Government Public Safety Public Works Culture and Recreation Total Expenditures EXCESS (DEFICIENCY) OF REVENUE OVER (UNDER) EXPENDITURES OTHER FINANCE SOURCES (USES) Transfers In Transfers Out Total Other Finance Sources (Uses) NET CHANGE IN FUND BALANCES FUND BALANCES Beginning of Year End of Year Budgeted Amounts Over (Under) Original Final Actual Final Budget $ 11,938,300 $ 11,938,300 $ 11,934,048 $ (4,252) 140,000 140,000 193,275 53,275 798,500 798,500 665,519 (132,981) 611,500 611,500 674,061 62,561 980,200 980,200 820,666 (159,534) 140,000 140,000 89,359 (50,641) 115,000 115,000 118,729 3,729 130,000 130,000 147,378 17,378 25,000 25,000 - (25,000) 6,500 6,500 13,659 7,159 14,885,000 14,885,000 14,656,694 (228,306) 4,244,650 4,244,650 4,036,523 (208,127) 8,102,800 8,102,800 7,503,513 (599,287) 2,187,500 2,187,500 2,132,913 (54,587) 2,136,650 2,136,650 1,941,732 (194,918) 16,671,600 16,671,600 15,614,681 (1,056,919) (1,786,600) (1,786,600) (957,987) 828,613 2,134,600 2,625,025 2,573,243 (51,782) (348,000) (348,000) (1,235,986) (887,986) 1,786,600 2,277,025 1,337,257 (939,768) $ $ 490,425 379,270 $ (111,155) 7,871,458 $ 8,250,728 See accompanying Notes to Basic Financial Statements. (28) CITY OF ELK RIVER, MINNESOTA STATEMENT OF NET POSITION - PROPRIETARY FUNDS DECEMBER 31, 2020 Municipal Liquor Sewer Garbage Storm Water Electric ASSETS AND DEFERRED OUTFLOWS OF RESOURCES CURRENT ASSETS Cash and Cash Equivalents $ 5,023,743 $ 6,344,631 $ 442,825 $ 1,179,754 $ 16,390,720 Cash and Investments Held by Trustee - 7,131,552 - - 1,261,359 Receivables: Accounts Receivable (Net) - 680,062 3,656 710 1,827,760 Accrued Interest 20,561 25,886 1,811 4,826 12,918 Due from Other Funds - 363,209 141,699 47,542 4,189 Inventory 1,244,443 - - - 843,909 Prepaid Items - - - - 212,378 Total Current Assets 6,288,747 14,545,340 589,991 1,232,832 20,553,233 NONCURRENT ASSETS Capital Assets: Nondepreciable 753,961 411,095 - - 1,717,702 Depreciable 3,050,084 53,312,802 18,634,205 85,157,194 Total 3,804,045 53,723,897 18,634,205 86,874,896 Less: Accumulated Depreciation (2,326,212) (22,493,652) (9,485,987) (33,150,788) Net Capital Assets 1,477,833 31,230,245 9,148,218 53,724,108 DEFERRED OUTFLOWS OF RESOURCES Pension Related 63,619 42,959 2,005 5,730 277,001 OPEB Related 5,142 4,408 - - - Deferred Charge on Debt Refunding - - - - 14,481 Total Deferred Outflows of Resources 68,761 47,367 2,005 5,730 291,482 Total Assets and Deferred Outflows of Resources $ 7,835,341 $ 45,822,952 $ 591,996 $ 10,386,780 $ 74,568,823 LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND NET POSITION CURRENT LIABILITIES Accounts and Contracts Payable $ 367,922 $ 121,682 $ 130,029 $ 120 $ 3,286,922 Accrued Salaries Payable 32,318 22,171 945 - 169,428 Due to Other Governments 96,322 - - - 154,926 Due to Other Funds - 546 2,725 918 869,165 Unearned Revenue 3,892 - - - - Accrued Interest Payable - 97,919 268,284 Customer Deposits Payable - - 900,609 Compensated Absences Payable 37,108 27,404 386,987 Notes Payable - - 206,616 Bonds Payable - 440,000 - - 953,000 Total Current Liabilities 537,562 709,722 133,699 1,038 7,195,937 NONCURRENT LIABILITIES Compensated Absences Payable 31,623 18,135 - - - Other Postemployment Benefits 51,790 44,391 - - 208,274 Net Pension Liability 588,399 397,315 18,540 52,997 2,791,010 Notes Payable - - - - 209,124 Bonds Payable - 14,724,705 - - 19,075,944 Total Noncurrent Liabilities 671,812 15,184,546 18,540 52,997 22,284,352 Total Liabilities 1,209,374 15,894,268 152,239 54,035 29,480,289 DEFERRED INFLOWS OF RESOURCES Pension Related 32,331 21,831 1,019 2,912 140,160 OPEB Related 4,650 3,986 - - - 36,981 25,817 1,019 2,912 140,160 NET POSITION Net Investment in Capital Assets 1,477,833 23,300,245 - 9,148,218 33,293,905 Restricted for Debt Service - - - - 1,261,359 Unrestricted 5,111,153 6,602,622 438,738 1,181,615 10,393,110 Total Net Position 6,588,986 29,902,867 438,738 10,329,833 44,948,374 Total Liabilities, Deferred Inflows of Resources, and Net Position $ 7,835,341 $ 45,822,952 $ 591,996 $ 10,386,780 $ 74,568,823 See accompanying Notes to Basic Financial Statements. (29) CITY OF ELK RIVER, MINNESOTA STATEMENT OF NET POSITION - PROPRIETARY FUNDS (CONTINUED) DECEMBER 31, 2020 Water Total $ 8,338,623 $ 37,720,296 - 8,392,911 318,269 2,830,457 3,230 69,232 137,314 693,953 8,379 2,096,731 32,103 244,481 8,837,918 52,048,061 171,055 3,053,813 39,231,984 199, 386,269 39,403,039 202,440,082 (19,869,847) (87,326,486) 19,533,192 115,113,596 43,701 435,015 - 9,550 3,620 18,101 47,321 462,666 $ 28,418,431 $ 167,624,323 $ 121,043 $ 4,027,718 28,900 253,762 3,009 254,257 29,991 903,345 245,668 249,560 9,119 375,322 118,000 1,018,609 41,037 492,536 - 206,616 282,000 1,675,000 878,767 9,456,725 - 49,758 44,526 348,981 446,537 4,294,798 - 209,124 319,796 34,120,445 810,859 39,023,106 1,689,626 48,479,831 21,807 220,060 8,636 21,807 228,696 18,935,016 86,155,217 - 1,261,359 7,771,982 31,499,220 26, 706, 998 118, 915, 796 $ 28,418,431 $ 167,624,323 See accompanying Notes to Basic Financial Statements. (30) CITY OF ELK RIVER, MINNESOTA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION - PROPRIETARY FUNDS YEAR ENDED DECEMBER 31, 2020 Municipal Liquor Sewer Garbage Storm Water Electric SALES AND COST OF SALES Sales $ 7,924,956 $ $ $ $ Cost of Sales (5,679,211) Gross Profit 2,245,745 OPERATING REVENUE User Charges - 2,296,735 1,684,840 564,123 37,714,965 Delinquent Collections - 1,692 1,824 576 42,556 Other 2,750 183,095 - - 164,986 Total Operating Revenue 2,750 2,481,522 1,686,664 564,699 37,922,507 OPERATING EXPENSES Personnel Services 957,028 661,298 28,780 49,630 2,844,551 Supplies 27,386 279,186 19,616 575 177,216 Purchased Power - - - - 24,240,440 Other Service Charges 360,039 767,321 1,517,086 57,907 3,799,958 Depreciation 95,998 1,636,413 - 463,058 2,896,839 Total Operating Expenses 1,440,451 3,344,218 1,565,482 571,170 33,959,004 OPERATING INCOME (LOSS) 808,044 (862,696) 121,182 (6,471) 3,963,503 NONOPERATING REVENUE (EXPENSES) Connection and Other Fees - 1,193,701 - - - Investment Earnings 215,252 265,503 19,017 48,888 134,468 Interest Expense - (327,958) - - (606,313) Gain (Loss) on Disposal of Capital Asset 23,263 Miscellaneous Revenue - - - - 547,009 Total Nonoperating Revenue (Expenses) 215,252 1,131,246 19,017 48,888 98,427 INCOME (LOSS) BEFORE CONTRIBUTIONS AND TRANSFERS 1,023,296 268,550 140,199 42,417 4,061,930 Capital Grants and Contributions - 444,622 - 446,428 174,557 Transfers In 14,205 20,780 - - Transfers Out (755,147) (155,000) (50,000) (15,500) (1,340,218) Total Contributions and Transfers (740,942) 310,402 (50,000) 430,928 (1,165,661) CHANGE IN NET POSITION 282,354 578,952 90,199 473,345 2,896,269 NET POSITION Beginning of Year 6,306,632 29,323,915 348,539 9,856,488 42,052,105 End of Year $ 6,588,986 $ 29,902,867 $ 438,738 $ 10,329,833 $ 44,948,374 See accompanying Notes to Basic Financial Statements. (31) CITY OF ELK RIVER, MINNESOTA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION — PROPRIETARY FUNDS (CONTINUED) YEAR ENDED DECEMBER 31, 2020 Water Totals $ $ 7,924,956 (5,679,211) 2,245,745 2,613,812 44,874,475 3,801 50,449 56,931 407,762 2,674,544 45,332,686 590,960 5,132,247 309,349 813,328 - 24,240,440 640,197 7,142,508 1,133,179 6,225,487 2,673,685 43,554,010 859 4,024,421 595,482 1,789,183 33,454 716,582 (23,516) (957,787) 3,507 26,770 262,311 809,320 871,238 2,384,068 872,097 6,408,489 477,194 1,542,801 - 34,985 - (2,315,865) 477,194 (738,079) 1,349,291 5,670,410 25, 357, 707 113, 245, 386 $ 26,706,998 $ 118,915,796 See accompanying Notes to Basic Financial Statements. (32) CITY OF ELK RIVER, MINNESOTA STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS YEAR ENDED DECEMBER 31, 2020 CASH FLOWS FROM OPERATING ACTIVITIES Cash Receipts from Customers Cash Paid to Suppliers Cash Paid to Employees Other Receipts Net Cash Provided by Operating Activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Connection Fees Received Grants Received Proceeds from Issuance of Bonds Principal Payments on Bonds Interest Payments on Bonds Principal Payments on Promissory Note Acquisition of Capital Assets Proceeds from Sale of Capital Assets Net Cash Provided (Used) by Capital and Related Financing Activities CASH FLOWS FROM INVESTING ACTIVITIES Interest Received on Investments CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers In Transfers Out Repayment Received on Advances to Other Funds Receipts from Borrowings from Other Funds Net Cash Used by Noncapital Financing Activities NET INCREASE IN CASH AND CASH EQUIVALENTS Cash and Cash Equivalents - Beginning of the Year CASH AND CASH EQUIVALENTS - END OF THE YEAR Municipal Liquor Sewer Garbage Storm Water $ 7,928,177 $ 2,093,125 $ 1,683,106 $ 559,892 (6,093,388) (996,387) (1,522,101) (58,893) (935,829) (663,253) (30,374) (83,692) 898,960 433,485 130,631 417,307 - 1,193,701 - - 7,234,705 (430,000) (331,541) - 7,666,865 - - 216,471 264,192 18,815 47,484 14,205 20,780 (755,147) (155,000) (50,000) (15,500) (740,942) (134,220) (50,000) (15,500) 374,489 8,230,322 99,446 449,291 See accompanying Notes to Basic Financial Statements. (33) CITY OF ELK RIVER, MINNESOTA STATEMENT OF CASH FLOWS — PROPRIETARY FUNDS (CONTINUED) YEAR ENDED DECEMBER 31, 2020 $ 38,528,528 $ 2,806,332 $ 53,599,160 (28,275,920) (957,636) (37,904,325) (2,830,949) (618,224) (5,162,321) 491,481 72,747 564,228 7,913,140 1,303,219 11,096,742 595,482 1,789,183 7,234,705 (924,000) (271,000) (1,625,000) (665,307) (26,618) (1,023,466) (203,952) (203,952) (3,409,297) (975,889) (4,385,186) 3,525 3,525 (5,202,556) (674,500) 1,789,809 128,440 31,947 707,349 34,985 (1,340,218) (2,315,865) 3,213 (8,464) (5,251) 6,779 (5,964) 815 (1,330,226) (14,428) (2,285,316) 1,508,798 646,238 11,308,584 & - - !lilt d` O ­0 - & .1 A A 1 - See accompanying Notes to Basic Financial Statements. (34) CITY OF ELK RIVER, MINNESOTA STATEMENT OF CASH FLOWS — PROPRIETARY FUNDS (CONTINUED) YEAR ENDED DECEMBER 31, 2020 RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES Operating Income (Loss) Adjustments to Operating Income (Loss): Other Revenue Related to Operations Noncash Expenses Included in Net Income: Depreciation Bad Debt Expense Change in Assets, Deferred Outflows, Liabilities, and Deferred Inflows: (Increase) Decrease in: Accounts Receivable Prepaid Items Inventory Due from Other Funds Deferred Outflows Related to Pensions Deferred Outflows Related to OPEB Increase (Decrease) in: Accounts Payable Accrued Salaries Payable Due to Other Funds Due to Other Governments Deposits Payable Unearned Revenue Compensated Absences Payable Other Postemployment Benefits Net Pension Liability Deferred Inflows Related to Pensions Net Cash Provided (Used) by Operating Activities NONCASH TRANSACTIONS Capital Contribution From Developers Municipal Liquor Sewer Garbage Storm Water $ 808,044 $ (862,696) $ 121,182 $ (6,471) 95,998 1,636,413 463,058 (388,397) (390) (278) (22,133) (11,004) (3,168) (4,529) (13,032) (7,542) (266) 322 (2,218) (1,902) - 418 (20,021) 61,116 13,439 (423) 10,222 7,841 259 (2,370) - 8 1,162 12 15,402 - - - 471 - 16,891 7,962 (7,220) 4,673 4,005 - (6,731) 80,776 41,920 1,090 (7,733) (76,113) (54,239) (2,677) (10,748) $ 898,960 $ 433,485 $ 130,631 $ 417,307 $ - $ 444,622 $ - $ 446,428 See accompanying Notes to Basic Financial Statements. (35) CITY OF ELK RIVER, MINNESOTA STATEMENT OF CASH FLOWS — PROPRIETARY FUNDS (CONTINUED) YEAR ENDED DECEMBER 31, 2020 Electric Water Total $ 3,963,503 $ 859 $ 4,024,421 547,009 262,311 809,320 2,896,839 1,133,179 6,225,487 21,646 - 21,646 537,183 (169,267) (21,149) (57,546) (9,692) (67,238) 138,053 1,265 117,185 - - (18,701) (32,755) (2,752) (56,025) - (3,702) (156,099) (314) (102,302) 30,780 7,167 53,899 - - 1,182 (4,360) 651 11,693 16,310 (33,225) (16,915) (3,000) 144,716 142,187 28,826 4,470 50,929 33,324 1,704 36,975 334,201 28,382 478,636 (380,774) (66,235) (590,786) $ 7,913,140 $ 1,303,219 $ 11,096,742 $ 174,557 $ 477,194 $ 1,542,801 See accompanying Notes to Basic Financial Statements. (36) CITY OF ELK RIVER, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Organization The City of Elk River, Minnesota (the City) operates under the "Optional Plan A" form of government as defined in Minnesota Statutes. Under this plan, the City Council, 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 accounting principles generally accepted in the United States of America, 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, Minnesota, 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 criteria that result in the EDA being reported as a blended component unit include the fact that the EDA may not exercise any of its authorized powers without prior approval of the City Council and the City having operational responsibility. The EDA is reported as a special revenue fund and does not issue separate financial statements. (37) CITY OF ELK RIVER, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) B. Reporting Entity (Continued) 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 criteria that results in the HRA being reported as a discretely presented component unit include 1) the five council appointed member 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 are included in the financial section of this report. 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. 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 requirements imposed by the provider have been met. (38) CITY OF ELK RIVER, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) C. Government -Wide Financial Statements (Continued) 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 (see Note 5). 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 fiduciary funds and blended component units. Separate statements for each fund category — governmental, and proprietary— 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. 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 Active ER Projects fund is used to account for the accumulation of resources and bonds proceeds issued to fund expenditures for the City of Elk River's related capital projects. The Pavement Management fund is used to account for franchise taxes collected to fund expenditures for the ongoing maintenance and repair of the 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 Sewer fund accounts for the activities of the sanitary sewer treatment system. The Garbage fund accounts for the activities of the garbage and recycling collection programs. The Storm Water fund accounts for the activities of the storm water collection system. The Electric fund accounts for the activities of the electric distribution system. The Water fund accounts for the activities of the water distribution system. (39) CITY OF ELK RIVER, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 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. E. Budgetary Information Annual budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America. 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 yearend. 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. The Minnesota Municipal Money Market (4M) Fund 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. (40 ) CITY OF ELK RIVER, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) F. Cash and Investments (Continued) Cash and investments held by trustee reflect balances held in segregated accounts for specific purposes. Interest earned on these investments is allocated directly to those accounts. 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, 2020 is as follows: Electric Water Total H. Property Taxes $ 25,355 250 $ 25,605 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 inflow of resources for taxes in governmental activities is susceptible to full accrual on the government -wide statements. I. Special Assessments Special assessments receivable include the following components: • Delinquent — includes amounts billed to property owners but not paid. • Deferred — includes assessment installments that will be billed to property owners in future years. (41) CITY OF ELK RIVER, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) I. Special Assessments (Continued) 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. At December 31, 2020, the total delinquent special assessment receivable balance was $23,641. J. Notes Receivable Notes receivable consist 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 expenditures/expenses 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. 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. (42 ) CITY OF ELK RIVER, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) N. Capital Assets (Continued) 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: Asset Buildings and Improvements 10 to 40 Years Other Park Improvements 10 to 20 Years Machinery and Equipment 3 to 20 Years Public Domain Infrastructure 15 to 50 Years System Infrastructure 4 to 50 Years 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 is reported in the government -wide statement of net position. A deferred charge on refunding 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 and OPEB resources are reported only in the statements of net position. These items result from actuarial calculations and current year pension and OPEB contributions made subsequent to the measurement date. 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 one type of item which arises under a modified accrual basis of accounting that qualifies for reporting in this category. 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 two additional items which qualify for reporting in this category on the statements of net position. The items, deferred pension resources and deferred OPEB resources, are reported only in the statements of net position and results from actuarial calculations involving net differences between projected and actuarial earnings on plan investments, changes in proportions, changes in assumptions, and differences between expected and actual experience. (43 ) CITY OF ELK RIVER, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 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. 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, 2020, the balance reported in the governmental fund financial statements consists of $675,385 mostly from unearned park dedication credits. R. Long -Term Liabilities In the government -wide and proprietary 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. (44 ) CITY OF ELK RIVER, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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% 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. T. Postemployment Benefits The City of Elk River and its discretely presented component unit provide a single - employer defined benefit healthcare plan to eligible retirees and their spouses. The plan offers medical insurance benefits. The total OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB and OPEB expense were measured actuarially in accordance with GASB Statement No. 75, based on entry age normal cost method. U. 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 it is 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. (45) CITY OF ELK RIVER, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) U. Fund Balance (Continued) 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 and/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 uses 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. V. Net Position Net position represents the difference between assets and deferred outflows of resources and liabilities and deferred inflows of resources. 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 does 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. W. 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." (46 ) CITY OF ELK RIVER, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 NOTE 2 STEWARDSHIP AND ACCOUNTABILITY A. Deficit Fund Balance The following funds had deficit fund balances at December 31, 2020: Fund Fund Balance Capital Projects Funds: Park Dedication $ (110,076) TIF Districts (2,080,901) NOTE 3 DEPOSITS AND INVESTMENTS A. Components of Cash and Investments Cash and investments are presented in the financial statements as follows: Statement of Net Position: Cash and Investments Restricted Cash and Investments Cash and Investments - Discrete CU Total B. Deposits Primary Component Total Primary Government Unit - HRA Gov and CU 95,298,638 8,392,911 $ 103,691,549 $ $ 95,298,638 8,392,911 548,530 548,530 $ 548,530 $ 104,240,079 In accordance with applicable Minnesota Statutes, the City maintains deposits at depository banks authorized by the City Council, including checking accounts and certificates of deposit. 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 fair 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 "AA" or better; irrevocable standard 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. (47) CITY OF ELK RIVER, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 NOTE 3 DEPOSITS AND INVESTMENTS (CONTINUED) B. Deposits (Continued) 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 collateral ization 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 $24,567,243 while the balance on the bank records was $24,773,150. At December 31, 2020, 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 $548,530 and the bank balance was $548,530. At December 31, 2020, 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. 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. (48 ) NOTE 3 CITY OF ELK RIVER, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 DEPOSITS AND INVESTMENTS (CONTINUED) C. Investments (Continued) The City has the following investments at year-end Primary Government Investments Measured at Fair Value Fair Value U.S. Treasuries with Maturities at Purchase of Greater Than 1 Year $ 7,081,830 Negotiable Certificates of Deposit 3,723,465 Municipal Bonds 27,967,309 Total Investments Measured at Fair Value $ 38,772,604 Investments Measured at Amortized Cost Amortized Cost U.S. Treasuries with Maturities at Purchase of Less Than 1 Year $ 49,722 Negotiable Certificates of Deposit with Maturities at Purchase of Less Than 1 Year 2,397,796 UBS Select Prime Institutional Money Market 10,194,066 Minnesota Municipal Money Market (4M Fund) 25,638,743 Other Money Market Funds 2,071,375 Total Investments Measured at Amortized Cost $ 40,351,702 The 4M Fund is regulated by Minnesota Statutes and the Board of Directors of the League of Minnesota Cities and is an external investment pool not registered with the Securities and Exchange Commission (SEC) that follows guidance under GASB Statement No. 79. The City's investment in the 4M Fund is measured at an amortized cost method that approximates fair value. The City's investment policy does not place any further limitations beyond the state statute requirements for the risk categories described below. Investments are subject to various risks, the following of which are considered the most significant. 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 than 30% of the City's investments may extend beyond a five-year maturity. 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. A schedule of the maturities and ratings of the City's investments as of December 31, 2020 is as follows: Maturity Duration in Years Investment Type Total Less Than 1 1 to 5 More Than 5 No Maturity Rating U.S. Treasury Notes $ 7,131,552 $ 49,722 $ 7,081,830 $ - $ - Not Rated Negotiable Certificates of Deposit 6,121,261 1,165,139 4,956,122 - - Not Rated Municipal Bonds 27,967,309 2,905,559 12,426,785 12,634,665 - AA -to AAA UBS Select Prime Institutional Money Market 10,194,066 - - - 10,194,066 Not Rated Minnesota Municipal Money Market (4M Fund) 25,638,743 - - - 25,638,743 Not Rated Other Money Market Funds 2,071,375 2,071,375 Not Rated Total Investments 79,124,306 41120,,720 24,4 44,737 12,6 44,665 77,904,184 (49) CITY OF ELK RIVER, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 NOTE 3 DEPOSITS AND INVESTMENTS (CONTINUED) C. Investments (Continued) Custodial Credit Risk — For an investment, 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, 2020 all investments were insured or registered, or securities were held by the City or its agent in the City's name. 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, 2020, the following is a list of investments which individually comprise more than 5% of the City's total investments: Percent of Tntal Values Minnesota Municipal Money Market (4M Fund) $ 25,638,743 32.40% 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 1 — 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. (50) CITY OF ELK RIVER, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 NOTE 3 DEPOSITS AND INVESTMENTS (CONTINUED) C. Investments (Continued) Fair Value Measurements (Continued) 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. Investment Type Level 1 Level 2 Level 3 Total U.S. Treasuries with Maturities at Purchase of Greater Than 1 Year $ 7,131,552 $ - $ $ 7,081,830 Negotiable Certificates of Deposit - 3,723,465 3,723,465 Municipal Bonds - 27,967,309 27,967,309 Total Investments Measured at Fair Value $ 7,131,552 $ 31.690. 774 $ - Investments Measured at Net Asset Value (NAV) Investments Measured at Amortized Cost Total Investments NOTE 4 NOTES RECEIVABLE 40,351,702 79,124,306 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 10 years. Under the terms of the grant agreement, the City retains the grant repayments. Notes receivable of $342,334 in the Revolving Loan fund and $374,525 in the State DEED fund are outstanding at December 31, 2020. 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 $909,718 in the Development Fund is outstanding at December 31, 2020. 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 1 %. Notes receivable of $400,000 in the HRA is outstanding at December 31, 2020. In 2015, the HRA issued loans to applicants under the rehabilitation loan program. The terms of each loan vary and are payable over five to 15 years with rates from 1.25% to 3.25%. Notes receivable of $159,584 in the HRA are outstanding at December 31, 2020. (51) CITY OF ELK RIVER, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 NOTE 5 CAPITAL ASSETS Capital asset activity for the year ended December 31, 2020 was as follows: Beginning Ending PRIMARY GOVERNMENT Balance Additions Deletions Balance Governmental Activities: Capital Assets, Not Being Depreciated: Land $ 40,946,181 $ - $ (176,668) $ 40,769,513 Construction in Progress 12,883,985 2,586,460 (12,883,985) 2,586,460 Total Capital Assets, Not Being Depreciated 53,830,166 2,586,460 (13,060,653) 43,355,973 Capital Assets, Being Depreciated: Buildings 44,997,927 28,031,363 (5,053,524) 67,975,766 Other Improvements 6,557,771 4,085,449 (256,108) 10,387,112 Equipment 14,298,469 1,657,550 (1,098,059) 14,857,960 Infrastructure 71,116,985 2,210,387 (620,500) 72,706,872 Total Capital Assets, Being Depreciated 136,971,152 35,984,749 (7,028,191) 165,927,710 Accumulated Depreciation for: Buildings (23,322,907) (1,620,389) 3,169,983 (21,773,313) Other Improvements (4,492,351) (319,132) 256,108 (4,555,375) Equipment (9,695,168) (833,427) 1,006,904 (9,521,691) Infrastructure (47,455,752) (2,700,388) 620,501 (49,535,639) Total Accumulated Depreciation (84,966,178) (5,473,336) 5,053,496 (85,386,018) Total Capital Assets, Being Depreciated, Net 52,004,974 30,511,413 (1,974,695) 80,541,692 Governmental Activities Capital Assets, Net $ 105,835,140 $ 33,097,873 $ (15,035,348) $ 123,897,665 Beginning Ending PRIMARY GOVERNMENT Balance Increases Decreases Balance Business -Type Activities: Capital Assets, Not Being Depreciated: Land $ 1,843,977 $ 94 $ $ 1,844,071 Construction in Progress 1,011,708 3,774,717 (3,576,683) 1,209,742 Total Capital Assets, Not Being Depreciated 2,855,685 3,774,811 (3,576,683) 3,053,813 Capital Assets, Being Depreciated: Buildings and Improvements 27,372,648 785,237 28,157,885 Equipment 11,625,356 514,275 (223,207) 11,916,424 Intangible Assets 24,114,139 857,538 24,971,677 Collection and Distribution 130,506,501 3,833,782 134,340,283 Total Capital Assets, Being Depreciated 193,618,644 5,990,832 (223,207) 199,386,269 Accumulated Depreciation for: Buildings and Improvements (10,228,135) (870,004) - (11,098,139) Equipment (4,109,109) (732,424) 215,025 (4,626,508) Intangible Assets (834,017) (668,135) - (1,502,152) Collection and Distribution (66,144,763) (3,954,924) - (70,099,687) Total Accumulated Depreciation (81,316,024) (6,225,487) 215,025 (87,326,486) Total Capital Assets, Being Depreciated, Net 112,302,620 (234,655) (8,182) 112,059,783 Business -Type Activities Capital Assets, Net $ 115,158,305 $ 3,540,156 $ (3,584,865) $ 115,113,596 (52) CITY OF ELK RIVER, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 NOTE 5 CAPITAL ASSETS (CONTINUED) COMPONENT UNIT Capital Assets, Not Being Depreciated: Land Capital Assets, Being Depreciated: Other Improvements Accumulated Depreciation for: Other Improvements Total Capital Assets, Being Depreciated, Net Component Unit Capital Assets, Net Beginning Ending Balance Increases Decreases Balance $ 257,100 $ $ $ 257,100 174,290 174,290 (82,302) (11,621) (93,923) 91,988 (11,621) 80,367 $ 349,088 $ (11,621) $ $ 337,467 Depreciation expense was charged to functions/programs of the primary government and component unit as follows: Governmental Activities: General Government $ 138,420 Public Safety 596,408 Public Works 3,344,915 Culture and Recreation 1,393,593 Total Depreciation Expense, Governmental Activities $ 5,473,336 Business -Type Activities: Electric $ 2,896,839 Water 1,133,179 Sewer 1,636,413 Storm Water 463,058 Liquor 95,998 Total Depreciation Expense, Business -Type Activities $ 6,225,487 Component Unit: Housing and Redevelopment Authority $ 11,621 (53) NOTE 6 CITY OF ELK RIVER, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 INTERFUND RECEIVABLES, PAYABLES, AND TRANSFERS The composition of interfund balances as of December 31, 2020 is as follows: Due To/From Other Funds Receivable Fund General General General Pavement Management Nonmajor Governmental Funds Sewer Sewer Garbage Storm Water Electric Electric Electric Water Water Payable Fund Amount Nonmajor Governmental Funds $ 15,488 Electric 218,173 Water 29,991 Electric 270,342 Nonmajor Governmental Funds 1,598,564 Nonmajor Governmental Funds 171,800 Electric 191,409 Electric 141,699 Electric 47,542 Sewer 546 Garbage 2,725 Storm Water 918 General 8,464 Nonmajor Governmental Funds 128,850 $ 2,826,511 The interfund receivable/payable balances result from the distribution of utility collections and the lending/borrowing between funds for operating or capital purposes. Due To/From Component Unit Receivable Entity Payable Entity Amount Primary Government - General Fund Component Unit - HRA $ 9,686 Component Unit - HRA Nonmajor Governmental Funds 187,499 $ 197,185 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 $187,499 payable to the HRA will be paid with the collection of tax increment revenue and will not be repaid within one year. Interfund Transfers Fund Governmental Funds: General Fund Nonmajor Governmental Funds Total Transfer In Transfer Out $ 2,573,243 $ 1,235,986 1,960,183 1,016,560 $ 4,533,426 $ 2,252,546 (54) CITY OF ELK RIVER, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 NOTE 6 INTERFUND RECEIVABLES, PAYABLES, AND TRANSFERS (CONTINUED) Interfund Transfers (Continued) Fund Proprietary Funds: Municipal Liquor Sewer Garbage Storm Water Electric Total Transfer In $ 14,205 20,780 $ 34,985 Transfer Out $ 755,147 155,000 50,000 15,500 1,340,218 $ 2,315,865 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. NOTE 7 LONG-TERM DEBT A. Components of Long -Term Debt The City had the following long-term liabilities outstanding at December 31, 2020: PRIMARY GOVERNMENT Governmental Activities: General Obligation Bonds Payable: G.O. Capital Improvement Bonds 2010A G.O. Capital Improvement Bonds 2012A EDA G.O. Refunding Bonds 2013A G.O. Sales Tax Revenue Bonds, Series 2019A G.O. Capital Improvement Bonds 2020A G.O. Capital Improvement Refunding Bonds 2020B Total General Obligation Bonds Unamortized Band Premiums Compensated Absences Total Governmental Activities Final Maturity Balance - Issue Date Date Original Issue Interest Rate End of Year 04/21/10 02/01/23 $ 6,105,000 2.00-4.00% $ 1,635,000 03/15/12 02/01/33 6,975,000 1.00-2.50% 4,840,000 02/12/13 02/01/33 9,685,000 2.00-3.00% 8,140,000 09/19/19 12/01/44 32,715,000 2.50-5.00% 32,165,000 12/29/20 02/01/42 9,435,000 1.00-5.00% 9,435,000 12/29/20 02/01/33 5,340,000 1.00-5.00% 5,340,000 61, 555,000 4,708,545 1,710,968 $ 67,974,513 (55) NOTE 7 CITY OF ELK RIVER, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 LONG-TERM DEBT (CONTINUED) A. Components of Long -Term Debt (Continued) Business -Type Activities: General Obligation Revenue Bonds: G.O. Water Revenue Refunding Bonds 2008A G.O. Capital Improvement Bonds 2010A G.O. Sewer Revenue Bonds 2014B G.O. Sewer Revenue Refunding Bonds 2020C Total General Obligation Revenue Bonds Revenue Bonds Electric Revenue Bonds, Series 2016A Electric Revenue Refunding Bonds 2016B Electric Revenue Bonds, Series 2018A Total Revenue Bonds Total Bonds Unamortized Bond Premiums Notes Payable Compensated Absences Total Business -Type Activities Final Maturity Balance - issue Date Date Original Issue Interest Rate End of Year 02/20/08 02/01/22 $ 3,085,000 2.75-3.65% $ 530,000 04/21/10 08/01/23 1,265,000 2.00-4.00°% 350,000 08/21/14 02/01/35 10,000,000 2.00-3.00% 7,930,000 12/29/20 02/01/35 7,200,000 1.00-1.70 % 7,200,000 16,010,000 07/14/16 02/01/36 9,755,000 2.00-4.00% 8,910,000 07/14/16 02/01/22 1,370,000 2.00-4.00°% 475,000 09/26/18 08/01/48 10,000,000 3.50-5.00% 9,600,000 18,985,000 34,995,000 800,445 415,740 542,294 $ 36,753,479 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. In 2020, the City issued $9,435,000 G.O. Capital Improvement Bonds, Series 2020A. The bonds are general obligations of the City for which it pledges its full faith and credit and power to levy direct general ad valorem taxes. The bonds bear coupon rates ranging from 1.8% to 5.0% and will be used to finance improvements to the public safety facility as well as fire station #3. The City also issued $5,340,000 G.O. Capital Improvement Refunding Bonds, Series 2020B. The bonds will be used, in 2021, to call and refund the remaining balance of the City's 2010A and 2012A bonds. 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 28% and 13% of revenues from the Sewer and Water funds, respectively. (56) NOTE 7 CITY OF ELK RIVER, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 LONG-TERM DEBT (CONTINUED) A. Components of Long -Term Debt (Continued) 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 required about 4% of revenues from the Electric fund. In 2020, the City issued $7,200,000 G.O. Sewer Revenue Refunding Bonds, Series 2020C. The bonds will be used, in 2022, to refund the remaining balance of the City's 2014B Sewer Revenue Bonds. Subsequent Debt Issuances In April 2021, the City issued $4,805,000 in G.O. Capital Improvement Plan and Equipment Bonds, Series 2021A. The proceeds of the bonds will be used to finance the construction of various improvements identified in the City's 2020-2025 Capital Improvement plan and the purchase of capital equipment. Revenues Pledged: Landfill Generator Note: 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. The City's outstanding note from direct borrowings related to governmental activities contain provisions that in an event of default, the note may be come due in full immediately. B. Changes in Long -Term Debt Long-term liability activity for the year ended December 31, 2020 was as follows: PRIMARY GOVERNMENT Governmental Activities: General Obligation Bonds General Obligation Sales Tax Revenue Bonds Unamortized Bond Premiums Total Bonds Payable Compensated Absences Total Governmental Activities Business -Type Activities: General Obligation Revenue Bonds Revenue Bonds Unamortized Bond Premiums Total Bonds Payable Note from Direct Borrowing - Generator Note Compensated Absences Total Business -Type Activities Total Primary Government Beginning End of Due Within of Year Additions Retirements Year One Year $ 15,965,000 $ 14,775,000 $ (1,350,000) $ 29,390,000 $ 7,015,000 32,715,000 - (550,000) 32,165,000 805,000 3,511,113 1,364,913 (167,481) 41708,545 52,191,113 16,139,913 (2,067,481) 66,263,545 7,820,000 1,607,604 747,583 (644,219) 1,710,968 711,447 53,798,717 16,887,496 (2,711,700) 67,974,513 8,531,447 9,595,000 7,200,000 (785,000) 16,010,000 810,000 19,825,000 - (840,000) 18,985,000 865,000 818,036 34,705 (52,296) 800,445 30,238,036 7,234,705 (1,677,296) 35,795,445 1,675,000 619,692 - (203,952) 415,740 206,616 491,365 496,934 (446,005) 542,294 492,536 31,349,093 7,731,639 (2,327,253) 36,753,479 2,374,152 $ 85,147,810 $ 24,619,135 $ (5,038,953) $ 104,727,992 $ 10,905,599 (57) NOTE 7 CITY OF ELK RIVER, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 LONG-TERM DEBT (CONTINUED) C. Future Minimum Debt Payments Annual debt service requirements to maturity for long-term obligations are as follows: Primary Government - Governmental Activities G.O. Bonds G.O. Sales Tax Revenue Bonds Year Ending December 31, Principal Interest Principal Interest 2021 $ 7,015,000 $ 534,715 $ 805,000 $ 1,111,837 2022 1,420,000 594,105 845,000 1,071,588 2023 1,840,000 529,331 890,000 1,029,337 2024 1,225,000 469,804 935,000 984,838 2025 1,270,000 424,905 1,000,000 938,087 2026-2030 7,060,000 1,408,256 5,680,000 3,911,138 2031-2035 5,790,000 494,493 6,905,000 2,689,337 2036-2040 2,650,000 204,574 7,960,000 1,633,431 2041-2044 1,120,000 19,973 7,145,000 534,875 Total $ 29,390,000 $ 4,680,156 $ 32,165,000 $ 13,904,468 Primary Government- Business -Type Activities G.O. Revenue Bonds Revenue Bonds Notes Payable Year Ending December 31 Principal Interest Principal Interest Principal Interest 2021 $ 810,000 $ 309,896 $ 865,000 $ 621,431 $ 206,616 $ - 2022 7,875,000 215,365 900,000 589,081 209,124 - 2023 645,000 89,935 680,000 560,531 - - 2024 520,000 82,235 705,000 535,906 - - 2025 530,000 76,985 730,000 510,331 - - 2026-2030 2,715,000 302,380 4,030,000 2,205,738 - - 2031-2035 2,915,000 119,235 4,650,000 1,569,925 - - 2036-2040 - - 2,580,000 914,706 - - 2041-2045 - - 2,275,000 534,069 - - 2046-2049 1,570,000 115,095 Total $ 16,010,000 $ 1,196,031 $ 18,985,000 $ 8,156,813 $ 415,740 $ (58) CITY OF ELK RIVER, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 NOTE 8 FUND BALANCES At December 31, 2020, a summary of the governmental fund balance classifications is as follows: Other Active ER Pavement Governmental General Fund Projects Management Funds Total Nonspendable Prepaid Items $ 282,860 $ $ $ 16 $ 282,876 Restricted for: Debt Service $ - $ $ $ 9,299,633 $ 9,299,633 Park and Recreation Improvements 5,841,159 461,813 6,302,972 Landfill Mitigation - 30,455 30,455 Economic Development 1,345,458 1,345,458 Law Enforcement 28,743 28,743 Capital Projects - 9,243,221 9,243,221 Total Restricted $ $ 5,841,159 $ $ 20,409,323 $ 26,250,482 Committed for: Library Operations $ $ - $ $ 384,664 $ 384,664 Ice Arena 184,997 184,997 Economic Development 5,243,116 5,243,116 Insurance Reserve - 80,480 80,480 Capital Projects 99,367 - 99,367 Street Improvements - 5,712,882 - 5,712,882 Total Committed $ $ 99,367 $ 5,712,882 $ 5,893,257 $ 11,705,506 Assigned for: Landfill Mitigation $ $ $ - $ 1,005,192 $ 1,005,192 Law Enforcement 4,385 4,385 Economic Development 631,924 631,924 Capital Equipment 2,417,664 2,417,664 Building Construction/Improvements 145,373 3,398,713 3,544,086 Street Improvements - 767,617 767,617 Other Improvement Projects 6,467,199 6,467,199 Park Improvements - 112,352 112,352 Total Assigned $ $ 145,373 $ $ 14,805,046 $ 14,950,419 NOTE 9 DEFINED BENEFIT PENSION PLANS — STATE-WIDE A. Plan Description The City of Elk River 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 plans under Section 401(a) of the Internal Revenue Code. 1. General Employees Retirement Plan The General Employees Retirement Plan covers certain full-time and part-time employees of the City. General Employees Plan members belong to the Coordinated Plan. Coordinated Plan members are covered by Social Security. (59) CITY OF ELK RIVER, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 NOTE 9 DEFINED BENEFIT PENSION PLANS — STATE-WIDE (CONTINUED) A. Plan Description (Continued) 2. Public Employees Police and Fire Fund The Police and Fire Plan, 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 Police and Fire Plan also covers police officers and firefighters belonging to local relief associations 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. 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. General Employees Plan Benefits General Employees Plan 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 Plan members. Members hired prior to July 1, 1989, receive the higher of Method 1 or Method 2 formulas. Only Method 2 is used for members hired after June 30, 1989. Under Method 1, the accrual rate for Coordinated members is 1.2% of average salary for each of the first 10 years of service and 1.7 % of average salary for each additional year. Under Method 2, the accrual rate for Coordinated members is 1.7% of average salary for all years 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. Benefit increases are provided to benefit recipients each January. The postretirement increase is equal to 50% of the cost -of -living adjustment (COLA) announced by the SSA, with a minimum increase of at least 1 % and a maximum of 1.5%. Recipients that have been receiving the annuity or benefit for at least a full year as of the June 30 before the effective date of the increase will receive the full increase. Recipients receiving the annuity or benefit for at least one month but less than a full year as of the June 30 before the effective date of the increase will receive a reduced prorated increase. For members retiring on January 1, 2024, or later, the increase will be delayed until normal retirement age (age 65 if hired prior to July 1, 1989, or age 66 for individuals hired on or after July 1, 1989). Members retiring under Rule of 90 are exempt from the delay to normal retirement. M CITY OF ELK RIVER, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 NOTE 9 DEFINED BENEFIT PENSION PLANS — STATE-WIDE (CONTINUED) B. Benefits Provided (Continued) 2. Police and Fire Plan Benefits Benefits for Police and Fire Plan members first hired after June 30, 2010, but before July 1, 2014, vest on a prorated basis from 50.0% after five years up to 100.0% after 10 years of credited service. Benefits for Police and Fire Plan members first hired after June 30, 2014, vest on a prorated basis from 50.0% after 10 years up to 100.0% after 20 years of credited service. The annuity accrual rate is 3.0% of average salary for each year of service. A full, unreduced pension is earned when members are age 55 and vested, or for members who were first hired prior to July 1, 1989, when age plus years of service equal at least 90. Annuities, disability benefits, and survivor benefits are increased effective every January 1. Beginning January 1, 2019, the postretirement increase will be fixed at 1.0%. Recipients that have been receiving the annuity or benefit for at least 36 months as of the June 30 before the effective date of the increase will receive the full increase. For recipients receiving the annuity or benefit for at least 25 months but less than 36 months as of the June 30 before the effective date of the increase will receive a reduced prorated increase. C. Contributions Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. Contribution rates can only be modified by the state legislature. General Employees Fund Contributions Coordinated Plan members were required to contribute 6.50% of their annual covered salary in fiscal year 2020 and the City was required to contribute 7.50% for Coordinated Plan members. The City and HRA contributions to the General Employees Fund for the year ended December 31, 2020, were $810,637 and $4,629, respectively. Both the City and HRA contributions were equal to the required contributions as set by state statute. 2. Police and Fire Fund Contributions Police and Fire member's contribution rates increased from 11.3% of pay to 11.8% and employer rates increased from 16.95% to 17.70% on January 1, 2020. The City's contributions to the Police and Fire Fund for the year ended December 31, 2020, were $610,950. The City's contributions were equal to the required contributions as set by state statute. (61) NOTE 9 CITY OF ELK RIVER, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 DEFINED BENEFIT PENSION PLANS — STATE-WIDE (CONTINUED) D. Pension Costs 1. GERF Pension Costs At December 31, 2020, the City and HRA reported liabilities of $9,013,814 and $51,316, respectively, for their proportionate shares of the GERF's net pension liability. The City and HRA net pension liabilities reflected a reduction due to the state of Minnesota's contribution of $16 million. The state of Minnesota is considered a nonemployer 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 HRA totaled $277,843 and $1,582, respectively. The net pension liability was measured as of June 30, 2020 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 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, 2019 through June 30, 2020 relative to the total employer contributions received from all of PERA's participating employers. The City and HRA's combined proportionate share was 0.1512% at the end of the measurement period and 0.1453% for the beginning of the period. Description City's Proportionate Share of the GERF Net Pension Liability HRA's Proportionate Share of the GERF Net Pension Liability State's Proportionate Share of the GERF Net Pension Liability Associated with the City and HRA Total Amount $ 9,013,814 51,316 279,425 $ 9,344,555 For the year ended December 31, 2020, the City and HRA recognized pension expense of $472,026 and $2,625, respectively, for their proportionate shares of the GERF's pension expense. In addition, the City and HRA recognized an additional $24,180 and $138, respectively, as pension expense (and grant revenue) for their proportionate share of the state of Minnesota's contribution of $16 million to the General Employees Fund during the City's fiscal year ended December 31, 2020. (62) NOTE 9 CITY OF ELK RIVER, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 DEFINED BENEFIT PENSION PLANS — STATE-WIDE (CONTINUED) D. Pension Costs (Continued) 1. GERF Pension Costs (Continued) At December 31, 2020, the City reported its proportionate share of the GERF's deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Description Differences Between Expected and Actual Economic Experience Changes in Actuarial Assumptions Net Difference Between Projected and Actual Earnings on Pension Plan Investments Changes in Proportion and Differences Between City Contributions and Proportionate Share of Contributions City Contributions Subsequent to the Measurement Date Total Deferred Outflows of Resources 1:• 156,244 305,513 402,402 $ 945,248 Deferred Inflows of Resources $ 34,104 331,664 113,595 $ 479,363 A total of $402,402 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, 2021. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows: Pension Expense Year Ending December 31, Amount 2021 $ (521,289) 2022 100,875 2023 265,305 2024 218,592 2025 - Thereafter - (63) NOTE 9 CITY OF ELK RIVER, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 DEFINED BENEFIT PENSION PLANS — STATE-WIDE (CONTINUED) D. Pension Costs (Continued) 1. GERF Pension Costs (Continued) At December 31, 2020, 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: Description Differences Between Expected and Actual Economic Experience Changes in Actuarial Assumptions Net Difference Between Projected and Actual Earnings on Pension Plan Investments Changes in Proportion and Differences Between City Contributions and Proportionate Share of Contributions HRA Contributions Subsequent to the Measurement Date Total Deferred Deferred Outflows of Inflows of Resources Resources 469 887 1,888 2,304 $ 5,548 194 1,903 723 $ 2,820 A total of $2,304 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 ending December 31, 2021. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows: Pension Expense Year Ending December 31, Amount 2021 $ (2,964) 2022 623 2023 1,523 2024 1,242 2. PEPFF Pension Costs At December 31, 2020, the City reported a liability of $3,951,685 for its proportionate share of the Police and Fire Fund's net pension liability. The net pension liability was measured as of June 30, 2020 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, 2019 through June 30, 2020 relative to the total employer contributions received from all of PERA's participating employers. At June 30, 2020, the City's proportionate share was .2998% at the end of the measurement period and .3175% for the beginning of the period. (64) NOTE 9 CITY OF ELK RIVER, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 DEFINED BENEFIT PENSION PLANS — STATE-WIDE (CONTINUED) D. Pension Costs (Continued) 2. PEPFF Pension Costs (Continued) The State of Minnesota contributed $13.5 million to the Police and Fire Fund in the plan fiscal year ended June 30, 2020. The contribution consisted of $4.5 million in direct state aid that does meet the definition of a special funding situation and $9.0 million in supplemental state aid that does not meet the definition of a special funding situation. The $4.5 million direct state aid was paid on October 1, 2019. Thereafter, by October 1 of each year, the state will pay $9 million to the Police and Fire Fund until full funding is reached or July 1, 2048, whichever is earlier. The $9 million in supplemental state aid will continue until the fund is 90% funded, or until the State Patrol Plan (administered by the Minnesota State Retirement System) is 90% funded, whichever occurs later. The State of Minnesota is included as a non -employer contributing entity in the Police and Fire Retirement Plan Schedule of Employer Allocations and Schedule of Pension Amounts by Employer, Current Reporting Period Only (pension allocation schedules) for the $4.5 million in direct state aid. Police and Fire Plan employers need to recognize their proportionate share of the State of Minnesota's pension expense (and grant revenue) under GASB 68 special funding situation accounting and financial reporting requirements. For the year ended December 31, 2020, the City recognized pension expense of $461,140 for its proportionate share of the Police and Fire Plan's pension expense. The City recognized $26,982 as grant revenue for its proportionate share of the State of Minnesota's pension expense for the contribution of $4.5 million to the Police and Fire Fund. The State of Minnesota is not included as a non -employer contributing entity in the Police and Fire Pension Plan pension allocation schedules for the $9 million in supplemental state aid. The City recognized $28,645 for the year ended December 31, 2020 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 Police and Fire Fund. Description City's Proportionate Share of the PEPFF Net Pension Liability State's Proportionate Share of the PEPFF Net Pension Liability Associated with the City Total Amount $ 3,951,685 93,106 $ 4,044,791 (65) NOTE 9 CITY OF ELK RIVER, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 DEFINED BENEFIT PENSION PLANS — STATE-WIDE (CONTINUED) D. Pension Costs (Continued) 2. PEPFF Pension Costs (Continued) At December 31, 2020, the City reported its proportionate share of the PEPFF's deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Description Differences Between Expected and Actual Economic Experience Changes in Actuarial Assumptions Net Difference Between Projected and Actual Earnings on Pension Plan Investments Changes in Proportion and Differences Between City Contributions and Proportionate Share of Contributions City Contributions Subsequent to the Measurement Date Total Deferred Outflows of Resources $ 174,608 1,324,292 120,031 198,283 337,176 $ 2,154,390 Deferred Inflows of Resources $ 187,662 2,464,526 340,165 $ 2,992,353 A total of $337,176 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, 2021. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows: Pension Expense Year Ending December 31, Amount 2021 $ (296,567) 2022 (1,116,451) 2023 128,306 2024 157,384 2025 (47,811) Thereafter - 3. Total Pension Expense For year ended December 31, 2020, the City and HRA recognized total pension expenses of $933,166 and $2,625, respectively, for their proportionate shares of the pension expense for all of the plans in which they participate. NOTE 9 CITY OF ELK RIVER, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 DEFINED BENEFIT PENSION PLANS — STATE-WIDE (CONTINUED) E. Actuarial Assumptions The total pension liability in the June 30, 2020, actuarial valuation was determined using an individual entry -age normal actuarial cost method and the following actuarial assumptions: Inflation 2.25% per year Active Member Payroll Growth 3.00% per year Investment Rate of Return 7.50% Salary increases were based on a service -related table. Mortality rates for active members, retirees, survivors, and disabilitants were based on Pub-2010 General Employee Mortality table for the General Employees Plan and RP 2014 tables for the Police and Fire Plan for males or females, as appropriate, with slight adjustments to fit PERA's experience. Cost of living benefit increases after retirement for retirees are assumed to be 1.25 percent per year for the General Employees Plan. For the Police and Fire Plan, cost of living benefit increases for retirees are 1.0% per year as set by state statute. Actuarial assumptions used in the June 30, 2020 valuation were based on the results of actuarial experience studies. The most recent four-year experience study for the General Employees Plan was completed in 2019. The assumption changes were adopted by the Board and became effective with the July 1, 2020 actuarial valuation. The four-year experience study used for the Police and Fire Plan was completed in 2016. Inflation and investment return assumptions for the Police and Fire Plan are based on the General Employees Retirement Plan experience study completed in 2019. The most recent four- year experience studies for the Police and Fire Plan were completed in 2020. The recommended assumptions for that plan were adopted by the Board and will be effective with the July 1, 2021 actuarial valuations if approved by the Legislature. The following changes in actuarial assumptions and plan provisions occurred in 2020: General Employees Fund Changes in Actuarial Assumptions: • The price inflation assumption was decreased from 2.50% to 2.25%. • The payroll growth assumption was decreased from 3.25% to 3.00%. • Assumed salary increase rates were changed as recommended in the June 30, 2019 experience study. The net effect is assumed rates that average 0.25% less than previous rates. • Assumed rates of retirement were changed as recommended in the June 30, 2019 experience study. The changes result in more unreduced (normal) retirements and slightly fewer Rule of 90 and early retirements. • Assumed rates of termination were changed as recommended in the June 30, 2019 experience study. The new rates are based on service and are generally lower than the previous rates for years 2-5 and slightly higher thereafter. (67) CITY OF ELK RIVER, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 NOTE 9 DEFINED BENEFIT PENSION PLANS — STATE-WIDE (CONTINUED) E. Actuarial Assumptions (Continued) • Assumed rates of disability were changed as recommended in the June 30, 2019 experience study. The change results in fewer predicted disability retirements for males and females. • The base mortality table for healthy annuitants and employees was changed from the RP-2014 table to the Pub-2010 General Mortality table, with adjustments. The base mortality table for disabled annuitants was changed from the RP-2014 disabled annuitant mortality table to the PUB-2010 General/Teacher disabled annuitant mortality table, with adjustments. • The mortality improvement scale was changed from Scale MP-2018 to Scale MP-2019. • The assumed spouse age difference was changed from two years older for females to one year older. • The assumed number of married male new retirees electing the 100% Joint & Survivor option changed from 35% to 45%. The assumed number of married female new retirees electing the 100% Joint & Survivor option changed from 15% to 30%. The corresponding number of married new retirees electing the Life annuity option was adjusted accordingly. Changes in Plan Provisions: Augmentation for current privatized members was reduced to 2.0% for the period July 1, 2020 through December 31, 2023 and 0.0% after. Augmentation was eliminated for privatizations occurring after June 30, 2020. Police and Fire Fund Changes in Actuarial Assumptions: The mortality projection scale was changed from MP-2018 to MP-2019. Changes in Plan Provisions: There have been no changes since the prior valuation. ME NOTE 9 CITY OF ELK RIVER, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 DEFINED BENEFIT PENSION PLANS — STATE-WIDE (CONTINUED) E. Actuarial Assumptions (Continued) The State Board of Investment, which manages the investments of PERA, prepares an analysis of the reasonableness on a regular basis of the long-term expected rate of return 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 geometric real rates of return for each major asset class are summarized in the following table: Asset Class Domestic Stocks International Stocks Bonds (Fixed Income) Alternative Assets (Private Markets) Cash Total F. Discount Rate Long -Term Target Expected Real Allocation Rate of Return 35.5 % 5.10 % 17.5 5.30 20.0 0.75 25.0 5.90 2.0 - 100 % The discount rate used to measure the total pension liability in 2020 was 7.50%. 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 General Employees Fund and the Police and Fire Fund 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. 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 one percentage point lower or one percentage point higher than the current discount rate: GERF PENSION LIABILITY Description City's Proportionate Share of the GERF Net Pension Liability HRA's Proportionate Share of the GERF Net Pension Liability One Percent One Percent Decrease in Current Increase in Discount Rate Discount Rate Discount Rate (6.50%) (7.50%) (8.50%) $ 14,445,979 $ 9,013,814 $ 4,532,671 $ 82,282 $ 51,316 $ 25,817 CITY OF ELK RIVER, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 NOTE 9 DEFINED BENEFIT PENSION PLANS — STATE-WIDE (CONTINUED) G. Pension Liability Sensitivity (Continued) PEPFF PENSION LIABILITY Description City's Proportionate Share of the PEPFF Net Pension Liability H. Pension Plan Fiduciary Net Position One Percent One Percent Decrease in Current Increase in Discount Rate Discount Rate Discount Rate (6.50%) (7.50%) (8.50%) $ 7,876,277 $ 3,951,685 $ 704,773 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. 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 the Public Employees Retirement Association of Minnesota (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 1 % (0.25%) of the assets in each member's account annually. Total contributions made by the City of Elk River during fiscal year 2020 were: Contribution Amount Employee Employer $ 1,406 $ 1,406 Percentage of Covered Payroll Employee Employer 5.0% 5.0% Required Rates 5.0% (70) CITY OF ELK RIVER, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 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, 2019, the plan covered 43 active fire fighters and 7 vested terminated firefighters 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 Twenty -Year Service Pension Each member who is at least 50 years of age; has retired from the Fire Department of the City of Elk River; has served at least 20 years of active service with such department before retirement; and, has been a member of the Association in good standing for at least five years prior to such retirement; shall be entitled to a lump sum service pension in the amount of $7,120 for each year of service. Less Than Twenty -Year Service Pension 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 five 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 five 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 nonforfeitable 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 $198,424 in fire state aid to the plan on behalf of the City Fire Department for the year ended December 31, 2020, which was recorded as a revenue. Required employer contributions are calculated annually based on statutory provisions. The City's statutorily -required contribution to the plan for the year ended December 31, 2020 was $-0- but the City voluntarily contributed $30,000. (71) CITY OF ELK RIVER, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 NOTE 11 DEFINED BENEFIT PENSION PLANS —FIRE RELIEF ASSOCIATION (CONTINUED) D. Pension Costs At December 31, 2020, the City reported a net pension asset of $631,368 for the plan. The net pension liability (asset) was measured as of December 31, 2019. The total pension liability used to calculate the net pension liability (asset) in accordance with GASB 68 was determined by an actuary applying an actuarial formula to specific census data certified by the Department as of December 31, 2019. For the year ended December 31, 2020, the City recognized pension expense of $190,830. At December 31, 2020, the City reported deferred outflows of resources, including its contributions subsequent to the measurement date, related to pension from the following sources: Description Changes in Actuarial Assumptions Net Difference Between Projected and Actual Earnings on Pension Plan Investments Differences Between Expected and Actual Economic Experience City Contributions Subsequent to the Measurement Date Total Deferred Outflows of Resources $ 164,168 30,000 $ 194,168 Deferred Inflows of Resources 153,843 98,638 $ 252,481 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 total pension liability in the year ended December 31, 2021. Other amounts reported as deferred outflows and inflows of resources related to the plan will be recognized in pension expense as follows: Expense Year Ending December 31, Amount 2021 $ (22,019) 2022 (10,288) 2023 29,924 2024 (82,829) 2025 (8,624) Thereafter 5,523 (72) CITY OF ELK RIVER, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 NOTE 11 DEFINED BENEFIT PENSION PLANS —FIRE RELIEF ASSOCIATION (CONTINUED) E. Actuarial Assumptions The total pension liability at December 31, 2019 was determined using the entry age normal actuarial cost method and the following actuarial assumptions: Retirement Eligibility Age 50 or After 20 Years of Service If both age 50, and minimum 10 year of service but not 20 years, pension reduced 4% for each year less than 20 years. Discount Rate 5.00 % Expected Long -Term Investment Return 5.00 % 20-Year Municipal Bond Yield 2.75 % Projected Salary Increases N/A Includes Inflation at 2.50 % Cost -of -Living Adjustment None Age of Service Retirement 50 The demographic assumption of mortality is based on the rates use in the July 1, 2018 Minnesota PERA Police & Fire Plan actuarial valuation as described below. Healthy Pre -retirement: RP-2014 employee generational mortality table projected with mortality improvement scale MP-2017, from a base year of 2006. Healthy Post -retirement: RP-2014 annuitant generational mortality table projected with mortality improvement scale MP-2017, from a base year of 2006. Male rates are adjusted by a factor of 0.96. Disabled: RP-2014 annuitant generational mortality table projected with mortality improvement scale MP-2017, from a base year of 2006. Male rates are adjusted by a factor of 0.96. The 5.00% 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. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Asset Class Domestic Equity International Equity Fixed Income Real Estate and Alternatives Cash and Equivalents Total Allocation at Measurement Date 46.00 % 8.00 24.00 19.00 3.00 100.00 % Long -Term Expected Real Rate of Return 4.76 % 5.41 2.01 4.53 0.74 (73) CITY OF ELK RIVER, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 NOTE 11 DEFINED BENEFIT PENSION PLANS —FIRE RELIEF ASSOCIATION (CONTINUED) F. Discount Rate The discount rate used to measure the total pension liability was 5.00%, a decrease of 0.25% from the previous measurement. 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 one percentage point lower or one percentage point higher than the current discount rate: Description Defined Benefit Plan H. Pension Plan Fiduciary Net Position One Percent One Percent Decrease in Current Increase in Discount Rate Discount Rate Discount Rate (4.00%) (5.00%) (6.00%) $ (561,616) $ (631,368) $ (699,072) 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, Minnesota 55330. (74) CITY OF ELK RIVER, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 NOTE 11 DEFINED BENEFIT PENSION PLANS —FIRE RELIEF ASSOCIATION (CONTINUED) H. Pension Plan Fiduciary Net Position (Continued) Information about the changes in the plan's net pension liability (asset) is as follows: On)n Total Pension Liability Service Cost $ 138,202 Interest 164,617 Assumption Changes 25,224 Plan Changes - Differences Between Expected and Actual Experience - Gain or Loss - Benefit Payments (396,875) Other Changes Net Change in Total Pension Liability (68,832) Total Pension Liability - Beginning 3,195,791 Total Pension Liability - Ending (a) $ 3,126,959 Fiduciary Net Position Municipal Contributions $ 30,000 State Contributions 199,451 Net Investment Income 540,907 Net Gain or Loss on Investments - Benefit Payments (396,875) Administrative Expenses (16,374) Other Changes - Net Change in Fiduciary Net Position 357,109 Fiduciary Net Position - Beginning 3,401,218 Fiduciary Net Position - Ending (b) $ 3,758,327 Association's Net Position Liability/ (Asset) - Ending (a) - (b) $ (631,368) Fiduciary Net Position as a Percentage of the Total Pension Liability 120.19 % (75) CITY OF ELK RIVER, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 NOTE 12 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 defined benefit healthcare plan, and Utilities Retirees Health Plan (URHP), a multi -employer defined benefit healthcare 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 the URHP do not issue publicly available financial reports. At December 31, 2020, the following employees were covered by the benefit terms: Municipal Retiree Health Plan Active Plan Members Active Plan Members Waiving Coverage Inactive Members or Beneficiaries Receiving Benefits Inactive Members Waiving Benefits Total Plan Members B. Funding Policy Utility Retiree Health Plan 124 29 11 36 8 164 44 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, 2020, and the Utilities total OPEB liability was measured as of December 31, 2020. (76) CITY OF ELK RIVER, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 NOTE 12 POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (CONTINUED) C. Total OPEB Liability (Continued) The total OPEB liability in the January 1, 2019 and December 31, 2019 actuarial valuations of the City and the Utilities were determined using the following actuarial assumptions, applied to all periods included in the measurement, unless otherwise specified: City of Elk River Elk River Municipal Utilities Valuation Date: January 1, 2019 December 31, 2019 Measurement Date: January 1, 2020 December 31, 2020 Methods and Assumptions Used to Determine the Contribution Rates: Actuarial Cost Method Amortization Method Amortization Period Inflation Healthcare cost trend rate Salary increases Discount rate Mortality Entry Age Level Percentage of Payroll, Closed Average of expected remaining service on a closed basis for differences between expected and actual experience and assumption chances. 2.50 6.25 % in 2020 grading to 5.00 % over 5 years. 3.00 Entry Age Level Percentage of Payroll, Closed Average of expected remaining service on a closed basis for differences between expected and actual experience and assumption changes. 2.50 6.40 % for 2019, gradually decreasing over several decades to an ultimate rate of 4.00 in 2075 and later years. Mortality, withdrawal and salary scale updated to the rates used in the July 1, 2019 PERA Minnesota Retirement Plan actuarial valuation to reflect recently published tables. 2.90 % 2.75 RP-2014 Mortality Tables (Blue Collar for RP-2014 Mortality Tables with projected Public Safety, White Collar for Others) with MP- mortality improvements based on scale MP- 2018 Generational Improvement Scale. 2018, and other adjustments. The discount rates used to measure the total OPEB liability of the City and Utilities were 2.90% and 2.75%, respectively. The actuarial assumption used in the January 1, 2019 and December 31, 2019 valuations 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. No assets were placed in a trust for the payment of OPEB. D. Changes in the Total OPEB Liability Balance - December 31, 2019 Changes for the Year: Service Cost Interest Differences Between Expected and Actual Experience Contributions - Employer Net Investment Income Benefit Payments Changes in Assumptions Net Changes Balance - December 31, 2020 Municipal Retiree Health Plan $ 834,639 53,284 32.766 (51,790) 48,516 82,776 $ 917,415 Utility Retiree Health Plan $ 217,772 31,032 9,231 (5,234) 35,029 $ 252,801 (77) CITY OF ELK RIVER, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 NOTE 12 POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (CONTINUED) D. Changes in the Total OPEB Liability (Continued) The following changes in assumptions and plan provisions occurred between the current and prior valuations: City - MRHP • The discount rate was changed from 3.80% to 2.90%. • The health care trend rates were changed to better anticipate short-term and long-term medical increases. • The mortality tables were updated from the RP-2014 White Collar Mortality Tables with MP-2016 Generational Improvement Scale (with Blue Collar adjustment for Police and Fire Personnel) to the RP-2014 White Collar Mortality Tables with MP-2018 Generational Improvement Scale (with Blue Collar adjustment for Police and Fire Personnel). • The retirement and withdrawal tables for Police and Fire Personnel were updated. Utility - URHP • The discount rate was changed from 3.71 % to 2.75%. • Mortality, withdrawal and salary scale updated to the rates used in the July 1, 2019 PERA of Minnesota Retirement Plan actuarial valuation to reflect recently - published tables. • Health care trend rates were updated to exclude the Affordable Care Act's Excise Tax on high -cost insurance plan due to its repeal. 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 one percentage point lower or one percentage point higher than the current discount rate: One Percent One Percent Decrease Discount Rate Increase (1.90%) (2.9%) (3.90%) City Total OPEB Liability (Asset) $ 983,968 $ 917,415 $ 855,098 One Percent One Percent Decrease Discount Rate Increase 1.75% 2.75% 3.75% Utility Total OPEB Liability (Asset) 273,995 252,801 233,468 (78) CITY OF ELK RIVER, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 NOTE 12 POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (CONTINUED) E. Sensitivity of Total OPEB Liability (Continued) 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 one percentage point lower or one percentage point higher than the current healthcare cost trend rates: City Total OPEB Liability (Asset) Utility Total OPEB Liability (Asset) One Percent Decrease (5.25% Decreasing to 4.00% 822,974 One Percent Decrease (5.40% Decreasing to 3.00%) $ 226,155 Healthcare Cost Trend Rates (6.25% Decreasing to 5.00%) $ 917,415 Healthcare Cost Trend Rates (6.40% Decreasing to 4.00%) $ 252,801 One Percent Increase (7.25% Decreasing to 6.00%) $ 1,028,260 One Percent Increase (7.40% Decreasing to 5.00%) $ 284,044 F. OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB For the year ended December 31, 2020, the City and Utilities recognized total OPEB expense of $62,034. At December 31, 2020, the Utilities did not report any deferred outflow of resources and deferred inflows of resources related to OPEB. At December 31, 2020, the City reported deferred outflow of resources and deferred inflows of resources related to OPEB from the following sources: Changes in Assumptions Gain or Loss Contributions Subsequent Measurement Date Total Citv of Elk River Deferred Deferred Outflows of Inflows of Resources Resources $ 41,584 $ 19,902 - 62,467 49,504 - $ 91,088 $ 82,369 (79) CITY OF ELK RIVER, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 NOTE 12 POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (CONTINUED) F. OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB (Continued) A total of $49,504 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, 2021. Other amounts reported as deferred outflows and inflows of resources related to the plan will be recognized in OPEB expense as follows: OPEB Expense Year Ending December 31, Amount 2021 $ (9,544) 2022 (9,544) 2023 (9,544) 2024 (9,544) 2025 (9,544) Thereafter 6,935 Total $ (40,785) 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. ME CITY OF ELK RIVER, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 NOTE 13 OTHER INFORMATION (CONTINUED) B. Contingent Liabilities (Continued) 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. 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 10 years from the date of sale of each individual area. The Utilities paid $-0- in 2020 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 five years, and if any of the eight areas are not acquired within this timeframe, the payment terms may be renegotiated. In 2019, the Utilities acquired the final service areas. 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 one in 2015 for $877,807, service area two in 2016 for $663,586, service areas three and four in 2017 for $276,776, service areas five and six in 2018 for $298,736 and service areas seven and eight in 2019 for $78,457. The loss of revenue payments made were $411,157 in 2017, $570,725 in 2018, $751,860 in 2019, and $834,185 in 2020, and $857,538 in 2021. All amounts paid are included in property and equipment, and loss of revenue payments are included in intangible assets. (81) CITY OF ELK RIVER, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 NOTE 13 OTHER INFORMATION (CONTINUED) 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, 2020, there was one series of revenue bonds outstanding, with a principal payable amount of $2,995,000. E. Commitments The Utilities entered into an agreement in 2007 with Central Minnesota Municipal Power Agency (CMMPA) to acquire an interest in the CAPX Initiative Brookings Project, a power transmission line in Minnesota. The project is a 250-mile, 345 kV 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%. The return on this investment through CMMPA is designed to provide approximately $124,000 annually over the 40-year project life. To ensure bond payment obligations, cash distributions for 2019 were curtailed. In 2018, the principal bond payment increased approximately by $700K. This increase remains in effect through 2020. In 2021, the bond payment drops nearly $1M. A contributing factor in participant cash distributions in 2020 is under recovery. The projected under recovery in 2020 is estimated to be $203K. The bond obligations are satisfied first, distribution to participants is directly affected by under recovery. The under recovery is rolled forward under the true up. However, the under recovery in 2020 (approximately $203K) would be included in the revenue requirements in 2022.The transmission payments for 2020 were $41,245, all of which was a receivable at December 31, 2020. 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. The City has no ongoing financial interest or responsibility with regards to the Cable Commission. Financial statements for the Commission can be obtained by writing to: Sherburne/Wright Cable Communications Commission at 444 Cedar Street, Suite 950, St. Paul, Minnesota 55101. (82) CITY OF ELK RIVER, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2020 NOTE 13 OTHER INFORMATION (CONTINUED) G. Segment Information The City maintains six enterprise funds that account for the municipal liquor operations, garbage collections, sewer, storm water, water and electric utilities. The City considers each of its enterprise funds to be a segment. Since the required segment information is already included in the City's proprietary funds' balance sheet and statement of revenues, expenses, and changes in net position balance, this information has not been repeated in the notes to the basic financial statements. 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 City's 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, 2020, the City has three agreements established under Minnesota Statutes Section 469.174 to 469.179 which resulted in property taxes totaling $256,403 being abated. Individual abatement payments which constituted more than 1 % of the City's 2020 tax levy include: • A pay-as-you-go note resulting in an abatement amount of $144,784, for a financial institution. As part of the City's tax abatement program, the City also enters into agreements with local businesses in the form of business subsidy agreements established under Minnesota Statutes Section 116J.993 through 116J.995. These agreements must meet a public purpose which may include, but may not be limited to, increasing the tax base. In 2020 the City of Elk River had five business subsidy agreements in place which resulted in property taxes totaling $114,791 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 2020 in excess of this amount. (83) REQUIRED SUPPLEMENTARY INFORMATION This page intentionally left blank. CITY OF ELK RIVER, MINNESOTA SCHEDULE OF CHANGES IN TOTAL OPEB LIABILITY AND RELATED RATIOS — MUNICIPAL RETIREES HEALTH PLAN DECEMBER 31, 2020 Total OPEB Liability: Service Cost Interest Changes in Benefit Terms Changes in Assumptions Differences Between Expected and Actual Experience Benefit Payments Net Change in Total OPEB Liability Total OPEB Liability - Beginning Total OPEB Liability - Ending Total OPEB Liability Plan Fiduciary Net Position as a Percentage of the Total OPEB Liability Covered Employee Payroll City's Total OPEB Liability as a Percentage of the Covered Employee Payroll 2020 2019 2018 $ 53,284 $ 44,470 $ 58,939 32,766 31,024 30,051 48,516 (27,862) - (87,455) (51,790) (42,048) (47,958) 82,776 (81,871) 41,032 834,639 916,510 875,478 $ 917,415 $ 834,639 $ 916,510 $ 917,415 $ 834,639 $ 916,510 0.00% 0.00% 0.00% $ 9,349,161 $ 9,076,855 $ 8,658,239 9.81 % 9.20% 10.59% Note: The City implemented GASB Statement No. 75 in fiscal year 2018. The schedule is provided prospectively beginning with the City's fiscal year ended December 31, 2018 and is intended to show a 10-year trend. Additional years will be reported as they become available. Valuation Date: Measurement Date: Methods and Assumptions Used to Determine the Contribution Rates: Actuarial Cost Method Amortization Method Amortization Period Inflation: Healthcare Cost Trend Rate Salary Increases Discount Rate Mortality January 1, 2019 January 1, 2020 Entry Age Level Percentage of Payroll, Closed Average of expected remaining service on a closed basis for differences between expected and actual experience and assumption changes. 2.50% 6.25% in 2020 grading to 5.00% over 5 years. 3.00% 2.90% RP-2014 Mortality Tables (Blue Collar for Public Safety, White Collar for Others) with MP-2018 Generational Improvement Scale • No assets were placed in a trust for the payment of OPEB. (84) CITY OF ELK RIVER, MINNESOTA SCHEDULE OF CHANGES IN TOTAL OPEB LIABILITY AND RELATED RATIOS — MUNICIPAL RETIREES HEALTH PLAN (CONTINUED) DECEMBER 31, 2020 Changes in Benefits and Assumptions 2020: 2019: 2018: Changes in Benefit Terms: • There were no significant changes in benefit terms. Changes in Assumptions • The discount rate was changed from 3.80% to 2.90%. Changes in Benefit Terms: • There were no significant changes in benefit terms. Changes in Assumptions • The discount rate was changed from 3.30% to 3.80%. • The health care trend rates were changed to better anticipate short-term and long-term medical increases. • The mortality tables were updated from the RP-2014 White Collar Mortality Tables with MP- 2016 Generational Improvement Scale (with Blue Collar adjustment for Police and Fire Personnel) to the RP-2014 White Collar Mortality Tables with MP-2018 Generational Improvement Scale (with Blue Collar adjustment for Police and Fire Personnel). • The retirement and withdrawal tables for Police and Fire Personnel were updated. 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%. (85) CITY OF ELK RIVER, MINNESOTA SCHEDULE OF CHANGES IN TOTAL OPEB LIABILITY AND RELATED RATIOS — UTILITIES RETIREES HEALTH PLAN DECEMBER 31, 2020 2020 2019 2018 Total OPEB Liability: Service Cost $ 31,032 $ 12,750 $ 11,084 Interest 9,231 3,751 3,526 Changes in Assumptions (5,234) 104,531 4,509 Differences Between Expected and Actual Experience - (3,832) - Net Change in Total OPEB Liability 35,029 117,200 19,119 Total OPEB Liability - Beginning 217,772 100,572 81,453 Total OPEB Liability - Ending $ 252,801 $ 217,772 $ 100,572 Total OPEB Liability $ 252,801 $ 217,772 $ 100,572 Plan Fiduciary Net Position as a Percentage of the Total OPEB Liability 0.00% 0.00% 0.00% Covered Employee Payroll $ 3,832,321 $ 3,547,495 $ 3,584,096 City's Total OPEB Liability as a Percentage of the 6.60% 6.14% 2.81 % Covered Employee Payroll Note: The Utilities implemented GASB Statement No. 75 in fiscal year 2018. The schedule is provided prospectively beginning with the City's fiscal year ended December 31, 2018 and is intended to show a 10-year trend. Additional years will be reported as they become available. Valuation Date: December 31, 2019 Measurement Date: December 31, 2020 Methods and Assumptions Used to Determine the Contribution Rates: Actuarial Cost Method Entry Age Amortization Method Level Percentage of Payroll, Closed Amortization Period Average of expected remaining service on a closed basis for differences between expected and actual experience and assumption changes. Inflation: 2.50% 6.40% for 2019, gradually decreasing over several decades to an Healthcare Cost Trend Rate ultimate rate of 4.00% in 2075 and later years. Mortality, withdrawal and salary scale updated to the rates used in the July 1, 2019 PERA Minnesota Retirement Plan actuarial Salary Increases and Mortality valuation to reflect recently published tables. Discount Rate 2.75% • No assets were placed in a trust for the payment of OPEB. am CITY OF ELK RIVER, MINNESOTA SCHEDULE OF CHANGES IN TOTAL OPEB LIABILITY AND RELATED RATIOS — UTILITIES RETIREES HEALTH PLAN (CONTINUED) DECEMBER 31, 2020 Changes in Benefits and Assumptions 2020: 2019: 2018: Changes in Benefit Terms: • There were no significant changes in benefit terms. Changes in Assumptions • The discount rate was changed from 3.71 % to 2.75%. • Mortality, withdrawal and salary scale updated to the rates used in the July 1, 2019 PERA of Minnesota Retirement Plan actuarial valuation to reflect recently published tables. • The Medical trend rates were updated to exclude the Affordable Care Act's Excise Tax on high -cost insurance plans due to its repeal. Changes in Benefit Terms: • There were no significant changes in benefit terms. Changes in Assumptions • The discount rate was changed from 3.31 % to 3.71 %. • Mortality, withdrawal and salary scale updated to the rates used in the July 1, 2018 PERA of Minnesota Retirement Plan actuarial valuation to reflect recently published tables. • Medical per capital claims costs were updated to reflect recent experience. • The assumed retirement age was updated from 60 to 57 to reflect recent experience. • The inflation assumption was changed from 2.75% to 2.50% based on an updated historical analysis of inflation rates and forward -looking market expectations. • 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. 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 %. (87) CITY OF ELK RIVER, MINNESOTA PERA SCHEDULE OF THE CITY'S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY DECEMBER 31, 2020 Primary Government: GERF Schedule of the City's Proportionate Share of the Net Pension Liability Last Seven Fiscal Years* City's Proportion of the Net Pension Liability City's Proportionate Share of the Net Pension Liability State's Proportionate Share of the Net Pension Liability Associated with the City Total Net Pension Liability Associated with the City City's Covered Payroll City's Proportionate Share of the Net Pension Liability as a Percentage of Its Covered Payroll Plan Fiduciary Net Position as a Percentage of the Total Pension Liability * The Amounts Presented for Each Fiscal Year were Determined as of 6/30. PEPFF Schedule of the City's Proportionate Share of the Net Pension Liability Last Seven Fiscal Years* City's Proportion of the Net Pension Liability City's Proportionate Share of the Net Pension Liability State's Proportionate Share of the Net Pension Liability Associated with the City Total Net Pension Liability Associated with the City City's Covered Payroll City's Proportionate Share of the Net Pension Liability as a Percentage of Its Covered Payroll Plan Fiduciary Net Position as a Percentage of the Total Pension Liability * The Amounts Presented for Each Fiscal Year were Determined as of 6/30. Measurement Date 6/30/2020 6/30/2019 6/30/2018 6/30/2017 6/30/2016 6/30/2015 6/30/2014 0.1503% 0.1443% 0.1444% 0.1515% 0.1435% 0.1438% 15.8700% $ 9,013,814 $ 7,977,792 $ 8,060,648 $ 9,611,075 $ 11,651,488 $ 7,452,462 $ 7,454,930 277,843 247,930 261,004 120,624 152,173 9,291,657 8,225,722 8,321,652 9,731,699 11,803,661 7,452,462 7,454,930 $ 10,715,865 $ 10,216,960 $ 9,702,980 $ 9,695,118 $ 8,902,000 $ 8,712,032 $ 8,332,262 84.12% 78.08% 83.07% 99.13% 130.89% 85.54% 89.47% 79.10% 80.20% 79.50% 75.90% 68.90% 78.20% 78.70% Measurement Date 6/30/2020 6/30/2019 6/30/2018 6/30/2017 6/30/2016 6/30/2015 6/30/2014 0.2998% 0.3175% 0.3045% 0.3140% 0.3060% 0.3040% 0.2990% $ 3,951,685 $ 3,380,110 $ 3,245,656 $ 4,239,374 $ 12,280,312 $ 3,454,151 $ 3,229,323 93,106 43,337 53,870 4,044,791 3,380,110 3,245,656 4,282,711 12,334,182 3,454,151 3,229,323 $ 3,390,212 $ 3,352,444 $ 3,220,233 $ 3,211,726 $ 2,952,673 $ 2,788,952 $ 2,440,932 116.56 % 100.83 % 100.79 % 132.00 % 415.90 % 87.20% 89.30% 88.80% 85.40% 63.90% E 123.85 % 132.30 % 86.60% 87.10% CITY OF ELK RIVER, MINNESOTA PERA SCHEDULE OF THE CITY'S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY (CONTINUED) DECEMBER 31, 2020 Component Unit: GERF Schedule of the HRA's Proportionate Share of the Net Pension Liability Last Seven Fiscal Years* HRA's Proportion of the Net Pension Liability HRA's Proportionate Share of the Net Pension Liability State's Proportionate Share of the Net Pension Liability Associated with the HRA Total Net Pension Liability Associated with the HRA HRA's Covered Payroll HRH's Proportionate Share of the Net Pension Liability as a Percentage of Its Covered Payroll Plan Fiduciary Net Position as a Percentage of the Total Pension Liability The Amounts Presented for Each Fiscal Year were Determined as of 6/30. Measurement Date 6/30/2020 6/30/2019 6/30/2018 6/30/2017 6/30/2016 6/30/2015 6/30/2014 0.0009% $ 51,316 1,582 52,898 $ 61,042 84.07% 79.10 % 0.0010% 0.0009% 0.0010% $ 55,520 $ 51,835 $ 60,586 1,725 1,698 1,170 57,245 53,533 61,756 $ 66,193 $ 62,892 $ 61,433 83.88% 82.42% 80.20 % 79.50 % (89) 0.0009% 0.0009% 0.0010% $ 73,404 $ 46,951 $ 46,966 959 74,363 46,951 46,966 $ 56,083 $ 54,886 $ 52,493 98.62% 130.88% 85.54% 89.47% 75.90 % 68.90 % 78.20 % 78.70 % CITY OF ELK RIVER, MINNESOTA NOTES TO PERA SCHEDULE OF THE CITY'S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY DECEMBER 31, 2020 NOTES TO PERA SCHEDULE OF THE CITY'S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY The following changes in plan provisions and actuarial assumptions occurred in 2020: General Employees Fund -hanges in Actuanal Hssumptions • The price inflation assumption was decreased from 2.50% to 2.25%. • The payroll growth assumption was decreased from 3.25% to 3.00%. • Assumed salary increase rates were changed as recommended in the June 30, 2019 experience study. The net effect is assumed rates that average 0.25% less than previous rates. • Assumed rates of retirement were changed as recommended in the June 30, 2019 experience study. The changes result in more unreduced (normal) retirements and slightly fewer Rule of 90 and early retirements. • Assumed rates of termination were changed as recommended in the June 30, 2019 experience study. The new rates are based on service and are generally lower than the previous rates for years 2-5 and slightly higher thereafter. • Assumed rates of disability were changed as recommended in the June 30, 2019 experience study. The change results in fewer predicted disability retirements for males and females. • The base mortality table for healthy annuitants and employees was changed from the RP-2014 table to the Pub-2010 General Mortality table, with adjustments. The base mortality table for disabled annuitants was changed from the RP-2014 disabled annuitant mortality table to the PUB-2010 General/Teacher disabled annuitant mortality table, with adjustments. • The mortality improvement scale was changed from Scale MP-2018 to Scale MP-2019. • The assumed spouse age difference was changed from two years older for females to one year older. • The assumed number of married male new retirees electing the 100% Joint & Survivor option changed from 35% to 45%. The assumed number of married female new retirees electing the 100% Joint & Survivor option changed from 15% to 30%. The corresponding number of married new retirees electing the Life annuity option was adjusted accordingly. Changes in Plan Provisions Augmentation for current privatized members was reduced to 2.0% for the period July 1, 2020 through December 31, 2023 and 0.0% after. Augmentation was eliminated for privatizations occurring after June 30, 2020. Police and Fire Fund Changes in Actuarial Assumptions • The mortality projection scale was changed from MP-2018 to MP-2019. Changes in Flan Provisions There have been no changes since the prior valuation. M CITY OF ELK RIVER, MINNESOTA NOTES TO PERA SCHEDULE OF THE CITY'S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY DECEMBER 31, 2020 The following changes in plan provisions and actuarial assumptions occurred in 2019: General Employees Fund Grid, • The mortality projection scale was changed from MP-2017 to MP-2018. Changes in Plan Provisions • The employer supplemental contribution was changed prospectively, decreasing from $31.0 million to $21.0 million per year. The State's special funding contribution was changed prospectively, requiring $16.0 million due per year through 2031. Police and Fire Fund Changes in Actuarial Assumptions • The mortality projection scale was changed from MP-2017 to MP-2018. Changes in Plan Provisions • There have been no changes since the prior valuation. The following changes in actuarial assumptions occurred in 2018: General Employees Fund Char 3umptions • The mortality projection scale was changed from MP-2015 to MP-2017. • The assumed benefit increase was changed from 1.00% per year through 2044 and 2.50% per year thereafter to 1.25% per year. Changes in Plan Provisions • The augmentation adjustment in early retirement factors is eliminated over a five-year period starting July 1, 2019, resulting in actuarial equivalence after June 30, 2024. • Interest credited on member contributions decreased from 4.00% to 3.00%, beginning July 1, 2018. • Deferred augmentation was changed to 0.00%, effective January 1, 2019. Augmentation that has already accrued for deferred members will still apply. • Contribution stabilizer provisions were repealed. • Postretirement benefit increases were changed from 1.00% per year with a provision to increase to 2.50% upon attainment of 90.00% funding ratio to 50.00% of the Social Security Cost of Living Adjustment, not less than 1.00% and not more than 1.50%, beginning January 1, 2019. • For retirements on or after January 1, 2024, the first benefit increase is delayed until the retiree reaches normal retirement age; does not apply to Rule of 90 retirees, disability benefit recipients, or survivors. • Actuarial equivalent factors were updated to reflect revised mortality and interest assumptions. (91) CITY OF ELK RIVER, MINNESOTA NOTES TO PERA SCHEDULE OF THE CITY'S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY DECEMBER 31, 2020 Police and Fire Fund Changes in Actuarial Assumptions • The mortality projection scale was changed from MP-2016 to MP-2017. Change ,,, i-,a„ r-, uv,o,u„o • Postretirement benefit increases were changed to 1.00% for all years, with no trigger. • An end date of July 1, 2048 was added to the existing $9.0 million state contribution. • New annual state aid will equal $4.5 million in fiscal years 2019 and 2020, and $9.0 million thereafter until the plan reaches 100% funding, or July 1, 2048, if earlier, which meets the special funding situation definition. • Member contributions were changed from 10.80% to 11.30% of pay, effective January 1, 2019 and 11.80% of pay, effective January 1, 2020. • Employer contributions were changed from 16.20% to 16.95% of pay, effective January 1, 2019 and 17.70% of pay, effective January 1, 2020. • Interest credited on member contributions decreased from 4.00% to 3.00%, beginning July 1, 2018. • Deferred augmentation was changed to 0.00%, effective January 1, 2019. Augmentation that has already accrued for deferred members will still apply. • Actuarial equivalent factors were updated to reflect revised mortality and interest assumptions. The following changes in plan provisions and actuarial assumptions occurred in 2017: General Employees Fund Changes in Actuarial Assumptions • The combined service annuity (CSA) loads were changed from 0.80% for active members and 60.00% for vested and non -vested deferred members. The revised CSA load are now 0.00% for active member liability, 15.00% for vested deferred member liability, and 3.00% for non -vested deferred member liability. • The assumed postretirement benefit increase rate was changed for 1.00% per year for all years to 1.00% per year through 2044 and 2.50% per year thereafter. Changes in Plan Provisions • The State's contribution for the Minneapolis Employees Retirement Fund equals $16,000,000 in 2017 and 2018, and $6,000,000 thereafter. • The Employer Supplemental Contribution for the Minneapolis Employees Retirement Fund changed from $21,000,000 to $31,000,000 in calendar years 2019 to 2031. The state's contribution changed from $16,000,000 to $6,000,000 in calendar years 2019 to 2031. (92) CITY OF ELK RIVER, MINNESOTA NOTES TO PERA SCHEDULE OF THE CITY'S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY DECEMBER 31, 2020 Police and Fire Fund Changes in Actuarial Assumptions • Assumed salary increases were changed as recommended in the June 30, 2016 experience study. The net effect is proposed rates that average 0.34% lower than the previous rates. • Assumed rates of retirement were changed, resulting in fewer retirements. • The combined service annuity (CSA) load was 30.00% for vested and non -vested, deferred members. The CSA has been changed to 33.00% for vested members and 2.00% for non -vested members. • The base mortality table for healthy annuitants was changed from the RP-2000 fully generational table to the RP-2014 fully generational table (with a base year of 2006), with male rates adjusted by a factor of 0.96. The mortality improvement scale was changed from Scale AA to Scale MP-2016. The base mortality table for disabled annuitants was changed from the RP-2000 disabled mortality table to the mortality tables assumed for healthy retirees. • Assumed termination rates were decreased to 3.00% for the first three years of service. Rates beyond the select period of three years were adjusted, resulting in more expected terminations overall. • Assumed percentage of married female members was decreased from 65.00% to 60.00%. • Assumed age difference was changed from separate assumptions for male members (wives assumed to be three years younger) and female members (husbands assumed to be four years older) to the assumption that males are two years older than females. • The assumed percentage of female members electing joint and survivor annuities was increased. • The assumed postretirement benefit increase rate was changed from 1.00% for all years to 1.00% per year through 2064 and 2.50% thereafter. • The single discount rate was changed from 5.60% per annum to 7.50% per annum. Changes in Plan Provisions • There have been no changes since the prior valuation. The following changes in plan provisions and actuarial assumptions occurred in 2016: General Employees Fund Changes in Actuarial Assumptions • The assumed postretirement benefit increase rate was changed from 1.00% per year through 2037 and 2.50% per year thereafter to 1.00% per year for all future years. • The assumed investment return was changed from 7.90% to 7.50%. • The single discount rate changed from 7.90% to 5.60%. • The assumed future salary increases, payroll growth, and inflation were decreased by 0.25% to 3.25% for payroll growth and 2.50% for inflation. (93) CITY OF ELK RIVER, MINNESOTA NOTES TO PERA SCHEDULE OF THE CITY'S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY DECEMBER 31, 2020 Chanaes in Plan Provisions • There have been no changes since the prior valuation. Police and Fire Fund ,nanguo „I 1-9l.LUC71,a, Assumption;, • The assumed postretirement benefit increase rate was changed from 1.00% per year through 2037 and 2.50% per year thereafter to 1.00% per year for all future years. • The assumed investment return was changed from 7.90% to 7.50%. • The single discount rate changed from 7.90% to 5.60%. • The assumed future salary increases, payroll growth, and inflation were decreased by 0.25% to 3.25% for payroll growth and 2.50% for inflation. Changes in Plan, • There have been no changes since the prior valuation. The following changes in plan provisions and actuarial assumptions occurred in 2015: General Employees Fund Changes in Actuarial Assumptoot,.: • The assumed postretirement benefit increase rate was changed from 1.00% per year through 2030 and 2.50% per year thereafter to 1.00% per year through 2035 and 2.50% per year thereafter. Changes in Plan Provisions: • On January 1, 2015, the Minneapolis Employees Retirement Fund was merged into the General Employees Fund, which increased the total pension liability by $1.1 billion and increase the fiduciary plan net position by $892 million. Upon consolidation, state and employer contributions were revised; the State's contribution of $6.0 million, which meets the special funding situation definition, was due September 2015. Police and Fire Fund Changes in Actuarial Assumptions • The assumed postretirement benefit increase rate was changed from 1.00% per year through 2030 and 2.50% per year thereafter to 1.00% per year through 2037 and 2.50% per year thereafter. Changes in Plan Provisions. - The postretirement benefit increase to be paid after the attainment of the 90.00% funding threshold was changed from inflation up to 2.50%, to a fixed rate of 2.50% (94) Primary Government: GERF Schedule of City Contributions Last Seven Fiscal Years Statutorily Required Contribution Contributions in Relation to the Statutorily Required Contribution Contribution Deficiency (Excess) City's Covered Payroll Contributions as a Percentage of Covered Payroll * The Amounts Presented for Each Fiscal Year were Determined as of 12/31. PEPFF Schedule of City Contributions Last Seven Fiscal Years* Statutorily Required Contribution Contributions in Relation to the Statutorily Required Contribution Contribution Deficiency (Excess) City's Covered Payroll Contributions as a Percentage of Covered Payroll * The Amounts Presented for Each Fiscal Year were Determined as of 12/31. Component Unit: GERF Schedule of HRA Contributions Last Seven Fiscal Years Statutorily Required Contribution Contributions in Relation to the Statutorily Required Contribution Contribution Deficiency (Excess) HRA's Covered Payroll Contributions as a Percentage of Covered Payroll * The Amounts Presented for Each Fiscal Year were Determined as of 12/31. CITY OF ELK RIVER, MINNESOTA PERA SCHEDULE OF CITY CONTRIBUTIONS DECEMBER 31, 2020 2020 2019 2018 2017 2016 2015 2014 $ 810,637 $ 753,933 $ 736,804 $ 706,711 $ 690,811 $ 668,633 $ 615,331 810,637 753,933 736,804 706,7111 (690,8111 (668,633) (615,3311 $ 10,808,493 $ 10,052,440 $ 9,824,053 $ 9,422,813 $ 9,210,813 $ 8,915,107 $ 8,487,324 7.50% 7.50% 7.50% 7.50% 7.50% 7.50% 7.25% 2020 2019 2018 2017 2016 2015 2014 $ 610,950 $ 631,494 $ 533,296 $ 508,774 $ 495,478 $ 478,192 $ 418,280 610,950 631,494 � ,296 (508,774) (495,478) 478,192 418,280 $ 3,451,695 $ 3,725,628 $ 3,291,951 $ 3,140,580 $ 3,058,506 $ 2,951,802 $ 2,581,975 17.70 % 16.95 % 16.20 % 16.20 % 16.20 % 16.20 % 16.20 % 2020 2019 2018 2017 2016 2015 2014 $ 4,629 $ 5,040 $ 4,810 $ 4,494 $ 4,352 $ 4,212 $ 3,877 (4,629) $ 61,720 $ 67,200 $ 64,133 $ 59,920 $ 58,027 $ 56,160 $ 53,476 7.50% 7.50% 7.50% (95) 7.50% 7.50% 7.50% 7.25% CITY OF ELK RIVER, MINNESOTA SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY AND RELATED RATIOS - ELK RIVER FIRE RELIEF DECEMBER 31, 2020 Total Pension Liability Service Cost Interest Differences Between Expected and Actual Experience Changes of Assumptions Changes of Benefit Terms Benefit Payments, Including Member Contribution Refunds Other Changes Net Change in Total Pension Liability Total Pension Liability - Beginning Total Pension Liability - Ending (a) Plan Fiduciary Net Position Municipal Contributions State Contributions Net Investment Income Benefit Payments Administrative Expenses Net Change in Fiduciary Net Position Fiduciary Net Position - Beginning Fiduciary Net Position - Ending (b) Association's Ending Net Pension Liability/(Asset) (a-b) Plan Fiduciary Net Position as a Percentage of Total Pension Liability (b/a) Covered Payroll Net Pension Liability/(Asset) as a Percentage of Covered Payroll 'Ten Years of Data Will Eventually Be Presented When Available 2020 2019 2018 2017 2016 2015 $ 138,202 $ 107,610 $ 101,600 $ 107,095 $ 99,459 $ 93,312 164,617 146,432 146,894 142,222 127,413 126,522 - (14,808) - (147,992) - - 25,224 39,541 11,196 - 297,706 - - 645,281 - 55,532 - 62,318 (396,875) (334,581) (147,015) (423,760) - (68,832) 589,475 259,690 9,842 100,818 282,152 3,195,791 2,606,316 2,346,626 2,336,784 2,235,966 1,953,814 3,126,959 3,195,791 2,606,316 2,346,626 2,336,784 2,235,966 30,000 30,000 30,000 30,000 30,000 30,000 199,451 189,502 182,297 179,192 177,826 164,825 540,907 (224,880) 457,331 229,424 (143,580) 124,109 (396,875) (334,581) - (147,015) (423,760) - (16,374) (11,963) (12,907) (12,884) (13,663) (8,634) 357,109 (351,922) 656,721 278,717 (373,177) 310,300 3,401,218 3,753,140 3,096,419 2,817,702 3,190,879 2,880,579 3,758,327 3,401,218 3,753,140 3,096,419 2,817,702 3,190,879 (631,368) (205,427) (1,146,824) (749,793) (480,918) (954,913) 120.19% 106.43% 144.00% 131.95% 120.58% 142.71% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A .a Year Ending 12/31/2020 12/31/2019 12/31/2018 12/31 /2017 12/31 /2016 12/31 /2015 12/31/2014 12/31/2013 CITY OF ELK RIVER, MINNESOTA SCHEDULE OF CITY CONTRIBUTIONS - ELK RIVER FIRE RELIEF DECEMBER 31, 2020 Actuarial Determined Contribution (a $ 206,496 199,424 189,502 182,297 179,192 174,826 164,825 167,103 Actual Contributions Paid (b) $ 236,496 229,424 219,502 212,297 209,192 204,826 194,825 197,103 "Ten Years of Data Will Eventually Be Presented When Available Contribution Deficiency (Excess)(a-b) (30,000) (30,000) (30,000) (30,000) (30,000) (30,000) (30,000) (30,000) (97) COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES This page intentionally left blank. NONMAJOR GOVERNMENTAL FUNDS Special Revenue — Special revenue funds are used to account for the 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. 13 This page intentionally left blank. CITY OF ELK RIVER, MINNESOTA COMBINING BALANCE SHEET — NONMAJOR GOVERNMENTAL FUNDS DECEMBER 31, 2020 ASSETS Cash and Investments Receivables: Accrued Interest Taxes Special Assessments Other Accounts Receivable Notes Receivable, Net Due from Other Governments Due from Other Funds Prepaid Items Land Held for Resale Total Assets LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCE LIABILITIES Accounts and Contracts Payable Accrued Salaries Payable Due to Other Governments Due to Other Funds Due to Component Unit Unearned Revenue Total Liabilities DEFERRED INFLOWS OF RESOURCES Unavailable Revenue - Taxes Unavailable Revenue - Special Assessments Total Deferred Inflows of Resources FUND BALANCE Nonspendable Restricted Committed Assigned Unassigned Total Fund Balance Total Liabilities, Deferred Inflows of Resources, and Fund Balance Special Debt Capital Revenue Service Projects Totals $ 5,621,174 $ 8,727,916 $ 23,639,259 $ 37,988,349 17,724 9,274 51,045 78,043 13,325 594,370 342 608,037 - - 1,631,458 1,631,458 26,938 - 394,507 421,445 1,626,577 - - 1,626,577 51 - 44,591 44,642 1,598,564 - - 1,598,564 - - 16 16 175,000 - - 175,000 $ 9,079,353 $ 9,331,560 $ 25,761,218 $ 44,172,131 $ 103,523 $ 24,561 $ 1,155,047 $ 1,283,131 17,359 - - 17,359 109 - 52 161 15,488 - 1,899,214 1,914,702 - - 187,499 187,499 - - 674,085 674,085 136,479 24,561 3,915,897 4,076,937 3,460 7,366 79 10,905 - - 1,629,453 1,629,453 3,460 7,366 1,629,532 1,640,358 - - 16 16 1,404,656 9,299,633 9,705,034 20,409,323 5,893,257 - - 5,893,257 1,641,501 - 13,163,545 14,805,046 - - (2,652,806) (2,652,806) 8,939,414 9,299,633 20,215,789 38,454,836 $ 9,079,353 $ 9,331,560 $ 25,761,218 $ 44,172,131 ME CITY OF ELK RIVER, MINNESOTA COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS YEAR ENDED DECEMBER 31, 2020 Special Debt Capital Revenue Service Projects Totals REVENUE Property Taxes $ 541,796 $ 1,133,141 $ 266,662 $ 1,941,599 Sales Tax Revenue - 3,030,938 - 3,030,938 Special Assessments - - 122,000 122,000 Intergovernmental Revenue 1,885,167 - 886,103 2,771,270 Charges for Services 445,788 - 207,127 652,915 Fines and Forfeits 17,659 - - 17,659 Other Revenue: Landfill Expansion Fee - - 2,065,125 2,065,125 Investment Earnings 179,458 35,290 538,369 753,117 Refunds and Reimbursements 47,394 - - 47,394 Contributions - 241,662 132,576 374,238 Miscellaneous Revenue 29,806 - 76,232 106,038 Total Revenue 3,147,068 4,441,031 4,294,194 11,882,293 EXPENDITURES Current: General Government 240,732 - 55,763 296,495 Public Safety 53,062 - 208,268 261,330 Public Works 35,096 - 106,607 141,703 Culture and Recreation 987,065 - 121,018 1,108,083 Economic Development 547,268 - 145,889 693,157 Capital Outlay: General Government 1,066,560 - 431,203 1,497,763 Public Safety - - 1,623,866 1,623,866 Public Works 22,735 - 898,890 921,625 Culture and Recreation 34,000 - 938,209 972,209 Debt Service: Principal Retirement - 1,900,000 - 1,900,000 Interest and Fiscal Charges - 1,827,494 37,539 1,865,033 Total Expenditures 2,986,518 3,727,494 4,567,252 11,281,264 EXCESS (DEFICIENCY) OF REVENUE OVER (UNDER) EXPENDITURES 160,550 713,537 (273,058) 601,029 OTHER FINANCE SOURCES (USES) Issuance of Bonds and Other Debt - 5,340,000 9,435,000 14,775,000 Premium on Debt Issued - 601,585 763,328 1,364,913 Transfers In 31,061 437,989 1,491,133 1,960,183 Transfers Out (578,571) - (437,989) (1,016,560) Proceeds from Sale of Capital Assets 364,334 - 67,937 432,271 Total Other Finance Sources (Uses) (183,176) 6,379,574 11,319,409 17,515,807 NET CHANGE IN FUND BALANCES (22,626) 7,093,111 11,046,351 18,116,836 FUND BALANCES Beginning of Year 8,962,040 2,206,522 9,169,438 20,338,000 End of Year $ 8,939,414 $ 9,299,633 $ 20,215,789 $ 38,454,836 (100) NONMAJOR SPECIAL REVENUE FUNDS Library — This fund accounts for any library maintenance costs which are not paid by the Great River Regional Library System. Multipurpose Facility — This fund accounts for the operation and maintenance of the multipurpose facility 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. CRF Grant Funds — This fund was established to account for revenues and expenditures related to the Coronavirus Relief Fund grant the City received in 2020 to help mitigate the impact of the COVID-19 pandemic. Economic Development Authority — This fund was established to account for a special tax levy authorized to help encourage development in the City. (101) CITY OF ELK RIVER, MINNESOTA COMBINING BALANCE SHEET - NONMAJOR SPECIAL REVENUE FUNDS DECEMBER 31, 2020 Multipurpose Revolving Library Facility Landfill Loan ASSETS Cash and Investments $ 384,674 $ 259,991 $ 1,027,887 $ 853,292 Receivables: Accrued Interest 1,614 997 4,218 3,491 Taxes 1,684 - - - Other Accounts Receivable - 20,693 4,803 - Notes Receivable, Net - - 342,334 Due from Other Governments - - Due from Other Funds - - Land Held for Resale - - - - Total Assets $ 387,972 $ 281,681 $ 1,036,908 $ 1,199,117 LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCE LIABILITIES Accounts and Contracts Payable $ 2,875 $ 80,955 $ 1,261 $ Accrued Salaries Payable - 15,620 - Due to Other Governments 109 Due to Other Funds - - - - Total Liabilities 2,875 96,684 1,261 - DEFERRED INFLOWS OF RESOURCES Unavailable Revenue - Taxes 433 - - - FUND BALANCE Restricted - - 30,455 - Committed 384,664 184,997 - 1,199,117 Assigned - - 1,005,192 - Total Fund Balance 384,664 184,997 1,035,647 1,199,117 Total Liabilities, Deferred Inflows of Resources, and Fund Balance $ 387,972 $ 281,681 $ 1,036,908 $ 1,199,117 (102) CITY OF ELK RIVER, MINNESOTA COMBINING BALANCE SHEET - NONMAJOR SPECIAL REVENUE FUNDS (CONTINUED) DECEMBER 31, 2020 Development Insurance Drug State DEED Fund Reserve Forfeiture CRF Grant EDA Totals $ 161,157 $ 1,535,967 $ 79,000 $ 33,088 $ - $ 1,286,118 $ 5,621,174 659 6,283 323 139 - 17,724 - 3,458 - - 8,183 13,325 - - 1,442 - - 26,938 374,525 909,718 - - 1,626,577 - - 51 51 1,598,564 - 1,598,564 - - - 175,000 175,000 $ 536,341 $ 4,053,990 $ 80,765 $ 33,278 $ $ 1,469,301 $ 9,079,353 $ $ 9,071 $ 285 $ 150 $ $ 8,926 $ 103,523 - - - 1,739 17,359 - 109 - - - 15,488 15,488 9,071 285 150 26,153 136,479 920 - - 2,107 3,460 536,341 - - 28,743 809,117 1,404,656 - 4,043,999 80,480 - - 5,893,257 - - - 4,385 631,924 1,641,501 536,341 4,043,999 80,480 33,128 1,441,041 8,939,414 $ 536,341 $ 4,053,990 $ 80,765 $ 33,278 $ $ 1,469,301 $ 9,079,353 (103) CITY OF ELK RIVER, MINNESOTA COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - NONMAJOR SPECIAL REVENUE FUNDS YEAR ENDED DECEMBER 31, 2020 REVENUE Property Taxes Intergovernmental Revenue Charges for Services Fines and Forfeits Other Revenue: Investment Earnings Refunds and Reimbursements Miscellaneous Revenue Total Revenue EXPENDITURES Current: General Government Public Safety Public Works Culture and Recreation Economic Development Capital Outlay: General Government Public Works Culture and Recreation Total Expenditures EXCESS (DEFICIENCY) OF REVENUE OVER (UNDER) EXPENDITURES OTHER FINANCE SOURCES (USES) Transfers In Transfers Out Proceeds from Sale of Capital Assets Total Other Finance Sources (Uses) NET CHANGE IN FUND BALANCES FUND BALANCES Beginning of Year End of Year Multipurpose Library Facility $ 68,944 $ $ 408,749 6,827 6,183 - 6,061 _ 75,771 420,993 Revolving Landfill Loan 9,713 13,039 44,936 37,656 9,255 67.688 46.911 - - 26,592 139,798 823,938 - - - - - 97,373 139,798 823,938 26,592 97,373 (64,027) (402,945) 41,096 (50,462) 28,000 3,061 - 28,000 3,061 - (36,027) (399,884) 41,096 (50,462) 420,691 584,881 994,551 1,249,579 $ 384,664 $ 184,997 $ 1,035,647 $ 1,199,117 (104) CITY OF ELK RIVER, MINNESOTA COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - NONMAJOR SPECIAL REVENUE FUNDS (CONTINUED) YEAR ENDED DECEMBER 31, 2020 Development State DEED Fund $ $ 138,575 $ 500 20,000 6,709 68,530 10,290 - _ 17,499 227,105 Insurance Drug Reserve Forfeiture CRF Grant EDA Totals $ $ - $ 334,277 $ 541,796 1,875,294 160 1,885,167 - 3,500 445,788 17,659 - 17,659 3,340 698 4,579 179,458 47,394 - - 47,394 - - 4,200 29,806 50,734 18,357 1,875,294 346,716 3,147,068 - 78,815 - 161,917 240,732 - - 23,284 29,778 53,062 - - 8,504 35,096 - - 23,329 - 987,065 533 163,654 - 285,708 547,268 - - 1,066,560 - 1,066,560 - 22,735 22,735 - - 34,000 - 34,000 533 163,654 78,815 23,284 1,346,823 285,708 2,986,518 16,966 63,451 (28,081) (4,927) 528,471 61,008 160,550 (10,600) 364,334 - 353,734 16,966 417,185 (28,081) 31,061 (528,471) (39,500) (578,571) 364,334 (528,471) (39,500) (183,176) (4,927) 21,508 (22,626) 519,375 3,626,814 108,561 38,055 1,419,533 8,962,040 $ 536,341 $ 4,043,999 $ 80,480 $ 33,128 $ $ 1,441,041 $ 8,939,414 (105) CITY OF ELK RIVER, MINNESOTA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES — BUDGET AND ACTUAL — LIBRARY SPECIAL REVENUE FUND YEAR ENDED DECEMBER 31, 2020 REVENUE Property Taxes Investment Earnings Total Revenue EXPENDITURES Current: Culture and Recreation: Capital Outlay: Culture and Recreation: Total Expenditures EXCESS (DEFICIENCY) OF REVENUE OVER (UNDER) EXPENDITURES OTHER FINANCE SOURCES Transfers In NET CHANGE IN FUND BALANCES FUND BALANCES Beginning of Year End of Year Budgeted Amounts Over (Under) Original Final Actual Final Budget $ 69,000 $ 69,000 $ 68,944 $ (56) 8,100 8,100 6,827 (1,273) 77,100 77,100 75,771 (1,329) 105,100 105,100 139,798 34,698 10,000 10,000 - (10,000) 115,100 115,100 139,798 24,698 (38,000) (38,000) (64,027) (26,027) 28,000 28,000 28,000 - $ (10,000) $ (10,000) (36,027) $ (26,027) 420,691 (106) CITY OF ELK RIVER, MINNESOTA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL - MULTI -PURPOSE FACILITY SPECIAL REVENUE FUND YEAR ENDED DECEMBER 31, 2020 REVENUE Charges for Services Investment Earnings Contributions Miscellaneous Revenue Total Revenue EXPENDITURES Current: Culture and Recreation: EXCESS (DEFICIENCY) OF REVENUE OVER (UNDER) EXPENDITURES OTHER FINANCE SOURCES Transfers In NET CHANGE IN FUND BALANCES FUND BALANCES Beginning of Year End of Year Budgeted Amounts Over (Under) Original Final Actual Final Budget $ 591,200 $ 591,200 $ 408,749 $ (182,451) 6,000 6,000 6,183 183 5,500 5,500 - (5,500) 11,600 11,600 6,061 (5,539) 614,300 614,300 420,993 (193,307) 766,300 766,300 823,938 57,638 (152,000) (152,000) - 3,061 $ (152,000) $ (148,939) (402,945) (250,945) 3,061 - (399,884) $ (250,945) 584,881 $ 184,997 (107) CITY OF ELK RIVER, MINNESOTA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL - ECONOMIC DEVELOPMENT AUTHORITY SPECIAL REVENUE FUND YEAR ENDED DECEMBER 31, 2020 REVENUE Property Taxes Intergovernmental Revenue Charges for Services Investment Earnings Miscellaneous Revenue Total Revenue EXPENDITURES Current: Economic Development EXCESS OF REVENUE OVER EXPENDITURES OTHER FINANCE SOURCES (USES) Transfers Out NET CHANGE IN FUND BALANCES FUND BALANCES Beginning of Year End of Year Budgeted Amounts Original Final Actual Over (Under) Final Budget $ 334,450 $ 334,450 $ 334,277 $ (173) - - 160 160 3,500 3,500 3,500 5,000 5,000 4,579 (421) - - 4,200 4,200 342,950 342,950 346,716 3,766 303,450 303,450 285,708 (17,742) 39,500 39,500 61,008 21,508 (39,500) (39,500) (39,500) $ - $ - 21,508 1,419,533 $ 1,441,041 (108) NONMAJOR DEBT SERVICE FUNDS 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. Sales Tax Bonds — This fund is used to account for the accumulation of resources and payment of principal and interest on long-term general obligation sales tax revenue debt used to finance the acquisition and betterment of certain recreational facility improvements, park improvements, trail improvements, and dredging of Lake Orono. 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. 2020A Capital Improvements Bonds — This fund is used to account for the accumulation of resources and payment of principal and interest on long-term general obligation capital improvement bonds that were used to finance improvements to the public safety building as well as fire station #3. (109) This page intentionally left blank. CITY OF ELK RIVER, MINNESOTA COMBINING BALANCE SHEET - NONMAJOR DEBT SERVICE FUNDS DECEMBER 31, 2020 ASSETS Cash and Investments Receivables: Accrued Interest Taxes Total Assets LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCE LIABILITIES Accounts and Contracts Payable DEFERRED INFLOWS OF RESOURCES Unavailable Revenue - Taxes FUND BALANCE Restricted Total Liabilities, Deferred Inflows of Resources, and Fund Balance Government 2020A Capital Building Sales Tax Improvement Bonds Bonds YMCA Bonds Bonds Totals $ 6,892,792 $ 1,216,500 $ 614,510 $ 4,114 $ 8,727,916 4,169 5,105 - - 9,274 14,677 567,523 12,170 - 594,370 $ 6,911,638 $ 1,789,128 $ 626,680 $ 4,114 $ 9,331,560 $ 24,361 $ 200 $ - $ $ 24,561 3,518 - 3,848 7,366 6,883,759 1,788,928 622,832 4,114 9,299,633 $ 6,911,638 $ 1,789,128 $ 626,680 $ 4,114 $ 9,331,560 (110) CITY OF ELK RIVER, MINNESOTA COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - NONMAJOR DEBT SERVICE FUNDS YEAR ENDED DECEMBER 31, 2020 Government 2020A Capital Building Sales Tax Improvement Bonds Bonds YMCA Bonds Bonds Totals REVENUE Property Taxes $ 618,868 $ - $ 514,273 $ $ 1,133,141 Sales Tax Revenue - 3,030,938 - 3,030,938 Other Revenue: Investment Earnings 10,630 23,252 1,408 35,290 Contributions - - 241,662 241,662 Total Revenue 629,498 3,054,190 757,343 4,441,031 EXPENDITURES Debt Service: Principal Retirement 825,000 550,000 525,000 1,900,000 Interest and Fiscal Charges 259,601 1,367,905 199,988 1,827,494 Total Expenditures 1,084,601 1,917,905 724,988 3,727,494 EXCESS (DEFICIENCY) OF REVENUE OVER (UNDER) EXPENDITURES (455,103) 1,136,285 32,355 713,537 OTHER FINANCE SOURCES Issuance of Bonds and Other Debt 5,340,000 - - 5,340,000 Premium on Debt Issued 601,585 601,585 Transfers In 433,875 4,114 437,989 Total Other Finance Sources (Uses) 6,375,460 - - 4,114 6,379,574 NET CHANGE IN FUND BALANCES 5,920,357 1,136,285 32,355 4,114 7,093,111 FUND BALANCES Beginning of Year 963,402 652,643 590,477 - 2,206,522 End of Year $ 6,883,759 $ 1,788,928 $ 622,832 $ 4,114 $ 9,299,633 NONMAJOR CAPITAL PROJECTS FUNDS Park Dedication — This fund accounts for park dedication fees from developers and expenditures for park land acquisitions and park capital improvements. Capital Outlay Reserve — This fund was established to help build reserves for the purchase of capital equipment. 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. Equipment Replacement — This fund is used to account for the purchase of capital equipment. Park Improvements — This fund was established to account for the replacement and maintenance of park equipment and for the beautification of City parks. Developer Deposits — This fund is used to account for resources received from developers for the payment of expenses incurred by the City for private development projects. TIF Districts — This fund is used to account for administrative and development costs associated with the various tax increment financing projects. Public Safety Building / Fire Station #3 — This fund is used to account for the capital improvements being done on the public safety building as well as fire station #3. (112) CITY OF ELK RIVER, MINNESOTA COMBINING BALANCE SHEET - NONMAJOR CAPITAL PROJECT FUNDS DECEMBER 31, 2020 ASSETS Cash and Investments Receivables: Accrued Interest Taxes Special Assessments Other Accounts Receivable Due from Other Governments Prepaid Items Total Assets LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCE LIABILITIES Accounts and Contracts Payable Due to Other Governments Due to Other Funds Due to Component Unit Unearned Revenue Total Liabilities DEFERRED INFLOWS OF RESOURCES Unavailable Revenue - Taxes Unavailable Revenue - Special Assessments Total Deferred Inflows of Resources FUND BALANCE Nonspendable Restricted Assigned Unassigned Total Fund Balance Total Liabilities, Deferred Inflows of Resources, and Fund Balance Capital Park Outlay Government GRE Street Dedication Reserve Buildings Reserve Improvements $ 566,895 $ 1,759,038 $ 3,024,928 $ 1,984,566 $ 767,845 2,319 5,319 12,468 8,118 3,219 - - 114 - 5 544 - 68,979 - 386,874 - 25,818 - 18,773 $ 569,214 $ 1,790,719 $ 3,424,384 $ 1,992,684 $ 858,821 $ 5,205 $ 18,962 $ 25,592 $ $ 24,230 674,085 - - - 679,290 18,962 25,592 24,230 - 79 - 544 - 66,974 544 79 66,974 461,813 - - - - - 1,771,213 3,398,713 1,992,684 767,617 (571,889) - - - - (110,076) 1,771,213 3,398,713 1,992,684 767,617 $ 569,214 $ 1,790,719 $ 3,424,384 $ 1,992,684 $ 858,821 CITY OF ELK RIVER, MINNESOTA COMBINING BALANCE SHEET - NONMAJOR CAPITAL PROJECT FUNDS (CONTINUED) DECEMBER 31, 2020 Public Safety Improvement Equipment Park Developer Building / Fire Projects Replacement Improvements Deposits TIF Districts Station #3 Totals $ 4,464,681 $ 652,585 $ 104,467 $ 746,231 $ 5,641 $ 9,562,382 $ 23,639,259 18,263 870 469 - 51,045 - - - 223 342 1,561,935 - - - 1,631,458 - 7,416 217 - 394,507 - - - 44,591 - - - 16 - - 16 $ 6,044,879 $ 653,455 $ 112,352 $ 746,464 $ 5,864 $ 9,562,382 $ 25,761,218 $ 8,429 $ 7,004 $ $ 746,464 $ - $ 319,161 $ 1,155,047 - - - 52 - 52 1,899,214 1,899,214 187,499 187,499 - - 674,085 8,429 7,004 746,464 2,086,765 319,161 3,915,897 - - 79 1,561,935 - 1,629,453 1,561,935 - 1,629, 532 16 - - 16 - - - - 9,243,221 9,705,034 4,474,515 646,451 112,352 - - 13,163,545 - - - (16) (2,080,901) - (2,652,806) 4,474,515 646,451 112,352 - (2,080,901) 9,243,221 20,215,789 $ 6,044,879 $ 653,455 $ 112,352 $ 746,464 $ 5,864 $ 9,562,382 $ 25,761,218 CITY OF ELK RIVER, MINNESOTA COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - NONMAJOR CAPITAL FUNDS YEAR ENDED DECEMBER 31, 2020 REVENUE Property Taxes Special Assessments Intergovernmental Revenue Charges for Services Other Revenue: Landfill Expansion Fee Investment Earnings Contributions Miscellaneous Revenue Total Revenue 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: Interest and Fiscal Charges Total Expenditures EXCESS (DEFICIENCY) OF REVENUE OVER (UNDER) EXPENDITURES OTHER FINANCE SOURCES (USES) Issuance of Bonds and Other Debt Premium on Debt Issued Transfers In Transfers Out Proceeds from Sale of Capital Assets Total Other Finance Sources (Uses) NET CHANGE IN FUND BALANCE FUND BALANCES Beginning of Year End of Year Park Capital Outlay Government GRE Street Dedication Reserve Buildings Reserve Improvements $ $ - $ 204 $ $ 12 80 - 55,934 156,160 - 18,773 137,067 28,060 42,000 - - - 2,065,125 - 23,095 56,446 129,459 87,805 34,593 - 117,847 - 5,671 - 16,457 - - 160,162 375,050 2,236,788 93,476 109,312 - 35,773 19,990 - - 56,190 7,112 - 76,265 - 32,607 - 42,000 83,954 316,543 13,425 491,472 - - - - 180,520 129,239 - 222,666 - - 29,071 - - - 61,678 265,607 1,099,783 180,520 129,239 98,484 109,443 1,137,005 (87,044) (19,927) 447,986 - (433,875) 447,986 (433,875) 98,484 557,429 703,130 (87,044) (19,927) (208,560) 1,213,784 2,695,583 2,079,728 787,544 $ (110,076) $ 1,771,213 $ 3,398,713 $ 1,992,684 $ 767,617 CITY OF ELK RIVER, MINNESOTA COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - NONMAJOR CAPITAL FUNDS (CONTINUED) YEAR ENDED DECEMBER 31, 2020 Improvement Equipment Park Developer Projects Replacement Improvement Deposits TIF Districts $ - $ $ $ $ 266,446 65,986 - - 420,154 291,016 194,523 10,441 1,991 - - 9,058 - - 23,735 - 36,040 _ 260,509 454,330 302,065 302,486 30,342 46,411 30,706 - 312,926 74,804 514,327 - - 175,044 540,499 105,146 1,033,003 586,910 Public Safety Building / Fire Station #3 Totals $ 266,662 122,000 886,103 207,127 2,065,125 16 538,369 - 132,576 - 76,232 16 4,294,194 - 55,763 144,966 208,268 - 106,607 - 121,018 145,889 145,889 - - 431,203 806,043 1,623,866 - 898,890 938,209 8,468 - 37,539 154,357 951,009 4,567,252 155,363 (578,673) (284,845) 148,129 (950,993) (273,058) - - 9,435,000 9,435,000 - - 763,328 763,328 788,000 255,147 - 1,491,133 - - (4,114) (437,989) 67,937 - 67,937 - 855,937 255,147 - 10,194,214 11,319,409 155,363 277,264 (29,698) 148,129 9,243,221 11,046,351 4,319,152 369,187 142,050 (2,229,030) - 9,169,438 $ 4,474,515 $ 646,451 $ 112,352 $ $ (2,080,901) $ 9,243,221 $ 20,215,789 This page intentionally left blank. 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. This page intentionally left blank. CITY OF ELK RIVER, MINNESOTA HOUSING AND REDEVELOPMENT AUTHORITY BALANCE SHEET - GOVERNMENTAL FUND DECEMBER 31, 2020 ASSETS Cash and Investments Receivables: Taxes Notes Other Accounts Receivable Due from Primary Government Land Held for Redevelopment Total Assets LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCE LIABILITIES Accounts Payable Accrued Salaries Payable Deposits Payable Due to Primary Government Total Liabilities DEFERRED INFLOWS OF RESOURCES Unavailable Revenue - Taxes FUND BALANCE Nonspendable Restricted for Housing and Redevelopment Total Fund Balance Total Liabilities, Deferred Inflows of Resources, and Fund Balance Housing and Redevelopment Authority $ 548,530 8,897 559,584 2,258 187,499 382,000 $ 1,688,768 $ 27,467 1,159 4,398 9,686 42.710 00M 559,584 1,084,269 1,643,853 $ 1,688,768 CITY OF ELK RIVER, MINNESOTA HOUSING AND REDEVELOPMENT AUTHORITY RECONCILIATION OF THE GOVERNMENTAL FUND BALANCE SHEET TO THE STATEMENT OF NET POSITION DECEMBER 31, 2020 Total Fund Balance - Housing and Redevelopment Authority Total net position reported for governmental activities in the statement of net position is different because: Capital assets used in governmental funds are not financial resources and, therefore, are not reported in the funds. Those assets consist of: Land $ 257,100 Other Improvements 174,290 Total Capital Assets 431,390 Less: Accumulated Depreciation (93,923) Some of the receivables (including property taxes and other long-term receivables) will be collected after year-end, but are not available soon enough to pay for the current period's expenditures and, therefore, are reported as deferred inflows of resources in the governmental funds. The net pension liability and related deferred inflows and deferred outflows are recorded only on the statement of net position. Balances at year-end are: Net Pension Liability (51,316) Deferred Inflows of Resources - Pensions (2,820) Deferred Outflows of Resources - Pensions 5,548 Total Net Position - Housing and Redevelopment Authority 1,643,853 337,467 2,205 (48,588) $ 1,934,937 (119) CITY OF ELK RIVER, MINNESOTA HOUSING AND REDEVELOPMENT AUTHORITY STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCES - GOVERNMENTAL FUND YEAR ENDED DECEMBER 31, 2020 Housing and Redevelopment Authority REVENUE Property Taxes $ 369,901 Intergovernmental Revenue 177 Charges for Services 10,167 Other Revenue: Investment Earnings 8,825 Total Revenue 389,070 EXPENDITURES Current: Economic Development 312,373 Capital Outlay: Economic Development 286,941 Total Expenditures 599,314 NET CHANGE IN FUND BALANCES (210,244) FUND BALANCES Beginning of Year 1,854,097 End of Year $ 1,643,853 (120) CITY OF ELK RIVER, MINNESOTA HOUSING AND REDEVELOPMENT AUTHORITY RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES YEAR ENDED DECEMBER 31, 2020 Net Change in Fund Balances - Housing and Redevelopment Authority $ (210,244) Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures and proceeds from the sale of capital assets as revenues. However, in the statement of activities, assets are capitalized and the cost is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which depreciation exceeded capital outlays in the current period. Depreciation Expense (11,621) Delinquent and certain other property taxes receivable will be collected subsequent to year-end, but are not available soon enough to pay for the current period's expenditures and, therefore, are reported as deferred inflows of resources and excluded from revenues in the governmental funds. Unavailable Revenue - Property Taxes 64 Pension expenditures in the governmental funds are measured by current year employee contributions. Pension expenses on the statement of activities are measured by the change in net pension liability and the related deferred inflows and outflows of resources. 13,158 Change in Net Position - Housing and Redevelopment Authority $ (208,643) (121) CITY OF ELK RIVER, MINNESOTA 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 123 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 128 These schedules contain information to help the reader assess the City's most significant local revenue sources; electric sales and property taxes. Debt Capacity 134 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 143 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 145 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. (122) This page intentionally left blank. CITY OF ELK RIVER, MINNESOTA NET POSITION BY COMPONENT - LAST TEN FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) Fiscal Year 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Governmental Activities: Net Investment in Capital Assets $ 84,741,957 $ 84,060,768 $ 84,353,785 $ 84,921,650 $ 75,030,579 $ 78,119,790 $ 78,958,608 $ 77,092,055 $ 78,288,782 $ 78,477,651 Restricted 6,283,346 6,391,182 5,256,724 4,192,856 3,675,588 11,990,647 2,925,562 4,236,048 3,741,368 17,138,100 Unrestricted 29,282,251 27,448,688 24,069,710 24,902,387 20,170,751 6,584,209 15,779,965 17,685,456 19,823,663 14,546,321 Total Governmental Activities Net Position $ 120,307,554 $ 117,900,638 $ 113,680,219 $ 114,016,893 $ 98,876,918 $ 96,694,646 $ 97,664,135 $ 99,013,559 $ 101,853,813 $ 110,162,072 Business -Type Activities: Net Investment in Capital Assets $ 60,525,218 $ 60,268,219 $ 62,035,437 $ 63,392,972 $ 76,747,269 $ 82,230,963 $ 83,919,324 $ 85,104,737 $ 84,327,032 $ 86,155,217 Restricted 724,500 724,500 647,000 490,500 490,500 997,660 997,660 1,261,359 1,261,359 1,261,359 Unrestricted 19,421,085 22,376,508 22,957,506 24,718,391 24,504,299 21,466,617 21,912,125 24,308,658 27,656,995 31,499,220 Total Business -Type Activities Net Position $ 80,670,803 $ 83,369,227 $ 85,639,943 $ 88,601,863 $ 101,742,068 $ 104,695,240 $ 106,829,109 $ 110,674,754 $ 113,245,386 $ 118,915,796 Primary Government: Net Investment in Capital Assets $ 145,267,175 $ 144,328,987 $ 146,389,222 $ 148,314,622 $ 151,777,848 $ 160,350,753 $ 162,877,932 $ 162,196,792 $ 162,615,814 $ 164,632,868 Restricted 7,007,846 7,115,682 5,903,724 4,683,356 4,166,088 12,988,307 3,923,222 5,497,407 5,002,727 18,399,459 Unrestricted 48,703,336 49,825,196 47,027,216 49,620,778 44,675,050 28,050,826 37,692,090 41,994,114 47,480,658 46,045,541 Total Primary Government Net Position $ 200,978,357 $ 201,269,865 $ 199,320,162 $ 202,618,756 $ 200,618,986 $ 201,389,886 $ 204,493,244 $ 209,688,313 $ 215,099,199 $ 229,077,868 (123) Expenses: Governmental Activities: General Government Public Safety Public Works Culture and Recreation Economic Development Interest and Fiscal Charges Total Governmental Activities Expenses Business -Type Activities: Municipal Liquor Garbage Sewer Stormwater Water Electric Total Business -Type Activities Expenses Total Primary Government Expenses Program Revenues: Governmental Activities: Charges for Services: General Government Public Safety Public Works Culture and Recreation Economic Development Operating Grants and Contributions Capital Grants and Contributions Total Governmental Activities Program Revenues Business -Type Activities: Charges for Services: Municipal Liquor Garbage Sewer Storm Water Water Electric Operating Grants and Contributions Capital Grants and Contributions Total Business -Type Activities Program Revenues Total Primary Government Program Revenues CITY OF ELK RIVER, MINNESOTA CHANGES IN NET POSITION - LAST TEN FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 $ 3,495,458 $ 2,994,342 $ 3,344,317 $ 3,554,136 $ 3,619,293 $ 3,996,316 $ 3,932,100 $ 3,981,134 $ 3,786,257 $ 4,526,987 6,238,611 6,187,246 6,173,244 6,615,593 6,720,283 9,231,492 7,670,839 7,398,041 9,188,562 8,372,884 5,720,759 6,037,000 6,535,616 6,860,673 5,351,630 5,539,045 6,803,504 5,619,836 5,920,022 4,468,711 3,851,181 4,013,098 3,914,000 4,088,992 3,970,704 4,014,737 4,157,960 4,474,619 4,094,690 6,080,466 1,451,109 1,059,058 2,088,064 1,091,125 959,414 954,723 1,221,761 969,443 540,497 691,956 1,045,905 1,163,352 1,288,020 1,075,408 1,084,902 996,933 549,303 486,630 979,755 1,490,127 21,803,023 21,454,096 23,343,261 23,285,927 21,706,226 24,733,246 24,335,467 22,929,703 24,509,783 25,631,131 5,366,557 5,622,305 5,706,760 5,776,873 5,945,126 6,063,922 6,030,973 6,233,700 6,772,414 7,119,662 1,304,238 1,276,887 1,251,420 1,303,943 1,382,890 1,475,027 1,521,803 1,588,956 3,550,622 3,672,176 2,130,287 2,239,914 2,320,743 2,156,329 2,318,709 2,473,139 3,377,828 3,504,489 1,456,482 1,565,482 - - - - 736,411 645,596 774,805 634,073 1,024,928 571,170 2,108,499 2,264,814 2,332,680 2,459,319 2,478,904 2,532,653 2,856,343 2,666,149 35,200,295 34,565,317 26,726,349 27,586,573 28,422,759 29,597,247 30,012,830 32,190,114 33,688,690 35,680,220 2,703,390 2,697,201 37,635,930 38,990,493 40,034,362 41,293,711 42,874,870 45,380,451 48,250,442 50,307,587 50,708,131 50,191,008 $ 59,438,953 $ 60,444,589 $ 63,377,623 $ 64,579,638 $ 64,581,096 $ 70,113,697 $ 72,585,909 $ 73,237,290 $ 75,217,914 $ 75,822,139 $ 425,954 $ 369,794 $ 338,469 $ 385,238 $ 439,826 $ 678,679 $ 756,586 $ 648,183 $ 765,646 $ 647,010 787,884 789,728 961,072 1,063,725 1,194,458 1,041,141 1,471,063 1,219,783 1,267,920 1,176,435 79,073 82,173 206,606 233,593 174,452 199,034 177,802 111,740 94,832 51,986 1,102,630 1,128,070 1,075,576 906,291 925,591 931,674 1,051,312 1,071,902 810,476 448,022 70,976 8,244 274,833 77,430 92,716 32,961 87,842 91,503 57,075 83,785 954,831 1,018,519 954,164 1,049,744 1,033,338 1,692,517 1,319,377 1,381,151 1,396,313 3,354,583 1,750,824 1,007,794 807,208 4,020,851 3,574,036 1,333,057 3,187,830 1,721,638 1,509,650 3,254,122 5,172,172 4,404,322 4,617,928 7,736,872 7,434,417 5,909,063 8,051,812 6,245,900 5,901,912 9,015,943 6,145,692 6,525,234 6,756,581 6,825,342 6,974,336 7,009,574 6,951,988 7,203,155 7,617,790 7,927,706 1,310,014 1,302,920 1,285,138 1,304,750 1,321,301 1,342,900 1,352,728 1,553,498 2,383,196 2,481,522 1,491,460 1,533,851 1,613,276 1,734,141 1,818,476 1,921,190 2,116,900 2,301,428 1,645,115 1,686,664 - - - - 355,454 477,377 509,365 485,484 510,889 564,699 1,917,384 2,343,881 2,381,651 2,290,824 2,379,835 2,370,221 2,553,651 2,757,237 2,552,630 2,936,855 28,657,698 30,403,469 31,029,299 31,596,217 32,831,209 34,746,098 36,465,382 39,151,208 38,663,268 38,469,516 38,550 23,440 - - - - - - 1,200 - 482,319 490,916 924,641 935,909 2,708,564 1,758,131 2,196,626 2,295,004 1,277,596 3,331,984 40,043,117 42,623,711 43,990,586 44,687,183 48,389,175 49,625,491 52,146,640 55,747,014 54,651,684 57,398,946 $ 45,215,289 $ 47,028,033 $ 48,608,514 $ 52,424,055 $ 55,823,592 $ 55,534,554 $ 60,198,452 $ 61,992,914 $ 60,553,596 $ 66,414,889 (124) CITY OF ELK RIVER, MINNESOTA CHANGES IN NET POSITION - LAST TEN FISCAL YEARS (CONTINUED) (ACCRUAL BASIS OF ACCOUNTING) 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Net Revenue (Expense): Governmental Activities $ (16,630,851) $ (17,049,774) $ (18,725,333) $ (15,549,055) $ (14,271,809) $ (18,824,183) $ (16,283,655) $ (16,683,803) $ (18,607,871) $ (16,615,188) Business -Type Activities 2,407,187 3,633,218 3,956,224 3,393,472 5,514,305 4,245,040 3,896,198 5,439,427 3,943,553 7,207,938 Total Primary Government Net Expense $ (14,223,664) $ (13,416,556) $ (14,769,109) $ (12,155,583) $ (8,757,504) $ (14,579,143) $ (12,387,457) $ (11,244,376) $ (14,664,318) $ (9,407,250) General Revenues and Other Changes in Net Position: Governmental Activities: Property Taxes $ 12,346,305 $ 11,684,445 $ 10,830,218 $ 10,509,231 $ 10,931,945 $ 11,136,310 $ 11,645,328 $ 12,192,911 $ 13,022,991 $ 13,972,068 Sales Taxes - - - - - - - - 652,665 3,030,938 Other Taxes 83,748 125,623 829,112 1,441,259 1,513,621 1,552,499 1,543,086 1,591,663 1,636,333 1,698,040 Unrestricted Grants and Contributions 1,702,334 1,307,662 1,436,135 1,749,886 1,642,098 1,820,248 1,720,932 1,754,373 2,588,461 2,644,469 Investment Earnings 499,034 319,654 (663,762) 1,137,024 512,193 311,469 498,235 430,642 1,420,677 1,240,595 Miscellaneous 23,233 49,470 629,177 29,593 2,796,041 29,695 116,012 - - 56,457 Capital Contribution - (348,259) (121,172) (313,287) (11,188,695) - - - - - Gain on Sale of Capital Assets - - - - - - - - 41,698 - Transfers 3,610,854 1,504,263 1,565,206 1,332,023 297,362 1,791,690 1,971,250 2,063,638 2,085,300 2,280,880 Total Governmental Activities 18,265,508 14,642,858 14,504,914 15,885,729 6,504,565 16,641,911 17,494,943 18,033,227 21,448,125 24,923,447 Business -Type Activities: Investment Earnings 269,716 219,950 (243,047) 557,659 259,494 167,849 231,599 467,294 704,099 716,582 Miscellaneous - 1,260 1,572 29,525 8,899 331,973 17,500 2,462 - - Capital Contribution - 348,259 121,172 313,287 11,188,695 - - - - - Gain on Sale of Capital Assets - - - - - - - - 8,280 26,770 Transfers (3,610,854) (1,504,263) (1,565,206) (1,332,023) (297,362) (1,791,690) (1,971,250) (2,063,638) (2,085,300) (2,280,880) Total Business -Type Activities (3,341,138) (934,794) (1,685,509) (431,552) 11,159,726 (1,291,868) (1,722,151) (1,593,882) (1,372,921) (1,537,528) Total Primary Government $ 14,924,370 $ 13,708,064 $ 12,819,405 $ 15,454,177 $ 17,664,291 $ 15,350,043 $ 15,772,692 $ 16,439,345 $ 20,075,204 $ 23,385,919 Change in Net Position: Governmental Activities $ 1,634,657 $ (2,406,916) $ (4,220,419) $ 336,674 $ (7,767,244) $ (2,182,272) $ 1,211,188 $ 1,349,424 $ 2,840,254 $ 8,308,259 Business -Type Activities (933,951) 2,698,424 2,270,715 2,961,920 16,674,031 2,953,172 2,174,047 3,845,545 2,570,632 5,670,410 Total Primary Government $ 700,706 $ 291,508 $ (1,949,704) $ 3,298,594 $ 8,906,787 $ 770,900 $ 3,385,235 $ 5,194,969 $ 5,410,886 $ 13,978,669 (125) CITY OF ELK RIVER, MINNESOTA FUND BALANCES, GOVERNMENTAL FUNDS - LAST TEN FISCAL YEARS (MODIFIED ACCRUAL BASIS OF ACCOUNTING) Fiscal Year 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 General Fund: Nonspendable $ - $ 20,201 $ 14,628 $ 22,725 $ 23,676 $ 20,964 $ 88,038 $ 124,064 $ 187,305 $ 282,860 Restricted 20,390 - - - 7,000 - - - - - Committed 156,323 208,486 247,937 317,929 376,943 - - - Assigned 859,508 200,000 - - - 266,832 356,174 237,813 - - Unassigned 5,261,391 5,776,627 5,791,725 5,822,948 6,157,179 6,470,281 6,853,298 7,299,540 7,684,153 7,967,868 Total General Fund $ 6,297,612 $ 6,205,314 $ 6,054,290 $ 6,163,602 $ 6,564,798 $ 6,758,077 $ 7,297,510 $ 7,661,417 $ 7,871,458 $ 8,250,728 All Other Governmental Funds: Nonspendable $ 57,870 $ 101,812 $ 99,703 $ 101,910 $ 103,295 $ 108,176 $ - $ 114,976 $ 62,017 $ 16 Restricted 5,942,368 7,608,842 14,800,868 13,925,683 13,202,500 12,245,679 3,104,196 3,150,743 28,548,680 26,250,482 Committed 2,712,645 2,456,185 4,393,689 5,829,001 8,099,951 9,250,014 10,354,648 12,068,614 10,182,700 11,705,506 Assigned 19,736,795 19,219,810 15,455,671 15,883,279 15,579,524 12,632,948 10,984,072 10,716,044 13,177,577 14,950,419 Unassigned (1,059,647) (1,384,984) (2,324,550) (2,527,613) (2,438,049) (2,660,264) (2,627,513) (2,934,515) (2,824,246) (2,652,806) Total All Other Governmental Funds $ 27,390,031 $ 28,001,665 $ 32,425,381 $ 33,212,260 $ 34,547,221 $ 31,576,553 $ 21,815,403 $ 23,115,862 $ 49,146,728 $ 50,253,617 Source: City's financial records. (126) CITY OF ELK RIVER, MINNESOTA CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS - LAST TEN FISCAL YEARS (MODIFIED ACCRUAL BASIS OF ACCOUNTING) Revenues: Property Taxes Sales Tax Revenue Other Taxes Licenses and Permits Intergovernmental Charges for Services Fines and Forfeits Special Assessments Investment Earnings Miscellaneous Total Revenues Expenditures: General Government Public Safety Public Works Culture and Recreation Economic Development Capital Outlay Debt Service: Principal Interest and Fiscal Charges Total Expenditures Excess (Deficiency) of Revenues Over (Under) Expenditures Other Financing Sources (Uses): Bonds Issued Premiums on Bonds Issued Sales of Capital Assets Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Debt Service as a Percentage of Noncapital Expenditures 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 $ 12,461,403 $ 11,720,311 $ 10,930,129 $ 10,640,251 $ 10,953,633 $ 11,171,496 $ 11,642,778 $ 12,214,702 $ 13,011,977 $ 13,975,014 - - - - - - - - 652,665 3,030,938 83,748 125,623 829,112 1,441,259 1,513,621 1,552,499 1,543,086 1,591,663 1,636,333 1,698,040 432,875 408,232 513,779 559,286 639,791 655,607 1,007,543 790,831 822,899 665,519 1,678,555 1,436,613 1,161,458 838,573 3,913,721 1,681,666 3,928,374 1,405,931 1,396,706 3,865,069 1,573,367 1,659,986 1,926,906 2,091,107 1,761,958 1,851,408 2,226,936 2,182,917 1,723,091 1,473,581 149,102 137,819 163,481 160,298 169,459 167,526 205,456 157,492 166,787 107,018 989,101 845,112 764,006 881,271 315,259 456,666 241,304 379,054 58,416 122,000 499,034 319,654 (663,763) 1,146,462 512,193 311,469 498,235 430,642 1,420,677 1,240,595 2,568,159 1,980,207 2,193,571 2,358,709 2,169,789 1,455,555 2,313,388 2,212,818 3,202,501 2,899,380 20,435,344 18,633,557 17,818,679 20,117,216 21,949,424 19,303,892 23,607,100 21,366,050 24,092,052 29,077,154 3,157,307 2,615,582 2,956,500 3,181,547 3,365,570 3,601,468 3,524,634 3,733,746 4,004,917 4,333,018 5,291,617 5,352,249 5,497,493 5,909,653 6,203,211 6,859,139 6,791,738 7,325,724 7,620,997 7,764,843 2,752,469 2,931,726 2,800,012 2,974,219 2,318,123 1,861,251 1,974,095 1,875,645 2,217,650 2,274,616 2,663,806 2,839,466 2,652,817 2,881,985 2,816,411 2,872,281 2,937,333 3,438,103 2,968,847 3,056,757 1,479,140 1,087,467 1,656,922 1,095,535 954,673 949,205 1,122,261 964,926 540,763 693,157 2,874,212 10,264,274 5,243,189 2,277,477 5,251,352 2,682,358 7,165,286 2,431,103 16,631,953 24,556,635 2,618,146 2,127,000 2,194,000 1,535,000 1,505,000 5,100,000 10,675,000 1,575,000 1,315,000 1,900,000 1,059,804 1,065,354 1,283,367 1,105,114 1,113,963 1,148,535 725,732 507,661 713,023 1,865,033 21,896,501 28,283,118 24,284,300 20,960,530 23,528,303 25,074,237 34,916,079 21,851,908 36,013,150 46,444,059 (1,461,157) (9,649,561) (6,465,621) (843,314) (1,578,879) (5,770,345) (11,308,979) (485,858) (11,921,098) (17,366,905) 8,500,000 9,685,000 32,715,000 14,775,000 - 115,164 341,700 - - - - - 3,234,515 1,364,913 23,233 49,470 686,407 44,827 3,017,674 80,587 116,012 86,586 127,190 432,271 5,978,905 4,792,943 6,457,233 4,837,016 4,703,787 6,524,537 4,275,797 3,354,035 3,288,938 4,533,426 (2,368,051) (3,288,680) (4,892,027) (3,504,993) (4,406,425) (4,832,400) (2,304,547) (1,290,397) (1,203,638) (2,252,546) 3,634,087 10,168,897 12,278,313 1,376,850 3,315,036 1,772,724 2,087,262 2,150,224 38,162,005 18,853,064 $ 2,172,930 $ 519,336 $ 5,812,692 $ 533,536 $ 1,736,157 $ (3,997,621) $ (9,221,717) $ 1,664,366 $ 26,240,907 $ 1,486,159 19.6% 17.1% 16.9% 14.1% 14.3% 27.4% 38.4% 10.4% 10.4% 18.1% (127) CITY OF ELK RIVER, MINNESOTA ELECTRIC SALES — LAST TEN FISCAL YEARS Fiscal Number of Total Year Customers KWh's Sold Billings 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 2019 12,244 325,981,176 37,640,985 2020 12,365 324,469,638 37,714,965 Source: Elk River Municipal Utilities (128) Customer Customer 1 Customer 2 Customer 3 Customer 4 Customer 5 Customer 6 Customer 7 Customer 8 Customer 9 Customer 10 Customer 11 Customer 12 Customer 13 Customer 14 TOTAL CITY OF ELK RIVER, MINNESOTA PRINCIPAL ELECTRIC CUSTOMERS - CURRENT YEAR AND NINE YEARS AGO 2020 Percentage Total kWh Total of Total Sold Billings Billings 55,713,600 $ 4,639,319 12.30% 26,472,000 2,277,648 6.04% 5,294,000 557,167 1.48% 4,199,200 417,466 1.11% 4,160,640 366,777 0.97% 4,045,500 366,483 0.97% 3,486,000 339,336 0.90% 3,055,000 286,943 0.76% 3,030,800 296,801 0.79% 2,827,500 264,360 0.70% 112,284,240 $ 9,812,300 26.02% 2011 Percentage Total kWh Total of Total Sold Billings Billings 46,219,200 $ 3,631,183 13.93% 16,156,800 1,391,145 5.34% 4,767,720 373,826 1.43% 5,856,750 470,539 1.81 % 5,030,800 407,167 1.56% 3,600,600 310,403 1.19% 4,855,600 412,112 1.58% 3,546,500 301,871 1.16% 3,184,000 286,294 1.10% 2,970,400 239,195 0.92% 96,188,370 $ 7,823,734 30.02% (129) CITY OF ELK RIVER, MINNESOTA TAX CAPACITY, MARKET VALUE, AND ESTIMATED 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 2011 2012 2013 2014 $ 24,736,999 $ 21,946,865 $ 19,969,977 $ 20,047,632 350,946 344,032 353,390 367,641 25,087,945 22,290,897 20,323,367 20,415,273 (784,101) (698,130) (122,648) (116,513) $ 24,303,844 $ 21,592,767 $ 20,200,719 $ 20,298,760 45.723% 47.588% 50.373% 48.544% $ 2,035,543,052 $ 1,775,334,600 $ 1,599,513,500 $ 1,622,624,100 17, 758, 600 17, 412, 900 18,055,900 18, 736, 600 2,053,301,652 $ 1,792,747,500 1,617,569,400 1,641,360,700 $ 2,403,906,238 $ 1,907,992,306 $ 1,758,428,600 $ 1,796,401,800 85.42% 93.96% 91.99% 91.37% Source: Sherburne County Assessor Note: Property in the county is reassessed annually. The county assessor's market value of property is approximately 95 percent of actual value for all types of real and personal property. (130) CITY OF ELK RIVER, MINNESOTA TAX CAPACITY, MARKET VALUE, AND ESTIMATED VALUE OF TAXABLE PROPERTY - LAST TEN FISCAL YEARS (CONTINUED) 2015 2016 2017 2018 2019 2020 $ 21,060,822 $ 21,850,219 $ 22,672,085 $ 23,858,008 $ 25,796,978 $ 27,662,602 366,113 385,056 381,355 384,540 408,699 375,332 21,426,935 22,235,275 23,053,440 24,242,548 26,205,677 28,037,934 (198,997) (204,017) (184,717) (196,166) (199,061) (211,066) $ 21,227,938 $ 22,031,258 $ 22,868,723 $ 24,046,382 $ 26,006,616 $ 27,826,868 47.190% 46.170% 46.193% 46.011 % 45.907% 46.241 % $ 1,735,898,300 $ 1,826,858,800 $ 1,909,814,070 $ 2,026,119,675 $ 2,219,031,172 $ 2,394,547,946 18,585,200 19,469,900 19,234,400 19,393,900 20,605,300 18,945,900 $ 1,754,483,500 $ 1,846,328,700 $ 1,929,048,470 $ 2,045,513,575 $ 2,239,636,472 $ 2,413,493,846 $ 1,900,894,800 $ 1,978,763,900 $ 2,060,082,600 $ 2,178,621,000 $ 2,374,405,900 $ 2,547,475,200 92.30% 93.31% 93.64% 93.89% 94.32% 94.74% (131) CITY OF ELK RIVER, MINNESOTA PROPERTY TAX RATES - DIRECT AND OVERLAPPING GOVERNMENTS - LAST TEN FISCAL YEARS City of Elk River Fiscal Debt Year Operating Service Total 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 2019 44.099 1.808 45.907 2020 44.013 2.228 46.241 Overlapping Rates Total School District Direct & Referendum Special Overlapping County Operating Mkt. Value Districts Rates 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 47.928 32.865 0.216 2.496 129.412 47.426 34.371 0.320 2.533 130.891 Source: Sherburne County Auditor/Treasurer ' 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. (132) CITY OF ELK RIVER, MINNESOTA PRINCIPAL TAXPAYERS - CURRENT YEAR AND NINE YEARS AGO Taxpaver Great River Energy JPM Capital Corporation Target Corp. BRE Retail Residual Owner, LLC Minnegasco Walmart Stores Menards, Inc Broadstone STI Minnesota, LLC Home Depot Meritex Elk River, LLC Bradley Operating LP Minn West Bank Phoenix Enterprises 7040 Lakeland Partners LLC TOTAL Source: Sherburne County Assessor 2020 Percentage Net Tax of Total Net Capacity Rank Tax Capacity $ 999,203 1 3.59% 371,282 2 1.33% 255,248 3 0.92% 233,986 4 0.84% 204,584 5 0.74% 196,186 6 0.71 % 139,400 8 0.50% 137,578 7 0.49% 110,342 9 0.40% 105,946 10 0.38% $ 2,753,755 9.90% 2011 Percentage Net Tax of Total Net Capacity Rank Tax Capacity $ 1,276,068 1 5.25% 519,882 2 2.14 397,120 3 1.63 289,708 4 1.19 187,556 6 0.77 142,364 9 0.59 190,024 5 0.78 162,096 7 0.67 157,095 8 0.65 141,018 10 0.58 $ 3,462,931 13.12% (133) This page intentionally left blank. CITY OF ELK RIVER, MINNESOTA PROPERTY TAX LEVIES AND COLLECTIONS - LAST TEN FISCAL YEARS Collected Within the Fiscal Year of the Levy Fiscal Total Year's Percentage Year Tax Levy Amount of Levy 2011 $ 11,164,581 $ 11,052,081 98.99 2012 10,701,225 10,592,493 98.98 2013 10,685,603 10,574,080 98.96 2014 10,315,213 10,300,688 99.86 2015 10,541,719 10,511,527 99.71 2016 10,852,545 10,843,359 99.92 2017 11,397,656 11,362,631 99.69 2018 11,935,095 11,899,143 99.70 2019 12,771,153 12,706,731 99.50 2020 13,707,429 13,647,883 99.57 Collections in Subsequent 101,247 99,530 66,936 12,924 27,864 7,950 32,118 31,279 47,313 (134) Total Collections to Date Percentage Amount of Levy $ 11,153,328 99.90 10,692,023 99.91 10,641,016 99.58 10,313,612 99.98 10,539,391 99.98 10,851,309 99.99 11,394,749 99.97 11,930,422 99.96 12,754,044 99.87 13,647,883 99.57 CITY OF ELK RIVER, MINNESOTA RATIOS OF OUTSTANDING DEBT BY TYPE - LAST TEN FISCAL YEARS Governmental Activities General Fiscal General Obligation Special Tax Year Obligation Revenue Assessment Increment Other 2011 $ 20,897,939 $ $ 2,955,000 $ 305,000 $ 1,410,000 2012 26,579,666 4,035,306 - 1,410,000 2013 35,223,141 1,633,459 1,410,000 2014 34,023,916 1,246,612 1,410,000 2015 32,789,690 924,765 1,410,000 2016 29,365,466 607,918 - 2017 18,951,241 296,071 2018 17,632,016 - 2019 16, 277, 791 35, 913, 322 2020 31,028,479 35,235,066 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. (135) CITY OF ELK RIVER, MINNESOTA RATIOS OF OUTSTANDING DEBT BY TYPE - LAST TEN FISCAL YEARS (CONTINUED) Business-Tvpe Activities General Obligation Revenue Notes Revenue Bonds Payable $ 5,520,656 $ 6,310,000 $ 2,162,882 4,791,567 5,085,000 1,975,812 4,027,478 4,340,000 1,789,224 12,868,388 3,634,845 1,599,876 12,564,299 3,020,935 1,408,368 11,858,552 12,462,779 1,214,076 11,132, 723 11, 781, 983 1,018,860 10,381,894 21,528,442 820,608 9,233,625 21,004,411 619,692 16,053,687 19,741,758 415,740 Total Percentage Primary of Personal Per Government Income Capita' $ 39,561,477 5.81% $ 1,713 43,877,351 6.30% 1,890 48,423,302 7.00% 2,072 54,783,637 7.14% 2,316 52,118,057 6.69% 2,183 55,508,791 6.81% 2,294 43,180,878 5.19% 1,758 50,362,960 5.89% 2,023 83,048,841 9.49% 3,290 102,474,730 11.44% 4,004 (136) CITY OF ELK RIVER, MINNESOTA RATIOS OF GENERAL BONDED DEBT OUTSTANDING - LAST TEN FISCAL YEARS Fiscal Year General Bonded Debt 2011 $ 26,418,595 2012 31,371,233 2013 39,250,619 2014 46,892,304 2015 45,353,989 2016 41,224,018 2017 30,083,964 2018 28,013,910 2019 13,076,667 2020 26,676,667 Less Amounts Less Percentage Net Restricted Cash With Net of Net Bonded Bonded for Debt Fiscal Bonded Debt to Tax Debt per Service Agent Debt Capacity' Capital $ 3,234,939 $ $ 23,183,656 95.39% $ 1,004 3,044,599 28,326,634 131.19% 1,224 2,329,723 9,712,875 27,208,021 99.50% 860 1,599,852 9,580,144 35,712,308 97.65% 838 1,154,728 9,423,440 34,775,821 86.72% 771 1,556,232 9,284,303 30,383,483 137.91% 1,247 1,608,880 - 28,475,084 124.52% 1,159 1,473,230 26,540,680 110.37% 1,066 2,206,522 10,870,145 41.80% 431 7,510,705 19,165,962 68.88% 749 Note: Details regarding the city's outstanding debt can be found in the notes to the financial statements. 1 See the Schedule of Tax Capacity, Market Value, and Estimated Actual Value of Taxable Property for property value data. 2 Population data can be found in the Schedule of Demographic and Economic Statistics. (137) CITY OF ELK RIVER, MINNESOTA DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT DECEMBER 31, 2020 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 (25,590 Population) Ratios of Debt to Taxable Market Value of $2,413,493,846 Source: Sherburne County and School District #728 Percent of Debt City's Outstanding Applicable Share Debt to City' of Debt $ 66,263,545 100.00% $ 66,263,545 41,505,000 26.07% 10,821,284 303,850,000 29.64% 90,061,140 345,355,000 100,882,424 $ 411,618,545 $ 167,145,969 $6,532 6.93% ' 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. (138) CITY OF ELK RIVER, MINNESOTA LEGAL DEBT MARGIN INFORMATION - LAST TEN FISCAL YEARS Debt Limit Bonds Reserves Total Net Debt Applicable to Limit Legal Debt Margin Total Net Debt Applicable to the Limit as a Percentage of Debt Limit 2011 2012 2013 2014 $ 61,599,050 $ 58,316,472 $ 52,752,858 $ 53,892,054 17,120,000 23,286,667 32,141,667 30,071,667 1,030,418 1,202,093 10,819,006 10,743,409 16,089,582 22,084,574 21,322,661 19,328,258 $ 45,509,468 $ 36,231,898 $ 31,430,197 $ 34,563,796 26.12% 37.87% 40.42% 35.86% Note: Under state law, the City of Elk River's outstanding general obligation debt should not exceed 3% 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. Only 2/3 of the $8,140,000 GO EDA Refunding Bonds, Series 2013A are subject to the debt limit. The remaining 1/3 will be paid by the YMCA. (139) CITY OF ELK RIVER, MINNESOTA LEGAL DEBT MARGIN INFORMATION - LAST TEN FISCAL YEARS (CONTINUED) 2015 2016 2017 2018 2019 2020 $ 57,026,844 $ 59,362,917 $ 61,802,478 $ 65,358,630 $ 71,232,177 $ 76,424,256 28,986,667 25,706,667 15,331,667 14,220,000 13,076,667 26,676,667 10,673,852 10,560,614 1,377,746 1,457,117 1,528,399 7,511,416 18,312,815 15,146,053 13,953,921 12,762,883 11,548,268 19,165,251 $ 38,714,029 $ 44,216,864 $ 47,848,557 $ 52,595,747 $ 59,683,909 $ 57,259,005 32.11 % 25.51 % 22.58% 19.53% 16.21 % 25.08% Legal Debt Margin Calculation for Fiscal Year 2020 Estimated Taxable Market Value $ 2,547,475,200 Debt Limit (3% of Market Value) $ 76,424,256 Debt Applicable to Limit G.O. Capital Improvement Bonds 21,250,000 G.O. EDA Bonds' 5,426,667 Less: Cash and Investments in Related Debt Service Funds (7,511,416) Total Net Debt Applicable to Limit 19,165,251 Legal Debt Margin $ 57,259,005 (140) CITY OF ELK RIVER, MINNESOTA PLEDGED -REVENUE COVERAGE - LAST TEN FISCAL YEARS Revenue Bonds' Net Fiscal Gross Operating Revenue Debt Service Year Revenue Expenses Available Principal Interest Coverage 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 2019 42,781,499 34,883,488 7,898,011 1,620,000 924,505 3.10 2020 43,078,573 34,310,476 8,768,097 1,625,000 931,230 3.43 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 (141) CITY OF ELK RIVER, MINNESOTA PLEDGED -REVENUE COVERAGE - LAST TEN FISCAL YEARS (CONTINUED) Special Assessment Bonds Special Assessment Debt Service Collections Principal Interest Coverage $ 327,975 $ 505,000 $ 124,185 0.52 287,759 505,000 122,209 0.46 202,457 850'000 4 87,268 0.22 182,191 375,000 29,000 0.45 162,519 310,000 21,550 0.49 135,447 305,000 15,400 0.42 106,349 300,000 8,900 0.34 - 295,000 2,950 0.00 - - 0.00 0.00 (142) CITY OF ELK RIVER, MINNESOTA DEMOGRAPHIC AND ECONOMIC STATISTICS - LAST TEN FISCAL YEARS Personal Fiscal Income Per Capita Median School Unemployment Year Population' (in thousands) Income Age Enrollment° Rates 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 24,891 854,433 34,327 36 14,448 3.8% 2019 25,243 875,452 34,681 36 14,623 3.9% 2020 25,590 895,676 35,001 36 14,280 4.9% Data Sources: State Demographer 2 Bureau of Economic Analysis 3 U.S. Census Bureau 4 School District 5 Minnesota Department of Employment and Economic Development (143) CITY OF ELK RIVER, MINNESOTA PRINCIPAL EMPLOYERS - CURRENT YEAR AND NINE YEARS AGO Employer Independent School District 728' Sherburne County Guardian Angels of Elk River Walmart Great River Energy City of Elk River Sportech, Inc. Menards Tescom Corporation First National Financial Services Coborn's Elk River Ford Total Total Employment ` 2020 Percentage of Total City Employees Rank Employment 2,100 1 16.61% 697 2 5.51 % 374 3 2.96% 354 4 2.80% 210 5 1.66% 188 6 1.49% 185 7 1.46% 173 8 1.37% 170 9 1.34% 142 10 1.12% 4,593 36.32% 12,641 1 Total District 2 Minnesota Department of Employment and Economic Development 2011 Percentage of Total City Employees Rank Employment 892 1 8.14% 598 2 5.46% 317 4 2.89% 463 3 4.23% 236 5 2.15% 203 6 1.85% 153 8 1.40% 187 7 1.71% 122 10 1.11% 147 9 1.34% 3,318 30.28% 10,952 (144) CITY OF ELK RIVER, MINNESOTA FULL-TIME EQUIVALENT BY FUNCTION - LAST TEN FISCAL YEARS Function 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 General Government 24.8 25.8 26.9 28.3 29.3 29.3 29.3 30.3 29.3 29.8 Public Safety: Police: Officers 30.0 31.0 31.0 31.0 32.0 32.0 32.0 34.0 34.0 34.0 Civilians 8.0 8.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 10.0 Fire: Fire Administration 3.7 1.7 1.7 2.7 3.0 3.0 3.0 3.0 5.0 5.0 Paid On -Call Volunteers 40.0 40.0 40.0 40.0 44.0 44.0 44.0 45.0 45.0 45.0 Other Public Safety 7.6 8.4 8.6 9.0 9.0 9.0 9.0 9.0 7.0 7.0 Public Works 14.5 15.5 15.0 15.0 15.0 15.0 15.0 15.0 16.0 15.5 Culture and Recreation 19.4 18.5 18.5 18.5 17.5 17.5 17.8 18.3 18.6 19.7 Economic Development 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 Municipal Liquor 12.5 13.0 13.0 13.0 13.0 13.0 13.0 13.0 13.5 13.5 Sewer 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 Storm Water - - - - 1.0 1.0 1.0 1.0 1.0 1.0 Water 5.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 Electric 29.0 30.0 31.0 31.0 34.0 34.0 34.0 34.0 36.0 36.0 Total 202.5 207.9 210.7 213.5 222.8 222.8 223.1 227.6 230.4 232.5 Source: City of Elk River Finance Department (145) Function Planning: Land Use Applications Police: Police Calls Traffic Citations Fire: Fire Calls Building/Environmental: Permits Issued Valuation of Permits (Thousands of Dollars) Public Works: Street Sweeping (Hours) Snowplowing (Hours) Equipment Repair (Hours) Culture and Recreation: Recreation Participants Ice Arena Usage (Hours) Sewer: Average Daily Treatment Flow (Thousands of Gallons) Water: Number of Customers Average Daily Consumption (Thousands of Gallons) Electric: Number of Customers Average Daily Consumption (Thousands of KWh's) Sources: Various City Departments CITY OF ELK RIVER, MINNESOTA OPERATING INDICATORS BY FUNCTION - LAST TEN FISCAL YEARS 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 54 56 71 85 118 138 122 103 102 126 20,707 20,451 20,676 21,585 21,930 24,728 26,329 27,061 26,209 24,083 2,125 1,840 1,925 1,930 2,778 2,818 3,294 2,309 2,575 1,570 469 355 446 411 436 442 473 483 497 497 1,841 1,683 1,866 1,956 1,722 1,804 2,245 2,316 2,466 2,701 $ 20,719 $ 25,585 $ 38,440 $ 47,037 $ 57,965 $ 51,368 $ 106,983 $ 66,048 $ 70,313 $ 81,056 1,494 1,811 1,652 1,888 1,824 1,520 1,314 991 1,000 1,100 2,964 1,675 4,263 5,872 3,018 3,368 3,812 5,122 4,200 3,900 5,711 5,051 5,125 5,210 3,575 3,688 4,196 5,140 5,100 5,200 26,934 26,803 27,065 27,330 27,348 27,452 27,608 27,637 33,522 12,285 4,740 4,752 4,736 4,568 5,469 4,583 4,518 4,459 4,234 2,108 1,245 1,200 1,203 1,200 1,200 1,300 1,300 1,300 1,300 1,350 4,515 4,542 4,613 4,676 4,672 4,903 5,011 5,140 5,256 5,320 1,786 2,321 2,152 2,143 2,192 2,196 2,159 2,254 2,133 2,391 9,227 9,285 9,358 9,449 10,499 10,816 11,448 11,983 12,244 12,365 716 749 795 790 773 837 878 931 922 923 (146) CITY OF ELK RIVER, MINNESOTA CAPITAL ASSET STATISTICS BY FUNCTION - LAST TEN FISCAL YEARS 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Function Public Safety: Police: Stations 1 1 1 1 1 1 1 1 1 1 Patrol Units 12 12 12 12 13 13 13 14 14 14 Fire Stations 2 2 2 2 2 2 2 2 2 2 Public Works: Streets (Miles) 151 151 151 151 151 155 155 155 155 157 Culture and Recreation: Parks 44 45 45 46 46 46 46 46 40' 40 Parks Acreage 964 988 988 1,392 1,392 1,392 1,392 1,392 1,392 1,392 Sewer: Sanitary Sewers (Miles) 80 80 80 80 80 80 80 80 80 82 Lift Stations 21 21 21 21 21 21 21 21 21 22 Maximum Daily Treatment Capacity 2,200 2,200 2,200 2,200 2,200 4,500 4,500 4,500 4,500 4,500 (Thousands of Gallons) Water: Maximum Daily Capacity 8,100 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 (Thousands of Gallons) Electric Generating Facilities 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. Several smaller parks were consolidated into Woodland Trails Regional Park (147) Clifton LarsonAllen LLP 6TW CLAconnect.com Honorable Mayor and the City Council City of 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 City of Elk River, Minnesota as of and for the year ended December 31, 2020, and have issued our report thereon dated May 25, 2021. We have previously communicated to you information about our responsibilities under auditing standards generally accepted in the United States of America, Government Auditing Standards, and Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), 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 Accountinq policies Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by City of Elk River are described in Note 1 to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during 2020. We noted no transactions entered into by the entity 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, 2020. 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. A qmember of exia QN. International Honorable Mayor and the City Council City of Elk River, Minnesota 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 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 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 the City Council City of Elk River, Minnesota 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 May 25, 2021. 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 entity'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 entity's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our engagement. 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 the City Council City of Elk River, Minnesota 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 schedule of expenditures of federal awards (SEFA) 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 SEFA to determine that the SEFA complies with the requirements of the Uniform Guidance, the method of preparing it has not changed from the prior period or the reasons for such changes, and the SEFA is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the SEFA to the underlying accounting records used to prepare the financial statements or to the financial statements themselves. We have issued our report thereon dated May 25, 2021. With respect to the combining 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 May 25, 2021. The introductory and statistical information 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. Honorable Mayor and the City Council City of Elk River, Minnesota Page 5 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. CliftonLarsonAllen LLP Minneapolis, Minnesota May 25, 2021 CITY OF ELK RIVER ELK RIVER, MINNESOTA SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AND OTHER REQUIRED REPORTS DECEMBER 31, 2020 CITY OF ELK RIVER TABLE OF CONTENTS DECEMBER 31, 2020 SINGLE AUDIT AND OTHER REQUIRED REPORTS 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 INDEPENDENT AUDITORS' REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM, REPORT ON INTERNAL CONTROL OVER COMPLIANCE, AND REPORT ON THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS REQUIRED BY THE UNIFORM GUIDANCE 3 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 6 NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS INDEPENDENT AUDITORS' REPORT ON MINNESOTA LEGAL COMPLIANCE 8 SCHEDULE OF FINDINGS AND QUESTIONED COSTS 9 SINGLE AUDIT AND OTHER REQUIRED REPORTS CliftonLarsonAllen LLP . CLAconnect.com 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 the 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 City of Elk River, as of and for the year ended December 31, 2020, and the related notes to the financial statements, which collectively comprise City of Elk River's basic financial statements, and have issued our report thereon dated May 25, 2021. 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 City of Elk River's internal control over financial reporting (internal control) as a basis for designing 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 City of Elk River's internal control. Accordingly, we do not express an opinion on the effectiveness of 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. A member of L\N'3Nexia c�> International Honorable Mayor and the City Council City of Elk River 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. Compliance and Other Matters As part of obtaining reasonable assurance about whether 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 financial statements. 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 results of that testing, and not to provide an opinion on the effectiveness of the entity'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 entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. ZZ->7? Clifton LarsonAllen LLP Minneapolis, Minnesota May 25, 2021 (2) 0 CliftonLarsonken LLP CLAconnect.com INDEPENDENT AUDITORS' REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM, REPORT ON INTERNAL CONTROL OVER COMPLIANCE, AND REPORT ON THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS REQUIRED BY THE UNIFORM GUIDANCE Honorable Mayor and the City Council City of Elk River Elk River, Minnesota Report on Compliance for Each Major Federal Program We have audited City of Elk River's compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of City of Elk River's major federal programs for the year ended December 31, 2020. City of Elk River's major federal programs are identified in the summary of auditors' results section of the accompanying schedule of findings and questioned costs. Management's Responsibility Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs. Auditors' Responsibility Our responsibility is to express an opinion on compliance for each of City of Elk River's major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about City of Elk River's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of City of Elk River's compliance. �A member of Nexia �3> International Honorable Mayor and the City Council City of Elk River Opinion on Each Major Federal Program In our opinion, City of Elk River complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended December 31, 2020. Other Matters The results of our auditing procedures disclosed instances of noncompliance, which are required to be reported in accordance with the Uniform Guidance and which are described in the accompanying schedule of findings and questioned costs as items 2020-001. Our opinion on each major federal program is not modified with respect to these matters. City of Elk River's response to the noncompliance findings identified in our audit is described in the accompanying Schedule of Findings and Questioned Costs. City of Elk River's response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response. Report on Internal Control Over Compliance Management of City of Elk River is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered City of Elk River's internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of City of Elk River's internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that have not been identified. We did identify a certain deficiency in internal control over compliance, described in the accompanying schedule of findings and questioned costs as item 2020-001 that we consider to be a material weakness. (4 ) Honorable Mayor and the City Council City of Elk River City of Elk River's response to the internal control over compliance findings identified in our audit is described in the accompanying Schedule of Findings and Questioned Costs. City of Elk River's response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. Report on Schedule of Expenditures of Federal Awards Required by the Uniform Guidance 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 City of Elk River as of and for the year ended December 31, 2020, and the related notes to the financial statements, which collectively comprise City of Elk River's basic financial statements. We issued our report thereon dated May 25, 2021, which contained unmodified opinions on those financial statements. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by the Uniform Guidance and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the 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 schedule of expenditures of federal awards is fairly stated in all material respects in relation to the basic financial statements as a whole. 4 � � �la, I t - � � � LLB Clifton LarsonAllen LLP Minneapolis, Minnesota May 25, 2021 (5) CITY OF ELK RIVER SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED DECEMBER 31, 2020 Federal Agency/Pass-Through Grantor/Program Title U.S. DEPARTMENT OF TREASURY Passed Through Minnesota Department of Revenue: COVID-19 Coronavirus Relief Fund U.S. DEPARTMENT OF TRANSPORTATION Passed Through Minnesota Department of Transportation: State and Community Highway Safety National Priority Safety Program Minimum Penalties for Repeat Offenders for Driving While Intoxicated Total U. S. Department of Transportation Passed Through Minnesota Department of Transportation: Total Federal Awards {a} = Highway Safety Cluster Total = $20,305 Note: the City did not have any subrecipients in the current fiscal year. Federal Pass -Through CFDA Federal Entity Number Number Expenditures SLT0016 21.019C $ 1,875,294 210710 {a} 20.600 10,178 210710 {a} 20.616 10,127 210710 20.608 26,066 46,371 $ 1,921,665 See accompanying Notes to Schedule of Expenditures of Federal Awards. (6) CITY OF ELK RIVER NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS DECEMBER 31, 2020 NOTE 1 REPORTING ENTITY The schedule of expenditures of federal awards presents the activities of federal award programs expended by the City of Elk River. The City of Elk River's reporting entity is defined in Note 1 to the financial statements. NOTE 2 BASIS OF PRESENTATION The accompanying schedule of expenditures of federal awards includes the federal grant activity of the City of Elk River under programs of the federal government for the year ended December 31, 2020. The information in this schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the schedule presents only a selected portion of the operations of the City of Elk River, it is not intended to and does not present the financial position, changes in net position, or cash flows of the City of Elk River. NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Expenditures reported on the schedule are reported on the modified accrual basis of accounting. Such expenditures are recognized following, as applicable, the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. The City of Elk River has elected to not use the 10 percent de minimis indirect cost rate allowed under the Uniform Guidance. CliftonLarsonAllen LLP . CLAconnect.com INDEPENDENT AUDITORS' REPORT ON MINNESOTA LEGAL COMPLIANCE Honorable Mayor and 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 (the City), Minnesota as of and for the year then ended December 31, 2020, and the related notes to the financial statements, which collectively comprise the City's basic financial statements, and have issued our report thereon dated May 25, 2021. 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 compliance with the provisions of Minnesota Legal Compliance Audit Guide for Cities. In connection with our audit, nothing came to our attention that caused us to believe that the City failed to comply with the provisions of the contracting and bidding, deposits and investments, conflicts of interest, public indebtedness, claims and disbursements, miscellaneous provisions, and tax increment financing sections of the Minnesota Legal Compliance Audit Guide for Cities, promulgated by the State Auditor pursuant to Minn. Stat. § 6.65, insofar as they relate to accounting matters. 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'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. Clifton LarsonAllen LLP Minneapolis, Minnesota May 25, 2021 A member of qL\N'3Nexia (8) International CITY OF ELK RIVER SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED DECEMBER 31, 2020 Section I — Summary of Auditors' Results Financial Statements Type of auditors' report issued: Unmodified 1. Internal control over financial reporting: • Material weakness(es) identified? yes x no • Significant deficiency(ies) identified? yes x none reported 2. Noncompliance material to financial statements noted? yes x no Federal Awards Internal control over major federal programs • Material weakness(es) identified? x yes no • Significant deficiency(ies) identified? yes x none reported 1. Type of auditors' report issued on compliance for major federal programs: Unmodified 2. Any audit findings disclosed that are required to be reported in accordance with 2 CFR 200.516(a)? x yes no Identification of Major Federal Programs CFDA Number(s) 21.019 Dollar threshold used to distinguish between Type A and Type B programs: Auditee qualified as low -risk auditee? Name of Federal Program or Cluster Coronavirus Relief Fund $ $750,000 yes x no H CITY OF ELK RIVER SCHEDULE OF FINDINGS AND QUESTIONED COSTS (CONTINUED) YEAR ENDED DECEMBER 31, 2020 Section 11 — Financial Statement Findings None noted. Section 111 — Findings and Questioned Costs — Major Federal Programs 2020-001 U.S. Department of the Treasury Coronavirus Relief Fund CFDA Number: 20.019 Passed Through Minnesota Department of Revenue Pass Through Number: 210710 Award Period: 3/1/2020 — 11/15/2020 Type of Finding: Material Weakness in Internal Control Over Compliance Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Condition and Context: The City did not properly document their review of the reports that were required to be submitted to the State of Minnesota's office of Management and Budget. There was no documentation of the review of these reports by someone other than the preparer for any of the reports tested which was a total of 2. Possible Effect: Not having a formal review process documented could result in no one being able to determine if the reports were reviewed. If the reports are not reviewed by anyone other than the preparer the preparer has a much greater chance of making a mistake or effectively misstating the report. Questioned Costs: None Repeat Finding: No Cause: The federal funding was new to the City in 2020 and they were not aware of the need to have formal documentation retained for all reports submitted for the grant. Recommendation: We recommend the City put in place internal controls to ensure that all reports for federal grants are reviewed by someone other than the preparer and that the process is properly documented and the documentation retained. Client's Response to the finding: The City will ensure that documentation of review of any reporting required for federal grants is performed by someone other than the preparer and properly documented going forward. W CITY OF ELK RIVER SCHEDULE OF FINDINGS AND QUESTIONED COSTS (CONTINUED) YEAR ENDED DECEMBER 31, 2020 Section IV — MN Legal Compliance Findings None noted.