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6.4 SR 06-06-2022Request for Action To Item Number Mayor and City Council 6.4 Agenda Section Meeting Date Prepared by Presentations, Awards, June 6, 2022 Lori Ziemer, Finance Director and Recognition Item Description Reviewed by Annual Comprehensive Financial Report for the Cal Portner, City Administrator Year Ended December 31, 2021 Reviewed by Action Requested Accept, by motion, the Annual Comprehensive Financial Report for the City of Elk River for the year ended December 31, 2021. 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. BerganKDV conducted the city's audit for the year 2021 and will present a summary of the 2021 financial report and audit results. Financial Impact N/A Mission/Policy/Goal Elk River Mission Attachments BerganKDV Audit Presentation Comprehensive Annual Financial Report for the year ended December 31, 2021 Communications Letter Legal Compliance 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 nancial Statement Pres December 31, 2021 Independent Auditor's Reports • Independent Auditor's Report "unmodified" or "clean" opinion. • Independent Auditor's Report in accordance with Government Auditing Standards — no significant deficiencies or material weaknesses in internal control reported • Independent Auditor's Report on Minnesota Legal Compliance no compliance findings reported PROFESSIONAL SERVICES THE MIDWEST WAY bergankdvcom I info@bergankdv.com L], 2 General Fund $10,000,000 $9,000,000 $8,000,000 i $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 2017 IPPOFESSIONAL SERVICES THE MIDWEST WAY bergankdv.com I info@bergankdv.com 2018 2019 2020 -Fund Balance Cash and Investment Balance 2021 General Fund $18,000,000 $16,000,000 $14,000,000 $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $0 2017 2018 2019 2020 2021 ® Total Revenues ■ Total Expenditures LPROFESSIONAL SERVICES THE MIDWEST WAY bergankdv.com I info@bergankdv.com 4 General Fund .p 1 V,VV 1- $14,000,000 $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $ 2017 2018 2019 2020 2021 ■Charges for Services $1,033,053 $960,294 $944,297 $820,666 $1,077,855 ■Other 450,334 413,168 663,548 369,125 426,864 ■ Licenses and Permits 1,007,543 790,831 822,899 665,519 1,015,529 ■Intergovernmental 546,362 578,324 618,488 674,061 581,927 ■ Taxes 10,0871400 10,646,232 11,330,080 12,127,323 12,531,317 IPROFES&ONAL SERVICES THE MIDWEST WAY bergarkdvcom I info@bergankdv.com General Fund ,p-,vvv,vvv $15,000,000 $10,000,000 - $5,000,000 $ 2017 2018 2019 2020 2021 ■CiAtureand Recreation $1,913,809 $2,044,286 $2,107,192 $1,941,732 $2,015,790 ■ Public Works 1,866,693 1,796,844 2,103,742 2,132,913 2,329,853 ■Public Safety 6,723,602 7,269,887 7,422,080 7,503,513 8,273,612 ■ General Government 3,355,858 3,631,936 3,857,489 4,036,523 4,173,627 PROFESSIONAL SEPVICES THE MIDWEST WAY bergankdvcom I info@bergankdv.com General Fund PROFESSIONAL SERVICES THE MIDWEST WAY bergankdvcom I info@bergankdv.com Revenues Property taxes Other taxes Licenses and permits Intergovernmental Charges for services Fines and forfeitures Miscellaneous revenues Total revenues Expenditures General government Public safety Public works Culture and recreation Capital outlay Total expenditures Excess of revenues over (under) disbursements Other Financing Sources (Uses) Net transfers Net change in fund balances Original and Final Budget $12,315,000 150,000 778,500 602,500 950,400 120,000 236,500 15,152,900 Actual Amounts $12,297,572 233,745 1,015,529 581,927 1,077,855 127,266 299,598 4,173,627 8,273,612 2,328,853 2,015,790 37,718 16,829,600 (1,196,108) 811 1,696,009 (311 $ 499,901 $ 49� 7 Sewer Fund ,nv,uuu.uvu $3.500,000 $3,000,000 $2.500.000 $2.000.000 $1,500A00 $1.000,000 $500,000 $- $(500,000) $(1,000,000) $(1,500,000) — — 2017 2018 2019 ■ Operating Revenues $2,116,900 $2,246,794 $2,383,196 ■ Operating Expenses 3,116398 3,251,292 3,305,917 ■ Operating Income without Depreciation 569,124 634,963 721,838 ■Operating Loss (999,498) (1,004,498) (922,621) PPOFESSIONAL SEPVIGES THE MIDWEST WAY bergankdv.com I info@bergankdv.com n 1 r I r�L $1,800,000 $1,600,000 $1,400,000 $1,200,000 $1.00000 $800.000 $600,000 $400,000 $200,000 $0 ■ Operating Revenues i Operating Expenses ■ Operating Income (Loss) PROFESSIONAL SERVICES THE MIDWEST WAY bergankdv.com I info@bergankdv.com 2017 2018 2019 2020 2021 ;1,352,728 $1,553,498 $1,645,115 $1,686,664 $1,773,62( 1,521,803 1,588,956 1,456,482 1,565,482 1,623,785 (169,075) (35,458) 198,633 121,182 149,835 (169,075) (35,458) 188,633 121,182 149,935 10 Storm Water Fund $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $(200,000) $(400,000) $(600,000) 2017 2018 2019 2020 2021 ■Operating Revenues $509,365 $485,484 $5I0,889 $564,699 $586,049 ■Operating Expenses 774,805 634,073 1,024,928 571,170 612,527 El Operating Income without Depreciation 187,388 308,889 (56,562) 456,587 440,918 ®Operating Loss (265,440) (148,589) (514,039) (6,471) (26,478) PROFESSIONAL SERVICES THE MIHWEST WAY 12 bergankdvcom I info@bergankdv.com PPOFESSIONAL SERVICES THE MIDWEST WAY bergankdv.com I info@bergankdv.com 14 Governmental Activities Governmental Funds Revenue Per Capita with State -Wide Averages by Population Class State -Wide* City of Elk River* Year December 31, 2020 2019 2020 Population 2,500-10,000 10,000-20,000 20,000-100,000 25,243 25,590 Property taxes $ 540 $ 517 $ 537 $ 506 $ 536 Tax increments 34 33 44 10 10 Franchise fees and other taxes 49 61 45 91 185 Special assessments 54 39 54 2 5 Licenses and permits 36 39 46 33 26 Intergovernmental revenues 474 367 273 55 151 Charges for services 112 89 90 68 58 Other 83 69 69 190 166 Total revenue $ 1,382 $ 1,214 $ 1,158 $ 955 $ 1,137 a 1,J4� ef IPROFESSIONAL SERVICES THE MIDWEST WAY 16 bergankdvcom I info@bergankdv.com Governmental Activities Mvernmental Funds Expenditures Per Capita with State -Wide Averages by Population Class State -Wide* City of Elk River** Year 74 December 31, 2020aft 2020 Population r2,50'0-1-0,000 10,000-20,000 20,000-100,000 25,243 25,590 25,835 Current General government $ 176 $ 140 $ 118 $ 159 $ 169 $ 172 Public safety 315 288 320 302 303 323 Public works 147 122 112 88 89 94 Parks and recreation 100 112 95 118 119 146 Other 96 108 104 21 27 12 Total current $ 834 $ 770 $ 749 $ 688 $ 707 $ 747 Capital outlay and construction $ 585 $ 428 $ 331 $ 659 $ 960 $ 1,095 Debt service Principal $ 172 $ 149 $ 91 $ 52 $ 74 $ 85 Interest and fiscal 45 42 33 28 73 72 Total debt service $ 217 $ 191 $ 124 $ 80 $ 147 $ 157 ®PROFESSIONAL SERVICES THE MIDWEST WAY bergankdvcom I info@bergankdv.com 17 q5 QUESTIONS?. Andrew Grice 95 2-5 63-6800 Andrew.Grice@berganKDV.co PROFESSIONAL SERVICES THE MIDWEST WAY bergankdvcom I info@bergankdv.com on Lla fI 20 BerganKDV is o leading professional services firm with o contagious culture; where growth is fostered and making o difference means something. Our values drive our decisions, and our passion is empowering people and creating o wow experience for our clients. We ore powered by people who do business the Midwest way delivering comprehensive business, financial and technology solutions including business planning and consulting, tax, assurance and accounting, technology, wealth management and turnaround management services. From tax reform to technology, we go beyond so you con... , DO MORE. c- J[er 1 City E Ewer Minnesota ANNUAL COMPREHENSIVE FINANCIAL REPORT For theYear Ended December 31, 2021 ilia did CITY OF ELK RIVER ELK RIVER, MINNESOTA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2021 PREPARED BY: FINANCE DEPARTMENT Member of Governmental Finance Officers Association of the United States and Canada Published May 31, 2022 City of Elk River, Minnesota Table of Contents Page Introductory Section Letter of Transmittal 3 Elected Officials and Administration 7 Organizational Chart 9 GFOA Certificate of Achievement for Excellence in Financial Reporting 11 Financial Section Independent Auditor's Report 15 Management's Discussion and Analysis 19 Basic Financial Statements Government -Wide Financial Statements Statement of Net Position 34 Statement of Activities 36 Fund Financial Statements Governmental Funds Balance Sheet 38 Reconciliation of the Balance Sheet to the Statement of Net Position 41 Statement of Revenues, Expenditures, and Changes in Fund Balances 42 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities 44 Statement of Revenues, Expenditures, and Changes in Fund Balances — Budget and Actual — General Fund 45 Proprietary Funds Statement of Net Position 46 Statement of Revenues, Expenses, and Changes in Net Position 50 Statement of Cash Flows 52 Notes to Basic Financial Statements 57 Required Supplementary Information Schedule of Changes in Total OPEB Liability and Related Ratios — Municipal Retirees Health Plan 104 Schedule of City's Proportionate Share of Net Pension Liability — General Employees Retirement Fund 105 Schedule of City's Proportionate Share of Net Pension Liability — Public Employees Police and Fire Retirement Fund 106 Schedule of City Contributions — General Employees Retirement Fund 107 Schedule of City Contributions — Public Employees Police and Fire Retirement Fund 108 Schedule of Changes in Net Pension Liability and Related Ratios — Elk River Fire Relief Association 109 Schedule of City Contributions — Elk River Fire Relief Association 109 Notes to Required Supplementary Information 110 City of Elk River, Minnesota Table of Contents Page Combining and Individual Fund Financial Statements and Schedules Nonmajor Governmental Funds Combining Balance Sheet 120 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 121 Nonmajor Special Revenue Funds Combining Balance Sheet 124 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 126 Budgeted Special Revenue Funds Schedule of Revenues, Expenditures, and Changes in Fund Balances — Budget and Actual Library 128 Multipurpose Facility 129 Economic Development Authority 131 Nonmajor Capital Projects Funds Combining Balance Sheet 134 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 136 Nonmajor Debt Service Funds Combining Balance Sheet 140 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 141 Component Unit Financial Statements Housing and Redevelopment Authority Balance Sheet 144 Statement of Revenues, Expenses, and Change in Fund Balance 145 Statistical Section (Unaudited) Financial Trends Net Position by Component 150 Changes in Net Position 152 Fund Balances of Governmental Funds 156 Changes in Fund Balances of Governmental Funds 158 Revenue Capacity Electric Sales 160 Principal Electric Customers 161 Tax Capacity, Market Value, and Estimated Value of Taxable Property 162 Property Tax Rates — Direct and Overlapping Governments 165 Debt Capacity Principal Property Taxpayers 166 Property Tax Levies and Collections 167 Ratios of Outstanding Debt by Type 168 Ratios of General Bonded Debt Outstanding 170 Direct and Overlapping Governmental Activities Debt 171 Legal Debt Margin Information 172 City of Elk River, Minnesota Table of Contents Page Statistical Section (Unaudited) (Continued) Debt Capacity (Continued) Pledged -Revenue Coverage 174 Demographic and Economic Information Demographic and Economic Statistics 176 Operating Information Principal Employers 177 Full -Time Equivalent Employees by Function 179 Operating Indicators by Function 180 Capital Asset Statistics by Function 182 (THIS PAGE LEFT BLANK INTENTIONALLY) INTRODUCTORY SECTION CITY OF ELK RIVER ELK RIVER, MINNESOTA FOR THE YEAR ENDED DECEMBER 31, 2021 (THIS PAGE LEFT BLANK INTENTIONALLY) City of ver June 6, 2022 Honorable Mayor, Members of the City Council, and Citizens of Elk River: The Annual Comprehensive Financial Report for the City of Elk River for the fiscal year ended December 31, 2021, 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 BerganKDV 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. 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 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). Because the cost of internal control should not exceed anticipated benefits, the objective is to provide reasonable but not absolute assurance that the financial statements are free of any material misstatements. Generally accepted accounting principles require that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of 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's MD&A can be found immediately following the independent auditor's report. Profile of the City 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 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 has been growing and will not reach full development in the near future. The current population is approximately 25,835. Urban services are available to about one-third of the land area in the city. The City of Elk River operates under a statutory form of government consisting of a four -member City Council and a Mayor who is also a voting member. Council members are elected by ward to a four-year term with two Council seats up for election each even year. The Mayor is also elected to a four-year term. The City Council is responsible for adopting the city's budget and tax levy, passing resolutions and ordinances, all hiring and firing decisions, policy making, development and growth planning, and overall direction of the city. 3 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's financial planning and control. The City Administrator must prepare estimates for an annual budget and submit them to the City Council for approval. The City Council is required to adopt a final budget by late December for the subsequent year. The budget is prepared by fund, function (e.g. public works), and department (e.g. streets). Department heads are allowed to make administrative budget amendments (excluding personal service and capital outlay) throughout the year if the total department budget does not change and the amendment is approved by the City Administrator and Finance Director. Budget amendments to the total budgeted expenditures require City Council approval. 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 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 $137,788,029 being issued in 2021. New construction accounts for $61,430,071 and additions/remodels make up the $76,357,958 balance. In 2021 residential growth increased greatly, the city issued 141 new housing permits which surpasses the 116 housing permits issued in 2020. Single family homes accounted for 140 of the new housing permits, in addition to a 60- unit multi -family apartment building. The average value home is about $278,000 compared to $267,000 in 2020. With the recent trend in the housing market, property value growth consists of both growth from valuation increases on existing properties and growth due to new construction/remodeling. There remains continued interest in both affordable and market rate multi -family housing projects, as well as protecting property values of an aging housing stock. Many of Elk River's employers reported stable employment levels during 2021 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 commercial/industrial sector has experienced modest growth and the economic outlook in this region looks promising with recent development projects that should continue to spur tax base growth and employment. Long-term Financial Planning The city has developed a financial management plan that 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 city services while keeping the property taxes stable. The financial management plan is reviewed and updated annually by the City Council as part of the annual budget and Capital Improvement Plan (CIP) process. The CIP is a comprehensive five-year planning tool that forecasts the city's capital needs based on the city's long-range plans, goals, and policies. 4 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. It is important for the financial stability of the city to maintain reserve funds for unanticipated expenditures or unforeseen emergencies, as well as to provide adequate working capital for current operating needs to avoid short-term borrowing. The city's policy states that the unassigned fund balance in the General Fund will be maintained at a target level of not less than 40-45% of budgeted operating expenditures; however, this may fluctuate with each year's budget objectives. Major Initiatives Elk River was selected for $157 million state transportation funding to redesign and reconstruct three miles of Highway 169 which runs north -south through the city. The Highway 169 corridor is an important arterial route serving commuters, recreational uses, and connecting economic centers in the state. The project will convert Highway 169 to a new freeway by removing five stop lights from the Mississippi River north through Elk River. During 2021, the `169 Redefine' project team consisting of MnDOT, the City of Elk River and Sherburne County finalized the design layouts of the interchanges, hosted public information meetings, and began utility relocations in preparation for the three-year construction project that will begin early in 2022. When complete, the project will increase capacity, improve overall traffic flow, and improve accessibility and safety. Update of the city's Comprehensive Plan which began in the fall of 2020 was completed and approved in September 2021. The goal of the update was to address anticipated changes resulting from the Highway 169 improvements, with additional focus on transportation and urban service area plans. The Comprehensive Plan is a guiding policy document that establishes a long-term vision for the community for the next 20 years with the recommendations and strategies necessary to make that vision a reality. As part of the $35,000,000 Active Elk River projects, the Lake Orono dredging project to remove 125,000 cubic yards of sediment to restore fish habitat and recreational improvements was completed in 2021. Construction also began in the spring of 2021 on park improvements for Orono Park and the Youth Athletic Complex. Park improvements include restroom/shelter facilities, concession area, skatepark, splash pad, and pickleball courts. Renovation and expansion of the Public Safety Facility to build out the police department second floor office space, expand the police parking garage, and add fire department support space, training rooms, and apparatus bays continued in 2021. Completion is expected early in 2022. The city began construction of Fire Station #3 to ensure fire protection services for our primary residential growth area during the construction of Highway 169. The new fire station will include classroom space, physical training area, and a built-in fire tower for hands-on training opportunities. 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 Annual Comprehensive Financial Report for the fiscal year ended December 31, 2020. This was the 32nd consecutive year the city has received this prestigious award. To be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized Annual Comprehensive 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 Annual Comprehensive 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 2021 Annual Comprehensive Financial Report meets the highest professional standards. The preparation of this report is made possible by the efficient and dedicated services of the entire staff of the finance department, other city departments, and through the helpful guidance and assistance from our auditing firm, BerganKDV. Credit must also be given to the Mayor and City Council for their diligence and resolve in maintaining high standards in the financial management of the city. Respectfully submitted, Fill - Lori Ziemer Finance Director 6 City of Elk River, Minnesota Elected Officials and Administration December 31, 2021 Elected Officials Position John Dietz Garrett Christianson Matthew Westgaard Mike Beyer Jennifer Wagner Administration Mayor Council Member Council Member Council Member Council Member Position Term Expires December 31, 2022 December 31, 2022 December 31, 2024 December 31, 2024 December 31, 2022 Calvin Portner City Administrator Lori Ziemer Finance Director Ron Nierenhausen Chief of Police Mark Dickinson Fire Chief Michael Hecker Parks and Recreation Director Justin Femrite Public Works Director/Chief Engineer Suzanne Fischer Community Operations and Development Director 7 (THIS PAGE LEFT BLANK INTENTIONALLY) City of Elk River, Minnesota Organizational Chart mrrissions Perks & Recreation Multipurpose Facility Energy City Herilige Preservation Library Community Administration Finance Development Finance Admin. Services Planning Communicauons Infomiation Tech. Building Safety Human Resources Liquor Code Enforcement Elections Environmental Energy City Citizens of Elk River Mayor & City Council City Adrniinistrator Leal Economic Develop. I Authority Housing & Redevelop. Authority Parks & I I Public Works Recreation Senior Citizens Snow Removal Lil]ra^ Equipment Services iltipurpose Fachit, Park Maintenance Building Maint. Engineering Stormwater Wastewater Police Patrol Investigations Support Services Reserves Public Safet,' Blda Fire Municipal Utilities IF - Ope vu:ris _I-ictri E"'i?r:ien , rA,r`t I (THIS PAGE LEFT BLANK INTENTIONALLY) 10 City of Elk River, Minnesota GFOA Certificate of Achievement for Excellence in Financial Reporting Goveirunent Fm,,uice Officers Association Certificate of Achievement iIor Excellence in Financial Reporting Presented to City of Elk River Minnesota For its A wl C.on4 rehensiv.e Financial Deport ror the Fiscal Year Ended Decernbex 31, 20 Exec itil. e Directof CEO 11 (THIS PAGE LEFT BLANK INTENTIONALLY) 12 FINANCIAL SECTION CITY OF ELK RIVER ELK RIVER, MINNESOTA FOR THE YEAR ENDED DECEMBER 31, 2021 13 (THIS PAGE LEFT BLANK INTENTIONALLY) 14 Independent Auditor's Report Honorable Mayor and Members of the City Council City of Elk River Elk River, Minnesota Report on the Audit of the Financial Statements Opinions We have audited the financial statements of the governmental activities, the business -type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Elk River, as of and for the year ended December 31, 2021, and the related notes to the financial statements, which collectively comprise the City's basic financial statements as listed in the Table of Contents. In our opinion, based on our report and the report of other auditors, the accompanying financial statements 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, 2021, and the respective changes in financial position and, where applicable, cash flows thereof, and the budgetary comparison for the General Fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. Basis for Opinions We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GARS) and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Responsibilities of Management for the Financial Statements The City of Elk River's management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for 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. BERGANKDV, LTD. I BERGANKDV.COM I DO MORE. 15 Responsibilities of Management for the Financial Statements (Continued) In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the City's ability to continue as a going concern for one year beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with GAAS and Government Auditing Standards, we: • Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. • Obtain an understanding of internal control relevant to the audit 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 City's internal control. Accordingly, no such opinion is expressed. • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. • Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the City's ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control —related matters that we identified during the audit. 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 65% of the assets and deferred outflows, 61% of the net position, and 88% 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. BERGANKDV, LTD. I BERGANKDV.COM I DO MORE. 16 Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis, which follows this report letter, and Required Supplementary information as listed in the Table of Contents be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board (GASB), 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. Supplementary 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 combining and individual nonmajor fund financial statements and schedules are presented for purposes of additional analysis and are 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 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 nonmajor fund financial statements and schedules are fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Information Management is responsible for the other information included in the Annual Comprehensive Financial Report. The other information comprises the introductory and statistical sections but does not include the basic financial statements and our auditor's report thereon. Our opinions on the basic financial statements do not cover the other information, and we do not express an opinion or any form of assurance thereon. In connection with our audit of the basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the basic financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report. BERGANKDV, LTD. I BERGANKDV.COM I DO MORE. 17 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated May 31, 2022, 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 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 the City's internal control over financial reporting and compliance. BVVK:;)Wjs W. Minneapolis, Minnesota May 31, 2022 BERGANKDV, LTD. I BERGANKDV.COM I DO MORE. 18 City of Elk River Management's Discussion and Analysis As management of the City of Elk River, Minnesota (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, 2021. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found starting on page 3 of this report. FINANCIAL HIGHLIGHTS • The assets and deferred outflows of resources of the City exceeded its liabilities and deferred inflows of resources at the close of the most recent fiscal year by $237,291,855 (net position). Of this amount, $60,095,617 (unrestricted net position) may be used to meet the City`s ongoing obligations to citizens and creditors. • The net position of business -type activities increased by $4,212,202 and net position of the governmental activities increased by $4,001,785. This resulted in a total net position increase of $8,213,987 for the City. • As of the close of the current fiscal year, the City`s governmental funds reported combined ending fund balances of $45,167,172, a decrease of $13,337,173 from the prior year. • At the end of the current fiscal year, unassigned fund balance for the General Fund was $8,590,610. The City`s policy is to maintain a minimum of 40-45% of the following year's budget in unassigned fund balance. At year end, the unassigned fund balance is 45% of the 2022 budgeted General Fund expenditures. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the City`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 basic financial statements. This report also contains other supplemental information in addition to the basic financial statements themselves. The financial statements also include notes that explain some of the information in the financial statements and provide more detailed data. The statements are followed by a section of "combining and individual fund financial statements and schedules" that further explains and supports the information in the financial statements. Figure 1 shows how the required parts of this annual report are arranged and relate to one another. In addition to these required elements, we have included a section with "combining and individual fund financial statements and schedules" that provide details about nonmajor governmental funds, which are added together and presented in a single column for governmental activities in the basic governmental financial statements. 19 City of Elk River Management's Discussion and Analysis OVERVIEW OF THE FINANCIAL STATEMENTS (CONTINUED) The following chart shows how the various parts of this annual report are arranged and related to one another: Figure 1 Required Components of the City`s Annual Financial Report P-Janagemenis Bask--, DSCLissien and Financial Analysis Statements ovemment- wide Financial Statements Surnmary Required Supplementary Information Fund Notes to the Financial Financial Statements State rnents Ctetai Figure 2 summarizes the major features of the City`s financial statements, including the portion of the City government they cover and the types of information they contain. The remainder of this overview section of management's discussion and analysis explains the structure and contents of each of the statements. 20 City of Elk River Management's Discussion and Analysis OVERVIEW OF THE FINANCIAL STATEMENTS (CONTINUED) Figure 2 Major Features of the Government -wide and Fund Financial Statements Fund Financial Statements Government -Wide Statements Governmental Funds Proprietary Funds Scope Entire City government The activities of the City that Activities the City operates and the City`s are not proprietary or similar to private businesses, component units fiduciary, such as police, fire such as the water and sewer and parks system Required • Statement of Net • Balance Sheet • Statement of Net Position financial Position . Statement of Revenues, • Statement of Revenues, statements • Statement of Activities Expenditures and Changes Expenses and Changes in in Fund Balances Net Position • Statement of Cash Flows Accounting Accrual accounting and Modified accrual accounting Accrual accounting and basis and economic resources and current financial resources economic resources focus measurement focus focus focus Type of All assets and liabilities, Only assets expected to be All assets and liabilities, both asset/liability both financial and used up and liabilities that financial and capital, and information capital, and short-term come due during the year or short-term and long-term and long-term soon thereafter; no capital assets included Type of All deferred Only deferred outflows of All deferred outflows/inflows deferred outflows/inflows of resources expected to be used of resources, regardless of outflows/inflo resources, regardless of up and deferred inflows of when cash is received or paid ws of when cash is received or resources that come due resources paid during the year or soon information thereafter; no capital assets included Type of All revenues and Revenues for which cash is All revenues and expenses inflow/outflow expenses during year, received during or soon after during the year, regardless of information regardless of when cash the end of the year; when cash is received or paid is received or paid expenditures when goods or services have been received and payment is due during the year or soon thereafter 21 City of Elk River Management's Discussion and Analysis OVERVIEW OF THE FINANCIAL STATEMENTS (CONTINUED) Government -Wide Financial Statements. The government -wide financial statements are designed to provide readers with a broad overview of the City`s finances, in a manner similar to a private -sector business. The Statement of Net Position presents information on all of the City`s assets and deferred outflows of resources and liabilities and deferred inflows of resources, with the difference between the four reported as netposition. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The Statement ofActivities 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 cashflows. 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 that are principally supported by taxes and intergovernmental revenue (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 include general government, public safety, public works, culture and recreation, community development, and interest on long-term debt. The business -type activities of the City include municipal liquor, sewer, garbage, storm water, electric, and water utilities. The government -wide financial statements include not only the City itself (known as the primary government), but also a legally separate Housing and Redevelopment Authority (HRA) which are backed by the full faith and credit of the City of Elk River. Financial information for this component unit is discretely presented for the primary government. The government -wide financial statements start on page 34 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, 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 can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental Funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government -wide financial statements. However, unlike the government -wide financial statements, governmental fund financial statements focus on near -term inflows and ou�flows ofspendable resources, as well as on balances ofspendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government's near -term financing requirements. 22 City of Elk River Management's Discussion and Analysis OVERVIEW OF THE FINANCIAL STATEMENTS (CONTINUED) 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 (deficits) provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City maintains several individual governmental funds, five of which are Debt Service 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 Fund, Active ER Projects, Pavement Management, Public Safety Building/Fire Station 43, and Government Building Bonds, all of which are considered to be major funds. Data from the other governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these nonmajor governmental funds is provided in the form of combining statements or schedules elsewhere in this report. The City adopts an annual appropriated budget for its General, Library, Multipurpose Facility, and Economic Development Funds. A budgetary comparison statement or schedule has been provided for these funds to demonstrate compliance with this budget. The basic governmental fund financial statements start on page 38 of this report. Proprietary Funds. The City maintains one type of proprietary funds. Enterprise funds are used to report the same functions presented as business -type activities in the government -wide financial statements. The City uses enterprise funds to account for its liquor, sewer, garbage, storm water, electric, and water operations. Proprietary funds provide the same type of information as the government -wide financial statements, only in more detail. The proprietary funds financial statements provide separate information for each of the enterprise funds which are considered to be major funds of the City. The basic proprietary funds financial statements start on page 46 of this report. Notes to the Basic 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 basic financial statements start on page 53 of this report. 23 City of Elk River Management's Discussion and Analysis OVERVIEW OF THE FINANCIAL STATEMENTS (CONTINUED) Required Supplementary 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 for defined benefit plans, schedule 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 104 of this report. Other Information. The combining statements referred to earlier in connection with nonmajor governmental funds are presented following the notes to the financial statements. Combining and individual fund financial statements and schedules start on page 120 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, assets and deferred outflows exceeded liabilities and deferred inflows by $237,291,855 at the close of the most recent fiscal year. By far, the largest portion of the City`s net position (68.8%) reflects its investment in capital assets (e.g., land, buildings, machinery, and equipment) less any related debt used to acquire those assets that are still outstanding. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City`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. 24 City of Elk River Management's Discussion and Analysis GOVERNMENT -WIDE FINANCIAL ANALYSIS (CONTINUED) Assets Current and other assets Capital assets Total assets Deferred Outflows of Resources Deferred OPEB resources Deferred pension resources Other deferred outflows Total deferred outflows of resources Liabilities Other liabilities Noncurrent liabilities Total liabilities Deferred Inflows of Resources Deferred OPEB resources Deferred pension resources Total deferred inflows of resources Net Position Net investment in capital assets Restricted Unrestricted Total net position City of Elk River's Summary of Net Position Governmental Activities Business -Type Activities Increase Increase 2021 2020 (Decrease) 2021 2020 (Decrease) $ 54,324,030 $ 67,567,102 $ (13,243,072) $ 62,144,712 $ 51,144,716 $ 10,999,996 140,641,604 123,897,665 16,743,939 122,264,788 115,113,596 7,151,192 194,965,634 191,464,767 3,500,867 184,409,500 166,258,312 18,151,188 85,487 81,538 3,949 11,553 9,550 2,003 7,586,984 2,858,791 4,728,193 2,242,888 435,015 1,807,873 - 76,991 (76,991) - 18,101 (18,101) 7,672,471 3,017,320 4,655,151 2,254,441 462,666 1,791,775 9,708,245 11,807,143 (2,098,898) 18,267,015 8,553,380 9,713,635 68,861,507 68,935,002 (73,495) 42,418,497 39,023,106 3,395,391 78,569,752 80,742,145 (2,172,393) 60,685,512 47,576,486 13,109,026 134,572 3,504,137 (3,369,565) 18,185 8,636 9,549 9,769,924 73,733 9,696,191 2,832,246 220,060 2,612,186 9,904,496 3,577,870 6,326,626 2,850,431 228,696 2,621,735 75,360,937 78,477,651 (3,116,714) 87,943,523 86,155,217 1,788,306 12,112,762 17,138,100 (5,025,338) 1,779,016 1,261,359 517,657 26,690,158 14,546,321 12,143,837 33,405,459 31,499,220 1,906,239 $ 114,163,857 $ 110,162,072 $ 4,001,785 $ 123,127,998 $ 118,915,796 $ 4,212,202 An additional portion of the City`s net position (5.9%) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted netposition (25.3%) may be used to meet the City`s ongoing obligations to citizens and creditors. At the end of the current fiscal year, the City 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. The same situation held true for the prior fiscal year. Governmental Activities. Governmental activities increased the City`s net position by $4,001,785, thereby accounting for 48.7% of the growth in the net position of the City. Key elements of this change are as follows: 25 City of Elk River Management's Discussion and Analysis GOVERNMENT -WIDE FINANCIAL ANALYSIS (CONTINUED) City of Elk River's Changes in Net Position Governmental Activities Business -Type Activities Increase Increase 2021 2020 (Decrease) 2021 2020 (Decrease) Revenues Program revenues Charges for services $ 3,524,749 $ 2,407,238 $ 1,117,511 $ 58,307,035 $ 54,066,962 $ 4,240,073 Operating grants and contributions 1,328,148 3,354,583 (2,026,435) - - - Capital grants and contributions 5,916,070 3,254,122 2,661,948 4,308,960 3,331,984 976,976 General revenues Property taxes 14,290,673 13,972,068 318,605 - - - Franchise and gravel taxes 1,754,189 1,698,040 56,149 - - - Sales taxes 3,469,146 3,030,938 438,208 - - - Grants and contributions not restricted 747,226 2,644,469 (1,897,243) - - - Unrestricted investment earnings (56,944) 1,240,595 (1,297,539) (75,566) 716,582 (792,148) Gain (loss) on disposal of capital assets 1,053,072 - 1,053,072 (159,879) 26,770 (186,649) Miscellaneous revenues 522,275 56,457 465,818 - - - Total revenues 32,548,604 31,658,510 890,094 62,380,550 58,142,298 4,238,252 Expenses General government 4,655,075 4,526,987 128,088 - - Public safety 8,082,449 8,372,884 (290,435) Public works 5,340,633 4,468,711 871,922 - - - Culture and recreation 11,070,966 6,080,466 4,990,500 - - - Economic development 433,530 691,956 (258,426) - - - Interest and fiscal charges 1,796,294 1,490,127 306,167 - - - Municipal liquor - - - 7,683,695 7,119,662 564,033 Sewer 3,743,503 3,672,176 71,327 Garbage - - - 1,623,785 1,565,482 58,303 Storm water - - - 612,527 571,170 41,357 Electric - - - 38,462,316 34,565,317 3,896,999 Water - - - 3,210,394 2,697,201 513,193 Total expenses 31,378,947 25,631,131 5,747,816 55,336,220 50,191,008 5,145,212 Increase in Net Assets before transfers 1,169,657 6,027,379 (4,857,722) 7,044,330 7,951,290 (906,960) Transfers 2,832,128 2,280,880 551,248 (2,832,128) (2,280,880) (551,248) Changes in Net Position 4,001,785 8,308,259 (4,306,474) 4,212,202 5,670,410 (1,458,208) Net position, January 1 110,162,072 101,853,813 8,308,259 118,915,796 113,245,386 5,670,410 Net position, December 31 $ 114,163,857 $ 110,162,072 $ 4,001,785 $ 123,127,998 $ 118,915,796 $ 4,212,202 • Property taxes represent approximately 44.1% of total revenues in 2021 in governmental activities. • The largest revenue variance was an increase in capital grants and contributions due in part to funding received through the Municipal Street Aid program. • The largest expense variance was an increase in the culture and recreation function as a result of capital project work occurring during the year. 26 City of Elk River Management's Discussion and Analysis GOVERNMENT -WIDE FINANCIAL ANALYSIS (CONTINUED) Governmental Activities (Continued) The following graph depicts various governmental activities and shows the revenues and expenses directly related to those activities. Expenses and Program Revenues - Governmental Activities a,I' nnn nnn .p 1G,V VV,VVV $10,000, 000 $8,000,000 $6,000,000 $4, 000, 000 $2, 000, 000 General Government Public Safety Public Works Culture and Recreation Economic Developme nt Interest and Fiscal Charges ■Expenses $4,655,075 $8,082,449 $5,340,633 $11,070,966 $433,530 $1,796,294 ■ Program revenues $963,496 $2,124,825 $4,222,998 $3,201,947 $117,364 $- Revenues by Source — Governmental Activities Sale of Capital Unrestricted Assets Miscellaneous Investment Earnings 3.22% Revenues Grants and -0.17% Contributions_ 1.60% Charges for Services j Unrestricted 2.29% 10.79% Sales Taxes Operating Grants 10.62% and Contributions 4.07% Franchise and Gravel Taxes... Capital Grants and Contributions 18.11% Property Taxes 43.75% 27 City of Elk River Management's Discussion and Analysis GOVERNMENT -WIDE FINANCIAL ANALYSIS (CONTINUED) Business -type Activities. Business -type activities increased the City`s net position by $4,212,202 primarily due to the operating income of the Electric and Water Funds. Elements of the increase are as follows: Expenses and Program Revenues - Business -Type Activities Q n c nnn nnn .pYJ,VVV,VVV $40,000,000 $35,000,000 $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $- Municipal Liquor Sewer Garbage Storm Water Electric Water 0Expenses 7,683,695 3,743,503 1,623,785 612,527 38,462,316 3,210,394 ■ Program revenues 8,620,643 4,464,802 1,773,620 1,171,515 41,782,024 4,803,391 Unrestric E�..s� -0.12% Revenues by Source - Business -Type Activities Contributions 6.87% City of Elk River Management's Discussion and Analysis GOVERNMENT -WIDE FINANCIAL ANALYSIS (CONTINUED) Financial Analysis of the Government's Funds As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance - related legal requirements. 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, unrestricted 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 $45,167,172, a decrease of $13,337,173 in comparison with the prior year. Approximately 15% of this total amount ($6,898,714) constitutes unassigned fund balance, which is available for spending at the City`s discretion. The remainder of fund balance ($38,268,458) is not available for new spending because it is either 1) nonspendable ($160,451), 2) restricted ($12,443,162), 3) committed ($11,880,096), or 4) assigned ($13,784,749) for the purposes described in the fund balance section of each balance sheet. Major Funds Fund Balance December 31, 2021 2020 Increase (Decrease) General $ 8,750,629 $ 8,250,728 $ 499,901 The General Fund is the chief operating fund of the City. The General Fund had an increase in fund balance of $499,901. The fund had net transfers of $1,696,009 during the year, which contributed to the increase. Active ER Projects $ 1,614,246 $ 6,085,899 $ (4,471,653) The Active ER Projects Fund is a major capital projects fund with a total fund balance of $1,614,246. Fund balance decreased $4,471,653 from 2020 due to park improvement capital expenditures. Pavement Management $ 6,369,604 $ 5,712,882 $ 656,722 The Pavement Management Fund is a major capital projects fund with a total fund balance of $6,369,604. Fund balance increased $656,722 from 2020 as franchise taxes and intergovernmental revenue outpaced capital expenditures related to street projects. Public Safety Building / Fire Station #3 $ 3,561,280 $ 9,243,221 $ (5,681,941) The Public Safety Building / Fire Station #3 capital project fund had a total fund balance of $3,561,280. Fund balance dropped significantly from the prior year as the public safety capital expenditures were incurred. Government Building Bonds $ 1,269,905 $ 6,883,759 $ (5,613,854) The Government Building Bonds Fund is a major debt service fund that has a total fund balance of $1,269,905. The fund had significant debt service expenditures in 2021 as two previously issued bonds were refunded and the related principal was retired. 29 City of Elk River Management's Discussion and Analysis GOVERNMENT -WIDE FINANCIAL ANALYSIS (CONTINUED) Financial Analysis of the Government's Funds (Continued) Proprietary Funds. The City`s proprietary funds provide the same type of information found in the government -wide financial statements, but in more detail. Unrestricted net position of the enterprise funds at the end of the year amounted to $33,405,459. The total increase in net position for the funds was $4,212,202. General Fund Budgetary Highlights The City`s General Fund budget was not amended during the year. The budget called for no change in fund balance. The General Fund had an actual increase of $499,901 in 2021. Some of the larger variances are as follows: • Revenues were over budget by $480,592 with license and permit revenue being over budget by $237,029. Charges for services were over budget by $127,455. • Expenditures were under budget by $330,900, in part due to public safety being under budget by $104,938 based on salaries and benefits coming in under anticipated amounts. Capital Asset and Debt Administration Capital Assets. The City`s investment in capital assets for its governmental and business -type activities as of December 31, 2021, amounts to $262,906,392 (net of accumulated depreciation). This investment in capital assets includes land, structures, improvements, machinery and equipment, park facilities, roads, highways and bridges. Major capital asset events during the current fiscal year included the following: • Construction in progress on the public safety facility • Construction in progress on Fire Station #3 • Construction in progress on Orono Park • Energy upgrades (air handling, boiler, lighting) • Purchases of vehicles • Purchases of radios and ancillary equipment • Various street improvement projects 30 City of Elk River Management's Discussion and Analysis GOVERNMENT -WIDE FINANCIAL ANALYSIS (CONTINUED) Capital Asset and Debt Administration (Continued) Capital Assets. (Continued) City of Elk River's Capital Assets (Net of Accumulated Depreciation) Governmental Activities Business -Type Activities Increase Increase 2021 2020 (Decrease) 2021 2020 (Decrease) Land $ 38,802,663 $ 40,769,513 $ 1,966,850 $ 1,924,686 $ 1,W,071 $ (80,615) Construction in progress 16,442,587 2,586,460 (13,856,127) 7,243,598 1,209,742 (6,033,856) Buildings 45,559,544 46,202,453 642,909 15,942,807 16,880,153 937,346 Improvements other than buildings 5,916,977 5,831,737 (85,240) 174,600 179,593 4,993 Equipment 6,497,219 5,336,269 (1,160,950) 6,891,996 7,289,916 397,920 Infrastructure 27,422,614 23,171,233 (4,251,381) 66,361,523 64,240,596 (2,120,927) Intangible assets - - - 23,725,578 23,469,525 (256,053) Total $ 140,641,604 $ 123,897,665 $ (16,743,939) $ 122,264,788 $ 115,113,596 $ (7,151,192) Additional information on the City`s capital assets can be found in Note 7 starting on page 72 of this report. Long-term Debt. At the end of the current fiscal year, the City had total bonded debt outstanding of $105,045,000. While all of the City`s bonds have revenue streams, they are also all backed by the full faith and credit of the City. City of Elk River's Outstanding Debt 2021 Governmental Activities Business -Type Activities Increase Increase 2020 (Decrease) 2021 2020 (Decrease) General obligation bonds $ 27,180,000 $ 29,390,000 $ 2,210,000 $ - $ - $ - General obligation revenue bonds 31,360,000 32,165,000 805,000 16,575,000 16,010,000 (565,000) Revenue bonds - - - 29,930,000 18,985,000 (10,945,000) Notes payable 209,124 415,740 206,616 Total $ 58,540,000 $ 61,555,000 $ 3,015,000 $ 46,714,124 $ 35,410,740 $ (11,303,384) The City`s bond rating is AA+ from Standard and Poor`s. Additional information on the City`s long- term debt can be found in Note 8 starting on page 75 of this report. 31 City of Elk River Management's Discussion and Analysis GOVERNMENT -WIDE FINANCIAL ANALYSIS (CONTINUED) Economic Factors and Next Year's Budgets and Rates 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 2022 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`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 the finance department, City of Elk River, 13065 Orono Pkwy, Elk River, Minnesota 55330 or by calling 763-635-1000. 32 BASIC FINANCIAL STATEMENTS 33 City of Elk River Statement of Net Position December 31, 2021 Primary Government Component Unit Housing and Governmental Business -Type Redevelopment Activities Activities Total Authority Assets Cash and investments $ 46,802,651 $ 46,621,796 $ 93,424,447 $ 775,500 Cash and investments held by trustee - 7,081,831 7,081,831 - Restricted cash - 1,779,016 1,779,016 - Taxes receivable 986,427 - 986,427 7,119 Accounts receivable 416,732 3,853,142 4,269,874 1,269 Interest receivable 161,264 86,938 248,202 - Notes receivable 1,721,445 - 1,721,445 474,338 Special assessments receivable 1,513,424 590,304 2,103,728 - Due from other governments 890,708 - 890,708 - Due from primary government - - - 179,331 Due from component unit 4,002 - 4,002 - Internal balances 497,503 (497,503) - - Inventory - 2,321,336 2,321,336 - Land held for resale 175,000 - 175,000 382,000 Prepaid items 160,451 307,852 468,303 - Pension asset 994,423 - 994,423 - Capital assets not being depreciated Land 38,802,663 1,924,686 40,727,349 257,100 Construction in progress 16,442,587 7,243,598 23,686,185 - Capital assets being depreciated Buildings and building improvements 68,613,007 27,762,844 96,375,851 - Improvements other than buildings 10,808,095 266,259 11,074,354 174,290 Infrastructure 74,076,919 - 74,076,919 - Collection and distribution systems - 140,337,044 140,337,044 - Intangible assets - 25,895,865 25,895,865 Equipment and furniture 16,371,053 12,144,130 28,515,183 - Less accumulated depreciation (84,472,720) (93,309,638) (177,782,358) (105,542) Total assets 194,965,634 184,409,500 379,375,134 2,145,405 Deferred Outflows of Resources Deferred outflows of resources related to OPEB 85,487 11,553 97,040 - Deferred outflows of resources related to pensions 7,586,984 2,242,888 9,829,872 20,255 Total deferred outflows of resources 7,672,471 2,254,441 9,926,912 20,255 Total assets and deferred outflows of resources $ 202,638,105 $ 186,663,941 $ 389,302,046 $ 2,165,660 See notes to basic financial statements. 34 City of Elk River Statement of Net Position December 31, 2021 Primary Government Component Unit Housing and Governmental Business -Type Redevelopment Activities Activities Total Authority Liabilities Accounts payable $ 2,499,069 $ 6,168,767 $ 8,667,836 $ 5,176 Salaries and benefits payable 479,110 287,546 766,656 1,797 Deposits payable - 1,135,714 1,135,714 - Contracts payable 1,011,531 - 1,011,531 - Due to other governments 16,990 267,376 284,366 - Due to primary government - - - 4,002 Due to component unit 179,331 - 179,331 - Unearned revenue 2,072,587 218,536 2,291,123 - Interest payable Payable within one year 432,040 624,928 1,056,968 - Net bonds payable Payable within one year 2,265,000 8,865,000 11,130,000 - Payable after one year 61,099,308 39,178,368 100,277,676 - Notes from direct borrowings Payable within one year - 209,124 209,124 - Compensated absences payable Payable within one year 752,587 490,024 1,242,611 - Payable after one year 1,092,529 53,948 1,146,477 - Net pension liability Payable after one year 5,902,850 3,082,557 8,985,407 27,283 Total OPEB liability Payable after one year 766,820 103,624 870,444 - Total liabilities 78,569,752 60,685,512 139,255,264 38,258 Deferred Inflows of Resources Deferred inflows of resources related to OPEB 134,572 18,185 152,757 - Deferred inflows of resources related to pensions 9,769,924 2,832,246 12,602,170 25,081 Total deferred inflows of resources 9,904,496 2,850,431 12,754,927 25,081 Net Position Net investment in capital assets 75,360,937 87,943,523 163,304,460 325,848 Restricted for Fiscal recovery 115 - 115 - Public safety 40,933 - 40,933 - Parks and recreation improvements 1,920,737 - 1,920,737 - Capital projects 3,561,280 - 3,561,280 - Economic development 1,463,357 - 1,463,357 - Debt service 5,126,340 1,779,016 6,905,356 - Housing and redevelopment - - - 1,776,473 Unrestricted 26,690,158 33,405,459 60,095,617 - Total net position 114,163,857 123,127,998 237,291,855 2,102,321 Total liabilities, deferred inflows of resources, and net position $ 202,638,105 $ 186,663,941 $ 389,302,046 $ 2,165,660 See notes to basic financial statements. 35 City of Elk River Statement of Activities Year Ended December 31, 2021 Program Revenues Operating Capital Grants Charges for Grants and and Functions/Programs Expenses Services Contributions Contributions Primary government Governmental activities General government $ 4,655,075 $ 853,100 $ 110,396 $ - Public safety 8,082,449 1,211,025 650,891 262,909 Public works 5,340,633 65,332 491,845 3,665,821 Culture and recreation 11,070,966 1,148,991 65,616 1,987,340 Economic development 433,530 246,301 9,400 - Interest and fiscal charges 1,796,294 - - - Total governmental activities 31,378,947 3,524,749 1,328,148 5,916,070 Business -type activities Municipal liquor 7,683,695 8,620,643 - - Sewer 3,743,503 2,517,025 - 1,947,777 Garbage 1,623,785 1,773,620 - - Storm water 612,527 586,049 - 585,466 Electric 38,462,316 41,396,708 - 385,316 Water 3,210,394 3,412,990 - 1,390,401 Total business -type activities 55,336,220 58,307,035 - 4,308,960 Totalprimary governmental $ 86,715,167 $ 61,831,784 $ 1,328,148 $ 10,225,030 Component Unit Housing and Redevelopment Authority $ 159,133 $ - $ 177 $ - General revenues Property taxes Franchise and gravel taxes Sales taxes Grants and contributions not restricted to specific programs Unrestricted investment income Gain (loss) on sale of assets Miscellaneous revenues Transfers Total general revenues and transfers Change in net position Net position - beginning Net position - ending See notes to basic financial statements. 36 Net (Expense) Revenues and Changes in Net Position Primary Government Component Unit Housing and Governmental Business -Type Redevelopment Activities Activities Total Authority $ (3,691,579) $ - $ (3,691,579) $ - (5,957,624) - (5,957,624) - (1,117,635) - (1,117,635) - (7,869,019) - (7,869,019) - (177,829) - (177,829) - (1,796,294) - (1,796,294) - (20,609,980) - (20,609,980) - - 936,948 936,948 - - 721,299 721,299 - - 149,835 149,835 - - 558,988 558,988 - - 3,319,708 3,319,708 - 1,592,997 1,592,997 - 7,279,775 7,279,775 - (20,609,980) 7,279,775 (13,330,205) - - (158,956) 14,290,673 - 14,290,673 320,799 1,754,189 - 1,754,189 - 3,469,146 - 3,469,146 - 747,226 - 747,226 - (56,944) (75,566) (132,510) 5,541 1,053,072 (159,879) 893,193 - 522,275 - 522,275 - 2,832,128 (2,832,128) - - 24,611,765 (3,067,573) 21,544,192 326,340 4,001,785 4,212,202 8,213,987 167,384 110,162,072 118,915,796 229,077,868 1,934,937 $ 114,163,857 $ 123,127,998 $ 237,291,855 $ 2,102,321 37 City of Elk River Balance Sheet - Governmental Funds December 31, 2021 Capital Projects Public Safety Active ER Pavement Building / Fire General Fund Projects Management Station #3 Assets Cash and investments $ 8,716,326 $ 2,367,833 $ 6,028,962 $ 4,269,175 Taxes receivable 270,506 121 - - Accounts receivable 26,695 - 142,751 - Interest receivable 39,744 - 26,917 - Notes receivable - - - - Special assessments receivable - - - - Due from other funds 294,652 - 270,693 64,295 Due from other governments 80,961 95,130 307,515 - Due from component unit 4,002 - - - Land held for resale - - - - Prepaid items 160,019 - - - Total assets $ 9,592,905 $ 2,463,084 $ 6,776,838 $ 4,333,470 Liabilities Accounts payable $ 300,058 $ 172,456 $ 99,719 $ 490,980 Salaries and benefits payable 451,071 - - - Contracts payable - 676,267 - 281,210 Due to other funds - - - - Due to other governments 14,262 - - - Due to component unit - - - - Unearned revenue - 115 - Total liabilities 765,391 848,838 99,719 772,190 Deferred Inflows of Resources Unavailable revenue - property taxes 76,885 - - - Unavailable revenue - special assessments - - - - Unavailable revenue - other - - 307,515 - Total deferred inflows of resources 76,885 - 307,515 - Fund Balances Nonspendable 160,019 - - - Restricted - 1,369,162 - 3,561,280 Committed - 99,711 6,369,604 - Assigned - 145,373 - - Unassigned 8,590,610 - - - Total fund balances 8,750,629 1,614,246 6,369,604 3,561,280 Total liabilities, deferred inflows of resources, and fund balances $ 9,592,905 $ 2,463,084 $ 6,776,838 $ 4,333,470 See notes to basic financial statements. 38 Debt Service Nonmajor Total Government Governmental Governmental Building Bonds Funds Funds $ 1,037,035 $ 24,383,320 $ 46,802,651 13,429 702,371 986,427 - 247,286 416,732 4,616 89,987 161,264 - 1,721,445 1,721,445 - 1,513,424 1,513,424 219,000 1,176,298 2,024,938 - 407,102 890,708 - - 4,002 - 175,000 175,000 $ 1,274,080 $ 30,416,665 $ 54,857,042 $ 361 $ 1,435,495 $ 2,499,069 - 28,039 479,110 - 54,054 1,011,531 - 1,527,435 1,527,435 - 2,728 16,990 - 179,331 179,331 2,070,568 2,070,683 361 5,297,650 7,784,149 3,814 6,916 87,615 - 1,510,591 1,510,591 IM G1G - 432 160,451 1,269,905 6,242,815 12,443,162 - 5,410,781 11,880,096 - 13,639,376 13,784,749 - (1,691,896) 6,898,714 1,269,905 23,601,508 45,167,172 $ 1,274,080 $ 30,416,665 $ 54,857,042 WE (THIS PAGE LEFT BLANK INTENTIONALLY) :1 City of Elk River Reconciliation of the Balance Sheet to the Statement of Net Position - Governmental Funds December 31, 2021 Total fund balances - governmental funds $ 45,167,172 Amounts reported for governmental activities in the Statement of Net Position are different because: Capital assets used in governmental activities are not current financial resources and, therefore, are not reported as assets in governmental funds. Cost of capital assets 225,114,324 Less accumulated depreciation (84,472,720) Long-term liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported as liabilities in the funds. Long-term liabilities at year-end consist of: Bond principal payable (58,540,000) Unamortized bond premiums/discounts (4,824,308) Compensated absences payable (1,845,116) Total OPEB liability (766,820) Net pension liability (5,902,850) Net pension asset 994,423 Delinquent receivables will be collected in subsequent years, but are not available soon enough to pay for the current period's expenditures and, therefore, are deferred in the funds. Property taxes 87,730 Deferred outflows of resources and deferred inflows of resources are created as a result of various differences related to pensions and OPEB that are not recognized in the governmental funds_ Deferred inflows of resources related to pensions (9,769,924) Deferred outflows of resources related to pensions 7,586,984 Deferred outflows of resources related to OPEB 85,487 Deferred inflows of resources related to OPEB (134,572) Revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds. Deferred special assessments 1,508,572 State shared taxes 307,515 Governmental funds do not report a liability for accrued interest on long-term debt until due and payable. (432,040) Total net position - governmental activities $ 114,163,857 See notes to basic financial statements. 41 City of Elk River Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds Year Ended December 31, 2021 Revenues Property taxes Sales taxes Other taxes Special assessments Licenses and permits Intergovernmental Charges for services Fines and forfeitures Other revenue Investment income Contributions and donations Refunds and reimbursements Landfill expansion fee Miscellaneous revenue Total revenues Expenditures Current General government Public safety Public works Culture and recreation Economic development Capital outlay General government Public safety Public works Culture and recreation Debt service Principal Interest and other charges Total expenditures Excess of revenues over (under) expenditures Other Financing Sources (Uses) Proceeds from sale of capital asset Issuance of bonds Bond premium on issuance of bonds Payment to refunding escrow agent Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Fund Balances Beginning of year End of year See notes to basic financial statements. Capital Projects Public Safety Active ER Pavement Building / Fire General Fund Projects Management Station 93 $ 12,297,572 $ 344 $ $ - 233,745 - 1,520,444 - 1,015,529 - - - 581,927 1,595,130 4,970,635 1,077,855 - - 127,266 - 120,968 2,764 (60,447) 2,206 145,251 - - - 33,379 - - - 15,633,492 1,598,238 6,430,632 2,206 4,173,627 - - 8,273,612 - 13,243 2,328,853 - - 2,015,790 8,970 37,718 - - 10,709,772 - - 5,773,910 - - 6,060,921 - - - - - 99,250 16,829,600 6,069,891 5,773,910 10,822,265 (1,196,108) (4,471,653) 656,722 (10,820,059) - - 4,805,000 - - 428,885 2,239,600 - - (543,591) - (95,767) 1,696,009 - - 5,138,118 499,901 (4,471,653) 656,722 (5,681,941) 8,250,728 6,085,899 5,712,882 9,243,221 $ 8,750,629 $ 1,614,246 $ 6,369,604 $ 3,561,280 42 Government Nonmajor Total Building Governmental Governmental Bonds Funds Funds $ 617,586 $ 1,371,402 $ 14,286,904 - 3,469,146 3,469,146 - - 1,754,189 - 339,278 339,278 - - 1,015,529 - 966,606 8,114,298 - 1,497,988 2,575,843 - 33,917 161,183 10,967 (133,402) (56,944) - 487,574 487,574 - 199,678 344,929 - 2,179,035 2,179,035 - 233,605 266,984 628,553 10,644,827 34,937,948 - 265,478 4,439,105 - 48,953 8,335,808 - 92,778 2,421,631 - 1,867,147 3,891,907 - 454,657 454,657 - 744,602 744,602 - 1,842,986 12,590,476 - 2,655,896 8,429,806 - 357,958 6,418,879 850,000 1,345,000 2,195,000 231,771 1,516,314 1,847,335 1,081,771 11,191,769 51,769,206 (453,218) (546,942) (16,831,258) - 1,053,072 1,053,072 - - 4,805,000 - - 428,885 (5,625,000) - (5,625,000) 464,364 1,424,361 4,128,325 - (656,839) (1,296,197) (5,160,636) 1,820,594 3,494,085 (5,613,854) 1,273,652 (13,337,173) 6,883,759 22,327,856 58,504,345 $ 1,269,905 $ 23,601,508 $ 45,167,172 43 City of Elk River Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities - Governmental Funds Year Ended December 31, 2021 Total change in fund balances - governmental funds $ (13,337,173) Amounts reported for governmental activities in the Statement of Activities are different because: Capital outlays are reported in governmental funds as expenditures. However, in the Statement of Activities, the cost of those assets is allocated over the estimated useful lives as depreciation expense. Capital outlays 25,052,551 Depreciation expense (6,151,592) Loss on disposal of capital assets (2,157,020) Some expenses are recognized as paid in the governmental funds but recognized as the expense is incurred in the Statement of Activities. Compensated absences payable (134,148) Total other post employment benefits (OPEB) liability (2,475) Principal payments on long-term debt are recognized as expenditures in the governmental funds but as an increase in the net position in the Statement of Activities. Bond principal payments 2,195,000 Governmental funds report the effects of bond premiums and discounts when debt is first issued, whereas these amounts are deferred and amortized in the Statement of Activities. (192,754) Interest on long-term debt in the Statement of Activities differs from the amount reported in the governmental funds because interest is recognized as an expenditure in the funds when it is due and thus requires use of current financial resources. In the Statement of Activities, however, interest expense is recognized as the interest accrues, regardless of when it is due. (185,090) Proceeds from long-term debt are recognized as another financing source in the governmental funds but have no impact on the changes in net position in the Statement of Activities. (4,805,000) Governmental funds recognize pension contributions as expenditures at the time of payment whereas the Statement of Activities factors in items related to pensions on a full accrual perspective. Pension expense 1,593,312 Revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds. State shared taxes (3,381,714) Certain revenues are recognized as soon as they are earned. Under the modified accrual basis of accounting certain revenues cannot be recognized until they are available to liquidate liabilities of the current period. Property taxes 3,769 Special assessments (120,881) Change in net position - governmental activities $ 4,001,785 See notes to basic financial statements. 44 Revenues Property taxes Other taxes Licenses and permits Intergovernmental Charges for services Fines and forfeitures Other revenue Investment income Refunds and reimbursements Miscellaneous revenue Total revenues Expenditures Current General government Public safety Public works Culture and recreation Capital outlay Public safety Public works Total expenditures Excess of revenues over (under) expenditures Other Financing Sources (Uses) Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Fund Balances Beginning of year End of year City of Elk River Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - General Fund Year Ended December 31, 2021 Budgeted Amounts Variance with Actual Final Budget - Original Final Amounts Over (Under) $ 12,315,000 $ 12,315,000 $ 12,297,572 $ (17,428) 150,000 150,000 233,745 83,745 778,500 778,500 1,015,529 237,029 602,500 602,500 581,927 (20,573) 950,400 950,400 1,077,855 127,455 120,000 120,000 127,266 7,266 75,000 75,000 120,968 45,968 130,000 130,000 145,251 15,251 31,500 31,500 33,379 1,879 15,152,900 15,152,900 15,633,492 480,592 4,256,750 4,256,750 4,173,627 (83,123) 8,378,550 8,378,550 8,273,612 (104,938) 2,413,400 2,413,400 2,328,853 (84,547) 2,058,800 2,058,800 2,015,790 (43,010) 40,000 40,000 37,718 (2,282) 13,000 13,000 - (13,000) 17,160,500 17,160,500 16,829,600 (330,900) (2,007,600) (2,007,600) (1,196,108) 811,492 2,379,600 2,379,600 2,239,600 (140,000) (372,000) (372,000) (543,591) (171,591) 2,007,600 2,007,600 1,696,009 (311,591) $ - $ - 499,901 $ 499,901 8,250,728 $ 8,750,629 See notes to basic financial statements. 45 City of Elk River Statement of Net Position - Proprietary Funds December 31, 2021 Municipal Liquor Sewer Garbage Storm Water Assets Current assets Cash and investments $ 4,713,463 $ 7,458,628 $ 528,325 $ 1,433,529 Cash and investments held by trustee - 7,081,831 - - Restricted cash - - - - Accounts receivable - 17,250 - - Interest receivable 21,044 33,300 2,359 6,400 Due from other funds - 365,382 148,828 49,384 Special assessments receivable - 556,127 2,865 461 Inventory 1,406,464 - - - Prepaid items - - - - Total current assets 6,140,971 15,512,518 682,377 1,489,774 Noncurrent assets Capital assets Land 753,961 302,581 - 9,900 Construction in progress - - - - Buildings and building improvements 2,912,901 20,312,707 - - Improvements other than buildings - 232,178 - - Collection and distribution - 26,239,609 - 19,089,255 Intangible assets - - - - Equipment and furniture 190,103 7,248,716 - 27,821 Total capital assets 3,856,965 54,335,791 - 19,126,976 Less accumulated depreciation (2,405,631) (24,133,746) - (9,866,177) Net capital assets 1,451,334 30,202,045 - 9,260,799 Total assets 7,592,305 45,714,563 682,377 10,750,573 Deferred Outflows of Resources Deferred outflows of resources related to OPEB 6,162 5,391 - - Deferred outflows of resources related to pensions 324,708 210,001 10,072 - Total deferred outflows of resources 330,870 215,392 10,072 - Total assets and deferred outflows of resources $ 7,923,175 $ 45,929,955 $ 692,449 $ 10,750,573 See notes to basic financial statements. 46 Electric Water Total $ 21,680,955 $ 10,806,896 $ 46,621,796 - - 7,081,831 1,779,016 - 1,779,016 3,650,922 184,970 3,853,142 19,068 4,767 86,938 4,350 128,850 696,794 7,248 23,603 590,304 893,268 21,604 2,321,336 260,234 47,618 307,852 28,295,061 11,218,308 63,339,009 662,567 195,677 1,924,686 6,993,891 249,707 7,243,598 3,335,013 1,202,223 27,762,844 34,081 - 266,259 55,390,664 39,617,516 140,337,044 25,895,865 - 25,895,865 4,161,248 516,242 12,144,130 96,473,329 41,781,365 215,574,426 (35,913,939) (20,990,145) (93,309,638) 60,559,390 20,791,220 122,264,788 88,854,451 32,009,528 185,603,797 - - 11,553 1,431,143 266,964 2,242,888 1,431,143 266,964 2,254,441 $ 90,285,594 $ 32,276,492 $ 187,858,238 WA City of Elk River Statement of Net Position - Proprietary Funds December 31, 2021 Municipal Liquor Sewer Garbage Storm Water Liabilities Current liabilities Accounts and contracts payable $ 349,119 $ 116,029 $ 130,762 $ 30 Salaries and benefits payable 35,783 22,323 1,130 - Deposits payable - - - Interest payable - 131,767 - Unearned revenue 4,726 - - - Due to other funds - 563 2,853 935 Due to other governments 90,946 - - - Notes from direct borrowings due within one year - - - Bonds payable due within one year - 7,490,000 - Current compensated absences 46,444 30,015 - - Total current liabilities 527,018 7,790,697 134,745 965 Noncurrent liabilities Compensated absences 34,684 19,264 - - Due to other funds - - - - Bonds payable - 7,232,230 - - Total OPEB liability 55,266 48,358 - Net pension liability 437,376 282,868 13,567 - Total noncurrent liabilities 527,326 7,582,720 13,567 Total liabilities 1,054,344 15,373,417 148,312 965 Deferred Inflows of Resources Deferred inflows of resources related to OPEB 9,698 8,487 - - Deferred inflows of resources related to pensions 402,078 260,039 12,472 - Total deferred inflows of resources 411,776 268,526 12,472 - Net Position Net investment in capital assets 1,451,334 22,561,646 - 9,260,799 Restricted for debt service - - - - Unrestricted 51005,721 7,726,366 531,665 1,488,809 Total net position 6,457,055 30,288,012 531,665 10,749,608 Total liabilities, deferred inflows of resources, and net position $ 7,923,175 $ 45,929,955 $ 692,449 $ 10,750,573 See notes to basic financial statements. 48 Electric Water Total $ 4,887,198 $ 685,629 $ 6,168,767 191,572 36,738 287,546 965,089 170,625 1,135,714 462,841 30,320 624,928 1,067 212,743 218,536 964,693 111,853 1,080,897 172,799 3,631 267,376 209,124 - 209,124 1,055,000 320,000 8,865,000 369,891 43,674 490,024 9,279,274 1,615,213 19,347,912 - - 53,948 90,720 22,680 113,400 30,250,891 1,695,247 39,178,368 - - 103,624 1,978,758 369,988 3,082,557 32,320,369 2,087,915 42,531,897 41,599,643 3,703,128 61,879,809 - - 18,185 1,818,303 339,354 2,832,246 1,818,303 339,354 2,850,431 35,045,278 19,624,466 87,943,523 1,779,016 - 1,779,016 10,043,354 8,609,544 33,405,459 46,867,648 28,234,010 123,127,998 $ 90,285,594 $ 32,276,492 $ 187,858,238 we, Sales and Cost of Sales Sales Cost of sales Gross profit Operating Revenues User charges Delinquent collections Other Total operating revenues Operating Expenses Personnel services Materials and supplies Purchased power Other services and charges Depreciation Total operating expenses Operating income (loss) Nonoperating Revenues (Expenses) Investment income Loss on sale of asset Interest and other charges Miscellaneous revenue Total nonoperating revenues Income (loss) before capital contributions and transfers Capital Contributions Transfers out Change in net position Net Position Beginning of year End of year City of Elk River Statement of Revenues, Expenses, and Changes in Net Position - Proprietary Funds Year Ended December 31, 2021 Business -Type Activities - Enterprise Funds Municipal Liquor Sewer Garbage Storm Water $ 8,614,747 $ - $ - $ - (6,234,978) - - - 2,379,769 - - - - 2,346,690 1,770,813 585,636 - 1,450 2,807 413 5,896 168,885 - - 5,896 2,517,025 1,773,620 586,049 1,000,839 662,725 31,094 (50,179) 21,122 241,914 20,658 131 331,817 872,771 1,572,033 195,179 nA n7n 1 CAn nnA AC' 9nc 936,948 (900,479) 149,835 (26,478) (67,485) (67,640) (4,908) (12,724) - (108,514) - (5,489) - (325,999) - - 869,463 (1,402,632) 144,927 (44,691) - 1,947,777 - 585,466 (1,001,394) (160,000) (52,000) (121,000) (131,931) 385,145 92,927 419,775 I��1Z1IR1T�T�t�T�4i1TiY- iZ1iiZ1� I�iLT�t1LL1 $ 6,457,055 $ 30,288,012 $ 531,665 $ 10,749,608 See notes to basic financial statements. 50 Business -Type Activities - Enterprise Funds $ 8,614,747 - - (6,234,978) - - 2,379,769 39,473,717 3,049,140 47,225,996 - - 4,670 1,287,227 71,520 1,533,528 40,760,944 3,120,660 48,764,194 2,394,957 674,752 4,714,188 151,466 337,410 772,701 28,169,146 - 28,169,146 3,952,588 993,134 7,917,522 2,957,685 1,139,802 6,299,916 37,625,842 3,145,098 47,873,473 3,135,102 (24,438) 3,270,490 52,514 24,677 (75,566) (45,214) (662) (159,879) (836,474) (65,296) (1,227,769) 2,941,692 226,611 2,735,370 385,316 1,390,401 4,308,960 (1,407,734) (90,000) (2,832,128) 1,919,274 1,527,012 4,212,202 44,948,374 26,706,998 118,915,796 $ 46,867,648 $ 28,234,010 $ 123,127,998 51 City of Elk River Statement of Cash Flows - Proprietary Funds Year Ended December 31, 2021 Cash Flows - Operating Activities Receipts from customers and users Payments to suppliers Payments to employees Other operating receipts Net cash flows - operating activities Cash Flows - Noncapital Financing Activities Borrowing (payments) on interfund balances Transfer to other funds Net cash flows - noncapital financing activities Cash Flows - Capital and Related Financing Activities Special assessments received Connection charges collected Principal paid on bonds Interest paid on bonds Proceeds from debt issuance Principal paid on notes from direct borrowings Capital grants Acquisition of capital assets Net cash flows - capital and related financing activities Cash Flows - Investing Activities Interest and dividends received Net change in cash and cash equivalents Cash and Cash Equivalents January 1 December 31 Business -Type Activities - Enterprise Funds Municipal Liquor Sewer Garbage Storm Water $ 8,621,477 $ 2,533,566 $ 1,773,620 $ 586,049 (6,774,117) (1,120,338) (1,591,958) (195,400) (1,019,838) (694,629) (32,496) - 827,522 718,599 149,166 390,649 - (2,156) (7,001) (1,825) (1,001,394) (160,000) (52,000) (121,000) (1,001,394) (162,156) (59,001) (122,825) - 90,144 791 249 - 1,227,369 - - - (440,000) - - - (294,626) - - (68,440) - - - (68,440) 582,887 791 249 (67,968) (75,054) (5,456) (14,298) (310,280) 1,064,276 85,500 253,775 •a� ems=. � r. � o � •. n r n s � � �=•nip i r n�. c� � $ 4,713,463 $ 14,540,459 $ 528,325 $ 1,433,529 See notes to basic financial statements. 52 Business -Type Activities - Enterprise Funds Electric Water Total $ 38,976,603 $ 3,063,848 $ 55,555,163 (30,572,031) (1,075,716) (41,329,560) (2,886,434) (691,068) (5,324,465) 648,569 478,538 1,127,107 6,166,707 1,775,602 10,028,245 189,737 203,920 382,675 (1,407,734) (90,000) (2,832,128) (1,217,997) 113,920 (2,449,453) - - 91,184 - 548,948 1,776,317 (1,145,000) (330,000) (1,915,000) (619,035) (13,874) (927,535) 12,409,897 1,715,935 14,125,832 (206,616) - (206,616) - 3,288 3,288 (9,626,428) (1,368,686) (11,063,554) 812,818 555,611 1,883,916 46,364 23,140 (93,272) 5,807,892 2,468,273 9,369,436 17,652,079 8,338,623 46,113,207 $ 23,459,971 $ 10,806,896 $ 55,482,643 53 City of Elk River Statement of Cash Flows - Proprietary Funds Year Ended December 31, 2021 Reconciliation of Operating Income (Loss) to Net Cash Flows - Operating Activities Operating income (loss) Adjustments to reconcile operating income (loss) to net cash flows - operating activities Other revenues Bad debt expense Depreciation expense Pension expense Accounts receivable Special assessments receivable Other receivables Prepaid items Inventory Accounts payable Deposits payable Due to other governmental units Salaries and benefits payable Unearned revenue OPEB expense Compensated absences payable Total adjustments Net cash flows - operating activities Supplemental Schedule of Noncash Capital and Related Financing Activities Contributions of capital assets Loss on disposal of capital assets Capital assets purchased on account Amortization of bond premium Amortization of deferred charges on refunding Business -Type Activities - Enterprise Funds Municipal Liquor Sewer Garbage Storm Water $ 936,948 $ (900,479) $ 149,835 $ (26,478) 94,939 1,640,094 - 467,396 (42,365) (43,281) (1,587) (50,179) - 16,541 - - (162,021) - - - (18,803) (5,653) 733 (90) (5,376) - - - 3,465 152 185 - 834 - - - 7,504 7,485 - - 12,397 3,740 - - (109,426) 1,619,078 (669) 417,127 $ 827,522 $ 718,599 $ 149,166 $ 390,649 $ - $ 720,408 $ - $ 585,466 $ - $ (108,514) $ - $ (5,489) See notes to financial statements. 54 Business -Type Activities - Enterprise Funds Electric Water Total $ 3,135,102 $ (24,438) $ 3,270,490 635,764 292,330 928,094 6,673 - 6,673 2,957,685 1,139,802 6,299,916 (288,251) 17,735 (407,928) (1,849,727) (79,462) (1,912,648) (161) 2,950 2,789 12,805 186,208 199,013 (47,856) (15,515) (63,371) (49,359) (13,225) (224,605) 1,773,838 282,946 2,032,971 64,480 52,625 117,105 17,873 622 13,119 22,144 7,838 33,784 1,067 (32,925) (31,024) (208,274) (44,526) (237,811) (17,096) 2,637 1,678 3,031,605 1,800,040 6,757,755 $ 6,166,707 $ 1,775,602 $ 10,028,245 $ 385,316 $ 748,165 $ 2,439,355 $ (45,214) $ (662) $ (159,879) $ 931,011 $ - $ 931,011 $ 61,585 $ - $ 61,585 $ 14,481 $ - $ 14,481 55 (THIS PAGE LEFT BLANK INTENTIONALLY) 56 City of Elk River Notes to Basic Financial Statements NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting Entity 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 basic 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. 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. 57 City of Elk River Notes to Basic Financial Statements NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) A. 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. B. Government -wide and Fund Financial Statements The government -wide financial statements (i.e., the Statement of Net Position and the Statement of Activities) report information on all of the nonfiduciary activities of the City. The fiduciary funds are only reported in the statement of fiduciary net position and the statement of changes in fiduciary net position at the fund financial statement level. 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 fees and charges for support. The Statement of Activities demonstrates the degree to which the direct expenses of a given function or segment is offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Interest on general long-term debt is considered an indirect expense and is reported separately in the Statement of Activities. 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 and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Internally dedicated revenues are reported as general revenues rather than program revenues. Separate financial statements are provided for governmental funds and proprietary funds. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government -wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund and fiduciary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. City of Elk River Notes to Basic Financial Statements NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued) Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within 60 days of the end of the current period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Property taxes, franchise taxes, licenses, and interest associated with the current period are all considered to be susceptible to accrual and so have been recognized as revenues of the current period. Only the portion of special assessments receivable due within the current period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the City. Description of Funds: Major Governmental Funds: General Fund — This 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. Active ER Projects Fund— This fund is established to account for the accumulation of resources and bond proceeds issued to fund expenditures for the City of Elk River's related capital projects. Pavement Management Fund — This fund accounts for franchise taxes collected to fund expenditures for the ongoing maintenance and repair of the City streets. Public Safety Building / Fire Station 93 Fund — This fund is used to account for the capital improvements being done on the public safety building as well as the construction of fire station 43. Government Building Bonds Fund — This fund is used to account for the accumulation of resources and payment of principal and interest to finance the construction of City facilities. Proprietary Funds: Municipal Liquor Fund — This fund accounts for the operations of the City's off -sale liquor stores. Sewer Fund — This fund accounts for the sewer service charges which are used to finance the sanitary sewer system operating expenses. 59 City of Elk River Notes to Basic Financial Statements NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued) Description of Funds: (Continued) Proprietary Funds (Continued): Garbage Fund — This fund accounts for the activities of the garbage and recycling collection programs. Storm Water Fund — This fund accounts for the activities of the storm water collection system. Electric Fund — This fund accounts for the activities of the electric distribution system. Water Fund — This fund accounts for the activities of the water distribution system. As a general rule, the effect of interfund activity has been eliminated from the government -wide financial statements. Exceptions to this general rule are charges between the City's utility functions and various other functions of the City. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. 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 City also recognizes as operating revenue the portion of tap fees intended to recover the cost of connecting new customers to the system. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. 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. D. Assets, Liabilities, Deferred Outflows/Inflows of Resources, and Net Position or Equity 1. Deposits and Investments Cash and investments include balances from all funds that are combined and invested to the extent available in various securities as authorized by state law. Earnings from the pooled investments are allocated to the individual funds based on the average of month -end cash and investment balances. 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. 60 City of Elk River Notes to Basic Financial Statements NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. Assets, Liabilities, Deferred Outflows/Inflows of Resources, and Net Position or Equity (Continued) 1. Deposits and Investments (Continued) Minnesota Statutes authorizes the City to invest in obligations of the U.S. Treasury, agencies and instrumentalities, shares of investment companies whose only investments are in the aforementioned securities, obligations of the State of Minnesota or its municipalities, bankers' acceptances, future contracts, repurchase and reverse repurchase agreements, and commercial paper of the highest quality with a maturity of no longer than 270 days and in the Minnesota Municipal Investment Pool. Certain investments for the City are reported at fair value as disclosed in Note 3. The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The Hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs. In accordance with GASB Statement No. 79, the Minnesota Municipal Investment Pool securities are valued at amortized cost, which approximates fair value. There are no restrictions or limitations on withdrawals from the 4M Liquid Asset Fund. Investments in the 4M Plus must be deposited for a minimum of 14 calendar days. Withdrawals prior to the 14-day restriction period will be subject to a penalty equal to seven days interest on the amount withdrawn. Seven days' notice of redemption is required for withdrawals of investments in the 4M Term Series withdrawn prior to the maturity date of that series. A penalty could be assessed as necessary to recoup the Series for any charges, losses, and other costs attributable to the early redemption. 2. Receivables All trade and property tax receivables are shown at a gross amount since both are assessable to the property taxes and are collectible upon the sale of the property. The City Council annually adopts a tax levy and certifies it to the County in December for collection in the following year. The County is responsible for collecting all property taxes for the City. These taxes attach an enforceable lien on taxable property within the City on January 1 and are payable by the property owners in two installments. The taxes are collected by the County and tax settlements are made to the City during January, July, and December each year. The County Auditor submits the list of taxes and special assessments to be collected on each parcel of property to the County Treasurer in January of each year. Accounts receivable include amounts billed for services provided before year end. Unbilled utility enterprise fund receivables are also included for services provided in 2021. The City annually certifies delinquent accounts to the County for collection in the following year. Therefore, there has been no allowance for doubtful accounts established. 61 City of Elk River Notes to Basic Financial Statements NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. Assets, Liabilities, Deferred Outflows/Inflows of Resources, and Net Position or Equity (Continued) 2. Receivables (Continued) Special assessments represent the financing for public improvements paid for by benefiting property owners. These assessments are recorded as receivable upon certification to the County. Special assessments are recognized as revenue when they are received in cash or within 60 days after year end. All governmental special assessments receivable are offset by a deferred inflow of resources in the fund financial statements unless related to unpaid charges and are due within one year. 3. Inventory and Prepaid Items 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. Prepaid items are recorded as an expenditure at the time of consumption. Inventory is valued at cost using the first in, first out (FIFO) method. Inventories of enterprise funds are recorded as expenditures when consumed rather than when purchased. Property held for resale consists of property that the City and Housing and Redevelopment Authority component unit holds for resale. Properties held for resale are reported as an asset at the lower of cost or estimated fair value. 4. Capital Assets Capital assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, 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 City as assets with an initial cost of more than $10,000 and an estimated useful life in excess of two years. In the case of initial capitalization of general infrastructure assets (i.e., those reported by governmental activities) the City chose to include all items previously accounted for. The City had already accounted for its prior infrastructure at historical cost for the initial reporting of these assets. As the City constructs or acquires capital assets each period, including infrastructure assets, they are capitalized and reported at historical cost. The reported value excludes normal maintenance and repairs which are essentially amounts spent in relation to capital assets that do not increase the capacity or efficiency of the item or extend its useful life beyond the original estimate. In the case of donations, the City values these capital assets at acquisition value of the item at the date of its donation. 62 City of Elk River Notes to Basic Financial Statements NOTE I — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. Assets, Liabilities, Deferred Outflows/Inflows of Resources, and Net Position or Equity (Continued) 4. Capital Assets (Continued) Property, plant, and equipment of the City, as well as the component unit, are depreciated using the straight-line method over the following useful lives: Classification Years Buildings and improvements 10-40 Other park improvements 10-20 Machinery and equipment 3-20 Public domain infrastructure 15-50 System infrastructure 4-50 5. 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 represents a consumption of net assets that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until that time. The City has two items that qualify for reporting in this category. The City presents deferred outflows of resources on the Statement of Net Position for deferred outflows of resources related to pensions and OPEB for various estimate differences that will be amortized and recognized over future years. 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 represents an acquisition of net assets 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 three items that qualify for reporting in this category. The City presents deferred inflows of resources on the Governmental Fund Balance Sheet as unavailable revenue. 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. The City presents deferred inflows of resources on the Statement of Net Position for deferred inflows of resources related to pensions and OPEB for various estimate differences that will be amortized and recognized over future years. 6. 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. 63 City of Elk River Notes to Basic Financial Statements NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. Assets, Liabilities, Deferred Outflows/Inflows of Resources, and Net Position or Equity (Continued) 6. Compensated Absences (Continued) 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. 7. Long -Term Obligations In the government -wide financial statements and proprietary fund types in the fund financial statements, long-term debt, and other long-term obligations are reported as liabilities in the applicable governmental activities, business -type activities, or proprietary fund type Statement of Net Position. Bond premiums and discounts are deferred and amortized over the life of the bonds using the straight-line method. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. 8. Pensions For purposes of measuring the net pension liability, net pension asset, deferred outflows/inflows of resources, and pension expense, information about the fiduciary net position of the Public Employees Retirement Association (PERA) and the relief association and additions to/deductions from PERA's and the relief association's fiduciary net position have been determined on the same basis as they are reported by PERA and the relief association except that PERA's fiscal year end 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. 9. 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. ME City of Elk River Notes to Basic Financial Statements NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 10. 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. 11. Fund Balance In the fund financial statements, governmental funds report various levels of spending constraints. • Nonspendable Fund Balances — These are amounts that cannot be spent because they are not in spendable form as they are legally or contractually required to be maintained intact and include prepaid items, inventory, and advances to other funds. • Restricted Fund Balances —These are subject to externally enforceable legal restrictions. • Committed Fund Balances — The government's highest level of decision making authority is the City Council. The formal action to establish or modify a commitment is made through resolution. Committed amounts cannot be used for any other purpose unless the City Council modifies or rescinds the commitment by resolution. • Assigned Fund Balances — Amounts constrained for specific purposes that are internally imposed. In governmental funds other than the General Fund, assigned fund balance represents all remaining amounts that are not classified as nonspendable and are neither restricted nor committed. The City Council has adopted a fund balance policy which delegates the authority to assign amounts for specific purposes to the City Administrator. Minimum Fund Balance Policy — The City 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. The City will spend restricted funds first for expenditures that meet the intended purpose before using unrestricted fund balance. Additionally, the City would first use committed, then assigned, and lastly unassigned amounts of unrestricted fund balance when expenditures are made for the purposes intended. E. Net Position Net position represents the difference between assets and deferred outflows of resources; and liabilities and deferred inflows of resources in the government -wide financial statements. Net investment in capital assets, consists of capital assets, net accumulated depreciation, reduced by the outstanding balance of any long-term debt used to build or acquire the capital assets. Net position is reported as restricted in the government -wide financial statement when there are limitations on use through external restrictions imposed by creditors, grantors, or laws or regulations of other governments. 65 City of Elk River Notes to Basic Financial Statements NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) F. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Estimates also affect the reported amounts of revenue and expenditures/expense during the reporting period. Actual results could differ from those estimates. G. 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, Multipurpose Facility, and Economic Development Authority special revenue funds. Project - length financial plans are adopted for all capital projects funds. All annual appropriations lapse at fiscal year end. On or before July 1 of each year, all departments and agencies of the City submit requests for appropriation to the City's administrator so that a budget may be prepared. Before September 30, the proposed budget is presented to the City Council for review and approval. The City Council holds public hearings and may add to, subtract from, or change appropriations. Any changes in the budget must be within the revenue and reserves estimated as available or the revenue estimates must be changed by an affirmative vote by a majority of the City Council. The budget is prepared by fund, function, and activity and includes information on the past year, current year estimates, and requested appropriations for the next fiscal year. Expenditures may not legally exceed budgeted appropriations at the fund level without Council approval. Spending control is established by the amount of expenditures budgeted for the fund, but management control is exercised at the department level. Reported budget amounts are as originally adopted or as amended by Council approved supplemental appropriations and budget transfers. NOTE 2 — STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY A. Deficit Fund Balances The following funds had deficit fund balances at December 31, 2021: Fund Amount Nonmajor Special Revenue Multipurpose Facility $ 68,433 Nonmajor Capital Projects TIF Districts 1,623,031 The deficits will be funded with future transfers and tax increment revenue. City of Elk River Notes to Basic Financial Statements NOTE 3 — DEPOSITS AND INVESTMENTS Cash balances of the City's funds are combined (pooled) and invested to the extent available in various investments authorized by Minnesota Statutes. Each fund's portion of this pool (or pools) is displayed in the financial statements as "cash and investments". For purposes of identifying risk of investing public funds, the balances and related restrictions are summarized as follows. A. Deposits Custodial Credit Risk — Deposits: This is the risk that in the event of a bank failure, the City's deposits may not be returned to it. The City (including Elk River Municipal Utilities) has an investment policy in place to address custodial credit risk for deposits, stating all deposits and investments must be in compliance with Minnesota Statutes 118A, with collateralization levels of 110% of the market value of the principal and accrued interest. As of December 31, 2021, the City's bank balance of $32,369,479 was not exposed to custodial credit risk because it was insured and fully collateralized by federal depository insurance. The book balance as of December 31, 2021 was $32,897,773. Discretely Presented Component Unit As of December 31, 2021, the HRA's bank balance of $775,500 was not exposed to custodial credit risk because it was fully collateralized. The HRA's book balance of all deposits at December 31, 2021, totaled $775,500. B. Investments Investment Maturities Credit Fair Less than Greater than Investment Type Rating Value One Year 1-5 Years 5 Years No Maturity U.S. treasury obligations N/A $ 7,081,830 $ 7,081,830 $ - $ - $ Negotiable certificates of deposit N/A 7,207,966 1,180,748 5,543,065 484,153 Municipal bonds AA to AAA 34,651,559 3,350,111 15,352,888 15,948,560 - UBS Select Prime Institutional Money Market N/A 8,255,690 - - - 8,255,690 Minnesota Municipal Money Market (4M Fund) N/A 11,186,265 - - 11,186,265 Other money market funds N/A 998,261 998,261 - - Total $ 69,381,571 $ 12,610,950 $ 20,895,953 $ 16,432,713 $ 19,441,955 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. As of December 31, 2021, the City had invested 5% or more of its total investment portfolio in one single issuer, the Minnesota Municipal Money Market (4M Fund). Credit Risk: Credit risk is the risk that an issuer to an investment will not fulfill its obligation. State law limits investments in state and local securities and commercial paper to those with specified rating by nationally recognized rating agencies. U.S. treasury obligations are not considered to have credit risk. The City's investment policy does not further limit the ratings of their investments. 67 City of Elk River Notes to Basic Financial Statements NOTE 3 — DEPOSITS AND INVESTMENTS (CONTINUED) B. Investments (Continued) Interest Rate Risk: This is the risk that market values of securities in a portfolio would decrease due to changes in market value interest rates. 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. Custodial Credit Risk — Investments: For an investment, this is the risk in the event of the failure of the counterparty the City will 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, 2021 all investments were insured or registered, or securities were held by the City or its agent in the City's name. The City has the following recurring fair value measurements as of December 31, 2021: • U.S. treasury obligations of $7,081,830 are valued using quoted market prices (Level 1 inputs) • Brokered certificates of deposit of $7,207,966 and municipal bonds of $34,651,559 are valued using a matrix pricing model (Level 2 inputs) C. Deposits and Investments Summary of cash deposits and investments as of December 31, 2021, were as follows: Deposits Investments Petty cash Total deposits and investments Primary Component Government Unit HRA Total $ 32,897,773 $ 775,500 $ 33,673,273 69,381,571 - 69,381,571 5,950 - 5,950 $ 102,285,294 $ 775,500 $ 103,060,794 W. City of Elk River Notes to Basic Financial Statements NOTE 3 — DEPOSITS AND INVESTMENTS (CONTINUED) C. Deposits and Investments (Continued) Deposits and investments are presented in the December 31, 2021, basic financial statements as follows: Statement of Net Position Cash and investments Cash and investments held by trustee Restricted cash Total deposits and investments Primary Component Government Unit HRA Total $ 93,424,447 7,081,831 1,779,016 $ 775,500 $94,199,947 7,081,831 1,779,016 $ 102,285,294 $ 775,500 $ 103,060,794 NOTE 4 — NOTES RECEIVABLEXONTRACT FOR DEED 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 $254,490 in the Revolving Loan fund and $333,907 in the State DEED fund are outstanding at December 31, 2021. 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 $813,048 in the Development Fund is outstanding at December 31, 2021. In 2021, the City entered into a $320,000 contract for deed for property, equipment, and buildings located at property commonly referred to as Pinewood Golf Course, located in Elk River, Minnesota. The contract for deed is to be repaid annually at 4% interest beginning July, 2022. The contract for deed matures on August 1, 2037. The balance of this contract for deed is $320,000 at December 31, 2021. 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, 2021. 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 $74,338 in the HRA are outstanding at December 31, 2021. City of Elk River Notes to Basic Financial Statements NOTE 5 — INTERFUND ASSETS/LIABILITIES At December 31, 2021, interfund balances for the City were as follows: Receivable Fund Payable Fund Due from/to other funds General Fund General Fund General Fund Pavement Management Public Safety / Fire Station #3 Government Building Bonds Government Building Bonds Nonmajor Governmental Funds Nonmajor Governmental Funds Sewer Sewer Garbage Storm Water Electric Electric Electric Water Total due from/to other funds Amount Nonmajor Governmental Funds $ 75,222 Electric 192,991 Water 26,439 Electric 270,693 Water 64,295 Water 43,800 Electric 175,200 Nonmajor Governmental Funds 1,151,564 Electric 24,734 Nonmajor Governmental Funds 171,800 Electric 193,582 Electric 148,828 Electric 49,384 Sewer 563 Garbage 2,853 Storm Water 934 Nonmajor Governmental Funds 128,850 $ 2,721,732 Due from/to component unit Primary Government - General Fund Component Unit - HRA $ 4,002 Component Unit - HRA Primary Government - Nonmajor Governmental Funds 179,331 Total due from/to component unit $ 183,333 The interfund receivable/payable balances result from the distribution of utility collections and the lending/borrowing between funds for operating or capital purposes. 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 $179,331 payable to the HRA will be paid with the collection of tax increment revenue and will not be repaid within one year. 70 City of Elk River Notes to Basic Financial Statements NOTE 6 — INTERFUND TRANSFERS Transfers during the year ended December 31, 2021, were as follows: Transfers In Government Nonmajor Building Governmental Transfers Out General Bonds Funds Total General $ - $ - $ 543,591 $ 543,591 Public Safety Building / Fire Station #3 - - 95,767 95,767 Nonmajor governmental funds 51,600 464,364 140,875 656,839 Municipal Liquor 500,000 - 501,394 1,001,394 Sewer 160,000 - - 160,000 Garbage 52,000 - - 52,000 Storm Water 121,000 - - 121,000 Electric 1,355,000 - 52,734 1,407,734 Water - - 90,000 90,000 Total $ 2,239,600 $ 464,364 $ 1,424,361 $4,128,325 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. 71 City of Elk River Notes to Basic Financial Statements NOTE 7 — CAPITAL ASSETS Capital asset activity for the year ended December 31, 2021, was as follows: Primary Government Governmental activities Capital assets not being depreciated Land Construction in progress Total capital assets not being depreciated Capital assets being depreciated Buildings Other Improvements Equipment Infrastructure Total capital assets being depreciated Less accumulated depreciation for Buildings Other Improvements Equipment Infrastructure Total accumulated depreciation Total capital assets being depreciated, net Beginning Balance $ 40,769,513 2,586,460 43,355,973 Increases 14,926,951 14,926,951 Decreases $ 1,966,850 1,070,824 3,037,674 Ending Balance $ 38,802,663 16,442,587 55,245,250 67,975,766 1,667,843 1,030,602 68,613,007 10,387,112 533,733 112,750 10,808,095 14,857,960 2,005,338 492,245 16,371,053 72,706,872 6,989,510 5,619,463 74,076,919 165,927,710 11,196,424 7,255,060 169,869,074 21,773,313 2,310,752 1,030,602 23,053,463 4,555,375 448,493 112,750 4,891,118 9,521,691 839,992 487,849 9,873,834 49,535,639 2,552,355 5,433,689 46,654,305 85,386,018 6,151,592 7,064,890 84,472,720 80,541,692 5,044,832 (190,170) 85,396,354 Governmental activities capital assets, net $ 123,897,665 $ 19,971,783 $ (3,227,844) $ 140,641,604 Depreciation expense was charged to functions/programs of the governmental activities as follows: Governmental activities General government $ 214,169 Public safety 519,944 Public works 3,245,175 Culture and recreation 2,172,304 Total depreciation expense - governmental activities $ 6,151,592 72 City of Elk River Notes to Basic Financial Statements NOTE 7 — CAPITAL ASSETS (CONTINUED) Primary Government (Continued) Business -type activities Capital assets not being depreciated Land Construction in progress Total capital assets not being depreciated Capital assets being depreciated Buildings and improvements Improvements other than buildings Equipment and furniture Intangible assets Collection and distribution Total capital assets being depreciated Less accumulated depreciation for Buildings and improvements Improvements other than buildings Equipment and furniture Intangible assets Collection and distribution Total accumulated depreciation Total capital assets being depreciated, net Business -type activities capital assets, net Beginning Ending Balance Increases Decreases Balance $ 1,844,071 $ 189,129 $ 108,514 $ 1,924,686 1,209,742 9,425,944 3,392,088 7,243,598 3,053,813 9,615,073 3,500,602 9,168,284 27,902,318 101,411 240,885 27,762,844 255,567 10,692 - 266,259 11,916,424 485,434 257,728 12,144,130 24,971,677 924,188 - 25,895,865 134,340,283 6,097,733 100,972 140,337,044 199,386,269 7,619,458 599,585 206,406,142 11,022,165 859,529 61,657 11,820,037 75,974 15,685 - 91,659 4,626,508 786,243 160,617 5,252,134 1,502,152 668,135 - 2,170,287 70,099,687 3,970,324 94,490 73,975,521 87,326,486 6,299,916 316,764 93,309,638 112,059,783 1,319,542 (282,821) 113,096,504 $ 115,113,596 $ 10,934,615 $ (3,783,423) $ 122,264,788 Depreciation expense was charged to functions/programs of the business -type activities as follows: Business -type activities Municipal liquor $ 94,939 Sewer 1,640,094 Storm water 467,396 Electric 2,957,685 Water 1,139,802 Total depreciation expense - business -type activities $ 6,299,916 73 City of Elk River Notes to Basic Financial Statements NOTE 7 — CAPITAL ASSETS (CONTINUED) Capital asset activity for the HRA for the year ended December 31, 2021, was as follows: Discretely Presented Component Unit Beginning Ending Balance Increases Decreases Balance Capital assets not being depreciated Land $ 257,100 $ - $ - $ 257,100 Capital assets being depreciated Improvements other than buildings 174,290 - - 174,290 Less accumulated depreciation for Improvements other than buildings 93,923 11,619 - 105,542 Total capital assets being depreciated, net 80,367 (11,619) - 68,748 Component unit capital assets, net $ 337,467 $ (I1,619) $ - $ 325,848 Depreciation expense was charged to functions/programs of the HRA as follows: Business -type activities Housing and Redevelopment Authority $ 11,619 NOTE 8 — LONG-TERM DEBT A. General Obligation Bonds The City issues general obligation (G.O.) bonds to provide for the construction of major capital improvements having a relatively long life. They are payable from special assessments levied and collected on local improvements to property and are backed by the full faith and credit of the City. 74 City of Elk River Notes to Basic Financial Statements NOTE 8 — LONG-TERM DEBT B. Components of Long -Term Liabilities Primary Government Governmental activities General obligation bonds EDA G.O. Refunding Bonds, Series 2013A G.O. Sales Tax Revenue Bonds, Series 2019A G.O. Capital Improvement Bonds, Series 2020A G.O. Capital Improvement Refunding Bonds, Series 2020B G.O. Capital Improvement and Equipment Bonds, Series 2021A Total general obligation bonds Unamortized bond premium/discount Compensated absences Total governmental activities Business -type activities General obligation revenue bonds G.O. Water Revenue Refunding Bonds, Series 2008A G.O. Sewer Revenue Bonds, Series 2014B G.O. Sewer Revenue Refunding Bonds, Series 2020C G.O. Water Revenue Bonds, Series 2021C Total general obligation revenue bonds Revenue Bonds Electric Revenue Bonds, Series 2016A Electric Revenue Refunding Bonds, Series 2016B Electric Revenue Bonds, Series 2018A Electric Revenue Bonds, Series 2021B Total revenue bonds Total bonds Unamortized bond premium/discount Notes from direct borrowings Compensated absences Total business -type activities Total all long-term liabilities Issue Interest Date Rates Original Issue Final Balance Maturity End of Year 02/12/13 2.00%-3.00% $ 9,685,000 02/01/33 $ 7,600,000 09/19/19 2.50%-5.00% 32,715,000 12/01/44 31,360,000 12/29/20 1.00%-5.00% 9,435,000 02/01/42 9,435,000 12/29/20 1.00%-5.00% 5,340,000 02/01/33 5,340,000 05/20/21 1.35%-5.00% 4,805,000 02/01/42 4,805,000 58,540,000 4,824,308 1,845,116 65,209,424 02/20/08 2.75%-3.65% 3,085,000 02/01/22 270,000 08/21/14 2.00%-3.00% 10,000,000 02/01/35 7,490,000 12/29/20 1.00%-1.70% 7,200,000 02/01/35 7,200,000 06/10/21 2.00%-4.00% 1,615,000 08/01/41 1,615,000 16,575,000 07/14/16 2.00%-4.00% 9,755,000 02/01/36 8,465,000 07/14/16 2.00%-4.00% 1,370,000 02/01/22 240,000 09/26/18 3.50%-5.00% 10,000,000 08/01/48 9,415,000 05/13/21 2.00%-5.00% 11,810,000 08/01/51 11,810,000 29,930,000 46,505,000 1,538,368 209,124 543,972 48,796,464 $ 114,005,888 Long-term bonded indebtedness listed above were issued to finance equipment and the acquisition and construction of capital facilities or to refinance (refund) previous bond issues. The City also issued note from direct borrowing 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. 75 City of Elk River Notes to Basic Financial Statements NOTE 8 — LONG-TERM DEBT (CONTINUED) C. Changes in Long -Term Liabilities Long-term liability activity for the year ended December 31, 2021, was as follows: Primary Government Governmental activities Bonds payable General obligation bonds General obligation revenue bonds Unamortized bond premiums Total bonds payable Compensated absences payable Governmental activities long-term liabilities Business -type activities Bonds payable General obligation revenue bonds Revenue bonds Unamortized bond premiums Total bonds payable Notes from direct borrowings Compensated absences payable Business -type activities long-term liabilities Beginning Ending Due Within Balance Additions Reductions Balance One Year $ 29,390,000 $ 4,805,000 $ (7,015,000) $ 27,180,000 $ 1,420,000 32,165,000 - (805,000) 31,360,000 845,000 4,708,545 428,885 (313,122) 4,824,308 - 66,263,545 5,233,885 (8,133,122) 63,364,308 2,265,000 1,710,968 886,735 (752,587) 1,845,116 752,587 $ 67,974,513 $ 6,120,620 $ (8,885,709) $ 65,209,424 $ 3,017,587 $ 16,010,000 $ 1,615,000 $ (1,050,000) $ 16,575,000 $ 7,810,000 18,985,000 11,810,000 (865,000) 29,930,000 1,055,000 800,445 814,014 (76,091) 1,538,368 - 35,795,445 14,239,014 (1,991,091) 48,043,368 8,865,000 415,740 - (206,616) 209,124 209,124 542,294 519,548 (517,870) 543,972 490,024 $ 36,753,479 $ 14,758,562 $ (2,715,577) $ 48,796,464 $ 9,564,148 76 City of Elk River Notes to Basic Financial Statements NOTE 8 - LONG-TERM DEBT (CONTINUED) D. Minimum Debt Payments Minimum annual principal and interest payments required to retire long-term liabilities: Primary Government Year Ending December 31, 2022 2023 2024 2025 2026 2027-2031 2032-2036 2037-2041 2042-2044 Total Year Ending December 31, Governmental Activities G.O. Bonds Principal Interest G.O. Revenue Bonds Principal Interest $ 1,420,000 $ 758,549 $ 845,000 $ 1,071,588 2,075,000 660,810 890,000 1,029,337 1,470,000 589,285 935,000 984,838 1,530,000 531,760 1,000,000 938,087 1,590,000 473,060 1,030,000 888,088 8,820,000 1,505,056 5,940,000 3,651,487 5,725,000 570,263 7,125,000 2,469,287 3,760,000 239,404 8,165,000 1,430,819 790,000 7,335 5,430,000 329,100 $ 27,180,000 $ 5,335,522 $ 31,360,000 $ 12,792,631 Business -Type Activities G.O. Revenue Bonds Revenue Bonds Principal Interest Principal Interest 2022 $ 7,810,000 $ 260,582 $ 1,055,000 $ 994,201 2023 580,000 131,435 915,000 885,756 2024 580,000 123,835 955,000 849,381 2025 595,000 116,185 990,000 811,306 2026 605,000 108,260 1,035,000 774,406 2027-2031 3,125,000 411,486 5,735,000 3,309,713 2032-2036 2,790,000 153,769 6,730,000 2,303,025 2037-2041 490,000 29,700 4,110,000 1,511,706 2042-2046 - - 4,705,000 906,525 2047-2049 - - 3,700,000 238,632 Total $ 16,575,000 $ 1,335,252 $ 29,930,000 $ 12,584,651 Business -Type Activities Year Ending Notes from direct borrowings December 31, Principal Interest 2022 $ 209,124 $ - 77 City of Elk River Notes to Basic Financial Statements NOTE 9 — FUND BALANCE Fund equity balances are classified as follows to reflect the limitations and restrictions of the respective funds. Major Funds Capital Project Funds Public Safety General Active ER Pavement Building / Fire Fund Projects Management Station #3 Nonspendable Prepaid items $ 160,019 Restricted Park and recreation improvements - 1,369,162 - - Debt service - - - - Fiscal recovery - - - - Economic development - - - - Law enforcement - - - - Capital projects - - - 3,561,280 Total restricted - 1,369,162 - 3,561,280 Committed Capital projects - 99,711 - - Street improvements - - 6,369,604 - Library operations - - - - Insurance reserve - - - - Economic development - - - - Total committed - 99,711 6,369,604 - Assigned Building construction/improvements - 145,373 - - Landfill mitigation - - - - Law enforcement - - - - Economic development - - - - Capital equipment - - - - Street improvements - - - - Other improvement projects - - - - Park improvements - - - - Total assigned - 145,373 - - Unassigned 8,590,610 - - - Total fund balances $ 8,750,629 $ 1,614,246 $ 6,369,604 $ 3,561,280 City of Elk River Notes to Basic Financial Statements NOTE 9 — FUND BALANCE (CONTINUED) Major Fund Debt Service Fund Government Nonmajor Building Governmental Bonds Funds Total Nonspendable Prepaid items $ - $ 432 $ 160,451 Restricted Park and recreation improvements - 551,575 1,920,737 Debt service 1,269,905 4,196,935 5,456,740 Fiscal recovery - 115 115 Economic development - 1,463,357 1,463,357 Law enforcement - 40,933 40,933 Capital projects - - 3,561,290 Total restricted 1,269,905 6,242,815 12,443,162 Committed Capital projects - - 99,711 Street improvements - - 6,369,604 Library operations - 231,891 231,891 Insurance reserve - 97,540 97,540 Economic development - 5,081,360 5,081,360 Total committed - 5,410,791 11,880,096 Assigned Building construction/improvements - 3,521,244 3,666,617 Landfill mitigation - 1,003,909 1,003,909 Law enforcement - 5,036 5,036 Economic development - 656,175 656,175 Capital equipment - 3,194,197 3,184,197 Street improvements - 456,104 456,104 Other improvement projects - 4,465,386 4,465,386 Park improvements - 347,325 347,325 Total assigned - 13,639,376 13,784,749 Unassigned - (1,691,896) 6,898,714 Total fund balances $ 1,269,905 $ 23,601,076 $ 45,167,172 79 City of Elk River Notes to Basic Financial Statements NOTE 10 — 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. NOTE 11 — PENSION PLANS The City participates in various pension plans. Total pension expense for the year ended December 31, 2021, was ($350,850). The components of pension expense are noted in the following plan summaries. The General Fund and Municipal Liquor, Sewer, Electric, and Water Funds typically liquidate the liability related to the pensions. Public Employees' Retirement Association A. Plan Description The City participates in the following cost -sharing multiple -employer defined benefit pension plans administered by 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. General Employees Retirement Plan All full-time and certain part-time employees of the City are covered by the General Employees Plan. General Employees Plan members belong to the Coordinated Plan. Coordinated Plan members are covered by Social Security. Public Employees Police and Fire Plan 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. :1 City of Elk River Notes to Basic Financial Statements NOTE 11 — PENSION PLANS (CONTINUED) Public Employees' Retirement Association (Continued) 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. General Employees Plan Benefits General Employees Plan benefits are based on a member's highest average salary for any 5 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 a Coordinated members is 1.2% for each of the first 10 years of service and 1.7% for each additional year. Under Method 2, the accrual rate for Coordinated members is 1.7% 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. Police and Fire Plan Benefits Benefits for the Police and Fire Plan members first hired after June 30, 2010, but before July 1, 2014, vest on a prorated basis from 50% after five years up to 100% after 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% after 10 years up to 100% after 20 years of credited service. The annuity accrual rate is 3% of average salary for each year of service. For Police and Fire Plan members who were first hired prior to July 1, 1989, a full annuity is available when age plus years of service equal at least 90. City of Elk River Notes to Basic Financial Statements NOTE 11 — PENSION PLANS (CONTINUED) Public Employees' Retirement Association (Continued) B. Benefits Provided (Continued) Police and Fire Plan Benefits (Continued) Benefit increases are provided to benefit recipients each January. The postretirement increase is fixed at 1%. 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. 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 6.5% of their annual covered salary in fiscal year 2021 and the City was required to contribute 7.5% for Coordinated Plan members. The City and HRA contributions to the General Employees Fund for the year ended December 31, 2021, were $574,317 and $3,678, respectively. The contributions were equal to the required contributions as set by state statute. Police and Fire Fund Contributions Police and Fire Plan members were required to contribute 11.8% of their annual covered salary in fiscal year 2021 and the City was required to contribute 17.7% for Police and Fire Plan members. The City's contributions to the Police and Fire Fund for the year ended December 31, 2021, were $690,006. The City's contributions were equal to the required contributions as set by state statute. D. Pension Costs General Employees Fund Pension Costs At December 31, 2021, the City and HRA reported liabilities of $6,610,551 and $25,725, respectively, for their proportionate shares of the General Employees Fund'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 non -employer contributing entity and the State's contribution meets the definition of a special funding situation. The State of Minnesota's proportionate share of the net pension liability associated with the City and HRA totaled $202,474. FIX City of Elk River Notes to Basic Financial Statements NOTE 11 — PENSION PLANS (CONTINUED) Public Employees' Retirement Association (Continued) D. Pension Costs (Continued) General Employees Fund Pension Costs (Continued) The net pension liability was measured as of June 30, 2021, 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 proportionate share 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, 2020, through June 30, 2021, relative to the total employer contributions received from all of PERA's participating employers. The City and HRA's proportionate share was 0.1554% at the end of the measurement period and 0.1512% for the beginning of the period. City's proportionate share of the net pension liability $ 6,610,551 HRA's proportionate share of the net pension liability 25,725 State of Minnesota's proportionate share of the net pension liability associated with the City 202,474 Total $ 6,813,025 For the year ended December 31, 2021, the City and HRA recognized pension expense of $157,939 and $743, respectively, for their proportionate share of General Employees Plan's pension expense. Included in the amount, the City and HRA recognized $16,269 and $67 as pension expense (and grant revenue), respectively, for their proportionate share of the State of Minnesota's contribution of $16 million to the General Employees Fund. FOR City of Elk River Notes to Basic Financial Statements NOTE 11 — PENSION PLANS (CONTINUED) Public Employees' Retirement Association (Continued) D. Pension Costs (Continued) General Employees Fund Pension Costs (Continued) At December 31, 2021, the City and HRA reported its proportionate share of the General Employees Plan's deferred outflows of resources and deferred inflows of resources, related to pensions from the following sources: Differences between expected and actual economic experience Changes in actuarial assumptions Net collective difference between projected and actual investment earnings Changes in proportion Contributions paid to PERA subsequent to the measurement date Total Deferred Deferred Outflows of Inflows of Resources Resources $ 38,121 $ 202,453 4,051,974 141,057 - 5,755,651 343,721 - 447,349 - $ 4,881,165 $ 6,099,161 The $447,349 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, 2022. Other amounts reported as deferred outflows and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Year Ending December 31, 2022 2023 2024 2025 Total Pension Expense Amount $ (130,855) 42,909 (9,811) (1,567,588) $ (1,665,345) ME City of Elk River Notes to Basic Financial Statements NOTE 11— PENSION PLANS (CONTINUED) Public Employees' Retirement Association (Continued) D. Pension Costs (Continued) Police and Fire Fund Pension Costs At December 31, 2021, the City reported a liability of $2,404,450 for its proportionate share of the Police and Fire Fund's net pension liability. The net pension liability was measured as of June 30, 2021, 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 proportionate share 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, 2020, through June 30, 2021, relative to the total employer contributions received from all of PERA's participating employers. The City's proportionate share was 0.3115% at the end of the measurement period and 0.2998% for the beginning of the period. The State of Minnesota contributed $18 million to the Police and Fire Fund in the plan fiscal year ended June 30, 2021. The contribution consisted of $9 million in direct state aid that does meet the definition of a special funding situation and $9 million in supplemental state aid that does not meet the definition of a special funding situation. The $9 million direct state aid was paid on October 1, 2020. 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. Strong asset returns for the fiscal year ended 2021 will accelerate the phasing out of these state contributions, although it is not anticipated that they will be phased out during the fiscal year ended 2022. 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 pension allocation schedules) for the $9 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, 2021, the City recognized pension expense of (130,856) for its proportionate share of the Police and Fire Plan's pension expense. Included in this amount, the City recognized $19,692 as pension expense (and grant revenue) for its proportionate share of the State of Minnesota's contribution of $9 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 also recognized $28,035 for the year ended December 31, 2021, as revenue and an offsetting reduction of the net pension liability for its proportionate share of the State of Minnesota's on -behalf contributions to the Police and Fire Fund. City of Elk River Notes to Basic Financial Statements NOTE 11 — PENSION PLANS (CONTINUED) Public Employees' Retirement Association (Continued) D. Pension Costs (Continued) Police and Fire Fund Pension Costs (Continued) At December 31, 2021, the City reported its proportionate share of the Police and Fire Plan's deferred outflows of resources and deferred inflows of resources related to pensions from the following sources. Differences between expected and actual economic experience Changes in actuarial assumptions Net collective difference between projected and actual investment earnings Changes in proportion Contributions paid to PERA subsequent to the measurement date Total Deferred Deferred Outflows of Inflows of Resources Resources $ 459,528 $ - 3,533,911 1,328,340 - 4,610,692 251,306 168,378 345,003 - $ 4,589,748 $ 6,107,410 The $345,003 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, 2022. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows: Pension Year Ending Expense December 31, Amount 2022 $(1,580,891) 2023 (310,532) 2024 (289,621) 2025 (480,953) 2026 799,332 Total $ (1,862,665) :• City of Elk River Notes to Basic Financial Statements NOTE 11 — PENSION PLANS (CONTINUED) Public Employees' Retirement Association (Continued) E. Long -Term Expected Return on Investment 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 equity International equity Fixed income Private markets Total F. Actuarial Methods and Assumptions Target Allocation Long -Term 33.5 % 5.10 % 16.5 5.30 25.0 0.75 25.0 5.90 100.0 % The total pension liability in the June 30, 2021, actuarial valuation was determined using an individual entry -age normal actuarial cost method. The long-term rate of return on pension plan investments used in the determination of the total liability is 6.5%. This assumption is based on a review of inflation and investments return assumptions from a number of national investment consulting firms. The review provided a range of return investment return rates deemed to be reasonable by the actuary. An investment return of 6.5% was deemed to be within that range of reasonableness for financial reporting purposes. Inflation is assumed to be 2.25% for the General Employees Plan and 2.25% for the Police and Fire Plan. Benefit increases after retirement are assumed to be 1.25% for the General Employees Plan. The Police and Fire Plan benefit increase is fixed at 1% per year and that increase was used in the valuation. Salary growth assumptions in the General Employees Plan range in annual increments from 10.25% after one year of service to 3.0% after 29 years of service and 6.0% per year thereafter. In the Police and Fire Plan, salary growth assumptions range from 11.75% after one year of service to 3.0% after 24 years of service. Mortality rates for the General Employees Plan are based on the Pub-2010 General Employee Mortality Table. Mortality rates for the Police and Fire Plan are based on the Pub-2010 Public Safety Employee Mortality tables. The tables are adjusted slightly to fit PERA's experience. RE City of Elk River Notes to Basic Financial Statements NOTE 11 — PENSION PLANS (CONTINUED) Public Employees' Retirement Association (Continued) F. Actuarial Methods and Assumptions (Continued) Actuarial assumptions for the General Employees Plan are reviewed every four years. 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 most recent four-year experience study for the Police and Fire Plan was completed in 2020 and was adopted by the Board and became effective with the July 1, 2021, actuarial valuation. The following changes in actuarial assumptions and plan provisions occurred in 2021: General Employees Fund Changes in Actuarial Assumptions • The investment return and single discount rates were changed from 7.5% to 6.5% for financial reporting purposes. • The mortality improvement scale was changed from scale MP-2019 to scale MP-2020. Changes in Plan Provisions • There have been no changes since the previous valuation. Police and Fire Fund Changes in Actuarial Assumptions • The investment return and single discount rates were changed from 7.5% to 6.5% for financial reporting purposes. • The inflation assumption was changed from 2.5% to 2.25%. • The payroll growth assumption was changed from 3.25% to 3.0%. • The base mortality table for healthy annuitants and employees was changed from the RP-2014 table to the Pub-2010 Public Safety mortality table. The mortality improvement scale was changed from MP-2019 to MP-2020. • The base mortality table for disabled annuitants was changed from the RP-2014 healthy annuitant mortality table (with future mortality improvement according to scale MP-2019) to the Pub-2010 Public Safety disabled annuitant mortality table (with future mortality improvement according to scale MP-2020). • Assumed rates of salary increase were modified as recommended in the July 14, 2020, experience study. The overall impact is a decrease in gross salary increase rates. • Assumed rates of retirement were changed as recommended in the July 14, 2020, experience study. The changes resulted in slightly more unreduced retirements and fewer assumed early retirements. • Assumed rates of withdrawal were changed from select and ultimate rates to service -based rates. The changes resulted in more assumed terminations. City of Elk River Notes to Basic Financial Statements NOTE 11 — PENSION PLANS (CONTINUED) Public Employees' Retirement Association (Continued) F. Actuarial Methods and Assumptions (Continued) Police and Fire Fund (Continued) Changes in Actuarial Assumptions (Continued) • Assumed rates of disability were increased for ages 25-44 and decreased for ages over 49. Overall, proposed rates resulted in more projected disabilities. • Assumed percent married for active female members was changed from 60% to 70%. Minor changes to form of payment assumptions were applied. Changes in Plan Provisions There have been no changes since the previous valuation. G. Discount Rate The discount rate used to measure the total pension liability in 2021 was 6.5%. The projection of cash flows used to determine the discount rate assumed that contributions from Plan members and employers will be made at rates set in Minnesota Statutes. Based on these assumptions, the fiduciary net positions of the General Employees Fund and the Police and Fire Fund were 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. H. Pension Liability Sensitivity The following presents the City's proportionate share of the net pension liability for all plans it participates in, calculated using the discount rate disclosed in the preceding paragraph, as well as what the City's proportionate share of the net pension liability would be if it were calculated using a discount rate 1 percentage point lower or 1 percentage point higher than the current discount rate: City's proportionate share of the General Employees Fund net pension liability City's proportionate share of the Police and Fire Fund net pension liability (asset) 1% Decrease in Current 1% Increase in Discount Rate Discount Rate Discount Rate (5.5%) (6.5%) (7.5%) $ 13,534,616 1% Decrease in Discount Rate $ 6,636,276 Current Discount Rate $ 975,768 1% Increase in Discount Rate (5.5%) (6.5%) (7.5%) $ 2,434,851 $ 2,376,415 $ (635,312) We City of Elk River Notes to Basic Financial Statements NOTE 11 — PENSION PLANS (CONTINUED) Public Employees' Retirement Association (Continued) I. Pension Plan Fiduciary Net Position 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. Public Employees Defined Contribution Plan (Defined Contribution Plan) Three council members of the City of Elk River are covered by the Defined Contribution Plan, a multiple -employer deferred compensation plan administered by PERA. The Defined Contribution Plan 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. The defined contribution plan consists of individual accounts paying a lump -sum benefit. Plan benefits depend solely on amounts contributed to the plan plus investment earnings, less administrative expenses; therefore, there is no future liability to the City. 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. For ambulance service personnel, employer contributions are determined by the employer, and for salaried employees must be a fixed percentage of salary. Employer contributions for volunteer personnel may be a unit value for each call or period of alert duty. 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% (.25%) of the assets in each member's account annually. Pension expense for the year is equal to the contributions made. Total contributions made by the City during fiscal year 2021 were: Contribution Amount Percentage of Covered Payroll Employee Employer Employee Employer Required Rate $ 1,225 $ 1,225 5% 5% 5% City of Elk River Notes to Basic Financial Statements NOTE 11 — PENSION PLANS (CONTINUED) Defined Benefit Pension Plan — Volunteer Firefighter's Relief Association A. Plan Description The Elk River Firefighter's Relief Association is the administrator of a single employer defined benefit pension plan established to provide benefits for members of the Elk River Fire Department per Minnesota State Statutes. B. Benefits Provided Volunteer firefighters of the City are members of the Elk River Firefighter's Relief Association. Full retirement benefits are payable to members who have reached age 50 and have completed 20 years of service for lump sum service pensions. Partial benefits are payable to members who have reached 50 and have completed 5 years of service. Disability benefits and widow and children's survivor benefits are also payable to members or their beneficiaries based upon requirements set forth in the bylaws. These benefit provisions and all other requirements are consistent with enabling state statutes. C. Employees Covered by Benefit Terms At December 31, 2020, the following employees were covered by the benefit terms: Inactive employees entitled to but not yet receiving benefit payments 8 Active employees 39 Total D. Contributions. 47 Minnesota Statutes Chapter 424A.092 specifies minimum support rates required on an annual basis. The minimum support rates from the municipality and from State aids are determined as the amount required to meet the normal cost plus amortizing any existing prior service costs over a ten year period. The City's obligation is the financial requirement for the year less state aids. Any additional payments by the City shall be used to amortize the unfunded liability of the relief association. The Association is comprised of volunteers: therefore, there are no payroll expenditures (i.e. there are no covered payroll percentage calculations). During the year, the City recognized as revenue and as an expenditure on behalf payment of $217,909 made by the State of Minnesota for the Relief Association. E. Net Pension Liability The City's net pension liability was measured as of December 31, 2020, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. 91 City of Elk River Notes to Basic Financial Statements NOTE 11 — PENSION PLANS (CONTINUED) Defined Benefit Pension Plan — Volunteer Firefighter's Relief Association (Continued) E. Net Pension Liability (Continued) The total pension liability in the December 31, 2020, actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Inflation Discount rate Investment rate of return 2.25 % Per year 5.00 % Per year 5.00 % The demographic assumption of mortality is based on the rates use in the July 1, 2020 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-2019, from a base year of 2006. Healthy Post -retirement: RP-2014 annuitant generational mortality table projected with mortality improvement scale MP-2019, 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-2019, 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. Best estimates of arithmetic real rates of return for each major asset class included in the pension plan's target asset allocation as of the measurement date are summarized in the table below. Asset Class Domestic equity International equity Fixed income Real estate and alternatives Cash and equivalents Total Long -Term Expected Real Target Allocation Rate of Return 32.0 % 4.90 % 23.0 5.32 25.0 1.40 5.0 4.43 15.0 0.09 100.0 % 92 City of Elk River Notes to Basic Financial Statements NOTE 11 — PENSION PLANS (CONTINUED) Defined Benefit Pension Plan — Volunteer Firefighter's Relief Association (Continued) E. Net Pension Liability (Continued) The discount rate used to measure the total pension liability was 5.00%. 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. F. Changes in the Net Pension Liability Balances at December 31, 2020 Changes for the year Service cost Interest cost Differences between expected and actual experience Changes of assumptions Contributions - State and local Net investment income Benefit payments Administrative expense Net changes Balances at December 31, 2021 Increase (Decrease) Total Plan Fiduciary Net Pension Net Pension Liability Position Liability (a) (b) (a) - (b) $ 3,126,959 $ 3,758,327 $ (631,368) 154,084 - 154,084 158,331 - 158,331 (141,716) - (141,716) 16,270 - 16,270 - 236,496 (236,496) - 326,613 (326,613) (228,840) (228,840) - - (13,085) 13,085 (41,871) 321,184 (363,055) $ 3,085,088 $ 4,079,511 $ (994,423) Sensitivity of the net pension liability to changes in the discount rate. The following table on the next page presents the net pension liability of the City, calculated using the discount rate of 5.00%, as well as what the City's net pension liability would be if it were calculated using a discount rate that is 1- percentage-point lower (4.00%) or 1-percentage-point higher (6.00%) than the current rate: 93 City of Elk River Notes to Basic Financial Statements NOTE 11 — PENSION PLANS (CONTINUED) Defined Benefit Pension Plan — Volunteer Firefighter's Relief Association (Continued) F. Changes in the Net Pension Liability (Continued) City's proportionate share of the Plan net pension liability (asset) 1% Decrease in Current 1% Increase in Discount Rate Discount Rate Discount Rate (4.00%) (5.00%) (6.00%) $ (910,879) $ (994,423) $ (1,074,919) Detailed information about the pension plan's fiduciary net position is available in the separately issued relief association financial report. G. Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions For the year ended December 31, 2021, the City recognized pension expense of ($379,901). At December 31, 2021, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Differences between expected and actual liability Changes in actuarial assumptions Net collective difference between projected and actual investment earnings Contributions paid to the plan subsequent to the measurement date Total Deferred Deferred Outflows of Inflows of Resources Resources $ - $ 205,969 131,305 - 214,712 247,909 - $ 379,214 $ 420,681 The $247,909 reported as deferred outflows of resources related to pensions resulting from contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended December 31, 2022. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as shown on the following page: City of Elk River Notes to Basic Financial Statements NOTE 11 — PENSION PLANS (CONTINUED) Defined Benefit Pension Plan — Volunteer Firefighter's Relief Association (Continued) G. Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions (Continued) Year Ending December 31, 2022 2023 2024 2025 2026 Thereafter Total NOTE 12 — POST EMPLOYMENT HEALTH CARE PLAN Pension Expense Amount $ (54,127) (13,919) (126,669) (52,463) (19,807) (22,391) $ (289,376) A. Plan Description The City provides other postemployment health insurance benefits for retired employees through a defined benefit plan: Municipal Retirees Health Plan (MRHP), a single -employer defined benefit healthcare plan. The 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 does not issue publicly available financial reports. Elk River Municipal Utilities has switched to age -based medical premiums and no longer has an OPEB liability. Since medical premiums are age -based, the premiums are equal to the expected true cost of retiree coverage. As a result, there is no implicit subsidy for these benefits. There is also no explicit subsidy, since retirees must pay the full premium to remain covered during retirement. B. Funding Policy Contribution requirements are reviewed at the time changes are made to the plans. Benefit provisions for MRHP are established and amended by the City. Eligible retirees receiving benefits are required to pay 100% of the total premium. 95 City of Elk River Notes to Basic Financial Statements NOTE 12 — POST EMPLOYMENT HEALTH CARE PLAN (CONTINUED) C. Members As of December 31, 2020, the following were covered by the benefit terms: Active employees electing coverage Retirees receiving payments Spouses receiving payments Total 126 7 2 135 E. Actuarial Assumptions The total OPEB liability was determined by an actuarial valuation measured as of January 1, 2021, using the following actuarial assumptions, applied to all periods included in the measurement, unless otherwise specified: Key Methods and Assumptions Used in Valuation of Total OPEB Liability Discount rate Salary increases Inflation Medical trend rate Mortality assumption 2.00% Service graded table 2.00% 6.50% as of January 1, 2021, grading to 5.00% over 6 years and then to 4.00% over the next 48 years Pub-2010 Public Retirement Plans Headcount -Weighted Mortality Tables (General, Safety) with MP-2020 Generational Improvement Scale The actuarial assumptions used in the December 31, 2021, valuation were based on the results of an actuarial experience study for the period January 1, 2021 to December 31, 2021. The discount rate used to measure the total OPEB liability was 2.00% based on 20-year municipal bond rates. F. Total OPEB Liability The City's total OPEB liability of $870,444 was measured as of January 1, 2021, and was determined by an actuarial valuation as of that date. •e City of Elk River Notes to Basic Financial Statements NOTE 12 — POST EMPLOYMENT HEALTH CARE PLAN (CONTINUED) F. Total OPEB Liability (Continued) Changes in the total OPEB liability are as follows: Balance at December 31, 2020 $ 917,415 Changes for the year Service cost 62,443 Interest 27,703 Differences between expected and actual experience (101,343) Changes of assumptions 13,730 Benefit payments (49,504) Net changes (46,971) Balance at December 31, 2021 $ 870,444 Changes of assumptions and other inputs reflect a change in the discount rate from 2.90% in 2020 to 2.00% in 2021. The inflation rate changed from 2.50% to 2.00%. Changes to health care trend rates, mortality tables, retirement and withdrawal rates, and salary increase rates were also made. The General Fund and Municipal Liquor and Sewer Funds typically liquidate the liability related to OPEB. G. OPEB Liability Sensitivity The following presents the City's total OPEB liability calculated using the discount rate of 2.00% as well as the liability measured using 1% lower and 1% higher than the current discount rate. Total OPEB Liability 1% decrease Current 1% increase 1.00% 2.00% 3.00% $ 929,716 $ 870,444 $ 814,208 The table on the next page presents the total OPEB liability of the City, as well as what the City's total OPEB liability would be if it were calculated using healthcare cost trend rates that are 1% lower and 1% higher than the current healthcare cost trend rates. 97 City of Elk River Notes to Basic Financial Statements NOTE 12 — POST EMPLOYMENT HEALTH CARE PLAN (CONTINUED) G. OPEB Liability Sensitivity (Continued) Total OPEB Liability 1% decrease Current 1% increase (5.5% decreasing (6.5% decreasing to 3.0%) to 4.0%) $ 785,809 $ 870,444 (7.5% decreasing to 5.0%) $ 969,902 H. OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB For the year ended December 31, 2021, the City recognized OPEB expense of $68,086. At December 31, 2021, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources: Deferred Deferred Outflows of Inflows of Resources Resources Difference between expected and actual liability $ - $ 136,838 Changes of assumptions 46,422 15,919 Contributions between measurement date and reporting date 50,618 - Total $ 97,040 $ 152,757 The $50,618 reported as deferred outflows of resources related to OPEB resulting from City contributions subsequent to the measurement date will be recognized as a reduction of the OPEB liability in the year ended December 31, 2022. Other amounts reported as deferred outflows of resources related to OPEB will be recognized in pension expense as shown on the following page: City of Elk River Notes to Basic Financial Statements NOTE 12 — POST EMPLOYMENT HEALTH CARE PLAN (CONTINUED) H. OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB (Continued) Year Ending December 31, 2022 2023 2024 2025 2026 Thereafter Total NOTE 13 — COMMITMENTS AND CONTINGENCIES Total (22,060) (22,060) (22,060) (22,052) (5,586) (12,517) $ (106,335) A. 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%. Revenues have been less than originally projected due to the decrease in Rate of Return (ROE) issued by FERC. The original ROE 12.38% has been reduced to 10.52% on this investment through CMMPA is designed to provide approximately $80K annually over the 40-year project life. With majority of the distributions once the bonds are paid off, the projected under recovery in 2021 is estimated to be $59K. 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 2021 (approximately $59K) would be included in the revenue requirements in 2023. The transmission payments for 2021 were $24,048, all of which was a receivable at December 31, 2021. 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. 01 City of Elk River Notes to Basic Financial Statements NOTE 13 — COMMITMENTS AND CONTINGENCIES (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. 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, 2021, the City has four agreements established under Minnesota Statutes Section 469.174 to 469.179 which resulted in property taxes totaling $311,080 being abated. Individual abatement payments which constituted more than 1% of the City's 2021 tax levy include: • A pay-as-you-go note resulting in an abatement amount of $154,872, 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 2021, the City of Elk River had four business subsidy agreements in place which resulted in property taxes totaling $95,164 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 2021 in excess of this amount. NOTE 15 — CONDUIT DEBT 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, 2021, there was one series of revenue bonds outstanding, with a principal payable amount of $2,920,000. 100 City of Elk River Notes to Basic Financial Statements NOTE 16 — OTHER INFORMATION A. Territorial Acquisition Agreement 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, $834,185 in 2020, $857,538 in 2021, and $924,187 in 2022. All amounts paid are included in property and equipment, and loss of revenue payments are included in intangible assets. B. 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. C. 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 17 — NEW STANDARDS ISSUED BUT NOT YET IMPLEMENTED GASB Statement No. 87, Leases establishes a single model for lease accounting based on the foundational principle that leases are financings of the right to use an underlying asset. Under this statement, a lessee is required to recognize a lease liability and an intangible right -to -use lease asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources, thereby enhancing the relevance and consistency of information about governments' leasing activities. This statement will be effective for the year ending December 31, 2022. 101 (THIS PAGE LEFT BLANK INTENTIONALLY) 102 REQUIRED SUPPLEMENTARY INFORMATION 103 City of Elk River Schedule of Changes in Total OPEB Liability and Related Ratios - Municipal Retirees Health Plan December 31, December 31, December 31, December 31, 2018 2019 2020 2021 Total OPEB Liability Service cost $ 58,939 $ 44,470 $ 53,284 $ 62,443 Interest 30,051 31,024 32,766 27,703 Differences between expected and actual experience - (87,455) - (101,343) Changes of assumptions - (27,862) 48,516 13,730 Benefit payments (47,958) (42,048) (51,790 (49,504) Net change in total OPEB liability 41,032 (81,871) 82,776 (46,971) Beginning of year 875,478 916,510 834,639 917,415 End of year $ 916,510 $ 834,639 $ 917,415 $ 870,444 Covered payroll $ 8,658,239 $ 9,076,855 $ 9,349,161 $ 10,007,339 Net OPEB liability as a percentage of covered payroll 10.59% 9.20% 9.81% 8.70% Note: Schedule is intended to show ten year trend. Additional years will be reported as they become available. See notes to required supplementary information. 104 City of Elk River Schedule of City's Proportionate Share of Net Pension Liability - General Employees Retirement Fund Last Ten Years Primary Government City's Proportionate Share of the Net Pension State's Liability and the City's Proportionate State's Proportionate City's City's Share (Amount) Proportionate Share of the Net Plan Fiduciary Proportionate Proportionate of the Net Share of the Net Pension Net Position as Share Share (Amount) Pension Pension Liability (Asset) a Percentage of For Fiscal (Percentage) of of the Net Liability Liablility as a Percentage the Total Year Ended the Net Pension Pension Associated with Associated with City's Covered of its Covered Pension June 30, Liability (Asset) Liability (Asset) the City the City Payroll Payroll Liability 2014 0.1587% $ 7,454,930 $ $ 7,454,930 $ 8,332,262 89.47% 78.70% 2015 0.1438% 7,452,462 7,452,462 8,712,032 85.54% 78.19% 2016 0.1435% 11,651,488 152,173 11,803,661 8,902,000 130.89% 68.91% 2017 0.1515% 9,611,075 120,624 9,731,699 9,695,118 99.13% 75.90% 2018 0.1444% 8,060,648 261,004 8,321,652 9,702,980 83.07% 79.53% 2019 0.1443% 7,977,792 247,930 8,225,722 10,216,960 78.08% 80.23% 2020 0.1503% 9,013,814 277,843 9,291,657 10,715,865 84.12% 79.06% 2021 0.1548% 6,610,551 201,689 6,812,240 11,138,929 59.35% 87.00% Note: Schedule is intended to show ten year trend. Additional years will be reported as they become available. Component Unit - Housing and Redevelopment Authority HRA's HRA's Proportionate Proportionate Share Share (Amount) For Fiscal (Percentage) of of the Net Year Ended the Net Pension Pension June 30, Liability (Asset) Liability (Asset) State's Proportionate Share (Amount) of the Net Pension Liability Associated with the HRA HRA's Proportionate Share of the Net Pension Liability and the State's Proportionate Share of the Net Pension Liablility Associated with the HRA HRA's Proportionate Share of the Net Plan Fiduciary Pension Net Position as Liability (Asset) a Percentage of HRA's as a Percentage the Total Covered of its Covered Pension Payroll Payroll Liability 2014 0.0010% $ 46,966 $ $ 46,966 $ 52,493 89.47% 78.70% 2015 0.0009% 46,951 46,951 54,886 85.54% 78.19% 2016 0.0009% 73,404 959 74,363 59,083 124.24% 68.91% 2017 0.0010% 60,586 1,170 61,756 61,433 98.62% 75.90% 2018 0.0009% 51,835 1,698 53,533 62,892 82.42% 79.53% 2019 0.0010% 55,520 1,725 57,245 66,193 83.88% 80.23% 2020 0.0009% 51,316 1,582 52,898 61,042 84.07% 79.06% 2021 0.0006% 25,725 785 26,510 43,351 59.34% 87.00% Note: Schedule is intended to show ten year trend. Additional years will be reported as they become available. See notes to required supplementary information. 105 City of Elk River Schedule of City's Proportionate Share of Net Pension Liability - Public Employees Police and Fire Retirement Fund Last Ten Years City's Proportionate Share of the Net Pension State's Liability and the City's Proportionate State's Proportionate Share (Amount) Proportionate Share of the Net Plan Fiduciary City's of the Net Share of the Net Pension Net Position as City's Proportionate Pension Pension Liability (Asset) a Percentage of For Fiscal Proportion of Share of the Net Liability Liablility as a Percentage the Total Year Ended the Net Pension Pension Associated with Associated with City's Covered of its Covered Pension June 30, Liability (Asset) Liability (Asset) the City the City Payroll Payroll Liability 2014 0.2990% $ 3,229,323 $ $ 3,229,323 $ 2,440,932 132.30% 86.61% 2015 0.3040% 3,454,151 3,454,151 2,788,952 123.85% 86.61% 2016 0.3060% 12,280,312 53,870 12,334,182 2,952,673 415.90% 63.88% 2017 0.3140% 4,239,374 43,337 4,282,711 3,211,726 132.00% 85.43% 2018 0.3045% 3,245,656 - 3,245,656 3,220,233 100.79% 88.84% 2019 0.3175% 3,380,110 - 3,380,110 3,352,444 100.83% 89.26% 2020 0.2998% 3,951,685 93,106 4,044,791 3,390,212 116.56% 87.19% 2021 0.3115% 2,404,450 108,129 2,512,579 3,682,040 65.30% 93.66% Note: Schedule is intended to show ten year trend. Additional years will be reported as they become available. See notes to required supplementary information. 106 Primary Government Fiscal Year Ending December 31, 2014 2015 2016 2017 2018 2019 2020 2021 Statutorily Required City of Elk River Schedule of City Contributions - General Employees Retirement Fund Last Ten Years Contributions in Relation to the Statutorily Required 615,331 $ 668,633 690,811 706,711 736,804 753,933 810,637 886,693 615,331 668,633 690,811 706,711 736,804 753,933 810,637 886,693 Contributions Contribution as a Percentage Deficiency City's Covered of Covered (Excess) Payroll Payroll $ - $ 8,487,324 7.25% - 8,915,107 7.50% - 9,210,813 7.50% - 9,422,813 7.50% - 9,824,053 7.50% - 10,052,440 7.50% - 10,808,493 7.50% - 11,822,573 7.50% Note: Schedule is intended to show ten year trend. Additional years will be reported as they become available. Component Unit - Housing and Redevelopment Authority Contributions in Relation to Fiscal Year Statutorily the Statutorily Ending Required Required December 31, Contribution Contributions 2014 $ 3,877 $ 3,877 2015 4,212 4,212 2016 4,352 4,352 2017 4,494 4,494 2018 4,810 4,810 2019 5,040 5,040 2020 4,629 4,629 2021 3,678 3,678 Contributions Contribution as a Percentage Deficiency City's Covered of Covered (Excess) Payroll Payroll $ - $ 53,476 7.25% - 56,160 7.50% - 58,027 7.50% - 59,920 7.50% - 64,133 7.50% - 67,200 7.50% - 61,720 7.50% - 49,040 7.50% Note: Schedule is intended to show ten year trend. Additional years will be reported as they become available. See notes to required supplementary information. 107 City of Elk River Schedule of City Contributions - Public Employees Police and Fire Retirement Fund Last Ten Years Contributions Contributions Fiscal Year Statutorily in Relation to Contribution as a Percentage Ending Required the Statutorily Deficiency City's Covered of Covered December 31, Contribution Required (Excess) Payroll Payroll 2014 $ 418,280 $ 418,280 $ - $ 2,581,975 16.20% 2015 478,192 478,192 - 2,951,802 16.20% 2016 495,478 495,478 - 3,058,506 16.20% 2017 508,774 508,774 - 3,140,580 16.20% 2018 533,296 533,296 - 3,291,951 16.20% 2019 631,494 631,494 - 3,725,628 16.95% 2020 610,950 610,950 - 3,451,695 17.70% 2021 690,006 690,006 - 3,898,339 17.70% Note: Schedule is intended to show ten year trend. Additional years will be reported as they become available. See notes to required supplementary information. 108 Total pension liability (TPL) Service cost Interest on the pension liability Differences between expected and actual experience Changes of assumptions Changes of benefit terms Benefit payments Net change in TPL TPL - beginning TPL - ending Plan fiduciary net position (PFNP) Contributions - State Contributions - City Net investment income Other additions Benefit payments Administrative expense Net change in PFNP PFNP - beginning PFNP - ending Net pension liability/ (asset) - ending Plan fiduciary net position as a percentage of the total pension liability City of Elk River Schedule of Changes in Net Pension Liability and Related Ratios - Elk River Fire Relief Association Last Ten Years* 2015 2016 2017 2018 2019 2020 2021 $ 93,312 $ 99,459 $ 107,095 $ 101,600 $ 107,610 $ 138,202 $ 154,084 126,522 127,413 142,222 146,894 146,432 164,617 158,331 - - (147,992) - (14,808) - (141,716) - 297,706 - 11,196 39,541 25,224 16,270 62,318 - 55,532 - 645,281 - - - (423,760) (147,015) - (334,581) (396,875) (228,840) 282,152 100,818 9,842 259,690 589,475 (68,832) (41,871) 1,953,814 2,235,966 2,336,784 2,346,626 2,606,316 3,195,791 3,126,959 $ 2,235,966 $ 2,336,784 $ 2,346,626 $ 2,606,316 $ 3,195,791 $ 3,126,959 $ 3,085,088 $ 164,825 $ 177,826 $ 179,192 $ 182,297 $ 189,502 $ 199,451 $ 206,496 30,000 30,000 30,000 30,000 30,000 30,000 30,000 124,109 (143,580) 229,424 457,331 (224,880) 540,907 326,613 (423,760) (147,015) (334,581) (396,875) (228,840) (8,634) (13,663) (12,884) (12,907) (11,963) (16,374) (13,085) 310,300 (373,177) 278,717 656,721 (351,922) 357,109 321,184 2,880,579 3,190,879 2,817,702 3,096,419 3,753,140 3,401,218 3,758,327 $ 3,190,879 $ 2,817,702 $ 3,096,419 $ 3,753,140 $ 3,401,218 $ 3,758,327 $ 4,079,511 $ (954,913) $ (480,918) $ (749,793) $ (1,146,824) $ (205,427) $ (631,368) $ (994,423) 142.71% 120.58% 131.95% 144.00% 106.43% 120.19% 132.23% Schedule of City Contributions - Elk River Fire Relief Association Last Ten Years* 2015 2016 2017 2018 2019 2020 2021 Statutorily required contribution (a) $ 174,826 $ 179,192 $ 182,297 $ 189,502 $ 199,424 $ 206,496 $ 220,909 Actual contributions paid (b) 204,826 209,192 212,297 219,502 229,424 236,496 250,909 Contribution deficiency (Excess) (a-b) (30,000) (30,000) (30,000) (30,000) (30,000) (30,000) (30,000) * This schedule is intended to show information for ten years. Additional years will be displayed as they become available. See notes to required supplementary information. 109 City of Elk River Notes to Required Supplementary Information General Employees Fund 2021 Changes Changes in Actuarial Assumptions • The investment return and single discount rates were changed from 7.5% to 6.5% for financial reporting purposes. • The mortality improvement scale was changed from scale MP-2019 to scale MP-2020. Changes in Plan Provisions • There have been no changes since the prior valuation. 2020 Changes Changes in Actuarial Assumptions • The price inflation assumption was decreased from 2.5% to 2.25%. • The payroll growth assumption was decreased from 3.25% to 3.0%. • 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 changes 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 and Survivor option changed from 35% to 45%. The assumed number of married female new retires electing the 100% Joint and 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% thereafter. Augmentation was eliminated for privatizations occurring after June 30, 2020. 2019 Changes Changes in Actuarial Assumptions • The mortality projection scale was changed from MP-2017 to MP-2018. 110 City of Elk River Notes to Required Supplementary Information General Employees Fund (Continued) 2019 Changes (Continued) 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. 2018 Changes Changes in Actuarial Assumptions • The mortality projection scale was changed from MP-2015 to MP-2017. • The assumed benefit increase was changed from 1.0% per year through 2044 and 2.5% 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. 2017 Changes Changes in Actuarial Assumptions • The CSA loads were changed from 0.8% for active members and 60% for vested and non -vested deferred members. The revised CSA loads are now 0.0% for active member liability, 15% for vested deferred member liability and 3% for non -vested deferred member liability. • The assumed post -retirement benefit increase rate was changed from 1.0% per year for all years to 1.0% per year through 2044 and 2.5% 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. III City of Elk River Notes to Required Supplementary Information General Employees Fund (Continued) 2016 Changes Changes in Actuarial Assumptions • The assumed post -retirement benefit increase rate was changed from 1.0% per year through 2035 and 2.5% per year thereafter to 1.0% per year for all future years. • The assumed investment return was changed from 7.9% to 7.5%. The single discount rate was changed from 7.9% to 7.5%. • Other assumptions were changed pursuant to the experience study dated June 30, 2015. The assumed future salary increases, payroll growth, the inflation was decreased by 0.25% to 3.25% for payroll growth and 2.50% for inflation. Changes in Plan Provisions • There have been no changes since the prior valuation. 2015 Changes Changes in Actuarial Assumptions • The assumed post -retirement benefit increase rate was changed from 1.0% per year through 2030 and 2.5% per year thereafter to 1.0% per year through 2035 and 2.5% 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 increased 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. 112 City of Elk River Notes to Required Supplementary Information Police and Fire Fund 2021 Changes Changes in Actuarial Assumptions • The investment return and single discount rates were changed from 7.5% to 6.5% for financial reporting purposes. • The inflation assumption was changed from 2.5% to 2.25%. • The payroll growth assumption was changed from 3.25% to 3.0%. • The base mortality table for healthy annuitants and employees was changed from the RP-2014 table to the Pub-2010 Public Safety mortality table. The mortality improvement scale was changed from MP-2019 to MP-2020. • The base mortality table for disabled annuitants was changed from the RP-2014 healthy annuitant mortality table (with future mortality improvement according to scale MP-2019) to the Pub-2010 Public Safety disabled annuitant mortality table (with future mortality improvement according to scale MP-2020). • Assumed rates of salary increase were modified as recommended in the July 14, 2020, experience study. The overall impact is a decrease in gross salary increase rates. • Assumed rates of retirement were changed as recommended in the July 14, 2020, experience study. The changes resulted in slightly more unreduced retirements and fewer assumed early retirements. • Assumed rates of withdrawal were changed from select and ultimate rates to service -based rates. The changes resulted in more assumed terminations. • Assumed rates of disability were increased for ages 25-44 and decreased for ages over 49. Overall, proposed rates resulted in more projected disabilities. • Assumed percent married for active female members was changed from 60% to 70%. Minor changes to form of payment assumptions were applied. Changes in Plan Provisions There have been no changes since the prior valuation. 2020 Changes 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. 2019 Changes 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. 2018 Changes Changes in Actuarial Assumptions • The mortality projection scale was changed from MP-2016 to MP-2017. Changes in Plan Provisions • Postretirement benefit increases were changed to 1.00% for all years, with no trigger. 113 City of Elk River Notes to Required Supplementary Information Police and Fire Fund (Continued) 2018 Changes (Continued) Changes in Plan Provisions (Continued) • 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. • 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. 2017 Changes 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 CSA load was 30% for vested and non -vested deferred members. The CSA has been changed to 33% for vested members and 2% 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% 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% to 60%. • 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 post -retirement benefit increase rate was changed from 1% for all years to 1% per year through 2064 and 2.5% thereafter. • The single discount rate was changed from 5.6% per annum to 7.5% per annum. Changes in Plan Provisions • There have been no changes since the prior valuation. 2016 Changes Changes in Actuarial Assumptions • The assumed post -retirement benefit increase rate was changed from 1.0% per year through 2037 and 2.5% thereafter to 1.0% per year for all future years. 114 City of Elk River Notes to Required Supplementary Information Police and Fire Fund (Continued) 2016 Changes (Continued) Changes in Actuarial Assumptions (Continued) • The assumed investment return was changed from 7.9% to 7.5%. The single discount rate changed from 7.9% to 5.6%. • 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 Provisions • There have been no changes since the prior valuation. 2015 Changes Changes in Actuarial Assumptions • The assumed post -retirement benefit increase rate was changed from 1.0% per year through 2030 and 2.5% per year thereafter to 1.0% per year through 2037 and 2.5% per year thereafter. Changes in Plan Provisions • The post -retirement benefit increase to be paid after attainment of the 90% funding threshold was changed, from inflation up to 2.5%, to a fixed rate of 2.5%. 115 City of Elk River Notes to Required Supplementary Information Post Employment Health Care Plan 2021 Changes Changes in Actuarial Assumptions • The discount rate was changed from 2.90% to 2.00% based on updated 20-year municipal bond rates. • The inflation rate changed from 2.50% to 2.00%. • 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 Mortality Tables (Blue Collar for Public Safety, White Collar for Others) with MP-2018 Generational Improvement Scale to the Pub- 2010 Public Retirement Plans Headcount -Weighted Mortality Tables (General, Safety) with MP- 2020 Generational Improvement Scale. • The retirement and withdrawal rates for non-public safety employees were updated. • The salary increase rates were changed from a flat 3.00% per year for all employees to rates which vary by service and contract group. 2020 Changes Changes in Actuarial Assumptions • The discount rate was changed from 3.80% to 2.90% based on updated 20-year municipal bond rates. 2019 Changes Changes in Actuarial Assumptions • The discount rate was changed from 3.30% to 3.80% based on updated 20-year municipal bond rates. • 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). 2018 Changes Changes in Actuarial Assumptions • The discount rate was changed from 3.50% to 3.30% based on updated 20-year municipal bond rates. 116 COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND SCHEDULES 117 (THIS PAGE LEFT BLANK INTENTIONALLY) 118 City of Elk River Nonmajor Governmental Funds Special Revenue Funds Special revenue funds are established to account for specific revenue or other sources that are designated for financing particular functions or activities as required by deferral regulations, Minnesota Statute, local ordinances, or specific grant agreements. Most of the special revenue funds are related to specific federal and state housing programs or grants for specific activities. Capital Projects Funds Capital project funds are established to account for the resources used for the acquisition of capital facilities and infrastructure for the City with the exception of those financed by the enterprise funds. Debt Service Funds The Debt Service funds are established to account for the collection of ad valorem taxes, special assessments, and tax increment revenue transfers as well as the payment of principal and interest of general long-term debt. 119 City of Elk River Nonmajor Governmental Funds Combining Balance Sheet December 31, 2021 Total Nonmajor Special Governmental Revenue Capital Projects Debt Service Funds Assets Cash and investments $ 7,296,113 $ 13,599,601 $ 3,487,606 $ 24,383,320 Taxes receivable 11,798 32 690,541 702,371 Accounts receivable 105,284 142,002 - 247,286 Interest receivable 20,135 57,188 12,664 89,987 Notes receivable 1,401,445 320,000 - 1,721,445 Special assessment receivable - 1,410,904 102,520 1,513,424 Due from other funds 1,151,564 24,734 - 1,176,298 Due from other governments 124 406,978 - 407,102 Land held for resale 175,000 - - 175,000 Prepaid items - 432 - 432 Total assets Liabilities Accounts payable Salaries and benefits payable Contracts payable Due to other funds Due to other governments Due to component unit Unearned revenue Total liabilities Deferred Inflows of Resources Unavailable revenue - property taxes Unavailable revenue - special assessments Total deferred inflows of resources Fund Balances Nonspendable Restricted Committed Assigned Unassigned Total fund balances Total liabilities, deferred inflows of resources, and fund balances $ 10,161,463 $ 15,961,871 $ 4,293,331 $ 30,416,665 $ 162,870 $ 1,271,541 $ 1,084 $ 1,435,495 28,039 - - 28,039 - 54,054 - 54,054 74,860 1,452,214 361 1,527,435 2,679 49 - 2,728 - 179,331 - 179,331 1,377,667 692,901 - 2,070,568 1,646,115 3,650,090 1,445 5,297,650 3,475 30 3,411 6,916 - 1,408,951 101,640 1,510,591 3,475 1,408,981 105,051 1,517,507 - 432 - 432 1,504,405 551,575 4,186,835 6,242,815 5,410,781 - - 5,410,781 1,665,120 11,974,256 - 13,639,376 (68,433) (1,623,463) - (1,691,896) 8,511,873 10,902,800 4,186,835 23,601,508 $ 10,161,463 $ 15,961,871 $ 4,293,331 $ 30,416,665 120 City of Elk River Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Year Ended December 31, 2021 Total Nonmajor Special Governmental Revenue Capital Projects Debt Service Funds Revenues Property taxes $ 531,881 $ 326,467 $ 513,054 $ 1,371,402 Sales taxes - - 3,469,146 3,469,146 Special assessments - 288,678 50,600 339,278 Intergovernmental 24,020 942,586 - 966,606 Charges for services 1,064,703 433,285 - 1,497,988 Fines and forfeitures 33,917 - - 33,917 Otherrevenue Investment income (29,287) (151,517) 47,402 (133,402) Contributions and donations 5,250 239,211 243,113 487,574 Refunds and reimbursements 84,130 115,548 - 199,678 Landfill expansion fee - 2,179,035 - 2,179,035 Miscellaneous revenue 47,916 185,689 - 233,605 Total revenues 1,762,530 4,558,982 4,323,315 10,644,827 Expenditures Current General government 62,857 202,621 - 265,478 Public safety 21,729 27,224 - 48,953 Public works 59,266 33,512 - 92,778 Culture and recreation 1,325,514 541,633 - 1,867,147 Economic development 454,657 - - 454,657 Capital outlay General government - 744,602 - 744,602 Public safety - 1,842,986 - 1,842,986 Public works - 2,655,896 - 2,655,896 Culture and recreation 242,448 115,510 - 357,958 Debt service Principal - - 1,345,000 1,345,000 Interest and other charges - 72,318 1,443,996 1,516,314 Total expenditures 2,166,471 6,236,302 2,788,996 11,191,769 Excess of revenues over (under) expenditures (403,941) (1,677,320) 1,534,319 (546,942) Other Financing Sources (Uses) Proceeds from sale of capital asset - 1,053,072 - 1,053,072 Transfers in 28,000 1,159,719 236,642 1,424,361 Transfers out (51,600) (605,239) - (656,839) Total other financing sources (uses) (23,600) 1,607,552 236,642 1,820,594 Net change in fund balances (427,541) (69,768) 1,770,961 1,273,652 Fund Balances Beginning of year 8,939,414 10,972,568 2,415,874 22,327,856 End of year $ 8,511,873 $ 10,902,800 $ 4,186,835 $ 23,601,508 121 City of Elk River Nonmajor Special Revenue Funds Combining Balance Sheet December 31, 2021 Multipurpose Revolving Library Facility Landfill Loan Assets Cash and investments $ 241,534 $ - $ 998,084 $ 911,298 Taxes receivable 1,588 - - - Accounts receivable - 102,814 2,470 - Interest receivable 1,075 - 4,456 4,069 Notes receivable - - - 254,490 Due from other funds - - - - Due from other governments - - - - Land held for resale - - - - Totalassets $ 244,197 $ 102,814 $ 1,005,010 $ 1,169,857 Liabilities Accounts payable $ 11,840 $ 75,577 $ 1,101 $ - Salaries and benefits payable - 25,344 - - Due to other funds 67,647 - - Due to other governments - 2,679 - - Unearned revenue - - - - Total liabilities 11,840 171,247 1,101 - Deferred Inflows of Resources Unavailable revenue - property taxes 476 - - - Fund Balances Restricted - - - - Committed 231,881 - - 1,169,857 Assigned - - 1,003,909 - Unassigned - (68,433) - - Total fund balances 231,881 (68,433) 1,003,909 1,169,857 Total liabilities, deferred inflows of resources, and fund balances $ 244,197 $ 102,814 $ 1,005,010 $ 1,169,857 122 Total Nonmajor Development Insurance Special State DEED Fund Reserve Drug Forfeiture CRF Grant EDA Revenue Funds $ 208,868 $ 1,999,893 $ 101,958 $ 49,312 $ 1,377,782 $ 1,407,384 $ 7,296,113 - 2,271 - - - 7,939 11,798 - - - - - - 105,284 932 8,929 455 219 - - 20,135 333,907 813,048 - - - - 1,401,445 - 1,151,564 - - - - 1,151,564 - - - 124 - - 124 - - - - - 175,000 175,000 $ 543,707 $ 3,975,705 $ 102,413 $ 49,655 $ 1,377,782 $ 1,590,323 $ 10,161,463 $ 1,620 $ 63,481 $ 4,873 $ 3,686 $ - $ 692 $ 162,870 - - - - - 2,695 28,039 - - - - - 7,213 74,860 - - - - - - 2,679 - - - - 1,377,667 - 1,377,667 1,620 63,481 4,873 3,686 1,377,667 10,600 1,646,115 721 - - - 2,278 3,475 542,087 - - 40,933 115 921,270 1,504,405 - 3,911,503 97,540 - - - 5,410,781 - - - 5,036 - 656,175 1,665,120 - - - - - - (68,433) 542,087 3,911,503 97,540 45,969 115 1,577,445 8,511,873 $ 543,707 $ 3,975,705 $ 102,413 $ 49,655 $ 1,377,782 $ 1,590,323 $ 10,161,463 123 City of Elk River Nonmajor Special Revenue Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Year Ended December 31, 2021 Multipurpose Revolving Library Facility Landfill Loan Revenues Property taxes $ 71,299 $ - $ - $ - Intergovernmental - - 19,671 - Charges for services - 1,039,302 21,401 500 Fines and forfeitures - - - - Other revenue Investment income 3,805 227 (13,544) (10,724) Contributions and donations - - - - Refunds and reimbursements - 2,755 - - Miscellaneous revenue - 16,361 - 8,269 Total revenues 75,104 1,058,645 27,528 (1,955) Expenditures Current General government - - - - Public safety - - - - Public works - - 59,266 - Culture and recreation 89,769 1,235,745 - - Economic development - - - 27,305 Capital outlay Culture and recreation 166,118 76,330 - - Total expenditures 255,887 1,312,075 59,266 27,305 Excess of revenues over (under) expenditures (180,783) (253,430) (31,738) (29,260) Other Financing Sources (Uses) Transfers in 28,000 - - - Transfers out - - - - Total other financing sources (uses) 28,000 - - - Net change in fund balances (152,783) (253,430) (31,738) (29,260) Fund Balances Beginning of year 384,664 184,997 1,035,647 1,199,117 End ofyear $ 231,881 $ (68,433) $ 1,003,909 $ 1,169,857 124 Development Insurance State DEED Fund Reserve Drug Forfeiture CRF Grant EDA $ - $ 98,418 $ - $ - $ - $ 362,164 - - - - - 4,349 - - - - - 3,500 - - - 33,917 - - (1,592) (8,165) (1,458) 653 115 1,396 - - - - - 5,250 - - 81,375 - - - 9,180 - - - - 14,106 7,588 90,253 79,917 34,570 115 390,765 - - 62,857 - - - - - - 21,729 - - 1,842 212,149 - - - 213,361 1,842 212,149 62,857 21,729 - 213,361 5,746 (121,896) 17,060 12,841 115 177,404 - (10,600) - - - (41,000) - (10,600) - - - (41,000) 5,746 (132,496) 17,060 12,841 115 136,404 536,341 4,043,999 80,480 33,128 - 1,441,041 $ 542,087 $ 3,911,503 $ 97,540 $ 45,969 $ 115 $ 1,577,445 125 (THIS PAGE LEFT BLANK INTENTIONALLY) 126 City of Elk River Nonmajor Special Revenue Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Year Ended December 31, 2020 Total Nonmajor Special Revenue Funds Revenues Property taxes $ 531,881 Intergovernmental 24,020 Charges for services 1,064,703 Fines and forfeitures 33,917 Other revenue Investment income (29,287) Contributions and donations 5,250 Refunds and reimbursements 84,130 Miscellaneous revenue 47,916 Total revenues 1,762,530 Expenditures Current General government 62,857 Public safety 21,729 Public works 59,266 Culture and recreation 1,325,514 Economic development 454,657 Capital outlay Culture and recreation 242,448 Total expenditures 2,166,471 Excess of revenues over (under) expenditures (403,941) Other Financing Sources (Uses) Transfers in 28,000 Transfers out (51,600) Total other financing sources (uses) (23,600) Net change in fund balances (427,541) Fund Balances Beginning of year 8,939,414 End of year $ 8,511,873 127 City of Elk River Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Library Special Revenue Fund Year Ended December 31, 2021 Budgeted Amounts Variance with Actual Final Budget - Original Final Amounts Over (Under) Revenues Property taxes $ 71,500 $ 71,500 $ 71,299 $ (201) Other revenue Investment income 7,000 7,000 3,805 (3,195) Total revenues 78,500 78,500 75,104 (3,396) Expenditures Current Culture and recreation 106,500 106,500 89,769 (16,731) Capital outlay Culture and recreation 10,000 10,000 166,118 156,118 Total expenditures 116,500 116,500 255,887 139,387 Excess of revenues over (under) expenditures (38,000) (38,000) (180,783) (142,783) Other Financing Sources (Uses) Transfers in 28,000 28,000 28,000 - Net change in fund balances $ (10,000) $ (10,000) (152,783) $ (142,783) Fund Balances Beginning of year 384,664 End of year $ 231,881 128 City of Elk River Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Multipurpose Facility Special Revenue Fund Year Ended December 31, 2021 Budgeted Amounts Variance with Actual Final Budget - Original Final Amounts Over (Under) Revenues Charges for services $ 1,728,050 $ 1,728,050 $ 1,039,302 $ (688,748) Otherrevenue Investment income 6,000 6,000 227 (5,773) Contributions and donations - - 2,755 2,755 Miscellaneous revenue 23,100 23,100 16,361 (6,739) Total revenues 1,757,150 1,757,150 1,058,645 (698,505) Expenditures Current Culture and recreation 1,199,900 1,199,900 1,235,745 35,845 Capital outlay Culture and recreation 122,000 122,000 76,330 (45,670) Total expenditures 1,321,900 1,321,900 1,312,075 (9,825) Excess of revenues over (under) expenditures 435,250 435,250 (253,430) (688,680) Other Financing Sources (Uses) Transfers out (140,000) (140,000) - 140,000 Net change in fund balances $ 295,250 $ 295,250 (253,430) $ (548,680) Fund Balances Beginning of year 184,997 End of year $ (68,433) 129 (THIS PAGE LEFT BLANK INTENTIONALLY) 130 Revenues Property taxes Intergovernmental Charges for services Otherrevenue Investment income Contributions and donations Miscellaneous revenue Total revenues Expenditures Current Economic development Excess of revenues over (under) expenditures Other Financing Sources (Uses) Transfers out Net change in fund balances Fund Balances Beginning of year End of year City of Elk River Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Economic Development Authority Special Revenue Fund Year Ended December 31, 2021 Budgeted Amounts Variance with Actual Final Budget - Original Final Amounts Over (Under) $ 363,150 $ 363,150 $ 362,164 $ (986) - - 4,349 4,349 3,500 3,500 3,500 - 3,000 3,000 1,396 (1,604) - - 5,250 5,250 - - 14,106 14,106 369,650 369,650 390,765 21,115 328,650 328,650 213,361 (115,289) 41,000 41,000 177,404 136,404 (41,000) (41,000) (41,000) - $ - $ - 136,404 $ 136,404 1,441,041 $ 1,577,445 131 Assets Cash and investments Taxes receivable Accounts receivable Interest receivable Notes receivable Special assessment receivable Due from other funds Due from other governments Prepaid items Total assets Liabilities Accounts payable Contracts payable Due to other funds Due to other governments Due to component unit Unearned revenue Total liabilities Deferred Inflows of Resources Unavailable revenue - property taxes Unavailable revenue - special assessments Total deferred inflows of resources Fund Balances Nonspendable Restricted Assigned Unassigned Total fund balances Total liabilities, deferred inflows of resources, and fund balances City of Elk River Nonmajor Capital Projects Funds Combining Balance Sheet - December 31, 2021 Park Capital Outlay Government Dedication Reserve Buildings GRE Reserve $ 932,773 $ 1,904,438 $ 3,499,380 $ 1,050,910 - - 32 - - - 137,460 - 4,164 7,737 15,689 4,692 320,000 - - - - 288,919 - - $ 1,256,937 $ 2,201,094 $ 3,652,561 $ 1,055,602 $ 10,442 $ 302,553 $ 131,287 $ - 694,920 - - - 705,362 302,553 131,287 - - - 30 - - - 30 - 551,575 - - - - 1,898,541 3,521,244 1,055,602 $ 1,256,937 $ 2,201,094 $ 3,652,561 $ 1,055,602 132 Street Improvement Equipment Park Developer Improvements Projects Replacement Improvements Deposits TIF Districts $ 334,763 $ 3,553,816 $ 1,255,318 $ 435,904 $ 620,596 $ 11,703 - - - 4,450 92 - 1,495 15,867 5,604 1,940 - - 29,813 1,381,091 - - - - - - 24,734 - - - 118,059 - - - - - - - - - 432 - $ 484,130 $ 4,950,774 $ 1,285,656 $ 442,294 $ 621,120 $ 11,703 $ 166 $ 107,864 $ - $ 94,969 $ 621,120 $ 3,140 - 54,054 - - - - - - - - - 1,452,214 - - - - - 49 - - - - - 179,331 - (2,019) - - - - 166 159,899 - 94,969 621,120 1,634,734 27,860 1,381,091 - - - - 27,860 1,381,091 - - - - - - - - 432 - 456,104 3,409,784 1,285,656 347,325 - - - - - - (432) (1,623,031) 456,104 3,409,784 1,285,656 347,325 - (1,623,031) $ 484,130 $ 4,950,774 $ 1,285,656 $ 442,294 $ 621,120 $ 11,703 Continued 133 (THIS PAGE LEFT BLANK INTENTIONALLY) 134 City of Elk River Nonmajor Capital Projects Funds Combining Balance Sheet - December 31, 2021 Continued Total Nonmajor Capital Projects Funds Assets Cash and investments $ 13,599,601 Taxes receivable 32 Accounts receivable 142,002 Interest receivable 57,188 Notes receivable 320,000 Special assessment receivable 1,410,904 Due from other funds 24,734 Due from other governments 406,978 Prepaid items 432 Total assets $ 15,961,871 Liabilities Accounts payable $ 1,271,541 Contracts payable 54,054 Due to other funds 1,452,214 Due to other governments 49 Due to component unit 179,331 Unearned revenue 692,901 Total liabilities 3,650,090 Deferred Inflows of Resources Unavailable revenue - property taxes 30 Unavailable revenue - special assessments 1,408,951 Total deferred inflows of resources 1,408,981 Fund Balances Nonspendable 432 Restricted 551,575 Assigned 11,974,256 Unassigned (1,623,463) Total fund balances 10,902,800 Total liabilities, deferred inflows of resources, and fund balances $ 15,961,871 135 City of Elk River Nonmajor Capital Projects Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Year Ended December 31, 2021 Revenues Property taxes Special assessments Intergovernmental Charges for services Other revenue Investment income Contributions and donations Refunds and reimbursements Landfill expansion fee Miscellaneous revenue Total revenues Expenditures Current General government Public safety Public works Culture and recreation Economic development Capital outlay General government Public safety Public works Culture and recreation Debt service Interest and other charges Total expenditures Excess of revenues over (under) expenditures Other Financing Sources (Uses) Proceeds from sale of capital asset Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Fund balances Beginning of year End of year Park Capital Outlay Government Dedication Reserve Buildings GRE Reserve $ - $ - $ 29 $ - - 544 - - - 309,603 - - 392,210 21,000 - - (2,093) (10,848) (31,350) (38,408) - 139,604 - 57,500 - 91,396 24,152 - - - 2,179,035 - 127,631 20,835 148,466 241,651 168,592 33,730 - 27,002 222 - 32,596 - 916 - 354,663 - 211,105 533,497 - 497,661 1,091,946 - - - 955,258 936,956 2,014,058 956,174 (385,657) 157,808 (937,082) 420,000 - 569,962 - 512,985 - - - (605,239) 420,000 512,985 (35,277) 661,651 127,328 122,531 (937,082) (110,076) 1,771,213 3,398,713 1,992,684 $ 551,575 $ 1,898,541 $ 3,521,244 $ 1,055,602 136 Street Improvement Equipment Park Improvements Projects Replacement Improvements TIF Districts $ 33 $ - $ 4 $ - $ 326,401 40,794 247,340 - - - 118,059 - 443,940 70,984 - - - - 20,075 - (15,935) (66,422) 7,424 6,115 - - - - 42,107 - 525 - 2,212 - 182,952 143,476 180,918 453,580 139,281 509,353 - - 299 - - - - - 59,339 - - - 253,379 - - 454,989 1,245,649 - - - - - 20,541 94,969 - - - - - 51,483 454,989 1,245,649 274,219 154,308 51,483 (311,513) (1,064,731) 179,361 (15,027) 457,870 - - 63,110 - - - - 396,734 250,000 - - - 459,844 250,000 - (311,513) (1,064,731) 639,205 234,973 457,870 767,617 4,474,515 646,451 112,352 (2,080,901) $ 456,104 $ 3,409,784 $ 1,285,656 $ 347,325 $ (1,623,031) 137 (THIS PAGE LEFT BLANK INTENTIONALLY) 138 City of Elk River Nonmajor Capital Projects Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Year Ended December 31, 2021 Total Nonmajor Capital Projects Funds Revenues Property taxes $ 326,467 Special assessments 288,678 Intergovernmental 942,586 Charges for services 433,285 Otherrevenue Investment income (151,517) Contributions and donations 239,211 Refunds and reimbursements 115,548 Landfill expansion fee 2,179,035 Miscellaneous revenue 185,689 Total revenues 4,558,982 Expenditures Current General government 202,621 Public safety 27,224 Public works 33,512 Culture and recreation 541,633 Economic development - Capital outlay General government 744,602 Public safety 1,842,986 Public works 2,655,896 Culture and recreation 115,510 Debt service Interest and other charges 72,318 Total expenditures 6,236,302 Excess of revenues over (under) expenditures (1,677,320) Other Financing Sources (Uses) Proceeds from sale of capital asset 1,053,072 Transfers in 1,159,719 Transfers out (605,239) Total other financing sources (uses) 1,607,552 Net change in fund balances (69,768) Fund balances Beginning of year 10,972,568 End of year $ 10,902,800 139 City of Elk River Nonmajor Debt Service Funds Combining Balance Sheet December 31, 2021 2020A Capital 2021A Capital Total Nonmajor Sales Tax Improvement Improvement Debt Service Bonds YMCA Bonds Bonds Bonds Funds Assets Cash and investments $ 2,744,182 $ 642,490 $ 4,177 $ 96,757 $ 3,487,606 Taxes receivable 679,898 10,643 - - 690,541 Interest receivable 12,214 - 19 431 12,664 Special assessment receivable 102,520 - - - 102,520 Total assets $ 3,538,814 $ 653,133 $ 4,196 $ 97,188 $ 4,293,331 Liabilities Accounts payable $ 362 $ - $ 361 $ 361 1,084 Due to other funds - 361 - - 361 Total liabilities 362 361 361 361 1,445 Deferred Inflows of Resources Unavailable revenue - property taxes - 3,411 - - 3,411 Unavailable revenue - special assessments 101,640 - - - 101,640 Total deferred inflows of resources 101,640 3,411 - - 105,051 Fund Balances Restricted 3,436,812 649,361 3,835 96,827 4,186,835 Total deferred inflows of resources and fund balances $ 3,538,814 $ 653,133 $ 4,196 $ 97,188 $ 4,293,331 140 City of Elk River Nonmajor Debt Service Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Year Ended December 31, 2021 2020A Capital 2021A Capital Total Nonmjor Sales Tax Improvement Improvement Debt Service Revenues Property taxes $ - $ 513,054 $ - $ - $ 513,054 Sales taxes 3,469,146 - - - 3,469,146 Special assessments 50,600 - - - 50,600 Otherrevenue Investment income 45,837 62 82 1,421 47,402 Contributions and donations - 243,113 - - 243,113 Total revenues 3,565,583 756,229 82 1,421 4,323,315 Expenditures Debt service Principal 805,000 540,000 - - 1,345,000 Interest and other charges 1,112,699 189,700 141,236 361 1,443,996 Total expenditures 1,917,699 729,700 141,236 361 2,788,996 Excess of revenues over (under) expenditures 1,647,884 26,529 (141,154) 1,060 1,534,319 Other Financing Sources (Uses) Transfers in - - 140,875 95,767 236,642 Net change in fund balances 1,647,884 26,529 (279) 96,827 1,770,961 Fund Balances Beginning of year 1,788,928 622,832 4,114 - 2,415,874 End of year $ 3,436,812 $ 649,361 $ 3,835 $ 96,827 $ 4,186,835 141 (THIS PAGE LEFT BLANK INTENTIONALLY) 142 City of Elk River 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. Housing and Redevelopment Authority Fund This governmental fund is used to account for housing and redevelopment activities. Revenues are derived from the HRA property tax levy. 143 City of Elk River Housing and Redevelopment Authority Component Unit Balance Sheet - Governmental Fund December 31, 2021 Housing and Redevelopment Authority Assets Cash and investments $ 775,500 Taxes receivable 7,119 Accounts receivable 1,269 Notes receivable 474,338 Due from primary government 179,331 Land held for resale 382,000 Total assets $ 1,819,557 Liabilities Accounts payable 5,176 Salaries and benefits payable 1,797 Due to primary government 4,002 Total liabilities 10,975 Deferred Inflows of Resources Unavailable revenue - property taxes 2,107 Fund Balances Nonspendable 474,338 Restricted for housing and redevelopment 1,332,137 Total fund balances 1,806,475 Total liabilities, deferred inflows of resources, and fund balances $ 1,819,557 Total fund balances reported above $ 1,806,475 Amounts reported for the Housing and Redevelopment Authority in the Statement of Net Position are different because: Capital assets used in governmental activities are not financial resources, and therefore, are not reported in the funds Land 257,100 Other improvements 174,290 Less: accumulated depreciation (105,542) Some receivables are not available soon enough to pay for the current periods expenditures, and therefore are reported as unavailable revenue in the funds Delinquent taxes receivable 2,107 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 (27,283) Deferred inflows of resources related to pensions (25,081) Deferred outflows of resources related to pensions 20,255 Total net position - Housing and Redevelopment Authority $ 2,102,321 144 City of Elk River Housing and Redevelopment Authority Component Unit Statement of Revenues, Expenditures, and Change in Fund Balances Year Ended December 31, 2021 Housing and Redevelopment Authority Revenues Property taxes $ 320,897 Intergovernmental 177 Other revenue Investment income 5,541 Total revenues 326,615 Expenditures Current Economic development 163,993 Net change in fund balances 162,622 Fund Balances Beginning of year 1,643,853 End of year $ 1,806,475 Amounts reported for the Housing and Redevelopment Authority in the Statement of Activities are different because: Net changes in fund balances - Housing and Redevelopment Authority $ 162,622 Capital outlays are reported in governmental funds as expenditures. However, in the Statement of Activities the cost of those assets is allocated over their estimated useful lives as depreciation expense. Capital outlay Depreciation expense (11,619) Certain revenues are recognized as soon as they are earned. Under the modified accrual basis of accounting, certain revenues cannot be recognized until they are available to liquidate liabilities of the current period. Property taxes (98) 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 deferred outflows of resources. 16,479 Change in net position - Housing and Redevelopment Authority $ 167,384 145 (THIS PAGE LEFT BLANK INTENTIONALLY) 146 STATISTICAL SECTION (UNAUDITED) CITY OF ELK RIVER ELK RIVER, MINNESOTA FOR THE YEAR ENDED DECEMBER 31, 2021 147 (THIS PAGE LEFT BLANK INTENTIONALLY) City of Elk River 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 City's overall financial health. Financial Trends 150 These schedules contain trend information to help the reader understand how the government's financial performance and well-being have changed over time. Revenue Capacity 160 These schedules contain information to help the reader assess the government's most significant local revenue source, property taxes. Debt Capacity 166 These schedules present information to help the reader assess the affordability of the government's current level of outstanding debt and the government's ability to issue additional debt in the future. Demographic and Economic Information 176 These schedules offer demographic and economic indicators to help the reader understand the environment within which the government's financial activities take place. Operating Information 177 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 annual comprehensive financial reports for the relevant year. 149 Governmental Activities Net investment in capital assets Restricted Unrestricted Total govennnental activities net position Business -Type Activities Net investment in capital assets Restricted Unrestricted Total business -type activities net position Total Primary Government Net investment in capital assets Restricted Unrestricted Total primary government City of Elk River, Minnesota Statistical Section (Unaudited) Net Position by Component Last Ten Fiscal Years Fiscal Year 2012 2013 2014 2015 $ 84,060,768 $ 84,353,785 $ 84,921,650 $ 75,030,579 6,391,182 5,256,724 4,192,856 3,675,588 27,448,688 24,069,710 24,902,387 20,170,751 $ 117,900,638 $ 113,680,219 $ 114,016,893 $ 98,876,918 $ 60,288,219 $ 62,035,437 $ 62,392,972 $ 76,747,269 724,500 647,000 490,500 490,500 22,376,508 22,957,506 24,718,391 24,504,299 $ 83,389,227 $ 85,639,943 $ 87,601,863 $ 101,742,068 $ 144,348,987 $ 146,389,222 $ 147,314,622 $ 151,777,848 7,115,682 5,903,724 4,683,356 4,166,088 49,825,196 47,027,216 49,620,778 44,675,050 $ 201,289,865 $ 199,320,162 $ 201,618,756 $ 200,618,986 150 Fiscal Year 2016 2017 2018 2019 2020 2021 $ 78,119,790 $ 78,958,608 $ 77,092,055 $ 78,288,782 $ 78,477,651 $ 75,360,937 11,990,647 2,925,562 4,236,048 3,741,368 17,138,100 12,112,762 6,584,209 15,779,965 17,685,456 19,823,663 14,546,321 26,690,158 $ 96,694,646 $ 97,664,135 $ 99,013,559 $ 101,853,813 $ 110,162,072 $ 114,163,857 $ 82,230,963 $ 83,919,324 $ 85,104,737 $ 84,327,032 $ 86,155,217 $ 87,943,523 997,660 997,660 1,261,359 1,261,359 1,261,359 1,779,016 21,466,617 21,912,125 24,308,658 27,656,995 31,499,220 33,405,459 $ 104,695,240 $ 106,829,109 $ 110,674,754 $ 113,245,386 $ 118,915,796 $ 123,127,998 $ 160,350,753 $ 162,877,932 $ 162,196,792 $ 162,615,814 $ 164,632,868 $ 163,304,460 12,988,307 3,923,222 5,497,407 5,002,727 18,399,459 13,891,778 28,050,826 37,692,090 41,994,114 47,480,658 46,045,541 60,095,617 $ 201,389,886 $ 204,493,244 $ 209,688,313 $ 215,099,199 $ 229,077,868 $ 237,291,855 151 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 Storm water Water Electric Total business -type activities expenses Total 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 revenue Business -type activities Charges for services Municipal liquor Garbage Sewer Storm water Water Electric Operating grants and contributions Capital grants and contributions Total governmental activities program revenue Total program revenues City of Elk River, Minnesota Statistical Section (Unaudited) Changes in Net Position Last Ten Fiscal Years (Accrual Basis of Accounting) Fiscal Year 2012 2013 2014 2015 $ 2,994,342 $ 3,344,317 $ 3,554,136 $ 3,619,293 6,187,246 6,173,244 6,615,593 6,720,283 6,037,000 6,535,616 6,860,673 5,351,630 4,013,098 3,914,000 4,088,992 3,970,704 1,059,058 2,088,064 1,091,125 959,414 1,163,352 1,288,020 1,075,408 1,084,902 21,454,096 23,343,261 23,285,927 21,706,226 5,622,305 5,706,760 5,776,873 5,945,126 1,276,887 1,251,420 1,303 ,943 1,382,890 2,239,914 2,320,743 2,156,329 2,318,709 - - - 736,411 2,264,814 2,332,680 2,459,319 2,478,904 27,586,573 28,422,759 29,597,247 30,012,830 38,990,493 40,034,362 41,293,711 42,874,870 $ 60,444,589 $ 63,377,623 $ 64,579,638 $ 64,581,096 $ 369,794 $ 338,469 $ 385,238 $ 439,826 789,728 961,072 1,063,725 1,194,458 82,173 206,606 233,593 174,452 1,128,070 1,075,576 906,291 925,591 8,244 274,833 77,430 92,716 1,018,519 954,164 1,049,744 1,033,338 1,007,794 807,208 4,020,851 3,574,036 4,404,322 4,617,928 7,736,872 7,434,417 6,525,234 6,756,581 6,825,342 6,974,336 1,302,920 1,285,138 1,304,750 1,321,301 1,533,851 1,613,276 1,734,141 1,818,476 - - - 355,454 2,343,881 2,381,651 2,290,824 2,379,835 30,403,469 31,029,299 31,596,217 32,831,209 23,440 - - - 490,916 924,641 935,909 2,708,564 42,623,711 43,990,586 44,687,183 48,389,175 47,028,033 48,608,514 52,424,055 55,823,592 152 Fiscal Year 2016 2017 2018 2019 2020 2021 $ 3,996,316 $ 3,932,100 $ 3,981,134 $ 3,786,257 $ 4,526,987 $ 4,655,075 9,231,492 7,670,839 7,398,041 9,188,562 8,372,884 8,082,449 5,539,045 6,803,504 5,619,836 5,920,022 4,468,711 5,340,633 4,014,737 4,157,960 4,474,619 4,094,690 6,080,466 11,070,966 954,723 1,221,761 969,443 540,497 691,956 433,530 996,933 549,303 486,630 979,755 1,490,127 1,796,294 24,733,246 24,335,467 22,929,703 24,509,783 25,631,131 31,378,947 6,063,922 6,030,973 6,233,700 6,772,414 7,119,662 7,683,695 1,475,027 1,521,803 1,588,956 3,550,622 3,672,176 3,743,503 2,473,139 3,377,828 3,504,489 1,456,482 1,565,482 1,623,785 645,596 774,805 634,073 1,024,928 571,170 612,527 2,532,653 2,856,343 2,666,149 35,200,295 34,565,317 38,462,316 32,190,114 33,688,690 35,680,220 2,703,390 2,697,201 3,210,394 45,380,451 48,250,442 50,307,587 50,708,131 50,191,008 55,336,220 $ 70,113,697 $ 72,585,909 $ 73,237,290 $ 75,217,914 $ 75,822,139 $ 86,715,167 $ 678,679 $ 756,586 $ 648,183 $ 765,646 $ 647,010 $ 853,100 1,041,141 1,471,063 1,219,783 1,267,920 1,176,435 1,211,025 199,034 177,802 111,740 94,832 51,986 65,332 931,674 1,051,312 1,071,902 810,476 448,022 1,148,991 32,961 87,842 91,503 57,075 83,785 246,301 1,692,517 1,319,377 1,381,151 1,396,313 3,354,583 1,328,148 1,333,057 3,187,830 1,721,638 1,509,650 3,254,122 5,916,070 5,909,063 8,051,812 6,245,900 5,901,912 9,015,943 10,768,967 7,009,574 6,951,988 7,203,155 7,617,790 7,927,706 8,620,643 1,342,900 1,352,728 1,553,498 1,645,115 1,686,664 1,773,620 1,921,190 2,116,900 2,301,428 2,383,196 2,481,522 2,517,025 477,377 509,365 485,484 510,889 564,699 586,049 2,370,221 2,553,651 2,757,237 2,552,630 2,936,855 3,412,990 34,746,098 36,465,382 39,151,208 38,663,268 38,469,516 41,396,708 - - - 1,200 - - 1,758,131 2,196,626 2,295,004 1,277,596 3,331,984 4,308,960 49,625,491 52,146,640 55,747,014 54,651,684 57,398,946 62,615,995 55,534,554 60,198,452 61,992,914 60,553,596 66,414,889 73,384,962 Continued 153 Net (Expenses) Revenues Governmental activities Business -type activities Total primary government General Revenues and Other Changes in Net Position Governmental activities Taxes Property taxes Sales taxes Other taxes Unrestricted grants and contributions Unrestricted investment earnings Miscellaneous Capital contributions Gain on sale of capital assets Transfers Total governmental activities expenses Business -type activities Unrestricted investment earnings Miscellaneous Capital contributions Gain on sale of capital assets Transfers Total business -type activities expenses Total primary government Change in Net Position Governmental activities Business -type activities Total primary government City of Elk River, Minnesota Statistical Section (Unaudited) Changes in Net Position (Continued) Last Ten Fiscal Years (Accrual Basis of Accounting) Fiscal Year Continued 2012 2013 2014 2015 $ (17,049,774) $ (18,725,333) $ (15,549,055) $ (14,271,809) 3,633,218 3,956,224 3,393,472 5,514,305 $ (13,416,556) $ (14,769,109) $ (12,155,583) $ (8,757,504) $ 11,684,445 $ 10,830,218 $ 10,509,231 $ 10,931,945 125,623 829,112 1,441,259 1,513,621 1,307,662 1,436,135 1,749,886 1,642,098 319,654 (663,762) 1,137,024 512,193 49,470 629,177 29,593 2,796,041 (348,259) (121,172) (313,287) (11,188,695) 1,504,263 1,565,206 1,332,023 297,362 14,642,858 14,504,914 15,885,729 6,504,565 219,950 (243,047) 557,659 259,494 1,260 1,572 29,525 8,899 348,259 121,172 313,287 11,188,695 (1,504,263) (1,565,206) (1,332,023) (297,362) (934,794) (1,685,509) (431,552) 11,159,726 $ 13,708,064 $ 12,819,405 $ 15,454,177 $ 17,664,291 $ (2,406,916) $ (4,220,419) $ 336,674 $ (7,767,244) 2,698,424 2,270,715 2,961,920 16,674,031 $ 291,508 $ (1,949,704) $ 3,298,594 $ 8,906,787 154 Fiscal Year 2016 2017 2018 2019 2020 2021 $ (18,824,183) $ (16,283,655) $ (16,683,803) $ (18,607,871) $ (16,615,188) $ (20,609,980) 4,245,040 3,896,198 5,439,427 3,943,553 7,207,938 7,279,775 $ (14,579,143) $ (12,387,457) $ (11,244,376) $ (14,664,318) $ (9,407,250) $ (13,330,205) $ 11,136,310 $ 11,645,328 $ 12,192,911 $ 13,022,991 $ 13,972,068 $ 14,290,673 - - - 652,665 3,030,938 3,469,146 1,552,499 1,543,086 1,591,663 1,636,333 1,698,040 1,754,189 1,820,248 1,720,932 1,754,373 2,588,461 2,644,469 747,226 311,469 498,235 430,642 1,420,677 1,240,595 (56,944) 29,695 116,012 - - 56,457 522,275 - - - 41,698 - 1,053,072 1,791,690 1,971,250 2,063,638 2,085,300 2,280,880 2,832,128 16,641,911 17,494,843 18,033,227 21,448,125 24,923,447 24,611,765 167,849 231,599 467,294 704,099 716,582 (75,566) 331,973 17,500 2,462 - - 8,280 26,770 (159,879) (1,791,690) (1,971,250) (2,063,638) (2,085,300) (2,280,880) (2,832,128) (1,291,868) (1,722,151) (1,593,882) (1,372,921) (1,537,528) (3,067,573) $ 15,350,043 $ 15,772,692 $ 16,439,345 $ 20,075,204 $ 23,385,919 $ 21,544,192 $ (2,182,272) $ 1,211,188 $ 1,349,424 $ 2,840,254 $ 8,308,259 $ 4,001,785 2,953,172 2,174,047 3,845,545 2,570,632 5,670,410 4,212,202 $ 770,900 $ 3,385,235 $ 5,194,969 $ 5,410,886 $ 13,978,669 $ 8,213,987 Continued 155 City of Elk River, Minnesota Statistical Section (Unaudited) Fund Balances of Governmental Funds Last Ten Fiscal Years (Modified Accrual Basis of Accounting) Fiscal Year 2012 2013 2014 2015 General Fund Nonspendable $ 20,201 $ 14,628 $ 22,725 $ 23,676 Restricted - - - 7,000 Committed 208,486 247,937 317,929 376,943 Assigned 200,000 - - - Unassigned 5,776,627 5,791,725 5,822,948 6,157,179 Total general fund $ 6,205,314 $ 6,054,290 $ 6,163,602 $ 6,564,798 All other governmental funds Nonspendable $ 101,812 $ 99,703 $ 101,910 $ 103,295 Restricted 7,608,842 14,800,868 13,925,683 13,202,500 Committed 2,456,185 4,393,689 5,829,001 8,099,951 Assigned 19,219,810 15,455,671 15,883,279 15,579,524 Unassigned (1,384,984) (2,324,550) (2,527,613) (2,438,049) Total all other governmental funds $ 28,001,665 $ 32,425,381 $ 33,212,260 $ 34,547,221 156 Fiscal Year 2016 2017 2018 2019 2020 2021 $ 20,964 $ 88,038 $ 124,064 $ 187,305 $ 282,860 $ 160,019 266,832 356,174 237,813 - - - 6,470,281 6,853,298 7,299,540 7,684,153 7,967,868 8,590,610 $ 6,758,077 $ 7,297,510 $ 7,661,417 $ 7,871,458 $ 8,250,728 $ 8,750,629 $ 108,176 $ - $ 114,976 $ 62,017 $ 16 $ 432 12,245,679 3,104,196 3,150,743 28,548,680 26,250,482 12,443,162 9,250,014 10,354,648 12,068,614 10,182,700 11,705,506 11,880,096 12,632,948 10,984,072 10,716,044 13,177,577 14,950,419 13,784,749 (2,660,264) (2,627,513) (2,934,515) (2,824,246) (2,652,806) (1,691,896) $ 31,576,553 $ 21,815,403 $ 23,115,862 $ 49,146,728 $ 50,253,617 $ 36,416,543 157 City of Elk River, Minnesota Statistical Section (Unaudited) Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years (Modified Accrual Basis of Accounting) Revenues Property taxes Sales taxes Other taxes Licenses and permits Intergovernmental Charges for services Fines and forfeitures 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 Deficiency of revenues under expenditures Other financing sources (uses) Bonds issued Premium on bonds issued Sale of capital assets Payment to refunding escrow agent Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Debt service as a percentage of non capital expenditures Fiscal Year 2012 2013 2014 2015 $ 11,720,311 $ 10,930,129 $ 10,640,251 $ 10,953,633 125,623 829,112 1,441,259 1,513,621 408,232 513,779 559,286 639,791 1,436,613 1,161,458 838,573 3,913,721 1,659,986 1,926,906 2,091,107 1,761,958 137,819 163,481 160,298 169,459 845,112 764,006 881,271 315,259 319,654 (663,763) 1,146,462 512,193 1,980,207 2,193,571 2,358,709 2,169,789 18,633,557 17,818,679 20,117,216 21,949,424 2,615,582 2,956,500 3,181,547 3,365,570 5,352,249 5,497,493 5,909,653 6,203,211 2,931,726 2,800,012 2,974,219 2,318,123 2,839,466 2,652,817 2,881,985 2,816,411 1,087,467 1,656,922 1,095,535 954,673 10,264,274 5,243,189 2,277,477 5,251,352 2,127,000 2,194,000 1,535,000 1,505,000 1,065,354 1,283,367 1,105,114 1,113,963 28,283,118 24,284,300 20,960,530 23,528,303 (9,649,561) (6,465,621) (843,314) (1,578,879) 8,500,000 9,685,000 115,164 341,700 - - 49,470 686,407 44,827 3,017,674 4,792,943 6,457,233 4,837,016 4,703,787 (3,288,680) (4,892,027) (3,504,993) (4,406,425) 10,168,897 12,278,313 1,376,850 3,315,036 $ 519,336 $ 5,812,692 $ 533,536 $ 1,736,157 19.6% 16.9% 14.1% 14.3% 158 Fiscal Year 2016 2017 2018 2019 2020 2021 $ 11,171,496 $ 11,642,778 $ 12,214,702 $ 13,011,977 $ 13,975,014 $ 14,286,904 - - - 652,665 3,030,938 3,469,146 1,552,499 1,543,086 1,591,663 1,636,333 1,698,040 1,754,189 655,607 1,007,543 790,831 822,899 665,519 1,015,529 1,681,666 3,928,374 1,405,931 1,396,706 3,865,069 8,114,298 1,851,408 2,226,936 2,182,917 1,723,091 1,473,581 2,575,843 167,526 205,456 157,492 166,787 107,018 161,183 456,666 241,304 379,054 58,416 122,000 339,278 311,469 498,235 430,642 1,420,677 1,240,595 (56,944) 1,455,555 2,313,388 2,212,818 3,202,501 2,899,380 3,278,522 19,303,892 23,607,100 21,366,050 24,092,052 29,077,154 34,937,948 3,601,468 3,524,634 3,733,746 4,004,917 4,333,018 4,439,105 6,859,139 6,791,738 7,325,724 7,620,997 7,764,843 8,335,808 1,861,251 1,974,095 1,875,645 2,217,650 2,274,616 2,421,631 2,872,281 2,937,333 3,438,103 2,968,847 3,056,757 3,891,907 949,205 1,122,261 964,926 540,763 693,157 454,657 2,682,358 7,165,286 2,431,103 16,631,953 24,556,635 28,183,763 5,100,000 10,675,000 1,575,000 1,315,000 1,900,000 2,195,000 1,148,535 725,732 507,661 713,023 1,865,033 1,847,335 25,074,237 34,916,079 21,851,908 36,013,150 46,444,059 51,769,206 (5,770,345) (11,308,979) (485,858) (11,921,098) (17,366,905) (16,831,258) 32,715,000 14,775,000 4,805,000 3,234,515 1,364,913 428,885 80,587 116,012 86,586 127,190 432,271 1,053,072 - - - - - (5,625,000) 6,524,537 4,275,797 3,354,035 3,288,938 4,533,426 4,128,325 (4,832,400) (2,304,547) (1,290,397) (1,203,638) (2,252,546) (1,296,197) 1,772,724 2,087,262 2,150,224 38,162,005 18,853,064 3,494,085 $ (3,997,621) $ (9,221,717) $ 1,664,366 $ 26,240,907 $ 1,486,159 $ (13,337,17-3 27.4% 38.4% 10.4% 10.4% 18.1% 15.1% 159 City of Elk River, Minnesota Electric Sales Last Ten Fiscal Years Fiscal Number of Total Year Customers KWlYs Sold Billings 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 2021 12,789 341,047,710 39,719,268 Source: Elk River Municipal Utilities 160 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 Customer 15 City of Elk River, Minnesota Principal Electric Customers Current Year and Nine Years Ago 2021 Percentage Total kWh Total of Total Sold Billings Billings 53,678,400 $ 4,541,252 11.43% 28,219,200 2,420,326 6.09% 5,968,500 612,036 1.54% 4,601,500 449,851 1.13% 4,102,080 363,183 0.91% 3,714,400 382,740 0.96% 3,678,800 349,139 0.88% 3,584,250 329,629 0.83% 2,811,750 262,056 0.66% 2,783,000 256,444 0.65% 2012 Percentage Total kWh Total of Total Sold Billings Billings 53,001,600 $ 4,187,988 14.78% 19,051,200 1,636,213 5.77% 5,063,400 414,856 1.46% 5,496,000 458,759 1.62% 3,629,000 322,837 1.14% 5,335,600 449,358 1.59% 5,292,000 454,374 1.60% 3,574,500 313,422 1.11% 3,096,960 273,280 0.96% 2,958,000 247,109 0.87% Total 113,141,880 $ 9,966,656 25.09% 106,498,260 $ 8,758,196 30.90% Source: Elk River Municipal Utilities Minnesota Statute 13.685 considers data on customers of municipal electric utilities as private data and will no longer be disclosing customer names. 161 City of Elk River, Minnesota Tax Capacity, Market Value and Estimated Actual Value of Taxable Property - Last Ten Fiscal Years 2012 2013 2014 2015 Tax capacity Real property $ 21,946,865 $ 19,969,977 $ 20,047,632 $ 21,060,822 Personal property 344,032 353,390 367,641 366,113 Total tax capacity 22,290,897 20,323,367 20,415,273 21,426,935 Tax increment (698,130) (122,648) (116,513) (198,997) Taxable net tax capacity $ 21,592,767 $ 20,200,719 $ 20,298,760 $ 21,227,938 Total tax capacity rate 47.588% 50.373% 48.544% 47.190% Taxable market value Real property $ 1,775,334,600 $ 1,599,513,500 $ 1,622,624,100 $ 1,735,898,300 Personal property 17,412,900 18,055,900 18,736,600 18,585,200 Taxable market value $ 1,792,747,500 $ 1,617,569,400 $ 1,641,360,700 $ 1,754,483,500 Estimated actual market value of taxable property $ 1,907,992,306 $ 1,758,428,600 $ 1,796,401,800 $ 1,900,894,800 Taxable market value as a percentage of estimated actual market value 93.96% 91.99% 91.37% 92.30% 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. 162 2016 2017 2018 2019 2020 2021 $ 21,850,219 $ 22,672,085 $ 23,858,008 $ 25,796,978 $ 27,658,820 $ 29,276,840 385,056 381,355 384,540 408,699 375,332 396,605 22,235,275 23,053,440 24,242,548 26,205,677 28,034,152 29,673,445 (204,017) (184,717) (196,166) (199,061) (211,066) (263,732) $ 22,031,258 $ 22,868,723 $ 24,046,382 $ 26,006,616 $ 27,823,086 $ 29,409,713 46.170% 46.193% 46.011% 45.907% 46.241% 44.556% $ 1,826,858,800 $ 1,909,814,070 $ 2,026,119,675 $ 2,219,031,172 $ 2,394,547,946 $ 2,558,852,731 19,469,900 19,234,400 19,393,900 20,605,300 18,945,900 20,009,600 $ 1,846,328,700 $ 1,929,048,470 $ 2,045,513,575 $ 2,239,636,472 $ 2,413,493,846 $ 2,578,862,331 $ 1,978,763,900 $ 2,060,082,600 $ 2,178,621,000 $ 2,374,405,900 $ 2,547,475,200 $ 2,707,389,000 93.31% 93.64% 93.89% 94.32% 94.74% 95.25% 163 (THIS PAGE LEFT BLANK INTENTIONALLY) 164 City of Elk River, Minnesota Property Tax Rates Direct and Overlapping Governments Last Ten Fiscal Years City of Elk River Overlapping Rates Total School District Direct & Fiscal Debt Referendum Special Overlapping Year Operating Service Total County Operating Mkt. Value Districts Rates 2011 42.449 3.274 45.723 46.342 43.489 0.188 4.956 140.698 2012 44.925 2.663 47.588 52.014 45.548 0.187 5.296 150.633 2013 47.222 3.151 50.373 54.420 50.058 0.190 5.260 160.301 2014 46.740 1.804 48.544 54.861 51.286 0.156 4.987 159.834 2015 45.433 1.757 47.190 51.979 42.483 0.209 4.779 146.640 2016 44.507 1.663 46.170 50.478 39.268 0.215 4.778 140.909 2017 44.584 1.609 46.193 50.460 36.659 0.219 4.509 138.040 2018 44.474 1.537 46.011 49.356 36.137 0.218 4.269 135.991 2019 44.099 1.808 45.907 47.928 32.865 0.216 2.496 129.412 2020 44.013 2.228 46.241 47.426 34.371 0.320 2.533 130.891 2021 42.452 2.104 44.556 45.835 31.717 0.306 2.328 124.742 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. 165 City of Elk River, Minnesota Principal Taxpayers Current Year and Nine Years Ago 2021 2012 Percentage Percentage Net Tax of Total Net Net Tax of Total Net Taxpayer Capacity Rank Tax Capacity Capacity Rank Tax Capacity Great River Energy $ 993,502 1 3.38% $ 1,235,908 1 5.72% JPM Capital Corporation 662,466 2 2.25 509,102 2 2.36 Target Corp. 454,840 3 1.55 388,730 3 1.80 BRE Retail Residual Owner, LLC 413,068 4 1.40 294,070 4 1.36 Minnegasco 377,940 5 1.29 133,976 10 0.62 Walmart Stores 349,116 6 1.19 282,622 5 1.31 Menards, Inc 249,722 7 0.85 183,200 6 0.85 Elk River Senior Properties LLC 193,602 8 0.66 - - - BIGO-Evans Meadows LLC 170,850 9 0.58 - - - BNSF Railway Company 198,827 10 0.68 - - - Home Depot - - - 138,982 8 0.64 Phoenix Enterprises - - - 151,877 7 0.70 7040 Lakeland Partners LLC - - - 137,310 9 0.64 TOTAL $ 4,063,933 13.83% $ 3,455,777 16.00% Source: Sherburne County Assessor 166 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 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 10,541,718 10,511,527 99.71 2016 10,852,545 10,843,359 99.92 2017 11,397,665 11,362,631 99.69 2018 11,910,489 11,899,143 99.90 2019 12,764,316 12, 706,731 99.55 2020 13,706,747 13,647,883 99.57 2021 13,976,839 13,911,413 99.53 Collections in Subsequent Total Collections to Date Amount $ 99,530 $ 10,692,023 66,936 10,641,016 12,924 10,313,612 27,864 10,539,391 7,950 10,851,309 34,305 11,396,936 8,641 11,907,784 51,878 12,758,609 45,131 13,693,014 - 13,911,413 Percentage of Levy 99.91 99.58 99.98 99.98 99.99 99.99 99.98 99.96 99.90 99.53 167 Fiscal General Year Obligation 2012 $ 26,579,666 $ 2013 35,223,141 2014 34,023,916 2015 32,789,690 2016 29,365,466 2017 18,951,241 2018 17,632,016 2019 16,277,791 2020 31,028,479 2021 29,062,498 City of Elk River, Minnesota Ratios of Outstanding Debt by Type Last Ten Fiscal Years Governmental Activities Business -Type Activities General General Aligation Special Obligation Revenue Notes Revenue Assessment Other Revenue Bonds Pavable $ 4,035,306 $ 1,410,000 $ 4,791,567 $ 5,085,000 $ 1,975,812 1,633,459 1,410,000 4,027,478 4,340,000 1,789,224 1,246,612 1,410,000 12,868,388 3,634,845 1,599,876 924,765 1,410,000 12,564,299 3,020,935 1,408,368 607,918 - 11,858,552 12,462,779 1,214,076 296,071 11,132,723 11,781,983 1,018,860 - 10,381,894 21,528,442 820,608 35,913,322 9,233,625 21,004,411 619,692 35,235,066 16,053,687 19,741,758 415,740 34,301,810 16,737,477 31,305,891 209,124 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. Total Percentage Primary of Personal Per Government Income" Capita` $ 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% 4,004 111,616,800 12.50% 4,320 169 City of Elk River, Minnesota Ratios of General Bonded Debt Outstanding Last Ten Fiscal Years Less Amounts Less Percentage Net General Restricted Cash with Net of Net Bonded Bonded Fiscal Bonded for Debt Fiscal Bonded Debt to Tax Debt per Year Debt' Service Agent Debt Capacity` Capita' 2012 $ 23,286,667 $ 3,044,599 $ - $ 20,242,068 93.74% $ 875 2013 32,141,667 2,329,723 9,712,875 20,099,069 99.50% 860 2014 31,001,667 1,599,852 9,580,144 19,821,671 97.65% 838 2015 28,986,667 1,154,728 9,423,440 18,408,499 86.72% 771 2016 25,728,333 1,556,232 9,284,303 14,887,798 67.58% 611 2017 15,331,667 1,608,880 - 13,722,787 60.01% 559 2018 14,220,000 1,473,230 - 12,746,770 53.01% 512 2019 13,076,667 1,553,879 - 11,522,788 44.31% 456 2020 26,676,667 7,510,704 - 19,165,963 68.89% 749 2021 24,646,667 2,019,928 - 22,626,739 76.94% 876 Note: Details regarding the city's outstanding debt can be found in the notes to the financial statements. I Only includes debt supported by tax levy. 2 See the Schedule of Tax Capacity, Market Value and Estimated Actual Value of Taxable Property for property value data. Population data can be found in the Schedule of Demographic and Economic Statistics 170 City of Elk River, Minnesota Direct and Overlapping Governmental Activities Debt December 31, 2021 Percent of Debt City's Outstanding Applicable Share Debt to City' of Debt Direct Debt: City of Elk River $ 63,364,308 100.00% $ 63,364,308 Overlapping Debt: Sherburne County 40,125,000 25.75% 10,332,414 School District #728 302,775,000 29.21% 88,440,578 Total overlapping debt 342,900,000 98,772,992 Total direct and overlapping debt $ 406,264,308 $ 162,137,300 Debt Ratios: Ratio of debt per capita (25,835 population) $6,336 Ratios of debt to taxable market value of $2,578,862,331 6.72% Source: Sherburne County and School District #728 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. 171 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 City of Elk River, Minnesota Legal Debt Margin Information Last Ten Fiscal Years 2012 2013 2014 2015 2016 $ 58,316,472 $ 52,752,858 $ 53,892,054 $ 57,026,844 $ 59,362,917 23,286,667 32,141,667 30,071,667 28,986,667 25,706,667 1,202,093 10,819,006 10,743,409 10,673,852 10,560,614 22,084,574 21,322,661 19,328,258 18,312,815 15,146,053 $ 36,231,898 $ 31,430,197 $ 34,563,796 $ 38,714,029 $ 44,216,864 37.87% 40.42% 35.86% 32.11% 25.51% Note: Under state law, the City of Elk River's outstanding general obligation debt should not exceed 3 percent of the market value of taxable property. By law, the general obligation debt subject to the limitation may be offset by amounts set aside for the extinguishment of those obligations. I 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. 172 2017 2018 2019 2020 2021 $ 61,802,478 $ 65,358,630 $ 71,232,177 $ 76,424,256 $ 77,365,870 15,331,667 14,220,000 13,076,667 26,676,667 24,646,667 1,377,746 1,457,117 1,528,399 7,511,416 1,780,459 13,953,921 12,762,883 11,548,268 19,165,251 22,866,208 $ 47,848,557 $ 52,595,747 $ 59,683,909 $ 57,259,005 $ 54,499,662 22.58% 19.53% 16.21% 25.08% 29.56% Legal Debt Margin Calculation for Fiscal Year 2021 Estimated taxable market value $ 2,578,862,331 Debt limit (3% of market value) $ 77,365,870 Debt applicable to limit: G.O. capital improvement bonds 19,580,000 G.O. EDA bonds 5,066,667 Less: Cash and investments in related debt service funds (1,780,459) Total net debt applicable to limit 22,866,208 Legal debt margin $ 54,499,662 173 City of Elk River, Minnesota Pledged -Revenue Coverge Last Ten Fiscal Years Revenue Bonds' Net Fiscal Gross Operating Revenue Debt Service Year Revenue' Expenses' Available Principal Interest Coverage 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 1,023,466 3.31 2021 46,397,754 38,450,863 7,946,891 1,915,000 863,514 2.86 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 ` Gross revenue excludes interest income, connection fees and miscellaneous revenues Expenses exclude depreciation, interest on bonds and miscellaneous expenses 174 Special Assessment Bonds Special Assessment Debt Service Collections Prmcipal Interest Coverage $ 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 - - - 0.00 175 Fiscal Year 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 City of Elk River, Minnesota Demographic and Economic Statistics Last Ten Fiscal Years Personal Income Population' (in thousands) 23,147 $ 696,794 $ 23,370 691,962 23,730 767,666 23,987 782,528 24,368 815,597 24,567 832,784 24,891 854,433 25,243 875,452 25,590 895,676 25,835 893,090 Data Sources: ' State Demographer 2 Bureau of Economic Analysis 3 US Census Bureau 4 School District Per Capita Median School Unemployment Incomez Age3 Enrolhnent4 Rates 30,103 34 13,255 6.4% 29,609 35 13,367 5.5% 32,350 36 13,627 4.1% 32,623 35 13,751 4.0% 33,470 36 14,077 3.4% 33,899 36 14,294 4.0% 34,327 36 14,448 3.8% 34,681 36 14,623 3.9% 35,001 36 14,280 4.9% 34,569 37 14,169 3.7% 5 Minnesota Department of Employment and Economic Development na - not available 176 City of Elk River, Minnesota Principal Employers Current Year and Nine Years Ago 2021 2012 Percentage Percentage of Total City of Total City Employer Employees Rank Employment Employees Rank Employment Independent School District 728 1 2,100 1 16.28% 1,573 1 13.93% Sherburne County 697 2 5.40% 578 2 5.12% Guardian Angels of Elk River 374 3 2.90% 317 4 2.81% Walmart 354 4 2.74% 380 3 3.37% City of Elk River 239 5 1.85% 207 6 1.83% Great River Energy 210 6 1.63% 223 5 1.98% Sportech, Inc. 185 7 1.43% - - - Menards 173 8 1.34% 150 8 1.33% Tescom Corporation 170 9 1.32% 174 7 1.54% First National Financial Services 142 10 1.10% - - - E & O Tool & Plastics, Inc - - - 141 10 1.25% Elk River Ford - - 147 9 1.30% Total 4,644 35.99% 3,890 34.46% Total Employment 2 12,903 11,290 1 Total District 2 Minnesota Department of Employment and Economic Development 177 (THIS PAGE LEFT BLANK INTENTIONALLY) 178 City of Elk River, Minnesota Full -Time Equivalent Employees by Function Last Ten Fiscal Years Function 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 General government 25.8 26.9 28.3 29.3 29.3 29.3 30.3 29.3 29.8 29.9 Public safety: Police Officers 31.0 31.0 31.0 32.0 32.0 32.0 34.0 34.0 34.0 34.0 Civilians 8.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 10.0 10.0 Fire Fire administration 1.7 1.7 2.7 3.0 3.0 3.0 3.0 5.0 5.0 5.0 Paid on -call volunteers 40.0 40.0 40.0 44.0 44.0 44.0 45.0 45.0 45.0 45.0 Other public safety 8.4 8.6 9.0 9.0 9.0 9.0 9.0 7.0 7.0 7.0 Public works 15.5 15.0 15.0 15.0 15.0 15.0 15.0 16.0 15.5 16.6 Culture and recreation 18.5 18.5 18.5 17.5 17.5 17.8 18.3 18.6 19.7 23.6 Economic development 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 Municipal liquor 13.0 13.0 13.0 13.0 13.0 13.0 13.0 13.5 13.5 13.5 Sewer 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 7.0 Storm Water - - - 1.0 1.0 1.0 1.0 1.0 1.0 0.0 Water 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.5 Electric 30.0 31.0 31.0 34.0 34.0 34.0 34.0 36.0 36.0 37.0 Total 207.9 210.7 213.5 222.8 222.8 223.1 227.6 230.4 232.5 239.1 Source: City of Elk River Finance Department 179 City of Elk River, Minnesota Operating Indicators by Function Last Ten Fiscal Years Function 2012 2013 2014 2015 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 K"s) Sources: Various city departments 2016 2017 2018 2019 56 71 85 118 138 122 103 102 20,451 20,676 21,585 21,930 24,728 26,329 27,061 26,209 1,840 1,925 1,930 2,778 2,818 3,294 2,309 2,575 355 446 411 436 442 473 483 497 1,683 1,866 1,956 1,722 1,804 2,245 2,316 2,466 $ 25,585 $38,440 $47,037 $ 57,965 $51,368 $106,983 $66,048 $70,313 1,811 1,652 1,888 1,824 1,520 1,314 991 1,000 1,675 4,263 5,872 3,018 3,368 3,812 5,122 4,200 5,051 5,125 5,210 3,575 3,688 4,196 5,140 5,100 26,803 27,065 27,330 27,348 27,452 27,608 27,637 33,522 4,752 4,736 4,568 5,469 4,583 4,518 4,459 4,234 1,200 1,203 1,200 1,200 1,300 1,300 1,300 1,300 4,542 4,613 4,676 4,672 4,903 5,011 5,140 5,256 2,321 2,152 2,143 2,192 2,196 2,159 2,254 2,133 9,285 9,358 9,449 10,499 10,816 11,448 11,983 12,244 749 795 790 773 837 878 931 922 11:E 2020 2021 126 89 24,083 25,449 1,570 2,339 497 577 2,701 2,747 $81,056 $137,788 1,100 950 3,900 4,160 5,200 5,440 12,285 36,752 2,108 1,870 1,350 1,350 5,320 5,430 2,391 2,677 12,365 12,789 923 953 181 City of Elk River, Minnesota Capital Asset Statistics by Function Last Ten Fiscal Years Function 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Public safety Police: Stations 1 1 1 1 1 1 1 1 1 1 Patrol units 12 12 12 13 13 13 14 14 14 14 Fire Stations 2 2 2 2 2 2 2 2 2 2 Public works Streets (miles) 151 151 151 151 155 155 155 155 157 160 Culture and recreation Parks 45 45 46 46 46 46 46 401 40 40 Parks acreage 988 988 1,392 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 82 87 Lift stations 21 21 21 21 21 21 21 21 22 23 Maximum daily treatment capacity 2,200 2,200 2,200 2,200 4,500 4,500 4,500 4,500 4,500 4,500 (thousands of gallons) Water Maximum daily capacity 10,000 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. 1 Several smaller parks were consolidated into Woodland Trails Regional Park 182 berganKDV City of Elk River Sherburne County, Minnesota Communications Letter December 31, 2021 bergonkdv.com 11 DO MORE. City of Elk River Table of Contents Report on Matters Identified as a Result of the Audit of the Basic Financial Statements Required Communication Financial Analysis 3 91 Emerging Issue 24 Report on Matters Identified as a Result of the Audit of the Basic Financial Statements Honorable Mayor, Members of the City Council, and Management City of Elk River Elk River, Minnesota In planning and performing our audit of the basic financial statements of the governmental activities, business -type activities, the aggregate discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Elk River, Minnesota, as of and for the year ended December 31, 2021, 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, we considered the City'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 the City's internal control. Accordingly, we do not express an opinion on the effectiveness of the City's internal control over financial reporting. Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and, therefore, material weaknesses or significant deficiencies may exist that have not been identified. In addition, because of inherent limitations in internal control, including the possibility of management override of controls, misstatements due to error, or fraud may occur and not be detected by such controls. 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 over financial reporting, such that there is a reasonable possibility that a material misstatement of the City's basic financial statements will not be prevented, or detected and corrected, on a timely basis. A reasonable possibility exists when the likelihood of an event occurring is either reasonably possible or probable as defined as follows: • Reasonably possible. The chance of the future event or events occurring is more than remote but less than likely. • Probable. The future event or events are likely to occur. We did not identify any deficiencies in internal control that we consider to be material weaknesses. 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. BERGANKDV, LTD. I BERGANKDV.COM I DO MORE. The accompanying memorandum also includes financial analysis provided as a basis for discussion. The matters discussed herein were considered by us during our audit and they do not modify the opinion expressed in our Independent Auditor's Report dated May 31, 2022, on such statements. This communication, which is an integral part of our audit, is intended solely for the information and use of the Members of the City Council and management and others within the City and state oversight agencies and is not intended to be, and should not be, used by anyone other than these specified parties. $ •.Kos, L,:1. Minneapolis, Minnesota May 31, 2022 BERGANKDV, LTD. I BERGANKDV.COM I DO MORE. 2 City of Elk River Required Communication We have audited the basic financial statements of the governmental activities, business -type activities, the aggregate discretely presented component unit, each major fund, and the aggregate remaining fund information of the City as of and for the year ended December 31, 2021. Professional standards require that we advise you of the following matters related to our audit. Our Responsibility in Relation to the Financial Statement Audit As communicated in our engagement letter, our responsibility, as described by professional standards, is to form and express opinions about whether the basic financial statements prepared by management with your oversight are presented fairly, in all material respects, in accordance with accounting principles generally accepted in the United States of America. Our audit of the basic financial statements does not relieve you or management of its respective responsibilities. Our responsibility, as prescribed by professional standards, is to plan and perform our audit to obtain reasonable, rather than absolute, assurance about whether the basic financial statements are free of material misstatement. An audit of the basic financial statements includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control over financial reporting. Accordingly, as part of our audit, we considered the internal control of the City solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control. We are also responsible for communicating significant matters related to the audit that are, in our professional judgement, relevant to your responsibilities in overseeing the financial reporting process. However, we are not required to design procedures for the purpose of identifying other matters to communicate to you. Generally accepted accounting principles provide for certain Required Supplementary Information (RSI) to supplement the basic financial statements. Our responsibility with respect to the RSI, which supplements the basic financial statements, is to apply certain limited procedures in accordance with generally accepted auditing standards. However, the RSI was not audited and, because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance, we do not express an opinion or provide any assurance on the RSI. Our responsibility for the supplementary information accompanying the basic financial statements, as described by professional standards, is to evaluate the presentation of the supplementary information in relation to the basic financial statements as a whole and to report on whether the supplementary information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. Our responsibility with respect to the other information in documents containing the audited basic financial statements and auditor's report does not extend beyond the basic financial information identified in the report. We have no responsibility for determining whether this other information is properly stated. This other information was not audited and we do not express an opinion or provide any assurance on it. 3 City of Elk River Required Communication Our Responsibility in Relation to Government Auditing Standards As communicated in our engagement letter, part of obtaining reasonable assurance about whether the basic financial statements are free of material misstatement, we performed tests of the City's compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of basic financial statement amounts. However, the objective of our tests was not to provide an opinion on compliance with such provisions. Planned Scope and Timing of the Audit We conducted our audit consistent with the planned scope and timing we previously communicated to you. Compliance with All Ethics Requirements Regarding Independence The engagement team, others in our firm, as appropriate, our firm, and our network firms have complied with all relevant ethical requirements regarding independence. Significant Risks Identified We have identified the following significant risks of material misstatement: • Risk of improper revenue recognition • Risk related to segregation of accounting duties • Risk of management override of internal control • Risk of misappropriation of assets Qualitative Aspects of the City's Significant Accounting Practices Significant Accounting Policies Management has the responsibility to select and use appropriate accounting policies. A summary of the significant accounting policies adopted by the City is included in the notes to basic financial statements. There have been no initial selection of accounting policies and no changes to significant accounting policies or their application during 2021. No matters have come to our attention that would require us, under professional standards, to inform you about (1) the methods used to account for significant unusual transactions and (2) the effect of significant accounting policies in controversial or emerging areas for which there is a lack of authoritative guidance or consensus. Significant Accounting Estimates Accounting estimates are an integral part of the basic financial statements prepared by management and are based on management's current judgements. Those judgements are normally based on 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 basic financial statements and because of the possibility that future events affecting them may differ markedly from management's current judgements. M City of Elk River Required Communication Qualitative Aspects of Significant Accounting Practices (Continued) Significant Accounting Estimates (Continue) The most sensitive estimates affecting the basic financial statements are: Depreciation — The City is currently depreciating its capital assets over their estimated useful lives, as determined by management, using the straight-line method. Expense Allocation — Certain expenses are allocated to programs based on an estimate of the benefit to that particular program. Examples are salaries, benefits, and supplies. Total Other Post Employment Benefits (OPEB) Liability, Deferred Outflows of Resources Related to OPEB and Deferred Inflows of Resources Related to OPEB — These balances are based on an actuarial study using the estimates of future obligations of the City for post employment benefits. Net Pension Liability, Deferred Outflows of Resources Related to Pensions and Deferred Inflows of Resources Related to Pensions — These balances are based on an allocation by the pension plans using estimates based on contributions. We evaluated the key factors and assumptions used to develop the accounting estimates and determined that they are reasonable in relation to the basic financial statements taken as a whole and in relation to the applicable opinion units. Financial Statement Disclosures Certain basic financial statement disclosures involve significant judgment and are particularly sensitive because of their significance to financial statement users. The basic financial statement disclosures are neutral, consistent, and clear. Significant Difficulties Encountered during the Audit We encountered no significant difficulties in dealing with management relating to the performance of the audit. Uncorrected and Corrected Misstatements For the purposes of this communication, professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that we believe are trivial, and communicate them to the appropriate level of management. Further, professional standards require us to also communicate the effects of uncorrected misstatements related to prior periods on the relevant classes of transactions, account balances or disclosures, and the basic financial statements taken as a whole and each applicable opinion unit. Management did not identify and we did not notify them of any uncorrected financial statement misstatements. In addition, professional standards require us to communicate to you all material, corrected misstatements that were brought to the attention of management as a result of our audit procedures. 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 basic financial statements taken as a whole. 5 City of Elk River Required Communication Disagreements with Management For purposes of this letter, professional standards define a disagreement with management as a matter, whether or not resolved to our satisfaction, concerning a financial accounting, reporting, or auditing matter, which could be significant to the City's basic financial statements or the auditor's report. No such disagreements arose during the course of our audit. Representations Requested from Management We have requested certain written representations from management, which are included in the management representation letter. Management's Consultations with Other Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters. Management has informed us that, and to our knowledge, there were no consultations with other accountants regarding auditing and accounting matters. Other Significant Matters, Findings, or Issues In the normal course of our professional association with the City, we generally discuss a variety of matters, including the application of accounting principles and auditing standards, significant events or transactions that occurred during the year, operating and regulatory conditions affecting the City, and operational plans and strategies that may affect the risks of material misstatement. None of the matters discussed resulted in a condition to our retention as the City's auditor. Other Information Included in Annual Reports Pursuant to professional standards, our responsibility as auditors for other information, whether financial or nonfinancial, included in the City's annual reports, does not extend beyond the information identified in the audit report, and we are not required to perform any procedures to corroborate such other information. We applied certain limited procedures to the RSI that supplements the basic financial statements. Our procedures consisted of inquiries of management regarding 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 did not audit the RSI and do not express an opinion or provide any assurance on the RSI. With respect to the supplementary information accompanying the financial statements, 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, 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 basic financial statements or to the basic financial statements themselves. We were not engaged to report on the other information accompanying the basic financial statements but are not RSL Such information has 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 it. C01 City of Elk River Required Communication Other Information Included in Annual Reports (Continued) Our responsibility also includes communicating to you any information which we believe is a material misstatement of fact. Nothing came to our attention that caused us to believe that such information, or its manner of presentation, is materially inconsistent with the information, or manner of its presentation, appearing in the basic financial statements. 7 City of Elk River Financial Analysis The following pages provide graphic representations of select data pertaining to the financial position and operations of the City for the past five years. Our analysis of each graph is presented to provide a basis for discussion of past performance and how implementing certain changes may enhance future performance. We suggest you view each graph and document if our analysis is consistent with yours. A subsequent discussion of this information should be useful for planning purposes. General Fund — Fund Balance The following graph illustrates the relationship between cash and investments and fund balance over the past five years. At December 31, 2021, the General Fund balance consisted of $160,019 nonspendable and $8,590,610 unassigned. The total unassigned fund balance represented over six months of expenditures at current levels. The Office of the State Auditor has issued a statement of position recommending cities maintain an unreserved fund balance of approximately 35% to 50% of fund operating revenues, or no less than five months of operating expenditures. The City's fund balance policy for the General Fund identifies a minimum unassigned fund balance of 40-45% of budgeted operating expenditures. Based on the 2022 budgeted expenditures of $18,913,650, the City's unassigned General Fund balance was at 45% at December 31, 2021. $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 Cash and Investments and Fund Balance $8,750,6291 $7,661,4171 2017 2018 2019 2020 2021 Fund Balance -4— Cash and Investment Balance On the following pages, we will discuss the revenues and expenditures of the General Fund and the variations in the fund balance. M City of Elk River Financial Analysis General Fund — Revenues and Expenditures The following table and graph show the overall operations of the General Fund. Revenues have fluctuated over the five years shown from a high in 2021 of $15,633,492 to a low of $13,124,692 in 2017. Overall, from 2017 to 2021, revenues have increased $2,508,800. Revenues increased by $976,798 when comparing 2021 to 2020. Similarly, expenditures have fluctuated over the five years presented. In 2021, expenditures were $16,829,600, an increase from the prior year of $1,214,919. Since 2017, expenditures have increased $2,969,638. $18,000,000 $16,000,000 $14,000,000 $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $0 Revenues and Expenditures r 3,859,962 4,742, 5,490,503 614,6%81 6,829,6M00 2017 2018 2019 2020 2021 ■ Total Revenues ■ Total Expenditures I City of Elk River Financial Analysis General Fund — Revenues The following graph presents comparisons of revenues by type, illustrating the majority of revenue for the City is from taxes, representing 80.2% of total General Fund revenues. Other revenues include items such as fines and forfeitures, investment earnings, and other miscellaneous items. Revenues of the General Fund increased from 2020 to 2021 by $976,798, or 6.7%. Tax revenue had the largest increase of $403,994 based on the increase in taxes levied for the fund. Licenses and permits increased $350,010 based on increased permit revenue, most notably building permits along with plumbing and heating permits. Charges for services increased $257,189 due to an uptick in revenue from plan check fees and police services. Other sources of revenue had relatively minor fluctuations when compared to the prior year. General Fund Revenues $14,000,000 $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $ 2017 2018 2019 2020 2021 ■Charges for Services $1,033,053 $960,294 $944,297 $820,666 $1,077,855 ■ Other 450,334 413,168 663,548 369,125 426,864 ■Licenses and Permits 1,007,543 790,831 822,899 665,519 1,015,529 ■ Intergovernmental 546,362 578,324 618,488 674,061 581,927 ■ Taxes 10,087,400 10,646,232 11,330,080 12,127,323 12,531,317 10 City of Elk River Financial Analysis General Fund — Expenditures The graph below represents the breakdown of expenditures by department. Public safety continues to comprise the largest portion of General Fund expenditures, representing 49.2%. Overall, General Fund expenditures increased $1,214,919, or 7.8%, from 2020. Public safety expenditures increased $770,099 with higher salaries and benefits due to personnel vacancies in 2020. Public works increased $195,940 when compared to the prior year with increases in personnel costs along with additional operating supply needs. General government expenditures increased $137,104 with increased wages for employees also related to staffing vacancies in the prior year. General Fund Expenditures .pGV,VVV,VVV $15,000,000 $10,000,000 $5,000,000 $ 2017 2018 2019 2020 2021 ■ Culture and Recreation $1,913,809 $2,044,286 $2,107,192 $1,941,732 $2,015,790 ■Public Works 1,866,693 1,796,844 2,103,742 2,132,913 2,328,853 ■ Public Safety 6,723,602 7,269,887 7,422,080 7,503,513 8,273,612 ■ General Government 3,355,858 3,631,936 3,857,489 4,036,523 4,173,627 11 City of Elk River Financial Analysis General Fund — Budgetary Comparison Variance With Final Original and Actual Budget - Final Budget mounts Revenues Property taxes $12,315,000 $12,297,572 $ (17,428) Other taxes 150,000 233,745 83,745 Licenses and permits 778,500 1,015,529 237,029 Intergovernmental 602,500 581,927 (20,573) Charges for services 950,400 1,077,855 127,455 Fines and forfeitures 120,000 127,266 7,266 Miscellaneous revenues 236,500 299,598 63,098 Total revenues 15,152,900 15,633,492 480,592 Expenditures General government 4,256,750 4,173,627 (83,123) Public safety 8,378,550 8,273,612 (104,938) Public works 2,413,400 2,328,853 (84,547) Culture and recreation 2,058,800 2,015,790 (43,010) Capital outlay 53,000 37,718 (15,282) Total expenditures 17,160,500 16,829,600 (330,900) Excess of revenues over (under) disbursements (2,007,600) (1,196,108) 811,492 Other Financing Sources (Uses) Net transfers 2,007,600 1,696,009 (311,591) Net change in fund balances $ - $ 499,901 $ 499,901 The City had a balanced budget in 2021 with anticipated revenues and net transfers equaling budgeted expenditures of $17,160,500. Overall, actual revenue was $480,592, or 3.2%, over budget. Licenses and permits revenue was $237,029 over budget due to receiving higher building and plumbing and heating permit revenue than anticipated. The charges for services category was $127,455 over budget related to plan check fees and police services. All other revenue categories were relatively consistent with the budget. Overall, actual expenditures were less than budgeted amounts by $330,900, or 1.9%. All of the departments came in under their respective budgeted amounts. Culture and recreation came in under budget by $43,010 due to the impact of COVID-19 on operations. Public safety was $104,938 under budget based on personnel vacancies and less operational expenditures than anticipated. General government expenditures were less than anticipated due to personnel vacancies. All other expenditure categories were less than anticipated. 12 City of Elk River Financial Analysis Sewer Operations The following graph illustrates the current operations of the Sewer Fund for the past five years. Operating income is shown with and without depreciation below. Operating revenue increased $35,503, or 1.4%, from 2020. Operating expenses increased by $73,286, or 2.2%. The net effect of the increased revenues and expenses is an operating loss of $900,479 for the year. When not including depreciation in the calculation, the Sewer Fund had an operating income of $739,615. Enterprise funds may be used to account for any activity in which a fee is charged. It is not required to have the fee support the entire activity; however, the basic premise in establishing an enterprise fund is that the activity will be operated similar to a business. Therefore, it is expected the enterprise fund would at least be able to meet its obligations currently and into the future. Sewer Operations �Y,VVV,VVV $3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $- $(500,000) $(1,000,000) $(1,500,000) 2017 2018 2019 2020 2021 ❑ Operating Revenues $2,116,900 $2,246,794 $2,383,196 $2,481,522 $2,517,025 ■ Operating Expenses 3,116,398 3,251,292 3,305,817 3,344,218 3,417,504 ❑Operating Income without Depreciation 569,124 634,963 721,838 773,717 739,615 ■Operating Loss (999,498) (1,004,498) (922,621) (862,696) (900,479) 13 Sewer Fund $16,000,000 $14,000,000 $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 ■ Cash and Investments ■ Unrestricted Net Position City of Elk River Financial Analysis Sewer Fund 2017 2018 2019 2020 2021 $3,778,728 $4,383,877 $5,245,861 $13,476,183 $14,540,459 3,514,216 4,529,146 5,261,879 6,602,622 7,726,366 The above graph shows the cash and investment and unrestricted net position balances as of December 31 for the last five years. The Sewer Fund cash and investment balance has increased $10,761,731 since 2017. The cash and investment balance increased $1,064,276 during 2021 while the unrestricted net position for the Sewer Fund increased $1,123,744 during the same time period. 14 City of Elk River Financial Analysis Garbage Operations The following graph illustrates the current operations of the Garbage Fund for the past five years. The Garbage Fund has shown an operating income in each of the last three years presented. In 2021, the Fund showed an operating income of $149,835. This is an increase in operating income of $28,653 from 2020. The Fund experienced an increase in operating revenue of $86,956 with increased rates, while sewer operating expenses increased $58,303 due to increased contractual service expenses based on garbage customer charges. Garbage Operations $1,800,000 $1,600,000 $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $0 2017 2018 2019 2020 2021 ■ Operating Revenues $1,352,728 $1,553,498 $1,645,115 $1,686,664 $1,773,620 ■ Operating Expenses 1,521,803 1,588,956 1,456,482 1,565,482 1,623,785 ■ Operating Income without Depreciation (169,075) (35,458) 188,633 121,182 149,835 ■Operating Income (Loss) (169,075) (35,458) 188,633 121,182 149,835 15 Garbage Fund City of Elk River Financial Analysis Garbage Fund The graph above shows the cash and investment and unrestricted net position balances as of December 31 for the last five years. The Garbage Fund cash and investment balance has increased $283,249 since 2017. In 2021, the Garbage Fund cash and investment balance increased $85,500 while the unrestricted net position increased $92,927 based on positive operations during the year. 16 City of Elk River Financial Analysis Storm Water Operations The following graph illustrates the current operations of the Storm Water Fund for the past five years. Operating revenue increased $21,350 in 2021 while expenses increased $41,357 with higher contractual service charges. The net effect of the changes in revenues and expenses is an operating loss of $26,478. The Fund had operating income of $440,918 when excluding depreciation. Storm Water Operations $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $(200,000) $(400,000) $(600,000) 2017 2018 2019 2020 2021 ■ Operating Revenues $509,365 $485,484 $510,889 $564,699 $586,049 ■ Operating Expenses 774,805 634,073 1,024,928 571,170 612,527 ■ Operating Income without Depreciation 187,388 308,889 (56,562) 456,587 440,918 ■Operating Loss (265,440) (148,589) (514,039) (6,471) (26,478) 17 City of Elk River Financial Analysis Storm Water Fund Storm Water Fund $1 600 000 $1,400,000 $1,200,000 $1,000,000 $800,000 S600,000 $400,000 $200,000 $_ LtE 2017 2018 2019 2020 2021 ■C.Z_-dImestments $430,083 $791,886 $730,463 $1,179,754 $1,433,529 ■ Unrestricted Net Position 409,910 723,564 691,640 1,181,615 1,488,809 As of December 31, 2021, the Storm Water Fund had an ending net cash and investment balance of $1,433,529. This is an increase of $253,775 compared to 2020. Unrestricted net position at year-end was $1,488,809 and also increased $307,194 compared to the prior year. 18 City of Elk River Financial Analysis Municipal Liquor Operations The following graph illustrates the current operations of the Municipal Liquor Fund for the past five years. Sales increased $689,791 in 2021 while expenses increased $555,767. The net effect of the changes in revenues and expenses is operating income of $936,948, an increase of $128,904 compared to 2020. Municipal Liquor Operations $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $ 2017 2018 2019 2020 2021 ■ Gross Profit $2,022,237 $2,081,377 $2,215,089 $2,245,745 $2,379,769 ■ Operating Expenses 1,105,442 1,114,046 1,372,517 1,440,451 1,448,717 ■ Operating Income without Depreciation 1,040,201 1,088,641 968,662 904,042 1,031,887 ■ Operating Income 921,015 969,455 845,376 808,044 936,948 19 City of Elk River Financial Analysis Municipal Liquor Fund Municipal Liquor Fund $6 000 000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $ 2017 2018 2019 2020 2021 ■Cash and Investments $3,754,059 $4,150,475 $4,649,254 $5,023,743 $4,713,463 ■ Unrestricted Net Position 3,860,570 4,296,260 4,732,801 5,111,153 5,005,721 As of December 31, 2021, the Municipal Liquor Fund had an ending net cash and investment balance of $4,713,463. This is a decrease of $310,208 compared to 2020. Unrestricted net position at year-end was $5,005,721, a decrease of $105,432 compared to the prior year. Both balances decreased as transfers out of $1.0 million were made out of the Municipal Liquor Fund for 2021. Rol City of Elk River Financial Analysis Governmental Activities The tables below and on the following page illustrate the City's various sources of revenue and expenditures per capita over a two-year period in comparison to 2020 data for Minnesota cities ranked by various sizes. nmental Funds Revenue erCapita with State -Wide Averages by Population Class State -Wide* City of El7River** Year December 31, 2020 2019 2020 2 Population sq, 2,500-10,000 10,000-20,000 20,000-100,000 25,243 25,590 25,835 Property taxes $ 540 $ 517 $ 537 $ 506 $ 536 $ 540 Tax increments 34 33 44 10 10 13 Franchise fees and other taxes 49 61 45 91 185 202 Special assessments 54 39 54 2 5 13 Licenses and permits 36 39 46 33 26 39 Intergovernmental revenues 474 367 273 55 151 314 Charges for services 112 89 90 68 58 100 Other 83 69 69 190 166 126 Total revenue $ 1,382 $ 1,214 $ 1,158 $ 955 $ 1,137 $ 1,347 State-wide data obtained from the Office of the State Auditor's 2020 Minnesota City Finances Report. Comparative data for 2021 is not yet available. ** Population range was estimated based on latest available data. The City traditionally receives sizeable tax revenue, including sales tax, and thus has consistently shown higher tax revenues per capita compared to the state averages. The City received significant funding through the Municipal State Aid Street program in 2021, which contributed to the increase in intergovernmental revenue per capita for the current year. 21 Governmental Activities (Continued) Year Population Current General governme Public safety Public works Parks and recreation Other Total current Capital outlay and construction City of Elk River Financial Analysis Governmental Funds Expenditures Per Capita with State -Wide Averages by Population Class State -Wide* City of Elk River** December 31, 2020 2019 2020 :::::Ij 10,000 10,000-20,000 20,000-100,000 25,243 25,590 25,835 $ 176 $ 140 $ 118 $ 159 $ 169 $ 172 315 288 320 302 303 323 147 122 112 88 89 94 100 112 95 118 119 146 96 108 104 21 27 12 $ 834 $ 770 $ 749 $ 688 $ 707 $ 747 $ 585 $ 428 $ 331 $ 659 $ 960 $ 1,095 Debt service Principal $ 172 $ 149 $ 91 $ 52 $ 74 $ 85 Interest and fiscal 45 42 33 28 73 72 Total debt service $ 217 $ 191 $ 124 $ 80 $ 147 $ 157 * State-wide data obtained from the Office of the State Auditor's 2020 Minnesota City Finances Report. Comparative data for 2021 is not yet available. ** Population range was estimated based on latest available data.. Overall, governmental expenditures increased $189 on a per capita basis when comparing 2021 to 2020. Current expenditures were similar to state-wide averages. The increase was primarily a result of increased capital and park and recreation expenditures in 2021. 22 City of Elk River Financial Analysis Governmental Activities (Continued) The chart below presents the minimum annual principal payments required to retire long-term liabilities. Debt Service Funds -Maturities D 7,VVV,VVV 88,000,000 P,000,000 66,000,000 65,000,000 64,000,000 63,000,000 s2,000,000 s1,000,000 $ 2022 2023 2024 2025 2026 2027-2031 2032-2036 2037-2041 2042-2046 ■YMCA $550,000 $565,000 $575,000 $590,000 $605,000 $3,260,000 $1,455,000 $0 $0 ■Sales Tax 845,000 890,000 935,000 1,000,000 1,030,000 5,940,000 7,125,000 8,165,000 5,430,000 ■GovtBldgs 870,000 1,510,000 895,000 940,000 985,000 5,560,000 4,270,000 3,760,000 790,000 23 City of Elk River Emerging Issue Executive Summary The following is an executive summary of financial and business related updates to assist you in staying current on emerging issues in accounting and finance. This summary will give you a preview of the new standards that have been recently issued and what is on the horizon for the near future. The most recent and significant update includes: • Accounting Standard Update — GASB Statement No. 87 — Leases — GASB has issued GASB Statement No. 87 relating to accounting and financial reporting for leases. This new statement establishes a single model for lease accounting based on the principle that leases are financing of the right to use an underlying asset. The following is an extensive summary of the current update. As your continued business partner, we are committed to keeping you informed of new and emerging issues. We are happy to discuss this issue with you further and its applicability to your City. Accounting Standard Update — GASB Statement No. 87 — Leases The objective of this Statement is to better meet the information needs of financial statement users by improving accounting and financial reporting for leases by governments. This Statement increases the usefulness of governments' basic financial statements by requiring recognition of certain lease assets and liabilities for leases that previously were classified as operating leases and recognized as inflows of resources or outflows of resources based on the payment provisions of the contract. It establishes a single model for lease accounting based on the foundational principle that leases are financings of the right to use an underlying asset. Under this Statement, a lessee is required to recognize a lease liability and an intangible right -to -use lease asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources, thereby enhancing the relevance and consistency of information about governments' leasing activities. A lease is defined as a contract that conveys control of the right to use another entity's nonfinancial asset (the underlying asset) as specified in the contract for a period of time in an exchange or exchange -like transaction. Examples of nonfinancial assets include buildings, land, vehicles, and equipment. Any contract that meets this definition should be accounted for under the leases guidance, unless specifically excluded in this Statement. A short-term lease is defined as a lease that, at the commencement of the lease term, has a maximum possible term under the lease contract of 12 months (or less), including any options to extend, regardless of their probability of being exercised. Lessees and lessors should recognize short-term lease payments as outflows of resources or inflows of resources, respectively, based on the payment provisions of the lease contract. City of Elk River Emerging Issue Accounting Standard Update — GASB Statement No. 87 — Leases (Continued) A lessee should recognize a lease liability and a lease asset at the commencement of the lease term, unless the lease is a short-term lease or it transfers ownership of the underlying asset. The lease liability should be measured at the present value of payments expected to be made during the lease term (less any lease incentives). The lease asset should be measured at the amount of the initial measurement of the lease liability, plus any payments made to the lessor at or before the commencement of the lease term and certain direct costs. A lessee should reduce the lease liability as payments are made and recognize an outflow of resources (for example, expense) for interest on the liability. The lessee should amortize the lease asset in a systematic and rational manner over the shorter of the lease term or the useful life of the underlying asset. The notes to basic financial statements should include a description of leasing arrangements, the amount of lease assets recognized, and a schedule of future lease payments to be made. A lessor should recognize a lease receivable and a deferred inflow of resources at the commencement of the lease term, with certain exceptions for leases of assets held as investments, certain regulated leases, short-term leases, and leases that transfer ownership of the underlying asset. A lessor should not derecognize the asset underlying the lease. The lease receivable should be measured at the present value of lease payments expected to be received during the lease term. The deferred inflow of resources should be measured at the value of the lease receivable plus any payments received at or before the commencement of the lease term that relate to future periods. A lessor should recognize interest revenue on the lease receivable and an inflow of resources (for example, revenue) from the deferred inflows of resources in a systematic and rational manner over the term of the lease. The notes to basic financial statements should include a description of leasing arrangements and the total amount of inflows of resources recognized from leases. GASB Statement No. 87 is effective for reporting periods beginning after June 15, 2021. Information provided above was obtained from www.gasb.org. 25 berganKDV City of Elk River Sherburne County, Minnesota Reports on Compliance with Government Auditing Standards, and Legal Compliance December 31, 2021 bergonkdv.com 11 DO MORE. City of Elk River Table of Contents 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 Minnesota Legal Compliance Sk berganKov 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 Auditor's Report Honorable Mayor and Members of the City Council City of Elk River Elk River, Minnesota We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business -type activities, the discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Elk River, Minnesota as of and for the year ended December 31, 2021, and the related notes to financial statements, which collectively comprise the City's basic financial statements, and have issued our report thereon dated May 31, 2022. Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered the City'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 the City's internal control. Accordingly, we do not express an opinion on the effectiveness of the City'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 City's financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses, or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified BERGANKDV, LTD. I BERGANKDV.COM I DO MORE. Compliance and Other Matters As part of obtaining reasonable assurance about whether the City'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 result of that testing, and not to provide an opinion on the effectiveness of the City's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. ]3"AA-N, W. Minneapolis, Minnesota May 31, 2022 BERGANKDV, LTD. I BERGANKDV.COM I DO MORE. 2 berganKDv Minnesota Legal Compliance Independent Auditor's Report Honorable Mayor and Members of the City Council City of Elk River Elk River, Minnesota We have audited, in accordance with auditing standards generally accepted in the United States of America, and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business -type activities, the discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Elk River, Minnesota as of and for the year ended December 31, 2021, and the related notes to financial statements, which collectively comprise the City's basic financial statements, and have issued our report thereon dated May 31, 2022. 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 and the results of that testing, and not to provide an opinion on compliance. Accordingly, this communication is not suitable for any other purpose. Minneapolis, Minnesota May 31, 2022 BERGANKDV, LTD. I BERGANKDV.COM I DO MORE. 3