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6.3 SR 06-05-2023Request for Action To Item Number Mayor and City Council 6.3 Agenda Section Meeting Date Prepared by Presentations, Awards, and June 5, 2023 Lori Stich, Finance Manager Recognition Item Description Reviewed by Annual Comprehensive Financial Report for the Cal Portner, City Administrator Year Ended December 31, 2022 Reviewed by Action Requested Accept, by motion, the Annual Comprehensive Financial Report for the City of Elk River for the year ended December 31, 2022. 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 2022 and will present a summary of the 2022 financial report and audit results. Financial Impact N/A Mission/Policy/Goal N/A Attachments Comprehensive Annual Financial Report for the year ended December 31, 2022 • 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 cityof El--� Annual Comprehensive k � River Financial Report Minnesota For the Year Ended December 31, 2022 194 J , r 7l d �,- { fr l — ftPl Mp`` pwo CITY OF ELK RIVER ELK RIVER, MINNESOTA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2022 PREPARED BY: FINANCE DEPARTMENT Member of Governmental Finance Officers Association of the United States and Canada 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 39 Statement of Revenues, Expenditures, and Changes in Fund Balances 40 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities 41 Statement of Revenues, Expenditures, and Changes in Fund Balances — Budget and Actual — General Fund 43 Proprietary Funds Statement of Net Position 44 Statement of Revenues, Expenses, and Changes in Net Position 48 Statement of Cash Flows 50 Notes to Basic Financial Statements 55 Required Supplementary Information Schedule of Changes in Total OPEB Liability and Related Ratios — Municipal Retirees Health Plan 101 Schedule of City's Proportionate Share of Net Pension Liability — General Employees Retirement Fund 102 Schedule of City's Proportionate Share of Net Pension Liability — Public Employees Police and Fire Retirement Fund 103 Schedule of City Contributions — General Employees Retirement Fund 104 Schedule of City Contributions — Public Employees Police and Fire Retirement Fund 105 Schedule of Changes in Net Pension Liability and Related Ratios — Elk River Fire Relief Association 106 Schedule of City Contributions — Elk River Fire Relief Association 107 Notes to Required Supplementary Information 108 City of Elk River, Minnesota Table of Contents Page Combining and Individual Fund Financial Statements and Schedules Nonmajor Governmental Funds 117 Combining Balance Sheet 118 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 119 Nonmajor Special Revenue Funds Combining Balance Sheet 120 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 122 Budgeted Special Revenue Funds Schedule of Revenues, Expenditures, and Changes in Fund Balances — Budget and Actual Library 124 Multipurpose Facility 125 Economic Development Authority 127 Nonmajor Capital Projects Funds Combining Balance Sheet 128 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 132 Nonmajor Debt Service Funds Combining Balance Sheet 136 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 138 Component Unit Financial Statements Housing and Redevelopment Authority Balance Sheet 141 Statement of Revenues, Expenses, and Change in Fund Balance 142 Statistical Section (Unaudited) Financial Trends Net Position by Component 146 Changes in Net Position 148 Fund Balances of Governmental Funds 152 Changes in Fund Balances of Governmental Funds 154 Revenue Capacity Electric Sales 156 Principal Electric Customers 157 Tax Capacity, Market Value, and Estimated Value of Taxable Property 158 Property Tax Rates — Direct and Overlapping Governments 161 Debt Capacity Principal Property Taxpayers 162 Property Tax Levies and Collections 163 Ratios of Outstanding Debt by Type 164 Ratios of General Bonded Debt Outstanding 165 Direct and Overlapping Governmental Activities Debt 167 Legal Debt Margin Information 168 City of Elk River, Minnesota Table of Contents Page Statistical Section (Unaudited) (Continued) Debt Capacity (Continued) Pledged -Revenue Coverage 170 Demographic and Economic Information Demographic and Economic Statistics 171 Operating Information Principal Employers 172 Full -Time Equivalent Employees by Function 173 Operating Indicators by Function 174 Capital Asset Statistics by Function 175 (THIS PAGE LEFT BLANK INTENTIONALLY) INTRODUCTORY SECTION CITY OF ELK RIVER ELK RIVER, MINNESOTA FOR THE YEAR ENDED DECEMBER 31, 2022 (THIS PAGE LEFT BLANK INTENTIONALLY) City E Wver June 5, 2023 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, 2022, is hereby submitted. Minnesota state statutes and the city's ordinance require an annual audit of the city's accounts by the Office of the State Auditor or an independent certified public accountant. 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. The responsibility for 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. GAAP requires management to 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 Elk River was originally incorporated in 1880 and consolidated with Elk River Township in 1978 to form a city of roughly 44 square miles. Elk River is the Sherburne County Seat and 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 26,406. Urban services are available to about one- third of the city's land area. Elk River operates as a Statutory Plan A form of government consisting of a four -member city council and an at -large 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 mayor and council are 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 Profile of the City (Continued) The city provides a full range of services and amenities including police and fire protection, building safety inspections, planning and zoning, economic development, environmental services, recreation programming, street and park maintenance, and snow removal. The city also manages municipal water, sanitary sewer, garbage/recycling, and electric services. Elk River also owns and operates two municipal off -sale liquor stores, the city library, community event center and over 40 active and passive parks. 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 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 directors 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 manager. 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 building permits with a construction value of $109,929,862 issued in 2022. New construction accounts for $42,492,977 and additions/remodels make up the $67,436,885 balance. In 2022, residential growth slowed as the city issued 95 new housing permits, significantly fewer than the 141 permits issued in 2021. Single family homes accounted for 93 of the new permits, in addition to two new multi -family apartment buildings with a total of 180 units. The average value home increased to $344,100 from $278,000 in 2021. The recent market trend shows property value growth by valuation increases on existing properties and new construction/remodeling. There remains continued interest in both affordable and market rate multi -family housing projects, as well as protecting property values of the existing housing stock. Many of Elk River's employers reported stable employment levels during 2022 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 projecting future expenditures, revenues, and development. The council diligently maintains a level tax rate and the plan provides the guidance needed to develop and sustain city services while keeping the property taxes stable. The council reviews and updates the financial management plan annually 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. 11 Relevant Financial Policies The council has adopted a comprehensive set of Financial Management Policies that provide the basic framework for the overall fiscal management of the city. The policies provide guidance for revenues, property taxes, investments, purchasing, financial reporting, reserves, fund balance, capital investment, and debt. Financial stability requires reserve funds for unanticipated expenditures or unforeseen emergencies, and adequate working capital for current operating needs to avoid short- term borrowing. City policy requires the unassigned funds in the General Fund be maintained at 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 which began in 2022 will convert Highway 169 to a new freeway by removing five stop lights from the Mississippi River north through Elk River. During 2022, the interchanges at the north and south ends of the project area were completed. In 2023, two more interchanges will be added. Construction on the final interchange will be done in 2024. When complete, the project will increase capacity, improve overall traffic flow, and improve accessibility and safety. As part of the $35,000,000 Active Elk River projects, several construction projects which began in 2021 were completed in 2022. Improvements completed in 2022 included a skatepark, restroom/shelter facilities, splash pad and pickleball courts at Orono Park and restroom/shelter facilities and concession area at the Youth Athletic Complex. 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 was completed in 2022. The city also completed the construction of Fire Station 93 to ensure fire protection services for our primary residential growth area during the construction of Highway 169. The new fire station includes 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 (ACFR) for the fiscal year ending December 31, 2021. This was the 33rd consecutive year the city has received this prestigious award. To be awarded the certificate, a government must publish an easily readable and efficiently organized ACFR. This report must satisfy both GAAP and applicable legal requirements. A Certificate of Achievement is valid for a period of one year. We believe that our current ACFR will meet the program's requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. 5 Awards and Acknowledgements (Continued) The preparation of this report is made possible by the efficient and dedicated services of the entire staff of the finance division, all 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, nZ tL� Lori Stich Finance Manager C City of Elk River, Minnesota Elected Officials and Administration December 31, 2022 Elected Officials Position John Dietz Garrett Christianson Matthew Westgaard Mike Beyer Jennifer Wagner Administration Calvin Portner Lori Stich Ron Nierenhausen Mark Dickinson Zachary Carlton Justin Femrite Suzanne Fischer Mayor Council Member Council Member Council Member Council Member Position City Administrator Finance Manager Chief of Police Fire Chief Community Development Director Public Works Director/Chief Engineer Environmental & Special Projects Director Term Expires December 31, 2022 December 31, 2022 December 31, 2024 December 31, 2024 December 31, 2022 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 Go -ern ent Fiance Officers . ssociafion Pi-e=rented to City of Elk River Njlfianesota For its Annual mpielien:�i;'e Financial RepGf7t For the Fiscal Ye ar Ended Dec42mbei 1. 1021 Execute: e DLrectGrs`CE0 11 (THIS PAGE LEFT BLANK INTENTIONALLY) 12 FINANCIAL SECTION CITY OF ELK RIVER ELK RIVER, MINNESOTA FOR THE YEAR ENDED DECEMBER 31, 2022 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, 2022, and the related notes to the basic 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, 2022, 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. Emphasis of Matter — Implementation of GASB 87 The City has adopted new accounting guidance, Governmental Accounting Standards Board (GASB) Statement No. 87, Leases. Our opinion is not modified with respect to this matter. 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 68% of the assets and deferred outflows, 61% of the net position, and 93% 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 accompanying supplementary information identified in the Table of Contents is 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 accompanying supplementary information is 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 25, 2023, 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. ]3"A4,-N. tea, Minneapolis, Minnesota May 25, 2023 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, 2022. 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 $245,315,759 (net position). Of this amount, $57,038,539 (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 $4,806,363 and net position of the governmental activities increased by $3,217,541. This resulted in a total net position increase of $8,023,904 for the City. • As of the close of the current fiscal year, the City's governmental funds reported combined ending fund balances of $42,522,183, a decrease of $2,644,989 from the prior year. • At the end of the current fiscal year, unassigned fund balance for the General Fund was $8,888,888. 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 43% of the 2023 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 Detai 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 and Pavement Management, 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 55 of this report. 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 101 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 101 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 118 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 $245,315,759 at the close of the most recent fiscal year. By far, the largest portion of the City's net position (72.1%) 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 Total deferred outflows of resources Liabilities Other liabilities Noncurrent liabilities Total liabilities Deferred Inflows of Resources Deferred OPEB resources Deferred pension resources Deferred lease 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 2022 2021 (Decrease) 2022 2021 (Decrease) $ 52,094,579 $ 54,324,030 $ (2,229,451) $ 53,468,950 $ 62,144,712 $ (8,675,762) 144,536,694 140,641,604 3,895,090 131,672,213 122,264,788 9,407,425 196,631,273 194,965,634 1,665,639 185,141,163 184,409,500 731,663 81,827 85,487 (3,660) 11,058 11,553 (495) 12,666,297 7,586,984 5,079,313 1,866,126 2,242,888 (376,762) 12,748,124 7,672,471 5,075,653 1,877,184 2,254,441 (377,257) 5,920,358 6,690,658 (770,300) 8,076,913 8,702,867 (625,954) 84,990,762 71,879,094 13,111,668 45,797,114 51,982,645 (6,185,531) 90,911,120 78,569,752 12,341,368 53,874,027 60,685,512 (6,811,485) 107,304 134,572 (27,268) 14,500 18,185 (3,685) 750,069 9,769,924 (9,019,855) 83,351 2,832,246 (2,748,895) 229,506 - 229,506 5,112,108 - 5,112,108 1,086,879 9,904,496 (8,817,617) 5,209,959 2,850,431 2,359,528 83,281,488 75,360,937 7,920,551 93,539,999 87,943,523 5,596,476 9,676,717 12,112,762 (2,436,045) 1,779,016 1,779,016 - 24,423,193 26,690,158 (2,266,965) 32,615,346 33,405,459 (790,113) $ 117,381,398 $ 114,163,857 $ 3,217,541 $ 127,934,361 $ 123,127,998 $ 4,806,363 An additional portion of the City's net position (4.6%) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net position (23.3%) 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 $3,217,541, thereby accounting for 40.1 % 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 2022 2021 (Decrease) 2022 2021 (Decrease) Revenues Program revenues Charges for services $ 3,805,379 $ 3,524,749 $ 280,630 $ 61,806,702 $ 58,307,035 $ 3,499,667 Operating grants and contributions 1,905,073 1,328,148 576,925 - - - Capital grants and contributions 8,005,633 5,916,070 2,089,563 7,289,979 4,308,960 2,981,019 General revenues Property taxes 15,250,309 14,290,673 959,636 - - - Franchise and gravel taxes 1,722,678 1,754,189 (31,511) Sales taxes 3,862,154 3,469,146 393,008 - Grants and contributions not restricted 734,932 747,226 (12,294) - - - Unrestricted investment earnings (2,079,797) (56,944) (2,022,853) (1,947,278) (75,566) (1,871,712) Gain (loss) on disposal of capital assets 108,455 1,053,072 (944,617) 32,788 (159,879) 192,667 Miscellaneous revenues 537,061 522,275 14,786 - - - Total revenues 33,851,877 32,548,604 1,303,273 67,182,191 62,380,550 4,801,641 Expenses General government 5,180,758 4,655,075 525,683 - - - Public safety 11,558,469 8,082,449 3,476,020 - Public works 7,638,554 5,340,633 2,297,921 - - - Culture and recreation 6,139,661 11,070,966 (4,931,305) - - - Economic development 527,673 433,530 94,143 - - - Interest and fiscal charges 1,615,250 1,796,294 (181,044) - - - Municipal liquor - - 7,785,027 7,683,695 101,332 Sewer 3,759,165 3,743,503 15,662 Garbage 1,670,454 1,623,785 46,669 Storm water 663,420 612,527 50,893 Electric 43,262,804 38,462,316 4,800,488 Water 3,208,929 3,210,394 (1,465) Total expenses 32,660,365 31,378,947 1,281,418 60,349,799 55,336,220 5,013,579 Increase in Net Assets before transfers 1,191,512 1,169,657 21,855 6,832,392 7,044,330 (211,938) Transfers 2,026,029 2,832,128 (806,099) (2,026,029) (2,832,128) 806,099 Changes in Net Position 3,217,541 4,001,785 (784,244) 4,806,363 4,212,202 594,161 Net position, January 1 114,163,857 110,162,072 4,001,785 123,127,998 118,915,796 4,212,202 Net position, December31 $ 117,381,398 $ 114,163,857 $ 3,217,541 $ 127,934,361 $ 123,127,998 $ 4,806,363 • Property taxes represent approximately 45.0% of total revenues in 2022 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 a decrease in the culture and recreation function as a result of capital project work that was completed in 2021. 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 0,000,000 8,000,000 6,000,000 4,000,000 2,000,000 $ General Government Public Safety Public Works Culture and Recreation Economic Development Interest and Fiscal Charges ■Expenses $5,180,758 $11,558,469 $7,638,554 $6,139,661 $527,673 $1,615,250 ■Program revenues 836,462 1,873,412 8,014,691 2,889,454 102,066 Grants and Contributions Unrestricted 1.93% Sales Taxes 10.16% Franchise Gravel Ta 4.53% Revenues by Source — Governmental Activities Unrestricted Investment Earnings -5.47% Property Taxes 40.12% Sale of Capital Assets 0 29% Charges for Services 10.01 % Operating Grants and Contributions 5.01% Capital Grants and Contributions 21.06% 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 $4,806,363 primarily due to the operating income of the Electric Fund. Elements of the increase are as follows: Expenses and Program Revenues - Business -Type Activities $45,000,000 $40,000,000 $35,000,000 $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $- Municipal Liquor Sewer Garbage Storm Water Electric Water ■Expenses $7,785,027 $3,759,165 $1,670,454 $663,420 $43,262,804 $3,208,929 0Program revenues 8,531,414 6,264,101 1,889,247 1,481,540 45,028,314 5,902,065 Charges for Service 85.960, Revenues by Source - Business -Type Activities Earnings -2.71% nts and 11.33% 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 $42,522,183, a decrease of $2,644,989 in comparison with the prior year. Approximately 18% of this total amount ($7,610,065) constitutes unassigned fund balance, which is available for spending at the City's discretion. The remainder of fund balance ($34,912,118) is not available for new spending because it is either 1) nonspendable ($114,967), 2) restricted ($12,149,090), 3) committed ($9,583,438), or 4) assigned ($13,064,623) for the purposes described in the fund balance section of each balance sheet. Fund Balance December 31, Increase or Funds 2022 2021 (Decrease) General $ 8,888,888 $ 8,750,629 $ 138,259 The General Fund is the chief operating fund of the City. The General Fund had an increase in fund balance of $138,259. The fund had net transfers of $2,158,650 during the year, which contributed to the increase. Pavement Management $ 6,274,764 $ 6,369,604 $ (94,840) The Pavement Management Fund is a major capital projects fund with a total fund balance of $6,274,764. Fund balance decreased $94,840 from 2021 as investment loses of $725,166 contributed to the decrease. 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 $32,615,346. The total increase in net position for the funds was $4,806,363. 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 $138,259 in 2022. Some of the larger variances are as follows: • Revenues were over budget by $206,671 with charges for services revenue being over budget by $111,410. Licenses and permits were over budget by $73,433. 29 City of Elk River Management's Discussion and Analysis GOVERNMENT -WIDE FINANCIAL ANALYSIS (CONTINUED) General Fund Budgetary Highlights (Continued) • Expenditures were over budget by $154,131, in part due to public safety being over budget by $255,904 due to new reporting requirements for leases. General government was under budget by $109,176. 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, 2022, amounts to $173,821,487 (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 completed on the public safety facility • Construction completed on Fire Station #3 • Construction completed on Orono Park • Purchases of vehicles • Various street improvement projects City of Elk River's Capital Assets (Net of Accumulated Depreciation/Amortization) Governmental Activities Business -Type Activities Increase Increase 2022 2021 (Decrease) 2022 2021 (Decrease) Land $ 38,838,959 $ 38,802,663 $ 36,296 $ 1,965,026 $ 1,924,686 $ 40,340 Construction in progress 1,913,782 16,442,587 (14,528,805) 2,351,587 7,243,598 (4,892,011) Buildings 56,533,406 45,559,544 10,973,862 27,401,128 15,942,807 11,458,321 Improvements other than buildings 9,567,471 5,916,977 3,650,494 158,677 174,600 (15,923) Equipment 7,743,980 6,497,219 1,246,761 7,005,001 6,891,996 113,005 Infrastructure 29,530,007 27,422,614 2,107,393 68,750,797 66,361,523 2,389,274 Intangible assets - - - 23,997,909 23,725,578 Leased equipment 409,089 - 409,089 42,088 - 42,088 Total $ 144,536,694 $ 140,641,604 $ 3,895,090 $ 131,672,213 $ 122,264,788 $ 9,135,094 Additional information on the City's capital assets can be found in Note 8 starting on page 70 of this report. 30 City of Elk River Management's Discussion and Analysis GOVERNMENT -WIDE FINANCIAL ANALYSIS (CONTINUED) Capital Asset and Debt Administration (Continued) Long-term Debt. At the end of the current fiscal year, the City had total bonded debt outstanding of $93,915,000. While all of the City's bonds have revenue streams, they are also all backed by the full faith and credit of the City. General obligation bonds General obligation revenue bonds Revenue bonds Notes payable Total City of Elk River's Outstanding Debt Governmental Activities Iml $ 25,760,000 30,515,000 Increase 2021 (Decrease) 2022 Business -Tune Activities 2021 Increase (Decrease) $ 27,180,000 $ (1,420,000) $ - $ - $ 31,360,000 (845,000) 8,765,000 16,575,000 (7,810,000) - 28,875,000 29,930,000 (1,055,000) - 209,124 (209,124) $ 56,275,000 $ 58,540,000 $ (2,265,000) $ 37,640,000 $ 46,714,124 $ (9,074,124) 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 9 starting on page 72 of this report. 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 2023 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. 31 (THIS PAGE LEFT BLANK INTENTIONALLY) 32 BASIC FINANCIAL STATEMENTS 33 Assets Cash and investments Restricted cash Taxes receivable Accounts receivable Interest receivable Notes receivable Leases receivable Special assessments receivable Due from other governments Due from primary government Due from component unit Internal balances Inventory Land held for resale Prepaid items Pension asset Capital assets not being depreciated Land Construction in progress Capital assets being depreciated/amortized Buildings and building improvements Improvements other than buildings Infrastructure Collection and distribution systems Intangible assets Equipment and furniture Leased equipment Less accumulated depreciation/amortization Total assets Deferred Outflows of Resources Deferred outflows of resources related to OPEB Deferred outflows of resources related to pensions Total deferred outflows of resources Total assets and deferred outflows of resources City of Elk River Statement of Net Position December 31, 2022 Government Governmental Business -Type Activities Activities $ 43,527,160 1,193,031 980,441 180,189 1,399,128 229,506 1,322,020 2,031,922 15,345 360,335 175,000 114,967 565,535 38,838,959 1,913,782 $ 39,179,277 1,779,016 4,074,552 118,640 5,188,673 526,323 8,263 (360,335) 2,644,406 310,135 --I $ 82,706,437 1,779,016 1,193,031 5,054,993 298,829 1,399,128 5,418,179 1,848,343 2,040,185 15,345 2,644,406 175,000 425,102 565,535 Component Unit Housing and Redevelopment Authority $ 794,508 10,961 875 452,468 170,632 382,000 1,965,026 40,803,985 315,900 2,351,587 4,265,369 - 80,179,661 40,144,257 120,323,918 15,044,458 266,259 15,310,717 174,290 78,753,214 - 78,753,214 - - 142,832,184 142,832,184 - 26,836,332 26,836,332 - 18,517,735 12,929,995 31,447,730 - 510,027 48,008 558,035 - (89,221,142) 1., 171 "1 (95,701,435) (184,922,577) (117,162) 701 ^I^P) All ') l O A A- l OC l d l l c7 81,827 11,058 92,885 - 12,666,297 1,866,126 14,532,423 21,067 1') '7no 1')A 1 O'7'7 1 on l A L')c '2AQ ')1 AK 7 $ 209,379,397 $ 187,018,347 $ 396,397,744 $ 2,205,539 See Accompanying Notes to Basic Financial Statements. 34 City of Elk River Statement of Net Position December 31, 2022 Primary Government Component Unit Housing and Governmental Business -Type Redevelopment Activities Activities Total Authority Liabilities Accounts payable $ 1,783,136 $ 5,682,671 $ 7,465,807 $ 2,977 Salaries and benefits payable 646,807 326,240 973,047 3,181 Deposits payable - 1,192,719 1,192,719 - Contracts payable 109,001 - 109,001 - Due to other governments 12,787 298,253 311,040 - Due to primary government - - - 15,345 Due to component unit 170,632 - 170,632 - Unearned revenue 2,816,765 146,716 2,963,481 Interest payable Payable within one year 381,230 430,314 811,544 Compensated absences payable Payable within one year 775,591 571,867 1,347,458 Payable after one year 1,090,839 63,287 1,154,126 - Total OPEB liability Payable after one year 794,913 107,421 902,334 - Lease liability - Payable within one year 112,697 9,216 121,913 - Payable after one year 295,134 32,679 327,813 - Net bonds payable Payable within one year 2,965,000 1,495,000 4,460,000 - Payable after one year 57,882,375 37,613,489 95,495,864 - Net pension liability Payable after one year 21,074,213 5,904,155 26,978,368 64,775 Total liabilities 90,911,120 53,874,027 144,785,147 86,278 Deferred Inflows of Resources Deferred inflows of resources related to OPEB 107,304 14,500 121,804 - Deferred inflows of resources related to pensions 750,069 83,351 833,420 909 Deferred inflows of resources related to leases 229,506 5,112,108 5,341,614 - Total deferred inflows of resources 1,086,879 5,209,959 6,296,838 909 Net Position Net investment in capital assets 83,281,488 93,539,999 176,821,487 373,028 Restricted for Fiscal recovery 37,669 - 37,669 - Public safety 36,311 - 36,311 - Parks and recreation improvements 960,718 - 960,718 - Economic development 1,538,419 - 1,538,419 - Debt service 7,103,600 1,779,016 8,882,616 - Housing and redevelopment - - - 1,745,324 Unrestricted 24,423,193 32,615,346 57,038,539 - Total net position 117,381,398 127,934,361 245,315,759 2,118,352 Total liabilities, deferred inflows of resources, and net position $ 209,379,397 $ 187,018,347 $ 396,397,744 $ 2,205,539 See Accompanying Notes to Basic Financial Statements. 35 City of Elk River Statement of Activities Year Ended December 31, 2022 Program Revenues Operating Capital Grants Charges for Grants and and Functions/Programs Expenses Services Contributions Contributions Primary government Governmental activities General government $ 5,180,758 $ 800,973 $ 35,489 $ - Public safety 11,558,469 1,184,261 689,151 - Public works 7,638,554 380,000 477,389 7,157,302 Culture and recreation 6,139,661 1,338,079 703,044 848,331 Economic development 527,673 102,066 - - Interest and fiscal charges 1,615,250 - - - Total governmental activities 32,660,365 3,805,379 1,905,073 8,005,633 Business -type activities Municipal liquor 7,785,027 8,531,414 - - Sewer 3,759,165 2,633,732 - 3,630,369 Garbage 1,670,454 1,889,247 - - Storm water 663,420 609,101 - 872,439 Electric 43,262,804 44,729,379 - 298,935 Water 3,208,929 3,413,829 - 2,488,236 Total business -type activities 60,349,799 61,806,702 - 7,289,979 Totalprimary governmental $ 93,010,164 $ 65,612,081 $ 1,905,073 $ 15,295,612 Component Unit Housing and Redevelopment Authority $ 322,460 $ - $ 192 $ - General revenues Property taxes Franchise and gravel taxes Sales taxes Grants and contributions not restricted to specific programs Unrestricted investment income Gain on sale of assets Miscellaneous revenues Transfers Total general revenues and transfers Change in net position Net position - beginning Net position - ending See Accompanying 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 $ (4,344,296) $ - $ (4,344,296) $ - (9,685,057) - (9,685,057) - 376,137 - 376,137 - (3,250,207) - (3,250,207) - (425,607) - (425,607) - (1,615,250) - (1,615,250) - (18,944,280) - (18,944,280) - - 746,387 746,387 - - 2,504,936 2,504,936 - - 218,793 218,793 - - 818,120 818,120 - - 1,765,510 1,765,510 - 2,693,136 2,693,136 - 8,746,882 8,746,882 - (18,944,280) 8,746,882 (10,197,398) - - (322,268) 15,250,309 - 15,250,309 334,121 1,722,678 - 1,722,678 - 3,862,154 - 3,862,154 - 734,932 - 734,932 - (2,079,797) (1,947,278) (4,027,075) 4,178 108,455 32,788 141,243 - 537,061 - 537,061 - 2,026,029 (2,026,029) - - 22,161,821 (3,940,519) 18,221,302 338,299 3,217,541 4,806,363 8,023,904 16,031 114,163,857 123,127,998 237,291,855 2,102,321 $ 117,381,398 $ 127,934,361 $ 245,315,759 $ 2,118,352 37 City of Elk River Balance Sheet - Governmental Funds December 31, 2022 Nonmajor Total Pavement Governmental Governmental General Fund Management Funds Funds Assets Cash and investments $ 9,307,918 $ 5,877,290 $ 28,341,952 $ 43,527,160 Taxes receivable 440,311 - 752,720 1,193,031 Accounts receivable 37,021 147,081 796,339 980,441 Interest receivable 43,084 31,055 106,050 180,189 Notes receivable - - 1,399,128 1,399,128 Leases receivable - - 229,506 229,506 Special assessments receivable Delinquent - - 19,706 19,706 Deferred - - 1,302,314 1,302,314 Due from other funds 213,105 266,763 1,238,763 1,718,631 Due from other governments 53,756 1,599,323 378,843 2,031,922 Due from component unit 15,345 - - 15,345 Land held for resale - - 175,000 175,000 Prepaid items - - 114,967 114,967 Total assets $ 10,110,540 $ 7,921,512 $ 34,855,288 $ 52,887,340 Liabilities Accounts payable $ 315,204 $ 47,425 $ 1,420,507 $ 1,783,136 Salaries and benefits payable 611,402 - 35,405 646,807 Contracts payable - - 109,001 109,001 Due to other funds - - 1,358,296 1,358,296 Due to other governments 8,068 - 4,719 12,787 Due to component unit - - 170,632 170,632 Unearned revenue - 2,816,765 2,816,765 Total liabilities 934,674 47,425 5,915,325 6,897,424 Deferred Inflows of Resources Unavailable revenue - property taxes 286,978 - 34,079 321,057 Unavailable revenue - special assessments - - 1,317,847 1,317,847 Unavailable revenue - other - 1,599,323 - 1,599,323 Deferred inflow related to leases receivable - - 229,506 229,506 Total deferred inflows of resources 286,978 1,599,323 1,581,432 3,467,733 Fund Balances Nonspendable - - 114,967 114,967 Restricted - - 12,149,090 12,149,090 Committed - 6,274,764 3,308,674 9,583,438 Assigned - - 13,064,623 13,064,623 Unassigned 8,888,888 - (1,278,823) 7,610,065 Total fund balances 8,888,888 6,274,764 27,358,531 42,522,183 Total liabilities, deferred inflows See Accompanying Notes to Basic Financial Statements. 38 City of Elk River Reconciliation of the Balance Sheet to the Statement of Net Position - Governmental Funds December 31, 2022 Total fund balances - governmental funds $ 42,522,183 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 233,757,836 Less accumulated depreciation/amortization (89,221,142) 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 (56,275,000) Revenue bonds payable Unamortized bond premiums/discounts (4,572,375) Lease liability (407,831) Compensated absences payable (1,866,430) Total OPEB liability (794,913) Net pension liability (21,074,213) Net pension asset 565,535 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 321,057 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 (750,069) Deferred outflows of resources related to pensions 12,666,297 Deferred outflows of resources related to OPEB 81,827 Deferred inflows of resources related to OPEB (107,304) Revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds. Deferred special assessments 1,317,847 State shared taxes 1,599,323 Governmental funds do not report a liability for accrued interest on long-term debt until due and payable. (381,230) Total net position - governmental activities $ 117,381,398 See Accompanying Notes to Basic Financial Statements. 39 City of Elk River Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds Year Ended December 31, 2022 Revenues Property taxes Sales taxes Othertaxes Special assessments Licenses and permits Intergovernmental Charges for services Fines and forfeitures Otherrevenue 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 Economic development 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 Lease issuance Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Fund Balances Beginning of year End of year Nonmajor Total Pavement Governmental Governmental General Fund Management Funds Funds $ 13,017,377 $ - $ 1,999,605 $ 15,016,982 - - 3,862,154 3,862,154 173,039 1,549,639 - 1,722,678 - - 230,872 230,872 939,133 - - 939,133 657,107 506,500 1,409,549 2,573,156 1,164,410 - 1,919,132 3,083,542 127,954 - 19,530 147,484 154,924 (725,166) (1,509,555) (2,079,797) - - 372,537 372,537 144,641 - 381,265 525,906 - - 2,135,716 2,135,716 39,086 - 144,956 184,042 16,417,671 1,330,973 10,965,761 28,714,405 4,463,622 - 174,419 4,638,041 9,038,263 - 62,370 9,100,633 2,399,494 - 129,470 2,528,964 2,398,314 - 1,928,428 4,326,742 - - 517,691 517,691 123,152 - 50,694 173,846 134,091 - 2,447,042 2,581,133 - 1,425,813 2,136,978 3,562,791 - - 963,089 963,089 - - 1,930,078 1,930,078 103,982 - 2,271,790 2,375,772 2,863 - 1,915,130 1,917,993 18,663,781 1,425,813 14,527,179 34,616,773 (2,246,110) (94,840) (3,561,418) (5,902,368) - - 108,455 108,455 225,719 - 37,572 263,291 2,562,650 - 1,522,465 4,085,115 (404,000) - (795,482) (1,199,482) 2,384,369 - 873,010 3,257,379 138,259 (94,840) (2,688,408) (2,644,989) 8,750,629 6,369,604 30,046,939 45,167,172 $ 8,888,888 $ 6,274,764 $ 27,358,531 $ 42,522,183 See Accompanying Notes to Basic Financial Statements. 40 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, 2022 Total change in fund balances - governmental funds $ (2,644,989) 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 7,997,434 Developer capital contributions 3,514,420 Depreciation/amortization expense (7,200,674) Loss on disposal of capital assets (75,089) Completed CIP Transferred to Enterprise Funds (859,604) 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 (21,314) Total other post employment benefits (OPEB) liability (4,485) 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 2,265,000 Lease principal payments 110,772 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. 251,933 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. 50,810 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 (1,501,083) Revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds. State shared taxes 1,291,808 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 233,327 Special assessments (190,725) Change in net position - governmental activities $ 3,217,541 See Accompanying Notes to Basic Financial Statements. 41 (THIS PAGE LEFT BLANK INTENTIONALLY) 42 City of Elk River Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - General Fund Year Ended December 31, 2022 Revenues Property taxes Othertaxes 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 Debt service Principal Interest and other charges Capital outlay General government Public safety Total expenditures Excess of revenues over (under) expenditures Other Financing Sources (Uses) Lease issuance Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Fund Balances Beginning of year End of year Budgeted Amounts Original Final Actual Amounts Variance with Final Budget - Over (Under) $ 13,109,300 $ 13,109,300 $ 13,017,377 $ (91,923) 180,000 180,000 173,039 (6,961) 865,700 865,700 939,133 73,433 623,000 623,000 657,107 34,107 1,053,000 1,053,000 1,164,410 111,410 120,000 120,000 127,954 7,954 100,000 100,000 154,924 54,924 130,000 130,000 144,641 14,641 30,000 30,000 39,086 9,086 16,211, 000 16,211,000 16,417,671 206,671 4,695,950 4,695,950 4,463,622 (232,328) 8,916,450 8,916,450 9,038,263 121,813 2,485,350 2,485,350 2,399,494 (85,856) 2,411,900 2,411,900 2,398,314 (13,586) - - 103,982 103,982 - - 2,863 2,863 - - 123,152 123,152 - - 134,091 134,091 18, 509,650 18,509,650 18,663,781 154,131 (2,298,650) (2,298,650) (2,246,110) 52,540 - - 225,719 225,719 2,702,650 2,702,650 2,562,650 (140,000) (404,000) (404,000) (404,000) - 2,298,650 2,298,650 2,384,369 85,719 $ - $ - 138,259 $ 138,259 8,750,629 $ 8,888,888 See Accompanying Notes to Basic Financial Statements. 43 City of Elk River Statement of Net Position - Proprietary Funds December 31, 2022 Assets Current assets Cash and investments Restricted cash Accounts receivable Interest receivable Due from other funds Due from other governments Leases receivable Special assessments receivable Inventory Prepaid items Total current assets Noncurrent assets Leases receivable Capital assets Land Construction in progress Buildings and building improvements Improvements other than buildings Collection and distribution Intangible assets Equipment and furniture Leased equipment Total capital assets Less accumulated depreciation/amortization Net capital assets Total noncurrent assets Total assets Deferred Outflows of Resources Deferred outflows of resources related to OPEB Deferred outflows of resources related to pensions Total deferred outflows of resources Total assets and deferred outflows of resources Municipal Liquor Sewer Garbage Storm Water $ 3,978,266 $ 8,078,281 $ 610,952 $ 1,548,347 - 34,098 - - 21,021 42,685 3,228 8,178 - 373,932 158,352 51,085 - 502,301 2,314 467 1,504,183 - - - 51503,470 9,031,297 774,846 1,608,077 753,961 302,581 - 9,900 2,912,901 20,312,707 - - - 232,178 - - - 28,939,941 - 19,961,694 190,103 7,371,463 - 27,821 20,873 27,135 - - 3,877,838 57,186,005 - 19,999,415 (2,498,332) (25,773,742) - (10,344,679) 1,379,506 31,412,263 - 9,654,736 1,379,506 31,412,263 - 9,654,736 6,882,976 40,443,560 774,846 11,262,813 5,898 5,160 - - 257,083 183,943 10,956 - 262,981 189,103 10,956 - $ 7,145,957 $ 40,632,663 $ 785,802 $ 11,262,813 See Accompanying Notes to Basic Financial Statements. 44 Electric Water Total $ 14,895,847 $ 10,067,584 $ 39,179,277 1,779,016 - 1,779,016 3,709,920 330,534 4,074,552 291 43,237 118,640 5,530 128,850 717,749 8,263 - 8,263 - 220,218 220,218 4,129 17,112 526,323 1,111,835 28,388 2,644,406 256,387 53,748 310,135 21,771,218 10,889,671 49, 578, 579 - 4,968,455 4,968,455 697,870 200,714 1,965,026 1,361,931 989,656 2,351,587 14,136,802 2,781,847 40,144,257 34,081 - 266,259 53,111,471 40,819,078 142,832,184 26,836,332 - 26,836,332 4,784,056 556,552 12,929,995 - - 48,008 100,962,543 45,347,847 227,373,648 (34,977,181) (22,107,501) (95,701,435) 65,985,362 23,240,346 131,672,213 65,985,362 28,208,801 136,640,668 87,756,580 39,098,472 186,219,247 - - 11,058 1,187,557 226,587 1,866,126 1,187,557 226,587 1,877,184 $ 88,944,137 $ 39,325,059 $ 188,096,431 45 City of Elk River Statement of Net Position - Proprietary Funds December 31, 2022 Municipal Liquor Sewer Garbage Storm Water Liabilities Current liabilities Accounts and contracts payable $ 310,326 $ 137,285 $ 127,123 $ 19,821 Salaries and benefits payable 39,345 24,339 1,533 - Deposits payable - - - Interest payable 17 37,536 - Unearned revenue 5,532 - - - Due to other funds - 1,150 2,481 1,899 Due to other governments 94,678 - - - Current compensated absences 55,250 39,817 - - Lease liability due within one year 4,007 5,209 - - Bonds payable due within one year - 520,000 - - Total current liabilities 509,155 765,336 131,137 21,720 Noncurrent liabilities Compensated absences 42,419 20,868 - - Total OPEB liability 57,291 50,130 - - Lease liability 14,208 18,471 - - Bonds payable - 6,709,769 - - Net pension liability 790,469 565,581 33,686 - Total noncurrent liabilities 904,387 7,364,819 33,686 Total liabilities 1,413,542 8,130,155 164,823 21,720 Deferred Inflows of Resources Deferred inflows of resources related to OPEB 7,733 6,767 - - Deferred inflows of resources related to pensions 11,091 7,935 473 - Deferred inflows of resources related to leases - - - - Total deferred inflows of resources 18,824 14,702 473 - Net Position Net investment in capital assets 1,379,506 24,182,494 - 9,654,736 Restricted for debt service - - - - Unrestricted 4,334,085 8,305,312 620,506 1,586,357 Total net position 5,713,591 32,487,806 620,506 11,241,093 Southwest Transit - Final inflows of resources, and net position $ 7,145,957 $ 40,632,663 $ 785,802 $ 11,262,813 See Accompanying Notes to Basic Financial Statements. 46 Electric Water Total $ 4,681,899 $ 406,217 $ 5,682,671 218,805 42,218 326,240 1,004,694 188,025 1,192,719 373,955 18,806 430,314 - 141,184 146,716 1,019,492 53,062 1,078,084 200,702 2,873 298,253 426,995 49,805 571,867 - - 9,216 915,000 60,000 1,495,000 8,841,542 962,190 11,231,080 - - 63,287 - - 107,421 - - 32,679 29,275,124 1,628,596 37,613,489 3,789,381 725,038 5,904,155 33,064,505 2,353,634 43,721,031 41,906,047 3,315,824 54,952,111 - - 14,500 54,129 9,723 83,351 - 5,112,108 5,112,108 54,129 5,121,831 5,209,959 36,644,436 21,678,827 93,539,999 1,779,016 - 1,779,016 8,560,509 9,208,577 32,615,346 46,983,961 30,887,404 127,934,361 $ 88,944,137 $ 39,325,059 $ 188,096,431 EVA 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/amortization Total operating expenses Operating income (loss) Nonoperating Revenues (Expenses) City of Elk River Statement of Revenues, Expenses, and Changes in Net Position - Proprietary Funds Year Ended December 31, 2022 Business -Type Activities - Enterprise Funds Municipal Liquor Sewer Garbage Storm Water $ 8,527,044 $ - $ - $ - (6,191,510) - - - 2,335,534 - - - - 2,441,729 1,886,972 608,796 - 1,496 2,275 305 4,370 190,507 - - 4,370 2,633,732 1,889,247 609,101 1,088,167 816,750 46,635 - 23,430 298,554 11,333 2,074 387,761 895,045 1,612,486 182,844 n7 olc 1 CA1 AAA A^o cnn 746,731 (1,018,061) 218,793 (54,319) Investment income (489,851) (999,746) (75,952) (191,635) Gain (loss) on sale of asset - - - - Interest and other charges (344) (107,372) - - Miscellaneous revenue - - - - Total nonoperating revenues (490,195) (1,107,118) (75,952) (191,635) Income (loss) before capital contributions and transfers 256,536 (2,125,179) 142,841 (245,954) Capital Contributions Contributions from Governmental - 859,604 - - Contributions from Developers - 698,498 - 872,439 Contributions from Customers - 1,142,230 - - Connection Fees - 1,789,641 - - Transfers out (1,000,000) (165,000) (54,000) (135,000) Change in net position (743,464) 2,199,794 88,841 491,485 Net Position Beginning of year 6,457,055 30,288,012 531,665 10,749,608 End of year $ 5,713,591 $ 32,487,806 $ 620,506 $ 11,241,093 See Accompanying Notes to Basic Financial Statements. 48 Business -Type Activities - Enterprise Funds 8,527,044 - - (6,191,510) - - 2,335,534 42,355,712 2,887,276 50,180,485 - - 4,076 1,467,344 101,559 1,763,780 43,823,056 2,988,835 51,948,341 3,368,970 824,819 6,145,341 123,009 341,432 799,832 31,544,604 - 31,544,604 4,312,271 884,373 8,274,780 3,062,751 1,117,357 6,393,869 42,411,605 3,167,981 53,158,426 1,411,451 (179,146) 1,125,449 (159,502) (30,592) (1,947,278) 41,938 (9,150) 32,788 (851,199) (40,948) (999,863) 906,323 424,994 1,331,317 (62,440) 344,304 (1,583,036) 1,349,011 165,158 (457,587) - - 859,604 - 940,306 2,511,243 - - 1,142,230 298,935 1,547,930 3,636,506 (1,531,633) - (2,885,633) 116,313 2,653,394 4,806,363 46,867,648 28,234,010 123,127,998 $ 46,983,961 $ 30,887,404 $ 127,934,361 WE City of Elk River Statement of Cash Flows - Proprietary Funds Year Ended December 31, 2022 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 interfimd 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 debt Principal paid on leases Proceeds from sale of capital assets Principal paid on notes from direct borrowings 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 $ 8,532,220 $ 2,616,884 $ 1,889,247 $ 609,101 (6,735,481) (1,172,343) (1,627,458) (165,127) (1,038,009) (746,378) (38,996) - 758,730 698,163 222,793 443,974 - (7,963) (9,896) (737) (1,000,000) (165,000) (54,000) (135,000) (1,000,000) (172,963) (63,896) (135,737) - 53,826 551 (6) - 1,789,641 - - - (7,490,000) - - (327) (204,064) - - (3,772) (4,903) - - - (122,747) - - (4,099) (5,978,247) 551 (6) (489,828) (1,009,131) (76,821) (193,413) (735,197) (6,462,178) 82,627 114,818 A 71' ALl I d Cdn dcn C�1�c l A' l Cnn $ 3,978,266 $ 8,078,281 $ 610,952 $ 1,548,347 See Accompanying Notes to Basic Financial Statements. 50 Business -Type Activities - Enterprise Funds Electric Water Total $ 43,811,156 $ 3,052,235 $ 60,510,843 (36,350,577) (1,379,029) (47,430,015) (2,994,598) (747,412) (5,565,393) 626,368 133,014 759,382 5,092,349 1,058,808 8,274,817 (38,861) (81,912) (139,369) (1,531,633) - (2,885,633) (1,570,494) (81,912) (3,025,002) - - 54,371 - 1,547,930 3,337,571 (1,055,000) (320,000) (8,865,000) (999,092) (58,672) (1,262,155) - - (8,675) 56,538 - 56,538 (209,124) - (209,124) (7,959,560) (2,816,404) (10,898,711) (10,166,238) (1,647,146) (17,795,185) (140,725) (69,062) (1,978,980) (6,785,108) (739,312) (14,524,350) 7'I 150 071 In ROC, ROC, 55 4R7 Fdl $ 16,674,863 $ 10,067,584 $ 40,958,293 51 City of Elk River Statement of Cash Flows - Proprietary Funds Year Ended December 31, 2022 Business -Type Activities - Enterprise Funds Municipal Liquor Sewer Garbage Storm Water Reconciliation of Operating Income (Loss) to Net Cash Flows - Operating Activities Operating income (loss) $ 746,731 $ (1,018,061) $ 218,793 $ (54,319) Adjustments to reconcile operating income (loss) to net cash flows - operating activities Otherrevenues - - - - Bad debt expense - - - - Depreciation/amortization expense 93,815 1,641,444 - 478,502 Pension expense 29,731 56,667 7,236 - Accounts receivable - (16,848) - - Special assessments receivable Lease receivable - - - - Other receivables - - - - Due from other governments - - - - Prepaid items - - - - Inventory (97,719) - - - Accounts payable (38,793) 21,256 (3,639) 19,791 Deposits payable - - - - Due to other governmental units 3,732 - - - Salaries and benefits payable 3,562 2,016 403 - Unearned revenue 806 - - - OPEB expense 324 283 - - Compensated absences payable 16,541 11,406 - - Deferred lease resources - - - - Total adjustments 11,999 1,716,224 4,000 498,293 Net cash flows - operating activities $ 758,730 $ 698,163 $ 222,793 $ 443,974 Supplemental Schedule of Noncash Capital and Related Financing Activities Contributions of capital assets $ - $ 2,700,332 $ - $ 872,439 Loss on disposal of capital assets - - - - Book value of disposed capital assets - - - - Capital assets purchased on account - - - - Amortization of bond premium - - - - See Accompanying Notes to Basic Financial Statements. 52 Business -Type Activities - Enterprise Funds Electric Water Total $ 1,411,451 $ (179,146) $ 1,125,449 906,323 424,994 1,331,317 12,993 28 13,021 3,062,751 1,117,357 6,393,869 290,035 65,796 449,465 (15,019) 56,909 25,042 3,119 6,491 9,610 - (5,188,673) (5,188,673) (56,972) (202,501) (259,473) (8,263) - (8,263) 3,847 (6,130) (2,283) (218,567) (6,784) (323,070) (450,127) (98,335) (549,847) 39,605 17,400 57,005 27,903 (758) 30,877 27,233 5,480 38,694 (1,067) (71,559) (71,820) - - 607 57,104 6,131 91,182 - 5,112,108 5,112,108 3,680,898 1,237,954 7,149,368 $ 5,092,349 $ 1,058,808 $ 8,274,817 $ 298,935 $ 940,306 $ 4,812,012 (14,600) (9,150) (23,750) 45,700 9,150 54,850 1,175,839 111,149 1,286,988 60,767 6,651 67,418 53 (THIS PAGE LEFT BLANK INTENTIONALLY) 54 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 is composed of an elected mayor and four elected Council Members. The Council appoints personnel responsible for the proper administration of all affairs relating to the City. The 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: 1. 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. 55 City of Elk River Notes to Basic Financial Statements NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) A. Reporting Entity (Continued) 2. 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 result 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. 56 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. Pavement Management Fund — This fund accounts for franchise taxes collected to fund expenditures for the ongoing maintenance and repair of the City streets. 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. 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. 57 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) 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. 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. 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) 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 2022. 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. 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. 59 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) 3. Inventory and Prepaid Items (Continued) 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. 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 The City recognizes lease liabilities and intangible right -to -use lease assets (leased assets) in the government -wide financial statements. The City recognizes lease liabilities with an initial, individual value of $10,000 or more for equipment leases, and an initial, individual value of $25,000 or more property, plant and infrastructure leases. •1 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) 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 four 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. Deferred inflows of resources related to leases receivable is reported in both the government -wide Statement of Net Position, the Governmental Funds Balance Sheet, and the Proprietary Funds Statement of Net Position. 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. 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. 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) 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. 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. 62 City of Elk River Notes to Basic Financial Statements NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) II. 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. 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. 63 City of Elk River Notes to Basic Financial Statements NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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 fund had a deficit fund balance at December 31, 2022: Fund Amount Nonmajor Capital Projects TIF Districts $ 1,450,432 The deficit will be funded with future transfers and tax increment revenue. NOTE 3 — DEPOSITS AND INVESTMENTS Cash balances of the City's funds that are intended to be invested on a long-term basis 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. ME City of Elk River Notes to Basic Financial Statements NOTE 3 — DEPOSITS AND INVESTMENTS (CONTINUED) 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, 2022, the City's bank balance of $24,582,649 was not exposed to custodial credit risk because it was insured and fully collateralized by federal depository insurance and collateral pledged. The book balance as of December 31, 2022, was $25,621,047. Discretely Presented Component Unit As of December 31, 2022, the HRA's bank balance of $794,556 was not exposed to custodial credit risk because it was fully collateralized. The HRA's book balance of all deposits at December 31, 2022, totaled $794,508. B. Investments Investment Maturities Credit Fair Less than Greater than Investment Type Rating Value One Year 1-5 Years 5 Years No Maturity Negotiable certificates of deposit N/A $ 8,024,458 $ 2,375,460 $ 5,442,896 $ 206,102 $ Municipal bonds AA to AAA 36,606,044 4,110,996 20,343,544 12,151,504 Government Securities N/A 484,740 - 484,740 - UBS Select Prime Institutional Money Market N/A 1,254,706 - 1,254,706 Minnesota Municipal Money Market (4M Fund) N/A 12,442,173 12,442,173 Other money market funds N/A 46,685 - - 46,685 Total $ 58,858,806 $ 6,486,456 $ 26,271,180 $ 12,357,606 $ 13,743,564 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, 2022, 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. Interest Rate Risk: This is the risk that fair values of securities in a portfolio would decrease due to changes in fair 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. 65 City of Elk River Notes to Basic Financial Statements NOTE 3 — DEPOSITS AND INVESTMENTS (CONTINUED) B. Investments (Continued) 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 parry. 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, 2022, 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, 2022: • Brokered certificates of deposit of $8,024,458, municipal bonds of $36,606,044, and government securities of $484,740 are valued using a matrix pricing model (Level 2 inputs) C. Deposits and Investments Summary of cash deposits and investments as of December 31, 2022, were as follows: Primary Component Government Unit HRA Total Deposits $ 25,621,047 $ 794,508 $ 26,415,555 Investments 58,858,806 - 58,858,806 Petty cash 5,600 - 5,600 Total deposits and investments $ 84,485,453 $ 794,508 $ 85,279,961 Deposits and investments are presented in the December 31, 2022, basic financial statements as follows: Primary Component Government Unit HRA Total Statement of Net Position Cash and investments $ 82,706,437 $ 794,508 $ 83,500,945 Restricted cash 1,779,016 - 1,779,016 Total deposits and investments $ 84,485,453 $ 794,508 $ 85,279,961 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 $220,580 in the Revolving Loan fund and $156,443 in the State DEED fund are outstanding at December 31, 2022. • • City of Elk River Notes to Basic Financial Statements NOTE 4 — NOTES RECEIVABLEXONTRACT FOR DEED (CONTINUED) 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 $718,086 in the Development Fund is outstanding at December 31, 2022. 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 $304,019 at December 31, 2022. 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, 2022. 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 $52,468 in the HRA are outstanding at December 31, 2022. NOTE 5 — LEASES RECEIVABLE The City has various leases for building space. The lease agreements include annual principal and interest payments. Interest and discount rates on the lease agreements range from 3.0% to 3.9%. Revenue from these leases for the year ended December 31, 2022, was $25,482. There are also multiple leases with Verizon and Sprint that allows Elk River Municipal Utilities to place antennas on water towers. The lease payments increase yearly. Interest and discount rates on the lease agreements range from 1.41% to 1.78%. As of December 31, 2022, the lease principal receivable balance was $5,188,673. This is partially offset with a deferred inflow of lease resources. 67 City of Elk River Notes to Basic Financial Statements NOTE 6 — INTERFUND ASSETS/LIABILITIES At December 31, 2022, interfund balances for the City were as follows: Receivable Fund Due from/to other funds General Fund General Fund General Fund Pavement Management Nonmajor Governmental Funds Nonmajor Governmental Funds Nonmajor Governmental Funds Sewer Sewer Garbage Storm Water Electric Electric Electric Water Total due from/to other funds Due from/to component unit Primary Government - General Fund Component Unit - HRA Total due from/to component unit Payable Fund Amount Nonmajor Governmental Funds $ 59,850 Electric 122,873 Water 30,382 Electric 266,763 Nonmajor Governmental Funds 997,796 Electric 218,287 Water 22,680 Nonmajor Governmental Funds 171,800 Electric 202,132 Electric 158,352 Electric 51,085 Sewer 1,150 Garbage 2,481 Storm Water 1,899 Nonmajor Governmental Funds 128,850 $ 2,436,380 Component Unit - HRA $ 15,345 Primary Government - Nonmajor Governmental Funds 170,632 $ 185,977 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 $170,632 payable to the HRA will be paid with the collection of tax increment revenue and will not be repaid within one year. W. City of Elk River Notes to Basic Financial Statements NOTE 7 — INTERFUND TRANSFERS Transfers during the year ended December 31, 2022, were as follows: Transfers In Government Nonmajor Building Governmental Transfers Out General Bonds Funds Total General $ - $ - $ 404,000 $ 404,000 Nonmajor governmental funds 103,650 - 691,832 795,482 Municipal Liquor 750,000 - 250,000 1,000,000 Sewer 165,000 - - 165,000 Garbage 54,000 - - 54,000 Storm Water 135,000 - - 135,000 Electric 1,355,000 - 176,633 1,531,633 Total $ 2,562,650 $ - $ 1,522,465 $4,085,115 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. City of Elk River Notes to Basic Financial Statements NOTE 8 — CAPITAL ASSETS Capital asset activity for the year ended December 31, 2022, was as follows: Primary Government Beginning Ending Balance Increases Decreases Balance Governmental activities Capital assets not being depreciated Land $ 38,802,663 $ 36,296 $ - $ 38,838,959 Construction in progress 16,442,587 2,648,123 17,176,928 1,913,782 Total capital assets not being depreciated 55,245,250 2,684,419 17,176,928 40,752,741 Other capital assets Buildings 68,613,007 13,555,854 1,989,200 80,179,661 Other Improvements 10,808,095 4,280,008 43,645 15,044,458 Equipment 16,371,053 2,495,046 348,364 18,517,735 Infrastructure 74,076,919 4,813,851 137,556 78,753,214 Leased equipment - 518,603 8,576 510,027 Total other capital assets at historical cost 169,869,074 25,663,362 2,527,341 193,005,095 Less accumulated depreciation for Buildings 23,053,463 2,574,419 1,981,627 23,646,255 Other Improvements 4,891,118 629,514 43,645 5,476,987 Equipment 9,873,834 1,248,285 348,364 10,773,755 Infrastructure 46,654,305 2,638,942 70,040 49,223,207 Less accumulated amortization for Leased equipment - 109,514 8,576 100,938 Total accumulated depreciation and amortization 84,472,720 7,200,674 2,452,252 89,221,142 Total other capital assets, net 85,396,354 18,462,688 75,089 103,783,953 Governmental activities capital assets, net $ 140,641,604 $ 21,147,107 $ 17,252,017 $ 144,536,694 Depreciation and amortization expense was charged to functions/programs of the governmental activities as follows: Governmental activities General government $ 305,036 Public safety 1,227,923 Public works 3,312,201 Culture and recreation 2,355,514 Total depreciation expense - governmental activities $ 7,200,674 70 City of Elk River Notes to Basic Financial Statements NOTE 8 — CAPITAL ASSETS (CONTINUED) Primary Government (Continued) Business -type activities Capital assets not being depreciated Land Construction in progress Total capital assets not being depreciated Other capital assets Buildings and improvements Improvements other than buildings Equipment and furniture Intangible assets Collection and distribution Leased equipment Total other capital assets at historical cost Less accumulated depreciation for Buildings and improvements Improvements other than buildings Equipment and furniture Intangible assets Collection and distribution Less accumulated amortization for Leased equipment Total accumulated depreciation and amortization Total other capital assets, net Business -type activities capital assets, net Beginning Ending Balance Increases Decreases Balance $ 1,924,686 $ 40,340 $ - $ 1,965,026 7,243,598 8,795,778 13,687,789 2,351,587 9,168,284 8,836,118 13,687,789 4,316,613 27,762,844 12,381,413 - 40,144,257 266,259 - - 266,259 12,144,130 979,684 193,819 12,929,995 25,895,865 940,467 - 26,836,332 140,337,044 6,346,582 3,851,442 142,832,184 - 50,570 2,562 48,008 206,406,142 20,698,716 4,047,823 223,057,035 11,820,037 923,092 - 12,743,129 91,659 15,923 - 107,582 5,252,134 820,928 148,068 5,924,994 2,170,287 668,136 - 2,838,423 73,975,521 3,957,308 3,851,442 74,081,387 - 8,482 2,562 5,920 93,309,638 6,393,869 4,002,072 95,701,435 113,096,504 14,304,847 45,751 127,355,600 $ 122,264,788 $ 23,140,965 $ 13,733,540 $ 131,672,213 Depreciation expense was charged to functions/programs of the business -type activities as follows: Business -type activities Municipal liquor $ 93,815 Sewer 1,641,444 Storm water 478,502 Electric 3,062,751 Water 1,117,357 Total depreciation expense - business -type activities $ 6,393,869 71 City of Elk River Notes to Basic Financial Statements NOTE 8 — CAPITAL ASSETS (CONTINUED) Capital asset activity for the HRA for the year ended December 31, 2022, was as follows: Discretely Presented Component Unit Capital assets not being depreciated Land Capital assets being depreciated Improvements other than buildings Less accumulated depreciation for Improvements other than buildings Total capital assets being depreciated, net Component unit capital assets, net Beginning Ending Balance Increases Decreases Balance $ 257,100 $ 58,800 $ - $ 315,900 174,290 - - 174,290 105,542 11,620 - 117,162 68,748 (11,620) 57,128 $ 325,848 $ 47,180 $ - $ 373,028 Depreciation expense was charged to functions/programs of the HRA as follows: Business -type activities Housing and Redevelopment Authority $ 11,620 NOTE 9 — 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. 72 City of Elk River Notes to Basic Financial Statements NOTE 9 — LONG-TERM DEBT (CONTINUED) 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 Lease liability Compensated absences Total governmental activities Business -type activities General obligation revenue bonds 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 Bonds, Series 2018A Electric Revenue Bonds, Series 2021B Total revenue bonds Total bonds Unamortized bond premium/discount Lease liability Compensated absences Total business -type activities Total all long-term liabilities Issue Interest Original Final Balance Date Rates Issue Maturity End of Year 02/12/13 2.00% 3.00% $ 9,685,000 02/01/33 $ 7,050,000 09/19/19 2.50%-5.00% 32,715,000 12/01/44 30,515,000 12/29/20 1.00%5.00% 9,435,000 02/01/42 9,435,000 12/29/20 1.00°/m5.00% 5,340,000 02/01/33 4,470,000 05/20/21 1.359/-5.00% 4,805,000 02/01/42 4,805,000 12/29/20 1.00%-1.70% 06/10/21 2.00%4.00% 07/14/16 2.00%4.00% 09/26/18 3.50%5.00% 05/ 13/21 2.00°/m5.00% 56,275,000 4,572,375 407,831 1,866,430 63,121,636 7,200,000 02/01/35 7,200,000 1,615,000 08/01/41 1,565,000 8,765,000 9,755,000 02/01/36 10,000,000 08/01/48 11,810,000 08/01/51 7,995,000 9,225,000 11,655,000 28,875,000 37,640,000 1,468,489 41,895 635,154 39,785,538 $ 102,907,174 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. 73 City of Elk River Notes to Basic Financial Statements NOTE 9 — LONG-TERM DEBT (CONTINUED) C. Changes in Long -Term Liabilities Long-term liability activity for the year ended December 31, 2022, was as follows: Primary Government Governmental activities Bonds payable General obligation bonds General obligation revenue bonds Unamortized bond premiums Total bonds payable Lease liability 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 Lease liability Compensated absences payable Business -type activities long-term liabilities Beginning Ending Due Within Balance Additions Reductions Balance One Year $ 27,180,000 $ - $ (1,420,000) $ 25,760,000 $ 2,075,000 31,360,000 - (845,000) 30,515,000 890,000 4,824,308 - (251,933) 4,572,375 - 63,364,308 - (2,516,933) 60,847,375 2,965,000 - 518,603 (110,772) 407,831 99,435 1,845,116 796,905 (775,591) 1,866,430 775,591 $ 65,209,424 $ 1,315,508 $ (3,403,296) $ 63,121,636 $ 3,840,026 $ 16,575,000 $ $ (7,810,000) $ 8,765,000 $ 580,000 29,930,000 (1,055,000) 28,875,000 915,000 1,538,368 - (69,879) 1,468,489 - 48,043,368 - (8,934,879) 39,108,489 1,495,000 209,124 - (209,124) - - - 50,570 (8,675) 41,895 9,216 543,972 581,206 (490,024) 635,154 571,867 $ 48,796,464 $ 631,776 $ (9,642,702) $ 39,785,538 $ 2,076,083 74 City of Elk River Notes to Basic Financial Statements NOTE 9 - 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, 2023 2024 2025 2026 2027 2028-2032 2033-2037 2038-2042 2043-2044 Total Governmental Activities G.O. Bonds G.O. Revenue Bonds Lease Liability Principal Interest Principal Interest Principal Interest $ 2,075,000 $ 660,810 $ 890,000 $ 1,029,337 $ 112,697 $ 5,610 1,470,000 589,285 935,000 984,838 113,628 4,167 1,530,000 531,760 1,000,000 938,087 115,099 2,696 1,590,000 473,060 1,030,000 888,088 54,996 1,192 1,640,000 412,616 1,080,000 836,588 11,411 67 8,970,000 1,252,279 6,200,000 3,391,738 - - 4,660,000 483,624 7,340,000 2,255,538 - - 3,825,000 173,537 8,365,000 1,230,631 - - - - 3,675,000 166,200 - - $ 25,760,000 $ 4,576,971 $ 30,515,000 $ 11,721,045 $ 407,831 $ 13,732 Business -Type Activities Year Ending G.O. Revenue Bonds Revenue Bonds Lease Liability December 31, Principal Interest Principal Interest Principal Interest 2023 $ 580,000 $ 131,435 $ 915,000 $ 885,756 $ 9,216 $ 1,070 2024 580,000 123,835 955,000 849,381 9,481 805 2025 595,000 116,185 990,000 811,306 9,754 533 2026 605,000 108,260 1,035,000 774,406 10,035 252 2027 605,000 100,110 1,075,000 738,256 3,409 20 2028-2032 3,175,000 363,196 5,925,000 3,110,300 - - 2033-2037 2,230,000 111,749 6,240,000 2,112,463 - - 2038-2042 395,000 19,900 4,225,000 1,396,156 - - 2043-2047 - - 4,845,000 771,688 - - 2048-2049 - - 2,670,000 140,738 - - Total $ 8,765,000 $ 1,074,670 $ 28,875,000 $ 11,590,450 $ 41,895 $ 2,680 E. Lease Liability The City entered into lease agreements for copiers, a mail machine, body cameras, fleet cameras, and tasers. The lease agreements include annual principal and interest payments as noted above. Interest and discount rates on the lease agreements range from 0.36% to 2.84%. 75 City of Elk River Notes to Basic Financial Statements NOTE 10 — FUND BALANCE Fund equity balances are classified as follows to reflect the limitations and restrictions of the respective funds. Major Funds Nonmajor General Pavement Governmental Fund Management Funds Total Nonspendable Prepaid items $ - $ - $ 114,967 $ 114,967 Restricted Park and recreation improvements - - 1,898,555 1,898,555 Debt service - - 7,440,170 7,440,170 Fiscal recovery - - 37,669 37,669 Economic development - - 1,538,419 1,538,419 Law enforcement - - 36,311 36,311 Capital projects - - 1,197,966 1,197,966 Total restricted - - 12,149,090 12,149,090 Committed Capital projects - - 99,328 99,328 Street improvements - 6,274,764 - 6,274,764 Library operations - - 241,203 241,203 Economic development - - 2,968,143 2,968,143 Total committed - 6,274,764 3,308,674 9,583,438 Assigned Building construction/improvements - - 4,511,063 4,511,063 Landfill mitigation - - 881,869 881,869 Law enforcement - - 6,642 6,642 Economic development - - 673,007 673,007 Capital equipment - - 3,260,896 3,260,896 Street improvements - - 478,211 478,211 Other improvement projects - - 3,065,393 3,065,393 Park improvements - - 187,542 187,542 Total assigned - - 13,064,623 13,064,623 Unassigned 8,888,888 - (1,278,823) 7,610,065 Total fund balances $ 8,888,888 $ 6,274,764 $ 27,358,531 $ 42,522,183 76 City of Elk River Notes to Basic Financial Statements NOTE 11 — 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 12 — PENSION PLANS The City participates in various pension plans. Total pension expense for the year ended December 31, 2022, was $3,823,673. 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. 77 City of Elk River Notes to Basic Financial Statements NOTE 12 — 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 12 — 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 2022 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, 2022, were $590,817 and $4,665, 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 2022 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, 2022, were $724,413. 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, 2022, the City and HRA reported liabilities of $12,716,785 and $66,148, 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 $374,912. 79 City of Elk River Notes to Basic Financial Statements NOTE 12 — 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, 2022, 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, 2021, through June 30, 2022, relative to the total employer contributions received from all of PERA's participating employers. The City and HRA's proportionate share was 0.1614% at the end of the measurement period and 0.1554% for the beginning of the period. City's proportionate share of the net pension liability $ 12,716,785 HRA's proportionate share of the net pension liability 66,148 State of Minnesota's proportionate share of the net pension liability associated with the City 374,912 Total $ 13,157,845 For the year ended December 31, 2022, the City and HRA recognized pension expense of $1,268,315 and $12,792, respectively, for their proportionate share of General Employees Plan's pension expense. Included in the amount, the City and HRA recognized $35,951 and $284 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. :1 City of Elk River Notes to Basic Financial Statements NOTE 12 — PENSION PLANS (CONTINUED) Public Employees' Retirement Association (Continued) D. Pension Costs (Continued) General Employees Fund Pension Costs (Continued) At December 31, 2022, 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 $ 106,772 $ 131,158 2,788,712 48,706 372,317 - 366,660 - 468,842 - $ 4,103,303 $ 179,864 The $468,842 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, 2023. 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, 2023 2024 2025 2026 Total Pension Expense Amount $ 1,327,715 1,274,994 (304,136) 1,156,024 $ 3,454,597 City of Elk River Notes to Basic Financial Statements NOTE 12 — PENSION PLANS (CONTINUED) Public Employees' Retirement Association (Continued) D. Pension Costs (Continued) Police and Fire Fund Pension Costs At December 31, 2022, the City reported a liability of $14,260,210 for its proportionate share of the Police and Fire Fund's net pension liability. The net pension liability was measured as of June 30, 2022, 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, 2021, through June 30, 2022, relative to the total employer contributions received from all of PERA's participating employers. The City's proportionate share was 0.3277% at the end of the measurement period and 0.3115% 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, 2022. 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, 2021. Thereafter, by October 1 of each year, the State will pay $9 million to the Police and Fire Fund until full funding is reached or July 1, 2048, whichever is earlier. The $9 million in supplemental state aid will continue until the fund is 90% funded, or until the State Patrol Plan (administered by the Minnesota State Retirement System) is 90% funded, whichever occurs later. The State of Minnesota is included as a non -employer contributing entity in the Police and Fire Retirement Plan Schedule of Employer Allocations and Schedule of Pension Amounts by Employer (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, 2022, the City recognized pension expense of $1,367,960 for its proportionate share of the Police and Fire Plan's pension expense. Included in this amount, the City recognized $120,833 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 $29,493 for the year ended December 31, 2022, 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. FIX City of Elk River Notes to Basic Financial Statements NOTE 12 — PENSION PLANS (CONTINUED) Public Employees' Retirement Association (Continued) D. Pension Costs (Continued) Police and Fire Fund Pension Costs (Continued) At December 31, 2022, 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 $ 851,521 8,247,298 354,213 253,206 362,207 79,938 115,595 $ 10,068,445 $ 195,533 The $362,207 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, 2023. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows: Year Ending December 31, 2023 2024 2025 2026 2027 Total Pension Expense Amount $ 1,835,752 1,856,683 1,665,325 2,945,629 1,207,316 $ 9,510,705 FIE City of Elk River Notes to Basic Financial Statements NOTE 12 — 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 Target Allocation 33.5 % 16.5 25.0 25.0 100.0 % Long -Term Expected Real Rate of Return 5.10 % 5.30 0.75 5.90 F. Actuarial Methods and Assumptions The total pension liability in the June 30, 2022, 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 27 years of service. 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. RUN City of Elk River Notes to Basic Financial Statements NOTE 12 — 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 2022: General Employees Fund Changes in Actuarial Assumptions • The mortality improvement scale was changed from scale MP-2020 to scale MP-2021. Changes in Plan Provisions • There have been no changes since the previous valuation. Police and Fire Fund Changes in Actuarial Assumptions • The mortality improvement scale was changed from MP-2020 to MP-2021. • The single discount rate was changed from 6.5% to 5.4%. Changes in Plan Provisions • There have been no changes since the previous valuation. G. Discount Rate The discount rate for the General Employees Plan used to measure the total pension liability in 2022 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 was projected to be available to make all projected future benefit payments of current Plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. FOR City of Elk River Notes to Basic Financial Statements NOTE 12 — PENSION PLANS (CONTINUED) Public Employees' Retirement Association (Continued) G. Discount Rate (Continued) In the Police and Fire Fund, the fiduciary net position was projected to be available to make all projected future benefit payments of current plan members through June 30, 2060. Beginning in the fiscal year ended June 30, 2061, projected benefit payments exceed the fund's projected fiduciary net position. Benefit payments projected after were discounted at the municipal bond rate of 3.69% (based on the weekly rate closest to but not later than the measurement date of the Fidelity "20-Year Municipal GO AA Index"). The resulting equivalent single discount rate of 5.4% for the Police and Fire Fund was determined to give approximately the same present value of projected benefits when applied to all years of projected benefits as the present value of projected benefits using 6.5% applied to all years of projected benefits through the point of asset depletion and 3.69% thereafter. 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: 1% Decrease in Current 1% Increase in Discount Rate Discount Rate Discount Rate (5.5%) (6.5%) (7.5%) City's proportionate share of the General Employees Fund net pension liability $ 20,191,313 $ 12,782,933 $ 6,706,918 1% Decrease in Current 1% Increase in Discount Rate Discount Rate Discount Rate (4.4%) (5.4%) (6.4%) City's proportionate share of the Police and Fire Fund net pension liability (asset) $ 21,580,998 $ 14,260,210 $ 8,341,790 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. :. City of Elk River Notes to Basic Financial Statements NOTE 12 — PENSION PLANS (CONTINUED) 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 2022 were: Contribution Amount Percentage of Covered Payroll Employee Employer Employee Employer Required Rate $ 1,200 $ 1,200 5% 5% 5% 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. Rt City of Elk River Notes to Basic Financial Statements NOTE 12 — PENSION PLANS (CONTINUED) Defined Benefit Pension Plan — Volunteer Firefighter's Relief Association 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 43 Total 51 D. Contributions. 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 $252,658 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, 2021, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The total pension liability in the December 31, 2021, 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: Pub-2010 Public Safety Employee mortality tables with projected mortality improvements based on scale MP-2020. Healthy Post -retirement: Pub-2010 Healthy Retired Public Safety mortality tables with projected mortality improvements based on scale MP-2020 with male rates being adjusted by a factor of 0.98. City of Elk River Notes to Basic Financial Statements NOTE 12 — PENSION PLANS (CONTINUED) Defined Benefit Pension Plan — Volunteer Firefighter's Relief Association (Continued) E. Net Pension Liability (Continued) Disabled: Pub-2010 Public Safety Disabled Retiree mortality tables with projected mortality improvements based on scale MP-2020. Male rates are adjusted by a factor of 1.05. 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 Target Allocation 32.0 % 23.0 25.0 5.0 15.0 Total 100.0 % Long -Term Expected Real Rate of Return 4.90 % 5.32 1.40 4.43 0.09 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. City of Elk River Notes to Basic Financial Statements NOTE 12 — PENSION PLANS (CONTINUED) Defined Benefit Pension Plan — Volunteer Firefighter's Relief Association (Continued) F. Changes in the Net Pension Liability Increase (Decrease) Total Plan Fiduciary Net Pension Net Pension Liability Position Liability (a) (b) (a) - (b) Balances at December 31, 2021 $ 3,085,088 $ 4,079,511 $ (994,423) Changes for the year Service cost 141,264 - 141,264 Interest cost 153,908 - 153,908 Differences between expected and actual experience 19,130 - 19,130 Changes of benefit terms 725,544 - 725,544 Contributions - State and local - 250,909 (250,909) Net investment income - 377,358 (377,358) Benefit payments (296,383) (296,383) - Administrative expense - (17,309) 17,309 Net changes 743,463 314,575 428,888 Balances at December 31, 2022 $ 3,828,551 $ 4,394,086 $ (565,535) 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: 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%) $ (475,922) $ (565,535) $ (651,834) Detailed information about the pension plan's fiduciary net position is available in the separately issued relief association financial report. .o City of Elk River Notes to Basic Financial Statements NOTE 12 — 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 For the year ended December 31, 2022, the City recognized pension expense of $708,795. At December 31, 2022, 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 $ 16,911 $ 171,584 82,173 - 287,348 $ 381,742 $ 458,932 The $282,658 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, 2023. 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: 91 City of Elk River Notes to Basic Financial Statements NOTE 12 — 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, 2023 2024 2025 2026 2027 Thereafter Total NOTE 13 — POST EMPLOYMENT HEALTH CARE PLAN Pension Expense Amount $ (47,078) (159,828) (85,622) (52,964) (7,961) (6,395) 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. 92 City of Elk River Notes to Basic Financial Statements NOTE 13 — POST EMPLOYMENT HEALTH CARE PLAN (CONTINUED) C. Members As of the valuation date of January 1, 2021, the following were covered by the benefit terms: Active employees electing coverage Retirees receiving payments Spouses receiving payments Total 126 7 2 135 D. Actuarial Assumptions The total OPEB liability was determined by an actuarial valuation measured as of January 1, 2022, 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% 6.25% in 2022, grading to 5.00% over 5 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, 2022, valuation were based on the results of an actuarial experience study for the period January 1, 2022 to December 31, 2022. The discount rate used to measure the total OPEB liability was 2.00% based on 20-year municipal bond rates. E. Total OPEB Liability The City's total OPEB liability of $902,334 was measured as of January 1, 2022, and was determined by an actuarial valuation as of that date. 93 City of Elk River Notes to Basic Financial Statements NOTE 13 — POST EMPLOYMENT HEALTH CARE PLAN (CONTINUED) E. Total OPEB Liability (Continued) Changes in the total OPEB liability are as follows: Balance at December 31, 2021 Changes for the year Service cost Interest Benefit payments Net changes Balance at December 31, 2022 64,316 18,192 (50,618) 31,890 $ 902,334 The General Fund and Municipal Liquor and Sewer Funds typically liquidate the liability related to OPEB. No assets are accumulated in a trust to pay related benefits. F. 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% $ 902,334 $ 964,030 $ 843,840 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. Total OPEB Liability 1% decrease Current 1% increase (5.25% decreasing to 3.0%) $ 902,334 (6.25% decreasing to 4.0%) $ 806,251 (7.25% decreasing to 5.0%) $ 1,015,866 City of Elk River Notes to Basic Financial Statements NOTE 13 — POST EMPLOYMENT HEALTH CARE PLAN (CONTINUED) G. OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB For the year ended December 31, 2022, the City recognized OPEB expense of $60,448. At December 31, 2022, 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 $ - $ 109,866 Changes of assumptions 37,529 11,938 Contributions between measurement date and reporting date 55,356 - Total $ 92,885 $ 121,804 The $55,356 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, 2023. Other amounts reported as deferred outflows of resources related to OPEB will be recognized in pension expense as shown on the following page: 95 City of Elk River Notes to Basic Financial Statements NOTE 13 — POST EMPLOYMENT HEALTH CARE PLAN (CONTINUED) G. OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB (Continued) Year Ending December 31, 2023 2024 2025 2026 2027 Thereafter Total NOTE 14 — COMMITMENTS AND CONTINGENCIES Total (22,060) (22,060) (22,052) (5,586) (12,517) $ (84,275) 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 distribution once the bonds are paid off, the projected over recovery in 2022 is estimated to be $25K. The bond obligations are satisfied first, distribution to participants is directly affected by under recovery. The over recovery is rolled forward under the true up. However, the over recovery in 2022 (approximately $25K) would be included in the revenue requirements in 2024. The transmission payments for 2022 were $78,165, all of which was a receivable at December 31, 2022. 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. City of Elk River Notes to Basic Financial Statements NOTE 14 — 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 15 — 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, 2022, the City has four agreements established under Minnesota Statutes Section 469.174 to 469.179 which resulted in property taxes totaling $333,757 being abated. Individual abatement payments which constituted more than 1% of the City's 2022 tax levy include: • A pay-as-you-go note resulting in an abatement amount of $165,085, 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 $94,212 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 2022 in excess of this amount. NOTE 16 — 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, 2022, there was one series of revenue bonds outstanding, with a principal payable amount of $2,840,000. 97 City of Elk River Notes to Basic Financial Statements NOTE 17 — 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, $924,187 in 2022, and $940,467 in 2023. 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 18 — NEW STANDARDS ISSUED BUT NOT YET IMPLEMENTED GASB Statement No. 96, Subscription -Based Information Technology Arrangements establishes that a Subscription -Based Information Technology Arrangement (SBITA) results in a right -to -use subscription asset and a corresponding liability. Under this statement, a governmental entity generally should recognize a right -to -use subscription asset — an intangible asset — and a corresponding subscription liability. This statement will be effective for the year ending December 31, 2023. 98 REQUIRED SUPPLEMENTARY INFORMATION •• (THIS PAGE LEFT BLANK INTENTIONALLY) 100 Total OPEB Liability Service cost Interest Differences between expected and actual experience Changes of assumptions Benefit payments Net change in total OPEB liability Beginning of year End of year Covered payroll Total OPEB liability as a percentage of covered payroll 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, December 31, 2018 2019 2020 2021 2022 $ 58,939 $ 44,470 $ 53,284 $ 62,443 $ 64,316 30,051 31,024 32,766 27,703 18,192 - (87,455) - (101,343) - - (27,862) 48,516 13,730 - (47,958) (42,048) (51,790) (49,504) (50,618) 41,032 (81,871) 82,776 (46,971) 31,890 875,478 916,510 834,639 917,415 870,444 $ 916,510 $ 834,639 $ 917,415 $ 870,444 $ 902,334 $ 8,658,239 $ 9,076,855 $ 9,349,161 $ 10,007,339 $ 10,307,559 10.59% 9.20% 9.81% 8.70% 8.75% Note 1: Schedule is intended to show ten year trend. Additional years will be reported as they become available. Note 2: No assets are accumulated in a trust. See Notes to Required Supplementary Information. 101 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 City's State's Liability and Proportionate Proportionate the State's Share of the City's City's Share Proportionate Net Pension Plan Fiduciary Proportionate Proportionate (Amount) of Share of the Liability Net Position as Share Share the Net Pension Net Pension (Asset) as a a Percentage of For Fiscal (Percentage) of (Amount) of Liability Liability Percentage of the Total Year Ended the Net Pension the Net Pension Associated Associated City's Covered its Covered Pension June 30, Liability (Asset) Liability (Asset) with the City with 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% 2022 0.1606% 12,716,785 372,972 13,089,757 12,032,776 105.68% 76.67% 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 Proportionate Share of the Net Pension F[RA's State's Liability and Proportionate Proportionate the State's Share of the HRA's HRA's Share Proportionate Net Pension Plan Fiduciary Proportionate Proportionate (Amount) of Share of the Liability Net Position as Share Share the Net Pension Net Pension (Asset) as a a Percentage of For Fiscal (Percentage) of (Amount) of Liability Liability HRA's Percentage of the Total Year Ended the Net Pension the Net Pension Associated Associated Covered its Covered Pension June 30, Liability (Asset) Liability (Asset) with the BRA with the HRA 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% 2022 0.0008% 66,148 1,940 68,088 62,584 105.70% 76.67% Note: Schedule is intended to show ten year trend. Additional years will be reported as they become available. See Notes to Required Supplementary Information. 102 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 City's State's Liability and Proportionate Proportionate the State's Share of the Share Proportionate Net Pension Plan Fiduciary City's (Amount) of Share of the Liability Net Position as City's Proportionate the Net Pension Net Pension (Asset) as a a Percentage of For Fiscal Proportion of Share of the Liability Liability Percentage of the Total Year Ended the Net Pension Net Pension Associated Associated City's Covered its Covered Pension June 30, Liability (Asset) Liability (Asset) with the City with 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% 2022 0.3277% 14,260,210 622,936 14,883,146 3,981,040 358.20% 70.53% Note: Schedule is intended to show ten year trend. Additional years will be reported as they become available. See Notes to Required Supplementary Information. 103 Primary Government Fiscal Year Ending December 31, 2014 2015 2016 2017 2018 2019 2020 2021 2022 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 $ 668,633 690,811 706,711 736,804 753,933 810,637 886,693 923,995 615,331 668,633 690,811 706,711 736,804 753,933 810,637 886,693 923,995 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% - 12,319,933 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 2022 4,665 4,665 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% - 62,200 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. 104 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% 2022 724,413 724,413 - 4,092,729 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. 105 ID O 7 �D N Cl n M O Vl Vl O O - O r- Cl O M M M Vl Vl O Vl l� O N M 01 Vl ID M Vl O O l- ID 01 7 Vl 7 N N N p N 01 7 N N M l- 01 .--i .--i r 01 Ic N Vl M Cl p �D O ' O C, O M O Vl 7 l� M o C, C O M � T r- O N O� O� - C1 O 01 O .--i 7 7 0 O� O --i N M .--i Vl N 7 M N O O p N C O 7 �D ID Vi ID O ID M 01 7 N O O p Cl M N N .--i 01 M N N .--i ."i N �..i O N M M C, .--i Cl N N �..i M M 7 N 01 .--i O r- Vl 7 01 r- Cl.--i N M N �D N 01 l- Vl 01 Vl Cl Cl r- r- O 7 0 C1 � M .--i N N M �D M 01 t O O Cl 01 O O ID ID r- .--i .--i Cl p N ~~ N_ 01 M Vl `� M .--i 7 Np N O_ O O .--i M N O M 0 7 r- �D 7 Vl N Vl 7 .--i M 01 l� Cl Cl N Vl O Vl C1 C1 7 N N 7 M 7 N N p 7 7 p r Ic 01 01 Cl OCl C 0 7 c= O 7 o N N p l 0 01 01 01 lD �D N lD ID M. ID 01 Cl M Cl N N O M C1 r- 7 ID 7 .--i N Cl O O O p n n O 01 01 WWy 01 O Vl 7 ClM N O l- Ni Vl Ol M 0 .�. N 7 OM N N N M N O Y O O N 0 7 N 01 M o O' r O 01 N p, M .--i 7 N �D 01 O N .--i O 01 Vl 0 01 01 O N N 01 Vl O l� .--i O' O l� 01 O 01 l� N l- lr- 7 r 01 a m p N N O G CC Q� L O •� •� M M .--i N `� N � O l� "'� � L O '� N �..i N N v N M N =- y a O - y O U �D O N R V y 't Cl 7 7 l� lr- � 01 l- O rD ID l� Cl Vl l- ID .--i l- O r 01 Vl O O 01 01 O •--i •--i O P y C, C, Cl 7 � N N O M N M l� M 7 N .--i l- `� 01 .--i � 7 N �] W ,� E O M ClN N t N M N .--i v M M N .--i x Cl•--i N cW W U O 01 ' ' 7 O 01 01 M N O O M Clr- r-N N O M Vl N M 01 Vl Cl �D M 7 0 7 Cl Vl O Cl 7 l� O M �D M N � 01 O M p N C1 N M � p� Cl p to O. 3 A. 15 ? z -0r w 3 o o d a v o 0 0 �UUzOPa� 0 �i City of Elk River Notes to Required Supplementary Information General Employees Fund 2022 Changes Changes in Actuarial Assumptions • The mortality improvement scale was changed from scale MP-2020 to scale MP-2021. Changes in Plan Provisions • There have been no changes since the prior valuation. 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. 107 City of Elk River Notes to Required Supplementary Information General Employees Fund (Continued) 2019 Changes Changes in Actuarial Assumptions • The mortality projection scale was changed from MP-2017 to MP-2018. Changes in Plan Provisions • The employer supplemental contribution was changed prospectively, decreasing from $31.0 million to $21.0 million per year. The State's special funding contribution was changed prospectively, requiring $16.0 million due per year through 2031. 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. 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. 15 City of Elk River Notes to Required Supplementary Information Police and Fire Fund 2022 Changes Changes in Actuarial Assumptions • The mortality improvement scale was changed from scale MP-2020 to scale MP-2021. • The single discount rate was changed from 6.5% to 5.4%. Changes in Plan Provisions There have been no changes since the prior valuation. 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. 110 City of Elk River Notes to Required Supplementary Information Police and Fire Fund (Continued) 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. • 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. 111 City of Elk River Notes to Required Supplementary Information Police and Fire Fund (Continued) 2017 Changes (Continued) Changes in Actuarial Assumptions (Continued) • 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. • 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 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 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%. 112 City of Elk River Notes to Required Supplementary Information Post Employment Benefits Plan No assets are accumulated in a trust to pay related benefits. 2022 Changes Changes in Actuarial Assumptions • None noted 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. 113 (THIS PAGE LEFT BLANK INTENTIONALLY) 114 COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND SCHEDULES 115 (THIS PAGE LEFT BLANK INTENTIONALLY) 116 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. 117 Assets Cash and investments Taxes receivable Accounts receivable Interest receivable Notes receivable Leases receivable Special assessment receivable Delinquent Deferred Due from other funds Due from other governments Land held for resale Prepaid items Total assets City of Elk River Nonmajor Governmental Funds Combining Balance Sheet December 31, 2022 Total Nonmajor Special Governmental Revenue Capital Projects Debt Service Funds $ 6,641,172 $ 15,113,275 $ 6,587,505 $ 28,341,952 14,816 23 737,881 752,720 155,405 640,934 - 796,339 15,842 62,974 27,234 106,050 1,095,109 304,019 - 1,399,128 229,506 - - 229,506 - 19,678 28 19,706 - 1,257,654 44,660 1,302,314 997,795 127,568 113,400 1,23 8,763 16 378,827 - 378,843 175,000 - - 175,000 113,869 1,098 - 114,967 $ 9,438,530 $ 17,906,050 $ 7,510,708 $ 34,855,288 Liabilities Accounts payable $ 238,168 $ 1,180,887 $ 1,452 $ 1,420,507 Salaries and benefits payable 35,405 - - 35,405 Contracts payable 91,347 17,654 - 109,001 Due to other funds 59,488 1,298,445 363 1,358,296 Due to other governments 4,719 - - 4,719 Due to component unit - 170,632 - 170,632 Unearned revenue 2,100,333 716,432 - 2,816,765 Total liabilities 2,529,460 3,384,050 1,815 5,915,325 Deferred Inflows of Resources Unavailable revenue - property taxes 9,725 319 24,035 34,079 Unavailable revenue - special assessments - 1,273,159 44,688 1,317,847 Deferred inflow related to leases receivable 229,506 - - 229,506 Total deferred inflows of resources 239,231 1,273,478 68,723 1,581,432 Fund Balances Nonspendable 113,869 1,098 - 114,967 Restricted 1,612,399 3,096,521 7,440,170 12,149,090 Committed 3,209,346 99,328 - 3,308,674 Assigned 1,561,518 11,503,105 - 13,064,623 Unassigned 172,707 (1,451,530) - (1,278,823) Total fund balances 6,669,839 13,248,522 7,440,170 27,358,531 Total liabilities, deferred inflows of resources, and fund balances $ 9,438,530 $ 17,906,050 $ 7,510,708 $ 34,855,288 118 City of Elk River Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Year Ended December 31, 2022 Total Nonmajor Special Governmental Revenue Capital Projects Debt Service Funds Revenues Property taxes $ 532,776 $ 354,787 $ 1,112,042 $ 1,999,605 Sales taxes - - 3,862,154 3,862,154 Special assessments - 173,284 57,588 230,872 Intergovernmental 665,551 743,998 - 1,409,549 Charges for services 1,187,371 731,761 - 1,919,132 Fines and forfeitures 19,530 - - 19,530 Other revenue Investment income (223,569) (1,394,288) 108,302 (1,509,555) Contributions and donations - 129,724 242,813 372,537 Refunds and reimbursements 50,474 330,791 - 381,265 Landfill expansion fee - 2,135,716 - 2,135,716 Miscellaneous revenue 39,889 105,067 - 144,956 Total revenues 2,272,022 3,310,840 5,382,899 10,965,761 Expenditures Current General government 96,209 78,210 - 174,419 Public safety 24,152 38,218 - 62,370 Public works 36,925 92,545 - 129,470 Culture and recreation 1,681,997 246,431 - 1,928,428 Economic development 350,437 167,254 - 517,691 Capital outlay General government - 50,694 - 50,694 Public safety - 2,447,042 - 2,447,042 Public works - 2,136,978 - 2,136,978 Culture and recreation - 963,089 - 963,089 Economic development 1,930,078 - - 1,930,078 Debt service Principal 6,790 - 2,265,000 2,271,790 Interest and other charges 590 88,239 1,826,301 1,915,130 Total expenditures 4,127,178 6,308,700 4,091,301 14,527,179 Excess of revenues over (under) expenditures (1,855,156) (2,997,860) 1,291,598 (3,561,418) Other Financing Sources (Uses) Proceeds from sale of capital asset 1,200 107,255 - 108,455 Lease issuance 37,572 - - 37,572 Transfers in 28,000 802,633 691,832 1,522,465 Transfers out (53,650) (741,832) - (795,482) Total other financing sources (uses) 13,122 168,056 691,832 873,010 Net change in fund balances (1,842,034) (2,829,804) 1,983,430 (2,688,408) Fund Balances Beginning of year 8,511,873 16,078,326 5,456,740 30,046,939 End of year $ 6,669,839 $ 13,248,522 $ 7,440,170 $ 27,358,531 119 City of Elk River Nonmajor Special Revenue Funds Combining Balance Sheet December 31, 2022 Multipurpose Revolving Library Facility Landfill Loan Assets Cash and investments $ 244,187 $ 219,985 $ 881,365 $ 845,638 Taxes receivable 2,582 - - - Accounts receivable - 154,527 878 - Interest receivable 1,126 1,014 4,657 4,468 Notes receivable - - - 220,580 Leases receivable - 229,506 - - Due from other funds - - - - Due from other governments - - - - Land held for resale - - - - Prepaid items - - - - Total assets $ 247,895 $ 605,032 $ 886,900 $ 1,070,686 Liabilities Accounts payable $ 4,986 $ 106,204 $ 5,031 $ - Salaries and benefits payable - 30,634 - - Contracts payable - - - - Due to other funds - - - Due to other governments - 4,719 - - Unearned revenue - - - Total liabilities 4,986 141,557 5,031 - Deferred Inflows of Resources Unavailable revenue - property taxes 1,706 - - - Deferred inflow related to leases receivable - 229,506 - - Total deferred inflows of resources 1,706 229,506 - - Fund Balances Nonspendable - - - - Restricted - - - - Committed 241,203 - - 1,070,686 Assigned - - 881,869 - Unassigned - 233,969 - - Total fund balances 241,203 233,969 881,869 1,070,686 Total liabilities, deferred inflows of resources, and fund balances $ 247,895 $ 605,032 $ 886,900 $ 1,070,686 120 Total Nonmajor Development Insurance Special State DEED Fund Reserve Drug Forfeiture CRF Grant EDA Revenue Funds $ 345,033 $ 376,987 $ - $ 42,740 $ 2,138,002 $ 1,547,235 $ 6,641,172 - - - - - 12,234 14,816 - - - - - - 155,405 1,823 2,557 - 197 - - 15,842 156,443 718,086 - - - - 1,095,109 - - - - - - 229,506 - 997,795 - - - - 997,795 - - - 16 - - 16 - - - - - 175,000 175,000 - - 113,869 - - - 113,869 $ 503,299 $ 2,095,425 $ 113,869 $ 42,953 $ 2,138,002 $ 1,734,469 $ 9,438,530 $ - $ 106,621 $ 14,346 $ - $ - $ 980 $ 238,168 - - - - - 4,771 35,405 - 91,347 - - - - 91,347 - - 46,916 - - 12,572 59,488 - - - - - - 4,719 - - - - 2,100,333 - 2,100,333 - 197,968 61,262 - 2,100,333 18,323 2,529,460 - - - - - 8,019 9,725 - - - - - - 229,506 - - - - - 8,019 239,231 - - 113,869 - - 113,869 503,299 - - 36,311 37,669 1,035,120 1,612,399 - 1,897,457 - - - - 3,209,346 - - - 6,642 - 673,007 1,561,518 - - (61,262) - - - 172,707 503,299 1,897,457 52,607 42,953 37,669 1,708,127 6,669,839 $ 503,299 $ 2,095,425 $ 113,869 $ 42,953 $ 2,138,002 $ 1,734,469 $ 9,438,530 121 City of Elk River Nonmajor Special Revenue Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Year Ended December 31, 2022 Multipurpose Revolving Library Facility Landfill Loan Revenues Property taxes $ 75,192- Intergovernmental - 655,000 10,341 - Charges for services - 1,170,836 13,035 - Fines and forfeitures - - - Other revenue Investment income 4,167 1,799 (108,491) (104,322) Refunds and reimbursements - - - - Miscellaneous revenue - 27,335 - 51796 Total revenues 79,359 1,854,970 (85,115) (98,526) Expenditures Current General government - - - - Public safety - - - - Public works - - 36,925 - Culture and recreation 98,037 1,583,960 - - Economic development - - - 645 Capital outlay Economic development - - - - Debt service Principal - 6,790 - - Interest and other charges - 590 - - Total expenditures 98,037 1,591,340 36,925 645 Excess of revenues over (under) expenditures (18,678) 263,630 (122,040) (99,171) Other Financing Sources (Uses) Proceeds from sale of capital asset - 1,200 - - Lease issuance - 37,572 - - Transfers in 28,000 - - - Transfers out - - - - Total other financing sources (uses) 28,000 38,772 - - Net change in fund balances 9,322 302,402 (122,040) (99,171) Fund Balances Beginning of year 231,881 (68,433) 1,003,909 1,169,857 End of year $ 241,203 $ 233,969 $ 881,869 $ 1,070,686 122 Total Nonmajor Development Insurance Special State DEED Fund Reserve Drug Forfeiture CRF Grant EDA Revenue Funds $ - $ 97,057 $ - $ - $ - $ 360,527 $ 532,776 - - - - - 210 665,551 - - - - - 3,500 1,187,371 - - - 19,530 - - 19,530 (42,818) (26,389) 802 796 37,554 13,333 (223,569) - - 50,474 - - - 50,474 5,948 - - 810 - - 39,889 (36,870) 70,668 51,276 21,136 37,554 377,570 2,272,022 - - 96,209 - - - 96,209 - - - 24,152 - - 24,152 - - - - - - 36,925 - - - - - - 1,681,997 1,918 143,986 - - - 203,888 350,437 - 1,930,078 - - - - 1,930,078 - - - - - 6,790 - - - - - - 590 1,918 2,074,064 96,209 24,152 - 203,888 4,127,178 (38,788) (2,003,396) (44,933) (3,016) 37,554 173,682 (1,855,156) - - - - - - 1,200 - - - - - - 37,572 - - - - - - 28,000 - (10,650) - - - (43,000) (53,650) - (10,650) - - - (43,000) 13,122 (38,788) (2,014,046) (44,933) (3,016) 37,554 130,682 (1,842,034) 542,087 3,911,503 97,540 45,969 115 1,577,445 8,511,873 $ 503,299 $ 1,897,457 $ 52,607 $ 42,953 $ 37,669 $ 1,708,127 $ 6,669,839 123 City of Elk River Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Library Special Revenue Fund Year Ended December 31, 2022 Budgeted Amounts Variance with Actual Final Budget - Original Final Amounts Over (Under) Revenues Property taxes $ 75,950 $ 75,950 $ 75,192 $ (758) Other revenue Investment income 7,000 7,000 4,167 (2,833) Total revenues 82,950 82,950 79,359 (3,591) Expenditures Current Culture and recreation 110,950 110,950 98,037 (12,913) Capital outlay Culture and recreation 10,000 10,000 - (10,000) Total expenditures 120,950 120,950 98,037 (22,913) Excess of revenues over (under) expenditures (38,000) (38,000) (18,678) 19,322 Other Financing Sources (Uses) Transfers in 28,000 28,000 28,000 - Net change in fund balances $ (10,000) $ (10,000) 9,322 $ 19,322 Fund Balances Beginning of year 231,881 End of year $ 241,203 124 Revenues Intergovernmental Charges for services Otherrevenue Investment income Miscellaneous revenue Total revenues Expenditures Current Culture and recreation Capital outlay 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 Lease issuance 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 Multipurpose Facility Special Revenue Fund Year Ended December 31, 2022 Budgeted Amounts Variance with Actual Final Budget - Original Final Amounts Over (Under) $ - $ - $ 655,000 $ 655,000 1,520,000 1,520,000 1,170,836 (349,164) 5,000 5,000 1,799 (3,201) 23,200 23,200 27,335 4,135 1,548,200 1,548,200 1,854,970 306,770 1,282,100 1,282,100 1,583,960 301,860 20,000 20,000 - (20,000) - - 6,790 6,790 - - 590 590 1,302,100 1,302,100 1,591,340 289,240 246,100 246,100 (140,000) (140,000) $ 106,100 $ 106,100 263,630 17,530 1,200 1,200 37,572 37,572 - 140,000 302,402 $ 196,302 (68,433) $ 233,969 125 (THIS PAGE LEFT BLANK INTENTIONALLY) 126 Revenues Property taxes Intergovernmental Charges for services Other revenue Investment income 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, 2022 Budgeted Amounts Original Final $ 363,150 $ 363,150 3,500 3,500 Actual Amounts $ 360,527 210 3,500 Variance with Final Budget - Over (Under) $ (2,623) 210 5,000 5,000 13,333 8,333 371,650 371,650 377,570 5,920 328,650 328,650 203,888 (124,762) 43,000 43,000 173,682 130,682 (43,000) (43,000) (43,000) - $ - $ - 130,682 $ 130,682 1,577,445 $ 1,708,127 127 City of Elk River Nonmajor Capital Projects Funds Combining Balance Sheet December 31, 2022 Park Capital Outlay Government Dedication Reserve Buildings GRE Reserve Assets Cash and investments $ 1,365,914 $ 1,592,218 $ 3,706,545 $ 709,464 Taxes receivable - - 22 - Accounts receivable - - 310,143 - Interest receivable 7,217 8,413 19,585 3,749 Notes receivable 304,019 - - - Special assessment receivable Delinquent - - - - Deferred - 6,356 - - Due from other funds - - - - Due from other governments - 21,486 - - Prepaid items - - - - Total assets $ 1,677,150 $ 1,628,473 $ 4,036,295 $ 713,213 Liabilities Accounts payable $ - $ 14,022 $ 1,375 $ 181 Contracts payable - - - - Due to other funds - - - - Due to component unit - - - - Unearned revenue 716,432 - - - Total liabilities 716,432 14,022 1,375 181 Deferred Inflows of Resources Unavailable revenue - property taxes - - 21 - Unavailable revenue - special assessments - 6,356 - - Total deferred inflows of resources - 6,356 21 - Fund Balances Nonspendable - - - - Restricted 960,718 - - - Committed - - - - Assigned - 1,608,095 4,034,899 713,032 Unassigned - - - - Total fund balances 960,718 1,608,095 4,034,899 713,032 Total liabilities, deferred inflows of resources, and fund balances $ 1,677,150 $ 1,628,473 $ 4,036,295 $ 713,213 128 Public Safety Street Improvement Equipment Active ER Building / Fire Park Developer Improvements Projects Replacement Projects Station #3 Improvements Deposits $ 476,495 $ 2,353,494 $ 1,517,216 $ 1,241,785 $ 905,013 $ 225,449 $ 1,001,037 1 - - - - - - - - - 330,791 - - - 2,518 12,436 8,017 - - 1,039 - 4,852 14,826 - - - - - 19,031 1,232,267 - - - - - - - 127,568 - - - - - - - - 357,341 - - - - - - - - 1,098 $ 502,897 $ 3,613,023 $ 1,652,801 $ 1,572,576 $ 1,262,354 $ 226,488 $ 1,002,135 $ 1,046 $ 17,499 $ - $ 41,295 $ 64,388 $ 38,946 $ 1,002,135 1,046 17,499 23,640 1,243,163 23,640 1,243,163 17,654 - 298 - - - - 298 - - - - - - - - - 1,098 - - - 937,837 1,197,966 - - - - - 99,328 - - - 478,211 2,352,361 1,652,801 476,164 - 187,542 - - - - - - - (1,098) 478,211 2,352,361 1,652,801 1,513,329 1,197,966 187,542 - $ 502,897 $ 3,613,023 $ 1,652,801 $ 1,572,576 $ 1,262,354 $ 226,488 $ 1,002,135 129 (THIS PAGE LEFT BLANK INTENTIONALLY) 130 City of Elk River Nonmajor Capital Projects Funds Combining Balance Sheet December 31, 2022 Total Nonmajor Capital TIF Districts Projects Funds Assets Cash and investments $ 18,645 $ 15,113,275 Taxes receivable - 23 Accounts receivable - 640,934 Interest receivable - 62,974 Notes receivable - 304,019 Special assessment receivable Delinquent - 19,678 Deferred - 1,257,654 Due from other funds - 127,568 Due from other governments - 378,827 Prepaid items - 1,098 Total assets $ 18,645 $ 17,906,050 Liabilities Accounts payable $ - $ 1,180,887 Contracts payable - 17,654 Due to other funds 1,298,445 1,298,445 Due to component unit 170,632 170,632 Unearned revenue - 716,432 Total liabilities 1,469,077 3,384,050 Deferred Inflows of Resources Unavailable revenue - property taxes - 319 Unavailable revenue - special assessments - 1,273,159 Total deferred inflows of resources - 1,273,478 Fund Balances Nonspendable - 1,098 Restricted - 3,096,521 Committed - 99,328 Assigned - 11,503,105 Unassigned (1,450,432) (1,451,530) Total fund balances (1,450,432) 13,248,522 Total liabilities, deferred inflows of resources, and fund balances $ 18,645 $ 17,906,050 131 City of Elk River Nonmajor Capital Projects Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Year Ended December 31, 2022 Park Capital Outlay Government Dedication Reserve Buildings GRE Reserve Revenues Property taxes $ - $ - $ 9 $ - Special assessments - - - - Intergovernmental - 51,821 - - Charges for services 718,461 - - - Other revenue Investment income (157,234) (195,615) (463,772) (84,752) Contributions and donations - 98,548 - - Refunds and reimbursements - - - - Landfill expansion fee - - 2,135,716 - Miscellaneous revenue - - 18,768 - Total revenues 561,227 (45,246) 1,690,721 (84,752) Expenditures Current General government - 60,276 17,934 - Public safety - 11,970 19,809 - Public works - 24,546 - 67,999 Culture and recreation 130,572 10,223 - - Economic development - - - - Capital outlay General government - 50,694 - - Public safety - 37,491 25,632 - Public works - - 421,859 189,819 Culture and recreation - - - - Debt service Interest and other charges 21,512 - - - Total expenditures 152,084 195,200 485,234 257,818 Excess of revenues over (under) expenditures 409,143 (240,446) 1,205,487 (342,570) Other Financing Sources (Uses) Proceeds from sale of capital asset - - - - Transfers in - - - - Transfers out - (50,000) (691,832) - Total other financing sources (uses) - (50,000) (691,832) - Net change in fund balances 409,143 (290,446) 513,655 (342,570) Fund balances Beginning of year 551,575 1,898,541 3,521,244 1,055,602 End of year $ 960,718 $ 1,608,095 $ 4,034,899 $ 713,032 132 Public Safety Street Improvement Equipment Active ER Building / Fire Park Improvements Projects Replacement Projects Station #3 Improvements $ 20 $ - $ - $ - $ - $ - 4,457 168,827 - - - - 111,213 - 451,094 129,870 - - - - - - - 13,300 (58,967) (287,591) (189,878) 17,792 20,724 5,005 - - - - - 31,176 - - - 330,791 - - - - 34,477 - - - 56,723 (118,764) 295,693 478,453 20,724 49,481 - - - - 6,439 - - - - - - 105,636 - - 6,320 - 2,377,599 - 34,616 938,659 552,025 - - - - - 30,091 579,370 - 353,628 22,107 (1,057,423) (292,743) (100,917) (2,363,314) (409,783) - - 107,255 - - - - - 552,633 - - 250,000 - - 659,888 - - 250,000 22,107 (1,057,423) 367,145 (100,917) (2,363,314) (159,783) 456,104 3,409,784 1,285,656 1,614,246 3,561,280 347,325 $ 478,211 $ 2,352,361 $ 1,652,801 $ 1,513,329 $ 1,197,966 $ 187,542 133 (THIS PAGE LEFT BLANK INTENTIONALLY) 134 City of Elk River Nonmajor Capital Projects Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Year Ended December 31, 2022 Total Nonmajor Capital Projects TIF Districts Funds Revenues Property taxes $ 354,758 $ 354,787 Special assessments - 173,284 Intergovernmental - 743,998 Charges for services - 731,761 Other revenue Investment income - (1,394,288) Contributions and donations - 129,724 Refunds and reimbursements - 330,791 Landfill expansion fee - 2,135,716 Miscellaneous revenue 51,822 105,067 Total revenues 406,580 3,310,840 Expenditures Current General government - 78,210 Public safety - 38,218 Public works - 92,545 Culture and recreation - 246,431 Economic development 167,254 167,254 Capital outlay General government - 50,694 Public safety - 2,447,042 Public works - 2,136,978 Culture and recreation - 963,089 Debt service Interest and other charges 66,727 88,239 Total expenditures 233,981 6,308,700 Excess of revenues over (under) expenditures 172,599 (2,997,860) Other Financing Sources (Uses) Proceeds from sale of capital asset - 107,255 Transfers in - 802,633 Transfers out - (741,832) Total other financing sources (uses) - 168,056 Net change in fund balances 172,599 (2,829,804) Fund balances Beginning of year (1,623,031) 16,078,326 End of year $ (1,450,432) $ 13,248,522 135 City of Elk River Nonmajor Debt Service Funds Combining Balance Sheet December 31, 2022 2020A Capital Government Sales Tax Improvement Building Bonds Bonds YMCA Bonds Bonds Assets Cash and investments $ 1,101,425 $ 4,801,535 $ 678,837 $ 4,250 Taxes receivable 19,933 701,198 16,750 - Interest receivable 5,077 22,130 - 20 Due from other funds 113,400 - - - Special assessment receivable Delinquent - 28 - - Deferred - 44,660 - - Total assets $ 1,239,835 $ 5,569,551 $ 695,587 $ 4,270 Liabilities Accounts payable $ 363 $ 363 $ - $ 363 Due to other funds - - 363 - Total liabilities 363 363 363 363 Deferred Inflows of Resources Unavailable revenue - property taxes 13,286 - 10,749 - Unavailable revenue - special assessments - 44,688 - - Total deferred inflows of resources 13,286 44,688 10,749 - Fund Balances Restricted 1,226,186 5,524,500 684,475 3,907 Total deferred inflows of resources and fund balances $ 1,239,835 $ 5,569,551 $ 695,587 $ 4,270 136 2021A Capital Improvement R.-A. Total Nonmajor Debt Service V--A $ 1,458 $ 6,587,505 - 737,881 7 27,234 - 113,400 - 28 - 44,660 $ 1,465 $ 7,510,708 $ 363 1,452 - 363 363 1,815 - 24,035 - 44,688 - 68,723 1,102 7,440,170 $ 1,465 $ 7,510,708 137 City of Elk River Nonmajor Debt Service Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Year Ended December 31, 2022 2020A Capital Government Sales Tax Improvement Building Bonds Bonds YMCA Bonds Bonds Revenues Property taxes $ 597,724 $ - $ 514,318 $ - Sales taxes - 3,862,154 - - Special assessments - 57,588 - - Other revenue Investment income 14,486 86,055 6,783 73 Contributions and donations - - 242,813 - Total revenues 612,210 4,005,797 763,914 73 Expenditures Debt service Principal 870,000 845,000 550,000 - Interest and other charges 168,999 1,073,109 178,800 240,085 Total expenditures 1,038,999 1,918,109 728,800 240,085 Excess of revenues over (under) expenditures (426,789) 2,087,688 35,114 (240,012) Other Financing Sources (Uses) Transfers in 383,070 - - 240,084 Net change in fund balances (43,719) 2,087,688 35,114 72 Fund Balances Beginning of year 1,269,905 3,436,812 649,361 3,835 End of year $ 1,226,186 $ 5,524,500 $ 684,475 $ 3,907 138 2021A Capital Total Nonmjor Improvement Debt Service Bonds Funds $ - $ 1,112,042 - 3,862,154 - 57,588 905 108,302 - 242,813 905 5,382,899 - 2,265,000 165,308 1,826,301 165,308 4,091,301 (164,403) 1,291,598 (95,725) 1,983,430 96.827 5.456.740 $ 1,102 $ 7,440,170 139 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. 140 City of Elk River Housing and Redevelopment Authority Component Unit Balance Sheet - Governmental Fund December 31, 2022 Housing and Redevelopment Authority Assets Cash and investments $ 794,508 Taxes receivable 10,961 Accounts receivable 875 Notes receivable 452,468 Due from primary government 170,632 Land held for resale 382,000 Total assets $ 1,811,444 Liabilities Accounts payable $ 2,977 Salaries and benefits payable 3,181 Due to primary government 15,345 Total liabilities 21,503 Deferred Inflows of Resources Unavailable revenue - property taxes 7,339 Fund Balances Nonspendable 452,468 Restricted for housing and redevelopment 1,330,134 Total fund balances 1,782,602 Total liabilities, deferred inflows of resources, and fund balances $ 1,811,444 Total fund balances reported above $ 1,782,602 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 315,900 Other improvements 174,290 Less: accumulated depreciation (117,162) 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 7,339 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 (64,775) Deferred inflows of resources related to pensions (909) Deferred outflows of resources related to pensions 21,067 Total net position - Housing and Redevelopment Authority $ 2,118,352 141 City of Elk River Housing and Redevelopment Authority Component Unit Statement of Revenues, Expenditures, and Change in Fund Balances Year Ended December 31, 2022 Housing and Redevelopment Authority Revenues Property taxes $ 328,889 Intergovernmental 192 Other revenue Investment income 4,178 Total revenues 333,259 Expenditures Current Economic development 171,706 Capital Outlay Economic development 185,426 Total expenditures 357,132 Net change in fund balances (23,873) Fund Balances Beginning of year 1,806,475 End of year $ 1,782,602 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 $ (23,873) 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 58,800 Depreciation expense (11,620) 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 5,232 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 position liability and the related deferred inflows and deferred outflows of resources. (12,508) Change in net position - Housing and Redevelopment Authority $ 16,031 142 STATISTICAL SECTION (UNAUDITED) CITY OF ELK RIVER ELK RIVER, MINNESOTA FOR THE YEAR ENDED DECEMBER 31, 2022 143 (THIS PAGE LEFT BLANK INTENTIONALLY) 144 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 146 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 156 These schedules contain information to help the reader assess the government's most significant local revenue source, property taxes. Debt Capacity 162 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 171 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 172 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. 145 City of Elk River Statistical Section (Unaudited) Net Position by Component Last Ten Fiscal Years Fiscal Year 2013 2014 2015 2016 Governmental Activities Net investment in capital assets $ 84,353,785 $ 84,921,650 $ 75,030,579 $ 78,119,790 Restricted 5,256,724 4,192,856 3,675,588 11,990,647 Unrestricted 24,069,710 24,902,387 20,170,751 6,584,209 Total governmental activities net position $ 113,680,219 $ 114,016,893 $ 98,876,918 $ 96,694,646 Business -Type Activities Net investment in capital assets $ 62,035,437 $ 62,392,972 $ 76,747,269 $ 82,230,963 Restricted 647,000 490,500 490,500 997,660 Unrestricted 22,957,506 24,718,391 24,504,299 21,466,617 Total business -type activities net position $ 85,639,943 $ 87,601,863 $ 101,742,068 $ 104,695,240 Total Primary Government Net investment in capital assets $ 146,389,222 $ 147,314,622 $ 151,777,848 $ 160,350,753 Restricted 5,903,724 4,683,356 4,166,088 12,988,307 Unrestricted 47,027,216 49,620,778 44,675,050 28,050,826 Total primary government $ 199,320,162 $ 201,618,756 $ 200,618,986 $ 201,389,886 146 Fiscal Year 2017 2018 2019 2020 2021 2022 $ 78,958,608 $ 77,092,055 $ 78,288,782 $ 78,477,651 $ 75,360,937 $ 83,281,488 2,925,562 4,236,048 3,741,368 17,138,100 12,112,762 9,676,717 15,779,965 17,685,456 19,823,663 14,546,321 26,690,158 24,423,193 $ 97,664,135 $ 99,013,559 $ 101,853,813 $ 110,162,072 $ 114,163,857 $ 117,381,398 $ 83,919,324 $ 85,104,737 $ 84,327,032 $ 86,155,217 $ 87,943,523 $ 93,539,999 997,660 1,261,359 1,261,359 1,261,359 1,779,016 1,779,016 21,912,125 24,308,658 27,656,995 31,499,220 33,405,459 32,615,346 $ 106,829,109 $ 110,674,754 $ 113,245,386 $ 118,915,796 $ 123,127,998 $ 127,934,361 $ 162,877,932 $ 162,196,792 $ 162,615,814 $ 164,632,868 $ 163,304,460 $ 176,821,487 3,923,222 5,497,407 5,002,727 18,399,459 13,891,778 11,455,733 37,692,090 41,994,114 47,480,658 46,045,541 60,095,617 57,038,539 $ 204,493,244 $ 209,688,313 $ 215,099,199 $ 229,077,868 $ 237,291,855 $ 245,315,759 Table 1 147 City of Elk River Statistical Section (Unaudited) Changes in Net Position Last Ten Fiscal Years (Accrual Basis of Accounting) 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 Fiscal Year 2013 2014 2015 2016 $ 3,344,317 $ 3,554,136 $ 3,619,293 $ 3,996,316 6,173,244 6,615,593 6,720,283 9,231,492 6,535,616 6,860,673 5,351,630 5,539,045 3,914,000 4,088,992 3,970,704 4,014,737 2,088,064 1,091,125 959,414 954,723 1,288,020 1,075,408 1,084,902 996,933 23,343,261 23,285,927 21,706,226 24,733,246 5,706,760 5,776,873 5,945,126 6,063,922 1,251,420 1,303,943 1,3 82,890 1,475,027 2,320,743 2,156,329 2,318,709 2,473,139 - - 736,411 645,596 2,332,680 2,459,319 2,478,904 2,532,653 28,422,759 29,597,247 30,012,830 32,190,114 40,034,362 41,293,711 $ 63,377,623 $ 64,579,638 42,874,870 45,380,451 $ 64,581,096 $ 70,113,697 $ 338,469 $ 385,238 $ 439,826 $ 678,679 961,072 1,063,725 1,194,458 1,041,141 206,606 233,593 174,452 199,034 1,075,576 906,291 925,591 931,674 274,833 77,430 92,716 32,961 954,164 1,049,744 1,033,338 1,692,517 807,208 4,020,851 3,574,036 1,333,057 4,617,928 7,736,872 7,434,417 5,909,063 6,756,581 6,825,342 6,974,336 7,009,574 1,285,138 1,304,750 1,321,301 1,342,900 1,613,276 1,734,141 1,818,476 1,921,190 - - 355,454 477,377 2,381,651 2,290,824 2,379,835 2,370,221 31,029,299 31,596,217 32,831,209 34,746,098 924,641 935,909 2,708,564 1,758,131 43,990,586 44,687,183 48,389,175 49,625,491 48,608,514 52,424,055 55,823,592 55,534,554 Fiscal Year 2017 2018 2019 2020 2021 2022 $ 3,932,100 $ 3,981,134 $ 3,786,257 $ 4,526,987 $ 4,655,075 $5,180,758 7,670,839 7,398,041 9,188,562 8,372,884 8,082,449 11,558,469 6,803,504 5,619,836 5,920,022 4,468,711 5,340,633 7,638,554 4,157,960 4,474,619 4,094,690 6,080,466 11,070,966 6,139,661 1,221,761 969,443 540,497 691,956 433,530 527,673 549,303 486,630 979,755 1,490,127 1,796,294 1,615,250 24,335,467 22,929,703 24,509,783 25,631,131 31,378,947 32,660,365 6,030,973 6,233,700 6,772,414 7,119,662 7,683,695 7,785,027 1,521,803 1,588,956 3,550,622 3,672,176 3,743,503 3,759,165 3,377,828 3,504,489 1,456,482 1,565,482 1,623,785 1,670,454 774,805 634,073 1,024,928 571,170 612,527 663,420 2,856,343 2,666,149 35,200,295 34,565,317 38,462,316 43,262,804 33,688,690 35,680,220 2,703,390 2,697,201 3,210,394 3,208,929 48,250,442 50,307,587 50,708,131 50,191,008 55,336,220 60,349,799 $ 72,585,909 $ 73,237,290 $ 75,217,914 $ 75,822,139 $ 86,715,167 $ 93,010,164 $ 756,586 $ 648,183 $ 765,646 $ 647,010 $ 853,100 $ 800,973 1,471,063 1,219,783 1,267,920 1,176,435 1,211,025 1,184,261 177,802 111,740 94,832 51,986 65,332 380,000 1,051,312 1,071,902 810,476 448,022 1,148,991 1,338,079 87,842 91,503 57,075 83,785 246,301 102,066 1,319,377 1,381,151 1,396,313 3,354,583 1,328,148 1,905,073 3,187,830 1,721,638 1,509,650 3,254,122 5,916,070 8,005,633 8,051,812 6,245,900 5,901,912 9,015,943 10,768,967 13,716,085 6,951,988 7,203,155 7,617,790 7,927,706 8,620,643 8,531,414 1,352,728 1,553,498 1,645,115 1,686,664 1,773,620 2,633,732 2,116,900 2,301,428 2,383,196 2,481,522 2,517,025 1,889,247 509,365 485,484 510,889 564,699 586,049 609,101 2,553,651 2,757,237 2,552,630 2,936,855 3,412,990 44,729,379 36,465,382 39,151,208 38,663,268 38,469,516 41,396,708 3,413,829 - - 1,200 - - - 2,196,626 2,295,004 1,277,596 3,331,984 4,308,960 7,289,979 52,146,640 55,747,014 54,651,684 57,398,946 62,615,995 69,096,681 60,198,452 61,992,914 60,553,596 66,414,889 73,384,962 82,812,766 Table 2 149 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 Othertaxes 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 Statistical Section (Unaudited) Changes in Net Position (Continued) Last Ten Fiscal Years (Accrual Basis of Accounting) Fiscal Year 2013 2014 2015 2016 $ (18,725,333) $ (15,549,055) $ (14,271,809) $ (18,824,183) 3,956,224 3,393,472 5,514,305 4,245,040 $ (14,769,109) $ (12,155,583) $ (8,757,504) $ (14,579,14-3 $ 10,830,218 $ 10,509,231 $ 10,931,945 $ 11,136,310 829,112 1,441,259 1,513,621 1,552,499 1,436,135 1,749,886 1,642,098 1,820,248 (663,762) 1,137,024 512,193 311,469 629,177 29,593 2,796,041 29,695 (121,172) (313,287) (11,188,695) - 1,565,206 1,332,023 297,362 1,791,690 14,504,914 15,885,729 6,504,565 16,641,911 (243,047) 557,659 259,494 167,849 1,572 29,525 8,899 331,973 121,172 313,287 11,188,695 - (1,565,206) (1,332,023) (297,362) (1,791,690) (1,685,509) (431,552) 11,159,726 (1,291,868) $ 12,819,405 $ 15,454,177 $ 17,664,291 $ 15,350,043 $ (4,220,419) $ 336,674 $ (7,767,244) $ (2,182,272) 2,270,715 2,961,920 16,674,031 2,953,172 $ (1,949,704) $ 3,298,594 $ 8,906,787 $ 770,900 150 Fiscal Year 2017 2018 2019 2020 2021 2022 $ (16,283,655) $ (16,683,803) $ (18,607,871) $ (16,615,188) $ (20,609,980) $ (18,944,280) 3,896,198 5,439,427 3,943,553 7,207,938 7,279,775 8,746,882 $ (12,387,457) $ (11,244,376) $ (14,664,318) $ (9,407,250) $ (13,330,205) $ (10,197,398) $ 11,645,328 $ 12,192,911 $ 13,022,991 $ 13,972,068 $ 14,290,673 $ 15,250,309 - - 652,665 3,030,938 3,469,146 3,862,154 1,543,086 1,591,663 1,636,333 1,698,040 1,754,189 1,722,678 1,720,932 1,754,373 2,588,461 2,644,469 747,226 734,932 498,235 430,642 1,420,677 1,240,595 (56,944) (2,079,797) 116,012 - - 56,457 522,275 537,061 - - 41,698 - 1,053,072 108,455 1,971,250 2,063,638 2,085,300 2,280,880 2,832,128 2,026,029 17,494,843 18,033,227 21,448,125 24,923,447 24,611,765 22,161,821 231,599 467,294 704,099 716,582 (75,566) (1,947,278) 17,500 2,462 - - - - - - 8,280 26,770 (159,879) 32,788 (1,971,250) (2,063,638) (2,085,300) (2,280,880) (2,832,128) (2,026,029) (1,722,151) (1,593,882) (1,372,921) (1,5371528) (3,067,573) (3,940,519) $ 15,772,692 $ 16,439,345 $ 20,075,204 $ 23,385,919 $ 21,544,192 $ 18,221,302 $ 1,211,188 $ 1,349,424 $ 2,840,254 $ 8,308,259 $ 4,001,785 $ 3,217,541 2,174,047 3,845,545 2,570,632 5,670,410 4,212,202 4,806,363 $ 3,385,235 $ 5,194,969 $ 5,410,886 $ 13,978,669 $ 8,213,987 $ 8,023,904 Table 2 Continued 151 General Fund Nonspendable Restricted Committed Assigned Unassigned Total general fund All other governmental funds Nonspendable Restricted Committed Assigned Unassigned Total all other governmental funds City of Elk River Statistical Section (Unaudited) Fund Balances of Governmental Funds Last Ten Fiscal Years (Modified Accrual Basis of Accounting) Fiscal Year 2013 2014 2015 2016 $ 14,628 $ 22,725 $ 23,676 $ 20,964 - - 7,000 - 247,937 317,929 376,943 - - - - 266,832 5,791,725 5,822,948 6,157,179 6,470,281 $ 6,054,290 $ 6,163,602 $ 6,564,798 $ 6,758,077 $ 99,703 $ 101,910 $ 103,295 $ 108,176 14,800, 868 13,925,683 13,202,500 12,245,679 4,393,689 5,829,001 8,099,951 9,250,014 15,455,671 15, 883,279 15,5 79,524 12,632,948 (2,324,550) (2,527,613) (2,438,049) (2,660,264) $ 32,425,381 $ 33,212,260 $ 34,547,221 $ 31,576,553 152 Fiscal Year 2017 2018 2019 2020 2021 2022 $ 88,038 $ 124,064 $ 187,305 $ 282,860 $ 160,019 $ - 356,174 237,813 - - - - 6,853,298 7,299,540 7,684,153 7,967,868 8,590,610 8,888,888 $ 7,297,510 $ 7,661,417 $ 7,871,458 $ 8,250,728 $ 8,750,629 $ 8,888,888 $ - $ 114,976 $ 62,017 $ 16 $ 432 $ 114,967 3,104,196 3,150,743 28,548,680 26,250,482 12,443,162 12,149,090 10,354,648 12,068,614 10,182,700 11,705,506 11,880,096 9,583,438 10,984,072 10,716,044 13,177,577 14,950,419 13,784,749 13,064,623 (2,627,513) (2,934,515) (2,824,246) (2,652,806) (1,691,896) 7,610,065 $ 21,815,403 $ 23,115,862 $ 49,146,728 $ 50,253,617 $ 36,416,543 $ 42,522,183 Table 3 153 City of Elk River 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 Lease issuance 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 2013 2014 2015 2016 $ 10,930,129 $ 10,640,251 $ 10,953,633 $ 11,171,496 829,112 1,441,259 1,513,621 1,552,499 513,779 559,286 639,791 655,607 1,161,458 838,573 3,913,721 1,681,666 1,926,906 2,091,107 1,761,958 1,851,408 163,481 160,298 169,459 167,526 764,006 881,271 315,259 456,666 (663,763) 1,146,462 512,193 311,469 2,193,571 2,358,709 2,169,789 1,455,555 17,818,679 20,117,216 21,949,424 19,303,892 2,956,500 3,181,547 3,365,570 3,601,468 5,497,493 5,909,653 6,203,211 6,859,139 2,800,012 2,974,219 2,318,123 1,861,251 2,652,817 2,881,985 2,816,411 2,872,281 1,656,922 1,095,535 954,673 949,205 5,243,189 2,277,477 5,251,352 2,682,358 2,194,000 1,535,000 1,505,000 5,100,000 1,283,367 1,105,114 1,113,963 1,148,535 24,284,300 20,960,530 23,528,303 25,074,237 (6,465,621) (843,314) (1,578,879) (5,770,345) 9,685,000 - - - 341,700 - - - 686,407 44,827 3,017,674 80,587 6,457,233 4,837,016 4,703,787 6,524,537 (4,892,027) (3,504,993) (4,406,425) (4,832,400) 12,278,313 1,376,850 3,315,036 1,772,724 $ 5,812,692 $ 533,536 $ 1,736,157 $ (3,997,621) 16.9% 14.1% 14.3% 27.4% 154 Fiscal Year 2017 2018 2019 2020 2021 2022 $ 11,642,778 $ 12,214,702 $ 13,011,977 $ 13,975,014 $ 14,286,904 $15,016,982 - - 652,665 3,030,938 3,469,146 3,862,154 1,543,086 1,591,663 1,636,333 1,698,040 1,754,189 1,722,678 1,007,543 790,831 822,899 665,519 1,015,529 939,133 3,928,374 1,405,931 1,396,706 3,865,069 8,114,298 2,573,156 2,226,936 2,182,917 1,723,091 1,473,581 2,575,843 3,083,542 205,456 157,492 166,787 107,018 161,183 147,484 241,304 379,054 58,416 122,000 339,278 230,872 498,235 430,642 1,420,677 1,240,595 (56,944) (2,079,797) 2,313,388 2,212,818 3,202,501 2,899,380 3,278,522 3,218,201 23,607,100 21,366,050 24,092,052 29,077,154 34,937,948 28,714,405 3,524,634 3,733,746 4,004,917 4,333,018 4,439,105 4,638,041 6,791,738 7,325,724 7,620,997 7,764,843 8,335,808 9,100,633 1,974,095 1,875,645 2,217,650 2,274,616 2,421,631 2,528,964 2,937,333 3,438,103 2,968,847 3,056,757 3,891,907 4,326,742 1,122,261 964,926 540,763 693,157 454,657 517,691 7,165,286 2,431,103 16,631,953 24,556,635 28,183,763 9,210,937 10,675,000 1,575,000 1,315,000 1,900,000 2,195,000 2,375,772 725,732 507,661 713,023 1,865,033 1,847,335 1,917,993 34,916,079 21,851,908 36,013,150 46,444,059 51,769,206 34,616,773 (11,308,979) (485,858) (11,921,098) (17,366,905) (16,831,258) (5,902,368) - - 32,715,000 14,775,000 4,805,000 - - - 3,234,515 1,364,913 428,885 - 116,012 86,586 127,190 432,271 1,053,072 108,455 - - - - (5,625,000) - - - - - - 263,291 4,275,797 3,354,035 3,288,938 4,533,426 4,128,325 4,085,115 (2,304,547) (1,290,397) (1,203,638) (2,252,546) (1,296,197) (1,199,482) 2,087,262 2,150,224 38,162,005 18,853,064 3,494,085 3,257,379 $ (9,221,717) $ 1,664,366 $ 26,240,907 $ 1,486,159 $ (13,337,173) $ (2,644,989) 38.4% 10.4% 10.4% 18.1% 15.1% 16.1% Table 4 155 City of Elk River Electric Sales Last Ten Fiscal Years Fiscal Number of Total Year Customers KWWs Sold Billings 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 2022 12,955 333,644,951 42,395,048 Source: Elk River Municipal Utilities Table 5 156 Customer Customer 1 Customer 2 Customer 3 Customer 4 Customer 5 Customer 6 Customer 7 Customer 8 Customer 9 Customer 10 Customer 11 Customer 12 Customer 13 Customer 14 Total City of Elk River Principal Electric Customers Current Year and Nine Years Ago 2022 Percentage Total kWh Total of Total Sold Billings Billings 50,522,400 $ 4,910,377 11.58% 31,065,600 3,033,918 7.16% 5,637,000 666,459 1.57% 3,738,840 380,486 0.90% 3,556,500 370,204 0.87% 3,401,500 393,981 0.93% 3,366,000 371,653 0.88% 3,112,500 329,068 0.78% 2,956,020 318,978 0.75% 2,723,750 287,050 0.68% Table 6 2013 Percentage Total kWh Total of Total Sold Billings Billings 54,417,600 $ 4,386,691 14.16% 21,369,600 1,873,674 6.05% 4,923,720 412,933 1.33% 5,130,750 400,201 1.29% - - 0.00% 3,421,000 302,768 0.98% 3,370,400 307,514 0.99% 4,562,000 424,033 1.37% 2,348,700 236,566 0.76% 2,898,400 248,216 0.80% 110,080,110 $ 11,062,174 26.09% 107,290,970 $ 9,017,631 29.10% Minnesota Statute 13.685 considers data on customers of municipal electric utilities as private data and will no longer be disclosing customer names. Source: Elk River Municipal Utilities 157 Tax capacity Real property Personal property Total tax capacity Tax increment Taxable net tax capacity Total tax capacity rate Taxable market value Real property Personal property Taxable market value Estimated actual market value of taxable property Taxable market value as a percentage of estimated actual market value City of Elk River Tax Capacity, Market Value and Estimated Actual Value of Taxable Property Last Ten Fiscal Years 2013 Fiscal Year 2014 2015 2016 2017 $ 19,969,977 $ 20,047,632 $ 21,060,822 $ 21,850,219 $ 22,672,085 353,390 367,641 366,113 385,056 381,355 20,323,367 20,415,273 21,426,935 22,235,275 23,053,440 (122,648) (116,513) (198,997) (204,017) (184,717) $ 20,200,719 $ 20,298,760 $ 21,227,938 $ 22,031,258 $ 22,868,723 50.373% 48.544% 47.190% 46.170% 46.193% $ 1,599,513,500 $ 1,622,624,100 $ 1,735,898,300 $ 1,826,858,800 $ 1,909,814,070 18,055,900 18,73 6,600 18,58 5,200 19,469,900 19,234,400 $ 1,617,569,400 $ 1,641,360,700 $ 1,754,483,500 $ 1,846,328,700 $ 1,929,048,470 $ 1,758,428,600 $ 1,796,401,800 $ 1,900,894,800 $ 1,978,763,900 $ 2,060,082,600 91.99% 91.37% 92.30% 93.31% 93.64% 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. Source: Sherburne County Assessor 158 Fiscal Year 2018 2019 2020 2021 2022 $ 23,858,008 $ 25,796,978 $ 27,658,820 $ 29,276,840 $ 31,408,437 384,540 408,699 375,332 396,605 467,376 24,242,548 26,205,677 28,034,152 29,673,445 31,875,813 (196,166) (199,061) (211,066) (263,732) (294,137) $ 24,046,382 $ 26,006,616 $ 27,823,086 $ 29,409,713 $ 31,581,676 46.011% 45.907% 46.241% 44.556% 43.967% $ 2,026,119,675 $ 2,219,031,172 $ 2,394,547,946 $ 2,558,852,731 $ 2,766,271,639 19,393,900 20,605,300 18,945,900 20,009,600 23,548,900 $ 2,045,513,575 $ 2,239,636,472 $ 2,413,493,846 $ 2,578,862,331 $ 2,789,820,539 $ 2,178,621,000 $ 2,374,405,900 $ 2,547,475,200 $ 2,707,389,000 $ 2,912,167,000 93.89% 94.32% 94.74% 95.25% 95.80% Table 7 159 (THIS PAGE LEFT BLANK INTENTIONALLY) 160 City of Elk River Property Tax Rates Direct and Overlapping' Governments Last Ten Fiscal Years Table 8 City of Elk River Overlapping Rates Total School District Direct and Fiscal Debt Referendum Special Overlapping Year Operating Service Total County Operating Mkt. Value Districts Rates 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 2022 42.059 1.908 43.967 44.080 30.889 0.305 2.200 121.441 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. Source: Sherburne County Auditor/Treasurer 161 City of Elk River Principal Taxpayers Current Year and Nine Years Ago Table 9 2022 2013 Percentage Percentage Net Tax of Total Net Net Tax of Total Net Taxlayer Capacity Rank Tax Capacity Capacity Rank Tax Capacity Great River Energy $ 976,772 1 3.09% $ 1,212,644 1 6.00% JPM Capital Corporation 706,224 2 2.24 392,850 2 1.94 Target Corp. 481,078 3 1.52 270,230 5 1.34 Minnegasco 455,162 4 1.44 138,902 8 0.69 Freeport Elk River LL 409,830 5 1.30 - 0 0.00 Walmart Stores 341,206 6 1.08 281,032 4 1.39 Menards, Inc 244,046 7 0.77 181,902 6 0.90 Elk River Senior Properties LLC 204,130 8 0.65 - - BIGO-Evans Meadows LLC 187,088 9 0.59 - - BNSF Railway Company 215,997 10 0.68 - - BRE Retail Residual Owner LLC - - - 287,846 3 1.42 Phoenix Enterprises - - 146,693 7 0.73 Home Depot - - 138,090 9 0.68 7040 Lakeland Partners LLC - - - 120,742 10 0.60 Total $ 4,221,533 13.37% $ 3,170,931 16.00% 162 City of Elk River 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 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 12,764,317 12, 706,731 99.55 2020 13,692,100 13,647,883 99.68 2021 13,963,950 13,911,413 99.62 2022 14,760,323 14,449,114 97.89 Collections in Subsequent Table 10 Total Collections to Date Years Amount $ 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 10,364 11,909,507 53,888 12,760,619 37,612 13,685,495 35,881 13,947,294 14,449,114 Percentage of Levy 99.58 99.98 99.98 99.99 99.99 99.99 99.97 99.95 99.88 97.89 163 cq Ic m 'T oc N 'T N In OO N N N s9 O O O O O O O O O O O �O 00 O0 O O0 C1 O0 h O0 O0 M M 00 00 O N x g c V1 cq oc� l\ _ O 00 � O �17 oc 'T N V1 M O M N Ol Vl Vl Vl 'T kn 00 O 01 �c 00 IO O 00 N O ' 01 01 00 00 O 00 01 01 �!1 01 O N O O V1 V1 01 M N oc_ O M � 00 'T Vl 01 N O 00 01. h 01 'T 'T h 00 �. M N IO 00 N O O 01 oc 69 oc C, V) N C, N oc M N Iq l W llc� llc� lz�l M h 00 'T 00 N � M M h 00 O0 Iq O O0 M W N O l 0T N N O 01 00 O O O O O O 0 0 0 a, N kn 69 M O 00 V� oc Vl Vl � M M M M M �3 O 01 �O N O h o0 M M 01 oc Vc N O h 01 O M M M N M N N 69 2 n �E 2 E 1� O '2 O O O L- O O O N N N � ✓' N N N City of Elk River Ratios of General Bonded Debt Outstanding Last Ten Fiscal Years Table 12 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' 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 2022 23,410,000 1,915,672 - 21,494,328 68.06% 814 Note: Details regarding the city's outstanding debt can be found in the notes to the financial statements. 1 Only includes debt supported by tax levy. 2 See the Schedule of Tax Capacity, Market Value and Estimated Actual Value of Taxable Property for property value data. 3 Population data can be found in the Schedule of Demographic and Economic Statistics. 165 (THIS PAGE LEFT BLANK INTENTIONALLY) 166 City of Elk River Direct and Overlapping Governmental Activities Debt December 31, 2022 Direct Debt: City of Elk River Overlapping Debt: Sherburne County School District #728 Total overlapping debt Total direct and overlapping debt Debt Ratios: Ratio of debt per capita (26,406 population) Ratios of debt to taxable market value of $2,789,820,539 Outstanding Debt $ 63,364,308 39,192,790 288,640,000 327,832,790 $ 391,197,098 1 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. Source: Sherburne County and School District #728 Table 13 Percent of Debt City's Applicable Share to City' of Debt 100.00% $ 63,364,308 25.36% 9,940,253 29.78% 85,952,451 95,892,704 $ 159,257,012 $6,223 5.71 % 167 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 Legal Debt Margin Information Last Ten Fiscal Years Fiscal Year 2013 2014 2015 2016 2017 $ 52,752,858 $ 53,892,054 $ 57,026,844 $ 59,362,917 $ 61,802,478 32,141,667 30,071,667 28,986,667 25,706,667 15,331,667 10, 819,006 10,743,409 10,673,852 10,560,614 1,377,746 21,322,661 19,328,258 18,312,815 15,146,053 13,953,921 $ 31,430,197 $ 34,563,796 $ 38,714,029 $ 44,216,864 $ 47,848,557 40.42% 35.86% 32.11% 25.51% 22.58% Note: Under state law, the City of Elk River's outstanding general obligation debt should not exceed 3 percent of the market value of taxable property. By law, the general obligation debt subject to the limitation may be offset by amounts set aside for the extinguishment of those obligations. 1 Only 2/3 of the $7,050,000 GO EDA Refunding Bonds, Series 2013A are subject to the debt limit. The remaining 1/3 will be paid by the YMCA. I •: Fiscal Year 2018 2019 2020 2021 2022 $ 65,358,630 $ 71,232,177 $ 76,424,256 $ 77,365,870 $ 83,694,616 14,220,000 13,076,667 26,676,667 24,646,667 23,410,000 1,457,117 1,528,399 7,511,416 1,780,459 1,785,970 12,762,883 11,548,268 19,165,251 22,866,208 21,624,030 $ 52,595,747 $ 59,683,909 $ 57,259,005 $ 54,499,662 $ 62,070,586 19.53% 16.21% 25.08% 29.56% 25.84% Legal Debt Margin Calculation for Fiscal Year 2022 Estimated taxable market value $ 2,789,820,539 Debt limit (3% of market value) $ 83,694,616 Debt applicable to limit: G.O. capital improvement bonds 18,710,000 G.O. EDA bonds' 4,700,000 Less: Cash and investments in related debt service funds (1,785,970) Total net debt applicable to limit 21,624,030 Legal debt margin $ 62,070,586 Table 14 169 LO O N O V1 O� O� U 4r Q cC O O O O O O r" O v1 O v1 O v1 U v1 L--:I 00 M M M M N 7-r 69 ct E 2 O� LC U U Ol M 00 h O_ O O � M O Ol Ol 00 � N 00 �!1 �O V1 V1 .0 Q cC r" O v1 O O O O O O O v1 O O O O O v1 O y1 O v1 Oq Ol O1 00 M fl llc� llc� Ol 00 69 y H cz N O v1 00 l O� O 6�9 00 � �c "O O_ 00 "O M l� N O 00 h O � 00 V1 O Q+ yi O W 00 NEf3 Ol N O M N M M V1 M m M m M OO roc)7T M Ol M V1 l� Ol O Ol M Ol M v 0 M 00 V) �c 00 h Ol 'T l N q l O M � N V1 �O 00 O M N M 110 Ol 69 H H N City of Elk River Demographic and Economic Statistics Last Ten Fiscal Years Table 16 Personal Fiscal Income Per Capita Median School Unemployment Year Population' (in thousands) Income Age3 Enrollment4 Rates 2013 23,370 $ 691,962 $ 29,609 35 13,367 5.5% 2014 23,730 767,666 32,350 36 13,627 4.1% 2015 23,987 782,528 32,623 35 13,751 4.0% 2016 24,368 815,597 33,470 36 14,077 3.4% 2017 24,567 832,784 33,899 36 14,294 4.0% 2018 24,891 854,433 34,327 36 14,448 3.8% 2019 25,243 875,452 34,681 36 14,623 3.9% 2020 25,590 895,676 35,001 36 14,280 4.9% 2021 25,835 893,090 34,569 37 14,169 3.7% 2022 26,406 997,143 37,762 37 14,956 2.9% Data Sources ' State Demographer 2 Bureau of Economic Analysis 3 US Census Bureau 4 School District s Minnesota Department of Employment and Economic Development n/a - not available 171 City of Elk River Principal Employers Current Year and Nine Years Ago Table 17 2022 2013 Percentage Percentage of Total City of Total City Employer Employees Rank Employment Employees Rank Employment Independent School District 728 2,100 1 16.01% 1,387 1 11.42% Sherburne County 697 2 5.31% 632 2 5.20% Guardian Angels of Elk River 374 3 2.85% 374 3 3.08% Walmart 354 4 2.70% 350 4 2.88% City of Elk River 240 5 1.83% 210 5 1.73% Great River Energy 210 6 1.60% 207 6 1.70% Sportech, Inc. 185 7 1.41% 185 7 1.52% Menards 173 8 1.32% 170 8 1.40% Tescom Corporation 170 9 1.30% 161 9 1.33% First National Financial Services 142 10 1.08% - - - Cornerstone Auto Resource - - - 138 10 1.14% Total 4,645 35.41% 31814 31.40% Total Employment 2 13,116 12,150 1 Total District 2 Minnesota Department of Employment and Economic Development 172 Function City of Elk River Full -Time Equivalent Employees by Function Last Ten Fiscal Years Table 18 Fiscal Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 General government 26.9 28.3 29.3 29.3 29.3 30.3 29.3 29.8 29.9 31.3 Public safety: Police Officers 31.0 31.0 32.0 32.0 32.0 34.0 34.0 34.0 34.0 34.0 Civilians 9.0 9.0 9.0 9.0 9.0 9.0 9.0 10.0 10.0 10.0 Fire Fire administration 1.7 2.7 3.0 3.0 3.0 3.0 5.0 5.0 5.0 5.0 Paid on -call volunteers 40.0 40.0 44.0 44.0 44.0 45.0 45.0 45.0 45.0 45.0 Other public safety 8.6 9.0 9.0 9.0 9.0 9.0 7.0 7.0 7.0 7.0 Public works 15.0 15.0 15.0 15.0 15.0 15.0 16.0 15.5 15.6 15.6 Culture and recreation 18.5 18.5 17.5 17.5 17.8 18.3 18.6 19.7 23.6 24.6 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 13.5 13.5 13.5 13.5 Sewer 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 7.0 7.0 Storm Water - - 1.0 1.0 1.0 1.0 1.0 1.0 0.0 0.0 Water 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.5 8.5 Electric 31.0 31.0 34.0 34.0 34.0 34.0 36.0 36.0 37.0 36.4 Total 210.7 213.5 222.8 222.8 223.1 227.6 230.4 232.5 238.1 239.9 Source: City ofElk River Finance Department 173 O B O O O � O\ � M Vl O\ O\ O\ h h 00 O O O N O O O h O\ M 00 � M h � 00 V1 \O � V1 h V1 M h 00 V1 O N Mi M N � N N 00 N � O N � N N ii cC o � o0 00 0o N v o0 0 00 0o N M o M �o �o � � �' •� F � v N" � c*i c*i h" v ,� v N" o � N CL O N 69 N l0 � l0 l0 O N M � vl l0 M M N 00 vl N m N O G G i ULw O O ^C CO w w N O N N �� N vi O al OO N O O N pp --i M Vl O N N �p M vl O N � N O N N ~O N O N 110 110 110 110 110 110 110 110 110 110 c c i U � y--I s C/l - c o 7- ct cz o cz a cz c cyC y U O a s O a s U cz cz u N ct O O QI y ct ct r3 �+ y ct U N i a berganKDV City of Elk River Sherburne County, Minnesota Communications Letter December 31, 2022 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 Emerging Issues 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, 2022, 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 25, 2023, 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. Minneapolis, Minnesota May 25, 2023 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, 2022. 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: Management Override of Controls — Management override of internal control is considered a risk in substantially all engagements as management may be incentivized to produce better results. Misappropriation of Assets — If duties cannot be appropriately segregated, there is a risk of unauthorized disbursements being made by the City. In addition, generally this results in less review taking place as transactions are recorded in the financial statements. Improper Revenue Recognition — Revenue recognition is considered a fraud risk on substantially all engagements as it generally has a significant impact on the results of the government's operations. In addition, complexities exist surrounding the calculation and recording of various revenue sources. 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 2022. 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. M City of Elk River Required Communication Qualitative Aspects of Significant Accounting Practices (Continued) Significant Accounting Estimates (Continue) 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. The most sensitive estimates affecting the basic financial statements are: Depreciation and Amortization — The City is currently depreciating or amortizing 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. 5 City of Elk River Required Communication Uncorrected and Corrected Misstatements (Continued) 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. 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. C01 City of Elk River Required Communication Other Information Included in Annual Reports (Continued) 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. 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, 2022, the General Fund balance consisted of an unassigned balance of $8,888,888. The total unassigned fund balance represented over five and a half 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 2023 budgeted expenditures of $20,490,000, the City's unassigned General Fund balance was at 43% at December 31, 2022. $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 2018 2019 2020 2021 2022 Fund Balance 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 increased over each of the five years shown from a low of $13,388,849 in 2018 to a high in 2022 of $16,417,671. Overall, from 2018 to 2022, revenues have increased $3,028,822, or 22.6%. Revenues increased by $784,179 when comparing 2022 to 2021. Similarly, expenditures have increased over each of the five years presented. In 2022, expenditures were $18,663,781, an increase from the prior year of $1,834,181. Since 2018, expenditures have increased $3,920,828, or 26.6%. $20,000,000 $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 1018 2019 2020 2021 2022 ■ Total Revenues ■ Total Expenditures u 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 80.3% 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 2021 to 2022 by $784,179, or 5.0%. Tax revenue had the largest increase of $659,099 based on the increase in taxes levied for the fund. Other sources of revenue had relatively minor fluctuations when compared to the prior year. General Fund Revenues ara,vvv,vvv $16,000,000 $14,000,000 $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $- ' 2018 2019 2020 2021 2022 ■ Charges for Services $960,294 $944,297 $820,666 $1,077,855 $1,164,410 ■ Other 413,168 663,548 369,125 426,864 466,605 ■ Licenses and Permits 790,831 822,899 665,519 1,015,529 939,133 ■ Intergovernmental 578,324 618,488 674,061 581,927 657,107 ■ Taxes 10,646,232 11,330,080 12,127,323 12,531,317 13,190,416 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 48.4%. Overall, General Fund expenditures increased $1,834,181, or 10.9%, from 2021. Public safety expenditures increased $764,651 with higher salaries and benefits along with additional costs for utilities and repair and maintenance needs. Culture and recreation increased $382,524 when compared to the prior year with increases in personnel costs along with additional operating supply needs as programs with continued recovery after the impact of COVID. General government expenditures increased $289,995 with increased wages for employees, higher utility costs, and larger repair and maintenance expenditures. General Fund Expenditures yGV,VVV,VVV $15,000,000 $10,000,000 $5,000,000 $ 2018 2019 2020 2021 2022 ■ Culture and Recreation $2,044,286 $2,107,192 $1,941,732 $2,015,790 $2,398,314 ■Public Works 1,796,844 2,103,742 2,132,913 21328,853 2,399,494 ■Public Safety 7,269,887 7,422,080 7,503,513 8,273,612 9,038,263 ■General Government 3,631,936 3,857,489 4,036,523 4,173,627 4,463,622 11 City of Elk River Financial Analysis General Fund - Budgetary Comparison Variance With Final ir Original and Actual Budget - Final Budget Amounts Over (Under) Revenues Property taxes $ 13,109,300 $ 13,017,377 $ (91,923) Other taxes 180,000 173,039 (6,961) Licenses and permits 865,700 939,133 73,433 Intergovernmental 623,000 657,107 34,107 Charges for services 1,053,000 1,164,410 111,410 Fines and forfeitures 120,000 127,954 7,954 Miscellaneous revenues 260,000 338,651 78,651 Total revenues 16,211,000 16,417,671 206,671 Expenditures General government 4,695,950 4,463,622 (232,328) Public safety 8,916,450 9,038,263 121,813 Public works 2,485,350 2,399,494 (85,856) Culture and recreation 2,411,900 2,398,314 (13,586) Debt service - 106,845 106,845 Capital outlay - 257,243 257,243 Total expenditures 18,509,650 18,663,781 154,131 Excess of revenues over (under) disbursements (2,298,650) (2,246,110) 52,540 Other Financing Sources (Uses) Lease issuance - 225,719 225,719 Net transfers 2,298,650 2,158,650 (140,000) Total other financing sources (uses) 2,298,650 2,384,369 85,719 Net change in fund balances $ - $ 138,259 $ 138,259 The City had a balanced budget in 2022 with anticipated revenues and net transfers equaling budgeted expenditures of $18,509,650. Overall, actual revenue was $206,671, or 1.3%, over budget. The charges for services category was $111,410 over budget related to increased fire contracts, farmers market revenue, and police services. All other revenue categories were relatively consistent with the budget. Overall, actual expenditures were more than budgeted amounts by $154,131, or 0.8%. The primary driver of the expenditures being budget related to the debt service and capital outlay categories, which were not budgeted. These categories had actual expenditure amounts in 2022 as the result of the required implementation of GASB Statement No. 87, which changed the accounting for leases. Public safety was $121,813 over budget based on personnel costs and more operational expenditures than anticipated. General government expenditures were $232,328 less than anticipated as a result of less wages due in part to personnel vacancies. All other expenditure categories had minor budget variances and 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 $116,707, or 4.6%, from 2021 with increased rates. Operating expenses increased by $234,289, or 6.9%, due in large part to a higher pension expense recognized along with greater supply and utility costs. The net effect of the increased revenues and expenses is an operating loss of $1,018,061 for the year. When not including depreciation and amortization of capital assets in the calculation, the Sewer Fund had an operating income of $623,383. 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 P, n $3,000,000 $2,000,000 $1,000,000 $(1,000,000) $(2,000,000) 2018 2019 2020 2021 2022 ■ Operating Revenues $2,246,794 $2,383,196 $2,481,522 $2,517,025 $2,633,732 ■ Operating Expenses 3,251,292 3,305,817 3,344,218 3,417,504 3,651,793 ® Operating Income without Depreciation/Amortization 634,963 721,838 773,717 739,615 623,383 ■Operating Loss (1,004,498) (922,621) (862,696) (900,479) (1,018,061) 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 2018 2019 2020 2021 2022 $4,383,877 $5245,861 $13,476,183 $14,540,459 $8,078,281 4,529,146 5,261,879 6,602,622 7,726,366 8,305,312 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 $3,694,404 since 2018. The cash and investment balance decreased $6,462,178 during 2022 while the unrestricted net position for the Sewer Fund increased $578,946 during the same time period. The large drop in cash was related to over $7 million in debt escrow proceeds that were held in 2021 and were used in 2022. 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 four years presented. In 2022, the Fund showed an operating income of $218,793, which was the highest of the five years presented. This is an increase in operating income of $68,958 from 2021. The Fund experienced an increase in operating revenue of $115,627 with increased rates, while garbage operating expenses increased $46,669 due to increased contractual service expenses based on garbage customer charges. Garbage Operations $2,000,000 $1,800,000 $1,600,000 $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $0 2018 2019 2020 2021 2022 ❑ Operating Revenues $1,553,498 $1,645,115 $1,686,664 $1,773,620 $1,889,247 ■ Operating Expenses 1,588,956 1,456,482 1,565,482 1,623,785 1,670,454 ❑ Operating Income without Depreciation (35,458) 188,633 121,182 149,835 218,793 ■ Operating Income (Loss) (35,458) 188,633 121,182 149,835 218,793 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 $409,646 since 2018. In 2022, the Garbage Fund cash and investment balance increased $82,627 while the unrestricted net position increased $88,841 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 $23,052 in 2022 while expenses increased $50,893. The net effect of the changes in revenues and expenses is an operating loss of $54,319. The Fund had operating income of $424,183 when excluding depreciation. Storm Water Operations U�1 inn nnn .p 1,GVV,VVV $1,000,000 $800,000 $600,000 $400,000 $200,000 $- $(200,000) $(400,000) $(600,000) 2018 2019 2020 2021 2022 ■ Operating Revenues $485,484 $510,889 $564,699 $586,049 $609,101 ■ Operating Expenses 634,073 1,024,928 571,170 612,527 663,420 ■ Operating Income without Depreci ation/A mortizat ion 308,889 (56,562) 456,587 440,918 424,183 ■ Operating Loss (148,589) (514,039) (6,471) (26,478) (54,319) 17 Storm Water Fund City of Elk River Financial Analysis Storm Water Fund ai,ovv,vvv $1,600,000 $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 2018 2019 2020 2021 2022 ■Cash-dInvestments $791,886 $730,463 $1,179,754 $1,433,529 $1,548,347 ■ Unrestricted Net Position 723,564 691,640 1,181,615 1,488,809 1,586,357 As of December 31, 2022, the Storm Water Fund had an ending net cash and investment balance of $1,548,347. This is an increase of $114,818 compared to 2021. Unrestricted net position at year-end was $1,586,357 and also increased $97,548 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 decreased $87,703 in 2022 after being at a high mark in 2021. Cost of sales also decreased $43,468, ending with a decrease in gross profit of 1.9%. The net effect of the decreases in revenues and expenses is operating income of $746.731, a decrease of $190,217 compared to 2021. Municipal Liquor Operations $2,000,000 $1,500,000 $1,000,000 $500,000 2022 2021 2020 2018 2019 ■ Gross Profit $2,081,377 $2,215,089 $2,245,745 $2,379,769 $2,335,534 ■ Operating Expenses 1,114,046 1,372,517 1,440,451 1,448,717 1,593,173 ■ Operating Income without Depreci ation/A mortizat ion 1,088,641 968,662 904,042 1,031,887 840,546 ■ Operating Income 969,455 845,376 808,044 936,948 746,731 19 Municipal Liquor Fund City of Elk River Financial Analysis Municipal Liquor Fund ao,Um'Uw $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 2018 2019 2020 2021 2022 ■Cash and Investments $4,150,475 $4,649,254 $5,023,743 $4,713,463 $3,978,266 ■ Unrestricted Net Position 4,296,260 4,732,801 5,111,153 5,005,721 4,334,085 As of December 31, 2022, the Municipal Liquor Fund had an ending net cash and investment balance of $3,978,266. This is a decrease of $735,197 compared to 2021. Unrestricted net position at year-end was $4,334,085, a decrease of $671,636 compared to the prior year. Both balances decreased as transfers out of $1.0 million were made out of the Municipal Liquor Fund for 2022. Unrestricted net position has increased by $37,825, or 0.9%, over the last five years when comparing 2022 to 2018. 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 2021 data for Minnesota cities ranked by various sizes. ... nmental Funds Revenue erCapita with State -Wide Averages by Population Class State -Wide* City of Elk Ri** Year December 31, 2021 2020 2021 2022 Population 2,500-10,000 10,000-20,000 20,000-100,000 25,590 25,835 26,406 operty taxes $ 560 $ 529 $ 557 $ 536 $ 540 $ 555 Tax increments 38 36 49 10 13 13 ranchise fees and other taxes 52 66 54 185 202 211 Special assessments 59 41 56 5 13 9 Licenses and permits 45 46 53 26 39 36 Intergovernmental revenues 421 293 202 151 314 97 Charges for services 136 111 108 58 100 117 Other 60 40 27 166 126 49 Total revenue $�1,371 $ 1,162 $ 1,106 $ 1,137 $ 1,347 $ 1,087 * State-wide data obtained from the Office of the State Auditor's 2021 Minnesota City Finances Report. Comparative data for 2022 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 decrease 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 Debt service Principal Interest and fiscal 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, 2021 2020 2021 2022 10,000-20,000 20,000-100,000 25,590 25,835 26,406 r $ 131 $ 116 $ 169 $ 172 $ 176 296 327 303 323 345 124 112 89 94 96 108 124 107 119 146 164 102 79 77 27 12 20 $ 848 $ 754 $ 739 $ 707 $ 747 $ 801 $ 523 $ 410 $ 317 $ 960 $ 1,095 $ 349 $ 168 $ 161 $ 110 $ 74 $ 85 $ 90 48 41 34 73 72 73 Total debt service $ 216 $ 202 $ 144 $ 147 $ 157 $ 163 * State-wide data obtained from the Office of the State Auditor's 2021 Minnesota City Finances Report. Comparative data for 2022 is not yet available. ** Population range was estimated based on latest available data. The City's capital outlay and debt service expenditures have been higher than the state-wide average for a city of a comparable population. Current expenditures have been similar to state-wide averages as well with a noted increase in 2022 related to increased Public Safety expenditures. Overall, governmental expenditures decreased $686 on a per capita basis when comparing 2022 to 2021 due to the large drop in capital expenditures in the current year as larger projects from the previous year were completed. 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 D7,VVV,VVV K000,000 0,000,000 $6,000,000 0,000,000 0,000,000 0,000,000 $2,000,000 $1,000,000 $ 2023 2024 2025 2026 2027 2028-2032 2033-2037 2038-2042 2043-2044 ■YMCA $565,000 $575,000 $590,000 $605,000 $615,000 $3,360,000 $740,000 $- $- ■ Sales Tax 890,000 935,000 1,000,000 1,030,000 1,080,000 6,200,000 7,340,000 8,365,000 3,675,000 ■ Govt Bldgs 1,510,000 895,000 940,000 985,000 1,025,000 5,610,000 3,920,000 3,825,000 - 23 City of Elk River Emerging Issues Executive Summary The following is an executive summary of financial 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 updates include: Accounting Standard Update — GASB Statement No. 96 — Subscription -Based Information Technology Arrangements GASB has issued GASB Statement No. 96 relating to accounting and financial reporting for subscription -based information technology arrangements. The requirements of this Statement will improve financial reporting by establishing a definition for subscription -based information technology arrangements and providing uniform guidance for accounting and financial reporting for transactions that meet that definition. Accounting Standard Update — GASB Statement No. 100 — Accounting Changes and Error Corrections GASB has issued GASB Statement No. 100 relating to accounting and financial reporting for accounting changes and error corrections. The requirements of this Statement will improve the clarity of the accounting and financial reporting requirements for accounting changes and error corrections, which will result in greater consistency in application in practice. In turn, more understandable, reliable, relevant, consistent, and comparable information will be provided to financial statement users for making decisions or assessing accountability. Accounting Standard Update — GASB Statement No. 101— Compensated Absences GASB has issued GASB Statement No. 101 relating to accounting and financial reporting for compensated absences. The unified recognition and measurement model in this Statement will result in a liability for compensated absences that more appropriately reflects when a government incurs an obligation. In addition, the model can be applied consistently to any type of compensated absence and will eliminate potential comparability issues between governments that offer different types of leave. The following are extensive summaries of the current updates. As your continued business partner, we are committed to keeping you informed of new and emerging issues. We are happy to discuss these issues with you further and their applicability to your City. Accounting Standard Update — GASB Statement No. 96 — Subscription -Based Information Technology Arrangements This Statement provides guidance on the accounting and financial reporting for subscription -based information technology arrangements (SBITAs) for government end users (governments). This Statement (1) defines a SBITA; (2) establishes that a SBITA results in a right -to -use subscription asset — an intangible asset — and a corresponding subscription liability; (3) provides the capitalization criteria for outlays other than subscription payments, including implementation costs of a SBITA; and (4) requires note disclosures regarding a SBITA. To the extent relevant, the standards for SBITAs are based on the standards established in Statement No. 87, Leases, as amended. City of Elk River Emerging Issues Accounting Standard Update — GASB Statement No. 96 — Subscription -Based Information Technology Arrangements (Continued) A SBITA is defined as a contract that conveys control of the right to use another party's (a SBITA vendor's) information technology (IT) software, alone or in combination with tangible capital assets (the underlying IT assets), as specified in the contract for a period of time in an exchange or exchange -like transaction. The subscription term includes the period during which a government has a noncancellable right to use the underlying IT assets. The subscription term also includes periods covered by an option to extend (if it is reasonably certain that the government or SBITA vendor will exercise that option) or to terminate (if it is reasonably certain that the government or SBITA vendor will not exercise that option). Under this Statement, a government generally should recognize a right -to -use subscription asset — an intangible asset — and a corresponding subscription liability. A government should recognize the subscription liability at the commencement of the subscription term, — which is when the subscription asset is placed into service. The subscription liability should be initially measured at the present value of subscription payments expected to be made during the subscription term. Future subscription payments should be discounted using the interest rate the SBITA vendor charges the government, which may be implicit, or the government's incremental borrowing rate if the interest rate is not readily determinable. A government should recognize amortization of the discount on the subscription liability as an outflow of resources (for example, interest expense) in subsequent financial reporting periods. The subscription asset should be initially measured as the sum of (1) the initial subscription liability amount, (2) payments made to the SBITA vendor before commencement of the subscription term, and (3) capitalizable implementation costs, less any incentives received from the SBITA vendor at or before the commencement of the subscription term. A government should recognize amortization of the subscription asset as an outflow of resources over the subscription term. Activities associated with a SBITA, other than making subscription payments, should be grouped into the following three stages, and their costs should be accounted for accordingly: • Preliminary Project Stage, including activities such as evaluating alternatives, determining needed technology, and selecting a SBITA vendor. Outlays in this stage should be expensed as incurred. Initial Implementation Stage, including all ancillary charges necessary to place the subscription asset into service. Outlays in this stage generally should be capitalized as an addition to the subscription asset. Operation and Additional Implementation Stage, including activities such as subsequent implementation activities, maintenance, and other activities for a government's ongoing operations related to a SBITA. Outlays in this stage should be expensed as incurred unless they meet specific capitalization criteria. In classifying certain outlays into the appropriate stage, the nature of the activity should be the determining factor. Training costs should be expensed as incurred, regardless of the stage in which they are incurred. 25 City of Elk River Emerging Issues Accounting Standard Update — GASB Statement No. 96 — Subscription -Based Information Technology Arrangements (Continued) If a SBITA contract contains multiple components, a government should account for each component as a separate SBITA or nonsubscription component and allocate the contract price to the different components. If it is not practicable to determine a best estimate for price allocation for some or all components in the contract, a government should account for those components as a single SBITA. This Statement provides an exception for short-term SBITAs. Short-term SBITAs have a maximum possible term under the SBITA contract of 12 months (or less), including any options to extend, regardless of their probability of being exercised. Subscription payments for short-term SBITAs should be recognized as outflows of resources. This Statement requires a government to disclose descriptive information about its SBITAs other than short-term SBITAs, such as the amount of the subscription asset, accumulated amortization, other payments not included in the measurement of a subscription liability, principal and interest requirements for the subscription liability, and other essential information. GASB Statement No. 96 is effective for reporting periods beginning after June 15, 2022. Earlier application is encouraged. Information provided above was obtained from www.gasb.org. Accounting Standard Update — GASB Statement No. 100 —Accounting Changes and Error Corrections — an Amendment of GASB Statement No. 62 The primary objective of this Statement is to enhance accounting and financial reporting requirements for accounting changes and error corrections to provide more understandable, reliable, relevant, consistent, and comparable information for making decisions or assessing accountability. This Statement defines accounting changes as changes in accounting principles, changes in accounting estimates, and changes to or within the financial reporting entity and describes the transactions or other events that constitute those changes. As part of those descriptions, for (1) certain changes in accounting principles and (2) certain changes in accounting estimates that result from a change in measurement methodology, a new principle or methodology should be justified on the basis that it is preferable to the principle or methodology used before the change. That preferability should be based on the qualitative characteristics of financial reporting — understandability, reliability, relevance, timeliness, consistency, and comparability. This Statement also addresses corrections of errors in previously issued financial statements. This Statement prescribes the accounting and financial reporting for (1) each type of accounting change and (2) error corrections. This Statement requires that (a) changes in accounting principles and error corrections be reported retroactively by restating prior periods, (b) changes to or within the financial reporting entity be reported by adjusting beginning balances of the current period, and (c) changes in accounting estimates be reported prospectively by recognizing the change in the current period. The requirements of this Statement for changes in accounting principles apply to the implementation of a new pronouncement in absence of specific transition provisions in the new pronouncement. 901 City of Elk River Emerging Issues Accounting Standard Update — GASB Statement No. 100 —Accounting Changes and Error Corrections — an Amendment of GASB Statement No. 62 (Continued) This Statement also requires that the aggregate amount of adjustments to and restatements of beginning net position, fund balance, or fund net position, as applicable, be displayed by reporting unit in the financial statements. This Statement requires disclosure in notes to financial statements of descriptive information about accounting changes and error corrections, such as their nature. In addition, information about the quantitative effects on beginning balances of each accounting change and error correction should be disclosed by reporting unit in a tabular format to reconcile beginning balances as previously reported to beginning balances as restated. Furthermore, this Statement addresses how information that is affected by a change in accounting principle or error correction should be presented in required supplementary information (RSI) and supplementary information (SI). For periods that are earlier than those included in the basic financial statements, information presented in RSI or SI should be restated for error corrections, if practicable, but not for changes in accounting principles. GASB Statement No. 100 is effective for reporting periods beginning after June 15, 2023. Earlier application is encouraged. Information provided above was obtained from www.gasb.org. Accounting Standard Update — GASB Statement No. 101— Compensated Absences The objective of this Statement is to better meet the information needs of financial statement users by updating the recognition and measurement guidance for compensated absences. That objective is achieved by aligning the recognition and measurement guidance under a unified model and by amending certain previously required disclosures. This Statement requires that liabilities for compensated absences be recognized for (1) leave that has not been used and (2) leave that has been used but not yet paid in cash or settled through noncash means. A liability should be recognized for leave that has not been used if (a) the leave is attributable to services already rendered, (b) the leave accumulates, and (c) the leave is more likely than not to be used for time off or otherwise paid in cash or settled through noncash means. Leave is attributable to services already rendered when an employee has performed the services required to earn the leave. Leave that accumulates is carried forward from the reporting period in which it is earned to a future reporting period during which it may be used for time off or otherwise paid or settled. In estimating the leave that is more likely than not to be used or otherwise paid or settled, a government should consider relevant factors such as employment policies related to compensated absences and historical information about the use or payment of compensated absences. However, leave that is more likely than not to be settled through conversion to defined benefit postemployment benefits should not be included in a liability for compensated absences. 27 City of Elk River Emerging Issues Accounting Standard Update — GASB Statement No. 101— Compensated Absences (Continued) This Statement requires that a liability for certain types of compensated absences — including parental leave, military leave, and jury duty leave — not be recognized until the leave commences. This Statement also requires that a liability for specific types of compensated absences not be recognized until the leave is used. This Statement also establishes guidance for measuring a liability for leave that has not been used, generally using an employee's pay rate as of the date of the financial statements. A liability for leave that has been used but not yet paid or settled should be measured at the amount of the cash payment or noncash settlement to be made. Certain salary -related payments that are directly and incrementally associated with payments for leave also should be included in the measurement of the liabilities. With respect to financial statements prepared using the current financial resources measurement focus, this Statement requires that expenditures be recognized for the amount that normally would be liquidated with expendable available financial resources. This Statement amends the existing requirement to disclose the gross increases and decreases in a liability for compensated absences to allow governments to disclose only the net change in the liability (as long as they identify it as a net change). In addition, governments are no longer required to disclose which governmental funds typically have been used to liquidate the liability for compensated absences. GASB Statement No. 101 is effective for reporting periods beginning after December 15, 2023. Earlier application is encouraged. Information provided above was obtained from www.gasb.org. W. berganKDV City of Elk River Sherburne County, Minnesota Reports on Compliance with Government Auditing Standards, Uniform Guidance, and Legal Compliance December 31, 2022 bergonkdv.com 11 DO MORE. City of Elk River Table of Contents Schedule of Expenditures of Federal Awards Notes to Schedule of Expenditures of Federal Awards 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 Report on Compliance for each Major Federal Program and Report on Internal Control over Compliance Required by the Uniform Guidance Schedule of Findings and Questioned Costs N Minnesota Legal Compliance 10 City of Elk River Schedule of Expenditures of Federal Awards Year Ended December 31, 2022 Federal Assistance Listing Federal Federal Agency/Pass Through Agency/Program Title Number Expenditures U.S. Department of the Interior Passed through the State of Minnesota Historic Preservation Fund Grants 15.904 $ 585 Outdoor Recreation Acquisition, Development and Planning 15.916 225,000 Total U.S. Department of the Interior 225,585 U.S. Department of Transportation Passed through Minnesota Department of Transportation State and Community Highway Safety 20.600 19,259 Minimum Penalties for Repeat Offenders for Driving While Intoxicated 20.608 36,774 National Priority Safety Programs 20.616 56,034 Total U.S. Department of Transportation 112,067 U.S. Department of Treasury Passed through the State of Minnesota Coronavirus Relief Fund - America Rescue Plan 21.027 655,000 Total Federal Expenditures $ 992,652 See notes to schedule of expenditures and federal awards. City of Elk River Notes to Schedule of Expenditures of Federal Awards NOTE 1 — BASIS OF PRESENTATION The accompanying Schedule of Expenditures of Federal Awards (the "Schedule") includes the federal award activity of the City under programs of the federal government for the year -ended December 31, 2022. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of the City, it is not intended to and does not present the financial position, changes in net position, or cash flows of the City. NOTE 2 — PASS -THROUGH GRANT NUMBERS All pass -through entities listed above use the same Assistance Listing numbers as the federal grantors to identify these grants and have not assigned any additional identifying numbers. NOTE 3 — INDIRECT COST RATE The City did not elect to use the 10 percent de minimis indirect cost rate, as allowed under the Uniform Guidance. 2 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, 2022, and the related notes to financial statements, which collectively comprise the City's basic financial statements, and have issued our report thereon dated May 25, 2023. Report on 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. 3 Report on 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. Minneapolis, Minnesota May 25, 2023 BERGANKDV, LTD. I BERGANKDV.COM I DO MORE. 4 berganKDv J/ Report on Compliance for each Major Federal Program and Report on Internal Control over Compliance Required by the Uniform Guidance Independent Auditor's Report Honorable Mayor and Members of the City Council City of Elk River Elk River, Minnesota Report on Compliance for Each Major Federal Program Opinion on Each Major Federal Program We have audited the City's compliance with the types of compliance requirements identified as subject to audit in the OMB Compliance Supplement that could have a direct and material effect on the City's major federal program for the year ended December 31, 2022. The City's major federal program is identified in the summary of auditor's results section of the accompanying Schedule of Findings and Questioned Costs. In our opinion, the City complied in all material respects, with the compliance requirements referred to above that could have a direct and material effect on its major federal program for the year ended December 31, 2022. Basis for Opinion on Each Major Federal Program We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America (GARS); the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States (Government Auditing Standards); and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Our responsibilities under those standards and the Uniform Guidance are further described in the Auditor's Responsibilities for the Audit of Compliance section of our report. We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with 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 opinion on compliance for each major federal program. Our audit does not provide a legal determination of the City's compliance with the compliance requirements referred to above. Responsibilities of Management for Compliance Management is responsible for compliance with the requirements referred to above and for the design, implementation, and maintenance of effective internal control over compliance with the requirements of laws, statutes, regulations, rules, and provisions of contracts or grant agreements applicable to the City's federal programs. BERGANKDV, LTD. I BERGANKDV.COM I DO MORE. 5 Auditor's Responsibilities for the Audit of Compliance Our objectives are to obtain reasonable assurance about whether material noncompliance with the compliance requirements referred to above occurred, whether due to fraud or error, and express an opinion on the City's compliance based on our audit. 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 GARS, Government Auditing Standards, and the Uniform Guidance will always detect material noncompliance when it exists. The risk of not detecting material noncompliance resulting from fraud is higher than for that resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Noncompliance with the compliance requirements referred to above is considered material, if there is a substantial likelihood that, individually or in the aggregate, it would influence the judgment made by a reasonable user of the report on compliance about the City's compliance with the requirements of each major federal program as a whole. In performing an audit in accordance with GAAS, Government Auditing Standards, and the Uniform Guidance, we • Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material noncompliance, 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 City's compliance with the compliance requirements referred to above and performing such other procedures as we considered necessary in the circumstances. • Obtain an understanding of the City's internal control over compliance relevant to the audit in order to design audit procedures that are appropriate in the circumstances and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control over compliance. Accordingly, no such opinion is expressed. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and any significant deficiencies and material weaknesses in internal control over compliance that we identified during the audit. Report on Internal Control over Compliance A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. BERGANKDV, LTD. I BERGANKDV.COM I DO MORE. 6 Report on Internal Control over Compliance (Continued) Our consideration of internal control over compliance was for the limited purpose described in Auditor's Responsibilities for the Audit of Compliance section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies in internal control over compliance. Given these limitations, during our audit we did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. However, material weaknesses or significant deficiencies in internal control over compliance may exist that were not identified. Our audit was not designed for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, no such opinion is expressed. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. Report on Schedule of Expenditures of Federal Awards Required by the Uniform Guidance We have audited the financial statements of the governmental activities, the business -type activities, the discretely presented component 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, 2022, and the related notes to financial statements which collectively comprise the City's basic financial statements. We issued our report thereon dated May 25, 2023, which contained unmodified opinions on those financial statements. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by the Uniform Guidance and is not a required part of the 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 financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Schedule of Expenditures of Federal Awards is fairly stated in all material respects in relation to the basic financial statements as a whole. 13,v� f,104, itA - Minneapolis, Minnesota May 25, 2023 BERGANKDV, LTD. I BERGANKDV.COM I DO MORE. 7 City of Elk River Schedule of Findings and Questioned Costs SECTION I — SUMMARY OF AUDITOR'S RESULTS Financial Statements Type of auditor's report issued: Internal control over financial reporting: • Material weakness(es) identified? • Significant deficiency(ies) identified? Noncompliance material to financial statements noted? Federal Awards Type of auditor's report issued on compliance for major programs: Internal control over major programs: • Material weakness(es) identified? • Significant deficiency(ies) identified? Any audit findings disclosed that are required to be reported in accordance with 2 CFR 200.516(a)? Identification of Major Programs Assistance Listing No.: Name of Federal Program or Cluster: Dollar threshold used to distinguish between type A and type B programs: Auditee qualified as low risk auditee? We issued an unmodified opinion on the fair presentation of the financial statements of the governmental activities, business -type activities, the discretely presented component units, each major fund, and the aggregate remaining fund information in accordance with accounting principles generally accepted in the United States of America (GAAP). No None reported Unmodified No None reported No 21.027 Coronavirus Relief Fund — America Rescue Plan $750,000 No City of Elk River Schedule of Findings and Questioned Costs SECTION II — FINANCIAL STATEMENT FINDINGS There were no financial statement findings. SECTION III — FEDERAL AWARD FINDINGS AND QUESTIONED COSTS There were no Federal award findings. There were no questioned costs. SECTION IV — PRIOR YEAR FINDINGS AND QUESTIONED COSTS None 0 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, 2022, and the related notes to financial statements, which collectively comprise the City's basic financial statements, and have issued our report thereon dated May 25, 2023. 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 Minnesota Statute § 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. 13ve'toi. w. Minneapolis, Minnesota May 25, 2023 BERGANKDV, LTD. I BERGANKDV.COM I DO MORE. 10 City of Elk River Audit Presentatio December 31, 20.1e nKDV 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 • Independent Auditor's Report on Compliance on each Major Federal Program and Report on Internal Control over Compliance required by the Uniform Guidance — no compliance findings or internal control findings reported ®PROFLSSIONAL SERVICES THE MIDWEST WAY bergankdvcom I info@bergankdv.com General Fund $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 S- 2018 2019 2020 2021 (Fund Balance Cash and Investment Balance 2022 ®PROFESSIONAL SERVICES THE MIDWEST WAY 3 bergankdv.com I info@hergankdv.mm General Fund $20,000,000 $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 2018 2019 2020 2021 2022 ■Total Revenues ■Total Expenditures ®PROFLSSIONAL SERVICES THE MIDWEST WAY 4 bergankdv.com I info@bergankdv.ccm General Fund ,p . $16,000,000 $14,000,000 $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $ 2019 2020 2021 2022 2018 ■Charges for Services $960,294 $944,297 $820,666 $1,077,855 $1,164,410 ■Other 413,168 663,548 369,125 426,864 466,605 * Licenses and Pennits 790,831 822,899 665,519 1,015,529 939,133 ■Intergovemmentai 578,324 618,488 674,061 581,927 657,107 ® Taxes 10,646,232 11,330,080 12,127,323 12,531,317 13,190,416 PROFESSIONAL SERVICES THE MIDWEST WAY bergankdv.com I info@bergankdv.com $15,000,000 $10,000,000 $5,000,000 $ 2018 2019 2020 2021 2022 ■ Culture and Recreation $2,044,286 $2,107,192 $1,941,732 $2,015,790 $2,398,314 ■Public Works 1,796,844 2,103,742 2,132,913 2,328,853 2,399,494 ■ Pub] ic Safety 7,269,887 7,422,080 7,503,513 8,273,612 9,038,263 ■ General Govemmient 3,631,936 3,857,489 4,036,523 4,173,627 4,463,622 PROFESSICNAL SERVICES THE MIDWEST WAY bergankdv.com I info@bergankdv.com General Fund ®PROFESSIONAL SERVICES THE MIDWEST WAY bergankdvxom I info@hergankdv.mm 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 Debt service Capital outlay Total expenditures Excess of revenues over (under) disbursements Other Financing Sources (Uses) Lease issuance Net transfers Total other financing sources (uses) Net change in fund balances Original and Final Budget $ 13,109,300 180,000 865,700 623,000 1,053,000 120,000 260,000 16.211.000 4,695,950 8,916,450 2,485,350 2,411,900 18.509.650 Actual Amounts Variance With Final Budget - $ 13,017,377 $ 173,039 939,133 657,107 1,164,410 127,954 338,651 _ 16,417,671 4,463,622 9,038,263 2,399,494 2,398,314 106,845 257,243 18,663,781 (2,298,650) (2,246,110) - 225,719 2,298,650 2,158,650 2,298,650 2,384,369 $ - $ 138,259 $ (91,923) (6,961) 73,433 34,107 111,410 7,954 78,651 206.671 (232,328) 121,813 (85,856) (13,586) 106,845 257,243 154.131 1 52,540 225,719 140,000) 85,719 138,259 Sewer Fund $4,000,000 1- $3,000,000 $2,000,000 $1,000,000 $(I,000,000) $(2,000,000) 2018 2019 2020 2021 2022 ■ Operating Revenues $2,246,794 $2,383,196 $2,481,522 $2,517,025 $2,633,732 ■ Operating Expenses 3,251,292 3,305,817 3,344,218 3,417,504 3,651,793 ■ Operating Income without D epreci atioulAmortization 634,963 721,838 773,717 739,615 623,383 ■ Operating Loss (1,004,498) (922,621) (862,696) (900,479) (1,018,061) ®PROFESSIONAL SERVICES THE MIDWEST WAY 8 bergankdv.com I info@hergankdv.mm ®PROFESSIONAL SERVICES THE MIDWEST WAY bergankdv.com I info@hergankdv.mm Garbage Fund ®PROFLSSIONAL SERVICES THE MIDWEST WAY 11 bergankdv.com I info@bergankdv.com Storm Water Fund .➢1,LVV,VVV $1,000,000 $800,000 $600,000 $400,000 $200,000 $- $(200,000) $(400,000) $(600,000) 2018 2019 2020 2021 2022 ■ Operating Revenues $485,484 $510,889 $564,699 $586,049 $609,101 ■Operating Expenses 634,073 1,024,928 571,170 612,527 663,420 ■ Operating Income without Depreciation/Amortization 308,889 (56,562) 456,587 440,918 424,183 ■Operating Loss (148,589) (514,039) (6,471) (26,478) (54,319) PROFESSIONAL SERVICES THE MIDWEST WAY 12 bergankdv.com I info@bergankdv.com Storm Water Fund $1,800,000 $1,600,000 $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 o Cash and Investments i Unrestricted Net Position 2018 2019 2020 2021 2022 $791,886 $730,463 $1,179,754 $1,433,529 $1,548,347 723,564 691,640 1,181,615 1,488,809 1,586,357 PROFLSSIONAL SERVICES THE MIDWEST WAY 13 bergankdv.com I info@bergankdv.com 14 Municipal Li uor Fund PROFLSSIONAL SERVICES THE MIDWEST WAY 15 bergankdv.com I info@bergankdv.com Governmental Activities overnnental Funds Revenue Per Capita with State -Wide Averages by Population Class State -Wide* City of Elk River** qw Year December 31, 2021 2020 2021 2022 Population 2,500-10,000 10,000-20,000 20,000-100,000 25,590 25,835 26,406 Property taxes $ 560 $ 529 $ 557 $ 536 $ 540 $ 555 Tax increments 38 36 49 10 13 13 Franchise fees and other taxes 52 66 54 185 202 211 Special assessments 59 41 56 5 13 9 Licenses and permits 45 46 53 26 39 36 Intergovernmental revenues 421 293 202 151 314 97 Charges for services 136 111 108 58 100 117 Other 60 40 27 166 126 49 Total revenue $ 1,371 $ 1,162 $ 1,106 $ 1,137 $ 1,347 $ 1,087 ®PROFLSSIONAL SERVICES THE MIDWEST WAY 16 bergankdv.com I info@bergankdv.com Governmental Activities o n a un s Expenditures Per Capita with State -Wide Averages by Population Class State -Wide* City of Elk Rive Year V215OR010,000 December 31, 2021 2020 2021 Population 10,000-20,000 20,000-100,000 25,590 25,835 Current General government $ 168 $ 131 $ 116 $ 169 $ 172 Public safety 326 296 327 303 323 Public works 144 124 112 89 94 Parks and recreation 108 124 107 119 146 Other 102 79 77 27 12 Total current $ 848 $ 754 $ 739 $ 707 $ 747 Capital outlay and construction $ 523 $ 410 $ 317 $ 960 $ 1,095 Debt service Principal $ 168 $ 161 $ 110 $ 74 $ 85 Interest and fiscal 48 41 34 73 72 Total debt service A $ 216 $ 202 $ 144 $ 147 $ 157 ®PROFLSSIONAL SERVICES THE MIDWEST WAY bergankdv.com I info@bergankdv.com Governmental Activities C9 000 000 a 68,000,000 $7,000,000 66,000,000 0,000,000 64,000,000 0,000,000 62,000,000 0,000,000 $ 2023 2024 2025 2026 2027 2028-203? 2033-2037 2035 2042 2043-2044 ■YMCA $565.000 1 $575.000 $590,000 $605,000 $615.000 $3,360,000 $740.000 $- $- ■ Sales Tax 990.000 1 935.000 1,000.000 1.030-000 1,080.000 6.200A00 7.340.000 9,365.000 3.675.000 ■GovtB1dgs 1.510,000 1 895,000 940,000 985.000 1,025,000 5,610.000 3.920.000 3,825,000 ®PROFESSIONAL SERVICES THE MIDWEST WAY 18 6ergankdv.com I info@hergankdv.mm Questions ? Andrew Grice 952-563-6800 Andrew.Grice@berganKDV.com PROFLSSIONAL SERVICES THE MIDWEST WAY bergankdv.com I info@bergankdv.com q- a a E �!i 20 BerganKDVis a leading professional services firm with a contagious culture; where growth is fostered and making a difference means something. Our values drive our decisions, and our passion is empowering people and creating a wow experience for our clients. We are 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 can... DO MORE. 1