2022 New Hope Management Report
Management Report
for
City of New Hope, Minnesota
December 31, 2022
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To the City Council and Management
City of New Hope, Minnesota
We have prepared this management report in conjunction with our audit of the City of New Hope,
Minnesota’s (the City) financial statements for the year ended December 31, 2022. We have organized this
report into the following sections:
•Audit Summary
•Governmental Funds Overview
•Enterprise Funds Overview
•Government-Wide Financial Statements
•Accounting and Auditing Updates
We would be pleased to further discuss any of the information contained in this report or any other concerns
that you would like us to address. We would also like to express our thanks for the courtesy and assistance
extended to us during our audit.
The purpose of this report is solely to provide those charged with governance of the City, management, and
those who have responsibility for oversight of the financial reporting process comments resulting from our
audit process and information relevant to city finances in Minnesota. Accordingly, this report is not suitable
for any other purpose.
Minneapolis, Minnesota
June 13, 2023
C E R T I F I E D
A C C O U N T A N T S
P UBLIC
PRINCIPALS
Thomas A. Karnowski, CPA
Paul A. Radosevich, CPA
William J. Lauer, CPA
James H. Eichten, CPA
Aaron J. Nielsen, CPA
Victoria L. Holinka, CPA/CMA
Jaclyn M. Huegel, CPA
Kalen T. Karnowski, CPA
Malloy, Montague, Karnowski, Radosevich & Co., P.A.
5353 Wayzata Boulevard • Suite 410 • Minneapolis, MN 55416 • Phone: 952-545-0424 • Fax: 952-545-0569 • www.mmkr.com
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AUDIT SUMMARY
The following is a summary of our audit work, key conclusions, and other information that we consider
important or that is required to be communicated to the City Council, administration, or those charged with
governance of the City.
OUR RESPONSIBILITY UNDER AUDITING STANDARDS GENERALLY ACCEPTED IN THE UNITED
STATES OF AMERICA AND GOVERNMENT AUDITING STANDARDS.
We have audited the financial statements of the governmental activities, the business-type activities,
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 provide you with information about our
responsibilities under auditing standards generally accepted in the United States of America and
Government Auditing Standards, as well as certain information related to the planned scope and timing of
our audit. We have communicated such information to you verbally and in our audit
engagement letter. Professional standards also require that we communicate the following information
related to our audit.
PLANNED SCOPE AND TIMING OF THE AUDIT
We performed the audit according to the planned scope and timing previously discussed and coordinated
in order to obtain sufficient audit evidence and complete an effective audit.
AUDIT OPINION AND FINDINGS
Based on our audit of the City’s financial statements for the year ended December 31, 2022:
• We issued an unmodified opinion on the City’s basic financial statements. Our report included a
paragraph emphasizing the City’s implementation of Governmental Accounting Standards Board
(GASB) Statement No. 87, Leases, during the year. Our opinion was not modified with respect to
this matter.
• We reported no deficiencies in the City’s internal control over financial reporting that we
considered to be material weaknesses.
• The results of our testing disclosed no instances of noncompliance required to be reported under
Government Auditing Standards.
• We reported no findings based on our testing of the City’s compliance with Minnesota laws and
regulations.
OTHER OBSERVATIONS AND RECOMMENDATIONS
Deposit Sweep Account
Minnesota Statutes § 118A.03 requires banks holding local government entity deposits to protect the
deposits from custodial credit risk (the risk of loss in the event of a bank failure) by providing adequate
insurance, bond, or pledged collateral to cover amounts “on deposit at the close of the financial institution’s
banking day.” Some banks utilize arrangements under which governmental entities’ deposit balances in
excess of Federal Deposit Insurance Corporation limits are swept out of their depository accounts daily into
other investments or to depository accounts at other banks.
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An issue has arisen with some sweep account arrangements, caused by a lag between the timing of when
the primary bank’s records show the funds being swept out of its account and when the receiving bank’s
records acknowledge receipt of the funds. If the receiving bank’s records do not show the transferred funds
arriving the same business day as the primary bank shows them being swept out, the funds in transit would
legally still be considered in the custody of the primary depository at the end of the banking day. This would
potentially subject any excess deposits to custodial credit risk and not complying with statutory
requirements. The Minnesota Office of the State Auditor (OSA) has added audit requirements to test such
sweep arrangements in their Legal Compliance Audit Guide. In addition, recent bank failures have placed
additional emphasis on the importance of protecting local government deposits from custodial credit risk.
We recommend the City review the terms of any sweep arrangement it has in place or is considering and
verify that the financial institutions on both sides of the sweep transaction are recognizing the transfer of
funds the same banking day.
Credit Card Transactions
Minnesota cities have the authority to make purchases using credit cards issued on behalf of their city.
Credit card purchases are becoming more commonplace, especially with the proliferation of e-commerce,
and have consequently been garnering increased scrutiny from oversight agencies. The statutes authorizing
credit card use by cities restrict their use to purchases made on behalf of a city, do not permit personal use
of the credit card by the card user, and specify they should only be used by employees authorized to make
purchases. Employees are personally liable for unauthorized credit card purchases.
Purchases made with credit cards must comply with other applicable state laws, including the requirement
that all claims presented for payment must be in writing and itemized. In its Statement of Position (SOP)
on credit card use, the OSA has clarified that the statement from the credit card company lacks sufficient
detail to comply with this requirement and, therefore, “public entities using credit cards must retain the
invoices and receipts needed to support the items charged in the bill from the credit card company.” The
SOP also states that the individual vendors providing the goods or services should be listed on the claims
list provided to a city council for review and approval, rather than the credit card company.
While the authorized use of a credit card to make small purchases offers advantages, such as convenience
and expedited purchasing, the ability of the credit card users to make a city liable for purchases that are
improper or not in compliance with statutory requirements is an added risk related to such transactions. The
OSA recommends that a robust credit card policy be established by public entities allowing credit card
purchases, which clearly delineates the requirements for use, supporting documentation requ ired, and the
review and approval process for credit card purchases. The OSA also recommends that cities obtain signed
written acknowledgement of the policy from all authorized card users.
SIGNIFICANT ACCOUNTING POLICIES
Management is responsible for the selection and use of appropriate accounting policies. The significant
accounting policies used by the City are described in Note 1 of the notes to basic financial statements. No
new accounting policies were adopted and the application of existing policies was not changed during the
year ended December 31, 2022. However, the City implemented the following governmental accounting
standard during the fiscal year:
• The City implemented GASB Statement No. 87, Leases, during the current fiscal year. This
standard changed the way lease transactions are reported by the City, but did not result in a
restatement of beginning net position or fund balances.
We noted no transactions entered into by the City during the year for which there is a lack of authoritative
guidance or consensus. All significant transactions have been recognized in the financial statements in the
proper period.
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ACCOUNTING ESTIMATES AND MANAGEMENT JUDGMENTS
Accounting estimates are an integral part of the financial statements prepared by management and are based
on management’s knowledge and experience about past and current events and assumptions about future
events. Certain accounting estimates are particularly sensitive because of their significance to the financial
statements and because of the possibility that future events affecting them may differ significantly from
those expected. The most sensitive estimates affecting the financial statements were:
• Depreciation/Amortization – Management’s estimates of depreciation/amortization expenses are
based on the estimated useful lives of the assets.
• Compensated Absences – Management’s estimate is based on current rates of pay; vacation,
wellness, personal, and sick leave balances; and the likelihood that accrued sick leave will
ultimately be paid at termination.
• Value of Land Held for Resale – These assets are stated at the lower of cost or acquisition value
based on management’s estimates.
• OPEB and Pension Benefits – The City has recorded liabilities and activity for other
post-employment benefits (OPEB) and pension benefits. Actuarial estimates of these obligations
are calculated using actuarial methodologies described in GASB Statement Nos. 68 and 75. The
actuarial calculations include significant assumptions, including projected changes, healthcare
insurance costs, investment returns, retirement ages, proportionate share, and employee turnover.
We evaluated the key factors and assumptions used by management to develop these accounting estimates
in determining that they are reasonable in relation to the basic financial statements taken as a whole.
Certain financial statement disclosures are particularly sensitive because of their significance to financial
statement users. The disclosures included in the notes to the basic financial statements related to OPEB and
pension benefits are particularly sensitive, due to the materiality of the liabilities, and the large and complex
estimates involved in determining the disclosures.
The financial statement disclosures are neutral, consistent, and clear.
DIFFICULTIES ENCOUNTERED IN PERFORMING THE AUDIT
We encountered no significant difficulties in dealing with management in performing and completing our
audit.
CORRECTED AND UNCORRECTED MISSTATEMENTS
Professional standards require us to accumulate all known and likely misstatements identified during the
audit, other than those that are clearly trivial, and communicate them to the appropriate level of
management. There were no misstatements detected as a result of audit procedures that were material, either
individually or in the aggregate, to each opinion unit’s financial statements taken as a whole.
DISAGREEMENTS WITH MANAGEMENT
For purposes of this report, a disagreement with management is a financial accounting, reporting, or
auditing matter whether or not resolved to our satisfaction, that could be significant to the financial
statements or the auditor’s report. We are pleased to report that no such disagreements arose during the
course of our audit.
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MANAGEMENT REPRESENTATIONS
We have requested certain representations from management that are included in the management
representation letter dated June 13, 2023.
MANAGEMENT CONSULTATIONS WITH OTHER INDEPENDENT ACCOUNTANTS
In some cases, management may decide to consult with other accountants about auditing and accounting
matters, similar to obtaining a “second opinion” on certain situations. If a consultation involves application
of an accounting principle to the City’s financial statements or a determination of the type of auditor’s
opinion that may be expressed on those statements, our professional standards require the consulting
accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge,
there were no such consultations with other accountants.
OTHER AUDIT FINDINGS OR ISSUES
We generally discuss a variety of matters, including the application of accounting principles and auditing
standards with management each year prior to retention as the City’s auditors. However, these discussions
occurred in the normal course of our professional relationship and our responses were not a condition to
our retention.
OTHER MATTERS
We applied certain limited procedures to the management’s discussion and analysis (MD&A) and the
pension and OPEB-related required supplementary information (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.
We were engaged to report on the combining and individual fund financial statements and schedules, which
accompany the financial statements, but are not RSI. With respect to this supplementary information, 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
financial statements or to the financial statements themselves.
We were not engaged to report on the introductory and statistical sections, which accompany the financial
statements, but are not RSI. 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.
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GOVERNMENTAL FUNDS OVERVIEW
This section of the report provides you with an overview of the financial trends and activities of the City’s
governmental funds, which includes the General, special revenue, debt service, and capital project funds .
These funds are used to account for the basic services the City provides to all of its citizens, which are
financed primarily with property taxes. The governmental fund information in the City’s financial
statements focuses on budgetary compliance and the sufficiency of each governmental fund’s current assets
to finance its current liabilities.
PROPERTY TAXES
Minnesota cities rely heavily on local property tax levies to support their governmental fund activities. For
the 2021 fiscal year, local ad valorem property tax levies provided 44.0 percent of the total governmental
fund revenues for cities over 2,500 in population, and 35.5 percent for cities under 2,500 in population.
Total property taxes levied by all Minnesota cities for taxes payable in 2022 increased 5.9 percent compared
to the prior year, and 4.2 percent for taxes payable in 2023.
The total tax capacity value of property in Minnesota cities increased about 5.6 percent for the 2022 levy
year. The tax capacity values used for levying property taxes are based on the assessed market values for
the previous fiscal year (e.g., tax capacity values for taxes levied in 202 2 were based on assessed market
values as of January 1, 2021), so the trend of change in these tax capacity values lags somewhat behind the
housing market and economy in general.
The City’s taxable market value increased 7.7 percent for taxes payable in 2021 and 6.0 percent for
taxes payable in 2022. The following graph shows the City’s changes in taxable market value over the past
10 years:
$–
$300,000,000
$600,000,000
$900,000,000
$1,200,000,000
$1,500,000,000
$1,800,000,000
$2,100,000,000
$2,400,000,000
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Taxable Market Value
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Tax capacity is considered the actual base available for taxation. It is calculated by applying the state’s
property classification system to each property’s market value. Each property classification, such as
commercial or residential, has a different calculation and uses different rates. Consequently, a city’s total
tax capacity will change at a different rate than its total market value, as tax capacity is affected by the
proportion of its tax base that is in each property classification from year -to-year, as well as legislative
changes to tax rates. The City’s tax capacity increased 8.1 percent for taxes payable in 2021 and 5.1 percent
for taxes payable in 2022.
The following graph shows the City’s change in tax capacities over the past 10 years:
$–
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Local Tax Capacity
The following table presents the average tax rates applied to city residents for each of the last three levy
years:
2020 2021 2022
Average tax rate
City 66.1 64.0 64.3
County 41.1 38.2 38.6
School 26.4 25.5 26.5
Special taxing 8.4 8.6 8.7
Total 142.0 136.3 138.1
Rates Expressed as a Percentage of Net Tax Capacity
City of New Hope
Both the City portion of the tax rate and the overall tax rate for New Hope residents increased slightly for
the 2022 levy year.
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GOVERNMENTAL FUND BALANCES
The following table summarizes the changes in the fund balances of the City’s governmental funds during
the year ended December 31, 2022, presented both by fund balance classification and by major fund.
2022 2021 Change
Fund balances of governmental funds
Total by classification
Nonspendable 12,957$ 49,680$ (36,723)$
Restricted 10,602,043 9,779,064 822,979
Committed 4,724,303 4,520,972 203,331
Assigned 10,314,362 9,059,040 1,255,322
Unassigned 5,750,212 6,646,030 (895,818)
Total governmental funds 31,403,877$ 30,054,786$ 1,349,091$
Total by fund
General 7,748,072$ 8,673,743$ (925,671)$
Economic Development Authority Special Revenue 4,333,830 4,212,479 121,351
HRA Construction Capital Projects 6,628,845 5,955,136 673,709
Street Infrastructure Capital Projects 1,370,801 1,156,367 214,434
Park Infrastructure Capital Projects 1,604,089 1,512,440 91,649
HRA Bonds Debt Service (1,905,269) (1,978,033) 72,764
Nonmajor funds 11,623,509 10,522,654 1,100,855
Total governmental funds 31,403,877$ 30,054,786$ 1,349,091$
as of December 31,
Governmental Funds Change in Fund Balance
Fund Balance
In total, the fund balances of the City’s governmental funds increased by $1,349,091 during the year ended
December 31, 2022.
The increase in restricted fund balances is primarily attributable to the improvement in the financial position
of the City’s HRA Construction Capital Projects Fund in 2022.
Resources accumulated for the second phase of the City’s public works facility addition in the (nonmajor)
Public Works Facility CIP Capital Projects Fund contributed to the increase in assigned fund balances.
The decrease in unassigned fund balance relates primarily to the General Fund, which included unbudgeted
transfers of $1,142,382 of excess fund balance accumulated in the previous year to other funds, the majority
of which went to the (nonmajor) Public Works Facility CIP Capital Projects Fund.
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GOVERNMENTAL FUNDS REVENUE AND EXPENDITURES
The following table presents the per capita revenue of the City’s governmental funds for the past three years,
along with state-wide averages.
We have included the most recent comparative state-wide averages available from the OSA to provide a
benchmark for interpreting the City’s data. The amounts received from the typical major sources of
governmental fund revenue will naturally vary between cities based on factors such as a city’s stage of
development, location, size and density of its population, property values, services it provides, and other
attributes. It will also differ from year-to-year, due to the effect of inflation and changes in its operation.
Also, certain data in these tables may be classified differently than how they appear in the City’s financial
statements in order to be more comparable to the state-wide information, particularly in separating capital
expenditures from current expenditures.
We have designed this section of our management report using per capita data in order to better identify
unique or unusual trends and activities of the City. We intend for this type of comparative and trend
information to complement, rather than duplicate, information in the MD&A. An inherent difficulty in
presenting per capita information is the accuracy of the population count, which for most years is based on
estimates.
Year 2020 2021 2022
Population 10,000–20,000 20,000–100,000 21,986 21,870 21,870
Property taxes 529$ 557$ 762$ 798$ 834$
Tax increments 36 49 87 97 101
Franchise and other taxes 66 53 44 44 44
Special assessments 41 56 11 7 6
Licenses and permits 46 53 18 18 16
Intergovernmental revenues 293 202 195 149 164
Charges for services 111 110 45 81 103
Other 39 26 35 19 (13)
Total revenue 1,161$ 1,106$ 1,197$ 1,213$ 1,255$
Governmental Funds Revenue per Capita
With State-Wide Averages by Population Class
City of New HopeState-Wide
December 31, 2021
In total, the City’s governmental fund revenues for 2022 were $27,459,463, an increase of $947,001
(3.6 percent) or $42 capita from the prior year. Property tax revenue was $36 per capita higher than last
year, due to an increase in the City’s levy. Intergovernmental revenue was $15 per capita higher than last
year, mainly due to an increase in municipal state aid (MSA) street aid. Increases in police service charges
and recreation program fees contributed to a $22 per capita increase in charges for services. Revenue from
“other” sources as presented above, were $32 per capita lower than the prior year, mainly due to a decrease
in investment earnings (charges) related to fair value declines in the City’s investment portfolio. As the
City generally holds its investments to maturity, these unrealized fair value fluctuations are expected to be
recovered by the time the individual investments mature.
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The expenditures of governmental funds will also vary from state -wide averages and from year-to-year,
based on the City’s circumstances. Expenditures are classified into three types as follows:
• Current – These are typically the general operating type expenditures occurring on an annual basis,
and are primarily funded by general sources, such as taxes and intergovernmental revenues.
• Capital Outlay and Construction – These expenditures do not occur on a consistent basis, more
typically fluctuating significantly from year-to-year. Many of these expenditures are
project-oriented, and are often funded by specific sources that have benefited from the expenditure,
such as special assessment improvement projects.
• Debt Service – Although the expenditures for debt service may be relatively consistent over the
term of the respective debt, the funding source is the important factor. Some debt may be repaid
through specific sources, such as special assessments or redevelopment funding, while other debt
may be repaid with general property taxes.
The City’s expenditures per capita of its governmental funds for the past three years, together with
comparative state-wide averages, are presented in the following table:
Year 2020 2021 2022
Population 10,000–20,000 20,000–100,000 21,986 21,870 21,870
Current
131$ 116$ 94$ 98$ 111$
296 327 380 393 408
124 112 84 87 100
124 107 93 120 138
79 77 59 61 59
Total current 754 739 710 759 816
Capital outlay
and construction 407 317 394 211 164
Debt service
161 110 87 117 121
41 34 81 79 74
Total debt service 202 144 168 196 195
Total expenditures 1,363$ 1,200$ 1,272$ 1,166$ 1,175$
Governmental Funds Expenditures per Capita
With State-Wide Averages by Population Class
City of New Hope
All other
State-Wide
December 31, 2021
Principal
Interest and fiscal
General government
Public safety
Public works
Culture and recreation
The City’s total governmental funds expenditures were $25,687,141 for 2022, an increase of $203,246
(0.8 percent) from the prior year, or $9 per capita. Current expenditures increased $57 per capita, with the
increase spread across almost all functional areas. Capital outlay expenditures decreased $47 per capita,
mainly due to less construction on the City’s public works facility addition than in the previous year. Debt
service expenditures decreased $1 per capita.
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GENERAL FUND
The City’s General Fund accounts for the financial activity of the basic services provided to the community.
The primary services included within this fund are the administration of the municipal operation, police
and fire protection, building inspection, streets and highway maintenance, culture and recreation, and
economic development. The graph below illustrates the change in the General Fund financial position over
the last five years. We have also included a line representing annual expenditures and operating transfers
out to reflect the change in the size of the General Fund operation over the same period.
2018 2019 2020 2021 2022
Fund Balance $7,180,951 $7,139,703 $8,926,086 $8,673,743 $7,748,072
Cash Balance (Net)$6,992,743 $7,187,781 $8,819,883 $8,578,067 $7,629,448
Exp & Trans Out $13,652,053 $14,337,748 $14,130,989 $16,845,891 $17,475,784
$–
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
$16,000,000
$18,000,000
General Fund Financial Position
Year Ended December 31,
The total fund balance of the City’s General Fund decreased $925,671 in 2022, as compared to a breakeven
budget. Unassigned fund balance was $7,655,481 at the end of fiscal year 2022, which represents
approximately 43.8 percent of annual expenditures and transfers out based on 2022 levels.
As the graph illustrates, the City has generally been able to maintain healthy cash and fund balance levels
as the volume of financial activity has grown. This is an important factor because a government, like any
organization, requires a certain amount of equity to operate. A healthy financial position allows the City to
avoid volatility in tax rates; helps minimize the impact of state funding changes; allows for the adequate
and consistent funding of services, repairs, and unexpected costs; and is a factor in determining the City’s
bond rating and resulting interest costs.
A trend that is typical to Minnesota local governments, especially the General Fund of cities, is the unusual
cash flow experienced throughout the year. The City’s General Fund cash disbursements are made fairly
evenly during the year, other than the impact of seasonal services, such as snowplowing, street maintenance,
and park activities. Cash receipts of the General Fund are quite a different story. Property taxes comprise
about 72.4 percent of the fund’s total annual revenue. Approximately half of these revenues are received
by the City in July and the rest in December. Consequently, the City needs to have adequate cash reserves
to finance its everyday operations between these payments.
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The following graph reflects the City’s General Fund revenue sources for 2022 compared to budget:
$(1)$– $1 $2 $3 $4 $5 $6 $7 $8 $9 $10 $11 $12
Property Taxes
Franchise Taxes
Licenses and Permits
Intergovernmental
Charges for Services
Fines and Forfeitures
Other
Millions
General Fund Revenue
Budget to Actual
Budget Actual
Total General Fund revenue for 2022 was $15,735,928, which was $141,223 (0.9 percent) lower than the
final budget. Intergovernmental revenue was $105,199 over budget, mainly in MSA street maintenance and
construction aid. Revenue from other sources, as shown above, was $283,928 under budget, which was
attributable to the fair value decline recognized on the City’s investment portfolio, as previously discussed.
The following graph presents the City’s General Fund revenue by source for the last five years. The graph
reflects the City’s reliance on property taxes, which represented 72.4 percent of General Fund revenue in
2022.
Property Taxes Intergovernmental Other
2018 $9,971,064 $1,332,638 $2,315,213
2019 $10,297,018 $1,342,543 $2,324,664
2020 $10,422,823 $3,161,645 $1,993,616
2021 $10,914,572 $2,603,365 $2,618,139
2022 $11,391,654 $1,629,741 $2,714,533
$–
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
$8,000,000
$9,000,000
$10,000,000
$11,000,000
$12,000,000
General Fund Revenue by Source
Year Ended December 31,
Total General Fund revenue for 2022 was $400,148 (2.5 percent) lower than the prior year. Property tax
revenue increased $477,082, due to a levy increase. Intergovernmental revenues were $973,624 less than
2021, primarily due to less federal American Rescue Plan Act (ARPA) award revenue recognized in the
General Fund in 2022. Revenue from other sources increased $96,394 from last year, mainly in charges for
services.
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The following graph illustrates the components of General Fund spending for 2022 compared to budget:
$– $1 $2 $3 $4 $5 $6 $7 $8 $9 $10
General Government
Public Safety
Public Works
Culture and Recreation
Millions
General Fund Expenditures
Budget to Actual
Budget Actual
Total General Fund expenditures for 2022 were $16,333,402, which was $154,209 (1.0 percent) over
budget. Public works expenditures were $271,808 over budget, mainly due to costs associated with an
Emerald Ash Borer abatement program. Public safety expenditures were $252,804 under budget, primarily
in police personnel services, as several positions remained vacant during the year.
The following graph illustrates the City’s General Fund expenditures by function over the last five years:
General
Government Public Safety Public Works Culture and
Recreation
2018 $1,788,108 $8,107,759 $1,491,045 $2,015,141
2019 $1,904,447 $8,482,568 $1,564,148 $2,032,585
2020 $2,063,407 $8,409,878 $1,622,046 $2,035,658
2021 $2,148,125 $8,772,777 $1,653,003 $2,629,453
2022 $2,423,685 $9,023,699 $1,870,737 $3,015,281
$– $1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
$8,000,000
$9,000,000
$10,000,000
General Fund Expenditures by Function
Year Ended December 31,
Total General Fund expenditures were $1,130,044 (7.4 percent) higher than the previous year. General
government expenditures increased $275,560, mainly in planning and zoning, elections, and City Hall
maintenance. Public safety expenditures went up by $250,922, mainly in police salaries and contributions
to the West Metro Fire Rescue District. Public works expenditures were $217,734 higher, mainly due to
costs related to Emerald Ash Borer abatement. Culture and recreation expenditures were $385,828 higher
than the prior year, mainly in salaries and services related to the aquatic center and recreation programs.
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ENTERPRISE FUNDS OVERVIEW
The City maintains several enterprise funds to account for services the City provides that are financed
primarily through fees charged to those utilizing the service. This section of the report provides you with
an overview of the financial trends and activities of the City’s enterprise funds, which include the
Sewer Utility, Water Utility, Golf Course, Ice Arena, Storm Water, and Street Lighting funds.
ENTERPRISE FUNDS FINANCIAL POSITION
The following table summarizes the changes in the financial position of the City’s enterprise funds during
the year ended December 31, 2022, presented both by classification and by fund:
2022 2021 Change
Net position of enterprise funds
Total by classification
Net investment in capital assets 24,036,351$ 22,607,046$ 1,429,305$
Unrestricted 7,913,393 6,953,260 960,133
Total enterprise funds 31,949,744$ 29,560,306$ 2,389,438$
Total by fund
Sewer Utility 6,762,627$ 5,977,582$ 785,045$
Water Utility 10,717,300 9,767,495 949,805
Golf Course 755,190 716,948 38,242
Ice Arena 4,316,750 4,087,498 229,252
Storm Water 8,908,669 8,536,338 372,331
Street Lighting 489,208 474,445 14,763
Total enterprise funds 31,949,744$ 29,560,306$ 2,389,438$
Enterprise Funds Change in Financial Position
Net Position
as of December 31,
In total, the net position of the City’s enterprise funds increased by $2,389,438 during the year ended
December 31, 2022, with the increase spread across all funds. The net investment in enterprise capital assets
increased $1,429,305, mainly due to the relationship between the repayment of outstanding capital-related
debt and depreciation/amortization recognized on the related capital assets. Unrestricted net position
increased by $960,133, mainly due to positive operating results in the Sewer Utility, Water Utility, and
Storm Water funds.
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SEWER UTILITY FUND
The following graph presents five years of operating results for the City’s Sewer Utility Fund:
2018 2019 2020 2021 2022
Oper Rev $3,154,709 $3,380,075 $3,712,613 $3,906,809 $4,026,715
Oper Exp $2,684,030 $2,843,056 $3,119,273 $2,868,543 $3,075,452
Oper Inc (Loss)$470,679 $537,019 $593,340 $1,038,266 $951,263
$–
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
$4,000,000
$4,500,000
Sewer Utility Operating Results
Year Ended December 31,
The Sewer Utility Fund ended 2022 with a total net position of $6,762,627, of which $4,228,034 represents
the net investment in sewer collection system capital assets, leaving an unrestricted balance of $2,534,593.
Net position increased $785,045 in the current year.
Operating revenue in the Sewer Utility Fund for 2022 increased $119,906 (3.1 percent) from the previous
year, which primarily reflects a 3.0 percent rate increase implemented for the year.
Operating costs for 2022 were $206,909 (7.2 percent) less than last year, mainly in salaries and benefits
expenses.
-15-
WATER UTILITY FUND
The following graph presents five years of operating results for the City’s Water Utility Fund:
2018 2019 2020 2021 2022
Oper Rev $4,391,025 $4,387,321 $5,139,616 $5,545,731 $5,526,619
Oper Exp $4,029,601 $3,720,072 $4,178,233 $4,677,022 $4,713,624
Oper Inc (Loss)$361,424 $667,249 $961,383 $868,709 $812,995
$–
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
$4,000,000
$4,500,000
$5,000,000
$5,500,000
$6,000,000
Water Utility Operating Results
Year Ended December 31,
The Water Utility Fund ended 2022 with a total net position of $10,717,300, of which $6,631,842 represents
the net investment in water distribution system capital assets, leaving an unrestricted balance of $4,085,458.
The Water Utility Fund net position increased $949,805 in 2022.
Operating revenue in the Water Utility Fund for 2022 decreased $19,112 (0.3 percent) from the prior year,
as water rates remained flat and consumption for irrigation remained high, due to another dry year.
Operating costs for 2022 were also very close to the previous year, increasing by $36,602 (0.8 percent).
-16-
GOLF COURSE FUND
The following graph presents five years of operating results for the City’s Golf Course Fund:
2018 2019 2020 2021 2022
Oper Rev $274,735 $282,323 $401,666 $450,307 $424,160
Oper Exp $309,757 $327,422 $324,994 $358,282 $389,397
Oper Inc (Loss)$(35,022)$(45,099)$76,672 $92,025 $34,763
$(100,000)
$(50,000)
$–
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
$450,000
$500,000
Golf Course Fund
Year Ended December 31,
The Golf Course Fund ended 2022 with a total net position of $755,190, an increase of $38,242. Of this,
$394,821 represents the net investment in golf course capital assets, leaving $360,369 in unrestricted
net position.
Golf Course Fund operating revenue for 2022 decreased $26,147 (5.8 percent) from the prior year, which
primarily reflects a 9.3 percent decrease in rounds played.
Operating expenses were $31,115 (8.7 percent) higher than the prior year, mainly in personnel costs and
depreciation/amortization.
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ICE ARENA FUND
The following graph presents five years of operating results for the City’s Ice Arena Fund:
2018 2019 2020 2021 2022
Oper Rev $825,531 $852,765 $560,316 $883,968 $879,927
Oper Exp $942,466 $953,352 $966,868 $1,059,816 $1,175,657
Oper Inc (Loss)$(116,935)$(100,587)$(406,552)$(175,848)$(295,730)
$(500,000)
$(300,000)
$(100,000)
$100,000
$300,000
$500,000
$700,000
$900,000
$1,100,000
$1,300,000
Ice Arena Fund
Year Ended December 31,
The Ice Arena Fund ended 2022 with a total net position of $4,316,750, an increase of $229,252. Of this,
$5,156,510 represents the net investment in ice arena capital assets, leaving an unrestricted deficit
net position of $839,760.
Ice Arena Fund operating revenue for 2022 decreased $4,041 (0.5 percent) from the prior year, primarily
from a decrease of about 3.8 percent in hours of ice time ice rental.
Operating expenses were $115,841 (10.9 percent) higher than the prior year, with increases in personnel
costs, supplies, utilities, and depreciation/amortization.
-18-
STORM WATER FUND
The following graph presents five years of operating results for the City’s Storm Water Fund:
2018 2019 2020 2021 2022
Oper Rev $1,139,007 $1,190,058 $1,259,707 $1,321,518 $1,378,944
Oper Exp $738,307 $874,407 $886,021 $890,301 $943,889
Oper Inc (Loss)$400,700 $315,651 $373,686 $431,217 $435,055
$–
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000
$900,000
$1,000,000
$1,100,000
$1,200,000
$1,300,000
$1,400,000
Storm Water Fund
Year Ended December 31,
The Storm Water Fund ended 2022 with a total net position of $8,908,669, an increase of $372,331. Of this,
$7,293,895 represents the net investment in storm water collection system capital assets, leaving an
unrestricted net position of $1,614,774.
Storm Water Fund operating revenues for 2022 increased $57,426 (4.3 percent) from the previous year,
mainly due to a 4.0 percent rate increase implemented in 2022.
Operating expenses were $53,588 (6.0 percent) higher than last year, mainly in personnel costs.
-19-
STREET LIGHTING FUND
The following graph presents five years of operating results for the City’s Street Lighting Fund:
2018 2019 2020 2021 2022
Oper Rev $144,582 $152,975 $161,866 $170,656 $178,120
Oper Exp $119,198 $116,612 $133,159 $136,112 $157,293
Oper Inc (Loss)$25,384 $36,363 $28,707 $34,544 $20,827
$–
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
$180,000
Street Lighting Fund
Year Ended December 31,
The Street Lighting Fund ended 2022 with a total net position of $489,208, an increase of $14,763. Of this,
$331,249 represents the net investment in street lighting capital assets, leaving an unrestricted net position
of $157,959.
Street Lighting Fund operating revenue for 2022 increased $7,464 (4.4 percent) from the previous year,
which reflects a 5.0 percent rate increase implemented this year.
Operating expenses were $21,181 (15.6 percent) higher than the previous year, mainly due to an increase
in utilities expense.
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GOVERNMENT-WIDE FINANCIAL STATEMENTS
In addition to fund-based information, the current reporting model for governmental entities also requires
the inclusion of two government-wide financial statements designed to present a clear picture of the City
as a single, unified entity. These government-wide financial statements provide information on the total
cost of delivering services, including capital assets and long-term liabilities.
STATEMENT OF NET POSITION
The Statement of Net Position essentially tells you what the City owns and owes at a given point in time,
the last day of the fiscal year. Theoretically, net position represents the resources the City has leftover to
use for providing services after its debts are settled. However, those resources are not always in spendable
form, or there may be restrictions on how some of those resources can be used. Therefore, net position is
divided into three components: net investment in capital assets, restricted, and unrestricted.
The following table presents the components of the City’s net position as of December 31, 2022 and 2021,
for governmental activities and business-type activities:
2022 2021 Change
Net position
Governmental activities
Net investment in capital assets 37,045,401$ 34,985,781$ 2,059,620$
Restricted 9,539,926 8,598,311 941,615
Unrestricted 22,780,655 23,427,177 (646,522)
Total governmental activities 69,365,982 67,011,269 2,354,713
Business-type activities
Net investment in capital assets 24,036,351 22,607,046 1,429,305
Unrestricted 7,525,398 6,455,200 1,070,198
Total business-type activities 31,561,749 29,062,246 2,499,503
Total net position 100,927,731$ 96,073,515$ 4,854,216$
As of December 31,
The City’s total net position at December 31, 2022 represented an increase of $4,854,216 from the previous
year-end.
Governmental activities net position increased by $2,354,713 overall. The increase in net investment in
capital assets is mainly due to current year capital asset additions, which were purchased or constructed for
without the issuance of new bonds. The increase in restricted net position was mainly due to an increase in
tax increment revenues in the HRA Construction Capital Projects Fund, which are restricted for economic
development. The decrease in unrestricted net position was mainly due to the unbudgeted transfers of excess
fund balance from the previous year in the General Fund, as discussed earlier in this report.
Business-type activities net position increased $2,499,503, as detailed in the discussion of enterprise fund
operations.
-21-
STATEMENT OF ACTIVITIES
The Statement of Activities tracks the City’s yearly revenues and expenses, as well as any other transactions
that increase or reduce total net position. These amounts represent the full cost of providing services. The
Statement of Activities provides a more comprehensive measure than just the amount of cash that changed
hands, as reflected in the fund-based financial statements. This statement includes the cost of supplies used,
depreciation/amortization of long-lived capital assets, and other accrual-based expenses.
The changes in the City’s net position for the years ended December 31, 2022 and 2021 were as follows:
2021
Program
Expenses Revenues Net Change Net Change
Governmental activities
General government 2,991,397$ 575,345$ (2,416,052)$ (419,736)$
Public safety 9,224,111 1,584,010 (7,640,101) (6,540,941)
Public works 4,716,237 1,357,560 (3,358,677) (3,135,345)
Culture and recreation 3,845,915 1,304,099 (2,541,816) (2,062,010)
Economic development 1,374,777 – (1,374,777) (1,434,986)
Interest on long-term debt 1,440,518 – (1,440,518) (1,518,351)
Business-type activities
Sewer utility 3,057,860 4,028,074 970,214 933,983
Water utility 4,732,554 5,914,064 1,181,510 1,099,890
Golf course 386,668 453,486 66,818 104,938
Ice arena 1,176,353 931,777 (244,576) (164,655)
Storm water 958,733 1,423,573 464,840 454,991
Street lighting 157,248 178,120 20,872 34,757
Total net (expense) revenue 34,062,371$ 17,750,108$ (16,312,263) (12,647,465)
General revenues
Property taxes and tax increments 20,423,652 19,476,109
Franchise taxes 959,744 962,395
Unrestricted grants and contributions 905,573 3,155,397
Unrestricted investment earnings (charges)(1,131,728) 17,650
Gain on sale of capital assets 9,238 70,300
Total general revenues 21,166,479 23,681,851
Change in net position 4,854,216$ 11,034,386$
2022
Net (expense) revenue
One of the goals of this statement is to provide a side-by-side comparison to illustrate the difference in the
way the City’s governmental and business-type operations are financed. The table clearly illustrates the
dependence of the City’s governmental operations on general revenues, such as property taxes and
unrestricted grants. It also shows that, for the most part, the City’s business-type activities are generating
sufficient program revenues (service charges and program-specific grants) to cover expenses.
The difference in the net change in general government was mainly due changes in the allocation of internal
service fund costs for technology and other services. The difference in the net change in public safety was
primarily due to a decline in the funding level of the state-wide Public Employees Retirement Association
Public Employees Police and Firefighter pension plan, recognized in 2022. The decrease in unrestricted
grants and contributions relates to the recognition of approximately $2.3 million of ARPA funding in the
prior year. The decline in unrestricted investment earnings was due to the fair value adjustments to
investments previously discussed.
-22-
ACCOUNTING AND AUDITING UPDATES
The following is a summary of Governmental Accounting Standards Board (GASB) standards expected to
be implemented in the next few years.
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 an SBITA; (2) establishes that an 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 an SBITA; and (4) requires
note disclosures regarding an SBITA. To the extent relevant, the standards for SBITAs are based on the
standards established in Statement No. 87, Leases, as amended.
An SBITA is defined as a contract that conveys control of the right to use another party’s (an 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. Under this statement, a government generally should recognize a right-to-use subscription
asset—an intangible asset—and a corresponding subscription liability.
This statement provides an exception for short-term SBITAs with a maximum possible term under the
SBITA contract of 12 months, 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.
The requirements of this statement are effective for fiscal years beginning after June 15, 2022, and all
reporting periods thereafter.
GASB STATEMENT NO. 99, OMNIBUS 2022
The objectives of this statement are to enhance comparability in accounting and financial reporting and to
improve the consistency of authoritative literature by addressing (1) practice issues that have been identified
during implementation and application of certain GASB statements and (2) accounting and financial
reporting for financial guarantees. The practice issues addressed by this statement are as follows:
• Classification and reporting of derivative instruments within the scope of Statement No. 53,
Accounting and Financial Reporting for Derivative Instruments, that do not meet the definition of
either an investment derivative instrument or a hedging derivative instrument.
• Clarification of provisions in Statement No. 87, Leases, as amended, related to the determination
of the lease term, classification of a lease as a short-term lease, recognition and measurement of a
lease liability and a lease asset, and identification of lease incentives.
• Clarification of provisions in Statement No. 94, Public-Private and Public-Public Partnerships
and Availability Payment Arrangements, related to (a) the determination of the public-private and
public-public partnership (PPP) term and (b) recognition and measurement of installment payments
and the transfer of the underlying PPP asset.
-23-
• Clarification of provisions in Statement No. 96, Subscription-Based Information Technology
Arrangements, related to the SBITA term, classification of an SBITA as a short-term SBITA, and
recognition and measurement of a subscription liability.
• Extension of the period during which the London Interbank Offered Rate (LIBOR) is considered
an appropriate benchmark interest rate for the qualitative evaluation of the effectiveness of an
interest rate swap that hedges the interest rate risk of taxable debt.
• Accounting for the distribution of benefits as part of the Supplemental Nutrition Assistance
Program (SNAP).
• Disclosures related to nonmonetary transactions.
• Pledges of future revenues when resources are not received by the pledging government.
• Clarification of provisions in Statement No. 34, Basic Financial Statements—and Management’s
Discussion and Analysis—for State and Local Governments, as amended, related to the focus of
the government-wide financial statements.
• Terminology updates related to certain provisions of Statement No. 63, Financial Reporting of
Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position.
• Terminology used in Statement No. 53, Accounting and Financial Reporting for Derivative
Instruments, to refer to resource flows statements.
The requirements of this statement that are effective are as follows:
• The requirements related to extension of the use of LIBOR, accounting for SNAP distributions,
disclosures of nonmonetary transactions, pledges of future revenues by pledging governments,
clarification of certain provisions in Statement No. 34, as amended, and terminology updates
related to Statement No. 53 and Statement No. 63 are effective upon issuance.
• The requirements related to leases, PPPs, and SBITAs are effective for fiscal years beginning after
June 15, 2022, and all reporting periods thereafter.
• The requirements related to financial guarantees and the classification and reporting of derivative
instruments within the scope of Statement No. 53 are effective for fiscal years beginning after
June 15, 2023, and all reporting periods thereafter.
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.
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.
In addition, the display and note disclosure requirements will result in more c onsistent, decision useful,
understandable, and comprehensive information for users about accounting changes and error corrections.
The requirements of this statement are effective for accounting changes and error corrections made in fiscal
years beginning after June 15, 2023, and all reporting periods thereafter. Earlier application is encouraged.
-24-
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.
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.
The requirements of this statement are effective for fiscal years beginning after December 15, 2023, and all
reporting periods thereafter. Earlier application is encouraged.
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