2016 Management Report
Management Report
for
City of New Hope, Minnesota
December 31, 2016
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C ERTIFIED
A CCOUNTANTS
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
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
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, 2016. We have organized
this report into the following sections:
Audit Summary
Governmental Funds Overview
Enterprise Funds Overview
Government-Wide Financial Statements
Legislative Updates
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 the course of 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
May 10, 2017
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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, 2016, and the related notes to the financial statements. 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, 2016:
We issued an unmodified opinion on the City’s basic financial statements.
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 one finding based on our testing of the City’s compliance with Minnesota laws and
regulations. Minnesota Statutes require the City to pay each vendor obligation according to the
terms of each contract or within 35 days after the receipt of the goods or services or the invoice
for the goods or services. For two of twenty-five disbursements selected for testing, the City did
not pay the obligation within the required time period, and did not pay interest on the unpaid
obligation.
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OTHER OBSERVATIONS AND RECOMMENDATIONS
Electronic Payment of Claims
Minnesota Statutes require that each claim made for payment from a Minnesota city include a signed
declaration that the claim is just and correct, and that no part of it has been paid. Cities have historically
obtained this signed declaration by including it above the endorsement line on the back side of their
checks. However, cities also have statutory authorization to make purchases using credit cards or pay
claims through various forms of electronic fund transfers, which typically do not involve the issuance of a
physical check. The statutes that authorized the use of these alternative purchasing methods specify that
the transactions must comply with all applicable Minnesota Statutes, which include the requirements to
obtain a signed declaration; however, there is no statutory guidance for how the claim declaration is to be
obtained for these types of transactions.
Local governments have been implementing various recommended alternative procedures that do not
comply with the letter of the law, but constitute “best-effort” practices to attempt to comply with this
requirement, including requiring employees making purchases with city credit cards to sign the required
declaration on the credit card statement prior to payment in lieu of a signed declaration from each vendor.
We recommend that the City examine its purchasing process, and consider adopting procedures to ensure
that Minnesota statutory requirements for vendor claims are complied with whenever possible.
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, 2016. We noted no transactions entered into by the City during the year for
which there is a lack of authoritative guidance or consensus. All significant transactions have been
recognized in the financial statements in the proper period.
ACCOUNTING ESTIMATES 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:
Value of Land Held for Resale – These assets are stated at the lower of cost or fair value based
on management’s estimates.
Depreciation – Management’s estimates of depreciation expense 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.
Other Post-Employment Benefit (OPEB) and Pension Liabilities – The City has recorded
liabilities and activity for other post-employment benefits (OPEB) and pension benefits. These
obligations are calculated using actuarial methodologies described in Governmental Accounting
Standards Board (GASB) Statement Nos. 45 and 68. These actuarial calculations include
significant assumptions, including projected changes, healthcare insurance costs, investment
returns, retirement ages, proportionate share, and employee turnover.
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We evaluated the key factors and assumptions used by management in the areas discussed on the previous
page in determining that they are reasonable in relation to the basic financial statements taken as a whole.
The financial statement disclosures are neutral, consistent, and clear.
CORRECTED AND UNCORRECTED MISSTATEMENTS
Professional standards require us to accumulate all known and likely misstatements identified during the
audit, other than those that are trivial, and communicate them to the appropriate level of management.
Where applicable, management has corrected all such misstatements. In addition, none of the
misstatements detected as a result of audit procedures and corrected by management, when applicable,
were material, either individually or in the aggregate, to each opinion unit’s financial statements taken as
a whole.
DIFFICULTIES ENCOUNTERED IN PERFORMING THE AUDIT
We encountered no significant difficulties in dealing with management in performing and completing our
audit.
DISAGREEMENTS WITH MANAGEMENT
For purposes of this report, professional standards define a disagreement with management as 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.
MANAGEMENT REPRESENTATIONS
We have requested certain representations from management that are included in the management
representation letter dated May 10, 2017.
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.
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OTHER MATTERS
We applied certain limited procedures to management’s discussion and analysis 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
accompanying the financial statements which 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. We did not audit or perform other procedures on this other information and
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 2015 fiscal year, local ad valorem property tax levies provided 39.8 percent of the total
governmental fund revenues for cities over 2,500 in population, and 35.6 percent for cities under 2,500 in
population. Property tax levies certified by Minnesota cities for 2016 increased about 4.8 percent over
2015, compared to an increase of 4.0 percent the prior year.
The total market value of property in Minnesota cities increased about 5.7 percent for the 2016 levy year.
While the percentage of market value growth was less than the 8.5 percent increase for levy year 2015, it
was considerably larger than the 1.1 percent growth experienced in levy year 2014. Market values
increased across all property categories for 2016, with gains in the market values of non-homestead
residential properties (9.1 percent) and other properties (7.3 percent) outpacing the market value gain of
residential homestead properties (5.0 percent), commercial/industrial properties (4.9 percent), and farms
(0.1 percent). The market values used for levying property taxes are based on the previous fiscal year
(e.g., market values for taxes levied in 2016 were based on assessed values as of January 1, 2015), so the
trend of change in these market values lags somewhat behind the housing market and economy in general.
The City’s taxable market value increased 8.0 percent for taxes payable in 2015 and 7.2 percent for taxes
payable in 2016. 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
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
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 the City’s 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 7.6 percent for taxes payable in 2015
and 7.5 percent for taxes payable in 2016.
The following graph shows the City’s change in tax capacities over the past 10 years:
$–
$3,000,000
$6,000,000
$9,000,000
$12,000,000
$15,000,000
$18,000,000
$21,000,000
$24,000,000
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Local Tax Capacity
The following table presents the average tax rates applied to city residents for each of the last two levy
years, along with comparative state-wide and metro area rates:
Rates expressed as a percentage of net tax capacity
2015 2016 2015 2016 2015 2016
Average tax rate
City 46.9 46.5 43.4 43.0 56.0 57.4
County 44.7 44.1 42.9 42.3 46.4 45.4
School 27.1 27.5 28.3 28.6 33.2 33.8
Special taxing 6.9 6.9 8.8 8.7 10.6 10.4
Total 125.6 125.0 123.4 122.6 146.2 147.0
State-Wide
All Cities
City of New HopeMetro Area
Seven-County
The City’s portion of the tax rate has been higher than average in recent years due to the City’s practice of
utilizing annual levies rather than special assessment bonds to finance street and park improvements.
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GOVERNMENTAL FUND BALANCES
The following table summarizes the changes in the fund balances of the City’s governmental funds during
the year ended December 31, 2016, presented both by fund balance classification and by fund:
Increase
2016 2015, as Restated (Decrease)
Fund balances of governmental funds
Total by classification
Nonspendable 18,242$ 16,765$ 1,477$
Restricted 7,772,782 8,069,238 (296,456)
Committed 5,397,075 5,431,288 (34,213)
Assigned 4,958,094 4,728,437 229,657
Unassigned 3,240,121 5,508,094 (2,267,973)
Total – governmental funds 21,386,314$ 23,753,822$ (2,367,508)$
Total by fund
General 6,273,678$ 6,080,412$ 193,266$
Economic Development Authority Special Revenue 5,198,723 5,236,971 (38,248)
HRA Construction Capital Projects 4,581,670 5,612,741 (1,031,071)
Street Infrastructure Capital Projects (2,274,312) (329,197) (1,945,115)
2016 Street Improvement Project Capital Projects (144,448) 2,144,683 (2,289,131)
HRA Bonds Debt Service (330,252) (226,356) (103,896)
Nonmajor funds 8,081,255 5,234,568 2,846,687
Total – governmental funds 21,386,314$ 23,753,822$ (2,367,508)$
as of December 31,
Governmental Funds Change in Fund Balance
Fund Balance
In total, the fund balances of the City’s governmental funds decreased by $2,367,508 during the year
ended December 31, 2016, excluding the impact of a prior period adjustment that reduced the fund
balance of the Street Infrastructure Capital Projects Fund by $1,097,244.
The majority of the decrease was in the unassigned fund balance category, primarily due to a fund balance
deficit of $2,274,312 created in the Street Infrastructure Capital Projects Fund. This deficit was caused by
spending for street improvement capital projects partially funded with advances of future years’ state
MSA street construction grant dollars. These advances must be reported as a deferred inflow of resources
and cannot be recognized as revenue until the grants dollars are awarded in future years. This situation
also caused the prior period adjustment mentioned above.
The decrease in the fund balances of the HRA Construction Capital Projects Fund was due to a transfer
out of $1,136,062 to finance the Xylon Avenue Street Improvement Project.
The decrease in the fund balance of the 2016 Street Improvement Project Capital Projects Fund reflects
the spenddown of proceeds from the City’s 2015B Street Reconstruction Bonds for the related projects.
The fund balance increase in the nonmajor funds is mainly due to unspent 2016A Street Reconstruction
Bond proceeds, which are in fund balance restricted for future street improvement projects at year-end.
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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 Office of the State
Auditor 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 the City’s operation. Also, certain data on these tables may be classified differently than how
they appear on 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 your city. We intend for this type of comparative and trend
information to complement, rather than duplicate, information in the management’s discussion and
analysis. An inherent difficulty in presenting per capita information is the accuracy of the population
count, which for most years is based on estimates.
Year 2014 2015 2016
Population 10,000–20,000 20,000–100,000 20,812 21,225 21,225
Property taxes 414$ 443$ 467$ 478$ 512$
Tax increments 33 37 26 20 23
Franchise and other taxes 42 39 21 21 21
Special assessments 52 59 5 2 8
Licenses and permits 31 43 17 18 22
Intergovernmental revenues 322 156 39 64 97
Charges for services 85 94 80 75 74
Other 62 58 29 34 25
Total revenue 1,041$ 929$ 684$ 712$ 782$
Governmental Funds Revenue per Capita
With State-Wide Averages by Population Class
City of New HopeState-Wide
December 31, 2015
In total, the City’s governmental fund revenues for 2016 were $16,622,182, an increase of $1,500,453
(9.9 percent) from the prior year. On a per capita basis, the City received $70 more per capita
governmental fund revenue for 2016 than the prior year. Property tax revenue was $34 per capita higher
than last year, due to an increase in the City’s levy. Revenue from intergovernmental sources was $33 per
capita higher than last year, mainly due to an increase in federal Community Development Block Grant
funds earned.
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The expenditures of governmental funds will also vary from state-wide averages and from year-to-year,
based on the City’s circumstances. Expenditures are classified into three types as follows:
Current – These are typically the general operating type expenditures occurring on an annual
basis, and are primarily funded by general sources such as taxes and intergovernmental revenues.
Capital Outlay and Construction – These expenditures do not occur on a consistent basis, more
typically fluctuating significantly from year-to-year. Many of these expenditures are
project-oriented, and are often funded by specific sources that have benefited from the
expenditure, such as special assessment improvement projects.
Debt Service – Although the expenditures for debt service may be relatively consistent over the
term of the respective debt, the funding source is the important factor. Some debt may be repaid
through specific sources such as special assessments or redevelopment funding, while other debt
may be repaid with general property taxes.
The City’s expenditures per capita of its governmental funds for the past three years, together with
state-wide averages, are presented in the following table:
Year 2014 2015 2016
Population 10,000–20,000 20,000–100,000 20,812 21,225 21,225
Current
109$ 89$ 80$ 80$ 88$
244 261 307 323 338
117 99 59 63 76
108 94 85 87 91
70 89 14 23 28
648 632 545 576 621
Capital outlay
and construction 389 286 144 387 387
Debt service
178 117 17 19 20
40 33 10 12 15
218 150 27 31 35
Total expenditures 1,255$ 1,068$ 716$ 994$ 1,043$
Principal
Interest and fiscal
General government
Public safety
Public works
Culture and recreation
Governmental Funds Expenditures per Capita
With State-Wide Averages by Population Class
City of New Hope
All other
December 31, 2015
State-Wide
The City’s total governmental funds expenditures were $22,125,018 for 2016, an increase of $1,033,469
(4.9 percent) from the prior year, or $49 per capita. The increase was mainly in current expenditures,
which were $45 per capita higher than last year, with the largest increases in spending for public safety
and public works.
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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, and parks and
recreation. 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 transfers out to reflect the
change in the size of the General Fund operation over the same period.
2012 2013 2014 2015 2016
Fund Balance $5,095,737 $5,583,417 $5,821,294 $6,080,412 $6,273,678
Cash Balance (Net)$5,043,417 $5,505,946 $5,763,629 $5,919,870 $6,090,997
Exp & Trans Out $10,283,196 $10,490,040 $11,329,709 $11,879,622 $12,624,250
$–
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
General Fund Financial Position
Year Ended December 31,
The total fund balance of the City’s General Fund increased $193,266 in 2016, as compared to a
breakeven budget. Unassigned fund balance was $6,255,436 at the end of 2016 fiscal year, which
represents approximately 49.6 percent of annual expenditures and transfers out based on 2016 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. Maintaining an adequate fund balance has become
increasingly important given the fluctuations in state funding for cities in recent years.
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 71 percent of the fund’s total annual revenue. Approximately half of these revenues
are received by the City in June/July and the rest in November/December. Consequently, the City needs
to have adequate cash reserves to finance its everyday operations between these payments.
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The following chart reflects the City’s General Fund revenue sources for 2016 compared to budget:
$– $1 $2 $3 $4 $5 $6 $7 $8 $9
Property Taxes
Franchise Taxes
Licenses and Permits
Intergovernmental
Charges for Services
Fines
Other
Millions
General Fund Revenue
Budget to Actual
Budget Actual
Total General Fund revenue for 2016 was $12,582,316, which was $22,784 (0.2 percent) lower than the
final budget. Intergovernmental revenue exceeded budget by $115,719, due to numerous small grants that
were not included in the budget. Revenue from licenses and permits was $72,718 over budget, mainly in
residential building permits and fees. Revenues from fines and forfeitures, which vary from year-to-year,
were below budget by $177,715.
The following graph presents the City’s General Fund revenues by source for the last five years. The
graph reflects the City’s reliance on property taxes and other local sources of revenue.
Property Taxes Intergovernmental Other
2012 $7,423,273 $500,547 $2,290,937
2013 $7,803,838 $526,909 $2,387,611
2014 $7,928,813 $696,731 $2,522,581
2015 $8,308,447 $1,133,965 $2,472,328
2016 $8,954,626 $1,170,180 $2,457,510
$–
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
General Fund Revenue by Source
Year Ended December 31,
Total General Fund revenue for 2016 was $667,576 (5.6 percent) higher than the prior year. Property tax
revenue increased $646,179 from last year, due to an increase in the adopted levy.
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The following graphs illustrate the components of General Fund spending for 2016 compared to budget:
$ – $ 1 $ 2 $ 3 $ 4 $ 5 $ 6 $ 7 $ 8
General Government
Public Safety
Public Works
Culture and Recreation
Millions
General Fund Expenditures
Budget to Actual
Budget Actual
Total General Fund expenditures for 2016 were $12,374,250, which was $491,050 (3.8 percent) under
budget. General government expenditures were $103,956 under budget, mainly in personnel costs and
purchased services for planning and zoning. Public safety expenditures were $322,651 under budget,
primarily in police salaries and benefits. Culture and recreation expenditures were under budget by
$71,122, mainly in the parks department.
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
2012 $1,612,658 $6,045,122 $926,056 $1,599,360
2013 $1,610,118 $6,052,292 $1,038,187 $1,605,757
2014 $1,678,999 $6,642,479 $1,009,257 $1,748,974
2015 $1,686,151 $6,975,382 $1,112,092 $1,855,997
2016 $1,750,414 $7,301,852 $1,389,553 $1,932,431
$–
$1,500,000
$3,000,000
$4,500,000
$6,000,000
$7,500,000
General Fund Expenditures by Function
Year Ended December 31,
Total General Fund expenditures were $744,628 (6.4 percent) higher than the previous year, with the
increase spread across all categories presented above. Public safety expenditures were $326,470 higher,
mainly in police and protective inspection costs. Public works expenditures increased $277,461 from last
year, primarily due to higher street maintenance expenditures.
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ENTERPRISE FUNDS OVERVIEW
The City maintains several enterprise funds to account for services the City provides that are financed
primarily through fees charged to those utilizing the service. This section of the report provides you with
an overview of the financial trends and activities of the City’s enterprise funds, which includes the Sewer
Utility, Water Utility, Golf Course, Ice Arena, Storm Water, and Street Lighting funds.
ENTERPRISE FUNDS FINANCIAL POSITION
The following table summarizes the changes in the financial position of the City’s enterprise funds during
the year ended December 31, 2016, presented both by classification and by fund:
Increase
2016 2015 (Decrease)
Net position of enterprise funds
Total by classification
Net investment in capital assets 19,286,134$ 16,087,559$ 3,198,575$
Restricted 868,853 627,939 240,914
Unrestricted (818,584) 209,839 (1,028,423)
Total – enterprise funds 19,336,403$ 16,925,337$ 2,411,066$
Total by fund
Sewer Utility 3,101,892$ 2,589,144$ 512,748$
Water Utility 5,029,330 4,547,538 481,792
Golf Course 644,161 666,302 (22,141)
Ice Arena 3,371,992 3,550,063 (178,071)
Storm Water 6,888,579 5,310,492 1,578,087
Street Lighting 300,449 261,798 38,651
Total – enterprise funds 19,336,403$ 16,925,337$ 2,411,066$
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 $2,411,066 during the year ended
December 31, 2016. The net investment in enterprise capital assets increased $3,198,575, primarily due to
the amount of contributed and internally financed utility infrastructure additions constructed during the
year. The $868,853 of restricted net position represents cash held in an escrow account in the Ice Arena
Fund for the future payment of the City’s energy conservation lease revenue bonds. Unrestricted net
position declined by $1,028,423, primarily in the Sewer Utility Fund due to capital improvements
financed with a $1.25 million internal loan from the Temporary Financing Capital Projects Fund.
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SEWER UTILITY FUND
The following graph presents five years of operating results for the City’s Sewer Utility Fund:
2012 2013 2014 2015 2016
Op. Rev $2,376,021 $2,443,094 $2,414,482 $2,468,638 $2,627,875
Op. Exp.$2,187,204 $2,279,155 $1,936,608 $2,447,426 $2,175,482
Op. Inc. (Loss)$188,817 $163,939 $477,874 $21,212 $452,393
$–
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
Sewer Utility Operating Results
Year Ended December 31,
The Sewer Utility Fund ended 2016 with a total net position of $3,101,892, of which $4,615,551
represents the net investment in sewer collection system capital assets, leaving an unrestricted deficit
balance of $1,513,659. Net position increased $512,748 in the current year.
Operating revenue in the Sewer Utility Fund for 2016 increased $159,237 (6.5 percent) from the previous
year due to a rate increase implemented for 2016.
Operating costs for 2016 were $271,944 (11.1 percent) lower than last year due to decreases in personnel
costs, purchased services, and disposal charges paid to Metropolitan Council Environmental Services.
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WATER UTILITY FUND
The following graph presents five years of operating results for the City’s Water Utility Fund:
2012 2013 2014 2015 2016
Op. Rev $3,532,349 $3,460,008 $3,572,291 $3,576,643 $3,835,031
Op. Exp.$3,586,341 $3,139,338 $4,554,088 $4,522,667 $3,519,233
Op. Inc. (Loss)$(53,992) $320,670 $(981,797) $(946,024) $315,798
$(1,500,000)
$(1,000,000)
$(500,000)
$–
$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
Water Utility Operating Results
Year Ended December 31,
The Water Utility Fund ended 2016 with a total net position of $5,029,330, of which $4,256,896
represents the net investment in water distribution system capital assets, leaving an unrestricted balance of
$772,434. Water Utility Fund net position increased $481,792 in 2016.
Operating revenue in the Water Utility Fund for 2016 increased $258,388 (7.2 percent) from the prior
year due to increases in both rates and consumption.
Operating costs for 2016 were $1,003,434 (22.2 percent) less than the prior year due to costs of goods
sold decreasing significantly. In the prior year, costs of goods sold was unusually high due to an
emergency water source capital assessment paid to the Golden Valley – Crystal – New Hope Joint Water
Commission.
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GOLF COURSE FUND
The following graph presents five years of operating results for the City’s Golf Course Fund:
2012 2013 2014 2015 2016
Op. Rev $289,448 $259,221 $243,497 $272,314 $299,856
Op. Exp.$288,457 $259,695 $298,222 $290,507 $338,940
Op. Inc. (Loss)$991 $(474) $(54,725) $(18,193) $(39,084)
$(100,000)
$(50,000)
$–
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
Golf Course Fund
Year Ended December 31,
The Golf Course Fund ended 2016 with a total net position of $644,161, a decrease of $22,141. Of this,
$586,196 represents the net investment in golf course capital assets, leaving $57,965 in unrestricted net
position.
Golf Course Fund operating revenue for 2016 increased $27,542 (10.1 percent) from the prior year, which
is attributable to an increase of about 12.1 percent in the number of rounds played.
Operating expenses were $48,433 (16.7 percent) higher than the prior year, mainly in central garage
charges and small equipment purchases.
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ICE ARENA FUND
The following graph presents five years of operating results for the City’s Ice Arena Fund:
2012 2013 2014 2015 2016
Op. Rev $694,702 $725,211 $775,784 $748,886 $713,649
Op. Exp.$713,020 $899,697 $809,598 $821,786 $890,144
Op. Inc. (Loss)$(18,318) $(174,486) $(33,814) $(72,900) $(176,495)
$(200,000)
$(100,000)
$–
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000
$900,000
$1,000,000
Ice Arena Fund
Year Ended December 31,
The Ice Arena Fund ended 2016 with a total net position of $3,371,992, a decrease of $178,071. Of this,
$3,037,321 represents the net investment in arena capital assets, and $868,853 is restricted for debt
service, leaving an unrestricted deficit balance of $534,182.
Ice Arena Fund operating revenue for 2016 decreased $35,237 (4.7 percent) from the prior year, mainly
due to less revenue from ice time rental to area hockey associations and school districts than last year.
Operating expenses were $68,358 (8.3 percent) higher than the prior year, mainly due to increased
purchased services and depreciation.
-20-
STORM WATER FUND
The following graph presents five years of operating results for the City’s Storm Water Fund:
2012 2013 2014 2015 2016
Op. Rev $948,650 $963,167 $948,537 $981,723 $1,037,429
Op. Exp.$375,989 $731,735 $517,585 $690,536 $797,604
Op. Inc. (Loss)$572,661 $231,432 $430,952 $291,187 $239,825
$–
$200,000
$400,000
$600,000
$800,000
$1,000,000
Storm Water Fund
Year Ended December 31,
The Storm Water Fund ended 2016 with a total net position of $6,888,579, an increase of $1,578,087. Of
this, $6,790,170 represents the net investment in storm water collection system capital assets, leaving
unrestricted net position of $98,409.
Storm Water Fund operating revenues for 2016 increased $55,706 (5.7 percent) from the previous year,
mainly due to a rate increase implemented in 2016.
Operating expenses were $107,068 (15.5 percent) higher than last year, due to increases in personnel
service, maintenance, and depreciation.
-21-
STREET LIGHTING FUND
The following graph presents five years of operating results for the City’s Street Lighting Fund:
2012 2013 2014 2015 2016
Op. Rev $124,397 $125,604 $123,060 $128,890 $137,525
Op. Exp.$104,721 $117,518 $99,506 $105,471 $102,912
Op. Inc. (Loss)$19,676 $8,086 $23,554 $23,419 $34,613
$–
$15,000
$30,000
$45,000
$60,000
$75,000
$90,000
$105,000
$120,000
$135,000
$150,000
Street Lighting Fund
Year Ended December 31,
The Street Lighting Fund ended 2016 with an unrestricted net position of $300,449, an increase of
$38,651 from the prior year.
Street Lighting Fund operating revenues for 2016 increased $8,635 (6.7 percent) from the previous year,
mainly due to a rate increase implemented in 2016.
Operating expenses were $2,559 (2.4 percent) lower than the previous year.
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GOVERNMENT-WIDE FINANCIAL STATEMENTS
In addition to fund-based information, the current reporting model for governmental entities also requires
the inclusion of two government-wide financial statements designed to present a clear picture of the City
as a single, unified entity. These government-wide financial statements provide information on the total
cost of delivering services, including capital assets and long-term liabilities.
STATEMENT OF NET POSITION
The Statement of Net Position essentially tells you what your city owns and owes at a given point in time,
the last day of the fiscal year. Theoretically, net position represents the resources the City has leftover to
use for providing services after its debts are settled. However, those resources are not always in spendable
form, or there may be restrictions on how some of those resources can be used. Therefore, net position is
divided into three components: net investment in capital assets, restricted, and unrestricted.
The following table presents the components of the City’s net position as of December 31, 2016 and 2015
for governmental activities and business-type activities:
Increase
2016 2015, as Restated (Decrease)
Net position
Governmental activities
Net investment in capital assets 29,951,754$ 27,549,276$ 2,402,478$
Restricted 4,893,801 5,917,848 (1,024,047)
Unrestricted 11,081,824 13,525,799 (2,443,975)
Total governmental activities 45,927,379 46,992,923 (1,065,544)
Business-type activities
Net investment in capital assets 19,286,134 16,087,559 3,198,575
Restricted 868,853 627,939 240,914
Unrestricted (1,839,376) (825,297) (1,014,079)
Total business-type activities 18,315,611 15,890,201 2,425,410
Total net position 64,242,990$ 62,883,124$ 1,359,866$
As of December 31,
The City’s total net position at December 31, 2016 increased $1,359,866 from the previous year-end,
excluding the impact of the previously discussed prior period adjustment, which reduced governmental
activities beginning net position by $1,097,244.
Governmental activities net position decreased by $1,065,544. A number of factors contributed to this
overall decrease, with the largest being an increase of about $1.63 million in the Public Employees
Retirement Association (PERA) net pension plan obligations, and a decrease in the City’s estimated
investment in the West Metro Fire-Rescue District joint venture of approximately $729,000. The shift
between the various elements of governmental activities net position from year-to-year also reflects the
utilization of available resources to help finance capital improvement projects.
Business-type activities net position increased $2,425,410, as outlined in the discussion of enterprise fund
operations earlier in this report.
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STATEMENT OF ACTIVITIES
The Statement of Activities tracks the City’s yearly revenues and expenses, as well as any other
transactions that increase or reduce total net position. These amounts represent the full cost of providing
services. The Statement of Activities provides a more comprehensive measure than just the amount of
cash that changed hands, as reflected in the fund-based financial statements. This statement includes the
cost of supplies used, depreciation of long-lived capital assets, and other accrual-based expenses.
The following table presents the change in net position of the City for the years ended December 31, 2016
and 2015:
2015
Program
Expenses Revenues Net Change Net Change
Governmental activities
General government 1,871,736$ 396,145$ (1,475,591)$ (1,254,503)$
Public safety 9,463,124 1,381,673 (8,081,451) (5,856,089)
Public works 3,143,421 1,123,159 (2,020,262) (3,448,855)
Culture and recreation 2,405,905 734,143 (1,671,762) (1,424,049)
Economic development 732,106 322,604 (409,502) (571,398)
Interest on long-term debt 323,326 – (323,326) (258,759)
Business-type activities
Sewer utility 2,187,006 2,759,819 572,813 9,914
Water utility 3,633,022 4,154,636 521,614 (735,563)
Golf course 341,776 315,422 (26,354) (4,639)
Ice arena 949,438 757,930 (191,508) (10,207)
Storm water 830,108 2,421,414 1,591,306 299,381
Street lighting 102,894 137,525 34,631 23,438
Total net (expense) revenue 25,983,862$ 14,504,470$ (11,479,392) (13,231,329)
General revenues
Property taxes and tax increments 11,336,286 10,562,638
Franchise taxes 447,248 442,556
Unrestricted grants and contributions 633,056 600,030
Unrestricted investment earnings 422,668 367,117
Total general revenues 12,839,258 11,972,341
Change in net position 1,359,866$ (1,258,988)$
2016
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. 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. This is critical given the
current downward pressures on the general revenue sources.
The difference in the net change in public safety from year-to-year is mainly due to the amount of the
PERA pension plan expense allocated to this function and the change in the estimated investment in the
West Metro Fire-Rescue District joint venture. The difference in the net change in storm water from
year-to-year is primarily attributable to a $1.38 million capital contribution from the Golden Valley –
Crystal – New Hope Joint Water Commission in 2016.
-24-
LEGISLATIVE UPDATES
The 2016 legislative session, falling in the second half of the state’s fiscal biennium, was scheduled to be
a short session lasting only 11 weeks. Since biennial budgets are adopted in odd-year legislative sessions,
less time is usually needed for the even-year sessions. However, because the 2015 Legislature adjourned
without passing funding bills in several significant areas, it was anticipated that the 2016 legislative
session would be considerably more active than the typical short session. In spite of this, only a few
funding bills were brought forth to the Governor by the end of the 2016 regular legislative session,
including a supplemental budget bill and an omnibus tax bill. The Governor chose not to sign the tax bill
due to a drafting error that would have resulted in an unintended reduction of state revenues. When the
framework for a special session could not be agreed upon, the fiscal year ended without the adoption of a
new tax bill, capital bonding bill, or transportation funding package.
The following is a summary of recent legislation affecting Minnesota cities:
Border-to-Border Broadband Grants – The 2016 supplemental budget act appropriated
$35 million in fiscal 2017 for a Border-to-Border Broadband Grant Program. The grants, available
through the Office of Broadband Development in the Department of Employment and Economic
Development (DEED), provide funding to help communities meet state goals for the development of
state-wide high-speed broadband access, focusing on areas currently considered to be underserved or
with a high concentration of low-income households.
Equity-Related Programs and Grants – The 2016 supplemental budget act also appropriated
$35 million in fiscal 2017 for the financing of equity-related programs through DEED, the majority of
which was allocated for programs and grants for communities of color, people with disabilities,
seniors, and youth.
Sales Tax Exemption – Effective January 1, 2017, the sales tax exemption on the purchase of goods
or services enacted for cities in 2014 is expanded to include all special districts; city, county, or
township instrumentalities; economic development authorities; housing and redevelopment
authorities; and all joint power boards or organizations.
Taxes Covered Under Debt Management Services – Amendments were made to the statutes
governing debt management and debt settlement services to clarify the status of delinquent taxes
owed to Minnesota local governments and political subdivisions as debt with regard to those services,
and include those entities as creditors for the purpose of debt management services.
Elections – An omnibus elections law was passed making several changes to elections administration
requirements. In addition to establishing a presidential primary to take the place of the current caucus
system beginning in 2020, the law modified election procedures in a number of areas, including:
absentee balloting, voting station dimensions, election canvassing, candidate filing, the extension of
polling hours to accommodate voters in line at closing, and emergency election plans.
Police-Worn Body Cameras – A number of new laws were enacted related to portable recording
systems (police-worn body cameras) and the data derived from their use, addressing: data retention
and destruction, permitted uses of the systems, audits of the data, and vendor practices. Among the
changes are a requirement for gathering public input before purchasing or implementing the use of
portable recording systems, and requirements for the adoption and dissemination of written policies
over the use of portable recording systems.
Veteran Preference Act – New language was added to state statutes clarifying that Minnesota cities
and towns may require a veteran to complete an initial probationary period when hired.
-25-
Charitable Gambling – Cities that require charitable gambling organizations to contribute
10 percent of their net profits to the city for charitable purposes are now required to acknowledge the
source of the funds, either in communications about the receipt or distribution of the funds.
Donation of Surplus Equipment – Local governments are now permitted to donate surplus public
works equipment, cell phones, or emergency medical and firefighting equipment to nonprofit
organizations. The donation of surplus equipment was added to the list of exceptions to municipal tort
liability. Prior to making any such donations, a city must adopt a policy on how it will determine what
equipment is considered surplus and eligible for donation and how it will determine which nonprofit
organizations will receive such donations. The policy must address the city’s obligation to disclose
that the donated equipment may be defective and cannot be relied upon for safety.
Temporary Family Health Care Housing Permits – A new special land use permit system was
established for a specific type of mobile health care-related mobile housing, intended to provide
transitional housing for seniors. Cities will be required to implement the new permit system unless
they officially act to opt out of the program. The program sets forth requirements for structure and
placement, the permit process and duration, applicants, inspections, and the process for opting out.
Partition Fence Viewing Exemption – Cities now have the authority to pass a resolution to exempt
adjoining owners or occupants from the partition fence law when their land is considered to be less
than 20 acres combined, thereby relieving the city of the responsibility of participating in a potentially
costly “fence-viewing” process to mediate disputes between adjoining landowners required to share
the costs of constructing fences.
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ACCOUNTING AND AUDITING UPDATES
GASB STATEMENT NO. 73, ACCOUNTING AND FINANCIAL REPORTING FOR PENSIONS AND RELATED
ASSETS THAT ARE NOT WITHIN THE SCOPE OF GASB STATEMENT 68, AND AMENDMENTS TO
CERTAIN PROVISIONS OF GASB STATEMENTS 67 AND 68
This statement extends the approach to accounting and financial reporting established in GASB Statement
No. 68 to all pensions, including those not administered through a trust. Governmental employers
participating in such plans will be required to report the total of any unfunded pension liability related to
the plan in their accrual basis financial statements, rather than the net pension liability. The requirements
of this statement that address accounting and financial reporting by employers and governmental
nonemployer contributing entities for pensions not within the scope of GASB Statement No. 68, are
effective for financial statements for fiscal years beginning after June 15, 2016.
This statement also clarified the application of certain provisions of GASB Statement Nos. 67 and 68
regarding 10-year schedules of required supplementary information (RSI) and other recognition issues
pertaining to employers and nonemployer contributing entities effective for financial statements for fiscal
years beginning after June 15, 2015.
GASB STATEMENT NO. 74, FINANCIAL REPORTING FOR POSTEMPLOYMENT BENEFIT PLANS OTHER
THAN PENSION PLANS
This statement establishes new accounting and financial reporting requirements for other
post-employment benefits (OPEB) plans, replacing GASB Statement Nos. 43 and 57. It also includes
requirements for defined contribution OPEB plans that replace the requirements for those OPEB plans in
GASB Statement Nos. 25, 43, and 50.
This statement will improve financial reporting primarily through enhanced note disclosures and
schedules of RSI that will be presented by OPEB plans administered through trusts meeting the specified
criteria. The new information will enhance the decision-usefulness of the financial reports of those OPEB
plans, their value for assessing accountability, and their transparency by providing information about
measures of net OPEB liabilities and explanations of how and why those liabilities changed from
year-to-year. The net OPEB liability information, including ratios, will offer an up-to-date indication of
the extent to which the total OPEB liability is covered by the fiduciary net position of the OPEB plan.
The comparability of the reported information for similar types of OPEB plans will be improved by the
changes related to the attribution method used to determine the total OPEB liability. The contribution
schedule will provide measures to evaluate decisions related to the assessment of contribution rates in
comparison with actuarially determined rates, if such rates are determined. In addition, new information
about rates of return on OPEB plan investments will inform financial report users about the effects of
market conditions on the OPEB plan’s assets over time and provide information for users to assess the
relative success of the OPEB plan’s investment strategy and the relative contribution that investment
earnings provide to the OPEB plan’s ability to pay benefits to plan members when they come due.
This statement is effective for financial statements for fiscal years beginning after June 15, 2016. Earlier
application is encouraged.
-27-
GASB STATEMENT NO. 75, ACCOUNTING AND FINANCIAL REPORTING FOR POSTEMPLOYMENT
BENEFITS OTHER THAN PENSIONS
GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than
Pensions, establishes new accounting and financial reporting requirements for governments whose
employees are provided with OPEB, as well as for certain nonemployer governments that have a legal
obligation to provide financial support for OPEB provided to the employees of other entities. This
statement replaces the requirements of GASB Statement Nos. 45 and 57.
This statement establishes standards for recognizing and measuring liabilities, deferred outflows of
resources, deferred inflows of resources, and expense/expenditures. Similar to changes implemented for
pensions, this statement requires the liability of employers and nonemployer contributing entities to
employees for defined benefit OPEB (net OPEB liability) to be measured as the portion of the present
value of projected benefit payments to be provided to current active and inactive employees that is
attributed to those employees’ past periods of service (total OPEB liability), less the amount of the OPEB
plan’s fiduciary net position. Note disclosure and RSI requirements about defined benefit OPEB also are
addressed.
This statement is effective for fiscal years beginning after June 15, 2017. Earlier application is
encouraged.
GASB STATEMENT NO. 80, BLENDING REQUIREMENTS FOR CERTAIN COMPONENT UNITS—AN
AMENDMENT OF GASB STATEMENT NO. 14
The objective of this statement is to clarify the financial statement presentation requirements for certain
component units. This statement amends the blending requirements for the financial statement
presentation of component units of all state and local governments. The additional criterion requires
blending of a component unit incorporated as a not-for-profit corporation in which the primary
government is the sole corporate member. The additional criterion does not apply to component units
included in the financial reporting entity pursuant to the provisions of GASB Statement No. 39,
Determining Whether Certain Organizations Are Component Units—an amendment of GASB Statement
No. 14.
The requirements of this statement are effective for reporting periods beginning after June 15, 2016.
Earlier application is encouraged.
GASB STATEMENT NO. 81, IRREVOCABLE SPLIT-INTEREST AGREEMENTS
This statement provides recognition and measurement guidance for the accounting and financial reporting
of irrevocable split-interest agreements by governments that are the beneficiary of such an agreement.
Split-interest agreements are a type of giving agreement used by donors to provide resources to two or
more beneficiaries, including governments.
This statement requires that a government that receives resources pursuant to an irrevocable split-interest
agreement (1) recognize assets, liabilities, and deferred inflows of resources at the inception of the
agreement, (2) recognize assets representing its beneficial interests in irrevocable split-interest agreements
that are administered by a third party if the government controls the present service capacity of the
beneficial interests, and (3) recognize revenue when the resources become applicable to the reporting
period.
The requirements of this statement are effective for financial statements for periods beginning after
December 15, 2016, and should be applied retroactively. Earlier application is encouraged.
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GASB STATEMENT NO. 82, PENSION ISSUES—AN AMENDMENT OF GASB STATEMENTS NO. 67,
NO. 68, AND NO. 73
The intent of this statement is to address certain issues raised with respect to GASB Statement Nos. 67,
68, and 73.
This statement amends GASB Statement Nos. 67 and 68, changing the definition of “covered payroll”
utilized in schedules of RSI from the payroll of employees that are provided with pensions through the
pension plan, to the payroll on which contributions to a pension plan are based. It clarifies that a
deviation, as the term is used in Actuarial Standards of Practice, is not considered to be in conformity
with the requirements of GASB Statement Nos. 67, 68, or 73 for the selection of assumptions used in
determining the total pension liability and related measures. It also clarifies that payments made by an
employer to satisfy contribution requirements that are identified by the pension plan terms as plan
member contribution requirements should be classified as plan member contributions for purposes of
Statement No. 67 and as employee contributions for purposes of Statement No. 68, and requires that an
employer’s expense and expenditures for those amounts be recognized in the period for which the
contribution is assessed and classified in the same manner as the employer classifies similar compensation
other than pensions.
The requirements of this statement are effective for reporting periods beginning after June 15, 2016,
except for the requirements of this statement for the selection of assumptions in a circumstance in which
an employer’s pension liability is measured as of a date other than the employer’s most recent fiscal
year-end. In that circumstance, the requirements for the selection of assumptions are effective for that
employer in the first reporting period in which the measurement date of the pension liability is on or after
June 15, 2017. Earlier application is encouraged.
GASB STATEMENT NO. 83, CERTAIN ASSET RETIREMENT OBLIGATIONS
This statement addresses accounting and financial reporting for certain asset retirement obligations
(ARO), which are legally enforceable liabilities associated with the retirement of a tangible capital asset.
This statement establishes criteria for determining the timing and pattern of recognition of a liability and a
corresponding deferred outflow of resources for ARO. A government that has legal obligations to perform
future asset retirement activities related to its tangible capital assets should recognize a liability when it is
both incurred and reasonably estimable. The measurement of an ARO is required to be based on the best
estimate of the current value of outlays expected to be incurred, and a deferred outflow of resources
associated with an ARO is required to be measured at the amount of the corresponding liability upon
initial measurement.
This statement requires the current value of a government’s AROs to be adjusted for the effects of general
inflation or deflation at least annually, and a government to evaluate all relevant factors at least annually
to determine whether the effects of one or more of the factors are expected to significantly change the
estimated asset retirement outlays. A government should remeasure an ARO only when the result of the
evaluation indicates there is a significant change in the estimated outlays. Deferred outflows of resources
should be reduced and recognized as outflows of resources in a systematic and rational manner over the
estimated useful life of the tangible capital asset.
If a government owns a minority interest in a jointly owned tangible asset where a nongovernmental
entity is the majority owner or has operational responsibility for the jointly owned asset, the government’s
minority share of an ARO should be reported using the measurement produced by the nongovernmental
majority owner or the nongovernmental minority owner that has operational responsibility, without
adjustment to conform to the liability measurement and recognition requirements of this statement.
-29-
The statement also requires disclosures of any funding or financial assurance requirements a government
has related to the performance of asset retirement activities, along with any assets restricted for the
payment of the government’s AROs. This statement also requires disclosure of information about the
nature of a government’s AROs, the methods and assumptions used for the estimates of the liabilities, and
the estimated remaining useful life of the associated tangible capital assets. If an ARO (or portions
thereof) has been incurred by a government but is not yet recognized because it is not reasonably
estimable, the government is required to disclose that fact and the reasons therefor. This statement
requires similar disclosures for a government’s minority shares of AROs.
The requirements of this statement are effective for reporting periods beginning after June 15, 2018.
Earlier application is encouraged.
GASB STATEMENT NO. 84, FIDUCIARY ACTIVITIES
This statement establishes criteria for identifying fiduciary activities of all state and local governments.
The focus of the criteria generally is on (1) whether a government is controlling the assets of the fiduciary
activity and (2) the beneficiaries with whom a fiduciary relationship exists. Separate criteria are included
to identify fiduciary component units and postemployment benefit arrangements that are fiduciary
activities.
An activity meeting the criteria should be reported in a fiduciary fund in the basic financial statements,
which should present a statement of fiduciary net position and a statement of changes in fiduciary net
position. This statement describes four fiduciary funds that should be reported, if applicable: (1) pension
(and other employee benefit) trust funds, (2) investment trust funds, (3) private-purpose trust funds, and
(4) custodial funds. Custodial funds generally should report fiduciary activities that are not held in a trust
or equivalent arrangement that meets specific criteria.
A fiduciary component unit, when reported in the fiduciary fund financial statements of a primary
government, should combine its information with its component units that are fiduciary component units
and aggregate that combined information with the primary government’s fiduciary funds.
This statement also provides for recognition of a liability to the beneficiaries in a fiduciary fund when an
event has occurred that compels the government to disburse fiduciary resources, defined as when a
demand for the resources has been made or when no further action, approval, or condition is required to
be taken or met by the beneficiary to release the assets.
The requirements of this statement are effective for reporting periods beginning after December 15, 2018.
Earlier application is encouraged.
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