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081720 Work Session Meeting Packet CITY COUNCIL WORK SESSION MEETING New Hope City Hall, 4401 Xylon Avenue North Civic Center Conference Room Monday, August 17, 2020 6:30 p.m. Mayor Kathi Hemken Council Member John Elder Council Member Cedrick Frazier Council Member Andy Hoffe Council Member Jonathan London 1. CALL TO ORDER – August 17, 2020 2. ROLL CALL 11. UNFINISHED & ORGANIZATIONAL BUSINESS 11.1 Discuss West Metro Fire-Rescue 2021 Budget 11.2 Update on Pool/Civic Center Park/City Hall Landscaping projects by Stantec Engineering (Improvement Project Nos. 995/941/994) 11.3 Discuss Commissioner Appreciation Event for 2020 11.4 Review electric and gas franchise fee ordinance 11.5 Discuss Three-Year Contract Renewal with AEM for Professional Financial Management Services for Years 2021-2023 11.6 Review Letter of Engagement from MMKR to Perform 2020 Audit/CAFR 11.7 Discussion regarding 2021 preliminary general fund budget and tax levy 11.8 Resolution calling for a closed meeting of the New Hope City Council authorized by Minn. Stat §13D.05, Subd. 3 to discuss and consider threatened litigation 12. OTHER BUSINESS 13. ADJOURNMENT I:\RFA\City Manager\2020\WMFRD\08.17.2020 WS\11.1 Q 2021 WMFRD Budget.docx Request for Action August 17, 2020 Approved by: Kirk McDonald, City Manager Originating Department: City Manager By: Kirk McDonald, City Manager Agenda Title Discuss West Metro Fire-Rescue District 2021 Budget. Requested Action Staff requests that the City Council briefly review and discuss the proposed 2021 West Metro Fire-Rescue District budget prior to it being placed on the August 24 council agenda for formal action. Chief Larson will be in attendance at the meeting. Policy/Past Practice Past practice has been for the City Council to review the budget after it has been approved by the Fire Board and prior to it being placed on the council agenda for formal consideration. Background Staff and Chief Larson are requesting that the City Council review the WMFRD 2021 budget before it is presented for formal approval at an upcoming council meeting. The Council previously reviewed the budget at the April work session in conjunction with the status of duty crew staffing. The budget was presented to the Fire Board at their July 8 annual meeting and the Board unanimously recommended approval of the budget. The Joint Powers Agreement requires both city councils to act on the budget by August 31; or state their objections to the budget. Council Member Elder serves as the New Hope Council Representative on the Board. Daniel Gates served on the Board as the New Hope Citizen Representative until the conclusion of the July board meeting, at which time he resigned his position due to moving out of the city (applications to fill the vacancy are currently being sought). The city managers from both cities also serve on the Board. 2021 Budget The proposed 2021 budget is attached and includes maintaining seven full-time members serving as daytime duty crew (also responsible for department operations including inspections, public education, community outreach, finance/payroll, records management, IT, human resources, emergency management, CERT, apparatus/equipment maintenance and training) and maintaining up to 66 paid on call firefighters (WMFRD currently has 53 paid on call firefighters). The total 2021 budget is $2,674,050, which is a $99,800 increase of 3.88% over the 2020 budget of $2,574,250. The general operating budget increase is $89,800 or 4.42%, based on increases in salaries, PERA, workers comp insurance, motor fuels, equipment repairs, communications and financial services. There is a $20,000 increase to the capital plan to offset a future deficit and there is a $10,000 decrease to the special revenue insurance fund. The costs of the budget are split between the two cities based on a cost sharing formula that includes average number of calls over a five-year period, population, and taxable market value. Based on the 2021 budget, Agenda Section Work Session Item Number 11.1 Request for Action, Page 2 New Hope’s increase is $54,673.33 or 4.2%. New Hope’s share of the total budget is $1,352,363 or 50.5736%. Crystal’s share of the total budget is $1,321,686 or 49.4264%. As the Council is aware, the WMFRD budget is incorporated into the city’s general fund budget. Staff recommends that the budget be placed on the August 24 council agenda for approval. It is anticipated that Crystal will approve the budget at their August 18 council meeting. Attachment  2021 West Metro Fire-Rescue District Budget I:\RFA\P&R\Pool and Civic Center Pk Projects\2020\WS Updates\Aug WS\Q- August Landscaping, Pool and Park Update.docx Request for Action August 17, 2020 Approved by: Kirk McDonald, City Manager Originating Department: Parks & Recreation By: Susan Rader, Director Agenda Title Update on Pool/Civic Center Park/City Hall Landscaping projects by Stantec Engineering (Improvement Project Nos. 995/941/994) Requested Action Staff requests that the City Council receive an update on the pool, Civic Center Park and city hall landscaping construction projects. City engineer, Dan Boyum will be in attendance. The last update was provided at the June 15, 2020 work session. Policy/Past Practice Past policy and practice has been to provide the Council with updates on projects and receive input and feedback. Background The city began discussing plans for the pool, Civic Center Park and city hall landscaping in January 2017 when the City Council approved the new police station/city hall being located on the former pool site. In June 2018, an agreement was approved with Stantec to provide engineering and planning services for the pool, Civic Center Park and city hall landscaping projects. As was recommended, a staff committee and the Mayor worked with the engineers regarding the final design plans for each of these projects. On December 10, 2018, the City Council approved plans and specifications and authorized advertisement for bids. Bids were reviewed with the Council at the March work session and on March 25, 2019 all five contracts were approved:  Demolition of theater, shelter building, hockey rink and city hall  Pool  Park amenities, parking lots and landscaping for the city hall and park  Theater and picnic shelter  Skatepark Update Sunram, the contractor for the green contract, has completed a majority of their project items. The remaining items they have left to complete include a few plantings and trees; start-up of lighting on the pool parking lot; adjustment of timing for trail lighting; paving of the parking lot wear course and striping; signage on the city hall and pool parking lots; watering for seed establishment in the park; and punchlist items. On the performance center and picnic shelter project, the contractor has finished sodding and restoration work. They are also completing their punchlist items and coordinating final electrical training for staff. Agenda Section Work Session Item Number 11.2 Request for Action, Page 2 At the pool, the contractor will be completing sodding between the Xylon Avenue sidewalk and recreational pool fencing the week of August 10. They are finishing up punchlist items and training. Weekly construction meetings have been discontinued, however staff and the city engineer meet with individual contractors as needed. Change Orders Staff would like to discuss the Extended General Conditions costs that have been submitted by Donlar Construction. On March 23, 2020, the Council approved Pool change order no. 7 for the Rainfall and Delay costs in the amount of $34,814.86 and the CenterPoint Utility Delay costs of $18,620.63. Winter Shelter/Inefficiency costs of $14,000 were added as a line item overage instead of a change order. A review of the negotiated costs is attached. At the time of negotiations, it was decided to wait to further discuss the Extended General Conditions costs and time extension which was identified at $49,207.89 ($44,291.53 plus Overhead and Profit of $4,429.15 and Bond cost of $487.21). In July, Donlar updated their request amount to $44,991.10, a reduction of $4,216.79. The city engineer and staff have reviewed the information provided by Donlar and met on several occasions to discuss. A meeting was held with Donlar on August 6 as part of negotiations related to their request. The attached Extended General Conditions Comparison outlines each of the items and the amounts requested as part of the original request, the revised request in July and the negotiated amount as a result of the meeting on August 6. The negotiated amount is $22,744.05, a reduction of $22,247.05. Staff and the city engineer feel this is a reasonable compromise. Overall, staff have been very pleased with the quality of workmanship on the aquatic complex. Depending on the feedback from the Council at the August 17, 2020 Council Work Session, this change order would be brought forward to the August 24, 2020 City Council meeting for formal approval. Also, as previously discussed, additional charges may be seen from Sunram for the park amenities, landscaping, and parking lots contract because of their delay at the new city hall site due to restricted access from the city hall contractor. Additional Information As projects are getting closer to completion, various inspections continue to take place. Intermediate Inspection Notices and Defective Work: Once a contractor indicates they are completed with their project, a punchlist is created. Punchlists have been prepared for the pool and the performance center/picnic shelter projects at this time. A punchlist is being prepared for the green project; however Intermediate Inspection Notices related to plantings and concrete as well as Defective Work Notices related to the concrete at the police entrance have been prepared for the green project. The Intermediate Inspection Notices list items that need to be resolved prior to preparation of a punchlist. Request for Action, Page 3 Schedule Key dates include: August/September Pool work: sodding; finish punchlist items and training; pool shut down/winterize Performance Center and picnic shelter: finish punchlist items and training Park and city hall: finish plantings; continue to water seeded area; install parking lot wear course and striping; install signage; coordinate training sessions; develop/work on punchlist items The City Council will be kept updated on the progress of the projects. Attachments  Review of Delay, Heating and Rain Claim  Extended General Conditions Comparison Review of Delay, Heating, and Rain Claim from Donlar dated 1/24/20 New Hope Pool Project March 16, 2020 Summary City Staff/Contractor Negotiations (A)(B)(C)(D = A - C) Items Donlar Original 1/24/2020 Request (1) City Proposal - 3/5/2020 Negotiated Request - 3/6/2020 Difference from Original Request to Negotiated Request Comments on City Proposal Part A - Rainfall and Delay Costs Identified on 10/25/2019 $116,893.85 $17,541.98 $31,353.02 $85,540.83 Pay as Change Order Part B - Winter Shelter/Inefficiency Costs (Pool Deck)$62,840.75 $14,000.00 $14,000.00 $48,840.75 Previously discussed frost - pay under Bid Item. City Manager approved $13,800 on 11/19/2019. Part C - CenterPoint Utility Delay $16,756.57 $16,756.57 $16,756.57 $0.00 Fuel, tanks, heating - Pay as Change Order Subtotal $196,491.17 $48,298.55 $62,109.59 $134,381.58 Overhead and Profit (OHP)$19,649.12 $2,414.93 $4,658.22 $14,990.90 Donlar Original Request at 10%, City Proposal at 5%, Negotiated at 7.5% Subtotal $216,140.29 $50,713.48 $66,767.81 $149,372.48 Bond 1%$2,161.40 $691.33 $667.68 $1,493.72 Total - Part A, B, and C $218,301.69 $51,404.81 $67,435.49 $150,866.20 Minus Base Bid Item (Part B)$14,000.00 Pay as Bid Item per past discussions. City Manager approved $13,800 on 11/19/2019. Potential Change Order for Council Approval $53,435.49 Amount needs City Council Approval City Staff/Contractor Agreed to Wait on Negotiations (A)(B)(C)(D = A - C) Items Donlar Original 1/24/2020 Request (1) City Proposal - 3/5/2020 Negotiated Request - 3/6/2020 Difference from Original Request to Negotiated Request Comments on City Proposal Part D - Extended General Conditions due from previous delays $44,291.53 Wait Wait Wait Contractor agreed to wait due to unknowns with Spring Construction. This item is still pending. Overhead and Profit (OHP)$4,429.15 Wait Wait Wait Subtotal $48,720.68 Wait Wait Wait Bond 1%$487.21 Wait Wait Wait Total $49,207.89 Wait Wait Wait Amount needs City Council Approval Total - Part A, B, C and D $267,509.58 Note(s): (1) Donlar updated Part C costs on 2/21/20 following final invoicing for fuel related costs. Part D Analysis - Donlar - Pool Part D - Extended General Conditions due from previous delays (A)(B)(C)(D = B - C) Item Description 1/24/2020 Original Request 7/6/2020 Revised Request 8/6/2020 Negotiated Amount Difference from Original Request to Negotiated Request Comments on Negotitations 1 Superintendent Costs $ 16,000.00 $ 20,000.00 $ 15,000.00 5,000.00 Staff negotiated a 25% reduction in this requested time. The Superintendent has spent 5 additional weeks and continues coordination on remaining punchlist work. 2 Trailer Rental $ 387.10 $ 0.00 $ 0.00 0.00 Contractor used bathhouse after trailer left, so no longer a cost request. 3 Temporary Sanitation Facilities $ 793.43 $ 0.00 $ 0.00 0.00 Contractor used bathhouse after trailer left, so no longer a cost request. 4 Project Manager Costs $ 25,500.00 $ 18,000.00 $ 4,500.00 13,500.00 Staff negotiated a 75% reduction in this requested time. The contractor expressed the Project Management time and subcontractor coordinations related to developing a pool opening plan. Staff discussed costs associated with Construction Administration. 5 Builders Risk Policy Extension $ 1,611.00 $ 1,611.00 $ 1,611.00 0.00 This was not part of the original scope, so Staff agreed to 100% payment. 6 Superintendent Truck/Travel Costs $ 1,100.00 $ 550.00 550.00 Staff negotiated a 50% reduction in this requested time. 7 Telephone/Tablet Use $ 190.00 $ 0.00 190.00 Not part of past requests. 8 Incentive $ 0.00 0.00 Staff updated the contractor on past discussions. The contractor asked for some consideration of the Council on a portion of the $50,000 incentive. 9 Contract Time Extension This Time Extension extends the substantial completion date on the overall project to July 10th, 2020. SubTotal - Part D $ 44,291.53 $ 40,901.00 $ 21,661.00 19,240.00 Overhead and Profit costs $4,429.15 $4,090.10 $1,083.05 3,007.05 The contractor asked for a 10% O&H. Staff negotiated a reduction to 5%. Bond 1%$487.21 Bond 1% was not included in revised or negotiated amounts. Total - Part D $49,207.89 $ 44,991.10 $ 22,744.05 $ 22,247.05 Notes 1. The City has continued to pay Stantec during the 5-week extension. The costs in June and July are around $27,000 to $28,000. 2. Other Projects (Theater and Park/Parking Lot/Landscaping) have not requested additional costs or payments for delays. However, those contractors did not continue to work on rain days. Donlar did continue. 3. Historically, the City has not paid extra costs for the extensions. However, those contractors are not typically working on rain days, etc. 4. City Staff is not recommending charging liquidated damages on the Pool project due to the cooperation, coordination, and continuing to work on the project by Donlar ($1,000 per day). 5. Often a project with a opening date will result in the contractor and subcontractors putting in overtime hours to get the project completed for the opening date. This was not required on this project based on COVID-19 delays. 6. City Council will make the final decision on the proposed payment for Part D items. I:\RFA\COMM DEV\2020\Work Sessions\Commissioner Appreciation Event\Commissioner Appreciation Event - WS.docx Request for Action August 17, 2020 Approved by: Kirk McDonald, City Manager Originating Department: Community Development By: Brandon Bell, Community Development Assistant & Kirk McDonald, City Manager Agenda Title Discuss Commissioner Appreciation Event for 2020 Requested Action Staff is requesting that the Council discuss cancelling the 2020 Commissioner appreciation event and instead replace it with a virtual tour. Policy/Past Practice In the past the city has conducted an annual Commissioner appreciation event. This event is typically comprised of a city-wide bus tour narrated by staff talking about different private and public projects taking place in the city. Background Each year staff invited all of the cities elected and appointed officials to an appreciation event . This event typically consisted of a narrated bus tour and a box lunch dinner held at the Golf Course. Due to the COVID- 19 pandemic, staff believes it is best to skip any tour on a confined space such as a bus. There was the possibility of still hosting something at the golf course, like an outdoor virtual bus tour on a projector screen; however staff feels that some may be uncomfortable attending an event like this with so many people. Staff is proposing conducting a virtual bus tour that would be pre-recorded and then sent out to all of the attendees who are typically invited to the annual appreciation event, along with a letter from the Council expressing appreciation for their service on a commission. Recommendation Staff recommends that the City Council direct staff on how to proceed with the Commissioner appreciation event. Attachments None Agenda Section Work Session Item Number 11.3 I:\RFA\City Manager\2020\Franchise Fees\WS - Gas & Electric Franchise Fee Review 08-17-20.docx Request for Action August 17, 2020 Approved by: Kirk McDonald, City Manager Originating Department: Community Development By: Jeff Alger, Community Development Specialist; Kirk McDonald, City Manager Agenda Title Review electric and gas franchise fee ordinance Requested Action Staff requests that the City Council discuss the city’s electric and gas franchise fee ordinance. Staff is not recommending changes to the ordinance but would like to document that the review took place, per City Code requirements. Policy/Past Practice The City Code requires that electric and gas franchise fee ordinances be reviewed every two years. The fees can be amended if deemed appropriate. The franchise fees were last reviewed at the August 20, 2018, work session. Background Minnesota Statute 216B.36 allows cities to charge a utility fee to both electric and gas companies for operating in the right-of-way. The fees are intended to reimburse the city for costs incurred from utility companies digging within the right-of-way and compromising the city’s infrastructure. Franchise fees allow cities to diversify their revenue streams and provide a stable source of funding, which can be used for any public purpose. The City Council approved implementing electric and gas franchise fees in 2003 and utility companies began collecting fees in 2004. Between 2004 and 2009, the revenue from franchise fees was split between the Economic Development Authority (EDA) and general fund. Starting in 2010, due to a reduction in Local Government Aid (LGA) from the state of Minnesota, all of the revenue the city collected (approximately $440,000 per year on average) was allocated to the general fund to help keep the tax levy as low as possible. In 2016, New Hope’s rates were increased to approximately “average” for cities in Hennepin County with a population of 10,000 or more that utilize a flat fee schedule. The city’s fee schedule, which had not changed since implementation, was revised as follows: Franchise Fees Fee City Code Franchise – Electricity 12-20 Residential $3/month Small Commercial & Industrial - Non-Demand $6/month Small Commercial & Industrial - Demand $26/month Large Commercial & Industrial $115/month Franchise – Gas 12-10 Residential $3/month Commercial - A ("Com A") $4/month Commercial/Industrial - B ("Com/Ind B") $11/month Commercial/Industrial - C ("Com/Ind C") $38/month Small Volume, Dual Fuel A ("SVDF A") $74/month Agenda Section Work Session Item Number 11.4 Request for Action, Page 2 Franchise Fees Fee City Code Franchise – Gas (continued) 12-10 Small Volume, Dual Fuel B ("SVDF B") $83/month Large Volume, Dual Fuel ("LVDF") $164/month Staff was directed to dedicate additional revenue from the fee increases to the city’s street infrastructure fund for the pavement management plan. In 2017 and 2018, the street infrastructure fund and general fund received $440,000 per year with excess revenue going to the street infrastructure fund. Beginning in 2019, excess revenue began to be distributed to the general fund. Revenue for the past 10 years and the first quarter of 2020 is as follows: Year Electric Gas Total General Fund Street Infrastructure Fund 2010 $231,496.75 $198,997.43 $430,494.18 $430,494.18 $0 2011 $250,144.10 $189,650.40 $439,794.50 $439,794.50 $0 2012 $251,949.06 $188,200.20 $440,149.26 $440,149.26 $0 2013 $250,946.91 $187,886.70 $438,833.61 $438,833.61 $0 2014 $249,914.91 $188,625.60 $438,540.51 $438,540.51 $0 2015 $252,900.84 $189,654.80 $442,555.64 $442,555.64 $0 2016 $256,709.53 $190,538.07 $447,247.60 $447,247.60 $0 2017 $543,310.29 $369,046.75 $912,357.04 $440,000.00 $472,357.04 2018 $571,348.98 $373,895.19 $945,244.17 $440,000.00 $505,244.17 2019 $584,116.54 $373,331.58 $957,448.12 $517,448.12 $440,000.00 2020 Q1 $146,239.84 $92,783.49 $239,023.33 $129,023.33 $110,000.00 The original electric franchise fee agreement was adopted in December 9, 1991, and was set to expire on the 20th anniversary of the agreement, December 9, 2011. The agreement was renewed on June 27, 2011, extending the term of the agreement for an additional 20 years. The city’s gas franchise fee agreement automatically renews on the 5th, 10th, and 15th anniversary of the commencement date of the agreement, April 13, 2003. The 15-year anniversary of the agreement took place on April 13, 2018, without either party serving a nonrenewal notice. According to the attached correspondence from the city attorney, on the 19th anniversary of the agreement, April 13, 2022, the city and CenterPoint must meet and discuss if the agreement will be renewed beyond April 13, 2023. It is not required that the city take any action on the gas franchise agreement until April of 2022. Recommendation Staff recommends that the City Council review the city’s electric and gas franchise fee ordinance. No changes are recommended to the ordinance at this time. Attachments  Excerpt from City Code on gas franchise agreement (Section 12-10)  Excerpt from City Code on electric franchise agreement (Section 12-20)  Ordinance 2016-11 increasing franchise fee schedule (August 22, 2016)  City attorney gas franchise fee memorandum (June 4, 2012) Request for Action, Page 3  City attorney electric franchise fee memorandum (April 12, 2011) Attachments included with the original memorandums from city attorney are not included within the RFA due to subsequent codification changes to City Code and changes to the city’s fee schedule. Sec. 12-10. - Gas franchise. A franchise to the Minneapolis Gas Company was passed by the council as Chapter 85, Ordinance 62-12, on November 27, 1962, published in the official newspaper on January 17, 1963, and accepted by the Minneapolis Gas Company on February 8, 1964. This franchise expired by its terms on January 1, 1983 but was renewed by Ordinance No. 84-9. The franchise granted by Ordinance No. 84-9 would have expired by its terms on June 30, 2003, but was replaced by Ordinance No. 03-08 prior to its expiration. The current gas franchise appears in Appendix G of the City Code. (1) Definitions. For the purposes of this section, the following terms shall have the following meanings: City. The City of New Hope, County of Hennepin, State of Minnesota. Code. The City of New Hope Municipal Code. Company. Centerpoint Energy Minnegasco, a division of Centerpoint Energy Resources Corp., a Delaware corporation, its successors and assigns. Franchise agreement. The franchise agreement between the city and company pursuant to City Ordinance 03-08. Notice. "Notice" means a writing served by any party or parties on any other party or parties. Notice to company shall be mailed to Centerpoint Energy Minnegasco, V.P., Regulatory & Supply Service, 800 LaSalle Avenue, Minneapolis, MN 55402-2006. Notice to city shall be mailed to the City Clerk at 4401 Xylon Avenue North, New Hope, Minnesota 55428. (2) Purpose. The city council has determined that it is in the best interest of the city to impose a franchise fee on those public utility companies that provide natural gas and electric services within the city. Pursuant to the franchise agreement the city has the right to impose a franchise fee on company. (3) Franchise fee statement. A franchise fee is hereby imposed on company commencing with the January 2004 billing month, and in accordance with the fee schedule set forth in the city's fee schedule. (4) Account fee. This fee is an account based fee and not a meter-based fee. In the event that an entity covered by this section has more than one meter, but only one account, only one fee shall be assessed to that account. In the event any entities covered by this section have more than one account, each account shall be subject to the appropriate fee. In the event a question arises as to the proper fee amount for any account, the highest possible fee amount shall apply. (5) Payment. Franchise fees as set in the city's fee schedule are to be collected by the company and submitted to the city as follows: January—March collections due by April 30. April—June collections due by July 31. July—September collections due by October 31. October—December collections due by January 31. (6) Record support for payment. The company shall make each payment when due and, if requested by the city, shall provide a statement summarizing how the franchise fee payment was determined, including information showing any adjustments to the total made to account for any noncollectible accounts, refunds or error corrections. The company shall permit the city, and its representatives, free access to the company's records for the purpose of verifying such statements. (7) Payment adjustments. Payment to the city will be adjusted where the company is unable to collect the franchise fee. This includes noncollectible accounts and customers on guaranteed fixed pricing program (no surprise bill program) through the term of their contract (contracts currently run from October to October). (8) Surcharge. The city recognizes that the Minnesota Public Utilities Commission allows the company to add a surcharge to customer rates to reimburse the company for the cost of implementing and administering the fee. (9) Dispute resolution. If either party asserts that the other party is in default in the performance of any obligation hereunder, the complaining party shall notify the other party of the default and the desired remedy. The notification shall be written. Representatives of the parties must promptly meet and attempt in good faith to negotiate a resolution of the dispute. If the dispute is not resolved within 30 days of the written notice, the parties may jointly select a mediator to facilitate further discussion. The parties will equally share the fees and expenses of this mediator. If a mediator is not used or if the parties are unable to resolve the dispute within 30 days after first meeting with the selected mediator, either party may commence an action in district court to interpret and enforce this section or for such other relief permitted by law. (10) Effective date of franchise fee. The effective date of this section shall be after its publication and 60 days after the sending of written notice enclosing a copy of this adopted ordinance from which this section derives to company by certified mail. Collection of the fee shall commence as provided above. (11) Relation to franchise agreement. This section is enacted in compliance with the franchise agreement shall be interpreted as such. If a provision of this section cannot be reasonable interpreted to avoid conflict with the franchise agreement, this section will control. (12) Review. The city council shall review this ordinance every two years in whatever manner the city manager then determines to be appropriate, including, but not limited to, review by the city council in either a work session or a regular session. Failure to review this section shall not in any way invalidate or limit it. a. Permit fees. The franchise fee shall be payable to the city by the company in lieu of permit or other fees otherwise imposed on the company in relation to its operations as a public utility in the city so long as the following requirements are met: b. The company applies for any and all permits, licenses and similar documentation as though this provision did not exist. c. The company requests the fee to be waived at the time of application. (Code 072684; Ord. No. 03-08, § 1, 4-14-2003; Ord. No. 17-01, § 9, 1-23-2017) Sec. 12-20 - Electric distribution franchise. A franchise for electric service from the city to Northern States Power Company is in effect per Ordinance 2011-03 identified as Appendix H of this Code. (1) Electricity franchise fee. Definitions. For the purposes of this section, the following terms shall have the following meanings: City. The City of New Hope, County of Hennepin, State of Minnesota. Code. The City of New Hope Municipal Code. Company. Northern States Power Company, a Minnesota corporation d/b/a Xcel Energy, its successors and assigns. Franchise agreement. The franchise agreement between the city and company pursuant to city ordinance 2011-03. Notice. "Notice" means a writing served by any party or parties on any other party or parties. Notice to company shall be mailed to the Regional General Manager thereof at 414 Nicollet Mall, 5th Floor, Minneapolis, Minnesota 55401. Notice to city shall be mailed to the City Clerk at 4401 Xylon Avenue North, New Hope, Minnesota 55428. (2) Purpose. The New Hope City Council has determined that it is in the best interest of the city to impose a franchise fee on those public utility companies that provide natural gas and electric services within the city. Pursuant to the franchise agreement the city has the right to impose a franchise fee on company. (3) Franchise fee statement. A franchise fee is hereby imposed on company commencing with the January 2004 billing month, and in accordance with the fee schedule set forth in the city's fee schedule. (4) Account fee. This fee is an account based fee and not a meter-based fee. In the event that an entity covered by this section has more than one meter, but only one account, only one fee shall be assessed to that account. In the event any entities covered by this section have more than one account, each account shall be subject to the appropriate fee. In the event a question arises as to the proper fee amount for any account, the highest possible fee amount shall apply. (5) Payment. Franchise fees as set in the city's fee schedule are to be collected by the company and submitted to the city as follows: January—March collections due by April 30. April—June collections due by July 31. July—September collections due by October 31. October—December collections due by January 31. (6) Record support for payment. The company shall make each payment when due and, if requested by the city, shall provide a statement summarizing how the franchise fee payment was determined, including information showing any adjustments to the total made to account for any noncollectible accounts, refunds or error corrections. The company shall permit the city, and its representatives, free access to the company's records for the purpose of verifying such statements. (7) Payment adjustments. Payment to the city will be adjusted where the company is unable to collect the franchise fee. This includes noncollectible accounts. (8) Surcharge. The city recognizes that the Minnesota Public Utilities Commission allows the company to add a surcharge to customer rates to reimburse the company for the cost of implementing and administering the fee. (9) Dispute resolution. If either party asserts that the other party is in default in the performance of any obligation hereunder, the complaining party shall notify the other party of the default and the desired remedy. The notification shall be written. Representatives of the parties must promptly meet and attempt in good faith to negotiate a resolution of the dispute. If the dispute is not resolved within 30 days of the written notice, the parties may jointly select a mediator to facilitate further discussion. The parties will equally share the fees and expenses of this mediator. If a mediator is not used or if the parties are unable to resolve the dispute within 30 days after first meeting with the selected mediator, either party may commence an action in district court to interpret and enforce this section or for such other relief permitted by law. (10) Effective date of franchise fee. The effective date of this section shall be after its publication and 60 days after the sending of written notice enclosing a copy of this adopted Ordinance to company by certified mail. Collection of the fee shall commence as provided above. (11) Relation to franchise agreement. This section is enacted in compliance with the franchise agreement shall be interpreted as such. If a provision of this section cannot be reasonable interpreted to avoid conflict with the franchise agreement, this section will control. (12) Review. The city council shall review this section every two years in whatever manner the city manager then determines to be appropriate, including, but not limited to, review by the city council in either a work session or a regular session. Failure to review this section shall not in any way invalidate or limit it. (13) Permit fees. The franchise fee shall be payable to the city by the company in lieu of permit or other fees otherwise imposed on the company in relation to its operations as a public utility in the city so long as the following requirements are met: a. The company applies for any and all permits, licenses and similar documentation as though this provision did not exist. b. The company requests the fee to be waived at the time of application. (Code 072684, Ord. No. 91-19; Ord. No. 2011-03, § 1, 6-27-2011; Ord. No. 17-01, § 10, 1-23- 2017) ORDINANCE NO. 2016-11 AN ORDINANCE AMENDING NEW HOPE CODE SECTIONS 14-51 AND 14-52 BY INCREASING ELECTRICITY AND GAS FRANCHISE FEES FOR 2017 The City Council of the City of New Hope ordains: Section 1. Section 14-51 Electricity Franchise fee of the New Hope City Code is hereby amended by amending subsection (c) "Franchise fee statement and schedule" to read as follows: c) Franchise fee statement and schedule. A franchise fee is hereby imposed on company commencing with the January 28A4-2017 billing month, and in accordance with the following fee schedule: Customer classification 7 mount per account per month ($) Residential 3-503.00 per month Small Commercial & Industrial—Non-Demand 1 4306.00 per month Small Commercial & Industrial—Demand 9-0026.00 per month Large Commercial & Industrial 36,AOI 15.00 per month Public Street Lights 430 pef menthno fee Municipal Pumping—Non-Demand 4.50 per monfto fee Municipal Pumping—Demand 450 pef ffie o fee Section 2. Section 14-51 Electricity Franchise fee of the New Hope City Code is hereby amended by amending subsection 0) "Effective date offranchise fee" to read as follows: 0) Effective date offranchise fee. The effective date of any amendment to & 14- 51 of this section code shall be after its publication and 60-90 days after the sending of written notice enclosing a copy of 04-51 and the amendment thereto* 9rdinane to the company by certified mail. Collection of the fee shall commence as provided above. Section 3. Section 14-52 Gas franchise fee of the New Hope City Code is hereby amended by amending subsection (c) "Franchise fee statement and schedule" to read as follows: c) Franchise fee statement and schedule. A franchise fee is hereby imposed on company commencing with the January 2084-2017 billing month, and in accordance with the following fee schedule: Customer Classification Amount per Account per Month ($) Residential 44503.00 per month Commercial - A ("Com A") 33.004.00 per month Commercial/Industrial - B ("Com/Ind B") 6:8011.00 per month Commercial/Industrial - C ("Com/Ind C") 28:8038.00 per month Small Volume, Dual Fuel A ("SVDF A") 330.0074_00 per month Small Volume, Dual Fuel B ("SVDF B") 40,0083_00 per month Large Volume, Dual Fuel ("LVDF") 68408164.00 per month J Section 4. Section 14-52 Gas Franchise fee of the New Hope City Code is hereby amended by amending subsection 0) "Effective date offranchise fee" to read as follows: 0) Effective date offranchise fee. The effective date of any amendment to § 14- 52 of this seetion code shall be after its publication and 60-90 days after the sending of written notice enclosing a copy of &14-52 and the amendment thereto th owe to the company by certified mail. Collection of the fee shall commence as provided above. Section 5. Effective Date. This Ordinance shall be effective January 1, 2017 upon its passage and publication provided 90 days written notice of these amendments to §§14-51 and 14- 52 of the New Hope Code has been provided to Xcel Energy and Centerpoint Energy as required by the code. Dated the 22 a day of August, 2016. v tfi /I.L YnJYiP Kathi Hernken, Mayor D Attest: LZ 42 Valerie Leone, City Clerk Published in the New Hope -Golden Valley Sun -Post the I" day of September, 2016.) GORDON L. JENSEN1 ADAM J. KAUFMAN MELANIE P. P.£RSELLINu STEVEN A. SONDRALL 1Real Property Law Specialist Certified By The Minnesota State Bar Association 2Liccnscd in Illinois/Colorado 3Qualificd Neutral Mediator under Rule 114 JENSEN SONDRALL & PERSELLIN, P.A. Attorneys At Law 8525 EDINBROOK CROSSING, STE. 201 BROOKLYN PARK, MINNESOTA 55443-1968 TELEPHONE (763) 424-8811 $ TELEFAX (763) 493-5193 e-maii law@jspattorneys.com Writer's Direct Dial No.: (763) 201-0211 e-mail sas@jspattorneys.comJune 4, 2012 Kirk McDonald City Manager City of New Hope 4401 Xylon Avenue North New Hope, MN 55428 Re: Gas Franchise Ordinance New Hope City Code -Appendix G Dear Kirk: This letter is in response to your May 25, 2012 e-mail regarding the Gas Franchise Fee ordinance. This ordinance is Appendix G in the New Hope City Code. The current Franchise Agreement was adopted on April 13, 2003 as Ordinance No. 03-08. Per Section 12-l0(c) the term of the Agreement is for 5 years. The Agreement automatically renews on the 5th, 10th and 15th anniversaries of the commencement date of the Agreement. As a result, the 1 0 year anniversary of the Agreement will occur next year on April 13, 2013 unless a notice of non renewal is served by either party. A notice of non-renewal must be served 90 days prior to the end of the term. If the City did not wish to renew for the next 5 years a notice should be sent to Centerpoint Energy early in January 2013. Also, on April 13, 2022, the 19th anniversary date of the Agreement, the City and Centerpoint must meet and discuss if the Agreement will be renewed after April 13, 2023. Therefore, we don't need to take any action on the Gas Franchise Agreement until April 2022 unless we were not intending to renew the Agreement on its 10 th anniversary next year, its 15th anniversary in April 2018 or we wanted to increase the fees. The fees are set out in Section 14-52 of the New Hone Code. The residential rate is $1.50 per month. There are numerous commercial/industrial rates depending on the classification of the user. I would recommend against increasing or decreasing the fee. If you recall our discussions with Xcel Energy last year, the fees for the gas franchise and the electric franchise should be equal. We can't give a fee advantage to one utility without doing the same for the other utility. We had extensive discussions with Xcel to convince it our fees for the electric franchise were equivalent to the gas franchise fees. After a lot of debate, Xcel finally relented and agreed the fees were equivalent. I don't want to see us get involved in that argument again, unless the City believed a fee change was absolutely necessary. Please contact me if you need any further. information. Very truly yours, Steven A. Sondrall cc: Valerie Leone P:\Allomey\SAS\ I Client Filos\2 City of New Hope\99-10000 C'11y Mg,\Ltr K McDonald gas franchise fee ordinance -June 20 t 2 work session.doc JENSEN SONDRALL & PERSELLIN, P.A. Attorneys At Law 8S2S EDINBROOK CROSSING, STE. 201 BROOKLYN PARK, MINNESOTA 55443-1968 TELEPHONE (763) 424-8811 • TELEFAX (763) 493-5193 e-mail law@jspattorneys.com MEMORANDUM Date: April 11, 2011 To: Kirk McDonald From: Steve Sondrall Re: Xcel Energy-Electric Franchise Fee/Ordinance Attached is a "red-lined" copy of a restated electric franchise ordinance with Xcel Energy for consideration at the April 18th work session. Titls ordinance will need to be adopted on or before the Council Meeting of August 8, 2011. Regarding background information as to the need for this ordinance, on December 9, 1991 the City Council adopted Ordinance No. 91-19. This ordinance established our existing electric franchise agreement with Xcel Energy which is found in the City Code as APPENDIX H. The agreement has a term of 20 years. As a result, the agreement is expiring in December of this year necessitating the need for a new agreement. Xcel Energy has provided the City with a proposed new agreement. I have reviewed the new Agreement and find it generally acceptable subject to the revisions I have made in the red-lined version attached to this memo. Basically, the major concern with the new agreement is the continuing collection of the City's Franchise Fee set out in Section 9 of the Ordinance. The franchise fee is a "pass-through" fee by Xcel to its customers in the City. The franchise fee amounts to a surcharge imposed and collected by Xcel against its customers and paid to the City for Xcel's exclusive right to provide electrical service to city residents. When, the franchise agreement was adopted in 1991, the City was not imposing a franchise fee against Xcel. The Franchise fee was adopted in 2003 by Ordinance No. 03-21. A corresponding franchise fee was imposed against Centerpoint Energy in 2003 by Ordinance No. 03-22 for its exclusive right to provide gas service to city residents. The new ordinance needs to be modified to maintain the current fee schedule. I don't want to be in a position where we have to adopt a separate fee ordinance to continue collecting our current franchise fee. Also, as we have discussed, the current fee has not been increased since it was originally adopted in 2003. If the Council desired, it could increase the fee, however, that would require a separate ordinance. As pract ical matter, based on the new PUC regulations, I believe we would need to wait until 2012 to increase the franchise fee. I am assuming the Council has no desire to increase the fee so I have not done any research to determine the exact process which the City would need to follow to increase the fee. Also, I am not sure of the extent to which we could increase the fee. I do know the maximum fee we can charge is 4.5% of the gross revenues collected by Xcel against its customers. However, I am not aware of how close our current fees approach this 4.5% limit. MEMORANDUM -PAGE 1 At the work session, the Council should consider and/or approve the recommended changes made to Xcel's proposed agreement/ordinance and direct us to finalize the agreement with Xcel for consideration and approval by the City Council as soon as possible but no later than the August 8, 2011 Council Meeting. Finally, you also asked me about the expiration date of the gas franchise agreement with Centerpoint Energy. The gas franchise agreement is APPENDIX G of the New Hope Code. The current agreement was adopted by Ordinance No. 03 -08 on April 14, 2003. The term of the gas franchise is 5 years, however, it automatically renews on the 5t `, 10 and 15 anniversaries of the commencement date (4- 14-03) unless a notice of non- renewal is served by either party. Further, the agreement states on the 14 anniversary of the commence date, which is April 13, 2022, the parties shall meet and discuss renewal of the agreement at that time. Therefore, we don't need to worry about the gas franchise for over 10 years unless the City intends not to renew the agreement on the 10 year anniversary date in 2013. If you have any other questions or comments about these issues please contact me. PAAttornWSAS \1 Client Filos\2 City of New Hope \99 -81103 (elec. fronchise)\City Mgr Memo for 4 -18 work session.doc MEMORANDUM - PAGE 2 I:\RFA\City Manager\2020\AEM Contract Renewal\WS 08172020\AEM Contract Renewal.docx Request for Action August 17, 2020 Approved by: Kirk McDonald, City Manager Originating Department: City Manager By: Kirk McDonald, City Manager Agenda Title Discuss Three-Year Contract Renewal with AEM for Professional Financial Management Services for Years 2021-2023 Requested Action Staff requests to discuss a three-year contract renewal (2021-2023) with AEM Financial Solutions, LLP. The current contract expires on December 31, 2020. Representatives from AEM will be in attendance to review the proposed contract. Staff recommends approval of the contract. If Council supports the new three-year contract, staff recommends it be placed on a future regular council agenda for formal approval. Policy/Past Practice The city enters into contracts for professional services on an as needed basis. Background The city has utilized the financial management services of AEM since December 2008 when the finance manager and several other finance department positions were vacated. The contract has been renewed on a two or three year basis since that time. The current amount for contracted services in 2020 is $130,050 and includes preparation of the Comprehensive Annual Financial Report. The cost of the CAFR preparation is $4,700, so the 2020 contract cost without the CAFR would have been $125,350. AEM has prepared a new three-year contract for council consideration with a term from January 1, 2021 through December 31, 2023. The proposed cost and percentage increase is as follows: Year Cost Without CAFR % Increase 2020 $125,350 2021 $129,150 3.03% 2022 $133,200 3.14% 2023 $137,250 3.04% Due to the fact that the current contract with AEM includes the cost of the CAFR preparation ($125,350 + $4,700 = $130,050), the proposed 2021 contract price of $129,150 is slightly less than the 2020 contract cost. The proposed 2021 contract cost has been included in the preliminary 2021 budget. As the council is aware, AEM was successful in getting the city’s finance department back on sound footing after several staffing changes took place in 2008-2009. Several accomplishments have been achieved since the implementation of AEM’s services, including quarterly budget/investment reports, significant improvements to the budget format, updating the investment policy, overall better understanding of the city funds, accurate audit information, upgrading the city’s credit rating by Standard & Poors, development of a ten year financial Agenda Section Work Session Item Number 11.5 Request for Action, Page 2 plan and improvements to the CIP budget. The city has also received the excellence in financial reporting certificate from the Government Finance Officers Association for the past ten years (2009-2018), and an application has been submitted for 2019. These certificated would not have been possible without AEM’s work on behalf of the city. As has been discussed in the past, This is a unique approach to contract for financial oversight services but the advantage has been that AEM can provide a broad spectrum of services. AEM is aware that sometime in the future the city may decide to hire a finance director and other finance personnel and they are agreeable to assisting the city with that process. However, in the near term, the city manager is recommending the city continue our working relationship with AEM so we can continue to improve efficiencies, address budget challenges and continue to improve the financial condition of the city. Over the past several years, West Metro Fire-Rescue District and the city of Crystal have both started utilizing the services of AEM. Attachment  July 24, 2020 AEM Proposal I:\RFA\City Manager\2020\Audit\WS 081720\RFA MMKR Letter of Engagement 2020 Audit_CAFR.docx Request for Action August 17, 2020 Approved by: Kirk McDonald, City Manager Originating Department: City Manager By: Kirk McDonald, City Manager Agenda Title Review Letter of Engagement from MMKR to Perform 2020 Audit/CAFR Requested Action Staff requests to briefly discuss the attached Letter of Engagement from MMKR to perform the 2020 audit and complete the Comprehensive Annual Financial Report. Staff recommends that this item be placed on a future regular council agenda for consideration. Policy/Past Practice The city has utilized the services of MMKR in past years to complete the annual audit. The City Council has approved four, three-year audit proposals from MMKR in the past for fiscal years 2011/2012/2013, 2014/2015/2016, 2017/2018/2019 and 2020/2021/2022. For each of the years included in the three -year proposals, a specific engagement letter is presented to the Council for approval for that year. Background At the October 28, 2019 Council meeting the City Council approved a three-year audit proposal from MMKR for the fiscal years ending December 31, 2020, 2021 and 2022. The cost for the auditing services in the proposal are outlined as follows: Year Ending December 31, Basic Audit Alternative Bid CAFR Preparation Total 2020 $34,230 $4,500 $38,730 2021 $34,745 $4,600 $39,345 2022 $35,265 $4,700 $39,965 Total $104,240 $13,800 $118,040 The proposal includes an alternative quote for Comprehensive Annual Financial Report (CAFR) preparation and production, which is currently included in the contract with AEM Financial Solutions. MMKR has proposed a 1.5% annual increase in their pricing for the basic audit and 2.2% annual increase in their pricing for preparation of the city’s annual financial report. Any services beyond the basic audit would be priced separately. A separate single audit for $5,000 will be required for 2020 because federal funding will be received from the CARES/FEMA funding. As discussed last fall, AEM requested a proposal from MMKR to prepare the city’s CAFR to improve the audit and financial reporting timeline. The city has traditionally scheduled its internal “cut-off” date for year-end payables on March 1 and audit fieldwork the last week in March. That provided a condensed timeframe to wrap audit preparation and draft the city’s CAFR. In partnering with MMKR to prepare the CAFR, the audit timeline will be enhanced and the city will save a small amount on preparation. AEM will Agenda Section Work Session Item Number 11.6 Request for Action, Page 2 continue to facilitate preparation of the statistical section of the city’s CAFR and oversee the city’s application to the Governmental Finance Officers Association Excellence in Financial Reporting award. The current three-year contract for services with AEM Financial Solutions (2018-2020) includes preparation of the CAFR. AEM prepared the city’s 2019 CAFR in 2020 at a cost of $4,700 per their contract. The CAFR preparation fee has been eliminated from AEM’s three-year proposal for services beginning in 2021 (CAFR preparation for year-ending December 31, 2020) to allow for MMKR to prepare the CAFR at a rate of $4,500 (A $200 savings). Per AEM, MMKR has worked with the city for several years and is very familiar with the city’s finances and processes. The firm completed the audit in a timely, professional manner and the audit engagement staff assigned to the city’s audit are knowledgeable and efficient. It is AEM and staff’s recommendation that the city accept the Letter of Engagement from MMKR to perform the 2020 audit and complete the CAFR in the amount of $43,730, including the single-audit of federal awards expenditures. The funds to pay for the audit are included in the 2021 budget. Attachments  Letter of engagement from MMKR  AEM correspondence RE: Letter of Engagement  September 27, 2019 MMKR three-year audit proposal  Excerpts from October 28, 2019 council minutes approving MMKR three-year proposal August 11, 2020 Mr. Kirk McDonald City Manager City of New Hope 4401 Xylon Avenue North New Hope, MN 55428 Dear Mr. McDonald: We appreciate the opportunity to be of service to the City of New Hope and believe this letter accurately summarizes the significant terms of our engagement. If you have any questions, please let us know. If you agree with the terms of our engagement as described in this letter, please sign and return to mmkr@mmkr.com. In order to provide documentation that certain required communications included in the engagement letter have been received by governance, please note that we are requesting the letter be signed by a representative of the City Council in addition to management. Please do not hesitate to contact me if you believe the letter should be modified or if you have any questions. Sincerely, MALLOY, MONTAGUE, KARNOWSKI, RADOSEVICH & CO., P.A. William J. Lauer, CPA Principal WJL:wls Enclosures 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 Standard Letterhead-r2.qxp_167639 Letterhead-RV1 9/7/18 6:34 PM Page 1 August 11, 2020 To the City Council and Management of the City of New Hope 4401 Xylon Avenue North New Hope, MN 55428 We are pleased to confirm our understanding of the services we are to provide the City of New Hope (the City) for the year ended December 31, 2020. We will audit the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information, including the related notes to the financial statements, which collectively comprise the basic financial statements of the City as of and for the year ended December 31, 2020. Accounting standards generally accepted in the United States of America provide for certain required supplementary information (RSI), such as management’s discussion and analysis, to supplement the City’s basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board (GASB), who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. As part of our engagement, we will apply certain limited procedures to City’s RSI in accordance with auditing standards generally accepted in the United States of America. These limited procedures will consist 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 will not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. The following RSI is required by U.S. generally accepted accounting principles and will be subjected to certain limited procedures, but will not be audited: 1.Management’s discussion and analysis 2.GASB-required pension and other post-employment benefits information We have also been engaged to report on supplementary information other than RSI that accompanies the City’s financial statements. We will subject the following supplementary information to the auditing procedures applied in our audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America, and we will provide an opinion on it in relation to the financial statements as a whole in a separate written report accompanying our auditor’s report on the financial statements OR in a report combined wit h our auditor’s report on the financial statements: 1.Combining and individual fund statements and schedules 2.Schedule of Expenditures of Federal Awards 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 Standard Letterhead-r2.qxp_167639 Letterhead-RV1 9/7/18 6:34 PM Page 1 City of New Hope Page 2 August 11, 2020 The following other information accompanying the financial statements will not be subjected to the auditing procedures applied in our audit of the financial statements, and our auditor’s report will not provide an opinion or any assurance on that other information. 1.Introductory section 2.Statistical tables We will perform the required State Legal Compliance Audit conducted in accordance with U.S. generally accepted auditing standards and the provisions of the Legal Compliance Audit Guide, promulgated by the Office of the State Auditor pursuant to Minnesota Statutes § 6.65 and will include such tests of the accounting records and other procedures we consider necessary to enable us to conclude that, for the items tested, the City has complied with the material terms and conditions of applicable legal provisions. We will also prepare a management report for the City Council and administration. This report will communicate such things as our concerns regarding accounting procedures or policies brought to our attention during our audit, along with recommendations for improvements. The report will also contain certain financial comparisons and analysis, and other information of interest. Audit Objectives The objective of our audit is the expression of opinions as to whether your financial statements are fairly presented, in all material respects, in conformity with U.S. generally accepted accounting principles and to report on the fairness of the supplementary information referred to in the second paragraph when considered in relation to the financial statements as a whole. The objective also includes reporting on: •Internal control over financial reporting and compliance with provisions of laws, regulations, contracts, and award agreements, noncompliance with which could have a material effect on the financial statements in accordance with Government Auditing Standards. •Internal control over compliance related to major programs and an opinion (or disclaimer of opinion) on compliance with federal statutes, regulations, and the terms and conditions of federal awards that could have a direct and material effect on each major program in accordance with the Single Audit Act Amendments of 1996 and Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). The Government Auditing Standards report on internal control over financial reporting and on compliance and other matters will include a paragraph that states that (1) the purpose of the report is solely to describe the scope of testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City’s internal control or on compliance, and (2) the report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control and compliance. The Uniform Guidance report on internal control over compliance will include a paragraph that states that the purpose of the report on internal control over compliance is solely to describe the scope of testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Both reports will state that the report is not suitable for any other purpose. City of New Hope Page 3 August 11, 2020 Our audit will be conducted in accordance with auditing standards generally accepted in the United States of America; the standards for financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; the Single Audit Act Amendments of 1996; and the provisions of the Uniform Guidance, and will include tests of accounting records, a determination of major program(s) in accordance with the Uniform Guidance, and other procedures we consider necessary to enable us to express such opinions. We will issue written reports upon completion of our Single Audit. Our reports will be addressed to the City Council and management of the City. We cannot provide assurance that unmodified opinions will be expressed. Circumstances may arise in which it is necessary for us to modify our opinions or add emphasis-of-matter or other-matter paragraphs. If our opinions are other than unmodified, we will discuss the reasons with you in advance. If, for any reason, we are unable to complete the audit or are unable to form or have not formed opinions, we may decline to express opinions or issue reports, or we may withdraw from this engagement. Audit Procedures – General An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; therefore, our audit will involve judgment about the number of transactions to be examined and the areas to be tested. An audit also includes evaluating the appropriateness of acc ounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We will plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether from (1) errors, (2) fraudulent financial reporting, (3) misappropriation of assets, or (4) violations of laws or governmental regulations that are attributable to the City or to acts by management or employees acting on behalf of the City. Because the determination of waste and abuse is subjective, Government Auditing Standards do not expect auditors to perform specific procedures to detect waste or abuse in financial audits nor do they expect auditors to provide reasonable assurance of detecting waste or abuse. Because of the inherent limitations of an audit, combined with the inherent limitations of internal control, and because we will not perform a detailed examination of all transactions, an unavoidable risk exists that some material misstatements or noncompliance may exist and not be detected by us, even though the audit is properly planned and performed in accordance with U.S. generally accepted auditing standards and Government Auditing Standards. In addition, an audit is not designed to detect immaterial misstatements or violations of laws or governmental regulations that do not have a direct and material effect on the financial statements or on major programs. However, we will inform the appropriate level of management of any material errors, any fraudulent financial reporting, or misappropriation of assets that come to our attention. We will also inform the appropriate level of management of any violations of laws or governmental regulations that come to our attention, unless clearly inconsequential. We will include such matters in the reports required for a Single Audit. Our responsibility as auditors is limited to the period covered by our audit and does not extend to any later periods for which we are not engaged as auditors. Our procedures will include tests of documentary evidence supporting the transactions recorded in the accounts, and may include tests of the physical existence of inventories, and direct confirmation of receivables and certain other assets and liabilities by correspondence with selected individuals, funding sources, creditors, and financial institutions. We will request written representations from your attorneys as part of the engagement, and they may bill you for responding to this inquiry. At the conclusion of our audit, we will require certain written representations from you about your responsibilities for the financial statements; Schedule of Expenditures of Federal Awards; federal award programs; compliance with laws, regulations, contracts, and grant agreements; and other responsibilities required by generally accepted auditing standards. City of New Hope Page 4 August 11, 2020 Audit Procedures – Internal Controls Our audit will include obtaining an understanding of the City and its environment, including internal control, sufficient to assess the risks of material misstatement of the financial statements and to design the nature, timing, and extent of further audit procedures. Tests of controls may be performed to test the effectiveness of certain controls that we consider relevant to preventing and detecting errors and fraud that are material to the financial statements and to preventing and detecting misstatements resulting from illegal acts and other noncompliance matters that have a direct and material effect on the financial statements. Our tests, if performed, will be less in scope than would be necessary to render an opinion on internal control and, accordingly, no opinion will be expressed in our report on internal control issued pursuant to Government Auditing Standards. As required by the Uniform Guidance, we will perform tests of controls over compliance to evaluate the effectiveness of the design and operation of controls that we consider relevant to preventing or detecting material noncompliance with compliance requirements applicable to each major federal award program. However, our tests will be less in scope than would be necessary to render an opinion on those controls and, accordingly, no opinion will be expressed in our report on internal control issued pursuant to the Uniform Guidance. An audit is not designed to provide assurance on internal control or to identify significant deficiencies or material weaknesses. Accordingly, we will express no such opinion. However, during the audit, we will communicate to management and those charged with governance internal control related matters that are required to be communicated under the American Institute of Certified Public Accountants (AICPA) professional standards, Government Auditing Standards, and the Uniform Guidance. Audit Procedures – Compliance As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we will perform tests of the City’s compliance with provisions of applicable laws, regulations, contracts, and agreements, including grant agreements. However, the objective of those procedures will not be to provide an opinion on overall compliance and we will not express such an opinion in our report on compliance issued pursuant to Government Auditing Standards. The Uniform Guidance requires that we also plan and perform the audit to obtain reasonable assurance about whether the auditee has complied with federal statutes, regulations, and the terms and conditions of federal awards applicable to major programs. Our procedures will consist of tests of transactions and other applicable procedures described in the Office of Management and Budget Compliance Supplement (OMB Compliance Supplement) for the types of compliance requirements that could have a direct and material effect on each of the City’s major programs. For federal programs that are included in the OMB Compliance Supplement, our compliance and internal control procedures will relate to the compliance requirements that the OMB Compliance Supplement identifies as being subject to audit. The purpose of these procedures will be to express an opinion on the City’s compliance with requirements applicable to each of its major programs in our report on compliance issued pursuant to the Uniform Guidance. City of New Hope Page 5 August 11, 2020 Other Services We will also assist in preparing the financial statements, Schedule of Expenditures of Federal Awards, and related notes of the City in conformity with U.S. generally accepted accounting principles and the Uniform Guidance based on information provided by you. These nonaudit services do not constitute an audit under Government Auditing Standards and such services will not be conducted in accordance with Government Auditing Standards. We will perform the services in accordance with applicable professional standards. The other services are limited to the financial statements, Schedule of Expenditures of Federal Awards, and related notes services previously defined. We, in our sole professional judgment, reserve the right to refuse to perform any procedure or take any action that could be construed as assuming management responsibilities. Management Responsibilities Management is responsible for (1) designing, implementing, establishing, and maintaining effective internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error, including internal controls over federal awards, and for evaluating and monitoring ongoing activities to help ensure that appropriate goals and objectives are met; (2) following laws and regulations; (3) ensuring that there is re asonable assurance that government programs are administered in compliance with compliance requirements; and (4) ensuring that management and financial information is reliable and properly reported. Management is also responsible for implementing systems designed to achieve compliance with applicable laws, regulations, contracts, and grant agreements. You are also responsible for the selection and application of accounting principles; for the preparation and fair presentation of the financial statements, Schedule of Expenditures of Federal Awards, and all accompanying information in conformity with U.S. generally accepted accounting principles; and for compliance with applicable laws and regulations (including federal statutes) and the provisions of contracts and grant agreements (including award agreements). Your responsibilities also include identifying significant contractor relationships in which the contractor has responsibility for program compliance and for the accuracy and completeness of that information. Management is also responsible for making all financial records and related information available to us and for the accuracy and completeness of that information. You are also responsible for providing us with (1) access to all information of which you are aware that is relevant to the preparation and fair presentation of the financial statements, including identification of all related parties and all related -party relationships and transactions, (2) access to personnel, accounts, books, records, supporting documentation, and other information as needed to perform an audit under the Uniform Guidance, (3) additional information that we may request for the purpose of the audit, and (4) unrestricted access to persons within the government from whom we determine it necessary to obtain audit evidence. Your responsibilities include adjusting the financial statements to correct material misstatements and confirming to us in the management representation letter that the effects of any uncorrected misstatements aggregated by us during the current engagement and pertaining to the latest period presented are immaterial, both individually and in the aggregate, to the financial statements of each opinion unit as a whole. City of New Hope Page 6 August 11, 2020 You are responsible for the design and implementation of programs and controls to prevent and detect fraud, and for informing us about all known or suspected fraud affecting the City involving (1) management, (2) employees who have significant roles in internal control, and (3) others where the fraud could have a material effect on the financial statements. Your responsibilities include informing us of your knowledge of any allegations of fraud or suspected fraud affecting the City received in communications from employees, former employees, grantors, regulators, or others. In addition, you are responsible for identifying and ensuring that the City complies with applicable laws, regulations, contracts, agreements, and grants. Management is also responsible for taking timely and appropriate steps to remedy fraud and noncompliance with provisions of laws, regulations, contracts, and grant agreements, that we report. Additionally, as required by the Uniform Guidance, it is management’s responsibility to evaluate and monitor noncompliance with federal statutes, regulations, and the terms and conditions of federal awards; take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings; promptly follow up and take corrective action on reported audit findings; and prepare a summary schedule of prior audit findings and a separate corrective action plan. The summary schedule of prior audit findings should be available for our review at the scheduled time of our audit. You are responsible for identifying all federal awards received and understanding and complying with the compliance requirements and for the preparation of the Schedule of Expenditures of Federal Awards (including notes and noncash assistance received) in conformity with the Uniform Guidance. You agree to include our report on the Schedule of Expenditures of Federal Awards in any document that contains and indicates that we have reported on the Schedule of Expenditures of Federal Awards. You also agree to include the audited financial statements with any presentation of the Schedule of Expenditures of Federal Awards that includes our report thereon OR make the audited financial statements readily available to intended users of the Schedule of Expenditures of Federal Awards no later than the date the Schedule of Expenditures of Federal Awards is issued with our report thereon. Your responsibilities include acknowledging to us in the written representation letter that (1) you are responsible f or presentation of the Schedule of Expenditures of Federal Awards in accordance with the Uniform Guidance; (2) you believe the Schedule of Expenditures of Federal Awards, including its form and content, is stated fairly in accordance with the Uniform Guidance; (3) the methods of measurement or presentation have not changed from those used in the prior period (or, if they have changed, the reasons for such changes); and (4) you have disclosed to us any significant assumptions or interpretations underlying the measurement or presentation of the Schedule of Expenditures of Federal Awards. You are also responsible for the preparation of the other supplementary information, which we have been engaged to report on, in conformity with U.S. generally accepted accounting principles. You agree to include our report on the supplementary information in any document that contains, and indicates that we have reported on, the supplementary information. You also agree to include the audited financial statements with any presentation of the supplementary information that includes our report thereon OR make the audited financial statements readily available to users of the supplementary information no later than the date the supplementary information is issued with our report thereon. Your responsibilities include acknowledging to us in the written representation letter that (1) you are responsible for presentation of the supplementary information in accordance with GAAP; (2) yo u believe the supplementary information, including its form and content, is fairly presented in accordance with GAAP; (3) the methods of measurement or presentation have not changed from those used in the prior period (or, if they have changed, the reasons for such changes); and (4) you have disclosed to us any significant assumptions or interpretations underlying the measurement or presentation of the supplementary information. City of New Hope Page 7 August 11, 2020 Management is responsible for establishing and maintaining a process for tracking the status of audit findings and recommendations. Management is also responsible for identifying and providing report copies of previous financial audits, attestation engagements, performance audits, or other studies related to the objectives discussed in the Audit Objectives section of this letter. This responsibility includes relaying to us corrective actions taken to address significant findings and recommendations resulting from those audits, attestation engagements, performance audits, or studies. You are also responsible for providing management’s views on our current findings, conclusions, and recommendations, as well as your planned corrective actions, for the report, and for the timing and format for providing that information. You agree to assume all management responsibilities relating to the financial statements, Schedule of Expenditures of Federal Awards, and related notes, and any other nonaudit services we provide. You will be required to acknowledge in the management representation letter our assistance with preparation of the financial statements, Schedule of Expenditures of Federal Awards, and related notes and that you have reviewed and approved the financial statements, Schedule of Expenditures of Federal Awards, and related notes prior to their issuance and have accepted responsibility for them. Further, you agree to oversee the nonaudit services by designating an individual, preferably from senior management, with suitable skill, knowledge, or experience; evaluate the adequacy and results of those services; and accept responsibility for them. Engagement Administration, Fees, and Other The assistance to be supplied by your personnel, including the preparation of schedules , account analysis, preparation of confirmations we request, and locating of invoices or other documentation we select for testing, will be discussed and coordinated with you. At the conclusion of the engagement, we will complete the appropriate sections of the Data Collection Form that summarizes our audit findings. It is management’s responsibility to electronically submit the reporting package (including financial statements, Schedule of Expenditures of Federal Awards, summary schedule of prior audit findings, auditor’s reports, and corrective action plan) along with the Data Collection Form to the federal audit clearinghouse. We will coordinate with you the electronic submission and certification. The Data Collection Form and the reporting package must be submitted within the earlier of 30 calendar days after receipt of the auditor’s reports or nine months after the end of the audit period. We will provide copies of our reports to the City; however, management is responsible for distribution of the reports and the financial statements. Unless restricted by law or regulation, or containing privileged and confidential information, copies of our reports are to be made available for public inspection. The audit documentation for this engagement is the property of Malloy, Montague, Karnowski, Radosevich & Co., P.A. (MMKR) and constitutes confidential information. However, subject to applicable laws and regulations, audit documentation and appropriate individuals will be made available upon request and in a timely manner to the City or its designee, a federal agency providing direct or indirect funding, or the U.S. Government Accountability Office for purposes of a quality review of the audit, to resolve audit findings, or to carry out oversight responsibilities. We will notify you of any such request. If requested, access to such audit documentation will be provided under the supervision of MMKR personnel. Furthermore, upon request, we may provide copies of selected audit documentation to the aforementioned parties. These parties may intend, or decide, to distribute the copies or information contained therein to others, including other governmental agencies. City of New Hope Page 8 August 11, 2020 The audit documentation for this engagement will be retained for a minimum of five years after the report release date or for any additional period requested by regulatory agencies. If we are aware that a federal awarding agency, pass-through entity, or auditee is contesting an audit finding, we will contact the party(ies) contesting the audit finding for guidance prior to destroying the audit documentation. We expect to begin our audit shortly after the end of the fiscal year and to issue our report no later than June 30, 2021. William J. Lauer, CPA, is the engagement partner and is responsible for supervising the engagement and signing the reports or authorizing another individual to sign them. Our fees for these services will be based on the actual time spent at our standard hourly rates. We will also bill you for travel and other out-of-pocket costs such as report production, typing, and postage. Our standard hourly rates vary according to the degree of responsibility involved and the experience level of the personnel assigned to your audit. Our invoices for these fees will be re ndered each month as work progresses and are payable upon presentation. Unless additional work is requested, or circumstances require additional work, our estimated fees for the services described above are as follows: Audit of Basic Financial Statements 34,230$ CAFR Preparation 4,500 Single Audit of Federal Awards Expenditures 5,000 Total 43,730$ In accordance with our firm policies, work may be suspended if your account becomes 60 days or more overdue and may not be resumed until your account is paid in full. If we elect to terminate our services for nonpayment, our engagement will be deemed to have been completed upon written notification of termination, even if we have not completed our report. You will be obligated to compensate us for all time expended and to reimburse us for all out-of-pocket costs through the date of termination. These fees are based on anticipated cooperation from your personnel and the assumption that unexpected circumstances will not be encountered during the audit. If significant additional time is necessary, we will discuss it with you and arrive at a new fee estimate before we incur the additional costs. If additional services are requested by the City, those services will be billed at our standard hourly rates. Additional audit procedures might be required for certain accounting issues or events, such as new contractual agreements, transactions and legal requirements of new bond issues, new funds, major capital projects, new tax increment districts, if there is an indication of misappropriation or misuse of public funds, or if significant difficulties are encountered due to the lack of accounting records, incomplete records, or turnover in the City’s staff. During the year, you might request additional services such as routine advice, assistance in implementing audit recommendations, review of your projections or budgets, and other similar projects. Independence standards allow us to perform these routine services; however, it is important that you understand that we are not allowed to make management decisions, perform management functions, nor can we audit our own work or provide nonaudit services that are significant to the subject matter of the audit. Our audit engagement ends on delivery of our audit report. Any follow-up services that might be required will be a separate, new engagement. The terms and conditions of that new engagement will be governed by a new, specific engagement letter for that service. City of New Hope Page 9 August 11, 2020 Please be aware that e-mail is not a secure method of transmitting data. It can be intercepted, read, and possibly changed. Due to the large volume of e-mails sent daily, the likelihood of someone intercepting your e-mail is relatively small, but it does exist. We will communicate with you via e-mail, if you are willing to accept this risk. To ensure that MMKR’s independence is not impaired under the AICPA Code of Professional Conduct, you agree to inform the engagement principal before entering into any substantive employment discussions with any of our personnel. With regard to the electronic dissemination of audited financial statements, including financial statements published electronically on your website, you understand that electronic sites are a means to distribute information and, therefore, we are not required to read the information contained in these sites or to consider the consistency of other information in the electronic site with the original document. If you intend to publish or otherwise reproduce the financial statements, such as in a bond statement, and make reference to our firm name, you agree to provide us with printers’ proofs or masters for our review and approval before printing. You also agree to provide us with a copy of the final reproduced material for our approval before it is distributed. If a dispute occurs related in any way to our services, our firm and the City agree to discuss the dispute and, if necessary, to promptly mediate in a good faith effort to resolve it. We will agree on a mediator, but if we cannot, either of us may apply to a court having personal jurisdiction over the parties for appointment of a mediator. We will share the mediator’s fees and expenses equally, but otherwise will bear our own attorney fees and costs of the mediation. Participation in such mediation shall be a condition to either of us initiating litigation. To allow time for the mediation, any applicable statute of limitations shall be tolled for a period not to exceed 120 days from the date either of us first requests in writing to mediate the dispute. The mediation shall be confidential in all respects, as allowed or required by law, except that our final settlement positions at mediation shall be admissible in litigation solely to determine the identity of the prevailing party for purposes of the awarding of attorney fees. We both recognize the importance of performing our obligations under this agreement in a timely way and fully cooperating with the other. In the event that either of us fails to timely perform or fully cooperate, the other party may, in its sole discretion, elect to suspend performance or terminate the agreement regardless of the prejudice to the other person. We agree we will give 10 days’ written not ice of an intent to suspend or terminate, specifying the grounds for our decision, and will give the other an opportunity to cure the circumstances cited as grounds for that decision. In the event of suspension or termination, all fees and costs are immediately due on billing. We agree that it is important that disputes be discussed and resolved promptly. For that reason, we agree that, notwithstanding any other statutes of limitations or court decisions concerning them, all claims either of us may have will be barred unless brought within one year of the date the complaining party first incurs any damage of any kind, whether discovered or not, related in any way to acts or omissions of the other party, whether or not the complaining party seeks recovery for that first damage and whether or not we have continued to maintain a business relationship after the first damage occurred. Notwithstanding anything in this letter to the contrary we agree that regardless of where the City is located, or where thi s agreement is physically signed, this agreement shall have been deemed to have been entered into at our office in Hennepin County, Minnesota, and Hennepin County shall be the exclusive venue and jurisdiction for resolving disputes related to this agreement. This agreement shall be interpreted and governed under the laws of Minnesota. City of New Hope Page 10 August 11, 2020 When requested, Government Auditing Standards require that we provide you with a copy of our most recent external peer review report and any letter of comment, and any subsequent peer review reports and letters of comment received during the period of the contract. Our most recent peer review report accompanies this letter. We appreciate the opportunity to be of service to the City and believe this letter accurately summarizes the significant terms of our engagement. If you have any questions, please let us know. If you agree with the terms of our engagement as described in this letter, please sign the enclosed copy and return it to us. Sincerely, MALLOY, MONTAGUE, KARNOWSKI, RADOSEVICH & CO., P.A. William J. Lauer, CPA Principal WJL:wls Response: This letter correctly sets forth the understanding of the City of New Hope. City Council Representative City Management Representative By: ______________________________ By: _______________________________ Title: ______________________________ Title: _______________________________ Date: ______________________________ Date: _______________________________ MEMO TO: KIRK MCDONALD FROM: VICKI HOLTHAUS, AEM FINANCIAL SOLUTIONS, LLC SUBJECT: ENGAGEMENT FOR 2020 AUDIT SERVICE DATE: AUGUST, 11 2020 BACKGROUND In 2019, the City Council accepted a multi-year proposal from MMKR for audit services. The pricing for the 2020, 2021 and 2022 audits are set and include a 1.5% annual increase. The following audit fees do not include any services beyond the basic audit (including a Federal single audit, which would be priced separately). RECOMMENDATIONS On August 11, MMKR submitted its annual Engagement Letter for the 2020 audit. The audit is priced at $34,230 as set forth in the multi-year proposal received in 2019. In addition, the Comprehensive Annual Financial Report (CAFR) preparation is priced at $4,500, which is consistent with the multi-year proposal. Due to the City’s award of Federal CARES Act and FEMA funding, it is anticipated that a Federal single audit will be required for 2020. MMKR has estimated the Federal single audit cost at $5,000. The City has worked with MMKR for several years and the Firm is very familiar with the City’s finances and processes. The Firm completes the audit in a timely, professional manner and the audit Engagement staff assigned to the City’s audit are knowledgeable and efficient. It is our recommendation that the City approve the Engagement with MMKR for audit services for the 2020 fiscal year. Year Ending December 31,Basic Audit 2020 34,230$ 2021 34,745 2022 35,265 Total 104,240 DOLLAR COST BID PROPOSAL SCHEDULE OF PROFESSIONAL FEES AND EXPENSES FOR CITY OF NEW HOPE, MINNESOTA FOR PROFESSIONAL AUDITING SERVICES FOR FISCAL YEARS ENDING DECEMBER 31, 2020, 2021, AND 2022 WILLIAM J. LAUER, CPA PRINCIPAL E-MAIL: BLAUER@MMKR.COM 952.545.0424 September 27, 2019 Mr. Kirk McDonald, City Manager City of New Hope 4401 Xylon Avenue North New Hope, MN 55428 Dear Mr. McDonald: We are pleased to submit this proposal to provide auditing services for the City of New Hope (the City) for the fiscal years ending December 31, 2020, 2021, and 2022, subject to the City’s annual review and approval. Our audits will be conducted in accordance with auditing standards generally accepted in the United States of America; the standards for financial and compliance audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; the provisions of the Legal Compliance Audit Guide promulgated by the State Auditor pursuant to Minnesota Statute s § 6.65; and any other applicable state or federal audit guide. We will review the City’s internal control and test accordingly. We anticipate issuing the following report letters in relation to the City’s audits: 1.A report on the fair presentation of the basic financial statements in conformity with accounting principles generally accepted in the United States of America, with an “in relation to” opinion on the combining and individual fund financial statements and supporting schedules. 2.A report on compliance and on internal control over financial reporting based on an audit of financial statements performed in accordance with Government Auditing Standards. 3.A report on compliance with Minnesota State Laws and Regulations. We understand the City does not expect to earn more than $750,000 of federal awards annually and, accordingly, is not expected to need a single audit of federal awards expenditures. We will also provide a management report to communicate comments and recommendations as a result of the audit, including: a discussion of any internal control-related or compliance findings resulting from the current year audit; recommendations to management on improving its accounting system and financial reports; an update on prior year audit issues; and the formal communications to the City’s finance committee or its equivalent as required by Statement on Auditing Standards No. 114, The Auditor’s Communication With Those Charged With Governance. We understand that you will provide us with the basic information required for our audit and that you are responsible for the accuracy and completeness of that information. We will advise you about appropriate accounting principles and their application and will assist in the preparation of your financial statements, but the responsibility for the financial statements remains with you. This responsibility includes the maintenance of adequate records and related internal control policies, the selection and a pplication of accounting principles, and the safeguarding of assets. 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 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 Standard Letterhead-r2.qxp_167639 Letterhead-RV1 9/7/18 6:34 PM Page 1 City of New Hope, Minnesota Page 2 September 27, 2019 The assistance to be supplied by your personnel, including the preparation of schedules and analysis of accounts, typing all cash or other confirmations we request, and locating any inv oices selected by us for testing, will be discussed and coordinated with you. Our audit is not specifically designed and cannot be relied on to disclose material weaknesses or significant deficiencies in the design or operation of the internal control. However, if our audit procedures indicate that material errors, illegal acts, or other irregularities might exist, we will make an immediate, written report to the City’s management, City Council, and/or other city officials, as appropriate. Our fees for these services will be based on the actual time spent at our standard hourly rates, plus travel and other out-of-pocket costs such as report production, typing, postage, etc. Our standard hourly rates vary according to the degree of responsibility involved and the experience level of the personnel assigned to your audit. Our invoices for these fees will be rendered each month as work progresses and are payable upon presentation. The anticipated fees for the indicated services are shown on the Schedule of Professional Fees and Expenses included in this Dollar Cost Bid Proposal. In prior years, the City’s contracted accounting service provider has been responsible for preparing the initial draft of the financial statements, notes, and supplementary schedules ; as well as typing, editing, and printing the financial statements. An alternative bid for our firm to provide these nonaudit services is included on the Schedule of Professional Fees and Expenses included in this Dollar Cost Bid Proposal . Prior to issuance of the final audit report, we shall review the report draft, management report, internal control letters, and any other required compliance reports with the City’s management. The fees charged are based on anticipated cooperation from your personnel and the assumption that unexpected circumstances will not be encountered during the audit. If we find that additional audit procedures are required, or if additional services are requested by the City, those services will be billed at our standard hourly rates. Additional audit procedures might be required for certain accounting issues or events such as new contractual agreements, new accounting and auditing standards, transactions an d legal requirements of new bond issues, new funds, major capital projects, or if there is an indication of misappropriation or misuse of public funds, or if significant difficulties are encountered due to the lack of accounting records, incomplete records, or turnover in the City’s staff. Our proposal assumes that the City will be responsible for preparing substantially all financial schedules and other information required for the audit, as has been the case in our previous audit engagements with the City. The cost of any additional accounting assistance performed at the request of the City will be based on the actual time required and the hourly rates of the individuals performing the services. We will not perform extended services at a cost to the City unless so authorized by the appropriate city officials. We hope you will give our firm and proposal due consideration. We will continue to give the City Council and administration the quality service you expect from your auditors. If you have any questions, please contact William J. Lauer, CPA, Principal. This proposal covers the fiscal years ending December 31, 2020, 2021, and 2022, and is a firm and irrevocable offer for a period of ninety (90) days. Sincerely, MALLOY, MONTAGUE, KARNOWSKI, RADOSEVICH & CO., P.A. William J. Lauer, CPA Principal WJL:wls Alternative Bid Year Ending Basic CAFR December 31,Audit Preparation Total 2020 34,230$ 4,500$ 38,730$ 2021 34,745 4,600 39,345 2022 35,265 4,700 39,965 Total 104,240$ 13,800$ 118,040$ City of New Hope, Minnesota Schedule of Professional Fees and Expenses For Professional Auditing Services Estimated fees for the years ending December 31, 2020, 2021, and 2022: I certify that I am entitled to represent Malloy, Montague, Karnowski, Radosevich & Co., P.A., (MMKR), empowered to submit the bid, and authorized to sign a contract with the City of New Hope (the City). Signed: William J. Lauer, CPA Principal Additional services hourly rates: If it should become necessary for the City to request the auditor to render any additional service to either supplement the services requested in this proposal or to perform additional work as a result of the specific recommendations included in any report issued on this engagement or as a result of new standards, then such additional work shall be performed only if set forth in an addendum to the contract between the City and MMKR. Any such additional work agreed to between the City and MMKR would be performed at the standard hourly rates of the professional staff performing the services. MMKR does not charge its audit clients for inquiries and technical assistance during the year that are minor in nature (those that would not require a significant amount of research or result in the issuance of a separate report letter or letter). I:\RFA\City Manager\2020\Budget 2021\WS 081720\Q-prel budget 2021 08.17.20.docx Request for Action August 17, 2020 Approved by: Kirk McDonald, City Manager Originating Department: City Manager By: Kirk McDonald, City Manager Agenda Title Discussion regarding 2021 preliminary general fund budget and tax levy Requested Action1 Staff requests to begin initial discussions on the preliminary 2021 general fund budget and city tax levy. Budget binders were distributed with the work session agenda packet, and an electronic copy of the budget is attached. The city manager and representatives from AEM will be present to provide an overview of the budget. Policy/Past Practice In the past the Council has discussed and provided feedback/direction on the general fund budget and city tax levy prior to the September council meeting when the maximum levy must be established. The general fund budget is reviewed and refined during the fall months with the final budget and tax levy adopted in December. All utility and enterprise fund budgets are reviewed and discussed in the fall, a determination is made regarding any necessary rate increases and all budgets adopted in December. Background Per Hennepin County, the City Council needs to adopt the preliminary maximum tax levy for certification to the county auditor by September 30. Staff is recommending that Council certify the preliminary tax levy at the September 14 council meeting. Per the schedule reviewed with the Council earlier this year, it was determined the preliminary budget would be distributed and discussed at the August 17 work session. If a special work session is needed prior to the September 14 council meeting to reach agreement on the initial maximum levy, staff recommends that it be conducted on September 8 (a special work session has not been necessary in the past). All general fund department budgets will be reviewed and discussed at the September 21 work session with department heads in attendance . All enterprise and utility fund budgets, including HRG, will be discussed at the October 19 work session. A final budget presentation that includes results from the city services survey is prepared and reviewed at the November 16 work session in advance of the December 7 public hearing. 2020 Budget The 2020 general fund budget was $15,410,550, and included a $136,483 levy increase (or 1.32% levy increase) over the 2019 budget of $14,224,112 for a total general fund tax levy of $10,511,431. The total city tax levy for 2020 was $16,844,716, which represented a 10.08% or $1,543,106 increase over the 2019 levy. The major increases in the general fund were adding pool operations back into the budget, wage and benefit increases (3% wage increase for city employees and council members), central garage charges, West Metro Fire-Rescue District joint powers agreement and 2020 election costs. The city received $815,623 in local government aid (LGA), and it was utilized in the general fund to help fund equipment replacement savings (not used for general operations). The total tax levy included a new levy for pool and park improvement bonds, a $100,000 increase in the park infrastructure fund for ice arena debt service/capital improvements and a $48,000 Agenda Section Work Session Item Number 11.7 Request for Action, Page 2 I:\RFA\City Manager\2020\Budget 2021\WS 081720\Q-prel budget 2021 08.17.20.docx increase in the EDA levy for redevelopment. The tax levy for the 2010 fire truck certificates was eliminated from the total levy as that debt was paid off in 2019. 2021 Budget The 2021 general fund budget is $15,936,977, which is an increase of $526,427 (3.4%) over the 2020 budget of $15,410,550. The major changes in the budget include:  An increase of $243,524 for wage and benefit increases ($193,013 in police department and $50,511 for other departments); a 3% cost of living adjustment is budgeted for employees along with an increase in the city’s share of health insurance coverage; and a 3% increase in City Council salaries is included in the budget (to be considered in October, 2020).  $156,000 is budgeted for phase 1 of police department body and squad camera purchases (phase 2 scheduled for 2022). It is recommended that this cost be funded with a transfer in from the IT reserve fund (utilized for IT purposes including security systems at city facilities) in order to keep the general fund tax levy to a minimum.  There is an increase of $85,288 in the budget for West Metro Fire -Rescue District due to a $54,673 or 4.2% increase in New Hope’s share of the joint powers agreement and a $35,778 increase in central garage charges due to a new replacement charge for the new emergency generator shared between the fire district and the police station/city hall facility. For 2021 it is recommended that New Hope’s share of the aerial lease payment ($51,800) be funded by the general fund instead of a transfer from the Fire Capital Projects fund so that the capital funds can be saved for future major apparatus replacement. The lease payment is included in the joint powers agreement budget.  General fund central garage charges increased by $57,427 based on the equipment replacement schedule and include a 100% replacement charge and a portion of the $400,000 building replacement charge for future public works facility improvements. Department allocations were adjusted according to the long- term replacement plan, with some increases and some decreases.  The city is scheduled to receive $865,307 in LGA (local government aid) in 2021, which is an increase of $49,684 over 2020. The revenue will be utilized in the general fund to offset central garage equipment and building replacement charges; it is not used for general operations. The total cost of general fund equipment/building replacement charges in 2021 is $917,949 so LGA does not cover the full amount; approximately $52,642 is needed from other revenue sources.  2021 is not an election year so there is a decrease of approximately $60,000 in the elections budget as compared to the 2020 budget. In 2020 funds were budgeted for three elections (Presidential Primary, Primary, and General). Funds are budgeted for equipment maintenance and postage expenses.  There is a $49,000 increase in the city hall budget due to the new replacement cost for the new generator ($24,000) and increases in utility costs and liability insurance for a larger building ($22,000 and $17,000, respectively); offset by a $14,000 decrease in repairs, furniture/fixtures and postage.  Similar to 2020, in 2021 general fund IT charges will increase approximately $33,000 and are based on the new allocation method implemented in 2020 for indirect charges (number of phones, computers and employees per department), with direct departmental Logis IT costs being allocated to the benefitting department.  There is $99,506 in revenue increases budgeted for an increase in right-of-way and easement fees, franchise fees, and state aid for streets and police pensions.  There is a $60,000 decrease budgeted for police charge outs due to the uncertainty of the school resource officer program. 2021 Tax Levy The tax levy for the general fund is $10,879,465, which is $368,034 or a 3.5% increase over the 2020 general fund levy of $10,511,431. The total tax levy for 2021, including the general fund, street and park infrastructure funds, economic development authority and prior levies for City Center, Northwood South and Northwood North infrastructure bonds, the 2017 police station/city hall facility bonds, and the 2018/2019 pool and park improvement bonds is $17,417,601. This represents a 3.4% or $572,885 increase over the 2020 levy of $16,844,716, which was a 10.08% increase. The total tax levy includes a 5% increase in the street and park infrastructure levies to support the long-term funding plans for street and park improvements. An additional $100,000 has been added to the park infrastructure levy for ice arena debt service and capital improvements (final year of increase), per the funding plan approved by the Council. A $17,000 increase in the EDA levy is recommended to support the scattered site housing program and other redevelopment. Four of the debt bond tax levies are decreasing (2015 City Center, 2015 Northwood South, 2017 City Hall and 2019 Pool and Park) for a total decrease of $7,285. Two of the debt bond tax levies are increasing (2016 Northwood North and 2018 Pool and Park) for a total increase of $3,674. Overall, the combined debt levies are decreasing by $3,611. Per AEM, the estimated overall impact of the city tax levy on residential properties will not be available from Hennepin County until late August/early September. The information will be provided to the Council when it is received and incorporated into the September budget presentation. The 2021 budget goals are listed in the preliminary budget binder and are the same goals discussed at the June work session. At the September 14 council meeting, the Council will be asked to set the public hearing date for the proposed 2021 budget. The meeting can be held at a regular council meeting; however, historically the Council has preferred a separate meeting for public input. Staff recommends the meeting be held on Monday, December 7, at 7 p.m. If Council desires an alternate date, please advise and staff will prepare the Request for action accordingly. The budget would then be presented to the Council for final adoption at the December 14 council meeting. Staff feels this is a reasonable place to start for the preliminary maximum budget and tax levy, with the understanding that more detailed discussions will transpire over the next several months. A PowerPoint presentation will be prepared for the September 14 council meeting after feedback is received at this work session. Thanks is extended to the city staff and AEM that have prepared information for the preliminary budget. As the Council is aware, staff is always open to your comments - the budget is a work in progress. Attachments  2021 Preliminary Budget Workbook I:\RFA\City Manager\2020\closed mtg 8.11.20\RFA 11.8 Closed Meeting tob ord.docx Request for Action August 17, 2020 Approved by: Kirk McDonald, City Manager Originating Department: Community Development By: Brandon Bell, Community Dev. Assistant Agenda Title Resolution calling for a closed meeting of the New Hope City Council authorized by Minn. Stat §13D.05, Subd. 3 to discuss and consider threatened litigation Requested Action Staff requests the opportunity to discuss with the Council threatened litigation related to the proposed tobacco ordinance. Policy/Past Practice As per Minnesota State Statute 13D.05 Subd. 3, the city is authorized to hold a closed meeting to consider threatened litigation. The closed meeting will be held immediately following adjournment of the regular work session. Materials of confidential nature will be provided to the Council under separate cover. Attachment  Resolution Agenda Section Work Session Item Number 11.8 1 RESOLUTION NO. 20-__ RESOLUTION CALLING FOR A CLOSED MEETING OF THE NEW HOPE CITY COUNCIL AUTHORIZED BY MINN. STAT. §13D.05, SUBD. 3 TO DISCUSS AND CONSIDER THREATENED LITIGATION WHEREAS, the City of New Hope has received multiple communications regarding potential litigation over the proposed tobacco ordinance the New Hope City Council (“City Council”) is considering; WHEREAS, the City Council is considering litigation avoidance methods and/or possible litigation strategy and requires the legal advice of the City Attorney to discuss this threatened litigation and litigation strategy; WHEREAS, such a discussion constitutes attorney-client privilege and requires that a closed meeting be called to ensure absolute confidentiality; WHEREAS, Minn. Stat. §13D.05 Subd. 3(b) authorizes and permits the City Council, by a majority vote taken in a public meeting, to hold a closed meeting to discuss litigation avoidance methods and/or litigation strategy with the City Attorney pursuant to attorney-client privilege; and WHEREAS, a closed meeting is necessary in that public disclosure of the information to be discussed at the closed meeting could possibly damage the City Council’s position in defending itself against this potential litigation. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of New Hope as follows: 1. That a closed meeting of the City Council shall be held on 17th day of August, 2020 immediately following the adjournment of the regularly scheduled work session meeting of the New Hope City Council in the Civic Center Conference Room at the New Hope City Hall. 2. That the purpose of the meeting shall be the discussion of the threatened litigation matters and litigation strategy with the City Attorney; 3. That said meeting shall not be open to the public. 4. That the New Hope City Clerk shall not be directed to electronically record the meeting because it is a closed meeting under the attorney-client privilege. 5. That the New Hope City Clerk shall prepare a written roll of the City Councilmembers and all other persons present at the closed meeting and make said roll available for public inspection upon adjournment of the closed meeting. 2 Adopted by the City Council of the City of New Hope, Hennepin County, Minnesota, this 17th day of August, 2020. ____________________________________ Kathi Hemken, Mayor Attest: _______________________ Valerie Leone, City Clerk P:\Attorney\SAS\1 Client Files\2 City of New Hope\99-82008 Tobacco Ordinance\Resolution - City Council closed meeting discussion (13D.05).docx