HomeMy WebLinkAbout2022-10-13 Council Work Session Agenda PacketCouncil Work Session Agenda
October 13, 2022 – 5:30 pm
1. Call to Order / Roll Call
2. 2022 Financial Management Plan*
3. Unscheduled Items
4. Adjournment
*Includes Materials - Materials relating to these agenda items can be found in the house agenda packet
book located by the Council Chambers entrance, or online at the City’s website at www.corcoranmn.gov.
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Item 2.
1
8200 County Road 116 Corcoran, MN 55340
763-420-2288 www.ci.corcoran.mn.us
MEMO
Meeting Date: October 13, 2022
To: City Council
From: Maggie Ung
Re: Draft 2022 Financial Management Plan
____________________________________________________________________
The draft 2022 Financial Management Plan is attached. Tammy Omdal from Northland
Securities will present the report and assist with answering any questions.
One specific area of discussion in the financial management plan is the proposed water
improvements project outlined in the CIP and Debt section and the Water Fund section.
The proposed $1 9 million project is financially feasible based upon the growth
assumptions used in the report between trunk fees and water users. The assumptions
used include continued development pace of over 200 new homes per year through
2027. This is a conservative projection based upon the growth the city is seeing. The
assumptions also include two multi-family housing projects taking place, St. Therese
campus and Applewood Pointe community .
Another specific area of discussion is the park improvement project outlined in the CIP
and Debt section. A portion of the project would be funded by park dedicati on fees and
additional funds if available, including but not limited to gambling revenue and ARPA
funds. The bond needed to fund the project is estimated to be $4.5 million and would
directly affect tax levy and the tax rate. This would be funded from gene ral obligation
bond issuance in 2023.
It should be noted that the document is for planning purposes only. Actual impacts will
be determined by decisions made by the City Council in the future.
Attachments:
1. Draft 2022 Financial Management Plan
Preliminary Draft In-Progress as of October 7, 2022*
*City staff is in the process of reviewing the assumptions city staff prepared for the inputs used for the development of the
Plan. This includes assumptions for growth, timing for capital improvements and estimated costs, among other items.
Northland Securities, Inc.
150 South Fifth Street, Suite 3300
Minneapolis, MN 55402
(800) 851-2920
Member FINRA and SIPC
Registered with SEC and MSRB
Letter of Transmittal
Introduction and Summary 1
Introduction and Summary ............................................................................................................1
Study Approach ..................................................................................................................................1
Revenue Suffi ciency ...........................................................................................................................2
Rate Calculations ................................................................................................................................3
City Tax Rate .................................................................................................................................3
Utility Rates ..................................................................................................................................5
Organization of the Plan .................................................................................................................6
TABLE 1 - Property Tax Levy and Tax Rate ................................................................................7
TABLE 2 - Projected City Taxes Payable for Example Properties ......................................8
CHART 1 - Annual Change in Property Tax Levy and Rate .................................................9
CHART 2 - City Tax Capacity (Tax Base) ......................................................................................9
CHART 3 - Fund Balance ...............................................................................................................10
CHART 4 - Cash Balances .............................................................................................................10
CHART 5 - Water Fund Cash Balances ....................................................................................11
CHART 6 - Sewer Fund Cash Balances ....................................................................................11
CHART 7 - CIP Use of Funds .......................................................................................................12
CHART 8 - CIP Source of Funds .................................................................................................12
Background 13
Summary .............................................................................................................................................13
TABLE 3 - Customer Units and Water Volume Sold ...........................................................14
CHART 9 - New Construction and Connection to Municipal Utilities .........................17
CHART 10 - Acres of Land Platted ............................................................................................17
Capital Improvement Plan and Debt 18
Overview of Plan ..............................................................................................................................18
Equipment and Vehicles .......................................................................................................18
Water Improvements .............................................................................................................18
Sewer Improvements .............................................................................................................18
Street Improvements .............................................................................................................18
Facility and Parks .....................................................................................................................18
Bond Terms ........................................................................................................................................20
TABLE 4 -Capital Improvement Plan ........................................................................................21
TABLE 5 - Debt Service ..................................................................................................................23
TABLE 6 - Bonds Outstanding ....................................................................................................24
CHART 11 - CIP Use of Funds .....................................................................................................25
CHART 12 - CIP Source of Funds ...............................................................................................25
CHART 13 - Annual Debt Service ..............................................................................................26
CHART 14 - Bonds Outstanding ................................................................................................26
CHART 15 - Debt Outstanding by Type ..................................................................................27
CHART 16 - Bonds Outstanding Existing and New ............................................................27
Financial Plans 28
Background ........................................................................................................................................28
Summary of Key Factors and Assumptions ...........................................................................28
Total Governmental Funds Combined ....................................................................................30
CHART 17 - Total Sources and Uses of Funds ................................................................31
CHART 18 - Cash Balance and Fund Balance .................................................................31
TABLE 7 - Finance Plan ............................................................................................................32
General Fund Financial Plan ........................................................................................................33
Figure 2 - Tax Levy Revenue ..................................................................................................33
CHART 19 - Cash Balance and Fund Balance .................................................................35
CHART 20 - Source and Use of Funds ...............................................................................35
CHART 21 - % Change in Source and Use of Funds ....................................................35
CHART 22 - Use of Funds by purpose ..............................................................................35
TABLE 8 - Finance Plan ............................................................................................................36
Debt Service Funds Financial Plan ............................................................................................37
CHART 23 - Cash Balance and Fund Balance .................................................................38
CHART 24 - Source and Use of Funds ...............................................................................38
CHART 25 - % Change in Source and Use of Funds ....................................................38
CHART 26 - Use of Funds by purpose ..............................................................................38
TABLE 9 - Finance Plan ............................................................................................................39
Special Revenue Funds Financial Plan .....................................................................................40
TABLE 10 - Finance Plan .........................................................................................................41
Capital Projects Funds Financial Plan ......................................................................................42
TABLE 11 - Finance Plan .........................................................................................................43
Capital Equipment Fund Financial Plan ..................................................................................44
TABLE 12 - Finance Plan .........................................................................................................45
Facilities Fund....................................................................................................................................46
TABLE 13 - Finance Plan .........................................................................................................47
Water Fund Financial Plan ............................................................................................................48
CHART 27 - Cash Balance by Purpose ..............................................................................50
CHART 28 - Ending Unrestricted Net Assets ..................................................................50
CHART 29 - Revenue and Expense .....................................................................................50
CHART 30 - Customers and Volume ..................................................................................50
TABLE 14 - Finance Plan .........................................................................................................51
TABLE 15 - Projected Water Revenues ..............................................................................53
TABLE 16 - Cash Balances ......................................................................................................56
Sewer Fund Financial Plan ...........................................................................................................57
CHART 31 - Cash Balance by Purpose ..............................................................................59
CHART 32 - Ending Unrestricted Net Assets ..................................................................59
CHART 33 - Revenue and Expense .....................................................................................59
CHART 34 - Customers and Volume ..................................................................................59
TABLE 17 - Finance Plan .........................................................................................................60
TABLE 18 - Projected Water Revenues ..............................................................................62
TABLE 19 - Cash Balances ......................................................................................................64
Appendix 65
TABLE A - Utility Fee Schedule ...................................................................................................65
TABLE B - Property Tax Levy Planned for Debt Service .....................................................68
TABLE C - Planned Staff Additions ............................................................................................69
The Financial Management Plan (the “Plan”) is intend-
ed to serve as a guide for the on-going fi nancial man-
agement of the City of Corcoran (the “City”). The Plan
was fi rst prepared in year 2012 and has been updated
annually.
The Plan contains proposed strategies and identifi ca-
tion of key factors and objectives to monitor with re-
spect to future fi nancial performance. Information is
included on estimated future property tax levies and
municipal fees and charges necessary to fund planned
city services, capital improvement plans, and debt ser-
vice.
The objectives of the study for the Plan are as follows:
• Revenue Suffi ciency - Develop and populate a
forecasting model that will determine the level
of revenue needed to satisfy general government
and utility enterprises operations, capital improve-
ments, and debt service while maintaining ade-
quate reserves for future service and capital needs
of the City.
• Rate Calculations - Model projected future tax ca-
pacity tax rates for the City and proposed rates and
structure for billing water and sewer services (the
“Utilities”) to meet defi ned revenue suffi ciency
objectives.
The Plan includes anticipated capital improvement for
years 2023-2027 (the “CIP”). Estimates were prepared
by the City as to cost and timing of projects.
While the specifi c timing of future improvements can
sometimes be uncertain, awareness of the funding de-
mands for projects is important when considering an-
nual tax levies, rates for fees and charges, and reserves
for future capital.
Future development will provide increased revenue
from charge for services and tax revenue. This will in-
clude increased revenue to the Utilities, with revenue
from both development fees and usage fees. It will also
provide additional property value and potential for
property tax revenue to pay for services.
The rate of future development and addition of tax-
payers and customers of the Utilities has been and
continues to be a signifi cant variable for the Plan. The
City should continue to monitor actual development
that occurs against the anticipated rate of develop-
ment assumed in the Plan. The rate of development
will impact the projected revenues and timing includ-
ed in the Plan. Information on projected housing units
to be added is included later in the Plan.
Study Approach
The following steps were taken as part of the study for
the Plan:
• City provided historical fi nancial data along with
current budget plans and capital improvement
plans.
• City provided the assumptions for future residen-
tial units to be constructed and connected to the
Utilities.
• Information provided by the City was organized,
analyzed, and used to support the development of
the Plan.
• The prior year data included in the Plan is recon-
ciled with the City’s annual audited fi nancial state-
ments.
• City staff off ered input and feedback on the as-
sumptions, diff erent options for levies and rates
and desired outcomes for the Plan.
• The study did not include a review and compari-
son to other cities for tax rates and fees and charg-
es.
Revenue Suffi ciency
The Study evaluated the suffi ciency of revenues to
meet current and projected fi nancial requirements
over future years for the various fi nancial “Funds” the
City maintains. The Plan determines the tax levies and
rates necessary in each year of the projection period to
provide revenue suffi ciency.
In year 2017, Moody’s Investor Service upgraded the
City’s rating for general obligations bonds to ‘Aa3’
from ‘A1’. In doing so the rating agency recognized the
City’s credit strength and strong fi nancial operations
resulting in growing reserves. The maintenance and
continued relative growth of reserves through revenue
suffi ciency remains an important credit factor for the
City.
The City should continue to actively manage its funds
to achieve its policy goals and to maintain suffi cient
balances within the funds to meet its needs including
the need for cash reserves.
The City has an adopted policy to maintain a mini-
mum balance in the General Fund equivalent to 35%
of annual expenditures. The goal of the Plan is to iden-
tify revenue suffi cient to meet closer to 50% of annual
expenditures, recognizing the need for the City to cash
fl ow its expenditures between the semi-annual tax dis-
bursements it receives from the County, among other
needs for cash balance.
The City evaluates ending fund balances at year-end
and makes decisions on the level of funds that is need-
ed and appropriate. While the Plan provides for the
General Fund to be at the 50% level, the City should
continue to consider its fund balance needs annually.
The City desires to manage its budget so that growth
in tax capacity from new development will provide
revenue suffi ciency for the City to maintain an ap-
proximate constant tax rate.
Future projected tax levy in the General Fund includes
revenue to support transfers to the Capital Project
Funds, while maintaining adequate ending fund bal-
ance in the General Fund.
The City may adjust planned staffi ng additions and
transfers to the Capital Projects Fund as needed based
on actual tax base growth and other needs that may
arise in the General Fund.
For purposes of the Plan, the revenue objective for the
Water Fund and the Sewer Fund focused on providing
revenue suffi cient to achieve projected year-end cash
balance to cover the following purposes:
• Three-months of operating expense
• Following-year debt service payments
• Following year capital acquisition (planned to be
paid from cash)
• Reserves for future capital improvements and oth-
er reserve purposes
The graphics and tables that follow in the Introduction
and Summary section of the Plan provide a summary
of key fi nancial information for the City funds.
Funding Depreciation for the Utilities
The funding of depreciation, or seft ing aside of funds
to replace depreciated infrastructure, is an important
element for establishment of suffi cient rates for the
Utilities. The Study focused on the City’s asset man-
agement practices to maintain and expand infrastruc-
ture at future estimated costs.
Rather than focus on “funding depreciation” it is beft er
to gain a strong understanding of the expected future
costs and, maybe more importantly, their timing, and
plan for replacement of infrastructure and facilities.
Using a planned schedule for capital improvements
and the incorporation of those plans into the Study
does that. Capital improvement plans combined with
fi nancial management targets are critical element that
allows for the seft ing of rates that meet City goals.
Financial management targets begin with criteria for
evaluating overall fi nancial condition. For instance, do
projections show suffi cient revenues to cover planned
operating and capital improvement expenses? The
Utilities must do beft er than break even, but by how
much?
The Plan helps to answer these question by allocating
projected year-end cash balance to defi ned purposes.
One of the purposes is for planned capital acquisition
and reserves for future capital.
The Plan provides a second criteria to evaluate reve-
nue suffi ciency for the Utilities. The Plan sets a target
(a fl oor ) to maintain an unrestricted net position in the
Water Fund and the Sewer Fund no lower than 50% of
the subsequent year’s estimated expenditures.
The majority of revenue for municipal utility opera-
tions comes from user charges, maintaining an unre-
stricted net position that is equal to at least 50% of ex-
penditures will help to ensure that suffi cient resources
are available to fund basic functions between receipts
of user charges.
The target (or fl oor ) for ending unrestricted net posi-
tion is meant to be an equivalent of the target for an
unrestricted fund balance for the General Fund. Equity
is reported as a fund balance in the General Fund and
as a net asset within the Water Fund and the Sewer
Fund. Fund balance and net assets are the diff erence
between fund assets and liabilities refl ected on the bal-
ance sheet or statement of net assets.
Rate Calculations
The Study focused on preparing projections for future
annual tax capacity rates for the City, and reviewing
the rates for the fees and charges of the Utilities. The
Study did not include a review and analysis of other
fees and charges, only the fees for the Utilities.
City Tax Rate
Future tax levies increases are projected to be neces-
sary to fund planned expenditures and to maintain
adequate cash balances across all City funds.
A summary of the projected City tax levy amounts is
shown in the Figure 1 on the next page, along with the
corresponding estimated City tax rate.
Future annual City tax rates are estimated based on
assumptions in the Plan for changes to the City’s tax
capacity from growth in the taxable market value of
property within the City. The Plan anticipates a sig-
nifi cant increase in the City’s tax capacity for tax col-
lection year 2025 from the planned new multi-family
development next to city hall, which along with tax
base growth from new single family housing units is
projected to help the City strive for achieving a con-
stant tax rate.
The key assumptions for the Plan that impact the City
Tax Rate include the following:
• Taxable market value within the City is projected
to increase by approximately 3.0% annually. Based
on recent years this is a conservative estimate. Be-
cause the Plan is focused on the long-term, the as-
sumption is meant to be conservative.
• Fiscal disparities contribution and corresponding
distribution of tax revenue are estimated to remain
constant (at preliminary Pay 2023 amounts) over
the planning period. The actual impact of the met-
ro-wide fi scal disparities program varies from year
to year.
• City will increase the tax levy to support addition-
al planned spending in the General Fund related to
growth of the community. Details on the specifi c
items, which includes staff positions, is included in
the Finance Plan section for the General Fund and
in the Appendix.
• General fund non-tax revenue is estimated to in-
crease by 2.0% and current expenditures by 3.0%.
There are no assumed major changes to non-tax
revenue. Based on current economic conditions
(infl ationary pressures) the 3.0% assumption for
expenditures is low but the focus of the Plan is
long-term.
• City estimates it will average approximately 345
new housing units (constructed) annually over the
next decade between 2022-2031. The Plan assumes
more rapid growth over the near term. For pur-
poses of estimating market value of property, the
average new home is estimated at $500,000, with
valuation infl ated 3.0% annually.
• The Plan assumes an increase in taxable market
value from the construction of new commercial
property in the City. The increase in taxable mar-
ket value from commercial property for tax collec-
tion year 2023 is from Hennepin County. The City
provided the estimate for year 2024 based on ap-
proved commercial development. For future years,
new commercial value of $1.0 million per year is
assumed.
• The construction of new multi-family housing
units in southeast Corcoran is anticipated at 204
units in 2023 for fi rst taxes payable in year 2025.
• For planning purposes, it is assumed the City will
issue bonds to fi nance a new municipal building in
2026 with a preliminary estimated $25 million proj-
ect cost. The Plan anticipates that debt service will
be paid from taxes (80%), water revenues (10%)
and sewer revenues (10%). The fi nal allocation of
costs will require further review. The increase to
the City’s tax levy beginning in year 2026 is esti-
mated at approximately $1.1 million for payment
of debt service for the project.
The table and graphics that follow provide historical
and projected City property tax levies and tax rates
along with tax capacity. A detailed break down of the
debt service levy by bond series is provided in Appen-
dix.
Utility Rates
The City currently has a two-part rate structure for
charging fees for water and sewer services, comprised
of both a fi xed and variable charges. This two-part
structure is recommended by generally accepted prac-
tices and is a practice followed by most cities within
the Twin Cities metropolitan area. This structure re-
covers a portion of system costs in a fi xed charge, rec-
ognizing that the Utilities have certain fi xed costs and
customer service costs that are incurred year-round.
These fi xed costs are incurred regardless of the level
of water usage.
Over the next fi ve years it is projected that approxi-
mately 40% of the Water Fund expenses, including
depreciation, will be fi xed and for the Sewer Fund it
is estimated at under 30%. The percentages vary some-
what from year to year. Fixed expenses as a percent of
total expenses is projected to decrease somewhat over
time as the number of customers increase and volume
of water usage grows.
For usage or metered volume-based rates, based on
the results of the study, there are no recommended
changes in the structure. As the number of customers
increases potential changes to the structure may be
needed.
The Plan anticipates the City adopts planned increases
to rates for water and sewer services as proposed in
the Plan. This includes increasing the water and sew-
er services fees by 3.0% annually, with the exception
of the base charge for water services which assumes
a 5.0% annual fee increase (to account for the annual
fee increase for the charge from Maple Grove, among
other factors).
Beginning in 2022, the City adopted a new trunk line
availability charge (TLAC) for water treatment and
storage. The City now has two availability charges: 1)
watermain and raw water TLAC; and 2) a treatment
& storage TLAC. The Plan anticipates all TLAC and
connectino charges for water and sewer services will
adjust by 3.0% annually.
The Appendix includes details on all fees amounts by
year for water and sewer services
The City should continue to annually review its util-
ity rates to ensure that both the rates and structure are
providing adequate revenues and cash fl ow based on
actual customers and volume activity and fi nancial
performance of the funds.
Organization of Plan
The Plan is organized into seven sections:
1. Introduction and Summary provides information
on the study approach, revenue suffi ciency, and
rate calculations.
2. Background provides historical and statistical con-
text for the Utilities.
3. CIP and Debt provides information on the City’s
plans for equipment, facilities, and maintaining
and expanding the water and sewer systems. This
includes estimates on project costs, timing, and
sources of funds. Information on outstanding debt
obligation and debt service is included.
4. Financial Plans provides the fi nancial plans (pro
forma) for the City funds, including the Water
Fund and the Sewer Fund. The fi nancial plans in-
clude historical, current, and projected sources and
uses of funds and estimated ending cash balances.
Financial plans take into account capital improve-
ment plans, both existing and planned debt issu-
ance, and proposed rates.
5. Appendices provide additional data and graphics.
The increase in the Water
Fund and Sewer Fund Year-
End Cash Balance is planned.
The diff erence between Pro-
jected Cash Position and
Minimum Cash Position
represents the net amount of
cash projected to be available
as reserves for future capi-
tal improvements. The City
collects development fees at
time of plaft ing and building
permit, use of the funds col-
lected occurs over time to pay
for fi nancing of projects.
Connection and availability
charges from development
will pay for future capital
improvements to support de-
velopment both programmed
and not yet programmed in
the CIP.
The City of Corcoran is located on the western edge of
the Twin Cities Metropolitan area in Hennepin Coun-
ty. The population is estimated at 6,770 (U.S. Census
Bureau as of July 1, 2021). Population will continue
to increase due to development of residential property
within the City. The land area for the City encompass-
es just under 36 square miles and includes area for fu-
ture residential development.
Commercial and industrial development in the City is
expected to continue to expand due to access to mu-
nicipal water and sewer services and the expansion of
transportation corridors. In 2012 the City successfully
fi nanced and implemented a major improvement proj-
ect to fi rst bring and then expand municipal water and
sewer services to the City. The project provided for
connection to the metropolitan disposal system. The
City forecasts continued development of both residen-
tial and commercial property.
The City’s development plan for its downtown area
provides an opportunity for additional economic de-
velopment. In recent years the City completed con-
struction of street improvements and utility infrastruc-
ture in the downtown area.
The table that follows provides the estimated number
of housing units along with municipal utility connec-
tions units for commercial property in the downtown
area the City projects to be added over the next twenty-
years. The assumptions on units is an important input
to the Plan and is updated on annual basis by the City.
The City is in the process of planning for water ser-
vice to serve the northeast area of the City. The access
to water purchased from Maple Grove is limited. The
City is planning on investments for a water treatment
plant and water tower in the near term.
The City annually reviews its plans for capital acqui-
sition and improvements and updates its multi-year
plan. The CIP in the Plan provides details on costs by
year and proposed funding sources. The debt service
study, included in the Plan, provides information on
current debt service and estimated future debt. The
CIP provides an important input into preparing the
fi nancial plans for the individual City funds.
Equipment and Vehicles
Over the next fi ve years the City anticipates spending
an average of approximately $1.10 million per year on
equipment and vehicles. The Plan includes anticipated
bonding in year 2022 and 2024 for equipment and ve-
hicles.
The City plans to continue to incrementally increasing
tax levy in the General Fund to support a transfer to
the Equipment Fund. Annual sale of capital assets is
estimated to provide approximately $75,000 for new
equipment and vehicles.
Water Improvements
Water improvements are included in the CIP for the
implementation of a water system for the northeast
area of the City estimated at $19,000,000 in year 2023.
Additional wells and treatment improvements are an-
ticipated in future years in the estimated amount of
$21,800,000 between years 2024-2031.
The Plan anticipates the southeast area of the City will
continue to be served under terms of an agreement
with Maple Grove for purchase of municipal water
until demand passes capacity. Future improvements
in southeast Corcoran will need to be undertaken at
some point in the future.
The CIP does not include water improvement projects
that are anticipated to be constructed and fi nanced
by private development and contributed to the City.
These projects will be paid entirely by private funds
with infrastructure then contributed to the City.
Sewer Improvements
The Plan includes planned construction of a north-
east-southeast trunk line in year 2027 in the estimated
amount of $10,000,000.
Street Improvements
The CIP includes street improvements for Hacka-
more Road, Horshoe Bend, and City Center Drive &
Development in year 2023 in the estimated amount of
$6,950,000. These improvements are anticipated to be
fi nanced through issuance of general obligation bonds
in 2023.
Improvement to Gravel Roads
Council has discussed a need to establish a plan to be-
gin paving gravel roads. A dedicated revenue source
is likely needed for this to take place and should be
discussed and included in future Plans.
Facility and Parks
A future municipal building or expansion of the ex-
isting building is planned for approximately $25 mil-
lion in year 2026; this is a “placeholder” year. The Plan
anticipates that the debt on the municipal building
will be paid 80% from tax levy and 20% from water
and sewer revenues. The annual debt service expense
is included in the fi nancial plans for the Debt Service
Fund, including the transfers in of revenues from the
Water Fund and Sewer Fund, respectively. The annual
debt service is estimated at approximately $1.6 million
for a $25.375 million bond issuance, which includes
funds for project construction and cost of issuance of
the bonds. The annual tax levy for debt service, after
accounting for use of utility revenues, is estimated at
approximately $1.1 million beginning in 2026.
Future Park Improvements
The City is planning for various park improvements
including City Park as well as other park planning as
outlined in the 2040 Comprehensive Plan. These im-
provements will be paid with park dedication funds
and completed as funds allow.
• Town Center Park and Linear Park
• Phase 1 of the City Park Improvement Project
• Open space park near Ravinia Development
• Open space park near Bellwether Development
• Neighborhood park near Bellwether Development
• County Road trail improvements
The Plan includes $4.5 million for park facilities in year
2023 to be funded from general obligation bond issu-
ance in 2023.
Bond Issuance
The City’s outstanding general obligation bonds are
rated as ‘Aa3’ by Moody’s Investors Service. The posi-
tive credit strengths include strong fi nancial opera-
tions resulting in growing reserves. The strong bond
rating means a lower cost of borrowing for the City.
The City anticipates the issuance of bonds to fi nance
certain capital improvements. The tables and graphics
that follows provide a summary of existing and future
estimated debt service payments (principal and inter-
est) and funding sources, along with a summary of
debt outstanding by year.
The annual debt service on “new” bonds to be issued
is also included in the fi nancial plans for the Debt Ser-
vice Fund, Water Fund, and the Sewer Fund. The pre-
liminary estimates for debt service are based on the
following estimated new bond issues:
• Year 2023, G.O. Bonds, $8,670,000 to fi nance street
and park improvements payable from tax levy,
with the bonds sized for capitalized interest.
• Year 2023, G.O. Bonds, $16,300,000 to fi nance water
system improvements over a 30 year term payable
from net revenues of the Water Fund.
• Year 2024, G.O. Bonds, $1,850,000 to fi nance equip-
ment and vehicle acquisition over a 10 year term
payable from tax levy.
• Year 2026, G.O. Bonds $25,375,000 to fi nance mu-
nicipal buildings over a 25 year term payable from
tax levy and net revenues of the Water Fund and
the Sewer Fund. The estimated split is 80% pay-
able from tax levy and 20% payable from the utility
revenues.
• Year 2026, G.O. Bonds, $2,040,000 to fi nance equip-
ment and vehicle acquisition over a 10 year term
payable from tax levy.
Bond Terms
The fi nal sizing, structuring, and interest rates will
depend on project specifi cs and market conditions
at time of issuance. The amounts shown in the Plan
are preliminary and for planning purposes only. The
bond issuance sizes include capital acquisition and
construction costs, cost of issuance of bonds, and capi-
talized interest funds, if applicable. The debt service
for the new bonds is based on the terms stated above
and a conservatively estimated 4-5% interest rate on
the bonds.
Background
Financial plans have been prepared for each of the fol-
lowing type of funds:
Governmental Funds
• General Fund
• Debt Service Funds
• Special Revenue Funds
• Capital Projects Funds
• Capital Equipment Fund
• Capital Facilities Fund
Proprietary Funds
• Water Fund
• Sewer Fund
Governmental Funds are used to account for most typ-
ical municipal functions of the City. The acquisition,
use, and balances of the City’s expendable fi nancial re-
sources and the related current liabilities (except those
accounted for in Proprietary Funds), are accounted for
through the Governmental Funds.
Proprietary Funds are used to account for the City’s
ongoing municipal utility operations that are similar
to businesses found in the private sector. These funds
are considered self-supporting in that the services
rendered by them are fi nanced through user charges.
The fi nancial plans, for the Proprietary Funds, include
assets and liabilities in addition to the revenues and
expenditures. For the Proprietary Funds, there is a
capitalization of certain expenses and the subsequent
depreciation of the capitalized costs.
Summary of Key Factors and Assumptions
The key factors or assumptions used to develop the
fi nancial plans are as follows:
• 3.0% annual increase in operating expense for the
Governmental Funds.
• 2.0% annual increase in non-property tax revenue
for the Governmental Funds.
• Annual projected increase in property tax levies to
be set at a level suffi cient to fund cash fl ow require-
ments and to maintain suffi cient fund balance lev-
els per City.
• Fiscal disparities distribution of property taxes and
contribution of property tax capacity is assumed to
be at the same levels as estimated for Pay 2023. The
actual amounts will vary by year and will impact
the projections shown in the Plan.
• Maintain a minimum balance in the General Fund
equal to approximately 45% of current expendi-
tures (which is greater than the 35% minimum per
policy), recognizing the need for cash fl ow and
contingency.
• 3.0% average annual rate increase for water and
sewer services, with the exception of the base fee
for water which is 5.0%. The annual percent rate
increase is approximate and refl ects the anticipat-
ed cost increases and project needs.
• A new availability charge for water treatment and
storage was adopted in 2022 for both Northeast
Corcoran and Southeast Corcoran.
• 1.0% annual investment income rate for all City
Funds.
• Maintain cash in the Water Fund and Sewer Fund
suffi cient to achieve projected year-end cash bal-
ance to cover the following purposes:
- Three-months of operating expense
- Following-year debt service payments
- Following year capital acquisition (planned
to be paid from cash)
- Reserves for future capital improvements
and other reserve purposes
• Maintain positive balances in all other City funds
and amounts suffi cient to meet specifi c cash fl ow
requirements of the funds.
Expense
Personnel and other operating costs overall have been
and are projected to remain stable in the near term
with planned increases in the future to address the de-
mands of a growing community.
The fi nancial plans anticipate includes projected staff -
ing increases in the General Fund. These increases are
detailed in the General Fund fi nancial plan that fol-
lows and in the Appendix.
A total of 26.21 new full time equivalent (FTE) are
planned to be added between years 2023-2027. The
timing of staff additions may need to be modifi ed to
achieve the City’s tax rate objectives.
Transfers To and From Other Funds
Transfers between funds for future years include the
following:
• Transfers from the Water Fund and Sewer Fund to
the General Fund to pay an allocated share of op-
erating costs.
• Transfer from the Water Fund and Sewer Fund to
the Debt Service Fund to pay an allocated share
of the debt services for the 2016A Bonds and the
bonds anticipated to be issued in 2025 to pay for
municipal building improvements.
• The Plan includes annual transfers of cash (tax
levy) from the General Fund to the Equipment
Fund, Facilities Fund, and Storm Water Fund for
capital projects.
The table that follows provides total sources and uses
of funds for the following Governmental Funds com-
bined. Individual fi nancial plans are then provided for
each of the following funds:
• General Fund
• Debt Service Funds
• Special Revenue Funds
• Capital Projects Fund
• Capital Equipment Fund
• Capital Facilities Fund
The City’s annual fi nancial statements include a break-
down of individual funds for the Debt Service Fund,
Special Revenue Fund, and Capital Projects Fund.
For example, the City maintains separate debt service
funds for each bond series issued. For capital projects,
the City establishes a specifi c “Capital Projects Fund”
for each individual project. For purposes of the Plan,
this level of detail is not included.
Revenue
Annual source of funds from non-property tax levy
sources has been stable for the City and is expected to
remain so in the future. The City does not receive local
government aid (LGA) from the state.
Property tax levy increases will be needed to pay for
increased operating costs and debt service related to
planned capital improvements.
TOTAL
GOVERNMENTAL
FUNDS
TOTAL
GOVERNMENTAL
FUNDS
The General Fund is the primary fund used by the
City. This fund is used to record all resource infl ows
and outfl ows that are not associated with special-pur-
pose funds. The activities being paid for through the
General Fund constitute the core administrative and
operational tasks of the City.
Revenue
Annual source of non-tax revenue for the General
Fund has been stable and is projected to remain sta-
ble. Licenses and permits provides the single largest
source of non-tax revenue to the General Fund. The
City does not receive local government aid (LGA) from
the state.
The next largest sources of non-tax revenue are charg-
es for services and intergovernmental.
Tax Levy Revenue
Property tax levy revenue is estimated to increase each
year. In addition to funding general city operations,
transfers to other funds for facility, equipment, and
other capital improvements, property tax levy pro-
vides revenue to meet fund balance goals for contin-
gency.
Figure 2 provides the projected General Fund prop-
erty tax levy by year, along with the annual percent
increase.
Non-Tax Revenue
Non-tax revenue includes charges for services, license
and permits, intergovernmental, transfers in from the
utility funds, among other sources of non-tax revenue.
The fi nancial plan for the General Fund is based on the
following key assumptions for non-tax revenues:
• Non-tax revenues increase of 2.0% annually.
• Annual investment income rate of 1.0%.
Intergovernmental Revenue in 2020-2021 has been
higher due to receipt of federal funds for Corona virus
aid.
Expense
The General Fund is used to account for the expense
of providing general government services for the City.
The largest use of funds in current expenditures is for
the cost of personnel, including salary and wages, and
benefi ts. Other costs including operating materials and
supplies, equipment, and other professional services.
GENERAL FUND
The fi nancial plan for the General Fund is based on the
following key assumptions:
• Current expenditures (includes personnel costs)
increase by 3.0% annually for infl ation.
• Increase in staff (FTE) and position changes are
planned (see Appendix for further details by po-
sition), with a portion of the costs to be allocated
to the Water and Sewer Funds for certain posi-
tions. The FTEs that may be paid either in full or
part from the General Fund, depending on avail-
able revenues, are listed below. The dollar amount
show below is equal to the estimated portion of the
cost of the FTEs to be paid from the General Fund.
- 2.46 FTE, $257,000 in 2023
- 6.58 FTE, $751,375 in 2024
- 7.85 FTE, $926,500 in 2025
- 4.30 FTE, $567,000 in 2026
- 1.8 FTE, $245,000 in 2027
Transfers To and From Other Funds
The Water Fund and the Sewer Fund transfer revenue
in to the General Fund to pay an allocated share of
operating costs. This transfer is projected to continue
with annual infl ationary adjustments.
Transfers out to other funds includes the following:
• Increase in transfer out to the Equipment Fund to
pay for a portion of planned equipment and ve-
hicle acquisitions as included in the CIP.
• Increase in transfer out to the Storm Water Fund to
begin to build a balance of funds for project costs.
• Additional transfers out of funds from the General
Fund to the Capital Projects Funds, including the
Facilities Fund, may occur to the extent annual rev-
enue is available in excess of annual expenditures,
after fi rst maintaining a minimum fund balance in
the General Fund equal to 40-50% of current ex-
penditures.
Fund Balance
The maintenance of the City’s reserves, including
growing fund balance (reserves), is important to the
maintaining the City’s credit rating on its outstanding
bonds.
Fund balance for the General Fund is projected to re-
main at approximately 40-50% of expenditures. City
has formally adopted a fund balance policy for the
General Fund. The City’s policy is to maintain a mini-
mum of 35% of budgeted operating expenditures for
cash-fl ow timing needs. Fund balance in excess of the
minimum is a credit positive with respect to maintain-
ing the City’s credit rating from Moody’s.
GENERAL FUND
Revenue
The Debt Service Funds include the following source
of funds: special assessments, interest income, trans-
fers in from other funds, property tax levy, and bond
proceeds for any capitalized interest funds.
General obligation equipment certifi cates will be re-
paid from property tax levy. Prior year and future pro-
jected tax levy amounts for repayment of equipment
certifi cates are included in the Plan.
Over the next fi ve years, the Plan anticipates the issu-
ance of general obligation bonds in years 2023, 2024,
and 2026 that will be accounted for in the Debt Service
Funds. Future debt will be supported by a combina-
tion of tax levy, special assessments, and transfers in
of revenue from the Water Fund and the Sewer Fund.
Expense
The use of funds is for the payment of debt, including
principal and interest payments.
Transfers From Other Funds
The City is to transfer revenue from the Water Fund
and Sewer Fund to the Debt Service Fund used to ac-
count of the 2016A Bonds.
The Debt Service Fund includes the combined funds
used to account for all of the City’s governmental debt
service.
At the end of 2021, the City reported total general obli-
gation bonds payable (reported as Governmental Debt)
of $7,655,000. The Water Fund and the Sewer Fund
also report debt outstanding, which is accounted for
separately as a liability for Proprietary Funds. At the
end of 2021, the City reported total general obligation
bonds payable in the proprietary funds of $3,505,000.
In addition to bonds outstanding, the Water Fund re-
ported $270,057 in outstanding notes payable to Maple
Grove for connections to the water system.
The year-end cash balance in the Debt Service Funds
fl uctuates due to the timing of collection of revenue,
for example tax levy, in the year prior to debt service
payments coming due.
The City is required to have cash available in the re-
spective debt service funds equal to 105% of the debt
service payments coming due for a specifi c bond se-
ries. For example, the year-end cash balance includes
cash from collection of special assessments and tax
levy in current year to pay the following February 1st
debt payments. The City receives a tax seft lement from
the County in June and December of each year. The
fi rst half tax seft lement is available to cover the August
1st debt payments and the second tax seft lement is
available to cover the February 1st payments.
DEBT SERVICE FUND
The fi nancial plan for the Special Revenue Funds as in-
cluded in the Plan provides sources and uses of funds
on a combined basis for the following special revenue
funds. The funds included are as follows:
• Fund 201 Reserve Donation
• Fund 202 Police Donation
• Fund 204 Firearms Safety
• Fund 205 DWI Forfeiture
• Fund 206 Drug Forfeiture
• Fund 207 Truck Safety
• Fund 208 Lawful Gambling
• Fund 209 Emergency Sirens
Revenue
The source of funds for the special revenue funds
come from donations, charges for services, and other
miscellaneous revenue sources which are generally
restricted for the purpose they were collected. There
is no property tax levy that is recorded to the special
revenue funds.
Expense
The use of funds is restricted for the purpose of the
funds collected.
Transfers To and From Other Funds
There are no transfers.
geted transfers to and from the Capital Projects Funds
based on available resources.
The fi nancial plan for the Capital Projects Funds, as in-
cluded in the Plan, provides sources and uses of funds
on a combined basis for all of the City’s capital proj-
ects funds, with two exceptions. For purposes of the
Plan, the Capital Equipment Fund (416) and the Facili-
ties Fund / City Hall (400) are not included as part of
the Capital Projects Funds. Separate fi nancial plans are
provided for equipment and facilities.
Revenue
The majority of the source of funds comes from charg-
es for service, special assessments, investment income,
intergovernmental, and bond proceeds.
Prior to year 2021, the City collected revenue from de-
veloper payment for Hackamore Road improvements.
Hackamore Road will be funded from a combination
of developer payments and bond proceeds supported
by tax levy. The issuance of bonds for Hackamore
Road is planned for year 2023.
Expense
The projected use of funds is for capital projects as in-
cluded in the CIP. This includes construction of street
and facility improvements, among other public im-
provements.
Transfers To and From Other Funds
The fi nancial plan does not include annual transfers
to and from other funds for the Capital Projects Funds
(transfers for the Facility Fund (400) and the Equip-
ment Fund (416) are included in the fi nancial plans for
these funds). The City Council may approve un-bud-
The City uses the Capital Equipment Fund to record
all revenue and expense related to the acquisition of
equipment and vehicles.
Revenue
The source of revenue has historically come from the
issuance of bonds. Beginning in year 2015, the City
implemented a plan to begin to transition to fund
equipment and vehicle acquisition on a pay-go basis to
eliminate the need to borrow (issue bonds) and incur
interest expense.
The Plan assumes the City will continue to transfer
cash from the General Fund to the Equipment Fund to
allow the City to limit issuance of debt for these types
of purchases.
Other sources of funds includes sale of capital assets,
estimated at $75,000 annually and investment income.
The Plan anticipates issuance of general obligation
bonds (equipment certifi cates) for equipment and ve-
hicle acquisitions in years 2024 and 2026. Future bond
issuance after year 2026 will depend on the future
available cash and future capital acquisition plans.
Expense
The projected use of funds is for planned capital acqui-
sition of equipment and vehicles.
Transfers To and From Other Funds
The transfer in shown in the fi nancial plan comes from
the transfer of cash (tax levy) from the General Fund.
The City established this fund to record transactions
related to improvements to City Hall in 2020 and a
new municipal building or signifi cant expansion in
2026.
Revenue
The source of revenue has come from a combination
of transfer in of cash from other City funds. Bond issu-
ance is anticipated in 2026 to provide funds for a new
municipal building or signifi cant expansion of the ex-
isting building. The exact timing and scope of the proj-
ect is uncertain. The placeholder amount included in
year 2026 is $25 million.
Expense
The projected use of funds will be to pay for capital
project spending, including planning for the improve-
ments.
Transfers To and From Other Funds
Transfer in of cash has come from the General Fund
and other funds to pay for facility improvement costs.
With proposed annual rate adjustments, the Water
Fund is projected to maintain adequate cash balance
over the planning period. For purposes of the Plan, the
revenue objective focused on providing revenue suf-
fi cient to achieve projected year-end cash balance to
cover the following purposes:
• Three-months of operating expense
• Following-year debt service payments
• Following year capital acquisition (planned to be
paid from cash)
• Reserves for future capital improvements and oth-
er reserve purposes
The Plan anticipates the issuance bonds in 2023 to fi -
nance water system improvements in the northeast
area of the City.
Expense
The use of funds is to pay for the operation and capital
improvements, and related debt service, for providing
municipal water services, including depreciation of
capital assets.
The City has an agreement with the City of Maple
Grove which provides for payment to Maple Grove
for water connections and distribution in the southeast
area of the City.
Approximately 40% of the Water Fund expenses are
estimated to be fi xed costs, this amount fl uctuates
somewhat from year to year and has been declining
as the number of customers using the system has in-
creased.
The City anticipates the addition of approximately 1.61
FTE (allocated portion) over the next fi ve years paid by
The Water Fund was established as a Proprietary Fund
for the accounting for costs of providing municipal
water services to residents and businesses. The Water
Fund is considered self-supporting in that the services
rendered are fi nanced through user charges.
The fi nancial plan includes assets and liabilities in ad-
dition to the revenues and expenditures. There is a
capitalization of certain expenses and the subsequent
depreciation of the capitalized costs.
Revenue
The source of funds are charges for services, special
assessments, developer fees and payments, and bond
proceeds. A schedule of fees and charges is included
in an Appendix.
Future growth from development, which impacts the
projection of operating and non-operating revenue for
the Water Fund, is assumed to be the following over
the next decade:
- Nearly 965 acres plaft ed between 2022-2027
- 2,590 new customer units to be added between
2022-2027
Details on the estimated acres plaft ed per year and cus-
tomer units added is shown in Table 3. Development
will provide increasing revenue to the Water Fund.
The Plan estimates annual rate adjustments of 3.0%.
The actual increase that may be needed in the future
will depend on growth in customers. A new availabil-
ity charge for water treatment and storage (on a per
acre basis) was adopted in 2022.
the Water Fund. The cost of the FTE’s is included in the
fi nancial plan.
Annual debt service payments on bonds issued to fi -
nance water improvements are supported by net rev-
enues of the Water Fund. The Water Fund pays a por-
tion of the debt on the 2014B Bonds. The portion of
the 2014B Bonds payable from water revenues is re-
ported as a liability of the Water Fund. As payments
on the debt are made the liability in the Water Fund is
reduced. Interest is recorded as an expense.
In addition to this liability, it is anticipated cash from
the Water Fund will be transferred to the Governmen-
tal Debt Service Funds to pay a portion of the 2016A
Bonds. Beginning in year 2026, the Water Fund is also
projected to begin transferring funds to pay an allo-
cated portion (10%) of the debt on the planned bonds
for municipal facilities improvements.
The Water Fund reports a debt obligation for the Notes
payable to the City of Maple Grove for water connec-
tion charges. As payment is made on the Notes the
liability in the Water Fund is reduced. The interest
expense on the Note issued in 2014 is recorded as an
expense in the Water Fund. There is no interest pay-
able on the Note issued in 2016.
Depreciation is reported as an expense and is adjusted
for anticipated annual depreciable capital acquisitions.
For purposes of the Plan, capital is depreciated over a
55 year term.
Transfers To and From Other Funds
The Water Fund transfers funds annually to the Gen-
eral Fund to pay for operational support.
Special assessment revenue from assessments levied
to fi nance connection fees and availability charges
for water services are deposited directly in the Water
Fund. As noted above, cash from the Water Fund is to
be transferred to the City’s Governmental Debt Service
Funds to pay allocated portions of debt service.
Fund is projected to maintain adequate cash balance
over the planning period. For purposes of the Plan, the
revenue objective focused on providing revenue suf-
fi cient to achieve projected year-end cash balance to
cover the following purposes:
• Three-months of operating expense
• Following-year debt service payments
• Following year capital acquisition (planned to be
paid from cash)
• Reserves for future capital improvements and oth-
er reserve purposes
The Plan does not anticipate the issuance of bonds to
fi nance sewer improvements.
Expense
The use of funds is to pay for the operation and capital
improvements, and related debt service, for providing
sewer services, including depreciation of capital as-
sets.
Approximately 25-30% of the Water Fund expenses
are estimated to be fi xed costs, this amount fl uctuates
somewhat from year to year and has been declining
as the number of customers using the system has in-
creased.
The City anticipates the addition of approximately
1.61 FTE (allocated portion) over the next fi ve years
paid by the Sewer Fund. The cost of the FTE’s is in-
cluded in the fi nancial plan.
Annual debt service payments on bonds issued to fi -
nance sewer related improvements are supported by
net revenues of the Sewer Fund. The Sewer Fund pays
a portion of the debt on the 2014B Bonds. The portion
The Water Fund was established as a Proprietary Fund
for the accounting for costs of providing municipal
water services to residents and businesses. The Water
Fund is considered self-supporting in that the services
rendered are fi nanced through user charges.
The fi nancial plan includes assets and liabilities in ad-
dition to the revenues and expenditures. There is a
capitalization of certain expenses and the subsequent
depreciation of the capitalized costs.
Source of Funds
The source of funds are charges for services, special
assessments, developer fees and payments, and bond
proceeds. A schedule of fees and charges is included
in an Appendix.
Future growth from development, which impacts the
projection of operating and non-operating revenue for
the Sewer Fund, is assumed to be the following over
the next decade:
- Nearly 965 acres plaft ed between 2022-2027
- 2,590 new customer units to be added between
2022-2027
Details on the estimated acres plaft ed per year and cus-
tomer units added is shown in Table 3. Development
will provide increasing revenue to the Water Fund.
The Plan estimates annual rate adjustments of 3.0%.
The actual increase that may be needed in the future
will depend on growth in customers.
With proposed annual rate adjustments, the Sewer
of the 2014B Bonds payable from sewer revenues is re-
ported as a liability of the Sewer Fund. In addition to
this liability, the Sewer Fund transfers revenue to the
Governmental Debt Service Funds to pay a portion of
the 2016A Bonds. Beginning in year 2026, the Sewer
Fund is also projected to begin transferring funds to
pay a portion of the debt on the planned bonds for mu-
nicipal facilities improvements.
Depreciation is reported as an expense and is adjusted
for anticipated annual depreciable capital acquisitions.
For purposes of the Plan, capital is depreciated over a
55 year term.
The City is planning for sewer extension project esti-
mated at $10.0 million in 2027, the North Sewer Con-
nection Project. The plan is to use cash to pay for this
project. The exact timing will depend on growth.
Transfers To and From Other Funds
The Sewer Fund transfers funds annually to the Gen-
eral Fund to pay for operational support.
As noted above, cash from the Sewer Fund is to be
transferred to the City’s Governmental Debt Service
Funds to pay allocated portions of debt service.
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