City of Sauk Rapids Benton County, Minnesota. Financial Statements. December 31, 2016

Transcription

1 Benton County, Minnesota Financial Statements December 31, 2016

2 Table of Contents Elected Officials and Administration 1 Independent Auditor's Report 2 Management's Discussion and Analysis 5 Basic Financial Statements Government-Wide Financial Statements Statement of Net Position 14 Statement of Activities 15 Fund Financial Statements Balance Sheet Governmental Funds 16 Reconciliation of the Balance Sheet to the Statement of Net Position Governmental Funds 17 Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds 18 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities Governmental Funds 19 Statement of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual General Fund 20 Statement of Net Position Proprietary Funds 21 Statement of Revenues, Expenses, and Changes in Fund Net Position Proprietary Funds 22 Statement of Cash Flows Proprietary Funds 23 Statement of Fiduciary Net Position 24 Statement of Changes in Fiduciary Net Position 24 Notes to Financial Statements 25 Required Supplementary Information Schedule of Funding Progress Other Post Employment Benefits 66 Schedule of City's Proportionate Share of Net Pension Liability General Employees Retirement Fund 67 Schedule of City's Proportionate Share of Net Pension Liability Public Employees Police and Fire Retirement Fund 67 Schedule of City Contributions General Employees Retirement Fund 68 Schedule of City Contributions Public Employees Police and Fire Retirement Fund 68 Schedule of Changes in the Net Pension Liability and Related Ratios Fire Relief Association 69 Schedule of Employer Contributions and Non Employer Contributing Entities Fire Relief Association 70 Notes to Required Supplementary Information 71

3 Table of Contents Supplementary Information Detailed Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual General Fund 74 Combining Balance Sheet Nonmajor Governmental Funds 76 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds 80 Combining Balance Sheet Housing and Redevelopment Authority 84 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Housing and Redevelopment Authority 86 Combining Balance Sheet City and Housing and Redevelopment Authority 88 Combining Schedule of Revenues, Expenditures, and Changes in Fund Balances City and Housing and Redevelopment Authority 89 Statistical Information (Unaudited) Table Page Sauk Rapids Organization Chart and City Employment History 1 93 City, County and School Tax Rate History 2 95 Tax Capacity History City and County 3 96 Sauk Rapids Tax Increment Finance District Summary Data 4 98 Sauk Rapids Tax Increment Finance District Tax Capacity and Receipts Data 5 99 Sauk Rapids Top Ten Tax Payers Last Ten Years Principal Employers Last Ten Years Sauk Rapids Levy and Collections History Sauk Rapids LGA and MVHC History Fund Balance and Accumulated Leave Liability Sauk Rapids Debt History Sauk Rapids Debt Margin Sauk Rapids Direct Overlapping Debt Sauk Rapids Demographic-Economic Statistics Sauk Rapids Permit Data History Sauk Rapids ½ Cent Sales Tax Receipts, Expenditures, Referendum Results, and Allocation Formula Sauk Rapids Franchise Fees Gas and Electric Receipts and Expenditures History Sauk Rapids Police Statistics Last Ten Years Sauk Rapids Fire Protection Statistics Last Ten Years Sauk Rapids Fire Relief Association Pension Information Last Ten Years Sauk Rapids Liquor Store Financials Last Ten Years Sauk Rapids Water Fund Financials Last Ten Years Sauk Rapids Sewer Fund Financials Last Ten Years Gallons Billed Water and Sewer Last Ten Years Annual Precipitation Temperature Last Ten Years Sauk Rapids Storm Water Fund Financials Last Ten Years Sauk Rapids Park Building Rental Data Miscellaneous Data Sauk Rapids General Fund Income Statements Last Ten Years Sauk Rapids Miscellaneous Data Last Ten Years

4 Table of Contents Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 142 Report on Legal Compliance 144 Schedule of Findings and Responses on Internal Control 145

5 Elected Officials and Administration December 31, 2016 Elected Officials Position Term Expires Brad Gunderson Mayor December 31, 2016 Steve Heinen Council Member December 31, 2016 Nick Sauer Council Member December 31, 2016 Kurt Hunstiger Council Member December 31, 2018 Ellen Thronson Council Member December 31, 2018 Administration Ross Olson City Administrator/ Appointed HRA Executive Director Jack Kahlhamer Financial Director Appointed HRA Officials Mark Campbell Chairman December 31, 2019 David Tripp Board Member December 31, 2018 Tony Hommerding Board Member December 31, 2020 Jesse Godzala Board Member December 31, 2020 Jeff Moon Board Member December 31,

6 Independent Auditor's Report Honorable Mayor and Members of the City Council City of Sauk Rapids Sauk Rapids, Minnesota Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Sauk Rapids, Minnesota, as of and for the year ended December 31, 2016, and the related notes to financial statements, which collectively comprise the City's basic financial statements as listed in the Table of Contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the City's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. BerganKDV, Ltd. bergankdv.com 2

7 Auditor's Responsibility (Continued) We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to in the first paragraph present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Sauk Rapids, Minnesota, as of December 31, 2016, and the respective changes in financial position and, where applicable, cash flows thereof, and the budgetary comparison for the General Fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that Management's Discussion and Analysis, which follows this report letter, and the Required Supplementary Information as listed in the Table of Contents be presented to supplement the 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. We have applied certain limited procedures to the Required Supplementary Information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The accompanying supplementary information and statistical section identified in the Table of Contents are presented for purposes of additional analysis and are not a required part of the basic financial statements. 3

8 Other Matters (Continued) Other Information (Continued) The supplementary information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplementary information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. The statistical section has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated May 1, 2017, on our consideration of the City's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control over financial reporting and compliance. St. Cloud, Minnesota May 1,

9 Management's Discussion and Analysis As management of the City of Sauk Rapids, Minnesota we offer readers of the City's financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended December 31, FINANCIAL HIGHLIGHTS The assets of the City exceeded its liabilities at the close of the most recent fiscal year by $92,698,680, while the assets of the Housing and Redevelopment Authority (HRA) of Sauk Rapids exceeded its liabilities at the close of the most recent fiscal year by $4,659,861 for a total of $97,358,541. Of this amount, $22,411,947 may be used to meet the government's ongoing obligations to citizens and creditors. The City and HRA's total net position decreased by $109,587. As of the close of the current fiscal year, the City's governmental funds reported combined ending fund balances of $17,194,007 a decrease of $382,573. At the end of the current fiscal year, unassigned fund balance for the General Fund was $3,026,431 or 61%, of 2016 total General Fund expenditures. The City's total long-term bonds, loans and notes payable decreased by $3,206,886 during the year ended December 31, Governmental long-term indebtedness decreased $2,246,294 of which $1,305,000 was due to the payoff of the 2005B bond that was refunded with the 2015B refunding bond. The total enterprise indebtedness decreased $960,592. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the City's basic financial statements. The City's basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. In 2013, the HRA was presented as a discretely presented component unit as a result of the implementation of Governmental Accounting Standards Board (GASB) Statements No. 61, The Financial Reporting Entity: Omnibus. The HRA was previously blended with the City. GOVERNMENT-WIDE FINANCIAL STATEMENTS The government-wide financial statements are designed to provide readers with a broader overview of the City and HRA's finances, in a manner similar to a private-sector business. The Statement of Net Position presents information on all of the City and HRA's assets, deferred outflows of resources, liabilities, and deferred inflows of resources with the difference between them reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City and HRA is improving or deteriorating. 5

10 Management's Discussion and Analysis GOVERNMENT-WIDE FINANCIAL STATEMENTS (CONTINUED) The Statement of Activities presents information showing how the City and HRA's net position changed during the most recent year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this Statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave). Both of the government-wide financial statements distinguish functions of the City and HRA that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City include general government, public safety, public works, economic development, interest on long-term debt and culture and recreation. The business-type activities of the City include the water, sanitary sewer, storm water, street light utility and municipal liquor store services. The governmental activities of the HRA are all economic development related. The government-wide financial statements can be found on pages of this report. FUND FINANCIAL STATEMENTS A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into three categories, governmental funds, proprietary funds and fiduciary funds. Governmental Funds Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the year. Such information may be useful in evaluating a City's near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the City's near-term financing decisions. Both the governmental fund Balance Sheet and the governmental fund Statement of Revenues, Expenditures and Changes in Fund Balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. Information is presented separately in the governmental fund balance sheet and in the governmental fund Statement of Revenues, Expenditures and Changes in Fund Balances for the General Fund, Permanent Improvement Revolving Fund, Half Cent Sales Tax Fund, the Gas/Electric Franchise Fund, and the $2,000, B Capital Bond Fund all of which are considered to be major funds. Data from the other governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements elsewhere in this report. 6

11 Management's Discussion and Analysis FUND FINANCIAL STATEMENTS (CONTINUED) Governmental Funds (Continued) The City adopts an annual appropriated budget for its General Fund. A budgetary comparison statement has been provided for the General Fund (page 20) to demonstrate compliance with this budget. The basic governmental fund financial statements can be found on pages of this report. Proprietary Funds The City maintains proprietary funds. The City's enterprise (proprietary) funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses enterprise funds to account for its water, sanitary sewer, storm water, street light utility, and municipal liquor store services. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for the water, sanitary sewer, storm water, street light utility, and municipal liquor store services, all of which are considered to be major funds of the City. The basic proprietary fund financial statements can be found on pages of this report. Notes to Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to financial statements can be found on pages of this report. Comparative Data In comparing year end 2016 to 2015, there are a few items of note. The City expended a total of $1,314,728 for a county road project in 2016 & 2015 that are in city limits but are not city assets. The total costs of the city's contributions to this county project net of any county grant reimbursements for the ROW are as follows: Total 2 nd Street ROW Project $ 781,827 $532,901 $2,183,851 $3,498,579 Other Information The combining statements referred to earlier in connection with non-major governmental funds and proprietary funds can be found on pages of this report. Individual fund statements for the HRA can be found on pages of this report. Combining City and HRA schedules can be found on pages of this report. FIDUCIARY FUNDS Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the City's own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. The basic fiduciary fund financial statements can be found on page 24 of this report. 7

12 Management's Discussion and Analysis GOVERNMENT-WIDE FINANCIAL ANALYSIS As noted earlier, net position may serve over time as a useful indicator of a City's financial position. In the case of the City, assets exceeded liabilities by $92,698,680 at the close of HRA assets exceeded liabilities by $4,659,861 at the close of By far the largest portion of the City and HRA net position reflects its net investment in capital assets- $68,673,785 and $64,289, respectively (e.g., land, buildings, infrastructure, machinery and equipment) less any related debt used to acquire those assets that are still outstanding. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. Statement of Net Position Total City Governmental Activities Business-Type Activities Total City HRA and HRA Assets Current and other assets $ 23,194,983 $ 20,578,121 $ 11,448,260 $ 10,869,672 $ 34,643,243 $ 31,447,793 $ 4,649,917 $ 39,293,160 Capital assets 48,196,263 50,183,811 35,923,552 35,418,905 84,119,815 85,602,716 64,289 84,184,104 Total assets $ 71,391,246 $ 70,761,932 $ 47,371,812 $ 46,288,577 $ 118,763,058 $ 117,050,509 $ 4,714,206 $ 123,477,264 Liabilities Long-term liabilities outstanding $ 12,291,742 $ 9,573,422 $ 9,463,021 $ 10,105,756 $ 21,754,763 $ 19,679,178 $ - $ 21,754,763 Other liabilities 2,569,979 3,312,412 1,739,636 1,430,323 4,309,615 4,742,735 54,345 4,363,960 Total liabilities $ 14,861,721 $ 12,885,834 $ 11,202,657 $ 11,536,079 $ 26,064,378 $ 24,421,913 $ 54,345 $ 26,118,723 Net Position Net investment in capital assets $ 41,936,131 $ 43,297,710 $ 26,737,654 $ 25,272,415 $ 68,673,785 $ 68,570,125 $ 64,289 $ 68,738,074 Restricted 5,020,885 5,234, ,020,885 5,234,723 1,187,635 6,208,520 Unrestricted 9,572,509 9,343,665 9,431,501 9,480,083 $ 19,004,010 18,823,748 3,407,937 22,411,947 Total net position $ 56,529,525 $ 57,876,098 $ 36,169,155 $ 34,752,498 $ 92,698,680 $ 92,628,596 $ 4,659,861 $ 97,358,541 The City & HRA's total net position decreased by $109,587. Business-Type Activities Business-type activities net position increased by approximately $1,416,657 due to positive operations of the Liquor, Water and Sewer Funds and Capital contributions into the Storm Water Fund. The Storm Water Fund and Street Light Fund are the business-type funds that generally show a net position decrease. The Storm Water Fund and Street Light funds currently do not charge enough to fund depreciation, thus its net positions will show a decrease annually until rates are adjusted upward. Reconstruction of Storm Water and Street Light capital assets is not fully funded through these Funds. The Storm Water and Street Light Fund assets are generally financed through assessment bonds and cash reserves along with the street and sidewalk costs. In 2016 the Storm Water Fund showed a net position increase due to Capital Contributions into the fund of $225,200 from the Franchise Fund. 8

13 Management's Discussion and Analysis GOVERNMENT-WIDE FINANCIAL ANALYSIS (CONTINUED) Business-Type Activities (Continued) Total City Governmental Activities Business-Type Activities Total HRA and HRA Revenues Program revenues Charges for services $ 1,793,986 $ 1,479,505 $ 6,881,913 $ 6,501,883 $ 8,675,899 $ 7,981,388 $ 133,155 $ 8,809,054 Operating grants and contributions 240, , , , ,400 Capital grants and contributions 1,239,946 1,826,004 53, ,045 1,293,122 2,232,049-1,293,122 General revenues - Property taxes and tax increment 3,412,725 3,421,999 1,475-3,414,200 3,421, ,711 3,705,911 Other taxes 856, , , , ,100 Grants and contributions not restricted - To specific programs 1,995,487 1,975, ,995,487 1,975,491-1,995,487 Other 276, ,135 89,498 56, , , , ,574 Total revenues 9,814,682 10,491,397 7,026,062 6,964,426 16,840,744 17,455, ,904 17,604,648 Expenses General government 1,214,604 1,133, ,214,604 1,133,265-1,214,604 Public safety 3,534,620 2,766, ,534,620 2,766,439-3,534,620 Public works 4,437,682 4,094, ,437,682 4,094,227-4,437,682 Culture and recreation 570, , , , ,145 Economic development 438, , , , ,364 Interest on long-term debt 147, , , , ,710 Municipal liquor store - - 2,563,240 2,497,129 2,563,240 2,497,129-2,563,240 Water - - 1,769,734 1,755,527 1,769,734 1,755,527-1,769,734 Sewer - - 1,497,158 1,458,402 1,497,158 1,458,402-1,497,158 Storm water , , , , ,497 Street light , , , , ,906 Housing and Redevelopment Authority , ,575 Total expenses 10,343,125 8,949,057 6,417,535 6,312,704 16,760,660 15,261, ,575 17,704,235 Change in net position before transfers (528,443) 1,542, , ,722 80,084 2,194,062 (179,671) (99,587) Transfers (818,130) (745,514) 808, ,514 (10,000) (10,000) - (10,000) Increase (decrease) in net position (1,346,573) 796,826 1,416,657 1,387,236 70,084 2,184,062 (179,671) (109,587) Net Position Beginning, as previously stated 57,876,098 58,336,139 34,752,498 33,512,683 92,628,596 91,848,822 4,839,532 97,468,128 Change in accounting principle - (1,256,867) - (542,452) - (1,799,319) - - Prior period adjustment , , Beginning 57,876,098 57,079,272 34,752,498 33,365,262 92,628,596 90,444,534 4,839,532 97,468,128 Ending $ 56,529,525 $ 57,876,098 $ 36,169,155 $ 34,752,498 $ 92,698,680 $ 92,628,596 $ 4,659,861 $ 97,358,541 Financial Analysis of the Government's Funds As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with financerelated legal requirements. 9

14 Management's Discussion and Analysis GOVERNMENT-WIDE FINANCIAL ANALYSIS (CONTINUED) Governmental Funds The focus of the City's governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City's financing requirements. In particular, unassigned fund balance may serve as a useful measure of a City's net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the City's governmental funds reported combined ending fund balances of $17,194,007. Approximately 18%, or $3,026,431, of this total amount constitutes unassigned fund balance. The restricted or assigned fund balances indicate that its expenditures are limited to the eligible expenditures imposed by other governing bodies such as the State of Minnesota for Revolving Loan Funds, funds that are identified for use under the City's capital plans, or is already committed for payments for loans, capital leases, and debt service. Proprietary Funds The City's proprietary funds provide the same type of information found in the government-wide financial statements. The proprietary fund's net position increased by approximately $1,416,657 due to positive operations of the Liquor, Water and Sewer Funds & Capital contributions into the Storm Water fund as stated earlier in the Business-Type Activities section. The total increase in Net Position before transfers & capital contributions was $608,527 in GENERAL FUND BUDGETARY HIGHLIGHTS The fund balance of the City's General Fund increased by $180,814 during The retirement/severance fund balance of $824,959 is dollars set aside to fund 100% of the Compensated Absences Liability. The City's increase in fund balance was due to both its revenue exceeding projections by approximately $388,000 and expenditures below the budget by approximately $263,000. This allowed the city to transfer $355,000 dollars out to the capital funds for future uses to reduce or eliminate the need for future debt. The total fund balance of $3,851,390 meets the City's policy of having a General Fund balance that is approximately 50% of its upcoming year's budgeted property tax and Local Government Aid (LGA) revenue plus 10% of next year's expenditure budget plus the balance of the Retirement/Severance Fund. 10

15 Management's Discussion and Analysis CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets The City's investment in capital assets for its governmental and business-type activities as of December 31, 2016, amounted to $84,119,815 (net of accumulated depreciation). This investment in capital assets includes land, buildings, improvements, machinery and equipment, furniture and office equipment, infrastructure, and sewer capacity rights. The City had $4,730,151 of capital asset additions in The net capital assets balance decreased $1,482,901 from 2015 to 2016 after depreciation expense. Total City Governmental Activities Business-Type Activities Total HRA and HRA , restated , restated , restated Land $ 6,761,821 $ 6,761,821 $ 1,524,108 $ 1,524,108 $ 8,285,929 $ 8,285,929 $ 64,289 $ 8,350,218 Construction in progress 994,912 1,357,118 1,018,368 26,921 2,013,280 1,384,039-2,013,280 Infrastructure 14,190,585 14,624,489 19,882,508 19,952,318 34,073,093 34,576,807-34,073,093 Buildings and building improvements 8,817,230 9,268,645 5,523,063 5,616,045 14,340,293 14,884,690-14,340,293 Intangibles - - 5,958,262 6,152,173 5,958,262 6,152,173-5,958,262 Improvements other than buildings 15,339,967 15,945,769 1,123,865 1,220,318 16,463,832 17,166,087-16,463,832 Vehicles 875, ,460 2,392 18, , , ,895 Machinery and equipment 979,619 1,128, , ,153 1,860,882 2,023,684-1,860,882 Office equipment and furniture 236, ,978 9,723 13, , , ,349 Total capital assets $ 48,196,263 $ 50,183,811 $ 35,923,552 $ 35,418,905 $ 84,119,815 $ 85,602,716 $ 64,289 $ 84,184,104 Additional information on the City's capital assets can be found in Note 6 on pages of this report. Long-Term Debt At the end of 2016, the City had total long-term debt outstanding of $15,375,898. Of this amount, $10,480,898 comprised debt backed by the full faith and credit of the City. The remainder of the City' debt represented bonds secured solely by specified revenue sources. Outstanding Debt (General Obligation and Revenue Bonds) Governmental Activities Business-Type Activities Total General Obligation (G.O.) $ 3,540,000 $ 5,185,000 $ - $ - $ 3,540,000 $ 5,185,000 G.O. Special Assessments 2,650,000 3,250, ,650,000 3,250,000 Revenue Bonds - - 4,895,000 5,505,000 4,895,000 5,505,000 Loans/notes payable - 1,294 4,290,898 4,641,490 4,290,898 4,642,784 Total $ 6,190,000 $ 8,436,294 $ 9,185,898 $ 10,146,490 $ 15,375,898 $ 18,582,784 The HRA Component Unit did not have any long-term outstanding debt. 11

16 Management's Discussion and Analysis CAPITAL ASSETS AND DEBT ADMINISTRATION (CONTINUED) The City did not issue any bonds in The City paid off the 2005A bond of $1,305,000 on February 1, 2016 that was part of the $1,225,000, 2015B Refunding bonds. The City improved its bond rating to "AA" from Standard & Poor's for G.O. debt in 2009 and maintains that rating to date. According to Standard & Poor's Municipal Credit Report in October of 2015, the AA rating reflects the City's strong management, very strong budgetary flexibility, very strong liquidity, and participation in the St. Cloud economic base & access to the Minneapolis-St. Paul employment base. Additional information on the City's long-term debt can be found in Note 7 on pages ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES The City has had some growth in residential and multi-family residential development that continued in The City saw a 3.8% increase in its net tax capacity due to growth and an increase in current values. REQUESTS FOR INFORMATION The financial report is designed to provide a general overview of the City's finances for all those with an interest in the government's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the City Administrator, 250 Summit Avenue North, Sauk Rapids, Minnesota

17 BASIC FINANCIAL STATEMENTS 13

18 Statement of Net Position December 31, 2016 Governmental Activities Assets Cash and investments (including cash equivalents) 17,299,323 Business-Type Activities Total HRA Component Unit $ $ 9,931,020 $ 27,230,343 $ 3,422,282 Property tax receivable 84,915 1,475 86,390 - Accounts receivable 237, , ,488 - Interest receivable 26,052-26,052 1,910 Due from other governments 256, , Loans receivable 176, ,968 22,246 Special assessments receivable Delinquent 5,703 8,167 13,870 - Deferred 644,094 67, ,457 - Inventories - 425, ,538 - Land held for resale 148, ,100 1,203,465 Net pension asset 335, ,539 - Capital assets Land 6,761,821 1,524,108 8,285,929 64,289 Construction in progress 994,912 1,018,368 2,013,280 - Capital assets being depreciated Infrastructure 64,910,446 37,848, ,759,373 - Buildings 13,630,478 9,286,698 22,917,176 - Improvements 20,988,274 1,929,035 22,917,309 - Vehicles 3,323, ,133 3,829,803 - Machinery and equipment 3,291,903 3,003,920 6,295,823 - Office equipment and furniture 899,271 31, ,557 - Sewer rights - 6,751,409 6,751,409 - Less accumulated depreciation (66,604,512) (25,976,332) (92,580,844) - Total capital assets 48,196,263 35,923,552 84,119,815 64,289 Total assets 67,411,744 47,010, ,422,358 4,714,206 Deferred Outflows of Resources Deferred outflows of resources related to pensions 3,979, ,198 4,340,700 - Total assets and deferred outflows of resources $ 71,391,246 $ 47,371,812 $ 118,763,058 $ 4,714,206 Liabilities Accounts payable $ 158,439 $ 116,444 $ 274,883 $ 1,064 Contracts payable 66,046-66,046 - Due to other governments 350, , ,444 50,000 Salaries and benefits payable 150,999 45, ,984 3,281 Interest payable 60,878 53, ,605 - Bonds payable Due within one year 985, ,000 1,605,000 - Due in more than one year 5,275,132 4,275,000 9,550,132 - Notes payable Payable within one year - 359, ,869 - Payable after one year - 3,931,029 3,931,029 - Compensated absences payable Payable within one year 125,640 23, ,858 - Due in more than one year 551, , ,251 - Net other post employment benefits (OPEB) liability 795, ,743 1,019,272 - Net pension liability 5,669, ,342 6,535,079 - Total liabilities 14,188,965 11,087,487 25,276,452 54,345 Deferred Inflows of Resources Deferred inflows of resources related to pensions 672, , ,926 - Net Position Net investment in capital assets 41,936,131 26,737,654 68,673,785 64,289 Restricted for Capital projects 1,320,230-1,320,230 - Debt service 3,213,636-3,213,636 - Tax increment ,024 Other projects 487, , ,611 Unrestricted 9,572,509 9,431,501 19,004,010 3,407,937 Total net position 56,529,525 36,169,155 92,698,680 4,659,861 Total liabilities and net position $ 71,391,246 $ 47,371,812 $ 118,763,058 $ 4,714,206 See notes to financial statements. 14

19 15 City of Sauk Rapids Statement of Activities Year Ended December 31, 2016 Program Revenues Operating Grants and Contributions Capital Grants and Contributions Net (Expense) Revenues and Changes in Net Position Functions/Programs Expenses Charges for Services Governmental Activities Business-Type Activities Total HRA Component Unit Governmental activities General government $ 1,214,604 $ 375,727 $ - $ - $ (838,877) $ - $ (838,877) $ - Public safety 3,534, , ,751 9,081 (2,627,870) - (2,627,870) - Public works 4,437, ,807 40,185 1,121,781 (2,573,909) - (2,573,909) - Culture and recreation 570,145 15,534 3, ,084 (442,527) - (442,527) - Economic development 438, (438,092) - (438,092) - Interest and fiscal charge on debt 147, (147,710) - (147,710) - Total governmental activities 10,343,125 1,793, ,208 1,239,946 (7,068,985) - (7,068,985) - Business-type activities Liquor 2,563,240 2,680, , ,544 - Water 1,769,734 1,986,205-36, , ,988 - Sewer 1,497,158 1,748,596-11, , ,577 - Storm water 350, ,286-1,773 - (81,438) (81,438) - Street light 236, ,042-3,747 - (34,117) (34,117) Total business-type activities 6,417,535 6,881,913-53, , ,554 - Total governmental and Business-type activities $ 16,760,660 $ 8,675,899 $ 240,208 $ 1,293,122 (7,068,985) 517,554 (6,551,431) Housing and redevelopment authority component unit $ 943,575 $ 133,155 $ 192 $ - (810,228) General revenues Property taxes 3,412,725 1,475 3,414,200 - Sales tax 856, ,100 - Tax increments ,711 State aids 1,995,487-1,995,487 - Investment earnings 139,234 86, ,232 30,546 Other general revenue 133, , ,300 Gain on sale of asset 3,757 2,500 6,257 - Transfers (818,130) 808,130 (10,000) - Total general revenues and transfers 5,722, ,103 6,621, ,557 Change in net position (1,346,573) 1,416,657 70,084 (179,671) Net position - beginning 57,876,098 34,752,498 92,628,596 4,839,532 Net position - ending $ 56,529,525 $ 36,169,155 $ 92,698,680 $ 4,659,861 See notes to financial statements.

20 Balance Sheet - Governmental Funds December 31, 2016 General Fund (101, 105) Permanent Improvement Revolving (501) Capital Projects Half Cent Sales Tax (231) Franchise - Gas and Electric (240) Other Governmental Funds Total Governmental Funds Assets Cash and investments $ 4,015,107 $ 3,673,311 $ 850,087 $ 1,215,990 $ 7,544,828 $ 17,299,323 Taxes receivable - delinquent 16, ,565 84,915 Special assessments receivable Delinquent - 1, ,935 5,703 Deferred - 50,228 30, , , ,094 Accounts receivable 49,673 51, ,550 2, ,808 Interest receivable 26, ,052 Due from other governments 22,380 39, , , ,979 Loans receivable , ,968 Land held for resale - 148, ,100 Total assets $ 4,129,788 $ 3,965,158 $ 1,053,111 $ 1,558,786 $ 8,173,099 $ 18,879,942 Liabilities Accounts payable $ 110,821 $ 3,986 $ 540 $ 28,806 $ 14,286 $ 158,439 Contracts payable ,046-66,046 Due to other governments 2 281,517 68, ,221 Salaries and benefits payable 150, ,999 Total liabilities 261, ,503 69,242 94,852 14, ,705 Deferred Inflows of Resources Unavailable revenue - property taxes 16, ,565 84,915 Unavailable revenue - special assessments - 51,813 30, , , ,797 Unavailable revenue - long-term receivables - 48, , ,518 Total deferred inflows of resources 16, ,137 30, , , ,230 Fund Balances Nonspendable - 148, ,100 Restricted ,611-3,668,225 4,621,836 Assigned 824,959 3,430,418-1,255,740 3,886,523 9,397,640 Unassigned 3,026, ,026,431 Total fund balances 3,851,390 3,578, ,611 1,255,740 7,554,748 17,194,007 Total liabilities, deferred inflows of resources, and fund balances $ 4,129,788 $ 3,965,158 $ 1,053,111 $ 1,558,786 $ 8,173,099 $ 18,879,942 See notes to financial statements. 16

21 Reconciliation of the Balance Sheet to the Statement of Net Position - Governmental Funds December 31, 2016 Total fund balances - governmental funds $ 17,194,007 Amounts reported for governmental activities in the Statement of Net Position are different because: Capital assets used in governmental activities are not current financial resources and, therefore, are not reported as assets in governmental funds. Cost of capital assets 114,800,775 Less accumulated depreciation (66,604,512) Long-term liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported as liabilities in the funds. Long-term liabilities at year-end consist of: Bond principal payable, net of premiums (6,260,132) Compensated absences payable (676,984) Net OPEB payable (795,529) Net pension liability (5,669,737) Net pension asset 335,539 Deferred outflows of resources and deferred inflows of resources are created as a result of various differences related to pensions that are not recognized in the governmental funds. Deferred inflows of resources related to pensions (672,756) Deferred outflows of resources related to pensions 3,979,502 Delinquent receivables will be collected in subsequent years, but are not available soon enough to pay for the current period's expenditures and, therefore, are deferred in the funds. Property taxes 84,915 Special assessments 5,703 Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. Deferred special assessments 644,094 Loans and accounts receivable 225,518 Governmental funds do not report a liability for accrued interest due and payable. (60,878) Total net position - governmental activities $ 56,529,525 See notes to financial statements. 17

22 Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds Year Ended December 31, 2016 Capital Projects Debt Service General Fund (101, 105) Permanent Improvement Revolving (501) Half Cent Sales Tax (231) Franchise - Gas and Electric (240) $ 2,000, B Capital Bond (446) Other Governmental Funds Total Governmental Funds Revenues Taxes $ 2,261,362 $ 3,180 $ - $ - $ - $ 1,152,892 $ 3,417,434 Miscellaneous taxes , , ,835 Special assessments - 149,258 9,230 59, , ,076 Licenses and permits 505, ,179 Intergovernmental 2,240, , ,084,272 Charges for services 453, , ,378 1,318,739 Fines and forfeitures 36, ,467 Miscellaneous Investment income 30,667 28,650 8,108 8,990 2,784 60, ,234 Contributions and donations 1,000 10, ,355 52,405 Loan payments , ,188 Other 73,134 3, , ,864 Total revenues 5,601, , ,438 1,500,745 2,784 2,154,023 10,326,693 Expenditures Current General government 852, , ,041 Public safety 2,435, ,448 2,445,492 Public works 1,023,566 7, ,030,793 Culture and recreation 351, , ,637 Economic development 120, , , ,584 Debt service Principal 1, ,305, ,000 2,246,785 Interest and other charges , , ,847 Capital outlay General government ,439 38,439 Public safety 53, , ,691 Public works 111, , , , ,595 2,234,845 Culture and recreation , ,106 68,634 Total expenditures 4,949, , , ,442 1,330,661 1,581,106 10,202,788 Excess of revenues over (under) expenditures 652,057 (316,077) 30, ,303 (1,327,877) 572, ,905 Other Financing Sources (Uses) Proceeds from sale of capital asset 3, ,757 Transfers in - 250,000-50, ,042 1,204,042 Transfers out (475,000) - (200,000) - (205,954) (833,323) (1,714,277) Total other financing sources (uses) (471,243) 250,000 (200,000) 50,000 (205,954) 70,719 (506,478) Net change in fund balances 180,814 (66,077) (169,418) 562,303 (1,533,831) 643,636 (382,573) Fund Balances Beginning of year 3,670,576 3,644,595 1,123, ,437 1,533,831 6,911,112 17,576,580 End of year $ 3,851,390 $ 3,578,518 $ 953,611 $ 1,255,740 $ - $ 7,554,748 $ 17,194,007 See notes to financial statements. 18

23 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities - Governmental Funds Year Ended December 31, 2016 Total net change in fund balances - governmental funds Amounts reported for governmental activities in the Statement of Activities are different because: $ (382,573) Capital outlays are reported in governmental funds as expenditures. However, in the Statement of Activities, the cost of those assets is allocated over the estimated useful lives as depreciation expense. Capital outlays 1,568,900 Depreciation expense (3,248,553) Transferred to proprietary funds (307,895) Compensated absences are recognized as paid in the governmental funds but recognized as the expense is incurred in the Statement of Activities. (72,988) Net OPEB are recognized as paid in the governmental funds but recognized as the expense is incurred in the Statement of Activities. (64,113) Principal payments on long-term debt are recognized as expenditures in the governmental funds but as an increase in the net position in the Statement of Activities. 2,246,294 Some expenses reported in the Statement of Activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. Accrued interest payable 21,694 Amortization of bond premiums 10,934 Loans and certain accounts receivable will be collected this year, but are not available soon enough to pay for the current period's expenditures and, therefore, are deferred in the funds. (387,916) Revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds. Special assessments deferred (121,756) Special assessments delinquent (1,387) Governmental funds recognize pension contributions as expenditures at the time of payment whereas the Statement of Activities factors in items related to pensions on a full accrual perspective. Pension expense (602,505) Delinquent property taxes receivable will be collected in subsequent years, but are not available soon enough to pay for the current period's expenditures and, therefore, are deferred in the funds. (4,709) Change in net position - governmental activities $ (1,346,573) See notes to financial statements. 19

24 Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - General Fund Year Ended December 31, 2016 Budgeted Amounts Original and Final Actual Amounts Revenues Property taxes $ 2,279,800 $ 2,261,362 $ (18,438) Licenses and permits 240, , ,079 Intergovernmental 2,213,700 2,240,504 26,804 Charges for services 395, ,347 58,247 Fines and forfeitures 39,500 36,292 (3,208) Miscellaneous 45, ,801 59,801 Total revenues 5,213,200 5,601, ,285 Expenditures Current General government 889, ,090 (37,610) Public safety 2,547,300 2,435,044 (112,256) Public works 1,090,300 1,023,566 (66,734) Culture and recreation 363, ,037 (12,363) Economic development 120, ,000 - Debt service Principal 1,600 1, Capital outlay General government 4,700 - (4,700) Public safety 54,700 53,995 (705) Public works 140, ,911 (28,089) Culture and recreation 1,500 - (1,500) Total expenditures 5,213,200 4,949,428 (263,772) Excess of revenues over expenditures - 652, ,057 Other Financing Sources (Uses) Proceeds from sale of capital asset - 3,757 3,757 Transfers out - (475,000) (475,000) Total other financing sources (uses) - (471,243) (471,243) Net change in fund balances $ - 180,814 $ 180,814 Fund Balances Beginning of year 3,670,576 End of year $ 3,851,390 Variance with Final Budget - Over (Under) See notes to financial statements. 20

25 Statement of Net Position - Proprietary Funds December 31, 2016 Assets Current assets Liquor (600) Water (601) Sewer (602) Storm Water (603) Street Light (604) Total Cash and investments $ 841,368 $ 5,480,595 $ 2,972,571 $ 569,632 $ 66,854 $ 9,931,020 Taxes receivable - delinquent - 1, ,475 Special assessments receivable Delinquent - 4,537 3, ,167 Deferred - 40,687 20,137 4,339 2,200 67,363 Accounts receivable 18, , ,394 48,828 54, ,680 Due from other governments Inventories 382,456 42, ,538 Total current assets 1,242,527 5,839,610 3,257, , ,737 11,087,062 Noncurrent Assets Capital assets Land 541, ,898 74, ,403-1,524,108 Construction in progress - 402, , ,018,368 Infrastructure - 16,461,536 11,657,087 9,730,304-37,848,927 Buildings 518,794 8,767, ,286,698 Improvements other than buildings - 426, ,502,846 1,929,035 Vehicles - 66,840 45, , ,133 Machinery and equipment 125,033 1,504,673 1,346,609 27,605-3,003,920 Office furniture and equipment 31, ,286 Sewer rights - - 6,751, ,751,409 Total capital assets 1,216,641 27,817,058 20,490,842 10,872,497 1,502,846 61,899,884 Less accumulated depreciation (363,081) (12,953,154) (7,663,130) (4,468,814) (528,153) (25,976,332) Total noncurrent assets 853,560 14,863,904 12,827,712 6,403, ,693 35,923,552 Total assets 2,096,087 20,703,514 16,085,682 7,026,901 1,098,430 47,010,614 Deferred Outflows of Resources Deferred outflows of resources related to City pensions 108, ,140 88,921 30, ,198 Total assets and deferred outflows of resources $ 2,204,616 $ 20,836,654 $ 16,174,603 $ 7,057,509 $ 1,098,430 $ 47,371,812 Liabilities Current Liabilities Accounts payable $ 62,029 $ 19,203 $ 10,988 $ 1,381 $ 22,843 $ 116,444 Salaries and benefits payable 13,584 17,027 11,263 4,111-45,985 Interest payable - 53, ,727 Due to other governments 28,311 2, , ,223 Bonds payable, due within one year - 620, ,000 Compensated absences, due within one year 5,490 9,305 6,510 1,913-23,218 Note payable, due within one year , ,869 Total current liabilities 109, , ,874 7,405 22,843 1,624,466 Noncurrent Liabilities Bonds payable - 4,895, ,895,000 Compensated absences 49,569 73,003 50,806 17, ,125 Notes payable - - 4,290, ,290,898 Net OPEB payable 74,581 74,581 49,721 24, ,743 Net pensions liability 256, , ,158 73, ,342 Less amount due within one year (5,490) (629,305) (366,379) (1,913) - (1,003,087) Total noncurrent liabilities 375,473 4,733,933 4,239, ,411-9,463,021 Total liabilities 484,887 5,455,863 5,002, ,816 22,843 11,087,487 Deferred Inflows of Resources Deferred inflows of resources related to City pensions 35,305 42,083 28,107 9, ,170 Net Position Net investment in capital assets 853,560 9,968,904 8,536,814 6,403, ,693 26,737,654 Unrestricted 830,864 5,369,804 2,607, , ,894 9,431,501 Total net position 1,684,424 15,338,708 11,144,418 6,926,018 1,075,587 36,169,155 Total liabilities, deferred inflows of resources, and net position $ 2,204,616 $ 20,836,654 $ 16,174,603 $ 7,057,509 $ 1,098,430 $ 47,371,812 See notes to financial statements. 21