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HomeMy WebLinkAbout3.a. Presentation and Acceptance of 2020 Comprehensive Annual Financial Report EXECUTIVE SUMMARY City Council Meeting Date: June 1, 2021 AGENDA ITEM: Presentation and Acceptance of 2020 Comprehensive Annual Financial Report AGENDA SECTION: Presentations PREPARED BY: Jeff May, Finance Director AGENDA NO. 3.a. ATTACHMENTS: Resolution, PowerPoint Presentation, 2020 Comprehensive Annual Financial Report, Management Report, Special Purpose Audit Reports, Corrective Action Plan Report APPROVED BY: LJM RECOMMENDED ACTION: Motion to adopt a Resolution Accepting the 2020 Comprehensive Annual Financial Report. BACKGROUND A representative from our audit firm, Malloy, Montague, Karnowski, Radosevich, & Co., P.A. (MMKR), will be here on Tuesday evening, June 1st, to review the City of Rosemount’s 2020 Comprehensive Annual Financial Report. The representative will give a brief presentation, highlighting the results of their investigation into the City’s financial position at the end of 2020, and will also be available to answer any questions that you may have RECOMMENDATION Staff recommends the City Council accept the 2020 Comprehensive Annual Financial Report. CITY OF ROSEMOUNT DAKOTA COUNTY, MINNESOTA RESOLUTION 2021 - 41 A RESOLUTION ACCEPTING THE 2020 COMPREHENSIVE ANNUAL FINANCIAL REPORT WHEREAS, the City of Rosemount has been presented its 2020 Comprehensive Annual Financial Report, prepared with the assistance of the firm of Baker Tilly Virchow Krause, LLP and audited by our audit firm of Malloy, Montague, Karnowski, Radosevich, & Co., P.A. NOW, THEREFORE, BE IT RESOLVED, that the City Council of the City of Rosemount, accepts its 2020 Comprehensive Annual Financial Report, audited by our audit firm of Malloy, Montague, Karnowski, Radosevich, & Co., P.A. ADOPTED this 1st day of June, 2021. _____________________________ William H. Droste, Mayor ATTEST: __________________________ Erin Fasbender, City Clerk CITY OF ROSEMOUNT AUDIT REPORT YEAR ENDED DECEMBER 31, 2020 Aaron J. Nielsen, CPA Opinion on Financial Statements Financial statements are fairly presented in accordance with accounting principles generally accepted in the United States of America Reports on Internal Controls and Compliance Financial Statement Audit Federal “Single Audit” MN Legal Compliance Audit AUDITOR’S ROLE Basic Financial Statements Unmodified or clean opinion Special Purpose Audit Reports –Reports on Internal Controls and Compliance I/C and Compliance –Financial Statement Audit and Federal Single Audit No material weaknesses or instances of noncompliance reported in the current year. Minnesota Legal Compliance Audit 2020-001 Missing quote/quote documentation 2020-002 Missing withholding affidavit AUDIT OPINIONS AND FINDINGS GOVERNMENTAL FUNDS 2020 2019 Change Fund balances of governmental funds Total by classification Nonspendable 455$ 529$ (74)$ Restricted 4,563,428 4,921,523 (358,095) Committed 590,017 517,102 72,915 Assigned 21,995,159 16,522,782 5,472,377 Unassigned 8,143,687 7,893,190 250,497 Total governmental funds 35,292,746$ 29,855,126$ 5,437,620$ Total by fund General 12,293,930$ 10,559,040$ 1,734,890$ Debt Service 2,300,537 2,449,174 (148,637) Capital Projects 17,844,916 13,856,932 3,987,984 Port Authority TIF 2,175,696 2,395,413 (219,717) Nonmajor funds 677,667 594,567 83,100 Total governmental funds 35,292,746$ 29,855,126$ 5,437,620$ as of December 31, Governmental Funds Change in Fund Balance Fund Balance GENERAL FUND FINANCIAL POSITION GENERAL FUND REVENUES GENERAL FUND EXPENDITURES ENTERPRISE FUNDS 2020 2019 Change Net position of enterprise funds Total by classification Net investment in capital assets 99,300,829$ 98,007,299$ 1,293,530$ Unrestricted 32,661,481 28,881,892 3,779,589 Total enterprise funds 131,962,310$ 126,889,191$ 5,073,119$ Total by fund Water 47,875,231$ 45,371,778$ 2,503,453$ Sewer 35,460,295 34,806,570 653,725 Storm Water 46,906,419 44,988,963 1,917,456 Street Lighting 57,069 – 57,069 Arena 1,663,296 1,721,880 (58,584) Total enterprise funds 131,962,310$ 126,889,191$ 5,073,119$ Enterprise Funds Change in Financial Position Net Position as of December 31, WATER FUND SEWER FUND STORM WATER FUND ARENA FUND STATEMENT OF NET POSITION 2020 2019 Change Net position Governmental activities Net investment in capital assets 89,980,056$ 85,993,734$ 3,986,322$ Restricted 6,372,033 6,255,555 116,478 Unrestricted 24,068,714 18,205,045 5,863,669 Total governmental activities 120,420,803 110,454,334 9,966,469 Business-type activities Net investment in capital assets 99,300,829 98,007,299 1,293,530 Unrestricted 32,661,481 28,881,892 3,779,589 Total business-type activities 131,962,310 126,889,191 5,073,119 Total net position 252,383,113$ 237,343,525$ 15,039,588$ As of December 31, COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2020 CITY OF ROSEMOUNT, MINNESOTA CITY OF ROSEMOUNT, MINNESOTA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2020 PREPARED BY THE DEPARTMENTS OF ADMINISTRATION AND FINANCE LOGAN MARTIN, City Administrator JEFFREY A. MAY, Finance Director City of Rosemount Table of Contents December 31, 2020 Page Introductory Section Letter of Transmittal 1 GFOA Certificate of Achievement 10 Organizational Chart 11 City Officials 12 Financial Section Independent Auditors' Report 13 Management's Discussion and Analysis 16 Basic Financial Statements Government-Wide Financial Statements: Statement of Net Position 26 Statement of Activities 27 Fund Financial Statements: Balance Sheet - Governmental Funds 28 Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds 29 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities 30 Statement of Net Position - Proprietary Funds 31 Statement of Revenues, Expenses and Changes in Net Position - Proprietary Funds 32 Statement of Cash Flows - Proprietary Funds 33 Notes to Financial Statements 35 City of Rosemount Table of Contents December 31, 2020 Page Required Supplementary Information Schedule of Revenues and Other Sources Compared to Budget (Budgetary Basis) - Budget and Actual - General Fund 74 Schedule of Expenditures and Other Uses (Budgetary Basis) - Budget and Actual - General Fund 75 Schedule of City's and Nonemployer Proportionate Share of the Net Pension Liability - Public Employees General Employees Retirement Fund 76 Schedule of Employer Contributions - Public Employees General Employees Retirement Fund 76 Schedule of City's and Nonemployer Proportionate Share of the Net Pension Liability - Public Employees Police and Fire Fund 77 Schedule of Employer Contributions - Public Employees Police and Fire Fund 77 Schedule of Changes in the Rosemount Fire Department Relief Association's Net Pension Asset and Related Ratios 78 Schedule of Employer Contributions - Rosemount Fire Department Relief Association 79 Schedule of Changes in the City's Total OPEB Liability and Related Ratios 80 Notes to Required Supplementary Information 81 Supplementary Information Combining and Individual Fund Statements and Schedules: Combining Balance Sheet - Nonmajor Governmental Funds 89 Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Governmental Funds 90 Schedules of Revenues, Expenditures and Changes in Fund Balances (Budgetary Basis) - Budget and Actual: Building CIP Capital Project Sub-Fund 91 Street CIP Capital Project Sub-Fund 92 Equipment CIP Capital Project Sub-Fund 93 Combining Balance Sheet – Nonmajor Enterprise Funds 94 Combining Statement of Revenues, Expenditures and Changes in Net Position – Nonmajor Enterprise Funds 95 Combining Statement of Cash Flows – Nonmajor Enterprise Funds 96 City of Rosemount Table of Contents December 31, 2020 Page Statistical Section (Unaudited) Net Position by Component 97 Changes in Net Position 98 Fund Balances, Governmental Funds 100 Changes in Fund Balances, Governmental Funds 101 Assessed Value (or Tax Capacity) and Estimated Market Value of All Taxable Property 102 Property Tax Rates - All Direct and Overlapping Governmental Units 103 Principal Property Tax Payers 104 Property Tax Levies and Collections 105 Ratios of Outstanding Debt by Type 106 Ratios of Net General Bonded Debt Outstanding 107 Direct and Overlapping Governmental Activities Debt 108 Legal Debt Margin Information 109 Pledged-Revenue Coverage 110 Demographic and Economic Statistics 111 Principal Employers 112 Full-Time/Permanent Part-Time City Government Employees by Function/Program 113 Operating Indicators by Function/Program 114 Capital Asset Statistics by Function/Program 115 2 Profile of the Government The City was established as a municipal corporation in 1858 and became a statutory City in 1974. The City has a Mayor-Council form of government, with the four Council members being elected to overlapping four-year terms of office and the Mayor serving a four-year term coinciding with the terms of two of the Council members. The City Council is responsible, among other things, for passing ordinances, adopting the budget, appointing committees and hiring the City's chief administrative officer. The City's chief administrative officer is the City Administrator, who is appointed by and serves at the discretion of the City Council. The City Administrator is responsible for carrying out the policies and ordinances of the City Council, for overseeing the day-to-day operations of the City and for appointing the heads of the City's various departments, with the City Council's final approval. The City is a growing southern suburb in the Minneapolis/St. Paul metropolitan area, located in Dakota County. The City encompasses approximately 36 square miles. The City is one of the fastest growing communities in the seven-county Minneapolis/St. Paul metropolitan area as demonstrated by the following population trend: Population Population Increase Percent Increase 2020 Staff Estimate 26,318 4,444 20% 2010 Census 21,874 7,255 50% 2000 Census 14,619 5,997 70% 1990 Census 8,622 3,539 70% 1980 Census 5,083 1,049 26% 1970 Census 4,034 The City has an extensive system of State and County highways and 117 miles of city streets that continue to contribute to the community's growth. This extensive highway network and large tracts of attractive, developable land have made the City an ideal location for residential development and increasingly commercial/industrial development. There is approximately 720 acres of industrial and commercially zoned property ready for development. There is also slightly less than 868 acres within the Municipal Service Area (MUSA) to permit future residential growth. Rail, air, barge and freeway access provides the City's economic community with an expedient transportation system. Four major highways link the City to Minneapolis, St. Paul and the rest of the metropolitan area. The City provides a full range of services, including police and fire protection; the construction and maintenance of highways, streets, and other infrastructure; water, sewer, and storm water services; and recreational activities and cultural events. Certain economic development services are provided through the Rosemount Port Authority. The Port Authority’s financial data has been presented in this financial report as a blended component unit. The annual budget serves as the foundation for the City's financial planning and control. All departments of the City submit requests for appropriation to the City Administrator on or before May 1st of each year. The City Administrator uses these requests as the starting point for developing a proposed budget. The City Administrator then presents this proposed budget to the Council for review and adoption of a preliminary levy by September 30th. The council holds a public hearing on the proposed budget and must adopt a final budget and levy by no later than December 20th, prior to the close of the City's fiscal year. 3 The appropriated budget is prepared by fund, department and function. The City’s department heads may make transfers of appropriations within a department; transfers of appropriation between departments require approval of the City Council. Budget-to-actual comparisons are provided in this report for each individual governmental fund for which an appropriated annual budget has been adopted. For the general fund, this comparison is presented on pages 74-75 as part of the Required Supplementary Information. Factors Affecting Financial Condition The information presented in the financial statements is perhaps best understood when it is considered from the broader perspective of the specific environment within which the City operates. Local Economy – The City is a growing community experiencing some of its residential growth in 2020 as compared to the last decade. In total there were 389 new dwelling units in 2020; 155 single family, 110 townhome units and 124 apartments. While the community continues to grow, ample land for residential, commercial and industrial development are still available and the community is projected to keep expanding post 2050. The central portion of the City centered around County Road 42/County Road 73 is the area of new growth and development activity. The City, partnering with Dakota County, is committed to installation of road and utility infrastructure that encourages and supports new growth. Additional development opportunities exist in the south, within the University of Minnesota (UMore) 3,000- acre landholding, and to the east which is primarily farmed until future pressures modify the land uses. Consistent with the City Council goals of promoting Rosemount’s historic Downtown, the City approved a 4-story market rate 124-unit apartment in 2020. The project is a redevelopment project, replacing an obsolete mall, the KenRose mall, and replacing it with the apartment building and a small stand-alone commercial structure. On the commercial and industrial side of development the projects continue at a steady pace. Significant projects include construction of the private recreational facility, Hope Field House, the Lorenz Clinic, tenant build outs for the first building within the Biscayne Business Park and a large ground-mounted solar installation at St. Joseph’s church. The City, in partnership with Xcel Energy and the University of Minnesota, have been responding to RFI’s for approximately 300 acres just east of Dakota County Technical College and have garnered some interest from potential users. OPUS Corporation continues to market the adjoining 160 acres they have reserved for future Business Park use. The City also continues to field inquiries regarding the Rosemount Business Park land and industrial development on the existing Rich Valley golf course. Although the national economy has been in turmoil due to COVID, the City’s local economy has not experienced a dramatic downturn. Local businesses have remained and through local, regional and state assistance small businesses in the service and hospitality industry continue to be open, under restrictions, and operational. Labor market data continues to be very impressive despite COVID for the State, Minneapolis/St. Paul metropolitan area and Dakota County, in which the City is located. 2020 labor force numbers were 3,018,355; 1,953,111; and 233,902, respectively, with unemployment rates of 4.6%; 4.5% and 4.3% to match. These figures compare quite favorably with national figures. Community leadership has preserved 540 beautiful acres of land for 30 parks. Residents can enjoy a round of golf on a 27-hole public course. Bordered by the scenic Mississippi River, the City also contains 270 acres of the Spring Lake Regional Park Preserve. The City's Community Center, a part of the Army National Guard's regional headquarters, provides a variety of indoor recreation opportunities and meeting spaces, including an ice arena, gymnasium, auditorium, and banquet facility. In 2015, the City opened a 10,000 square foot addition to the Steeple Center to house a variety of activities and events. Given the underlying strength of the economy in the seven county metropolitan area, the diversification of tax and employment bases and the City's desirable location, the future outlook is very optimistic. 4 Long-term financial planning – Growth and development in the City are guided by the recently approved 2040 Comprehensive Plan. That Plan is generally consistent with the goals and objectives of the previous 2030 Plan with the exception that additional land has been brought into the Metropolitan Urban Service Area (MUSA) to permit further residential development within the community. The City’s population projection for 2020 is 26,318; 2030 is 31,700; and 2040 is 38,000. Other factors – Development within the community continues on a steady path, slightly increasing year over year. In 2020 there were 3,894 new residential units built in the community, 115 units more than 2019. The mix of residential units also illustrates a shift from purely single-family residential units. There were 124 apartment units, 110 townhome units and 155 more traditional single-family units. The change in mix is due to a concerted effort by the City Council to attract life-cycle housing into the Community. Council housing goals are to provide housing at different price points and differing styles. Developers have platted numerous lots making them available for construction in 2021. By January 1, 2021, there were approximately 300 lots ready for permit within the community. In 2020, the City’s construction valuation was also greater than 2019 by approximately $15,000,000. The construction valuation increase is attributable to the additional residential development although there was also an increase in commercial construction valuation. Cartegraph and GIS – In 2020 we continued to implement new features of our Cartegraph Operations Management System (OMS), taking advantage of its user-friendly, map-based interface to manage all facets of Public Works operations. A continued focus in 2020 was reviewing water meter information and continued development of a comprehensive multi-year replacement plan, with the intention of replacing all meters with “smart technology” meters over the next several years. Capital Improvement Projects – The Public Works Department coordinated and / or completed the following capital improvement projects in 2020:  Replaced pumps, rails, top slab and control cabinets at sanitary sewer lift stations #3 and #5  Replaced pumps at sanitary sewer lift station #4  New roof on Well #12  Replaced the pump on Well #9  Replaced two pumps at Schwarz Pond storm lift station  Purchased new mechanic toolbox  Replaced the backstop at Connemara Park  Completed the second year of a five-year plan for replacing picnic tables  Replaced service doors at Public Works north, central and south buildings  Replaced make up air units at Public Works central building  Painted the exterior of Public Works south building  Replaced two roof top units at City Hall  Repainted the upper floor of City Hall  Replaced two service doors at Fire Station 2  Repainted the interior of Jaycee Park Shelter  Completed roof inspections on City Hall, Public Works north and central buildings City Construction Projects  2019 Street Improvements – Phase 2 – Pavement mill & overlay and reclamation on Chippendale Avenue, Dodd Boulevard, 151st Street, Crestone Avenue, Claret Avenue and Cimarron Avenue. Lane configuration on Chippendale Avenue was modified to single lane in each direction with a center turn lane. The intersection with County Road 42 at Claret Avenue was modified to improve driver visibility. 5  Adalyn Avenue – This road will connect Addison Avenue to the new section of Connemara Trail east of Akron Avenue. This road will serve existing multi-family homes in the area, as well as future development to the north of Connemara Trail and east of Akron Avenue.  Autumn Path (Biscayne Avenue to Almeria Trail) – Construction began in 2020 and will be completed in 2021. This new urban paved road with curb and gutter provides additional access to the Bella Vista subdivision. It also provides for the extension of raw and potable water mains as well as sanitary and storm sewer.  Connemara Trail (east of Akron) – Design for this project began in 2018, and construction was delayed to 2021. This road will eventually extend into the Emerald Isle development currently being planned to the east of the existing developments.  Bonaire Path East (Akron Avenue to Anderson Drive) – The gravel road was upgraded to an urban paved section with curb and gutter and the extension of water main. The completion of road within the Union Pacific Railroad right of way remains for 2021 when cross arms and median will be installed. This project also extends the railroad quiet zone to include the crossing on Bonaire Path East.  Biscayne Avenue (Boulder Trail to CSAH 46) – Construction began in 2020. The gravel road was upgraded to an urban paved section with curb and gutter. This project also extends sanitary sewer to service those properties to the south and provided for stormwater management.  Chippendale Water Tower Reconditioning – The water tower was recoated both inside and outside to preserve the structure. Final restoration was completed in the summer of 2020.  Deepwoods Court – Design began in 2019 and construction began in 2020. The project reclaimed the entire length of Deepwoods Court and provides a rural paved section and the construction of a ribbon curb paid for by the abutting property owners. This project also included some minor stormwater improvements.  Minnesota Trunk Highway 3 Drainage Improvements – Construction began in 2020. This project provided for grading and storm sewer improvements linking the system underneath MN Highway 3 as part of the overall stormwater management plan. Developer Construction Projects  Bella Vista 7th Addition – This subdivision is the final phase of the Bella Vista development of single-family homes by developer Lennar.  Emerald Isle 1st Addition – This subdivision is a single-family neighborhood south of the Greystone subdivision by developer CNC Development IV.  Harmony Parkview 2nd Addition – This is the final phase of the Harmony development to the east of MN Highway 3, south of Bonaire Path. This is a multi-family home development by Timbercrest.  Meadow Ridge 2nd and 3rd Additions – These phases are part of the Meadow Ridge development west of Akron Avenue and north of Bonaire Path. They are single family neighborhoods by developer Lennar.  Prestwick Place 20th Addition – This is the final phase of the Prestwick development of single- family homes by Prestwick LLC, located on the west side of Akron Avenue, north of Connemara Trail.  The Morrison – This is a downtown redevelopment that is constructing a multi-family apartment building and parking lot. Also included are some minor improvements to the sanitary sewer system. The developer is the Morrison Partners.  Rosemount Woods – This is an expansion of an existing manufactured home park to provide additional home sites. The developer is MHC Rosemount Woods. 6 The Police Department is responsible for policing services to the community to ensure safety and response to service calls. A mission statement guides the actions of the Department: “In partnership with the community, the Rosemount Police Department assists and educates the public, resolves problems, prevents crimes and enforces laws. We pursue our mission and serve with honor, integrity and courage.” Staffing levels are continually evaluated to meet the needs of a growing community. The specific service functions within the Police Department are described below.  Police Administration – This budget provides for the overall leadership, planning, coordination and management of personnel and administration of activities within the Police Department. This includes the collection, preparation and filing of crime data and miscellaneous reports with the State of Minnesota; preparation and oversight of the operating and capital improvements budgets; and strategic planning for the future needs of the Department and the community. Police Department leadership is also involved in many consolidated services governance boards that contribute to policing services for the city. The Dakota Communications Center (DCC), Dakota County Criminal Justice Network (CJN), Local Government Information Systems (LOGIS), Dakota County Drug Task Force, South Metro SWAT, Dakota County Domestic Preparedness Committee, the Dakota County Coordinated Response program, and the Dakota County Electronic Crimes Unit are consolidated services organizations that contribute to Rosemount’s policing services.  Records Unit – The Police Department’s Records Unit is responsible for the processing of over 3,300 case reports each year. Reports require transcription and compilation for transmittal to the City or County prosecutor’s office or any other agency (i.e. Social Services, Department of Human Services, etc.) requiring information for service to the community. Records staff ensure the Police Department is compliant with all Minnesota Bureau of Criminal Apprehension data management laws, regulations and reporting requirements. Administrative support is provided to the entire Police Department for gun permit applications, criminal background checks, city licensing requirements and data requests among others.  Patrol Operations – Uniformed patrol is the core function of the Police Department and the most visible in the community. Through 24-hour daily patrols in marked police vehicles, patrol officers respond to calls for service, investigate traffic accidents, regulate traffic control, conduct preliminary criminal investigations, enforce traffic laws, enforce criminal laws, perform foot/bike patrol and provide general and specific deterrence to crime. In addition, Patrol Officers respond to medical calls as trained in First Aid and CPR. Through patrol operations the Police Department meets its goal of the protection of life and property and creating a sense of safety and security in the community. Equally important, a significant amount of time is spent developing relationships within the community and partnering with members of community organizations. Patrol Officers perform additional specialty assignments as Crime Scene Technicians, Use-of-Force Instructors, South Metro SWAT Tactical Officers, Drug Recognition Experts, Special Operations Team operators (SOT), Field Training Officers and as various committee members (i.e. Uniform Committee, Recognition Committee, etc.).  Criminal Investigations – Patrol Officers and investigators are responsible for the investigation of criminal incidents through evidence gathering and analysis, witness and suspect interviews, and court preparation and testimony. Complex investigations or those requiring a multi-jurisdictional or agency involvement are coordinated by the investigator. This is accomplished by working cooperatively with other police agencies, the County Attorney’s Office, Dakota County Social Services, victim services and other local, state and federal law enforcement agencies. One investigator is assigned to the Dakota County Drug Task Force, a multi-jurisdictional joint powers entity, whose mission is to investigate drug crimes in the City and throughout Dakota County. 7  Crime Prevention and Community Education A significant effort is made by the Police Department to build relationships with the community to build trust, share perspectives and create partnerships to serve the community together. Moreover, the Police Department works to inform residents of crime within the community, methods/strategies to help prevent crimes and keep open channels of communications to receive input/feedback about crime that is occurring. While these objectives are part of each officer’s daily responsibilities, there are specific programs that are more associated with community policing; these programs emphasize the need for the police and citizens to work together to prevent criminal activity and reduce the opportunities for criminals to commit crimes.  School Resource Officer (SRO) – Officers serve as a liaison to the Rosemount Middle and the Rosemount High School. One officer is assigned full-time to the High School and a second officer spends one-quarter time at the Middle School. The liaison officers investigate criminal incidents that occur at the schools or that involve students at the schools. In addition, the liaisons work with the school staff to enhance the safety and security for both staff and students, specifically providing school safety planning, and hostile event prevention and response planning. Presentations on a variety of topics are made by the liaison to classes at all grade levels. The Middle School officer also spends time at each of the elementary schools, working with staff on any issues and making presentations in classes when requested.  Community Resource Officer (CRO) – In order to work together with the community, the Police Department must share information concerning criminal activity and crime prevention with the community. While all officers are available to make presentations to community groups and organizations on a variety of topics, the Community Resource Officer focuses on acting as a primary liaison to the community. Several events are also held throughout the year to build relationships with the residents and local businesses. These include Night-to-Unite block parties, Neighborhood Watch meetings, Shop with a Cop, Cops for Kicks, Guns vs. Hoses Hockey Game, Ballin’ in Dakota County Basketball Tournament, Pink Patch Project, Warrior 196 Run, Public Safety in the Park, and several events throughout the annual Leprechaun Days events (i.e. Kids Dance, Police Booth, etc.). Finally, the Rosemount Police Department also utilizes a Facebook page to inform the community on a variety of issues surrounding the community and public safety.  Reserve Officer Program – Reserve officers are volunteers who supplement the staff of sworn officers of the Department to serve the mission. The Reserve Officers are utilized to handle traffic and crowd control duties at accident scenes, city festivals, community gatherings or other emergencies. The Reserve Officers work a variety of community events (i.e. Leprechaun Days, Food Truck Festival, high school football games, etc.), hazardous materials spills or leaks, damage resulting from tornadoes or other severe weather and major criminal incidents. Reserve Officers patrol on some evenings, handle calls for service such as motorist assists and animal complaints, and they often help with prisoner transports. Reserve Officers regularly provide crime prevention information to citizens at community events or through other programs.  Chaplain Program – The Police Chaplains assist in a variety of situations in which individuals or families are having difficulties. Chaplains provide support to persons that are experiencing stress as a result of the death of a loved one, marital or family problems, financial struggles or any other event. By utilizing the chaplains to console and counsel persons in crisis, police officers can focus on their primary duties, while the chaplains are able to remain with the persons involved in the crisis. 8  Explorer Program – Exploring is a community based, co-educational program supervised by the local police department. The Explorer program is designed for young adults ages 14-21 that want to learn more about law enforcement. The program is part of the Boy Scouts of America and is open to both young men and young women. Membership in the Rosemount Police Department Explorer Post is restricted to those young people that live in the City or attend school in Rosemount. Residents of other communities that do not attend school in Rosemount are turned away. The Rosemount Police Explorer Post was formed in 2014. Explorers meet twice a month under the direction of the two officers that serve as Post advisers. During these meetings they conduct post business and train in law enforcement skills. The Explorers also take part in the statewide Explorer Conference where they compete against other Explorer Posts in law enforcement scenarios including crime scene processing, domestic disturbance calls, building searches, etc. In the past, the Explorers attended the national conference every other year. Five years ago, due to budget constraints, we ended this. Although the Explorers paid their own way to the conference there was a cost associated with sending the two officers that serve as post advisors. The Explorer Post is an opportunity for youth of our community to become exposed to law enforcement. Some just want to learn more about the Police Department. Others are truly “exploring” law enforcement as a potential future career. In either case it brings teenagers closer to the Police Department in a service capacity. As such it fits with the Department’s mission of improving quality of life in our community.  Adult Citizen Academy Program – The Adult Citizen Academy has been a project of the Rosemount Police Department for the past 9 years. In 2018, the Rosemount Police Department partnered with the Apple Valley Police Department to conduct an Adult Citizen Academy. It is a way to offer those who live or work in Rosemount an inside look at the operation of their police department. It also allows them an opportunity to meet the officers who serve them. The academy covers topics such as recruiting, ethics, criminal investigations, the charging process, drug task force, use of force, traffic enforcement, forensics, and includes a citizen ride-along with a patrol officer. As such, it helps fulfill the department’s educational mission.  Teen Citizen Academy Program – In 2018 the Rosemount Police Department partnered with the Apple Valley Police Department to conduct a Teen Citizen Academy. The academy covers topics similar to the Adult Citizen Academy, but it is geared towards teens.  Animal Control – The Police Department is responsible for the enforcement of ordinances related to the control and care of domestic animals. These tasks are mainly handled by Community Service Officers. Their duties include the licensing of dogs and ferrets, assisting in the handling of stray, lost or injured animals and other complaints of animals causing a nuisance by barking, howling or being allowed to roam off the owner’s property.  Code Enforcement – The Police Department assists the Community Development Department with code enforcement of city ordinances related to property maintenance and outside storage. The Department’s Community Service Officers primarily handle this effort. Property owners that are observed to be in violation of an ordinance are notified of the violation and given an explanation of how to remedy the violation. The enforcement of city ordinances is important to maintain community standards, which help the City attain its mission of providing a safe, healthy and pleasant community.  Emergency Management – The City has an all-hazards emergency plan and the Chief of Police serves as the City’s Emergency Manager. The Emergency Manager is responsible for the development of emergency plans in the event of a chemical, technical or natural disaster in the community (e.g. tornado, flooding, school shooting, or hazardous materials release). The Chief of Police represents the City of Rosemount on the Dakota County Domestic Preparedness Committee (DCDPC). The DCDPC is comprised of police, fire, dispatch, EMS, public health, and medical facility representatives to aid all Dakota County cities and Dakota County with all-hazards emergency planning and leadership. 10 11 CITY OF ROSEMOUNT CITY OFFICIALS As of and for the Year Ended December 31, 2020 12 Term of Office Term Expires ELECTED OFFICIALS: Mayor Bill Droste Four Years December 31, 2022 Council member Tamara Block Four Years December 31, 2022 Council member Paul Essler Four Years December 31, 2022 Council member Heidi Freske Four Years December 31, 2024 Council member Jeff Weisensel Four Years December 31, 2024 APPOINTED OFFICIALS: City Administrator Logan Martin Finance Director Jeffrey A. May Assistant City Administrator Emmy Foster City Engineer/Public Works Director Brian Erickson Community Development Director Kim Lindquist Police Chief Mikael Dahlstrom Fire Chief Richard Schroeder Parks and Recreation Director Dan Schultz CONSULTANTS AND ADVISORS: Legal Kennedy & Graven Fluegel Law Firm, P.A. Auditing Baker Tilly Virchow Krause, LLP Malloy, Montague, Karnowski, Radosevich & Co., PA Fiscal Baker Tilly Municipal Advisors, LLC Ehlers & Associates, Inc. Engineering WSB & Associates Short, Elliot, Hendrickson, Inc. (SEH) KLM Engineering Bolton & Menk, Inc. ISG Oertel Architects, Ltd. Black & Veatch TKDA Barr Engineering Co. Stantec Inc. Donahue & Associates, Inc. SRF Consulting Group, Inc. Houston Engineering, Inc. Sunde Engineering, PLLC Advanced Engineering and Environmental Services, Inc. (AE2S) Emmons & Olivier Resources, Inc. Evergreen Land Services Company Braun Intertec Co. American Engineering Testing, Inc. Wold Architects and Engineers 13 INDEPENDENT AUDITOR’S REPORT To the City Council and Management City of Rosemount, Minnesota REPORT ON THE FINANCIAL STATEMENTS We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Rosemount, Minnesota (the City) as of and for the year ended December 31, 2020, and the related notes to the 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. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. (continued) C E R T I F I E D A C C O U N T A N T S P UBLIC PRINCIPALS Thomas A. Karnowski, CPA Paul A. Radosevich, CPA William J. Lauer, CPA James H. Eichten, CPA Aaron J. Nielsen, CPA Victoria L. Holinka, CPA/CMA Jaclyn M. Huegel, CPA Kalen T. Karnowski, CPA Malloy, Montague, Karnowski, Radosevich & Co., P.A. 5353 Wayzata Boulevard • Suite 410 • Minneapolis, MN 55416 • Phone: 952-545-0424 • Fax: 952-545-0569 • www.mmkr.com Standard Letterhead-r2.qxp_167639 Letterhead-RV1 9/7/18 6:34 PM Page 1 14 OPINIONS In our opinion, the financial statements referred to on the previous page present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City as of December 31, 20 20, and the respective changes in financial position, and, where applicable, cash flows thereof, 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 the management ’s discussion and analysis and the required supplementary information (RSI), 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, 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 RSI 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 introductory section, supplementary information, and statistical section, as listed in the table of contents, are presented for purposes of additional analysis and are not required parts of the basic financial statements. 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 introductory and statistical sections have 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 them. (continued) 15 OTHER REPORTING REQUIRED BY GOVERNMENT AUDITING STANDARDS In accordance with Government Auditing Standards, we have also issued our report dated May 5, 2021 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, grant agreements, and other matters. The purpose of that report is solely 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 the effectiveness of the City ’s 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. Minneapolis, Minnesota May 5, 2021 THIS PAGE INTENTIONALLY LEFT BLANK 16 MANAGEMENT'S DISCUSSION AND ANALYSIS (Unaudited) As management of the City of Rosemount (the City), 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, 2020. We encourage readers to consider the information presented here in conjunction with the letter of transmittal and the City’s financial statements following this section. Financial Highlights > The assets and deferred outflows of resources of the City exceeded its liabilities and deferred inflows of resources at the close of the most recent fiscal year by $252,383,113 (net position). Of this amount, $56,730,195 (unrestricted net position) may be used to meet the government's ongoing obligations to citizens and creditors. > The City's total net position increased by $15,039,588. This increase is partially attributable to an increase in capital assets funded by grants or developers. > At year-end, unassigned fund balance for the General Fund was $8,143,687, or 56% percent of the total General Fund expenditures and transfers out budgeted for the upcoming year. Comparison of this balance to prior years’ balances is illustrated on the table on page 22. > The City's total bonded debt decreased by $1,775,000 (approximately 18%) during the current year. 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 the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide financial statements The government-wide financial statements are designed to provide readers with a broad overview of the City's finances, in a manner similar to a private-sector business. The statement of net position presents information on all of the City's assets, liabilities, and deferred outflows/inflows of resources, with the difference 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 is improving or deteriorating. The statement of activities presents information showing how the government's net position changed during the most recent fiscal 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/vested but unused vacation and sick leave). 17 Both the government-wide financial statements distinguish functions of the City 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; culture, education and recreation; and conservation and economic development. The business- type activities of the City include water, sewer, storm water, street lighting and an arena. The government-wide financial statements include not only the City itself, but also a legally separate port authority, which functions as the economic development arm of the City, and therefore has been blended in with the primary government. The government-wide financial statements can be found on pages 26-27 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 two categories: governmental funds and proprietary 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 the near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government'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 government's near-term financing decisions. Both the governmental fund balance sheet and 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, debt service fund, capital projects fund, and the Port Authority TIF fund all of which are considered major funds. Data from the four other governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these nonmajor governmental funds is provided in the form of combining statements elsewhere in this report. The City adopts an annual appropriated budget for its general fund. A budgetary comparison schedule has been provided for the general fund to demonstrate compliance with this budget. The basic governmental fund financial statements can be found on pages 28-30 of this report. 18 Proprietary funds The City maintains two different types of proprietary funds. Enterprise 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 public utilities and ice arena operations. The internal service fund is an accounting device to accumulate and allocate costs internally among the City's various functions. The City uses its internal service fund to account for insurance premiums and deductibles and to accumulate resources for the risk of uninsured loss. Because this service predominantly benefits governmental rather than business-type functions, it has been included within governmental activities in the government-wide financial statements. 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, sewer and storm water utilities, which are considered to be major funds of the City, and combined information on the street lighting utility and ice arena funds, which are considered non-major funds. Individual fund data for each of these nonmajor proprietary funds is provided in the form of combining statements elsewhere in this report. The internal service fund is also presented separately in the proprietary fund financial statements. The basic proprietary fund financial statements can be found on pages 31-34 of this report. Notes to the 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 the financial statements can be found on pages 35-73 of this report. Other information Required supplementary information is included on pages 74-88. The combining statements referred to earlier in connection with nonmajor governmental funds are presented following the basic financial statements. Combining and individual fund statements and schedules can be found on pages 89-96 of this report. Lastly, the statistical section is included on pages 97-115. Government-wide Financial Analysis As noted earlier, net position may serve over time as a useful indicator of a government's financial position. In the case of the City, assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $252,383,113 at the close of the most recent fiscal year. The largest portion of the City's net position (75 percent) reflects its investment in capital assets (e.g., land, buildings, machinery and equipment, infrastructure) less any related debt used to acquire those assets that is 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's investment in 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. 19 City’s Statement of Net Position Governmental Business- Type 2020 Governmental Business- Type 2019 Activities Activities Totals Activities Activities Totals Current and other assets $ 43,947,434 $ 34,218,354 $ 78,165,788 $ 36,705,733 $ 30,785,158 $ 67,490,891 Capital assets 98,584,304 100,394,932 198,979,236 95,172,935 99,193,708 194,366,643 Total assets 142,531,738 134,613,286 277,145,024 131,878,668 129,978,866 261,857,534 Deferred outflows of resources 2,055,460 164,328 2,219,788 3,027,976 137,656 3,165,632 Long-term liabilities outstanding 16,640,240 2,534,792 19,175,032 16,310,551 2,473,251 18,783,802 Other liabilities 3,226,475 240,101 3,466,576 1,983,226 599,617 2,582,843 Total liabilities 19,866,715 2,774,893 22,641,608 18,293,777 3,072,868 21,366,645 Deferred inflows of resources 4,299,680 40,411 4,340,091 6,158,533 154,463 6,312,996 Net position: Net investment in capital assets 89,980,056 99,300,829 189,280,885 85,993,734 98,007,299 184,001,033 Restricted 6,372,033 - 6,372,033 6,255,555 - 6,255,555 Unrestricted 24,068,714 32,661,481 56,730,195 18,205,045 28,881,892 47,086,937 Total net position $ 120,420,803 $ 131,962,310 $ 252,383,113 $ 110,454,334 $ 126,889,191 $ 237,343,525 An additional portion of the City’s net position ($6,372,033 or 3%) represents resources that are subject to external restrictions on how they may be used. The remaining balance representing unrestricted net position ($56,730,195) may be used to meet the government’s ongoing obligations to citizens and creditors. At the end of the current fiscal year, the City is able to report positive balances in all three categories of net position, both for the government as a whole, as well as for its separate governmental and business- type activities. Governmental activities Governmental activities increased the City’s net position by $9,966,469 accounting for approximately 66% of the total growth in the government’s net position. This compares to an increase (from governmental activities) of $7,654,696 in 2019. Net transfers to governmental activities from business- type activities decreased $1,401,694 from 2019. Revenues increased by approximately $7,012,000 mainly related to capital grants and contributions and unrelated grants in 2020. Total expenses increased from 2019 and the net effect was the increase in net position of $9,966,469. Business-type activities Business-type activities increased the City’s net position by $5,073,119 accounting for approximately 34% of the total growth in the government’s net position. This compares to an increase of $1,917,057 in 2019. The primary reason for the change in net position compared to the prior year change was due to increases in net transfers to business-type activities from governmental activities and charges for services. Net transfers from business-type activities to governmental activities were $1,401,694 less than the prior year. Total expenses increased from 2019 and the net effect was the increase in net position of $5,073,119. 20 Elements of these changes are as follows: City’s Changes in Net Position Governmental Business- Type 2020 Governmental Business- Type 2019 Activities Activities Totals Activities Activities Totals Revenues: Program revenues: Charges for services $ 5,705,396 $ 10,555,980 $ 16,261,376 $ 5,370,058 $ 7,922,139 $ 13,292,197 Operating grants and contributions 755,114 10,860 765,974 749,242 4,267 753,509 Capital grants and contributions 8,197,794 1,445,403 9,643,197 3,941,424 2,132,156 6,073,580 General revenues: Property taxes 13,957,333 - 13,957,333 13,153,531 - 13,153,531 Other taxes 400,076 - 400,076 411,423 - 411,423 Intergovernmental revenues not restricted to specific programs 1,833,933 - 1,833,933 - - - Interest earnings 390,959 425,709 816,668 547,947 628,194 1,176,141 Change in fair value of investments 104,408 208,847 313,255 119,787 67,467 187,254 Gain on sale of capital assets 25,155 - 25,155 33,783 - 33,783 Miscellaneous 49,133 - 49,133 79,694 - 79,694 Total revenues 31,419,301 12,646,799 44,066,100 24,406,889 10,754,223 35,161,112 Expenses: General government 4,972,215 - 4,972,215 3,826,860 - 3,826,860 Public safety 5,259,828 - 5,259,828 5,332,313 - 5,332,313 Public works 7,089,996 - 7,089,996 5,692,171 - 5,692,171 Culture, education and recreation 1,982,191 - 1,982,191 2,217,403 - 2,217,403 Conservation and economic development 1,160,449 - 1,160,449 56,611 - 56,611 Interest and fiscal charges 241,623 - 241,623 281,999 - 281,999 Water - 2,381,646 2,381,646 - 2,845,741 2,845,741 Sewer - 3,309,194 3,309,194 - 3,053,021 3,053,021 Storm water - 1,935,245 1,935,245 - 1,732,753 1,732,753 Street lighting - 193,114 193,114 - - - Arena - 501,011 501,011 - 550,487 550,487 Total expenses 20,706,302 8,320,210 29,026,512 17,407,357 8,182,002 25,589,359 Increase in net position before transfers 10,712,999 4,326,589 15,039,588 6,999,532 2,572,221 9,571,753 Transfers (746,530) 746,530 - 655,164 (655,164) - Increase in net position 9,966,469 5,073,119 15,039,588 7,654,696 1,917,057 9,571,753 Net position – Beginning of Year 110,454,334 126,889,191 237,343,525 102,799,638 124,972,134 227,771,772 Net position – End of Year $ 120,420,803 $ 131,962,310 $ 252,383,113 $ 110,454,334 $ 126,889,191 $ 237,343,525 21 Expenses and Program Revenues – Governmental Activities Expenses and Program Revenues – Business-Type Activities Financial Analysis of the Government’s Funds As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance- related legal requirements. 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 government’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 $35,292,746, an increase of $5,437,620 in comparison with the prior year. $8,143,687 constitutes unassigned fund balance, which is available for spending at the government’s discretion (this amount is entirely in the General Fund and is typically available to meet cash flow needs). A small amount ($455) is classified as nonspendable in regards to prepaid items, $4,563,428 is classified as restricted to meet debt service requirements, restricted for the Port Authority TIF, or relates to donations for capital projects, and the remainder of the fund balance is considered to be committed or assigned for specific purposes and unavailable for discretionary spending. 0 1 2 3 4 5 6 7 8 9 General government Public safety Public works Culture, education, and recreation Conservation and economic development Interest and fiscal charges Millions Expenses Revenue 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 Water Sewer Storm water Street lighting Arena Millions Expenses Revenue 22 The General Fund is the chief operating fund of the City. At the end of the current fiscal year, unassigned fund balance of the General Fund was $8,143,687, while total fund balance reached $12,293,930. The following table shows year-end General Fund unassigned fund balance as compared to the adopted expenditure and other financing uses budget of the following year: General Fund Unassigned Fund Balance Year Budget Amount Percent of Next Budget 2011 $ 10,480,400 $ 5,700,071 54% 2012 10,531,800 5,905,056 55% 2013 10,728,600 6,001,628 54% 2014 11,098,600 6,288,615 55% 2015 11,423,500 6,506,697 55% 2016 11,835,528 6,918,833 56% 2017 12,392,700 7,333,743 56% 2018 13,086,400 7,503,588 55% 2019 13,702,700 7,893,190 55% 2020 14,307,500 8,143,687 56% 2021 14,624,000 During the current fiscal year, unassigned fund balance in the General Fund increased by $250,497. The increase was intentional, as the City has determined, through the adoption of a formal Fund Balance Policy, it would like to maintain an unassigned fund balance of 55 percent of the next General Fund operating expenditure and other financing uses budget. Forty to fifty percent normally provides adequate working capital to finance General Fund operations until property taxes and state aids are received. The desired unassigned fund balance level also provides a certain amount of comfort that unforeseen emergencies can be addressed without causing an immediate financial crisis. As of December 31, 2020, 100% percent of the unassigned fund balance of the General Fund is available to meet working capital needs. The debt service fund balance decreased by $148,637 due to an increase in principal retirement and a decrease in taxes. The capital projects fund balance increased by $3,987,984 due to revenues and other financing sources exceeding expenditures and other financing uses in the current year. The Port Authority TIF fund balance decreased by $219,717 due to increase in conservation and economic development expenditures. 23 Revenues by Source – Governmental Funds Proprietary funds The City’s proprietary funds provide the same type of information found in the government-wide statements, but in more detail. Unrestricted net position of the major utility funds at the end of the year amounted to $32,194,756 while the street lighting fund had an unrestricted net position amounting to $57,069 and the arena fund had an unrestricted net position amounting to $409,656. The increase in total net position for the major utility funds was $5,074,634 after $3,658,608 from private entities (i.e. developers) and governmental funds, as well as, net transfers out of $1,596,794. The increase in total net position for the street lighting fund was $57,069 which included special assessments of $3,620. The decrease in total net position for the arena fund was $58,584, which included net transfers out of $126,500. Revenues by Source – Proprietary Funds Taxes 46.0% Intergovernmental 16.4% Public charges for services 15.0% Licenses and permits 3.6% Fines and forfeitures 0.2% Special assessments 9.1% Investment income and other 9.7% Charges for services 61.1% Water meters 1.0% Connection fees 28.5% Intergovernmental 0.1% Investment and miscellaneous income 6.2% Surcharges and penalties 3.1% 24 General Fund Budgetary Highlights There were a few slight variances between final budgeted revenues and actual amounts. License and permit revenues exceeded budget by approximately $300,000 because of more activity than expected. Public charges for services were under budget by approximately $123,000 but this was due mostly to the decrease in activity in the culture, education, and recreation area due to the pandemic. Without this decrease the overall impact to the budget would have been a modest increase due to higher than expected collections for development related revenues. State aid intergovernmental revenues exceeded budget by approximately $51,000 mainly due to a larger than expected payment for Police State Aid and a larger than expected payment for MSA maintenance. Interest revenues were approximately $116,000 higher than budgeted because of improving market conditions early in the year. It is anticipated that the interest numbers will decrease significantly in 2021 because of the current market conditions. Fines were under budget by approximately $19,000 mainly due to the effects of the pandemic. All other revenue areas experienced either small surpluses or deficits that led to the final surplus amount. Overall, total expenditures and other financing uses were right at budget before the adjustment to meet the 55% fund balance number with most departments being slightly less than budget and a few being just slightly over budget. The change between the original and final budget included minor Council approved adjustments primarily for donations. The final budget also included adjustments for Federal monies received as part of the CARES distribution to local governments. The City of Rosemount received approximately $1,834,000 in Federal funds as part of this program. All those funds are reflected in the final budget for 2020. Capital Asset and Debt Administration Capital assets The City’s investment in capital assets for its governmental and business-type activities as of December 31, 2020, amounts to $198,979,236 (net of accumulated depreciation). This investment in capital assets includes land, buildings and structures, machinery and equipment, water, sewer, and storm water systems, infrastructure and construction in progress. City of Rosemount’s Capital Assets (net of depreciation) Governmental Business-Type Activities Activities Totals Land $ 7,886,846 $ 3,501,877 $ 11,388,723 Land improvements (not depreciable) 4,790,045 - 4,790,045 Land improvements (depreciable) 5,128,173 - 5,128,173 Buildings 18,455,360 12,110,980 30,566,340 Machinery and equipment 14,934,239 4,586,228 19,520,467 Infrastructure: Other 209,037 - 209,037 Roads 65,049,592 - 65,049,592 Bridges 2,034,591 - 2,034,591 Parking lots 1,358,831 - 1,358,831 Mains and lines and other improvements - 146,923,101 146,923,101 Construction in progress 12,075,912 755,094 12,831,006 Accumulated depreciation (33,338,322) (67,482,348) (100,820,670) Total capital assets $ 98,584,304 $ 100,394,932 $ 198,979,236 Additional information on the City's capital assets can be found in Note 4. on pages 49-51 of this report. 25 Long-term debt At the end of the current fiscal year, the City had total bonded debt outstanding of $8,030,000 (including debt recorded in the Port Authority). Of this amount, $1,775,000 was for general obligation improvement debt which has financed special assessment construction as part the continuing development within the City. An additional $4,495,000 was general obligation debt issued by the Port Authority which financed the City's economic development and redevelopment programs. Another $965,000 was general obligation revenue bond debt issued to add to and improve the water utility system within the City. The remaining $795,000 was general obligation refunding debt (for Fire Station 2). The City's total bonded debt decreased by $1,775,000 (approximately 18%) during the current year. Cities in Minnesota may issue general obligation debt up to a maximum of three percent of the total estimated market value of property within the City, per state statutes. The current debt limit for the City is $90,226,513. Of the City's $8,030,000 in outstanding general obligation debt at the current fiscal year end, $795,000 is subject to the restrictions placed by state statute. The City received a S&P Global Ratings bond rating of AA+ for bonds issued in 2018, and no new bonds were issued in 2020. This rating amounts to a rating upgrade from our Aa2 Moody’s rating for previously issued debt. These excellent ratings have had a positive effect on the sale of the City’s bonds. Additional information on the City's long-term debt can be found in Note 4. on pages 52-55 of this report. Economic Factors > Dakota County's unemployment rate ended the year at 4.3 percent, which compares favorably with the state unemployment rate of 4.6 percent, and the national unemployment rate of 6.5 percent. > City building permits were up significantly in quantity and in value in 2020, as compared to 2019. A total of 4,426 permits with a total valuation of $105,548,812 were issued in 2020. Building permits for 2021 are on track to be at similar levels as 2020. > In December 2019, a novel strain of coronavirus was reported in Wuhan, Hubei province, China. For all of 2020, the virus, SARS-CoV-2, and resulting disease, COVID-19, spread to the United States, including to areas impacting the City. The City’s evaluation of the effects of these events is ongoing; however, at the current time there has not been a significant impact on operations in 2020 or 2021 other than in the area of Parks & Recreation. The extent of the impact of COVID-19 on the City’s operational and financial performance going forward will depend on future developments, including the duration and spread of the outbreak and related governmental or other regulatory actions. Requests for Information This financial report is designed to provide a general overview of the City's finances for all those with an interest in the government's finances. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the Finance Director, City of Rosemount, 2875 145th Street West, Rosemount, Minnesota 55068-4997. Business- Governmental Type Activities Activities Totals Assets Cash and investments 39,495,744$ 32,284,386$ 71,780,130$ Receivables: Taxes 732,113 - 732,113 Delinquent taxes 108,682 - 108,682 Accounts 325,092 1,463,940 1,789,032 Special assessments 1,292,296 341,130 1,633,426 Due from other governmental units 18,767 - 18,767 Prepaid items 110,595 128,898 239,493 Net pension asset 1,864,145 - 1,864,145 Capital assets: Land 7,886,846 3,501,877 11,388,723 Nondepreciable land improvements 4,790,045 - 4,790,045 Construction in progress 12,075,912 755,094 12,831,006 Other capital assets, net of depreciation/amortization 73,831,501 96,137,961 169,969,462 Total assets 142,531,738 134,613,286 277,145,024 Deferred Outflows of Resources Other postemployment benefit related amounts 40,327 5,319 45,646 Pension related amounts 2,015,133 159,009 2,174,142 Total deferred outflows 2,055,460 164,328 2,219,788 Liabilities Accounts payable 1,988,213 176,244 2,164,457 Accrued payroll and payroll taxes 104,397 52,340 156,737 Other accrued liabilities and deposits 1,133,865 11,517 1,145,382 Noncurrent liabilities: Due within one year 1,772,829 277,565 2,050,394 Due in more than one year 8,136,399 1,041,250 9,177,649 Net pension liability 6,060,881 1,127,664 7,188,545 Other postemployment benefits liability 670,131 88,313 758,444 Total liabilities 19,866,715 2,774,893 22,641,608 Deferred Inflows of Resources Contributions received for subsequent year 1,761,057 - 1,761,057 Pension related amounts 2,538,623 40,411 2,579,034 Total deferred inflows of resources 4,299,680 40,411 4,340,091 Net Position Net investment in capital assets 89,980,056 99,300,829 189,280,885 Restricted for debt service 4,420,693 - 4,420,693 Restricted for pensions 1,864,145 - 1,864,145 Restricted PEG fees 87,195 - 87,195 Unrestricted 24,068,714 32,661,481 56,730,195 Total net position 120,420,803$ 131,962,310$ 252,383,113$ City of Rosemount Statement of Net Position December 31, 2020 See notes to financial statements 26 Operating CapitalCharges for Grants and Grants and Governmental Business-TypeFunctions/Programs Expenses Services Contributions Contributions ActivitiesActivitiesTotalsPrimary GovernmentGovernmental activities:General government4,972,215$ 4,083,135$ -$ -$ (889,080)$ -$ (889,080)$ Public safety 5,259,828 109,511 383,354 18,553 (4,748,410) - (4,748,410) Public works7,089,996 138,741 330,711 8,022,818 1,402,274 - 1,402,274 Culture, education and recreation1,982,191 1,374,009 2,710 155,223 (450,249) - (450,249) Conservation and economic development1,160,449 - 38,339 1,200 (1,120,910) - (1,120,910) Interest and fiscal charges241,623 - - - (241,623) - (241,623) Total governmental activities20,706,302 5,705,396 755,114 8,197,794 (6,047,998) - (6,047,998) Business-type activities:Water2,381,646 4,438,036 6,302 230,905 - 2,293,597 2,293,597 Sewer3,309,194 3,004,901 926 599,016 - 295,649 295,649 Storm water1,935,245 2,553,747 3,289 611,862 - 1,233,653 1,233,653 Street lighting193,114 246,554 - 3,620 - 57,060 57,060 Arena501,011 312,742 343 - - (187,926) (187,926) Total business-type activities8,320,210 10,555,980 10,860 1,445,403 - 3,692,033 3,692,033 Total primary government29,026,512$ 16,261,376$ 765,974$ 9,643,197$ (6,047,998) 3,692,033 (2,355,965) General revenues:Taxes:Property taxes, levied for general purposes12,816,806 - 12,816,806 Property taxes, levied for debt service1,140,527 - 1,140,527 Other taxes400,076 - 400,076 Intergovernmental revenues not restricted tospecific programs1,833,933 - 1,833,933 Interest earnings390,959 425,709 816,668 Change in fair value of investments104,408 208,847 313,255 Gain on sale of capital assets25,155 - 25,155 Miscellaneous49,133 - 49,133 Transfers(746,530) 746,530 - Total general revenues and transfers16,014,467 1,381,086 17,395,553 Change in net position9,966,469 5,073,119 15,039,588 Net Position, Beginning110,454,334 126,889,191 237,343,525 Net Position, Ending120,420,803$ 131,962,310$ 252,383,113$ City of RosemountStatement of ActivitiesYear Ended December 31, 2020Program RevenuesPrimary GovernmentChanges in Net PositionNet (Expense) Revenue and See notes to financial statements27 Port Nonmajor Total Capital Authority Governmental Governmental General Debt Service Projects TIF Funds Funds Assets Cash and investments 12,804,760$ 2,300,537$ 21,190,123$ 2,171,242$ 703,697$ 39,170,359$ Receivables from: Taxes 836,341 - - 4,454 - 840,795 Accounts 49,546 - 268,458 - 7,088 325,092 Special assessments 13,617 44,773 1,232,810 - - 1,291,200 Delinquent special assessments - - 1,096 - - 1,096 Due from other governmental units 18,767 - - - - 18,767 Prepaid items - - - - 455 455 Total assets 13,723,031$ 2,345,310$ 22,692,487$ 2,175,696$ 711,240$ 41,647,764$ Liabilities, Deferred Inflows of Resources and Fund Balances Liabilities Accounts payable 285,527$ -$ 1,638,036$ -$ 32,640$ 1,956,203$ Accrued payroll and payroll taxes 103,464 - - - 933 104,397 Deposits payable 801,155 - 232,397 - - 1,033,552 Total liabilities 1,190,146 - 1,870,433 - 33,573 3,094,152 Deferred Inflows of Resources Unavailable revenue 227,083 44,773 1,227,953 - - 1,499,809 Contributions received for subsequent year 11,872 - 1,749,185 - - 1,761,057 Total deferred inflows of resources 238,955 44,773 2,977,138 - - 3,260,866 Fund Balances Nonspendable - - - - 455 455 Restricted - 2,300,537 - 2,175,696 87,195 4,563,428 Committed - - - - 590,017 590,017 Assigned 4,150,243 - 17,844,916 - - 21,995,159 Unassigned 8,143,687 - - - - 8,143,687 Total fund balances 12,293,930 2,300,537 17,844,916 2,175,696 677,667 35,292,746 Total liabilities, deferred inflows of resources and fund balances 13,723,031$ 2,345,310$ 22,692,487$ 2,175,696$ 711,240$ Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds.98,584,304 Some receivables that are not currently available are reported as deferred inflows of resources in the fund financial statements but are recognized as revenue when earned in the government-wide statements.1,499,809 Internal service funds are reported in the statement of net position as governmental activities.403,515 The net pension asset does not relate to current financial resources and is not reported in the governmental funds.1,864,145 The net pension liability does not relate to current financial resources and is not reported in the governmental funds.(6,060,881) Deferred outflows of resources related to pensions do not relate to current financial resources and is not reported in the governmental funds.2,015,133 Deferred inflows of resources related to pensions do not relate to current financial resources and is not reported in the governmental funds.(2,538,623) The other postemployment benefits liability does not relate to current financial resources and is not reported in the governmental funds.(670,131) Deferred outflows of resources related to other postemployment benefits do not relate to current financial resources and is not reported in the governmental funds.40,327 Some liabilities, including long-term debt, are not due and payable in the current period and, therefore, are not reported in the funds. See Note 2.(10,009,541) Net position of governmental activities 120,420,803$ City of Rosemount Balance Sheet - Governmental Funds December 31, 2020 See notes to financial statements 28 Port Nonmajor Total Capital Authority Governmental Governmental General Debt Service Projects TIF Funds Funds Revenues Taxes 11,133,030$ 180,941$ 1,517,897$ 959,586$ 140,956$ 13,932,410$ Intergovernmental 2,589,046 - 2,376,263 - - 4,965,309 Public charges for services 1,237,405 - 3,286,705 - 21,871 4,545,981 Licenses and permits 1,098,631 - - - - 1,098,631 Fines and forfeitures 75,452 - - - - 75,452 Special assessments 142 998,854 1,743,177 - - 2,742,173 Interest earnings 179,703 53,099 124,215 29,602 - 386,619 Change in fair value of investments 86,846 - 17,562 - - 104,408 Donations/contributions - - 1,479 - - 1,479 Miscellaneous 34,186 - 2,381,216 - 4,248 2,419,650 Total revenues 16,434,441 1,232,894 11,448,514 989,188 167,075 30,272,112 Expenditures Current: General government 4,110,524 - 7,500 160,787 - 4,278,811 Public safety 4,954,705 - - - - 4,954,705 Public works 3,860,813 - - - 556 3,861,369 Culture, education and recreation 1,515,223 - - - 18,865 1,534,088 Conservation and economic development - - - 600,000 79,554 679,554 Capital outlay - - 10,302,698 - - 10,302,698 Debt service: Principal retirement - 1,345,000 99,931 285,000 - 1,729,931 Interest and fiscal charges - 107,531 20,419 163,118 - 291,068 Total expenditures 14,441,265 1,452,531 10,430,548 1,208,905 98,975 27,632,224 Excess (deficiency) of revenues over expenditures 1,993,176 (219,637) 1,017,966 (219,717) 68,100 2,639,888 Other Financing Sources (Uses) Lease issuance - - 1,182,844 - - 1,182,844 Sale of capital assets - - 129,594 - 15,000 144,594 Transfers in 6,714 71,000 1,660,868 - - 1,738,582 Transfers out (265,000) - (3,288) - - (268,288) Total other financing sources (uses)(258,286) 71,000 2,970,018 - 15,000 2,797,732 Net change in fund balances 1,734,890 (148,637) 3,987,984 (219,717) 83,100 5,437,620 Fund Balances, Beginning 10,559,040 2,449,174 13,856,932 2,395,413 594,567 29,855,126 Fund Balances, Ending 12,293,930$ 2,300,537$ 17,844,916$ 2,175,696$ 677,667$ 35,292,746$ City of Rosemount Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds Year Ended December 31, 2020 See notes to financial statements 29 City of Rosemount Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities Year Ended December 31, 2020 Net Change in Fund Balances, Total Governmental Funds 5,437,620$ Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of net position the cost of these assets is capitalized and they are depreciated over their estimated useful lives with depreciation expense reported in the statement of activities. Capital outlay is reported as an expenditure in the fund financial statements but is capitalized in the government-wide financial statements 10,302,698 Some items reported as capital outlay but not capitalized (2,101,958) Capital contributions from external parties 386,714 Depreciation is reported in the government-wide statements (2,694,083) Utility infrastructure constructed by capital projects funds not reported as governmental activities (2,216,824) A gain or loss on the disposal of capital assets, including the difference between carrying value and any related sale proceeds, is included in the change in net position. However, only the sale proceeds are included in the change in fund balances.(265,178) Internal service funds are reported in the statement of activities.18,371 Receivables not currently available are reported as unavailable revenue in the fund financial statements but are recognized as revenue when earned in the government-wide financial statements.310,087 Issuing debt provides current financial resources to governmental funds, but issuing debt increases long-term liabilities in the statement of net position. This is the amount of debt issued during the year.(1,182,844) Repayment of debt principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net position. This is the amount of principal payments paid.1,729,931 Governmental funds report the effect of premiums and discounts, and similar items when debt is first issued, whereas these amounts were amortized in the statement of activities.27,866 Some expenses in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in the governmental funds. This is the change in the following liabilities. Compensated absences (200,812) Accrued interest on debt 21,582 Net pension liability (766,878) Net other post employment benefits liability 63,048 Net pension asset 549,484 Deferred outflows of resources related to pensions (972,416) Deferred inflows of resources related to pensions 1,520,161 Deferred outflows of resources related to other post employment benefits (100) Change in Net Position of Governmental Activities 9,966,469$ See notes to financial statements 30 Governmental Activities - Storm Nonmajor Internal Water Sewer Water Funds Totals Service Fund Assets Current assets: Cash and investments 14,169,550$ 7,653,100$ 9,916,372$ 545,364$ 32,284,386$ 325,385$ Accounts receivable 491,077 538,696 320,685 113,482 1,463,940 - Special assessments receivable 113,791 86,640 137,146 3,553 341,130 - Prepaid items 6,404 117,469 1,433 3,592 128,898 110,140 Total current assets 14,780,822 8,395,905 10,375,636 665,991 34,218,354 435,525 Noncurrent assets: Property and equipment: Land 1,008,628 547,158 1,946,091 - 3,501,877 - Construction in progress 181,450 - 573,644 - 755,094 - Buildings 7,820,143 401,414 1,489,523 2,399,900 12,110,980 - Machinery and equipment 2,525,085 888,684 970,880 201,579 4,586,228 - Mains and lines 25,227,291 22,379,962 32,827,182 - 80,434,435 - Other improvements 17,026,077 36,927,460 12,535,129 - 66,488,666 - Less accumulated depreciation (19,083,205) (33,636,252) (13,415,052) (1,347,839) (67,482,348) - Net property and equipment 34,705,469 27,508,426 36,927,397 1,253,640 100,394,932 - Total assets 49,486,291 35,904,331 47,303,033 1,919,631 134,613,286 435,525 Deferred Outflows of Resources Other postemployment benefit related amounts 1,804 1,793 937 785 5,319 - Pension related amounts 47,983 47,592 41,668 21,766 159,009 - Total deferred outflows 49,787 49,385 42,605 22,551 164,328 - Liabilities Current liabilities: Accounts payable 103,123 11,093 45,842 16,186 176,244 32,010 Accrued payroll and payroll taxes 38,485 5,826 5,804 2,225 52,340 - Accrued interest 11,517 - - - 11,517 - Current portion of long term obligations 192,291 36,649 34,100 14,525 277,565 - Total current liabilities 345,416 53,568 85,746 32,936 517,666 32,010 Noncurrent liabilities: Net pension liability 346,577 342,880 286,984 151,223 1,127,664 - General obligation debt 864,376 - - - 864,376 - Lease obligations 25,022 17,501 17,501 - 60,024 - Other postemployment benefits liability 30,191 30,023 14,808 13,291 88,313 - Accrued compensated absences 34,625 34,625 31,864 15,736 116,850 - Total noncurrent liabilities 1,300,791 425,029 351,157 180,250 2,257,227 - Total liabilities 1,646,207 478,597 436,903 213,186 2,774,893 32,010 Deferred Inflows of Resources Pension related amounts 14,640 14,824 2,316 8,631 40,411 - Net Position Net investment in capital assets 33,655,742 27,486,238 36,905,209 1,253,640 99,300,829 - Unrestricted 14,219,489 7,974,057 10,001,210 466,725 32,661,481 403,515 Total net position 47,875,231$ 35,460,295$ 46,906,419$ 1,720,365$ 131,962,310$ 403,515$ City of Rosemount Statement of Net Position - Proprietary Funds December 31, 2020 Business-Type Activities - Enterprise Funds See notes to financial statements 31 Governmental Activities - Storm Nonmajor Internal Water Sewer Water Funds Totals Service Funds Operating Revenues Charges for services 2,365,681$ 2,450,239$ 1,471,219$ 558,521$ 6,845,660$ -$ Surcharges and penalties 331,578 7,703 3,118 775 343,174 - Water meters 117,612 - - - 117,612 - Miscellaneous - - 51,621 - 51,621 - Total operating revenues 2,814,871 2,457,942 1,525,958 559,296 7,358,067 - Operating Expenses Personnel services 514,293 501,692 568,585 194,850 1,779,420 - Supplies 217,036 18,296 21,370 15,102 271,804 2,500 Professional services and charges 169,632 1,722 94,037 42,323 307,714 20,078 Other services and charges 540,390 446,681 453,391 378,958 1,819,420 384,281 Metro sewer charges - 1,386,562 - - 1,386,562 - Depreciation 918,915 954,124 797,745 62,892 2,733,676 - Total operating expenses 2,360,266 3,309,077 1,935,128 694,125 8,298,596 406,859 Operating income (loss)454,605 (851,135) (409,170) (134,829) (940,529) (406,859) Nonoperating Revenues (Expenses) Connection fees 1,623,165 546,959 1,027,789 - 3,197,913 - Taxes - - - - - 425,000 Intergovernmental 6,302 926 3,289 343 10,860 - Interest earnings 187,045 104,239 131,574 2,851 425,709 230 Change in fair value of investments 94,366 48,795 65,686 - 208,847 - Loss from disposal of capital assets (378) - - - (378) - Interest expense and fiscal agent fees (21,003) (117) (117) - (21,237) - Total nonoperating revenues 1,889,497 700,802 1,228,221 3,194 3,821,714 425,230 Income (loss) before contributions and transfers 2,344,102 (150,333) 819,051 (131,635) 2,881,185 18,371 Capital contributions, including special assessments 869,705 1,193,016 1,595,887 3,620 3,662,228 - Transfers in - - 74 130,000 130,074 - Transfers out (710,354) (388,958) (497,556) (3,500) (1,600,368) - Change in net position 2,503,453 653,725 1,917,456 (1,515) 5,073,119 18,371 Total Net Position, Beginning 45,371,778 34,806,570 44,988,963 1,721,880 126,889,191 385,144 Total Net Position, Ending 47,875,231$ 35,460,295$ 46,906,419$ 1,720,365$ 131,962,310$ 403,515$ Business-Type Activities - Enterprise Funds City of Rosemount Statement of Revenues, Expenses and Changes in Net Position - Proprietary Funds Year Ended December 31, 2020 See notes to financial statements 32 GovernmentalActivities - Storm Nonmajor Internal Water Sewer Water Funds Totals Service FundCash Flows From Operating ActivitiesCash received from customers4,380,833$ 2,917,464$ 2,524,615$ 496,691$ 10,319,603$ -$ Cash paid to suppliers for goods and services(897,869) (1,915,393) (480,048) (435,164) (3,728,474) (178,150) Cash paid for employees(514,293) (501,692) (568,585) (194,850) (1,779,420) - Net cash flows from (used by) operating activities2,968,671 500,379 1,475,982 (133,323) 4,811,709 (178,150) Cash Flows From Noncapital Financing ActivitiesProperty taxes- - - - - 425,000 Repayment of advance to other governmental units- - 54,483 - 54,483 - Transfers from other funds- - 74 130,000 130,074 - Transfers to other funds(710,354) (388,958) (497,556) (3,500) (1,600,368) - Net cash flows from (used by) noncapital financing activities(710,354) (388,958) (442,999) 126,500 (1,415,811) 425,000 Cash Flows From Investing ActivitiesMarketable securities purchased(8,005,516) (2,721,205) (5,090,314) (150,000) (15,967,035) - Marketable securities sold10,383,764 5,251,570 6,644,305 100,000 22,379,639 - Interest earnings199,053 113,130 147,517 2,851 462,551 230 Net cash flows from (used by) investing activities2,577,301 2,643,495 1,701,508 (47,149) 6,875,155 230 Cash Flows From Capital and Related Financing ActivitiesDebt retired(151,910) (1,269) (1,269) - (154,448) - Interest paid(30,441) (117) (117) - (30,675) - Acquisition and construction of capital assets(58,799) (111,997) (632,225) (24,231) (827,252) - Contribution received for construction75,629 78,738 54,033 67 208,467 - Net cash flows from (used by) capital and related financing activities(165,521) (34,645) (579,578) (24,164) (803,908) - Net increase (decrease) in cash and cash equivalents4,670,097 2,720,271 2,154,913 (78,136) 9,467,145 247,080 Cash and Cash Equivalents, Beginning2,724,205 1,629,033 1,809,773 473,500 6,636,511 78,305 Cash and Cash Equivalents, Ending7,394,302$ 4,349,304$ 3,964,686$ 395,364$ 16,103,656$ 325,385$ Reconciliation of Cash and Cash EquivalentsCash and investments per statement of net position14,169,550$ 7,653,100$ 9,916,372$ 545,364$ 32,284,386$ 325,385$ Less noncash equivalents(6,775,248) (3,303,796) (5,951,686) (150,000) (16,180,730) - Cash and cash equivalents per statement of cash flows7,394,302$ 4,349,304$ 3,964,686$ 395,364$ 16,103,656$ 325,385$ City of RosemountStatement of Cash Flows - Proprietary FundsYear Ended December 31, 2020Business-Type Activities - Enterprise FundsSee notes to financial statements33 GovernmentalActivities - Storm Nonmajor Internal Water Sewer Water Funds Totals Service FundCity of RosemountStatement of Cash Flows - Proprietary FundsYear Ended December 31, 2020Business-Type Activities - Enterprise FundsReconciliation of Operating Income (Loss) to Net CashFlows From (Used by) Operating ActivitiesOperating income (loss)454,605$ (851,135)$ (409,170)$ (134,829)$ (940,529)$ (406,859)$ Nonoperating income1,629,467 547,885 1,031,078 343 3,208,773 - Adjustments to reconcile operating (loss) to net cash flowsfrom (used by) operating activities:Noncash items included in income:Depreciation918,915 954,124 797,745 62,892 2,733,676 - Change in assets and liabilities:Accounts receivable(63,155) (88,363) (32,421) (62,948) (246,887) - Prepaid items12,458 18,534 10,346 5,092 46,430 197,667 Accounts payable42,129 (50,390) (12,544) 3,716 (17,089) 31,042 Other current liabilities6,998 3,489 3,085 640 14,212 - Accrued liabilities183 412 12,143 4,197 16,935 - Other post employment benefits related deferrals and liabilities(2,581) (2,555) (2,314) (946) (8,396) - Pension related deferrals and liabilities(30,348) (31,622) 78,034 (11,480) 4,584 - Net cash flows from (used by) operating activities2,968,671$ 500,379$ 1,475,982$ (133,323)$ 4,811,709$ (178,150)$ Noncash Capital, Investing and Financing ActivitiesThe Water Utility received contributed plant of $800,373 during the year. The Sewer Utility received contributed plant of $1,111,678 during the year. The Storm Water Utility received contributed plant of $1,481,035 during the year.Construction in progress included in the Water Utility accounts payable was $39,071. Construction in progress included in the Storm Water Utility accounts payable was $316,360.Unrealized gain on investments were $94,366 for the Water Utility, $48,795 for the Sewer Utility and $65,686 for the Storm Water Utility for the year.See notes to financial statements34 City of Rosemount Index to Notes to Financial Statements December 31, 2020 Page 1. Summary of Significant Accounting Policies 35 Reporting Entity 35 Government-Wide and Fund Financial Statements 36 Measurement Focus, Basis of Accounting and Financial Statement Presentation 38 Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources and Net Position or Equity 39 Deposits and Investments 39 Receivables 40 Inventories and Prepaid Items 41 Capital Assets 41 Deferred Outflows of Resources 42 Compensated Absences 42 Long-Term Obligations/Conduit Debt 42 Deferred Inflows of Resources 42 Equity Classifications 43 Pension 44 2. Reconciliation of Government-Wide and Fund Financial Statements 44 Explanation of Certain Differences Between the Governmental Funds Balance Sheet and the Statement of Net Position 44 3. Stewardship, Compliance and Accountability 45 Budgetary Information 45 Excess Expenditures Over Appropriations 45 4. Detailed Notes on All Activities and Funds 45 Deposits and Investments 45 Receivables 48 Capital Assets 49 Interfund Transfers 51 Long-Term Obligations 52 Lease Disclosures 54 Net Position/Fund Balances 55 5. Other Information 57 Employees' Retirement System 57 Risk Management 69 Commitments and Contingencies 69 Postemployment Benefits Other Than Pensions 71 Effect of New Accounting Standards on Current-Period Financial Statements 73 City of Rosemount Notes to Financial Statements December 31, 2020 35 1. Summary of Significant Accounting Policies The City of Rosemount, Minnesota (the City) was formed and operates pursuant to applicable Minnesota laws and statutes. The governing body consists of a five-member City Council elected at large by voters of the City. City Council members serve four-year staggered terms and the mayor serves a four-year term coinciding with the terms of two of the Council members. Elections take place every two years. The accounting policies of the City conform to accounting principles generally accepted in the United States of America, as applicable to governmental units. The accepted standard-setting body for establishing governmental accounting and financial reporting principles is the Governmental Accounting Standards Board (GASB). Reporting Entity This report includes all of the funds of the City. The reporting entity for the City consists of the primary government and its component unit. Component units are legally separate organizations for which the primary government is financially accountable or other organizations for which the nature and significance of their relationship with the primary government are such that their exclusion would cause the reporting entity's financial statements to be misleading. The primary government is financially accountable if: (1) it appoints a voting majority of the organization's governing body and it is able to impose its will on that organization, (2) it appoints a voting majority of the organization's governing body and there is a potential for the organization to provide specific financial benefits to, or impose specific financial burdens on, the primary government, (3) the organization is fiscally dependent on and there is a potential for the organization to provide specific financial benefits to, or impose specific financial burdens on, the primary government. Certain legally separate, tax exempt organizations should also be reported as a component unit if all of the following criteria are met: (1) the economic resources received or held by the separate organization are entirely or almost entirely for the direct benefit of the primary government, its component units, or its constituents; (2) the primary government or its component units, is entitled to, or has the ability to access, a majority of the economic resources received or held by the separate organization; and (3) the economic resources received or held by an individual organization that the primary government, or its component units, is entitled to, or has the ability to otherwise access, are significant to the primary government. Component units are reported using one of three methods, discrete presentation, blending or fiduciary. Generally, component units should be discretely presented in a separate column in the financial statements. A component unit should be reported as part of the primary government using the blending method if it meets any one of the following criteria: (1) the primary government and the component unit have substantially the same governing body and a financial benefit or burden relationship exists, (2) the primary government and the component unit have substantially the same governing body and management of the primary government has operational responsibility for the component unit, (3) the component unit serves or benefits, exclusively or almost exclusively, the primary government rather than its citizens, or (4) the total debt of the component unit will be paid entirely or almost entirely from resources of the primary government. The financial statements include the Rosemount Port Authority as a blended component unit. The Port Authority serves all the citizens of the government and is governed by a board comprised of three of five of the primary government's elected council and four citizens appointed at large. The bond issuance authorizations are approved by the primary government's council and the legal liability for the general obligation portion of the Port Authority's debt remains with the primary government. The Port Authority is reported in a special revenue fund and debt service fund. The Rosemount Port Authority does not issue separate financial statements. City of Rosemount Notes to Financial Statements December 31, 2020 36 Government-Wide and Fund Financial Statements Government-Wide Financial Statements The statement of net position and statement of activities display information about the reporting government as a whole. They include all funds of the reporting entity. The statements distinguish between governmental and business-type activities. Governmental activities generally are financed through taxes, intergovernmental revenues and other nonexchange revenues. Business- type activities are financed in whole or in part by fees charged to external parties for goods or services. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. The City does not allocate indirect expenses to functions in the statement of activities. Program revenues include: 1) charges to customers or applicants who purchase, use or directly benefit from goods, services or privileges provided by a given function or segment, and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not included among program revenues are reported as general revenues. Internally directed resources are reported as general revenues rather than as program revenues. Fund Financial Statements Financial statements of the City are organized into funds, each of which is considered to be a separate accounting entity. Each fund is accounted for by providing a separate set of self- balancing accounts, which constitute its assets, deferred outflows of resources, liabilities, deferred inflows of resources, net position/fund equity, revenues, and expenditures/expenses. Funds are organized as major funds or nonmajor funds within the governmental and proprietary statements. An emphasis is placed on major funds within the governmental and proprietary categories. A fund is considered major if it is the primary operating fund of the City or meets the following criteria: a. Total assets/deferred outflows of resources, liabilities/deferred inflows of resources, revenues, or expenditures/expenses of that individual governmental or enterprise fund are at least 10 percent of the corresponding total for all funds of that category or type, and b. The same element of the individual governmental fund or enterprise fund that met the 10 percent test is at least 5 percent of the corresponding total for all governmental and enterprise funds combined. c. In addition, any other governmental or enterprise fund that the City believes is particularly important to financial statement users may be reported as a major fund. Separate financial statements are provided for governmental funds and proprietary funds. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. City of Rosemount Notes to Financial Statements December 31, 2020 37 The City reports the following major governmental funds: General Fund The General Fund accounts for the City's primary operating activities. It is used to account for and report all financial resources except those accounted for and reported in another fund. Debt Service Fund The Debt Service Fund is used to account for and report financial resources that are restricted, committed, or assigned to expenditure for the payment of general long-term debt principal, interest, and related costs, other than enterprise debt. Capital Projects Fund The Capital Projects Fund is used to account for and report financial resources that are restricted, committed, or assigned to expenditures for capital outlays, including the acquisition or construction of capital facilities and other capital assets. The Capital Projects Fund consists of one primary fund and three separate internal funds maintained by the City. Port Authority TIF Fund The Port Authority TIF Fund is used to account for and report financial resources that are restricted, committed, or assigned to expenditures related to the activities of the City's Downtown - Brockway TIF District. The City reports the following major enterprise funds: Water The Water Fund accounts for operations of the water system. Sewer The Sewer Fund accounts for operations of the sewer system. Storm Water The Storm Water Fund accounts for operations of the storm water drainage system. The City reports the following nonmajor governmental and enterprise funds: Special Revenue Funds Special Revenue Funds are used to account for and report the proceeds of specific revenue sources that are restricted or committed to expenditures for specified purposes (other than debt service or capital projects). PEG Fees Fund Fire Safety Education Fund GIS Fund Port Authority General Fund City of Rosemount Notes to Financial Statements December 31, 2020 38 Enterprise Funds Enterprise Funds may be used to report any activity for which a fee is charged to external users for goods or services, and must be used for activities which meet certain debt or cost recovery criteria. The Street Lighting Fund accounts for the activities of the City’s street lighting operations. The Arena Fund accounts for the activities of the City's ice arena operations. In addition, the City reports the following fund type: Internal Service Fund Internal Service Funds are used to account for the financing of goods and services provided by one department or agency to other departments or agencies of the City on a cost-reimbursement basis. The Insurance Fund accumulates resources to pay deductibles and uninsured claims, and pays for a majority of the general liability insurance and workers compensation insurance premiums for the City. Measurement Focus, Basis of Accounting and Financial Statement Presentation Government-Wide Financial Statements The government-wide statement of net position and statement of activities are reported using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when the liability is incurred or economic asset used. Revenues, expenses, gains, losses, assets and liabilities resulting from exchange and exchange-like transactions are recognized when the exchange takes place. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider are met. Special assessments are recorded as revenue when levied. Unbilled receivables are recorded as revenues when services are provided. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are charges between the City's water and sewer utility and various other functions of the government. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Fund Financial Statements Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recorded when they are both measurable and available. Available means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures are recorded when the related fund liability is incurred, except for unmatured interest on long-term debt, claims, judgments, compensated absences, pension, and OPEB expenditures, which are recorded as a fund liability when amounts are due and payable. City of Rosemount Notes to Financial Statements December 31, 2020 39 Property taxes, special assessments, intergovernmental revenues, charges for services and interest associated with the current fiscal period are all considered to susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the City. Proprietary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as described previously in this note. The proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the water, sewer, storm water, arena and street lighting funds are charges to customers for sales and services. Operating expenses for proprietary funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. All Financial Statements The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, deferred outflows of resources, liabilities, and deferred inflows of resources and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures/expenses during the reporting period. Actual results could differ from those estimates. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources, and Net Position or Equity Deposits and Investments For purposes of the statement of cash flows, the City considers all highly liquid investments with an initial maturity of three months or less when acquired to be cash equivalents. Investment of City funds is restricted by state statutes. Available investments are limited to: a. Direct obligations or obligations guaranteed by the United States or its agencies, commercial paper, repurchase or reverse repurchase agreements with banks that are members of the Federal Reserve System with capitalization exceeding $10,000,000, a primary reporting dealer in U.S. Government Securities to the Federal Reserve Bank of New York or certain Minnesota brokers/dealers. b. General obligations of the State of Minnesota or any of its municipalities. c. Bankers acceptances of United States banks eligible for purchase by the Federal Reserve System. d. Shares of investment companies registered under the Federal Investment Company Act of 1940 and whose only investments are direct obligations guaranteed by the United States or its agencies. City of Rosemount Notes to Financial Statements December 31, 2020 40 The City has adopted an investment policy. The policy contains the following guidelines: Credit Risk - The policy follows state statutes for allowable investments except that it does not permit the purchase of shares of investment companies registered under the Federal Investment Company Act of 1940 whose only investments are direct obligations guaranteed by the United States or its agencies. Concentration of Credit Risk - The policy does not limit the amount the City may invest in any one issuer. Interest Rate Risk - As a means of limiting its exposure to fair value losses arising from rising interest rates, the City's investment policy limits the amount of investments with maturities of more than five years to 35 percent of the City's total investment portfolio (including certificates of deposit). Investments are stated at fair value, which is the amount at which an investment could be exchanged in a current transaction between willing parties. Fair values are based on quoted market prices. Adjustments necessary to record investments at fair value are recorded in the operating statement as increases or decreases in investment income. The difference between the bank statement balance and carrying value is due to outstanding checks and/or deposits in transit. See Note 4. for further information. Receivables Property tax levies are set by the City Council in the fall of each year, and certified to Dakota County for collection in the following year. In Minnesota, counties act as collection agents for all property taxes, spreading the levies over all taxable property. Such taxes become a lien on January 1 and are recorded as receivables by the City on that date. Tax levies on real property are payable in two equal installments on May 15 and October 15. Personal property taxes may be paid on February 28 and June 30. The county provides tax settlements to the City three times a year: in January, July and December. Property taxes are accrued and recognized as revenue in the year levied in the government-wide financial statements and proprietary fund financial statements. In the governmental fund financial statements, taxes are recognized as revenue when received in cash or within 60 days after year- end. Taxes which remain unpaid on December 31 are classified as delinquent taxes receivable, and are offset by a deferred inflow of resources in the governmental fund financial statements. Special assessments are levied against the benefited properties for the assessable costs of special assessments improvement projects in accordance with state statutes. The City usually adopts the assessment rolls when the individual projects are complete. The assessments are collectible over a term of years generally consistent with the term of years of the related bond issue. Collection of annual installments (including interest) is handled by the County in the same manner as property taxes. Property owners are allowed to prepay total future installments without interest or prepayment penalties. Special assessments receivable includes the following components: Current - amount collected by Dakota County and not remitted to the City. Delinquent - amounts billed to property owners but not paid. Unavailable - assessment installments, which will be billed to property owners in future years. Other - assessments for which payment has been postponed based on council action. Accounts receivable are considered to be 100 percent collectible. City of Rosemount Notes to Financial Statements December 31, 2020 41 During the course of operations, transactions occur between individual funds that may result in amounts owed between funds. Short-term interfund loans are reported as "due to and from other funds." Long-term interfund loans (noncurrent portion) are reported as "advances from and to other funds." Interfund receivables and payables between funds within governmental activities are eliminated in the statement of net position. Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as internal balances. In the governmental fund financial statements, advances to other funds are offset equally by a nonspendable fund balance account which indicates that they do not constitute expendable available financial resources and, therefore, are not available for appropriation or by a restricted fund balance account, if the funds will ultimately be restricted when the advance is repaid. Inventories and Prepaid Items Governmental fund inventory items are charged to expenditure accounts when purchased. Year- end inventory was not significant. Proprietary fund inventories are generally used for construction and for operation and maintenance work. They are not for resale. They are valued at cost based on weighted average, and charged to construction and/or operation and maintenance expense when used. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements and expensed as the items are used (consumption method). Capital Assets Government-Wide Statements Capital assets, which include property, plant and equipment, are reported in the government- wide financial statements. Capital assets are defined by the government as assets with an initial cost of more than $5,000 for general capital assets and infrastructure assets, and an estimated useful life in excess of one year. All capital assets are valued at historical cost or estimated historical cost if actual amounts are unavailable. Donated capital assets are recorded at their estimated acquisition value at the date of donation. Additions to and replacements of capital assets of business-type activities are recorded at original cost, which includes material, labor, overhead, and an allowance for the cost of funds used during construction when significant. The cost of renewals and betterments relating to retirement units is added to plant accounts. The cost of property replaced retired or otherwise disposed of, is deducted from plant accounts and, generally, together with removal costs less salvage, is charged to accumulated depreciation. Depreciation of all exhaustible capital assets is recorded as an allocated expense in the statement of activities, with accumulated depreciation reflected in the statement of net position. Depreciation is provided over the assets' estimated useful lives using the straight-line method of depreciation. The range of estimated useful lives by type of asset is as follows: Years Buildings 30 - 65 Machinery and equipment 4 - 20 Other improvements 60 Utility system 65 Infrastructure 35 - 50 City of Rosemount Notes to Financial Statements December 31, 2020 42 Land, some land improvements and construction work in progress are not depreciated. Fund Financial Statements In the fund financial statements, capital assets used in governmental fund operations are accounted for as capital outlay expenditures of the governmental fund upon acquisition. Capital assets used in proprietary fund operations are accounted for the same way as in the government-wide statements. Deferred Outflows of Resources A deferred outflow of resources represents a consumption of net position/fund balance that applies to a future period and will not be recognized as an outflow of resources (expense/expenditure) until that future time. Compensated Absences Under terms of employment, employees are granted vacation, sick and comp time benefits in varying amounts. These benefits are based upon union contracts and City actions as applicable. Amounts carried forward for vacation and comp time accruals are governed by these contracts and actions. Sick pay accruals may be carried forward indefinitely. All vested vacation, sick leave and comp time pay is accrued when incurred in the government- wide and proprietary fund financial statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee resignations and retirements, and are payable with expendable available resources. Payments for vacation, sick and comp time leave will be made at rates in effect when the benefits are used. Accumulated vacation, sick and comp time leave liabilities at year-end are determined on the basis of current salary rates and include salary related payments. Long-Term Obligations/Conduit Debt All long-term obligations to be repaid from governmental and business-type resources are reported as liabilities in the government-wide statements. The long-term obligations consist primarily of notes and bonds payable, capital lease obligations, other postemployment benefits, accrued compensated absences, and net pension liability. Long-term obligations for governmental funds are not reported as liabilities in the fund financial statements. The face value of debts (plus or minus any premiums or discounts) are reported as an other financing source and payments of principal and interest are reported as expenditures. The accounting in proprietary funds is the same as it is in the government-wide statements. The City has approved the issuance of industrial revenue bonds (IRB) for the benefit of private business enterprises. IRB's are secured by mortgages or revenue agreements on the associated projects, and do not constitute indebtedness of the City. Accordingly, the bonds are not reported as liabilities in the accompanying financial statements. At year-end, the aggregate principal amount for the three issues outstanding could not be determined; however, their original issue amounts totaled $8,294,720. Deferred Inflows of Resources A deferred inflow of resources represents an acquisition of net position that applies to a future period and therefore will not be recognized as inflow of resources (revenue) until that future time. City of Rosemount Notes to Financial Statements December 31, 2020 43 Equity Classifications Government-Wide Statements Equity is classified as net position and displayed in three components: a. Net investment in capital assets - Consists of capital assets including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances (excluding unspent debt proceeds) of any bonds, mortgages, notes or other borrowings that are attributable to the acquisition, construction or improvement of those assets. b. Restricted net position - Consists of net position with constraints placed on their use either by 1) external groups such as creditors, grantors, contributors, or laws or regulations of other governments or, 2) law through constitutional provisions or enabling legislation. c. Unrestricted net position - All other net positions that do not meet the definitions of "restricted" or "net investment in capital assets." When both restricted and unrestricted resources are available for use, it is the City's policy to use restricted resources first, then unrestricted resources as they are needed. Fund Statements Governmental fund balances are displayed as follows: a. Nonspendable - Includes fund balance amounts that cannot be spent either because they are not in spendable form or because legal or contractual requirements require them to be maintained intact. b. Restricted - Consists of fund balances with constraints placed on their use either by 1) external groups such as creditors, grantors, contributors, or laws or regulations of other governments or 2) law through constitutional provisions or enabling legislation. c. Committed - Includes fund balance amounts that are constrained for specific purposes that are internally imposed by the government through formal action of the highest level of decision making authority. Fund balance amounts are committed through a formal action (resolution) of the City Council. This formal action must occur prior to the end of the reporting period, but the amount of the commitment, which will be subject to the constraints, may be determined in the subsequent period. Any changes to the constraints imposed require the same formal action of the City Council that originally created the commitment. d. Assigned - Includes spendable fund balance amounts that are intended to be used for specific purposes that do not meet the criteria to be classified as restricted or committed. The City Council has authorized the Finance Director and/or Administrator to assign amounts for a specific purpose. Assignments may take place after the end of the reporting period. e. Unassigned - Includes residual positive fund balance within the general fund which has not been classified within the other above mentioned categories. Unassigned fund balance may also include negative balances for any governmental fund if expenditures exceed amounts restricted or committed for those purposes. City of Rosemount Notes to Financial Statements December 31, 2020 44 The City considers restricted amounts to be spent first when both restricted and unrestricted fund balance is available unless there are legal documents / contracts that prohibit doing this, such as in grant agreements requiring dollar for dollar spending. Additionally, the City would first use committed, then assigned and lastly unassigned amounts of unrestricted fund balance when expenditures are made. The City has a formal minimum fund balance policy. That policy is to maintain a working capital fund of 45 to 55 percent of the subsequent year's general fund budgeted expenditures and transfers out. The balance at year-end was $8,143,687, or 56 percent, and is included in unassigned general fund balance. Proprietary fund equity is classified the same as in the government-wide statements. Pension For purposes of measuring the net pension liability, deferred outflows/inflows of resources, and pension expense, information about the fiduciary net position of the Public Employees Retirement Association (PERA) and additions to/deductions from PERA's fiduciary net position have been determined on the same basis as they are reported by PERA. For this purpose, plan contributions are recognized as of employer payroll paid dates and benefit payments and refunds are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. 2. Reconciliation of Government-Wide and Fund Financial Statements Explanation of Certain Differences Between the Governmental Funds Balance Sheet and the Statement of Net Position The governmental fund balance sheet includes a reconciliation between fund balance - total governmental funds and net position - governmental activities as reported in the government-wide statement of net position. One element of that reconciliation explains that "Some liabilities, including long-term debt, are not due and payable in the current period and, therefore, are not reported in the funds". The details of this $10,009,541 difference are as follows: Long-term liabilities applicable to the City's governmental activities are not due and payable in the current period, and accordingly, are not reported as fund liabilities. Interest on long-term debt is not accrued in governmental funds, but rather is recognized as an expenditure when due. All liabilities - both current and long-term - are reported in the statement of net position. Bonds and notes payable $ 7,065,000 Capital lease obligations 1,372,132 Compensated absences 1,304,980 Unamortized premium on bonds payable 167,116 Accrued interest 100,313 Combined adjustment for long-term liabilities $ 10,009,541 City of Rosemount Notes to Financial Statements December 31, 2020 45 3. Stewardship, Compliance and Accountability Budgetary Information Annual budgets have been adopted for the general fund and the capital project fund that is created by the following sub-funds, Building CIP, Street CIP and Equipment CIP. The remaining capital project sub funds adopt project-length budgets and therefore are not included in the annual budgeting process. Formal budgetary integration is not employed for debt service funds because effective budgetary control is alternatively achieved through general obligation bond indenture provisions. The budgeted amounts presented include any amendments made. The appropriated budget is prepared by fund, department and function. The legal level of budgetary control is at the department level. The City Council may authorize department heads to transfer budgeted appropriations within departments. The Council approved several supplemental budgetary appropriations during the year. Appropriations lapse at year-end unless specifically carried over. Carryovers to the following year were $10,503,836. Excess Expenditures Over Appropriations Fund Budgeted Expenditures Actual Expenditures Excess Expenditures Building CIP sub-fund $ 627,500 $ 629,371 $ 1,871 Equipment CIP sub-fund 704,412 1,755,841 1,051,429 Some individual departments experienced expenditures which exceeded appropriations. The detail of those items can be found in the City's year-end budget to actual reports. These variances were financed with revenues and other financing sources in excess of budget or available fund balance. 4. Detailed Notes on All Activities and Funds Deposits and Investments The City maintains a cash and investment pool that is available for use by all funds. Each fund type's portion of this pool is displayed on the statement of net position and balance sheet as cash and investments. In addition, investments are separately held by several of the City's funds. City of Rosemount Notes to Financial Statements December 31, 2020 46 The City's cash and investments at year-end were comprised of the following: Carrying Value Statement Balances Associated Risks Petty cash and cash on hand $ 2,400 $ 2,400 N/A Demand deposits 48,534,904 49,729,049 Custodial credit risk Negotiable CDs 14,522,696 14,522,696 Custodial credit, credit, concentration of credit, interest rate risk U.S. agencies 8,720,130 8,720,130 Custodial credit, credit, concentration of credit, interest rate risk Total cash and investments $ 71,780,130 $ 72,974,275 Reconciliation to the financial statements: Per statement of net position: Cash and investments $ 71,780,130 Deposits in each local and area bank are insured by the FDIC in the amount of $250,000 for time and savings accounts (including NOW accounts) and $250,000 for demand deposit accounts (interest-bearing and noninterest-bearing). In addition, if deposits are held in an institution outside of the state in which the government is located, insured amounts are further limited to a total of $250,000 for the combined amount of all deposit accounts. The Securities Investor Protection Corporation (SIPC), created by the Securities Investor Protection Act of 1970, is an independent government-sponsored corporation (not an agency of the U.S. government). SIPC membership provides account protection up to a maximum of $500,000 per customer, of which $100,000 may be in cash. The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs. The valuation methods for recurring fair value measurements of the Level 2 investments are as follows: Automated method - IDC Institutional Bond Pricing Automated method - IDC CD Pricing Matrix pricing based upon yields and effective maturity Investment Type Level 1 Level 2 Level 3 Total U.S. agencies $ - $ 8,720,130 $ - $ 8,720,130 Negotiable CDs - 14,522,696 - 14,522,696 Total $ - $ 23,242,826 $ - $ 23,242,826 City of Rosemount Notes to Financial Statements December 31, 2020 47 Custodial Credit Risk Deposits Custodial credit risk is the risk that in the event of a financial institution failure, the City's deposits may not be returned to the City. The City maintains collateral agreements with its banks. At December 31, 2020, the banks had pledged various government securities in the amount of $18,508,817 to secure the City's deposits. Investments For an investment, custodial credit risk is the risk that, in the event of the failure of the counterparty, the City will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. Credit Risk Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. As of December 31, 2020, the City's investments in U.S. agency obligations received AA+ and/or AAA ratings from Standard & Poor's and/or Moody's Investors Service, respectively. The City also had investments in negotiable certificates of deposit which were unrated. Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of the City's investment in a single issuer. As of December 31, 2020, the City's investment portfolio was concentrated as follows: Issuer Investment Type Percentage of Total Federal Home Loan Mortgage Corporation U.S. agencies 17 % Federal Home Loan Bank U.S. agencies 9 Federal Farm Credit Bank U.S. agencies 6 Interest Rate Risk Interest rate risk is the risk that changes in interest rates will adversely affect the value of an investment. City of Rosemount Notes to Financial Statements December 31, 2020 48 As of December 31, 2020, the City’s investments were as follows: Investment Maturities (in Years) Investment Type Total Fair Value Less Than 1 1 - 5 6+ U.S. agencies $ 8,720,130 $ 699,753 $ 1,999,855 $ 6,020,522 Negotiable CDs 14,522,696 5,769,561 8,262,569 490,566 Total $ 23,242,826 $ 6,469,314 $ 10,262,424 $ 6,511,088 At December 31, 2020, the City held $499,770 in U.S. Agency Obligations that are callable at increasing stepped interest rates. See Note 1 for further information on deposit and investment policies. Receivables Receivable amounts not expected to be collected within one year are listed below: Governmental Activities General Debt Service Capital Projects Total Amounts not expected to be collected within one year $ 8,278 $ 27,217 $ 750,072 $ 785,567 Business-Type Activities Water Utility Sewer Utility Storm Water Utility Total Amounts not expected to be collected within one year $ 69,172 $ 52,667 $ 83,369 $ 205,208 Governmental funds report unavailable or unearned revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection with resources that have been received, but not yet earned. At the end of the current fiscal year, the various components of unavailable revenue and unearned revenue reported in the governmental funds were as follows: Unavailable Unearned Total Delinquent property taxes receivable $ 108,682 $ - $ 108,682 Delinquent special assessments 1,095 - 1,095 Special assessments not yet due 1,285,126 1,749,185 3,034,311 Unearned fire contract - 11,872 11,872 Donations receivable for future projects 104,906 - 104,906 Total unearned/unavailable revenue for governmental funds $ 1,499,809 $ 1,761,057 $ 3,260,866 City of Rosemount Notes to Financial Statements December 31, 2020 49 Capital Assets Capital asset activity for the year ended December 31, 2020 was as follows: Beginning Balance Additions Deletions Ending Balance Governmental Activities Capital assets not being depreciated: Land $ 7,886,846 $ - $ - $ 7,886,846 Land improvements 4,373,815 416,230 - 4,790,045 Construction in progress 11,619,341 7,224,419 6,767,848 12,075,912 Total capital assets not being depreciated 23,880,002 7,640,649 6,767,848 24,752,803 Capital assets being depreciated: Land improvements 4,584,665 553,898 10,390 5,128,173 Buildings 17,437,170 1,018,190 - 18,455,360 Machinery and equipment 13,382,737 2,488,769 937,267 14,934,239 Infrastructure: Other 209,037 - - 209,037 Roads 63,837,793 1,436,972 225,173 65,049,592 Bridges 2,034,591 - - 2,034,591 Parking lots 1,358,831 - - 1,358,831 Total capital assets being depreciated 102,844,824 5,497,829 1,172,830 107,169,823 Less accumulated depreciation for: Land improvements (1,955,926) (214,905) 8,226 (2,162,605) Buildings (6,340,638) (358,042) - (6,698,680) Machinery and equipment (7,681,185) (936,200) 819,992 (7,797,393) Infrastructure: Other (30,599) (5,336) - (35,935) Roads (14,565,798) (1,098,389) 79,434 (15,584,753) Bridges (683,295) (50,865) - (734,160) Parking lots (294,450) (30,346) - (324,796) Total accumulated depreciation (31,551,891) (2,694,083) 907,652 (33,338,322) Net capital assets being depreciated 71,292,933 2,803,746 265,178 73,831,501 Total governmental activities capital assets, net of accumulated depreciation $ 95,172,935 $ 10,444,395 $ 7,033,026 $ 98,584,304 City of Rosemount Notes to Financial Statements December 31, 2020 50 Depreciation expense was charged to functions as follows: Governmental Activities General government $ 319,506 Public safety 334,309 Public works, which includes the depreciation of roads, bridges and parking lots 1,622,511 Culture, education and recreation 417,757 Total governmental activities depreciation expense $ 2,694,083 Beginning Balance Additions Deletions Ending Balance Business-Type Activities Capital assets not being depreciated: Land $ 2,893,277 $ 608,600 $ - $ 3,501,877 Construction in progress 673,877 3,058,656 2,977,439 755,094 Total capital assets not being depreciated 3,567,154 3,667,256 2,977,439 4,256,971 Capital assets being depreciated: Buildings 12,110,980 - - 12,110,980 Machinery and equipment 4,443,454 268,022 125,248 4,586,228 Infrastructure, mains and lines and other improvements 143,945,662 2,977,439 - 146,923,101 Total capital assets being depreciated 160,500,096 3,245,461 125,248 163,620,309 Less accumulated depreciation for: Buildings (4,414,898) (269,829) - (4,684,727) Machinery and equipment (2,521,636) (255,427) 124,870 (2,652,193) Infrastructure, mains and lines and other improvements (57,937,008) (2,208,420) - (60,145,428) Total accumulated depreciation (64,873,542) (2,733,676) 124,870 (67,482,348) Net capital assets being depreciated 95,626,554 511,785 378 96,137,961 Total business-type capital assets, net of accumulated depreciation $ 99,193,708 $ 4,179,041 $ 2,977,817 $ 100,394,932 City of Rosemount Notes to Financial Statements December 31, 2020 51 Depreciation expense was charged to functions as follows: Business-Type Activities Water $ 918,915 Sewer 954,124 Storm Water 797,745 Arena 62,892 Total business-type activities depreciation expense $ 2,733,676 Interfund Transfers Transfers The following is a schedule of interfund transfers: Fund Transferred To Fund Transferred From Amount Principal Purpose General Arena $ 3,500 Building and grounds maintenance Capital Projects 3,214 Share of capital projects costs Debt Service Water 71,000 Water share of debt payment Capital Projects Water 639,354 Share of capital project costs Sewer 388,958 Share of capital project costs Storm Water 497,556 Share of capital project costs General 135,000 Share of capital project costs Enterprise Storm Water Capital Projects 74 Share of capital projects costs Arena General 130,000 Operating expenses Subtotal, fund financial statements 1,868,656 Less government-wide capital transfers (2,216,824) Less fund eliminations (398,362) Total transfers, government-wide statement of activities $ (746,530) City of Rosemount Notes to Financial Statements December 31, 2020 52 Generally, transfers are used to: (1) move revenues from the fund that collects them to the fund that the budget requires to expend them, (2) move receipts restricted to debt service from the funds collecting the receipts to the debt service fund, and (3) use unrestricted revenues collected in the general fund to finance various programs accounted for in other funds in accordance with budgetary authorizations. For the statement of activities, interfund transfers within the governmental activities or business- type activities are netted and eliminated. Long-Term Obligations Long-term obligations activity for the year ended December 31, 2020 was as follows: Beginning Balance Increases Decreases Ending Balance Amounts Due Within One Year Governmental Activities Bonds and notes payable: General obligation debt $ 8,695,000 $ - $ 1,630,000 $ 7,065,000 $ 905,000 Add premiums 194,982 - 27,866 167,116 - Total bonds and notes payable 8,889,982 - 1,657,866 7,232,116 905,000 Other liabilities: Vested compensated absences 1,104,168 730,813 530,001 1,304,980 626,390 Capital lease liabilities 289,219 1,182,844 99,931 1,372,132 241,439 Net pension liability 5,294,003 1,342,245 575,367 6,060,881 - Other postemployment benefits 733,179 - 63,048 670,131 - Total other liabilities 7,420,569 3,255,902 1,268,347 9,408,124 867,829 Total governmental activities long-term liabilities $ 16,310,551 $ 3,255,902 $ 2,926,213 $ 16,640,240 $ 1,772,829 Business-type activities: Bonds and notes payable: General obligation debt $ 1,110,000 $ - $ 145,000 $ 965,000 $ 150,000 Add premiums 57,605 - 8,229 49,376 - Total bonds and notes payable 1,167,605 - 153,229 1,014,376 150,000 Other liabilities: Vested compensated absences 207,777 116,668 99,733 224,712 107,862 Capital lease liabilities 18,804 70,371 9,448 79,727 19,703 Net pension liability 982,344 235,270 89,950 1,127,664 - Other postemployment benefits 96,721 - 8,408 88,313 - Total other liabilities 1,305,646 422,309 207,539 1,520,416 127,565 Total business-type activities long-term liabilities $ 2,473,251 $ 422,309 $ 360,768 $ 2,534,792 $ 277,565 City of Rosemount Notes to Financial Statements December 31, 2020 53 General Obligation Debt All general obligation bonds payable are backed by the full faith and credit of the City. Tax incremental bonds are paid by segregated property taxes, but are ultimately backed by the full faith and credit of the City if incremental taxes are inadequate to meet payments. Remaining bonds in the governmental funds will be retired by future property tax levies accumulated by the debt service fund. Business-type activities debt is payable by revenues from user fees of those funds or, if the revenues are not sufficient, by future tax levies. Governmental Activities General Obligation Debt Date of Issue Final Maturity Interest Rates Original Indebtedness Balance December 31, 2020 Port Authority TIF, Series 2008A 2008 2024 5.00 - 5.50 % $ 2,765,000 $ 1,195,000 Improvement Bonds, Series 2014A 2014 2025 0.35 - 2.40 2,400,000 420,000 Fire Station Refunding Bonds, Series 2015B 2015 2025 1.50 - 3.00 1,345,000 795,000 Port Authority TIF Crossover Refunding Bonds, Series 2015A 2015 2032 3.00 3,335,000 3,300,000 Improvement Bonds, Series 2017A 2017 2023 3.00 1,055,000 660,000 Improvement Bonds, Series 2018A 2018 2024 5.00 835,000 695,000 Total governmental activities, general obligation debt $ 7,065,000 Business-Type Activities General Obligation Debt Date of Issue Final Maturity Interest Rates Original Indebtedness Balance December 31, 2020 Water Revenue Bonds, Series 2015A 2015 2026 1.50 - 3.00 % $ 1,525,000 $ 965,000 Debt service requirements to maturity are as follows: General Obligation Debt Governmental Activities Business-Type Activities Principal Interest Principal Interest Years: 2021 $ 905,000 $ 222,831 $ 150,000 $ 25,043 2022 935,000 186,063 155,000 21,036 2023 980,000 147,445 160,000 16,705 2024 780,000 110,693 165,000 12,154 2025 625,000 84,605 165,000 7,451 2026 - 2030 1,975,000 262,963 170,000 2,550 2031 - 2032 865,000 26,175 - - Total $ 7,065,000 $ 1,040,775 $ 965,000 $ 84,939 City of Rosemount Notes to Financial Statements December 31, 2020 54 Other Debt Information Estimated payments of compensated absences, other postemployment benefits liability and the net pension liability are not included in the debt service requirement schedules. The compensated absences liability, other postemployment benefits liability and net pension liability attributable to governmental activities will be liquidated primarily by the general fund. There are a number of limitations and restrictions contained in the various bond indentures and loan agreements. The City believes it is in compliance with all significant limitations and restrictions, including federal arbitrage regulations. The water utility has pledged future revenues, net of specified operating expenses, to repay revenue bonds issued in 2015. Proceeds from the bonds provided financing for utility improvements. The bonds are payable solely from water revenues and are payable through 2026. Annual principal and interest payments on the bonds are expected to require 6 percent of net revenues. The total principal and interest remaining to be paid on the bonds is $1,049,939. Principal and interest paid on these bonds for the current year and the gross customer revenues were $173,730 and $4,438,036, respectively. Lease Disclosures Lessee, Capital Leases Since 2018, the City has been acquiring capital assets through multiple lease/purchase agreements. The gross amount of these assets under capital leases is $2,118,515 and $139,215, which are included in the machinery and equipment asset category of capital assets, less accumulated depreciation of $342,668 and $32,974 in governmental activities and business-type activities, respectively. A portion of these capital assets were not financed through lease arrangements but rather paid by the City upon purchase, these amounts are $537,058 in governmental activities and $40,703 in business-type activities. A corresponding liability is recorded in the government-wide statement of net position. The liability of the capital lease obligations that were capitalized at December 31, 2020 was $1,372,132 in governmental activities and $79,727 in the business-type activities (split between water, sewer and storm water funds). Principal and interest payments in fiscal year 2020 totaled $120,350 in governmental activities and $10,876 in business-type activities. The capital lease liability attributable to governmental activities will be liquidated by the capital projects fund. The lease agreement contains certain provisions that in the event of default the lessor may demand and receive immediate possession of the leased property or recover all amounts owed by the City. City of Rosemount Notes to Financial Statements December 31, 2020 55 A schedule of future lease payments as of December 31, 2020, are as follows: Vehicles Lease Obligations Governmental Activities Business-Type Activities Principal Interest Principal Interest Years: 2021 $ 241,439 $ 68,792 $ 19,703 $ 1,411 2022 247,830 39,865 19,703 1,411 2023 217,067 29,325 15,942 682 2024 197,683 21,256 14,062 317 2025 175,835 14,686 10,317 232 2026 143,842 9,335 - - 2027 148,436 4,741 - - Total $ 1,372,132 $ 188,000 $ 79,727 $ 4,053 Net Position/Fund Balances Net position reported on the government-wide statement of net position at December 31, 2020 includes the following: Governmental Activities Net investment in capital assets: Land $ 7,886,846 Nondepreciable land improvements 4,790,045 Construction in progress 12,075,912 Other capital assets, net of accumulated depreciation 73,831,501 Less related long-term debt outstanding (excluding unspent capital-related debt proceeds) (8,604,248) Total net investment in capital assets $ 89,980,056 City of Rosemount Notes to Financial Statements December 31, 2020 56 Governmental Funds Governmental fund balances reported on the fund financial statements at December 31, 2020 include the following: General Fund Debt Service Capital Projects Port Authority TIF Nonmajor Funds Total Fund balances: Nonspendable: Prepaid items $ - $ - $ - $ - $ 455 $ 455 Restricted for: Debt service - 2,300,537 - - - 2,300,537 Port Authority TIF - - - 2,175,696 - 2,175,696 PEG fees - - - - 87,195 87,195 Total - 2,300,537 - 2,175,696 87,195 4,563,428 Committed for: Fire safety education - - - - 3,728 3,728 GIS - - - - 90,040 90,040 Port Authority, general - - - - 496,249 496,249 Total - - - - 590,017 590,017 Assigned for: Compensated absences 1,301,494 - - - - 1,301,494 Health insurance 290,700 - - - - 290,700 Comp plan 6,969 - - - - 6,969 Building maintenance 518,406 - - - - 518,406 Park maintenance 967,168 - - - - 967,168 Parking lot maintenance 459,000 - - - - 459,000 Street chemicals 39,021 - - - - 39,021 Landscaping projects 25,030 - - - - 25,030 Election equipment 39,934 - - - - 39,934 Economic development 50,000 - - - - 50,000 Various projects/equipment 452,521 - 14,636,007 - - 15,088,528 Building CIP - - 2,285,246 - - 2,285,246 Street CIP - - 428,748 - - 428,748 Equipment CIP - - 494,915 - - 494,915 Total 4,150,243 - 17,844,916 - - 21,995,159 Unassigned 8,143,687 - - - - 8,143,687 Total fund balances $ 12,293,930 $ 2,300,537 $ 17,844,916 $ 2,175,696 $ 677,667 $ 35,292,746 City of Rosemount Notes to Financial Statements December 31, 2020 57 Business-Type Activities Net investment in capital assets: Land $ 3,501,877 Construction in progress 755,094 Other capital assets, net of accumulated depreciation 96,137,961 Less related long-term debt outstanding (excluding unspent capital-related debt proceeds) (1,094,103) Total net investment in capital assets $ 99,300,829 5. Other Information Employees' Retirement System Employees of the City participate in three defined benefit pension plans. Two of the plans are state-wide cost-sharing, multiple employer defined benefit pension plans administered by the Public Employees Retirement Association (PERA) of Minnesota: the General Employees Retirement Fund (GERF) and the Public Employees Police and Fire Fund (PEPFF). The third is a single-employer defined benefit pension plan administered through the Rosemount Fire Fighters' Relief Association (the Association). The details of the City's participation in each of these plans are presented later in these notes. The following table summarizes the impact of these plans on the City's government-wide financial statements: Rosemount Fire Department State-Wide PERA Pension Plans Relief All Plans GERF PEPFF Total Association Total Net pension asset $ - $ - $ - $ 1,864,145 $ 1,864,145 Deferred outflows 544,820 1,522,484 2,067,304 106,838 2,174,142 Net pension liability 4,346,706 2,841,839 7,188,545 - 7,188,545 Deferred inflows 173,405 1,933,899 2,107,304 471,730 2,579,034 Pension expense 312,568 351,821 664,389 60,994 725,383 Public Employees Retirement Association (PERA) Plan Description All full-time and certain part-time employees of the City are covered by cost-sharing multiple-employer defined benefit pension plans administered by the Public Employees Retirement Association of Minnesota (PERA). PERA's defined benefit pension plans are established and administered in accordance with Minnesota Statutes, Chapters 353 and 356. PERA's defined benefit pension plans are tax qualified plans under Section 401(a) of the Internal Revenue Code. General Employees Retirement Plan. General Employees Plan members belong to the Coordinated Plan. Coordinated Plan members are covered by Social Security. City of Rosemount Notes to Financial Statements December 31, 2020 58 Public Employees Police and Fire Plan. The Police and Fire Plan, originally established for police officers and firefighters not covered by a local relief association, now covers all police officers and firefighters hired since 1980. Effective July 1, 1999, the Police and Fire Plan also covers police officers and firefighters belonging to a local relief association that elected to merge with and transfer assets and administration to PERA. Benefits PERA provides retirement, disability and death benefits. Benefit provisions are established by state statute and can only be modified by the state Legislature. Vested, terminated employees who are entitled to benefits, but are not receiving them yet, are bound by the provisions in effect at the time they last terminated their public service. General Employees Plan Benefits. General Employees Plan benefits are based on a member’s highest average salary for any five successive years of allowable service, age, and years of credit at termination of service. Two methods are used to compute benefits for PERA's Coordinated Plan members. Members hired prior to July 1, 1989, receive the higher of Method 1 or Method 2 formulas. Only Method 2 is used for members hired after June 30, 1989. Under Method 1, the accrual rate for Coordinated members is 1.2 percent for each of the first 10 years of service and 1.7 percent for each additional year. Under Method 2, the accrual rate for Coordinated members is 1.7 percent for all years of service. For members hired prior to July 1, 1989 a full annuity is available when age plus years of service equal 90 and normal retirement age is 65. For members hired on or after July 1, 1989, normal retirement age is the age for unreduced Social Security benefits capped at 66. Benefit increases are provided to benefit recipients each January. Beginning in 2019, the postretirement increase is equal to 50 percent of the cost-of-living adjustment (COLA) announced by the SSA, with a minimum increase of at least 1 percent and a maximum of 1.5 percent. Recipients that have been receiving the annuity or benefit for at least a full year as of the June 30 before the effective date of the increase will receive the full increase. For recipients receiving the annuity or benefit for at least one month but less than a full year as of the June 30 before the effective date of the increase will receive a reduced prorated increase. For members retiring on January 1, 2024, or later, the increase will be delayed until normal retirement age (age 65 if hired prior to July 1, 1989, or age 66 for individuals hired on or after July 1, 1989). Members retiring under Rule of 90 are exempt from the delay to normal retirement. Police and Fire Plan Benefits. Benefits for Police and Fire Plan members first hired after June 30, 2010, but before July 1, 2014, vest on a prorated basis from 50 percent after five years up to 100 percent after ten years of credited service. Benefits for Police and Fire Plan members first hired after June 30, 2014, vest on a prorated basis from 50 percent after ten years up to 100 percent after twenty years of credited service. The annuity accrual rate is 3 percent of average salary for each year of service. For Police and Fire Plan members who were first hired prior to July 1, 1989, a full annuity is available when age plus years of service equal at least 90. City of Rosemount Notes to Financial Statements December 31, 2020 59 Benefit increases are provided to benefit recipients each January. The postretirement increase will be fixed at 1 percent. Recipients that have been receiving the annuity or benefit for at least 36 months as of the June 30 before the effective date of the increase will receive the full increase. For recipients receiving the annuity or benefit for at least 25 months but less than 36 months as of the June 30 before the effective date of the increase will receive a reduced prorated increase. Contributions Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. Contribution rates can only be modified by the state Legislature. General Employees Plan Contributions. Coordinated Plan members were required to contribute 6.50 percent of their annual covered salary in fiscal year 2020 and the City was required to contribute 7.50 percent for Coordinated Plan members. The City's contributions to the General Employees Plan for the year ended December 31, 2020, were $392,643. The City's contributions were equal to the required contributions as set by state statute. Police and Fire Plan Contributions. Police and Fire member’s contribution rates increased from 11.3 percent of pay to 11.8 percent and employer rates increased from 16.95 percent to 17.70 percent on January 1, 2020. The City’s contributions to the Police and Fire Fund for the year ended December 31, 2020, were $446,860. The City’s contributions were equal to the required contributions as set by state statute. Pension Costs General Employees Fund Pension Costs. At December 31, 2020, the City reported a liability of $4,346,706 for its proportionate share of the General Employees Fund's net pension liability. The City's net pension liability reflected a reduction due to the State of Minnesota's contribution of $16 million to the fund in 2020. The State of Minnesota is considered a nonemployer contributing entity and the state's contribution meets the definition of a special funding situation. The State of Minnesota's proportionate share of the net pension liability associated with the City totaled $133,973. The net pension liability was measured as of June 30, 2020 and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The City's proportion of the net pension liability was based on the City's contributions received by PERA during the measurement period for employer payroll paid dates from July 1, 2019 through June 30, 2020 relative to the total employer contributions received from all of PERA's participating employers. At June 30, 2020, the City's proportion share was 0.0725 percent, which was an increase of 0.0024 percent from its proportion measured as of June 30, 2019. City's proportionate share of the net pension liability $ 4,346,706 State of Minnesota's proportionate share of the net pension liability associated with the City 133,973 Total $ 4,480,679 City of Rosemount Notes to Financial Statements December 31, 2020 60 For the year ended December 31, 2020, the City recognized pension expense of $300,908 for its proportionate share of the General Employees Plan's pension expense. In addition, the City recognized an additional $11,660 as pension expense and grant revenue for its proportionate share of the State of Minnesota's contribution of $16 million to the General Employees Fund. At December 31, 2020, the City reported its proportionate share of the General Employees Plan's deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows of Resources Deferred Inflows of Resources Differences between expected and actual economic experience $ 38,291 $ 16,446 Changes of actuarial assumptions - 156,959 Difference between projected and actual investment earnings 99,442 - Changes in proportion 194,629 - Contributions paid to PERA subsequent to measurement date 212,458 - Total $ 544,820 $ 173,405 $212,458 reported as deferred outflows related to pension resulting from City contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended December 31, 2021. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pension will be recognized in pension expense as follows: Pension Expense Amount Years ending December 31: 2021 $ (109,653) 2022 51,302 2023 115,597 2024 101,711 Police and Fire Fund Pension Costs. At December 31, 2020, the City reported a liability of $2,841,839 for its proportionate share of the Police and Fire Fund's net pension liability. The net pension liability was measured as of June 30, 2020, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The City's proportion of the net pension liability was based on the City's contributions received by PERA during the measurement period for employer payroll paid dates from July 1, 2019, through June 30, 2020, relative to the total employer contributions received from all of PERA's participating employers. At June 30, 2020, the City's proportion was 0.2156 percent, which was a decrease of 0.0099 percent from its proportion measured as of June 30, 2019. City of Rosemount Notes to Financial Statements December 31, 2020 61 The State of Minnesota contributed $13.5 million to the Police and Fire Fund in the plan fiscal year ended June 30, 2020. The contribution consisted of $4.5 million in direct state aid that does meet the definition of a special funding situation and $9.0 million in supplemental state aid that does not meet the definition of a special funding situation. The $4.5 million direct state was paid on October 1, 2019. Thereafter, by October 1 of each year, the state will pay $9 million to the Police and Fire Fund until full funding is reached or July 1, 2048, whichever is earlier. The $9 million in supplemental state aid will continue until the fund is 90 percent funded, or until the State Patrol Plan (administered by the Minnesota State Retirement System) is 90 percent funded, whichever occurs later. The State of Minnesota is included as a non-employer contributing entity in the Police and Fire Retirement Plan Schedule of Employer Allocations and Schedule of Pension Amounts by Employer, Current Reporting Period Only (pension allocation schedules) for the $4.5 million in direct state aid. Police and Fire Plan employers need to recognize their proportionate share of the State of Minnesota’s pension expense (and grant revenue) under GASB 68 special funding situation accounting and financial reporting requirements. For the year ended December 31, 2020, the City recognized pension expense of $332,417 for its proportionate share of the Police and Fire Plan’s pension expense. The City recognized $19,404 as grant revenue for its proportionate share of the State of Minnesota’s pension expense for the contribution of $4.5 million to the Police and Fire Fund. City's proportionate share of the net pension liability $ 2,841,839 State of Minnesota's proportionate share of the net pension liability associated with the City 66,955 Total $ 2,908,794 The State of Minnesota is not included as a non-employer contributing entity in the Police and Fire Pension Plan pension allocation schedules for the $9 million in supplemental state aid. The City recognized $20,599 for the year ended December 31, 2020 as revenue and an offsetting reduction of net pension liability for its proportionate share of the State of Minnesota’s on-behalf contributions to the Police and Fire Fund. At December 31, 2020, the City reported its proportionate share of the Police and Fire Plan's deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows of Resources Deferred Inflows of Resources Differences between expected and actual economic experience $ 125,456 $ 128,949 Changes in actuarial assumptions 908,865 1,690,381 Difference between projected and actual investment earnings 96,608 - Changes in proportion 141,088 114,569 Contributions paid to PERA subsequent to measurement date 250,467 - Total $ 1,522,484 $ 1,933,899 City of Rosemount Notes to Financial Statements December 31, 2020 62 $250,467 reported as deferred outflows of resources related to pensions resulting from City contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended December 31, 2021. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows: Pension Expense Amount Years ending December 31: 2021 $ (183,346) 2022 (731,536) 2023 148,231 2024 118,941 2025 (14,172) Actuarial Assumptions The total pension liability in the June 30, 2020, actuarial valuation was determined using the following actuarial assumptions: General Employees Fund Police and Fire Fund Inflation 2.25 percent per year 2.50 percent per year Active member payroll growth 3.00 percent per year 3.25 percent per year Investment rate of return 7.50 percent 7.50 percent Salary increases were based on a service-related table. Mortality rates for active members, retirees, survivors, and disabilitants for all plans were based on RP 2014 tables for males or females, as appropriate, with slight adjustments to fit PERA’s experience. Cost of living benefit increases after retirement for retirees are assumed to be 1.25 percent per year for the General Employees Plan, and 1.0 percent per year for the Police and Fire Plan. Actuarial assumptions used in the June 30, 2020 valuation were based on the results of actuarial experience studies. The most recent four-year experience study for the General Employees Plan was completed in 2019. The assumption changes were adopted by the Board and become effective with the July 1, 2020 actuarial valuation. The most recent four-year experience studies for the Police and Fire Plan were completed in 2020. The recommended assumptions for those plans were adopted by the Board and will be effective with the July 1, 2021 actuarial valuations if approved by the Legislature. The following changes in actuarial assumptions and plan provisions occurred in 2020: General Employees Fund Changes in Actuarial Assumptions: The price inflation assumption was decreased from 2.50 percent to 2.25 percent. The payroll growth assumption was decreased from 3.25 percent to 3.00 percent. Assumed salary increase rates were changed as recommended in the June 30, 2019 experience study. The net effect is assumed rates that average 0.25 percent less than previous rates. City of Rosemount Notes to Financial Statements December 31, 2020 63 Assumed rates of retirement were changed as recommended in the June 30, 2019 experience study. The changes result in more unreduced (normal) retirements and slightly fewer Rule of 90 and early retirements. Assumed rates of termination were changed as recommended in the June 30, 2019 experience study. The new rates are based on service and are generally lower than the previous rates for years 2-5 and slightly higher thereafter. Assumed rates of disability were changed as recommended in the June 30, 2019 experience study. The change results in fewer predicted disability retirements for males and females. The base mortality table for healthy annuitants and employees was changed from the RP-2014 table to the Pub-2010 General Mortality table, with adjustments. The base mortality table for disabled annuitants was changed from the RP-2014 disabled annuitant mortality table to the PUB-2010 General/Teacher disabled annuitant mortality table, with adjustments. The mortality improvement scale was changed from Scale MP-2018 to Scale MP- 2019. The assumed spouse age difference was changed from two years older for females to one year older. The assumed number of married male new retirees electing the 100 percent Joint & Survivor option changed from 35 percent to 45 percent. The assumed number of married female new retirees electing the 100 percent Joint & Survivor option changed from 15 percent to 30 percent. The corresponding number of married new retirees electing the Life annuity option was adjusted accordingly. Changes in Plan Provisions: Augmentation for current privatized members was reduced to 2.0 percent for the period July 1, 2020 through December 31, 2023 and 0.0 percent after. Augmentation was eliminated for privatizations occurring after June 30, 2020. Police and Fire Fund Changes in Actuarial Assumptions: The mortality projection scale was changed from MP-2018 to MP-2019. Changes in Plan Provisions: There have been no changes since the prior valuation. City of Rosemount Notes to Financial Statements December 31, 2020 64 The State Board of Investment, which manages the investments of PERA, prepares an analysis of the reasonableness on a regular basis of the long-term expected rate of return using a building- block method in which best-estimate ranges of expected future rates of return are developed for each major asset class. These ranges are combined to produce an expected long-term rate of return by weighting the expected future rates of return by the target asset allocation percentages. The target allocation and best estimates of geometric real rates of return for each major asset class are summarized in the following table: Asset Class Target Allocation Long-Term Expected Real Rate of Return Domestic stocks 35.5 % 5.10 % International stocks 17.5 5.30 Bonds (fixed income) 20.0 0.75 Alternative assets (private markets) 25.5 5.90 Cash equivalents 2.0 - Discount Rate The discount rate used to measure the total pension liability in 2020 was 7.50 percent. The projection of cash flows used to determine the discount rate assumed that contributions from plan members and employers will be made at rates set in Minnesota Statutes. Based on these assumptions, the fiduciary net positions of the General Employees Fund and the Police and Fire Fund was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Pension Liability Sensitivity The following presents the City's proportionate share of the net pension liability for all plans it participates in, calculated using the discount rate disclosed in the preceding paragraph, as well as what the City's proportionate share of the net pension liability would be if it were calculated using a discount rate one percentage point lower or one percentage point higher than the current discount rate: 1% Decrease to Discount Rate (6.50%) Current Discount Rate (7.50%) 1% Increase to Discount Rate (8.50%) City's proportionate share of the General Employees Fund net pension liability $ 6,966,263 $ 4,346,706 $ 2,185,783 City's proportionate share of the Police and Fire Fund net pension liability 5,664,194 2,841,839 506,835 Pension Plan Fiduciary Net Position Detailed information about each pension plan's fiduciary net position is available in a separately-issued PERA financial report that includes financial statements and required supplementary information. That report may be obtained on the Internet at www.mnpera.org. City of Rosemount Notes to Financial Statements December 31, 2020 65 Rosemount Fire Department Relief Association-Defined Benefit Pension Plan Plan Description The City of Rosemount contributes to the Rosemount Fire Department Relief Association Pension Plan; a single-employer retirement system administered by the Rosemount Fire Department Relief Association. The Rosemount Fire Department Relief Association provides a lump-sum benefit to its members upon retirement, total disability or death. These benefit provisions are established and can be amended by the Rosemount Fire Department Relief Association's Board of Trustees with approval by the Rosemount City Council. Benefits Individuals with at least 20 years of service who have reached age 50 are entitled to a lump sum payment of $7,400 per year of service plus a Supplemental Benefit of 10 percent of the regular lump sum distributions, but not more than $1,000. In the event an otherwise qualified member has less than 20 years of service, the member is eligible for a pension payment of 60 percent after 10 years of service, increasing 4 percent for each year of service after 10 years to a maximum of 100 percent. Members retiring before 50 do not receive distributions until age 50, but interest at 5 percent per year is added to their retirement benefit until paid. Employees Covered by Benefit Terms At the December 31, 2018 valuation date, the following employees were covered by the benefit terms: Inactive employees or beneficiaries currently receiving benefits - Inactive employees entitled to but not yet receiving benefits 4 Active members 42 46 Contributions The contribution requirements are established and may be amended by the Minnesota State Legislature. The Rosemount Fire Department Relief Association is comprised of volunteers. Therefore, there are no covered payroll amounts or member contributions required. Pension Costs At December 31, 2020, the City reported a net pension asset of $1,864,145 for the plan. The net pension asset was measured as of December 31, 2019. The total pension liability used to calculate the net pension asset in accordance with GASB 68 was determined by applying an actuarial formula to specific census data certified by the Department as of December 31, 2018. City of Rosemount Notes to Financial Statements December 31, 2020 66 The following table presents the changes in net pension asset during the year. Total Pension Liability (a) Plan Fiduciary Net Position (b) Net Pension Liability (Asset) (c) Beginning balance, January 1, 2020 $ 2,508,508 $ 3,823,169 $ (1,314,661) Changes for the year: Service cost 135,927 - 135,927 Interest on pension liability 158,132 - 158,132 Changes of assumptions 16,431 - 16,431 Changes of benefit terms 35,343 - 35,343 Contributions (state and local) - 180,583 (180,583) Net investment income - 725,014 (725,014) Benefit payments, including member contribution refunds (17,800) (17,800) - Administrative expense - (10,280) 10,280 Total net changes 328,033 877,517 (549,484) Ending balance, December 31, 2020 $ 2,836,541 $ 4,700,686 $ (1,864,145) For the year ended December 31, 2020, the City recognized pension expense of $60,994. At December 31, 2020, the City reported deferred inflows of resources and deferred outflows of resources, its contributions subsequent to the measurement date, related to pension from the following sources: Deferred Outflows of Resources Deferred Inflows of Resources Differences between expected and actual experience $ - $ 159,227 Changes in actuarial assumptions 76,838 46,403 Net differences between projected and actual earnings on pension plan investments - 266,100 Employer contributions subsequent to the measurement date 30,000 - Total $ 106,838 $ 471,730 City of Rosemount Notes to Financial Statements December 31, 2020 67 Deferred outflows of resources totaling $30,000 related to pensions resulting from the City's contributions to the plan subsequent to the measurement date will be recognized as a reduction of the net pension liability (asset) in the year ended December 31, 2021. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pension will be recognized in pension expense as follows: Future Recognition Years ending December 31: 2021 $ (96,591) 2022 (82,377) 2023 (30,429) 2024 (112,739) 2025 (15,069) Thereafter (57,687) Actuarial Assumptions The total pension liability at December 31, 2019 was determined using the entry age normal actuarial cost method and the following actuarial assumptions: Fifty (50) percent of active members will retire when reaching retirement eligibility (later of age 50 and 20 years of service); then fifty (50) percent retire each subsequent year until one hundred (100) percent retirement at the earlier of age 65 or 30 years of service. Actuarial valuation date: December 31, 2018 Measurement date of net pension asset: December 31, 2019 Actuarial cost method: Entry age normal Index rate for 20-year, tax exempt municipal bonds: 2.75 percent Long-term expected rate of return: 5.75 percent Discount rate: 5.75 percent Inflation: 2.50 percent Mortality rates were based on the July 1, 2018 Minnesota Public Employees' Retirement Association Police and Fire Plan actuarial valuation as described below: Healthy Pre-Retirement - RP-2014 employee generational mortality table projected with mortality improvement scale MP-2017, from a base year of 2006. Healthy Post-Retirement and Disabled - RP-2014 annuitant generational mortality table projected with mortality improvement scale MP-2017 from a base year of 2006. Male rates are adjusted by a factor of 0.96. The actuarial assumptions used in the December 31, 2018 valuation were based on the results of an actuarial experience study for the period January 1, 2018 - December 31, 2018. The benefit lump-sum payment per year of service increased from $7,300 to $7,400. City of Rosemount Notes to Financial Statements December 31, 2020 68 The long-term expected rate of return on pension plan investments was determined using a building-block method in which best estimates for expected future real rates of return (expected returns, net of pension plan investment expense and inflation) were developed for each major asset class. The asset class estimates were combined to produce the portfolio long-term expected rate of return by weighting the expected future real rates of return by the current asset allocation percentage and by adding expected inflation (2.50 percent). All results are then rounded to the nearest quarter percentage point. The best estimates of geometric real and nominal rates of return for each major asset class are summarized in the following table: Asset Class Allocation at Measurement Date Long-Term Expected Real Rate of Return Long-Term Expected Nominal Rate of Return Domestic equity 58.46 % 4.76 % 7.26 % International equity 1.94 5.41 7.91 Fixed income 13.86 2.01 4.51 Real estate and alternatives - 4.53 7.03 Cash and cash equivalents 25.74 0.74 3.24 Total 100.00 % 6.19 Reduced for assumed investment expense (0.40) Net assumed investment return (weighted average, rounded to ¼%) 5.75 % Discount Rate The discount rate used to measure the total pension liability was 5.75 percent. The discount rate was developed using the alternative method. Considering the plan's current overfunded status, combined with statutory funding requirements, it is assumed the projected plan assets will be adequate to pay future retiree benefits. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Net Pension Asset Sensitivity The following presents the City's net pension asset for the plan, calculated using the discount rate disclosed in the preceding paragraph, as well as what the City's net pension asset would be if it were calculated using a discount rate 1 percent lower or 1 percent higher than the current discount rate: 1% Decrease Current 1% Increase Net pension asset $ 1,796,051 $ 1,864,145 $ 1,929,780 City of Rosemount Notes to Financial Statements December 31, 2020 69 Pension Plan Fiduciary Net Position The Rosemount Fire Department Relief Association issues a publicly available financial report that includes financial statements and required supplementary information for the Rosemount Fire Department Relief Association Pension Plan. That report may be obtained by writing to City of Rosemount, 2875 145th Street West, Rosemount, Minnesota 55068-4997, or by calling 651-423-4411. Risk Management The City is exposed to various risks of loss related to torts; theft of, damage to, or destruction of assets; errors and omissions; workers' compensation; and health care of its employees. The City purchases commercial insurance and participates in a public entity risk pool called the Minnesota League of Cities Insurance Trust to provide coverage for these various risks of loss. Settled claims have not exceeded coverage in any of the past three years. There were no significant reductions in coverage compared to the prior year. The City has established an internal service fund (Insurance Fund) to account for and finance uninsured risks of loss related to torts, theft of, damage to and destruction of assets, including deductibles. The majority of the City's general liability and workers' compensation insurance premiums are paid for by this fund. At December 31, 2020, there are no claims liabilities in the Insurance Fund based on the requirements of Governmental Accounting Standards Board Statement Number 10, which requires that a liability for claims be reported if information prior to the issuance of the financial statements indicates that it is probable a liability has been incurred at the date of the financial statements and the amount of loss can be reasonably estimated. Commitments and Contingencies Claims and judgments are recorded as liabilities if all the conditions of Governmental Accounting Standards Board pronouncements are met. The liability and expenditure for claims and judgments are only reported in governmental funds if it has matured. Claims and judgments are recorded in the government-wide statements and proprietary funds as expenses when the related liabilities are incurred. From time to time, the City is party to various pending claims and legal proceedings. Although the outcome of such matters cannot be forecasted with certainty, it is the opinion of management and the City attorney that the likelihood is remote that any such claims or proceedings will have a material adverse effect on the City's financial position or results of operations. The City has received federal and state grants for specific purposes that are subject to review and audit by the grantor agencies. Such audits could lead to requests for reimbursements to the grantor agency for expenditures disallowed under terms of the grants. Management believes such disallowances, if any, would be immaterial. The City has active construction projects as of December 31, 2020. Work that has been completed on these projects but not yet paid for (including contract retainages) is reflected as accounts payable and expenditures. $3,380,042 remains on commitments on signed contracts that were not yet complete as of year-end. City of Rosemount Notes to Financial Statements December 31, 2020 70 In 2007, the City, through the Port Authority TIF (Authority) which was established under Minnesota Statutes Chapter 469.0813, entered into an agreement with 146th Street Partners, Limited Partnership (Developer) in the form of a tax incremental revenue note to stimulate economic development. The amount of the obligation is $1,500,000, and is payable to the developer solely from available tax increments collected from a specific portion of the development. Payments are scheduled through the year 2032, and carry an interest rate of 4.96 percent. The agreement is authorized through the Contract for Private Redevelopment between the Authority and Developer. The Developer pays property taxes as they become due, and since meeting the criteria established in the development agreement, is entitled to incentive payments that directly correlate to the taxes paid. The incentive is based on the repayment schedule in the tax incremental revenue note but only to the extent of available tax increment, defined as 90 percent of the tax increment that is received by the Authority in the six-month period immediate before each payment date. The obligation does not constitute a charge upon any funds of the City. In the event that future tax increments are not sufficient to pay off the obligation, the obligation terminates with no further liability to the City. Since the amount of future payments is contingent on the collection of future TIF increments, the obligation is not reported as a liability in the accompanying financial statements. Incentive payments for the year ended December 31, 2020 were $147,438. In 2020, the City, through the Port Authority TIF (Authority) which was established under Minnesota Statutes Chapter 469.0813, entered into an agreement with the Morrison Project, LLC (Developer) in the form of a tax incremental revenue note to stimulate economic development. The amount of the obligation is $3,400,000, and is payable to the developer solely from available tax increments collected from a specific portion of the development. Payments are scheduled through the year 2049, and carry an interest rate of 4.35 percent. In addition, the Authority agreed to pay the Developer $600,000, with no obligation to repay, for the acquisition of the property to be developed. The agreement is authorized through the Contract for Private Redevelopment between the Authority and Developer. The Developer pays property taxes as they become due, and since meeting the criteria established in the development agreement, is entitled to incentive payments that directly correlate to the taxes paid. The incentive is based on the repayment schedule in the tax incremental revenue note but only to the extent of available tax increment, defined as 95 percent of the tax increment that is received by the Authority in the six-month period immediate before each payment date. The obligation does not constitute a charge upon any funds of the City. In the event that future tax increments are not sufficient to pay off the obligation, the obligation terminates with no further liability to the City. Since the amount of future payments is contingent on the collection of future TIF increments, the obligation is not reported as a liability in the accompanying financial statements. Incentive payments for the year ended December 31, 2020 were $600,000. During 2017 and 2018, the City entered into several subscription agreements with community solar garden operators to purchase the right to receive bill credits associated with energy production of the solar community garden projects. The solar capacity and energy will be produced at installations to be constructed and interconnected with the distribution facilities of Northern States Power Company d/b/a Xcel Energy. Once the solar project is operating, the City will receive bill credits against its monthly retail electrical bill from Xcel. The term of the agreement is set to match the term of the power purchase agreement between Xcel Energy and each solar garden operator of 25 years from the date of commercial operations. Commercial operations commenced in 2019 for a majority of the projects. City of Rosemount Notes to Financial Statements December 31, 2020 71 Postemployment Benefits Other Than Pensions General Information About the Plan Plan Description The City's other postemployment benefit (OPEB) plan provides insurance benefits for eligible retirees through the City's OPEB plan, a single-employer defined benefit plan administered by the City. All post-employment benefits are based on contractual agreements with employee groups. These contractual agreements do not include any specific contribution or funding requirements. The plan does not issue a publically available financial report. Benefits Provided All retirees of the City have the option under state law to continue their medical insurance coverage through the City from the time of retirement until the employee reaches the age of eligibility for Medicare. For members of all employee groups, the retiree must pay the full premium to continue coverage for medical and dental insurance. The City is legally required to include any retirees for whom it provides health insurance coverage in the same insurance pool as its active employees, whether the premiums are paid by the City or the retiree. Consequently, participating retirees are considered to receive a secondary benefit known as an "implicit rate subsidy." This benefit relates to the assumption that the retiree is receiving a more favorable premium rate than they would otherwise be able to obtain if purchasing insurance on their own, due to being included in the same pool with the City's younger and statistically healthier active employees. Employees Covered by Benefit Terms At the December 31, 2019 valuation date, the following employees were covered by the benefit terms: Active employees electing coverage 65 Active employees waiving coverage 22 Retirees electing coverage 2 89 Total OPEB Liability The City's total OPEB liability of $758,444 was measured as of December 31, 2019, and was determined in accordance with the Alternative Measurement Method (AMM), prescribed by GASB 75 for employers with under 100 plan participants, as of that date, in place of an actuarial valuation. City of Rosemount Notes to Financial Statements December 31, 2020 72 Valuation Assumptions and Other Inputs The total OPEB liability in the December 31, 2019 valuation was determined using the following valuation assumptions and other inputs, applied to all periods included in the measurement, unless otherwise specified: Discount rate 2.75 percent, based on index rate for 20-year, tax exempt municipal bonds Inflation 2.50 percent Healthcare cost trend rates 6.2 percent initially, decreased annually to a minimum of 5.2% in 2023, gradually decreasing over several decades to an ultimate rate of 4.0 percent in 2075 and later years. Salary increases were based on a service-related table. Mortality rates were based on the RP 2014 tables (with adjustments) as the base table and project future improvements with MP-2018 generational improvement scale, as adopted by the Council in connection with the 2015 six-year Experience Study for the General Employees Plan and the 2016 four-year Experience Study for the Police and Fire Plan and performed by the actuary for the Public Employees Retirement Association of Minnesota. The valuation assumptions used in the December 31, 2019 valuation were based on the results of the Public Employees Retirement Association of Minnesota actuarial valuation as of June 30, 2019. Changes in the Total OPEB Liability Balance at December 31, 2019 $ 829,900 Changes for the year: Service cost 67,726 Interest 32,453 Changes in assumptions or other inputs (34,127) Differences between expected and actual experience (91,750) Benefit payments (45,758) Net changes (71,456) Balance at December 31, 2020 $ 758,444 Changes of assumptions or other inputs reflect an update of demographic assumptions based upon the most recent PERA experience studies, a change in the annual claim costs to reflect current medical provisions and premiums, and an update to the medical trend rates to be consistent with the most recent Getzen model application. Sensitivity of the Total OPEB Liability to Changes in the Discount Rate The following presents the total OPEB liability of the City, as well as what the City's total OPEB liability would be if it were calculated using a discount rate that is 1-percentage-point lower or 1-percentage-point higher than the current discount rate: 1% Decrease (1.75%) Discount Rate (2.75%) 1% Increase (3.75%) Total OPEB liability $ 825,097 $ 758,444 $ 697,669 City of Rosemount Notes to Financial Statements December 31, 2020 73 Sensitivity of the Total OPEB Liability to Changes in the Healthcare Cost Trend Rates The following presents the total OPEB liability of the City, as well as what the City's total OPEB liability would be if it were calculated using healthcare cost trend rates that are 1-percentage-point lower or 1-percentage-point higher than the current healthcare cost trend rates: 1% Decrease Current Trend Rate 1% Increase Total OPEB liability $ 675,363 $ 758,444 $ 857,380 OPEB Expense and Deferred Outflow s of Resources and Deferred Inflows of Resources Related to OPEB For the year ended December 31, 2020, the City recognized negative OPEB expense of ($25,698). At December 31, 2020, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources: Deferred Outflows of Resources Deferred Inflows of Resources Employer contributions subsequent to the measurement date $ 45,646 $ - The AMM method only allows amortization of investment gains and losses, of which the City's plan had none. All other gains and losses due to experience and assumption changes are recognized immediately in the annual OPEB expense. $45,646 reported as deferred outflows related to OPEB resulting from the employer contributions subsequent to the measurement date will be recognized as a reduction of the net OPEB liability in the year ended December 31, 2021. Effect of New Accounting Standards on Current-Period Financial Statements The Governmental Accounting Standards Board (GASB) has approved the following: Statement No. 87, Leases Statement No. 91, Conduit Debt Obligations Statement No. 92, Omnibus 2020 Statement No. 96, Subscription-Based Information Technology Arrangements Statement No. 97, Certain Component Unit Criteria, and Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans – an amendment of GASB Statements No.14 and No. 84, and a supersession of GASB Statement No.32 When they become effective, application of these standards may restate portions of these financial statements. R E Q U I R E D S U P P L E M E N T A R Y I N F O R M A T I O N Variance With Original Final Actual Final Budget Revenues Taxes: General property tax 9,369,709$ 9,369,709$ 9,387,667$ 17,958$ Fiscal disparities 1,361,991 1,361,991 1,361,991 - Other 401,000 401,000 383,372 (17,628) Total taxes 11,132,700 11,132,700 11,133,030 330 Intergovenmental revenues: Federal grants - 1,833,933 1,833,933 - State aid, police 220,000 220,000 243,106 23,106 State aid, general government 80,000 80,000 69,823 (10,177) State aid, highway 300,000 300,000 330,711 30,711 Other 103,800 103,800 111,473 7,673 Total intergovernmental revenues 703,800 2,537,733 2,589,046 51,313 Public charges for services: General government 908,700 908,700 988,121 79,421 Public safety 42,600 42,600 34,059 (8,541) Highways and streets 102,000 102,000 124,804 22,804 Culture, education and recreation 301,400 301,400 81,823 (219,577) SAC 5,500 5,500 8,598 3,098 Total public charges for services 1,360,200 1,360,200 1,237,405 (122,795) Licenses and permits: Business 59,500 59,500 41,259 (18,241) Nonbusiness 740,800 740,800 1,057,372 316,572 Total licenses and permits 800,300 800,300 1,098,631 298,331 Fines and forfeitures: County 95,000 95,000 75,452 (19,548) Special assessments - - 142 142 Investment income and miscellaneous: Interest earnings 151,000 151,000 179,703 28,703 Change in fair value of investments - - 86,846 86,846 Miscellaneous general revenues 58,500 58,500 20,048 (38,452) Donations - 11,628 11,628 - Rents 2,500 2,500 2,510 10 Total investment income and miscellaneous 212,000 223,628 300,735 77,107 Total revenues 14,304,000 16,149,561 16,434,441 284,880 Other Financing Sources Transfers in 3,500 3,500 6,714 3,214 Total revenues and other financing sources 14,307,500$ 16,153,061$ 16,441,155$ 288,094$ Budgeted Amounts Year Ended December 31, 2020 City of Rosemount Schedule of Revenues and Other Sources Compared to Budget (Budgetary Basis) - Budget and Actual - General Fund Required Supplementary Information See notes to required supplementary information 74 Variance With Original Final Actual Final Budget Current Expenditures General government: Mayor and council 341,600$ 396,533$ 452,776$ (56,243)$ Executive 719,900 719,900 696,651 23,249 Elections 62,300 62,300 55,006 7,294 Finance 665,600 665,600 675,756 (10,156) Community development 1,247,000 1,247,000 1,204,962 42,038 Other general government 373,900 1,077,900 1,224,934 (147,034) Total general government 3,410,300 4,169,233 4,310,085 (140,852) Public safety: Police department 4,640,000 4,645,250 4,484,573 160,677 Fire department 484,500 486,924 470,132 16,792 Total public safety 5,124,500 5,132,174 4,954,705 177,469 Public works: Government building maintenance 653,300 1,103,300 1,069,673 33,627 Fleet maintenance 633,100 633,100 666,673 (33,573) Street maintenance 1,479,900 1,654,900 1,638,944 15,956 Park maintenance 1,177,600 1,627,600 1,570,775 56,825 Total public works 3,943,900 5,018,900 4,946,065 72,835 Culture, education and recreation 1,698,800 1,702,754 1,515,223 187,531 Other Financing Uses Transfers out 130,000 130,000 265,000 (135,000) Total expenditures and other financing uses 14,307,500$ 16,153,061$ 15,991,078 161,983$ Beginning of Year Budget Basis Encumbrances 1,506,910 End of Year Budget Basis Encumbrances (2,791,723) GAAP Basis Expenditures and Other Financing Uses 14,706,265$ Budgeted Amounts Year Ended December 31, 2020 City of Rosemount Schedule of Expenditures and Other Uses (Budgetary Basis) - Budget and Actual - General Fund Required Supplementary Information See notes to required supplementary information 75 Required Supplementary Information (Last Ten Years*)City's State's and State's City's Proportionate Proportionate ProportionateCity's Share of the Share of the Share of the City's Proportionate Net Pension Net Pension Net Pension Plan FiduciaryProportion Share of the Liability Liability City's Liability as a Net PositionCity Fiscal PERA Fiscal of the Net Net Pension Associated AssociatedCovered Percentage of as a PercentageYear End Year End Date Pension Liability With City With City Payroll ** Covered Payroll of the totalDate (Measurement Date) Liability (a) (b) (a+b) (c) ((a+b)/c) Pension Liability12/31/15 6/30/15 0.0645% 3,342,725$ N/A3,342,725$ 3,896,543$ 85.79% 78.20%12/31/16 6/30/16 0.0653% 5,302,014 69,191$ 5,371,205 4,004,601 134.13% 68.90%12/31/17 6/30/17 0.0651% 4,155,941 52,248 4,208,189 4,192,648 100.37% 75.90%12/31/18 6/30/18 0.0688% 3,816,742 125,096 3,941,838 4,622,170 85.28% 79.50%12/31/19 6/30/19 0.0701% 3,875,672 120,495 3,996,167 4,937,666 80.93% 80.20%12/31/20 6/30/20 0.0725% 4,346,706 133,973 4,480,679 5,170,027 86.67% 79.10%* This schedule is provided prospectively beginning with the fiscal year ended December 31, 2015.**For purposes of this schedule, covered payroll is defined as "pensionable wages."Contributions inRelation to the ContributionsStatutorily Statutorily Contribution as a PercentageCity Fiscal PERA Fiscal Required Required Deficiency Covered of CoveredYear End Year End Date Contributions Contributions (Excess) Payroll ** Payroll Date (Measurement Date) (a) (b) (a-b) (d) (b/d)12/31/15 6/30/15 292,241$ 292,241$ -$ 3,896,543$ 7.50%12/31/16 6/30/16 308,184 308,184 - 4,109,750 7.50%12/31/17 6/30/17 331,224 331,224 - 4,417,884 7.50%12/31/18 6/30/18 356,724 356,724 - 4,756,318 7.50%12/31/19 6/30/19 397,839 397,839 - 5,303,999 7.50%12/31/20 6/30/20 392,643 392,643 - 5,235,241 7.50%* This schedule is presented prospectively beginning with the fiscal year ended December 31, 2015.**For purposes of this schedule, covered payroll is defined as "pensionable wages."City of RosemountSchedule of City's and Nonemployer Proportionate Share of the Net Pension Liability - Public Employees General Employees Retirement FundYear Ended December 31, 2020Year Ended December 31, 2020Schedule of Employer Contributions - Public Employees General Employees Retirement FundRequired Supplementary Information (Last Ten Years*)See notes to required supplementary information76 Required Supplementary Information (Last Ten Years*)City's State's and State's City's Proportionate Proportionate ProportionateCity's Share of the Share of the Share of theCity's Proportionate Net Pension Net Pension Net Pension Plan FiduciaryProportion Share of the Liability Liability City's Liability as a Net PositionCity Fiscal PERA Fiscal of the Net Net Pension Associated AssociatedCovered Percentage of as a PercentageYear End Year End Date Pension Liability With City With City Payroll ** Covered Payroll of the TotalDate (Measurement Date) Liability (a) (b) (a+b) (b) (a/b) Pension Liability12/31/15 6/30/15 0.2130% 2,420,178$ N/A 2,420,178$ 1,984,803$ 121.94% 86.60%12/31/16 6/30/16 0.2060% 8,267,138 N/A 8,267,138 1,895,019 436.26% 63.90%12/31/17 6/30/17 0.2050% 2,767,744 N/A 2,767,744 2,107,072 131.35% 85.40%12/31/18 6/30/18 0.2179% 2,322,590 N/A 2,322,590 2,297,620 101.09% 88.80%12/31/19 6/30/19 0.2255% 2,400,675 N/A 2,400,675 2,381,224 100.82% 89.30%12/31/20 6/30/20 0.2156% 2,841,839 66,955$ 2,908,794 2,436,061 116.66% 87.20%* This schedule is provided prospectively beginning with the fiscal year ended December 31, 2015.**For purposes of this schedule, covered payroll is defined as "pensionable wages."Required Supplementary Information (Last Ten Years*)Contributions inRelation to the ContributionsStatutorily Statutorily Contribution as a PercentageCity Fiscal PERA Fiscal Required Required Deficiency Covered of CoveredYear End Year End Date Contributions Contributions (Excess) Payroll ** Payroll Date (Measurement Date) (a) (b) (a-b) (d) (b/d)12/31/15 6/30/15321,538$ 321,538$ -$ 1,984,803$ 16.20%12/31/16 6/30/16326,037 326,037 - 2,012,572 16.20%12/31/17 6/30/17356,264 356,264 - 2,199,164 16.20%12/31/18 6/30/18384,894 384,894 - 2,375,890 16.20%12/31/19 6/30/19418,417 418,417 - 2,468,538 16.95%12/31/20 6/30/20446,860 446,860 - 2,524,631 17.70%* This schedule is provided prospectively beginning with the fiscal year ended December 31, 2015.**For purposes of this schedule, covered payroll is defined as "pensionable wages."Year Ended December 31, 2020City of RosemountSchedule of City's and Nonemployer Proportionate Share of the Net Pension Liability - Public Employees Police and Fire FundYear Ended December 31, 2020Schedule of Employer Contributions - Public Employees Police and Fire FundSee notes to required supplementary information77 City's City's City's City's City's City's Year End 2015 Year End 2016 Year End 2017 Year End 2018 Year End 2019 Year End 2020Measurement Measurement Measurement Measurement Measurement Measurement Date 2014 Date 2015 Date 2016 Date 2017 Date 2018 Date 2019Total Pension LiabilityService cost113,354$ 116,471$ 133,433$ 136,040$ 141,612$ 135,927$ Interest125,956 137,850 148,293 167,555 164,841 158,132 Changes of assumptions- 32,190 (68,607) - 57,836 16,431 Differences between expected and actual experience- - (76,515) - (133,406) - Changes of benefit terms- 22,230 52,512 24,100 62,194 35,343 Benefit payments, including membercontribution refunds- (88,394) - (576,871) (170,088) (17,800) Net change in total pension liability239,310 220,347 189,116 (249,176) 122,989 328,033 Total Pension Liability, Beginning1,985,922 2,225,232 2,445,579 2,634,695 2,385,519 2,508,508 Total Pension Liability, Ending2,225,232$ 2,445,579$ 2,634,695$ 2,385,519$ 2,508,508$ 2,836,541$ Plan Fiduciary Net PositionContributions, state and local296,595$ 244,269$ 170,901$ 170,267$ 180,579$ 180,583$ Contributions, donations and other- - 277 - - - Net investment income186,351 (44,297) 271,652 502,429 (147,171) 725,014 Benefit payments, including membercontribution refunds- (88,394) - (576,871) (170,088) (17,800) Administrative costs(8,300) (13,285) (8,570) (8,500) (8,805) (10,280) Net change in plan fiduciary net position474,646 98,293 434,260 87,325 (145,485) 877,517 Plan Fiduciary Net Position, Beginning2,874,130 3,348,776 3,447,069 3,881,329 3,968,654 3,823,169 Plan Fiduciary Net Position, Ending3,348,776$ 3,447,069$ 3,881,329$ 3,968,654$ 3,823,169$ 4,700,686$ Net Pension Liability/(Asset), Ending(1,123,544)$ (1,001,490)$ (1,246,634)$ (1,583,135)$ (1,314,661)$ (1,864,145)$ Plan Fiduciary Net Position as a Percentage of the Total Pension Liability150.49% 140.95% 147.32% 166.36% 152.41% 165.72%* This schedule is provided prospectively beginning with the fiscal Year Ended December 31, 2015.City of RosemountRequired Supplementary Information (Last Ten Years*)Schedule of Changes in the Rosemount Fire Department Relief Association's Net Pension Asset and Related RatiosYear Ended December 31, 2020See notes to required supplementary information78 Required Supplementary Information (Last Ten Years*) Non-Employer Statutorily Contribution Year End Determined Actual Contribution State 2% Date Contribution Contribution Excess Fire Aid 12/31/15 -$ 109,100$ 109,100$ 135,169$ 12/31/16 - 30,000 30,000 140,901 12/31/17 - 30,000 30,000 140,267 12/31/18 - 30,000 30,000 150,579 12/31/19 - 30,000 30,000 150,583 12/31/20 - 30,000 30,000 160,169 * This schedule is provided prospectively beginning with the fiscal year ended December 31, 2015. City Contributions Year Ended December 31, 2020 City of Rosemount Schedule of Employer Contributions - Rosemount Fire Department Relief Association See notes to required supplementary information 79 Required Supplementary Information (Last Ten Years*) Schedule of Changes in the City's Total OPEB Liability and Related Ratios Year Ended December 31, 2020 City's City's City's Year End 2018 Year End 2019 Year End 2020 Measurement Measurement Measurement Date 2017 Date 2018 Date 2019 Total OPEB Liability Service cost 59,324$ 68,385$ 67,726$ Interest 29,170 28,211 32,453 Changes of assumptions 32,417 (28,245) (34,127) Differences between expected and actual experience - - (91,750) Benefit payments (41,850) (44,738) (45,758) Net change in total OPEB liability 79,061 23,613 (71,456) Total OPEB Liability, Beginning 727,226 806,287 829,900 Total OPEB Liability, Ending 806,287$ 829,900$ 758,444$ OPEB-Eligible Payroll for the Measurement Period 6,514,100$ 7,102,494$ 7,349,777$ Net OPEB Liability as a Percent of Eligible Payroll 12.4% 11.7% 10.3% * This schedule is provided prospectively beginning with the fiscal year ended December 31, 2018. City of Rosemount See notes to required supplementary information 80 City of Rosemount Notes to Required Supplementary Information Year Ended December 31, 2020 81 Budgetary Information Budgetary information is derived from the annual operating budget and is presented using generally accepted accounting principles and the modified accrual basis of accounting with departures from generally accepted accounting principles for encumbrances. Public Employees Retirement Association (PERA) The amounts determined for each fiscal year were determined as of the calendar year-end and occurred within the fiscal year. The City is required to present the last ten years of data; however, accounting standards allow the presentation of as many years as are available until ten fiscal years are presented. Changes in benefit terms: There were no changes of benefit terms for any participating employer in the Public Employees Retirement Association. 2020 General Employees Fund Changes Changes in Actuarial Assumptions The price inflation assumption was decreased from 2.50 percent to 2.25 percent. The payroll growth assumption was decreased from 3.25 percent to 3.00 percent. Assumed salary increase rates were changed as recommended in the June 30, 2019 experience study. The net effect is assumed rates that average 0.25 percent less than previous rates. Assumed rates of retirement were changed as recommended in the June 30, 2019 experience study. The changes result in more unreduced (normal) retirements and slightly fewer Rule of 90 and early retirements. Assumed rates of termination were changed as recommended in the June 30, 2019 experience study. The new rates are based on service and are generally lower than the previous rates for years 2-5 and slightly higher thereafter. Assumed rates of disability were changed as recommended in the June 30, 2019 experience study. The change results in fewer predicted disability retirements for males and females. The base mortality table for healthy annuitants and employees was changed from the RP-2014 table to the Pub-2010 General Mortality table, with adjustments. The base mortality table for disabled annuitants was changed from the RP-2014 disabled annuitant mortality table to the PUB-2010 General/Teacher disabled annuitant mortality table, with adjustments. The mortality improvement scale was changed from Scale MP-2018 to Scale MP-2019. The assumed spouse age difference was changed from two years older for females to one year older. The assumed number of married male new retirees electing the 100 percent Joint & Survivor option changed from 35 percent to 45 percent. The assumed number of married female new retirees electing the 100 percent Joint & Survivor option changed from 15 percent to 30 percent. The corresponding number of married new retirees electing the Life annuity option was adjusted accordingly. City of Rosemount Notes to Required Supplementary Information Year Ended December 31, 2020 82 Changes in Plan Provisions Augmentation for current privatized members was reduced to 2.0 percent for the period July 1, 2020 through December 31, 2023 and 0.0 percent after. Augmentation was eliminated for privatizations occurring after June 30, 2020. 2019 General Employees Fund Changes Changes in Actuarial Assumptions The mortality projection scale was changed from MP-2017 to MP-2018. Changes in Plan Provisions The employer supplemental contribution was changed prospectively, decreasing from $31 million to $21 million per year. The State's special funding contribution was changed prospectively, requiring $16 million due per year through 2031. 2018 General Employees Fund Changes Changes in Actuarial Assumptions The mortality projection scale was changed from MP-2015 to MP-2017. The assumed benefit increase was changed from 1.00 percent per year through 2044 and 2.50 percent per year thereafter to 1.25 percent per year. Changes in Plan Provisions The augmentation adjustment in early retirement factors is eliminated over a five-year period starting July 1, 2019, resulting in actuarial equivalence after June 30, 2024. Interest credited on member contributions decreased from 4.0 percent to 3.0 percent, beginning July 1, 2018. Deferred augmentation was changed to 0.00 percent, effective January 1, 2019. Augmentation that has already accrued for deferred members will still apply. Contribution stabilizer provisions were repealed. City of Rosemount Notes to Required Supplementary Information Year Ended December 31, 2020 83 Post-retirement benefit increases were changed from 1.0 percent per year with a provision to increase to 2.5 percent upon attainment of 90 percent funding ratio to 50 percent of the Social Security Cost of Living Adjustment, not less than 1.0 percent and not more than 1.5 percent, beginning January 1, 2019. For retirements on or after January 1, 2024, the first benefit increase is delayed until the retiree reaches Normal Retirement Age. Does not apply to Rule of 90 retirees, disability benefit recipients or survivors. Actuarial equivalent factors were updated to reflect revised mortality and interest assumptions. 2017 General Employees Fund Changes Changes in Actuarial Assumptions The Combined Service Annuity (CSA) loads were changed from 0.8 percent for active members and 60 percent for vested and nonvested deferred members. The revised CSA loads are now zero percent for active member liability, 15.0 percent for vested deferred member liability and 3.0 percent for nonvested deferred member liability. The assumed post-retirement benefit increase rate was changed from 1.0 percent per year for all years to 1.0 percent per year through 2044, and 2.5 percent per year thereafter. Changes in Plan Provisions The State's contribution for the Minneapolis Employees Retirement Fund equals $16,000,000 in 2017 and 2018, and $6,000,000 thereafter. The Employer Supplemental Contribution for the Minneapolis Employees Retirement Fund changed from $21,000,000 to $31,000,000 in calendar years 2019 to 2031. The State's contribution changed from $16,000,000 to $6,000,000 in calendar years 2019 to 2031. 2016 General Employees Fund Changes Changes in Actuarial Assumptions The assumed post-retirement benefit increase rate was changed from 1.0 percent per year through 2035, and 2.5 percent per year thereafter, to 1.0 percent per year for all years. The assumed investment return was changed from 7.9 percent to 7.5 percent. The single discount rate was changed from 7.9 percent to 7.5 percent. Other assumptions were changed pursuant to the experience study dated June 30, 2015. The assumed future salary increases, payroll growth and inflation were decreased by 0.25 percent to 3.25 percent for payroll growth, and 2.50 percent for inflation. 2015 General Employees Fund Changes Changes in Actuarial Assumptions The assumed post-retirement benefit increase rate was changed from 1.0 percent per year through 2030, and 2.5 percent per year thereafter, to 1.0 percent per year through 2035, and 2.5 percent per year thereafter. City of Rosemount Notes to Required Supplementary Information Year Ended December 31, 2020 84 Changes in Plan Provisions On January 1, 2015, the Minneapolis Employees Retirement Fund was merged into the General Employees Retirement Fund, which increased the total pension liability by $1.1 billion and increased the fiduciary plan net position by $892 million. Upon consolidation, state and employer contributions were revised; the State's contribution of $6 million, which meets the special funding situation definition, was due September 2015. 2020 Police and Fire Fund Changes Changes in Actuarial Assumptions The mortality projection scale was changed from MP-2018 to MP-2019. 2019 Police and Fire Fund Changes Changes in Actuarial Assumptions The mortality projection scale was changed from MP-2017 to MP-2018. 2018 Police and Fire Fund Changes Changes in Actuarial Assumptions The mortality projection scale was changed from MP-2016 to MP-2017. Changes in Plan Provisions Post-retirement benefit increases were changed to 1.0 percent for all years, with no trigger. An end date of July 1, 2048 was added to the existing $9.0 million state contribution. New annual state aid will equal $4.5 million in fiscal years 2019 and 2020, and $9.0 million thereafter until the plan reaches 100 percent funding, or July 1, 2048, if earlier. Member contributions were changed from 10.8 percent to 11.3 percent of pay, effective January 1, 2019 and 11.8 percent of pay, effective January 1, 2020. Employer contributions were changed from 16.20 percent to 16.95 percent of pay, effective January 1, 2019 and 17.70 percent of pay, effective January 1, 2020. Interest credited on member contributions decreased from 4.0 percent to 3.0 percent, beginning July 1, 2018. Deferred augmentation was changed to 0.00 percent, effective January 1, 2019. Augmentation that has already accrued for deferred members will still apply. Actuarial equivalent factors were updated to reflect revised mortality and interest assumptions. City of Rosemount Notes to Required Supplementary Information Year Ended December 31, 2020 85 2017 Police and Fire Fund Changes Changes in Actuarial Assumptions Assumed salary increases were changed as recommended in the June 30, 2016 experience study. The net effect is proposed rates that average 0.34 percent lower than the previous rates. Assumed rates of retirement were changed, resulting in fewer retirements. The Combined Service Annuity (CSA) load was 30 percent for vested and nonvested deferred members. The CSA has been changed to 33 percent for vested members and 2 percent for nonvested members. The base mortality table for healthy annuitants was changed from the RP-2000 fully generational table to the RP-2014 Fully Generational Table (with a base year of 2006), with male rates adjusted by a factor of 0.96. The mortality improvement scale was changed from Scale AA to Scale MP-2016. The base mortality table for disabled annuitants was changed from the RP-2000 Disabled Mortality Table to the mortality tables assumed for healthy retirees. Assumed termination rates were decreased to 3.0 percent for the first three years of service. Rates beyond the select period of three years were adjusted, resulting in more expected terminations overall. Assumed percentage of married female members was decreased from 65 percent to 60 percent. Assumed age difference was changed from separate assumptions for male members (wives assumed to be three years younger) and female members (husbands assumed to be four years older) to the assumption that males are two years older than females. The assumed percentage of female members electing joint and survivor annuities was increased. The assumed post-retirement benefit increase rate was changed from 1.00 percent for all years to 1.00 percent per year through 2064, and 2.50 percent thereafter. The single discount rate changed from 5.60 percent to 7.50 percent. 2016 Police and Fire Fund Changes Changes in Actuarial Assumptions The assumed post-retirement benefit increase rate was changed from 1.0 percent per year through 2037, and 2.5 percent thereafter, to 1.0 percent per year for all future years. The assumed investment return was changed from 7.9 percent to 7.5 percent. The single discount rate changed from 7.9 percent to 5.6 percent. The assumed future salary increases, payroll growth and inflation were decreased by 0.25 percent to 3.25 percent for payroll growth, and 2.50 percent for inflation. City of Rosemount Notes to Required Supplementary Information Year Ended December 31, 2020 86 2015 Police and Fire Fund Changes Changes in Actuarial Assumptions The assumed post-retirement benefit increase rate was changed from 1.0 percent per year through 2030, and 2.5 percent per year thereafter, to 1.0 percent per year through 2037, and 2.5 percent per year thereafter. Changes in Plan Provisions The post-retirement benefit increase to be paid after attainment of the 90 percent funding threshold was changed, from inflation up to 2.5 percent, to a fixed rate of 2.5 percent. Rosemount Fire Department Relief Association-Defined Benefit Pension Plan The City is required to present the last ten years of data; however, accounting standards allow the presentation of as many years as are available until ten fiscal years are presented. 2020 Changes Changes in Plan Provisions The lump sum benefit increased from $7,300 to $7,400 per year. Changes in Actuarial Assumptions The expected investment return and discount rate decreased from 6.00 percent to 5.75 percent to reflect updated capital market assumptions. 2019 Changes Changes in Plan Provisions The lump sum benefit increased from $7,200 to $7,300 per year. Changes in Actuarial Assumptions The expected investment return and discount rate decreased from 6.75 percent to 6.00 percent to reflect updated capital market assumptions. The mortality, withdrawal, and disability assumptions were updated from the rates used in the July 1, 2016 Minnesota PERA Police & Fire Plan actuarial valuation. The inflation assumption was updated from 2.75 percent to 2.50 percent. 2018 Changes Changes in Plan Provisions The lump sum benefit increased from $7,100 to $7,200 per year. City of Rosemount Notes to Required Supplementary Information Year Ended December 31, 2020 87 2017 Changes Changes in Plan Provisions The lump sum benefit increased from $7,000 to $7,100 per year. Changes in Actuarial Assumptions The expected investment return and discount rate increased from 5.75 percent to 6.75 percent to reflect updated capital market assumptions. 2016 Changes Changes in Plan Provisions The lump sum benefit increased from $6,900 to $7,000 per year. Changes in Actuarial Assumptions The discount rate was updated from 6.00 percent to 5.75 percent. Other Post Employment Benefit (OPEB) Plan The City implemented GASB Statement No. 75 in fiscal year 2018. Information prior to fiscal year 2018 is not available. The City is required to present the last ten fiscal years of data; however, accounting standards allow the presentation of as many years as are available until ten fiscal years are presented. Accumulation of Assets No assets are accumulated in a trust that meets the criteria in paragraph 4 of Statement No. 75. Changes in benefit terms: There were no changes of benefit terms. City of Rosemount Notes to Required Supplementary Information Year Ended December 31, 2020 88 2020 Changes Changes in Valuation Assumptions The discount rate was changed from 3.71 percent to 2.75 percent based on updated 20-year municipal bond rates. Healthcare trend rates were reset to reflect updated cost increase expectations, including the repeal of the Affordable Care Act’s Excise Tax on high-cost health insurance plans. Medical per capita claims costs were updated to reflect recent experience, including an adjustment to reflect age/gender based risk scores published by the Society of Actuaries Salary increase rates were updated from the July 1, 2017 PERA of Minnesota General Employees and Police & Fire actuarial valuations to the rates used in the July 1, 2019 valuations. Mortality rates were updated from the RP-2014 headcount-weighted tables to the rates used in the July 1, 2019 PERA of Minnesota General Employees and Police & Fire actuarial valuations to reflect recently-published mortality rates. Coverage elections and assumed retirement ages were updated for Police and Non-Police Employees to reflect recent plan experience. 2019 Changes Changes in Valuation Assumptions The discount rate changed from 3.31 percent in 2018 to 3.71 percent in 2019. 2018 Changes Changes in Valuation Assumptions The discount rate changed from 3.78 percent in 2017 to 3.31 percent in 2018. S U P P L E M E N T A R Y I N F O R M A T I O N Total Fire Nonmajor Safety Port Authority Governmental PEG Fees Education GIS General Funds Assets Cash and investments 94,896$ 3,728$ 90,040$ 515,033$ 703,697$ Receivables from: Accounts 7,088 - - - 7,088 Prepaid items - - - 455 455 Total assets 101,984$ 3,728$ 90,040$ 515,488$ 711,240$ Liabilities Accounts payable 14,789$ -$ -$ 17,851$ 32,640$ Accrued liabilities - - - 933 933 Total liabilities 14,789 - - 18,784 33,573 Fund Balances Nonspendable - - - 455 455 Restricted 87,195 - - - 87,195 Committed - 3,728 90,040 496,249 590,017 Total fund balances 87,195 3,728 90,040 496,704 677,667 Total liabilities and fund balances 101,984$ 3,728$ 90,040$ 515,488$ 711,240$ Special Revenue Funds City of Rosemount Combining Balance Sheet - Nonmajor Governmental Funds December 31, 2020 89 Total Fire Nonmajor Safety Port Authority Governmental PEG Fees Education GIS General Funds Revenues Taxes 28,956$ -$ -$ 112,000$ 140,956$ Public charges for services - - 23,346 (1,475) 21,871 Miscellaneous 168 8 165 3,907 4,248 Total revenues 29,124 8 23,511 114,432 167,075 Expenditures Current: Public works - - 556 - 556 Culture, education and recreation 18,865 - - - 18,865 Conservation and development - - - 79,554 79,554 Total expenditures 18,865 - 556 79,554 98,975 Excess (deficiency) of revenues over expenditures 10,259 8 22,955 34,878 68,100 Other Financing Sources Sale of capital assets - - - 15,000 15,000 Net change in fund balance 10,259 8 22,955 49,878 83,100 Fund Balances, Beginning 76,936 3,720 67,085 446,826 594,567 Fund Balances, Ending 87,195$ 3,728$ 90,040$ 496,704$ 677,667$ Special Revenue Funds Year Ended December 31, 2020 City of Rosemount Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Governmental Funds 90 Original and Final Budgeted Variance With Amounts Actual Final Budget Revenues Intergovernmental -$ 26,877$ 26,877$ Public charges for services 1,300,000 1,856,051 556,051 Interest earnings 25,000 51,012 26,012 Total revenues 1,325,000 1,933,940 608,940 Expenditures Current: General government 2,500 2,500 - Capital outlay 625,000 626,871 (1,871) Total expenditures 627,500 629,371 (1,871) Excess of revenues over expenditures 697,500 1,304,569 607,069 Fund Balance, Beginning 747,626 747,626 - Fund Balance, Ending 1,445,126$ 2,052,195$ 607,069$ Building CIP Capital Project Sub-Fund City of Rosemount Year Ended December 31, 2020 Schedules of Revenues, Expenditures and Changes in Fund Balances (Budgetary Basis) - Budget and Actual 91 Original and Final Budgeted Variance With Amounts Actual Final Budget Revenues Taxes 877,897$ 877,897$ -$ Intergovernmental 2,045,000 - (2,045,000) Public charges for services 125,000 125,000 - Special assessments 150,000 1,493,822 1,343,822 Interest earnings 26,000 62,466 36,466 Miscellaneous - 337,256 337,256 Total revenues 3,223,897 2,896,441 (327,456) Expenditures Current: General government 2,500 2,500 - Capital outlay 4,819,700 125,000 4,694,700 Total expenditures 4,822,200 127,500 4,694,700 Excess (deficiency) of revenues over expenditures (1,598,303) 2,768,941 4,367,244 Other Financing Sources (Uses) Transfers out - (2,606,271) (2,606,271) Net change in fund balance (1,598,303) 162,670 1,760,973 Fund Balance, Beginning 3,738,298 3,738,298 - Fund Balance, Ending 2,139,995$ 3,900,968$ 1,760,973$ Street CIP Capital Project Sub-Fund City of Rosemount Year Ended December 31, 2020 Schedules of Revenues, Expenditures and Changes in Fund Balances (Budgetary Basis) - Budget and Actual 92 Original and Final Budgeted Variance With Amounts Actual Final Budget Revenues Taxes 640,000$ 640,000$ -$ Interest earnings 10,500 4,298 (6,202) Miscellaneous - 1,479 1,479 Total revenues 650,500 645,777 (4,723) Expenditures Current: General government 2,500 2,500 - Capital outlay 701,912 1,632,991 (931,079) Debt service: Principal retirement - 99,931 (99,931) Interest and fiscal charges - 20,419 (20,419) Total expenditures 704,412 1,755,841 (1,051,429) Excess (deficiency) of revenues over expenditures (53,912) (1,110,064) (1,056,152) Other Financing Sources Lease issuance - 1,182,844 1,182,844 Sale of capital assets 50,100 129,594 79,494 Transfers in - 135,000 135,000 Total other financing sources 50,100 1,447,438 1,397,338 Net change in fund balance (3,812) 337,374 341,186 Fund Balance, Beginning 438,561 438,561 - Fund Balance, Ending 434,749$ 775,935$ 341,186$ City of Rosemount Year Ended December 31, 2020 Equipment CIP Capital Project Sub-Fund Schedules of Revenues, Expenditures and Changes in Fund Balances (Budgetary Basis) - Budget and Actual 93 Total Nonmajor Street Enterprise Lighting Arena Funds Assets Current assets: Cash and investments 25,204$ 520,160$ 545,364$ Accounts receivable 44,498 68,984 113,482 Special assessments receivable 3,553 - 3,553 Prepaid items - 3,592 3,592 Total current assets 73,255 592,736 665,991 Noncurrent assets: Property and equipment: Buildings - 2,399,900 2,399,900 Machinery and equipment - 201,579 201,579 Less accumulated depreciation - (1,347,839) (1,347,839) Net property and equipment - 1,253,640 1,253,640 Total assets 73,255 1,846,376 1,919,631 Deferred Outflows of Resources Other postemployment benefit related amounts - 785 785 Pension related amounts - 21,766 21,766 Total deferred outflows - 22,551 22,551 Liabilities Current liabilities: Accounts payable 16,186 - 16,186 Accrued payroll and payroll taxes - 2,225 2,225 Current portion of long term obligations - 14,525 14,525 Total current liabilities 16,186 16,750 32,936 Noncurrent liabilities: Net pension liability - 151,223 151,223 Other postemployment benefits liability - 13,291 13,291 Accrued compensated absences - 15,736 15,736 Total noncurrent liabilities - 180,250 180,250 Total liabilities 16,186 197,000 213,186 Deferred Inflows of Resources Pension related amounts - 8,631 8,631 Net Position Net investment in capital assets - 1,253,640 1,253,640 Unrestricted 57,069 409,656 466,725 Total net position 57,069$ 1,663,296$ 1,720,365$ City of Rosemount Combining Balance Sheet - Nonmajor Enterprise Funds December 31, 2020 94 Total Nonmajor Street Enterprise Lighting Arena Funds Operating Revenues Charges for services 245,779$ 312,742$ 558,521$ Surcharges and penalties 775 - 775 Total operating revenues 246,554 312,742 559,296 Operating Expenses Personnel services - 194,850 194,850 Supplies 1,602 13,500 15,102 Professional services and charges - 42,323 42,323 Other services and charges 191,512 187,446 378,958 Depreciation - 62,892 62,892 Total operating expenses 193,114 501,011 694,125 Operating income (loss)53,440 (188,269) (134,829) Nonoperating Revenues (Expenses) Intergovernmental - 343 343 Interest earnings 9 2,842 2,851 Total nonoperating revenues 9 3,185 3,194 Income (loss) before contributions and transfers 53,449 (185,084) (131,635) Capital contributions, including special assessments 3,620 - 3,620 Transfers in - 130,000 130,000 Transfers out - (3,500) (3,500) Change in net position 57,069 (58,584) (1,515) Total Net Position, Beginning - 1,721,880 1,721,880 Total Net Position, Ending 57,069$ 1,663,296$ 1,720,365$ City of Rosemount Statement of Revenues, Expenses and Changes in Net Position - Nonmajor Enterprise Funds Year Ended December 31, 2020 95 Street Lighting Arena Totals Cash Flows From Operating Activities Cash received from customers 202,056$ 294,635$ 496,691$ Cash paid to suppliers for goods and services (176,928) (258,236) (435,164) Cash paid for employees - (194,850) (194,850) Net cash flows from (used by) operating activities 25,128 (158,451) (133,323) Cash Flows From Noncapital Financing Activities Transfers from other funds - 130,000 130,000 Transfers to other funds - (3,500) (3,500) Net cash flows from (used by) noncapital financing activities - 126,500 126,500 Cash Flows From Investing Activities Marketable securities purchased - (150,000) (150,000) Marketable securities sold - 100,000 100,000 Interest earnings 9 2,842 2,851 Net cash flows from (used by) investing activities 9 (47,158) (47,149) Cash Flows From Capital and Related Financing Activities Acquisition and construction of capital assets - (24,231) (24,231) Contribution received for construction 67 - 67 Net cash flows from (used by) capital and related financing activities 67 (24,231) (24,164) Net increase (decrease) in cash and cash equivalents 25,204 (103,340) (78,136) Cash and Cash Equivalents, Beginning - 473,500 473,500 Cash and Cash Equivalents, Ending 25,204$ 370,160$ 395,364$ Reconciliation of Cash and Cash Equivalents Cash and investments per statement of net position 25,204$ 520,160$ 545,364$ Less noncash equivalents - (150,000) (150,000) Cash and cash equivalents per statement of cash flows 25,204$ 370,160$ 395,364$ Reconciliation of Operating Income (Loss) to Net Cash Flows From (Used by) Operating Activities Operating income (loss)53,440$ (188,269)$ (134,829)$ Nonoperating income - 343 343 Adjustments to reconcile operating (loss) to net cash flows from (used by) operating activities: Noncash items included in income: Depreciation - 62,892 62,892 Change in assets and liabilities: Accounts receivable (44,498) (18,450) (62,948) Prepaid items - 5,092 5,092 Accounts payable 16,186 (12,470) 3,716 Other current liabilities - 640 640 Accrued liabilities - 4,197 4,197 Other post employment benefits related deferrals and liabilities - (946) (946) Pension related deferrals and liabilities - (11,480) (11,480) Net cash flows from (used by) operating activities 25,128$ (158,451)$ (133,323)$ City of Rosemount Statement of Cash Flows - Nonmajor Enterprise Funds Year Ended December 31, 2020 96 Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. STATISTICAL SECTION (Unaudited) This part of the City of Rosemount’s comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the government’s overall financial health. Contents Schedule No. FINANCIAL TRENDS 1-4 These schedules contain trend information to help the reader understand how the government’s financial performance and well-being have changed over time. REVENUE CAPACITY 5-8 These schedules contain information to help the reader assess the government’s most significant local revenue source, the property tax. DEBT CAPACITY 9-13 These schedules present information to help the reader assess the affordability of the government’s current levels of outstanding debt and the government’s ability to issue additional debt in the future. DEMOGRAPHIC AND ECONOMIC INFORMATION 14-15 These schedules offer demographic and economic indicators to help the reader understand the environment within which the government’s financial activities take place. OPERATING INFORMATION 16-18 These schedules contain service and infrastructure data to help the reader understand how the information in the government’s financial report relates to the services the government provides and the activities it performs. Schedule 1City of RosemountNet Position by ComponentLast Ten Fiscal Years(Accrual Basis of Accounting)2011201220132014201520162017201820192020Governmental activities Net investment in capital assets 53,419,036$ 54,828,890$ 57,746,938$ 58,438,402$ 64,684,403$ 69,942,544$ 74,294,033$ 80,094,490$ 85,993,734$ 89,980,056$ Restricted (1) 5,764,792 6,608,554 7,148,774 - - - - - - - Restricted for debt service - - - 7,709,903 6,925,597 6,111,575 5,883,329 6,478,370 4,863,958 4,420,693 Restricted donations for future construction - - - 1,988,610 1,589,000 - - - - - Restricted for pensions - - - - 1,123,544 1,001,490 1,246,634 1,583,135 1,314,661 1,864,145 Restricted for PEG fees - - - - - - 21,759 46,965 76,936 87,195 Unrestricted 16,772,383 15,970,416 15,883,105 17,913,535 13,031,913 13,100,682 14,090,028 14,596,678 18,205,045 24,068,714 Total governmental activities net position 75,956,211 77,407,860 80,778,817 86,050,450 87,354,457 90,156,291 95,535,783 102,799,638 110,454,334 120,420,803 Business-type activities Net investment in capital assets 90,695,202$ 93,501,405$ 95,770,585$ 98,194,408$ 96,808,557$ 98,722,624$ $97,328,281 97,977,645$ 98,007,299$ 99,300,829$ Unrestricted 17,772,742 19,247,600 18,591,663 19,348,437 20,376,753 21,739,120 23,521,090 26,994,489 28,881,892 32,661,481 Total business-type activities net position 108,467,944 112,749,005 114,362,248 117,542,845 117,185,310 120,461,744 120,849,371 124,972,134 126,889,191 131,962,310 Primary government Net investment in capital assets 144,114,238$ 148,330,295$ 153,517,523$ 156,632,810$ 161,492,960$ 168,665,168$ 171,622,314$ 178,072,135$ 184,001,033$ 189,280,885$ Restricted (1) 5,764,792 6,608,554 7,148,774 - - - - - - - Restricted for debt service - - - 7,709,903 6,925,597 6,111,575 5,883,329 6,478,370 4,863,958 4,420,693 Restricted donations for future construction - - - 1,988,610 1,589,000 - - - - - Restricted for pension - - - - 1,123,544 1,001,490 1,246,634 1,583,135 1,314,661 1,864,145 Restricted for PEG fees - - - - - - 21,759 46,965 76,936 87,195 Unrestricted 34,545,125 35,218,016 34,474,768 37,261,972 33,408,666 34,839,802 37,611,118 41,591,167 47,086,937 56,730,195 Total primary government net position 184,424,155$ 190,156,865$ 195,141,065$ 203,593,295$ 204,539,767$ 210,618,035$ 216,385,154$ 227,771,772$ 237,343,525$ 252,383,113$ (1) Prior to 2014 "Restricted" was included in one summary line.Source: City of Rosemount Comprehensive Annual Financial Reports Fiscal Years97 Schedule 2City of RosemountChanges in Net PositionLast Ten Fiscal Years(Accrual Basis of Accounting)2011201220132014201520162017201820192020ExpensesGovernmental activities General government2,612,911$ 2,701,234$ 2,583,271$ 2,961,500$ 2,878,070$ 4,426,817$ 3,859,090$ 3,605,197$ 3,826,860$ 4,972,215$ Public safety 3,763,742 3,872,633 4,051,642 4,233,610 4,378,347 5,629,866 5,170,637 5,235,993 5,332,313 5,259,828 Public works4,336,345 4,341,203 5,448,047 5,764,176 4,468,049 4,765,115 5,822,738 5,163,908 5,692,171 7,089,996 Culture, education and recreation1,496,068 2,405,676 1,586,449 1,613,600 1,643,886 1,959,224 2,042,299 2,119,418 2,217,403 1,982,191 Conservation and economic development9,069 - 3,267 1,032,304 53,040 3,968 4,315 61,637 56,611 1,160,449 Interest and fiscal charges637,609 541,386 517,067 501,682 569,722 476,121 308,567 295,431 281,999 241,623 Total governmental activities expenses12,855,744 13,862,132 14,189,743 16,106,872 13,991,114 17,261,111 17,207,646 16,481,584 17,407,357 20,706,302 Business-Type activities Water Utility1,792,613 1,827,543 1,903,275 1,962,833 2,219,781 2,075,460 2,175,626 2,156,694 2,845,741 2,381,646 Sewer Utility2,386,660 2,317,324 2,425,486 2,522,913 2,575,330 2,742,402 2,837,550 3,029,482 3,053,021 3,309,194 Storm Water Utility950,114 968,935 989,574 1,122,839 1,117,526 1,228,697 1,275,073 1,330,580 1,732,753 1,935,245 Street Light Utility- - - - - - - - - 193,114 Arena479,707 498,118 578,345 493,943 497,838 510,968 484,903 659,827 550,487 501,011 Total Business-Type activities expenses5,609,094 5,611,920 5,896,680 6,102,528 6,410,475 6,557,527 6,773,152 7,176,583 8,182,002 8,320,210 Total primary government expenses18,464,838$ 19,474,052$ 20,086,423$ 22,209,400$ 20,401,589$ 23,818,638$ 23,980,798$ 23,658,167$ 25,589,359$ 29,026,512$ Program RevenuesGovernmental activities Charges for services General government1,881,337$ 2,286,892$ 2,465,695$ 3,202,744$ 3,182,769$ 3,128,969$ 3,286,273$ 4,226,249$ 3,915,953$ 4,083,135$ Public safety 169,718 184,011 139,432 146,973 151,168 150,571 134,893 136,077 149,992 109,511 Public works68,166 45,564 53,813 59,417 99,060 54,893 100,038 107,057 153,036 138,741 Culture, education and recreation272,958 365,486 342,100 571,222 728,567 392,102 779,541 1,321,699 1,151,077 1,374,009 Operating grants and contributions General government- 46,326 - - - 20,631 1,509 - - - Public safety 249,515 275,114 263,805 283,095 406,657 547,505 366,654 384,207 418,138 383,354 Public works108,640 53,198 32,790 53,515 41,235 41,235 42,495 42,960 300,431 330,711 Culture, education and recreation33,499 1,275 6,241 3,736 7,347 2,617 1,337 3,326 410 2,710 Conservation and economic development67,400 - 20,635 22,536 23,000 24,000 25,000 30,263 30,263 38,339 Capital grants and contributions General government- - - 1,988,610 - - - - - - Public safety - - - 18,131 - 3,918 6,358 16,632 11,846 18,553 Public works4,214,641 3,628,190 3,967,849 4,318,692 1,650,864 3,170,374 3,538,480 4,819,520 3,925,601 8,022,818 Culture, education and recreation- - - - - 419 293 250,973 2,777 155,223 Conservation and economic development- 39,352 322,808 740,660 287,090 7,000 33,629 600 1,200 1,200 Total governmental activities program revenues7,065,874 6,925,408 7,615,168 11,409,331 6,577,757 7,544,234 8,316,500 11,339,563 10,060,724 14,658,304 Fiscal Years98 Schedule 2 (continued)City of RosemountChanges in Net PositionLast Ten Fiscal Years(Accrual Basis of Accounting)2011201220132014201520162017201820192020Business-Type activities Charges for services Water Utility1,983,264 2,406,557 2,167,709 2,379,147 2,552,123 2,692,740 3,041,642 3,567,275 3,301,002 4,438,036 Sewer Utility1,470,626 1,707,730 1,716,022 1,733,646 1,873,687 1,996,130 2,126,771 2,351,986 2,425,548 3,004,901 Storm Water Utility927,429 1,135,067 1,061,632 1,350,259 1,544,158 1,387,817 1,693,845 1,981,312 1,757,747 2,553,747 Street Light Utility- - - - - - - - - 246,554 Arena378,046 352,930 376,058 392,631 408,874 430,103 441,059 448,445 437,842 312,742 Operating grants and contributions Water Utility- - - 9,901 - 24,248 84,042 58,411 720 6,302 Sewer Utility- - - - - - - - 712 926 Storm Water Utility- - - 19,680 - - - - 2,521 3,289 Arena- - - - - - - - 314 343 Capital grants and contributions Water Utility243,835 168,573 371,582 180,568 75,622 1,041,806 216,454 402,788 635,944 230,905 Sewer Utility110,538 207,422 83,484 98,863 85,848 1,153,536 204,114 417,279 483,220 599,016 Storm Water Utility190,022 487,082 648,297 193,402 42,708 989,073 210,802 525,305 1,012,992 611,862 Street Light Utility- - - - - - - - - 3,620 Total Business-Type activities program revenues5,303,760 6,465,361 6,424,784 6,358,097 6,583,020 9,715,453 8,018,729 9,752,801 10,058,562 12,012,243 Total primary government program revenues12,369,634 13,390,769 14,039,952 17,767,428 13,160,777 17,259,687 16,335,229 21,092,364 20,119,286 26,670,547 Net (Expense) RevenueGovernmental activities(5,789,870) (6,936,724) (6,574,575) (4,697,541) (7,413,357) (9,716,877) (8,891,146) (5,142,021) (7,346,633) (6,047,998) Business-Type activities(305,334) 853,441 528,104 255,569 172,545 3,157,926 1,245,577 2,576,218 1,876,560 3,692,033 Total primary government net expense(6,095,204)$ (6,083,283)$ (6,046,471)$ (4,441,972)$ (7,240,812)$ (6,558,951)$ (7,645,569)$ (2,565,803)$ (5,470,073)$ (2,355,965)$ General Revenues and Other Changes in Net PositionGovernmental activities Property taxes, levied for general purposes10,266,170$ 10,001,071$ 10,123,158$ 10,328,709$ 10,479,883$ 10,709,952$ 11,139,036$ 11,520,992$ 12,005,548$ 12,816,806$ Property taxes, levied for debt service936,054 1,038,404 1,037,524 1,022,258 1,094,210 1,142,142 1,178,589 1,207,786 1,147,983 1,140,527 Other taxes262,783 242,491 259,064 288,425 332,290 354,571 366,745 400,551 411,423 400,076 Unrestricted intergovernmental revenues- - - - - - - - - 1,833,933 Investment income243,193 136,310 121,886 221,243 181,754 270,676 307,497 391,991 547,947 390,959 Change in fair value of investmentsn/a n/a (458,073) 319,644 (1,788) (147,945) (20,104) (63,299) 119,787 104,408 Gain (loss) on the sale of assets130,114 13,248 12,883 - 7,328 - - - 33,783 25,155 Miscellaneous204,149 127,617 116,123 103,615 104,237 103,394 171,294 89,672 79,694 49,133 Transfers688,873 (3,170,768) (1,267,033) (2,314,720) (31,534) 85,921 1,127,581 (1,141,817) 655,164 (746,530) Total governmental activities12,731,336 8,388,373 9,945,532 9,969,174 12,166,380 12,518,711 14,270,638 12,405,876 15,001,329 16,014,467 Business-Type activities Investment income377,868 256,852 209,227 333,929 272,336 339,012 295,867 438,095 628,194 425,709 Change in fair value of investmentsn/a n/a (391,121) 276,379 (24,638) (134,583) (26,236) (33,367) 67,467 208,847 Transfers(688,873) 3,170,768 1,267,033 2,314,720 31,534 (85,921) (1,127,581) 1,141,817 (655,164) 746,530 Total Business-Type activities(311,005) 3,427,620 1,085,139 2,925,028 279,232 118,508 (857,950) 1,546,545 40,497 1,381,086 Total primary government12,420,331 11,815,993 11,030,671 12,894,202 12,445,612 12,637,219 13,412,688 13,952,421 15,041,826 17,395,553 Change in Net PositionGovernmental activities6,941,466 1,451,649 3,370,957 5,271,633 4,753,023 2,801,834 5,379,492 7,263,855 7,654,696 9,966,469 Business-Type activities(616,339) 4,281,061 1,613,243 3,180,597 451,777 3,276,434 387,627 4,122,763 1,917,057 5,073,119 Total primary government6,325,127$ 5,732,710$ 4,984,200$ 8,452,230$ 5,204,800$ 6,078,268$ 5,767,119$ 11,386,618$ 9,571,753$ 15,039,588$ Source: City of Rosemount Comprehensive Annual Financial Reports Fiscal Years99 Schedule 3City of RosemountFund Balances, Governmental FundsLast Ten Fiscal Years(Modified Accrual Basis of Accounting)2011201220132014201520162017201820192020General Fund Nonspendable85,067$ 80,623$ 67,266$ 66,238$ 69,348$ -$ -$ 33,484$ -$ -$ Assigned1,894,348 2,319,433 2,292,257 2,808,794 2,981,632 2,969,701 2,222,507 2,458,337 2,665,850 4,150,243 Unassigned5,700,071 5,905,056 6,001,628 6,288,615 6,506,697 6,918,833 7,333,743 7,503,588 7,893,190 8,143,687 Total General Fund7,679,486 8,305,112 8,361,151 9,163,647 9,557,677 9,888,534 9,556,250 9,995,409 10,559,040 12,293,930 All Other Governmental Funds Nonspendable for Capital projects funds- 10,000 10,000 10,000 10,000 10,000 - - - - Nonmajor governmental funds- - - 549 606 113 444 548 529 455 Restricted for Debt service4,782,476 4,193,284 4,554,980 4,976,137 5,256,841 4,307,191 2,983,348 3,209,605 2,449,174 2,300,537 Capital Projects- - - 1,988,610 1,589,000 - - - - - Port Authority TIF fund677,057 887,616 1,046,218 1,021,730 4,534,417 4,994,060 1,849,055 2,119,361 2,395,413 2,175,696 Nonmajor governmental funds- - - - - - 21,759 46,965 76,936 87,195 Committed for Nonmajor governmental funds159,048 191,307 214,031 290,834 190,941 181,276 230,162 223,619 517,102 590,017 Assigned for Capital projects funds8,515,086 6,229,951 6,243,406 7,330,501 6,923,755 8,397,771 10,804,425 11,300,057 13,856,932 17,844,916 Total All Other Governmental Funds14,133,667 11,512,158 12,068,635 15,618,361 18,505,560 17,890,411 15,889,193 16,900,155 19,296,086 22,998,816 Total All Funds21,813,153$ 19,817,270$ 20,429,786$ 24,782,008$ 28,063,237$ 27,778,945$ 25,445,443$ 26,895,564$ 29,855,126$ 35,292,746$ Source: City of Rosemount Comprehensive Annual Financial Reports Fiscal Years100 Schedule 4City of RosemountChanges in Fund Balances, Governmental FundsLast Ten Fiscal Years(Modified Accrual Basis of Accounting)2011201220132014201520162017201820192020Revenues Taxes 10,643,333$ 10,376,939$ 10,514,617$ 10,747,756$ 10,940,420$ 11,167,397$ 11,591,837$ 11,986,223$ 12,319,478$ 12,972,824$ Tax increments 576,675 660,056 660,130 646,636 720,963 794,268 832,533 863,105 865,476 959,586 Intergovernmental 2,394,400 584,381 2,288,281 2,509,924 882,930 674,220 1,216,200 1,570,847 3,130,311 4,965,309 Public charges for services2,226,976 2,277,051 2,370,562 3,132,556 3,352,219 2,826,231 3,457,253 4,811,376 4,309,059 4,545,981 Licenses and permits388,615 484,644 522,131 730,765 694,765 792,557 741,243 884,165 925,938 1,098,631 Fines and forfeitures124,324 129,343 106,617 116,384 114,580 108,561 101,327 94,281 109,083 75,452 Special assessments 496,386 2,155,618 1,539,059 2,123,199 2,368,403 1,035,044 718,051 1,895,665 639,203 2,742,173 Investment income and miscellaneous1,552,188 1,773,249 650,402 3,135,395 1,240,234 508,130 1,546,665 1,886,005 1,966,868 2,912,156 Total revenues18,402,897 18,441,281 18,651,799 23,142,615 20,314,514 17,906,408 20,205,109 23,991,667 24,265,416 30,272,112 Expenditures General government2,382,663 2,569,649 2,506,529 2,752,153 2,841,775 2,977,518 3,253,808 3,141,886 3,263,349 4,278,811 Public safety3,436,225 3,510,222 3,632,212 3,762,826 4,014,411 4,072,189 4,306,808 4,651,700 4,702,502 4,954,705 Public works 3,078,059 3,032,940 3,285,257 3,192,487 2,957,952 3,005,419 4,395,373 3,125,886 3,825,266 3,861,369 Parks and recreation 1,239,857 1,271,513 1,321,946 1,304,867 1,298,271 1,516,720 1,546,723 1,663,618 1,752,993 1,534,088 Conservation and development- - - 376,496 - - - 73,383 96,229 679,554 Capital Outlay6,185,959 8,096,866 7,628,944 9,470,432 6,831,658 5,087,107 5,422,617 9,276,566 7,112,935 10,302,698 Debt Service Principal retirement2,225,000 2,405,000 1,545,000 1,580,000 3,470,000 2,165,000 2,240,000 1,426,727 1,567,033 1,729,931 Interest and fiscal charges677,469 582,377 511,526 508,605 573,607 495,638 384,544 337,407 324,042 291,068 Total expenditures19,225,232 21,468,567 20,431,414 22,947,866 21,987,674 19,319,591 21,549,873 23,697,173 22,644,349 27,632,224 Excess (deficiency) of revenues over (under) expenditures(822,335) (3,027,286) (1,779,615) 194,749 (1,673,160) (1,413,183) (1,344,764) 294,494 1,621,067 2,639,888 Other financing sources (uses) Issuance of long-term debt2,080,000 810,000 1,500,000 2,400,000 4,680,000 - 1,055,000 835,000 - - Payment to escrow agent- - - - - - (3,275,000) - - - Premium on long-term debt- - - - 180,637 - 61,287 83,871 - - Lease issuance- - - - - - - 276,848 166,131 1,182,844 Sale of capital assets10,121 12,740 3,627 348,335 69,578 407,581 42,394 68,130 269,903 144,594 Transfers in 2,847,900 348,663 1,330,491 1,908,755 1,008,983 851,403 1,743,745 226,703 1,273,584 1,738,582 Transfers out(804,755) (140,000) (441,987) (499,617) (984,809) (130,093) (616,164) (334,925) (371,123) (268,288) Total other financing sources (uses)4,133,266 1,031,403 2,392,131 4,157,473 4,954,389 1,128,891 (988,738) 1,155,627 1,338,495 2,797,732 Net change in fund balances3,310,931 (1,995,883) 612,516 4,352,222 3,281,229 (284,292) (2,333,502) 1,450,121 2,959,562 5,437,620 Fund balances - Beginning18,502,222 21,813,153 19,817,270 20,429,786 24,782,008 28,063,237 27,778,945 25,445,443 26,895,564 29,855,126 Fund balances - Ending21,813,153$ 19,817,270$ 20,429,786$ 24,782,008$ 28,063,237$ 27,778,945$ 25,445,443$ 26,895,564$ 29,855,126$ 35,292,746$ Debt service as a percentage of noncapital expenditures22.0% 22.3% 16.1% 15.5% 26.7% 18.7% 16.3% 12.2% 12.2% 11.7%Source: City of Rosemount Comprehensive Annual Financial Reports Fiscal Years101 Schedule 5City of RosemountAssessed Value (or Tax Capacity) and Estimated Market Value of All Taxable PropertyLast Ten Fiscal YearsTotalTaxCapacityas % ofLocal TaxEstimated Local TaxEstimated Local TaxEstimated CityEstimated State TaxNet TaxMarket Net TaxMarket Net TaxMarket TaxMarket Net TaxPay-YearCapacityValueCapacityValueCapacityValueRate (1)ValueCapacity201123,635,880$ 2,078,373,200$ 685,721$ 35,284,800$ 24,321,601$ 2,113,658,000$ 44.661 1.15% 6,248,792$ 2012 21,590,701 1,878,822,866 689,398 35,353,750 22,280,099 1,914,176,616 46.994 1.16% 6,203,052 2013 21,076,941 1,829,557,955 728,110 37,319,224 21,805,051 1,866,877,179 48.862 1.17% 6,237,507 2014 21,898,381 1,908,586,387 788,742 40,027,970 22,687,123 1,948,614,357 47.676 1.16% 6,371,221 2015 23,706,444 2,087,149,995 797,258 40,447,970 24,503,702 2,127,597,965 45.152 1.15% 6,429,613 2016 25,325,479 2,241,801,959 893,756 45,278,045 26,219,235 2,287,080,004 43.149 1.15% 6,649,004 2017 26,876,375 2,384,213,461 998,770 50,550,481 27,875,145 2,434,763,942 41.832 1.14% 6,949,051 2018 28,461,255 2,533,539,603 1,098,545 55,561,924 29,559,800 2,589,101,527 40.961 1.14% 6,995,647 2019 30,580,651 2,724,354,762 1,142,238 57,687,563 31,722,889 2,782,042,325 39.3551.14% 7,413,571 2020 32,985,256 2,951,572,780 1,107,296 55,977,663 34,092,552 3,007,550,443 38.580 1.13% 7,554,678 Source: Dakota County Assessor's Office, Usage Classification Report - Real Estate and Personal PropertiesNote: Property values shown are established at January 1 of the year preceding the "Pay-Year" listed They are the basis of the taxes collected and applied to the "Pay-Year"(1) Rates taken from Schedule 6Real PropertyPersonal PropertyTotal1.12%1.13%1.14%1.15%1.16%1.17%1.18%2011 2012 2013 2014 2015 2016 2017 2018 2019 2020Total Tax Capacity as % ofEstimated Market ValueTotal %102 Schedule 6ISD 196 ISD 199 ISD 200 Dakota TotalsCity MarketSchool Market School Market School Market CountySchool School SchoolYearReferendum District Referendum District Referendum District Referendum Dakota Referendum Special District District DistrictCollectible CityRates (1) No. 196 Rates (1) No. 199 Rates (1) No. 200 Rates (1) CountyRates (1) Districts No. 196 No. 199 No. 2002011 44.661 0.00697 26.959 0.22601 24.679 0.15606 22.140 0.26626 29.149 0.00537 5.199 105.968 103.688 101.1492012 46.994 n/a 28.440 0.22131 28.363 0.16428 25.435 0.28618 31.426 0.00551 5.562 112.422 112.345 109.4172013 48.862 n/a 27.956 0.23542 27.556 0.18354 23.932 0.29483 33.421 n/a 5.884 116.123 115.723 112.0992014 47.676 n/a 27.606 0.25809 33.418 0.15657 23.052 0.26005 31.827 n/a 5.538 112.647 118.459 108.0932015 45.152 n/a 23.271 0.25484 34.864 0.16151 20.965 0.25310 29.633 n/a 5.033 103.089 114.682 100.7832016 43.149 n/a 24.317 0.26999 30.272 0.13929 20.938 0.25990 28.570 n/a 5.063 101.099 107.054 97.7202017 41.832 n/a 23.336 0.27380 28.572 0.14151 20.305 0.24713 28.004 n/a 4.907 98.079 103.315 95.0482018 40.961 n/a 21.352 0.26715 26.680 0.17143 20.545 0.27360 26.580 n/a 4.307 93.200 98.528 92.3932019 39.355 n/a 20.613 0.26162 26.537 0.13282 19.079 0.26713 25.386 n/a 4.227 89.581 95.505 88.0472020 38.580 n/a 19.860 0.34367 22.896 0.12279 17.924 0.24540 24.133 n/a 4.030 86.603 89.639 84.667Source: Dakota County Treasurer-AuditorNote: All rates are overlapping rates except for the "City" and the "City Market Referendum Rates" (these two are the City's direct rates). Overlapping rates consist of the "School Districts", "Dakota County" and the "Special Districts".(1) Levies for voter approved referendums are based on market value. Therefore, a separate rate for these market valued levies is included for the applicable entity for thelife of the levies. Since these rates are calculated separately, they are not included in the total tax rates.n/a - Not Applicable(Rate per 1% of Market Value)City of RosemountProperty Tax Rates - All Direct and Overlapping Governmental UnitsLast Ten Fiscal Years103 2020 2011 Percentage Percentage Local of Total Local of Total Tax Local Tax Tax Local Tax Taxpayer Capacity (1) Rank Capacity Capacity (1) Rank Capacity Flint Hills Resources Pine Bend LLC (Merged w/below)3,509,161$ 1 10.29% 1,224,967$ 2 5.04% Great Northern Oil Company (2009 - Koch Refining)- 1,602,738 1 6.59% Northern States Power Co. 377,714 2 1.11% 297,424 3 1.22% Dakota Aggregates 202,250 3 0.59% - Clarel Corporation (Cub Foods) 196,998 4 0.58% 189,250 4 0.78% 146th Street Partners LP (Waterford Commons) 177,119 5 0.52% 152,550 5 0.63% Minnesota Energy Resources Corp. (MERC)154,414 6 0.45% - Northern Natural Gas Co. 150,134 7 0.44% 128,618 6 0.53% Rosemount Senior Living Associates 139,106 8 0.41% - Limerick Way LLC 133,112 9 0.39% 76,251 14 0.31% Minnesota Pipeline Co. 125,488 10 0.37% - Hawkins Inc. 113,886 11 0.33% - Proto Labs Inc. (2011 - Webb Properties LLC) 100,640 12 0.30% 96,494 8 0.40% Francis & Patricia Dolejs (Celtic Crossing) 98,412 13 0.29% 90,444 9 0.37% SKB Environmental Inc. 93,543 14 0.27% - Mosaic Crop Nutrition LLC (Formerly CF Industries) 91,222 15 0.27% 86,086 11 0.35% Rosemount Crossing LLC (Aldi's) - 106,016 7 0.44% Bigos - Rosemount LLC (Cannon Equipment) - 87,660 10 0.36% Warren & K. Israelson (Formerly Progress Land Co.) - 82,870 12 0.34% Hidden Valley SPE LLC (Rosemount Woods) - 79,310 13 0.33% Koch Exploration Properties LLC - 41,458 15 0.17% Principal Taxpayers Total 5,663,199$ 16.61% 4,342,136$ 17.85% Total City Tax Capacity 34,092,552$ 24,321,601$ Source: Dakota County Treasurer-Auditor (1) These figures do not include the dollars collected but the tax capacity for each entity. Schedule 7 City of Rosemount Principal Property Tax Payers Current Year and Nine Years Ago 104 Ratio ofPercent ofDelinquent Total Outstanding Total TaxTotal Tax Current Tax Current TaxesTax Tax Delinquent Collections toYearLevy (1) Collections Collected Collections (2) Collections Taxes Total Tax Levy2011 10,985,813$ 10,898,846$ 99.21% 123,066$ 11,021,912$ -$ 100.00%2012 10,490,554 10,418,211 99.31% 99,300 10,517,511 3,697 99.96%2013 10,750,485 10,667,447 99.23% 84,910 10,752,357 1,468 99.99%2014 11,031,983 10,986,828 99.59% 110,510 11,097,338 3,916 99.96%2015 11,313,577 11,279,075 99.70% 43,833 11,322,908 3,504 99.97%2016 11,465,695 11,417,277 99.58% 53,354 11,470,631 7,693 99.93%2017 11,833,975 11,802,700 99.74% 73,494 11,876,194 9,733 99.92%2018 12,311,425 12,253,448 99.53% 41,449 12,294,897 21,438 99.83%2019 12,730,971 12,667,353 99.50% 22,475 12,689,828 2,266 99.98%2020 13,433,951 13,362,417 99.47% 90,329 13,452,746 72,794 99.46%Source: Dakota County Treasurer-Auditor(1) The total tax levy differs from actual levy certified to the County by the City because of fiscal disparity calculations done by the County after certification.(2) Delinquent tax collections are all delinquent collections during that tax year - not just for the delinquent collections of that calendar year.Schedule 8City of RosemountProperty Tax Levies and CollectionsLast Ten Fiscal Years105 Schedule 9G.O. and G.O. andG.O. Property G.O. Tax Revenue Special Capital Tax Increment Equipment Supported Assessment Lease G.O. Capital Total PercentagePopulation Personal Supported Supported Certificates (Port Auth.) Supported Liabilities Revenue Lease Primary of Personal PerYear (1) Income (1) (2) (2) (2) (2) (2) (3) Bonds (2) Liabilities (3) Government Income Capita2011 22,239 1,033,557,525$ 2,885,000$ 6,040,000$ 520,000$ 2,725,000$ 4,765,000$ -$ 4,585,000$ -$ 21,520,000$ 2.08% 968$ 2012 22,432 1,118,167,904 2,575,000 6,005,000 265,000 1,355,000 5,140,000 - 3,785,000 - 19,125,000 1.71% 853 2013 22,711 1,151,152,457 2,255,000 5,930,000 85,000 1,230,000 5,795,000 - 1,935,000 - 17,230,000 1.50% 759 2014 23,044 1,202,366,788 2,010,000 5,820,000 - 1,105,000 7,180,000 - 1,400,000 - 17,515,000 1.46% 760 2015 23,244 1,248,435,240 3,100,000 9,005,000 - 980,000 5,865,000 - 2,515,000 - 21,465,000 1.72% 923 2016 23,574 1,295,980,650 1,416,281 8,905,469 - 855,000 4,150,000 - 2,172,292 - 17,499,042 1.35% 742 2017 24,295 1,400,315,210 1,278,361 5,394,502 - 720,000 3,460,000 - 1,719,063 - 12,571,926 0.90% 517 2018 24,866 1,508,147,766 1,214,313 5,133,535 - 585,000 3,430,000 245,121 1,320,834 30,252 11,959,055 0.79% 481 2019 25,460 1,544,174,460 1,052,413 4,857,569 - 445,000 2,535,000 289,219 1,167,605 18,804 10,365,610 0.67% 407 2020 26,318 1,596,213,018 890,515 4,566,601 - - 1,775,000 1,372,132 1,014,376 79,727 9,698,351 0.61% 369 Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements.(1) Population and personal income figures are taken from Schedule 14.(2) Figures taken from City of Rosemount bond documents.(3) Figures taken from City of Rosemount lease documents.Governmental ActivitiesCity of RosemountRatios of Outstanding Debt by TypeLast Ten Fiscal YearsBusiness - TypeActivities106 Schedule 10 Percentage ofEstimated Less Restricted Total EstimatedMarket G.O. Debt Service General Market PerYearPopulation(1)Value(2) Debt (3) Funds Bonded DebtValue Capita2011 22,239 2,113,658,000$ 21,520,000$ 1,605,726$ 19,914,274$ 0.94% 895$ 2012 22,432 1,914,176,616 19,125,000 1,129,632 17,995,368 0.94% 802 2013 22,711 1,866,877,179 17,230,000 737,907 16,492,093 0.88% 726 2014 23,044 1,948,614,357 17,515,000 528,504 16,986,496 0.87% 737 2015 23,244 2,127,597,965 21,465,000 5,151,437 16,313,563 0.77% 702 2016 23,574 2,287,080,004 17,499,042 3,469,959 14,029,083 0.61% 595 2017 24,295 2,434,763,942 12,571,926 177,759 12,394,167 0.51% 510 2018 24,866 2,589,101,527 11,683,682 184,655 11,499,027 0.44% 462 2019 25,460 2,782,042,325 10,057,587 192,407 9,865,180 0.35% 387 2020 26,318 3,007,550,443 8,246,492 289,724 7,956,768 0.26% 302 Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements.(1) Population figures are taken from Schedule 14.(2) Estimated Market Value figures are taken from Schedule 5.(3) Figures are taken from Schedule 9.General Bonded Debt OutstandingCity of RosemountRatios of Net General Bonded Debt OutstandingLast Ten Fiscal Years107 City of Rosemount Governmental Estimated Estimated Activities Percentage Amount Debt Applicable Applicable Governmental Units (1) Outstanding (2)(5) to City (4) to City Direct Debt: City of Rosemount 8,604,248$ 100.00% 8,604,248$ Overlapping Debt: School Districts: I.S.D. 196 - Rosemount 131,675,000 14.50% 19,092,875 I.S.D. 199 - Inver Grove Heights 51,435,000 5.20% 2,674,620 I.S.D. 200 - Hastings 73,732,524 0.10% 73,733 Regional: Metropolitan Council 12,435,000 (3) 0.70% 87,045 Total Overlapping Debt 269,277,524 21,928,273 Total Direct & Overlapping Debt 277,881,772$ 30,532,521$ (1) Only those units with outstanding general obligation debt are shown here. (2) Excludes general obligation tax and aid anticipation certificates and revenue-supported debt. (3) Excludes general obligation debt supported by wastewater revenues and housing rental payments. Includes certificates of participation. (4) Percent of governmental unit within the City of Rosemount's boundaries calculated by the city's Financial Advisors, Baker Tilly Municipal Advisors, LLC (5) The percentage of overlapping debt applicable is estimated using tax capacity. Applicable percentages were estimated by determining the portion of the governmental unit’s tax capacity that is within the City’s boundaries and dividing it by the governmental unit’s total tax capacity. Schedule 11 Direct and Overlapping Governmental Activities Debt As of December 31, 2020 108 City of Rosemount Legal Debt Margin Calculation for Fiscal Year 2020Estimated Market Value3,007,550,443$ Debt Limitation - 3% of Estimated Market Value 90,226,513 Debt Applicable to Limitation: Total Bonded Debt 8,030,000$ Less: Special Assessment Bonds 1,775,000$ Tax Increment Bonds 4,495,000 Revenue Bonds 965,000 Amount Available for Repayment of G.O. Bonds 289,724 7,524,724 Total Debt Applicable to Limitation 505,276 Legal Debt Margin89,721,237$ 2011201220132014201520162017201820192020Estimated Market Value 2,113,658,000$ 1,914,176,616$ 1,866,877,179$ 1,948,614,357$ 2,127,597,965$ 2,287,080,004$ 2,434,763,942$ 2,589,101,527$ 2,782,042,325$ 3,007,550,443$ Debt Limit - 3% of Estimated Market Value - 63,409,740 57,425,298 56,006,315 58,458,431 63,827,939 68,612,400 73,042,918 77,673,046 83,461,270 90,226,513 Total Net Debt Applicable to Debt Limit 1,799,274 1,710,368 1,602,093 1,481,496 1,298,857 1,184,483 1,037,241 890,345 742,593 505,276 Legal Debt Margin 61,610,466$ 55,714,930$ 54,404,222$ 56,976,935$ 62,529,082$ 67,427,917$ 72,005,677$ 76,782,701$ 82,718,677$ 89,721,237$ Legal debt margin as a percentage of the debt limit 97.16% 97.02% 97.14% 97.47% 97.97% 98.27% 98.58% 98.85% 99.11% 99.44%Note: Under State law, the City's outstanding general debt cannot exceed 3% of the total estimated market value of the City. The legal debt margin is the City's available borrowing authority under State law and is calculated by subtracting the net debt applicable to the legal debt limit from the legal debt limit.Fiscal YearSchedule 12Legal Debt Margin InformationLast Ten Fiscal Years109 Net RevenueAvailableSpecialGross For Debt AssessmentYear Revenue Expenses (1) Service Principal (2) Interest Total Coverage Collections Principal (3) Interest Total Coverage2011 3,744,722$ 2,737,918$ 1,006,804$ 2,380,000$ 218,295$ 2,598,295$ 38.75% 496,386$ 1,590,000$ 147,850$ 1,737,850$ 28.56%2012 4,175,312 2,767,111 1,408,201 800,000 133,478 933,478 150.86% 2,155,618 435,000 112,512 547,512 393.71%2013 4,419,729 2,958,568 1,461,161 1,850,000 110,313 1,960,313 74.54% 1,539,059 845,000 103,835 948,835 162.21%2014 4,195,215 3,262,938 932,277 535,000 53,940 588,940 158.30% 2,123,199 1,015,000 97,241 1,112,241 190.89%2015 4,428,925 3,514,975 913,950 410,000 39,921 449,921 203.14% 2,368,403 1,315,000 97,562 1,412,562 167.67%2016 4,778,063 3,587,124 1,190,939 425,000 52,360 477,360 249.48% 1,035,044 1,715,000 77,163 1,792,163 57.75%2017 5,528,083 3,740,785 1,787,298 445,000 50,560 495,560 360.66% 718,051 1,745,000 48,140 1,793,140 40.04%2018 5,634,576 3,954,469 1,680,107 390,000 39,108 429,108 391.53% 1,895,665 865,000 58,506 923,506 205.27%2019 5,632,784 4,982,808 649,976 145,000 31,993 176,993 367.23% 639,203 895,000 85,508 980,508 65.19%2020 2,814,871 1,441,351 1,373,520 145,000 28,730 173,730 790.61% 2,742,173 760,000 72,720 832,720 329.30%Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements.(1) Figure does not include depreciation expense.(2) 2011 includes call payments on 2001B, 2002B & 2003B bonds and 2013 includes call payment on 2005C bonds.(3) 2011 includes calls for 2002A & 2003A bonds.Debt Service RequirementsCity of RosemountG.O. Revenue BondsDebt Service RequirementsSchedule 13Pledged-Revenue CoverageLast Ten Fiscal YearsG.O. Special Assessment Bonds110 Schedule 14 City of Rosemount Demographic and Economic Statistics Last Ten Calendar Years Calendar Per Capita Personal School Unemployment Median Year Population (1) Income (1) Income (2) Enrollment (3) Rate (4) Age (5) 2011 22,239 46,475$ 1,033,557,525$ 4,745 5.2% 37.2 2012 22,432 49,847 1,118,167,904 4,860 4.8% 37.5 2013 22,711 50,687 1,151,152,457 4,889 4.1% 37.4 2014 23,044 52,177 1,202,366,788 4,910 3.2% 36.8 2015 23,244 53,710 1,248,435,240 5,074 3.0% 37.3 2016 23,574 54,975 1,295,980,650 5,181 3.4% 37.6 2017 24,295 57,638 1,400,315,210 5,066 2.7% 37.8 2018 24,866 60,651 1,508,147,766 5,279 2.6% 38.2 2019 25,460 60,651 1,544,174,460 5,695 2.9% 38.2 2020 26,318 60,651 1,596,213,018 5,991 4.3% 38.2 (1) These figures are provided by and are for Dakota County. These figures usually have a 2 to 3-year lag time so that is why the two most current years use the 2018 figure for computing the "Personal Income" figure. (2) These figures are derived by multiplying the City's population figure times Dakota County's per capita income figures. (3) School enrollment is the total number of students who reside within the Rosemount High School boundaries and go to Independent School District No. 196 schools located in Rosemount. The total school enrollment includes the total number of students with homes in the City of Rosemount. (4) Unemployment rates were compiled by the Minnesota Local Area Unemployment Statistics (LAUS) - for Dakota County. (5) These figures are provided by Dakota County. 2018's median age is the most current information available so 2019 - 2020 shown as the same age. 111 2020 2011 Percentage Percentage of Total of Total City City Employer Employees Rank Employment Employees Rank Employment Note: The City of Rosemount does not track this information and there are no sources at the County or State level to provide this information. Current Year and Nine Years Ago Schedule 15 City of Rosemount Principal Employers 112 2011201220132014201520162017201820192020Function/ProgramGeneral Government Administration 4.50 3.50 3.50 3.50 3.50 4.50 4.50 4.50 4.50 4.50 Finance 4.30 4.30 4.30 4.55 4.55 4.55 4.55 5.05 5.10 5.10 Community Development 9.75 9.50 9.50 9.50 9.50 9.50 9.50 9.50 10.50 10.50 Police Sworn Officers 22.00 22.00 22.00 23.00 23.00 23.00 24.00 25.00 24.00 25.00 Nonsworn Employees 3.25 3.25 3.25 3.25 3.00 3.00 3.00 3.00 3.00 3.00 Fire Firefighters and Officers 43.00 41.00 43.00 42.00 45.00 52.00 47.00 42.00 42.00 50.00 Public Works Building Maintenance - 0.80 0.80 0.80 0.85 0.85 1.25 1.25 1.25 1.25 Fleet Maintenance 2.10 2.20 2.20 2.20 2.30 2.30 2.30 2.30 2.30 2.20 Street Maintenance 6.40 5.80 5.80 5.80 6.00 6.00 6.00 6.30 6.30 6.10 Parks Maintenance 5.60 4.60 4.60 4.60 4.65 4.65 5.00 5.05 5.05 5.85 Parks and Recreation Parks & Rec 9.50 9.50 9.50 9.50 9.50 10.25 10.25 10.25 10.25 10.25 Arena 1.85 1.85 1.85 1.85 1.85 1.85 1.85 1.88 1.90 1.90 Utilities Water 4.83 4.68 4.68 4.68 4.88 4.88 4.88 5.11 4.55 5.10 Sewer 4.83 4.68 4.68 4.68 4.88 4.88 4.88 5.06 4.50 5.05 Storm Water 2.10 2.10 2.10 2.10 2.30 2.30 2.55 2.88 4.30 4.70 124.01 119.75 121.75 122.00 125.75 134.50 131.50 129.12 129.50 140.50 Sources: Finance DepartmentNote: Employees listed are full-time and permanent part-time employees. Seasonal and temporary positions are not included.Schedule 16City of RosemountFull-Time/Permanent Part-Time City Government Employees by Function/ProgramLast Ten Fiscal YearsFiscal Years113 2011201220132014201520162017201820192020Function/ProgramGeneral Government Total Permits Issued by the Building Department2,359 2,251 2,471 2,879 2,677 3,033 3,136 3,503 3,997 4,426 Total Number of Inspections Conducted 4,048 3,553 4,296 4,618 5,467 5,927 5,425 6,317 8,001 8,198 Police Number of Calls for Service 14,554 14,346 13,730 15,538 16,894 16,691 16,194 15,166 17,533 16,512 Number of Patrol Miles152,097 194,764 186,490 195,393 204,226 185,101 186,155 227,530 199,931 243,685 Adult Arrests 432 369 312 230 465 326 406 375 355 252 Juvenile Arrests 146 107 102 101 88 105 85 87 74 23 Traffic Violations2,232 2,610 2,147 2,452 1,872 1,939 1,372 1,187 1,088 848 Parking Violations296 378 436 197 207 271 88 178 264 191 Fire Number of Calls Answered 690 724 637 715 710 720 744 820 894 848 Fires Extinguished 34 52 35 38 33 38 60 46 48 20 Public Works Street Resurfacing (Miles)1.30 2.30 1.60 1.20 - 1.20 1.95 3.15 1.20 4.14 Park Acres Mowed134 154 154 154 154 160 160 167 167 181 Parks and Recreation Overall Program Participation 14,500 14,500 15,000 15,000 15,200 15,200 15,200 15,500 15,800 3,000 Hours of Ice Time Used2,515 2,577 2,479 2,378 2,670 2,678 2,805 2,704 2,999 1,992 Water Connections 6,431 7,464 7,576 7,701 7,827 7,938 8,107 8,281 8,462 8,645 Water Main Breaks - - 1 1 2 1 1 1 1 - Average Daily Consumption (In Gallons)2,344,546 2,665,979 2,412,638 2,233,593 2,227,616 2,520,915 2,530,849 2,250,066 2,136,434 2,585,996 Sewer Connections 6,414 6,505 6,614 6,734 6,734 6,968 7,050 7,198 7,376 7,580 Sources: Various City departments.Schedule 17City of RosemountOperating Indicators by Function/ProgramLast Ten Fiscal YearsFiscal Years114 2011201220132014201520162017201820192020Function/ProgramGeneral Government City Halls/Other Buildings 1 1 1 1 1 1 1 1 1 1 Police Stations 1 1 1 1 1 1 1 1 1 1 Patrol Units (Marked/Unmarked) 9/4 9/4 9/4 8/6 9/6 9/6 10/6 10/6 10/6 10/6Fire Stations 2 2 2 2 2 2 2 2 2 2 Fire Units (Vehicles & Trailer) 14 14 15 15 15 16 16 16 17 17 Public Works Buildings 3 3 3 3 3 3 3 3 3 3 City Maintained Streets (Miles) 103 105 106 108 110 110 113 114 115 117 Street Lights 1,500 1,510 1,520 1,539 1,561 1,568 1,599 1,601 1,622 1,704 Parks and Recreation Community Centers 1 1 1 1 1 2 2 2 2 2 Shelters/Other Buildings 3 3 3 3 3 3 3 3 3 3 Acreage 467 467 534 533 533 540 540 540 540 540 Parks 28 28 27 29 29 30 30 30 30 30 Playgrounds 20 20 20 21 21 21 21 21 21 21 Baseball/Softball Diamonds 20 22 23 23 23 24 24 24 24 24 Soccer/Football Fields 16 16 19 19 19 20 20 24 24 24 Tennis Courts 8 8 8 12 12 12 12 12 12 12 Water Water Mains (Miles) 125 127 129 130 130 134 135 135 138 145 Wells (Municipal/Rural) 8 8 8 8 8 8 8 9 9 9 Water Towers 4 4 4 4 4 4 4 4 4 4 Fire Hydrants 1,342 1,342 1,366 1,412 1,420 1,445 1,450 1,452 1,560 1,571 Storage Capacity 3,500,000 3,500,000 3,500,000 3,500,000 3,500,000 3,500,000 3,500,000 3,500,000 3,500,000 3,500,000 Maximum Pumping Capacity 12,096,000 12,096,000 12,096,000 12,096,000 12,384,000 12,384,000 12,384,000 14,976,000 14,976,000 14,976,000 Sewer Sanitary Sewer Mains (Miles) 95 97 98 98 98 100 103 103 105 118 Storm Sewer Mains (Miles) 84 86 86 88 89 91 105 105 111 123 Public Education Facilities: Number of Elementary Schools 2 2 2 2 2 2 2 2 2 2 Number of Secondary Schools 2 2 2 2 2 2 2 2 2 2 Number of Special Education Schools 2 2 2 2 2 2 2 2 2 2 (Dakota County Technical College)Sources: Various City departments.Schedule 18City of RosemountCapital Asset Statistics by Function/ProgramLast Ten Fiscal YearsFiscal Years115 Management Report for City of Rosemount, Minnesota December 31, 2020 THIS PAGE INTENTIONALLY LEFT BLANK To the City Council and Management City of Rosemount, Minnesota We have prepared this management report in conjunction with our audit of the City of Rosemount, Minnesota’s (the City) financial statements for the year ended December 31, 2020. We have organized this report into the following sections: •Audit Summary •Governmental Funds Overview •Enterprise Funds Overview •Government-Wide Financial Statements •Legislative Updates •Accounting and Auditing Updates We would be pleased to further discuss any of the information contained in this report or any other concerns that you would like us to address. We would also like to express our thanks for the courtesy and assistance extended to us during the course of our audit. The purpose of this report is solely to provide those charged with governance of the City, management, and those who have responsibility for oversight of the financial reporting process comments resulting from our audit process and information relevant to city finances in Minnesota. Accordingly, this report is not suitable for any other purpose. Minneapolis, Minnesota May 5, 2021 C E R T I F I E D A C C O U N T A N T S P UBLIC PRINCIPALS Thomas A. Karnowski, CPA Paul A. Radosevich, CPA William J. Lauer, CPA James H. Eichten, CPA Aaron J. Nielsen, CPA Victoria L. Holinka, CPA/CMA Jaclyn M. Huegel, CPA Kalen T. Karnowski, CPA Malloy, Montague, Karnowski, Radosevich & Co., P.A. 5353 Wayzata Boulevard • Suite 410 • Minneapolis, MN 55416 • Phone: 952-545-0424 • Fax: 952-545-0569 • www.mmkr.com Standard Letterhead-r2.qxp_167639 Letterhead-RV1 9/7/18 6:34 PM Page 1 THIS PAGE INTENTIONALLY LEFT BLANK -1- AUDIT SUMMARY The following is a summary of our audit work, key conclusions, and other information that we consider important or that is required to be communicated to the City Council, administration, or those charged with governance of the City. OUR RESPONSIBILITY UNDER AUDITING STANDARDS GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA, GOVERNMENT AUDITING STANDARDS, AND TITLE 2 U.S. CODE OF FEDERAL REGULATIONS (CFR) PART 200, UNIFORM ADMINISTRATIVE REQUIREMENTS, COST PRINCIPLES, AND AUDIT REQUIREMENTS FOR FEDERAL AWARDS (UNIFORM GUIDANCE) We have audited the financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City as of and for the year ended December 31, 2020. Professional standards require that we provide you with information about our responsibilities under auditing standards generally accepted in the United States of America, Government Auditing Standards, and the Uniform Guidance, as well as certain information related to the planned scope and timing of our audit. We have communicated such information to you verbally and in our audit engagement letter. Professional standards also require that we communicate the following information related to our audit. PLANNED SCOPE AND TIMING OF THE AUDIT We performed the audit according to the planned scope and timing previously discussed and coordinated in order to obtain sufficient audit evidence and complete an effective audit. AUDIT OPINION AND FINDINGS Based on our audit of the City’s financial statements for the year ended December 31, 2020: • We have issued an unmodified opinion on the City’s basic financial statements. • We reported no deficiencies in the City’s internal control over financial reporting that we consider to be material weaknesses. It should be understood that internal controls are never perfected, and those controls, which protect the City’s funds from such things as fraud and accounting errors, need to be continually reviewed by your management and modified as necessary. • The results of our testing disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards. • We reported that the Schedule of Expenditures of Federal Awards is fairly stated, in all material respects, in relation to the basic financial statements. • The results of our tests indicate that the City has complied, in all material respects, with the types of compliance requirements that could have a direct and material effect on each of its major federal programs. • We reported no deficiencies in the City’s internal controls over compliance that we considered to be material weaknesses with the types of compliance requirements that could have a direct and material effect on each of its major federal programs. -2- • We reported two findings based on our testing of the City’s compliance with Minnesota laws and regulations: 1. We noted that a withholding affidavit was not obtained from the contractor prior to the final payment being made on two contracts as required by Minnesota Statutes § 270C.66. 2. We noted for one purchase of greater than $25,000, but less than $175,000, the City did not follow purchasing policies as required by Minnesota Statutes § 471.345, Subd. 4, requiring multiple quotes. FOLLOW-UP ON PRIOR YEAR FINDINGS AND RECOMMENDATIONS As part of our audit of the City’s financial statements for the year ended December 31, 2020, we performed procedures to follow-up on the findings and recommendations that resulted from our prior year audit. We reported the following findings that were corrected by the City in the current year: • During 2019, the City had a limited segregation of duties in certain areas. The City continued efforts to separate incompatible duties and corrected this prior year finding in 2020. • During 2019, the City had pledged collateral of a general obligation of a state or local government that was not rated “A” or better by a national bond rating service, as required by state statutes. The City corrected this prior year finding in 2020. OTHER OBSERVATIONS AND RECOMMENDATIONS Electronic Funds Transfers Fraud As the use of electronic funds transfers and payment methods has become more prevalent, we have seen increases in both the incidences of fraud related to these transactions and the dollar amounts involved. Operational changes related to the COVID-19 pandemic, including greater reliance on technology and more employees working remotely, have tended to increase risk in this area. We urge cities to carefully review controls over these transactions, and consider best practices to address these risks, such as: • Ensuring segregation of duties over these transactions by involving more than one employee in the process. • Requiring multi-factor authentication of requests for electronic payments from new vendors or for changes in wiring instructions for existing vendors. It is recommended that changes for existing vendors be verified through trusted contact information used previously for that vendor, not as provided in the change request, to verify the accuracy of the change. • Educate employees on the controls in place to protect the organization’s financial assets and ensure management is supportive and accepting of the processes in place. Attempted fraudulent transactions are often initiated using the profile of a supervisor. Employees must be comfortable questioning unusual transactions or requests, and instructed not to circumvent internal control procedures regardless of whom they believe initiated the transaction. • Recommended cyber security measures, such as limiting network access and requiring robust passwords that are changed regularly, should be implemented and followed by all city employees, not just those directly involved with financial transactions. • Review insurance policies to understand the coverage provided for financial losses due to cybersecurity risks and evaluate whether they provide adequate coverage based on management’s assessment of these risks. -3- Uniform Guidance Written Controls and Federal Micro-Purchase Threshold Federal Uniform Guidance (UG) requires that nonfederal entities must have and use documented procurement procedures consistent with 2CFR § 200.317-320 for the acquisition of property or services required under a federal award or sub-award. Effective August 31, 2020, the federal micro-purchase threshold, which is the threshold that allows for procurements without soliciting competitive price or rate quotations given certain conditions, was increased from $3,500 to $10,000 in the Federal Acquisition Regulations (FAR). Effective November 12, 2020, the UG was also revised to allow nonfederal entities to establish a micro-purchase threshold higher than the $10,000 threshold established in the FAR under certain circumstances. The nonfederal entity may self-certify a micro-purchase threshold up to $50,000 if the requirements in 2CFR § 200.320(a)(1)(iv) are followed. Requirements include an annual self-certification and clear documentation of the justification to support the increase in the threshold. Acceptable reasons for justification must meet one of the following criteria: • A qualification as a low-risk auditee, in accordance with the criteria in § 200.520 for the most recent audit, • An annual internal institutional risk assessment to identify, mitigate, and manage financial risks, or, • A higher threshold consistent with state law. This flexibility would allow Minnesota local governments to increase and align their federal procurement procedures, specifically the micro-purchase threshold, with state law, which allows for procurements below $25,000 to be made without competitive price or rate quotations. We recommend that the City review its current federal procurement policy. If the micro -purchase threshold in your currently adopted policy is below the allowable FAR limit of $10,000, you would need to make a one-time amendment to the policy to adopt the $10,000 FAR limit before using it. If you prefer to increase your federal micro-purchase threshold to $25,000 to align it with state law, in addition to amending your federal procurement policy, you would need to annually certify the h igher threshold and the justification for using the higher threshold. SIGNIFICANT ACCOUNTING POLICIES Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the City are described in Note 1 of the notes to basic financial statements. No new accounting policies were adopted and the application of existing policies was not changed during the year ended December 31, 2020. We noted no transactions entered into by the City during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. ACCOUNTING ESTIMATES AND MANAGEMENT JUDGMENTS Accounting estimates are an integral part of the financial statements prepared by management and are based on management’s knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. -4- The most sensitive estimates affecting the financial statements were: • Depreciation – Management’s estimates of depreciation expense are based on the estimated useful lives of the assets. • Compensated Absences – Management’s estimate is based on current rates of pay and unused compensated absences balances estimated to be paid out as termination pay. • Pension/Other Post-Employment Benefits (OPEB) – The City has recorded liabilities and activity for pension benefits and OPEB. These obligations include calculations using actuarial methodologies described in Governmental Accounting Standards Board Statement Nos. 68 and 75. These actuarial calculations include significant assumptions, including projected changes, healthcare insurance costs, investment returns, retirement ages, proportionate share, and employee turnover. We evaluated the key factors and assumptions used by management to develop these est imates in determining that they are reasonable in relation to the basic financial statements taken as a whole. Certain financial statement disclosures are particularly sensitive because of their significance to financial statement users. The disclosures included in the notes to the basic financial statements related to OPEB and pension benefits are particularly sensitive, due to the materiality of the liabilities, and the large and complex estimates involved in determining the disclosures. The financial statement disclosures are neutral, consistent, and clear. DIFFICULTIES ENCOUNTERED IN PERFORMING THE AUDIT We encountered no significant difficulties in dealing with management in performing and completing our audit. CORRECTED AND UNCORRECTED MISSTATEMENTS Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management. There were no misstatements detected as a result of audit procedures that were material, either individually or in the aggregate, to each opinion unit’s financial statements taken as a whole. DISAGREEMENTS WITH MANAGEMENT For purposes of this report, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor’s report. We are pleased to report that no such disagreements arose during the course of our audit. MANAGEMENT REPRESENTATIONS We have requested certain representations from management that are included in the management representation letter dated May 5, 2021. -5- MANAGEMENT CONSULTATIONS WITH OTHER INDEPENDENT ACCOUNTANTS In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a “second opinion” on certain situations. If a consultation involves application of an accounting principle to the City’s financial statements or a determination of the type of auditor’s opinion that may be expressed on those statements, our professional sta ndards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. OTHER AUDIT FINDINGS OR ISSUES We generally discuss a variety of matters, including the application of accounting principles and auditing standards with management each year prior to retention as the City’s auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. OTHER MATTERS We applied certain limited procedures to the management’s discussion and analysis (MD&A) and the remaining budgetary, pension, and OPEB related required supplementary information (RSI) that supplements the basic financial statements. Our procedures consisted of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We did not audit the RSI and do not express an opinion or provide any assurance on the RSI. We were engaged to report on the combining and individual fund statements and schedules, reported as supplementary information accompanying the financial statements, and the separately issued Schedule of Expenditures of Federal Awards, which are not RSI. With respect to this supplementary information, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves. We were not engaged to report on the introductory section and the statistical section, which accompany the financial statements, but are not RSI. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on it. THIS PAGE INTENTIONALLY LEFT BLANK -6- GOVERNMENTAL FUNDS OVERVIEW This section of the report provides you with an overview of the financial trends and activities of the City’s governmental funds, which includes the General, special revenue, debt service, and capital project funds . These funds are used to account for the basic services the City provides to all of its citizens, which are financed primarily with property taxes. The governmental fund information in the City’s financial statements focuses on budgetary compliance and the sufficiency of each governmental fund’s current assets to finance its current liabilities. PROPERTY TAXES Minnesota cities rely heavily on local property tax levies to support their governmental fund activities. For the 2019 fiscal year, local ad valorem property tax levies provided 40.8 percent of the total governmental fund revenues for cities over 2,500 in population, and 37.6 percent for cities under 2,500 in population. Total property taxes levied by all Minnesota cities for taxes payable in 2020 increased 6.1 percent from the prior year. The total tax capacity value of property in Minnesota cities increased about 6.5 percent for the 2020 levy year. The tax capacity values used for levying property taxes are based on the assessed market values for the previous fiscal year (e.g., tax capacity values for taxes levied in 2020 were based on assessed market values as of January 1, 2019), so the trend of change in these tax capacity values lags somewhat behind the housing market and economy in general. The City’s estimated market value increased 7.5 percent for taxes payable in 2019 and increased 8.1 percent for taxes payable in 2020. The following graph shows the City’s changes in estimated market value over the past 10 years: $– $500,000,000 $1,000,000,000 $1,500,000,000 $2,000,000,000 $2,500,000,000 $3,000,000,000 $3,500,000,000 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Estimated Market Value -7- Tax capacity is considered the actual base available for taxation. It is calculated by applying the state’s property classification system to each property’s market value. Each property classification, such as commercial or residential, has a different calculation and uses different rates. Consequently, a city’s total tax capacity will change at a different rate than its total market value, as tax capacity is affected by the proportion of a city’s tax base that is in each property classification from year-to-year, as well as legislative changes to tax rates. The City’s tax capacity increased 7.3 percent for 2019 and increased 7.5 percent for 2020. The following graph shows the City’s change in tax capacities over the past 10 years: $– $5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000 $30,000,000 $35,000,000 $40,000,000 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Taxable Tax Capacity The following table presents the average tax rates applied to city residents for each of the last three levy years: Rates expressed as a percentage of net tax capacity 2018 2019 2020 Average tax rate City 41.0 39.4 38.6 County 26.6 25.4 24.1 School 21.4 20.6 19.9 Special taxing 4.3 4.2 4.0 Total 93.3 89.6 86.6 City of Rosemount The increase in tax capacity values previously discussed, contributed to the decrease in the City’s average tax rate presented in the table above. -8- GOVERNMENTAL FUND BALANCES The following table summarizes the changes in the fund balances of the City’s governmental funds during the year ended December 31, 2020, presented both by fund balance classification and by fund: 2020 2019 Change Fund balances of governmental funds Total by classification Nonspendable 455$ 529$ (74)$ Restricted 4,563,428 4,921,523 (358,095) Committed 590,017 517,102 72,915 Assigned 21,995,159 16,522,782 5,472,377 Unassigned 8,143,687 7,893,190 250,497 Total governmental funds 35,292,746$ 29,855,126$ 5,437,620$ Total by fund General 12,293,930$ 10,559,040$ 1,734,890$ Debt Service 2,300,537 2,449,174 (148,637) Capital Projects 17,844,916 13,856,932 3,987,984 Port Authority TIF 2,175,696 2,395,413 (219,717) Nonmajor funds 677,667 594,567 83,100 Total governmental funds 35,292,746$ 29,855,126$ 5,437,620$ as of December 31, Governmental Funds Change in Fund Balance Fund Balance In total, the fund balances of the City’s governmental funds increased by $5,437,620 during the year ended December 31, 2020. The largest changes were in assigned fund balances as noted in the table above. Fund balances assigned to the Capital Projects Fund accounted for a majority of the increase in assigned fund balance. -9- GOVERNMENTAL FUNDS REVENUES The following table presents the per capita revenue of the City’s governmental funds for the past three years, along with state-wide averages. We have included the most recent comparative state-wide averages available from the Office of the State Auditor to provide a benchmark for interpreting the City’s data. The amounts received from the typical major sources of governmental fund revenue will naturally vary between cities based on factors such as a city’s stage of development, location, size and density of its population, property values, services it provides, and other attributes. It will also differ from year -to-year, due to the effect of inflation and changes in its operation. Also, certain data in these tables may be classified differently than how they appear in the City’s financial statements in order to be more comparable to the state-wide information, particularly in separating capital expenditures from current expenditures. We have designed this section of our management report using per capita data in order to better identify unique or unusual trends and activities of the City. We intend for this type of comparative and trend information to complement, rather than duplicate, information in the MD&A. An inherent difficulty in presenting per capita information is the accuracy of the population count, which for most years is based on estimates. Year 2018 2019 2020 Population 2,500–10,000 10,000–20,000 20,000–100,000 24,866 25,460 26,318 Property taxes 514$ 489$ 512$ 471$ 473$ 483$ Tax increments 30 28 44 35 34 36 Franchise and other taxes 45 50 50 11 10 9 Special assessments 54 38 53 76 25 104 Licenses and permits 40 35 51 36 36 42 Intergovernmental revenues 342 297 201 63 123 189 Charges for services 135 108 115 193 169 173 Other 89 78 79 80 82 114 Total revenue 1,249$ 1,123$ 1,105$ 965$ 952$ 1,150$ December 31, 2019 City of RosemountState-Wide Governmental Funds Revenue per Capita With State-Wide Averages by Population Class The City’s governmental fund revenues for 2020 were $30,272,112, an increase of $6,006,696 (24.8 percent) from the prior year. On a per capita basis, the City received $1,150 in governmental fund revenue for 2020, an increase of $198 from the prior year. A city’s stage of development, along with the way a city finances various capital projects, will impact the mix of revenue sources it receives. Property taxes were up $10 per capita, as anticipated, with the increase in the certified levy. Special assessments were $79 more per capita than the prior year, with increased prepayments on deferred assessments. Intergovernmental revenues increased by $66 per capita , with the recognition of federal coronavirus relief funds awarded in the current year. The $32 increase in the other category was largely due to increases in development activity in the City in the current year. -10- GOVERNMENTAL FUNDS EXPENDITURES The expenditures of governmental funds will also vary from state-wide averages and from year-to-year, based on the City’s circumstances. Expenditures are classified into three types as follows: • Current – These are typically the general operating type expenditures occurring on an annual basis, and are primarily funded by general sources, such as taxes and intergovernmental revenues. • Capital Outlay and Construction – These expenditures do not occur on a consistent basis, more typically fluctuating significantly from year-to-year. Many of these expenditures are project-oriented, and are often funded by specific sources that have benefited from the expenditure, such as special assessment improvement projects. • Debt Service – Although the expenditures for debt service may be relatively consistent over the term of the respective debt, the funding source is the important factor . Some debt may be repaid through specific sources, such as special assessments or redevelopment funding, while other debt may be repaid with general property taxes. The City’s expenditures per capita of its governmental funds for the past three years, together with state-wide averages, are presented in the following table: Year 2018 2019 2020 Population 2,500–10,000 10,000–20,000 20,000–100,000 24,866 25,460 26,318 Current General government 152$ 128$ 107$ 126$ 128$ 163$ Public safety 300 282 306 187 185 188 Streets and highways 146 149 119 142 150 147 Parks and recreation 103 124 106 67 69 58 All other 74 75 97 3 4 26 Total current 775 758 735 525 536 582 Capital outlay and construction 438 376 355 357 279 391 Debt service Principal 168 182 88 57 62 66 Interest and fiscal 43 41 28 14 13 11 Total debt service 211 223 116 71 75 77 Total expenditures 1,424$ 1,357$ 1,206$ 953$ 890$ 1,050$ December 31, 2019 State-Wide Governmental Funds Expenditures per Capita With State-Wide Averages by Population Class City of Rosemount Total expenditures in the City’s governmental funds for 2020 were $27,632,224, an increase of $4,987,875 (22.0 percent) from the prior year. On a per capita basis, the City expended a total of $1,050 in 2020, an increase of $160 from the previous year. The biggest change was in capital outlay, which fluctuates from year-to-year based on timing and approved projects. As the above table reflects, the City’s expenditures per capita have historically been below the state-wide average. The largest change occurred in capital outlay and construction spending, which increased $112 per capita based on timing and approved projects. Increases in general government and all other were largely related to additional spending of coronavirus relief funds received, as previously mentioned, and economic development spending. -11- GENERAL FUND The City’s General Fund accounts for the financial activity of the basic services provided to the community. The primary services included within this fund are the administration of the municipal operation, police and fire protection, building inspection, streets and highway maintenance, and culture and recreation. The graph below illustrates the change in the General Fund financial position over the last five years. We have also included a line representing annual revenues to reflect the change in the size of the General Fund operation over the same period. 2016 2017 2018 2019 2020 Fund Balance $9,888,534 $9,556,250 $9,995,409 $10,559,040 $12,293,930 Cash (Net)$10,397,380 $10,130,901 $10,656,356 $10,985,167 $12,804,760 Revenue $12,409,954 $12,669,945 $13,580,346 $14,220,550 $16,434,441 $– $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 $14,000,000 $16,000,000 $18,000,000 General Fund Financial Position Year Ended December 31, The City’s General Fund cash and investments balance at December 31, 2020 was $12,804,760, an increase of $1,819,593 from the previous year. Total fund balance at year-end was $12,293,930, an increase of $1,734,890 from the prior year. As the graph illustrates, the City has generally been able to maintain healthy cash and fund balance levels as the volume of financial activity has fluctuated. This is an important factor because a government, like any organization, requires a certain amount of equity to operate. A healthy financial position allows the City to avoid volatility in tax rates; helps minimize the impact of state funding changes; allows for the adequate and consistent funding of services, repairs, and unexpected costs; and is a factor in det ermining the City’s bond rating and resulting interest costs. Maintaining an adequate fund balance has become increasingly important given the fluctuations in state funding for cities in recent years. A trend that is typical to Minnesota local governments, especially the General Fund of cities, is the unusual cash flow experienced throughout the year. The City’s General Fund cash disbursements are made fairly evenly during the year other than the impact of seasonal services, such as snowplowing, street maintenance, and park activities. Cash receipts of the General Fund are quite a different story. Taxes comprise about 68 percent of the fund’s total annual revenue. Approximately half of these revenues are received by the City in July and the rest in December. Consequently, the City needs to have adequate cash reserves to finance its everyday operations between these payments. The City’s unassigned General Fund balance at the end of the 2020 fiscal year represents approximately 56 percent of annual expenditures based on projected 2021 levels. -12- The following graph reflects the City’s General Fund revenue sources for 2020 compared to budget: $– $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 Taxes Licenses and Permits Intergovernmental Charges for Services Other General Fund Revenue –Budget and Actual (Budgetary Basis) Actual Budget General Fund revenue for 2020 was $16,434,441, which was $284,880 (1.8 percent) more than budget. Favorable variances in every category except for charges for services, contributed to the overall revenue variance. The City had less charges for services revenue than expected, with a variance of $122,795, due to the impact of the COVID-19 pandemic on recreation charges. Remaining sources exceeded amounts anticipated in the budget, due in part to conservative budgeting and elevated activity for development activities in the City. The following graph presents the City’s General Fund revenues by source for the last five years. The graph reflects the City’s reliance on property and other taxes, which represented 68 percent of General Fund revenues in 2020: Taxes Intergovernmental All Other 2016 $9,397,523 $596,817 $2,415,614 2017 $9,750,637 $417,036 $2,502,272 2018 $10,148,566 $460,756 $2,971,024 2019 $10,428,208 $749,242 $3,043,100 2020 $11,133,030 $2,589,046 $2,712,365 $– $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 General Fund Revenue by Source Year Ended December 31, Total General Fund revenue for 2020 was $2,213,891 (15.6 percent) more than last year. Taxes increased by $704,822, due to an increase in the approved tax levy. Intergovernmental revenue was $1,839,804 more than last year, with an increase in federal coronavirus relief funding in the current year. Remaining revenue sources of the General Fund were $330,735 less than 2019, due to a decrease in charges for services, due to the impact of the pandemic as mentioned earlier. -13- The following graph illustrates the components of General Fund spending for 2020 compared to budget: $– $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 General Government Public Safety Public Works Culture, Education and Recreation General Fund Expenditures –Budget and Actual (Budgetary Basis) Actual Budget General Fund expenditures for 2020 on a budgetary basis were $15,726,078, which was $296,983 (1.9 percent) under budget. Spending was under budget for public safety by $177,469, for public works by $72,835, and for parks and recreation by $187,531. General Government was $140,852 over budget, partially offsetting the savings in the other functions. The following graph presents the City’s General Fund expenditures by function for the last five years: General Government Public Safety Public Works Culture, Education and Recreation Capital Outlay 2016 $2,769,172 $4,072,189 $3,002,678 $1,516,720 $591,931 2017 $3,035,701 $4,306,808 $3,900,699 $1,546,723 $68,105 2018 $2,972,769 $4,651,700 $3,525,071 $1,663,618 $454 2019 $3,090,733 $4,702,502 $3,820,949 $1,751,115 $– 2020 $4,110,524 $4,954,705 $3,860,813 $1,515,223 $– $(500,000) $500,000 $1,500,000 $2,500,000 $3,500,000 $4,500,000 $5,500,000 General Fund Expenditures by Function Year Ended December 31, Total General Fund expenditures for 2020 on an accounting principle generally accepted in the United States of America-basis were $1,075,966 (8.1 percent) more than the previous year. The increase was spread across the general government, public safety, and public works categories as presented in the table above. Increases were partially due to the use of federal funds recognized in the current year, along with strong ongoing development in the City. Culture, education and recreation was down with limitations caused by the COVID-19 pandemic. -14- ENTERPRISE FUNDS OVERVIEW The City maintains several enterprise funds to account for services the City provides that are financed primarily through fees charged to those utilizing the service. This section of the report provides you with an overview of the financial trends and activities of the City’s enterprise funds, which include the Water, Sewer, Storm Water, Street Lighting, and Arena Funds. The utility funds comprise a considerable portion of the City’s activities. These funds help to defray overhead and administrative costs and provide additional support to general government operations by way of annual transfers. We understand that the City is proactive in reviewing these activities on an ongoing basis and we want to reiterate the importance of continually monitoring these operations. Over the years, we have emphasized to our city clients the importance of these utility operations being self-sustaining, preventing additional burdens on general government funds. This would include the accumulation of net position for future capital improvements and to provide a cushion in the event of a negative trend in operations. ENTERPRISE FUNDS FINANCIAL POSITION The following table summarizes the changes in the financial position of the City’s enterprise funds during the year ended December 31, 2020, presented both by classification and by fund: 2020 2019 Change Net position of enterprise funds Total by classification Net investment in capital assets 99,300,829$ 98,007,299$ 1,293,530$ Unrestricted 32,661,481 28,881,892 3,779,589 Total enterprise funds 131,962,310$ 126,889,191$ 5,073,119$ Total by fund Water 47,875,231$ 45,371,778$ 2,503,453$ Sewer 35,460,295 34,806,570 653,725 Storm Water 46,906,419 44,988,963 1,917,456 Street Lighting 57,069 – 57,069 Arena 1,663,296 1,721,880 (58,584) Total enterprise funds 131,962,310$ 126,889,191$ 5,073,119$ Enterprise Funds Change in Financial Position Net Position as of December 31, In total, the net position of the City’s enterprise funds increased by $5,073,119 during the year ended December 31, 2020. The increase in net position is primarily from connection fees and capital contributions recognized in the current year. -15- WATER FUND At December 31, 2020, the Water Fund had a cash balance of $14,169,550 and total net position of $47,875,231. Of this net position total, $33,655,742 is the investment in capital assets, while unrestricted has a balance of $14,219,489. The following graph shows the financial position of the Water Fund over the past five years: $– $10,000,000 $20,000,000 $30,000,000 $40,000,000 $50,000,000 2016 2017 2018 2019 2020 Water Fund Financial Position Year Ended December 31, Cash, Net of Interfund Loans Total Net Position Operating Revenue The following graph shows the operating results of the Water Fund over the last five years: $– $250,000 $500,000 $750,000 $1,000,000 $1,250,000 $1,500,000 $1,750,000 $2,000,000 $2,250,000 $2,500,000 $2,750,000 $3,000,000 2016 2017 2018 2019 2020 Water Fund Operating Results Year Ended December 31, Operating Expenses Operating Revenue The Water Fund maintains a healthy financial position. During fiscal 2020, the Water Fund recognized an operating income of $454,605, compared to an operating loss of $472,851 in fiscal 2019. The increase in operating revenue was due to a combination of more water usage and a change in the rate structure in the current year. Consumption will fluctuate from year-to-year based on many factors, including weather patterns and the number of utility customers. The City should continue to review utility rates during its annual budget process to make sure an adequate, yet fair rate is charged for the services provided. Operating expenses were down in the current year, with a decrease in other services and charges. -16- SEWER FUND At December 31, 2020, the Sewer Fund had a cash balance of $7,653,100 and total net position of $35,460,295. Of this net position total, $27,486,238 is the investment in capital assets, while $7,974,057 is unrestricted. The following graph shows the financial position of the Sewer Fund over the past five years: $– $5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000 $30,000,000 $35,000,000 $40,000,000 2016 2017 2018 2019 2020 Sewer Fund Financial Position Year Ended December 31, Cash, Net of Interfund Loans Total Net Position Operating Revenue The following graph shows the operating results of the Sewer Fund for the last five years: $– $250,000 $500,000 $750,000 $1,000,000 $1,250,000 $1,500,000 $1,750,000 $2,000,000 $2,250,000 $2,500,000 $2,750,000 $3,000,000 $3,250,000 $3,500,000 2016 2017 2018 2019 2020 Sewer Fund Operating Results Year Ended December 31, MCES Costs Other Operating Expenses Operating Revenue The major expense of the sanitary sewer operation is the charge from the Metropolitan Council Environmental Services (MCES). The main cause of the expense fluctuations from year-to-year, shown on the graph above, are generally changes made to the charges from the MCES, reflecting the results of its sewer treatment operations. During fiscal 2020, the Sewer Fund reported an operating loss of $851,135, compared to an operating loss of $1,090,651 in fiscal 2019. A change in the rate structure and an increase in users contributed to the growth in operating revenue in the current year. The City should continue to review utility rates during its annual budget process to make sure an adequate, yet fair rate is charged for the services provided. Operating expenses were up in the current year, with an increase in other services and charges and metro sewer charges. -17- STORM WATER FUND At December 31, 2020, the Storm Water Fund had a cash balance of $9,916,372 and total net position of $46,906,419. Of this net position total, $36,905,209 is the investment in capital assets, while $10,001,210 is unrestricted. The following graph shows the financial position of the Storm Water Fund over the past five years: $– $5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000 $30,000,000 $35,000,000 $40,000,000 $45,000,000 $50,000,000 2016 2017 2018 2019 2020 Storm Water Fund Financial Position Year Ended December 31, Cash, Net of Interfund Loans Total Net Position Operating Revenue The following graph shows the operating results of the Storm Water Fund for the last five years: $– $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000 $1,400,000 $1,600,000 $1,800,000 $2,000,000 2016 2017 2018 2019 2020 Storm Water Fund Operating Results Year Ended December 31, Operating Expenses Operating Revenue The Storm Water Fund maintains a healthy financial position. During fiscal 2020, the Storm Water Fund reported an operating loss of $409,170, compared to an operating loss of $411,351 in fiscal 2019. A similar increase in operating revenues and operating expenses resulted in an operating loss comparable to the prior year. -18- ARENA FUND At December 31, 2020, the Arena Fund had a cash balance of $520,160 and total net position of $1,663,296. Of this net position total, $1,253,640 is the investment in capital assets, while $409,656 is unrestricted. The following graph shows the financial position of the Arena Fund over the past five years: $– $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000 $1,400,000 $1,600,000 $1,800,000 2016 2017 2018 2019 2020 Arena Fund Financial Position Year Ended December 31, Cash, Net of Interfund Loans Total Net Position Operating Revenue The following graph shows the operating results of the Arena Fund for the last five years: $– $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 $700,000 2016 2017 2018 2019 2020 Arena Fund Operating Results Year Ended December 31, Operating Expenses Operating Revenue During fiscal 2020, the Arena Fund reported an operating loss of $188,269, compared to an operating loss of $112,645 in fiscal 2019. The decrease in operating revenues and expenses was due to the impact of the ongoing pandemic in the current year. STREET LIGHTING FUND The City established the Street Lighting Fund in the current year to account for the financial activity of the street lighting utility operation. At December 31, 2020, the Street Lighting Fund had a cash balance of $25,204 and total net position of $57,069, reported as unrestricted. THIS PAGE INTENTIONALLY LEFT BLANK -19- GOVERNMENT-WIDE FINANCIAL STATEMENTS In addition to fund-based information, the current reporting model for governmental entities also requires the inclusion of two government-wide financial statements designed to present a clear picture of the City as a single, unified entity. These government-wide financial statements provide information on the total cost of delivering services, including capital assets and long-term liabilities. STATEMENT OF NET POSITION The Statement of Net Position essentially tells you what the City owns and owes at a given point in time, the last day of the fiscal year. Theoretically, net position represents the resources the City has leftover to use for providing services after its debts are settled. However, those resources are not always in spendable form, or there may be restrictions on how some of those resources can be used. Therefore, net position is divided into three components: net investment in capital assets, restricted, and unrestricted. • Net Investment in Capital Assets – The portion of net position reflecting equity in capital assets (i.e., capital assets minus related debt). • Restricted Net Position – The portion of net position equal to resources whose use is l egally restricted minus any noncapital-related liabilities payable from those same resources. • Unrestricted Net Position – The residual balance of net position after the elimination of net investment in capital assets and restricted net position. The following table presents the components of the City’s net position as of December 31, 2020 and 2019, for governmental activities and business-type activities: 2020 2019 Change Net position Governmental activities Net investment in capital assets 89,980,056$ 85,993,734$ 3,986,322$ Restricted 6,372,033 6,255,555 116,478 Unrestricted 24,068,714 18,205,045 5,863,669 Total governmental activities 120,420,803 110,454,334 9,966,469 Business-type activities Net investment in capital assets 99,300,829 98,007,299 1,293,530 Unrestricted 32,661,481 28,881,892 3,779,589 Total business-type activities 131,962,310 126,889,191 5,073,119 Total net position 252,383,113$ 237,343,525$ 15,039,588$ As of December 31, The City’s total net position at December 31, 2020 was $15,039,588 more than the previous year. Governmental activities increased $9,966,469 and business-type activities increased $5,073,119. The change in components of governmental activity net position reflects the City’s continued investment in street infrastructure and capital equipment in the current year. Capital contributions from developers also increased the net investment in capital assets of governmental activities. The increase in business-type activities net position matches the enterprise funds activity previously discussed. At the end of the current fiscal year, the City is able to present positive balances in all categories of net position, both for the government as a whole, as well as for its separate governmental and business -type activities. The same situation held true for the prior fiscal year. -20- STATEMENT OF ACTIVITIES The Statement of Activities tracks the City’s yearly revenues and expenses, as well as any other transactions that increase or reduce total net positions. These amounts represent the full cost of providing services. The Statement of Activities provides a more comprehensive measure than just the amount of cash that changed hands, as reflected in the fund-based financial statements. This statement includes the cost of supplies used, depreciation of long-lived capital assets, and other accrual-based expenses. The following table presents the change in the net position of the City for the years ended December 31, 2020 and 2019: 2019 Program Expenses Revenues Net Change Net Change Net (expense) revenue Governmental activities General government 4,972,215$ 4,083,135$ (889,080)$ 89,093$ Public safety 5,259,828 511,418 (4,748,410) (4,752,337) Public works 7,089,996 8,492,270 1,402,274 (1,313,103) Culture, education, and recreation 1,982,191 1,531,942 (450,249) (1,063,139) Conservation and economic development 1,160,449 39,539 (1,120,910) (25,148) Interest and fiscal changes 241,623 – (241,623) (281,999) Business-type activities Water 2,381,646 4,675,243 2,293,597 1,091,925 Sewer 3,309,194 3,604,843 295,649 (143,541) Storm water 1,935,245 3,168,898 1,233,653 1,040,507 Street lighting 193,114 250,174 57,060 – Arena 501,011 313,085 (187,926) (112,331) Total net (expense) revenue 29,026,512$ 26,670,547$ (2,355,965) (5,470,073) General revenues Taxes 14,357,409 13,564,954 Unrestricted intergovernmental revenues 1,833,933 – Unrestricted investment earnings 1,129,923 1,363,395 Other 74,288 113,477 Total general revenues 17,395,553 15,041,826 Change in net position 15,039,588 9,571,753 Net position – beginning 237,343,525 227,771,772 Net position – ending 252,383,113$ 237,343,525$ 2020 One of the goals of this statement is to provide a side-by-side comparison to illustrate the difference in the way the City’s governmental and business-type operations are financed. The table clearly illustrates the dependence of the City’s governmental operations on general revenues, such as property taxes, unrestricted grants, and unrestricted investment earnings. In contrast, the City’s business-type activities tend to rely more heavily on program revenues like charges f or services (sales) and program-specific grants to cover expenses. This is critical given the current downward pressures on the general revenue sources. The change in net (expense) revenue, presented in the table above, when compared to the prior year is primarily due to the amount of developer contributions recognized from year-to-year. These contributions fluctuate with the size and number of completed development projects. -21- LEGISLATIVE UPDATES The 2020 legislative session, coming in the second half of the state’s fiscal biennium, was expected to be a typical short session focused primarily on making relatively minor modifications to the biennial budget. Given a projected budget surplus of $1.5 billion going into the session, consideration of a substantial capital investment and bonding bill was also a potential focus. The start of the legislative session in February was followed by a series of significant events that changed the course of the session, including a world-wide health pandemic, the death of George Floyd while in police custody and the ensuing protests and unrest, and a hotly contested national election. On March 13, 2020, the Governor issued an executive order declaring a peacetime emergency, giving his administration the ability to quickly impose restrictions and measures aimed at mitigating the COVID-19 outbreak. By early May, the state’s budget outlook had changed from a robust surplus to a projected deficit of $2.4 billion. The legislative session ultimately encompassed an unprecedented seven special sessions, more than double the previous state record of three, with the final special session in mid-December. In the end, a $1.87 billion omnibus bonding bill was passed that included $1.36 billion in general obligation state bonding for capital improvements, $31.0 million in supplemental General Fund budget spending, and provisions for tax relief and economic assistance. The session also yielded a new Police Accountability Act, and a $217.0 million economic relief package to help businesses negatively impacted by the pandemic. The following is a brief summary of legislative changes from the 2020 session or previous legislative sessions potentially impacting Minnesota cities. Coronavirus Aid, Relief, and Economic Security (CARES) Act – The CARES Act provided federal economic relief to protect the American people from the public health and economic impacts of COVID-19. Minnesota received approximately $2.2 billion in funding under the CARES Act. When the first legislative special session ended without an agreement on the distribution of approximately $841.5 million of federal Coronavirus Relief Fund (CRF) funding earmarked for Minnesota local governments, the Governor distributed the funds by executive order based on the framework of the legislative agreement debated during the first special session. This resulted in $350.4 million being distributed directly to Minnesota cities with populations equal to or greater than 200. The funds were authorized for use for unbudgeted costs related to the COVID-19 pandemic, but not to replace lost revenues. In accordance with CARES Act provisions, the CRF funding was available to cover costs that; 1) were necessary expenditures incurred due to the public health emergency related to COVID-19; 2) were not accounted for in the entity’s budget most recently approved as of March 27, 2020; and 3) were incurred during the period from March 1, 2020 through December 31, 2020 (the availability period end date was revised by the state to November 15, 2020 for Minnesota cities). Emergency Small Business Assistance Program – The Legislature created a program to appropriate $60.0 million of federal CRF funding to make grants available through the Minnesota Department of Employment and Economic Development for eligible small businesses impacted by COVID-19. Small businesses employing up to 50 full-time employees are eligible to receive grants of up to $10,000. The allocation is split between the metro area and greater Minnesota, with specific allocations for businesses owned by minorities, veterans, and women. $18.0 million of the allocation is earmarked for businesses with 6 or less employees. Workers’ Compensation Claims – COVID-19 Presumption – The Legislature adopted several new provisions to state unemployment statutes related to COVID-19, including a presumption that an employee who contracts COVID-19 has an “occupational disease” arising out of, and in the course of, employment if the employee works in one of the specified occupations and has a confirmed case of COVID-19. Covered occupations include nurses, healthcare workers, and workers required to provide childcare for first responders and healthcare workers under Executive Orders 20 -02 and 20-19. The COVID-19 presumption provision sunsets on May 1, 2021. -22- Bonding Bill – The 2020 bonding bill provided financing for approximately $1.36 billion of projects. Some of the more significant appropriations for local infrastructure included: $105 million in undesignated grants for local road improvement and bridge replacement; $100 million for water infrastructure and point source implementation grants; $25 million for state match of federal grants for public facilities improvements, $20 million for natural resource asset preservation, $17 million for flood control mitigation, $15 million for the Local Government Roads Wetlands Replacement Program; $5 million for Metropolitan Council inflow and infiltration grants; and $5 million for metropolitan regional parks and trails. The bill also included funding for a number of state initiatives, including: $300 million in trunk highway bonds for the improvement of the state trunk highway system; $145 million in appropriation bonds to fund the infrastructure and capital needs of the Minnesota Housing Finance Agency, Minnesota Pollution Control Agency, and Minnesota Public Television; $30 million for state agency projects aimed at promoting racial equity, $29.5 million for the state Emergency Operations Center; and $16 million for the Minnesota Housing Finance Agency. The bill provides authority for eligible local governments to own and operate childcare facilities, and permits local governments to enter into management agreements with licensed childcare providers to operate in publicly-owned facilities. It also makes cities, counties, school districts, and joint powers boards located outside of the seven-county metro area eligible to apply for grants through the Greater Minnesota Childcare Facility Capital Grant Program. The bill also included a provision extending the equal pay certificate of compliance requirement to contracts by any public entity, including political subdivisions, using state general obligation bond proceeds for all or part of a capital project. Local governments will be responsible for requiring that bids include proper certification on applicable projects, which applies to projects for goods or services valued at more than $1 million utilizing appropriated bond proceeds on or after January 1, 2022. Elections – A number of measures were passed to help ensure the safe and secure conduct of the 2020 state primary and general elections, including; allowing for the processing of absentee ballots to begin 14 days prior to the date of the election, extending the period during which absentee ballots could be processed for 2 days following the election, accepting electronic filings for affidavits of candidacy or nominating petitions, and specifying that municipalities were to use schools as polling places only when no other public or private location was reasonably available. Funds from the federal Help America Vote Act were made available for modernizing, securing, and improving election facilities, a portion of which was made available for grants to local governments to fund activities prescribed by this program. Minors Operating Lawn Care Equipment – Effective May 28, 2020, Minnesota Statutes lowered the employment age for operating lawn care equipment to age 16. Minors aged 16 and 17 must be trained in the safe operation of the equipment and wear appropriate personal protective equipment when operating the lawn care equipment. The exception under this statute applies only to minors directly employed by golf courses, resorts, rental property owners, or municipalities to perform lawn care on golf courses, resort grounds, rental property, or municipal grounds. Open Meeting Law Exception – The interactive television provision of the Minnesota Open Meeting Law was amended to allow for participation in meetings by interactive electronic means, such as Skype or Zoom, without requiring that an elected official be advised to do so by a healthcare professional for personal or family medical reasons. This allowance is available only when a national security or peacetime emergency has been declared and may be used up to 60 days after the emergency declaration has been lifted. Whenever public meetings are held via interactive electronic means of this type, votes must be conducted by roll call and be recorded in the minutes. Expanded Authority for Electronic Signatures During COVID-19 – Effective May 17, 2020, cities are allowed to accept certain documents, signatures, or filings electronically, by mail, or facsimile during the COVID-19 pandemic, including; planning and zoning applications and permits; land use documents; documents requiring the signature of licensed architects, engineers, land surveyors, geoscientists, or interior designers; applications for birth or death certificates; or recording notary commissions. This accommodation expires January 16, 2021, or 60 days following the termination of the peacetime public health emergency. -23- Solid Waste Recycling Exemption – The requirement that not more than 15 percent of mixed municipal solid waste received by recycling or composting facilities be disposed of, rather than recycled or composted, is suspended as long as the need for the exception is triggered by operational changes implemented to address the COVID-19 pandemic. Pension Changes – Effective January 1, 2021, the maximum lump-sum pension amount for volunteer firefighters is increased from $10,000 to $15,000 per year of service. Municipalities are permitted to split state fire aid received between its career firefighters and its affiliated volunteer firefighters, but only if the amount allocated to the career firefighters is approved by the membership of the volunteer firefighter relief association. Any aid allocated to career firefighters must be used to pay the Public Employees Retirement Association (PERA) employer contributions on their behalf within 18 months of the transfer or be returned to the relief association. Police Accountability Act – The Legislature passed the Police Accountability Act, which enacted a number of changes to laws governing police conduct, training, and oversight. Among the more significant changes adopted were: • Defined and authorized “public safety peer counseling” and “critical incident stress management,” and classifies information shared in these settings as private data. • Established an Independent Use of Force Investigations Unit within the Bureau of Criminal Apprehension to investigate all officer-involved deaths in the state, as well as criminal sexual assault allegations against peace officers, effective August 1, 2020. • Authorized statutory or home rule charter cities to offer incentives to encourage a person hired as a peace officer to be a resident of the city. • Limited the use of certain restraint methods by peace officer unless the use of deadly force is authorized in a given situation. • Established and modified provisions related to law enforcement use of deadly force. • Defined and prohibited “warrior-style” training for peace officers. • Established a 15-member “Ensuring Police Excellence and Improving Community Relations Advisory Council” under the Police Officer Standards and Training (POST) Board, to assist the POST Board in maintaining policies and regulating peace officers in a manner that ensures the protection of civil and human rights. • Established a duty for peace officers to intercede when another officer is using excessive force and report incidents of excessive force to supervisors. THIS PAGE INTENTIONALLY LEFT BLANK -24- ACCOUNTING AND AUDITING UPDATES The following is a summary of Governmental Accounting Standards Board (GASB) standards expected to be implemented in the next few years. Due to the COVID-19 pandemic, the GASB has delayed the original implementation dates of these and other standards as described below. GASB Statement No. 87, Leases A lease is a contract that transfers control of the right to use another entity’s nonfinancial asset as specified in the contract for a period of time in an exchange or exchange -like transaction. Examples of nonfinancial assets include buildings, land, vehicles, and equipment. Any contract that meets this definition should be accounted for under the leases guidance, unless specifically excluded in this statement. Governments enter into leases for many types of assets. Under the previous guidance, leases were classified as either capital or operating depending on whether the lease met any of the four tests. In many cases, the previous guidance resulted in reporting lease transactions differently than similar nonleas e financing transactions. The goal of this statement is to better meet the information needs of users by improving accounting and financial reporting for leases by governments. It establishes a single model for lease accounting based on the principle that leases are financings of the right to use an underlying asset. This statement increases the usefulness of financial statements by requiring recognition of certain lease assets and liabilities for leases that previously were classified as operating leases and recognized as inflows of resources or outflows of resources based on the payment provisions of the contract. Under this statement, a lessee is required to recognize a lease liability and an intangible right to use lease asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources, thereby enhancing the relevance and consistency of information about governments’ leasing activities. To reduce the cost of implementation, this statement includes an exception for short -term leases, defined as a lease that, at the commencement of the lease term, has a maximum possible term under the lease contract of 12 months (or less), including any options to extend, regardless of their probability of being exercised. Lessees and lessors should recognize short-term lease payments as outflows of resources or inflows of resources, respectively, based on the payment provisions of the lease contract. The requirements of this statement are effective for reporting periods beginning after June 15, 2021. -25- GASB Statement No. 91, Conduit Debt Obligations The primary objectives of this statement are to provide a single method of reporting conduit debt obligations by issuers and eliminate diversity in practice associated with (1) commitments extended by issuers, (2) arrangements associated with conduit debt obligations, and (3) related note disclosures. This statement achieves those objectives by clarifying the existing definition of a conduit debt obligation; establishing that a conduit debt obligation is not a liability of the issuer; establishing standards for accounting and financial reporting of additional commitments and voluntary commitments extended by issuers and arrangements associated with conduit debt obligations; and improving required note disclosures. A conduit debt obligation is defined as a debt instrument having all of the following characteristics: • There are at least three parties involved: (1) an issuer, (2) a third party obligor, and (3) a debt holder or a debt trustee. • The issuer and the third party obligor are not within the same financial reporting entity. • The debt obligation is not a parity bond of the issuer, nor is it cross -collateralized with other debt of the issuer. • The third party obligor or its agent, not the issuer, ultimately receives the proceeds from the debt issuance. • The third party obligor, not the issuer, is primarily obligated for the payment of all amounts associated with the debt obligation (debt service payments). This statement also addresses arrangements, often characterized as leases, that are associated with conduit debt obligations. In those arrangements, capital assets are constructed or acquired with the proceeds of a conduit debt obligation and used by third party obligors in the course of their activities. This statement requires issuers to disclose general information about their conduit debt obligations, organized by type of commitment, including the aggregate outstanding principal amount of the issuers’ conduit debt obligations and a description of each type of commitment. Issuers that recognize liabilities related to supporting the debt service of conduit debt obligations also should disclose information about the amount recognized and how the liabilities changed during the reporting period. The requirements of this statement are effective for reporting periods beginning after December 15, 2021. Earlier application is encouraged. -26- GASB Statement No. 92, Omnibus 2020 The objectives of this statement are to enhance comparability in accounting and financial reporting and to improve the consistency of authoritative literature by addressing practice issues that have been identified during implementation and application of certain GASB Statements. This statement addresses a variety of topics and includes specific provisions about the following: • The effective date of Statement No. 87, Leases, and Implementation Guide No. 2019-3, Leases, for interim financial reports • Reporting of intra-entity transfers of assets between a primary government employer and a component unit defined benefit pension plan or defined benefit other post-employment benefit (OPEB) plan • The applicability of Statements No. 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68, as amended, and No. 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, as amended, to reporting assets accumulated for post-employment benefits • The applicability of certain requirements of Statement No. 84, Fiduciary Activities, to post-employment benefit arrangements • Measurement of liabilities (and assets, if any) related to asset retirement obligations in a government acquisition • Reporting by public entity risk pools for amounts that are recoverable from reinsurers or excess insurers • Reference to nonrecurring fair value measurements of assets or liabilities in authoritative literature • Terminology used to refer to derivative instruments The requirements of this statement are effective for fiscal years beginning after June 15, 2021. Earlier application is encouraged. GASB Statement No. 96, Subscription-Based Information Technology Arrangements This statement provides guidance on the accounting and financial reporting for subscription -based information technology arrangements (SBITAs) for government end users (governments). This statement (1) defines a SBITA; (2) establishes that a SBITA results in a right-to-use subscription asset—an intangible asset—and a corresponding subscription liability; (3) provides the capitalization criteria for outlays other than subscription payments, including implementation costs of a SBITA; and (4) requires note disclosures regarding a SBITA. To the extent relevant, the standards for SBITAs are based on the standards established in Statement No. 87, Leases, as amended. An SBITA is defined as a contract that conveys control of the right to use another party’s (an SBITA vendor’s) information technology (IT) software, alone or in combination with tangible capital assets (the underlying IT assets), as specified in the contract for a period of time in an exchange or exchange -like transaction. Under this statement, a government generally should recognize a right-to-use subscription asset—an intangible asset—and a corresponding subscription liability. This statement provides an exception for short-term SBITAs with a maximum possible term under the SBITA contract of 12 months, including any options to extend, regardless of their probability of being exercised. Subscription payments for short-term SBITAs should be recognized as outflows of resources. This statement requires a government to disclose descriptive information about its SBITAs other than short-term SBITAs, such as the amount of the subscription asset, accumulated amortization, other payments not included in the measurement of a subscription liability, principal and interest requirements for the subscription liability, and other essential information. The requirements of this statement are effective for fiscal years beginning after June 15, 2022, and all reporting periods thereafter. -27- GASB Statement No. 97, Certain Component Unit Criteria, and Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans—an Amendment of GASB Statement No. 14 and No. 84, and a Supersession of GASB Statement No. 32 The primary objectives of this statement are to (1) increase consistency and comparability related to the reporting of fiduciary component units in circumstances in which a potential component unit does not have a governing board and the primary government performs the duties that a governing board typically would perform; (2) mitigate costs associated with the reporting of certain defined contribution pension plans, defined contribution OPEB plans, and employee benefit plans other than pension plans or OPEB plans (other employee benefit plans) as fiduciary component units in fiduciary fund financial statements; and (3) enhance the relevance, consistency, and comparability of the accounting and financial reporting for Internal Revenue Code Section 457 deferred compensation plans (Section 457 plans) that meet the definition of a pension plan and for benefits provided through those plans. The requirements of this statement that (1) exempt primary governments that perform the duties that a government board typically performs from treating the absence of a governing board the same as the appointment of a voting majority of a governing board in determining whether they are financially accountable for defined contribution pension plans, defined contribution OPEB plans, or other employee benefit plans, and (2) limit the applicability of the financial burden criterion in paragraph 7 of Statement 84 to defined benefit pension plans and defined benefit OPEB plans that are administered through trusts that meet the criteria in paragraph 3 of Statement 67 or paragraph 3 of Statement 74, respectively, are effective immediately. The requirements of this statement that are related to the accounting and financial reporting for Section 457 plans are effective for fiscal years beginning after June 15, 2021. For purposes of determining whether a primary government is financially accountable for a potential component unit, the requirements of this statement that provide that for all other arrangements, the absence of a governing board be treated the same as the appointment of a voting majority of a governing board if the primary government performs the duties that a governing board typically would perform, are effective for reporting periods beginning after June 15, 2021. Earlier application of those requirements is encouraged and permitted by requirement as specified within this statement. CITY OF ROSEMOUNT DAKOTA COUNTY, MINNESOTA Special Purpose Audit Reports Year Ended December 31, 2020 THIS PAGE INTENTIONALLY LEFT BLANK Page Schedule of Expenditures of Federal Awards 1 Independent Auditor’s 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 2–3 Independent Auditor’s Report on Compliance for Each Major Federal Program; Report on Internal Control Over Compliance; and Report on the Schedule of Expenditures of Federal Awards Required by the Uniform Guidance 4–6 Independent Auditor’s Report on Minnesota Legal Compliance 7 Schedule of Findings and Questioned Costs 8–10 Table of Contents CITY OF ROSEMOUNT Special Purpose Audit Reports Year Ended December 31, 2020 DAKOTA COUNTY, MINNESOTA THIS PAGE INTENTIONALLY LEFT BLANK Pass-Through Entity Federal Identification Federal CFDA No.Number Expenditures Community Development Block Grants/Entitlement Grants 14.218 B-19-UC-27-003 26,228$ COVID-19 – Coronavirus Relief Fund 21.019 SLT0016 1,833,933 Total federal awards 1,860,161$ Note 1: Note 2: Note 3: Note 4:Unaudited Disclosure –The City received donated personal protective equipment (PPE)with an estimated value of less than $1,500. The City was unable to determine whether federal dollars were used to purchase the donated PPE. Passed through Dakota County Community Development Agency U.S. Department of Treasury Passed through the Minnesota Department of Management and Budget Unless noted in the table above,the pass-through entities use the same CFDA numbers as the federal grantors to identify these grants, and have not assigned any additional identifying numbers. The City did not elect to use the 10 percent de minimis indirect cost rate. The Schedule of Expenditures of Federal Awards is prepared on the accrual basis of accounting.The information in this schedule is presented in accordance with the OMB’s Uniform Administrative Requirements,Cost Principles, and Audit Requirements for Federal Awards.Therefore,some amounts presented in this schedule may differ from the amounts presented in, or used in the preparation of, the City’s basic financial statements. Federal Grantor/Pass-Through Grantor/Program Title U.S. Department of Housing and Urban Development CITY OF ROSEMOUNT Schedule of Expenditures of Federal Awards Year Ended December 31, 2020 -1- THIS PAGE INTENTIONALLY LEFT BLANK -2- INDEPENDENT AUDITOR’S 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 To the City Council and Management City of Rosemount, Minnesota We have audited, 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, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Rosemount, Minnesota (the City) as of and for the year ended December 31, 2020, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements, and have issued our report thereon dated May 5, 2021. INTERNAL CONTROL OVER FINANCIAL REPORTING In planning and performing our audit of the financial statements, we considered the City’s internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the City’s financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section, and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. (continued) C E R T I F I E D A C C O U N T A N T S P UBLIC PRINCIPALS Thomas A. Karnowski, CPA Paul A. Radosevich, CPA William J. Lauer, CPA James H. Eichten, CPA Aaron J. Nielsen, CPA Victoria L. Holinka, CPA/CMA Jaclyn M. Huegel, CPA Kalen T. Karnowski, CPA Malloy, Montague, Karnowski, Radosevich & Co., P.A. 5353 Wayzata Boulevard • Suite 410 • Minneapolis, MN 55416 • Phone: 952-545-0424 • Fax: 952-545-0569 • www.mmkr.com Standard Letterhead-r2.qxp_167639 Letterhead-RV1 9/7/18 6:34 PM Page 1 -3- COMPLIANCE AND OTHER MATTERS As part of obtaining reasonable assurance about whether the City’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. PURPOSE OF THIS REPORT The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control and compliance. Accordingly, this report is not suitable for any other purpose. Minneapolis, Minnesota May 5, 2021 -4- INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM; REPORT ON INTERNAL CONTROL OVER COMPLIANCE; AND REPORT ON THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS REQUIRED BY THE UNIFORM GUIDANCE To the City Council and Management City of Rosemount, Minnesota REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM We have audited the City of Rosemount, Minnesota’s (the City) compliance with the types of compliance requirements described in the U.S. Office of Management and Budget Compliance Supplement that could have a direct and material effect on each of the City’s major federal programs for the year ended December 31, 2020. The City’s major federal programs are identified in the Summary of Audit Results section of the accompanying Schedule of Findings and Questioned Costs. MANAGEMENT’S RESPONSIBILITY Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs. AUDITOR’S RESPONSIBILITY Our responsibility is to express an opinion on compliance for each of the City’s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effe ct on a major federal program occurred. An audit includes examining, on a test basis, evidence about the City’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the City’s compliance. (continued) C E R T I F I E D A C C O U N T A N T S P UBLIC PRINCIPALS Thomas A. Karnowski, CPA Paul A. Radosevich, CPA William J. Lauer, CPA James H. Eichten, CPA Aaron J. Nielsen, CPA Victoria L. Holinka, CPA/CMA Jaclyn M. Huegel, CPA Kalen T. Karnowski, CPA Malloy, Montague, Karnowski, Radosevich & Co., P.A. 5353 Wayzata Boulevard • Suite 410 • Minneapolis, MN 55416 • Phone: 952-545-0424 • Fax: 952-545-0569 • www.mmkr.com Standard Letterhead-r2.qxp_167639 Letterhead-RV1 9/7/18 6:34 PM Page 1 -5- OPINION ON EACH MAJOR FEDERAL PROGRAM In our opinion, the City complied, in all material respects, with the types of compliance requirements referred to on the previous page that could have a direct and material effect on each of its major federal programs for the year ended December 31, 2020. REPORT ON INTERNAL CONTROL OVER COMPLIANCE Management of the City is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to on the previous page. In planning and performing our audit of compliance, we considered the City’s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program, and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a feder al program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. PURPOSE OF THIS REPORT The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. (continued) -6- REPORT ON SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS REQUIRED BY THE UNIFORM GUIDANCE We have audited the financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City as of and for the year ended December 31, 2020, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements. We issued our report thereon dated May 5, 2021, which contained unmodified opinions on those financial statements. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the basic financial statements. The accompanying Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by the Uniform Guidance and is not a required part of the basic financial statements. Such 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. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the 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 Schedule of Expenditures of Federal Awards is fairly stated, in all material respects, in relation to the basic financial statements as a whole. Minneapolis, Minnesota May 5, 2021 THIS PAGE INTENTIONALLY LEFT BLANK -7- INDEPENDENT AUDITOR’S REPORT ON MINNESOTA LEGAL COMPLIANCE To the City Council and Management City of Rosemount, Minnesota We have audited, 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, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Rosemount, Minnesota (the City) as of and for the year ended December 31, 2020, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements, and have issued our report thereon dated May 5, 2021. MINNESOTA LEGAL COMPLIANCE In connection with our audit, we noted that the City failed to comply with provisions of the contracting and bidding section of the Minnesota Legal Compliance Audit Guide for the Cities, promulgated by the State Auditor pursuant to Minnesota Statutes § 6.65, insofar as they relate to accounting matters as described in the Schedule of Findings and Questioned Costs as findings 2020-001 and 2020-002. Also, in connection with our audit, nothing came to our attention that caused us to believe that the City failed to comply with the provisions of the deposits and investments, conflicts of interest, public indebtedness, claims and disbursements, miscellaneous provisions, and tax increment financing sections of the Minnesota Legal Compliance Audit Guide for Cities, insofar as they relate to accounting matters. However, our audit was not directed primarily toward obtaining knowledge of such noncompliance. Accordingly, had we performed additional procedures, other matters may have come to our attention regarding the City’s noncompliance with the above referenced provisions, insofar as they relate to accounting matters. CITY’S RESPONSES TO THE FINDINGS The City’s responses to the legal compliance findings identified in our audit have been included in the Schedule of Findings and Questioned Costs. The City’s responses were not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on them. PURPOSE OF THIS REPORT The purpose of this report is solely to describe the scope of our testing of compliance and the results of that testing, and not to provide an opinion on compliance. Accordingly, this report is not suitable for any other purpose. Minneapolis, Minnesota May 5, 2021 C E R T I F I E D A C C O U N T A N T S P UBLIC PRINCIPALS Thomas A. Karnowski, CPA Paul A. Radosevich, CPA William J. Lauer, CPA James H. Eichten, CPA Aaron J. Nielsen, CPA Victoria L. Holinka, CPA/CMA Jaclyn M. Huegel, CPA Kalen T. Karnowski, CPA Malloy, Montague, Karnowski, Radosevich & Co., P.A. 5353 Wayzata Boulevard • Suite 410 • Minneapolis, MN 55416 • Phone: 952-545-0424 • Fax: 952-545-0569 • www.mmkr.com Standard Letterhead-r2.qxp_167639 Letterhead-RV1 9/7/18 6:34 PM Page 1 THIS PAGE INTENTIONALLY LEFT BLANK CITY OF ROSEMOUNT Schedule of Findings and Questioned Costs Year Ended December 31, 2020 -8- A. SUMMRY OF AUDIT RESULTS This summary is formatted to provide federal granting agencies and pass -through agencies answers to specific questions regarding the audit of federal awards. Financial Statements What type of auditor’s report is issued? X Internal control over financial reporting: Material weakness(es) identified?Yes X No Significant deficiency(ies) identified?Yes X Noncompliance material to the financial statements noted?Yes X No Federal Awards Internal controls over major federal award programs: Material weakness(es) identified?Yes X No Significant deficiency(ies) identified?Yes X Type of auditor’s report issued on compliance for major programs? U.S. Department of Treasury – COVID-19 – Coronavirus Relief Fund Unmodified Any audit findings disclosed that are required to be reported in accordance with 2 CFR 200.516(a)?Yes X No Programs tested as major programs: Program or Cluster(s)CFDA No. U.S. Department of Treasury – COVID-19 – Coronavirus Relief Fund 21.019 Threshold for distinguishing between type A and B programs. 750,000$ Does the auditee qualify as a low-risk auditee?Yes X No Unmodified Qualified Adverse Disclaimer None reported None reported CITY OF ROSEMOUNT Schedule of Findings and Questioned Costs (continued) Year Ended December 31, 2020 -9- B. FINANCIAL STATEMENT FINDINGS None. C. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS None. D. FINDINGS – MINNESOTA LEGAL COMPLIANCE FINDINGS 2020-001 CITY CONTRACTING – QUOTES Criteria – Minnesota Statutes § 471.345, Subd. 4. Condition – Minnesota Statutes require that each contract, from $25,000 to $175,000, be made either upon sealed bids or by direct negotiation, by obtaining two or more quotations for the purchase or sale when possible, and without advertising for bids or otherwise complying with the requirements of competitive bidding. All quotations obtained shall be kept on file for a period of at least one year after receipt thereof. For one purchase tested to which this requirement applied, the City of Rosemount, Minnesota (the City) did not follow this process or retain documentation to support that proper procedures were completed. Questioned Costs – Not applicable. Context – One of four purchases tested were not in compliance. Repeat Finding – This is a current year and prior year finding. Cause – This was an oversight by city personnel. Effect – The City did not ensure that it was obtaining the required quotes or ensure documentation that proper quote procedures were completed. Recommendation – We recommend that the City review purchasing procedures in place to ensure future compliance with this statute. View of Responsible Official and Planned Corrective Actions – There is no disagreement with the audit finding. The City will review its procedures in place to ensure future compliance with Minnesota Statutes. The City has separately issued a Corrective Action Plan related to this finding. CITY OF ROSEMOUNT Schedule of Findings and Questioned Costs (continued) Year Ended December 31, 2020 -10- D. FINDINGS – MINNESOTA LEGAL COMPLIANCE FINDINGS (CONTINUED) 2020-002 WITHHOLDING AFFIDAVIT Criteria – Minnesota Statutes § 270C.66. Condition – Before making final settlement with any contractor under a contract requiring the employment of employees for wages by said contractor or subcontractors, the City must obtain a certificate by the Commissioner of Revenue that the contractor or subcontractor has complied with the withholding requirements of Minnesota Statutes § 270C.66 (either a Commissioner of Revenue Form IC134, or a Contractor’s Withholding Affidavit). The City did not obtain the required certificate for two contracts completed during 2020. Questioned Costs – Not applicable. Context – Two of four contracts tested were not in compliance. Repeat Finding – This is a current year and prior year finding. Cause – This was an oversight by city personnel. Effect – The City did not obtain the required documentation of either a Commissioner of Revenue Form IC134 or a Contractor’s Withholding Affidavit. Recommendation – We recommend that the City review withholding affidavit procedures in place to ensure future compliance with this statute. View of Responsible Official and Planned Corrective Actions – There is no disagreement with the audit finding. The City will review its procedures in place to ensure future compliance with Minnesota Statutes. The City has separately issued a Corrective Action Plan related to this finding. THIS PAGE INTENTIONALLY LEFT BLANK -1- Corrective Action Plans and Summary Schedule of Prior Audit Findings Year Ended December 31, 2020 A. FINANCIAL STATEMENT FINDINGS None. B. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS None. C. MINNESOTA LEGAL COMPLIANCE FINDINGS 2020-001 CITY CONTRACTING – QUOTES Finding Summary Minnesota Statutes require that each contract, from $25,000 to $175,000, be made either upon sealed bids or by direct negotiation, by obtaining two or more quotations for the purchase or sale when possible, and without advertising for bids or otherwise complying with the requirements of competitive bidding. All quotations obtained shall be kept on file for a period of at least one year after receipt thereof. For one purchase tested to which this requirement applied, the City of Rosemount, Minnesota (the City) did not follow this process or retain documentation to support that proper procedures were completed. Corrective Action Plan Actions Planned – The City will review purchasing procedures to make sure the City is in compliance with statutes relating to quotes. Official Responsible – Jeffrey A. May, Finance Director, in coordination with other departments. Planned Completion Date – December 31, 2021. Disagreement With or Explanation of Finding – The City is in agreement with this finding. Plan to Monitor – Jeffrey A. May, Finance Director, will review the City’s procedures for quotes with city employees responsible for making and approving these purchases. CITY OF ROSEMOUNT Corrective Action Plans and Summary Schedule of Prior Audit Findings (continued) Year Ended December 31, 2020 -2- C. MINNESOTA LEGAL COMPLIANCE FINDINGS (CONTINUED) 2020-002 CLAIMS AND DISBURSEMENTS Finding Summary Before making final settlement with any contractor under a contract requiring the employment of employees for wages by said contractor or subcontractors, the City must obtain a certificate by the Commissioner of Revenue that the contractor or subcontractor has complied with the withholding requirements of Minnesota Statutes § 270C.66 (either a Commissioner of Revenue Form IC134 or a Contractor’s Withholding Affidavit). The City did not obtain the required certificate for two contracts completed during 2020. Corrective Action Plan Actions Planned – The City will review payment procedures and will obtain the required documentation of either a Commissioner of Revenue Form IC134 or a Contractor’s Withholding Affidavit prior to disbursement of final payment. Official Responsible – Jeffrey A. May, Finance Director, in coordination with other departments. Planned Completion Date – December 31, 2021. Disagreement With or Explanation of Finding – The City is in agreement with this finding. Plan to Monitor – Jeffrey A. May, Finance Director, will review the City’s procedures for paying final contractor invoices with city employees responsible for approving and processing disbursements. CITY OF ROSEMOUNT Corrective Action Plans and Summary Schedule of Prior Audit Findings (continued) Year Ended December 31, 2020 -3- D. SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS FINANCIAL STATEMENT FINDING – SIGNIFICANT DEFICIENCY 2019-001 INADEQUATE SEGREGATION OF DUTIES Corrective action has been taken. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No audit findings were reported for the year ended December 31, 2019. The City did not require a federal awards audit for the year ended December 31, 2019.