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Comprehensive Annual Financial Report 12/31/2014
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Comprehensive Annual Financial Report 12/31/2014
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Comprehensive Annual Financial Report
Date
12/31/2014
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Factors Affecting Financial Condition (Continued) <br />Long-term financial planning. The City's currently adopted five-year financial plan identifies street and utility <br />improvements totaling $23,387,990 over the five-year period. These improvements are anticipated to be funded <br />through a number of funding sources, including special assessments, municipal state aid road funds, the area and <br />unit trunk fund, the stormwater management fund and voter -approved tax levies. Also included in the final year of <br />the plan is a feasibility study for a new public works facility. Scheduled capital equipment and office equipment <br />needs and the financing for those needs are also included in the plan. The five-year plan also includes funding <br />projections for operations and operating impacts for the five-year period. This plan is in the process of being <br />revised to reflect the anticipated activity through the year 2019. <br />Relevant Financial Policies <br />The City uses a variety of financial policies to guide its fiscal actions and ensure fiscal stability. <br />Fund balance policy. The City had adopted a Fund Balance policy which identified the required designated <br />amounts in the Fund Balance of the General Fund at fiscal year-end and directed the transfer of any excess <br />revenues to other funds for specific purposes, as identified annually. For the year ended December 31, 2011 and <br />subsequent years, the City amended its Fund Balance policy to conform to the requirements of GASB 54. The <br />new policy targets the unassigned fund balance of the general fund in a range of 40% to 50% of budgeted general <br />fund expenditures and other financial uses. In addition, fund balances are classified in compliance with GASB 54 <br />according to the hierarchy of usable fund balance resources. The unassigned general fund balance as of December <br />31, 2014 was $5,053,064, which is 57% of general fund budgeted expenditures and other financing uses for the <br />year. <br />Cash management policies and practices. The City's policy is to invest all available moneys at competitive <br />rates in accordance with Minnesota law. Investments are made by minimizing credit and market risks while <br />maintaining a competitive yield. Funds are invested in certificates of deposit, commercial paper and U.S. <br />government agencies. Cash is pooled in one account to provide maximum return. The City Council reviews the <br />investment policy annually. <br />The City's investment policy's primary objective is safety of principal. Therefore, all deposits were either insured <br />by Federal depository insurance or were collateralized as required by State Statute. Due to the weakened <br />economy, a historically low interest rate environment has persisted over the last several years and has had a <br />dramatic impact on the city's investment earnings. The average interest income yield on investments for 2014 was <br />0.85%. Total investment income also includes positive or negative changes in the fair value of investments. <br />Changes in fair value of investments during the current year resulted in a net increase of $152,718, or 0.48%, for a <br />total investement yield of 1.33%. The changes in fair value during the current year, however, do not necessarily <br />represent trends that will continue; nor is it always possible to realize such amounts, especially in the case of <br />temporary changes in the fair value of investments the City intends to hold to maturity. It is the City's practice to <br />purchase and hold investments to maturity and, accordingly, changes in fair value over the term of the City's <br />investments are expected to net to book value. <br />
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