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Factors Affecting Financial Condition (Continued) <br />land in the Legacy at Woods Edge development, and the 112 -unit residential development received final <br />approval in September 2016. DR Horton is currently working on their second phase of the development. <br />Developers also broke ground on the 56 -acre Clearwater Creek Business Park in 2016. This development <br />includes the construction of a 402,000 square -foot building providing warehousing and fulfillment <br />services. <br />Long-term financial planning. The City's currently adopted five-year financial plan identifies street and <br />utility improvements totaling $26,590,408 over the five-year period. These improvements are anticipated <br />to be funded through a number of funding sources, including special assessments, municipal state aid road <br />funds, the area and unit trunk fund, the stormwater management fund and voter -approved tax levies. The <br />five-year plan also includes funding projections for operations and operating impacts for the five-year <br />period. This plan is in the process of being revised to reflect the anticipated activity through the year 2021. <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 <br />and subsequent years, the City amended its Fund Balance policy to conform to the requirements of GASB <br />54. The new policy targets the unassigned fund balance of the general fund in a range of 40% to 50% of <br />budgeted general fund expenditures and other financial uses. In addition, fund balances are classified in <br />compliance with GASB 54 according to the hierarchy of usable fund balance resources. The unassigned <br />general fund balance as of December 31, 2016 was $6,031,077 which is 61% of general fund budgeted <br />expenditures and other financing uses for the year. <br />Cash management policies and practices. The City's policy is to invest all available moneys at <br />competitive rates in accordance with Minnesota law. Investments are made by minimizing credit and market <br />risks while maintaining a competitive yield. Funds are invested in certificates of deposit, state and local <br />securities, and U.S. government agencies. Cash is pooled in one account to provide maximum return. The <br />City Council reviews the investment policy annually. <br />The City's investment policy's primary objective is safety of principal. Therefore, all deposits were either <br />insured by Federal depository insurance or were collateralized as required by State Statute. Due to the <br />weakened economy, a historically low interest rate environment has persisted over the last several years <br />and has had a dramatic impact on the city's investment earnings. The average interest income yield on <br />investments for 2016 was 0.75%. Total investment income also includes positive or negative changes in <br />the fair value of investments. Changes in fair value of investments during the current year resulted in <br />unrealized gains of $17,588, or 0.04%, for a total investment yield of 0.79%. The changes in fair value <br />during the current year, however, do not necessarily represent trends that will continue; nor is it always <br />possible to realize such amounts, especially in the case of temporary changes in the fair value of investments <br />the City intends to hold to maturity. It is the City's practice to purchase and hold investments to maturity <br />and, accordingly, changes in fair value over the term of the City's investments are expected to net to book <br />value. <br />6 <br />