06-02-14 Council Packet - Laserfiche WebLink

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6 Factors Affecting Financial Condition (Continued) Long-term financial planning. The City’s currently adopted five-year financial plan identifies street and utility improvements totaling $23,287,990 over the five-year period. These improvements are anticipated to be funded through a number of funding sources, including special assessments, municipal state aid road fun ds, the area and unit trunk fund, the stormwater management fund and voter-approved tax levies. Also included in the final year of the plan is a feasibility study for a new public works facility. Scheduled capital equipment and office equipment needs and the financing for those needs are also included in the plan. The five-year plan also includes funding projections for operations and operating impacts for the five-year period. This plan is in the process of being revised to reflect the anticipated activity through the year 2018. Relevant Financial Policies The City uses a variety of financial policies to guide its fiscal actions and ensure fiscal stability. Fund balance policy. The City had adopted a Fund Balance policy which identified the required des ignated amounts in the Fund Balance of the General Fund at fiscal year-end and directed the transfer of any excess revenues to other funds for specific purposes, as identified annually. For the year ended December 31, 2011 and subsequent years, the City amended its Fund Balance policy to conform to the requirements of GASB 54. The new policy targets the unassigned fund balance of the general fund in a range of 40% to 50% of budgeted general fund expenditures and other financial uses. In addition, fund balan ces are classified in compliance with GASB 54 according to the hierarchy of usable fund balance resources. The unassigned general fund balance as of December 31, 2013 was $5,209,286, which is 61% of general fund budgeted expenditures and other financing us es for the year. Cash management policies and practices. The City’s policy is to invest all available moneys at competitive rates in accordance with Minnesota law. Investments are made by minimizing credit and market risks while maintaining a competitive yield. Funds are invested in certificates of deposit, commercial paper and U.S. government agencies. Cash is pooled in one account to provide maximum return. The City Council reviews the investment policy annually. The City’s investment policy’s primary objective is safety of principal. Therefore, all deposits were either insured by Federal depository insurance or were collateralized as required by State Statute. Due to the weakened economy, a historically low interest rate environment has persisted over the last several years and has had a dramatic impact on the city’s investment earnings. The average interest income yield on investments for 2013 was 1.07%. Total investment income also includes positive or negative changes in the fair value of investments. Changes in fair value of investments during the current year resulted in unrealized losses of $428,867, or -1.39%, for a total investement yield of -0.32%. The changes in fair value during the current year, however, do not necessarily represent trends that will continue; nor is it always possible to realize such amounts, especially in the case of temporary changes in the fair value of investments the City intends to hold to maturity. It is the City’s practice to purchase and hold investments to maturity and, accordingly, changes in fair value over the term of the City’s investments are expected to net to book value.