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CITY OF HUGO, MINNESOTA <br />MANAGEMENT'S DISCUSSION AND ANALYSIS <br />As management of the City of Hugo, Minnesota, we offer readers of the City's financial statements this <br />narrative overview and analysis of the financial activities of the City of Hugo for the fiscal year ended <br />December 31, 2016. We encourage readers to consider the information presented here in conjunction <br />with additional information that we have furnished in our letter of transmittal, which can be found in pages <br />i — iv of this report. <br />FINANCIAL HIGHLIGHTS <br />• The assets of the City of Hugo exceeded its liabilities at the close of the most recent fiscal year <br />by $78,298,032 (net position). Of this amount, $28,876,782 (unrestricted net position) may be <br />used to meet the City's ongoing obligations to citizens and creditors in accordance with the City's <br />fund designations and fiscal policies. <br />• The City's total net position increased by $3,688,064, primarily due to charges for services and <br />other income in the City's sewer and water fund in excess of operating expenses (including <br />depreciation) as well as capital grants and contributions and property tax revenues received by <br />governmental activities. <br />• At the end of the current fiscal year, unassigned fund balance for the general fund was <br />$2,603,086 or 60 percent of total general fund expenditures. Given the uncertainty of state <br />funding, to plan for the future and to be prepared for any contingencies, the City believes this is <br />an appropriate amount. <br />• As of the close of the current fiscal year, the City of Hugo's governmental funds reported <br />combined ending fund balances of $16,527,108. <br />• The City of Hugo decreased general long-term debt obligations by $1,570,000 during the current <br />fiscal year primarily as a result of scheduled debt service payments. <br />• The City was again recognized in 2016 by the Government Finance Officers Association of the <br />United States and Canada (GFOA) for obtaining a Certificate of Achievement for Excellence in <br />Financial Reporting. <br />OVERVIEW OF THE FINANCIAL STATEMENTS <br />This discussion and analysis is intended to serve as an introduction to the City of Hugo's basic financial <br />statements. The City of Hugo's basic financial statements are comprised of the following three <br />components: <br />M <br />