HomeMy WebLinkAbout2017 Audit Report
City of St. Joseph
Stearns County, Minnesota
Financial Statements
December 31, 2017
City of St. Joseph
Table of Contents
Elected Officials and Administration 1
Independent Auditor's Report 2
Management's Discussion and Analysis 5
Basic Financial Statements
Government-Wide Financial Statements
Statement of Net Position 24
Statement of Activities 25
Fund Financial Statements
Balance Sheet Governmental Funds 26
Reconciliation of the Balance Sheet to the Statement of Net Position
Governmental Funds 27
Statement of Revenues, Expenditures, and Changes in Fund Balances
Governmental Funds 28
Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund
Balances to the Statement of Activities Governmental Funds 29
Statement of Revenues, Expenditures, and Changes in Fund Balance Budget
and Actual General Fund 30
Statement of Revenues, Expenditures, and Changes in Fund Balance Budget
and Actual State Collected Sales Tax 31
Statement of Net Position Proprietary Funds 32
Reconciliation of the Statement of Net Position Business-Type Activities 33
Statement of Revenues, Expenses, and Changes in Fund Net Position
Proprietary Funds 34
Reconciliation of the Statement of Revenues, Expenses, and Changes in Net
Position Business-Type Activities 35
Statement of Cash Flows Proprietary Funds 36
Notes to Financial Statements 37
Required Supplementary Information
Schedule of City's Proportionate Share of Net Pension Liability General
Employees Retirement Fund 76
Schedule of City's Proportionate Share of Net Pension Liability Public
Employees Police and Fire Retirement Fund 76
Schedule of City Contributions General Employees Retirement Fund 77
Schedule of City Contributions Public Employees Police and Fire
Retirement Fund 77
Schedule of Changes in the Net Pension Liability and Related Ratios
Fire Relief Association 78
Schedule of City Contributions and Non-Employer Contributing Entities
Fire Relief Association 79
Notes to Required Supplementary Information 80
City of St. Joseph
Table of Contents
Supplementary Information
Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget
and Actual General Fund 84
Combining Balance Sheet Nonmajor Governmental Funds 86
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances
Nonmajor Governmental Funds 92
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 99
Report on Legal Compliance 101
Schedule of Finding and Response on Internal Control 102
City of St. Joseph
Elected Officials and Administration
December 31, 2017
Elected OfficialsPositionTerm Expires
Rick SchultzMayor January 2019
Robert LosoCouncil MemberJanuary 2021
Troy GorackeCouncil MemberJanuary 2021
Dale WickCouncil MemberJanuary 2019
Matt KillamCouncil MemberJanuary 2019
Administration
Judy WeyrensCity AdministratorAppointed
Lori BartlettFinance DirectorAppointed
1
Independent Auditor's Report
Honorable Mayor and Members
of the City Council
City of St. Joseph
St. Joseph, 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 St. Joseph, Minnesota, as of and for the year ended December 31, 2017, and the
related notes to 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.
BerganKDV, Ltd.
bergankdv.com
2
Auditor's Responsibility (Continued)
We believe that the audit evidence we have obtained is sufficient and appropriate to provide
a basis for our audit opinions.
Opinions
In our opinion, the financial statements referred to in the first paragraph 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 of St. Joseph, Minnesota, as of December 31, 2017, and the respective changes in
financial position and, where applicable, cash flows thereof, and the budgetary comparison
for the General Fund 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, which follows this report letter, and Required
Supplementary Information 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 (GASB) 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 Required Supplementary Information 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 of St. Joseph's basic financial statements. The combining and
individual nonmajor fund financial statements are presented for purposes of additional
analysis and are not a required part of the basic financial statements.
3
Other Matters (Continued)
Other Information (Continued)
The combining and individual nonmajor fund financial statements are the responsibility of
management and were 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 combining and individual nonmajor fund financial statements are fairly
stated, in all material respects, in relation to the basic financial statements as a whole.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated
April 19, 2018, on our consideration of the City of St. Joseph's internal control over financial
reporting and on our tests of its compliance with certain provisions of laws, regulations,
contracts and grant agreements, and other matters. The purpose of that report is 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 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 of St. Joseph's
internal control over financial reporting and compliance.
St. Cloud, Minnesota
April 19, 2018
4
City of St. Joseph
Management's Discussion and Analysis
As management of the City of St. Joseph, we offer readers of the City of St. Joseph's financial
statements this narrative overview and analysis of the financial activities of the City of St. Joseph for the
fiscal year ended December 31, 2017.
FINANCIAL HIGHLIGHTS
Key financial highlights for 2017 include the following:
The assets and deferred outflows of resources of the City of St. Joseph exceeded its liabilities and
deferred inflows of resources at the close of the most recent fiscal year by $33,649,854. Of this
amount, $2,967,863 may be used to meet government's ongoing obligations to citizens and creditors
(unrestricted net position).
The government's total net position increased by $1,443,921 from 2016 to 2017. The increase is due
to removing the other post-employment benefit liability, paying down bonded debt, realizing
significant development activity, and reduction in pension expense for the City's share of the PERA
retirement plans.
As of the close of the current fiscal year, the City of St. Joseph's governmental funds reported
combined ending fund balances of $6,018,275, a decrease of $1,863,216. Of this amount $1,438,837
is unassigned for spending at the government's discretion. The remaining balance of $4,579,438 is
set aside for specific future expenditures.
At the end of the current fiscal year, unassigned fund balance for the general fund was $1,449,363 or
48% of total general fund expenditures ($1,503,355 or 50% excluding the fire and PEG Access
funds).
The City of St. Joseph's total long-term debt decreased by $958,861 during the current fiscal year.
The City had two debts paid in full in 2017 and issued four new debts. The new debts issued paid for
street improvements, government center, water filtration plant improvements and St. Cloud main lift
station and biosolids improvements.
OVERVIEW OF THE FINANCIAL STATEMENTS
This discussion and analysis is intended to serve as an introduction to the City of St. Joseph's basic
financial statements. The City of St. Joseph's basic financial statements are comprised of three
components: 1) government-wide financial statements, 2) fund financial statements and 3) notes to
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 broader overview of the City of St. Joseph's finances, in a manner similar to a
private-sector business.
The Statement of Net Position presents information on all of the City of St. Joseph's assets and deferred
outflows of resources and liabilities and deferred inflows of resources, with the difference between the
two 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 of St. Joseph's 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 but unused vacation leave).
5
City of St. Joseph
Management's Discussion and Analysis
Both of the government-wide financial statements distinguish functions of the City of St. Joseph 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 of St. Joseph include general
government, public safety, public works, economic development, culture and recreation, and interest on
long-term debt. The business-type activities of the City of St. Joseph include water, sanitary sewer,
refuse, storm water and street light utility services.
The government-wide financial statements include not only the City of St. Joseph itself (known as the
primary government), but also a legally separate Economic Development Authority. Financial
information for this component unit is blended in the financial information.
The government-wide financial statements can be found on pages 24-25 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 of St. Joseph, 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 of St. Joseph 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 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 the governmental fund statement of revenues,
expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison
between governmental funds and government-wide governmental activities.
The City of St. Joseph maintains forty-two individual governmental funds. 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, State Collected Sales Tax
special revenue fund, Government Center capital project fund and Field Street Improvement capital
project fund which are considered to be major funds. Data from the other governmental funds are
combined into a single, aggregated presentation. Individual fund data for each of these non-major
governmental funds is provided in the form of combining statements elsewhere in this report.
The City of St. Joseph adopts an annual appropriated budget for its General and State Collected Sales
Tax funds. A budgetary comparison statement has been provided for these funds (pages 30-31) to
demonstrate compliance with the budgets.
The basic governmental fund financial statements can be found on pages 26-29 of this report.
6
City of St. Joseph
Management's Discussion and Analysis
Proprietary Funds. The City of St. Joseph maintains proprietary funds that are used to report the same
functions presented as business-type activities in the government-wide financial statements. The City of
St. Joseph uses proprietary funds to account for its water, sanitary sewer, refuse, storm water and street
light utility activities.
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, sanitary sewer, refuse, storm water and street light utility, all of which are considered to be major
funds of the City of St. Joseph.
The basic proprietary fund financial statements can be found on pages 32-36 of this report.
Notes to 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
financial statements can be found on pages 37-73 of this report.
Other Information. The combining statements referred to earlier in connection with non-major
governmental funds can be found on pages 86-98 of this report.
Comparative Data. While comparative data is not illustrated in this report, comments throughout this
narrative and overview will discuss significant changes from the prior year.
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 of St. Joseph, assets and deferred outflows of resources exceeded
liabilities and deferred inflows of resources by $33,649,854 at the close of the most recent fiscal year.
By far the largest portion of the City of St. Joseph's net position reflects its investment in capital assets
(e.g., land, buildings, machinery and equipment) net accumulated depreciation, less any related debt
used to acquire those assets that is still outstanding. The City of St. Joseph uses these capital assets to
provide services to citizens; consequently, these assets are not available for future spending. Although
the City of St. Joseph's investment in its capital assets is reported net of related debt, it should be noted
that the resources needed to repay this debt must be provided from other sources, since the capital assets
themselves cannot be used to liquidate these liabilities.
A summary of the City's Net Position is depicted on the following page.
7
City of St. Joseph
Management's Discussion and Analysis
NET POSITION
GovernmentalBusiness-Type
ActivitiesActivitiesTotal
201720162017201620172016
Assets
Current and other assets$ 8,228,770 $ 10,084,991$ 1,976,036$ 1,092,948$ 10,204,806$ 11,177,939
Capital assets, net 17,472,504 16,434,381 32,381,743 32,307,757 49,854,247 48,742,138
Total assets 25,701,274 26,519,372 34,357,779 33,400,705 60,059,053 59,920,077
Deferred Outflows
of Resources
Deferred outflows of resources
related to pensions 1,292,782 2,018,645 78,580 135,738 1,371,362 2,154,383
Total deferred outflows 1,292,782 2,018,645 78,580 135,738 1,371,362 2,154,383
Liabilities
Current liabilities 1,587,142 2,034,698 1,410,513 1,329,746 2,997,655 3,364,444
Long-term liabilities 12,280,610 14,543,892 10,877,865 11,334,423 23,158,475 25,878,315
Total liabilities 13,867,752 16,578,590 12,288,378 12,664,169 26,156,130 29,242,759
Deferred Inflows
of Resources
Deferred inflows of resources
related to lease receivables 173,356 202,925 - - 173,356 202,925
Deferred inflows of resources
related to pensions 1,399,302 387,397 51,773 35,446 1,451,075 422,843
Total deferred inflows 1,572,658 590,322 51,773 35,446 1,624,431 625,768
Net Position
Invested in capital assets,
Net related debt 7,626,612 7,603,491 20,699,611 20,427,682 26,508,482 25,878,291
Restricted 4,173,509 4,503,362 - - 4,173,509 4,503,362
Unrestricted (246,475) (737,748) 1,396,597 409,146 2,967,863 1,824,280
Total net position$ 11,553,646 $ 11,369,105$ 22,096,208$ 20,836,828$ 33,649,854$ 32,205,933
An additional portion of the City of St. Joseph's net position (12%) represents resources that are subject
to external restrictions on how they may be used. The remaining balance of unrestricted net position is a
surplus of $2,967,863, a surplus of $1,150,122 after removing the unrestricted portion of governmental
debt for enterprise assets. The surplus is the result of the change in St. Joseph's realized portion of the
Minnesota employee's pension liability. The liability fluctuates significantly with changes in
amortization assumptions such as the rate of return. The City of St. Joseph also no longer recognizes a
net other pension liability for retiree implicit health insurance rates. The City of St. Joseph moved from
a large employer to a small employer insurance plan and does not contribute to retiree health insurance
premiums. Without the net pension liability, the unrestricted net position would be a surplus of
$4,683,159.
At the end of the current fiscal year, the City of St. Joseph is able to report positive balances in all three
categories of net position for the government as a whole, as well as for its separate business-type
activities. The governmental activities had positive balances in all, but the unrestricted net position.
8
City of St. Joseph
Management's Discussion and Analysis
The governmental activities change in net position balance increased by 2%. The City's governmental
operational activity was strong. Development activity was a key factor. The change would have been
greater without recording pension expense as required by GASB 68 to recognize a pension liability for
the City's portion of contributions to the Public Employees Retirement Association of Minnesota
(PERA). The City and employees are affected by funding law changes as a result of PERA's funding
performance each year. A net pension liability was recorded for $1,351,208 in the governmental
activities.
There was a 6% increase (5% increase excluding net pension liability) in the total net position for the
business-type activities. The increase is due to paying down bonds, increase utility rates and improved
development fees collected. The full value of the assets is netted against the bonds payable. Also,
construction in progress includes assets contributed from governmental funds improving the business-
type net position.
Governmental Activities. Governmental activities improved the City of St. Joseph's total net position
by $184,541. The most significant factor for the increase is the significant development fees collected
including building permit revenue of $284,277. Also significant was removing the other post-
employment benefits liability of $209,053.
Business-Type Activities. Business-type activities increased the City of St. Joseph's net position by
$1,259,380. The largest contributors were the water and sewer funds. The storm water fund also realized
a healthy positive change in net position. The water and sewer funds are combined with the water access
(WAC) and sewer access (SAC) funds in the Government-Wide financial statements. The WAC/SAC is
intended to charge new development a proportional fee for the asset that they will be utilizing. The
connection fees totaled $525,264 for 2017. In addition, city council increased water rates January 2017
and sewer rates in September 2017 (5% and 59%, respectively) to help cover the water and sewer debt
costs. The storm water fund's net position increase was due to capital contributions from governmental
funds. Without the capital contributions, the storm water fund would have a $59,140 decrease in net
position.
The graphs and charts on the following pages summarize and graphically depict the changes in net
position for the governmental and business-type activities.
9
City of St. Joseph
Management's Discussion and Analysis
CHANGE IN NET POSITION
Program Revenues
Charges for services$ 892,945 $ 760,364 $ 3,335,861 $ 2,888,146 $ 4,228,806 $ 3,648,510
Operating grants and
contributions 150,126 232,268 293 1,313 150,419 233,581
Capital grants and
Contributions 966,205 3,187,179 701 495 966,906 3,187,674
General Revenues
Property taxes 1,993,743 1,774,928 23,893 73,407 2,017,636 1,848,335
Tax increments 85,216 42,507 - - 85,216 42,507
Sales tax 437,232 432,227 - - 437,232 432,227
Franchise fees 12,595 126,817 - - 12,595 126,817
Lodging tax 129,242 8,046 - - 129,242 8,046
State aids 927,154 921,207 - - 927,154 921,207
Unrestricted investment earnings 52,710 93,662 23,458 25,094 76,168 118,756
Total revenues 5,647,168 7,579,205 3,384,206 2,988,455 9,031,374 10,567,660
Expenses
General government 1,080,879 704,096 - - 1,080,879 704,096
Public safety 1,757,471 1,912,915 - - 1,757,471 1,912,915
Public works 1,284,017 1,573,836 - - 1,284,017 1,573,836
Economic development 141,853 207,508 - - 141,853 207,508
Culture and recreation 472,849 495,630 - - 472,849 495,630
Interest on long-term debt 299,612 386,233 - - 299,612 386,233
Water - - 920,296 915,505 920,296 915,505
Sanitary sewer - - 1,106,664 1,037,570 1,106,664 1,037,570
Storm water - - 289,557 282,280 289,557 282,280
Refuse - - 169,389 178,189 169,389 178,189
Street light utility - - 64,866 63,327 64,866 63,327
Total expenses 5,036,681 5,280,218 2,550,772 2,476,871 7,587,453 7,757,089
Increase (decrease) in net position
before transfers 610,487 2,298,987 833,434 511,584 1,443,921 2,810,571
Transfers (425,946) (232,669) 425,946 232,669 - -
Change in net position 184,541 2,066,318 1,259,380 744,253 1,443,921 2,810,571
Net Position
Net Position - beginning 11,369,105 9,302,787 20,836,828 20,092,575 32,205,933 29,395,362
Net Position - ending$ 11,553,646 $ 11,369,105 $ 22,096,208 $ 20,836,828 $ 33,649,854 $ 32,205,933
10
City of St. Joseph
Management's Discussion and Analysis
FINANCIAL ANALYSIS OF THE CITY'S FUNDS AT THE FUND LEVEL
The financial performance of the City of St. Joseph as a whole is reflected in its governmental funds as
well. As the City completed the year, its governmental funds reported a combined fund balance of
$6,018,275, a decrease of $1,863,216 from 2016. Revenues for the City's governmental funds were
$5,752,019, while total expenditures were $8,069,882. The excess of expenditures over revenues is
mainly attributed to the City completing construction of the government center and the first phase of
Field Street. In addition, projects completed using accumulated local option sales tax reduced the net
position by $361,400. To facilitate the City also plans to sell the previous city hall with proceeds going
towards the 2017 capital improvement bond issue. Bond proceeds and sale of surplus property are other
financing sources not reported in the above operating numbers.
A summary of financial highlights for each major governmental fund follows.
General Fund
The General fund is the chief operating fund of the City of St. Joseph. At the end of the current fiscal
year, unassigned fund balance of the general fund was $1,449,363. As a measure of the general fund's
liquidity, it may be useful to compare both unassigned fund balance to total fund expenditures.
Unassigned fund balance represents 48% of total general fund expenditures, 50% (6 months working
capital) after removing the Fire and PEG Access fund. The City Council has adopted a financial policy
which includes a goal to maintain the General Fund working capital fund balance equal to 4-6 months of
expenditures. The excess unassigned fund balance can be attributed to development related receipts. The
City experienced an increase in construction projects in 2017 resulting in permit and plan review fees in
excess of budgeted amounts ($199,955 over budgeted amounts). One of the development fees is land use
deposits charged to developers for administrative, legal and engineering fees for proposed projects. The
City collected $11,000 in deposits during 2017. The funds will be spent down or returned to the
developer once their proposed projects are completed.
General fund expenditures were less than budgeted by $93,539 and over 2016 expenditures by
$180,779. The City of St. Joseph sets funds aside for the street maintenance plan. The street
maintenance plan expenditures fluctuate each year, increasing in 2017. The police operational budget
was under-spent by $44,277. The department spent conservatively in many line items. One of the largest
savings was health insurance. The City budgets insurance benefits as family coverage, not what a person
elected in the year prior. The excess budgeted is transferred into the Employee Retirement Reserve fund
102 which is combined with the General fund in the financial statements. The 2016 and 2017 snow
seasons were warmer and dryer than other more average years. The ice and snow budget is set to allow
for an average temperature and snow season. Culture and recreation operational expenditures are under
budget mainly due to budgeting recreational staff at the community center. The School District extended
their lease of using a portion of the facility for ECFE and offered to include recreational activities with
their community recreation program; therefore, the City opted to delay staffing gym hours until summer
2018. One area shown as over-budget is other general government expenditures. The city council
approved a contract to update the comprehensive plan using excess building permit revenues from 2016.
As a result of the prudent financial policies of the City, the General fund remained stable.
13
City of St. Joseph
Management's Discussion and Analysis
The schedule below presents a summary of General fund revenues and expenditures.
December 31,December 31,IncreasePercent
20172016(Decrease)Change
Revenues
Taxes$ 1,255,007$ 1,209,884 $ 45,1234%
Special assessment 9,127 3,740 5,387144%
Licenses and permits 356,990 270,780 86,21032%
Intergovernmental 1,133,362 1,212,746 (79,384)-7%
Charges for services 376,946 345,321 31,6259%
Fines and forfeitures 55,474 46,747 8,72719%
Miscellaneous 71,131 117,470 (46,339)-39%
Total General Fund revenue$ 3,258,037$ 3,206,688 $ 51,3492%
December 31,December 31,IncreasePercent
20172016(Decrease)Change
Expenditures
General government$ 749,008$ 623,771 $ 125,23720%
Public safety 1,611,596 1,471,657 139,93910%
Public works 397,662 433,200 (35,538)-8%
Culture and recreation 270,980 319,839 (48,859)-15%
Total General Fund expenditures$ 3,029,246$ 2,848,467 $ 180,7796%
General Fund Budgetary Highlights
Over the course of the year, the City did not amend the annual operating budget. Historically, the City
has minimal budget amendments during the budget year.
Actual revenues were $197,912 more than expected mainly due to development related revenues.
Tax delinquencies were down and a few foreclosed properties sold improving the tax collections.
14
City of St. Joseph
Management's Discussion and Analysis
General Fund Budgetary Highlights (Continued)
Actual expenditures were $93,539 less than budget. The To help minimize fluctuations in the
budget, the City budgets family insurance coverage for the majority of the employees even
though some elect single and some do not elect coverage. The City's will be faced with a number
of retirements in the next five (5) years and along with that comes the payment of unused
accumulated benefit hours. Therefore, health insurance savings between budget and actual is
transferred into a retirement reserve account for payment of unused benefit hours. In addition,
budgeting for the highest insurance cost alleviates budget spikes when employees change from
single to family or a new employee is hired with family insurance and the employee they are
replacing was at the single rate. The City manages established and adopted a five-year capital
equipment plan (CEP) and capital improvement plan (CIP). During the budget process the each
year the plans are reviewed and the Council prioritizes which projects/equipment will be funded
and funds are sets aside funding for equipment purchases and improvements taking into account
the useful life of the equipment and infrastructure. The intent is to incrementally set aside funds
to offset the purchase price of large equipment/infrastructure expenditures. Due to the large
expenditures associated with some of the needed equipment such as a street sweeper and,
fluctuations in budget to actual are realized. Some years will show expenditures lower than
budget, some over budget in the years larger pieces are purchased. In 2017, the City updated the
pavement management plan. Routine street maintenance is scheduled over the life of a street.
Some years are more than others. The City levies funds annually for maintenance with some
funding set aside for future years with the intent of preventing large spikes and dips in the levy.
As with equipment, some years may show over-spent form the current year budget as previous
year's reserves are spent down. Snow and ice removal was under budget by $59,208 mainly due
to less snow and ice events during 2017 compared to some other years.
State Collected Sales Tax Special Revenue State Collected Sales Tax special revenue fund began in
2006. The State of Minnesota and voters in the St. Cloud area approved a 0.5% local option sales tax to
fund regional projects such as a community center, transportation needs, parks and trails, and facilities.
As of December 31, 2017, the City of St. Joseph collected $3,820,999; $761,223 more than originally
budgeted. The City spent $2,774,810 on facility, trails and park projects for a total restricted fund
balance of $1,046,189.
State Collected Sales Tax Fund Budgetary Highlights
The City Council adopts a budget for the State Collected Sales Tax fund through the five-year capital
improvement plan. Budgets were not amended during the year. The fund ended the year $255,650 over
budget. Sales tax revenues were $28,147 over the budgeted amount and capital outlay came in under
budget by $112,453. Sales tax revenues continue to exceed original expectations when the State
approved the local option collection. The City budgets conservatively to avoid over-committing
available funds for project planning.
Government Center Capital Project Fund
The Government Center capital project fund was established in 2016 for the construction of the
Government Center. The Government Center includes the police department, administrative and
financial services, planning and building, council chambers and a multi-purpose community room. The
Government Center was constructed on the western end of the community center land. The project was
completed in 2017.
15
City of St. Joseph
Management's Discussion and Analysis
Field Street Improvement Capital Project Fund
The Field Street Improvement capital project fund was established in 2016 to construct the first phase of
th
the City's east/west Collector Street extending from County Road 121 to 7 Avenue SE. Minnesota State
Aid in the amount of $1,438,537 was received to cover a portion of the cost. Construction was
completed in 2017.
Proprietary Funds. The City of St. Joseph's proprietary fund statements provide the same type of
information found in the government-wide financial statements, but in more detail. The unrestricted net
position of the proprietary funds increased $755,514 overall. The paragraphs on the following pages
provide a brief financial overview of each major proprietary fund that supported in the increase.
Water Enterprise Fund
The Water fund is used to account for the operations of the City's water utility. In 2017, the water fund's
net position increased $473,391. Before transfers and capital contributions, the net position would show
an increase of $146,682. The net position includes depreciation of $417,012. The water operating
revenues are covering over 100% of the depreciation. Bonded debt payments in the water fund totaled
$622,096. Debt payments are covered by water rates, debt levy, water connection and trunk fees, and
transfers from the sewer fund. Water rates have been and are projected to continue to be incrementally
increased to cover operational costs as well as any water related debt. As the City was facing large rate
increases and projected future projects that would require funding, the City hired a consultant to review
the water rates in 2015 and provide a five (5) to ten (10) year perspective. After reviewing the consultant
report and verifying potential projects requiring funding, the council approved a 5% increase in water
rates for 2017 to reduce the dependency on debt levies and transfers from other funds to cover
operational and non-operational expenses. Since the rate increases are based on projected growth and
operational costs, it is anticipated that the rates will increase approximately 5% in the future years. The
actual increase will be based on the annual review of growth and operational costs.
Sanitary Sewer Enterprise Fund
The Sanitary Sewer fund is used to account for the operations of the City's sanitary sewer utility. In
2017, the sanitary sewer fund's net position increased $389,833. Before transfers and capital
contributions, the net position would show an increase of $195,214. As a contract user of the St. Cloud
Wastewater Treatment Facility, St. Joseph is obligated to pay a portion of the costs to maintain the St.
Cloud treatment facility and conveyance system. St. Joseph issued six notes with St. Cloud for various
conveyance and treatment facility projects. In addition, St. Joseph issued bonds to rehabilitate the Sauk
River manhole feed from the St. Joseph force main into St. Cloud, rehabilitate St. Joseph's Main lift
station and sewer mains under CSAH 75, and purchased capacity in the St. Cloud Treatment Plant. The
large debt costs are partially paid with reserved SAC fees, trunk fees and sewer usage rates. The
development fees have been minor prior to 2016 and 2017. The City of St. Joseph experienced a larger
increase in connection (SAC) fees to assist in paying debts. As stated above in the water fund, the City
hired a consultant to review the sewer rates in 2015 to conduct the same analysis as for water. That is,
reviewing current operational expenses, debt and future projects. After reviewing the consultant report,
the council approved 16% (spring) and 59% (fall) increases in sewer rates for 2016; with no additional
increase in 2017 due to the SAC fees received 2017. The report suggests that sewer rates increase 19%
to assist with debt payments, less if significant SAC fees are collected. Operational revenues are
covering 100% of the $481,406 depreciation.
16
City of St. Joseph
Management's Discussion and Analysis
Refuse Enterprise Fund
The Refuse fund is used to account for the contract services to provide residential refuse, recycling and
compost services. The refuse fund has a net position balance increased $3,478. Council opted to
maintain refuse and compost rates to allow for larger increases in other utility funds. The current rates
are covering the contracted expenses.
Storm Water Enterprise Fund
The Storm Water fund is used to account for the operations of the City's storm water utility. In 2017, the
storm water fund's net position increased $160,498, a decrease of $39,890 before capital contributions
and transfers. The storm water fund had an operating loss of $42,222 or, $62,991 surplus after removing
depreciation expense. The deficit is consistent with previous years and expected with the decision to
maintain storm water rates. The city council chose to maintain the fees while still covering some
depreciation to allow for larger increases in other utility funds. The decision was based on the fund
having a healthy net position balance. In addition, the storm water fund collected $26,948 in
development fees included in the fund's charges for services.
Street Light Utility Enterprise Fund
The Street Light Utility fund is used to account for the operations of the City's street lighting. In 2013,
the City Council voted to create a street light utility fee to pay for operations of the street lights,
removing the expenditure from the general fund levy. The street light user fee allows the City to capture
revenue from tax exempt properties to help pay for the service provided to them. The City of St. Joseph
is somewhat unique in that over 36% of the City property is classified as tax exempt. To be fair to all
users benefiting from street lighting, the city council determined a user fee was a more equitable method
to charge for street lighting.
The net position change of the street light utility fund was an increase of $243 at December 31, 2017.
CAPITAL ASSETS AND DEBT ADMINISTRATION
Capital Assets
The City of St. Joseph's investment in capital assets for its governmental and business-type activities as
of December 31, 2017, amounts to $49,854,247 (net of accumulated depreciation), an increase of
$1,112,109. The investment in capital assets includes land, intangible assets, buildings, improvements,
machinery and equipment, furniture and office equipment, infrastructure, intangible assets, and
construction in progress. Net investment in capital assets increased $630,191. The increase is
attributable to capital asset construction in progress for the street improvements and St. Cloud area
sewer improvements, and the completion of the government center, Millstream park shelter and first
phase of Field Street. The assets disposed were much smaller than the value of the improvements added.
The City of St. Joseph issued four debts in 2017 for street improvements, government center, water plant
improvements and two St. Cloud area sewer improvements. The bond issues were less than what was
paid off in 2017. The overall debt related to capital assets decreased $958,861.
The table on the following page is a summary of the City of St. Joseph's capital assets.
17
City of St. Joseph
Management's Discussion and Analysis
CAPITAL ASSETS
Governmental ActivitiesBusiness-Type ActivitiesTotal
201720162017201620172016
Land$ 874,133 $ 874,133 $ 377,882 $ 377,882 $ 1,252,015 $ 1,252,015
Easements 175,873 175,873 67,915 67,915 243,788 243,788
Construction in progress 465,006 4,633,084 705,096 714,700 1,170,102 5,347,784
Improvements 1,369,201 1,356,427 - - 1,369,201 1,356,427
Infrastructure 20,176,666 18,830,234 - - 20,176,666 18,830,234
Buildings 9,540,762 4,746,527 8,797,686 8,797,686 18,338,448 13,544,213
Intangible assets 200,000 - - - 200,000 -
Plant and lines - - 24,275,118 23,679,159 24,275,118 23,679,159
Sewer rights - - 9,068,746 8,569,212 9,068,746 8,569,212
Machinery and equipment 3,677,400 3,468,207 778,232 787,554 4,455,632 4,255,761
Less: Accumulated
Depreciation (19,006,537) (17,650,104) (11,688,932) (10,686,351) (30,695,469) (28,336,455)
Total$ 17,472,504 $ 16,434,381 $ 32,381,743 $ 32,307,757 $ 49,854,247 $ 48,742,138
Additional information on the City of St. Joseph's capital assets can be found in Note 5 on page 50 of
this report. Total depreciation expense for 2017 was $2,556,050.
Long-Term Liabilities
At the end of the current fiscal year, the City of St. Joseph had total net bonded debt outstanding of
$23,398,061, a decrease of $958,861. Of this amount, $11,715,929 comprises debt backed by the full
faith and credit of the government. The remainder of the City of St. Joseph's debt represents bonds and
notes secured by specified revenue sources (i.e. utility bonds). Other long-term debt includes
compensated absences payable and net pension liabilities. The liability for other post-employment
benefits no longer exists as a result of the City opting small group health insurance. Under the current
medical plan the implicit rate for retirees went away. The liability was removed through operational
activity in 2017.
An illustration of the City's long-term liabilities is included in the table on the following page.
18
City of St. Joseph
Management's Discussion and Analysis
OUTSTANDING LONG-TERM LIABILITIES
Percent
20172016Change
Governmental Activities
General Obligation Bonds$ 4,958,545$ 5,083,650-2%
General Obligation Special Assessment Bonds 5,107,149 5,630,929-9%
General Obligation Abatement Bonds 1,650,235 1,762,268-6%
Compensated Absences Payable 452,500 402,18613%
Net Other Post Employment Benefits - 209,053-100%
Net Pension Liability 1,351,208 2,936,834-54%
Total governmental activities$ 13,519,637$ 16,024,920-16%
Business-Type Activities
General Obligation Revenue Bonds$ 6,959,071$ 7,285,026-4%
Notes Payable 4,723,061 4,595,049100%
Compensated Absences Payable 143,239 130,78210%
Net Other Post Employment Benefits - 61,124-100%
Net Pension Liability 284,375 326,413100%
Total business-type activities$ 12,109,746$ 12,398,394-2%
The City of St. Joseph issued $337,000 General Obligation Capital Improvement Bonds, Series 2017A
in August 2017. The bond issue funds the balance of the Government Center construction. The bonds
will be called once proceeds from the sale of the previous city hall are received. In addition, the City
issued $697,000 General Obligation Bonds, Series 2017B in August 2017. These bonds have two
projects funded: 2017 alley and water treatment plant improvements. The City of St. Joseph also issued
two Public Facilities Notes with the City of St. Cloud for Main lift station and biosolids improvements
in the amount of $508,878.
The City decreased the net bonded debt by $760,918 in the governmental activities to end the year. The
business-type activities realized a decrease in bonded debt of $325,955 and an increase of $128,012 in
St. Cloud notes payables. In 2017, two governmental bonds were paid in full resulting in reducing
bonded debt in the governmental-type activities. The bonded business-type activities bonds spent down
more of the debt liability than was added for the water treatment plant improvements.
The City of St. Joseph maintained their bond rating AA-/Stable from Standard & Poor's for the general
obligation debts issued in 2017. The debt issues in 2017 were under the threshold to receive a bond
rating; therefore, a bond rating update was not piloted.
Minnesota state statutes limit the amount of net general obligation debt a governmental entity may issue
to 3% of its taxable market value. Net general obligation debt is debt solely paid for, with limited
exceptions, by ad valorem taxes. The current debt limitation for the City of St. Joseph is $8,771,335
which significantly exceeds of the City of St. Joseph's outstanding pure general obligation debt of
$470,000.
Additional information on the St. Joseph's long-term liabilities can be found in Note 6 on pages 52-56.
19
City of St. Joseph
Management's Discussion and Analysis
The City also anticipates commercial/industrial development with the expansion of the Industrial Park,
development to the west along Interstate 94, and planning initiatives for downtown revitalization. The
first downtown project began construction in 2006 with completion in 2009. The project consists of a
commercial and residential mixed-use facility and is known as the Millstream Shops and Lofts. All units
are occupied. In 2014 city council approved another redevelopment TIF to add a mixed use facility in
downtown. The project is entitled 24 College North (formerly known as Bayou Blues and Alley Flats).
The proposed development will include two floors of residential living units, office space and restaurant.
The Alley Flats consists of a four-unit two-story condominium living space, complete with roof top
decks. Construction of 24 College North began early 2018 and is expected to be completed by
December 2018. Also, in the downtown area, the City Council accepted a purchase agreement from Bad
Habit Brewing Company for the previous city hall/police station located at 25 College Ave N, St.
Joseph.
In 2009 the Coborn's PUD was approved which contained three commercial development sites. The
PUD is located on CSAH 75 and CR 133, one of the major commerce corridors in St. Joseph.
CentraCare medical clinic, Coborn's Superstore (including grocery and liquor stores) and Central MN
Credit Union currently occupy the development site. A recent market study of the St. Joseph area
indicated that the trade area of St. Joseph would increase by 150% if a grocery store was added to the
landscape of the City. In 2012, McDonald's opened in the adjacent area, followed by Central Minnesota
Credit Union constructing their call center. In late 2017, O'Reilly's auto parts store opened on the north
of McDonald's.
The St. Joseph Economic Development Authority (EDA) identified the need for industrial lots. A 20
acre parcel on the north side of the current industrial park was considered for expansion in 2008. The
development did not happen at that time due to the Great Recession. The property is bank owned. A
local developer is considering development of the property, partnering with the City to request State
BDPI funding through the Minnesota Department of Employment and Economic Development. There
has been some interest for potential businesses to build on this site. The project will proceed in 2018 if
funding is approved.
Other developments include a second Kwik Trip convenience store adjacent to the industrial park,
athletic fields and recreational facilities for the College of St. Benedicts, and the College of St.
Benedicts renovating three buildings previously owned by the Monastery of St. Benedict for a Welcome
Center and Administration Building.
The City of St. Joseph is in the process of updating the Comprehensive Plan. In fact, the Plan is being
completely re-written. Through the public engagement process, the new plan will identify ideas for
future growth and identify opportunities.
In 2017 the Community Center Task Force group completed their study and formalized a
recommendation for the City Council for a building concept plan for the Community Center. As stated
earlier, the City purchased the former Colts Academy building from ISD 742 to create a community
center. Initial concept plans for the Community Center includes the addition of gym space and
conversion of the existing space for items such as historical society, food shelf, activity rooms for youth
and seniors, and banquet facilities.
21
City of St. Joseph
Management's Discussion and Analysis
In December 2017 the City of St. Joseph notified St. Joseph Township the City would be exercising
their rights to annex all properties listed in the Orderly Annexation Agreement (OAA), effective April 1,
2018. Through negotiations between the City and Township, the City agreed to reconsider the area to be
annexed and the effective date. The City and Township continue to develop the revised annexation area
along with the new regulations and tax sharing agreements. It is anticipated that the City and Township
will notify the Minnesota Boundary and Adjustment Board on July 1, 2018 of the annexation.
The St. Joseph EDA has identified the need to locate a hotel in St. Joseph and have been encouraging
investors to consider constructing a 40 -70 bed hotel either in the downtown area or on the interstate.
The City has received various interests for the hotel and commercial/industrial development.
The City submitted three bonding requests for State Legislative consideration. They include: pedestrian
crossing under CSAH 75; Jacob Wetterling Recreation Center; and development of East Park. To help
facilitate the bonding process the City hired a lobbyist.
All the factors were considered in preparing the City of St. Joseph's budget and fee schedule for 2017
and future reporting years. The budget for 2018 was prepared knowing the following projects were
anticipated or already in the construction phase: designing the 95 acres natural east park, construction of
the final two phases of the County Road 2 bike trail, and improvements to the water treatment plant one.
REQUESTS FOR INFORMATION
The financial report is designed to provide a general overview of the City of St. Joseph's finances for all
those with an interest in the City's finances. Questions concerning any of the information provided in
this report or requests for additional financial information should be addressed to the Finance Director,
75 Callaway Street East, St. Joseph, MN 56374.
22
BASIC FINANCIAL STATEMENTS
23
City of St. Joseph
Statement of Net Position
December 31, 2017
Governmental Business-Type
ActivitiesActivitiesTotal
Assets
Cash and investments (including cash equivalents)$ 5,925,321$ 1,482,643$ 7,407,964
Property tax receivable 16,134 327 16,461
Accounts receivable 32,630 457,945 490,575
Interest receivable 12,477 6,581 19,058
Due from other governments 94,757 383 95,140
Notes receivable 5,025 - 5,025
Lease receivable 173,356 - 173,356
Special assessments receivable
Delinquent 7,323 605 7,928
Deferred 1,706,107 27,552 1,733,659
Prepaid items 25,712 - 25,712
Net pension asset 229,928 - 229,928
Capital assets
Land 874,133 377,882 1,252,015
Easements 175,873 67,915 243,788
Construction in progress 465,006 705,096 1,170,102
Buildings 9,540,762 8,797,686 18,338,448
Infrastructure 20,176,666 - 20,176,666
Improvements 1,369,201 - 1,369,201
Intangible asset 200,000 - 200,000
Plant and lines - 24,275,118 24,275,118
Machinery and equipment 3,677,400 778,232 4,455,632
Sewer rights 9,068,746 9,068,746
-
Less accumulated depreciation (19,006,537) (11,688,932) (30,695,469)
Capital assets (net of accumulated depreciation) 17,472,504 32,381,743 49,854,247
25,701,274 34,357,779 60,059,053
Total assets
Deferred Outflows of Resources
Deferred outflows of resources related to pensions 1,292,782 78,580 1,371,362
$ 26,994,056$ 34,436,359$ 61,430,415
Total assets and deferred outflows of resources
Liabilities
Accounts payable$ 101,050$ 45,932$ 146,982
Contracts payable 86,960 - 86,960
Due to other governments 10,822 62,534 73,356
121,869 15,383 137,252
Salaries and benefits payable
Interest payable 27,414 54,783 82,197
Bond principal payable (net)
Payable within one year 1,158,000 756,000 1,914,000
Payable after one year 10,557,929 6,203,071 16,761,000
Notes payable (net)
Payable within one year - 455,101 455,101
Payable after one year - 4,267,960 4,267,960
Compensated absences payable
Payable within one year 81,027 20,780 101,807
Payable after one year 371,473 122,459 493,932
Net pension liability 1,351,208 284,375 1,635,583
Total liabilities 13,867,752 12,288,378 26,156,130
Deferred Inflows of Resources
173,356 - 173,356
Deferred inflows of resources related to lease receivables
Deferred inflows of resources related to pensions 1,399,302 51,773 1,451,075
Total deferred inflows of resources 1,572,658 51,773 1,624,431
Net Position
7,626,612 20,699,611 26,508,482
Net investment in capital assets
Restricted for
2,706,373 - 2,706,373
Debt service
Other purposes 1,467,136 - 1,467,136
Unrestricted (246,475) 1,396,597 2,967,863
Total net position 11,553,646 22,096,208 33,649,854
Total liabilities, deferred inflows of resources, and net position$ 26,994,056$ 34,436,359$ 61,430,415
See notes to financial statements.24
-
42
2,034
85,21612,59576,168
(42,204)
515,997310,214786,083437,232129,242927,154
(949,291) (946,838)(360,282)(129,789)(341,593)(299,612)
2,017,6363,685,2431,443,921
Total
(3,027,405) (2,241,322)
32,205,93333,649,854
$
$
------------
42
2,034
23,89323,458
(42,204)
515,997310,214786,083786,083425,946473,297
1,259,380
20,836,82822,096,208
Activities
Business-Type
$
$
Net (Expense) Revenue
and Changes in Net Position
------
85,21612,59552,710
437,232129,242927,154184,541
(949,291) (946,838) (360,282) (129,789) (341,593) (299,612) (425,946)
1,993,7433,211,946
(3,027,405) (3,027,405)
11,369,10511,553,646
Activities
Governmental
$
$
------
701701
3,171
17,51750,728
894,789966,205966,906
Capital Grants
$
$
and Contributions
---
48 85 18 19
752123293
1,975
147,399150,126150,419
$
$
Operating Grants
and Contributions
Program Revenues
City of St. Joseph
-
Statement of Activities
28,94612,06479,77664,889
Year Ended December 31, 2017
112,096660,063892,945291,506127,167
1,435,5441,416,7553,335,8614,228,806
Services
Charges for
$ $
64,866
Total general revenues and transfers
141,853472,849299,612920,296289,557169,389
1,080,8791,757,4711,284,0175,036,6811,106,6642,550,7727,587,453
Property taxesTax incrementsSales taxesLodging taxesFranchise feesState aidsUnrestricted investment earnings
Expenses
$ $
General revenuesTransfersChange in net positionNet position - beginningNet position - ending
Total governmental activitiesTotal business-type activitiesTotal governmental and business-type activities
See notes to financial statements.
General governmentPublic safetyPublic worksEconomic developmentCulture and recreationInterest on long-term debtWaterSanitary sewerRefuseStorm waterStreet light utility
25
Functions/ProgramsGovernmental activitiesBusiness-type activities
City of St. Joseph
Balance Sheet - Governmental Funds
December 31, 2017
Special Revenue
General Fund Other Total
(101, 102, State Collected Governmental Governmental
105, 108)Sales Tax (200)FundsFunds
Assets
Cash and investments$ 2,507,026 $ 961,315$ 2,704,590$ 6,172,931
Taxes receivable - delinquent 9,572 - 6,562 16,134
Special assessments receivable
Delinquent - - 7,323 7,323
Deferred 13,972 - 1,692,135 1,706,107
Accounts receivable 30,784 - 1,846 32,630
Interest receivable 6,193 - 6,753 12,946
Due from other funds - - 13,700 13,700
Due from other governments 5,731 85,753 3,273 94,757
Notes receivable - - 5,025 5,025
Lease receivable 173,356 - - 173,356
Prepaid items 25,712 - - 25,712
Total assets$ 2,772,346 $ 1,047,068$ 4,441,207$ 8,260,621
Liabilities
Accounts payable$ 90,397 $ 879 $ 9,774$ 101,050
Contracts payable - - 86,960 86,960
Due to other funds - - 13,700 13,700
Due to other governments 8,768 - 2,054 10,822
Salaries and benefits payable 120,458 - 1,411 121,869
Total liabilities 219,623 879 113,899 334,401
Deferred Inflows of Resources
Unavailable revenue - property taxes 9,572 - 6,562 16,134
Unavailable revenue - special assessments 13,972 - 1,699,458 1,713,430
Unavailable revenue - notes receivable - - 5,025 5,025
Unavailable revenue - leases receivable 173,356 - - 173,356
196,900 - 1,711,045 1,907,945
Total deferred inflows of resources
Fund Balances
Nonspendable 25,712 - - 25,712
Restricted 34,370 1,046,189 1,547,008 2,627,567
Committed - - 39,774 39,774
Assigned 846,378 - 1,040,007 1,886,385
Unassigned 1,449,363 - (10,526) 1,438,837
Total fund balances 2,355,823 1,046,189 2,616,263 6,018,275
Total liabilities, deferred inflows
of resources, and fund balances$ 2,772,346 $ 1,047,068$ 4,441,207$ 8,260,621
See notes to financial statements. 26
City of St. Joseph
Reconciliation of the Balance Sheet to
The Statement of Net Position - Governmental Funds
Year Ended December 31, 2017
Total fund balances - governmental funds$ 6,018,275
Amounts reported for governmental activities in the Statement of Net Position
are different because
Capital assets used in governmental activities are not current financial resources
and, therefore, are not reported as assets in governmental funds.
Cost of capital assets
36,479,041
Less accumulated depreciation
(19,006,537)
Long-term liabilities, including bonds payable, are not due and payable in
the current period and, therefore, are not reported as liabilities in the funds.
Long-term liabilities at year-end consist of
(11,715,929)
Bond principal payable, net of premiums and discounts
(452,500)
Compensated absences payable
Delinquent receivables will be collected in subsequent years, but are not
available soon enough to pay for the current period's expenditures and,
therefore, are deferred in the funds.
16,134
Property taxes
7,323
Special assessments
Other long-term assets are not available to pay for current expenditures and,
therefore, are deferred in the funds.
1,706,107
Deferred special assessments
5,025
Notes receivable
Deferred outflows of resources and deferred inflows of resources are
created as a result of various differences related to pensions that are
not recognized in the governmental funds.
Deferred inflows of resources related to pensions (1,399,302)
Deferred outflows of resources related to pensions 1,292,782
Fire relief net pension asset 229,928
Net pension liability (1,351,208)
The water access capital project fund is proprietary in nature and, therefore,
(241,721)
included in the business-type activities in the Statement of Net Position.
The sewer access capital project fund is proprietary in nature and, therefore,
(6,358)
included in the business-type activities in the Statement of Net Position.
Governmental funds do not report a liability for accrued interest
(27,414)
due and payable.
Total net position - governmental activities
$ 11,553,646
See notes to financial statements. 27
City of St. Joseph
Statement of Revenues, Expenditures, and
Changes in Fund Balances - Governmental Funds
Year Ended December 31, 2017
Special RevenueCapital Projects
2016 Field
General Fund Street Other Total
(101, 102, 105, State Collected Government Improvements Governmental Governmental
108)Sales Tax (200)Center (401)(404)FundsFunds
Revenues
Property taxes$ 1,124,680$ -$ - $ - $ 865,781$ 1,990,461
Tax increments - - - - 85,216 85,216
Sales taxes 1,085 436,147 - - - 437,232
Lodging taxes - - - 12,595 12,595
Special assessments 9,127 - - - 399,609 408,736
Franchise fees 129,242 - - - - 129,242
Licenses and permits 356,990 - - - - 356,990
Intergovernmental 1,133,362 - 14,017 - - 1,147,379
Charges for services 376,946 - - - 560,291 937,237
Fines and forfeitures 55,474 - - - - 55,474
Miscellaneous
Investment income 20,686 - - - 25,464 46,150
Contributions and donations 5,094 40,000 - - 8,999 54,093
Revolving loan repayments - - - - 34,785 34,785
Other 45,351 - - - 11,078 56,429
Total revenues 3,258,037 476,147 14,017 - 2,003,818 5,752,019
Expenditures
Current
General government 749,008 - - - - 749,008
Public safety 1,537,183 - - - - 1,537,183
Public works 342,806 - - - - 342,806
Culture and recreation 270,555 - - - 5,390 275,945
Economic development - - - - 133,485 133,485
Debt service
Principal - - - - 1,425,000 1,425,000
Interest and other charges - - - - 316,153 316,153
Capital outlay
General government - - 507,242 - 1,411 508,653
Public safety 74,413 - 250,000 - 17,546 341,959
Public works 54,856 - - 1,033,923 425,046 1,513,825
Culture and recreation 425 837,547 55,828 - 32,065 925,865
Total expenditures 3,029,246 837,547 813,070 1,033,923 2,356,096 8,069,882
Excess of revenues over
(under) expenditures 228,791 (361,400) (799,053) (1,033,923) (352,278) (2,317,863)
Other Financing Sources (Uses)
Insurance recoveries 1,470 - - - - 1,470
Sale of property 275 - 1,069 - 23,483 24,827
Bonds issued - - 325,747 - 355,253 681,000
Transfers in 13,896 - 6,176 - 1,078,767 1,098,839
Transfers out (250,548) (162,000) (2,177) (199,566) (737,198) (1,351,489)
Total other financing sources (uses) (234,907) (162,000) 330,815 (199,566) 720,305 454,647
Net change in fund balances (6,116) (523,400) (468,238) (1,233,489) 368,027 (1,863,216)
Fund Balances
Beginning of year2,361,939 1,569,589 468,238 1,233,489 2,248,236 7,881,491
End of year$ 2,355,823$ 1,046,189$ - $ - $ 2,616,263$ 6,018,275
See notes to financial statements. 28
City of St. Joseph
Reconciliation of the Statement of Revenues, Expenditures,
and Changes in Fund Balances to the Statement
of Activities - Governmental Funds
Year Ended December 31, 2017
Total net change in fund balances - governmental funds$ (1,863,216)
Amounts reported for governmental activities in the Statement of Activities are different because
Capital outlays are reported in governmental funds as expenditures. However, in the
Statement of Activities, the cost of those assets is allocated over the estimated useful lives
as depreciation expense.
3,065,444
Capital outlays
5,546
Capital contributions
(1,545,813)
Depreciation expense
(18,758)
Loss on disposal
(468,296)
Transferred to proprietary funds
Principal payments on long-term debt are recognized as expenditures in the governmental
1,425,000
funds but as an increase in net position in the Statement of Activities.
Some expenses reported in the Statement of Activities do not require the use of current
financial resources and, therefore, are not reported as expenditures in governmental funds.
(377)
Accrued interest payable
16,918
Amortization of bond discounts, premiums and issuance charges
Proceeds from long-term debt are recognized as an other financing source in the governmental
(681,000)
funds but as a decrease in net position in the Statement of Activities.
Compensated absences and OPEB payments are recognized as paid in the
158,739
governmental funds but recognized as the expense is incurred in the Statement of Activities.
Delinquent receivables will be collected in subsequent years, but are not available soon enough
to pay for the current period's expenditures and, therefore, are not revenues in the funds.
1,904
Delinquent special assessments
3,282
Delinquent property taxes
Certain revenues in the Statement of Activities that do not provide current financial resources
are not reported as revenues in the funds.
438,464
Deferred special assessments
(33,799)
Notes receivable
Governmental funds recognized pension contributions as expenditures at the
time of payment whereas the Statement of Activities factors in items related to
pensions on a full accrual perspective.
(87,560)
Pension expense
The water access capital project fund is proprietary in nature and, therefore, is reported
(200,622)
with business-type activities.
The sewer access capital project fund is proprietary in nature and, therefore, is reported
(31,315)
with business-type activities.
Change in net position - governmental activities$ 184,541
See notes to financial statements.29
City of St. Joseph
Statement of Revenues, Expenditures, and
Changes in Fund Balance -
Budget and Actual - General Fund
Year Ended December 31, 2017
Variance with
Original and Actual
Final Budget -
Final BudgetAmountsOver (Under)
Revenues
Property taxes$ 1,128,180$ 1,124,680 $ (3,500)
Sales taxes - 1,085 1,085
Special assessments 3,000 9,127 6,127
Franchise fees 126,300 129,242 2,942
Licenses and permits 157,035 356,990 199,955
Intergovernmental 1,155,220 1,133,362 (21,858)
Charges for services 361,990 376,946 14,956
Fines and forfeitures 43,000 55,474 12,474
Miscellaneous revenues
Investment income 37,000 20,686 (16,314)
Contributions and donations 3,550 5,094 1,544
Other 44,850 45,351 501
Total revenues 3,060,125 3,258,037 197,912
Expenditures
Current
General government 662,175 749,008 86,833
Public safety 1,581,460 1,537,183 (44,277)
Public works 403,220 342,806 (60,414)
Culture and recreation 299,470 270,555 (28,915)
Capital outlay
General government 2,760 - (2,760)
Public safety 84,100 74,413 (9,687)
Public works 89,600 54,856 (34,744)
Culture and recreation - 425 425
Total expenditures 3,122,785 3,029,246 (93,539)
Excess of revenues over
(under) expenditures (62,660) 228,791 291,451
Other Financing Sources (Uses)
Insurance recoveries - 1,470 1,470
Sale of property 12,350 275 (12,075)
Transfers in - 13,896 13,896
Transfers out (39,000) (250,548) (211,548)
Total other financing sources (uses) (26,650) (234,907) (208,257)
Net change in fund balances$ (89,310) (6,116)$ 83,194
Fund Balances
Beginning of year2,361,939
End of year$ 2,355,823
See notes to the financial statements.30
City of St. Joseph
Statement of Revenues, Expenditures, and
Changes in Fund Balance -
Budget and Actual - State Collected Sales Tax
Year Ended December 31, 2017
Variance with
Original and Actual
Final Budget -
Final BudgetAmountsOver (Under)
Revenues
Sales taxes$ 408,000 $ 436,147$ 28,147
Miscellaneous revenues
Contributions and donations - 40,000 40,000
Total revenues 408,000 476,147 68,147
Expenditures
Capital outlay
Culture and recreation 950,000 837,547 (112,453)
Excess of revenues over
(under) expenditures (542,000) (361,400) 180,600
Other Financing Sources (Uses)
Transfers out (237,050) (162,000) 75,050
Net change in fund balances$ (779,050) (523,400)$ 255,650
Fund Balances
Beginning of year1,569,589
End of year$ 1,046,189
See notes to the financial statements.31
City of St. Joseph
Statement of Net Position - Proprietary Funds
December 31, 2017
Sanitary Sewer Storm Water Street Light
Water (601)(602)Refuse (603)(651)Utility (652)Total
Assets
Current assets
Cash and investments$ 670,382$ 2,346 $ 257,764$ 280,964$ 23,577$ 1,235,033
Taxes receivable - delinquent 327 - - - - 327
Special assessments receivable
Delinquent 605 - - - - 605
Deferred 24,557 84 80 2,814 17 27,552
Accounts receivable 159,810 221,288 49,370 16,954 10,523 457,945
Interest receivable 1,650 3,135 621 649 57 6,112
Due from other governments 68 - 315 - - 383
Total current assets 857,399 226,853 308,150 301,381 34,174 1,727,957
Noncurrent assets
Capital assets
Land 372,941 4,941 - - - 377,882
Easements - - - 67,915 - 67,915
Construction in progress 93,860 451,979 - 159,257 - 705,096
Buildings 7,502,432 1,295,254 - - - 8,797,686
Plants and lines 10,372,479 8,724,026 - 5,178,613 - 24,275,118
Machinery and equipment 199,940 530,068 45,842 2,382 - 778,232
Sewer rights - 9,068,746 - - - 9,068,746
Total capital assets 18,541,652 20,075,014 45,842 5,408,167 - 44,070,675
Less accumulated depreciation (5,270,138) (4,968,606) (32,830) (1,417,358) - (11,688,932)
Net capital assets 13,271,514 15,106,408 13,012 3,990,809 - 32,381,743
Total assets 14,128,913 15,333,261 321,162 4,292,190 34,174 34,109,700
Deferred Outflows of Resources
Deferred outflows of resources related to pensions 36,428 29,512 3,816 7,298 1,526 78,580
Total assets and deferred
$ 14,165,341$ 15,362,773 $ 324,978$ 4,299,488$ 35,700$ 34,188,280
outflows of resources
Liabilities
Current liabilities
Accounts payable$ 18,438$ 2,656 $ 20,583$ 9$ 4,246$ 45,932
Due to other governments 2,238 57,571 2,725 - - 62,534
Salaries and benefits payable 7,229 5,604 810 1,424 316 15,383
Interest payable 12,161 42,622 - - - 54,783
Long-term liabilities due
Within one year 584,427 643,528 934 2,619 373 1,231,881
Total current liabilities 624,493 751,981 25,052 4,052 4,935 1,410,513
Noncurrent liabilities
Compensated absences 59,620 59,620 8,650 11,890 3,459 143,239
Notes payable, net - 4,723,061 - - - 4,723,061
Bonds payable, net 5,248,737 1,710,334 - - - 6,959,071
Net pension liability 131,829 106,802 13,809 26,411 5,524 284,375
Less amounts due within one year (584,427) (643,528) (934) (2,619) (373) (1,231,881)
Total noncurrent liabilities 4,855,759 5,956,289 21,525 35,682 8,610 10,877,865
Total liabilities 5,480,252 6,708,270 46,577 39,734 13,545 12,288,378
Deferred Inflows of Resources
Deferred inflows of resources related to pensions 24,001 19,444 2,514 4,808 1,006 51,773
Net Position
Net investment in capital assets 8,022,777 8,673,013 13,012 3,990,809 - 20,699,611
Unrestricted 638,311 (37,954) 262,875 264,137 21,149 1,148,518
Total net position 8,661,088 8,635,059 275,887 4,254,946 21,149 21,848,129
Total liabilities, deferred inflows
of resources, and net position$ 14,165,341$ 15,362,773 $ 324,978$ 4,299,488$ 35,700$ 34,188,280
See notes to financial statements.32
City of St. Joseph
Reconciliation of the Statement
of Net Position - Business-Type Activities
December 31, 2017
Total net position - proprietary funds$ 21,848,129
Amounts reported for business-type activities in the Statement of Net Position
are different because
The water access capital project fund is proprietary in nature and
relates to water improvements for the applicable funds. Therefore,
241,721
it is included as a business-type activity.
The sewer access capital project fund is proprietary in nature and
relates to sewer improvements for the applicable funds. Therefore,
6,358
it is included as a business-type activity.
Total net position - business-type activities
$ 22,096,208
See notes to financial statements. 33
City of St. Joseph
Statement of Revenues, Expenses, and Changes
in Net Position - Proprietary Funds
Year Ended December 31, 2017
Sanitary Storm Water Street Light
Water (601)Sewer (602)Refuse (603)(651)Utility (652)Total
Operating revenues
Charges for services$ 968,823 $ 1,271,765$ 288,151 $ 127,167 $ 61,359 $ 2,717,265
Operating Expenses
Wages and salaries 165,607 135,543 20,621 34,581 8,748 365,100
Materials and supplies 59,424 35,280 2,790 252 - 97,746
Repairs and maintenance 26,374 31,785 2,225 17,042 10,996 88,422
Professional services 33,437 18,121 4,061 10,695 - 66,314
Insurance 11,690 10,653 - - - 22,343
Utilities 68,613 17,610 578 - 44,771 131,572
Depreciation 417,012 481,406 6,606 105,213 - 1,010,237
Contracted services - 220,528 251,100 - - 471,628
Equipment - 6,152 - - - 6,152
Miscellaneous 9,622 2,070 1,576 1,606 351 15,225
Total operating expenses 791,779 959,148 289,557 169,389 64,866 2,274,739
Operating income (loss) 177,044 312,617 (1,406) (42,222) (3,507) 442,526
Nonoperating revenues
(expenses)
Investment income 5,882 11,174 2,214 2,314 201 21,785
Special assessments 701 84 80 8 17 890
Loss on disposal of asset (1,458) (208) - - - (1,666)
Property taxes 23,893 - - - - 23,893
Interest expense (133,955) (151,289) - - - (285,244)
Amortization of bond premium 6,896 3,981 - - - 10,877
Other income 67,679 18,855 3,360 10 3,532 93,436
Total nonoperating revenues
(expenses) (30,362) (117,403) 5,654 2,332 3,750 (136,029)
Income (loss) before capital
contributions and transfers 146,682 195,214 4,248 (39,890) 243 306,497
Capital contributions 104,499 144,159 - 219,638 - 468,296
Transfers in 263,980 95,000 - - - 358,980
Transfers out (41,770) (44,540) (770) (19,250) - (106,330)
Change in net position 473,391 389,833 3,478 160,498 243 1,027,443
Net position
Beginning of year 8,187,697 8,245,226 272,409 4,094,448 20,906 20,820,686
End of year$ 8,661,088 $ 8,635,059$ 275,887 $ 4,254,946 $ 21,149 $ 21,848,129
See notes to financial statements. 34
City of St. Joseph
Reconciliation of the Statement of Revenues, Expenses,
and Changes in Net Position - Business-Type Activities
Year Ended December 31, 2017
Total net change in fund net position - proprietary funds$ 1,027,443
Amounts reported for business-type activities in the Statement of Activities
are different because:
Recognized current year activity from the water access capital project fund
with the business-type activities. 200,622
Recognized current year activity from the sewer access capital project fund
with the business-type activities. 31,315
Capital contributions from governmental activities (468,296)
Transfers in of capital assets from governmental activities 468,296
Change in net position - business-type activities$ 1,259,380
See notes to financial statements.35
City of St. Joseph
Statement of Cash Flows - Proprietary Funds
Year Ended December 31, 2017
Sanitary Refuse Storm Water Street Light
Water (601)Sewer (602)(603)(651)Utility (652)Total
Cash Flows - Operating Activities
Receipts from customers and users$ 952,959 $ 1,270,825$ 292,127$ 128,526$ 62,006 $ 2,706,443
Payments to suppliers (198,163) (396,345) (260,787) (31,740) (56,331) (943,366)
Payments to employees (165,995) (135,521) (25,862) (43,004) (8,584) (378,966)
Other miscellaneous receipts 91,638 18,855 3,360 2,816 3,532 120,201
Net cash flows - operating activities 680,439 757,814 8,838 56,598 623 1,504,312
Cash Flows - Noncapital Financing
Activities
Interfund loan payment - (30,000) - - - (30,000)
Transfer from other funds 263,980 95,000 - - - 358,980
Transfer to other funds (41,770) (44,540) (770) (19,250) - (106,330)
Net cash flows - noncapital financing
Activities 222,210 20,460 (770) (19,250) - 222,650
Cash Flows - Capital and Related
Financing Activities
Principal paid on debt (490,000) (558,944) - - - (1,048,944)
Interest paid on debt (132,096) (153,120) - - - (285,216)
Bond proceeds 353,000 508,878 - - - 861,878
Acquisition of capital assets (30,975) (586,618) - - - (617,593)
Net cash flows - capital and related
Financing activities (300,071) (789,804) - - - (1,089,875)
Cash Flows - Investing Activities
Interest and dividends received 6,936 8,098 2,034 2,118 182 19,368
Net change in cash and cash equivalents 609,514 (3,432) 10,102 39,466 805 656,455
Cash and Cash Equivalents
Beginning of year 60,868 5,778 247,662 241,498 22,772 578,578
End of year$ 670,382 $ 2,346$ 257,764$ 280,964$ 23,577 $ 1,235,033
Reconciliation of Operating
Income (Loss) to Net Cash Flows -
Operating Activities
Operating income (loss)$ 177,044 $ 312,617$ (1,406) $ (42,222)$ (3,507)$ 442,526
Adjustments to reconcile operating loss
to net cash flows - operating activities
Depreciation expense 417,012 481,406 6,606 105,213 - 1,010,237
Pension expense 21,658 17,623 (1,889) (6,017) 72 31,447
Other miscellaneous receipts 91,638 18,855 3,360 2,816 3,532 120,201
Accounts receivable (16,223) (940) 4,291 1,359 647 (10,866)
Due from other governments 359 - (315) - - 44
Accounts payable 10,464 (443) 1,431 (2,145) (213) 9,094
Due to other governmental units 533 (53,703) 112 - - (53,058)
Salaries payable 2,084 1,083 48 139 - 3,354
Compensated absences payable 5,524 5,524 231 1,086 92 12,457
Net OPEB obligation (29,654) (24,208) (3,631) (3,631) - (61,124)
Total adjustments 503,395 445,197 10,244 98,820 4,130 1,061,786
Net cash flows - operating activities$ 680,439 $ 757,814$ 8,838$ 56,598$ 623 $ 1,504,312
Non-Cash Activities
Capital asset contributions from
governmental funds$ 104,499 $ 144,159$ - $ 219,638$ -$ 468,296
See notes to financial statements. 36
City of St. Joseph
Notes to Financial Statements
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Reporting Entity
The City of St. Joseph (the "City") is a statutory city governed by an elected mayor and four council
members. The accompanying financial statements present the government entities for which the
government is considered to be financially accountable.
The financial statements represent the City and its component units. The City includes all funds, account
groups, organizations, institutions, agencies, departments, and offices that are not legally separate from
such. Component units are legally separate organizations for which the elected officials of the City are
financially accountable and are included within the basic financial statements of the City because of the
significance of their operational or financial relationships with the City.
The City is considered financially accountable for a component unit if it appoints a voting majority of
the organization's governing body and it is able to impose its will on the organization by significantly
influencing the programs, projects, activities, or level of services performed or provided by the
organization, or there is a potential for the organization to provide specific financial benefits to or
impose specific financial burdens on, the City.
As a result of applying the component unit definition criteria above, certain organizations have been
defined and are presented in this report as follows:
Blended Component Unit Reported as if they were part of the City.
Joint Ventures The relationship of the City with the entity is disclosed.
For the categories above, the specific entities are identified as follows:
1. Blended Component Unit
The St. Joseph Economic Development Authority (EDA) was organized for the purpose of
preserving and creating jobs, enhancing the tax base, and promoting the general welfare of the people
of the City. The St. Joseph EDA is governed by a five member board appointed by the City Council,
two members of which are City Council Members. The St. Joseph EDA is included as a blended
component unit of the City because the St. Joseph EDA is financially accountable to the City, as the
City Council approves the budget. The St. Joseph EDA provides services almost entirely for the City.
The St. Joseph EDA is presented as the Economic Development Authority Special Revenue Fund.
Separate financial statements are not prepared for the St. Joseph EDA.
37
City of St. Joseph
Notes to Financial Statements
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
A. Reporting Entity (Continued)
2. Joint Ventures
The Central Minnesota Major Crime Investigation Unit is a group of local law enforcement officers
within the four county surrounding areas that will be available to assist any of the participating
entities in the investigation and solution of major crimes. During 2017, the City contributed $10,290
to the organization. It is reported as a special revenue fund of the City of Sauk Rapids. Complete
financial statements can be obtained from: City of Sauk Rapids, 250 Summit Avenue North, Sauk
Rapids, Minnesota 56379.
The City of St. Cloud Human Rights Office is a joint venture between the cities of St. Cloud,
St. Joseph, Sauk Rapids, and Sartell, which works to enhance the lives of the citizens of the
communities. During 2017, the City contributed $0 to the organization. It is reported as an agency
fund of the City of St. Cloud. Complete financial statements can be obtained from: City of
nd
St. Cloud, 400 2 Street South, St. Cloud, Minnesota 56301.
B.Government-Wide and Fund Financial Statements
The government-wide financial statements (i.e., the Statement of Net Position and the Statement of
Activities) report information on all of the nonfiduciary activities of the City. Governmental activities,
which normally are supported by taxes and intergovernmental revenues, are reported separately from
business-type activities, which rely to a significant extent on fees and charges for support.
The Statement of Activities demonstrates the degree to which the direct expenses of a given function or
segment is offset by program revenues. Direct expenses are those that are clearly identifiable with a
specific function or segment. Interest on general long-term debt is considered an indirect expense and is
reported separately 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 properly included
among program revenues are reported instead as general revenues. Internally dedicated revenues are
reported as general revenues rather than program revenues.
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.
C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation
The government-wide financial statements are reported using the economic resources measurement focus
and the accrual basis of accounting, as are the proprietary fund financial statements. Revenues are
recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of
related cash flows. 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 have been met.
38
City of St. Joseph
Notes to Financial Statements
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued)
Governmental fund financial statements are reported using the current financial resources measurement
focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both
measurable and available. Revenues are considered to be available when they are collectible within the
current period or soon enough thereafter 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 period.
Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However,
debt service expenditures, as well as expenditures related to compensated absences and claims and
judgments, are recorded only when payment is due.
Property taxes, franchise taxes, licenses, and interest associated with the current period are all
considered to be susceptible to accrual and so have been recognized as revenues of the current period.
Only the portion of special assessments receivable due within the current 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.
Description of Funds
Major Governmental Funds:
General Fund This fund is the City's primary operating fund. It accounts for all financial resources of
the general City, except those required to be accounted for in another fund.
State Collected Sales Tax This fund accounts for the collection of state approved local option sales
tax.
Government Center This fund accounts for the costs associated with the construction of the
Government Center.
2016 Field Street Improvements This fund accounts for the costs associated with the City's street
improvement project.
Proprietary Funds
Water Fund This fund accounts for the operations of the City's water utility.
Sanitary Sewer Fund This fund accounts for the operations of the City's sanitary sewer utility.
Refuse Fund This fund accounts for the operations of the City's refuse and compost utility.
Storm Water Fund This fund accounts for the operations of the City's storm water utility.
Street Light Utility Fund This fund accounts for the operations of the City's street light utility.
39
City of St. Joseph
Notes to Financial Statements
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued)
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, sanitary
sewer, refuse, storm water, and street light utility functions and various other functions of the City.
Elimination of these charges would distort the direct costs and program revenues reported for the
various functions concerned.
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, Sanitary Sewer, Refuse, Storm Water, and Street Light Utility Enterprise Funds are charges to
customers for sales and services. Operating expenses for enterprise 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.
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.
D. Assets, Liabilities, Deferred Outflows/ Inflows of Resources, and Net Position or Equity
1. Cash and Investments
Cash and investments include balances from all funds that are combined and invested to the extent
available in various securities as authorized by state law. Earnings from the pooled investments are
allocated to the individual funds based on the average of month-end cash and investment balances.
The City's cash and cash equivalents are considered to be cash on hand, demand deposits and short-
term investments with original maturities of three months or less from the date of acquisition.
Minnesota Statutes authorizes the City to invest in obligations of the U.S. Treasury, agencies, and
instrumentalities, shares of investment companies whose only investments are in the aforementioned
securities, obligations of the State of Minnesota or its municipalities, bankers' acceptances, future
contracts, repurchase and reverse repurchase agreements, and commercial paper of the highest
quality with a maturity of no longer than 270 days and in the Minnesota Municipal Investment Pool.
Certain investments for the City are reported at fair value as disclosed in Note 3. 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.
40
City of St. Joseph
Notes to Financial Statements
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
D. Assets, Liabilities, Deferred Outflows/ Inflows of Resources, and Net Position or Equity
(Continued)
2. Receivables and Payables
All trade and property tax receivables are shown at a gross amount since both are assessable to the
property taxes and are collectible upon the sale of the property.
The City levies its property tax for the subsequent year during the month of December. December 28
is the last day the City can certify a tax levy to the County Auditor for collection the following year.
Such taxes become a lien on January 1 and are recorded as receivables by the City at that date. The
property tax is recorded as revenue when it becomes measurable and available. Stearns County is the
collecting agency for the levy and remits the collections to the City four times a year. The tax levy
notice is mailed in March with the first half of the payment due on May 15 and the second half due
on October 15. Taxes not collected as of December 31 each year are shown as delinquent taxes
receivable.
The County Auditor prepares the tax list for all taxable property in the City, applying the applicable
tax rate to the tax capacity of individual properties, to arrive at the actual tax for each property. The
County Auditor also collects all special assessments, except for certain prepayments paid directly to
the City.
The County Auditor submits the list of taxes and special assessments to be collected on each parcel
of property to the County Treasurer in January of each year.
3. Prepaid Items
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. Prepaid items are reported
using the consumption method and recorded as expenditures at the time of consumption.
4. Capital Assets
Capital assets, which include property, plant, equipment, and infrastructure assets (e.g., roads,
sidewalks, and similar items), are reported in the applicable governmental or business-type activities
columns in the government-wide financial statements. Capital assets are defined by the City as assets
with an initial, individual cost of more than $1,000 and an estimated useful life in excess of two
years. Such assets are recorded at historical cost or estimated historical cost if purchased or
constructed. Donated capital assets are recorded at acquisition value at the date of donation.
The costs of normal maintenance and repairs that do not add to the value of the asset or materially
extend assets' lives are not capitalized.
41
City of St. Joseph
Notes to Financial Statements
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
D. Assets, Liabilities, Deferred Outflows/ Inflows of Resources, and Net Position or Equity
(Continued)
4. Capital Assets (Continued)
Property, plant, and equipment of the City are depreciated using the straight-line full year convention
method over the following estimated useful lives:
AssetsYears
Land improvements 5-20
Buildings30-40
Building improvements15
Infrastructure10-50
Sewer rights20-50
Furniture and fixtures 5-10
Vehicles 5-20
Equipment3-7
Machinery5-7
5. Deferred Outflows/ Inflows of Resources
In addition to assets, the statement of financial position will sometimes report a separate section for
deferred outflows of resources. This separate financial statement element represents a consumption
of net position that applies to future periods and so will not be recognized as an outflow of resources
(expense/expenditure) until that time. The City presents deferred outflows of resources on the
Statements of Net Position for deferred outflows of resources related to pensions for various estimate
differences that will be amortized and recognized over future years.
In addition to liabilities, the statement of financial position and fund financial statements will
sometimes report a separate section for deferred inflows of resources. This separate financial
statement element represents an acquisition of net position that applies to future periods and so will
not be recognized as an inflow of resources (revenue) until that time. The City has two items that
qualify for reporting in this category. The City presents deferred inflows of resources on the
Governmental Fund Balance Sheet as unavailable revenue. The governmental funds report
unavailable revenues from four sources: property taxes, special assessments, notes receivable, and
leases receivable. These amounts are deferred and recognized as an inflow of resources in the period
that the amounts become available. The City presents deferred inflows of resources on the
Statements of Net Position for deferred inflows of resources related to pensions for various estimate
differences that will be amortized and recognized over future years.
42
City of St. Joseph
Notes to Financial Statements
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
D. Assets, Liabilities, Deferred Outflows/ Inflows of Resources, and Net Position or Equity
(Continued)
6. Compensated Absences
The City compensates employees who leave City service in good standing for all earned, unused
vacation. Employees can accrue up to 200 hours of vacation depending on years of service. The
maximum amount of carryover from year-to-year is 100 hours or the amount of the current vacation
accrual rate. In addition, employees are compensated for unused sick leave (up to a maximum of 720
hours or 960 hours for LELS and AFSCME employees) at various rates depending on the employee
type and years of service, provided the City's notice of termination policy has been complied with.
7. Long-Term Obligations
In the government-wide financial statements, and proprietary fund types in the fund financial
statements, long-term debt and other long-term obligations are reported as liabilities in the applicable
governmental activities, business-type activities, or proprietary fund type Statement of Net Position.
Bond premiums and discounts are deferred and amortized over the life of the bonds using the
effective interest method.
In the fund financial statements, governmental fund types recognize bond premiums and discounts,
as well as bond issuance costs, during the current period. The face amount of debt issued is reported
as other financing sources. Premiums received on debt issuances are reported as other financing
sources while discounts on debt issuances are reported as other financing uses. Issuance costs,
whether or not withheld from the actual debt proceeds received, are reported as debt service
expenditures.
8. Pensions
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 the relief association and additions to/deductions from PERA's and the
relief association's fiduciary net position have been determined on the same basis as they are reported
by PERA and the relief association except that PERA's fiscal year end is June 30. 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.
43
City of St. Joseph
Notes to Financial Statements
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
D. Assets, Liabilities, Deferred Outflows/ Inflows of Resources, and Net Position or Equity
(Continued)
9. Fund Equity
a) Classification
In the fund financial statements, governmental funds report fund classifications that comprise a
hierarchy based primarily on the extent to which the City is bond to honor constraints on the
specific purpose for which amounts in those funds can be spent.
Nonspendable Fund Balance These are amounts that cannot be spent because they are
not in spendable form as they are legally or contractually required to be maintained intact
and include amounts set aside for prepaid items.
Restricted Fund Balance These are amounts that are restricted to specific purposes
either by a) constraints placed on the use of resources by creditors, grantors, contributors,
or laws or regulations of other governments, or b) imposed by law through enabling
legislation.
Committed Fund Balance These are amounts that can only be used for specific purposes
pursuant to constraints imposed by the City Council (highest level of decision making
authority) through resolution. The City Council must also pass a resolution to remove the
constraint of committed resources.
Assigned Fund Balance These are amounts that are constrained by the City's intent to be
used for specific purposes but are neither restricted nor committed. Assignments are made
by the City's Finance Director based on the City Council's direction.
Unassigned Fund Balance These are residual amounts in the General Fund not reported
in any other classification. The General Fund is the only fund that can report a positive
unassigned fund balance. Other funds would report a negative unassigned fund balance
should the total of nonspendable, restricted, committed, and assigned fund balances
exceed the total net resources of that fund.
When both restricted and unrestricted resources are available for use, it is the City's policy to first
use restricted resources, and then use unrestricted resources as they are needed. When committed,
assigned, and unassigned resources are available for use, it is the City's policy to use resources in
the following order: committed, assigned, and unassigned.
b) Minimum Fund Balance
The City's target General Fund balance is to maintain working capital, a portion of the
unassigned balance, in the amount of four to six months of the next year's budgeted expenditures
of the General Fund, excluding the fire department.
44
City of St. Joseph
Notes to Financial Statements
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
D. Assets, Liabilities, Deferred Outflows/ Inflows of Resources, and Net Position or Equity
(Continued)
10. Net Position
Net position represents the difference between assets, deferred outflows of resources, liabilities, and
deferred inflows of resources in the government-wide financial statements. Net investment in capital
assets consists of capital assets, net of accumulated depreciation, reduced by the outstanding balance
of any long-term debt used to build or acquire the capital assets. A reclassification of $1,817,741
between the net position and unrestricted net position on the total column in the Statement of Net
Position to recognize the portion of debt attributable to capital assets donated from governmental
activities to business-type activities. Net position is reported as restricted in the government-wide
financial statement when there are limitations on their use through external restrictions imposed by
creditors, grantors, or laws or regulations of other governments. The restricted for other purposes
restriction of net position for governmental activities of $1,467,136 includes $25,550 for tax
incrementing financing, $1,046,189 in state collected sales tax restricted by enabling legislation,
$20,755 restricted for lodging tax, $121,382 in park dedication fees, $2,090 restricted by donors for
future projects, $11,145 DEED Funds, $205,655 in revolving loan funds restricted for EDA projects
and $34,370 of restricted PEG access fees.
11. Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements. Estimates also affect the reported amounts of revenues and
expenditures/expenses during the reporting period. Actual results could differ from those estimates.
E.Budgetary Information
1. In August of each year, City staff submits to the City Council, a proposed operating budget for
the year commencing the following January 1. The operating budget includes proposed
expenditures and the means of financing them for the upcoming year.
2. Public hearings are conducted to obtain taxpayer comments.
3. The budget is legally enacted through passage of a resolution after obtaining taxpayer comments.
4. Budgets for the General Fund and the Economic Development Authority Special Revenue Fund
are adopted on a basis consistent with accounting principles generally accepted in the United
States of America.
5. Expenditures may not legally exceed budgeted appropriations at the department level. No fund's
budget can be increased without City Council approval. The City Council may authorize transfer
of budgeted amounts between departments within any fund. Management may amend budgets
within a department level, so long as the total department budget is not changed.
45
City of St. Joseph
Notes to Financial Statements
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
E.Budgetary Information (Continued)
6. Annual appropriated budgets are adopted during the year for the General Fund and the Economic
Development Authority Special Revenue Fund. Budgetary control for the remaining special
revenue fund is done through the use of project controls when the council authorizes the project.
Annual appropriated budgets are not adopted for Debt Service Funds because effective budgetary
control is alternatively achieved through bond indenture provisions. Budgetary control for
Capital Projects Funds is accomplished through the use of project controls and formal
appropriated budgets are not adopted.
7. Budgeted amounts are as originally adopted by the City Council. Budgeted expenditure
appropriations lapse at year-end.
Encumbrances outstanding at year-end expire and outstanding purchase orders are canceled and not
reported in the financial statements.
NOTE 2 STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY
A. Deficit Fund Balance
The following fund had a deficit fund balance at December 31, 2017.
Nonmajor governmental funds
Special Revenue
TIF 2-2 St. Joseph Meat Market$ 166
TIF 2-3 Bayou Blues/Alley Flat 7,080
TIF 3-1 Central Minnesota Credit Union 3,236
Debt Service
G.O. Certificates of Indebtedness of 2011A 44
This deficit will be eliminated with future tax increment revenues and future debt levies.
NOTE 3 DEPOSITS AND INVESTMENTS
Cash balances of the City's funds are combined (pooled) and invested to the extent available in various
investments authorized by Minnesota Statutes. Each fund's portion of this pool (or pools) is displayed in
the financial statements as "cash and cash equivalents" or "investments." For purposes of identifying risk
of investing public funds, the balances and related restrictions are summarized on the following page.
46
City of St. Joseph
Notes to Financial Statements
NOTE 3 DEPOSITS AND INVESTMENTS (CONTINUED)
A. Deposits
Custodial Credit Risk Deposits: This is the risk that in the event of a bank failure, the City's deposits
may not be returned to it. The City has a policy that requires the District's deposits be collateralized as
required by Minnesota Statutes for an amount exceeding FDIC, SAIF, BIF, or FCUA coverage. As of
December 31, 2017, the City's bank balance was not exposed to custodial credit risk because it was fully
insured through the FDIC or NCUA and fully collateralized with securities held by the pledging
financial institutions trust department or agent and in the City's name. As of December 31, 2017, the
City's deposits had a carrying value as shown below.
Certificates of deposit$ 426,184
Checking 159,316
Savings 3,128,263
Total$ 3,713,763
B.Investments
As of December 31, 2017, the City had the following investments:
Weighted
FairAverageMoody's
ValueMaturity (Years)Rating
Brokered certificates of deposit$ 3,395,087 2.20N/A
Brokered money market 909N/AN/A
U.S. government securities 297,9307.01AA+
Total$ 3,693,926
Credit Risk: Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its
obligations. Minnesota Statutes 118A.04 and 118A.05 limit investments that are in the top two ratings
issued by nationally recognized statistical rating organizations. The City's investment policy limits the
allowable investments in accordance with these statutes. As of December 31, 2017, the City's
investments were rated as listed in the table above.
Interest Rate Risk: The City should try to minimize the risk that arises from over investing in specific
instruments, individual financial institutions, or maturities. The City's investment policy states the
investment portfolio will be structured so that securities mature to meet cash flow requirements and
avoiding the need to sell securities prior to maturity, investing in short-term securities, investing in long-
term securities if the market rate is favorable.
47
City of St. Joseph
Notes to Financial Statements
NOTE 4 INTERFUND BALANCES AND TRANSFERS
A. Interfund Balances
The composition of interfund balances as of December 31, 2017, is as follows:
Amounts Due to
Other Funds
Other
Governmental
Funds
Amounts Due from Other Funds
Other governmental Funds$ 13,700
The due from/due to other funds balances represent loans made to cover tax increment financing (TIF)
consulting costs to establish the TIF districts.
B.Transfers
The composition of interfund transfers as of December 31, 2017, is as follows:
Transfer InTransfer OutDescription Amount
General FundSanitary SewerTransfer retirement reserve funding$ 1,540
General FundRefuseTransfer retirement reserve funding 770
General FundWaterTransfer retirement reserve funding 770
Transfer of funds for project costs
General FundOther Governmental Funds 10,816
Transfer of residual funds for project costs
Government CenterOther Governmental Funds 6,176
Transfer of residual funds for project costs
Other Governmental FundsGeneral Fund 195,548
Transfer to reduce the 2018 certified levy
Other Governmental FundsGeneral Fund 55,000
Transfer sales tax revenue committed for bond payments
Other Governmental FundsState Collected Sales Tax 162,000
Transfer of residual funds for project costs
Other Governmental FundsGovernment Center 2,177
Transfer of residual funds for project costs
Other Governmental Funds2016 Field Street Improvements 199,566
Other Governmental FundsOther Governmental FundsTransfer of funds for bond payments 231,512
Transfer of excess project revenue for future projects
Other Governmental FundsOther Governmental Funds 136,714
Other Governmental FundsWaterAnnual transfer for bond payment 41,000
Other Governmental FundsSanitary SewerAnnual transfer for bond payment 36,000
Other Governmental FundsStorm WaterAnnual transfer for bond payment 19,250
Transfer costs funded with the main lift station project
WaterSanitary Sewer 7,000
Transfer of residual funds for project costs
WaterOther Governmental Funds 56,980
Annual transfer for bond payment
WaterOther Governmental Funds 200,000
Annual transfer for bond payment
Sanitary SewerOther Governmental Funds 95,000
$ 1,457,819
49
City of St. Joseph
Notes to Financial Statements
NOTE 5 CAPITAL ASSETS
Capital asset activity for the year ended December 31, 2017, was as follows:
BeginningEnding
BalanceIncreasesDecreasesBalance
Governmental activities
Capital assets not being depreciated
Land$ 874,133$ - $ -$ 874,133
Easements 175,873 - - 175,873
Construction in progress 4,633,084 300,072 4,468,150 465,006
Total capital assets
not being depreciated 5,683,090 300,072 4,468,150 1,515,012
Capital assets being depreciated
Buildings 4,746,527 4,796,919 2,684 9,540,762
Infrastructure
18,830,234 1,346,432 - 20,176,666
Intangible Assets - 200,000 - 200,000
Improvements 1,356,427 26,260 13,486 1,369,201
401,161 191,968
Machinery and equipment 3,468,207 3,677,400
Total capital assets
being depreciated 28,401,395 6,770,772 208,138 34,964,029
Less accumulated depreciation for
Buildings 1,304,919 262,117 2,585 1,564,451
Infrastructure
13,415,684 942,934 - 14,358,618
Intangible assets - 10,000 - 10,000
Improvements 53,648 13,241
558,312 598,719
Machinery and equipment 2,371,189 277,114 173,554 2,474,749
Total accumulated
17,650,104 1,545,813 189,380 19,006,537
depreciation
Total capital assets being
depreciated, net 10,751,291 5,224,959 18,758 15,957,492
Governmental activities capital
$ 16,434,381$ 5,525,031$ 4,486,908$ 17,472,504
assets, net
50
City of St. Joseph
Notes to Financial Statements
NOTE 5 CAPITAL ASSETS (CONTINUED)
BeginningEnding
BalanceIncreasesDecreasesBalance
Business-type activities
Capital assets not being depreciated
Land$ 377,882$ - $ -$ 377,882
Easements 67,915 - - 67,915
Construction in progress 714,700 575,222 584,826 705,096
Total capital assets
not being depreciated 1,160,497 575,222 584,826 1,150,893
Capital assets being depreciated
Buildings 8,797,686 - - 8,797,686
Plant and lines
23,679,159 595,959 - 24,275,118
Machinery and equipment - 9,322
787,554 778,232
499,534 -
Sewer rights 8,569,212 9,068,746
Total capital assets
being depreciated 41,833,611 1,095,493 9,322 42,919,782
Less accumulated depreciation for
Buildings 1,968,111 214,141 - 2,182,252
Plant and lines 6,456,285 500,359 - 6,956,644
Machinery and equipment 538,047 41,917 7,656 572,308
Sewer rights 1,723,908 253,820 - 1,977,728
Total accumulated
depreciation 10,686,351 1,010,237 7,656 11,688,932
Total capital assets being
depreciated, net 31,147,260 85,256 1,666 31,230,850
Business-type activities captial
$ 32,307,757$ 660,478$ 586,492$ 32,381,743
assets, net
Depreciation expense was charged to functions/programs of the City as follows:
Governmental activities
General government$ 159,438
Public safety 202,050
Public works 988,440
Culture and recreation 195,651
Economic development 234
Total depreciation expense - governmental activities$ 1,545,813
Business-type activities
Water$ 417,012
Sanitary sewer 481,406
Refuse 6,606
Storm sewer 105,213
Total depreciation expense - business-type activities$ 1,010,237
51
City of St. Joseph
Notes to Financial Statements
NOTE 6 LONG-TERM DEBT
A. General Obligation Bonds
The City issues General Obligation (G.O.) bonds to provide for financing improvement, development,
and street improvement projects.
G.O. bonds are direct obligations and pledge the full faith and credit of the City. These bonds generally
are issued as 5 to 20 year serial bonds with equal debt service payments each year.
Revenue bonds are issued by the City where the City pledges income derived from the acquired or
constructed assets to pay debt service including access and trunk charges and utility user fees.
B.Components of Long-Term Liabilities
IssueInterestOriginalFinalPrincipalDue Within
DateRateIssueMaturityOutstandingOne Year
Governmental Activities
G.O. Bonds, including Refunding Bonds
G.O. Capital Improvement Plan
Refunding Bonds 2009B09/03/091.10%-3.75%$ 495,000 12/01/18$ 60,000$ 60,000
G.O. Certificates of Indebtedness
of 2011A11/10/112.00%-2.40% 390,000 10/01/21 165,000 40,000
G.O. Capital Improvement Plan
Bonds of 2011A11/10/112.00%-2.40% 195,000 10/01/21 80,000 20,000
G.O. Certificates of Indebtedness of 2013A09/01/132.00% 265,000 12/01/18 60,000 60,000
G.O. Certificates of Indebtedness 2015A08/13/151.20%-2.00% 165,000 12/01/20 105,000 35,000
G.O. Certificates of Indebtedness 2016A07/07/162.00%-2.875% 4,275,000 12/15/36 4,100,000 180,000
G.O. Certificates of Indebtedness 2017A08/30/172.75% 337,000 12/15/25 337,000 43,000
Total G.O. Bonds 4,907,000 438,000
G.O. Special Assessment Bonds
G.O. Improvement Refunding Bonds of 2010B09/28/102.00%-3.25% 1,035,000 12/01/20 405,000 135,000
G.O. Improvement Bonds of 2010B09/28/102.00%-3.25% 790,000 12/01/25 455,000 50,000
G.O. Improvement Crossover
Refunding Bonds of 2011A11/10/112.00%-2.40% 1,040,000 10/01/21 540,000 130,000
G.O. Improvement Bonds of 2013A09/01/132.00%-3.00% 405,000 12/01/24 310,000 35,000
G.O. Improvement Bonds of 2014A06/15/142.00%-3.40% 2,010,000 12/01/30 1,790,000 115,000
G.O. Improvement Bonds of 2015A08/13/151.20%-3.00% 595,000 12/01/25 485,000 60,000
G.O. Improvement Bonds of 2016B11/03/161.00%-3.00% 740,000 12/15/32 740,000 50,000
G.O. Improvement Bonds of 2017B08/30/172.25%-3.00% 344,000 12/15/27 344,000 35,000
Total G.O. Special
Assessment Bonds 5,069,000 610,000
G.O. Abatement Bonds
G.O. Tax Abatement Bonds of 2015B08/13/152.00%-3.05% 1,840,000 12/01/30 1,635,000 110,000
Unamortized premiums/discounts 104,929 -
452,500
Compensated absences 81,027
Total long-term liabilities,
governmental activities$ 12,168,429$ 1,239,027
52
City of St. Joseph
Notes to Financial Statements
NOTE 6 LONG-TERM DEBT (CONTINUED)
B.Components of Long-Term Liabilities (Continued)
Long-term bonded indebtedness listed on the previous page and above were issued to finance acquisition
and construction of capital assets or to refinance (refund) previous bond issues.
53
City of St. Joseph
Notes to Financial Statements
NOTE 6 LONG-TERM DEBT (CONTINUED)
C. Changes in Long-Term Liabilities
Long-term liability activity for the year ended December 31, 2017, was as follows:
BeginningEnding
BalanceAdditionsReductionsBalance
Governmental activities
Bonds payable
General obligation$ 5,025,000 $ 337,000$ 455,000 $ 4,907,000
G.O. special assessment bonds 5,585,000 344,000 860,000 5,069,000
G.O. abatement bonds 1,745,000 - 110,000 1,635,000
Total bonds payable
12,355,000 681,000 1,425,000 11,611,000
Unamortized premiums/discounts 121,847 - 16,918 104,929
Compensated absences 402,186 191,461 141,147 452,500
Total governmental
activities
12,879,033 872,461 1,583,065 12,168,429
Business-type activities
Bonds payable
G.O. utility revenue bonds 7,230,000 353,000 670,000 6,913,000
Notes payable
City of St. Cloud notes 4,590,939 508,877 378,943 4,720,873
Unamortized premiums
59,136 - 10,877 48,259
Compensated absences 130,782 46,273 33,816 143,239
Total business-type
activities 12,010,857 908,150 1,093,636 11,825,371
Total long-term liabilities$ 24,889,890$ 1,780,611$ 2,676,701$ 23,993,800
For governmental activities, the General Fund typically liquidates the liability related to compensated
absences. For Business-Type Activities, the Water, Sanitary Sewer, Refuse, Storm Water, and Street
Light Utility Funds typically liquidates the liability related to the compensated absences.
54
City of St. Joseph
Notes to Financial Statements
NOTE 6 LONG-TERM DEBT (CONTINUED)
D. Minimum Debt Payments
Minimum annual principal and interest payments required to retire long-term liabilities:
Governmental Activities
G.O. Government ActivitiesG.O. Special Assessment Bonds
Year Ended
December 31,PrincipalInterestPrincipalInterest
2018$ 438,000$ 115,693$ 610,000$ 127,182
2019 317,000 103,033 625,000 112,880
2020 322,000 96,553 635,000 100,483
2021 297,000 89,678 510,000 86,950
2022 237,000 83,163 374,000 75,740
2023-2027 1,151,000 340,142 1,595,000 231,678
2028-2032 1,130,000 222,902 720,000 51,675
2033-2036 1,015,000 72,583 - -
Total$ 4,907,000$ 1,123,747 $ 5,069,000$ 786,588
Governmental Activities
Abatement Bonds
Year Ended
December 31,PrincipalInterestTotal
2018$ 110,000$ 42,135$ 1,443,010
2019 115,000 39,935 1,312,848
2020 115,000 37,635 1,306,671
2021 120,000 35,335 1,138,963
2022 120,000 32,935 922,838
2023-2027 650,000 118,950 4,086,770
2028-2030 405,000 24,638 2,554,215
Total$ 1,635,000$ 331,563 $ 12,765,315
55
City of St. Joseph
Notes to Financial Statements
NOTE 6 LONG-TERM DEBT (CONTINUED)
D. Minimum Debt Payments (Continued)
Business-Type Activities
Utility Revenue BondsNotes Payable
Year Ended
December 31,PrincipalInterestPrincipalInterestTotal
2018$ 756,000$ 174,139$ 455,101$ 101,826$ 1,487,066
2019 771,000 155,785 510,541 98,128 1,535,454
86,857
2020 771,000 139,235 420,903 1,417,995
79,301
2021 775,000 122,635 406,256 1,383,192
72,059
2022 725,000 105,340 416,950 1,319,349
2023-2027 2,640,000 273,823 2,132,394 249,667 5,295,884
2028-2032 475,000 30,477 1,373,909 74,387 1,953,773
2033-2037 - - 483,372 15,994 499,366
Total$ 6,913,000 $ 1,001,434$ 6,199,426 $ 778,219 $ 14,892,079
*
* - Balance does not agree to amounts listed in Note 6.C. due to payment schedule including estimated
PFA draw that is scheduled to occur in July 2018.
E.Conduit Debt
Conduit debt obligations are certain limited obligation revenue bonds or similar debt instruments issued
for the express purpose of providing capital financing for a specific third party. The City has issued
various revenue bonds to provide funding to private sector entities for projects deemed to be in the
public interest. Although these bonds bear the name of the City, the City has no obligation for such debt.
Accordingly, the bonds are not reported as liabilities in the financial statements of the City.
56
City of St. Joseph
Notes to Financial Statements
NOTE 7 FUND BALANCE
Fund equity balances are classified as follows to reflect the limitations and restrictions of the respective
funds.
StateNonmajor
CollectedGovernmental
GeneralSales TaxFundTotal
Nonspendable
Prepaid items$ 25,712 $ -$ -$ 25,712
Restricted
Peg access fees 34,370 - - 34,370
Debt service - - 1,160,431 1,160,431
Tax increments - - 25,550 25,550
State collected sales tax projects - 1,046,189 - 1,046,189
Park dedication fees - - 121,382 121,382
Chartitable gambling - - 2,090 2,090
Lodging tax - - 20,755 20,755
DEED CDAP - - 11,145 11,145
Revolving loan - - 205,655 205,655
Total restricted 34,370 1,046,189 1,547,008 2,627,567
Committed
Economic development - - 39,774 39,774
Assigned
Elections 14,988 - - 14,988
Street seal coating /crack filling 131,506 - - 131,506
Schneider Field 3,817 - - 3,817
Loader tires 4,389 - - 4,389
Fire operations 20,000 - - 20,000
Fire debt service 129,452 - - 129,452
Fire capital 408,433 - - 408,433
Police forfeiture 7,835 - - 7,835
Severance pay 115,843 - - 115,843
Comp plan update 4,915 - - 4,915
GASB updates 5,200 - - 5,200
Capital outlay reserves - - 647,654 647,654
Debt service relief - - 392,353 392,353
Total assigned 846,378 - 1,040,007 1,886,385
Unassigned 1,449,363 - (10,526) 1,438,837
Total$ 2,355,823$ 1,046,189 $ 2,616,263$ 6,018,275
57
City of St. Joseph
Notes to Financial Statements
NOTE 8 RISK MANAGEMENT
The City purchases commercial insurance coverage through the League of Minnesota Cities Insurance
Trust (LMCIT) with other cities in the state, which is a public entity risk pool currently operating as a
common risk management and insurance program. The City pays an annual premium to the LMCIT for
its insurance coverage. The LMCIT is self-sustaining through commercial companies for excess claims.
The City is covered through the pool for any claims incurred but unreported, however, retains risk for the
deductible portion of its insurance policies. The amount of these deductibles is considered immaterial to
the financial statements.
There were no significant reductions in insurance from the previous year or settlements in excess of
insurance coverage for any of the past three years.
The City's workers' compensation insurance policy is retrospectively rated. With this type of policy, final
premiums are determined after loss experience is known. The amount of premium adjustment for 2017 is
estimated to be immaterial based on workers' compensation rates and salaries for the year.
At December 31, 2017, there were no other claims liabilities reported in the fund based on the
requirements of GASB Statement No. 10, which requires a liability for claims be reported if information
prior to the issuance of the financial statements indicates it is probable a liability has been incurred at the
date of the financial statements and the amount of the loss can be reasonably estimated.
NOTE 9 PENSION PLANS
Public Employees' Retirement Association
The City participates in various pension plans. Total pension expense for the year ended December 31,
2017, was $288,836. The components of pension expense are noted in the following plan summaries.
Public Employees' Retirement Association
A. Plan Description
The City participates in the following cost-sharing multiple-employer defined benefit pension plans
administered by 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 (accounted for in the General Employees
Fund))
All full-time and certain part-time employees of the City are covered by the General Employees Plan.
General Employees Plan members belong to the Coordinated Plan. Coordinated Plan members are
covered by Social Security.
58
City of St. Joseph
Notes to Financial Statements
NOTE 9 PENSION PLANS (CONTINUED)
Public Employees' Retirement Association (Continued)
A. Plan Description (Continued)
Public Employees Police and Fire Plan (Police and Fire Plan (accounted for in the Police and Fire Fund))
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.
B.Benefits Provided
PERA provides retirement, disability, and death benefits. Benefit provisions are established by state
statute and can only be modified by the state legislature.
Benefit increases are provided to benefit recipients each January. Increases are related to the funding
ratio of the plan. Members in plans that are at least 90% funded for two consecutive years are given
2.5% increases. Members in plans that have not exceeded 90% funded, or have fallen below 80%, are
given 1% increases.
The benefit provisions stated in the following paragraphs of this section are current provisions and apply
to active plan participants. 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. The retiring member receives the higher of a
step-rate benefit accrual formula (Method 1) or a level accrual formula (Method 2). Under Method 1, the
annuity accrual rate for a Coordinated Plan member is 1.2% of average salary for each of the first ten
years and 1.7% for each remaining year. Under Method 2, the annuity accrual rate is 1.7% for
Coordinated Plan members for each year 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.
59
City of St. Joseph
Notes to Financial Statements
NOTE 9 PENSION PLANS (CONTINUED)
Public Employees' Retirement Association (Continued)
B.Benefits Provided (Continued)
Police and Fire Plan Benefits
Benefits for the Police and Fire Plan members first hired after June 30, 2010, but before July 1, 2014,
vest on a prorated basis from 50% after five years up to 100% 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% after
ten years up to 100% after twenty years of credited service. The annuity accrual rate is 3% of average
salary for each year of service. For Police and Fire Plan who were first hired prior to July 1, 1989, a full
annuity is available when age plus years of service equal at least 90.
C. 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 Fund Contributions
Coordinated Plan members were required to contribute 6.5% of their annual covered salary in calendar
year 2017. The City was required to contribute 7.50% for Coordinated Plan members in calendar year
2017. The City's contributions to the General Employees Fund for the year ended December 31, 2017,
were $69,820. The City's contributions were equal to the required contributions as set by state statute.
Police and Fire Fund Contributions
Plan members were required to contribute 10.8% of their annual covered salary in calendar year 2017.
The City was required to contribute 16.2% of pay for members in calendar year 2017. The City's
contributions to the Police and Fire Fund for the year ended December 31, 2017, were $93,325. The
City's contributions were equal to the required contributions as set by state statute.
60
City of St. Joseph
Notes to Financial Statements
NOTE 9 PENSION PLANS (CONTINUED)
Public Employees' Retirement Association (Continued)
D. Pension Costs
General Employees Fund Pension Costs
At December 31, 2017, the City reported a liability of $906,519 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 $6 million to the fund in 2017. The State of Minnesota is considered
a non-employer 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 $11,418. The net pension liability was measured as of June 30, 2017, 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, 2016, through June
30, 2017, relative to the total employer contributions received from all of PERA's participating
employers. At June 30, 2017, the City's proportion share was 0.0142%, which was an increase of
0.0007% from its proportion measured as of June 30, 2016.
For the year ended December 31, 2017, the City recognized pension expense of $131,874 for its
proportionate share of General Employees Plan's pension expense. In addition, the City recognized an
additional $330 as pension expense (and grant revenue) for its proportionate share of the State of
Minnesota's contribution of $6 million to the General Employees Fund.
At December 31, 2017, the City reported its proportionate share of the General Employees Plan's
deferred outflows of resources and deferred inflows of resources related to pensions from the following
sources:
Deferred Deferred
Outflows of Inflows of
ResourcesResources
Differences between expected and actual economic experience$ 29,877$ 55,705
Changes in actuarial assumptions 143,082 90,879
Difference between projected and actual investment earnings - 1,286
Changes in proportion 42,627 17,169
Contributions paid to PERA subsequent
to the measurement date 34,910 -
Total$ 250,496$ 165,039
61
City of St. Joseph
Notes to Financial Statements
NOTE 9 PENSION PLANS (CONTINUED)
Public Employees' Retirement Association (Continued)
D. Pension Costs (Continued)
$34,910 reported as deferred outflows of resources related to pensions resulting from City contributions
subsequent to the measurement date will be recognized as a reduction of the net pension liability in the
year ended December 31, 2018. Other amounts reported as deferred outflows and deferred inflows of
resources related to pensions will be recognized in pension expense as follows:
Year Ended Pension Expense
December 31,Amount
2018$ 36,312
2019 57,726
2020 (5,011)
2021 (38,480)
$ 50,547
Total
Police and Fire Fund Pension Costs
At December 31, 2017, the City reported a liability of $729,064 for its proportionate share of the Police
and Fire Fund's net pension liability. The net pension liability was measured as of June 30, 2017, 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, 2016,
through June 30, 2017, relative to the total employer contributions received from all of PERA's
participating employers. At June 30, 2017, the City's proportion was 0.054%, which was the same from
its proportion measured as of June 30, 2016. The City also recognized $4,860 for the year ended
December 31, 2017, as revenue and an offsetting reduction of the net pension liability for its
proportionate share of the State of Minnesota's on-behalf contributions to the Police and Fire Fund.
Legislation passed in 2013 required the State of Minnesota to begin contributing $9 million to the Police
and Fire Fund each year, starting in fiscal year 2014.
For the year ended December 31, 2017, the City recognized pension expense of $177,118 for its
proportionate share of the Police and Fire Fund pension expense.
At December 31, 2017, the City reported its proportionate share of the Police and Fire Plan's deferred
outflows of resources and deferred inflows of resources related to pensions from the sources below and
on the following page.
62
City of St. Joseph
Notes to Financial Statements
NOTE 9 PENSION PLANS (CONTINUED)
Public Employees' Retirement Association (Continued)
D. Pension Costs (Continued)
Police and Fire Fund Pension Costs (Continued)
Deferred Deferred
Outflows of Inflows of
ResourcesResources
Differences between expected and actual economic experience$ 16,782$ 198,225
Changes in actuarial assumptions 954,128 1,035,090
Difference between projected and actual investment earnings 12,983 -
Changes in proportion - 22,724
Contributions paid to PERA subsequent
to the measurement date 46,662 -
Total$ 1,030,555$ 1,256,039
$46,662 reported as deferred outflows of resources related to pensions resulting from City contributions
subsequent to the measurement date will be recognized as a reduction of the net pension liability in the
year ended December 31, 2018. Other amounts reported as deferred outflows and inflows of resources
related to pensions will be recognized in pension expense as follows:
Year Ended Pension Expense
December 31,Amount
2018$ 7,390
2019 7,392
2020 (20,820)
2021 (62,447)
2022 (203,661)
Total$ (272,146)
63
City of St. Joseph
Notes to Financial Statements
NOTE 9 PENSION PLANS (CONTINUED)
Public Employees' Retirement Association (Continued)
E. Actuarial Assumptions
The total pension liability in the June 30, 2017, actuarial valuation was determined using the entry age
normal actuarial cost method and the following actuarial assumptions:
Inflation2.50%Per year
Active member payroll growth3.25Per year
Investment rate of return7.50
Salary increases were based on a service-related table. Mortality rates for active members, retirees,
survivors, and disabilitants were based on RP-2014 tables for all plans for males or females, as
appropriate, with slight adjustments to fit PERA's experience. Cost of living benefit increases for retirees
are assumed to be 1% per year for the General Employees plan through 2044 and the Police and Fire
Plan through 2064 and then 2.5% thereafter for both plans.
Actuarial assumptions used in the June 30, 2017, valuation were based on the results of actuarial
experience studies. The most recent four-year experience study in the General Employees Plan was
completed in 2015. The most recent five-year experience study for Police and Fire Plan was completed
in 2016.
The following changes in actuarial assumptions occurred in 2017:
General Employees Fund
The Combined Service Annuity (CSA) loads were changed from 0.8% for active members and
60% for vested and non-vested deferred members. The revised CSA loads are now 0.0% for
active member liability, 15% for vested deferred member liability, and 3% for non-vested
deferred member liability.
The assumed post-retirement benefit increase rate was changed from 1% per year for all years to
1% per year through 2044 and 2.5% per year thereafter.
Police and Fire Fund
Assumed salary increases were changed as recommended in the June 30, 2016 experience study.
The net effect is proposed rates that average 0.34% lower than the previous rates.
Assumed rates of retirement were changed, resulting in fewer retirements.
The CSA load was 30% for vested and non-vested deferred members. The CSA has been
changed to 33% for vested members and 2% for non-vested 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.
64
City of St. Joseph
Notes to Financial Statements
NOTE 9 PENSION PLANS (CONTINUED)
Public Employees' Retirement Association (Continued)
E. Actuarial Assumptions (Continued)
Police and Fire Fund (Continued)
Assumed termination rates were decreased to 3.0% 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% to 60%.
Assumed age difference was changed from separate assumptions for male members (wives
assumed to be 3 years younger) and female members (husbands assumed to be 4 years older) to
the assumption that males are 2 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% for all years to 1% per
year through 2064 and 2.5% thereafter.
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:
Long-Term Expected
Asset ClassTarget AllocationReal Rate of Return
Domestic stocks39%5.10%
International stock195.30
Bonds200.75
Alternative assets205.90
Cash20.00
Total100%
65
City of St. Joseph
Notes to Financial Statements
NOTE 9 PENSION PLANS (CONTINUED)
Public Employees' Retirement Association (Continued)
F. Discount Rate
The discount rate used to measure the total pension liability in 2017 was 7.5%. 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 those assumptions, the fiduciary net position 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.
G. Pension Liability Sensitivity
The following table 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 1 percentage point lower or 1 percentage point higher than the current discount rate:
1% Decrease in1% Increase in
Discount Rate
Discount Rate Discount Rate
(6.5%)
(7.5%)(8.5%)
City's proportionate share of
the General Employees Fund
net pension liability$ 1,406,078$ 906,519$ 497,539
1% Decrease in 1% Increase in
Discount Rate Discount Rate Discount Rate
(6.5%)(7.5%)(8.5%)
City's proportionate share of
the Police and Fire Fund
net pension liability$ 1,373,041$ 729,064$ 197,426
H. 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.
Public Employees Defined Contribution Plan (Defined Contribution Plan) (Continued)
Five of the City's council members are covered by the Defined Contribution Plan, a multiple-employer
deferred compensation plan administered by PERA. The Defined Contribution Plan is a tax qualified
plan under Section 401(a) of the Internal Revenue Code and all contributions by or on behalf of
employees are tax deferred until time of withdrawal.
66
City of St. Joseph
Notes to Financial Statements
NOTE 9 PENSION PLANS (CONTINUED)
Public Employees Defined Contribution Plan (Defined Contribution Plan) (Continued)
The defined contribution plan consists of individual accounts paying a lump sum benefit, plan benefits
depend solely on amounts contributed to the plan plus investment earnings, less administrative expenses,
therefore, there is no future liability to the employer. Minnesota Statutes, Chapter 353D.03, specifies
plan provisions, including the employee and employer contribution rates for those qualified personnel
who elect to participate. An eligible elected official who decides to participate contributes 5% of salary
which is matched by the elected official's employer. For ambulance service personnel, employer
contributions are determined by the employer, and for salaried employees must be a fixed percentage of
salary. Employer contributions for volunteer personnel may be a unit value for each call or period of
alert duty. Employees who are paid for their services may elect to make member contributions in an
amount not to exceed the employer share. Employer and employee contributions are combined and used
to purchase shares in one or more of the seven accounts of the Minnesota Supplemental Investment
Fund. For administering the plan, PERA receives 2% of employer contributions and twenty-five
hundredths of 1% (.0025) of the assets in each member's account annually.
Pension expense for the year is equal to contributions made. Total contributions made by the City during
fiscal year 2017 were:
Contribution AmountPercentage of Covered Payroll
EmployeeEmployerEmployeeEmployerRequired Rate
$ 1,460$ 1,460 5%5%5%
Defined Benefit Pension Plan Volunteer Fire Fighter's Relief Association
A. Plan Description
The City of St. Joseph Volunteer Fire Department Relief Association is the administrator of a single
employer defined benefit pension plan established to provide benefits for members of the Relief
Association per Minnesota State Statutes.
The Association issues a publicly available financial report that includes financial statements and
required supplementary information. That report may be obtained by writing to the St. Joseph Volunteer
Fire Department Relief Association, 75 Callaway St E, St. Joseph, MN 56374.
B.Benefits Provided
Volunteer firefighters of the City are member of Joseph Volunteer Fire Department Relief Association.
Full retirement benefits are payable to members who have reached age 50 and have completed twenty
years of service for lump sum service pension. Partial benefits are payable to members who have reached
50 years and have completed ten years of service. Disability benefits and widow and children's survivor
benefits are also payable to members or their beneficiaries based upon requirements set forth in the
bylaws. These benefit provisions and all other requirements are consistent with enabling state statutes.
67
City of St. Joseph
Notes to Financial Statements
NOTE 9 PENSION PLANS (CONTINUED)
Defined Benefit Pension Plan Volunteer Fire Fighter's Relief Association
C. Employees Covered by Benefit Terms
At December 31, 2017, the following employees were covered by the benefit terms:
Inactive employees entitled to but not yet receiving benefits3
Active employees29
Total32
D. Contributions.
Minnesota Statutes Chapter 424A.092 specifies minimum support rates required on an annual basis. The
minimum support rates from the municipality and from State aids are determined as the amount required
to meet the normal cost plus amortizing any existing prior service costs over a ten year period. The City's
obligation is the financial requirement for the year less state aids. Any additional payments by the City
shall be used to amortize the unfunded liability of the relief association. The Association is comprised of
volunteers: therefore, there are no payroll expenditures (i.e. there are no covered payroll percentage
calculations). During the year, the City recognized as revenue and as an expenditure an on behalf
payment of $53,310 made by the State of Minnesota for the Relief Association.
E.Net Pension Liability
The City's net pension liability was measured as of December 31, 2017, and the total pension liability
used to calculate the net pension liability was determined by an actuarial valuation as of that date.
Actuarial assumptions
The total pension liability in the December 31, 2017, actuarial valuation was determined using the
following actuarial assumptions, applied to all periods included in the measurement:
Inflation2.75%
Salary increase0%, average, including inflation
Investment rate of return5.50%, net of pensions plan investment
expense including inflation
The value of death benefits is similar to the value of the retirement pension. Because of low retirement
ages, the plan assumes no pre-retirement mortality. Post-retirement mortality does not apply as the
benefit structure and form of payment do not reflect lifetime benefits.
The long-term return on assets has been set based on the plan's target investment allocation along with
long-term return expectations by asset class. When there is sufficient historical evidence of market
outperformance, historical average returns may be considered. Best estimates of arithmetic real rates of
return for each major asset class included in the pension plan's target asset allocation as of the
measurement date are summarized in the table on the following page.
68
City of St. Joseph
Notes to Financial Statements
NOTE 9 PENSION PLANS (CONTINUED)
Defined Benefit Pension Plan Volunteer Fire Fighter's Relief Association (Continued)
E.Net Pension Liability (Continued)
Long-Term Expected
Asset ClassTarget AllocationReal Rate of Return
Cash14.17%0.79%
Fixed income37.041.98
Real estate and alternatives0.904.25
Equities47.8910.59
Total100%
Discount rate
The discount rate used to measure the total pension liability was 5.5%. Assets were projected using
expected benefit payments and expected asset returns. Expected benefit payments by year were
discounted using the expected asset return assumption for years in which the assets were sufficient to
pay all benefit payments. Any remaining benefit payments after the trust fund is exhausted are
discounted at the municipal bond rate. The equivalent single rate is the discount rate.
F. Changes in the Net Pension Liability
Increase (Decrease)
Total Plan FiduciaryNet
PensionNet Pension
Liability PositionLiability
(a) (b)(a) - (b)
Balances at January 1, 2017$ 610,621$ 775,967$ (165,346)
Changes for the year
Service cost 25,641 - 25,641
Interest cost 33,188 - 33,188
Differences between expected and
actual experience - - -
Change in assumptions, changes
in benefit terms 4,299 - 4,299
Contributions - state and local - 58,310 (58,310)
Net investment income - 77,946 (77,946)
Benefit payments, including refunding of
employee contributions (118,151) (118,151) -
Administrative expense - (8,546) 8,546
Net charges (55,023) 9,559 (64,582)
Balances at December 31, 2017$ 555,598$ 785,526$ (229,928)
69
City of St. Joseph
Notes to Financial Statements
NOTE 9 PENSION PLANS (CONTINUED)
Defined Benefit Pension Plan Volunteer Fire Fighter's Relief Association (Continued)
F. Changes in the Net Pension Liability (Continued)
Sensitivity of the net pension liability to changes in the discount rate. The following presents the net
pension liability of the City, calculated using the discount rate of 5.5%, as well as what the City's net
pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower
(4.5%) or 1-percentage-point higher (6.5%) than the current rate:
1%Current1%
DecreaseDiscountIncrease
(4.5%)Rate (5.5%)(6.5%)
City's net pension liability$ (212,394)$ (229,928)$ (246,892)
Pension plan fiduciary net position. Detailed information about the pension plan's fiduciary net position
is available in the separately issued relief association financial report.
G. Pension Expense and Deferred Outflows of Resources, and Deferred Inflows of Resources
Related to Pensions
For the year ended December 31, 2017, the City recognized pension expense of $21,650. At
December 31, 2017, the City reported deferred outflows of resources and deferred inflows of resources
related to pensions from the following sources:
Deferred Deferred
Outflows ofInflows of
ResourcesResources
Differences between expected and actual experience$ - $ 24,345
Changes of assumptions 90,311 -
Net difference between projected and actual earnings on
pension plan investments - 5,652
Total$ 90,311$ 29,997
70
City of St. Joseph
Notes to Financial Statements
NOTE 9 PENSION PLANS (CONTINUED)
Defined Benefit Pension Plan Volunteer Fire Fighter's Relief Association (Continued)
G. Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources
Related to Pensions (Continued)
Amounts reported as deferred outflows of resources and deferred inflows of resources related to
pensions will be recognized in pension expense as follows:
Year Ending
June 30,
2018$ 14,048
2019 14,048
2020 (3,617)
2021 1,197
2022 7,832
Therafter 26,806
Total$ 60,314
NOTE 10 COMMITMENTS
The City has entered into contracts for construction as follows:
Expended
Contractthrough
ProjectAmount12/31/17Commitment
CBD Alley Improvements$ 255,935$ 213,196$ 42,739
WTP 1 Refurbish 193,700 - 193,700
Total$ 236,439
71
City of St. Joseph
Notes to Financial Statements
NOTE 11 TAX INCREMENT FINANCING
The City has entered into five Tax Increment Financing agreements which meet the criteria for
disclosure under Governmental Accounting Standards Board Statement No. 77 Tax Abatement
Disclosures. The City's authority to enter into these agreements comes from Minnesota Statute 469. The
City entered into these agreements for the purpose of economic development.
Under each agreement, the City and developer agree on an amount of development costs to be
reimbursed to the developer by the City though tax revenues from the additional taxable value of the
property generated by the development (tax increment). A "pay-as-you-go" note is established for this
amount, on which the City makes payments for a fixed period of time with available tax increment
revenue after deducting for certain administrative costs.
During the year ended December 31, 2017, the City generated $85,216 in tax increment revenue and
made $76,902 in payments to developers.
NOTE 12 NEW STANDARDS ISSUED BUT NOT YET IMPLEMENTED
GASB Statement No. 83, Certain Asset Retirement Obligations establishes criteria for determining the
timing and pattern of recognition of a liability and a corresponding deferred outflow of resources for
Asset Retirement Obligations (AROs). This statement requires that recognition occur when the liability
is both incurred and reasonably estimable. The determination of when the liability is incurred should be
based on the occurrence of external laws, regulations, contracts, or court judgments, together with the
occurrence of an internal event that obligates a government to perform asset retirement activities. Laws
and regulations may require governments to take specific actions to retire certain tangible capital assets
at the end of the useful lives of those capital assets, such as decommissioning nuclear reactors and
dismantling and removing sewage treatment plants. Other obligations to retire tangible capital assets
may arise from contracts or court judgments. Internal obligating events include the occurrence of
contamination, placing into operation a tangible capital asset that is required to be retired, abandoning a
tangible capital asset before it is placed into operation, or acquiring a tangible capital asset that has an
existing ARO. This statement will be effective for the year ending December 31, 2019.
GASB Statement No. 84, Fiduciary Activities establishes criteria for identifying fiduciary activities of all
state and local governments. The focus of the criteria generally is on (1) whether a government is
controlling the assets of the fiduciary activity and (2) the beneficiaries with whom a fiduciary
relationship exists. Separate criteria are included to identify fiduciary component units and
postemployment benefit arrangements that are fiduciary activities. This statement will be effective for
the year ending December 31, 2019.
GASB Statement No. 85, Omnibus 2017 addresses practice issues that have been identified during
implementation and application of certain GASB statements, including issues related to blending
component units, goodwill, fair value measurement and application, and post-employment benefits. This
statement will be effective for the year ending December 31, 2018.
72
City of St. Joseph
Notes to Financial Statements
NOTE 12 NEW STANDARDS ISSUED BUT NOT YET IMPLEMENTED (CONTINUED)
GASB Statement No. 86, Certain Debt Extinguishment Issues improves consistency in accounting and
financial reporting for in-substance defeasance of debt by providing guidance for transactions in which
cash and other monetary assets acquired with only existing resources are placed in an irrevocable trust
for the sole purpose of extinguishing debt. This statement also improves accounting and financial
reporting for prepaid insurance on debt that is extinguished and notes to the financial statements for debt
that is defeased in substance. This statement will be effective for the year ending December 31, 2018.
GASB Statement No. 87, Leases establishes a single model for lease accounting based on the
foundational principle that leases are financings of the right to use an underlying asset. 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
be effective for the year ending December 31, 2020.
NOTE 13 SUBSEQUENT EVENT
On February 28, 2018, the City issued equipment certificates of indebtedness for $265,000 to finance the
purchase of various equipment for the City.
The City Council notified St. Joseph Township the City of St. Joseph will be exercising their rights to
annex a portion of the Township included in the Orderly Annexation Agreement. After negotiations
with between the City of St. Joseph and the St. Joseph Township, the entities agreed upon the area to be
annexed and the terms of annexation at their April 2018 meetings. The annexation will be completed by
July 1, 2018.
Bad Habit Brewing Company agreed to terms for the purchase of the previous city hall facility. City
Council approved the sell at their April 16, 2018 council meeting with final terms to be negotiated
between the Administrator and buyer. On April 19, 2018, Bad Habit Brewing Company submitted a
purchase agreement in the amount of $400,000 along with an earnest deposit of $10,000. The closing
will be completed by 7/16/18.
NOTE 14 CONTINGENCIES AND LITIGATION
The City is currently involved in various pending litigation cases. After evaluation by the City's attorney,
it is unknown if the resolution of these cases will have a material impact on the financial statements.
73
(THIS PAGE LEFT BLANK INTENTIONALLY
74
REQUIRED SUPPLEMENTARY INFORMATION
75
City of St. Joseph
Schedule of City's Proportionate Share
of Net Pension Liability
General Employees Retirement Fund
Last Ten Years
City's Proportionate
State's Share of the Net City's
City's City's Proportionate Pension Liability Proportionate
Proportionate Proportionate Share (Amount) and the State's Share of the Net Plan Fiduciary Net
Share Share (Amount) of the Net Pension Proportionate Share Pension Liability Position as a
(Percentage) of of the Net Liability of the Net Pension (Asset) as a Percentage of the
City's Covered
For Fiscal Year the Net Pension Pension Liability Associated with Liability Associated Percentage of its Total Pension
Payroll
Ended June 30,Liability (Asset)(Asset) the Citywith the CityCovered Payroll Liability
20150.0138%$ 715,188 $ -$ 715,188$ 799,773 89.42%78.19%
20160.0135% 1,096,133 14,341 1,110,474 839,240 130.61%68.91%
20170.0142% 906,519 11,418 917,937 916,373 98.92%75.90%
Note: Schedule is intended to show ten year trend. Additional years will be reported as they become available.
Schedule of City's Proportionate Share
of Net Pension Liability
Public Employees Police and Fire Retirement Fund
Last Ten Years
City's Proportionate
City's Share of the Net Plan Fiduciary
City's Proportion Proportionate Pension Liability Net Position as a
of the Net Share of the Net (Asset) as a Percentage of the
For Fiscal Year Pension Liability Pension Liability City's Covered Percentage of its Total Pension
Ended June 30,(Asset)(Asset) PayrollCovered Payroll Liability
20150.0570%$ 647,653 $ 505,160128.21%86.61%
20160.0540% 2,167,114 518,580417.89%63.88%
20170.0540% 729,064 554,975131.37%85.43%
Note: Schedule is intended to show ten year trend. Additional years will be reported as they become available.
76
City of St. Joseph
Schedule of City Contributions -
General Employees Retirement Fund
Last Ten Years
Contributions in
Relation to the
Fiscal Year Statutorily Statutorily Contribution Contributions as a
Ending Required Required Deficiency City's Covered Percentage of
December 31,ContributionContributions(Excess)PayrollCovered Payroll
2015$ 57,804$ 57,804$ -$ 770,7207.5%
2016 66,294 66,294 - 883,9207.5%
2017 69,820 69,820 - 930,9337.5%
Note: Schedule is intended to show ten year trend. Additional years will be reported as they become available.
Schedule of City Contributions -
Public Employees Police and Fire Retirement Fund
Last Ten Years
Contributions in
Relation to the
Fiscal Year Statutorily Statutorily Contribution Contributions as a
Ending Required Required Deficiency City's Covered Percentage of
December 31,ContributionContributions(Excess)PayrollCovered Payroll
2015$ 85,925$ 85,925$ -$ 530,40116.2%
2016 89,587 89,587 - 553,006 16.2%
2017 93,325 93,325 - 576,080 16.2%
Note: Schedule is intended to show ten year trend. Additional years will be reported as they become available.
77
City of St. Joseph
Schedule of Changes in Net Pension Liability
and Related Ratios - Fire Relief Association
Measurement Date
201520162017
Total Pension Liability (TPL)
Service cost$ 20,898 $ 25,691 $ 25,641
Interest 29,709 35,786 33,188
Differenced between expected and actual experience - (29,935) -
Changes of assumptions 55,033 56,691 4,299
Changes of benefit terms 31,883 - -
Benefit payments, including refunds, or member contributions (41,168) (49,000) (118,151)
Net change in total pension liability 96,355 39,233 (55,023)
Beginning of year 475,033 571,388 610,621
End of Year$ 571,388 $ 610,621 $ 555,598
Plan Fiduciary Net Pension (FNP)
Contributions - employer$ 52,164 $ 63,111 $ 58,310
Net investment income (41,979) 68,585 77,946
Benefit payments, including refunds of member contributions (41,168) (49,000) (118,151)
Administrative expense (8,121) (7,724) (8,546)
Net change in plan fiduciary net position (39,104) 74,972 9,559
Beginning of year 740,099 700,995 775,967
End of year$ 700,995 $ 775,967 $ 785,526
Net Pension Liability (NPL)$ (129,607)$ (165,346)$ (229,928)
Plan fiduciary net position as a percentage of the total
pension liability122.7%127.1%141.4%
Covered employee payrolln/an/an/a
Net pension liability as a percentage of covered payrolln/an/an/a
The City implemented the Provisions of Governmental Accounting Standards Board Statement No. 68 for the year ended
December 31, 2015. The schedules within the Required Supplementary Information section required a ten year presentation,
but does not require retroactive reporting. Information prior to 2015 is not available. Additional years will be reported as they
become available.
78
City of St. Joseph
Schedule of Employer Contributions
and Non-Employer Contributing
Entities - Fire Relief Association
201520162017
Employer
Statutorily determined contribution (SDC)$ -$ -$ -
Contribution in relation to the SDC 3,000 3,000 3,000
Contribution deficiency (excess)$ (3,000)$ (3,000)$ (3,000)
Non-employer
2% aid$ 52,164$ 60,111$ 55,310
Covered employee payrolln/an/an/a
Contributions as a percentage of covered employee payrolln/an/an/a
The Association implemented the Provisions of Governmental Accounting Standards Board Statement No. 68 for the year ended
December 31, 2015. The schedules within the Required Supplementary Information section required a ten year presentation, but does not
require retroactive reporting. Information prior to 2015 is not available. Additional years will be reported as they become available.
79
City of St. Joseph
Notes to Required Supplementary Information
GENERAL EMPLOYEES FUND
2017 Changes
Changes in Actuarial Assumptions
The CSA loads were changed from 0.8% for active members and 60% for vested and non-
vested deferred members. The revised CSA loads are now 0.0% for active member liability,
15% for vested deferred member liability and 3% for non-vested deferred member liability.
The assumed post-retirement benefit increase rate was changed from 1.0% per year for all
years to 1.0% per year through 2044 and 2.5% per year thereafter.
2016 Changes
Changes in Actuarial Assumptions
The assumed post-retirement benefit increase rate was changed from 1.0% per year through 2035
and 2.5% per year thereafter to 1.0% per year for all future years.
The assumed investment return was changed from 7.9% to 7.5%. The single discount rate was
changed from 7.9% to 7.5%.
Other assumptions were changed pursuant to the experience study dated June 30, 2015. The
assumed future salary increases, payroll growth, the inflation were decreased by 0.25% to 3.25%
for payroll growth and 2.50% for inflation.
2015 Changes
Changes in Plan Provisions
On January 1, 2015, the Minneapolis Employees Retirement Fund was merged into the General
Employees 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.
Changes in Actuarial Assumptions
The assumed post-retirement benefit increase rate was changed from 1.0% per year through 2030
and 2.5% per year thereafter to 1.0% per year through 2035 and 2.5% per year thereafter.
80
City of St. Joseph
Notes to Required Supplementary Information
POLICE AND FIRE FUND
2017 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% lower than the previous rates.
Assumed rates of retirement were changed, resulting in fewer retirements.
The CSA load was 30% for vested and non-vested deferred members. The CSA has been
changed to 33% for vested members and 2% for non-vested 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% 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% to 60%.
Assumed age difference was changed from separate assumptions for male members (wives
assumed to be 3 years younger) and female members (husbands assumed to be 4 years older)
to the assumption that males are 2 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% for all years to 1%
per year through 2064 and 2.5% thereafter.
2016 Changes
Changes in Actuarial Assumptions
The assumed post-retirement benefit increase rate was changed from 1.0% per year through 2037
and 2.5% thereafter to 1.0% per year for all future years.
The assumed investment return was changed from 7.9% to 7.5%. The single discount rate
changed from 7.9% to 5.6%.
The assumed future salary increases, payroll growth, and inflation were decreased by 0.25% to
3.25% for payroll growth and 2.50% for inflation.
2015 Changes
Changes in Plan Provisions
The post-retirement benefit increase to be paid after attainment of the 90% funding threshold was
changed, from inflation up to 2.5%, to a fixed rate of 2.5%.
Changes in Actuarial Assumptions
The assumed post-retirement benefit increase rate was changed from 1.0% per year through 2030 and
2.5% per year thereafter to 1.0% per year through 2037 and 2.5% per year thereafter.
81
(THIS PAGE LEFT BLANK INTENTIONALLY)
82
SUPPLEMENTARY INFORMATION
83
City of St. Joseph
Schedule of Revenues, Expenditures, and
Changes in Fund Balance -
Budget and Actual - General Fund
Year Ended December 31, 2017
Variance with
Original and Actual Final Budget -
Final BudgetAmounts
Over (Under)
Revenues
Property taxes$ 1,128,180$ 1,124,680$ (3,500)
Sales taxes - 1,085 1,085
Special assessments 3,000 9,127 6,127
Franchise fees 126,300 129,242 2,942
Licenses and permits 157,035 356,990 199,955
Intergovernmental revenue
Local government aid 919,430 919,415 (15)
PERA aid 1,540 1,541 1
Fire aid 43,000 56,560 13,560
Police aid 63,500 71,757 8,257
Federal grants 62,300 6,713 (55,587)
State grants 50,950 51,073 123
Other grants and aids 14,500 26,303 11,803
Total intergovernmental revenue 1,155,220 1,133,362 (21,858)
Charges for services
General government 31,935 44,139 12,204
Public safety 263,375 269,772 6,397
Public works 3,830 3,983 153
Culture and recreation 62,850 59,052 (3,798)
Total charges for services 361,990 376,946 14,956
Fines and forfeitures 43,000 55,474 12,474
Miscellaneous revenues
Investment income 37,000 20,686 (16,314)
Contributions and donations 3,550 5,094 1,544
Other 44,850 45,351 501
Total miscellaneous revenues 85,400 71,131 (14,269)
Total revenues 3,060,125 3,258,037 197,912
Expenditures
General government
Mayor and council 85,825 70,931 (14,894)
Administrative and finance 407,525 412,051 4,526
Other general government 168,825 266,026 97,201
Capital outlay 2,760 - (2,760)
Total general government 664,935 749,008 84,073
84
City of St. Joseph
Schedule of Revenues, Expenditures, and
Changes in Fund Balance -
Budget and Actual - General Fund
Year Ended December 31, 2017
Variance with
Original and Actual
Final Budget -
Final BudgetAmountsOver (Under)
Expenditures
Public safety
Police
Current$ 1,139,210$ 1,042,291$ (96,919)
Capital outlay - 1,590 1,590
Total police 1,139,210 1,043,881 (95,329)
Fire
Current 346,440 396,702 50,262
Capital outlay 84,100 72,823 (11,277)
Total fire 430,540 469,525 38,985
Other
Current 95,810 98,190 2,380
Total public safety 1,665,560 1,611,596 (53,964)
Public works
Streets and highways
Street maintenance and storm sewers 254,755 270,135 15,380
Snow and ice removal 113,465 54,257 (59,208)
Street engineering 35,000 18,414 (16,586)
Capital outlay 89,600 54,856 (34,744)
Total public works 492,820 397,662 (95,158)
Culture and recreation
Current 299,470 270,555 (28,915)
Capital outlay - 425 425
Total culture and recreation 299,470 270,980 (28,490)
Total expenditures 3,122,785 3,029,246 (93,539)
Excess of revenues over
(under) expenditures
(62,660) 228,791 291,451
Other Financing Sources (Uses)
Insurance recoveries - 1,470 1,470
Sale of property 12,350 275 (12,075)
Transfers in - 13,896 13,896
Transfers out (39,000) (250,548) (211,548)
Total other financing sources (uses) (26,650) (234,907) (208,257)
Net change in fund balances$ (89,310) (6,116)$ 83,194
Fund Balances
Beginning of year2,361,939
End of year$ 2,355,823
85
City of St. Joseph
Combining Balance Sheet -
Nonmajor Governmental Funds
December 31, 2017
Special Revenue
TIF 3-1
Economic TIF 2-1 Central
Development Millstream TIF 2-2 St. TIF 2-3 Bayou Minnesota
Authority Shops and Joseph Meat Blues/ Alley Credit Union
(150)Lofts (157)Market (158)Flat (159)(152)
Assets
Cash and investments$ 27,549 $ 23,357 $ 333 $ 120 $ 2,760
Taxes receivable - delinquent 732 - - - -
Special assessments receivable
Delinquent - - - - -
Deferred - - - - -
Accounts receivable 1,250 - - - -
Interest receivable 300 54 1 - 4
Due from other funds 13,700 - - - -
Due from other governments 229 - - - -
Notes receivable - - - - -
Total assets$ 43,760 $ 23,411 $ 334 $ 120 $ 2,764
Liabilities
Accounts payable$ 1,843 $ - $ - $ - $ -
Contracts payable - - - - -
Due to other funds - - 500 7,200 6,000
Due to other governments - - - - -
Salaries and benefits payable 1,411 - - - -
Total liabilities 3,254 - 500 7,200 6,000
Deferred Inflows of Resources
Unavailable revenue - property taxes 732 - - - -
Unavailable revenue - special assessments - - - - -
Unavailable revenue - notes receivable - - - - -
Total deferred inflows of resources 732 - - - -
Fund Balances
Restricted - 23,411 - - -
Committed 39,774 - - - -
Assigned - - - - -
Unassigned - - (166) (7,080) (3,236)
Total fund balances 39,774 23,411 (166) (7,080) (3,236)
Total liabilities, deferred inflows
of resources, and fund balances$ 43,760 $ 23,411 $ 334 $ 120 $ 2,764
86
Special RevenueDebt Service
G.O.
TIF 4-1 Improvement G.O.
Fortitude Park Charitable Deed Bonds of Improvement
Senior Housing Dedication Gambling Lodging Tax Revolving Housing 2005B/2010B Bonds of 2013A
(153)(205)(215)(220)Loan (250)(225)(333)(348)
$ 2,136$ 121,019$ 2,085$ 20,177$ 205,555$ 11,126$ 108,556 $ 110,705
- - - - - - 199 66
- - - - - - 5,371 -
- - - - - - 222,193 43,802
- 30 - 548 - - - -
3 285 5 30 100 19 394 319
- - - - - - - -
- 48 - - - - 69 28
- - - - 5,025 - - -
$ 2,139$ 121,382$ 2,090$ 20,755$ 210,680$ 11,145$ 336,782 $ 154,920
$ -$ -$ -$ -$ -$ -$ 109$ 109
- - - - - - - -
- - - - - - - -
- - - - - - - -
- - - - - - - -
- - - - - - 109 109
- - - - - - 199 66
- - - - - - 227,564 43,802
- - - - 5,025 - - -
- - - - 5,025 - 227,763 43,868
2,139 121,382 2,090 20,755 205,655 11,145 108,910 110,943
- - - - - - - -
- - - - - - - -
- - - - - - - -
2,139 121,382 2,090 20,755 205,655 11,145 108,910 110,943
$ 2,139$ 121,382$ 2,090$ 20,755$ 210,680$ 11,145$ 336,782 $ 154,920
87
City of St. Joseph
Combining Balance Sheet -
Nonmajor Governmental Funds
December 31, 2017
Debt Service
G.O.
G.O. Improvement G.O. Capital G.O. G.O.
Certificates of Bonds of Improvement Improvement Certificates of
Indebtedness of 2011A/2006C Plan Bonds of Bonds of Indebtedness of
2013A (349)(338)2009B (343)2010B (345)2011A (346)
Assets
Cash and investments$ 7,044 $ 100,178$ 10,633$ 169,832 $ 28
Taxes receivable - delinquent 438 419 541 47 141
Special assessments receivable
Delinquent - 1,042 - 775 -
Deferred - 155,790 - 110,762 -
Accounts receivable - - - - -
Interest receivable 38 259 34 474 3
Due from other funds - - - - -
Due from other governments 157 686 180 33 34
Notes receivable - - - - -
Total assets$ 7,677 $ 258,374$ 11,388$ 281,923 $ 206
Liabilities
Accounts payable$ 109 $ 109 $ 109$ 109$ 109
Contracts payable - - - - -
Due to other funds - - - - -
Due to other governments - - - - -
Salaries and benefits payable - - - - -
Total liabilities 109 109 109 109 109
Deferred Inflows of Resources
Unavailable revenue - property taxes 438 419 541 47 141
Unavailable revenue - special assessments - 156,832 - 111,537 -
Unavailable revenue - notes receivable - - - - -
Total deferred inflows of resources 438 157,251 541 111,584 141
Fund Balances
Restricted 7,130 101,014 10,738 170,230 -
Committed - - - - -
Assigned - - - - -
Unassigned - - - - (44)
Total fund balances 7,130 101,014 10,738 170,230 (44)
Total liabilities, deferred inflows
of resources, and fund balances$ 7,677 $ 258,374$ 11,388$ 281,923 $ 206
88
Debt Service
G.O. Capital G.O. G.O. G.O. G.O. Tax G.O. Capital G.O.
Improvement Improvement Improvement Certificates of Abatement Improvement Improvement
Plan Bonds of Bonds of Bonds of Indebtedness Bonds of Plan Bonds of Bonds of
2011A (347)2014A (350)2015A (351)2015A (352)2015B (353)2016A (301)2016B (304)
$ 3,320$ 249,175 $ 146,997 $ 1,528 $ 20,204 $ 17,891 $ 190,460
196 588 707 776 - 892 -
- - - - - - -
- 140,993 165,766 - - - 632,581
- - - - - 18 -
2 863 536 75 126 305 1,906
- - - - - - -
72 238 299 320 - 622 -
- - - - - - -
$ 3,590$ 391,857 $ 314,305 $ 2,699 $ 20,330 $ 19,728 $ 824,947
$ 109$ 109$ 109$ 109$ 109$ 109$ 6,296
- - - - - - 76,300
- - - - - - -
- - - - - - 138
- - - - - - -
109 109 109 109 109 109 82,734
196 588 707 776 - 892 -
- 140,993 165,766 - - - 632,581
- - - - - - -
196 141,581 166,473 776 - 892 632,581
3,285 250,167 147,723 1,814 20,221 18,727 109,632
- - - - - - -
- - - - - - -
- - - - - - -
3,285 250,167 147,723 1,814 20,221 18,727 109,632
$ 3,590$ 391,857 $ 314,305 $ 2,699 $ 20,330 $ 19,728 $ 824,947
89
City of St. Joseph
Combining Balance Sheet -
Nonmajor Governmental Funds
December 31, 2017
Debt ServiceCapital Projects
Capital G.O. Jacob
Improvement Improvement Debt Service Wetterling CBD Alley
Bonds of Bonds of Relief Fund Recreation Improvement
2017A (303)2017B (305)(390)Center (402)Project (405)
Assets
Cash and investments$ 55,006 $ 44,962 $ 392,281 $ 1,885$ 62,956
Taxes receivable - delinquent - - 820 - -
Special assessments receivable
Delinquent - - 135 - -
Deferred - 89,271 130,977 - -
Accounts receivable - - - - -
Interest receivable 2 145 - 2 -
Due from other funds - - - - -
Due from other governments - - 72 - -
Notes receivable - - - - -
Total assets$ 55,008 $ 134,378 $ 524,285 $ 1,887$ 62,956
Liabilities
Accounts payable$ 109$ 109$ - $ -$ -
Contracts payable - - - - 10,660
Due to other funds - - - - -
Due to other governments - - - - -
Salaries and benefits payable - - - - -
Total liabilities 109 109 - - 10,660
Deferred Inflows of Resources
Unavailable revenue - property taxes - - 820 - -
Unavailable revenue - special assessments - 89,271 131,112 - -
Unavailable revenue - notes receivable - - - - -
Total deferred inflows of resources - 89,271 131,932 - -
Fund Balances
Restricted 54,899 44,998 - - -
Committed - - - - -
Assigned - - 392,353 1,887 52,296
Unassigned - - - - -
Total fund balances 54,899 44,998 392,353 1,887 52,296
Total liabilities, deferred inflows
of resources, and fund balances$ 55,008 $ 134,378 $ 524,285 $ 1,887$ 62,956
90
Capital Projects
Total
General Capital Water Access Sewer Access Governmental
Outlay (490)Fund (501)Fund (502)Funds
$ 347,122$ 241,291$ 6,319$ 2,704,590
- - - 6,562
- - - 7,323
- - - 1,692,135
- - - 1,846
- 430 39 6,753
- - - 13,700
186 - - 3,273
- - - 5,025
$ 347,308$ 241,721$ 6,358$ 4,441,207
$ -$ -$ -$ 9,774
- - - 86,960
- - - 13,700
1,916 - - 2,054
- - - 1,411
1,916 - - 113,899
- - - 6,562
- - - 1,699,458
- - - 5,025
- - - 1,711,045
- - - 1,547,008
- - - 39,774
345,392 241,721 6,358 1,040,007
- - - (10,526)
345,392 241,721 6,358 2,616,263
$ 347,308$ 241,721$ 6,358$ 4,441,207
91
City of St. Joseph
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances -
Nonmajor Governmental Funds
Year Ended December 31, 2017
Special Revenue
TIF 2-1 TIF 3-1 Central
Economic Millstream TIF 2-2TIF 2-3 Bayou Minnesota
Development Shops and St. Joseph Meat Blues/ Alley Credit Union
Authority (150)Lofts (157)Market (158)Flat (159)(152)
Revenues
Property taxes$ 93,818$ -$ -$ -$ -
Tax increments - 38,355 4,182 89 42,590
Lodging taxes - - - - -
Special assessments - - - - -
Charges for services - - - - -
Miscellaneous
Investment income 1,070 194 5 - 14
Contributions and donations - - - - -
Revolving loan repayments - - - - -
Other - - - - -
Total revenues 94,888 38,549 4,187 89 42,604
Expenditures
Current
Public works - - - - -
Culture and recreation - - - - -
Economic development 51,780 35,980 4,170 1,500 39,994
Debt service
Principal - - - - -
Interest and other charges - - - - -
Capital outlay
General government - - - - -
Public safety - - - - -
Public works - - - - -
Culture and recreation - - - - -
Total expenditures 51,780 35,980 4,170 1,500 39,994
Excess of revenues over
(under) expenditures
43,108 2,569 17 (1,411) 2,610
Other Financing Sources (Uses)
Sale of property - - - - -
Bonds issued - - - - -
Transfers in - - - - -
Transfers out (136,714) - - - -
Total other financing sources (uses) (136,714) - - - -
Net change in fund balances (93,606) 2,569 17 (1,411) 2,610
Fund Balances
Beginning of year 133,380 20,842 (183) (5,669) (5,846)
End of year$ 39,774$ 23,411$ (166)$ (7,080)$ (3,236)
92
Special Revenue
TIF 4-1
Fortitude Park
Senior Housing Dedication Charitable Lodging Tax Revolving Loan Deed Housing
(153)(205)Gambling (215)(220)(250)(225)
$ -$ 20,000$ -$ -$ -$ -
- - - - - -
- - - 12,595 - -
- - - - - -
- 2,301 - - - -
10 1,014 18 106 356 67
- 6,944 - - - -
- - - - 34,785 -
- - - - - 11,078
10 30,259 18 12,701 35,141 11,145
- - - - - -
- 5,390 - - - -
- - - - 61 -
- - - - - -
- - - - - -
- - - - - -
- - - - - -
- - - - - -
- 23,788 - - - -
- 29,178 - - 61 -
10 1,081 18 12,701 35,080 11,145
- - - - - -
- - - - - -
- - - - 136,714 -
- - - - - -
- - - - 136,714 -
10 1,081 18 12,701 171,794 11,145
2,129 120,301 2,072 8,054 33,861 -
$ 2,139$ 121,382$ 2,090$ 20,755$ 205,655$ 11,145
93
City of St. Joseph
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances -
Nonmajor Governmental Funds
Year Ended December 31, 2017
Debt Service
G.O.
G.O. Crossover Fire Hall G.O. Improvement G.O. G.O.
Refunding Refunding Bonds of Improvement Certificates of
Bonds of Bonds of 2005B/2010B Bonds of Indebtedness of
2009A (318)2003B (331)(333)2013A (348)2013A (349)
Revenues
Property taxes$ 25,528$ 19,051$ 33,395$ 9,980$ 56,680
Tax increments - - - - -
Lodging taxes - - - - -
Special assessments 116,640 - 57,838 12,213 -
Charges for services - 19,796 - - -
Miscellaneous
Investment income 1,204 182 1,406 1,138 136
Contributions and donations - - - - -
Revolving loan repayments - - - - -
Other - - - - -
Total revenues 143,372 39,029 92,639 23,331 56,816
Expenditures
Current
Public works - - - - -
Culture and recreation - - - - -
Economic development - - - - -
Debt service
Principal 350,000 75,000 130,000 35,000 55,000
Interest and other charges 10,150 1,995 11,957 8,578 2,411
Capital outlay
General government - - - - -
Public safety - - - - -
Public works - - - - -
Culture and recreation - - - - -
Total expenditures 360,150 76,995 141,957 43,578 57,411
Excess of revenues over
(under) expenditures
(216,778) (37,966) (49,318) (20,247) (595)
Other Financing Sources (Uses)
Sale of property - - - - -
Bonds issued - - - - -
Transfers in 65,000 15,548 - - -
Transfers out (8,766) - - - -
Total other financing sources (uses) 56,234 15,548 - - -
Net change in fund balances (160,544) (22,418) (49,318) (20,247) (595)
Fund Balances
Beginning of year 160,544 22,418 158,228 131,190 7,725
End of year$ -$ -$ 108,910$ 110,943$ 7,130
94
Debt Service
G.O.
Improvement G.O. Capital G.O. G.O. G.O. Capital G.O. G.O.
Bonds of Improvement Improvement Certificates of Improvement Improvement Improvement
2011A/2006C Plan Bonds of Bonds of Indebtedness of Plan Bonds of Bonds of Bonds of
(338)2009B (343)2010B (345)2011A (346)2011A (347)2014A (350)2015A (351)
$ 49,953$ 64,931$ 5,993$ 12,880$ 25,953$ 79,879$ 29,776
- - - - - - -
- - - - - - -
56,982 - 16,698 - - 36,337 40,787
- - - 12,930 - - -
924 122 1,689 11 5 3,078 1,910
- - - - - - -
- - - - - - -
- - - - - - -
107,859 65,053 24,380 25,821 25,958 119,294 72,473
- - - - - - -
- - - - - - -
- - - - - - -
130,000 60,000 50,000 40,000 20,000 110,000 55,000
14,339 4,805 13,765 4,470 2,229 51,745 11,719
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
144,339 64,805 63,765 44,470 22,229 161,745 66,719
(36,480) 248 (39,385) (18,649) 3,729 (42,451) 5,754
- - - - - - -
- - - - - - -
18,000 4,400 13,250 15,000 - 109,269 109,077
- - - - - - -
18,000 4,400 13,250 15,000 - 109,269 109,077
(18,480) 4,648 (26,135) (3,649) 3,729 66,818 114,831
119,494 6,090 196,365 3,605 (444) 183,349 32,892
$ 101,014$ 10,738$ 170,230$ (44)$ 3,285$ 250,167$ 147,723
95
City of St. Joseph
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances -
Nonmajor Governmental Funds
Year Ended December 31, 2017
Debt Service
G.O. G.O. Tax G.O. Capital G.O. Capital
Certificates of Abatement Improvement Improvement Improvement
Indebtedness Bonds of Plan Bonds of Bonds of Bonds of
2015A (352)2015B (353)2016A (301)2016B (304)2017A (303)
Revenues
Property taxes$ 31,776$ -$ 229,108$ -$ -
Tax increments - - - - -
Lodging taxes - - - - -
Special assessments - - - - -
Charges for services - - - - -
Miscellaneous
Investment income 267 451 1,088 6,795 8
Contributions and donations - - - - -
Revolving loan repayments - - - - -
Other - - - - -
Total revenues 32,043 451 230,196 6,795 8
Expenditures
Current
Public works - - - - -
Culture and recreation - - - - -
Economic development - - - - -
Debt service
Principal 30,000 110,000 175,000 - -
Interest and other charges 2,219 44,445 96,852 15,652 11,362
Capital outlay
General government - - - - -
Public safety - - - - -
Public works - - - 82,625 -
Culture and recreation - - - - -
Total expenditures 32,219 154,445 271,852 98,277 11,362
Excess of revenues over
(under) expenditures
(176) (153,994) (41,656) (91,482) (11,354)
Other Financing Sources (uses)
Sale of property - - 18 - -
Bonds issued - - - - 11,253
Transfers in - 162,000 2,177 199,566 55,000
Transfers out - - - - -
Total other financing sources (uses) - 162,000 2,195 199,566 66,253
Net change in fund balances (176) 8,006 (39,461) 108,084 54,899
Fund Balances
Beginning of year 1,990 12,215 58,188 1,548 -
End of year$ 1,814$ 20,221$ 18,727$ 109,632$ 54,899
96
Debt ServiceCapital Projects
Clinton
G.O. Jacob Villiage/ 2015
Improvement Debt Service Wetterling CBD Alley Park Terrace Northland Equipment
Bonds of Relief Fund Recreation Improvement Improvements Improvements Certificates
2017B (305)(390)Center (402)Project (405)(450)(451)(452)
$ -$ -$ -$ -$ -$ -$ -
- - - - - - -
- - - - - - -
43,797 18,317 - - - - -
- - - - - - -
516 - 7 - - - -
- - 2,055 - - - -
- - - - - - -
- - - - - - -
44,313 18,317 2,062 - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
7,460 - - - - - -
- - - - - - 1,212
- - - - - - 6,336
- 39,261 - 272,743 8,020 20,870 1,527
- - 175 - - - -
7,460 39,261 175 272,743 8,020 20,870 9,075
36,853 (20,944) 1,887 (272,743) (8,020) (20,870) (9,075)
- - - - - - -
8,145 - - 335,855 - - -
- 173,766 - - - - -
- (10,576) - (10,816) (166,249) (109,077) -
8,145 163,190 - 325,039 (166,249) (109,077) -
44,998 142,246 1,887 52,296 (174,269) (129,947) (9,075)
- 250,107 - - 174,269 129,947 9,075
$ 44,998$ 392,353$ 1,887$ 52,296$ -$ -$ -
97
City of St. Joseph
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances -
Nonmajor Governmental Funds
Year Ended December 31, 2017
Capital Projects
Total Other
General Capital Water Access Sewer Access Governmental
Outlay (490)Fund (501)Fund (502)Funds
Revenues
Property taxes$ 77,080$ -$ -$ 865,781
Tax increments - - - 85,216
Lodging taxes - - - 12,595
Special assessments - - - 399,609
Charges for services - 399,090 126,174 560,291
Miscellaneous
Investment income - 1,532 141 25,464
Contributions and donations - - - 8,999
Revolving loan repayments - - - 34,785
Other - - - 11,078
Total revenues 77,080 400,622 126,315 2,003,818
Expenditures
Current
Public works - - - -
Culture and recreation - - - 5,390
Economic development - - - 133,485
Debt service
Principal - - - 1,425,000
Interest and other charges - - - 316,153
Capital outlay
General government 199 - - 1,411
Public safety 11,210 - - 17,546
Public works - - - 425,046
Culture and recreation 8,102 - - 32,065
Total expenditures 19,511 - - 2,356,096
Excess of revenues over
(under) expenditures
57,569 400,622 126,315 (352,278)
Other Financing Sources (uses)
Sale of property 23,465 - - 23,483
Bonds issued - - - 355,253
Transfers in - - - 1,078,767
Transfers out - (200,000) (95,000) (737,198)
Total other financing sources (uses) 23,465 (200,000) (95,000) 720,305
Net change in fund balances 81,034 200,622 31,315 368,027
Fund Balances
Beginning of year 264,358 41,099 (24,957) 2,248,236
End of year$ 345,392$ 241,721$ 6,358$ 2,616,263
98
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
Independent Auditor's Report
Honorable Mayor and Members
of the City Council
City of St. Joseph
St. Joseph, Minnesota
We have audited, in accordance with the 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 St. Joseph, Minnesota, as of and for
the year ended December 31, 2017, and the related notes to financial statements, which
collectively comprise the City's basic financial statements, and have issued our report
thereon dated April 19, 2018.
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) to determine the 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.
BerganKDV, Ltd.
bergankdv.com
99
Internal Control over Financial Reporting (Continued)
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 and therefore, material
weaknesses or significant deficiencies may exist that were not identified. We did identify a
certain deficiency in internal control, as described in the accompanying Schedule of Finding
and Response on Internal Control that we consider to be a material weakness, listed as audit
finding 2006-001.
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 determination of financial statement amounts.
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.
City's Response to Findings
The City's response to the finding identified in our audit is described in the accompanying
Schedule of Finding and Response on Internal Control. The City's response was not
subjected to the auditing procedures applied in the audit of the financial statements and,
accordingly, we express no opinion on it.
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 communication is not suitable for
any other purpose.
St. Cloud, Minnesota
April 19, 2018
100
Report on Legal Compliance
Independent Auditor's Report
Honorable Mayor and Members
of the City Council
City of St. Joseph
St. Joseph, 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 St. Joseph, Minnesota, as of and for
the year ended December 31, 2017, and the related notes to financial statements, which
collectively comprise the City's basic financial statements, and have issued our report
thereon dated April 19, 2018.
The Minnesota Legal Compliance Audit Guide for Cities, promulgated by the State Auditor
pursuant to Minnesota Statutes § 6.65, contains seven categories of compliance to be tested:
contracting and bidding, deposits and investments, conflicts of interest, public indebtedness,
claims and disbursements, miscellaneous provisions, and tax increment financing. Our audit
considered all of the listed categories.
In connection with our audit, nothing came to our attention that caused us to believe that the
City of St. Joseph failed to comply with the provisions of the Minnesota Legal Compliance
Audit Guide for Cities. 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.
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
communication is not suitable for any other purpose.
St. Cloud, Minnesota
April 19, 2018
BerganKDV, Ltd.
bergankdv.com
101
City of St. Joseph
Schedule of Finding and Response on
Internal Control
CURRENT AND PRIOR YEAR INTERNAL CONTROL FINDING
Material Weakness
Audit Finding 2006-001 Improve Segregation of Accounting Duties
Adequate segregation of accounting duties is in place when the four areas of a transaction have been
separated: authorization, custody, recording, and reconciliation.
As part of this year's audit, we reviewed the City's documentation of its internal control over
significant areas including: cash receipts, cash disbursements, capital assets, payroll, and utility
billing. The lack of adequate segregation of accounting duties could adversely affect the City's ability
to initiate, record, process, and report financial data consistent with the assertions of management in
the financial statements. Some of the areas in which we noticed a lack of segregation or an overlap in
duties are as follows:
Cash Receipts
The Office Specialist or City Administrator enters cash and checks into the point of sale system,
reconciles the entries, and prepares the deposit. The Police Records Specialist records police
receipts, receives payments, and reconciles the collections.
Cash Disbursements
The Finance Director approves some invoices for payment, enters invoices into the system,
generates checks, and a check register. The Finance Director is also an authorized signer and has
access to the Mayor's electronic signature. The Administrator reviews and approves checks for
payment. At year-end, the Finance Director reconciles and records accounts and contracts
payable.
Capital Assets
The Finance Director records, processes, reconciles, and posts journal entries related to capital
assets. The department heads review their listing for accuracy.
Payroll
The Finance Director enters employees' time, processes, and posts payroll, generates a payroll
report, distributes paystubs to employees, and posts the journal entries related to payroll. In
addition, this same employee reconciles payroll accruals and time off balances. The City
Administrator does review payroll reports, time off balances, and calculated compensated
absences balances for the audit.
102
City of St. Joseph
Schedule of Finding and Response on
Internal Control
CURRENT AND PRIOR YEAR INTERNAL CONTROL FINDING (CONTINUED)
Material Weakness (Continued)
Audit Finding 2006-001 Improve Segregation of Accounting Duties (Continued)
Utility Billing
The Utility Billing Clerk enters new accounts into the utility billing system and uploads meter
readings via interfacing with electronic readers. The Utility Billing Clerk enters any rate changes
to the system and can enter manual adjustments. The Utility Billing Clerk calculates and enters
final bills, prints, and mails utility bills, reconciles receipts to billed amounts, and enters receipts
batches.
Cash Reconciliation and Access
The Finance Director performs the above noted responsibilities, while also reconciling cash, and
generating manual journal entries.
City's Response
The City Council and City staff are aware of the limited personnel handling the City's financial
matters. The processes and internal controls are reviewed frequently to look for ways to improve
internal controls. The department heads, City Administrator and City Council each have active roles
in monitoring the financial matters of the City to provided additional oversight. It is unlikely
complete segregation of accountings duties will be achieved due to the cost of hiring several
additional staff.
103
City of St. Joseph
Communications Letter
December 31, 2017
City of St. Joseph
Table of Contents
Report on Matters Identified as a Result of
the Audit of the Financial Statements 1
Material Weakness 3
Other Deficiency 5
Required Communication 6
Financial Analysis 9
Emerging Issues 23
Report on Matters Identified as a Result of
the Audit of the Financial Statements
Honorable Mayor, Members
of the City Council and Management
City of St. Joseph
St. Joseph, Minnesota
In planning and performing our audit of the financial statements of the governmental
activities, business-type activities, each major fund, and the aggregate remaining fund
information of City of St. Joseph, Minnesota, as of and for the year ended December 31,
2017, in accordance with auditing standards generally accepted in the United States of
America, 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.
Our consideration of internal control was for the limited purpose described in the preceding
paragraph and was not designed to identify all deficiencies in internal control that might be
material weaknesses or significant deficiencies and, therefore, material weaknesses or
significant deficiencies may exist that were not identified. In addition, because of inherent
limitations in internal control, including the possibility of management override of controls,
misstatements due to error, or fraud may occur and not be detected by such controls.
However, as discussed below, we identified certain deficiencies in internal control that we
consider to be a material weakness.
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. The material weakness
identified is stated within this letter.
A significant deficiency is a deficiency, or 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.
BerganKDV, Ltd.
bergankdv.com
1
During our audit, we also became aware of a deficiency in internal control other than
significant deficiencies or material weaknesses, and other matters that are opportunities for
strengthening internal controls and operating efficiency. It is described in the accompanying
letter under Other Deficiency.
The accompanying memorandum also includes financial analysis provided as a basis for
discussion. The matters discussed herein were considered by us during our audit and they do
not modify the opinion expressed in our Independent Auditor's Report dated April 19, 2018,
on such statements.
This communication is intended solely for the information and use of the City Council,
management, others within the City and state oversight agencies and is not intended to be,
and should not be, used by anyone other than these specified parties.
St. Cloud, Minnesota
April 19, 2018
2
City of St. Joseph
Material Weakness
IMPROVE SEGREGATION OF ACCOUNTING DUTIES
Adequate segregation of accounting duties is in place when the four areas of a transaction have been
separated: authorization, custody, recording, and reconciliation.
As part of this year's audit, we reviewed the City's documentation of its internal control over significant
areas including: cash receipts, cash disbursements, capital assets, payroll, and utility billing. The lack of
adequate segregation of accounting duties could adversely affect the City's ability to initiate, record,
process, and report financial data consistent with the assertions of management in the financial
statements. Some of the areas in which we noticed a lack of segregation or an overlap in duties are as
follows:
Cash Receipts
The Office Specialist or City Administrator enter cash and checks into the point of sale system,
reconcile the entries, and prepare the deposit. The Police Records Specialist records police receipts,
receives payments, and reconciles the collections.
Cash Disbursements
The Finance Director approves some invoices for payment, enters invoices into the system, and
generates checks and a check register. The Finance Director also is an authorized signer and has
access to the Mayor's electronic signature. At year-end, the Finance Director reconciles and records
accounts and contracts payable. The City Administrator reviews and approves checks for payment.
Capital Assets
The Finance Director records, processes, reconciles, and posts journal entries related to capital
assets. Department heads review their listing for accuracy.
Payroll
The Finance Director enters employee's time, processes and posts payroll, generates a payroll report,
distributes paystubs to employees, and posts the journal entries related to payroll. In addition, this
same employee reconciles payroll accruals and time off balances. The City Administrator does
review payroll reports and time off balances and calculates compensated absences balances for the
audit.
Utility Billing
The Utility Billing Clerk enters new accounts into the utility billing system and uploads meter
readings via interfacing with electronic readers. The Utility Billing Clerk enters any rate changes to
the system. The Utility Billing Clerk can enter manual adjustments, calculates, and enters final bills,
prints, and mails utility bills, reconciles receipts to billed amounts, and enters receipts batches.
Cash Reconciliation and Access
The Finance Director performs the above noted responsibilities, while also reconciling cash and
generating manual journal entries.
3
City of St. Joseph
Material Weakness
IMPROVE SEGREGATION OF ACCOUNTING DUTIES (CONTINUED)
We recommend management and the City Council review the above deficiencies and improve
segregation of accounting duties where possible to build upon the control environment. We also
recommend the City closely follow its internal control plan and follow through with the control
activities that have been designed.
4
City of St. Joseph
Other Deficiency
POLICE DEPARTMENT TICKET BILLING
During our testing of police deposits, it was noted no one reviews the police secretary's reconciliation of
the Police Department's daily receipts or records maintained by the Police Department. This could lead
to unrecorded collections the City's Finance Department is not aware of.
It wasalso noted the follow up notices are not mailed out timely. We noted several past due, uncollected
tickets on hand that were not currently being pursued. This could result in reduced revenues for the City.
In addition, it was determined that the City's fee schedule was not being properly followed when issuing
receipts through the police department. It was noted there were multiple instances where late payment
fees were written off. In addition, there were multiple instances of inconsistent fees being charged for
the same violation.
We recommend someone other than the Police Secretary reconcile the daily collections to records
maintained by the Police Department and that the City develop a process for sending timely notices and
for collecting past due tickets. We also recommend that the City implement controls to ensure the fee
schedule is being uniformly followed.
5
City of St. Joseph
Required Communication
We have audited the financial statements of the governmental activities, business-type activities, each
major fund, and the aggregate remaining fund information of the City as of and for the year ended
December 31, 2017. Professional standards require that we provide you with the following information
related to our audit.
OUR RESPONSIBILITY UNDER AUDITING STANDARDS GENERALLY ACCEPTED IN
THE UNITED STATES OF AMERICA AND GOVERNMENT AUDITING STANDARDS
As stated in our engagement letter, our responsibility, as described by professional standards, is to
express opinions about whether the financial statements prepared by management with your oversight
are fairly presented, in all material respects, in conformity with accounting principles generally accepted
in the United States of America. Our audit of the financial statements does not relieve you or
management of your responsibilities.
As part of our audit, we considered the internal control of the City. Such considerations were solely for
the purpose of determining our audit procedures and not to provide any assurance concerning such
internal control.
As part of obtaining reasonable assurance about whether the financial statements are free of material
misstatement, we performed tests of the City's compliance with certain provisions of laws, regulations,
contracts, and grants. However, the objective of our tests was not to provide an opinion on compliance
with such provisions.
Generally accepted accounting principles provide for certain required supplementary information (RSI)
tosupplement the basic financial statements. Our responsibility with respect to the RSI, which
supplements the basic audit financial statements, is to apply certain limited procedures in accordance
with generally accepted auditing standards. However, the RSI was not audited and, because the limited
procedures do not provide us with sufficient evidence to express an opinion or provide any assurance,
we do not express an opinion or provide any assurance on the RSI.
Our responsibility for the supplementary information accompanying the financial statements, as
described by professional standards, is to evaluate the presentation of the supplementary information in
relation to the financial statements as a whole and to report on whether the supplementary information is
fairly stated, in all material respects, in relation to the financial statements as a whole.
PLANNED SCOPE AND TIMING OF THE AUDIT
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements; therefore, our audit involved judgment about the number of transactions to be
examined and the areas to be tested.
Our audit included obtaining an understanding of the City and its environment, including internal
control, sufficient to assess the risks of material misstatement of the financial statements and to design
the nature, timing, and extent of further audit procedures. Material misstatements may result from
(1) errors, (2) fraudulent financial reporting, (3) misappropriation of assets, or (4) violations of laws or
governmental regulations that are attributable to the City or to acts by management or employees acting
on behalf of the City.
6
City of St. Joseph
Required Communication
QUALITATIVE ASPECTS OF ACCOUNTING PRACTICES
Management is responsible for the selection and use of appropriate accounting policies. The significant
accounting policies used by the City are described in the notes to financial statements. No new
accounting policies were adopted and the application of existing policies was not changed during the
year ended December 31, 2017. 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 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. The most sensitive estimates affecting the financial statements were:
Depreciation The City is currently depreciating its capital assets over their estimated useful lives,
as determined by management, using the straight-line method.
Net Pension Liability, Deferred Outflows of Resources Relating to Pension Activity, and Deferred
Inflows of Resources relating to Pension Activity These balances are based on an allocation by
the pension plans using estimates based on contributions.
We evaluated the key factors and assumptions used to develop the accounting estimates in determining
that they are reasonable in relation to the financial statements taken as a whole.
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. Management did not identify and we did not notify them of any uncorrected financial
statement misstatements.
DISAGREEMENTS WITH MANAGEMENT
For purposes of this letter, 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.
7
City of St. Joseph
Required Communication
MANAGEMENT REPRESENTATIONS
We requested certain representations from management that are included in the management
representation letter.
MANAGEMENT CONSULTATIONS WITH OTHER 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 standards 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 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.
With respect to the supplementary information accompanying the financial statements, 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.
8
City of St. Joseph
Financial Analysis
The following pages provide graphic representation of select data pertaining to the financial position and
operations of the City for the past five years. Our analysis of each graph is presented to provide a basis
for discussion of past performance and how implementing certain changes may enhance future
performance. We suggest you view each graph and document if our analysis is consistent with yours. A
subsequent discussion of this information should be useful for planning purposes.
TAX CAPACITY, LEVY, AND RATES
The certified levy increased more than the taxable tax capacity increased in 2017 causing the tax rate to
increase.
Tax Capacity, Levy, and Rates
$4,500,000100%
99.61%
99.00%
98.38%
97.10%
97.00%
90%
$4,000,000
80%
$3,379,730
$3,342,661
$3,500,000
$3,215,462
$3,272,269
70%
$3,199,935
60%
$3,000,000
59.26%
50%
55.01%
54.78%
52.70%
53.89%
$2,500,000
40%
30%
$2,000,000
$2,002,920
20%
$1,838,805
$1,704,320
$1,724,270
$1,500,000
$1,673,870
10%
$1,000,0000%
20132014201520162017
Taxable Tax CapacityCertified Tax LevyTax RateCollection Rate
GENERAL FUND
For the year ended December 31, 2017, General Fund revenues exceeded expenditures by $228,791. In
addition to this, the City received $275 in proceeds from the sale of property, $1,470 of insurance
recoveries, transferred out $250,548 to other funds and transferred in $13,896 from other funds. This
resulted in a decrease in the General Fund balance of $(6,116). Of the City's General Fund balance at
December 31, 2017, $846,378 was assigned for specific expenditures, such as the fire department,
elections, and a City structure/facility study. An additional $34,370 was restricted by PEG access fees
restricted for future cable access expenditures. The City also has $25,712 of its fund balance in
nonspendable form as the funds have already been spent on prepaid insurance. The unassigned portion
of the fund balance, which includes monies set aside for working capital, totaled $1,449,363 represents
approximately six months of 2017 General Fund expenditures. The City's target General Fund balance is
to maintain working capital, a portion of the unassigned balance, in the amount of four to six months of
the next year's budgeted expenditures of the General Fund, excluding the fire department.
9
City of St. Joseph
Financial Analysis
GENERAL FUND
The graphs below and on the following page show the City's General Fund balance and the General
Fund revenues and expenditures for the last five years.
General Fund
$2,500,000
$23,479
$25,712
$26,567
$34,370
$77
$295,972
$20,366
$2,000,000
$288,493
$150,544
$22,423
$19,500
$576,622
$557,885
$112,556
$69,600
$1,500,000
$514,060
$491,170
$500,085
$1,000,000
$1,439,299
$1,315,805
$1,134,091$1,090,634$1,449,363
$500,000
$-
20132014201520162017
UnassignedAssigned for Fire FundAssigned for Other PurposesRestrictedNonspendable
10
City of St. Joseph
Financial Analysis
GENERAL FUND (CONTINUED)
General Fund
$3,500,000
$3,000,000
$2,500,000
$2,000,000
$1,500,000
$1,000,000
$500,000
$-
20132014201520162017
Total revenues
$2,626,455$2,745,142$2,927,909$3,206,688$3,258,037
Total Expenditures
$2,603,383$2,656,243$2,682,512$2,848,467$3,029,246
Fund Balance
1,721,2311,740,9142,000,8522,361,9392,355,823
During the year ended December 31, 2017, the City's General Fund revenues increased $51,349, or
1.6%, from 2016, while expenditures increased by $180,779, or 6.3%. These changes in revenues and
expenditures will be discussed by source and function, respectively, on the following pages.
As discussed earlier, fund balance did decrease $6,116 from 2016 to 2017. Fund balance has increased
$634,592 or 36.9% since 2013.
11
City of St. Joseph
Financial Analysis
GENERAL FUND REVENUES
20132014201520162017
Taxes$ 1,152,533$ 1,124,594$ 1,107,058$ 1,083,067$ 1,125,765
Special assessments 2,080 7,302 3,590 3,740 9,127
Franchise fees 117,894 124,940 124,283 126,817 129,242
Licenses and permits 97,192 105,929 152,158 270,780 356,990
Intergovernmental 884,370 1,018,932 1,107,840 1,212,746 1,133,362
Charges for services 244,699 243,067 270,508 345,321 376,946
Fines and forfeitures 45,439 38,330 50,489 46,747 55,474
Miscellaneous 82,248 82,048 111,983 117,470 71,131
Total revenues$ 2,626,455$ 2,745,142$ 2,927,909$ 3,206,688$ 3,258,037
As discussed earlier, the City's revenue increased $51,349 from 2016 to 2017. The most significant
variance was an increase in licenses and permits of $86,210. This increase was due to new development
in the City in 2017. Intergovernmental revenues decreased $79,384 from 2016, due primarily to the City
receiving a onetime county grant for the turnback street project totaling $95,000 in 2016. Charges for
services increased $31,625 from the prior year due to an increase in in fire service. Property tax
revenues increased due to an increase in amounts levied for general purposes. Miscellaneous revenues
decreased $46,339 due receiving a lower dividend through the League of MN Cities and fewer insurance
recoveries in 2017. Other revenues stayed consistent with the prior year.
Total revenues have grown $631,582 since 2013, an increase of 24.1%. The largest variances between
the types of revenue have been the increases in Licenses and Permits.
The pie charts on the following page show the General Fund sources of revenue for 2017 and 2016 as a
percentage of total revenues. The allocation of sources of revenue fluctuates minimally from year-to-
year. Intergovernmental revenue and Taxes account for the two largest components of revenues, each
making up 34% and 35% of the total. The total of these two categories accounts for approximately 69%
and 72% of General Fund revenues in 2017 and 2016.
12
City of St. Joseph
Financial Analysis
GENERAL FUND REVENUES (CONTINUED)
2017 General Fund Revenues
Licenses and Permits
Intergovernmental
11%
35%
Franchise Fees
4%
Special Assessments
Less Than
1%
Charges for Services
12%
\[CATEGORY NAME\]
35%
Miscellaneous
Fines and Forfeitures
2%
2%
2016 General Fund Revenues
Intergovernmental
Licenses and Permits
38%
Franchise Fees
8%
4%
Special Assessments
Less Than
1%
Charges for Services
11%
Taxes
34%
Fines and forfeitures
Miscellaneous
1%
4%
13
City of St. Joseph
Financial Analysis
GENERAL FUND EXPENDITURES
20132014201520162017
General government$ 485,778$ 552,559$ 582,258$ 617,764$ 749,008
Public safety 1,405,347 1,419,890 1,376,624 1,459,196 1,537,183
Public works 344,935 403,435 329,004 353,421 342,806
Culture and recreation 196,504 199,011 264,168 317,839 270,555
Capital outlay 170,819 81,348 130,458 100,247 129,694
Total Expenditures$ 2,603,383$ 2,656,243$ 2,682,512$ 2,848,467$ 3,029,246
As discussed earlier, General Fund expenditures increased $180,779, or 6.3%, from 2016 to 2017. The
most significant increases in expenditures occurred in general government, public safety, and capital
outlay. General government expenditures increased $131,244 due to an increase in wages as well as a
full-time community development director. Public Safety increased $77,987 due to increased salaries as
well as hiring a full-time officer. Capital outlay expenditures increased $29,447 from 2016 due to the
City improving a parking lot. All other expenses remained consistent with the prior year.
Partially offsetting these increases was a decrease in Culture and recreation expenditures of $29,447,
which was the result of less weed spraying and fewer operational supplies needed in 2017.
The pie charts on the following page show the General Fund expenditures by function for 2017 and
2016as a percentage of total expenditures. The allocation of expenditures by function was fairly
consistent from 2016 to 2017. Public safety remains the largest component of General Fund
expenditures, representing 51% of total expenditures for both 2017 and 2016.
14
City of St. Joseph
Financial Analysis
GENERAL FUND EXPENDITURES (CONTINUED)
2017 General Fund Expenditures
Public Safety
51%
Public Works
11%
General Government
25%
Culture and
Recreation
9%
Capital Outlay
4%
2016 General Fund Expenditures
Public Safety
51%
Public Works
12%
Culture and
General Government
Recreation
22%
11%
Capital Outlay
4%
15
City of St. Joseph
Financial Analysis
GENERAL FUND BUDGET
The table below illustrates the General Fund budget and actual for 2017 revenues and expenditures by
function.
Variance
With Final
Actual
Original and
Budget -
Amounts
Final Budget
Over (under)
Revenues
Taxes$ 1,128,180$ 1,125,765$ (2,415)
Special assessments 3,000 9,127 6,127
Franchise fees 126,300 129,242 2,942
Licenses and permits 157,035 356,990 199,955
Intergovernmental 1,155,220 1,133,362 (21,858)
Charges for services 361,990 376,946 14,956
Fines and forfeitures 43,000 55,474 12,474
Miscellaneous 85,400 71,131 (14,269)
Total revenues 3,060,125 3,258,037 197,912
Expenditures
General government 662,175 749,008 86,833
Public safety 1,581,460 1,537,183 (44,277)
Public works 403,220 342,806 (60,414)
Culture and recreation 299,470 270,555 (28,915)
Capital outlay 176,460 129,694 (46,766)
Total expenditures 3,122,785 3,029,246 (93,539)
Excess of receipts over
(under) disbursements
(62,660) 228,791 291,451
Other Financing Sources (Uses)
Insurance recoveries - 1,470 1,470
Sale of property 12,350 275 (12,075)
Transfers in - 13,896 13,896
Transfers out (39,000) (250,548) (211,548)
Total other financing sources
(26,650) (234,907) (208,257)
Net change in fund balance$ (89,310)$ (6,116)$ 83,194
16
City of St. Joseph
Financial Analysis
GENERAL FUND BUDGET (CONTINUED)
General Fund revenues were over budget by $197,912, or 6.5% in 2017. The area with the largest
budget variance was licenses and permits, which exceeded budget by $199,955. Licenses and permits
were over budget due to the City budgeting conservatively for them as they can vary from year to year,
2017was a year of increased development resulting in revenues exceeding the budget. The remaining
areas were on budget, with a total variance between them of $16,999 under budget.
General fund expenditures were under budget by $93,539. Public works, Capital Outlay, Public Safety,
and Culture and recreation were under budget $60,414, $46,766, $44,277 and $28,915, respectively.
Public works is under budget due to the City having a mild winter, resulting in less hours worked for
snow removal services. Capital outlay expenditures were under budget $46,766, the largest component
of this variance relates to setting monies aside each year for future fire equipment purchases. Public
Safety was under budget due to conservative budgeting. Culture and recreation was under budget due to
not having to pay utilities for the school building as Colt's Academy extended its lease. These areas were
partially offset by General government, which was over budget $86,833. This variance was due to a
compensation plan update that was designated in the prior year's equity.
ENTERPRISE FUNDS
Enterprise funds are used to account for operations financed and operated in a manner, similar to private
business enterprises, where the City intends the cost of providing goods or services to the public be
financed or recovered primarily through user charges. The City's Enterprise Funds include the Water,
Sanitary Sewer, Refuse, Storm Water, and Street Light Utility Funds.
17
City of St. Joseph
Financial Analysis
ENTERPRISE FUNDS
Water Fund
The Water Fund showed operating income for the third year in a row, after two years of operating
losses. Operating revenues increased $85,222, or 9.6%, from 2016 due to rate increases, while operating
expenses increased $9,722, or 1.2%, from 2016 to 2017, due to the purchase of water meters.
Operations produced operating income of $177,044, the highest in the five years presented. With the
exclusion of $417,012 in depreciation expense, the Fund experienced operating income of $594,056.
However, depreciation should be considered as a true expense in operations, being that most equipment
and facilities will eventually need upgrades or replacement. The operations of the Water Fund covered
100% of depreciation expense.
In addition to the operating revenues and expenses of the Water Fund, there were net non-operating
expenses of $30,362, which is comprised of property taxes and other income, offset by interest expense
on the outstanding bond debt. The operating and non-operating activities netted with capital
contributions and transfers resulted in an increase in net position of $473,391 to $8,661,088 at December
31, 2017. The cash and investments balance at December 31, 2017, totaled $670,382, an increase of
$609,514, a large portion of this increase was attributed to bond proceeds received at year end but not
spent.
Water Fund
$1,000,000
$800,000
$600,000
$400,000
$200,000
$-
$(200,000)
20132014201520162017
Operating Revenues
$713,136$723,850$770,889$883,601$968,823
Operating Expenses
733,526753,725762,423782,057791,779
Operating Income (Loss) with Depreciation
(20,390)(29,875)8,466101,544177,044
Operating Income without Depreciation
357,200349,539413,747513,809594,056
18
City of St. Joseph
Financial Analysis
ENTERPRISE FUNDS (CONTINUED)
Sanitary Sewer Fund
Operating revenues increased $274,559, or 15.6%%, from 2016 to 2017, while operating expenses
increased $72,338, or 8.2%. The increase in revenue is due to the City raising rates. Expenses increased
due to increases in depreciation and repairs and maintenance.
The Sewer Fund produced operating income for the second time in the five years presented. Due to the
nature and cost of the Sewer Fund's assets, it is difficult to establish sewer rates sufficient to cover
replacement of the assets represented by depreciation expense. Ideally, sewer revenues should cover all
operating expenses, including depreciation. However, depreciation of Sewer Fund assets is a difficult
cost to recover from system users since there are relatively few users in relation to the cost of asset
replacement. The operations of the Sewer Fund covered 100% of depreciation expense in 2016 and
2017.
The graph below indicates the Sewer Fund did generate operating income each year when depreciation
expense is not considered, indicated by the orange bar.
In addition to the operating revenues and expenses of the Sewer Fund, there were net non-operating
expenses of $117,403, which is mainly due to $151,289 of interest expense paid on outstanding debt.
Capital contributions and transfers along with the operating and non-operating activities resulted in an
increase in net position of $389,833 to $8,635,059 at December 31, 2017. The cash balance at
December 31, 2017, totaled $2,346, a decrease of $3,432.
Sanitary Sewer Fund
$1,400,000
$1,200,000
$1,000,000
$800,000
$600,000
$400,000
$200,000
$-
$(200,000)
$(400,000)
20132014201520162017
Operating Revenues
$709,892$661,679$840,148$997,206$1,271,765
Operating Expenses
809,378850,112848,367886,810959,148
Operating Income (Loss) with Depreciation
(99,486)(188,433)(8,219)110,396312,617
Operating Income without Depreciation
289,213204,478433,404563,309794,023
19
City of St. Joseph
Financial Analysis
ENTERPRISE FUNDS (CONTINUED)
Refuse Fund
The following graph displays selected financial data for the Refuse Fund for the past five years. The
Fund consistently showed an operating loss each year, except for 2016. Operating revenues increased
$1,548,or 0.5%, while operating expenses increased $7,277, or 2.6%, from 2016 to 2017. This increase
in expenditures was a result of an increase in refuse fees. These changes resulted in an operating loss of
$1,406 for 2017. The Fund produced operating income of $5,200 when depreciation is not factored in.
The operations of the Refuse Fund cover 79% of the depreciation expense. It should be noted that the
Refuse Fund receives non-operating revenues including interest income and special assessments
revenue,which resulted in an increase in the Fund's net position of $3,478. The cash balance increased
$10,102 in 2017 and totaled $257,764 at December 31, 2017.
Refuse Fund
$350,000
$300,000
$250,000
$200,000
$150,000
$100,000
$50,000
$-
$(50,000)
20132014201520162017
Operating Revenues
$298,123$285,197$284,585$286,603$288,151
Operating Expenses316,087322,397287,877282,280289,557
Operating Income (Loss) with Depreciation
(17,964)(37,200)(3,292)4,323(1,406)
Operating Income (Loss) without Depreciation
(11,458)(30,694)3,31410,9295,200
20
City of St. Joseph
Financial Analysis
ENTERPRISE FUNDS (CONTINUED)
Storm Water Fund
The Storm Water Fund showed operating losses in the past five years. Operating revenues increased
$27,955,or 28.2%, from 2016 to 2017, due to increased developer fees while operating expenses
decreased $8,800, or 4.9% due to the decreased wage expense due to extinguished OPEB liability.
The Storm Water Fund produced an operating loss of $42,222 with depreciation and operating income
of $62,991 without depreciation expense. The operations of the Storm Water Fund covered
approximately 59.9% of depreciation expense. The Storm Water Fund also reported non-operating
revenues including investment income and special assessments totaling $2,332, with capital
contributions and transfers of $200,388 for bonded improvement projects to other funds. Fund activity
resulted in an increase in net position of $160,498. The cash balance increased $39,466 in 2017 and
totaled $280,964 at December 31, 2017.
We recommend the City continue to monitor rates as well as operating expenses to ensure the Fund's
profitability in the future.
Storm Water Fund
$200,000
$150,000
$100,000
$50,000
$-
$(50,000)
$(100,000)
20132014201520162017
Operating Revenues
$102,009$97,505$98,133$99,212$127,167
Operating Expenses170,289167,939180,681178,189169,389
Operating Loss with Depreciation
(68,280)(70,434)(82,548)(78,977)(42,222)
Operating Income without Depreciation
28,94627,22415,21123,78662,991
21
City of St. Joseph
Financial Analysis
ENTERPRISE FUNDS (CONTINUED)
Street Light Utility
The Street Light Utility Fund was opened during 2013 to track activity relating to the street light utility.
The Street Light Utility Fund showed an operating loss in two of the four years presented. Operating
revenues increased $809, from 2016 to 2017 while operating expenses increased $1,539, or 2.4%.
The Street Light Utility Fund produced an operating loss of $3,507. The fund also reported non-
operating income including investment income and special assessments totaling $3,750, which resulted
in an increase in net position of $243. The cash balance increased $805 in 2017 and totaled $23,577 at
December 31, 2017.
We recommend the City continue to monitor rates as well as operating expenses to ensure the Fund's
profitability in the future.
Street Light Utility
$70,000
$60,000
$50,000
$40,000
$30,000
$20,000
$10,000
$-
$(10,000)
20132014201520162017
Operating Revenues
$43,066$63,037$60,564$60,550$61,359
Operating Expenses
47,63850,53153,75163,32764,866
Operating Income (Loss)(4,572)12,5066,813(2,777)(3,507)
22
City of St. Joseph
Emerging Issues
Executive Summary
The following is an executive summary of financial and business related updates to assist you in staying
current on emerging issues in accounting and finance. This summary will give you a preview of the new
standards that have been recently issued and what is on the horizon for the near future. The most recent
and significant update(s) include(s):
Accounting Standard Update GASB Statement No. 84 Fiduciary Activities GASB has
issued GASB Statement No. 84 relating to accounting and financial reporting for fiduciary
activities. This new statement establishes clarity to determines when a government has fiduciary
responsibility for a certain activity.
Accounting Standard Update GASB Statement No. 87 Leases GASB has issued GASB
Statement No. 87 relating to accounting and financial reporting for leases. This new statement
establishes a single model for lease accounting based on the principle that leases are financing of
the right to use an underlying asset.
The following is/are (an) extensive summary(ies) of the current update(s). As your continued business
partner, we are committed to keeping you informed of new and emerging issues. We are happy to
discuss these issues with you further and their applicability to your City.
ACCOUNTING STANDARD UPDATE GASB STATEMENT NO. 84 FIDUCIARY
ACTIVITIES
The objective of this Statement is to improve guidance regarding the identification of fiduciary activities
for accounting and financial reporting purposes and how those activities should be reported.
This Statement establishes criteria for identifying fiduciary activities of all state and local governments.
The focus of the criteria generally is on (1) whether a government is controlling the assets of the
fiduciary activity and (2) the beneficiaries with whom a fiduciary relationship exists. Separate criteria
are included to identify fiduciary component units and postemployment benefit arrangements that are
fiduciary activities. An activity meeting the criteria should be reported in a fiduciary fund in the basic
financial statements. Governments with activities meeting the criteria should present a statement of
fiduciary net position and a statement of changes in fiduciary net position. An exception to that
requirement is provided for a business-type activity that normally expects to hold custodial assets for
three months or less.
GASB Statement No. 84 describes four fiduciary funds that should be reported, if applicable: (1)
pension (and other employee benefit) trust funds, (2) investment trust funds, (3) private-purpose trust
funds, and (4) custodial funds. Custodial funds generally should report fiduciary activities that are not
held in a trust or equivalent arrangement that meets specific criteria.
This Statement also provides for recognition of a liability to the beneficiaries in a fiduciary fund when
an event has occurred that compels the government to disburse fiduciary resources. Events that compel a
government to disburse fiduciary resources occur when a demand for the resources has been made or
when no further action, approval, or condition is required to be taken or met by the beneficiary to release
the assets.
23
City of St. Joseph
Emerging Issues
ACCOUNTING STANDARD UPDATE GASB STATEMENT NO. 84 FIDUCIARY
ACTIVITIES (CONTINUED)
GASB Statement No. 84 is effective for reporting periods beginning after December 15, 2018. Earlier
application is encouraged.
Information provided above was obtained from www.gasb.org.
ACCOUNTING STANDARD UPDATE GASB STATEMENT NO. 87 LEASES
The objective of this Statement is to better meet the information needs of financial statement users by
improving accounting and financial reporting for leases by governments. This Statement increases the
usefulness of governments' 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. It establishes a
single model for lease accounting based on the foundational principle that leases are financings of the
right to use an underlying asset. Under this Statement, a lessee is required to recognize a lease liability
and anintangible 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.
A lease is defined as a contract that conveys control of the right to use another entity's nonfinancial asset
(the underlying 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.
A short-term lease is 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.
A lessee should recognize a lease liability and a lease asset at the commencement of the lease term,
unless the lease is a short-term lease or it transfers ownership of the underlying asset. The lease liability
should be measured at the present value of payments expected to be made during the lease term (less any
lease incentives). The lease asset should be measured at the amount of the initial measurement of the
lease liability, plus any payments made to the lessor at or before the commencement of the lease term
and certain direct costs. A lessee should reduce the lease liability as payments are made and recognize
an outflow of resources (for example, expense) for interest on the liability. The lessee should amortize
the lease asset in a systematic and rational manner over the shorter of the lease term or the useful life of
the underlying asset. The notes to financial statements should include a description of leasing
arrangements, the amount of lease assets recognized, and a schedule of future lease payments to be
made.
24
City of St. Joseph
Emerging Issues
ACCOUNTING STANDARD UPDATE GASB STATEMENT NO. 87 LEASES
(CONTINUED)
A lessor should recognize a lease receivable and a deferred inflow of resources at the commencement of
the lease term, with certain exceptions for leases of assets held as investments, certain regulated leases,
short-term leases, and leases that transfer ownership of the underlying asset. A lessor should not
derecognize the asset underlying the lease. The lease receivable should be measured at the present value
of lease payments expected to be received during the lease term. The deferred inflow of resources
should be measured at the value of the lease receivable plus any payments received at or before the
commencement of the lease term that relate to future periods. A lessor should recognize interest revenue
on the lease receivable and an inflow of resources (for example, revenue) from the deferred inflows of
resources in a systematic and rational manner over the term of the lease. The notes to financial
statements should include a description of leasing arrangements and the total amount of inflows of
resources recognized from leases.
GASB Statement No. 87 is effective for reporting periods beginning after December 15, 2019. Earlier
application is encouraged.
Information provided above was obtained from www.gasb.org.
25