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HomeMy WebLinkAbout2015 Audit Report City of St. Joseph Stearns County, Minnesota Financial Statements December 31, 2015 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 Net Position – Proprietary Funds 31 Reconciliation of the Statement of Net Position – Business-Type Activities 32 Statement of Revenues, Expenses, and Changes in Fund Net Position – Proprietary Funds 33 Reconciliation of the Statement of Revenues, Expenses, and Changes in Net Position – Business-Type Activities 34 Statement of Cash Flows – Proprietary Funds 35 Notes to Financial Statements 37 Required Supplementary Information Schedule of Funding Progress – Other Post Employment Benefits 76 Schedule of City's Proportionate Share of Net Pension Liability GERF Retirement Fund 77 Schedule of City's Proportionate Share of Net Pension Liability PEPFF Retirement Fund 77 Schedule of City Contributions GERF Retirement Fund 78 Schedule of City Contributions PEPFF Retirement Fund 78 Schedule of Changes in the Net Pension Liability and Related Ratios – Fire Relief Association 79 Schedule of City Contributions and Non Employer Contributing Entities– Fire Relief Association 80 City of St. Joseph Table of Contents Supplementary Information Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – General Fund 82 Combining Balance Sheet – Nonmajor Governmental Funds 84 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Nonmajor Governmental Funds 90 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 97 Report on Legal Compliance 99 Schedule of Finding and Response on Internal Control 100 1 City of St. Joseph Elected Officials and Administration December 31, 2015 Elected Officials Position Term Expires Rick Schultz Mayor January 2017 Robert Loso Council Member January 2017 Renee Symanietz Council Member January 2017 Dale Wick Council Member January 2019 Matt Killam Council Member January 2019 Administration Judy Weyrens City Administrator Appointed Lori Bartlett Finance Director Appointed 2 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, 2015, 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. 3 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 above 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, 2015, 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. Implementation of GASB 68 and GASB 71 As discussed in Note 13 to the financial statements, the City has adopted the provisions of the Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions and GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date. Our opinion is not modified with respect to this matter. 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. 4 Other Information (Continued) The combining and individual nonmajor fund financial statements are the responsibility of management and were derived from and relate 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 28, 2016, 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 28, 2016 City of St. Joseph Stearns County, Minnesota Management's Discussion and Analysis 5 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, 2015. FINANCIAL HIGHLIGHTS Key financial highlights for 2015 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 $29,395,362. Of this amount, $1,518,823 may be used to meet government's ongoing obligations to citizens and creditors (unrestricted net position).  The governmental net position decreased by $110,473 from 2014 to 2015. The decrease is due to transfers made to the water and sewer fund to help pay for utility debts while minimizing rate increases in the funds.  As of the close of the current fiscal year, the City of St. Joseph's governmental funds reported combined ending fund balances of $5,726,377, a decrease of $593,837. Of this amount $1,299,631 is unassigned for spending at the government's discretion. The remaining balance of $4,426,746 is set aside for specific future expenditures.  At the end of the current fiscal year, unassigned fund balance for the general fund was $1,315,805 or 49.1% of total general fund expenditures ($1,324,826 or 49.4% excluding the fire and PEG Access funds).  The City of St. Joseph's total long-term debt increased by $550,061 during the current fiscal year. The City had two debts paid in full in 2015 and incurred three new debts. The largest debt was issued to purchase a community center. 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 liabilities, 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 Cit y 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). City of St. Joseph Stearns County, Minnesota Management's Discussion and Analysis 6 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 thirty-four 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 and State Collected Sales Tax 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 Fund. A budgetary comparison statement has been provided for the General Fund (page 30) to demonstrate compliance with this budget. The basic governmental fund financial statements can be found on pages 26-29 of this report. City of St. Joseph Stearns County, Minnesota Management's Discussion and Analysis 7 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 31-35 of this report. Notes to the 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 the Financial Statements can be found on pages 37-74 of this report. Other Information. The combining statements referred to earlier in connection with non-major governmental funds can be found on pages 84-95 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 $29,395,362 at the close of the most recent fiscal year. By far the largest portion of the City of St. Joseph's net position reflects its investment in capital assets (e.g., land, buildings, machinery, and equipment) net accumulated depreciation, less any related debt used to acquire those assets that is still outstanding. The City of St. Joseph uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City of St. Joseph's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. City of St. Joseph Stearns County, Minnesota Management's Discussion and Analysis 8 NET POSITION 2015 2014 2015 2014 2015 2014 Assers Current and other assets 7,994,562$ 8,086,164$ 893,303$ 1,431,529$ 8,887,865$ 9,517,693$ Capital assets, net 12,072,185 10,015,177 32,642,113 33,208,533 44,714,298 43,223,710 Total assets 20,066,747 18,101,341 33,535,416 34,640,062 53,602,163 52,741,403 Deferred Outflows of resources Deferred outflows of resources Related to pensions 339,470 - 33,738 - 373,208 - Total deferred outflows 339,470 - 33,738 - 373,208 - Liabilities Current liabilities 1,640,535 1,329,513 1,358,124 1,457,613 2,998,659 2,787,126 Long-term liabilities 9,084,972 6,620,623 12,096,018 12,920,244 21,180,990 19,540,867 Total liabilities 10,725,507 7,950,136 13,454,142 14,377,857 24,179,649 22,327,993 Deferred Inflows of Resources Deferred inflows of resources Related to lease receivables 231,089 - - - 231,089 - Deferred inflows of resources Related to pensions 146,834 - 22,437 - 169,271 - Total deferred inflows 377,923 - 22,437 - 400,360 - Net Position Invested in capital assets, net related debt 6,427,207 6,370,844 19,907,165 19,429,295 23,972,202 23,072,465 Restricted 3,904,337 4,556,952 - - 3,904,337 4,556,952 Unrestricted (1,028,757) (776,591) 185,410 832,910 1,518,823 2,783,993 Total net position 9,302,787$ 10,151,205$ 20,092,575$ 20,262,205$ 29,395,362$ 30,413,410$ Governmental Business-Type Activities Activities Total An additional portion of the City of St. Joseph's net position (13%) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net position is a deficit of $1,028,757. The deficit is the result of realizing a portion of the Minnesota employee's pension liability (net pension liability), new in 2015 as required by GASB 68. Without the net pension liability, the unrestricted net position would be a surplus of $84,316. 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. City of St. Joseph Stearns County, Minnesota Management's Discussion and Analysis 9 The governmental activities change in net position balance decreased by 1.1% before the change in accounting principles (8.4% decrease overall). A relatively stable year in operations. The decrease due to the change in accounting principles is a new GASB requirement 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 effected by funding law changes as a result of PERA's funding performance each year. A net pension liability was recorded for $1,113,073 in the governmental activities. There was a 0.3% increase (.8% decrease after the change in accounting principles) 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 City completed the main lift station improvement project to fully capitalize the asset and substantially completed the water tower rehabilitation project. The full value of the assets are netted against the bonds payable. The decrease due to the change in accounting principles is a new GASB requirement as stated above. A net pension liability was recorded for $249,768 in the business-type activities. Governmental Activities. Governmental activities reduced the City of St. Joseph's total net position by $848,418. The most significant change in governmental net position is a result of the change in accounting principle to recognize net pension liability through PERA. The governmental activities shows a break-even before transfers. Council approved transferring governmental reserved funds to water and sewer to minimize the rate increase in 2015. The transfers were need to assist in utility debt payments. Business-Type Activities. Business-type activities decreased the City of St. Joseph's net position by $169,630, without the decrease of $229,758 relating to the change in accounting principle to recognize net pension liability, business type activities increased net position by $60,128. The largest contributors were in the water, refuse, and street light utility funds. The water fund received transfers from the debt service reserve fund, levied taxes and increased water rates 5% to help cover water debt costs. In addition to utility rates, new development requires an access fee known as Water Access Charge (WAC) and Sewer Access Charge (SAC). The WAC/SAC is intended to charge new development a proportional fee for the asset that they will be utilizing. Utility rates in the refuse and street light utility funds is sufficient to cover the operating expenses of these funds. The sewer fund received transfers from governmental activities to pay debts. Sewer rates increased 7% in 2015 to cover expenses. Storm water rates were left unchanged as the city council planned to spend down reserves in this fund. The water utility inclusive of the WAC fund realized a net position increase of $165,479. Water rate increases, development fees collected, transfers from governmental funds and debt levies improved the water fund's financial health. Debt was spent down by $533,757 and asset values increased as the water tower project was substantially completed along with project contributions from the Park Terrace improvement project. Also, a waterline was extended along 1st Ave NE adding to the asset value. As a result, the net position for investment in capital assets, net related debt increased $315,500. Unrestricted net position decreased $144,545. The change in accounting principle to record net pension liabilities reduced the water fund's net position by $101,572. Additional rate increases were approved for 2016 after the City hired a consultant to review the water fund's current and future health. The sewer utility inclusive of the SAC fund realized a net position decrease of $217,985. Sewer rates were increased and development activity improved to assist paying for sewer debts. In previous years the City was able to minimize subsidy of the sewer fund as the SAC fund had a surplus fund balance based on development; however, the account was depleted in 2015 to cover debt costs. Sewer projects City of St. Joseph Stearns County, Minnesota Management's Discussion and Analysis 10 for the main lift station and Park Terrace were substantially completed during 2015. The full value of the assets netted against the debt payments and depreciation increased the net position for investment in capital assets, net related debt by $246,717. Unrestricted net position decreased $190,247 partly due to the change in accounting principle of $83,395 to record net pension liability. Transfers to other funds for debt payments totaled $103,150. Additional rate increases were approved for 2016 after the City hired a consultant to review the sewer fund's current and future health. The graphs and charts below and on the following pages summarize and graphically depict the changes in net position for the governmental and business-type activities. CHANGE IN NET POSITION 2015 2014 2015 2014 2015 2014 Revenues Program revenues Charges for Services 602,611$ 478,561$ 2,254,780$ 1,959,537$ 2,857,391$ 2,438,098$ Operating grants and contributions 326,678 407,978 6,873 408 333,551 408,386 Capital grants and contributions 409,469 876,982 12,104 306,381 421,573 1,183,363 General revenues Property taxes 1,685,639 1,674,468 44,656 - 1,730,295 1,674,468 Tax increments 41,385 41,094 - - 41,385 41,094 Sales tax 405,859 380,113 - - 405,859 380,113 Franchise fees 124,283 124,940 - - 124,283 124,940 State aids 910,488 875,663 - - 910,488 875,663 Unrestricted investment earnings 76,419 88,145 36,799 88,986 113,218 177,131 Gain on sale of capital assets - - 2,810 - 2,810 - Total revenues 4,582,831 4,947,944 2,358,022 2,355,312 6,940,853 7,303,256 Expenses General government 641,393 604,527 - - 641,393 604,527 Public safety 1,547,886 1,616,153 - - 1,547,886 1,616,153 Public works 1,278,903 1,413,380 - - 1,278,903 1,413,380 Economic development 358,378 432,250 - - 358,378 432,250 Culture and recreation 439,504 334,232 - - 439,504 334,232 Interest on long-term debt 287,934 230,831 - - 287,934 230,831 Water - - 912,963 1,102,600 912,963 1,102,600 Sanitary sewer - - 1,001,928 1,027,840 1,001,928 1,027,840 Storm water - - 180,681 322,397 180,681 322,397 Refuse - - 287,877 181,074 287,877 181,074 Street light utility - - 53,751 50,531 53,751 50,531 Total expenses 4,553,998 4,631,373 2,437,200 2,684,442 6,991,198 7,315,815 Decrease in net position before transfers 28,833 316,571 (79,178) (329,130) (50,345) (12,559) Transfers (139,306) (1,002,963) 139,306 1,002,963 - - Change in net position (110,473) (686,392) 60,128 673,833 (50,345) (12,559) Net Position Net position - beginning 10,151,205 10,837,597 20,262,205 19,588,372 30,413,410 30,425,969 Change in accounting principle (737,945) - (229,758) - (967,703) - Net position - beginning restated 9,413,260 10,837,597 20,032,447 19,588,372 29,445,707 30,425,969 Net position - ending 9,302,787$ 10,151,205$ 20,092,575$ 20,262,205$ 29,395,362$ 30,413,410$ Governmental Activities Business-Type Activities Total City of St. Joseph Stearns County, Minnesota Management's Discussion and Analysis 11 EXPENSES AND PROGRAM REVENUES – GOVERNMENTAL ACTIVITIES REVENUES BY SOURCE – GOVERNMENTAL ACTIVITIES EXPENSES AND PROGRAM REVENUES – BUSINESS-TYPE ACTIVITIES REVENUES BY SOURCE - GOVERNMENTAL ACTIVITIES - 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 1,800,000 General Government Public Safety Public Works Culture and Recreation Economic Development Interest on Long- term Debt Revenue Expenditures General Government 2% Public Safety 13% Public Works 9% Culture and Recreation 1% Economic Development 4% General Revenues 71% City of St. Joseph Stearns County, Minnesota Management's Discussion and Analysis 12 EXPENSES AND PROGRAM REVENUES – BUSINESS-TYPE ACTIVITIES - 200,000 400,000 600,000 800,000 1,000,000 1,200,000 Water Sanitary Sewer Refuse Storm Water Street Light Utility Revenue Expenditures REVENUES BY SOURCE – BUSINESS-TYPE ACTIVITIES Water 41% Sanitary Sewer 39% Refuse 13% Storm Water 4% Street Light Utility 3% City of St. Joseph Stearns County, Minnesota Management's Discussion and Analysis 13 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 $5,726,377, a decrease of $593,837 from 2014. Revenues for the City's governmental funds were $4,919,442, while total expenditures were $7,719,832. The excess of expenditures over revenues is mainly attributed to the City purchasing the former Kennedy School property known as Colts Academy, including 13 acres of open land from ISD 742. The property was purchased for a future community center and construction of a new government center. To facilitate the purchase of the property, the City issued Tax Abatement Bonds and allocated $500,000 of local option sales tax reserves. The local option sales tax has been set aside for the past few years pending future projects. In addition to purchasing the property from ISD 742, transfers from debt service reserves and water and sewer connection fees to the water and sewer funds accounted for a portion of the decrease in the net change in fund balances. 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 $1,315,805. 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 49.1% of total general fund expenditures, 49.4% (5.9 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. Although the General fund experienced reductions in intergovernmental revenues and property tax revenues, the contributions and charges for services increased $62,085 to help maintain a healthy fund balance. New in 2015, the City purchased property for a future community center. At the time of purchasing the property, the City entered into a five (5) year lease with a music based daycare, Little Saints Academy (LSA), to operate in a portion of the existing facility located on the property. Rent proceeds are collected from LSA and are added to the General Fund to help cover the building operation. General fund expenditures were less than budgeted by $146,773 and over 2014 expenditures by $26,269. The City of St. Joseph sets funds aside for the street maintenance plan. The street maintenance plan expenditures fluctuate each year, increasing in 2015. Spring 2014 was one of the snowiest periods on record for Central Minnesota. The Council added to the ice and snow removal budget for 2015. The 2015 winter was warmer and dryer; thus, the City was under-budget in streets and allowing time for other projects. Engineering expenditures were over budget as the city council approved studies to consider downtown alley improvements, Parkway Business Center expansion, Minnesota Street turnback, utility rate study, and Field Street construction. In addition, the City purchased Colts Academy for a community center in August 2015. The facility operations is funded under the General Fund as a new department recorded as culture and recreation. As a result of the prudent financial policies of the City, the General Fund remained stable. The schedule on the next page presents a summary of General Fund revenues and expenditures. City of St. Joseph Stearns County, Minnesota Management's Discussion and Analysis 14 State Collected Sales Tax Fund The State Collected Sales Tax Fund was established in 2005 for the collection of voter approved local option sales taxes for regional development of facilities, parks and trails, and transportation. Voters approved extending the local options sales tax collection through 2030. The City of St. Joseph purchased a former elementary school to repurpose as a community center. The year-end restricted fund balance was $1,296,254. December 31,December 31,Increase Percent 2015 2014 (Decrease)Change Revenues Taxes 1,231,341$ 1,249,534$ (18,193)$ -1% Special assessment 3,590 7,302 (3,712) -51% Licenses and permits 152,158 105,929 46,229 44% Intergovernmental 1,107,840 1,018,932 88,908 9% Charges for services 270,508 243,067 27,441 11% Fines and forfeitures 50,489 38,330 12,159 32% Miscellaneous 111,983 82,048 29,935 36% Total general fund revenue 2,927,909$ 2,745,142$ 182,767$ 7% December 31,December 31,Increase Percent 2015 2014 (Decrease)Change Expenditures General government 595,071$ 552,709$ 42,362$ 8% Public safety 1,416,039 1,455,771 (39,732) -3% Public works 396,766 448,752 (51,986) -12% Culture and recreation 274,636 199,011 75,625 38% Total general fund expenditures 2,682,512$ 2,656,243$ 26,269$ 1% 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 $171,294 more than expected mainly due to development related revenues, state aids and donor contributions. Tax delinquencies were down and a few foreclosed properties sold increasing the tax collections.  Actual expenditures were $146,773 less than budget. 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 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, the savings between budgets to 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 established and adopted a five-year capital improvement plan. During the budget process the CIP is reviewed and the Council prioritizes which projects/equipment will be funded and funds are set aside each year for equipment purchases until the useful life of the equipment is reached. Due to the large expenditures associated with some of the needed City of St. Joseph Stearns County, Minnesota Management's Discussion and Analysis 15 equipment such as a street sweeper and plow truck, 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 2015 the Public Works staff spent more time in culture and recreation. The additional staff time and costs were a result of reconstructing a warming house and various other park projects. The winter months were warmer and dryer than normal freeing up time for staff to work on other projects. Engineering costs were over budget as many project and development proposals surfaced the past couple years. When projects move forward, the engineer costs are reimbursed from the project funding. 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 decreased $367,569 overall. The paragraphs on the following pages provide a brief financial overview of each major proprietary fund. Water Enterprise Fund The Water Fund is used to account for the operations of the City's water utility. In 2015, the Water fund's net position increased $272,527. Before transfers and capital contributions, the net position would show a decrease of $28,983. The net position includes depreciation of $405,281. The water revenues are covering over 100% of the depreciation. Bonded debt payments in the water fund totaled $684,968. Debt payments are covered by water rates, debt levy, transfers from governmental funds and WAC fees. Water rates have been and are projected to continue to be incrementally increased to cover operational costs along with the debts. 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 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 30% increase in water rates for 2016 to reduce the dependency on debt levies and transfers from other funds to cover operational and non-operational expenses. Sanitary Sewer Enterprise Fund The Sanitary Sewer Fund is used to account for the operations of the City's sanitary sewer utility. In 2015, the Sanitary Sewer Fund's net position increased $139,865, a decrease before capital contributions and transfers of $145,932. 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 four notes with St. Cloud for various conveyance and treatment facility projects. In addition, St. Joseph issued a bond in 2013 to rehabilitate the Sauk River manhole feed from the St. Joseph force main into St. Cloud to reduce toxins discharged into the wastewater treatment system. In 2013 the City issued a $1.875M bond to cover costs to rehabilitate the Main lift station and sewer mains under CSAH 75. The large debt costs are partially funded with reserved SAC fees, trunk fees, and sewer usage rates. The reserves have been depleted in 2015; however, new development increase revenues. As stated above in the water fund, the City hired a consultant to review the sewer rates 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 a 24% increase in sewer rates for 2016. Operational revenues are covering near 100% of depreciation. Refuse Enterprise Fund The refuse fund is used to account for the contract services to provide residential refuse, recycling and compost services. In 2015, the refuse fund's net position decreased $660. The operating revenues and expenses decreased from 2014. The refuse fund has a net position balance that built up from earlier years of operations. Council opted to maintain refuse rates to allow for larger increases in other utility funds. In addition, city council approved paying for an aquatics and facilities studies out of the reserved City of St. Joseph Stearns County, Minnesota Management's Discussion and Analysis 16 balance in previous year. The 2015 operations reflects true revenues and costs. The composting services are also operated out of the refuse fund and in 2012 the City partnered with a local business to provide the services. After the initial three year contract, the remaining contract is year to year and is anticipated to be long term. Storm Water Enterprise Fund The Storm Water Fund is used to account for the operations of the City's storm water utility. In 2015, the Storm Water Fund's net position decreased $78,695. The Storm Water Fund had an operating loss of $82,548 or, $15,211 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 funds. The decision was based on the fund having a healthy net position balance. The Storm Water Fund has not collected any development fees for the previous five years. 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 average household pays $3 more per year while an average business pays $173 less per year for street lighting. The new 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 35% 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 way to charge for services. The net position change of the Street Light Utility Fund was positive $7,022 at December 31, 2015. 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, 2015, amounts to $44,714,298 (net of accumulated depreciation), an increase of $1,490,588. The investment in capital assets includes land, intangible assets, buildings, improvements, machinery and equipment, furniture and office equipment, infrastructure, and construction in progress. Net investment in capital assets increased $899,737. The increase is attributable to capital asset construction in progress for the street improvements and government center; and the purchase of a future community center. The assets disposed were much smaller than the value of the improvements added. In addition, construction in progress is not depreciated until the asset is fully constructed and operational. The overall debt related to capital assets increased $552,112. The City of St. Joseph issued three debts in 2015 for street improvements, general equipment replacements and a community center. The bond issues were more than what was paid off in 2015 mainly from the community center bonds. The table on the next page is a summary of the City of St. Joseph's capital assets. City of St. Joseph Stearns County, Minnesota Management's Discussion and Analysis 17 CAPITAL ASSETS 2015 2014 2015 2014 2015 2014 Land 561,194$ 457,194$ 377,882$ 377,882$ 939,076$ 835,076$ Easements 25,664 5,820 67,915 67,915 93,579 73,735 Construction in progress 1,760,591 960,861 1,154,199 3,212,639 2,914,790 4,173,500 Improvements 1,237,728 1,251,885 - - 1,237,728 1,251,885 Infrastructure 16,613,244 16,613,244 - - 16,613,244 16,613,244 Buildings 4,746,527 2,511,263 8,797,686 8,120,415 13,544,213 10,631,678 Plant and lines - - 22,599,469 21,461,161 22,599,469 21,461,161 Sewer rights - - 8,569,212 8,569,212 8,569,212 8,569,212 Machinery and equipment 3,343,262 3,242,495 787,554 680,376 4,130,816 3,922,871 Less: accumulated Depreciation (16,216,025) (15,027,585) (9,711,804) (9,281,067) (25,927,829) (24,308,652) Total 12,072,185$ 10,015,177$ 32,642,113$ 33,208,533$ 44,714,298$ 43,223,710$ Governmental Activities Business-Type Activities Total 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 2015 was $2,196,335. Long-Term Liabilities At the end of the current fiscal year, the City of St. Joseph had total net bonded debt outstanding of $21,355,699. Of this amount, $8,620,751 comprises debt backed by the full faith and credit of the government. The remainder of the City of St. Joseph's debt represents bonds and notes secured by specified revenue sources (i.e. utility bonds). Other long-term debt includes compensated absences payable, net pension liabilities and other post-employment benefits. An illustration of the City's long-term liabilities is included in the table on the following page. City of St. Joseph Stearns County, Minnesota Management's Discussion and Analysis 18 OUTSTANDING LONG-TERM LIABILITIES Percent 2015 2014 Change Governmental Activities General obligation bonds 1,029,157$ 1,134,323$ -9% General obligation special assessment bonds 5,731,903 5,800,026 -1% Public project revenue bonds - 90,000 -100% General obligation abatement bonds 1,859,691 - 100% Compensated absences payable 428,803 439,015 -2% Net other post employment benefits 195,197 183,098 7% Net pension liability 1,113,073 - 100% Total governmental activities 10,357,824$ 7,646,462$ 35% Business-Type Activities General obligation revenue bonds 8,005,087$ 8,706,244$ -8% Notes payable 4,729,861 5,072,994 100% Compensated absences payable 130,582 122,421 7% Net other post employment benefits 57,227 53,620 7% Net pension liability 249,768 - 100% Total business-type activities 13,172,525$ 13,955,279$ -6% The City of St. Joseph issued $760,000 General Obligation Bonds, Series 2015A in August 2015. The bond issue funds the Clinton Village and Northland area street improvements; and general equipment replacements. In addition, the City issued $1,840,000 General Obligation Tax Abatement Bonds, Series 2015B in August 2015 to fund the purchase of the Colts Academy for a future community center. The City increased the net bonded debt by $1,596,402 on the governmental activities to end the year. The business-type activities saw a decrease in bonded debt of $1,044,290. The 2015 debt issues were recorded in governmental activities. The two bonds paid in full reduced bonded debt in governmental activities. The City of St. Joseph raised their bond rating to an AA-/Stable rating from A+/Stable rating from Standard & Poor's for the general obligation debt issued in 2015. According to Standard & Poor's municipal credit analysis, rating action is based on the city's improved economy, reflected by its improved projected per capita effective buying income. The City's solid bond rating reflects the City's financial operations characterized by strong management with good financial policies and practices, adequate economy and budgetary performance, very strong budgetary flexibility and liquidity, and weak debt and contingent liability position. Although a large debt liability, the report sites they positively factored the City's rapids debt amortization (76.5% within the next ten years). The City's proximity to the St. Cloud metro area factors positively for the City of St. Joseph. 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 $9,241,335 which significantly exceeds of the City of St. Joseph's outstanding pure general obligation debt of $1,020,000. City of St. Joseph Stearns County, Minnesota Management's Discussion and Analysis 19 Additional information on the St. Joseph's long-term liabilities can be found in Note 6 on pages 52-56. ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES The City of St. Joseph experienced a stable financial position at the end of 2015. After many years of declining market values and slow development the City realized improvements. The taxable market value increased 0.7% and development activities increased. The City has been able to keep a steady tax rate and maintain service levels with other revenues and improving process efficiencies. While the housing market for newly constructed homes has significantly declined since 2008, the City of St. Joseph experienced growth in both residential and commercial development. The construction of a community school (K-8) will spur development adjacent to the school site. The City has been working with a developer to develop a lifecycle housing development on approximately 125 acres near Kennedy School. The development is anticipated to include a campus with a combination of patio homes, memory care, independent living apartments and commercial services such as a chapel, beauty salon, rehabilitation center and bistro/restaurant. When fully developed with the site will accommodate approximately 200 living units. In the same vicinity is a new patio home development that is nearing completion; therefore, the developer will be seeking approval of phase 2 in 2016 adding approximately 12 more patio homes. The City is also working with a developer to construct a 40 unit apartment building serving the elderly allowing for aging in place. The facility will be located centrally in the city with construction anticipated in the spring of 2016. School enrollment has surpassed planning expectations. ISD 742 began constructed a 10 classroom addition in 2014/2015 to accommodate the growth. Other residential developments include Graceview phase 4 which is a phased development with 19 lots in the first phase, and Jasmine Court with 10 single family lots available. As an incentive for single family construction, city council approved $50,000 in WAC/SAC incentives for the first ten new homes. The incentive will be carried forward until used. The incentive was depleted in early 2016. In 2014 the City of St. Joseph was awarded a $600,000 Minnesota Small Cities Development Program (SCDP) housing rehabilitation grant to correct deficiencies of older, low to moderate income homes in St. Joseph. A qualified homeowner in the targeted area can receive up to a $35,000 0% forgivable seven year loan to upgrade their home's roofing, exterior, or interior health and safety items that improve energy efficiency. The homeowner's match is 10-15% of the construction costs. The unused balance at the end of 2015 was $138,517. 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 Bayou Blues and Alley Flats. The Bayou Blues facility will include residential, office space and restaurant. The Alley Flats consists of a four-unit two-story condominium living space, complete with roof top decks. In 2009 the Coborn's PUD was approved which contained three commercial development sites. The PUD is located on CSAH 75 and CR133, 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 grocer y store was added to the landscape of the City. In late 2012, McDonald's opened in the adjacent area. The City also anticipates an auto parts store to be constructed in mid-2016. City of St. Joseph Stearns County, Minnesota Management's Discussion and Analysis 20 In addition, the city council approved TIF financing for the Central Minnesota Credit Union to construct a $4.2M office building for a call center, information technology support/equipment, and other administrative and support staff. A minimum of 30 employees will work in the facility with room to expand to 80 employees. The new facility opened in late 2015. The City is also experiencing new growth in the industrial park. Scenic Specialties landscape business rehabilitated a barn on their site to create a rustic events center named Rolling Ridge Event Center. Weddings, corporate gatherings, family gatherings can rent the facility for their event. There are few options in the Central Minnesota area for a rustic event center. The first wedding was held in October 2015. The City is also working with a current business in the Industrial Park to expand to a new location. Other developments include a ten patio-bay townhomes in the Graceview development, a Kwik Trip convenience store to replace a closed restaurant/bar and athletic fields for the College of St. Benedicts. The Central Minnesota Housing Partnership (CMHP) was awarded federal grant money to rehabilitate the 36 unit Cloverdale Townhomes for low to moderate income families. Construction began in late 2014 with occupancy taken in 2015. Finally, the College of St. Benedicts remodeled and expanded their nursing school facility. The state of the art training facility will draw students to the campus. Also new in St. Joseph is a government center to house city administration, council chambers and police department. The City accepted bids for the $4.8M complex in April 2016. Construction is expected to be completed by February 2017. The current facility is being sold for the current market value. A purchase agreement was submitted and accepted by the City. The new facility is being constructed on the west side of the future community center the City purchased in 2015. The St. Joseph Economic Development Authority (EDA) is an active group promoting business interests within the St. Joseph Community. The EDA continues to work with property owners to develop industrial and commercial sites. The EDA is also working with the Comprehensive Economic Development Strategy (CEDS) to attract businesses from around the country to the area and to provide opportunity for possible federal grant funding. In addition, the EDA is working on a plan to identify and revitalize the downtown area to attract people to the area. Property tax reforms and budget fluctuations at the state level have significantly impacted government aid payments made to the City. Further, the taxable market value on properties has just started to come back the past two years. The Council continues to budget conservatively to keep minimal increases in the tax rate. As the Nation's economic instability continues, the City is monitoring the federal and state legislation with the impacts on the local government. The City annually reviews the fee structures for all licenses and permits and services to recover appropriate costs in lieu of raising property taxes. The City's rate structure for the utilities is established to help cover not only the operating costs but the depreciation as well. Water and sanitary sewer are charged from the first gallon used with a separate line charge to recover current and future capital replacements. This structure began in 2006 to promote water conservation. Residential sewer rates are capped at the water used for the November/December billing. The City hired Carl Brown Consulting in 2015 to review the water and sanitary sewer funds current and future financial health. Mr. Brown determined the current rates were not sufficient to meet the financial needs of the utilities. He recommended at a minimum a 30% increase in water rates and 24% increase in sewer rates. At these minimum rate increases, further increases will be needed the next couple years before the funds would stabilize. The amount of increase will depend somewhat on the growth of the City of St. Joseph Stearns County, Minnesota Management's Discussion and Analysis 21 City. As development occurs additional access fees are collected offsetting some of the need for increased usage fees. The Council agreed to the minimum rate beginning in 2016 with a follow up performance review in September 2016. The City's long-term goal is for each fund to cover operations, including depreciation, and debt payments through rates. All the factors were considered in preparing the City of St. Joseph's budget and fee schedule for 2015 and future reporting years. As the City looks forward to 2016, construction of the government center will begin, construction of the first phase of Field Street is anticipated, improvements to the filtration system at water treatment plant one will start, a six-hole footgolf course in Northland Park will open, park planning in Millstream Park will continue, and a potential dog park in the City will continue to be researched. A busy 2016 is anticipated. 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, PO Box 668, 25 College Avenue North, St. Joseph, MN 56374. 22 (THIS PAGE LEFT BLANK INTENTIONALLY) 23 BASIC FINANCIAL STATEMENTS City of St. Joseph Statement of Net Position December 31, 2015 Governmental Activities Business-Type Activities Total Assets Cash and investments (including cash equivalents)5,894,568$ 484,770$ 6,379,338$ Property tax receivable 27,366 299 27,665 Accounts receivable 28,908 368,315 397,223 Interest receivable 11,869 6,914 18,783 Due from other governments 115,895 298 116,193 Notes receivable 58,816 - 58,816 Lease receivable 231,089 - 231,089 Special assessments receivable Delinquent 17,259 605 17,864 Deferred 1,479,108 32,102 1,511,210 Prepaid items 77 - 77 Net pension asset 129,607 - 129,607 Capital assets Land 561,194 377,882 939,076 Easements 25,664 67,915 93,579 Construction in progress 1,760,591 1,154,199 2,914,790 Buildings 4,746,527 8,797,686 13,544,213 Infrastructure 16,613,244 - 16,613,244 Improvements 1,237,728 - 1,237,728 Plant and lines - 22,599,469 22,599,469 Machinery and equipment 3,343,262 787,554 4,130,816 Sewer rights - 8,569,212 8,569,212 Less accumulated depreciation (16,216,025) (9,711,804) (25,927,829) Capital assets (net of accumulated depreciation)12,072,185 32,642,113 44,714,298 Total assets 20,066,747 33,535,416 53,602,163 Deferred outflows of resources Deferred outflows of resources related to pensions 339,470 33,738 373,208 Total assets and deferred outflows of resources 20,406,217$ 33,569,154$ 53,975,371$ Liabilities and Net Position Liabilities Accounts payable 64,440$ 46,071$ 110,511$ Contracts payable 166,039 31,727 197,766 Due to other governments 4,151 130,896 135,047 Salaries and benefits payable 91,144 12,622 103,766 Interest payable 41,909 60,301 102,210 Bond principal payable (net) Payable within one year 1,205,000 710,000 1,915,000 Payable after one year 7,415,751 7,295,087 14,710,838 Notes payable (net) Payable within one year - 358,946 358,946 Payable after one year - 4,370,915 4,370,915 Compensated absences payable Payable within one year 67,852 7,561 75,413 Payable after one year 360,951 123,021 483,972 Net other post employment benefits (OPEB) obligation 195,197 57,227 252,424 Net pension liability 1,113,073 249,768 1,362,841 Total liabilities 10,725,507 13,454,142 24,179,649 Deferred inflows of resources Deferred inflows of resources related to lease receivables 231,089 - 231,089 Deferred inflows of resources related to pensions 146,834 22,437 169,271 Total deferred inflows of resources 377,923 22,437 400,360 Net position Net investment in capital assets 6,427,207 19,907,165 23,972,202 Restricted for Debt service 2,525,687 - 2,525,687 Other purposes 1,378,650 - 1,378,650 Unrestricted (1,028,757) 185,410 1,518,823 Total net position 9,302,787 20,092,575 29,395,362 Total liabilities, deferred inflows of resources, and net position 20,406,217$ 33,569,154$ 53,975,371$ See notes to financial statements.24 Program Revenues Functions/programs Expenses Charges for Services Operating Grants and Contributions Capital Grants and Contributions Governmental Activities Business-type Activities Total Governmental activities General government 641,393$ 79,540$ 22,823$ -$ (539,030)$ -$ (539,030)$ Public safety 1,547,886 434,735 145,300 10,519 (957,332) - (957,332) Public works 1,278,903 20,902 - 375,266 (882,735) - (882,735) Economic development 358,378 48,711 153,355 - (156,312) - (156,312) Culture and recreation 439,504 18,723 5,200 23,684 (391,897) - (391,897) Interest on long-term debt 287,934 - - - (287,934) - (287,934) Total governmental activities 4,553,998 602,611 326,678 409,469 (3,215,240) - (3,215,240) Business-type activities Water 912,963 924,640 - 12,104 - 23,781 23,781 Sanitary sewer 1,001,928 886,858 6,374 - - (108,696) (108,696) Refuse 287,877 284,585 383 - - (2,909) (2,909) Storm water 180,681 98,133 99 - - (82,449) (82,449) Street light utility 53,751 60,564 17 - - 6,830 6,830 Total business-type activities 2,437,200 2,254,780 6,873 12,104 - (163,443) (163,443) Total governmental and business-type activities 6,991,198$ 2,857,391$ 333,551$ 421,573$ (3,215,240) (163,443) (3,378,683) General revenues Property Taxes 1,685,639 44,656 1,730,295 Tax Increments 41,385 - 41,385 Sales Taxes 405,859 - 405,859 Franchise Fees 124,283 - 124,283 State Aids 910,488 - 910,488 Unrestricted Investment Earnings 76,419 36,799 113,218 Gain on sale of assets - 2,810 2,810 Transfers (139,306) 139,306 - Total general revenues and transfers 3,104,767 223,571 3,328,338 Change in net position (110,473) 60,128 (50,345) Net position - beginning 10,151,205 20,262,205 30,413,410 Change in accounting principle (737,945) (229,758) (967,703) Net position - beginning restated 9,413,260 20,032,447 29,445,707 Net position - ending 9,302,787$ 20,092,575$ 29,395,362$ 2 5 See notes to financial statements. And Changes In Net Position Net (expense) Revenue City of St. Joseph Statement of Activities Year Ended December 31, 2015 Special Revenue General Fund (101, 102, 105, 108) State Collected Sales Tax (200) Other Governmental Funds Total Governmental Funds Assets Cash and investments 2,086,928$ 1,212,524$ 2,595,338$ 5,894,790$ Taxes receivable - delinquent 19,357 - 8,009 27,366 Special assessments receivable Delinquent 1,617 - 15,642 17,259 Deferred 3,636 - 1,475,472 1,479,108 Accounts receivable 28,878 - 30 28,908 Interest receivable 4,801 - 7,680 12,481 Due from other funds 6,600 - 11,500 18,100 Due from other governments 13,452 83,730 18,713 115,895 Notes receivable - - 58,816 58,816 Lease receivable 231,089 - - 231,089 Prepaid items 77 - - 77 Total assets 2,396,435$ 1,296,254$ 4,191,200$ 7,883,889$ Liabilities, Deferred Inflows of Resources and Fund Balances Liabilities Accounts payable 44,589$ 13$ 19,838$ 64,440$ Contracts payable - 29,465 136,574 166,039 Due to other funds - - 18,100 18,100 Due to other governments 4,151 - - 4,151 Salaries and benefits payable 91,144 - - 91,144 Total liabilities 139,884 29,478 174,512 343,874 Deferred inflows of resources Unavailable revenue - property taxes 19,357 - 8,009 27,366 Unavailable revenue - special assessments 5,253 - 1,491,114 1,496,367 Unavailable revenue - notes receivable - - 58,816 58,816 Unavailable revenue - leases receivable 231,089 - - 231,089 Total deferred inflows of resources 255,699 - 1,557,939 1,813,638 Fund balances Nonspendable 77 - - 77 Restricted 20,366 1,266,776 1,331,440 2,618,582 Committed - - 85,665 85,665 Assigned 664,604 - 1,057,818 1,722,422 Unassigned 1,315,805 - (16,174) 1,299,631 Total fund balances 2,000,852 1,266,776 2,458,749 5,726,377 Total liabilities, deferred inflows Of resources and fund balances 2,396,435$ 1,296,254$ 4,191,200$ 7,883,889$ See notes to financial statements.26 Balance Sheet - Governmental Funds City of St. Joseph Year Ended December 31, 2015 City of St. Joseph Reconciliation of the Balance Sheet to The Statement of Net Position - Governmental Funds Total fund balances - governmental funds 5,726,377$ Capital assets used in governmental activities are not current financial resources Cost of capital assets 28,288,210 Less accumulated depreciation (16,216,025) 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 Bond principal payable, net of premiums and discounts (8,620,751) Compensated absences payable (428,803) Net OPEB obligation (195,197) 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. Property taxes 27,366 Special assessments 17,259 Other long-term assets are not available to pay for current expenditures and, therefore, are deferred in the funds. Deferred special assessments 1,479,108 Notes receivable 58,816 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 (146,834) Deferred outflows of resources related to pensions 339,470 Fire relief net pension asset 129,607 Net pension liability (1,113,073) The water access capital project fund is proprietary in nature and, therefore, included in the business-type activities in the statement of net position.(195) The sewer access capital project fund is proprietary in nature and, therefore, i]ncluded in the business-type activities in the statement of net position.(639) Governmental funds do not report a liability for accrued interest due and payable.(41,909) 9,302,787$ See notes to financial statements.27 Amounts reported for governmental activities in the statement of net position and, therefore, are not reported as assets in governmental funds. Total net position - governmental activities are different because Year Ended December 31, 2015 Special Revenue General Fund (101, 102, 105, 108) State Collected Sales Tax (200) Other Governmental Funds Total Governmental Funds Revenues Property taxes 1,107,058$ -$ 600,291$ 1,707,349$ Tax increments - - 41,385 41,385 Sales taxes - 405,859 - 405,859 Special assessments 3,590 - 507,856 511,446 Franchise fees 124,283 - - 124,283 Licenses and permits 152,158 - - 152,158 Intergovernmental 1,107,840 - 153,355 1,261,195 Charges for services 270,508 - 223,049 493,557 Fines and forfeitures 50,489 - - 50,489 Miscellaneous Investment income 18,206 - 41,359 59,565 Contributions and donations 43,825 110 6,650 50,585 Revolving loan repayments - - 11,149 11,149 Other 49,952 - 470 50,422 Total revenues 2,927,909 405,969 1,585,564 4,919,442 Expenditures Current General government 582,258 - - 582,258 Public safety 1,376,624 - - 1,376,624 Public works 329,004 - 5,940 334,944 Culture and recreation 264,168 - 7,233 271,401 Economic development - - 358,143 358,143 Debt service Principal - - 1,015,000 1,015,000 Interest and other charges - - 282,775 282,775 Capital outlay General government 12,813 - 352 13,165 Public safety 39,415 - 50,102 89,517 Public works 67,762 - 797,930 865,692 Culture and recreation 10,468 2,419,472 100,373 2,530,313 Total expenditures 2,682,512 2,419,472 2,617,848 7,719,832 Excess of revenues over (under) expenditures 245,397 (2,013,503) (1,032,284) (2,800,390) Other Financing Sources (uses) Insurance recoveries 1,501 - - 1,501 Sale of property 278 - 22,403 22,681 Bonds issued - 1,794,000 806,000 2,600,000 Bond premium - - 28,021 28,021 Transfers in 14,562 - 117,140 131,702 Transfers out (1,800) - (575,552) (577,352) Total other financing sources (uses)14,541 1,794,000 398,012 2,206,553 Net change in fund balances 259,938 (219,503) (634,272) (593,837) Fund Balances Beginning of year 1,740,914 1,486,279 3,093,021 6,320,214 End of year 2,000,852$ 1,266,776$ 2,458,749$ 5,726,377$ See notes to financial statements.28 City of St. Joseph Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds Year Ended December 31, 2015 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement Total net change in fund balances - governmental funds (593,837)$ 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. Capital outlays 3,458,304 Capital contributions 5,350 Depreciation expense (1,254,066) Loss on disposal (11,024) Transferred to proprietary funds (141,556) Principal payments on long-term debt are recognized as expenditures in the governmental funds but as an increase in net position in the Statement of Activities.1,015,000 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. Accrued interest payable (21,778) Amortization of bond discounts, premiums and issuance charges 16,619 Proceeds from long-term debt are recognized as an other financing source in the governmental funds but as a decrease in net position in the statement of activities.(2,600,000) The governmental funds report the effect of premiums, discounts and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities.(28,021) Compensated absences and OPEB payments are recognized as paid in the governmental funds but recognized as the expense is incurred in the statement of activities.(1,889) 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. Delinquent special assessments (97,987) Delinquent property taxes (21,710) Certain revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. Deferred special assessments (98,018) Notes receivable 37,092 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. Pension expense (58,013) State aid related to pension expense 5,130 The water access capital project fund is proprietary in nature and, therefore, is reported with business-type activities.5,476 The sewer access capital project fund is proprietary in nature and, therefore, is reported with business-type activities.274,455 Change in net position - governmental activities (110,473)$ See notes to financial statements.29 of Activities - Governmental Funds City of St. Joseph Year Ended December 31, 2015 City of St. Joseph Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual - General Fund Year Ended December 31, 2015 Original Budget Final Budget Actual Amounts Revenues Property taxes 1,065,885$ 1,065,885$ 1,107,058$ 41,173$ Special assessments 2,000 2,000 3,590 1,590 Franchise fees 120,950 120,950 124,283 3,333 Licenses and permits 99,010 99,010 152,158 53,148 Intergovernmental 1,067,090 1,067,090 1,107,840 40,750 Charges for services 261,530 261,530 270,508 8,978 Fines and forfeitures 47,500 47,500 50,489 2,989 Miscellaneous revenues Investment income 27,500 27,500 18,206 (9,294) Contributions and donations 18,250 18,250 43,825 25,575 Other 46,900 46,900 49,952 3,052 Total revenues 2,756,615 2,756,615 2,927,909 171,294 Expenditures Current General government 641,515 641,515 582,258 (59,257) Public safety 1,471,680 1,471,680 1,376,624 (95,056) Public works 378,255 378,255 329,004 (49,251) Culture and recreation 222,575 222,575 264,168 41,593 Capital outlay General government 3,010 3,010 12,813 9,803 Public safety 62,250 62,250 39,415 (22,835) Public works 50,000 50,000 67,762 17,762 Culture and recreation - - 10,468 10,468 Total expenditures 2,829,285 2,829,285 2,682,512 (146,773) Excess of revenues over (under) expenditures (72,670) (72,670) 245,397 318,067 Other Financing Sources (uses) Insurance recoveries - - 1,501 1,501 Sale of property 200 200 278 78 Transfers in 67,930 67,930 14,562 (53,368) Transfers out - - (1,800) (1,800) Total other financing sources (uses)68,130 68,130 14,541 (53,589) Net change in fund balances (4,540)$ (4,540)$ 259,938 264,478$ Fund Balances Beginning of year 1,740,914 End of year 2,000,852$ See notes to the financial statements.30 Variance with Final Budget - Over (Under) City of St. Joseph Statement of Net Position - Proprietary Funds Water (601) Sanitary Sewer (602)Refuse (603) Storm Water (651) Street Light Utility (652)Total Assets Current assets Cash and investments 2,354$ 750$ 231,906$ 229,796$ 19,742$ 484,548$ Taxes receivable - delinquent 299 - - - - 299 Special assessments receivable Delinquent 605 - - - - 605 Deferred 23,361 89 179 8,456 17 32,102 Accounts receivable 121,904 162,147 54,505 18,347 11,412 368,315 Interest receivable 4,830 166 622 644 40 6,302 Due from other governments 298 - - - - 298 Total current assets 153,651 163,152 287,212 257,243 31,211 892,469 Noncurrent Assets Capital assets Land 372,941 4,941 - - - 377,882 Easements - - - 67,915 - 67,915 Construction in Progress 523,622 448,735 - 181,842 - 1,154,199 Buildings 7,502,432 1,295,254 - - - 8,797,686 Plants and Lines 9,646,676 8,079,001 - 4,873,792 - 22,599,469 Machinery and Equipment 207,183 532,147 45,842 2,382 - 787,554 Sewer rights - 8,569,212 - - - 8,569,212 Total capital assets 18,252,854 18,929,290 45,842 5,125,931 - 42,353,917 Less accumulated depreciation (4,446,647) (4,036,157) (19,618) (1,209,382) - (9,711,804) Net capital assets 13,806,207 14,893,133 26,224 3,916,549 - 32,642,113 Total assets 13,959,858 15,056,285 313,436 4,173,792 31,211 33,534,582 Deferred Outflows of Resources Deferred outflows of resources related to pensions 14,915 12,246 2,425 4,121 31 33,738 Total assets and deferred outflows of 13,974,773$ 15,068,531$ 315,861$ 4,177,913$ 31,242$ 33,568,320$ Liabilities and Net Position Current liabilities Accounts payable 8,654$ 11,929$ 18,792$ 2,740$ 3,956$ 46,071$ Contracts payable 31,727 - - - - 31,727 Due to other governments 1,206 129,690 - - - 130,896 Salaries and benefits payable 5,575 5,000 662 1,081 304 12,622 Interest payable 11,849 48,452 - - - 60,301 Long-term liabilities due Within one year 548,231 527,177 315 658 126 1,076,507 Total current liabilities 607,242 722,248 19,769 4,479 4,386 1,358,124 Noncurrent liabilities Compensated absences 53,837 53,837 8,281 11,315 3,312 130,582 Notes payable, net - 4,729,861 - - - 4,729,861 Bonds payable, net 5,945,462 2,059,625 - - - 8,005,087 Net opeb obligation 27,763 22,664 3,400 3,400 - 57,227 Net pension liability 110,418 90,658 17,954 30,509 229 249,768 Less amounts due within one year (548,231) (527,177) (315) (658) (126) (1,076,507) Total noncurrent liabilities 5,589,249 6,429,468 29,320 44,566 3,415 12,096,018 Total liabilities 6,196,491 7,151,716 49,089 49,045 7,801 13,454,142 Deferred inflows of resources Deferred inflows of resources related to pensions 9,919 8,144 1,613 2,740 21 22,437 Net position Net investment in capital assets 7,860,745 8,103,647 26,224 3,916,549 - 19,907,165 Unrestricted (92,382) (194,976) 238,935 209,579 23,420 184,576 Total net position 7,768,363 7,908,671 265,159 4,126,128 23,420 20,091,741 Total liabilities, deferred inflows of resources and net position 13,974,773$ 15,068,531$ 315,861$ 4,177,913$ 31,242$ 33,568,320$ See notes to financial statements.31 December 31, 2015 City of St. Joseph Reconciliation of the Statement of Net Position - Business-Type Activities December 31, 2015 Total net position - proprietary funds 20,091,741$ The water access capital project fund is proprietary in nature and relates to water improvements for the applicable funds. Therefore, it is included as a business-type activity.195 The sewer access capital project fund is proprietary in nature and relates to sewer improvements for the applicable funds. Therefore, it is included as a business-type activity.639 20,092,575$ See notes to financial statements.32 Amounts reported for business-type activities in the statement of net position Total net position - business-type activities are different because Water (601) Sanitary Sewer (602)Refuse (603) Storm Water (651) Street Light Utility (652)Total Operating revenues Charges for services 770,889$ 840,148$ 284,585$ 98,133$ 60,564$ 2,054,319$ Operating Expenses Wages and salaries 182,549 120,236 29,252 43,633 3,625 379,295 Materials and supplies 43,239 40,984 2,558 66 - 86,847 Repairs and maintenance 23,893 7,710 2,065 23,664 3,394 60,726 Professional services 24,395 13,170 9,301 13,852 901 61,619 Insurance 12,092 10,683 - - - 22,775 Utilities 61,591 15,291 590 - 44,428 121,900 Depreciation 405,281 441,623 6,606 97,759 - 951,269 Contracted services - 196,255 236,399 - - 432,654 Miscellaneous 9,383 2,415 1,106 1,707 1,403 16,014 Total operating expenses 762,423 848,367 287,877 180,681 53,751 2,133,099 Operating income (loss)8,466 (8,219) (3,292) (82,548) 6,813 (78,780) Nonoperating revenues (expenses) Investment income 25,917 799 2,999 3,105 192 33,012 Special assessments 12,104 374 383 99 17 12,977 Gain on disposal of asset - 2,810 - - - 2,810 Property taxes 44,656 - - - 44,656 Operating grants and contributions - 6,000 - - - 6,000 Interest expense (159,297) (158,874) - - - (318,171) Amortization of bond premium 8,757 5,313 - - - 14,070 Other income 30,414 5,865 - - 36,279 Total nonoperating revenues (expenses)(37,449) (137,713) 3,382 3,204 209 (168,367) Loss before capital Contributions and transfers (28,983) (145,932) 90 (79,344) 7,022 (247,147) Capital contributions 83,695 38,447 - 19,414 - 141,556 Transfers in 255,725 350,500 - - - 606,225 Transfers out (37,910) (103,150) (750) (18,765) - (160,575) Change in net position 272,527 139,865 (660) (78,695) 7,022 340,059 Net Position Beginning of year 7,597,408 7,852,201 282,334 4,232,888 16,609 19,981,440 Change in accounting principle (101,572) (83,395) (16,515) (28,065) (211) (229,758) Beginning of year, restated 7,495,836 7,768,806 265,819 4,204,823 16,398 19,751,682 End of year 7,768,363$ 7,908,671$ 265,159$ 4,126,128$ 23,420$ 20,091,741$ 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, 2015 City of St. Joseph Reconciliation of the Statement of Revenues, Expenses and Changes in Net Position - Business-Type Activities Total net change in fund net position - proprietary funds 340,059$ 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.(5,476) Recognized current year activity from the sewer access capital project fund with the business-type activities.(274,455) Capital contributions from governmental activities (141,556) Transfers in of capital assets from governmental activities 141,556 Change in net position - business-type activities 60,128$ See notes to financial statements.34 Year Ended December 31, 2015 Water (601) Sanitary Sewer (602) Refuse (603) Storm Water (651) Street Light Utility (652)Total Cash Flows - Operating Activities Receipts from customers and users 768,773$ 808,736$ 288,806$ 99,095$ 61,659$ 2,027,069$ Payments to suppliers (142,025) (446,678) (257,023) (36,683) (50,663) (933,072) Payments to employees (171,887) (110,781) (27,901) (44,954) (1) (355,524) Other miscellaneous receipts 73,737 12,448 437 3,213 33 89,868 Net cash flows - operating activities 528,598 263,725 4,319 20,671 11,028 828,341 Cash Flows - Noncapital Financing Activities Transfer from other funds 255,725 350,500 - - - 606,225 Transfer to other funds (37,910) (103,150) (750) (18,765) - (160,575) Net cash flows - noncapital financing Activities 217,815 247,350 (750) (18,765) - 445,650 Cash Flows - Capital and Related Financing Activities Principal paid on debt (525,000) (505,220) - - - (1,030,220) Interest paid on debt (160,713) (170,926) - - - (331,639) Proceeds from disposal of capital assets - 2,810 - - - 2,810 Acquisition of capital assets (103,329) (139,360) (302) (302) - (243,293) Net cash flows - capital and related Financing activities (789,042) (812,696) (302) (302) - (1,602,342) Cash Flows - Investing Activities Interest and dividends received 25,055 2,962 2,807 2,867 162 33,853 Net change in cash and cash equivalents (17,574) (298,659) 6,074 4,471 11,190 (294,498) Cash and Cash Equivalents Beginning of year 19,928 299,409 225,832 225,325 8,552 779,046 End of year 2,354$ 750$ 231,906$ 229,796$ 19,742$ 484,548$ Reconciliation Of Operating Income (loss) To Net Cash Flows - Operating Activities Operating income (loss)8,466$ (8,219)$ (3,292)$ (82,548)$ 6,813$ (78,780)$ Adjustments to reconcile operating loss to net cash flows - operating activities Depreciation expense 405,281 441,623 6,606 97,759 - 951,269 Pension Expense 3,850 3,161 627 1,063 8 8,709 Other income 86,875 12,239 383 99 17 99,613 Accounts receivable (1,818) (31,412) 4,221 962 1,095 (26,952) Special assessments receivable (13,138) 209 54 3,114 16 (9,745) Due from other governments (298) - - - - (298) Prepaid items 125 125 - - - 250 Accounts payable 1,983 (8,078) (2,411) 2,606 (537) (6,437) Contracts payable 31,727 (185,741) - - - (154,014) Due to other governmental units (1,267) 33,524 (2,593) - - 29,664 Salaries payable 1,425 1,228 70 267 304 3,294 Compensated absences payable 3,638 3,638 439 (2,866) 3,312 8,161 Net opeb obligation 1,749 1,428 215 215 - 3,607 Total adjustments 520,132 271,944 7,611 103,219 4,215 907,121 Net cash flows - operating activities 528,598$ 263,725$ 4,319$ 20,671$ 11,028$ 828,341$ Non Cash Activities Capital asset contributions from governmental funds 83,695$ 38,447$ -$ 19,414$ -$ 141,556$ See notes to financial statements.35 City of St. Joseph Statement Of Cash Flows - Proprietary Funds Year Ended December 31, 2015 36 (THIS PAGE LEFT BLANK INTENTIONALLY) City of St. Joseph Notes to Financial Statements 37 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 and the City Hall General Obligation (G.O.) EDA Refunding Bonds of 2005A Debt Service Fund. Separate financial statements are not prepared for the St. Joseph EDA. City of St. Joseph Notes to Financial Statements 38 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 2015, the City contributed $2,422 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 2015, 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 St. Cloud, 400 2nd 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. City of St. Joseph Notes to Financial Statements 39 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 Special Revenue Fund – This fund accounts for the receipts associated with the special sales tax collections. In addition, the fund accounted for a building purchase and related financing. 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. City of St. Joseph Notes to Financial Statements 40 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 Enterprise, Sanitary Sewer Enterprise, Refuse Enterprise, 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. D. Assets, Liabilities, Deferred Outflows/ Inflows of Resources, and Net Position or Equity 1. Cash and Investments The City's cash and cash equivalents are considered to be cash on hand, deposits and highly liquid debt instruments purchased with original maturities of three months or less from the date of acquisition. Investments are stated at fair value. Minnesota Statutes require all deposits made by cities with financial institutions are collateralized in an amount equal to 110% of deposits in excess of Federal Deposit Insurance Corporation (FDIC) insurance. 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. Concentration of Credit Risk: Investments should be diversified to avoid incurring unreasonable risks inherent in over investing in specific instruments, individual financial institutions, or maturities. The City's investment policy states the City will attempt to diversify its investments according to type, issuer, and maturity. The portfolio, as much as possible, will contain both short- term and long-term investments. The City will attempt to match its investments with anticipated cash flow requirements. Extended maturities may be utilized to take advantage of higher yields. No more than 20% of the total investments should extend beyond five years and the weighted average maturity of the portfolio shall never exceed five years. City of St. Joseph Notes to Financial Statements 41 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. Assets, Liabilities, Deferred Outflows/ Inflows of Resources, and Net Position or Equity (Continued) 1. Cash and Investments (Continued) 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. 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. Custodial Credit Risk – Investments: For an investment, this is the risk that in the event of the failure of the counterparty, the City will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The City's investment policy addresses this risk and states the City will permit investments only to the extent that there is Securities Investor Protection Corporation (SIPC) and excess SIPC coverage available. 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. City of St. Joseph Notes to Financial Statements 42 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. Assets, Liabilities, Deferred Outflows/ Inflows of Resources, and Net Position or Equity (Continued) 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 estimated fair market 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. Property, plant, and equipment of the City are depreciated using the straight-line full year convention method over the following estimated useful lives: Years Land improvements 5-20 Buildings 30-40 Building improvements 15 Infrastructure 10-50 Sewer rights 20-50 Furniture and fixtures 5-10 Vehicles 5-20 Equipment 3-7 Machinery 5-7 Assets 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 has one item that qualifies for reporting in this category. The City presents deferred outflows of resources on the Statements of Net Position for deferred outflows of resources related to pensions. Deferred outflows of resources related to pensions results from the net effect of the change in proportionate share and employer contributions paid to PERA subsequent to the measurement date. City of St. Joseph Notes to Financial Statements 43 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. Assets, Liabilities, Deferred Outflows/ Inflows of Resources, and Net Position or Equity (Continued) 5. Deferred Outflows/ Inflows of Resources (Continued) 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 and leases receivable. Deferred inflows of resources related to pensions results from the net difference between projected and actual earnings on plan investments. 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. City of St. Joseph Notes to Financial Statements 44 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. Assets, Liabilities, Deferred Outflows/ Inflows of Resources and Net Position or Equity (Continued) 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. 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.  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. City of St. Joseph Notes to Financial Statements 45 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 (Continued) a) Classification (Continued) 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. 10. Net Position Net position represents the difference between assets and deferred outflows of resources and 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 $2,362,170 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 $1,378,650 includes $17,330 for tax incrementing financing, $1,266,776 in state collected sales tax restricted by enabling legislation, $59,727 in park dedication fees, $2,400 restricted by donors for future projects, $12,051 in revolving loan funds restricted for EDA projects and $20,366 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. City of St. Joseph Notes to Financial Statements 46 NOTE 2 – STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY A. 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. 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. B. Deficit Fund Balance The following Fund had a deficit fund balance at December 31, 2015. Nonmajor governmental funds Special revenue TIF 2-2 St. Joseph Meat Market 256$ TIF 2-3 Bayou Blues/ Alley Flat 4,263 TIF 3-1 Central Minnesota Credit Union 5,597 G.O. Capital Improvement Plan Bonds of 2011A 6,058 This deficit will be eliminated with future tax increment revenues and future debt levies. City of St. Joseph Notes to Financial Statements 47 NOTE 2 – STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY C. Disbursements in Excess of Appropriations Disbursements exceeded appropriations in the following Fund for the year ended December 31, 2015. Disbursements Appropriations Economic Development Authority 267,967$ 130,595$ NOTE 3 – DEPOSITS AND INVESTMENTS A. Deposits 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 as follows. Custodial Credit Risk – Deposits: As of December 31, 2015, 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, 2015, the City's deposits had a carrying value as shown below. Certificates of deposit 1,827,147$ Checking 471,388 Savings 1,329,978 Total 3,628,513$ B. Investments As of December 31, 2015, the City had the following investments: Value Maturity (Years)Rating Brokered certificates of deposit 1,962,177$ 3.30 N/A Brokered money market 917 N/A N/A Government bonds/ notes 787,456 7.09 AAA Total 2,750,550$ Credit Risk: As of December 31, 2015, the City's investments were rated as listed in the table above. City of St. Joseph Notes to Financial Statements 48 NOTE 3 – DEPOSITS AND INVESTMENTS (CONTINUED) B. Investments (Continued) Concentration of Credit Risk: As of December 31 2015, the City's investment in government securities, Federal Home Loan Banks (28.6%), and investments of CD's, ST Bank of India (8.9%), Ally Bank (7.8%), GE Money Bank- UT (7.3%), GE Captial Financial Inc.- UT (7.3%), American Express – Salt Lake City, UT (8.9%), Capital One Bank – Glen Allen (8.9%), and Discover Greenwood, DE (7.8%) exceeded 5% of the City's total investment portfolio. Money market accounts are not subject to concentration of credit risk. C. Deposits and Investments The following is a summary of deposits and investments as of December 31, 2015: Deposits (Note 3.A.)3,628,513$ Investments (Note 3.B.)2,750,550 Petty cash 275 Total 6,379,338$ Deposits and investments are presented in the December 31, 2015, basic financial statements as follows: Statement of Net Position Cash and Investments 6,379,338$ NOTE 4 – INTERFUND BALANCES AND TRANSFERS A. Interfund Balances The composition of interfund balances as of December 31, 2015, is as follows: General fund 6,600$ Other governmental funds 11,500 Total 18,100$ The due from/due to other funds balances represent loans made to cover tax increment financing (TIF) consulting costs to establish the TIF districts and to cover a cash deficit. City of St. Joseph Notes to Financial Statements 49 NOTE 4 – INTERFUND BALANCES AND TRANSFERS (CONTINUED) B. Transfers The composition of interfund transfers as of December 31, 2015, is as follows: Transfer In Transfer Out Description Amount General fund Other governmental funds Close fund 562$ General fund Other governmental funds Transfer tanker reserve to seal coating reserve 7,000 General fund Water Transfer retirement reserve funding 2,910 General fund Sanitary sewer Transfer retirement reserve funding 2,825 General fund Refuse Transfer retirement reserve funding 750 General fund Storm water Transfer retirement reserve funding 515 Other governmental funds General fund Transfer for equipment purchase 1,800 Other governmental funds Other governmental funds Reimburse fund for tif development costs 9,134 Other governmental funds Other governmental funds Allocate funds to the revolving loan program 7,951 Other governmental funds Other governmental funds Reimburse wac/ sac incentives 10,000 Other governmental funds Other governmental funds Close fund 5 Other governmental funds Water Annual transfer for bond payment 35,000 Other governmental funds Sanitary sewer Annual transfer for bond payment 35,000 Storm water Annual transfer for bond payment 18,250 Water Other governmental funds Annual transfer for bond payment 190,400 Water Sanitary sewer Transfer costs funded with the main lift station project 58,325 Water Sanitary sewer Annual transfer for bond payment 7,000 Sanitary sewer Other governmental funds Annual transfer for bond payment 350,500 737,927$ Other governmental funds City of St. Joseph Notes to Financial Statements 50 NOTE 5 – CAPITAL ASSETS Capital asset activity for the year ended December 31, 2015, was as follows: Beginning Ending Balance Increases Decreases Balance Governmental Activities Capital assets not being depreciated Land 457,194$ 104,000$ -$ 561,194$ Easements 5,820 19,844 - 25,664 Construction in progress 960,861 799,730 - 1,760,591 Total capital assets Not being depreciated 1,423,875 923,574 - 2,347,449 Capital assets being depreciated Buildings 2,511,263 2,235,264 - 4,746,527 Infrastructure 16,613,244 - - 16,613,244 Improvements 1,251,885 1,500 15,657 1,237,728 Machinery and equipment 3,242,495 161,760 60,993 3,343,262 Total capital assets Being depreciated 23,618,887 2,398,524 76,650 25,940,761 Less accumulated depreciation for Buildings 1,029,155 137,882 - 1,167,037 Infrastructure 11,403,690 859,265 - 12,262,955 Improvements 460,747 52,942 15,656 498,033 Machinery and equipment 2,133,993 203,977 49,970 2,288,000 Total accumulated Depreciation 15,027,585 1,254,066 65,626 16,216,025 Total capital assets being depreciated, net 8,591,302 1,144,458 11,024 9,724,736 Governmental activities capital assets, net 10,015,177$ 2,068,032$ 11,024$ 12,072,185$ City of St. Joseph Notes to Financial Statements 51 NOTE 5 – CAPITAL ASSETS (CONTINUED) Beginning Ending Balance Increases Decreases Balance Business-Type Activities Capital assets not being depreciated Land 377,882$ -$ -$ 377,882$ Easements 67,915 - - 67,915 Construction in progress 3,212,639 203,965 2,262,405 1,154,199 Total capital assets not being depreciated 3,658,436 203,965 2,262,405 1,599,996 Capital assets being depreciated Buildings 8,120,415 1,195,254 517,983 8,797,686 Plant and lines 21,461,161 1,138,308 - 22,599,469 Machinery and equipment 680,376 109,728 2,550 787,554 Sewer rights 8,569,212 - - 8,569,212 Total capital assets being depreciated 38,831,164 2,443,290 520,533 40,753,921 Less accumulated depreciation for Buildings 2,053,695 214,141 517,982 1,749,854 Plant and lines 5,505,598 465,488 - 5,971,086 Machinery and equipment 455,551 42,797 2,550 495,798 Sewer rights 1,266,223 228,843 - 1,495,066 Total accumulated depreciation 9,281,067 951,269 520,532 9,711,804 Total capital assets being depreciated, net 29,550,097 1,492,021 1 31,042,117 Business-type activities captial assets, net 33,208,533$ 1,695,986$ 2,262,406$ 32,642,113$ Depreciation expense was charged to functions/programs of the City as follows: Governmental activities General government 38,251$ Public safety 123,445 Public works 905,133 Culture and recreation 178,002 Economic development 235 Total depreciation expense - governmental activities 1,245,066$ Business-type activities Water 405,281$ Sanitary sewer 441,623 Refuse 6,606 Storm sewer 97,759 Total depreciation expense - business-type activities 951,269$ City of St. Joseph Notes to Financial Statements 52 NOTE 6 – LONG-TERM DEBT A. G.O. Bonds The City issues G.O. bonds to provide for financing improvement, development, and street improvement projects. Debt service is covered respectively by contract revenue, special assessments against benefited properties, federal grants special sales tax collections, and lease revenue with any shortfalls being paid from general taxes. 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 Issue Interest Original Final Principal Due Within Date Rate Issue Maturity Outstanding One Year Governmental Activities G.O. Bonds, Including Refunding Bonds G.O. capital improvement plan Refunding bonds 2009b 09/03/09 1.10%-3.75%495,000$ 12/01/18 175,000$ 55,000$ G.O. refunding bonds of 2011a 11/10/11 2.00%430,000 10/01/17 150,000 75,000 G.O. certificates of indebtedness of 2011a 11/10/11 2.00%-2.40%390,000 10/01/21 245,000 40,000 G.O. capital improvement plan bonds of 2011a 11/10/11 2.00%-2.40%195,000 10/01/21 120,000 20,000 G.O. certificates of indebtedness of 2013a 09/01/13 2.00%265,000 12/01/18 165,000 50,000 G.O. equipment certificates 2015a 08/13/15 1.20%-2.00%165,000 12/01/20 165,000 30,000 Total G.O. Bonds 1,020,000 270,000 G.O. Special Assessment Bonds G.O. improvement crossover refunding bonds of 2009a 03/19/09 1.25%-2.90%2,555,000 12/01/17 690,000 340,000 G.O. improvement refunding bonds of 2010b 09/28/10 2.00%-3.25%1,035,000 12/01/20 665,000 130,000 G.O. improvement bonds of 2010b 09/28/10 2.00%-3.25%790,000 12/01/25 555,000 50,000 G.O. improvement crossover refunding bonds of 2011a 11/10/11 2.00%-2.40%1,040,000 10/01/21 795,000 125,000 G.O. Improvement bonds of 2013a 09/01/13 2.00%-3.00%405,000 12/01/24 375,000 30,000 G.O. improvement bonds of 2014a 06/15/14 2.00%-3.40%2,010,000 12/01/30 2,010,000 110,000 G.O. improvement bonds of 2015a 08/13/15 1.20%-3.00%595,000 12/01/25 595,000 55,000 Total G.O. special assessment bonds 5,685,000 840,000 G.O. Abatement Bonds G.O. tax abatement bonds of 2015b 08/13/15 2.00%-3.05%1,840,000 12/01/30 1,840,000 95,000 Unamortized premiums/discounts 75,751 - Compensated absences 428,803 67,852 Total long-term liabilities, governmental activities 9,049,554$ 1,272,852$ City of St. Joseph Notes to Financial Statements 53 NOTE 6 – LONG-TERM DEBT (CONTINUED) B. Components of Long-Term Liabilities (Continued) Issue Interest Original Final Principal Due Within Date Rate Issue Maturity Outstanding One Year Business-type activities G.O. revenue bonds G.O. water revenue bonds of 2006a 01/12/06 3.50%-4.00%3,575,000 12/01/16 390,000$ 390,000$ G.O. sewer revenue crossover refunding bonds of 2009a 03/19/09 1.25%-3.85%455,000 12/01/21 245,000 35,000 G.O. water revenue refunding bonds of 2009c 10/20/09 1.00%-2.60%425,000 12/01/16 70,000 70,000 G.O. sewer revenue bonds of 2011a 11/10/11 2.00-2.40%225,000 10/01/21 145,000 20,000 G.O. water revenue crossover refunding bonds of 2012a 04/19/12 1.00-2.85%4,860,000 12/01/28 4,805,000 55,000 G.O. sewer revenue bonds of 2013a 09/01/13 2.00-3.70%1,875,000 12/01/28 1,655,000 110,000 G.O. utility improvement bonds of 2014a 06/15/14 2.00%-3.40%660,000 12/01/32 630,000 30,000 Total G.O. revenue bonds 7,940,000 710,000 Utility revenue notes payable City of St. Cloud SIS phases 1 and 2 (2009b bonds)10/26/09 2.00%-4.0%835,000 08/01/19 365,000 90,000 City of st. Cloud SIS phase 3 (2010 bonds)10/28/10 2.00%-2.5%180,000 08/01/20 100,000 20,000 City of St. Cloud SIS phase 4 (2013b bonds)11/01/13 3.00%-4.00%650,000 02/01/29 620,000 35,000 City of St. Cloud PFA loan 08/01/10 1.77%4,527,703 08/20/30 3,638,316 213,946 Total notes payable 4,723,316 358,946 Unamortized premium 71,632 - Compensated absences 130,582 7,561 Total business-type activities 12,865,530 1,076,507 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. City of St. Joseph Notes to Financial Statements 54 NOTE 6 – LONG-TERM DEBT (CONTINUED) C. Changes in Long-Term Liabilities Long-term liability activity for the year ended December 31, 2015, was as follows: Beginning Ending Balance Additions Reductions Balance Governmental Activities Bonds payable General obligation 1,120,000$ 165,000$ 265,000$ 1,020,000$ G.O. special assessment bonds 5,750,000 595,000 660,000 5,685,000 Public project revenue bonds 90,000 - 90,000 - G.O. abatement bonds - 1,840,000 - 1,840,000 Total bonds payable 6,960,000 2,600,000 1,015,000 8,545,000 Unamortized premiums/discounts 64,349 28,021 16,619 75,751 Compensated absences 439,015 167,990 178,202 428,803 Total governmental activities 7,463,364 2,796,011 1,209,821 9,049,554 Business-Type Activities Bonds payable G.O. utility revenue bonds 8,630,000 - 690,000 7,940,000 Notes payable City of St. Cloud notes 5,063,536 - 340,220 4,723,316 Unamortized premiums 85,702 - 14,070 71,632 Compensated absences 122,421 46,170 38,009 130,582 Total business-type activities 13,901,659 46,170 1,082,299 12,865,530 Total long-term liabilities 21,365,023$ 2,842,181$ 2,292,120$ 21,915,084$ 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. City of St. Joseph Notes to Financial Statements 55 NOTE 6 – LONG-TERM DEBT D. Minimum Debt Payments Minimum annual principal and interest payments required to retire long-term liabilities: Year Ended December 31,Principal Interest Principal Interest 2016 270,000$ 22,300$ 840,000$ 141,358$ 2017 280,000 16,590 860,000 121,598 2018 215,000 10,480 525,000 101,688 2019 95,000 5,305 540,000 91,303 2020 95,000 3,580 550,000 80,193 2021-2025 65,000 1,560 1,595,000 251,730 2026-2030 - - 775,000 76,295 Total 1,020,000$ 59,815$ 5,685,000$ 864,165$ Year Ended December 31,Principal Interest Total 2016 95,000$ 61,647$ 1,430,305$ 2017 110,000 44,335 1,432,523 2018 110,000 42,135 1,004,303 2019 115,000 39,935 886,543 2020 115,000 37,635 881,408 2021-2025 620,000 150,500 2,683,790 2026-2030 675,000 61,358 1,587,653 Total 1,840,000$ 437,545$ 9,906,525$ Governmental Activities Abatement Bonds Governmental Activities G.O. Government Activities G.O. Special Assessment Bonds City of St. Joseph Notes to Financial Statements 56 NOTE 6 – LONG-TERM DEBT (CONTINUED) C. Minimum Debt Payments (Continued) Year Ended December 31,Principal Interest Principal Interest Total 2016 710,000$ 199,860$ 358,946$ 101,485$ 1,370,291$ 2017 670,000 177,640 362,671 93,196 1,303,507 2018 685,000 163,880 366,510 84,841 1,300,231 2019 700,000 149,440 380,461 75,418 1,305,319 2020 700,000 134,488 289,526 65,525 1,189,539 2021-2025 3,430,000 437,618 1,434,611 237,932 5,540,161 2026-2030 955,000 85,343 1,530,591 86,358 2,657,292 2031-2032 90,000 4,590 - - 94,590 Total 7,940,000$ 1,352,859$ 4,723,316$ 744,755$ 14,760,930$ Utility Revenue Bonds Business-Type Activities Notes Payable 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. As of December 31, 2015, the City's conduit debt consisted of the following: Industrial revenue bonds (St. Joseph Development, LLC), Series 2002 120,000$ City of St. Joseph Notes to Financial Statements 57 NOTE 7 – FUND BALANCE Fund equity balances are classified as follows to reflect the limitations and restrictions of the respective funds. Nonmajor Collected Governmental General Sales Tax Fund Total Nonspendable Prepaid expenses 77$ -$ -$ 77$ Restricted Peg access fees 20,366 - - 20,366 Debt service - - 1,239,932 1,239,932 Tax increments - - 17,330 17,330 State collected sales tax projects - 1,266,776 - 1,266,776 Park dedication fees - - 59,727 59,727 Chartitable gambling - - 2,400 2,400 Revolving loan - - 12,051 12,051 Total restricted 20,366 1,266,776 1,331,440 2,618,582 Committed Economic development - - 85,665 85,665 Assigned Elections 23,709 - - 23,709 Street seal coating /crack filling 15,945 - - 15,945 Street maintenance plan 5,000 - - 5,000 Schneider field 2,250 - - 2,250 Loader tires 1,764 - - 1,764 Fire operations 20,000 - - 20,000 Fire debt service 160,000 - - 160,000 Fire capital 334,060 - - 334,060 Police forfeiture 9,317 - - 9,317 Severance pay 92,559 - - 92,559 Capital outlay reserves - - 872,826 872,826 Debt service relief - - 184,992 184,992 Total assigned 664,604 - 1,057,818 1,722,422 Unassigned 1,315,805 - (16,174) 1,299,631 Total 2,000,852$ 1,266,776$ 2,458,749$ 5,726,377$ City of St. Joseph Notes to Financial Statements 58 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 2015 is estimated to be immaterial based on workers' compensation rates and salaries for the year. At December 31, 2015, 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 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 ad 356. PERA's defined benefit pension plans are tax qualified plans under Section 401(a) of the Internal Revenue Code. General Employees Retirement Fund (GERF) All full-time and certain part-time employees of the City are covered by the GERF. GERF members belong to either the Coordinated Plan or the Basic Plan. Coordinated Plan members are covered by Social Security and Basic Plan members are not. The Basic Plan was closed to new members in 1967. All new members must participate in the Coordinated Plan. Public Employees Police and Fire Fund (PEPFF) The PEPFF, 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 PEPFF also covers police officers and firefighters belonging to a local relief association that elected to merge with and transfer assets and administration to PERA. City of St. Joseph Notes to Financial Statements 59 NOTE 9 – PENSION PLANS (CONTINUED) Public Employees' Retirement Association (Continued) B. Benefits Provided (Continued) 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. GERF Benefits 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 and Basic 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 Basic Plan member is 2.2% of average salary for each of the first ten years of service and 2.7% for each remaining year. 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 2.7% of average salary for Basic Plan members and 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. Disability benefits are available for vested members, and are based upon years of service and average high-five salary. PEPFF Benefits Benefits for the PEPFF 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 PEPFF 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 PEPFF who were first hired prior to July 1, 1989, a full annuity is available when age plus years of service equal at least 90. City of St. Joseph Notes to Financial Statements 60 NOTE 9 – PENSION PLANS (CONTINUED) Public Employees' Retirement Association (Continued) C. Contributions Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. Contribution rates can only be modified by the state legislature. GERF Contributions Basic Plan members and Coordinated Plan members were required to contribute 9.1% and 6.50%, respectively, of their annual covered salary in calendar year 2015. The City was required to contribute 11.78% of pay for Basic Plan members and 7.50% for Coordinated Plan members in calendar year 2015. The City's contributions to the GERF for the year ended December 31, 2015, were $57,804. The City's contributions were equal to the required contributions as set by state statute. PEPFF Contributions Plan members were required to contribute 10.8% of their annual covered salary in calendar year 2015. The City was required to contribute 16.20% of pay for PEPFF members in calendar year 2015. The City's contributions to the PEPFF for the year ended December 31, 2015, were $85,925. The City's contributions were equal to the required contributions as set by state statute. D. Pension Costs GERF Pension Costs At December 31, 2015, the City reported a liability of $715,188 for its proportionate share of the GERF's net pension liability. The net pension liability was measured as of June 30, 2015, 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, 2014, through June 30, 2015, relative to the total employer contributions received from all of PERA's participating employers. At June 30, 2015, the City's proportion was 0.0138%. For the year ended December 31, 2015, the City recognized pension expense of $85,938 for its proportionate share of GERF's pension expense. City of St. Joseph Notes to Financial Statements 61 NOTE 9 – PENSION PLANS (CONTINUED) Public Employees' Retirement Association (Continued) D. Pension Costs (Continued) At December 31, 2015, the City reported its proportionate share of GERF's deferred outflows of resources and deferred inflows of resources, and its contributions subsequent to the measurement date, from the following sources: Differences between expected and actual economic experience -$ 36,058$ Difference between projected and actual investment earnings 67,703 - Changes in proportion - 28,185 Contributions paid to PERA subsequent to the measurement date 28,902 - 96,605$ 64,243$ Deferred Outflows of Resources Deferred Inflows of Resources $28,902 reported as deferred outflows of resources related to pensions resulting from City contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended December 31, 2016. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows: Year Ended Pension Expense December 31,Amount 2016 (4,488)$ 2017 (4,488) 2018 (4,488) 2019 16,924 City of St. Joseph Notes to Financial Statements 62 NOTE 9 – PENSION PLANS (CONTINUED) Public Employees' Retirement Association (Continued) D. Pension Costs (Continued) PEPFF Pension Costs At December 31, 2015, the City reported a liability of $647,653 for its proportionate share of the PEPFF's net pension liability. The net pension liability was measured as of June 30, 2015, 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, 2014, through June 30, 2015, relative to the total employer contributions received from all of PERA's participating employers. At June 30, 2015, the City's proportion was 0.057%. For the year ended December 31, 2015, the City recognized pension expense of $111,606 for its proportionate share of the PEPFF's pension expense. The City also recognized $5,130 for the year ended December 31, 2015, as pension expense (and grant revenue) for its proportionate share of the State of Minnesota's on-behalf contributions to the PEPFF. Legislation passed in 2013 required the State of Minnesota to begin contributing $9 million to the PEPFF each year, starting in fiscal year 2014. At December 31, 2015, the City reported its proportionate share of the PEPFF's deferred outflows of resources and deferred inflows of resources related to pensions from the sources below. Differences between expected and actual economic experience -$ 105,028$ Difference between projected and actual investment earnings 112,843 - Contributions paid to PERA subsequent to the measurement Date 42,962 - 155,805$ 105,028$ Deferred Outflows of Resources Deferred Inflows of Resources City of St. Joseph Notes to Financial Statements 63 NOTE 9 – PENSION PLANS (CONTINUED) Public Employees' Retirement Association (Continued) D. Pension Costs (Continued) $42,962 reported as deferred outflows of resources related to pensions resulting from City contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended December 31, 2016. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows: Year Ended Pension Expense December 31,Amount 2016 7,205$ 2017 7,205 2018 7,205 2019 7,205 2020 (21,005) E. Actuarial Assumptions The total pension liability in the June 30, 2015, actuarial valuation was determined using the entry age normal actuarial cost method and the following actuarial assumptions: Inflation 2.75 %Per Year Active member payroll growth 3.50 %Per Year Investment rate of return 7.90 % Salary increases were based on a service-related table. Mortality rates for active members, retirees, survivors, and disabilitants were based on RP-2000 tables for males or females, as appropriate, with slight adjustments. Benefit increases for retirees are assumed to be 1% effective every January 1 through 2026 and 2.5% thereafter. Actuarial assumptions used in the June 30, 2015, valuation were based on the results of actuarial experience studies. The experience study in the GERF was for the period July 1, 2004 through June 30, 2008, with an update of economic assumptions in 2014. Experience studies have not been prepared for PERA's other plans, but assumptions are reviewed annually. City of St. Joseph Notes to Financial Statements 64 NOTE 9 –PENSION PLANS (CONTINUED) Public Employees' Retirement Association (Continued) E. Actuarial Assumptions (Continued) The long-term expected rate of return on pension plan investments is 7.9%. The State Board of Investment, which manages the investments of PERA, prepares an analysis of the reasonableness of the long-term expected rate of return on a regular basis 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 arithmetic real rates of return for each major asset class are summarized in the following table: Target Allocation Domestic stocks 45%5.50 % International stock 15%6.00 Bonds 18%1.45 Alternative assets 20%6.40 Cash 2%0.50 Total 100% Asset Class Long-Term Expected Real Rate of Return F. Discount Rate The discount rate used to measure the total pension liability was 7.9%. The projection of cash flows used to determine the discount rate assumed that employee and employer contributions will be made at the rates specified in statute. Based on those assumptions, each of the pension plan's fiduciary net position was projected to be available to make all projected future benefit payments of current active and inactive employees. 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. City of St. Joseph Notes to Financial Statements 65 NOTE 9 –PENSION PLANS (CONTINUED) Public Employees' Retirement Association (Continued) 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 in 1% Increase in City's proportionate share of the GERF net pension liability 1,124,529$ 715,188$ 377,134$ City's proportionate share of the PEPFF net pension liability 1,262,283 647,653 139,862 Discount Rate (6.9%) Discount Rate (7.9%) Discount Rate (8.9%) 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; by writing to PERA at 60 Empire Drive #200, St. Paul, Minnesota, 55103-2088; or by calling (651) 296-7460 or 1-800-652-9026. Defined Contribution Plan Five of the City's council members are covered by the Public Employees Defined Contribution Plan (PEDCP), a multiple-employer deferred compensation plan administered by PERA. The PEDCP 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. Plan benefits depend solely on amounts contributed to the plan plus investment earnings, less administrative expenses. 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. City of St. Joseph Notes to Financial Statements 66 NOTE 9 –PENSION PLANS (CONTINUED) Public Employees' Retirement Association (Continued) H. Pension Plan Fiduciary Net Position (Continued) Total contributions made by the entity during fiscal year 2015 were: 1,535$ 1,535$ 5%5%5% Contribution Amount Percentage of Covered Payroll Employee Employer Employee Employer Required Rate 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, P.O. Box 4, 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. C. Employees Covered by Benefit Terms At December 31, 2015, the following employees were covered by the benefit terms: Inactive employees entitled to but not yet receiving benefits 3 Active employees 28 Total 31 City of St. Joseph Notes to Financial Statements 67 NOTE 9 –PENSION PLANS (CONTINUED) Defined Benefit Pension Plan – Volunteer Fire Fighter's Relief Association (Continued) 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 $52,164 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, 2015, 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, 2015, actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Inflation 2.75 % Salary increase 0 %, average, including inflation Investment rate of return 6.25 %, 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. City of St. Joseph Notes to Financial Statements 68 NOTE 9 –PENSION PLANS (CONTINUED) Defined Benefit Pension Plan – Volunteer Fire Fighter's Relief Association (Continued) E. Net Pension Liability (Continued) 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. Long-Term Expected Asset Class Target Allocation Real Rate of Return Cash 0.35%0.25% Fixed income 52.40%1.75% Equities 47.25%5.25% Total 100% Discount rate. The discount rate used to measure the total pension liability was 6.25%. 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. City of St. Joseph Notes to Financial Statements 69 NOTE 9 –PENSION PLANS (CONTINUED) Defined Benefit Pension Plan – Volunteer Fire Fighter's Relief Association (Continued) F. Changes in the Net Pension Liability Total Plan Fiduciary Net Pension Net Pension Liability Position Liability (a) (b)(a) - (b) Balances at January 1, 2015 475,033$ 740,099$ (265,066)$ Changes for the year Service cost 20,898 - 20,898 Interest cost 29,709 - 29,709 Change in assumptions, changes in benefit terms 86,916 - 86,916 Contributions - state and local - 52,164 (52,164) Net investment income - (41,979) 41,979 Benefit payments, including refunding of employee contributions (41,168) (41,168) - Administrative expense - (8,121) 8,121 Other charges - - - Net charges 96,355 (39,104) 135,459 Balances at December 31, 2015 571,388$ 700,995$ (129,607)$ Increase (Decrease) City of St. Joseph Notes to Financial Statements 70 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 6.25%, 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 (5.25%) or 1-percentage-point higher (7.25%) than the current rate: 1%Current 1% Decrease Discount Increase (5.25%)Rate (6.25%)(7.25%) County's net pension liability (114,780)$ (129,607)$ (143,888)$ 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, 2015, the City recognized pension expense of $66,826. At December 31, 2015, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Deferred Outflows of Inflows of Resources Resources Changes of assumptions 50,137$ -$ Net difference between projected and actual earnings on pension plan investments 70,660 - Total 120,797$ -$ City of St. Joseph Notes to Financial Statements 71 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, 2016 22,561$ 2017 22,561 2018 22,561 2019 22,561 2020 4,896 Therafter 25,657 Total 120,797$ NOTE 10 – POST EMPLOYMENT HEALTH CARE PLAN A. Plan Description The City provides a single-employer defined benefit health care plan to eligible retirees. The plan offers medical coverage. Medical coverage is administered by BlueCross BlueShield. It is the City's policy to periodically review its medical coverage, and to obtain requests for proposals in order to provide the most favorable benefits and premiums for City employees and retirees. B. Funding Policy Retirees contribute to the health care plan at the same rate as City employees. This results in the retirees receiving an implicit rate subsidy. Contribution requirements are established by the City, based on the contract terms with BlueCross BlueShield. The required contributions are based on projected pay-as- you-go financing requirements. For 2015, the City contributed $5,388 to the plan. As of December 31, 2015, there was one retiree receiving health benefits from the City's health plan. City of St. Joseph Notes to Financial Statements 72 NOTE 10 – POST EMPLOYMENT HEALTH CARE PLAN (CONTINUED) C. Annual Other Post Employment Benefits Cost and Net Other Post Employment Benefits Obligation The City's annual other post employment benefits (OPEB) cost (expense) is calculated based on the annual required contribution (ARC) of the City, an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The City prospectively implemented this Statement during the 2009 year. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed 30 years. The table on the following page shows the components of the City's annual OPEB cost of the year, the amount actually contributed to the plan, and changes in the City's net OPEB obligation to the plan. ARC 25,315$ Interest on net OPEB obligation 9,469 Adjustment to ARC (13,690) Annual OPEB cost 21,094 Contributions made 5,388 Increase in net OPEB obligation 15,706 Net OPEB obligation - beginning of year 236,718 Net OPEB obligation - end of year 252,424$ The City's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan and the net OPEB obligation for 2015, 2014, and 2013 was as follows: Year Ended Annual OPEB Cost Employer Contribution Percentage of Annual OPEB Cost Contributed Net OPEB Obigation 12/31/13 33,966 4,487 13%206,587 12/31/14 35,044 4,913 14%236,718 12/31/15 21,094 5,388 26%252,424 D. Funded Status and Funding Progress As of January 1, 2015, the most recent actuarial valuation date, the City had no assets deposited to fund the plan. The actuarial accrued liability for benefits was $188,649 and the actuarial value of assets was $0, resulting in an unfunded actuarial accrued liability (UAAL) of $188,649. The covered payroll (annual payroll of active employees covered by the plan) was $1,522,110, and the ratio of the UAAL to the covered payroll was 12.4%. City of St. Joseph Notes to Financial Statements 73 NOTE 10 – POST EMPLOYMENT HEALTH CARE PLAN (CONTINUED) D. Funded Status and Funding Progress (Continued) Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality and the health care cost trend. Amounts determined regarding the funded status of the plan and the ARC of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The Schedule of Funding Progress – Other Post Employment Benefits, presented as required supplementary information following the Notes to the Financial Statements, presents multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. E. Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities, consistent with the long-term perspective of the calculations. At the January 1, 2015, actuarial valuation date, the projected unit credit with 30 year amortization of the unfunded liability method was used. The actuarial assumptions included a 4.0% discount rate. The City currently does not plan to prefund for this benefit. At the actuarial valuation date, the annual health care cost trend rate was calculated to be 7.2% initially, reduced incrementally to an ultimate rate of 5% after seven years. The UAAL is being amortized as a level percentage of projected payroll on an open basis. NOTE 11 – COMMITMENTS The City has entered into contracts for construction as follows: Expended Contract through Project Amount 12/31/15 Commitment 2015 1st Ave NE waterline 94,497$ 81,923$ 12,574$ 2015 Jasmine court 117,066 19,844 97,222 2015 Street improvements 516,767 454,909 61,858 Government Center design 309,400 241,600 67,800 Total 239,454$ City of St. Joseph Notes to Financial Statements 74 NOTE 12 – RELATED PARTY TRANSACTION The St. Joseph EDA has issued Public Project Revenue Bonds of 2005A. These Bonds are to finance the City Hall and maintenance facility projects. Rental payments are due from the City to the St. Joseph EDA. The City will own the projects upon completion of the rental payments. These bonds were paid in full at December 31, 2015. Since the St. Joseph EDA is reported as a blended component unit of the City the lease transactions are not reported. The debt and projects are recorded as though part of the City. NOTE 13 – CHANGE IN ACCOUNTING PRINCIPLE For the year ended December 31, 2015, the City implemented GASB Statement No. 68, Accounting and Financial Reporting for Pensions and GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date. This resulted in an adjustment to the beginning net position on the Statement of Activities of $737,945 to add the beginning net pension liability, and an adjustment to the beginning net position on the Statement of Revenues, Expenses, and Changes in Fund Net Position – Proprietary Funds of $229,758 to add the beginning net pension liability. NOTE 14 – NEW STANDARDS ISSUED BUT NOT YET IMPLEMENTED GASB has issued GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits other than Pensions. The new statement requires governments in all types of OPEB plans to present more extensive note disclosures and required supplementary information (RSI) about OPEB liabilities. NOTE 15 – SUBSEQUENT EVENTS On April 4, 2016, the City approved the issuance of G.O. Capital Improvement Plan Bonds to finance the government center. The council also accepted bids and approved contracts for the government center totaling $4,717,888. 75 REQUIRED SUPPLEMENTARY INFORMATION City of St. Joseph Schedule of Funding Progress - Other Post Employment Benefits Actuarial UAAL as a Actuarial Accrued Liability Unfunded Percentage of Actuarial Value of (AAL) -AAL Funded Covered Covered Valuation Assets Entry Age (UAAL)Ratio Payroll Payroll Date (a)(b)(b-a)(a/b)(c)((b-a)/c) 12/31/09 -$ 345,319$ 345,319$ 0.0%1,070,515$ 32.3% 12/31/12 - 239,852 239,852 0.0%1,386,050 17.3% 12/31/15 - 188,649 188,649 0.0%1,522,110 12.4% 76 December 31, 2015 City's Covered- Employee Payroll 2015 0.0138%715,188$ 799,773$ 89.42%78.19% For Fiscal Year Ended June 30, City's Proportion of the Net Pension Liability (Asset) City's Proportionate Share of the Net Pension Liability (Asset) City's Covered- Employee Payroll City's Proportionate Share of the Net Pension Liability (Asset) as a Percentage of its Covered- Employee Payroll Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 2015 0.0570%647,653$ 505,160$ 128.21%86.61% 77 Plan Fiduciary Net Position as a Percentage of the Total Pension Liability For Fiscal Year Ended June 30, Last Ten Years PEPFF Retirement Fund Schedule of City's Proportionate Share of Net Pension Liability City of St. Joseph Schedule of City's Proportionate Share of Net Pension Liability GERF Retirement Fund City's Proportion of the Net Pension Liability (Asset) City's Proportionate Share of the Net Pension Liability (Asset) City's Proportionate Share of the Net Pension Liability (Asset) as a Percentage of its Covered- Employee Payroll 2015 59,983$ 59,983$ -$ 799,773$ 7.50% 2015 81,836$ 81,836$ -$ 505,160$ 16.20% 78 Contributions as a Percentage of Covered- Employee Payroll Statutorily Required Contribution Contributions in Relation to the Statutorily Required Contributions Fiscal Year Ending June 30, City of St. Joseph Schedule of City Contributions GERF Retirement Fund Contribution Deficiency (Excess) City's Covered- Employee Payroll Schedule of City Contributions PEPFF Retirement Fund Contributions as a Percentage of Covered- Statutorily Required Contribution Contributions in Relation to the Statutorily Contribution Deficiency (Excess) Fiscal Year Ending June 30, City's Covered- Employee Payroll 2015 Total Pension Liability (TPL) Service cost 20,898$ Interest 29,709 Changes of assumptions 55,033 Changes of benefit terms 31,883 Benefit payments, including refunds or member contributions (41,168) Net change in total pension liability 96,355 Beginning of year (1)475,033 End of Year 571,388$ Plan Fiduciary Net Pension (FNP) Contributions - employer 52,164$ Net investment income (41,979) Benefit payments, including refunds of member contributions (41,168) Administrative expense (8,121) Net change in plan fiduciary net position (39,104) Beginning of year 740,099 End of year 700,995$ Net Pension Liability (NPL)(129,607)$ 79 City of St. Joseph Schedule of Changes in Net Pension Liability and Related Ratios - Fire Relief Association The City implemented the Provisions of Governmental Accounting Standards Board Statement No. 68 for the year ended Decmber 31, 2015. The schedules within the Require Supplementary Information section required a ten year presentation, but does not require retroactive reporting. Information prior to 2015 is not available. Year Ended December 31, 2015 2015 Employer Statutorily determined contribution (sdc)-$ Contribution sdc 3,000 Contribution deficiency (excess)(3,000)$ Non-employer 2% aid 52,164$ 80 City of St. Joseph Schedule of Employer Contributions and Non-Employer Contributing Entities - Fire Relief Association The Association implemented the Provisions of Governmental Accounting Standards Board Statement No. 68 for the year ended December 31, 2015. The schedules within the Require Supplementary Information section required a ten year presentation, but does not require retroactive reporting. Information prior to 2015 is not available. Year Ended December 31, 2015 81 SUPPLEMENTARY INFORMATION City of St. Joseph Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual - General Fund Year Ended December 31, 2015 Original Budget Final Budget Actual Amounts Revenues Property taxes 1,065,885$ 1,065,885$ 1,107,058$ 41,173$ Special assessments 2,000 2,000 3,590 1,590 Franchise fees 120,950 120,950 124,283 3,333 Licenses and permits 99,010 99,010 152,158 53,148 Intergovernmental revenue Local government aid 902,580 902,580 902,582 2 Pera aid 1,540 1,540 1,541 1 Fire aid 39,000 39,000 53,664 14,664 Police aid 53,500 53,500 67,664 14,164 Federal grants 8,000 8,000 3,390 (4,610) State grants 43,475 43,475 49,408 5,933 Other grants and aids 18,995 18,995 29,591 10,596 Total intergovernmental revenue 1,067,090 1,067,090 1,107,840 40,750 Charges for services General government 25,950 25,950 24,599 (1,351) Public safety 223,805 223,805 224,678 873 Public works 3,775 3,775 3,575 (200) Culture and recreation 8,000 8,000 17,656 9,656 Total charges for services 261,530 261,530 270,508 8,978 Fines and forfeitures 47,500 47,500 50,489 2,989 Miscellaneous revenues Investment income 27,500 27,500 18,206 (9,294) Contributions and donations 18,250 18,250 43,825 25,575 Other 46,900 46,900 49,952 3,052 Total miscellaneous revenues 92,650 92,650 111,983 19,333 Total revenues 2,756,615 2,756,615 2,927,909 171,294 Expenditures General government Mayor and council 77,095 77,095 71,252 (5,843) Administrative and finance 452,685 452,685 404,581 (48,104) Other general government 111,735 111,735 106,425 (5,310) Capital outlay 3,010 3,010 12,813 9,803 Total general government 644,525 644,525 595,071 (49,454) 82 Variance with Final Budget - Over (Under) City of St. Joseph Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual - General Fund Year Ended December 31, 2015 Original Budget Final Budget Actual Amounts Expenditures Public safety Police Current 1,034,310$ 1,034,310$ 932,028$ (102,282)$ Capital outlay - - 3,726 3,726 Total police 1,034,310 1,034,310 935,754 (98,556) Fire Current 343,125 343,125 348,697 5,572 Capital outlay 62,250 62,250 35,689 (26,561) Total fire 405,375 405,375 384,386 (20,989) Other Current 94,245 94,245 95,899 1,654 Total public safety 1,533,930 1,533,930 1,416,039 (117,891) Public works Streets and highways Street maintenance and storm sewers 244,095 244,095 232,694 (11,401) Snow and ice removal 106,160 106,160 49,331 (56,829) Street engineering 28,000 28,000 46,979 18,979 Capital outlay 50,000 50,000 67,762 17,762 Total public works 428,255 428,255 396,766 (31,489) Culture and recreation Current 222,575 222,575 264,168 41,593 Capital outlay - - 10,468 10,468 Total culture and recreation 222,575 222,575 274,636 52,061 Total expenditures 2,829,285 2,829,285 2,682,512 (146,773) Excess of revenues over (under) expenditures (72,670) (72,670) 245,397 318,067 Other Financing Sources (Uses) Insurance recoveries - - 1,501 1,501 Sale of property 200 200 278 78 Transfers in 67,930 67,930 14,562 (53,368) Transfers out - - (1,800) (1,800) Total other financing sources (uses)68,130 68,130 14,541 (53,589) Net change in fund balances (4,540)$ (4,540)$ 259,938 264,478$ Fund Balances Beginning of year 1,740,914 End of year 2,000,852$ 83 Variance with Final Budget - Over (Under) Economic Development Authority (150) TIF 2-1 Millstream Shops and Lofts (157) TIF 2-2 St. Joseph Meat Market (158) TIF 2-3 Bayou Blues/ Alley Flat (159) TIF 3-1 Central Minnesota Credit Union (152) Assets Cash and investments 73,709$ 17,162$ 243$ 737$ 403$ Taxes receivable - delinquent 1,707 - - - - Special assessments receivable Delinquent - - - - - Deferred - - - - - Accounts Receivable - - - - - Interest Receivable 243 48 1 - - Due from Other Funds 11,500 - - - - Due from Other Governments 12,016 1,205 - - - Notes Receivable - - - - - Total assets 99,175$ 18,415$ 244$ 737$ 403$ Liabilities, Deferred Inflows Of Resources and Fund Balances Liabilities Accounts payable 11,803$ 1,085$ -$ -$ -$ Contracts Payable - - - - - Due to Other Funds - - 500 5,000 6,000 Total liabilities 11,803 1,085 500 5,000 6,000 Deferred inflows of resources Unavailable revenue - property taxes 1,707 - - - - Unavailable revenue - special assessments - - - - - Unavailable revenue - notes receivable - - - - - Total deferred inflows of resources 1,707 - - - - Fund balances Restricted - 17,330 - - - Committed 85,665 - - - - Assigned - - - - - Unassigned - - (256) (4,263) (5,597) Total fund balances 85,665 17,330 (256) (4,263) (5,597) Total liabilities, deferred inflows of resource,s and fund balances 99,175$ 18,415$ 244$ 737$ 403$ 84 December 31, 2015 Special Revenue City of St. Joseph Combining Balance Sheet - Nonmajor Governmental Funds Park Dedication (205) Charitable Gambling (215) Revolving Loan (250)Total G.O. Crossover Refunding Bonds of 2009A (318) Fire Hall G.O. Refunding Bonds of 2003B (331) G.O. Improvement Bonds of 2005B/2010B (333) 59,508$ 2,391$ 11,994$ 166,147$ 264,400$ 49,619$ 200,061$ - - - 1,707 1,203 402 208 - - - - 648 - - - - - - 217,786 - 221,657 30 - - 30 - - - 124 9 57 482 1,003 194 719 - - - 11,500 - - - 65 - - 13,286 549 166 105 - - 58,816 58,816 - - - 59,727$ 2,400$ 70,867$ 251,968$ 485,589$ 50,381$ 422,750$ -$ -$ -$ 12,888$ 62$ 62$ 62$ - - - - - - - - - - 11,500 - - - - - - 24,388 62 62 62 - - - 1,707 1,203 402 208 - - - - 218,434 - 221,657 - - 58,816 58,816 - - - - - 58,816 60,523 219,637 402 221,865 59,727 2,400 12,051 91,508 265,890 49,917 200,823 - - - 85,665 - - - - - - - - - - - - - (10,116) - - - 59,727 2,400 12,051 167,057 265,890 49,917 200,823 59,727$ 2,400$ 70,867$ 251,968$ 485,589$ 50,381$ 422,750$ 85 Debt Service Special Revenue G.O. Improvement Bonds of 2013A (348) G.O. Certificates of Indebtedness of 2013A (349) G.O. Improvement Bonds of 2011A/2006C (338) G.O. Capital Improvement Plan Bonds of 2009B (343) G.O. Improvement Bonds of 2010B (345) Assets Cash and investments 148,037$ 3,339$ 116,549$ 1,481$ 215,398$ Taxes receivable - delinquent - 608 752 997 86 Special assessments receivable Delinquent 1 - 5,183 - 775 Deferred 58,954 - 256,756 - 137,367 Accounts Receivable - - - - - Interest Receivable 470 29 365 37 620 Due from Other Funds - - - - - Due from Other Governments 334 383 2,120 394 64 Notes Receivable - - - - - Total assets 207,796$ 4,359$ 381,725$ 2,909$ 354,310$ Liabilities, Deferred Inflows of Resources and Fund Balances Liabilities Accounts payable 62$ 62$ 62$ 62$ 62$ Contracts Payable - - - - - Due to Other Funds - - - - - Total liabilities 62 62 62 62 62 Deferred inflows of resources Unavailable revenue - property taxes - 608 752 997 86 Unavailable revenue - special assessments 58,955 - 261,939 - 138,142 Unavailable revenue - notes receivable - - - - - Total deferred inflows of resources 58,955 608 262,691 997 138,228 Fund Balances Restricted 148,779 3,689 118,972 1,850 216,020 Committed - - - - - Assigned - - - - - Unassigned - - - - - Total fund balances 148,779 3,689 118,972 1,850 216,020 Total liabilities, deferred inflows of resources, and fund balances 207,796$ 4,359$ 381,725$ 2,909$ 354,310$ 86 Debt Service Nonmajor Governmental Funds December 31, 2015 City of St. Joseph Combining Balance Sheet - G.O. Certificates of Indebtedness of 2011A (346) G.O. Capital Improvement Plan Bonds of 2011A (347) G.O. Improvement Bonds of 2014A (350) G.O. Improvement Bonds of 2015A (351) Equipment Certificates of Indebtedness 2015A (352) G.O. Tax Abatement Bonds of 2015B (353) Debt Service Relief Fund (390) 2,752$ 102$ 199,691$ 23,411$ 2,220$ 3,391$ 184,349$ 323 185 34 - - - 1,504 - - 996 - - - 8,039 - - 197,713 225,029 - - 160,210 - - - - - - - 18 499 1,779 370 101 382 - - - - - - - - 153 3 34 - - - 643 - - - - - - - 3,246$ 789$ 400,247$ 248,810$ 2,321$ 3,773$ 354,745$ 62$ 62$ 62$ 62$ 62$ 62$ -$ - - - - - - - - 6,600 - - - - - 62 6,662 62 62 62 62 - 323 185 34 - - - 1,504 - - 198,709 225,029 - - 168,249 - - - - - - - 323 185 198,743 225,029 - - 169,753 2,861 - 201,442 23,719 2,259 3,711 - - - - - - - - - - - - - - 184,992 - (6,058) - - - - - 2,861 (6,058) 201,442 23,719 2,259 3,711 184,992 3,246$ 789$ 400,247$ 248,810$ 2,321$ 3,773$ 354,745$ 87 Debt Service Debt Service Total City Hall/Police Garage Capital Improvements (447) Park Terrace Improvements (450) Clinton Villiage/ Northland Improvements (451) 2015 Equipment Certificates (452) Assets Cash and investments 1,414,800$ 174,042$ 322,467$ 166,458$ 93,174$ Taxes receivable - delinquent 6,302 - - - - Special assessments receivable Delinquent 15,642 - - - - Deferred 1,475,472 - - - - Accounts Receivable - - - - - Interest Receivable 6,586 - - - - Due from Other Funds - - - - - Due from Other Governments 4,948 - - - - Notes Receivable - - - - - Total assets 2,923,750$ 174,042$ 322,467$ 166,458$ 93,174$ Liabilities, Deferred Inflows of Resources and Fund Balances Liabilities Accounts payable 868$ -$ 1,245$ 4,719$ -$ Contracts Payable - - 125,201 11,373 - Due to Other Funds 6,600 - - - - Total liabilities 7,468 - 126,446 16,092 - Deferred inflows of resources Unavailable revenue - property taxes 6,302 - - - - Unavailable revenue - special assessments 1,491,114 - - - - Unavailable revenue - notes receivable - - - - - Total deferred inflows of resources 1,497,416 - - - - Fund Balances Restricted 1,239,932 - - - - Committed - - - - - Assigned 184,992 174,042 196,021 150,366 93,174 Unassigned (6,058) - - - - Total fund balances 1,418,866 174,042 196,021 150,366 93,174 Total liabilities, deferred inflows of resources, and fund balances 2,923,750$ 174,042$ 322,467$ 166,458$ 93,174$ 88 Nonmajor Governmental Funds December 31, 2015 Capital Projects City of St. Joseph Combining Balance Sheet - General Capital Outlay (490) Water Access Fund (501) Sewer Access Fund (502)Total Total Governmental Funds 258,028$ 99$ 123$ 1,014,391$ 2,595,338$ - - - - 8,009 - - - - 15,642 - - - - 1,475,472 - - - - 30 - 96 516 612 7,680 - - - - 11,500 479 - - 479 18,713 - - - - 58,816 258,507$ 195$ 639$ 1,015,482$ 4,191,200$ 118$ -$ -$ 6,082$ 19,838$ - - - 136,574 136,574 - - - - 18,100 118 - - 142,656 174,512 - - - - 8,009 - - - - 1,491,114 - - - - 58,816 - - - - 1,557,939 - - - - 1,331,440 - - - - 85,665 258,389 195 639 872,826 1,057,818 - - - - (16,174) 258,389 195 639 872,826 2,458,749 258,507$ 195$ 639$ 1,015,482$ 4,191,200$ 89 Capital Projects Economic Development Authority (150) TIF 2-1 Millstream Shops and Lofts (157) TIF 2-2 St. Joseph Meat Market (158) TIF 2-3 Bayou Blues/ Alley Flat (159) TIF 3-1 Central Minnesota Credit Union (152) Revenues Property taxes 94,402$ -$ -$ -$ -$ Tax increments - 37,426 3,959 - - Special assessments - - - - - Intergovernmental 153,355 - - - - Charges for services - - - - - Miscellaneous Investment income 1,169 231 3 - - Contributions and donations - - - - - Revolving loan repayments - - - - - Other - - - - - Total revenues 248,926 37,657 3,962 - - Expenditures Current Public works - - - - - Culture and recreation - - - - - Economic development 267,967 34,041 3,816 413 4,580 Debt service Principal - - - - - Interest and other charges - - - - - Capital outlay General government - - - - - Public safety - - - - - Public works - - - - - Culture and recreation - - - - - Total expenditures 267,967 34,041 3,816 413 4,580 Excess of revenues over (under) expenditures (19,041) 3,616 146 (413) (4,580) Other Financing Sources (Uses) Sale of property - - - - - Bonds issued - - - - - Bond premium - - - - - Transfers in 9,134 - - - - Transfers out (7,951) (4,267) - (3,850) (1,017) Total other financing sources (uses)1,183 (4,267) - (3,850) (1,017) Net change in fund balances (17,858) (651) 146 (4,263) (5,597) Fund Balances Beginning of year 103,523 17,981 (402) - - End of year 85,665$ 17,330$ (256)$ (4,263)$ (5,597)$ 90 Year Ended December 31, 2015 Special Revenue City of St. Joseph Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Governmental Funds Park Dedication (205) Charitable Gambling (215) Revolving Loan (250)Total G.O. Crossover Refunding Bonds of 2009A (318) City Hall G.O. EDA Refunding Bonds of 2005A (322) Fire Hall G.O. Refunding Bonds of 2003B (331) 9,469$ -$ -$ 103,871$ 76,008$ 92,245$ 24,125$ - - - 41,385 - - - - - - - 138,487 - - - - - 153,355 - - - 9,299 - - 9,299 - - 25,760 596 43 273 2,315 4,833 1,110 937 1,450 5,200 - 6,650 - - - - - 11,149 11,149 - - - - - 470 470 - - - 20,814 5,243 11,892 328,494 219,328 93,355 50,822 - - - - - - - 1,173 6,060 - 7,233 - - - - - 47,326 358,143 - - - - - - - 330,000 90,000 70,000 - - - - 30,311 4,230 4,462 - - - - - - - - - - - - - - - - - - - - - - - - - - - - 1,173 6,060 47,326 365,376 360,311 94,230 74,462 19,641 (817) (35,434) (36,882) (140,983) (875) (23,640) - - - - - - - - - - - - - - - - - - - - - - - 7,951 17,085 60,000 - - - - - (17,085) - (5) - - - 7,951 - 60,000 (5) - 19,641 (817) (27,483) (36,882) (80,983) (880) (23,640) 40,086 3,217 39,534 203,939 346,873 880 73,557 59,727$ 2,400$ 12,051$ 167,057$ 265,890$ -$ 49,917$ 91 Debt ServiceSpecial Revenue G.O. Improvement Bonds of 2005B/2010B (333) G.O. Improvement Bonds of 2013A (348) G.O. Certificates of Indebtedness of 2013A (349) G.O. Improvement Bonds of 2011A/2006C (338) G.O. Capital Improvement Plan Bonds of 2009B (343) Revenues Property taxes 15,195$ -$ 55,026$ 48,779$ 56,960$ Tax increments - - - - - Special assessments 69,188 12,363 - 48,275 - Intergovernmental - - - - - Charges for services - - - - - Miscellaneous Investment income 3,466 2,265 140 1,762 176 Contributions and donations - - - - - Revolving loan repayments - - - - - Other - - - - - Total revenues 87,849 14,628 55,166 98,816 57,136 Expenditures Current Public works - - - - - Culture and recreation - - - - - Economic development - - - - - Debt service Principal 125,000 30,000 50,000 125,000 55,000 Interest and other charges 17,010 9,731 4,363 19,787 8,057 Capital outlay General government - - - - - Public safety - - - - - Public works - - - - - Culture and recreation - - - - - Total expenditures 142,010 39,731 54,363 144,787 63,057 Excess of revenues over (under) expenditures (54,161) (25,103) 803 (45,971) (5,921) Other Financing Sources (Uses) Sale of property - - - - - Bonds issued - - - - - Bond premium - - - - - Transfers in - - - 15,000 - Transfers out - - - - - Total other financing sources (uses)- - - 15,000 - Net change in fund balances (54,161) (25,103) 803 (30,971) (5,921) Fund Balances Beginning of year 254,984 173,882 2,886 149,943 7,771 End of year 200,823$ 148,779$ 3,689$ 118,972$ 1,850$ 92 Year Ended December 31, 2015 Debt Service Nonmajor Governmental Funds City of St. Joseph Combining Statement Of Revenues, Expenditures And Changes In Fund Balances - G.O. Certificates of Indebtedness of 2010A (344) G.O. Improvement Bonds of 2010B (345) G.O. Certificates of Indebtedness of 2011A (346) G.O. Capital Improvement Plan Bonds of 2011A (347) G.O. Improvement Bonds of 2014A (350) G.O. Improvement Bonds of 2015A (351) Equipment Certificates of Indebtedness 2015A (352) 25,687$ 4,591$ 22,011$ 227$ 4,984$ -$ -$ - - - - - - - - 35,666 - - 39,387 12,362 - - - - - - - - - - 23,808 - - - - 113 2,990 89 2,653 8,576 2,194 570 - - - - - - - - - - - - - - - - - - - - - 25,800 43,247 45,908 2,880 52,947 14,556 570 - - - - - - - - - - - - - - - - - - - - - 30,000 50,000 40,000 20,000 - - - 824 15,716 6,024 2,983 53,895 30,140 8,307 - - - - - - - - - - - - - - - - - - - - - - - - - - - - 30,824 65,716 46,024 22,983 53,895 30,140 8,307 (5,024) (22,469) (116) (20,103) (948) (15,584) (7,737) - - - - - - - - - - - - 32,545 9,996 - - - - - 6,758 - - 13,250 - - - - - (562) - - - - - - (562) 13,250 - - - 39,303 9,996 (5,586) (9,219) (116) (20,103) (948) 23,719 2,259 5,586 225,239 2,977 14,045 202,390 - - -$ 216,020$ 2,861$ (6,058)$ 201,442$ 23,719$ 2,259$ 93 Debt Service G.O. Tax Abatement Bonds of 2015B (353) Debt Service Relief Fund (390)Total City Hall/Police Garage Capital Improvements (447) Park Terrace Improvements (450) Revenues Property taxes -$ 1,053$ 426,891$ -$ -$ Tax increments - - - - - Special assessments - 23,006 378,734 - - Intergovernmental - - - - - Charges for services - - 49,568 - - Miscellaneous Investment income 3,383 - 35,257 - - Contributions and donations - - - - - Revolving loan repayments - - - - - Other - - - - - Total revenues 3,383 24,059 890,450 - - Expenditures Current Public works - - - - 5,940 Culture and recreation - - - - - Economic development - - - - - Debt service Principal - - 1,015,000 - - Interest and other charges 66,935 - 282,775 - - Capital outlay General government - - - - - Public safety - - - - - Public works - - - - 256,814 Culture and recreation - - - - 19,525 Total expenditures 66,935 - 1,297,775 - 282,279 Excess of revenues over (under) expenditures (63,552) 24,059 (407,325) - (282,279) Other Financing Sources (uses) Sale of property - - - - - Bonds issued 46,000 - 88,541 - - Bond premium 21,263 - 28,021 - - Transfers in - 5 88,255 - - Transfers out - (93,000) (93,567) - - Total other financing sources (uses)67,263 (92,995) 111,250 - - Net change in fund balances 3,711 (68,936) (296,075) - (282,279) Fund Balances Beginning of year - 253,928 1,714,941 174,042 478,300 End of year 3,711$ 184,992$ 1,418,866$ 174,042$ 196,021$ 94 Capital Projects Year Ended December 31, 2015 Debt Service City of St. Joseph Combining Statement Of Revenues, Expenditures And Changes In Fund Balances - Nonmajor Governmental Funds Clinton Villiage/ Northland Improvements (451) 2015 Equipment Certificates (452) General Capital Outlay (490) Water Access Fund (501) Sewer Access Fund (502)Total Total Other Governmental Funds -$ -$ 69,529$ -$ -$ 69,529$ 600,291$ - - - - - - 41,385 129,122 - - - - 129,122 507,856 - - - - - - 153,355 - - - 123,337 40,845 164,182 223,049 - - - 587 3,200 3,787 41,359 - - - - - - 6,650 - - - - - - 11,149 - - - - - - 470 129,122 - 69,529 123,924 44,045 366,620 1,585,564 - - - - - 5,940 5,940 - - - - - - 7,233 - - - - - - 358,143 - - - - - - 1,015,000 - - - - - - 282,775 - - 352 - - 352 352 - 33,632 16,470 - - 50,102 50,102 515,692 14,179 11,245 - - 797,930 797,930 25,519 14,019 41,310 - - 100,373 100,373 541,211 61,830 69,377 - - 954,697 2,617,848 (412,089) (61,830) 152 123,924 44,045 (588,077) (1,032,284) - - 22,403 - - 22,403 22,403 562,455 155,004 - - - 717,459 806,000 - - - - - - 28,021 - - 1,800 8,000 2,000 11,800 117,140 - - (7,000) (137,400) (320,500) (464,900) (575,552) 562,455 155,004 17,203 (129,400) (318,500) 286,762 398,012 150,366 93,174 17,355 (5,476) (274,455) (301,315) (634,272) - - 241,034 5,671 275,094 1,174,141 3,093,021 150,366$ 93,174$ 258,389$ 195$ 639$ 872,826$ 2,458,749$ 95 Capital Projects 96 (THIS PAGE LEFT BLANK INTENTIONALLY) 97 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, 2015, and the related notes to financial statements, which collectively comprise the City's basic financial statements, and have issued our report thereon dated April 28, 2016. 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. 98 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, described in the accompanying Schedule of Finding and Response on Internal Control that we consider to be material weaknesses, 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 28, 2016 99 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, 2015, and the related Notes to the Financial Statements, and have issued our report thereon dated April 28, 2016. 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. This report is intended solely for the information and use of those charged with governance and management of the City and the State Auditor and is not intended to be and should not be used by anyone other than these specified parties. St. Cloud, Minnesota April 28, 2016 City of St. Joseph Schedule of Finding and Response on Internal Control 100 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. The Finance Director or police take deposits to the bank. 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. 101 City of St. Joseph Schedule of Finding and Response on Internal Control CURRENT AND PRIOR YEAR INTERNAL CONTROL FINDING Material Weakness (Continued) Audit Finding 2006-01 – 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. During the course of the audit, we proposed a material audit adjustment that may not have been identified as a result of the city's existing internal control and therefore, could have resulted in a material misstatement of the financial statement. 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. City of St. Joseph Communications Letter December 31, 2015 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 1 1 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 City of St. Joseph, Minnesota, as of and for the year ended December 31, 2015, 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 auditing procedures that are appropriate in the circumstances for the purpose of expressing our opinion 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. 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. 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. 2 2 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 28, 2016, 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 28, 2016 3 3 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 enters 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. The Finance Director or police take deposits to the bank. 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. 4 4 City of St. Joseph Material Weakness IMPROVE SEGREGATION OF ACCOUNTING DUTIES (CONTINUED) During the course of our audit, we proposed a material audit adjustment that may not have been identified as a result of the City's existing internal control and, therefore, could have resulted in a material misstatement of the financial statements. 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. 5 5 City of St. Joseph Other Deficiency POLICE DEPARTMENT DEPOSIT RECONCILIATION 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. We also noted that deposits are not being made to the bank in a timely manner. In addition, we noted that there were several past due, uncollected tickets on hand that were not currently being pursued. This could result in reduced revenues for the City. We recommend an additional person, other than the Police Secretary, reconcile the daily collections to records maintained by the Police Department and that deposits are made to the bank in a timely manner. We also recommend that the City develop a process for collecting past due tickets. 6 6 City of St. Joseph Required Communication We have audited the financial statements of the City of St. Joseph for the year ended December 31, 2015, and have issued our report thereon dated April 28, 2016. 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 an opinion 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. 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. 7 7 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 Note 1 to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during the year ended December 31, 2015. The City implemented GASB 68 and 71 relating to pension accounting during the year ended December 31, 2015. 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 Other Post Employment Benefits (OPEB) Obligation – This liability is based on an actuarial study using the estimates of future obligations of the City for post employment benefits. 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. 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 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. A material misstatement relating to capital assets detected as a result of audit procedures was corrected by management. 8 8 City of St. Joseph Required Communication 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. 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 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. 9 9 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. GENERAL FUND For the year ended December 31, 2015, General Fund revenues exceeded expenditures by $245,397. In addition to this, the City received $1,501 in insurance recoveries, $278 in proceeds from the sale of property, $14,562 transferred in from other funds and transferred out $1,800 to other funds. This resulted in an increase in the General Fund balance of $259,938. Of the City's General Fund balance at December 31, 2015, $664,604 was assigned for specific expenditures, such as the fire department, elections, and a City structure/facility study. Another $20,366 was restricted by PEG access fees restricted for future cable access expenditures. The City also has $77 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 $1,315,805 represents approximately five months of 2015 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. 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. $1,034,354 $1,146,290 $1,134,091 $1,090,634 $1,315,805 $615,568 $501,399 $491,170 $500,085 $514,060 $48,993 $32,448 $69,600 $112,556 $150,544 $6,870 $15,216 $20,366 $15,903 $16,058 $19,500 $22,423 $77 $- $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 2011 2012 2013 2014 2015 General Fund Unassigned Assigned for Fire Fund Assigned for Other Purposes Restricted Nonspendable 10 10 City of St. Joseph Financial Analysis GENERAL FUND (CONTINUED) 2011 2012 2013 2014 2015 Total Revenues $2,773,578 $2,645,201 $2,626,455 $2,745,142 $2,927,909 Total Expenditures 2,519,310 2,676,215 2,603,383 2,656,243 2,682,512 Fund Balance 1,714,818 1,705,274 1,721,231 1,740,914 2,000,852 $- $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 $3,500,000 General Fund During the year ended December 31, 2015, the City's General Fund revenues increased $182,767, or 6.7%, from 2014, while expenditures increased by $26,269, or 1.0%. These changes in revenues and expenditures will be discussed by source and function, respectively, on the following pages. As discussed earlier, fund balance did increase $259,938 from 2014 to 2015. Fund balance has increased $286,034 or 16.7% since 2010. 11 11 City of St. Joseph Financial Analysis GENERAL FUND REVENUES 2011 2012 2013 2014 2015 Taxes 1,193,326$ 1,104,008$ 1,152,533$ 1,124,594$ 1,107,058$ Special assessments 1,458 845 2,080 7,302 3,590 Franchise fees 115,583 116,668 117,894 124,940 124,283 Licenses and permits 141,035 138,631 97,192 105,929 152,158 Intergovernmental 801,027 775,313 884,370 1,018,932 1,107,840 Charges for services 345,032 268,653 244,699 243,067 270,508 Fines and forfeitures 69,592 62,065 45,439 38,330 50,489 Miscellaneous 106,525 179,018 82,248 82,048 111,983 Total Revenues 2,773,578$ 2,645,201$ 2,626,455$ 2,745,142$ 2,927,909$ As discussed earlier, the City's revenue increased $182,767 from 2014 to 2015. The most significant variance was an increase in intergovernmental revenue of $88,908 primarily due to increased local government aid and state grants received. License and permit revenue increased $40,229 a result of increased building activity, miscellaneous revenues increased $29,935 due to a donation from the College of St. Benedict which they did not receive in 2014. 12 12 City of St. Joseph Financial Analysis GENERAL FUND REVENUES (CONTINUED) Total revenues have been consistent since 2011, increasing just 5.6% overall. The largest variances between the types of revenue have been the increases in intergovernmental revenues offset by the decreases in taxes and charges for services. The taxable tax capacity increased in 2015 causing the tax rate to increase. $3,675,356 $3,289,107 $3,199,935 $3,215,462 $3,272,269 $1,782,327 $1,660,190 $1,724,270 $1,673,870 $1,704,320 48.49% 50.48%53.89%54.78% 52.70% 96.80%96.92%97.00%97.10%98.38% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% $- $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 $3,500,000 $4,000,000 2011 2012 2013 2014 2015 Tax Capacity, Levy and Rates Taxable Tax Capacity Certified Tax Levy Tax Rate Collection Rate The pie charts on the following page show the General Fund sources of revenue for 2015 and 2014 as a percentage of total revenues. The allocation of sources of revenue fluctuates minimally from year-to- year. Taxes account for the largest component of General Fund revenues, making up 38% of the total. Intergovernmental revenue accounts for 38%. The total of these two categories accounts for approximately 76% and 78% of General Fund revenues in 2015 and 2014. 13 13 City of St. Joseph Financial Analysis GENERAL FUND REVENUE (CONTINUED) Taxes 38% Special assessments less than 1% Franchise fees 4% Licenses and permits 5%Intergovernmental 38% Charges for services 9% Fines and forfeitures 2% Miscellaneous 4% 2015 General Fund Revenues Taxes 41% Special assessments less than 1% Franchise fees 5% Licenses and permits 4%Intergovernmental 37% Charges for services 9% Fines and forfeitures 1%Miscellaneous 3% 2014 General Fund Revenues 14 14 City of St. Joseph Financial Analysis GENERAL FUND REVENUE (CONTINUED) Taxes Special assessments Franchise fees Licenses and Permits Intergovernmental Charges for Services Fines and Forfeitures Miscellaneous Budget $1,065,885 $2,000 $120,950 $99,010 $1,067,090 $261,530 $47,500 $92,650 Actual 1,107,058 3,590 124,283 152,158 1,107,840 270,508 50,489 111,983 $- $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000 General Fund Revenues Budget and Actual The graph above illustrates revenue of the General Fund for 2015 compared to budgeted amounts by source. Total revenues were over budget by $171,294 or 6.2%. Tax revenue were $41,173 over budget, a large component to this was collections on delinquent taxes. Licenses and permit revenues were $53,148 over budget due to conservatively budgeting for development. Intergovernmental revenues were $40,750 over budget due to police and fire aid coming in higher than anticipated. 15 15 City of St. Joseph Financial Analysis GENERAL FUND EXPENDITURES 2011 2012 2013 2014 2015 General government 492,861$ 499,170$ 485,778$ 552,559$ 582,258$ Public safety 1,277,072 1,290,614 1,405,347 1,419,890 1,376,624 Public works 374,154 353,298 344,935 403,435 329,004 Culture and recreation 202,065 211,578 196,504 199,011 264,168 Capital outlay 173,158 321,555 170,819 81,348 130,458 Total Expenditures 2,519,310 2,676,215 2,603,383 2,656,243 2,682,512 As discussed earlier, General Fund expenditures increased $26,269, or 1.0%, from 2014 to 2015. The most significant increases in expenditures occurred in general government, culture and recreation, and capital outlay expenditures. General government expenditures increased by $29,699, or 5.4%, from 2014, due to a rate study being completed. Culture and recreation expenditures increased $65,157 or 32.7% due to staff time and supplies relating to redoing the warming house. Partially offsetting these increases were decreases in public safety and public works expenditures. Public safety expenditures decreased $43,266 or 3.0%, a large portion of this was related to open police officer position in which the replacements were hired at lower rates as well as decreases in fire calls and utilities. Public works expenditures decreased $74,431 or 18.4%. Lower snow and ice removal expenditures made up the largest component of this decrease. The pie charts on the following page show the General Fund expenditures by function for 2015 and 2014 as a percentage of total expenditures. The allocation of expenditures by function was fairly consistent from 2014 to 2015. Public safety remains the largest component of General Fund expenditures, decreasing from 53% to 51% during 2015. The most significant change between the two years is public works expenditures, which decreased from 15% to 12% of total expenditures due to the decrease in snow and ice removal. 16 16 City of St. Joseph Financial Analysis GENERAL FUND EXPENDITURES (CONTINUED) General government 22% Public safety 51% Public works 12% Culture and recreation 10% Capital outlay 5% 2015 General Fund Expenditures General government 21% Public safety 53% Public works 15% Culture and recreation 8% Capital outlay 3% 2014 General Fund Expenditures 17 17 City of St. Joseph Financial Analysis GENERAL FUND EXPENDITURES (CONTINUED) The chart below illustrates expenditures of the General Fund for 2015 compared to budgeted amounts by function. Total expenditures were lower than the total budgeted expenditures by $146,773, or 5.2%. General Government Public Safety Public Works Culture and Recreation Capital Outlay Budget $641,515 $1,471,680 $378,255 $222,575 $115,260 Actual 582,258 1,376,624 329,004 264,168 130,458 $- $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000 $1,400,000 $1,600,000 General Fund Expenditures Budget and Actual General government expenditures were $59,257 under budget, the largest pieces of this variance were health insurance, and software support as more was allocated to other funds. Public safety expenditures were $95,056 under budget due to open positions throughout the year, a long term officer replaced with a newer, less expensive officer and budgeting a reserve for fire equipment. Public works expenditures were $49,251 under budget due to a savings on snow removal. Culture and recreation expenditures were $41,593 over budget due to staff time and supplies relating to the warming house project. 18 18 City of St. Joseph Financial Analysis 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. Water Fund The Water Fund showed operating income for the first time in 2015, after four years of operating losses. Operating revenues increased $47,039, or 6.5%, from 2014 due to rate increases, while operating expenses increased $8,698, or 1.2%, from 2014 to 2015, due to increased depreciation. Operations produced a small operating income; with the exclusion of $405,281 in depreciation expense, the Fund experienced operating income of $413,747. 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 about 102% of depreciation expense. In addition to the operating revenues and expenses of the Water Fund, there were net non-operating expenses of $37,449, which is mainly due to interest expense paid on outstanding debt. The operating and non-operating activities netted with capital contributions and transfers resulted in an increase in net position of $272,527 to $7,768,363 at December 31, 2015. The cash and investments balance at December 31, 2015, totaled $2,354, a decrease of $17,574. 2011 2012 2013 2014 2015 Operating Revenues $502,359 $626,360 $713,136 $723,850 $770,889 Operating Expenses 734,017 758,440 733,526 753,725 762,423 Operating Income (Loss) with Depreciation (231,658)(132,080)(20,390)(29,875)8,466 Operating Income without Depreciation 153,517 250,450 357,200 349,539 413,747 $(400,000) $(200,000) $- $200,000 $400,000 $600,000 $800,000 $1,000,000 Water Fund 19 19 City of St. Joseph Financial Analysis ENTERPRISE FUNDS (CONTINUED) Sanitary Sewer Fund Operating revenues increased $178,469, or 27.0%, from 2014 to 2015, while operating expenses increased $1,745, or 0.2%. The increase in revenue is due to the City raising rates. The Sewer Fund has shown operating losses for each of the past five years. 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 98% of depreciation expense. The graph below indicates the Sewer Fund did generate operating income each year when depreciation expense is not considered (indicated by the orange bar), thereby covering a portion, but not all of annual depreciation expense. In addition to the operating revenues and expenses of the Sewer Fund, there were net non-operating expenses of $137,713, which is mainly due to $158,874 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 $139,865 to $7,908,671 at December 31, 2015. The cash balance at December 31, 2015, totaled $750, a decrease of $298,659. 2011 2012 2013 2014 2015 Operating Revenues $494,160 $460,685 $709,892 $661,679 $840,148 Operating Expenses 682,708 681,214 809,378 850,112 848,367 Operating Loss with Depreciation (188,548)(220,529)(99,486)(188,433)(8,219) Operating Income without Depreciation 66,234 42,217 289,213 204,478 433,404 $(400,000) $(200,000) $- $200,000 $400,000 $600,000 $800,000 $1,000,000 Sanitary Sewer Fund 20 20 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. Operating revenues decreased $612, or 0.2%, while operating expenses decreased $34,520, or 10.7%, from 2014 to 2015 as a result of no rate increases and monitoring contractor charges versus city billings to residents. These changes resulted in an operating loss of $3,292 for 2015. The Fund produced operating income of $3,314 when depreciation is not factored in. The operations of the Refuse Fund cover 50% 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 a decrease in the Fund's net position of $660. The cash balance increased $6,074 in 2015 and totaled $231,906 at December 31, 2015. 2011 2012 2013 2014 2015 Operating Revenues $298,909 $294,998 $298,123 $285,197 $284,585 Operating Expenses 305,660 296,119 316,087 322,397 287,877 Operating Loss with Depreciation (6,751)(1,121)(17,964)(37,200)(3,292) Operating Income (Loss) without Depreciation (6,751)(1,121)(11,458)(30,694)3,314 $(50,000) $- $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 Refuse Fund 21 21 City of St. Joseph Financial Analysis ENTERPRISE FUNDS (CONTINUED) Storm Water Fund The Storm Water Fund showed operating losses in the past five years. Operations were consistent with the prior year. Operating revenues increased $628, or 0.6%, from 2014 to 2015, while operating expenses increased $12,742, or 7.6%. The Storm Water Fund produced an operating loss of $82,548 with depreciation and operating income of $15,211 without depreciation expense. The operations of the Storm Water Fund covered approximately 16% of depreciation expense. The Storm Water Fund also reported non-operating revenues including investment income and special assessments totaling $3,204, with capital contributions and transfers of $18,765 for bonded improvement projects to other funds. Fund activity resulted in decrease in net position of $78,695. The cash balance increased $4,471 in 2015 and totaled $229,796 at December 31, 2015. We recommend the City continue to monitor rates as well as operating expenses to ensure the Fund's profitability in the future. 2011 2012 2013 2014 2015 Operating Revenues $100,093 $101,336 $102,009 $97,505 $98,133 Operating Expenses 171,383 169,508 170,289 167,939 180,681 Operating Loss with Depreciation (71,290)(68,172)(68,280)(70,434)(82,548) Operating Income without Depreciation 26,153 29,179 28,946 27,224 15,211 $(100,000) $(50,000) $- $50,000 $100,000 $150,000 $200,000 Storm Water Fund 22 22 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 operating income in 2014 and 2015 compared to an operating loss in 2013. Operating revenues decreased $2,473, or 3.9%, from 2014 to 2015 while operating expenses increased $3,220, or 6.4% as a result of increased time allocation and repairs and maintenance. The Street Light Utility Fund produced an operating income of $6,813. The fund also reported non- operating income including investment income and special assessments totaling $209, which resulted in an increase in net position of $7,022. The cash balance increased $11,190 in 2015 and totaled $19,742 at December 31, 2015. We recommend the City continue to monitor rates as well as operating expenses to ensure the Fund's profitability in the future. $(20,000) $(10,000) $- $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000 2013 2014 2015 2013 2014 2015 Operating Revenues $43,066 $63,037 $60,564 Operating Expenses 47,638 50,531 53,751 Operating Income (Loss)(4,572)12,506 6,813 Street Light Utility 23 23 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 updates include:  Accounting Standard Update –GASB Statement No. 75 - Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions –GASB has issued GASB statement 75 relating to accounting and financial reporting for postemployment benefits other than pensions. The new statement requires governments in all types of OPEB plans to present more extensive note disclosures and required supplementary information (RSI) about their OPEB liabilities. The following are extensive summaries of each of the current updates. 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. 75 - ACCOUNTING AND FINANCIAL REPORTING FOR POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS The primary objective of this Statement is to improve accounting and financial reporting by state and local governments for postemployment benefits other than pensions (other postemployment benefits or OPEB). It also improves information provided by state and local governmental employers about financial support for OPEB that is provided by other entities. This Statement results from a comprehensive review of the effectiveness of existing standards of accounting and financial reporting for all postemployment benefits (pensions and OPEB) with regard to providing decision-useful information, supporting assessments of accountability and interperiod equity, and creating additional transparency. This Statement replaces the requirements of Statements No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, as amended, and No. 57, OPEB Measurements by Agent Employers and Agent Multiple-Employer Plans, for OPEB. Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, establishes new accounting and financial reporting requirements for OPEB plans. GASB Statement 75 requires governments to report a liability on the face of the financial statements for the OPEB that they provide:  Governments that are responsible only for OPEB liabilities related to their own employees and that provide OPEB through a defined benefit OPEB plan administered through a trust that meets specified criteria will report a net OPEB liability—the difference between the total OPEB liability and assets accumulated in the trust and restricted to making benefit payments. 24 24 City of St. Joseph Emerging Issues ACCOUNTING STANDARD UPDATE – GASB STATEMENT NO. 75 - ACCOUNTING AND FINANCIAL REPORTING FOR POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (CONTINUED)  Governments that participate in a cost-sharing OPEB plan that is administered through a trust that meets the specified criteria will report a liability equal to their proportionate share of the collective OPEB liability for all entities participating in the cost-sharing plan.  Governments that do not provide OPEB through a trust that meets specified criteria will report the total OPEB liability related to their employees. GASB Statement 75 carries forward from Statement 45 the option to use a specified alternative measurement method in place of an actuarial valuation for purposes of determining the total OPEB liability for benefits provided through OPEB plans in which there are fewer than 100 plan members (active and inactive). This option was retained in order to reduce costs for smaller governments. GASB Statement 75 requires governments in all types of OPEB plans to present more extensive note disclosures and required supplementary information (RSI) about their OPEB liabilities. Among the new note disclosures is a description of the effect on the reported OPEB liability of using a discount rate and a healthcare cost trend rate that are one percentage point higher and one percentage point lower than assumed by the government. The new RSI includes a schedule showing the causes of increases and decreases in the OPEB liability and a schedule comparing a government's actual OPEB contributions to its contribution requirements. Information provided above was obtained from www.gasb.org.