2018 City of Shakopee Comprehensive Annual Financial Report

transfers, use of existing fund balance position, as well as review of charges and fees that may be applicable to the projects, and currently not tapped for future funding sources. In addition, the City Council passed an ordinance effective January 1, 2017 assessing the private gas and electric utilities a franchise tax based on three percent of energy sales. This franchise tax generated approximately $895,000 in 2018, with revenue dedicated to the Capital Improvement Fund. City capital and equipment needs are currently identified and funded in a manner that will not place an undue burden or single year expense fluctuation on the taxpayers. The planned CIP clearly identifies the needs for current projects as well as future use. This is based on known and anticipated programs and mandates, such as environmental program adjustments and possible community expansion and growth. The capital and equipment needs of the city require constant appraisal for replacement cost, life span and the assurance that the insurance coverage is providing for the most comprehensive, yet affordable, coverage. A Self-Insurance Internal Service Fund was created in 2016 to aid in controlling general liability insurance costs by monitoring the premiums against deductible expenses. The long-term goal of the fund is to eventually self-insure for non-catastrophic type of losses. The city is also considering the move to self-insurance for employee health insurance. This move would also aid in controlling costs and stabilizing rates for both the city and its employees. The City Council approved a $600,000 transfer from the General Fund to the Self-Insurance Fund as a first step in establishing the necessary reserves to move in this direction. It is anticipated that for calendar year 2020, the city will be self-insured for health insurance. Relevant Financial Policies The city’s target General Fund balance is to maintain an unassigned level between 40% and 45% of expenditures. This level is to provide working capital for cash flow, expected declines in revenues, and for unforeseen expenditures such as natural disasters, or for unforeseen but urgent requests. Replenishing the fund balance when it falls below the target level shall be accomplished by inter-fund transfers, or adjusting of expenditures or revenues, over a period not to exceed three years. The city historically receives no local government aid (LGA). Annual legislative actions may impact the financial position of those cities that are currently reliant on these and other government derived revenue sources, which leaves them vulnerable to the economies of the State as a whole. As of this writing, it was not anticipated that actions by the Minnesota Legislature would negatively impact the city and its operations and planning. The standard budget process, which provides for the presentation and approval of the property tax levies for the General fund (including Economic Development), debt service and referendum debt, will be consistent with prior year actions.

8