2018 City of Shakopee Comprehensive Annual Financial Report

CITY OF SHAKOPEE NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2018

NOTE 3 – STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY (CONTINUED) B. Deficit Net Position and Fund Balance The Economic Development Authority (EDA) special revenue fund had a negative fund balance of $821,472 on December 31, 2018 as a result of partial construction costs to install utilities and streets in EDA land held for resale. Anticipated land sales in this area are expected to recover this deficit. The TIF District No. 17 capital projects fund had a negative fund balance of $1,801,093 on December 31, 2018 as a result of street improvements costs. Tax increment revenue over the next seven years is anticipated to eliminate this deficit. The TIF District No. 10 capital projects fund had a negative fund balance of $653 on December 31, 2018. This deficit will be eliminated in 2019, as the administrative portion of tax increment revenue will be used to eliminate this deficit. The TIF District No. 18 Canterbury Commons capital projects fund had a negative fund balance of $150,218 on December 31, 2018. This deficit will be eliminated upon the issuance of tax increment bonds in the fall of 2019 to cover the costs incurred and additional street reconstruction costs. The City Hall capital projects fund had a negative fund balance of $50,000 on December 31, 2018. This deficit will be eliminated in 2019 with a transfer from the Building internal service fund. The Employee Benefits internal service fund had a deficit net position of $1,247,749 on December 31, 2018. This deficit has been in place for many years and is not expected to be resolved. Management’s position is that the cash balance should be sufficient enough to cover the current compensated absences and not necessarily the noncurrent portion of compensated absences. NOTE 4 – DEPOSITS AND INVESTMENTS A. Deposits In accordance with applicable Minnesota Statutes , the City and the Component Unit maintains deposits at depository banks authorized by the City Council and the Commissioners. Custodial Credit Risk: This is the risk that an issuer or other counterparty to an investment will not fulfill its obligation to the holder of the investment. Minnesota Statutes 118A.04 and 188A.05 limit investments that are in the top two ratings issued by nationally recognized statistical rating organizations. The City’s investment policy references Minnesota Statutes and further limits the types of investments that the City is allowed to invest in. The Commission has a deposit policy that requires the Commission’s deposits to be collateralized as required by Minnesota Statues 118.03 for an amount exceeding FDIC, SAIF, BIF, FCUA, or other federal deposit coverage. As of December 31, 2018, the City and Commission’s bank balances were not exposed to custodial credit risk because they were insured through Federal Deposit Insurance Corporation (FDIC) and properly collateralized with securities held by the pledging financial institutions’ trust departments or agents in the City’s name.

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