2025 Annual Comprehensive Financial Report

CITY OF SHAKOPEE

NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2025

NOTE 3 – STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY (CONTINUED)

B. Deficit Net Position and Fund Balance

The TIF District No. 18 Canterbury Commons capital project fund had a negative fund balance of $8,152,219 on December 31, 2025 as a result of construction on River City Centre and roads in the Canterbury district. Future tax increment revenues are anticipated to eliminate this deficit. The TIF District No. 19 Riverfront capital project fund had a negative fund balance of $1,543,117 on December 31, 2025 as a result of public infrastructure costs. Future tax increment revenues are anticipated to eliminate this deficit. The TIF District No. 20 Enclave capital project fund had a negative fund balance of $2,144,580 on December 31, 2025 as a result of lot improvements at the former city hall site. Future tax increment revenue is anticipated to eliminate this deficit. The Employee Benefits internal service fund had a negative net position of $1,176,777 on December 31, 2025. 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. The Former Gravel Pit capital project fund had a negative fund balance of $111,270 on December 31, 2025 as a result of TIF district in planning phase. Future tax increment revenue is anticipated to eliminate this deficit. 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 Statutes 118.03 for an amount exceeding FDIC, SAIF, BIF, FCUA, or other federal deposit coverage. As of December 31, 2025, the City and Commission’s bank balances were not exposed to custodial credit risk because they were insured through Federal Deposit Insurance Corporation (FDIC), National Credit Union Association (NCUA) and properly collateralized with securities held by the pledging financial institutions’ trust departments or agents in the City’s name. A. Deposits NOTE 4 – DEPOSITS AND INVESTMENTS

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