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06/02/2011 - City Council Finance CommitteeFINANCE COMMITTEE MEETING JUNE 2, 2011 12:00 -2:00 P.M. CITY HALL CONFERENCE ROOMS 2A & 2B AGENDA I. AGENDA ADOPTION II. BROADBAND FIBER EXTENSION PLAN & PHASING III. FUND STATUS TRANSFER SCENARIO FOR CONSIDERATION IV. OTHER BUSINESS V. ADJOURNMENT City of Eaftafl MeMo TO: FINANCE COMMITTEE FROM: CITY ADMINISTRATOR HEDGES DATE: MAY 27, 2011 SUBJECT: FINANCE COMMITTEE MEETING / THURSDAY, JUNE 2, 12 -2 PM A Finance Committee meeting is scheduled for Thursday, June 2 from 12 -2 p.m. in Conference Room 2A &B. Also, as a reminder, in keeping with past practice, no plans are being made to provide lunch on the 2 11d so if you could, please plan to eat before the meeting or bring a "brown bag" lunch. The purpose of the June 2 Finance Committee is to discuss plans and phasing options for broadband fiber as well as consider a scenario for fund status transfer(s). While earlier policy and conceptual commitment was given to the broadband initiatives recommended by consultant Andrew Cohill, staff want to make sure the Committee is comfortable with the phasing and financial pro forma/return before seeking Council authorization for an RFP to install the first phase. At the direction of the Finance Committee, staff has also continued to research and prepare information regarding the current status of all City funds (accounting entities) in the context of current and potential future needs. This review has been undertaken to result in a strategic realignment of existing City resources to be approved by the City Council as part of the City's overall financial planning. Included in the background material and provided as a basis for discussion is one scenario that seeks to address the Finance Committee's priorities. Please feel free to contact me if you have any questions in advance of the June 2 Finance Committee. /s /Thomas L. Hedges City Administrator J, Agenda Information Memo Finance Committee Meeting June 2,2011 ACTION TO BE CONSIDERED: • Determine parameters of proposed phasing of City fiber extension, and associated costs /expected return on investment for creation of open access fiber routes for business use. • Recommend action by the full City Council to authorize preparation of RFPs to determine precise pricing for Year One objectives. FACTS: II. BROADBAND FIBER EXTENSION PLAN & PHASING • On November 9, 2010 the Finance Committee heard a presentation of the Tech Working Group's recommendations and consultant's findings relative to broadband strategies in furtherance of the City Councils technology goals. • Mr. Andrew Cohill discussed a twin strategy of seeking to attract a state of the art colocation facility to position Eagan as a telecommunications hub for multiple providers while at the same time extending City fiber and duct to business locations in the city for open access use by any provider offering telecommunications services to Eagan businesses. • For the two projects, Mr. Cohill discussed City involvement of between $1 -3 million, but also revenue generation. The Finance Committee indicated comfort with at least $2 million toward the two projects and directed staff to recommend the best possible source of funding. • Mr. Cohill is back with parameters regarding the fiber extension piece only. A separate contract is underway with a team led by Five 9s Digital regarding colocation site selection and business case analysis. • Due to scheduling conflicts, it was not possible for consultant Cohill and Director of Administrative Services Van Overbeke to meet to review proposed financials until June 1. They will be bringing recommended year one and out year funding and phasing to the June 2 Finance Committee meeting for the committee's review. • Specifically Mr. Cohill will review the suggested first year budget items, amounts, and procurement schedule. He will also briefly review likely second and third year procurement amounts and schedule. • On January 4, 2011, the City Council accepted the 2010 broadband report, passed a resolution in support of both an Eagan colocation facility and open 3 access fiber extension. It also ratified its direction at the December 14, 2010 work session to pursue five strategies in pursuit of the two tactics in support of its goal to: Ensure the economic competitiveness of Eagan's business and residential communities in the global marketplace by anticipating and addressing the evolving "infostructure" bandwidth, capacity and speed needs of Eagan's residents, businesses and employers. • The City Council concluded in its resolution passed in January that "the placement and construction of a colocation facility /data center and the installation and extension of City -owned fiber infrastructure are in the public interest and necessity as critical infrastructure." • Regarding the colocation portion of the strategy, significant progress is being made and it is anticipated that recommendations regarding that piece will come back to the City Council /Finance Committee in September. Attachments: ➢ Enclosed on pages 5 and are the November 9, 2010 Finance Committee Meeting Notes pertaining to the Tech Working Group Recommendations /Consultant's Findings. Finance Committee Meeting Notes November 9, 2010 Page 2 Upon reviewing the various payment options, it was the recommendation of the Finance Committee to pursue direct payments from the overpass and interchange component of the annual major street tax levy (essentially paying cash from current balances and future tax levies). Public Works Director Colbert noted that there are no special assessments proposed with the overpass and, thus, there will be no typical feasibility report public hearing process associated with the project. However, the Council will be considering the approval of plans and specifications in December for a bid solicitation in early 2011. IV. TECH WORKING GROUP RECOMMENDATIONS /CONSULTANT'S FINDINGS City Administrator Hedges and Director of Communications Garrison provided an overview of the Eagan Technology Working Group's recommendations. Mr. Garrison introduced Andrew Cohill, Design Nine Consultant, who joined the conversation via conference call. Mr. Cohill summarized his observations and proposed goals and recommendations for the Committee's consideration. The Committee discussed the feasibility for a colocation facility in Eagan. Mr. Cohill noted the cost to extend the needed southern fiber could be approximately $1 million. Cohill also noted that it would be doable to proceed with the colocation facility and the fiber extensions at the same time, suggesting that four to six months would be realistic to get a commitment to build a colocation facility. Mr. Cohill suggested a timeline of nine to twelve months to build the facility. Mr. Cohill suggested the total anticipated investment for the project would be between $1.5 and $3 million, noting that there would be an opportunity for revenue generation as well. Mr. Cohill added that if the City proceeds with directing a colocation facility, the first step should be to send letters to current providers such as Qwest to invite them onto the network, emphasizing the opportunity to retain existing customers while attracting new customers. The Committee reviewed possible funding sources for the City's monetary contribution to the project, including the use of revenues from the antennae leases. The Director of Administrative Services was asked to report back recommended funding sources for this project as a result of an overall review of city funds. The Finance Committee made the following five recommendations to be forwarded to the City Council for their earliest consideration in December: 1. Authorize pursuit of a private colocation facility on City land big enough to support a future meet point as a key strategy to keep and grow jobs in Eagan; 2. Make a clear policy commitment to extend public purpose City duct and fiber to business, parks and commercial areas over the next 3 -5 years to create an open access fiber ring connected to the colocation facility that can be used by any carrier. Commit at least $2 million in City funds to accomplish these connection and begin with the focus of where the right -of -way is already crowded. 5 Finance Committee Meeting Notes November 9, 2010 Page 3 3. Make a clear policy commitment to ensuring southern fiber routes out of Eagan. 4. Authorize preparation without delay of a well- designed package of economic development and financial incentives for a qualified firm interested in the City's vision to have a modern energy efficient data center and common meet point. The City package of incentives would include the commitment to invest in fiber to most commercial areas of the City, financial support for a southern route, assistance with land acquisition, City data on business locations and fiber routes, and in partnership with the Technology Working Group, introductions to local companies that may wish to lease space in such a facility. 5. As marketing assistance may be necessary, work with the City Attorney and the Tech Working Group to define a process to select a vendor to work with service providers and long haul carriers to establish routes and common meet point, identify and meet with prospects, and develop marketing package and materials. 6 Agenda Information Memo Finance Committee Meeting June 2,2011 III. FUND STATUS TRANSFER SCENARIO FOR CONSIDERATION ACTION TO BE CONSIDERED: To provide direction to staff regarding the potential reallocation of resources among the various City funds. FACTS: • At the March 8, 2011 Finance Committee Meeting Director of Administrative Services VanOverbeke provided an overview of City funds, which the Committee discussed. • Within the material presented and in the discussion it was noted that the following funds have available resources that could potentially be redirected by the City Council: o Housing o Cable TV Franchise Fees o Community Investment o Utility Trunk Funds • Storm Sewer Trunk • Water Trunk • Sanitary Sewer Trunk o Benefit Accrual o Risk Management o Workers' Compensation Self Insurance • Although not included in previous discussion, the City's General Fund balance will also have resources available resulting from 2010 operations. An improvement on the revenue side combined with continuing tight expenditure budgeting and controls, resulted in a significant increase to the fund balance at December 31, 2010. Consequently, some dollars from that source are included in the resource reallocation being presented. • Also noted as having available resources were the following restricted accounts within the Public Utilities Fund: o Water System Bonds and Debt Service o Antennae Lease Revenue ri • It is expected that the Allowance for Uncollectible Taxes first levied for payable 2011 will have an available balance at some point, but it is too early to project any available balance. Therefore, no use of that potential balance is included in the resource reallocation being presented. • Within the material presented and in the discussion in March it was noted that the following funds have potential resource needs: o Park Systems Development and Renewal & Replacement o Fire Safety Campus o Cedar Grove TIF o New Combined Utility Trunk o Fiber Infrastructure • Also noted as having potential resource needs was the following restricted account within the Public Utilities Fund: o Storm Drainage Renewal & Replacement • In response to the public policy questions presented at the meeting the Committee directed staff to specifically address the following priorities without an increase to the City's existing tax levy: 1. Managing the Cedar Grove TIF deficit and carrying costs 2. Funding the Fiber Project 3. Funding the Fire Safety Center 4. Providing additional resources for the Park System • The Committee asked for more detail on the assumptions being used in recommending transfers, various transfer options and potential consequences of making fund transfers. • Enclosed on page 1 t is a copy of one possible scenario assembled by staff that addresses the above referenced priorities. The material is highly summarized and there is a great deal of support documentation regarding each of the funds that is not presented with this summary, but can be provided and /or used if the finance committee desires more details. Various other options could be derived from this scenario and the discussion will likely surface a more thorough understanding of options and consequences. • The over arching objective of any scenario is to provide for a strategic realignment of existing City resources with current and future obligations as part of the City's overall financial planning. In proposing, approving, and implementing the plan the following risks /factors should be given consideration: 2 o The pressure on revenues, especially property taxes combined with service demands will continue to increase the scrutiny on operations and on cash balances. o Minimal growth and aging infrastructure will compound the tension among available revenues, expenditure appropriations, and use of cash balances. o Any desire /impulse to maintain or increase service levels through the use of reserves or one time fixes is clearly problematic. o The use of available resources to address today's challenges will logically limit options for addressing future obligations. The challenge is to ensure that viable options exist to address future obligations with today's larger cash reserves no longer being available. o Viable future options may include the following: • Continued use of the General fund balance as reserves become available. • Bonding for infrastructure renewal and replacement with the largest potential impact in utilities. Bonding will roll the cost impact forward and would likely necessitate some user rate increases. • Continued use of the Community Investment Fund for smaller, one -time capital improvements. • Any catastrophic events primarily in workers compensation and /or self insurance may require some internal borrowing and the development of a plan to return to strong financial footing. This probability is fairly low. • The Trunk Fund advances to the Cedar Grove TIF need to be structured in a manner such that if tax increment is generated helping to solve the deficit and carrying costs over time, the Trunk Fund money can come back out and be redirected by the City Council as part of a revised /updated strategic financial plan. This will not likely be a short term possibility, but there is a chance that additional funds would be available in the future when development progresses and especially, if the TIF district can be extended. o The scenario as presented provides for today's resource needs with the exception of trying to finance the TINA construction. In the event the City Council desires that today's available resources address TINA and /or any other desired or contemplated construction, program or service, modifications will be necessary. o In no particular order and with no degree of certainty some of the potential future obligations /desires that appear to be out there include the following: • Financing the TINA construction. The possible scenario presented in this memo actually reduces the amount of money available to the Major Street Fund by reallocating R $400,000 of the existing Overpasses & Interchanges levy to the Park Systems Development and Renewal & Replacement Fund. The levy left behind after the $400,000 reallocation will be used to pay the bonding and construction costs for the two overpasses. There may be some desire to treat the Overpasses and Interchanges levy differently either to use it to help finance the TINA construction or to make some or all of it available to the needs of the Major Street Fund CIP not related to overpasses and interchanges. Absent the proposed reallocation, it will be difficult to address a new Park Systems levy without an overall levy increase or creating an adverse impact to operations or to other capital requirements. ■ Financing for replacement of the joint fire training facility (ABLE). The preliminary estimate is $500,000 each for the four cities for phase 1. • Financing for any type of enhanced Art House or Performing Arts venue. • Financing for any type of City housing revitalization loan or grant program. • Financing assistance for any CDA initiatives to be constructed in the City. ■ Potential debt service relief to Cascade Bay. ATTACHMENTS: • Enclosed on pages /a and ) is a copy of the notes from the March 8, 2011 Finance Committee Meeting. • Enclosed on pages /5 through cam/1 is a copy of the memo from Director of Administrative Services VanOverbeke providing information regarding the financial status of the various City funds as of December 31, 2010. PUBLIC POLICY DISCUSSION OUTCOMES: 1. Does the scenario presented meet the Finance Committee priorities with or without modification? 2. What are the next steps: i. Additional scenarios and /or more information to the Finance Committee ii. Discussion at a City Council Workshop iii. Consent Agenda item at a Regular City Council Meeting 1D 17- May -11 i 300,000 E8Z' 60£'62 I - All additional connection charges related to treatment plant construction (1124) are to be deposited into the Water Supply & Storage account (1123). Trunk Fundi Fiber Capacity', 8,365,000 17,250,000 3,386,283 j 300,000 J 000'09n Fire Safety 23,216 365,000 31- Dec -10 ! Transferred ! Remaining Balance 392,374 6,224,561 6,224,561 13,267,545 1,500,000 2,392,374 2,000,000 E8Z` 60£`6Z 2,273,216 4,938,239 1,836,405 Avai 'Fund Name j 6uisnoHij (Risk Management _ 1 (General (Fund Balance) (Community Investment 1 Storm Water Trunk LWater Trunk (Sanitary Sewer Trunk 1 ( Total Trunk Funds[ Cable TV Franchise Fees FINANCE COMMITTEE MEETING NOTES MARCH 8, 2011 12:00 — 2:00 PM CONFERENCE ROOMS 2A &B Committee members present: Mayor Maguire and Councilmember Bakken City staff present: City Administrator Hedges, Assistant to the City Administrator Miller, Director of Administrative Services VanOverbeke, Public Works Director Colbert, Community Development Director Hohenstein, and Finance Intern Pratt. I. FUND STATUS UPDATE —CITY WIDE AND CEDAR GROVE TIF FUND STATUS Director of Administrative Services VanOverbeke provided an overview of City funds, which the committee discussed. The discussion was further focused on the funds with available resources and the four funds that were noted as needing assistance: 1.) Park Site Acquisition and Development; 2.) Cedar Grove TIF; 3.) Fire Safety Campus; and, 4.) Fiber Conduit Ring. funds: The committee offered the following direction and recommendations on each of the Park Site Acquisition and Development Fund (To be renamed the Park Systems Development and Renewal & Replacement Fund)— According to the Committee, this fund is an immediate need that will likely need funding via a levy. The committee stated that it would be their desire to consider redirecting an existing levy (e.g. Major Street Fund (Overpasses & Interchanges Funding)), if possible, but would suggest that all future options be kept open. The committee asked for additional information on the balance of the Overpasses & Interchanges account once it is determined how much funding is needed to complete the two overpasses, taking into account the future cash flows. Fire Safety Campus —The committee recommended that the Fire Safety Campus be kept off the levy by using internal transfers. A possibility for further research includes transfers from the Benefit Accrual, Risk Management, and Worker's Compensation Self Insurance Funds to pay for the Campus. The committee asked that staff come back with additional information about the impact to the funds should such transfers be made. Fiber Conduit Ring Fund —The committee concurred with staff's suggestion to rename the Fiber Conduit Ring Fund as the Fiber Infrastructure (for Fiber Capacity and Collocation) Fund. The committee also concurred with the suggestion that this fund could serve as an enterprise fund with a revenue stream in the future. There was committee consensus to explore the use of antennae lease revenues and Cable TV Franchise Fees to fund the Fiber Infrastructure Fund. The committee noted that they wanted to ensure that funding from the antennae lease revenues to Holz Farm and the Eagan Community Center would not be negatively impacted. FINANCE COMMITTEE MEETING NOTES JUNE 2, 2011 12:00 PM CONFERENCE ROOMS 2A&B Committee members present: Mayor Maguire and Councilmember Bakken City staff present: City Administrator Hedges, Assistant to the City Administrator Miller, Director of Administrative Services VanOverbeke, Community Development Director Hohenstein, Chief Financial Officer Pepper, and Communications Director Garrison. Guests present: Andrew Cohill and Sid Boswell, consultants with Design Nine I. BROADBAND FIBER EXTENSION PLAN AND PHASING City Administrator Hedges introduced the item, noting the purpose of today's discussion is to determine the parameters of the proposed phasing of City fiber extension, and the associated costs/expected return on -investment for the creation of open access fiber routes for business use. Hedges noted that staff is also seeking a recommendation from the Committee as to whether the Council should authorize preparation of RFPs to determine precise pricing for year -one objectives. Communications Director Garrison introduced Consultants Andrew Cohill and Sid Boswell from Design Nine, who reviewed a City fiber map with the committee. It was noted that a connection fee of approximately $500 would be proposed to be paid by the provider or customer. Mr. Cohill noted that ongoing marketing, branding, and public awareness campaigns would be necessary for the success of the project. The Committee reviewed the financial summary proposed for the fiber extension. City Administrator Hedges pointed out the modest staffing within support services that would be needed for the program, but acknowledged that the City would need to be very cautious not to overstaff the program. The Committee discussed an exit strategy should the fiber extension project not meet the expectations of the City. Mr. Cohill noted that the city would be in the position to sell the fiber network and suggested that the City would likely be able to recoup its initial investment. The Committee also discussed future opportunities to extend fiber to different markets in the community. Upon further discussion, the Finance Committee voiced their consensus that they are comfortable with the proposed approach and financing of the fiber extension. The Committee recommended a funding allocation of up to $2 million to get through the fourth year of the project. 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W C � (7 0 U) m L Q Olu r C C W C W m O t1 N m m Z C O m N v m W Q to m �j m m U o Qtw�u E m c ly `i° >- ED X c O m o f d G °' F m a an d b n OO o U C m m m m O »_ Q Da. 4 m !L Cm N N m m U•O lw[ U. m O m V Zo 0 C .A aQ+ CO J EO C CL > m Z v E ED E 4 J Z N y W m 'n c 5 N v N Q m E m o o +� t4- W ro a � m ,9 ° m E m mc` It F. n H a n E a v o w9 H U c[ m C7 0 0 m x D- - o° ,• m a m E m m m Co 0 o W o o - N (L F+ F- U) W O S F- 5 W O m ¢ Z 0 U U ¢ w to Fr U 'A, City Council Finance Committee Meeting Notes March 8, 2011 Page 2 Cedar Grove TIF —The committee recommended that the City consider a one -time, interest free transfer into the Cedar Grove TIF Fund from the Utility Trunk Funds, which consist of the storm sewer, water, and sanitary sewer. This transfer would be subject to review by the City's bonding attorney to ensure compliance with all TIF regulations. The committee concurred that if such a transfer occurs, then the three individual trunk funds should be combined into one fund and renamed the Utility Trunk Fund. The Committee asked for additional information as to how the operations of Public Works and Utilities would be impacted by such a transfer. The Committee also recommended that the Housing Fund could be considered as an opportunity to transfer additional funds into the Cedar Grove TIF. The Committee concurred with staffs recommendation to have the full Council review the Finance Committee's recommendations on fund transfers in the fall of 2011. The Committee asked that staff provide additional information to the Committee regarding the balance of each fund being considered for transfers, the assumptions being made as to availability of funds, and any possible consequences of the proposed transfers. The Committee suggested that the Council consider the transfers under the confines of "rectifying city funds" or "strategic financial plan for all City funds ". The Committee also asked staff to contact Bill Schreiber or Tom Pohl of Messerli and Kramer (attorneys serving the MLC) to inquire about any legislative options to extend the Cedar Grove TIF district, which is scheduled to be decertified in 2029. II. CEDAR GROVE REDEVELOPMENT PARTNERS AND AGREEMENT City Administrator Hedges and Director of Community Development Hohenstein introduced master development partner Len Pratt. Mr. Pratt noted that Mr. Kelly Doran has indicated that he needs to withdraw from the development partnership for personal reasons. As a result, Mr. Pratt noted that he is proposing to add a broker team from Cassidy Turley, including broker Jim McCaffrey, to the development team to cast a broader net for business and development prospects that may be attracted to the Cedar Grove district. Mr. Jim McCaffrey provided a presentation to the Committee on the services of Cassidy Turley, and some considerations for the Committee and City to make in terms of broader marketing of prospective businesses and developers. The committee provided feedback on the City's perceptions of the parameters for the marketing efforts of the Cedar Grove Redevelopment District. The Committee reiterated the City's vision for vertical, mixed use development in the area. In discussing Mr. McCaffrey's suggestions and questions, the Committee noted their desire for the master developers and Cassidy Turley to seek out all potential buyers /uses, with the understanding that should a use be proposed that is outside of the City's vision for the area, then the City Council could make suggestions to refine such a proposal or modify the vision as appropriate to find common interests. The Committee also recommended that the EDA consider action at the March 15, 2011 meeting to approve an amended preliminary redevelopment agreement for Pratt Development LLC for the Cedar Grove Redevelopment Core Area, which would formalize the proposed modifications to the development team. City Council Finance Committee Meeting Notes March 8, 2011 Page 3 III. ADJOURNMENT The Committee meeting adjourned at 2 p.m. f 1} 4 City of Eagan Memo TO: City Administrator Hedges FROM: Director of Administrative Services VanOverbeke DATE: May 06, 2011 SUBJECT: Fund Status At your request, I am providing this updated background information regarding the financial status of the various City funds along with general information about the source of those funds and any restrictions on the use of the funds. The information was last provided in June of 2010. The memo is arranged in the following three sections: Section!. Included is a brief description of each City fund with fund purpose and information about sources and uses of resources. The description is a combination of accounting /legal requirements and information and specific application to Eagan's circumstances. The December 31, 2010 Financial Report includes 44 separate City Funds with each fund considered a separate accounting entity. Certain debt service and capital projects funds are combined in this memo because of their similarities. Section 11. Section II identifies some public policy considerations that should perhaps be considered in discussions regarding appropriate uses of fund and /or investment balances. Attachment Included in the attachment is a table listing the various funds or fund combinations with fund balance and investment amounts. The general information and the footnotes provide general information regarding the table and circumstances unique to the individual funds. Section I. GENERAL FUND (1 Fund) Purpose /Sources & Uses of Resources The General Fund is established to account for the revenues and expenditures to carry out basic governmental activities of the City such as general government, public safety, public works, and parks and recreation. Revenue is recorded by source; i.e. taxes, licenses and permits, fines and forfeits, service charges, etc. General Fund expenditures are made primarily for current day -to -day operations and operating equipment and are recorded by major functional classifications and by operating departments. This fund accounts for all financial transactions not properly accounted for in another fund. is- SPECIAL REVENUE FUNDS (7 Funds) Special Revenue Funds are used to account for revenues derived from specific taxes or other earmarked revenue sources. They are usually required by statute or local ordinance to finance particular functions or activities of government. Housing Fund Purpose /Sources & Uses of Resources This fund accounts for the proceeds of an annual fee equal to 1/8 of 1% of the outstanding principal balance of certain revenue bonds or obligations issued to finance multifamily housing developments in accordance with the City's housing program and housing plan. It also accounts for the activities of the Housing and Redevelopment Authority in and for the City. The fund will be used to finance future housing - related developments within the City as determined by the City Council. Cable TV Franchise Fees Fund Purpose /Sources & Uses of Resources This fund was established to account for franchise fees paid to the City from the area cable television provider. The money is restricted for cable - related and communications activities. Through this fund, the City provides funding for the City's Communications Department, E -TV and certain fiber projects as approved by the City Council. Minnesota Investment Fund Revolving Loan Fund Purpose /Sources & Uses of Resources This fund was established to account for loan payments made by Biothera for a loan through the State - administered MIF program targeting job growth. The City is allowed to retain 20% of the payments received for seed money for future loans. Recycling Fund Purpose /Sources & Uses of Resources This fund was established to account for the implementation and on -going operation of the City's recycling program. Funding is provided primarily from Dakota County grants and is restricted to recycling activities. This fund is essentially inactive. Cedarvale Special Services Fund Purpose /Sources & Uses of Resources This fund was established to account for the Cedarvale Area Special Services district. This designation allows property owners in the area to pay for and receive special services beyond those provided to the remainder of the community. Eagan TV Fund Purpose /Sources & Uses of Resources This fund accounts for Public /Education /Government (PEG) fees from the cable provider as well as the local cable TV programming activities of Eagan Television (E -TV), which was established in 2008 after BECT was dissolved. DWI Forfeiture Fund Purpose /Sources & Uses of Resources This fund was established in 2006 to account for money received from the court system related to DWI forfeitures. The money accounted for in this fund is restricted for DWI education and enforcement activities. l6 DEBT SERVICE FUNDS (7 Funds) Debt Service Funds are established to finance and account for the payment of interest and principal on all general obligation debt, including debt payable from special assessments but excluding debt issued for and serviced by a governmental enterprise. Provisions are made in the City's general property tax levy for money sufficient to meet the general obligation debt. Special assessment levies are sufficient to meet the debt service obligation of the special assessment improvement debt issues. Improvement Bonds Fund Purpose /Sources & Uses of Resources This fund accounts for the special assessment receivables for projects accounted for in the Revolving Improvement Construction Fund, and for which bonds have not yet been issued. Special Assessment Improvement Bond Funds (Combination of 4 Funds) Purpose /Sources & Uses of Resources In general, balances in debt service funds are pledged to repayment of the bonds and cannot be appropriated until the bonds have been retired. By City Council policy, these balances are allocated to the Community Investment Fund after all other Special Assessment Improvement Bond Funds have been determined to be financially sound. Municipal State Aid Bonds Fund Purpose /Sources & Uses of Resources This fund accounts for the debt service payments for the G.O. State Aid Street Bonds sold to provide funding for the Northwood Parkway Overpass across 35E. The debt service is repaid from the City's municipal state aid allotments received annually from the Minnesota Department of Transportation. The Overpass and Infrastructure levy in the Major Street Fund supplements the loss of direct MSA dollars available for construction. 2009A Equipment Certificates Purposes /Sources & Uses of Resources This fund accounts for the debt service payments on the 2009 Equipment Certificates sold to finance a fire pumper as part of the City's Fire Apparatus Replacement Plan. The revenues to pay the debt service are a component of the annual $400,000 tax levy dedicated to Fire Apparatus Replacement. CAPITAL PROJECTS FUNDS (19 Funds) Capital Projects Funds are established to account for the resources expended to acquire assets of a relatively permanent nature. (Special revenue and enterprise fund resources are not included in this category.) These funds evolve from the need for special accounting for bond proceeds, grants, and contributions for the acquisition of capital assets. Capital Projects Funds provide a formal mechanism that enables administrators to ensure that revenues designated for certain purposes are properly used. Capital Projects Funds further enhance reporting and verification that requirements regarding the use of revenue were fully satisfied. 17 The City's Capital Projects Funds are as follows: Park Site Acquisition & Development Fund Purpose /Sources & Uses of Resources This fund is a combination of the Park Site Fund, which accounted for park dedication fees from developers for the purpose of obtaining and developing parklands, and the Park Acquisition and Development Grants Fund, which accounted for parks - related grant proceeds and corresponding expenditures. The budget for this fund is approved by way of the five -year Capital Improvement Program adopted by the City Council. Community Investment Fund Purpose /Sources & Uses of Resources This fund is financed primarily from special assessment collections remaining after all debt service obligations are met in special assessment debt service funds. The fund is used to pay capital costs and City Council designated start -up operational costs of projects of general benefit to the City. Fire Safety Campus Fund Purpose /Sources & Uses of Resources This fund was created to account for the revenues and expenditures related to the construction of the Fire Safety Campus. Tax Increment Funds (Combination of 5 Funds) Purpose /Sources & Uses of Resources These funds are each set up to account for the revenues and expenditures related to the individual tax increment districts approved in the City. The City's Tax Increment Funds are as follows: • Hwy 55/149 Tax Increment (2 -3) Fund • Hwy 55 /Grand Oaks Tax Increment (2 -4) Fund • Cedar Grove /Hwy 13 Tax Increment Fund • Hwy 55 /Blue Gentian Tax Increment (2 -5) Fund • Southeast Eagan Tax Increment Fund Equipment Revolving Fund Purpose /Sources & Uses of Resources This fund is used to account for capital equipment purchases financed from a dedicated portion of the City's operating levy. Acquisitions are budgeted through the Part II section of the City's Capital Improvements Program. General Facilities Renewal & Replacement Fund Purpose /Sources & Uses of Resources This fund was created to account for the tax levy collected for providing resources to allow for major repairs for the City's general facilities. The fund also pays the City's share of special assessments levied against City owned property. Revolving Improvement Construction Fund Purpose /Sources & Uses of Resources This fund is used to account for all construction costs for public improvement projects that will be permanently financed by bond sales with debt service payments made from special assessment collections. 1� Housing Improvement District Funds (2) Purpose /Sources & Uses of Resources These funds were created to account for the internally financed loans to the Cedar Bluffs Townhome and Meadowlark Ridge Townhome developments and the collection of assessments to repay the loans. Fire Apparatus Revolving Fund Purpose /Sources & Uses of Resources This fund was created to account for activities related to the renewal and replacement of the City's fire apparatus. Funding is through a tax levy and through use of equipment certificates. The fund separates the purchase of fire apparatus from the Equipment Revolving Fund. Utility Trunk Funds Purpose /Sources & Uses of Resources The City's utility trunk funds are used to account for the collection and expenditure of money used to provide over sizing for utilities. The revenues come primarily from area assessment charges and from connection charges. The primary purpose of each trunk fund is to complete construction of the required utility infrastructure across the entire community necessary for full development. Available resources after completion of the original construction are generally earmarked for renewal and replacement of those systems. The following trunk funds are in place and fund titles describe activities accounted for within each fund. Storm Sewer Construction Fund Water Trunk Construction Fund Sanitary Sewer Trunk Construction Fund Major Street Construction Fund Purpose /Sources & Uses of Resources This fund operates similarly to the utility trunk funds; however, streets cannot be classified as utilities. Financing derives from the tax levy, Municipal State Aid, and interest earnings. Expenditures are used to pay the City's share of collector streets, county roads, certain trails, signal lights, etc. Energy Efficiency Improvements Fund Purpose /Sources & Uses of Resources This fund was created to account for the proceeds and expenditures related to the Federal stimulus funding received through the Energy Efficiency Conservation Block Grant. Improvements to provide reductions in energy usage have been made to a number of City facilities. INTERNAL SERVICE FUNDS (3 Funds) Internal service funds are established to account for the financing of goods or services provided by one department or agency to other departments or agencies of the governmental unit, or to other governmental units, on a cost - reimbursement basis. Records are maintained on the accrual basis. Benefit Accrual Fund Purpose /Sources & Uses of Resources This fund's revenues are derived from direct labor charges to other City funds. All benefits are accrued and paid by the Benefit Accrual Fund. 19 Risk Management Fund Purpose /Sources & Uses of Resources This fund's revenues are derived from general insurance premium charges to other City funds. This fund purchases general insurance with certain deductibles and pays all uninsured claims. Workers' Compensation Self- Insurance Fund Purpose /Sources & Uses of Resources This fund's revenues are derived from charges to other City funds. Workers' compensation claims are paid directly from this fund. Premiums for workers' compensation reinsurance coverage required by state statute are paid by this fund as well. ENTERPRISE FUNDS (5 Funds) Enterprise Funds are established to account for the financing of self - supporting activities of governmental units which render services to the general public on a user charge basis. Records are maintained on the accrual basis of accounting. The reports of the Enterprise Funds are similar to comparable private enterprise reports and are self- contained. Creditors, legislators, or the general public can evaluate the performance of the municipal enterprise on the same basis as they can the performance of investor -owned enterprises. Public Utilities Funds Purpose /Sources & Uses of Resources The operations of the water, sanitary sewer, street lighting, storm drainage, and water quality utilities provided by the City are accounted for in this fund. Civic Arena Fund Purpose /Sources & Uses of Resources The City's Civic Arena contains two sheets of ice that are in use about eleven months of the year for ice skating and hockey games. All arena operations including dry floor activities are accounted for in this fund. Aquatic Facility Fund Purpose /Sources & Uses of Resources Cascade Bay, an outdoor recreational pool with slides a "lazy river," and miniature golf course operates during the summer months. Its operations are accounted for in this fund. Community Center Fund Purpose /Sources & Uses of Resources This fund accounts for all activity related to the Community Center with its variety of programs and uses. The outstanding bonds used to finance the construction of the Community Center, although supported by a tax levy, are accounted for in this fund. Fiber Conduit Rinq Purpose /Sources & Uses of Resources This fund was established to account for the City costs related to construction of the 11.5 -mile conduit ring installed in conjunction with the Independent School District 196 fiber project. OPEB Trust Fund Purpose /Sources & Uses of Resources This fund was created to account for the trust established to provide future payments for post retirement health insurance benefits and related premium costs related to retiree health insurance. The City does not have access to these dollars for operations. Dakota County Drug Task Force Agency Fund Purpose /Sources & Uses of Resources This fund was created to account for the activities of the Dakota County Drug Task Force for which Eagan serves as the fiscal agent. The City does not have access to these dollars for operations and participates in control of the operations through a joint powers agreement. Section II. PUBLIC POLICY General public policy issues regarding the use of balances and appropriate levels of balances in the various funds include the following: Fund Integrity The City's past practice has been to place a high priority on fund integrity meaning that money raised for and being accounted for in a particular fund would be used for the purpose for which it was raised and not made available for other purposes as general revenue. For example, the City's Cable TV Franchise Fees Fund has not been used to provide general government services but has been restricted to Cable TV and communications special purposes. The primary exception to that process involves funds where the original purpose has been met and there are remaining assets. The City Council has the discretion in most cases to appropriate the residual assets of that fund to any other authorized public purpose. The creation of the Community Investment Fund formalized the method for dealing with remaining assets in the Special Assessment Debt Service Funds. Highest Priority Funding Items As assets become available, the City is typically faced with the issue of allocating them now or saving them for later in an attempt to get the best long -term return on the resources. Today's project may not be the highest priority over a period of time and it is necessary to strike a balance between short and long -term perspectives. Credit Ratings In spite of very rapid growth and tremendous infrastructure demands, the City has been able to maintain and increase its credit ratings from the bond rating agencies over the years. There are a number of rating factors that have been favorable for the City and have resulted in this very positive outcome. One of the most obvious and clearly noted in the rating reviews has been the City's conservative financial operations resulting in favorable reserves. The agencies have consistently noted a strong trend of prudent management. Please advise, if you want to discuss this information or if you would like anything else. Director of istrative Services VanOverbeke c21 Attachment General Table Information: In reviewing the available balances included in the table, the following general parameters should be noted: ➢ In certain funds, there is little difference between investments and fund balance while in others there are large differences. The differences relate primarily to how many receivables and payables exist and how the receivables are accounted for in the particular fund. ➢ Certain of the designations between reserved /designated and unreserved /undesignated are accounting requirements, others are in place by City Council action meaning the City Council could change them, and others are there by State Statute. Per accounting standards, deficit fund balances all become undesignated because there is nothing to designate; however, when assets become available the fund balances would be designated for the purpose of the specific fund. ➢ The size of the balances should be kept in perspective relative to the assets in the particular funds. For example, the Public Utilities Enterprise funds include capital assets with a historical value of nearly $236 million. ➢ The appropriate level of cash and /or fund balance will vary by fund depending upon working capital requirements, future fund obligations, and circumstances unique to particular funds. Fund Table Notes: (1) The General Fund cash balance includes $466,683 held by the City in escrow deposits to provide reimbursement for City costs related to development. The money does not technically belong to the City. (2) The Housing Fund is owed $610,000 by Cascade Bay as of 12- 31 -10. The loan is being repaid in annual installments with the last installment due in 2018. The original loan amount was $1,200,000 and the first payment was made in 1999. (3) The General Obligation Recreational Facilities Bonds sold to finance the Community Center, although supported by a tax levy, are accounted for in the Community Center Enterprise Fund. (4) The deficit position in the unreserved /undesignated fund balance reflects costs that have been incurred by the City but not permanently financed through a bond sale. (5) Advances /loans to other funds total $986,047 at 12- 31 -10. Although not reflected in either the cash or fund balance positions, the fund includes $2.2 million in special assessment receivables at 12- 31 -10. Approximately $1.35 million is in green acres status and will be collected only upon certain conditions (primarily sale or development); of that amount nearly $1.1 million relates to the McCarthy property. An amount of $58,750 remains pledged in an account for Open Space Preservation per previous City Council direction. (6) The Cedar Grove Tax Increment Fund includes an asset of $14,163,925 for property being held by the City. The City has historically financed most TIF activity internally with the resulting internal borrowing repaid through tax increment generated by the development. (7) The deficit position in the Revolving Improvement Construction Fund results from the City's practice of financing the construction internally and bonding later. That process allows the City to reduce bonding amounts because assessment prepayments can be used to pay for initial construction rather than for debt service. (8) The deficit in the Housing Improvement Districts reflects the internal financing of the loans which are being repaid by assessments. as 6-May-11 GOVERNMENTAL ACTIVITIES Fund Balance GASB Designation Fund Name Reserved/ Designated Unreserved/ Undesignated Total Cash & Investments 'General ( 4.0*1 13.263.504 13.267.5*5 13.452.420 Special Revenue Funds: Housing (2) 2.e19.604 ' e.919.604 2.273.216 Cable TV Franchise Fees 2,56 1,643 2,561,643 2.5*4.702 Minnesota Investment Fund Revolvirig 17.220 ' 17.220 17.142 Recycling 13,200 ' 13.200 13,141 Cedarvale Special Services 4,483 ' 4,483 4,519 Eagan TV 265.394 ' 2*5.3e4 20*.541 DWI Forfeiture 4,140 - 4,140 5.128 Subtotal Special Revenue Funds 5.785.684 ' *.785.684 5.074.390 Debt Service Funds: (3) Improvement Bonds (4) 677.105 �_-- ( .554) (4�2,449) (4,844.338 �� -�� 035 '177 Special Assess Improve Bonds | 2,068,710 -- 2,068710 48,64448.148 Equipment Certificate 48,644 MSA Bonds 3,807 _ - 3.807 3.790 Subtotal Debt Service Funds 2.798.266 (5.449.550 (2.651.288) (2.7*7.223) � Capital Projects Funds: Park Site Acquisition & Developmen 1.123.066 - 1.123.066 1.12*.376 Community Investment (5) 3.019,988 ' 3,019,989 2,392,374 Fire Safet Campus - (6.999.136) (6,999,136) (5,969,405) Tax Increment (6) 14,163,925 (40,194,878) (26,030.953) (39,985,756) Equipment Revolving 1.522711 ' 1,522,711 1,725,256 General Facilities R & R 474,207 ' 474,207 472,063 Revolving lmp Construction (7) - (*.760.840) (*.763.840) (4,269,338) Housing Imp Districts (8) - (1.259.963) (1.259.963 ) (1.255.2*5 Fire Apparatus Revolving 1.055,9*4 - 1.055944 6*4352 Energy Efficiency Gran (14,2e9) (14,26e ) 12,292 Utility Trunk Funds: Storm Sewer 6.257.502 ' 6.257.502 6.224.561 Water 4,807,151 *.782.032 Sanitary aGawe � ��� r.*1s�u7 - 7.416.107 7,379,690 Major Street Construction 20.120,469 - 20,120,469 21,683,714 Subtotal Capital Projects Funds 59.961.071 (53.232.086) 8.728.885 (5.039.033) Internal Service Funds: Benefit Accrual - � 1.320.919 1.320.819 4,461,349 Risk Management 1,832.577 1.832.577 1,836,405 Workers' Compensation Self-Ins - 4.852.e59 I 4,852,959 4,938,239 Subtotal Internal Service Funds - 8,006,455 8.006,455 11.235.992 Total Governmental Activities 68.*49,062 (37,*11.681) 31.137,381 21,966,545 1 ' - r ^ '^ I | �- BUSINESS-TYPE ACTIVITIES / I | Retained Earnings Fund Name Invested in Capital Assets Net of Related Debt Reserved/ Designated Unreserved/ Undesignated Total Cash & Investments Enterprise Funds: Public Utilities 169.770.298 29.996.188 } 10.185.000 209.961.48* 38.270.804 Civic Arena 5.734.346 - p.315.786) 3.418.*60 356.775 Aquatic Facility 3.870.755 - (84*901) 3,025,854 200,638 Community Center 3.*90.012 - 2.071.327 6,461.859 3.245.5e6 Fiber Conduit Ring 352.588 (295,023) 57.565 (292,039) Subtotal Enterprise Funds 183.317.999 29.e96.166 9.*10.617 222.92*.782 39.781.77* Total Business-Type Activities 2e.9e6.166 9.610.617 39.606.783 39.781.77* Grand Total City e8.545.228 (27.801.064) 70.744.16* 61.748.319 Grand Total This To�|: 61,748,319 Finon�io|napp�|nvws�`en�|u»mnmvmo|u�ed|n I OPEB 7.444.678.30 ECC Cash With Fisca Agent 8.318,62778 Tom P. 12-31-10 Total 62.30480910 1 Petty Cash & Change Funds Not Included -- Drug Task Force (448.084.02) General 1,450.00 (107,606.00) Civic Arena 1.100.00 Amount Listed in City Funds 61.748.319.16 ECC 900.00 Drug Task Force 13.560o0 100.00 Drug Task Force 448.084.02 107,606.00 - Financial Report - Pages Payroll Cash 5.300.05 '- _���_��__�/�_-��-���� _ Adj to Mkt Value 1.537.67 Ties to Draft 68 and 131 78.091.257.e8