City Council - 05/02/2023 - Workshop
APPROVED MINUTES
CITY COUNCIL WORKSHOP & OPEN PODIUM
TUESDAY, MAY 02, 2023 CITY CENTER
5:00 – 6:25 PM, HERITAGE ROOMS
6:30 – 7:00 PM, COUNCIL CHAMBER
CITY COUNCIL: Mayor Ron Case, Council Members Kathy Nelson, Mark Freiberg, PG
Narayanan, and Lisa Toomey
CITY STAFF: City Manager Rick Getschow, Police Chief Matt Sackett, Fire Chief Scott Gerber,
Public Works Director Robert Ellis, Community Development Director Julie Klima, Parks and
Recreation Director Jay Lotthammer, Administrative Services/HR Director Alecia Rose,
Communications Manager Joyce Lorenz, City Attorney Maggie Neuville, and Recorder Kelsey
Engelen
Workshop - Heritage Rooms I and II (5:30)
A. 2022 AUDIT REPORT AND FINANCIAL STATEMENT
Tammy Wilson, Finance Manager, explained that every six years or so the City
seeks out new auditors to have fresh eyes looking at the City’s books. Wilson
mentioned that this is the City’s third year using Bergan KDV.
Caroline Stutsman, with Bergan KDV, was the director involved with the 2022
audit and presented a clean and unmodified opinion of the City’s financial
statements. The audit report was issued in accordance with the Government
Auditing Standards. There were no significant deficiencies or material weaknesses
in internal control, and no compliance findings. Bergan KDV also conducted a
Federal Single Audit. This is required when there is $750,000 or more of Federal
funding. There were no compliance or internal control findings. There were also no
compliance findings in the Independent Auditor’s Report on Minnesota Legal
Compliance.
Stutsman stated the general fund revenues increased about $1.8 million. Taxes and
assessments increased about $1.9 million due to the levy, licenses and permits
revenue decreased due to less new construction, additions, and remodels. Charges
for services increased because of rebounding from the Covid pandemic; levels are
not completely back to pre-pandemic levels. Other revenues, which includes
investment income, decreased about $500,000 due to market conditions on
December 31. General fund expenditures increased about $3.4 million. Police,
which makes up the largest portion of general fund expenditures, increased about
$887,000 driven by an increase in wages and benefits. Parks and Recreation
increased about $1.2 million due to more programs and activities.
Stutsman stated the general fund budgetary comparison revenues were over budget
by $1.2 million, or 2.2 percent. Stutsman pointed out licenses and permits were
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May 2, 2023
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budgeted conservatively due to it’s potential for high variance. The other item that
differed significantly from the budged was investments, again due to market
conditions at the end of 2022 which affect interest rates and fixed securities.
Expenditures came in less than anticipated by $1.3 million. Police came in under
budget due to some open positions. Parks and Recreation also came in under budget
based because, though there was a significant rebound post-pandemic, it has not
bounced back completely to pre-Covid anticipation. Additionally, $1 million was
transferred out to the capital improvement maintenance plan for the upcoming
Police Department remodel.
Relating to general fund operations, both the cash and investment balance, and the
unassigned fund balance increased. Wilson outlined the City’s detailed fund balance
policy, and Stutsman stated the City is in compliance with the guidelines laid out.
Getschow pointed out that each time the budget grows so does the fund balance;
having this detailed fund balance policy with money set aside has resulted in very
high bond ratings.
Stutsman shifted gears to discuss enterprise funds, stating the water fund operating
revenue increased about 3 percent, due to changes in rates and continued
development. Operating expenses were up about 9 percent due to wages and
benefits, and the continuation of the water meter change out project. This led to an
operating loss of about $2.2 million. The water fund had an increase in cash and
investments and unrestricted net position. Ellis updated council that the labor- and
cost-intensive water meter change out project is two-thirds complete at this time.
Getschow noted that the meters can be monitored via an application. Mayor Case
inquired when we last adjusted rates. Ellis replied rates are adjusted every year.
Stutsman stated the wastewater fund had an increase in operating revenues based on
rates, and an increase in operating expenses due to wages and benefits, repairs and
maintenance, and the lift station rehab project. This resulted in an operating loss of
$840,000. Operating income covered about 49 percent of depreciation in 2022. The
wastewater fund cash and investments balance was $9.4 million and unrestricted net
position was $11.1 million.
The stormwater fund had an increase in operating revenue due to an increase in
rates. Expenses increased as well by $275,000. This includes operating costs
relating to a road drainage project. The fund did completely cover depreciation cost.
Getschow pointed out the inherent depreciation that water experiences, compared to
stormwater, based on the volume of equipment involved. He noted that we would
expect depreciation to be covered for stormwater which has comparatively little
equipment. The cash and investment balances decreased about $1.1 million and
unrestricted net position decreased about $1.1 million. Stutsman noted the decrease
is project-driven.
Stutsman moved on to discuss the liquor fund, noting the operating sales and
revenue increased about 1.2 percent, with a similar increase to cost of sales. It
generated a gross profit of $3.6 million. Stutsman stated that the fund transfers
dollars out based on generated profits, and $800,000 was transferred out to the
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May 2, 2023
Page 3
capital improvement maintenance fund. Councilmember Narayan asked what
happens to the balance of profits. Wilson answered that most of this money goes to
the building fund for maintaining the city-owned buildings. Getschow looked back
to 2020 when staff presumed the sales increase was due to the Covid pandemic, but
the numbers have amazingly held up in the past two years and have not dipped back
to pre-Covid sales. The gross profit percentage increased from 29.8 in 2021 to 30
percent in 2022 and remains high compared to the average of other Metro municipal
liquor which was 26.9 percent in 2021. Cash and investments decreased slightly,
keeping in mind the $800,000 transferred out, and unrestricted net position
increased $200,000.
Stutsman stated general fund revenue per capita increased from $1,165 to $1,197.
This includes property taxes, tax increments, franchise fees, special assessments,
licenses and permits, intergovernmental revenues, and charges for service. This
compares to a 2021 statewide average of $1,106 for cities with population of 20,000
to 100,000. Stutsman stated general fund expenditures per capita increased from
$800 to $868. This includes capital outlay and construction, which increased from
$190 to $224. Debt service decreased significantly from $197 to $51 due to a bond
refunding in 2021. Getschow pointed out that the 2022 debt service is a better
reflection of the City’s low debt than 2021’s numbers which were skewed because
of the bond refunding. Case also noted that any time there is a big construction
project, like the upcoming Police Department remodel, the debt principle will be
elevated temporarily.
Stutsman talked about the tax capacity, tied to market values in the City. This
increased by 1.9 percent from $120.5 million to $122.8 million. The certified tax
levy increased from $41 million to $43.1 million. The change in the capacity and
levy led to a slight increase in tax capacity rate, from 31.43 to 32.32. Case inquired
about the 2023 rate which was just approved in the budget. Getschow replied that
the tax capacity rate dropped very low to 28.84. Getschow also touted the
importance of this figure and explained that Eden Prairie consistently has one of the
lowest rates compared to similar cities.
Open Podium - Council Chamber (6:30)
I. OPEN PODIUM
III. ADJOURNMENT