Agenda - Council Work Session - 06/13/2017

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GENERAL FUND The City's General Fund accounts for the financial activity of the basic services provided to the community. The primary services included within this fund are the administration of the municipal operation, police and fire protection, building inspection, streets and highway maintenance, and parks and recreation. The graph below illustrates the change in the General Fund financial position over the last five years. We have also included a line representing annual revenues to reflect the change in the size of the General Fund operation over the same period. $12,000,000 $10, 000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $— I General Fund Financial Position Year Ended December 31, 1 2012 2013 2014 2015 2016 Fund Balance O Cash and Investments Balance (Net of Interfund Borrowing) Revenue The City's General Fund cash and investments balance (net of interfund borrowing) at December 31, 2016 was $7,524,681, an increase of $244,374 from the previous year. Total fund balance at year-end was $7,517,393, an increase of $244,348 from the prior year. The stability of the General Fund's financial position is greatly attributed to the City's "Fund Balance and Excess Revenue Policy" as well as the general budgeting policies. These policies have allowed the City to provide funding for equipment replacement and recurring capital maintenance programs without disrupting the General Fund's financial position. This is an important factor because a government, like any organization, requires a certain amount of equity to operate. The amount of required equity increases as the size of the operation increases. Increase in the size of the operation is natural, caused by such things as inflation, population growth, desired increases in services, and —something which has impacted cities significantly in recent years —mandated increases in services and administrative requirements. Generally, a healthy financial position allows the City to avoid volatility in tax rates; helps minimize the impact of state funding changes; allows for the adequate and consistent funding of services, repairs, and unexpected costs; and can be a factor in determining the City's bond rating and resulting interest costs. A trend that is typical to Minnesota local governments, especially the General Fund of cities, is the unusual cash flow experienced throughout the year. The City's General Fund cash disbursements are made fairly evenly during the year other than the impact of seasonal services such as snowplowing, street maintenance, and park activities. Cash receipts of the General Fund are quite a different story. Property taxes comprise 81.7 percent of the fund's total annual revenue. Approximately half of these revenues are received by the City in July and the rest in December. Consequently, the City needs to have adequate cash reserves to finance its everyday operations between these payments. -10-