2015 City of Hopkins, MN Annual Report
City of Hopkins, Minnesota
Comprehensive Annual Financial Report
for year ended December 31, 2015
COMPREHENSIVE ANNUAL
FINANCIAL REPORT
of the
CITY OF HOPKINS, MN
For The Year Ended
December 31, 2015
Prepared by the Department of Finance
THE CITY OF HOPKINS, MINNESOTA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
YEAR ENDED DECEMBER 31, 2015
TABLE OF CONTENT
S
I
INTRODUCTORY SECTION
Page
Letter of Transmittal from the City Manager and Finance Director3
Certificate of Achievement for Excellence in Financial Reporting9
Administrative Organization Chart10
City Officials11
IIFINANCIAL SECTION
Independent Auditors' Report13
Management's Discussion and Analysis16
A.Basic Financial Statements:
Government-wide Financial Statements:
Statement of Net Position31
Statement of Activities32
Fund Financial Statements:
Balance Sheet - Governmental Funds33
Reconciliation of the Balance Sheet of Governmental Funds
to the Statement of Net Position35
Statement of Revenues, Expenditures and Changes in
Fund Balances - Governmental Funds36
Reconciliation of the Statement of Revenues, Expenditures
and Changes in Fund Balances of Governmental Funds
to the Statement of Activities38
Statement of Revenues, Expenditures and Changes in
Fund Balances - Budget and Actual - General Fund39
Statement of Revenues, Expenditures and Changes in
Fund Balances - Budget and Actual - Economic
Development Special Revenue Fund40
Statement of Revenues, Expenditures and Changes in
Fund Balances - Budget and Actual - Arts Center
Special Revenue Fund41
Statement of Revenues, Expenditures and Changes in
Fund Balances - Budget and Actual - Tax Increment
District Super Valu Special Revenue Fund42
Statement of Net Position - Proprietary Funds43
Statement of Revenues, Expenses and Changes in
Net Position - Proprietary Funds45
Statement of Cash Flows - Proprietary Funds46
Notes to Financial Statements48
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THE CITY OF HOPKINS, MINNESOTA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
YEAR ENDED DECEMBER 31, 2015
Page
B.Required Supplementary Information
Schedule of Funding Progress - Other Postemployment Benefit Plan85
Schedules of Proportionate Share of Net Pension Liability85
Schedule of the City's Contribution to the Hopkins Fire Relief Fund86
Schedule of Proportionate Share of Net Pension Liability -
Hopkins Fire Relief88
C.Combining and Individual Nonmajor Fund Statements and Schedules:
Combining Balance Sheet - Nonmajor Governmental Funds91
Combining Statement of Revenues, Expenditures and Changes
in Fund Balances - Nonmajor Governmental Funds100
Schedules of Revenues, Expenditures, and Changes in Fund
Balances - Budget and Actual:
Special Revenue Funds:
State Chemical Assessment 109
Real Estate Purchases & Sales110
Parking111
Communications112
Depot Coffee House113
Tax Increment District Entertainment Center114
Tax Increment District Sonoma Project115
Tax Increment District Oaks of Mainstreet116
5th Avenue Flats117
Tax Increment District Marketplace & Main118
Combining Statement of Net Position - Nonmajor Enterprise Funds120
Combining Statement of Revenues, Expenses and Changes in
Net Position - Nonmajor Enterprise Funds121
Combining Statement of Cash Flows - Nonmajor Enterprise Funds122
Combining Statement of Net Position - Internal Service Funds124
Combining Statement of Revenues, Expenses and Changes in
Net Position - Internal Service Funds125
Combining Statement of Cash Flows - Internal Service Funds126
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THE CITY OF HOPKINS, MINNESOTA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
YEAR ENDED DECEMBER 31, 2015
III
STATISTICAL SECTION
Page
A.Financial Trends
Net Position by Component138
Changes in Net Position140
Fund Balances, Governmental Funds142
Changes in Fund Balances, Governmental Funds144
B.Revenue Capacity
Assessed and Actual Value of Taxable Property146
Direct and Overlapping Property Tax Rates147
Principal Property Taxpayers148
Property Tax Levies and Collections149
C. Debt Capacity
Ratios of Outstanding Debt by Type150
Ratios of Net General Bonded Debt Outstanding151
Direct and Overlapping Governmental Activities Debt152
153
Legal Debt Margin Informatio
n
Pledged-Revenue Coverage154
D.Demographic and Economic Information
Demographic and Economic Statistics155
Principal Employers156
E.Operating Informatio
n
Full-time Equivalent City Employees by Type157
Operating Indicators by Function/Program158
Capital Asset Statistics by Function/Program160
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CITY OF HOPKINS, MINNESOTA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED DECEMBER 31, 2015
SECTION I
INTRODUCTORY SECTION
1
2
August 1, 2016
To the Honorable Mayor, Members of the Hopkins City Council and the Citizens of the
City of Hopkins, Minnesota:
The Comprehensive Annual Financial Report (CAFR) of the City of Hopkins, Minnesota (the
City) for the fiscal year ended December 31, 2015 is hereby submitted. This report was prepared
in accordance with U.S. generally accepted accounting principles (GAAP) as established by the
Governmental Accounting Standards Board (GASB) and meets the requirements of the
Minnesota State Auditor’s Office.
This report consists of management’s representations concerning the finances of the City of
Hopkins. Consequently, management assumes full responsibility for both the completeness and
reliability of all of the information presented in this report. To provide a reasonable basis for
making these representations, management of the City of Hopkins has established a
comprehensive internal control framework that is designed both to protect the government’s
assets from loss, theft, or misuse and to compile sufficient reliable information for the
preparation of the City of Hopkins financial statements in conformity with GAAP. Because the
cost of internal controls should not outweigh their benefits, the City of Hopkins comprehensive
framework of internal controls has been designed to provide reasonable rather than absolute
assurance that the financial statements will be free from material misstatement. As management,
we assert that, to the best of our knowledge and belief, this financial report is complete and
reliable in all material respects.
The City of Hopkins financial statements have been audited by CliftonLarsonAllen LLP, a firm
of licensed certified public accountants. The goal of the independent audit was to provide
reasonable assurance that the financial statements of the City of Hopkins for the fiscal
year ended December 31, 2015, are free of material misstatement. The independent audit
involved examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements; assessing the accounting principles used and significant estimates made by
management; and evaluating the overall financial statement presentation. The independent
auditor concluded based upon the audit, that there was a reasonable basis for rendering
unmodified opinions that the City of Hopkins financial statements for the fiscal year ended
December 31, 2015, are fairly presented in conformity with GAAP. The independent auditors’
report is presented as the first component of the financial section of this report.
GAAP requires that management provide a narrative introduction, overview, and analysis to
accompany the basic financial statements in the form of Management’s Discussion and Analysis
(MD&A). This letter of transmittal is designed to complement the MD&A and should be read in
conjunction with it. The City’s MD&A can be found in the financial section of this report
immediately following the report of the independent auditors.
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Profile of the Government
Hopkins was first settled in 1853 and was incorporated as the Village of West Minneapolis in
1893. The name was changed in 1928 to Hopkins after one of the early residents. The original
territory of incorporation was three square miles, but successive annexation since 1946 has
enlarged this area by one-third.In 1947, the residents of the area adopted a City Charter with a
Council/Manager form of government. The governing council is responsible, among other
things, for passing ordinances, adopting the budget, appointing committees and hiring the
government’s manager and the government’s attorney. The government’s manager is
responsible for carrying out the policies and ordinances of the government, for overseeing day-
to-day operations of the government and for appointing the heads of the government’s
departments.
The report includes all funds of the City, including the City’s Housing and Redevelopment
Authority (HRA). The City provides a full range of services including general government,
public safety, highways and streets, urban redevelopment and housing, culture and recreation,
and health and welfare. In addition to general municipal activities, the City provides water,
sewer, storm sewer and refuse services and operates an ice arena. Low-income rental housing is
a function of the HRA. The Hopkins Fire Relief Association has not met the established criteria
for inclusion in the reporting entity, and accordingly is excluded from this report.
The annual budget serves as the foundation for the City of Hopkins financial planning and
control. All departments of the City of Hopkins are required to submit requests for appropriation
to the Finance Director by July of each year. The Finance Director uses these requests as the
starting point for developing a proposed budget.The Finance Director then presents this
proposed budget to the Council for review prior to September 30th. The Council is required to
hold public hearings on the proposed budget and to adopt a final budget no later than December
31, the close of the City of Hopkins fiscal year.
The appropriated budget is prepared by fund and department. Department heads may make
transfers of appropriations within a department. Transfers of appropriations between funds
require approval of the City Council. Budget to actual comparisons are provided in this report
for each individual governmental fund for which an annual budget has been adopted. For the
General Fund and the major Special Revenue Funds this comparison is presented on pages 39-42
as part of the basic financial statements for the governmental funds. For governmental funds,
other than the General fund and major Special Revenue Funds, with annual budgets, this
comparison is presented in the combining and individual fund statements and schedules
subsection of this report on pages 109-126.
Factors Affecting Financial Condition
The City of Hopkins, consisting of 2,504 acres, is located in Hennepin County on the westerly
fringe of the Minneapolis urban area. The City, as part of the Minneapolis-St. Paul metropolitan
complex, is readily accessible by the many highways and railways leading into the area. This
easy access prompted steady growth for the City of Hopkins during its formative years. In
response to this growth the City developed goals of working towards a planned community, with
its policies directed toward sound ratios of residential, commercial and industrial components,
with the current tax base approximately 76% single family residential and apartments, and 24%
commercial-industrial. The city’s population has stabilized due to the fact that the City is largely
developed and the national trend toward the lowering of persons per household.
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The City Council and staff along with an organized group of concerned partners determined what
the Vision and the Mission of the City of Hopkins should be. Participation in this project was
very high and the resulting Vision and Mission are as follows:
Community Vision
Creating a Spirit of Unity – Hopkins will be a community where
People are treated with respect
People participate in building culture, character and common bonds
Business growth throughout the City is supported while maintaining a vibrant City center
People feel safe, support outstanding schools and celebrate cultural heritages
People enjoy quality public services, parks and housing
City of Hopkins Mission
Inspire, Educate, Involve, Communicate
Economic Condition and Outlook
Hopkins continues to show strong economic and redevelopment activities within the city. The
valuation of new non-residential construction in 2015 was $12.6 million dollars. This
development activity has been the result of a good development market in the Hopkins area
along with successful planning on the part of the city council and city staff.
Significant projects completed or begun in 2015 include the following:
Activity Valuation
Commercial Additions/Alterations:
Super Valu – test kitchens $ 1,300,000
Hopkin Honda – addition $ 1,423,500
Walser Jeep Chrysler – addition $ 1,600,000
Johnson Building redevelopment $53,000,000
Efforts are being made for continued development and growth for 2015 and beyond. It is
anticipated that approximately $149,000,000 of construction will also take place in the City of
Hopkins during the next several years.
Some anticipated projects for 2016-2019 include the following:
Project Valuation
Hopkins Cold Storage Site Redevelopment $62,000,000
EBCO Site redevelopment $10,000,000
Oxford Green Apartments $ 7,000,000
Metropolitan Council Lift Station $ 5,000,000
Hopkins Village Apartments remodel $ 4,400,000
Long-term financial planning
The City of Hopkins has a strategic plan for economic development and has completed extensive
planning work in anticipation of the Southwest Light Rail Transit (SWLRT) line and the three
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Hopkins LRT stations. As a part of the plans, the City of Hopkins intends to pursue various
development and redevelopment efforts throughout the City. Several projects are anticipated.
In 2015, projects completed were the Super Valu test kitchens, along with the Hopkins Honda
and Walser Jeep Chrysler additions. In addition the Johnson Building redevelopment was
started. This development by Doran Companies known as "The Moline" will be a 241-unit
market rate apartment building with state-of-the-art amenities along with retail on the first level.
The project is projected to be completed in the fall of 2017. These developments will have major
impacts on the community. Specialized planning is taking place to ensure that these
developments occur so as to benefit the community and residential neighborhoods.
Major improvements continue to be made along the Hopkins section of Excelsior Boulevard
(County Road 3). The first phase of improvements occurred in 1998 - 2000 between Shady Oak
th
Road and 9 Avenue South. The second phase occurred in 2002 – 2004 between Highway 169
and Blake Road. The third phase occurred in 2007 on the segment between Highway 169 and
th
8 Avenue. The final phase is the section from Blake Road to Meadowbrook Road, has
provisional county funding and is tentatively scheduled for 2016-2017.
Significant improvements for Shady Oak Road (County Road 61) began in 2013 and were
completed in 2015. This project is a joint effort between Hennepin County and the Cities of
Minnetonka and Hopkins. A number of neighborhood and town meetings were held to gather
input on this project that will re-align the road and facilitate re-development of the area. The
project began in earnest in 2013 with the acquisition of right of way property with major road
construction starting in 2014 and finishing in 2015.
Another project in the planning stages is the 14-mile Southwest Corridor Light Rail Transit
(SWLRT) line that will go from Eden Prairie to downtown Minneapolis passing through
Hopkins and providing development potential at three transit stations that are planned for
Hopkins. In downtown Minneapolis the Southwest LRT will connect with the Hiawatha and
Central LRT lines. Construction of the light rail line is expected to begin in 2017 and is
expected to be funded with the Counties Transit Improvement Board’s transit sales tax in the
metro area (30%), and with Hennepin County Regional Railroad Authority (10%), Federal
(50%), and State (10%) dollars.
Relevant Financial Policies
The City of Hopkins has adopted a comprehensive set of financial policies. While no new
policies were developed in 2015 staff continues to review current policies to ensure they remain
relevant.
In addition the City of Hopkins’ Fund Balance policy requires that the General Fund’s
Unassigned portion of fund balance be equivalent to a minimum of five months expenditures or
42% of the prior fiscal year General Fund operating expenses. At December 31, 2015 the
General Fund unassigned fund balance is at 48.01% or $5,439,799 which represents slightly
more than five months expenditures of the 2015 budget. Due to sound fiscal policy and close
monitoring of budgets we remain at the targeted General Fund balance goal.
Major Initiatives
For 2015, the staff, following specific directives of the council and the city manager, has been
involved in a variety of projects throughout the year. These projects reflect the government’s
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commitment to ensuring that its citizens are able to live and work in a safe environment and that
the needs for services are met.
In 2015, we accomplished our annual street repair and improvements, at a cost of approximately
$4,900,359. This included the city's share of the Shady Oak Road project, along with
improvements to Mainstreet reconstruction. Along with the street improvements, improvements
to various parking lots totaled $1,093,118. In addition preliminary work was begun on the 2016
street improvement project.
We continue to improve Cottageville Park and invested $2,146,978 in that park in 2015 adding
play equipment and continuing to expand the park. Additional park project improvements for
2015 totaled $50,182.
The water, sewer and storm sewer departments also completed in conjunction with the street
improvements, infrastructure reconstruction projects totaling $911,825 along with several other
small projects.
Other miscellaneous improvement projects in 2015 included the purchase of a downtown
building for $142,053 with the intention of moving the Hopkins Historical Society out of another
city building into one more visible to the public that will offer them more space for their
collections, running fiber optic cable to various city buildings at a cost of $215,002 which will
improve communication between city facilities, and various other city park improvements at a
total cost of $50,182. Preliminary work has also begun on the Public Works garage upgrade with
the majority of the work to be completed in 2016 at an estimated cost of $746,500.
Future projects
A systematic citywide sidewalk rehab program was initiated in 1992. Each year one quadrant is
inspected and necessary repairs made. A sidewalk/trail plan was developed and implemented in
2003, which guides future improvements and connections to regional trails.
The City has established a street reconstruction and storm sewer program based on a street
condition survey and storm water management program. The streets found in poor condition and
future problem streets will be systematically included for repairs in the five-year Capital
Improvement Plan.
Certificate of Achievement For
Excellence in Financial Reporting
The Government Finance Officers Association of the United States and Canada (GFOA)
awarded a Certificate of Achievement for Excellence in Financial reporting to the City of
Hopkins for its comprehensive annual finance report for the fiscal year ended December 31,
2014. In order to be awarded a Certificate of Achievement for Excellence in Financial
Reporting, a governmental unit must publish an easily readable and efficiently organized
comprehensive annual financial report. This report must satisfy both U.S. generally accepted
accounting principles and applicable legal requirements.
7
A Certificate of Achievement is valid for a period of one year only.We believe our current
comprehensive annual financial report continues to meet the Certificate of Achievement
Program’s requirements and we are submitting it to the GFOA to determine its eligibility for
another certificate.
Acknowledgments
We wish to express our appreciation to the Mayor and City Council for their continued interest
and support in planning and conducting the financial operations of the City in a responsible and
progressive manner. We also want to express our appreciation to the Finance Department staff
for their work in preparing this report.
Respectfully submitted,
Michael J. Mornson Christine M. Harkess, CPA, CGFM
City Manager Finance Director
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Organizational Chart
CITIZENS
CITY
Boards &
City Attorney
COUNCIL
Commissions
AdministrativeCenter for the
City Manager
ServicesArts
City of
Minnetonka
Community
FinanceFireRecreation
Services
AssessingFire & MedicalDepot Coffee
Accounting
City ClerkResponseHouse
Payroll
CommunicationsPrevention
Utility Billing
InformationEmergency
ServicesPreparedness
Inspections
Reception
Activity Center
Planning &
EconomicPolicePublic Works
Development
Economic
Building Maint. &
Patrol
Development
Equipment Services
Investigation
Housing
Engineering
Communication
Planning &
Parks & Forestry
Crime
Zoning
Street/Traffic/Refuse
Prevention
Public Housing
Water & Sewer
Pavilion/Ice Arena
10
THE CITY OF HOPKINS, MINNESOTA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
CITY OFFICIALS
December 31, 2015
CITY COUNCIL
Term
Expires
Molly Cummings Mayor 12-31-17
Katy Campbell Councilmember 12-31-17
Jason Gadd Councilmember 12-31-19
Kristi Halverson Councilmember 12-31-17
Aaron Kuznia Councilmember 12-31-19
CITY MANAGER
Michael J. Mornson Appointed
DIRECTOR OF FINANCE
Christine M. Harkess Appointed
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CITY OF HOPKINS, MINNESOTA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED DECEMBER 31, 2015
SECTION II
FINANCIAL SECTION
12
INDEPENDENT AUDITORS' REPORT
Honorable Mayor and
Members of the City Council
City of Hopkins, Minnesota
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, the business-
type activities, each major fund, and the aggregate remaining fund information of the City of Hopkins
(the City), as of and for the year ended December 31, 2015, and the related notes to the financial
statements, which collectively comprise the City’s basic financial statements as listed in the table of
contents.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with accounting principles generally accepted in the United States of America; this includes
the design, implementation, and maintenance of internal control relevant to the preparation and fair
presentation of financial statements that are free from material misstatement, whether due to fraud or
error.
Auditors’ Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We
conducted our audit in accordance with auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Government Auditing Standards,
issued by the Comptroller General of the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free from
material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. The procedures selected depend on the auditors’ judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation and fair presentation of the financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of significant
accounting estimates made by management, as well as evaluating the overall presentation of the
financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinions.
An independent member of Nexia International
13
Honorable Mayor and
Members of the City Council
City of Hopkins
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the
respective financial position of the governmental activities, the business-type activities, each major
fund, and the aggregate remaining fund information of the City as of December 31, 2015, and the
respective changes in financial position and, where applicable, cash flows thereof and the respective
budgetary comparison for the General Fund and major special revenue funds for the year then ended in
accordance with accounting principles generally accepted in the United States of America.
Emphasis of a Matter
During the year ended December 31, 2015, the City adopted the provisions of Governmental
Accounting Standards Board Statement (GASB) No. 68, Accounting and Financial Reporting for
Pensions and the related GASB Statement No. 71, Pension Transition for Contributions Made
Subsequent to the Measurement Date—an amendment of GASB Statement No. 68. As a result of the
implementation of these standards, the City reported a restatement for the change in accounting
principle (see Note 16). Our auditors’ opinion was not modified with respect to the restatement.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the
management’s discussion and analysis, schedule of funding progress – other postemployment benefits
plan, schedules of the City’s proportionate share of net pension liabilities and schedules of pension
contributions and the schedule of funding progress, as listed in the table of contents, be presented to
supplement the basic financial statements. Such information, although not a part of the basic financial
statements, is required by the Governmental Accounting Standards Board who considers it to be an
essential part of financial reporting for placing the basic financial statements in an appropriate
operational, economic, or historical context. We have applied certain limited procedures to the required
supplementary information in accordance with auditing standards generally accepted in the United
States of America, which consisted of inquiries of management about the methods of preparing the
information and comparing the information for consistency with management’s responses to our
inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic
financial statements. We do not express an opinion or provide any assurance on the information
because the limited procedures do not provide us with sufficient evidence to express an opinion or
provide any assurance.
Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that
collectively comprise the City’s basic financial statements. The introductory section, combining and
individual nonmajor fund statements and schedules and statistical section are presented for purposes
of additional analysis and are not a required part of the basic financial statements.
The combining and individual nonmajor fund statements and schedules are the responsibility of
management and were derived from and relate directly to the underlying accounting and other records
used to prepare the basic financial statements. Such information has been subjected to the auditing
procedures applied in the audit of the basic financial statements and certain additional procedures,
including comparing and reconciling such information directly to the underlying accounting and other
records used to prepare the basic financial statements or to the basic financial statements themselves,
and other additional procedures in accordance with auditing standards generally accepted in the United
States of America. In our opinion, the combining and individual fund statements and schedules are
fairly stated, in all material respects, in relation to the basic financial statements as a whole.
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Honorable Mayor and
Members of the City Council
City of Hopkins
Other Matters (Continued)
Other Information (Continued)
The introductory and statistical sections have not been subjected to the auditing procedures applied in
the audit of the basic financial statements and, accordingly, we do not express an opinion or provide
any assurance on them.
Other Reporting Required by
Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated August 1,
2016, on our consideration of the City's internal control over financial reporting and on our tests of its
compliance with certain provisions of laws, regulations, contracts, and grant agreements and other
matters. The purpose of that report is to describe the scope of our testing of internal control over
financial reporting and compliance and the result of that testing, and not to provide an opinion on
internal control over financial reporting or on compliance. That report is an integral part of an audit
performed in accordance with Government Auditing Standards in considering the City’s internal control
over financial reporting and compliance.
CliftonLarsonAllen LLP
Minneapolis, Minnesota
August 1, 2016
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CITY OF HOPKINS, MINNESOTA
MANAGEMENT’S DISCUSSION AND ANALYSIS
(Unaudited)
This section of the City’s comprehensive annual financial report presents a discussion and analysis of
the City’s financial activities during the fiscal year ended December 31, 2015. This discussion and
analysis should be read in conjunction with the letter of transmittal in the introductory section of this
report.
Financial Highlights
The assets and deferred outflows of the City exceeded liabilities and deferred inflows at the
close of the 2015 fiscal year by approximately $62.5 million (net position). Of this amount,
approximately $8.03 million (unrestricted net deficit) is unavailable to meet the City’s ongoing
obligations to citizens and creditors due in part to the recognition of the City's share of the
unfunded pension obligation.
The net position of the government-wide financial statements was negatively impacted in the
current year by $6.0 million due to the required implementation of GASB Statement No. 68,
Accounting and Financial Report for Pensions, a new accounting standard. This is more fully
described on page 20. Net Position was also negatively impacted by approximately $1.7
million due to the payment of refunding debt that was called February 1, 2015.
As of the close of the current fiscal year, the City's governmental funds reported combined
ending fund balances of approximately $26.9 million, an increase of approximately $1.8 million
in comparison with the prior year. The increase was primarily due to sale of refunding bonds
late in the year that will be used to refund debt in February 2016. Approximately $5.1 million
of fund balance is available for spending at the City’s discretion (assigned or unassigned fund
balance).
As of December 31, 2015, unassigned fund balance for the General Fund was approximately
$5.4 million, or 48% of total general fund expenditures. This compares to $5.1 million from the
prior year, an increase of approximately $255,000. The General Fund working capital goal
policy stated that the City will strive to maintain a fund balance in the General Fund for
working capital of 42% of the previous year's General Fund expenditures. At December 31st
working capital is at 48%.
The City of Hopkins total debt increased by approximately $9.5 million during the current
fiscal year due to the sale of improvement, tax abatement and refunding bonds for four bond
issues. Total new debt totaled $18.7 million and bond maturities totaled $9.2 million.
Overview of the Financial Statements
This discussion and analysis is intended to serve as an introduction to the City of Hopkins basic
financial statements. The City of Hopkins basic financial statements comprise three components: 1)
government-wide financial statements, 2) fund financial statements, and 3) notes to the financial
statements. This report also contains other supplementary information in addition to the basic financial
statements themselves.
Government-wide financial statements.
The government-wide financial statements are designed to
provide readers with a broad overview of the City of Hopkins finances, in a manner similar to a private-
sector business.
16
The statement of net position presents information on all of the City of Hopkins assets, deferred
outflows of resources, liabilities, and deferred inflows of resources with the difference between them
reported as net position. Over time, increases or decreases in net position may serve as a useful
indicator of whether the financial position of the City of Hopkins is improving or deteriorating.
The statement of activities presents information showing how the City net position changed during the
most recent fiscal year. All changes in net position are reported as soon as the underlying event giving
rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses
are reported in this statement for some items that will only result in cash flows in future fiscal periods
(e.g., uncollected taxes and earned but unused vacation leave).
Both of the government-wide financial statements distinguish functions of the City of Hopkins that are
principally supported by taxes and intergovernmental revenues (governmental activities) from other
functions that are intended to recover all or a significant portion of their costs through user fees and
charges (business-type activities). The governmental activities of the City of Hopkins include general,
public safety, highways, streets, culture, recreation, urban redevelopment, housing, health and welfare.
The business-type activities of the City of Hopkins include water, sewer, refuse, storm sewer utilities,
an ice arena, and a housing and redevelopment authority.
The government-wide financial statements include the City of Hopkins itself, but also a legally separate
Hopkins Housing and Redevelopment Authority. Although the Hopkins Housing and Redevelopment
Authority is legally separate, it functions for all practical purposes as a department of the City of
Hopkins, and therefore has been included as an integral part of the primary government.
The government-wide financial statements can be found on pages 28-29 of this report.
Fund financial statements.
A fund is a grouping of related accounts that is used to maintain control
over resources that have been segregated for specific activities or objectives. The City of Hopkins, like
other state and local governments, uses fund accounting to ensure and demonstrate compliance with
finance-related legal requirements. All of the funds of the City of Hopkins can be divided into two
categories: governmental funds and proprietary funds.
Governmental funds.
Governmental funds are used to account for essentially the same functions
reported as governmental activities in the government-wide financial statements. However, unlike the
government-wide financial statements, governmental fund financial statements focus on near-term
inflows of spendable resources, as well as on balances of spendable resources available at the end of the
fiscal year. Such information may be useful in evaluating a City’s near-term financing requirements.
Because the focus of governmental funds is narrower than that of the government-wide financial
statements, it is useful to compare the information presented for governmental funds with similar
information presented for governmental activities in the government-wide financial statements. By
doing so, readers may better understand the long-term impact of the City’s near-term financing
decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues,
expenditures, and changes in fund balance provide a reconciliation to facilitate this comparison between
governmental funds and governmental activities.
The City of Hopkins maintains thirty-seven individual governmental funds. Information is presented
separately in the governmental fund balance sheet and in the governmental fund statement of revenues,
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expenditures, and changes in fund balances for the General Fund, Economic Development, Arts Center,
Tax Increment District Super Valu, 2009B Housing Improvement Bonds of 1999B Refunding Bonds,
2015D GO TI Revenue Bonds, and Permanent Improvement Revolving fund all of which are
considered to be major funds. Data from the other thirty-two funds are combined into a single,
aggregated presentation. Individual fund data for each of these non-major governmental funds is
provided in the form of combining statements elsewhere in this report.
The City of Hopkins adopts an annual appropriated budget for its general fund and all of its special
revenue funds except for the Community Development Block Grant fund. A budgetary comparison
statement has been provided for the General fund and major special revenue funds and schedules are
provided for other funds to demonstrate compliance with the budget.
The basic governmental fund financial statements can be found on pages 30-39 of this report.
Proprietary funds.
The City of Hopkins maintains two types of proprietary funds. Enterprise funds
are used to report the same functions presented as business-type activities in the government-wide
financial statements. The City of Hopkins uses enterprise funds to account for its water, sewer, refuse,
storm sewer utilities, the pavilion ice arena, and the housing and redevelopment authority. Internal
service funds are an accounting device used to accumulate and allocate costs internally among the City
of Hopkins various functions. The City of Hopkins uses internal service funds to account for
replacement of equipment, insurance deductibles and compensated absences. Because all of these
services predominantly benefit governmental rather than business-type functions, they have been
included within governmental activities in the government-wide financial statements.
Proprietary funds provide the same type of information as the government-wide financial statements,
only in more detail. The proprietary fund financial statements provide separate information for the
water, sewer, storm sewer utility funds, all of which are considered to be major funds of the City of
Hopkins. Data from the other three enterprise funds are combined into a single, aggregated
presentation. Individual fund data for each of these non-major proprietary funds is provided in the form
of combining statements elsewhere in this report. The internal service funds are combined into a single,
aggregated presentation in the proprietary fund financial statements. Individual fund data for the
internal service funds is also provided in the form of combining statements elsewhere in this report.
The basic proprietary fund financial statements can be found on pages 40-44 of this report.
Notes to the Financial Statements
The notes provide additional information that is essential to a full understanding of the data provided in
the government-wide and fund financial statements. The notes to the financial statements can be found
on pages 46-69 of this report.
Other Information
In addition to the basic financial statements and accompanying notes, this report also presents certain
required supplementary information. Required supplementary information can be found on page 71 of
this report.
The combining statements referred to earlier in connection with non-major governmental funds, non-
major proprietary funds and internal service funds are presented immediately following the required
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supplementary information. Combining and individual fund statements and schedules can be found on
pages 74-108 of this report.
Government-Wide Financial Analysis
As noted earlier, net position may serve over time as a useful indicator of a government’s financial
position. In the case of the City of Hopkins, assets exceeded liabilities by $62,490,991 at the close of
the most recent fiscal year.
Slightly over two thirds (75%) of the City of Hopkins net position is reflected in its investment in
capital assets (e.g., land, buildings, machinery and equipment); less any related debt used to acquire
those assets that are still outstanding. The City of Hopkins uses these capital assets to provide services
to citizens. The net capital assets are not available for future spending. Although the City of Hopkins
investment in its capital assets is reported net of related debt, it should be noted that the resources
needed to repay this debt must be provided from other sources.
City of Hopkins Net Position
December 31
Governmental Activities Business-Type Activities Total
2015 2014 2015 2014 2015 2014
Assets
Current and other assets $ 35,661,380 $ 35,773,666 $ 2,611,965 $ 2,682,760 $ 38,273,345 $ 38,456,426
Capital assets 57,145,566 49,314,501 22,701,488 22,425,930 79,847,054 71,740,431
Total assets 92,806,946 85,088,167 25,313,453 25,108,690 118,120,399 110,196,857
Deferred Outflows of Resources
Deferred charges on refunding 309,483 312,743 - - 309,483 312,743
Pensions 1,355,974 - 113,826 - 1,469,800 -
Total deferred outflows of
resources 1,665,457 312,743 113,826 - 1,779,283 312,743
Liabilities
Other liabilities 2,916,998 4,731,255 262,178 517,572 3,179,176 5,248,827
Long-term liabilities
outstanding 47,533,793 30,527,243 5,769,591 5,698,978 53,303,384 36,226,221
Total liabilities 50,450,791 35,258,498 6,031,769 6,216,550 56,482,560 41,475,048
Deferred Inflows of Resources
Pensions 843,495 - 82,636 - 926,131 -
Net Position
Net investment in capital assets 32,609,356 31,272,253 17,893,856 16,937,928 50,503,212 48,210,181
Restricted 20,016,574 16,967,889 - - 20,016,574 16,967,889
Unrestricted (9,447,813) 1,902,270 1,419,018 1,954,212 (8,028,795) 3,856,482
Total net position $ 43,178,117 $ 50,142,412 $ 19,312,874 $ 18,892,140 $ 62,490,991 $ 69,034,552
A portion of the City of Hopkins net position represent resources that are subject to external restrictions
on how they may be used. The remaining balance of unrestricted net deficit ($8,028,795) was
negatively impacted by the implementation of GASB Statement No. 68, more fully described below.
At the end of the current fiscal year, the City of Hopkins is able to report positive balances in all two
categories of net position, for its governmental activities and in all three categories for the business-type
activities. The City’s net position decreased by $593,191 during the current fiscal year.
The City adopted new accounting guidance, GASB Statement No. 68, Accounting and Financial
Reporting for Pensions - an Amendment of GASB Statement No. 27and the related GASB Statement
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No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date - an
amendment of GASB Statement No. 68 for the year ended December 31, 2015. Essentially, the standard
required the unfunded portion of defined benefit pension plans to be reported by all participating
employers. Recording the net pension liability and the pension related deferred outflows and inflows of
resources do not change the City's future funding requirements or obligations under the plans, which are
determined by state statutes. Additionally, the standard required the net pension asset of the Hopkins
Fire Department Relief Association to be recorded in the government-wide financial statements for the
first time.
The statement of net position was impacted by $6,131,406 at December 31, 2015 due to the
implementation of this standard. Pension-related amounts included in the above schedule related to the
standard are as follows:
Net pension asset $ 688,067
Deferred outflows of resources 1,469,800
Net pension liability (7,363,142)
Deferred inflows of resources (926,131)
Total $ (6,131,406)
(remainder of this page left blank intentionally)
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Governmental and business-type activities.
Governmental activities decreased the City of Hopkins
net position by $1,795,485 and business-type activities increased net position by $1,202,294. Key
elements of the increases are as follows:
City of Hopkins Changes in Net Position
For the Year Ended December 31
Governmental Activities Business-Type Activities Total
2015 2014 2015 2014 2015 2014
Revenues:
Programrevenues:
Charges for services $ 1,367,196 $ 1,069,080 $ 5,705,338 $ 5,521,545 $ 7,072,534 $ 6,590,625
Operating grants and
contributions 4,970,313 2,943,889 622,332 795,199 5,592,645 3,739,088
Capital grants and
contributions 501,029 2,728,416 - - 501,029 2,728,416
Generalrevenues:
Property taxes 11,038,746 11,207,914 64,161 - 11,102,907 11,207,914
Tax increments 2,920,681 2,700,110 - - 2,920,681 2,700,110
Grants and contributions
not restricted 20,510 20,510 - - 20,510 20,510
Investment earnings 279,418 193,546 23,477 24,503 302,895 218,049
Gain on sale of capital
assets 27,535 27,235 - - 27,535 27,235
Total revenues 21,125,428 20,890,700 6,415,308 6,341,247 27,540,736 27,231,947
Expenses:
General government 13,016,991 2,276,155 - - 13,016,991 2,276,155
Public safety 6,665,974 6,526,230 - - 6,665,974 6,526,230
Health and welfare 185,248 171,187 - - 185,248 171,187
Highways and streets 4,542,014 5,709,009 - - 4,542,014 5,709,009
Urban redevelopment and
housing 1,249,457 2,247,553 - - 1,249,457 2,247,553
Culture and recreation 2,068,887 1,941,912 - - 2,068,887 1,941,912
Interest on long-term debt 688,155 711,697 - - 688,155 711,697
Water - - 1,699,540 1,540,940 1,699,540 1,540,940
Sewer - - 2,061,180 2,042,106 2,061,180 2,042,106
Storm sewer - - 394,707 508,686 394,707 508,686
Refuse - - 848,685 834,113 848,685 834,113
Pavilion/ice arena - - 462,771 460,246 462,771 460,246
Housing and
redevelopment authority - - 610,318 625,667 610,318 625,667
Total expenses 28,416,726 19,583,743 6,077,201 6,011,758 34,493,927 25,595,501
Increase in net position before (7,291,298) 1,306,957 338,107 329,489 (6,953,191) 1,636,446
transfers
Transfers (864,187) 493,093 864,187 (493,093) - -
Increase in net position (8,155,485) 1,800,050 1,202,294 (163,604) (6,953,191) 1,636,446
Net position - January 1, as
previously reported 50,142,412 50,255,758 18,892,140 19,090,595 69,034,552 69,346,353
Prior period adjustment (5,168,810) (1,790,073) (781,560) - (5,950,370) (1,790,073)
Cumulative effect of change in
accounting principle - (123,323) - (34,851) - (158,174)
Net position - January 1, as
restated 44,973,602 48,342,362 18,110,580 19,055,744 63,084,182 67,398,106
Net position - December 31 36,818,117 50,142,412 19,312,874 18,892,140 56,130,991 69,034,552
21
Governmental activities:
Property taxes decreased in 2015 as a result of tax appeals filed with the
County resulting in taxes being refunded to the appellants. The City also received a number of program
grants for specific programs in addition to state municipal aid for a major street improvement project.
Net position decreased primarily due to payment of refunding debt that was sold the previous year and
called in February 2015.
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Business-type activities.
Business-type activities had a increase in net position due to transfers and
greater than expected revenues. A utility master plan was developed in 2007 with scheduled rate
increases that are designed to cover operations, debt and capital needs over the next 15 years. As a
result the utility funds are in a stronger financial position than they were a couple years ago.
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Financial Analysis of the City’s Funds
As noted earlier, the City of Hopkins uses fund accounting to ensure and demonstrate compliance with
finance-related legal requirements.
Governmental funds.
The focus of the City of Hopkins governmental funds is to provide information
on near-term inflows, outflows, and balances of spendable resources. Such information is useful in
assessing the City of Hopkins financing requirements. In particular, unassigned fund balance may serve
as a useful measure of a City’s net resources available for spending at the end of the fiscal year.
As of the end of the current fiscal year, the City of Hopkins governmental funds reported combined
ending fund balances of $26,898,710, a increase of $1,771,219 in comparison with the prior year. The
key factor of the increase is the sale of refunding bonds that will be used to liquidate the 2007 HRA
Revenue Bonds in February 2016.
Approximately 19% of fund balance or $5,068,309, constitutes assigned and unassigned fund balance,
which is available for spending at the City’s discretion. The remainder of fund balance is non-
spendable, restricted or committed to indicate that it is not available for new spending because it is
either in a non-spendable form (inventory, prepaid expenses, rehabilitative loans, or property held for
resale); restricted (debt service, tax increment projects) or has already been committed (for economic
development, property purchases, parking, and communication activities).
The general fund is the chief operating fund of the City of Hopkins. At the end of the current fiscal
year, unassigned fund balance of the general fund was $5,439,799. This represents 90.6% of the general
fund’s total fund balance. As a measure of the general fund’s liquidity, it may be useful to compare
both unassigned fund balance and total fund balance to total fund expenditures. Unassigned fund
balance represents approximately 48.1% of total general fund expenditures while total fund balance
represents approximately 53.1% of that same amount.
The fund balance of the City of Hopkins general fund increased by $270,465 during the current fiscal
year. Revenues exceeded expenditures by $280,465 before transfers. This increase was a result of
conservative spending an increase in building permit revenues and public safety program grants for
specific programs.
The Economic Development fund has a total fund balance of $4,385,982 of which $4,285,982 is
committed for economic development. The fund balance increased by $263,936 primarily as a result of
an increase in the tax levy and conservative spending.
The Arts Center fund has a deficit fund balance of ($1,182,956) of which $68 is nonspendable and
($1,183,024) is unassigned. The fund balance deficit increased by $11,045. While the Arts Center
received a programming grant from the Minnesota State Arts Board to offset programming costs those
costs still exceeded budgeted revenues due to higher performing artist fees and expenses . Staff and the
Friends of the Hopkins Center for the Arts, a non-profit associated with the Arts Center, continue
working to identify significant donors and corporate sponsors to underwrite arts programming and
decrease the deficit.
The Tax Increment District Super Valu fund has a total fund balance of $3,511,730 of which all is
restricted for tax increment. The fund balance increased by $1,908,187 due to revenues exceeding
amounts owed to developers for project costs and related financing.
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The 2009B Housing Improvement refunding bonds of 1999B bond fund has a total fund balance of
$694,722, all of which is restricted for the payment of debt service. The fund balance increased by
$51,915 as special assessment revenues exceeded current debt payment requirements.
The 2015D GO TI Refunding bond fund has a total fund balance of $7,454,556 all of which is restricted
for the payment of debt service. The fund balance increased by $7,454,556 as refunding bonds were
sold in December 2015 to call the 2007 HRA Revenue bonds in February 2016.
The Permanent Improvement Revolving fund has a total fund balance of $442,413 which is assigned for
construction projects. The fund balance decreased by $(2,342,904) a result of project costs expended
from prior year revenues. Revenues in this fund are derived from special assessments and taxes.
Proprietary funds.
The City of Hopkins proprietary funds provide the same type of information found
in the government-wide financial statements, but in more detail.
Unrestricted net position of the Water fund at the end of the year amounted to ($440,506). The
decrease in net position amounted to $213,225 and is due to transfers in from the permanent
improvement fund for reimbursement of project costs. The City is in the process of a utility rate study
which is evaluating the entire rate structure of the water fund. The City is looking at implementing a
tiered rate structure that will meet state requirements for conservation pricing and meet the City's needs
for operations and capital expenditures. The new rates are anticipated to go into effect in mid-2016.
Unrestricted net position of the Sewer fund at the end of the year amounted to $245,576. The
unrestricted net position will be used to pay for infrastructure improvements. The increase in net
position amounted to $305,222 and is due to operating revenues exceeding operating expenses along
with transfers in from the permanent improvement fund for reimbursement of project costs.. Along
with the water fund a utility rate study is also being done for the sewer fund. A rate structure will be
put in place to ensure adequate funds are maintained for operations and capital needs in the long-term.
Unrestricted net position of the Storm Sewer Utility fund at the end of the year amounted to $720,310.
The unrestricted net position will be used to pay for infrastructure improvements. The increase in net
position amounted to $720,492 and is due to transfers in from the permanent improvement fund for
reimbursement of project costs.
General Fund Budgetary Highlights
The difference between the general fund original budget and the final amended budget resulted in
departmental budget changes but did not increase the total expenditure budget when transfers out are
included. The reason for the inter-departmental amendments was a transfer between expenditure
categories to match actual expenditures and a transfer from the contingency fund for health insurance
increases following bargaining unit negotiations which were outstanding when the year began.. The
budget changes can be summarized as follows:
Several departments had small budget modifications, however when departments were
combined for reporting purposes the budget changes balanced out and no change was noted.
During the year revenues were over budgetary estimates by $252,229 due to increases in license and
permit revenue, fines, federal grants, recreation fees and donations. This was offset by a decrease in tax
revenues as a result of rebates due taxpayers who challenged their valuations in tax court and less than
expected miscellaneous revenues.
25
Expenditures were under budget by $18,236 and was due to decreased costs in the public works
department primarily in the engineering and snow removal divisions. Due to the large amount of
projects in 2015 a greater portion of the engineering budget was charged back to the various
improvement projects and due to lower snowfalls less supplies were needed in the snow removal
budget.
The net effect of these budget impacts was an increase in fund balance of $270,465 after transfers.
Capital Asset and Debt Administration
Capital assets.
The City of Hopkins investment in capital assets for its governmental and business type
activities as of December 31, 2015, amounts to $79,847,054 (net of accumulated depreciation). This
investment in capital assets includes land, buildings, improvements, vehicles, machinery and
equipment, park facilities, roads, highways, bridges, distribution systems and construction in progress.
Major capital asset events during the current fiscal year included the following:
Construction in progress additions totaled $9,297,915 for infrastructure projects and
enhancements to an undeveloped city park.
A total of $6,264,060 of assets was transferred from construction in progress to other
improvements as infrastructure projects were completed and put into service.
Vehicle and equipment purchases totaled $1,376,523. Major purchases included public works
equipment, public safety vehicles and equipment.
Vehicle and equipment deletions totaled $261,576. Deletions were a result of scheduled
replacements of public works, public safety vehicles and equipment.
City of Hopkins Capital Assets
(net of depreciation)
December 31
Governmental Activities Business-Type Activities Total
2015 2014 2015 2014 2015 2014
Land $ 6,157,677 $ 6,157,677 $ 254,299 $ 254,299 $ 6,411,976 $ 6,411,976
Buildings 13,588,144 13,838,575 3,284,952 3,412,915 16,873,096 17,251,490
Infrastructure - - 6,930,852 7,332,186 6,930,852 7,332,186
Improvements 24,710,194 22,167,426 10,005,964 7,999,437 34,716,158 30,166,863
Vehicles 1,840,710 1,869,078 467,459 260,750 2,308,169 2,129,828
Equipment 2,430,725 1,384,675 308,583 381,005 2,739,308 1,765,680
Construction in progress 8,418,116 3,897,070 1,449,379 2,785,338 9,867,495 6,682,408
$ 57,145,566 $ 49,314,501 $ 22,701,488 $ 22,425,930 $ 79,847,054 $ 71,740,431
Additional information on the City of Hopkins capital assets can be found in note 5 on pages 57-58 of
this report.
Long-term debt.
At the end of the current fiscal year, the City of Hopkins had total bonded debt
outstanding of $44,010,000. Of this amount $13,105,000 comprises tax increment redevelopment debt,
and $24,060,000 comprises general obligation and special assessment debt, all of which is backed by
the full faith and credit of the government. Another $2,100,000 is special fees debt for which the
government is liable in the event of default by the property owners subject to the fees. The remainder
of the City of Hopkins debt, $4,745,000, represents bonds secured solely by specified revenue sources
(i.e., revenue bonds).
26
City of Hopkins Outstanding Debt
General Obligation and Revenue Bonds
December 31
Governmental Activities Business-Type Activities Total
2015 2014 2015 2014 2015 2014
G.O. Tax increment bonds $ 13,105,000 $ 1,650,000 $ -$ - $ 13,105,000 $ 1,650,000
G.O. Housing fee bonds 2,100,000 2,470,000 - - 2,100,000 2,470,000
G.O. Equipment certificates 585,000 665,000 - - 585,000 665,000
G.O. Capital improvement bonds 14,815,000 14,300,000 - - 14,815,000 14,300,000
G.O. Special assessment bonds 8,660,000 10,015,000 - - 8,660,000 10,015,000
Revenue bonds - - 4,745,000 5,420,000 4,745,000 5,420,000
$ 39,265,000 $ 29,100,000 $ 4,745,000 $ 5,420,000 $ 44,010,000 $ 34,520,000
The City of Hopkins total bonded debt increased by $9,490,000 during the current fiscal year. The
increase is a result of the issuance of $4,100,000 in G.O. Street Reconstruction Bonds that financed
street improvements on Mainstreet, the issuance of $2,940,000 on GO Tax Abatement Bonds for
various park and parking lot improvements and the issuance of $4,340,000 in GO TI refunding bonds to
refund the 2008 HRA Revenue Bonds that were called in December 2105 and $7,355,000 on GO TI
refunding bonds to refund the 2007 HRA Revenue bonds that will be called February 12, 2016.
General Obligation Bonds are backed by the full faith, credit and taxing power of the City, and are
serviced by General and Tax Increment levies and also by fees assessed against benefited properties.
Revenue Bonds are backed by the full faith, credit and taxing power of the City, and are serviced by the
Water, Sewer, and Storm Sewer Utility Funds and the Pavilion Fund current revenues.
City Special Assessment Bonds are backed by the full faith, credit and taxing power of the City, and
repayment monies are generated by the collection of special assessments and general levies.
The City is subject to a statutory limit of bonded indebtedness equaling 3.0 percent of taxable market
value. At December 31, 2015, the debt limit for the City is $48,167,756. Of the total debt, $15,400,000
of general obligation and revenue bonds is applicable to the limit. The legal debt margin is
$32,767,756.
The City of Hopkins was upgraded to a “AA+” rating from Standard & Poor’s in January 2014 which
was reaffirmed in November 2015 and maintains an “A1” rating from Moody’s.
Additional information on the City of Hopkins long-term debt can be found in note 9 on pages 60-63 of
this report.
Economic Factors and Next Year’s Budgets and Rates
A number of factors were taken into consideration when preparing the City of Hopkins 2016 budget. A
utility rate study was begun to look at the rates for the water and sewer funds to better position those
funds for the future. The tax capacity rate increased as a result of economic conditions. Property
values are starting to increase and this was taken into consideration when determining estimated tax
revenues. Also taken into consideration is that the City’s population would remain constant. As a
result of these factors the City prepared a budget for 2016 that included an overall increase of 4.66% in
expenditures.
27
During the current fiscal year, unassigned fund balance in the general fund increased to $5,439,799 or
48% of general fund expenditures. The Office of the State Auditor recommends unassigned fund
balances no less than five months of operating expenditures. The City is meeting the recommendation
for the general fund. The unassigned fund balance is used to pay for the City’s general fund obligations
until it receives its property tax levy revenues in June.
Requests for Information
This financial report is designed to provide a general overview of the City of Hopkins finances for all
those with an interest in the government’s finances. Questions concerning any of the information
provided in this report or requests for additional financial information should be addressed to the
Director of Finance, City of Hopkins, 1010 First Street South, Hopkins, MN 55343.
28
29
BASIC FINANCIAL STATEMENTS
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
NOTES TO THE
FINANCIAL STATEMENTS
48
City of Hopkins, Minnesota
NOTES TO FINANCIAL STATEMENTS
December 31, 2015
1. SUMMARY OF SIGNIFICANT ACCOUNT POLICIES
The City of Hopkins, Minnesota (the City) is a charter City, which was approved December 2, 1947. The City
operates pursuant to applicable Minnesota laws and statutes. The governing body of the City is a Council – Manager
form of government.
The financial statements of the City have been prepared in conformity with U.S. generally accepted accounting
principles as applied to governmental units by the Government Accounting Standards Board (GASB). The more
significant accounting policies of the City are described below.
A. REPORTING ENTITY
In accordance with GASB pronouncements, the City’s financial statements include all funds and departments of
the City and its component units, for which the City is considered to be financially accountable. A blended
component unit, although legally separate entity is, in substance, part of the City’s operations and so data from this
unit is combined with data of the primary government. The City’s blended component unit has a March 31 year-
end, however when blended with the City it is shown with a December 31 year-end.
Blended Component Unit
Housing and Redevelopment Authority in and for the City of Hopkins (HRA)
The HRA was created by the City to carry out certain redevelopment projects and low-income rental housing. The
HRA's governing body is the same as the governing body of the primary government in that all members of the
Hopkins City Council are also the Hopkins Housing and Redevelopment Authority Commissioners. The City of
Hopkins in its capacity as the HRA Board of Directors, has operational responsibility for the HRA. Therefore
there is a burden relationship between the primary government and the component unit. The housing activity is
supported in part by federal subsidies. There is an extensive trust agreement between the HRA and HUD
regarding the facility. The HRA is included in the City’s enterprise funds. Separate financials are not prepared.
B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS
The government-wide financial statements (i.e., statement of net position and the statement of changes in net
position) report information on all activities of the primary government and its component units. The interfund
services provided and used are not eliminated in the process of consolidation. Governmental activities, which
normally are supported by taxes and intergovernmental revenues, are reported separately from business-type
activities, which rely to a significant extent on fees and charges for support.
The statement of activities demonstrates the degree to which the direct expenses of a given function or segment is
offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or
segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit
from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that
are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and
other items not properly included among program revenues are reported instead as general revenues.
Separate financial statements are provided for governmental funds and proprietary funds. Major individual
governmental funds and major individual enterprise funds are reported as separate columns in the fund financial
statements.
C. MEASUREMENT FOCUS, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT PRESENTATION
The government-wide financial statements are reported using the economic resources measurement focus and the
accrual basis of accounting, as are the proprietary fund financial statements. Revenues are recorded when earned
49
City of Hopkins, Minnesota
NOTES TO FINANCIAL STATEMENTS (CONT.)
December 31, 2015
and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property
taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as
revenue as soon as all eligibility requirements have been met. Unbilled utility service receivables are recorded at
year-end.
Governmental funds are accounted for using the current financial resources measurement focus and the modified
accrual basis of accounting. Their revenues are recognized when susceptible to accrual (i.e., when they become
measurable and available). “Measurable” means the amount of the transaction can be determined and “available”
means collectible within the current period or within sixty days thereafter to be used to pay liabilities of the current
period.
Major revenues that are susceptible to accrual include property taxes, special assessments, intergovernmental
revenues, charges for services, and investment earnings. Major revenues that are not susceptible to accrual include
fees and miscellaneous revenues; such revenues are recorded only as received because they are not measurable
until collected.
Expenditures are generally recognized under the modified accrual basis of accounting when the related fund
liability is incurred, except for principal and interest on general long-term debt and compensated absences that are
recognized when due and payable.
The City reports the following major governmental funds:
Thegeneral fund is the primary operating fund of the City. It is used to account for all financial resources
except those required to be accounted for in another fund.
Theeconomic development special revenue fund accounts for development opportunities of the city. Sources
of funds are derived from the administration of loans and an annual tax levy.
Thearts center special revenue fund accounts for the activities of the Hopkins Center for the Arts. Sources of
funds are derived from leases, ticket sales, admission fees, grants and donations.
Thetax increment district super valu special revenue fund accounts for the activities of the Super Valu tax
increment development district. Sources of funds are a tax increment levy.
The2009B taxable housing improvement bonds of 1999B refunding bond debt service fund accounts for
resources accumulated and payments made for principal and interest on long-term debt issued to pay for
Westbrook Patio Home improvements. The owners of these town homes pay an annual fee, which in turn pays
for the bond issue.
The2015D general obligation tax increment revenue bonds debt service fund accounts for resources
accumulated and payments made for principal and interest on long-term debt issued for the Cargill
development project.
Thepermanent improvement revolving capital projects fund accounts for resources and accumulated payments
for street improvements funded with bonds and special assessments levied on benefited property.
The City reports the following major proprietary funds:
Thewater utility fund accounts for the operations of the City-owned water distribution system. The water
bonds of 2009A, 2012B and 2013A are included as part of this fund since revenues of the water fund are
pledged to pay principal and interest on this bond.
Thesewer utility fund accounts for the operations of the City-owned sewer lift stations and disposal system.
The sewer bonds of 2009A, 2012B and 2013A are included as part of this fund since revenues of the sewer
fund are pledged to pay principal and interest on this bond.
50
City of Hopkins, Minnesota
NOTES TO FINANCIAL STATEMENTS (CONT.)
December 31, 2015
Thestorm sewer utility fund accounts for the operations and improvements of the storm water drainage system.
The storm water bond issues of 2009A, 2010B, 2012B and 2013A are included as part of this fund since
revenues of the storm sewer fund are pledged to pay principal and interest on these bonds.
Additionally, the City reports the following fund types:
Governmental Funds
Special Revenue Funds - Special revenue funds are used to account for the proceeds of specific revenue
sources that are legally restricted or committed by Council to expenditures for specified purposes.
Debt Service Funds - Debt service funds are used to account for the accumulation of resources for, and the
payment of, general long-term debt principal, interest, and related costs.
Capital Project Funds - Capital project funds are used to account for financial resources to be used for the
acquisition or construction of major capital facilities and infrastructure, other than those financed by
proprietary funds or special revenue funds.
Proprietary Funds
Enterprise Funds - Enterprise funds are used to account for operations that are financed and operated in a
manner similar to private business enterprises, where the intent of the governing body is that the costs
(expenses, including depreciation) of providing goods or services to the general public on a continuing basis,
be financed or recovered primarily through user charges.
Internal Service Funds – Internal service funds are used to account for the financing of goods and services
provided by one department to other departments of the City on a cost-reimbursement basis. Internal service
funds are used for equipment replacement, insurance deductions and employee benefits.
As a general rule the effect of interfund activity has been eliminated from the government-wide financial
statements, however interfund services provided and used are not eliminated in the process of consolidation.
Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or
privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions, including
special assessments. Internally dedicated resources are reported as general revenues rather than as program
revenues. Likewise, general revenues include all taxes.
Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and
expenses generally result from providing services and producing and delivering goods in connection with a
proprietary fund’s principal ongoing operations. The principal operating revenues of the City enterprise funds and
internal service funds are charges to customers for sales and service. Operating expenses for enterprise funds and
internal service funds include the cost of sales and services, administrative expenses and depreciation on capital
assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and
expenses.
When both restricted and unrestricted resources are available for use, it is the City’s policy to use restricted
resources first, and then use unrestricted resources as they are needed.
D. CASH AND INVESTMENTS
Cash balances from all funds are combined and invested to the extent available in authorized investments pursuant
to Minnesota Statutes (see note 4). Earnings from such investments are allocated to the respective funds on the
basis of applicable cash balance participation by each fund. Investments in certificates of deposit with a maturity
date of less than one year at the date of purchase are reported at cost or amortized cost, which approximates fair
value. Investments held longer than one year are reported at fair value, based on quoted market prices.
51
City of Hopkins, Minnesota
NOTES TO FINANCIAL STATEMENTS (CONT.)
December 31, 2015
The City accounts for its cash, cash equivalents and investments in an entity-wide cash management pool, which is
used essentially as a demand deposit account. For purposes of the statement of cash flows, the proprietary funds
consider all investments to be cash equivalents. Restricted cash and investments are reported separately on the
financial statement.
E. INTERFUND RECEIVABLES/PAYABLES
Activity between funds that is representative of lending/borrowing arrangements and transactions between funds
that are outstanding at the end of the fiscal year are referred to “due to/from other funds” Any residual balances
outstanding between the governmental activities and business-type activities are reported in the government-wide
financial statements as “internal balances.”
The non-current portion of due from other funds is offset by nonspendable fund balance in the general fund to
indicate that this portion of fund balance is not available for appropriation and is not expendable available
financial resources.
F. INVENTORIES AND PREPAID ITEMS
All inventories are accounted for using the consumption method and are valued at cost using the first-in/first-out
(FIFO) method.
Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items
in both government-wide and fund financial statements. Prepaid items are reported using the consumption method
and recorded as expenditures/expenses at the time of consumption.
G. CAPITAL ASSETS
Capital assets, which include land, buildings, equipment and infrastructure assets (e.g., roads, bridges, curbs and
gutters, streets and sidewalks, drainage systems, lighting systems, and similar items), are reported in the applicable
governmental or business-type activities columns in the government-wide financial statements and the proprietary
fund financial statements. The City defines capital assets as assets with an initial, individual cost of more than
$5,000 and an estimated useful life in excess of three years. Such assets are recorded at historical cost. Donated
capital assets are recorded at estimated fair market value at the date of donation.
The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend assets
lives are not capitalized.
Assets not being depreciated include land and construction in progress. Buildings, equipment, and infrastructure
of the City and the HRA are depreciated using the straight-line method over the estimated useful lives as follows:
Buildings 30 - 40 years
Mains and Lines 40 - 50 years
Streets 20 - 25 years
Improvements 10 - 20 years
Vehicles 3 - 30 years
Equipment 3 - 20 years
H. DEFERRED OUTFLOWS/INFLOWS OF RESOURCES
In addition to assets, the statement of financial position will sometimes report a separate section for deferred
outflows of resources. This separate financial statement element, deferred outflows of resources, represents a
consumption of net position that applies to a future period(s) and will not be recognized as an outflow of
52
City of Hopkins, Minnesota
NOTES TO FINANCIAL STATEMENTS (CONT.)
December 31, 2015
resources (expense/expenditure) until then. The City has two items that qualify for reporting in this category. It is
the deferred charge on refunding reported in the government-wide statement of net position and the deferred
charge for pensions (see Pension section below for explanation). A deferred charge on refunding results from the
difference in the carrying value of refunded debt and its reacquisition price. This amount is deferred and
amortized over the shorter of the life of the refunded or refunding debt. In addition to liabilities, the statement of
financial position will sometimes report a separate section for deferred inflows of resources. This separate
financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to
a future period(s) and will not be recognized as an inflow of resources (revenue) until that time. The City has one
item item that qualifies for reporting in this category. It is the deferred charge for pensions (see Pension section
below for explanation). The City also has one type of item, which arises under a modified accrual basis of
accounting that qualifies for reporting in this category. Accordingly, the item, unavailable revenue, is reported
only in the governmental funds balance sheet. The governmental funds report unavailable revenues from four
sources: property taxes, special assessments, loans and grants. These amounts are deferred and recognized as an
inflow of resources in the period that the amounts become available.
I. COMPENSATED ABSENCES
The City compensates all employees upon termination for unused vacation or flex leave. Employees hired prior to
August 1, 1998 may opt to have sick leave, at the rate of 8 hours for each calendar month of full-time service,
instead of flex leave.
Employees hired prior to August 1, 1998, that have not opted for flex leave, shall be entitled to severance pay,
after completion of five years of continuous City employment. Severance pay is calculated by multiplying the
total number of continuous years in the City employ and/or accumulated sick leave by the daily wage rate
prevailing at date of severance, at one day per year of such employment, to a maximum of 20 days. Such
severance money shall be paid in case of separation caused by death, eligible retirements, or medically attested
disability preventing an employee from performing the major duties of the position or separation for non-
disciplinary reasons.
Accumulated vacation, flex and vested severance pay is reported as an expense and an accrued liability as the
benefits accrue to employees in the government-wide and proprietary fund financial statements. A liability for
these amounts is reported in the governmental funds only if benefits have matured as a result of employee
resignations and retirements. The employee benefits internal service fund reports the governmental funds’ liability
for compensated absences on the accrual basis.
J. PENSIONS
For purposes of measuring the net pension liability, deferred outflows/inflows of resources, and pension expense,
information about the fiduciary net position of the Public Employees Retirement Association (PERA) and
additions to/deductions from PERA's fiduciary net position have been determined on the same basis as they are
reported by PERA except that PERA's fiscal year end is June 30. For this purpose, plan contributions are
recognized as of employer payroll paid dates and benefit payments and refunds are recognized when due and
payable in accordance with the benefit terms. Investments are reported at fair value.
For purposes of measuring the liability, deferred outflows of resources and deferred inflows of resources, and
expense associated with the City's requirement to contribute to the Hopkins Fire Relief Association, information
about the Plan's fiduciary net position and additions to/deductions from the Hopkins Fire Relief Association Plan's
fiduciary net position have been determined on the same basis as they are reported by the Plan. For this purpose,
benefit payments (including refunds of contributions) are recognized when due and payable in accordance with the
benefit terms. Investments are reported at fair value.
53
City of Hopkins, Minnesota
NOTES TO FINANCIAL STATEMENTS (CONT.)
December 31, 2015
K. LONG-TERM OBLIGATIONS
In the government-wide financial statements, and proprietary fund financial statements, long-term debt and other
long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities,
or proprietary fund type statement of net position. Bond premiums and discounts, amortized over the life of the
bonds. Bonds payable are reported net of the applicable bond premium or discount.
In the governmental fund financial statements bond premiums and discounts, as well as bond issuance costs are
recognized during the current period. The face amount of debt issued is reported as other financing sources.
Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are
reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received,
are reported as debt service expenditures.
L. NET POSITION/FUND EQUITY
Net position represents the difference between assets and liabilities in the government-wide financial statements.
Net position invested in capital assets consists of capital assets net of accumulated depreciation, reduced by the
outstanding balance of any long-term debt used to build or acquire the capital assets. Net position is reported as
restricted in the government-wide financial statements when there are limitations imposed on their use through
external restrictions imposed by creditors, grantors, laws or regulations of other governments.
In the fund financial statements, governmental funds report fund balances in classifications that disclose
constraints for which amounts in those funds can be spent. These classifications are as follows:
Nonspendable – portions of fund balance related to prepaids, inventories, long-term receivables, and land held
for resale.
Restricted – funds are constrained by external parties (statute, grantors, bond agreements, etc.).
Committed – fund constraints are established and modified by a resolution approved by the City Council.
Assigned – consists of internally imposed constraints. These constraints are established by the City Council
and/or management. The City Council also delegates the authority to assign fund balance to the Finance
Director per City Legislative Policy 6-G, Fund Balance.
Unassigned – is the residual classification for the General Fund and also reflects negative residual amounts in
other funds.
When an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available,
it is the City’s policy to use restricted first, then unrestricted fund balance.
When an expenditure is incurred for purposes for which committed, assigned, and unassigned amounts are
available, it is the City’s policy to use committed first, then assigned, and finally unassigned amounts.
The City formally adopted a fund balance policy for the General Fund. The policy establishes an unassigned fund
of a minimum of 5 months or 42% of the previous year’s budgeted expenditures.
54
City of Hopkins, Minnesota
NOTES TO FINANCIAL STATEMENTS (CONT.)
December 31, 2015
M. INTERFUND TRANSACTIONS
Inter-fund services provided and used are accounted for as revenues and expenditures. Transactions that constitute
reimbursements to a fund for expenditures initially made from it that are properly applicable to another fund are
recorded as expenditures in the reimbursing fund and as reductions of expenditures in the fund that is reimbursed.
All other interfund transactions are reported as transfers.
N. PROPERTY TAXES
Property tax levies are set by the City Council in December of each year, and are certified to Hennepin County
(the County) for collection in the following year. In the State of Minnesota, counties act as collection agents for
all property taxes. The County spreads all levies over assessable property. Such taxes become a lien on January 1
and are recorded as receivables by the City at that date.
Real property taxes are payable by taxpayers in two equal installments, on May 15 and October 15. Personal
property taxes are also payable by taxpayers in two equal installments, on February 28 and June 30. The County
provides tax settlements to cities and other local governments three times a year, on or before January 25, July 5
and December 5.
In the governmental fund financial statements property taxes are accrued and recognized as revenue for collections
within 60 days of year-end. Taxes that remain unpaid at the County on December 31 are classified as delinquent
taxes receivable, and are fully offset by deferred inflows of resources because they are not available to finance
current expenditures. No allowance for uncollectible taxes has been provided because such amounts are not
expected to be material.
O. CONDUIT DEBT OBLIGATIONS
From time to time, the City has issued Commercial Development Revenue Notes/Bonds in accordance with the
Minnesota Municipal Industrial Development Act. These obligations are issued to provide financial assistance to
private-sector entities for the acquisition and construction of industrial and commercial facilities deemed to be in
the public interest. The obligations are secured by the property financed and are payable solely from payments
received on the underlying mortgage loans. Upon repayment of the obligations, ownership of the acquired
facilities transfers from the bond holder to the private-sector entity served by the debt issuance. Neither the City,
the State, nor any political subdivision thereof is obligated in any manner for repayment of the obligations.
Accordingly, the bonds are not reported as liabilities in the accompanying financial statements. As of December
31, 2015, there were 7 notes/bond issues outstanding, with an aggregate principal amount payable of
approximately $31 million.
P. USE OF ESTIMATES
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ from those estimates.
55
City of Hopkins, Minnesota
NOTES TO FINANCIAL STATEMENTS (CONT.)
December 31, 2015
2. RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS
A. EXPLANATION OF CERTAIN DIFFERENCES BETWEEN THE GOVERNMENTAL FUND BALANCE
SHEET AND THE GOVERNMENT-WIDE STATEMENT OF NET POSITION
The governmental fund balance sheet includes a reconciliation between fund balance – total governmental funds
and net position – governmental activities as reported in the government-wide statement of net position. One
element of that reconciliation explains that long-term liabilities, including bonds payable, are not due and payable
in the current period and therefore are not reported in the funds. Details of this difference are as follows:
Bonds payable $ 39,914,855
Accrued interest payable 325,248
Net OPEB obligation 144,904
Net adjustment to reduce fund balance - total governmental
funds to arrive at net position - governmental activities $ 40,385,007
B. EXPLANATION OF CERTAIN DIFFERENCES BETWEEN THE GOVERNMENTAL FUND STATEMENT
OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE AND THE GOVERNMENT-
WIDE STATEMENT OF ACTIVITIES
The governmental fund statement of revenues, expenditures, and changes in fund balances includes a
reconciliation between net changes in fund balances – total governmental funds and change in net position of
governmental activities as reported in the government-wide statement of activities. One element of that
reconciliation explains, “Governmental funds report capital outlays as expenditures. However, in the statement of
activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation
expense.” The details of this difference are as follows:
Capital outlay $ 8,789,979
Depreciation expense (1,522,232)
Net adjustment to increase net changes in fund balances -
total governmental funds to arrive at changes in net position
of governmental activities $ 7,267,747
Another element of that reconciliation explains that, “the issuance of long-term debt provides current financial
resources to governmental funds, while the repayment of the principal of long-term debt uses financial resources
of the governmental funds. Neither of these transactions has any effect on the net position. Also, governmental
funds report the effect of premiums, discounts and similar items when debt is first issued, whereas these amounts
are deferred and amortized in the statement of activities.” The details of these differences are as follows:
Principal repayments $ (8,570,000)
Issuance of general obligation bonds 18,735,000
Add premium 425,129
Less deferred loss on refunding debt (37,518)
OPEB expense (39,636)
Amortization of deferred losses on refunding 40,778
Amortization of bond premium and discount 13,332
Prior year interest expense (292,030)
Accrue interest expense for current year 325,248
Net adjustment to decrease net changes in fund balances -
total governmental funds to arrive at changes in net
position of governmental activities 10,600,303
56
City of Hopkins, Minnesota
NOTES TO FINANCIAL STATEMENTS (CONT.)
December 31, 2015
3. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY
A. BUDGETS AND BUDGETARY ACCOUNTING
Annual budgets are adopted on a basis consistent with U.S. generally accepted accounting principles for all
governmental funds except the Section 8 and Hennepin County CDBG special revenue funds, the debt service
funds and the capital projects funds, which are not budgeted. A capital improvement plan is reviewed annually by
the City Council for the capital projects funds and utility funds. However, appropriations for major projects are
not adopted until the actual bid award of the improvement. The appropriations are not reflected in the financial
statements. All annual appropriations lapse at fiscal year-end.
The City follows these procedures in establishing the budgetary data reflected in the financial statements and set
forth in Section 7.04 of the City Charter.
1.The City Manager shall, at the first regular council meeting in September, submit to the Council a proposed
budget and an explanatory budget message in a form and manner as prescribed by the City Charter.
2.The Council shall determine the plan and time of the public hearings on the budget to obtain taxpayer
comments.
3.The Council shall adopt the tax levy by resolution no later than a December date, which is annually established
by law for the county auditor to levy taxes. The budget shall set forth the total for each budgeted fund with
such segregation as to objects and purposes of expenditures as the Council deems necessary for purposes of
budget control.
4.The City Manager is authorized to transfer budgeted amounts between departments within any fund; however,
any revisions that alter the total expenditures of any fund must be approved by the City Council and are limited
to the amount revenues exceed the budgets or authorize the transfer of sums from unexpended balances to other
purposes. Budgeted expenditure appropriations lapse at year-end. The level of legal control is at the fund
level.
5.The Council made no supplemental budgetary appropriation throughout the year.
B. EXCESS OF EXPENDITURES OVER APPROPRIATIONS
For the year ended December 31, 2015, actual expenditures exceeded the budgeted amounts in the following
funds:
Economic Development $ 224,666
State Chemical Assessment Team 56,131
Real Estate Purchases and Sales 35
Parking 65,192
Depot Coffee House 29,485
Tax Increment District Entertainment District 10,427
5th Avenue Flats 2,209
Tax Increment Marketplace & Main 27,921
These over expenditures were funded by greater than anticipated revenues of the Economic Development, State
Chemical Assessment Team, Parking, Depot Coffee House, and Tax Increment District Entertainment District
funds, from fund balance in the State Chemical Assessment Team, and Real Estate Purchase & Sales funds, and by
future revenues in the Arts Center, 5th Avenue Flats and Tax Increment District Marketplace & Main funds.
57
City of Hopkins, Minnesota
NOTES TO FINANCIAL STATEMENTS (CONT.)
December 31, 2015
Budgets are adopted for some special revenue fund types but not all. Excluded from the budget adoption process
are funds that are completely reimbursable from the federal and state governments. The Community Development
Block Grant Funds is a non-budgeted fund.
C. FUND BALANCE DEFICITS
At December 31, 2015, the following funds had deficit fund balances or net position. These deficits will be
funded through future tax levies, contributions, grants, charges for services or developer payments:
Art Center $ 1,183,024
State Chemical Assessment 1,918
Depot Coffee House 10,780
Tax Increment District Entertainment District 22,002
Tax Increment District Sonoma 137,862
5th Avenue Flats 386,947
Tax Increment District Marketplace & Main 218,385
D. NET POSITION RESTRICTED BY ENABLING LEGISLATION
The government-wide statement of net position reports $4,217,494 in restricted net position for economic
development, of which $4,073,601 is restricted by enabling legislation.
4. DEPOSITS AND INVESTMENTS
As of December 31, 2015 the City had the following deposits and investments:
Investment Type Fair Value
Government sponsored entities $ 495,152
Municipal obligations 5,498,980
Negotiable certificates of deposit 10,263,040
Money market 13,530,796
Deposits 434,480
Total fair value cash and investments $ 30,222,448
Interest rate risk – Interest rate risk is the risk that the fair value of investments will be adversely affected by a change
in interest rates. In accordance with City of Hopkins Legislative Policy 6-B, Standards of Investments, the city
manages its exposure to declines in fair values by structuring the investment portfolio so that securities mature to meet
cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to
maturity.
At December 31, 2015 the City had the following investment maturities:
Investment Maturities (in Years)
Fair Less No
ValuethanOne1-5 6-10 Maturity
Investment Type:
Government sponsored entities
FNMA $ 495,151 $ - $ 495,151 $ - $ -
Municipal obligations 5,498,981 1,306,859 3,600,458 591,664 -
Negotiable certificates of deposit 10,263,040 5,145,000 5,118,040 - -
Repurchase agreement 13,530,796 - - - 13,530,796
Demand deposits 434,480 - - - 434,480
$ 30,222,448 $ 6,451,859 $ 9,213,649 $ 591,664 $ 13,965,276
58
City of Hopkins, Minnesota
NOTES TO FINANCIAL STATEMENTS (CONT.)
December 31, 2015
Credit risk – Credit risk is the risk that an issuer or other counter party to an investment will not fulfill its obligations.
Credit risk is measured using credit quality ratings of investments in debt securities as described by nationally
recognized rating agencies such as Standard & Poor’s and Moody’s. According to the City’s investment policy
commercial paper shall be restricted to issues, which mature in 270 days or less with a rating of A-1 (Moody’s), P-1
(Standard & Poor’s) or F-1 (Fitch) among at least two of the three rating agencies.
The City is authorized by Minnesota Statutes to invest in the following:
(a)Direct obligations or obligations guaranteed by the United States or its agencies
(b)Shares of investment companies registered under the Federal Investment Company Act of 1940 and
whose only investments are in securities described in (a) above
(c)General obligations in the State of Minnesota or any of its municipalities
(d)Bankers’ acceptances of United States banks eligible for purchase by the Federal Reserve System
(e)Commercial paper issued by United States corporations or their Canadian subsidiaries, of the highest
quality, and maturity in 270 days or less; and
(f)Guaranteed investment contracts issued or guaranteed by United States commercial banks or domestic
branches of foreign banks or United States insurance companies or their subsidiaries
(g)Repurchase or reverse repurchase agreements with banks that are members of the Federal Reserve System
with capitalization exceeding $10,000,000, a primary reporting dealer in U.S. Government securities to
the Federal Reserve Bank of New York, or certain Minnesota securities broker-dealers.
The following table lists the credit quality ratings per Moody’s and/or Standard and Poor’s and/or Fitch of the
City’s investments at December 31, 2015.
QualityRatings
Fair Not
Value AAA AA Rated
Investment Type:
Government securities
FNMA $ 495,152 $ - $ 495,152 $ -
Municipal obligations 5,498,980 1,754,867 3,744,113 -
Negotiable certificates of deposit 10,263,040 - - 10,263,040
Repurchase agreement 13,530,796 - - 13,530,796
Demand deposits 434,480 - - 434,480
$ 30,222,448 $ 1,754,867 $ 4,239,265 $ 24,228,316
Custodial credit risk
Deposits – For deposits, this is the risk that in the event of a bank failure, the City’s deposits may not be
returned to it. Minnesota Statutes require that all City deposits be protected by insurance, surety bond, or
collateral. The market value of collateral pledged must equal 110% of the deposits not covered by insurance or
bonds. Authorized collateral includes the legal investments described above, as well as certain first mortgage
notes, and certain other state or local government obligations. Minnesota Statutes require that securities
pledged as collateral be held in safekeeping by the City treasurer or in a financial institution other than that
furnishing the collateral. At December 31, 2014 the City had no deposits that were uninsured or
uncollateralized. The deposits were insured or collateralized by securities held by the City’s agent in the City’s
name.
Investments – For an investment, this is the risk that, in the event of the failure of the counterparty, the City
will not be able to recover the value of its investments or collateral securities that are in the possession of an
outside party. All investments held by the City are insured or registered or are held by the City or its agent in
the City’s name. The City has no investments that are uninsured or unregistered nor are any investments held
by a counterparty or a counterparty's trust department or agent that is not in the city's name.
59
City of Hopkins, Minnesota
NOTES TO FINANCIAL STATEMENTS (CONT.)
December 31, 2015
Concentration of credit risk – This is the risk associated with investing a significant portion of the City’s investments
(considered 5% or more) in the securities of a single issuer, excluding U.S. explicitly guaranteed investments
(Treasuries), investment pools, and mutual funds. As of December 31, 2015, the city had no investments exceeding
5% or more for a single issuer.
5. CAPITAL ASSETS
Capital asset activities for the year ended December 31, 2015 were as follows:
Beginning Ending
Balance Increase Decreases Transfers Balance
Governmental activities:
Capital assets, not being depreciated
Land $ 6,157,677 $ - $ - $ - $ 6,157,677
Construction in progress 3,897,070 8,602,064 (106,650) (3,974,368) 8,418,116
Total not being depreciated 10,054,747 8,602,064 (106,650) (3,974,368) 14,575,793
Capital assets, being depreciated
Buildings 20,006,594 176,478 - 64,706 20,247,778
Other Improvements 38,341,781 - - 3,517,776 41,859,557
Vehicles 3,988,628 219,564 (174,944) - 4,033,248
Machinery & equipment 5,170,046 935,880 (86,632) 391,886 6,411,180
Total being depreciated 67,507,049 1,331,922 (261,576) 3,974,368 72,551,763
Less accumulated depreciation
Buildings (6,168,019) (491,615) - - (6,659,634)
Other Improvements (16,174,355) (975,008) - - (17,149,363)
Vehicles (2,119,550) (247,932) 174,944 - (2,192,538)
Machinery & equipment (3,785,371) (281,716) 86,632 - (3,980,455)
Total accumulated depreciation (28,247,295) (1,996,271) 261,576 - (29,981,990)
Total capital assets, being
depreciated, net 39,259,754 (664,349) - 3,974,368 42,569,773
Governmental activities capital
assets, net $ 49,314,501 $ 7,937,715 $ (106,650) $ - $ 57,145,566
(remainder of page left blank intentionally)
60
City of Hopkins, Minnesota
NOTES TO FINANCIAL STATEMENTS (CONT.)
December 31, 2015
Beginning Ending
Balance Increases Decreases Transfers Balance
Business-type Activities:
Capital assets, not being depreciated
Land $ 254,299 $ - $ - $ $ 254,299
Construction in progress 2,785,338 1,235,851 (282,118) (2,289,692) 1,449,379
Total not being depreciated 3,039,637 1,235,851 (282,118) (2,289,692) 1,703,678
Capital assets, being depreciated
Buildings 8,019,452 44,965 - 65,198 8,129,615
Infrastructure 19,141,910 - - - 19,141,910
Other Improvements 9,834,041 - - 2,224,494 12,058,535
Vehicles 754,107 232,515 - 36,739 1,023,361
Machinery & equipment 913,408 - - (36,739) 876,669
Total being depreciated 38,662,918 277,480 - 2,289,692 41,230,090
Less accumulated depreciation
Buildings (4,606,537) (238,126) - - (4,844,663)
Infrastructure (11,809,724) (401,334) - - (12,211,058)
Other Improvements (1,834,604) (217,967) - - (2,052,571)
Vehicles (493,357) (62,545) - - (555,902)
Machinery & equipment (532,403) (35,683) - - (568,086)
Total accumulated depreciation (19,276,625) (955,655) - - (20,232,280)
Total capital assets, being
depreciated, net 19,386,293 (678,175) - 2,289,692 20,997,810
Business-type activities capital
assets, net $ 22,425,930 $ 557,676 $ (282,118) $ - $ 22,701,488
Depreciation expense was charged to City functions as follows:
Governmental activities:
General government $ 57,156
Public safety 207,345
Highways and streets 1,121,942
Urban redevelopment and housing -
Culture and recreation 135,787
Capital assets held by the government's internal service funds are 474,041
charged to the various functions based on their usage of the assets
Total depreciation expense - governmental activities $ 1,996,271
Business-type activities:
Water $ 241,645
Sewer 174,758
Storm Sewer 230,152
Refuse 52,214
Pavilion/Ice arena 80,857
Housing and Redevelopment Authority 176,029
Total depreciation expense - business-type activities $ 955,655
61
City of Hopkins, Minnesota
NOTES TO FINANCIAL STATEMENTS (CONT.)
December 31, 2015
Construction commitments
The City has active construction projects as of December 31, 2054. The projects include street improvements. The
City’s commitment with contractors related to these projects is $198,932.
On October 15, 2013 the City Council entered into a 14 year maintenance agreement with SEH Design/Build, Inc. for
inspection, maintenance, cleaning and painting of the city's two water towers. The contract commitment totals
$1,529,400 and will be paid in annual installments beginning in 2014.
6. INTERFUND RECEIVABLES AND PAYABLES
The following funds had amounts receivable from other funds, and the respective funds had equal amounts payable
to other funds at December 31, 2015:
Due from Other Funds
Economic
General Development Total
Due to other funds:
Non-major governmental $ 403,721 $ 555,090 $ 958,811
Arts Center 852,597 300,000 1,152,597
Permanent Improvement Revolving - - -
Water 172,965 - 172,965
Non-major proprietary 39,408 - 39,408
Total due to other funds $ 1,468,691 $ 855,090 $ 2,323,781
The interfund receivables and payables are to eliminate negative cash between funds and to allow for development
loans or to facilitate a project or operations of another fund.
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62
City of Hopkins, Minnesota
NOTES TO FINANCIAL STATEMENTS (CONT.)
December 31, 2015
7. INTERFUND TRANSFERS
The following is a summary of transfers between funds as of December 31, 2015:
Transfers in
Permanent
Art Economic Improvement Non-major Storm
Center Development Revolving Governmental Water Sewer Sewer Total
Transfers out:
General $ - $ - $ - $ 10,000 $$ $ - $ 10,000
Economic
Development - - - - - -
Tax Increment District
Super Valu - - - 231,910 231,910
Permanent
Improvement
Revolving - - - 308,840 496,274 297,004 605,843 1,707,961
Water - - - 100,300 100,300
Sewer - - - 105,300 - 105,300
Storm Sewer - - - 304,334 - 304,334
Non-major
governmental 86,920 2,127 5,361,851 1,977,053 - 7,427,951
Non-major business-
type - 25,000 - 25,000
Total transfers in $ 86,920 $ 2,127 $ 5,361,851 $ 3,062,737 $ 496,274 $ 297,004 $ 605,843 $ 9,912,756
Interfund transfers allow the City to allocate financial resources to debt service funds that are paying the general
obligation debt.
Non-routine transfers include the following:
1)Annual transfers from water, sewer, storm sewer and refuse funds for lease payments on new public works
facility.
2)An annual transfer, from the non-major governmental Communication funds to the Art Center Fund totaling
$86,920 to pay the original debt for building the facility.
3)Annual transfers from Tax Increment Special Revenue funds to Debt Service funds for debt payments.
4)Transfers from non-major governmental funds to Permanent Improvement Revolving for bond proceeds.
5)Transfer from the water, sewer and storm sewer funds to a non-major governmental Park Dedication fund of
$340,000 for Cottageville Park improvements.
6)Transfer from the Permanent Improvement Revolving to a non-major governmental Park Dedication fund of
$225,000 for Cottageville Park improvements.
7)Transfers from water, sewer and storm sewer to non-major governmental debt funds for bond payment
contributions.
63
City of Hopkins, Minnesota
NOTES TO FINANCIAL STATEMENTS (CONT.)
December 31, 2015
8. LEASES
The city has entered into a lease agreement as a lessee for financing the acquisition of an aerial lift fire truck with a
down payment of $445,427. The lease agreement qualifies as a capital lease for accounting purposes and, therefore,
has been recorded at the present value of their future minimum lease payments as of the inception date.
The asset acquired through the capital lease is as follows:
Governmental Activities
Asset:
Machinery and equipment $ 870,427
Less: Accumulated depreciation (311,848)
Total $ 558,579
The future minimum lease obligations and the net present value of these minimum lease payments as of December
31, 2014 are as follows:
Governmental
Year Ending December 31, Activities
2016 $ 54,217
2017 54,217
2018 54,217
Total minimum lease payments 162,651
Less: amount representing interest (13,035)
Present value of minimum lease payments $ 149,616
9. LONG-TERM DEBT
The City issues general obligation bonds to provide funds for the acquisition and construction of major capital
facilities. General obligation bonds have been issued for governmental activities.
General Obligation Bonds are backed by the full faith, credit and taxing power of the City, and are serviced by
General and Tax Increment levies and also by fees assessed against benefited properties. These bonds generally are
issued as 20-year serial bonds.
Refunding
On November 20, 2014 the City issued $6,345,000 General Obligation Refunding Bonds, Series 2014B for a
refunding of $5,700,000 General Obligation Capital Improvement Bonds, Series 2007A and $645,000 of General
Obligation Permanent Improvement Revolving Bonds, Series 2007B. Future combined debt service payments will
be reduced by $691,761 with a present value savings of $651,072. The refunded bonds were called and paid on
February 1, 2015.
On November 24, 2015 the City issued $4,340,000 General Obligation Tax Increment Revenue Refunding Bonds,
Series 2015C to refinance the 2008 HRA Tax Increment Bonds. Future debt service payments will be reduced by
$1,512,822 with a present value savings of $1,653,200. The refunded bonds were paid on February 1, 2016.
On December 22, 2015 the City issued $7,355,000 General Obligation Tax Increment Revenue Refunding Bonds,
Series 2015D to refinance the 2007 HRA Tax Increment Bonds. Future debt service payments will be reduced by
$2,286,264 with a present value savings of $2,684,264. The refunded bonds were paid on February 1, 2016.
The 2007 and 2008 HRA Tax Increment Bonds were originally issued as Pay-As-You-Go Bonds by the developer
which were backed by tax increment revenues received by the City. These developer issued bonds were not an
obligation of the City and therefore were not recognized in the City’s financials. Therefore there is no economic gain
or loss by the City.
64
City of Hopkins, Minnesota
NOTES TO FINANCIAL STATEMENTS (CONT.)
December 31, 2015
General Obligation Bonds
On May 28, 2015 the City issued $4,100,000 General Obligation Street Reconstruction Bonds, series 2015A for the
2015 street reconstruction project and $2,940,000 General Obligation Tax Abatement Bonds, Series 2015B for park
projects and parking lot improvements.
General obligation bonds currently outstanding are as follows:
Interest Rates Original Amount Current Amount
Purpose
Governmental activities 0.35 – 5.00% 9,740,000 $ 9,055,000
Governmental activities – refunding 0.50 – 5.15% 24,215,000 21,550,000
Annual debt service requirements to maturity for general obligation bonds are as follows:
Year Ending Governmental Activities
December 31 Principal Interest
2016 $ 2,480,000 $ 619,496
2017 2,480,000 630,899
2018 2,540,000 577,323
2019 2,400,000 422,884
2020 2,465,000 467,793
2021-2025 9,725,000 1,587,958
2026-2030 7,145,000 671,114
2031-2035 1,180,000 104,080
2036 190,000 3,040
$ 30,605,000 $ 5,084,587
The City also has special assessment bonds, which are backed by the full faith, credit and taxing power of the City,
and repayment monies are generated by the collection of special assessments and general levies.
General obligation bonds currently outstanding are as follows:
Purpose Interest Rates Original Amount Current Amount
Street Improvements 0.50 – 4.25% 9,810,000 $ 8,660,000
Annual debt service requirements to maturity for special assessment bonds are as follows:
Year Ending Governmental Activities
December 31 Principal Interest
2016 $ 595,000 $ 194,703
2017 600,000 183,409
2018 620,000 171,428
2019 635,000 158,646
2020 645000 145,188
2021-2025 3,350,000 492,110
2026-2030 2,215,000 110,405
$ 8,660,000 $ 1,455,889
65
City of Hopkins, Minnesota
NOTES TO FINANCIAL STATEMENTS (CONT.)
December 31, 2015
Revenue Bonds
The City also issues bonds where the government pledges income derived from the acquired or constructed assets to
pay debt service.
Revenue bonds outstanding at year-end are as follows:
Purpose Interest Rates Original Amount Current Amount
Water construction & replacement 2.0 – 4.0% 820,000 585,000
Water construction & replacement 2.0 – 2.2% 760,000 640,000
Water construction & replacement 2.0 - 2.5% 860,000 810,000
Sanitary sewer construction & replacement 2.0 – 4.0% 1,020,000 730,000
Sanitary sewer construction & replacement 2.0 – 2.2% 170,000 140,000
Sanitary sewer construction & replacement 2.0 - 2.5% 490,000 460,000
Storm sewer – refunding 0.5 – 2.9% 875,000 610,000
Storm sewer construction & replacement 2.0 – 2.2% 320,000 270,000
Storm sewer construction & replacement 2.0 - 2.5% 380,000 360,000
Pavilion equipment certificates 2.0 – 2.0% 175,000 140,000
Revenue bond debt service requirements to maturity are as follows:
Year Ending
December 31 Principal Interest
2016 $ 380,000 $ 117,794
2017 385,000 108,969
2018 395,000 99,494
2019 405,000 89,563
2020 410,000 78,951
2021-2025 1,980,000 222,463
2026-2029 790,000 34,385
$ 4,745,000 $ 751,619
The City is subject to a statutory limit of bonded indebtedness equaling 3.0 percent of taxable market value. At
December 31, 2015, the debt limit for the City is $48,167,756. Of the total debt, $15,400,000 of general obligation
and revenue bonds is applicable to the limit. The legal debt margin is $32,767,756.
66
City of Hopkins, Minnesota
NOTES TO FINANCIAL STATEMENTS (CONT.)
December 31, 2015
Changes in Long-Term Liabilities
Long-term liability activity for the year ended December 31, 2015, was as follows:
Beginning Ending Due Within
Balance Additions Deductions Balance One Year
Governmental Activities:
Bonds payable:
G.O. tax increment bonds $ 4,120,000 $ 11,695,000 $ 610,000 $ 15,205,000 $ 1,370,000
General obligation bonds 14,965,000 7,040,000 6,605,000 15,400,000 1,110,000
Total general obligation bonds 19,085,000 18,735,000 7,215,000 30,605,000 2,480,000
Special assessment bonds 10,015,000 - 1,355,000 8,660,000 595,000
Less deferred amounts
For issuance discounts (95,338) - 46,910 (48,428) -
For issuance premiums 306,732 425,128 33,577 698,283 -
Total bonds payable 29,311,394 19,160,128 8,650,487 39,914,855 3,075,000
Compensated absences 836,441 905,264 936,041 805,664 805,664
Net OPEB liability 184,540 163,184 202,820 144,904 -
Net pension liability - 6,518,754 - 6,518,754 -
Governmental activity
long-term liabilities $ 30,332,375 $ 26,747,330 $ 9,789,348 $ 47,384,177 $ 3,880,664
Business-type activities:
Bonds payable:
Revenue bonds $ 5,420,000 $ -$ 675,000 $ 4,745,000 $ 380,000
Less deferred amounts
For issuance discounts (5,793) - 717 (5,076) -
For issuance premiums 73,795 - (6,087) 67,708 -
Total bonds payable 5,488,002 - 669,630 4,807,632 380,000
Compensated absences 172,861 9,071 97,995 83,937 81,713
Net OPEB liability 38,115 37,979 42,360 33,734 -
Net pension liability - 844,388 - 844,388 22,458
Capital lease payable 194,868 - 45,252 149,616
Business-type activity
long-term liabilities $ 5,893,846 $ 891,438 $ 855,237 $ 5,919,307 $ 484,171
For the governmental activities, compensated absences and the net OPEB liability are generally liquidated by the
general and special revenue funds.
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67
City of Hopkins, Minnesota
NOTES TO FINANCIAL STATEMENTS (CONT.)
December 31, 2015
10. FUND BALANCES
At December 31, 2015, the City had various fund balances through legal restriction and City Council
authorization. Major fund balance appropriations at December 31, 2015 are shown on the various balance sheets as
segregations of the fund balance. The fund balances are as follows:
Total Nonspendable Restricted Committed Assigned Unassigned
General Fund $ 5,439,799 $ - $ - $ - $ - $ 5,439,799
Inventories 102,124 102,124 - - - -
Prepaid items 124,988 124,988 - - - -
Community development 340,189 - - - 340,189 -
Total General Fund 6,007,100 227,112 - - 340,189 5,439,799
Economic Development
Facade Grant 100,000 - 100,000 - - -
Economic Development 4,285,982 - - 4,285,982 - -
Total Economic Development Fund 4,385,982 - 100,000 4,285,982 - -
Arts Center
Prepaid items 68 68 - - - -
Deficit Fund Balance (1,183,024) - - - - (1,183,024)
Total Arts Center Fund (1,182,956) 68 - - - (1,183,024)
Tax Increment District Super Valu
Property held for resale 321,719 321,719
Tax Increment 3,190,011 3,190,011
Total Tax Increment District
Super Valu 3,511,730 - 3,511,730 - - -
Housing Improvement Bonds of 1999B
Refunding Bonds of 2009B
Debt service 694,722 - 694,722 - - -
2015D G.O. TI Revenue Bonds
Debt service 7,454,556 - 7,454,556 - - -
Permanent Improvement Revolving
Capital asset replacement 442,413 - - - 442,413 -
Nonmajor Governmental Funds
Prepaid items 136 136 - - - -
Rehab loans 43,893 - 43,893 - - -
Debt service 4,095,157 - 4,095,157 - - -
Tax increment 561,871 - 561,871 - - -
Park improvements 258,547 - 258,547 - - -
Economic development - - - - -
Parking improvements 63,744 - - 63,744 - -
Communications 532,883 - - 532,883 - -
Capital asset replacement 806,826 - - - 806,826 -
Deficit fund balance (777,894) - - - - (777,894)
Total Nonmajor Funds 5,585,163 136 4,959,468 596,627 806,826 (777,894)
Total Fund Balances $ 26,898,710 $ 227,316 $ 16,720,476 $ 4,882,609 $ 1,589,428 $ 3,478,881
68
City of Hopkins, Minnesota
NOTES TO FINANCIAL STATEMENTS (CONT.)
December 31, 2015
11. PENSION PLAN OBLIGATIONS
1. Defined Benefit Pension Plans - Statewide
A. Plan Description
The City participates in the following cost-sharing multiple-employer defined benefit pension plans administered
by the Public Employees Retirement Association of Minnesota (PERA). PERA’s defined benefit pension plans
are established and administered in accordance with Minnesota Statutes, Chapters 353 and 356. PERA’s defined
benefit pension plans are tax qualified plans under Section 401 (a) of the Internal Revenue Code.
1. General Employees Retirement Fund (GERF)
All full-time and certain part-time employees of the City are covered by the General Employees Retirement
Fund (GERF). GERF members belong to either the Coordinated Plan or the Basic Plan. Coordinated Plan
members are covered by Social Security and Basic Plan members are not. The Basic Plan was closed to new
members in 1967. All new members must participate in the Coordinated Plan.
2. Public Employees Police and Fire Fund (PEPFF)
The PEPFF, originally established for police officers and firefighters not covered by a local relief association, now
covers all police officers and firefighters hired since 1980. Effective July 1, 1999, the PEPFF also covers police
officers and firefighters belonging to a local relief association that elected to merge with and transfer assets and
administration to PERA.
Benefits Provided
PERA provides retirement, disability, and death benefits. Benefit provisions are established by state statute and can
only be modified by the state legislature.
Benefit increases are provided to benefit recipients each January. Increases are related to the funding ratio of the
plan. Members in plans that are at least 90 percent funded for two consecutive years are given 2.5% increases.
Members in plans that have not exceeded 90% funded, or have fallen below 80%, are given 1% increases.
The benefit provisions stated in the following paragraphs of this section are current provisions and apply to active
plan participants. Vested, terminated employees who are entitled to benefits but are not receiving them yet are bound
by the provisions in effect at the time they last terminated their public service.
1.GERF Benefits
Benefits are based on a member’s highest average salary for any five successive years of allowable service, age, and
years of credit at termination of service. Two methods are used to compute benefits for PERA's Coordinated and
Basic Plan members. The retiring member receives the higher of a step-rate benefit accrual formula (Method 1) or a
level accrual formula (Method 2). Under Method 1, the annuity accrual rate for a Basic Plan member is 2.2% of
average salary for each of the first ten years of service and 2.7% for each remaining year. The annuity accrual rate for
a Coordinated Plan member is 1.2 percent of average salary for each of the first ten years and 1.7% for each
remaining year. Under Method 2, the annuity accrual rate is 2.7% of average salary for Basic Plan members and 1.7%
for Coordinated Plan members for each year of service. For members hired prior to July 1, 1989, a full annuity is
available when age plus years of service equal 90 and normal retirement age is 65. For members hired on or after
July 1, 1989, normal retirement age is the age for unreduced Social Security benefits capped at 66. Disability
benefits are available for vested members and are based upon years of service and average high-five salary.
69
City of Hopkins, Minnesota
NOTES TO FINANCIAL STATEMENTS (CONT.)
December 31, 2015
2. PEPFF Benefits
Benefits for the PEPFF members first hired after June 30, 2010, but before July 1, 2014, vest on a prorated basis
from 50% after five years up to 100% after ten years of credited service. Benefits for PEPFF members first hired
after June 30, 2014, vest on a prorated basis from 50% after ten years up to 100% after twenty years of credited
service. The annuity accrual rate is 3% of average salary for each year of service. For PEPFF who were first hired
prior to July 1, 1989, a full annuity is available when age plus years of service equal at least 90.
B. Contributions
Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. Contribution rates can only
be modified by the state legislature.
1. GERF Contributions
Basic Plan members and Coordinated Plan members were required to contribute 9.1% and 6.50%, respectively, of
their annual covered salary in calendar year 2015. The City was required to contribute 11.78% of pay for Basic Plan
members and 7.50% for Coordinated Plan members in calendar year 2015. The City’s contributions to the GERF for
the year ended December 31, 2015, were $343,161. The City’s contributions were equal to the required
contributions as set by state statute.
2. PEPFF Contributions
Plan members were required to contribute 10.8% of their annual covered salary in calendar year 2015. The City was
required to contribute 16.20% of pay for PEPFF members in calendar year 2015. The City’s contributions to the
PEPFF for the year ended December 31, 2015, were $423,942. The City’s contributions were equal to the required
contributions as set by state statute.
C. Pension Costs
1. GERF Pension Costs
At December 31, 2015, the City reported a liability of $4,306,673 for its proportionate share of the GERF’s net
pension liability. The net pension liability was measured as of June 30, 2015, and the total pension liability used to
calculate the net pension liability was determined by an actuarial valuation as of that date. The City’s proportion of
the net pension liability was based on the City’s contributions received by PERA during the measurement period for
employer payroll paid dates from July 1, 2014, through June 30, 2015, relative to the total employer contributions
received from all of PERA’s participating employers. At June 30, 2015, the City’s proportion was .0831%, which
was a decrease of .0058% from its proportion measured as of June 30, 2014.
For the year ended December 31, 2015, the City recognized pension expense of $505,955 for its proportionate share
of the GERF’s pension expense.
70
City of Hopkins, Minnesota
NOTES TO FINANCIAL STATEMENTS, (CONT.)
December 31, 2015
At December 31, 2015, the City reported its proportionate share of the GERF’s deferred outflows of resources and
deferred inflows of resources related to pensions from the following sources:
Deferred
Deferred
Description Outflows of Inflows of
Resources Resources
Differences between expected and actual economic $ -$ 217,130
experience
Changes of assumptions
Net difference between projected and actual earnings on 407,693 -
pension plan investments
Changes in proportion and differences between city - 204,341
contributions and proportionate share of contributions
City contributions subsequent to the measurement date 172,861 -
Total $ 580,554 $ 421,471
A total of $172,861 reported as deferred outflows of resources related to pensions resulting from City contributions
subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended
December 31, 2016. Other amounts reported as deferred outflows and inflows of resources related to pensions will
be recognized in pension expense as follows:
Year Ended June 30
2016 (38,567)
2017 (38,567)
2018 (38,567)
2019 101,923
2020 -
Thereafter -
2. PEPFF Pension Costs
At December 31, 2015, the City reported a liability of $3,056,469 for its proportionate share of the PEPFF’s net
pension liability. The net pension liability was measured as of June 30, 2015, and the total pension liability used to
calculate the net pension liability was determined by an actuarial valuation as of that date. The City’s proportion of
the net pension liability was based on the City’s contributions received by PERA during the measurement period for
employer payroll paid dates from July 1, 2014, through June 30, 2015, relative to the total employer contributions
received from all of PERA’s participating employers. At June 30, 2015, the City’s proportion was .269%, which was
a decrease of .001% from its proportion measured as of June 30, 2014.
For the year ended December 31, 2015, the City recognized pension expense of $524,902 for its proportionate share
of the PEPFF’s pension expense. The City also recognized $24,210 for the year ended December 31, 2015, as
pension expense (and grant revenue) for its proportionate share of the State of Minnesota’s on-behalf contributions to
the PEPFF. Legislation passed in 2013 required the State of Minnesota to begin contributing $9 million to the PEPFF
each year, starting in fiscal year 2014.
71
City of Hopkins, Minnesota
NOTES TO FINANCIAL STATEMENTS, (CONT.)
December 31, 2015
At December 31, 2015, the City reported its proportionate share of the PEPFF’s deferred outflows of resources and
deferred inflows of resources related to pensions from the following sources:
Deferred Deferred
Description Outflows of Inflows of
Resources Resources
Differences between expected and actual economic $ -$ 495,659
experience
Changes of assumptions
Net difference between projected and actual earnings on 532,539 -
pension plan investments
Changes in proportion and differences between city - 9,000
contributions and proportionate share of contributions
City contributions subsequent to the measurement date 217,542 -
Total $ 750,081 $ 504,659
A total of $217,542 reported as deferred outflows of resources related to pensions resulting from City contributions
subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended
December 31, 2016. Other amounts reported as deferred outflows and inflows of resources related to pensions will
be recognized in pension expense as follows:
Year Ended June 30
2016 32,203
2017 32,203
2018 32,203
2019 32,203
2020 (100,932)
Thereafter -
D. Actuarial Assumptions
The total pension liability in the June 30, 2015, actuarial valuation was determined using the following actuarial
assumptions:
Inflation 2.75% per year
Active Member Payroll Growth 3.50% per year
Investment Rate of Return 7.90%
Salary increases were based on a service-related table. Mortality rates for active members, retirees, survivors and
disabilitants were based on RP-2000 tables for males or females, as appropriate, with slight adjustments. Benefit
increases for retirees are assumed to be 1% effective every January 1st through 2026 and 2.5% thereafter.
Actuarial assumptions used in the June 30, 2015, valuation were based on the results of actuarial experience studies.
The experience study in the GERF was for the period July 1, 2004, through June 30, 2008, with an update of
economic assumptions in 2014. Experience studies have not been prepared for PERA’s other plans, but assumptions
are reviewed annually.
There were no changes in actuarial assumptions in 2015.
The long-term expected rate of return on pension plan investments is 7.9%. The State Board of Investment, which
manages the investments of PERA, prepares an analysis of the reasonableness of the long-term expected rate of return
on a regular basis using a building-block method in which best-estimate ranges of expected future rates of return are
72
City of Hopkins, Minnesota
NOTES TO FINANCIAL STATEMENTS (CONT.)
December 31, 2015
developed for each major asset class. These ranges are combined to produce an expected long-term rate of return by
weighting the expected future rates of return by the target asset allocation percentages. The target allocation and best
estimates of arithmetic real rates of return for each major asset class are summarized in the following table:
Asset Class Target Allocation Long-Term Expected Real
Rate of Return
Domestic Stocks 45% 5.50%
International Stocks 15% 6.00%
Bonds 18% 1.45%
Alternative Assets 20% 6.40%
Cash 2% 0.50%
E. Discount Rate
The discount rate used to measure the total pension liability was 7.9%. The projection of cash flows used to
determine the discount rate assumed that employee and employer contributions will be made at the rate specified in
statute. Based on that assumption, each of the pension plan’s fiduciary net position was projected to be available to
make all projected future benefit payments of current active and inactive employees. Therefore, the long-term
expected rate of return on pension plan investments was applied to all periods of projected benefit payments to
determine the total pension liability.
F. Pension Liability Sensitivity
The following presents the City’s proportionate share of the net pension liability for all plans it participates in,
calculated using the discount rate disclosed in the preceding paragraph, as well as what the City’s proportionate share
of the net pension liability would be if it were calculated using a discount rate 1 percentage point lower or 1
percentage point higher than the current discount rate:
1% Decrease in 1% Increase
Discount Rate Discount Rate in Discount
Description(6.9%)(7.9%)Rate (8.9%)
City's Proportionate Share of the GERF Net
Pension Liability:$ 6,771,621$ 4,306,673$ 2,271,005
City's Proportionate Share of the PEPFF Net
Pension Liability: 5,957,091 3,056,469 660,051
G. Pension Plan Fiduciary Net Position
Detailed information about each pension plan’s fiduciary net position is available in a separately-issued PERA
financial report that includes financial statements and required supplementary information. That report may be
obtained on the Internet at www.mnpera.org; by writing to PERA at 60 Empire Drive #200, St. Paul, Minnesota,
55103-2088; or by calling (651) 296-7460 or 1-800-652-9026.
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City of Hopkins, Minnesota
NOTES TO FINANCIAL STATEMENTS (CONT.)
December 31, 2015
2. Hopkins Fire Relief Association (HFRA)
A. Plan Description
Firefighters of the City of Hopkins are members of the Hopkins Fire Department Relief Association. The
Association is the administrator of the single-employer defined benefit pension plan available to firefighters. The
plan was established in 1909 and is administered pursuant to Minnesota Statutes Chapter 69, Chapter 424A, and
the Association’s by-laws. It is governed by a Board of Trustees made up of six members elected by the members
of the Association for three year terms, and the Mayor, City Clerk and Fire Chief, who serve as ex-officio voting
members of the Board of Trustees. As of December 31, 2014, membership includes 40 active participants and 18
vested terminated employees entitled to benefit but not yet receiving them.
The Association issues a publically available financial report that includes financial statements and required
supplementary information of the Hopkins Fire Relief Association. That report may be obtained by writing to the
Hopkins Fire Relief Association, 1010 First St S, Hopkins, MN 55343.
For financial reporting purposes, the Association’s financial statements are not included with the City financial
statements because the Association is not a component unit of the City. The Association does not have any
component units.
B. Benefits Provided
The Association operates under a defined benefit plan. The pension liability is calculated by the number of active
service years multiplied by a set benefit level. The Association’s current level is at $6,100 per active year. According
to the bylaws of the Association and pursuant to Minnesota statute 424A.02, subdivisions 2 and 4, members who retire
with less than 20 years of service and have reached the age of 50 years and have completed at least ten years of active
membership are entitled to a reduced service pension not to exceed the amount calculated by multiplying the
member’s service pension for the completed years of service times the applicable non-forfeitable percentage of
pension. The defined retirement benefits are based on members’ years of service. Vesting begins after the 10th year of
service with a 60% benefit increasing by 4% per year to 100% after the 20th year of service.
If a member of the Association shall become totally and permanently disabled, with a service related disability (injured
in the line of duty) to the extent that a physician or surgeon acceptable to the Board shall certify that such disability
will permanently prevent said member from performing said member’s duties in the Department, the Association shall
pay to such member the sum of the current pension amount for each year and fractions of a year that the member has
served as an active member of the Department, without regard to minimum or partial vesting requirements. If a
member who has received such a disability pension should subsequently recover and return to active duty in the
Department, any amount paid to said member as a disability pension shall be deducted from said member’s service
pension.
Upon the death of any member of the Association who is in good standing at the time of said member’s death, the
Association shall pay to the surviving spouse, if any, and if there is no surviving spouse, to child or children, if any,
and if no child or children survive, to the estate of such deceased member, the credited sum of said member’s pension.
C. Contributions
Minnesota Statues Chapter 424A.093 specifies minimum support rates required on an annual basis. The significant
actuarial assumptions used to compute the municipal support are the same as those used to compute the accrued
pension liability. The association is comprised of volunteers; therefore, there are no payroll expenditures (i.e. there are
no covered payroll percentage calculations). The minimum contribution from the City of Hopkins and state aid is
determined as follows:
74
City of Hopkins, Minnesota
NOTES TO FINANCIAL STATEMENTS (CONT.)
December 31, 2015
Normal Cost for the Next Year
+Amortization of Unfunded Actuarial Liability as Reported
in the Latest Actuarial Valuation
+Administrative Expenses for the Prior Year Multiplied
by a Factor of 1.035
-Anticipated State Aid (Not to Exceed the Fire Aid Received
in the Prior Year Multiplied by a Factor of 1.035)
-Anticipated Contributions Required by the Association
Bylaws from Active Members of the Association
=Minimum Municipal Obligation
The Plan is funded in part by fire state aid and, if necessary, City contributions. The State of Minnesota distributed to
the City $94,308 in fire state aid paid by the City to the Relief Association for the year ended December 31, 2014.
Required employer contributions are calculated annually based on statutory provisions. The City’s statutorily-
required contribution to the plan for the year ended December 31, 2014 was $32,166.
D. Pension Costs
At December 31, 2015, the City reported an asset of $688,067 for the Association’s net pension asset. The net pension
asset was measured as of December 31, 2014, and the total pension liability used to calculate the net pension liability
was determined by an actuarial valuation as of that date.
As a result of its requirement to contribute to the Relief Association, the City reduced expense by $43,568 for the year
ended December 31, 2015. At December 31, 2015, the City reported deferred outflows of resources and deferred
inflows of resources from the following sources:
Deferred Deferred
Description Outflows of Inflows of
Resources Resources
Differences between expected and actual economic $ -$ -
experience
Changes of assumptions
Net difference between projected and actual earnings on 102,277 -
pension plan investments
City contributions subsequent to the measurement date 36,889 -
Total $ 139,166 $ -
75
City of Hopkins, Minnesota
NOTES TO FINANCIAL STATEMENTS (CONT.)
December 31, 2015
The City contributions to the Association subsequent to the measurement date of $36,889, reported as deferred
outflows of resources, will be recognized as a reduction of the net pension liability in the year ended December 31,
2016. Other amounts reported as deferred outflows and inflows of resources related to the Association’s pension will
be recognized in pension expense as follows:
Pension
Expense
Year Ended December 31 Amount
2016 25,569
2017 25,569
2018 25,569
2019 25,570
2020 -
Thereafter -
E. Actuarial Assumptions
The actuarial total pension liability was determined as of December 31, 2014, using the following actuarial
assumptions, applied to all periods included in the measurement:
ASSUMPTIONS FROM ACTUARIAL REPORT
Valuation Date12/31/14
Actuarial Cost MethodEntry Age Normal
Amortization MethodLevel Dollar
Closed
Actuarial Assumptions:
Discount Rate 7.50%
Investment Rate of Return7.50%
20-Year Municipal Bond Yield4.00%
Age of Service RetirementAge 50
MortalityN/A
DisabilityNone
WithdrawalNone
Percent MarriedN/A
Age DifferenceN/A
Form of PaymentLump Sum
The long-term expected rate of return on pension plan investments was determined using a building-block method in
which best-estimates of expected future real rates of return (expected returns, net of pension plan investment expense
and inflation) are developed for each major asset class. These asset class estimates are combined to produce the
portfolio long-term expected rate of return by weighting the expected future real rates of return by weighting the
expected future real rates of return by the current asset allocation percentage (or target allocation, if available) and by
adding expected inflation.
The best-estimate of expected future real rates of return were developed by aggregating data from several published
capital market assumption surveys and deriving a single best-estimate based on the average survey values. These
capital market assumptions reflect both historical market experience as well as diverse views regarding anticipated
future returns. The expected inflation assumption was developed based on an analysis of historical experience blended
76
City of Hopkins, Minnesota
NOTES TO FINANCIAL STATEMENTS, (CONT.)
December 31, 2015
with forward-looking expectations available in market data.
Best estimates of geometric real and nominal rates of return for each major asset class included in the pension plan's
asset allocation as of December 31, 2015 are summarized in the following table:
Allocation at Long-Term
December 31, Expected Expected Nominal
Asset Class 2014 Portfolio Weight Rate of Return
Cash 48.38%43.00%8.00%
Fixed Income 49.81%42.00%4.00%
Domestic Equity 0.00%5.00%6.50%
International Equity 1.81%10.00%6.00%
Total Portfolio 100.00%100.00%6.00%
F. Discount Rate
The discount rate used to measure the total pension liability was 7.50%. Assets were projected using expected benefit
payments and expected asset returns. Expected benefit payments were discounted by year using expected assets return
assumption for years in which the assets were sufficient to pay all benefit payments. Any remaining benefit payments
after the trust fund is exhausted are discounted at the municipal bond rate of return. The equivalent single rate is the
discount rate. Based on those assumptions, the pension plan's fiduciary net position was projected to be available to
make all projected future benefit payments of current plan members.
G. Pension Liability Sensitivity
The following presents the City of Eden Prairies proportionate share of the net pension liability of the Association,
calculated using the discount rate of 7.50%, as well as what the Association’s net pension liability would be if it were
calculated using a discount rate that is one percentage point lower (6.50%) or one percentage point higher (8.50%)
than the current rate:
Selected
1% DecreaseDiscount Rate1% Increase
Net Pension Liability (Asset)(591,685)$ (688,067)$ (773,359)$
Discount Rate6.50%7.50%8.50%
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77
City of Hopkins, Minnesota
NOTES TO FINANCIAL STATEMENTS (CONT.)
December 31, 2015
H. Plan’s Fiduciary Net Position
Detailed information about the Plan’s fiduciary’s net position is available in a separately-issued report. That report may
be obtained by writing to the Hopkins Fire Relief Association, 1010 First St S, Hopkins, MN 55343.
78
City of Hopkins, Minnesota
NOTES TO FINANCIAL STATEMENTS (CONT.)
December 31, 2015
12. OTHER POST EMPLOYMENT BENEFIT PLAN
At December 31, 2008, the City adopted Governmental Accounting Standards Board (GASB) Statement No. 45,
Accounting and Financial Reporting by Employers for Postemployment Benefits Other than Pensions. The City
engaged an actuary to determine the City’s liability for postemployment healthcare benefits other than pensions as of
January 1, 2013, for this single employer defined benefit OPEB plan.
1. Plan Description
The City, a single-employer postemployment benefit plan, provides benefits for retirees as required by Minnesota
Statute §471.61 subdivision 2b. Active employees, who were hired prior to July 1, 1993 and have been with the City
for at least ten years and are either (1) age 60 years or older or (2) eligible for full PERA retirement benefits.
Employees retiring by June 30, 2007 will receive full single health and life insurance coverage until age 65;
employees retiring between July 1, 2007 and December 31, 2009 will receive $500 per month towards the cost of
single health and life insurance until age 65; and employees retiring after December 31, 2009 will receive $15 per
month times years of service (maximum of $500 per month) towards the cost of single health and life insurance until
age 65. Currently 16 employees meet those eligibility requirements. As of December 31, 2015 there were
approximately 91 active participants and 17 retired participants receiving benefits from the City’s health plans.
2. Funding Policy
The City funds its OPEB obligation on a pay as you go basis. For fiscal year 2015, the City contributed $245,180 to
the plan. The City's OPEB pension obligation is funded by the General and Enterprise Funds.
3. Annual OPEB Cost and Net OPEB Obligation
The City’s annual other postemployment benefit (OPEB) cost (expense) is calculated based on the annual required
contribution (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement 45.
The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year
and amortize any un-funded actuarial liabilities over a period not to exceed thirty years. The following table shows
the components of the City’s annual OPEB cost for the year, the amount actually paid from the plan, and changes in
the City’s net OPEB obligation.
Annual Required Contribution $ 204,517
Interest on Net OPEB Obligation 10,019
Adjustment to Annual Required Contribution (13,372)
Annual OPEB Cost (Expense) 201,164
Contributions Made (245,180)
Increase in Net OPEB Obligation (44,016)
Net OPEB Obligation - Beginning of Year 222,655
Net OPEB Obligation - End of Year $ 178,639
79
City of Hopkins, Minnesota
NOTES TO FINANCIAL STATEMENTS (CONT.)
December 31, 2015
The City’s annual OPEB cost, the percentage of the annual OPEB cost contributed to the plan, and the net OPEB
obligation for 2015:
Percentage
Fiscal Annual of Annual Net
Year OPEB OPEB Cost OPEB
Ended Cost Contributed Obligation
12/31/2013 $ 201,090 85.1 %$ 229,026
12/31/2014 200,416 103.2 % 222,653
12/31/2015 201,164 121.9 % 178,639
4. Funded Status and Funding Progress
As of January 1, 2013, the most recent actuarial valuation date, the City’s unfunded actuarial accrued liability
(UAAL) was $2,029,907. The annual payroll for active employees covered by the plan in the actuarial valuation was
$6,583,173 for a ratio of UAAL to covered payroll of 30.83%.
Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about
the probability of occurrence of events far into the future. Examples include assumptions about future employment,
mortality, and healthcare cost trends. Amounts determined regarding the funded status of the plan and the annual
required contributions of the employer are subject to continual revision as actual results are compared with past
expectations and new estimates are made about the future. The schedule of funding progress, presented as required
supplementary information following the notes to the financial statements, presents multiyear trend information about
whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued
liabilities for benefits.
5. Actuarial Methods and Assumptions
Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by
the employer and plan members) and include the types of benefits provided at the time of each valuation and the
historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial
methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in
actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the
calculations.
In the January 1, 2013 actuarial valuation, the projected unit credit actuarial cost method was used. The actuarial
assumptions included a 4.5% investment rate of return (net of administrative expenses), which is a blended rate of the
expected long-term investment returns on plan assets and on the employer’s own investments calculated based on the
funded level of the plan at the valuation date. The initial healthcare trend rate was 7.5%, reduced by decrements to
an ultimate rate of 5% after six years. Both rates include a 2.5% inflation assumption. The UAAL is being
amortized over 30 years (2013 - 2037) as a level percentage of projected payrolls on an closed basis.
13. REHABILITATION LOANS RECEIVABLE
The City makes rehabilitation loans to residential and commercial entities within the City. Residential loans are
made for 20 year periods at 3% interest. A mortgage against the property improved is required and City staff is
responsible to follow-up any delinquent accounts. Loan repayments are made to Matrix Financial Services, a loan
service bureau, which charges a fee of $5.95 per month per loan. Principal and interest are forwarded to the City
monthly with loan collection and loan status reports. Rehabilitation loan activity is a function of the Economic
Development Fund, and the Hennepin County CDBG Funds. Loans become due in full upon sale of property.
Rehabilitation loans receivable amounted to $ 43,893 at December 31, 2015 and are recorded in the Hennepin
County CDBG non-major special revenue funds.
80
City of Hopkins, Minnesota
NOTES TO FINANCIAL STATEMENTS (CONT.)
December 31, 2015
14. CLAIMS AND LITIGATION
The City had the usual and customary types of miscellaneous claims pending at year-end, which are of a minor nature
and usually all covered by insurance carried for that purpose. The City carries a $1,000,000 Public Official Liability
Insurance policy with public entity and employee endorsement.
15. RISK MANAGEMENT
The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and
omissions; injuries to employees; and natural disasters. The City participates in a public entity risk pool to mitigate
its exposure to these risks. Workers compensation and property and liability coverage are provided through a pooled
self-insurance plan with other cities. Settled claims have not exceeded insurance coverage in any of the past three
fiscal years and no significant reductions in coverage from the prior year. The City pays an annual premium based
on prior claims history for its workers compensation coverage. The public entity risk pool is responsible for the
payment of all associated claims. The City has a $20,000 deductible per occurrence with a maximum per year out of
pocket of $40,000, for its property and liability coverage. The public entity risk pool is responsible for all losses in
excess of $20,000 per occurrence and all losses occurring after the $40,000 maximum City out of pocket costs.
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81
City of Hopkins, Minnesota
NOTES TO FINANCIAL STATEMENTS (CONT.)
December 31, 2015
16. PRIOR PERIOD ADJUSTMENT
During the fiscal year ended December 31, 2015, the City adopted GASB Statement No. 68, Accounting and
Financial Reporting for Pensions and the related Statement No. 71. As a result, the City’s net position as of December
31, 2014 has been restated to reflect the recognition of the City’s proportionate share of the Public Employees’
Retirement Association of Minnesota General Employees’ Retirement Fund (GERF) and Public Employees’ Police
and Fire Fund’s (PEPFF) net pension liability and related deferred inflows and outflows of resources as well as the
Hopkins Fire Relief Association’s net pension asset and related deferred inflows and outflows of resources.
Governmental Business-Type
ActivitiesActivitiesWaterSewer
Net Position, December 31, 2014, as
Previously Reported$50,142,412 $18,892,140 $3,811,086 $3,212,016
Cumulative Affect of Application of
GASB 68, Net Pension Liability(6,273,405) (818,783) (295,496) (162,730)
Cumulative Affect of Application of
GASB 68, Net Pension Asset714,610 -
- -
Cumulative Affect of Application of
GASB 71, Deferred Outflow of
Resources for City Contributions Made
to the Plan During Fiscal Year Ending
December 31, 2014 389,985 37,223 13,434 7,398
Net Position, December 31, 2014, as
Restated
$44,973,602$18,110,580 $3,529,024 $3,056,684
Non-major Funds
Storm SewerRefusePavilionTotal
Net Position, December 31, 2014, as
Previously Reported$6,603,658 $1,325,440 $2,054,142 $69,034,552
Cumulative Affect of Application of
GASB 68, Net Pension Liability (35,146) (166,325)(159,086)(7,092,188)
Cumulative Affect of Application of
GASB 68, Net Pension Asset - -
- 7 14,610
Cumulative Affect of Application of
GASB 71, Deferred Outflow of
Resources for City Contributions Made
to the Plan During Fiscal Year Ending
December 31, 2014 1,598 7,561 7,232 427,208
Net Position, December 31, 2014, as
Restated
$6,570,110$1,166,676 $1,902,288 $63,084,182
82
City of Hopkins, Minnesota
NOTES TO FINANCIAL STATEMENTS (CONT.)
December 31, 2015
17. SUBSEQUENT EVENT
At the May 17, 2016 meeting, the City Council approved issuance and sale of $4,480,000 General Obligation
Improvement Bonds, Series 2016A and $1,630,000 General Obligation Tax Abatement Bonds, Series 2016B.
Proceeds from the 2016A bonds will be used for the City’s 2016 road construction project and proceeds from the
2016B bonds will be used for various park improvements and improvements to the City owned parking ramp. Both
issuances were offered for sale on June 21, 2016.
83
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City of Hopkins, Minnesota
REQUIRED SUPPLEMENTARY INFORMATION
December 31, 2015
1. OTHER POSTEMPLOYMENT BENEFITS PLAN
Schedule of Funding Progress:
Actuarial UAAL as a
Actuarial Accrued Percentage
Actuarial Value of Liability Unfunded Funded Covered of Covered
Valuation Assets (AAL) AAL Ratio Payroll Payroll
Date (a) (b) (b-a) (a/b) (c) ((b-a)/c)
01/01/07 $ - $ 2,297,909 $ 2,297,909 -$ 5,621,587 41 %
01/01/10 - 2,145,617 2,145,617 - 6,244,081 34 %
01/01/13 - 2,029,907 2,029,907 - 6,583,173 31 %
2. SCHEDULE OF PROPORTIONATE SHARE OF NET PENSION LIABILITY
PUBLIC EMPLOYEES GENERAL EMPLOYEES RETIREMENT FUND
Last Ten Years*
PERA - General Employees Retirement Fund
Employer's
Employer's Proportionate
Proportionate Share of the
Share
Net Pension Plan Fiduciary
Employer's (Amount) of Liability Net Position
Proportionate the Net Pension Employer's (Asset) as a as a Percentage
Fiscal (Percentage) of
Liability CoveredPercentage of of the Total
Yearthe (Asset)Payroll** its Covered Pension
Ending Net Pension (a)(b)PayrollCoverage
June 30, 2015 0.0831% $4,306,673 $4,802,000 89.68% 78.20%
PERA - Public Employees Police and Fire Fund
Employer's
Employer's Proportionate
Proportionate Share of the
ShareNet Pension Plan Fiduciary
Employer's (Amount) of Liability Net Position
Proportionate the Net Pension Employer's (Asset) as a
as a Percentage
Fiscal (Percentage) of
Liability CoveredPercentage of of the Total
Yearthe (Asset)Payroll** its Covered Pension
Ending Net Pension (a)(b)PayrollCoverage
June 30, 2015 - $3,056,469 $2,540,691120.30% 86.60%
Notes to schedules
* This schedule is provided prospectively beginning with the fiscal year ended December 31, 2015.
** For purposes of this schedule, covered payroll is defined as "pensionable wages".
85
City of Hopkins, Minnesota
REQUIRED SUPPLEMENTARY INFORMATION
December 31, 2015
3. SCHEDULES OF THE CITY'S CONTRIBUTIONS
Last Ten Years*
PERA - General Employees Retirement Fund
Contributions
in Relation to
Statutorily the Statutorily Contribution Contributions as a
Fiscal Required Required Deficiency
Covered Percentage of
YearContributions Contributions (Excess) Payroll ** Covered Payroll
Ending (a)(b)(a-b)(d)(b/d)
December 31, 2015 $360,150 ($360,150) - $4,802,000 7.50%
PERA - Public Employees Police and Fire Fund
Contributions
in Relation to
Statutorily the Statutorily Contribution Contributions as a
Fiscal Required Required Deficiency
Covered Percentage of
YearContributions Contributions (Excess) Payroll ** Covered Payroll
Ending (a)(b)(a-b)(d)(b/d)
December 31, 2015 $411,592 ($411,592) - $2,540,691 16.20%
Notes to schedules
* This schedule is provided prospectively beginning with the fiscal year ended December 31, 2015.
** For purposes of this schedule, covered payroll is defined as "pensionable wages".
86
City of Hopkins, Minnesota
REQUIRED SUPPLEMENTARY INFORMATION
December 31, 2015
4. SCHEDULE OF THE CITY'S CONTRIBUTION TO THE HOPKINS FIRE RELIEF FUND
Last Ten Years
Contributions
in Relation to
Fiscal Statutorily the Statutorily Contribution
YearRequired Required Deficiency
Ending Contributions Contributions(Excess)
December 31 (a)(b)(a-b)
2015 $ 36,889 $ (36,889) $ -
2014 32,166 (32,166) -
2013 32,166 (32,166) -
2012 32,166 (32,166) -
2011 32,166 (32,166) -
2010 189,825 (189,825) -
2009 32,166 (32,166) -
2008 32,166 (32,166) -
2007 32,166 (32,166) -
2006 32,166 (32,166) -
87
City of Hopkins, Minnesota
REQUIRED SUPPLEMENTARY INFORMATION
December 31, 2015
5. SCHEDULE OF PROPORTIONATE SHARE OF NET PENSION LIABILITY –
HOPKINS FIRE RELIEF
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CITY OF HOPKINS, MINNESOTA
STATISTICAL SECTION
This part of the City of Hopkins’ comprehensive annual financial report presents detailed
information as a context for understanding what the information in the financial statements, note
disclosures, and the required supplementary information says about the city’s overall financial
health
.
ContentsPage
Financial Trends 130
These schedules contain trend information to help the reader understand how the
city’s financial performance and well-being have changed over time.
Revenue Capacity 134
These schedules contain information to help the reader assess the factors affecting
the city’s ability to generate its property and sales taxes.
Debt Capacity 138
These schedules present information to help the reader assess the affordability of the
city’s current levels of outstanding debt and the city’s ability to issue additional debt in
the future.
Demographic and Economic Information 143
These schedules offer demographic and economic indicators to help the reader
understand the environment within which the city’s financial activities take place and
to help make comparisons over time and with other governments.
Operating Information 145
These schedules contain information about the city’s operations and resources to
help the reader understand how the city’s financial information relates to the services
the city provides and the activities it performs.
Sources:
Unless otherwise noted, the information in these schedules is derived from the comprehensive
annual financial reports for the relevant year.
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