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VII.3. Fourth Quarter Financial Report; Bishop CITY OF HOPKINS Memorandum To: Honorable Mayor and Council Members Mike Mornson, City Manager From: Nick Bishop, Finance Director Date: March 16, 2021 Subject: Fourth Quarter Financial Update _____________________________________________________________________ The fourth quarter financial report has been prepared based on preliminary and unaudited results. Audit field work is scheduled for April. Financial Statements are required to be issued by June 30. General Fund The City’s General Fund revenues exceeded budget by $836,011 or 5.44%. General Fund expenditures were $277,601 or 1.81% less than budget. The fund balance increased by $1,113,613. The main factors for the increase in fund balance are: • Approximately $515,000 of reductions to the general fund expenditure budget, including hiring freezes and other reductions to spending as a response to COVID- 19. • Approximately $585,000 of Coronavirus Aid, Relief, and Economic Security (CARES) Act reimbursements for budgeted payroll. These are personnel costs associated with responding to COVID-19 instead of City projects and goals. • The General Fund also includes approximately $250,000 of previously unbudgeted expenditures related to COVID-19 that were reimbursed through CARES. This does not have an effect on the change in fund balance. The City’s Fund Balance Policy aims for an unassigned fund balance of 42% of annual expenditures or approximately 5 months. At the end of 2020, the unassigned fund balance in the general fund was $6,741,008 or 44.69% of expenditures. The $1.1 million surplus could be used as a contingency balance for COVID, for transfers to eliminate losses in other funds, for finishing I.T. projects or other projects that have been delayed. The City also expects to receive additional assistance from the $1.9 trillion American Rescue Plan Act. The guidelines have not been released. Staff is waiting for a better understanding of the American Rescue Plan before making a recommendation on the $1.1 million surplus. Finance Department Special Revenue Funds The Chemical Assessment, Economic Development, Parking, Communications, Depot Coffee House and Arts Center Funds collectively increased their fund balances by $210,403. • Chemical Assessment – no change in fund balance. Fund operates on a reimbursement basis. • Economic Development – increased fund balance by $150,245. • Parking Fund – decreased fund balance by $48,131, due to decreased parking demand at municipal lots and parking ramp. • Communication Fund – decreased fund balance by $312. • Depot Coffee House – decreased fund balance by $28,099, due to closures and modified operations as a result of COVID-19. • Arts Center - increased fund balance by $136,700. Enterprise Funds The Water, Sewer, Refuse, Storm Sewer and Pavilion Funds collectively decreased their net position (fund balance) by $1,033,505, which includes $1,479,274 of depreciation expense. All funds, except the Pavilion have a positive cash flow. • Water – decreased net position (fund balance) by $299,836. • Sewer – decreased net position (fund balance) by $407,195. • Storm Sewer – increased net position (fund balance) by $75,311. • Refuse – increased net position (fund balance) by $13,769. • Pavilion – decreased net position (fund balance) by $415,553. The Pavilion Fund has a negative cash flow in 2020 of $131,100 due to closures and modified operations as a result of COVID-19. 2020 4th Quarter Financial Update Prepared by Finance Department 2020 4th Quarter Results Preliminary and Unaudited General Fund Overview At the end of the 4th quarter Revenues are at 105.44% Expenditures are at 98.19% General Fund Revenues % of Budget Actual Budget Taxes 12,567,105$ 12,451,754$ 99.08% Intergovernmental 1,352,946 2,304,514 170.33% Licenses, Permits & Fines 775,065 841,141 108.53% Charges for Services 251,250 241,423 96.09% Miscellaneous 415,350 358,895 86.41% Total Revenues 15,361,716$ 16,197,727$ 105.44% General Fund Expenditures % of Budget Actual Budget General Government 2,481,743$ 2,685,518$ 108.21% Community Services 863,252 442,958 51.31% Public Safety 7,460,272 8,393,876 112.51% Public Works 3,442,841 3,012,880 87.51% Recreation 783,082 248,198 31.70% Urban Development 330,525 300,684 90.97% Total Expenditures 15,361,715$ 15,084,114$ 98.19% 2020 General Fund Surplus Increased Fund Balance by $1.1 million Reductions to 2020 Budget -$515,000 CARES Act payroll reimbursements (Response to COVID-19 instead of City Projects and Goals) -$585,000 CARES Act Review Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on March 27 $2.2 trillion of federal funding for public health and economic impacts of COVID-19 $150 billion for State, Local and Tribal Governments CARES Act Review On June 25th, Governor Walz announced distribution of $841 million of State’s share of distribution to local governments Cities received $75.34 per capita Hopkins allocation was $1,485,183 CARES Act Reimbursements Budgeted payroll (Response to COVID-19 instead of City Projects and Goals) -$585,000 Payroll from March 1st –November 15th Based on actual timesheets or other documentation Did not use blanket coverage for public safety employees Potential Uses of Surplus Contingency balance for COVID-19 Eliminate losses in other funds Finish I.T. Projects relating to COVID-19 Other projects that have been delayed 42% Fund Balance Policy Potential Uses of Surplus Waiting on guidelines for American Rescue Plan Act before any recommendation on use Special Revenue Funds Revenues % of Budget Actual Budget Chemical Assessment 65,000$ 62,550$ 96.23% Economic Development 467,951 1,148,745 245.48% Parking 154,524 114,402 74.04% Communications 238,014 242,681 101.96% Depot Coffee House 307,412 203,964 66.35% Art Center 1,185,836 1,005,973 84.83% Special Revenue Funds Expenditures % of Budget Actual Budget Chemical Assessment 65,000$ 62,550$ 96.23% Economic Development 430,345 998,501 232.02% Parking 150,690 162,533 107.86% Communications 238,656 242,993 101.82% Depot Coffee House 307,412 232,062 75.49% Art Center 1,125,836 869,273 77.21% Special Revenue Funds Financial Position Change Ending In Fund Fund Revenues Expenses Balance Balance Chemical Assessment 62,550$ 62,550$ (0)$ (20,130)$ Economic Development 1,148,745 998,501 150,245 3,347,167 Parking 114,402 162,533 (48,131) 88,247 Communications 242,681 242,993 (312) 543,056 Depot Coffee House 203,964 232,062 (28,099) (92,637) Art Center 1,005,973 869,273 136,700 (1,094,391) Enterprise Funds Revenues Enterprise Funds Expenses Enterprise Funds Financial Position All funds include depreciation expense Next Steps Audit fieldwork is scheduled for April Financial Statements issued before 06/30/2021 Financial Management Plan 2022 Infrastructure Projects 6th Avenue South/7th Avenue South Trunk Water Main Rehabilitation Debt Levy will decrease in 2023 Final debt payment for 2002 Public Works Facility & Fire Station projects Financial Management Plan Projected Debt Levies 2021 2022 2023 2024 2025 2026 Current Debt *4,108,650 4,023,318 3,488,010 3,571,860 3,595,253 3,398,638 6th Ave South/7th Ave South - - 84,740 84,740 84,740 84,740 2022 Project Trunk Water Main Rehabilitation - - 110,290 110,290 110,290 110,290 2022 Project Central Avenues - - - 223,600 223,600 223,600 2023 Project 17th Avenue - - - - 302,274 302,274 2024 Project Central Avenues (West)- - - - - 367,133 (2025 Project) 4,108,650 4,023,318 3,683,040 3,990,490 4,316,157 4,486,675 Increase (Decrease)(3.33%)(2.08%)(8.46%)8.35%8.16%3.95% *Including as estimate for debt being issued 3/16/2021 Levy Year Financial Management Plan Park Improvements Fund Paying Burnes Park Debt Service from this fund in 2021/2022? Remaining Funding Source is Park Dedication Fees Uncertain timing Financial Management Plan Hopkins Center for the Arts Budgeting to reduce deficit by $60,000/year Eliminate deficit position in 2037 Financial Management Plan Department Updates in January/February 2021 Mission & Goals –March 2nd City Council’s Priorities Next Steps –2022 Budget Meeting Date Meeting Type Subject Details April-July N/A Internal Preparations -2020 Audit Ongoing -Departments Prepare Budgets, Equipment Replacement and Capital Improvement Plans July 13 Work Session Review 2022 Tax Levy and General Fund Budget -First Draft Next Steps –2022 Budget Meeting Date Meeting Type Subject Details August 10 Work Session Review Capital Improvement Plan and Equipment Replacement Plans -Park Dedication Fund -Permanent Improvement Revolving Fund (Street Projects) -Equipment Replacement Levy August 16 Community Event Review 2022 Tax Levy and General Fund Budget -Presentation -Question and Answer Session September 7 Regular Meeting Review 2022 Tax Levy and General Fund Budget -Preliminary for approval on September 21 September 21 Regular Meeting Approve Preliminary Tax Levy and General Fund Budget -Must be approved by September 30 Next Steps –2022 Budget Meeting Date Meeting Type Subject Details October 12 Work Session Review Enterprise Fund Budgets and Utility Rates -Water -Sewer -Storm Sewer -Refuse -Pavilion November 3 Regular Meeting Approve CIP, ERP and Utility Rates November 9 Work Session Review Special Revenue Budgets and Activity Center Budget -Chemical Assessment -Economic Development -Communications -Parking -Depot -Arts Center -Activity Center Next Steps –2022 Budget Meeting Date Meeting Type Subject Details December 6 (Monday) Regular Meeting Truth in Taxation Hearing -Overview of 2022 Budget and Tax Levy -Public Comment December 7 Regular Meeting Approve Final Budget and Tax Levy December 14 Regular Meeting Approve Final Budget and Tax Levy -Last scheduled meeting to approve