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VII.2. Fourth Quarter Financial Update; Bishop CITY OF HOPKINS Memorandum To: Honorable Mayor and Council Members Mike Mornson, City Manager From: Nick Bishop, Finance Director Date: April 18, 2023 Subject: Fourth Quarter Financial Update _____________________________________________________________________ The fourth quarter financial report has been prepared based on preliminary and unaudited results. Audit field work was completed the first week of April. Financial Statements are required to be issued by June 30. General Fund The City’s General Fund revenues exceeded budget by $834,420 or 5.16%. General Fund expenditures exceeded budget by $386,738 or 2.39%. The fund balance increased by $447,682. The main factors for the increase in fund balance are: • The City exceeded its revenue budget for inspections department charges and private activity bond fees which was offset by tax settlements. • The City had higher than anticipated costs for parts, supplies, workers compensation insurance and contracted services. 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 2022, the unassigned fund balance in the general fund was $8,437,081 or 50.95% of 2022 expenditures. City Council approved transfers and uses of $1,038,214 million in 2023. The remaining $443,517 can be kept as fund balance or reallocated for any governmental purpose. 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 $238,346. • Chemical Assessment – decreased fund balance by $25,630. Fund operates on a reimbursement basis. It has not received reimbursements for 3rd & 4th quarters of 2022. • Economic Development – increased fund balance by $14,286. • Parking Fund – decreased fund balance by $6,495, due to decreased parking demand at municipal lots and the parking ramp. The decrease was offset by American Rescue Plan Act (ARPA) grant revenue. • Communication Fund – decreased fund balance by $65,973, due to a planned reduction in fund balance and decreased franchise fees collected. • Depot Coffee House – decreased fund balance by $79,684, primarily due to coffee operations. • Arts Center - increased fund balance by $393,142. The increase can be attributed to cost-effective operations and ARPA grant revenue. The remaining ARPA funds will be recorded in 2023 and 2024. The following chart shows additional detail on ending fund balances and ARPA revenue allocated to special revenue funds. Enterprise Funds The Water, Sewer, Refuse, Storm Sewer and Pavilion Funds collectively increased their working capital by $495,830. Working capital is the difference between current assets and current liabilities. It represents the amount available to meet current financial needs. It does not include capital assets and is not affected by depreciation expense. The chart below shows changes to working capital for enterprise funds. Chemical Assessment Economic Development Parking Fund Communication Fund Depot Coffee House Arts Center Fund Balance on 1/1/2022 (26,055) 4,511,489 (8,700) 281,129 (134,914) (757,211) Normal Revenue 28,720 513,084 101,237 200,032 224,077 1,188,383 ARPA Revenue - - 65,000 - - 207,172 Total Revenue 28,720 513,084 166,237 200,032 224,077 1,395,555 Expenditures 54,350 498,798 164,032 266,005 303,761 1,002,413 Increase (decrease) in Fund Balance (25,630) 14,286 2,205 (65,973) (79,684) 393,142 Fund Balance on 12/31/2022 (51,685) 4,525,775 (6,495) 215,156 (214,598) (364,069) Water Sewer Storm Sewer Refuse Pavilion Working Capital on 1/1/2022 14,079 1,909,131 2,724,492 1,296,196 (250,377) Increase (Decrease) to Working Capital Operating Activities 283,023 287,299 424,260 (56,408) 26,512 Capital and Financing Activities 745,744 (927,159) (537,381) - - ARPA Revenue - - - - 250,000 Total Increase (Decrease) to Working Capital 1,028,767 (639,860) (113,121) (56,408) 276,512 Working Capital on 12/31/2022 1,042,846 1,269,271 2,611,371 1,239,788 26,135