3.5 Annual Comprehensive Financial Report
Request for
City Council Action
DEPARTMENT INFORMATION
ORIGINATING DEPARTMENT REQUESTOR: MEETING DATE:
Administration City Administrator/Finance Director Flaherty June 13, 2022
PRESENTER(s) REVIEWED BY: ITEM #:
Consent 3.5 – Adopt 2021 Financial
Statements
STRATEGIC VISION
MEETS: THE CITY OF OTSEGO:
X Is a strong organization that is committed to leading the community through innovative
communication.
Has proactively expanded infrastructure to responsibly provide core services.
Is committed to delivery of quality emergency service responsive to community needs and
expectations in a cost-effective manner.
Is a social community with diverse housing, service options, and employment opportunities.
Is a distinctive, connected community known for its beauty and natural surroundings.
AGENDA ITEM DETAILS
RECOMMENDATION:
City staff is recommending that the City Council approve a resolution adopting the annual comprehensive
financial report for the year ended December 31, 2021.
ARE YOU SEEKING APPROVAL OF A CONTRACT? IS A PUBLIC HEARING REQUIRED?
No No
BACKGROUND/JUSTIFICATION:
The City annually prepares a Annual Comprehensive Financial Report (the Report). In accordance with
Minnesota Statutes, the financial statements within the City’s Report must be audited on an annual basis.
Said audit has been completed by BerganKDV, who was present at the 530PM special meeting on June 13,
2022 to review the results of the audit with the City Council. A short summary on each of the three
documents attached (were received by the Council for the 530PM special meeting) is below:
The Report
This is a comprehensive document regarding the finances of the City of Otsego and is prepared by the City.
The Report includes narrative discussion, financial statements, note disclosures, statistical tables, and much
more. Maybe the most important aspect of the Report is the Independent Auditor’s Report which is issued
by BerganKDV. The audit report outlines that the City has received an Unmodified opinion, also known as a
clean opinion, and is the best opinion that can be given.
Communications Letter
This document is prepared by BerganKDV and is a blend of required communications and summary
financial analysis. This was the primary source for the discussion at the 530PM special meeting.
Reports on Compliance
This document contains reporting required by BerganKDV on other aspects of the City’s audit. This
document contains four separate components:
1) Schedule of Expenditures of Federal Awards
2) Report on Government Auditing Standards
3) Report on Major Federal Programs (Single Audit)
4) Report on Minnesota Legal Compliance (MN Statutes)
SUPPORTING DOCUMENTS ATTACHED:
• Resolution 2022-52
• Hard copies of the following documents were provided to the City Council at the 530PM
Meeting. They are available to the public on the City website.
o Comprehensive Annual Financial Report
o Communications Letter
o Reports on Compliance
POSSIBLE MOTION
PLEASE WORD MOTION AS YOU WOULD LIKE IT TO APPEAR IN THE MINUTES:
Motion to approve Resolution 2022-52 adopting the annual comprehensive financial report for the year
ended December 31, 2021.
BUDGET INFORMATION
FUNDING: BUDGETED:
N/A
1
CITY OF OTSEGO
COUNTY OF WRIGHT
STATE OF MINNESOTA
RESOLUTION NO: 2022-52
ADOPTING THE ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE YEAR ENDED DECEMBER 31, 2021
WHEREAS, the City annually prepares an Annual Comprehensive Financial Report (ACFR); and
WHEREAS, the ACFR contains the financial statements for the City of Otsego which have been prepared in
accordance with accounting principles generally accepted in the United States of America (GAAP), as applied
to governmental units by the Governmental Accounting Standards Board (GASB); and
WHEREAS, the financial statements have been subjected to a statutorily required audit, which has been
conducted by BerganKDV, an independent CPA firm; and
WHEREAS, BerganKDV opined that the financial statements present fairly, in all material respects, the
respective financial position of the City of Otsego for the year ended December 31, 2021; and
WHEREAS, said ACFR and the documents summarizing the audit process have been distributed to and
discussed with the City Council on June 13, 2022.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF OTSEGO, MINNESOTA:
1. That the Annual Comprehensive Financial Report (ACFR) for the City of Otsego for the year ended
December 31, 2021, and all supporting documentation, is hereby adopted as the official financial
record for said fiscal year.
2
ADOPTED by the Otsego City Council this 13th day of June, 2022.
MOTION BY:
SECONDED BY:
IN FAVOR:
OPPOSED:
CITY OF OTSEGO
__________________________________
Jessica L. Stockamp, Mayor
ATTEST:
__________________________________
Audra Etzel, City Clerk
Annual Comprehensive Financial Report
For the Year Ended December 31, 2021
East Wastewater Treatment Facility Biosolids Building – Opened 2021
City of Otsego, Minnesota
Annual Comprehensive Financial Report
For the Year Ended
December 31, 2021
Adam Flaherty
City Administrator
Prepared by:
Finance Department
Member of the:
Government Finance Officers’ Association
of the United States and Canada
CITY OF OTSEGO, MINNESOTA
TABLE OF CONTENTS
Page No.
INTRODUCTORY SECTION
Letter of Transmittal 1
Elected Officials and Administration 7
Organizational Chart 8
Certificate of Achievement 9
FINANCIAL SECTION
Independent Auditor's Report 11
Management's Discussion and Analysis 14
Basic Financial Statements
Government-Wide Financial Statements
Statement of Net Position 28
Statement of Activities 29
Fund Financial Statements
Governmental Funds
Balance Sheet 30
Reconciliation of the Balance Sheet of the Governmental Funds
to the Statement of Net Position 33
Statement of Revenues, Expenditures and Changes in Fund Balances34
Reconciliation of the Statement of Revenues, Expenditures and Changes in
Fund Balances of the Governmental Funds to the Statement of Activities 36
Statement of Revenues, Expenditures and Changes in Fund Balances: Budget-to-Actual
General Fund 37
Proprietary Funds
Statement of Net Position 38
Statement of Revenues, Expenses and Changes in Net Position 39
Statement of Cash Flows 40
Notes to the Financial Statements 41
Required Supplementary Information
Schedule of Employer's Proportionate Share of Net Pension Liability 72
Schedule of Employer's Contributions 73
Notes to Required Supplementary Information 74
Combining and Individual Fund Statements and Schedules
Governmental Funds
Nonmajor Governmental Funds
Combining Balance Sheet 78
Combining Statement of Revenues, Expenditures and Changes in Fund Balances 79
Nonmajor Special Revenue Funds
Combining Balance Sheet 82
Combining Statement of Revenues, Expenditures and Changes in Fund Balances 83
Schedule of Revenues, Expenditures and Changes in Fund Balances: Budget-to-Actual
Revolving Loans Fund 84
Tax Increment District No. 1 Fund 85
Tax Increment District No. 3 Fund 86
Tax Increment District No. 4 Fund 87
Nonmajor Capital Projects Funds
Combining Balance Sheet 90
Combining Statement of Revenues, Expenditures and Changes in Fund Balances 92
Schedule of Revenues, Expenditures and Changes in Fund Balances: Budget-to-Actual
General Fund 94
CITY OF OTSEGO, MINNESOTA
TABLE OF CONTENTS
Debt Service Fund by Account
Combining Balance Sheet 100
Combining Schedule of Revenues, Expenditures and Changes in Fund Balances 101
Schedule of Revenues, Expenditures and Changes in Fund Balances: Budget-to-Actual
Series 2012A 102
Series 2018A 103
Series 2020A 104
Series 2010B 105
STATISTICAL SECTION (UNAUDITED)
Financial Trends
Net Position by Component 108
Changes in Net Position 110
Governmental Activities Tax Revenue by Source 117
Fund Balances of Governmental Funds 118
Changes in Fund Balances of Governmental Funds 120
Revenue Capacity
Estimated Actual Value, Taxable Market Value and Tax Capacity of Taxable Property 122
Tax Capacity of Real Estate & Personal Property 124
Property Tax Rates - Direct and Overlapping Governments 125
Principal Property Taxpayers 126
Property Tax Levies and Collections 127
Debt Capacity
Ratios of Outstanding Debt by Type 128
Ratios of General Bonded Debt Outstanding 129
Computation of Direct and Overlapping Governmental Activities Debt 131
Legal Debt Margin Information 132
Pledged Revenue Coverage 134
Demographic and Economic Information
Demographic and Economic Statistics 135
Principal Employment Sectors 136
Operating Information
Full-Time City Government Positions by Function 137
Operating Indicators by Function 138
Capital Asset Statistics by Function 140
This page has been left blank intentionally.
City of Otsego│13400 90th Street NE, Otsego, MN 55330│Tel. (763) 441-4414 Fax (763) 441-9163
May 31, 2022
Honorable Mayor and Members of the City Council
City of Otsego
Transmitted herewith is the Annual Comprehensive Financial Report of the City of
Otsego for the fiscal year ended December 31, 2021.
Responsibility for both the accuracy of the data and the completeness and fairness of the
presentation, including all disclosures, rests with the management of the City following
the policies and procedures specified by the City’s system of internal control. Because
the cost of internal controls should not exceed anticipated benefits, the objective is to
provide reasonable, rather than absolute, assurance that the financial statements are free
of any material misstatements.
To the best of our knowledge and belief, the enclosed data is accurate, in all material
respects, and is reported in a manner designed to present fairly the financial position and
results of operations of the various funds of the City. All disclosures deemed necessary
to enable the reader to gain an understanding of the City’s financial activities have been
included.
Minnesota Statutes require that the financial statements of the City be audited annually
by the State Auditor or a Certified Public Accountant selected by the City Council. These
financial statements have been audited by BerganKDV (the Auditors). The Auditors
expressed an unmodified opinion on the financial statements, and their opinion letter is
included as the first component within the financial section of this report.
The Auditors have also issued a number of other reports on compliance with Government
Auditing Standards and Minnesota Legal Compliance. These reports have been issued
under separate cover.
Accounting principles generally accepted in the United States of America require that
management provide a narrative introduction, overview and analysis to accompany the
basic financial statements in the form of a 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 immediately following the
report of the auditors.
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City of Otsego│13400 90th Street NE, Otsego, MN 55330│Tel. (763) 441-4414 Fax (763) 441-9163
PROFILE OF THE CITY
The first town site in Otsego was originally platted in 1857 in what was once known as
the Big Woods, heavily laden with deciduous trees, and interspersed with rivers, ponds,
and prairies. The first settlers to the area were of European descent settling the area in
1852. On April 5, 1858, Otsego Township was established. The area remained a
township until 1990 when it was incorporated into the City of Otsego to more fully serve
its residents and to manage growth.
Otsego is located at the confluence of the Mississippi and Crow Rivers approximately
thirty miles northwest of Minneapolis. The Mississippi River runs along the northern and
eastern borders of the City and the Crow River runs along the southern border in the far
eastern part of the City until it enters the Mississippi River.
The City is located in the northeast corner of Wright County and covers an area of about
30.5 square miles. The 2020 US Census population estimate was 19,966, compared with
6,389 from the 2000 US Census. Otsego is both the largest and fastest growing city in
Wright County and outpaces growth in neighboring cities outside Wright County.
The City operates under the “Optional Plan A” form of government as defined in
Minnesota Statutes. Under this plan, the government of the City is directed by a City
Council consisting of an elected mayor and four elected councilmembers at large. The
City Council exercises legislative authority and determines all matters of policy. The
City Council appoints personnel responsible for the proper administration of all affairs
relating to the City. The mayor and councilmembers serve four year terms with two
councilmembers elected to four year terms every two years. The mayor is also elected to
a four year term.
The City provides its residents and businesses a full range of municipal services
consisting of the construction & maintenance of highways, streets, and other
infrastructure, park facilities, recreational opportunities, and general administrative
services. The City services also provide public utilities including water, sanitary sewer
and storm water services accounted for in enterprise funds. Police protection has been
provided for more than 25 years through an agreement with the Wright County Sheriff’s
department which provides 48 hours of service each and every day. Fire suppression and
emergency response services are provided through agreements with the neighboring cities
of Albertville, Elk River and Rogers, with each agreement having geographical
boundaries based upon response times.
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City of Otsego│13400 90th Street NE, Otsego, MN 55330│Tel. (763) 441-4414 Fax (763) 441-9163
Financial planning and control for the City of Otsego are based on the annual Operating
Budget and the multi-year Capital Improvement Plan. Under Minnesota Statutes, a
preliminary property tax levy must be adopted by the City Council no later than
September 30th of each year for the ensuing year’s collection. This establishes a
maximum levy that may subsequently be lowered but may not be increased at time of
final adoption. A ceiling on the increase of the annual property tax levy is established
from time to time by the Minnesota Legislature. Such a limit was not in place for taxes
payable 2021 and 2022.
Effective establishment of this levy means that a preliminary operating budget must be
prepared. The City Administrator, with the assistance of the Finance Director and
management staff, prepares such a budget each year and presents it along with the
preliminary levy for City Council review. The City Council is required to adopt a final
tax levy and annual budget each December for the subsequent year, which begins on
January 1. Departments may make transfers of appropriations within their department.
However, transfers of budget appropriations between departments needs authorization of
the City Administrator. The legal level of budgetary control is at the fund level, so any
appropriation transfers between funds needs the approval of the City Council.
In addition, a Capital Improvement Plan covering a ten year period is reviewed and
revised during the annual budget process. This includes projects for which the City may
issue debt and/or assess portions of the cost to adjacent or benefitting property owners.
Because there are limited funds available each year and the City does not wish to issue
excessive amounts of debt, these projects are reviewed and reprioritized each year.
ECONOMIC CONDITION
Otsego continues to experience strong residential and commercial growth due to its ideal
location. The City is 30 miles from downtown Minneapolis, the center of the Twin Cities
metropolitan area and has excellent transportation access with Interstate 94 and State
Highway 101. The City maintains a Comprehensive Plan document for land use and
development to manage and encourage growth.
The residential growth can be expressed with the 435 new residential construction
permits issued during 2021. The average number of new residential construction permits
through the past five years is 330. The latest estimates developed by the City show total
households at 6,957 or a growth of 42 percent over the past ten years.
The City is expecting for this trend in residential housing growth to continue into the
future as well. There have been a number of builders continuing to develop properties
and go through the final platting process.
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City of Otsego│13400 90th Street NE, Otsego, MN 55330│Tel. (763) 441-4414 Fax (763) 441-9163
The taxable market value of property within the City increased $227 million (10.91
percent) to a total of $2,315,141,700 for taxes payable 2022. According to Wright
County, for taxes payable 2022, there was approximately $131 million of value added for
new residential and commercial / industrial development. The remaining portion of the
growth would be due to market driven factors. The increased taxable value translates into
increased tax capacity and has allowed the City to maintain or slightly decrease the
property tax rate for nine consecutive years. The City’s tax rate for payable 2022 is
34.545.
In 2021, Independent School District No. 728 continued construction of the first middle
school within the City. The new middle school will help serve the educational needs of
the rapid residential growth occurring within the City. The City is working closely with
School District officials on the project, with construction expected to be complete for the
2022-2023 school year.
During 2021, the City approved development of two new businesses within the City’s
commercial zoning district. The buildings have been under construction throughout the
year, and in 2022 are expected to open and welcome operations from Heartland Dental
and Dunkin’.
Late in 2021, the City received development applications for a number of industrial
projects throughout the City. The respective projects would add approximately 600
thousand square feet of industrial warehousing and distribution facilities, a notable
number of jobs and tax base within the community. These projects are scheduled for City
Council considerations as of the writing of this letter.
Aligned with the City’s Strategic Plan of having diverse housing options River’s Edge
Apartments, The Village of Otsego Apartments and the Parkview Grand Apartments will
provide continued expansion of multiple family housing choices for residents looking to
call Otsego home. The first phases of these complexes include 267 market rate apartment
units, with one, two- and three-bedroom options, with leasing underway. Future phases of
these apartment buildings will provide an additional 157 units.
LONG-TERM FINANCIAL PLANNING
The City has adopted and annually updates a ten-year Capital Improvement Plan (CIP) to
facilitate the growth and maintenance of public infrastructure, community facilities and
capital equipment. Projects in the CIP demonstrate the importance of developing long
range financial planning strategies to facilitate the growth and prosperity of the City. The
process assists with both short- and long-range financial planning needs by:
Prioritizing capital projects and equipment acquisitions
Estimating resource needs and related cash flows
Identifying adequate and sustainable funding sources
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City of Otsego│13400 90th Street NE, Otsego, MN 55330│Tel. (763) 441-4414 Fax (763) 441-9163
MAJOR INITIATIVES
With all of the growth that has been experienced in Otsego, the City has identified the
need to expand our future planning, and has illustrated this by developing a Strategic
Plan. Within this Plan, the City has developed a practical vision of what Otsego should be
in three to five years. The following list outlines the City’s strategic directions with
certain examples of initiatives that have been accomplished in 2021 or set as goals in
2022.
Positioning for Growth.
o Budgeted for Comprehensive Plan Update in 2022
o Completed design of West Wastewater Facility Expansion Project
o Initiated a facility and space needs analysis for City Hall & Public Works
Empowering the Organization.
o Commitment to an annual Strategic Planning process
o Conducted an Employee Survey to gauge employee engagement
o Implemented Staff Focus Groups for increased communication
Engaging Stakeholders.
o Attend Chamber of Commerce Events to Communicate with Businesses
o Conducted a Community Survey to Obtain Feedback from Residents
o Participation in Legislative Focus Groups for Transportation
RELEVANT FINANCIAL POLICIES
The City Council has approved a fund balance policy that established the minimum fund
balance requirements of the General Fund at forty-five percent of the subsequent year’s
expenditures. The policy also includes the annual review of the fund balance reserves of
all other funds and the criteria for the use of reserves. Reserve balances are reviewed
annually as part of the budget/financial planning process and at the time the Capital
Improvement Plan is approved by the City Council.
Financial management staff of the City of Otsego have developed and implemented
internal controls designed to protect the City’s assets from loss, abuse, theft or other
misappropriation. These controls provide reasonable assurance of the safety of the City’s
assets while recognizing that management estimates and judgements as to the cost of
such controls are also important to deriving maximum benefit from these controls.
Policies relating to investment of City funds, billing and collection of public utility
charges, management of long term debt, purchasing, fund balances and general
accounting procedures have been developed. In addition, goals and objectives have been
established for internal and external financial reporting and for long-term financial
planning strategies.
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City of Otsego│13400 90th Street NE, Otsego, MN 55330│Tel. (763) 441-4414 Fax (763) 441-9163
FINANCIAL REPORTING AWARD
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 Otsego for its Annual Comprehensive Financial Report for the fiscal year ended
December 31, 2020. The City first applied for this award in 2012, and has received the
award every year since.
In order to be awarded a Certificate of Achievement, a government must publish an
easily readable and efficiently organized annual comprehensive financial report. The
report must satisfy both accounting principles generally accepted in the United States and
applicable federal, state and local legal requirements.
A Certificate of Achievement is valid for a period of one year. It is expected that the
2021 Annual Comprehensive Financial Report continues to meet the Certificate of
Achievement program requirements and it will be submitted to the GFOA to determine
the eligibility for another Certificate.
ACKNOWLEDGEMENTS
The preparation of this report would not have been possible without the expertise and
dedication of the City’s staff. Further, the City Council’s support to promote and sustain
the highest standards of professionalism in the financial management of the City of
Otsego are acknowledged and appreciated.
Respectfully submitted,
Adam Flaherty
City Administrator & Finance Director
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CITY OF OTSEGO, MINNESOTA
ELECTED OFFICIALS AND ADMINISTRATION
ELECTED OFFICIALS
Name Position Term Expires
Jessica Stockamp Mayor December 31, 2024
Tom Darkenwald Council Member December 31, 2022
Tina Goede Council Member December 31, 2022
Jeff Dahl Council Member December 31, 2024
Brittany Moores Council Member December 31, 2024
ADMINISTRATION
Name Position
Audra Etzel City Clerk
Adam Flaherty City Administrator & Finance Director
Sabrina Hille Assistant City Administrator & Human Resources
Kevin Lamson Street Operations Manager
Ross Demant Parks & Recreation Director
Kurt Neidermeier Public Utilities Manager
David Kendall City Attorney
Daniel Licht City Planner
Ron Wagner City Engineer
7
CusTitle ofSmartCITY COUNCILADVISORY COMMISSIONSPlanningParks & RecreationPublic SafetyHeritage PreservationCITY ATTORNEYCITY ADMINISTRATORCITY CLERKCommunicationsElectionsRecords RetentionFINANCE DIRECTORAccounting, Budget & ReportingUtility BillingInformation TechnologyASSISTANT CITY ADMINISTRATORHuman ResourcesCustomer ServiceCommunicationsPARKS & RECREATION DIRECTORRecreation ProgrammingParks MaintenancePrairie CenterSTREET OPERATIONS MANAGERStreets MaintenanceFleet MaintenanceStorm Water UtilityUTILITY OPERATIONS MANAGERWater UtilitySanitary Sewer UtilityPROFESSIONAL SERVICESPlanning & ZoningEngineeringBuilding Safety8
Government Finance Officers Association
Certificate of
Achievement
for Excellence
in Financial
Reporting
Presented to
City of Otsego
Minnesota
For its Annual Comprehensive
Financial Report
For the Fiscal Year Ended
December 31, 2020
Executive Director/CEO
9
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10
Independent Auditor's Report
Honorable Mayor and Members
of the City Council
City of Otsego
Otsego, Minnesota
Report on the Audit of the Financial Statements
Opinions
We have audited the financial statements of the governmental activities, the business-type activities,
each major fund, and the aggregate remaining fund information of the City of Otsego, Minnesota, as of
and for the year ended December 31, 2021, and the related notes to financial statements, which
collectively comprise the City's basic financial statements as listed in the Table of Contents.
In our opinion, the accompanying financial statements referred to in the first paragraph 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 of Otsego,
Minnesota, as of December 31, 2021, and the respective changes in financial position and, where
applicable, cash flows thereof and the respective budgetary comparison for the General Fund for the
year then ended in accordance with accounting principles generally accepted in the United States of
America
Basis for Opinions
We conducted our audit in accordance with auditing standards generally accepted in the United States of
America (GAAS) and the standards applicable to financial audits contained in Government Auditing
Standards, issued by the Comptroller General of the United States. Our responsibilities under those
standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements
section of our report. We are required to be independent of the City of Otsego and to meet our other
ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinions.
Responsibilities of Management for the Financial Statements
The City of Otsego's management is responsible for the preparation and fair presentation of the financial
statements in accordance with accounting principles generally accepted in the United States of America,
and for 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.
In preparing the financial statements, management is required to evaluate whether there are conditions
or events, considered in the aggregate, that raise substantial doubt about the City of Otsego's ability to
continue as a going concern for one year beyond the financial statement date, including any currently
known information that may raise substantial doubt shortly thereafter.
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Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor's report that
includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance
and therefore is not a guarantee that an audit conducted in accordance with GAAS and Government
Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a
material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Misstatements are considered material if there is a substantial likelihood that, individually or in the
aggregate, they would influence the judgment made by a reasonable user based on the financial
statements.
In performing an audit in accordance with GAAS and Government Auditing Standards, we:
• Exercise professional judgment and maintain professional skepticism throughout the audit.
• Identify and assess the risks of material misstatement of the financial statements, whether due to
fraud or error, and design and perform audit procedures responsive to those risks. Such
procedures include examining, on a test basis, evidence regarding the amounts and disclosures in
the financial statements.
• Obtain an understanding of internal control relevant to the audit 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 City of Otsego's internal control. Accordingly, no such
opinion is expressed.
• Evaluate the appropriateness of accounting policies used and the reasonableness of significant
accounting estimates made by management, as well as evaluate the overall presentation of the
financial statements.
• Conclude whether, in our judgment, there are conditions or events, considered in the aggregate,
that raise substantial doubt about the City of Otsego's ability to continue as a going concern for a
reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters,
the planned scope and timing of the audit, significant audit findings, and certain internal control–related
matters that we identified during the audit.
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the Management's
Discussion and Analysis, which follows this report letter, and Required Supplementary information as
listed in the Table of Contents be presented to supplement the basic financial statements. Such
information is the responsibility of management and, although not a part of the basic financial
statements, is required by the Governmental Accounting Standards Board (GASB), 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.
12
Supplementary Information
Our audit was conducted for the purpose of forming opinions on the financial statements that
collectively comprise the City of Otsego's basic financial statements. The combining and individual
nonmajor fund financial statements and schedules are presented for purposes of additional analysis and
are not a required part of the basic financial statements.
Such information is the responsibility of management and was derived from and relates directly to the
underlying accounting and other records used to prepare the basic financial statements. The 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
nonmajor fund financial statements and schedules are fairly stated, in all material respects, in relation to
the basic financial statements as a whole.
Other Information
Management is responsible for the other information included in the Annual Comprehensive Financial
Report. The other information comprises the introductory and statistical sections but does not include
the basic financial statements and our auditor's report thereon. Our opinions on the basic financial
statements do not cover the other information, and we do not express an opinion or any form of
assurance thereon.
In connection with our audit of the basic financial statements, our responsibility is to read the other
information and consider whether a material inconsistency exists between the other information and the
basic financial statements, or the other information otherwise appears to be materially misstated. If,
based on the work performed, we conclude that an uncorrected material misstatement of the other
information exists, we are required to describe it in our report.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated May 31, 2022,
on our consideration of the City of Otsego'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 solely to describe the scope of our testing of internal control over
financial reporting and compliance and the results of that testing, and not to provide an opinion on the
effectiveness of 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 of
Otsego's internal control over financial reporting and compliance.
St. Cloud, Minnesota
May 31, 2022
13
CITY OF OTSEGO, MINNESOTA
MANAGEMENT'S DISCUSSION AND ANALYSIS
DECEMBER 31, 2021
As management of the City of Otsego, Minnesota, (the City), we offer readers of the City's financial statements this narrative overview and
analysis of the financial activities of the City for the fiscal year ended December 31, 2021. We encourage readers to consider the
information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found
on pages 1-6 of this report.
Financial Highlights
• The assets and deferred outflows of resources of the City exceeded its liabilities and deferred inflows of resources at the close of the
most recent fiscal year by $135,240,322 (net position). Of this amount, $44,893,234 (unrestricted net position) may be used to meet
the City's ongoing obligations to citizens and creditors.
• The City's total net position increased by $19,227,834 (16.57%) from the previous year. The net position of the governmental
activities increased $8,035,560 (14.54%). The increase is primarily attributable to the investment in public assets and infrastructure by
the City and housing developers in the community. This infrastructure consists of streets, trail systems and park additions. The business
type activities increased $11,192,274 (18.43%) due to a combination of connection fees to the City's public utility system, and similar
to the governmental activities, the investment in public assets and infrastructure.
• As of the close of the current fiscal year, the City’s governmental funds reported combined ending fund balances of $23,407,200,
which is an increase of $4,296,327 (22.48%) from the previous year. Of the total fund balance, the unassigned portion is $1,049,562,
which is free from any internal or external constraints upon its use.
• The General fund has a fund balance of $5,199,901 at the close of the current fiscal year. During 2021, the fund balance decreased
$787,832 (13.16%) from the previous year. The decrease in fund balance can be attributed to a transfer of $2,434,846, made in
accordance with the City's fund balance policy, the transfer was made to Capital Improvements and Trails Management funds. The
policy indicates that any fund balance exceeding 45% of the subsequent years budget will be transferred, and set aside for future
capital expenditures. There is $354,473 (6.82%) of fund balance that is nonspendable, which is a combination of prepaid items and
land held for resale. The remaining fund balance is either assigned, $272,801 (5.25%) or is unassigned, $4,572,627 (87.93%).
• The City issued $4,345,000 of General Obligation Water Revenue bonded debt to finance the construction of a water tower. The City
also issued $7,390,000 of General Obligation Revenue Refunding bonded debt during the year to refund the 2010C bond issue to take
advantage of lower interest rates, resulting in a decrease of future debt service payments. The City's total outstanding bonded debt
decreased by $205,000 (1.03%) during the current fiscal year.
14
CITY OF OTSEGO, MINNESOTA
MANAGEMENT'S DISCUSSION AND ANALYSIS
DECEMBER 31, 2021
Overview of the Financial Statements
The discussion and analysis are intended to serve as an introduction to the City’s basic financial statements. The City's basic
financial statements include 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's finances, in a manner similar to a private-sector business.
The statement of net position presents information on all of the City’s assets, liabilities and deferred inflows/outflows of resources,
with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of
whether the City's overall financial position is stable, improving or deteriorating.
The statement of activities presents information showing how the City’s 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 the
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, special assessments and earned but unused personal time off).
Both of the government-wide financial statements distinguish functions of the City 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 include: general
government, public safety, public works, culture & recreation, economic development, and interest on long-term debt.
The business- type activities of the City include: water utility, sanitary sewer utility and storm water utility.
The government-wide financial statements can be found on pages 28 through 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, like other state and local governments, uses fund accounting to
ensure and demonstrate compliance with finance-related legal requirements. The funds of the City can be divided into two
categories: governmental funds and proprietary funds.
15
CITY OF OTSEGO, MINNESOTA
MANAGEMENT'S DISCUSSION AND ANALYSIS
DECEMBER 31, 2021
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 and outflows 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 government's near-term financial
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
financial decisions. Both the governmental funds balance sheet and governmental funds statement of revenues, expenditures, and
changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental
activities.
The City maintains 18 individual governmental funds. Information is presented separately in the governmental funds balance sheet
and in the governmental funds statement of revenues, expenditures, and changes in fund balances for the following: General fund, the Debt
Service fund, the Pavement Management fund, the MSA Construction fund, and the Development & Builder Escrows fund, which are
considered to be major funds. Data from the remaining governmental funds are combined into a single, aggregated presentation.
Individual fund data for each of these nonmajor governmental funds is provided in the form of combining statements or schedules,
elsewhere in this report.
The City adopts an annual appropriated budget for the General Fund, the Debt Service Fund, the Revolving Loan, Tax Increment District
No. 1, Tax Increment District No. 3, and Tax Increment District No. 4 special revenue funds. A budgetary comparison statement has
been provided in the basic financial statements for the General fund.
The basic governmental fund financial statements can be found on pages 30 through 37 of this report.
Proprietary Funds: Proprietary funds provide similar information to the government-wide financial statements, but in more
detail. The City maintains one type of proprietary fund.
Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial
statements. The City uses enterprise funds to account for its water, sanitary sewer and storm water utilities. All of the City's
enterprise funds are considered to be major funds, and separate information is provided for each of them in the basic financial
statements.
The basic proprietary fund financial statements can be found on pages 38 through 40 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
41 through 69 of this report.
Other Information: In addition to the basic financial statements and accompanying notes, this report also presents certain
required supplementary information in relation to the City's net pension liability. The schedules can be found on pages 72 through 76
of this report.
The combining statements referred to earlier in connection with nonmajor governmental funds are presented immediately following
the required supplementary information. Combining statements can be found on pages 78 through 105 of this report.
16
CITY OF OTSEGO, MINNESOTA
MANAGEMENT'S DISCUSSION AND ANALYSIS
DECEMBER 31, 2021
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,
assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $135,240,322 at the close of
the most recent fiscal year.
The largest portion of the City's net position ($82,686,039 or 61.14%) reflects its investment in capital assets, which includes: land,
infrastructure, buildings, and machinery & equipment, less any related debt used to acquire those assets that is still outstanding.
The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending.
Although the City's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to
repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities.
Increase Increase
2021 2020 (Decrease) 2021 2020 (Decrease)
Current Assets 37,691,906$ 31,770,371$ 5,921,535$ 31,037,860$ 26,894,333$ 4,143,527$
Capital Assets 43,824,005 40,752,252 3,071,753 75,660,511 61,029,397 14,631,114
Total Assets 81,515,911 72,522,623 8,993,288 106,698,371 87,923,730 18,774,641
Deferred Outflows of Resources 636,140 193,838 442,302 204,866 54,113 150,753
Long-term Liabilities 4,957,696 6,009,043 (1,051,347) 30,201,724 22,268,031 7,933,693
Other Liabilities 10,219,598 7,755,864 2,463,734 4,144,802 4,967,557 (822,755)
Total Liabilities 15,177,294 13,764,907 1,412,387 34,346,526 27,235,588 7,110,938
Deferred Inflows of Resources 3,656,597 3,668,954 (12,357) 634,549 12,367 622,182
Net Investment in Capital Assets 39,104,289 34,622,760 4,481,529 43,581,750 36,563,803 7,017,947
Restricted 7,661,049 7,445,422 215,627 - - -
Unrestricted 16,552,822 13,214,418 3,338,404 28,340,412 24,166,085 4,174,327
Total Net Position 63,318,160$ 55,282,600$ 8,035,560$ 71,922,162$ 60,729,888$ 11,192,274$
At the end of the current fiscal year, the City is able to report positive balances in all three categories of net position, both for the
government as a whole, as well as for its separate governmental and business-type activities.
A portion of the City’s net position (5.66%) represents resources that are subject to external restrictions on how they may be used.
The unrestricted portion (33.20%) may be used to meet the City's ongoing obligations to citizens and creditors.
The governmental activities experienced significant increases in both current and capital assets. The increase of current assets is due to
increased cash and investment balances, with the Development & Builder Escrows increasing most significantly as a result of the number
of active development projects within the City. The increase in capital assets can be illustrated with projects such as the Heritage Hills
street renewal project, pedestrial trail reconstruction and additions, the bridge addition at Carrick's Landing Park, vehicles and equipment,
and developer infrastructure contributions. The increase in liabilities is a net result, with long-term liabilities decreasing as a result of
continued debt service payments, with current liabilities increasing in the Development & Builder Escrows fund for deposits payable, and
the General fund due to the unearned revenue for ARPA funding received, but not yet earned.
The assets of the business-type activities increased as a result of cash and investment balances from continued growth in development,
which generates revenues such as water and sewer access fees. The capital asset increases were attributable to ongoing investment in
the utility system infrastructure and the construction of water tower #4. The long-term liabilities increased with the issuance of the
2021 Water Revenue bonds and additional direct borrowing note issuance as part of the 2020 PFA Note.
CITY OF OTSEGO - SUMMARY OF NET POSITION
Governmental Activities Business-type Activities
17
CITY OF OTSEGO, MINNESOTA
MANAGEMENT'S DISCUSSION AND ANALYSIS
DECEMBER 31, 2021
Increase Increase
2021 2020 (Decrease) 2021 2020 (Decrease)
Program Revenues
Charges for Services 3,837,134$ 3,401,691$ 435,443$ 6,153,693$ 4,702,829$ 1,450,864$
Operating Grants and Contributions 415,173 366,461 48,712 - 2,157 (2,157)
Capital Grants and Contributions 5,838,257 3,212,230 2,626,027 11,066,329 9,214,377 1,851,952
General Revenues
Property Taxes 7,718,135 7,170,868 547,267 34,000 32,000 2,000
Tax Increment 311,971 275,445 36,526
Franchise Taxes 129,467 132,137 (2,670) - - -
Grants and Contributions not
Restricted to Specific Programs 64,729 1,411,685 (1,346,956) - - -
Unrestricted Investment Earnings (191,523) 625,964 (817,487) (225,303) 688,236 (913,539)
Other General Revenues 40,000 - 40,000 - - -
Total Revenues 18,163,343 16,596,481 1,566,862 17,028,719 14,639,599 2,389,120
Expenses
General Government 1,509,107 1,616,634 (107,527) - - -
Public Safety 2,889,365 2,683,103 206,262 - - -
Public Works 4,101,313 4,967,363 (866,050) - - -
Culture and Recreation 1,240,142 1,151,569 88,573 - - -
Economic Development 503,411 889,173 (385,762) - - -
Interest on Long-term Debt 125,168 247,702 (122,534) - - -
Water Utility - - - 2,150,216 1,443,522 706,694
Sanitary Sewer Utility - - - 3,257,261 2,739,519 517,742
Storm Water Utility - - - 188,245 138,985 49,260
Total Expenses 10,368,506 11,555,544 (1,187,038) 5,595,722 4,322,026 1,273,696
Increase Before Transfers 7,794,837 5,040,937 2,753,900 11,432,997 10,317,573 1,115,424
Transfers 243,100 262,369 (19,269) (243,100) (262,369) 19,269
Transfers - Capital Assets (2,377) (410,322) 407,945 2,377 410,322 (407,945)
Change in Net Position 8,035,560 4,892,984 3,142,576 11,192,274 10,465,526 726,748
Net Position - January 1 55,282,600 50,389,616 4,892,984 60,729,888 50,264,362 10,465,526
Net Position - December 31 63,318,160$ 55,282,600$ 8,035,560$ 71,922,162$ 60,729,888$ 11,192,274$
CITY OF OTSEGO - CHANGES IN NET POSITION
Governmental Activities Business-type Activities
18
CITY OF OTSEGO, MINNESOTA
MANAGEMENT'S DISCUSSION AND ANALYSIS
DECEMBER 31, 2021
Governmental Activities
Governmental activities resulted in an increase of the City's net position by $8,035,560. Key elements of this change is as follows:
• Revenues increased $1,566,862 (9.44%) from the previous year; with the most notable increase within capital grants and
contributions which is specifically related to developer contributed assets. Property taxes was the second largest increase due to an
increased tax levy for payable 2021. Unrestricted grants and contributions decreased specifically because of the CARES Act in 2020.
• Expenses decreased $1,187,038 (10.27%) from the previous year. The most notable decrease was within the public works, which was
the result of the completion of local share contributions for two major Wright County road improvement projects. The second largest
change was in Economic Development expenses, which decreased as there were no CARES Act grant program in 2021. The largest
increase was noted in Public Safety with increased contractual service costs for law enforcement, fire protection and building safety.
Below are specific graphs which provide comparisons of the governmental activities revenues and expenses:
21.13%; Charges for
Services
2.29%; Operating Grants32.14%; Capital Grants
42.48%; Property Taxes 1.72%; Tax Increment
0.71%; Franchise Taxes
0.36%; Unrestricted
Grants & Contributions
‐1.05%; Investment
Earnings
0.22%; Sales of Capital
Assets
Revenues by Source
-
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
General
Government
Public Safety Public Works Culture &
Recreation
Economic
Development
Interest on Long-
Term Debt
Function Expenses vs. Program Revenues
Expense Program Revenue
19
CITY OF OTSEGO, MINNESOTA
MANAGEMENT'S DISCUSSION AND ANALYSIS
DECEMBER 31, 2021
Business-type Activities
Business-type activities resulted in an increase of net position by $11,192,274. Key elements of this change are as follows:
• An increase was noted in revenues, $2,389,120 (16.32%), most significantly in capital grants and contributions, and represents a
combination of utility system availability and connection fees, as well as capital asset contributions from developers. The second
notable increase was charges for services, resulting from more customers, increased water usage, and increased user rates.
• Expenses increased $1,273,696 (29.47%), attributable to a water meter replacement project, sanitary sewer chemical supplies for the
completed Biosolids building and increased services and other charges in both the water and sanitary sewer operations.
• Revenues exceeded expenses by $11,432,997 primarily the result of the continued residential growth within the City. This housing
growth generates connection fees to the public utility system, which is used to retire debt service and for future capital costs.
Below are specific graphs which provide comparisons of the business-type activities revenues and expenses:
-
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
9,000,000
10,000,000
Water Utility Sanitary Sewer Utility Storm Water Utility
Function Expenses vs. Program Revenues
Expense Program Revenue
36.14%, Charges for
Services
64.98%; Capital Grants 0.20%, Property Taxes
‐1.32%, Investment
Earnings
Revenues by Source
20
CITY OF OTSEGO, MINNESOTA
MANAGEMENT'S DISCUSSION AND ANALYSIS
DECEMBER 31, 2021
Financial Analysis of the Government's Funds
Governmental Funds: The focus of the City's governmental funds is to provide information on near-term inflows, outflows, and
balances of spendable resources. Such information is useful in assessing the City's financing requirements. In particular, unassigned
fund balance may serve as useful measure of a government's net resources available at the end of the fiscal year.
At the end of the current fiscal year, the City's governmental funds reported combined ending fund balances of $23,407,200, which
is an increase of $4,296,327 (22.48%) from the previous year. The unassigned fund balance, which is not subject to internal or
external constraints upon its use, $1,049,562 (4.48% of total).
Major Funds
The General fund is the primary operating fund of the City. At the end of the current fiscal year, total fund balance is $5,199,901, a
decrease of $787,832 (13.16%). The decrease in fund balance was the result of a transfer of $2,434,846, made in accordance with the
City's fund balance policy, with the transfer going to the Capital Improvements and Trails Management funds to be set aside for future
capital projects. Revenues were over budget by $1,436,647, with the two primary factors being that actual licenses and permits
exceeded estimates from the budget process; and charges for services exceeded estimates. Expenditures were under budget,
most significantly in the general government and public works functions. Expenditures for the public works function was over budget
as building safety costs exceeded budget as permit issuance was higher than estimated. As a measure of the General fund's liquidity,
it may be useful to compare both unassigned and total fund balance, to total fund expenditures. The unassigned fund balance, which is
$4,572,627, represents 71.44% of the current year General fund expenditures. Total General fund balance represents 81.23% of those
same expenditures.
The Debt Service fund has a total fund balance of $1,186,039 at the end of the year, an increase of $65,968 (5.89%) from the
previous year. The City paid the final principal installments on both the 2010B and 2012A bond issues during 2021.
The Pavement Management fund has a fund balance of $5,534,565 at the end of the year, an increase of $231,452 (4.36%) from the
previous year. Expenditures for the year totaled $1,205,953, which were for the Heritage Hills street renewal project, and annual
pavement preservation projects including crack filling, paint striping, fog sealing, seal coating and micro-surfacing.
The MSA Construction fund has a deficit fund balance of $3,523,065 from the 85th Street and MacIver Avenue street extension project,
with the fund balance deficit to be reduced over the next five years as municipal state-aid for construction funding, currently a deferred
inflow, will be recognized as revenue. The City will continue to receive MSA funding even once the funding advancement is completed.
The Development & Builder Escrows fund has no fund balance at the end of the current fiscal year. The fund has assets in the amount
of $8,126,696, all of which are cash and investment balances that offset the accounts and deposits payable within the fund. The revenues
and expenditures in this fund correlate with the level of development activity within the City.
Proprietary Funds: The City's proprietary funds provide the same type of information presented as business-type activities
found in the government-wide financial statements, but in more detail.
The enterprise funds have a combined ending net position of $71,922,162, an increase of $11,192,274 (18.43%). There are two
components to net position in the enterprise funds, unrestricted ($28,340,412 or 39.40%) and net investment in capital assets
($43,581,750 or 60.60%). As a measure of liquidity, the unrestricted net position amounts to 587.00% of the current year operating
expenses. Other factors concerning the finances of these funds have already been addressed in the discussion of the City's
business-type activities.
21
CITY OF OTSEGO, MINNESOTA
MANAGEMENT'S DISCUSSION AND ANALYSIS
DECEMBER 31, 2021
Below is a graph with comparative amounts for each fund balance component for fiscal years 2019, 2020 and 2021:
The City's Unassigned fund balance is currently $1,049,562, and represents 4.48% of total governmental fund balance. The
City also has four other components of fund balance, including Nonspendable (1.51%), Restricted (27.64%), Committed (1.48%) and
Assigned (64.89%).
• Nonspendable fund balance represents the amount of assets the City has invested in prepaid items and land assets held for resale. This
fund balance component can largely fluctuate with the timing of certain payments (e.g. insurance premiums) and the net realizable
value of the land assets being held by the City for future resale.
• The City's restricted fund balance is the result of external constraints placed upon it. The source of that constraint includes debt
service, park development, and tax increments. The debt service component has decreased slightly over the past three years as the
bonds payable balance has declined, while the park dedication component has increased due to revenues exceeding expenditures.
• The committed fund balances are within the City's special revenue funds for Street Lighting and Revolving Loans. This
fund balance component has stayed consistent over the past three years.
• Assigned fund balances are primarily associated with the City's capital project funds. The fund balance in this component
is the result of the City accumulating resources for future capital improvement projects and capital equipment purchases.
A more detailed breakdown of the fund balance components can be found in the basic financial statements and accompanying
financial statement footnotes.
(2,000,000)
-
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
Nonspendable Restricted Committed Assigned Unassigned
Governmental Fund Balance Components
2019 2020 2021
22
CITY OF OTSEGO, MINNESOTA
MANAGEMENT'S DISCUSSION AND ANALYSIS
DECEMBER 31, 2021
General Fund Budgetary Highlights
During the year, there were no amendments to the General fund budget. The budgeted revenues and expenditures resulted in
no change in fund balance. Actual results for the fiscal year were a decrease of $787,832 (13.16%). The key elements of this change
are as follows:
• Actual revenues exceeded the budget by $1,436,647 (22.56%). The largest revenue variance was provided by licenses and
permits, which were over budget by $1,328,778. The City projected 200 new residential construction permits when preparing the
budget with actual results being 435 new residential construction permits. Another signicant variance was within charges for
services, which exceeded the budget by $228,894 which is largely contributed to development fees from the continued growth
of the City. The notable variance that was less than budget was investment earnings. Current market conditions for investments
caused a decrease in the fair market value of the City's portfolio, and is the reason for the negative line item. The City holds all of its
investments until maturity, so this change in fair market value is only illustrative of a point in time, and when the City's investments
mature, they will mature and provide proceeds at full par value.
• Actual expenditures were less than budget by $210,367 (3.18%). The largest variance was within the general government function
and is mostly the result of an unused contingency budget within the City Council department as well as Legal services being less
than estimated. The public safety function was over budget by $159,926, attributed to contracted building safety services exceeding
estimates consistent with the number of building permits that were beyond estimated numbers.
• Transfers in were as budgeted, and represent annual contributions from the Water and Sanitary Sewer utility funds that help
manage the property tax levy.
• Transfers out were not budgeted for during 2021. The actual transfer out of $2,434,846 is in accordance with the City's fund
balance policy. That policy outlines that any General fund balance exceeding 45% of the subsequent year's expenditure budget
will be transferred, and assigned for future capital items.
The ending unassigned fund balance of the General fund ($4,572,627) represents 62.23% of the adopted 2022 budget.
23
CITY OF OTSEGO, MINNESOTA
MANAGEMENT'S DISCUSSION AND ANALYSIS
DECEMBER 31, 2021
Capital Asset and Debt Administration
Capital Assets: The City's investment in capital assets for its governmental and business-type activities at the end of the current
year, amounts to $119,484,516 (net of accumulated depreciation). This investment in capital assets includes: land, buildings, street and
utility infrastructure, parks equipment, trails, machinery and equipment and construction in progress. The City's investment in
capital assets increased $17,702,867 (17.39%) from the previous year.
Major capital asset events during the current year included the following:
• The City updated its machinery & equipment fleet with several new pieces of equipment. The City maintains a ten-year capital
improvement plan budget which schedules equipment and vehicle replacements and additions.
• The Heritage Hills street renewal project was completed during the year. This project improved the condition of street infrastructure
within the respective neighborhood. This project was located in an area with no water or sanitary sewer utilities.
• The City received contributed infrastructure from housing developers. These assets include: streets, trail systems, and public utility
infrastructure. These assets are paid for and installed by the developer, are inspected by the City Engineer to City standards, and are
later accepted by the City, who is responsible for future maintenance and replacement.
• The East Wastewater Treatment Facility Biosolids project was substantially completed during the year. This project included
construction of a new building that removes the long-term liquid storage from the facility by further processing the material into a dry
matter, which can be removed from the site to landfills or distributed as fertilizer.
• The City reconstructed two existing paved pedestrian trails and constructed a new segment of paved pedestrial trails to improve safe
access for pedestrians across the City. The City also partnered with Guardian Angels to install a pedestrian bridge located at Carrick's
Landing Park, which is adjacent to the Mississippi River.
• The City began construction of Water Tower #4, located at the intersection of McAllister Avenue and CSAH 38. This tower
will hold 1.5 million gallons of water, and will serve an important role in providing water to the community.
• The City initiated a number of construction projects including: Well #10, the East-West Water System Connection, the Walesch
Estates & O'Day Acres Street Renewal Project, and the West Wastewater Treatment Facility Expansion Project.
Increase Increase
2021 2020 (Decrease) 2021 2020 (Decrease)
Land 4,278,161$ 4,278,161$ -$ 703,695$ 703,695$ -$
Construction in Progress 14,203 796,561 (782,358) 5,138,670 10,619,801 (5,481,131)
Buildings and Improvements 4,157,161 4,317,953 (160,792) 16,633,181 150,733 16,482,448
Land Improvements 3,784,102 3,513,709 270,393 - - -
Machinery and Equipment 1,927,033 1,893,111 33,922 966,443 1,051,808 (85,365)
Infrastructure 29,663,345 25,952,757 3,710,588 52,218,522 48,503,360 3,715,162
43,824,005$ 40,752,252$ 3,071,753$ 75,660,511$ 61,029,397$ 14,631,114$
Additional information on the City’s capital assets can be found in Note 3 (B) on pages 53 through 54 of this report.
(net of depreciation)
Governmental Activities Business-type Activities
CITY OF OTSEGO - CAPITAL ASSETS
24
CITY OF OTSEGO, MINNESOTA
MANAGEMENT'S DISCUSSION AND ANALYSIS
DECEMBER 31, 2021
Long-Term Debt: At the end of the current year, the City had outstanding long-term bonded debt of $35,965,983.
Increase Increase
2021 2020 (Decrease) 2021 2020 (Decrease)
General Obligation Bonds 4,400,000$ 5,760,000$ (1,360,000)$ -$ -$ -$
Notes from Direct Borrowings - - - 16,305,983 9,438,936 6,867,047
General Obligation Revenue Bonds - - - 15,260,000 14,105,000 1,155,000
Unamortized Premiums 319,716 369,492 (49,776) 1,475,843 921,658 554,185
Compensated Absences 104,969 102,331 2,638 32,187 25,139 7,048
Total 4,824,685$ 6,231,823$ (1,407,138)$ 33,074,013$ 24,490,733$ 8,583,280$
Revenue streams for the repayment of the outstanding debt liabilities include: special assessments upon benefitting properties, fees
from new connections to the water and sanitary sewer utility systems, and property tax levies. Should any of these sources of
revenues prove inadequate, all outstanding bonds are backed by the full faith and credit of the City.
During 2021, the City issued $4,345,000 of General Obligation Water Revenue bonds to finance the construction of Water Tower #4. The
bond has an average coupon of 1.84%, a true interest cost of 1.31% and will mature in February 2037.
During 2021, the City issued $7,390,00 of General Obligation Water and Sewer Revenue Refunding Bonds to achieve interest savings from
lower interest rates. The refunding resulted in a decrease of future debt service payments in the amount of $496,333, with a net present
value cash flow savings in the amount of $486,507.
The City made scheduled principal payments of $12,070,866, which provided a net reduction of $205,000 (1.03%) in the total outstanding
long-term debt.
The City's bond rating is AA+, with a stable outlook from Standard & Poor's Rating Services.
State statutes limit the amount of general obligation debt a Minnesota city may issue to 3% of total Estimated Market Value. The
current debt limitation for the City is $62,622,810, with $2,356,981 in debt outstanding that is applicable to the limit.
Additional information on the City’s long-term debt can be found in Note 3 (E) on pages 57 through 60 of this report.
CITY OF OTSEGO - OUTSTANDING DEBT
Governmental Activities Business-type Activities
25
CITY OF OTSEGO, MINNESOTA
MANAGEMENT'S DISCUSSION AND ANALYSIS
DECEMBER 31, 2021
Economic Factors and Next Year's Budget and Rates
The following economic factors were identified by the City as potentially having an impact on the financial future of the City, and
were considered in preparation of the 2022 operating budgets and capital improvement plans.
• The Taxable Market Value of real estate and personal property within the City increased 10.91% for taxes payable 2022. This
increase is driven by both new construction within the City as well as market driven valuation increases.
• New construction in the residential sector continues within the City. During 2021, the City issued 435 building permits for new
residential construction. The City also continues to see builders final platting new developments for future years construction.
• The City is initiating a project at the City's West Wastewater Treatment Facility. The project, first identified in the City's Master Sewer
Plan, will provide for not only expansion of the facility, but will change the way the City completes the treatment processing within
sanitary sewer operations. Construction of this facility will begin in the summer of 2022, with estimated completion in the fall of 2024.
• The City has began the construction of Water Tower No. 4, which will be a 1.50 million gallon water storage tank located at the
intersection of CSAH 38 and McAllister Avenue. This tower, identified in the City's Master Water Plan, will increase storage
capacity of the water system to meet growing demand and to provide for ample storage in the event of fires within the City.
• The City continues to expand upon and make improvements to the Capital Improvement Plan (CIP). The adopted CIP for 2022
plans for capital purchasing ten years into the future. These long range planning efforts assure that the City is always looking into the
future and that the City is adequately planning from a financial resources standpoint.
Requests for Information
This financial report is designed to provide a general overview of the City of Otsego's 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: Finance Director, 13400 90th Street NE, Otsego, MN 55330.
26
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27
CITY OF OTSEGO, MINNESOTA
STATEMENT OF NET POSITION
DECEMBER 31, 2021
Governmental Business-Type
Activities Activities Total
ASSETS
Cash and Investments 35,224,160$ 28,855,592$ 64,079,752$
Receivables
Interest 105,706 - 105,706
Accounts 26,671 613,907 640,578
Taxes 161,290 - 161,290
Special Assessments 1,818,116 1,234,413 3,052,529
Due from Other Governments 1,490 272,234 273,724
Land Held for Resale 202,200 - 202,200
Prepaid Items 152,273 61,714 213,987
Capital Assets
Nondepreciable 4,292,364 5,842,365 10,134,729
Depreciable, Net of Accumulated Depreciation 39,531,641 69,818,146 109,349,787
Total Assets 81,515,911 106,698,371 188,214,282
DEFERRED OUTFLOWS OF RESOURCES
General Employees Retirement Plan Pension Resources 636,140 204,866 841,006
LIABILITIES
Accounts Payable 344,037 772,321 1,116,358
Deposits Payable 8,080,494 - 8,080,494
Due to Other Governments 21,972 19,950 41,922
Accrued Salaries Payable 31,092 11,779 42,871
Accrued Interest Payable 65,294 206,315 271,609
Unearned Revenue 995,715 - 995,715
Compensated Absences Payable
Due Within One Year 20,994 6,437 27,431
Due in More than One Year 83,975 25,750 109,725
Bonds Payable
Due Within One Year 660,000 2,320,000 2,980,000
Due in More than One Year 4,059,716 14,415,843 18,475,559
Notes from Direct Borrowings
Due Within One Year - 808,000 808,000
Due in More than One Year - 15,497,983 15,497,983
General Employees Retirement Plan Net Pension Payable
Due in More than One Year 814,005 262,148 1,076,153
Total Liabilities 15,177,294 34,346,526 49,523,820
DEFERRED INFLOWS OF RESOURCES
Grants for Subsequent Years 2,910,929 - 2,910,929
General Employees Retirement Plan Pension Resources 745,668 240,140 985,808
Deferred Gain on Refunding - 394,409 394,409
Total Deferred Inflows of Resources 3,656,597 634,549 4,291,146
NET POSITION
Net Investment in Capital Assets 39,104,289 43,581,750 82,686,039
Restricted
Debt Service 2,362,735 - 2,362,735
Tax Increment Financing 192,036 - 192,036
Park Development 5,106,278 - 5,106,278
Unrestricted 16,552,822 28,340,412 44,893,234
Total Net Position 63,318,160$ 71,922,162$ 135,240,322$
The notes to the financial statements are an integral part of this statement.
28
CITY OF OTSEGO, MINNESOTA
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED DECEMBER 31, 2021
Program Revenues Net (Expense) Revenue and Changes in Net Position
Operating Capital
Charges For Grants and Grants and Governmental Business-Type
FUNCTIONS/PROGRAMS Expenses Services Contributions Contributions Activities Activities Total
Government Activities
General Government 1,509,107$ 889,736$ -$ -$ (619,371)$ -$ (619,371)$
Public Safety 2,889,365 2,557,049 76,382 - (255,934) - (255,934)
Public Works 4,101,313 308,739 272,126 4,630,312 1,109,864 - 1,109,864
Culture and Recreation 1,240,142 81,610 66,665 1,207,945 116,078 - 116,078
Economic Development 503,411 - - - (503,411) - (503,411)
Interest on Long-Term Debt 125,168 - - - (125,168) - (125,168)
Total Government Activities 10,368,506 3,837,134 415,173 5,838,257 (277,942) - (277,942)
Business-Type Activities
Water Utility 2,150,216 2,982,786 - 3,426,904 - 4,259,474 4,259,474
Sanitary Sewer Utility 3,257,261 3,048,707 - 6,287,685 - 6,079,131 6,079,131
Storm Water Utility 188,245 122,200 - 1,351,740 - 1,285,695 1,285,695
Total Business-Type Activities 5,595,722 6,153,693 - 11,066,329 - 11,624,300 11,624,300
Total 15,964,228$ 9,990,827$ 415,173$ 16,904,586$ (277,942) 11,624,300 11,346,358
General Revenues
Property Taxes 7,718,135 34,000 7,752,135
Tax Increments 311,971 - 311,971
Franchise Taxes 129,467 - 129,467
Grants and Contributions Not
Restricted to Specific Programs 64,729 - 64,729
Unrestricted Investment Earnings (191,523) (225,303) (416,826)
Gain on Disposal of Capital Assets 40,000 - 40,000
Transfers 243,100 (243,100) -
Transfers - Capital Assets (2,377) 2,377 -
Total General Revenues and Transfers 8,313,502 (432,026) 7,881,476
Change in Net Position 8,035,560 11,192,274 19,227,834
Net Position - January 1 55,282,600 60,729,888 116,012,488
Net Position - December 31 63,318,160$ 71,922,162$ 135,240,322$
The notes to the financial statements are an integral part of this statement.
29
CITY OF OTSEGO, MINNESOTA
BALANCE SHEET
GOVERNMENTAL FUNDS
DECEMBER 31, 2021
Debt
General Service
ASSETS
Cash and Investments 5,800,669$ 1,186,209$
Receivables
Interest 105,706 -
Accounts 16,671 -
Taxes
Current 77,674 -
Delinquent 83,616 -
Special Assessments
Current 375 413
Deferred 4,500 1,240,922
Delinquent 1,942 1,068
Due from Other Governments 1,490 -
Due from Other Funds - -
Land Held for Resale 202,200 -
Prepaid Items 152,273 -
Total Assets 6,447,116 2,428,612
LIABILITIES
Accounts Payable 108,378 583
Accrued Salaries Payable 31,092 -
Deposits Payable - -
Due to Other Governments 21,972 -
Due to Other Funds - -
Unearned Revenue 995,715 -
Total Liabilities 1,157,157 583
DEFERRED INFLOWS OF RESOURCES
Unavailable Revenue - Property Taxes 83,616 -
Unavailable Revenue - Special Assessments 6,442 1,241,990
Grants for Subsequent Years - -
Total Deferred Inflows of Resources 90,058 1,241,990
FUND BALANCES
Nonspendable 354,473 -
Restricted - 1,186,039
Committed - -
Assigned 272,801 -
Unassigned 4,572,627 -
Total Fund Balances (Deficits) 5,199,901 1,186,039
Total Liabilities, Deferred Inflows of
Resources and Fund Balances (Deficits)6,447,116$ 2,428,612$
The notes to the financial statements are an integral part of this statement.
30
Development Other
Pavement MSA & Builder Nonmajor Total
Management Construction Escrows Governmental Governmental
5,682,063$ -$ 8,126,696$ 14,428,523$ 35,224,160$
- - - - 105,706
- - - 10,000 26,671
- - - - 77,674
- - - - 83,616
335 - - 142 1,265
258,271 - - 306,512 1,810,205
2,240 - - 1,396 6,646
- - - - 1,490
- - - 612,136 612,136
- - - - 202,200
- - - - 152,273
5,942,909 - 8,126,696 15,358,709 38,304,042
147,833 - 46,202 41,041 344,037
- - - - 31,092
- - 8,080,494 - 8,080,494
- - - - 21,972
- 612,136 - - 612,136
- - - - 995,715
147,833 612,136 8,126,696 41,041 10,085,446
- - - - 83,616
260,511 - - 307,908 1,816,851
- 2,910,929 - - 2,910,929
260,511 2,910,929 - 307,908 4,811,396
- - - - 354,473
- - - 5,283,854 6,469,893
- - - 347,417 347,417
5,534,565 - - 9,378,489 15,185,855
- (3,523,065) - - 1,049,562
5,534,565 (3,523,065) - 15,009,760 23,407,200
5,942,909$ -$ 8,126,696$ 15,358,709$ 38,304,042$
31
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32
CITY OF OTSEGO, MINNESOTA
RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE
STATEMENT OF NET POSITION
DECEMBER 31, 2021
Fund Balances - Governmental Funds 23,407,200$
Amounts reported for the governmental activities within the statement
of net position are different because:
Capital assets used in governmental activities are not financial resources,
and therefore, are not reported as assets in governmental funds.
Cost of Capital Assets 61,658,409
Accumulated Depreciation (17,834,404)
Long-term liabilities, including bonds payable, are not due and payable in the
current period, and therefore, are not reported as liabilities in governmental funds.
Bonds Payable (4,400,000)
Unamortized Premium on Bonds Payable (319,716)
Accrued Interest Payable (65,294)
Compensated Absences Payable (104,969)
GERF Pension Payable (814,005)
Some receivables are not available soon enough to pay for the current period's
expenditures, and therefore, are unavailable in governmental funds.
Delinquent Property Taxes Receivable 83,616
Special Assessments Receivable 1,816,851
Deferred resources from pensions reported in governmental activities are not
financial resources and are not payable in the current period, therefore are not
reported in governmental funds.
GERF Pension Deferred Outflows of Resources 636,140
GERF Pension Deferred Inflows of Resources (745,668)
Total Net Position - Governmental Activities 63,318,160$
The notes to the financial statements are an integral part of this statement.
33
CITY OF OTSEGO, MINNESOTA
STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCES (DEFICITS)
GOVERNMENTAL FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2021
Debt
General Service
REVENUES
Property Taxes 4,592,524$ 749,551$
Tax Increments - -
Franchise Taxes 129,467 -
Licenses and Permits 2,529,588 -
Intergovernmental 88,037 -
Charges for Services 427,809 -
Special Assessments 5,732 830,557
Fines and Forfeitures 27,461 -
Investment Earnings (net) (48,486) -
Miscellaneous 52,872 -
Total Revenues 7,805,004 1,580,108
EXPENDITURES
Current
General Government 1,342,682 -
Public Safety 2,874,479 -
Public Works 1,278,968 -
Culture and Recreation 779,820 -
Economic Development 91,248 -
Capital Outlay
General Government 15,818 -
Public Safety 4,930 -
Public Works 8,820 -
Culture and Recreation 4,325 -
Debt Service
Principal - 1,360,000
Interest - 153,062
Fiscal Agent Fees - 1,078
Total Expenditures 6,401,090 1,514,140
Excess of Revenues
Over Expenditures 1,403,914 65,968
OTHER FINANCING SOURCES (USES)
Transfers In 243,100 -
Sales of Capital Assets - -
Transfers Out (2,434,846) -
Total Other Financing Sources (Uses) (2,191,746) -
Net Change in Fund Balance (787,832) 65,968
Fund Balance (Deficit) - January 1 5,987,733 1,120,071
Fund Balance (Deficit) - December 31 5,199,901$ 1,186,039$
The notes to the financial statements are an integral part of this statement.
34
Development Other
Pavement MSA & Builder Nonmajor Total
Management Construction Escrows Governmental Governmental
1,050,000$ -$ -$ 1,323,874$ 7,715,949$
- - - 311,971 311,971
- - - - 129,467
- - - - 2,529,588
272,126 713,726 - - 1,073,889
- - 708,893 1,580,426 2,717,128
58,945 - - 32,515 927,749
- - - - 27,461
(46,127) - - (96,910) (191,523)
102,461 - - 66,665 221,998
1,437,405 713,726 708,893 3,218,541 15,463,677
- - 122,721 - 1,465,403
- - - - 2,874,479
- - 586,172 68,900 1,934,040
- - - - 779,820
- - - 412,163 503,411
- - - 17,489 33,307
- - - 9,410 14,340
1,205,953 1,563 - 500,786 1,717,122
- - - 610,063 614,388
- - - - 1,360,000
- - - - 153,062
- - - - 1,078
1,205,953 1,563 708,893 1,618,811 11,450,450
231,452 712,163 - 1,599,730 4,013,227
- - - 2,434,846 2,677,946
- - - 40,000 40,000
- - - - (2,434,846)
- - - 2,474,846 283,100
231,452 712,163 - 4,074,576 4,296,327
5,303,113 (4,235,228) - 10,935,184 19,110,873
5,534,565$ (3,523,065)$ -$ 15,009,760$ 23,407,200$
35
CITY OF OTSEGO, MINNESOTA
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES
IN FUND BALANCES (DEFICITS) OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED DECEMBER 31, 2021
Total Net Change in Fund Balances - Governmental Funds 4,296,327$
Amounts reported for governmental activities in the statement of activities are different because:
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 as depreciation.
Capital Outlays 1,474,224
Depreciation Expense (1,863,229)
Assets Contributed by Developers 3,463,135
Contributions of capital assets to the proprietary funds decrease net position in the statement of
activities, but do not appear in the governmental funds because they are not financial resources.(2,377)
The repayment of principal of long-term debt consumes the current financial resources of
governmental funds. Neither transaction, however, has any effect on net position.
Principal Repayments 1,360,000
Interest on long-term debt in the statement of activities differs from the amount reported in the
governmental funds because interest is recognized as an expenditure in the funds when it is due,
and thus requires the use of current financial resources. In the statement of activities; however,
interest expense is recognized as the interest accrues, regardless of when it is due.28,972
Certain revenues are recognized as soon as they are earned. Under the modified accrual
basis of accounting, certain revenues cannot be recognized until they are available to
liquidate liabilities of the current period.
Property Taxes 2,186
Special Assessments (805,655)
In the statement of activities, personnel expenses are recognized as they are accrued, however
these expenses do not consume current financial resources, and under the modified accrual
basis of accounting, are not reported in the governmental funds until they are due.
Compensated Absences (2,637)
GERF Pension 84,614
Change in Net Position - Governmental Activities 8,035,560$
The notes to the financial statements are an integral part of this statement.
36
CITY OF OTSEGO, MINNESOTA
GENERAL FUND - STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
FOR THE YEAR ENDED DECEMBER 31, 2021
Variance with
Original Final Budget -
and Final Actual Over
Budget Amounts (Under)
REVENUES
Property Taxes 4,646,632$ 4,592,524$ (54,108)$
Franchise Taxes 135,000 129,467 (5,533)
Licenses and Permits 1,200,810 2,529,588 1,328,778
Intergovernmental 87,500 88,037 537
Charges for Services 198,915 427,809 228,894
Special Assessments 3,500 5,732 2,232
Fines and Forfeitures 24,000 27,461 3,461
Investment Earnings (net) 72,000 (48,486) (120,486)
Miscellaneous - 52,872 52,872
Total Revenues 6,368,357 7,805,004 1,436,647
EXPENDITURES
Current
General Government 1,505,269 1,342,682 (162,587)
Public Safety 2,714,553 2,874,479 159,926
Public Works 1,420,909 1,278,968 (141,941)
Culture and Recreation 791,116 779,820 (11,296)
Economic Development 129,710 91,248 (38,462)
Capital Outlay
General Government 35,600 15,818 (19,782)
Public Safety - 4,930 4,930
Public Works 9,000 8,820 (180)
Culture and Recreation 5,300 4,325 (975)
Total Expenditures 6,611,457 6,401,090 (210,367)
Excess (Deficiency) of Revenues
Over (Under) Expenditures (243,100) 1,403,914 1,647,014
OTHER FINANCING SOURCES (USES)
Transfers In 243,100 243,100 -
Transfers Out - (2,434,846) (2,434,846)
Total Other Financing Sources (Uses)243,100 (2,191,746) (2,434,846)
Net Change in Fund Balance - (787,832) (787,832)
Fund Balance - January 1 5,987,733 5,987,733 -
Fund Balance - December 31 5,987,733$ 5,199,901$ (787,832)$
The notes to the financial statements are an integral part of this statement.
37
CITY OF OTSEGO, MINNESOTA
STATEMENT OF NET POSITION
PROPRIETARY FUNDS
DECEMBER 31, 2021
Sanitary Storm
Water Sewer Water Total
Utility Utility Utility Enterprise
ASSETS
Current Assets
Cash and Cash Equivalents 11,515,712$ 16,800,943$ 538,937$ 28,855,592$
Receivables
Accounts 195,317 413,084 5,506 613,907
Special Assessments
Current - - 766 766
Delinquent 18 - 198 216
Due from Other Governments - 272,234 - 272,234
Prepaid Items 13,404 48,310 - 61,714
Total Current Assets 11,724,451 17,534,571 545,407 29,804,429
Noncurrent Assets
Special Assessments
Deferred 322,651 874,731 36,049 1,233,431
Capital Assets
Land 170,178 533,517 - 703,695
Buildings and Building Improvements 109,096 16,561,654 - 16,670,750
Machinery and Equipment 454,653 1,218,585 - 1,673,238
Infrastructure 27,300,918 39,411,971 6,539,073 73,251,962
Construction in Progress 3,601,181 1,537,489 - 5,138,670
Total Capital Assets 31,636,026 59,263,216 6,539,073 97,438,315
Less: Accumulated Depreciation (7,604,311) (13,660,857) (512,636) (21,777,804)
Net Capital Assets 24,031,715 45,602,359 6,026,437 75,660,511
Total Noncurrent Assets 24,354,366 46,477,090 6,062,486 76,893,942
Total Assets 36,078,817 64,011,661 6,607,893 106,698,371
DEFERRED OUTFLOWS OF RESOURCES
General Employees Retirement Plan Pension Resources 51,217 153,649 - 204,866
LIABILITIES
Current Liabilities
Accounts Payable 342,573 418,720 11,028 772,321
Due to Other Governments 19,950 - - 19,950
Accrued Salaries Payable 2,945 8,834 - 11,779
Accrued Interest Payable 62,042 144,273 - 206,315
Bonds Payable 835,200 1,484,800 - 2,320,000
Notes from Direct Borrowings - 808,000 - 808,000
Compensated Absences Payable 1,609 4,828 - 6,437
Total Current Liabilities 1,264,319 2,869,455 11,028 4,144,802
Noncurrent Liabilities
Bonds Payable (net)8,131,219 6,284,624 - 14,415,843
Notes from Direct Borrowings - 15,497,983 - 15,497,983
Compensated Absences Payable 6,438 19,312 - 25,750
General Employees Retirement Plan Net Pension Payable 65,538 196,610 - 262,148
Total Noncurrent Liabilities 8,203,195 21,998,529 - 30,201,724
Total Liabilities 9,467,514 24,867,984 11,028 34,346,526
DEFERRED INFLOWS OF RESOURCES
General Employees Retirement Plan Pension Resources 60,036 180,104 - 240,140
Deferred Gain on Refunding 141,987 252,422 - 394,409
Total Deferred Inflows of Resources 202,023 432,526 - 634,549
NET POSITION
Net Investment in Capital Assets 16,280,783 21,274,530 6,026,437 43,581,750
Unrestricted 10,179,714 17,590,270 570,428 28,340,412
Total Net Position 26,460,497$ 38,864,800$ 6,596,865$ 71,922,162$
The notes to the financial statements are an integral part of this statement.
38
CITY OF OTSEGO, MINNESOTA
STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION
PROPRIETARY FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2021
Sanitary Storm
Water Sewer Water Total
Utility Utility Utility Enterprise
OPERATING REVENUES
Charges for Services 2,873,324$ 3,028,939$ 122,200$ 6,024,463$
OPERATING EXPENSES
Personal Services 165,725 497,399 13,626 676,750
Supplies 577,879 260,896 2,979 841,754
Insurance 11,602 40,588 - 52,190
Utilities 140,238 332,165 - 472,403
Services and Other Charges 255,406 587,836 35,322 878,564
Depreciation 703,828 1,066,214 136,318 1,906,360
Total Operating Expenses 1,854,678 2,785,098 188,245 4,828,021
Operating Income (Loss) 1,018,646 243,841 (66,045) 1,196,442
NONOPERATING REVENUES (EXPENSES)
Antenna Rental 83,513 - - 83,513
Property Taxes - - 34,000 34,000
Investment Earnings (net) (80,139) (141,314) (3,850) (225,303)
Miscellaneous Revenue 25,949 19,768 - 45,717
Interest and Fiscal Agent Fees (295,538) (472,163) - (767,701)
Total Nonoperating Revenues (Expenses) (266,215) (593,709) 30,150 (829,774)
Income (Loss) Before Capital Contributions and Transfers 752,431 (349,868) (35,895) 366,668
Connection Fees 1,673,258 4,706,920 - 6,380,178
Capital Contributions - Developer Assets 1,753,646 1,580,765 1,351,740 4,686,151
Capital Contributions - Governmental Funds 871 611 895 2,377
Transfers Out (60,775) (182,325) - (243,100)
Change in Net Position 4,119,431 5,756,103 1,316,740 11,192,274
Net Position - January 1 22,341,066 33,108,697 5,280,125 60,729,888
Net Position - December 31 26,460,497$ 38,864,800$ 6,596,865$ 71,922,162$
The notes to the financial statements are an integral part of this statement.
39
CITY OF OTSEGO, MINNESOTA
STATEMENT OF CASH FLOWS
PROPRIETARY FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2021
Sanitary Storm
Water Sewer Water Total
Utility Utility Utility Enterprise
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from Customers and Users 2,870,307$ 2,936,570$ 127,141$ 5,934,018$
Other Operating Receipts 109,462 19,768 - 129,230
Payments to Suppliers (1,007,107) (1,226,409) (30,190) (2,263,706)
Payments to Employees (159,087) (477,262) (13,626) (649,975)
Net Cash Flows Provided by Operating Activities 1,813,575 1,252,667 83,325 3,149,567
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Property Taxes - - 34,000 34,000
Transfers Out (60,775) (182,325) - (243,100)
Net Cash Flows Provided (Used) by Noncapital Financing Activities (60,775) (182,325) 34,000 (209,100)
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES
Acquisition and Construction of Capital Assets (3,238,644) (10,148,674) - (13,387,318)
Bond Proceeds 4,596,118 - - 4,596,118
Principal Paid on Revenue Bonds (842,009) (1,496,904) - (2,338,913)
Interest Paid on Revenue Bonds (304,428) (376,608) - (681,036)
Note Proceeds from Direct Borrowings - 8,633,491 - 8,633,491
Principal Paid on Direct Borrowings - (130,866) - (130,866)
Interest Paid on Direct Borrowings - (110,709) - (110,709)
Connection Fees 1,729,088 4,880,164 - 6,609,252
Net Cash Flows Provided by Capital and Related Financing Activities 1,940,125 1,249,894 - 3,190,019
CASH FLOWS FROM INVESTING ACTIVITIES
Interest on Investments (80,139) (141,314) (3,850) (225,303)
Net Increase in Cash and Cash Equivalents 3,612,786 2,178,922 113,475 5,905,183
Cash and Cash Equivalents - January 1 7,902,926 14,622,021 425,462 22,950,409
Cash and Cash Equivalents - December 31 11,515,712$ 16,800,943$ 538,937$ 28,855,592$
RECONCILIATION OF OPERATING INCOME (LOSS) TO NET
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES
Operating Income (Loss) 1,018,646$ 243,841$ (66,045)$ 1,196,442$
Adjustments to Reconcile Operating Income (Loss)
to Net Cash Flows Provided by Operating Activities:
Depreciation 703,828 1,066,214 136,318 1,906,360
GERF Pension Activity 3,938 12,038 - 15,976
Other Income Related to Operations 109,462 19,768 - 129,230
(Increase) Decrease in Assets & Deferred Outflows of Resources:
Accounts Receivable (34,228) (92,553) 2,203 (124,578)
Special Assessments 31,211 - 2,738 33,949
Due from Other Governments - 184 - 184
Prepaid Items (1,860) (10,691) - (12,551)
Increase (Decrease) in Liabilities & Deferred Inflows of Resources
Accounts Payable (24,930) 22,181 8,111 5,362
Due to Other Governments 4,808 (16,414) - (11,606)
Accrued Salaries Payable 938 2,813 - 3,751
Compensated Absences Payable 1,762 5,286 - 7,048
Net Cash Flows Provided by Operating Activities 1,813,575$ 1,252,667$ 83,325$ 3,149,567$
NONCASH FINANCING ACTIVITIES
Amortization of Premium on Bonds Payable 55,300$ 98,311$ -$ 153,611$
Acquisition of Capital Assets on Account 329,823$ 366,023$ -$ 695,846$
Contribution of Capital Assets - Developer 1,753,646$ 1,580,765$ 1,351,740$ 4,686,151$
Contribution of Capital Assets - Governmental Funds 871$ 611$ 895$ 2,377$
The notes to the financial statements are an integral part of this statement.
40
CITY OF OTSEGO, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2021
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. REPORTING ENTITY
The City of Otsego, Minnesota (the City) was incorporated in 1990 after being an established township since 1858. The
City operates under the "Optional Plan A" form of government, as defined in Minnesota statutes. The governing body
of the City (City Council) consists of an elected Mayor, and four elected Council members, all of which are elected at-large
and serve four year staggered terms. The City Council exercises legislative authority and determines all matters of policy.
The financial statements of the City have been prepared in accordance with accounting principles generally accepted in
the United States of America (GAAP), as applied to governmental units by the Governmental Accounting Standards
Board (GASB).
The City includes all funds, organizations, institutions, agencies, departments, boards, and offices that are not legally
separate from the City. Component units are legally separate organizations for which the elected officials of the City are
financially accountable and are included within the basic financial statements of the City because of the significance of
their operational or financial relationships with the City.
The City is considered financially accountable for a component unit if it appoints a voting majority of the organization's
governing body and is able to impose its will on the organization by significantly influencing the programs, projects,
activities, or level of services performed or provided by the organization, or there is a potential for the organization to
provide specific financial benefits to, or impose specific financial burdens on, the City.
Blended component units, although legally separate, are, in substance, part of the government’s operations. A blended
component unit is reported as if it were a fund of the City throughout the year. It is included at both the government-wide
and fund financial reporting levels.
A description of the City’s blended component unit follows:
The City of Otsego Economic Development Authority (EDA) – The EDA is a legal entity separate from the City.
Although legally separate, the EDA is reported as if it were part of the primary government because the Board of
Commissioners is made up of the Mayor and four Council members and the City has operational responsibility over
the EDA. It is this criterion that results in the EDA being reported as a blended component unit within the primary
government, although there is currently no financial activity for the EDA. Separate financial statements would not be
prepared for the EDA, even if there was financial activity.
41
CITY OF OTSEGO, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2021
B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS
The government-wide financial statements (i.e., the statement of net position and the statement of activities) report
information on all activities of the City and its component units. 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 are
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 business-type activity and 2) grants and contributions that are
restricted to meeting the operational or capital requirements of a particular function or business-type activity. Taxes
and other items not 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 and
expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes and special
assessments 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 imposed by the provider have been met.
Governmental fund financial statements are reported using the current financial resources measurement focus and the
modified accrual basis of accounting . Revenues are recognized as soon as they are both measurable and available.
Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay
liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within 60
days of the end of the current fiscal year. Expenditures generally are recorded when a liability is incurred, as under accrual
accounting. However, debt service expenditures, compensated absences, as well as expenditures related to claims and
judgements, are recorded only when payment is due.
Property taxes, special assessments, intergovernmental revenues, charges for services and interest associated with the current
fiscal year are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal year.
Only the portion of special assessments receivable due within the current fiscal year is considered to be susceptible to accrual
as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is
received by the City.
42
CITY OF OTSEGO, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2021
The City reports the following major governmental funds:
General Fund - This is the City's primary operating fund, and accounts for all of the general financial resources of
the City, except those required to be accounted for in another fund. Most of the current day-to-day operations of the
City are financed from this fund.
Debt Service Fund - This fund is used to account for the collection of property taxes, special assessments and other
resources which are used to repay the principal and interest on debt issued for various improvements in the City.
Pavement Management Fund - This fund was established to provide funds and to account for the expenditure of
such funds, for costs associated with the City's street maintenance and replacement plan adopted annually within the
Capital Improvement Plan. Annual projects may include: fog & seal coating, crack filling, paint striping, patching and
asphalt overlays.
Municipal State-Aid for Construction Fund - This fund was established to account for the State allotment of
construction aid. The source of the State funding is provided for through collection of gasoline taxes. The funds
accumulated are used on transportation related construction projects.
Development and Builder Escrows Fund - This fund was established to receipt funds and to account for the
expenditure of such funds, for costs associated within residential, commercial and industrial developments in the City.
The City reports the following major enterprise funds:
Water Utility Fund - This fund accounts for the operations of the public water utility system. The resources
accumulated are primarily from system user charges and system connection fees. The accumulated funds are then used
to pay for the operational costs of pumping and distributing water to the system customers. The fund also accumulates
resources to finance certain capital improvements and to pay the debt service associated with the water utility.
Sanitary Sewer Utility Fund - This fund accounts for the operations of the public sewer utility system. The resources
accumulated are primarily from system user charges and system connection fees. The accumulated funds are then used
to pay for the operational costs of collection and treatment of sewage from the system. The fund also accumulates
resources to finance certain capital improvements and to pay the debt service associated with the sewer utility.
Storm Water Utility Fund - This fund accounts for the operations of the storm water collection system. The resources
accumulated are primarily from system user charges and property taxes. The accumulated funds are then used to pay
for the operational costs of collection and treatment of surface water runoff that does not require treatment.
43
CITY OF OTSEGO, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2021
As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements.
Exceptions to this general rule are transactions that would be treated as revenues, expenditures or expenses if they involved
external organizations, such as buying goods and services or payments in lieu of taxes. Elimination of these charges would
distort the direct costs and program revenues reported for the various functions concerned.
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 enterprise funds are charges to customers for sales and services.
Operating expenses for enterprise 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 nonoperating revenue and expenses.
D. DEPOSITS AND INVESTMENTS
The City's cash and cash equivalents are considered to be cash on hand, demand deposits and investments with a maturity of
three months or less when from the date of acquisition. All of the deposits and investments allocated to the proprietary funds
are considered to meet this criteria.
Cash balances from all funds are pooled and invested, to the extent available, in certificates of deposit and other authorized
investments. Earnings from such investments are allocated on the basis of applicable participation by each of the funds.
Minnesota statute §118A.04 governs the investment of public funds and outlines the allowable investment types. The City's
investment policy is more restrictive than statute, and authorizes the City to invest in the following:
a] Securities which are direct obligations or are guaranteed or insured issues of the United States, its agencies, its
instrumentalities, or organizations created by an act of Congress.
b] Shares of investment companies registered under the Federal Securities Act of 1940, and received the highest credit
rating and is rated in one of the two highest categories by at least one nationally recognized statistical rating agency.
c] Obligations of any state or local government with taxing powe rs rated "A" for general obligations or with a rating of
"AA" or better for revenue backed obligations, with the ratings being provided by a national bond rating service.
d] Commercial paper issued by a United States corporation or their Canadian subsidiaries that is rated in the highest quality
by at least two nationally recognized rating agencies.
e] Time deposits that are fully insured by the Federal Deposit Insurance Corporation.
Certain investments for the City are reported at fair value as disclosed in Note 3 (A). The City categorizes its fair value
measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based
on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for
identical assets; Level 2 inputs are significant other observable inputs; and Level 3 inputs are significant unobservable inputs.
In accordance with Governmental Accounting Standards Board (GASB) Statement No. 79, the Minnesota Municipal
Investment Pool (4M) securities are valued at amortized cost, which approximates fair value. There are no restrictions or
limitations on withdrawals from the 4M Liquid Asset Fund. Amounts invested in the 4M Plus must be deposited for a minimum
of 14 days. Withdrawals made prior to the 14-day requirement will be subject to a penalty equal to 7 days interest on the
amount withdrawn.
44
CITY OF OTSEGO, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2021
E. RECEIVABLES AND PAYABLES
Accounts Receivable
Receivables include amounts billed for services provided by the City before year-end. Receivables within the enterprise
funds do include unbilled charges for services provided from the middle of December to the end of the year, as the City
bills for those services mid-month. The City currently has not established an allowance for doubtful accounts for either
trade or utility charge receivables. The City annually certifies unpaid trade and utility charge receivable to Wright County
for collection in the following year, and is the primary factor in reporting the receivables at a gross amount, rather than
net of allowance.
Property Taxes
The City Council annually adopts a property tax levy and certifies it to Wright County in December. The County allocates
this levy across taxable properties in the City based on valuations assessed in the prior year. These taxes become an
enforceable lien against the property on January 1st, and are recorded as receivables by the City as of that date.
Tax statements are generated and mailed by the County to the respective taxpayers, with half of the total due on May 15th
and the second half due on October 15th. The County is also the collecting agency, and remits the amounts collected to the
City with primary settlements in June and December, and a minor settlement in January.
Property taxes that are unpaid as of December 31st, are then classified as delinquent. Delinquent taxes receivable include
the past six years of uncollected taxes and are fully offset by a deferred inflow of resources for those collections not
received within 60 days of year-end in the governmental fund financial statements.
Special Assessments
Special assessments represent the financing for public improvements paid for by benefiting property owners. These
assessments are recorded as receivables upon certification to the County. Special assessments have been offset by a
deferred inflow of resources for those collections not received within 60 days after year end in the governmental fund
financial statements.
Interfund Receivables and Payables
During the course of operations, numerous transactions occur between individual funds for goods provided or services
rendered. Short-term interfund loans are classified as “due to/from other funds.” All short-term interfund receivables and
payables at December 31, 2021 are planned to be eliminated in 2022. Long-term interfund loans are classified as
“advances 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".
F. PREPAID ITEMS
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 rather than when purchased.
G. ASSETS HELD FOR RESALE
Assets held for resale represent various parcels of land that are currently owned by the City with the intent to sell in the future
to create economic development activity within the City. The assets are reported at their net realizable value in the General
fund. During the year ended December 31, 2021, management has reviewed the reported values of the assets.
45
CITY OF OTSEGO, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2021
H. CAPITAL ASSETS
Capital assets, which include property, plant, equipment, infrastructure assets (e.g., roads, bridges, sidewalks, and similar items)
and intangible assets such as easements and computer software, are reported in the applicable governmental or business-type
activities columns in the government-wide financial statements and the proprietary fund financial statements. Capital assets are
defined by the City as assets with an initial, individual cost in excess of the amounts in the table below and with an estimated
useful life in excess of three years. All land assets are recorded by the City with no assigned cost threshold. Such assets are
recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at
acquisition value at the date of donation.
Infrastructure $ 100,000
Buildings and Building Improvements 50,000
Land Improvements 25,000
Machinery and Equipment 5,000
The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not
capitalized.
Capital assets of the City, are depreciated using the straight line method over the following estimated useful lives:
Infrastructure 25 - 40 years
Buildings and Building Improvements 10 - 40 years
Land Improvements 5 - 20 years
Machinery and Equipment 3 - 15 years
I. DEFERRED OUTFLOWS 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 assets
that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The
City presents deferred outflows of resources on the Statement of Net Position for deferred outflows of resources related to
pensions for various estimate differences that will be amortized and recognized over future years.
J. COMPENSATED ABSENCES
It is the City's policy to permit employees to accumulate earned but unused personal time-off (PTO) benefits. All PTO pay is
accrued when incurred in the government-wide and proprietary fund financial statements. A liability for these amounts is
reported in governmental fund financial statements only if they have matured, for example, as a result of an employee
retirement or resignation. The General fund is typically used to liquidate the compensated absences payable for governmental
activities.
46
CITY OF OTSEGO, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2021
K. LONG TERM OBLIGATIONS
In the government-wide financial statements and proprietary fund types in the 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 are amortized over the life of the bonds using
the straight line method. Bonds payable are reported net of the applicable bond premium or discount.
In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance
costs, 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. PENSIONS
For purposes of measuring the net pension liability, deferred outflows of resources, deferred inflows of resources, and
pension expense, information about the fiduciary net position of the Public Employees Retirement Association (PERA) and
additions to or 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. The General fund is typically used to liquidate the net pension liability for
governmental activities. The Water Utility and Sanitary Sewer Utility funds would be used to liquidate the net pension liability
for business-type activities.
M. POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS
In June 2015, the Governmental Accounting Standards Board (GASB) issued Statement No. 75, Accounting and Financial
Reporting for Postemployment Benefits Other Than Pensions. The primary objective of this Statement was to improve
accounting and financial reporting for postemployment benefits other than pensions (OPEB). The City has no plans that would
result in an OPEB liability and, therefore, the City anticipates it will not incur any future explicit or implicit OPEB costs for its
employees, and therefore, no liability will be recorded.
N. DEFERRED INFLOWS OF RESOURCES
In addition to liabilities, statements of financial position or balance sheets will sometimes report a separate section for deferred
inflows of resources. This separate financial statement element represents an acquisition of net assets that applies to future
periods and so will not be recognized as an inflow of resources (revenue) until that time. The City has three types of items
which qualify for reporting in this category. One item, unavailable revenue, which arises only under a modified accrual basis
of accounting, therefore, is reported only in the governmental funds Balance Sheet. The governmental funds report unavailable
revenue from sources such as: property taxes and special assessments not collected within 60 days of year-end. The statement
of net position and governmental funds also report deferred inflows of grants for subsequent years due to timing requirements
not being met at year-end. These amounts are deferred and recognized as an inflow of resources in the period the amounts
become available. The second item presented by the City are deferred inflows of resources on the Statement of Net Position
for deferred inflows of resources related to pensions for various estimate differences that will be amortized and recognized
over future years. The third item presented by the City on the government-wide statement of net position and on the proprietary
funds statement of net position are deferred inflows of resources related to a deferred gain on a refunding bond issuance
which will be amortized over the remaining life of the debt issuance.
47
CITY OF OTSEGO, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2021
O. FUND EQUITY
Fund equity in the fund financial statements is classified as fund balance for governmental funds and net position for
proprietary funds. Fund equity in the government-wide financial statements is classified as net position for both
governmental and business-type activities.
Fund Balance – In the fund financial statements, governmental funds report fund balance in classifications that disclose
restraints for which amounts in those funds can be spent. These classifications are as follows:
Nonspendable – consists of amounts that are not in spendable form or are required to be maintained intact.
Restricted – consists of amounts related to externally imposed constraints established by creditors, grantors or
contributors; or constraints imposed by state statutory provisions.
Committed – consists of internally imposed constraints. These constraints are imposed by formal action (resolution)
of the City Council, which is the highest level of decision making authority.
Assigned – consists of internally imposed constraints. These constraints reflect the specific purpose for which it is
the City’s intended use. These constraints are established by the City Council or, pursuant to council resolution, the
City Administrator or the Finance Director.
Unassigned – is the residual classification for the General fund and also reflects negative residual amounts in other
funds.
When committed, assigned, or unassigned resources are available for an allowable use, it is the City’s policy to use
resources in the following order; 1) committed, 2) assigned, and 3) unassigned.
The City has formally adopted a fund balance policy for the General Fund. The policy establishes a year-end target
fund balance amount of 45% of the next year’s operating budget for cash flow needs.
Net Position – Net position represents the difference between assets, deferred outflows of resources, liabilities and
deferred inflows of resources. Net position can be displayed in the three following classifications:
Net Investment in Capital Assets – consists of capital assets, net of accumulated depreciation, and further reduced by
the outstanding balance of any long-term debt used to build or acquire the respective capital assets.
Restricted – reported when there are limitations of use through external restrictions imposed by creditors, grantors,
or laws and regulations of other governments.
Unrestricted – all remaining net position is reported in this classification.
When both restricted and unrestricted net position are available for an allowable use, it is the government’s policy to
use restricted resources first, then unrestricted resources as they are needed.
48
CITY OF OTSEGO, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2021
P. USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of
America (GAAP), requires management to make estimates and assumptions that affect amounts reported in the financial
statements and accompanying notes. Actual results could differ from such estimates.
Q. BUDGETARY INFORMATION
An annual budget is adopted on a basis consistent with accounting principles generally accepted in the United States of
America (GAAP) for the General fund, the Debt Service fund, and the Revolving Loan, Tax Increment District No. 1,
Tax Increment District No. 3, and Tax Increment District No. 4 special revenue funds. All annual appropriations lapse
at year-end. The City does not use encumbrance accounting.
In June of each year, General fund departments submit requests for appropriations to the City Administrator so that a budget
may be prepared. The requested budget appropriations are presented and reviewed with the City Council. The proposed
General fund budget and preliminary property tax levy must be certified to Wright County prior to September 30. The City
Council holds public hearings and a final budget is adopted in early December, with the final property tax levy required to be
certified to Wright County prior to the end of December.
The appropriated budget is prepared by fund and department. The City's department heads are authorized to make transfers of
budgeted appropriations within a department. Any transfers of appropriations between a department needs authorization of the
City Administrator. The legal level of budgetary control is at the fund level, so any appropriations transfers between funds
needs the approval of the City Council. There were no transfers of budgeted appropriations or budget amendments during
the year.
NOTE 2 STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY
A. DEFICIT FUND EQUITY
Deficit fund equity exists at December 31, 2021 in the following fund:
Major Governmental Funds:
Capital Project Funds
MSA Construction 3,523,065$
The deficit is being funded through internal borrowing. The MSA Construction fund deficit will be repaid with State-Aid
funding from 2022 through 2025, which has been advanced to the City for the 85th Street and Maciver Avenue street extension
project.
49
CITY OF OTSEGO, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2021
NOTE 3 DETAILED NOTES ON ALL FUNDS
A. DEPOSITS AND INVESTMENTS
In accordance with Minnesota Statutes, the City maintains deposits at only those depository banks authorized by the
City Council. All such depositories are members of the Federal Reserve System.
Minnesota Statutes require that all City deposits with financial institutions be protected by federal deposit insurance, corporate
surety bonds or collateral. The market value of collateral pledged must equal 110% of the deposits not covered by insurance
or bonds. Minnesota Statutes require that all securities pledged as collateral be placed in safekeeping in a restricted account at
the Federal Reserve Bank, or in an account at a trust department of a commercial bank or other financial institution that is not
owned or controlled by the financial institution furnishing the collateral.
At year-end, the City's carrying amount of deposits was $716,822, and a bank balance of $1,229,635.
Custodial credit risk for the City's deposits would arise in the event of a bank failure, where the City's deposits may not be
returned to it. As of year-end, the City's bank balance was not exposed to custodial credit risk because it was insured and fully
collateralized with securities held by the pledging financial institution's trust department or agent in the City's name.
As of December 31, 2021 the City had the following investments:
Fair Value < 1 1 - 3 3 - 5
Negotiable Certificates of Deposit 26,139,953$ 6,472,122$ 14,601,105$ 5,066,726$
U.S. Government Agency Securities 16,013,478 2,506,903 11,675,201 1,831,374
Municipal Bonds 4,645,864 - 2,933,753 1,712,111
External Investment Pool 16,518,714 16,518,714 - -
Brokered Money Market Accounts 44,321 44,321 - -
Total 63,362,330$ 25,542,060$ 29,210,059$ 8,610,211$
The external investment pool and brokered money market investments are valued at amortized cost. All of the remaining City
investments have recurring fair value measurements using a matrix pricing model (level 2 inputs).
Investment Maturities (In Years)
Investment Type
50
CITY OF OTSEGO, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2021
As of December 31, 2021, the City's investments in U.S. Government Agency Securities and Municipal Bonds carried the
following ratings as well as their respective concentration percentage when compared to the total investment portfolio. An
indication of "NR" in the ratings below mean that the respective rating organization has not provided a rating on the respective
investment.
Moody's S & P Fair Portfolio
Rating Rating Value Concentration %
U.S. Government Agency Securities
Federal Farm Credit Bank (FFCB) Aaa AA+ 4,971,267$ 7.85%
Federal Home Loan Bank (FHLB) Aaa AA+ 4,187,409 6.61%
Federal Home Loan Mortgage Corporation (FHLMC) Aaa AA+ 2,462,876 3.89%
Federal National Mortgage Association (FNMA) Aaa AA+ 4,391,926 6.93%
Total 16,013,478$ 25.27%
Municipal Bonds
City of Bloomington, Minnesota NR AAA 155,490 0.25%
City of Minneapolis, Minnesota Aa1 AAA 1,354,675 2.14%
State of Texas Aaa AAA 105,641 0.17%
City of Arlington, TX Aa1 AAA 134,519 0.21%
Shakopee School District, MN Aa2 NR 732,726 1.16%
City of New York NY Aa2 AA 979,385 1.55%
State of Oregon Aa1 AA+ 498,656 0.79%
Lake of the Woods School District, MN NR AAA 684,772 1.08%
Total 4,645,864$ 7.33%
The following is a summary of total deposits and investments as of December 31, 2021 and presented in the basic financial
statements in the Statement of Net Position:
Deposits 716,822$
Investments 63,362,330
Petty Cash and Change Funds 600
Total 64,079,752$
Investment Type
51
CITY OF OTSEGO, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2021
Interest Rate Risk – This is the risk that the market values of the securities in the City's investment portfolio would decrease
due to changes in market interest rates. The City identifies interest rate risk within the second and fourth objectives of the City's
investment policy, which are liquidity and return on investment. The City attempts to limit its exposure to interest rate risk by
keeping the investment portfolio sufficiently liquid to meet cash flow requirements, while still attempting to obtain a reasonable
return on investment. The City also addresses interest rate risk by attempting to create proportions in the maturities of the City's
investment portfolio which places longer term investments higher on the yield curve than those shorter term investments.
Credit Risk – This is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. Minnesota
Statutes limits allowable investments to those that are in the top two ratings issued by nationally recognized statistical rating
organizations. The City's investment policy also addresses credit risk by further limiting investments to the list provided
within Note 1-D.
Concentration of Credit Risk – This is the risk of loss attributed to the magnitude of the City's investment in any single issuer.
The first objective of the City's investment policy is safety. To obtain this objective, diversification is to be considered in the
type of investment, maturity and the issuer of the respective investments. Each of the City's certificates of deposit are
purchased in amounts not exceeding federal deposit insurance. The tables above outline the concentrations of the City's other
investment types, including U.S. Government Agency Securities and Municipal Bonds.
More than 5 percent of the City's investments are in Federal Farm Credit Bank (FFCB), Federal Home Loan Bank (FHLB),
Federal National Mortgage Assocation (FNMA) and the Minnesota Municipal Investment Pool (4M). These investments are
7.85 percent, 6.61 percent, 6.93 percent, and 26.07 percent respectively, of the City's total investments.
Custodial Credit Risk – This is the risk that in the event of the failure of a counterparty to an investment, the City will not be
able to recover the value of an investment or collateral securities that are in possession of an outside party. In accordance with
the City's investment policy, all investment securities shall be held by a single safekeeping agent in the name of the City.
52
CITY OF OTSEGO, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2021
B. CAPITAL ASSETS
Capital asset activity for the year ended December 31, 2021 was as follows:
Beginning Ending
Balance Increases Decreases Balance
Governmental Activities:
Capital Assets, not Being Depreciated:
Land 4,278,161$ -$ -$ 4,278,161$
Construction in Progress 796,561 614,819 (1,397,177) 14,203
Total Capital Assets, not Being Depreciated 5,074,722 614,819 (1,397,177) 4,292,364
Capital Assets, Being Depreciated:
Buildings and Building Improvements 6,562,050 - - 6,562,050
Land Improvements 6,661,527 551,856 - 7,213,383
Machinery and Equipment 4,276,691 378,765 (188,547) 4,466,909
Infrastructure 34,336,984 4,786,719 - 39,123,703
Total Capital Assets, Being Depreciated 51,837,252 5,717,340 (188,547) 57,366,045
Less Accumulated Depreciation for:
Buildings and Building Improvements 2,244,097 160,792 - 2,404,889
Land Improvements 3,147,818 281,463 - 3,429,281
Machinery and Equipment 2,383,580 344,843 (188,547) 2,539,876
Infrastructure 8,384,227 1,076,131 - 9,460,358
Total Accumulated Depreciation 16,159,722 1,863,229 (188,547) 17,834,404
Total Capital Assets Being Depreciated - Net 35,677,530 3,854,111 - 39,531,641
Governmental Activities Capital Assets - Net 40,752,252$ 4,468,930$ (1,397,177)$ 43,824,005$
Depreciation expense was charged to the functions of the City as follows:
Governmental Activities:
General Government 30,409$
Public Safety 9,280
Public Works 1,407,123
Culture and Recreation 416,417
Total Depreciation Expense - Governmental Activities 1,863,229$
53
CITY OF OTSEGO, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2021
Beginning Ending
Balance Increases Decreases Balance
Business-type Activities:
Capital Assets, not Being Depreciated:
Land 703,695$ -$ -$ 703,695$
Construction in progress 10,619,801 11,800,072 (17,281,203) 5,138,670
Total Capital Assets, not Being Depreciated 11,323,496 11,800,072 (17,281,203) 5,842,365
Capital Assets, Being Depreciated:
Buildings and Building Improvements 177,604 16,493,146 - 16,670,750
Machinery and Equipment 1,621,987 51,251 - 1,673,238
Infrastructure 67,777,754 5,474,208 - 73,251,962
Total Capital Assets, Being Depreciated 69,577,345 22,018,605 - 91,595,950
Less Accumulated Depreciation for:
Buildings and Building Improvements 26,871 10,698 - 37,569
Machinery and Equipment 570,179 136,616 - 706,795
Infrastructure 19,274,394 1,759,046 - 21,033,440
Total Accumulated Depreciation 19,871,444 1,906,360 - 21,777,804
Total Capital Assets Being Depreciated - Net 49,705,901 20,112,245 - 69,818,146
Business-type Activities Capital Assets - Net 61,029,397$ 31,912,317$ (17,281,203)$ 75,660,511$
Depreciation expense was charged to the functions of the City as follows:
Business-type Activities:
Water Utility 703,828$
Sanitary Sewer Utility 1,066,214
Storm Water Utility 136,318
Total Depreciation Expense - Business-type Activities 1,906,360$
54
CITY OF OTSEGO, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2021
C. CONSTRUCTION COMMITMENTS
At December 31, 2021 the City had construction project contracts in progress. The commitments related to remaining contract
balances are summarized as follows:
Contract Remaining
Amount Commitment
Water Utility
Water Tower #4 3,921,000$ 489,000$
Sanitary Sewer Utility
East WWTF Biosolids Building 14,021,924 24,665
Total 17,942,924$ 513,665$
D. INTERFUND BALANCES AND TRANSFERS
At December 31, 2021, the composition of balances for due to/from other funds of the City were as follows:
Due from Due to
Other Funds Other Funds
Major Governmental Funds:
MSA Construction -$ 612,136$
Nonmajor Governmental Funds:
Capital Improvements 612,136 -
Total 612,136$ 612,136$
Interfund due to/from balances are representative of lending/borrowing arrangements to cover deficit cash balances at the end
of the fiscal year. The balance in the Municipal State-Aid for Construction fund will be repaid with State-Aid funding for the
85th Street and Maciver Avenue extension projects.
Fund
Fund & Project
55
CITY OF OTSEGO, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2021
Transfers between funds made during the year ended December 31, 2021 were as follows:
Transfer In Transfer Out
Major Governmental Funds:
General 243,100$ 2,434,846$
Nonmajor Governmental Funds:
Trails Management 300,000 -
Capital Improvements 2,134,846 -
Total Governmental Funds 2,677,946 2,434,846
Major Proprietary Funds:
Water Utility - 60,775
Sanitary Sewer Utility - 182,325
Total Proprietary Funds - 243,100
Total All Funds 2,677,946$ 2,677,946$
Interfund transfers allow the City to allocate financial resources to the funds that receive benefit from services provided by
another fund or to provide additional capital and infrastructure funding. In addition, interfund transfers are occasionally
authorized to allow redistribution of resources between funds for the most efficient use of funds. In 2021, the following
transfers were made between funds:
• The General fund transferred $300,000 to the Trails Management fund and $2,134,846 to the Capital Improvements
fund. These transfers were in accordance with the City's fund balance policy, where any balance exceeding the
minimum fund balance is set aside for future capital items.
• The Water Utility and Sanitary Sewer Utility funds transferred $60,775 and $182,325 respectively to the General
fund as an annual contribution to help manage the property tax levy.
Fund
56
CITY OF OTSEGO, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2021
E. LONG-TERM DEBT
Governmental Activities
The City issued general obligation bonds to provide funding for the acquisition and construction of major capital facilities
and construction of infrastructure in the governmental activities. General obligation bonds have also been issued to
refinance general obligation improvement bonds, which were originally intended to be fully repaid with collections of
special assessments. All long-term indebtedness outstanding is backed by the full faith and credit of the City. Bonds in the
governmental activities will be retired with future property tax levies and collections of special assessments. In the event
that a deficiency exists because of unpaid or delinquent taxes or special assessments at the time a debt service payment is
due, the City must provide resources to cover the deficiency until other resources are available. At the end of the current
year, there are $2,428,612 of assets accumulated in the debt service funds for future debt service. Included within those
accumulated assets, there are $1,068 of delinquent special assessments receivable, of which collection is uncertain.
Final
Interest Issue Maturity Original Payable
Rates Date Date Issue 12/31/21
General Obligation Bonds:
Improvement Bonds, Series 2018A 3.00 - 3.13% 7/11/2018 2/1/2034 2,305,000$ 1,955,000$
Refunding Bonds 2020A 1.03 - 1.11% 11/17/2020 2/1/2028 2,950,000 2,445,000
Total - Bonded Indebtedness 5,255,000$ 4,400,000
Other Liabilities:
Unamortized Premium on Issuance of Bonds 319,716
Compensated Absences Payable 104,969
Total Governmental Activities 4,824,685$
Annual debt service requirements to maturity for governmental activities long-term indebtedness are as follows:
Principal Interest
660,000$ 144,431$
685,000 119,406
460,000 98,406
480,000 81,556
495,000 64,081
1,415,000 102,531
205,000 9,765
4,400,000$ 620,176$
2032 - 2034
Total
2027 - 2031
General Obligation Bonds
2024
2025
2026
Year Ending
December 31
2022
2023
Governmental Activities
57
CITY OF OTSEGO, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2021
Business-type Activities
The City issued general obligation bonds to provide funding for the acquisition and construction of major capital facilities
and construction of infrastructure in the business-type activities. All long-term indebtedness outstanding is backed by the
full faith and credit of the City. Bonds in the business-type activities will be retired with the net revenues of the Water and
Sanitary Sewer funds. (Net revenues are defined as the excess of gross revenues and earnings over the normal, reasonable
and current costs of operating and maintenance). In the event that a deficiency exists because of inadequate net revenues
at the time a debt service payment is due, the City must provide resources to cover the deficiency until other resources are
available. At the end of the current year, the Water and Sanitary Sewer funds provided net revenues of $7,642,665, which
accounts for a debt-service coverage ratio of 234.33%.
Final
Interest Maturity Original Payable
Rates Date Date Issue 12/31/21
General Obligation Bonds:
Revenue Bonds, Series 2019A 4.00 - 4.00% 12/19/2019 12/1/2026 3,525,000$ 3,525,000$
Revenue Bonds, Series 2021A 1.00 - 3.00% 9/23/2021 2/1/2037 4,345,000 4,345,000
Revenue Bonds, Series 2021B 5.00 - 5.00% 9/23/2021 12/1/2026 7,390,000 7,390,000
Note from Direct Borrowing:
G.O. PFA Revenue Note, 2020 1.16% 4/27/2020 8/20/2040 17,199,866 16,305,983
Sub-Total 32,459,866$ 31,565,983
Other Liabilities:
Unamortized Premium on Issuance of Bonds 1,475,843
Compensated Absences Payable 32,187
Total Business-type Activities 33,074,013$
58
CITY OF OTSEGO, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2021
Annual debt service requirements to maturity for business-type activities long-term indebtedness are as follows:
Principal Interest Principal Interest
2,320,000$ 658,454$ 808,000$ 185,582$
2,745,000 482,630 817,000 188,790
2,335,000 349,155 827,000 179,305
2,210,000 243,355 837,000 169,703
2,295,000 152,280 846,000 159,986
1,455,000 213,450 4,381,000 650,276
1,570,000 101,093 4,641,000 389,992
330,000 3,300 3,912,000 114,208
15,260,000$ 2,203,717$ 17,069,000$ 2,037,842$
In April 2020, the City issued $17,199,866 of General Obligation PFA Revenue Note, Series 2020 for the purpose of
financing the eligible projects costs of the Clean Water State Revolving Fund project to construct a Biosolids Building at
the East Wastewater Treatment Facility. The aggregate principal amount of the loan disbursed and outstanding will bear
interest at the rate of 1.16 percent per annum accruing from and after the date of the Note, which is April 27, 2020, through
the date on which no principal of the loan remains unpaid and all accrued interest and servicing fees have been paid.
The annual debt service requirements to maturity presented are based on the final projected costs and debt authorized by
the Minnesota Public Facilities Authority. The balance of the debt represents costs incurred through December 31, 2021.
In September 2021, the City issued $7,390,000 of General Obligation Water and Sewer Revenue Refunding Bonds, Series
2021B for the current refunding of the General Obligation Water and Sewer Revenue Refunding Bond, Series 2010C.
The refunding was done to take advantage of lower interest rates. The refunding resulted in a decrease of future debt
service payments of $496,333. The net present value cash flow savings from this transaction was $486,507.
Total
Business-type Activities
2023
2024
2025
2026
Year Ending Note from Direct Borrowing
December 31
2022
2032 - 2036
2027 - 2031
2037 - 2040
Business-type Activities
General Obligation Bonds
59
CITY OF OTSEGO, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2021
Changes in Long-Term Liabilities
Long-term liability activity for the year ended December 31, 2021 was as follows:
Beginning Ending Due Within
Balance Additions Reductions Balance One Year
Governmental Activities:
General Obligation Bonds 5,760,000$ -$ (1,360,000)$ 4,400,000$ 660,000$
Unamortized Bond Premium 369,492 - (49,776) 319,716 -
Compensated Absences 102,331 144,641 (142,003) 104,969 20,994
Total - Governmental 6,231,823 144,641 (1,551,779) 4,824,685 680,994
Business-type Activities:
General Obligation Bonds 14,105,000 11,735,000 (10,580,000) 15,260,000 2,320,000
Notes from Direct Borrowings 9,438,936 6,997,913 (130,866) 16,305,983 808,000
Unamortized Bond Premium 921,658 707,796 (153,611) 1,475,843 -
Compensated Absences 25,139 43,097 (36,049) 32,187 6,437
Total - Business-type 24,490,733 19,483,806 (10,900,526) 33,074,013 3,134,437
Grand Total Long-Term Liabilities 30,722,556$ 19,628,447$ (12,452,305)$ 37,898,698$ 3,815,431$
The General fund is typically used to liquidate the compensated absences payable for governmental activities.
F. CONDUIT DEBT OBLIGATIONS
Conduit debt obligations are certain limited-obligation revenue bonds or similar instruments issued for the express purpose of
providing capital financing for a specific third party. The City has issued various revenue bonds to provide funding to private
sector entities for projects deemed to be in the public interest. Although these bonds bear the name of the City, the City has no
obligation for such debt. Accordingly, the bonds are not reported as liabilities in the financial statements of the City.
As of December 31, 2021, the City's conduit debt consisted of the following:
Guardian Angels Senior Services
Revenue Bonds, Series 2017 28,890,000$
Guardian Angels Senior Services
Revenue Refunding Bonds, Series 2017A 9,165,000
Revenue Refunding Bonds, Series 2017B 5,285,000
Kaleidoscope Charter School
Revenue Bonds, Series 2014A 14,390,000
60
CITY OF OTSEGO, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2021
G. TAX ABATEMENTS
The City has entered into certain agreements for economic development purposes to either attract new businesses or retain
existing business operations within the City. The authority for the City to enter into such agreements comes from Minnesota
Statute §469. The City further has an established Business Subsidy Policy that provides evaluation criteria for any business
subsidy requests. As of December 31, 2021, the City has entered into two types of agreements.
Property Tax Abatements
For the year ended December 31, 2021, the City abated property taxes totaling $45,874. Details of each agreement and
the abatement for the current year are as follows:
• The City has entered into a tax abatement agreement with Duke Realty for land acquisition costs paid by the developer
that ultimately allowed for the City to construct street infrastructure within the Gateway North industrial park. The
agreement outlines that 50 percent of taxes payable in 2016-2022 will be abated by the City, to a maximum value
of $340,000. The abatement amounted to $45,874 in the current year.
• The City has entered into a tax abatement agreement with Wright County in order to finance the cost of Parkview
Avenue and 88th Street improvements which facilitated the Parkview Retail development. The agreement outlines
that the City will use tax abatement financing in an amount not to exceed $950,000 to reimburse the costs of the public
improvements. Wright County will use tax abatement financing in an amount not to exceed $400,000 to reimburse the
City for a portion of the costs of the public improvements. This abatement will begin with taxes payable 2022.
61
CITY OF OTSEGO, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2021
Tax Increment Financing
For the year ended December 31, 2021, the Tax Increment Financing Districts within the City generated increment in the
amount of $311,971 and payments to the developers in the amount of $261,155. Details of each agreement are as follows:
• Tax Increment Financing District No. 1 was established in 2015 for the purpose of promoting industrial development
on a parcel owned by the City which had been obtained through the tax forfeiture process. The parcel would not have
been developed but-for tax increment financing given the existing special assessments and the extraordinary amount
of soil improvements. Under the agreement, up to $694,487 of costs incurred by the developer will be reimbursed
through a tax increment revenue note, payable beginning in 2018 and concluding in 2027. Payments on the tax
increment revenue note are only made to the extent of increment generated by the district. For 2021, this tax increment
financing district generated increment in the amount of $94,744 and payments to the developer in the amount
of $86,742.
• Tax Increment Financing District No. 3 was established in 2017 for the purpose of facilitating the development of a
142 unit senior housing facility, consisting of independent living, assisted living and memory care. The tax increment
district is a housing district, and is intended for occupancy, in part, by persons or families of low and moderate income.
In order to qualify as a housing district, the senior housing facility is required to provide at least 20% of the residential
units to persons whose incomes do not exceed 50% of the County median income. By providing the affordable housing,
the City believes that such a project was in the best interests of the City and its residents and agreed to reimburse the
developer the lesser of $2,389,400 or the costs of the site improvements actually incurred. The reimbursements will be
made through a tax increment revenue note, payable beginning in 2020 and concluding in 2047. Payments of the tax
increment revenue note are only made to the extent of increment generated by the district. For 2021, this tax increment
financing district generated increment in the amount of $175,868 and payments to the developer in the amount
of $154,759.
• Tax Increment Financing District No. 4 was established in 2018 for the purpose of facilitating the redevelopment of an
existing site including the decommissioning of a private wastewater treatment facility. The redevelopment of this site
will facilitate the construction of 164 units of market-rate multifamily housing, a mini-storage facility, and will create
shovel ready sites for approximately 15,000 square feet of future commercial retail development. The City determined
this development will ultimately preserve and enhance the tax base, redevelop sub-standard areas and provide
employment opportunities within the City that would not reasonably be expected to occur solely through private
investment within the forseeable future. Under the agreement, up to $3,359,685 of costs incurred by the developer will
be reimbursed through a tax increment revenue note, payable beginning in 2021 and concluding in 2046. Payments on
the tax increment revenue note are only made to the extent of increment generated by the district. For 2021, this tax
increment financing district generated increment in the amount of $41,359 and payments to the developer in the
amount of $19,654.
62
CITY OF OTSEGO, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2021
H. FUND EQUITY
Net position reported in the government-wide statement of net position at December 31, 2021 include the following:
Governmental Activities
Net Investment in Capital Assets:
Cost of Capital Assets 61,658,409$
Less: Accumulated Depreciation (17,834,404)
Less: Related Long-Term Debt Outstanding (4,719,716)
Total Net Investment in Capital Assets 39,104,289
Restricted for Debt Service
Fund Balance - Governmental Fund Financial Statements 1,186,039
Add: Unavailable Revenue - Special Assessments 1,241,990
Less: Accrued Interest Payable (65,294)
Total Restricted for Debt Service 2,362,735
Restricted for Tax Increment Financing 192,036
Restricted for Park Development
Fund Balance - Governmental Fund Financial Statements 5,091,818
Add: Unavailable Revenue - Special Assessments 14,460
Total Restricted for Park Development 5,106,278
Unrestricted 16,552,822
Total Governmental Activities Net Position 63,318,160$
Business-type Activities
Net Investment in Capital Assets:
Cost of Capital Assets 97,438,315$
Add: Unspent Bond Proceeds for 2021A Issuance 1,357,474
Less: Accumulated Depreciation (21,777,804)
Less: Related Long-Term Debt Outstanding (33,041,826)
Less: Deferred Gain on Refunding (394,409)
Total Net Investment in Capital Assets 43,581,750
Unrestricted 28,340,412
Total Business-type Activities Net Position 71,922,162$
63
CITY OF OTSEGO, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2021
Aggregated funds balances reported in the governmental funds balance sheet at December 31, 2021 include the following:
Governmental Funds
Nonspendable Restricted Committed Assigned
General Fund
Prepaid Items 152,273$ -$ -$ -$
Assets Held for Resale 202,200 - - -
Insurance Deductibles - - - 245,758
Educational Programs - - - 27,043
Debt Service
Debt Service - 1,186,039 - -
Pavement Management
City Buildings & Infrastructure - - - 5,534,565
Nonmajor Governmental Funds
Tax Increment Financing - 192,036 - -
Street Light Replacement - - 64,772 -
Business Development Loans - - 282,645 -
Park Development - 5,091,818 - -
City Buildings & Infrastructure - - - 8,650,375
City Parks - - - 728,114
Total Fund Balances 354,473$ 6,469,893$ 347,417$ 15,185,855$
NOTE 4 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
and natural disasters.
Property and casualty insurance is provided through the League of Minnesota Cities Insurance Trust (LMCIT), a public entity
risk pool currently operating as a common risk management and insurance program. The City pays an annual premium to the
LMCIT for its insurance coverage. The LMCIT is self-sustaining through member premiums and reinsures through commercial
companies for excess claims. The City is covered through the pool for any claims incurred but unreported, however, retains
risk for the deductible portions of the insurance policies. The amount of those deductibles is considered immaterial to the
financial statements.
Workers’ compensation coverage is provided through a pooled self-insurance program through the LMCIT. The respective
insurance policy is retrospectively rated. With this type of coverage, final premiums are determined after loss experience is
known. The amount of premium adjustment, if any, is considered immaterial and not recorded until received or paid. This
coverage is not subject to a deductible.
There were no significant reductions in insurance from the previous year or settlements in excess of insurance coverage for
any of the past three years.
The City is subject to certain legal claims in the normal course of business. Management does not expect the resolution of
these claims will have a material impact on the City’s financial condition or results of operations.
64
CITY OF OTSEGO, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2021
NOTE 5 PENSION PLAN
Public Employee's Retirement Association
A. PLAN DESCRIPTION
The City participates in the following cost-sharing multiple-employer defined benefit pension plan 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.
General Employees Retirement Plan
All full-time and certain part-time employees of the City are covered by the General Employees Plan. General Employees
Plan members belong to the Coordinated Plan. Coordinated Plan members are covered by Social Security.
B. 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. 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.
General Employees Plan 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 or service. Two methods are used to compute benefits for PERA's Coordinated Plan members. The
retiring member, if hired prior to July 1, 1989, receives the higher of a step-rate benefit accrual formula (Method 1) or level
accrual formula (Method 2), which is used for members hired after June 30, 1989. Under Method 1, the accrual rate for a
Coordinated Plan member is 1.2 percent for each of the first ten years of service and 1.7 percent for each additional year.
Under Method 2, the accrual rate for Coordinated members is 1.7 percent for all years 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.
Benefit increases are provided to benefit recipients each January. The postretirement increase is equal to 50 percent of the
cost-of-living adjustment (COLA) announced by the SSA, with a minimum increase of at least 1 percent and a maximum
of 1.5 percent. Recipients that have been receiving the annuity or benefit for at least a full year as of the June 30 before
the effective date of the increase will receive the full increase. Recipients receiving the annuity or benefit for at least one
month but less than a full year as of the June 30 before the effective date of the increase will receive a reduced or prorated
increase. For members retiring on January 1, 2024, or later, the increase will be delayed until normal retirement age (age 65
if hired prior to July 1, 1989, or age 66 for individuals hired on or after July 1, 1989). Members retiring under Rule of 90
are exempt for the delay to normal retirement.
65
CITY OF OTSEGO, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2021
C. CONTRIBUTIONS
Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. Contribution rates can only be
modified by the state Legislature.
General Employees Fund Contributions
Coordinated Plan members were required to contribute 6.5 percent of their annual covered salary in fiscal year 2021 and
the City was required to contribute 7.5 percent for Coordinated Plan members. The City's contributions to the General
Employees Fund for years ended December 31, 2021, 2020 and 2019 were $142,796, $133,158, and $120,583. The City's
contributions were equal to the required contributions as set by state statute.
D. PENSION COSTS
General Employees Fund Pension Costs
At December 31, 2021, the City reported a liability of $1,076,153 for its proportionate share of the General Employees
Fund's net pension liability. The City's net pension liability reflected a reduction due to the State of Minnesota's contribution
of $16 million. The State of Minnesota is considered a non-employer contributing entity and the State's contribution meets
the definition of a special funding situation. The State of Minnesota's proportionate share of the net pension liability
associated with the City totaled $32,902.
The net pension liability was measured as of June 30, 2021, and the total pension liability used to calculate the net pension
was determined by an actuarial valuation as of that date. The City's proportionate share of the net pension liability was
based on the City's contributions received by PERA during the measurement period for employer payroll paid dates from
July 1, 2020 through June 30, 2021, relative to the total employer contributions received from all of PERA's participating
employers. The City's proportionate share was 0.0252 percent at the end of the measurement period and 0.0247 percent
for the beginning of the period.
City's proportionate share of the net pension liability 1,076,153$
State of Minnesota's proportionate of the net pension liability
associated with the City 32,902
Total 1,109,055$
For the year ended December 31, 2021, the City recognized pension expense of $76,813 for its proportionate share of the
General Employees Plan's pension expense. Included in the amount, the City recognized $2,655 as pension expense
(and grant revenue) for its proportionate share of the State of Minnesota's contribution of $16 million to the General
Employees Fund.
66
CITY OF OTSEGO, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2021
At December 31, 2021, the City reported its proportionate share of the General Employees Plan's deferred outflows of
resources and deferred inflows of resources, related to pensions from the following sources:
Deferred Deferred
Outflows of Inflows of
Resources Resources
Differences Between Expected and Actual Economic Experience 5,719$ 32,859$
Changes in Actuarial Assumptions 657,078 22,462
Net Collective Difference Between
Projected and Actual Investment Earnings - 930,487
Changes in Proportion 106,811 -
Contributions Paid Subsequent to the Measurement Date 71,398 -
Totals 841,006$ 985,808$
Deferred outflows totaling $71,398 related to pensions resulting from the City's contributions subsequent to the
measurement date will be recognized as a reduction of the net pension liability in the year ended December 31, 2022.
Other amounts reported as deferred outflows and deferred inflows of resources related to pensions will be recognized in
pension expense as follows:
Year Pension
Ended Expense
December 31, Amount
2022 9,026$
2023 30,588
2024 (1,611)
2025 (254,203)
2026 -
Thereafter -
Total (216,200)$
E. LONG-TERM EXPECTED RETURN ON INVESTMENT
The State Board of Investment, which manages the investments of PERA, prepares an analysis of the reasonableness on a
regular basis of the long-term expected rate of return using a building-block method in which best-estimate ranges of expected
future rates of return are 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 geometric real rates of return for each major asset class are summarized in the following table:
Target
Allocation Long-Term
Domestic Equity 33.50% 5.10%
International Equity 16.50% 5.30%
Fixed Income 25.00% 0.75%
Private Markets 25.00% 5.90%
Total 100.00%
Asset Class
Description
67
CITY OF OTSEGO, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2021
F. ACTUARIAL ASSUMPTIONS
The total pension liability in the June 30, 2021, actuarial valuation was determined using an individual entry age normal
actuarial cost method. The long-term rate of return on pension plan investments used in the determination of the total liability
is 6 percent. This assumption is based on a review of inflation and investment return assumptions from a number of national
investment consulting firms. The review provided a range of return investment return rates deemed to be reasonable by the
actuary. An investment return of 6.5 percent was deemed to be within that range of reasonableness for financial reporting
purposes.
Inflation is assumed to be 2.25 percent and benefit increases after retirement are assumed to be 1.25 percent.
Salary growth assumptions range in annual increments from 10.25 percent after one year of service to 3.0 percent after 29
years of service and 6.0 percent thereafter.
Mortality rates are based on the Pub-2010 General Employee Mortality Table, adjusted slightly to fit PERA's experience.
Actuarial assumptions are reviewed every four years. The most recent four-year experience study was completed in 2019. The
assumption changes were adopted by the Board and became effective with the July, 2020 actuarial valuation.
The following changes in actuarial assumptions and plan provisions occurred in 2021:
Changes in Actuarial Assumptions:
• The investment return and single discount rates were changed from 7.5 percent to 6.5 percent for financial reporting.
• The mortality improvement scale was changed from scale MP-2019 to scale MP-2020.
Changes in Plan Provisions:
• There have been no changes since the previous valuation.
68
CITY OF OTSEGO, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2021
G. DISCOUNT RATE
The discount rate used to measure the total pension liability in 2021 was 6.5 percent. The projection of cash flows used to
determine the discount rate assumed that contributions from Plan members and employers will be made at rates set in
Minnesota Statutes. Based on these assumptions, the fiduciary net positions of the General Employees Fund was projected to
be available to make all projected future benefit payments of current Plan members. 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.
H. 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 rate.
5.50% 6.50% 7.50%
One Point Current One Point
Decrease Rate Increase
General Employees Fund 2,194,803$ 1,076,153$ 158,233$
I. 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 at www.mnpera.org.
NOTE 6 NEW ACCOUNTING PRONOUNCEMENTS
The Governmental Accounting Standards Board recently approved the following statements which were not implemented in
these financial statements. The effect these standards may have on future financial statements has not been determined.
• Statement No. 87, Leases
This new standard establishes a single model for lease accounting based on the foundational principle that leases are
financings of the right to use an underlying asset. Under this statement, a lessee is required to recognize a lease liability
and an intangible right-to-use lease asset, and a lessor is required to recognize a lease receivable and deferred inflow
of resources, thereby enhancing the relevance and consistency about governments' leasing activities. This statement
will be effective for the year ending December, 31, 2022.
City's Proportionate Share
of the Net Pension Liability
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71
CITY OF OTSEGO, MINNESOTA
REQUIRED SUPPLEMENTARY INFORMATION (LAST TEN YEARS*)
SCHEDULE OF CITY'S PROPORTIONATE SHARE OF NET PENSION LIABILITY
GENERAL EMPLOYEE'S RETIREMENT FUND
City's
Proportionate ($)
Share of the Net
Pension Liability City's
State's and the State's Proportionate (%)
City's City's Proportionate (S) Proportionate ($)Share of Net Plan Fiduciary
Proportionate (%) Proportionate ($) Share of the Net Share of the Net Pension Liability Net Position
Fiscal Share of Share of Pension Liability Pension Liability City's Compared With as a Percentage
Year Net Pension Net Pension Associated With Associated With Covered Covered of the Total
Ending Liability Liability the City the City Payroll Payroll Pension Liability
June 30, 2021 0.0252% 1,076,153$ 32,902$ 1,109,055$ 1,813,749$ 59.33%87.00%
June 30, 2020 0.0247% 1,480,878 45,554 1,526,432 1,745,138 84.86%79.10%
June 30, 2019 0.0218% 1,205,273 37,332 1,242,605 1,531,014 78.72%80.20%
June 30, 2018 0.0215% 1,192,732 39,115 1,231,847 1,365,460 87.35%79.50%
June 30, 2017 0.0215% 1,372,546 17,254 1,389,800 1,332,687 102.99%75.89%
June 30, 2016 0.0198% 1,607,662 20,935 1,628,597 1,136,013 141.52%68.91%
June 30, 2015 0.0195% 1,010,592 - 1,010,592 1,124,606 89.86%78.19%
This supplementary information is provided prospectively beginning with the Year Ended December 31, 2015.
72
CITY OF OTSEGO, MINNESOTA
REQUIRED SUPPLEMENTARY INFORMATION (LAST TEN YEARS*)
SCHEDULE OF CITY'S CONTRIBUTIONS
GENERAL EMPLOYEE'S RETIREMENT FUND
Contributions
in Relation to Contributions
Statutorily Statutorily Contribution City's as a Percentage
Year Required Required (Excess) Covered of Covered
Ending Contributions Contributions Deficiency Payroll Payroll
December 31, 2021 142,796$ 142,796$ -$ 1,903,947$ 7.50%
December 31, 2020 133,158 133,158 - 1,775,440 7.50%
December 31, 2019 120,583 120,583 - 1,607,772 7.50%
December 31, 2018 110,473 110,473 - 1,472,972 7.50%
December 31, 2017 98,542 98,542 - 1,313,896 7.50%
December 31, 2016 96,567 96,567 - 1,287,564 7.50%
December 31, 2015 83,256 83,256 - 1,110,085 7.50%
This supplementary information is provided prospectively beginning with the Year Ended December 31, 2015.
73
CITY OF OTSEGO, MINNESOTA
NOTES TO REQUIRED SUPPLEMENTARY INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 2021
NOTE 1 GENERAL EMPLOYEES FUND
CHANGES FOR 2021
Changes in Actuarial Assumptions
• The investment return and single discount rates were changed from 7.5 percent to 6.5 percent for financial reporting.
• The mortality improvement scale was changed from scale MP-2019 to scale MP-2020.
Changes in Plan Provisions
• There have been no changes since the previous valuation.
CHANGES FOR 2020
Changes in Actuarial Assumptions
• The prince inflation assumption was decreased from 2.5 percent to 2.25 percent.
• The payroll growth assumption was decreased from 3.25 percent to 3.0 percent.
• Assumed salary increase rates were changed as recommended in the June 30, 2019, experience study. The net
effect is assumed rates that average 0.25 percent less than previous rates.
• Assumed rates of retirement were changed as recommended in the June 30, 2019, experience study. The changes
result in more unreduced (normal) retirements and slightly fewer Rule of 90 and early retirements.
• Assumed rates of termination were changes as recommended in the June 30, 2019, experience study. The new rates
are based on service and are generally lower than previous rates for years 2-5 and slightly higher thereafter.
• Assumed rates of disability were changed as recommended in the June 30, 2019, experience study. The change results
in fewer predicted disability retirements for males and females.
• The base mortality table for healthy annuitants and employees was changed from the RP-2014 table to the Pub-2010
General Mortality table, with adjustments. The base mortality table for disabled annuitants was changed from the
RP-2014 disabled annuitant mortality table to the Pub-2010 General/Teacher disabled annuitant mortality table, with
adjustments.
• The mortality improvement scale was changed from Scale MP-2018 to Scale MP-2019.
• The assumed spouse age difference was changed from two years older for females to one year older.
• The assumed number of married male new retirees electing the 100% Joint and Survivor option changed from 35
percent to 45 percent. The assumed number of married female new retirees electing the 100% Joint and Survivor
option changed from 15 percent to 30 percent. The corresponding number of married new retirees electing the Life
annuity option was adjusted accordingly.
74
CITY OF OTSEGO, MINNESOTA
NOTES TO REQUIRED SUPPLEMENTARY INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 2021
Changes in Plan Provisions
• Augmentation for current privatized members was reduced to 2.0 percent for the period July 1, 2020 through
December 31, 2023, and 0.0 percent thereafter. Augmentation was eliminated for privatizations occurring after
June 30, 2020.
CHANGES FOR 2019
Changes in Actuarial Assumptions
• The mortality projection scale was changed from MP-2017 to MP-2018.
Changes in Plan Provisions
• The employer supplemental contribution was changed prospectively, decreasing from $31.0 million to $21.0 million per
year. The State's special funding contribution was changed prospectively, requiring $16.0 million per year through 2031.
CHANGES FOR 2018
Changes in Actuarial Assumptions
• The mortality projection scale was changed from MP-2015 to MP-2017.
• The assumed post-retirement benefit increase rate was changed from 1.00 percent per year through 2044 and 2.50
percent per year thereafter to 1.25 percent per year.
Changes in Plan Provisions
• The augmentation adjustment in early retirement factors is eliminated over a five-year period starting July 1, 2019,
resulting in actuarial equivalence after June 30, 2024.
• Interest credited on member contributions decreased from 4.0 percent to 3.0 percent, beginning July 1, 2018.
• Deferred augmentation was changed to 0.0 percent, effective January 1, 2019. Augmentation that has already accrued
for deferred members will still apply.
• Contribution stabilizer provisions were repealed.
• Postretirement benefit increases were changed from 1.0 percent per year with a provision to increase to 2.5 percent
upon attainment of 90.0 percent funding ratio to 50.0 percent of the Social Security Cost of Living Adjustment, not less
than 1.0 percent and not more than 1.5 percent, beginning January 1, 2019.
• For retirements on or after January 1, 2024, the first benefit increase is delayed until the retiree reaches normal
retirement age; does not apply to Rule of 90 retirees, disability benefit recipients, or survivors.
• Actuarial equivalent factors were updated to reflect revised mortality and interest assumptions.
75
CITY OF OTSEGO, MINNESOTA
NOTES TO REQUIRED SUPPLEMENTARY INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 2021
CHANGES FOR 2017
Changes in Actuarial Assumptions
• The Combined Service Annuity (CSA) loads were changed from 0.80 percent for active members and 60 percent for
both vested and non-vested deferred members. The revised CSA loads are now 0.00 percent for active member liability,
15 percent for vested deferred member liability, and 3.00 percent for non-vested deferred member liability.
• The assumed post-retirement benefit increase rate was changed from 1.00 percent per year for all years to 1.00 percent
per year through 2044, and 2.50% percent thereafter.
Changes in Plan Provisions
• The State's contribution for the Minneapolis Employees Retirement Fund equals $16.0 million in 2017 and 2018, and
$6.0 million thereafter.
• The Employer Supplemental Contribution for the Minneapolis Employees Retirement Fund changed from $21.0 million
to $31.0 million in calendar years 2019 to 2031. The State's contribution changed from $16.0 million to $6.0 million
in calendar years 2019 to 2031.
CHANGES FOR 2016
Changes in Actuarial Assumptions
• The assumed post-retirement benefit increase was changed from 1.00% per year through 2035 and 2.50% per year
thereafter to 1.00% per year for all future years.
• The assumed investment return was changed from 7.90% to 7.50%. The single discount rate was changed
from 7.90% to 7.50%.
• Other assumptions were changed pursuant to the experience study dated June 30, 2015. The assumed future salary
increases and payroll growth were decreased by 0.25% to 3.25%. Inflation was decreased 0.25% to 2.50%.
Changes in Plan Provisions
• There have been no changes since the prior valuation.
CHANGES FOR 2015
Changes in Actuarial Assumptions
• The assumed post-retirement benefit increase rate was changed from 1.00% per year through 2030 and 2.50% per
year thereafter to 1.00% per year through 2035 and 2.50% per year thereafter.
Changes in Plan Provisions
• On January 1, 2015, the Minneapolis Employees Retirement Fund was merged into the General Employees Fund, which
increased the total pension liability by $1.10 billion, and increased the fiduciary plan net position by $892 million. Upon
consolidation, state and employer contributions were revised; the State's contribution of $6.0 million, which meets the
special funding situation definition, was due September 2015.
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77
CITY OF OTSEGO, MINNESOTA
COMBINING BALANCE SHEET
NONMAJOR GOVERNMENTAL FUNDS
DECEMBER 31, 2021
Total
Special Capital Nonmajor
Revenue Project Governmental
ASSETS
Cash and Investments 539,453$ 13,889,070$ 14,428,523$
Receivables
Accounts - 10,000 10,000
Special Assessments
Current - 142 142
Deferred - 306,512 306,512
Delinquent - 1,396 1,396
Due from Other Funds - 612,136 612,136
Total Assets 539,453 14,819,256 15,358,709
LIABILITIES
Accounts Payable - 41,041 41,041
DEFERRED INFLOWS OF RESOURCES
Unavailable Revenue - Special Assessments - 307,908 307,908
FUND BALANCES
Restricted
Tax Increment Financing 192,036 - 192,036
Park Development - 5,091,818 5,091,818
Committed
Street Light Replacement 64,772 - 64,772
Business Development Loans 282,645 - 282,645
Assigned
City Buildings & Infrastructure - 8,650,375 8,650,375
City Parks - 728,114 728,114
Total Fund Balances 539,453 14,470,307 15,009,760
Total Liabilities, Deferred Inflows of
Resources and Fund Balances 539,453$ 14,819,256$ 15,358,709$
78
CITY OF OTSEGO, MINNESOTA
COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCES
NONMAJOR GOVERNMENTAL FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2021
Total
Special Capital Nonmajor
Revenue Project Governmental
REVENUES
Property Taxes 45,874$ 1,278,000$ 1,323,874$
Tax Increments 311,971 - 311,971
Charges for Services 35,190 1,545,236 1,580,426
Special Assessments - 32,515 32,515
Investment Earnings (net) (3,455) (93,455) (96,910)
Miscellaneous - 66,665 66,665
Total Revenues 389,580 2,828,961 3,218,541
EXPENDITURES
Current
Public Works 68,900 - 68,900
Economic Development 412,163 - 412,163
Capital Outlay
General Government - 17,489 17,489
Public Safety - 9,410 9,410
Public Works - 500,786 500,786
Culture and Recreation - 610,063 610,063
Total Expenditures 481,063 1,137,748 1,618,811
Excess (Deficiency) of Revenues
Over (Under) Expenditures (91,483) 1,691,213 1,599,730
OTHER FINANCING SOURCES (USES)
Transfers In - 2,434,846 2,434,846
Sales of Capital Assets - 40,000 40,000
Total Other Financing Sources (Uses) - 2,474,846 2,474,846
Net Change in Fund Balance (91,483) 4,166,059 4,074,576
Fund Balance - January 1 630,936 10,304,248 10,935,184
Fund Balance - December 31 539,453$ 14,470,307$ 15,009,760$
79
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80
CITY OF OTSEGO, MINNESOTA
NONMAJOR SPECIAL REVENUE FUNDS
A special revenue fund is used to account for and report the proceeds of specific revenue sources that are restricted or
committed to expenditure for specified purposes other than debt service or capital projects.
Street Lighting
This fund accounts for the electrical service, maintenance, repair and replacement of street lights within the City's
above standard street-lighting district for commercially developed areas. The primary funding source of the fund
is generated through charges for services imposed upon the benefitting properties in the district.
Revolving Loans
This fund was established to provide for economic development subsidies and loans to be provided to business
entities in the City through the City's Economic Development Authority (EDA).
Tax Increment District No. 1 - Great River Centre
This fund was established to account for the collection of tax increment generated revenues for parcels within the
District. The District encompasses two parcels in the Great River Centre commercial and industrial area. The
increment generated is used for specific economic development incentives within the District.
Tax Increment District No. 3 - Riverview Landing
This fund was established to account for the collection of tax increment generated revenues for parcels within the
District. The District is a housing district and is located in the Waterfront East development area. The increment
generated is used to provide 20% of the residential units to persons or families of low and moderate income.
Tax Increment District No. 4 - Riverbend North
This fund was established to account for the collection of tax increment generated revenues for parcels within the
District. The District is a redevelopment district and includes four parcels within the Riverbend North plat, located
near CSAH 42 and Highway 101. The increment generated is used to redevelop the existing site, including the
decommissioning of a private wasterwater facility, construciton of multifamily housing, a mini-storage facility and
and site preparations to accomodate approximately 15,000 square feet of future commercial development.
81
CITY OF OTSEGO, MINNESOTA
COMBINING BALANCE SHEET
NONMAJOR SPECIAL REVENUE FUNDS
DECEMBER 31, 2021
Total
Nonmajor
Street Revolving Tax Increment Tax Increment Tax Increment Special
Lighting Loans District No. 1 District No. 3 District No. 4 Revenue
ASSETS
Cash and Investments 64,772$ 282,645$ 57,233$ 108,532$ 26,271$ 539,453$
FUND BALANCES
Restricted
Tax Increment Financing - - 57,233 108,532 26,271 192,036
Committed
Street Light Replacement 64,772 - - - - 64,772
Business Development Loans - 282,645 - - - 282,645
Total Fund Balances 64,772$ 282,645$ 57,233$ 108,532$ 26,271$ 539,453$
82
CITY OF OTSEGO, MINNESOTA
COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCES
NONMAJOR SPECIAL REVENUE FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2021
Total
Nonmajor
Street Revolving Tax Increment Tax Increment Tax Increment Special
Lighting Loans District No. 1 District No. 3 District No. 4 Revenue
REVENUES
Property Taxes -$ 45,874$ -$ -$ -$ 45,874$
Tax Increments - - 94,744 175,868 41,359 311,971
Charges for Services 35,190 - - - - 35,190
Investment Earnings (net) (711) (2,744) - - - (3,455)
Total Revenues 34,479 43,130 94,744 175,868 41,359 389,580
EXPENDITURES
Current
Public Works 68,900 - - - - 68,900
Economic Development - 145,874 88,391 156,545 21,353 412,163
Total Expenditures 68,900 145,874 88,391 156,545 21,353 481,063
Net Change in Fund Balance (34,421) (102,744) 6,353 19,323 20,006 (91,483)
Fund Balance - January 1 99,193 385,389 50,880 89,209 6,265 630,936
Fund Balance - December 31 64,772$ 282,645$ 57,233$ 108,532$ 26,271$ 539,453$
83
CITY OF OTSEGO, MINNESOTA
NONMAJOR SPECIAL REVENUE FUNDS
REVOLVING LOANS FUND - SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
FOR THE YEAR ENDED DECEMBER 31, 2021
Variance with
Original Final Budget -
and Final Actual Over
Budget Amounts (Under)
REVENUES
Property Taxes 45,874$ 45,874$ -$
Investment Earnings (net) - (2,744) (2,744)
Total Revenues 45,874 43,130 (2,744)
EXPENDITURES
Current
Economic Development
Services and Other Charges 45,874 145,874 100,000
Net Change in Fund Balance - (102,744) (102,744)
Fund Balance - January 1 385,389 385,389 -
Fund Balance - December 31 385,389$ 282,645$ (102,744)$
84
CITY OF OTSEGO, MINNESOTA
NONMAJOR SPECIAL REVENUE FUNDS
TAX INCREMENT DISTRICT NO. 1 - SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
FOR THE YEAR ENDED DECEMBER 31, 2021
Variance with
Original Final Budget -
and Final Actual Over
Budget Amounts (Under)
REVENUES
Tax Increments 97,419$ 94,744$ (2,675)$
EXPENDITURES
Current
Economic Development
Personal Services 500 804 304
Services and Other Charges 90,177 87,587 (2,590)
Total Expenditures 90,677 88,391 (2,286)
Net Change in Fund Balance 6,742 6,353 (389)
Fund Balance - January 1 50,880 50,880 -
Fund Balance - December 31 57,622$ 57,233$ (389)$
85
CITY OF OTSEGO, MINNESOTA
NONMAJOR SPECIAL REVENUE FUNDS
TAX INCREMENT DISTRICT NO. 3 - SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
FOR THE YEAR ENDED DECEMBER 31, 2021
Variance with
Original Final Budget -
and Final Actual Over
Budget Amounts (Under)
REVENUES
Tax Increments 166,873$ 175,868$ 8,995$
EXPENDITURES
Current
Economic Development
Personal Services 500 940 440
Services and Other Charges 152,686 155,605 2,919
Total Expenditures 153,186 156,545 3,359
Net Change in Fund Balance 13,687 19,323 5,636
Fund Balance - January 1 89,209 89,209 -
Fund Balance - December 31 102,896$ 108,532$ 5,636$
86
CITY OF OTSEGO, MINNESOTA
NONMAJOR SPECIAL REVENUE FUNDS
TAX INCREMENT DISTRICT NO. 4 - SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
FOR THE YEAR ENDED DECEMBER 31, 2021
Variance with
Original Final Budget -
and Final Actual Over
Budget Amounts (Under)
REVENUES
Tax Increments 151,384$ 41,359$ (110,025)$
EXPENDITURES
Current
Economic Development
Personal Services 500 854 354
Services and Other Charges 145,796 20,499 (125,297)
Total Expenditures 146,296 21,353 (124,943)
Net Change in Fund Balance 5,088 20,006 14,918
Fund Balance - January 1 6,265 6,265 -
Fund Balance - December 31 11,353$ 26,271$ 14,918$
87
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88
CITY OF OTSEGO, MINNESOTA
NONMAJOR CAPITAL PROJECTS FUNDS
Capital projects funds are used to account for and report financial resources that are restricted, committed, or
assigned to expenditure for capital outlays, including the acquisition or construction of capital facilities and other
capital assets.
Trails Management
This fund was established to provide funds and to account for the expenditure of such funds, for costs associated
with the City's trail maintenance plan adopted annually within the Capital Improvement Plan. Annual projects will
typically include: crack filling, patching and seal coating.
Park Development
This fund was established to accumulate funds that will be used to provide for the acquisition and construction of
new park sites, buildings and facilities throughout our growing City.
Parks Capital Equipment
This fund was established to accumulate funds for major maintenance and future replacement of equipment within
the City's park system.
Revolving Capital Equipment
This fund was established to provide funds and to account for the expenditure of such funds, for costs associated
with the replacement of capital equipment, most significantly the City's machinery and vehicle fleet.
Fire Reserve
This fund was established to accumulate funds that will be used to finance the costs associated with the future
construction of a fire department building and the capital equipment that will be housed within.
Watershed Districts
This fund was established to provide funds and to account for the expenditure of such funds, for costs associated
with the maintenance of major water drainage system ditches throughout the City.
Capital Improvements
This fund was established to accumulate resources that may be used to internally finance future City projects.
City Buildings & Property Maintenance
This fund was established to provide funds and to account for the expenditure of such funds, for costs associated
with the maintenance of and improvements to City buildings and properties.
89
CITY OF OTSEGO, MINNESOTA
COMBINING BALANCE SHEET
NONMAJOR CAPITAL PROJECT FUNDS
DECEMBER 31, 2021
Parks Revolving
Trails Park Capital Capital
Management Development Equipment Equipment
ASSETS
Cash and Investments 303,125$ 5,104,520$ 718,114$ 358,414$
Receivables
Accounts - - 10,000 -
Special Assessments
Current - - - -
Deferred - 14,460 - -
Delinquent - - - -
Due from Other Funds - - - -
Total Assets 303,125 5,118,980 728,114 358,414
LIABILITIES
Accounts Payable 16,656 12,702 - -
DEFERRED INFLOWS OF RESOURCES
Unavailable Revenue - Special Assessments - 14,460 - -
FUND BALANCES
Restricted
Park Development - 5,091,818 - -
Assigned
City Buildings & Infrastructure 286,469 - - 358,414
City Parks - - 728,114 -
Total Fund Balances 286,469 5,091,818 728,114 358,414
Total Liabilities, Deferred Inflows of
Resources and Fund Balances 303,125$ 5,118,980$ 728,114$ 358,414$
90
Total
City Buildings Nonmajor
Fire Watershed Capital & Property Capital
Reserve Districts Improvements Maintenance Projects
1,961,368$ 1,835,893$ 3,516,644$ 90,992$ 13,889,070$
- - - - 10,000
142 - - - 142
- 16,563 275,489 - 306,512
216 - 1,180 - 1,396
- - 612,136 - 612,136
1,961,726 1,852,456 4,405,449 90,992 14,819,256
4,275 563 6,845 - 41,041
216 16,563 276,669 - 307,908
- - - - 5,091,818
1,957,235 1,835,330 4,121,935 90,992 8,650,375
- - - - 728,114
1,957,235 1,835,330 4,121,935 90,992 14,470,307
1,961,726$ 1,852,456$ 4,405,449$ 90,992$ 14,819,256$
91
CITY OF OTSEGO, MINNESOTA
COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCES
NONMAJOR CAPITAL PROJECT FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2021
Parks Revolving
Trails Park Capital Capital
Management Development Equipment Equipment
REVENUES
Property Taxes 40,000$ -$ 62,000$ 300,000$
Charges for Services - 1,205,535 - -
Special Assessments - 2,410 - -
Investment Earnings (net) (1,975) (37,771) (5,350) (2,311)
Miscellaneous - - 66,665 -
Total Revenues 38,025 1,170,174 123,315 297,689
EXPENDITURES
Capital Outlay
General Government - - - -
Public Safety - - - -
Public Works - - - 300,228
Culture and Recreation 255,862 284,485 - 69,716
Total Expenditures 255,862 284,485 - 369,944
Excess (Deficiency) of Revenues
Over (Under) Expenditures (217,837) 885,689 123,315 (72,255)
OTHER FINANCING SOURCES (USES)
Transfers In 300,000 - - -
Sales of Capital Assets - - - 40,000
Total Other Financing Sources (Uses) 300,000 - - 40,000
Net Change in Fund Balance 82,163 885,689 123,315 (32,255)
Fund Balance - January 1 204,306 4,206,129 604,799 390,669
Fund Balance - December 31 286,469$ 5,091,818$ 728,114$ 358,414$
92
Total
City Buildings Nonmajor
Fire Watershed Capital & Property Capital
Reserve Districts Improvements Maintenance Projects
190,000$ -$ 661,000$ 25,000$ 1,278,000$
- 339,701 - - 1,545,236
202 2,761 27,142 - 32,515
(15,082) (15,012) (15,300) (654) (93,455)
- - - - 66,665
175,120 327,450 672,842 24,346 2,828,961
- - - 17,489 17,489
9,410 - - - 9,410
- 563 199,995 - 500,786
- - - - 610,063
9,410 563 199,995 17,489 1,137,748
165,710 326,887 472,847 6,857 1,691,213
- - 2,134,846 - 2,434,846
- - - - 40,000
- - 2,134,846 - 2,474,846
165,710 326,887 2,607,693 6,857 4,166,059
1,791,525 1,508,443 1,514,242 84,135 10,304,248
1,957,235$ 1,835,330$ 4,121,935$ 90,992$ 14,470,307$
93
CITY OF OTSEGO, MINNESOTA
GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES, AND Page 1 of 5
CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
FOR THE YEAR ENDED DECEMBER 31, 2021
(With Comparative Actual Amounts for the Year Ended December 31, 2020)
2020
Variance with
Original Final Budget -
and Final Actual Over Actual
Budget Amounts (Under) Amounts
REVENUES
Property Taxes
Current 4,624,632$ 4,594,438$ (30,194)$ 4,461,923$
Delinquent 20,000 1,579 (18,421) 34,083
Penalties and interest 2,000 (3,493) (5,493) 1,717
Total Property Taxes 4,646,632 4,592,524 (54,108) 4,497,723
Franchise Taxes 135,000 129,467 (5,533) 132,137
Licenses and Permits
Business Licenses 34,900 50,548 15,648 31,023
Rental Licenses 41,200 46,923 5,723 33,202
Other Licenses 2,000 2,030 30 1,730
Right of Way Permits 50,000 93,540 43,540 79,505
Building Permits 1,060,410 2,317,645 1,257,235 2,371,929
Other Permits 12,300 18,902 6,602 15,400
Total Licenses and Permits 1,200,810 2,529,588 1,328,778 2,532,789
Intergovernmental
Federal
Other Aid & Grants - - - 1,302,963
State
Police Aid 78,000 76,180 (1,820) 78,124
Other Aid & Grants 9,500 9,357 (143) 15,127
Local
Other Aid & Grants - 2,500 2,500 -
Total Intergovernmental 87,500 88,037 537 1,396,214
Charges for Services
General Government 57,800 175,111 117,311 115,675
Public Works 73,250 171,088 97,838 118,671
Culture and Recreation 67,865 81,610 13,745 22,852
Total Charges for Services 198,915 427,809 228,894 257,198
Special Assessments 3,500 5,732 2,232 5,434
Fines and Forfeitures 24,000 27,461 3,461 19,959
Investment Earnings (net)72,000 (48,486) (120,486) 177,948
Miscellaneous
Refunds and Reimbursements - 49,160 49,160 30,388
Contributions and Donations - 500 500 1,000
Other - 3,212 3,212 4,907
Total Miscellaneous - 52,872 52,872 36,295
Total Revenues 6,368,357 7,805,004 1,436,647 9,055,697
2021
94
CITY OF OTSEGO, MINNESOTA
GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES, AND Page 2 of 5
CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
FOR THE YEAR ENDED DECEMBER 31, 2021
(With Comparative Actual Amounts for the Year Ended December 31, 2020)
2020
Variance with
Original Final Budget -
and Final Actual Over Actual
Budget Amounts (Under) Amounts
EXPENDITURES
General Government
City Council
Personal Services 36,688 33,464 (3,224) 31,368
Supplies 375 - (375) 371
Services and Other Charges 120,676 67,851 (52,825) 54,373
Total 157,739 101,315 (56,424) 86,112
City Administrator
Personal Services 178,657 176,027 (2,630) 169,680
Supplies 50 82 32 63
Services and Other Charges 6,626 1,843 (4,783) 1,463
Total 185,333 177,952 (7,381) 171,206
Administration
Personal Services 231,910 230,526 (1,384) 214,358
Supplies 8,650 5,773 (2,877) 8,211
Services and Other Charges 65,519 67,230 1,711 52,151
Total 306,079 303,529 (2,550) 274,720
Elections
Personal Services - - - 22,597
Supplies - - - 7,237
Services and Other Charges 1,600 1,955 355 3,363
Total 1,600 1,955 355 33,197
Assessing
Services and Other Charges 137,374 139,898 2,524 125,118
Finance
Personal Services 202,490 196,753 (5,737) 169,227
Supplies 2,100 855 (1,245) 664
Services and Other Charges 70,598 70,482 (116) 78,849
Total 275,188 268,090 (7,098) 248,740
Information Technology
Supplies 3,500 5,037 1,537 4,534
Services and Other Charges 91,840 74,192 (17,648) 88,138
Total 95,340 79,229 (16,111) 92,672
Legal
Services and Other Charges 99,000 35,960 (63,040) 83,558
Human Resources
Personal Services 74,368 60,739 (13,629) 71,573
Supplies 50 66 16 -
Services and Other Charges 645 14,852 14,207 17,594
Total 75,063 75,657 594 89,167
2021
95
CITY OF OTSEGO, MINNESOTA
GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES, AND Page 3 of 5
CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
FOR THE YEAR ENDED DECEMBER 31, 2021
(With Comparative Actual Amounts for the Year Ended December 31, 2020)
2020
Variance with
Original Final Budget -
and Final Actual Over Actual
Budget Amounts (Under) Amounts
EXPENDITURES (CONTINUED)
General Government (Continued)
Prairie Center
Supplies 9,500 5,156 (4,344) 11,097
Services and Other Charges 35,906 35,776 (130) 26,947
Total 45,406 40,932 (4,474) 38,044
City Hall & Public Works Garage
Supplies 12,500 7,000 (5,500) 17,531
Services and Other Charges 111,347 107,973 (3,374) 95,868
Total 123,847 114,973 (8,874) 113,399
Old Town Hall
Services and Other Charges 3,300 3,192 (108) 2,990
Total General Government 1,505,269 1,342,682 (162,587) 1,358,923
Public Safety
Police Services
Services and Other Charges 1,456,260 1,457,521 1,261 1,391,755
Public Safety Commission
Personal Services 960 720 (240) 390
Supplies 500 123 (377) -
Services and Other Charges 1,500 - (1,500) -
Total 2,960 843 (2,117) 390
Fire Protection
Supplies 500 - (500) 450
Services and Other Charges 768,799 769,133 334 722,566
Total 769,299 769,133 (166) 723,016
Building Inspections
Personal Services 151,042 151,086 44 146,365
Supplies 4,600 5,441 841 3,138
Services and Other Charges 312,092 463,372 151,280 385,589
Total 467,734 619,899 152,165 535,092
Emergency Management
Supplies 500 986 486 1,785
Services and Other Charges 2,100 3,177 1,077 607
Total 2,600 4,163 1,563 2,392
Animal Control
Services and Other Charges 15,700 22,920 7,220 14,790
Total Public Safety 2,714,553 2,874,479 159,926 2,667,435
2021
96
CITY OF OTSEGO, MINNESOTA
GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES, AND Page 4 of 5
CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
FOR THE YEAR ENDED DECEMBER 31, 2021
(With Comparative Actual Amounts for the Year Ended December 31, 2020)
2020
Variance with
Original Final Budget -
and Final Actual Over Actual
Budget Amounts (Under) Amounts
EXPENDITURES (CONTINUED)
Public Works
Streets Maintenance
Personal Services 650,860 618,034 (32,826) 575,609
Supplies 175,611 149,718 (25,893) 146,871
Services and Other Charges 92,807 65,148 (27,659) 55,860
Total 919,278 832,900 (86,378) 778,340
Engineering
Services and Other Charges 92,400 63,697 (28,703) 52,253
Street Lighting
Services and Other Charges 158,920 157,353 (1,567) 153,058
Fleet Management
Personal Services 85,654 60,436 (25,218) 82,946
Supplies 154,297 124,261 (30,036) 111,149
Services and Other Charges 10,360 40,321 29,961 26,918
Total 250,311 225,018 (25,293) 221,013
Total Public Works 1,420,909 1,278,968 (141,941) 1,204,664
Culture and Recreation
Parks Maintenance
Personal Services 319,553 319,958 405 276,154
Supplies 84,880 61,217 (23,663) 88,035
Services and Other Charges 140,364 150,153 9,789 136,971
Total 544,797 531,328 (13,469) 501,160
Recreation
Personal Services 167,351 174,146 6,795 152,951
Supplies 15,150 13,100 (2,050) 5,279
Services and Other Charges 61,338 60,045 (1,293) 36,057
Total 243,839 247,291 3,452 194,287
Parks and Recreation Commission
Personal Services - 570 570 -
Heritage Preservation Commission
Personal Services 480 590 110 300
Supplies 500 41 (459) -
Services and Other Charges 1,500 - (1,500) -
Total 2,480 631 (1,849) 300
Total Culture and Recreation 791,116 779,820 (11,296) 695,747
2021
97
CITY OF OTSEGO, MINNESOTA
GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES, AND Page 5 of 5
CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
FOR THE YEAR ENDED DECEMBER 31, 2021
(With Comparative Actual Amounts for the Year Ended December 31, 2020)
2020
Variance with
Original Final Budget -
and Final Actual Over Actual
Budget Amounts (Under) Amounts
EXPENDITURES (CONTINUED)
Economic Development
Planning Commission
Personal Services 2,500 1,900 (600) 1,550
Supplies - 9 9 -
Services and Other Charges 1,500 - (1,500) -
Total 4,000 1,909 (2,091) 1,550
Planning
Services and Other Charges 110,250 78,318 (31,932) 102,460
Economic Development
Supplies 100 - (100) -
Services and Other Charges 15,360 11,021 (4,339) 561,788
Total 15,460 11,021 (4,439) 561,788
Total Economic Development 129,710 91,248 (38,462) 665,798
Capital Outlay
General Government 35,600 15,818 (19,782) 60,712
Public Safety - 4,930 4,930 -
Public Works 9,000 8,820 (180) -
Culture and Recreation 5,300 4,325 (975) 4,046
Total 49,900 33,893 (16,007) 64,758
Total Expenditures 6,611,457 6,401,090 (210,367) 6,657,325
Excess (Deficiency) of Revenues
Over (Under) Expenditures (243,100) 1,403,914 1,647,014 2,398,372
OTHER FINANCING SOURCES (USES)
Transfers In 243,100 243,100 - 201,795
Transfers Out - (2,434,846) (2,434,846) (932,244)
Total Other Financing Sources (Uses)243,100 (2,191,746) (2,434,846) (730,449)
Net Change in Fund Balance - (787,832) (787,832) 1,667,923
Fund Balance - January 1 5,987,733 5,987,733 - 4,319,810
Fund Balance - December 31 5,987,733$ 5,199,901$ (787,832)$ 5,987,733$
2021
98
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99
CITY OF OTSEGO, MINNESOTA
COMBINING BALANCE SHEET
DEBT SERVICE FUND BY ACCOUNT
DECEMBER 31, 2021
Total
Series Series Series Series Debt
2012A 2018A 2020A 2010B Service
ASSETS
Cash and Investments 3,333$ 429,354$ 751,896$ 1,626$ 1,186,209$
Receivables
Special Assessments
Current - 413 - - 413
Deferred 23,750 902,452 314,720 - 1,240,922
Delinquent - 1,068 - - 1,068
Total Assets 27,083 1,333,287 1,066,616 1,626 2,428,612
LIABILITIES
Accounts Payable 146 146 146 145 583
DEFERRED INFLOWS OF RESOURCES
Unavailable Revenue - Special Assessments 23,750 903,520 314,720 - 1,241,990
FUND BALANCES
Restricted 3,187 429,621 751,750 1,481 1,186,039
Total Liabilities, Deferred Inflows of
Resources and Fund Balances 27,083$ 1,333,287$ 1,066,616$ 1,626$ 2,428,612$
100
CITY OF OTSEGO, MINNESOTA
COMBINING SCHEDULE OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCES
DEBT SERVICE FUND BY ACCOUNT
FOR THE YEAR ENDED DECEMBER 31, 2021
Total
Series Series Series Series Debt
2012A 2018A 2020A 2010B Service
REVENUES
Property Taxes -$ 94,551$ 195,000$ 460,000$ 749,551$
Special Assessments 33,220 147,578 649,759 - 830,557
Total Revenues 33,220 242,129 844,759 460,000 1,580,108
EXPENDITURES
Debt Service
Principal 195,000 180,000 505,000 480,000 1,360,000
Interest 3,900 61,606 73,156 14,400 153,062
Fiscal Agent Fees 146 641 146 145 1,078
Total Expenditures 199,046 242,247 578,302 494,545 1,514,140
Net Change in Fund Balance (165,826) (118) 266,457 (34,545) 65,968
Fund Balance - January 1 169,013 429,739 485,293 36,026 1,120,071
Fund Balance - December 31 3,187$ 429,621$ 751,750$ 1,481$ 1,186,039$
101
CITY OF OTSEGO, MINNESOTA
DEBT SERVICE FUND - SERIES 2012A
SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
FOR THE YEAR ENDED DECEMBER 31, 2021
Variance with
Original Final Budget -
and Final Actual Over
Budget Amounts (Under)
REVENUES
Special Assessments 33,045$ 33,220$ 175$
EXPENDITURES
Debt Service
Principal 195,000 195,000 -
Interest 3,900 3,900 -
Fiscal Agent Fees 500 146 (354)
Total Expenditures 199,400 199,046 (354)
Net Change in Fund Balance (166,355) (165,826) 529
Fund Balance - January 1 169,013 169,013 -
Fund Balance - December 31 2,658$ 3,187$ 529$
102
CITY OF OTSEGO, MINNESOTA
DEBT SERVICE FUND - SERIES 2018A
SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
FOR THE YEAR ENDED DECEMBER 31, 2021
Variance with
Original Final Budget -
and Final Actual Over
Budget Amounts (Under)
REVENUES
Property Taxes 94,551$ 94,551$ -$
Special Assessments 146,042 147,578 1,536
Total Revenues 240,593 242,129 1,536
EXPENDITURES
Debt Service
Principal 180,000 180,000 -
Interest 61,606 61,606 -
Fiscal Agent Fees 500 641 141
Total Expenditures 242,106 242,247 141
Net Change in Fund Balance (1,513) (118) 1,395
Fund Balance - January 1 429,739 429,739 -
Fund Balance - December 31 428,226$ 429,621$ 1,395$
103
CITY OF OTSEGO, MINNESOTA
DEBT SERVICE FUND - SERIES 2020A
SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
FOR THE YEAR ENDED DECEMBER 31, 2021
Variance with
Original Final Budget -
and Final Actual Over
Budget Amounts (Under)
REVENUES
Property Taxes 195,000$ 195,000$ -$
Special Assessments 110,304 649,759 539,455
Total Revenues 305,304 844,759 539,455
EXPENDITURES
Debt Service
Principal 505,000 505,000 -
Interest 73,156 73,156 -
Fiscal Agent Fees 1,000 146 (854)
Total Expenditures 579,156 578,302 (854)
Net Change in Fund Balance (273,852) 266,457 540,309
Fund Balance - January 1 485,293 485,293 -
Fund Balance - December 31 211,441$ 751,750$ 540,309$
104
CITY OF OTSEGO, MINNESOTA
DEBT SERVICE FUND - SERIES 2010B
SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
FOR THE YEAR ENDED DECEMBER 31, 2021
Variance with
Original Final Budget -
and Final Actual Over
Budget Amounts (Under)
REVENUES
Property Taxes 460,000$ 460,000$ -$
EXPENDITURES
Debt Service
Principal 480,000 480,000 -
Interest 14,400 14,400 -
Fiscal Agent Fees 500 145 (355)
Total Expenditures 494,900 494,545 (355)
Net Change in Fund Balance (34,900) (34,545) 355
Fund Balance - January 1 36,026 36,026 -
Fund Balance - December 31 1,126$ 1,481$ 355$
105
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106
CITY OF OTSEGO, MINNESOTA
STATISTICAL SECTION (UNAUDITED)
This part of the City of Otsego's comprehensive annual financial report presents detailed
information as a context for understanding what the financial statements, note disclosures, and
required supplementary information say about the City's overall financial health.Page No.
Financial Trends 108
These tables contain trend information to help the reader understand how the City's
financial performance and well-being have changed over time.
Revenue Capacity 122
These tables contain information to help the reader assess the City's most significant
local revenue source, the property tax.
Debt Capacity 128
These tables present information to help the reader assess the affordability of the City's
current level of outstanding debt and the City's ability to issue debt in the future.
Demographic and Economic Information 135
These tables offer demographic and economic indicators to help the reader understand
the environment within which the City's financial activities take place.
Operating Information 137
These tables contain service and infrastructure data to help the reader understand how
the information in the City's financial report relates to services the City provides and the
activities it performs.
Sources: Unless otherwise noted, the information in these tables is derived from the report for each respective year.
107
CITY OF OTSEGO, MINNESOTA
STATISTICAL SECTION (UNAUDITED)
NET POSITION BY COMPONENT
Last Ten Fiscal Years
(accrual basis of accounting)
2012 2013 2014 2015
Governmental Activities
Net Investment in Capital Assets 13,673,424$ 14,709,024$ 15,515,291$ 15,303,426$
Restricted 6,570,533 5,882,912 5,430,795 4,547,327
Unrestricted 7,850,150 7,313,054 9,601,854 9,627,962
Total Governmental Activities Net Position 28,094,107$ 27,904,990$ 30,547,940$ 29,478,715$
Business-type activities
Net Investment in Capital Assets 14,795,965$ 13,694,517$ 12,619,305$ 11,553,869$
Unrestricted 9,054,217 10,546,291 13,487,231 15,474,362
Total Business-type Activities Net Position 23,850,182$ 24,240,808$ 26,106,536$ 27,028,231$
Primary Government
Net Investment in Capital Assets 28,469,389$ 28,403,541$ 28,134,596$ 26,857,295$
Restricted 6,570,533 5,882,912 5,430,795 4,547,327
Unrestricted 16,904,367 17,859,345 23,089,085 25,102,324
Total Primary Government Net Position 51,944,289$ 52,145,798$ 56,654,476$ 56,506,946$
Sources: The data for this table has been extracted from the respective years report.
108
Table 1
2016 2017 2018 2019 2020 2021
19,103,702$ 21,496,582$ 25,330,507$ 31,373,524$ 34,622,760$ 39,104,289$
4,292,589 4,973,536 6,929,688 7,658,124 7,445,422 7,661,049
10,745,858 13,338,398 13,626,318 11,357,968 13,214,418 16,552,822
34,142,149$ 39,808,516$ 45,886,513$ 50,389,616$ 55,282,600$ 63,318,160$
15,889,294$ 20,504,751$ 24,701,888$ 31,344,999$ 36,563,803$ 43,581,750$
15,248,794 15,679,356 18,287,811 18,919,363 24,166,085 28,340,412
31,138,088$ 36,184,107$ 42,989,699$ 50,264,362$ 60,729,888$ 71,922,162$
34,992,996$ 42,001,333$ 50,032,395$ 62,718,523$ 71,186,563$ 82,686,039$
4,292,589 4,973,536 6,929,688 7,658,124 7,445,422 7,661,049
25,994,652 29,017,754 31,914,129 30,277,331 37,380,503 44,893,234
65,280,237$ 75,992,623$ 88,876,212$ 100,653,978$ 116,012,488$ 135,240,322$
109
CITY OF OTSEGO, MINNESOTA
STATISTICAL SECTION (UNAUDITED)
CHANGES IN NET POSITION - CONTINUED ON THE FOLLOWING PAGES
Last Ten Fiscal Years
(accrual basis of accounting)
2012 2013 2014 2015
GOVERNMENTAL ACTIVITIES
Expenses
General Government 1,002,690$ 906,102$ 1,230,335$ 1,174,510$
Public Safety 1,445,397 1,447,887 1,499,538 1,670,627
Public Works 2,486,553 2,760,130 2,383,890 6,521,708
Culture and Recreation 575,592 573,581 792,525 792,936
Economic Development 103,884 75,303 45,024 145,771
Interest on Long-term Debt 631,129 543,821 347,503 231,242
Total Expenses 6,245,245 6,306,824 6,298,815 10,536,794
Program Revenues
Charges for Services
General Government 54,674 36,735 119,757 36,235
Public Safety 588,894 784,038 1,159,073 1,191,134
Public Works 50,906 106,913 724,009 247,260
Culture and Recreation 8,840 28,600 43,606 52,075
Operating Grants and Contributions 203,645 220,790 233,606 244,497
Capital Grants and Contributions 620,574 485,533 1,619,209 3,154,662
Total Program Revenues 1,527,533 1,662,609 3,899,260 4,925,863
Net (Expense) / Revenue (4,717,712) (4,644,215) (2,399,555) (5,610,931)
General Revenues and Transfers
Taxes
Property 4,271,751 4,333,972 4,476,810 4,602,153
Tax Increments - - - -
Franchise Taxes 106,547 83,681 120,964 128,722
Unrestricted Grants and Contributions 54,601 10,954 132,104 242,970
Investment Earnings (net)212,731 (17,852) 157,640 55,909
Gain on Disposal of Capital Assets 40,009 44,343 32,355 35,600
Transfers 49,000 - 122,632 284,586
Transfers - Capital Assets - - - -
Total General Revenues and Transfers 4,734,639 4,455,098 5,042,505 5,349,940
Change in Net Position 16,927$ (189,117)$ 2,642,950$ (260,991)$
110
Table 2
Page 1 of 3
2016 2017 2018 2019 2020 2021
1,376,793$ 1,085,554$ 1,228,607$ 1,383,291$ 1,616,634$ 1,509,107$
1,846,459 1,906,843 2,207,699 2,411,751 2,683,103 2,889,365
3,389,909 2,618,584 3,348,200 3,387,481 4,967,363 4,101,313
847,553 1,013,252 1,095,151 1,177,721 1,151,569 1,240,142
302,296 365,768 223,175 741,705 889,173 503,411
223,938 197,282 276,423 212,402 247,702 125,168
7,986,948 7,187,283 8,379,255 9,314,351 11,555,544 10,368,506
81,876 100,125 118,219 639,077 651,770 889,736
1,677,788 1,384,626 1,698,522 1,726,367 2,552,748 2,557,049
656,570 805,248 942,042 127,176 174,321 308,739
59,236 67,112 80,047 71,553 22,852 81,610
248,910 261,814 328,410 319,332 366,461 415,173
4,437,611 3,957,672 5,800,583 3,361,497 3,212,230 5,838,257
7,161,991 6,576,597 8,967,823 6,245,002 6,980,382 10,090,564
(824,957) (610,686) 588,568 (3,069,349) (4,575,162) (277,942)
4,963,787 5,572,250 6,078,341 6,681,989 7,170,868 7,718,135
- - 96,938 97,419 275,445 311,971
131,229 135,652 139,161 137,510 132,137 129,467
255,951 231,683 191,570 162,120 1,411,685 64,729
82,385 124,052 263,784 754,079 625,964 (191,523)
31,160 38,373 37,563 47,362 - 40,000
186,755 195,686 207,840 212,869 262,369 243,100
(162,876) (20,643) (1,525,768) (520,896) (410,322) (2,377)
5,488,391 6,277,053 5,489,429 7,572,452 9,468,146 8,313,502
4,663,434$ 5,666,367$ 6,077,997$ 4,503,103$ 4,892,984$ 8,035,560$
111
CITY OF OTSEGO, MINNESOTA
STATISTICAL SECTION (UNAUDITED)
CHANGES IN NET POSITION - CONTINUED
Last Ten Fiscal Years
(accrual basis of accounting)
2012 2013 2014 2015
BUSINESS-TYPE ACTIVITIES
Expenses
Water Utility 1,301,990$ 1,241,343$ 1,187,553$ 1,246,064$
Sanitary Sewer Utility 2,326,550 2,123,381 2,052,493 2,207,811
Storm Water Utility 69,834 72,944 57,977 95,533
Total Expenses 3,698,374 3,437,668 3,298,023 3,549,408
Program Revenues
Charges for Services
Water Utility 1,049,531 1,259,942 1,167,066 1,261,303
Sanitary Sewer Utility 1,055,557 1,186,523 1,325,181 1,479,703
Storm Water Utility 69,608 41,831 45,570 76,211
Operating Grants and Contributions - - - -
Capital Grants and Contributions 1,032,687 1,267,189 2,560,270 2,020,299
Total Program Revenues 3,207,383 3,755,485 5,098,087 4,837,516
Net (Expense) / Revenue (490,991) 317,817 1,800,064 1,288,108
General Revenues and Transfers
Property Taxes - 57,739 24,824 25,000
Investment Earnings (net) 152,321 (34,717) 168,320 85,259
Gain on Disposal of Capital Assets - 18,733 28,440 -
Transfers (49,000) - (122,632) (284,586)
Transfers - Capital Assets - - - -
Total General Revenues and Transfers 103,321 41,755 98,952 (174,327)
Change in Net Position (387,670)$ 359,572$ 1,899,016$ 1,113,781$
112
Table 2
Page 2 of 3
2016 2017 2018 2019 2020 2021
1,276,338$ 1,377,537$ 1,468,485$ 1,729,938$ 1,443,522$ 2,150,216$
2,480,519 2,477,995 2,561,070 2,600,436 2,739,519 3,257,261
42,342 62,172 71,040 123,163 138,985 188,245
3,799,199 3,917,704 4,100,595 4,453,537 4,322,026 5,595,722
1,334,442 1,529,127 1,754,947 1,734,090 2,108,577 2,982,786
1,601,172 1,744,067 1,932,885 2,254,688 2,473,673 3,048,707
75,932 94,919 104,916 109,372 120,579 122,200
- - - - 2,157 -
4,766,947 5,591,332 5,500,794 6,543,224 9,214,377 11,066,329
7,778,493 8,959,445 9,293,542 10,641,374 13,919,363 17,220,022
3,979,294 5,041,741 5,192,947 6,187,837 9,597,337 11,624,300
25,000 25,000 26,000 30,000 32,000 34,000
129,442 154,321 260,833 748,799 688,236 (225,303)
- - 7,884 - - -
(186,755) (195,686) (207,840) (212,869) (262,369) (243,100)
162,876 20,643 1,525,768 520,896 410,322 2,377
130,563 4,278 1,612,645 1,086,826 868,189 (432,026)
4,109,857$ 5,046,019$ 6,805,592$ 7,274,663$ 10,465,526$ 11,192,274$
113
CITY OF OTSEGO, MINNESOTA
STATISTICAL SECTION (UNAUDITED)
CHANGES IN NET POSITION - CONTINUED
Last Ten Fiscal Years
(accrual basis of accounting)
2012 2013 2014 2015
TOTAL PRIMARY GOVERNMENT
Expenses
Governmental Activities 6,245,245$ 6,306,824$ 6,298,815$ 10,536,794$
Business-type Activities 3,698,374 3,437,668 3,298,023 3,549,408
Total Expenses 9,943,619 9,744,492 9,596,838 14,086,202
Program Revenues
Governmental Activities 1,527,533 1,662,609 3,899,260 4,925,863
Business-type Activities 3,207,383 3,755,485 5,098,087 4,837,516
Total Program Revenues 4,734,916 5,418,094 8,997,347 9,763,379
Net (Expense) / Revenue (5,208,703) (4,326,398) (599,491) (4,322,823)
General Revenues and Transfers
Governmental Activities 4,734,639 4,455,098 5,042,505 5,349,940
Business-type Activities 103,321 41,755 98,952 (174,327)
Total General Revenues and Transfers 4,837,960 4,496,853 5,141,457 5,175,613
Change in Net Position (370,743)$ 170,455$ 4,541,966$ 852,790$
Sources: The data for this table has been extracted from the respective years report.
114
Table 2
Page 3 of 3
2016 2017 2018 2019 2020 2021
7,986,948$ 7,187,283$ 8,379,255$ 9,314,351$ 11,555,544$ 10,368,506$
3,799,199 3,917,704 4,100,595 4,453,537 4,322,026 5,595,722
11,786,147 11,104,987 12,479,850 13,767,888 15,877,570 15,964,228
7,161,991 6,576,597 8,967,823 6,245,002 6,980,382 10,090,564
7,778,493 8,959,445 9,293,542 10,641,374 13,919,363 17,220,022
14,940,484 15,536,042 18,261,365 16,886,376 20,899,745 27,310,586
3,154,337 4,431,055 5,781,515 3,118,488 5,022,175 11,346,358
5,488,391 6,277,053 5,489,429 7,572,452 9,468,146 8,313,502
130,563 4,278 1,612,645 1,086,826 868,189 (432,026)
5,618,954 6,281,331 7,102,074 8,659,278 10,336,335 7,881,476
8,773,291$ 10,712,386$ 12,883,589$ 11,777,766$ 15,358,510$ 19,227,834$
115
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116
CITY OF OTSEGO, MINNESOTA
STATISTICAL SECTION (UNAUDITED)
GOVERNMENTAL ACTIVITIES TAX REVENUE BY SOURCE Table 3
Last Ten Fiscal Years
(accrual basis of accounting)
Property Tax Franchise
Taxes Increments Taxes Total
2012 4,271,751$ -$ 106,547$ 4,378,298$
2013 4,333,972 - 83,681 4,417,653
2014 4,476,810 - 120,964 4,597,774
2015 4,602,153 - 128,722 4,730,875
2016 4,963,787 - 131,229 5,095,016
2017 5,572,250 - 135,652 5,707,902
2018 6,078,341 96,938 139,161 6,314,440
2019 6,681,989 97,419 137,510 6,916,918
2020 7,170,868 275,445 132,137 7,578,450
2021 7,718,135 311,971 129,467 8,159,573
Sources: The data for this table has been extracted from the respective years report.
117
CITY OF OTSEGO, MINNESOTA
STATISTICAL SECTION (UNAUDITED)
FUND BALANCES - GOVERNMENTAL FUNDS
Last Ten Fiscal Years
(modified accrual basis of accounting)
2012 2013 2014 2015
General Fund
Nonspendable 11,254$ 11,254$ 80,423$ 105,547$
Assigned 87,971 103,418 101,833 128,646
Unassigned 1,665,366 1,797,403 3,211,382 2,656,330
Total General Fund 1,764,591$ 1,912,075$ 3,393,638$ 2,890,523$
All Other Governmental Funds
Nonspendable 4,601$ 351$ -$ 2,675$
Restricted 7,898,825 8,805,554 2,576,729 2,278,379
Committed 52,360 595,191 387,033 406,683
Assigned 5,605,265 4,267,012 5,218,020 6,825,237
Unassigned (341,194) (9,555) (10,584) (26,070)
Total All Other Governmental Funds 13,219,857$ 13,658,553$ 8,171,198$ 9,486,904$
Sources: The data for this table has been extracted from the respective years report.
Note: During 2011, the City implemented GASB Statement No. 54, Fund Balance and Governmental Fund Type Definitions.
118
Table 4
2016 2017 2018 2019 2020 2021
110,973$ 317,197$ 320,887$ 323,124$ 334,946$ 354,473$
192,408 205,257 205,449 223,740 242,785 272,801
3,342,821 3,368,191 3,587,331 3,772,946 5,410,002 4,572,627
3,646,202$ 3,890,645$ 4,113,667$ 4,319,810$ 5,987,733$ 5,199,901$
2,000$ 1,325$ 650$ -$ -$ -$
1,931,757 3,290,750 4,167,765 5,226,784 5,472,554 6,469,893
419,829 474,863 448,699 438,676 484,582 347,417
7,221,257 9,098,697 10,526,550 11,492,028 11,401,232 14,913,054
(281,273) (355,150) (1,790,236) (4,463,532) (4,235,228) (3,523,065)
9,293,570$ 12,510,485$ 13,353,428$ 12,693,956$ 13,123,140$ 18,207,299$
119
CITY OF OTSEGO, MINNESOTA
STATISTICAL SECTION (UNAUDITED)
CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS
Last Ten Fiscal Years
(modified accrual basis of accounting)
2012 2013 2014 2015
Revenues
Property Taxes 4,344,415$ 4,564,068$ 4,524,092$ 4,651,453$
Tax Increments - - - -
Franchise Taxes - - 120,964 128,722
Licenses and Permits 553,577 819,493 1,238,823 1,179,136
Intergovernmental 621,447 241,996 1,034,552 3,570,630
Charges for Services 86,655 170,194 1,142,453 555,660
Special Assessments 875,822 1,987,647 905,441 560,748
Fines and Forfeitures 2,000 - 4,000 11,998
Investment Earnings (net) 209,984 (17,852) 157,640 55,909
Miscellaneous 56,625 78,457 50,286 105,573
Total Revenues 6,750,525 7,844,003 9,178,251 10,819,829
Expenditures
General Government 918,055 923,255 1,169,697 1,141,113
Public Safety 1,440,908 1,447,182 1,495,008 1,664,031
Public Works 1,009,827 1,121,981 1,023,693 1,044,024
Culture and Recreation 277,605 313,023 464,840 466,205
Economic Development 103,884 75,303 45,024 145,771
Capital Outlay 1,707,346 1,984,531 1,688,847 4,477,153
Debt Service
Principal 810,000 840,000 860,000 1,130,000
Interest 554,245 574,715 454,566 256,148
Bond Issuance & Fiscal Agent Fee's 42,900 - - 2,979
Total Expenditures 6,864,770 7,279,990 7,201,675 10,327,424
Excess (Deficiency) of Revenues
Over (Under) Expenditures (114,245) 564,013 1,976,576 492,405
Other Financing Sources (Uses)
Transfers In 997,325 - 612,433 1,574,500
Issuance of Debt 1,400,000 - - -
Premium on Issuance of Debt 64,542 - - -
Sales of Capital Assets 40,009 - - 35,600
Payment to Refunded Bond Escrow Agent - - (6,105,000) -
Insurance Recovery - 22,167 - -
Transfers Out (948,325) - (489,801) (1,289,914)
Total Other Financing Sources (Uses)1,553,551 22,167 (5,982,368) 320,186
Net Change in Fund Balances 1,439,306$ 586,180$ (4,005,792)$ 812,591$
Debt Service as a Percentage of
Noncapital Expenditures 22.37%23.32%21.16%14.22%
Sources: The data for this table has been extracted from the respective years report.
120
Table 5
2016 2017 2018 2019 2020 2021
4,960,518$ 5,595,120$ 6,084,051$ 6,662,307$ 7,141,972$ 7,715,949$
- - 96,938 97,419 275,445 311,971
131,229 135,652 139,161 137,510 132,137 129,467
1,661,565 1,363,384 1,672,906 1,699,879 2,532,789 2,529,588
2,111,727 1,093,154 2,339,286 1,801,414 2,541,072 1,073,889
1,274,578 2,129,514 2,328,991 2,130,542 1,994,941 2,717,128
575,155 734,522 508,865 586,109 457,606 927,749
16,223 21,092 25,616 26,488 19,959 27,461
82,385 124,052 263,784 754,079 625,964 (191,523)
119,732 294,909 233,946 141,533 149,472 221,998
10,933,112 11,491,399 13,693,544 14,037,280 15,871,357 15,463,677
1,233,680 1,072,195 1,182,959 1,313,178 1,479,856 1,465,403
1,807,985 1,886,661 2,168,187 2,379,440 2,667,435 2,874,479
1,019,946 1,066,349 1,205,464 1,683,958 1,640,892 1,934,040
534,122 587,739 654,786 710,406 695,747 779,820
196,534 195,716 223,175 265,498 889,173 503,411
4,349,555 2,160,857 8,422,796 7,001,285 5,137,983 2,379,157
1,210,000 1,125,000 1,160,000 1,185,000 1,330,000 1,360,000
233,498 206,748 182,875 230,217 222,250 153,062
3,362 3,267 74,512 2,874 65,483 1,078
10,588,682 8,304,532 15,274,754 14,771,856 14,128,819 11,450,450
344,430 3,186,867 (1,581,210) (734,576) 1,742,538 4,013,227
648,087 1,278,609 1,397,210 1,274,595 2,465,348 2,677,946
- - 2,305,000 - 2,950,000 -
- - 58,475 - 312,200 -
31,160 78,805 75,860 68,378 - 40,000
- - - - (3,170,000) -
- - - - - -
(461,332) (1,082,923) (1,189,370) (1,061,726) (2,202,979) (2,434,846)
217,915 274,491 2,647,175 281,247 354,569 283,100
562,345$ 3,461,358$ 1,065,965$ (453,329)$ 2,097,107$ 4,296,327$
18.40%19.32%16.69%15.85%13.82%15.17%
121
CITY OF OTSEGO, MINNESOTA
STATISTICAL SECTION (UNAUDITED)
ESTIMATED ACTUAL VALUE, TAXABLE MARKET VALUE AND TAX CAPACITY OF TAXABLE PROPERTY
Last Ten Fiscal Years
2012 2013 2014 2015
Estimated Actual Value 1,070,068,000$ 989,365,300$ 1,051,543,200$ 1,177,857,500$
Taxable Market Value
Real Estate 913,874,900$ 839,428,000$ 908,532,000$ 1,039,579,100$
Personal Property 14,003,900 14,305,700 14,513,300 14,952,700
Total Taxable Market Value 927,878,800$ 853,733,700$ 923,045,300$ 1,054,531,800$
Taxable Market Value as a Percentage
of Estimated Actual Value 86.71%86.29%87.78%89.53%
Tax Capacity
Real Estate 9,999,046$ 9,184,748$ 9,805,499$ 11,060,135$
Personal Property 279,502 285,540 290,266 298,480
Net Tax Capacity for Direct Rate 10,278,548$ 9,470,288$ 10,095,765$ 11,358,615$
Net Tax Capacity as a Percentage
of Estimated Actual Value 0.96%0.96%0.96%0.96%
Property Tax Levies
General Revenues 3,836,000$ 3,952,910$ 4,024,715$ 4,070,000$
Debt Service 425,000 425,000 475,285 610,000
Total Property Taxes Levied 4,261,000$ 4,377,910$ 4,500,000$ 4,680,000$
Tax Rates
General Revenues 37.320 41.740 39.865 35.832
Debt Service 4.135 4.488 4.708 5.370
Total Direct Tax Rate 41.455 46.228 44.573 41.202
Sources: The data for this table has been provided by the Wright County Auditor / Treasurer's Office.
122
Table 6
2016 2017 2018 2019 2020 2021
1,340,579,000$ 1,473,986,500$ 1,644,926,700$ 1,837,875,900$ 2,043,966,400$ 2,237,499,800$
1,195,720,700$ 1,327,925,100$ 1,490,919,200$ 1,666,323,700$ 1,864,979,200$ 2,054,871,100$
16,476,000 20,388,300 23,397,400 29,560,400 27,109,100 32,555,900
1,212,196,700$ 1,348,313,400$ 1,514,316,600$ 1,695,884,100$ 1,892,088,300$ 2,087,427,000$
90.42%91.47%92.06%92.27%92.57%93.29%
12,909,476$ 14,465,922$ 16,228,630$ 18,029,678$ 19,955,742$ 21,940,788$
328,948 407,194 467,378 578,862 541,536 650,470
13,238,424$ 14,873,116$ 16,696,008$ 18,608,540$ 20,497,278$ 22,591,258$
0.99%1.01%1.02%1.01%1.00%1.01%
4,380,206$ 4,974,745$ 5,448,302$ 5,975,816$ 6,447,491$ 7,078,874$
640,000 655,000 655,000 734,293 746,758 749,551
5,020,206$ 5,629,745$ 6,103,302$ 6,710,109$ 7,194,249$ 7,828,425$
33.087 33.448 32.632 32.114 31.455 31.335
4.834 4.404 3.923 3.946 3.643 3.318
37.921 37.852 36.555 36.060 35.099 34.653
123
CITY OF OTSEGO, MINNESOTA
STATISTICAL SECTION (UNAUDITED)
TAX CAPACITY OF REAL ESTATE & PERSONAL PROPERTY Table 7
Last Ten Fiscal Years
Non Commercial Personal
Homestead Homestead & Industrial Agricultural Property Other Total
2012 6,460,276$ 1,097,107$ 1,821,302$ 543,596$ 279,502$ 76,765$ 10,278,548$
62.85% 10.67% 17.72%5.29%2.72%0.75% 100.00%
2013 5,906,265 903,006 1,788,872 533,264 285,540 53,341 9,470,288
62.37%9.54% 18.89%5.63%3.02%0.56% 100.00%
2014 6,607,296 918,439 1,664,605 536,842 290,266 78,317 10,095,765
65.45% 9.10% 16.49% 5.32% 2.88% 0.78% 100.00%
2015 7,732,867 1,057,409 1,633,988 582,530 298,480 53,341 11,358,615
68.08% 9.31% 14.39% 5.13% 2.63% 0.47% 100.00%
2016 8,878,089 1,183,843 2,166,341 627,666 328,948 53,537 13,238,424
67.06% 8.94% 16.36% 4.74% 2.48% 0.40% 100.00%
2017 9,942,548 1,232,700 2,627,164 597,483 407,194 66,027 14,873,116
66.85% 8.29% 17.66% 4.02% 2.74% 0.44% 100.00%
2018 11,298,428 1,276,749 2,981,199 612,928 467,378 59,326 16,696,008
67.67% 7.65% 17.86% 3.67% 2.80% 0.36% 100.00%
2019 12,807,798 1,481,672 3,017,858 667,248 578,862 55,102 18,608,540
68.83% 7.96% 16.22% 3.59% 3.11% 0.30% 100.00%
2020 14,392,621 1,899,299 2,935,016 670,618 541,536 58,188 20,497,278
70.22% 9.27% 14.32% 3.27% 2.64% 0.28% 100.00%
2021 16,107,001 1,982,727 3,121,710 665,277 650,470 64,073 22,591,258
71.30% 8.78% 13.82% 2.94% 2.88% 0.28% 100.00%
Sources: The data for this table has been provided by the Wright County Auditor / Treasurer's Office.
Residential
124
CITY OF OTSEGO, MINNESOTA
STATISTICAL SECTION (UNAUDITED)
PROPERTY TAX RATES - DIRECT AND OVERLAPPING GOVERNMENTS
Last Ten Fiscal Years Table 8
General Debt School School School School School School
Revenues Service Total District 728 District 882 District 885 County District 728 District 882 District 885
2012 37.320 4.135 41.455 45.548 28.262 52.646 43.452 130.455 113.169 137.553
2013 41.740 4.488 46.228 50.058 26.229 57.213 44.288 140.574 116.745 147.729
2014 39.865 4.708 44.573 51.286 28.269 51.570 43.450 139.309 116.292 139.593
2015 35.832 5.370 41.202 42.483 22.882 51.082 40.593 124.278 104.677 132.877
2016 33.087 4.834 37.921 39.266 20.857 49.102 39.970 117.157 98.748 126.993
2017 33.448 4.404 37.852 36.659 16.242 46.893 39.599 114.110 93.693 124.344
2018 32.632 3.923 36.555 36.137 15.621 47.950 39.946 112.638 92.122 124.451
2019 32.114 3.946 36.060 32.865 16.972 47.143 44.273 113.198 97.305 127.476
2020 31.455 3.643 35.099 34.371 15.865 45.280 44.421 113.891 95.385 124.800
2021 31.335 3.318 34.653 31.717 15.390 44.216 43.719 110.089 93.762 122.588
Sources: The data for this table has been provided by the Wright County Auditor / Treasurer's Office.
Overlapping Rates Total Direct & OverlappingDirect Rates
125
CITY OF OTSEGO, MINNESOTA
STATISTICAL SECTION (UNAUDITED)
PRINCIPAL PROPERTY TAXPAYERS Table 9
Current Year and Nine Years Ago
2021 2012
Percentage of Percentage of
Net Tax Total Tax Net Tax Total Tax
Taxpayer Classification Capacity Rank Capacity Value Capacity Rank Capacity Value
Duke Realty LP Industrial 1,112,750$ 1 4.93%240,392$ 2 2.34%
Centerpoint Energy Utility 437,102 2 1.93%144,488 3 1.41%
Wagner Spray Tech Corporation Industrial 237,250 3 1.05%0.00%
Target Corporation Commercial 199,450 4 0.88%248,514 1 2.42%
Evans Park, Inc.Apartments 167,496 5 0.74%0.00%
Ahava Realty ADA Compliant LP Industrial 159,250 6 0.70%0.00%
Wright-Hennepin Co-op Electric Utility 150,815 7 0.67%87,866 6 0.85%
Elk Inn Partners LP Commercial 99,250 8 0.44%99,250 5 0.97%
P & F Properties, Inc.Industrial 87,662 9 0.39%0.00%
Apex Business Center LLC Industrial 78,130 10 0.35%84,578 7 0.82%
Appello Group LLC Commercial 103,766 4 1.01%
GCI Capital, Inc.Commercial 71,550 8 0.70%
OHW LLC Residential 67,532 9 0.66%
Ryan Companies US Inc Commercial 52,080 10 0.51%
Totals 2,729,155$ 12.08%1,200,016$ 11.69%
Sources: The data for this table has been provided by the Wright County Auditor / Treasurer's Office.
126
CITY OF OTSEGO, MINNESOTA
STATISTICAL SECTION (UNAUDITED)
PROPERTY TAX LEVIES AND COLLECTIONS Table 10
Last Ten Fiscal Years
Collected within the
Certified Fiscal Year of the Levy Collections in Total Collections to Date
Property Percentage Subsequent Percentage
Tax Levy Amount of Levy Years Amount to Date
2012 4,261,000$ 4,111,857$ 96.50% 149,143$ 4,261,000$ 100.00%
2013 4,377,910 4,306,802 98.38%71,108 4,377,910 100.00%
2014 4,500,000 4,444,153 98.76%55,847 4,500,000 100.00%
2015 4,680,000 4,641,720 99.18%38,280 4,680,000 100.00%
2016 5,020,206 4,979,508 99.19%36,640 5,016,148 99.92%
2017 5,629,745 5,606,101 99.58%22,109 5,628,210 99.97%
2018 6,103,302 6,084,700 99.70%16,962 6,101,662 99.97%
2019 6,710,109 6,670,163 99.40%34,736 6,704,899 99.92%
2020 7,194,249 7,134,792 99.17%52,235 7,187,027 99.90%
2021 7,828,425 7,764,474 99.18%- 7,764,474 99.18%
Sources: The data for this table has been provided by Wright County and from City financial maintenance documents.
Note: The components of the Certified Property Tax Levy can be viewed in table 6 of the statistical section.
127
CITY OF OTSEGO, MINNESOTA
STATISTICAL SECTION (UNAUDITED)
RATIOS OF OUTSTANDING DEBT BY TYPE Table 11
Last Ten Fiscal Years
General General Notes Percentage
Obligation Equipment Obligation from Direct Total of Personal Per
Bonds Certificates Revenue Bonds Borrowings Debt Income Capita
2012 18,413,438$ 310,000$ 28,764,347$ -$ 47,487,785$ 8.82% 3,384$
2013 17,601,634 265,000 28,685,465 - 46,552,099 8.26% 3,220
2014 10,664,830 220,000 28,606,583 - 39,491,413 6.33% 2,638
2015 9,553,029 175,000 28,527,701 - 38,255,730 5.61% 2,473
2016 8,380,857 130,000 26,448,820 - 34,959,677 4.68% 2,182
2017 7,293,686 85,000 24,334,937 - 31,713,623 3.95% 1,910
2018 8,534,989 40,000 22,126,056 - 30,701,045 3.53% 1,772
2019 7,378,641 - 17,515,267 - 24,893,908 2.66% 1,373
2020 6,129,492 - 15,026,658 9,438,936 30,595,086 2.78% 1,532
2021 4,719,716 - 16,735,843 16,305,983 37,761,542 3.12% 1,723
Sources: The data for this table has been provided from City financial maintenance documents.
Note: More detailed information for Population and Personal Income can be viewed in table 16 of the statistical section.
Governmental Activities Business-Type Activites
128
CITY OF OTSEGO, MINNESOTA
STATISTICAL SECTION (UNAUDITED)
RATIOS OF GENERAL BONDED DEBT OUTSTANDING Table 12
Last Ten Fiscal Years
Total Percentage of
General General Less: Amounts Net General Estimated
Obligation Equipment Bonded Debt Restricted to Obligation Actual Value Per
Bonds Certificates Outstanding Debt Service Debt of Property Capita
2012 18,413,438$ 310,000$ 18,723,438$ 6,570,533$ 12,152,905$ 1.14% 866$
2013 17,601,634 265,000 17,866,634 5,882,912 11,983,722 1.21% 829
2014 10,664,830 220,000 10,884,830 5,430,795 5,454,035 0.52% 364
2015 9,553,029 175,000 9,728,029 4,506,243 5,221,786 0.44% 337
2016 8,380,857 130,000 8,510,857 4,292,589 4,218,268 0.31% 263
2017 7,293,686 85,000 7,378,686 3,596,348 3,782,338 0.26% 228
2018 8,534,989 40,000 8,574,989 4,484,680 4,090,309 0.25% 236
2019 7,378,641 - 7,378,641 3,979,190 3,399,451 0.18% 188
2020 6,129,492 - 6,129,492 3,076,069 3,053,423 0.15% 153
2021 4,719,716 - 4,719,716 2,362,735 2,356,981 0.11% 108
Sources: The data for this table has been provided from City financial maintenance documents.
Note: More detailed information for Population can be viewed in table 16 of the statistical section.
Note: More detailed information for Estimated Property Values can be viewed in table 6 of the statistical section.
129
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130
CITY OF OTSEGO, MINNESOTA
STATISTICAL SECTION (UNAUDITED)
COMPUTATION OF DIRECT AND OVERLAPPING Table 13
GOVERNMENTAL ACTIVITIES DEBT
DECEMBER 31, 2021
Estimated Estimated Share
Debt Percentage of Overlapping
Governmental Unit Outstanding Applicable Debt
Overlapping Debt:
School Districts:
No. 728 - Elk River 303,850,000$ 19.50% 59,250,750$
No. 882 - Monticello 47,680,000 4.02% 1,916,736
No. 885 - St. Michael-Albertville 158,010,000 4.76% 7,521,276
Wright County 146,970,000 11.99% 17,621,703
Total Overlapping Debt 656,510,000$ 86,310,465
City of Otsego Direct Debt 4,719,716
Total Direct and Overlapping Debt 91,030,181$
Sources: The majority of the data for this table has been provided by Wright County Auditor / Treasurer's Office.
Sources: The remaining data for this table was provided by School District No. 728.
Note: More detailed information for the City's outstanding debt can be viewed in table 11 of the statistical section.
Note: Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the City. The schedule
estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of
the City. This process recognizes that, when considering the City's ability to issue and repay long-term debt, the entire debt
burden borne by the residents and businesses should be taken into account. However, this does not imply that every taxpayer is a
resident, and therefore responsible for repaying the debt, of each overlapping government.
Note: The percentage of overlapping debt applicable is estimated using tax capacity values. Applicable percentages were estimated
by determining the portion of each entity's tax capacity that is within the City's boundaries, and dividing it by the entity's
total tax capacity.
131
CITY OF OTSEGO, MINNESOTA
STATISTICAL SECTION (UNAUDITED)
LEGAL DEBT MARGIN INFORMATION
Last Ten Fiscal Years
2012 2013 2014 2015
Taxable Market Value 927,878,800$ 853,733,700$ 923,045,300$ 1,054,531,800$
Debt Limit Percentage 3.00% 3.00% 3.00% 3.00%
Debt Limit 27,836,364 25,612,011 27,691,359 31,635,954
Total Net Debt Applicable to Limit 12,152,905 11,983,722 5,454,035 5,221,786
Legal Debt Margin 15,683,459$ 13,628,289$ 22,237,324$ 26,414,168$
Total Net Debt Applicable to the Limit
as a Percentage of Debt Limit 43.66% 46.79% 19.70% 16.51%
Sources: The data for this table has been provided by Wright County and from City financial maintenance documents.
132
Table 14
2016 2017 2018 2019 2020 2021
1,212,196,700$ 1,348,313,400$ 1,514,316,600$ 1,695,884,100$ 1,892,088,300$ 2,087,427,000$
3.00% 3.00% 3.00% 3.00% 3.00% 3.00%
36,365,901 40,449,402 45,429,498 50,876,523 56,762,649 62,622,810
4,218,268 3,782,338 4,090,309 3,399,451 3,053,423 2,356,981
32,147,633$ 36,667,064$ 41,339,189$ 47,477,072$ 53,709,226$ 60,265,829$
11.60% 9.35% 9.00% 6.68% 5.38% 3.76%
133
CITY OF OTSEGO, MINNESOTA
STATISTICAL SECTION (UNAUDITED)
PLEDGED-REVENUE COVERAGE Table 15
Last Ten Fiscal Years
Water and Water and
Sanitary Sewer Sanitary Sewer Less: Net
Utility Connection Operating Available Debt Service
Charges Charges Expenses Revenue Principal Interest Coverage
2012 2,256,616$ 1,032,687$ 1,148,605$ 2,140,698$ -$ 1,006,961$ 212.59%
2013 2,429,661 1,233,224 1,136,790 2,526,095 - 1,007,100 250.83%
2014 2,687,572 2,435,460 1,016,382 4,106,650 - 1,007,585 407.57%
2015 2,641,566 2,020,299 2,524,073 2,137,792 - 1,007,762 212.13%
2016 2,857,174 3,662,097 2,831,346 3,687,925 2,000,000 1,007,725 122.62%
2017 3,197,486 3,577,039 2,973,383 3,801,142 2,035,000 967,815 126.59%
2018 3,588,031 4,195,354 3,229,493 4,553,892 2,130,000 886,043 150.99%
2019 3,872,764 4,930,688 3,544,713 5,258,739 4,531,906 883,087 97.11%
2020 4,482,841 7,428,178 3,704,373 8,206,646 2,335,000 603,612 279.27%
2021 5,902,263 6,380,178 4,639,776 7,642,665 2,469,779 791,745 234.33%
Sources: The data for this table has been provided from City financial maintenance documents.
General Obligation Revenue Bonds
134
CITY OF OTSEGO, MINNESOTA
STATISTICAL SECTION (UNAUDITED)
DEMOGRAPHIC AND ECONOMIC STATISTICS Table 16
Last Ten Fiscal Years
School Enrollments
Per Capita No. 885
No. of Personal Personal Unemployment Median No. 728 No. 882 St. Michael
Population Households Income Income Rate Age Elk River Monticello Albertville
2012 14,034 4,894 538,231,968$ 38,352 5.9%33.4 12,753 4,137 5,645
2013 14,457 5,035 563,823,000 39,000 5.0%33.4 13,123 4,137 5,747
2014 14,968 5,218 623,821,336 41,677 4.2%33.8 13,076 4,193 5,904
2015 15,472 5,394 682,361,616 44,103 3.7%34.1 13,136 4,096 6,096
2016 16,019 5,580 746,373,267 46,593 3.9%33.2 13,219 4,094 6,286
2017 16,605 5,787 803,366,505 48,381 3.5%34.3 13,461 4,168 6,335
2018 17,323 5,975 869,285,463 50,181 3.0%34.7 13,670 4,125 6,463
2019 18,130 6,254 935,671,170 51,609 3.3%34.3 13,921 4,201 6,557
2020 19,966 6,554 1,102,482,588 55,218 5.2%33.7 13,464 4,072 6,366
2021 21,915 6,957 1,210,077,622 55,218 3.3%33.7 13,847 4,166 6,653
Sources: Population - Minnesota State Demographer (2012-2019); U.S. Census Bureau (2020); Estimated by City (2021)
Households - Minnesota State Demographer (2012-2019); Estimated by City (2020-2021)
Personal Income - Calculated by the City
Per Capita Personal Income - US Department of Commerce; Bureau of Economic Analysis
Unemployment Rate - Minnesota Department of Employment and Economic Development
Median Age - US Department of Commerce, Bureau of the Census
School Enrollment - Minnesota Department of Education
Note: Some data was not yet available for 2021. In those instances, 2020 data was shown for the current year.
135
CITY OF OTSEGO, MINNESOTA
STATISTICAL SECTION (UNAUDITED)
PRINCIPAL EMPLOYMENT SECTORS Table 17
Current Year and Nine Years Ago
Percentage of Percentage of
Total City Total City
Employment Industry Employees Rank Employment Employees Rank Employment
Education & Health Services 1,129 1 26.29%146 5 8.62%
Trade, Transportation & Utilities 947 2 22.05% 445 1 26.28%
Financial Activities 691 3 16.09% 31 7 1.83%
Construction 456 4 10.62% 199 3 11.75%
Leisure & Hospitality 343 5 7.99% 388 2 22.92%
Professional & Business Services 335 6 7.80% 159 4 9.39%
Manufacturing 170 7 3.96%
Other Services 88 8 2.05% 122 6 7.21%
Public Administration 40 9 0.93% 20 8 1.18%
Information 28 10 0.65%
Natural Resources and Mining 8 11 0.19%
Totals 4,235 98.63% 1,510 89.19%
Sources: The data for this table has been provided from the Minnesota Department of Employment and Economic Development.
Note: Due to data privacy within the State, data for principal employers of the City is not available. Given this limitation, the
City determined it was appropriate to provide data regarding employment industry data. The City felt that this data would still
provide the user information to understand the degree to which the City's economy is or is not dependent on a certain
employment sector.
2021 2012
136
CITY OF OTSEGO, MINNESOTA
STATISTICAL SECTION (UNAUDITED)
FULL TIME CITY GOVERNMENT POSITIONS BY FUNCTION Table 18
Last Ten Fiscal Years
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
General Government
Administration 3.0 3.0 3.0 4.0 3.5 3.6 3.6 3.6 4.0 4.0
Finance 3.9 3.7 3.9 3.0 3.0 3.0 3.0 3.0 3.0 3.0
Total General Government 6.9 6.7 6.9 7.0 6.5 6.6 6.6 6.6 7.0 7.0
Public Safety
Police - - - - - - - - - -
Fire - - - - - - - - - -
Building Inspections 1.0 1.0 1.0 1.0 1.5 1.5 1.8 2.0 2.0 2.0
Total Public Safety 1.0 1.0 1.0 1.0 1.5 1.5 1.8 2.0 2.0 2.0
Public Works
Street Maintenance 5.9 5.8 5.8 6.9 6.9 6.9 6.9 7.8 7.8 7.8
Mechanic 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0
Total Public Works 6.9 6.8 6.8 7.9 7.9 7.9 7.9 8.8 8.8 8.8
Culture and Recreation
Parks Maintenance 1.4 1.4 1.4 3.5 3.5 3.5 3.9 4.4 4.4 4.4
Recreation 0.6 1.1 1.1 1.4 1.4 1.4 1.6 1.5 2.0 1.5
Total Culture and Recreation 2.0 2.5 2.5 4.9 4.9 4.9 5.5 5.9 6.4 5.9
Public Utilities
Water Utility - 2.0 2.0 1.3 1.3 1.3 1.4 1.5 1.8 1.8
Sanitary Sewer Utility - 2.0 2.0 3.7 3.7 3.7 4.1 4.5 5.4 5.4
Total Public Utilities - 4.0 4.0 5.0 5.0 5.0 5.5 6.0 7.2 7.2
Total 16.8 21.0 21.2 25.8 25.8 25.9 27.3 29.3 31.4 30.9
Sources: The data for this table has been provided from City financial maintenance documents.
Note: Police and Fire services are contracted services with Wright County and neighboring Cities respectively, therefore no City employees.
Note: Public Utilities staffing were contracted with a service provider through 2012. In 2013, the City hired a staff and assumed operations.
137
CITY OF OTSEGO, MINNESOTA
STATISTICAL SECTION (UNAUDITED)
OPERATING INDICATORS BY FUNCTION
Last Ten Fiscal Years
Function 2012 2013 2014 2015
Administration
Rental Licenses Issued 292 337 372 372
Code Enforcement Citations 89 20 16 31
Registered Voters 7,168 7,329
Actual Votes Tallied 7,126 4,693
Police
Total Calls for Service 4,234 3,856 4,060 3,575
Fire
Calls - Albertville Department 82 76
Calls - Elk River Department 74 73
Calls - Rogers Department 18
Building Inspections
Number of Permits - All Types 645 699 692 893
New Homes Constructed 143 190 188 207
Public Works
Miles of Streets Constructed 0.45 1.33 2.30 1.66
Miles of Streets Reconstructed
Snow Plowing Events 46 37 22 16
Culture and Recreation
Parks Acres Maintained 167.8 184.3 184.3 184.3
Prairie Festival Attendance 4,900 5,100 6,200
Recreation Programs Offered 17 60 106 132
Recreation Programs Participants 550 9,875 14,958 12,662
Water Utility
Connections 2,517 2,678 2,829 3,023
Gallons Delivered 429,293,500 409,492,730 37,529,984 389,118,330
Sanitary Sewer Utility
Average Daily Gallons Treated 485,000 543,000 539,000 551,000
Sources: The data for this table has been provided by each respective City department.
Note: The City made significant changes to the indicators included in this table for 2015. Not all historical data
was able to be compiled, and this table will be updated on a go-forward basis.
138
Table 19
2016 2017 2018 2019 2020 2021
387 351 329 332 300 297
41 30 68 18 37 42
9,324 9,754 13,081
7,362 6,228 11,389
3,619 4,310 4,279 4,484 4,145 3,783
93 129 131 164 158 204
80 92 96 105 92 110
15 12 27 26 28 59
968 722 1,147 1,173 1,791 1,856
219 210 300 300 403 435
2.59 3.93 7.80 4.68 1.47 3.83
0.35 1.80 5.30 - 0.78 0.76
16 22 37 21 11 19
190.3 160.0 160.0 160.0 173.0 175.0
5,000 4,000 4,800 6,450 - 6,850
100 127 231 153 52 161
12,662 17,341 20,885 18,500 5,359 16,936
3,155 3,278 3,748 4,014 4,335 4,445
393,795,210 491,484,000 427,795,004 491,074,000 632,552,814 787,182,348
600,000 627,000 673,000 738,000 798,000 840,000
139
CITY OF OTSEGO, MINNESOTA
STATISTICAL SECTION (UNAUDITED)
CAPITAL ASSET STATISTICS BY FUNCTION
Last Ten Fiscal Years
Function 2012 2013 2014 2015
Public Works
Street Miles (MSA) 113.30 114.63 116.93 118.59
Heavy Duty Trucks 8 8 8 8
Light Duty Vehicles 11 15 15 15
Tractors & Grading Equipment 8 8 8 8
Culture and Recreation
Trail Miles 19.68 19.68 19.68 19.96
Number of Parks 8 10 10 10
Playgrounds 7 7 7 7
Park Shelters 9 9 9 9
Ball Fields 5 5 5 5
Soccer Fields - - - 3
Basketball Courts 5 5 5 5
Tennis Courts 7 7 7 7
Pickleball Courts
Outdoor Ice Rinks 1 1 1
Mowing Equipment 5 5 5 5
Water Utility
Water Towers 3 3 3 3
Wells 8 8 8 8
Miles of Water Main 63 63 74
Hydrants 717 722 794
Water Valves 1,555 1,603 1,659
Sanitary Sewer Utility
Treatment Facilities 2 2 2 2
Lift Stations 9 9 9 9
Miles of Sanitary Sewer Lines 69 - 74
Manholes 1,257 1,257 1,366
Miles of Sanitary Forcemain 20 20 20
Sources: The data for this table has been provided by each respective City department.
Note: The City made significant changes to the statistics included in this table for 2015. Not all historical data
was able to be compiled, and this table will be updated on a go-forward basis.
140
Table 20
2016 2017 2018 2019 2020 2021
120.88 124.81 131.00 131.00 134.41 138.31
8 8 9 9 9 10
15 17 17 16 19 16
8 8 7 7 6 7
21.13 25.11 25.60 27.95 38.31 42.00
11 12 14 14 14 14
8 9 10 10 14 14
10 10 12 13 13 16
6 6 6 6 7 7
3 3 3 3 3 3
5 5 6 6 7 6
8 8 8 8 8 7
4
1 1 1 1 2 2
6 6 6 6 7 6
3 3 3 3 3 3
8 8 8 7 9 9
77 79 83 87 90 94
846 871 923 975 1,014 1,066
1,841 1,881 1,983 2,106 2,360 2,287
2 2 2 2 2 2
10 10 10 10 10 10
76 80 81.8 86.1 96.9 103.7
1,480 1,524 1,594 1,730 1,774 1,814
20 20 21 21 21 27
141
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142
City of Otsego
Wright County, Minnesota
Communications Letter
December 31, 2021
City of Otsego
Table of Contents
Report on Matters Identified as a Result of
the Audit of the Basic Financial Statements 1
Significant Deficiency 3
Required Communication 4
Financial Analysis 9
Emerging Issue 20
1
Report on Matters Identified as a Result of
the Audit of the Basic Financial Statements
Honorable Mayor, Members of the
City Council and Management
City of Otsego
Otsego, Minnesota
In planning and performing our audit of the basic financial statements of the governmental activities,
business-type activities, each major fund, and the aggregate remaining fund information of the City of
Otsego, Minnesota, as of and for the year ended December 31, 2021, 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, we considered the City's internal control over financial reporting (internal control) as a basis for
designing audit procedures that are appropriate in the circumstances for the purpose of expressing our
opinions on the financial statements, but not for the purpose of expressing an opinion on the
effectiveness of the City's internal control. Accordingly, we do not express an opinion on the
effectiveness of the City's internal control over financial reporting.
Our consideration of internal control was for the limited purpose described in the preceding paragraph
and was not designed to identify all deficiencies in internal control that might be material weaknesses or
significant deficiencies and, therefore, material weaknesses or significant deficiencies may exist that
have not been identified. In addition, because of inherent limitations in internal control, including the
possibility of management override of controls, misstatements due to error, or fraud may occur and not
be detected by such controls.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, to prevent, or
detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a
combination of deficiencies, in internal control over financial reporting, such that there is a reasonable
possibility that a material misstatement of the City's basic financial statements will not be prevented, or
detected and corrected, on a timely basis. A reasonable possibility exists when the likelihood of an event
occurring is either reasonably possible or probable as defined as follows:
• Reasonably possible. The chance of the future event or events occurring is more than remote but
less than likely.
• Probable. The future event or events are likely to occur.
We did not identify any deficiencies in internal control that we consider to be material weaknesses.
2
A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less
severe than a material weakness, yet important enough to merit attention by those charged with
governance. The significant deficiency identified is stated within this letter.
The accompanying memorandum also includes financial analysis provided as a basis for discussion. The
matters discussed herein were considered by us during our audit and they do not modify the opinion
expressed in our Independent Auditor's Report dated May 31, 2022, on such statements.
This communication, which is an integral part of our audit, is intended solely for the information and use
of management, Members of the City Council, others within the City and state oversight agencies and is
not intended to be, and should not be, used by anyone other than these specified parties.
St. Cloud, Minnesota
May 31, 2022
3
City of Otsego
Significant Deficiency
Lack of Segregation of Accounting Duties
The City had a lack of segregation of accounting duties due to a limited number of office employees.
Adequate segregation of accounting duties is in place when the following four areas of a transaction
have been separated: authorization, custody, recording, and reconciliation. Examples of functions
within the City that demonstrate this lack of segregation of accounting duties include, but are not limited
to, the following:
• Cash Receipts – The Utility Billing Clerk and Accountant have access to initiate and record
receipts. The Utility Billing Clerk is also responsible for depositing cash receipts. The
Accountant is also involved in the reconciliation process and has full access to the general
ledger.
• Utility Billing Process – The Utility Billing Clerk is responsible for handling customer payments,
depositing payments received.
• Disbursements – Due to small staff the City allows access to other employees to perform
disbursement related activities in order to fill in for normal roles and responsibilities in the
absences of other staff. In the absence of the Accountant, the Utility Billing Clerk has access to
record and cut checks and has access to blank checks.
• Financial Reporting and Journal Entry Process – The Finance Director and Accountant have full
access to the general ledger and can make adjustments without review during the monthly and
year-end financial closing process.
Management and the City Council must remain aware of this situation and management should
continually monitor internal control, including changes that occur.
4
City of Otsego
Required Communication
We have audited the basic financial statements of the governmental activities, business-type activities,
each major fund, and the aggregate remaining fund information of the City as of and for the year ended
December 31, 2021. Professional standards require that we advise you of the following matters related
to our audit.
Our Responsibility in Relation to the Financial Statement Audit
As communicated in our engagement letter, our responsibility, as described by professional standards, is
to form and express opinions about whether the basic financial statements prepared by management with
your oversight are presented fairly, in all material respects, in accordance with accounting principles
generally accepted in the United States of America. Our audit of the basic financial statements does not
relieve you or management of its respective responsibilities.
Our responsibility, as prescribed by professional standards, is to plan and perform our audit to obtain
reasonable, rather than absolute, assurance about whether the basic financial statements are free of
material misstatement. An audit of the basic financial statements includes consideration of internal
control over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City's internal
control over financial reporting. Accordingly, as part of our audit, we considered the internal control of
the City solely for the purpose of determining our audit procedures and not to provide any assurance
concerning such internal control.
We are also responsible for communicating significant matters related to the audit that are, in our
professional judgement, relevant to your responsibilities in overseeing the financial reporting process.
However, we are not required to design procedures for the purpose of identifying other matters to
communicate to you.
Generally accepted accounting principles provide for certain Required Supplementary Information (RSI)
to supplement the basic financial statements. Our responsibility with respect to the RSI, which
supplements the basic financial statements, is to apply certain limited procedures in accordance with
generally accepted auditing standards. However, the RSI was not audited and, because the limited
procedures do not provide us with sufficient evidence to express an opinion or provide any assurance,
we do not express an opinion or provide any assurance on the RSI.
Our responsibility for the supplementary information accompanying the basic financial statements, as
described by professional standards, is to evaluate the presentation of the supplementary information in
relation to the basic financial statements as a whole and to report on whether the supplementary
information is fairly stated, in all material respects, in relation to the basic financial statements taken as a
whole.
Our responsibility with respect to the other information in documents containing the audited basic
financial statements and auditor's report does not extend beyond the basic financial information
identified in the report. We have no responsibility for determining whether this other information is
properly stated. This other information was not audited and we do not express an opinion or provide any
assurance on it.
5
City of Otsego
Required Communication
Our Responsibility in Relation to Government Auditing Standards
As communicated in our engagement letter, part of obtaining reasonable assurance about whether the
basic financial statements are free of material misstatement, we performed tests of the City's compliance
with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which
could have a direct and material effect on the determination of basic financial statement amounts.
However, the objective of our tests was not to provide an opinion on compliance with such provisions.
Our Responsibility in Relation to Title 2 U.S. Code of Federal Regulations Part 200, Uniform
Administrative Requirements, Cost Principles, and Audit Requirements for Federa l Awards
(Uniform Guidance)
As communicated in our engagement letter, in accordance with the Uniform Guidance, we examined on
a test basis, evidence about the City's compliance with the types of compliance requirements described
in the U.S. Office of Management and Budget (OMB) Compliance Supplement applicable to each of its
major federal programs for the purpose of expressing an opinion on the City's compliance with those
requirements. While our audit provided a reasonable basis for our opinion, it did not provide a legal
determination on the City's compliance with those requirements.
In planning and performing our audit of compliance, we considered the City's internal control over
compliance with the types of requirements that could have a direct and material effect on each major
federal program to determine the auditing procedures that are appropriate in the circumstances for the
purpose of expressing an opinion on compliance for each major federal program and to test and report
on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose
of expressing an opinion on the effectiveness of internal control over compliance.
Planned Scope and Timing of the Audit
We conducted our audit consistent with the planned scope and timing we previously communicated to
you.
Compliance with All Ethics Requirements Regarding Independence
The engagement team, others in our firm, as appropriate, our firm, and our network firms have complied
with all relevant ethical requirements regarding independence.
Significant Risks Identified
We have identified the following significant risks of material misstatement:
• Risk of Improper Revenue Recognition – Revenue recognition is considered a fraud risk on
substantially all engagements as it is generally the largest line item impacting a City's change in
fund balance or net position.
• Risk of Misappropriation of Assets – If duties cannot be appropriately segregated within finance
department, there is a risk of misappropriation of assets.
• Risk of Management Override of Controls – Management override of internal control is
considered a risk in substantially all engagements as management may be incentivized to
produce better results.
6
City of Otsego
Required Communication
Qualitative Aspects of the City's Significant Accounting Practices
Significant Accounting Policies
Management has the responsibility to select and use appropriate accounting policies. A summary of the
significant accounting policies adopted by the City is included in the notes to financial statements. There
have been no initial selection of accounting policies and no changes to significant accounting policies or
their application during 2021. No matters have come to our attention that would require us, under
professional standards, to inform you about (1) the methods used to account for significant unusual
transactions and (2) the effect of significant accounting policies in controversial or emerging areas for
which there is a lack of authoritative guidance or consensus.
Significant Accounting Estimates
Accounting estimates are an integral part of the basic financial statements prepared by management and
are based on management's current judgements. Those judgements are normally based on knowledge
and experience about past and current events and assumptions about future events. Certain accounting
estimates are particularly sensitive because of their significance to the basic financial statements and
because of the possibility that future events affecting them may differ markedly from management's
current judgements. The most sensitive estimates affecting the basic financial statements relate to:
Depreciation – The City is currently depreciating its capital assets over their estimated useful lives,
as determined by management, using the straight-line method.
Expense Allocation – Certain expenses are allocated to programs based on an estimate of the benefit
to that particular program. Examples are salaries, benefits, and supplies.
Net Pension Liability, Deferred Outflows of Resources Related to Pensions and Deferred Inflows of
Resources Related to Pensions – These balances are based on an allocation by the pension plans
using estimates based on contributions.
We evaluated the key factors and assumptions used to develop the accounting estimates and determined
that they are reasonable in relation to the basic financial statements taken as a whole and in relation to
the applicable opinion units.
Financial Statement Disclosures
Certain basic financial statement disclosures involve significant judgment and are particularly sensitive
because of their significance to financial statement users. The basic financial statement disclosures are
neutral, consistent, and clear.
Significant Difficulties Encountered during the Audit
We encountered no significant difficulties in dealing with management relating to the performance of
the audit.
7
City of Otsego
Required Communication
Uncorrected and Corrected Misstatements
For the purposes of this communication, professional standards require us to accumulate all known
and likely misstatements identified during the audit, other than those that we believe are trivial, and
communicate them to the appropriate level of management. Further, professional standards require
us to also communicate the effects of uncorrected misstatements related to prior periods on the
relevant classes of transactions, account balances or disclosures, and the basic financial statements
taken as a whole and each applicable opinion unit.
Management did not identify and we did not notify them of any uncorrected financial statement
misstatements.
In addition, professional standards require us to communicate to you all material, corrected
misstatements that were brought to the attention of management as a result of our audit procedures.
None of the misstatements detected as a result of audit procedures and corrected by management were
material, either individually or in the aggregate, to the basic financial statements taken as a whole.
Disagreements with Management
For purposes of this letter, professional standards define a disagreement with management as a
matter, whether or not resolved to our satisfaction, concerning a financial accounting, reporting, or
auditing matter, which could be significant to the City's financial statements or the auditor's report.
No such disagreements arose during the course of our audit.
Representations Requested from Management
We have requested certain written representations from management, which are included in the
management representation letter.
Management's Consultations with Other Accountants
In some cases, management may decide to consult with other accountants about auditing and
accounting matters. Management has informed us that, and to our knowledge, there were no
consultations with other accountants regarding auditing and accounting matters.
Other Significant Matters, Findings, or Issues
In the normal course of our professional association with the City, we generally discuss a variety of
matters, including the application of accounting principles and auditing standards, significant events or
transactions that occurred during the year, operating and regulatory conditions affecting the City, and
operational plans and strategies that may affect the risks of material misstatement. None of the matters
discussed resulted in a condition to our retention as the City's auditor.
Other Information Included in Annual Reports
Pursuant to professional standards, our responsibility as auditors for other information, whether financial
or nonfinancial, included in the City's annual reports, does not extend beyond the information identified
in the audit report, and we are not required to perform any procedures to corroborate such other
information.
8
City of Otsego
Required Communication
Other Information Included in Annual Reports (Continued)
We applied certain limited procedures to the RSI that supplements the basic financial statements. Our
procedures consisted of inquiries of management regarding 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 did not audit the RSI and do not express an opinion or provide any assurance on the RSI.
With respect to the supplementary information accompanying the financial statements, we made
certain inquiries of management and evaluated the form, content and methods of preparing the
information to determine that the information complies with accounting principles generally
accepted in the United States of America, the method of preparing it has not changed from the prior
period, and the information is appropriate and complete in relation to our audit of the financial
statements. We compared and reconciled the supplementary information to the underlying
accounting records used to prepare the basic financial statements or to the basic financial statements
themselves.
We were not engaged to report on the other information accompanying the basic financial statements
but are not RSI. Such information has 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 it.
Our responsibility also includes communicating to you any information which we believe is a material
misstatement of fact. Nothing came to our attention that caused us to believe that such information, or its
manner of presentation, is materially inconsistent with the information, or manner of its presentation,
appearing in the basic financial statements.
9
City of Otsego
Financial Analysis
The following pages provide graphic representation of select data pertaining to the financial position and
operations of the City for the past five years. Our analysis of each graph is presented to provide a basis
for discussion of past performance and how implementing certain changes may enhance future
performance. We suggest you view each graph and document if our analysis is consistent with yours. A
subsequent discussion of this information should be useful for planning purposes.
General Fund
The following graph summarizes the past five years of General Fund revenues, expenditures, and fund
balance. For the year ended December 31, 2021, revenues for the City's General Fund totaled
$7,805,004. This represents a decrease of $1,250,693, or 13.8%, from 2020. General Fund expenditures
totaled $6,401,090 in 2021, which is a decrease of $256,235, or 3.8%, from 2020. Revenue and
expenditure activity, combined with net transfers out of $2,191,746, resulted in a decrease in fund
balance of $787,832 in 2021.
The ending General Fund balance of $5,199,901 is further broken down into spending categories;
$354,473 is for nonspendable fund balances which is made up of $152,273 of prepaid items and
$202,200 of assets held for resale. In addition, $245,758 is assigned for insurance deductibles and
$27,043 is assigned for educational programs. This leaves $4,572,627 available for spending on any
purpose, which is considered unassigned fund balance. The City's policy is to maintain a minimum fund
balance in the General Fund of 45.0% of the subsequent years' expenditures. The fund balance at
December 31, 2021, represents 70.8% of 2022 budgeted expenditures of $7,347,416.
2017 2018 2019 2020 2021
Total Revenues $5,895,990 $6,305,790 $6,692,859 $9,055,697 $7,805,004
Total Expenditures 4,732,327 5,294,967 5,686,890 6,657,325 6,401,090
Fund Balance 3,890,645 4,113,667 4,319,810 5,987,733 5,199,901
$-
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
$8,000,000
$9,000,000
$10,000,000
General Fund
10
City of Otsego
Financial Analysis
General Fund Revenues
Trends for each of the City's major revenue classifications over the past five years are graphically
portrayed in the bar chart below.
As stated earlier, General Fund revenues decreased $1,250,693, or 13.8%, from 2020. Taxes increased
$92,131 due to an increased tax levy. Intergovernmental decreased $1,308,177 due to receiving the
CARES grant in 2020. Charges for services increased $170,611 due to COVID-19 and reduced services
offered in 2020. Investment income decreased $226,434 due to worsening market conditions. Other
sources of revenue stayed consistent with the prior year.
2017 2018 2019 2020 2021
Investment Income $31,343 $48,761 $155,709 $177,948 $(48,486)
Other 259,416 58,077 108,364 61,688 86,065
Intergovernmental 74,080 78,437 88,328 1,396,214 88,037
Charges for Services 275,740 315,699 310,871 257,198 427,809
Licenses and Permits 1,363,384 1,672,906 1,699,879 2,532,789 2,529,588
Taxes 3,892,027 4,131,910 4,329,708 4,629,860 4,721,991
$-
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
$8,000,000
$9,000,000
$10,000,000
General Fund Revenues
11
City of Otsego
Financial Analysis
General Fund Revenues (Continued)
The allocation of revenues by source within each major classification is presented below for 2021 and
2020. The City continues to rely on tax revenue as the majority of its General Fund revenue, accounting
for 60.5% of its total revenue in 2021. Intergovernmental decreased to 1.1% due to CARES funding
received in 2020. Other sources of revenue were fairly consistent with the prior year.
Taxes
60.5%
Intergovernmental
1.1%
Licenses and
Permits
32.4%
Charges for
Services
5.5%
Investment
Income
(0.6)%
Other
1.1%
2021 General Fund Revenues
Taxes
51.1%
Intergovernmental
15.4%
Licenses and
Permits
28.0%Charges for
Services
2.8%
Investment
Income
2.0%
Other
0.7%
2020 General Fund Revenues
12
City of Otsego
Financial Analysis
General Fund Revenues Budget and Actual
The graph below outlines the budget and actual results for General Fund revenues.
Taxes Intergovernmental Licenses and
Permits
Charges for
Services
Investment
Income Other
Budget $4,781,632 $87,500 $1,200,810 $198,915 $72,000 $27,500
Actual 4,721,991 88,037 2,529,588 427,809 $(48,486)86,065
$-
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
$4,000,000
$4,500,000
$5,000,000
2021 General Fund Revenues
Budget and Actual
Overall, actual revenue exceeded budgeted revenue by $1,436,647, or 22.6%. The largest variance was
for licenses and permits which was $1,328,778 over budget. This was the result of budgeting
conservatively for building and commercial construction permits for 2021. The second largest variance
was in Charges for services which was over budget $228,894 due to budgeting conservatively.
Investment income was $120,486 underbudget due to unanticipated market conditions. The remaining
revenue sources were consistent with budgeted amounts.
13
City of Otsego
Financial Analysis
General Fund Expenditures
As discussed previously, total General Fund expenditures decreased $256,235, or 3.8%, from 2020.
Public safety expenditures increased $211,974 due to an increase in the County contract. Economic
development expenditures decreased $574,550 due to CARES grant expenditures related to pandemic
relief grants expended in 2020. Parks and recreation expenditures increased $84,352 due to increased
programming related to the impact of COVID-19 lessening. Public works expenditures increased
$83,124 due to increased hours worked in 2021 and cost of living adjustments. General government
expenditures were relatively consistent with the amounts expended in the prior year.
2017 2018 2019 2020 2021
General Government $1,079,577 $1,188,219 $1,227,565 $1,419,635 $1,358,500
Public Safety 1,895,467 2,168,187 2,379,440 2,667,435 2,879,409
Public Works 1,055,965 1,170,464 1,250,718 1,204,664 1,287,788
Parks and Recreation 587,739 654,786 715,026 699,793 784,145
Economic Development 113,579 113,311 114,141 665,798 91,248
$-
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
General Fund Expenditures
14
City of Otsego
Financial Analysis
General Fund Expenditures (Continued)
The following charts illustrate the allocation of General Fund expenditures by program/function. The
allocation of total expenditures by program has fluctuated slightly between the past two years as a result
of the changes in expenditures as discussed on the previous page. The most significant fluctuation in
2021 was economic development decreasing from 10.0% in 2020 to 1.4% in 2021 due to the pandemic
relief grants provided in 2020.
General
Government
21.2%
Public Safety
45.0%
Public Works
20.1%
Parks and
Recreation
12.3%
Economic
Development
1.4%
2021 General Fund Expenditures
General
Government
21.3%
Public Safety
40.1%Public Works
18.1%
Parks and
Recreation
10.5%
Economic
Development
10.0%
2020 General Fund Expenditures
15
City of Otsego
Financial Analysis
General Fund Expenditures Budget and Actual
The graph below outlines the budget and actual results for General Fund expenditures.
General Government Public Safety Public Works Parks and Recreation Economic
Development
Budget $1,540,869 $2,714,553 $1,429,909 $796,416 $129,710
Actual $1,358,500 2,879,409 1,287,788 784,145 91,248
$-
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
2021 General Fund Expeditures
Budget and Actual
Overall, actual expenditures were under budgeted amounts by $210,367, or 3.2%. General Government
had the largest variance, coming in $182,369 under budget. This variance is due to budgeting
conservatively. Public Safety had the second largest variance, coming in $164,856 over budget. This
variance is primarily due to building inspection expenditures being more than anticipated. Public Works
had the next largest variance, coming in $142,121 under budget. This variance is primarily due to
budgeting conservatively. The other functions were consistent with the budgeted amounts.
16
City of Otsego
Financial Analysis
Tax Capacity, Levy, And Rates
The chart below graphs the tax capacity, certified tax levy, and City tax rate for 2016 through 2020.
Comparing 2017 through 2021, the City's tax capacity has increased $7,718,142, or 51.9%, to
$22,591,258. The City's certified levy increased $2,198,680, or 39.1%, over the same time frame. As a
result, the City's tax capacity rate has decreased from 37.9% in 2017 to 34.7% in 2021. When comparing
2020 to 2021 the chart indicates that even with a levy increase of $634,176 the tax rate decreased from
35.1% to 34.7% due to a $2,093,980 increase in the total tax capacity.
$5,629,745 $6,103,302 $6,710,109 $7,194,249 $7,828,425
$14,873,116
$16,696,008
$18,608,540
$20,497,278
$22,591,258
37.85%36.56%
36.06%35.10%34.65%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
45.00%
50.00%
$-
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
2017 2018 2019 2020 2021
Tax Capacity, Levy, and Rates
Tax Levy Total Tax Capacity Tax Capacity Rate
17
City of Otsego
Financial Analysis
Water Fund
2017 2018 2019 2020 2021
Operating Revenues $1,459,868 $1,666,629 $1,626,076 $2,013,487 $2,873,324
Operating Expenses 1,059,863 1,180,414 1,447,050 1,289,632 1,854,678
Operating Income with
Depreciation 400,005 486,215 179,026 723,855 1,018,646
Operating Income without
Depreciation 906,196 1,031,364 771,993 1,352,583 1,722,474
$-
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
Water Fund
The Water Fund experienced operating income of $1,018,646 in 2021. This is the fifth consecutive year
with an operating income in the five years presented. We have also illustrated the operating income for
the past five years with depreciation, a non-cash expense, factored out of operating expenses. In 2021,
the City experienced operating income of $1,722,474 with depreciation expense factored out of
operating expenses. Depreciation expense amortizes the original cost of fund capital assets over their
estimated useful lives.
In 2021, operating revenues increased $859,837, or 42.7%, while operating expenses increased
$565,046, or 43.8%. The increase in operating revenues was due to increased usage and more customers
as well as a new rate structure. Operating expenses increased due to ordering more meters in 2021.
After factoring in non-operating items and capital contributions, in the form of connection fees and
developer and governmental fund contributions, and transfers, the net position in this fund increased by
$4,119,431. Unrestricted net position was $10,037,727 at December 31, 2021.
18
City of Otsego
Financial Analysis
Sewer Fund
2017 2018 2019 2020 2021
Operating Revenues $1,737,618 $1,921,402 $2,246,688 $2,469,354 $3,028,939
Operating Expenses 1,913,520 2,049,079 2,097,663 2,414,741 2,785,098
Operating Income (Loss) with Depreciation (175,902)(127,677)149,025 54,613 243,841
Operating Income without Depreciation 736,786 833,442 1,137,333 1,080,702 1,310,055
$(250,000)
$-
$250,000
$500,000
$750,000
$1,000,000
$1,250,000
$1,500,000
$1,750,000
$2,000,000
$2,250,000
$2,500,000
$2,750,000
$3,000,000
$3,250,000
Sewer Fund
In 2021, the Sewer Fund generated an operating income for the third time in the five years presented. In
2021, the Sewer Fund experienced an operating income of $243,841 with depreciation. Operating
revenues increased $559,585 or 22.7% over the prior year, while operating expenses increased
$370,357, or 15.3%. The increase in operating revenues was due to an increase in rates and usage. The
increase in operating expenses was due to increased utility and chemical costs related to the increased
usage.
The operating income in 2021 was a result of increasing rates to assist in covering operating expenses
and has experienced an increase in users. Without depreciation, operating income totaled $1,310,055.
We recommend the City continue to monitor operations and fee structures of this fund to ensure positive
operating results.
After factoring in non-operating items, capital contributions, in the form of connection fees and
developer and governmental fund contributions, and transfers, the net position in this fund increased
$5,756,103. Unrestricted net position was $17,337,848 at December 31, 2021.
19
City of Otsego
Financial Analysis
Storm Water Fund
2017 2018 2019 2020 2021
Operating Revenues $61,540 $70,010 $109,372 $120,579 $122,200
Operating Expenses 62,172 71,040 123,163 138,985 188,245
Operating Income (Loss) with Depreciation (632)(1,030)(13,791)(18,406)(66,045)
Operating Income (Loss) without
Depreciation 34,502 46,414 44,177 77,164 70,273
$(100,000)
$(50,000)
$-
$50,000
$100,000
$150,000
$200,000
Storm Water Fund
The Storm Water Fund experienced an increase in operating revenues of $1,621 or 1.3% from 2020 due
to more customers. Operating expenses increased, $49,260 or 35.4% from 2020 to 2021 due to increases
in depreciation expense due to a large number of capital assets being recently added. The fund
experienced an operating loss of $66,045 in 2021. Without depreciation included in operating expenses,
the fund experienced operating income of $70,273.
After factoring in non-operating items, capital contributions from developers and governmental funds
and transfers, this fund's net position increased by $1,316,740. Unrestricted net position was $570,428 at
December 31, 2021.
20
City of Otsego
Emerging Issue
Executive Summary
The following is an executive summary of financial and business related updates to assist you in staying
current on emerging issues in accounting and finance. This summary will give you a preview of the new
standards that have been recently issued and what is on the horizon for the near future. The most recent
and significant update includes:
• Accounting Standard Update – GASB Statement No. 87 – Leases – GASB has issued GASB
Statement No. 87 relating to accounting and financial reporting for leases. This new statement
establishes a single model for lease accounting based on the principle that leases are financing of
the right to use an underlying asset.
The following is an extensive summary of the current update. As your continued business partner, we
are committed to keeping you informed of new and emerging issues. We are happy to discuss these
issues with you further and its applicability to your City.
Accounting Standard Update – GASB Statement No. 87 – Leases
The objective of this Statement is to better meet the information needs of financial statement users by
improving accounting and financial reporting for leases by governments. This Statement increases the
usefulness of governments' basic financial statements by requiring recognition of certain lease assets and
liabilities for leases that previously were classified as operating leases and recognized as inflows of
resources or outflows of resources based on the payment provisions of the contract. It establishes a
single model for lease accounting based on the foundational principle that leases are financings of the
right to use an underlying asset. Under this Statement, a lessee is required to recognize a lease liability
and an intangible right-to-use lease asset, and a lessor is required to recognize a lease receivable and a
deferred inflow of resources, thereby enhancing the relevance and consistency of information about
governments' leasing activities.
A lease is defined as a contract that conveys control of the right to use another entity's nonfinancial asset
(the underlying asset) as specified in the contract for a period of time in an exchange or exchange-like
transaction. Examples of nonfinancial assets include buildings, land, vehicles, and equipment. Any
contract that meets this definition should be accounted for under the leases guidance, unless specifically
excluded in this Statement.
A short-term lease is defined as a lease that, at the commencement of the lease term, has a maximum
possible term under the lease contract of 12 months (or less), including any options to extend, regardless
of their probability of being exercised. Lessees and lessors should recognize short-term lease payments
as outflows of resources or inflows of resources, respectively, based on the payment provisions of the
lease contract.
21
City of Otsego
Emerging Issue
Accounting Standard Update – GASB Statement No. 87 – Leases (Continued)
A lessee should recognize a lease liability and a lease asset at the commencement of the lease term,
unless the lease is a short-term lease or it transfers ownership of the underlying asset. The lease liability
should be measured at the present value of payments expected to be made during the lease term (less any
lease incentives). The lease asset should be measured at the amount of the initial measurement of the
lease liability, plus any payments made to the lessor at or before the commencement of the lease term
and certain direct costs. A lessee should reduce the lease liability as payments are made and recognize
an outflow of resources (for example, expense) for interest on the liability. The lessee should amortize
the lease asset in a systematic and rational manner over the shorter of the lease term or the useful life of
the underlying asset. The notes to basic financial statements should include a description of leasing
arrangements, the amount of lease assets recognized, and a schedule of future lease payments to be
made.
A lessor should recognize a lease receivable and a deferred inflow of resources at the commencement of
the lease term, with certain exceptions for leases of assets held as investments, certain regulated leases,
short-term leases, and leases that transfer ownership of the underlying asset. A lessor should not
derecognize the asset underlying the lease. The lease receivable should be measured at the present value
of lease payments expected to be received during the lease term. The deferred inflow of resources
should be measured at the value of the lease receivable plus any payments received at or before the
commencement of the lease term that relate to future periods. A lessor should recognize interest revenue
on the lease receivable and an inflow of resources (for example, revenue) from the deferred inflows of
resources in a systematic and rational manner over the term of the lease. The notes to basic financial
statements should include a description of leasing arrangements and the total amount of inflows of
resources recognized from leases.
GASB Statement No. 87 is effective for fiscal years beginning after June 15, 2021.
Information provided above was obtained from www.gasb.org.
City of Otsego
Wright County, Minnesota
Schedule of Expenditures of Federal Awards and
Reports on Compliance with
Government Auditing Standards, Uniform Guidance, and
Legal Compliance
December 31, 2021
City of Otsego
Table of Contents
Schedule of Expenditures of Federal Awards 1
Notes to the Schedule of Expenditures of Federal Awards
2
Report on Internal Control Over Financial Reporting and on Compliance
and Other Matters Based on an Audit of Financial Statements Performed in
Accordance with Government Auditing Standards 3
Report on Compliance for each Major Federal Program and on Internal Control over
Compliance Required by the Uniform Guidance 5
Schedule of Findings and Questioned Costs 8
Minnesota Legal Compliance 11
See notes to schedule of expenditures and federal awards. 1
City of Otsego
Schedule of Expenditures of Federal Awards
For the Year Ended December 31, 2021
Federal CFDA
Number Expenditures
Environmental Protection Agency
Passed through Minnesota Public Facility Authority
Capitalization Loans for Clean Water State Revolving Funds 66.458 6,997,913$
Total federal expenditures 6,997,913$
Federal Grantor/Pass-Through Grantor/Grant Program Title
2
City of Otsego
Notes to Schedule of Expenditures of Federal Awards
NOTE 1 – BASIS OF PRESENTATION
The accompanying Schedule of Expenditures of Federal Awards includes the federal grant activity of
the City of Otsego, Minnesota and is presented on the accrual basis of accounting. The information in
this Schedule is presented in accordance with the requirements of the Uniform Guidance. Therefore,
some amounts presented in this Schedule may differ from amounts presented in, or used in, the
preparation of the regulatory basis financial statements.
NOTE 2 – PASS-THROUGH GRANT NUMBERS
All pass-through entities listed above use the same CFDA numbers as the federal grantors to identify
these grants and have not assigned any additional identifying numbers.
NOTE 3 – INDIRECT COST RATE
The City did not elect to use the 10 percent de minimis indirect cost rate, as allowed under the Uniform
Guidance.
3
Report on Internal Control Over Financial Reporting
and on Compliance and Other Matters Based on an Audit of
Financial Statements Performed in Accordance with
Government Auditing Standards
Honorable Mayor and Members
of the City Council
City of Otsego
Otsego, Minnesota
We have audited, 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, the financial statements of the governmental
activities, the business-type activities, each major fund, and the aggregate remaining fund information of
the City of Otsego, Minnesota as of and for the year ended December 31, 2021, and the related notes to
financial statements, which collectively comprise the City's basic financial statements and have issued
our report thereon dated May 31, 2022.
Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the City's internal
control over financial reporting (internal control) to determine the audit procedures that are appropriate
in the circumstances for the purpose of expressing our opinions on the financial statements, but not for
the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we
do not express an opinion on the effectiveness of the City's internal control.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, to prevent, or
detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a
combination of deficiencies, in internal control such that there is a reasonable possibility that a material
misstatement of the City's financial statements will not be prevented, or detected and corrected, on a
timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control
that is less severe than a material weakness, yet important enough to merit attention by those charged
with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this
section and was not designed to identify all deficiencies in internal control that might be material
weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies
may exist that were not identified. Given these limitations, during our audit we did not identify any
deficiencies in internal control that we consider to be material weaknesses. We did identify a certain
deficiency in internal control, described in the accompanying Schedule of Findings and Questioned
Costs that we consider to be a significant deficiency as audit finding 2021-001.
4
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the City's financial statements are free from
material misstatement, we performed tests of its compliance with certain provisions of laws, regulations,
contracts, and grant agreements, noncompliance with which could have a direct and material effect on
the determination of financial statement amounts. However, providing an opinion on compliance with
those provisions was not an objective of our audit, and accordingly, we do not express such an opinion.
The results of our tests disclosed no instances of noncompliance or other matters that are required to be
reported under Government Auditing Standards.
City's Response to Finding
The City's response to the finding identified in our audit is described in the accompanying Schedule of
Findings and Questioned Costs. The City's response was not subjected to the auditing procedures
applied in the audit of the financial statements and, accordingly, we express no opinion on the response.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and
compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City's
internal control or on compliance. This report is an integral part of an audit performed in accordance
with Government Auditing Standards in considering the City's internal control and compliance.
Accordingly, this communication is not suitable for any other purpose.
St. Cloud, Minnesota
May 31, 2022
5
Report on Compliance for each Major Federal Program
and Report on Internal Control over Compliance Required by
the Uniform Guidance
Independent Auditor's Report
Honorable Mayor and Members
of the City Council
City of Otsego
Otsego, Minnesota
Report on Compliance for Each Major Federal Program
Opinion on Each Major Federal Program
We have audited the City's compliance with the types of compliance requirements identified as subject
to audit in the OMB Compliance Supplement that could have a direct and material effect the City's major
federal program for the year ended December 31, 2021. The City's major federal program is identified in
the summary of auditor's results section of the accompanying Schedule of Findings and Questioned
Costs.
In our opinion, the City complied, in all material respects, with the types of compliance requirements
referred to above that could have a direct and material effect on its major federal program for the year
ended December 31, 2021.
Basis for Opinion on Each Major Federal Program
We conducted our audit of compliance in accordance with auditing standards generally accepted in the
United States of America (GAAS); the standards applicable to financial audits contained in Government
Auditing Standards issued by the Comptroller General of the United States (Government Auditing
Standards); and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform
Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform
Guidance). Our responsibilities under those standards and the Uniform Guidance are further described in
the Auditor’s Responsibilities for the Audit of Compliance section of our report.
We are required to be independent of the City and to meet our other ethical responsibilities, in
accordance with relevant ethical requirements relating to our audit. We believe that the audit evidence
we have obtained is sufficient and appropriate to provide a basis for our opinion on compliance for each
major federal program. Our audit does not provide a legal determination of the City's compliance with
the compliance requirements referred to above.
Responsibilities of Management for Compliance
Management is responsible for compliance with the requirements referred to above and for the design,
implementation, and maintenance of effective internal control over compliance with the requirements of
laws, statutes, regulations, rules and provisions of contracts or grant agreements applicable to the City's
federal programs.
6
Auditor's Responsibilities for the Audit of Compliance
Our objectives are to obtain reasonable assurance about whether material noncompliance with the
compliance requirements referred to above occurred, whether due to fraud or error, and express an
opinion on the City's compliance based on our audit. Reasonable assurance is a high level of assurance
but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with
GAAS, Government Auditing Standards, and the Uniform Guidance will always detect material
noncompliance when it exists. The risk of not detecting material noncompliance resulting from fraud is
higher than for that resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control. Noncompliance with the compliance
requirements referred to above is considered material, if there is a substantial likelihood that,
individually or in the aggregate, it would influence the judgment made by a reasonable user of the report
on compliance about the City's compliance with the requirements of each major federal program as a
whole.
In performing an audit in accordance with GAAS, Government Auditing Standards, and the Uniform
Guidance, we
• Exercise professional judgment and maintain professional skepticism throughout the audit.
• Identify and assess the risks of material noncompliance, whether due to fraud or error, and
design and perform audit procedures responsive to those risks. Such procedures include
examining, on a test basis, evidence regarding the City's compliance with the compliance
requirements referred to above and performing such other procedures as we considered necessary
in the circumstances.
• Obtain an understanding of the City's internal control over compliance relevant to the audit in
order to design audit procedures that are appropriate in the circumstances and to test and report
on internal control over compliance in accordance with the Uniform Guidance, but not for the
purpose of expressing an opinion on the effectiveness of Example Entity’s internal control over
compliance. Accordingly, no such opinion is expressed.
We are required to communicate with those charged with governance regarding, among other matters,
the planned scope and timing of the audit and any significant deficiencies and material weaknesses in
internal control over compliance that we identified during the audit
Report on Internal Control over Compliance
A deficiency in internal control over compliance exists when the design or operation of a control over
compliance does not allow management or employees, in the normal course of performing their assigned
functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a
federal program on a timely basis. A material weakness in internal control over compliance is a
deficiency, or combination of deficiencies, in internal control over compliance, such that there is a
reasonable possibility that material noncompliance with a type of compliance requirement of a federal
program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in
internal control over compliance is a deficiency, or a combination of deficiencies, in internal control
over compliance with a type of compliance requirement of a federal program that is less severe than a
material weakness in internal control over compliance, yet important enough to merit attention by those
charged with governance.
7
Report on Internal Control over Compliance (Continued)
Our consideration of internal control over compliance was for the limited purpose described in Auditor's
Responsibilities for the Audit of Compliance section and was not designed to identify all deficiencies in
internal control over compliance that might be material weaknesses or significant deficiencies in internal
control over compliance. Given these limitations, during our audit we did not identify any deficiencies
in internal control over compliance that we consider to be material weaknesses, as defined above.
However, material weaknesses or significant deficiencies in internal control over compliance may exist
that were not identified.
Our audit was not designed for the purpose of expressing an opinion on the effectiveness of internal
control over compliance. Accordingly, no such opinion is expressed.
The purpose of this report on internal control over compliance is solely to describe the scope of our
testing of internal control over compliance and the results of that testing based on the requirements of
the Uniform Guidance. Accordingly, this report is not suitable for any other purpose.
St. Cloud, Minnesota
May 31, 2022
8
City of Otsego
Schedule of Findings and Questioned Costs
SECTION I – SUMMARY OF AUDITOR'S RESULTS
Financial Statements
Type of auditor's report issued:
We issued an unmodified opinion on the
fair presentation of the financial
statements of the governmental
activities, business-type activities, each
major fund, and the aggregate remaining
fund information in accordance with
accounting principles generally accepted
in the United States of America
(GAAP).
Internal control over financial reporting:
• Material weakness(es) identified? No
• Significant deficiency(ies) identified? Yes, Audit Finding 2021-001
Noncompliance material to financial statements noted? No
Federal Awards
Type of auditor's report issued on compliance for major
programs: Unmodified
Internal control over major programs:
• Material weakness(es) identified? No
• Significant deficiency(ies) identified? No
Any audit findings disclosed that are required to
be reported in accordance with 2 CFR 200.516(a)? No
Identification of Major Programs
CFDA No.: 66.458
Name of Federal Program or Cluster:
Capitalization Loans for Clean Water
State Revolving Funds
Dollar threshold used to distinguish
between type A and type B programs: $750,000
Auditee qualified as low risk auditee? No
9
City of Otsego
Schedule of Findings and Questioned Costs
SECTION II – FINANCIAL STATEMENT FINDING
Audit Finding 2021-001
Criteria:
Internal control that supports the City's ability to initiate record, process and report financial data
consistent with the assertions of management in the financial statements requires adequate segregation
of accounting duties.
Condition:
The City had a lack of segregation of accounting duties due to a limited number of office employees.
Adequate segregation of accounting duties is in place when the following four areas of a transaction
have been separated: authorization, custody, recording, and reconciliation. Examples of functions
within the City that demonstrate this lack of segregation of accounting duties include, but are not limited
to, the following:
• Cash Receipts – The Utility Billing Clerk and Accountant have access to initiate and record
receipts. The Utility Billing Clerk is also responsible for depositing cash receipts. The
Accountant is also involved in the reconciliation process and has full access to the general
ledger.
• Utility Billing Process – The Utility Billing Clerk is responsible for handling customer payments,
depositing payments received.
• Disbursements – Due to small staff the City allows access to other employees to perform
disbursement related activities in order to fill in for normal roles and responsibilities in the
absences of other staff. In the absence of the Accountant, the Utility Billing Clerk has access to
record and cut checks and has access to blank checks.
• Financial Reporting and Journal Entry Process – The Finance Director and Accountant have full
access to the general ledger and can make adjustments without review during the monthly and
year-end financial closing process.
Context:
This finding impacts the internal control for all significant accounting functions.
Effect or Potential Effect:
The lack of adequate segregation of accounting duties could adversely affect the City's ability to initiate,
record, process, and report financial data consistent with the assertions of management in the financial
statements.
Cause:
There are a limited number of office employees.
Recommendation:
Continue to review the accounting system, including changes that may occur. Implement segregation
whenever practical.
10
City of Otsego
Schedule of Findings and Questioned Costs
SECTION II – FINANCIAL STATEMENT FINDING (CONTINUED)
AUDIT FINDING 2021-001 (CONTINUED)
Views of Responsible Officials and Planned Corrective Action:
The City is aware of the limited segregation of duties as a result of our limited number of staffing. The
City is committed to an environment with strong internal controls and is constantly evaluating the
system and implementation of compensating controls when available.
SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
There were no questioned costs.
SECTION IV – PRIOR YEAR FINDINGS AND QUESTIONED COSTS
None
11
Minnesota Legal Compliance
Independent Auditor's Report
Honorable Mayor and Members
of the City Council
City of Otsego
Otsego, Minnesota
We have audited, 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, the financial statements of the governmental
activities, the business-type activities, each major fund, and the aggregate remaining fund information of
the City of Otsego, Minnesota as of and for the year ended December 31, 2021, and the related notes to
financial statements, and have issued our report thereon dated May 31, 2022.
In connection with our audit, nothing came to our attention that caused us to believe that the City failed
to comply with the provisions of the contracting and bidding, deposits and investments, conflicts of
interest, public indebtedness, claims and disbursements, miscellaneous provisions, and tax increment
financing sections of the Minnesota Legal Compliance Audit Guide for Cities, promulgated by the State
Auditor pursuant to Minnesota Statutes § 6.65, insofar as they relate to accounting matters. However,
our audit was not directed primarily toward obtaining knowledge of such noncompliance. Accordingly,
had we performed additional procedures, other matters may have come to our attention regarding the
City’s noncompliance with the above referenced provisions, insofar as they relate to accounting matters.
The purpose of this report is solely to describe the scope of our testing of compliance and the results of
that testing, and not to provide an opinion on compliance. Accordingly, this communication is not
suitable for any other purpose.
St. Cloud, Minnesota
May 31, 2022