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 12, 2023
PRESENTER(s) REVIEWED BY: ITEM #:
Consent 3.5 – Adopt 2022 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, 2022.
ARE YOU SEEKING APPROVAL OF A CONTRACT? IS A PUBLIC HEARING REQUIRED?
No No
BACKGROUND/JUSTIFICATION:
The City annually prepares an 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 6:00PM special meeting on June 12,
2023, 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 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 special meeting.
Reports on Compliance
This document contains reporting required by BerganKDV on other aspects of the City’s audit. This
document contains multiple components:
1) Report on Government Auditing Standards
2) Report on Minnesota Legal Compliance (MN Statutes)
SUPPORTING DOCUMENTS ATTACHED:
• Resolution 2023-38
• Hard copies of the following documents were available to the City Council at the 6:00PM
Meeting. They are available to the public on the City website.
o Annual Comprehensive 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 2023-38 adopting the annual comprehensive financial report for the year
ended December 31, 2022.
BUDGET INFORMATION
FUNDING: BUDGETED:
N/A
N/A
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CITY OF OTSEGO
COUNTY OF WRIGHT
STATE OF MINNESOTA
RESOLUTION NO: 2023-38
ADOPTING THE ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE YEAR ENDED DECEMBER 31, 2022
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, 2022; and
WHEREAS, said ACFR and the documents summarizing the audit process have been distributed to and
discussed with the City Council on June 12, 2023.
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, 2022, and all supporting documentation, is hereby adopted as the official financial
record for said fiscal year.
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ADOPTED by the Otsego City Council this 12th day of June, 2023.
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, 2022
Water Tower No. 4 – Operational in 2022
City of Otsego, Minnesota
Annual Comprehensive Financial Report
For the Year Ended
December 31, 2022
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 84
Schedule of Revenues, Expenditures and Changes in Fund Balances: Budget-to-Actual
Tax Increment District No. 1 Fund 86
Tax Increment District No. 3 Fund 87
Tax Increment District No. 4 Fund 88
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 2018A 102
Series 2020A 103
STATISTICAL SECTION (UNAUDITED)
Financial Trends
Net Position by Component 106
Changes in Net Position 108
Governmental Activities Tax Revenue by Source 115
Fund Balances of Governmental Funds 116
Changes in Fund Balances of Governmental Funds 118
Revenue Capacity
Estimated Actual Value, Taxable Market Value and Tax Capacity of Taxable Property 120
Tax Capacity of Real Estate & Personal Property 122
Property Tax Rates - Direct and Overlapping Governments 123
Principal Property Taxpayers 124
Property Tax Levies and Collections 125
Debt Capacity
Ratios of Outstanding Debt by Type 126
Ratios of General Bonded Debt Outstanding 127
Computation of Direct and Overlapping Governmental Activities Debt 129
Legal Debt Margin Information 130
Pledged Revenue Coverage 132
Demographic and Economic Information
Demographic and Economic Statistics 133
Principal Employment Sectors 134
Operating Information
Full-Time City Government Positions by Function 135
Operating Indicators by Function 136
Capital Asset Statistics by Function 138
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City of Otsego│13400 90th Street NE, Otsego, MN 55330│Tel. (763) 441-4414 Fax (763) 441-9163
May 31, 2023
To the Honorable Mayor, Members of the City Council, and Citizens of the City of
Otsego.
Transmitted herewith is the Annual Comprehensive Financial Report of the City of
Otsego for the fiscal year ended December 31, 2022.
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 several 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 independent 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 serve its
residents more fully 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 State Demographer’s most recent population estimate was
21,289, compared with 19,966 from the 2020 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 50 hours of service 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 the 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 2022 and 2023.
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 need authorization of
the City Administrator. The legal level of budgetary control is at the fund level, so any
appropriation transfers between funds need 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 benefiting 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 317 new residential construction
permits issued during 2022. The average number of new residential construction permits
over the past five years is 351. The latest estimates developed by the City show total
households at 7,593 or a growth of 50 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 several 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 $636 million (27.47
percent) to a total of $2,981,117,012 for taxes payable 2023. According to Wright
County, for taxes payable 2023, there was approximately $184 million of value added for
new residential, commercial, and 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 ten consecutive years. The City’s tax rate for payable 2023 is 29.572,
a decrease of 14.39% compared to the previous year.
In 2022, Independent School District No. 728 opened the first middle school within the
City serving students in grades 5 to 8. 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 aligning capacity planning efforts with
community growth projection models.
During 2022, the City saw growth of more than 600 thousand square feet of industrial
warehousing and distribution facilities, a notable number of new jobs, and diversification
of the City’s tax base. These projects were highlighted by businesses such as Room &
Board, Blu Dot, and Dakota Supply Group. Given the economic importance of this type
of development, the City is navigating planning efforts to supply the infrastructure
necessary to accommodate such development, and as of the writing of this letter, is close
to approving another 80 acres of property for industrial development.
As the City has continued to grow over the years, commercial development has paced
well behind residential and industrial sectors. The City is seeing this trend change course
during 2022 and 2023. A retail space that had been vacant for several years has now been
leased by Michael’s, a popular attraction for those into arts and crafts. Approved
development projects that are in varying stages of construction include a new grocery
store, a car-wash facility, a drive-through coffee house, daycare facilities, automotive
repair facilities, and a vision medical office.
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 2022 or set as goals in
2023.
Positioning for Growth.
o Community Engagement Sessions for Comprehensive Plan Update
o Initiated Construction of the West Wastewater Facility Expansion Project
o Completed a facility and space needs study for City Hall & Public Works
o Completed an evaluation of Fire Service Delivery Models
Empowering the Organization.
o Commitment to an annual Strategic Planning process
o Conducted an Employee Survey to gauge employee engagement
o Implemented Administrator & Department group discussions
Engaging Stakeholders.
o Attend Chamber of Commerce Events to Communicate with Businesses
o Obtained County and Federal grant funding for multiple projects
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.
The 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, 2021. This was the 10th consecutive year that the City has achieved this
prestigious award.
In order to be awarded a Certificate of Achievement, the City had to publish an easily
readable and efficiently organized annual comprehensive financial report that satisfied
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
2022 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 skill, effort, 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 is 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
Nick Jacobs Parks & Recreation Director
Kurt Neidermeier Public Utilities Manager
David Kendall City Attorney
Daniel Licht City Planner
Ron Wagner City Engineer
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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, 2021
Executive Director/CEO
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1
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, 2022, 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, 2022, 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.
Emphasis of Matter – Implementation of GASB 87
The City has adopted new accounting guidance, Governmental Accounting Standards Board (GASB)
Statement No. 87, Leases. Our opinion is not modified with respect to this matter.
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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2
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 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.
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3
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 accompanying combining and
individual fund statements and schedules identified in the Table of Contents 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 accompanying combining and
individual fund 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, 2023,
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, 2023
13
CITY OF OTSEGO, MINNESOTA
MANAGEMENT'S DISCUSSION AND ANALYSIS
DECEMBER 31, 2022
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, 2022. 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 $149,448,169 (net position). Of this amount, $53,002,081 (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 $14,207,847 (10.51%) from the previous year. The net position of the governmental
activities increased $5,795,605 (9.15%). 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 $8,412,242 (11.70%) 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 $27,655,480,
which is an increase of $4,248,280 (18.15%) from the previous year. Of the total fund balance, the unassigned portion is $1,646,298,
which is free from any internal or external constraints upon its use.
• The General fund has a fund balance of $4,951,443 at the close of the current fiscal year. During 2022, the fund balance decreased
$248,458 (4.78%) from the previous year. The decrease in fund balance can be attributed to a transfer of $1,266,290, made in
accordance with the City's fund balance policy, the transfer was made to Capital Improvements fund. 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 $323,790 (6.54%) 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, $327,332 (6.61%) or is unassigned, $4,300,321 (86.85%).
• The City issued $26,215,000 of General Obligation Sewer Revenue bonded debt to temporarily finance the construction of the West
Wastewater Treatment Facility Expansion. The City's total outstanding bonded debt increased by $23,235,000 (118.18%) during the
current fiscal year.
14
CITY OF OTSEGO, MINNESOTA
MANAGEMENT'S DISCUSSION AND ANALYSIS
DECEMBER 31, 2022
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, 2022
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 19 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, 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, 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 103 of this report.
16
CITY OF OTSEGO, MINNESOTA
MANAGEMENT'S DISCUSSION AND ANALYSIS
DECEMBER 31, 2022
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 $149,448,169 at the close of
the most recent fiscal year.
The largest portion of the City's net position ($88,019,022 or 58.90%) reflects its investment in capital assets, which includes: land,
infrastructure, buildings, and machinery & equipment, less any related debt used to acquire those assets that is still outstanding.
The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending.
Although the City's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to
repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities.
2022 2021 2022 2021 2022 2021
Current Assets 39,253,266$ 37,691,906$ 57,606,553$ 31,037,860$ 96,859,819$ 68,729,766$
Capital Assets 44,955,325 43,824,005 81,430,682 75,660,511 126,386,007 119,484,516
Total Assets 84,208,591 81,515,911 139,037,235 106,698,371 223,245,826 188,214,282
Deferred Outflows of Resources 569,758 636,140 203,274 204,866 773,032 841,006
Long-term Liabilities 5,031,666 4,957,696 53,104,742 30,201,724 58,136,408 35,159,420
Other Liabilities 8,574,870 10,219,598 5,164,266 4,144,802 13,739,136 14,364,400
Total Liabilities 13,606,536 15,177,294 58,269,008 34,346,526 71,875,544 49,523,820
Deferred Inflows of Resources 2,058,048 3,656,597 637,097 634,549 2,695,145 4,291,146
Net Investment in Capital Assets 40,938,214 39,104,289 47,080,808 43,581,750 88,019,022 82,686,039
Restricted 8,427,066 7,661,049 - - 8,427,066 7,661,049
Unrestricted 19,748,485 16,552,822 33,253,596 28,340,412 53,002,081 44,893,234
Total Net Position 69,113,765$ 63,318,160$ 80,334,404$ 71,922,162$ 149,448,169$ 135,240,322$
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 (5.64%) represents resources that are subject to external restrictions on how they may be used.
The unrestricted portion (35.46%) may be used to meet the City's ongoing obligations to citizens and creditors.
The governmental activities experienced increases in both current and capital assets. The increase of current assets is due to increased
cash and investment balances within the General Fund as a result of additional ARPA funding received, and also in the Capital Improvements
Fund as the City continues to strengthen their reserves for future facility improvement projects. The increase in capital assets can be
illustrated with street renewal projects, vehicles and equipment, and developer infrastructure contributions. The decrease in liabilities is
primarily contributed to the decrease in Development & Builder Fund deposits payable, and with long-term liabilities decreasing as a result
of continued debt service payments. This decrease was offset with an increase in the General fund due to the unearned revenue for ARPA
funding received, but not yet earned.
The current assets of the business-type activities increased as a result of unspent bond proceeds for the West Wastewater Treatment
Facility expansion and as a result 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 systems infrastructure and the construction of projects
such as the West Wastewater Treatment Facility, Water Tower No. 4, and Well No. 10. The long-term liabilities increased with the issuance
of the 2022A Sewer Revenue Bonds.
CITY OF OTSEGO - SUMMARY OF NET POSITION
Governmental Activities Business-type Activities Total
17
CITY OF OTSEGO, MINNESOTA
MANAGEMENT'S DISCUSSION AND ANALYSIS
DECEMBER 31, 2022
2022 2021 2022 2021 2022 2021
Program Revenues
Charges for Services 3,372,368$ 3,837,134$ 6,701,241$ 6,153,693$ 10,073,609$ 9,990,827$
Operating Grants and Contributions 399,743 415,173 - - 399,743 415,173
Capital Grants and Contributions 4,631,372 5,838,257 9,754,695 11,066,329 14,386,067 16,904,586
General Revenues
Property Taxes 8,583,996 7,718,135 36,000 34,000 8,619,996 7,752,135
Tax Increment 436,817 311,971 - - 436,817 311,971
Franchise Taxes 345,108 129,467 - - 345,108 129,467
Grants and Contributions not
Restricted to Specific Programs 152,452 64,729 - - 152,452 64,729
Unrestricted Investment Earnings (870,574) (191,523) (1,232,893) (225,303) (2,103,467) (416,826)
Other General Revenues 11,956 40,000 - - 11,956 40,000
Total Revenues 17,063,238 18,163,343 15,259,043 17,028,719 32,322,281 35,192,062
Expenses
General Government 1,849,685 1,509,107 - - 1,849,685 1,509,107
Public Safety 3,101,633 2,889,365 - - 3,101,633 2,889,365
Public Works 4,559,629 4,101,313 - - 4,559,629 4,101,313
Culture and Recreation 1,396,260 1,240,142 - - 1,396,260 1,240,142
Economic Development 499,481 503,411 - - 499,481 503,411
Interest on Long-term Debt 92,945 125,168 - - 92,945 125,168
Water Utility - - 2,311,989 2,150,216 2,311,989 2,150,216
Sanitary Sewer Utility - - 4,084,200 3,257,261 4,084,200 3,257,261
Storm Water Utility - - 218,612 188,245 218,612 188,245
Total Expenses 11,499,633 10,368,506 6,614,801 5,595,722 18,114,434 15,964,228
Increase Before Transfers 5,563,605 7,794,837 8,644,242 11,432,997 14,207,847 19,227,834
Transfers 293,500 243,100 (293,500) (243,100) - -
Transfers - Capital Assets (61,500) (2,377) 61,500 2,377 - -
Change in Net Position 5,795,605 8,035,560 8,412,242 11,192,274 14,207,847 19,227,834
Net Position - January 1 63,318,160 55,282,600 71,922,162 60,729,888 135,240,322 116,012,488
Net Position - December 31 69,113,765$ 63,318,160$ 80,334,404$ 71,922,162$ 149,448,169$ 135,240,322$
Governmental Activities Business-type Activities Total
CITY OF OTSEGO - CHANGES IN NET POSITION
18
CITY OF OTSEGO, MINNESOTA
MANAGEMENT'S DISCUSSION AND ANALYSIS
DECEMBER 31, 2022
Governmental Activities
Governmental activities resulted in an increase of the City's net position by $5,795,605. Key elements of this change is as follows:
• While revenues decreased $1,100,105 compared to the previous year, revenues exceeded expenses by $5,563,605 which is driven
by capital grants and contributions which are derived from developer contributed assets and for development fees that offset future
capital projects. Notable increases in revenues include property taxes as a result of an increased tax levy and the implementation of
additional electric and gas utility franchise fees to improve funding for pavement management.
• Expenses increased $1,131,127 compared to the previous year, with a fairly equal spread amongst the four primary government
functions of the City. Drivers for increases in expenses from the previous year would include contracted public safety costs for
law enforcement, fire protection and building safety. Personnel costs would be a second driver with increased wages and new hires.
Below are specific graphs which provide comparisons of the governmental activities revenues and expenses:
19.76%; Charges for
Services
2.34%; Operating Grants27.14%; Capital Grants
50.32%; Property Taxes
2.56%; Tax Increment
2.02%; Franchise Taxes
0.89%; Unrestricted
Grants & Contributions
-5.10%; Investment
Earnings
0.07%; Sales of Capital
Assets
Revenues by Source
-
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
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, 2022
Business-type Activities
Business-type activities resulted in an increase of net position by $8,412,242. Key elements of this change are as follows:
• Revenues decreased $1,769,676 when compared to the previous year. Factors of this decrease include investment earnings, which
were impacted by the sudden change in investment rates of return during the year. Another decrease was the result of capital grants
and contributions, which were the result of fewer new home permits and respective utility availability and connection fees.
• Expenses increased $1,019,079 with increases amongst each utility function. The largest increase occurred in the sanitary sewer utility
which had the first full year of operations in the newly constructed Biosolids facility.
• Revenues exceeding expenses is attributable to the new development within the City. Charges for services are adequately covering
the expenses, with capital grants and contributions resulting in the increase and will provide for future debt service and capital projects.
Below are specific graphs which provide comparisons of the business-type activities revenues and expenses:
-
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
Water Utility Sanitary Sewer Utility Storm Water Utility
Function Expenses vs. Program Revenues
Expense Program Revenue
43.92%, Charges for
Services
63.92%; Capital Grants 0.24%, Property Taxes
-8.08%, Investment
Earnings
Revenues by Source
20
CITY OF OTSEGO, MINNESOTA
MANAGEMENT'S DISCUSSION AND ANALYSIS
DECEMBER 31, 2022
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 $27,655,480, which
is an increase of $4,248,280 (18.15%) from the previous year. The unassigned fund balance, which is not subject to internal or
external constraints upon its use, $1,646,298 (5.95% 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 $4,951,443, a
decrease of $248,458 (4.78%). The decrease in fund balance was the result of a transfer of $1,266,290, made in accordance with the
City's fund balance policy, with the transfer going to the Capital Improvements fund to be set aside for future capital projects. Revenues
exceeded the budget by $778,341, with the two primary factors being that actual licenses and permits that exceeded estimates for the
number of new home permits used in the budget process; and charges for services exceeded estimates. Expenditures were under budget,
most significantly in the general government and economic development functions. Expenditures for the public safety 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 $4,300,321, represents 60.50% of the current year General fund expenditures. Total General fund balance represents 69.66%
of those same expenditures.
The Debt Service fund has a total fund balance of $1,186,373 at the end of the year, an increase of $334 (0.03%) from the previous
year. There were no new bond issuances in the fund during the year, and there were $660,000 of principal payments.
The Pavement Management fund has a fund balance of $5,551,624 at the end of the year, an increase of $17,059 (0.31%) from the
previous year. Expenditures for the year totaled $1,454,600, which were for the Walesch Estates and O'Day Acres street renewal
project and annual pavement preservation projects including crack filling, fog sealing, seal coating and micro-surfacing.
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 $5,516,792, 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 $80,334,404, an increase of $8,412,242 (11.70%). There are two
components to net position in the enterprise funds, unrestricted ($33,253,596 or 41.39%) and net investment in capital assets
($47,080,808 or 58.61%). As a measure of liquidity, the unrestricted net position amounts to 569.95% 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, 2022
Below is a graph with comparative amounts for each fund balance component for fiscal years 2020, 2021 and 2022:
The City's Unassigned fund balance is currently $1,646,298, and represents 5.95% of total governmental fund balance. The
City also has four other components of fund balance, including Nonspendable (1.17%), Restricted (26.99%), Committed (1.21%) and
Assigned (64.68%).
• 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, lawful gambling, and tax increments. This component of fund balance has been on an increasing trend as
the result of fees collected on new development for park dedication. A new component of this fund balance in 2022 is the result of
lawful gambling contributions from not-for profit community groups, which the funds are limited to uses outlined in Minnesota Statutes.
• The committed fund balances are within the City's special revenue funds for Street Lighting and Revolving Loans. This fund balance
component has remained 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
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
18,000,000
20,000,000
Nonspendable Restricted Committed Assigned Unassigned
Governmental Fund Balance Components
2020 2021 2022
22
CITY OF OTSEGO, MINNESOTA
MANAGEMENT'S DISCUSSION AND ANALYSIS
DECEMBER 31, 2022
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 $248,458 (4.78%). The key elements of this change
are as follows:
• Actual revenues exceeded the budget by $778,341 (11.03%). The largest revenue variance was provided by licenses and
permits, which were over budget by $613,171. The City projected 261 new residential construction permits when preparing the
budget with actual results being 317 new residential construction permits. Another signicant variance was within charges for
services, which exceeded the budget by $237,761 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 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 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 $239,491 (3.26%). 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 $68,345, 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 2022. The actual transfer out of $1,266,490 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 ($4,300,321) represents 53.91% of the adopted 2023 budget.
23
CITY OF OTSEGO, MINNESOTA
MANAGEMENT'S DISCUSSION AND ANALYSIS
DECEMBER 31, 2022
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 $126,386,007 (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 $6,901,491 (5.78%) 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 Walesch Estates & O'Day Acres 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.
• Water Tower No. 4 was completed and put into operation in 2022. This new tower is the largest of the City's water towers and can
hold 1.5 million gallons of water. The tower will increase storage capacity to meet growing demand and fire protection needs.
• The City initiated construction of the West Wastewater Treatment Facility Expansion which will increase the treatment capacity of
the west sewer system. The project will also bring the treatment processes to the most current technologies available in order to
meet current and future regulatory requirements. An additional component of the project will be the construction of an Administration
building that will provide staff workspaces, vehicle storage, and customer service accessibility.
• The City initiated a number of additional utility projects that are in process, which include the Otsego Creek Rehabilitation which will
improve storm water systems; Wells No. 10 and No. 11 which will increase drinking water supply; and the East-West Water
Connection project that will combine the two separate water systems which will improve redundancy, storage, and water quality.
• The City also initiated three projects for governmental activity functions. The Parks system projects include School Knoll Park
Improvements which will rehabilitate the City's oldest park; the Carrick's Landing River Access Improvements which will provide
increased accessibility and amenities to the Mississippi River; and the 2023 Street Renewal Project.
2022 2021 2022 2021 2022 2021
Land 4,278,161$ 4,278,161$ 741,333$ 703,695$ 5,019,494$ 4,981,856$
Construction in Progress 50,128 14,203 5,994,416 5,138,670 6,044,544 5,152,873
Buildings and Improvements 3,996,488 4,157,161 16,210,154 16,633,181 20,206,642 20,790,342
Land Improvements 3,515,353 3,784,102 - - 3,515,353 3,784,102
Machinery and Equipment 1,899,269 1,927,033 1,232,927 966,443 3,132,196 2,893,476
Infrastructure 31,215,926 29,663,345 57,251,852 52,218,522 88,467,778 81,881,867
44,955,325$ 43,824,005$ 81,430,682$ 75,660,511$ 126,386,007$ 119,484,516$
Additional information on the City’s capital assets can be found in Note 3 (C) on pages 53 through 54 of this report.
Governmental Activities Business-type Activities Total
CITY OF OTSEGO - CAPITAL ASSETS
(net of depreciation)
24
CITY OF OTSEGO, MINNESOTA
MANAGEMENT'S DISCUSSION AND ANALYSIS
DECEMBER 31, 2022
Long-Term Debt: At the end of the current year, the City had outstanding long-term bonded debt of $58,591,489.
2022 2021 2022 2021 2022 2021
General Obligation Bonds 3,740,000$ 4,400,000$ -$ -$ 3,740,000$ 4,400,000$
Notes from Direct Borrowings - - 15,696,489 16,305,983 15,696,489 16,305,983
General Obligation Revenue Bonds - - 39,155,000 15,260,000 39,155,000 15,260,000
Unamortized Premiums 277,111 319,716 1,215,203 1,475,843 1,492,314 1,795,559
Compensated Absences 125,130 104,969 36,765 32,187 161,895 137,156
Total 4,142,241$ 4,824,685$ 56,103,457$ 33,074,013$ 60,245,698$ 37,898,698$
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 2022, the City issued $26,215,000 of General Obligation Sewer Revenue Bonds, Series 2022A, to provide temporary financing of
the West Wastewater Treatment Facility Expansion. The bond issuance is an interim financing solution until the Minnesota Public
Facilities Authority has the necessary funds in the Clean Water State Revolving Fund to provide long-term financing of the project.
The City made scheduled principal payments of $3,788,000 during the year, which represents 11.70% of the respective outstanding
liabilities; however with the 2022A issuance, outstanding debt increased by 62.91%.
The City maintained it's long term bond rating of AA+, with a stable outlook, and was assigned a short term rating of SP-1+ 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 $74,032,656, with $1,879,417 in debt outstanding that is applicable to the limit.
Additional information on the City’s long-term debt can be found in Note 3 (F) on pages 57 through 60 of this report.
CITY OF OTSEGO - OUTSTANDING DEBT
Governmental Activities Business-type Activities Total
25
CITY OF OTSEGO, MINNESOTA
MANAGEMENT'S DISCUSSION AND ANALYSIS
DECEMBER 31, 2022
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 2023 operating budgets and capital improvement plans.
• The Taxable Market Value of real estate and personal property within the City increased 27.47% for taxes payable 2023. 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 2022, the City issued 317 building permits for new
residential construction. The City also continues to see builders final platting new developments for future years construction.
• The City began construction of 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 continue through the spring of 2025.
• The City has completed a Facility Space Needs Assessment which identified a new City Hall building, expansion and renovations of
the existing Public Works building, a new Cold Storage building for public works, a future addition to the Mechanics Bays at the
public works facility, renovations to the Prairie Center building, and deferred maintenance components to each existing facility. The
City has engaged an architectural firm to proceed with design of Phase 1 of the respective projects. The projects may initiate as soon
as the fall of 2023.
• The City continues to expand upon and make improvements to the Capital Improvement Plan (CIP). The adopted CIP for 2023
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, 2022
Governmental Business-Type
Activities Activities Total
ASSETS
Cash and Investments 36,686,939$ 54,495,098$ 91,182,037$
Receivables
Interest 180,068 - 180,068
Accounts 215,408 663,919 879,327
Taxes 178,342 - 178,342
Special Assessments 1,647,798 2,042,025 3,689,823
Leases - 313,880 313,880
Due from Other Governments 20,921 17,195 38,116
Land Held for Resale 202,200 - 202,200
Prepaid Items 121,590 74,436 196,026
Capital Assets
Nondepreciable 4,328,289 6,735,749 11,064,038
Depreciable, Net of Accumulated Depreciation 40,627,036 74,694,933 115,321,969
Total Assets 84,208,591 139,037,235 223,245,826
DEFERRED OUTFLOWS OF RESOURCES
General Employees Retirement Plan Pension Resources 569,758 203,274 773,032
LIABILITIES
Accounts Payable 194,926 1,279,671 1,474,597
Deposits Payable 5,478,992 - 5,478,992
Due to Other Governments 108,187 19,216 127,403
Accrued Salaries Payable 48,245 15,792 64,037
Accrued Interest Payable 55,065 280,234 335,299
Unearned Revenue 1,979,429 - 1,979,429
Compensated Absences Payable
Due Within One Year 25,026 7,353 32,379
Due in More than One Year 100,104 29,412 129,516
Bonds Payable
Due Within One Year 685,000 2,745,000 3,430,000
Due in More than One Year 3,332,111 37,625,203 40,957,314
Notes from Direct Borrowings
Due Within One Year - 817,000 817,000
Due in More than One Year - 14,879,489 14,879,489
General Employees Retirement Plan Net Pension Payable
Due in More than One Year 1,599,451 570,638 2,170,089
Total Liabilities 13,606,536 58,269,008 71,875,544
DEFERRED INFLOWS OF RESOURCES
Grants for Subsequent Years 2,036,497 - 2,036,497
General Employees Retirement Plan Pension Resources 21,551 7,689 29,240
Antenna Rental Leases - 313,880 313,880
Deferred Gain on Refunding - 315,528 315,528
Total Deferred Inflows of Resources 2,058,048 637,097 2,695,145
NET POSITION
Net Investment in Capital Assets 40,938,214 47,080,808 88,019,022
Restricted
Debt Service 2,137,694 - 2,137,694
Lawful Gambling Programs 136,996 - 136,996
Tax Increment Financing 221,101 - 221,101
Park Development 5,931,275 - 5,931,275
Unrestricted 19,748,485 33,253,596 53,002,081
Total Net Position 69,113,765$ 80,334,404$ 149,448,169$
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, 2022
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 1,849,685$ 937,238$ -$ -$ (912,447)$ -$ (912,447)$
Public Safety 3,101,633 2,156,222 84,148 - (861,263) - (861,263)
Public Works 4,559,629 164,533 291,478 3,548,115 (555,503) - (555,503)
Culture and Recreation 1,396,260 114,375 24,117 1,083,257 (174,511) - (174,511)
Economic Development 499,481 - - - (499,481) - (499,481)
Interest on Long-Term Debt 92,945 - - - (92,945) - (92,945)
Total Government Activities 11,499,633 3,372,368 399,743 4,631,372 (3,096,150) - (3,096,150)
Business-Type Activities
Water Utility 2,311,989 3,020,259 - 2,795,904 - 3,504,174 3,504,174
Sanitary Sewer Utility 4,084,200 3,543,804 - 6,126,966 - 5,586,570 5,586,570
Storm Water Utility 218,612 137,178 - 831,825 - 750,391 750,391
Total Business-Type Activities 6,614,801 6,701,241 - 9,754,695 - 9,841,135 9,841,135
Total 18,114,434$ 10,073,609$ 399,743$ 14,386,067$ (3,096,150) 9,841,135 6,744,985
General Revenues
Property Taxes 8,583,996 36,000 8,619,996
Tax Increments 436,817 - 436,817
Franchise Taxes 345,108 - 345,108
Grants and Contributions Not
Restricted to Specific Programs 152,452 - 152,452
Unrestricted Investment Earnings (870,574) (1,232,893) (2,103,467)
Gain on Disposal of Capital Assets 11,956 - 11,956
Transfers 293,500 (293,500) -
Transfers - Capital Assets (61,500) 61,500 -
Total General Revenues and Transfers 8,891,755 (1,428,893) 7,462,862
Change in Net Position 5,795,605 8,412,242 14,207,847
Net Position - January 1 63,318,160 71,922,162 135,240,322
Net Position - December 31 69,113,765$ 80,334,404$ 149,448,169$
The notes to the financial statements are an integral part of this statement.
29
CITY OF OTSEGO, MINNESOTA
BALANCE SHEET
GOVERNMENTAL FUNDS
DECEMBER 31, 2022
Debt
General Service
ASSETS
Cash and Investments 6,559,727$ 1,186,327$
Receivables
Interest 180,068 -
Accounts 1,800 -
Taxes
Current 73,966 -
Delinquent 104,376 -
Special Assessments
Current - 404
Deferred 8,700 1,006,168
Delinquent 2,662 218
Due from Other Governments 5,654 -
Due from Other Funds - -
Land Held for Resale 202,200 -
Prepaid Items 121,590 -
Total Assets 7,260,743 2,193,117
LIABILITIES
Accounts Payable 110,900 358
Accrued Salaries Payable 48,245 -
Deposits Payable - -
Due to Other Governments 54,988 -
Due to Other Funds - -
Unearned Revenue 1,979,429 -
Total Liabilities 2,193,562 358
DEFERRED INFLOWS OF RESOURCES
Unavailable Revenue - Property Taxes 104,376 -
Unavailable Revenue - Special Assessments 11,362 1,006,386
Grants for Subsequent Years - -
Total Deferred Inflows of Resources 115,738 1,006,386
FUND BALANCES
Nonspendable 323,790 -
Restricted - 1,186,373
Committed - -
Assigned 327,332 -
Unassigned 4,300,321 -
Total Fund Balances 4,951,443 1,186,373
Total Liabilities, Deferred Inflows of
Resources and Fund Balances 7,260,743$ 2,193,117$
The notes to the financial statements are an integral part of this statement.
30
Development Other
Pavement & Builder Nonmajor Total
Management Escrows Governmental Governmental
5,346,134$ 5,516,792$ 18,077,959$ 36,686,939$
- - - 180,068
199,256 - 14,352 215,408
- - - 73,966
- - - 104,376
214 - 46 664
336,111 - 292,701 1,643,680
- - 574 3,454
12,633 - 2,634 20,921
- - 617,526 617,526
- - - 202,200
- - - 121,590
5,894,348 5,516,792 19,005,792 39,870,792
6,613 37,800 39,255 194,926
- - - 48,245
- 5,478,992 - 5,478,992
- - 53,199 108,187
- - 617,526 617,526
- - - 1,979,429
6,613 5,516,792 709,980 8,427,305
- - - 104,376
336,111 - 293,275 1,647,134
- - 2,036,497 2,036,497
336,111 - 2,329,772 3,788,007
- - - 323,790
- - 6,277,322 7,463,695
- - 335,939 335,939
5,551,624 - 12,006,802 17,885,758
- - (2,654,023) 1,646,298
5,551,624 - 15,966,040 27,655,480
5,894,348$ 5,516,792$ 19,005,792$ 39,870,792$
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, 2022
Fund Balances - Governmental Funds 27,655,480$
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 64,749,160
Accumulated Depreciation (19,793,835)
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 (3,740,000)
Unamortized Premium on Bonds Payable (277,111)
Accrued Interest Payable (55,065)
Compensated Absences Payable (125,130)
General Employees Retirement Plan Net Pension Payable (1,599,451)
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 104,376
Special Assessments Receivable 1,647,134
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 569,758
GERF Pension Deferred Inflows of Resources (21,551)
Total Net Position - Governmental Activities 69,113,765$
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
GOVERNMENTAL FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2022
Debt
General Service
REVENUES
Property Taxes 5,023,231$ 547,187$
Tax Increments - -
Franchise Taxes 133,218 -
Licenses and Permits 2,123,810 -
Intergovernmental 107,732 -
Charges for Services 476,632 -
Special Assessments 3,963 263,594
Fines and Forfeitures 31,812 -
Investment Earnings (net) (149,701) -
Miscellaneous 81,560 -
Total Revenues 7,832,257 810,781
EXPENDITURES
Current
General Government 1,547,207 -
Public Safety 3,080,382 -
Public Works 1,491,649 -
Culture and Recreation 851,357 -
Economic Development 91,729 -
Capital Outlay
General Government 26,884 -
Public Safety - -
Public Works 12,222 -
Culture and Recreation 6,495 -
Debt Service
Principal - 660,000
Interest - 144,431
Fiscal Agent Fees - 1,348
Total Expenditures 7,107,925 805,779
Excess of Revenues
Over Expenditures 724,332 5,002
OTHER FINANCING SOURCES (USES)
Transfers In 293,500 -
Sales of Capital Assets - -
Transfers Out (1,266,290) (4,668)
Total Other Financing Sources (Uses) (972,790) (4,668)
Net Change in Fund Balance (248,458) 334
Fund Balance - January 1 5,199,901 1,186,039
Fund Balance - December 31 4,951,443$ 1,186,373$
The notes to the financial statements are an integral part of this statement.
34
Development Other
Pavement & Builder Nonmajor Total
Management Escrows Governmental Governmental
1,100,000$ -$ 1,892,818$ 8,563,236$
- - 436,817 436,817
211,890 - - 345,108
- - - 2,123,810
291,478 - 885,371 1,284,581
- 727,065 1,584,800 2,788,497
43,660 - 65,538 376,755
- - - 31,812
(184,455) - (536,418) (870,574)
9,086 - 106,853 197,499
1,471,659 727,065 4,435,779 15,277,541
- 131,831 - 1,679,038
- - - 3,080,382
- 595,234 - 2,086,883
- - - 851,357
- - 407,752 499,481
- - 29,490 56,374
- - 6,635 6,635
1,454,600 - 614,219 2,081,041
- - 181,252 187,747
- - - 660,000
- - - 144,431
- - - 1,348
1,454,600 727,065 1,239,348 11,334,717
17,059 - 3,196,431 3,942,824
- - 1,353,307 1,646,807
- - 11,956 11,956
- - (82,349) (1,353,307)
- - 1,282,914 305,456
17,059 - 4,479,345 4,248,280
5,534,565 - 11,486,695 23,407,200
5,551,624$ -$ 15,966,040$ 27,655,480$
35
CITY OF OTSEGO, MINNESOTA
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES
IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED DECEMBER 31, 2022
Total Net Change in Fund Balances - Governmental Funds 4,248,280$
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 1,243,874
Depreciation Expense (1,973,751)
Assets Contributed by Developers 1,922,697
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.(61,500)
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 660,000
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.52,834
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 20,760
Special Assessments (169,716)
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 (20,162)
GERF Pension (127,711)
Change in Net Position - Governmental Activities 5,795,605$
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, 2022
Variance with
Original Final Budget -
and Final Actual Over
Budget Amounts (Under)
REVENUES
Property Taxes 5,000,506$ 5,023,231$ 22,725$
Franchise Taxes 129,000 133,218 4,218
Licenses and Permits 1,510,639 2,123,810 613,171
Intergovernmental 87,500 107,732 20,232
Charges for Services 238,871 476,632 237,761
Special Assessments 3,400 3,963 563
Fines and Forfeitures 24,000 31,812 7,812
Investment Earnings (net) 60,000 (149,701) (209,701)
Miscellaneous - 81,560 81,560
Total Revenues 7,053,916 7,832,257 778,341
EXPENDITURES
Current
General Government 1,720,593 1,547,207 (173,386)
Public Safety 3,012,037 3,080,382 68,345
Public Works 1,539,375 1,491,649 (47,726)
Culture and Recreation 850,826 851,357 531
Economic Development 161,910 91,729 (70,181)
Capital Outlay
General Government 42,600 26,884 (15,716)
Public Safety 3,000 - (3,000)
Public Works 12,075 12,222 147
Culture and Recreation 5,000 6,495 1,495
Total Expenditures 7,347,416 7,107,925 (239,491)
Excess (Deficiency) of Revenues
Over (Under) Expenditures (293,500) 724,332 1,017,832
OTHER FINANCING SOURCES (USES)
Transfers In 293,500 293,500 -
Transfers Out - (1,266,290) (1,266,290)
Total Other Financing Sources (Uses)293,500 (972,790) (1,266,290)
Net Change in Fund Balance - (248,458) (248,458)
Fund Balance - January 1 5,199,901 5,199,901 -
Fund Balance - December 31 5,199,901$ 4,951,443$ (248,458)$
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, 2022
Sanitary Storm
Water Sewer Water Total
Utility Utility Utility Enterprise
ASSETS
Current Assets
Cash and Cash Equivalents 12,116,576$ 41,766,932$ 611,590$ 54,495,098$
Receivables
Accounts 192,756 464,587 6,576 663,919
Special Assessments
Current 836 2,087 265 3,188
Delinquent - - 587 587
Due from Other Governments - 17,195 - 17,195
Prepaid Items 18,001 56,435 - 74,436
Total Current Assets 12,328,169 42,307,236 619,018 55,254,423
Noncurrent Assets
Receivables
Leases 313,880 - - 313,880
Special Assessments
Deferred 520,991 1,483,285 33,974 2,038,250
Capital Assets
Land 207,816 533,517 - 741,333
Buildings and Building Improvements 109,096 16,561,654 - 16,670,750
Machinery and Equipment 454,653 1,595,905 32,200 2,082,758
Infrastructure 32,534,644 40,278,895 7,370,898 80,184,437
Construction in Progress 323,561 5,609,355 61,500 5,994,416
Total Capital Assets 33,629,770 64,579,326 7,464,598 105,673,694
Less: Accumulated Depreciation (8,362,900) (15,189,260) (690,852) (24,243,012)
Net Capital Assets 25,266,870 49,390,066 6,773,746 81,430,682
Total Noncurrent Assets 26,101,741 50,873,351 6,807,720 83,782,812
Total Assets 38,429,910 93,180,587 7,426,738 139,037,235
DEFERRED OUTFLOWS OF RESOURCES
General Employees Retirement Plan Pension Resources 50,818 152,456 - 203,274
LIABILITIES
Current Liabilities
Accounts Payable 317,844 960,973 854 1,279,671
Due to Other Governments 19,216 - - 19,216
Accrued Salaries Payable 3,948 11,844 - 15,792
Accrued Interest Payable 49,900 230,334 - 280,234
Bonds Payable 1,125,800 1,619,200 - 2,745,000
Notes from Direct Borrowings - 817,000 - 817,000
Compensated Absences Payable 1,838 5,515 - 7,353
Total Current Liabilities 1,518,546 3,644,866 854 5,164,266
Noncurrent Liabilities
Bonds Payable (net)6,901,544 30,723,659 - 37,625,203
Notes from Direct Borrowings - 14,879,489 - 14,879,489
Compensated Absences Payable 7,353 22,059 - 29,412
General Employees Retirement Plan Net Pension Payable 142,658 427,980 - 570,638
Total Noncurrent Liabilities 7,051,555 46,053,187 - 53,104,742
Total Liabilities 8,570,101 49,698,053 854 58,269,008
DEFERRED INFLOWS OF RESOURCES
General Employees Retirement Plan Pension Resources 1,922 5,767 - 7,689
Antenna Rental Leases 313,880 - - 313,880
Deferred Gain on Refunding 113,590 201,938 - 315,528
Total Deferred Inflows of Resources 429,392 207,705 - 637,097
NET POSITION
Net Investment in Capital Assets 17,125,936 23,181,126 6,773,746 47,080,808
Unrestricted 12,355,299 20,246,159 652,138 33,253,596
Total Net Position 29,481,235$ 43,427,285$ 7,425,884$ 80,334,404$
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, 2022
Sanitary Storm
Water Sewer Water Total
Utility Utility Utility Enterprise
OPERATING REVENUES
Charges for Services 2,904,563$ 3,539,069$ 137,178$ 6,580,810$
OPERATING EXPENSES
Personal Services 208,748 626,252 6,538 841,538
Supplies 617,472 346,704 11,800 975,976
Insurance 14,463 51,997 - 66,460
Utilities 160,997 415,148 - 576,145
Services and Other Charges 407,861 479,201 22,058 909,120
Depreciation 758,588 1,528,404 178,216 2,465,208
Total Operating Expenses 2,168,129 3,447,706 218,612 5,834,447
Operating Income (Loss) 736,434 91,363 (81,434) 746,363
NONOPERATING REVENUES (EXPENSES)
Antenna Rental 90,024 - - 90,024
Property Taxes - - 36,000 36,000
Investment Earnings (net) (410,061) (803,960) (18,872) (1,232,893)
Miscellaneous Revenue 25,672 4,735 - 30,407
Interest and Fiscal Agent Fees (143,860) (636,494) - (780,354)
Total Nonoperating Revenues (Expenses) (438,225) (1,435,719) 17,128 (1,856,816)
Income (Loss) Before Capital Contributions and Transfers 298,209 (1,344,356) (64,306) (1,110,453)
Capital Contributions - Connection Fees 1,871,679 5,260,042 - 7,131,721
Capital Contributions - Developer Assets 924,225 866,924 831,825 2,622,974
Capital Contributions - Governmental Funds - - 61,500 61,500
Transfers Out (73,375) (220,125) - (293,500)
Change in Net Position 3,020,738 4,562,485 829,019 8,412,242
Net Position - January 1 26,460,497 38,864,800 6,596,865 71,922,162
Net Position - December 31 29,481,235$ 43,427,285$ 7,425,884$ 80,334,404$
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, 2022
Sanitary Storm
Water Sewer Water Total
Utility Utility Utility Enterprise
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from Customers and Users 2,863,845$ 3,483,468$ 138,295$ 6,485,608$
Other Operating Receipts 115,696 4,735 - 120,431
Payments to Suppliers (1,128,917) (1,025,455) (44,032) (2,198,404)
Payments to Employees (187,196) (561,582) (6,538) (755,316)
Net Cash Flows Provided by Operating Activities 1,663,428 1,901,166 87,725 3,652,319
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Property Taxes - - 36,000 36,000
Transfers Out (73,375) (220,125) - (293,500)
Net Cash Flows Provided (Used) by Noncapital Financing Activities (73,375) (220,125) 36,000 (257,500)
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES
Acquisition and Construction of Capital Assets (1,171,454) (4,182,654) (32,200) (5,386,308)
Bond Proceeds - 26,215,000 - 26,215,000
Principal Paid on Revenue Bonds (835,200) (1,484,800) - (2,320,000)
Interest Paid on Revenue Bonds (288,274) (572,532) - (860,806)
Note Proceeds from Direct Borrowings - 455,556 - 455,556
Principal Paid on Direct Borrowings - (808,000) - (808,000)
Interest Paid on Direct Borrowings - (185,150) - (185,150)
Connection Fees 1,715,800 4,651,488 - 6,367,288
Net Cash Flows Provided (Used) by Capital and Related Financing Activities (579,128) 24,088,908 (32,200) 23,477,580
CASH FLOWS FROM INVESTING ACTIVITIES
Interest on Investments (410,061) (803,960) (18,872) (1,232,893)
Net Increase in Cash and Cash Equivalents 600,864 24,965,989 72,653 25,639,506
Cash and Cash Equivalents - January 1 11,515,712 16,800,943 538,937 28,855,592
Cash and Cash Equivalents - December 31 12,116,576$ 41,766,932$ 611,590$ 54,495,098$
RECONCILIATION OF OPERATING INCOME (LOSS) TO NET
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES
Operating Income (Loss) 736,434$ 91,363$ (81,434)$ 746,363$
Adjustments to Reconcile Operating Income (Loss)
to Net Cash Flows Provided by Operating Activities:
Depreciation 758,588 1,528,404 178,216 2,465,208
GERF Pension Activity 19,405 58,226 - 77,631
Other Income Related to Operations 115,696 4,735 - 120,431
(Increase) Decrease in Assets & Deferred Outflows of Resources:
Accounts Receivable 2,561 (51,503) (1,070) (50,012)
Special Assessments (43,279) (2,087) 2,187 (43,179)
Due from Other Governments - (2,011) - (2,011)
Prepaid Items (4,597) (8,125) - (12,722)
Increase (Decrease) in Liabilities & Deferred Inflows of Resources
Accounts Payable 77,207 275,720 (10,174) 342,753
Due to Other Governments (734) - - (734)
Accrued Salaries Payable 1,003 3,010 - 4,013
Compensated Absences Payable 1,144 3,434 - 4,578
Net Cash Flows Provided by Operating Activities 1,663,428$ 1,901,166$ 87,725$ 3,652,319$
NONCASH FINANCING ACTIVITIES
Amortization of Premium on Bonds Payable 132,272$ 207,249$ -$ 339,521$
Acquisition of Capital Assets on Account 227,887$ 632,556$ -$ 860,443$
Contribution of Capital Assets - Developer 924,225$ 866,924$ 831,825$ 2,622,974$
Contribution of Capital Assets - Governmental Funds -$ -$ 61,500$ 61,500$
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, 2022
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 City of Otsego EDA is a legal entity separate
from the City. Although legally separate, the City of Otsego 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 City of Otsego 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 City of Otesgo EDA.
Separate financial statements would not be prepared for the City of Otsego EDA, even if there was financial activity.
41
CITY OF OTSEGO, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2022
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, 2022
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.
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, 2022
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. Term Series investments are designed to be held to maturity. If an investment made in a Term Series is
withdrawn prior to the maturity date of that Series, seven days notice of redemption is required, and a penalty will likely be
assessed.
44
CITY OF OTSEGO, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2022
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, 2022 are planned to be eliminated in 2023. 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, 2022, 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, 2022
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, 2022
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 four 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. The fourth item, Antenna Rental Leases, is reported in
both the government-wide and proprietary funds statements of net position.
47
CITY OF OTSEGO, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2022
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, 2022
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, 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, 2022 in the following fund:
Non-Major Governmental Funds:
Capital Project Funds
MSA Construction 2,654,023$
The deficit is being funded through internal borrowing. The MSA Construction fund deficit will be repaid with State-Aid
funding from 2023 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, 2022
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 fair 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 $739,830, and a bank balance of $1,384,956.
Custodial credit risk for the City's deposits would arise in the event of a bank failure, where the City's deposits may not be
returned to it. As of year-end, the City's bank balance was not exposed to custodial credit risk because it was insured and fully
collateralized with securities held by the pledging financial institution's trust department or agent in the City's name.
As of December 31, 2022 the City had the following investments:
Fair Value < 1 1 - 3 3 - 5
Negotiable Certificates of Deposit 24,592,619$ 6,046,878$ 16,039,094$ 2,506,647$
U.S. Government Agency Securities 19,111,524 7,793,989 9,951,582 1,365,953
Municipal Bonds 7,578,288 770,508 4,456,904 2,350,876
External Investment Pool 39,097,081 39,097,081 - -
Brokered Money Market Accounts 62,095 62,095 - -
Total 90,441,607$ 53,770,551$ 30,447,580$ 6,223,476$
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, 2022
As of December 31, 2022, 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+ 3,338,747$ 3.69%
Federal Home Loan Bank (FHLB) Aaa AA+ 7,769,155 8.59%
Federal Home Loan Mortgage Corporation (FHLMC) Aaa AA+ 3,416,117 3.78%
Federal National Mortgage Association (FNMA) Aaa AA+ 4,587,504 5.07%
Total 19,111,524$ 21.13%
Municipal Bonds
City of Bloomington, Minnesota NR AAA 149,943 0.17%
City of Minneapolis, Minnesota Aa1 AAA 1,260,589 1.39%
State of Texas Aaa AAA 100,427 0.11%
City of Arlington, TX Aa1 AAA 126,580 0.14%
Shakopee School District, MN Aa1 NR 664,269 0.73%
City of New York NY Aa2 AA 876,959 0.97%
State of Oregon Aa1 AA+ 476,712 0.53%
Lake of the Woods School District, MN NR AAA 633,666 0.70%
State of California Aa2 AA- 460,265 0.51%
Multnomah County School District, TX Aa2 AA 645,773 0.71%
Canutillo School District, TX Aaa NR 509,122 0.56%
State of Mississippi Aa2 AA 1,350,677 1.49%
Sunnyvale School District, CA NR AAA 323,307 0.36%
Total 7,578,288$ 8.38%
The following is a summary of total deposits and investments as of December 31, 2022 and presented in the basic financial
statements in the Statement of Net Position:
Deposits 739,830$
Investments 90,441,607
Petty Cash and Change Funds 600
Total 91,182,037$
Investment Type
51
CITY OF OTSEGO, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2022
Interest Rate Risk – This is the risk that the fair 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 Home Loan Bank (FHLB) and Federal National Mortgage
Assocation (FNMA). These investments are 8.59 percent, 5.07 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.
B. LEASE RECEIVABLE
The City has implemented GASB 87 effective December 31, 2022 and has recognized a Lease Receivable and respective
Deferred Inflow of Resources in the amount of $313,880. Leases included in the lease receivable are the leased space above
Water Towers No. 1 and No. 3 to several communication companies. Lease terms are as follows:
2022 Lease 2022 Lease
Revenue Receivable
T-Mobile 33,454$ 96,579$ n/a
Nextera Wireless 18,614 87,216 Three Terms of 5-Years
Verizon Wireless 37,956 130,085 n/a
Adjustment Factor
Annual Lease
Options
Renewal
Lessee
4%
5%
4%
52
CITY OF OTSEGO, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2022
C. CAPITAL ASSETS
Capital asset activity for the year ended December 31, 2022 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 14,203 872,811 (836,886) 50,128
Total Capital Assets, not Being Depreciated 4,292,364 872,811 (836,886) 4,328,289
Capital Assets, Being Depreciated:
Buildings and Building Improvements 6,562,050 - - 6,562,050
Land Improvements 7,213,383 - - 7,213,383
Machinery and Equipment 4,466,909 309,565 (14,320) 4,762,154
Infrastructure 39,123,703 2,759,581 - 41,883,284
Total Capital Assets, Being Depreciated 57,366,045 3,069,146 (14,320) 60,420,871
Less Accumulated Depreciation for:
Buildings and Building Improvements 2,404,889 160,673 - 2,565,562
Land Improvements 3,429,281 268,749 - 3,698,030
Machinery and Equipment 2,539,876 337,329 (14,320) 2,862,885
Infrastructure 9,460,358 1,207,000 - 10,667,358
Total Accumulated Depreciation 17,834,404 1,973,751 (14,320) 19,793,835
Total Capital Assets Being Depreciated - Net 39,531,641 1,095,395 - 40,627,036
Governmental Activities Capital Assets - Net 43,824,005$ 1,968,206$ (836,886)$ 44,955,325$
Depreciation expense was charged to the functions of the City as follows:
Governmental Activities:
General Government 30,409$
Public Safety 9,280
Public Works 1,523,943
Culture and Recreation 410,119
Total Depreciation Expense - Governmental Activities 1,973,751$
53
CITY OF OTSEGO, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2022
Beginning Ending
Balance Increases Decreases Balance
Business-type Activities:
Capital Assets, not Being Depreciated:
Land 703,695$ 37,638$ -$ 741,333$
Construction in progress 5,138,670 5,165,245 (4,309,499) 5,994,416
Total Capital Assets, not Being Depreciated 5,842,365 5,202,883 (4,309,499) 6,735,749
Capital Assets, Being Depreciated:
Buildings and Building Improvements 16,670,750 - - 16,670,750
Machinery and Equipment 1,673,238 409,520 - 2,082,758
Infrastructure 73,251,962 6,932,475 - 80,184,437
Total Capital Assets, Being Depreciated 91,595,950 7,341,995 - 98,937,945
Less Accumulated Depreciation for:
Buildings and Building Improvements 37,569 423,027 - 460,596
Machinery and Equipment 706,795 143,036 - 849,831
Infrastructure 21,033,440 1,899,145 - 22,932,585
Total Accumulated Depreciation 21,777,804 2,465,208 - 24,243,012
Total Capital Assets Being Depreciated - Net 69,818,146 4,876,787 - 74,694,933
Business-type Activities Capital Assets - Net 75,660,511$ 10,079,670$ (4,309,499)$ 81,430,682$
Depreciation expense was charged to the functions of the City as follows:
Business-type Activities:
Water Utility 758,588$
Sanitary Sewer Utility 1,528,404
Storm Water Utility 178,216
Total Depreciation Expense - Business-type Activities 2,465,208$
54
CITY OF OTSEGO, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2022
D. CONSTRUCTION COMMITMENTS
At December 31, 2022 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
Well #6 111,797$ 50,422$
Well #10 159,454 124,074
Sanitary Sewer Utility
West Wastewater Treatment Facility Expansion 34,059,135 31,233,528
Total 34,330,386$ 31,408,024$
E. INTERFUND BALANCES AND TRANSFERS
At December 31, 2022, the composition of balances for due to/from other funds of the City were as follows:
Due from Due to
Other Funds Other Funds
Nonmajor Governmental Funds:
MSA Construction -$ 617,526$
Capital Improvements 617,526 -
Total 617,526$ 617,526$
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, 2022
Transfers between funds made during the year ended December 31, 2022 were as follows:
Transfer In Transfer Out
Major Governmental Funds:
General 293,500$ 1,266,290$
Debt Service - 4,668
Nonmajor Governmental Funds:
Parks Capital Equipment - 82,349
Lawful Gambling 82,349 -
Capital Improvements 1,270,958 -
Total Governmental Funds 1,646,807 1,353,307
Major Proprietary Funds:
Water Utility - 73,375
Sanitary Sewer Utility - 220,125
Total Proprietary Funds - 293,500
Total All Funds 1,646,807$ 1,646,807$
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 2022, the following
transfers were made between funds:
• The General fund transferred $1,266,290 to the Capital Improvements fund. This transfer was 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 Parks Capital Equipment fund transferred $82,349 to the Lawful Gambling fund to create a new fund where
lawful gambling contributions could be better segregated for restricted purposes.
• The Water Utility and Sanitary Sewer Utility funds transferred $73,375 and $220,125 respectively to the General
fund as an annual contribution to help manage the property tax levy.
• The Debt Service fund transferred $4,668 to the Capital Improvements fund to close out remaining balances from
two bond issuances that were paid in full and the funds no longer served a purpose.
Fund
56
CITY OF OTSEGO, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2022
F. 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 $2,193,117 of assets accumulated in the debt service funds for future debt service. Included within those
accumulated assets, there are $218 of delinquent special assessments receivable, of which collection is uncertain.
Final
Interest Issue Maturity Original Payable
Rates Date Date Issue 12/31/22
General Obligation Bonds:
Improvement Bonds, Series 2018A 3.00 - 3.13% 7/11/2018 2/1/2034 2,305,000$ 1,770,000$
Refunding Bonds 2020A 1.03 - 1.11% 11/17/2020 2/1/2028 2,950,000 1,970,000
Total - Bonded Indebtedness 5,255,000$ 3,740,000
Other Liabilities:
Unamortized Premium on Issuance of Bonds 277,111
Compensated Absences Payable 125,130
Total Governmental Activities 4,142,241$
Annual debt service requirements to maturity for governmental activities long-term indebtedness are as follows:
Principal Interest
685,000$ 119,406$
460,000 98,406
480,000 81,556
495,000 64,081
525,000 45,756
955,000 62,166
140,000 4,375
3,740,000$ 475,746$
2028 - 2032
General Obligation Bonds
2025
2026
2027
Year Ending
December 31
2023
2024
Governmental Activities
2033 - 2034
Total
57
CITY OF OTSEGO, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2022
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 $7,959,518, which
accounts for a debt-service coverage ratio of 190.69%.
Final
Interest Maturity Original Payable
Rates Date Date Issue 12/31/22
General Obligation Bonds:
Revenue Bonds, Series 2019A 4.00 - 4.00% 12/19/2019 12/1/2026 3,525,000$ 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 5,070,000
Revenue Bonds, Series 2022A 3.13% 11/8/2022 11/1/2024 26,215,000 26,215,000
Note from Direct Borrowing:
G.O. PFA Revenue Note, 2020 1.16% 4/27/2020 8/20/2040 17,199,866 15,696,489
Sub-Total 58,674,866$ 54,851,489
Other Liabilities:
Unamortized Premium on Issuance of Bonds 1,215,203
Compensated Absences Payable 36,765
Total Business-type Activities 56,103,457$
58
CITY OF OTSEGO, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2022
Annual debt service requirements to maturity for business-type activities long-term indebtedness are as follows:
Principal Interest Principal Interest
2,745,000$ 1,285,920$ 817,000$ 188,790$
28,550,000 1,168,374 827,000 179,305
2,210,000 243,355 837,000 169,703
2,295,000 152,280 846,000 159,986
275,000 57,530 856,000 150,164
1,485,000 184,423 4,432,000 599,413
1,595,000 75,888 4,695,000 336,110
- - 2,951,000 68,789
39,155,000$ 3,167,770$ 16,261,000$ 1,852,260$
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, 2022.
In September 2022, the City issued $26,215,000 of General Obligation Sewer Revenue Bonds, Series 2022A, to provide
temporary financing of the West Wastewater Treatment Facility Expansion. The bond issuance is an interim financing
solution until the Minnesota Public Facilities Authority has the necessary funds in the Clean Water State Revolving Fund
to provide the long-term financing of the project.
2028 - 2032
2038 - 2040
Business-type Activities
General Obligation Bonds
Total
Business-type Activities
2024
2025
2026
2027
Year Ending Note from Direct Borrowing
December 31
2023
2033 - 2037
59
CITY OF OTSEGO, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2022
Changes in Long-Term Liabilities
Long-term liability activity for the year ended December 31, 2022 was as follows:
Beginning Ending Due Within
Balance Additions Reductions Balance One Year
Governmental Activities:
General Obligation Bonds 4,400,000$ -$ (660,000)$ 3,740,000$ 685,000$
Unamortized Bond Premium 319,716 - (42,605) 277,111 -
Compensated Absences 104,969 158,791 (138,630) 125,130 25,026
Total - Governmental 4,824,685 158,791 (841,235) 4,142,241 710,026
Business-type Activities:
General Obligation Bonds 15,260,000 26,215,000 (2,320,000) 39,155,000 2,745,000
Notes from Direct Borrowings 16,305,983 198,506 (808,000) 15,696,489 817,000
Unamortized Bond Premium 1,475,843 - (260,640) 1,215,203 -
Compensated Absences 32,187 51,457 (46,879) 36,765 7,353
Total - Business-type 33,074,013 26,464,963 (3,435,519) 56,103,457 3,569,353
Grand Total Long-Term Liabilities 37,898,698$ 26,623,754$ (4,276,754)$ 60,245,698$ 4,279,379$
The General fund is typically used to liquidate the compensated absences payable for governmental activities.
G. 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, 2022, the City's conduit debt consisted of the following:
Guardian Angels Senior Services
Revenue Bonds, Series 2017 28,445,000$
Guardian Angels Senior Services
Revenue Refunding Bonds, Series 2017A 8,905,000
Revenue Refunding Bonds, Series 2017B 4,830,000
Kaleidoscope Charter School
Revenue Bonds, Series 2014A 14,060,000
60
CITY OF OTSEGO, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2022
H. 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, 2022, the City has entered into two types of agreements.
Property Tax Abatements
For the year ended December 31, 2022, the City abated property taxes totaling $40,228. Details of each agreement and
the abatement for the current year are as follows:
• 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 began with taxes payable 2022, with Wright
County providing an abatement in the amount of $35,838.
61
CITY OF OTSEGO, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2022
Tax Increment Financing
For the year ended December 31, 2022, the Tax Increment Financing Districts within the City generated increment in the
amount of $436,817 and payments to the developers in the amount of $400,514. 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 2022, this tax increment
financing district generated increment in the amount of $93,966 and payments to the developer in the amount
of $84,919.
• 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 2022, this tax increment
financing district generated increment in the amount of $173,111 and payments to the developer in the amount
of $157,041.
• 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 2022, this tax
increment financing district generated increment in the amount of $169,740 and payments to the developer in the
amount of $158,554.
62
CITY OF OTSEGO, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2022
H. FUND EQUITY
Net position reported in the government-wide statement of net position at December 31, 2022 include the following:
Governmental Activities
Net Investment in Capital Assets:
Cost of Capital Assets 64,749,160$
Less: Accumulated Depreciation (19,793,835)
Less: Related Long-Term Debt Outstanding (4,017,111)
Total Net Investment in Capital Assets 40,938,214
Restricted for Debt Service
Fund Balance - Governmental Fund Financial Statements 1,186,373
Add: Unavailable Revenue - Special Assessments 1,006,386
Less: Accrued Interest Payable (55,065)
Total Restricted for Debt Service 2,137,694
Restricted for Lawful Gambling Programs 136,996
Restricted for Tax Increment Financing 221,101
Restricted for Park Development
Fund Balance - Governmental Fund Financial Statements 5,919,225
Add: Unavailable Revenue - Special Assessments 12,050
Total Restricted for Park Development 5,931,275
Unrestricted 19,748,485
Total Governmental Activities Net Position 69,113,765$
Business-type Activities
Net Investment in Capital Assets:
Cost of Capital Assets 105,673,694$
Add: Unspent Bond Proceeds for 2022A Issuance 22,032,346
Less: Accumulated Depreciation (24,243,012)
Less: Related Long-Term Debt Outstanding (56,066,692)
Less: Deferred Gain on Refunding (315,528)
Total Net Investment in Capital Assets 47,080,808
Unrestricted 33,253,596
Total Business-type Activities Net Position 80,334,404$
63
CITY OF OTSEGO, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2022
Aggregated funds balances reported in the governmental funds balance sheet at December 31, 2022 include the following:
Governmental Funds
Nonspendable Restricted Committed Assigned
General Fund
Prepaid Items 121,590$ -$ -$ -$
Assets Held for Resale 202,200 - - -
Insurance Deductibles - - - 260,757
Educational Programs - - - 66,575
Debt Service
Debt Service - 1,186,373 - -
Pavement Management
City Buildings & Infrastructure - - - 5,551,624
Nonmajor Governmental Funds
Lawful Gambling Programs - 136,996 - -
Tax Increment Financing - 221,101 - -
Street Light Replacement - - 62,635 -
Business Development Loans - - 273,304 -
Park Development - 5,919,225 - -
City Buildings & Infrastructure - - - 10,956,329
City Vehicles & Equipment - - - 383,997
City Parks - - - 666,476
Total Fund Balances 323,790$ 7,463,695$ 335,939$ 17,885,758$
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, 2022
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, 2022
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 2022 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, 2022, 2021 and 2020 were $161,169, $142,796, and $133,158. 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, 2022, the City reported a liability of $2,170,089 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 $63,613.
The net pension liability was measured as of June 30, 2022, and the total pension liability used to calculate the net pension
was determined by an actuarial valuation as of that date. The City's proportionate share of the net pension liability was
based on the City's contributions received by PERA during the measurement period for employer payroll paid dates from
July 1, 2021 through June 30, 2022, relative to the total employer contributions received from all of PERA's participating
employers. The City's proportionate share was 0.0274 percent at the end of the measurement period and 0.0252 percent
for the beginning of the period.
City's proportionate share of the net pension liability 2,170,089$
State of Minnesota's proportionate of the net pension liability
associated with the City 63,613
Total 2,233,702$
For the year ended December 31, 2022, the City recognized pension expense of $376,016 for its proportionate share of the
General Employees Plan's pension expense. Included in the amount, the City recognized $9,505 as pension expense
(and grant revenue) for its proportionate share of the State of Minnesota's contribution of $16 million to the General
Employees Fund.
66
CITY OF OTSEGO, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2022
At December 31, 2022, the City reported its proportionate share of the General Employees Plan's deferred outflows of
resources and deferred inflows of resources, related to pensions from the following sources:
Deferred Deferred
Outflows of Inflows of
Resources Resources
Differences Between Expected and Actual Economic Experience 18,126$ 21,283$
Changes in Actuarial Assumptions 452,889 7,957
Net Collective Difference Between
Projected and Actual Investment Earnings 95,898 -
Changes in Proportion 125,534 -
Contributions Paid Subsequent to the Measurement Date 80,585 -
Totals 773,032$ 29,240$
Deferred outflows totaling $80,585 related to pensions resulting from the City's contributions subsequent to the
measurement date will be recognized as a reduction of the net pension liability in the year ended December 31, 2023.
Other amounts reported as deferred outflows and deferred inflows of resources related to pensions will be recognized in
pension expense as follows:
Year Pension
Ended Expense
December 31, Amount
2023 261,315$
2024 229,115
2025 (23,475)
2026 196,252
2027 -
Thereafter -
Total 663,207$
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%
Description
Asset Class
67
CITY OF OTSEGO, MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2022
F. ACTUARIAL ASSUMPTIONS
The total pension liability in the June 30, 2022, 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 27
years of service.
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 2022:
Changes in Actuarial Assumptions:
• The mortality improvement scale was changed from scale MP-2020 to scale MP-2021.
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, 2022
G. DISCOUNT RATE
The discount rate used to measure the total pension liability in 2022 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 position 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 3,427,769$ 2,170,089$ 1,138,597$
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. 96, Subscription Based Information Technology Arrangements
This new standard establishes that a Subscription Based Information Technology Arrangement (SBITA) results in a
right-to-use subscription asset and a corresponding liability. Under this statement, a governmental entity generally should
recognize a right-to-use subscription asset - an intangible asset - and a corresponding subcription liability. This statement
will be effective for the year ending December 31, 2023.
City's Proportionate Share
of the Net Pension Liability
69
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70
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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 ($) Share of the Net Share of the Net Pension Liability Net Position
Fiscal Share of Share of Pension Liability Pension Liability City's Compared With as a Percentage
Year Net Pension Net Pension Associated With Associated With Covered Covered of the Total
Ending Liability Liability the City the City Payroll Payroll Pension Liability
June 30, 2022 0.0274% 2,170,089$ 63,613$ 2,233,702$ 2,051,891$ 105.76%76.70%
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, 2022 161,169$ 161,169$ -$ 2,148,921$ 7.50%
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, 2022
NOTE 1 GENERAL EMPLOYEES FUND
CHANGES FOR 2022
Changes in Actuarial Assumptions
• The mortality improvement scale was changed from scale MP-2020 to scale MP-2021.
Changes in Plan Provisions
• There have been no changes since the previous valuation.
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.
74
CITY OF OTSEGO, MINNESOTA
NOTES TO REQUIRED SUPPLEMENTARY INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 2022
• 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.
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, 2022
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 $6.0 million, which meets the
special funding situation definition, was due September 2015.
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77
CITY OF OTSEGO, MINNESOTA
COMBINING BALANCE SHEET
NONMAJOR GOVERNMENTAL FUNDS
DECEMBER 31, 2022
Total
Special Capital Nonmajor
Revenue Project Governmental
ASSETS
Cash and Investments 679,684$ 17,398,275$ 18,077,959$
Receivables
Accounts 14,352 - 14,352
Special Assessments
Current - 46 46
Deferred 21,200 271,501 292,701
Delinquent - 574 574
Due from Other Governments - 2,634 2,634
Due from Other Funds - 617,526 617,526
Total Assets 715,236 18,290,556 19,005,792
LIABILITIES
Accounts Payable - 39,255 39,255
Due to Other Governments - 53,199 53,199
Due to Other Funds - 617,526 617,526
Total Liabilities - 709,980 709,980
DEFERRED INFLOWS OF RESOURCES
Unavailable Revenue - Special Assessments 21,200 272,075 293,275
Unavailable Revenue - Intergovernmental - 2,036,497 2,036,497
Total Deferred Inflows of Resources 21,200 2,308,572 2,329,772
FUND BALANCES
Restricted
Lawful Gambling Programs 136,996 - 136,996
Tax Increment Financing 221,101 - 221,101
Park Development - 5,919,225 5,919,225
Committed
Street Light Replacement 62,635 - 62,635
Business Development Loans 273,304 - 273,304
Assigned
City Buildings & Infrastructure - 10,956,329 10,956,329
City Vehicles & Equipment - 383,997 383,997
City Parks - 666,476 666,476
Unassigned - (2,654,023) (2,654,023)
Total Fund Balances 694,036 15,272,004 15,966,040
Total Liabilities, Deferred Inflows of
Resources and Fund Balances 715,236$ 18,290,556$ 19,005,792$
78
CITY OF OTSEGO, MINNESOTA
COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCES
NONMAJOR GOVERNMENTAL FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2022
Total
Special Capital Nonmajor
Revenue Project Governmental
REVENUES
Property Taxes -$ 1,892,818$ 1,892,818$
Tax Increments 436,817 - 436,817
Intergovernmental - 885,371 885,371
Charges for Services - 1,584,800 1,584,800
Special Assessments - 65,538 65,538
Investment Earnings (net) (14,517) (521,901) (536,418)
Miscellaneous 57,686 49,167 106,853
Total Revenues 479,986 3,955,793 4,435,779
EXPENDITURES
Current
Economic Development 407,752 - 407,752
Capital Outlay
General Government - 29,490 29,490
Public Safety - 6,635 6,635
Public Works - 614,219 614,219
Culture and Recreation - 181,252 181,252
Total Expenditures 407,752 831,596 1,239,348
Excess of Revenues
Over Expenditures 72,234 3,124,197 3,196,431
OTHER FINANCING SOURCES (USES)
Transfers In 82,349 1,270,958 1,353,307
Sales of Capital Assets - 11,956 11,956
Transfers Out - (82,349) (82,349)
Total Other Financing Sources (Uses) 82,349 1,200,565 1,282,914
Net Change in Fund Balance 154,583 4,324,762 4,479,345
Fund Balance - January 1 539,453 10,947,242 11,486,695
Fund Balance - December 31 694,036$ 15,272,004$ 15,966,040$
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.
Lawful Gambling
This fund was established to account for contributions from not-for-profit organizations who are conducting
licensed lawful gambling activities within the City. The contributions, which are based on 10% of net profits, are
restricted expenditures only for purposes outlined in Minnesota Statute.
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, 2022
Lawful Street Revolving
Gambling Lighting Loans
ASSETS
Cash and Investments 122,644$ 62,635$ 273,304$
Receivables
Accounts 14,352 - -
Special Assessments
Deferred - 21,200 -
Total Assets 136,996 83,835 273,304
DEFERRED INFLOWS OF RESOURCES
Unavailable Revenue - Special Assessments - 21,200 -
FUND BALANCES
Restricted
Lawful Gambling Programs 136,996 - -
Tax Increment Financing - - -
Committed
Street Light Replacement - 62,635 -
Business Development Loans - - 273,304
Total Fund Balances 136,996 62,635 273,304
Total Liabilities, Deferred Inflows of
Resources and Fund Balances 136,996$ 83,835$ 273,304$
82
Total
Nonmajor
Tax Increment Tax Increment Tax Increment Special
District No. 1 District No. 3 District No. 4 Revenue
64,034$ 122,214$ 34,853$ 679,684$
- - - 14,352
- - - 21,200
64,034 122,214 34,853 715,236
- - - 21,200
- - - 136,996
64,034 122,214 34,853 221,101
- - - 62,635
- - - 273,304
64,034 122,214 34,853 694,036
64,034$ 122,214$ 34,853$ 715,236$
83
CITY OF OTSEGO, MINNESOTA
COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCES
NONMAJOR SPECIAL REVENUE FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2022
Lawful Street Revolving
Gambling Lighting Loans
REVENUES
Tax Increments -$ -$ -$
Investment Earnings (net)(3,039) (2,137) (9,341)
Miscellaneous 57,686 - -
Total Revenues 54,647 (2,137) (9,341)
EXPENDITURES
Current
Economic Development - - -
Excess (Deficiency) of Revenues
Over (Under) Expenditures 54,647 (2,137) (9,341)
OTHER FINANCING SOURCES
Transfers In 82,349 - -
Net Change in Fund Balance 136,996 (2,137) (9,341)
Fund Balance - January 1 - 64,772 282,645
Fund Balance - December 31 136,996$ 62,635$ 273,304$
84
Total
Nonmajor
Tax Increment Tax Increment Tax Increment Special
District No. 1 District No. 3 District No. 4 Revenue
93,966$ 173,111$ 169,740$ 436,817$
- - - (14,517)
- - - 57,686
93,966 173,111 169,740 479,986
87,165 159,429 161,158 407,752
6,801 13,682 8,582 72,234
- - - 82,349
6,801 13,682 8,582 154,583
57,233 108,532 26,271 539,453
64,034$ 122,214$ 34,853$ 694,036$
85
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, 2022
Variance with
Original Final Budget -
and Final Actual Over
Budget Amounts (Under)
REVENUES
Tax Increments 94,744$ 93,966$ (778)$
EXPENDITURES
Current
Economic Development
Personal Services 500 887 387
Services and Other Charges 87,770 86,278 (1,492)
Total Expenditures 88,270 87,165 (1,105)
Net Change in Fund Balance 6,474 6,801 327
Fund Balance - January 1 57,233 57,233 -
Fund Balance - December 31 63,707$ 64,034$ 327$
86
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, 2022
Variance with
Original Final Budget -
and Final Actual Over
Budget Amounts (Under)
REVENUES
Tax Increments 175,868$ 173,111$ (2,757)$
EXPENDITURES
Current
Economic Development
Personal Services 500 1,031 531
Services and Other Charges 160,781 158,398 (2,383)
Total Expenditures 161,281 159,429 (1,852)
Net Change in Fund Balance 14,587 13,682 (905)
Fund Balance - January 1 108,532 108,532 -
Fund Balance - December 31 123,119$ 122,214$ (905)$
87
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, 2022
Variance with
Original Final Budget -
and Final Actual Over
Budget Amounts (Under)
REVENUES
Tax Increments 151,384$ 169,740$ 18,356$
EXPENDITURES
Current
Economic Development
Personal Services 500 1,247 747
Services and Other Charges 146,314 159,911 13,597
Total Expenditures 146,814 161,158 14,344
Net Change in Fund Balance 4,570 8,582 4,012
Fund Balance - January 1 26,271 26,271 -
Fund Balance - December 31 30,841$ 34,853$ 4,012$
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.
Municipal State-Aid for Construction
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.
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, 2022
Parks Revolving
Trails Park Capital Capital
Management Development Equipment Equipment
ASSETS
Cash and Investments 261,239$ 5,917,450$ 675,502$ 383,997$
Receivables
Special Assessments
Current - - - -
Deferred - 12,050 - -
Delinquent - - - -
Due from Other Governments - 2,634 - -
Due from Other Funds - - - -
Total Assets 261,239 5,932,134 675,502 383,997
LIABILITIES
Accounts Payable - 859 9,026 -
Due to Other Governments - - - -
Due to Other Funds - - - -
Total Liabilities - 859 9,026 -
DEFERRED INFLOWS OF RESOURCES
Unavailable Revenue - Special Assessments - 12,050 - -
Unavailable Revenue - Intergovernmental - - - -
Total Deferred Inflows of Resources - 12,050 - -
FUND BALANCES (DEFICITS)
Restricted
Park Development - 5,919,225 - -
Assigned
City Buildings & Infrastructure 261,239 - - -
City Vehicles & Equipment - - - 383,997
City Parks - - 666,476 -
Unassigned - - - -
Total Fund Balances (Deficits)261,239 5,919,225 666,476 383,997
Total Liabilities, Deferred Inflows of
Resources and Fund Balances (Deficits)261,239$ 5,932,134$ 675,502$ 383,997$
90
Total
City Buildings Nonmajor
Fire MSA Watershed Capital & Property Capital
Reserve Construction Districts Improvements Maintenance Projects
2,083,833$ -$ 2,227,565$ 5,760,092$ 88,597$ 17,398,275$
46 - - - - 46
- - 13,802 245,649 - 271,501
- - - 574 - 574
- - - - - 2,634
- - - 617,526 - 617,526
2,083,879 - 2,241,367 6,623,841 88,597 18,290,556
- - 27,098 2,272 - 39,255
- - - 53,199 - 53,199
- 617,526 - - - 617,526
- 617,526 27,098 55,471 - 709,980
- - 13,802 246,223 - 272,075
- 2,036,497 - - - 2,036,497
- 2,036,497 13,802 246,223 - 2,308,572
- - - - - 5,919,225
2,083,879 - 2,200,467 6,322,147 88,597 10,956,329
- - - - - 383,997
- - - - - 666,476
- (2,654,023) - - - (2,654,023)
2,083,879 (2,654,023) 2,200,467 6,322,147 88,597 15,272,004
2,083,879$ -$ 2,241,367$ 6,623,841$ 88,597$ 18,290,556$
91
CITY OF OTSEGO, MINNESOTA
COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCES (DEFICITS)
NONMAJOR CAPITAL PROJECT FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2022
Parks Revolving
Trails Park Capital Capital
Management Development Equipment Equipment
REVENUES
Property Taxes 63,000$ -$ 64,000$ 320,000$
Intergovernmental - 10,939 - -
Charges for Services - 1,069,908 - -
Special Assessments - 2,410 - -
Investment Earnings (net) (9,427) (187,408) (22,611) (9,031)
Miscellaneous - - 13,329 -
Total Revenues 53,573 895,849 54,718 310,969
EXPENDITURES
Capital Outlay
General Government - - - -
Public Safety - - - -
Public Works - - - 297,342
Culture and Recreation 78,803 68,442 34,007 -
Total Expenditures 78,803 68,442 34,007 297,342
Excess (Deficiency) of Revenues
Over (Under) Expenditures (25,230) 827,407 20,711 13,627
OTHER FINANCING SOURCES (USES)
Transfers In - - - -
Sales of Capital Assets - - - 11,956
Transfers Out - - (82,349) -
Total Other Financing Sources (Uses) - - (82,349) 11,956
Net Change in Fund Balance (25,230) 827,407 (61,638) 25,583
Fund Balance (Deficit) - January 1 286,469 5,091,818 728,114 358,414
Fund Balance (Deficit) - December 31 261,239$ 5,919,225$ 666,476$ 383,997$
92
Total
City Buildings Nonmajor
Fire MSA Watershed Capital & Property Capital
Reserve Construction Districts Improvements Maintenance Projects
200,000$ -$ -$ 1,215,818$ 30,000$ 1,892,818$
- 874,432 - - - 885,371
- - 514,892 - - 1,584,800
410 - 2,761 59,957 - 65,538
(67,131) - (74,760) (148,628) (2,905) (521,901)
- - - 35,838 - 49,167
133,279 874,432 442,893 1,162,985 27,095 3,955,793
- - - - 29,490 29,490
6,635 - - - - 6,635
- 5,390 77,756 233,731 - 614,219
- - - - - 181,252
6,635 5,390 77,756 233,731 29,490 831,596
126,644 869,042 365,137 929,254 (2,395) 3,124,197
- - - 1,270,958 - 1,270,958
- - - - - 11,956
- - - - - (82,349)
- - - 1,270,958 - 1,200,565
126,644 869,042 365,137 2,200,212 (2,395) 4,324,762
1,957,235 (3,523,065) 1,835,330 4,121,935 90,992 10,947,242
2,083,879$ (2,654,023)$ 2,200,467$ 6,322,147$ 88,597$ 15,272,004$
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, 2022
(With Comparative Actual Amounts for the Year Ended December 31, 2021)
2021
Variance with
Original Final Budget -
and Final Actual Over Actual
Budget Amounts (Under) Amounts
REVENUES
Property Taxes
Current 4,958,506$ 4,945,354$ (13,152)$ 4,594,438$
Delinquent 40,000 76,119 36,119 1,579
Penalties and interest 2,000 1,758 (242) (3,493)
Total Property Taxes 5,000,506 5,023,231 22,725 4,592,524
Franchise Taxes 129,000 133,218 4,218 129,467
Licenses and Permits
Business Licenses 35,200 41,989 6,789 50,548
Rental Licenses 40,200 38,115 (2,085) 46,923
Other Licenses 2,000 3,310 1,310 2,030
Right of Way Permits 60,000 71,818 11,818 93,540
Building Permits 1,360,139 1,953,478 593,339 2,317,645
Other Permits 13,100 15,100 2,000 18,902
Total Licenses and Permits 1,510,639 2,123,810 613,171 2,529,588
Intergovernmental
State
Police Aid 78,000 83,738 5,738 76,180
Other Aid & Grants 9,500 20,494 10,994 9,357
Local
Other Aid & Grants - 3,500 3,500 2,500
Total Intergovernmental 87,500 107,732 20,232 88,037
Charges for Services
General Government 83,300 206,210 122,910 175,111
Public Works 80,250 156,047 75,797 171,088
Culture and Recreation 75,321 114,375 39,054 81,610
Total Charges for Services 238,871 476,632 237,761 427,809
Special Assessments 3,400 3,963 563 5,732
Fines and Forfeitures 24,000 31,812 7,812 27,461
Investment Earnings (net)60,000 (149,701) (209,701) (48,486)
Miscellaneous
Refunds and Reimbursements - 35,506 35,506 49,160
Contributions and Donations - 41,472 41,472 500
Other - 4,582 4,582 3,212
Total Miscellaneous - 81,560 81,560 52,872
Total Revenues 7,053,916 7,832,257 778,341 7,805,004
2022
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, 2022
(With Comparative Actual Amounts for the Year Ended December 31, 2021)
2021
Variance with
Original Final Budget -
and Final Actual Over Actual
Budget Amounts (Under) Amounts
EXPENDITURES
General Government
City Council
Personal Services 36,682 31,519 (5,163) 33,464
Supplies 375 142 (233) -
Services and Other Charges 115,349 49,973 (65,376) 67,851
Total 152,406 81,634 (70,772) 101,315
City Administrator
Personal Services 197,873 193,011 (4,862) 176,027
Supplies 50 50 - 82
Services and Other Charges 4,519 1,931 (2,588) 1,843
Total 202,442 194,992 (7,450) 177,952
Administration
Personal Services 244,148 252,222 8,074 230,526
Supplies 9,150 5,391 (3,759) 5,773
Services and Other Charges 72,120 61,206 (10,914) 67,230
Total 325,418 318,819 (6,599) 303,529
Elections
Personal Services 37,856 35,959 (1,897) -
Supplies 13,730 5,778 (7,952) -
Services and Other Charges 8,190 2,347 (5,843) 1,955
Total 59,776 44,084 (15,692) 1,955
Assessing
Services and Other Charges 150,002 151,608 1,606 139,898
Finance
Personal Services 241,427 237,073 (4,354) 196,753
Supplies 1,850 1,387 (463) 855
Services and Other Charges 77,349 66,209 (11,140) 70,482
Total 320,626 304,669 (15,957) 268,090
Information Technology
Supplies 5,500 2,136 (3,364) 5,037
Services and Other Charges 115,570 102,803 (12,767) 74,192
Total 121,070 104,939 (16,131) 79,229
Legal
Services and Other Charges 85,100 25,942 (59,158) 35,960
Human Resources
Personal Services 108,377 109,864 1,487 60,739
Supplies 50 95 45 66
Services and Other Charges 22,075 13,579 (8,496) 14,852
Total 130,502 123,538 (6,964) 75,657
2022
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, 2022
(With Comparative Actual Amounts for the Year Ended December 31, 2021)
2021
Variance with
Original Final Budget -
and Final Actual Over Actual
Budget Amounts (Under) Amounts
EXPENDITURES (CONTINUED)
General Government (Continued)
Prairie Center
Supplies 6,600 3,481 (3,119) 5,156
Services and Other Charges 39,416 47,734 8,318 35,776
Total 46,016 51,215 5,199 40,932
City Hall & Public Works Garage
Supplies 9,300 8,729 (571) 7,000
Services and Other Charges 114,535 133,299 18,764 107,973
Total 123,835 142,028 18,193 114,973
Old Town Hall
Services and Other Charges 3,400 3,739 339 3,192
Total General Government 1,720,593 1,547,207 (173,386) 1,342,682
Public Safety
Police Services
Services and Other Charges 1,499,184 1,500,296 1,112 1,457,521
Public Safety Commission
Personal Services 960 600 (360) 720
Supplies 500 - (500) 123
Services and Other Charges 1,500 - (1,500) -
Total 2,960 600 (2,360) 843
Fire Protection
Supplies 500 - (500) -
Services and Other Charges 941,073 941,074 1 769,133
Total 941,573 941,074 (499) 769,133
Building Inspections
Personal Services 157,744 157,692 (52) 151,086
Supplies 4,100 7,236 3,136 5,441
Services and Other Charges 383,266 444,718 61,452 463,372
Total 545,110 609,646 64,536 619,899
Emergency Management
Supplies 2,000 1,989 (11) 986
Services and Other Charges 4,510 4,582 72 3,177
Total 6,510 6,571 61 4,163
Animal Control
Services and Other Charges 16,700 22,195 5,495 22,920
Total Public Safety 3,012,037 3,080,382 68,345 2,874,479
2022
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, 2022
(With Comparative Actual Amounts for the Year Ended December 31, 2021)
2021
Variance with
Original Final Budget -
and Final Actual Over Actual
Budget Amounts (Under) Amounts
EXPENDITURES (CONTINUED)
Public Works
Streets Maintenance
Personal Services 720,540 707,394 (13,146) 618,034
Supplies 185,934 180,756 (5,178) 149,718
Services and Other Charges 107,267 71,504 (35,763) 65,148
Total 1,013,741 959,654 (54,087) 832,900
Engineering
Services and Other Charges 81,600 60,635 (20,965) 63,697
Street Lighting
Services and Other Charges 167,080 167,245 165 157,353
Fleet Management
Personal Services 85,752 75,623 (10,129) 60,436
Supplies 172,648 173,350 702 124,261
Services and Other Charges 18,554 55,142 36,588 40,321
Total 276,954 304,115 27,161 225,018
Total Public Works 1,539,375 1,491,649 (47,726) 1,278,968
Culture and Recreation
Parks Maintenance
Personal Services 338,064 303,315 (34,749) 319,958
Supplies 93,560 96,492 2,932 61,217
Services and Other Charges 145,363 158,865 13,502 150,153
Total 576,987 558,672 (18,315) 531,328
Recreation
Personal Services 181,732 203,177 21,445 174,146
Supplies 15,150 13,940 (1,210) 13,100
Services and Other Charges 71,657 74,182 2,525 60,045
Total 268,539 291,299 22,760 247,291
Parks and Recreation Commission
Personal Services 960 690 (270) 570
Supplies - 82 82 -
Services and Other Charges 1,500 - (1,500) -
Total 2,460 772 (1,688) 570
Heritage Preservation Commission
Personal Services 840 350 (490) 590
Supplies 500 - (500) 41
Services and Other Charges 1,500 264 (1,236) -
Total 2,840 614 (2,226) 631
Total Culture and Recreation 850,826 851,357 531 779,820
2022
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, 2022
(With Comparative Actual Amounts for the Year Ended December 31, 2021)
2021
Variance with
Original Final Budget -
and Final Actual Over Actual
Budget Amounts (Under) Amounts
EXPENDITURES (CONTINUED)
Economic Development
Planning Commission
Personal Services 2,000 1,500 (500) 1,900
Supplies - 3 3 9
Services and Other Charges 1,500 - (1,500) -
Total 3,500 1,503 (1,997) 1,909
Planning
Services and Other Charges 142,950 86,678 (56,272) 78,318
Economic Development
Supplies 100 - (100) -
Services and Other Charges 15,360 3,548 (11,812) 11,021
Total 15,460 3,548 (11,912) 11,021
Total Economic Development 161,910 91,729 (70,181) 91,248
Capital Outlay
General Government 42,600 26,884 (15,716) 15,818
Public Safety 3,000 - (3,000) 4,930
Public Works 12,075 12,222 147 8,820
Culture and Recreation 5,000 6,495 1,495 4,325
Total 62,675 45,601 (17,074) 33,893
Total Expenditures 7,347,416 7,107,925 (239,491) 6,401,090
Excess (Deficiency) of Revenues
Over (Under) Expenditures (293,500) 724,332 1,017,832 1,403,914
OTHER FINANCING SOURCES (USES)
Transfers In 293,500 293,500 - 243,100
Transfers Out - (1,266,290) (1,266,290) (2,434,846)
Total Other Financing Sources (Uses)293,500 (972,790) (1,266,290) (2,191,746)
Net Change in Fund Balance - (248,458) (248,458) (787,832)
Fund Balance - January 1 5,199,901 5,199,901 - 5,987,733
Fund Balance - December 31 5,199,901$ 4,951,443$ (248,458)$ 5,199,901$
2022
98
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99
CITY OF OTSEGO, MINNESOTA
COMBINING BALANCE SHEET
DEBT SERVICE FUND BY ACCOUNT
DECEMBER 31, 2022
Total
Series Series Series Series Debt
2012A 2018A 2020A 2010B Service
ASSETS
Cash and Investments -$ 440,134$ 746,193$ -$ 1,186,327$
Receivables
Special Assessments
Current - 404 - - 404
Deferred - 785,519 220,649 - 1,006,168
Delinquent - 218 - - 218
Total Assets - 1,226,275 966,842 - 2,193,117
LIABILITIES
Accounts Payable - 179 179 - 358
DEFERRED INFLOWS OF RESOURCES
Unavailable Revenue - Special Assessments - 785,737 220,649 - 1,006,386
FUND BALANCES
Restricted - 440,359 746,014 - 1,186,373
Total Liabilities, Deferred Inflows of
Resources and Fund Balances -$ 1,226,275$ 966,842$ -$ 2,193,117$
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, 2022
Total
Series Series Series Series Debt
2012A 2018A 2020A 2010B Service
REVENUES
Property Taxes -$ 97,187$ 450,000$ -$ 547,187$
Special Assessments - 155,356 108,238 - 263,594
Total Revenues - 252,543 558,238 - 810,781
EXPENDITURES
Debt Service
Principal - 185,000 475,000 - 660,000
Interest - 56,131 88,300 - 144,431
Fiscal Agent Fees - 674 674 - 1,348
Total Expenditures - 241,805 563,974 - 805,779
Excess (Deficiency) of Revenues
Over (Under) Expenditures - 10,738 (5,736) - 5,002
OTHER FINANCING SOURCES (USES)
Transfers Out (3,187) - - (1,481) (4,668)
Net Change in Fund Balance (3,187) 10,738 (5,736) (1,481) 334
Fund Balance - January 1 3,187 429,621 751,750 1,481 1,186,039
Fund Balance - December 31 -$ 440,359$ 746,014$ -$ 1,186,373$
101
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, 2022
Variance with
Original Final Budget -
and Final Actual Over
Budget Amounts (Under)
REVENUES
Property Taxes 97,187$ 97,187$ -$
Special Assessments 135,122 155,356 20,234
Total Revenues 232,309 252,543 20,234
EXPENDITURES
Debt Service
Principal 185,000 185,000 -
Interest 56,131 56,131 -
Fiscal Agent Fees 750 674 (76)
Total Expenditures 241,881 241,805 (76)
Net Change in Fund Balance (9,572) 10,738 20,310
Fund Balance - January 1 429,621 429,621 -
Fund Balance - December 31 420,049$ 440,359$ 20,310$
102
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, 2022
Variance with
Original Final Budget -
and Final Actual Over
Budget Amounts (Under)
REVENUES
Property Taxes 450,000$ 450,000$ -$
Special Assessments 105,838 108,238 2,400
Total Revenues 555,838 558,238 2,400
EXPENDITURES
Debt Service
Principal 475,000 475,000 -
Interest 88,300 88,300 -
Fiscal Agent Fees 750 674 (76)
Total Expenditures 564,050 563,974 (76)
Net Change in Fund Balance (8,212) (5,736) 2,476
Fund Balance - January 1 751,750 751,750 -
Fund Balance - December 31 743,538$ 746,014$ 2,476$
103
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104
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 106
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 120
These tables contain information to help the reader assess the City's most significant
local revenue source, the property tax.
Debt Capacity 126
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 133
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 135
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.
105
CITY OF OTSEGO, MINNESOTA
STATISTICAL SECTION (UNAUDITED)
NET POSITION BY COMPONENT
Last Ten Fiscal Years
(accrual basis of accounting)
2013 2014 2015 2016
Governmental Activities
Net Investment in Capital Assets 14,709,024$ 15,515,291$ 15,303,426$ 19,103,702$
Restricted 5,882,912 5,430,795 4,547,327 4,292,589
Unrestricted 7,313,054 9,601,854 9,627,962 10,745,858
Total Governmental Activities Net Position 27,904,990$ 30,547,940$ 29,478,715$ 34,142,149$
Business-type activities
Net Investment in Capital Assets 13,694,517$ 12,619,305$ 11,553,869$ 15,889,294$
Unrestricted 10,546,291 13,487,231 15,474,362 15,248,794
Total Business-type Activities Net Position 24,240,808$ 26,106,536$ 27,028,231$ 31,138,088$
Primary Government
Net Investment in Capital Assets 28,403,541$ 28,134,596$ 26,857,295$ 34,992,996$
Restricted 5,882,912 5,430,795 4,547,327 4,292,589
Unrestricted 17,859,345 23,089,085 25,102,324 25,994,652
Total Primary Government Net Position 52,145,798$ 56,654,476$ 56,506,946$ 65,280,237$
Sources: The data for this table has been extracted from the respective years report.
106
Table 1
2017 2018 2019 2020 2021 2022
21,496,582$ 25,330,507$ 31,373,524$ 34,622,760$ 39,104,289$ 40,938,214$
4,973,536 6,929,688 7,658,124 7,445,422 7,661,049 8,427,066
13,338,398 13,626,318 11,357,968 13,214,418 16,552,822 19,748,485
39,808,516$ 45,886,513$ 50,389,616$ 55,282,600$ 63,318,160$ 69,113,765$
20,504,751$ 24,701,888$ 31,344,999$ 36,563,803$ 43,581,750$ 47,080,808$
15,679,356 18,287,811 18,919,363 24,166,085 28,340,412 33,253,596
36,184,107$ 42,989,699$ 50,264,362$ 60,729,888$ 71,922,162$ 80,334,404$
42,001,333$ 50,032,395$ 62,718,523$ 71,186,563$ 82,686,039$ 88,019,022$
4,973,536 6,929,688 7,658,124 7,445,422 7,661,049 8,427,066
29,017,754 31,914,129 30,277,331 37,380,503 44,893,234 53,002,081
75,992,623$ 88,876,212$ 100,653,978$ 116,012,488$ 135,240,322$ 149,448,169$
107
CITY OF OTSEGO, MINNESOTA
STATISTICAL SECTION (UNAUDITED)
CHANGES IN NET POSITION - CONTINUED ON THE FOLLOWING PAGES
Last Ten Fiscal Years
(accrual basis of accounting)
2013 2014 2015 2016
GOVERNMENTAL ACTIVITIES
Expenses
General Government 906,102$ 1,230,335$ 1,174,510$ 1,376,793$
Public Safety 1,447,887 1,499,538 1,670,627 1,846,459
Public Works 2,760,130 2,383,890 6,521,708 3,389,909
Culture and Recreation 573,581 792,525 792,936 847,553
Economic Development 75,303 45,024 145,771 302,296
Interest on Long-term Debt 543,821 347,503 231,242 223,938
Total Expenses 6,306,824 6,298,815 10,536,794 7,986,948
Program Revenues
Charges for Services
General Government 36,735 119,757 36,235 81,876
Public Safety 784,038 1,159,073 1,191,134 1,677,788
Public Works 106,913 724,009 247,260 656,570
Culture and Recreation 28,600 43,606 52,075 59,236
Operating Grants and Contributions 220,790 233,606 244,497 248,910
Capital Grants and Contributions 485,533 1,619,209 3,154,662 4,437,611
Total Program Revenues 1,662,609 3,899,260 4,925,863 7,161,991
Net (Expense) / Revenue (4,644,215) (2,399,555) (5,610,931) (824,957)
General Revenues and Transfers
Taxes
Property 4,333,972 4,476,810 4,602,153 4,963,787
Tax Increments - - - -
Franchise Taxes 83,681 120,964 128,722 131,229
Unrestricted Grants and Contributions 10,954 132,104 242,970 255,951
Investment Earnings (net)(17,852) 157,640 55,909 82,385
Gain on Disposal of Capital Assets 44,343 32,355 35,600 31,160
Transfers - 122,632 284,586 186,755
Transfers - Capital Assets - - - (162,876)
Total General Revenues and Transfers 4,455,098 5,042,505 5,349,940 5,488,391
Change in Net Position (189,117)$ 2,642,950$ (260,991)$ 4,663,434$
108
Table 2
Page 1 of 3
2017 2018 2019 2020 2021 2022
1,085,554$ 1,228,607$ 1,383,291$ 1,616,634$ 1,509,107$ 1,849,685$
1,906,843 2,207,699 2,411,751 2,683,103 2,889,365 3,101,633
2,618,584 3,348,200 3,387,481 4,967,363 4,101,313 4,559,629
1,013,252 1,095,151 1,177,721 1,151,569 1,240,142 1,396,260
365,768 223,175 741,705 889,173 503,411 499,481
197,282 276,423 212,402 247,702 125,168 92,945
7,187,283 8,379,255 9,314,351 11,555,544 10,368,506 11,499,633
100,125 118,219 639,077 651,770 889,736 937,238
1,384,626 1,698,522 1,726,367 2,552,748 2,557,049 2,156,222
805,248 942,042 127,176 174,321 308,739 164,533
67,112 80,047 71,553 22,852 81,610 114,375
261,814 328,410 319,332 366,461 415,173 399,743
3,957,672 5,800,583 3,361,497 3,212,230 5,838,257 4,631,372
6,576,597 8,967,823 6,245,002 6,980,382 10,090,564 8,403,483
(610,686) 588,568 (3,069,349) (4,575,162) (277,942) (3,096,150)
5,572,250 6,078,341 6,681,989 7,170,868 7,718,135 8,583,996
- 96,938 97,419 275,445 311,971 436,817
135,652 139,161 137,510 132,137 129,467 345,108
231,683 191,570 162,120 1,411,685 64,729 152,452
124,052 263,784 754,079 625,964 (191,523) (870,574)
38,373 37,563 47,362 - 40,000 11,956
195,686 207,840 212,869 262,369 243,100 293,500
(20,643) (1,525,768) (520,896) (410,322) (2,377) (61,500)
6,277,053 5,489,429 7,572,452 9,468,146 8,313,502 8,891,755
5,666,367$ 6,077,997$ 4,503,103$ 4,892,984$ 8,035,560$ 5,795,605$
109
CITY OF OTSEGO, MINNESOTA
STATISTICAL SECTION (UNAUDITED)
CHANGES IN NET POSITION - CONTINUED
Last Ten Fiscal Years
(accrual basis of accounting)
2013 2014 2015 2016
BUSINESS-TYPE ACTIVITIES
Expenses
Water Utility 1,241,343$ 1,187,553$ 1,246,064$ 1,276,338$
Sanitary Sewer Utility 2,123,381 2,052,493 2,207,811 2,480,519
Storm Water Utility 72,944 57,977 95,533 42,342
Total Expenses 3,437,668 3,298,023 3,549,408 3,799,199
Program Revenues
Charges for Services
Water Utility 1,259,942 1,167,066 1,261,303 1,334,442
Sanitary Sewer Utility 1,186,523 1,325,181 1,479,703 1,601,172
Storm Water Utility 41,831 45,570 76,211 75,932
Operating Grants and Contributions - - - -
Capital Grants and Contributions 1,267,189 2,560,270 2,020,299 4,766,947
Total Program Revenues 3,755,485 5,098,087 4,837,516 7,778,493
Net (Expense) / Revenue 317,817 1,800,064 1,288,108 3,979,294
General Revenues and Transfers
Property Taxes 57,739 24,824 25,000 25,000
Investment Earnings (net) (34,717) 168,320 85,259 129,442
Gain on Disposal of Capital Assets 18,733 28,440 - -
Transfers - (122,632) (284,586) (186,755)
Transfers - Capital Assets - - - 162,876
Total General Revenues and Transfers 41,755 98,952 (174,327) 130,563
Change in Net Position 359,572$ 1,899,016$ 1,113,781$ 4,109,857$
110
Table 2
Page 2 of 3
2017 2018 2019 2020 2021 2022
1,377,537$ 1,468,485$ 1,729,938$ 1,443,522$ 2,150,216$ 2,311,989$
2,477,995 2,561,070 2,600,436 2,739,519 3,257,261 4,084,200
62,172 71,040 123,163 138,985 188,245 218,612
3,917,704 4,100,595 4,453,537 4,322,026 5,595,722 6,614,801
1,529,127 1,754,947 1,734,090 2,108,577 2,982,786 3,020,259
1,744,067 1,932,885 2,254,688 2,473,673 3,048,707 3,543,804
94,919 104,916 109,372 120,579 122,200 137,178
- - - 2,157 - -
5,591,332 5,500,794 6,543,224 9,214,377 11,066,329 9,754,695
8,959,445 9,293,542 10,641,374 13,919,363 17,220,022 16,455,936
5,041,741 5,192,947 6,187,837 9,597,337 11,624,300 9,841,135
25,000 26,000 30,000 32,000 34,000 36,000
154,321 260,833 748,799 688,236 (225,303) (1,232,893)
- 7,884 - - - -
(195,686) (207,840) (212,869) (262,369) (243,100) (293,500)
20,643 1,525,768 520,896 410,322 2,377 61,500
4,278 1,612,645 1,086,826 868,189 (432,026) (1,428,893)
5,046,019$ 6,805,592$ 7,274,663$ 10,465,526$ 11,192,274$ 8,412,242$
111
CITY OF OTSEGO, MINNESOTA
STATISTICAL SECTION (UNAUDITED)
CHANGES IN NET POSITION - CONTINUED
Last Ten Fiscal Years
(accrual basis of accounting)
2013 2014 2015 2016
TOTAL PRIMARY GOVERNMENT
Expenses
Governmental Activities 6,306,824$ 6,298,815$ 10,536,794$ 7,986,948$
Business-type Activities 3,437,668 3,298,023 3,549,408 3,799,199
Total Expenses 9,744,492 9,596,838 14,086,202 11,786,147
Program Revenues
Governmental Activities 1,662,609 3,899,260 4,925,863 7,161,991
Business-type Activities 3,755,485 5,098,087 4,837,516 7,778,493
Total Program Revenues 5,418,094 8,997,347 9,763,379 14,940,484
Net (Expense) / Revenue (4,326,398) (599,491) (4,322,823) 3,154,337
General Revenues and Transfers
Governmental Activities 4,455,098 5,042,505 5,349,940 5,488,391
Business-type Activities 41,755 98,952 (174,327) 130,563
Total General Revenues and Transfers 4,496,853 5,141,457 5,175,613 5,618,954
Change in Net Position 170,455$ 4,541,966$ 852,790$ 8,773,291$
Sources: The data for this table has been extracted from the respective years report.
112
Table 2
Page 3 of 3
2017 2018 2019 2020 2021 2022
7,187,283$ 8,379,255$ 9,314,351$ 11,555,544$ 10,368,506$ 11,499,633$
3,917,704 4,100,595 4,453,537 4,322,026 5,595,722 6,614,801
11,104,987 12,479,850 13,767,888 15,877,570 15,964,228 18,114,434
6,576,597 8,967,823 6,245,002 6,980,382 10,090,564 8,403,483
8,959,445 9,293,542 10,641,374 13,919,363 17,220,022 16,455,936
15,536,042 18,261,365 16,886,376 20,899,745 27,310,586 24,859,419
4,431,055 5,781,515 3,118,488 5,022,175 11,346,358 6,744,985
6,277,053 5,489,429 7,572,452 9,468,146 8,313,502 8,891,755
4,278 1,612,645 1,086,826 868,189 (432,026) (1,428,893)
6,281,331 7,102,074 8,659,278 10,336,335 7,881,476 7,462,862
10,712,386$ 12,883,589$ 11,777,766$ 15,358,510$ 19,227,834$ 14,207,847$
113
This page has been left blank intentionally.
114
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
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
2022 8,583,996 436,817 345,108 9,365,921
Sources: The data for this table has been extracted from the respective years report.
115
CITY OF OTSEGO, MINNESOTA
STATISTICAL SECTION (UNAUDITED)
FUND BALANCES - GOVERNMENTAL FUNDS
Last Ten Fiscal Years
(modified accrual basis of accounting)
2013 2014 2015 2016
General Fund
Nonspendable 11,254$ 80,423$ 105,547$ 110,973$
Assigned 103,418 101,833 128,646 192,408
Unassigned 1,797,403 3,211,382 2,656,330 3,342,821
Total General Fund 1,912,075$ 3,393,638$ 2,890,523$ 3,646,202$
All Other Governmental Funds
Nonspendable 351$ -$ 2,675$ 2,000$
Restricted 8,805,554 2,576,729 2,278,379 1,931,757
Committed 595,191 387,033 406,683 419,829
Assigned 4,267,012 5,218,020 6,825,237 7,221,257
Unassigned (9,555) (10,584) (26,070) (281,273)
Total All Other Governmental Funds 13,658,553$ 8,171,198$ 9,486,904$ 9,293,570$
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.
116
Table 4
2017 2018 2019 2020 2021 2022
317,197$ 320,887$ 323,124$ 334,946$ 354,473$ 323,790$
205,257 205,449 223,740 242,785 272,801 327,332
3,368,191 3,587,331 3,772,946 5,410,002 4,572,627 4,300,321
3,890,645$ 4,113,667$ 4,319,810$ 5,987,733$ 5,199,901$ 4,951,443$
1,325$ 650$ -$ -$ -$ -$
3,290,750 4,167,765 5,226,784 5,472,554 6,469,893 7,463,695
474,863 448,699 438,676 484,582 347,417 335,939
9,098,697 10,526,550 11,492,028 11,401,232 14,913,054 17,558,426
(355,150) (1,790,236) (4,463,532) (4,235,228) (3,523,065) (2,654,023)
12,510,485$ 13,353,428$ 12,693,956$ 13,123,140$ 18,207,299$ 22,704,037$
117
CITY OF OTSEGO, MINNESOTA
STATISTICAL SECTION (UNAUDITED)
CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS
Last Ten Fiscal Years
(modified accrual basis of accounting)
2013 2014 2015 2016
Revenues
Property Taxes 4,564,068$ 4,524,092$ 4,651,453$ 4,960,518$
Tax Increments - - - -
Franchise Taxes - 120,964 128,722 131,229
Licenses and Permits 819,493 1,238,823 1,179,136 1,661,565
Intergovernmental 241,996 1,034,552 3,570,630 2,111,727
Charges for Services 170,194 1,142,453 555,660 1,274,578
Special Assessments 1,987,647 905,441 560,748 575,155
Fines and Forfeitures - 4,000 11,998 16,223
Investment Earnings (net) (17,852) 157,640 55,909 82,385
Miscellaneous 78,457 50,286 105,573 119,732
Total Revenues 7,844,003 9,178,251 10,819,829 10,933,112
Expenditures
General Government 923,255 1,169,697 1,141,113 1,233,680
Public Safety 1,447,182 1,495,008 1,664,031 1,807,985
Public Works 1,121,981 1,023,693 1,044,024 1,019,946
Culture and Recreation 313,023 464,840 466,205 534,122
Economic Development 75,303 45,024 145,771 196,534
Capital Outlay 1,984,531 1,688,847 4,477,153 4,349,555
Debt Service
Principal 840,000 860,000 1,130,000 1,210,000
Interest 574,715 454,566 256,148 233,498
Bond Issuance & Fiscal Agent Fee's - - 2,979 3,362
Total Expenditures 7,279,990 7,201,675 10,327,424 10,588,682
Excess (Deficiency) of Revenues
Over (Under) Expenditures 564,013 1,976,576 492,405 344,430
Other Financing Sources (Uses)
Transfers In - 612,433 1,574,500 648,087
Issuance of Debt - - - -
Premium on Issuance of Debt - - - -
Sales of Capital Assets - - 35,600 31,160
Payment to Refunded Bond Escrow Agent - (6,105,000) - -
Insurance Recovery 22,167 - - -
Transfers Out - (489,801) (1,289,914) (461,332)
Total Other Financing Sources (Uses) 22,167 (5,982,368) 320,186 217,915
Net Change in Fund Balances 586,180$ (4,005,792)$ 812,591$ 562,345$
Debt Service as a Percentage of
Noncapital Expenditures 23.32%21.16%14.22%18.40%
Sources: The data for this table has been extracted from the respective years report.
118
Table 5
2017 2018 2019 2020 2021 2022
5,595,120$ 6,084,051$ 6,662,307$ 7,141,972$ 7,715,949$ 8,563,236$
- 96,938 97,419 275,445 311,971 436,817
135,652 139,161 137,510 132,137 129,467 345,108
1,363,384 1,672,906 1,699,879 2,532,789 2,529,588 2,123,810
1,093,154 2,339,286 1,801,414 2,541,072 1,073,889 1,284,581
2,129,514 2,328,991 2,130,542 1,994,941 2,717,128 2,788,497
734,522 508,865 586,109 457,606 927,749 376,755
21,092 25,616 26,488 19,959 27,461 31,812
124,052 263,784 754,079 625,964 (191,523) (870,574)
294,909 233,946 141,533 149,472 221,998 197,499
11,491,399 13,693,544 14,037,280 15,871,357 15,463,677 15,277,541
1,072,195 1,182,959 1,313,178 1,479,856 1,465,403 1,679,038
1,886,661 2,168,187 2,379,440 2,667,435 2,874,479 3,080,382
1,066,349 1,205,464 1,683,958 1,640,892 1,934,040 2,086,883
587,739 654,786 710,406 695,747 779,820 851,357
195,716 223,175 265,498 889,173 503,411 499,481
2,160,857 8,422,796 7,001,285 5,137,983 2,379,157 2,331,797
1,125,000 1,160,000 1,185,000 1,330,000 1,360,000 660,000
206,748 182,875 230,217 222,250 153,062 144,431
3,267 74,512 2,874 65,483 1,078 1,348
8,304,532 15,274,754 14,771,856 14,128,819 11,450,450 11,334,717
3,186,867 (1,581,210) (734,576) 1,742,538 4,013,227 3,942,824
1,278,609 1,397,210 1,274,595 2,465,348 2,677,946 1,646,807
- 2,305,000 - 2,950,000 - -
- 58,475 - 312,200 - -
78,805 75,860 68,378 - 40,000 11,956
- - - (3,170,000) - -
- - - - - -
(1,082,923) (1,189,370) (1,061,726) (2,202,979) (2,434,846) (1,353,307)
274,491 2,647,175 281,247 354,569 283,100 305,456
3,461,358$ 1,065,965$ (453,329)$ 2,097,107$ 4,296,327$ 4,248,280$
19.32%16.69%15.85%13.82%15.17%7.97%
119
CITY OF OTSEGO, MINNESOTA
STATISTICAL SECTION (UNAUDITED)
ESTIMATED ACTUAL VALUE, TAXABLE MARKET VALUE AND TAX CAPACITY OF TAXABLE PROPERTY
Last Ten Fiscal Years
2013 2014 2015 2016
Estimated Actual Value 989,365,300$ 1,051,543,200$ 1,177,857,500$ 1,340,579,000$
Taxable Market Value
Real Estate 839,428,000$ 908,532,000$ 1,039,579,100$ 1,195,720,700$
Personal Property 14,305,700 14,513,300 14,952,700 16,476,000
Total Taxable Market Value 853,733,700$ 923,045,300$ 1,054,531,800$ 1,212,196,700$
Taxable Market Value as a Percentage
of Estimated Actual Value 86.29%87.78%89.53%90.42%
Tax Capacity
Real Estate 9,184,748$ 9,805,499$ 11,060,135$ 12,909,476$
Personal Property 285,540 290,266 298,480 328,948
Net Tax Capacity for Direct Rate 9,470,288$ 10,095,765$ 11,358,615$ 13,238,424$
Net Tax Capacity as a Percentage
of Estimated Actual Value 0.96%0.96%0.96%0.99%
Property Tax Levies
General Revenues 3,952,910$ 4,024,715$ 4,070,000$ 4,380,206$
Debt Service 425,000 475,285 610,000 640,000
Total Property Taxes Levied 4,377,910$ 4,500,000$ 4,680,000$ 5,020,206$
Tax Rates
General Revenues 41.740 39.865 35.832 33.087
Debt Service 4.488 4.708 5.370 4.834
Total Direct Tax Rate 46.228 44.573 41.202 37.921
Sources: The data for this table has been provided by the Wright County Auditor / Treasurer's Office.
120
Table 6
2017 2018 2019 2020 2021 2022
1,473,986,500$ 1,644,926,700$ 1,837,875,900$ 2,043,966,400$ 2,237,499,800$ 2,467,755,200$
1,327,925,100$ 1,490,919,200$ 1,666,323,700$ 1,864,979,200$ 2,054,871,100$ 2,285,619,500$
20,388,300 23,397,400 29,560,400 27,109,100 32,555,900 29,522,200
1,348,313,400$ 1,514,316,600$ 1,695,884,100$ 1,892,088,300$ 2,087,427,000$ 2,315,141,700$
91.47%92.06%92.27%92.57%93.29%93.82%
14,465,922$ 16,228,630$ 18,029,678$ 19,955,742$ 21,940,788$ 24,263,079$
407,194 467,378 578,862 541,536 650,470 589,792
14,873,116$ 16,696,008$ 18,608,540$ 20,497,278$ 22,591,258$ 24,852,871$
1.01%1.02%1.01%1.00%1.01%1.01%
4,974,745$ 5,448,302$ 5,975,816$ 6,447,491$ 7,078,874$ 8,037,818$
655,000 655,000 734,293 746,758 749,551 547,187
5,629,745$ 6,103,302$ 6,710,109$ 7,194,249$ 7,828,425$ 8,585,005$
33.448 32.632 32.114 31.455 31.335 32.343
4.404 3.923 3.946 3.643 3.318 2.202
37.852 36.555 36.060 35.099 34.653 34.545
121
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
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%
2022 17,987,127 2,273,760 3,269,738 666,662 589,792 65,792 24,852,871
72.37% 9.15% 13.16% 2.68% 2.37% 0.26% 100.00%
Sources: The data for this table has been provided by the Wright County Auditor / Treasurer's Office.
Residential
122
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
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 34.652 31.717 15.390 44.216 43.719 110.088 93.761 122.587
2022 32.343 2.202 34.545 30.889 15.459 42.438 43.751 109.185 93.755 120.734
Sources: The data for this table has been provided by the Wright County Auditor / Treasurer's Office.
Overlapping Rates Total Direct & OverlappingDirect Rates
123
CITY OF OTSEGO, MINNESOTA
STATISTICAL SECTION (UNAUDITED)
PRINCIPAL PROPERTY TAXPAYERS Table 9
Current Year and Nine Years Ago
2022 2013
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 1,084,350$ 1 4.36%214,922$ 2 2.27%
Centerpoint Energy Utility 529,600 2 2.13%150,864 3 1.59%
Wagner Spray Tech Corporation Industrial 237,250 3 0.95%0.00%
Target Corporation Commercial 202,544 4 0.81%248,514 1 2.62%
Ahava Realty ADA Compliant LP Industrial 167,250 5 0.67%0.00%
Evans Park Inc Apartments 166,289 6 0.67%0.00%
Otsego Apartments LLC Apartments 116,238 7 0.47%0.00%
Coborn Realty Company LP Commercial 113,576 8 0.46%0.00%
Elk Inn Partners LP Commercial 99,250 9 0.40%99,250 4 1.05%
P & F Properties Inc Industrial 87,662 10 0.35%0.00%
Appello Group LLC Commercial 98,232 5 1.04%
GCI Capital, Inc.Commercial 69,306 8 0.73%
Wright-Hennepin Co-Op Electric Utility 85,215 6 0.90%
Apex Business Center LLC Industrial 74,578 7 0.79%
Otsego GRC LLC Commercial 49,682 9 0.52%
Otsego Mall LLC Commercial 43,250 10 0.46%
Totals 2,804,009$ 11.27%1,133,813$ 11.97%
Sources: The data for this table has been provided by the Wright County Auditor / Treasurer's Office.
124
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
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%40,698 5,020,206 100.00%
2017 5,629,745 5,606,101 99.58%19,405 5,625,506 99.92%
2018 6,103,302 6,084,700 99.70%17,034 6,101,734 99.97%
2019 6,710,109 6,670,163 99.40%35,485 6,705,648 99.93%
2020 7,194,249 7,134,792 99.17%54,638 7,189,430 99.93%
2021 7,828,425 7,764,474 99.18%53,091 7,817,565 99.86%
2022 8,585,005 8,506,576 99.09%- 8,506,576 99.09%
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.
125
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
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 2.62% 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 3.02% 1,774
2022 4,017,111 - 40,370,203 15,696,489 60,083,803 4.55% 2,673
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
126
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
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% 111
2022 4,017,111 - 4,017,111 2,137,694 1,879,417 0.08% 84
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.
127
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128
CITY OF OTSEGO, MINNESOTA
STATISTICAL SECTION (UNAUDITED)
COMPUTATION OF DIRECT AND OVERLAPPING Table 13
GOVERNMENTAL ACTIVITIES DEBT
DECEMBER 31, 2022
Estimated Estimated Share
Debt Percentage of Overlapping
Governmental Unit Outstanding Applicable Debt
Overlapping Debt:
School Districts:
No. 728 - Elk River 302,775,000$ 19.87% 60,161,393$
No. 882 - Monticello 45,475,000 4.14% 1,882,665
No. 885 - St. Michael-Albertville 148,115,000 5.20% 7,701,980
Wright County 140,385,000 12.48% 17,520,048
Total Overlapping Debt 636,750,000$ 87,266,086
City of Otsego Direct Debt 4,017,111
Total Direct and Overlapping Debt 91,283,197$
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.
129
CITY OF OTSEGO, MINNESOTA
STATISTICAL SECTION (UNAUDITED)
LEGAL DEBT MARGIN INFORMATION
Last Ten Fiscal Years
2013 2014 2015 2016
Taxable Market Value 853,733,700$ 923,045,300$ 1,054,531,800$ 1,212,196,700$
Debt Limit Percentage 3.00% 3.00% 3.00% 3.00%
Debt Limit 25,612,011 27,691,359 31,635,954 36,365,901
Total Net Debt Applicable to Limit 11,983,722 5,454,035 5,221,786 4,218,268
Legal Debt Margin 13,628,289$ 22,237,324$ 26,414,168$ 32,147,633$
Total Net Debt Applicable to the Limit
as a Percentage of Debt Limit 46.79% 19.70% 16.51% 11.60%
Sources: The data for this table has been provided by Wright County and from City financial maintenance documents.
130
Table 14
2017 2018 2019 2020 2021 2022
1,348,313,400$ 1,514,316,600$ 1,695,884,100$ 1,892,088,300$ 2,087,427,000$ 2,315,141,700$
3.00% 3.00% 3.00% 3.00% 3.00% 3.00%
40,449,402 45,429,498 50,876,523 56,762,649 62,622,810 69,454,251
3,782,338 4,090,309 3,399,451 3,053,423 2,356,981 1,879,417
36,667,064$ 41,339,189$ 47,477,072$ 53,709,226$ 60,265,829$ 67,574,834$
9.35% 9.00% 6.68% 5.38% 3.76% 2.71%
131
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
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%
2022 6,443,632 7,131,721 5,615,835 7,959,518 3,128,000 1,045,956 190.69%
Sources: The data for this table has been provided from City financial maintenance documents.
General Obligation Revenue Bonds
132
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
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 6,254 949,341,190 52,363 3.3%34.3 13,921 4,201 6,557
2020 19,966 6,554 1,102,462,622 55,217 5.6%33.7 13,464 4,072 6,366
2021 21,289 7,190 1,250,856,484 58,756 3.5%38.2 13,847 4,166 6,653
2022 22,475 7,593 1,320,557,552 58,756 2.6%38.2 14,152 4,142 6,670
Sources: Population - Minnesota State Demographer (2013-2019 and 2021); U.S. Census Bureau (2020); Estimated by City (2022)
Households - Minnesota State Demographer (2012-2021); Estimated by City (2022)
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 2022. In those instances, 2021 data was shown for the current year.
133
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 1,256 1 30.75%201 4 11.09%
Trade, Transportation & Utilities 1,015 2 24.85% 479 1 26.43%
Construction 491 3 12.02% 209 3 11.53%
Leisure and Hospitality 377 4 9.23% 438 2 24.17%
Professional & Business Services 344 5 8.42% 177 5 9.77%
Manufacturing 195 6 4.77%
Other Services 105 7 2.57% 117 6 6.46%
Financial Activities 60 8 1.47% 30 7 1.66%
Public Administration 44 9 1.08% 25 8 1.38%
Information 35 10 0.86%
Natural Resources and Mining 8 11 0.20%
Totals 3,930 96.21% 1,676 92.49%
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.
2022 2013
134
CITY OF OTSEGO, MINNESOTA
STATISTICAL SECTION (UNAUDITED)
FULL TIME CITY GOVERNMENT POSITIONS BY FUNCTION Table 18
Last Ten Fiscal Years
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
General Government
Administration 3.0 3.0 4.0 3.5 3.6 3.6 3.6 4.0 4.0 4.2
Finance 3.7 3.9 3.0 3.0 3.0 3.0 3.0 3.0 3.0 4.0
Total General Government 6.7 6.9 7.0 6.5 6.6 6.6 6.6 7.0 7.0 8.2
Public Safety
Police - - - - - - - - - -
Fire - - - - - - - - - -
Building Inspections 1.0 1.0 1.0 1.5 1.5 1.8 2.0 2.0 2.0 2.0
Total Public Safety 1.0 1.0 1.0 1.5 1.5 1.8 2.0 2.0 2.0 2.0
Public Works
Street Maintenance 5.8 5.8 6.9 6.9 6.9 6.9 7.8 7.8 7.8 8.4
Mechanic 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0
Total Public Works 6.8 6.8 7.9 7.9 7.9 7.9 8.8 8.8 8.8 9.4
Culture and Recreation
Parks Maintenance 1.4 1.4 3.5 3.5 3.5 3.9 4.4 4.4 4.4 4.5
Recreation 1.1 1.1 1.4 1.4 1.4 1.6 1.5 2.0 1.5 1.5
Total Culture and Recreation 2.5 2.5 4.9 4.9 4.9 5.5 5.9 6.4 5.9 6.0
Public Utilities
Water Utility 2.0 2.0 1.3 1.3 1.3 1.4 1.5 1.8 1.8 2.2
Sanitary Sewer Utility 2.0 2.0 3.7 3.7 3.7 4.1 4.5 5.4 5.4 6.5
Total Public Utilities 4.0 4.0 5.0 5.0 5.0 5.5 6.0 7.2 7.2 8.7
Total 21.0 21.2 25.8 25.8 25.9 27.3 29.3 31.4 30.9 34.3
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.
135
CITY OF OTSEGO, MINNESOTA
STATISTICAL SECTION (UNAUDITED)
OPERATING INDICATORS BY FUNCTION
Last Ten Fiscal Years
Function 2013 2014 2015 2016
Administration
Rental Licenses Issued 337 372 372 387
Code Enforcement Citations 20 16 31 41
Registered Voters 7,329 9,324
Actual Votes Tallied 4,693 7,362
Police
Total Calls for Service 3,856 4,060 3,575 3,619
Fire
Calls - Albertville Department 82 76 93
Calls - Elk River Department 74 73 80
Calls - Rogers Department 15
Building Inspections
Number of Permits - All Types 699 692 893 968
New Homes Constructed 190 188 207 219
Public Works
Miles of Streets Constructed 1.33 2.30 1.66 2.59
Miles of Streets Reconstructed 0.35
Snow Plowing Events 37 22 16 16
Culture and Recreation
Parks Acres Maintained 184.3 184.3 184.3 190.3
Prairie Festival Attendance 4,900 5,100 6,200 5,000
Recreation Programs Offered 60 106 132 100
Recreation Programs Participants 9,875 14,958 12,662 12,662
Water Utility
Connections 2,678 2,829 3,023 3,155
Gallons Delivered 409,492,730 37,529,984 389,118,330 393,795,210
Sanitary Sewer Utility
Average Daily Gallons Treated 543,000 539,000 551,000 600,000
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.
136
Table 19
2017 2018 2019 2020 2021 2022
351 329 332 300 297 334
30 68 18 37 42 51
9,754 13,081 13,895
6,228 11,389 9,402
4,310 4,279 4,484 4,145 3,783 3,696
129 131 164 158 204 209
92 96 105 92 110 96
12 27 26 28 59 93
722 1,147 1,173 1,791 1,856 1,826
210 300 300 403 435 317
3.93 7.80 4.68 1.47 3.83 2.83
1.80 5.30 - 0.78 0.76 2.28
22 37 21 11 19 32
160.0 160.0 160.0 173.0 175.0 175.0
4,000 4,800 6,450 - 6,850 8,000
127 231 153 52 161 177
17,341 20,885 18,500 5,359 16,936 23,397
3,278 3,748 4,014 4,335 4,445 5,100
491,484,000 427,795,004 491,074,000 632,552,814 787,182,348 765,960,269
627,000 673,000 738,000 798,000 840,000 900,000
137
CITY OF OTSEGO, MINNESOTA
STATISTICAL SECTION (UNAUDITED)
CAPITAL ASSET STATISTICS BY FUNCTION
Last Ten Fiscal Years
Function 2013 2014 2015 2016
Public Works
Street Miles (MSA) 114.63 116.93 118.59 120.88
Heavy Duty Trucks 8 8 8 8
Light Duty Vehicles 15 15 15 15
Tractors & Grading Equipment 8 8 8 8
Culture and Recreation
Trail Miles 19.68 19.68 19.96 21.13
Number of Parks 10 10 10 11
Playgrounds 7 7 7 8
Park Shelters 9 9 9 10
Ball Fields 5 5 5 6
Soccer Fields - - 3 3
Basketball Courts 5 5 5 5
Tennis Courts 7 7 7 8
Pickleball Courts
Outdoor Ice Rinks 1 1 1 1
Mowing Equipment 5 5 5 6
Water Utility
Water Towers 3 3 3 3
Wells 8 8 8 8
Miles of Water Main 63 63 74 77
Hydrants 717 722 794 846
Water Valves 1,555 1,603 1,659 1,841
Sanitary Sewer Utility
Treatment Facilities 2 2 2 2
Lift Stations 9 9 9 10
Miles of Sanitary Sewer Lines 69 - 74 76
Manholes 1,257 1,257 1,366 1,480
Miles of Sanitary Forcemain 20 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.
138
Table 20
2017 2018 2019 2020 2021 2022
124.81 131.00 131.00 134.41 138.31 142.00
8 9 9 9 10 11
17 17 16 19 16 17
8 7 7 6 7 6
25.11 25.60 27.95 38.31 42.00 43.40
12 14 14 14 14 14
9 10 10 14 14 14
10 12 13 13 16 16
6 6 6 7 7 7
3 3 3 3 3 3
5 6 6 7 6 6
8 8 8 8 7 7
4 4
1 1 1 2 2 3
6 6 6 7 6 6
3 3 3 3 3 4
8 8 7 9 9 10
79 83 87 90 94 93
871 923 975 1,014 1,066 1,197
1,881 1,983 2,106 2,360 2,287 2,673
2 2 2 2 2 2
10 10 10 10 10 10
80 82 86.1 96.9 103.7 104.8
1,524 1,594 1,730 1,774 1,814 2,071
20 21 21 21 27 27
139
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140
City of Otsego
Wright County, Minnesota
Communications Letter
December 31, 2022
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 Issues 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, 2022, 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, 2023, 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, 2023
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, 2022. 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.
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.
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 basic financial statements.
There have been no initial selection of accounting policies and no changes to significant accounting
policies or their application during 2022. 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.
6
City of Otsego
Required Communication
Qualitative Aspects of the City's Significant Accounting Practices (Continued)
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.
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. We identified the following uncorrected
misstatements of the financial statements. Management has determined their effects are immaterial,
both individually and in the aggregate, to the basic financial statements taken as a whole and each
opinion unit.
Right to use assets and lease liabilities are understated.
7
City of Otsego
Required Communication
Uncorrected and Corrected Misstatements (Continued)
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 basic 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.
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.
8
City of Otsego
Required Communication
Other Information Included in Annual Reports (Continued)
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, 2022, revenues for the City's General Fund totaled
$7,832,257. This represents an increase of $27,253, or 0.35%, from 2021. General Fund expenditures
totaled $7,107,925 in 2022, which is an increase of $706,835, or 11.04%, from 2021. Revenue and
expenditure activity, combined with net transfers out of $972,790, resulted in a decrease in fund balance
of $248,458 in 2022.
The ending General Fund balance of $4,951,443 is further broken down into spending categories;
$323,790 is for nonspendable fund balances which is made up of $121,590 of prepaid items and
$202,200 of assets held for resale. In addition, $260,757 is assigned for insurance deductibles and
$66,575 is assigned for educational programs. This leaves $4,300,321 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, 2022, represents 62.07% of 2023 budgeted expenditures of $7,976,649.
2018 2019 2020 2021 2022
Total Revenues $6,305,790 $6,692,859 $9,055,697 $7,805,004 $7,832,257
Total Expenditures 5,294,967 5,686,890 6,657,325 6,401,090 7,107,925
Fund Balance 4,113,667 4,319,810 5,987,733 5,199,901 4,951,443
$-
$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 increased $27,253, or 0.35%, from 2021. Taxes increased
$434,458 due to an increased tax levy. Licenses and Permits decreased $405,779 due to fewer permits
being issued in 2022. Investment income decreased $101,215 due to worsening market conditions. Other
sources of revenue stayed consistent with the prior year.
2018 2019 2020 2021 2022
Investment Income $48,761 $155,709 $177,948 $(48,486) $(149,701)
Other 58,077 108,364 61,688 86,065 117,335
Intergovernmental 78,437 88,328 1,396,214 88,037 107,732
Charges for Services 315,699 310,871 257,198 427,809 476,632
Licenses and Permits 1,672,906 1,699,879 2,532,789 2,529,588 2,123,810
Taxes 4,131,910 4,329,708 4,629,860 4,721,991 5,156,449
$(2,000,000)
$-
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$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 2022 and
2021. The City continues to rely on tax revenue as the majority of its General Fund revenue, accounting
for 65.8% of its total revenue in 2022. Licenses and Permits decreased to 27.1% due to fewer permits
being issued in 2022. Other sources of revenue were fairly consistent with the prior year.
Taxes 65.8%
Intergovernmental
1.4%
Licenses and
Permits
27.1%
Charges for
Services
6.1%
Investment
Income
-1.9%
Other
1.5%
2022 General Fund Revenues
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
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 $5,129,506 $87,500 $1,510,639 $238,871 $60,000 $27,400
Actual 5,156,449 107,732 2,123,810 476,632 $(149,701) 117,335
$(500,000)
$-
$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
$5,500,000
2022 General Fund Revenues
Budget and Actual
Overall, actual revenue exceeded budgeted revenue by $778,341, or 11.03%. The largest variance was
for licenses and permits which was $613,171 over budget. This was the result of budgeting
conservatively for building and commercial construction permits for 2022. The second largest variance
was in Charges for services which was over budget $237,761 due to budgeting conservatively.
Investment income was $209,701 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 increased $706,835, or 11.0%, from 2021.
General government expenditures increased $215,591 due to adding a finance clerk position in 2022 as
well as having a full year of another position in 2022 compared to a partial year in 2021. Public works
expenditures increased $216,083 due to adding an additional position in 2022 and cost of living
adjustments. Public safety expenditures increased $200,973 due to an increase in the County contract.
Parks and recreation and economic development expenditures were relatively consistent with the
amounts expended in the prior year. Parks and recreation expenditures increased $73,707 due to
playground equipment repair expenditures.
2018 2019 2020 2021 2022
General Government $1,188,219 $1,227,565 $1,419,635 $1,358,500 $1,574,091
Public Safety 2,168,187 2,379,440 2,667,435 2,879,409 3,080,382
Public Works 1,170,464 1,250,718 1,204,664 1,287,788 1,503,871
Parks and Recreation 654,786 715,026 699,793 784,145 857,852
Economic Development 113,311 114,141 665,798 91,248 91,729
$-
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
$8,000,000
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.
General
Government
22.1%
Public Safety
43.3%Public Works
21.2%
Parks and
Recreation
12.1%
Economic
Development
1.3%
2022 General Fund Expenditures
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
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 $1,763,193 $3,015,037 $1,551,450 $855,826 $161,910
Actual $1,574,091 3,080,382 1,503,871 857,852 91,729
$-
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
2022 General Fund Expeditures
Budget and Actual
Overall, actual expenditures were under budgeted amounts by $239,491, or 3.3%. General Government
had the largest variance, coming in $189,102 under budget. This variance is due to budgeting
conservatively and having unused contingencies. Economic Development had the second largest
variance, coming in $70,181 under budget due to budgeting conservatively for planning fees. Public
Safety expenditures were over budget by $65,345 due to building inspection costs being budgeted
similarly to revenues. 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 2018 through 2022.
Comparing 2018 through 2022, the City's tax capacity has increased $8,156,863, or 48.9%, to
$24,852,871. The City's certified levy increased $2,481,703, or 40.7%, over the same time frame. As a
result, the City's tax capacity rate has decreased from 36.6% in 2018 to 34.5% in 2022. When comparing
2021 to 2022 the chart indicates that even with a levy increase of $756,580 the tax rate decreased from
34.7% to 34.5% due to a $2,261,613 increase in the total tax capacity.
$6,103,302 $6,710,109 $7,194,249 $7,828,425 $8,585,005
$16,696,008
$18,608,540
$20,497,278
$22,591,258
$24,852,871
36.56%36.06%35.10%
34.65%34.54%
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
$30,000,000
2018 2019 2020 2021 2022
Tax Capacity, Levy, and Rates
Tax Levy Total Tax Capacity Tax Capacity Rate
17
City of Otsego
Financial Analysis
Water Fund
2018 2019 2020 2021 2022
Operating Revenues $1,666,629 $1,626,076 $2,013,487 $2,873,324 $2,904,563
Operating Expenses 1,180,414 1,447,050 1,289,632 1,854,678 2,168,129
Operating Income with
Depreciation 486,215 179,026 723,855 1,018,646 736,434
Operating Income without
Depreciation 1,031,364 771,993 1,352,583 1,722,474 1,495,022
$-
$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 $736,434 in 2022. 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 2022,
the City experienced operating income of $1,495,022 with depreciation expense factored out of
operating expenses. Depreciation expense amortizes the original cost of fund capital assets over their
estimated useful lives.
In 2022, operating revenues increased $31,239, or 1.09%, while operating expenses increased $313,451,
or 16.9%. Revenues stayed consistent due to an increase in the number of customers offset by a decrease
in usage. Operating expenses increased due to increased chemical supply costs, increased repair and
maintenance, and increased depreciation expense.
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
$3,020,738. Unrestricted net position was $12,355,299 at December 31, 2022.
18
City of Otsego
Financial Analysis
Sewer Fund
2018 2019 2020 2021 2022
Operating Revenues $1,921,402 $2,246,688 $2,469,354 $3,028,939 $3,539,069
Operating Expenses 2,049,079 2,097,663 2,414,741 2,785,098 3,447,706
Operating Income (Loss) with Depreciation (127,677) 149,025 54,613 243,841 91,363
Operating Income without Depreciation 833,442 1,137,333 1,080,702 1,310,055 1,619,767
$(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
$3,500,000
$3,750,000
Sewer Fund
In 2022, the Sewer Fund generated an operating income for the fourth time in the five years presented.
In 2022, the Sewer Fund experienced an operating income of $91,363 with depreciation. Operating
revenues increased $510,130 or 16.8% over the prior year, while operating expenses increased
$662,608, or 23.8%. The increase in operating revenues was due to an increase in rates, number of
customers, and usage. The increase in operating expenses was due to increased depreciation expense and
utility and chemical costs related to the increased usage.
The operating income in 2022 was a result of increasing rates to assist in covering operating expenses
and has experienced an increase in users. Without depreciation, operating income totaled $1,619,767.
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
$4,562,485. Unrestricted net position was $20,246,159 at December 31, 2022.
19
City of Otsego
Financial Analysis
Storm Water Fund
2018 2019 2020 2021 2022
Operating Revenues $70,010 $109,372 $120,579 $122,200 $137,178
Operating Expenses 71,040 123,163 138,985 188,245 218,612
Operating Income (Loss) with Depreciation (1,030) (13,791) (18,406) (66,045) (81,434)
Operating Income (Loss) without
Depreciation 46,414 44,177 77,164 70,273 96,782
$(100,000)
$(50,000)
$-
$50,000
$100,000
$150,000
$200,000
$250,000
Storm Water Fund
The Storm Water Fund experienced an increase in operating revenues of $14,978 or 12.3% from 2021
due to more customers. Operating expenses increased, $30,367 or 16.1% from 2021 to 2022 due to
increases in depreciation expense due to a large number of capital assets being recently added. The fund
experienced an operating loss of $81,434 in 2022. Without depreciation included in operating expenses,
the fund experienced operating income of $96,782.
After factoring in non-operating items, capital contributions from developers and governmental funds
and transfers, this fund's net position increased by $829,019. Unrestricted net position was $652,138 at
December 31, 2022.
20
City of Otsego
Emerging Issues
Executive Summary
The following is an executive summary of financial 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 updates include:
Accounting Standard Update – GASB Statement No. 96 – Subscription-Based Information
Technology Arrangements
GASB has issued GASB Statement No. 96 relating to accounting and financial reporting for
subscription-based information technology arrangements. The requirements of this Statement
will improve financial reporting by establishing a definition for subscription-based information
technology arrangements and providing uniform guidance for accounting and financial reporting
for transactions that meet that definition.
Accounting Standard Update – GASB Statement No. 100 – Accounting Changes and Error
Corrections
GASB has issued GASB Statement No. 100 relating to accounting and financial reporting for
accounting changes and error corrections. The requirements of this Statement will improve the
clarity of the accounting and financial reporting requirements for accounting changes and error
corrections, which will result in greater consistency in application in practice. In turn, more
understandable, reliable, relevant, consistent, and comparable information will be provided to
financial statement users for making decisions or assessing accountability.
Accounting Standard Update – GASB Statement No. 101 – Compensated Absences
GASB has issued GASB Statement No. 101 relating to accounting and financial reporting for
compensated absences. The unified recognition and measurement model in this Statement will
result in a liability for compensated absences that more appropriately reflects when a government
incurs an obligation. In addition, the model can be applied consistently to any type of
compensated absence and will eliminate potential comparability issues between governments
that offer different types of leave.
The following are extensive summaries of the current updates. 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. 96 – Subscription-Based Information
Technology Arrangements
This Statement provides guidance on the accounting and financial reporting for subscription-based
information technology arrangements (SBITAs) for government end users (governments). This
Statement (1) defines a SBITA; (2) establishes that a SBITA results in a right-to-use subscription asset –
an intangible asset – and a corresponding subscription liability; (3) provides the capitalization criteria for
outlays other than subscription payments, including implementation costs of a SBITA; and (4) requires
note disclosures regarding a SBITA. To the extent relevant, the standards for SBITAs are based on the
standards established in Statement No. 87, Leases, as amended.
21
City of Otsego
Emerging Issues
Accounting Standard Update – GASB Statement No. 96 – Subscription-Based Information
Technology Arrangements (Continued)
A SBITA is defined as a contract that conveys control of the right to use another party's (a SBITA
vendor's) information technology (IT) software, alone or in combination with tangible capital assets (the
underlying IT assets), as specified in the contract for a period of time in an exchange or exchange-like
transaction.
The subscription term includes the period during which a government has a noncancellable right to use
the underlying IT assets. The subscription term also includes periods covered by an option to extend (if
it is reasonably certain that the government or SBITA vendor will exercise that option) or to terminate
(if it is reasonably certain that the government or SBITA vendor will not exercise that option).
Under this Statement, a government generally should recognize a right-to-use subscription asset – an
intangible asset – and a corresponding subscription liability. A government should recognize the
subscription liability at the commencement of the subscription term, – which is when the subscription
asset is placed into service. The subscription liability should be initially measured at the present value of
subscription payments expected to be made during the subscription term. Future subscription payments
should be discounted using the interest rate the SBITA vendor charges the government, which may be
implicit, or the government's incremental borrowing rate if the interest rate is not readily determinable.
A government should recognize amortization of the discount on the subscription liability as an outflow
of resources (for example, interest expense) in subsequent financial reporting periods.
The subscription asset should be initially measured as the sum of (1) the initial subscription liability
amount, (2) payments made to the SBITA vendor before commencement of the subscription term, and
(3) capitalizable implementation costs, less any incentives received from the SBITA vendor at or before
the commencement of the subscription term. A government should recognize amortization of the
subscription asset as an outflow of resources over the subscription term.
Activities associated with a SBITA, other than making subscription payments, should be grouped into
the following three stages, and their costs should be accounted for accordingly:
Preliminary Project Stage, including activities such as evaluating alternatives, determining
needed technology, and selecting a SBITA vendor. Outlays in this stage should be expensed as
incurred.
Initial Implementation Stage, including all ancillary charges necessary to place the subscription
asset into service. Outlays in this stage generally should be capitalized as an addition to the
subscription asset.
Operation and Additional Implementation Stage, including activities such as subsequent
implementation activities, maintenance, and other activities for a government's ongoing
operations related to a SBITA. Outlays in this stage should be expensed as incurred unless they
meet specific capitalization criteria.
In classifying certain outlays into the appropriate stage, the nature of the activity should be the
determining factor. Training costs should be expensed as incurred, regardless of the stage in which they
are incurred.
22
City of Otsego
Emerging Issues
Accounting Standard Update – GASB Statement No. 96 – Subscription-Based Information
Technology Arrangements (Continued)
If a SBITA contract contains multiple components, a government should account for each component as
a separate SBITA or nonsubscription component and allocate the contract price to the different
components. If it is not practicable to determine a best estimate for price allocation for some or all
components in the contract, a government should account for those components as a single SBITA.
This Statement provides an exception for short-term SBITAs. Short-term SBITAs have a maximum
possible term under the SBITA contract of 12 months (or less), including any options to extend,
regardless of their probability of being exercised. Subscription payments for short-term SBITAs should
be recognized as outflows of resources.
This Statement requires a government to disclose descriptive information about its SBITAs other than
short-term SBITAs, such as the amount of the subscription asset, accumulated amortization, other
payments not included in the measurement of a subscription liability, principal and interest requirements
for the subscription liability, and other essential information.
GASB Statement No. 96 is effective for reporting periods beginning after June 15, 2022. Earlier
application is encouraged.
Information provided above was obtained from www.gasb.org.
Accounting Standard Update – GASB Statement No. 100 – Accounting Changes and Error
Corrections – an Amendment of GASB Statement No. 62
The primary objective of this Statement is to enhance accounting and financial reporting requirements
for accounting changes and error corrections to provide more understandable, reliable, relevant,
consistent, and comparable information for making decisions or assessing accountability.
This Statement defines accounting changes as changes in accounting principles, changes in accounting
estimates, and changes to or within the financial reporting entity and describes the transactions or other
events that constitute those changes. As part of those descriptions, for (1) certain changes in accounting
principles and (2) certain changes in accounting estimates that result from a change in measurement
methodology, a new principle or methodology should be justified on the basis that it is preferable to the
principle or methodology used before the change. That preferability should be based on the qualitative
characteristics of financial reporting – understandability, reliability, relevance, timeliness, consistency,
and comparability. This Statement also addresses corrections of errors in previously issued financial
statements.
This Statement prescribes the accounting and financial reporting for (1) each type of accounting change
and (2) error corrections. This Statement requires that (a) changes in accounting principles and error
corrections be reported retroactively by restating prior periods, (b) changes to or within the financial
reporting entity be reported by adjusting beginning balances of the current period, and (c) changes in
accounting estimates be reported prospectively by recognizing the change in the current period. The
requirements of this Statement for changes in accounting principles apply to the implementation of a
new pronouncement in absence of specific transition provisions in the new pronouncement.
23
City of Otsego
Emerging Issues
Accounting Standard Update – GASB Statement No. 100 – Accounting Changes and Error
Corrections – an Amendment of GASB Statement No. 62 (Continued)
This Statement also requires that the aggregate amount of adjustments to and restatements of beginning
net position, fund balance, or fund net position, as applicable, be displayed by reporting unit in the
financial statements.
This Statement requires disclosure in notes to financial statements of descriptive information about
accounting changes and error corrections, such as their nature. In addition, information about the
quantitative effects on beginning balances of each accounting change and error correction should be
disclosed by reporting unit in a tabular format to reconcile beginning balances as previously reported to
beginning balances as restated.
Furthermore, this Statement addresses how information that is affected by a change in accounting
principle or error correction should be presented in required supplementary information (RSI) and
supplementary information (SI). For periods that are earlier than those included in the basic financial
statements, information presented in RSI or SI should be restated for error corrections, if practicable, but
not for changes in accounting principles.
GASB Statement No. 100 is effective for reporting periods beginning after June 15, 2023. Earlier
application is encouraged.
Information provided above was obtained from www.gasb.org.
Accounting Standard Update – GASB Statement No. 101 – Compensated Absences
The objective of this Statement is to better meet the information needs of financial statement users by
updating the recognition and measurement guidance for compensated absences. That objective is
achieved by aligning the recognition and measurement guidance under a unified model and by amending
certain previously required disclosures.
This Statement requires that liabilities for compensated absences be recognized for (1) leave that has not
been used and (2) leave that has been used but not yet paid in cash or settled through noncash means. A
liability should be recognized for leave that has not been used if (a) the leave is attributable to services
already rendered, (b) the leave accumulates, and (c) the leave is more likely than not to be used for time
off or otherwise paid in cash or settled through noncash means. Leave is attributable to services already
rendered when an employee has performed the services required to earn the leave. Leave that
accumulates is carried forward from the reporting period in which it is earned to a future reporting
period during which it may be used for time off or otherwise paid or settled. In estimating the leave that
is more likely than not to be used or otherwise paid or settled, a government should consider relevant
factors such as employment policies related to compensated absences and historical information about
the use or payment of compensated absences. However, leave that is more likely than not to be settled
through conversion to defined benefit postemployment benefits should not be included in a liability for
compensated absences.
24
City of Otsego
Emerging Issues
Accounting Standard Update – GASB Statement No. 101 – Compensated Absences (Continued)
This Statement requires that a liability for certain types of compensated absences – including parental
leave, military leave, and jury duty leave – not be recognized until the leave commences. This Statement
also requires that a liability for specific types of compensated absences not be recognized until the leave
is used.
This Statement also establishes guidance for measuring a liability for leave that has not been used,
generally using an employee's pay rate as of the date of the financial statements. A liability for leave that
has been used but not yet paid or settled should be measured at the amount of the cash payment or
noncash settlement to be made. Certain salary-related payments that are directly and incrementally
associated with payments for leave also should be included in the measurement of the liabilities.
With respect to financial statements prepared using the current financial resources measurement focus,
this Statement requires that expenditures be recognized for the amount that normally would be
liquidated with expendable available financial resources.
This Statement amends the existing requirement to disclose the gross increases and decreases in a
liability for compensated absences to allow governments to disclose only the net change in the liability
(as long as they identify it as a net change). In addition, governments are no longer required to disclose
which governmental funds typically have been used to liquidate the liability for compensated absences.
GASB Statement No. 101 is effective for reporting periods beginning after December 15, 2023. Earlier
application is encouraged.
Information provided above was obtained from www.gasb.org.
City of Otsego
Wright County, Minnesota
Reports on Internal Control and Compliance with
Government Auditing Standards
and Legal Compliance
December 31, 2022
City of Otsego
Table of Contents
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 1
Minnesota Legal Compliance 3
Schedule of Findings and Responses of Internal Control 4
1
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
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, 2022, 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, 2023.
Report on 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 Responses on
Internal Control that we consider to be a significant deficiency as audit finding 2022-001.
2
Report on 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 financial statements. 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
Government Auditing Standards requires the auditor to perform limited procedures on the City's
response to the finding identified in our audit is described in the accompanying Schedule of Findings
and Responses on Internal Control. The City's response was not subjected to the other 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, 2023
3
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, 2022, and the related notes to
financial statements, and have issued our report thereon dated May 31, 2023.
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, 2023
City of Otsego
Schedule of Findings and
Responses on Internal Control
4
CURRENT AND PRIOR YEAR INTERNAL CONTROL FINDING:
Significant Deficiency:
Audit Finding 2022-001 – 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.
City's Response:
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.