2015 shakopee cafr

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For the fiscal year ended December 31, 2015

Comprehensive

ANNUAL FINANCIAL REPORT

FIRE SKY AT LIONS PARK

SHAKOPEE

2015 Show Off Shakopee Photo Contest Runner-Up

Zachary Totten

ShakopeeCity of Shakopee | 129 Holmes St. S., Shakopee MN 55379 | (952) 233-9300 | www.ShakopeeMN.gov Minnesota


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CITY OF SHAKOPEE, MINNESOTA

Scott County

COMPREHENSIVE ANNUAL FINANCIAL REPORT

For the Year Ended

December 31, 2015

Department of Finance

Darin Nelson, Director of FinanceMelissa Schlingman, Accounting Manager

129 Holmes Street SouthShakopee, MN 55379


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CITY OF SHAKOPEE

TABLE OF CONTENTS

SECTION I

PageINTRODUCTORY SECTION

Elected Officials and Administration................................................................................ 1Organization Chart ............................................................................................................ 2Letter of Transmittal ......................................................................................................... 3Certificate of Achievement for Excellence in Financial Reporting .................................. 9

SECTION II

FINANCIAL SECTIONIndependent Auditors Report........................................................................................... 11Managements Discussion and Analysis (Unaudited) ...................................................... 15Basic Financial Statements:

Government-Wide Financial Statements:

Statement of Net Position ..................................................................................... 28Statement of Activities .......................................................................................... 29

Fund Financial Statements:Balance Sheet Governmental Funds .................................................................. 30Reconciliation of the Balance Sheet to the Statement of Net Position

Governmental Funds ........................................................................................... 33Statement of Revenues, Expenditures and Changes in Fund Balances

Governmental Funds ........................................................................................... 34Reconciliation of the Statement of Revenues, Expenditures and Changes inFund Balances to the Statement of Activities Governmental Funds ............... 37

Statement of Revenues, Expenditures and Changes in Fund Balances Budget and Actual General Fund ..................................................................... 39

Statement of Net Position Proprietary Funds ..................................................... 40Statement of Revenues, Expenses and Changes in Fund Net Position Proprietary Funds ................................................................................................ 41

Statement of Cash Flows Proprietary Funds ...................................................... 42Combined Statement of Fiduciary Net Position ................................................... 45Statement of Net Position Component Unit ....................................................... 46Statement of Revenues, Expenses and Changes in Fund Net Position

Component Unit ................................................................................................. 47Notes to the Financial Statements ............................................................................... 49

Required Supplementary Information:Schedule of Funding Progress Other Post Employment Benefits ........................... 94Schedule of City's Proportionate Share of Net Pension Liability GERF

Retirement Fund................................................................................................. 95Schedule of City's Proportionate Share of Net Pension Liability PEPFF

Retirement Fund................................................................................................. 96Schedule of Component Units' Proportionate Share of Net Pension Liability

GERF Retirement Fund ..................................................................................... 97Schedule of City Contributions GERF Retirement Fund .......................................... 98Schedule of City Contributions PEPFF Retirement Fund ......................................... 99Schedule of Component Unit Contributions GERF Retirement Fund ....................... 100Schedule of Changes in the Net Pension Liability and Related Ratios

Fire Relief Association ...................................................................................... 101


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CITY OF SHAKOPEE

TABLE OF CONTENTS

SECTION II (Continued)

FINANCIAL SECTIONRequired Supplementary Information: (Continued)

Schedule of City Contributions and Non Employer Contributing EntitiesFire Relief Association ...................................................................................... 102

Supplementary Information:Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual General Fund ........................................................................... 104

Combining and Individual Fund Financial Statements and Schedules:Combining Balance Sheet Nonmajor Governmental Funds .............................. 106Combining Statement of Revenues, Expenditures and Changes in FundBalances Nonmajor Governmental Funds ....................................................... 112

Combining Statement of Fund Net Position Internal Service Funds ................. 118Combining Statement of Revenues, Expenses and Changes in Fund NetPosition Internal Service Funds ....................................................................... 119

Combining Statement of Cash Flows Internal Service Funds ........................... 120Combined Statement of Fiduciary Net Position ................................................... 121Statement of Changes in Assets and Liabilities Agency Fund ........................... 122

SECTION III

STATISTICAL SECTIONNet Position by Component .............................................................................................. 1 128Changes in Net Position .................................................................................................... 2 130Fund Balances Governmental Funds ............................................................................. 3 132Changes in Fund Balances Governmental Funds .......................................................... 4 134Tax Capacity and Estimated Actual Value of Taxable Property ...................................... 5 136

Direct and Overlapping Property Tax Rates ..................................................................... 6 137Principal Taxpayers .......................................................................................................... 7 138Property Tax Levies and Collections ................................................................................ 8 139Ratio of Outstanding Debt by Type .................................................................................. 9 140Ratio of General Bonded Outstanding .............................................................................. 10 141Direct and Overlapping Governmental Activities Debt.................................................... 11 143Legal Debt Margin Information ........................................................................................ 12 144Pledged Revenue Coverage .............................................................................................. 13 146Demographic and Economic Statistics ............................................................................. 14 147Principal Employers .......................................................................................................... 15 149Full-Time Equivalent City Government Employees by Function/Program ..................... 16 150Operating Indicators by Function/Program ...................................................................... 17 152Capital Asset Statistics by Function/Program................................................................... 18 154


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CITY OF SHAKOPEE

ELECTED OFFICIALS AND ADMINISTRATIONDECEMBER 31, 2015

Brad Tabke Mayor December 31, 2015

Matthew Lehman Council Member December 31, 2015

Jay Whiting Council Member December 31, 2015

Michael Luce Council Member December 31, 2017

Kathleen Mocol Council Member December 31, 2017

Bill Reynolds City Administrator

TBD* Assistant City Administrator

Darin Nelson Finance Director

TBD* HR Manager

Andy Hutson IT Director

Lori Hensen City Clerk

TBD* Director of Planning & Development

Dave Kriesel Building Official

TBD* Planning Manager

Jeff Tate Police Chief

Rick Coleman Fire Chief Bruce Loney Public Works Director/Engineer

Jamie Polley Park and Recreation Director

* Vacant Position as of 12/31/15

Elected Officials Position Term Expires

Administration

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CITY OF SHAKOPEE

ORGANIZATION CHARTDECEMBER 31, 2015

Electorate

City Council

City

Administrator

PoliceDepartment

FireDepartment

FinanceDepartment

Department ofAdministration

HR Division

IT Division

City Clerk

Facility Maintenance Division

Engineering &Public WorksDepartment

Department ofPlanning &

Development

PlanningDivision

BuildingInspection

Division

EconomicDevelopment

Transit

Parks &RecreationDepartment

Planning Commission & Board ofAdjustment & Appeals

Park and Recreation AdvisoryBoard

Shakopee Public UtilitiesCommission

Police Civil Service Commission

Environmental AdvisoryCommittee

Economic Development AdvisoryCommittee

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COMMUNITY PRIDE SINCE 1857129 Holmes Street South Shakopee, Minnesota 55379-1351 952-233-9300 FAX 952-233-3801 www.ShakopeeMN.gov

May 23, 2016

To the Honorable Mayor, Members of the City Council, and Citizens of the City of Shakopee:

The Comprehensive Annual Financial Report for the City of Shakopee, Minnesota, for the fiscal year

ended December 31, 2015, is submitted herewith:

Management assumes full responsibility for the completeness and reliability of the informationcontained in this report, based upon a comprehensive framework of internal control that it has

established for this purpose. The costs of internal control should not exceed anticipated benefits and

therefore the object is to provide reasonable rather than absolute assurance that the financial

statements are free from material misstatement.

The City of Shakopees financial statements have been audited by BerganKDV, Ltd., a firm of

licensed certified public accountants. The goal of the independent audit was to provide reasonableassurance that the financial statements of the City for the year ended December 31, 2015, are fairly

presented in conformity with GAAP (generally accepted accounting principles). Based on the audit,

the independent auditor concluded that there was reasonable basis for rendering an unmodified(clean) opinion on the Citys financial statements for the year ended December 31, 2015. The

independent audit involved examining, on a test basis, evidence supporting the amounts and

disclosures in the financial statements; assessing the accounting principles used; significant estimatesmade by management; as well as evaluation of the overall financial statement presentation. The

independent auditors report is presented as the first component of the financial section of this report.

Management Discussion and Analysis (MD&A) immediately follows the independent auditors report

and provides a narrative introduction, overview, and analysis to accompany the basic financial

statements. This letter of transmittal is designed to complement the MD&A and should be read in

conjunction with it.

Profile of the City

The City of Shakopee was incorporated for the second time in 1870 and is located approximately 25

miles southwest of Minneapolis. Bound by the Minnesota River on the north, Shakopee is in the

northern part of Scott County and is the county seat. In recent years, the City has been one of themost rapidly growing communities in the state. The 2000 population of the City was 20,568 and the

land area covered is approximately 30 square miles. The 2010 census confirmed that the population

had increased to 37,076 and has been continuing to experience growth into the current year, with anestimated population of 39,523, in 2015. The City comprises a unique blend of residential,

commercial and industrial properties, which provides a wide range of opportunities that are the result

of the strong economic health of the community and region. More than 60% of the community isdeveloped, with approximately 30% of the developed land as residential. However, about 25% of the

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undeveloped land is owned or controlled by the Shakopee Mdewakanton Sioux Community (SMSC),a federally recognized Native American Tribe. The City levies a property tax on both real andpersonal property located within its boundaries. The City may also by state statute, extend itscorporate limits by annexation, which historically has occurred periodically.

Shakopee is organized in Minnesota under Plan A, which includes a City Administrator, but the CityCouncil retains primary decision making authority such as policy setting, adopting ordinances andbudget and staffing. The City Council has four members who serve staggered terms of four years plusthe Mayor who serves a two-year term. All council positions are non-partisan, part-time and membersare elected at large.

The City provides typical municipal services such as police and fire protection, street andinfrastructure construction, public works maintenance, parks, recreation, planning and zoning. Alsoprovided are utilities such as sewer and storm drainage utilities, organized refuse collection, andrecycling. In 2015, the City merged its local transit services with a larger regional transit provider,Minnesota Valley Transit Authority (MVTA) to provide enhanced commuter service to the

Minneapolis-St.Paul area. Electric and water utilities are operated by Shakopee Public UtilitiesCommission which is appointed by the City Council but operates independently of the City ofShakopee.

Economic development and redevelopment are controlled by the Shakopee Economic DevelopmentAuthority (the Authority). The Authority is comprised of the Mayor and City Council members andis included as an integral part of the Citys report. The economic development activities of bothstaff and Council continue to increase from past years, as the strong economic climate in the regionhas provided the City with the benefit of planned commercial and industrial growth as well asexpansion of several existing businesses and commercial sites. 2016 activity has already confirmedthat the continuation of the growth trend will carry into the current year as the valuation of buildingpermits for the first quarter of 2016 was $36 million compared to $9 million for the same timeframein 2015.

The annual budget is the basis for the Citys financial planning and control. The budget is preparedby Fund (e.g., General), function (e.g., Public Works) and division (e.g., Engineering). Budgetrequests are submitted in July by Department Heads. The City Administrator reviews the submittalswith the Finance Director and Department Heads, to determine the prioritization of specific budgetrequests. Informational budget summaries are presented to the City Council during work sessions andallow for open community presentation and discussion. The City Council is presented with aproposed budget and tax levy in August of each year. This information succinctly details changes inthe upcoming year budget, such as changes in personnel and position structure, funding requests thatare unique to the specific budget year, and the basis for the request, such as development of a newprogram or project, to a Council approved initiative, as well as requests for transfers and internalfunding needs, such as internal service fund reviews. City Council is required to adopt a maximumtax levy by September 30. The final tax levy and budget are adopted in December after a publicmeeting, which provides the City Council and community impact information relating to both thebudget decisions and property tax levies. Final levy information is submitted to the County, forinclusion in the development of the upcoming year property tax statements. Budgeting control isprovided by an annual budget resolution passed by City Council. Formal control is at the division

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level and Council action is necessary to change budgeted amounts between divisions and/or funds.The Finance Director or City Administrator may make changes within divisions.

Along with the operating budget, the city annually prepares a five-year capital improvement plan(CIP) that is the basis for the long term goal of providing and maintaining a functional public facility

program, that provides the residents and businesses with infrastructure necessary for the on-goinggrowth and development. The capital plans have historically provided details on the infrastructureprojects that are funded through property tax levy, special assessments, utility funds and otherintergovernmental revenue sources. These projects are primarily allowing for the upgrades, expansionand coordination of transportation based needs, as well as trails, signals and other infrastructureimprovements. The City Council also reviews and discusses the Park planned improvements that arefunded through the Park Reserve fund, which provides for the use of park and community facilitiesthat have historically been funded through the collection of Park Dedication fees. The capital plansare reviewed with the Council and City staff, and the funding sources and priorities developed for theannual and future budget practices.

A five-year major equipment list is also annually prepared and presented to Council. The funding forthis program is through the Internal Service fund rate charges, which are determined by departmentaluse, replacement plans and determination of the remaining life. Internal Service funds are utilized forthe definition and application of other charges, including governmental buildings, park assetsfacilities, and information technology. These charges are integrated into the individual budgets of theGeneral fund and departments that are benefitted by the activities of the programs. The InternalService funds continue to be reviewed and updated as the community needs and council directives areconsidered during each budget cycle.

Local Economy

Shakopee is the county seat of Scott County, and it abuts the largest county in the region, HennepinCounty. Shakopee continues to benefit from its strategic location within the metropolitan region, aswell as its direct access to TH 169, which connects the city to other major regional roadways, theMSP International Airport, and major employment centers. The City is also at the heart of regionalattractions which includes Valleyfair, Canterbury Park horse racing track, Mystic Lake and LittleSix casinos, and the Minnesota Renaissance Festival. These and other factors have propelled theCity through a period of strong and consistent growth that is likely to continue for years to come.

In 2015 and 2016, permits were issued for the construction of the following:

Rahr Malting Company expansion including the addition of 112,000 square footmanufacturing, assembly, and processing plant, a 90,000 square foot warehouse, a14,500 square foot maintenance warehouse, and an 18,400 square foot researchlaboratory

Amazon.com, Inc. constructed a new 820,000 square foot order fulfillment warehousefacility with a targeted open date of August 2016. The interior of this space includesthree mezzanines which brings the total square footage to just over 2 million. Thisfacility is expected to bring 1,000 new jobs to the City

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Amazon.com, Inc. remodeled an existing building and opened a sortation center that

employs 150 new FTEs.

Construction of a 55 unit senior assisted living facility near the downtown area

Duke Reality, Inc. constructed a 242,000 square foot light industrial building that willbe occupied by Milestone AV.

800,000 sq. ft. of vacant space in a previous Kmart distribution center is now occupiedby Polaris Industries.

Amerisource Bergen is constructing a 200,000 sq. ft. Pharmaceutical Distribution

Facility.

Warner Stellian constructed a new three tenant building. They are occupy 1/3 of thespace and have the additional 2/3 available for lease.

St. Francis Regional Medical Center is constructing a new 15,500 sq. ft. addition.

Local tax incentives were provided for both the Rahr Malting Company and the Amazon.com, Inc.projects. Tax incentives for the Amazon project are directed towards City and County publicinfrastructure and street improvements. Rahr Malting Company tax incentives are being directed

back towards the expansion project. Both TIF projects will expire in nine years.

In addition to the 55 unit senior assisted living facility mentioned above, the City continues to issueresidential permits in the Dakota Highlands first and second editions.

Major Initiatives

The recent commercial, industrial and residential growth has required the City to maintain acommitment to the infrastructure plans, and integration with other local and regional projects. TheCity Council committed funding in 2013 for a dedicated transfer of the property tax levy to fund aportion of the planned capital improvements. The initial $500,000 commitment allows for street

reconstruction and overlays, and miscellaneous other construction projects. The 2014 and 2015budgets provided $750,000 and $1,000,000 respectively for continued and expanded capitalimprovement funding. The 2016 budget continues with the commitment, dedicating $1 milliontowards capital improvement funding. This will provide for a consistent funding source needed toaddress recently deferred infrastructure programs. The City also continues to work with Scott County,the State of Minnesota (MnDOT), as well as private developers, to allow for a strong coordination ofproject planning and benefits to the regions transportation system and business climate.

Supporting retail opportunities, such as restaurants and small retail sites, are investigating Shakopee asa result of the impending increased employee counts from the planned commercial ventures that arescheduled to build in the community.

Scott County has historically dealt with a daily out-migration of workers who work in neighboringcounties. This issue is being addressed by decision makers, who want to utilize the skilled andeducated work force as an attraction to businesses. The commercial and industrial growth that theCity has recently and will continue to experience will eliminate some of the loss of daily work forcefrom the area. By seeking a solution to both transportation and employment issues, the residents ofthe Shakopee area will be able to benefit by living and working close to home.

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The Citys community center and ice rink renovation broke ground April 1, 2016. This $30.4 millionproject includes the construction of a new two-sheet arena, addition of an aquatic facility, and theexpansion of fitness, senior lounge, indoor playground, and child care areas. This project is beingfunded through the issuance of tax abatement bonds.

Long-Term Financial Planning

Historically, the City has issued only limited debt, in the form of bonds and internal funding for theplanned infrastructure projects, expansion specific to streets, underground utilities, trails andsidewalk expansion. A portion of the long term debt is funded by special assessments againstbenefited properties. The City applies special assessments against benefitted properties at a rate of30% of the assessable project costs. This limited amount of special assessment revenue doesrequire the City to clearly define the other recognized components of the payment of project costs.The City does not assess for overlays, which then requires funding from the tax levy or otherregional revenues sources. The City Council has recently allowed for the use of inter-fundtransfers, use of existing fund balance position, as well as review of charges and fees that may be

applicable to the projects, and currently not tapped for future funding sources.

City equipment needs are currently identified and funded in a manner that will not place an undueburden or single year expense fluctuation on the taxpayers. The planned equipment replacementprogram clearly identifies the equipment needs for current projects as well as future use. This is basedon known and anticipated programs and mandates, such as environmental program adjustments andpossible community expansion and growth. The capital and equipment needs of the City requireconstant appraisal for replacement cost, life span and the assurance that the insurance coverage isproviding for the most comprehensive, yet affordable, coverage. This has become a high priority ofthe departments to make certain that the assets of the City are adequately covered.

Relevant Financial Policies

The Citys target General Fund balance is to maintain an unassigned level between 40% and 45% ofcurrent year expenditures. This level is to provide working capital for cash flow, expected declinesin revenues, and for unforeseen expenditures such as natural disasters, or for unforeseen but urgentrequests. Replenishing the fund balance when it falls below the target level shall be accomplishedby inter-fund transfers, or adjusting of expenditures or revenues, over a period not to exceed threeyears.

The City historically receives no local government aid (LGA). Annual legislative actions mayimpact the financial position of those cities that are currently reliant on these and other revenue

sources, which leaves them vulnerable to the economies of the State as a whole. As of this writing,it was not anticipated that actions by the Minnesota Legislature would negatively impact the Cityand its operations and planning. The standard budget process, which provides for the presentationand approval of the property tax levies for the General fund (including Economic Development),debt service and referendum debt, will be consistent with prior year actions.

The accounting, auditing and financial reporting policies are designed to maintain a system offinancial monitoring, control and reporting for all operations and funds in order to provide effective

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means of ensuring that overall City goals and objectives will be met and to assure the Citysresidents and investors that the City is well managed and fiscally sound.

The investment policy provides for conservative investing, preserving capital and maintainingadequate liquidity for forecasted cash needs. A third party investment manager handles the majority

of the portfolio and all investments are held in a trust account.

The debt policy ensures that the City's debt; 1) does not weaken the City's financial structure; and 2)provide limits on debt to avoid problems in servicing debt. This policy is critical for maintainingthe best possible credit rating.

Capital policies include having expenditures forecasted ahead for five to ten years and are updatedannually. Internal Service Funds for major equipment, major buildings and facilities, park assetreplacement and information technology costs stabilize the annual impact of those items to theGeneral fund.

Awards and Acknowledgements

The Government Finance Officers Association of the United States and Canada (GFOA) awarded aCertificate of Achievement for Excellence in Financial Reporting to the City of Shakopee for itsComprehensive Annual Financial Report (CAFR) for the fiscal year ended December 31, 2014.This was the 30th consecutive year that the City has received this award. In order to be awarded aCertificate of Achievement, a government must publish an easily readable and efficiently organizedCAFR. This report satisfied both GAAP and applicable legal requirements.

A Certificate of Achievement is valid for a period of one year only. We believe our current CAFRcontinues to meet the Certificate of Achievement Programs requirements and we are submitting itto the GFOA to determine its eligibility for another certificate.

The preparation of this report would not have been possible without the efficient and dedicatedservices of the Finance Department, Accounting Manager Melissa Schlingman, and the entire citystaff. We express appreciation to those staff members who assisted and contributed to thepreparation of this report. Credit also must be given to the Mayor and Councilors for their supportfor maintaining the highest standards of professionalism in the management of the City ofShakopees finances.

Respectfully submitted,

William H. Reynolds Darin NelsonCity Administrator Finance Director

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Independent AuditorsReport

Honorable Mayor and Members

of the City CouncilCity of Shakopee

Shakopee, Minnesota

Report on the Financial Statements

We have audited the accompanying financial statements of the governmental activities, the

business-type activities, the aggregate discretely presented component units, each major

fund and the aggregate remaining fund information of the City of Shakopee, Minnesota, as

of and for the year ended December 31, 2015, and the related notes to financial statements,which collectively comprise the Citys basic financial statements as listed in the Table of

Contents.

Managements Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial

statements in accordance with accounting principles generally accepted in the United States

of America; this includes the design, implementation, and maintenance of internal controlrelevant to the preparation and fair presentation of financial statements that are free from

material misstatement, whether due to fraud or error.

Auditors ResponsibilityOur responsibility is to express opinions on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the

United States of America and the standards applicable to financial audits contained inGovernment Auditing Standards, issued by the Comptroller General of the United States.

Those standards require that we plan and perform the audit to obtain reasonable assurance

about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and

disclosures in the financial statements. The procedures selected depend on the auditors

judgment, including the assessment of the risks of material misstatement of the financial

statements, whether due to fraud or error. In making those risk assessments, the auditorconsiders internal control relevant to the Citys preparation and fair presentation of the

financial statements in order to design audit procedures that are appropriate in the

circumstances, but not for the purpose of expressing an opinion on the effectiveness of the

Citys internal control. Accordingly, we express no such opinion. An audit also includesevaluating the appropriateness of accounting policies used and the reasonableness of

significant accounting estimates made by management, as well as evaluating the overall

presentation of the financial statements.

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Auditors Responsibility(Continued)

We believe that the audit evidence we have obtained is sufficient and appropriate to

provide a basis for our audit opinions.

Opinions

In our opinion, the financial statements referred to above present fairly, in all material

respects, the respective financial position of the governmental activities, the business-type

activities, the aggregate discretely presented component units, each major fund and theaggregate remaining fund information of the City of Shakopee, Minnesota, as of

December 31, 2015, and the respective changes in financial position and, where applicable,

cash flows thereof and the budgetary comparison for the General Fund for the year then

ended in accordance with accounting principles generally accepted in the United States ofAmerica.

Implementation of GASB 68 and GASB 71

As discussed in Note 20 to the financial statements, the City has adopted the provisions ofthe Governmental Accounting Standards Board (GASB) Statement No. 68,Accounting andFinancial Reporting for Pensions and GASBStatement No. 71,Pension Transition for

Contributions Made Subsequent to the Measurement Date. Our opinion is not modified with

respect to this matter.

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the

Managements Discussion and Analysis, which follows this letter, and RequiredSupplementary Information, as listed in the Table of Contents, be presented to supplement

the basic financial statements. Such information, although not a part of the basic financialstatements, is required by 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 requiredsupplementary 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 withmanagements 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 donot provide us with sufficient evidence to express an opinion or provide any assurance.

Other Information

Our audit was conducted for the purpose of forming opinions on the financial statementsthat collectively comprise the City of Shakopeesbasic financial statements. The

introductory section, supplementary information and statistical section, are presented for

purposes of additional analysis, and are not a required part of the basic financial statements.

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Other Matters (Continued)

Other Information (Continued)

The supplementary 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. Such information has been subjected to the auditing procedures applied

in the audit of the basic financial statements and certain additional procedures, includingcomparing 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 generallyaccepted in the United States of America. In our opinion, the supplementary information is

fairly stated, in all material respects, in relation to the basic financial statements as a whole.

The introductory and statistical sections have not been subjected to the auditing proceduresapplied in the audit of the basic financial statements, and accordingly, we do not express an

opinion or provide any assurance on it.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated

May 23, 2016, on our consideration of the City of Shakopeesinternal control over financial

reporting and on our tests of its compliance with certain provisions of laws, regulations,contracts and grant agreements, and other matters. The purpose of that report is to describe

the scope of our testing of internal control over financial reporting and compliance and

results of that testing, and not to provide an opinion on internal control over financial

reporting or on compliance. That report is an integral part of an audit performed inaccordance with Government Auditing Standardsin considering the City of Shakopees

internal control over financial reporting and compliance.

St. Cloud, Minnesota

May 23, 2016

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CITY OF SHAKOPEE

MANAGEMENTS DISCUSSION AND ANALYSISDecember 31, 2015

As management of the City of Shakopee (the City), we offer readers of the Citys financial statements

this narrative overview and analysis of the financial activities of the City for the year endedDecember 31, 2015. We encourage readers to consider the information presented here in conjunctionwith additional information that we have furnished in our Letter of Transmittal, which can be found onpages 3 to 8 of this report.

Financial Highlights

The assets of the City exceeded its liabilities at the close of the most recent year by $ 247.3million (net position). Of this amount, $ 49.9 million (unrestricted net position) may be used tomeet the Citys ongoing obligations to citizens and creditors.

The Citys total net position decreased $ 9,417,587. GASB 68 was implemented in 2015 to

record the Citys pension liability. This resulted in decrease in overall net positon of $ 7.5million as a change in accounting principle to record the initial year of liability. The current yearnet position before the change in account principal decreased $ 1,866,170.

As of the close of the current year, the Citys governmental funds reported combined endingfund balances of $ 21,501,392, decreasing from the prior year. Approximately 37.7% of thistotal amount, $ 8.1 million is available for spending at the Citys discretion (unassigned fundbalance).

At the end of the current year, unassigned fund balance for the General Fund was $ 9.8 million,or 46.7 %, of total General Fund 2015 expenditures and 45% of the 2016 budgeted expenditures.

The Citys total bonded debt decreased $ 5,615,000.

Overview of the Financial Statements

This discussion and analysis are intended to serve as an introduction to the Citys basic financialstatements. The Citys basic financial statements comprise three components: 1) government-widefinancial statements, 2) fund financial statements, and 3) Notes to the Financial Statements. This reportalso 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 theCitys finances, in a manner similar to private-sector business.

The Statement of Net Position presents information on all of the Citys assets and deferred outflows ofresources and liabilities and deferred inflows of resources, with the difference between them reported asnet position. Over time, increases or decreases in net position may serve as a useful indicator of whether

the financial position of the City is improving or deteriorating.

The Statement of Activities presents information showing how the Citys net position changed duringthe most recent year. All changes in net position are reported as soon as the underlying event giving riseto the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses arereported in this statement for some items that will only result in cash flows in future fiscal periods (e.g.,uncollected taxes and earned but unused employee leaves).

Both of the government-wide financial statements distinguish functions of the City that are principallysupported by taxes and intergovernmental revenues (governmental activities) from other functions thatare intended to recover all or a significant portion of their costs through user fees and charges (business-

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CITY OF SHAKOPEE


type activities). The governmental activities of the City include general government, public safety,

highways and streets, economic development and recreation. The business-type activities of the Cityinclude sewer, storm drainage utilities and refuse.

The government-wide financial statements include not only the City itself (known as the primarygovernment), but also two legally separate entities for which the City is financially accountable. Thecomponent units are Shakopee Public Utilities Commission (SPUC) and the Economic DevelopmentAuthority (EDA). SPUCs financial information is reported separately from the financial informationpresented for the primary government as a discretely presented component unit. The EDA, whichfunctions like a department of the City although it is a legally separate entity, is presented within theCitys government-wide financial statements. The City Council is the EDA Board.

The government-wide financial statements can be found on pages 28 and 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 beensegregated for specific activities or objectives. The City, like other state and local governments, usesfund accounting to ensure and demonstrate compliance with finance-related legal requirements. All ofthe funds of the City can be divided into three categories: governmental funds, proprietary funds andfiduciary funds.

Government Funds

Government funds are used to account for essentially the same functions reported as governmentalactivities in the government-wide financial statements. However, unlike the government-wide financial

statements, governmental fund financial statements focus on near-term inflows and outflows ofspendable resources, as well as on balances of spendable resources available at the end of the year. Suchinformation may be useful in evaluating a Citys near-term financings requirements.

Because the focus of governmental funds is narrower than that of the government-wide financialstatements, it is useful to compare the information presented for governmental funds with similarinformation presented for governmental activities in the government-wide financial statements. Bydoing so, readers may better understand the long-term impact of the Citys near-term financingdecisions. The governmental funds Balance Sheet and the governmental funds Statement of Revenues,Expenditures and Changes in Fund Balances provide a reconciliation to facilitate this comparisonbetween governmental funds and governmental activities.

The City maintains 31 individual governmental funds. Information is presented separately in thegovernmental funds Balance Sheet and in the governmental funds Statement of Revenues, Expendituresand Changes in Fund Balances for the General Fund, Economic Development Authority SpecialRevenue Fund, 2004D Building Bonds and 2012A Refunding Bonds Debt Service Funds and the CapitalImprovements and Community Center and Ice Arena Capital Project Funds. Those are considered to bemajor funds. Data from the other governmental funds are combined into a single, aggregatedpresentation. Individual fund data for each of these non-major governmental funds is provided in theform of combining statements elsewhere in this report.

The City adopts an annual appropriated budget for its General Fund. A budgetary comparison statementhas been prepared for the fund to demonstrate compliance with the budget.

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The basic governmental funds financial statements can be found on pages 30 to 39 of this report.

Proprietary Funds

The City maintains three different types of proprietary funds. Enterprise funds are used to report thesame functions presented as business-type activities in the government-wide financial statements. TheCity uses enterprise funds to account for its sewer, storm drainage and refuse operations. Internalservice funds are an accounting device used to accumulate and allocate costs internally among the Citysvarious functions. The City uses internal service funds to account for its fleet of vehicles and mobileequipment, its major buildings, the replacement of park assets, information technology items and foremployee compensated absences. All of these services predominantly benefit governmental rather thanbusiness-type functions.

Proprietary funds provide the same type of information as the government-wide financial statements.

The proprietary fund financial statements provide separate information for the sewer, storm drainage andrefuse operations, all of which are considered to be major funds of the City. Conversely, all internalservice funds are combined into a single, aggregated presentation in the proprietary fund financialstatements. Individual fund data for the internal service funds is provided in the form of combiningstatements elsewhere in this report.

The basic proprietary fund financial statements can be found on pages 40 to 43 of this report.

Component Units

Component units are legally separate organizations for which the City is financially accountable. Thegovernment-wide financial statements present information for the component units in a single column

on the Statement of Net Position. Also, some information on the Statement of Changes in Net Positionis aggregated for component units. The component units Statements of Net Position and Statement ofChanges in Net Position provide detail for each major component unit.

Fiduciary Funds

Fiduciary funds are used to account for resources held for the benefit of parties outside the government.Fiduciary funds are not reflected in the government-wide financial statement because the resources ofthose funds are not available to support the Citys own programs.

The basic fiduciary fund financial statements can be found on page 45 of this report.

Notes to the Financial Statements

The notes provide additional information that is essential to a full understanding of the data provided inthe government-wide and fund financial statements. The Notes to the Financial Statements can be foundon pages 49 to 92 of this report.

Other Information

In addition to the basic financial statements and accompanying notes, this report also presents certainrequired supplementary information concerning the Citys progress in funding its obligation to providepension benefits to its employees.

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During the current year, the Citys net position decreased $ 1.8 million along with a decrease of $ 7.5

million related to pension liability. Governmental activities decreased as a result of the Cityconsolidating public transit services and transferring the remaining fund balance to Minnesota ValleyTransit Authority (MVTA). Additionally, the City purchased new election equipment during 2015. Thebusiness-type activities decreased as a result of declining usage reported by Shakopee Public UtilitiesAssociation related to sewer. Expenses remained consistent with the prior year. This resulted inrevenues under expenditures in business type activities resulting in an overall decrease in net position.

Changes in Net Position(Expressed in Thousands)

2015 2014 2015 2014 2015 2014

REVENUES:

Program Revenues:

Charges for Services 7,920$ 7,574$ 4,699$ 4,200$ 12,619$ 11,774$

Operating Grants and

Contributions 2,510 2,880 - - 2,510 2,880

Capital Grants and

Contributions 1,735 6,669 66 497 1,801 7,166

General Revenues:

Property Taxes 16,807 16,447 - - 16,807 16,447

Other Taxes 407 216 - - 407 216

Other 540 780 367 538 907 1,318

Total Revenues 29,919 34,566 5,132 5,235 35,051 39,801

EXPENSES:

General Government 4,238 5,514 - - 4,238 5,514

Public Safety 10,582 10,544 - - 10,582 10,544

Public Works 8,552 10,667 - - 8,552 10,667Culture and Recreation 4,355 4,251 - - 4,355 4,251

Economic Development 2,604 1,594 - - 2,604 1,594

Interest on Long-Term Debt 275 454 - - 275 454

Sewer - - 3,824 3,778 3,824 3,778

Storm - - 1,726 1,924 1,726 1,924

Refuse - - 128 - 128 -

Total Expenses 30,606 33,024 5,678 5,702 36,284 38,726

Increase (Decrease in Net

Position before Transfers (687) 1,542 (546) (467) (1,233) 1,075

Transfers 496 (419) (496) 419 - -

Special Items (634) - - - (634) -

Change in Net Position (825) 1,123 (1,042) (48) (1,867) 1,075

NET POSTION:

January 1 160,386 159,263 96,317 96,365 256,703 255,628

Change in Accounting Principle (7,244) - (307) - (7,551) -

January 1 As Restated* 153,142 159,263 96,010 96,365 249,152 255,628

December 31 152,317$ 160,386$ 94,968$ 96,317$ 247,285$ 256,703$

Governmental Acvtivities Business-Type Activities Total

*GASB Statement No. 68 was implemented for the year ended December 31, 2015 and required a$ 7,244,500 and $ 306,917 restatement of beginning net position for governmental activities andbusiness type activities, respectively. Prior year amounts were not restated causing variance in endingnet position at December 31, 2014 and beginning net position on December 31, 2015. See Note 20.

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Governmental Activities

Governmental activities decreased the Citys net position before change in accounting principal by$ 824,085. The major decrease was related to transit services being consolidated within MVTAresulting in a transfer of $ 634,070 to MVTA to begin operations. Additionally the city purchased$114,800 in election equipment during 2015.

Expenses and Program Revenues Governmental Activities

$-

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

General

Government

PublicSafety

Publicworks

Recreation

Economic

Development

InterestonLong

Term

Debt

Program Revenues

Expenses

Revenues by Source Governmental Activities

Property Taxes56%

Other Taxes1%

Charges forServices

27%

Other Revenues2%

Operating Grantsand

Contributions8%

Capital Grantsand

Contributions6%

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Business-Type Activities

Business-type activities decreased the Citys net position by $ 1,042,085. The City had an increase intrunk charges due to development. Revenues and expenditures were consistent between the current andprior year however overall expenditures exceeded revenues as the revenue collected for sewer servicesdoes not cover the payments made to suppliers. Additionally, Business Type activities transferred$496,484 to the governmental funds for operational expenses. The sewer and storm water activities willcontinue to experience a higher degree of expense, as the deferral of maintenance and increasingmandates will continue to put pressure on the funds, to meet the demands of on-going and futuredevelopment needs.

Expenses and Program Revenues Business-Type Activities

$-

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

$3,500,000

$4,000,000

Sewer Storm Refuse

ProgramRevenues

Expenses

Revenues by Source Business-Type Activities

Charges forServices

92%

InvestmentEarnings

7%

Capital Grantsand

Contributions1%

FINANCIAL ANALYSIS OF THE CITYS FUNDS

As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements.

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Governmental Funds

The focus of the Citys governmental funds is to provide information on near-term inflows, outflows andbalances of spendable resources. Such information is useful in assessing the Citys financingrequirements. In particular, assigned and unassigned fund balance may serve as a useful measure of aCitys net resources available for spending at the end of the year.

As of the end of the current year, the Citys governmental funds reported combined ending fundbalances of $ 21,501,392, a decrease of $ 4,385,581 in comparison with the prior year. Approximately37.7%, ($ 8,103,435), of the total amount constitutes unassigned fund balance, which is available forspending at the Citys discretion. Approximately 36.0%, ($ 7,744,416), of the total amount constitutesassigned fund balance, which is assigned for designated purposes. The remainder of fund balance,($ 5,653,541), is not available for new spending because it has already been restricted or isnon-spendable.

The General Fund is the chief operating fund of the City. At the end of the current year, fund balance ofthe General Fund was $ 9,840,110. As a measure of the General Funds liquidity, it may be useful tocompare fund balance (unassigned) to total fund expenditures. Fund balance represents 46.7% of totalGeneral Fund expenditures.

Fund balance of the Citys General Fund increased by $ 2,064 during the current year. Key factors inthis increase consist of the following:

Before transfers, the fund balance of the General Fund showed a $ 3,267,530 increase. After thenet transfer out of $ 3,265,466, fund balance increased $ 2,064. Transfers provided the necessaryfunding for several significant capital infrastructure programs and projects, payment of some

debt service funds as well as funding for the growing Information Technology needs of the City Overall revenues increased approximately $ 537,000 as a result of increased property taxes.

Additional licenses and permits increased due to increased growth and development during theyear. Intergovernmental revenue increased due to an increase in state aid maintenance money.Charges for services increased due to additional contracted services being performed in 2015.Fine and forfeitures decreased due to the Scott Joint Prosecution Association (SJPA) ceasingoperations during 2014. All court fines are turned over to Scott County as part of the agreement.

Overall expenditures increased approximately $ 557,000 due to cost of living increases and newpositions added in 2015. Additionally as part of City restructuring an early buy-out incentivewas offered in 2015 to one employee. This resulted in a payout of severance for a long termemployees. Additionally new election equipment was purchased for $114,800 during 2015.

Fund balance of the Economic Development Authority fund increased $ 313,341. This was a result oftransfers of $ 1,450,385 from the general fund for operations, improvement loans and downtownredevelopment and sewer fund for SAC business subsidy payments to nine companies. The EDA fundbalance increase was due to not completing downtown redevelopment projects.

Fund balance of the 2004D Building Bonds fund decreased $ 4,110,786 as this bond reached thecrossover date on refunding and the final bond payment was made. The remaining balance wastransferred to close the fund to the 2012A Refunding Bonds fund.

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Fund balance of the 2012A Refunding Bond increased $ 658,179. The major reason for the increase

was due to a transfer from the 2004D Building Bonds fund when the fund was closed. Additionally fundbalance increased due to a prior period adjustment with the Capital Improvement fund relating toassessment revenues, see note 21.

Fund balance of the Capital Improvements fund increased $ 671,098. The increase was attributed totransfers to reimbursement payments related to completed street projects. The City paid for thefollowing projects in 2015 from this fund:

Street Reconstruction Projects Bituminous Overlay

Offsetting the increase was a fund balance decreased related to a prior period adjustment with the 2012ARefunding Bond fund relating to assessment revenues, see note 21.

Fund balance of the Community Center and Ice Arena fund decreased $ 1,676,076 as this project beganin 2015 with design and bid work being completed in 2015 and construction beginning in 2016.

Fund balance of the Non-major Governmental Funds decreased $ 243,401. Major changes are asfollows:

Debt service fund decreased $ 686,404 due to regular bond payments offset by tax levies and

assessment revenue related to the bonds. Transit decreased approximately $ 635,247. Services were transferred to Metro Valley Transit

Authority (MVTA) in 2015.

Park Reserve decreased approximately $ 247,000. Southbridge Community Park, Quarry LakePark and Tahpah Park field work and lighting are projects that took place during the year.

Tree Replacement increased approximately $ 113,000 as a result of fines paid for unplantedtrees.

City Hall increased approximately $ 1.1 million as a result of transfers from the general fund and2004C bond fund when it closed to help pay for the construction of a new city hall.

Proprietary funds

The Citys proprietary funds provide the same type of information found in the government-widefinancial statements, but in more detail.

Unrestricted net position of the enterprise funds (expressed in thousands):

Sewer Storm Refuse

Beginning of Year 14,209$ 15,235$ (1,100)$

Change During Year (2,148) (494) 92

End of Year 12,061$ 14,741$ (1,008)$

The Refuse fund was created during 2014 with the Citys purchase of garbage carts. The City hasundertaken several new development projects and continues to review fees charged to make sure costs arecovering operations of the funds. The capital assets of the projects will increase the capital assets of thesefunds, as well as the offsetting future year depreciation charges. A portion of these projects are fundedthrough special assessments, but a significant portion of this is funded through the anticipated futurerevenues collected for services.

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GENERAL FUND BUDGETARY HIGHLIGHTS

The original and final legally adopted budget for expenditures was $ 21,867,167 and transfers out werebudgeted at $ 1,900,000. There was one budget amendment during 2015 which just moved expendituresfrom the governmental function to the public safety function totaling $ 64,600. Actual expenditures of$ 21,063,756 were $ 803,411 under budget. The variance was a result of several unique events,including higher than anticipated position turnover and the accompanying lag in replacement hiring timeand lower than anticipated fuel and vehicle maintenance. Additionally, City staff continued a trend ofconservative spending. The City was diligent in obtaining many of the services and supplies originallybudgeted for the year at a lower than anticipated cost, such as training and training related costs,building maintenance costs and limited use of the contingency funds which provide for unplannedevents or occurrences. Additional transfers out over budget are under taken annually. This is to complywith the Citys established fund balance policy. At the end of 2015 following transfers the citymaintained a fund balance percentage of 46.7% of current year expenditures and 43.1 % of the 2016

budgeted expenditures.

The original and final adopted budgets for revenues were $ 23,104,893 and transfers in were$ 250,000. Actual revenues of $ 24,331,286 were $ 1,226,393 over budget. This was a result of anincreases in development and building and conservative budgeting resulting in both licenses and permitsand charges for services to come in over budget. The revenue received from the Electric and Waterutility, component units, is recorded as a Charge for Service, were over budget as a result ofconservative budgeting as the amounts can fluctuate from year to year based on usage.Intergovernmental also came in over budget as a result of increased maintenance money and police aid.Fines and forfeitures came in under budget as a result of SJPA fines not removed from the budget whenthe SJPA ceased operations in 2014, in 2015 all court fines received from the state are passed through toScott County.

CAPITAL ASSET AND DEBT ADMINISTRATION

Capital Assets

The Citys investment in capital assets for its governmental and business type activities as ofDecember 31, 2015, amounts to $ 198,032,398 (net of accumulated depreciation). This investment incapital assets includes land, buildings and systems, improvement, machinery and equipment, parkfacilities, roads, highways and bridges.

Major capital assets events during the current year included the following: Purchase of a 2014 Rosenbaur smart aerial fire truck

Started planning on the new two sheet ice arena and community center remodel Quarry Lake Park construction was started in 2015 Field improvements at tahpah park and schleper stadium

Reconstruction of streets, sanitary sewer, storm sewer and water mains on St. Marks street,Shumway street, 7thstreet, Market street, Thrush street, CSAH 83, Danube avenue, Valley Viewroad and Jennifer lane.

Several bituminous overlay projects were also undertaken in the community, to maintain theinfrastructure of the system

Vehicle replacements in police, streets and parks

Additional information on the Citys capital assets can be found in Note 6 on pages 66 to 68 of thisreport. 24


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CAPITAL ASSETS

(Net of Depreciation)Expressed in Thousands

2015 2014 2015 2014 2015 2014

Land 20,907$ 20,783$ 3,797$ 3,797$ 24,704$ 24,580$

ROW 254 254 448 448 702 702

Construction in Progress 4,136 2,671 212 1,716 4,348 4,387

Line Rights - - 817 841 817 841

Infrastructure 69,489 71,471 61,499 58,532 130,988 130,003

Buildings 25,631 26,041 - - 25,631 26,041

Machinery and Equipment 8,629 7,011 2,214 2,497 10,843 9,508

Total 129,046$ 128,231$ 68,987$ 67,831$ 198,033$ 196,062$

Governmental Activities Business-Type Activities Total

In 2015, several projects that were in progress were continued and completed, as these projects ofteninvolved the coordination with County, State and Federal entities. The status of these projects is highlydependent on weather and the funding and staffing of cooperating entities, and will often impact theability of the City to complete these projects in the anticipated year.

Long-Term Debt

At the end of the current year, the City had total bonded debt outstanding of $ 8,215,000. Of this

amount, $ 5,100,000 comprises debt backed by the full faith and credit of the government and$ 3,115,000 is special assessment debt for which the government is liable in the event of default by theproperty owners subject to the assessment.

Outstanding DebtG.O. and Revenue BondsExpressed in Thousands

2015 2014

G.O. Bonds 5,100$ 9,390$

Special Assessment Debt with

Governmental Commitment 3,115 4,440

Total 8,215$ 13,830$

Governmental Activities

The Citys total bonded debt decreased by $ 5,615,000 during the current year. The 2004D bond wasrefunded in 2012 as a crossover refunding with the call date being February 2015. That bond was paidoff in 2015 with $ 3,580,000 coming from escrow.

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Minnesota Statutes limit the amount of general obligation (G.O.) debt a government entity may issue to

a net figure of 3% of the taxable market value. The current legal debt margin for the City is $ 108million, which is significantly in excess of the Citys outstanding G.O. debt.

Additional information on the Citys long-term debt can be found in Note 7 on pages 68 to 71 of thisreport.

ECONOMIC FACTORS AND NEXT YEARS BUDGETS AND RATES

The unemployment rate for the state continued to decrease to a year-end level of 3.0%.

The City is currently experiencing the construction and development of several new commercialbusiness sites. These companies such as Amazon, Duke Reality, Amerisource Bergen, and WarnerStellian, and improvements at sites such as Rahr Malting, St. Francis Regional Medical Center and

Polaris Industries located in a previous vacant distribution center are expanding and enhancing theeconomic tax base as well as the employment options in the community. These business ventures willbring not only a strong base of varied jobs to the area but enhanced tax base for the recently developedcommercial and industrial sites.

The City is also experiencing interest from business entities that are considering Shakopee as a favorablesite due to increased economic activity and expanded retail sale activity.

During the current year, the unassigned fund balance in the General Fund was $ 9,818,537. This can besimilarly compared to the unassigned fund balance of 2014 of $ 9,824,097. The City continues tomaintain a strong financial position as the economic climate and the economic diversification of theregion and the state continue to improve.

The general tax levy for 2015/2016 is increased to $ 16,825,900, in comparison to the prior year amountof $ 16,138,000. This levy was increase to provide needed funding for city positions and infrastructureneeds through the capital improvement fund. Historically only 30 % of some of the project costs arefunded through special assessments which will require a firm commitment of the Council to provideneeded resources for maintenance, improvements and additions to the existing infrastructure.

City staff continues to refine and coordinate multi-department development related activities. This isdone through review of fees, charges, consistent practices and detailed discussions specific to eachdevelopment review. As staff continues to refine these practices the achieved outcome will be toprovide a higher level of positive customer and development satisfaction.

REQUESTS FOR INFORMATION

This financial report is designed to provide a general view of the Citys finances for all those with aninterest in the Citys finances. Questions concerning any of the information provided in this report orrequests for additional information should be addressed to the Finance Director, 129 Holmes St. S.,Shakopee, Minnesota, 55379.

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BASIC FINANCIAL STATEMENTS

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STATEMENT OF NET POSITION

December 31, 2015

Governmental

Activities

Business-Type

Activities Total Component Unit

ASSETS AND DEFERRED OUTFLOWS OF RESOURCES

Assets

Cash and Investments (Including Cash Equivalents) 37,041,048$ 26,726,691$ 63,767,739$ 32,467,135$

Restricted Cash and Investments - - - 13,509,936

Property Tax Receivable 145,958 - 145,958 -Accounts Receivable (Net of Allowance for

Uncollectible Accounts) 355,737 - 355,737 3,927,498

Interest Receivable 155,561 111,958 267,519 31,289

Due From Other Governments 984,714 472,014 1,456,728 452,544

Special Assessments Receivable 5,314,342 215,286 5,529,628 -

Inventories - - - 1,329,595

Prepaid Expenses 21,573 - 21,573 75,635

Land Held for Resale 779,926 - 779,926 -

Net Pension Asset 1,517,988 - 1,517,988 -

Capital Assets, Net of Accumulated

Depreciation (Where Applicable):

Land and Land Improvements 20,907,105 3,796,803 24,703,908 5,097,532

Right of Way 253,904 447,746 701,650 -

Construction in Progress 4,136,075 211,774 4,347,849 8,274,803

Line Rights - 816,809 816,809 -

Infrastructure 69,489,100 61,498,818 130,987,918 -

Plant in Service - - - 64,951,984

Buildings 25,631,092 - 25,631,092 -

Machinery and Equipment 8,628,753 2,214,419 10,843,172 -

Total Assets 175,362,876 96,512,318 271,875,194 130,117,951

Deferred Outflows of Resources

Deferral on Refunding - - - 243,081

Deferred Outflows of Resources Related to Pensions 2,352,313 44,160 2,396,473 436,899

Total Deferred Outflows of Resources 2,352,313 44,160 2,396,473 679,980

Total Assets and Deferred Outflows of Resources 177,715,189$ 96,556,478$ 274,271,667$ 130,797,931$

LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND NET POSITION

Liabilities

Accounts and Contracts Payable 1,501,521$ 445,506$ 1,947,027$ 3,886,141$

Other Current Liabilities - - - 385,753

Due to Other Governments 875,580 662,411 1,537,991 906,992

Salaries and Benefits Payable 217,667 - 217,667 -

Deposits Payable - - - 2,069,558

Interest Payable 90,598 - 90,598 151,393

Unearned Revenue 1,125 - 1,125 6,091

Customer Advances - - - 490,048

Bond Principal Payable, Net:

Payable Within One Year 1,685,000 - 1,685,000 410,000

Payable After One Year 6,530,000 - 6,530,000 8,005,782

Compensated Absences Payable:

Payable Within One Year 851,770 24,497 876,267 -

Payable After One Year 1,041,052 29,941 1,070,993 -

Net Other Post Employment Benefits (OPEB) Obligation 1,345,024 66,616 1,411,640 -

Net Pension Liability 9,860,185 322,582 10,182,767 3,150,972

Total Liabilities 23,999,522 1,551,553 25,551,075 19,462,730

Deferred Inflows of Resources

Deferred Inflows of Resources Related to Pensions 1,398,084 37,014 1,435,098 338,541

Total Deferred Inflows of Resources 1,398,084 37,014 1,435,098 338,541

Total Liabilities and Deferred Inflows of Resources 25,397,606$ 1,588,567$ 26,986,173$ 19,801,271$

Net Position

Net Investment in Capital Assets 120,831,029 68,986,369 189,817,398 69,908,537

Restricted for:

Economic Development 674,910 - 674,910 -

Cable PEG Fees 108,627 - 108,627 -

Forfeiture 180,555 - 180,555 -

Debt Service 5,202,731 - 5,202,731 -

Component Units - - - 11,188,985

Capital Improvements 1,380,667 - 1,380,667 -

Unrestricted 23,939,064 25,981,542 49,920,606 29,899,138

Total Net Position 152,317,583 94,967,911 247,285,494 110,996,660

Total Liabilities and Net Position 177,715,189$ 96,556,478$ 274,271,667$ 130,797,931$

The Notes to the Financial Statements are an integral part of this statement. 28


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BALANCE SHEET - GOVERNMENTAL FUNDS

December 31, 2015

Special Revenue Capital Project

General Fund

EconomicDevelopment

Authority

2012ARefunding

Bonds

Capital

Improvements

ASSETS

Cash and Investments 10,145,047$ 980,681$ 1,284,291$ 5,837,364$

Delinquent Taxes Receivable 145,557 29 - -

Special Assessments Receivable:

Delinquent 5,786 - - 855

Deferred 39,975 - 1,599,298 3,059,926

Accounts Receivable 331,816 - - 12,968

Interest Receivable 46,318 3,504 5,388 26,834

Due From Other Governments 416,944 - - 567,273

Prepaid Items 21,573 - - -

Land Held for Resale - 673,300 - -

Total Assets 11,153,016$ 1,657,514$ 2,888,977$ 9,505,220$

LIABILITIES, DEFERRED INFLOWS OF

RESOURCES AND FUND BALANCES

Liabilities

Accounts Payable 480,624$ 41,181$ 200$ 50,785$

Contracts Payable - - - 174,880

Due to Other Funds - - - -

Due to Other Governments 422,172 - - 88,580

Salaries and Benefits Payable 217,667 - - -

Advance from Other Funds - 941,394 - -

Unearned Revenue 1,125 - - -

Total Liabilities 1,121,588 982,575 200 314,245

Deferred Inflows of Resources

Unavailable Revenue - Property Taxes 145,557 29 - -

Unavailable Revenue - Special Assessments 45,761 - 1,599,298 3,060,781

Total Deferred Inflows of Resources 191,318 29 1,599,298 3,060,781

Fund Balances

Nonspendable 21,573 - - -

Restricted - 674,910 1,289,479 -

Assigned - - - 6,130,194

Unassigned 9,818,537 - - -

Total Fund Balances 9,840,110 674,910 1,289,479 6,130,194

Total Liabilities, Deferred Inflows of Resources and Fund Balances 11,153,016$ 1,657,514$ 2,888,977$ 9,505,220$

Debt Service

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Capital Project

CommunityCenter & Ice

Arena

OtherGovernmental

Funds

TotalGovernmental

Funds

-$ 5,741,349$ 23,988,732$

- 372 145,958

- 21,701 28,342

- 586,801 5,286,000

- 10,953 355,737

(3,764) 17,972 96,252

- - 984,217

- - 21,573

- 106,626 779,926

(3,764)$ 6,485,774$ 31,686,737$

444,858$ 149,407$ 1,167,055$

- - 174,880

897,344 - 897,344

330,110 34,718 875,580

- - 217,667

- 450,000 1,391,394

- - 1,125

1,672,312 634,125 4,725,045

- 372 145,958

- 608,502 5,314,342

- 608,874 5,460,300

- - 21,573

- 3,667,579 5,631,968

- 1,614,222 7,744,416

(1,676,076) (39,026) 8,103,435

(1,676,076) 5,242,775 21,501,392

(3,764)$ 6,485,774$ 31,686,737$

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RECONCILIATION OF THE BALANCE SHEET TO

THE STATEMENT OF NET POSITION - GOVERNMENTAL FUNDS

December 31, 2015

Total Fund Balances - Governmental Funds 21,501,392$

Cost of Capital Assets 171,734,560

Less Accumulated Depreciation (75,478,730)

1,517,988

Long-term liabilities, including bonds payable, are not due and payable in

the current period and, therefore, are not reported as liabilities in the funds.

Long-term liabilities at year-end consist of:

Bond Principal Payable (8,215,000)

Net OPEB Obligation (1,345,024)

Net Pension Liability (9,860,185)

Delinquent property taxes and assessments receivable will be collected this

year, but are not available soon enough to pay for the current period's

expenditures and, therefore, are reported as unavailable revenue in the funds.

Property Taxes 145,958

Special Assessments 28,342

Deferred special assessments receivable are not available to pay for current

expenditures and, therefore, are reported as unavailable revenue in the funds.

Deferred Special Assessments 5,286,000

Governmental funds do not report a liability for accrued interest

due and payable. (90,598)

Deferred Outflows of Resources and Deferred Inflows of Resources are created as a

result of various differences related to pensions that are not recognized in the governmental

funds.

Deferred Inflows of Resources Related to Pensions (1,398,084)

Deferred Outflows of Resources Related to Pensions 2,352,313

Internal service funds are used by management to charge the costs ofequipment, buildings, park assets and employee benefits to individual funds.

A portion of the assets and liabilities of those funds are included in

governmental activities in the Statement of Net Position. 46,138,651

Total Net Position - Governmental Activities 152,317,583$

not reported as assets in the funds.

Amounts reported for governmental activities in the Statement of Net Position

are different because:

Capital assets used in governmental activities are not current financial

resources and, therefore, are not reported as assets in governmental funds.

Long-term assets from pensions reported in governmental activities are not financial resources and



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Capital

Improvements

CommunityCenter & Ice

Arena

OtherGovernmental

Funds

TotalGovernmental

Funds

-$ -$ 658,887 16,818,964$

- - 406,571 406,571

635,055 - 275,835 1,157,405

- - 965,602 2,989,038

1,070,397 - - 3,427,130

- - 3,430 4,479,845

- - 164,763 171,856

110,347 (991) 73,113 604,816

1,815,799 (991) 2,548,201 30,055,625

- - 3,025 3,864,337

- - 59,323 10,209,739

- - - 3,036,284

- - 2,464 3,891,542

- - 432,551 2,352,621

- - 1,540,000 5,615,000

- - 193,619 365,898

2,391,523 1,675,085 1,018,021 5,461,607

2,391,523 1,675,085 3,249,003 34,797,028

(575,724) (1,676,076) (700,802) (4,741,403)

1,396,822 - 1,938,257 6,135,344

(150,000) - (846,786) (5,145,452)

1,246,822 - 1,091,471 989,892

- - (634,070) (634,070)

671,098 (1,676,076) (243,401) (4,385,581)

5,630,178 - 5,486,176 25,886,973

(171,082) - - -

5,459,096 - 5,486,176 25,886,973

6,130,194$ (1,676,076)$ 5,242,775$ 21,501,392$

Capital Projects

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CITY OF SHAKOPEE

STATEMENT OF REVENUES, EXPENDITURES AND

CHANGES IN FUND BALANCES -

BUDGET AND ACTUAL - GENERAL FUND

For the Year Ended December 31, 2015

Original Final

Actual

Amounts

REVENUES

Property Taxes 16,163,000$ 16,163,000$ 16,160,075$ (2,925)$

Special Assessments 11,500 11,500 12,043 543

Licenses and Permits 1,348,300 1,348,300 2,023,436 675,136

Intergovernmental 1,028,393 1,028,393 1,356,733 328,340

Charges for Services 4,050,700 4,050,700 4,452,415 401,715

Fines and Forfeitures 251,000 251,000 7,093 (243,907)

Miscellaneous Revenues:

Investment Income 150,000 150,000 110,785 (39,215)

Contributions and Donations 2,550 2,550 18,992 16,442Rents 9,500 9,500 9,096 (404)

Other 89,950 89,950 180,618 90,668

Total Revenues 23,104,893 23,104,893 24,331,286 1,226,393

EXPENDITURES

Current

General Government 4,512,825 4,448,225 3,861,312 (586,913)

Public Safety 9,855,744 9,920,344 10,150,416 230,072

Public Works 3,238,343 3,238,343 3,036,284 (202,059)

Parks and Recreation 4,258,755 4,258,755 3,889,078 (369,677)

Capital Outlay

General Government - - 21,800 21,800

Public Safety - - 76,875 76,875Park and Recreation 1,500 1,500 27,991 26,491

Total Expenditures 21,867,167 21,867,167 21,063,756 (803,411)

Excess of Revenues Over

(Under) Expenditures 1,237,726 1,237,726 3,267,530 2,029,804

OTHER FINANCING SOURCES (USES)

Transfers In 250,000 250,000 250,000 -

Transfers Out (1,900,000) (1,900,000) (3,515,466) (1,615,466)

Total Other Financing Sources (Uses) (1,650,000) (1,650,000) (3,265,466) (1,615,466)

Net Change in Fund Balances (412,274)$ (412,274)$ 2,064 414,338$

FUND BALANCES

Beginning of Year 9,838,046

End of Year 9,840,110$

Variance with

Final Budget -

Over (Under)

Budget



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Sewer

Storm

Drainage Refuse Total

Governmental

Activities -

Internal

Service Funds

ASSETS

Current Assets

Cash and Investments, Including Cash Equivalents 11,167,716$ 15,371,971$ -$ 26,539,687$ 13,239,320$

Interest Receivable 47,664 64,492 (198) 111,958 59,309

Special Assessment Receivable:

Delinquent 3,314 - - 3,314 -

Deferred 211,737 235 - 211,972 -

Due from Other Funds 47,332 - - 47,332 897,344

Due from Other Governments 336,295 135,719 - 472,014 497

Total Current Assets 11,814,058 15,572,417 (198) 27,386,277 14,196,470

Noncurrent Assets

Advances to Other Funds, Noncurrent 960,330 - - 960,330 1,391,394

Capital Assets:

Land 4,500 3,792,303 - 3,796,803 124,326

Right of Way - 447,746 - 447,746 -

Construction in Progress 50,059 161,715 - 211,774 321,396

Line Rights 1,368,569 - - 1,368,569 -Infrastructure 42,208,501 42,201,769 - 84,410,270 3,405,196

Buildings - - - - 34,717,968

Machinery and Equipment 1,894,016 987,857 1,172,068 4,053,941 14,294,738

Total Cost 45,525,645 47,591,390 1,172,068 94,289,103 52,863,624

Less Accumulated Depreciation (12,884,997) (12,300,626) (117,111) (25,302,734) (20,073,425)

Net Capital Assets 32,640,648 35,290,764 1,054,957 68,986,369 32,790,199

Total Noncurrent Assets 33,600,978 35,290,764 1,054,957 69,946,699 34,181,593

Total Assets 45,415,036 50,863,181 1,054,759 97,332,976 48,378,063

Deferred Outflows of Resources

Deferred Outflows of Resources Related to Pensions 22,525 21,635 - 44,160 -

Tota l Assets and Deferred Outf lows of Resources 45,437,561$ 50,884,816$ 1,054,759$ 97,377,136$ 48,378,063$

LIABILITIES AND NET POSITION

Current LiabilitiesAccounts Payable 20,308$ 314,984$ -$ 335,292$ 107,185

Contracts Payable 98,418 11,796 - 110,214 52,401

Due to Other Funds - - 47,332 47,332 -

Due to Other Governments 373,369 289,042 - 662,411 -

Current Compensated Absences 12,152 12,345 - 24,497 851,770

Total Current Liabilities 504,247 628,167 47,332 1,179,746 1,011,356

Noncurrent Liabilities

Advances from Other Funds - - 960,330 960,330 -

Compensated Absences 14,852 15,089 - 29,941 1,041,052

Net OPEB Obligation 33,308 33,308 - 66,616 -

Net Pension Liability 164,538 158,044 - 322,582 -

Total Noncurrent Liabilities 212,698 206,441 960,330 1,379,469 1,041,052

Total Liabilities 716,945 834,608 1,007,662 2,559,215 2,052,408

Deferred Inflows of ResourcesDeferred Inflows of Resources Related to Pensions 18,880 18,134 - 37,014 -

Net Position

Investment in Capital Assets 32,640,648 35,290,764 1,054,957 68,986,369 32,790,199

Unrestricted 12,061,088 14,741,310 (1,007,860) 25,794,538 13,535,456

Total Net Position 44,701,736 50,032,074 47,097 94,780,907 46,325,655

Total Liabilities, Deferred Inflows of Resources and

Net Position 45,437,561$ 50,884,816$ 1,054,759$ 48,378,063$

Adjustment to Reflect the Consolidation of Internal Service

Fund Activity Related to Enterprise Funds (See Note 2c) 187,004

Total Business-Type Activities Net Position 94,967,911$

Business-Type Activities - Enterprise Funds

December 31, 2015

STATEMENT OF NET POSITION - PROPRIETARY FUNDS

CITY OF SHAKOPEE



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Sewer Storm Drainage Refuse Total

Governmental

Activities -Internal Service

Funds

OPERATING REVENUES

Charges for Services 2,834,769$ 1,102,668$ 104,665$ 4,042,102$ -$

Rental Charges - - - - 1,715,554

Other Charges 10,670 - (1,028) 9,642 654

Special Assessments - 60 - 60 -

Total Operating Revenues 2,845,439 1,102,728 103,637 4,051,804 1,716,208

OPERATING EXPENSES

Salaries and Benefits 282,682 558,318 - 841,000 167,550

Depreciation 770,616 777,711 117,111 1,665,438 1,780,065

Professional Services 111,361 198,594 - 309,955 144,901

Sewer Disposal Charges 2,408,708 - - 2,408,708 -

Repairs and Maintenance 59,721 108,666 - 168,387 111,147

Materials and Supplies 35,373 44,579 - 79,952 368,589

Rent 37,600 48,445 - 86,045 -

Insurance 71,653 11,608 - 83,261 -

Utilities 68,624 540 - 69,164 -

Total Operating Expenses 3,846,338 1,748,461 117,111 5,711,910 2,572,252

Operating Income (Loss) (1,000,899) (645,733) (13,474) (1,660,106) (856,044)

NONOPERATING REVENUES

(EXPENSES)

Investment Income 154,950 195,751 (926) 349,775 180,730

Interest Expense - - (10,670) (10,670) -

Gain (Loss) on Sale of Asset 2,220 15,218 - 17,438 87,819

Trunk Charges (15,458) 662,952 - 647,494 5,000

Total Nonoperating Revenues

(Expenses) 141,712 873,921 (11,596) 1,004,037 273,549

Income before Capital

Contributions and Transfers (859,187) 228,188 (25,070) (656,069) (582,495)

Capital Contributions from Special Assessments 65,844 - - 65,844 -

Captial Contributions from Governmental Funds 13,600 163,128 176,728 1,332

Transfers In 30,008 97,165 - 127,173 150,000

Transfers Out (675,385) (125,000) - (800,385) (466,680)

Change in Net Position (1,425,120) 363,481 (25,070) (1,086,709) (897,843)

NET POSITION

Beginning of Year 46,283,404 49,818,962 72,167 96,174,533 47,223,498

Change in Accounting Principle (156,548) (150,369) - (306,917) -

Beginning of Year, Restated 46,126,856 49,668,593 72,167 95,867,616 47,223,498

End of Year 44,701,736$ 50,032,074$ 47,097$ 94,780,907$ 46,325,655$

Adjustment to Reflect the Consolidation of Internal Service

Fund Activity Related to Enterprise Funds (See Note 2d) 44,624

Governmental Activites Contribution Revenue Reported Above (176,728)

Transfers In of Captial Assets from Governmental Activities 176,728

Change in Net Position - Business-Type Activities (1,042,085)$

CITY OF SHAKOPEE

STATEMENT O

2015 shakopee cafr

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