2020 Comprehensive Annual Financial Report

CITY OF SHAKOPEE

MANAGEMENT’S DISCUSSION AND ANALYSIS December 31, 2020

As management of the City of Shakopee (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 year ended December 31, 2020. 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 4 to 11 of this report.

Financial Highlights

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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 year by $276.8 million (net position). Of this amount, $44.2 million (unrestricted net position) may be used to meet the City’s ongoing obligations to citizens and creditors. The City’s total net position increased $2.0 million. Before transfers, the net increase in governmental activities accounts for 24 percent of the total increase and business-type activities accounts for 76 percent of the increase. As of the close of the current year, the City’s governmental funds reported combined ending fund balances of $28.9 million, which is an increase of $1.4 million from the prior year. Approximately 35.3 percent of this total amount, $10.2 million is available for spending at the City's discretion (unassigned fund balance) At the end of the current year, unassigned fund balance for the General Fund was $14.9 million, or 51.6 percent of total General Fund 2020 expenditures and 49.9 percent of the 2021 budgeted expenditures. The City’s total outstanding bonded debt increased by $6.4 million during the current year. The City retired $1.8 million in principal in 2020 and issued $8.2 million General Obligation Tax Increment Bonds 2020A to fund infrastructure improvements.

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Overview of the Financial Statements

This discussion and analysis are intended to serve as an introduction to the City’s basic financial statements. The City’s basic financial statements comprise 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 private-sector business. The Statement of Net Position presents information on all of the City’s assets and deferred outflows of resources and liabilities and deferred inflows of resources, with the difference between them reported as net 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 City’s net position changed during the most recent 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 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 and earned but unused employee leaves). 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, highways and streets, economic development and recreation. The business-type activities of the City include sewer, storm drainage utilities and refuse.

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