2022 Annual Comprehensive Financial Report

CITY OF SHAKOPEE

MANAGEMENT’S DISCUSSION AND ANALYSIS December 31, 2022

FINANCIAL ANALYSIS OF THE CITY’S FUNDS

The General Fund is the chief operating fund of the City. At the end of the current year, fund balance of the General Fund was $20,005,296. As a measure of the General Fund’s liquidity, it may be useful to compare fund balance (unassigned) to total fund expenditures. Unassigned fund balance represents 52.6 percent of total General Fund expenditures or 50 percent of the 2023 budgeted expenditures. Fund balance of the City’s General Fund increased by $2,233,399 during the current year, primarily as a result of revenues exceeding budgeted expectations. Overall General Fund revenues decreased $1,982,604 in comparison to last year as a result of intergovernmental revenue. In 2021 the city received ARPA funds and also drew the 2022 allocation as revenue replacement. This decrease was partially offset by increases in the property tax levy, contribution from the Shakopee Public Utilities and building permit revenues. The General Fund exceeded expectations in building permit revenue as a result of an influx in development. Overall General Fund expenditures increased by $2,240,697 due to cost of living increases, new positions added in 2022, and inflationary increases impacting utilities and motor fuels. The largest operational increase of $932,526 was in public safety. As of the end of the current year, the City’s governmental funds reported combined ending fund balances of $43,755,381, an increase of $11,622,957 in comparison with the prior year. Approximately 29.1 percent, $12,714,951, of the total amount constitutes unassigned fund balance, which is available for spending at the City’s discretion. Approximately 34.2 percent, $14,975,970, of the total amount constitutes assigned fund balance, which is assigned for designated purposes. Approximately 5.3 percent, $2,333,000, of the total amount constitutes committed fund balance through formal action of the City Council. The remainder of fund balance, $13,731,460, is not available for new spending because it has already been restricted or is non-spendable. Following is a discussion of the major 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, assigned and unassigned fund balance may serve as a useful measure of a City’s net resources available for spending at the end of the year. The Capital Improvement fund had a fund balance increase of $5,086,187. In 2022, the City invested $4,850,090 in infrastructure including $2.7 million in pavement reconstruction/bituminous overlayprojects, $1.5 million on the Maras/Hanson street reconstruction and approximately $469,000 on the 169 pedistrian bridge planning. The TIF District No. 18 Canterbury Common fund had a fund balance increase of $2,018,724. In 2022, the City invested $3,894,084 in infrastructure including $3.6 million as the City's cost sharing portion of the CSAH 83 expansion being complete by Scott County. The TIF District No. 20 Enclave fund had a fund balance increase of $26,681. The first year of tax increment was received for $109,883. The fund paid admin fees and project costs of $83,202 including accrued interest on its interfund advance. As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds

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