2024 Annual Comprehensive Financial Report

CITY OF SHAKOPEE, MINNESOTA

Scott County

ANNUAL COMPREHENSIVE FINANCIAL REPORT

For the Year Ended December 31, 2024

Department of Finance

Nathan Reinhardt, Director of Finance Melissa Schlingman, Accounting Manager

485 Gorman Street Shakopee, MN 55379

CITY OF SHAKOPEE

ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2024

TABLE OF CONTENTS

SECTION I

Page

INTRODUCTORY SECTION

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

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SECTION II

FINANCIAL SECTION

Statement of Changes in Fiduciary Net Position........................................................ Statement of Fiduciary Net Position.......................................................................... Notes to the Financial Statements................................................................................... Statement of Cash Flows – Proprietary Funds........................................................... Statement of Net Position – Proprietary Funds.......................................................... Statement of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual – Economic Development Authority Special Revenue Fund..... Statement of Revenues, Expenses and Changes in Net Position – Proprietary Funds.................................................................................................... Statement of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual – General Fund.......................................................................... Independent Auditor’s Report............................................................................................. Management’s Discussion and Analysis.............................................................................. Basic Financial Statements: Government-Wide Financial Statements: Statement of Net Position.......................................................................................... Statement of Activities.............................................................................................. Fund Financial Statements: Balance Sheet – Governmental Funds....................................................................... Reconciliation of the Balance Sheet to the Statement of Net Position – Governmental Funds............................................................................................... Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds............................................................................................... Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances to the Statement of Activities – Governmental Funds.....................

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CITY OF SHAKOPEE

ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2024

TABLE OF CONTENTS (CONTINUED)

SECTION II (Continued)

FINANCIAL SECTION

Required Supplementary Information:

Schedule of Changes in the City’s OPEB Liability and Related Ratios..................... Schedule of Component Unit Contributions General Employees Retirement Fund .. Notes to Required Supplementary Information.......................................................... Schedule of City Contributions General Employees Retirement Fund ...................... Schedule of City Contributions Public Employees Police and Fire Retirement Fund General Employees Retirement Fund...................................................................... Employees Police and Fire Retirement Fund........................................................... Schedule of Component Units' Proportionate Share of Net Pension Liability Schedule of City's Proportionate Share of Net Pension Liability Public Employees Retirement Fund.................................................................................... Schedule of City's Proportionate Share of Net Pension Liability General

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Supplementary Information: Schedule of Revenues, Expenditures and Changes in Fund Balance –

Budget and Actual – General Fund..........................................................................

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Combining and Individual Fund Financial Statements and Schedules:

Combining Balance Sheet – Nonmajor Governmental Funds............................... Combining Statement of Revenues, Expenditures and Changes in Fund Balances – Nonmajor Governmental Funds....................................................... Combining Statement of Net Position – Internal Service Funds........................... Combining Statement of Revenues, Expenses and Changes in Net Position – Internal Service Funds....................................................................... Combining Statement of Cash Flows – Internal Service Funds............................

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CITY OF SHAKOPEE

ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2024

TABLE OF CONTENTS (CONTINUED)

SECTION III

STATISTICAL SECTION

Financial Trends:

Ratio of General Bonded Outstanding....................................................................... Direct and Overlapping Governmental Activities Debt............................................. Legal Debt Margin Information................................................................................. Ratio of Outstanding Debt by Type........................................................................... Property Tax Levies and Collections......................................................................... Direct and Overlapping Property Tax Rates.............................................................. Principal Taxpayers................................................................................................... Tax Capacity and Estimated Actual Value of Taxable Property................................ Net Position by Component....................................................................................... Changes in Net Position............................................................................................ Fund Balances – Governmental Funds...................................................................... Changes in Fund Balances – Governmental Funds....................................................

12 162 10 159 11 161 9 158 154 6 155 7 156 8 157 5 146 2 148 3 150 1 4 152

Revenue Capacity:

Debt Capacity:

Demographic and Economic Information:

164 Principal Employers.................................................................................................. 14 165 Demographic and Economic Statistics....................................................................... 13

Operating Information:

Full-Time Equivalent City Government Employees by Function/Program................ Operating Indicators by Function/Program................................................................ 16 168 Capital Asset Statistics by Function/Program............................................................ 17 170 166 15

CITY OF SHAKOPEE

ELECTED OFFICIALS AND ADMINISTRATION

DECEMBER 31, 2024

Angelica Contreras Matthew Lehman Elected Officials

Position

December 31, 2026 December 31, 2026 Term Expires December 31, 2026 December 31, 2028 December 31, 2028

Mayor

Council Member Council Member Council Member Council Member

Jim DuLaney Jesse Lara Jay Whiting

Administration

William H. Reynolds

City Administrator Assistant City Administrator

Michael Kerski Nathan Reinhardt Chelsea Petersen

Finance Director

Director of Planning & Development

Jeff Tate

Police Chief

Alex Jordan Mike Nelson

Fire Chief

City Engineer

Bill Egan

Public Works Director

Kelsi McNutt

Park and Recreation Director

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CITY OF SHAKOPEE

ORGANIZATION CHART DECEMBER 31, 2024

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May 15 , 2024

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

The Annual Comprehensive Financial Report for the City of Shakopee, Minnesota, for the fiscal year ended December 31, 2024, is submitted herewith:

Management assumes full responsibility for the completeness and reliability of the information contained 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 Shakopee’s financial statements have been audited by Abdo, LLP, a firm of licensed certified public accountants. The goal of the independent audit is to provide reasonable assurance that the financial statements of the city for the year ended December 31, 2024, are fairly presented in conformity with GAAP (generally accepted accounting principles). Based on the audit, the independent auditor concluded that there is reasonable basis for rendering an unmodified (clean”) opinion on the city’s financial statements for the year ended December 31, 2024. The independent audit involves examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used; significant estimates made by management; as well as evaluation of the overall financial statement presentation. The independent auditor’s report is presented as the first component of the financial section of this report. Management Discussion and Analysis (MD&A) immediately follows the independent auditor’s 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. 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 the most 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 2020 census confirmed that the population had increased to 43,698 and is expected to continue to grow to 53,000 in 2030. 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. The city levies a property tax on both real and personal property located within its boundaries except for land owned or controlled by the Shakopee Mdewakanton Sioux Community (SMSC), a Federally recognized Native American Tribe. The city may also by state statute, extend Profile of the City

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its corporate limits by annexation, which historically has occurred periodically. The city has an executed an orderly annexation agreement with Jackson Township that will allow the city to actively annex certain portions of the township as market forces dictate. Shakopee is organized in Minnesota under Plan A, which includes a City Administrator, but the City Council retains primary decision-making authority such as policy setting, adopting ordinances and budget and staffing. The City Council has four members plus the Mayor who serve staggered terms of four years. All council positions are non-partisan, part-time and members are elected at large. The city provides typical municipal services such as police and fire protection, street and infrastructure construction, public works maintenance, parks, recreation, planning and zoning. Also provided are utilities such as sewer and storm drainage utilities, organized refuse collection, and recycling. Electric and water utilities are operated by Shakopee Public Utilities Commission which is appointed by the City Council but operates independently of the City of Shakopee. Economic development and redevelopment are controlled by the Shakopee Economic Development Authority (the Authority). The Authority is comprised of the Mayor and City Council members and is included as an integral part of the city’s report. The economic development activities of both staff and Council continue to increase from past years, as the strong economic climate in the region has provided the city with the benefit of planned commercial and industrial growth as well as expansion of several existing businesses and commercial sites. 2025 activity has already confirmed that the continuation of the growth trend will carry into the current year, as the valuation of building permits for the first quarter of 2025 was $74.3 million. Included in the first quarter 2025 valuation is 45 single-family home building permits. This number is expected to increase as additional phases of existing housing developments come online in 2025. The annual budget is the basis for the city’s financial planning and control. The budget is prepared by fund (e.g., General), function (e.g., Public Safety) and division (e.g., Fire). Major budget requests or initiatives are submitted in July by department directors. The City Administrator reviews the submittals with the Finance Director and department directors to determine the prioritization of specific budget requests. The City Council is presented with a proposed budget and a maximum tax levy in September of each year. This information succinctly details changes in the upcoming year budget, such as changes in personnel and position structure. It also includes funding requests that are unique to the specific budget year, the basis for the request, as well as requests for transfers and internal funding needs, such as internal service fund reviews. The City Council is required to adopt a maximum tax levy by September 30. The final tax levy and budget are adopted in December after a public meeting, which provides the City Council and community impact information relating to both the budget decisions and property tax levies. Final

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levy information is submitted to the County for inclusion in the development of the upcoming year property tax statements.

Budgeting control is provided by an annual budget resolution passed by City Council. Formal control is at the division 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 detailed five-year capital improvement plan (CIP), 15 year capital improvement schedule, and a long-term financial plan. These documents are the basis for the long-term goal of providing and maintaining a functional public facility program, that provides the residents and businesses with infrastructure and equipment necessary for the on-going growth and development. The capital plans have historically provided details on the infrastructure projects and capital equipment that are funded through property tax levy, franchise taxes, special assessments, utility user-fees and other intergovernmental revenue sources. These projects primarily allow for the upgrade, expansion and coordination of transportation-based needs, as well as trails, signals and other infrastructure improvements. The City Council also reviews, discusses and approves the park planned improvements that are funded through the Park Development fund, which provides for the use of park and community facilities that have historically been funded through the collection of Park Dedication fees. The capital plans are reviewed with the Council and city staff, and the funding sources and priorities developed for the annual and future budget practices. The city also maintains several internal service funds including equipment, park assets, information technology, buildings and self-insurance. The funding for this program is through the internal service fund rate charges, which are determined by departmental use, replacement plans and determination of the remaining life. These charges are integrated into the individual budgets of the General fund and departments that are benefitted by the activities of the programs. Funds are accumulated over time to ensure adequate funding is available when equipment and facilities are scheduled to be replaced. The Internal Service funds continue to be reviewed and updated as community needs and council directives are considered during each budget cycle. Shakopee is the county seat of Scott County, and it abuts the largest county in the region, Hennepin County. Shakopee continues to benefit from its strategic location within the metropolitan region, as well as its direct access to TH 169, which connects the city to other major regional roadways, the MSP International Airport, and major employment centers. The city is also at the heart of regional attractions which includes ValleyFair, Canterbury Park horse racing track, Mystic Lake and Little Six casinos, the Minnesota Renaissance Festival and will soon be joined by a 19,000-seat amphitheater. These and other factors have propelled the city through a period of strong and consistent growth that is likely to continue for years to come. Local Economy

The City’s taxable market value is $8.44 billion for taxes payable 2025, which is an increase of $660 million or 8.5 percent from last year. New construction accounted for $250 million of the

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increase in value. Residential housing makes up 45.0% of the 2025 tax capacity base. For the valuation used to calculate the 2025 property tax statements, the median value home in the City of Shakopee is $350,700 compared to $338,400 in the previous valuation.

The following projects are anticipated to begin construction in the near future or are currently under construction in the City:

Residential:  Arbor Bluff: Located south of Valley View Road and west of Independence Drive, Lennar is constructing 54 new homes in the first phase, with a total of 196 single-family lots in the full build-out.  Blakeley Apartments: 1600 Windermere Way, a 205-unit market-rate apartment building by Roers Companies opened.  Canterbury Crossing: 1050 Schenian Street; a total of 152 residential units, 108 townhomes by Pulte Homes and Artessa in the northwest corner of Eagle Creek Boulevard and Schenian Street, and a 42-unit senior co-op building by Lifestyle Communities at 2695 Paddock Path. The final phase of townhomes is under construction.  Countryside 3rd Addition: Located south of Lusitano Street and east of Marystown Road, consisting of 17 single-family residential lots by Donnay Homes, Inc. is under construction.  Gateway Townhouses: Located between Lincoln Street, Vierling Drive West, and Taylor Street, 43 units are under construction with first units renting in mid-2025.  Highview Park: South of 130th Street (CR78) and along Zumbro Avenue, a 172 single family and twin-home residential subdivision (first phase of the overall 601-lot development) by D.R. Horton. They have been building and selling faster than anticipated and will be completing the final phase in late 2025.  Jefferson Court: Intersection of 10th Avenue West and Adams Street South, to be used for the creation of eight single-family lots, which are under construction.  Legacy Central: The Scott County CDA broke ground on a 60-unit senior apartment complex.  Omry Apartments: 2900 Winners Circle Drive, a 147-unit luxury senior apartment building, opened.  Lennar Multifamily completed the 288-unit Emblem apartment complex (12 buildings with 24 units each) at 1601 Emblem Way, located along the north side of 17th Avenue (CSAH 16), west of Canterbury Road/Mystic Lake Boulevard. The project is in the final rent up.  Summerland Place: North of 17th Avenue (CSAH 16), south of Hwy. 169, west of Canterbury Road/Mystic Lake Boulevard, and east of Balinese St. Construction continues on a mix of 300 single-family and townhome units over several phases by Summergate Development. David Weekly Homes purchased the remaining lots in the subdivision and is completing the build out.  Valley Crest: West of Mystic Lake Drive S and north and south of Thrush Street, M/I Homes are constructing 175 single-family homes on 56 acres. The second and third/final phases of the development are currently under construction.

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 Whispering Waters: South of Eagle Creek Boulevard and west of Foothill Trail S, Brandl-Anderson, Key Land Homes, and One TenTen Construction are constructing a total of 134 single-family homes in two phases. Construction on the second phase began in the spring of 2024 and the development is in its final build out.  Windermere South 4th Addition: Approximately 53 acres of property located north of Astoria Dr. and west of Attenborough St. for a residential development creating 125 single-family lots that are under construction and nearing completion.  Windermere South 5th Addition: Approximately 72 acres of property located north of CSAH 78, west of Zumbro Avenue, and east of CR 69/Old Brick Yard Road to be used for residential development, with 158 single-family lots under construction.  Windermere South 6th Addition: Approximately 14 acres of property located north of CSAH 78 and west of Zumbro Avenue to be used for residential development, creating 43 single-family lots that are under construction. Commercial/Industrial:  Scott County CDA: Construction is constructing a new 21,000 sq. ft. office location. The building is located across from the Scott County Government Center at 5th Ave E and Holmes St S.  Affinity Plus Credit Union: A new, 2,400 sq. ft. credit union building was constructed at 1714 Crossings Boulevard, south of McCoy’s Copper Pint for its new Shakopee offices.  Canterbury Amphitheater: Located east of Canterbury Park, the 19,000-person amphitheater is under construction, with an opening scheduled for Spring 2025. The facility will be operated by Live Nation.  Canterbury Boardwalk and Stables: North of Shenandoah Drive, adjacent to the Canterbury Park racetrack, it is a 19,000 sq. ft. restaurant and event venue with an outdoor bar, patio, and game area under construction with an opening in mid-2025.  Canterbury Horse Barn Redevelopment: Located north of 12th Avenue East and west of CSAH 83, this project included new barns and four supporting facility buildings, remodeling of existing barns and dorms, construction of new dorms, reconfiguring the practice track, and architectural and structural engineering of the Stable Gate and Quarantine Barn.  Canterbury Starting Gate: A 9,600 sq. ft. building located north of Winners Circle Drive and east of Schenian Street in the Canterbury Southwest Development was constructed. It houses three tenants: Mr. Pig’s Smokery restaurant, Discover Strength and OG ZaZa.  Dean Lakes Corporate Center: At 5201/5225 Dean Lakes Boulevard, speculative shell buildings of 226,000 sq. ft. and 136,000 sq. ft. were completed in 2024. The developer, Inland Development Partners, is marketing both buildings to prospective tenants.  Eagle Pointe Estates: This 140-acre mixed-use development, on property owned by Shakopee Gravel, Inc. and Michael Hawkins, proposes 155 single-family residences, 110 attached townhomes, 74 detached townhomes, up to 534 apartment units, 174,000 sq. ft. of commercial/office/medical space, and approximately 24 acres of open space. A water treatment facility, to be owned and operated by Shakopee Public Utilities, is also proposed. The city council approved a Tax Increment Financing District, preliminary plat and PUD Zoning for this estimated $500 million development.

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 Holiday / Circle K Gas Station: A 6,600 sq. ft. gas station, convenience store, and car wash was constructed at the southwest corner of Marystown Road and Windermere Way.  J & J Minneapolis: A 126,120 sq. ft. industrial building was constructed at 3750 4th Avenue E. It offers multiple industrial suites from 17,000 sq ft. to 126,120 sq. ft.  Saint Francis Ambulatory Surgery Center: A 43,600 sq. ft. outpatient surgery building, operated by Tria Orthopedics, was constructed at the northwest corner of Valley View Road E and Sarazin Street.  Southwest Logistics Center: The build-out of a 505,000 sq. ft. facility at 7400 Hentges Way, predominantly leased to Sam’s Club, was completed.  Southern Valley Alliance: Completed their new HQ office building in downtown Shakopee.  GN Resound: Denmark-based international company manufactures hearing aids and Jabra speakers is relocating its North American hearing headquarters into the former Shutterfly facility at 5005 Dean Lakes Blvd. GN is leasing the 218,437 sq. ft. space. GN employees approximately 600 people in Minnesota, all of which will be relocated into this new North American HQ. GN plans on locating staff from California and Arizona for its Jabra and Parrott headsets to the facility in 2026.  Valvoline was granted a grading permit for a new oil change facility at 8231 Crossings Boulevard. Building should begin construction in Spring 2025.  Quality Equipment: Opened its new 120,000 square foot corporate headquarters, sales and repair facility at 5300 12 th Avenue E. The facility had been planned for many years and solidifies Shakopee as the headquarters.  XCEL: Began construction of a new gas/hydrogen turbine replacement facility at the Blue Lake Generation Facility at Quarry Lake. This eliminates the need for diesel generators or storage on site and is highly efficient. Should be online in 2026. Tommy’s Malt Shop, changing rooms and showers, offices and a community space. The existing pool was reconstructed with new amenities including a boardwalk and new liner.  Windermere Park was completed including a new 50-foot viewing tower, playground and trails.  Jackson Commons began construction. This new multi-use park will include a custom themed playground, mountain bike trails, training course, boardwalk and tails. Completion will be in the fall of 2025. As part of the park development, a pedestrian tunnel was installed under CR 78, allowing all residents in the area to access the new park.  Work began on the designs for the reconstruction of the bank of the Minnesota River that will include riverbank armoring and new public access points, reconstruction of the marina for canoe and kayak access, a sculpture garden, lookouts, new trails and parking.  Final construction plans were completed for Killarney Hills, ValleyCrest, and the Marystown dog park. The three are out for bid and will be constructed in 2025. Public:  SandVenture in Lions Park was completed including a new building that houses

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 River City Centre: Renovations and new streetscape were completed and the retail portion of the building controlled by the City’s EDA is one hundred percent leased.  Memorial Park: The city removed the former Chamber of Commerce building and restrooms along with a remote shelter that was no longer used. The removals were observed under a State of Minnesota plan with an archeologist present at all times. The entire park and the removal areas have been planted in native seeds to recreate the historic Oak Savannah. Historically, the city has issued only limited debt, in the form of bonds and internal funding for planned infrastructure projects, expansion specific to streets, underground utilities, trails and sidewalk expansion. A portion of the long-term debt is funded by special assessments against benefited properties. The city applies special assessments against benefitted properties at a rate of 30% of the assessable project costs. City capital and equipment needs are currently identified and funded in a manner that will not place an undue burden or single year expense fluctuation on the taxpayers. The planned CIP clearly identifies the needs for current projects as well as future use. This is based on known and anticipated programs and mandates, such as environmental program adjustments and possible community expansion and growth. The capital and equipment needs of the city require constant appraisal for replacement cost, life span and the assurance that the insurance coverage is providing for the most comprehensive, yet affordable, coverage. Annually the City develops a 15-year CIP, which is a schedule of planned projects and funding sources that extend past the more detailed five-year CIP. The document increases transparency, project coordination and financial planning of future projects. The City also prepares a Long term Financial Plan annually that includes trend analysis and ten-year General Fund projections, which allows for a view on city finances from a wider perspective. These documents are reviewed and discussed with the City Council and included as part of the adopted five-year CIP. The city’s target General Fund balance is to maintain an unassigned level between 35% and 50% of expenditures. This level is to provide working capital for cash flow, expected declines in revenues, and for unforeseen expenditures such as natural disasters, or for unforeseen but urgent requests. Replenishing the fund balance when it falls below the target level shall be accomplished by inter-fund transfers, or adjusting of expenditures or revenues, over a period not to exceed three years. The accounting, auditing and financial reporting policies are designed to maintain a system of financial monitoring, control and reporting for all operations and funds to provide effective means of ensuring that overall city goals and objectives will be met and to assure the city’s residents and investors that the city is well managed and fiscally sound. Long-Term Financial Planning Relevant Financial Policies

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Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting

Presented to City of Shakopee Minnesota For its Annual Comprehensive Financial Report For the Fiscal Year Ended December 31, 2023

Executive Director/CEO

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INDEPENDENT AUDITOR’S REPORT

Honorable Mayor and City Council City of Shakopee, Minnesota

Opinions

We have audited the accompanying financial statements of the governmental activities, the business-type activities, the discretely presented component units, each major fund and the aggregate remaining fund information of the City of Shakopee, Minnesota (the City), as of and for the year ended December 31, 2024, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents. 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 discretely presented component units, each major fund and the aggregate remaining fund information of the City as of December 31, 2024, and the respective changes in financial position and, where applicable, cash flows thereof and the respective budgetary comparison for the General fund and Economic Development fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. We did not audit the financial statements of Shakopee Public Utilities Commission, as of December 31, 2024, and the respective changes in financial position, and where applicable, cash flows thereof for the year then ended. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for the Shakopee Public Utilities Commission is based solely on the report of the other auditors.

Basis for Opinions

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 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 to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Responsibilities of Management for the Financial Statements

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 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 ’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. 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 assuranc e is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards 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. Auditor’s Responsibilities for the Audit of the Financial Statements

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In performing an audit in accordance with generally accepted auditing standards 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’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’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. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis starting on page 16 and the Schedules of Employer’s Share of the Net Pension Liability, the Schedules of Employer’s Contributions and the Schedule of Changes in the Other Post-Employment Benefit Liability and Related Ratios starting on page 108 be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board 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. Supplementary Information Our audit was conducted for the purpose of forming opinion on the financial statements that collectively comprise the City’s basic financial statements. The accompanying supplementary information is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and related 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 supplementary information is fairly stated, in all material respects, in relation to the basic financial statements as a whole.

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Other Information

Management is responsible for the other information included in the annual 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. In accordance with Government Auditing Standards , we have also issued our report dated May 15, 2025 , on our consideration of the City’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 the City’s 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’s internal control over fin ancial reporting and compliance. Other Reporting Required by Government Auditing Standards

Abdo Minneapolis, Minnesota May 15, 2025

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CITY OF SHAKOPEE

MANAGEMENT’S DISCUSSION AND ANALYSIS December 31, 2024

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, 2024. 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 3 to 10 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 $343.1 million (net position). Of this amount, $51.8 million (unrestricted net position) may be used to meet the City’s ongoing obligations to citizens and creditors, $14.8 million is restricted for specific purposes (restricted net position) and $276.5 million is the City’s net investment in capital assets. The City’s total net position increased $13.8 million. Before transfers, the net increase in governmental activities accounts for 47 percent of the total increase and business-type activities accounts for 53 percent of the increase.The City’s net investment in capital assets increased by $18.9 million, primarily a result of developer contributed infrastructure and infrastructure paid from capital grants. As of the close of the current year, the City’s governmental funds reported combined ending fund balances of $39.7 million, which is a decrease of $5,167,000 from the prior year. Approximately 25.0 percent of this total amount, $9.9 million is available for spending at the City's discretion (unassigned fund balance). The City has assigned $14.2 million primarily for capital projects, restricted $12.9 million primarily for debt service and park development, and committed $2.2 million for building inspections. The remaining $526,886 is considered non-spendable fund balance. At the end of the current year, unassigned fund balance for the General Fund was $20.3 million, or 54.0 percent of total General Fund 2024 expenditures and 51.2 percent of the 2025 budgeted expenditures. The City’s total outstanding bonded debt decreased from $43.96 million to $41.48 million during the current year. The City retired $2.48 million in principal and did not issue any additional bonded debt.

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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.

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CITY OF SHAKOPEE

MANAGEMENT’S DISCUSSION AND ANALYSIS December 31, 2024

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

The government-wide financial statements can be found on pages 32 to 35 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. All of the funds of the City can be divided into three categories: governmental funds, proprietary funds and fiduciary funds.

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 year. Such information may be useful in evaluating a City’s near-term financing’s requirements.

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CITY OF SHAKOPEE

MANAGEMENT’S DISCUSSION AND ANALYSIS December 31, 2024

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 financing decisions. The governmental funds Balance Sheet and the 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 29 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 General Fund, and the Economic Development Authority Special Revenue Funds, and the Capital Improvement and TIF District No. 18 Canterbury Commons Capital Project Funds. Those are considered to be major funds. Data from the other 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 elsewhere in this report. The City adopts an annual appropriated budget for its General Fund. Budgetary comparison statements have been prepared for the fund to demonstrate compliance with the budget. 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 and refuse operations, all of which are considered to be major funds of the City. Conversely, all internal service funds are combined into a single, aggregated presentation in the proprietary fund financial statements. Individual fund data for the internal service funds is provided in the form of combining statements elsewhere in this report. the replacement of park assets, information technology items, insurance funding and for employee compensated absences. All of these services predominantly benefit governmental rather than business-type functions. The City maintains three different types of proprietary funds. 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 sewer, storm drainage and refuse operations. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City’s various functions. The City uses internal service funds to account for its fleet of vehicles and mobile equipment, its major buildings, Proprietary Funds The basic governmental funds financial statements can be found on pages 36 to 39 of this report.

The basic proprietary fund financial statements can be found on pages 42 to 45 of this report.

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