2024 Annual Comprehensive Financial Report

CITY OF SHAKOPEE

MANAGEMENT’S DISCUSSION AND ANALYSIS December 31, 2024

FINANCIAL ANALYSIS OF THE CITY’S FUNDS

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

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. As of the end of the current year, the City’s governmental funds reported combined ending fund balances of $39,720,732, a de crease of $5,166,829 in comparison with the prior year. Approximately 25 percent, $9,922,361, of the total amount constitutes unassigned fund balance, which is available for spending at the City’s discretion. Approximately 35.7 percent, $14,165,969, of the total amount constitutes assigned fund balance, which is assigned for designated purposes. Approximately 5.6 percent, $2,225,000, of the total amount constitutes committed fund balance through formal action of the City Council. The remainder of fund balance, $13,407,402, is not available for new spending because it has already been restricted or is non spendable. 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 $23,521,240. 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 54.0 percent of total General Fund expenditures or 51.2 percent of the 2025 budgeted expenditures. The City’s fund balance policy is to maintain an unassigned fund balance in the General Fund of 35 to 50 percent of budgeted expenditures, as a result a transfer of $2,460,000 was approved to adjust the assigned fund balance accordingly. The transfers went to the Capital Improvement Fund for future projects, the Buildings Internal Service Fund for future fire station remodeling and 2022A GO Improvement Bond Debt Service Fund for next years bond payments. Fund balance of the City’s General Fund increased by $1,496,762 during the current year, primarily as a result of revenues exceeding budgeted expectations. Overall General Fund revenues increased $879,080 in comparison to last year as a result of taxes, charges for services and investment income revenue offset by a decrease in intergovernmental revenue. As mentioned in the previous paragraph, the City did a one time transfer of $2,460,000 to help offset future expenses of those funds. Overall General Fund expenditures increased by $3,159,946 due to cost of living increases plus market value adjustment related to unions, additional public safety employees and sick and safe time. The largest operational increase of $2,242,671 was in public safety. Following is a discussion of the major governmental funds:

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