Finance Committee - Regular Meeting

Thank you Go ahead call the Finance Committee meeting to order for Thursday September 10th roll call I

Member Matt Viren. Here. Sue Rowe. Here. Member Tim Lima. Here. Member Mark Willer.

Here.

Member Susie Zillmer. Here. We also have present Finance Director Tina Nelson, Council Member Bruce Thielen, Dan Carlson with Clifton, Larson, Allen, Auditor, and Cindy Bauer, City Clerk. We have a quorum.

Discuss, consider approval of the minutes for the July 10th, 2025 Finance Committee meeting.

I move to approve those minutes. Willer will second.

We have a motion and a second. All in favor say aye.

Aye. Any opposed?

Motion carries. All right. Discuss, consider recommendations to council regarding the approval of the comprehensive annual financial report for 2025 to be discussed at the September 10th council meeting.

So everyone, this is Dan Carlson. He's the lead auditor for us.

Hi, Dan.

Instead of going page by page, he will come. He's got a summary here. And the summary was actually also mailed with all the report. But he'll go over that. And then if you have any questions, we'll answer your questions.

I did have a question. Did that include a management letter? Or did I miss that?

Did it include what?

A management letter? You know, that cover letter, that kind of thing? summarizes everything.

No, that's what you just had signed, right? Because I included everything.

No, what I signed is the compilation or the... Yeah, you should have signed...

That's what I was curious about.

And that should have been attached.

Yeah, there was some things that was combined. I mean, it was not, it was this week that we just sent out either Tuesday or something. And I think I sent everybody here's the readjustment. And then the summary just had a little change out and I put revised on that, but And it was probably after this, so if you scroll down all the way, it's what I had.

This is the revised one.

Okay, we'll get there then.

We'll go over it, but yeah. Good thing we got you here, Mark. All right, I'll get started then. The audit went really well. Thanks to Tina and the finance department team for getting everything we needed for the audit once again. As Tita mentioned, the auto report itself is longer, and we're summarizing it like we usually do. And I've jotted down some notes to go along with it, but feel free, as we go through, just to ask questions as we go along. I think it's easier that way. So feel free to chime in if you have any questions.

Can you talk into the microphone?

Oh, yeah.

Please. Should I have brought a step stool?

Can you hear me okay? Yeah. Okay. The first thing I wanted to note was the audit opinion. Just as in years past, the city received an unmodified audit opinion, which means the financial statement numbers and the disclosures are materially stated correctly. It's the highest level of audit opinion a city can receive. Second part talks about, well, right below that, the management letter, which we just discussed, and There's three things in there that have been in there in the past that are common with other cities of your size in the area. One, CLA, it helps prepare the financial statements and notes. Two, there's adjustments that are made as part of the audit that we make every year. And the third being just the limited segregation of duties because of smaller office staff. So it's hard to have controls over every cycle at every level. So just items were required to disclose, but honestly, it's not that big of a deal, because if you look at other letters as well in the area, you'll see the same things.

And just if I can comment on each of those, what they do for the, they create the financial statements. A lot of it is like keeping up with GASB rules and things like that, and things that I don't have the time to learn in their CPAs. So they put the financial statement together. So you're always going to have that in there unless I created that financial statement. And there's going to be those adjustments that they do at the end, the depreciation. I believe the adjustments are getting pretty small compared to what they used to be. And I think as a municipality, we have very few adjusting entries at the end, compared to a lot of, because we do most of them. And then the lack of segregation of duties. We're doing a lot better, I think, than we're doing everything that we can to try to split up only one person doing things. And at some point, maybe we could hire them to show, but it is difficult in a small office. It's getting more and more hard. I don't know how somebody could actually do anything because we are separating everything out. This person writes the text. This person looks it over. This stuff's mailed. This person approves.

As we get bigger, that's an area that I always focus on because we have seen a lot of growth and I would think at some point.

We could get more help. I would like that.

Well, I know it's a fine line, but it's such an important area.

Yeah. We are setting up an AP process system too. We're in the middle of that project right now. And that's going to have, Dan doesn't really know about it, but he's going to have to. each department head will have, it'll go through a process and it'll have the backup of them approving it and putting the assigned number in and things. Hopefully that helps a little bit too. I know having Jackie, she's taken on some more things. So Betsy used to stuff envelopes. She doesn't do that anymore. She puts the checks in, I review it, and then they get printed out. And then Jackie actually sends them out. and make sure that everything that is on the check is on the report. And then it gets posted. And it's always in a batch, and I go back and look at those batches to make sure what I looked at. And then I also see every time there's a batch of check that gets out, we have what's called positive pay that we upload to the bank. And so that goes in so that every check is matched against what you say it is. You upload to the bank, this check was to... car dealership or the grocery store and it was this much, it has to match up exactly. Otherwise, it'll flag something and we get messages every day to make sure that those are accurate.

Do you foresee in the future a system where you don't even have to write checks anymore?

I think the checks for us right now, although it's the best trail right now, the way that we have it, I really don't like credit cards. I don't like the credit card statement because it's not a good trail.

I mean, as far as, you know, like online bill pay. I mean, the car dealership could take a wire transfer versus... And we do manual, we call them manual checks.

We do them in batches. But, yeah.

I mean, I just... Yeah. It's interesting, the tools that are coming on board. I mean, it's crazy. I mean, we're learning something new, and we're being introduced to new technologies all the time. It's crazy. I mean, our heads are spinning.

We're kind of in the middle of it, and right now we don't have the system set up for all ACH things. And I prefer, because of all the processes that we go through, to actually send that check out and get it stuffed and mailed. If you just had an ACH go through, that's cutting that lack of, you know, segregation of duties down because maybe, you know, someone could go and create that. I don't know.

Going with that older process does allow more people to have oversight and interaction with the transaction along the way.

I don't know how you feel.

Yeah, I mean, there's certain things electronically that you can do as far as electronic sign-offs and things, but it's definitely things that we're seeing more often But, yeah, you don't want to make it even worse situation having less segregation of duties by doing something electronic.

And then every check has attached to it a voucher, and it has the invoice of what it is. So, yeah.

It's a whole piece of paper.

Yeah. Well, we have a scanned, actually we have the scanned copy. Everything's scanned in right now.

Where does the paper copy go then?

We keep it for a year until it's audited, completely audited, and then it'll go for attention.

And we pay to have it taken care of.

No.

We're not keeping those anymore. No, we pay for somebody to come in and shred it.

We just don't throw it away.

Oh, we've sent it out through EO Johnson. We've done that. And then other times we have shredders, and then we can pay for it.

But that was kind of our mass. We had a mass in the last couple of years, our records back up. And that's when there were so many that there's no way we could handle it.

We applied for attention, and they came in, and we set up a date, and they brought out, they loaded up a truck, and bye-bye.

Yeah, it's looking a lot better in the basement than it used to be.

Yeah, I know. We had a lot of nicknames for that. Sorry, DM.

No, that's all right.

I get it.

For the recommendation of the lack of segregation of duties, there's just to say, like, we should continue to look for more or additional positions or dedicated people that would kind of interact and just add as an extra kind of buffer.

Yeah, like if there are changes that are made in the cycles to make sure that things are covered as changes get made and technology happens as well.

Say, Mark, just for the record, I did, it was like page 79. It was after the draft. Because I always like to know if there's something missing, but it was at the end of the page. I didn't know what route, so I'm sorry if I put in the wrong order.

The second section this is a couple of things that we've helped with the city this year in the past the PSC report financial report form to the statement annual report in July that's due so those are just listed there Now to get into the numbers we can go over the general fund first and This is a similar summary in years past where we have the balance sheet showing here the last four years, and then the revenues and expenditures shown below. So I'll note a few things on the balance sheet. You'll notice the due from other funds. So that's like the third line down. So if you look at, this is comparing last year to this year now. It went down from 1.2 million down to 297,000. There is an amount that, was due to the general fund from the public safety building fund. It was like around a million dollars. So that's the reason why it came back down. 24 was kind of the anomaly of why it was so high. If you go down in the fund balance section under assigned, there's a few things that are in there, some assigned dollars related to Solo Circle and the music series. that we just classify that as assigned in that section. Revenues and expenditures, you'll see just a gradual increase with both over the last four years, which makes sense in a growing city. The number that changes more is that net other financing sources and uses row. The large amount last year related to those ALERs, there's some investments that were transferred to the capital projects fund last year. So that's why it sticks out so much that 4.6 million in 2024 related to that. And we'll talk about that too. When we get to the capital projects fund, you'll see that show up there as well. Back at 20, 2024. But overall, you know, at the end of the year, the general fund had a net loss at 370,000. Really the general fund's goal is to break close to even almost every year. And I mean, It's pretty close, $370,000.

That was our last year for budgeting that $400,000 from reserves to stay equal. And then now, 2026, we budgeted that. We're not using that. We don't have that in our budget.

Yeah, and you look back in 23 and 22, and it was close to zero as well.

Dan, what was our cash in investments so much bigger in 23 and 22?

Oh, that relates to those investments from Aylers that transferred over to the Capital Projects Fund, yeah. So if you look at the Capital Projects Fund's balance sheet.

That's right, we dumped that into the Capital Fund.

Just a reclassification, really, of the investments of where they should have been. We have a calculation on the bottom there. It takes the unassigned fund balance with the $5.2 million. divided by the expenditures, the 8.5 million. So really what's that saying is if you have the same amount of expenditures next year, your fund balance could cover 61% of the year of the costs. And it's gradually decreasing over the last four years. I don't necessarily think it's a bad thing. It's just a matter of using the fund balance to what you have at the time. A lot of times we see like 30 to 40%. So you're still above the average that I see as far as your available fund balance for the future. The next section is the special revenue funds. It's a little different format than the general fund. It just shows the fund balance at a set in time. So it's just the the balance of that fund, you know, all four years. Public library, you'll see just a gradual increase over time. There's a larger jump in 2024, up to 580,000 that related to the, there's like 183,000 donations that year. The CDBG residential loan fund, that stays consistent. There's not a lot of activity that happens in that fund. The yard fund, that's new, not a whole lot of activity in the current year, just a smaller positive balance of 10,000. And the affordable housing fund, that was created back in 2023, as you can see there. There's 228,000 transferred from TID II before it closed. Then just interest income in 2024. Then in 2025, there was 6.2 million transferred from TID III before it was closed. That's why from 24 to 25. The debt service fund, the fund balance is still pretty consistent. The revenues that come in the property taxes and the transfers in from the TIDs offset with the debt payments that are made. So for example, in 2025, the property tax revenue, 4.5 million was transferred from TID III to pay debt. So overall, there was $5.8 million, almost 5.9 million of principal and interest that was paid out of the debt service fund in 2025.

And the TID portion, we didn't have to tax, so that allowed. The TID paid for that much of the debt service, which was 4.5 million that the TID chipped in.

That takes us down then to Section 6, the capital projects funds. The TIDs are listed on top there. The Neighborhood Container Grant, Hillcrest Safe Room, a new fund. Public Safety Building and Capital Projects Fund. TID 2, you'll see zero, and that did close in 2024. TID 3, and this is the fund balance, a point in time at the end of the year, like we looked at the Special Revenue Fund, so it's the same sort of presentation. Went from 11.1 down to 4.7. During the year, well, part of that was the debt the transfer over to the debt service fund to pay the debt. Like I said, the 4.5 million. Let's see.

And then the transfer to the affordable housing fund. Yes, yep. The 6.2 million. Yep.

Yeah, so really there's still property tax revenue that came in, but... You know the costs offset that to bring the balance down and then it's closed though in 2026 and then paid to the other Taxing jurisdictions what was left over? Did for the negative fund balance went down from 1.3 million down to 794 thousand that's just a matter of the property tax revenue increased was higher than the cost for the year and So there is more cost than TID IV in 2024. More of a timing thing and when the costs are going to happen. But the property tax revenue keeps coming in.

So if you look at TID IV, we did the wells eight and nine were charged to TID IV too, right? That's in there and part of the payment for that. So I mean, it's going to be in the hole for a while. That expenditure period is completely done. But at the end of 2025, it still was in the negative of 794. So that's what we still got to collect in tax revenue to be able to pay for all the bills that it owes.

And that'll continue to just kind of go down.

Keep going down as we collect that.

Yeah. The neighborhood container grant went to zero in 2025. That closed. The project was done. Hillcrest Safe Room, there was some cost in there, some revenues that came in, but just a negative smaller balance so far. I mean, that fund would have more activity.

And that's all by grant or backed by Hillcrest. Any costs that aren't covered by grant funds will be paid by Hillcrest. So this is just a point in time. At the end of that project, the city will be out. Nothing.

Public Saving Building. Public Safety Building also closed in 2024 for that project. Capital Projects Fund, you'll see there, this is kind of what Tim brought up, you'll see the jump here from 23 to 24, the 3.9 up to 6.4, and that had to do with those investments that were transferred over, the Aylor's investments. Then in 25, it went up another million dollars. Just the activity in that account, or in that fund, caused it. So if you look at, there's almost $4.2 million of debt issued, another $1.4 million in revenue, while $5 million was spent. So there's a lot of activity that you can see. If you look at the audit report itself, it'll show that detail of the expenditures and revenue. But it's a time and thing. A lot of time with capital projects fund, you'll have debt or grants come in and might not get spent right away, depending on the order of things. Now to the utilities. The water utilities first has similar representation as far as the columns as the general fund where you can see the balance sheet over the last four years and then down below here we have the change in that position and some ratios that we do. The first thing I wanted to note, you'll see the cash went up about a million dollars from 24 to 25. There was some you know, debt proceeds that were received during the year, $875,000, and you also see that, you know, the corresponding long-term obligation also went up for the year, but there are also payments made on that, so it's not the million, but that also increased, but that was the reason why. Other current assets, you'll see, and Tina was talking about this, how it jumped up from like $451,000 up to, 2.1 million, that's the amount owed from TID, TID 4 for those wells, payments they're going to do to the water utility from the TID. And that TID 4 will just pay those over the life of that safe drinking water loan. Otherwise, I didn't really notice anything else, the statement of net position, everything, you know, comparing this year to last year. You look at the current ratio, and the current ratio is your current assets divided by your current liabilities. So you'd take the 3.1, 2 million, add those together, and divide it by your 571,000. So it's sitting really strong. I mean, anything over 1 is desired. So the balance sheet is sitting in good shape for the statement of net position. It went up so much from last year because of the cash increase, basically.

And that's borrowing every other year. One year, we're going to have a lot of cash. Next year, we're not going to have it.

Or we're going to have a lot of cool stuff.

All that water made.

That's the street sweepers.

The change in net position, I mean, it's been higher the last three years. And it really has to do with the contribution. For example, for 2025, there was, let's see, I think it was around $800,000 that was contributed from TID III for the Whitetail Woods project. So if you look at last year in 2024, there was 1.5 that was contributed. So anything that's paid for by a governmental fund but still gets recorded on a utility still gets recorded as revenue, and that's what are making those dollar amounts so high. And that probably will continue over time as long as these projects happen.

And that's contributed not only governmentally, it's from the developers as well, right?

Yeah, they can also be included in there too, developer.

So before we accept the road, they have to get it up. And then it becomes our street. So then they contribute it to us. So it's now our street. So we have to record that as our assets. Yep, exactly.

Rate of return as a PSE number stays consistent. If you're looking at the last four years, pretty consistent. And the last rate adjustment was in 2024, June 17th. Sewer utility, same thing as the water as far as the cash. Cash went up some and so did the long-term obligations. So that had to do with $725,000 of debt proceeds that were received.

One thing to note on the sewer utility, we talked about this, and to make sure, we did record the amount, because we have an amount that we still owe to the city of Eau Claire, and I got a number from Christian, a really good number, and we booked an amount as a payable and an expense, so that the financial statements aren't off. So it's not just sitting out there that we only spent this much in one year.

Yep, exactly. You'll see the capital assets also went up $1.5 million, and that had to do with that contribution from the Whitetail Woods TID III project. So you'll see the increase there. The majority of it was related to that. Otherwise, the rest of the statement of net position looks pretty consistent with last year. Your current ratio is looking good, consistent at six. Change in net position. The reason why it's so high is that contribution from the Whitetail Woods project. $1.5 million, and that's why 2024 was down, but 2023 must have had another contribution. So you can see how it can fluctuate from year to year a lot, depending on what's contributed. The stormwater fund, that position looked pretty consistent. I wasn't going to go over anything there. Current ratios, consistent over time as well, looking really good. High number. The change in that position, I mean, you can see it's kind of gradually decreased, and that's expenses being higher.

Which made all the more sense why we did a stormwater study and increased the rates. And it was a good time to do that.

Because of the new tractor? Here's where it said 1,000 words.

Section 8, this is all your long-term obligations. We talked a little bit about the debt, but I'll summarize it again here. This is a nice little snapshot of a point in time of how much liabilities you had. So for your general obligation note, so we talked about, in total, it was like $6.1 million with the new GO note. 4.170, 4,170,000 went to the capital projects fund. So that was like an addition to this. So it would have bumped it up. But on the other hand, $5,500,000 was paid on principle. So that brought it down that that TID number three note was totally paid off. It was like 3.8 million. So it nets to not changing a whole lot from 15 down to 14, but there was some activity in there causing that increase and decrease.

which in 2026 we won't be borrowing, so we'll be paying debt but not borrowing, so that'll go down. And then it'll go back up in 27 when we borrow again. It'll go back down in 20.

Yeah, it'll fluctuate.

Yeah, unless we have to buy a big fire truck or something in 26 yet.

Yeah, and you can see that 23 to 24 how it went down was just principal payments made. That would be what would be expected in 26, like Tina said. If you go down under business type activities, the general obligation notes, I mean, you have your normal payments that are made, but then that new note in 2025, $1.9 million was allocated to the utilities, and that's why that bumped up, even though some payments were made. The lease liability, going back up here, your normal payments are made on the lease, but there is also $230,000 in new leases. And then some of the 215,000 of the leases transferred down here to the business type or utility leases. So overall there was some new leases and payments made, but it's just showing the difference from how the business type went up and then the lease liability for your governmental type funds went down. WRS and life insurance OPEB, that's just the city's portion of the state retirement. So it's showing a liability now. So you just allocate a certain, every city or whoever's in that, WRS gets allocated a certain dollar amount they have to record as a liability. And sometimes with WRS, it can be an asset. Like if you look back in 2022, it was actually an asset at that time. Your OPEB liability, that's just the city itself. That larger change, back in 23 to 24 went from 1.4 million down to 800,000. That was the change and I think the plan itself, I think retirees hired after 2012, 31, 23 would no longer be eligible for the benefit.

The police department change?

So that's why you see that decrease there. It's gonna fluctuate a little bit here and there just depending on the actuarial study, but that's why that large drop happened in 23 to 24 with that liability. The mortgage revenue bonds for business type, the plan payments were made on that. It just went down a little bit. Then there's a calculation at the bottom. Your debt limit is calculated based off of your equalized valuation at 5% of it. So the city could borrow up to almost $70 million in general obligation notes or bonds, but right now you're only at $18.9 million, and that's just adding up. General obligation notes from business type and governmental activities those two numbers combined is what makes the 18 million It's 27% of your limitation of the debt limit is what you borrow on and so far and That's pretty consistent to what I see every city is a little different, but It's kind of in line what I see in other cities as well

But I've been working for other municipalities that do not have the equalized value, and it's really difficult. You get up to that limit. We have these big projects, so we're fortunate to be where we're at.

That's all the notes I had. I don't know if there are any other questions at all.

And do you want him to come to the council, or do you feel comfortable whatever you make for a recommendation?

I feel comfortable. Unless Dan wants to stick around and hang out.

I'm okay enjoying the evening. It's up to you guys, I guess. I appreciate you.

One thing that did happen in the year is... They lost one of their other lead auditors. I had missed him this year. Yeah, Logan, yeah. Logan was really, not that Madison isn't great, but Logan was really good. I missed him.

Yeah, he'd been with the firm for four years. working at a car dealership down in Osseo. Yeah, guess who stole them? It's funny how that word. Speck?

Speck stole them.

To do what? To sell cars? Finance?

No, he's the finance. He's the finance. That's all the financing for the old dealerships. Oh, wow. He had a baby this year and wants to be home more, I guess.

I'm good. Any other discussion? Mark Willer, are you good? I'm good.

He just got to page 197. 79. Yeah, I'm going to go to page 79.

He's at Mount MacArthur. 79 through 84. So then I think this committee...

If you feel comfortable, I was supposed to make a recommendation that goes to the council and then the council actually Approves the resolution and closes the books you have the wording for the motion Recommend a council acceptance of the comprehensive annual financial report for 2025 as presented by Clifton Larson Allen so move We have a motion for all second

Second all in favor say aye aye any opposed motion carries. Thank you again. Yeah, this is a great important Work you guys put out on this really helps make it a lot of sense. Thanks again. What you do. Thank you. Enjoy the evening I'll bet Again Tina, I think that was that's just just to be able to show here Yep, the adjustments are the differences. This is there. This is there like yeah, it makes sense. So Nice job Well, we let the boss finish up this item any miscellaneous

Well, I just want to say thank you to Tina and our team for all their work on this. It takes quite a bit of work to get to this point. And so I just want to say thank you.

Thank you. It's always something, you know? Just finished. I'm working in three years right now. Just finished 25, working in 26, and working on 27 budgets. So it's like sometimes I write the wrong year down. I'm like, whoops. Thank you.

And at that, we'll take a motion for adjournment. I will move to adjourn at 5.37. Roll a second. Motion second. All in favor say aye.

Aye.

We're adjourned. Thanks again.