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opportunities are reflected in low Sherburne County unemployment rate of 4.2% in August <br />2003. <br /> <br />STRONG FINANCIAL POSITION WITH MODEST DEPENDENCE ON STATE AID <br /> <br />Moody's believes the city will maintain a well-managed financial position given <br />historically conservative budgeting practices, which have resulted in the maintenance of <br />healthy reserves. Following three consecutive years of operating surpluses, the General <br />Fund balanced increased from $2.7 million, or 44.6% of General Fund revenues, for FY 2000 <br />to $3.2 million, or 45.1%, for FY 2002. The Debt Service Fund cash is ample at $4.7 <br />million or approximately 1 3/4 years of debt service expenditures for FY 2002. The city is <br />anticipating reductions in state aid of $644,000 for FY 2003 and 2004. In FY 2003, city <br />officials have implemented a hiring freeze, reduced personnel, and made across the <br />department miscellaneous cuts. Cost savings from these measures along with higher than <br />expected revenues from building permits will sufficiently offset the reduction for FY 2003 <br />and a $175,000 surplus is expected. In FY 2004, the city intends to implement the same <br />plan but will levy back 60% of the state aid loss, the maximum allowed. Balanced <br />operations or a modest surplus is anticipated for FY 2004. Favorably, state aid accounted <br />for only 16.8% of the city operating revenues for FY 2002. The city's modest dependence on <br />state aid mitigates the impact of current and future reductions due to budget shortfalls <br />at the state level. Moody's believes that strong management practices and healthy fund <br />balances will ensure stable financial operations going forward. <br /> <br />HIGH YET MANAGEABLE DEBT BURDEN HEAVILY SUPPORTED BY SPECIAL ASSESSMENTS <br /> <br />Moody's expects the city's high debt burden to remain manageable due to anticipated future <br />tax base growth, support from non-levy sources, and rapid principal amortization. The <br />city's overall debt burden is high at 9.0% and is mostly attributable to overlapping debt <br />from Elk River I.S.D. 728. Favorably, the city's direct debt burden is moderate at 2.9%. <br />Similar to many rapidly developing cities, a significant portion of the city's debt, <br />approximately 49%, is backed by special assessments on affected property, which eases the <br />burden on the general tax levy. Principal amortization is rapid with 70.3% of debt retired <br />within 10 years. The city plans to issue $400,000 in Equipment Certificates in FY 2004. <br /> <br />KEY STATISTICS: <br /> <br />2000 population (census): 16,447 <br /> <br />2002 full value: $1.2 billion <br /> <br />Full value per capita: $70,227 <br /> <br />1999 Median family income: $65,471 (115.1% of state) <br /> <br />1999 Per capita income: $21,808 (04.0% of state) <br /> <br />2000 Median housing value: $144,800 (118.3% of state) <br /> <br />Sherburne County unemployment (August 2003): 4.2% (3.9% of state} <br /> <br />Overall debt burden: 9.0% <br /> <br />Direct debt burden: 2.9% <br /> <br />Amortization of principal (10 years): 70.3% <br /> <br />FY 2002 General Fund balance: $3.2 million (45.1% of General Fund revenues) <br />Post sale parity debt: $21.7 million, including current this issue <br /> <br />ANALYSTS: <br />John Crawford, Analyst, Public Finance Group, Moody's Investors Service Jonathan North, <br />Backup Analyst, Public Finance Group, Moody's Investors Service <br /> <br />CONTACTS: <br />Journalists: (212) 553-0376 <br /> <br /> <br />