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IV-41CITY OF ELK RIVER NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2019 NOTE 13 OTHER INFORMATION (CONTINUED) C. Territorial Acquisition Agreement (Continued) The Utilities acquired designated service area one in 2015 for $877,807, service area two in 2016 for $663,586, service areas three and four in 2017 for $276,776, service areas five and six in 2018 for $298,736 and service areas seven and eight in 2019 for $78,457. The loss of revenue payments made were $411,157 in 2017, $570,725 in 2018, $751,860 in 2019, and $834,185 in 2020. All amounts paid are included in property and equipment, and loss of revenue payments are included in intangible assets. D. Conduit Debt Obligations From time-to-time, the City has issued revenue bonds to provide financial assistance to private-sector entities for the acquisition and construction of industrial and commercial, multi-family and educational facilities deemed to be in the public interest. The bonds are secured by the property financed and are payable solely from payment received from the benefited entity. Neither the City, the state, nor any political subdivision thereof is obligated in any manner for repayment of the bonds. Accordingly, the bonds are not reported as liabilities in the accompanying financial statements. As of December 31, 2019, there were two series of revenue bonds outstanding, with an aggregate principal payable amount of $5,045,000. E. Commitments The Utilities entered into an agreement in 2007 with Central Minnesota Municipal Power Agency (CMMPA) to acquire an interest in the CAPX Initiative Brookings Project, a power transmission line in Minnesota. The project is a 250-mile, 345 kV AC transmission line with a rating of 2,300 MW, between Brookings, South Dakota, and the Southeast Twin Cities. In 2011 there was increased opportunity for investment, and subsequent agreements provide the Utilities with an ownership share of $5.6 million or 18.89%. The return on this investment through CMMPA is designed to provide approximately $124,000 annually over the 40-year project life. To ensure bond payment obligations, cash distributions for 2019 were curtailed. In 2018, the principal bond payment increased approximately by $700K. This increase remains in effect through 2020. In 2021, the bond payment drops nearly $1 M. A contributing factor in participant cash distributions in 2019 is under recovery. The projected under recovery in 2019 is estimated to be $203K. The bond obligations are satisfied first, distribution to participants is directly affected by under recovery. The under recovery is rolled forward under the true up. However, the under recovery in 2019 (approximately $203K} would be included in the revenue requirements in 2021.The transmission payments for 2019 were $46,021, all of which was a receivable at December 31, 2019. CITY OF ELK RIVER NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2019 NOTE 13 OTHER INFORMATION (CONTINUED} F. Joint Ventures The City has agreements with government and other entities which provide reduced costs, better service and additional benefits to the participants. In 2007, the City and neighboring municipalities formed the Sherburne/Wright Cable Communications Commission (the Commission). The purpose of the organization is to monitor the operation and activities of cable communications of the member municipalities. The Commission also provides coordination, administration and enforcement of the franchises for the cable communication system. Financial statements for the Commission can be obtained by writing to: Sherburne/Wright Cable Communications Commission at 444 Cedar Street, Suite 950, St. Paul, Minnesota 55101. G. Segment Information The City maintains six enterprise funds that account for the municipal liquor operations, garbage collections, sewer, storm water, water and electric utilities. The City considers each of its enterprise funds to be a segment. Since the required segment information is already included in the City's proprietary funds' balance sheet and statement of revenues, expenses, and changes in net position balance, this information has not been repeated in the notes to the basic financial statements. NOTE 14 TAX ABATEMENTS The City of Elk River has established a tax abatement program pursuant to Minnesota Statutes, Sections 469.1812 through 469.1815. As part of the City's program the City enters into agreements through the use of tax increment financing districts under Minnesota Statutes Section 469.174 to 469.179 (the Tax Increment Act}. Under these statutes the City annually abates taxes collected above the district's base tax capacity which is established during adoption of the tax increment district. These agreements are established to foster economic development and redevelopment through creating jobs, removing blight and providing affordable housing. For fiscal year ending December 31, 2019, the City has two agreements established under Minnesota Statutes Section 469.174 to 469.179 which resulted in property taxes totaling $250,266 being abated. Individual abatement payments which constituted more than 1% of the City's 2019 tax levy include: • A pay-as-you-go note resulting in an abatement amount of $142,544, for a financial institution. • A pay-as-you-go note resulting in an abatement amount of $107,722 for an industrial developer. As part of the City's tax abatement program, the City also enters into agreements with local businesses in the form of business subsidy agreements established under Minnesota Statutes Section 116J.993 through 116J.995. These agreements must meet a public purpose which may include, but may not be limited to, increasing the tax base. 189
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