6.4 SR 06-16-2025 - Laserfiche WebLink

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100 City of Elk River Notes to Basic Financial Statements NOTE 14 – COMMITMENTS AND CONTINGENCIES A. 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%. Revenues have been less than originally projected due to the decrease in Rate of Return (ROE) issued by FERC. The original ROE 12.38% has been reduced to 10.48% on this investment through CMMPA is designed to provide approximately $80K annually over the 40 -year project life. With majority of the distribution once the bonds are paid off , the projected over recovery in 2024 is estimated to be $146K. 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 2024 (approximately $146K) would be included in the revenue requirements in 2026. The transmission payments for 2024 were $0. B. Contingent Liabilities Amounts received or receivable from grant agencies are subject to audit and adjustment by grantor agencies, principally the federal government. Any disallowed claims , including amounts already collected, may constitute a liability of the applicable funds. The amount , if any, of expenditures that may be disallowed by the grantor cannot be determined at this time , although the government expects such amounts, if any, to be immaterial. The City's tax increment districts are subject to review by the state of Minnesota Office of the State Auditor (OSA). Any disallowed claims or misuse of tax increments could become a liability of the applicable fund. The City's management is not aware of any instances of noncompliance which would have a material effect on the financial statements. NOTE 15 – 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, 202 4, the City has six agreements established under Minnesota Statutes Section 469.174 to 469.179 which resulted in property taxes totaling $276,800 being abated. Individual abatement payments which constituted more than 1% of the City's 2023 tax levy include: • A pay-as-you-go note resulting in an abatement amount of $1 72,027, for a financial institution. Page 290 of 637