5.1. SR 04-05-2010 - Laserfiche WebLink

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Summary: Elk River, Minnesota; General Obligation high reserves. Over the past three years, general fund reserves have ranged between 45% and 48% of expenditures, which adheres to the city's policy of maintaining an unreserved general fund balance of at least 40% of expenditures. As of fiscal year-end Dec. 31, 2008, the city had a $5.2 million unreserved fund balance, o~ in our opinion, a very strong 45% of expenditures. During fisca12008, the city reported a drawdown of $161,000, which management attributes mainly to the unallotment of $467,000 of state aid. The city was unallotted $393,000 of state aid in fisca12009; but due to conservative budgeting and several steps taken by management to offset the state aid reduction, the city expects to report an approximately $400,000 surplus. For fisca12010, management has taken numerous measures to become less dependent on state aid revenues; it has budgeted for no local government aid and an unallotment of $221,000 of market value homestead credit. City officials are projecting to end the year with at least break-even operations for fiscal 2010. The city has additional reserves in its liquor fund, providing about $3.4 million of cash assets, available for the general fund. Officials annually transfer about $248,000 into the general fund from the liquor fund; they planned to make that transfer in 2009. The city also annually transfers approximately $200,000 from its electric fund; it planned to make that transfer in 2009. Property taxes (78%) are the city's leading revenue stream while intergovernmental aid (8%) accounts for most of the remainder. Standard & Poor's considers Elk River's management practices "good" under its Financial Management Assessment (FMA) methodology, indicating financial practices exist in most areas but that governance officials might not formalize or regularly monitor all of them. Highlights of these policies include monthly reports to the city council on budgeted numbers compared to actual performance; the council can amend the budget, as necessary. Management maintains along-term financial and capital plan. The city maintains an adopted investment and debt management policy. The city-adopted reserve policy requires it to maintain a general fund unreserved balance of at least 40% of expenditures for cash flow purposes. In our opinion, the city's overall debt burden, excluding self-supporting utility debt, is a moderate $4,528 per capita, or 4.5% of market value. Carrying charges were an elevated 16.4% of total governmental expenditures less capital outlay in 2008. Debt amortization is above average with officials planning to retire 64% of principal over 10 years. The city might issue less than a million dollars in debt for street improvement projects in 2010. Outlook The stable outlook reflects Standard & Poor's expectation that Elk River should continue to maintain very strong financial reserves and take the necessary steps to adjust its budget in anticipation of potential local governmental aid reductions. We also expect the city to continue its extensive planning and good financial practices. The stable outlook also reflects the city's access to the St. Paul-Minneapolis and St. Cloud metropolitan areas. Related Criteria And Research USPF Criteria: GO Debt, Oct. 12, 2006 Complete ratings information is available to RatingsDirect on the Global Credit Portal subscribers at www.globalcreditportal.com and RatingsDirect subscribers at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column. www.standardandpoors.com/ratingsdirect