CITY OF HUTCHINSON, MINNESOTA · Hutchinson’s financial planning and control. Requests from all departments and agencies are submitted and prepared by the City Administrator for

CITY OF HUTCHINSON HUTCHINSON, MINNESOTA

COMPREHENSIVE

ANNUAL FINANCIAL REPORT

FOR THE YEAR ENDED DECEMBER 31, 2016

PREPARED BY:

FINANCE DEPARTMENT

ANDREW REID Finance Director

Member GFOA of U.S. and Canada

Published June 15, 2017

THIS PAGE IS LEFT BLANK

INTENTIONALLY

CITY OF HUTCHINSON, MINNESOTA COMPREHENSIVE ANNUAL FINANCIAL REPORT

TABLE OF CONTENTS FOR THE YEAR ENDED DECEMBER 31, 2016

Page No. INTRODUCTORY SECTION Transmittal Letter 7 Organizational Chart 13 Principal City Officials 15 GFOA Certificate of Achievement for Excellence in Financial Reporting 17

FINANCIAL SECTION Independent Auditor's Report 21 Management Discussion and Analysis 25

Basic Financial Statements Government-wide Financial Statements

Statement of Net Position 40 Statement of Activities 42 Fund Financial Statements

Governmental Funds Balance Sheet 48 Reconciliation of the Balance Sheet to the Statement of Net Position 51 Statement of Revenues, Expenditures and Changes in Fund Balances 52 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of

Governmental Funds to the Statement of Activities 54 Statement of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual -

General Fund 55 Proprietary Funds

Statements of Net Position 56 Statements of Revenues, Expenses and Changes in Net Position 62 Statements of Cash Flows 68

Notes to the Financial Statements 75

Required Supplementary Information Schedule of Employer’s Share of Public Employees Retirement Association Net Pension Liability - General Employees Retirement Fund 121 Schedule of Employer’s Public Employees Retirement Association Contributions - General Employees Retirement Fund 121 Schedule of Employer’s Share of Public Employees Retirement Association Net Pension Liability - Public Employees Police and Fire Fund 122 Schedule of Employer’s Public Employees Retirement Association Contributions - Public Employees Police and Fire Fund 122 Schedule of Changes in the Fire Relief Association’s Net Pension Liability (Asset) and Related Ratios 123 Schedule of Employer’s Fire Relief Association Contributions 124 Schedule of Employer’s Funding Progress for the Retiree Health Plan 124

Combining and Individual Fund Financial Statements and Schedules Nonmajor Governmental Funds

Combining Balance Sheet 127 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 128 Nonmajor Special Revenue Funds

Combining Balance Sheet 134 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 138 Schedules of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual

Rural Fire Department Fund 142 Hutchinson Area Transportation Facility Fund 143

Nonmajor Capital Projects Funds Combining Balance Sheet 148 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 150

-1-

kvanthuyne_ABDO16C

Sticky Note

Marked set by kvanthuyne_ABDO16C


TABLE OF CONTENTS - CONTINUED FOR THE YEAR ENDED DECEMBER 31, 2016

Page No. Combining and Individual Fund Financial Statements and Schedules - Continued

General Fund Comparative Balance Sheets 155 Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 156

Debt Service Funds Combining Balance Sheet 166 Combining Schedule of Revenues, Expenditures and Changes in Fund Balances 170

Internal Service Funds Combining Statements of Net Position 178 Combining Statements of Revenues, Expenses and Changes in Net Position 180 Combining Statements of Cash Flows 182

Discretely Presented Component Unit - Economic Development Authority Comparative Balance Sheets 187 Schedules of Revenues, Expenditures and Changes in Fund Balances 188

Summary Financial Report Revenues and Expenditures for General Operations - Governmental Funds 189

STATISTICAL SECTION (UNAUDITED) TABLE Financial Trends

Net Position by Component 1 194 Changes in Net Position 2 196 Governmental Activities Tax Revenues by Source 3 203 Fund Balances of Governmental Funds 4 204 Changes in Fund Balances of Governmental Funds 5 206

Revenue Capacity Assessed Value and Estimated Actual Value of Taxable Property 6 209 Property Tax Rates - Direct and Overlapping Governments 7 210 Principal Property Taxpayers 8 212 Property Tax Levies and Collections 9 213

Debt Capacity Ratios of Outstanding Debt by Type 10 214 Ratios of Net General Bonded Debt Outstanding 11 216 Computation of Direct and Overlapping Debt 12 217 Legal Debt Margin Information 13 218 Pledged Revenue Coverage 14 220

Demographic and Economic Information Demographic and Economic Statistics 15 223

Principal Employers 16 224 Operating Information

Full-time Equivalent City Government Employees by Function 17 225 Operating Indicators by Function 18 226 Capital Asset and Infrastructure Statistics by Function 19 228

Other Information Combined Schedule of Bonds Payable 20 231 Operating Expenses by Function - Public Utilities Commission 21 232 Thousand Cubic Feet (MCF) Sales - Natural Gas Division - Public Utilities Commission 22 234 Raw Water Finished and Sold 23 236 Cost Per Thousand Gallons of Finished Water 24 238 Wastewater Inflow and Cost Per Thousand Gallons Treated 25 239

-2-

kvanthuyne_ABDO16C

Sticky Note



TABLE OF CONTENTS - CONTINUED FOR THE YEAR ENDED DECEMBER 31, 2016

Page No. OTHER REQUIRED REPORTS Independent Auditor’s Report on Minnesota Legal Compliance 243 Independent Auditor’s Report on Internal Control Over Financial Reporting on Compliance And Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards 244

-3-


INTENTIONALLY

-4-

INTRODUCTORY SECTION



-5-


INTENTIONALLY

-6-

June 15, 2017

To The Honorable Mayor and City Council City of Hutchinson Hutchinson, MN 55350

Dear Honorable Mayor and City Council:

Minnesota statutes require all cities to issue an annual report on its financial position and activity prepared in accordance with generally accepted accounting principles in the United States of America (GAAP), and audited in accordance with generally accepted auditing standards by a firm of licensed certified public accountants or the Office of the State Auditor. Pursuant to these requirements, we hereby issue the comprehensive annual financial report of the City of Hutchinson for the fiscal year ended December 31, 2016.

This report consists of management’s representations concerning the finances of the City. Consequently, management assumes full responsibility for the completeness and reliability of all the information presented in this report. To provide a reasonable basis for making these representations, management of the City has established a comprehensive internal control framework that is designed not only to protect the government’s assets from loss, theft, or misuse, but also to compile sufficient reliable information for the preparation of the City’s financial statements in conformity with GAAP. Because the cost of internal controls should not outweigh its benefits, the City’s internal controls have been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. As management, we assert that to the best of our knowledge and belief, this financial report is complete and reliable in all material respects.

The City’s financial statements have been audited by Abdo, Eick and Meyers, LLP, a firm of independent licensed certified public accountants. The goal of the independent audit was to provide reasonable assurance that the financial statements of the City for the fiscal year ended December 31, 2016 are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and evaluating the overall financial statement presentation. The independent auditor concluded, based upon the audit, that there was a reasonable basis for rendering an unqualified opinion that the City’s financial statements for the fiscal year ended December 31, 2016 are fairly presented in conformity with GAAP. The independent auditor’s report is presented as the first component of the financial section of this report.

-7-

The independent audit of the financial statements of the City was part of a broader, federally mandated “Single Audit” designed to meet the special needs of federal grantor agencies. The standards governing single audit engagements require the independent auditor to report not only on the fair presentation of the financial statements, but also on the audited government’s internal controls and compliance with legal requirements. The auditor places a special emphasis on internal controls and legal requirements involving the administration of federal awards. The City did not meet the requirement for a Single Audit in 2016.

GAAP requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the (MD&A) and should be read in conjunction with it. The City’s MD&A can be found immediately following the report of the independent auditors.

PROFILE OF THE GOVERNMENT

The City of Hutchinson was incorporated in 1855 and exists under the state laws of Minnesota. The City is located in McLeod County in south-central Minnesota. Hutchinson is located 60 miles west of the Twin Cities at the junctions of Highways 7, 15, and 22 and occupies 4,734 acres. Considered a Greater Minnesota Regional Center, Hutchinson’s economy is diverse and includes retail, manufacturing, agricultural and services. For 2016, the latest estimate of the City’s population is 14,135.

The City is governed under City charter, which was readopted by voters on November 5, 2002. The charter provides for a separate electric and gas commission that oversees its operations but requires Council rate review. The Council is comprised of a mayor, serving a two (2) year term and four Council members, each serving four (4) year staggered terms. Council members are elected at large but each candidate must file by seat. The City shall hold a primary election if there should be three or more candidates filing for one designated seat. The City Administrator is appointed by the Council and also serves as the City Clerk.

The City’s mission statement is as follows; “The City of Hutchinson exists so that residents, businesses, property owners and visitors are provided with quality services and programs that support a safe, healthy, sustainable and business-friendly community with a small town atmosphere, for a cost of government similar to, or less than, comparable out-state Minnesota cities”. To achieve its mission, the City has established six core areas of focus:

1) Public Safety• Provide residents and visitors a “safe” environment with protection of property.

2) Health & Recreation• Provide and contribute to a “healthy quality of life”.

3) Transportation• Provide safe and effective movement throughout the city.

4) Economic Development• Provide diversification, job growth and employment opportunities.

5) Environment• Provide concepts that are sustainable and environmentally friendly.

6) Good Government• Citizens perceive the City is delivering quality services at a reasonable price and that there

is adequate planning for the future.

The City provides the full range of municipal services prescribed by statute or charter. This includes police and fire protection, construction and maintenance of highways, streets and other infrastructure, and recreational and cultural events. Enterprise activities include water, sewer, storm water, refuse,

-8-

kvanthuyne_ABDO16C

Sticky Note


composting services and a municipal off-sale liquor store. The City owns and operates the airport, gas and electric services and continues to maintain a lease arrangement with Hutchinson Health which is a 501c(3) tax exempt nonprofit health care organization. Each year the Council approves an annual budget, which serves as the foundation for the City of Hutchinson’s financial planning and control. Requests from all departments and agencies are submitted and prepared by the City Administrator for presentation to the Council. The Council, following a public hearing no later than December 31, approves the budgets. Page 55 of this 2016 CAFR provides the General fund budget to actual results.

FACTORS AFFECTING FINANCIAL CONDITION Local Economy Hutchinson’s economy continued to show economic stability throughout 2016. The City’s overall Market Value increased 3.9% in 2016, which is the third consecutive annual increase after values stabilized from the recession in 2013. The City’s 2016 market valuation is comprised of Residential (72%), Commercial & Industrial (21%), Apartments (6.5%) and Agriculture (0.5%). The 2016 market values increased for Residential (6%) and Commercial & Industrial (0.6%) but decreased for Apartments (-5.0%) and Agriculture (-18.5%). Hutchinson Technology Incorporated (HTI), a precision component manufacturer serving the medical, defense/aerospace, computer and microelectronic industries, currently employs approximately 592 area residents. The company also operates a fully functional manufacturing/assembly plant in Thailand. TDK Corporation, a leading electronics company based in Tokyo, Japan, finalized the purchase of HTI in late 2016 and is continuing operations in the Hutchinson plant. Minnesota Mining & Manufacturing (3M) has its largest North American production facility in Hutchinson, employing approximately 1,675 area residents in the production of tape and related adhesive product lines. While HTI and 3M are the City’s largest manufacturing employers, other manufacturing companies in the community provide quality jobs and strong diversity to the local economy, including Hutchinson Manufacturing, Goebel Fixture Company, Warrior Manufacturing, NuCrane Manufacturing, Stearnswood Inc., Impressions, Inc. and MITGI. Hutchinson serves as a regional retail-shopping hub with a variety of local retailers as well as national and regional retail stores such as Target, Shopko, Wal-Mart, and Menards. The City’s retail trade area covers a 30-mile radius with an estimated customer base of 128,000 people. A sizable number of fast food franchise restaurants are present in the community along with locally owned full service establishments. Hutchinson is also home to a 233,300 square foot enclosed shopping mall with JC Penney, Runnings and Dunham’s Sports as anchor tenants. JC Penney announced that the Hutchinson location will be closed in late 2017, which will present a major void in the shopping mall. Two strip malls add to Hutchinson’s retail shopping base. New retail for 2016 includes Aldi, QDoba and Goodwill, all on the south side of town off of state highway 15. Aldi reconstructed a portion of a Cub Foods store that had been vacant since 1999. Pizza Ranch is currently constructing a new store in another portion of that building and is scheduled to open in July 2017. Downtown Hutchinson continues to show strength and diversity. The downtown business climate provides vitality and a strong sense of community. Businesses range from retail stores, locally owned restaurants, local and nation-wide banks and service providing businesses. Investments continue to be made to preserve and promote the downtown area because of the vital aspect it brings to the City of Hutchinson.

-9-

kvanthuyne_ABDO16C

Sticky Note


A three-phase apartment complex began construction in 2016 on the south side of the city near the Ridgewater College campus. The first two phases will be completed in 2017 and the final phase is scheduled to be completed in 2018. Each phase consists of 29 units with a total of 87 units. The developer received public assistance through tax increment financing. In order to gain access to the apartment complex, the City incurred costs in 2016 to extend the Denver Avenue roadway from Montreal Street SE to Bradford Street SE, with the extended roadway being fully completed in early 2017. The roadway costs are accounted for in the 2017 Special Assessment Improvement fund and will be financed with a General Obligation Assessment bond issuance in 2017. This results in a negative fund balance in the 2017 Special Assessment Improvement fund at December 31, 2016 as the City is carrying the construction costs for one year prior to the bond issuance.

Long-term Financial Planning

The City annually prepares a 5-year capital improvement plan detailing specific projects and proposed financing sources. The plan is a collaborative effort between the City’s fleet committee, facility committee, resource allocation committee and department directors. In addition, as part of the annual General fund budget process, a 5-year financial forecast is updated, trending revenues and expenditures. The intent of the 5-year forecast is to determine how easily a future balanced budget can be achieved based on a set of assumptions. Management can then make operational changes in the near-term that will positively affect the long-term budget outlook.

Relevant Financial Policies

The City of Hutchinson uses a “pooled cash” concept of investing, which means that all the funds with cash balances participate in an investment pool. Available cash is invested in short-term government money market accounts, certificates of deposit, obligations of the U.S. Treasury and its agencies, and municipal bonds. Investment income includes appreciation in the fair value of investments. Increases in fair value during the current year, however, do not necessarily represent trends that will continue; nor is it always possible to realize such amounts, especially in the case of temporary changes in the fair value of investments that the City intends to hold to maturity.

The City annually issues 15-year general obligation debt for significant infrastructure projects. A debt tax levy and assessments against benefitting properties are the main revenue source for debt service payments. Federal and State Aid, Enterprise fund contributions, and other City funding are other financing sources leveraged annually to reduce the infrastructure project costs to a level that is supported by the City’s Debt Management plan. The Debt Management plan is a mechanism to control long-term debt funded by the local tax levy and to assist in prioritizing capital infrastructure needs. The City has achieved a bond rating of AA- from Standard & Poor’s.

Management philosophy used in the General fund budget for City Council consideration and approval included conservative revenue estimates and realistic expenditures. The City’s fund balance policy designates 40 percent of General fund reserves for working capital. This threshold ensures the City can meet ongoing monthly obligations with cash on hand. In addition, management maintains a philosophy that expenditures included in the budget are not automatically considered “approved”. Capital expenditures as well as other significant expenditures are not approved until it has been determined that adequate funds are available and the expenditure is necessary.

Additional information on the City’s pension arrangements can be found in Notes 4 and 5 of the financial statements.

-10-

kvanthuyne_ABDO16C

Sticky Note


Major Initiatives The City commenced construction of a new $6 million outdoor aquatic center in 2016 that is scheduled to open by June 2017. The facility is located at the City’s existing Recreation Building and is replacing the original outdoor pool built in 1985. The City is financing the majority of the project with reserves from the General, Capital Projects and Community Improvement funds. A minor portion of the project costs will be financed by an inter-fund loan from the Refuse fund to the Capital Projects fund. No external debt is being issued to finance the project. Independent School District #423 began a major renovation of the Hutchinson High School in 2016 after a $45 million referendum was approved in 2015. Construction will continue into 2018 with the class of 2019 being the first to graduate from the fully renovated school. The Hutchinson Police department is implementing a body camera program in early 2017. A local manufacturing business has graciously committed $70,000 to help the City implement the program. AWARDS & ACKNOWLEDGEMENTS The Government Finance Officers Association (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Hutchinson, Minnesota for its comprehensive annual financial report (CAFR) for the fiscal year ended December 31, 2015. The Certificate of Achievement is a prestigious national award recognizing the City’s conformance with the highest standards for preparation of state and local government financial reports. In order to be awarded a certificate of achievement, a government must publish an easily readable and efficiently organized comprehensive annual financial report, whose contents conform to program standards. Such CAFR must satisfy both generally accepted accounting principles and applicable legal requirements. A certificate of achievement is valid for a period of one year. The City of Hutchinson has received a certificate of achievement award each year since fiscal year ended 1996. We believe our current report continues to conform to the Certificate of Achievement program requirements and we are submitting it to GFOA to determine its eligibility for another certificate. We would like to express our appreciation to all members of the finance department that assisted and contributed to the preparation of this report. Without their efficient and dedicated service this report could not be accomplished. Special recognition is in order to Justin Juergensen, Senior Accountant, who assisted with the preparation and production of this report. We would also like to thank Mayor Forcier and the City Council members for their interest and support in planning and conducting the financial operations of the City in a responsible manner. Respectfully submitted, CITY OF HUTCHINSON

Matthew Jaunich Andrew J. Reid City Administrator Finance Director

-11-


INTENTIONALLY

-12-

Utilities Commission Airport CommissionPlanning Commission Bicycle/Pedestrian Advisory Committee

Housing & Redevelopment Authority (HRA) Library BoardCharter Commission Park/Recreation/Community Ed. Advisory Board

City/School/Community Advisory Committee Police Civil Service CommissionCreekside Renewables Board Public Arts Commission

Economic Development Authority (EDA) Tree BoardSenior Advisory Board

2016 Organizational Chart

Citizens of Hutchinson

City of Hutchinson

Public Works ManagerWater Supervisor

LieutenantSergeant

PlanningDirector

Liquor SalesManager

Police Chief /Emergency

Management

City AttorneyMotor Vehicle

Supervisor

Information Technology

Director

Compost Manager

Public Works Director / City

Engineer

FinanceDirector

Wastewater Supervisor Parks Supervisor

Recreation Facilities/Oper MgrRecreation Services Coorinator

Building OfficialFacilities Manager

Mayor and City Council

PRCEDirector

FireChief

Human Resources Director

Economic Development

Director

CityAdministrator

-13-


INTENTIONALLY

-14-

CITY OF HUTCHINSON, MINNESOTA PRINCIPAL CITY OFFICIALS


Name Title Term Expires

Gary Forcier Mayor 12/31/18

Chad Czmowski Council 12/31/20Bill Arndt Council 12/31/16

Mary Christensen Council 12/31/18John Lofdahl Council 12/31/18

Matthew Jaunich City Administrator Appointive

Marc Sebora City Attorney

Andrew Reid Finance Director

Dan Hatten Chief of Police

Curtis Hughes Police Commissioner AppointiveTodd Brandel Police Commissioner Appointive

Jo Piehl Police Commissioner Appointive

Mike Schumann Fire Chief

Dolf Moon Director of Parks, Recreationand Community Education

Kent Exner Director of Public Works

ELECTED

-15-


INTENTIONALLY

-16-

-17-


INTENTIONALLY

-18-

FINANCIAL SECTION



-19-


INTENTIONALLY

-20-

INDEPENDENT AUDITOR'S REPORT Honorable Mayor and City Council City of Hutchinson, Minnesota Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, the discretely presented component units, each major fund and the aggregate remaining fund information of the City of Hutchinson, Minnesota (the City), as of and for the year ended December 31, 2016, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the Hutchinson Public Utilities Commission, which is a major fund and 57 percent, 59 percent, and 69 percent, respectively, of the assets, net position, and revenues of the business-type activities. Those financial statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for the Hutchinson Public Utilities Commission mentioned above, is based solely on the reports of the other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the City’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the discretely presented component units, each major fund and the aggregate remaining fund information of the City as of December 31, 2016, and the respective changes in financial position and, where applicable, cash flows thereof and the budgetary comparison for the General fund for the year then ended in accordance with accounting principles generally accepted in the United States of America.

-21-


INTENTIONALLY

-22-

Other Matters

Report on Summarized Comparative Information

We have previously audited the City's 2015 financial statements, and we expressed unmodified opinions on the respective proprietary fund financial statements in our report dated June 22, 2016. In our opinion, the summarized comparative information presented herein for the respective proprietary fund financial statements as of and for the year ended December 31, 2015, is consistent, in all material respects, with the audited financial statements from which it has been derived.

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis starting on page 25 and the Schedules of Employer’s Share of the Net Pension Liability, the Schedule of Changes in Net Pension Liability (Asset) and Related Ratios, the Schedules of Employer’s Contributions and the Schedule of Funding Progress for the Retiree Health Plan starting on page 121 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Information

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The introductory section, combining and individual fund financial statements and schedules and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements.

The combining and individual fund financial statements and schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual fund financial statements and schedules are fairly stated, in all material respects, in relation to the basic financial statements as a whole.

The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated June 15, 2017, on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over financial reporting and compliance.

ABDO, EICK & MEYERS, LLPMankato, MinnesotaJune 15, 2017

-23-

kvanthuyne_ABDO16C

Sticky Note


kvanthuyne_ABDO16C

Sticky Note



INTENTIONALLY

-24-

Management’s Discussion and Analysis

As management of the City of Hutchinson, Minnesota (the City), we offer readers of the City’s financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended December 31, 2016. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found starting on page 7 of this report.

Financial Highlights

• The assets and deferred outflows of resources of the City exceeded its liabilities and deferred inflows of resources ofresources at the close of the 2016 fiscal year by $185,580,122 (net position). Of this amount, $30,134,891 may be used tomeet the City’s ongoing obligations to citizens and creditors.

• The City’s total net position increased by $3,124,393 compared to an increase of $7,308,000 in the previous year.Government-type activities accounted for 20.0 percent of the total increase, with capital grants and contributions accountingfor 64.7 percent of the total increase. Business-type activities accounted for 80.0 percent of the total increase attributedmainly to the water, sewer, electric and gas operations.

• As of the close of 2016, the City’s combined governmental funds reported ending fund balances of $18,818,468, a decreaseof $2,277,682 in comparison with the prior year. The decrease is due primarily to cash reserves of $3,400,000 being used tofinance the 2016 construction costs of a new outdoor aquatic center. The General, Community Improvement and CapitalImprovement Projects funds each contributed to the aquatic center costs in the amounts of $500,000, $1,500,000 and$1,400,000, respectively. Cash reserves estimated at $2,500,000 will be used in 2017 to finish the construction with theaquatic center opening in June 2017. Approximately $647,213, or 3.4 percent, is available for spending at the City’sdiscretion (unassigned fund balance).

• During the year, the City’s governmental expenditures and financing uses totaled $26,671,253 compared to $24,393,571generated in revenues and other financing sources for governmental programs.

• At the end of the current fiscal year, the fund balance for the General fund was $6,660,670, or 56.4 percent of total Generalfund expenditures and transfers out. The unassigned fund balance of the General fund was $1,219,563 or 10.3 percent oftotal General fund expenditures and transfers out.

-25-

kvanthuyne_ABDO16C

Sticky Note


Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the City’s basic financial statements. The City’s basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplemental information in addition to the basic financial statements themselves. The financial statements also include notes that explain some of the information in the financial statements and provide more detailed data. The statements are followed by a section of combining and individual fund financial statements and schedules that further explains and supports the information in the financial statements. Figure 1 reflects how the required parts of this annual report are arranged and relate to one another. In addition to these required elements, we have included a section with combining and individual fund financial statements and schedules that provide details about nonmajor governmental funds, which are added together and presented in single columns in the basic financial statements.

Figure 1 Required Components of the

City’s Annual Financial Report

Management's Discussion and

Analysis

Basic Financial Statements

Required Supplementary

Information

Government-wide Financial

Statements

FundFinancial

Statements

Notes to theFinancial

Statements

Summary Detail

-26-

Figure 2 summarizes the major features of the City’s financial statements, including the portion of the City government they cover and the types of information they contain. The remainder of this overview section of management’s discussion and analysis explains the structure and contents of each of the statements.

Figure 2 Major Features of the Government-wide and Fund Financial Statements

Fund Financial Statements

Government-wide Statements

Governmental Funds Proprietary Funds

Scope Entire City government (except fiduciary funds) and the City’s component units

The activities of the City that are not proprietary or fiduciary, such as police, fire and parks

Activities the City operates similar to private businesses, such as the water and sewer system

Required financial statements

• Statement of Net Position

• Statement of Activities

• Balance Sheet • Statement of Revenues,

Expenditures, and Changes in Fund Balances

• Statement of Net Position • Statement of Revenues,

Expenses and Changes in Net Position

• Statement of Cash Flows Accounting basis and measurement focus

Accrual accounting and economic resources focus

Modified accrual accounting and current financial resources focus

Accrual accounting and economic resources focus

Type of asset/liability information

All assets and liabilities, both financial and capital, and short-term and long-term

Only assets expected to be used up and liabilities that come due during the year or soon thereafter; no capital assets included

All assets and liabilities, both financial and capital, and short-term and long-term

Type of deferred outflows/inflows of resources information

All deferred outflows/inflows of resources, regardless of when cash is received or paid.

Only deferred outflows of resources expected to be used up and deferred inflows of resources that come due during the year or soon thereafter; no capital assets included

All deferred outflows/inflows of resources, regardless of when cash is received or paid

Type of in flow/out flow information

All revenues and expenses during year, regardless of when cash is received or paid

Revenues for which cash is received during or soon after the end of the year; expenditures when goods or services have been received and payment is due during the year or soon thereafter

All revenues and expenses during the year, regardless of when cash is received or paid

Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the City’s finances, in a manner similar to private-sector business. The statement of net position presents information on all of the City’s assets and deferred outflows of resources and liabilities and deferred inflows of resources, with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The statement of activities presents information showing how the City’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave). Both government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City include general government, public safety, streets and highways, culture and recreation and housing and economic development. The business-type activities of the City include electric, natural gas, water, sewer, refuse, composting, storm water, and a municipal liquor store operation.

-27-

The government-wide financial statements include not only the City itself (known as the primary government), but also two legally separate component units under the community redevelopment agency (the Economic Development Authority (EDA) and the Housing and Redevelopment Authority (HRA). Financial information for these component units is discretely presented in the government-wide financial statements. The government-wide financial statements can be found starting on page 40 of this report. Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. These statements focus on individual parts of the City government, reporting the City’s operations in more detail than the government-wide statements. All of the funds of the City can be divided into two categories: governmental funds and proprietary funds. Governmental Funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financing requirement. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City maintains 40 individual governmental funds, 14 of which are Debt Service funds, which are reported as one major fund for financial reporting. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures and changes in fund balances for the General fund, the Debt Service fund, Capital Improvement Projects fund, and the Special Assessment Improvement 2014 fund, all of which are considered to be major funds. Data from the other nonmajor governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these nonmajor governmental funds is provided in the form of combining statements or schedules elsewhere in the report. The City adopts an annual appropriated budget for its General fund. A budgetary comparison statement has been provided for the General fund on page 55 in this report to demonstrate compliance with this budget. The basic governmental fund financial statements can be found starting on page 48 of this report. Proprietary Funds. The City maintains two different types of proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses enterprise funds to account for its residential refuse pickup, compost, water and sewer, electric and gas, storm water, and liquor operations. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City’s various functions. The City uses internal service funds to account for its central garage and insurance operations. Because both of these services predominantly benefit governmental rather than business-type functions, they have been included within governmental activities in the government-wide financial statements. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for each of its operations that are considered to be major funds of the City. Both internal service funds balances have been incorporated into the functions of the governmental activities that benefited from these services. Individual fund data for the internal service funds is provided in the form of combining statements elsewhere in this report. The basic proprietary fund financial statements can be found starting on page 56 of this report. Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found starting on page 75 of this report. Required supplementary information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the City of Hutchinson’s share of net pension liabilities (assets) for defined benefits plans, schedules of contributions, and progress in funding its obligation to provide pension and other postemployment benefits to its employees. Required supplementary information can be found starting on page 121 of this report.

-28-

Other information. The combining statements referred to earlier in connection with nonmajor governmental funds are presented immediately following the required supplementary information. Combining and individual fund financial statements and schedules can be found starting on page 127 of this report.

Further, a statistical section has been included as part of the comprehensive annual financial report to facilitate additional analysis and can be found starting on page 194 of this report.

Government-wide Financial Analysis

The two government-wide statements report the City’s net position and how they have changed. The table below presents net position - the difference between the City’s assets and deferred outflows of resources and liabilities and deferred inflows of resources - is one way to measure the City’s financial health, or position.

• Over time, increases or decreases in the City’s net position are an indicator of whether its financial health is improving ordeteriorating, respectively.

• To assess the overall health of the City consider additional nonfinancial factors such as changes in the City’s property taxbase and the condition of the City’s roads.

By far the largest portion of the City’s net position (76.7 percent) reflects its investment in capital assets (e.g., land, buildings, machinery, and equipment), less any related debt used to acquire those assets that are still outstanding. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities.

City of Hutchinson’s Summary of Net Position

Increase Increase2016 2015 (Decrease) 2016 2015 (Decrease)

Current and other assets 26,907,201$ 27,922,546$ (1,015,345)$ 39,630,710$ 36,230,071$ 3,400,639$ Capital assets 76,127,527 71,157,711 4,969,816 126,957,802 131,731,210 (4,773,408)

Total assets 103,034,728 99,080,257 3,954,471 166,588,512 167,961,281 (1,372,769)

Deferred outflows of resources 6,264,605 949,554 5,315,051 3,171,538 685,439 2,486,099

Long-term liabilities outstanding 31,135,847 22,972,948 8,162,899 51,896,535 53,008,058 (1,111,523)

Other liabilities 1,903,069 1,389,669 513,400 6,070,987 6,516,668 (445,681)

Total liabilities 33,038,916 24,362,617 8,676,299 57,967,522 59,524,726 (1,557,204)

Deferred inflows of resources 1,428,471 1,460,963 (32,492) 1,044,352 872,496 171,856

Net positionNet investment in capital

assets 58,487,080 53,823,361 4,663,719 83,737,730 86,594,081 (2,856,351) Restricted 10,680,796 11,119,053 (438,257) 2,539,625 541,716 1,997,909 Unrestricted 5,664,070 9,263,817 (3,599,747) 24,470,821 21,113,701 3,357,120

Total net position 74,831,946$ 74,206,231$ 625,715$ 110,748,176$ 108,249,498$ 2,498,678$

Governmental Activities Business-type Activities

An additional portion of the City’s net position (7.1 percent) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net position (16.2 percent) may be used to meet the City’s ongoing obligations to citizens and creditors.

At the end of 2016, the City is able to report positive balances in all three categories of net position, both for the City as a whole, as well as for its separate governmental and business-type activities.

-29-

kvanthuyne_ABDO16C

Sticky Note


kvanthuyne_ABDO16C

Sticky Note


Governmental activities. Governmental activities increased the City’s net position by $625,715, thereby accounting for 20.0 percent of the total growth in the net position of the City. Key elements of the activities are shown below:

City of Hutchinson’s Changes in Net Position


RevenuesProgram revenuesCharges for services 3,460,029$ 3,571,721$ (111,692)$ 54,590,325$ 55,082,972$ (492,647)$ Operating grants and contributions 715,410 598,506 116,904 22,452 12,608 9,844 Capital grants and contributions 1,823,110 3,325,032 (1,501,922) 199,684 1,019,453 (819,769)

General revenuesProperty taxes/tax increments 6,797,702 6,970,507 (172,805) - - - Other taxes 822,181 516,480 305,701 1,270,814 1,224,846 45,968 Grants and contributions notrestricted to specific programs 2,306,470 2,290,237 16,233 - - -

Unrestricted investment earnings 89,916 109,278 (19,362) 88,542 134,502 (45,960)

Other 269,357 4,904 264,453 - - - Gain on sale of capital assets 106,699 8,198 98,501 84,046 6,819 77,227

Total revenues 16,390,874 17,394,863 (1,003,989) 56,255,863 57,481,200 (1,225,337)

ExpensesGeneral government 2,354,768 2,274,447 80,321 - - - Public safety 5,307,364 4,297,569 1,009,795 - - - Streets and highways 5,421,270 4,559,499 861,771 - - - Culture and recreation 2,892,986 2,779,174 113,812 - - - Housing and economicdevelopment 583,421 217,094 366,327 - - -

Cemetery, airport and other 1,316,993 1,109,584 207,409 - - - Interest on long-term debt 491,730 436,626 55,104 - - - Electric - - - 26,538,262 26,936,359 (398,097) Natural gas - - - 9,232,357 9,563,857 (331,500) Water - - - 2,610,633 2,634,150 (23,517) Sewer - - - 3,593,584 3,327,256 266,328 Refuse - - - 1,077,519 1,036,616 40,903 Composting - - - 2,064,529 2,634,096 (569,567) Storm water - - - 585,575 497,695 87,880 Liquor - - - 5,451,353 5,264,041 187,312

Total expenses 18,368,532 15,673,993 2,694,539 51,153,812 51,894,070 (740,258)

Increase (decrease) in netpoistion before transfers (1,977,658) 1,720,870 (3,698,528) 5,102,051 5,587,130 (485,079)

Transfers 2,603,373 750,657 1,852,716 (2,603,373) (750,657) (1,852,716) Change in net position 625,715 2,471,527 (1,845,812) 2,498,678 4,836,473 (2,337,795) Net position -

74,206,231 71,734,704 2,471,527 108,249,498 103,413,025 4,836,473 Net position -

74,831,946$ 74,206,231$ 625,715$ 110,748,176$ 108,249,498$ 2,498,678$ December 31

January 1


-30-

The City of Hutchinson governmental revenues and business-type activity revenue each decreased for 2016 while governmental expenses increased and business-type expenses decreased. The decrease in governmental revenue was mainly due to capital grants and contributions being unusually high in 2015 as a result of $2,000,000 in federal and state funding received for the City’s airport runway reconstruction. Increases in governmental expenses were $2,694,539 or a 17.2 percent increase. Public safety recognized a $936,048 increase in pension expense in 2016. Streets and highways completed a major street seal coating project in 2016, contributing to the increase in expense. The City’s seal coating program is on a biennial basis. Business-type activities had an aggregate revenue decrease of $1,225,337 or 2.1 percent. The major contributor to the decrease in charges for services was the reduced production model for the Compost fund, selling 1.3M bags of soil and mulch product in 2016 compared to 2.5M bags in 2015. The decrease in capital grants and contributions is attributed to a $958,369 grant received in 2015 for construction of a new solar array at the Sewer facility. The Liquor business continued to increase its overall sales revenue because of the strategic positioning in the community. Water and Sewer fund revenue reflect moderate decreases due to lower consumption. Refuse and Storm Water funds had moderate revenue increases. Liquor, Refuse, Water, Sewer and Storm Water funds all incurred moderate expense increases. The cost of goods sold continued to rise in the Liquor business. Two areas that affected the liquor store cost of goods sold were the continued price increases in purchasing inventory, higher freight costs and the number of units sold. The Electric and Gas division expenses reflected moderate decreases. The following graphs depict various governmental activities and show the revenue and expenses directly related to those activities.

Expenses and Program Revenues - Governmental Activities

$-

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

Generalgovernment

Public safety Street andhighways

Culture andrecreation

Housing andeconomic

development

Cemetery,airport and

other

Interest onlong-term debt

Expenses Program Revenues

Revenues by Source - Governmental Activities

Charges for services21.1%

Operating grants and contributions

4.4%

Capital grants and contributions

11.1%

Property taxes41.5%

Other taxes5.0%

Grants and contributions unrestricted

14.1%

Other 2.8%

-31-

kvanthuyne_ABDO16C

Sticky Note


Business-type activities. Business-type activities increased the City’s net position by $2,498,678 for 2016 thereby accounting for 80.0 percent of the total growth in net position of the City. Key elements of the activities are shown below:

Expenses and Program Revenues - Business - type Activities

$-

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$30,000,000

Electric Natural gas Water Sewer Refuse Composting Storm water Liquor

Expenses Program Revenues

Revenues by Source Business - type Activities

Charges for services96.9%

Capital grants and contributions

0.4%

Sales tax2.3%

Other0.4%

-32-

Financial Analysis of City’s Funds As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds - The focus of the City’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City’s financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. The General fund is the chief operating fund of the City. At the end of 2016, fund balance of the General fund was $6,660,670. During 2016, the fund balance of the General fund decreased by $198,943 due to the $500,000 transfer of reserves to the Capital Improvements Project fund to finance the 2016 construction costs of a new outdoor aquatic center. As a measure of the General fund’s liquidity, it may be useful to compare fund balance to total fund expenditures. Fund balance represents 56.4 percent of total General fund expenditures and transfers out. The Debt Service fund has a total fund balance of $5,481,226, all of which is restricted for future debt service principal and interest. The Debt Service fund’s fund balance increased by $982,632 during the current year, mainly due to prepayment of special assessments during the year. Additionally, the City and Ridgewater College agreed on a settlement of deferred assessments that were payable in the years 2012-2016 related to the Special Assessment Bond fund 2006/2012B (#326). The College paid the entire assessment principal and interest of $336,602 in 2016. The Capital Improvement Projects fund has a total fund balance of $901,017 at the end of the year. The Capital Improvement Projects fund’s fund balance decreased by $1,089,184 during the current year, mainly due to construction of a new outdoor aquatic center during the year. The Special Assessment Improvement 2014 fund was closed during the year. The Special Assessment Improvement 2014 fund’s fund balance increased by $105,428 during the current year due to a transfer of resources to close the fund. Proprietary Funds - The City’s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. Liquor fund operation sales increased in 2016 by $135,882 or 2.3 percent with gross profit increasing by $12,103 from the previous year. The operating income decreased by $54,666 as a result of higher personal services due to an increase in pension expense. The fund has a deficit in unrestricted net position of $322,533 at December 31, 2016 due to an interfund advance related to building renovation. The Composting fund’s net position at year end was $4,220,360, which was an increase of $6,213 from the previous year due mainly to the increased sale of bagged soil products. The City continues to operate Creekside Soils, a compost facility that manufactures and produces bag and bulk products sold to retailers and distributors. Creekside implemented a major change in its production model during 2016, substantially reducing production of low-margin bagged product sold to big box retailers through a distributor. This change allows Creekside the ability to place more focus on growing its own brands with higher margins. The City anticipates that net operating revenue will be substantially lower than prior years during the first two or three years of this new model and will gradually increase as we expand the Creekside brand sales. The Refuse fund’s net position at year end was $2,510,009, which was an increase of $75,656 from the previous year. The Refuse fund continued to show stability with no increase in user rates for 2016 and continues to show a positive cash flow. The last rate increase occurred in 2008. The City contracted with a new refuse hauler in 2015 for the residential refuse service. The five year contract is at beneficial rates that allow customer rates to remain stable. The Water fund’s net position at year end was $13,413,531, which was an increase of $187,769 from the previous year. The Sewer fund’s net position at year end were $19,766,205, which was an increase of $305,506 from the previous year. Rates in the Water and Sewer funds remained unchanged in 2016 and were last increased in 2011. The local sales tax of 0.5 percent in place since January 1, 2012 resulted in $1.270 million of revenue for these two funds in 2016. The local sales tax revenue is being used exclusively for debt service payments on the Water and Wastewater facilities. The City’s Storm Water fund’s net position at year end was $4,550,806, which was an increase of $20,433 from the previous year. Contributing to the increase in net position was an 8.3 percent increase in storm water rates for 2016. Income before contributions and transfers was $290,530. A one-time transfer of $270,097 was made to the Capital Projects fund to fund capital project fund expenditures. The City’s Electric and Gas Utilities provide services to residents of the City. Holding expenses in line helped to offset the lower gas demand due to the mild winter, resulting in an operating income of $3,361,875. The net position of the Utilities increased by $1,839,467 in 2016.

-33-

General Fund Budgetary Highlights The City amended its 2016 General fund budget to include a $500,000 transfer of reserves to finance the construction costs of the new outdoor aquatic center. Results of the 2016 fiscal year are favorable against the budget. Expenditures and transfers out exceeded revenues and other financing resources by $198,943. Several positive fluctuations in actual versus budgeted revenues resulted in a positive budget variance of $109,720. Actual expenditures came in lower than budget by $161,557. Significant budget variances are summarized below:

• Licenses and permit revenue exceeded the budget by $10,059 due mainly to building permit activity. • Intergovernmental revenue was over budget by $32,472 due to higher than expected State pension aid and state grants.

Police pension aid was $20,200 higher than budget. • Miscellaneous revenues were over budget by $65,056, largely due to the premium dividend of $80,009 received on the

general liability insurance premiums paid for the policy year July 2015 through June 2016. • Total expenditures were lower than budget by $161,557 mainly due to fuel demand and utility consumption. Low fuel prices

combined with a mild winter resulted in a $58,551 budgetary savings for fuel. The mild winter also contributed to budgetary savings of $38,436 for utility expense.

• The largest expenditure variances occurred in streets and highways. Streets and highways is under budget by $138,430 due to a combination of lower personal services, lower fuel costs and lower demand for contracted snow removal services. Also contributing is the fact that $25,000 budgeted to address diseased trees was not used in 2016.

Capital Assets and Debt Administration Capital assets. The City’s investment in capital assets for its governmental and business-type activities as of December 31, 2016, amounts to $203,085,329 (net of accumulated depreciation). This investment in capital assets includes land, buildings, infrastructure and improvements, machinery and equipment, office furniture and fixtures, automotive equipment and construction in progress. The total increase in the City’s investment in capital assets for the current fiscal year was 0.1 percent (a 7.0 percent increase for governmental activities and a 3.6 percent decrease for business-type activities). Major capital asset events during the current fiscal year included the following:

• The City began construction of a $6,000,000 outdoor aquatic center, replacing the original outdoor pool built in 1985. The City is funding the entire project with cash reserves, expending $3,400,000 in 2016 and the remaining balance in 2017. The new aquatic center is scheduled to open by June 1, 2017.

• The City continued to invest in its Pavement Management Program reconstructing West Shore Drive on the southwest side of town and Linden, Madson and Milwaukee avenues and Church and Grove streets in the south central portion of town.

• The City completed the reconditioning of the north water tower along Golf Course Road. Additional information on the City’s capital assets can be found in Note 3C starting on page 89 of this report.

-34-

City of Hutchinson’s Capital Assets (net of depreciation)


Land 8,992,736$ 8,614,668$ 378,068$ 1,434,853$ 1,434,853$ -$ Buildings 4,753,766 4,956,209 (202,443) 24,244,875 25,654,036 (1,409,161) Infrastructure and

improvements 51,960,752 52,023,569 (62,817) 96,817,545 100,125,925 (3,308,380) Machinery and equipment 1,891,887 1,799,397 92,490 3,623,456 4,210,068 (586,612) Automotive equipment 1,441,127 1,005,349 435,778 284,219 306,328 (22,109) Construction in progress 7,087,259 2,758,519 4,328,740 552,854 - 552,854

Total 76,127,527$ 71,157,711$ 4,969,816$ 126,957,802$ 131,731,210$ (4,773,408)$


Long-term debt - At the end of the current fiscal year, the City had total bonded debt outstanding of $59,661,370. This consists of bonds secured by special assessments ($18,540,000) and specified revenue sources (i.e., revenue bonds of $41,121,370).

City of Hutchinson’s Outstanding Debt


G.O. improvement bonds 18,540,000$ 16,780,000$ 1,760,000$ -$ -$ -$ General obligation revenue bonds - - - 24,116,370 26,487,370 (2,371,000) Revenue bonds - - - 17,005,000 18,290,000 (1,285,000) Contracts and notes 120,000 150,000 (30,000) 133,865 209,287 (75,422)

Total 18,660,000$ 16,930,000$ 1,730,000$ 41,255,235$ 44,986,657$ (3,731,422)$


The City’s total debt decreased by $2,001,422 during 2016. Issuances of debt totaled $3,880,000 and long-term debt of $5,881,422 was retired during the year. The debt issued included $1,445,000 to finance several pieces of heavy equipment, including a new fire engine. The debt for heavy equipment has a 5-year maturity compared to a 15-year maturity on debt for annual infrastructure improvements. Standard & Poor’s rates the City of Hutchinson’s 2016 bonds as “AA-”. The revenue bonds of the Electric and Gas Utility fund are separately rated “A1” by Moody’s Investor Services and insured by MBIA Insurance Corporation. Additional information on the City’s long-term debt can be found in Note 3F starting on page 96 of this report.

-35-

Economic Factors and Next Year’s Budgets and Rates

• Hutchinson had an average unemployment rate of 4.4 percent during the fiscal year end 2016. This is an estimate based on information obtained from the Minnesota Department of Employment and Economic Development, which is higher than the average rate of 4.0 percent a year ago. This rate compares unfavorably to the State’s average unemployment rate of approximately 4.1 percent and favorably to the national average annual rate of 4.5 percent.

• Inflationary trends in the region on average for fiscal year 2016 were lower than national indices (i.e. Consumer Price Index).

All of these factors were considered in preparing the City’s budget for the 2017 fiscal year. City management and City Council continually look at cooperative partnerships as a cost savings measure, reductions in program and service areas, and where personnel cost savings can be achieved while at the same time minimizing service impacts on the community. The City continues to rely on a 5 year budget model to predict long-term challenges that may be faced so that in the near-term they can be addressed. Every effort is made each year to provide a realistic balanced budget to maintain long-term financial viability for the City of Hutchinson. Factors involved in balancing the 2017 General fund budget included a four percent tax levy increase to address rising costs. The new outdoor aquatic center was included in the 2017 General fund budget and assumed to open by June 2017. The City compiled a conservative budget for the aquatic center, consisting of $444,000 of revenues and $424,753 of expenses, resulting in a net positive revenue of $19,247. The City’s LGA received from the State increased by $8,414 in 2017 to a total of $2,295,074. The General fund is utilizing only $1,000,000 of the LGA to cover operating expenses with the remaining LGA being reserved in the Capital Improvements Projects fund for General fund facility improvements, miscellaneous infrastructure maintenance and other projects as approved by City Council. The LGA utilized in the 2017 General fund increased from $862,500 in 2016 to offset the reduced transfer-in from the City’s Public Utilities Commission (PUC). The PUC’s transfer is based on 2.75 percent of annual operating revenues and because of warmer than usual winter weather, the PUC’s gas revenue was down more than $4,000,000. This resulted in a reduction to the City transfer of more than $111,000. The storm water rates were increased 3 percent in 2017 to address cash flow needs within the fund. Water, sewer and refuse rates remained unchanged for the year. The Compost fund implemented a reduction in its production model for 2017, substantially reducing the volume of low-margin bagged product sold to big box retailers. The City is placing more effort on expanding sales of its higher quality soil and mulch brands containing higher margins. Compost pricing has been adjusted either up or down depending on the product line for 2017. Pricing adjustments occurred based on the actual cost to produce a certain product line or to neutralize market pricing from competitors. The Liquor budget was amended for 2017 to include additional operating expenses that are anticipated in having the store open on Sundays starting July 2, 2017, as approved by the Minnesota State Legislature. Requests for Information This financial report is designed to provide a general overview of the City’s finances for all those with an interest in the government’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Finance Director, City of Hutchinson, 111 Hassan Street Southeast, Hutchinson, Minnesota 55350.

-36-

kvanthuyne_ABDO16C

Sticky Note


FUND FINANCIAL STATEMENTS



-37-


INTENTIONALLY

-38-


INTENTIONALLY

-39-

The notes to the financial statements are an integral part of this statement.

CITY OF HUTCHINSON, MINNESOTASTATEMENT OF NET POSITION

DECEMBER 31, 2016

Governmental Business-typeActivities Activities Total

ASSETSCash and temporary investments 20,460,647$ 28,818,584$ 49,279,231$ Restricted assets - 2,539,625 2,539,625 Receivables

Interest 27,079 19,880 46,959 Delinquent taxes 114,794 - 114,794 Accounts, net of allowances 410,214 4,470,137 4,880,351 Notes 1,476,113 - 1,476,113 Special assessments 2,762,739 - 2,762,739 Intergovernmental 1,635,409 473,891 2,109,300

Internal balances 14,831 (14,831) - Due from component unit 416 - 416 Inventories - 3,217,890 3,217,890 Prepaid items 4,959 105,534 110,493 Capital assets

Nondepreciable 16,079,995 1,987,707 18,067,702 Depreciable, net of accumulated depreciation 60,047,532 124,970,095 185,017,627

TOTAL ASSETS 103,034,728 166,588,512 269,623,240

DEFERRED OUTFLOWS OF RESOURCESDeferred pension resources 6,264,605 3,171,538 9,436,143

LIABILITIESAccounts payable 1,072,448 3,249,546 4,321,994 Contracts payable 306,858 - 306,858 Due to primary government - - - Due to other governments 22,055 1,836,379 1,858,434 Accrued interest payable 182,266 318,360 500,626 Accrued salaries payable 256,119 210,462 466,581 Deposits payable 30,880 456,240 487,120 Unearned revenue 32,443 - 32,443 Noncurrent liabilities

Due within one year 2,176,646 4,114,612 6,291,258 Due in more than one year 28,959,201 47,781,923 76,741,124

TOTAL LIABILITIES 33,038,916 57,967,522 91,006,438

DEFERRED INFLOWS OF RESOURCESDeferred pension resources 1,428,471 1,044,352 2,472,823

NET POSITIONNet investment in capital assets 58,487,080 83,737,730 142,224,810 Restricted for

Debt service 7,526,229 2,539,625 10,065,854 Future loans 2,485,193 - 2,485,193 Public sites 118,631 - 118,631 Rural fire 12,543 - 12,543 Drug forfeiture 56,607 - 56,607 Tax increment activities 481,593 - 481,593

Unrestricted 5,664,070 24,470,821 30,134,891

TOTAL NET POSITION 74,831,946$ 110,748,176$ 185,580,122$

Primary Government

-40-


Economic Housing andDevelopment Redevelopment

Authority Authority

166,352$ 1,750,871$ - 36,995

207 290 - - - 3,067 - 97,635 - -

804 2,658 - - - - - - - 4,155

- 92,775 - 1,666,742

167,363 3,655,188

52,361 -

1,216 11,839 - -

416 - 115 27,959

- - 4,968 11,359

- 36,995 - 1,344

162 20,752 150,059 325,753

156,936 436,001

17,660 -

- 1,525,517

- - - - - - - - - - - -

45,128 1,693,670

45,128$ 3,219,187$

Component Units

-41-


CITY OF HUTCHINSON, MINNESOTASTATEMENT OF ACTIVITIES


Operating CapitalCharges for Grants and Grants and

Expenses Services Contributions ContributionsPrimary government

Governmental activitiesGeneral government 2,354,768$ 641,899$ 17,416$ -$ Public safety 5,307,364 833,822 394,374 20,800 Streets and highways 5,421,270 760,014 52,840 1,462,207 Culture and recreation 2,892,986 938,724 32,628 148,330 Housing and economic development 583,421 19,076 35,380 - Cemetery, airport and other 1,316,993 266,494 182,772 191,773 Interest on long-term debt 491,730 - - -

Total governmental activities 18,368,532 3,460,029 715,410 1,823,110

Business-type activitiesElectric 26,538,262 27,207,567 - - Natural gas 9,232,357 11,658,645 - - Water 2,610,633 2,355,374 2,221 86,593 Sewer 3,593,584 3,194,892 2,215 113,091 Refuse 1,077,519 1,172,250 13,448 - Composting 2,064,529 2,143,152 1,768 - Storm water 585,575 868,817 782 - Liquor 5,451,353 5,989,628 2,018 -

Total business-type activities 51,153,812 54,590,325 22,452 199,684

Total primary government 69,522,344$ 58,050,354$ 737,862$ 2,022,794$

Component unitsEconomic development 197,188$ 2,921$ 10,558$ -$ Housing and redevelopment 861,625 371,898 230,298 -

Total component units 1,058,813$ 374,819$ 240,856$ -$

General revenuesProperty taxes, levied for general purposesProperty taxes, levied for debt serviceTax incrementsSales taxHotel/motel taxPayment in lieu of taxesFranchise taxesGrants and contributions not restricted to specific programsUnrestricted investment earningsOther revenuesGain on sale of capital assets

Transfers

Total general revenues and transfers

Change in net positionNet position, January 1

Net position, December 31

Functions/Programs

Program Revenues

-42-


Economic Housing andGovernmental Business-type Development Redevelopment

Activities Activities Total Authority Authority

(1,695,453)$ (1,695,453)$ (4,058,368) (4,058,368) (3,146,209) (3,146,209) (1,773,304) (1,773,304)

(528,965) (528,965) (675,954) (675,954) (491,730) (491,730)

(12,369,983) (12,369,983)

- 669,305$ 669,305 - 2,426,288 2,426,288 - (166,445) (166,445) - (283,386) (283,386) - 108,179 108,179 - 80,391 80,391 - 284,024 284,024 - 540,293 540,293

- 3,658,649 3,658,649

(12,369,983) 3,658,649 (8,711,334)

(183,709)$ -$ - (259,429)

(183,709) (259,429)

4,597,702 - 4,597,702 156,890 161,562 2,200,000 - 2,200,000 - -

293,878 - 293,878 - - - 1,270,814 1,270,814 - -

95,133 - 95,133 - - 236,393 - 236,393 - - 196,777 - 196,777 - -

2,306,470 - 2,306,470 22 - 89,916 88,542 178,458 561 5,792

269,357 - 269,357 - - 106,699 84,046 190,745 - -

2,603,373 (2,603,373) - - -

12,995,698 (1,159,971) 11,835,727 157,473 167,354

625,715 2,498,678 3,124,393 (26,236) (92,075) 74,206,231 108,249,498 182,455,729 71,364 3,311,262

74,831,946$ 110,748,176$ 185,580,122$ 45,128$ 3,219,187$

Net (Expense) Revenue and

Primary Government

Changes in Net PositionComponent Units

-43-


INTENTIONALLY

-44-

GOVERNMENT-WIDE FINANCIAL STATEMENTS



-45-


INTENTIONALLY

-46-


INTENTIONALLY

-47-

Capital

Debt Improvement

General Service Projects

ASSETS

Cash and investments 6,965,614$ 5,007,388$ 1,235,300$

Receivables

Interest 8,881 5,184 1,490

Delinquent taxes 114,794 - -

Accounts 239,538 168,301 -

Notes - - -

Special assessments - 2,211,009 -

Intergovernmental 46,122 13,829 388

Advances to other funds - 297,103 402,592

Prepaid items 4,959 - -

TOTAL ASSETS 7,379,908$ 7,702,814$ 1,639,770$

LIABILITIES

Accounts payable 306,534$ 1,424$ 562,513$

Contracts payable - - 176,240

Advances from other funds - - -

Due to other governments 18,760 - -

Accrued salaries payable 246,602 - -

Deposits payable 105 - -

Unearned revenue 32,443 - -

TOTAL LIABILITIES 604,444 1,424 738,753

DEFERRED INFLOWS OF RESOURCES

Unavailable revenue - taxes 114,794 - -

Unavailable revenue - special assessments - 2,211,009 -

Unavailable revenue - interest receivable on interfund loans - 9,155 -

Unavailable revenue - intergovernmental - - -

TOTAL DEFERRED INFLOWS OF RESOURCES 114,794 2,220,164 -

FUND BALANCES

Nonspendable 4,959 - -

Restricted 56,607 5,481,226 -

Committed 5,266,128 - -

Assigned 113,413 - 901,017

Unassigned 1,219,563 - -

TOTAL FUND BALANCES 6,660,670 5,481,226 901,017

TOTAL LIABILITIES, DEFERRED INFLOWS

OF RESOURCES AND FUND BALANCES 7,379,908$ 7,702,814$ 1,639,770$

DECEMBER 31, 2016

GOVERNMENTAL FUNDS

BALANCE SHEET

CITY OF HUTCHINSON, MINNESOTA


-48-

Special

Capital Assessment Other

Improvement Improvement Governmental

Projects 2014 Funds Totals

1,235,300$ -$ 5,173,535$ 18,381,837$

1,490 - 9,469 25,024

- - - 114,794

- - 2,375 410,214

- - 1,476,113 1,476,113

- - 551,730 2,762,739

388 - 1,478,236 1,538,575

402,592 - 753 700,448

- - - 4,959

1,639,770$ -$ 8,692,211$ 25,414,703$

562,513$ -$ 193,835$ 1,064,306$

176,240 - 130,618 306,858

- - 700,448 700,448

- - 3,295 22,055

- - 9,517 256,119

- - 30,775 30,880

- - - 32,443

738,753 - 1,068,488 2,413,109

- - - 114,794

- - 551,730 2,762,739

- - - 9,155

- - 1,296,438 1,296,438

- - 1,848,168 4,183,126

- - - 4,959

- - 3,097,960 8,635,793

- - 1,066,665 6,332,793

901,017 - 2,183,280 3,197,710

- - (572,350) 647,213

901,017 - 5,775,555 18,818,468

1,639,770$ -$ 8,692,211$ 25,414,703$

DECEMBER 31, 2016

GOVERNMENTAL FUNDS

BALANCE SHEET



-49-

kvanthuyne_ABDO16C

Sticky Note



INTENTIONALLY

-50-


Amounts reported for governmental activities in the statementof net position are different because

Total fund balances - governmental funds 18,818,468$

Capital assets used in governmental activities are not financialresources and therefore are not reported as assets in the funds. 74,191,699

Long-term liabilities, including bonds payable, are not due and payable in thecurrent period and therefore are not reported as liabilities in the funds.Long-term liabilities at year-end consist of

Severance payable (490,823) Other post-employment benefit obligation (245,483) Pension liability (11,276,495) Bonds payable (17,095,000) Notes payable (120,000) Bond premiums issued, net of accumulated amortization (425,447)

Long-term assets are not available to pay current-period expenditures and, therefore,are unavailable in the funds.

Delinquent property taxes receivable 114,794 Special assessments receivable 2,762,739 Intergovernmental receivable 1,296,438 Interest receivable 9,155

Governmental funds do not report long-term amounts related to pensions.Deferred outflows of pension resources 6,264,605 Deferred inflows of pension resources (1,428,471)

Governmental funds do not report a liability for accrued interest untildue and payable. (175,161)

Internal service funds are used by management to charge the costs of various services toindividual funds. The assets and liabilities of certain internal service funds are included ingovernmental activities in the statement of net position. 2,630,928

Total net position - governmental activities 74,831,946$

DECEMBER 31, 2016

CITY OF HUTCHINSON, MINNESOTARECONCILIATION OF THE BALANCE SHEET

TO THE STATEMENT OF NET POSITIONGOVERNMENTAL FUNDS

-51-


CITY OF HUTCHINSON, MINNESOTASTATEMENT OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS


Special Capital Assessment

Debt Improvement ImprovementGeneral Service Projects 2014

REVENUESTaxes 4,873,212$ 2,374,511$ 11,433$ -$ Special assessments - 1,179,975 1,424,160 - Licenses and permits 281,559 - - - Intergovernmental 1,441,001 - - 25,000 Charges for services 1,850,037 - - - Fines and forfeits 45,588 - - - Investment earnings 23,920 13,982 6,346 - Miscellaneous 936,627 - 99,113 -

TOTAL REVENUES 9,451,944 3,568,468 1,541,052 25,000

EXPENDITURESCurrent

General government 2,101,566 - - - Public safety 4,090,284 - - - Streets and highways 1,681,625 - - - Culture and recreation 2,355,645 - - - Housing and economic development - - - - Miscellaneous 972,558 - - -

Capital outlayGeneral government - - 22,297 - Public safety - - 57,291 - Streets and highways - - 435,316 1,360 Culture and recreation - - 4,003,544 - Housing and economic development - - - Miscellaneous - - -

Debt servicePrincipal - 2,120,000 30,000 - Interest and other - 448,584 - Bond issuance costs - - -

TOTAL EXPENDITURES 11,201,678 2,568,584 4,548,448 1,360

EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (1,749,734) 999,884 (3,007,396) 23,640

OTHER FINANCING SOURCES (USES)Sale of capital assets - - - - Transfers in 2,150,546 116,077 2,000,000 81,788 Bonds issued - - - - Premiums on bonds issued - - - - Transfers out (599,755) (133,329) (81,788) -

TOTAL OTHER FINANCING SOURCES (USES) 1,550,791 (17,252) 1,918,212 81,788

NET CHANGE IN FUND BALANCES (198,943) 982,632 (1,089,184) 105,428

FUND BALANCES, JANUARY 1 6,859,613 4,498,594 1,990,201 (105,428)

FUND BALANCES, DECEMBER 31 6,660,670$ 5,481,226$ 901,017$ -$

-52-


OtherGovernmental

Funds Totals

119,367$ 7,378,523$ 208,259 2,812,394

- 281,559 438,421 1,904,422 342,407 2,192,444

- 45,588 30,126 74,374

240,182 1,275,922

1,378,762 15,965,226

- 2,101,566 118,563 4,208,847 427,182 2,108,807

37,315 2,392,960 575,177 575,177

- 972,558

- 22,297 - 57,291

3,324,741 3,761,417 241,942 4,245,486 276,965 276,965

91,702 91,702

- 2,150,000 10,152 458,736 43,495 43,495

5,147,234 23,467,304

(3,768,472) (7,502,078)

2,915 2,915 1,577,911 5,926,322 2,435,000 2,435,000

64,108 64,108 (2,389,077) (3,203,949)

1,690,857 5,224,396

(2,077,615) (2,277,682)

7,853,170 21,096,150

5,775,555$ 18,818,468$

-53-


CITY OF HUTCHINSON, MINNESOTARECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDSTO THE STATEMENT OF ACTIVITIES

GOVERNMENTAL FUNDSFOR THE YEAR ENDED DECEMBER 31, 2016

Amounts reported for governmental activities in the statement of activities are different because

Net change in fund balances - governmental funds (2,277,682)$

Governmental funds report capital outlay as expenditures. However, in the statement of activities the costof those assets is allocated over the estimated useful lives and reported as depreciation expense.

Capital outlay 7,314,480 Depreciation expense (3,133,478)

The net effect of various miscellaneous transactions involving capital assets is to increase (decrease) net position.Sale of capital assets (78,589)

The issuance of long-term debt provides current financial resources to governmental funds, while the repayment of principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net position. Also, governmental funds report the effect ofpremiums, discounts and similar items when debt is first issued, whereas these amounts are deferred andamortized in the statement of activities.

Principal repayments 2,150,000 Debt issued or incurred (2,435,000) Premiums on bonds issued, net of amortization expense (21,097)

Interest on long-term debt in the statement of activities differs from the amount reported in the governmental fund because interest is recognized as an expenditure in the funds when it is due, and thus requires the use of current financial resources. In the statement of activities, however, interest expense is recognized as the interest accrues, regardless of when it is due. 406

Long-term pension activity is not reported in governmental funds.Pension expense (986,225) Direct aid contributions 31,726

Certain revenues are recognized as soon as they are earned. Under the modified accrual basis of accounting certain revenues cannot be recognized until they are available to liquidate liabilities of the current period.

Property taxes/tax increments 4,967 Special assessments (613,104) Intergovernmental 611,332 Interest earnings 9,155

Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds.

Compensated absences (38,516) Other post-employment benefits costs (33,645)

Internal service funds are used by management to charge the costs of various services to individual funds. The net revenues of certain activities of internal service funds is reported with governmental activities. 120,985

Change in net position - governmental activities 625,715$

-54-


CITY OF HUTCHINSON, MINNESOTASTATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES

BUDGET AND ACTUALGENERAL FUND


Actual Variance withOriginal Final Amounts Final Budget

REVENUESTaxes 4,853,035$ 4,853,035$ 4,873,212$ 20,177$ Licenses and permits 271,500 271,500 281,559 10,059 Intergovernmental 1,408,529 1,408,529 1,441,001 32,472 Charges for services 1,832,589 1,832,589 1,850,037 17,448 Fines and forfeits 55,000 55,000 45,588 (9,412) Investment earnings 50,000 50,000 23,920 (26,080) Miscellaneous 871,571 871,571 936,627 65,056

TOTAL REVENUES 9,342,224 9,342,224 9,451,944 109,720

EXPENDITURESCurrent

General government 2,190,931 2,190,931 2,101,566 89,365 Public safety 4,088,858 4,088,858 4,090,284 (1,426) Streets and highways 1,820,055 1,820,055 1,681,625 138,430 Culture and recreation 2,362,595 2,362,595 2,355,645 6,950 Miscellaneous 890,796 890,796 972,558 (81,762)

Capital outlayMiscellaneous 10,000 10,000 - 10,000

TOTAL EXPENDITURES 11,363,235 11,363,235 11,201,678 161,557

DEFICIENCY OF REVENUES UNDER EXPENDITURES (2,021,011) (2,021,011) (1,749,734) 271,277

OTHER FINANCING SOURCES (USES)Transfers in 2,121,011 2,121,011 2,150,546 29,535 Transfers out (100,000) (600,000) (599,755) 245

TOTAL OTHER FINANCING SOURCES (USES) 2,021,011 1,521,011 1,550,791 29,780

NET CHANGE IN FUND BALANCES - (500,000) (198,943) 301,057

FUND BALANCES, JANUARY 1 6,859,613 6,859,613 6,859,613 -

FUND BALANCES, DECEMBER 31 6,859,613$ 6,359,613$ 6,660,670$ 301,057$

Budgeted Amounts

-55-

2016 2015 2016 2015 2016 2015

ASSETS

CURRENT ASSETS

Cash and investments 117,131$ 177,086$ 2,032,600$ 1,643,238$ 1,205,782$ 1,158,695$

Receivables

Interest - - 3,365 3,144 1,894 1,924

Accounts, net of allowances of $71,132

and $49,206 for 2016 and 2015, respectively 95,644 66,766 69,601 548,543 115,050 111,784

Intergovernmental - - 52,574 5,248 3,792 3,002

Advances to other funds - - - - - -

Inventories 585,180 583,193 1,186,135 1,314,968 - -

Prepaid items 3,211 3,231 - - - -

TOTAL CURRENT ASSETS 801,166 830,276 3,344,275 3,515,141 1,326,518 1,275,405

NONCURRENT ASSETS

Restricted assets

Cash and investments - - - - - -

Advances from other funds - - - - - -

Capital assets

Land 308,072 308,072 400,608 400,608 10,913 10,913

Construction in progress

Buildings and structures 1,631,037 1,631,037 59,667 59,667 2,318,948 2,318,948

Infrastructure and improvements 99,732 99,732 467,006 424,675 90,345 48,014

Machinery and equipment 259,052 304,437 1,658,893 1,557,779 1,879,554 1,825,794

Automotive equipment - - 483,916 492,123 45,938 45,938

Construction in progress - - - - - -

Less accumulated depreciation (962,844) (936,685) (1,707,498) (1,659,185) (2,952,217) (2,823,387)

Total capital assets

(net of accumulated depreciation) 1,335,049 1,406,593 1,362,592 1,275,667 1,393,481 1,426,220

TOTAL NONCURRENT ASSETS 1,335,049 1,406,593 1,362,592 1,275,667 1,393,481 1,426,220

TOTAL ASSETS 2,136,215 2,236,869 4,706,867 4,790,808 2,719,999 2,701,625

DEFERRED OUTFLOWS OF RESOURCES

Deferred pension resources 189,232 38,223 165,834 34,471 45,900 9,784


STATEMENTS OF NET POSITION

PROPRIETARY FUNDS - CONTINUED ON THE FOLLOWING PAGES

DECEMBER 31, 2016 AND 2015

Business-type Activities - Enterprise Funds

Municipal Liquor Store

609 651 603

Composting Refuse


-56-

kvanthuyne_ABDO16C

Sticky Note



2016 2015 2016 2015 2016 2015

3,174,699$ 3,406,669$ 5,458,782$ 4,142,576$ 1,256,340$ 1,227,425$

5,403 5,618 7,175 8,318 2,043 2,175

232,075 247,430 386,864 1,330,810 17,455 16,904 137,015 117,490 134,924 140,274 - -

54,000 52,000 54,000 52,000 - - - - - - - - - - - - - -

3,603,192 3,829,207 6,041,745 5,673,978 1,275,838 1,246,504

- - - - - - 177,818 232,003 177,818 232,003 - -

16,282 16,282 311,915 311,915 387,063 387,063

17,431,706 17,431,706 28,279,159 28,279,159 - - 16,262,848 16,154,577 19,700,219 19,490,087 4,138,845 4,117,258

3,262,800 3,225,331 6,566,655 6,503,667 242,964 242,964 57,336 79,470 427,187 400,562 160,332 195,372

505,614 - 47,240 - - - (15,119,216) (13,914,067) (29,388,491) (27,766,997) (996,769) (888,244)

22,417,370 22,993,299 25,943,884 27,218,393 3,932,435 4,054,413

22,595,188 23,225,302 26,121,702 27,450,396 3,932,435 4,054,413

26,198,380 27,054,509 32,163,447 33,124,374 5,208,273 5,300,917

161,399 30,006 207,713 42,721 73,380 12,634

Storm Water

652601 602Business-type Activities - Enterprise Funds

Water Sewer

-57-

Governmental

Activities-

Internal

Service

Funds

2016 2015 2016 2015 2016

ASSETS

CURRENT ASSETS

Cash and investments 15,573,250$ 12,640,223$ 28,818,584$ 24,395,912$ 2,078,810$

Receivables

Interest - - 19,880 21,179 2,055

Accounts, net of allowances of $71,132

and $49,206 for 2016 and 2015, respectively 3,553,448 3,123,543 4,470,137 5,445,780 -

Intergovernmental 145,586 128,359 473,891 394,373 96,834

Advances to other funds - - 108,000 104,000 -

Inventories 1,446,575 1,514,693 3,217,890 3,412,854 -

Prepaid items 102,323 1,011 105,534 4,242 -

TOTAL CURRENT ASSETS 20,821,182 17,407,829 37,213,916 33,778,340 2,177,699

NONCURRENT ASSETS

Restricted assets

Cash and investments 2,539,625 2,567,940 2,539,625 2,567,940 -

Advances from other funds - - 355,636 464,006 -

Capital assets

Land - - 1,434,853 1,434,853 -

Construction in progress 39,969

Buildings and structures - - 49,720,517 49,720,517 -

Infrastructure and improvements 134,904,559 134,100,290 175,663,554 174,434,633 -

Machinery and equipment - - 13,869,918 13,659,972 1,441,144

Automotive equipment - - 1,174,709 1,213,465 3,181,897

Construction in progress - - 552,854 - -

Less accumulated depreciation (64,331,568) (60,743,665) (115,458,603) (108,732,230) (2,727,182)

Total capital assets

(net of accumulated depreciation) 70,572,991 73,356,625 126,957,802 131,731,210 1,935,828

TOTAL NONCURRENT ASSETS 73,112,616 75,924,565 129,853,063 134,763,156 1,935,828

TOTAL ASSETS 93,933,798 93,332,394 167,066,979 168,541,496 4,113,527

DEFERRED OUTFLOWS OF RESOURCES

Deferred pension resources 2,328,080 517,600 3,171,538 685,439 -

Public Utilities Commission Totals


STATEMENTS OF NET POSITION

PROPRIETARY FUNDS - CONTINUED

DECEMBER 31, 2016 AND 2015



-58-

kvanthuyne_ABDO16C

Sticky Note



2016 2015 2016 2015 2016 2015

LIABILITIESCURRENT LIABILITIES

Accounts payable 131,809$ 195,073$ 46,260$ 149,327$ 68,645$ 104,529$ Advances from other funds 108,000 104,000 - - - - Due to other governments 66,673 89,186 155 866 9,293 9,196 Accrued interest payable - - - - 580 1,136 Accrued salaries payable 21,624 20,559 15,388 16,320 4,594 1,357 Accrued vacation payable 21,133 18,295 29,122 27,763 1,535 3,427 Deposits payable - - - - - - Current portion of debt - - - - 23,334 -

TOTAL CURRENT LIABILITIES 349,239 427,113 90,925 194,276 107,981 119,645

NONCURRENT LIABILITIESAdvances from other funds 355,636 464,006 - - - - Accrued vacation payable 2,308 7,033 88 - - 827 Other post-employment benefit obligation 23,767 22,473 51,306 48,717 6,745 6,314 Pension liability 518,159 329,822 454,091 297,448 125,684 84,428 Capital leases and notes payable - - - - 23,334 45,777 Bonds payable - - - - - - Less current portion of debt - - - - (23,334) -

TOTAL NONCURRENT LIABILITIES 899,870 823,334 505,485 346,165 132,429 137,346

TOTAL LIABILITIES 1,249,109 1,250,447 596,410 540,441 240,410 256,991

DEFERRED INFLOWS OF RESOURCESDeferred pension resources 63,822 78,385 55,931 70,691 15,480 20,065

NET POSITION Net investment in capital assets 1,335,049 1,406,593 1,362,592 1,275,667 1,370,147 1,380,443 Restricted for

Debt service - - - - - - Unrestricted (322,533) (460,333) 2,857,768 2,938,480 1,139,862 1,053,910

TOTAL NET POSITION 1,012,516$ 946,260$ 4,220,360$ 4,214,147$ 2,510,009$ 2,434,353$


Municipal Liquor Store Composting Refuse

651 603609

PROPRIETARY FUNDS - CONTINUEDDECEMBER 31, 2016 AND 2015

CITY OF HUTCHINSON, MINNESOTASTATEMENTS OF NET POSITION

-59-


2016 2015 2016 2015 2016 2015

23,246$ 64,022$ 111,985$ 108,588$ 12,405$ 15,555$ - - - - - -

1,548 1,615 1,063 5,499 46 - 135,119 145,797 115,529 128,996 3,750 4,917

15,711 15,931 17,549 21,412 7,142 8,574 11,626 14,545 19,205 24,774 7,613 5,488

- - - - - - 1,134,000 1,034,000 1,172,489 1,249,979 145,000 140,000

1,321,250 1,275,910 1,437,820 1,539,248 175,956 174,534

- - - - - - 16,989 7,158 - 1,279 3,143 - 13,628 11,903 42,224 39,635 10,525 9,662

441,947 258,922 568,764 368,634 200,931 109,016 - - 110,531 163,510 - -

12,231,999 13,277,325 11,548,050 12,756,460 460,543 604,057 (1,134,000) (1,034,000) (1,172,489) (1,249,979) (145,000) (140,000)

11,570,563 12,521,308 11,097,080 12,079,539 530,142 582,735

12,891,813 13,797,218 12,534,900 13,618,787 706,098 757,269

54,435 61,535 70,055 87,609 24,749 25,909

10,185,371 9,715,974 14,285,303 14,298,423 3,471,892 3,450,356

- - - - - - 3,228,160 3,509,788 5,480,902 5,162,276 1,078,914 1,080,017

13,413,531$ 13,225,762$ 19,766,205$ 19,460,699$ 4,550,806$ 4,530,373$

602

Sewer

652

Storm WaterWater

601Business-type Activities - Enterprise Funds

-60-


CITY OF HUTCHINSON, MINNESOTASTATEMENTS OF NET POSITION

PROPRIETARY FUNDS - CONTINUEDDECEMBER 31, 2016 AND 2015

GovernmentalActivities-

InternalServiceFunds

2016 2015 2016 2015 2016


Accounts payable 2,855,196$ 2,993,675$ 3,249,546$ 3,630,769$ 8,142$ Advances from other funds - - 108,000 104,000 - Due to other governments 1,757,601 1,757,600 1,836,379 1,863,962 - Accrued interest payable 63,382 67,676 318,360 348,522 7,105 Accrued salaries payable 128,454 110,957 210,462 195,110 - Accrued vacation payable - - 90,234 94,292 - Deposits payable 456,240 478,305 456,240 478,305 - Current portion of debt 1,549,555 1,488,410 4,024,378 3,912,389 -

TOTAL CURRENT LIABILITIES 6,810,428 6,896,623 10,293,599 10,627,349 15,247

NONCURRENT LIABILITIESAdvances from other funds - - 355,636 464,006 - Accrued vacation payable 470,994 446,823 493,522 463,120 - Other post-employment benefit obligation - - 148,195 138,704 - Pension liability 5,634,936 3,700,319 7,944,512 5,148,589 - Capital leases and notes payable - - 133,865 209,287 - Bonds payable 18,845,615 20,316,224 43,086,207 46,954,066 1,482,599 Less current portion of debt (1,549,555) (1,488,410) (4,024,378) (3,912,389) -

TOTAL NONCURRENT LIABILITIES 23,401,990 22,974,956 48,137,559 49,465,383 1,482,599

TOTAL LIABILITIES 30,212,418 29,871,579 58,431,158 60,092,732 1,497,846

DEFERRED INFLOWS OF RESOURCESDeferred pension resources 759,880 528,302 1,044,352 872,496 -

NET POSITION Net investment in capital assets 51,727,376 55,066,625 83,737,730 86,594,081 779,013 Restricted for

Debt service 2,539,625 541,716 2,539,625 541,716 - Unrestricted 11,022,579 7,841,772 24,485,652 21,125,910 1,836,668

TOTAL NET POSITION 65,289,580$ 63,450,113$ 110,763,007 108,261,707 2,615,681$

Adjustment to reflect the consolidationof internal service fund activitiesrelated to enterprise funds. (14,831) (12,209)

Net position of business-typeactivities 110,748,176$ 108,249,498$

TotalsPublic Utilities Commission


-61-


2016 2015 2016 2015 2016 2015OPERATING REVENUES

Sales 5,986,201$ 5,850,319$ 2,136,758$ 3,096,186$ -$ -$ Cost of sales (4,609,147) (4,485,368) (1,547,051) (2,439,647) - -

GROSS PROFIT 1,377,054 1,364,951 589,707 656,539 - - Charges for services - - - - 1,163,115 1,136,765 Penalties - - - - 9,135 9,928 Other operating revenue 2,018 - 1,768 - 489 -

TOTAL OPERATING REVENUES 1,379,072 1,364,951 591,475 656,539 1,172,739 1,146,693

OPERATING EXPENSESPersonal services 588,971 526,184 358,631 70,206 175,229 148,995 Supplies and maintenance 19,888 19,027 (26,006) (11,124) 50,831 54,055 Other services and charges 127,772 121,589 127,148 90,495 721,271 708,693 Depreciation and depletion 81,228 82,272 57,113 13,769 128,830 122,519 Production - - - - - - Purchased power/gas - - - - - - Transmission - - - - - - Distribution - - - - - - Customer accounts expense - - - - - - Sales expense - - - - - - Administration and general - - - - - -

TOTAL OPERATING EXPENSES 817,859 749,072 516,886 163,346 1,076,161 1,034,262

OPERATING INCOME (LOSS) 561,213 615,879 74,589 493,193 96,578 112,431

NONOPERATING REVENUES (EXPENSES)Sales tax - - - - - - Intergovernmental - - - - 12,959 12,608 Interest earnings 574 820 8,942 8,823 5,381 6,506 Rents - - - - - - Merchandise and contract work, net - - - - - - Other income 3,155 2,886 6,394 3,975 - - Gain (loss) on sale of capital assets - - 26,288 (24,284) 17,000 - Interest expense - customer accounts and other (23,686) (27,951) - - (1,262) (2,139) Interest expense - bonds - - - - - - Amortization of development study - - - - - - Bond premium amortization - - - - - - Bond issuance costs - - - - - -

TOTAL NONOPERATING REVENUES (EXPENSES) (19,957) (24,245) 41,624 (11,486) 34,078 16,975

INCOME (LOSS) BEFORE CONTRIBUTIONS AND TRANSFERS 541,256 591,634 116,213 481,707 130,656 129,406

FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015PROPRIETARY FUNDS - CONTINUED ON THE FOLLOWING PAGES

STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET POSITIONCITY OF HUTCHINSON, MINNESOTA

Business-type Activities - Enterprise Funds609 651 603


-62-


2016 2015 2016 2015 2016 2015

-$ -$ -$ -$ -$ -$ - - - - - -

- - - - - - 2,264,144 2,357,428 3,141,811 3,313,050 861,999 797,751

13,226 15,268 16,018 18,365 - - 1,721 - 2,215 - 782 -

2,279,091 2,372,696 3,160,044 3,331,415 862,781 797,751

533,046 452,294 637,918 585,705 267,727 188,254 117,147 126,862 181,332 187,610 120,606 99,616 380,452 516,584 858,674 674,195 47,430 63,975

1,227,282 1,159,268 1,621,494 1,552,533 143,566 134,222 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

2,257,927 2,255,008 3,299,418 3,000,043 579,329 486,067

21,164 117,688 (139,374) 331,372 283,452 311,684

635,407 612,423 635,407 612,423 - - 500 - - 958,369 - -

26,754 35,390 32,390 44,157 6,129 6,850 62,009 56,979 9,160 3,584 - 631

- - - - - - 15,995 52,964 27,903 54,166 6,818 3,853

- - - - - - - - - - - -

(363,482) (389,687) (304,958) (337,635) (9,383) (14,780) - - - - - -

11,326 11,326 11,410 11,410 3,514 3,514 - - - - - -

388,509 379,395 411,312 1,346,474 7,078 68

409,673 497,083 271,938 1,677,846 290,530 311,752


Water Sewer Storm Water

652

-63-


CITY OF HUTCHINSON, MINNESOTASTATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION

PROPRIETARY FUNDS - CONTINUEDFOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015



2016 2015 2016 2015OPERATING REVENUES

Sales -$ -$ 8,122,959$ 8,946,505$ -$ Cost of sales - - (6,156,198) (6,925,015) -

GROSS PROFIT - - 1,966,761 2,021,490 - Charges for services 36,734,294 36,428,559 44,165,363 44,033,553 325,224 Penalties - - 38,379 43,561 - Other operating revenue 1,772,429 1,715,004 1,781,422 1,715,004 -

TOTAL OPERATING REVENUES 38,506,723 38,143,563 47,951,925 47,813,608 325,224

OPERATING EXPENSESPersonal services - - 2,561,522 1,971,638 - Supplies and maintenance - - 463,798 476,046 - Other services and charges - - 2,262,747 2,175,531 112,872 Depreciation and depletion 3,822,398 3,824,434 7,081,911 6,889,017 294,756 Production 3,387,289 3,066,764 3,387,289 3,066,764 - Purchased power/gas 19,587,444 21,057,004 19,587,444 21,057,004 - Transmission 2,495,813 2,072,776 2,495,813 2,072,776 - Distribution 1,550,410 1,533,087 1,550,410 1,533,087 - Customer accounts expense 448,412 417,218 448,412 417,218 - Sales expense 392,888 294,625 392,888 294,625 - Administration and general 3,460,194 3,299,819 3,460,194 3,299,819 -

TOTAL OPERATING EXPENSES 35,144,848 35,565,727 43,692,428 43,253,525 407,628

OPERATING INCOME (LOSS) 3,361,875 2,577,836 4,259,497 4,560,083 (82,404)

NONOPERATING REVENUES (EXPENSES)Sales tax - - 1,270,814 1,224,846 - Intergovernmental - - 13,459 970,977 - Interest earnings 8,372 31,956 88,542 134,502 6,387 Rents - - 71,169 61,194 - Merchandise and contract work, net 4,990 6,765 4,990 6,765 - Other income 354,499 158,282 414,764 276,126 4,904 Gain (loss) on sale of capital assets 40,758 - 84,046 (24,284) 76,872 Interest expense - customer accounts and other - (96) (24,948) (30,186) - Interest expense - bonds (811,379) (857,029) (1,489,202) (1,599,131) (7,105) Amortization of development study - (262,972) - (262,972) - Bond premium amortization 185,608 185,608 211,858 211,858 - Bond issuance costs - - - - (25,811)

TOTAL NONOPERATING REVENUES (EXPENSES) (217,152) (737,486) 645,492 969,695 55,247

INCOME (LOSS) BEFORE CONTRIBUTIONS AND TRANSFERS 3,144,723 1,840,350 4,904,989 5,529,778 (27,157)


TotalsPublic Utilities Commission

-64-


2016 2015 2016 2015 2016 2015

CAPITAL CONTRIBUTIONS FROM OTHER FUNDS -$ -$ -$ -$ -$ -$ OTHER CAPITAL CONTRIBUTIONS

Capital contributions from townships - - - - - - Special assessments - - - - - - Connection fees - - - - - -

TRANSFERS OUT (475,000) (465,000) (110,000) (110,000) (55,000) (55,000)

CHANGE IN NET POSITION 66,256 126,634 6,213 371,707 75,656 74,406

NET POSITION, JANUARY 1 946,260 819,626 4,214,147 3,842,440 2,434,353 2,359,947

NET POSITION, DECEMBER 31 1,012,516$ 946,260$ 4,220,360$ 4,214,147$ 2,510,009$ 2,434,353$





-65-


2016 2015 2016 2015 2016 2015

-$ 562,212$ -$ 186,623$ -$ 352,155$

- - - - - - 545 211 - - - -

86,048 26,304 113,091 34,569 - - (308,497) (277,058) (79,523) (79,025) (270,097) (127,454)

187,769 808,752 305,506 1,820,013 20,433 536,453

13,225,762 12,417,010 19,460,699 17,640,686 4,530,373 3,993,920

13,413,531$ 13,225,762$ 19,766,205$ 19,460,699$ 4,550,806$ 4,530,373$

601 602 652

Storm WaterSewerWater


-66-






2016 2015 2016 2015

CAPITAL CONTRIBUTIONS FROM OTHER FUNDS -$ -$ -$ 1,100,990$ -$ OTHER CAPITAL CONTRIBUTIONS

Capital contributions from townships - - - - 264,453 Special assessments - - 545 211 - Connection fees - - 199,139 60,873 -

TRANSFERS OUT (1,305,256) (738,110) (2,603,373) (1,851,647) (119,000)

CHANGE IN NET POSITION 1,839,467 1,102,240 2,501,300 4,840,205 118,296

NET POSITION, JANUARY 1 63,450,113 65,994,236 108,261,707 107,067,865 2,497,385

NET POSITION, DECEMBER 31 65,289,580$ 63,450,113$ 110,763,007$ 108,261,707$ 2,615,681$

2,501,300 4,840,205$

(2,622) (3,732)

Change in net position as shown above $

Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds.

Change in net position of business-type activities 2,498,678$ 4,836,473$

TotalCommissionPublic Utilities


-67-

kvanthuyne_ABDO16C

Sticky Note



2016 2015 2016 2015 2016 2015CASH FLOWS FROM OPERATING ACTIVITIES

Receipts from customers 5,959,341$ 5,842,932$ 2,570,142$ 2,684,417$ 1,169,473$ 1,148,469$ Receipts from interfund services provided - - - - - - Other receipts 3,155 2,886 6,394 3,975 - - Payments to vendors and suppliers (4,844,551) (4,696,641) (1,540,422) (2,309,314) (807,889) (731,264) Payments to or on behalf of employees (565,734) (531,934) (345,007) (154,218) (173,725) (184,660)

NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 552,211 617,243 691,107 224,860 187,859 232,545

CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIESTransfers out (475,000) (465,000) (110,000) (110,000) (55,000) (55,000) Operating grants received - - - - 12,169 16,348

NET CASH PROVIDED (USED) BY NONCAPITAL FINANCING ACTIVITIES (475,000) (465,000) (110,000) (110,000) (42,831) (38,652)

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIESAcquisition of capital assets (9,684) (26,164) (226,754) (143,294) (96,091) (75,084) Capital grant received - - - - - - Proceeds from sale of capital assets - - 26,288 6,818 17,000 5,310 Sales tax received - - - - - - Special assessments received - - - - - - Connection fees collected - - - - - - Net proceeds from issuance of debt - - - - - - Principal paid on long-term debt - - - - (22,443) (21,586) Interest paid on long-term debt (23,686) (27,951) - - (1,818) (2,675) Bond issuance costs - - - - - - Interfund advance for capital improvements (104,370) (100,354) - - - -

NET CASH PROVIDED (USED) BY CAPITAL AND RELATED FINANCING ACTIVITIES (137,740) (154,469) (200,466) (136,476) (103,352) (94,035)

CASH FLOWS FROM INVESTING ACTIVITIESInterest received on investments 574 820 8,721 8,025 5,411 6,233

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (59,955) (1,406) 389,362 (13,591) 47,087 106,091

CASH AND CASH EQUIVALENTS, JANUARY 1 177,086 178,492 1,643,238 1,656,829 1,158,695 1,052,604

CASH AND CASH EQUIVALENTS, DECEMBER 31 117,131$ 177,086$ 2,032,600$ 1,643,238$ 1,205,782$ 1,158,695$

CASH AND CASH EQUIVALENTS , REPORTED ON STATEMENT OF NET POSITION AS FOLLOWSUnrestricted cash and investments 117,131$ 177,086$ 2,032,600$ 1,643,238$ 1,205,782$ 1,158,695$ Restricted cash and investments - - - - - -

TOTAL CASH AND CASH EQUIVALENTS 117,131$ 177,086$ 2,032,600$ 1,643,238$ 1,205,782$ 1,158,695$

609 651 603



CITY OF HUTCHINSON, MINNESOTASTATEMENTS OF CASH FLOWS

PROPRIETARY FUNDS - CONTINUED ON FOLLOWING PAGESFOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

-68-


2016 2015 2016 2015 2016 2015

2,294,446$ 2,341,531$ 3,145,421$ 2,364,046$ 862,230$ 797,895$ - - - - - -

78,004 109,943 995,432 57,750 6,818 4,484 (538,442) (705,535) (1,041,045) (876,961) (171,140) (151,514) (480,097) (445,392) (628,456) (586,118) (233,019) (185,330)

1,353,911 1,300,547 2,471,352 958,717 464,889 465,535

(308,497) (277,058) (79,523) (79,025) (270,097) (127,454) 500 - - 958,369 - -

(307,997) (277,058) (79,523) 879,344 (270,097) (127,454)

(651,353) (559,531) (346,985) (1,842,890) (21,588) - - - - - - - - - - - - -

615,882 563,091 640,957 540,307 - - 545 211 - - - -

86,048 26,304 113,091 34,569 - - - - - - - -

(1,034,000) (913,000) (1,249,979) (1,222,511) (140,000) (166,917) (374,160) (399,189) (318,425) (350,734) (10,550) (26,625)

- - - - - - 52,185 50,177 52,185 50,177 - -

(1,304,853) (1,231,937) (1,109,156) (2,791,082) (172,138) (193,542)

26,969 35,063 33,533 43,020 6,261 6,274

(231,970) (173,385) 1,316,206 (910,001) 28,915 150,813

3,406,669 3,580,054 4,142,576 5,052,577 1,227,425 1,076,612

3,174,699$ 3,406,669$ 5,458,782$ 4,142,576$ 1,256,340$ 1,227,425$

3,174,699$ 3,406,669$ 5,458,782$ 4,142,576$ 1,256,340$ 1,227,425$ - - - - - -

3,174,699$ 3,406,669$ 5,458,782$ 4,142,576$ 1,256,340$ 1,227,425$

Business-type Activities - Enterprise Funds601 602 652


-69-



PROPRIETARY FUNDS - CONTINUED FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015



2016 2015 2016 2015CASH FLOWS FROM OPERATING ACTIVITIES

Receipts from customers 36,282,324$ 37,257,602$ 52,283,377$ 52,436,892$ -$ Receipts from interfund services provided - - - - 325,224 Other receipts 2,114,690 1,996,379 3,204,493 2,175,417 4,904 Payments to vendors and suppliers (27,282,475) (26,514,283) (36,225,964) (35,985,512) (122,008) Payments to or on behalf of employees (3,814,264) (4,285,411) (6,240,302) (6,373,063) -

NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 7,300,275 8,454,287 13,021,604 12,253,734 208,120

CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIESTransfers out (1,305,256) (738,110) (2,603,373) (1,851,647) (119,000) Operating grants received - - 12,669 974,717 -

NET CASH PROVIDED (USED) BY NONCAPITAL FINANCING ACTIVITIES (1,305,256) (738,110) (2,590,704) (876,930) (119,000)

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIESAcquisition of capital assets (1,038,764) (817,844) (2,391,219) (3,464,807) (1,196,784) Capital grant received - - - - 167,619 Proceeds from sale of capital assets 40,758 - 84,046 12,128 111,497 Sales tax received - - 1,256,839 1,103,398 - Special assessments received - - 545 211 - Connection fees collected - - 199,139 60,873 - Net proceeds from issuance of debt - - - - 1,482,599 Principal paid on long-term debt (1,285,000) (1,225,000) (3,731,422) (3,549,014) - Interest paid on long-term debt (815,673) (861,112) (1,544,312) (1,668,286) - Bond issuance costs - - - - (25,811) Interfund advance for capital improvements - - - - -

NET CASH PROVIDED (USED) BY CAPITAL AND RELATED FINANCING ACTIVITIES (3,098,679) (2,903,956) (6,126,384) (7,505,497) 539,120

CASH FLOWS FROM INVESTING ACTIVITIESInterest received on investments 8,372 31,956 89,841 131,391 6,586

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,904,712 4,844,177 4,394,357 4,002,698 634,826

CASH AND CASH EQUIVALENTS, JANUARY 1 15,208,163 10,363,986 26,963,852 22,961,154 1,443,984

CASH AND CASH EQUIVALENTS, DECEMBER 31 18,112,875$ 15,208,163$ 31,358,209$ 26,963,852$ 2,078,810$

CASH AND CASH EQUIVALENTS , REPORTED ON STATEMENT OF NET POSITION AS FOLLOWSUnrestricted cash and investments 15,573,250$ 12,640,223$ 28,818,584$ 24,395,912$ 2,078,810$ Restricted cash and investments 2,539,625 2,567,940 2,539,625 2,567,940 -

TOTAL CASH AND CASH EQUIVALENTS 18,112,875$ 15,208,163$ 31,358,209$ 26,963,852$ 2,078,810$



-70-


2016 2015 2016 2015 2016 2015RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH

PROVIDED (USED) BY OPERATING ACTIVITIESOperating income (loss) 561,213$ 615,879$ 74,589$ 493,193$ 96,578$ 112,431$ Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities

Other income related to operations 3,155 2,886 6,394 3,975 - - Depreciation and amortization (see note below) 81,228 82,272 139,829 127,632 128,830 122,519 Pension related adjustments - - - - - - (Increase) decrease in assets

Accounts receivable (28,878) (7,387) 478,942 (414,191) (3,266) 1,776 Due from other governments - - (47,326) 2,422 - - Inventories (1,987) (105,945) 128,833 164,375 - - Prepaid items 20 (175) - - - -

(Increase) decrease in deferred outflows of resourcesDeferred pension resources (151,009) 16,167 (131,363) 23,972 (36,116) 8,609

Increase (decrease) in liabilitiesAccounts payable (63,264) 8,352 (103,067) (69,147) (35,884) 31,248 Due to other governments (22,513) 27,111 (711) 613 97 236 Accrued salaries payable 1,065 4,854 (932) (7,965) 3,237 (4,689) Accrued vacation payable (1,887) (325) 1,447 (2,407) (2,719) 2,913 Other post-employment benefit obligation 1,294 1,395 2,589 2,792 431 465 Pension liability 188,337 (13,469) 156,643 (71,426) 41,256 (31,661) Deposits payable - - - - - -

Increase (decrease) in deferred inflows of resourcesDeferred pension resources (14,563) (14,372) (14,760) (28,978) (4,585) (11,302)

NET CASH PROVIDED BY OPERATING ACTIVITIES 552,211$ 617,243$ 691,107$ 224,860$ 187,859$ 232,545$

Note: Depreciation expense for the Composting fund includes $82,716 and $113,863 allocated to costs of good sold in2016 and 2015, respectively.

NONCASH INVESTING, CAPITAL AND FINANCING ACTIVITIESCapital contributions from other funds -$ -$ -$ -$ -$ -$ Gain (loss) on disposal of capital assets - - - - - - Book value of disposed/traded capital assets - - - 31,102 - 5,310 Amortization of bond (premium) discount - - - - - - Amounts used from escrow for debt payments - - -


609 651 603Business-type Activities - Enterprise Funds


PROPRIETARY FUNDS - CONTINUED FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

-71-


2016 2015 2016 2015 2016 2015

21,164$ 117,688$ (139,374)$ 331,372$ 283,452$ 311,684$

78,004 109,943 37,063 57,750 6,818 4,484 1,227,282 1,159,268 1,621,494 1,552,533 143,566 134,222

- - - - - -

15,355 (31,165) 943,946 (967,369) (551) 144 - - (200) - - - - - - - - - - - - - - -

(131,393) 11,870 (164,992) 18,068 (60,746) 5,024

(40,776) (62,164) 3,397 (16,130) (3,150) 12,077 (67) 75 (4,436) 974 46 -

(220) 5,671 (3,863) 8,174 (1,432) 4,832 6,912 2,304 (6,848) 1,661 5,268 (1,225) 1,725 2,326 2,589 2,791 863 930

183,025 (5,388) 200,130 (15,046) 91,915 (2,433) - - - - - -

(7,100) (9,881) (17,554) (16,061) (1,160) (4,204)

1,353,911$ 1,300,547$ 2,471,352$ 958,717$ 464,889$ 465,535$

-$ 562,212$ -$ 186,623$ -$ 352,155$ - - - - - - - - - - - -

(11,326) (11,326) (11,410) (11,410) (3,514) (3,514) - - - 595,000

Storm WaterWater Sewer

601 602 652Business-type Activities - Enterprise Funds

-72-


STATEMENTS OF CASH FLOWS

PROPRIETARY FUNDS - CONTINUED

FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

Governmental

Activities-

Internal

Service

Funds

2016 2015 2016 2015

RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH

PROVIDED (USED) BY OPERATING ACTIVITIES

Operating income (loss) 3,361,875$ 2,577,836$ 4,259,497$ 4,560,083$ (82,404)$

Adjustments to reconcile operating income (loss) to

net cash provided (used) by operating activities

Other income related to operations 359,488 164,951 490,922 343,989 4,904

Depreciation and amortization (see note below) 3,822,398 3,824,434 7,164,627 7,002,880 294,756

Pension related adjustments 355,715 64,658 355,715 64,658 -

(Increase) decrease in assets

Accounts receivable (429,905) 791,933 975,643 (626,259) -

Due from other governments (17,227) 116,424 (64,753) 118,846 -

Inventories 68,118 16,841 194,964 75,271 -

Prepaid items (101,312) 15,121 (101,292) 14,946 -

(Increase) decrease in deferred outflows of resources

Deferred pension resources - - (675,619) 83,710 -

Increase (decrease) in liabilities

Accounts payable (138,479) 399,856 (381,223) 304,092 (9,136)

Due to other governments 1 430,124 (27,583) 459,133 -

Accrued salaries payable 17,497 3,508 15,352 14,385 -

Accrued vacation payable 24,171 11,491 26,344 14,412 -

Other post-employment benefit obligation - - 9,491 10,699 -

Pension liability - - 861,306 (139,423) -

Deposits payable (22,065) 37,110 (22,065) 37,110 -

Increase (decrease) in deferred inflows of resources

Deferred pension resources - - (59,722) (84,798) -

NET CASH PROVIDED BY OPERATING ACTIVITIES 7,300,275$ 8,454,287$ 13,021,604$ 12,253,734$ 208,120$

Note: Depreciation expense for the Composting fund includes $82,716 and $113,863 allocated to costs of good sold in

2016 and 2015, respectively.

NONCASH INVESTING, CAPITAL AND FINANCING ACTIVITIES

Capital contributions from other funds -$ -$ -$ 1,100,990$ -$

Gain (loss) on disposal of capital assets - - - - 76,872

Book value of disposed/traded capital assets - - - 36,412 34,625

Amortization of bond (premium) discount (185,608) (185,608) (211,858) (211,858) -

Amounts used from escrow for debt payments - - 595,000 -




-73-

kvanthuyne_ABDO16C

Sticky Note



INTENTIONALLY

-74-

CITY OF HUTCHINSON, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2016 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting entity The City of Hutchinson (the City) operates under its own Home Rule Charter. The City is governed by an elected mayor

and a four-member council. The Council exercises legislative authority and determines all matters of policy. The Council appoints personnel responsible for the proper administration of all affairs relating to the City. The City has considered all potential units for which it is financially accountable, and other organizations for which the nature and significance of their relationship with the City are such that exclusion would cause the City’s financial statements to be misleading or incomplete. The Governmental Accounting Standards Board (GASB) has set forth criteria to be considered in determining financial accountability. These criteria include appointing a voting majority of an organization’s governing body, and (1) the ability of the primary government to impose its will on that organization or (2) the potential for the organization to provide specific benefits to, or impose specific financial burdens on the primary government. Each discretely presented component unit is reported in a separate column in the combined financial statements to emphasize it is legally separate from the City. Each discretely presented component unit has a

December 31 year end. Discretely Presented Component Units. The Hutchinson Housing and Redevelopment Authority (HRA) was created

pursuant to Minnesota statutes to carry out housing and redevelopment within the City in accordance with policies established by the City Council. The HRA is presented as a discretely presented component unit as a proprietary fund type. It is classified as a discretely presented component unit because the five-member board consists of five mayor-approved members, the HRA may not exercise any of the powers enumerated by the authorizing statutes without prior approval of the City Council, the HRA does not provide services entirely, or almost entirely, to the City and there is no debt that is expected to be repaid almost entirely with the City’s resources. Separate financial statements for the HRA may be obtained at the City’s offices.

The Hutchinson Economic Development Authority (EDA) was created pursuant to Minnesota statutes 469.090 through

469.108 to carry out economic and industrial development and redevelopment within the City in accordance with policies established by the City Council. The EDA is presented as a discretely presented component unit as a governmental fund type. It is classified as a discretely presented component unit because the seven-member board consists of two Council members and five other Council approved members, the EDA may not exercise any of the powers enumerated by the authorizing statutes without prior approval of the City Council, the EDA does not provide services entirely, or almost entirely, to the City and there is no debt that is expected to be repaid almost entirely with the City’s resources. Separate financial statements are not issued for this component unit.

Other Agencies. The Hutchinson Public Utilities Commission (PUC) was established and statutory authority is provided

in accordance with chapter 412.321 of the Minnesota statutes. The Commission has five Council approved members who serve overlapping five-year terms for no more than two successive terms. The statutes provide the City Council all the discretionary authority necessary to operate the utilities except as its powers has been delegated to the Commission. The PUC fund is considered to be part of the primary government and is included with the enterprise funds of this report. Separate financial statements are issued for the PUC and may be obtained at the City’s offices.

Joint ventures The City has entered into a joint powers agreement with the Minnesota Department of Transportation and McLeod

County. The purpose of the agreement is to provide policies and procedures for the joint operation of the Hutchinson Area Transportation Facility. The Joint Powers Board consists of four members. Two members are appointed by the Hutchinson City Council, one member is appointed by the Minnesota Commissioner of Transportation, and one member is appointed by the McLeod County Commissioners. The present budget funding for the operation is as follows:

City of Hutchinson 40 %State of Minnesota 30 %McLeod County 30 %

The City is the fiscal agent for the venture, whose operations are reported as a special revenue fund of the City. Since

inception in 1996, the joint venture has accumulated sufficient financial resources from the funding sources to provide for operations. No separate financial statements are issued for this joint venture.

-75-


DECEMBER 31, 2016 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED B. Government-wide and fund financial statements

The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the activities of the primary government and its component units. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. Likewise, the primary government is reported separately from certain legally separate component units for which the primary government is financially accountable. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Amounts reported as program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds and proprietary funds. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements.

C. Measurement focus, basis of accounting, and financial statement presentation

The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences, other postemployment benefits, and claims and judgments, are recorded only when payment is due. Property taxes, franchise taxes, licenses, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the City. Revenue resulting from exchange transactions, in which each party gives and receives essentially equal value, is recorded on the accrual basis when the exchange takes place. On a modified accrual basis, revenue is recorded in the year in which the resources are measurable and become available. Non-exchange transactions, in which the City receives value without directly giving equal value in return, include property taxes, grants, entitlement and donations. On an accrual basis, revenue from property taxes is recognized in the year for which the tax is levied. Revenue from grants, entitlements and donations is recognized in the year in which all eligibility requirements have been satisfied. Eligibility requirements include timing requirements, which specify the year when the resources are required to be used or the year when use is first permitted, matching requirements, in which the City must provide local resources to be used for a specified purpose, and expenditure requirements, in which the resources are provided to the City on a reimbursement basis. On a modified accrual basis, revenue from non-exchange transactions must also be available before it can be recognized.

-76-


DECEMBER 31, 2016

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Unearned revenue arises when assets are recognized before revenue recognition criteria have been satisfied. Grants and entitlements received before eligibility requirements are met are also recorded as unearned revenue.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

The City reports the following major governmental funds:

The General fund is the City’s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund.

The Debt Service fund accounts for the resources accumulated and payments made for principal and interest on long-term general obligation debt of governmental funds.

The Capital Improvement Projects fund accounts for the resources to fund various capital improvements and purchases though the City.

The Special Assessment Improvement 2014 fund accounts for the resources provided and the infrastructure improvements related to the City’s street and parking lot projects for 2014.

The City reports the following major proprietary funds:

The Municipal Liquor fund is used to account for the operation of the municipal off-sale liquor store.

The Composting fund is used to account for the operation, maintenance, and capital improvements of the City’s composting system.

The Refuse fund is used to account for the operation, maintenance, and capital improvements of the City’s residential refuse system.

The Water fund is used to account for the operation, maintenance, and capital improvements of the City’s water, system.

The Sewer fund is used to account for the operation, maintenance, and capital improvements of the City’s sewer system.

The Storm Water fund is used to account for the operation, maintenance, and capital improvement of the City’s storm water system.

The Public Utilities Commission fund is used to account for the operation, maintenance, and capital improvements, of the municipally owned electric and natural gas systems in the City.

Additionally, the City reports the following fund types:

Internal service funds account for operations that provide central garage and insurance services to other departments or agencies of the City, or to other governments, on a cost reimbursement basis.

Enterprise funds are used to account for those operations that are financed and operated in a manner similar to private business or where the Council has decided that the determination of revenues earned, costs incurred and/or net income is necessary for management accountability.

As a general rule the effect of interfund activity has been eliminated from government-wide financial statements. Exceptions to this general rule are payments in lieu of taxes and charges between the City’s water, sewer, refuse, electric and natural gas functions and various other functions of the City. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned.

-77-

kvanthuyne_ABDO16C

Sticky Note



DECEMBER 31, 2016 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and

expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the City’s enterprise funds and of the City’s internal service funds are charges to customers for sales and services. The City also recognizes as operating revenue the portion of tap fees intended to recover the cost of connecting new customers to the system. Operating expenses for enterprise funds and internal service funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses.

When both restricted and unrestricted resources are available for use, it is the City’s policy to use restricted resources first, then unrestricted resources as they are needed.

D. Assets, deferred outflows of resources, liabilities, deferred inflows of resources and net position/fund balance Deposits and investments The City’s cash and cash equivalents are considered to be cash on hand, demand deposits and short-term investments

with original maturities of three months or less from the date of acquisition. Certain restricted assets are included in cash and cash equivalents. The proprietary funds’ portion in the government-wide cash and temporary investments pool is considered to be cash and cash equivalents for purposes of the statements of cash flows.

Cash balances from all funds are pooled and invested, to the extent available, in certificates of deposit and other

authorized investments. Earnings on investments are allocated to the individual funds based upon the average of month-end cash and investment balances.

The City may also invest idle funds as authorized by Minnesota statutes, as follows:

1. Direct obligations or obligations guaranteed by the United States or its agencies.

2. Shares of investment companies registered under the Federal Investment Company Act of 1940 and received the highest credit rating, rated in one of the two highest rating categories by a statistical rating agency, and have a final maturity of thirteen months or less.

3. General obligations of a state or local government with taxing powers rated “A” or better; revenue obligations rated “AA” or better.

4. General obligations of the Minnesota Housing Finance Agency rated “A” or better.

5. Obligation of a school district with an original maturity not exceeding 13 months and (i) rated in the highest category by a national bond rating service or (ii) enrolled in the credit enhancement program pursuant to statute section 126C.55.

6. Bankers’ acceptances of United States banks eligible for purchase by the Federal Reserve System.

7. Commercial paper issued by United States banks corporations or their Canadian subsidiaries, of highest quality category by at least two nationally recognized rating agencies, and maturing in 270 days or less.

8. Repurchase or reverse repurchase agreements and securities lending agreements with financial institutions qualified as a “depository” by the government entity, with banks that are members of the Federal Reserve System with capitalization exceeding $10,000,000, a primary reporting dealer in U.S. government securities to the Federal Reserve Bank of New York, or certain Minnesota securities broker-dealers.

9. Guaranteed investment contracts (GIC's) issued or guaranteed by a United States commercial bank, a domestic branch of a foreign bank, a United States insurance company, or its Canadian subsidiary, whose similar debt obligations were rated in one of the top two rating categories by a nationally recognized rating agency.

-78-


DECEMBER 31, 2016 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED Investment policy

The purpose of this policy is to establish specific guidelines the City of Hutchinson will use in the investment of City funds. It will be the responsibility of the City Administrator to invest City Funds in order to attain the highest market rate of return with the maximum security while meeting the daily cash flow demands of the City and protecting the capital of the overall portfolio. Investments will be made in accordance with all state and local statutes governing the investment of public funds.

Investment officers acting in accordance with this policy, with Minnesota statutes, chapter 118A, and exercising due diligences shall be relieved of personal responsibility for an individual security’s risk or market price change, provided that reasonable action is taken to control adverse developments and unexpected deviations are reported in a timely manner.

Objective

A. Safety - Safety of principal is of critical importance to the investment program. Investments of the City shall be undertaken in a manner that seeks to ensure the preservation of principal in the overall portfolio. The objective will be to mitigate credit risk and interest rate risk. 1. Credit Risk - the risk of loss due to failure of the security issuer or backer, will be minimized by:

- Limiting investments to the types of securities listed in Section VIII of this investment policy. - Pre-qualifying the financial institutions, broker/dealers, intermediaries, and advisors with which the

City will do business in accordance with Section VII. - Diversifying the investment portfolio so that the impact of potential losses from any one type of

security or from any one individual issuer will be minimized. Insurance or collateral may be required to ensure return of principal.

2. Interest Rate Risk - the risk that the market value of securities in the portfolio will fall due to changes in market interest rates will be minimized to:

- Provide for liquidity by reviewing cash flow requirements and make investments to meet the shorter

cash flow needs, thereby avoiding the need to sell securities in the open market prior to maturity. - Manage the average maturity of the overall portfolio to be consistent with the risk of the City.

B. Liquidity - The City’s investment portfolio will remain sufficiently liquid to enable the City to meet all

operating requirements reasonably anticipated. The portfolio will be structured so that the portfolio emphasizes liquidity and consists largely of securities with active secondary or resale markets (dynamic liquidity). A portion of the portfolio may be placed in money market mutual funds or local government investment pools which offer same day liquidity for short-term funds.

C. Yield - The City’s investment portfolio shall be designed with the objective of attaining a market rate of return.

The core of investments is limited to low-risk securities in anticipation of earning a fair return relative to the risk being assumed. Securities shall generally be held until maturity with the following exceptions:

• A security with declining credit may be sold early to minimize loss of principal. • A security swap would improve the quality, yield, or target duration in the portfolio. • Liquidity needs of the portfolio require that the security be sold.

The City Administrator or investment designee will attempt to diversify its investments according to type and maturity. The City will attempt to match its investments with anticipated cash flow requirements. Extended maturities may be utilized to take advantage of higher yields. Diversifications strategies shall be determined and revised periodically by the City Council for all funds. Broker money market funds operate in accordance with appropriate state laws and regulations. The reported value of the pool is the same as the fair value of the shares.

-79-


DECEMBER 31, 2016 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs. The City has the following recurring fair value measurements as of December 31, 2016:

• Government agency securities of $5,776,196 are valued using quoted market prices (Level 1 inputs) • Municipal bonds of $2,019,332, government agency securities of $1,757,895 and negotiable certificates of

deposits of $9,193,247 are valued using a matrix pricing model (Level 2 inputs) Property taxes The City Council annually adopts a tax levy and certifies it to the County in December for collection the following year.

The County is responsible for collecting all property taxes for the City. These taxes attach an enforceable lien on taxable property within the City on January 1 and are payable by the property owners in two installments in May and October. The taxes are collected by the County Treasurer and tax settlements are made to the City during January, June and November each year.

Delinquent taxes receivable include the past six years' uncollected taxes. Delinquent taxes have been offset by a deferred inflow of resources for delinquent taxes not received within 60 days after year end in the governmental fund financial statements.

Accounts receivable

Accounts receivable include amounts billed for services provided before year end. Unbilled utility enterprise fund receivables are also included for services provided in 2016. All trade receivables are shown net of an allowance for uncollectible accounts. The allowance in the Public Utilities Commission enterprise fund at December 31, 2016 was $71,132. The other utility funds do not record an allowance because uncollected bills may be certified to the County for collection.

Special assessments

Special assessments represent the financing for public improvements paid for by benefiting property owners. These assessments are recorded as receivables upon certification to the County. Special assessments are recognized as revenue when they are received in cash or within 60 days after year end. All governmental special assessments receivable are offset by a deferred inflow of resources in the fund financial statements. Interfund receivables and payables

Transactions between funds that are representative of lending/borrowing arrangements outstanding at the end of the

fiscal year are referred to as either “interfund receivables/payables” (i.e., the current portion of interfund loans) or “advances to/from other funds” (i.e., the non-current portion of interfund loans). All other outstanding balances between funds are reported as “due to/from other funds.”

Advances between funds are offset by a fund balance nonspendable account in applicable governmental funds to indicate they are not available for appropriation and are not expendable available financial resources.

Inventories and prepaid items The inventories are stated at the lower of cost or market on the first-in, first-out (FIFO) method. The cost of inventory is

recorded as expenditure at the time inventory is purchased in the General fund and as an expense when consumed in the proprietary fund types.

Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in

both government-wide and fund financial statements. The cost of prepaid items is recorded as expenditures/expenses when consumed rather than when purchased.

-80-


DECEMBER 31, 2016 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED Capital assets

Capital assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items), are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the City as assets with an initial, individual cost of $1 for land and more than $5,000 (amount not rounded) for all other assets and an estimated useful life in excess of one year. The City reports infrastructure assets on a network and subsystem basis. Accordingly, the amounts spent for the construction or acquisition of infrastructure assets are capitalized and reported in the government-wide financial statements. In the case of initial capitalization of general infrastructure assets (i.e., those reported by governmental activities) the City chose to include items dating back to June 30, 1980. The City had already accounted for its prior infrastructure at historical cost for the initial reporting of these assets. As the City constructs or acquires capital assets each period, including infrastructure assets, they are capitalized and reported at historical cost. The reported value excludes normal maintenance and repairs which are essentially amounts spent in relation to capital assets that do not increase the capacity or efficiency of the item or extend its useful life beyond the original estimate. In the case of donations the City values these capital assets at the acquisition value of the item at the date of its donation. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed.

Property, plant and equipment of the primary government, as well as the component units, are depreciated using the

straight-line method over the following estimated useful lives:

Assets Years

Land improvements 4 - 25Buildings and improvements 5 - 50System improvements/infrastructure 20 - 50Office furniture and fixtures 3 - 15Machinery and equipment 4 - 20Automotive equipment 2 - 10

Deferred outflows of resources In addition to assets, the statement of net position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The City has only one item that qualifies for reporting in this category. Accordingly, the item, deferred pension resources, is reported only in the statements of net position. This item results from actuarial calculations and current year pension contributions made subsequent to the measurement date. Pensions For purposes of measuring the net pension liability, deferred outflows/inflows of resources, and pension expense, information about the fiduciary net position of the Public Employees Retirement Association (PERA) and additions to/deductions from PERA’s fiduciary net position have been determined on the same basis as they are reported by PERA except that PERA’s fiscal year end is June 30. For this purpose, plan contributions are recognized as of employer payroll paid dates and benefit payments and refunds are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. For purposes of measuring the net pension liability (asset), deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the defined benefit plan administered by Hutchinson Fire Department Relief Association and additions to and deductions from the plan’s fiduciary net position have been determined on the same basis as they are reported by the plan. Investments are reported at fair value.

-81-



Compensated absences

It is the City's policy to permit employees to accumulate earned but unused vacation and sick pay benefits. No liability is recorded for unpaid accumulated sick leave. However, a liability is recognized for that portion of accumulated sick leave that is estimated will be taken as “terminal leave” prior to retirement. All vacation and sick pay is accrued when incurred in the government-wide and proprietary fund financial statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee resignations and retirements. For the most part, the General fund is typically used to liquidate governmental compensated absences payable. Postemployment benefits other than pensions Under Minnesota statute 471.61, subdivision 2b., public employers must allow retirees and their dependents to continue coverage indefinitely in an employer-sponsored health care plan, under the following conditions: 1) Retirees must be receiving (or eligible to receive) an annuity from a Minnesota public pension plan, 2) Coverage must continue in group plan until age 65, and retirees must pay no more than the group premium, and 3) Retirees may obtain dependent coverage immediately before retirement. All premiums are funded on a pay-as-you-go basis. The liability was actuarially determined, in accordance with GASB Statement 45, at January 1, 2014. For the most part, the General fund is typically used to liquidate governmental OPEB liabilities. Long-term obligations In the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net position. Bond premiums and discounts are deferred and amortized over the life of the bonds using the straight-line method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as an expense in the period incurred. In the fund financial statements, governmental fund types recognized bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. Deferred inflows of resources

In addition to liabilities, the statement of net position and fund financial statements will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The government has only one type of item, which arises only under a modified accrual basis of accounting that qualifies as needing to be reported in this category. Accordingly, the item, unavailable revenue, is reported only in the governmental funds balance sheet. The governmental funds report unavailable revenues from four sources: property taxes, special assessments, intergovernmental and interest. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. The City has an additional item which qualifies for reporting in this category. The item, deferred pension resources, is reported only in the statements of net position and results from actuarial calculations.

-82-



Fund balance In the fund financial statements, fund balance is divided into five classifications based primarily on the extent to which the City is bound to observe constraints imposed upon the use of resources reported in the governmental funds. These classifications are as follows:

Nonspendable - consists of amounts that cannot be spent because it is not in spendable form, such as prepaid items.

Restricted - consists of amounts related to externally imposed constraints established by creditors, grantors or contributors; or constraints imposed by state statutory provisions.

Committed - consists of amounts that are constrained for specific purposes that are internally imposed by formal action (resolution) of the City Council. Those committed amounts cannot be used for any other purpose unless the City Council removes or changes the specified use by taking the same type of action it employed to previously commit those amounts. Assigned - consists of amounts intended to be used for specific purposes set by the governing body itself or by an official to which the governing body delegates the authority. Pursuant to the City’s fund balance policy, the City Administrator is authorized to establish assignments of fund balance. Unassigned - is the residual classification for the General fund and also reflects negative residual amounts in other funds.

When both restricted and unrestricted resources are available for use, it is the City’s policy to first use restricted resources and then use unrestricted resources as they are needed. When committed, assigned or unassigned resources are available for use, it is the City’s policy to use resources in the following order: (1) Committed, (2) Assigned, and (3) Unassigned. The City’s fund balance policy requires an unrestricted fund balance in the General fund of an amount not less than 40 percent of the next year’s budgeted expenditures of the General fund.

Net position

Net position represents the difference between assets and deferred outflows of resources and liabilities and deferred inflows of resources. Net position is displayed in three components:

a. Net investment in capital assets - Consists of capital assets, net of accumulated depreciation reduced by any

outstanding debt attributable to acquire capital assets. b. Restricted net position - Consists of net position restricted when there are limitations imposed on their use

through external restrictions imposed by creditors, grantors, laws or regulations of other governments. c. Unrestricted net position - All other net position that do not meet the definition of “restricted” or “net

investment in capital assets”.

Comparative data/reclassifications

Comparative total data for the prior year have been presented only for individual enterprise funds in the fund financial statements in order to provide an understanding of the changes in the financial position and operations of these funds. Also, certain amounts presented in the prior year have been reclassified in order to be consistent with the current year’s presentation.

-83-


DECEMBER 31, 2016 Note 2: STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY A. Budgetary information Annual budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of

America for the General and Rural Fire Department and Hutchinson Area Transportation Facility special revenue funds. All annual appropriations lapse at fiscal year-end. The City does not use encumbrance accounting.

In June of each year, all departments of the City submit requests for appropriations to the City Administrator so that a

budget may be prepared. Before September 30, the proposed budget is presented to the Council for review. The Council holds public hearings and a final budget is prepared and adopted in early December.

The appropriated budget is prepared by fund, function and department. The City’s department heads may make transfers

of appropriations within a department. Transfers of appropriations between departments require the approval of the Council. The legal level of budgetary control is the department level. Budgeted amounts are as originally adopted, or as amended by the Council.

The City amended its General fund budget for 2016 to include a Council approved transfer of $500,000 to the Capital

Projects. The amended transfer is a use of General fund reserves to fund the 2016 construction costs of a new Aquatic Center that is scheduled to be completed in May 2017.

B. Excess of expenditures over appropriations For the year ended December 31, 2016, expenditures exceeded appropriations in the following fund:

Excess ofExpenditures

OverBudget Actual Appropriations

Special RevenueRural Fire Department 111,706$ 118,563$ 6,857$

Fund

The excess expenditures over appropriations were funded by available fund balance.

C. Deficit fund equity The following funds had fund equity deficits at December 31, 2016:

Amount

Special RevenueTax Increments 2016 288,958$ TIF #4-17 Enterprise Center 8,145 TIF #4-18 Highfield Housing Development 1,536

Capital projectsSpecial Assessment Improvement 2017 273,711

Fund

The City intends to fund these deficits through future tax increments and special assessment levies, grants, transfers from other funds and various other sources.

-84-


DECEMBER 31, 2016 Note 3: DETAILED NOTES ON ALL FUNDS A. Deposits and investments Deposits

Custodial credit risk for deposits and investments is the risk that in the event of a bank failure, the City’s deposits and investments may not be returned or the City will not be able to recover collateral securities in the possession of an outside party. In accordance with Minnesota statutes and as authorized by the Council, the City maintains deposits at those depository banks, all of which are members of the Federal Reserve System.

Minnesota statutes require that all City deposits be protected by insurance, surety bond or collateral. The market value of collateral pledged must equal 110 percent of the deposits not covered by insurance, bonds, or irrevocable standby letters of credit from Federal Home Loan Banks. Authorized collateral in lieu of a corporate surety bond includes:

• United States government Treasury bills, Treasury notes, Treasury bonds; • Issues of United States government agencies and instrumentalities as quoted by a recognized industry quotation

service available to the government entity; • General obligation securities of any state or local government with taxing powers which is rated “A” or better

by a national bond rating service, or revenue obligation securities of any state or local government with taxing powers which is rated “AA” or better by a national bond rating service;

• General obligation securities of a local government with taxing powers may be pledged as collateral against

funds deposited by that same local government entity; • Irrevocable standby letters of credit issued by Federal Home Loan Banks to a municipality accompanied by

written evidence that the bank’s public debt is rated “AA” or better by Moody’s Investors Service, Inc., or Standard & Poor’s Corporation; and

• Time deposits that are fully insured by any federal agency.

Minnesota statutes require that all collateral shall be placed in safekeeping in a restricted account at a Federal Reserve Bank, or in an account at a trust department of a commercial bank or other financial institution that is not owned or controlled by the financial institution furnishing the collateral. The selection should be approved by the City.

-85-


DECEMBER 31, 2016 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED At year end, the City’s carrying amount of deposits was $32,957,878 and the bank balance was $33,300,307. The bank

balance was covered by federal depository insurance and securities pledged by the financial institution’s trust department in the City’s and the Public Utilities Commission’s names. The primary government and the EDA component unit deposits and investments are pooled.

At year end, the HRA’s (discretely presented component unit) carrying amount of deposits was $1,787,866 and the bank balance was $1,850,768. Of the bank balance, $593,601 was covered by federal depository insurance. Of the remaining balance was collateralized with securities held by the pledging financial institution’s trust department in the HRA’s name. Investments

As of December 31, 2016, the City had the following investments that are insured or registered, or securities held by the City or it’s agent in the City’s name:

Credit Segmented Quality Time

Ratings (1) Distribution (2) Amount Level 1 Level 2 Level 3Pooled investments at amortized costs

4M Fund N/A less than 6 monthsBroker Money Market Funds N/A less than 6 months 273,785$

Non-pooled investments at amortized costsMoney Market Funds N/A less than 6 monthsNon-negotiable certificates of deposit

Non-pooled investments at fair valueMunicipal Bonds A2 2 to 5 years 2,019,332 -$ 2,019,332$ -$

Government Agency Securities Aa3 6 months to 1 year 500,020 500,020 - - Government Agency Securities Aa2 1 to 3 years 506,260 506,260 - - Government Agency Securities N/A 1 to 3 years 431,763 431,763 - - Government Agency Securities AA more than 3 years 493,940 493,940 - - Government Agency Securities Aa1 more than 3 years 1,458,775 1,458,775 - - Government Agency Securities N/A more than 3 years 2,385,438 2,385,438 - - Government Agency Securities Aaa 2 to 5 years 1,757,895 - 1,757,895 -

Negotiable certificates of deposit N/A less than 6 months 249,043 - 249,043 - Negotiable certificates of deposit N/A 6 months to 1 year 818,160 - 818,160 - Negotiable certificates of deposit N/A 1 to 3 years 3,737,313 - 3,737,313 - Negotiable certificates of deposit N/A more than 3 years 4,388,731 - 4,388,731 -

Total investments 19,020,455$ 5,776,196$ 12,970,474$ -$

Types of InvestmentsFair Value Measurement Using

-86-


DECEMBER 31, 2016

Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED

The investments of the City are subject to the following risks:

• Credit Risk. The credit risk for investments is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. Ratings are provided by various credit rating agencies and where applicable, indicate associated credit risk. Minnesota Statutes limit the City’s investments to the list on page 83 of the notes.

• Custodial Credit Risk. The custodial credit risk for investments is the risk that, in the event of the failure of

the counterparty to a transaction, a government will not be able to recover the value of investment or collateral securities that are in the possession of an outside party. The City typically limits its exposure by purchasing insured or registered investments.

• Concentration of Credit Risk. The concentration of credit risk is the risk of loss attributed to the magnitude

of a government's investment in a single issuer. At December 31, 2016, there were no investments in one issuer (other than investments issued by or explicitly guaranteed by U.S. government, mutual funds, external investment pools, and other pooled investments) that represent 5 percent or more of the City’s investments.

• Interest Rate Risk. The interest rate risk is the risk that changes in interest rates will adversely affect the fair

value of an investment. Cash on hand

Cash in the possession of the City, consisting of petty cash and change funds totals $6,875. Cash and investments summary Cash and investments as shown on the statement of net position for the City as follows:

TotalPrimary Component Component Reporting

Government Unit - EDA Unit - HRA Entity

Deposits 32,791,526$ 166,352$ 1,787,866$ 34,745,744$ Investments 19,020,455 - - 19,020,455 Cash on hand 6,875 - - 6,875

Total 51,818,856$ 166,352$ 1,787,866$ 53,773,074$

Cash and investmentsUnrestricted 49,279,231$ 166,352$ 1,750,871$ 51,196,454$ Restricted 2,539,625 - 36,995 2,576,620

Total 51,818,856$ 166,352$ 1,787,866$ 53,773,074$

-87-


DECEMBER 31, 2016 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED

Cash and investments - restricted Cash and investments - restricted are deposits designated by bond covenants in the City’s Public Utilities Commission

fund for specific purposes. At December 31, 2016, restricted cash and investments consisted of the following: Primary Government

Hutchinson Public Utilities CommissionPublic Utility Revenue Bond Sinking Fund - 2003

Funds designated under bond resolution which require monthly depositsof amounts necessary to meet annual principal and interest payments with an escrow agent. 350,931$

Reserve AccountsFunds required to be held in amount equal to the maximum amount of principal and interest to become due on the bonds during the year 2,188,694

Total restricted cash and investments 2,539,625$

B. Notes receivable

The City has issued various notes to local residents and businesses which are payable to the City with variable payments

and interest rates. The balance on these notes as of December 31, 2016 is $1,476,113. Most of the notes to local residents do not have to be repaid if they remain property owners for ten years. This applies to Housing Rehabilitation Grant special revenue fund notes totaling $773,453. This City also has TIF loans that do not have to be repaid if they remain in the property for five years totaling $13,295. The Economic Development Loan fund has notes with local businesses outstanding of $30,390 and the Minnesota Investment funds has loans outstanding of $99,938. The City also has notes receivable in the Energy Loan fund of $559,037 at year end.

-88-



C. Capital assets

Primary government Capital asset activity for the year ended December 31, 2016 was as follows:

Beginning EndingBalance Increases Decreases Transfers Balance

Governmental activitiesCapital assets not being depreciatedLand 8,614,668$ 378,068$ -$ -$ 8,992,736$ Construction in progress 2,758,519 6,771,318 (2,442,578) - 7,087,259

Total capital assets not being depreciated 11,373,187 7,149,386 (2,442,578) - 16,079,995

Capital assets being depreciatedBuildings and structures 9,548,601 22,718 (27,725) - 9,543,594 Infrastructure and improvements 86,061,153 2,586,520 (86,733) - 88,560,940 Machinery and equipment 5,245,836 493,906 (464,809) - 5,274,933 Automotive equipment 4,019,965 701,312 (61,558) 57,175 4,716,894

Total capital assets being depreciated 104,875,555 3,804,456 (640,825) 57,175 108,096,361

Less accumulated depreciation forBuildings and structures (4,592,392) (225,161) 27,725 - (4,789,828) Infrastructure and improvements (34,037,584) (2,613,130) 50,526 - (36,600,188) Machinery and equipment (3,446,439) (324,407) 387,800 - (3,383,046) Automotive equipment (3,014,616) (265,536) 4,385 (57,175) (3,275,767)

Total accumulated depreciation (45,091,031) (3,428,234) 470,436 (57,175) (48,048,829)

Total capital assets being depreciated, net 59,784,524 376,222 (170,389) - 60,047,532

Governmental activitiescapital assets, net 71,157,711$ 7,525,608$ (2,612,967)$ -$ 76,127,527$

-89-



Beginning EndingBalance Increases Decreases Transfers Balance

Business-type activitiesCapital assets not being depreciated

Land 1,434,853$ -$ -$ -$ 1,434,853$ Construction in progress - 552,854 - - 552,854

Total capital assets not being depreciated 1,434,853 552,854 - - 1,987,707

Capital assets being depreciatedBuildings and structures 49,720,517 - - - 49,720,517 Infrastructure and improvements 174,434,633 1,463,416 (234,495) - 175,663,554 Machinery and equipment 13,659,972 348,325 (138,379) - 13,869,918 Automotive equipment 1,213,465 26,624 (8,205) (57,175) 1,174,709

Total capital assets being depreciated 239,028,587 1,838,365 (381,079) (57,175) 240,428,698

Less accumulated depreciation forBuildings and structures (24,066,481) (1,409,161) - - (25,475,642) Infrastructure and improvements (74,308,708) (4,771,796) 234,495 - (78,846,009) Machinery and equipment (9,449,904) (934,937) 138,379 - (10,246,462) Automotive equipment (907,137) (48,733) 8,205 57,175 (890,490)

Total accumulated depreciation (108,732,230) (7,164,627) 381,079 57,175 (115,458,603)

Total capital assets being depreciated, net 130,296,357 (5,326,262) - - 124,970,095

Business-type activities capital assets, net 131,731,210$ (4,773,408)$ -$ -$ 126,957,802$

-90-


DECEMBER 31, 2016


Depreciation expense was charged to functions/programs of the primary government as follows:

Governmental activitiesGeneral government 133,891$ Public safety 186,004 Streets and highways, including depreciation of general infrastructure assets 2,288,771 Culture and recreation 368,442 Housing and economic development 8,244 Miscellaneous 148,126 Capital assets held by the City's internal service funds are charged to the

various functions based on their usage of the assets 294,756

Total depreciation expense - governmental activities 3,428,234$

Business-type activitiesElectric 2,820,446$ Natural gas 1,001,952 Water 1,227,282 Sewer 1,621,494 Refuse 128,830 Composting 139,829 Storm water 143,566 Liquor 81,228

Total depreciation expense - business-type activities 7,164,627$

Construction commitments

The City has active projects as of December 31, 2016. The projects include: aquatics center, street improvement projects and a water tower project. At year end the City’s commitments with contractors are as follows:

RemainingSpent-to-Date Commitment

Aquatics Center 3,824,190$ 1,547,674$ 2016 PMP Project 1,773,624 726,376 Denver Avenue Project 297,098 202,902 Golf Course Water Tower Project 462,952 287,048

Total 6,357,864$ 2,764,000$

Project

-91-

kvanthuyne_ABDO16C

Sticky Note



DECEMBER 31, 2016 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED Discretely presented component unit Capital asset activity for the HRA for the year ending December 31, 2016 was as follows:

Beginning EndingBalance Increases Decreases Balance

HRACapital assets not being depreciatedLand 92,775$ -$ -$ 92,775$ Construction in progress 172,236 2,205 (174,441) -

Total capital assetsnot being depreciated 265,011 2,205 (174,441) 92,775

Capital assets being depreciatedBuildings and structures 4,516,442 232,081 (2,671) 4,745,852 Machinery and equipment 611,944 6,215 (4,550) 613,609

Total capital assets being depreciated 5,128,386 238,296 (7,221) 5,359,461

Less accumulated depreciation forBuildings and structures (3,029,749) (193,572) - (3,223,321) Machinery and equipment (433,065) (40,883) 4,550 (469,398)

Total accumulated depreciation (3,462,814) (234,455) 4,550 (3,692,719)

Total capital assets being depreciated, net 1,665,572 3,841 (2,671) 1,666,742

HRA capital assets, net 1,930,583$ 6,046$ (177,112)$ 1,759,517$

Depreciation expense was charged to functions/programs of the discretely presented component unit is as follows:

Discretely presented component unitHRA 234,455$

-92-


DECEMBER 31, 2016


D. Interfund receivables, payables and transfers

Advances from/to other funds

AmountSpecial Revenue Nonmajor governmental

HRA Loan TIF #4-18 Highfield Housing Development 753$

Debt Service Nonmajor governmentalG.O. Tax Increment Refunding Bonds 2004 Tax Increment 2016 288,958

TIF #4-17 Enterprise Center 8,145

Nonmajor governmental Nonmajor governmentalCapital Improvement Projects Airport Renovation 152,930

Special Assessment Improvement 2017 249,662

Enterprise EnterpriseWater Municipal Liquor Store 231,818 Sewer Municipal Liquor Store 231,818

Totals 1,164,084$

Payable FundReceivable Fund

The Special Revenue HRA fund and the G.O. Tax Increment Refunding Bonds 2004 Debt Service funds loaned funds to the Tax Increment 2016 and TIF #4-17 Enterprise Center funds for cash deficits. These balances will be paid back as the TIF districts generate tax increment revenues.

The Capital Improvement Projects fund loaned funds to the Airport Renovation and Special Assessment Improvement 2017 funds for construction costs. The balances will be paid back as funds become available.

The Water and Sewer funds loaned the Municipal Liquor Store fund $1,400,000 for a major remodeling project at the City-owned off-sale liquor store. The loan is to be paid back with annual payments of $69,000 to $123,000 including interest at 4.25 percent from December 1, 2006 to December 1, 2020.

Amounts due from/to the EDA component unit representing monthly and year-end charges to other funds are as follows:

AmountPrimary government Component unit

Internal service - Central Garage EDA 416$

Payable EntityReceivable Entity

-93-

kvanthuyne_ABDO16C

Sticky Note



DECEMBER 31, 2016


Interfund transfers

The following transfers were made for the year ended December 31, 2016:

Special Capital Assessment

Debt Improvement Improvement NonmajorGeneral Service Projects 2014 Governmental Total

Transfer outGeneral -$ -$ 500,000$ -$ 99,755$ 599,755$ Debt Service - - - - 133,329 133,329 Capital Improvement Projects - - - 81,788 - 81,788 Nonmajor governmental - 116,077 1,500,000 - 773,000 2,389,077 Composting enterprise 110,000 - - - - 110,000 Refuse enterprise 55,000 - - - - 55,000 Water enterprise 43,145 - - - 265,352 308,497 Sewer enterprise 43,145 - - - 36,378 79,523 Storm Water enterprise - - - - 270,097 270,097 Municipal Liquor Store enterprise 475,000 - - - - 475,000 Public Utilities Commission enterprise 1,305,256 - - - - 1,305,256 Self Insurance internal service 119,000 - - - - 119,000

Total transfers 2,150,546$ 116,077$ 2,000,000$ 81,788$ 1,577,911$ 5,926,322$

Fund

Transfer In

Transfers are used to 1) move revenues from the fund with collection authorization to the debt service fund as debt service principal and interest payments become due, 2) move restricted amounts from borrowings to the debt service fund to establish mandatory reserve accounts, 3) move unrestricted revenues to finance various programs that the government must account for in other funds in accordance with budgetary authorizations, including amounts provided as subsidies or matching funds for various grant programs.

For the year ended December 31, 2016, the City made the following one-time transfers:

• From the Water fund ($265,352), the Sewer fund ($36,378), the Storm Water fund ($270,097) to the SpecialAssessment Improvement 2016 fund for capital expenditures.

• From the Debt Service fund ($133,329) and Energy Loan fund ($30,000) to the Community Improvement fundto close out the 2004 debt service fund and to finance a signage project.

• From the Special Assessment Improvement 2014 fund ($116,077) to the Debt Service Fund to close out the2015 construction fund.

• From the Capital Improvement Project fund ($81,788) to the Special Assessment Improvement 2014 fund tohelp cover 2014 construction funds.

• From the Community Improvement fund ($250,000) and Minnesota Investments funds ($493,000) to theHutchinson Enterprise Center fund to fund the EDA Incubator project.

• From the Self Insurance fund ($119,000) to the General fund to help fund higher HSA contributions.• From the General fund ($99,755) to the Hutchinson Area Transportation Facility fund for operating costs.• From the General fund ($500,000) and the Community Improvement fund ($1,500,000) to the Capital

Improvement Projects fund to fund the 2016 aquatic center construction costs.

-94-


DECEMBER 31, 2016 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED E. Inventories Inventories at December 31, 2016 consist of the following:

AmountMunicipal Liquor Store

Liquor 209,262$ Wine 230,648 Beer 123,286 Miscellaneous 21,984

Total 585,180

CompostingProcessed materials 320,235 Bulk product 174,376 Bagged product 621,968 Parts 69,556

Total 1,186,135

Public Utilities CommissionElectric division

Fuel oil and lubricants 89,066 Plant 6,441 Engine parts 498,121 Distribution materials 339,752 Transformers 107,451

Total 1,040,831

Natural gas divisionFittings 102,174 Transmission line gas 303,570

Total 405,744

Totals 3,217,890$

Fund

-95-


DECEMBER 31, 2016

Note 3: DETAILED NOTES ON AND ALL FUNDS - CONTINUED

F. Long-term debt

General Obligation Bonds. The City issues general obligation bonds to provide funds for the acquisition andconstruction of major capital facilities. General obligation bonds have been issued for both governmental andproprietary activities. These bonds are reported in the proprietary funds if they are expected to be repaid fromproprietary fund revenues. In addition, general obligation bonds have been issued to refund both general obligation andrevenue bonds.

General obligation bonds are direct obligations and pledge the full faith and credit of the government. Generalobligation bonds currently outstanding are as follows:

Primary government debt - governmental activity debt

General obligation special assessment bondsThese bonds were issued to finance various improvements and will be repaid primarily from special assessments leviedon the properties benefiting from the improvements. Some issues, however, are partly financed by ad valorem tax levies.

BalanceAuthorized Issue Maturity atand Issued Date Date Year End

Improvement Bonds of 2007A 425,000$ 3.50 - 3.80 % 11/01/07 02/01/17 50,000$ Improvement Bonds of 2009D 2,255,000 2.00 - 3.63 11/05/09 02/01/24 1,195,000 Improvement and Refunding

Bonds of 2010C 4,595,000 3.00 - 3.13 11/10/10 02/01/25 1,070,000 Improvement Bonds of 2011A 2,830,000 0.50 - 3.25 11/02/11 02/01/27 1,980,000 G.O. Refunding Bonds of 2012B 2,095,000 3.00 07/25/12 02/01/21 1,455,000 Improvement Bonds of 2012C 2,275,000 2.00 - 2.50 10/30/12 02/01/28 1,775,000 Improvement Bonds of 2013A 2,230,000 2.00 - 3.50 09/05/13 02/01/29 1,920,000 Improvement and Refunding

Bonds of 2014A 3,415,000 2.00 - 3.00 11/04/14 02/01/30 3,075,000 Improvement Bonds of 2015A 2,140,000 2.85 - 3.00 10/01/15 02/01/31 2,140,000 Improvement Bonds of 2016A 3,880,000 2.00 10/06/16 02/01/32 3,880,000

Total G.O. Special Assessment Bonds 18,540,000$

RateInterest

Description

-96-


DECEMBER 31, 2016


The annual debt service requirements to maturity for general obligation special assessment bonds are as follows:

Year EndingDecember 31, Principal Interest Total

2017 1,805,000$ 432,490$ 2,237,490$ 2018 2,540,000 393,693 2,933,693 2019 2,175,000 337,083 2,512,083 2020 1,995,000 286,459 2,281,459 2021 1,600,000 242,408 1,842,408

2022 - 2026 5,700,000 698,463 6,398,463 2027 - 2031 2,585,000 151,198 2,736,198

2032 140,000 1,398 141,398

Total 18,540,000$ 2,543,192$ 21,083,192$

Governmental ActivitiesG.O. Special Assessment Bonds

Contracts payable

Various obligations were issued by the City for purchase of land, buildings and equipment. These contracts are general obligations of the City and will be retired through Capital Improvement Projects fund operations.

BalanceAuthorized Issue Maturity atand issued Date Date Year End

McLeod Rail Authority Contract 600,000$ 0.00 % 08/12/04 08/12/20 120,000$

RateInterest

Description

The annual debt service requirements to maturity for contracts payable are as follows:


2017 30,000$ -$ 30,000$ 2018 30,000 - 30,000 2019 30,000 - 30,000 2020 30,000 - 30,000

Total 120,000$ -$ 120,000$

Governmental ActivitiesContracts

-97-



Business-type activity debt General obligation revenue bonds These bonds were issued to finance capital improvements to the Water, Sewer and Storm Water funds. These bonds will

be retired from net revenue of these enterprise funds.


G.O. Water RevenueBonds of 2005 (PFA) 5,696,371$ 2.53 % 09/28/05 08/20/24 2,730,370$

G.O. Water RevenueBonds of 2006 (PFA) 12,216,000 2.63 08/07/06 08/20/25 6,670,000

G.O. Sewer RevenueBonds of 2007 (PFA) 13,696,602 2.15 06/26/07 08/20/26 8,411,000

G.O. Sewer RefundingBonds of 2009A 2,025,000 3.25 - 4.20 07/07/09 02/01/25 2,025,000

G.O. Water RefundingBonds of 2009B 1,735,000 4.05 - 4.40 07/07/09 02/01/29 1,735,000

G.O. Water and Sewer Refunding Bonds of 2012B 2,700,000 3.00 10/30/12 02/01/28 2,095,000

G.O. Storm WaterRefunding Bonds of 2014A 590,000 2.00 - 3.00 11/04/14 02/01/23 450,000

Total G.O. Revenue Bonds 24,116,370$

RateInterest

Description

The annual debt service requirements to maturity for general obligation revenue bonds are as follows:


2017 2,397,000$ 638,088$ 3,035,088$ 2018 2,463,000 576,960 3,039,960 2019 2,531,000 513,871 3,044,871 2020 2,436,000 450,409 2,886,409 2021 2,510,000 386,399 2,896,399

2022 - 2026 10,829,370 961,015 11,790,385 2027 - 2029 950,000 63,022 1,013,022

Total 24,116,370$ 3,589,764$ 27,706,134$

Business-type ActivitiesG.O. Revenue Bonds

-98-



Annual revenues from charges for services, principal and interest payments, and percentage of revenue required to cover principal and interest payments are as follows:


Revenue 2,279,091$ 3,160,044$ 862,781$ Principal and interest 1,408,160 1,568,404 150,550 Percent of revenue 61.8% 49.6% 17.4%

Revenue bonds These bonds were issued to finance capital improvements to the Public Utilities Commission. These bonds will be

retired from net revenue of this enterprise fund. Balance

Authorized Issue Maturity atand Issued Date Date Year End

Public Utility Revenue Bonds of 2003 31,725,000$ 3.75 - 4.63 % 12/01/03 12/01/21 590,000$

Public Utility Revenue Refunding Bondsof 2012A 20,720,000 4.00 - 5.00 07/19/12 12/01/26 16,415,000

Total Revenue Bonds 17,005,000$

InterestRateDescription

The annual debt service requirements to maturity for revenue bonds are as follows:


2017 1,345,000$ 760,588$ 2,105,588$ 2018 1,420,000 694,338 2,114,338 2019 1,495,000 624,140 2,119,140 2020 1,580,000 550,202 2,130,202 2021 1,655,000 487,033 2,142,033

2022 - 2026 9,510,000 1,339,400 10,849,400

Total 17,005,000$ 4,455,701$ 21,460,701$

Business-type ActivitiesRevenue Bonds

The G.O. revenue bonds were issued to finance capital improvements. The bonds are payable from future revenues pledged from the PUC and are backed by the full faith and credit of the City. Annual revenues from charges for services, principal and interest payments, and percentage of revenue required to cover principal and interest payments for the PUC are as follows:

PUC

Revenue 36,734,294$ Principal and interest 2,097,112 Percent of revenue 5.7%

-99-



Capital leases payable An obligation was issued by the City for the purchase of equipment in the Refuse and Sewer fund. The obligation will be retired by the net revenue of the enterprise fund. The cost of the John Deere Wheel Loader equipment was $122,133 and accumulated depreciation at December 31, 2016 was $54,970, for a book value of $67,163. The capitalized asset value of $122,133 differs from the lease obligation of $108,093 due to the capitalization of a net gain of $14,040 on a like-kind trade. The cost of the Jet Vac was $329,204 and accumulated depreciation at December 31, 2016 was $115,221, for a book value of $213,982. The capitalized asset value of $329,204 differs from the lease obligation of $322,744 due to the capitalization of sales tax and registration fees on the chassis.


John Deere Wheel Loader 108,093$ 3.90 % 05/20/12 05/20/17 23,334$ Jet Vac 322,744 2.85 03/29/13 03/29/18 110,531

Total capital leases payable 133,865$

RateInterest

Description

The annual debt service requirements to maturity for capital leases payable are as follows:


2017 77,823$ 4,077$ 81,900$ 2018 56,042 1,598 57,640

Total 133,865$ 5,675$ 139,540$

Capital LeasesBusiness-type Activities

-100-



Changes in long-term liabilities Long-term liability activity for the year ended December 31, 2016, was as follows:

Beginning Ending Due WithinBalance Increases Decreases Balance One Year

Governmental activitiesBonds payable

General obligation specialassessment bonds 16,780,000$ 3,880,000$ (2,120,000)$ 18,540,000$ 1,805,000$

Bond premium 404,350 101,707 (43,011) 463,046 -

Total bonds payable 17,184,350 3,981,707 (2,163,011) 19,003,046 1,805,000

Notes payable 150,000 - (30,000) 120,000 30,000 Compensated absences

payable 452,307 414,036 (375,520) 490,823 341,646 Pension liability

GERF 2,850,013 1,916,084 (293,110) 4,472,987 - PEPFF 1,852,061 4,791,339 (262,453) 6,380,947 - FRA 272,379 302,741 (152,559) 422,561 -

Other post-employment benefit obligation 211,838 50,102 (16,457) 245,483 -

Governmental activity long-term liabilites 22,972,948$ 11,456,009$ (3,293,110)$ 31,135,847$ 2,176,646$

Business-type activitiesBonds payable

General obligationrevenue bonds 26,487,370$ -$ (2,371,000)$ 24,116,370$ 2,397,000$

Revenue bonds 18,290,000 - (1,285,000) 17,005,000 1,345,000 Bond premium 2,176,695 - (211,858) 1,964,837 185,608

Total bonds payable 46,954,065 - (3,867,858) 43,086,207 3,927,608

Capital leases payable 209,287 - (75,422) 133,865 77,823 Compensated absences

payable 557,412 455,539 (429,195) 583,756 109,181 Pension liability

GERF 5,148,589 5,109,463 (2,313,540) 7,944,512 - Other post-employment

benefit obligation 138,704 20,267 (10,776) 148,195 -

Business-type activity long-term liabilities 53,008,057$ 5,585,269$ (6,696,791)$ 51,896,535$ 4,114,612$

-101-


DECEMBER 31, 2016


Component unit debt

Change in long-term liabilities

Long-term liability activity for the year ended December 31, 2016, was as follows:

Beginning Ending Due WithinBalance Increases Decreases Balance One Year

Component unit activities (EDA)Compensated absences

payable -$ 7,247$ (7,085)$ 162$ 162$ Other post-employment

benefit obligation 6,253 917 (486) 6,684 - Pension liability

GERF 80,946 69,776 (7,347) 143,375 -

Total 87,199$ 77,940$ (14,918)$ 150,221$ 162$

Component unit activities (HRA)Notes payable - MHFA 179,000$ 234,000$ (100,000)$ 313,000$ -$ Compensated absences

payable 32,862 26,463 (25,820) 33,505 20,752

Total 211,862$ 260,463$ (125,820)$ 346,505$ 20,752$

-102-


DECEMBER 31, 2016


G. Fund balance classification

At December 31, 2016, a summary of the governmental fund balance classifications are as follows:

SpecialCapital Assessment Other

Debt Improvement Improvement GovernmentalGeneral Service Projects 2014 Funds Total

Fund balancesNonspendable for

Prepaid items 4,959$ -$ -$ -$ -$ 4,959$

Restricted forDrug forfeiture 56,607 - - - - 56,607 Debt service - 5,481,226 - - - 5,481,226 MNDOT land proceeds - - - - 1,700 1,700 Parkland dedication - - - - 107,932 107,932 Capital projects - - - - 8,999 8,999 Rural fire department - - - - 12,543 12,543 Economic development loans - - - - 465,879 465,879 Energy loans - - - - 904,279 904,279 HRA loans - - - - 76,765 76,765 Housing rehabilitation - - - - 745,941 745,941 Minnesota investment - - - - 292,329 292,329 Tax increment financing - - - - 481,593 481,593

Total restricted 56,607 5,481,226 - - 3,097,960 8,635,793

Committed forWorking capital 4,904,051 - - - - 4,904,051 Emerald ash borer 362,077 - - - - 362,077 Capital projects - - - - 236,293 236,293 Economic development - - - - 708,011 708,011 Tree escrow - - - - 98,440 98,440 Public arts commission - - - - 23,921 23,921

Total committed 5,266,128 - - - 1,066,665 6,332,793

Assigned forPerpetual care (cemetery) 113,413 - - - 113,413 Rural fire department - - - 1,321 1,321 Hutchinson area transportation facility - - - 208,240 208,240 Development - - - 287,237 287,237 Public arts commission - - - 10,000 10,000 Capital projects - - 901,017 - - 901,017 Community improvement - - - 1,676,482 1,676,482

Total assigned 113,413 - 901,017 - 2,183,280 3,197,710

Unassigned 1,219,563 - - - (572,350) 647,213

Total fund balance 6,660,670$ 5,481,226$ 901,017$ -$ 5,775,555$ 18,818,468$

-103-

kvanthuyne_ABDO16C

Sticky Note



DECEMBER 31, 2016

Note 4: DEFINED BENEFIT PENSION PLAN - STATEWIDE

A. Plan description

The City participates in the following cost-sharing multiple-employer defined benefit pension plans administered by thePublic Employees Retirement Association of Minnesota (PERA). PERA’s defined benefit pension plans are establishedand administered in accordance with Minnesota statutes, chapters 353 and 356. PERA’s defined benefit pension plansare tax qualified plans under Section 401(a) of the Internal Revenue Code.

General Employees Retirement Fund (GERF)

All full-time and certain part-time employees of the City are covered by the General Employees Retirement Fund(GERF). GERF members belong to either the Coordinated Plan or the Basic Plan. Coordinated Plan members arecovered by Social Security and Basic Plan members are not. The Basic Plan was closed to new members in 1967. Allnew members must participate in the Coordinated Plan.

Public Employees Police and Fire Fund (PEPFF)

The PEPFF, originally established for police officers and firefighters not covered by a local relief association, nowcovers all police officers and firefighters hired since 1980. Effective July 1, 1999, the PEPFF also covers police officersand firefighters belonging to a local relief association that elected to merge with and transfer assets and administration toPERA.

B. Benefits provided

PERA provides retirement, disability and death benefits. Benefit provisions are established by Minnesota statute and canonly be modified by the state legislature.

Benefit increases are provided to benefit recipients each January. Increases are related to the funding ratio of the plan.Members in plans that are at least 90 percent funded for two consecutive years are given 2.5 percent increases. Membersin plans that have not exceeded 90 percent funded, or have fallen below 80 percent, are given 1 percent increases.

The benefit provisions stated in the following paragraphs of this section are current provisions and apply to active planparticipants. Vested, terminated employees who are entitled to benefits but are not receiving them yet are bound by theprovisions in effect at the time they last terminated their public service.

GERF benefits

Benefits are based on a member’s highest average salary for any five successive years of allowable service, age, andyears of credit at termination of service. Two methods are used to compute benefits for PERA's Coordinated and BasicPlan members. The retiring member receives the higher of a step-rate benefit accrual formula (Method 1) or a levelaccrual formula (Method 2). Under Method 1, the annuity accrual rate for a Basic Plan member is 2.2 percent of averagesalary for each of the first ten years of service and 2.7 percent for each remaining year. The annuity accrual rate for aCoordinated Plan member is 1.2 percent of average salary for each of the first ten years and 1.7 percent for eachremaining year. Under Method 2, the annuity accrual rate is 2.7 percent of average salary for Basic Plan members and1.7 percent for Coordinated Plan members for each year of service. For members hired prior to July 1, 1989, a fullannuity is available when age plus years of service equal 90 and normal retirement age is 65. For members hired on orafter July 1, 1989, normal retirement age is the age for unreduced Social Security benefits capped at 66.

-104-


DECEMBER 31, 2016

Note 4: DEFINED BENEFIT PENSION PLANS - STATEWIDE - CONTINUED

PEPFF benefits

Benefits for the PEPFF members first hired after June 30, 2010, but before July 1, 2014, vest on a prorated basis from 50 percent after five years up to 100 percent after ten years of credited service. Benefits for PEPFF members first hired after June 30, 2014 vest on a prorated basis from 50 percent after ten years up to 100 percent after twenty years of credited service. The annuity accrual rate is 3 percent of average salary for each year of service.

For PEPFF members who were first hired prior to July 1, 1989, a full annuity is available when age plus years of service equal at least 90.

C. Contributions

Minnesota statutes chapter 353 sets the rates for employer and employee contributions. Contribution rates can only bemodified by the state legislature.

GERF contributions

Basic Plan members and Coordinated Plan members were required to contribute 9.10 percent and 6.50 percent,respectively, of their annual covered salary in calendar year 2016. The City was required to contribute 11.78 percent ofpay for Basic Plan members and 7.50 percent for Coordinated Plan members in calendar year 2016. The City’scontributions to the GERF for the years ending December 31, 2016, 2015 and 2014 were $715,812, $708,668 and$672,433, respectively. The City’s contributions were equal to the contractually required contributions for each year asset by Minnesota statute.

PEPFF contributions

Plan members were required to contribute 10.8 percent of their annual covered salary in calendar year 2016. The Citywas required to contribute 16.20 percent of pay for PEPFF members in calendar year 2016. The City’s contributions tothe PEPFF for the years ending December 31, 2016, 2015 and 2014 were $250,640, $240,427 and $227,303,respectively. The City’s contributions were equal to the contractually required contributions for each year as set byMinnesota statute.

D. Pension costs

GERF pension costs

At December 31, 2016, the City of Hutchinson reported a liability of $12,560,874 for its proportionate share of theGERF’s net pension liability of which the EDA’s portion was calculated at $143,375. The City’s net pension liabilityreflected a reduction due to the State of Minnesota’s contribution of $6 million to the fund in 2016. The State ofMinnesota is considered a non-employer contributing entity and the State’s contribution meets the definition of a specialfunding situation. The State of Minnesota’s proportionate share of the net pension liability associated with the Citytotaled $164,029. The net pension liability was measured as of June 30, 2016, and the total pension liability used tocalculate the net pension liability was determined by an actuarial valuation as of that date. The City of Hutchinson’sproportion of the net pension liability was based on the City’s contributions received by PERA during the measurementperiod for employer payroll paid dates from July 1, 2015 through June 30, 2016 relative to the total employercontributions received from all of PERA’s participating employers. At June 30, 2016, the City of Hutchinson’sproportionate share was 0.1547 percent which was a decrease of 0.0012 percent from its proportion measured as of June30, 2015. The EDA’s proportionate share was 0.0032 percent which was an increase of 0.0016 percent from itsproportion measured as of June 30, 2015.

For the year ended December 31, 2016, the City recognized pension expense of $1,501,773 for its proportionate share ofGERF’s pension expense of which the EDA’s portion was calculated at $15,457. In addition, the City recognized anadditional $48,909 as pension expense (and grant revenue) for its proportionate share of the State of Minnesota’scontribution of $6 million to the GERF.

-105-


DECEMBER 31, 2016


At December 31, 2016, the City reported its proportionate share of GERF’s deferred outflows of resources and deferred inflows of resources, and its contributions subsequent to the measurement date, from the following sources:

Deferred Deferred Deferred DeferredOutflows Inflows Outflows Inflows

of Resources of Resources of Resources of ResourcesDifferences between expected and

actual experience 22,631$ 1,012,343$ 478$ 11,723$ Changes in actuarial assumptions 2,564,089 - 30,879 - Net difference between projected and

actual earnings on plan investments 1,830,199 - 16,080 - Changes in proportion 32,519 582,948 687 5,937 Contributions to GERF subsequent

to the measurement date 355,638 - 4,237 -

Total 4,805,076$ 1,595,291$ 52,361$ 17,660$

Primary Government Component Unit - EDA

Deferred outflows of resources totaling $359,875 related to pensions resulting from the City’s contributions to GERF subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended December 31, 2017. Other amounts reported as deferred outflows and inflows of resources related to GERF pensions will be recognized in pension expense as follows:

Primary ComponentGovernment Unit - EDA

687,167$ 7,232 533,743 3,989

1,184,691 14,064 448,546 5,179

2017201820192020

PEPFF pension costs

At December 31, 2016, the City reported a liability of $6,380,947 for its proportionate share of the PEPFF’s net pension liability. The net pension liability was measured as of June 30, 2016, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The City’s proportion of the net pension liability was based on the City’s contributions received by PERA during the measurement period for employer payroll paid dates from July 1, 2015 through June 30, 2016 relative to the total employer contributions received from all of PERA’s participating employers. At June 30, 2016, the City’s proportionate share was 0.1590 percent which was a .0040 percent decrease from its proportion measured as of June 30, 2015.

For the year ended December 31, 2016, the City recognized pension expense of $959,546 for its proportionate share of PEPFF’s pension expense The City also recognized $14,310 for the year ended December 31, 2016 as pension expense (and an offsetting reduction of net pension liability) for its proportionate share of the State of Minnesota’s on-behalf contributions to the plan. Legislation passed in 2013 required the State of Minnesota to begin contributing $9 million to the PEPFF each year, starting in fiscal year 2014.

-106-


DECEMBER 31, 2016 Note 4: DEFINED BENEFIT PENSION PLANS - STATEWIDE - CONTINUED

At December 31, 2016, the City reported its proportionate share of PEPFF’s deferred outflows of resources and deferred inflows of resources, and its contributions subsequent to the measurement date, from the following sources:

Deferred DeferredOutflows Inflows

of Resources of Resources

Differences between expected andactual experience 1,439$ 725,122$

Changes in actuarial assumptions 3,768,818 - Net difference between projected and

actual earnings on plan investments 544,968 - Changes in proportion - 43,501 Contributions to PEPFF subsequent

to the measurement date 132,435 -

Total 4,447,660$ 768,623$

Primary Government

Deferred outflows of resources totaling $132,435 related to pensions resulting from the City’s contributions to PEPFF subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended December 31, 2017. Other amounts reported as deferred outflows and inflows of resources related to PEPFF pensions will be recognized in pension expense as follows:

671,797$ 671,797 888,966 719,932 594,110

20172018201920202021

E. Actuarial assumptions The total pension liability in the June 30, 2016 actuarial valuation was determined using the following actuarial assumptions: Inflation 2.50% per yearActive member payroll growth 3.25% per yearInvestment rate of return 7.50%

Salary increases were based on a service-related table. Mortality rates for active members, retirees, survivors and disabilitants were based on RP-2014 tables for the GERF and RP-2000 tables for the PEPFF for males or females, as appropriate, with slight adjustments. Cost of living benefit increases for retirees are assumed to be: 1 percent per year for all future years for the GERF and PEPFF. Actuarial assumptions used in the June 30, 2016 valuation were based on the results of actuarial experience studies. The most recent four-year experience study in the GERF was completed in 2015. The experience study for PEPFF was for the period July 1, 2004 through June 30, 2009.

-107-


DECEMBER 31, 2016


The following changes in actuarial assumptions occurred in 2016:

GERF

• The assumed post-retirement benefit increase rate was changed from 1.0 percent per year through 2035 and 2.5percent per year thereafter to 1.0 percent per year for all future years.

• The assumed investment return was changed from 7.9 percent to 7.5 percent. The single discount rate waschanged from 7.9 percent to 7.5 percent.

• Other assumptions were changed pursuant to the experience study dated June 30, 2015. The assumed futuresalary increases, payroll growth and inflation were decreased by 0.25 percent to 3.25 percent for payroll growthand 2.50 percent for inflation.

PEPFF

• The assumed post-retirement benefit increase rate was changed from 1.0 percent per year through 2037 and 2.5percent per year thereafter to 1.0 percent per year for all future years.

• The assumed investment return was changed from 7.9 percent to 7.5 percent. The single discount rate waschanged from 7.9 percent to 5.6 percent.

• The assumed future salary increases, payroll growth and inflation were decreased by 0.25 percent to 3.25percent for payroll growth and 2.50 percent for inflation.

State Board of Investment, which manages the investments of PERA, prepares an analysis of the reasonableness on a regular basis of the long-term expected rate of return using a building-block method in which best-estimate ranges of expected future rates of return are developed for each major asset class. These ranges are combined to produce an expected long-term rate of return by weighting the expected future rates of return by the target asset allocation percentages. The target allocation and best estimates of geometric real rates of return for each major asset class are summarized in the following table:

Asset Class

Domestic stocks 45.00 % 5.50 %International stocks 15.00 6.00 Bonds 18.00 1.45 Alternative assets 20.00 6.40 Cash 2.00 0.50

Total 100.00 %

Long-termTarget Expected Real

Allocation Rate of Return

-108-


DECEMBER 31, 2016


F. Discount rate

The discount rate used to measure the total pension liability was 7.50 percent, a reduction from the 7.90 percent used in2015. The projection of cash flows used to determine the discount rate assumed that contributions from plan membersand employers will be made at rates set in Minnesota statutes. Based on these assumptions, the fiduciary net position ofthe GERF was projected to be available to make all projected future benefit payments of current plan members.Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projectedbenefit payments to determine the total pension liability.

In the PEPFF, the fiduciary net position was projected to be available to make all projected future benefit payments ofcurrent plan members through June 30, 2056. Beginning in fiscal year ended June 30, 2057 for the PEPFF, whenprojected benefit payments exceed the funds’ projected fiduciary net position, benefit payments were discounted at themunicipal bond rate of 2.85 percent based on an index of 20-year general obligation bonds with an average AA creditrating at the measurement date. An equivalent single discount rate of 5.60 percent for the PEPFF was determined thatproduced approximately the same present value of projected benefits when applied to all years of projected benefits asthe present value of projected benefits using 7.50 percent applied to all years of projected benefits through the point ofasset depletion and 2.85 percent after.

G. Pension liability sensitivity

The following presents the City’s proportionate share of the net pension liability for all plans it participates in, calculatedusing the discount rate disclosed in the preceding paragraph, as well as what the City’s proportionate share of the netpension liability would be if it were calculated using a discount rate 1 percentage point lower or 1 percentage pointhigher than the current discount rate:

1 Percent 1 PercentDecrease (6.50%) Current (7.50%) Increase (8.50%)

GERFPrimary government 17,636,527$ 12,417,499$ 8,118,439$ Component unit - EDA 203,635 143,375 93,737


PEPFF 8,932,478$ 6,380,947$ 4,296,151$

City Proportionate Share of NPL

H. Pension plan fiduciary net position

Detailed information about each pension plan’s fiduciary net position is available in a separately-issued PERA financialreport that includes financial statements and required supplementary information. That report may be obtained on theInternet at www.mnpera.org.

-109-


DECEMBER 31, 2016

Note 5: DEFINED CONTRIBUTION PLANS

Elected officials of the City are covered by the Public Employees Defined Contribution Plan (PEDCP), a multiple-employer deferred compensation plan administered by the Public Employees Retirement Association of Minnesota (PERA). The PEDCP is a tax qualified plan under section 401(a) of the Internal Revenue Code and all contributions by or on behalf of employees are tax deferred until time of withdrawal.

The defined contribution plan consists of individual accounts paying a lump-sum benefit. Plan benefits depend solely on amounts contributed to the plan plus investment earnings, less administrative expenses, therefore, there is no future liability to the employer. Minnesota statutes, chapter 353d.03, specifies plan provisions, including the employee and employer contribution rates for those qualified personnel who elect to participate. An eligible elected official who decides to participate contributes 5 percent of salary which is matched by the elected official's employer. Employees who are paid for their services may elect to make member contributions in an amount not to exceed the employer share. Employer and employee contributions are combined and used to purchase shares in one or more of the seven accounts of the Minnesota Supplemental Investment Fund. For administering the plan, PERA receives 2 percent of employer contributions and twenty-five hundredths of 1 percent (.0025) of the assets in each member's account annually.

The City’s contributions to the PEDCP for the years ended December 31, 2016, 2015 and 2014 were $676, $684 and $911 respectively. The City’s contributions were equal to the contractually required contributions for each year as set by Minnesota statute.

Employee Employer Employee Employer Required Rate

676$ 676$ 5.00% 5.00% 5.00%

Percentage of Contribution Amount Covered Payroll

Note 6: DEFINED CONTRIBUTION PLANS (COMPONENT UNIT)

HRA

All eligible employees as determined by the local HRA HUD approved personnel policy are covered by a pension plan with The Housing Renewal and Local Agency Retirement Plan. The HRA’s contributions to the PEDCP for the years ended December 31, 2016, 2015 and 2014 were $19,017, $18,542 and $17,611, respectively. Pension contributions for the year under the plan were as follows:

Employee Employer Employee Employer Required Rate

16,394$ 19,017$ 6.25% 7.25% N/A

Percentage of Contribution Amount Covered Payroll

-110-


DECEMBER 31, 2016

Note 7: DEFINED BENEFIT PENSION PLANS - FIRE RELIEF ASSOCIATION

A. Plan description

Firefighters, retired and active, of the City are members of the Hutchinson Fire Department Relief Association (theAssociation). The Association is the administrator of a single-employer defined benefit pension plan available tofirefighters. The Association was established May 6, 1907, and operates under the provisions of Minnesota statutes,chapters 69 and 424. It is governed by a Board of Trustees made up of nine members, of which six are elected by themembers of the Association for three-year terms, the Mayor, the City Clerk and the fire chief, who serve as ex-officiovoting members of the board.

B. Benefits provided

A fire fighter who completes at least 20 years as an active member of the Municipal Fire Department (the Department) isentitled, after age 50, to a full service pension upon retirement.

The bylaws of the Association also provide for an early vested service pension for a retiring member who has completedfewer than 20 years of service. The reduced pension, available to members with 10 years of service, shall be equal to 60percent of the pension as prescribed by the bylaws. This percentage increases 4 percent per year so that at 20 years ofservice, the full amount prescribed is paid. Members who retire at or after age 50 with 10 years of credited service areentitled to an annual retirement benefit, payable monthly for life, in an amount equal to the applicable vesting percentagetimes $17 per month per year of service up to a maximum benefit of $450 per month. The City has agreed to contributean annual amount equal to the greater of the statutorily-required amount or $2,500 per active firefighter.

C. Contributions

Minnesota statutes, chapters 424 and 424A authorize pension benefits for volunteer fire relief associations. The plan isfunded by property taxes, fire state aid, investment earnings and, if necessary, employer contributions as specified inMinnesota statutes and voluntary City contributions (if applicable). The State of Minnesota contributed $106,662 in firestate aid to the plan on behalf of the Hutchinson Fire Department for the year ended December 31, 2016, which wasrecorded as a revenue. Required employer contributions are calculated annually based on statutory provisions. TheCity’s statutorily-required contributions to the plan for the year ended December 31, 2016 were $43,365. The City’scontributions were equal to the required contributions as set by state statute. The City also made $31,635 of voluntarycontributions to the plan. Furthermore, the firefighter has no obligation to contribute to the plan.

-111-

kvanthuyne_ABDO16C

Sticky Note



DECEMBER 31, 2016 Note 7: DEFINED BENEFIT PENSION PLANS - FIRE RELIEF ASSOCIATION - CONTINUED

D. Pension costs

At December 31, 2016, the City reported a net pension liability of $442,561 for the plan. The net pension liability was

measured as of December 31, 2016. The total pension liability used to calculate the net pension liability in accordance with GASB 68 was determined by Van Iwaarden Associates applying an actuarial formula to specific census data certified by the Department as of December 31, 2016. The following table presents the changes in net pension liability (asset) during the year:

Total Plan Net

Pension Fiduciary PensionLiability Net Position Liability (Asset)

(a) (b) (a-b)

Beginning balance January 1, 2016 2,194,219$ 1,921,840$ 272,379$

Changes for the yearService cost 31,267 - 31,267 Interest on pension liability (asset) 144,254 - 144,254 Change in benefit terms 165,505 165,505 Actuarial experience (gains)/losses 23,647 - 23,647 Change in assumptions 114,838 114,838 Projected investment return - 165,615 (165,615) Contributions (employer) - 75,000 (75,000) Nonemployer contributions - 106,662 (106,662) Benefit payments (176,770) (176,770) - Administrative expenses - (16,414) 16,414 Other - (1,534) 1,534

Total net changes 302,741 152,559 150,182

Ending balance December 31, 2016 2,496,960$ 2,074,399$ 422,561$

For the year ended December 31, 2016, the City recognized pension expense of $62,569.

-112-


DECEMBER 31, 2016

Note 7: DEFINED BENEFIT PENSION PLANS - FIRE RELIEF ASSOCIATION - CONTINUED

At December 31, 2016, the City reported deferred inflows of resources and deferred outflows of resources related to pension from the following sources:

Deferred DeferredOutflows Inflows

of Resources of Resources

Differences between expected andactual experience 18,669$ -$

Changes in actuarial assumptions 90,662 108,909 Net difference between projected and

actual earnings on plan investments 74,076 -

Total 183,407$ 108,909$

Amounts reported as deferred outflows and inflows of resources related to the plan will be recognized in pension expense as follows:

10,940$ 10,940 38,737 13,881

2017201820192020

F. Actuarial assumptions

The total pension liability at December 31, 2016 was determined using the entry age normal actuarial cost method andthe following actuarial assumptions:

Retirement eligibility at later of age 50 and 20 years of serviceSalary increases N/AInflation rate 2.75%Investment rate of return 6.50%20 year municipal bond yield 3.78%

Changes in actuarial assumptions related to updating the discount rate to reflect current asset returns, updating the index rate for 20-year, tax-exempt municipal bonds to reflect index rates as of December 31, 2015 and updating retirement rates to reflect plan experience and expectations.

The 6.50 percent long-term expected rate of return, a reduction from the 6.75 percent used in 2015, on pension plan investments was determined using a building-block method in which best estimates for expected future real rates of return (expected returns, net of inflation) were developed for each asset class using the plan’s target investment allocation along with long-term return expectations by asset class. Inflation expectations were applied to derive the nominal rate of return for the portfolio.

-113-


DECEMBER 31, 2016

Note 7: DEFINED BENEFIT PENSION PLANS - FIRE RELIEF ASSOCIATION - CONTINUED

The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table:

Asset Class

Domestic Equities 46.09 % 5.58 %International equities 11.98 5.71 Cash 20.73 0.84 Fixed income 19.36 2.27 Other 1.84 4.44

Total 100.00 %

Long-termTarget Expected Real

Allocation Rate of Return

G. Discount rate

The discount rate used to measure the total pension liability was 6.50 percent, a reduction from the 6.75 percent used in2015. The projection of cash flows used to determine the discount rate assumed that contributions to the plan will bemade as specified in statute. Based on that assumption and considering the funding ratio of the plan, the fiduciary netposition was projected to be available to make all projected future benefit payments of current active and inactivemembers. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods ofprojected benefit payments to determine the total pension liability.

H. Pension liability sensitivity

The following presents the City’s net pension liability for the plan, calculated using the discount rate disclosed in thepreceding paragraph, as well as what the City’s net pension liability would be if it were calculated using a discount rate1 percent lower or 1 percent higher than the current discount rate:


Defined benefit plan 699,350$ 422,561$ 191,338$

I. Pension plan fiduciary net position

For financial reporting purposes, the Association’s financial statements are not included with the City’s financialstatements because the Association is not a component unit of the City. The financial statements of the Association maybe obtained at the City’s offices.

-114-


DECEMBER 31, 2016

Note 8: OTHER INFORMATION

A. Risk management

The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors andomissions; injuries to employees; and natural disasters for which the City carries insurance. The City obtains insurancethrough participation in the League of Minnesota Cities Insurance Trust (LMCIT) which is a risk sharing pool withapproximately 800 other governmental units. The City pays an annual premium to LMCIT for its workers compensationand property and casualty insurance. The LMCIT is self-sustaining through member premiums and will reinsure forclaims above a prescribed dollar amount for each insurance event. Settled claims have not exceeded the City’s coveragein any of the past three fiscal years.

Liabilities are reported when it is probable that a loss has occurred and the amount of the loss can be reasonablyestimated. Liabilities, if any, include an amount for claims that have been incurred but not reported (IBNRs). The City’smanagement is not aware of any incurred but not reported claims.

B. Commitments and contingencies

The City has received Federal and State grants in current and past years for specific purposes that are subject to reviewand audit by the grantor agencies or their designee. Such audits could lead to a request for reimbursement to the grantoragency for expenditures disallowed under terms of the grant. The City administration believes such disallowances ifany, will be immaterial.

The City is a defendant in various legal proceedings; however, City administration believes that the ultimate dispositionof these proceedings will not have a material adverse effect on the City's financial position.

The PUC is committed to purchase 25 MW of its power requirements from Missouri River Power Company throughpursuant to the Power Sale Agreement dated April 28, 2010. This contract is effective through January 1, 2046.

C. Self-insurance - benefit plans

Self-funded dental insurance: The City (internal service self-insurance fund) and Public Utilities Commission (thefunds) provide dental insurance coverage to its employees under a self-funded plan. The funds pay the dental insuranceclaims as they are incurred by the employee up to $1,000. The Funds record a liability for claims incurred but notreported or paid, which is included in accrued expenses on the balance sheet. Settled claims have not exceeded coveragein either of the past three years.

The claims liability at December 31, 2016 is based on requirements of Governmental Accounting Standards BoardStatement No. 10, which requires that a liability for claims be reported if information prior to the issuance of thefinancial statements indicates that it is probable that a liability has been incurred at the date of the financial statementsand the amount of the loss can be reasonably estimated. Changes in the funds’ claims liability amount in fiscal years2016, 2015 and 2014 were:

Current YearJanuary 1 Claims and Current Year December 31

Claims Changes in Claim ClaimsYear Liability Estimates Payments Liability

2016 17,128$ 99,753$ (109,304)$ 7,577$ 2015 5,668 101,871 (90,411) 17,128 2014 1,339 82,270 (77,941) 5,668

-115-

kvanthuyne_ABDO16C

Sticky Note



DECEMBER 31, 2016

Note 8: OTHER INFORMATION - CONTINUED

D. Major customers

For the years ended December 31, 2016 and 2015, the PUC’s Electric Division derived approximately 52 percent and 51percent, respectively of utility revenue from the top five major industrial customers.

For the years ended December 31, 2016 and 2015, the PUC’s Natural Gas Division derived approximately 39 percentand 37 percent, respectively of its utility revenue from the top five major industrial customers.

E. Tax increment districts

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. Management hasindicated that they are not aware of any instances of noncompliance which would have a material effect on the financialstatements.

F. Legal debt margin

In accordance with Minnesota statutes, the City may not incur or be subject to general obligation debt in excess of threepercent of the market value of taxable property within the City. General obligation debt is payable solely from advalorem taxes and therefore, excludes debt financed partially or entirely by special assessments, enterprise fund receiptsor tax increments. Currently, the City has no general obligation debt outstanding subject to this limit.

G. Concentrations

The City receives a significant amount of its annual General fund revenues from the State of Minnesota from the LocalGovernment Aid (LGA) program. The amount received in 2016 was $862,500 for LGA. This accounted 9 percent ofGeneral fund revenues. In addition to the General fund amount noted above, the City has allocated $1,424,160 of LGAto the Capital Projects fund.

H. Economic dependency

The programs of the HRA are economically dependent on annual contributions and grants from HUD. Without thosecontributions and grants, the programs would operate at a loss.

I. Postemployment benefits other than pensions

Plan Description. The City administers a single-employer defined benefit healthcare plan (“the Retiree Health Plan”).The plan provides lifetime healthcare insurance for eligible retirees and their spouses through the City’s group healthinsurance plan, which covers both active and retired members. Benefit provisions are established through negotiationsbetween the City and the union representing employees and are renegotiated each three-year bargaining period. Thecomponent unit is included in the City’s plan. The Retiree Health Plan does not issue a publicly available financialreport.

Funding Policy. Contribution requirements also are negotiated between the City and union representatives. The Citydoes not contribute to the cost of current-year premiums for eligible retired plan members and their spouses. For fiscalyear 2016, the City contributed $27,719 to the plan.

-116-


DECEMBER 31, 2016


Annual OPEB Cost and Net OPEB Obligation. The City’s annual other post-employment benefit (OPEB) cost (expense) is calculated based on the annual required contribution of the employer (ARC). The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and to amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years. The following table shows the components of the City’s annual OPEB cost for the year, the amount actually contributed to the plan, and changes in the City’s net OPEB obligation:

Component UnitEconomic

Primary DevelopmentGovernment Authority Total

Annual required contribution 77,275$ 1,041$ 78,316$ Interest on net OPEB obligation 15,775 281 16,056 Adjustment to annual required contribution (22,681) (405) (23,086)

Annual OPEB cost 70,369 917 71,286

Contributions made (27,233) (486) (27,719) Increase in net OPEB obligation 43,136 431 43,567

Net OPEB obligation - beginning of year 350,542 6,253 356,795

NET OPEB obligation - end of year 393,678$ 6,684$ 400,362$

The City’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for fiscal year 2016 and the two preceding fiscal years were as follows:

Primary Government

Year Annual Net OPEBEnding OPEB Cost Obligation

12/31/16 70,369$ 38.7 % 393,678$ 12/31/15 71,409 36.2 350,542 12/31/14 71,993 59.4 304,964

Annual OPEBContributed

Three Year Trend InformationPercentage

-117-


DECEMBER 31, 2016


Component Unit

Year Annual Net OPEBEnding OPEB Cost Obligation

12/31/16 917$ 53.0 % 6,684$ 12/31/15 955 51.3 6,253 12/31/14 1,150 74.0 5,788

Three Year Trend InformationPercentage

Annual OPEBContributed

Funded Status and Funding Progress. As of January 1, 2014, the City’s actuarial accrued liability for benefits was $548,182, all of which was unfunded. The City’s covered payroll (annual payroll of active employees covered by the plan) was $5,746,010, and the ratio of the unfunded actuarial accrued liability to the covered payroll was 9.5 percent.

The projection of future benefit payments for an ongoing plan involves estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits.

Methods and Assumptions. Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations.

In the January 1, 2014 actuarial valuation, the projected unit credit actuarial cost method was used. The actuarial assumptions include a 4.5 percent investment rate of return, which is a blended rate of the expected long-term investment returns on plan assets and on the employer’s own investments. The actuarial assumptions also include a 2.5 percent inflation rate. The initial healthcare trend rate was 7.50 percent, reduced by decrements to an ultimate rate of 5 percent after ten years. The unfunded actuarial accrued liability (UAAL) is being amortized as a level percentage of projected payroll on a closed basis. The remaining amortization period at December 31, 2016 was 22 years.

-118-

REQUIRED SUPPLEMENTARY INFORMATION

CITY OF HUTCHINSON

HUTCHINSON, MINNESOTA


-119-


INTENTIONALLY

-120-

CITY OF HUTCHINSON, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION FOR THE YEAR ENDED DECEMBER 31, 2016

Schedule of employer’s share of PERA net pension liability - General Employees Retirement Fund

State'sProportionate

Share ofCity's the Net Pension

Proportionate LiabilityShare of Associated with City's

Fiscal the Net Pension the Primary CoveredYear Liability Government Total Payroll

Ending (a) (b) (a+b) (c) *

06/30/16 0.1547 % 12,560,874$ 164,029$ 12,724,903$ 9,593,197$ 130.9 % 68.9 %06/30/15 0.1559 8,079,548 - 8,079,548 9,207,014 87.8 78.2

* Includes EDA activity

Required Supplementary InformationCity's

ProportionateShare of theNet PensionLiability as a Plan Fiduciary

City's Percentage of Net Position

Liability * (a/c) Pension Liability

Proportion of Covered as a Percentagethe Net Pension Payroll of the Total

Note: Schedule is intended to show 10-year trend. Additional years will be reported as they become available.

Schedule of employer’s PERA contributions - General Employees Retirement Fund

Contributions inRelation to the

Statutorily Statutorily Contribution City'sRequired Required Deficiency Covered

Year Contribution Contribution (Excess) PayrollEnding (a) * (b) * (a-b) (c) *

12/31/16 715,812$ 715,812$ -$ 9,544,167$ 7.5 %12/31/15 708,668 708,668 - 9,448,902 7.5

* Includes EDA activity

(b/c)


Contributions asa Percentage ofCovered Payroll


-121-

CITY OF HUTCHINSON, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION - CONTINUED


Schedule of employer’s share of PERA net pension liability - Public Employees Police and Fire Fund

State'sProportionate

City's Share ofProportionate the Net Pension

Share of Liability City'sFiscal the Net Pension Associated with CoveredYear Liability the City Total Payroll

Ending (a) (b) (a+b) (c)

06/30/16 0.1590 % 6,380,947$ -$ 6,380,947$ 1,531,607$ 416.6 % 63.9 %06/30/15 0.1630 1,852,061 - 1,852,061 1,472,983 125.7 86.6

Liability as a Plan Fiduciary

Required Supplementary InformationCity's

ProportionateShare of theNet Pension

City's Percentage of Net PositionProportion of Covered as a Percentage

the Net Pension Payroll of the TotalLiability (a/c) Pension Liability


Schedule of employer’s PERA contributions - Public Employees Police and Fire Fund

Contributions inRelation to the

Statutorily Statutorily Contribution City'sRequired Required Deficiency Covered

Year Contribution Contribution (Excess) PayrollEnding (a) * (b) * (a-b) (c) *

12/31/16 256,640$ 256,640$ -$ 1,584,198$ 16.2 %12/31/15 240,427 240,427 - 1,484,116 16.2

(b/c)


Contributions asa Percentage ofCovered Payroll


-122-



Schedule of changes in the Fire Relief Association’s net pension liability (asset) and related ratios

2016 2015Total pension liability

Service cost 31,267$ 37,483$ Interest 144,254 141,826 Changes of benefit terms 165,505 61,339 Differences between expected and actual experience 23,647 - Changes of assumptions 114,838 (200,047) Benefit payments (176,770) (156,240)

Net change in total pension liability 302,741 (115,639) Total pension liability - January 1 2,194,219 2,309,858

Total pension liability - December 31 (a) 2,496,960$ 2,194,219$

Plan fiduciary net positionContributions - State 106,662$ 106,989$ Contributions - employer 75,000 96,664 Projected investment return 165,615 (54,069) Benefit payments, including refunds of employee contributions (176,770) (156,240) Administrative expenses (16,414) (19,904) Other (1,534) -

Net change in plan fiduciary net position 152,559 (26,560)

Plan fiduciary net position - January 1 1,921,840 1,948,400

Plan fiduciary net position - December 31 (b) 2,074,399$ 1,921,840$

Fire Relief's net pension liability (asset) - December 31 (a-b) 422,561$ 272,379$

Plan fiduciary net position as a percentage of the total pension liability (b/a) 83.08% 87.59%

Covered-employee payroll N/A N/A

Fire Relief's net pension liability (asset) as a percentageof covered-employee payroll N/A N/A

Notes to Schedule:

municipal bonds was updated to reflect index rates as of December 31, 2015 and retirement rates were updated to reflectplan experience and expectations.

Benefit changes. Monthly benefit was increased from $15 to $17 per month

Changes of assumptions . The discount rate was updated to reflect current asset returns, the index rate for 20-year


-123-



Schedule of employer’s Fire Relief Association contributions

Actuarial Actual ContributionDetermined Contributions Deficiency

Year Contribution Paid (Excess)Ending (a) (b) (a-b)

12/31/16 144,183$ 181,662$ (37,479)$ 12/31/15 165,022 203,653 (38,631)


Schedule of funding progress for the retiree health plan

Actuarial UnfundedAccrued Actuarial

Actuarial Actuarial Liability - AccruedValuation Value of Projected Unit Liability Covered

Date Assets (a) Credit (b) (UAAL) (b-a) Payroll (c)

01/01/14 -$ 548,182$ 548,182$ - % 5,746,010$ 9.5 %01/01/11 - 707,035 707,035 - 5,409,557 13.1 01/01/08 - 693,327 693,327 - 5,762,374 12.0

Ratio (a/b) Payroll ((b-a)/c)


UAAL as aPercentage

Funded of Covered

-124-

COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND SCHEDULES



-125-


INTENTIONALLY

-126-


COMBINING BALANCE SHEET

NONMAJOR GOVERNMENTAL FUNDS

DECEMBER 31, 2016

Total

Nonmajor Nonmajor Nonmajor

Special Capital Governmental

Revenue Projects Funds

ASSETS

Cash and investments 3,081,829$ 2,091,706$ 5,173,535$

Receivables

Interest 4,609 4,860 9,469

Accounts 2,375 - 2,375

Notes 1,476,113 - 1,476,113

Delinquent special assessments - 24,705 24,705

Noncurrent special assessments - 527,025 527,025

Intergovernmental 17,808 1,460,428 1,478,236

Advances to other funds 753 - 753

TOTAL ASSETS 4,583,487$ 4,108,724$ 8,692,211$

LIABILITIES

Accounts payable 114,552$ 79,283$ 193,835$

Contracts payable - 130,618 130,618

Advances from other funds 297,856 402,592 700,448

Due to other governments 3,295 - 3,295

Accrued salaries payable 9,517 - 9,517

Deposits payable 30,775 - 30,775

TOTAL LIABILITIES 455,995 612,493 1,068,488

DEFERRED INFLOWS OF RESOURCES

Unavailable revenue - special assessments - 551,730 551,730

Unavailable revenue - intergovernmental - 1,296,438 1,296,438

TOTAL DEFERRED INFLOWS OF RESOURCES - 1,848,168 1,848,168

FUND BALANCES

Restricted 3,088,961 8,999 3,097,960

Committed 830,372 236,293 1,066,665

Assigned 506,798 1,676,482 2,183,280

Unassigned (298,639) (273,711) (572,350)

TOTAL FUND BALANCES 4,127,492 1,648,063 5,775,555

TOTAL LIABILITIES, DEFERRED INFLOWS

OF RESOURCES AND FUND BALANCES 4,583,487$ 4,108,724$ 8,692,211$

-127-

kvanthuyne_ABDO16C

Sticky Note


CITY OF HUTCHINSON, MINNESOTACOMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES

NONMAJOR GOVERNMENTAL FUNDSFOR THE YEAR ENDED DECEMBER 31, 2016

TotalNonmajor Nonmajor Nonmajor

Special Capital GovernmentalRevenue Projects Funds

REVENUESTaxes

Tax increment district taxes 119,367$ -$ 119,367$ Special assessments - 208,259 208,259 Intergovernmental

FederalAirport aid - 181,491 181,491

StateStreet maintenance and construction aid 76,735 40,000 116,735 Airport aid - 10,282 10,282 Other 50,603 - 50,603

CountyCounty shared aids 79,310 - 79,310

Charges for servicesPublic safety 110,000 - 110,000 Streets and highways 232,407 - 232,407

Investment earnings 12,945 17,181 30,126 Miscellaneous

Rents 2,250 14,400 16,650 Contributions and donations 148,330 - 148,330 Loan repayments 19,076 - 19,076 Refunds and reimbursements 33,526 - 33,526 Other - 22,600 22,600

TOTAL REVENUES 884,549 494,213 1,378,762

EXPENDITURESCurrent

Public safety 118,563 - 118,563 Streets and highways 427,182 - 427,182 Culture and recreation 37,315 - 37,315 Housing and economic development 575,177 - 575,177

Capital outlayStreets and highways - 3,324,741 3,324,741 Culture and recreation 120,835 121,107 241,942 Housing and economic development 276,965 - 276,965 Miscellaneous - 91,702 91,702

Debt serviceInterest and other 10,152 - 10,152 Bond issuance costs - 43,495 43,495

TOTAL EXPENDITURES 1,566,189 3,581,045 5,147,234

EXCESS (DEFICIENCY) OF REVENUESOVER (UNDER) EXPENDITURES (681,640) (3,086,832) (3,768,472)

OTHER FINANCING SOURCES (USES)Sale of assets - 2,915 2,915 Transfers in 842,755 735,156 1,577,911 Bonds issued - 2,435,000 2,435,000 Premium on bonds issued - 64,108 64,108 Transfers out (523,000) (1,866,077) (2,389,077)

TOTAL OTHER FINANCING SOURCES (USES) 319,755 1,371,102 1,690,857

NET CHANGE IN FUND BALANCES (361,885) (1,715,730) (2,077,615)

FUND BALANCES, JANUARY 1 4,489,377 3,363,793 7,853,170

FUND BALANCES, DECEMBER 31 4,127,492$ 1,648,063$ 5,775,555$

-128-

NONMAJOR SPECIAL REVENUE FUNDS Special revenue funds are used to account for specific revenues that are legally restricted to expenditures for particular purposes.

Rural Fire Department Fund: This fund accounts for funds from rural townships to support their equipment and expenditures of the fire department while training and responding to rural fires. Hutchinson Area Transportation Services Facility Fund: This fund accounts for the expenditures and revenues of the transportation building. This building is jointly operated by the City of Hutchinson, McLeod County and the Minnesota Department of Transportation. Economic Development Loan Fund: This fund loans monies which have been originally received by the City from the State of Minnesota. As the original loan is repaid, funds are subsequently loaned under City guidelines as approved by the State of Minnesota. Energy Loan Fund: Revolving loan funds received from the City and State which are under Hutchinson Economic Development Authority (EDA) guidelines are approved by City Council for downtown commercial rehabilitation loans. HRA Loan Fund: This fund accounts for the housing rehabilitation loans with the City and the Minnesota Housing Finance Agency (MnHFA). Housing Rehabilitation Grant Fund: This fund accounts for the Hutchinson housing rehabilitation project grant from the State of Minnesota Department of Trade and Economic Development. Tax Increment Fund: This fund includes TIF districts 7, 8, 13 and 14. Development Fund: This fund accounts for assistance with land development within the City. Minnesota Investment Fund: This fund loans monies which have been originally received by the City from the State of Minnesota. As the original loan is repaid, funds are subsequently loaned under City guidelines as approved by the State of Minnesota. Tax Increment Fund 1994 Fund: This fund accounts for the construction costs of various TIF districts. Tax Increment Fund 1996 Fund: This fund includes TIF district 11. Tax Increment Fund 1997 Fund: This fund includes TIF district 12.

-129-


INTENTIONALLY

-130-

NONMAJOR SPECIAL REVENUE FUNDS - CONTINUED

Tax Increment Fund 2016 Fund: This fund includes TIF district 16.

Tax Increment Fund #4-17 Enterprise Center Fund: This fund includes TIF district 17.

Tax Increment Fund #4-18 Highfield Housing Development Fund: This fund includes TIF district 18.

Public Sites Fund: This fund is used to account for payments made by developments in lieu of land contributions for parkland purchases and improvements.

Hutchinson Enterprise Center Fund: This fund accounts for the expenditures and revenues of the Hutchinson Enterprise Center building, a 20,000 square foot business incubator to help small business grow.

-131-


INTENTIONALLY

-132-


INTENTIONALLY

-133-

225 226 231 232 240

Hutchinson

Rural Area Economic

Fire Transportation Development Energy HRA

Department Facility Loan Loan Loan

ASSETS

Cash and investments 19,136$ 209,245$ 435,003$ 344,859$ 75,926$

Receivables

Interest - 313 670 528 119

Accounts - 2,375 - - -

Notes - - 30,390 559,037 -

Intergovernmental 6,507 11,301 - - -

Advance to other funds - - - - 753

TOTAL ASSETS 25,643$ 223,234$ 466,063$ 904,424$ 76,798$

LIABILITIES

Accounts payable 3,639$ 13,617$ 184$ 145$ 33$

Due to other governments - - - - -

Advances from other funds - - - - -

Accrued salaries payable 8,140 1,377 - - -

Deposits payable - - - - -

TOTAL LIABILITIES 11,779 14,994 184 145 33

FUND BALANCES

Restricted 12,543 - 465,879 904,279 76,765

Committed - - - - -

Assigned 1,321 208,240 - - -

Unassigned - - - - -

TOTAL FUND BALANCES 13,864 208,240 465,879 904,279 76,765

TOTAL LIABILITIES AND FUND BALANCES 25,643$ 223,234$ 466,063$ 904,424$ 76,798$

DECEMBER 31, 2016

COMBINING BALANCE SHEET - CONTINUED ON THE FOLLOWING PAGES

NONMAJOR SPECIAL REVENUE FUNDS


-134-

kvanthuyne_ABDO16C

Sticky Note


241 250 242 233/234/235 254

Housing Tax

Rehabilitation Tax Minnesota Increment

Grant Increment Development Investment 1994

263,066$ 420,935$ 27,075$ 191,646$ 35,331$

397 611 83 1,028 55

- - - - -

773,453 13,295 - 99,938 -

- - - - -

- - - - -

1,036,916$ 434,841$ 27,158$ 292,612$ 35,386$

109$ 168$ 12$ 283$ 15$

- - - - -

- - - - -

- - - - -

30,775 - - - -

30,884 168 12 283 15

745,941 434,673 - 292,329 35,371

- - - - -

260,091 - 27,146 - -

- - - - -

1,006,032 434,673 27,146 292,329 35,371

1,036,916$ 434,841$ 27,158$ 292,612$ 35,386$

-135-

kvanthuyne_ABDO16C

Sticky Note


256 257 258 259

Tax Tax Tax TIF #4-17

Increment Increment Increment Enterprise

1996 1997 2016 Center

ASSETS

Cash and investments 7,143$ 7,685$ -$ -$

Receivables

Interest 9 12 - -

Accounts - - - -

Notes - - - -

Intergovernmental - - - -

Advance to other funds - - - -

TOTAL ASSETS 7,152$ 7,697$ -$ -$

LIABILITIES

Accounts payable 2$ 3$ -$ -$

Due to other governments 3,295 - - -

Advances from other funds - - 288,958 8,145

Accrued salaries payable - - - -

Deposits payable - - - -

TOTAL LIABILITIES 3,297 3 288,958 8,145

FUND BALANCES

Restricted 3,855 7,694 - -

Committed - - - -

Assigned - - - -

Unassigned - - (288,958) (8,145)

TOTAL FUND BALANCES 3,855 7,694 (288,958) (8,145)

TOTAL LIABILITIES AND FUND BALANCES 7,152$ 7,697$ -$ -$


NONMAJOR SPECIAL REVENUE FUNDS

COMBINING BALANCE SHEET - CONTINUED

DECEMBER 31, 2016

-136-

kvanthuyne_ABDO16C

Sticky Note


260 270 239

TIF #4-18 Hutchinson

Highfield Housing Public Enterprise

Development Sites Center Totals

-$ 337,035$ 707,744$ 3,081,829$

- 416 368 4,609

- - - 2,375

- - - 1,476,113

- - - 17,808

- - - 753

-$ 337,451$ 708,112$ 4,583,487$

783$ 95,458$ 101$ 114,552$

- - - 3,295

753 - - 297,856

- - - 9,517

- - - 30,775

1,536 95,458 101 455,995

- 109,632 - 3,088,961

- 122,361 708,011 830,372

- 10,000 - 506,798

(1,536) - - (298,639)

(1,536) 241,993 708,011 4,127,492

-$ 337,451$ 708,112$ 4,583,487$

-137-

kvanthuyne_ABDO16C

Sticky Note


225 226 231 232Hutchinson

Rural Area EconomicFire Transportation Development Energy

Department Facility Loan LoanREVENUES

TaxesTax increment district taxes -$ -$ -$ -$

IntergovernmentalState

Street maintenance aid - 76,735 - - Other - - - -

CountyCounty shared aids - 79,310 - -

Charges for servicesPublic safety 110,000 - - - Streets and highways - 232,407 - -

Investment earnings 74 842 1,924 1,300 Miscellaneous

Rents - - - - Contributions and donations - - - - Loan repayments - - 1,540 14,255 Refunds and reimbursements - 7,526 - -

TOTAL REVENUES 110,074 396,820 3,464 15,555

EXPENDITURESCurrent

Public safety 118,563 - - - Streets and highways - 427,182 - - Culture and recreation - - - - Housing and economic development - - - 21,827

Capital outlay Culture and recreation - - - - Housing and economic development - - - -

Debt serviceInterest and other - - - -

TOTAL EXPENDITURES 118,563 427,182 - 21,827

EXCESS (DEFICIENCY) OF REVENUES OVER(UNDER) EXPENDITURES (8,489) (30,362) 3,464 (6,272)

OTHER FINANCING SOURCES (USES)Transfers in - 99,755 - - Transfers out - - - (30,000)

TOTAL OTHER FINANCING SOURCES (USES) - 99,755 - (30,000)

NET CHANGE IN FUND BALANCES (8,489) 69,393 3,464 (36,272)

FUND BALANCES, JANUARY 1 22,353 138,847 462,415 940,551

FUND BALANCES, DECEMBER 31 13,864$ 208,240$ 465,879$ 904,279$

FOR THE YEAR ENDED DECEMBER 31, 2016CONTINUED ON THE FOLLOWING PAGES

COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES -NONMAJOR SPECIAL REVENUE FUNDS


-138-

240 241 250 242 233/234/235 254

Housing TaxHRA Rehabilitation Tax Minnesota IncrementLoan Grant Increment Development Investment 1994

-$ -$ 119,367$ -$ -$ -$

- - - - - - - 35,380 - - - -

- - - - - -

- - - - - - - - - - - -

347 1,339 1,676 120 3,425 158

- - - - - - - - - - - - - - - - 3,281 - - - - - - -

347 36,719 121,043 120 6,706 158

- - - - - - - - - - - - - - - - - - - 124,004 59,812 - 300,000 -

- - - - - - - - - - - -

- - - - - -

- 124,004 59,812 - 300,000 -

347 (87,285) 61,231 120 (293,294) 158

- - - - - - - - - - (493,000) -

- - - - (493,000) -

347 (87,285) 61,231 120 (786,294) 158

76,418 1,093,317 373,442 27,026 1,078,623 35,213

76,765$ 1,006,032$ 434,673$ 27,146$ 292,329$ 35,371$

-139-

256 257 258 259

Tax Tax Tax TIF #4-17Increment Increment Increment Enterprise H

1996 1997 2016 CenterREVENUES

TaxesTax increment district taxes -$ -$ -$ -$


Street maintenance aid - - - - Other - - - -

CountyCounty shared aids - - - -

Charges for servicesPublic safety - - - - Streets and highways - - - -

Investment earnings 24 34 - - Miscellaneous

Rents - - - - Contributions and donations - - - - Loan repayments - - - - Refunds and reimbursements - - - -

TOTAL REVENUES 24 34 - -

EXPENDITURESCurrent

Public safety - - - - Streets and highways - - - - Culture and recreation - - - - Housing and economic development - - 30,681 8,000

Capital outlayCulture and recreation - - - - Housing and economic development - - 249,267 -

Debt serviceInterest and other 997 - 9,010 145

TOTAL EXPENDITURES 997 - 288,958 8,145

EXCESS (DEFICIENCY) OF REVENUES OVER(UNDER) EXPENDITURES (973) 34 (288,958) (8,145)

OTHER FINANCING SOURCES (USES)Transfers in - - - - Transfers out - - - -

TOTAL OTHER FINANCING SOURCES (USES) - - - -

NET CHANGE IN FUND BALANCES (973) 34 (288,958) (8,145)

FUND BALANCES, JANUARY 1 4,828 7,660 - -

FUND BALANCES, DECEMBER 31 3,855$ 7,694$ (288,958)$ (8,145)$

CITY OF HUTCHINSON, MINNESOTANONMAJOR SPECIAL REVENUE FUNDS

COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - CONTINUEDFOR THE YEAR ENDED DECEMBER 31, 2016

-140-

260 270 239

TIF #4-18 HutchinsonHighfield Housing Public Enterprise

Development Sites Center Totals

-$ -$ -$ 119,367$

- - - 76,735 - 15,223 - 50,603

- - - 79,310

- - - 110,000 - - - 232,407 - 1,156 526 12,945

- 2,250 - 2,250 - 148,330 - 148,330 - - - 19,076

21,500 4,500 - 33,526

21,500 171,459 526 884,549

- - - 118,563 - - - 427,182 - 37,315 - 37,315

23,036 - 7,817 575,177

- 120,835 - 120,835 - - 27,698 276,965

- - - 10,152

23,036 158,150 35,515 1,566,189

(1,536) 13,309 (34,989) (681,640)

- - 743,000 842,755 - - - (523,000)

- - 743,000 319,755

(1,536) 13,309 708,011 (361,885)

- 228,684 - 4,489,377

(1,536)$ 241,993$ 708,011$ 4,127,492$

-141-

CITY OF HUTCHINSON, MINNESOTARURAL FIRE DEPARTMENT FUND

SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES -BUDGET AND ACTUAL

FOR THE YEAR ENDED DECEMBER 31, 2016With Comparative Actual Amounts for the Year Ended December 31, 2015

2016 2015Final Actual Variance with Actual

Budget Amounts Final Budget AmountsREVENUES

Charges for services Public safety 110,000$ 110,000$ -$ 110,000$

Investment earnings 150 74 (76) 36

TOTAL REVENUES 110,150 110,074 (76) 110,036 EXPENDITURES

CurrentPublic safety

Rural fire departmentPersonal services 70,831 76,634 (5,803) 76,560 Supplies 26,556 30,121 (3,565) 12,903 Other services and charges 14,319 11,808 2,511 15,444

TOTAL EXPENDITURES 111,706 118,563 (6,857) 104,907

NET CHANGE IN FUND BALANCES (1,556) (8,489) (6,933) 5,129

FUND BALANCES, JANUARY 1 22,353 22,353 - 17,224

FUND BALANCES, DECEMBER 31 20,797$ 13,864$ (6,933)$ 22,353$

-142-

CITY OF HUTCHINSON, MINNESOTAHUTCHINSON AREA TRANSPORTATION FACILITY FUND

SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES -BUDGET AND ACTUAL


2016 2015Final Actual Variance with Actual

Budget Amounts Final Budget AmountsREVENUES

Intergovernmental State

Street maintenance aid 76,735$ 76,735$ -$ 74,138$ County

County shared aids 79,310 79,310 - 77,000 Charges for services

Streets and highways 530,000 232,407 (297,593) 279,547 Investment earnings 650 842 192 989 Miscellaneous

Refunds and reimbursements 2,500 7,526 5,026 10,562

TOTAL REVENUES 689,195 396,820 (292,375) 442,236 EXPENDITURES

CurrentStreets and highways

Streets and alleysPersonal services 59,470 48,786 10,684 57,958 Supplies 528,600 233,286 295,314 291,880 Other services and charges 166,371 145,110 21,261 159,348

Capital outlayStreets and highways

Streets and alleys 33,600 - 33,600 35,910

TOTAL EXPENDITURES 788,041 427,182 360,859 545,096

EXCESS (DEFICIENCY) OF REVENUESOVER (UNDER) EXPENDITURES (98,846) (30,362) 68,484 (102,860)

OTHER FINANCING SOURCES Transfers in 99,755 99,755 - 96,850

NET CHANGE IN FUND BALANCES 909 69,393 68,484 (6,010)

FUND BALANCES, JANUARY 1 138,847 138,847 - 144,857


-143-


INTENTIONALLY

-144-

NONMAJOR CAPITAL PROJECTS FUNDS

Capital projects funds are used to account for the acquisition and construction of major capital facilities other than those financed by proprietary funds and trust funds.

-145-


INTENTIONALLY

-146-


INTENTIONALLY

-147-

408 402 407 435Special

AssessmentAirport MSA Community Improvement

Renovation Construction Improvement 2015ASSETS

Cash and investments -$ -$ 1,739,682$ -$ Receivables

Interest - - 4,860 - Delinquent special assessments - - 24,705 - Noncurrent special assessments - - 527,025 - Intergovernmental 161,929 1,296,438 2,061 -

TOTAL ASSETS 161,929$ 1,296,438$ 2,298,333$ -$

LIABILITIESAccounts payable -$ -$ 70,121$ -$ Contracts payable - - - - Advances from other funds 152,930 - - -

TOTAL LIABILITIES 152,930 - 70,121 -

DEFERRED INFLOWS OF RESOURCESUnavailable revenue - special assessments - - 551,730 - Unavailable revenue - intergovernmental - 1,296,438 - -

TOTAL DEFERRED INFLOWS OF RESOURCES - 1,296,438 551,730 -

FUND BALANCES Restricted 8,999 - - - Committed - - - - Assigned - - 1,676,482 - Unassigned - - - -

TOTAL FUND BALANCES 8,999 - 1,676,482 -

TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES 161,929$ 1,296,438$ 2,298,333$ -$

DECEMBER 31, 2016COMBINING BALANCE SHEET

NONMAJOR CAPITAL PROJECTS FUNDSCITY OF HUTCHINSON, MINNESOTA

-148-

436 437Special Special

Assessment AssessmentImprovement Improvement

2016 2017 Totals

352,024$ -$ 2,091,706$

- - 4,860 - - 24,705 - - 527,025 - - 1,460,428

352,024$ -$ 4,108,724$

750$ 8,412$ 79,283$ 114,981 15,637 130,618

- 249,662 402,592

115,731 273,711 612,493

- - 551,730 - - 1,296,438

- - 1,848,168

- - 8,999 236,293 - 236,293

- - 1,676,482 - (273,711) (273,711)

236,293 (273,711) 1,648,063

352,024$ -$ 4,108,724$

-149-

408 402 407 435Special

AssessmentAirport MSA Community Improvement

Renovation Construction Improvement 2015REVENUES

TaxesSpecial assessments -$ -$ 143,044$ -$ Intergovernmental

FederalAirport aid 181,491 - - -

StateStreet construction aid - - - 40,000 Airport aid 10,282 - - -

Investment earnings - - 15,819 795 Miscellaneous

Rents 14,400 - - - Other - - 22,600 -

TOTAL REVENUES 206,173 - 181,463 40,795

EXPENDITURESCapital outlay

Streets and highways - - 193,351 750 Culture and recreation - - 121,107 - Miscellaneous 91,702 - - -

Debt serviceBond issuance costs - - - -

TOTAL EXPENDITURES 91,702 - 314,458 750 EXCESS (DEFICIENCY) OF REVENUES OVER

(UNDER) EXPENDITURES 114,471 - (132,995) 40,045

OTHER FINANCING SOURCES (USES)Sale of assets - - 2,915 - Transfers in - - 163,329 - Bonds issued - - - - Premium on bonds issued - - - - Transfers out - - (1,750,000) (116,077)

TOTAL OTHER FINANCING

SOURCES (USES) - - (1,583,756) (116,077)

NET CHANGE IN FUND BALANCES 114,471 - (1,716,751) (76,032)

FUND BALANCES, JANUARY 1 (105,472) - 3,393,233 76,032

FUND BALANCES, DECEMBER 31 8,999$ -$ 1,676,482$ -$

FOR THE YEAR ENDED DECEMBER 31, 2016COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES

NONMAJOR CAPITAL PROJECTS FUNDSCITY OF HUTCHINSON, MINNESOTA

-150-

436 437Special Special

Assessment AssessmentImprovement Improvement

2016 2017 Totals

-$ 65,215$ 208,259$

- - 181,491

- - 40,000 - - 10,282

542 25 17,181

- - 14,400 - - 22,600

542 65,240 494,213

2,791,689 338,951 3,324,741 - - 121,107 - - 91,702

43,495 - 43,495

2,835,184 338,951 3,581,045

(2,834,642) (273,711) (3,086,832)

- - 2,915 571,827 - 735,156

2,435,000 - 2,435,000 64,108 - 64,108

- - (1,866,077)

3,070,935 - 1,371,102

236,293 (273,711) (1,715,730)

- - 3,363,793

236,293$ (273,711)$ 1,648,063$

-151-


INTENTIONALLY

-152-

GENERAL FUND

The General fund is used to account for resources traditionally associated with the City which are not required legally or by sound financial management to be accounted for in another fund.

-153-


INTENTIONALLY

-154-

CITY OF HUTCHINSON, MINNESOTAGENERAL FUND

COMPARATIVE BALANCE SHEETSDECEMBER 31, 2016 AND 2015

2016 2015ASSETS

Cash and investments 6,965,614$ 7,084,709$ Receivables

Interest 8,881 9,257 Delinquent taxes 114,794 109,827 Accounts 239,538 187,437 Intergovernmental 46,122 110,013

Prepaid items 4,959 126,547

TOTAL ASSETS 7,379,908$ 7,627,790$

LIABILITIESAccounts payable 306,534$ 338,853$ Due to other governments 18,760 7,270 Accrued salaries payable 246,602 276,139 Deposits payable 105 10,307 Unearned revenue 32,443 25,781

TOTAL LIABILITIES 604,444 658,350

DEFERRED INFLOWS OF RESOURCESUnavailable revenue - taxes 114,794 109,827

FUND BALANCESNonspendable 4,959 126,547 Restricted 56,607 54,607 Committed 5,266,128 4,883,882 Assigned 113,413 255,279 Unassigned 1,219,563 1,539,298

TOTAL FUND BALANCES 6,660,670 6,859,613

TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES 7,379,908$ 7,627,790$

-155-


SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES -BUDGET AND ACTUAL - CONTINUED ON THE FOLLOWING PAGES


2015

Original Final Actual Variance with ActualBudget Budget Amounts Final Budget Amounts

REVENUESTaxes

Property taxes 4,581,035$ 4,581,035$ 4,581,302$ 267$ 4,500,973$ Hotel/motel tax 87,000 87,000 95,133 8,133 96,269 Franchise fees 185,000 185,000 196,777 11,777 195,074

Total taxes 4,853,035 4,853,035 4,873,212 20,177 4,792,316

Licenses and permitsBusiness 43,500 43,500 34,536 (8,964) 37,204 Nonbusiness 228,000 228,000 247,023 19,023 286,879

Total licenses and permits 271,500 271,500 281,559 10,059 324,083

IntergovernmentalFederal

Other Federal aids 37,000 37,000 45,232 8,232 31,073

StateLocal government aid 862,500 862,500 862,500 - 825,000 Property tax credits - - 1,898 1,898 1,808 Police aid 150,000 150,000 170,200 20,200 166,158 Fire aid 110,818 110,818 106,662 (4,156) 106,989 Street maintenance aid 27,000 27,000 27,735 735 27,735 Airport aid 25,000 25,000 26,727 1,727 26,727 Other State aids 72,012 72,012 77,062 5,050 75,088

Total State 1,247,330 1,247,330 1,272,784 25,454 1,229,505

LocalSchool liaison program 50,875 50,875 50,542 (333) 45,201 Community education reimbursement 73,324 73,324 72,443 (881) 71,090

Total local 124,199 124,199 122,985 (1,214) 116,291

Total intergovernmental 1,408,529 1,408,529 1,441,001 32,472 1,376,869

Charges for servicesGeneral government 318,375 318,375 329,131 10,756 293,372 Public safety 376,000 376,000 336,288 (39,712) 404,133 Streets and highways 442,214 442,214 450,412 8,198 447,582 Culture and recreation 605,000 605,000 636,305 31,305 610,853 Other charges 91,000 91,000 97,901 6,901 83,946

Total charges for services 1,832,589 1,832,589 1,850,037 17,448 1,839,886

Fines and forfeits 55,000 55,000 45,588 (9,412) 45,449

Investment earnings 50,000 50,000 23,920 (26,080) 32,193

MiscellaneousRents 173,533 173,533 186,739 13,206 177,941 Contributions and donations 13,500 13,500 27,030 13,530 19,054 Refunds and reimbursements 461,893 461,893 505,285 43,392 549,853 Other 222,645 222,645 217,573 (5,072) 208,064

Total miscellaneous 871,571 871,571 936,627 65,056 954,912

TOTAL REVENUES 9,342,224 9,342,224 9,451,944 109,720 9,365,708

2016

-156-


SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES -BUDGET AND ACTUAL - CONTINUED


2015


EXPENDITURESCurrent

General governmentMayor and Council

Personal services 36,590$ 36,590$ 33,983$ 2,607$ 31,886$ Supplies 250 250 259 (9) - Other services and charges 7,450 7,450 3,998 3,452 7,005

Total Mayor and Council 44,290 44,290 38,240 6,050 38,891

City administratorPersonal services 373,901 373,901 367,014 6,887 374,341 Supplies 2,000 2,000 1,221 779 862 Other services and charges 54,350 54,350 39,144 15,206 13,861

Total city administrator 430,251 430,251 407,379 22,872 389,064

ElectionsPersonal services 14,000 14,000 11,641 2,359 4,969 Supplies 500 500 939 (439) 2,522 Other services and charges 1,450 1,450 948 502 456

Total elections 15,950 15,950 13,528 2,422 7,947

FinancePersonal services 274,403 274,403 267,308 7,095 285,718 Supplies 11,800 11,800 12,944 (1,144) 15,209 Other services and charges 75,265 75,265 70,795 4,470 66,100

Total finance 361,468 361,468 351,047 10,421 367,027

Motor vehiclesPersonal services 190,486 190,486 201,033 (10,547) 170,170 Supplies 6,450 6,450 2,732 3,718 2,198 Other services and charges 6,900 6,900 11,661 (4,761) 8,571

Total motor vehicles 203,836 203,836 215,426 (11,590) 180,939

AssessingOther services and charges 60,911 60,911 60,953 (42) 60,911

LegalPersonal services 207,643 207,643 206,681 962 182,065 Supplies 16,700 16,700 24,202 (7,502) 22,247 Other services and charges 63,850 63,850 55,768 8,082 70,669

Total legal 288,193 288,193 286,651 1,542 274,981

PlanningPersonal services 140,447 140,447 128,710 11,737 134,832 Supplies 900 900 889 11 179 Other services and charges 8,625 8,625 8,604 21 9,719

Total planning 149,972 149,972 138,203 11,769 144,730

Information servicesPersonal services 314,798 314,798 314,891 (93) 318,612 Supplies 38,500 38,500 36,024 2,476 26,455 Other services and charges 151,440 151,440 119,686 31,754 92,140

Total information services 504,738 504,738 470,601 34,137 437,207

2016

-157-




2015


EXPENDITURES - CONTINUEDCurrent - Continued

General government - ContinuedCity hall building

Personal services 52,202$ 52,202$ 39,479$ 12,723$ 30,944$ Supplies 13,770 13,770 9,298 4,472 13,410 Other services and charges 65,350 65,350 70,761 (5,411) 49,164

Total city hall building 131,322 131,322 119,538 11,784 93,518

Total general government 2,190,931 2,190,931 2,101,566 89,365 1,995,215

Public safetyPolice

Personal services 2,769,815 2,769,815 2,818,634 (48,819) 2,736,598 Supplies 105,000 105,000 93,216 11,784 94,430 Other services and charges 187,750 187,750 172,958 14,792 187,813

Total police 3,062,565 3,062,565 3,084,808 (22,243) 3,018,841

Emergency managementSupplies 2,000 2,000 3,948 (1,948) 144

Other services and charges 10,800 10,800 5,551 5,249 6,442

Total emergency management 12,800 12,800 9,499 3,301 6,586

Safety councilSupplies 200 200 - 200 -

Other services and charges 9,300 9,300 8,772 528 9,516

Total safety council 9,500 9,500 8,772 728 9,516

FirePersonal services 373,751 373,751 373,239 512 418,665 Supplies 42,250 42,250 43,127 (877) 26,832

Other services and charges 66,550 66,550 51,081 15,469 66,228

Total fire 482,551 482,551 467,447 15,104 511,725

Building inspectionPersonal services 210,286 210,286 206,278 4,008 216,807 Supplies 3,170 3,170 4,484 (1,314) 5,960

Other services and charges 14,100 14,100 15,197 (1,097) 28,097

Total building inspection 227,556 227,556 225,959 1,597 250,864

Hospital securityPersonal services 288,611 288,611 291,234 (2,623) 269,449 Supplies 2,875 2,875 947 1,928 1,908

Other services and charges 2,400 2,400 1,618 782 2,921

Total hospital security 293,886 293,886 293,799 87 274,278

Total public safety 4,088,858 4,088,858 4,090,284 (1,426) 4,071,810

2016

-158-




2015



Streets and highwaysEngineering

Personal services 351,534$ 351,534$ 352,112$ (578)$ 344,026$ Supplies 10,950 10,950 7,209 3,741 5,546 Other services and charges 40,230 40,230 41,154 (924) 35,721

Total engineering 402,714 402,714 400,475 2,239 385,293

Streets and alleysPersonal services 546,911 546,911 508,961 37,950 457,723 Supplies 204,450 204,450 140,283 64,167 171,789 Other services and charges 665,980 665,980 631,906 34,074 637,326

Total streets and alleys 1,417,341 1,417,341 1,281,150 136,191 1,266,838

Total streets and highways 1,820,055 1,820,055 1,681,625 138,430 1,652,131

Culture and recreationParks and recreation administration

Personal services 188,883 188,883 190,175 (1,292) 188,913 Supplies 2,100 2,100 1,601 499 2,247 Other services and charges 31,340 31,340 42,028 (10,688) 39,718

Total park and recreation administration 222,323 222,323 233,804 (11,481) 230,878

RecreationPersonal services 132,547 132,547 127,331 5,216 123,435 Supplies 57,700 57,700 44,126 13,574 46,993 Other services and charges 44,150 44,150 33,182 10,968 39,678

Total recreation 234,397 234,397 204,639 29,758 210,106

Senior citizen centerPersonal services 36,297 36,297 34,624 1,673 35,562 Supplies 18,250 18,250 6,132 12,118 12,095 Other services and charges 29,200 29,200 42,634 (13,434) 39,920

Total senior citizen center 83,747 83,747 83,390 357 87,577

Evergreen buildingPersonal services - - - - 78 Supplies 1,250 1,250 1,360 (110) 1,604 Other services and charges 24,200 24,200 22,467 1,733 12,922

Total evergreen building 25,450 25,450 23,827 1,623 14,604

Civic arenaPersonal services 147,192 147,192 153,494 (6,302) 143,345 Supplies 31,285 31,285 32,285 (1,000) 32,209 Other services and charges 145,250 145,250 143,548 1,702 147,202

Total civic arena 323,727 323,727 329,327 (5,600) 322,756

ParkPersonal services 564,301 564,301 586,320 (22,019) 581,033 Supplies 141,550 141,550 130,365 11,185 131,570 Other services and charges 146,900 146,900 156,984 (10,084) 131,696

Total park 852,751 852,751 873,669 (20,918) 844,299

2016

-159-




2015



Culture and recreation - ContinuedRecreation building and pool

Personal services 112,718$ 112,718$ 117,506$ (4,788)$ 136,020$ Supplies 18,700 18,700 6,918 11,782 19,080 Other services and charges 39,400 39,400 38,743 657 36,121

Total recreation building and pool 170,818 170,818 163,167 7,651 191,221

Events centerPersonal services 168,327 168,327 164,510 3,817 152,726 Supplies 10,070 10,070 10,259 (189) 7,776 Other services and charges 64,620 64,620 62,836 1,784 68,389

Total events center 243,017 243,017 237,605 5,412 228,891

LibraryPersonal services - - - - 9,227 Supplies 2,950 2,950 1,898 1,052 1,739 Other services and charges 203,415 203,415 204,319 (904) 193,173

Total library 206,365 206,365 206,217 148 204,139

Total culture and recreation 2,362,595 2,362,595 2,355,645 6,950 2,334,471

MiscellaneousCemetery

Personal services 83,652 83,652 72,046 11,606 70,733 Supplies 15,348 15,348 14,830 518 12,454 Other services and charges 21,785 21,785 65,136 (43,351) 26,164

Total cemetery 120,785 120,785 152,012 (31,227) 109,351

AirportPersonal services 16,185 16,185 15,365 820 17,157 Supplies 9,625 9,625 3,574 6,051 7,457 Other services and charges 78,825 78,825 78,731 94 60,016

Total airport 104,635 104,635 97,670 6,965 84,630

UnallocatedOther services and charges 665,376 665,376 722,876 (57,500) 694,000

Total miscellaneous 890,796 890,796 972,558 (81,762) 887,981

Total current 11,353,235 11,353,235 11,201,678 151,557 10,941,608

Capital outlayStreets and highways - - - - 3,000 Miscellaneous 10,000 10,000 - 10,000 189,564

Total capital outlay 10,000 10,000 - 10,000 192,564

TOTAL EXPENDITURES 11,363,235 11,363,235 11,201,678 161,557 11,134,172

2016

-160-




Final Final Actual Variance with ActualBudget Budget Amounts Final Budget Amounts

EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (2,021,011)$ (2,021,011)$ (1,749,734)$ 271,277$ (1,768,464)$

OTHER FINANCING SOURCES (USES)Transfers in 2,121,011 2,121,011 2,150,546 29,535 1,990,400 Transfers out (100,000) (600,000) (599,755) 245 (96,850)

TOTAL OTHER FINANCING SOURCES (USES) 2,021,011 1,521,011 1,550,791 29,780 1,893,550

NET CHANGE IN FUND BALANCES - (500,000) (198,943) 301,057 125,086

FUND BALANCES, JANUARY 1 6,859,613 6,859,613 6,859,613 - 6,734,527

FUND BALANCES, DECEMBER 31 6,859,613$ 6,359,613$ 6,660,670$ 301,057$ 6,859,613$

-161-


INTENTIONALLY

-162-

DEBT SERVICE FUNDS

The Debt Service funds are used to account for the accumulation of resources and payment of general obligation bond principal and interest from City resources and special assessment bond principal and interest from special assessment levies when the City is obligated in some manner for the payment.

-163-


INTENTIONALLY

-164-


INTENTIONALLY

-165-

382 383 324 326G.O. Tax G.O. Tax Special SpecialIncrement Increment Assessment Assessment

Bonds Refunding Bonds Bonds1992 Bonds 2004 2004 2006/2012B

ASSETSCash and investments 14,010$ 245,635$ -$ 388,673$ Receivables

Interest 12 362 - - Accounts - - - 168,301 Delinquent special assessments - - - 3,252 Noncurrent special assessments - - - 24,998 Intergovernmental - 1,186 - 2,755

Advances to other funds - 297,103 - -

TOTAL ASSETS 14,022$ 544,286$ -$ 587,979$

LIABILITIESAccounts payable 3$ 99$ -$ -$ Due to other funds - - - -

TOTAL LIABILITIES 3 99 - -

DEFERRED INFLOWS OF RESOURCESUnavailable revenue - special assessments - - - 28,250 Unavailable revenue - interest receivable on interfund loans - 9,155 - -

TOTAL DEFERRED INFLOWS OF RESOURCES - 9,155 - 28,250

FUND BALANCES Restricted 14,019 535,032 - 559,729

TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES 14,022$ 544,286$ -$ 587,979$

CITY OF HUTCHINSON, MINNESOTADEBT SERVICE FUNDS

COMBINING BALANCE SHEET - CONTINUED ON FOLLOWING PAGESDECEMBER 31, 2016

With Comparative Totals for December 31, 2015

-166-

327 328 329Special Special Special

Assessment Assessment AssessmentBonds Bonds Bonds2007 2008 2009

197,592$ 139,907$ 292,808$

230 22 266 - - - - 60,973 - - 87,773 42,369

339 734 818 - - -

198,161$ 289,409$ 336,261$

63$ 6$ 73$ - - -

63 6 73

- 148,746 42,369 - - -

- 148,746 42,369

198,098 140,657 293,819

198,161$ 289,409$ 336,261$

-167-

330 331 332 333Special Special Special Special

Assessment Assessment Assessment AssessmentBonds Bonds Bonds Bonds2010 2011 2012 2013

ASSETSCash and investments 539,879$ 635,031$ 703,707$ 689,131$ Receivables

Interest 671 740 913 832 Accounts - - - - Delinquent special assessments 8,884 10,866 4,479 7,847 Noncurrent special assessments 138,169 376,662 214,369 237,491 Intergovernmental 2,179 904 2,445 901

Advances to other funds - - - -

TOTAL ASSETS 689,782$ 1,024,203$ 925,913$ 936,202$

LIABILITIESAccounts payable 185$ 204$ 251$ 229$ Due to other funds - - - -

TOTAL LIABILITIES 185 204 251 229

DEFERRED INFLOWS OF RESOURCESUnavailable revenue - special assessments 147,053 387,528 218,848 245,338 Unavailable revenue - interest receivable on interfund loans - - - -

TOTAL DEFERRED INFLOWS OF RESOURCES 147,053 387,528 218,848 245,338

FUND BALANCES Restricted 542,544 636,471 706,814 690,635

TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES 689,782$ 1,024,203$ 925,913$ 936,202$

With Comparative Totals for December 31, 2015DECEMBER 31, 2016

COMBINING BALANCE SHEET - CONTINUEDDEBT SERVICE FUNDS


-168-


Assessment Assessment Assessment TotalsBonds Bonds Bonds2014 2015 2016 2016 2015

467,792$ 459,971$ 233,252$ 5,007,388$ 4,486,647$

533 511 92 5,184 5,997 - - - 168,301 -

2,367 167 - 98,835 364,041 407,844 196,346 386,153 2,112,174 2,444,151

587 981 - 13,829 17,566 - - - 297,103 -

879,123$ 657,976$ 619,497$ 7,702,814$ 7,318,402$

146$ 140$ 25$ 1,424$ 1,417$ - - - - 10,199

146 140 25 1,424 11,616

410,211 196,513 386,153 2,211,009 2,808,192 - - - 9,155 -

410,211 196,513 386,153 2,220,164 2,808,192

468,766 461,323 233,319 5,481,226 4,498,594

879,123$ 657,976$ 619,497$ 7,702,814$ 7,318,402$

-169-

382 383 324 326G.O. Tax G.O. Tax Special SpecialIncrement Increment Assessment Assessment

Bonds Refunding Bonds Bonds1992 Bonds 2004 2004 2006/2012B

REVENUESTaxes

Property taxes -$ -$ 452,656$ 516,591$ Tax increment district taxes 24,910 149,601 - -

Special assessments - - 5,055 435,978 Intergovernmental - State

Street construction aid - - - - Investment earnings 61 1,297 41 381

TOTAL REVENUES 24,971 150,898 457,752 952,950 EXPENDITURES

Debt servicePrincipal - - 430,000 415,000 Interest and other 1,405 31,773 6,623 50,670


EXCESS (DEFICIENCY) OF REVENUES OVER(UNDER) EXPENDITURES 23,566 119,125 21,129 487,280

OTHER FINANCING SOURCES (USES)Transfers in - - - - Transfers out - - (133,329) -

TOTAL OTHER FINANCING SOURCES (USES) - - (133,329) -

NET CHANGE IN FUND BALANCES 23,566 119,125 (112,200) 487,280

FUND BALANCES, JANUARY 1 (9,547) 415,907 112,200 72,449

FUND BALANCES, DECEMBER 31 14,019$ 535,032$ -$ 559,729$

With Comparative Totals for the Year Ended December 31, 2015FOR THE YEAR ENDED DECEMBER 31, 2016

CONTINUED ON FOLLOWING PAGESCOMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES -

DEBT SERVICE FUNDSCITY OF HUTCHINSON, MINNESOTA

-170-


Assessment Assessment AssessmentBonds Bonds Bonds2007 2008 2009

74,508$ 161,244$ 179,583$ - - - - 34,415 18,627

- - - 565 462 779

75,073 196,121 198,989

50,000 175,000 155,000 3,175 19,975 44,608

53,175 194,975 199,608

21,898 1,146 (619)

- - - - - -

- - -

21,898 1,146 (619)

176,200 139,511 294,438

198,098$ 140,657$ 293,819$

-171-

330 331 332 333Special Special Special Special

Assessment Assessment Assessment AssessmentBonds Bonds Bonds Bonds2010 2011 2012 2013

REVENUESTaxes

Property taxes 105,876$ 160,645$ 135,231$ 137,669$ Tax increment district taxes - - - -

Special assessments 64,325 101,681 57,772 112,022 Intergovernmental - State

Street construction aid - - - - Investment earnings 1,975 2,087 2,556 2,057

TOTAL REVENUES 172,176 264,413 195,559 251,748 EXPENDITURES

Debt servicePrincipal 180,000 215,000 170,000 165,000 Interest and other 35,517 52,766 40,605 55,215


EXCESS (DEFICIENCY) OF REVENUES OVER(UNDER) EXPENDITURES (43,341) (3,353) (15,046) 31,533

OTHER FINANCING SOURCES (USES)Transfers in - - - - Transfers out - - - -

TOTAL OTHER FINANCING SOURCES (USES) - - - -

NET CHANGE IN FUND BALANCES (43,341) (3,353) (15,046) 31,533

FUND BALANCES, JANUARY 1 585,885 639,824 721,860 659,102



With Comparative Totals for the Year Ended December 31, 2015FOR THE YEAR ENDED DECEMBER 31, 2016

CONTINUEDCOMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES -

DEBT SERVICE FUNDS

-172-


Assessment Assessment Assessment TotalsBonds Bonds Bonds2014 2015 2016 2016 2015

128,934$ 147,063$ -$ 2,200,000$ 2,177,193$ - - - 174,511 144,258

77,471 39,227 233,402 1,179,975 814,141

- - - - 111,482 991 468 262 13,982 16,847

207,396 186,758 233,664 3,568,468 3,263,921

165,000 - - 2,120,000 3,300,000 54,670 51,237 345 448,584 458,378

219,670 51,237 345 2,568,584 3,758,378

(12,274) 135,521 233,319 999,884 (494,457)

- 116,077 - 116,077 269,771 - - - (133,329) (227,474)

- 116,077 - (17,252) 42,297

(12,274) 251,598 233,319 982,632 (452,160)

481,040 209,725 - 4,498,594 4,950,754

468,766$ 461,323$ 233,319$ 5,481,226$ 4,498,594$

-173-


INTENTIONALLY

-174-

INTERNAL SERVICE FUNDS

Internal service funds are used to account for the financing of goods or services provided by one department or agency to other departments or agencies of the City and to other government units, on a cost reimbursement basis. Central Garage and Equipment: This fund accounts for the cost of maintaining the City’s vehicle fleet. All City vehicles are maintained by the central garage and billed for the maintenance on a departmental basis. Self-insurance: This fund is used to account for the costs of the City employee dental insurance plan. Premiums are paid by the benefiting funds and dental insurance and other claims are paid out of the fund.

-175-


INTENTIONALLY

-176-


INTENTIONALLY

-177-

CITY OF HUTCHINSON, MINNESOTAINTERNAL SERVICE FUNDS

COMBINING STATEMENTS OF NET POSITIONDECEMBER 31, 2016 AND 2015

2016 2015 2016 2015ASSETSCURRENT ASSETS

Cash and investments 1,297,498$ 526,967$ 781,312$ 917,017$ Receivables

Interest 654 635 1,401 1,619 Intergovernmental 96,834 - - -

TOTAL CURRENT ASSETS 1,394,986 527,602 782,713 918,636

CAPITAL ASSETSConstruction in progress 39,969 - - - Machinery and equipment 1,441,144 1,265,864 - - Vehicles 3,181,897 2,476,128 - - Less accumulated depreciation (2,727,182) (2,673,567) - -

TOTAL CAPITAL ASSETS 1,935,828 1,068,425 - -

TOTAL ASSETS 3,330,814 1,596,027 782,713 918,636


Accounts payable 180 150 7,962 17,128 Accrued interest payable 7,105 - - -

TOTAL CURRENT LIABILITIES 7,285 150 7,962 17,128

NONCURRENT LIABILITIESBonds payable 1,482,599 - - -

TOTAL LIABILITIES 1,489,884 150 7,962 17,128

NET POSITIONNet investment in capital assets 779,013 1,068,425 - - Unrestricted 1,061,917 527,452 774,751 901,508

TOTAL NET POSITION 1,840,930$ 1,595,877$ 774,751$ 901,508$

Central Garage701 703

Self-insurance

-178-

Totals2016 2015

2,078,810$ 1,443,984$

2,055 2,254 96,834 -

2,177,699 1,446,238

39,969 - 1,441,144 1,265,864 3,181,897 2,476,128

(2,727,182) (2,673,567)

1,935,828 1,068,425

4,113,527 2,514,663

8,142 17,278 7,105 -

15,247 17,278

1,482,599 -

1,497,846 17,278

779,013 1,068,425 1,836,668 1,428,960

2,615,681$ 2,497,385$

-179-

CITY OF HUTCHINSON, MINNESOTAINTERNAL SERVICE FUNDS

COMBINING STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET POSITIONFOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

2016 2015 2016 2015OPERATING REVENUES

Charges for servicesPremiums -$ -$ 100,224$ 98,641$ Vehicle rent 225,000 225,000 - -

TOTAL OPERATING REVENUES 225,000 225,000 100,224 98,641

OPERATING EXPENSESSupplies and maintenance - 14,688 - - Medical and dental claims - - 99,753 101,871 Other services and charges 750 - 12,369 14,413 Depreciation 294,756 275,531 - -

TOTAL OPERATING EXPENSES 295,506 290,219 112,122 116,284

OPERATING INCOME (LOSS) (70,506) (65,219) (11,898) (17,643)

NONOPERATING REVENUES (EXPENSES)Interest earnings 2,246 2,322 4,141 5,736 Gain (loss) on sale of assets 76,872 2,940 - - Other income 4,904 4,904 - - Interest expense - bonds (7,105) - - - Bond issuance costs (25,811) - - -

TOTAL NONOPERATING REVENUES (EXPENSES) 51,106 10,166 4,141 5,736

INCOME (LOSS) BEFORE CONTRIBUTIONS AND TRANSFERS (19,400) (55,053) (7,757) (11,907)

CAPITAL CONTRIBUTIONS FROMTOWNSHIPS 264,453 - - -

TRANSFERS OUT - - (119,000) (36,000)

CHANGE IN NET POSITION 245,053 (55,053) (126,757) (47,907)

NET POSITION, JANUARY 1 1,595,877 1,650,930 901,508 949,415

NET POSITION, DECEMBER 31 1,840,930$ 1,595,877$ 774,751$ 901,508$

701 703Central Garage Self-insurance

-180-

Totals2016 2015

100,224$ 98,641$ 225,000 225,000

325,224 323,641

- 14,688 99,753 101,871 13,119 14,413

294,756 275,531

407,628 406,503

(82,404) (82,862)

6,387 8,058 76,872 2,940

4,904 4,904 (7,105) -

(25,811) -

55,247 15,902

(27,157) (66,960)

264,453 - (119,000) (36,000)

118,296 (102,960)

2,497,385 2,600,345

2,615,681$ 2,497,385$

-181-


INTERNAL SERVICE FUNDS

COMBINING STATEMENTS OF CASH FLOWS


2016 2015 2016 2015

CASH FLOWS FROM OPERATING ACTIVITIES

Receipts from interfund services provided 225,000$ 225,000$ 100,224$ 98,641$

Other receipts 4,904 4,904 - -

Payments to suppliers and vendors (720) (14,538) (121,288) (106,163)

NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 229,184 215,366 (21,064) (7,522)

CASH FLOWS FROM NONCAPITAL FINANCING

ACTIVITIES

Transfers out - - (119,000) (36,000)

CASH FLOWS FROM CAPITAL AND RELATED

FINANCING ACTIVITIES

Purchase of capital assets (1,196,784) (159,270) - -

Capital grant received 167,619 - - -

Proceeds from sale of capital assets 111,497 8,198 - -

Net proceeds from issuance of debt 1,482,599 - - -

Bond issuance costs (25,811) - - -

NET CASH PROVIDED (USED) BY CAPITAL AND

RELATED FINANCING ACTIVITIES 539,120 (151,072) - -

CASH FLOWS FROM INVESTING ACTIVITIES

Interest received on investments 2,227 2,189 4,359 5,570

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 770,531 66,483 (135,705) (37,952)

CASH AND CASH EQUIVALENTS, JANUARY 1 526,967 460,484 917,017 954,969

CASH AND CASH EQUIVALENTS, DECEMBER 31 1,297,498$ 526,967$ 781,312$ 917,017$

RECONCILIATION OF OPERATING INCOME (LOSS) TO

NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES

Operating income (loss) (70,506)$ (65,219)$ (11,898)$ (17,643)$

Adjustments to reconcile operating income (loss) to

net cash provided (used) by operating activities

Other income related to operations 4,904 4,904 - -

Depreciation 294,756 275,531 - -

Increase (decrease) in liabilities

Accounts payable 30 150 (9,166) 10,121

NET CASH PROVIDED (USED) BY

OPERATING ACTIVITIES 229,184$ 215,366$ (21,064)$ (7,522)$

701 703

Central Garage Self-insurance

-182-

kvanthuyne_ABDO16C

Sticky Note


Totals

2016 2015

325,224$ 323,641$

4,904 4,904

(122,008) (120,701)

208,120 207,844

(119,000) (36,000)

(1,196,784) (159,270)

167,619 -

111,497 8,198

1,482,599 -

(25,811) -

539,120 (151,072)

6,586 7,759

634,826 28,531

1,443,984 1,415,453

2,078,810$ 1,443,984$

(82,404)$ (82,862)$

4,904 4,904

294,756 275,531

(9,136) 10,271

208,120$ 207,844$

-183-

kvanthuyne_ABDO16C

Sticky Note



INTENTIONALLY

-184-

DISCRETELY PRESENTED COMPONENT UNIT ECONOMIC DEVELOPMENT AUTHORITY

CITY OF HUTCHINSON

HUTCHINSON, MINNESOTA


-185-


INTENTIONALLY

-186-

2016 2015

ASSETS

Cash and investments 166,352$ 175,072$

Receivables

Interest 207 242

Intergovernmental 804 1,484

TOTAL ASSETS 167,363$ 176,798$

LIABILITIES

Accounts payable 1,216$ 3,551$

Due to other governments 115 -

Accrued salaries payable 4,968 4,479

Accrued vacation payable 162 -

TOTAL LIABILITIES 6,461 8,030

FUND BALANCES

Assigned 160,902 168,768

TOTAL LIABILITIES AND FUND BALANCES 167,363$ 176,798$

Amounts reported for governmental activities in the statement

of net position are different because

Total fund balances - Economic Development Authority 160,902$ 168,768$

Long-term liabilities, including bonds payable, are not due and payable in the

current period and therefore are not reported as liabilities in the funds.

Long-term liabilities at year-end consist of

Other post-employment benefit obligation (6,684) (6,253)

Pension liability (143,375) (80,946)

Governmental funds do not report long-term amounts related to pensions.

Deferred outflows of pension resources 52,361 9,381

Deferred inflows of pension resources (17,660) (19,237)

Internal service funds are used by management to charge the costs of various services to

individual funds. The assets and liabilities of certain internal service funds are included in

governmental activities in the statement of net position. (416) (349)

Total net position - governmental activities 45,128$ 71,364$

CITY OF HUTCHINSON, MINNESOTA BALANCE SHEETS

ECONOMIC DEVELOPMENT AUTHORITY DECEMBER 31, 2016 AND 2015

-187-

kvanthuyne_ABDO16C

Sticky Note


ECONOMIC DEVELOPMENT AUTHORITY

2016 2015REVENUES

TaxesProperty taxes 156,890$ 152,625$


Property tax credits 22 21 Investment earnings 561 894 Miscellaneous 12,921 5,499

TOTAL REVENUES 170,394 159,039

EXPENDITURESCurrent

Housing and economic development 178,260 169,209

NET CHANGE IN FUND BALANCES (7,866) (10,170)

FUND BALANCES, JANUARY 1 168,768 178,938

FUND BALANCES, DECEMBER 31 160,902$ 168,768$

Amounts reported for governmental activities in the statement of activities are different because

Net change in fund balances - Economic Development Authority (7,866)$ (10,170)$

Long-term pension activity is not reported in governmental funds.Pension expense (18,430) (15,224) Pension revenue 558 -

Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds.

Other post-employment benefit costs (431) (465)

Internal service funds are used by management to charge the costs of various services to individual funds. The net revenues of certain activities of internal service funds is reported with governmental activities. (67) (92)

Change in net position - governmental activities (26,236)$ (25,951)$

SCHEDULES OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCESCITY OF HUTCHINSON, MINNESOTA


-188-

kvanthuyne_ABDO16C

Sticky Note



SUMMARY FINANCIAL REPORT

REVENUES AND EXPENDITURES FOR GENERAL OPERATIONS

GOVERNMENTAL FUNDS


Totals

2016 2015

REVENUES

Taxes 7,378,523$ 7,255,422$ 1.70 %

Special assessments 2,812,394 830,081 238.81

Licenses and permits 281,559 324,083 (13.12)

Intergovernmental 1,904,422 5,911,845 (67.79)

Charges for services 2,192,444 1,922,483 14.04

Fines and forfeits 45,588 45,449 0.31

Investment earnings 74,374 101,220 (26.52)

Miscellaneous 1,275,922 1,485,213 (14.09)

TOTAL REVENUES 15,965,226$ 17,875,796$ (10.69) %

Per Capita 1,127$ 1,266$ (10.98) %

EXPENDITURES

Current

General government 2,101,566$ 1,995,215$ 5.33 %

Public safety 4,208,847 4,176,717 0.77

Streets and highways 2,108,807 2,161,317 (2.43)

Culture and recreation 2,392,960 2,339,479 2.29

Economic development 575,177 208,850 175.40

Miscellaneous 972,558 887,981 9.52

Capital outlay

General government 22,297 230,631 (90.33)

Public safety 57,291 66,149 (13.39)

Streets and highways 3,761,417 3,928,737 (4.26)

Culture and recreation 4,245,486 697,422 508.74

Economic development 276,965 - 100.00

Miscellaneous 91,702 2,424,845 (96.22)

Debt service

Principal 2,150,000 3,330,000 (35.44)

Interest and other charges 458,736 459,149 (0.09)

Bond issuance costs 43,495 50,384 (13.67)

TOTAL EXPENDITURES 23,467,304$ 22,956,876$ 2.22 %

Per Capita 1,656$ 1,625$ 1.89 %

Total Long-term Indebtedness 18,660,000$ 16,930,000$ 10.22 %

Per Capita 1,317 1,199 9.86

General Fund Balance - December 31 6,660,670$ 6,859,613$ (2.90) %

Per Capita 470 486 (3.22)

The purpose of this report is to provide a summary of financial information concerning the City of Hutchinson, Minnesota to

interested citizens. The complete financial statements may be examined at 111 Hassan St. SE, Hutchinson, Minnesota.

Questions about this report should be directed to Andy Reid, Finance Director at 320-234-4244.

(Decrease)

Increase

Percent

-189-


INTENTIONALLY

-190-

STATISTICAL SECTION (UNAUDITED)

This part of the City of Hutchinson’s comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the government’s overall financial health. Financial Trends

These schedules contain trend information to help the reader understand how the government’s financial performance and well-being have changed over time.

Revenue Capacity

These schedules contain information to help the reader assess the government’s most significant local revenue source, the property tax.

Debt Capacity These schedules present information to help the reader assess the affordability of the

government’s current levels of outstanding debt and the government’s ability to issue additional debt in the future.

Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader

understand the environment within which the government’s financial activities take place.

Operating Information These schedules contain service and infrastructure data to help the reader understand how

the information in the government’s financial report relates to the services the government provides and the activities it performs.

-191-


INTENTIONALLY

-192-


INTENTIONALLY

-193-


NET POSITION BY COMPONENT

LAST TEN FISCAL YEARS

(accrual basis of accounting)

2016 2015 2014 2013 2012

Governmental activities

Net investment in capital assets 58,487,080$ 53,823,361$ 50,999,100$ 49,566,730$ 46,659,087$

Restricted 10,680,796 11,119,053 10,939,342 9,121,915 9,595,849

Unrestricted 5,664,070 9,263,817 15,351,159 18,324,681 17,538,239

Total governmental activities net position 74,831,946 74,206,231 77,289,601 77,013,326 73,793,175

Business-type activities

Net investment in capital assets 83,737,730 86,594,081 85,492,312 85,583,151 85,784,415

Restricted 2,539,625 541,716 365,983 191,832 194,548

Unrestricted 24,470,821 21,113,701 24,293,705 20,135,323 18,397,355

Total business-type activities net position 110,748,176 108,249,498 110,152,000 105,910,306 104,376,318

Primary government

Net investment in capital assets 142,224,810 140,417,442 136,491,412 135,149,881 132,443,502

Restricted 13,220,421 11,660,769 11,305,325 9,313,747 9,790,397

Unrestricted 30,134,891 30,377,518 39,644,864 38,460,004 35,935,594

Total primary government net position 185,580,122$ 182,455,729$ 187,441,601$ 182,923,632$ 178,169,493$

Source: Financial Statements

Note: In 2008 the Hutchinson Health Care (HHC) was being presented as a discretely presented component unit. Beginning in 2008, the

amounts for the business-type activities do not include HHC.

Fiscal Year

-194-

Table 1

2011 2010 2009 2008 2007

46,273,082$ 44,483,859$ 46,611,346$ 43,647,089$ 42,396,596$

10,431,764 9,854,186 7,050,208 8,162,579 9,166,906

13,585,520 13,707,354 13,440,659 12,967,706 11,796,804

70,290,366 68,045,399 67,102,213 64,777,374 63,360,306

79,471,842 77,762,739 76,557,982 77,565,725 76,793,850

380,755 349,212 315,585 276,063 241,858

21,936,120 20,550,035 17,748,172 16,587,193 15,414,172

101,788,717 98,661,986 94,621,739 94,428,981 92,449,880

125,744,924 122,246,598 123,169,328 121,212,814 119,190,446

10,812,519 10,203,398 7,365,793 8,438,642 9,408,764

35,521,640 34,257,389 31,188,831 29,554,899 27,210,976

172,079,083$ 166,707,385$ 161,723,952$ 159,206,355$ 155,810,186$

Fiscal Year

-195-


CHANGES IN NET POSITION



2016 2015 2014 2013 2012

EXPENSES


General government 2,354,768$ 2,274,447$ 2,032,887$ 2,307,145$ 2,210,908$

Public safety 5,307,364 4,297,569 4,181,806 4,018,616 4,036,929

Streets and highways 5,421,270 4,559,499 5,579,567 4,893,115 4,470,565

Culture and recreation 2,892,986 2,779,174 2,585,826 2,675,883 2,436,528

Housing and economic development 583,421 217,094 436,241 300,264 326,743

Miscellaneous 1,316,993 1,109,584 1,267,447 1,014,805 995,836

Interest on long-term debt 491,730 436,626 477,101 556,537 635,721

Total governmental activities expenses 18,368,532 15,673,993 16,560,875 15,766,365 15,113,230


Electric 26,538,262 26,936,359 26,012,324 26,189,278 26,284,199

Natural gas 9,232,357 9,563,857 13,601,847 11,450,559 10,693,048

Water 2,610,633 2,634,150 2,556,042 2,717,124 2,499,411

Sewer 3,593,584 3,327,256 3,513,726 3,736,919 3,710,136

Refuse 1,077,519 1,036,616 1,106,012 1,079,901 1,054,727

Composting 2,064,529 2,634,096 2,715,660 2,449,375 2,172,366

Storm water 585,575 497,695 527,613 401,086 519,193

Liquor 5,451,353 5,264,041 5,098,025 4,865,901 4,817,672

Health care - - - - -

Total business-type activities expenses 51,153,812 51,894,070 55,131,249 52,890,143 51,750,752

Total primary government expenses 69,522,344$ 67,568,063$ 71,692,124$ 68,656,508$ 66,863,982$ PROGRAM REVENUES


Charges for services

General government 641,899$ 663,176$ 731,450$ 703,624$ 708,213$

Public safety 833,822 919,533 819,654 525,525 439,368

Streets and highways 760,014 769,523 1,051,923 1,122,566 1,004,963

Culture and recreation 938,724 943,835 983,674 1,004,713 928,700

Housing and economic development 19,076 22,251 21,029 51,442 55,609

Miscellaneous 266,494 253,403 237,595 253,208 253,341

Operating grants and contributions 715,410 598,506 866,989 685,199 761,593

Capital grants and contributions 1,823,110 3,325,032 1,389,461 3,053,878 1,547,152

Total governmental activities program revenues 5,998,549 7,495,259 6,101,775 7,400,155 5,698,939

Fiscal Year

-196-

Table 2

UPDATED FOR 2014

2011 2010 2009 2008 2007

2,132,263$ 2,241,575$ 2,361,914$ 2,249,680$ 2,222,222$

3,907,785 4,113,350 3,989,773 4,142,770 3,977,048

4,423,328 5,413,503 4,172,011 4,085,697 3,428,763

2,473,720 2,444,278 2,538,639 2,672,382 2,434,079

368,587 533,141 461,222 471,026 424,390

807,905 767,227 696,477 690,169 625,261

538,400 642,718 647,620 683,266 803,795

14,651,988 16,155,792 14,867,656 14,994,990 13,915,558

25,668,586 25,706,034 24,174,446 28,309,337 26,867,516

12,744,621 13,542,317 13,979,404 17,613,906 15,234,749

2,438,187 2,489,793 2,651,175 2,658,017 2,845,625

3,862,158 4,020,317 3,946,139 3,683,313 3,432,531

1,204,465 1,165,704 1,152,444 1,144,313 1,118,324

2,095,500 2,010,751 2,538,327 2,386,624 2,867,750

518,569 404,662 408,531 339,238 283,616

4,642,486 4,713,680 4,619,807 4,482,906 4,280,314

- - - 59,568,374

53,174,572 54,053,258 53,470,273 60,617,654 116,498,799

67,826,560$ 70,209,050$ 68,337,929$ 75,612,644$ 130,414,357$

645,877$ 595,552$ 632,362$ 665,656$ 522,225$

423,521 509,625 514,085 574,629 556,157

1,079,416 1,049,561 977,200 1,241,098 965,086

901,738 959,799 903,191 874,932 854,253

54,908 83,623 243,627 10,495 79,365

205,522 234,745 197,094 134,899 123,404

863,828 1,392,417 716,964 1,214,001 926,277

3,115,830 4,088,899 1,353,094 1,471,426 2,523,584

7,290,640 8,914,221 5,537,617 6,187,136 6,550,351

Fiscal Year

-197-


CHANGES IN NET POSITION - CONTINUED



2016 2015 2014 2013 2012

PROGRAM REVENUES - CONTINUED


Charges for services

Electric 27,207,567$ 26,882,789$ 26,150,428$ 25,834,604$ 27,583,576$

Natural gas 11,658,645 11,425,821 16,171,261 13,946,578 11,799,117

Water 2,355,374 2,482,639 2,336,775 2,464,672 2,569,955

Sewer 3,194,892 3,389,165 3,226,938 3,345,367 3,394,548

Refuse 1,172,250 1,146,693 1,143,283 1,130,817 1,135,884

Composting 2,143,152 3,100,161 3,158,465 2,843,294 2,422,876

Storm water 868,817 802,235 735,773 677,421 637,853

Liquor 5,989,628 5,853,469 5,614,596 5,388,997 5,330,668

Healthcare - - - - -

Operating grants and contributions 22,452 12,608 12,600 12,231 34,392

Capital grants and contributions 199,684 1,019,453 102,476 117,357 39,047

Total business-type activities program revenues 54,812,461 56,115,033 58,652,595 55,761,338 54,947,916

Total primary government program revenues 60,811,010$ 63,610,292$ 64,754,370$ 63,161,493$ 60,646,855$

Net (expense)/revenue

Governmental activities (12,369,983)$ (8,178,734)$ (10,459,100)$ (8,366,210)$ (9,414,291)$

Business-type activities 3,658,649 4,220,963 3,521,346 2,871,195 3,197,164

Total primary government net expense (8,711,334)$ (3,957,771)$ (6,937,754)$ (5,495,015)$ (6,217,127)$

GENERAL REVENUES AND OTHER CHANGES IN NET POSITION


Taxes

Property taxes, levied for general purposes 4,597,702$ 4,526,246$ 4,518,247$ 4,492,207$ 4,531,190$

Property taxes, levied for debt service 2,200,000 2,177,193 2,073,517 1,974,778 1,974,779

Tax increments 293,878 267,068 315,558 323,237 281,773

Hotel-motel tax 95,133 96,269 86,613 83,175 79,290

Payment in lieu of taxes 236,393 225,137 214,416 204,206 194,482

Franchise taxes 196,777 195,074 184,421 85,765 84,382

Grants and contributions not

restricted to specific programs 2,306,470 2,290,237 2,265,678 1,674,549 4,059,738

Unrestricted investment earnings (loss) 89,916 109,278 223,893 (93,334) 108,169

Other revenues 269,357 4,904 6,364 2,348 1,911

Gain on sale of capital assets 106,699 8,198 14,924 120,359 16,608

Transfers 2,603,373 750,657 831,744 2,765,536 1,584,778

Total governmental activities 12,995,698 10,650,261 10,735,375 11,632,826 12,917,100

Fiscal Year

-198-

Table 2 (Continued)

2011 2010 2009 2008 2007

27,723,908$ 27,577,008$ 26,317,291$ 31,409,886$ 30,949,451$

14,250,540 14,383,916 14,687,379 18,003,007 15,725,224

2,447,251 2,457,829 2,357,775 2,357,502 2,119,906

3,750,471 3,959,736 3,346,699 3,176,327 2,790,895

1,143,949 1,146,573 1,105,317 1,114,206 1,045,503

2,080,197 2,196,486 2,593,586 2,484,424 2,257,627

581,499 563,735 542,032 522,611 494,332

5,102,948 5,045,227 5,016,036 4,761,093 4,545,020

- - - - 59,962,152

52,262 25,773 26,692 28,232 24,903

51,087 266,078 67,952 95,125 219,685

57,184,112 57,622,361 56,060,759 63,952,413 120,134,698

64,474,752$ 66,536,582$ 61,598,376$ 70,139,549$ 126,685,049$

(7,361,348)$ (7,241,571)$ (9,330,039)$ (8,807,854)$ (7,365,207)$

4,009,540 3,569,103 2,590,486 3,334,759 3,635,899

(3,351,808)$ (3,672,468)$ (6,739,553)$ (5,473,095)$ (3,729,308)$

4,217,015$ 4,125,739$ 3,897,360$ 3,715,388$ 3,520,056$

1,751,870 1,660,746 1,626,602 1,523,587 1,467,142

274,297 264,339 278,074 231,116 214,257

72,627 60,184 63,298 73,927 75,609

185,220 176,400 168,000 160,000 117,000

83,587 78,435 72,394 72,427 66,619

2,061,956 1,934,252 2,715,774 2,358,024 2,840,005

231,062 97,837 128,219 314,941 490,333

1,556 1,845 63,278 8,099 24,463

155,757 56,829 3,184 5,514 26,665

839,268 (271,849) 2,638,695 1,761,899 414,911

9,874,215 8,184,757 11,654,878 10,224,922 9,257,060

Fiscal Year

-199-


CHANGES IN NET POSITION - CONTINUED



2016 2015 2014 2013 2012

GENERAL REVENUES AND OTHER CHANGES IN NET POSITION


Sales tax 1,270,814$ 1,224,846$ 1,323,298$ 1,354,668$ 1,300,911$

Unrestricted investment earnings 88,542 134,502 183,535 63,661 236,144

Gain on sale of capital assets 84,046 6,819 45,259 10,000 49,398

Transfers (2,603,373) (750,657) (831,744) (2,765,536) (1,584,778)

Total business-type activities (1,159,971) 615,510 720,348 (1,337,207) 1,675

Total primary government 11,835,727$ 11,265,771$ 11,455,723$ 10,295,619$ 12,918,775$

CHANGES IN NET POSITION

Governmental activities 625,715$ 2,471,527$ 276,275$ 3,266,616$ 3,502,809$

Business-type activities 2,498,678 4,836,473 4,241,694 1,533,988 3,198,839

Total primary government 3,124,393$ 7,308,000$ 4,517,969$ 4,800,604$ 6,701,648$


Note: Starting in 2008, Hutchinson Health Care (HHC) is being presented as a discretely presented component unit.

The 2008 amounts for the business-type activities do not include HHC.

Fiscal Year

-200-

Table 2 (Continued)

2011 2010 2009 2008 2007

-$ -$ -$ -$ -$

147,308 174,941 223,670 288,972 1,197,476

- 24,354 17,297 117,269 -

(839,268) 271,849 (2,638,695) (1,761,899) (414,911)

(691,960) 471,144 (2,397,728) (1,355,658) 782,565

9,182,255$ 8,655,901$ 9,257,150$ 8,869,264$ 10,039,625$

2,512,867$ 943,186$ 2,324,839$ 1,417,068$ 1,891,853$

3,317,580 4,040,247 192,758 1,979,101 4,418,464

5,830,447$ 4,983,433$ 2,517,597$ 3,396,169$ 6,310,317$

Fiscal Year

-201-


INTENTIONALLY

-202-


GOVERNMENTAL ACTIVITIES TAX REVENUES BY SOURCE



Table 3

Levied for Levied for Hotel- Payment in

Fiscal General Debt Tax Motel Lieu of Franchise

Year Purposes Service Increments Tax Tax Tax Total

2016 4,597,702$ 2,200,000$ 293,878$ 95,133$ 236,393$ 196,777$ 7,619,883$

2015 4,526,246 2,177,193 267,068 96,269 225,137 195,074 7,486,987

2014 4,518,247 2,073,517 315,558 86,613 214,416 184,421 7,392,772

2013 4,492,207 1,974,778 323,237 83,175 204,206 85,765 7,163,368

2012 4,531,190 1,974,779 281,773 79,290 194,482 84,382 7,145,896

2011 4,217,015 1,751,870 274,297 72,627 185,220 83,587 6,584,616

2010 4,125,739 1,660,746 264,339 60,184 176,400 78,435 6,365,843

2009 3,897,360 1,626,602 278,074 63,298 168,000 72,394 6,105,728

2008 3,715,388 1,523,587 231,116 73,927 160,000 72,427 5,776,445

2007 3,520,056 1,467,142 214,257 75,609 117,000 66,619 5,460,683


Property Taxes

-203-


FUND BALANCES OF GOVERNMENTAL FUNDS


(modified accrual basis of accounting)

2016 2015 2014 2013 2012

General fund

Nonspendable (Reserved in 2007 - 2009) 4,959$ 126,547$ -$ 112,127$ -$

Restricted (Reserved in 2007 - 2009) 56,607 54,607 29,786 67,434 72,161

Committed 5,266,128 4,959,914 4,663,847 4,616,184 4,360,875

Assigned 113,413 255,279 426,610 395,301 355,293

Unassigned (Unreserved in 2007 - 2009) 1,219,563 1,539,298 1,614,284 1,059,185 1,464,413

6,660,670$ 6,935,645$ 6,734,527$ 6,250,231$ 6,252,742$

All other governmental funds

Nonspendable, reported in

Special revenue funds -$ -$ -$ -$ -$

Capital projects funds - - - - -

Restricted (Reserved in 2007 - 2009), reported in

Debt Service funds 5,481,226 4,498,594 4,950,754 4,872,276 5,698,459

Special revenue funds 3,088,961 3,933,227 4,057,729 2,049,954 1,476,793

Capital projects funds 8,999 - - 12,019 -

Committed, reported in

Special revenue funds 830,372 120,278 120,278 121,398 130,465

Capital projects funds 236,293 - 14,661 - -

Assigned, reported in

Special revenue funds 506,798 435,872 375,967 284,861 276,647

Capital projects funds 2,577,499 5,383,434 5,926,037 7,236,090 5,592,191

Unassigned (Unreserved in 2007 - 2009), reported in

Special revenue funds (298,639) - (1,026) (7,159) (13,037)

Debt Service funds - - - - -

Capital projects funds (273,711) (210,900) (111,282) (28,367) (12,812)

Total all other governmental funds 12,157,798$ 14,160,505$ 15,333,118$ 14,541,072$ 13,148,706$


Note: The City implemented GASB 54 in fiscal year 2010, resulting in significant reclassification of the components of fund balance.

Years prior to 2010 have not been restated.

Fiscal Year

-204-

Table 4

2011 2010 2009 2008 2007

1,196$ -$ -$ -$ -$

67,597 353,996 - - -

4,268,852 4,333,248 - - -

314,755 125,000 - - -

1,346,010 1,113,391 5,539,639 4,935,003 4,922,856

5,998,410$ 5,925,635$ 5,539,639$ 4,935,003$ 4,922,856$

16$ -$ -$ -$ -$

- 148,821 - - -

4,284,797 7,169,000 4,533,085 4,858,639 4,427,399

1,329,943 1,411,528 435,049 448,084 432,940

- 97,653 148,821 - -

129,965 - - - -

- - - - -

185,031 301,621 - - -

3,710,233 3,051,795 - - -

(37,026) (14,062) 1,103,059 883,903 1,123,657

- - - - 1,385,158

(87,661) (20,159) 1,533,136 2,450,719 1,252,417

9,515,298$ 12,146,197$ 7,753,150$ 8,641,345$ 8,621,571$

Fiscal Year

-205-


CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS


(modified accrual basis of accounting)

2016 2015 2014 2013 2012

REVENUES

Taxes 7,378,523$ 7,255,422$ 7,168,812$ 6,980,438$ 6,969,013$

Special assessments 2,812,394 830,081 1,057,900 1,646,524 978,975

Intergovernmental revenue 1,904,422 5,911,845 4,227,782 4,000,220 3,871,042

Licenses and permits 281,559 324,083 283,488 278,629 241,114

Charges for services 2,192,444 1,922,483 2,183,844 2,249,396 2,040,203

Fines and forfeits 45,588 45,449 59,737 60,012 60,498

Investment earnings (loss) 74,374 101,220 207,830 (85,668) 97,918

Other revenues 1,275,922 1,485,213 2,251,024 2,304,362 2,248,873

TOTAL REVENUES 15,965,226 17,875,796 17,440,417 17,433,913 16,507,636

EXPENDITURES

General government 2,101,566 1,995,215 1,902,830 2,247,388 2,028,772

Community development 575,177 208,850 427,997 325,164 478,847

Public safety 4,208,847 4,176,717 3,949,625 3,741,161 3,756,228

Streets and highways 2,108,807 2,161,317 2,458,488 2,638,192 2,406,663

Culture and recreation 2,392,960 2,339,479 2,258,762 2,365,151 2,133,359

Miscellaneous 972,558 887,981 834,461 712,597 710,972

Capital outlay 8,455,158 7,347,784 7,601,893 5,892,215 5,000,514

Debt service

Principal 2,150,000 3,330,000 4,470,000 3,080,000 2,525,000

Interest 458,736 459,149 499,079 566,548 538,299

Bond issuance costs 43,495 50,384 76,143 48,223 113,173

TOTAL EXPENDITURES 23,467,304 22,956,876 24,479,278 21,616,639 19,691,827

DEFICIENCY OF REVENUES

activities do not include HHC.UNDER EXPENDITURES (7,502,078) (5,081,080) (7,038,861) (4,182,726) (3,184,191)

OTHER FINANCING SOURCES (USES)

Sale of assets 2,915 - - 525,359 16,608

Transfers in 5,926,322 3,396,428 4,521,284 4,381,016 4,248,730

Transfers out (3,203,949) (1,508,781) (1,771,083) (1,615,480) (1,756,810)

Bonds issued 2,435,000 2,140,000 3,415,000 2,230,000 4,370,000

Premiums on bonds issued 64,108 81,938 86,554 51,686 193,403

Discount on bonds issued - - - - -

Payment to refunded bond escrow agent - - - - -

TOTAL OTHER FINANCING SOURCES (USES) 5,224,396 4,109,585 6,251,755 5,572,581 7,071,931

NET CHANGE IN FUND BALANCES (2,277,682)$ (971,495)$ (787,106)$ 1,389,855$ 3,887,740$

Debt service as a percentage of noncapital

expenditures 16.15% 23.86% 27.20% 22.32% 20.22%


* The capital outlay is broken down in the CAFR's by function of government but consolidated on this table.

Fiscal Year

-206-

Table 5

2011 2010 2009 2008 2007

6,582,570$ 6,365,424$ 6,102,114$ 5,778,739$ 5,440,429$

888,578 1,603,764 1,068,018 1,401,718 1,361,016

4,495,896 5,255,753 4,036,473 3,945,981 5,319,234

223,755 314,974 296,876 286,848 356,176

2,055,597 2,050,042 2,022,470 2,257,148 1,923,608

50,604 48,606 43,789 46,578 54,061

207,153 88,886 112,298 304,329 468,782

1,355,080 1,543,394 1,423,595 1,190,910 2,687,758

15,859,233 17,270,843 15,105,633 15,212,251 17,611,064

2,103,242 2,044,377 2,028,821 2,049,864 1,994,394

687,323 1,179,804 514,619 1,006,653 852,651

3,623,400 3,761,614 3,722,815 3,838,866 3,758,514

2,609,878 2,481,888 2,466,984 2,767,621 2,625,454

2,164,374 2,173,344 2,281,405 2,328,562 2,222,410

647,341 595,494 528,114 527,855 513,288

5,844,312 3,981,440 5,489,548 3,448,562 4,132,168

2,725,000 2,720,000 2,830,000 2,465,000 2,325,000

554,350 703,427 665,048 696,044 754,688

58,268 - - - -

21,017,488 19,641,388 20,527,354 19,129,027 19,178,567

(5,158,255) (2,370,545) (5,421,721) (3,916,776) (1,567,503)

127,078 37,619 207,434 5,514 5,500

3,000,203 3,166,848 3,693,929 5,215,611 5,038,237

(822,150) (864,307) (992,084) (3,453,712) (3,289,980)

2,830,000 4,595,000 2,255,000 2,200,000 425,000

- 214,428 - - -

- - (26,117) (18,716) (2,975)

(2,535,000) - - - -

2,600,131 7,149,588 5,138,162 3,948,697 2,175,782

(2,558,124)$ 4,779,043$ (283,559)$ 31,921$ 608,279$

21.35% 19.92% 22.68% 19.93% 19.92%

Fiscal Year

-207-


INTENTIONALLY

-208-

Table 6

Fiscal

Year Total Taxable Estimated (1) Total

Ended Residential Commercial Personal Assessed Actual Taxable Direct

December 31, Property Property Property Value Value Tax Rate

2016 646,911,200$ 186,475,400$ 1,681,000$ 835,067,600$ 879,018,526$ 73.966

2015 609,870,300 185,836,600 1,659,800 797,366,700 839,333,368 74.416

2014 583,378,600 187,325,600 1,612,500 772,316,700 812,964,947 74.518

2013 577,624,600 186,990,400 463,500 765,078,500 805,345,789 73.230

2012 575,631,700 185,032,700 456,100 761,120,500 801,179,474 70.708

2011 634,969,600 186,354,700 486,500 821,810,800 865,064,000 61.331

2010 746,354,700 185,406,100 453,800 932,214,600 981,278,526 55.481

2009 743,805,100 179,000,900 433,300 923,239,300 771,234,519 55.241

2008 730,998,600 159,532,800 422,300 890,953,700 1,012,526,382 56.104

2007 673,247,600 157,608,700 392,900 831,249,200 950,120,507 57.616

Source: County Auditors Office

Note: (1)

According to the Minnesota Department of Revenue, the Assessor's Taxable Market Value for the City of Hutchinson is about

104% of the actual selling prices of property most recently sold in the City. Estimated actual taxable value is calculated by dividing

assessed value by the percent (104%). Valuations are determined as of January 1st of the year preceding the tax collection year.

Amounts are shown for the year in which taxes are payable. Assessed value is prior to Fiscal Disparity and Tax Increment

District Adjustments.


ASSESSED VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY


-209-


PROPERTY TAX RATES

DIRECT AND OVERLAPPING GOVERNMENTS


Fiscal Debt Total Debt Total

Year Operating Service City Operating Service County

2016 50.112 23.854 73.966 51.002 1.952 52.954

2015 50.280 24.136 74.416 50.785 2.175 52.960

2014 51.137 23.381 74.518 55.418 - 55.418

2013 51.027 22.203 73.230 59.664 - 59.664

2012 49.236 21.472 70.708 60.901 - 60.901

2011 43.331 18.000 61.331 49.517 4.109 53.626

2010 39.491 15.990 55.481 52.247 3.973 56.220

2009 39.234 16.007 55.241 51.940 4.205 56.145

2008 39.582 16.522 56.104 53.239 9.705 62.944

2007 41.240 16.376 57.616 59.041 4.819 63.860

Source: McLeod County Auditor and Treasurers Office

Overlapping Rates

City of Hutchinson County

-210-

Table 7

Total

Total Total Direct and

Debt Total Special Direct Overlapping Overlapping

Operating Service School Districts Rates Rates Rates

9.600 17.772 27.372 3.659 73.966 83.985 157.951

8.641 6.332 14.973 3.634 74.416 71.567 145.983

8.033 6.966 14.999 3.678 74.518 74.095 148.613

9.040 7.767 16.807 3.651 73.230 80.122 153.352

8.855 7.612 16.467 3.477 70.708 80.845 151.553

8.638 7.014 15.652 3.022 61.331 72.300 133.631

6.896 6.714 13.610 2.832 55.481 72.662 128.143

7.004 7.541 14.545 2.810 55.241 73.500 128.741

7.240 7.786 15.026 2.835 56.104 80.805 136.909

5.707 8.238 13.945 1.397 57.616 79.202 136.818

School District

Overlapping Rates

-211-

Taxable Taxable

Assessed Assessed

Taxpayer Type of Business Value Rank Value Rank

3M Company Manufacturing 16,007,200$ 1 1.92 % 17,088,700$ 1 2.06 %

Hutchinson Technology Manufacturing 9,623,200 2 1.15 11,129,400 2 1.34

Wal-Mart Commercial/Retail 7,702,200 3 0.92 7,712,700 3 0.93

Menards, Inc. Commercial/Retail 6,961,900 4 0.83 6,750,700 4 0.81

Target Commercial/Retail 5,292,700 5 0.63 5,936,200 5 0.71

Wisota LLC Apartment 4,585,700 6 0.55 -

City of Hutchinson Retail Building 3,991,400 7 0.48 5,195,900 6 0.63

NuCrane Manufacturing Manufacturing 3,964,100 8 0.47 -

Crow River Apartments Limited Apartment 3,955,100 9 0.47 -

Cash Wise Foods Commercial/Grocery 3,417,900 10 0.42 3,255,900 8 0.39

Inland Hutchinson LLC Commercial - - 4,820,300 7 0.58

Developed Diversified Shopping Center - - 3,048,000 9 0.37

Shopko Commercial/Retail - - 2,853,700 10 0.34

Total 65,501,400$ 7.84 % 67,791,500$ 8.16 %

Source: McLeod County Auditors Office

Value

Assessed

Percentage of

Total Taxable

Assessed

Value

Total Taxable

Percentage of


PRINCIPAL PROPERTY TAXPAYERS

CURRENT YEAR AND NINE YEARS AGO

2007

Table 8

2016

-212-

Fiscal Year Total Tax Collections in

Ended Levy for Subsequent

December 31, Fiscal Year Amount Years Amount

2016 6,769,035$ 6,720,677$ 99.29 % -$ 6,720,677$ 99.29 %

2015 6,656,623 6,604,808 99.22 28,136 6,632,944 99.64

2014 6,552,963 6,493,765 99.10 40,428 6,534,193 99.71

2013 6,454,224 6,403,138 99.21 35,612 6,438,750 99.76

2012 6,454,224 6,396,926 99.11 53,590 6,450,516 99.94

2011 6,557,762 6,494,747 * 99.04 61,529 6,556,276 99.98

2010 6,183,374 6,118,748 98.95 63,756 6,182,504 99.99

2009 5,890,698 5,828,165 98.94 61,847 5,890,012 99.99

2008 5,605,900 5,539,014 98.81 66,181 5,605,195 99.99

2007 5,367,326 5,300,020 98.75 66,248 5,366,268 99.98

* 2011 includes $315,993 of un-allotted market rate homestead credit.

Source: McLeod County Tax Settlements and City of Hutchinson Finance Department


PROPERTY TAX LEVIES AND COLLECTIONS


Collected within the

of Levy of Levy

Percentage

Total Collections to Date

Table 9

Fiscal Year of the Levy

Percentage

-213-


RATIOS OF OUTSTANDING DEBT BY TYPE


General General Obligation Special

Fiscal Obligation Tax Increment Assessment Notes

Year Bonds Bonds Bonds Payable

2016 -$ -$ 19,003,047$ 120,000$

2015 - - 17,184,350 150,000

2014 - - 18,322,782 180,000

2013 - - 19,314,609 210,000

2012 - 220,000 19,822,859 330,000

2011 - 320,000 17,684,443 360,000

2010 145,000 420,000 19,869,428 390,000

2009 280,000 515,000 17,520,000 420,000

2008 410,000 605,000 17,845,000 450,000

2007 530,000 685,000 17,840,000 480,000

Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements.

(1) Outstanding General Obligation Revenue Bonds are a combination of Water and Sewer Bonds and Minnesota Public

Facilities Authority (MPFA) Drinking Water Revolving Fund loans. The Funds from the MPFA are being used to build a

new water treatment facility. (2) Outstanding Revenue Bonds reflect bonds issued by the City owned Public Utilities.

(3) Business-type capital leases reflect equipment leased by the Water and Sewer funds, the Public Utility Commission

and the City owned Composting facility.

(4) Includes refunded bonds of $21,330,000.

Governmental Activities

-214-

Table 10

General

Obligation Total

Revenue Revenue Capital Primary Per

Bonds (1)

Bonds (2)

Leases (3) Government Capita

24,240,591$ 18,845,615$ 133,865$ 62,343,118$ 9.82 % 4,411$

26,637,841 20,316,224 209,287 64,497,702 10.47 4,552

29,301,371 21,903,551 314,301 70,022,005 11.91 4,958

33,469,371 23,269,326 415,298 76,678,604 13.46 5,416

35,451,371 44,837,671 (4) 198,648 100,860,549 17.99 7,187

34,677,371 22,510,000 117,465 75,669,279 14.71 5,348

36,549,371 23,640,000 - 81,013,799 16.46 5,714

38,362,373 24,730,000 56,448 81,883,821 17.28 5,819

40,247,973 25,785,000 109,909 85,452,882 17.37 6,104

52,595,169 26,810,000 241,647 99,181,816 21.79 7,096

Income

of Personal

Percentage

Business-type Activities

-215-

Table 11

Less: Amounts Less: Amounts

General (1) Paid from Available in

Fiscal Obligation Proprietary Debt Service Per

Year Bonds Revenue Fund Total Capita

2016 24,240,591$ 24,240,591$ -$ -$ 0.00 % -$

2015 26,637,841 26,637,841 - - 0.00 -

2014 29,301,371 29,301,371 - - 0.00 -

2013 33,469,371 33,469,371 - - 0.00 -

2012 35,451,371 35,451,371 - - 0.00 -

2011 34,677,371 34,677,371 321,964 - 0.00 -

2010 36,694,371 36,549,371 318,980 - 0.00 -

2009 38,642,373 38,362,373 311,943 - 0.00 -

2008 40,657,973 40,247,973 295,113 114,887 0.01 8

2007 53,125,169 52,595,169 275,975 254,025 0.03 18


(1) General Obligation bonds exclude Tax Increment Bonds, Special Assessment Bonds and Revenue Bonds issued by the City owned

Public Utilities. The bonds included in this table are the G.O. Bonds and the G.O. Revenue Bonds from table 10.(2)

See table 6 for property value data.

Value of Property

Assessed (2)

Total Taxable


RATIOS OF NET GENERAL BONDED DEBT OUTSTANDING


Percentage of

-216-

Table 12

Estimated

Share of

Debt Overlapping

Outstanding (1) Debt

Direct debt

City of Hutchinson 19,123,047$ 100.00 % 19,123,047$

Overlapping debt

McLeod County 12,183,863 25.11 3,058,780

Independent School Dist. 423 43,635,000 59.82 26,102,727

Total overlapping debt 55,818,863 29,161,507

Total direct and overlapping debt 74,941,910$ 48,284,554$

Sources : (1)

Outstanding debt data provided by the McLeod County Auditors Office. (2)

Estimated percentages come from

the Local Taxable Tax Capacity numbers supplied annually by the McLeod County Auditors Office.

Note: Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the City. This

schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents

and businesses of the City of Hutchinson. This process recognized that, when considering the government's ability to

issue and repay long-term debt, the entire debt burden borne by the residents and businesses should be taken into account.

However, this does not imply that every taxpayer is a resident, and therefore responsible for repaying the debt, of each

overlapping government.


COMPUTATION OF DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT

Applicable (2)

Percentage

Estimated

Governmental Unit

DECEMBER 31, 2016

-217-


LEGAL DEBT MARGIN INFORMATION


2016 2015 2014 2013 2012

Assessed Value 835,067,600$ 797,366,700$ 772,316,700$ 765,078,500$ 761,120,500$

(See Table 6)

Legal Debt Limit *

Debt limit (2 or 3% of assessed value) 25,052,028 23,921,001 23,169,501 22,952,355 22,833,615

Debt applicable to limit:

(See Table 10)

General Obligation Bonds - - - - -

Less: Amount reserved

for repayment of general

obligation debt - - - - -

Total net debt applicable to limit - - - - -

Legal debt margin 25,052,028$ 23,921,001$ 23,169,501$ 22,952,355$ 22,833,615$

Total net debt applicable to the limit

as a percentage of debt limit 0.00% 0.00% 0.00% 0.00% 0.00%

Source: Assessed values are provided by McLeod County Auditor's Office.

Note: Minn. Stat. Section 475.53, subd. 1 states that except as otherwise provided in Minn. Stat. Sections 474.74 to 475.51,

no municipality except a school district or a city of the first class, shall incur or be subject to a net debt in

excess of two percent of the estimated market value.

* Debt limit percentage changed from 2 to 3 percent in 2008.

-218-

Table 13

2011 2010 2009 2008 2007

821,810,800$ 932,214,600$ 923,239,300$ 890,953,700$ 831,249,200$

24,654,324 27,966,438 27,697,179 26,728,611 16,624,984

- 145,000 280,000 410,000 530,000

(321,964) (318,980) (311,943) (295,113) (275,975)

- - - 114,887 254,025

24,654,324$ 27,966,438$ 27,697,179$ 26,613,724$ 16,370,959$

0.00% 0.00% 0.00% 0.43% 1.53%

-219-


PLEDGED-REVENUE COVERAGE


Net Revenue

Operating Operating Available for

Year Revenues Expenses(2) Debt Service Principal Interest Coverage Tax Collections

(3)

2016 44,808,639$ 41,281,522$ 3,527,117$ 3,731,422$ 1,544,312$ 0.67

2015 44,645,425 41,306,845 3,338,580 3,549,014 1,668,286 0.64

2014 48,405,216 44,148,102 4,257,114 3,313,997 1,839,412 0.83

2013 46,072,120 41,713,462 4,358,658 5,029,891 2,478,505 0.58

2012 45,289,317 40,652,102 4,637,215 4,059,048 2,431,400 0.71

2011 48,605,386 42,437,474 6,167,912 3,925,667 2,227,551 1.00

2010 48,193,329 42,385,093 5,808,236 3,603,925 2,313,163 0.98

2009 46,339,567 42,852,665 3,486,902 4,458,600 3,020,697 0.47

2008 56,295,282 52,701,182 3,594,100 3,997,000 2,751,372 0.53

2007 112,438,511 107,484,611 4,953,900 3,373,000 3,187,434 0.76

Source: City of Hutchinson Financial Records


(1) Utility Revenue Bonds include Water, Sewer, Storm Water, Public Utilities Commission and Hutchinson Area Health Care (until 2008) funds

(excludes the Municipal Liquor Store, Composting and Refuse funds which have no outstanding debt service requirements)(2)

Total operating expenses exclusive of depreciation(3)

Debt service requirements for special assessment bonds issued comes from a combination of tax collections, which includes tax credits from the

State and special assessment collections.

Utility Revenue Bonds (1)

Debt Service Requirements

-220-

Table 14

Special

Assessment and

Tax Collections(3) Principal Interest Coverage

3,379,975$ 2,120,000$ 415,406$ 1.33

2,991,334 2,070,000 429,706 1.20

3,105,874 2,315,000 494,045 1.11

2,944,900 2,395,000 517,024 1.01

2,913,300 2,740,000 554,790 0.88

2,421,259 2,450,000 569,083 0.80

3,119,919 2,460,000 590,800 1.02

2,573,236 2,400,000 613,120 0.85

2,770,702 2,195,000 635,489 0.98

2,795,913 2,060,000 683,983 1.02

Special Assessment Bonds

Debt Service Requirements

-221-

kvanthuyne_ABDO16C

Sticky Note



INTENTIONALLY

-222-

Table 15

Fiscal Personal (2) Per Capita School

(3)

Year Population (1) Income Personal Income Enrollment (K-12)

2016 14,135 634,658,573$ 44,900$ 2,968 4.4 % 4.1 % 4.5 %

2015 14,170 616,173,372 43,484 2,957 4.0 3.7 4.8

2014 14,124 587,806,085 41,618 2,959 4.1 3.6 5.4

2013 14,158 569,746,963 40,242 3,055 6.1 5.1 7.4

2012 14,034 560,652,795 39,950 3,007 7.0 5.6 8.1

2011 14,148 514,408,651 36,359 3,064 8.2 6.5 8.9

2010 14,178 492,056,152 34,706 2,894 9.5 7.4 9.6

2009 14,073 473,734,445 33,663 3,020 11.1 8.0 9.3

2008 13,999 492,080,947 35,151 3,247 6.4 5.4 5.8

2007 13,977 455,089,547 32,560 3,136 5.6 4.7 4.6

Data Sources: (1)

United States Census Bureau or Minnesota State Demographer.(2)

Personal Income is estimated based on McLeod County numbers, McLeod County population and City of Hutchinson Population.(3)

Minnesota Department of Education.(4)

Minnesota Department of Employment and Economic Development (DEED); average annual rates(5)

2016 data is not available at time of publish; these are estimated totals

Unemployment

Rate (4)


DEMOGRAPHIC AND ECONOMIC STATISTICS


Unemployment

Rate (4)

Unemployment

National

Rate (4)

State

-223-

kvanthuyne_ABDO16C

Sticky Note


Table 16

Employer Employees (3) Rank Employees

(3) Rank

3M Corporation 1,675 1 8.81 % 1,575 2 8.39 %

Hutchinson Area Health Care 665 2 3.50 737 3 3.93

Hutchinson Technology, Inc. 592 3 3.12 2,300 1 12.26

Hutchinson Schools - ISD 423 484 4 2.55 415 4 2.21

City of Hutchinson 295 5 1.55 231 6 1.23

Wal-Mart 280 6 1.47 380 5 2.03

Customer Elations 190 7 1.00 -

Cash Wise Foods 180 8 0.95 215 7 1.15

National Guard Recruiting 150 9 0.79 -

Menards 144 10 0.76 121 10 0.64

Goebel Fixture Co - 121 10 0.64

Ridgewater College - 150 9 0.80

Hutchinson Medical Center - 159 8 0.85

Total 4,655 24.50 % 6,404 34.13 %

Sources: (1)

2016 Offering Statement on Municipal Bonds sold. (2)

2007 Offering Statement on Municipal Bonds sold.(3)

Includes full-time, part-time and seasonal employees. (4)

Percentages are compiled based on Total County employment and come from the Minnesota Department of Employment

and Economic Development.


PRINCIPAL EMPLOYERS

CURRENT YEAR AND NINE YEARS AGO

Employment (4)

of Total County

Percentage

Employment (4)

2007 (2)

2016 (1)

Percentage

of Total County

-224-

2016 2015 2014 2013 2012 2011 2010 2009 2008 2007

General government

Mayor and City Council (1) 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00

Administration 3.17 3.45 3.08 3.53 3.46 3.71 3.52 3.51 3.50 3.50

Finance 2.98 3.21 2.82 3.16 3.29 3.10 4.10 5.40 5.41 5.30

Attorney 1.50 1.22 1.22 1.19 1.26 1.32 1.30 1.00 1.47 1.50

Planning and zoning 1.22 1.29 1.31 1.47 1.80 1.83 1.46 1.31 1.70 2.00

Information services 3.00 3.16 3.16 3.79 3.64 2.71 3.08 3.25 3.25 3.80

Motor vehicle 3.28 2.97 3.16 3.18 3.15 3.08 3.26 3.46 3.73 3.80

Building maintenance 0.69 0.46 0.71 0.78 0.99 0.97 1.16 1.00 1.00 1.00

Cemetery 0.96 1.16 1.11 1.11 1.48 1.84 1.95 1.79 1.95 1.70

Central garage - - - - - - - - 1.75 2.00

Public safety

Police

Officers 21.63 21.74 21.87 22.04 23.03 21.13 22.42 21.47 23.62 23.38

Civilians 15.59 15.73 13.19 9.86 9.36 9.22 11.80 10.48 10.86 12.25

Fire

Firefighters and officers (2) 4.98 4.20 4.46 3.23 3.34 3.57 4.02 4.38 4.01 4.80

Building inspection 2.50 2.26 2.07 2.06 1.61 1.58 2.25 2.97 3.30 3.00

Streets and highways

Engineering 3.77 3.94 4.30 5.31 5.33 5.21 4.78 5.18 5.07 5.20

Maintenance 7.05 7.41 8.18 7.15 7.44 8.04 8.45 10.04 10.39 13.50

Culture and recreation

Parks (3) 23.48 25.30 24.04 24.43 24.07 23.33 24.79 24.90 26.34 14.81

Library 0.00 0.13 0.20 0.21 0.35 0.34 0.32 0.22 0.39 0.40

Housing and economic development 1.53 1.55 1.79 1.92 1.75 1.83 1.92 1.80 1.27 1.90

Transportation

Airport and bus drivers 0.34 0.26 0.31 0.25 0.28 0.35 0.30 0.24 - -

Health care (4) - - - - - - - - - 510.20

Liquor 11.55 11.30 10.97 10.35 10.67 9.89 10.32 10.40 10.52 10.60

Water 7.65 6.11 5.34 5.37 5.44 5.46 5.70 5.97 5.64 5.00

Sewer 6.64 7.39 7.94 7.55 8.00 7.91 8.12 9.98 11.28 10.70

Refuse 1.58 2.07 2.46 2.66 2.83 2.86 3.17 2.54 1.42 1.20

Storm water 2.71 1.87 1.59 1.53 1.68 1.70 1.97 1.47 2.20 2.10

Composting 5.57 6.14 7.67 7.91 8.36 8.51 8.36 8.19 8.91 12.00

Natural gas 9.00 9.00 9.00 9.00 9.00 9.00 9.00 9.00 9.00 8.00

Electric 36.00 36.00 36.00 36.00 36.00 36.00 36.00 37.00 36.00 41.00

Total 183.37 184.32 182.95 180.04 182.61 179.49 188.52 191.95 198.98 709.64

Source: City of Hutchinson Budget Books, Hutchinson Area Health Care and Public Utilities Commission

(1)The City of Hutchinson is comprised of one mayor and four council members. These numbers do not reflect full-time equivalent hours

based on actual yearly full-time hours worked.(2)

Paid-on-call volunteer firefighters are reflected in full-time equivalent hours on a yearly basis.(3)

Seasonal employees were added for the Parks Department in 2008.(4)

Includes Contract Labor. Starting in 2008 the Hutchinson Area Health Care was no longer a part of the City.

Function/Program

Table 17

Full-time Equivalent Employees as of December 31


FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION


-225-

kvanthuyne_ABDO16C

Sticky Note



OPERATING INDICATORS BY FUNCTION


2016 2015 2014 2013 2012

General government

Permits issued 1,089 1,108 1,080 1,133 946

Building inspections 1,415 1,850 1,222 1,716 1,508

Public safety

Police

Incidents (calls for service) 17,152 15,589 17,119 16,812 19,000

Case reports - - - - -

Arrests 372 371 380 369 670

Citations 802 484 1,179 1,185 874

Fire

Number of calls answered 505 466 465 388 439

Code inspections 218 74 660 869 917

Training hours 3,018 3,038 3,636 3,327 3,120

Highways and streets

Street reconstruction (miles) 1.630 1.180 1.550 0.720 1.600

Street resurfacing (miles) 8.250 0.550 8.560 2 9

Patching material used (tons) 183 348 136 103 135

Sanitation

Raw incoming (tons)

Source separated organics 1,785 2,150 2,728 2,137 2,109

Leaves, grass, and other wastes 8,227 8,149 14,158 14,623 13,152

Culture and recreation

Athletic field maintenance hours 2,811 2,664 2,698 2,898 2,674

Ice time sold 2,222 2,121 1,793 2,089 2,188

activities do not include HHC.Pool admissions - 10,487 11,415 12,564 12,689

Shelters reserved 522 465 364 380 317

Water

Average daily consumption (in gallons) 1,418,500 1,476,445 1,458,000 1,493,000 1,533,000

Wastewater

Average daily sewage treatment

MGD (million gallons/day) 2.54 2.00 2.25 1.97 2.08

Public Utilities

Kilowatt hours (KWH) generated 35,823,000 22,411,000 28,819,000 35,619,000 25,473,000

Natural gas purchased and

generated (MCF) 1,817,631 1,714,534 2,058,642 2,014,780 1,692,502

Liquor

Liquor store sales volume ($) 5,986,472$ 5,850,584$ 5,612,423$ 5,384,444$ 5,325,305$

Health Care

Hospital admissions (1) - - - - -

Sources: Various City departments, Public Utilities Commission and Hutchinson Area Health Care

(1) Adjusted Hospital Admission numbers

* Due to new computer system installation in May 2012 numbers are estimates by Hutchinson Public Safety based on a monthly average.

Case reports are no longer reported separately as they are included in total incidents.

Function

Fiscal Year

-226-

Table 18

2011 2010 2009 2008 2007

905 792 833 925 858

1,381 1,727 1,627 1,931 2,380

* 17,849 17,844 16,853 15,087 15,741

2,155 2,174 2,263 2,337 2,474

* 510 572 740 907 803

* 1,003 1,811 1,234 1,045 1,568

475 436 419 413 422

744 1,009 882 2,098 560

2,703 2,760 1,855 2,681 4,035

1.720 1.490 1.247 1.784 0.195

0.720 - - 0.394 0.750

85 82 302 325 186

2,362 2,751 2,166 2,046 2,084

10,122 8,576 11,524 10,368 13,582

2,682 2,359 2,187 2,006 1,842

1,980 2,120 2,046 2,039 1,904

12,436 11,398 12,583 11,667 12,262

250 293 290 260 267

1,550,000 1,643,000 1,757,000 2,445,000 2,630,000

2.63 2.60 2.33 2.43 3.16

13,311,000 11,764,000 6,583,000 20,453,000 28,971,000

1,702,324 1,772,156 1,708,907 1,892,644 1,914,407

5,099,785$ 5,042,670$ 5,011,980$ 4,792,507$ 4,585,623$

- - - - 6,842

Fiscal Year

-227-


CAPITAL ASSET AND INFRASTRUCTURE STATISTICS BY FUNCTION


2016 2015 2014 2013 2012

General government

City center 1 1 1 1 1

Public safety

Police:

Stations 1 1 1 1 1

Patrol units 11 11 11 11 11

Fire:

Stations 1 1 1 1 1

Vehicles 9 9 9 9 9

Highways and streets

Miles of street 77.0 76.0 76.0 76.0 76.2

Bridges 6 6 6 6 6

Parks and recreation

Parks 37 37 37 37 37

Area in acres 401 401 401 401 401

Indoor ice arena 2 2 2 2 2

Recreation center (includes pool) 1 1 1 1 1

Event center 1 1 1 1 1

Compost/Refuse

Compost buildings 2 2 2 2 2

Liquor

Liquor store building 1 1 1 1 1

Utilities

Municipal water

Water treatment plant 1 1 1 1 1

Water towers 3 3 3 3 3

Miles of water main 99.0 109.0 106.0 106.0 105.2

Municipal sanitary sewer

Wastewater treatment buildings 8 8 8 8 8

Miles of sanitary sewer 91.0 95.0 95.0 95.0 95.1

Number of lift stations 13 13 13 13 13

Storm sewer

Holding ponds and lakes 53 53 50 49 49

Electric division

Miles of transmission lines 17.0 17.1 17.1 17.0 17.1

Number of substations 6 6 6 6 4

Natural gas division

Miles of gas lines 292 292 290 290 288

Source: Various City departments and capital asset system

Function

Fiscal Year

-228-

Table 19

2011 2010 2009 2008 2007

1 1 1 1 1

1 1 1 1 1

11 7 6 6 6

1 1 1 1 1

9 9 10 10 10

76.4 75.9 74.1 74.1 74.5

6 6 6 6 6

37 37 37 37 37

401 401 401 401 401

2 2 2 2 2

1 1 1 1 1

1 1 1 1 1

2 2 2 2 2

1 1 1 1 1

1 1 1 1 1

3 3 3 3 3

104.4 103.7 102.3 99.5 99.5

8 8 8 8 8

94.6 93.8 92.6 91.4 91.4

13 13 13 13 13

49 47 44 15 13

17.1 17.1 17.1 17.1 17.1

4 4 4 4 4

288 297 286 296 276

Fiscal Year

-229-


INTENTIONALLY

-230-

Table 20

Year Original Bonds

Issued Amount Retired Outstanding Coupon Rates

2007A 425,000$ 375,000$ 50,000$ 3.50 - 3.80

2009D 2,255,000 1,060,000 1,195,000 2.00 - 3.63

2010C 4,595,000 3,525,000 1,070,000 3.00 - 3.13

2011A 2,830,000 850,000 1,980,000 0.50 - 3.25

2012B 2,095,000 640,000 1,455,000 3.00

2012C 2,275,000 500,000 1,775,000 2.00 - 2.50

2013A 2,230,000 310,000 1,920,000 2.00 - 3.50

2014A 3,415,000 340,000 3,075,000 2.00 - 3.00

2015A 2,140,000 - 2,140,000 2.85 - 3.00

2016A 3,880,000 - 3,880,000 2.00

Totals 26,140,000$ 7,600,000$ 18,540,000$

2005 PFA 5,696,371$ 2,966,001$ 2,730,370$ 2.53

2006 PFA 12,216,000 5,546,000 6,670,000 2.63

2007 PFA 13,696,602 5,285,602 8,411,000 2.15

2009A 2,025,000 - 2,025,000 3.25 - 4.20

2009B 1,735,000 - 1,735,000 4.05 - 4.40

2012B 2,700,000 605,000 2,095,000 3.00

2014A 590,000 140,000 450,000 2.00 - 3.00

Totals 38,658,973$ 14,542,603$ 24,116,370$

2003 31,725,000$ 31,135,000$ 590,000$ 3.75 - 4.63

2012A 20,720,000 4,305,000 16,415,000 4.00 - 5.00

Totals 52,445,000$ 35,440,000$ 17,005,000$


COMBINED SCHEDULE OF BONDS PAYABLE

DECEMBER 31, 2016

ELECTRIC UTILITIES REVENUE BONDS

GENERAL OBLIGATION SPECIAL ASSESSMENT BONDS

GENERAL OBLIGATION REVENUE BONDS

-231-


PUBLIC UTILITIES COMMISSION

OPERATING EXPENSES BY FUNCTION


Electric Division 2016 2015 2014 2013 2012

Production 3,387,289$ 3,066,764$ 3,065,423$ 3,944,441$ 3,414,293$

Purchase Power/Gas 13,889,577 15,068,183 14,187,971 13,769,831 15,179,773

Transmission 2,376,359 1,953,324 1,684,538 1,493,351 1,172,259

Distribution 969,907 594,143 863,097 882,745 833,847

Customer Accounts 246,627 229,470 190,638 191,713 166,748

Administrative 2,816,972 2,610,006 2,709,414 2,680,919 2,591,948

Depreciation and depletion 2,820,446 2,816,301 2,744,769 2,612,388 2,289,200

Total Electric 26,507,177$ 26,338,191$ 25,445,850$ 25,575,388$ 25,648,068$

Natural Gas Division

Transmission 119,454$ 119,452$ 130,519$ 118,379$ 117,642$

Purchased Gas 5,697,867 5,988,821 9,986,448 7,433,522 6,400,838

Distribution 580,503 638,944 614,544 590,116 618,559

Customer Accounts 201,785 187,748 155,976 156,843 136,431

Administrative 1,036,110 984,438 1,032,731 1,035,498 1,012,840

Depreciation and depletion 1,001,952 1,008,133 1,002,804 1,027,662 1,043,233

Total Natural Gas 8,637,671$ 8,927,536$ 12,923,022$ 10,362,020$ 9,329,543$

-232-

Table 21

2011 2010 2009 2008 2007

3,083,489$ 3,126,884$ 2,847,310$ 4,230,709$ 4,563,760$

15,774,955 14,988,258 15,891,963 18,835,198 17,596,640

142,324 157,204 132,920 132,372 6,880

752,862 673,363 667,051 730,870 588,417

253,198 269,202 241,366 239,526 219,226

2,605,654 2,549,037 2,129,787 2,023,707 1,921,840

2,284,770 2,257,016 2,231,132 2,084,038 1,932,542

24,897,252$ 24,020,964$ 24,141,529$ 28,276,420$ 26,829,305$

98,462$ 100,368$ 98,440$ 103,791$ 95,971$

9,028,704 9,806,771 10,057,683 13,750,609 11,473,093

590,717 568,170 549,143 549,473 499,837

168,798 179,470 160,910 159,684 146,150

829,667 832,122 1,002,994 964,227 929,302

1,042,071 1,037,707 1,026,235 966,926 948,789

11,758,419$ 12,524,608$ 12,895,405$ 16,494,710$ 14,093,142$

-233-

Table 22

Percent of

Revenue Percent of MCF Revenue to Number

MCF Amount Billed Per MCF to Total MCF Total Revenue of Meters

2016

Residential 382,184 3,839,034$ 10.04499$ 26.7 % 38.8 % 5,051

Commercial 292,212 2,824,329 9.66534 20.4 28.6 551

Large Industrial 754,604 3,215,714 4.26146 52.9 32.6 3

Total Sales 1,429,000 9,879,077 6.91328 100.0 100.0 5,605

2015

Residential 387,205 3,731,066 9.63589 26.7 37.6 5,032

Commercial 295,186 2,748,161 9.30993 20.3 27.7 552


Total Sales 1,452,846 9,923,500 6.83039 100.0 100.0 5,589

2014

Residential 475,387 4,706,388 9.90012 28.2 32.2 4,992

Commercial 401,726 3,853,504 9.59237 23.9 26.3 550


Total Sales 1,682,893 14,626,182 8.69109 100.0 100.0 5,546

2013

Residential 470,678 4,626,722 9.82991 28.7 38.5 4,941

Commercial 392,469 3,729,790 9.50340 24.0 31.1 526


Total Sales 1,637,182 12,003,021 7.33151 100.0 100.0 5,470

2012

Residential 364,652 3,697,538 10.13991 25.7 38.2 4,941

Commercial 325,027 3,150,925 9.69435 22.9 32.6 526


Total Sales 1,421,244 9,674,887 6.80734 100.0 100.0 5,470



THOUSAND CUBIC FEET (MCF) SALES - NATURAL GAS DIVISION


Type of Service

-234-

Table 22

Percent of

Revenue Percent of MCF Revenue to Number

MCF Amount Billed Per MCF to Total MCF Total Revenue of Meters

2011

Residential 434,536 4,327,788 9.95956$ 26.2 % 34.9 % 4,922

Commercial 399,781 3,823,162 9.56314 24.1 30.8 530


Total Sales 1,655,646 12,397,730 7.48815 100.0 100.0 5,454

2010

Residential 417,391 3,979,581 9.53442 25.1 31.8 4,918

Commercial 400,222 3,638,751 9.09183 24.1 29.1 525


Total Sales 1,662,052 12,508,883 7.52617 100.0 100.0 5,445

2009

Residential 444,371 4,426,071 9.96031 27.2 34.5 4,881

Commercial 420,842 4,020,619 9.55375 25.7 31.3 523


Total Sales 1,635,471 12,827,564 7.84335 100.0 100.0 5,406

2008

Residential 483,752 4,769,216 9.85880 28.3 29.6 4,807

Commercial 445,484 4,242,479 9.52330 26.0 26.4 485


Total Sales 1,711,863 16,097,601 9.40356 100.0 100.0 5,294

2007

Residential 442,775 4,272,287 9.64889 27.7 30.9 4,719

Commercial 388,223 3,584,296 9.23257 24.3 25.9 513


Total Sales 1,600,431 13,840,872 8.64822 100.0 100.0 5,235

Type of Service

THOUSAND CUBIC FEET (MCF) SALES - NATURAL GAS DIVISION - CONTINUED




-235-

Table 23

Volume in Percent of Total Revenue Per Number of

Gallons Total Pumped Revenue 1,000 Gallons Water Meters

2016

Net Raw Water 650,851,600 100.0 %

Used in Production 135,169,452 20.8

Net Finished Water 515,682,148 79.2

Loss in Distribution System 18,056,148 2.8

Total Sales 497,626,000 76.4 2,203,975$ 4.428979$ 4,920

2015

Net Raw Water 663,500,100 100.0




Total Sales 503,697,000 75.9 2,302,296 4.570796 4,913

2014

Net Raw Water 664,897,200 100.0




Total Sales 478,839,000 72.0 2,214,552 4.624836 4,755

2013

Net Raw Water 681,159,000 100.0




Total Sales 522,348,000 76.7 2,334,708 4.469641 4,718

2012

Net Raw Water 704,095,000 100.0




Total Sales 536,896,388 76.3 2,421,630 4.510423 4,731


RAW WATER FINISHED AND SOLD


-236-

Table 23

Volume in Percent of Total Revenue Per Number of

Gallons Total Pumped Revenue 1,000 Gallons Water Meters

2011

Net Raw Water 709,759,000 100.0 %




Total Sales 520,399,000 73.4 2,324,974$ 4.467676$ 4,792

2010

Net Raw Water 752,860,000 100.0




Total Sales 571,401,000 75.9 2,326,124 4.070913 4,746

2009

Net Raw Water 807,643,000 100.0




Total Sales 601,329,000 74.5 2,290,288 3.808710 4,702

2008

Net Raw Water 900,049,000 100.0




Total Sales 677,443,000 75.3 2,390,433 3.528611 4,746

2007

Net Raw Water 830,894,000 100.0




Total Sales 743,719,000 89.5 2,050,252 2.756756 4,693

RAW WATER FINISHED AND SOLD - CONTINUED



-237-

Table 24

Production Administrative Depreciation Total Operating Cost Per

Cost Per Cost Per Cost Per Expenses Per Finished Water M Gallons

Year M Gallons M Gallons M Gallons M Gallons Billed Billed

2016 859,423$ 124,715$ 1,227,282$ 2,211,420$ 515,682,148

1.6666 0.2418 2.3799 4.2883 497,626,000 4.4439$

2015 987,374 111,763 1,159,268 2,258,405 524,014,595

1.8842 0.2133 2.2123 4.3098 503,697,000 4.4837

2014 951,131 105,442 1,093,807 2,150,380 526,249,000

1.8074 0.2004 2.0785 4.0863 478,839,000 4.4908

2013 848,825 185,095 1,088,642 2,122,562 546,379,000

1.5535 0.3388 1.9925 3.8848 522,348,000 4.0635

2012 791,089 142,040 1,047,600 1,980,729 566,020,000

1.3976 0.2509 1.8508 3.4993 536,896,388 3.6892

2011 783,673 135,581 1,028,894 1,948,148 562,527,000

1.3931 0.2410 1.8291 3.4632 520,399,000 3.7436

2010 817,030 146,571 1,009,537 1,973,138 599,193,000

1.3636 0.2446 1.6848 3.2930 571,401,000 3.4532

2009 916,260 177,837 995,826 2,089,923 643,387,000

1.4241 0.2764 1.5478 3.2483 601,329,000 3.4755

2008 919,228 208,433 995,764 2,123,425 715,432,000

1.2849 0.2913 1.3918 2.9680 677,443,000 3.1345

2007 1,131,726 166,918 623,107 1,921,751 764,980,000

1.4794 0.2182 0.8145 2.5121 743,719,000 2.5840


COST PER THOUSAND GALLONS OF FINISHED WATER


-238-

Table 25

Daily Flow

Total M Gallons Treatment/ Administrative Depreciation Gallons

to Treatment Collection Cost Cost Per Cost Per Total Cost Per Minimum/

Year Facility Per M Gallons M Gallons M Gallons M Gallons Maximum

2016 930,509 1,466,815$ 189,585$ 1,621,494$ 3,277,894$ 1,500,000

1.5764 0.2037 1.7426 3.5227 7,755,000

2015 728,632 (1) 1,319,913 170,670 1,552,533 3,043,116 1,580,000

1.8115 0.2342 2.1308 4.1765 3,270,000

2014 820,690 1,401,814 178,580 1,637,557 3,217,951 1,640,000

1.7081 0.2176 1.9953 3.9210 6,070,000

2013 719,950 1,354,855 302,650 (2) 1,637,557 3,295,062 1,230,000

1.8819 0.4204 2.2745 4.5768 4,780,000

2012 759,200 1,431,686 167,032 1,625,644 3,224,362 1,490,000

1.8858 0.2200 2.1413 4.2471 4,910,000

2011 958,920 1,610,786 166,157 1,620,505 3,397,448 1,470,000

1.6798 0.1733 1.6899 3.5430 7,660,000

2010 951,000 1,696,763 211,082 1,609,668 3,517,513 1,890,000

1.7842 0.2220 1.6926 3.6988 6,290,000

2009 849,420 1,564,768 216,475 1,604,486 3,385,729 1,650,000

1.8422 0.2549 1.8889 3.9860 3,770,000

2008 920,640 1,696,370 189,858 1,428,888 3,315,116 1,620,000

1.8426 0.2062 1.5521 3.6009 3,720,000

2007 1,153,530 1,725,836 195,869 1,197,918 3,119,623 1,550,000

1.4961 0.1698 1.0385 2.7044 5,300,000

(1)As part of the Wastwater Infrastructure fund (WIF) grant, the City processed zero gallons related to the grant during 2015.

The restricted balance in the System Replacement fund at December 31, 2015 is $350.(2)

Includes a one-time bad debt write-off of $117,214.


WASTEWATER INFLOW AND COST PER THOUSAND GALLONS TREATED


-239-

kvanthuyne_ABDO16C

Sticky Note



INTENTIONALLY

-240-

OTHER REQUIRED REPORTS



-241-


INTENTIONALLY

-242-

INDEPENDENT AUDITOR’S REPORT ON MINNESOTA LEGAL COMPLIANCE

Honorable Mayor and City Council City of Hutchinson, Minnesota

We have audited, in accordance with auditing standards generally accepted in the United States of America, the financial statements of the governmental activities, the business-type activities, the discretely presented component units, each major fund and the aggregate remaining fund information of the City of Hutchinson, Minnesota (the City) as of and for the year ended December 31, 2016, and the related notes to the financial statements, and have issued our report thereon dated June 15, 2017.

The Minnesota Legal Compliance Audit Guide for Cities, promulgated by the State Auditor pursuant to Minnesota Statute §6.65, contains seven categories of compliance to be tested: contracting and bidding, deposits and investments, conflicts of interest, public indebtedness, claims and disbursements, miscellaneous provisions, and tax increment financing. Our audit considered all of the listed categories.

In connection with our audit, nothing came to our attention that caused us to believe that the City failed to comply with the provisions of the Minnesota Legal Compliance Audit Guide for Cities. However, our audit was not directed primarily toward obtaining knowledge of such noncompliance. Accordingly, had we performed additional procedures, other matters may have come to our attention regarding the City’s noncompliance with the above referenced provisions.

This report is intended solely for the information and use of those charged with governance and management of the City and the State Auditor and is not intended to be and should not be used by anyone other than these specified parties.

ABDO, EICK & MEYERS, LLP Mankato, MinnesotaJune 15, 2017

-243-

INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING ON COMPLIANCE

AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE

WITH GOVERNMENT AUDITING STANDARDS

Honorable Mayor and City Council City of Hutchinson, Minnesota

We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, the discretely presented component units, each major fund and the aggregate remaining fund information of the City of Hutchinson, Minnesota (the City), as of and for the year ended December 31, 2016, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements, and have issued our report thereon dated June 15, 2017.

Internal Control Over Financial Reporting

In planning and performing our audit of the financial statements, we considered the City's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether the City's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

-244-


INTENTIONALLY

-245-

Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

ABDO, EICK & MEYERS, LLPMankato, MinnesotaJune 15, 2017

-246-

Documents

CITY OF HUTCHINSON, MINNESOTA · Hutchinson’s financial planning and control. Requests from all departments and agencies are submitted and prepared by the City Administrator for